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[2021] WASC 331
General information, not legal advice.
Supreme Court of WA
2021-12-23
Miere J
Original judgment source is linked above.
CITATION : CARDACI -v- FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI [No 5] [2021] WASC 331
MATTER : The Family Provision Act 1972
The Estate of Marco Antonio Cardaci of 327 West Coast Drive, Trigg in the State of Western Australia, Businessman, deceased
FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI
GIOVANNI MAURIZIO CARRELLO as the Trustee in Bankruptcy of the Estate of MARCO ANTONIO CARDACI (Dec)
MATTER : Section 77 of the Trustees Act 1962
The Washburn Trust and the Marc Cardaci Testamentary Trust
TRUSTS - Trustees - Removal - Jurisdiction of court to remove trustee where expedient to do so
TRUSTS - Trustees - Exercise of discretionary power - Whether discretionary powers alter fiduciary duties of trustee to beneficiaries - Elovadis v Elovadis [2008] WASCA 141
SUCCESSION - Wills, probate and administration - Memorandum of wishes - Whether trustee bound to consider memorandum - Whether memorandum reflected maker's intentions at time of death - Whether wishes relate to distribution of income and capital
TRUSTS - Trustees - Removal- Trustee as controller of trustee company - Whether trustee made statements of intention to not exercise distribution powers - Whether settlement offer made in personal capacity - Whether settlement offer made with intention to not exercise distribution powers - Whether trustee could have discharged duties and responsibilities of trust - Whether conduct of trustee company impacted management of trust
EQUITY - Fiduciary duties - Duties of trustee to beneficiaries - Duty to act in best interest - Whether conflict of interest in approving or ratifying loan to company of which trustee is director - Whether conflict of interest in trustee company selling shares to company under control of trustee - Whether trustee aware that sale agreement breached terms of trust deed - Whether trustee failed to provide adequate disclosure when making settlement offer
TRUSTS - Trustee - Conduct of trustee - Whether implicit agreement between trustee and beneficiary that trust payments were loans - Whether deceased's borrowing practice created implication - Whether trustee intended to characterise payments as loans
TRUSTS - Trustees - Appointment- General principles of court appointment - Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485
TRUSTS - Trustees - Appointment - Whether court should appoint beneficiary as trustee - Whether beneficiary unfit to be appointed trustee - Whether independent professional trustee necessary - Litigation funding - Whether conflict of interest created by litigating funding agreement
TRUSTS - Trustees - Appointment and removal - Whether change in trustee valid - Whether terms of trust confer power to replace trustee - Construction and interpretation of trust terms - Whether purported exercise of power is improper
TRUSTS - Trustees - Indemnity - Whether trustee can be indemnified against trust assets for proceeding costs - Trustees Act 1962 (WA)
TRUSTS - Trustees - Guardian - Construction and interpretation of deed terms - Whether definition of guardian effectively varied by deed - Whether variation of definition alters substratum of trust - Whether nomination and replacement of guardian effective
TRUSTS - Court appointed receivers - Whether court has power to appoint receiver - Whether receiver can be appointed over exercise of guardian powers - Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721 - Receiver not appointed
SUCCESSION - Administration of estates - Estate liability - Whether estate liable for loans despite absence of dividends declared for purpose of paying loans - Loans due and payable - Whether estate liable for loan repayment - No liability
EQUITY - Fiduciary duties - Duties of executor of an estate - Duty to exercise reasonable care and skill - Whether executor breached duty by mischaracterising loans - No breach - Whether executor failed to deposit funds from asset sale into bank account of estate - No fiduciary obligation - No breach
EQUITY - Fiduciary duties - Duties of executor of an estate - Self-dealing rule - Whether executor breached duty by making settlement offer in personal capacity - Executor failed to differentiate between personal and trust assets - Absence of transaction - No breach
SUCCESSION - Administrators and executors - Jurisdiction of court to remove executor - Whether executor should be removed - Woodley v Woodley [No 2] [2017] WASC 94 - Whether executor personally liable for additional costs and expenses of appointment of trustee in bankruptcy - Whether executor acted reasonably and honestly - Whether executor ought to be excused
SUCCESSION - Administration of estates - Amendment of will - Whether court has jurisdiction to amend - Whether court exercises discretion to amend - Deceased failed to make adequate provision for proper maintenance of spouse - Net estate awarded to plaintiff
Bankruptcy Act 1966 (Cth)
Trustees Act 1962 (WA)
Mr M D Cuerden SC, Mr G D Cobby SC, Mr L Pham & Dr J McComish
Mr M D Cuerden SC, Mr G D Cobby SC, Mr L Pham & Dr J McComish
Abacus Trust Co (Isle of Man) v Barr [2003] EWHC 114 (Ch); [2003] Ch 409
Anglo-Italian Bank v Davies [1878] UKLawRpCh 227; (1878) 9 Ch D 275
Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Australian Special Opportunity Fund LP v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570
Australian Special Opportunity Fund v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570
Bates v Messner [1967] 1 NSWR 638; (1967) 67 SR (NSW) 187
Blenkinsop v Blenkinsop Nominees Pty Ltd as Trustee for Blenkinsop Family Trust [2015] WASC 463
Blenkinsop v Herbert [2017] WASCA 87; (2017) 51 WAR 264
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Cachia v Westpac Financial Services Ltd [2000] FCA 161; (2000) 170 ALR 65
Cambridge Electronics v McMaster [2005] NSWSC 198
Chapman v Browne [1902] UKLawRpCh 79; [1902] 1 Ch 785
Clayton v Clayton [2015] NZCA 30; [2015] 3 NZLR 293
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Colston v McMullen [2010] QSC 292
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Elovalis v Elovalis [2008] WASCA 141
Global Alliance Network Pty Ltd v Sensis Pty Ltd [2007] NSWCA 163
Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183
Gray v Gray [2004] NSWCA 408; (2004) 12 BPR 22,755
Hall v Foster [2012] NSWSC 974
Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1
Heydon v Perpetual Executors, Trustees and Agency Co (WA) Ltd [1930] HCA 26; (1930) 45 CLR 111
Hobkirk v Ritchie (1934) 29 Tas LR 14
Hunter v Hunter [1938] NZLR 520
In the matter of the Internine and the Inter-traders Trusts Sheikh Abdullah Ali M Alhamrani v Russa Management [2005] JLR 236
Integrated Commercial Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Kearns v Hill (1990) 21 NSWLR 107
Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76
Letterstedt v Broers (1884) 9 App Cas 371
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
Masri v Consolidated Contractors International (UK) Ltd [No 2] [2008] EWCA Civ 303; [2009] QB 450
Mavrideros v Mack [1998] NSWCA 286; (1998) 45 NSWLR 80
McLauchlan v Prince [2002] WASC 274
Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88
Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572
Montevento Holdings Pty Ltd v Scaffidi [2012] HCA 48; (2012) 246 CLR 325
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] UKLawRpAC 28; [1905] AC 373
Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288; (2005) Aust Contract R 90‑213
Parker v Camden Borough Council [1985] 3 WLR 47
Partridge v Equity Trustees Executors & Agency Co Ltd [1947] HCA 42; (1947) 75 CLR 149
Pitt v Holt [2013] UKSC 26; [2013] 2 AC 108
PNPF Trust Co Ltd v Taylor [2010] EWHC 1573; [2010] All ER (D) 251 (Jun)
Porteous v Rinehart [1998] WASC 270; (1998) 19 WAR 495
Pua Hor Ong v Wu You Yang Pty Ltd [2008] SASC 365; (2008) 103 SASR 9
Re D'Jan of London Ltd [1994] 1 BCLC 561
Re Estate of Crane [2005] SASC 379; (2005) 93 SASR 198
Re Estate of Roberts (1983) 20 NTR 13
Re Estate of Stuart [2009] SASC 399; (2009) 106 SASR 39
Re Ledir Enterprises Pty Ltd [2013] NSWSC 101
Re Stuart; Smith v Stuart [1897] UKLawRpCh 125; [1897] 2 Ch 583
Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485
Re Turner; Barker v Ivimey [1897] UKLawRpCh 30; [1897] 1 Ch 536
Schmierer v Taouk [2004] NSWSC 345; (2004) 207 ALR 301
Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 260 CLR 85
Smith v Cowell [1880] UKLawRpKQB 80; (1880) LR 6 QBD 75
Smith v Smith [2006] WASC 166
Sproule v Sproule [2009] NSWSC 152; (2009) 2 ASTLR 80
Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721
Taylor v Farrugia [2009] NSWSC 801
The University of Western Australia v Gray [No 6] [2006] FCA 1825
Tsaknis as Executor and Trustee of Estate of Lilburne (decd) v Lilburne [2010] WASC 152
Walker v Stones [2001] QB 902
Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522
Wong Wen-Young v Grand View Private Trust Co Ltd [2019] SC (Bda) 37 Com
Woodley v Woodley [No 2] [2017] WASC 94
Wyndham v Egremont [2009] EWHC 2076 (Ch)
Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; (2000) 35 ACSR 34
1 The plaintiff, Mae Cardaci (Mae), married the late Marc Cardaci (Marc) on 23 September 2012. Marc died on 7 November 2015. By his will Marc appointed his brother, Filippo Cardaci (Philip) to be the executor and trustee of his will and gave the whole of his property to his trustee, in the circumstances which eventuated, to hold his estate on the terms of the trust annexed to his will. The trust provides that the trustee may apply the income of the trust fund for one or more beneficiaries, as the trustee may in their absolute discretion determine. The beneficiaries are Mae and persons in various degrees of relationship to Mae.
2 During his lifetime most of Marc's wealth derived from and resided in the Washburn Trust, a discretionary trust, of which he was the trustee and a beneficiary. The other beneficiaries are Mae and persons and companies in varying degrees of relationship to Marc. Marc was also the guardian and appointor of the Washburn Trust until, by a deed of variation of 21 December 2012, Marc as trustee amended or purported to amend the trust deed to appoint Philip as Guardian and Appointor. On 24 December 2015, which is after Marc's death, Philip appointed Washburn Pty Ltd (Washburn), as trustee of the Washburn Trust. Philip is the sole director and controller of Washburn.
3 Powercity Pty Ltd (Powercity), a company controlled by Marc, was a beneficiary of the Washburn Trust and regularly received distributions of income from the Washburn Trust. Powercity made loans to Marc. To avoid being deemed the payment of a dividend for income tax purposes, these loans were made on conditions which included minimum yearly repayments. Mae contends that during Marc's lifetime he had a practice of causing Powercity to declare dividends to make funds available to Marc to meet the required repayments. At the time of Marc's death there were outstanding loans from Powercity to Marc. Mae claims that the Powercity loans are not due and payable because they were repayable only from distributions made by the trustee of the Washburn Trust out of funds received by way of dividends from Powercity.
4 Marc's mother, Grace Cardaci (Grace), died on 20 November 2014. Marc, Philip and their sister, Angela Florido (Angela), were appointed executors and trustees of Grace's will. By her will Grace, in effect, left one third of her estate on trust for each of Philip, Marc and Angela on the terms of the trusts established by her will. The trust in favour of Marc is described as Marc's Testamentary Trust. Marc was the initial trustee. On 31 August 2015 Marc retired as trustee and appointed Ongold Corporation Pty Ltd (Ongold), a company controlled by Marc, as trustee of Marc's Testamentary Trust. On Marc's death Ongold was controlled by Philip, as the executor and trustee of Marc's will. On 30 January 2017 Philip and Angela, as executors of Grace's will, by deed appointed, or purported to appoint, Rectangular Pty Ltd (Rectangular), a company controlled by Philip, as trustee of Marc's Testamentary Trust in place of Ongold. Mae contends that the appointment was beyond power and invalid. On 15 March 2020 Philip, Angela, Ongold and Rectangular executed a further deed to the effect that, to the extent the deed of 30 January 2017 did not result in the valid dismissal of Ongold and appointment of Rectangular, Philip, in his capacity as executor or of Marc's will, appointed Rectangular as trustee of Marc's Testamentary Trust in place of Ongold.
5 After Marc's death Philip caused advances to be made to Mae from various sources. There is a dispute about the nature of those advances and in particular whether they are repayable loans.
6 Mae alleges, and Philip denies, that on 18 May 2016 Philip said to Mae that he was the trustee of the Washburn Trust, he would never distribute anything to her from the trust or the company and he wanted all of the wealth to go into a charitable foundation established in memory of Marc.
7 On 13 July 2016, Philip made a settlement offer to Mae. There is a dispute about the terms of the offer and in what capacity or capacities Philip made the offer. Mae says that the offer was that she would receive $2 million and relinquish any interest or entitlements under Marc's estate, Marc's Testamentary Trust, the Washburn Trust and any Cardaci family entity. Philip says that he made the offer in his personal capacity and the terms of the offer were that by means to be determined Philip would ensure that Mae retained the benefits she had received from Marc's estate, Marc's Testamentary Trust, the Washburn Trust and Cardaci family entities, which amounted to approximately $4.3 million, together with a further $2 million and she would relinquish any interest or entitlement under those entities.
8 At the date of his death Marc owed $1,280,714 to Duporte Pty Ltd (Duporte), a company jointly controlled by Marc and Philip. After Marc's death the loan was repaid by Ongold with funds of Marc's Testamentary Trust. The defendants assert, and Mae denies, that the payment gave rise to a debt of $1,280,714 owing by Marc's estate to Marc's Testamentary Trust.
9 As a result of a petition presented by Philip as executor of Marc's estate on the ground that Marc's estate was insolvent, the Federal Circuit Court ordered that Marc's estate be administered in bankruptcy. In support of his petition Philip swore that the debts of Marc's estate included $1,280,714 owed to Marc's Testamentary Trust and the outstanding Powercity loans. In the absence of those debts Marc's estate was not insolvent.
10 On 20 December 2016, Mae commenced CIV 3186 of 2016 in which she seeks an order for further provision from Marc's estate, pursuant to the Family Provision Act 1972 (WA), for declaratory relief in respect of alleged debts of Marc's estate to Powercity and Marc's Testamentary Trust, orders against Philip for damages and/or that Philip account to Marc's estate with respect to additional costs and expenses incurred by Marc's estate by reason of being administered in insolvency under the Bankruptcy Act 1966 (Cth), and for orders removing Philip as executor and as trustee of the trust created under Marc's will.
11 On 10 May 2017, Mae commenced CIV 1750 of 2017. The principal relief she seeks in that proceeding is an order removing Washburn and Rectangular as trustee of the Washburn Trust and Marc's Testamentary Trust respectively and the appointment of Mae as trustee in their place. Mae also seeks other relief related to the Washburn Trust and Marc's Testamentary Trust.
12 These two actions were heard together. All of the defendants in the Trust action (CIV 1750 of 2017) and all of the defendants in the Family Provision action (CIV 3186 of 2016) except for the second defendant, the trustee in bankruptcy of Marc's estate, were represented by the same solicitors and counsel. The trustee in bankruptcy of Marc's estate took only a limited part in the proceedings.
13 For the reasons which follow in the Trust action (CIV 1750 of 2017) I find:
1. the fourth defendant (Ongold) was not validly removed and the third defendant (Rectangular) was not validly appointed as trustee of Marc's Testamentary Trust by the deed of dismissal and appointment of trustee dated 30 January 2017;
2. Philip was validly appointed Guardian of the Washburn Trust by the deed of variation of the Washburn Trust made 21 December 2012;
3. the third defendant (Rectangular) should be removed as trustee of Marc's Testamentary Trust;
4. the plaintiff (Mae) should be appointed trustee of Marc's Testamentary Trust;
5. the second defendant (Washburn) should be removed as trustee of the Washburn Trust;
6. the plaintiff (Mae) should be appointed trustee of the Washburn Trust;
7. the court will not appoint a receiver of the powers of the Guardian of the Washburn Trust;
8. whether the second defendant (Washburn) is entitled to indemnity against the Washburn Trust assets will be determined after the parties have made further submissions after the publication of these reasons; and
9. whether the third defendant (Rectangular) is entitled to indemnity against the assets of Marc's Testamentary Trust will be determined after the parties have made further submissions after the publication of these reasons.
14 In the Family Provision action (CIV 3186 of 2016) I find:
1. the Powercity loans are due and payable by Marc's estate;
2. Marc's estate is not indebted to the trustee of Marc's Testamentary Trust in the sum of $1,280,714 in respect of the payment by the trustee of Marc's Testamentary Trust to Duporte on 10 November 2015;
3. Philip did not breach his duties as executor of Marc's estate by asserting and accepting that the Powercity loans are liabilities of Marc's estate;
4. Philip did not breach his duties as executor of Marc's estate by asserting and accepting that the payment of $1,280,714 by Ongold to Duporte gave rise to a loan by Ongold to Marc's estate;
5. Philip did not breach his duties as executor of Marc's estate by causing the net proceeds of the sale of Shimmer, the brig, and the lease of the boat pen to be deposited with CEFS rather than with a bank or other financial institution;
6. in making his settlement offer, Philip misused his position as controller of the trustee of the Washburn Trust and Marc's Testamentary Trust but no breach of trust resulted because the settlement offer was not accepted and no transaction was undertaken to give effect to it;
7. Philip should be removed as executor of Marc's estate; and
8. the whole of the net estate of Marc should be awarded to the plaintiff.
15 In the Trust action (CIV 1750 of 2017) Mae is the plaintiff. Philip is the first defendant. Washburn, Rectangular and Ongold are the second, third and fourth defendants respectively. The fifth defendant, Duporte, and the sixth defendant, Powercity, are companies to which the defendants claim, and Mae denies, Marc was indebted at the time of his death or at the time when probate of his will was granted. Angela is the seventh defendant.
16 In the Family Provision action (CIV 3186 of 2016) Mae is the plaintiff. The first defendant is Philip in his capacity as executor of Marc's estate. The second defendant is the trustee in bankruptcy of Marc's estate. The third and fourth defendants are Powercity and Duporte.
17 Mae was born on 1 March 1986 in Melbourne. She graduated from Monash University with a law degree in 2009. On graduation she commenced employment as a graduate lawyer with international law firm Freehills (later Herbert Smith Freehills or HSF) in Melbourne in March 2010.
18 Mae was living with her mother when she met Marc in February 2011. Within a month of meeting Marc she moved into his apartment in Melbourne. Mae moved to Singapore for work in July 2011. Marc and Mae were married in Victoria on 23 September 2012. In November 2012 they moved to Perth. Mae continued to work for HSF after she married Marc.
19 In 2013, Marc was diagnosed with cancer of the oesophagus. Mae ceased work in early 2014 to care for Marc who was then seriously ill and cared for him until his death on 7 November 2015.
20 In July 2018, Mae returned to work three days a week as a solicitor at HSF's Perth office. At the time of trial Mae was on maternity leave, having given birth to a child earlier in 2020.
21 Marc is the second of three children of Frank Cardaci (Frank) and Grace. Philip, is the eldest and Angela is the youngest of the siblings.
22 Frank and his brother, Carl Cardaci (Carl), started a transport business which grew into one of the largest privately owned businesses in WA with interests in distribution, logistics, mining services, property and infrastructure.
23 Philip was born on 5 August 1965. Philip studied physics and computer science at Murdoch University and then worked with Fujitsu as a systems engineer for approximately four years. Philip started working in the family businesses in 1990.
24 Marc was born on 8 December 1966. Marc studied economics at the University of Western Australia. On graduating he worked at a funds management company named Wheeler Grace and Perucci and then as a senior economic advisor at The ABC Fund Managers. He then started working in the family businesses.
26 The Cardaci group of companies is known as the CFC Group. The name reflects the origins of the Group - 'Cardaci, Frank and Carl'. The CFC Group consists of four main businesses: Centurion Transport Group (Centurion), Construction Equipment Australia Group (CEA), Cape Crushing and Earthmoving and Underground Services Australia Group (Cape) and Birchmead Property Group (Birchmead).
27 Centurion is a transport and logistics business. It is based in Perth and operates across Australia as a provider of transport and logistics supply chain solutions. Centurion has mobile, land and infrastructure assets nationwide, including 14 distribution centres and a fleet of more than 1,500 vehicles.
28 CEA is involved in the distribution and supply of a diverse range of equipment to many industries including construction, agriculture, government, defence, waste management, mining and civil works.
29 Cape operates in the resources, utilities and infrastructure sectors. It supplies civil, mining services and underground utility installation and maintenance services.
30 Birchmead is the property development and land holding arm of the group. Birchmead acquires and holds industrial properties which are leased, including to other companies within the CFC Group. Birchmead also develops land for residential, commercial and industrial uses.
31 Frank and Carl started the CFC Group with a business known as Cardaci Cartage Contractors. In 1971, Frank and Carl incorporated their cartage business and named the incorporated entity Centurion Transport Co Pty Ltd. There were originally two shareholders of Centurion - Frank and Carl. In 1974, Frank and Carl started CFC Holdings, which was a business of buying and selling used equipment. It is the business now known as CEA.
32 Philip started working in the family business in 1990. Philip was put in charge of CFC Holdings. At that time CFC Holdings had one permanent employee - Kaye Bailey.
33 Marc started working in the family business in 1991. Initially, Marc worked with Frank and Carl at Centurion. At that time, Philip and Marc were just employees.
34 In or around 1996, Philip and Marc discussed buying all or part of CFC Holdings from Frank and Carl. In about 1996, Frank and Carl's interests in CFC Holdings were purchased by Contura Mining Pty Ltd (Contura) for $600,000. At that time the shareholders of Contura were the trustees of the four discretionary trusts of Frank, Carl, Philip and Marc, which were established at that time. The $600,000 paid to Frank and Carl was loaned to Contura by a bank.
35 The four discretionary trusts were established at that time through Brentnalls Pty Ltd (Brentnalls), a chartered accounting firm and Philip and Marc's accountants and financial advisors. The trusts were: The Alexandra Trust (which was controlled by Frank), The Sterling Trust (which was controlled by Carl), the TF Family Trust (which was controlled by Philip) and the Washburn Trust of which Marc was the trustee, appointor, guardian and a beneficiary. Also, around that time, four companies were established (through Brentnalls) each as a corporate beneficiary of one of the Trusts. In Marc's case that was Powercity.
36 Philip and Marc acquired an interest in Centurion. At that time, Centurion was outside and independent of the CFC Group. In 1997, the four discretionary trusts together purchased a 50% interest in the business of a customer of CEA - Underground Services Australia, a civil contracting company. In 2003 or 2004, Toll Holdings offered Frank and Carl $21 million to purchase Centurion (including Centurion's regional properties owned by Trentwood Corporation Pty Ltd). Later Toll changed the offer to a half share, which Frank and Carl rejected. Subsequently Philip and Marc discussed purchasing Centurion from Frank and Carl. Philip and Marc purchased Centurion from Frank and Carl through Contura for a consideration equivalent to the Toll offer, and with Frank and Carl each maintaining a 25% interest in Contura through their trusts. The transaction was completed in about 2005. Frank and Carl then retired from the businesses.
37 In about 2003, CFC Holdings had acquired the assets of CEA. CEA's headquarters was in Melbourne and it operated in Victoria, New South Wales and Queensland. In 2003 Marc moved to Melbourne to be the family representative on the east coast and manage the parts and service business for CEA.
38 Duporte is a company through which, by their discretionary trusts, Philip and Marc conducted joint property investments, commencing in or about 2003. In 2005 or 2006, Duporte purchased the apartment in Melbourne into which Marc moved and lived (Marc's apartment).
39 Construction Equipment Financing Services Pty Ltd (CEFS) was a dormant company that sat outside the CFC Group before it was used to act as a bank. CEA had a floor plan financing agreement with GE. The floor plan was backed by assets. Frank and Carl had spare cash which was tied up in banks. CEFS took deposits from Frank and Carl and paid them a higher rate of interest than they were earning. The business paid less interest than under the GE facility, Frank and Carl were paid a higher rate of interest and the 'bank' would have security over the assets.
40 Ms Kaye Bailey was responsible for the day to day operations of CEFS, including all receipts and payments, calculating and paying interest and doing the day to day accounts and bookkeeping.
41 Philip's evidence is that if a shareholder wanted funds from CEFS, they would usually email or call Ms Bailey and direct Ms Bailey to transfer the funds. Ms Bailey then gave effect to the payment instruction as long as that shareholder had money in CEFS. There was no requirement for a shareholder or Ms Bailey to get authorisation from any of the other shareholders to transfer funds. When it was initially set up, Ms Bailey would send Frank, Carl, Philip and Marc statements each month setting out their drawings and interest accrued for the month. What they got from Ms Bailey was their own statement, not anyone else's so as to keep each trust's interest private. Ms Bailey maintained the confidentiality of their personal financial positions. CEFS used Westpac as its bank. Its own bank accounts are held separate from CFC Group bank accounts.
42 In 2007, Philip was appointed the Executive Chairman of the CFC Group and Marc was appointed Chief Executive Officer of the CFC Group. As the Executive Chairman, Philip had oversight of all the businesses of the CFC Group.
43 The Washburn Trust was established by trust deed executed between Anthony Cipriano as settlor and Marc as trustee, appointor and guardian on 6 September 1995. Anthony Cipriano was Marc's close friend. The trust is a discretionary trust. It provides, in effect, that the trustee may distribute any part of the income or capital of the trust fund to any beneficiary for their own use or for the maintenance education and advancement or benefit of the beneficiary. The beneficiaries were Marc, his children, parents, siblings and other relatives, any corporation of which Marc is a director or shareholder or in which a share is beneficially owned by any beneficiary and any trust or settlement under which any beneficiary has any interest. Therefore the beneficiaries included, as well as Marc, Powercity and Duporte, in each of which Marc was a director and shareholder. They also include Philip and his trust.
44 In the 2011 financial year Marc, as trustee of the Washburn Trust, made distributions of $246,452 and $41,788 to Powercity and Marc (personally) respectively.
45 In the 2012 financial year Ongold, as trustee, made distributions of $233,840 and $49,000 to Powercity and Marc respectively. Brentnalls note that the distribution to Marc related to Division 7A loans.
46 In the 2013 financial year Ongold, as trustee, made distributions of $247,700, $147,200 and $58,800 to Powercity, Marc and Mae respectively. Brentnalls note that the distributions to Marc and Mae related to Division 7A loans.
47 In the 2014 financial year Ongold, as trustee, distributed $521,315 and $220,000 to Powercity and Mae respectively. Brentnalls note that the distribution to Mae related to Division 7A loans.
48 In the 2015 financial year Ongold, as trustee, distributed $230,701 and $126,000 to Powercity and Mae respectively. Brentnalls note that the distribution to Mae related to Division 7A loans.
49 In the years in which there were distributions to Mae, she did not receive any cash from the distributions. They were distributions made so as to allow the appropriate accounting entries to be made to satisfy the requirements of Division 7A loans.
50 Marc died on 7 November 2015 and control of the trustee of the Washburn Trust, Ongold, passed to Philip.
51 In 2017, Philip caused the Leone restructure to be effected. A new entity, Leone Family Holdings Pty Ltd (Leone), was created as the new holding entity for the group of companies comprising Contura and its wholly‑owned subsidiaries. In a letter to the Office of State Revenue in support of an application for stamp duty exemption, the solicitors for Contura and Leone said that Leone was created with the intention that it will sit outside the current banking facilities and securities that Contura and its subsidiaries currently had in place. They stated that the shareholders of Leone will be the same as the shareholders of Contura prior to the transaction and in the same proportions. It was necessary for Contura and Leone to obtain valuations of the companies. Those valuations are reflected in the 2017 and 2018 accounts.
52 The financial statements for Washburn as trustee for the Washburn Trust for each of the 2017 and 2018 financial years show that the value of the Washburn Trust's interest in Leone was $17,363,251. The balance sheet shows that the net assets of the trust were $17,358,400 and $17,358,102 for the 2017 and 2018 financial years respectively. Lead counsel for the plaintiff, Mr Cuerden SC, submitted that the balance sheets greatly underestimated the true value of the Washburn Trust's assets. For example, shares held by the trust in several companies are shown at the nominal value of $1 when the companies had substantial assets. Further, Mr Cuerden submitted that the values shown for the trust's one fourth interest in Trentwood Corporation of $1,476,379, does not reflect its true value. Trentwood's 2018 balance sheet shows it has net assets of $25,208,389, a one fourth share of which is $6,302,097.
53 Philip gave evidence that in August 2020 the general manager of the family office told him that the Washburn Trust had net assets of approximately $50 million.
54 The financial statements for Ongold as trustee for Marc's Testamentary Trust show that as at 30 June 2016 the trust had net assets of $8,690,621. However, those assets include loans to Marc's estate and Mae of $1,485,714 and $1,919,337 respectively which Mae disputes.
55 When Marc met Mae in 2011, he was a wealthy man in the sense that he controlled and had access to for his personal benefit an abundance of assets and money. However, Marc beneficially owned few assets personally. Most of Marc's wealth was held in the Washburn Trust. The Washburn Trust had a 25% interest in the CFC Group and a 50% interest in Duporte, in which Philip's trust held the other 50% interest. Marc controlled, through the Washburn Trust, 25% ownership of the CFC Group and Birchmead, which held a portfolio of properties. The CFC Group and Birchmead held very substantial assets.
56 Marc structured his financial affairs including the entities from which he received payments to minimise tax payments. One of the ways Marc minimised tax obligations was by what are popularly referred to as Division 7A loans. In very broad terms, payments may be made by a private company to a shareholder as a loan without being deemed the payment of a dividend provided that certain conditions are met which include minimum yearly repayments of loans. Marc received payments from Powercity, the corporate beneficiary of the Washburn Trust, which were treated as Division 7A loans and required a minimum yearly repayment to avoid being deemed the payment of a dividend.
57 Before addressing the issues in these actions, I will outline the facts giving rise to those issues
58 Marc met Mae at a charity party hosted by Marc at his Melbourne apartment on 25 February 2011. Mae moved into Marc's apartment within a month of their initial meeting.
59 Mae met Marc's family at his cousin's wedding in early 2011 about a month after they had started dating. Marc paid for Mae to fly to Perth for the wedding. At the time Marc had a house at Scarborough. In early 2011, Marc bought a house at Trigg in his own name for $2.05 million.
60 In June 2011, Marc and Mae went on a three‑‑week European holiday together. Marc paid for their flights, accommodation at four or five‑star hotels and eating at nice restaurants. Marc purchased designer accessories for Mae.
61 In July 2011, Mae moved to Singapore for work. Whilst Mae lived in Singapore, Marc travelled to Singapore every weekend or every second weekend to see her. Marc paid for Mae to fly to Perth to see him when he could not travel to Singapore.
62 Marc and Mae became engaged in December 2011. In May 2012 Tony Monisse of Brentnalls, on behalf of Marc, sought legal advice from Andrew Davies of the law firm O'Sullivan Davies. Mr Monisse wrote:
Whilst my client has expressed no concern in respect of personal assets in his own name (principal residence etc), the majority of his wealth is in the family trust. In particular, there are investments in trading entities and if forced to sell these assets to raise finance in the future due to a change in personal circumstances, this could have an adverse effect on continuity of these businesses. Please note the appointor of the trust Filippo is Marc's brother.
63 Mr Davies replied on 12 June 2012 stating, amongst other things, that he understood:
Marc wishes to review his circumstances in the lead up to any marriage with Mae Comber and to consider options for estate planning if there is a breakdown in the relationship after marriage.
64 On 25 June 2012, Tony Monisse made a file note in which he referred to discussions with Marc and Mr Davies and noted that Marc had decided not to proceed with amendments to the trust deed in respect of the appointor introducing other family members and that
[h]e trusted his judgment on this and was comfortable with the person he was marrying and that his assets and trust were not at risk.
65 Mr Monisse also noted that Marc had requested that Mae be made a beneficiary of the Washburn Trust because a spouse was not included in the list of trust beneficiaries. On 22 August 2012 in an email to Marc, Mr Monisse confirmed Marc's instructions that the definition of general beneficiaries in the Washburn Trust would be amended to include Marc's spouse and the appointor clause would not be amended.
66 In or about September 2012, Marc executed a deed of appointment that had the effect of appointing Mae as a member of the general class of beneficiaries of the Washburn Trust.
67 Marc and Mae were married in the Yarra Valley, Victoria, on 23 September 2012. Marc paid for the wedding. Marc's parents gave Mae an Omega watch valued at $10,000 as a wedding gift.
68 In November 2012, Marc and Mae moved to Perth. They moved to Marc's house in Trigg. Mae transferred to HSF's Perth office. She was then a fourth‑year lawyer.
69 After their marriage Marc arranged joint bank accounts and credit cards for Mae. During their relationship Marc paid for everything they needed or wanted. Marc gave Mae many expensive gifts. Mae understood that Marc accessed money by directing Ms Bailey to pay certain amounts to Marc by Marc communicating about it with his accountants, Brentnalls. Mae believed that Marc followed Brentnalls' advice so that he would pay the least amount of tax. Mae believes she signed documents to receive income or dividend distributions to allow Marc to pay the least amount of tax and to manage their expenses. She does not know the details of these distributions. She left all business and financial matters to Marc and his advisers. Mae did not actually receive any cash distributions.
Marc makes new will and Memorandum of Wishes and varies Washburn Trust deed
70 On 21 December 2012, Marc executed a deed of variation of the Washburn Trust, a new will and a Memorandum of Wishes.
71 The deed of variation amended the Washburn Trust deed by removing the definition of the appointor and the guardian of the trust and substituting new definitions. The new definitions relevantly appointed as Appointor and Guardian Philip, and upon his death Marc, and upon the death of the last of them Mae.
72 By his will Marc appointed Philip as his executor and trustee. He gave all his property to his trustees to establish a trust for Mae on the terms that his trustees may during a period (the option exercise period) transfer to Mae for her benefit all or any part of his estate and to hold the balance on the terms of the trust set out in a schedule to the will. This schedule sets out the terms of the testamentary trust. The primary beneficiary is Mae and her children. The beneficiaries include relatives of the primary beneficiary and corporations associated with the primary beneficiary. The terms of the trust provide that the trustee may, until the Distribution Date, apply the income to one or more beneficiaries as the trustees may determine. The Distribution Date is the Vesting Date or such earlier date as the trustees may determine. On the Distribution Date, the trustees are to distribute the capital to one or more of the beneficiaries in such proportions as the trustees may determine. If the Primary Beneficiary, that is Mae, dies before the vesting of the trust fund, then the trust fund shall thereafter form part of the estate of the Primary Beneficiary.
73 The Memorandum of Wishes is addressed to the Trustee, Appointor and Guardian of the Washburn Trust. In the memorandum, Marc expressed his wish that the Trustee pay all income and capital received by the trust from time to time to Mae, after making suitable provision for taxes and other expenses. In the memorandum, Marc declared that it was his wish that those charged with the administration of his affairs conduct the affairs of the trust to give effect to his expressed intentions in an equitable yet considered manner and bearing in mind the interests of the beneficiaries of the trust.
74 In January 2013, Marc was diagnosed with cancer of the oesophagus. In February 2013, Marc commenced chemotherapy. Marc and Mae made unsuccessful attempts for Mae to become pregnant and Marc had his sperm frozen before he commenced chemotherapy and again later.
75 During the times when Marc was not in hospital or undergoing active treatment, Marc and Mae travelled through Europe and to Singapore and Melbourne. They travelled business class and stayed in four or five‑star hotels. Money was no restriction. They did whatever activity they wanted.
76 HSF allowed Mae to take days and weeks off work when Marc was in hospital, the days when he was receiving treatment or recovery or any time his health was not strong.
77 After a lengthy illness, Frank died on 6 January 2014.
78 Marc initially responded well to chemotherapy. However, in late 2013 he relapsed and required hospitalisation. In January 2014, Mae ceased working with HSF and took extended leave without pay.
79 From January to March 2014, Marc underwent further chemotherapy and radiotherapy but his condition did not significantly improve. From late 2014, he was heavily reliant on Mae for everyday tasks and care.
80 Grace died on 20 November 2014. Her death was sudden and unexpected.
81 By her will Grace appointed Philip, Marc and Angela as her executors. On 8 May 2015, Philip, Marc and Angela swore an affidavit in support of a motion for grant of probate of Grace's will. On 29 May 2015, this court issued a grant of probate over the estate of Grace. As I have said, Grace's will established three testamentary trusts, one for each of her children. Each of them subsequently appointed a company as the corporate trustee of their testamentary trust. Marc appointed Ongold as trustee of Marc's Testamentary Trust. Marc was the sole director and shareholder in Ongold.
82 Marc was the primary beneficiary under Marc's Testamentary Trust and Philip and Angela were the primary beneficiaries under the other two trusts respectively. The general class of beneficiaries of Marc's Testamentary Trust were Marc's children, his spouse, other persons in various degrees of relationship with Marc, certain education institutions, corporations in which Marc was an officer or shareholder or had a beneficial interest, trustees of any trust in which Marc had any beneficial interest and associated persons.
83 In examination‑in‑chief, Philip said that the three trusts established under Grace's will were 'one for each of her three children'.
84 On 13 November 2014, Marc purchased a luxury boat named Shimmer. Marc borrowed funds from Duporte to purchase the boat. The Duporte balance sheet for the financial year ended 30 June 2015 records a loan to Marc in the sum of $1,280,714.
85 Philip says Marc told him that he (Marc) had told Ms Bailey to repay the Duporte loan from Marc's Testamentary Trust as soon as it was in funds to do so. Philip says he suggested, and Marc agreed, that a dividend be paid from Duporte that would enable Marc to pay down all or part of the Duporte loan. Philip says this was unusual because Duporte did not ordinarily pay dividends.
86 On 22 October 2015, Philip sent Ms Bailey an email, copied to Marc, with the subject line 'Duporte dividend' which stated:
I have spoken to Marc and he agrees with a dividend of 1.5 million being paid to shareholders (750k per holder). Could you please process and if possible can we offset Marc[']s against his current loan and when the funds are available can mine be placed into CEFS.
87 In response, on 22 October 2015 Ms Bailey sent an email, copied to Marc, stating she would process and arrange the relevant paperwork. On 22 October 2015, Marc sent an email to Philip and Ms Bailey stating 'Thanks Phil'.
88 The funds came in from Grace's estate. On 26 October 2015, Ms Bailey sent an email to Philip and Marc, which stated that the funds had been received from Westpac. Philip says that Angela had received an advance, as had Marc, which affected the sum their respective testamentary trusts received. On 26 October 2015, the CEFS account held by Marc's Testamentary Trust received $1,566,900.
89 On 30 October 2015, Ms Bailey sent an email to Philip and Marc, noting that the Duporte facility in the sum of $4,215,000 was due to expire and could be extended to 31 December 2015. On 1 November 2015, Philip sent an email to Ms Bailey copying Marc, stating 'I don't think we need to at this point'. Philip says that by then he had spoken with Marc and said there was no point doing the dividend now that the funds had come through and Marc agreed. Duporte's records show that on 10 November 2015, three days after Marc died, Ms Bailey processed the repayment of the Duporte loan from Marc's Testamentary Trust.
90 Marc arranged for the purchase of a new property at Watermans Bay in Mae's name. On 22 September 2015, Mae entered into a written contract to purchase 77 Flora Terrace Watermans Bay. Marc told Mae the house was for her. I find that Marc intended to pay the purchase price as a gift to Mae.
91 Marc told Mae that he would use the proceeds from the sale of his Trigg property towards the purchase of the Watermans Bay property. Marc requested Ms Bailey pay $50,000 for the deposit. Marc and Mae selected furniture which cost hundreds of thousands of dollars. Mae had no means of paying for the furniture. Marc intended to pay for the furniture as a gift to Mae.
92 On 1 October 2015, Marc underwent an operation which he said: 'may be life or death'. Marc asked Tony Monisse to arrange for his will to be amended to ensure Mae is entitled to his sperm and said:
[I]t will be Mae's responsibility to start up a foundation to reflect my legacy to my family and the greater community.
93 Marc survived the operation but was hospitalised again on 13 October and was again admitted to hospital on 30 October for surgery.
94 Marc returned home. On 3 November 2015, Mae hosted a Melbourne Cup function at Marc and Mae's house.
95 On 5 November 2015, Marc deposited $1.8 million to Marc and Mae's joint bank account. The money was the proceeds from the sale of Marc's Trigg property.
96 On 7 November 2015, Marc dies. Marc was admitted to Sir Charles Gairdner Hospital and subsequently transferred to St John of God Hospital.
97 Mae arranged for Marc to sign his last will. The new will was the same as Marc's previous will with the additions that it declared Marc's wish that following his death his sperm be donated and Mae be entitled to use it as she wishes and that he wished to be buried with his parents.
98 Philip arranged for Marc to sign some documents. At the time and for some time later Mae did not know what document or documents Philip had caused Marc to sign. In an affidavit she swore on 9 May 2017, Mae swore that she had no confidence that the trustee companies under Philip's control would ensure that she was properly provided for out of the Washburn Trust or Marc's Testamentary Trust and one of the matters which caused her lack of confidence was that Philip had put documents in front of Marc on his deathbed to sign at a time when he was not fully conscious to benefit himself and detriment Marc's estate. The documents which Philip caused Marc to sign were documents which appointed Philip as director of Castlemaine Superannuation Pty Ltd and transferred the shares in that company to Philip. Castlemaine Superannuation Pty Ltd was the trustee of Castlemaine Superannuation Fund, Frank and Grace's superannuation fund. That appointment and transfer did not benefit Philip personally or cause detriment to Marc's estate.
99 On 11 and 12 November 2015, Mae transferred $1,940,000 from Marc and Mae's joint bank account to Mae's personal bank account for the settlement of the Watermans Bay property.
100 Philip had a discussion with Mae on 19 November. On the previous day, 18 November, there was an exchange of emails between Philip and Chris Smith of Brentnalls. In the first email Mr Smith said:
Not sure if you were planning to discuss with Mae tomorrow morning, however, I have calculated the Net Cash After Tax on Mae receiving $30 K /month dividend from the group.
101 In a reply email, Philip asked if it would be necessary to allow cash for the repayment of Division 7A loans over 25 years. Mr Smith replied that it would be necessary and made further comments about that.
102 The following day, 19 November, at the Watermans Bay property Philip had a discussion with Mae about finances. Philip said to Mae that she can take up to $180,000 without incurring any tax. Philip said that the bills for the boat Shimmer of $10,000 a month would be paid from Washburn dividends. Mae asked Philip about the Watermans Bay property. Philip said to Mae not to worry, that she can access the funds when the time comes and she should tell him how much she needs. Philip asked if Mae had access to the proceeds from the sale of the Trigg house. Mae told Philip that she did, that Marc had transferred $1.8 million to their joint account a few days before he passed away.
103 On 14 December 2015, Mae sent an email to Philip in which she asked Philip if he knew how she needs to organise finance for the Watermans Bay property. Philip responded by saying, among other things, that Ms Bailey would organise the balance of the funds and asked whether Mae had the balance of funds available for the furniture. Mae responded that there would be some additional furnishings which would be around $30,000, that the amount owing on the furniture would be around $160,000, that she did not have enough in the account to cover it, and that she had about $90,000 left. Mae asked Philip if he thought she should use some of the remaining funds for the furniture. Philip replied:
We can organise additional amount as long as we get a few days' notice ... With regards to the furniture we can discuss when we are closer.
104 On 24 December 2015, Philip executed two deeds varying the terms of the Washburn Trust. By the first deed Philip, in the exercise of the power given by the Trustees Act 1962 (WA) and contained in cl 22 of the Washburn Trust deed appointed Washburn as Trustee of the Washburn Trust. By a second deed, Washburn as Trustee, with the consent of Philip as Guardian, varied the terms of the trust deed to appoint Philip as Appointor and Guardian.
Communications between Mae and Philip in early 2016
105 On 11 January 2016, Ms Bailey sent an email to Philip in which she said:
Mae has $785,405 left in Ongold Testamentary trust after repaying the loan to Duporte ($1,280,714) and also will receive $1,178,000 from Alexandra Trust via CEFS as part of Marc's estate but not sure when these can be paid out.
106 On 17 January 2016, Mae sent an email to Ms Bailey and Philip attaching an invoice from Ultimo Interiors for furniture for the new house, stating that she needed to pay a progress payment of $50,000 for the new house and asking if that was something they can arrange. On 19 January 2016, Ms Bailey sent an email to Mae confirming that $50,000 was transferred to Ultimo Interiors.
107 On 8 February 2016, Mae sent an email to Philip stating:
I have transferred the $1.8 million to the settlement agents but it is making me nervous about my future financial position. I realise that the net position of the estate is uncertain but I wondered if you could tell me whether I can source everyday funds after the house has been settled. I still have a little bit of funds, but not a lot. Do I need to find a source of income (eg, go back to work soon) or are there sufficient funds if I would like another influx for furniture, boat payments, insurances, holidays and general living.
Sorry to burden you with these questions. Unfortunately as Marc and I never discussed these issues, I am nervous about my current financial situation and how I need to plan for the future. Feel free to respond in a simple email or give me a quick call whenever it suits.
We will work it out step by step as I said once we get over the house and furniture then we can get into a regular pattern and work out what you need to live. Maybe you can sit down with Angela as she does all her family's budgeting. This will help in the next step.
Either way we will get through this with our assistance.
109 The balance of the purchase price ($1,500,633) for the Watermans Bay property was paid to the vendor on 11 February and settlement occurred on 15 February.
110 On 16 February 2016, Mr Smith emailed to Philip a document entitled 'List of Marc Cardaci's assets & liabilities (date of death = 7/11/2015)'. The accompanying email stated that the draft was for probate of Marc's estate and highlighted items in respect of which Mr Smith required further information from Philip or Ms Bailey. Mr Smith said that based on the draft, 'there is a liability of $602k showing'.
111 On 19 February 2016, at Mae's request, Ms Bailey paid $93,304 to Ultimo Interiors for furniture for the Watermans Bay property.
112 On 6 March 2016, Mae emailed to Philip stating:
I am starting to think about my finances again and what I should do. What is the process for getting funds going forward? I have more bills coming in, such as for my birthday and all the ancillary items for the house such as the security system, electrical work, furniture items, as well as my regular boat bills etc. I am almost out of funds in my account so just wanted to check with you what I should do.
113 On 8 March 2016, Mae sent an email to Ms Bailey and Philip saying that she had significant bills, didn't have sufficient funds in her accounts to cover them, was still unclear about where any funds should be coming from and asking if a lump sum could be transferred to her or if she should send invoices to them. On 11 March 2016, Ms Bailey caused $22,340 to be paid to Ultimo Interiors for furniture for the Watermans Bay property.
114 On 15 March 2016, Mae emailed Philip asking if he was available that week to discuss financial matters, that she had some bills and did not have sufficient funds to pay them. There followed emails between Mae and Philip trying to organise a meeting. On 21 March 2016, Mae sent an email to Philip saying she would like to organise a meeting with him and Tony Monisse to get an understanding of what her finances look like. Philip responded saying he was still waiting for Brentnalls to finalise the accounts for Marc's estate and until that was done it made it difficult to work out the future. Philip suggested a meeting after his meeting with Brentnalls on 31 March. By email of 21 March to Philip, Mae asked if the meeting could take place earlier. They arranged to meet at Brentnalls on 31 March.
115 On 30 March 2016, Philip met with Mr Smith and Ms Bailey. Mr Smith presented an excel document outlining the assets and liabilities of Marc's estate, a summary balance of Marc's superannuation fund and some information regarding Marc's Testamentary Trust. The schedule included the details as they were likely to be presented in the asset and liability schedule for the application for probate of Marc's estate. Philip asked that the schedule be summarised into a more succinct format and consolidate some of the asset classes. They discussed the position to be presented to Mae at the meeting the following day. Philip asked Mr Smith to present an updated position including cash that had been withdrawn from the testamentary trust and the Washburn Trust or Powercity since 1 July 2015. Philip said that at the meeting with Mae they were not going to discuss the Washburn Trust or Powercity.
116 Later that day, 30 March 2016, Mr Smith emailed to Philip and Ms Bailey three documents. In his email Mr Smith said that the first document,[1] entitled 'List of Marc Cardaci's assets & liabilities', includes Marc's estate's assets in a more summarised format (showing net liability of $787,000), the estimated super of $187,000, the estimated entitlement held within the Marc Cardaci Estate of approximately $9,536,000 and the adjustments relating to additional drawings made during the year. The second document[2] showed details from the CEFS general ledger. Mr Smith said the third document,[3] Pro‑Forma Testamentary Trust accounts for Marc Cardaci Testamentary Trust, shows the $9,536,000 value that is recorded in the first document.
117 On the morning of 31 March 2016, there was a meeting at Brentnalls' offices between Mae, Philip, Ms Bailey and Mr Smith. Philip opened the meeting by saying that they would be discussing Marc's asset and liability position, that his estate was in deficit, and they would be talking about some of the tax implications of loans that Marc had with Powercity, about Marc's Testamentary Trust and funds that had been withdrawn from the testamentary trust since Marc's death.
118 Mae was given a number of documents during the meeting. The first document[4] was described by Mae as a spreadsheet. I will refer to it as the March spreadsheet. It lists assets of Marc's estate and liabilities which exceed assets by $787,758. It refers to Marc's self‑managed super fund as an asset of $187,293. It lists assets of Marc's Testamentary Trust of $9,536,000. The list then shows 'Net assets prior to adjustments' of $8,935,535 which is calculated by adding the net assets of Marc's Testamentary Trust to the net liabilities of Marc's estate. The document then shows adjustments connected with the testamentary trust, which refer to drawings or amounts withdrawn from the testamentary trust, and adjustments not connected with the testamentary trust, which refer to drawings or amounts withdrawn from the Washburn Trust and Powercity. The adjustments are then aggregated and deducted from the 'Net assets prior to adjustments' to give a final total of $6,357,981.
119 Mr Smith went through the list talking about items on it. Amongst other things they referred to Shimmer and said the loan had been repaid. They talked about Marc's Testamentary Trust and Mae understood that to form part of Marc's assets because that is what he inherited through his parents. Mae made handwritten notes on the document.[5]
120 Mae was also given a document[6] which described Division 7A loans which Mr Smith talked about. Mr Smith's evidence is that he said that there were required annual repayments that historically had been satisfied by declaring dividends from Powercity and distributions to individual taxpayers - either Marc or Mae - which caused there to be a tax payable or top up tax on the dividends that were declared and he discussed the timing of dividends and the paying of the loans over a period of seven years. Mr Smith's evidence is that Philip said that the loans were required to be repaid back to Powercity, that there were tax implications of making those repayments, and those repayments could be managed via distributions through the Washburn Trust. That is broadly consistent with Mae's recollection that it was said at the meeting that the Division 7A loans were typically paid out from Washburn Trust dividends and it would take about five to six years to pay them off.
121 Mae was also handed a document[7] which stated the cash position on 30 March 2016 of the Ongold Testamentary Trust, which is Marc's Testamentary Trust, and Grace's estate and also stated the income of the testamentary trust per annum. Philip or Ms Bailey explained that the testamentary trust's assets included properties and the trust would be topped up from rentals from those properties.
122 At the meeting, Mae repeated back what she understood had been discussed. She said, 'we have got the cash that is available in Ongold, which is liquid assets.' She then said, 'then there is Marc's long service leave entitlements plus his superannuation, which they mentioned would come to [her], plus any liquid assets that were in Marc's Testamentary Trust, meaning what [Marc] would inherit from [Frank and Grace].' Also the Washburn Trust because that is where Marc kept all his business assets and his real wealth. Nobody corrected her. Mae says she walked away feeling that she was financially wealthy and that there would be plenty of money coming in. There was no discussion about her having taken money out as loans that would be repayable. It may have been said that Marc's estate is in deficit, but it was not said that Marc was bankrupt. Mae understood that the overall value of his estate was $6.5 million dollars and that wasn't including the Washburn Trust or the liquid assets of Marc's Testamentary Trusts. Mae was told that Marc controlled his testamentary trust through Ongold, that she would be the shareholder in Ongold and that is how she would control the trust that would ultimately distribute to her.
123 Philip says one of his principal purposes for the meeting was to explain to Mae the distinction between Marc's estate and Marc's Testamentary Trust. However, the March spreadsheet is entitled 'List of Marc Cardaci's assets and liabilities', includes the assets of Marc's Testamentary Trust and adds the assets, in fact a deficit, of the estate to the assets of the testamentary trust, makes adjustments connected and not connected with the testamentary trust and states a final total of $6,357,981. That supports Mae's understanding from the meeting that the overall value of Marc's estate available to her was about $6.5 million.
124 Philip's evidence is that Mr Smith went through the March spreadsheet and explained it line by line. He says that, while doing that, he explained to Mae that Marc's estate was in deficit. Philip says that Mr Smith then spoke to the document setting out the Division 7A loans and said that there was a requirement for repayments of the loans to be made over the next seven years. Philip recalls Mae asking how much cash there was available.
Communications between 31 March 2016 meeting and 18 May 2016 meeting
125 On the afternoon following the meeting, Ms Bailey emailed Mae that she had transferred $100,000 to Mae's account that day. The money transferred was from Marc's Testamentary Trust.
126 In mid‑April 2016, Mae and Philip exchanged emails about Mae taking up property development or investment in the course of which Philip arranged for Mae to meet one of his contacts.
127 On 25 April 2016, Mae and Philip met at the Wild Fig Café. Mae and Philip agree they spoke about opportunities for Mae to get into property investment. Mae says she told Philip that she had decided to sell the boat, Shimmer, and Philip said that was a good idea. Mae says she asked Philip if he needed any money from the sale to pay back the Division 7A loans and Philip said 'no, keep it, it is yours.' Philip says he only recalls property investment opportunities being discussed and that there was no discussion about Marc's estate, Marc's Testamentary Trust or the Washburn Trust.
128 On 5 May 2016, Mae emailed Ms Bailey requesting an updated spreadsheet of her cash position. On 6 May 2016, Ms Bailey emailed Mae attaching what she described in her email as 'April statement for Ongold Corporation Testamentary Trust'. The attached statement is entitled 'Construction Equipment Financial Services Pty Ltd Statement of Loan Account for Ongold Corporation Testamentary Trust'. The statement includes an opening loan balance, accrued interest, drawdowns, funds deposited to CEFS and tax provisions. The statement concludes with 'available for drawdown $505,254.38'. On the face of it, this statement, in response to Mae's request for a spreadsheet of her cash position, is a statement that Ongold's account with CEFS had a balance of $505,254.38 which was available for Mae to drawdown.
129 Mae first went on a date with Sean Hughes in mid‑April 2016. They started a romantic relationship shortly afterwards.
130 In late April, Philip's wife, Helen, told Philip that she had seen Mae and Mr Hughes in front of the apartment, that Mae looked very guilty and that Mr Hughes ran off to the side.
131 Members of the Cardaci family held a family dinner at about monthly intervals. The defendants submit that the family dinner on 29 April 2016 was significant. Philip gave evidence that one of his reasons for deciding to make his settlement offer on 13 July 2016 was that it appeared to him that Mae had moved on and one of the matters that led him to that conclusion was the way Mae acted at the 29 April family dinner. Philip said that at the dinner Mae seemed detached, she was texting consistently on her phone, she did not seem to be there and seemed to want to be somewhere else.
132 I do not accept that Mae behaved in that way at the dinner or that Philip formed the belief that Mae had moved on in part because of Mae's behaviour at the dinner. There is no evidence to support Philip's contention. The defendants obtained discovery of many text messages sent or received by Mae but tendered no evidence of texts to support Philip's contention that Mae was texting consistently during the dinner. Angela referred to the 29 April family dinner in her evidence but did not say that Mae appeared distracted or was texting at the time. After the dinner Angela sent an email to Mae, Philip and Philip's wife, Helen, in which she said:
Thanks Mae for hosting tonight's family dinner it was nice to see everyone.
133 I accept Mae's evidence that she was not distracted, that she was the host, she was cooking and showing the others around the house, which she had recently moved into, and was engaging with them.
134 Mae says that in a telephone call in early May she told Anthony Cipriano that she had started seeing Mr Hughes. Mr Cipriano says that the call was in the first few days of May and that Mae said to him that she was in love with another man. Mr Cipriano said that that sparked in him the thought whether something had started before Marc died. Mr Hughes was the selling agent on the sale of the Watermans Bay property in September 2015. Mae had met Mr Hughes prior to Marc's death. There is no evidence, and Mae denies, that she had started any sort of relationship with Mr Hughes prior to mid‑April 2016. I accept her evidence.
135 Mr Cipriano immediately called Philip. Philip's evidence is that Mr Cipriano told him that Mae was seeing another man; Philip guessed it was Mr Hughes and Mr Cipriano confirmed that. A few days later Mr Cipriano again called Philip and told him Mae was in love with Mr Hughes and she was confused because she was in love with two men. Philip says that, in that or another call, Mr Cipriano told him that Mae wanted to have a child with Mr Hughes. Philip says that in a later call Mr Cipriano told Philip that Mae was going away with Mr Hughes and they had decided to buy a boat together. Mr Cipriano's evidence is broadly consistent with that of Philip although they differ in some detail.
136 Learning that Mae was seeing someone else affected the way Philip regarded Mae's relationship with the Cardaci family. In his evidence‑in‑chief Philip said that when his sister, Angela, told him that Mae was seeing someone, he said that he had already known about it and told her not to worry, as it was something that Marc would have expected anyway. However, in cross‑examination, Philip agreed that after his conversations with Angela and Mr Cipriano about Mae seeing Mr Hughes, he thought Mae had moved on. Later Philip said there were other things that had contributed to his view that Mae had moved on. One matter was Mae texting at the house, her disinterest and not coming to family dinners. The reference to texting is a reference to Mae's participation in a Cardaci family dinner on 29 April during which Philip says she was constantly texting and appeared detached. For the reasons I have stated, I find that that was not a matter which contributed to Philip's belief that Mae had moved on.
137 I find that the way in which Philip regarded Mae, her relationship with the Cardaci family and the financial obligations of the family, including his control of Marc's estate, Marc's Testamentary Trust and the Washburn Trust, to Mae had changed by May 2016. Philip expressed that change as his belief that Mae had moved on and that she wanted financial independence. I find that Philip's belief that Mae had moved on was based principally, if not exclusively, on Philip's knowledge or belief of Mae's relationship with Mr Hughes.
138 Philip's belief that Mae wanted financial independence could only be based on Mae's requests for information about her finances, that is information about the assets of Marc's estate, Marc's Testamentary Trust and the Washburn Trust and her access to those funds.
139 On 18 May 2016, Mae and Philip met at the Wild Fig Café. Mae and Philip agree that Philip said to Mae that he was disappointed in her because she had decided not to apply for the position as executive assistant at FMG. Mae says that she was upset by that. Philip says Mae appeared to be upset by that.
140 Mae says that she asked Philip for company accounts for Washburn. Philip said:
I am the trustee of Washburn Trust. I will never distribute anything to you from the trust or the company. I want all of the wealth to go into the foundation for Marc.
141 Mae says that she was shocked and distressed by what Philip said.
142 Philip denies that he said he would never distribute anything to Mae from the trust or the company. Philip says Mae asked about working in the family business and he said that was not going to happen because it was a rule his father and uncle had put in place that spouses did not work in the business. Philip says Mae got upset at that.
143 Mae and Philip agree that the meeting finished with them talking about the proposed foundation. Mae says she did that because she wanted to speak about something positive.
144 On 24 May 2016, Philip executed an affidavit in support of his application for a grant of probate of Marc's estate. Included in that affidavit was a statement of assets and liabilities of Marc's estate. That statement did not reflect the fact that Marc's Testamentary Trust had paid out Marc's liability to Duporte because the statement of assets and liabilities reflected the position as at the date of Marc's death.
145 On 30 May, Mae emailed Ms Bailey and asked that she transfer $100,000 to Mae's bank account. Ms Bailey replied the following day that she had transferred the funds to Mae's bank account.
146 On 1 June, Mae resigned from her employment with HSF. She wanted to pursue a career in property development or investment rather than as a lawyer.
147 On 13 June, Mae emailed Philip confirming that she was negotiating with an interested party for the sale of Shimmer. Philip replied confirming that Mae could proceed to sell Shimmer. On 15 June 2016, Mae sold Shimmer for $1,215,000.
148 Mae met Angela for a coffee on 14 June. Mae and Angela disagree on what Mae said to Angela when she first told Angela that she had started dating Mr Hughes. They agree that Mae told Angela that she had started seeing or dating Mr Hughes. Angela says that it was during this meeting that Mae told her that she (Mae) had started seeing Mr Hughes and Mae said she was in love with Mr Hughes as well as Marc. Angela says that within an hour or two of the meeting she called Philip and told him what Mae had said.
Mae and Philip arranged to meet on 16 June at the Wild Fig Café
149 Philip says that he met Mae at the Wild Fig Café on 16 June. Philip says that it was at this meeting that Mae told him she was seeing another man. Mae's recollection is that the meeting did not go ahead but she may have spoken to Philip by telephone. Mae's evidence is that she told Philip that she was seeing Mr Hughes at their meeting on 3 July.
150 In late June 2016, there were emails between Mae and Philip about the sale of Shimmer. By email of 27 June 2016, Philip said to Mae that the sale could go through but the transfer could not be effected until probate of Marc's will was obtained and the funds from the sale should be put into an account handled by Ms Bailey. Philip said he would organise to make the minimum Division 7A loan repayment. Philip said that Marc's estate was in deficit. Philip added:
The funds in the other account are not part of Marc's estate and you can continue to use these.
I infer from the context of the email that 'the other account' is a reference to funds held by or on behalf of Marc's Testamentary Trust.
151 On 28 June 2016, Garry Same of Taylor Smart lawyers emailed Philip that on 22 June Philip had been granted probate of Marc's will. In his affidavit in support of his motion for a grant of probate, Philip swore that Marc's estate had assets of $2,213,451 and liabilities of $3,007,555. The principal liabilities were debts to Powercity of $1,397,245 and Duporte of $1,280,714. Philip informed Mae that probate had been granted.
152 On 30 June, Ms Bailey emailed Mae attaching a statement for Ongold and stating:
[T]hese funds ... are actually being borrowed by yourself until finalisation of Marc's Estate.
153 That appears to be the first time that Mae was informed that the amounts paid to her from Marc's Testamentary Trust were loans.
Washburn Trust and Marc's Testamentary Trust 2016 distributions
154 In the 2016 financial year, the Washburn Trust made a net profit of $622,916. By written resolution stated as 'dated 30 June 2016' Philip, as the director of Washburn as trustee for the Washburn Trust, resolved to distribute $345,000 to Marc's estate, $10,000 to Abernethy Trust 3 and the balance to Powercity. Philip says he does not remember when he signed the resolutions but he made all the resolutions before 1 July each year. Philip says the distribution to Marc's estate was to make the minimum repayments of Division 7A loans required to avoid the loans being deemed dividends and hence income for income tax purposes. Brentnalls note that the distribution to Marc's estate related to Division 7A loans. The amount distributed to Powercity was $267,916. The Washburn Trust owned 999 of the 1,000 shares issued in Powercity. The other share was owned by Marc's estate.
155 In the 2016 financial year, Marc's Testamentary Trust made a net profit of $84,167. By resolution dated 30 June 2016, Philip, as the sole director of Ongold, the trustee of Marc's Testamentary Trust, resolved to distribute the whole of the trusts income to Powercity.
156 Philip says that in early July he decided to make an offer to Mae to settle her claims against, or rights in respect of, Marc's estate, Marc's Testamentary Trust, the Washburn Trust and any other Cardaci family interests. Philip says he did so for a number of interrelated or overlapping reasons. First, Mae had moved on, she had met someone and at the last family dinner did not seem interested. Secondly, she wanted her independence. Thirdly, Philip wanted to make a distinction between family and money. Fourthly, Philip wanted Mae to stand on her own two feet. She did not want to get a job and to stand on her own two feet. Fifthly, Mae thought that the lifestyle that she and Marc were leading when he was sick was the lifestyle that Marc normally led.
157 Philip prepared a spreadsheet entitled 'List of Marc Cardaci's assets & liabilities (date of death = 7/11/2015)' which I will describe as the July spreadsheet. I will outline the data in the spreadsheet because it formed the basis for the settlement offer Philip made to Mae. The spreadsheet was based on the March spreadsheet. Philip updated the entries for changes since March. The spreadsheet is divided into three columns. The first contains items under headings 'Assets', 'Liabilities', 'Adjustments' and 'Other items'. The second column is headed 'Probate values Marc Cardaci'. The third column is headed 'Loan Mae Cardaci'.
158 The assets total $2,218,981 and liabilities total $3,007,554 giving net liabilities of $788,573. Those assets and liabilities appear to be assets and liabilities of Marc's estate. The only reference to Marc's Testamentary Trust is a loan of $205,000 to Ongold as trustee of Marc's Testamentary Trust which is listed as a liability. There is no reference to the Washburn Trust, Duporte or Powercity in the assets. After the net liability of $788,573 appears an entry for Marc's super fund which appears to be shown as an asset of $187,283. Then appear a number of 'adjustments'. These include drawings from the Washburn Trust which is shown as a liability of $338,198, new drawings from Powercity which is shown as a liability of $25,133 and Division 7A loans which are shown as liabilities of $400,000 and $130,000 respectively. The column 'Probate values Marc Cardaci' shows total net liabilities of $1,375,026.
159 The column 'Loan Mae Cardaci' lists four items under the heading assets - boat brig Eagle, CBA cash investment account, furniture and personal effects, and boat pen Royal Perth Yacht Club, which are shown as liabilities of $105,000, $186,256, $10,000 and $53,765 respectively. Those 'assets' are added and 'Total assets' are recorded as a liability of $355,021. There is then an adjustment described as 'new drawings from Washburn Trust not included in the probate estimate' which is a liability of $118,530. That is added to the previous total to show 'total assets (liability), of $473,551. There are then further adjustments relating to the testamentary trust described as 'new drawings from Washburn Trust not included in the probate estimate' and 'new loan testamentary trust refunds to Mae Cardaci' shown as liabilities of $1,666,277 and $253,060 respectively to arrive at 'total adjustments (testamentary trust loan)' of $1,919,337. The totals for Marc's estate and Marc's Testamentary Trust are then added to arrive at a total liability of $2,392,888. Then come 'further items' made up of 'Maserati - owing to Duporte' and 'funds gifted' of $100,000 and $1,800,000 respectively. Those items are then added to the totals for Marc's estate and Marc's Testamentary Trust to give 'Total Mae Cardaci' a liability of $4,292,888.
160 On 13 July 2016, Mae and Philip met at the Wild Fig Café. Mae and Philip agree that during the meeting Philip gave Mae a printout of the July spreadsheet.[8]
161 Mae's evidence is that she opened the meeting by saying that she was pleased with the price she had got for Shimmer. Philip agreed it was a good price. Mae asked Philip to help her understand how to access those funds. Philip and Mae agree that Philip said that Marc's estate was bankrupt. They disagree about when, during the meeting, Philip said that, but that difference is not very significant. They agree that Philip gave Mae the July spreadsheet and they discussed the figures on the July spreadsheet, but thereafter their evidence diverges significantly.
162 I will set out later in these reasons Mae and Philip's conflicting evidence of what Philip said at the meeting. It is sufficient at this stage to note that they agree that Philip made what he described as a settlement offer which involved Mae receiving $2 million cash. Philip says that the offer also involved Mae retaining assets or being relieved of liabilities totalling $4.3 million. Mae says that Philip said that as trustee of the Washburn Trust, he intended to put all of Marc's wealth and any future wealth, including from Frank and Grace's estate, into a foundation. Philip denies he said words to that effect.
Emails between Mae and Philip after 13 July 2016 meeting
163 On 14 July 2016, Mae sent an email to Ms Bailey in which she referred to her meeting the previous day with Philip, said that Philip had mentioned that the cash is still available in Ongold and requested that the remainder be transferred to her. Philip replied to that email stating 'transferring the whole lot while we are still finalising the estate is a problem' but he would not leave her in the lurch from a day‑to‑day basis and if she needed any funds to let Ms Bailey know what she needed for the next month.
164 Mae responded on 19 July stating that she did not understand how an estate works, as she had thought that those funds were available to her, and she would follow Philip's advice and get her own legal and financial advice. Mae asked Philip to confirm where the $2 million cash that he offered her would be coming from and how and when it would be paid.
165 Philip responded the same day, 19 July. Philip confirmed he did not want to leave Mae in the lurch from a day‑to‑day basis and asked what funds Mae required for her personal use and for advice. He said he would ask Ms Bailey to deposit $40,000 into Mae's account for her to get appropriate advice. With regards to the $2 million cash payment to be made as part of the settlement, Philip said he was not sure where those funds would be coming from but he was prepared at that stage to personally fund any shortfalls. He proposed $1 million on finalisation of the agreement, $500,000 in 12 months and a final $500,000 in 24 months. He said that any payments made from now on would be adjusted from the $1 million including the $40,000 payment.
166 On 20 July, Mae sent an email to Philip. Mae asked Philip for clarity on two matters about which she was confused. The first matter was whether Philip's offer of settlement was to buy her out of Frank and Grace's estate or Marc's personal estate. Secondly, she was unclear why Philip had said that he will never give her any funds from the Washburn Trust and instead he would put the funds into a foundation.
167 Philip replied by an email of 24 July. I will refer in greater detail to Philip's email later in these reasons. It is sufficient at this stage to note that Philip said that his offer was one of family benevolence in relation to her interests in Marc's estate, Marc's Testamentary Trust and the Washburn Trust.
Settlement negotiations after Philip's 13 July 2016 offer
168 On 13 July, Ms Bailey had collected from Taylor Smart, the lawyers who had prepared Marc's wills, Marc's Memorandum of Wishes and the deeds of variation of trust, a number of documents including copies of Marc's Memorandum of Wishes and the 2012 deed of variation to the Washburn Trust appointing Mae as an additional general beneficiary. Ms Bailey emailed copies of the documents to Philip on 13 July, after Philip's meeting with Mae that day.
169 Philip did not inform Mae of the Memorandum of Wishes. In his email of 24 July to Mae, Philip refers to Marc's intentions but does not make any reference to Marc's intentions expressed in that memorandum.
170 On 25 July, the net proceeds of the sale of Shimmer of $1,131,476 were deposited to a CEFS bank account and recorded as a loan to CEFS by Marc's estate.
171 On 28 July, Ms Bailey emailed Mae requesting Mae cease using Marc's credit card and requested that Mae repay the outstanding balance.
172 On 29 July, Philip emailed Mae stating he had not heard from Mae and enquiring whether she wanted clarification regarding Philip's previous email about the settlement.
173 In August 2016, Mae travelled to Europe on holiday. On 9 August, Mae emailed to Philip. She apologised for her delay in responding and said she had been in shock and pain at the position Philip had taken and the way he had dealt with her. Mae said that Philip's offer of settlement was not what Marc had intended. She said she was in the process of appointing advisers to deal with the matter on her behalf.
174 Philip forwarded Mae's email to Angela. On 10 August at 3.47 am, Angela emailed Philip. Angela said that Mae's email had infuriated her and Angela made comments critical of Mae. Amongst other things Angela said that the right thing would have been for Mae to mourn her husband respectfully.
175 On 12 August, Philip emailed Mae saying that his settlement offer was open to 30 September. In an email to Philip of 19 August, Mae said she was sourcing and engaging independent advisers and would get them to contact Philip when this has been done. Mae requested details of Philip's offer. Mae said that Philip's offer did not take into account any of Marc's business interests and she was unclear why Philip was seeking to disinherit her from this.
176 Philip emailed Mae on 22 August suggesting that she appoint advisers and they meet with Philip's advisers regarding her questions.
177 Mae emailed Philip on 26 August, referring to Philip saying he intended not to distribute anything to her from the Washburn Trust or Marc's Testamentary Trust.
178 Philip responded by email on 31 August. I will refer to Mae's email of 26 August and Philip's reply of 31 August 2016 in greater detail later in these reasons.
179 On 13 September, Mae emailed a three‑page letter dated 12 September to Philip in his capacity as the executor of Marc's estate. Mae requested information. Mae referred to the Memorandum of Wishes and asked Philip to confirm that he would follow and honour Marc's direction to the trustee of the Washburn Trust. Mae sent a further email to Philip on 21 September asking Philip to indicate when he would send the information she had requested. Mae further said:
[Y]ou have ceased giving me access to any funds until your settlement offer has been dealt with. I gave up working and abandoned my legal career to care for and support Marc during his battle with cancer. As all my income has come from Marc and The Washburn Trust for the last few years, I require funds for living expenses. Please can you let me know if and when you plan to make a distribution to me.
180 By email of 23 September, Philip replied to Mae's letter of 12 September. He provided copies of a number of documents.
181 In September and October 2016, there were emails between Mae and Philip in which Mae requested information and Philip responded, in effect, that he and his advisers were working on it.
182 On 4 October, Mae emailed Philip asking notwithstanding that he was travelling to eastern Australia and overseas that he provide information she had requested and to which she was entitled as a beneficiary. Mae noted that Philip had not responded to her 'repeated request for funds for living expenses', said that all her income had come from Marc and the Washburn Trust in the past few years, that she had no way of getting any other immediate income and asked:
[W]hat funds will you provide to me going forward, if any, and what part of the estate will you transfer to me at the date of the Option Exercise Period lapses?
183 Philip replied by email of 5 October in which he said that his advisers were working on her 'numerous requests'. Philip said that in Mae's letter of 12 September and subsequent emails, she had written to him in his capacity as executor of Marc's will in relation to her living expenses and request for funds and Marc's estate is bankrupt. Philip said that Mae may wish to approach the trustee of the Washburn Trust in that regard and the trustee may ask for details of her living expenses. That was in effect an invitation by Philip to write to him in his capacity as controller of Washburn, the trustee of the Washburn Trust.
184 On 12 October, Mae emailed to Philip a letter of 12 October which she said was written to him in his capacity as sole director and secretary of Washburn, the new trustee for the Washburn Trust. Mae said that on 18 May Philip had told her that he was the trustee of the Washburn Trust and as trustee would never distribute any money to her. Mae asked whether Philip had changed his mind and will now make provision for her from the Washburn Trust. Mae made reference to Marc's Memorandum of Wishes, a copy of which she attached. Mae made further representations concerning provision for her from the Washburn Trust. Mae made representations and requests concerning funds from Marc's Testamentary Trust. Mae made further requests for information. Philip replied on 14 October stating that his advisers are working through her numerous requests.
185 On 21 October, Mae sent an email noting that in his capacity as trustee of Marc's estate and effectively trustee of the Washburn Trust Philip had failed to respond to almost all of her written requests for information. Philip responded on 21 October that a detailed response was being finalised and was imminent.
186 On 27 October, Philip sent to Mae a 10‑page letter responding in detail to the requests for information and documents in her emails of 26 August, 21 September and 21 October and her letters of 12 September, 28 September and 12 October. Philip wrote the letter in conjunction with his lawyers. Philip made detailed reference to amounts advanced to Mae. Philip said, in relation to Mae's access to funds from Marc's Testamentary Trust, that he made these available to Mae as a loan prior to probate being granted to provide her with funds for living expenses. Philip said he was aware of Marc's Letter of Wishes dated 21 December 2012, that Washburn as trustee for the Washburn Trust is under no obligation to follow and honour this letter but would consider it when it deliberates later in the financial year in relation to distributions to beneficiaries of the Washburn Trust. Philip said:
Your recollection of me saying I (as director of Washburn Pty Ltd) would never distribute to you from The Washburn Trust is incorrect. I said that in the future I would give consideration to the issue that a majority of income be distributed to Marc's foundation when formed. Also until I knew the exact position of his personal estate it may be necessary to distribute to Marc's estate to pay down debts.
187 On 11 November, Philip emailed Mae regarding the brig, the Royal Perth Yacht Club yacht pen licence and the delivery up of the Maserati which had been used by Marc.
188 Philip took steps to establish a foundation in memory of Marc. The Marc Cardaci Foundation Pty Ltd was incorporated in November with Philip and Mr Cipriano as its directors and shareholders. The trust deed for the Marc Cardaci Foundation was executed on 16 November 2016 with the Marc Cardaci Foundation Pty Ltd as trustee. It is a common ground that the Marc Cardaci Foundation was not then, and is not now, a beneficiary of the Washburn Trust.[9]
189 On 25 November, Philip emailed Mae attaching a copy of the assets and liabilities statement lodged with the application for probate of Marc's estate. The statement showed that the estate was insolvent and its assets included loans to Mae and assets in Mae's possession. Philip said he was still keen to discuss matters with Mae; the brig and the Maserati were issues they needed to discuss and he was willing to discuss providing some interim financial assistance.
190 On 29 November, Philip emailed Mr Smith regarding bankruptcy of Marc's estate.
191 On 2 December, Mae sent a letter to Philip regarding her living expenses, employment choices, assets advanced to her and asset confiscation and attaching a personal monthly budget and the summary of email correspondence between Mae, Philip and Ms Bailey between November 2015 and July 2016.
192 On 20 December, Mae commenced CIV 3186 of 2016 by filing the originating summons. The originating summons was not served until May 2017.
193 On 21 December 2016, Philip presented a petition to the Federal Circuit Court for orders that Marc's estate be administered in bankruptcy. The statement of affairs was verified by Philip. The principal stated creditors were Ongold as trustee of Marc's Testamentary Trust and Powercity. The sale, transfer or gift of assets in the last five years were stated to include $1,800,000 from Marc's CBA bank account gifted to Mae. The assets Marc was stated to have contributed towards or helped purchase included Mae's Fiat motor vehicle, ATO tax payments for Mae, and the deposit on the Watermans Bay property.
194 On 6 February 2017, the Federal Circuit Court sequestrated Marc's estate. The second defendant in CIV 3186 of 2016, Mr Gamble, became trustee of the estate.
Philip causes Rectangular to replace Ongold as trustee of Marc's Testamentary Trust
195 On 30 January 2017, Ongold, Rectangular, Philip and Angela executed the Deed of Dismissal and Appointment of Trustee of Marc's Testamentary Trust. Philip and Angela executed the deed jointly as the appointor of the trust on the basis that, as the executors of Marc's will, cl 4 (c) of sch B to Marc's will made them the appointor of the trust. By the deed Philip and Angela dismissed Ongold as trustee and appointed Rectangular as trustee in its place, or purported to do so.
196 On 31 March, Mae sold the Watermans Bay property for $3,100,000.
197 On 11 April 2017, Contura, Leone and the trustees of the Alexandra, TF Family, Washburn and Stirling trusts, and Philip in his personal capacity executed the share sale agreement by which the owners of the shares in Contura (the Alexandra, TF Family, Washburn and Stirling trusts) sold to Leone their shares in Contura in consideration for which they received shares in Leone in the same proportion as they held shares in Contura. At the same time the parties executed a heads of agreement concerning Contura and a heads of agreement concerning Leone. These instruments effected the Leone restructure.
198 On 10 May 2017, Mae commenced CIV 1750 of 2017 by filing the originating summons. The originating summons and the originating summons in CIV 3186 of 2016 were served on Philip on that day or the following day.
199 On 12 May 2017, Mae and Philip separately attended the RQC ball. An incident occurred between them about which there is conflicting evidence. Philip considers that Mae acted to embarrass him in front of his friends. In cross‑examination he agreed that he now regards it as a trivial incident but he did not at the time.
200 On 27 June, Abernethy 4 Pty Ltd as trustee of Abernethy Trust 3 resolved to distribute $30,000 and $97,478 of its trust income to Mae and Powercity respectively.
201 On the same day, Washburn as trustee of the Washburn Trust resolved to distribute the trust income of $44,654 to Powercity, and Rectangular as trustee of Marc's Testamentary Trust resolved to distribute the trust income of $28,136 to Powercity.
202 On 8 November 2018, there was an unsuccessful court annexed mediation conference in both these actions.
203 By letter of 14 November 2018 to Mae's solicitors, Duporte's solicitors withdrew permission for Mae to use the Maserati which they said had been purchased by Duporte and requested that it be made available for collection. There was correspondence between the solicitors and on 14 February 2019 Mae delivered up the Maserati.
204 The trial was conducted as an electronic trial. A large number of documents were received in evidence. Many of the documents were transactional documents such as trust deeds, deeds of appointment, deeds of trust variation, trustee resolutions and wills. Others recorded financial dealings such as ledgers, financial statements and bank statements. The reliability of those documents is for the most part uncontroversial.
205 Two types of documents are important and in some cases more controversial. The first is emails (including emailed letters) which make up a large proportion of the documentary evidence. They provide a relatively uncontroversial framework of events and communications. Generally, they were brought into existence close in time to the events, negotiations, demands and requests they record and will usually be reliable sources. I do not overlook that statements and emails can be wrong, as often they depend on the accuracy and purpose of the person who makes or generates the record. Nevertheless, they are more likely to be right than wrong, and more likely to be reliable, because they are usually contemporaneous, than the recollections of witnesses related orally in court years later.
206 A second type of document which is significant in this case are some spreadsheets prepared by or for Philip which represent assets and liabilities of Marc's estate and Marc's Testamentary Trust and loans to or benefits received by Mae and the basis of Philip's settlement offer to Mae. Whilst these documents are open to interpretation, what they disclose and do not disclose and the financial picture they present are an indication of Philip's view of the situation and his intentions.
207 Mae is an intelligent woman. She is a qualified lawyer who has worked for an international law firm. At times she showed a lack of knowledge of some legal concepts but that shows a lack of familiarity with some areas of law rather than any disingenuousness. Mae gave her evidence in a careful and thoughtful manner.
208 Counsel for the defendants cross‑examined Mae over six days. The cross‑examination was thorough, challenging and at times intense.
209 In his closing submissions lead counsel for the plaintiff, Mr Cuerden SC, submits that Mae was an impressive witness who gave her evidence in a direct, candid and cooperative manner, volunteered appropriate information and made appropriate concessions. Mr Cuerden submits that Mae's evidence is consistent with the contemporaneous documents, objectively established facts and logic.
210 In contrast, in their closing submissions counsel for the defendants submit that the court should find that Mae was not a credible and reliable witness and that her evidence was in some cases untruthful and in many respects a reconstruction given to suit or support her case. Counsel submit that Mae's evidence should be seen in the context of her mistaken belief and emotional response to the fact that she considered herself solely entitled to the entirety of the assets of the Washburn Trust and Marc's Testamentary Trust and as a consequence tended to very easily and perhaps unconsciously conjure up legal rights that did not exist.
211 The extent of the defendants' challenge to Mae's evidence is demonstrated by their closing submissions which challenge her evidence under 15 headings covering 45 A4 pages.
212 Counsel for the defendants, Mr Bennett, challenged Mae about inconsistencies between her evidence‑in‑chief and her affidavit sworn on 9 May 2017.[10] Mae did not refer in her affidavit to several matters of which she gave evidence‑in‑chief. It is not uncommon for a witness to give more detailed evidence at trial, including evidence of significant matters which she has failed to refer to in affidavits sworn earlier in the proceedings. That is often a result of a greater appreciation of the relevance and importance of detail in giving evidence at trial rather than being a fabrication.
213 I attach more significance to direct inconsistencies between Mae's affidavit and her evidence‑in‑chief. Mae acknowledged that her affidavit incorrectly stated that at the 31 March 2016 meeting she was handed a spreadsheet which was in fact provided to her at the 13 July 2016 meeting. She accepted that her affidavit was wrong as to the times of the meetings on 31 March, 18 May and 13 July 2016.
214 I am not persuaded that Mae knowingly or recklessly gave false evidence in her affidavit or her evidence‑in‑chief. It is probable that her memory has been refreshed by a more careful review of contemporaneous documents and the surrounding circumstances. Nevertheless, those inconsistencies are reasons to carefully scrutinise Mae's evidence‑in‑chief and in cross‑examination of what occurred at her meetings with Philip.
215 The defendants cross‑examined Mae to the effect that it was inappropriate for her to have read the witness outlines of the defendants' witnesses before she gave her evidence. I do not consider that is a matter which goes to Mae's credibility. The decision to show the plaintiff the witness outlines of the defendants' witnesses was a decision of Mae's lawyers. It is not conduct of such a nature as to tend, logically and rationally, to weaken confidence in her veracity or in her trustworthiness as a witness of truth.
216 It is relevant to the reliability of Mae's evidence that she read the witness outlines of the defendants' witnesses before she gave her evidence. Although the practice is followed by many lawyers in Perth it should not be. The practice is contrary to the Western Australian Bar Association Best Practice Guide to preparing witness statements for use in civil cases. Where it is necessary to put to a witness the evidence of others, it should be done by way of questions rather than putting the witness statement of others to the witness. Showing the witness the statement of another witness may contaminate the witness' evidence. I have considered the whole of Mae's evidence in the circumstances of this case. I am satisfied that reading the defendants' witnesses' outlines of evidence did not contaminate or have any significant effect on her testimony.
217 The defendants submit that Mae falsely asserted, or at least exaggerated, her evidence about her request for a meeting with Brentnalls and her request for information from Philip since January 2016 and that she did so for the purpose of portraying Philip in a negative light. I do not consider that diminishes her credibility. Mae's evidence reflects her state of mind about her attempt to obtain relevant financial information from Philip.
218 The defendants submit that in her evidence Mae displayed baseless hostility and distrust of Philip. In the period immediately after Marc's death, Philip made available to Mae whatever funds she needed to complete the purchase of the Watermans Bay house and pay for the furniture for it, to maintain the Shimmer boat and for meeting all her other expenses and arranged for those funds to come out of Marc's estate and Marc's Testamentary Trust on the implicit assumption that Mae was entitled to all of those assets. From sometime around May 2016, Mae and Philip had different expectations of what Mae should receive from Marc's estate and the various entities which held Marc's wealth during his lifetime. That led to differences between them which developed into mutual ill feeling, resentment and distrust. That does not of itself go to Mae's credibility or reliability.
219 The defendants submit that Mae intended to and did embarrass Philip in public as much as possible. The defendants referred to a number of incidents. They include HSF writing on Mae's instructions to Dr Cooper and Ms Harrison, who are mutual friends of Marc and Philip, to provide assistance in the proceedings. I find at least some of the incidences referred to by the defendants reflect Mae's ill feeling, resentment and distrust of Philip. For example, her conduct towards Philip at the RQC ball reflects that ill feeling, resentment and distrust. However, Philip's conduct towards Mae provided some basis for her attitude. Some of Mae's actions towards Philip in relation to peripheral or relatively trivial matters are understandable, though impolite and embarrassing, having regard to the way Philip behaved towards Mae after May 2016.
220 The defendants submit that in cross‑examination Mae sought to distance herself from the HSF letter to Dr Cooper and Ms Harrison and avoided questions as to the nature of her instructions in relation to the letter. I am not persuaded that Mae sought to distance herself from the letter. She gave an explanation that the recipients had been spreading rumours harmful to her reputation and the object of the letter was to get them to contact her lawyers so that they could discuss that matter. The letter does not say that, but in the absence of evidence of events surrounding the sending of the letter, I am unable to conclude that Mae's answers were not truthful. If Mae's evidence was truthful, then it means the letter was opaque in conveying its purpose but it is going too far to say, as the defendants do, that it means Mae was willing to instruct solicitors to send the letter to Dr Cooper and Ms Harrison under a false pretense.
221 Philip caused Marc to sign some documents on the day on which he died. At the time, and for some time later, Mae did not know what documents Philip had caused Marc to sign. In an affidavit she swore on 9 May 2017, Mae swore that she had no confidence that the trustee companies under Philip's control would ensure that she was properly provided for out of the Washburn Trust or Marc's Testamentary Trust and one of the matters which caused her lack of confidence was that Philip had put documents in front of Marc on his deathbed to sign at a time when he was not fully conscious and Philip did so to benefit himself and detriment Marc's estate.
222 The documents which Philip caused Marc to sign were documents which appointed Philip as director of Castlemaine Superannuation Pty Ltd and transferred the shares in that company to Philip. Castlemaine Superannuation Pty Ltd was the trustee of Castlemaine Superannuation Fund, Frank and Grace's superannuation fund. The documents did not benefit Philip or detriment Marc's estate.
223 The defendants submit that Mae gave false evidence in her affidavit because she was in possession of an email that revealed that the documents that Marc signed were not foisted on Marc on his deathbed. Further, the defendants say that by a letter of 27 October 2016 Philip had given Mae an explanation which ought to have made those matters clear.
224 I am not satisfied that Mae knew, as distinct from having information from which she may have concluded, the nature of the documents Philip had Marc sign. I am not satisfied that Philip's letter put the matter to rest in Mae's mind or that Mae unreasonably persisted with her questioning of what documents Philip had put before Marc. Philip advised Mae that 'the only other document that I recall may have been signed'. That tentative language was interpreted by Mae as evasive. Mae did not knowingly or recklessly give false evidence. Nor is her persisting suspicion a basis for concluding that her evidence as to matters of fact is unreliable.
225 The defendants further submit that Mae falsely asserted or at least embellished what Philip had said to her when she said in an email to Dr Van Hagan:
Philip denies getting Marc to sign any documents, said he doesn't recall.
The defendants further say that Mae obfuscated in cross‑examination before conceding that Philip had said he 'may have signed', rather than denying that he had signed, the documents.
226 In a letter of 27 October 2016, Philip said in relation to the documents Marc signed on the day of his death, apart from his will, 'the only other document that I recall that may have been signed was in relation to transferring a share held in the Castlemaine Superannuation Pty Ltd to me'. Mae's statement to Dr Van Hagan was in effect that Philip refused to admit that he had got Marc to sign any documents by saying he does not recall. If that is an inaccurate rendering of what Philip said in his letter, and I am not satisfied it is, it is a minor discrepancy. As to Mae obfuscating in cross‑examination on the matter, Mae's recollection was that she may have seen other correspondence in which Philip denied getting Marc to sign any documents. After she was taken through relevant correspondence, she conceded that Philip's letter of 27 October 2016 was the basis of her statement to Dr Van Hagan. Mae then conceded that Philip had said he 'may have signed'. I do not find this evidence and cross‑examination to be significant in assessing Mae's credibility or reliability.
227 The defendants submit that Mae engaged Mr Mitchell of HSF as a legal advisor on 17 July 2016 but said in evidence that Mr Mitchell was assisting her as a mentor. Mae's evidence was not knowingly or recklessly false. Mae had previously worked with Mr Mitchell. She regarded him as a mentor. Mae had not formally retained Mr Mitchell at the time.
228 The defendants further submit that Mae concealed from Philip that she had retained legal advisors. Mae represented to Philip that she would retain advisors. She did not say that she did not have a legal advisor. She had not retained a financial advisor. The defendants submit that Mae concealed from Philip that she had retained advisors to 'flush out more of the relationship and more of what [she] needs to know' by keeping Philip on side.
229 It is likely that Mae chose not to inform Philip that she had retained legal advisors for some time after she had done so. Mae was under no obligation to inform Philip that she had retained lawyers. I infer from her evidence as a whole that Mae chose to obtain, and act on, legal advice without telling Philip because she was wary in dealing with him. I observe that Philip retained lawyers to assist him in his communications with Mae without disclosing that fact to Mae for some time. Philip also was under no obligation to tell Mae. That both of them chose to obtain, and act on, legal advice without telling the other, indicates that each of them was wary in dealing with the other. This is not a matter which affects Mae's credibility.
230 The defendants submit that Mae expressed a lack of understanding of legal concepts that is impossible to accept. It may be that with more time to reflect under less pressure than in a confrontational cross‑examination, Mae might be able to retrieve knowledge or understanding of some legal matters she was unable to recall during cross‑examination. Whether that is so or not, I am not satisfied that Mae feigned lack of knowledge or understanding.
231 The defendants also submit that Mae obfuscated or was unwilling to properly answer questions about her legal training and experience. Mae was cautious of answering questions that required her to retrieve memories from law school or soon after. I do not believe that Mae obfuscated in answering such questions as the defendants assert.
232 The defendants also submit that Mae obfuscated or was unwilling to answer questions about the relationship between Marc and Philip. Mae was hesitant in answering the question whether Philip and Marc trusted each other implicitly. It is likely that was borne out of a caution at adopting a simple, subjective descriptor of the relationship between her husband and her brother‑in‑law rather than obfuscation.
233 The defendants submit that Mae falsely asserted that she decided to commence these proceedings after receiving a telephone call from John (Giovanni) Carrello, the trustee in bankruptcy of Marc's estate, advising her that Marc's estate was in bankruptcy. The evidence shows that Mae had been preparing to bring legal proceedings for some time before that. Nevertheless, the phone call may have been a trigger for Mae to commence proceedings, which she did by filing the originating summons the following day, having sworn the supporting affidavit on the day of her telephone call with Mr Carrello.
234 The defendants submit that Mae gave false evidence by denying that she told Angela and Mr Cipriano that she was in love with two men. I do not find this to be a significant matter. First, as the defendants submit, the nature of Mae's relationship with Mr Hughes is not directly relevant to the relief she seeks in the proceedings.
235 Secondly, Mae and Angela have different recollections of the details of conversations which took place four years before they gave evidence and of which they are likely to retrieve memories of their perception of the effect of what was said rather than the precise words that were spoken. In evidence‑in‑chief Angela said that Mae said she was struggling being in love with two men at the same time, one being Marc, her late husband, and the second Sean Hughes. In her evidence‑in‑chief, Mae had said that she recalled saying that she told Angela that she was seeing Mr Hughes and that 'I am struggling with still being in love with Marc'. In cross‑examination, Angela agreed that Mae had said to her that she had started seeing Mr Hughes. When it was put to her in cross‑examination that Mae had said that seeing Mr Hughes was difficult for her because she would always be in love with Marc, Angela responded: 'She said she was still in love with Marc'.
236 Thirdly, Mae denied she had a conversation with Mr Cipriano where she had told him she was struggling with loving two men, but when she was asked whether she told Mr Cipriano that she was in love with two men, she responded: 'I don't believe I told Anthony, but I don't recall'. In the end, I find these differences in recollection or assertion of the words Mae used in the relevant conversations to be of no significance.
237 Philip requested that Mae prepare a budget. The first time Mae provided Philip with a budget was on 2 December 2016, some 10 months after his first written request. The defendants submit that the budget presented to Philip substantially exaggerated her yearly expenditure. By December 2016, the relationship between Mae and Philip had deteriorated to the point that both parties had lawyered up and 18 days later Mae commenced the Family Provision action. Mae's budget may well have had elements of ambit claim or blue sky demand or be tactical. I do not consider it to be of any significance when considering Mae's credibility or reliability as a witness.
238 Mae was thoroughly and vigorously cross‑examined for six days. Every avenue was explored and no stone was left unturned in the cross‑examination. At times Mae was cautious, perhaps hesitant, in dealing with difficult and confrontational questions. Some of her evidence may be wrong or incomplete in detail. That is a reflection of the fallibility of human memory. My overall impression is that she sought to give truthful answers.
239 At time Mae's perception and recollection of events may have been affected or subsequently altered by unconscious bias. I have assessed her evidence in the light of contemporaneous documents and the inherent probabilities in the light of surrounding circumstances. I find that Mae was generally a credible and reliable witness.
240 Dr Van Hagan was Marc's oncologist. He is an independent witness. Both parties submit that he was a credible witness. I accept his evidence.
241 Ms Spence is a friend of Mae. In 2016, she was living in Sydney. She came to Perth and stayed with Mae from about mid‑May to mid‑June 2016.
242 Ms Spence gave evidence of a conversation with Mae at a gym next door to the Wild Fig Café at which Mae had met Philip on 18 May 2016 immediately after that meeting. Mae says, and the defendants deny, that Ms Spence's evidence corroborates Mae's evidence that Philip said to her that he would never distribute anything to her from the Washburn Trust.
243 The defendants made no direct challenge to Ms Spence's evidence in cross‑examination but in their written closing submissions they submit that Ms Spence
[c]onceded that she discussed the subject matter of her evidence with the plaintiff in June 2020 (after the trial had initially been adjourned and before resumption in August 2020).
244 I have carefully considered Ms Spence's evidence about her discussion with Mae. In essence, in a telephone conversation with Mae, Ms Spence, without prompting from Mae, volunteered that she had a memory that she thought could be useful and told Mae that memory. Mae said that might be useful and she would speak to her lawyers. About two weeks later, Ms Spence was contacted by Mae's lawyers. There is no evidence that Mae in any way contaminated Ms Spence's recollection or influenced her evidence.
245 Ms Spence gave her evidence in a direct and cooperative manner. I accept the truthfulness of her evidence.
246 There is a curious issue concerning the status of Ms Spence's evidence. The plaintiff submits that, the defendants having not objected to Ms Spence's evidence, Ms Spence's evidence is not limited to credit to rebut any allegation of recent invention but is 'proof to the extent of whatever rational persuasive power it may have'.[11]
247 The defendants submit that Ms Spence's evidence was admitted for the limited purpose of corroborating an alleged prior consistent statement made by Mae on 18 May 2016. They submit that was the sole basis upon which the plaintiff contended that the evidence of Ms Spence was admissible.
248 When a statement is admitted under the rule that a previous consistent statement by a witness is admissible to rehabilitate credit by rebutting the suggestion that the testimony is a construction subsequent to the events, it is admitted not as evidence of the truth of its contents, but as tending to disprove a concoction. However, as I have said, the plaintiff submits that Ms Spence's evidence was not admitted on that basis.
249 The matter unfolded in this way. On 28 August 2020, during the cross‑examination of Mae, lead counsel for the plaintiff, Mr Cuerden SC, raised an issue concerning evidence the plaintiff proposed to adduce from Ms Spence. Mr Cuerden submitted that the effect of Mr Bennett's cross‑examination of Mae was to put to her an allegation of recent invention with respect to her evidence as to what occurred in the meeting of 18 May 2016, and as a result the plaintiff submitted she was entitled to adduce evidence from Ms Spence of a prior consistent statement. Mr Cuerden said that the plaintiff's solicitors had sent to the court an outline of Ms Spence's proposed evidence. Senior counsel for the defendants, Mr Penglis SC, said that the defendants had only recently received notice of the plaintiff's intention to adduce the evidence from Ms Spence. I deferred consideration of the matter. On 31 August, Mr Cuerden informed the court that the defendants no longer objected to Ms Spence giving evidence and that appeared to be an acceptance that an allegation of recent invention had been put to Mae. Mr Bennett said: 'No. Well, that's a mistake'. Senior counsel for the defendants, Mr Penglis SC said that the defendants had no difficulty with the court seeing Ms Spence's outline of evidence but the court should not
[i]nfer any particular concession in the agreement to allow the evidence to be adduced, we simply don't oppose it.
250 On 1 September, without objection from the defendants, the plaintiff adduced evidence from Ms Spence of her conversation with Mae at the gym on the morning of 18 May.
251 The statements by Mr Bennett and Mr Penglis on 31 August and their failure to object to the evidence adduced from Ms Spence on 1 September, or to state expressly that they were not objecting on the ground that it was admitted for the limited purpose of rebutting an allegation of fabrication, makes it arguable that the defendants waived their objection to Ms Spence's hearsay evidence and the evidence is not limited to credit to rebut any allegation of recent invention.
252 However, having regard to all of the circumstances, I consider that the defendants did not object to the evidence of Ms Spence because they accepted that it was admissible. The only ground on which it was admissible was to rebut any allegation of recent invention. I will treat the evidence as having been admitted for that limited purpose.
253 The distinction between using a prior consistent statement for the truth of its contents and to rehabilitate a witness' credibility has been criticised on the ground that it is unrealistic to require the court to consider the prior consistent statement for the limited purpose only of whether it meets the attack that the evidence is a recent invention.[12] It has been suggested that there is little difference between the two. Because the contents of a prior consistent statement are, by definition, essentially similar to the contents of the witness' testimony, it is said to be artificial to distinguish between using the statement to support the witness' credibility and using it as evidence of its contents. Either way, it is argued, the result of considering the prior consistent statement is that the witness' story is more likely to be believed.
254 Nevertheless, the prior consistent statement does not add affirmatively to the credibility of the witness. Recent fabrication is a rebuttal rule. If the court believes the prior consistent statement to have been made to Ms Spence, as I do, it will neutralise the defendants' challenge to the plaintiff's evidence without adding corroboration, confirmation or affirmative weight to the credibility or reliability of the plaintiff. Her evidence remains in the state it was before the failed 'recent fabrication' challenge.
255 The defendants submit that the court should find Philip is a truthful, credible and reliable witness.
256 The plaintiff submits that Philip was an unimpressive witness. They raise eight specific matters which they submit demonstrates Philip is not a credible or reliable witness.
257 The plaintiff submits that in two important respects, Philip gave evidence which was inconsistent with the defendants' pleaded case. First, on two occasions in cross‑examination Philip said that at the meeting on 31 March 2016 he told Mae that the amounts paid to her or for her benefit from cash of Marc's Testamentary Trust to that time ($1,666,277) had been advanced to her by way of loan. That was not mentioned by Philip in examination‑in‑chief and not put to Mae in cross‑examination. It was contrary to the defendants' pleaded case which was that Philip did not mention the existence of loans until 13 July 2016.[13] It was not pleaded that this was mentioned at the 31 March 2016 meeting.[14] Philip ultimately conceded that he could not recall it being said at the 31 March 2016 meeting that these monies were being loaned to the plaintiff.
258 Secondly, in cross‑examination Philip said that at the time he made the settlement offer on 13 July 2016 it did not occur to him that it would require Mae to relinquish her interests in the trusts. I will refer to this matter in greater detail when considering what was said at the 13 July meeting. I find that Philip's initial evidence was inconsistent with the defendants' pleaded case and Philip ultimately conceded that he knew from the time he made his offer on 13 July 2016 that it did involve the plaintiff relinquishing her interest.
259 The plaintiff submits that on 23 March 2020, Philip swore an affidavit in support of the defendants' application to withdraw the admission in [96] of their defence, which responded to [74] of the statement of claim. At [74] of her substituted statement of claim filed 9 November 2017, the plaintiff pleaded that Philip caused Ongold to repay the Alleged Duporte Loan to Duporte from the funds of Marc's Testamentary Trust. At [96] of their defence, the defendants admitted the plaintiff's plea. The defendants maintained that plea until during the course of the plaintiff's opening, lead counsel for the plaintiff, Mr Cuerden SC, said that it was common ground that on 10 November 2015 Philip caused Ongold to make the payment. Senior counsel for the defendants, Mr Penglis SC, stated that was not correct. Subsequently the defendants applied for, and were granted, leave to withdraw that admission. Philip swore his affidavit of 23 March 2020 in support of that application.
260 In cross‑examination Philip said that he read the affidavit carefully before he swore it, but when pressed he could not explain what it meant and his evidence was to the effect that the explanation in the affidavit was not correct. He ultimately agreed that he had no involvement in the preparation of the affidavit and that it was prepared by his solicitors without his involvement.
261 In their written closing submissions the defendants describe Philip's evidence about his affidavit of 23 March 2020 as 'Philip's lapse regarding the preparation of his affidavit'. The defendants submit that the effect of Philip's evidence is that the affidavit was prepared on Philip's instructions, that the preparation of the affidavit was undertaken by the solicitors without Philip's involvement but then he read it and swore it.
262 In his affidavit Philip said that the admission at [96] of the defence was not correct but at the time of its filing he considered it to be correct. Philip swore that, in the course of preparing for trial, he had reflected on the events immediately following Marc's passing and he recalls only learning of the payment after it had been made by Ms Bailey. Philip was cross‑examined on his explanation for the apparent change in his recollection. Philip obfuscated. Philip said that in his affidavit he was giving clarity to exactly what had happened at the time of Marc's death. He said that his recollections in the course of preparing for trial which caused him to recall something about those events included discussions with his lawyers and looking at his diary. He said that his diary showed that between 7 and 10 November 2015 he was engaged in discussions with people responsible for his brother's funeral. However, he agreed that he had always known that. Philip then said: 'What it did is confirm for me completely that I wasn't at work on the 10th'. In relation to his statement in his affidavit that: 'I now recall only learning of the payment after it had been made by Kaye Bailey', Philip said: 'Well, maybe the wording should be: 'I can now confirm'. When it was put to him that his affidavit suggests that his recollection had changed, which it does, Philip said: 'No. My recollection hadn't changed. It was still the same'.
263 Philip's evidence concerning the payment on 10 November 2015 was unsatisfactory.
264 The plaintiff further submits that on 24 August 2020, Philip swore his fifth affidavit of discovery pursuant to orders made on 15 May 2020. Philip conceded that when he swore the affidavit he read the list of documents attached to the affidavit for only a few minutes and that other than relying on his advisors he took no steps to satisfy himself that the list was correct. He did not review any of the documents that were referred to in the list. Other than relying on his advisors, he had no idea whether the list attached to the affidavit was correct.
265 This shows Philip's lack of care in swearing an affidavit that was to be presented to the court. It shows some arrogance on Philip's part and reflects adversely on the reliability of his evidence.
266 The plaintiff submits that Philip swore a false affidavit in support of his Federal Circuit Court petition for a sequestration order over Marc's estate which verified the statement of affairs he signed on 20 December 2016. The affidavit and statement were prepared by Brentnalls. This is another example of Philip adopting an affidavit prepared by his advisors without taking the care he should have taken to satisfy himself of the accuracy of the statements.
267 The plaintiff submits that, despite Philip agreeing that it has never been an issue that the Washburn Trust has net assets of many millions of dollars, from the first version of the defence until the present, the defendants have refused to admit this allegation in [45] of the statement of claim. The pleadings and correspondence were prepared for and on Philip's behalf by his solicitors. Philip could not explain these matters. In cross‑examination Philip said that it was easy to ascertain the Washburn Trust had net assets of many millions of dollars.
268 This litigation was hard fought. This is an example of the defendants' tactical and uncompromising approach to the litigation. However, it does not reflect adversely on Philip's credibility as a witness at trial.
269 Philip gave evidence about documents said to record his reasons for his distributions of income of the Washburn Trust and Marc's Testamentary Trust (and also the Abernethy Trust 3) for the 2017, 2018, 2019 and 2020 financial years. Philip said that these documents recorded his actual reasons. The evidence disclosed that the documents were the product of significant contributions from his legal advisors, Brentnalls and Mr Weatherspoon. Further, the plaintiff submits that the 2017 and 2019 documents cannot have been prepared for the purpose of recording Philip's reasons because they were originally the subject of claims for legal professional privilege and so necessarily were prepared for the dominant purpose of obtaining legal advice or for use in these proceedings, not for the purpose of recording Philip's reasons. Further, the plaintiff submits the reasons appear contrived and formulaic. The plaintiff submits that Philip could not explain his so called reasons in respect of the 2019 financial year and when asked whether somebody else prepared it for him he said: 'I'm not sure'.
270 I accept each of those criticisms of Philip's evidence. They reflect adversely on the reliability of Philip's evidence about his reasons for causing distributions of income by the trustees of the Washburn Trust and Marc's Testamentary Trust and more generally his exercise, as controller of those trustees, of the powers of those trustees.
271 The plaintiff says that as at 30 June 2019, the Leone Family Holdings Pty Ltd financial statements recorded related party loans of approximately $16.3 million, up by around $10 million from the previous year. However, although being the executive chairman of the CFC Group, Philip professed an inability to explain what these loans were.
272 After conferral between the solicitors, it was later put to Philip that the $16.3 million was made up of an unpaid declared dividend in the amount of $12 million from Contura to Leone and a provision for an income tax loan in the amount of $4,302,806 and Philip was challenged on the unpaid dividend. Philip said that the majority of the dividends had been paid to Leone and that Leone had invested $5 million in bonds and invested in two companies outside the Contura group in multiple millions of dollars. I do not draw a conclusion adverse to Philip's credibility from that matter.
273 The plaintiff submits that Philip said that Washburn had exhausted the cash in the Washburn Trust to meet its legal fees of these proceedings and he was not sure whether Rectangular had exhausted the cash in Marc's Testamentary Trust to meet its legal fees. He had no idea how the costs were being apportioned between the trusts and himself. The defendants say that Philip's evidence was that he was not sure of the exact apportionment of legal fees paid by Washburn but it would be approximately between 10% and 30% and he estimated the total legal costs were between $4 million and $5 million.
274 Philip's evidence is that he asked his advisors to ensure that legal fees are 'apportioned correctly ... according to the case' and that he was 'making sure that the legal fees across all entities are involved with are reasonable and fair'. I am not satisfied that the evidence on that matter establishes a basis for an adverse finding about Philip's credibility.
275 The plaintiff refers to Philip's change of position regarding the meeting he alleged occurred with Mae on 16 June 2016. The plaintiff submits that Philip's explanation for his very late asserted recollection about a further meeting with Mae on 16 June 2016, which was not previously mentioned either in opening or otherwise until it was put to Mae in cross‑examination, was confused and unconvincing.
276 Philip's explanation is that it was not until he heard Mae's evidence‑in‑chief regarding her meeting with Angela on 14 June 2016 which prompted him to relook into his diary and make enquiries which resulted in the 16 June meeting becoming very clear.
277 I find that Philip's evidence of meeting Mae on 16 June 2016 is a reconstruction. I am not satisfied that the meeting occurred as Philip asserts. But in my opinion, Philip gave evidence of what he believed based on the enquiries he made and the things he had been told. I do not attach wider significance to his evidence on this matter, other than his willingness to reconstruct from documents, surrounding circumstances and what he was told by others.
278 The plaintiff submits that the proper conclusion from the evidence is that Philip had Marc sign the Castlemaine documents when Marc was barely conscious. When Philip gave evidence about the circumstances in which Marc signed the Castlemaine documents, he professed to have a clear recollection on the subject. However, when he wrote to Mae on 27 October 2016 he professed to have no clear recollection on the subject. He could not satisfactorily explain the improvement in his memory.
279 Philip's evidence of a clear memory is inconsistent with his letter of 27 October 2016. In my opinion his oral evidence is a result of a reconstruction.
280 The plaintiff further submits that significant parts of Philip's evidence on important issues were the result of leading questions despite senior counsel for the defendants being requested on more than one occasion not to lead.
281 It is correct that Philip was asked many leading questions in his examination‑in‑chief and senior counsel for the plaintiff objected on a number of occasions. I do not find that any of those matters are critical. However, it is consistent with the impression I formed that at times Philip was reconstructing from documents he has viewed and surrounding circumstances rather than having an actual recollection of events.
282 At times Philip obfuscated. His evidence concerning his settlement offer requiring Mae to relinquish her interests in the trusts, his evidence concerning the withdrawal of the defendants' admission that he caused Ms Bailey to make the 10 November 2015 payment and his evidence of his reasons for his distributions of income of the Washburn Trust and Marc's Testamentary Trust are examples of such obfuscation. Philip's evidence in relation to those matters was evasive and self‑serving. Some of Philip's evidence is a reconstruction rather than an actual memory. He was at times careful to give evidence that supported his case.
283 Where Philip's evidence conflicts with Mae's, I generally prefer Mae's evidence. Nevertheless, I assess the evidence of both Mae and Philip having regard to the documentary evidence, the surrounding circumstances and the inherent probabilities, as well as my impression of the reliability of Philip's evidence in relation to particular matters.
284 Angela's hostility towards Mae was apparent in the way in which she gave her evidence as was her support for her brother, Philip. However, the only evidence of any relevance was her evidence about conversations with Mae about Mae's relationship with Mr Hughes. In the end I find the detail of what Mae said to Angela to be of little, if any, significance.
285 Mr Smith is a chartered accountant. His firm, Brentnalls, are financial advisors to, and have a long standing professional relationship with, Philip.
287 I approach Mr Smith's evidence with caution and assess it in the light of the contemporaneous documents and surrounding circumstances.
288 Mr Cipriano was a close friend of Marc. Contemporaneous documents show that in 2016 Mr Cipriano had aligned himself with Philip in Philip's conflict with Mae. That was apparent in his evidence.
289 Mr Cipriano's evidence is peripheral to the main issues. I do not have sufficient confidence in the accuracy of his recollection of conversations with Mae for his evidence to be a basis for rejecting Mae's evidence. I do not think the detail of what was said in those conversations is of much significance. The effect of it is that Mae told Mr Cipriano, as she believed in confidence, that she was seeing Mr Hughes, and Mr Cipriano was quick to relay that information to Philip. Mr Cipriano said that when Mae told him she was in love with Mr Hughes, his thoughts turned to whether 'something sparked whilst Marc was still alive'. That reflects Mr Cipriano's adverse attitude to Mae. That attitude coloured Mr Cipriano's evidence.
290 Mr Macri gave evidence about the events at the RQC ball on 12 May 2017. The evidence is inconsequential.
291 The plaintiff did not cross‑examine Mr Monisse. Accordingly, I accept his evidence.
292 Mr Monisse was present at the Action Plan meeting at Brentnalls on or about 11 December 2015, the meeting at Brentnalls on 30 March 2016 and the tax planning meeting at Brentnalls on 28 June 2016 but was not asked any questions about any of those meetings. The plaintiff submits that a Jones v Dunkel inference may be drawn to the effect that Mr Monisse's evidence on each of those issues would not have assisted the defendants' case. I accept that is so. However, that does not lead anywhere significant in an evidentiary sense.
293 Ms Bailey has worked for the Cardaci family for 42 years. She agrees she has a position of great trust and confidence within the Cardaci family and their companies. Her loyalty to Philip was apparent.
294 Ms Bailey's evidence concerning the payment she caused Ongold to make on 10 November 2015 to Duporte was unconvincing. Ms Bailey's evidence is that she made the payment because she had been told on numerous occasions by Marc to do so when the funds came into Marc's Testamentary Trust and she did so without any discussion with Philip.
295 The contemporaneous objective facts and circumstances do not support Ms Bailey's evidence. The funds were received by Marc's Testamentary Trust on 26 October that Ms Bailey did not make the payment. There was no apparent urgency to make the payment.
296 I place no weight on Ms Bailey's evidence to the effect that monies paid to Mae were loans. That is at best her opinion and is inconsistent with her email of 11 January 2016 to Philip in which she said:
Mae has $785,405 left in Ongold Testamentary trust after repaying the loan to Duporte ($1,280,714) and also will receive $1,178,000 from Alexandra Trust via CEFS as part of Marc's estate but not sure when these can be paid out.
I find Ms Bailey's evidence in relation to that matter less assistance than the contemporaneous documents and the objective circumstances.
297 Mr Same is an experienced legal practitioner. The plaintiff did not cross‑examine him other than to identify an email and to establish that Marc never contacted him or his office for the purpose of revoking or making any changes to his Memorandum of Wishes executed on 21 December 2012 and that Mr Same did not receive any further instructions from Marc any time prior to his death on the subject of the Memorandum of Wishes.
299 Broadly speaking, the issues in the Trust action are as follows:
1. Should Washburn and Rectangular be removed as trustee of the Washburn Trust and Marc's Testamentary Trust respectively?
2. If so, should the plaintiff, Mae, be appointed as the replacement trustee of the Washburn Trust and Marc's Testamentary Trust?
3. Was Ongold validly removed and Rectangular validly appointed as trustee of Marc's Testamentary Trust on 30 January 2017 or only on 15 March 2020?
4. Is Washburn entitled to indemnity against the Washburn Trust assets for its costs of defending these proceedings?
5. Is Rectangular entitled to indemnity against the assets of Marc's Testamentary Trust for its costs of defending these proceedings?
6. Was the deed of variation executed by Marc on 21 December 2012 ineffective to alter the definition of Guardian but effective to nominate Mae as Guardian of the Washburn Trust in the event of Marc's death?
7. If the answer to issue (6) is no (such that Philip is the Guardian of the Washburn Trust), should the court appoint a receiver of his powers as Guardian?
Issues in CIV 3186 of 2016 (Family Provision action)
300 Broadly speaking, the issues in the Family Provision action are as follows:
1. Is Marc's estate unconditionally liable to Powercity in respect of Division 7A loans advanced to Marc during his lifetime totalling $1,397,245, in the absence of dividends being declared for the purpose of paying those loans?
2. Is Marc's estate liable to Marc's Testamentary Trust in the sum of $1,280,714 in respect of the repayment of the Duporte loan in that amount on 10 December 2015?
3. Did Philip breach his duties as executor of Marc's estate?
4. Should Philip be removed as executor of Marc's estate?
5. Is Philip liable in damages or otherwise liable to account to Marc's estate, for the amount of additional costs and expenses to Marc's estate which has resulted from the making of the order under s 247 of the Bankruptcy Act 1966 (Cth)?
6. Should Marc's will be amended under the Family Provision Act 1972 (WA)?
Trust Action Issue 1: Should Washburn and Rectangular be removed as trustees of Washburn Trust and Marc's Testamentary Trust?
301 In his opening address, lead counsel for the plaintiff, Mr Cuerden SC, submitted that at the heart of this proceeding is whether it is in the interests of the beneficiaries of the Washburn Trust and Marc's Testamentary Trust, having regard to the security of the trust property, the efficient and satisfactory execution of the trusts, and the faithful and sound exercise of the powers conferred upon the trustees, that the trustee of each trust, being a company controlled by Philip, ought to be removed as trustee. Mr Cuerden submitted that the trustees should be removed because of the conduct of Philip, as the controlling mind of the relevant trustee company.
302 Mr Cuerden submitted that the relevant conduct of Philip falls into two categories. The first category is Philip's statements of intention with respect to the exercise or refusal to exercise powers under each of the trusts to distribute income and to advance capital in favour of Mae. The most significant matters in relation to this issue are what Philip said to Mae at the meetings of 18 May and 13 July 2016. The second category concerns other aspects of Philip's conduct in his management of the trusts.
303 There are two sources of the court's power to remove a trustee: the inherent jurisdiction of the court and s 77(1) of the Trustees Act 1962 (WA) which provides:
The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the court, make an order for the appointment of new trustees or new trustees, either in substitution for, or in addition to, any existing trustee or trustees, or although there is no existing trustee.
304 The plaintiff relies on both sources of power. The principles regarding the exercise of the power from either source are essentially the same.[17]
305 The power conferred upon the court is remedial rather than punitive. The dominant consideration in the exercise of the jurisdiction is the welfare of the beneficiaries of the trust, not the imposition of a sanction or punishment upon the trustee as a consequence of misconduct.[18]
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised (580 ‑ 581).
307 Dixon J went on to conclude, on the facts of the case, that a lack of confidence in the trustee's further administration of the trust was sufficient to justify his removal, without the necessity of establishing misconduct.
308 In Porteous v Rinehart,[21] White J made a number of observations with respect to the proper construction and application of s 77 of the Trustees Act. His Honour cited with approval the observations made by O'Leary J with respect to the meaning to be given to the word 'expedient' in the similar context in the Trustees Act 1980 (NT) in Re Estate of Roberts:[22]
Expedient here, I think, may be taken to mean 'conducive to advantage in general, or to a definite purpose; fit, proper, or suitable to the circumstances of the case': OED, Vol III, v 426. In the context of appointing a new trustee in substitution for an existing one, I take it to mean then conducive to, or fit or proper or suitable having regard to, 'the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee (17).
309 White J referred with approval to the decision in Hunter v Hunter.[23] In that case, the New Zealand Court of Appeal held that the inherent jurisdiction of the court to remove a trustee is ancillary to its principal duty to see that the trusts are properly executed and, if the court is satisfied that the continuance of the trustee would prevent the trust being properly executed, the trustee may be removed. The New Zealand Court of Appeal adopted the principle stated by Lord Blackburn in delivering the judgment of the Privy Council in Letterstedt v Broers[24] that the main guide in the exercise of this jurisdiction must be, not whether the trustee has committed breaches of trust, but the welfare of the beneficiaries. In Elovalis v Elovalis Martin CJ, with whom Newnes JA agreed, referred with approval to that statement of principle in Hunter v Hunter.
310 The power to remove a trustee is a power which, because it interferes with the appointments by the parties, will be exercised cautiously and only where the court is satisfied that there is a clear need for the appointment to be made.[25] In Elovalis v Elovalis[26] Martin CJ cited with approval the observation of Murray J in Smith v Smith:[27]
The question of misconduct is, on the authorities as I understand them, not a matter which necessarily carries an implication of fault or deliberate misconduct. It is a term which may be applied to a trustee who has failed to understand what are the obligations properly imposed upon him or her in the administration of the trust [9].
311 The authorities establish that the jurisdiction to remove a trustee and appoint a substitute can be exercised whenever it is expedient to do so in the sense described in the cases I have referred to and without it being necessary to establish bad faith, misconduct or breach of trust.
312 The Washburn Trust deed confers on the trustee wide discretionary powers to distribute income. Clause 3.1 of the Washburn Trust Deed provides that the trustee may apply all or any parts of the net income of the trust fund for an accounting period for any one or more of the general beneficiaries. Clause 3.2.5 and cl 11 provide in effect, that the trustee shall have an absolute discretion in making any such determination.
313 Clause 8 confers extensive powers on the trustee to undertake transactions and deal with trust property in the trustee's personal capacity, or in the trustee's capacity as trustee of other trust funds, or by any company notwithstanding the trustee is a shareholder or director of the company. Clause 10 is a wide exoneration or immunity clause providing that the trustee shall not be responsible for loss or damage by the exercise of any discretionary power or any breach of duty or trust unless 'committed made or omitted in personal conscious and fraudulent bad faith by the trustee.' It is not necessary to give further consideration to cl 8 and cl 9 because, as I have said, the jurisdiction to remove a trustee and appoint a substitute can be exercised whenever it is expedient to do so and without it being necessary to establish bad faith, misconduct or breach of trust.
314 The provisions of the trust deed conferring wide discretionary powers on the trustee do not alter the fiduciary nature of the trustee's role. Notwithstanding that the trustee is given a very broad discretion, the discretionary powers are given for the purposes of the administration of the trust. Each beneficiary of the trust has a right to require its due administration, which includes a right to require the trustee to consider from time to time whether or not to exercise the discretionary powers conferred by the trust in his or her favour.[28]
315 The first duty of a trustee possessing a discretionary power is to act honestly and in good faith. The second duty is to act upon genuine consideration, that is, to make an informed view of whether or not to exercise their discretion, and not to act irresponsibly, capriciously or wantonly. Their third duty is to exercise their power of due consideration for the purpose for which it was conferred.[29]
316 The decision of the Court of Appeal in Elovalis v Elovalis provides a summary of principles relating to a trustee's exercise of discretionary powers of distribution. The plaintiffs were the daughters of Michael and Sophie Elovalis. The defendants were their uncles - Steve and Chris. In 1980, the trust was established by deed. The initial trustee was Mike's Nominees Pty Ltd, the shareholders in which were Michael and Chris. The primary beneficiaries were the children of Michael - the daughters. The deed provided that Michael and relatives in varying degrees of the daughters were additional general beneficiaries. Accordingly, Steve and Chris were general beneficiaries. Chris was the appointor. The trust deed conferred power on the trustee to apply any of the income or capital of the trust to or for the benefit of any of the beneficiaries in the trustee's absolute and uncontrolled discretion. Michael and Sophie separated. Subsequently, Michael became unwell. Chris gave up his employment to move in with Michael and care for him. Michael died on 19 March 2002. On 16 June 2002, the daughters met with Steve to discuss their father's estate. The daughters swore that Steve said to them that he and Chris were going to protect their father's assets, that the daughters did not deserve something for nothing, that it was their mother's fault that their father had died and that their father had written on a piece of paper that he wanted them to have everything if they would be good girls but that Chris had decided that he wanted to wait until he [Chris] had died. Mike's Nominees Pty Ltd was replaced as trustee by Steve. The daughters applied for orders that Steve be removed as trustee.
317 In their statement of claim the daughters pleaded, amongst other things, that Steve had informed them orally that:
(a) it was appropriate that Chris occupy the property until his death;
(b) they intended to protect the deceased's assets and the daughters did not deserve something for nothing; and
(c) when he became trustee of the trust the daughters would get nothing from the trust.
318 The Master summarily dismissed the daughters' claim for relief. In evaluating the significance of the allegations made against the trustee, the Master proceeded on the basis that the trust deed empowered the trustee to 'do what he likes' with trust property or 'to do virtually anything with it'. The Court of Appeal set aside the Master's decision, dismissed the application for summary judgment and reinstated the proceedings.
319 The Chief Justice, with whom Newnes AJA agreed, and Buss JA relevantly agreed, reviewed the powers of the trustee. The Chief Justice said that notwithstanding the breadth of discretion conferred, each beneficiary of the trust has a right to require its due administration, which includes a right to require the discretionary trustee to consider from time to time whether or not to exercise the discretionary powers conferred by the trust in his or her favour.[30] Further, the Chief Justice said that notwithstanding the breadth of discretion conferred upon the trustee by the trust deed, it was nevertheless a discretion which has to be exercised by reference to the objects and purposes of the trust, having regard to the competing interests of the various potential beneficiaries of the trust and without taking into account improper, irrelevant or irrational considerations.[31] The Chief Justice said:
The discretions are, of course, to be exercised from time to time, having regard to all relevant circumstances as they exist from time to time [51].
Accordingly, in concluding that the Trust Deed authorised the trustee to 'do what he likes' with Trust property, the master misconstrued the obligations to which the trustee is subject. The allegations made by the daughters in their amended statement of claim could, if made out at trial, arguably sustain the proposition that the trustee had a closed mind with respect to the exercise of the discretionary powers conferred upon him, or misunderstood the nature of those powers and the obligations to which he was personally subject. If those propositions were made out, they could arguably sustain the removal of the trustee on the grounds of expedience [52].
321 The Washburn Trust was established for the purpose of providing a vehicle for the accumulation and distribution of wealth under Marc's control and direction. At the time of the establishment of the Washburn Trust by Marc, similar trusts were created under the control of Frank, Carl and Philip as the vehicles for holding their wealth and holding by each of them their respective 25% interest in the Cardaci group of companies.
322 Between 5 and 23 September 2012 Marc, as trustee of the Washburn Trust, nominated Mae to be an additional member of the class of general beneficiaries. Mae and Marc were married on 23 September 2012. The plaintiff submits, and I agree, it may properly be inferred that the appointment was made in contemplation of their marriage. Mae and Marc were living together in a caring relationship at the time of Marc's death on 7 November 2015.
323 The plaintiff submits, and I agree, that Mae was the natural and most likely object of Marc's bounty and the prime candidate for the favourable exercise of the trustee's discretion.
324 Marc stated his wishes in the Memorandum of Wishes. On 21 December 2012, Marc executed the Memorandum of Wishes addressed to the Trustee, Appointor and Guardian of the Washburn Trust. The memorandum was drawn by and witnessed by Marc's solicitors. The Memorandum of Wishes states:
The Trustee of the Trust pay all income and capital received by the Trust from time to time to my wife Mae Cardaci (Mae), after making suitable provision for tax and other expenses, provided that if Mae shall predecease me, then the Trustee of the Trust shall pay all income and capital received by the Trust from time to time to such of my children as shall survive me and if more than one, then in equal shares.
I declare that it is my wish for those charged with the Administration of my affairs to conduct the affairs of the Trust to give effect to my expressed intentions above in an equitable and yet considered manner and bearing in mind the interests of the beneficiaries of the trust.
325 The authors of the 19th edition of Underhill and Hayton Law Relating to Trusts and Trustees distinguish three classes of letters or memorandums of wishes: those which are legally binding, those which are legally significant and those which are morally binding only.[32] A legally significant letter is intended to have legal significance but not to be legally binding. Underhill and Hayton says that a legally significant letter has to be considered by the trustees because it normally is the key document to guide the trustees in exercising very broad flexible discretions in a fairly standard form trust deed. It will make clear to the trustees what are the purposes and expectations of the settlor in conferring such immense discretions upon the trustees.[33]
326 The UK Supreme Court has held that settlor's wishes are always a material consideration in the exercise of fiduciary discretions.[34] The authors of the 20th edition of Lewin on Trusts say that it was previously well established that the trustees are entitled to take serious account of the settlor's wishes and it is the better view that they are bound to do so.[35] Lewin on Trusts observes that the court has treated it as a sufficient reason for overturning an appointment made by trustees that they believed that they were thereby giving effect to the settlor's wishes when in fact, through a misunderstanding, they were not.[36]
327 The Memorandum of Wishes was not executed at the time of the creation of the trust deed. Nor was it executed by the settlor. However, the trust was established at Marc's instigation as the vehicle to hold, control and distribute Marc's wealth and was controlled by him during his lifetime. The contents and form of the Memorandum of Wishes shows that Marc intended it to have legal significance. The trustee is not legally bound to give effect to the wishes set out in the memorandum, but the trustee is bound to give consideration to the memorandum.
328 The defendants submit that the Memorandum of Wishes did not reflect Marc's wishes at the time of his death because it was signed by Marc prior to him:
(a) executing the Contura and USA shareholder's agreement;
(b) being diagnosed with oesophagus cancer;
(c) accumulating significant Division 7A loan obligations and loans; and
(d) deciding that he wanted a foundation established to help people and families in need to access expensive cancer treatment.
329 There is no evidence that Marc changed his wishes as a result of or after any of the first three outcomes or circumstances referred to. None of them are outcomes or circumstances that would be expected inherently to change Marc's wishes. They are not outcomes that inherently affect a person's wish for their wealth to pass on their death to their spouse who is living with and caring for them.
330 Philip says that Marc had discussed with him establishing a foundation. The evidence establishes that Marc intended that he, Marc, and Mae would establish and run the foundation. In 2015, Marc said to Mae that he would like to start a foundation that would help people who were affected by cancer. Marc and Mae discussed helping people to be able to pay for expensive cancer treatments and to assist their families by substituting an income to enable couples to not to have to continue working during treatment and to go on a family holiday. This was something Marc wanted to do during his lifetime.
331 Marc said to Mae that the funds would come from the Washburn Trust and that Marc and Mae would set up and run the foundation. Mae asked Marc whether starting a foundation meant that they would lose their lifestyle. Marc smiled and said:
No, it's simply where we would like some of our future wealth to go.
332 On 25 August 2015, Tony Monisse emailed Marc in relation to changes Marc had proposed to the Alexandra Trust and making Mae the default appointor of the Washburn Trust. Marc replied stating to hold off any additional changes with regard to the Washburn Trust 'as [I] am looking at setting up a foundation which may change my [w]ill accordingly'.
Today [I] may be going in for an operation today which may be life or death. Could you please ensure that if death does occur Mae['s] entitlement to my [s]perm is reflected in my will and that [I] am buried with my mother and father. Hopefully everything goes ok but [I] do want this to be reflected in my will. It will be Mae's responsibility to start up a foundation to reflect my legacy to my family and the greater community.
334 Mr Monisse forwarded Marc's email to Gary Same of Taylor Smart lawyers and instructed Mr Same to advise what needed to change in Marc's will. Glen Giles, also of Taylor Smart lawyers, emailed Mr Monisse referring to their telephone conversation and attaching an amended will incorporating the changes Marc had requested in relation to his burial and sperm donation. Mr Giles stated that the instructions regarding Mae's responsibility to start up a foundation were a little unclear and that 'this would appear to be a direction for an additional trust to be established with Mae as the trustee' and more detailed instructions were necessary.
335 Later on 9 October, Mr Monisse emailed Philip stating that he had instructed Taylor Smart to update Marc's will 'except for the setup of the foundation' and suggesting that Philip obtain further instructions from Marc on the additional information required to set up the foundation.
336 Dr Van Hagan gave evidence that in the last five to six weeks of Marc's life, Marc and Mae told him that they were going to set up a foundation to look at research into the upper GI cancers and that when Marc passed away, Mae was going to be the head of the foundation. Dr Van Hagan did not recall Marc saying anything about Philip being involved in the foundation.
337 Mr Cipriano gave evidence of a conversation with Marc prior to 27 August 2015 about the family establishing a foundation. Mr Cipriano said that Marc spoke of a foundation to be established while he was alive. They spoke of the foundation 'in the context of a corporate sense ... with their business interest, that having a philanthropic arm to the business, and therefore the Cardaci foundation was something that was worth considering doing'.
338 At the time of signing his final will on the day of his death, Marc said that it was Mae's responsibility to set up and run a foundation.
339 The evidence establishes that Marc wanted him and Mae to establish the foundation during Marc's lifetime. Marc did not want or ask Philip to establish the foundation. Marc intended to provide funds to the foundation from his wealth in the Washburn Trust. Marc did not intend that all or a majority of his income from or in the Washburn Trust would be applied to the foundation. He intended that during his lifetime, it would not diminish the lifestyle enjoyed by he and Mae; the foundation was 'simply where he would like some of our future wealth to go'.
340 The evidence does not establish that the Memorandum of Wishes did not reflect Marc's wishes at the time of his death. Marc was a careful and thoughtful businessman. He executed the Memorandum of Wishes less than three years before his death. Marc gave instructions to change his will shortly before his death and executed his last will on the day of his death. He gave no instructions to revoke or change his Memorandum of Wishes.
341 Mae gave evidence, which I accept, of three conversations with Marc about what would happen to his wealth after he died. The first was in about mid‑2014. Marc said he had left everything to Mae but Philip would be the trustee and that is because it will be easier for the company to run 'but he will help you access whatever funds you need'. The second conversation was when they were on holiday in London in mid‑2015. Marc said that Mae would inherit everything. The third occasion was in October 2015 in the Watermans Bay house that was being built. Marc said:
You will inherit everything and you and your family won't ever have to worry about any money.
342 There is no evidence from which it can properly be inferred that Marc changed his intentions with respect to his Memorandum of Wishes prior to his death. To the contrary, I conclude that Marc's wishes in relation to the distribution of income and capital received by the trust remained as set out in his Memorandum of Wishes.
343 There is no evidence that Philip believed that Marc's intentions had changed since he executed the Memorandum of Wishes. Philip gave no evidence as to his state of mind with respect to the status of Marc's Memorandum of Wishes. Philip gave no evidence that he had regard to the contents of the Memorandum of Wishes or that he formed the view that its contents did not reflect Marc's wishes at the time of his death.
Philip's statement of intention with respect to exercise of distribution powers
344 The plaintiff submits that the trustees should be removed because of the conduct of Philip, as the controlling mind of the relevant trustee company. The first category of Philip's relevant conduct is Philip's statements of intention with respect to the exercise or refusal to exercise powers under each of the trusts to distribute income and to advance capital in favour of Mae. The plaintiff says that the most significant matters in relation to this issue are what Philip said to Mae at the meetings of 18 May and 13 July 2016. It is therefore necessary to make findings of fact of what Philip said at those meetings.
345 The plaintiff pleads that at the 18 May 2016 meeting, Philip said to Mae words to the effect that he was the trustee of the Washburn Trust and that as trustee he would never distribute anything to Mae from the Washburn Trust; and at the 13 July 2016 meeting, Philip said to Mae words to the effect that he would only distribute from the Washburn Trust to a foundation to be established and not to the plaintiff.
346 The defendants deny that Philip made those statements. The defendants plead that at the 13 July 2016 meeting Philip informed Mae that he intended to distribute income of the Washburn Trust towards the establishment of a charitable foundation for Marc's legacy.
347 Mae gave evidence of her meeting with Philip on 18 May as follows. The meeting started just after 7.30 am at the Wild Fig Café. They started talking about the foundation. Mae asked about getting the company accounts for Washburn. Philip said abruptly that she would never have any involvement in the company. Philip then said:
I am trustee of Washburn Trust. I will never distribute anything to you from the Washburn Trust ... or from the company. I will put it all into the foundation for Marc.
348 Philip then said that he was very disappointed in Mae for not having applied for the executive assistant position at FMG. Mae told Philip her reasons for not applying for the role. She said she wanted to focus on property investment and she was still conscious to have a family. Philip said he was doing what he believed Marc would want him to do to get Mae to move on with her life. Mae said that is not what Marc had intended. Philip said again that he was doing what Marc wanted, which was to help Mae move on with her life. Philip then proceeded to talk about the foundation and they ended the conversation predominantly talking about what the foundation would look like.
349 Philip denies that he said he would never distribute anything to Mae from the trust or the company. Philip says Mae asked about working in the family business and he said that was not going to happen because it was a rule his father and uncle had put in place that spouses did not work in the business.
350 I find that Philip said to Mae words to the effect that he was the trustee of the Washburn Trust, that as trustee he would never distribute anything to Mae from the Washburn Trust and he would put all of Marc's wealth from the Washburn Trust into the foundation for Marc. Further, Philip said to Mae that that was what Marc intended. I make those findings for the following reasons.
351 First, Mae's evidence of what Philip said was consistent and convincing. Her evidence was not shaken by a thorough and forceful cross‑examination.
352 Counsel for the defendants cross‑examined Mae to the effect that she had fabricated her evidence that Philip said, at the 18 May meeting, that he would never distribute anything to her from the Washburn Trust. Counsel put to Mae that she had not told her confidante, Mr Hughes, that Philip had said that and that she first raised with Philip the allegation of what he said to her after she had flown to Melbourne and taken advice from her team of advisers in July 2016.
353 I find that Mae did not fabricate her evidence that Philip said to her that he would never distribute anything to her from the trust or the company. Immediately after the 18 May meeting Mae went to the gym, which was next door to the Wild Fig Café where she met Philip, to meet her friend, Charlotte Spence. Ms Spence gave evidence that she had arranged to meet Mae at the gym for a fitness class. Mae was running late. As Mae arrived she was upset. She had visibly been crying. Mae told Ms Spence that she had had a meeting with her brother‑in‑law, it had turned nastier than she expected and he had said something to the effect that she would not receive or see any of the money that Marc had left behind. That evidence is consistent with Mae's evidence of what Philip said to her, although more succinct and less detailed, as I would expect.
354 Secondly, I found Philip's evidence of what was said at the meeting to be unconvincing.
355 Mae says that at the 18 May meeting, Philip made the statement that he would never distribute anything to her from the trust when she asked Philip for company accounts for Washburn. Philip says that Mae did not ask about company accounts but rather asked about working in the family business. Prior to and subsequent to the 18 May meeting Mae asked for information about her finances. Prior to the 18 May meeting Mae had been considering, and had discussed with Philip, taking up property development or investment. There is no evidence that prior to or subsequent to the meeting Mae ever considered or discussed with anyone working in the family businesses.
356 Thirdly, Philip's settlement offer he made to Mae on 13 July 2016 is consistent with Philip intending that Mae would receive no future distributions from the Washburn Trust and that distributions from the Washburn Trust would go into the foundation to be established as Marc's legacy. Philip calculated his settlement offer by estimating the value of Marc's estate and Marc's Testamentary Trust. He made no allowance for the value of any distributions she might receive from the Washburn Trust notwithstanding that Marc's wealth was predominantly in the Washburn Trust. Thus the settlement offer is consistent with Philip intending that Mae would not receive distributions of income or assets from the Washburn Trust in the future. Further, prior to the lawyers becoming involved, Philip only provided information to Mae about Marc's estate and Marc's Testamentary Trust. For the March 31 meeting to discuss Mae's financial position, Philip instructed Mr Smith that Mae be given information about Marc's estate and Marc's Testamentary Trust and not the businesses in which Washburn Trust held shares.
357 Philip agreed in cross‑examination that his settlement offer of 13 July 2016 was premised on valuing Mae's interest in the Washburn Trust at nothing. It is open to infer, and I do infer, that Philip viewed the value of the plaintiff's interest in the Washburn Trust at nothing because he had decided that he would never distribute to Mae anything from the Washburn Trust. There is no evidence that Philip's state of mind about the distributions from the Washburn Trust changed between 18 May and 13 July 2016. It is open to infer, and I do infer, that on 18 May Philip had relevantly the same state of mind as of 13 July 2016, which was that he would never distribute to Mae anything from the Washburn Trust.
358 Fourthly, Philip's decision on 28 June 2016 not to make a distribution to Mae from the Washburn Trust is consistent with him having that state of mind on 18 May. Philip, as director of Washburn as trustee of the Washburn Trust, resolved to distribute the income for the 2016 financial year as to $345,000 to Marc's estate, $10,000 to Abernethy Trust 3 and the balance of $267,916 to Powercity. As a director of Ongold, as trustee of Marc's Testamentary Trust, Philip resolved to distribute the whole of the income for the 2016 financial year, $93,267, to Powercity.
359 Philip's evidence of his reasons for making no distributions to Mae from the Washburn Trust 2016 financial year was:
I have taken into account the significant cash that I had distributed to Mae - well, not distributed to Mae, but that Mae had available to her that year. So I took it into consideration that she had use of $1.9 million from Marc's Testamentary Trust, that she had use of $186,000 from Marc's estate - cash from Marc's estate, his personal bank account, and I took into consideration that she had the benefit of drawings of the Washburn Trust of approximately $118,000 that year. So significant cash had been paid to Mae in that particular year, and therefore decided not to distribute to Mae in that year.
That explanation makes little sense if, as Philip contends - he believed those amounts were loans to Mae which were repayable.
360 Fifthly, Mae's evidence is consistent with her account of the meeting in her affidavit sworn on 9 May 2017. Mae's statement is a statement on oath about 12 months after the meeting of 18 May 2016.
361 Sixthly, the defendants led evidence from Angela of an occasion in or about May 2016 when Mae told her she was 'deeply hurt by Philip's actions'. Angela agreed that that occurred after 17 May 2016. It must be a reference to Philip's actions at the 18 May 2016 meeting. It is consistent with Mae's account of the meeting. Philip's explanation for Mae being upset is that she was upset because he told her that she could not work in the family businesses. It is unlikely that Mae asked to work in the family businesses. Even if she had it is unlikely she would have been 'deeply hurt' by Philip saying she could not. There is no evidence, apart from Philip's evidence of the 18 May meeting, that Mae ever raised the subject of working in the family businesses.
362 Seventhly, Philip instructed EY Law from 20 May 2016. The defendants led evidence from Mr Smith that he (Mr Smith) came to know in May 2016 that Philip had retained EY Law in regard to Marc's estate and matters relating to Marc's estate and that he attended meetings with Philip and EY Law. Mr Smith agreed that the reason he did not follow through on the promise he made at the 31 March 2016 meeting to recommend a financial advisor to Mae was that the nature of the discussions that subsequently took place between Philip and EY Law by May 2016 were such as to give rise to a concern in his (Mr Smith's) mind that he had a conflict of interests in providing the name of a financial advisor to Mae.
Eighthly, on multiple occasions after 20 July 2016 Philip failed to deny Mae's assertion that he had said he would never distribute anything to her from the Washburn Trust and he would put all of Marc's wealth into the foundation.
363 Mae's statement in her email of 20 July 2016 that Philip had said that he would never give her any funds from the Washburn Trust and instead would put it into a foundation was not contradicted by Philip in his reply email of 24 July.
364 Mae's email was succinct. Mae asked Philip for clarity on two matters. The first was whether Philip's offer of settlement was to buy her out of Frank and Grace's estate or Marc's personal estate. The second was why Philip had said that he will never give her any funds from the Washburn Trust and instead will put it into a foundation.
365 In his reply email of 24 July, Philip said that he would be happy to provide additional clarity regarding the offer of settlement he made as well as the position of Marc's estate and the operation of the family trusts. Philip then referred to Marc's estate, Marc's Testamentary Trust and the Washburn Trust. In relation to Marc's estate Philip said the estate was in deficit when Marc died and he was not able to make any distributions from the estate and this 'is a strict legal duty of mine as executor of Marc's estate'. In relation to Marc's Testamentary Trust, Philip said that this is a discretionary trust and no beneficiary has any entitlement to a distribution but that the trust had provided funds to Mae in the order of $253,000 in cash as well as $1.67 million towards the purchase of her house and furniture. In relation to the Washburn Trust Philip said Marc did not have any interest in the underlying assets that could be transferred on his passing including to Mae and that the trust owns shares in the family businesses and the majority of its income comprises discretionary dividends paid from the businesses each year. Philip said that Mae is a beneficiary of the trust 'along with a broad class of beneficiaries' and that it is the decision of the trustee, appointor and guardian each year. Philip then said that his settlement offer 'was one of family benevolence, or goodwill if you like, in relation to your interests in all of the above' and that after the settlement she would have received cash and assets in the order of $6.3 million over the past year. Philip said that it was his intention to commence the foundation for the Cardaci family bearing Marc's name and fulfilling his wishes and Marc would have wanted Mae involved in deciding what charities they should contribute to.
366 On the face of it, Philip's email was a considered and careful response to the matters raised by Mae in her email. He had had a telephone conversation with EY Law on 21 July and received input from EY Law into his email of 24 July. In response to Mae's request for clarity on his statement that he will never give her any funds from the Washburn Trust and instead will put it into a foundation, Philip did not contradict Mae's statement. To the contrary, Philip's response appears to be an explanation and elaboration of his statement that he would distribute any funds from the Washburn Trust to the foundation and not to her.
367 In his evidence at trial, Philip's explanation of his failure to rebut Mae's assertion is that he did not rebut every point in Mae's email. That explanation is not persuasive. A person who fails to contradict a statement concerning matters within his own knowledge may be understood as acquiescing in the statement if the circumstances are such as to make it unlikely that he would allow an erroneous statement to pass unchallenged.[37] The circumstances here make it unlikely that Philip would allow the statement that he would never give Mae any funds from the Washburn Trust and instead will put it into a foundation to pass unchallenged if he had not made the statement.
368 Philip's email is a considered response. He must have appreciated that Mae's statement that he had said that he would never give her any funds from the Washburn Trust was a serious allegation. Philip did not deny it. To the contrary, Philip's response is consistent with explaining or justifying that position. Philip says that the Washburn Trust is a separate trust outside of Marc's estate in which Marc did not have any interest in the underlying assets that could be transferred on his passing, including to Mae.
You are a beneficiary of this trust, along with a broad class of beneficiaries. It is the decision of the Trustee, Appointor and Guardian each year where distributions should flow, if any, from the Washburn Trust.
That statement is broadly consistent with Mae's evidence that at the meeting Philip said that he was the trustee and there are many beneficiaries of the Washburn Trust, including himself, all the family members and his children.
370 In an email to Philip of 26 August 2016, Mae asked:
If you propose never to distribute anything to me from those trusts, as you have said before, then please could you explain why that is[?] Marc has clearly stated many times that I was to get all capital and income from the Washburn Trust as his primary beneficiary of the will and be the one to set up and run the Foundation. Your current proposal gives me no way of following his wishes and I am genuinely confused as to why you are not considering his wishes or the directions that he made.
371 In his reply email of 31 August, Philip did not contradict Mae's statement that he proposed never to distribute anything to her from the Washburn Trust, nor did he refer to the Memorandum of Wishes. As with Philip's reply to Mae's email of 20 July, the circumstances here make it unlikely that Philip would allow the statement that he proposed never to distribute anything to Mae from those trusts to pass unchallenged if it had not been made.
372 Ninthly, in the circumstances, Philip's failure prior to 27 October 2016 to deny Mae's assertions that he had stated that he would never distribute anything to her from the Washburn Trust and that he would put all of the trust wealth into the foundation was an affirmation that that was Philip's intention. The plaintiff submits that Philip knew that she (Mae) would have to consider his settlement offer made on 13 July 2016 in the context of his stated intention never to distribute to her from the Washburn Trust. He wanted her to know that. That is why he repeatedly failed to deny having made those statements. His failure to deny those statements was, and was intended to be, an affirmation of the truth - that that was Philip's intention, which he had stated on 18 May 2016. That conclusion is a reasonable inference from the facts I have stated and is supported by Philip's failure in cross‑examination and re‑examination to give any adequate explanation why he did not deny Mae's assertions until his letter of 26 October 2016.
373 In cross‑examination, Mr Cuerden SC asked Philip why he was concerned to correct Mae's wrong understanding and assertion that he had those intentions and made those statements. Philip's answer was that there were several wrong things in her email which he did not correct and it seemed pointless to have arguments. Mr Cuerden then elicited from Philip that in fact, in his email of 24 July 2016, he had rebutted some of the things said by Mae in her email of 20 July 2016. Philip's explanation was inadequate and unconvincing. In re‑examination, his own counsel asked Philip, in effect, why he had denied Mae's allegation in his letter of 27 October but not in his previous letters responding to Mae's allegations. His answer was: 'I can't remember'.
374 Mae and Philip agree that Mae opened the meeting by saying she was pleased with the price she had got for Shimmer. Philip agreed it was a good price and Mae asked Philip how to access those funds. They agree that Philip gave Mae the July spreadsheet and they discussed the figures on the July spreadsheet but thereafter their evidence conflicts.
375 Mae says that the discussion about the July spreadsheet was very brief. She says Philip did not say the amounts shown were loans. In relation to the settlement of the Watermans Bay property, Philip said:
377 Philip said the furniture loan was in reference to the Ultimo furniture for the new house. Philip referred to loans to related companies and that they would never get repaid. After referring to meetings and amounts that Mae had received, Philip said:
That was why, Mae says, she circled that figure on the copy of the July spreadsheet she retained.
378 Philip said he went through the spreadsheet which showed a list of assets that were either in Mae's possession or that she had had access to from Marc's Testamentary Trust, his estate or other assets outside of his estate, like the motor vehicle from Duporte. Philip says the spreadsheet showed approximately $4.3 million worth of assets that she had either in her possession or had had funds from. He spoke about Mae's independence and said:
It's become apparent to me that you want your independence and maybe I have a proposal to put forward to you that maybe gives you that independence.
379 Philip then said he proposed to Mae that he would make all of those assets available to her because some of those were loans, but he would make them all available to her encumbrance free. In addition, he would give her $2 million in cash, which totalled $6.3 million in assets and cash. Mae asked Philip what cash was left in the estate and they talked about the $400,000 cash left in Marc's Testamentary Trust. Mae asked if that was included in the $2 million and Philip said it was. Mae then asked about the Washburn Trust and what Philip's intentions with the trust would be. Philip explained his intentions would be to fulfil Marc's wishes, which were to form a foundation and for the majority of the funds from Washburn Trust to be given to the foundation. Mae said she was confused because she thought that the funds would flow to her and she would decide what goes in the foundation. Philip said that is not the way it would work and the purpose of his offer was to give her some independence. Philip says there was a discussion about the proposed foundation and then he suggested that she needed to get independent legal and financial advice about what he had put to her.
380 Mae's evidence is to the following effect. She asked Philip 'what about the Washburn Trust', to which Philip said he was the trustee and there are many beneficiaries of the Washburn Trust, including himself, all the family members and his children and that he wanted to put all of Marc's wealth into the foundation and that any future wealth, including from Frank and Grace's estate, would go into the foundation as well. Philip said he would like Mae to be involved in the foundation. Philip said:
381 Philip said that Mae would need to get her legal advisers and accounting advisors to give her some advice and he was happy to give them whatever information they require and she could just email him direct for that.
382 Mae said 'No' and showed she was shocked. Philip said:
But Marc's Testamentary Trust is still available. You can still access those funds. So you can just email Kaye, because they are outside the estate.
383 At the end of the meeting Mae told Philip that she had started seeing Mr Hughes. Philip said:
You will move on with your life and you will remarry.
384 I find that at the 13 July 2016 meeting, Philip said to Mae words to the effect that he would only distribute from the Washburn Trust to a foundation to be established, and implicitly not to Mae. I make that finding for a number of reasons.
385 First, Mae's evidence of what Philip said was consistent and convincing during a thorough and forceful cross‑examination.
386 Secondly, Mae's contemporaneous notes of the 13 July 2016 meeting are consistent with her evidence. She records, under the words 'Assets in the future from Marc', the words 'go into his foundation (won't go to anyone else)'.
387 Thirdly, aspects of Philip's evidence of what he said at these meetings was unconvincing.
388 Philip's evidence about his intention in making the offer and the terms of the offer was evasive and inconsistent. The distinction between Marc's estate, Marc's Testamentary Trust and the Washburn Trust was clear in Philip's mind. Philip's evidence is that one of his principal purposes for the 31 March 2016 meeting was to explain to Mae the distinction between Marc's estate and Marc's Testamentary Trust. Philip had given careful thought to the settlement offer. He had prepared the July spreadsheet to formulate and explain his offer. The spreadsheet detailed assets and liabilities of Marc's estate and Marc's Testamentary Trust; it detailed drawings from the Washburn Trust. Nevertheless, in cross‑examination Philip denied that his offer was that Mae would receive $2 million plus a transfer of various assets in exchange for relinquishing her interest in the estate and her interests in the various trusts. He insisted that his offer was in his 'personal capacity', that he did not know what he had to do and if Mae accepted his offer he would get legal advisors involved to formulate some sort of deed. However, Philip conceded that the deed he intended to be drawn up would provide for Mae to relinquish her interests in all of the trusts. Furthermore, in his amended defence of 10 September 2020, that is four days before Philip commenced giving evidence, Philip pleaded that it was part of his offer that 'the plaintiff would relinquish her interests in respect of Marc's Estate, Marc's Testamentary Trust, The Washburn Trust and all other entities within the Cardaci Family Group'. Ultimately, after much cross‑examination, Philip accepted that his intention when he made the offer was that the settlement would involve Mae relinquishing her interests in the Washburn Trust, Marc's estate and all the trusts.
389 Philip said that he prepared the July spreadsheet with technical assistance from Ms Bailey. However, Philip's explanation of the document was inadequate. In cross‑examination he said the heading 'Loan Mae Cardaci' in the right hand column was an error which he could not explain.
390 Fourthly, on multiple occasions after 20 July 2016 Philip, failed to deny, despite opportunities to do so, Mae's assertion as to what he had said at the 13 July 2018 meeting as well as what he had said at the 18 May 2016 meeting. I have considered that matter when considering what was said at the 18 May 2016 meeting.
391 Fifthly, Philip's settlement offer is consistent with Philip intending that Mae would receive no future distributions from the Washburn Trust and distributions from the Washburn Trust would go into the foundation for the reasons I have stated when considering what was said at the 18 May 2016 meeting.
392 Sixthly, the conduct of Mae and Philip after the meeting is consistent with them having a common understanding that Philip did not intend to distribute funds from the Washburn Trust to Mae in the future.
393 The Washburn Trust deed confers a very wide range of powers and discretions on the trustee, including the power to raise money from a beneficiary.[38] However, the Washburn Trust deed does not confer upon the trustee the power to buy out a beneficiary's interest in the trust. The trust deed of Marc's Testamentary Trust conferred no such power on the trustee.
394 At general law a trustee may purchase the equitable interest of a beneficiary in the trust property. But if the transaction is impeached, the trustee must prove that the trustee and the beneficiary were at arm's length and that no confidence was reposed in the trustee, that the transaction was for the advantage of the beneficiary, and that full information was given to the beneficiary of the value of the property, of the nature of the beneficiary's interest therein and of the circumstances of the transaction.[39]
395 The defendants do not attempt to justify Philip's settlement offer on the ground that it was a permissible exercise of the powers of the trustee of Marc's estate, Marc's Testamentary Trust and the Washburn Trust. To the contrary, Philip says that his settlement offer was made 'in his personal capacity' and was 'one of family benevolence' in relation to Mae's interests in Marc's estate, Marc's Testamentary Trust and the Washburn Trust.
396 Mae disputes that Philip's offer was made in his personal capacity or that Philip made it for her benefit. Further, Mae says that even if Philip's explanation were true, his conduct in making his offer of settlement was of its nature inimical to the proper discharge of his duties as controller of the trustees.
397 Philip's offer was, in effect, to buy out Mae's interest in Marc's estate, Marc's Testamentary Trust and the Washburn Trust. It was an essential part of his offer that Mae relinquish her interests in the estate and those trusts.
398 Philip's assertion that he made his settlement offer 'in his personal capacity' was made for the first time in these proceedings in the defendants' written outline of submissions for trial filed on 3 March 2020. The defendants amended their defence on 18 May 2020 to plead that Philip's offer was made by him in his personal capacity.
399 Philip did not make his offer expressly in his personal capacity. Philip made the offer to resolve Mae's rights in respect of Marc's estate, Marc's Testamentary Trust and the Washburn Trust. Philip intended that Mae would relinquish her interests in the estate and the trusts. The defendants plead Philip's intention was that Mae would relinquish her interests in Marc's estate, Marc's Testamentary Trust, the Washburn Trust and all other entities within the Cardaci family group. In his email of 31 August 2016, Philip said that his settlement offer would be done by way of a settlement deed which would cover all entities within the Cardaci family group. Philip in his capacity as controller of the executor of Marc's estate and the trustees of the Washburn Trust and Marc's Testamentary Trust would be parties to the settlement deed.
400 Philip made his settlement offer, as I have found, in circumstances where he had informed Mae that, as trustee of the Washburn Trust he would not distribute any of the trust funds to Mae. Philip's offer cannot be segregated from his position as controller of the trustee of the Washburn Trust.
401 The defendants plead that the terms of the offer were that Mae would be paid $2 million, inclusive of the $40,000 to be made available to her for the purpose of obtaining advice on the offer, and would receive or keep as appropriate, the items or amounts set out in the list under the heading 'Loan Mae Cardaci' and recorded on the list as totalling $4,292,888. The list is a reference to the July spreadsheet Philip gave to Mae at the 13 July meeting. The $40,000 referred to was paid to Mae from Marc's Testamentary Trust. Also, part of Philip's offer was that Mae would receive, or keep, the benefit of loans from Marc's Testamentary Trust totalling $1.97 million.
402 Philip did not claim that he intended to pay Marc's Testamentary Trust and the Washburn Trust the amounts he said had been loaned by those trusts to Mae so that she would be released from those loans. To the contrary, the defendants plead that whilst Philip did not know how his offer would be given effect to, including where the necessary funds would be coming from, 'to the extent it was required of him to do so' Philip would personally fund the same. In his email of 19 July 2016 to Mae, Philip said:
With regards to the $2 million cash payment to be made as part of the settlement I am not sure where those funds will be coming from but am prepared at this stage to personally fund any shortfalls. (emphasis added)
In his evidence Philip said that his intention was to put his hand in his own pocket 'if he had to' and 'only to the extent necessary'.
403 In his email of 24 July 2016 to Mae, Philip said that his settlement offer made to her
was one of family benevolence, or goodwill if you like, in relation to your interests in all of the above. It was to ensure that you are adequately provided for, as Marc would have wanted, even though his [e]state was bankrupt.
404 I do not accept that characterisation of the effect of, or reason for, Philip's offer. Philip described his offer as a 'settlement offer'. The ordinary understanding of a 'settlement' is an agreement to resolve a disagreement or difference. A settlement involves consideration. In this case the consideration to be provided by Mae was to relinquish her legal or equitable interests in Marc's estate, Marc's Testamentary Trust, the Washburn Trust and all Cardaci family trusts. Philip intended, and stated that the settlement should be, effected by a deed. That is neither necessary nor usual to give effect to an act of benevolence.
405 In making his settlement offer Philip used his position as the controller of the trustee of the Washburn Trust and Marc's Testamentary Trust and executor of Marc's estate to attempt to buy out Mae's interest in the trusts. The proper conclusion as to the capacity in which Philip made his offer is that Philip did not distinguish between his personal capacity and his capacity as controller of the trusts.
406 The settlement Philip offered was neither a necessary nor obvious way to ensure that Mae was properly provided for. The obvious way for Philip to provide for Mae was out of the trusts. Mae had no need for, and had not asked for, any lump sum in lieu of future distributions from the trusts. Philip did not even consider ensuring that Mae was adequately provided for by receiving funds from the Washburn Trust, as he stated in the following evidence:
Did it occur to you at the time that the plaintiff, perhaps, didn't need an offer from ‑ an offer of settlement from you in order to ensure that she was adequately provided for?---I didn't think of that.
Did it occur to you that you could ensure she was adequately provided for by simply discharging the ongoing duties and responsibilities as controller of the trustee of the Washburn trust?---I didn't consider that.
The only reason she needed your settlement offer in order to ensure that she was adequately provided for was because you told her on two occasions, namely 18 May and 13 July, that she would never be receiving any funds from the Washburn trust, correct?---No, I didn't.
407 The fact that Philip did not consider ensuring that Mae was adequately provided for by discharging his duties and responsibilities as controller of the trustee of the Washburn Trust is a strong indication that ensuring that Mae was adequately provided for by an act of benevolence was not the reason for Philip's offer. The reason for Philip's offer was to buy Mae out of Marc's estate, Marc's Testamentary Trust, the Washburn Trust and any other Cardaci family trusts so that Philip, as controller of the trustees of those trusts, could administer those trusts and make any distributions from those trusts without having to give any consideration to the needs or interests of Mae.
408 The second category of Philip's conduct because of which the plaintiff submits Washburn and Rectangular should be removed as trustees of the Washburn Trust and Marc's Testamentary Trust respectively, consists of aspects of Philip's conduct in his management of the trusts through his control of the trustees. The plaintiff identifies a number of instances of such conduct, which I will address seriatim.
409 At the date of his death Marc owed Duporte $1,280,714 which he had borrowed from Duporte in November 2014 to purchase the boat, Shimmer. On 10 November 2015, three days after Marc's death, Ms Bailey transferred $1,280,714 from cash assets of Marc's Testamentary Trust to Duporte in repayment of that debt.
410 It is common ground that the payment discharged Marc's debt to Duporte. The defendants contend that the payment gave rise to a corresponding liability of Marc's estate to Marc's Testamentary Trust. The plaintiff submits that the proper conclusion from the evidence is that Marc's estate is not - and never has been - liable to Marc's Testamentary Trust in respect of this payment.
411 Further, the plaintiff alleges, and the defendants deny, that by causing or ratifying the payment Philip caused Ongold to breach its fiduciary duty to the beneficiaries of Marc's Testamentary Trust.
412 In [74] of her substitute statement of claim filed 9 November 2017, the plaintiff pleaded that Philip caused Ongold, the trustee of Marc's Testamentary Trust, to repay the Alleged Duporte Loan to Duporte from the funds of Marc's Testamentary Trust. The Alleged Duporte Loan was a loan of $1,280,000 that Philip claimed was owed by Marc to Duporte. In [96] of their defence filed 8 December 2017, the defendants admitted the plaintiff's plea.
413 The defendants maintained that plea until during the course of the plaintiff's opening when lead senior counsel for the plaintiff, Mr Cuerden SC, said that it was common ground that on 10 November 2015 Philip caused Ongold to make the payment. Senior counsel for the defendants, Mr Penglis SC, said that it was not common ground. Subsequently, the defendants applied for, and were granted, leave to withdraw the admission in [74] of their defence. The defendants now plead that Philip became aware of the payment shortly after it was made and
on the basis that he considered it to give effect to Marc's intentions and instructions to Philip and Kaye Bailey to repay the Duporte Loan as pleaded in paragraphs 94.6 above and 97D.13 below, did not take steps to reverse or otherwise change the Ongold Payment (87).[40]
414 There is no longer any admission on the pleadings. However, the admission in the defendants' defence of 8 December 2017, which was tendered and received in evidence, is an admission.[41]
415 As I have set out earlier, Philip's explanation for the change of the defendants' position, and his evidence concerning the payment, are unsatisfactory.
416 Ms Bailey's evidence is that she made the payment on 10 November 2015 because she had been told on numerous occasions by Marc to do so when the funds came into Marc's Testamentary Trust and she did so without any discussion with Philip. The contemporaneous objective facts and circumstances do not support Ms Bailey's evidence. The funds were received by Marc's Testamentary Trust on 26 October but Ms Bailey did not then make the payment. There was no apparent urgency to make the payment when she did.
417 Notwithstanding the unsatisfactory evidence of Philip and Ms Bailey concerning the 10 November 2016 payment, I am not able to make a finding that Ms Bailey made the payment as a result of an instruction or approval from Philip.
418 The defendants' case is that Ms Bailey made the payment as the agent of Ongold to give effect to instructions provided to her by the sole director of Ongold, Marc, which had not been countermanded.
419 Ms Bailey's evidence does not establish an instruction by Ongold to make the payment of $1,280,714 that she caused Ongold to make on 10 November 2015. Ms Bailey's evidence‑in‑chief was that she made the payment because she
had been told on numerous occasions by Marc that when the funds came in from - I had to repay the loan that - to Duporte.
In cross‑examination, Ms Bailey said she decided to make the payment without reference to Philip because
[i]f Marc asked me to make payments, I don't have to go to Philip, because they're Marc's accounts.
420 There is no evidence that Marc requested or instructed Ms Bailey to cause Ongold to pay $1,280,714 to Duporte after his death to discharge the debt owing by his estate. Ms Bailey made the payment without the authority of Ongold. Furthermore, I am not satisfied that any authority or instruction given by Marc as director of Ongold to Ms Bailey, in the circumstances of this case, continued to be of effect after Marc died and ceased to be a director of Ongold. The situation is analogous to that where the death of a principal extinguishes the authority of the agent.
421 Before his death, Marc was the only director and shareholder of Ongold. On Marc's death, Philip acted in the position of director of Ongold. Furthermore, the ASIC Current & Historical Organisation Extract extracted 20 November 2017 records that Philip became the director of Ongold on 7 November 2015. Philip had power to reverse the payment and recall the monies from the account of Duporte. Philip confirmed in his evidence that he had the power to reverse the payment but he decided to allow the monies to remain in the account of Duporte. Philip approved and ratified the act of Ms Bailey in making the 10 November 2015 payment.
Marc's estate is not indebted to Marc's Testamentary Trust
422 The defendants say that the proper characterisation of the Ongold payment is a loan from Ongold as trustee of Marc's Testamentary Trust to Marc's estate. The defendants do not plead a written or oral loan agreement.
423 A loan agreement can, in some limited circumstances, be inferred from the conduct of the parties. However, it will only be in a clear case that a promise will be implied from facts which do not involve written or oral communication from which a promise appears.[42] It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.[43]
424 The conduct of Ongold in discharging the Duporte loan is consistent with a loan agreement between Ongold and Marc's estate but does not positively establish that the amount was advanced by way of loan to Marc's estate rather than as a voluntary payment or as a distribution of capital or income to Marc's estate or Duporte.
425 The defendants have not identified any dealing which can properly form the basis of a loan agreement. The defendants assert that a practice had been established between Marc, Ms Bailey and Brentnalls that payments made at Marc's request were treated as a loan when made and what to do with the loan (if anything) was determined by Marc, on advice from Brentnalls, before the end of the financial year in which the payment was made. However, whatever practice may or may not have existed during Marc's lifetime when he controlled Ongold and could determine the characterisation of payments made by Ongold cannot establish an agreement between Ongold and Marc's estate after Marc's death.
426 The fact of payment and nothing more does not establish a loan or an obligation to repay. In Re Ledir Enterprises Pty Ltd[44] Black J in Eq said:
The Australian position appears to be that, if a payment is made at a person's request and for his benefit, there is no implied obligation to repay (28).[45]
427 When a payment is made by a third party to discharge a debt at the request of the debtor, the circumstances may give rise to an implied contract of loan or alternatively the payer may be able to recover the amount of the payment from the debtor by way of restitution. However, there is no evidence that the payment was made at the request of Marc's estate. Philip's evidence is that, on behalf of Ongold, he could have reversed the payment but decided not to do so. There is no evidence that Philip, in his capacity as executor of Marc's estate, requested that the payment be made. Furthermore, the defendants' case is that Marc's estate is indebted to Marc's Testamentary Trust because the payment was a loan not because Marc's estate is liable to Ongold in restitution.
428 I conclude that Marc's estate is not indebted to, or liable to, Ongold as trustee of Marc's Testamentary Trust in the sum of $1,280,714.
Philip caused Ongold to breach its duty by making or ratifying the payment
429 Ms Bailey effected the 10 November 2015 payment as agent for, or on behalf of, Ongold. A short time later, Philip became aware of the payment. He had the power to reverse the payment. He decided to let the payment stand rather than reverse it, as he could have and should have if the payment was not in the best interests of the trust and its beneficiaries. Philip's action, as controller of the trustee, ratified or approved the payment.
430 On the assumption that the transaction gave rise to a loan by Marc's Testamentary Trust to Marc's estate, as the defendants assert, the effect of the transaction on Marc's Testamentary Trust was to substitute for its asset of $1,280,714 cash, the chose in action constituted by a debt in that amount owed by Marc's estate. If the transaction amounted to a voluntary payment by Marc's Testamentary Trust without the right to be paid that amount by Marc's estate, as the plaintiff asserts, then the trust received nothing for the $1,280,714 it paid to Duporte. In either case Marc's Testamentary Trust suffered a detriment as a result of the transaction.
431 Philip gave evidence that he believed, immediately prior to Marc's death, that Marc was under some sort of financial pressure.
432 Philip knew that the loan was unsecured and interest free.
433 Philip's family trust, the TF Family Trust, was a 50% shareholder in Duporte. Philip was the actual or de facto director of Duporte after Marc's death. The payment on 10 November 2015 ensured that Duporte was repaid before, or in advance of, any of the other creditors of Marc's estate.
434 Philip put himself in a conflict of interest by approving or ratifying, as the controller of the trustee of Marc's Testamentary Trust, the loan from Marc's Testamentary Trust to Marc's estate to discharge the debt owing by Marc's estate to Duporte. The payment made by Ongold as trustee of Marc's Testamentary Trust to Marc's estate was not in the best interests of the beneficiaries of Marc's Testamentary Trust. It was in Philip's interest because it prioritised Duporte, of which he through his family trust held 50% of the shares, over Marc's other creditors or alleged creditors. There was no real prospect of Marc's Testamentary Trust being repaid the loan. At the very least, the loan was highly risky.
435 In making, or ratifying, or approving the payment, Ongold breached its duty to the beneficiaries of the trust to act in their best interests. Philip, as controller of Ongold, caused that breach of duty.
Philip's conduct in asserting and accepting the alleged liability of Marc's estate to Marc's Testamentary Trust of $1,280,714
437 Mae says that the payment of $1,280,714 by Ongold to Duporte did not create a loan of that amount by Ongold to Marc's estate or a liability of Marc's estate to pay that amount to Marc's Testamentary Trust.
438 Philip asserted that the 10 November 2015 payment, which the defendants refer to as the Ongold payment, gave rise to a loan that was due and owing by Marc's estate to Marc's Testamentary Trust notwithstanding that Ms Bailey had made the payment without any request or authority from him, Philip, as executor of Marc's estate. Philp, as the executor of Marc's estate, accepted the liability without taking legal advice. Philip's conduct was to the disadvantage of Marc's estate.
Philip's conduct in asserting and accepting the Powercity loans
439 Powercity, a company controlled by Marc and a corporate beneficiary of the Washburn Trust, made payments to Marc which were recorded and treated in the Powercity accounts as loans to Marc and in turn were repaid from dividends declared by Powercity to the Washburn Trust which held 99.9% of the shares in Powercity and then distributed to Marc for the purpose of repaying the loans, or the loan repayment instalments required to comply with the relevant provisions of pt 3 div 7A of the Income Tax Assessment Act 1936 (Cth) and thereby minimise the tax otherwise payable. At the date of his death Marc had outstanding loans of $1,614,153 to Powercity.
440 Mae says that it was a term of the loans that they were repayable only from distributions made by the trustee of the Washburn Trust out of funds received by way of dividends declared by Powercity.
441 The High Court has indorsed the statement of principle taken from the majority opinion of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[48] that for a term to be implied, five criteria there set out must be satisfied.[49] However, where the contract has not been recorded in a formal document the five criteria are replaced with a single criterion:
A term is implied if it is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.[50]
442 The criterion of what is necessary for the reasonable or effective operation of a contract is coextensive or interchangeable with what is necessary for its business efficacy, at least in relation to business dealings.
443 What is required is consideration of what would make the contract workable in a business sense. It is not required to show necessity by showing that without the term in question the contract cannot be carried out at all.
444 There is evidence that Marc had for some time followed the practice referred to in relation to the Powercity loans. However, I am not satisfied that Mae has established that each of the Powercity loan agreements would not be workable in a business sense unless a term is implied that they were not repayable unless and until dividends were declared by Powercity to the Washburn Trust and then distributed to Marc to enable him to repay the loans or loan repayment instalments.
445 I find that Marc's estate was unconditionally liable to Powercity in respect of loans advanced to Marc during his lifetime totalling $1,614,154. Philip did not engage in any misconduct in accepting that Marc's estate was indebted to Powercity in that amount.
Philip's entry into the Leone Shareholders Agreement
446 On 11 April 2017, Philip caused Washburn, as trustee of the Washburn Trust, to enter into the Contura Sale Agreement by which Washburn sold its shares in Contura Mining Pty Ltd, through which the Washburn Trust held its 25% interest in the CEFS group, to Leone Family Holdings Pty Ltd. At or about the same time, Philip caused Washburn, as trustee of the Washburn Trust, to enter into the Leone Shareholders Agreement dated 11 April 2017. Mae says that the terms of the Leone Shareholders Agreement are not in the best interests of the beneficiaries of the Washburn Trust.
447 Philip gave evidence that the purpose of the Contura Sale Agreement was to facilitate the interposition of a new holding company between the four family trusts and Contura Mining. The idea came from Grant Gardner, the group's CEO. At the time the assets of Contura Mining were charged to the company's banker. Mr Gardner proposed interposing another company between the shareholders and Contura Mining. Any assets within the new company would not be charged to the bank. A report prepared for Contura Mining by accountants and business advisors Grant Thornton stated that the primary reason for the interposition of the new holding company was asset protection. I accept Philip's evidence. Philip caused Washburn to enter into the Contura Sale Agreement for the purpose of asset protection, that is, removing some of the assets of the group from the bank's charge.
448 The Leone Shareholders Agreement contains terms to the effect pleaded at [96F] of the further further further re‑amended substitute statement of claim filed 19 May 2020 (4FASSOC) as follows:
(a) Philip would be the chairman of Leone Family Holdings;
(b) for so long as he is chairman, Philip is to determine who are to be the other directors of Leone Family Holdings in his absolute discretion and may remove any director of the company;
(c) each shareholder in Leone Family Holdings is obliged to vote their shares as directed by Philip for so long as he is chairman, save in respect of a vote to remove Philip as chairman;
(d) Philip can only be removed as chairman of Leone Family Holdings on the sole ground that Philip is clearly not acting in the best interests of the company and then only by resolution passed by members of the company holding more than 50% of the rights to vote at a general meeting of the company;
(e) the board of directors of Leone Family Holdings may declare or determine to pay a dividend to shareholders in its absolute discretion;
(f) where a dividend is paid by Leone Family Holdings to Philip in his capacity as the purported bare trustee of the shares in Leone Family Holdings held on behalf of the Washburn Trust, Philip has irrevocably agreed to lend the amount of that dividend to CEFS;
(g) the terms of each such loan to CEFS are that:
(i) the loan is for an unlimited term;
(ii) the loan is unsecured;
(iii) the loan is not due for repayment and CEFS is not permitted to repay the loan until the board of directors of Leone Family Holdings gives notice specifying the amount which can be repaid by CEFS;
(iv) where such a notice is issued, the loans are repayable on a first in first out basis;
(v) interest is payable on each such loan annually at the rate determined by the board of CEFS;
(vi) if the board of CEFS does not make such a determination, the interest rate payable is the Reserve Bank of Australia cash rate plus 2%;
(vii) the board of directors of Leone Family Holdings may, in its absolute discretion, determine that a particular dividend be paid in cash to shareholders, in which case the dividend will not be a loan to CEFS;
(viii) the terms of the agreement prevail over any inconsistent clause in Leone Family Holdings' constitution.
449 The shareholders of Leone are, through their trustees, the Alexandra Trust, the Stirling Trust, the TF Family Trust and the Washburn Trust. The trustees of the Alexandra Trust, the TF Family Trust and the Washburn Trust were at the time of execution of the Leone Shareholders Agreement, and remain, controlled by Philip. That is, Philip controls 75% of the shares in Leone.
450 The terms of the Leone Shareholders Agreement are not in the best interests of the beneficiaries of the Washburn Trust because those terms have the effect of surrendering control of the Contura group to Philip and depriving the beneficiaries of the Washburn Trust of any dividend income from Leone except at Philip's absolute and unfettered discretion.
451 Philip's explanation for causing Washburn to enter into the Leone Shareholders Agreement is that the agreement mirrored the Contura Shareholders Agreement. That does not, of itself, justify Philip causing Washburn to enter into the Leone Shareholders Agreement for a number of reasons. First, Washburn entered into the Contura Shareholders Agreement in 2014 in circumstances materially different from the circumstances in which Washburn entered into the Leone Shareholders Agreement. In 2014, Marc controlled Washburn and effectively ran the CEFS group with Philip.
452 Secondly, Washburn as trustee of the Washburn Trust was under a duty to act in the best interests of the beneficiaries of the Washburn Trust. The terms of the Leone Shareholders Agreement were contrary to the best interests of the beneficiaries of the trust. It is not to the point that the terms of the Leone Shareholders Agreement were similar to those of the Contura Shareholders Agreement which no longer applied.
453 Thirdly, the inference to be drawn from Philip's evidence is that he caused Washburn to enter into the Leone Shareholders Agreement without considering whether to do so was in the best interests of the trust and its beneficiaries. Philip caused Washburn to enter into the agreement merely because the terms were similar to the Contura Shareholders Agreement which no longer applied.
454 By causing Washburn to enter into the Leone Shareholders Agreement, Philip caused Washburn to act contrary to the best interests of the Washburn Trust and its beneficiaries.
Agreement contravenes cl 27 of the Washburn Trust deed
455 The Leone Shareholders Agreement contains a term to the effect that where a dividend is paid by Leone to the Washburn Trust, the amount of that dividend is to be loaned to CEFS on the terms pleaded in 4FASSOC [96F(g)] set out in [449] above. The Washburn Trust deed contains terms to the effect that no part of the capital or income of the Washburn Trust shall be applied for the benefit, directly or indirectly, of a member of the 'excluded class'. Both Carl and CEFS are and were at all material times members of the excluded class. The effect of Washburn entering into the Leone Shareholders Agreement was to enter into an agreement by which part of the Washburn Trust capital and/or income would be applied in breach of the prohibition against doing so for the benefit of a member of the excluded class. By causing Washburn to enter into the Leone Shareholders Agreement, Philip caused Washburn to breach the terms of the Washburn Trust deed.
456 Philip's action in causing Washburn to enter into the Leone Shareholders Agreement in breach of cl 27 of the Washburn deed was inadvertent. Indeed, I infer that the business advisors and lawyers who advised Philip in relation to the Leone Shareholders Agreement did not advert to that issue. Further, there is no evidence that the breach has any practical or significant consequence for the Washburn Trust or its beneficiaries.
457 In her counsel's closing written submissions, Mae submits that notwithstanding that Philip and his advisors are on notice of the breach of cl 27 of the Washburn Trust deed, Philip has no plan of action to deal with it. I do not consider that is a significant matter. There is no evidence that Philip has been advised that by entering into the Leone Shareholders Agreement, Washburn has breached cl 27 of the Washburn Trust deed.
458 Mae pleads that in his dealings with her in relation to his settlement offer, Philip represented to her that he would fully and frankly disclose to her and her advisors all matters that might reasonably bear upon her decision whether to accept any such offer but that he failed to provide that disclosure. Mae pleads that in circumstances in which Philip failed to provide the represented disclosure and in breach of his duty of undivided loyalty to act in the interests of the beneficiaries of the trusts being administered and not his own interests, Philip has sought to persuade Mae to enter into a settlement agreement to his own benefit.
459 I am not satisfied that Philip represented that he would disclose to Mae and her advisors all matters that might reasonably bear upon her decision whether to accept his settlement offer. Philip did not assume an obligation to determine and then provide to Mae and her advisors what information she may reasonably need. Philip encouraged Mae to obtain her own advisors to identify what information they considered she required and seek that information from Philip.
460 However, Philip did not ensure that Ongold and Washburn provided to Mae all information that might reasonably bear upon her decision to relinquish her interests in Marc's Testamentary Trust and the Washburn Trust in consideration of Philip's settlement offer. Philip made the offer in his capacity as controller of the trustees of Marc's Testamentary Trust and the Washburn Trust as well as in his personal capacity. In those circumstances he should have, but failed to, provide to Mae all the information that might reasonably bear upon her decision whether to accept the offer, such as the value of the assets of the Washburn Trust.
Assertion of loans owing by Mae to Marc's Testamentary Trust
461 The plaintiff asserts that a further aspect of Philip's conduct which reinforces the conclusion that the trustee companies which he controls should be removed is his conduct in causing Ongold to assert that funds totalling $1,970,867 advanced to Mae or for her benefit between 19 January 2016 and 28 July 2016, including for the purposes of completing the settlement of the purchase of the Watermans Bay property and the purchase of furniture and costs associated with the property, were loans to Mae by Ongold as trustee of Marc's Testamentary Trust and that Mae is indebted to Marc's Testamentary Trust in that amount.
462 The defendants admit that Philip has caused Ongold to make that assertion, but say he did so because he believes Mae was and is indebted in the amount of $1,970,867 and that Philip had a reasonable basis for making that assertion. The defendants continue to hold that position and assert that the amounts totalling $1,970,867 are immediately repayable on demand.
463 The plaintiff says that the defendants' position gives rise to three issues. The first is whether the amounts were advanced by way of loan. The second is whether Philip knew that there is and was no loan agreement between Ongold and Mae in respect of all or any of those advances. The third is whether Philip had any reasonable basis to cause Ongold to assert that the monies were advanced by way of loan.
The payments to or on behalf of Mae from Marc's Testamentary Trust
464 The defendants have provided the following summary of the funds which they assert were loaned to Mae from Marc's Testamentary Trust:
Payment to Ultimo Furniture for furniture for Mae Cardaci
Balance of purchase price for the Watermans Bay Property
Payment to Ultimo Furniture for furniture for Mae Cardaci
Payment to the Australian Taxation Office for Mae Cardaci December quarter of PAYG
Payments to Ultimo Furniture for furniture for Mae Cardaci
Payment to Australian Taxation Office for Mae Cardaci March quarter PAYG
Payment to the Australian Taxation Office for Mae Cardaci June quarter of PAYG
465 The defendants' case is not that Mae is liable to pay Marc's Testamentary Trust the amount of the Payments as money had and received or by way of restitution. The defendants' case is that the conduct of Mae and Philip in his capacity as director of Ongold, the trustee of Marc's Testamentary Trust, gives rise to an implied agreement by which the Payments were loans repayable on demand.
466 The defendants submit that the loan agreement is to be implied from the circumstances pleaded at [89.6] of their defence. At [89.6(a)(iii)] of their defence, the defendants plead the circumstance that Philip and Mae were aware that during his lifetime Marc had an established practice of borrowing funds from entities he controlled as a means of accessing those funds in the most tax effective way. It appears to be the defendants' case that the Payments to or on behalf of Mae were made on the same basis as funds were paid from CEFS bank account to Marc during his lifetime. There are many difficulties with that proposition.
467 First, the practice was described by senior counsel for the defendants, Mr Penglis SC, in his opening submission. Mr Penglis said that CEFS was the company's internal banker and if Marc wanted some money he would request Ms Bailey to make the money available. Mr Penglis continued:
The money is treated as a loan on the basis that when it comes to near the financial year end, everyone will sit down with Brentnalls and figure out how to categorise this payment going forward.
468 The practice described is not that the money was loaned to Marc by CEFS or any other entity, but that the money was paid to or on behalf of Marc and Ms Bailey recorded the advance in an account in the nature of a clearing or suspense account that records a transaction on a temporary basis until it is determined to post it to a permanent account. It is a bookkeeping entry, not a loan agreement.
469 Secondly, the evidence does not establish that Mae knew of the practice alleged in the defendants' closing submissions. In support of the assertion that Mae knew of the alleged practice, the defendants referred to Mae's evidence[51] where, referring to from where Philip would obtain funds to pay the $2 million cash component of his settlement offer, Mae said
it always comes from CEFS and then afterwards, they work out what is the most tax effective way to fund it.
470 When asked what she knew about CEFS, Mae said she knew that it was like the private bank of the company and that every time she got a transfer from Ms Bailey it came from CEFS. Later in cross‑examination, Mae was asked about her knowledge of Marc having a practice of drawing funds out and then at the end of the financial year working with his accountant to determine how best to record those drawings to ensure tax effective treatment. Mae responded:
We would just access cash when he needed it, so it could have been - in my mind, it was dividends from Washburn. From the company group. It was cash he was entitled to.
Well, so he'd taken cash as a gift, or from a trust, or a dividend, did you think?---I never considered how the money was coming. It was just cash that was paying off assets, credit cards. Just ... cash that I was using.
All right. And his work with the accountants was to work out how to produce the most tax effective treatment of his financial affairs?---Yes.
472 That does not establish that Mae knew that money withdrawn by Marc from CEFS was a loan.
473 Thirdly, the practice referred to by Mr Penglis could not apply to the advances to Mae. The practice in relation to payments to or on behalf of Marc was that at or near the end of the financial year, the recipient of and controller of the entity making the payments, Marc, would, with the advice of his financial advisors, determine the legal characterisation of each payment. However, Mae could not determine the legal characterisation of each Payment. Marc's estate, Marc's Testamentary Trust and the Washburn Trust were all controlled by Philip.
474 Fourthly, neither Philip, as controller of the trustee of Marc's Testamentary Trust and of the Washburn Trust, or Ms Bailey, the person who arranged the Payments, stated expressly or impliedly that the payments were made on the basis of the practice applying to payments to Marc during his lifetime.
475 The first Payment of $50,000 on 19 January 2016 was a payment to Ultimo Furniture for furniture for the Watermans Bay house. The only Ultimo Furniture invoice in evidence is an invoice to Marc and Mae. Ultimo Furniture was paid directly by Ms Bailey with funds from CEFS. In none of the communications between Mae, Philip and Ms Bailey concerning the payment is there any reference to the payment being made in accordance with the practice relating to payments made from the CEFS account to or on behalf of Marc during his lifetime, nor is it stated or implied that the payment was or gave rise to a loan repayable by Mae. The same observation applies to the third payment, a payment of $93,304 to Ultimo Furniture on 19 February 2016.
476 The second payment of $1,500,633.02 on 11 February 2016 constitutes 76% of the total of the Payments. Ms Bailey caused the payment to be made by direct debit from CEFS account to the bank account of Property Settlement Services. Again, in none of the communications between Mae, Philip and Ms Bailey concerning the payment is there any reference to the payment being made in accordance with the practice relating to payments made from the CEFS account to or on behalf of Marc during his lifetime, nor is it stated or implied that the payment was or gave rise to a loan agreement under which the amount was repayable by Mae.
477 At [89.6(qq)] of their defence, the defendants plead that in the circumstances pleaded at subpars (hh), (ii) and (jj), Mae acknowledged and affirmed by her conduct in accepting the further payments from Marc's Testamentary Trust pleaded at subpars (kk) and (oo), that the funds she had received or had been paid on her behalf from Marc's Testamentary Trust were loans.
478 The circumstances which the defendants refer to are threefold. First, upon receiving an email of 30 June 2016 from Ms Bailey advising that the payments to her or on her behalf were loans from Marc's Testamentary Trust, Mae did not contend that the funds had been paid to her on any other basis. Secondly, at the 13 July 2016 meeting Philip told Mae that the payments were loans from Marc's Testamentary Trust. Thirdly, in his email of 14 July 2016 to Mae, Philip confirmed that the payments were loans from Marc's Testamentary Trust and that any funds provided to her in the future would be by way of loan from Marc's Testamentary Trust.
479 Ms Bailey's email of 30 June 2016 was the first communication to Mae which referred to funds being loaned to, or borrowed by, Mae. The email was in response to an email from Mae in which she requested 'an updated position of Ongold' and said:
Could you please send me an updated position of Ongold when you get a chance? I think I understand from Philip that this is available to me despite probate going through, however, if you are unsure, please feel free to check with him.
In response, Ms Bailey attached a statement for Ongold and said:
Re these funds, they are actually being borrowed by yourself until finalisation of Marc's estate.
480 The statement attached to Ms Bailey's email is entitled 'Construction Equipment Financial Services Pty Ltd statement of loan account for Ongold Corporation Testamentary Trust'. It shows a loan balance of $405,703.71. It is a statement of Ongold's loan account with CEFS, not a statement of loans owing by Mae to Ongold. The statement that $405,703.71 is 'available for drawdown' suggests that that amount is available to Mae to drawdown, not that the amounts received by Mae were recourse loans repayable to Ongold by Mae from independent sources, that is, from sources other than assets of Marc's estate, Marc's Testamentary Trust or the Washburn Trust.
481 In the circumstances, the words 'borrowed by yourself until finalisation of Marc's estate' in Ms Bailey's email convey that, for bookkeeping purposes, the payments were to be treated as loans until Marc's estate was finalised but not that they gave rise to loan agreements whereby the amounts were repayable by Mae from independent sources.
482 The third column of the July spreadsheet which Philip gave Mae at the 13 July 2016 meeting is entitled 'Loan Mae Cardaci'. Philip's email of 14 July 2016 to Mae was in response to an email from Mae to Ms Bailey requesting that the cash available in Ongold be transferred to her bank account. In his email of 14 July, Philip said:
Transferring the whole lot while we are still finalising the estate is a problem ... At the moment this is all the cash we have and as mentioned we are loaning it from the trust.
The statements made by Philip on 13 July or in his email of 14 July do not give rise to a loan agreement. Indeed, Philip's statement in his email is not an assertion of a loan agreement by which the payments which had been made to or on behalf of Mae were repayable by her from independent sources.
483 The relevant conduct of Mae alleged by the defendants' pleading is that she did not contend that the Payments had been other than by way of loan. The further payments Mae accepted are $40,000 'loaned to Mae for legal/accounting advice' pursuant to Philip's request that Mae obtain legal and accounting advice in relation to the settlement offer he made on 13 July 2016, and the payment of $11,530 to the ATO for a PAYG tax instalment which appears to have been in payment of a return prepared by Ms Bailey or Brentnalls. Apart from those two payments, all of the other Payments were made before Ms Bailey's email of 30 June 2016. Mae's silence in response to Ms Bailey's email of 30 June, accepting receipt of the $40,000 and not stopping Ms Bailey paying the PAYG instalment, cannot give rise to a loan agreement in respect of the payments before that time.
484 It is not apparent how the defendants' plea of 'acknowledgement and affirmation' can give rise to a loan agreement in relation to payments made prior to and without reference to the alleged 'acknowledgement and affirmation'. The defendants do not plead estoppel. Nor do the defendants allege that in some way Mae ratified an agreement made by someone on her behalf. An acknowledgement and affirmation may have some consequence in relation to limitation issues or alleged repudiation of an agreement. However, in the absence of any existing loan agreement, Mae's conduct in not contesting assertions by Ms Bailey or Philip and receiving a payment subsequent to those assertions, does not give rise to a loan agreement in relation to payments made before the assertions.
485 It is not necessary to determine the legal characterisation of the Payments. The relevant issue is whether they were loans repayable by Mae as asserted by the defendants. The defendants do not contend that there was any express loan agreement. I find that there was no implied loan agreement between Mae and Ongold as trustee of Marc's Testamentary Trust that the Payments were loans repayable by Mae.
The basis on which Philip decided the Payments were loans
486 Before 13 July 2016, Philip did not assert there was a loan agreement between Mae and Ongold in relation to the Payments which were made before that time - that is, all but the last two payments - or that Mae had a legal obligation to repay to Ongold the amount of the Payments. Philip's conduct from the time of Marc's death on 7 November 2015 until 13 July 2016 is inconsistent with him having believed the Payments to have been loans repayable by Mae. The following are non‑exhaustive, but sufficient, instances of that conduct.
487 On 19 November 2015, when Mae anticipated that settlement of the purchase of the Watermans Bay property would be taking place in the near future, Mae met Philip at the Trigg property. I find that at that meeting Philip said to Mae that she could take up to $180,000 a year without incurring any tax and that the bills for the boat, Shimmer, of $10,000 a month would be paid from distributions from the Washburn Trust.[52] Mae asked about the Watermans Bay property. Philip said that she could access the funds when the time came and she just needed to tell him how much she needed.
488 Mr Smith produced an action list after a meeting with Mr Monisse, Ms Bailey and Philip on about 11 December 2015. The action list included the following items:
489 From December 2015, Mae began asking Philip about funds. In an email to Philip on 15 December, Mae said that settlement of the house was set for 15 January 2016 and asked how she needed to organise finance. Later that day, Philip replied saying that closer to the settlement date Ms Bailey would organise the balance of funds and asked if Mae had the balance of funds available for the furniture. Mae replied that the amount owing on the furniture was around $160,000 and she did not have enough in the account to cover it. Philip responded:
We can organise additional amount [for house settlement] as long as we get a few days' notice ... with regards to the furniture we can discuss when we are closer.
490 Philip confirmed in cross‑examination that at that time, 15 December 2015, it was his expectation and plan to use the money in Marc's Testamentary Trust to settle the purchase of the Watermans Bay property.
491 On 19 February 2016, Ms Bailey transferred $1,500,633 from CEFS bank account for the balance required on the settlement of the Watermans Bay property. There is no evidence that prior to this time Philip had discussed with Mae where the money for the settlement would come from. In cross‑examination, Philip agreed that by February 2016 he had not had a conversation with Mae to the effect that the monies being provided to her were being provided by way of a loan or loans.
492 After 19 February 2016, Philip continued to authorise Ms Bailey to make payments to Mae from cash held by Marc's Testamentary Trust. Philip did not say to Mae that the payments were loans.
493 At the 31 March 2016 meeting, Philip gave to Mae the 'List of Marc Cardaci's assets and liabilities' prepared by Mr Smith in accordance with Philip's instructions. The list included Marc's superfund and the assets of Marc's Testamentary Trust notwithstanding that neither was an asset of Marc or Marc's estate. The inference from the list is that the funds in the superfund and Marc's Testamentary Trust were regarded by Philip as funds for Mae's use. The list included 'adjustments connected with testamentary trust'. The adjustments included 'house/furniture from testamentary trust' and 'other general drawings from testamentary trust'. That is, the amounts were referred to as drawings not loans.
494 Philip did not say to Mae at the 31 March 2016 meeting that the Payments were loans which she was obliged to repay to Marc's Testamentary Trust.
495 Philip and Mr Smith gave evidence that during the meeting, Ms Bailey said she would send to Mae regular monthly statements of the Ongold cash position so that Mae would know on a regular basis what her cash position was. Mr Smith said that Mae was told at the meeting that the current and future cash in Marc's Testamentary Trust would be available to her.
496 Immediately after the 31 March meeting, Philip authorised Ms Bailey to transfer $100,000 to Mae from Marc's Testamentary Trust. Philip did not say that the payment was a loan.
497 On 31 May 2016, Philip instructed Ms Bailey to transfer $100,000 to Mae from Marc's Testamentary Trust. He did not say that the payment was a loan.
498 On 27 June 2016, Philip emailed Mae in relation to the sale of Shimmer. In the email Philip said:
The funds in the other account are not part of Marc's estate and you can continue to use these.
499 Philip agreed that the 'other account' was a reference to the funds in Marc's Testamentary Trust account and that he told Mae she could continue to use those funds. I find that Philip had not by this time told Mae that the funds were a loan to her.
500 Philip says that at some date before 30 June 2016, he signed the 'Resolution of the directors of Washburn Pty Ltd as trustee for the Washburn Trust dated 30 June 2016'. The resolution was to distribute the trust income and capital gains of the Washburn Trust for the year ended 30 June 2016 to beneficiaries other than Mae. In his evidence‑in‑chief Philip was asked what was in his mind when he made that decision. He said:
I had taken into account the significant cash that I had distributed to Mae - well, not distributed to Mae, but that Mae had available to her that year. So I took into consideration that she had use of $1.9 million from Marc's testamentary trust, that she had use of $186,000 from Marc's estate - cash from Marc's estate, his personal bank account, and I took into consideration that she had the benefit of drawings of the Washburn Trust of approximately $118,000 that year. So significant cash had been paid to Mae in that particular year, and therefore [I] decided not to distribute to Mae in that year.
501 Philip did not say that Marc's Testamentary Trust had loaned $1.9 million to Mae. Mae clearly had no means of repaying such a loan other than from distributions of capital or income from Marc's Testamentary Trust, the Washburn Trust or another Cardaci entity. If Philip believed that Mae had an obligation to repay the $1.9 million to Marc's Testamentary Trust, that would not be a rational reason for making no distribution of income or capital to Mae from the Washburn Trust.
502 From early July 2016, Philip decided to make a compromise or settlement agreement with Mae by which she would relinquish any interest she had as a beneficiary or object of the Washburn Trust, Marc's Testamentary Trust, Marc's estate or any associated Cardaci entity. Philip's approach to the negotiation was to assert that Mae like the other beneficiaries of Marc's Testamentary Trust had 'no set entitlement to a distribution from the testamentary trust'.
503 From at least 13 July 2016, Philip chose to characterise the Payments, which he had previously referred to as drawings or funds available to Mae, as loans. For the reasons set out earlier I find there was no express or implied loan agreement in relation to the Payments. Philip's basis for characterising the payments as loans when he chose to do so, is that at the time of authorising the payments Philip had not determined that they were distributions of income or capital and any payment which he caused to be made by the trustee that was not a distribution of capital or income, could and should be characterised as a loan.
504 Philip has not adequately or sufficiently explained how or why he decided to characterise the Payments as loans rather than cause the trustee to determine or confirm that they were distributions of capital or income.
It is expedient that Washburn and Rectangular be removed as trustees
505 Philip's conduct is such that it is expedient to remove Washburn as trustee of the Washburn Trust. Philip is the controlling mind of Washburn. His conduct in relation to the trust, is conduct of the trustee. Importantly, the future conduct of the trustee will be determined by Philip. In stating and intending that the trustee will never distribute anything to Mae from the trust, Philip, as controller of the trustee, had a closed mind with respect to the exercise of the discretionary powers conferred upon the trustee or misunderstood the nature of those powers and the obligations to which the trustee was subject.
506 Further, in making his settlement offer, Philip used his position as controller of the trustee of the Washburn Trust to attempt to buy out Mae's interests in the trusts. The proper conclusion as to the capacity in which Philip made his offer is that Philip did not distinguish between his personal capacity and his capacity as controller of the trustee. That shows that Philip ignored or did not understand the nature of the powers and the obligations to which the trustee was subject.
507 Philip's evidence that he did not consider ensuring that Mae was adequately provided for by discharging his ongoing duties and responsibilities as controller of the trustee of the Washburn Trust shows that Philip ignored or did not understand the nature of the powers and obligations to which the trustee was subject.
508 Philip has maintained his intention to distribute the majority, if not all, of the trust income to the foundation notwithstanding that the foundation is not a charitable foundation and therefore not a beneficiary under the trust deed.
509 This is not a case where the trustee, or its controller, has acted without a full and proper understanding of their duties, responsibilities and obligations and now with the benefit of correct legal advice will obey them in the future. Philip, in his personal capacity and as controller of the trustee, Washburn, defended these proceedings on the ground that they were aware of their legal duties, gave a real and genuine consideration to distribution of income to Mae and did not decide never to make any distribution to Mae. Philip and Washburn maintain that their exercise of their powers and discretions was at all times correct and above reproach.
510 In his opening submissions senior counsel for the defendants, Mr Penglis SC, submitted that the underlying difference between the parties
[is] not a legal issue ... or even a factual issue ... [it's] the concept of what does 'looking after' mean? What does it look like? Philip Cardaci considers he is looking after, and has looked after, and will continue to look after, the plaintiff. The plaintiff says, 'no, you're not looking after me because you're not giving me the cash I'm entitled to, and you're also not giving me access' to what she considers ... her inheritance'.
511 The defendants maintained that position throughout the trial and in their written closing submissions said:
The plaintiff's misplaced sense of entitlement has contributed to her being quick to make serious and unjustified allegations against Philip.
512 There is a real risk, at the least, that even with correct legal advice and the benefit of these reasons, the interests of Mae may not be given real and genuine consideration by the present trustee but that, under Philip's control, it may simply reinstate the decision not to make income distributions to Mae and, if and when the foundation becomes a beneficiary, to distribute all or most of the trust's income to the foundation.
513 I draw that conclusion based on Philip's statements of intention with respect to the exercise or refusal to exercise powers under each of the trust deeds to distribute income and to advance capital in favour of Mae and his conduct in making the settlement offer he made to Mae on 13 July 2016 and subsequently which required Mae to relinquish her interests in Marc's estate, Marc's Testamentary Trust and the Washburn Trust. I am confirmed in that conclusion and draw it more readily because of Philip's conduct in the management of the trusts to which I have referred.
514 It is expedient to remove Rectangular as trustee of Marc's Testamentary Trust. Philip made his settlement offer on the basis that he could give effect to it to the extent necessary, by exercising powers through Rectangular as trustee of Marc's Testamentary Trust. The settlement offer involved Mae relinquishing her interests in Marc's Testamentary Trust as well as in the Washburn Trust. The defendants did not distinguish between Philip's intention in relation to the exercise of powers by the trustee of Marc's Testamentary Trust and the exercise of powers by the trustee of the Washburn Trust.
515 There is a real risk, at the least, that even with correct legal advice and with the benefit of these reasons, the interests of Mae may not be given real and genuine consideration by Rectangular as trustee of Marc's Testamentary Trust.
516 The welfare of the beneficiaries and an efficient and satisfactory execution of the Washburn Trust and Marc's Testamentary Trust and a faithful and sound exercise of the powers conferred upon the trustees of those trusts is opposed to Washburn and Rectangular continuing as trustees of the Washburn Trust and Marc's Testamentary Trust respectively. Washburn and Rectangular should be removed as trustee of the Washburn Trust and Marc's Testamentary Trust respectively.
Trust Action Issue 2: Should Mae be trustee of Washburn Trust and Marc's Testamentary Trust?
517 The second principal issue is that, if the court determines that Washburn and Rectangular should be removed as trustee of the Washburn Trust and Marc's Testamentary Trust respectively, should the court appoint Mae as trustee of each trust, as Mae submits and the defendants oppose?
518 It is common ground that s 77(1) of the Trustees Act empowers the court to remove a trustee and appoint a new trustee in place of the old trustee.
If there is a general principle, it is that the court's task is to appoint the person or persons best suited to administer the trust in the circumstances prevailing (97).
520 In Re Tempest,[55] Lord Justice Turner said that in appointing a new trustee the court acts upon and exercises its discretion, but the discretion is, and ought to be, guided by some general rules and principles. Lord Justice Turner observed that the difficulty which the court has to encounter lies not so much in ascertaining the rules and principles by which it ought to be guided, as in applying those rules and principles to the varying circumstances of each particular case. Lord Justice Turner said that the following rules and principles may be laid down as applying to all cases of appointments by the court of new trustees.
521 First, the court will have regard to the wishes of a persons by whom the trust was created, if expressed in the trust instrument, or clearly to be collected from it. If the creator of the trust has made clear that a particular person should not be a trustee, the court would not appoint that person.[56]
522 Secondly, the court will not appoint a person with a view to the interest of some of the persons interested under the trust, in opposition either to the wishes of the creator of the trust or to the interests of other beneficiaries.[57]
523 Thirdly, the court will have regard to whether the appointment will promote or impede the execution of the trust.[58]
525 The second of these considerations is concerned with avoiding conflict of interest and is reflected in the court's preference not to appoint a beneficiary or relative of a beneficiary as trustee.[61] However, this general preference is not an absolute rule. In Hancock v Rinehart, Brereton J explained:
The second [main consideration informing the court in appointing a new trustee] is that a trustee should not be appointed with a view to promoting the interests of some of the beneficiaries in opposition either to the wishes of the settlor or the interests of the other beneficiaries. This is concerned with avoiding conflict of interest, and is reflected in the court's preference not to appoint a beneficiary, or the relative of a beneficiary, as trustee: Ex parte Conybeare's Settlement (1853) 1 WR 458 (Conybeare's Settlement); Johnstone v Johnstone [1902] NSWStRp 83; (1902) 2 SR (NSW) Eq 90 (Johnstone); Re Cunningham's Settled Estates (1909) 27 WN (NSW) 28 (Cunningham's Settled Estates); Re Roberts (1983) 20 NTR 13; 70 FLR 158 (Roberts); Saul v Lin (No 2) [2004] NSWSC 332; (2004) 60 NSWLR 275 at [9] (Saul). However, this general preference is not an absolute rule. Thus it may be moderated by a contrary intention on the part of the settlor: not infrequently, a settlor or testator may indicate a contrary intention by appointing a beneficiary at the outset, or by limiting the class of those who can be appointed. And it also yields to necessity: the court may appoint a beneficiary (or relative of a beneficiary) if there is no one else suitable or willing to act: Conybeare; Waddell v Patterson (1865) 2 WW & a'B (E) 36; Re Ferrett's Trusts (1894) 6 QLJ 183; Re Simmonds [1954] QWN 3; Re Neeve [1956] QWN 21; Re Paroz [1956] QWN 37; Re Grace [1955] QWN 81; Re Greenfield (No 2) [1909] NZGazLawRp 148; (1909) 12 GLR 22. The disinclination to appoint a beneficiary (or relative) has prevailed in cases where it was possible to appoint an independent trustee, where the trustee's discretions have been such as to create a significant potential for conflicts of interest and duty, and/or where there were additional reasons for considering the beneficiary candidate unsuitable. In Re Tempest itself, the proposed trustee was found to have been proposed with a view to acting in the interests of some only of the beneficiaries and not as an independent trustee for the benefit of all the beneficiaries. In Johnstone, there was ill feeling between the beneficiary proposed for appointment and other beneficiaries, and no reason why an independent rival nominee could not be appointed. In Cunningham's Settled Estates, the trustee had a wide discretion as to investment such that the life tenant (who sought to be appointed) could advantage himself over the remaindermen, and there was no evidence that an independent trustee could not be appointed. In Roberts, the Public Trustee, whose conduct had not been unsatisfactory, was willing to continue to act as trustee of a trust for the benefit of the testator's widow and her children, and the widow admittedly had immediate plans to move out of the jurisdiction. In Saul, the new trustee would be in a position to administer the trust in such a way as may benefit the life tenant to the disadvantage of the remaindermen, or vice versa, and there was no reason why an independent trustee could not be appointed [123].
While the Court may be reluctant to appoint a beneficiary as a trustee it will do so where special circumstances exist: Ex parte Conybeare's Settlements [1853] 1 WL 458. In Waddell v Patterson [1865] 2 WW&A'B(E) 36 the Court held that although the decided cases have shown that it is undesirable to appoint as trustees near relatives of the beneficiaries such appointments are often necessarily done when no more eligible person can be found and where strangers are disinclined to assume the onerous duties of trustees [23].
527 In Hancock v Rinehart,[64] Brereton J appointed Bianca Rinehart (Bianca) trustee of the Hope Margaret Hancock Trust notwithstanding that she was one of the four beneficiaries of the trust and was opposed by one of the other beneficiaries. Brereton J found that the appointment of independent professional trustees proposed by the discharged trustee held significant drawbacks. His Honour found that that reasons of the objecting beneficiary for objecting to the appointment of Bianca were to a large extent objectively unsound, and as to her subjective position she gave no evidence of her wishes and, while her objections included the allegation that Bianca was biased or held animus against her and was untrustworthy, she gave no evidence to the effect that she would find it intolerable or obnoxious if Bianca were to be appointed or that she believed that Bianca could not be trusted.
528 Throughout the proceeding Mae's proposal for a replacement trustee or trustees has been that she should be appointed trustee. In her statement of claim Mae seeks, in the alternative, that the court should appoint an independent trustee. The defendants' position has been that Washburn and Rectangular should not be removed as trustees and, if they are, Mae should not be appointed as the replacement trustee.
529 Neither counsel for the plaintiff nor counsel for the defendants made any submission concerning the appointment of a trustee other than Mae in their oral opening submissions.
530 In their written closing submissions counsel for Mae submitted that one of the reasons she should be appointed trustee is that the defendants have never suggested somebody better placed than Mae to be trustee.
531 In their written responsive closing submissions counsel for the defendants said that Mae, through her conduct of the trial, has brought about a splitting of the issue concerning the appointment of a replacement trustee and Mae's observation that the defendants have never suggested somebody better placed than her to be trustee
is inappropriate given the manner in which the trial has been conducted as a result of the plaintiff's failure to adduce any evidence in respect to an alternate trustee (and thus there presently be no requirement on the defendants to make any such suggestion).
532 In relation to that matter, the defendants referred to my statement on 14 September 2020 that if I found that Washburn and Rectangular should be removed as trustees of the Washburn Trust and Marc's Testamentary Trust respectively, and that Mae should not be appointed as replacement trustee, I would invite the parties to adduce evidence and make submissions about who should then be appointed as trustee.
533 No party sought, and the court did not order, a split trial in which the court deals with the question of whether the existing trustees should be removed in the first instance before receiving evidence concerning the appointment of a replacement trustee. My statement on 14 September 2020 was made on the 15th day of the trial after the plaintiff had closed her case. Senior counsel for the defendants, Mr Penglis SC, submitted that Mae had led no evidence and made no submissions concerning the alternative relief she sought that an independent trustee be appointed. My statement acknowledged the submission by counsel for Mae that the court will not permit a trust to fail for want of trustees and accordingly if the court determined to remove the existing trustees but not to appoint Mae as replacement trustee, which was the only proposal before the court, the court would receive evidence and submissions concerning the appointment of an independent professional trustee or trustees.
534 The defendants have not proposed somebody better placed than Mae to be trustee. The defendants have not proposed an independent professional trustee or led any evidence that an independent professional trustee is willing to accept appointment or would be a suitable trustee. The defendants' evidence and submissions are confined to the proposition that Mae is not a suitable trustee and should not be appointed.
535 The appointment of new trustees should be considered in the context of the functions of the trustees, which in turn are affected by the assets of each trust.
536 The assets of the Washburn Trust consist of investments, principally its shareholding in Leone and other companies which form part of the Cardaci corporate group including Birchmead Pty Ltd, Trentwood Corporation Pty Ltd and Underground Services Pty Ltd as well as a 50% shareholding in Duporte. The Washburn Trust does not itself, through its trustee, carry on any business other than managing its investments. The effect of the Leone Shareholders Agreement limits the functions of the trustee in relation to its interest in the CEFS group.
537 The balance sheet of Washburn as trustee for the Washburn Trust for the year ended 30 June 2019 shows investments of $19,817,065. However, many of the shareholdings are shown at nominal value. Philip said that in August 2020 he had asked his general manager of the family office to tell him the net asset position of each of the trusts, that is, the Stirling Trust, Alexandra Trust, TF Family Trust and Washburn Trust. Philip was informed that the net asset position of the Washburn Trust was approximately $50 million.
538 The 2019 financial statements show that the total income for the Washburn Trust for the year ended 30 June 2019 was $542,512 and profit of $204,098. However, that profit was after legal expenses of $293,223, expenses principally associated with this litigation.
539 The functions of the trustee of the Washburn Trust include all the broad discretionary powers that the trust deed confers on the trustee. The trustee has discretion to distribute the income or capital of the trust among the beneficiaries. The functions of a replacement trustee will include reviewing the books and records in relation to the past administration of the trust, taking any action in that respect that may be in the interests of the trust, and enforcing the rights of the trust as a shareholder in Leone and in relation to other assets of the trust. Those functions include potentially asserting the interests of the trust against the outgoing trustee, Washburn, and the interests of the trust in Leone and the CEFS group controlled by Philip.
540 The balance sheet of Marc's Testamentary Trust as at 30 June 2019 has total assets of $8,723,171. Those assets consist principally of loans including disputed loans of $1,485,714 to Marc's estate and $1,970,867 to Mae.
541 The 2019 financial statements show that the income for Marc's Testamentary Trust for the year ended 30 June 2019 was $109,303.
542 The functions of the trustee of Marc's Testamentary Trust will include reviewing the books and records in relation to the past administration of the trust, taking any action in that respect that may be in the interests of the trust, and enforcing the rights of the trust in relation to the property in which it has an interest. The functions of the trustee will include exercising the broad discretionary powers that the trust deed confers on the trustee to distribute capital or income of the trust among the beneficiaries. However, the functions of the trustee are likely to be less extensive and less onerous than those of the trustee of the Washburn Trust because of the more limited, and less valuable, interests of Marc's Testamentary Trust.
Factors for and against appointing Mae as replacement trustee
543 Mae submitted she should be appointed trustee of each trust for reasons which may be summarised as follows.
1. Marc contemplated that Mae could become appointor and therefore trustee.
2. Mae's appointment is consistent with the wishes of the substantive creator of the Washburn Trust - Marc.
3. Mae is the prime and natural candidate for distributions and provision from the trusts.
4. The appointment of an independent professional trustee is likely to involve unnecessary costs to the trust.
5. Mae is competent to carry on the duties and responsibilities of trustee.
6. There is a guardian to protect the interests of the beneficiaries.
7. The litigation funding agreement does not militate against Mae's appointment.
8. Philip's expressed concerns about Mae being appointed trustee are not relevant or not established.
9. There is no evidence that the beneficiaries, other than Philip, oppose Mae's appointment.
544 The defendants submit that Mae should not be appointed for two reasons. The first reason is that Mae would be in a conflict of interest, arising both from her status as a beneficiary and her obligations under the litigation funding agreement with LCM Operations Pty Ltd (LCMO) and is likely to exhibit bias and not represent the interests of all beneficiaries.
545 The second reason is that Mae's appointment would impede the execution of the trusts by her liquidating the assets of each trust to discharge her obligation to LCMO and maintain the lifestyle to which she was accustomed when Marc was alive.
546 I will consider these matters in the context of the three Re Tempest principles or considerations. However, it is convenient to first consider two separate matters which are relevant to whether Mae should be appointed as the replacement trustee. The first is whether Mae is competent or lacks the qualities to be a suitable trustee. The second is whether it is unnecessary or undesirable to incur the costs of an independent professional trustee.
547 Some of the defendants' submissions impugn Mae's fitness to be appointed trustee on the ground that she lacks important qualities of a trustee.
548 First, the defendants submitted that in her evidence Mae expressed a lack of understanding of a number of trust, probate and tax concepts. The defendants submitted that the evidence that Mae gave about her lack of understanding or the nature of her understanding of those concepts is, given her legal training and experience, 'patently impossible to accept'. That submission impugned Mae's credibility rather than her competence. Nevertheless, having regard to the nature and assets of the trusts, particularly the Washburn Trust, it is relevant to consider Mae's competence to act as trustee.
549 Mae is a qualified lawyer. She has experience in dealing with trusts both in respect of her family trust, the M&M Family Trust, and as a director on the board of the Foundation for the Western Australian Museum and Chair of the Artefact Circle.
550 During the course of her evidence‑in‑chief and cross‑examination which extended over many days, I had the opportunity to observe Mae closely. I am satisfied that Mae understands the concept of trusteeship and the general concept of fiduciary obligations, and appreciates the functions that she would need to perform if appointed. It is not, of course, necessary that Mae should have the knowledge of a lawyer experienced in all trusts and property matters. Mae may retain suitably qualified lawyers, accountants and financial advisers to advise and assist her in managing the affairs of the trust where necessary.
551 The defendants submit that Mae was not a credible and reliable witness and that her evidence was in some cases untruthful. Those submissions are directed to Mae's credit as a witness. However, a conclusion that she was not an honest witness is relevant to her fitness to be a trustee. I have found that Mae was generally a credible and reliable witness. Mae does not lack qualities of honestly or integrity so as to render her unfit to be trustee.
552 There is no evidence of the likely costs of a professional trustee to manage and administer the Washburn Trust and Marc's Testamentary Trust. However, there would be substantial work for a trustee to do, both on assuming the role and then managing and administering the trusts. The trustee would first have to familiarise themselves with the trust. The Washburn Trust is relatively complex. It has interests in entities other than Leone, including Duporte and Birchmead. The trustee would have to investigate the past administration of the trust. The trustee would have to monitor the performance of the entities in which the trust has an interest and enforce its rights in relation to those interests. The trustee would have to consider the distribution of capital or income to the beneficiaries.
553 A trustee may calculate their remuneration using one method or a combination of methods of calculation including an hourly rate on the basis of time spent working on the administration and an annual fee charged on the value of the assets of the trust. It is open to infer, and I do infer, that the costs of a professional trustee would be substantial.
554 If Mae is appointed trustee she would incur out of pocket costs in engaging professional services such as accounting and legal services as and when required. However, those services would also be engaged by a professional trustee. Mae has not sought to be remunerated for her services as trustee. That would save the trust the substantial initial and recurrent costs of a professional trustee.
555 The appointment of a professional trustee as trustee of Marc's Testamentary Trust would also involve substantial costs. However, those costs are likely to be less than the costs of engaging a professional trustee as trustee of the Washburn Trust because of the nature and lesser assets of Marc's Testamentary Trust.
556 Appointing Mae rather than a professional trustee as trustee of the Washburn Trust and Marc's Testamentary Trust would make a substantial saving in costs for the trusts. That is not decisive because the trusts have substantial assets. Saving the costs of a professional trustee is a relevant consideration in favour of appointing Mae but it is subject to ensuring that the court appoints a suitable person as trustee.
557 Lord Justice Turner's first principle or consideration in Re Tempest is that the court will have regard to the wishes of the person by whom the trust has been created, if expressed in the trust deed, or clearly to be collected from it. To this end, it has been said that the court will not appoint a person whom the creator of the trust intended to exclude from all interest or connection with the trust property.[65]
558 Marc was the real or substantial creator of the Washburn Trust notwithstanding that Mr Cipriano is the settlor. In any event, the trust deed itself does not evince an intention that a beneficiary should not be or become trustee. To the contrary, the original trustee was Marc who was also the first named general beneficiary.
559 Further, on 21 December 2012 Marc executed a deed of variation which amended the definition of appointor in the trust instrument by providing, relevantly, that upon the death or legal incapacity of Marc and Philip, Mae would be the appointor and thus have the capacity to appoint herself as trustee. The deed of variation amended the trust instrument so that the trust instrument contemplates Mae being appointor. Mae's appointment as trustee is consistent with the apparent intention of the creator of the trust.
560 Mae is a beneficiary. The court is usually reluctant to appoint a beneficiary as trustee because of the potential for conflict of interest as a beneficiary with duty as trustee. The court does not ordinarily appoint a beneficiary to act as a trustee. But this is not an ordinary case. The application of the principle that the court does not ordinarily appoint a beneficiary as trustee is influenced by the extent to which there is potential for conflict of interest and duty, the express or implied wishes of the creator of the trust and the feasibility of appointing a satisfactory independent trustee.[66] In this case the significance of Mae being a beneficiary is reduced for three reasons.
561 The first reason is that no party has proposed an alternative trustee. In her statement of claim, the plaintiff seeks as an alternative to her being appointed trustee that an independent trustee be appointed. However, that is only a fall back position. The plaintiff has led no evidence of a willing and suitable independent professional trustee. No other party has proposed an alternative trustee. As I have said, in the course of the trial I stated that if I should conclude that the existing trustee should be removed and that Mae should not be appointed as replacement trustee, then it would be necessary to receive evidence and submissions concerning the appointment of an independent professional trustee. It is likely that a suitable and willing independent professional trustee would be identified. However, that has not been done. No party has proposed, and there is no evidence of, the terms, including remuneration terms, on which an independent professional trustee may be appointed. There is no proposed alternative trustee.
562 The second reason is that Mae is the prime and natural candidate for provision from each of the trusts. Whilst there is a large range of beneficiaries of the Washburn Trust and no primary beneficiary, no beneficiary other than Mae has, or can have, any reasonable expectation of receiving any distribution from the Washburn Trust.
563 A diagram entitled 'Marc Cardaci Group Structure - July 2013' prepared by Mr Smith and sent by Mr Monisse to Philip shows that Marc is the trustee, appointor and guardian of the Washburn Trust and distributions are made from the Washburn Trust to Marc, Mae and Powercity. Powercity is the corporate beneficiary or 'bucket company' of the Washburn Trust. It is owned as to 99.9% by the Washburn Trust itself and as to the other 0.1% by Marc's estate. Its existence is entirely tax driven. It exists for no reason other than as a vehicle for tax minimisation in the financial interests of other beneficiaries of the Washburn Trust.
564 In cross‑examination when it was put to Philip that the Washburn Trust distributed to Marc, Mae and Marc's bucket company, Philip replied:
Well, they could have distributed to any of those entities. Yes.
When pressed, Philip agreed that the Washburn Trust did not distribute to anyone else.
565 The purpose and object of the Washburn Trust is to make provision for Marc and his family. That is apparent from recital A which provides that the settlor desires to make provision for the persons hereinafter set out and the stated beneficiaries who are Marc and persons related to him as well as corporations in which those persons have some interest. Mae was the only person dependent upon, or for whom Marc provided, during his lifetime.
566 That Mae is the prime and natural candidate for provision from the Washburn Trust is reinforced by Marc's Memorandum of Wishes addressed to the trustee, appointor and guardian of the Washburn Trust in which Marc expressed his wish that the trustee pay all income and capital received by the trust from time to time to Mae, after making suitable provision for tax and other expenses. For the reasons set out earlier in these reasons, the trustee is bound to give consideration to the wishes set out in Marc's Memorandum of Wishes.
567 When Philip was asked in cross‑examination to express his concerns about Mae being appointed replacement trustee, he did not express concern at the possibility that Mae would not make distributions to himself, his family or any member of the extended Cardaci family. His only stated concern in respect of distributions was that a foundation be set up and funded.
568 Angela gave evidence but did not express any concern that Mae would not make distributions to herself or any member of the extended Cardaci family.
569 Philip's evidence reflects the Cardaci group structure. Each of Frank, Carl, Philip and Marc held a quarter interest through their respective family discretionary trusts in the CFC Group as well as other interests. It is true, as Philip observed, that Washburn may legally distribute capital and income to a range of beneficiaries related to Marc or to corporations or institutions with which he is associated. However, the Washburn Trust is to provide for Marc and his family. The trusts associated with Frank, Carl and Philip are to provide for their families. Of course Frank, Carl, Philip and Marc have common relatives to whom each trust may legally distribute capital or income. However, members of the Cardaci family can have no reasonable expectation of receiving provision from the Washburn Trust.
570 The third reason is that the trust deed envisages that the trustee could and would be a beneficiary. Marc was a beneficiary of the trust from its establishment and was the original trustee. Furthermore, as I have set out above the amendment to the trust deed on 21 December 2012 provided that Philip and Mae, who are both beneficiaries, may be the Appointor and thus have the capacity to appoint themselves as trustee.
Conflict of interest - the litigation funding agreement
571 The defendants submit that the litigation funding agreement which Mae has entered into with LCMO for the purpose of funding these proceedings places Mae in a conflict of interest and duty which makes her unsuitable as a trustee for the Washburn Trust.
572 The litigation funding agreement is made between LCMO and Mae. The agreement provides in effect that, in consideration of LCMO paying the costs of this action, Mae will pay to LCMO from any amounts received by her or to which she is or becomes entitled related to or arising out of these proceedings, including any capital sum or income, the costs incurred by LCMO in funding the proceedings and a premium equivalent to three times those costs.
573 Any capital or income which Mae will receive as a result of these proceedings will be as a result of distributions to her from Marc's Testamentary Trust and/or the Washburn Trust. In essence, Mae will be obliged to pay to LCMO four times its cost of funding these proceedings.
574 As at July 2020, LCMO had incurred costs of $1,904,418 and anticipated expending costs of $2,458,500 to the conclusion of the trial. Consequently, the defendants submit that if Mae receives any capital or income from Marc's Testamentary Trust and/or the Washburn Trust, she will be under an obligation to pay at least $9,834,000 to LCMO.
575 Mae said in evidence that she has no plans as to how she would exercise her powers as trustee should she be appointed as trustee of the Washburn Trust and/or Marc's Testamentary Trust and she has no plans to realise and distribute any of the capital of either trust.
576 The defendants submit that it is open to infer that Mae plans to liquidate the assets of any trust over which she is appointed. The defendants point to a document prepared by LCMO entitled 'Budget monitoring' which describes Mae's claim as a beneficiary of three discretionary trusts for removal of the trustee and the claim under the bankrupt estate of her late husband. The document describes the 'total claim size' at $45 million. The defendants submit that having regard to the estimated claim size and the evidence as to the value of the assets of each trust, it is to be inferred that Mae's intention (or at least the one she conveyed to LCMO) is to liquidate the assets of the Washburn Trust and distribute the net proceeds to herself.
577 I do not infer that Mae has a plan that if she is appointed trustee of the Washburn Trust she will liquidate the assets of the Washburn Trust and distribute the net proceeds to herself. I infer that the 'total claim size' of $45 million recorded in the LCMO Budget monitoring document is an estimate of the value of the assets of the Washburn Trust and Marc's Testamentary Trust. I infer that Mae plans that if she is appointed trustee of the Washburn Trust and Marc's Testamentary Trust, she will discharge her obligation to LCMO, as she is obliged to, from income or capital which she distributes to herself from the trusts. However, that obligation may be discharged over time as and when Mae receives distributions of income or capital from the trusts.
578 The defendants submit that if Mae were to be appointed as trustee of the Washburn Trust, Marc's Testamentary Trust or both, she would more likely than not have great difficulty in remaining impartial; and given the nature and extent of her obligations to LCMO and the expectation of recovery she has engendered in LCMO, she would have an irreconcilable conflict between her duty as trustee to act impartially and her personal pecuniary interest in seeing her obligations to LCMO satisfied.
579 The litigation funding agreement does not put Mae in a conflict of interest so as to make her unsuitable to be trustee of the trusts for a number of reasons. The first reason is that it is in Mae's interests to maximise the trust assets.
580 The second reason is that the funding agreement provides that nothing in cl 10, which provides for payment by Mae to LCMO, shall be construed as requiring Mae to breach or otherwise fail to comply with any duty as trustee of any trust the subject of these proceedings.
581 The third reason is that any replacement trustee would take into account Mae's liabilities under the litigation funding agreement. The new trustee will have regard to Mae's needs and financial situation including her obligations and liabilities under the litigation funding agreement.
582 Mae entered into the funding agreement because of Philip's conduct which caused her to commence these proceedings. If Philip had not engaged in that conduct, and the defendants had not vigorously defended these proceedings, it would have not been necessary for Mae to enter into the litigation funding agreement to enable her to bring these proceedings to remediate Philip's conduct. I have found that Philip's conduct justifies the removal of Washburn and Rectangular as trustees of the Washburn Trust and Marc's Testamentary Trust. Mae was justified in bringing these proceedings and incurring the obligations under the litigation funding agreement. Accordingly, any trustee would have regard to those obligations in the exercise of their powers of distribution under the trusts.
583 The fourth reason is that there is a guardian to protect the interests of the beneficiaries. Clause 11.3 of the Washburn Trust deed provides that the trustees shall not when there is a Guardian exercise the reserved powers or the restricted powers except with the consent of the Guardian. Among other things, those reserved or restricted powers include the powers to advance capital or make loans to a beneficiary. Mae will not be able to exercise those powers without the consent of the Guardian - Philip.
Philip's express concerns about Mae being appointed trustee
584 In his evidence, Philip identified his concerns about Mae being appointed trustee. The first was that the underlying CFC business not be interrupted or the shareholding sold. Philip described this as his first priority. I do not consider that to be a relevant consideration. The purpose and object of the Washburn Trust which is set out in the first recital to the Washburn Trust deed is to make provision for the persons set out and in the manner set out in the trust deed. The purpose and object of Marc's Testamentary Trust is to make provision for the beneficiaries. Facilitating the business of CFC or that the trust maintain an interest, direct or indirect, in the CFC business is not an object of the trusts. That Philip stated this to be his first priority is an indication that Philip does not understand the duties of the trustee of the Washburn Trust or Marc's Testamentary Trust.
585 Philip's second concern is to ensure that what he described as Marc's wishes be fulfilled, in regards to setting up and funding a foundation. This is not a relevant consideration. First, Marc's wish was for Mae to establish the foundation, not Philip in his personal capacity or as controller of the trustee of the Washburn Trust. Secondly, the foundation which Philip has established is not an object or beneficiary of the trust. Thirdly, Philip's concern is based upon a mistaken belief as to Marc's wishes or is contrary to Marc's wishes. Marc's wishes were set out in his Memorandum of Wishes. Insofar as those wishes were qualified by Marc's wish for a foundation to be established to assist the families of cancer sufferers, Marc did not express the wish that all or most of the distributions of income or capital from the Washburn Trust be for that purpose.
586 Philip's third and fourth concerns are Mae's understanding of financial matters and of trust assets and liabilities in the administration of trusts. I have already considered this matter. Mae is competent to act as trustee. She can be expected to take advice from lawyers, accountants and financial advisors as necessary.
587 Philip's fifth concern is the litigation funding agreement. I have already considered that.
588 Philip's concerns are either not considerations relevant to the appointment of a new trustee or are objectively unsound.
Acceptability of Mae as trustee to other beneficiaries
589 The court may have regard to the acceptability of the proposed trustee to the beneficiaries of the trust. Philip and Angela oppose Mae's appointment as trustee. No other beneficiary has expressed a view.
590 I have addressed Philip's concerns about Mae being appointed trustee. Those concerns are either irrelevant or objectively unsound. The defendants submit that Mae is biased or holds animus against Philip. I have found that the differences between Mae and Philip has led to mutual ill feeling, resentment and distrust. That is not a significant factor against Mae being appointed trustee. Philip has no reasonable expectation that he or members of his immediate family will or should receive any distribution from the Washburn Trust or Marc's Testamentary Trust. That was acknowledged by Philip in his evidence.
591 The defendants submit that Mae's appointment would impede the execution of the trusts by her liquidating the assets of each trust to discharge her obligations to LCMO and maintain the lifestyle to which she was accustomed when Marc was alive. I have already addressed the issue of Mae's obligations to LCMO under the litigation funding agreement.
592 Whilst Marc and Mae were married, Mae enjoyed a lifestyle well above that enjoyed by most. Philip regarded their lifestyle as extravagant and not the lifestyle Marc was accustomed to. Philip believes that after Marc's death Mae lived beyond her means and aspires to a lifestyle beyond her means. That is the position taken by the defendants.
593 I do not consider that Mae's current lifestyle, or the lifestyle to which she aspires, or her failure to have drawn a budget at Philip's request, disqualifies her from being appointed trustee. Philip wanted Mae to draw up a written budget and to do so with the assistance of Angela. Mae's failure to do so is a source of disapprobation by Philip. However, the circumstances in which it took place may explain why Mae did not comply with Philip's request.
594 The evidence does not establish that, since Mae ceased receiving substantial benefits from entities associated with Marc or his estate, Mae has lived beyond her means so as to incur debts or liabilities beyond her capacity to meet them. Mae prepared an Estimated Income & Expenditure Summary Budget for the Calendar Year ended 31 December 2020. The budget showed a deficit of $70,837. However, Mae was, or expected to be, on unpaid maternity leave for seven months of that calendar year. Mae was able to meet her expenses from assets or investments.
595 Mae is the only person who has been proposed as the new trustee. I stated during the course of the trial that if I determined Mae should not be appointed trustee then the court would consider the appointment of an independent professional trustee. However, no such person has been proposed and no evidence has been advanced of an alternative willing and suitable trustee or the terms on which they should be appointed. Mae has the qualities to be a competent trustee.
596 Mae's appointment would not incur the substantial costs to the trust which will be incurred if an independent professional trustee is appointed.
597 The court would not ordinarily appoint a beneficiary as trustee but for the reasons I have set out this is an exceptional case and it is appropriate in this case. Mae's appointment would not impede the execution of the trusts. Mae should be appointed the trustee of the Washburton Trust and trustee of Marc's Testamentary Trust.
Trust Action Issue 3: Removal of Ongold and appointment of Rectangular As Trustee of Marc's Testamentary Trust
598 By Grace's will, Marc was appointed as the trustee of Marc's Testamentary Trust. By deed dated 31 August 2015, Marc retired as trustee and Marc appointed Ongold to be trustee. At the time of his death Marc was the sole director and shareholder of Ongold.
599 On 30 January 2017, Philip and Angela by a deed (Deed of Dismissal and Appointment of Trustee) removed, or purported to remove, Ongold as trustee and appointed Rectangular as trustee of Marc's Testamentary Trust. The plaintiff claims, and the defendants deny, that Philip and Angela did not have power to appoint a new trustee or dismiss an existing trustee and hence the Deed of Dismissal and Appointment did not remove Ongold as trustee and Ongold remained trustee of Marc's Testamentary Trust.
600 On 15 March 2020, that is the day before the trial commenced, Philip, Angela, Ongold and Rectangular executed a deed (March Deed) to the effect that to the extent the Deed of Dismissal and Appointment did not result in the valid dismissal of Ongold and appointment of Rectangular, Philip in his capacity as executor of Marc's will, appointed Rectangular as trustee of Marc's Testamentary Trust in place of Ongold.
601 The parties agree that the March Deed was effective to appoint Rectangular as trustee of Marc's Testamentary Trust in place of Ongold. The issue between the parties is whether the Deed of Dismissal and Appointment was effective to appoint Rectangular as trustee in place of Ongold and hence whether Ongold or Rectangular was the trustee of Marc's Testamentary Trust from 30 January 2017 to 15 March 2020.
602 The terms of the trusts comprising Marc's Testamentary Trust are contained in Schedule B to Grace's will. Marc was appointed trustee by cl 3 of Schedule B. The power to appoint new trustees and to remove existing trustees from Marc's Testamentary Trust is contained in cl 4 of Schedule B.
(a) [Marc] may, in his absolute discretion, appoint a new Trustee or Trustees or dismiss existing Trustees.
(b) During any periods of incapacity by way of bankruptcy or the unsound mind of [Marc] or upon the death of [Marc], such of the children of [Marc] who shall have attained the age of 25 years, and if more than one, then jointly, shall have the power to appoint a new Trustee or Trustees or dismiss existing Trustees provided always that the power to appoint a new Trustee or Trustees or dismiss existing Trustees shall be exercised by unanimous approval in writing only.
(c) Where any of the children of [Marc] shall have failed to attain the age of 25 years, then, the Executors of the Testatrix's Will shall have the power to appoint a new Trustee or Trustees or dismiss existing Trustees until such time as the children of [Marc] have attained the age of 25 years.
(d) During any periods of incapacity by way of bankruptcy or the unsound mind, or upon death of the last of the Executors of the Testatrix's Will, the legal personal representative (but not a trustee in bankruptcy) of [Marc] shall have the power to appoint a new Trustee or Trustees or dismiss existing trustees until such time as the children of [Marc] have attained the age of 25 years.
604 The defendants say the removal of Ongold and appointment of Rectangular as trustee was within power on the basis that cl 4, and in particular cl 4(c), conferred on Philip and Angela, as the surviving executors of Grace's will, the power to remove the existing trustee and appoint a new one. The plaintiff says that cl 4(c) does not, in the circumstances, authorise the removal of Ongold and appointment of Rectangular. That issue turns on the proper construction of cl 4 and in particular cl 4(c).
605 It is common ground that cl 4(a) conferred upon Marc power to 'in his absolute discretion, appoint or dismiss a new Trustee or Trustees or dismiss existing Trustees'.
606 The plaintiff says that the powers to appoint and remove trustees conferred by each of cl 4(b), (c), and (d) are conditioned upon Marc having had a child or children. The plaintiff says that cl 4 evinces the intention that the powers to appoint and remove trustees were to be limited to Marc and such of his children who attained the age of 25 but not otherwise, provision being made only for the situation where Marc's children had not yet attained that age.
607 The defendants submit that upon the proper construction of cl 4(c), the executors of Grace's will had the power to appoint a new trustee and dismiss an existing trustee if Marc did not have any children or if Marc had children but they had not attained the age of 25 years. The defendants submit that cl 4 evinces an intention to cover the field with respect to who had power to dismiss an existing trustee and appoint a new trustee. That power was given to Marc, save that if Marc became bankrupt, of unsound mind or died, the power could be exercised by the children of Marc who had attained the age of 25, failing which the executors of Grace's will or, in the event that the executors of Grace's will had died, then Marc's legal personal representative.
608 The defendants say that the construction advanced by the plaintiff would lead to a result that there is a lacuna in the scheme provided by the settlor if Marc did not have any children. When the trust was created Marc was 40 years old and did not have any children. In those circumstances, the defendants say, it is unlikely the settlor did not intend to confer on any party a power to appoint a new trustee if Marc went bankrupt, became of unsound mind or died leaving no children.
609 The exercise in interpretation must start with the ordinary linguistic or grammatical meaning. The text is the primary indication of intention. A court may not adopt a construction which strains the literal meaning to promote an assumed intended or more convenient meaning. Where only one sensible or reasonable meaning is possible then the chosen words will have priority irrespective of the convenience of the outcome.
610 The subclauses of cl 4 must be read together. The principal provisions are cl 4(a) and 4(b). Clause 4(a) provides that Marc may appoint new trustees or dismiss existing trustees. Clause 4(b) provides for where Marc is incapacitated by bankruptcy or unsound mind or has died. In any of those circumstances the power to appoint or dismiss a trustee is conferred upon such of Marc's children who have attained 25 years. Clauses 4(c) and 4(d) are supplementary to cl 4(b). Both sub‑clauses provide for who is to have power to dismiss a trustee or appoint a new trustee 'until such time as the children of Marc have attained the age of 25 years'. Clauses 4(c) and 4(d) operate only where Marc has children and those children have not attained the age of 25 years.
611 Clause 4(c) provides for the circumstance where Marc is incapacitated by bankruptcy or unsound mind or has died with children who have failed to attain the age of 25 years. In that circumstance the executors of the testatrix's will shall have the power to appoint a new trustee. Clause 4(d) provides for the circumstances where Marc is incapacitated by bankruptcy or unsound mind or has died with children who have not attained 25 years and the last of the executors of the testatrix's will is incapacitated by bankruptcy or unsound mind or has died. In those circumstances the legal personal representative of Marc shall have the power to appoint a new trustee.
612 The plain meaning of cl 4(c) is that the sub‑clause provides for the circumstance where Marc has children who have not attained 25 years. That is clear from the opening words, 'where any of the children of [Marc] have failed to attain the age of 25 years'. It is also clear from the concluding words, 'until such time as the children of [Marc] have attained the age of 25 years'.
613 Clause 4(d) provides for the circumstances where Marc is incapacitated by bankruptcy or unsound mind or has died with children who have not attained 25 years and the last of the executors of the testatrix's will, upon whom cl 4(c) confers power to dismiss or appoint a trustee where Marc is incapacitated by bankruptcy or unsound mind or has died with children who have not attained 25 years, is incapacitated by bankruptcy or unsound mind or has died. That is clear from the concluding words, 'until such time as the children of [Marc] have attained the age of 25 years'.
614 The defendants say that the construction of cl 4(c) advanced by the plaintiff leads to a lacuna in the scheme provided by the settlor, namely if Marc did not have any children. The plaintiff agrees that the provisions for the appointment of new trustees does not provide for the situation where Marc died not having children. The plaintiff submits that her construction is supported by cl 5 which provides that:
The Trustees, with the written consent of [Marc] and upon the death thereof, such of the children of [Marc] who shall have attained the age of 25 years, and if more than one, then by unanimous approval in writing only, may by deed or will add to, delete, or otherwise vary the powers of the Trustees and this paragraph, but no such addition, deletion or variation may:
(a) affect the beneficial entitlement to any amount allocated for or otherwise absolutely and irrevocably vested in any Beneficiary prior to the date of the amendment;
(b) infringe the law against perpetuities;
(c) alter the definition of Primary Beneficiaries in paragraphs 2(a) and 2(b) in this Schedule B; or
(d) have the effect of delegating testamentary power or otherwise resulting in any provision of the Testatrix's Will becoming void.
615 The plaintiff's second senior counsel, Mr Cobby SC, submitted that the 'gap in the drafting' is not an oversight, it is a decision to give to such of Marc's children as have reached the age of 25 the power to appoint new trustees and the prerogative to consent to the variation of the powers of the trustee.
616 Senior counsel for the defendants, Mr Penglis SC, submitted that cl 5 does not assist in the construction of cl 4(c). Mr Penglis submitted that cl 5 can be construed on the basis that it was intended that if there are no children after Marc's death then the trustee should be able to exercise the power or alternatively it can be construed, as the plaintiff does, on the basis that the trustees do not have the power unless there was a child who had attained the age of 25 years.
617 In my opinion the proper construction of cl 5 is clear. The trustees cannot vary their powers without the consent of Marc or, on his death, his children who have attained 25 years. The alternative construction advanced by the defendants would do impermissible violence to the language of the clause.
618 The terms of the testamentary trust have been drafted by a lawyer. The ordinary and natural meaning of cl 4(c) is not ambiguous; it is not grammatically capable of several meanings. Nor is it obscure; it is not disorganised, garbled, or otherwise opaque, when one must find the intended grammatical meaning. Clause 4(c) provides that where Marc is incapacitated by bankruptcy or unsound mind or has died with children and those children have not attained the age of 25 years, the executors of the testatrix's will shall have the power to appoint a new trustee. Clause 4(c) has no operation where Marc has no children. The testatrix has made no provision for the dismissal of trustees or the appointment of new trustees where Marc dies without children. That is consistent with the scheme of cl 4. It is consistent with cl 5 which similarly makes provision for the trustees to vary their powers with the consent of Marc or, upon his death, his children who have attained 25 years but makes no provision for the trustees to vary their powers when Marc has died without children.
619 Where the testatrix has failed to confer power to dismiss trustees or appoint new trustees in the circumstance where Marc dies without children, it is not for the Court to remedy that omission by rewriting cl 4(c) to provide for what the court presumes the testatrix would have intended to happen if Marc died without children if she had provided for that circumstance.
620 Marc having died childless, the trust instrument did not empower or authorise Philip and Angela, as the executors of Grace's will, to dismiss the trustee of Marc's Testamentary Trust and appoint a new trustee. The Deed of Dismissal and Appointment of Trustee was ineffective to remove Ongold as trustee of Marc's Testamentary Trust and appoint Rectangular in its place. Ongold remained trustee of Marc's Testamentary Trust until replaced by Rectangular as trustee by the March Deed on 15 March 2020.
621 The plaintiff further says that, in [36] ‑ [38] of their statement of claim, if Philip and Angela had power to remove Ongold and appoint Rectangular as trustee of Marc's Testamentary Trust, the purported exercise of the power was a fraud on the power and consequently void and of no effect.
622 It is strictly unnecessary to determine this issue because I have found that Philip and Angela did not have power to remove Ongold and appoint Rectangular as trustee of Marc's Testamentary Trust and the Deed of Dismissal and Appointment of Trustee executed by Philip and Angela on 30 January 2017 was ineffective to remove Ongold and appoint Rectangular as trustee. However, in case the matter should go on appeal, I will briefly state my finding on Mae's alternative claim that the purported exercise of the power was a fraud on the power.
623 Mae pleads a number of facts and circumstances in support of that contention and pleads that it is to be inferred from those matters that the exercise of power to remove and replace Ongold as the trustee of Marc's Testamentary Trust was directly influenced by Philip's interests in order to:
(a) prevent Mae obtaining effective control of Marc's Testamentary Trust and to enable Philip to retain control of Marc's Testamentary Trust for his own benefit or the benefit of himself and other Cardaci family interests;
(b) further and alternatively, to secure a settlement with Mae which would bring to an end her rights in respect of each of the Washburn Trust, Marc's Testamentary Trust and all other Cardaci family interests including the Cardaci trusts;
(c) further and alternatively, to ensure that Mae would not receive any distributions of the income or advances of capital or other financial benefit from Marc's Testamentary Trust.
624 Mae says that consequently, Rectangular has been a constructive trustee of all the assets and undertaking of Marc's Testamentary Trust and is under a duty to reinstate to Marc's Testamentary Trust with interest at compound rates any monies that it has caused to be distributed from Marc's Testamentary Trust.
625 The defendants deny the facts and circumstances pleaded by the plaintiff, deny that the exercise by Philip and Angela of the power to remove Ongold and appoint Rectangular was a fraud on the power and deny that Rectangular is a constructive trustee of the assets and undertaking of Marc's Testamentary Trust.
626 The defendants say that the power was exercised for a proper purpose. The defendants say that the power was exercised because Marc's estate was in deficit, that that would likely result in the appointment of a trustee in bankruptcy, the shares in Ongold were held in Marc's name and therefore would be controlled by the trustee in bankruptcy. It was to avoid that circumstance that a new trustee was appointed.
627 I am not satisfied that Mae has established that Philip and Angela exercised, or purported to exercise, the power for the improper purposes alleged. Mae has not made out that the Deed of Dismissal and Appointment of Trustee was a fraud on the power.
Trust Action Issue 4: Is Washburn entitled to indemnity against the Washburn Trust assets for its costs of defending these proceedings?
Trust Action Issue 5: Is Rectangular entitled to indemnity against Marc's Testamentary Trust assets for its costs of defending these proceedings?
629 Mae pleads that in the event that Washburn and/or Rectangular is removed as trustee of the Washburn Trust or Marc's Testamentary Trust, as the case may be, they are not entitled to be indemnified out of the relevant trust funds for the costs of defending these proceedings.
630 The defendants assert that Washburn and Rectangular are entitled to be indemnified out of the relevant trust funds for the costs of defending these proceedings notwithstanding that they are removed as trustees of the trusts. The defendants rely upon the s 70 of the Trustees Act 1962 (WA) and s 71, cl 16 of the Washburn Trust Deed and cl 11 of schedule F of the Will of Grace Cardaci which establishes Marc's Testamentary Trust. Further, they say that if the court finds any breach of trust by Philip, Washburn, Ongold or Rectangular, the relevant trustee should be relieved from any such liability pursuant to s 75 of the Trustees Act. Washburn further relies upon cl 10 of the Washburn Trust Deed to the effect that in the absence of personal conscious and fraudulent bad faith by Washburn, it is not liable for any loss occasioned by any such breach.
631 The defendants submit that this issue goes solely to the question of relief and is dependent upon what, if any, adverse findings are made against the trustees and the nature of any such findings. Consequently, the defendants submit they were unable to make full submissions on this issue and the proper time for any such submissions is after the court has published its reasons for decision on the various substantive complaints made by Mae in her statement of claim.
632 Mae acknowledged in her counsel's written closing submissions that the question of the trustees' right of indemnity necessarily overlaps with broader questions of costs which fall to be exercised as a matter of discretion and may conveniently be considered after the court publishes its reasons for judgment on the substantive issues. Mae submitted that her submissions at trial are not intended to limit what may be said on the question of costs generally which may include orders for costs against Philip personally.
633 It is appropriate to consider the question of the trustees' right to indemnity from trust assets together with the question of costs generally after the publication of these reasons for judgment.
Trust Action Issue 6: Was the Deed of Variation executed by Marc on 21 December 2012 ineffective to alter the definition of Guardian but effective to nominate Mae as Guardian of the Washburn Trust in the event of Marc's death?
634 Mae claims a declaration that since the death of Marc, she has been the sole Guardian of the Washburn Trust. The defendants say that Philip is, and since 21 December 2012 has been, the Guardian.
635 The Washburn Trust Deed relevantly provides that the Guardian means successively the persons or persons described as such in the Schedule to the deed. The Schedule relevantly provides that the Guardian is Marc during his lifetime and after his death, then such person as he may nominate in writing during his lifetime; but failing any such appointment then Philip during his lifetime and after his death, then such person as he may nominate in writing during his lifetime; but failing any such appointment then his personal representative; and if Philip should predecease Marc the Guardian shall, upon the death of and failing any appointment by Marc, be Marc's personal representative.
636 By an instrument dated 21 December 2012 (Deed of Variation), Marc as trustee, with the consent of Marc as Guardian, varied, or purported to vary, the trust deed to amend the descriptions of Guardian and Appointor in the Schedule to the Deed of Trust by removing the definitions and substituting provisions relevantly to the effect that the Guardian and Appointor is Philip and upon the death, legal incapacity or bankruptcy of Philip then Marc and upon the death, legal incapacity or bankruptcy of the last of Philip and Marc, then Mae. The Deed of Variation stated that it was made pursuant to the power of variation in cl 29 of the Deed of Trust.
637 Mae says that the Deed of Variation is invalid to the extent that it purported to amend the provisions of the Schedule but was a valid exercise of Marc's power as Guardian during his lifetime to nominate Mae to succeed him as Guardian on his death. Therefore, Mae says, upon the death of Marc, she became the Guardian.
638 The defendants say that the Deed of Variation validly amended the provisions of the Schedule with the effect that Philip is, and has been since the execution of the Deed of Variation, the Guardian. Alternatively, the defendants say that if the Deed of Variation is invalid to the extent that it purported to amend the provisions of the Schedule, it was not a nomination by Marc of Mae as Guardian upon Marc's death. Therefore, the defendants say, if the Deed of Variation did not validly amend the provisions of the Schedule, then on Marc's death Philip became Guardian in accordance with the provisions of the Schedule.
639 Whether Philip or Mae is the Guardian depends upon the validity and effect of the Deed of Variation. Those questions turn on the proper construction of the Deed of Trust and the Deed of Variation.
640 The scope of the power in cl 29 of the Deed of Trust to amend the provisions of the Schedule is a matter of the construction of the words of cl 29 in accordance with the surrounding context and in the light of any admissible extrinsic evidence.
642 The following principles of construction are particularly relevant in this case. First, the objective approach to determining the meaning of provisions of a trust deed requires that the terms of the deed are to be determined by what a reasonable person in the position of the parties would have understood the terms to mean.[69] For construction purposes relevant parties to a trust instrument include the original trustee or other party that caused the trust to be executed,[70] in this case Marc.
643 Secondly, the interpretation of the relevant trust provisions requires consideration of the language used by the makers of the instrument.[71] In determining the objective meaning of a provision of a trust deed, the text of the provision is the first matter to which the court will refer.[72] The meaning of the text of the instrument is informed by a consideration of not only the natural meaning of the relevant words used in the provision but also by how the provision interacts with other relevant provisions of the instrument; and the context in which the provision and the instrument operate.
644 The focus on the natural and ordinary meaning in the context of the instrument as a whole is illustrated by the decision of the High Court in Montevento Holdings Pty Ltd v Scaffidi.[73] The trust deed of a discretionary family trust authorized an appointor to remove a trustee and to appoint new trustees. The deed provided that if and so long as any individual appointor was a beneficiary that individual was not eligible to be appointed as a trustee. An individual who was the appointor removed a company that was the sole trustee of the trust and appointed as trustee a company of which he was the sole director and shareholder. The appointor was a person within the class of beneficiaries of the trust. The High Court held that the trust deed prohibited only the appointment as a trustee of a natural person who held the office of appointor. Hence the appointment of the company was valid.
645 Thirdly, in order to arrive at the true interpretation of a document, a clause must not be considered in isolation, but must be considered in the context of the whole document. The meaning of any one part of an instrument may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.[74] Preference is given to a construction supplying a congruent operation to the various components of the whole.[75] However, the context of the document as a whole will not usually override the plain meaning of the words.
646 Fourthly, in construing a contract all parts of it must be given effect where possible, and no part of it should be treated as inoperative or surplus.
647 Fifthly, the meaning of a provision in a trust deed is informed by the purpose or object of the provision. The High Court has repeatedly stated that determining the meaning of the terms of a commercial contract will require consideration of the commercial purpose or objects to be secured by the contract.[76] The purposive approach applies to the construction of trust instruments.[77]
648 Sixthly, where the text of an instrument presents constructional choices between plausible competing constructions, the instrument should be construed so as to give a reasonable and practical effect to the instrument just as a commercial contract should be given a commercially sensible construction. That is because the court should assume that the parties intended to make sensible and practical provisions, and thus a reasonable and practical construction is a good indication of the presumed intentions of the parties.[78]
649 The relevant context of the Deed of Trust is that it established the Washburn Trust in 1995. Marc established the Washburn Trust to hold one quarter of a substantial business for the benefit of the trust's beneficiaries. The Deed of Trust established Marc as the trustee, appointor and guardian and therefore effective controller of the Trust. On its establishment, the beneficiaries of the trust were Marc and persons and companies in varying degrees of relationship to Marc.
650 The power to amend the deed is conferred by cl 29 which is in these terms:
Subject to clause 11 hereof the Trustee may at any time and from time to time by deed vary all or any of the trusts provisions terms and conditions contained in this Deed (as varied from time to time by any previous deed) provided that the rule known as the Rule against Perpetuities is not thereby infringed and provided that any such variation insofar as it creates new beneficial interests in the Trust Fund or any part thereof shall be for the benefit of all or any one or more of the General Beneficiaries or the General Beneficiaries as a whole or any one or more persons born or unborn being lineal descendants of whatever degree (or the spouse of any lineal descendant) of any grandparent of any General Beneficiary but:
29.1 shall not be in favour of or result in any benefit to any member of the excluded class;
29.2 shall not affect the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation; and
29.3 shall not (save as provided in sub clause 29.1 hereof) enlarge the number of persons capable of falling within the description 'beneficiary' hereinbefore contained.
Save as provided in this clause these presents shall not be capable of being varied.
In this clause 'vary' include revoke add to or amend and 'variation' and 'varied' have a corresponding meaning.
651 The natural and ordinary meaning of cl 29 is that subject to provisos and exceptions which are not presently relevant, the Trustee may vary any of the provisions, terms or conditions contained in the trust deed, including the descriptions of Guardian and Appointor in the Schedule.
652 The phrase 'the trusts provisions terms and conditions contained in this Deed' refers to the trusts created or declared by the trust deed and to the other provisions, terms and conditions of the trust deed, including the Schedule. Furthermore, the provisions of the Schedule in which persons are named, described or defined as the Guardian are to be read and construed as if they were embodied in the definition of Guardian contained in cl 1.10. Accordingly, the power in cl 29 extends to varying the definition or description of the Guardian in the Schedule.
653 Mae submits that construed in the context of the trust deed as a whole, the power of amendment in cl 29 does not empower the trustee to vary the description or definition of Guardian in the Schedule so as to appoint someone other than Marc as Guardian during Marc's lifetime.
654 Item 10 of the Schedule, which describes or defines the Guardian, provides that Marc is to be the Guardian during his lifetime and confers on Marc during his lifetime the power to nominate the person to be Guardian on Marc's death. Mae submits that the general power of variation in cl 29 is qualified by the express and specific power concerning the appointment of others as Guardian conferred in item 10 of the Schedule, such that the power to amend conferred by cl 29 could not be exercised so as to alter the identity of the Guardian in a manner that was not expressly permitted by the deed itself.
655 The trust deed confers on the Guardian various powers. Clause 11.3 provides that many reserved powers, which include the power of the trustee under cl 1.10 to declare that a person named as Guardian shall not become Guardian and the power of the trustee under cl 29 to vary the trusts provisions terms and conditions contained in the deed, cannot be exercised without the consent of the Guardian. Mae submits that the intent of the trust deed is that Marc is to remain the Guardian, and thereby retain control over the reserved powers, during his lifetime.
656 I do not accept those arguments. The provisions of the trust deed which expressly deal with the line of succession as Guardian including the power of Marc during his lifetime to nominate a successor (Schedule item 10), the powers of the Trustee to declare that any person who has not yet become Guardian but who would or might at some time become Guardian shall not become a Guardian (cl 1.10), and the provisions requiring the Guardian's consent to the exercise of reserved powers (cl 11) do not require or justify qualifying or limiting the ordinary and natural meaning of the words of cl 29.
657 The proviso to the definition of Guardian in cl 1.10 merely confers on the Trustee a limited power to declare that a person shall not become Guardian. The status of that power as a reserved power makes its exercise subject to cl 11. However, subject to cl 11, the power may be exercised by an instrument in writing and without the necessity of a variation of the deed pursuant to cl 29. The power in the proviso can operate, reasonably and sensibly, independently of cl 29. It has 'work to do'.[79]
658 There is no basis in the language of the provisions of the trust deed with respect to the position of Guardian, construed in the context of the trust deed as a whole, to infer that a wider power for the Trustee to remove or appoint a Guardian, than the limited power in the proviso to the definition, was omitted deliberately from the trust deed.[80]
659 Mae further argues that a variation of the trust deed to nominate a person other than Marc to become Guardian in the lifetime of Marc is invalid because any such variation would alter the substratum of the trust.
660 A power of variation or amendment must, like other limited powers, be used only for the purpose for which it was given. The use of a power of amendment or variation must be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the trust instrument was made, having regard to its nature and circumstances. The test is an objective one.[81] Lewin on Trusts says that another way of expressing the point is that an amendment must not change the whole substratum of the trust or its basic purpose.[82]
661 The principle that general powers of amendment cannot be used to change the substratum of the trust has been characterised as a rule of construction or a species of fraud on the power.[83] In Mercanti v Mercanti, Buss P agreed with the statement by Hely J in Cachia v Westpac Financial Services Ltd[84] that the authorities which suggest that a power to vary a trust deed may be held not to extend to a variation which would alter the substratum of the trust may be no more than an application of the equitable doctrine of fraud on the power.[85]
662 The difficulty in applying the principle that a power of amendment must not change the substratum of the trust lies in defining the substratum of the trust for the purpose of the amendment power. The terms of the trust may be such that there is no identifiable substratum, or none capable of providing much of a limit on the power of amendment.[86] In a discretionary trust there may be no substratum to be preserved beyond the provision of benefits to the class of objects, which may be very widely expressed.[87]
663 Mae submits that the substratum of the trust deed is Marc's ultimate control over the reserved powers for his lifetime. Mae submits that the Washburn Trust Deed, consistently with the context in which it was made, made clear that Marc and no other person was to have ultimate control over the reserved powers for the course of his life.
664 In my opinion, varying the trust deed by replacing the description of the Guarantor in the Schedule, including replacing Marc as Guarantor during his lifetime, does not change the substratum of the trust or its basic purpose.
665 It is difficult to discern any substratum or purpose of the Washburn Trust beyond making 'provision for the persons ... set out and in the manner ... set out'[88] in the trust deed, that is to benefit persons and entities in various degrees of relationship to Marc. Marc's appointment as Guardian gave Marc ultimate control of the trust in the sense that item 10 of the Schedule and cl 11 gave Marc, as Guardian, a power of veto over the exercise by the Trustee of the reserved powers for so long as Marc remained Guardian and the power in cl 29 to replace Marc as Guardian could only be exercised with Marc's consent.
666 The power of the Trustee with the consent of the Guardian to replace the Guardian does not destroy the substratum of the trust. The Trustee cannot remove or replace the Guardian except with the consent of the Guardian. The requirement that the Guardian consent to the exercise of the reserved powers would not be subverted by the replacement of the Guardian if the Trustee has power to vary the trust deed by removing the Guardian and appointing a new Guardian where the original Guardian consented to such a removal and appointment.
667 In Mercanti v Mercanti, the Court of Appeal held that a deed of variation which amended the description of Appointor in the schedule to a trust deed in substantially the same terms as the Washburn Deed of Trust, so as to replace the original Appointor, did not alter the substratum of the trust. Buss P considered that the substratum of the trust was the conferral of benefits from time to time on one or more of the beneficiaries for the time being of the trust, as determined from time to time by the Trustee, subject to the provisions of the trust deed, including any consent required from the Guardian. The substratum was not, in his Honour's view, to be ascertained or defined by reference to the identity of the persons who, at the date of execution of the trust deed, held the offices of Trustee, Guardian or Appointor.[89] Newnes and Murphy JJA observed that the exercise of the amendment power required the consent of the Guardian and under the trust deed, if, with the consent of the Guardian, one Appointor is replaced with another Appointor, the Trustee remains amenable to removal by the Appointor. Their Honours concluded that the exercise of the amendment power to remove the Appointor does not affect, let alone destroy, the substratum of the trust deed.[90]
668 I find that cl 29 of the Deed of Trust empowers the Trustee, with the consent of the Guardian, to remove the Guardian, including Marc during his lifetime, and appoint a new Guardian in his place.
669 By the Deed of Variation, the Trustee, with the consent of the Guardian, amended the definition or description of the Guardian in the Schedule to the Deed of Trust to the effect that Philip replaced Marc as Guardian. I have found that cl 29 of the Deed of Trust empowered and authorised the Trustee to do so. Accordingly, Philip is the Guardian of the Washburn Trust and has been since the execution of the Deed of Variation on 21 December 2012.
670 If, contrary to my finding, cl 29 of the Trust Deed does not empower the Trustee to remove Marc as the Guardian during his lifetime and appoint a new Guardian in his place, then the Deed of Variation was not effective to appoint Philip as Guardian. The plaintiff says that in that event, the Deed of Variation was effective to nominate Mae to succeed him as Guardian on his death.
671 The power for Marc to nominate a Guardian to succeed him as Guardian on his death is found in item 10 of the Schedule to the Trust Deed, which provides that the Guardian is Marc during his lifetime and 'after his death then such other person as may be nominated in writing by him during his lifetime'.
672 The Deed of Variation was executed by Marc as the Trustee and by Marc as the Guardian of the trust. The deed recites that the parties are desirous of amending and varying the Deed of Trust pursuant to the power of variation in cl 29 of the Deed of Trust, and that the Guardian has consented to be a party to the Deed of Variation in accordance with the provisions of cl 11 of the Deed of Trust. Clause 2 of the Deed of Variation provides:
Guardian: [Philip] and upon the death, legal incapacity or bankruptcy of [Philip], then [Marc] and upon the death, legal incapacity or bankruptcy of the last of [Philip] and [Marc], then [Mae] and upon the death, legal incapacity or bankruptcy of [Mae], then such person or persons as the last survivor shall have, by Deed or document, appointed and, in the absence of any such appointment, the legal representative thereof but specifically excluding a Trustee in bankruptcy.
673 Mae says that on its proper construction, the Deed of Variation is a nomination by Marc of Mae as Guardian 'upon the death, legal incapacity or bankruptcy of the last of' Philip and Marc.
674 I do not accept that argument. First, the Deed of Variation purports to remove the definition of the Guardian in the Schedule, which is the source of Marc's power to nominate a person to succeed him as Guardian on his death. A purported amendment of a trust deed to remove a provision conferring a power cannot be an exercise of the power conferred by that provision.
675 Secondly, the Deed of Variation does not provide that Mae is to be Guardian on the death of Marc. It provides that Mae is to be Guardian upon the death, legal incapacity or bankruptcy of the last of Philip and Marc. Mae submits that the phrase 'death, legal incapacity or bankruptcy' of Philip is wide enough to encompass the situation where Philip is incapable of acting as Guardian due to his having been invalidly appointed. I do not accept that argument. Legal incapacity refers to Philip's lack of mental capacity, not the invalidity of the instrument purporting to appoint him.
676 Thirdly, Mae's argument is in effect that the part of the Deed of Variation which purports to amend the definition of Guardian in the Schedule to make Philip Guardian in place of Marc may be severed from the part of the deed which manifests an intention that Mae should become Guardian on the death, legal incapacity or bankruptcy of Marc and Philip.
677 Whether or not an invalid part of an instrument can be severed depends upon the intention of the parties as to whether the operation of the instrument (apart from the impugned part) was to be conditional on the efficacy of that part, or whether it was to take effect notwithstanding the failure of that part.[91] That intention is to be ascertained from the construction of the instrument as a whole.
678 The purpose of the Deed of Variation was to amend the Schedule to the Deed of Trust to replace the definitions of Guardian and Appointor in items 10 and 11 of the Schedule. It is not sensible to attribute to the makers of the Deed of Variation an intention that part of the definition of Guardian that was to replace the existing definition in item 10 should take effect where the principal object of the deed did not take effect.
679 If, contrary to my finding, the Deed of Variation was not effective to appoint Philip as Guardian, the Deed of Variation was not effective to nominate Mae to succeed him as Guardian on his death. Accordingly, on Marc's death Philip would have become Guardian in accordance with the provisions of item 10 of the Schedule to the Deed of Trust.
Trust Action Issue 7: Should the court appoint a receiver of Philip's powers as guardian?
680 I have found that Washburn should be removed as trustee of the Washburn Trust and that Mae should be appointed the new trustee in its place. I have further found that Philip is, and has been since 21 December 2012, the Guardian of the Washburn Trust.
681 In her statement of claim Mae seeks relief in the form of an order appointing a receiver to the Washburn Trust. In their written opening submissions counsel for Mae submitted that she seeks orders, to the extent necessary, for the appointment of a receiver, including over the powers of Trustee, Appointor or Guardian.
682 In his closing submissions junior counsel for Mae, Mr McComish, sought a more limited order - an order appointing a receiver of the exercise of the powers of the Guardian of the Washburn Trust.
683 The issue relates to the powers conferred upon the Guardian by the Washburn Trust Deed. The deed provides that 'the trustee shall not when there is a Guardian exercise the reserved powers or the restrictive powers except with the consent of the Guardian. Among other things, those reserved or restricted powers include:
1. the power to pay, apply or set aside trust income to a general beneficiary on the first occasion (cl 11.7.1.5 referring to cl 3.1.1);
2. the power to appoint trusts of capital in relation to the Vesting Day (cl 11.7.1.6 referring to cl 4.1); and
3. the powers to advance capital, or make loans, to a beneficiary (cl 11.7.2.1 referring to cl 6.1 ‑ cl 6.3).
684 Mae submits that these powers, which her counsel describe as 'blocking powers', of the Guardian mean that even if the court finds that Philip's conduct is sufficiently antithetical to the proper administration of the trust to warrant Washburn being removed as trustee, there is a real risk that the proper administration of the trust will remain impeded - with significant personal and financial consequences for Mae - for so long as Philip retains a veto power as Guardian. Mae submits that replacing Washburn as trustee will be insufficient to remedy the maladministration of the trust if the Guardian's powers remain unconstrained in the hands of Philip, whose conduct warranted the court's intervention. A critical aspect of that conduct, counsel submit, is Philip's fixed and explicit determination never to permit any distribution to Mae from the Washburn Trust.
685 The defendants oppose the appointment of a receiver of the powers of the Guardian on the ground that the court does not have power to make such an order and if it does it should not exercise its discretion to make such an order.
686 The court has power to appoint a receiver pursuant to its inherent equitable jurisdiction,[92] or its power under s 25(9) of the Supreme Court Act 1935 (WA) which provides that a receiver may be appointed 'by an interlocutory order of the Court or a judge in all cases in which it shall appear to the Court or a judge to be just or convenient that such order should be made'.
687 The power conferred by s 25(9) of the Supreme Court Act to appoint a receiver is a wide, general power and the classes of cases in which the court may appoint a receiver are not closed.[93] However, the power must be exercised judicially and in accordance with established principles.[94]
688 There are two reasons why the court does not have power to grant the order appointing a receiver sought by Mae in this case, or alternatively, why the court should not make such an order. The first is that the order sought is for the appointment of a receiver over a power which is not an asset or property or tantamount to property. The second is that the order sought is not interim in nature or effect. I will address each aspect in turn.
689 The function of a receiver is to receive property or assets. In principle, a receiver may be appointed over any asset, including whatever is considered in equity to be assets.[95]
690 A receiver may be appointed over trust assets, powers of revocation and interests under discretionary trusts.
691 Mae submits that the court may appoint a receiver of property or interests in a trust. Junior counsel for Mae, Mr McComish, referred to a number of authorities in which the court appointed a receiver of trust property. Mr McComish submitted that the leading modern case is Yunghanns v Candoora No 19 Pty Ltd (No 2).[96] After reviewing relevant authorities and texts, Warren J concluded that three principles can be distilled from those authorities and texts:
First, the courts will appoint a receiver of trust property (on an interlocutory and/or permanent basis) where that property is in jeopardy through misconduct, waste, improper disposition, breach of the trustee's duty or the unsuitable character of the trustee. Second, the case in favour of appointment of a receiver must be a strong one but in assessing the risk to the trust the courts will apply a qualitative judgment. Third, a receiver will be appointed to preserve the benefit of a person who has an interest in trust property [84].
Her Honour appointed a receiver of the trust's assets and undertakings.
692 What makes this case different is that Mae does not seek the appointment of a receiver of the property of the trust or its assets and undertakings. Mae seeks the appointment of a receiver of the exercise of the powers of the Guardian. In general, a power is personal and not property, it does not ordinarily constitute property to which a receiver may be appointed.
693 Mr McComish submitted that some powers are sufficiently close to the notion of property that a court may appoint a receiver of them. Mr McComish submitted that the leading case about receivers and personal powers is Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd (TMSF v Merrill Lynch).[97]
694 The appellant, TMSF, had obtained judgment against Mr Demirel for US$30 million. Mr Demirel failed to satisfy the judgment debt and was made bankrupt in Turkey. Mr Demirel had established two discretionary trusts in the Cayman Islands with assets of over US$24 million. The trustee was the first respondent, Merrill Lynch. The beneficiaries of the trusts were Mr Demirel and his wife. Mr Demirel had a power of revocation of the trusts. TMSF brought proceedings in the Cayman Islands seeking the appointment of a receiver by way of equitable execution of Mr Demirel's power to revoke the trusts and an order that Mr Demirel assign or delegate his power of revocation to the receiver. The judge dismissed TMSF's application on the grounds that the power to appoint a receiver was limited to property, and making the orders sought would involve setting aside the longstanding common law distinction between powers and the property they affect. The Court of Appeal of the Cayman Islands upheld the decision and TMSF appealed to the Judicial Committee of the Privy Council.
695 In delivering the opinion of the Board, Lord Collins of Mapesbury said that the appeal was about the jurisdiction of the court to appoint receivers by way of equitable execution and in particular, whether the court should appoint receivers over a judgment debtor's power of revocation of trusts.[98] Mr Demirel had power of revocation of the trusts with the consequence that he could reinvest in himself an amount which would satisfy a very large portion of the judgment debt.
696 Lord Collins referred to the judgment of the Court of Appeal of England and Wales in Masri v Consolidated Contractors International (UK) Ltd [No 2][99] in which the Court of Appeal held that the jurisdiction to appoint a receiver by way of equitable execution permitted of gradual and incremental development, and, in particular, was not limited to choses in action which were presently available for legal execution, but extends to whatever is considered in equity to be assets.
697 Lord Collins said that the main question on the appeal was whether the power of revocation of the trusts
is sufficiently close to the notion of property to enable the equitable remedy of a receiver by way of equitable execution to be available to ensure that Mr Demirel has not put himself beyond the reach of the judgment creditor, and whether the appointment can be made effective by ordering transfer or delegate the power of revocation to the receivers [8].
698 Lord Collins observed that the traditional view was that a power was distinct from property but this was not an absolute rule.[100] Lord Collins explained:
But even apart from express legislative intervention general powers have been regarded as giving rise to property rights. In Clarkson v Clarkson [1994] BCC 921 (a decision on the definition of property in the Insolvency Act 1986, section 283(4)) Hoffmann LJ referred to In re Mathieson and said, obiter, at p 931:
'I think that even at the time this was quite a remarkable decision. Lord St Leonards [ie Sugden] in his book on Powers, 8th ed (1861) said: "To take a distinction between a general power and a limitation in fee is to grasp at a shadow while the substance escapes."'
So also in In re Triffit's Settlement [1958] Ch 852, 861, Upjohn J said that 'where there is a completely general power in its widest sense, that is tantamount to ownership'. That was in the context of the question, discussed below, whether a power could be delegated.
As Thomas, Powers (1998) puts it (at para 1‑08), the fundamental distinction between the concepts of power and property has not been preserved in all contexts and for all purposes. A donee of a truly general power can appoint the subject matter of the power to himself. He therefore has an 'absolute disposing power' over the property, citing Sugden, Powers, 8th ed (1861), p 394. Consequently, for many purposes, the law regards the donee as the effective owner of that property [41] ‑ [43].
699 The Board concluded that the powers of revocation in the trust were such that in equity Mr Demirel can be regarded as having rights tantamount to ownership, and an order appointing a receiver should be made in order to make effective the judgment of the Cayman court recognising and enforcing the judgment.[101]
700 TMSF v Merrill Lynch was followed by the New Zealand Court of Appeal in Clayton v Clayton[102] where the court held that a general power of appointment constituted 'relationship property' under the Property (Relationship Act) 1976 (NZ). The court held that were was no practical distinction between the power to revoke the trust the subject of the decision in TMSF v Merrill Lynch and Mr Clayton's power to appoint himself as the sole beneficiary of the trust in that case. If Mr Clayton were to exercise his power in that way, he would become both the legal and beneficial owner of the trust assets.
701 The powers conferred on the Guardian by the Washburn Trust are quite different from the powers considered in TMSF v Merrill Lynch and Clayton v Clayton. A donee of a truly general power can appoint the subject matter of the power to himself. He has an absolute dispensing power over the property. Consequently, for many purposes, the law regards the donee as the effective owner of that property.
702 Difficult questions may arise as to what rights or powers are tantamount to ownership so as to be capable of being the subject of a receivership. However, the powers conferred on the Guardian by the Washburn Trust are not tantamount to ownership, however wide a meaning is given to that notion. The powers conferred on the Guardian by the Washburn Trust are described by Mae's counsel as 'blocking' or veto powers. The trust deed does not confer any power of appointment or other dispositive power on the Guardian. The Guardian does not have power to appoint any property or assets, that is to determine when a beneficiary will receive income or capital of the trust, the extent of such benefits or the identity of the beneficiary. The powers conferred on the Guardian are negative powers; the Guardian's consent is required before the trustee carries out the transactions in question.
703 The powers of the Guardian are not capable of being the subject of a receivership.
The appointment of a receiver is inherently temporary
704 The court may appoint a receiver during proceedings or after judgment has been given.[103] The words 'interlocutory order' in s 25(9) of the Supreme Court Act are not confined in their meaning to an order made between commencement of action and final judgment, but mean an order other than an order by way of final judgment in an action, whether such order was made before judgment or after.[104]
705 However, in all cases, the remedy of the appointment of a receiver is an interim measure.
706 A court appointed receiver is appointed to collect, protect and receive assets.[105] The appointment of a receiver is for the purpose of getting in and holding or securing funds or other property for the benefit of those entitled to such property, and which the court will have the power and the means to distribute. The appointment is an inherently temporary appointment pending distribution. The object sought by such appointment is therefore the safeguarding of property for the benefit of those entitled to it. There are two main classes of cases in which the appointment of a receiver is made:
(a) to enable persons who possess rights over property to obtain the benefit of those rights and to preserve the property pending realisation, where ordinary legal remedies are defective; and
(b) to preserve property from some danger which threatens it. [106]
707 An important category of case within the first class is the appointment of receivers by way of equitable execution. TMSF v Merrill Lynch is a case where a receiver was appointed by way of equitable execution.
708 The second class of cases includes those in which the appointment is made to preserve property and where required, to ensure its proper management, pending litigation to decide the rights of the parties.[107]
709 In this case, Mae does not seek the appointment of a receiver by way of equitable execution. There is no judgment or sum of money to which she is entitled or right which she seeks to enforce. Mae does not seek to preserve property. The exercise or non‑exercise of the Guardian's powers does not give rise to any peril to the assets of the trust. Nor does Mae seek to ensure the proper management of the trust pending litigation to decide the rights of the parties. Mae seeks the appointment of a receiver to exercise the powers of the Guardian indefinitely or permanently.
710 The court will not appoint a receiver to exercise the powers of the Guardian permanently.
Family Provision Action Issue 1: The Powercity loans
711 I have referred earlier to the Powercity loans. Mae acknowledges the existence of the loans but submits that they are not due and payable because they were repayable only from distributions made by the trustee of the Washburn Trust out of funds received by way of dividends declared by Powercity.
712 I have set out earlier in these reasons that I am not satisfied that Mae has established that it was a term of each of the Powercity loans that they were not repayable unless and until dividends were declared by Powercity to the Washburn Trust and then distributed to Marc to enable him to repay the loans or loan repayment instalments. I find that the Powercity loans are due and payable.
Family Provision Action Issue 2: The alleged liability of Marc's Testamentary Trust for $1,280,714
713 It is common ground that the payment of $1,280,714 by Ongold as trustee of Marc's Testamentary Trust to Duporte on 10 November 2015 discharged the debt owing by Marc's estate to Duporte. The defendants assert, and Mae denies, that the payment gave rise to a debt of $1,280,714 owing by Marc's estate to Marc's Testamentary Trust.
Marc's estate is not indebted to Marc's Testamentary Trust
714 I have set out earlier in these reasons that Marc's estate is not indebted to Ongold as trustee of Marc's Testamentary Trust for $1,280,714 as a result of the 10 November 2015 payment.
Family Provision Action Issue 3: Philip's alleged breaches of duty as executor
715 Mae alleges four relevant breaches by Philip of his duties as executor of Marc's estate by the following actions or omissions:
1. asserting and accepting that the Powercity loans are liabilities of Marc's estate (Reamended Substitute Statement of Claim (RASSOC) [10D]);
2. asserting and accepting that the amount of the Duporte loan was a liability of the estate (RASSOC [10H]);
3. making an offer to settle Mae's claims against, or rights in respect of, Marc's estate, Marc's Testamentary Trust, the Washburn Trust and any other Cardaci family interests for $2 million as executor of Marc's estate while simultaneously acting as the controlling mind of the trustees of the Washburn Trust, Marc's Testamentary Trust, and other Cardaci family interests (RASSOC [10P]); and
4. failing to properly deal with net proceeds of the sale of assets of Marc's estate (RASSOC [10S]).
Alleged breach of duty in relation to Powercity loans
716 The alleged breach of duty is premised on Mae's assertion that it was a term of the Powercity loans that they would be repayable only from distributions made by the Washburn Trust out of funds received by way of dividend from Powercity. As set out earlier in these reasons, Mae has not established that assertion. Mae's claim that, by asserting and accepting that the Powercity loans are liabilities of Marc's estate, Philip breached his duties as executor of Marc's estate is not established.
Alleged breach of duty in relation to amount of Duporte loan
717 Philip's conduct which is alleged to be a breach of his duty as executor is his conduct as executor of Marc's estate in accepting and asserting that the Ongold payment constituted or gave rise to a loan to Marc's estate or caused Marc's estate to be indebted to Ongold in that amount. Mae alleges that by accepting and asserting the debt Philip failed to administer Marc's estate according to law and failed to exercise reasonable care.
718 In administering estate property, and in dealing with it, an executor is required to use the same degree of diligence and care in the execution of his office that a person of ordinary prudence would exercise in the management of his own affairs.
719 The defendants say that Philip acted with reasonable care because the characterisation of the transaction as a loan was made by Brentnalls and Ms Bailey, and to Philip's knowledge both were familiar with Marc's financial affairs; Philip acted reasonably in relying upon their characterisation of the transaction as a loan. The defendants submit that characterisation was consistent with how Marc had conducted his affairs during his lifetime and Philip's knowledge of that conduct.
720 There is no magic in describing the question whether a transaction is a loan as a question of characterisation. The issue is whether Philip, as executor of Marc's estate, acted with reasonable care and skill in asserting that Marc's estate was indebted to Marc's Testamentary Trust in the amount of $1,280,714 in the lists of assets and liabilities of Marc's estate he presented to Mae, the statement of assets and liabilities in support of his application for a grant of probate of Marc's will, and the statement of affairs under pt XI of the Bankruptcy Act in support of his petition to the Federal Circuit Court of Australia which resulted in the appointment of the second defendant as trustee in bankruptcy of Marc's estate and otherwise acting on that basis.
721 I am not satisfied that Philip breached his duty as executor to exercise reasonable care and skill. The circumstances in which Philip accepted that the discharge of the Duporte loan by Ongold created a loan by Ongold to Marc's estate include the following. First, to Philip's knowledge, Marc had requested Ms Bailey to repay the Duporte loan from funds of Marc's Testamentary Trust. A request by a debtor to a third party to discharge a debt owing by the debtor to his creditor may give rise to an obligation of the debtor to repay that amount to the third party.
722 Secondly, Brentnalls drafted the Statement of Affairs which included the amount of the Duporte loan (the Ongold payment) as a loan by Ongold to Marc's estate. Brentnalls are not lawyers, but they are accountants and business advisers who had advised Philip and Marc about their financial affairs for many years.
723 Thirdly, from the perspective of the executor of Marc's estate, the effect of accepting that the discharge of the Duporte loan by Ongold created a loan from Ongold to Marc's estate was to swap a loan owing to Ongold for a loan owing to Duporte. An error of judgment is not of itself a failure to exercise reasonable care and skill.
724 I have found that Philip made an offer to Mae on 13 July 2016, and in subsequent emails, to settle Mae's claims against, or rights in respect of, Marc's estate, Marc's Testamentary Trust and the Washburn Trust and any other Cardaci family interests. The offer was not accepted by Mae and no transaction or dealing resulted from the offer.
725 Mae pleads that Philip engaged in that conduct as executor of Marc's estate while simultaneously acting as the controlling mind of the trustees of the Washburn Trust, Marc's Testamentary Trust and other Cardaci family interests. Mae pleads that Philip sought to buy out her rights in Marc's estate and to do so on terms which required her to give up her rights not only in the estate but also in the Washburn Trust, Marc's Testamentary Trust and other Cardaci family interests. In doing so, Mae pleads, Philip acted in breach of his duties as executor of Marc's estate.
726 Mae pleads that on 25 November 2016 Philip revised the offer to include the brig Eagle 780 boat which was an asset of Marc's estate and the Maserati car which was in Marc's possession prior to his death.
727 The defendants agree that the brig Eagle boat and Maserati were both provided for in Philip's offer but say that the Maserati was not an asset of Marc's estate and was at all material times owned by Duporte.
728 I find that Marc's estate had an interest in the Maserati. Whilst the vehicle was registered in the name of Duporte, Duporte provided only a relatively small portion of the purchase price and the balance was provided by Marc.
729 The defendants plead that Philip's offer was made by him in his personal capacity and to be personally funded by him to the extent required.
730 I have set out earlier in these reasons my finding that Philip made the offer as the executor of Marc's estate, the controller of the trustee of the Washburn Trust, the controller of the trustee of Marc's Testamentary Trust as well as in his personal capacity. In making his offer Philip did not distinguish between assets of Marc's estate, the Washburn Trust, Marc's Testamentary Trust and any funds which Philip might provide from his personal sources.
731 Philip's offer included conveying to Mae the interest of Marc's estate in the brig Eagle and the Maserati. It is theoretically possible for Philip to effect those transactions using his own funds rather than assets of Marc's estate. He could have purchased those assets from Marc's estate with his own funds and then transferred them to Mae. However, that would have involved a breach of the self‑dealing rule - the executor or trustee selling the trust property to himself.
732 In any event, that was not Philip's intention. Philip's offer was that Mae would retain the assets and be discharged from the liabilities listed in the 'Loan Mae Cardaci' column of the July spreadsheet, totalling $4,292,888, and in addition receive a further $2 million cash. At no time when his offer was open or since has Philip said that he intended to purchase the assets from Marc's estate, Marc's Testamentary Trust or the Washburn Trust or himself repay any liabilities of Mae to those entities. Nor did he or does he say that he would have paid the $2 million from his own pocket. The defendants' pleading, and Philip's evidence, is that whilst he did not know how his offer would be given effect if accepted, including where the necessary funds would be coming from, to the extent it required him to do so, Philip would personally fund the same (emphasis added).
733 Mae submits that Philip's offer to buy out her interests in Marc's estate, the Washburn Trust and Marc's Testamentary Trust involved a complete failure to differentiate between the assets of each, and an improper use of the assets. Mae says, in particular, that in including the Maserati in his offer, Philip expressly used estate assets to try to buy out Mae's interests in the trusts. Mae submits that this was a misuse of his power and reflects his misunderstanding of his role and duties as executor.
734 Philip did not differentiate between the assets of Marc's estate, the Washburn Trust, Marc's Testamentary Trust, and his own funds. He treated them as all under his control and made his offer on the basis that he could transfer the assets to Mae and relieve her of liabilities by his control of each of those entities as well as his own funds.
735 In making and persisting with his offer, Philip did not understand or ignored his duty as executor of Marc's estate to deal with the assets of the estate only for the benefit of its beneficiaries.
736 However, no breach of trust resulted because Philip's settlement offer was not accepted and no transaction was undertaken to give effect to it.
Alleged failure to properly deal with net proceeds of sale of assets
737 Mae says that Philip caused the net proceeds of the sale of Shimmer, the brig Eagle and the lease of the boat pen to be deposited with CEFS rather than into an account at a bank or other financial institution and failed to account to the trustee in bankruptcy for the proceeds until the trustee demanded the funds be transferred to him on or about 10 May 2017.
738 I am not satisfied that in doing those things Philip committed any breach of trust. There is no obligation for an executor to open a bank account in the name of the estate. Philip deposited the funds with CEFS and CEFS paid interest at a greater return than would have been the case had the funds been invested at a bank or other financial institution.
Family Provision Action Issue 4: should Philip be removed as executor of Marc's estate?
The court's jurisdiction to remove an executor and trustee
739 In the exercise of the court's jurisdiction in probate matters under s 18 of the Supreme Court Act 1935 (WA), it has power to revoke a grant of probate to an executor, which results in the removal of that executor.[108] Furthermore, the court also has inherent, or inherited, jurisdiction, to remove an executor by revocation of the grant of probate to him.[109]
740 As I have set out earlier in these reasons, the court has power to remove a trustee when it is expedient to do so.
741 In Woodley v Woodley [No 2],[110] Pritchard J undertook an analysis of the principles by which the court exercises its jurisdiction to pass over an executor under a will or to revoke a grant of probate to an executor which results in the removal of that executor. Her Honour considered that the principles pursuant to which the court exercises its jurisdiction to remove an executor by revoking a grant of probate are the same as those by which the court exercises its jurisdiction to pass over an executor under a will.
742 Justice Pritchard held that the primary concern of the court will be to ensure that the estate will be duly and properly administered according to the terms of the will, in the interests of the parties beneficially entitled to the estate. Her Honour said:[111]
the test will be whether the due and proper administration of the estate has been put in jeopardy or prevented, either by reason of acts or omissions on the part of the executor, or by virtue of matters personal to him or her, or by virtue of the proof of other matters which establish that the executor is not a fit and proper person to carry out the duties of an executor [46].
743 Justice Pritchard held that there are a great variety of circumstances where the grant of probate to an executor will be revoked on the basis that the executor should not be permitted to continue to undertake that role. After referring to a number of examples and relevant authorities discussed by Heenan J in Tsaknis v Lilburne,[112] including a history of family conflict or bitter relations between the executors or trustees of an estate and the beneficiaries which is likely to impact on the decisions made by the executor or trustee, her Honour said that those examples are not exhaustive and every case must depend upon its facts and be decided on its own merits.[113]
744 Philip should be removed as executor of Marc's estate. I have referred earlier in these reasons to the conduct of Philip in relation to Marc's estate in the context of the administration of Marc's estate, the Washburn Trust and Marc's Testamentary Trust. The matters which make Philip unsuitable to remain as executor and to make it expedient to remove him as trustee of Marc's estate include the following.
745 First, Philip asserted that the amount of the Duporte loan, described by the defendants as the Ongold payment, was a liability of Marc's estate. The asserted debt arose out of a transaction which was for the benefit of Philip personally in that it caused the loan from Duporte to Marc to be repaid in priority to other creditors thereby personally advantaging Philip who is in substance a 50% owner of Duporte. That conduct was not a breach of trust for which Philip is liable to the estate but it demonstrates a lack of understanding of the duties and responsibilities of a trustee.
746 Secondly, in making his offer to settle Mae's claims against, or rights in respect of, Marc's estate, Marc's Testamentary Trust, the Washburn Trust and any other Cardaci family interests whilst simultaneously acting as the trustee of Marc's estate and the controlling mind of the trustees of the Washburn Trust, Marc's Testamentary Trust and other Cardaci family interests, Philip failed to distinguish between the assets of Marc's estate and the other entities and used the assets of Marc's estate, including the brig Eagle and the estate's interest in the Maserati, for the purpose of buying out Mae's interests in the Washburn Trust and Marc's Testamentary Trust as well as Marc's estate. Philip either does not understand the duties and responsibilities of a trustee or ignored them.
747 Thirdly, Philip's conduct in deciding and informing Mae that he would never distribute anything to Mae from the Washburn Trust shows a disregard of his duty and responsibility as a trustee which makes it in the interest of Marc's estate that Philip not remain as executor and trustee of the estate.
Family Provision Action Issue 5: Is Philip is liable in damages and/or to account to the estate?
748 Mae says that by asserting against the estate that the Powercity loans and the amount of the Duporte loan, described by the defendants as the Ongold payment, is a liability of Marc's estate and then on behalf of the estate accepting those assertions, without having first sought and obtained appropriate directions from the court or legal advice, Philip breached his duties as executor to administer Marc's estate according to law and to act to the standard of an ordinary and reasonable and prudent businessperson and to act prudently and properly with the administration of the estate.
749 The Federal Circuit Court made the order on 6 February 2017 pursuant to s 247 of the Bankruptcy Act that Marc's estate be administered under pt XI, that is in insolvency, as a result of Philip's petition presented to the Federal Circuit Court on 21 December 2016. The assertion that Marc's estate was insolvent rested upon the acceptance of the Powercity loans and the amount of the Duporte loan. Mae says that, as the making of the order under s 247 of the Bankruptcy Act resulted in the appointment of a trustee in bankruptcy (the second defendant) it has resulted in the incurring of additional costs and expenses to Marc's estate which would not have occurred had Philip properly administered the estate. Mae says that these additional costs and expenses resulted from Philip's breaches of duty as executor and he is therefore liable in damages and ought to account to the estate for the amount of that additional loss and expense.
750 I have found that Marc's estate was indebted to Powercity for the amount of the Powercity loans. Philip did not commit any breach of duty by accepting that Marc's estate was indebted to Powercity for the amount of those loans.
751 I have found that Philip did not commit a breach of his duty as executor of Marc's estate by accepting and acting upon the basis that Marc's estate was liable to Marc's Testamentary Trust for the amount of the Duporte loan, described by the defendants as the Ongold payment.
752 In case that matter should be the subject of appeal, I will briefly set out my findings on the basis that Philip did commit a breach of trust by accepting that Marc's estate was indebted to Ongold.
753 Mae submits that Marc's estate would not have been insolvent if Philip had not included the alleged outstanding loan in the amount of the Duporte loan (the Ongold payment) as a liability in the Statement of Affairs under pt XI verified by Philip as part of his application to the Federal Circuit Court for an order that Marc's estate be administered in bankruptcy. The defendants submit, to the contrary, that Marc's estate would still have been insolvent if the amount of the Duporte loan had not been included as a liability of the estate.
754 The assets and liabilities verified by Philip in the Statement of Affairs were assets of $2,228,657 and liabilities of $3,180,724. The Statement of Affairs omitted the interest of Marc's estate in the Maserati. The estate's interest in the Maserati is $78,878.[114] The value of the estate's assets, including the value of the Maserati, is $2,307,535.
755 However, the defendants submit that the following further adjustments should be made to the value of the assets. First, the amount of $58,612 should be deducted from the value of the share in CFC Consolidated Pty Ltd to reflect the capital gains tax that would be payable on the sale of the share. I do not accept that submission.
756 Secondly, the amount owing to the estate under the CEFS ledger account should be -$98.49 not $1,129,192 as shown in the Statement of Affairs. That figure is derived by deducting the proceeds of sale of the boat Shimmer from the funds held in the estate's CEFS ledger account. Although the net proceeds of the sale was $1,131,476.05, the defendants say that no value should be attributed to the boat if the liability is not a debt of the estate. I do not accept that submission. The boat belonged to Marc and became an asset of the estate. The boat was purchased with funds loaned by Duporte. The Duporte loan was discharged by Marc's Testamentary Trust. I have found that the discharged loan was not replaced by a loan by Marc's Testamentary Trust.
757 Thirdly, the amount of $198,192 in respect of the MC Super Fund should be deducted because the MC Super Fund death benefits were paid to Mae not to Marc's estate and did not form an asset of Marc's estate. I accept that submission.
758 Fourthly, the net proceeds of the sale of the Brig Boat was $78,750 not $87,500. Fifthly, the net proceeds of sale of the Boat Pen was $39,603 not $38,000. I accept that both of those adjustments should be made.
759 Therefore, I find that the value of the assets of Marc's estate was $2,102,196.
760 The amount of the Duporte loan of $1,280,714 described by the defendants as the Ongold payment, should not have been included in the liabilities because I have found that the payment by Ongold did not create a loan owing by Marc's estate to Ongold. Accordingly, the liabilities of the estate were $1,900,010. Therefore, the assets of the estate exceeded its liabilities. The estate was not insolvent.
761 The additional costs and expenses incurred by Marc's estate by reason of Philip presenting his petition to the Federal Circuit Court as a result of which the Federal Circuit Court made an order on 6 February 2017 and the second defendant was appointed as Trustee in Bankruptcy of Marc's estate were $480,248.09.[115]
762 The defendants plead that by operation of s 42 of the Trustees Act 1962 (WA) Philip is not liable for any loss to Marc's estate arising from his admission of the pleaded loan to Duporte as a liability of Marc's estate and the presentation of the petition to the Federal Circuit Court.
763 Section 42 of the Trustees Act does not exonerate Philip from a breach of his duty of care. Section 42 confers upon an executor the power to allow any debt or claim on any evidence that they think sufficient and for that purpose to do things as to them seem expedient without being responsible for any loss occasioned by the things so done by them in good faith. However, that provision does not relieve the trustee of the duty to exercise reasonable care. The relieving power is in s 75 of the Trustees Act which the defendants rely upon in the alternative.
764 The defendants submit that if the court finds Philip breached his duty of care and skill then he should be relieved from any such liability pursuant to s 75 of the Trustees Act.
765 Section 75 of the Trustees Act empowers the court to excuse a trustee, which includes an executor or other personal representative, for breach of trust if the trustee has acted honestly and reasonably and ought to be fairly excused. A trustee is not entitled to relief by proving only that he acted honestly and reasonably. He must show that in all the circumstances he ought fairly to be excused for his breach of trust.[116]
766 The onus is on the trustee to satisfy the court by evidence that the trustee acted reasonably and honestly and that he ought to be fairly excused.[117] The test of reasonableness is objective.[118] A trustee can fail to act honestly or reasonably if the trustee fails to obtain legal advice or seek directions from a court.[119]
767 I find that Philip acted honestly. He believed that Marc's estate was indebted to Ongold for the amount of the Duporte loan.
768 I find that Philip acted reasonably. Whether a prudent executor would have accepted that the estate was indebted to Ongold without taking legal advice may be open to debate. However, in the following circumstances I find that Philip acted reasonably. First, Philip's action resulted in accepting that the Duporte loan was swapped for a loan owing to Ongold. Secondly, during his lifetime Marc had requested that the Duporte loan be repaid by Ongold and if the payment had been made during Marc's lifetime, the request may have given rise to an obligation on Marc to repay the amount to Ongold. Thirdly, the accountants and business advisers to Philip and Marc drafted the Statement of Affairs and included the payment as a loan owing by Marc's estate to Ongold.
769 Mere negligence does not of itself disentitle a trustee or executor from relief under the s 75 of the Trustees Act.[120]
770 I find that Philip acted honestly and reasonably and that he acted in such a way that he ought fairly to be excused. Commonly, reliance on legal advice is a passport to relief.[121] Philip did not obtain legal advice but he acted on the advice of the accountants and business advisers who had provided financial advice to Philip and Marc for many years. In that circumstance and the circumstances to which I have referred earlier, Philip ought fairly to be excused.
Family Provision Action Issue 6: Marc's will should be amended under the Family Provision Act 1972 (WA)
771 Section 6(1) of the Family Provision Act 1972 (WA) provides:
If any person (in this Act called the deceased) dies, then, if the Court is of the opinion that the disposition of the deceased's estate effected by his will, or the law relating to intestacy, or the combination of his will and that law, is not such as to make adequate provision from his estate for the proper maintenance, support, education or advancement in life of any of the persons mentioned in section 7 as being persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion, on application made by or on behalf of any such person, order that such provision as the Court thinks fit is made out of the estate of the deceased for that purpose.
772 Section 7 provides that, amongst others, a person who was married to the deceased immediately before the death of the deceased may apply for provision out of the estate of the deceased person.
773 Section 10 provides relevantly that an order takes effect as a codicil to the will.
774 The applicable legal principles were considered by Buss P in Lemon v Mead.[122] Section 6(1) requires the court to carry out a two‑stage process. The first stage involves the determination of whether the disposition of the deceased's estate affected by his will is not such as to make adequate provision from his estate for the proper maintenance, support, education advancement in life of the claimant. This first stage has been described as the 'jurisdictional question', which means no more than that the court's power to make an order in the claimant's favour is conditioned upon the court being satisfied that the disposition of the deceased's estate affected by his will is not such as to make adequate provision from his estate for the proper maintenance etc of the claimant.[123]
775 The first stage involves a question of fact, notwithstanding that involves the exercise of value judgments. The evaluated character of the decision arises from the fact that the court must determine whether the claimant has been left without adequate provision for her proper maintenance etc.[124]
776 The second stage, which arises if the jurisdictional question is determined in the claimant's favour, involves the exercise of discretion: the court may order that such provision as the court thinks fit be made out of the deceased's estate for the proper maintenance etc of the claimant.[125]
777 The question which arises at the first stage must be determined as at the date of death of the deceased, having regard to all material facts that existed at the date of death, whether the deceased knew of them or not, and all material eventualities that might at that date reasonably have been foreseen by a deceased who knew the facts.[126]
778 At the second stage, the court exercises its discretion to order adequate provision for the proper maintenance etc of the claimant by reference to the circumstances as they exist at the date of the order.[127]
780 In their opening written submissions, counsel for Mae set out the relevant circumstances which satisfy the jurisdictional question. No party disputed or made any submissions about those contentions. I accept those submissions which are as follows:
781 Mae is Marc's widow. They had been married just over three years at the date of his death, although they had been in a relationship for almost five years. She was aged 29 at the date of Marc's death. She was 34 years old at the time of trial and has one dependent, a newborn child.
782 Mae was financially dependent upon Marc for the high standard of living which she enjoyed during the whole of her relationship with Marc.
783 Mae left her home in Melbourne and moved to Perth to be with Marc in 2012, and ceased work in early 2014 to look after Marc during his illness which led to his death.
784 There are no other claims upon Marc's estate competing with those of Mae.
785 Shortly prior to his death, in September 2015, Marc sold their then matrimonial home in Trigg, and by way of replacement arranged for the purchase in Mae's name of a residential property in Waterman's Bay, for a price of $3.2 million. He paid the deposit of $50,000 and provided Mae with $1.8 million towards the balance of the purchase price, but did not provide her with sufficient funds to complete the purchase or to cover the (very substantial) costs of furnishing it, almost all of the furnishings having been ordered by Marc and Mae prior to Marc's death. Nor did Marc leave Mae with sufficient funds to maintain the property.
786 The vast majority of the sums totalling approximately $1.97 million which Ongold as trustee for Marc's Testamentary Trust advanced to Mae over the period January to July 2016 (and which Philip has caused Ongold to assert were loans to Mae, repayable to Ongold) were required to complete the purchase of the property and to furnish it. Philip asserts that these alleged loans are 'immediately repayable on demand', but I have found they are not.
787 Marc also left as an asset of his estate the boat Shimmer, which cost about $1.27 million, and which itself cost a very significant amount to maintain (although it has since been sold).
788 In the circumstances, Marc failed to make adequate provision for Mae's proper maintenance etc by failing to make direct provision for her from his estate, and by instead leaving her wholly dependent upon the exercise of favourable discretions by Philip in his capacity as trustee of the trust established by Marc's will.
789 Although Marc was a wealthy man in the sense that he had access to great wealth for his personal use, he held few assets personally and left a relatively modest estate, even after disregarding the amount of the Duporte loan (the Ongold payment). The beneficiaries of Marc's will are Mae and persons in varying degrees of relationship to Mae. There are no legitimate claims on Marc's testamentary bounty competing with Mae's claim.
790 Marc's will should be amended by providing for all the property of Marc's estate to be given to Mae absolutely. As Mae was 34 years old at trial, mature, legally trained and an experienced lawyer, there is no reason for these funds to be held for Mae on trust.
I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
CITATION : CARDACI -v- FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI [No 5] [2021] WASC 331 (S)
MATTER : The Family Provision Act 1972 (WA)
The Estate of Marco Antonio Cardaci of 327 West Coast Drive, Trigg in the State of Western Australia, Businessman, deceased
FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI
GIOVANNI MAURIZIO CARRELLO as the Trustee in Bankruptcy of the Estate of MARCO ANTONIO CARDACI (Dec)
MATTER : Section 77 of the Trustees Act 1962 (WA)
The Washburn Trust and the Marc Cardaci Testamentary Trust
Practice and procedure - Costs - Special costs order - Multiple claims in trust and family provision proceedings - Where money appropriated from trusts to pay for proceedings
Costs - Trustee's right of indemnity - Whether defendants entitled to indemnity against trust assets for cost of proceeding
Trustees Act 1962 (WA)
Barnes v Addy (1874) LR 9 Ch App 2
Cardaci v Filippo Primo Cardaci as executor of the estate of Marco Antonio Cardaci [No 5] [2021] WASC 331
Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Commissioner of Taxation v Bargwanna [2012] HCA 11; (2012) 244 CLR 655
Garrett v Yiasemides [2004] NSWSC 828
Griffin v Higgs [2018] EWHC 2498; [2018] 4 WLR 139
Grljusich v Grljusich (Unreported, WASC Library No 960646, 8 November 1996)
Hunter v Hunter [1938] NZLR 520
Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
McFadzean v Construction, Forestry, Mining and Energy Union [2007] VSCA 289; (2007) 20 VR 250
Metropolitan Petar v Mitreski [2012] NSWSC 16
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572
National Trustees Executors & Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268
Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd [2007] VSCA 309
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S)
Smith v Madden [1946] HCA 19; (1946) 73 CLR 129
Spotless Group Ltd v Premier Building & Consulting Pty Ltd (recs apptd) [2008] VSCA 115
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Swanson v Dungey [1892] SALawRp 17; (1892) 25 SALR 87
Trapani v Ciocca [No 2] [2013] VSC 510
Wareham v Marsella [No 2] [2020] VSCA 118
791 I delivered reasons for decision in these proceedings on 1 October 2021 (the Principal Judgment)[130] and made orders to give effect to those reasons on 4 October 2021. I deferred the determination of two issues in the Trust action (CIV 1750 of 2017) to allow the parties to make further submissions after the publication of my reasons. Those issues are whether Washburn Pty Ltd and Rectangular Pty Ltd are entitled to indemnity against the Washburn Trust assets and Marc's Testamentary Trust assets respectively for their costs of defending these proceedings. I subsequently heard submissions from the parties concerning those issues and the costs of the proceedings generally.
792 For the reasons which follow, orders should be made to give effect to the following findings.
1. The second defendant (Washburn) is not entitled to indemnity from the assets of the Washburn Trust with respect to its liability for costs of this proceeding or its own costs of the proceeding.
2. The third defendant (Rectangular) and the fourth defendant (Ongold) are not entitled to indemnity from the assets of Marc's Testamentary Trust with respect to their liability for costs of this proceeding or their own costs of the proceeding.
3. The first defendant (Philip), Washburn and Rectangular each jointly and severally pay to the plaintiff (Mae) 90% of her costs of the proceeding, including all reserved costs, to be assessed as if the proceedings were commenced by writ of summons and without regard to the limits, including hourly limits, in the relevant costs determinations.
4. There be no order as to costs as between Mae and the fourth defendant (Ongold).
5. There be no order as to costs as between Mae and the sixth defendant (Powercity).
6. There be no order as to costs as between Mae and the seventh defendant (Angela).
7. Mae pay to the fifth defendant (Duporte) its costs of the proceeding.
8. Washburn pay to Mae as trustee of the Washburn Trust the amount of all monies paid from the assets of the Washburn Trust for the purpose of meeting Washburn's costs of this proceeding together with interest at 6% per annum from the date of each payment, and an account be taken for this purpose.
9. Rectangular and Ongold pay to Mae as trustee of Marc's Testamentary Trust the amount of all monies paid from the assets of Marc's Testamentary Trust for the purpose of meeting their costs of this proceeding together with interest at 6% per annum from the date of each payment, and an account be taken for this purpose.
10. Directions should be given for the taking of the accounts in orders 8 and 9.
11. Mae's and Duporte's bills of costs in CIV 1750 of 2017 be assessed together with Mae's, Philip's and Duporte's bills of costs in CIV 3186 of 2016.
1. Philip is entitled to indemnity from the assets of Marc's estate with respect to his costs of the proceeding extra to his costs of defending the Trust action, except the costs incurred in defending the claim that he should be removed as executor of Marc's estate and the costs of defending the claim that the Ongoing payment was not a loan by Ongold as trustee of Marc's Testamentary Trust to Marc's estate. Philip's costs should be paid out of Marc's estate prior to distributions of the balance of the estate to the beneficiary.
2. Phillip's costs of the proceeding extra to the costs incurred by him in defending the Trust action, except the extra costs caused to him by the issues of whether he should be removed as executor of Marc's will and whether he breached his duties as executor of Marc's will and should pay damages, be paid out of Marc's estate.
3. Mae's costs of the proceeding extra to the costs incurred by Mae in bringing or maintaining the Trust action, except the extra costs caused to her by the issues of whether Phillip should be removed as executor of Marc's will and whether Phillip breached his duties as executor of Marc's will and should pay damages, be paid out of Marc's estate.
4. Philip pay to Mae the extra costs caused to her by the issue of whether Phillip should be removed as executor of Marc's will.
5. Mae pay to Philip the extra costs caused to him by the issue of whether Phillip breached his duties as executor of Marc's will and should pay damages.
6. Ongold and Rectangular pay to Mae the extra costs relating to the amount of the Duporte loan (the Ongold payment).
7. Ongold and Rectangular are entitled to indemnity from the assets of Marc's Testamentary Trust in relation to the extra costs relating to the amount of the Duporte loan (the Ongold payment).
8. Mae pay to Duporte its costs of the proceeding extra to the costs incurred by it in defending the Trust action.
9. The costs are to be assessed as if the proceedings were commenced by writ of summons and without regard to the limits, including hourly limits, in the relevant costs determinations.
10. Mae's, Philip's and Duporte's bill of costs in respect of CIV 3186 of 2016 be assessed together with Mae's and Duporte's bills of costs in CIV 1750 of 2017.
Entitlement of Washburn, Ongold and Rectangular to indemnity from trust assets
793 The first issue, or issues, that I will address is whether Washburn, Ongold and Rectangular are entitled to be indemnified from the assets of the Washburn Trust and Marc's Testamentary Trust respectively against their costs incurred in defending the Trust action (CIV 1750 of 2017).
794 Whether pursuant to the Trustees Act 1962 (WA) s 71 or in equity, a trustee acting within his powers who incurs a liability in the course of the administration of the trust is entitled to indemnity out of the trust estate. If he has not discharged it out of his individual property, he is entitled to apply the trust property in discharging it, that is he is entitled to exoneration.[131] The trustee's power of exoneration is a power to use trust funds to discharge debts that were properly incurred by the trustee in the course of trust business.[132] The power of indemnity is the means by which the trustee uses the right to discharge his liabilities out of trust funds.[133]
795 Senior counsel for Washburn and Rectangular, Mr Penglis SC, referred to the summary of authorities concerning a trustee's right of indemnity by Brereton J in Metropolitan Petar v Mitreski,[134] where it was alleged that the trustee had acted in breach of trust. Brereton J said that a trustee is entitled to an indemnity for expenses not improperly incurred, and may reimburse itself, or pay or discharge out of the trust property, all expenses so incurred in or about the execution of the trustee's trusts or powers.[135] Brereton J said that this right of indemnity accrues at the time when the obligation is incurred and applies not only in respect of claims by a third party against the trustee but also in respect of an application by the beneficiaries, for example, to remove the trustee. Brereton J referred with approval to passages in the 18th edition of Lewin on Trusts,[136] concerning the trustee's right of indemnity against the costs of trusts proceedings.
796 Chapter 48 of the 20th edition of Lewin on Trusts advances the following propositions. The general principle is that a trustee is entitled to indemnity out of the trust fund in respect of costs and expenses properly incurred by him in connection with the performance of his duties and the exercise of his powers and discretions as a trustee.[137] The right of a trustee to indemnity in respect of costs extends only to costs properly incurred in the execution of the trust. If misconduct is established against the trustee, the trustee may be deprived of his right of indemnity and further ordered to pay the costs of other parties. Misconduct should be widely construed and may include conduct which is unreasonable in the circumstances.[138] The ordinary rules as to costs of hostile litigation apply to breach of trust actions. Accordingly, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, subject to the general qualifications which apply in ordinary hostile litigation. The right of indemnity does not avail a trustee who is successfully sued for breach of trust, for the fact that he has committed a breach of trust usually suffices to exclude entitlement to indemnity and there is no need for the claimant to show that the breach of trust amounts to misconduct.[139]
797 The authors of Lewin on Trusts discuss the trustee's right of indemnity for costs in proceedings for the removal of the trustee.[140] In a case where a claim for removal of a trustee forms part of the relief sought by a breach of trust action, the position as to costs will be governed by the general principles applicable to breach of trust actions. If a trustee is removed on the ground of misconduct, even if some of the charges of misconduct are rejected, the trustee who is removed will normally be ordered to pay the costs of the successful applicant as well as bearing his own costs, though the court will consider whether the costs of discrete issues on which the trustee was successful should be treated differently. The test should be the same regardless of the grounds relied upon for the trustee's removal, that is whether the trustee has acted reasonably in resisting the application for his removal. The authors cite Re Piedmont Trust[141] and Griffin v Higgs[142] in support of that proposition.
798 The summary of the law concerning a trustee's right of indemnity for costs in proceedings for the removal of the trustee in Lewin on Trusts reflects the law in Australia. In Law of Costs, 5th edition, Prof Dal Pont says that a person who, in a trustee capacity, successfully prosecutes or defends a proceeding is generally entitled to a costs order in his favour and if the trustee has used trust funds to incur those costs, pursuant to the trustee's right of exoneration, the costs order will operate so as to indemnify the trust fund. On the other hand, a trustee who unsuccessfully prosecutes or defends a suit on behalf of the trust will not necessarily be ordered to pay costs from his own pocket. It is open to the court to order that the costs be paid directly from the trust fund, or otherwise that the trustee's liability be indemnified from the trust fund pursuant to the trustee's right of indemnity. The court may make such an order if it determines that the trustee acted reasonably and not in substance for his own personal benefit, such that the costs were properly incurred or at least not improperly incurred. But a trustee will remain personally liable to meet the relevant costs order if he has, in the litigation, acted unreasonably, or for his own benefit rather than for that of the trust. The costs of proceedings occasioned by the trustee's own misconduct or breach or neglect of duty are unlikely to be recoverable from the trust fund.[143]
799 Prof Dal Pont says that a trustee who is removed will, as a general rule, be ordered to pay the costs attributable to the application for the removal, particularly if the removal is due to misconduct, citing Swanson v Dungey,[144] Miller v Cameron,[145] Hunter v Hunter,[146] and Garrett v Yiasemides.[147] The court retains a discretion as to costs, though, and may allow costs from the trust fund to a trustee whose conduct has been honest albeit mistaken, or may require the trustee to bear his own costs where there have been breaches of trust but other mitigating circumstances explain (if only partly) his conduct.[148]
801 In Wareham v Marsella, in holding that the unsuccessful trustee was not entitled to indemnity for the costs of the appeal out of the trust estate, the Victorian Court of Appeal said:
It has long been the case that trustees who are in breach of trust can be ordered to pay the costs of proceedings to remove them. As with every costs discretion, each case depends on its particular circumstances. However, it will always be relevant, and often critical, to decide whether the litigation in which removal is sought is in substance adversarial or whether it raises a question as a matter of administration of the trust in question. This is an instance of the larger principle that a trustee can only be indemnified out of the trust against costs and expenses properly incurred for the benefit of the trust. The onus is on the trustee in that regard.
In the present case, the conclusion is inescapable that, in pursuing the appeal, the appellants acted in their own self-interest rather than in the execution of the trust. No question arose as to the proper interpretation of the trust deed or the nature of the trustees' duties under the deed. The only issue was whether the exercise of the discretion to pay the death benefit in favour of the first appellant had miscarried and, if so, whether the trustees should be removed. Success in the appeal would have restored the death benefit to the first appellant, or at least have enabled the appellants to remain in place as trustees. There was no advantage to the trust in either of those outcomes. At best, its interest in the appeal was neutral. The only relevant interest of the trust was in having the death benefit properly administered, and that was facilitated by the trial judge's judgment. In seeking to displace that judgment, the appellants undertook adversarial litigation for their own purposes ([18] ‑ [20] (citations omitted).
802 Order 66 r 9(2) of the Rules of the Supreme Court 1971 (WA) (RSC) provides relevantly:
Where a person is or has been a party to any proceedings in the capacity of trustee... he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee...; and the Court may otherwise order only on the ground that the trustee... has acted unreasonably, or in the case of a trustee... has in substance acted for his own benefit rather than for the benefit of the fund.
803 The authors of the Red Book[151] say that r 9 is a complete code as to the circumstances in which costs will be awarded to trustees, citing Grljusich v Grljusich[152] in support of that proposition. Professor Dal Pont says that the rule reflects the general proposition that a trustee will remain personally liable to meet the relevant costs order if he has in the course of the litigation acted unreasonably or for his own benefit rather than for that of the trust. It is unnecessary to explore the differences, if any, between the general law and RSC O 66 r9(2) because they yield the same result in this case.
804 As a general rule, a trustee who resists removal but whose removal is subsequently ordered by the court will not be entitled to indemnity from the trust. If a trustee has resisted removal but been found unjustified in doing so, then generally its costs were not reasonably incurred in the interests of the beneficiaries and it has no claim to indemnification from the trust.
Washburn not entitled to indemnity at general law and under the rules
805 I find that Washburn is not entitled to be indemnified by the Washburn Trust against its own costs and any costs it is ordered to pay to Mae in the Trust action (CIV 1750 of 2017) for the following reasons.
806 First, this was hostile litigation.[153] Washburn was unsuccessful.
807 Secondly, Washburn was removed as trustee because of the misconduct of its controller, Philip. In stating and intending that Washburn would never distribute anything to Mae, Philip had a closed mind with respect to the exercise of the discretionary powers conferred upon the trustee or misunderstood the nature of those powers and the obligations to which the trustee was subject.[154] In making his settlement offer to Mae, Philip misused his position as the controller of the trustee of the Washburn Trust as well as Marc's Testamentary Trust and executor of Marc's estate to attempt to buy out Mae's interests in the trusts, Marc's estate and any other Cardaci family trusts so that Philip, as controller of the trustees, could administer those trusts and make any distributions from those trusts without having to give any consideration to the needs or interests of Mae.[155] Further, by causing Washburn to enter into the Leone Shareholders Agreement, Philip caused Washburn to act contrary to the best interests of the Trust and its beneficiaries.[156]
808 Thirdly, Washburn, by its controller, Philip, failed to carry out its trustee duties properly and precipitated the litigation for the reasons I have set out in the previous paragraph. Further, Washburn, by Philip, did not provide to Mae information about the Trust and its assets that should have been provided.[157]
809 Fourthly, Washburn, by its controller Philip, in substance acted for his own benefit rather than for the benefit of the Trust. I find that Philip caused Washburn to resist its removal as trustee so that he could continue to control and administer the trust and make any or no distributions from the trust without having to give any consideration to the needs or interests of the beneficiaries, specifically Mae.
810 I further find that Philip caused Washburn to resist its removal as trustee so that he could continue to run the business of which his trust and other interests he controlled were joint owners without interruption from a trustee of the Washburn Trust acting in the interests of the Trust. I draw that inference from the whole of the evidence including Phillip's cross examination about his concern that Washburn be removed as trustee of the Washburn Trust:
And can I ask you this, Mr Cardaci -...If Washburn Proprietary Limited is removed as trustee of the Washburn Trust, you have a concern as to who the replacement trustee should be, is that right? ---Yes.
What is your reason for having a concern?---My reason ... my main reason is to - well, my reason is to number one, not interrupt the business, and potential, you know, from my aspect there could be an enactment of the shareholder agreement.
Could be a what, sort? ---An enactment of the shareholder agreement.
By enactment, do you mean an attempt to set it aside, is that what you mean? ---No, no - to sell the shares in Washburn.
I see. Yes? ---So an act that - which would cause disruption in the business, and obviously we have 1500 employees as well, we need to - I need to worry about that. So that would be the first priority for me, to make sure that hopefully that didn't happen. The other issue is to ensure that my brother's wishes were fulfilled, in regards to the setting up of a foundation and funding of a foundation, and whether the new trustee would have the same interest. They're the two major reasons.
811 Fifthly, Washburn acted unreasonably in resisting its removal as trustee. The critical factual issue in the proceeding was whether, as Mae asserted and Philip denied, Philip stated and intended that the trustee of the Washburn Trust would never distribute anything to Mae from the trust and the trustee would distribute the majority, if not all, of the trust income to the foundation to be established as his brother's legacy. Washburn, through Philip, knew that he had made those statements and held those intentions. Notwithstanding that knowledge, Washburn defended the proceedings on the basis that Philip had not made those statements or held those intentions. Furthermore, Washburn, by Philip, knew that Philip had used his position as controller of the trustee to try and buy out Mae's interests in the trust notwithstanding that to do so put him in a position of conflict of interest.
812 As a general rule, if a trustee has resisted removal but been found unjustified in doing so, then its costs were not reasonably incurred in the interests of the beneficiaries and it has no claim to indemnification from the trust. In the circumstances of this case Washburn was not justified in resisting its removal. It acted unreasonably in doing so and incurring the costs of doing so.
Washburn not entitled to indemnity under Trustee Act s 75
813 Washburn submits that the court should relieve it from liability for any breach of trust pursuant to Trustees Act s 75 and thereby entitle Washburn to an indemnity against its costs of these proceedings.
814 Section 75 provides that the court may relieve a trustee from personal liability for any breach of trust where (1) the trustee has acted honestly; (2) the trustee has acted reasonably; and (3) the trustee ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the court in the manner in which he committed the breach. Washburn submits that I found, 'in the context of the claim that Philip had breached his duties as executor of Marc's estate which included conduct also providing a basis for the removal of Washburn' and 'Philip acted honestly and reasonably in that he acted in such a way that he ought fairly to be excused'.
815 Section 75 operates to relieve the trustee from liability for a breach of trust. It is not a provision entitling the trustee to an indemnity against the costs incurred by the trustee in legal proceedings except arguably where the trustee has committed a breach of trust by paying his legal costs out of trust assets. I have not found, and I do not find, that Philip or Washburn ought fairly to be excused for that breach, if it was a breach of trust.
Washburn not entitled to indemnity by clauses of trust deed
816 Washburn says that it is entitled to an indemnity against its costs, and any costs it is ordered to pay to Mae, pursuant to cl 16 and cl 10 of the Washburn Trust Deed.
The Trustee shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by the Trustee in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof or by virtue of being the Trustee hereof but the Trustee shall not be entitled to be indemnified by any beneficiary personally in respect of any liabilities or other matters aforesaid other than in respect of any duty or tax which the Trustee is entitled to recover from the beneficiary by law.
818 Accordingly, the trustee is entitled to be indemnified against liabilities:
(a) incurred by the trustee in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof; or
(b) incurred by the trustee by virtue of being the trustee hereof.
819 The usual meaning of 'hereof' is 'of or concerning this document, matter or thing'.[158] In limb (a) of the clause 'hereof' means of the trust deed. Limb (a) refers to the execution et cetera of the trusts, authorities, powers and discretions in the Trust Deed.
820 Washburn submits that the proceedings were commenced against Washburn for removal because it was alleged, and ultimately found, that Washburn had committed breaches of trust in relation to the exercise or non-exercise of powers conferred on it under the Washburn Trust Deed. Therefore Washburn submits, any costs incurred in defending the proceedings as well as any adverse cost orders made against Washburn, engage the first category of liability covered by the indemnity in cl 16.
821 I do not agree with that analysis. I find that the costs incurred by Washburn in defending the action do not fall within the first limb of cl 16 for two reasons. First, the liability for Washburn's own costs is a liability to pay its solicitors for representing it in the proceedings to resist its removal as trustee. Defending its removal as trustee is not the execution or attempted execution or a consequence of the failure to exercise any of the trusts, authorities, powers or discretions in the Trust Deed. Washburn has not identified any trust, authority, power or discretion in the trust deed which it was executing or attempting to execute by defending its removal. Washburn has not identified any trust, authority, power or discretion in the Trust deed in respect of which defending the action was a consequence of the failure to exercise. Similarly, incurring the liability to pay Mae's costs of the proceedings is a result of unsuccessfully defending the proceedings and is not the execution or attempted execution or a consequence of the failure to exercise any of the trusts, authorities, powers and discretions in the Trust Deed.
822 Secondly, the defence of the proceedings was not done in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions in the Trust Deed but was undertaken in the personal interest of Washburn's controller, Philip. In Wareham v Marsella [No 2][159] the Victorian Court of Appeal considered an indemnity clause in the relevant trust deed which provided:
The Trustee shall be indemnified out of the Fund for and in respect of all liabilities whatsoever or howsoever arising incurred by the Trustee in the exercise or purported exercise or attempted exercise of the trusts, powers, authorities and discretions vested in the Trustee pursuant to this Deed or by the Act [5].
It would be surprising if a trust deed were to be construed as affording an indemnity for a trustee's costs of so acting. That is borne out by cl 11.3, which speaks to costs incurred in the exercise or purported or attempted exercise of the trusts, powers, authorities and discretions of the trustee. The undertaking of litigation in the trustee's personal interest does not meet this description [20].
824 The right of indemnity conferred on the trustee by cl 16 is only available if the trustee defended the proceedings 'in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions' in the trust deed. The trustee cannot be said to be acting in the execution et cetera of the trust's authorities powers and discretions in the trust deed if it defends the proceedings for its own purposes, or the purposes of its controller, and not for the purposes of the trust or its beneficiaries. For the reasons I have stated earlier, I find that Washburn undertook the defence of the proceedings in the personal interest of its controller, Philip. Incurring costs for that purpose does not meet the description of incurring a liability in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions in the Trust Deed.
825 The second limb requires that the liability be incurred by the trustee 'by virtue of being the trustee'. The phrase 'by virtue of' means by reason of, because or as a result of. The connection between incurring the liability and being trustee must be a causal connection. In the context of cl 16, and against the background of the general law concerning a trustee's right of indemnity, the causal connection required is that Washburn defended the proceedings as trustee in the interests of the Trust. Where, as I have found, Washburn defended the proceedings in the personal interest of its controller, it did not incur the liability by virtue of being trustee.
826 Washburn submits that it is entitled to an indemnity by virtue of cl 10 of the Trust Deed which provides:
10.1 any loss or damage occasioned to the Trust Fund or any part thereof or to any person by the exercise of any discretion or power hereby or by law conferred on the Trustee or by any alleged failure to exercise any such discretion or power; or
unless the same shall be proved to have been committed made or omitted in personal conscious and fraudulent bad faith by the Trustee charged to be so liable. All persons claiming any interest in the income or capital of the Trust Fund shall be deemed to take with notice of and subject to the protection hereby conferred on the Trustee.
827 Trustee exemption clauses of this nature are to be construed no more widely than their language on a fair reading requires.[160] Clause 10 is an exemption clause, it is not a provision conferring on the trustee a right of indemnity against the trust. That is the natural and ordinary meaning of the words 'no trustee shall be responsible for'. When it is engaged, the clause exempts the trustee from liability, that is from having to pay damages or compensation or otherwise being responsible or answerable for some act or omission.
828 Furthermore, the whole of the trust deed has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. A broad right of indemnity is conferred by cl 16. It would not be a harmonious construction of the terms of the deed to interpret cl 10 as conferring a right of indemnity in circumstances where cl 16 does not confer a right of indemnity.
829 For the reasons stated, Washburn is not entitled to indemnity from the assets of the Washburn Trust with respect to its liability to pay the costs of the Trust action (CIV 1750 of 2017) to Mae or its own costs of these proceedings.
Rectangular and Ongold were unsuccessful in the Trust action
830 There were a number of issues between Mae on the one hand and Rectangular and Ongold on the other hand. First, and primarily, Mae sought an order removing Rectangular as trustee of Marc's Testamentary Trust if it had been validly appointed as trustee and alternatively, an order removing Ongold as trustee of Marc's Testamentary Trust if Rectangular had not been validly appointed as trustee. Secondly, Mae sought a declaration that Rectangular had not been validly appointed as trustee. Mae also sought consequential relief.
831 Whether Rectangular or Ongold was the trustee of Marc's Testamentary Trust depended upon whether the Deed of Dismissal and Appointment of Trustee executed by Ongold, Rectangular, Philip and Angela on 30 January 2017 was effective to dismiss Ongold as trustee and appoint Rectangular as trustee in its place. Mae argued that the deed was beyond power and alternatively a fraud on the power. I found that the deed was beyond power and hence Ongold was not validly removed and Rectangular was not validly appointed as trustee by the Deed of Dismissal and Appointment. Although it was unnecessary to do so, I found that the deed was not a fraud on the power. Mae was successful in relation to the issue of the validity of the Deed of Dismissal and Appointment.
832 On 15 March 2020, the day before the trial commenced, Phillip, Angela, Ongold and Rectangular executed the March deed to the effect that to the extent the Deed of Dismissal and Appointment did not result in the valid dismissal of Ongold and the appointment of Rectangular, Philip in his capacity as executor of Marc's will appointed Rectangular as trustee of Marc's Testamentary Trust in place of Ongold. Mae accepted the March deed was effective to appoint Rectangular trustee of Marc's Testamentary Trust. Thus, Ongold was trustee at all material times until 15 March 2020 and Rectangular was trustee from 15 March 2020 until removed by order of this court.
833 There were subsidiary issues between Mae and Ongold. First, I found that it was a breach of trust by Ongold to make, ratify or approve the payment described by Mae as the amount of the Duporte loan, and by the defendants as the Ongold payment. Secondly, I found that Ongold, by Philip, failed to provide to Mae information that it should have provided. Thirdly, I found that there was no implied loan agreement between Mae and Ongold that the payments described at [464] of the Principal Judgment were loans repayable by Mae.
834 For the most part Mae was successful and Ongold was unsuccessful in relation to these subsidiary issues. In any event, they were subsidiary or intermediate issues in the sense that they were part of the principal issue whether Washburn and Rectangular should be removed as trustees of the Washburn Trust and Marc's Testamentary Trust respectively because of the conduct of Philip as controller of Washburn and Ongold.
835 In substance, Ongold and Rectangular were unsuccessful in the proceedings.
Rectangular and Ongold not entitled to indemnity at general law and under the Rules
836 I find that Ongold and Rectangular are not entitled to be indemnified by Marc's Testamentary Trust against their own costs and any costs of the proceeding they are ordered to pay to Mae for the following reasons.
837 First, this was hostile litigation. Ongold and Rectangular were in substance unsuccessful. The defendants submitted that Ongold and Rectangular successfully defended the fraud on the power allegation. I do not consider that affects their entitlement to an indemnity. The issue was whether the Deed of Dismissal and Appointment was valid. Ongold and Rectangular were unsuccessful in relation to that issue. In any event, more fundamentally, whether Ongold or Rectangular was trustee did not bear on the central issue of the proceeding. That was whether a company controlled by Philip, whether Ongold or Rectangular, should be removed as trustee of Marc's Testamentary Trust.
838 The defendants submitted that Ongold and Rectangular did not act unreasonably in defending the allegation that the Deed of Dismissal and Appointment was not valid and so should not be denied an indemnity in relation to the costs of defending that issue. The defendants further submitted that Ongold and Rectangular, whilst unsuccessful in establishing that the Ongold payment was a loan owed by Marc's estate to Marc's Testamentary Trust, there was a finding that Philip's treatment of the Ongold payment as a loan qua executor was honest and reasonable and it follows that Philip's treatment of the Ongold payment as a loan qua controller of the trustee company controlling Marc's Testamentary Trust was honest and reasonable.
839 Those are different questions than whether Ongold and Rectangular acted reasonably in incurring legal costs to defend the proceedings. These were intermediate findings as a step towards the ultimate finding of whether Ongold or Rectangular should be removed as trustee. The real question is whether Ongold and Rectangular acted reasonably in defending the proceedings to remove them as trustee.
840 The defendants submitted that even though Rectangular was removed as trustee of Marc's Testamentary Trust it was not because there was a finding that it had committed a breach of trust or had engaged in misconduct. They submitted that the sole basis upon which Rectangular was removed was as set out at [514] of the Principal Judgment:
It is expedient to remove Rectangular as trustee of Marc's Testamentary Trust. Philip made his settlement offer on the basis that he could give effect to it to the extent necessary, by exercising powers through Rectangular as trustee of Marc's Testamentary Trust. The settlement offer involved Mae relinquishing her interests in Marc's Testamentary Trust as well as in the Washburn Trust. The defendants did not distinguish between Philip's intention in relation to the exercise of powers by the trustee of Marc's Testamentary Trust and the exercise of powers by the trustee of the Washburn Trust.
841 'Rectangular' in line 4 is an erroneous reference to Ongold. However, the defendants' submission is not a fair description of the reasons for removing Rectangular as trustee of Marc's Testamentary Trust. Paragraphs [505] ‑ [516] of the Principal Judgment are the conclusion to the reasons for deciding the first issue in the Trust Action - 'Should Washburn and Rectangular be removed as trustees of the Washburn Trust and Marc's Testamentary Trust?' - and must be read in that context. As referred to at [510] and observed in the last sentence of [514], the defendants presented their case on the basis that it was concerned with the conduct of Philip as controller of the trusts and did not distinguish between his conduct as controller of Rectangular and his conduct as controller of Ongold or Washburn. It was the conduct of Philip as controller of the trustee of both the Washburn Trust and Marc's Testamentary Trust, as well as Marc's estate, that made it expedient to remove Rectangular as trustee of Marc's Testamentary Trust.
842 Secondly, Rectangular was removed as trustee because of the misconduct of its controller, Philip, as the effective controller of the Washburn Trust and Marc's Testamentary Trust.
843 Thirdly, Rectangular and Ongold, by their controller, Philip, failed to carry out their trustee duties properly and precipitated the litigation for the reasons I have set out earlier in these reasons. Further, Ongold, by Philip, did not provide to Mae information about the Trust and its assets that should have been provided.[161]
844 Fourthly, Ongold and Rectangular, by their controller, Philip, in substance acted for his own benefit rather than for the benefit of Marc's Testamentary Trust. Philip caused Ongold and Rectangular to resist their removal as trustee so that he could continue to control and administer the trust and make any or no distributions from the trust without having to give any consideration to the needs or interests of the beneficiaries, specifically Mae.
845 Fifthly, Ongold and Rectangular acted unreasonably in resisting their removal as trustee. The most significant factual issue in the proceeding was whether, as Mae asserted and Philip denied, Philip stated and intended that the trustee of the Washburn Trust would never distribute anything to Mae from the trust and the trustee would distribute the majority, if not all, of the trust income to the foundation to be established as his brother's legacy. Ongold and Rectangular, through Philip, knew that he had made those statements and held those intentions. Notwithstanding that knowledge, Ongold and Rectangular defended the proceedings on the basis that Philip had not made those statements or held those intentions. Furthermore, Ongold and Rectangular, by Philip, knew that Philip had used his position as controller of the trustee of Marc's Testamentary Trust and the Washburn Trust to try and buy out Mae's interests in the trusts notwithstanding that to do so put him in a position of conflict of interest.
846 As a general rule, if a trustee has resisted removal but been found unjustified in doing so, then its costs were not reasonably incurred in the interests of the beneficiaries and it has no claim to indemnification from the trust. In the circumstances of this case Ongold and Rectangular were not justified in resisting their removal. They acted unreasonably in doing so and incurring the costs of doing so.
847 Mae submits that Philip, Washburn and Rectangular should jointly and severally pay her costs of the proceeding, and that there should be no order as to costs as between Mae, Ongold, Duporte, Powercity, and Angela.
848 Mae and Angela agree that there should be no order as to costs as between them.
849 Powercity was not represented at the hearing in relation to costs and makes no submissions as to the costs of the proceedings. Having regard to the conduct of the trial, the Principal Judgment and Mae's submissions, I will order that there be no order as to costs as between Mae and Powercity.
850 The remaining defendants, Philip, Washburn, Rectangular, Ongold and Duporte, propose the following orders:
2. Alternatively to proposed order 1, Mae pay Philip's costs of and incidental to the claims made by Mae that:
2.1 Philip was not the Guardian of the Washburn Trust ([4] ‑ [24] of the Statement of Claim and Prayer for Relief A);
2.3 a receiver be appointed over the Washburn Trust (Prayer for Relief F); and
2.4 a receive be appointed over the Marco Antonio Cardaci Testamentary Trust (Prayer for Relief K);
3. Mae pay the costs of Washburn, Ongold and Rectangular thrown away regarding all abandoned claims including:
3.1 the alleged Duporte Dividend ([75A] ‑ [75G] of the SOC/[97A] ‑ [97G] of the Defence);
3.2 Castlemaine Superannuation Pty Ltd ([87] ‑ [94] of the SOC/[109] ‑ [116] of the Defence);
3.3 Sale of boat, brig and boat pen lease ([85] ‑ [86F] of the SOC/[107] ‑ [108F] of the Defence);
3.4 Conflicts in administration of different trusts ([96] of the SOC/[118] of the Defence);
3.5 Removal of Ongold and Appointment of Rectangular being a fraud on the power ([36] ‑ [38] of the SOC/[36] ‑ [38] of the Defence);
3.6 Mae has not received any funds from the CFC Group since 20 June 2016 and Mae did not know the source of the $1.9 million advanced to her from Marc's Testamentary Trust ([41] and [42] of Statement of Claim dated 1 September 2017);
3.7 Philip caused the transfer of various shareholdings which had been listed in the Inventory of Assets and Liabilities and this has had the effect of removing control of various assets of the Estate to the detriment of the Estate and Mae ([46] of the Statement of Claim dated 1 September 2017);
3.8 Philip's appointment of Washburn as trustee of the Washburn Trust by the Deed of Variation of the Washburn Trust dated 24 December 2014 was not in good faith and not for a proper purpose ([36], [36A], [36B] and [36C] of the Statement of Claim dated 20 September 2017);
3.9 Philip's change of the definition of Guardian and Appointor of the Washburn Trust by the Deed of Variation of the Washburn Trust dated 24 December 2014 was not in good faith and not for a proper purpose ([37], [38], [38A], [38B] and [38C] of the Statement of Claim dated 20 September 2017); and
3.10 Philip's conduct in taking steps immediately prior to Marc's death to ensure that the estate would not control Castlemaine Superannuation Pty Ltd, winding it up after Marc's death and valuing the Marc's estate's shareholding in Castlemaine Superannuation Pty Ltd at $1 ([44] to [44D] of the Statement of Claim dated 20 September 2017);
4. Washburn pay Mae's costs of the proceeding in relation to Mae's application to remove Washburn as trustee of the Washburn Trust except for the abandoned claims.
5. Ongold and Rectangular pay Mae's costs of the proceeding in relation to Mae's application with respect to the validity of the Deed of Dismissal and Appointment and Mae's application to remove them as trustees of Marc's Testamentary Trust except for the abandoned claims.
851 Without limiting the court's discretion as to costs, the starting point in relation to the award of costs is that the court will generally order that the successful party to the proceedings recover their costs.[162] What constitutes 'success' in proceedings is to be determined by the reality of the circumstances involved in the case.[163]
852 Mae proposes costs orders on the basis that she was the successful party and Philip, Washburn and Rectangular were the unsuccessful parties. Mae submits that there should be no order as to costs between her on the one hand and Ongold and Duporte on the other hand because the grounds of Mae's claims against Ongold and Duporte were not ends in themselves but in support of the ultimate relief sought and granted - the removal of Washburn and Rectangular as trustees of the trusts.
853 The defendants' proposed costs orders reflect a division of the proceeding into multiple separate issues between Mae on the one hand and each of the defendants on the other.
854 The primary orders proposed by the defendants are that Mae pay Phillip's and Duporte's costs of the proceeding, that Mae pay the costs of Washburn, Ongold and Rectangular of specified issues and that Washburn, Ongold and Rectangular pay Mae's costs of specified issues. The alternative order proposed by the defendants in relation to the costs between Mae and Philip is that Mae pay Phillip's costs of specified issues.
855 The proposed order that Mae pay Phillip's costs of the proceeding is based on the assertion that, as between Mae and Philip, Phillip was the successful party. For reasons I address below, I do not accept that proposition. The alternative order proposed by the defendants in relation to the costs as between Mae and Philip and the orders proposed by the defendants in relation to the costs as between Mae on the one hand and Washburn, Ongold and Rectangular on the other hand fail to address, or address adequately, how the costs of the proceeding between those parties should be assessed for the reasons I will now explain.
856 The defendants' proposed orders fail to deal, or deal adequately, with the distinction between costs of the action and costs of issues. The relevant principles were explained by Justice Dixon in Smith v Madden.[164] His Honour held that on the taxation of the costs of an action in which judgement had been given for the plaintiff on the claim with costs and for the defendant on the counterclaim with costs, the claim should be treated as if it stood alone and the counterclaim should bear only the amount by which the costs of the proceedings have been increased by it. Justice Dixon explained that in an action where the generally successful party had failed on some issues, the successful party recovered his costs of the action and the unsuccessful party recovered the costs of the issues on which he succeeded only to the extent that those costs were discrete and had added to the costs of the proceeding:
But at common law apportionment was not practised. If issues were found, some for one party, some for the other, then that party who was considered to have succeeded in the result became entitled to the general costs of the action and the costs of the issues upon which he had nevertheless failed went to his adversary. In the common law courts in such circumstances, upon a taxation, the party entitled to the general costs of the action received all the costs necessarily or reasonably incurred in order to enable him to achieve the success in result and the party entitled to the costs of the issues on which the former had failed received only the extra costs caused to him by the inclusion of those issues (133).
857 Justice Dixon applied the common law rule which distinguished the costs of the action from the costs of issues to the situation where one party was awarded the costs of the action and the other party the costs of a counterclaim.
858 Later in his judgement Justice Dixon explained the difference between mixed costs, common costs and costs attributable only to an issue, or, in the case his Honour was considering, a counterclaim:
But, although there can be no apportionment of items of costs between the two parts of the cause, it may be necessary to divide an item of costs in two parts. This will occur when there is a single charge for work but a severable part of that work relates to the claim and the other severable part of the work relates to the counterclaim. It will then be necessary to divide the single charge in accordance with the two classes of work it covers. Division of charges in this way must be distinguished from apportionment, but it is easy to see that, under cover of division, apportionment in the sense of the Chancery practice may really be applied. The likelihood of a disguised apportionment thus occurring is not lessened by the use of the word 'apportion' to describe the division necessary. Indeed the subject is embarrassed by the ambiguity, generality and indefiniteness of much of the terminology employed in the cases. Some attempt, however, has been made to find more specific terms. Charges which cover without discrimination work referable to the action and work referable to the counterclaim have been called 'mixed' by O'Connor LJ in James Crean & Son Ltd v M'Millan in the course of a judgment which has been referred to with approval more than once: see particularly per Lord Haldane in the Medway Oil & Storage Co's Case, and per Scrutton LJ in Wilson v Walters. An example of such a mixed item is a fee of a pleader for drawing the defence and counterclaim or drawing a reply that includes a defence to a counterclaim. Such a fee covers work that belongs to the claim and severable work that belongs to the counterclaim. In contrast to such mixed items, there are items that serve as much the purpose of the claim as the counterclaim. These are 'common' items. Thus the costs of witnesses whose evidence relates to an issue arising both on the claim and on the counterclaim would be a common item and so would be an attendance to enter the cause, to obtain an adjournment, to hear judgment and so on. But there are many items, notably costs incurred in steps in the proceedings before the filing of the counterclaim, which are not common but are incurred only in bringing and maintaining or, in the case of the defendant, in defending the action. Writ, appearance and statement of claim are examples of this class of item. They, of course, all form part of the costs of the action, but so do the common items. The mixed items must, however, be divided and a proper part attributed to so much of the work covered by the charges as belongs to the counterclaim and the rest to the action. O'Connor LJ has pointed out that it is possible that a charge or item may cover some work belonging to the claim, some work belonging to the counterclaim and some that is common to both. In such a case the division should be of the amount properly attributable to the work relating to the counterclaim from that representing the work with reference to the claim and from the work common to both. The two latter form part of the costs of the action (136 ‑ 137).
859 The defendants' approach is unrealistic and artificial. The principal issues in the proceeding were whether Washburn and Rectangular should be removed as trustees and replaced by Mae. That is reflected in the history of the pleading, the way in which the proceeding was defended by the defendants, the way in which the case was opened for Mae and for the defendants, the way in which the evidence was adduced, the way in which closing submissions were presented and the way in which the reasons for judgment are organised.
860 In my reasons for decision I identified seven issues. The first two, and principal, issues are whether Washburn and Rectangular should be removed as trustees and replaced by Mae.
861 Two of the issues are whether Washburn and Rectangular are entitled to indemnity against the trust assets for their costs of defending these proceedings. Submissions on those issues were deferred until after I had delivered reasons for decision on the principal issues. I have now determined those issues. Mae has been successful and the defendants unsuccessful. Furthermore, any evidence adduced at trial that is relevant to those issues was admissible and relevant to the principal issues of whether Washburn and Rectangular should be removed as trustees.
862 A fifth issue is whether Ongold was validly removed and Rectangular was validly appointed as trustee of Marc's Testamentary Trust by the Deed of Dismissal and Appointment. That issue was an intermediate issue, not an ultimate issue in the proceeding. It was necessary to determine who was the trustee of Marc's Testamentary Trust so that it could be ordered that that company be removed as trustee.
863 The remaining two issues are whether Phillip is the guardian of the Washburn Trust, and if he is, then whether the court should appoint a receiver of his powers as Guardian. Those issues were not necessary to determine whether Washburn and Rectangular should be removed as trustees. They are separate issues on which Mae failed. Whether Phillip is the guardian of the trust is a question of law, or more specifically the construction of the relevant deeds. Whether the court should appoint a receiver of Phillip's powers as Guardian is a question of law and fact. The evidence relevant to that issue is evidence that is admissible and relevant to the principal issue of whether Washburn should be removed as trustee of the trust.
864 The proceeding was commenced against Philip, Washburn and Rectangular. The substantial relief claimed were orders removing Washburn and Rectangular as trustees of the trusts and restraining Philip from exercising the powers of Appointor without the consent of Mae or the court. The grounds on which Mae sought the removal of Washburn and Rectangular were breaches of trust and misconduct by Philip as the controlling mind of each of those companies and Philip's animus and attitude towards Mae. The pleadings changed over time. However, the principal issues remained whether Washburn and Rectangular should be removed as trustees because of the breaches of trust and misconduct constituted or caused by the conduct of Philip as the controlling mind of each company.
865 The relevant defendants (who I will refer to as the defendants in this part of my reasons) are Philip and four companies - Washburn, Ongold, Rectangular, and Duporte. Philip is the first defendant. He controls each of the other companies.
866 The defendants were all represented by the same solicitors.
867 The defendants filed a common defence. In their defence the defendants did not distinguish the answer of each defendant to the various allegations in the statement of claim. For example, the defendants' proposed costs orders characterise as a separate issue the 'alleged Duporte Dividend ([75A] ‑ [75G] of the Further Further Further Re‑amended Substitute Statement of Claim (SOC) and [97A] ‑ [97G] of the Amended Defence to Further Further Further Re‑amended Substitute Statement of Claim (Defence))'. Paragraphs [97A] ‑ [97G] of the Defence plead 'the defendants' response to [75A] ‑ [75G] of the SOC. By way of further example, at [72] ‑ [75] of the SOC, Mae pleads a loan by Marc to Duporte, that Philip caused Ongold as trustee of Marc's Testamentary Trust to pay the amount of that loan to Duporte and that Philip thereby caused Ongold to act in breach of its duty as trustee of Marc's Testamentary Trust. Philip, Ongold and Duporte do not plead separately to those allegations. To the contrary, the Defence states that 'the defendants' admit, deny or otherwise plead to [72] ‑ [75] of the SOC.
868 The defendants were represented at trial by the same counsel. Senior counsel's opening submissions were made on behalf of all the defendants. Senior counsel did not submit separate and distinct answers by each of the defendants to the various matters now characterised by the defendants as separate issues between separate parties.
869 The evidence adduced by the defendants was adduced by all the defendants without any distinction as to what evidence was adduced on behalf of which defendant. It would not have been possible to attribute the evidence adduced by the defendants in chief or by cross examination to a particular defendant or a particular issue because all, or almost all, of the evidence was admissible and relevant to the ultimate issues of whether Washburn and Rectangular should be removed as trustees.
870 Counsel's closing submissions were made on behalf of all defendants. Counsel did not make individual submissions on behalf of each defendant. Counsel made submissions in relation to the separate issues but, as I have said, other than the issues of whether Phillip is Guardian of the Washburn Trust and a receiver should be appointed of his powers, the other issues were relevant to the ultimate issues of whether Washburn and Rectangular should be removed as trustees.
872 Mae was the successful party. Philip, Washburn, Rectangular and Ongold were the unsuccessful parties. Those defendants unsuccessfully opposed the removal of Washburn and Rectangular as trustees.
873 The defendants submit that to order that Philip, as well as Washburn, Rectangular and Ongold, pay Mae's costs is to incorrectly elide Philip and the corporate trustees. They submit that separate causes of action were pleaded against them, separate relief was claimed against them and there is no basis upon which to 'pierce the corporate veils'. The defendants submit that the fact that Philip was the sole director/controller of those companies, or that they shared the same legal representatives, does not alter the analysis. They submit that the causes of action against Philip were primarily concerned with his position as Guardian of the Washburn Trust and as one of the surviving executors of Grace's will.
874 This is not a case of piercing the corporate veil. The reality of the circumstances is that the case was primarily about whether Washburn and Rectangular should be removed as trustees because of the conduct of Philip as their controlling mind. The defences of Washburn and Rectangular were directed by Philip as the controller of each company.
875 The court has power to order costs against the 'effective litigant' or 'real party', even if he is not a party.[167] In this case Philip is a party and he is not only the controller of the corporate defendants but in reality he is the effective defendant. It is, as I have said, the conduct of Philip which is the principal issue in the case. It is Phillip's evidence about his conversations with, conduct towards and intentions towards Mae that is the heart of the case. Philip caused Washburn and Rectangular to oppose their removal as trustees. For the reasons I have stated earlier, I find that Philip caused Washburn and Rectangular to resist their removal as trustee so that he could continue to control and administer the trusts and make any or no distributions from the trusts without having to give any consideration to the needs or interests of the beneficiaries, specifically Mae, and he could continue to run the business of which his trust and other interests he controlled were joint owners without interruption from a trustee of the Washburn trust, acting in the interests of the trust.
876 I find that Mae was the successful party and Washburn, Rectangular and Philip were the unsuccessful parties and they should pay Mae's costs of the action jointly and severally.
877 The defendants submit that they should be awarded the costs of issues on which Mae failed and of the abandoned claims.
878 Under RSC O 66 r 1(3), where a party, though generally successful in an action, has, by the introduction of some issue or issues on which it has failed, increased the costs, the court may order such party to pay the costs of such issue or issues.
879 An order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. Furthermore, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if, by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case.[168]
880 Mae failed in her claim that Philip was not validly appointed Guardian of the Washburn Trust and in her claim that a receiver be appointed of Philip's powers as Guardian. All of the evidence relevant to those issues was admissible and relevant to the principal issue whether Washburn and Rectangular should be removed as trustees.
881 Mae succeeded in her claim that the Deed of Dismissal and Appointment was ineffective to appoint Rectangular as trustee of Marc's Testamentary Trust on the ground that it was beyond power but failed on her alternative argument that it was a fraud on the power. It is not appropriate to award Philip the costs of that issue. Mae succeeded on the issue whether the deed was effective to appoint Rectangular as trustee and raising the alternative ground of fraud on the power did not add substantially to the costs of the proceedings.
882 The order for costs should recognise that whilst Mae succeeded in the action on the whole, she raised some issues on which she failed and which increased the costs of the proceeding, including the abandoned claims. It is not appropriate to order that the defendants have the costs of those issues. That would lead to unnecessary complexity and expense in the assessment of costs in trying to discern which costs are attributable to the issues on which Mae failed (including the abandoned claims) which are not costs common to the issues on which she succeeded.
883 The more usual approach in circumstances like this case is the 'pragmatic approach' described by Redlich JA, with whom Dodds‑Streeton JA agreed in Spotless Group Ltd v Premier Building & Consulting Pty Ltd (recs apptd)[169] where his Honour said:
In certain cases it is apposite for a trial judge to apportion costs having regard to the multiplicity of parties, actions, issues and the mixed success enjoyed by the plaintiffs. Under r 63.04, the judge may award costs in relation to particular questions or parts of the proceeding. The rules of court are wide enough to permit an apportionment of costs according to issues or causes of action, which enable a court to look at the realities of the case and attempt to do substantial justice [14].
884 Thus a pragmatic approach may be taken in cases where no party is wholly successful and there are practical difficulties in awarding costs on an issue by issue basis. In exercising its discretion as to costs the court is entitled to take into account the failure of a party on certain 'issues'. 'Issue' is not used in the technical pleading sense, but refers to any disputed question of fact of law. In Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd[170] the Victorian Court of Appeal observed:
In cases where neither party is wholly successful there are clearly practical difficulties in awarding costs on an issue by issue basis which would involve making separate costs orders. His Honour took a pragmatic approach, which has much to commend it, of apportioning the costs between the parties [89].
885 A trial judge may find that despite the complex nature of the case it remains entirely possible to identify the disputed issues which were resolved, and the evidence adduced specifically with respect to them so as to conclude that particular issues dominated the trial. In McFadzean v Construction Mining and Energy Union[171] the Court of Appeal said:
In fixing costs a superior court may treat 'heads of controversy as units of litigation' and give directions to the taxing master in relation to them, such units not being circumscribed by pleadings, causes of action or issues capable in themselves of leading to the granting of relief. But to avoid the complications of taxation resulting from making orders recognising the entitlements to costs of a party on each action on which they were successful, the orders may be notionally set off against each other or other adjustments made so as to produce an order for a proportion of one party's costs. This approach to costs orders where an action has had mixed success has been followed in a number of cases. In Hughes v Western Australian Cricket Association (Inc), Toohey J had regard to the fact that the plaintiff had succeeded on some issues but failed on others, but concluded that: 'it would be unsatisfactory to attempt to apportion issues and leave the fixing of costs of those issues to the taxing officer. That would impose a very great burden on him and upon the parties' legal representatives.' In our view, the judge's approach to the apportionment of costs was particularly apposite in this case, having regard to the multiplicity of parties, actions, and issues, and the mixed success enjoyed by the plaintiffs [158] (citations omitted).
886 In determining the appropriate apportionment, I have regard to the following. First, Mae was on the whole successful. Secondly, by making and then abandoning some claims Mae added unnecessarily to the costs of the proceeding. Thirdly, Mae failed on some issues at trial. Fourthly, the issues on which Mae failed at trial did not add substantially to the evidence adduced at trial. Fifthly, the issues on which Mae failed at trial occupied a relatively small time in submissions.
887 The appropriate order is that Phillip, Washburn and Rectangular pay 90% of Mae's costs of the proceeding.
888 There should be no order as to costs between Mae on the one hand and Ongold, Powercity and Angela on the other.
889 Mae failed in her initial claim against Duporte. Mae should pay Duporte's costs.
G. An order that the first and second defendants do each jointly and severally restore to the Washburn Trust with interest all monies paid from the trust for the purposes of meeting the second defendant's costs of these proceedings.
L. An order that the first and third defendants do each jointly and severally restore to Marc's Testamentary Trust with interest all monies paid from the trust for the purposes of meeting the third defendant's costs of these proceedings. (proposed amendments underlined)
892 At [96L] and [96KA] of the SOC Mae pleaded that Philip caused Washburn and Rectangular to pay out of the funds of the trusts, funds for the purpose of meeting the costs of these proceedings and that if they are removed as trustee they are not entitled to be indemnified out of the relevant trust funds for the costs of defending the proceedings. In [G] and [L] of her prayer for relief Mae sought orders that Washburn and Rectangular restore money paid from the trusts back to the trusts for the purposes of meeting their costs of these proceedings. Mae did not plead a claim that Philip should restore to the trusts the funds withdrawn from the trusts to pay the costs of these proceedings. Lead senior counsel, Mr Cuerden SC, opened Mae's case on that basis.
893 In their costs submissions counsel for Mae referred to Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand.[172] In that case the association which held property subject to a trust was sued for breach of trust. The association applied for judicial advice whether it would be justified in defending the proceedings and whether it was entitled to indemnity from the assets of the trust for legal costs incurred in defending the proceedings. The trial judge, Palmer J, answered each question in the affirmative. The Court of Appeal reversed that decision. The High Court restored the decision of the trial judge. The plurality said, with apparent approval:[173]
Palmer J formulated that aspect of the problem thus:
The choice is between, on the one hand, giving advice which would permit the Association to have recourse to Schedule A property to defend the Schedule A Property Issue, with an attendant risk of unauthorised expenditure, and, on the other hand, avoiding that risk by refusing any advice and thereby denying the Association the means of defending the Schedule A Property Issue at all.
His Honour resolved the issue, so explained, as follows:
In my opinion, the choice should be resolved by permitting the Association to defend the Schedule A Property Issue by recourse to the Schedule A property and leaving the risk of unauthorised expenditure on the shoulders of the Association and its legal representatives. If the [first plaintiff] succeeds in the Main Proceedings in his contentions as to what are the precise terms of the trust upon which Schedule A property is held, and if it becomes apparent, on an assessment of costs or the taking of accounts, that the Association and its lawyers have expended Schedule A property on issues clearly not authorised by the Court's judicial advice, then the Association, its responsible officers and its legal representatives will leave themselves open to personal liability to restore the assets of the trust by reason of procuring or participating in a breach of trust or receiving trust property with knowledge of the facts which make the payments a breach of trust. I have little doubt that the Association, its responsible officers and its lawyers will be well aware of their exposure to such personal liability and will act accordingly in the way in which Schedule A property realisations are expended on costs in the Main Proceedings [127] (emphasis added by High Court, citations omitted).
894 Mae says that it was a breach of trust for Washburn and Rectangular to use the funds of the trusts to pay their costs of these proceedings and that Philip is liable for the loss of the trust funds under the second limb of Barnes v Addy[174] in that he knowingly assisted in the breach of trust.
895 In their costs submissions, counsel for Mae submitted that the issue need not be determined in the original proceedings in which the trustee incurred the costs, but may instead be determined in subsequent proceedings.[175] Counsel further stated that provided the requirements of procedural fairness have been met, it may be desirable for the court to decide such matters at the conclusion of the litigation in question. Mr Cuerden informed the court that Mae did not plead that Philip knowingly assisted in the breach of trust because it would have been inconsistent with counsel's obligations to the court to plead fraud in advance of the court's findings.
896 I refused the amendment because it would be procedurally unfair to Philip to allow an amendment and determine the issue after the trial has concluded and reasons for decision have been delivered in circumstances where Mae may pursue the claim against Philip in separate, subsequent proceedings. The defendants conducted the trial on the basis that no orders for restoration were sought against Philip and the pleas at [96L] and [96KA] of the SOC were material facts relevant to the restoration orders sought against Washburn and Rectangular. Counsel for Mae did not open the case on the basis that a claim was made against Philip to restore the trust funds used by Washburn and Rectangular to defend these proceedings. Procedural fairness requires that the claim against Philip be pleaded and he have a proper opportunity to meet the case against him.
Washburn and Rectangular should restore to the trusts the trust funds used to meet their costs of the proceeding
897 Washburn and Rectangular have no right of indemnity against the trust funds for the payment of their costs of this proceeding. Washburn and Rectangular had no authority to use trust funds to defend these proceedings. Washburn and Rectangular precipitated this proceeding by their breaches of trust and misconduct through Philip. They defended the proceeding, by their controller Philip, in substance for his benefit rather than for the benefit of the Trust. Washburn and Rectangular each acted unreasonably in defending the proceeding for their removal as trustee. They acted in breach of trust by using trust funds to pay their costs of defending this proceeding.
898 Washburn and Rectangular should restore to the trusts the trust funds used by them to pay the costs of these proceedings, together with interest, and an account should be taken for that purpose.
Entitlement of Philip to indemnity from Marc's estate
899 Mae commenced this proceeding by originating summons. The only defendant was Phillip as executor of Marc's estate. By the originating summons Mae applied pursuant to s 6 of the Family Provision Act 1972 for further provision out of Marc's estate. Orders were subsequently made for the filing of pleadings. Mae's first statement of claim of 1 September 2017 claimed an order for such adequate provision for her proper maintenance and support as the court thinks fit be made out of Marc's estate and for consequential relief.
900 On 9 November 2017 the trustee in bankruptcy of Marc's estate was added as a second defendant and on 10 November 2017 a substitute statement of claim was filed which claimed an order amending Marc's will to make adequate provision for the proper maintenance and support of Mae out of Marc's estate. Mae pleaded that Marc's estate was undervalued because certain liabilities had been incorrectly included in the inventory of assets and liabilities including the Powercity loan. Mae pleaded that Philip had failed to act in a proper manner in carrying out his duties as executor. Mae claimed that Philip had caused Washburn and Rectangular to breach their duties as trustee of the Washburn Trust and Marc's Testamentary Trust respectively and claimed an order removing Philip as executor of the estate.
901 Philip first filed a defence on 24 April 2018. Philip denied that the estate had been undervalued, denied that he had failed to act in a proper manner carrying out his duties as executor, denied that Marc had failed to make adequate provision for Mae's proper maintenance and support and denied that Mae was entitled to an order for further provision out of Marc's estate. Further, Philip pleaded that as a consequence of the second defendant being appointed as the trustee in bankruptcy of Marc's estate, all of the divisible property of Marc's estate vested in the trustee in bankruptcy. Philip denied that he had caused Washburn and Rectangular to breach their duties as trustee of the Washburn Trust and Marc's Testamentary Trust respectively. Philip denied that Mae was entitled to any relief.
902 Powercity and Duporte were added as the third and fourth defendant in December 2019. Ongold and Rectangular were added as defendants in March 2020. The statement of claim and defences were amended several times before and during the trial.
903 Philip maintained his pleading denying that Marc's will did not make adequate provision for Mae's maintenance and support and denied that the will should be amended as claimed by Mae. In the defendants' opening trial submissions Philip stated that his position was that as Mae is the only living beneficiary under the will, it was not an issue upon which Phillip wishes to be heard other than to observe that it is hard to see what further provision out of the deceased's estate can be made in the circumstances and that he would otherwise provide the court with such assistance as the court may request.
904 Where the applicant succeeds in an action to secure further provision from the deceased's estate, the usual order for costs is that the executor has his costs out of the estate. However, unreasonable or improper conduct connected with the conduct of the proceeding by an executor in the course of the proceeding may deprive the executor of some of his costs out of the estate.[176] Philip defended Mae's claim until trial and at trial submitted that it is hard to see what further provision could be made out of Marc's estate. However, Phillip's conduct in defending the claim was not unreasonable or improper. His costs of defending Mae's family provision claim should be paid out of Marc's estate.
905 There were other issues between Philip and Mae in the Family Provision proceeding. Philip successfully defended the claims against him that he breached his duties as an executor and should pay damages. Philip should be indemnified by Marc's estate in respect of costs incurred in successfully defending that claim.
906 Philip unsuccessfully defended the claim that he should be removed as executor of Marc's estate. He acted unreasonably in doing so. He should not be indemnified by the estate for the costs of defending the claim that he be removed as executor.
907 Philip did not act reasonably in defending the claim that the Ongold payment was not a loan by Ongold as trustee of Marc's Testamentary Trust to Marc's estate. The claim was successful. Resisting it was not for the benefit of Marc's estate. Philip should not be indemnified by Marc's estate for the costs of defending that claim.
908 The general rule is that costs follow the event. As I set out earlier in these reasons what constitutes 'success' in proceedings is to be determined by 'the reality of the circumstances involved in the case', the successful party is the party 'who on the whole succeeds in the action'.[177]
909 I have referred to the history of this proceeding. Mae's principal claims were for further provision under the Family Provision Act and for the removal of Philip as executor of Marc's estate. Mae's further claims that the Powercity loans were not due and payable by Marc's estate and that Marc's estate was not indebted to Ongold as trustee of Marc's Testamentary Trust for the amount of the Duporte loan or the Ongold payment were intermediate claims to establish that Marc's estate was solvent and hence that a family provision order could or should be made. Mae's other major claim was her unsuccessful claim for damages against Philip for breach of duties as executor of Marc's estate.
910 Looked at as a whole Mae was successful in the proceeding. She succeeded in obtaining an order for further provision under the Family Provision Act, which involved establishing that Marc's estate was solvent, and an order that Philip be removed as executor of the estate.
911 Where the applicant succeeds in an action to secure further provision from the deceased's estate, the usual order for costs is that the applicant has her costs out of the estate. Notwithstanding that Mae's claim was opposed by Philip, Philip did not act improperly or unreasonably in opposing Mae's claim. Mae should have the general costs of the proceeding paid by Marc's estate. For the same reasons, Philip should have the general costs of the proceeding paid by Marc's estate.
912 The defendants initially submitted that Phillip's costs incurred in defending the proceedings should be paid out of Marc's estate as an obligation of the first ranking priority to distributions of the balance of the estate to the beneficiary. The second defendant, the trustee in bankruptcy, did not agree. Mae made no submissions on the issue. The defendants and the trustee in bankruptcy subsequently agreed that Phillip's costs should be paid out of Marc's estate prior to distributions of the balance of the estate to the beneficiary. I agree that is the appropriate order.
913 There were two other main issues between Mae and Philip - Mae's claims that Philip be removed as executor of Marc's estate and her claim for damages from Philip for breaches of his duty as executor of Marc's estate.
914 Mae succeeded in her application that Phillip be removed as executor of Marc's estate. Philip unsuccessfully opposed that claim. Philip should pay Mae's costs of that issue.
915 Mae failed in her claims that Phillip breached his duties as executor and should pay damages. Philip succeeded in relation to those claims. Mae should pay Phillips costs of that issue.
916 The defendants submit that Ongold and Rectangular should pay Mae's costs of the proceeding relating to the amount of the Duporte loan (the Ongold payment) and they should be indemnified from the funds of Marc's Testamentary Trust in respect of their costs of the proceeding and their liability to pay costs.
917 I agree that Ongold and Rectangular should pay Mae's costs of the proceeding relating to the amount of the Duporte loan (the Ongold payment) and that they should be indemnified from the funds of Marc's Testamentary Trust in respect of their costs of their liability to pay those costs and the costs incurred by them in respect of that issue.
918 Mae abandoned her initial claim that the Duporte loan was not due and payable but succeeded in her subsequent claim that the Ongold payment was not a loan by Ongold as trustee of Marc's Testamentary Trust to Marc's estate. Duporte successfully resisted the only claim against it. Mae should pay Duporte's costs of Mae's unsuccessful claim that the Duporte loan was not due and payable. That ceased to be an issue when Mae conceded that the Duporte loan was due and payable. Duporte did not incur any costs after that time. Whilst Duporte remained represented by counsel at the trial, counsel were engaged in adducing evidence and making submissions on behalf of the other defendants. No additional costs were incurred on behalf of Duporte. Nevertheless, Duporte incurred costs prior to Mae abandoning her claim that the Duporte loan was not due and payable. Mae should pay Duporte's costs.
919 Mae's minute of proposed orders as to costs provides that her costs of the Trust action should be paid by Philip, Washburn and Rectangular, and her costs of the Family Provision action should be paid by Philip without regard to the limits, including hourly limits, in all relevant costs determinations.
920 The defendants submit that the costs of each proceeding should be assessed as if the proceedings were commenced by writ of summons and without regard to the limits imposed by the fixed amounts under Table B of cl 13 of the relevant Legal Profession (Supreme and District Courts) (Contentious Business) Determinations.
921 The costs of each action should be assessed as if the proceedings were commenced by writ of summons.
922 In my opinion the amount of costs allowable in respect of the matters in these proceedings under the relevant costs determination is inadequate because of the complexity and importance of the matters. It is appropriate to remove the limits on costs, including hourly rates, fixed in the relevant determinations.
923 In her minutes of proposed orders Mae proposed that Philip, Washburn and Rectangular pay her costs in the Trust action, to be assessed as one set of costs with the costs in the Family Provision action. That is not possible because I have determined that Mae's costs and Philip's costs of the Family Provision action should be paid out of Marc's estate.
924 Mae's bills of costs in the Trust action and in the Family Provision action, and Philip's bill of costs in the Family Provision action, should be taxed together. Duporte's costs in the two proceedings should be taxed as one bill, together with the bills of costs of Mae and Philip.
925 Some charges or items may cover work belonging to the Trust action, some work belonging to the Family Provision action and some that is common to both. Substantial costs may be incurred in assessment and in particular the attribution of costs to one proceeding rather than the other. The obligation of the court to exercise its discretion to facilitate the expeditious and efficient resolution of matters requires that I make some directions to assist the parties and the taxing officer.
926 Notwithstanding that the Family Provision action was commenced first, the Trust action was the lead and more substantive action in terms of the matters in issue and the evidence relevant to the two actions. The trial of the proceedings occupied 30 days. The overwhelming majority of that time was taken up with evidence that was admissible and relevant to the issues in the Trust action. A smaller part of the time was taken up with evidence that was admissible and relevant to the issues in the Family Provision action and most of that evidence was admissible and relevant to the issues in the Trust action.
927 It would not be appropriate for Mae to recover from Philip the whole of the general costs of the Trust action and recover from Marc's estate the whole of the general costs of the Family Provision action because that may involve, in part, double recovery. It would not be appropriate to apportion the common costs of the two proceedings between the two proceedings because the overwhelming majority of time at trial was taken up with evidence admissible and relevant to the Trust action and much less time was occupied by evidence relevant to the Family Provision action.
928 Justice is best served by allowing as costs of the Family Provision action only the extra costs incurred in bringing and maintaining or defending the Family Provision action, that is only the costs incurred by bringing and maintaining or defending the Family Provision action extra to the costs incurred in bringing, maintaining or defending the Trust action.
I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
[5] The March spreadsheet with Mae's handwritten notes is exhibit 1128.
[9] The beneficiaries include any charity but it is common ground that the Marc Cardaci Foundation was not then, and is not now, a charity.
[11] See Jones v Sutherland Shire Council [1979] 2 NSWLR 206, 219.
[12] For example, Australian Law Reform Commission, Evidence (Interim) Report [1985] Australian Law Review Commission 26 [334].
[13] Amended defence to further further further re-amended substituted statement of claim dated 10 September 2020 [89.6(ii)].
[14] Amended defence to further further further re-amended substituted statement of claim dated 10 September 2020 [89(z)], [89.6(aa)].
[17] Blenkinsop v Blenkinsop Nominees Pty Ltd as Trustee for Blenkinsop Family Trust [2015] WASC 463 [15] (Allanson J).
[18] Elovalis v Elovalis [2008] WASCA 141 [30]; Letterstedt v Broers (1884) 9 App Cas 371.
[19] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572.
[20] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572.
[21] Porteous v Rinehart [1998] WASC 270; (1998) 19 WAR 495.
[22] Re Estate of Roberts (1983) 20 NTR 13.
[23] Hunter v Hunter [1938] NZLR 520.
[24] Letterstedt v Broers (1884) 9 App Cas 371, 387.
[25] Elovalis v Elovalis [2008] WASCA 141 [37].
[26] Elovalis v Elovalis [2008] WASCA 141 [38].
[27] Smith v Smith [2006] WASC 166.
[28] Elovalis v Elovalis [2008] WASCA 141 [50].
[29] Heydon JD & Leeming MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016) [16 ‑08].
[30] Elovalis v Elovalis [2008] WASCA 141 [50].
[31] Elovalis v Elovalis [2008] WASCA 141 [51].
[32] Hayton et al, Underhill and Hayton Law of Trusts and Trustees (19th ed, 2016) [56.50].
[33] Hayton et al, Underhill and Hayton Law of Trusts and Trustees (19th ed, 2016) [56.54].
[34] Pitt v Holt [2013] UKSC 26; [2013] 2 AC 108 [66].
[35] Tucker L et al, Lewin on Trusts (20th ed, 2020) [29‑046].
[36] Tucker L et al, Lewin on Trusts (20th ed, 2020) [29‑046] citing Abacus Trust Co (Isle of Man) v Barr [2003] EWHC 114 (Ch); [2003] Ch 409 approved in Pitt v Holt [2013] VKSC 26; [2013] UKSC 26; [2013] 2 AC 108.
[37] Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134, 143.
[38] Clause 7.3. See also cl 28 regulating dealings with beneficiaries.
[39] Hayton et al, Underhill and Hayton Law of Trusts and Trustees (19th ed, 2016) [55.1].
[40] Defendants' amended defence to further further further re-amended substituted statement of claim filed 10 September 2021.
[41] Global Alliance Network Pty Ltd v Sensis Pty Ltd [2007] NSWCA 163 [48].
[42] Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288; (2005) Aust Contract R 90‑213 [45] (Finkelstein J); Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112 [221] (Tate JA).
[43] Integrated Commercial Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110.
[44] Re Ledir Enterprises Pty Ltd [2013] NSWSC 101.
[45] Citing Heydon v Perpetual Executors, Trustees and Agency Co (WA) Ltd [1930] HCA 26; (1930) 45 CLR 111; Gray v Gray [2004] NSWCA 408; (2004) 12 BPR 22,755, 755; Schmierer v Taouk [2004] NSWSC 345; (2004) 207 ALR 301; Cambridge Electronics v McMaster [2005] NSWSC 198 [10].
[46] For example, the financial statements of Rectangular as trustee for Marc's Testamentary Trust for the year ended 30 June 2019 list a non‑current asset of the trust to be a loan to Marc's estate which includes the asserted loan of $1,280,714. The statements are signed by Philip as director of the trustee.
[47] For example, the statement of affairs for Marc under pt XI of the Bankruptcy Act 1966 (Cth) listed Ongold as trustee of Marc's Testamentary Trust as an unsecured creditor of Marc's estate in an amount which includes the asserted loan of $1,280,714. On 24 March 2017 Philip declared the statement to be true.
[48] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.
[49] See for example, Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337.
[50] Seddon NC & Bigwood RA, Cheshire & Fifoot Law of Contract (11th Aust ed, 2017) [10.55] and the cases cited at [10.55] footnote 644.
[52] Mae's notes referred to dividends, but I am satisfied that Philip referred to or was understood to refer to distributions.
[53] Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 [120] (Brereton J).
[54] Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88.
[55] Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485.
[56] Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485, 487.
[57] Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485, 487 ‑ 488.
[58] Re Tempest [1866] UKLawRpCh 58; (1866) LR 1 Ch App 485, 488.
[59] Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183, 185 (Rolfe J).
[60] Hobkirk v Ritchie (1934) 29 Tas LR 14, 46.
[61] Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 [123] (Brereton J).
[62] Halsbury's Laws of Australia [430‑3410] fn 5‑7.
[63] McLauchlan v Prince [2002] WASC 274.
[64] Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1.
[65] Halsbury's Laws of Australia [430‑3405].
[66] Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 [278].
[67] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [102]; Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [72]; Blenkinsop v Herbert [2017] WASCA 87; (2017) 51 WAR 264 [106].
[68] See Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104; Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 260 CLR 85; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544.
[69] Australian Special Opportunity Fund LP v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570 [69], [183], [189]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [47]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16], [42], [73].
[70] See for example, In the matter of the Internine and the Inter-traders Trusts Sheikh Abdullah Ali M Alhamrani v Russa Management [2005] JLR 236, 255.
[71] Australian Special Opportunity Fund v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570 [69], [183], [189].
[72] See Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].
[73] Montevento Holdings Pty Ltd v Scaffidi [2012] HCA 48; (2012) 246 CLR 325.
[74] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109.
[75] Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [16].
[76] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [47].
[77] Australian Special Opportunity Fund v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570 [67], [183], [189].
[78] See Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] in relation to contracts; PNPF Trust Co Ltd v Taylor [2010] EWHC 1573; [2010] All ER (D) 251 (Jun) [128] in relation to amendments of a pension scheme.
[79] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [152] (Buss P).
[80] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [152] (Buss P).
[81] PNPF Trust Co Ltd v Taylor [2010] EWHC 1573; [2010] All ER (D) 251 (Jun); Wong Wen-Young v Grand View Private Trust Co Ltd [2019] SC (Bda) 37 Com.
[82] Tucker et al, Lewin on Trusts (20th ed, 2020) [33‑079].
[83] Wong Wen-Young v Grand View Private Trust Co Ltd [2019] SC (Bda) 37 Com [67].
[84] Cachia v Westpac Financial Services Ltd [2000] FCA 161; (2000) 170 ALR 65 [68].
[85] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [101].
[86] Tucker et al, Lewin on Trusts (20th ed, 2020) [33‑080].
[87] Kearns v Hill (1990) 21 NSWLR 107; see also Wyndham v Egremont [2009] EWHC 2076 (Ch); Wong Wen-Young v Grand View Private Trust Co Ltd [2019] SC (Bda) 37 Com, where Kawaley AJ found that any transaction which effectively revoked the trust and resettled the assets on new trusts would prima facie involve changing the substratum of the trust.
[88] Washburn Deed of Trust, recital A.
[89] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [265].
[90] Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 [358].
[91] See for example, Pua Hor Ong v Wu You Yang Pty Ltd [2008] SASC 365; (2008) 103 SASR 9 [59] ‑ [60].
[92] See for example, Hall v Foster [2012] NSWSC 974 [16] ‑ [19] (Ball J).
[93] The University of Western Australia v Gray [No 6] [2006] FCA 1825 [71] (French J).
[94] Parker v Camden Borough Council [1985] 3 WLR 47, 54 referring to Supreme Court Act 1981 (UK) s 37 which corresponds to Supreme Court Act s 25(9).
[95] Robinson T & Professor Walton P, Kerr & Hunter on Receivership and Administration (21st ed, 2020) [3 ‑ 1] citing Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721 [6].
[96] Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; (2000) 35 ACSR 34.
[97] Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721.
[98] Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721 [1].
[99] Masri v Consolidated Contractors International (UK) Ltd [No 2] [2008] EWCA Civ 303; [2009] QB 450.
[100] Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721 [31].
[101] Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; [2012] 1 WLR 1721 [59].
[102] Clayton v Clayton [2015] NZCA 30; [2015] 3 NZLR 293.
[103] Company Receivers and Administrators, Thompson Reuters, Online version accessed 25 June 2021 [20.1360] citing Anglo-Italian Bank v Davies [1878] UKLawRpCh 227; (1878) 9 Ch D 275, 286; Smith v Cowell [1880] UKLawRpKQB 80; (1880) LR 6 QBD 75.
[104] See Smith v Cowell [1880] UKLawRpKQB 80; (1880) 6 QBD 75, 78.
[105] Robinson T & Professor Walton P, Kerr & Hunter on Receivership and Administration (21st ed, 2020) [2 - 1].
[106] Robinson T & Professor Walton P, Kerr & Hunter on Receivership and Administration (21st ed, 2020) [2 - 23] - [2 - 24].
[107] Robinson T & Professor Walton P, Kerr & Hunter on Receivership and Administration (21st ed, 2020) [2 - 29].
[108] Woodley v Woodley [No 2] [2017] WASC 94 [43] (Pritchard J).
[109] Woodley v Woodley [No 2] [2017] WASC 94 [44], Pritchard J citing Tsaknis as Executor and Trustee of Estate of Lilburne (decd) v Lilburne [2010] WASC 152 [51] ‑ [53] (Heenan J); Porteous v Rinehart [1998] WASC 270; (1998) 19 WAR 495, 506 (White J); Re Estate of Crane [2005] SASC 379; (2005) 93 SASR 198 [15] - [23] (Besanko J).
[110] Woodley v Woodley [No 2] [2017] WASC 94.
[111] Woodley v Woodley [No 2] [2017] WASC 94 [53] citing Mavrideros v Mack [1998] NSWCA 286; (1998) 45 NSWLR 80, 108; Bates v Messner [1967] 1 NSWR 638; (1967) 67 SR (NSW) 187, 191 ‑ 192; Re Estate of Stuart [2009] SASC 399; (2009) 106 SASR 39 [22] ‑ [23] and cases cited therein; Colston v McMullen [2010] QSC 292 [39] (White J).
[112] Tsaknis as Executor and Trustee of Estate of Lilburne (decd) v Lilburne [2010] WASC 152.
[113] Woodley v Woodley [No 2] [2017] WASC 94 [47] ‑ [51].
[114] That is 93.71% of the sale price of $84,000. In supplementary submissions the defendants submit that GST should be deducted from that amount. However, I do not accept that submission.
[115] See the fourth report to creditors of Marc's estate dated 20 February 2020.
[116] National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] UKLawRpAC 28; [1905] AC 373, 381.
[117] Re Stuart; Smith v Stuart [1897] UKLawRpCh 125; [1897] 2 Ch 583, 590; Re Turner; Barker v Ivimey [1897] UKLawRpCh 30; [1897] 1 Ch 536, 542.
[118] Walker v Stones [2001] QB 902, 939 ‑ 941.
[119] Chapman v Browne [1902] UKLawRpCh 79; [1902] 1 Ch 785, 805 ‑ 806; Partridge v Equity Trustees Executors & Agency Co Ltd [1947] HCA 42; (1947) 75 CLR 149, 165.
[120] Sproule v Sproule [2009] NSWSC 152; (2009) 2 ASTLR 80 [43] Ward J; Heydon JD & Leeming MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016) [22‑13] citing Re D'Jan of London Ltd [1994] 1 BCLC 561 and Sproule v Sproule [2009] NSWSC 152; (2009) 2 ASTLR 80.
[121] Heydon JD & Leeming MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016) [22.14] and the cases therein cited at footnote 85.
[122] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [46] ‑ [83].
[123] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [51].
[124] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [52].
[125] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [53].
[126] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [54].
[127] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [56].
[128] Taylor v Farrugia [2009] NSWSC 801 [62] (Brereton J); Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [188].
[129] Lemon v Mead [2017] WASCA 215; (2017) 53 WAR 76 [188] ‑ [189].
[130] Cardaci v Filippo Primo Cardaci as executor of the estate of Marco Antonio Cardaci [No 5] [2021] WASC 331 (the Principal Judgment).
[131] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [29] (Kiefel CJ, Keane & Edelman JJ).
[132] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [31].
[133] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [30].
[134] Metropolitan Petar v Mitreski [2012] NSWSC 16.
[135] Metropolitan Petar v Mitreski [2012] NSWSC 16 [108].
[136] Metropolitan Petar v Mitreski [2012] NSWSC 16 [109].
[137] Tucker L, Le Poidevin N & Brightwell J, Lewin on Trusts (20th ed, 2002) [48‑004].
[138] Tucker L, Le Poidevin N & Brightwell J, Lewin on Trusts (20th ed, 2002) [48‑006].
[139] Tucker L, Le Poidevin N & Brightwell J, Lewin on Trusts (20th ed, 2002) [48‑067] ‑ [48‑068].
[140] Tucker L, Le Poidevin N & Brightwell J, Lewin on Trusts (20th ed, 2002) [48‑085].
[141] Re Piedmont Trust [2016] JRC 016 [27].
[142] Griffin v Higgs [2018] EWHC 2498; [2018] 4 WLR 139 [126] ‑ [129].
[143] Dal Pont GE, Law of Costs (5th ed, 2021) [10.3] ‑ [10.4].
[144] Swanson v Dungey [1892] SALawRp 17; (1892) 25 SALR 87.
[145] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 579.
[146] Hunter v Hunter [1938] NZLR 520, 538‑9.
[147] Garrett v Yiasemides [2004] NSWSC 828 [31] ‑ [33].
[148] Dal Pont GE, Law of Costs (5th ed, 2021) [10.14].
[149] Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S) [38] (Murphy JA).
[150] Wareham v Marsella [No 2] [2020] VSCA 118.
[151] Lexis Nexis, Civil Procedure Western Australia [66.9.2].
[152] Grljusich v Grljusich (Unreported, WASC Library No 960646, 8 November 1996).
[153] See the Principal Judgment, in particular at [208], [238] [267], [282], [352], [388], [582].
[154] Principal Judgment [505], [747].
[155] Principal Judgment [14 (6)], [405] ‑ [407, [506], [514], [734] ‑ [735], [746].
[158] See online Oxford English Dictionary; online McQuarrie Dictionary; Encyclopedic Australian Legal Dictionary.
[159] Wareham v Marsella [No 2] [2020] VSCA 118.
[160] Commissioner of Taxation v Bargwanna [2012] HCA 11; (2012) 244 CLR 655 [13].
[162] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [49].
[163] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [50].
[164] Smith v Madden [1946] HCA 19; (1946) 73 CLR 129, 132 ‑ 134.
[165] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [50].
[166] Dal Pont GE, Law of Costs (5th ed, 2021) [8.2].
[167] Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178.
[168] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [51].
[169] Spotless Group Ltd v Premier Building & Consulting Pty Ltd (recs apptd) [2008] VSCA 115.
[170] Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd [2007] VSCA 309.
[171] McFadzean v Construction, Forestry, Mining and Energy Union [2007] VSCA 289; (2007) 20 VR 250.
[172] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [51].
[173] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66.
[174] Barnes v Addy (1874) LR 9 Ch App 2.
[175] See National Trustees Executors & Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268 [71] ‑ [73].
[176] See, for example, Trapani v Ciocca [No 2] [2013] VSC 510 [11].
[177] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [127] (Gummow ACJ, Kirby, Hayne & Heydon JJ).
(2011) 243 CLR 253
(2017) 53 WAR 76
(1998) 45 NSWLR 80
(1936) 54 CLR 572
(2007) 20 VR 250
(1941) 64 CLR 268
(2019) 54 WAR 388
(1973) 129 CLR 99
(2015) 323 ALR 570
(2017) 51 WAR 264
(1982) 149 CLR 337
(2017) 261 CLR 544
(2014) 251 CLR 640
(1930) 45 CLR 111
(2005) 93 SASR 198
(1992) 174 CLR 178
(2012) 246 CLR 325
(2004) 207 ALR 301
(2016) 260 CLR 85
(2005) 221 CLR 522
(2019) 268 CLR 524
(2012) 244 CLR 655
(2000) 170 ALR 65
(1990) 21 NSWLR 107
(1935) 54 CLR 134
(2016) 50 WAR 495
(1947) 75 CLR 149
(1998) 19 WAR 495
(2008) 103 SASR 9
(2009) 106 SASR 39
(2004) 60 NSWLR 275
(1946) 73 CLR 129
(2016) 343 ALR 112
(1977) 180 CLR 266
(2015) 256 CLR 104
(2008) 237 CLR 66