JEFFREY LAURENCE HERBERT as trustee for THE BLENKINSOP FAMILY TRUST and as trustee for THE BLENKINSOP FAMILY TRUST NO 2 -v- BLENKINSOP [2018] WASC 369 (8 May 2019)

1. At the time of Mr Herbert's appointment there were continuing proceedings between Mrs Blenkinsop, and the former trustees (the Loan Account Proceedings).[2] The action was commenced by writ with indorsed statement of claim on 23 April 2014. It had, accordingly been prosecuted for over three years at the time of the mediation at which the proposed settlement was reached.
2. Mrs Blenkinsop claimed:

(1) Blenkinsop Nominees, as trustee of Trust No 1, is indebted to her for the sum of $1,969,995.13;

(2) Silverglade, as trustee of Trust No 2, is indebted to her for the sum of $2,526,455.56.

1. Mrs Blenkinsop pleaded that the debts arose, in part, from loans and from the transfer of property by Mrs Blenkinsop and her husband to the trusts, and from contributions she and her husband made to the purchase price of properties held as trust assets.
2. The former trustees opposed Mrs Blenkinsop's claims. Proceeding in the action was slow and beset by difficulties, caused in part by Mrs Blenkinsop being a director of the trustee companies and supported in her action by another director[3], and in part by the fact that Blenkinsop Nominees and Silverglade were unable to operate effectively due to discord among the directors. It was the inability of the companies to function effectively, and to carry out their duties as trustees, that led to the orders for the replacement of the trustees. The defendants to the writ, Blenkinsop Nominees and Silverglade, were represented by two firms between May 2014 and May 2016. There are unresolved questions regarding their ability to properly instruct solicitors.
3. In 6 May 2016, the new trustee, Mr Herbert, was named as a party to the action by Mrs Blenkinsop.

1. Mr Herbert deposes that following his appointment as trustee he proposed a general strategy to the directors of the former corporate trustees to liquidate the assets of the trusts and distribute the proceeds of sale as part of an early vesting. He sought the assistance of the directors and the provision of any further documents that they may have to assist in his review of Mrs Blenkinsop's alleged loan accounts.[4]
2. Mr Herbert then conducted a loan account analysis 'to understand, with the input of beneficiaries ... the nature, calculation and extent of amounts alleged to be owing by the trusts to [Mrs Blenkinsop]'.[5]
3. In 2016, Mr Herbert decided that the trustee should defend the Loan Account Proceedings, and advised the beneficiaries that he would.[6]
4. On 15 March 2017, Mrs Blenkinsop filed a substituted statement of claim in which she claimed:

1. Mrs Blenkinsop also claimed costs which could be in the range of $350,000 $400,000; the claim for interest, should the claims succeed, could exceed $600,000, depending upon when repayment was validly demanded.[7]
2. Following a mediation in August 2017, Mr Herbert and Mrs Blenkinsop recorded the terms of their settlement in Heads of Agreement, subsequently formalised into a Deed of Settlement and Release in September 2017. The settlement and payment of the settlement sums is conditional upon the court granting a direction under s 92 of the Trustees Act that Mr Herbert is justified in settling the claim on the terms set out.
3. Mr Herbert considers that the settlement of the Loan Account Proceedings forms part of an overall commercial strategy to have the trusts vest early, as being a way to resolve the disputes between the family members. That overall strategy is, apparently, not in dispute. But as someone with experience of the proceedings between members of this family, I expect that any step towards its implementation will be contested.
4. The estate held by the two trusts is relatively large. It has already met legal costs from earlier proceedings and is likely to be further substantially diminished by legal costs as well as the costs of administration of the trusts by Mr Herbert.

1. Evidence was on affidavit.
2. The applicant read two affidavits of Mr Herbert, sworn 24 October 2017 and 16 April 2018. The earlier affidavit included a confidential exhibit containing legal advices, including senior counsel's advice. The confidential exhibit had been disclosed to such of the beneficiaries of the trusts as wished to see it.
3. The first respondent read an affidavit of Judith Ann Blenkinsop, sworn 31 March 2018.
4. Mr Blenkinsop sought to read (or refer to) 12 specified affidavits and 'any subsequent affidavits or documents filed in the proceedings or referred to in other parties' submissions or affidavits.' Ultimately he read his affidavits of 17 March 2015, 23 October 2015, 14 June 2016, 14 August 2017, 22 January 2018, 3 April 2018, and 2 May 2018. He also sought to read affidavits of the second respondent, Kim Rosina Holland, sworn 23 October 2015 and 29 January 2018; an affidavit of the sixth respondent, Ross Alexander Blenkinsop, sworn 21 April 2017; and affidavits of Mr Herbert sworn 7 February 2017, 15 May 2017, and 24 October 2017. Many of those affidavits were sworn in other proceedings. Although no party objected to them being read, my opinion on reading them was that little of the evidence was relevant.
5. Mr Herbert set out in detail the considerations to which he had regard in deciding to settle the proceedings:

(1) a global settlement would avoid protracted litigation and avoid the trusts incurring legal costs;

(2) the likely costs of proceeding to trial having regard to the history of interlocutory disputes, the likely length of trial, and the cost and complexity of interrogating the financial records of the trusts which were incomplete and fragmented;

(3) the prospects of successfully defending the claim and the possible cost exposure to the trusts if the defence was unsuccessful;

(4) particular legal and factual issues arising in the proceedings, including whether the former corporate trustees would be required to be joined as parties to the proceedings;

(5) the incomplete nature of the information available;[8]

(6) the loan amount recorded in the financial accounts was far larger than that claimed in the substituted statement of claim;

(8) the overall strategy to wind up the trusts and distribute the remaining assets which could not be done without bringing the Loan Account Proceedings to an end.[9]

1. I do not intend in these reasons to analyse the Deed of Settlement and Release in any detail. It is, however, important to note the mutual releases. Mrs Blenkinsop releases Mr Herbert and the former trustees and any employees, officers, advisers and agents of the trustee and the former trustees:

from all or any Claims which Mrs Blenkinsop has or, but for this deed, may have had against [the released parties]:

(i) arising from or the subject of the Action or at any time pleaded in the Action; and

(ii) arising from any transaction recorded in or forming part of the balance of the Loan Accounts, including without limitation, monies advanced to the Trusts, assets advanced to the Trusts, property purchased on behalf of the Trusts, distributions made by the Trusts in favour of Mrs Blenkinsop, credit applied to the Loan accounts in respect of wages, journal adjustments applied to the Loan accounts, and other entries included in the Loan accounts (even where some or all of the details of those entries are currently unknown),

irrespective of any demand being made or any legal proceedings being commenced and whether such claims were known or unknown to Mrs Blenkinsop at the date of this Deed.[10]

1. Mr Herbert, as trustee, provides a corresponding release of Mrs Blenkinsop from any claims which he may have had.
2. Mrs Blenkinsop, as plaintiff in the 2014 action, wishes to compromise those actions in the terms agreed.

1. Section 42 of the Trustees Act provides, relevantly:

(c) pay or allow any debt or claim on any evidence that he thinks sufficient; or

(f) compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing whatever relating to the trust or to the trust property;

and for any of those purposes may enter into, give, execute, and do such agreements, instruments of composition or arrangement, releases, and other things as to him seem expedient, without being responsible for any loss occasioned by any act or thing so done by him in good faith.

1. As s 42 makes clear, the power to compromise is not limited to the compromise of an action, but extends to any debt, account, claim or thing whatever relating to the trust or to the trust property.
2. By s 92(1) of the Trustees Act 1962 (WA):

Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

1. The only jurisdictional bar to relief under s 92 is that the applicant trustee must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument.[11] The decision whether to compromise a claim relating to the trust property raises questions respecting the management or administration of the trust property and is within s 92. That is, the jurisdiction of the court to give advice may be properly exercised and advice given as to whether Mr Herbert is justified in settling the Loan Account Proceedings and other claims by Mrs Blenkinsop on the terms proposed.
2. The authorities provide guidance on the exercise of the jurisdiction. The proceedings are for the purpose of the court providing private and personal advice to the trustee but have 'another and no less important purpose' of protecting the interests of the trust.[12]
3. In Australian Executor Trustees Ltd v Attorney General (WA), Martin CJ said of the jurisdiction under s 92:

[T]he powers conferred by provisions like s 92 of the Act should generally be exercised for the purposes for which they are conferred, which are the protection of the property of the trust and the protection of a trustee acting properly and in accordance with the directions of the court. Subject to conformity with those overarching purposes, the exercise of the powers conferred by such provisions is discretionary and will depend upon the particular facts and circumstances of each case, unconstrained by inflexible rules or prescriptive standards.

Nevertheless, the cases do provide some guidance with respect to the exercise of the discretion conferred upon the court. In exercising its powers, the court will generally endeavour to act in the best interests of the beneficiaries of the relevant trust and, where appropriate, will take account of the views of those beneficiaries. Further, ordinarily the court will not exercise its jurisdiction in such a way as to usurp the roles and responsibilities of trustees in relation to the making of commercial decisions or with respect to the conduct of litigation. Rather, the court will be concerned to ensure that the trustee has taken proper advice and given full consideration to all relevant matters before arriving at a reasoned and appropriate decision. If satisfied of those matters, in appropriate cases the court will give the directions sought and thereby confer protection upon a trustee taking action in accordance with those directions.[13]

1. The present application and the responses to it raised several issues:

(1) would Mr Herbert act properly in settling the claims when the debts alleged were incurred by the former trustees and there is no issue or dispute between Mr Herbert and Mrs Blenkinsop in relation to the claimed debts;

(2) was the decision to enter into the compromise agreement made in good faith;

(3) did Mr Herbert give fair consideration to the relevant issues with the assistance of legal and accounting advice.

1. There is then a separate question about whether it is proper for Mr Herbert to apportion the settlement sum between the two trusts in the manner proposed, particularly when the effect will be to compromise the claim against Trust No 2 for an amount greater than that claimed in the Loan Account Proceedings.
2. It is first necessary to consider the effect of the replacement of the trustees since the commencement of the Loan Account Proceedings. That issue goes to whether it is proper for Mr Herbert to compromise the Loan Account Proceedings, and precedes questions of his discretion.

1. The claim by Mrs Blenkinsop is for debts incurred by the former trustees.
2. Blenkinsop Nominees and Silverglade are liable for any debts they incurred to Mrs Blenkinsop, even if those debts were incurred in the performance of their roles as trustee and for the benefit of the trust estate. As trustees, they were entitled to be indemnified out of the trust property for debts each incurred as trustee in the administration of the trust.[14]

Where the trustee acting within his powers makes a contract with a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person on the contract, he is entitled to indemnity out of the trust estate. If he has discharged the liability out of his individual property, he is entitled to reimbursement; if he has not discharged it, he is entitled to apply the trust property in discharging it, that is, he is entitled to exoneration.[15]

1. The right of indemnity arose when relevant trust related liabilities were incurred. The rights of exoneration in discharging a debt incurred in the administration of the trust operate as a charge or lien on the trust property. While they were in possession of the trust property, Blenkinsop Nominees and Silverglade could retain possession as against a beneficiary until their right of indemnity was exercised.[16] Loss of office and loss of possession of the trust estate would result in loss of the former trustees' lien, but does not deprive them of an accrued right of indemnity.[17] On the vesting of the trust property in Mr Herbert as new trustee, he took the property subject to the rights of the former trustees.[18] He did not, however, assume liability for any debt - the liability remained with the former trustees.
2. The former trustees' right to exoneration takes priority over the rights of the beneficiaries, and the entitlement of the beneficiaries 'is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them'.[19] As the court said in CPT Custodian Pty Ltd v Commissioner of State Revenue:

Until satisfaction of rights of reimbursement or exoneration, it was impossible to say what the trust fund in question was.[20]

1. Thus, while Mr Herbert did not assume responsibility for the debts of the former trustee, the entitlements of the beneficiaries in Trust No 1 and Trust No 2 are subject to the right of indemnity of the former trustees.
2. Mr Blenkinsop argued that no coercive orders could be made against the former trustees, as they are not parties to the proceedings. But that, in my opinion, does not address the relevant question. The question is whether the present trustee may properly settle Mrs Blenkinsop's claims as claims or things relating to the trust or the trust property. They are claims in relation to the trust property because the entitlement of the beneficiaries 'is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them'.
3. It is not necessary that Mrs Blenkinsop has a claim against Mr Herbert. Were Mrs Blenkinsop successful in her claim against the former trustees, she could, indirectly, have recourse to the trust funds. Creditors to whom a trustee has become indebted in the course of carrying on the trust business have no direct claim in law upon the assets of the trust. But in equity they may be subrogated to the trustee's right of indemnity or lien.[21] In that sense the creditors' claims upon the assets of the estate are indirect, but they are claims in relation to the trust fund.
4. Because there is a potential claim through subrogation, Mr Herbert is not simply a volunteer settling the liability of a third party.
5. Further, there are reasonable grounds to conclude that any attempt to recover the debt from the former trustees would be fruitless. The former trustees' right of indemnity against the trust property appears to be their only significant asset. In Re Wilson; Kerr v Wilson, O'Bryan J said:

There appears to be no reason in principle why a creditor must pursue his common law rights to judgment before he will be allowed to be subrogated to the trustees' indemnity against the estate. It is one thing to refuse him an order for administration as a matter of discretion if no more appears than the fact of the debt, but if he has demanded payment from his debtor and has failed to receive payment and the circumstances are such as to lead to the reasonable conclusion that a judgment, if obtained, would be fruitless, it would be a harsh and unnecessary rule that required him first to proceed to judgment. The principle of this right of subrogation is stated in Halsbury's Laws of England (2nd ed.), vol 13, p 189, in the following terms - 'the executor is personally liable for the debts of the business, but he has a right of indemnity against the assets of the testator's estate, so far as they are authorised to be employed in the business; the creditor, on the other hand, has no legal claim against the estate, but he is allowed in equity to enforce on his own behalf the executor's right of indemnity. He is subrogated to this right, while he retains also his legal claim against the executor.' This statement of the law, in my opinion, is justified by the authorities (In re Johnson; Shearman v Robinson; In re Frith; Newton v Rolfe). In the latter case the creditor's right of subrogation was recognised and given effect to although he does not appear to have sued the trustee at law (see also In re Bracey; Hull v Johns).[22]

1. In these circumstances, there is no reason why such a settlement could not be a proper exercise of the power of the trustee to protect the trust property in the interests of the beneficiaries, without requiring the creditors of the former trustees to first proceed to judgment against them.
2. There is no suggestion here of disentitling conduct by the former trustees that would disqualify them from relying on the right of indemnity, so that the derivative claim of the creditor would be lost.
3. The fact that the former trustees are no longer named as parties to the Loan Account Proceedings is procedural, and could be remedied if required. It does not make the proceedings a nullity, particularly where they were originally brought against the former trustees. The re-joining of the former trustees would be a formal step, particularly if the substitution of Mr Herbert was procedurally incorrect.
4. In short, I am satisfied that Mr Herbert has power to compromise the claims as they relate to the trust or to the trust property, even if the claim is for a debt incurred by his predecessors in office. It is not a requirement of s 42 that the compromise be of a debt incurred by the trustee, merely that it relate to the trust property. Nor does s 42 require that there first be proceedings against the trustee.

1. The application is concerned not only with whether Mr Herbert may compromise the claim, but he also approaches the court for directions in relation to the terms of the compromise.
2. This case raises the question of the proper role of the court in an application for directions regarding a decision which lies in the discretion of the trustee.

1. Mr Herbert submitted that, under the trust deeds and at law, he has wide powers to deal with the trust assets, including the power to take such action as he thinks fit for the adequate protection of any part or parts of the Trust Fund and to do all such other things as may be incidental to the exercise of the powers and authorities conferred on the trustee by the trust deeds.
2. Counsel for Mr Herbert referred the court to the discussion in Ireland v Retallack,[23] referred to by Le Miere J in Messina v Rodi As Executor of the Estate of Virginia Silvestro (Dec) [No 2].[24] In short, counsel submitted that the court is to consider whether it is proper for the trustee to consider a compromise. Whether the trustee does compromise the action and the terms of the compromise will be for the trustee to determine.
3. In exercising the power, Mr Herbert says that he carefully considered the relevant issues, which involved a detailed analysis of the financial records of the trusts, supplemented over many months by further matters raised by some of the guardians.[25] Mr Herbert took into account the advice of legal advisors on a range of matters, including the prospects of successfully defending the claims as well as the possible cost exposure of the trusts.
4. Mr Herbert says that he also had regard to the broader interests of all beneficiaries in exploring a 'global settlement' involving the early vesting of the trusts.
5. Finally, counsel submitted that the settlement documentation is reasonable and appropriate. The deed of settlement not only covers the claims the subject of the Loan Account Proceedings, but also any claims 'arising from any transaction recorded in or forming part of the balance of the Loan Accounts'.
6. On this basis, Mr Herbert submitted that his decision is proper, and that he has exercised his discretion in good faith and given fair and thorough consideration to the relevant issues.

1. Counsel for Mrs Blenkinsop submitted that, in compromising a claim made against the trust or the trust property, the criterion prescribed by s 42 is whether the proposal seems 'expedient' to the trustee, that is, desirable and fair for the trust as a whole or (which is the same thing) in the interests of all the beneficiaries.[26]
2. Mrs Blenkinsop submitted that trustees with such a discretionary power have three duties:

(b) to act upon genuine consideration, that is, to take an informed view of whether or not to exercise their discretion, and not to act 'irresponsibly, capriciously or wantonly'; and

(c) to exercise their power with due consideration for the purpose for which it was conferred, and not for some ulterior purpose.

1. Mrs Blenkinsop submitted that the trustee's discretion in this case is absolute or uncontrolled, and will be limited only by the obligation to act in good faith, which includes acting for a proper purpose and on genuine and real consideration.[27] In particular, Mrs Blenkinsop relied on the observations of McGarvie J in Karger v Paul:

[I]t is relevant to look at evidence of the inquiries which were made by the trustees, the information they had and the reasons for, and manner of, their exercising their discretion. However, it is not open to the Court to look at those things for the independent purpose of impugning the exercise of discretion on the grounds that their inquiries, information or reasons or the manner of exercise of the discretion, fell short of what was appropriate and sufficient. Nor is it open to the Court to look at the factual situation established by the evidence, for the independent purpose of impugning the exercise of the discretion on the grounds that the trustees were wrong in their appreciation of the facts or made an unwise or unjustified exercise of discretion in the circumstances. The issues which are examined by the Court are limited to whether there has been a failure to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. In short, the Court examines whether the discretion was exercised but does not examine how it was exercised.[28]

1. Mrs Blenkinsop submitted that the court's jurisdiction is limited to advising or directing as to whether the proposed compromise of litigation would be a lawful or proper exercise of the trustee's discretionary power. The court does not assess the reasonableness of the trustee's decision, or even ascertain whether the trustee's consideration of the matter was appropriate or sufficient. The court is solely concerned to determine whether the trustee has complied with his obligation to exercise the relevant discretion in good faith, upon genuine consideration and in accordance with the purposes for which the discretion was conferred.
2. Further, the consideration by the trustee is not limited to the legal merits of the claim or defence, but includes commercial and practical considerations relevant to the exercise of a commercial judgment which the trustee is called upon to make.

1. Mr Blenkinsop filed two written submissions. After the hearing he also sent various submissions in correspondence to the court. He neither sought nor was granted leave to make further submissions and I have not had regard to that later material.
2. Much of what he presented was directed to matters not relevant to the exercise of the court's jurisdiction under s 92. In particular, he went into detail on facts relating to the adequacy of the loan account analysis. He also sought to use these proceedings to question the independence of Mr Herbert and, generally, to attack the conduct of Mr Herbert in the administration of the trusts.
3. Mr Blenkinsop submitted that the trustee had not taken advice on the whole of the claims to be compromised. In particular, the advice of senior counsel was given about 10 months before Mrs Blenkinsop filed a substituted statement of claim.
4. Mr Blenkinsop also wanted to dispute the factual basis of the advice provided to Mr Herbert.
5. The second submission was principally directed to the power of Mr Herbert to compromise the claims, and questioned the reliance on s 42 of the Trustees Act.
6. Mr Blenkinsop submitted that the court must consider whether:

(1) the trustee's decision to agree to the conditional compromise was within power;

(2) there was any impropriety in the trustee's decision;

(3) the trustee exercised his discretion in good faith; and

(4) the trustee gave fair consideration to the relevant issues.

1. He submitted that the Loan Account Proceedings are not properly brought against Mr Herbert, with the result that the mediation, the Heads of Agreement and the Deed of Settlement and Release are nullities. He characterised the current application as seeking approval for a coercive order for payment against the former trustees.
2. Mr Blenkinsop also submitted that the trustee had not fairly considered the relevant issues and was not acting in good faith. Much of his submission was based on the argument, which I do not accept for the reasons given above, that the claims by Mrs Blenkinsop are not claims relating to the trust or the trust property. In part, he relied on the limited advice considered by the trustee regarding the prospects of the claims.

1. In my opinion, the submissions of the trustee and Mrs Blenkinsop, in particular the latter, impose too great restrictions on the consideration by the court as to whether the proposed compromise is justified.
2. The procedure under s 92 of the Trustees Act enables the trustee to apply for advice as to whether the proposed settlement is justified.
3. These are not proceedings in which the court should determine disputed issues of fact. The application for judicial advice 'is founded upon facts stated to the Court by the trustee, untested by adversarial procedure, and assumed by the Court to be true' - although 'only for the purpose of the application'.[29] The advice is given on that basis. The trustee must fully and fairly disclose the facts known to him to the court. The protection afforded to the trustee is lost should he have been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction.[30]
4. In applications for advice about whether a trustee is justified in bringing or defending proceedings, it has been held that the matter should be sufficiently investigated to determine whether or not the proceedings would be fruitless.[31] In Application of Macedonian Orthodox Community Church St Petka Inc (No 3), in a passage later quoted by the High Court, Palmer J said:

In a judicial advice application in which the trustee asks whether it is justified in prosecuting or defending litigation, all the Court does is to reach a view as to whether the Opinion of Counsel satisfies it that there are sufficient prospects of success to warrant the trustee in proceeding with the litigation. Counsel's Opinion must address the facts necessary to support the legal conclusions reached and must demonstrate that the propositions of law relied upon for those conclusions are properly arguable. Whether, in the light of Counsel's Opinion, there are 'sufficient' prospects of success calls for another judgment, founded upon such considerations as:

- whether the likely costs to be incurred by the trustee are proportionate to the issues and [the] significance of the case;

- the consequences of the litigation to the parties concerned;

- in the case of a charitable trust, any relevant public interest factors.[32]

1. The same approach should, in my opinion, apply to a proposed settlement. The proceedings are for the 'no less important' purpose of protecting the interests of the trusts, which requires the court to endeavour to act in the best interests of all beneficiaries.
2. I have earlier set out the considerations which Mr Herbert said have guided his decision (subject to the court's direction). There is no dispute that a settlement would avoid the trust incurring legal costs, but that has to be balanced with the prospects of successfully defending any claim. Mrs Blenkinsop brings her claim as a creditor, not a beneficiary. She is an ordinary litigant and, should she be unsuccessful, may be personally liable for costs and not entitled to be indemnified out of the trust estates.
3. Mr Herbert has taken the advice of senior counsel, but before the amendment to the statement of claim. There is no later advice properly addressing the prospects of successfully defending the claim, so as to enable the court to be satisfied that there has been proper consideration of whether settlement in the sum proposed is in the interests of all of the beneficiaries. The amount of the claim in the amended statement of claim is substantial and, in total, about a third of the trust assets.
4. I accept that it is a relevant consideration that the trustee believes it is in the best interests of the beneficiaries to wind up the trusts and, to achieve that end, thinks it fit to resolve any potential liability out of the trust property to Mrs Blenkinsop.
5. The court is not assessing either the correctness of the trustee's decision or the reasonableness of the settlement as a decision in his discretion. But it should consider whether there has been sufficient consideration to enable the court to determine that the proposed settlement is justifiable as in the interest of all of the beneficiaries. Specifically, the court should consider whether counsel's opinion supports the propositions relied on in the settlement. The opinion is confidential, and I will not set out the content. It is sufficient to say that the claims in the amended statement of claim, and the foreshadowed (but not particularised) further claims on which Mrs Blenkinsop relies, have not been considered. The opinion is comprehensive, but its utility is limited by the questions counsel was considering.
6. As Martin CJ said in a passage quoted earlier in these reasons:

[O]rdinarily the court will not exercise its jurisdiction in such a way as to usurp the roles and responsibilities of trustees in relation to the making of commercial decisions or with respect to the conduct of litigation. Rather, the court will be concerned to ensure that the trustee has taken proper advice and given full consideration to all relevant matters before arriving at a reasoned and appropriate decision.[33]

1. On the material before me, I am not satisfied that it is appropriate to give the directions sought.

1. Although it is not necessary, having regard to my decision on the primary question, the allocation of the settlement sums was fully argued and I will briefly give my views.
2. The Deed of Settlement and Release does not specify or allocate which trust would pay the settlement sum, or the proportion to be paid by each of them.
3. Mr Herbert said that it is not proposed that settlement sum will be paid equally from each trust. He does not base the allocation between each trust on the amount claimed in the Loan Account Proceedings against each of them, but on the following factors:

(a) the differences in the balances of the loan accounts recorded in the trusts' previous financial statements;

(b) the difference in the vesting date of each trust (2023 and 2072 respectively); and

(c) the difference in the number of beneficiaries of each trust.

1. As Mr Blenkinsop correctly submitted, the trustee proposes to compromise a claim against the trustee of Trust No 2, and thus a claim that relates to the trust fund in Trust No 2, for more than the amount now claimed in relation to that trust fund.
2. As a result of matters raised by Mr Blenkinsop, Mr Herbert provided further evidence regarding his proposed allocation of the settlement sum in his affidavit of 16 April 2018. In particular, he responded to the suggestion that the settlement sum should be in proportion to the sums pleaded in the substituted statement of claim. Mr Herbert demonstrated that under that proposed method of allocation, Trust No 1 would be liable for 73.39% of the payment when, based on the book value of the loan balances according to the financial statements between each trust in the loan account analysis set out in his first affidavit, it only owed 31.9%.[34]
3. With respect to the trustee, I cannot see what difference the vesting dates for each trust makes to how the payment of the claims under the proposed settlement should be allocated.
4. The trustee's proposal requires that the two trust estates be, in effect, treated as one. The allocation subordinates the interests of the beneficiaries in Trust No 2 to the interests of the beneficiaries in Trust No 1. The beneficiaries are not identical.
5. The book value of the loan accounts is of little relevance where there are unresolved limitation issues in relation to the claims and, more generally, where there is no legal advice permitting an analysis of the prospects of recovery by Mrs Blenkinsop against each trust for the full amount of the book value of the account.

1. Mr Herbert has power to compromise the claims of Mrs Blenkinsop as they relate to the trusts and to the trust property. The material before the court does not, however, enable me to direct that the proposed settlement is justified. The legal advice obtained by the trustee does not enable the court to determine that proper consideration has been given to the claims as now formulated and the prospects and consequences of defending them. I can make no finding whether the proposed directions would protect the interests of all beneficiaries.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CITATION : JEFFREY LAURENCE HERBERT as trustee for THE BLENKINSOP FAMILY TRUST and as trustee for THE BLENKINSOP FAMILY TRUST NO 2 -v- BLENKINSOP [2018] WASC 369 (S)

BETWEEN : JEFFREY LAURENCE HERBERT as trustee for THE BLENKINSOP FAMILY TRUST AS TRUSTEE FOR THE BLENKINSOP FAMILY TRUST NO 2

Costs - Where costs incurred by trustee -Whether costs should be paid out of the trust fund

Costs - Where beneficiaries appear in application brought by trustee for advice and directions - Whether beneficiaries' costs should be paid out of trust fund

Costs - Where costs requested to be fixed - Whether there is enough information to determine costs

Trustees Act 1962 (WA), s 92, s 97

Costs of applicant and first and third respondent to be paid from trust funds

Blenkinsop Nominees Pty Ltd as trustee for the Blenkinsop Family Trust [2015] WASC 463

Blenkinsop -v- Blenkinsop Nominees Pty Ltd as trustee for the Blenkinsop Family Trust [2015] WASC 254

Brookvista Pty Ltd v Meloni [2009] WASCA 180

Herbert as trustee for the Blenkinsop Family Trust (as trustee for the Blenkinsop Family Trust No 2) v Blenkinsop [2018] WASC 369

In Re Buckton, Buckton v Buckton [1907] 2 Ch 406

Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572

Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S)

Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119

1. These reasons deal with the issues of costs arising out of the application by the trustee of the Blenkinsop Family Trusts pursuant to s 92 of the Trustees Act 1962 ( WA).
2. I will not recite the background to this decision in any detail. This is the eighth time I have published reasons in the dispute between members of the Blenkinsop family over two trusts set up by the late William Frederick Blenkinsop. The background is set out in those earlier decisions.[35]
3. The trustee, Jeffrey Laurence Herbert, sought advice and directions of the court as to whether he was justified in settling claims brought, by Judith Ann Blenkinsop, in CIV 1537 of 2014, on terms contained in Heads of Agreement and Deeds of Settlement and Release. Mr Herbert further sought advice and directions regarding how he proposed to allocate the payment of the settlement sum between the two trusts.[36]
4. Judith Blenkinsop was also the first respondent in this application, as a beneficiary of the trusts. She appeared by counsel and supported the trustee's position.
5. The only other beneficiary to appear was the third respondent, Scott Frederick Blenkinsop, who acted for himself.
6. In short, I held that Mr Herbert had power to compromise the claims of Judith Blenkinsop as they related to the trusts and to the trust property. The material before the court did not, however, enable me to direct that he was justified in entering into and completing the proposed settlement.
7. The parties who took part in the application have all applied for costs. Both respondents have asked the court to fix their costs, on the general basis that their costs were necessarily incurred for the benefit of the estate and should be ordered to be paid out of the funds either on a solicitor and client or indemnity basis.

1. Section 97 of Trustees Act 1962 (WA) grants the Court a broad discretion in awarding costs in any proceedings brought under the Trustees Act:

The Court may order the costs and expenses of and incidental to any application for any order under this Act, or of and incidental to the order, or any conveyance or assignment in pursuance thereof, to be raised and paid out of the property in respect of which any of them is made, or out of the income of the property, or to be borne and paid in such manner and by such persons as the Court thinks fit.

1. In awarding costs in actions concerning the administration of trusts, the court is guided in the exercise of the discretion under s 97 by the principles developed in many cases, and also by the Rules of the Supreme Court 1971 (WA).
2. Under O 66 r 9(2):

Where a person is or has been a party to any proceedings in the capacity of trustee, personal representative or mortgagee, 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 or personal representative or the mortgaged property, as the case may be; and the Court may otherwise order only on the ground that the trustee, personal representative or mortgagee has acted unreasonably, or in the case of a trustee or personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.

Certainly, as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken. In the ordinary case a trustee brings or contests legal proceedings on behalf of the trust and not on his own behalf. He is often a necessary party to proceedings where he ought to be present even though he may do no more than submit to the judgment of the Court. In such a case the trustee receives his costs. The position is admittedly different in a case of misconduct.[37]

1. The trustee approached the court for directions and advice where settlement of Judith Blenkinsop's claim would undoubtedly be controversial among the beneficiaries, where the third respondent in particular had raised questions about his authority to settle the proceedings, and where, without the direction of the court, he might be accused of not acting impartially between the beneficiaries. I am satisfied that he acted reasonably in seeking the direction of the court and there is no basis for any suggestion that he acted for his own benefit. There is no reason to depart from the usual rule, and the trustee should have his costs of this application out of the trust funds.
2. The trustee did not oppose the applications by the first and third respondents that their costs be paid out of the trust fund and stated that he would abide the decision of the court.
3. In considering the position of the two respondents who participated, the court is guided by the principles stated by Kekewich J in In Re Buckton, Buckton v Buckton,[38] and followed in many later decisions.[39]
4. On my understanding of the authorities, the first criterion is the nature of the application. The primary question is whether the application relates to a question arising in the course of administration of the trust. If the application was of that kind, the costs incurred by the respondent beneficiaries may be properly characterised as expenses of the trust.
5. The court should also have regard to the position each party adopted in the proceedings.
6. There is an underlying adversarial action, in which Judith Blenkinsop sues in debt. Her position is complicated by her dual role, as the trustee's application was for advice in relation to the compromise of her action, and she is a beneficiary of each trust.
7. Judith Blenkinsop submitted that she properly appeared as first respondent in the application. She supported the power of the trustee to compromise her claim on the terms agreed in the settlement. But she confined her participation in the application to the power of the trustee to compromise the claims, the power of the court to control or review the trustee's powers, and the nature and scope of the jurisdiction to give the directions sought. To the extent her submissions went to the exercise of the trustee's power, it was primarily to address the issue of whether the trustee was acting honestly and in good faith.
8. Scott Blenkinsop argued that the position of Judith meant that her interest in the proceedings was inimical to the interests of the other beneficiaries, and by reason of that interest she should be denied her costs. The fact that the application related to a proposed settlement of Judith's claim in other proceedings does not necessarily make her participation in this application inimical to the interests of the other beneficiaries. In simple terms, settlement of her claim might, ultimately, have been to the benefit of all beneficiaries.
9. Scott Blenkinsop opposed the advice and directions sought on a range of grounds, some of which were irrelevant to the exercise of the court's jurisdiction under s 92. He sought to put before the court and rely on extensive material - as I noted in the judgment, he read or referred to thirteen affidavits from this application and from other proceedings, including four affidavits he swore in this application. In particular, I found that he sought to use these proceedings to question the independence of Mr Herbert and, generally, to attack the conduct of Mr Herbert in the administration of the trusts.[40]
10. Mr Blenkinsop is a legal practitioner, but also a litigant in person. He lacked the sense of proportion and objectivity that an independent legal adviser would bring to the case. His conduct of the application, however, goes to the reasonableness of the amount of costs he incurred. It was not such as to disentitle him to costs.
11. I am satisfied that both of the participating respondents should have the legal costs they incurred paid out of the trust fund, subject to those costs being reasonably incurred.

1. Both respondents have requested the court to fix the amount of their costs.
2. The purpose of fixing costs is to avoid the expense and delay involved in a taxation. The court does not subject the costs to the detailed scrutiny often applied in taxation of costs, but applies a 'broader brush' than would be applied on taxation: Brookvista Pty Ltd v Meloni [2009] WASCA 180 [26] (Newnes JA, Buss JA agreeing). His Honour continued at [27]:

But in fixing the amount of the costs, the approach of the court should be 'logical, fair and reasonable': see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, 123; Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 [8]. And the power to award a fixed sum should only be exercised when the court considers that it can determine the amount of the costs fairly. That means the court must have available to it sufficient material that it is confident it can arrive at an appropriate sum: see Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [22].

1. It may be that the parties will be able to agree an amount, perhaps following a provisional assessment under the Consolidated Practice Directions. But I am not satisfied that, even on a broad brush approach, the court has sufficient material to be satisfied that it can fairly determine the amount of the costs that should be paid.
2. The costs are to be paid from trust funds. The proper order, in my opinion, is that the respondents should be allowed a reasonable amount in respect of all costs reasonably incurred.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Blenkinsop v Blenkinsop Nominees Pty Ltd [2015] WASC 463.

[2] In these reasons I will refer to that action (CIV 1537 of 2014) as the '2014 action'.

[4] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [18] [19].

[5] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [21].

[6] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [28].

[7] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [33].

[8] Mr Herbert describes the records of the trusts' former accountant as 'only in hard copy, fragmented and incomplete. Many of the records were missing, and in some cases, records for complete financial years were missing. The records rarely included supporting documentation of transactions, and the general ledger printout (if available) was the main source of information on individual transactions. Even then, the transaction descriptions in the general ledger were not comprehensive'. Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [49(c)].

[9] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017 [49].

[10] Affidavit of Jeffrey Laurence Herbert, sworn 24 October 2017, JLH 12, 136.

[11] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008); 237 CLR 66 [58].

[12] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar [65], [72].

[13] Australian Executor Trustees Ltd v Attorney General (WA) [2015] WASC 439 [32] - [33]. See also Plan B Trustees Ltd v Maitland Parker [2012] WASC 392 [45] - [47].

[14] Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226 [48]; Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360, 367.

[15] Fratcher WF, Scott on Trusts (4th ed, Little Brown, 1987) Vol IIIA s 246, quoted and approved in Chief Commissioner of Stamp Duties (NSW) v Buckle [48].

[16] Octavo Investments v Knight (369 - 370).

[17] Coates v McInerney (1992) 7 WAR 537; Southern Wine Corp Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31 WAR 162 [30].

[18] Octavo Investments v Knight, 370; Chief Commissioner of Stamp Duties v Buckle, 246. The trust deeds for the two Blenkinsop Family Trusts do not exclude any property from the lien, which extends over all of the trust property: Octavo Investments v Knight, 367.

[19] Chief Commissioner of Stamp Duties (NSW) v Buckle [48], [50]. Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360, 367.

[20] CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 [51].

[21] Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 336.

[22] Re Wilson; Kerr v Wilson [1942] VicLawRp 40; [1942] VLR 177, 183; and see Deancrest Nominees Pty Ltd v Nixon [2007] WASC 304 [49].

[23] Ireland v Retallack [2012] NSWSC 1179.

[24] Messina v Rodi As Executor of the Estate of Virginia Silvestro (Dec) [No 2] [2014] WASC 32 [13].

[25] Each of the respondents is also a guardian of each trust.

[26] In re Earl of Strafford, deceased; Royal Bank of Scotland Ltd v Byng [1980] 1 Ch 28, 44 45.

[27] Gisborne v Gisborne (1877) 2 App Cas 300, 305, 306, 310 311, 311 312; Whishaw v Stephens; Re Gulbenkian's Settlement Trusts [1970] AC 508, 518; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 427, 428 429.

[28] Karger v Paul [1984] VicRp 13; [1984] VR 161, 164 - 165.

[29] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar [79].

[30] Trustees Act 1962 (WA) s 95(2).

[31] Re Atkinson (dec'd) [1971] VicRp 73; [1971] VR 612, 615.

[32] Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247, [80].

[33] Australian Executor Trustees Ltd v Attorney General (WA) [33].

[34] Affidavit of Jeffrey Laurence Herbert, sworn 16 April 2018 [73].

[35] See, in particular, Blenkinsop -v- Blenkinsop Nominees Pty Ltd as trustee for the Blenkinsop Family Trust [2015] WASC 254; Blenkinsop -v- Blenkinsop Nominees Pty Ltd as trustee for the Blenkinsop Family Trust [2015] WASC 463.

[36] Herbert as trustee for the Blenkinsop Family Trust v Blenkinsop [2018] WASC 369.

[37] Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 578 - 579.

[38] In Re Buckton, Buckton v Buckton [ 1907] 2 Ch 406.

[39] For example Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119 [5]-[9]; Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 (S) [35].

[40] [2018] WASC 369 [66].