Cardaci v Filippo Primo Cardaci as executor of the estate of Marco Antonio Cardaci [No 5]

[2021] WASC 331 (S)

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION: CARDACI -v- FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI [No 5] [2021] WASC 331

CORAM:   LE MIERE J

HEARD:   30 DAYS BETWEEN 16 MARCH & 22 OCTOBER 2020

DELIVERED          :   1 OCTOBER 2021

PUBLISHED           :   1 OCTOBER 2021

FILE NO/S:   CIV 3186 of 2016

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

BETWEEN:   MAE CARDACI

Plaintiff

AND

FILIPPO PRIMO CARDACI as executor of the estate of MARCO ANTONIO CARDACI

First Defendant

GIOVANNI MAURIZIO CARRELLO as the Trustee in Bankruptcy of the Estate of MARCO ANTONIO CARDACI (Dec)

Second Defendant

POWERCITY PTY LTD

Third Defendant

DUPORTE CORPORATION PTY LTD

Fourth Defendant

ONGOLD CORPORATION PTY LTD

Fifth Defendant

RECTANGULAR PTY LTD

Sixth Defendant

FILE NO/S:   CIV 1750 of 2017

MATTER: Section 77 of the Trustees Act 1962

The Washburn Trust and the Marc Cardaci Testamentary Trust

BETWEEN:   MAE CARDACI

Plaintiff

AND

FILIPPO PRIMO CARDACI

First Defendant

WASHBURN PTY LTD

Second Defendant

RECTANGULAR PTY LTD

Third Defendant

ONGOLD CORPORATION PTY LTD

Fourth Defendant

DUPORTE CORPORATION PTY LTD

Fifth Defendant

POWERCITY PTY LTD

Sixth Defendant

ANGELA FRANCESCA CARLA FLORIDO

Seventh Defendant

Catchwords:

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) 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 [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 

Legislation:

Bankruptcy Act 1966 (Cth)
Family Provision Act 1972 (WA)
Income Tax Assessment Act 1936 (Cth)
Supreme Court Act 1935 (WA)
Trustees Act 1962 (WA)

Result:

Plaintiff appointed as trustee
Receiver of guardian powers not appointed
First defendant removed as executor
Net estate awarded to plaintiff

Category:    B

Representation:

CIV 3186 of 2016

Counsel:

Plaintiff	:	Mr M D Cuerden SC, Mr G D Cobby SC, Mr L Pham & Dr J McComish
First Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Second Defendant	:	Ms E McCloskey
Third Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Fourth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Fifth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Sixth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia

Solicitors:

Plaintiff	:	Herbert Smith Freehills
First Defendant	:	Bennett + Co
Second Defendant	:	Tottle Partners
Third Defendant	:	Bennett + Co
Fourth Defendant	:	Bennett + Co
Fifth Defendant	:	Bennett + Co
Sixth Defendant	:	Bennett + Co

CIV 1750 of 2017

Counsel:

Plaintiff	:	Mr M D Cuerden SC, Mr G D Cobby SC, Mr L Pham & Dr J McComish
First Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Second Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Third Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Fourth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Fifth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Sixth Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia
Seventh Defendant	:	Mr S Penglis SC, Mr M L Bennett & Mr W C J Zappia

Solicitors:

Plaintiff	:	Herbert Smith Freehills
First Defendant	:	Bennett + Co
Second Defendant	:	Bennett + Co
Third Defendant	:	Bennett + Co
Fourth Defendant	:	Bennett + Co
Fifth Defendant	:	Bennett + Co
Sixth Defendant	:	Bennett + Co
Seventh Defendant	:	Bennett + Co

Cases referred to in decision:

Abacus Trust Co (Isle of Man) v Barr [2003] EWHC 114 (Ch); [2003] Ch 409

Anglo-Italian Bank v Davies (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] 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] 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) 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] 2 Ch 583

Re Tempest (1866) LR 1 Ch App 485

Re Turner; Barker v Ivimey [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) 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

Table of Contents

Summary

People and entities

The parties

The plaintiff

Cardaci family

Cardaci family businesses

Washburn Trust

Distributions by Washburn Trust

The 2017 restructure

Assets of Washburn Trust

Assets of Marc's Testamentary Trust

Marc's finances

Factual overview

Marc meets Mae

Mae becomes a beneficiary of Washburn Trust

Marc and Mae marry

Marc makes new will and Memorandum of Wishes and varies Washburn Trust deed

Marc diagnosed with cancer

Frank dies

Marc's condition deteriorates

Grace dies

Shimmer and the Duporte loan

Mae purchases Watermans Bay property

Marc undergoes operation

Marc deposits $1.8 million to joint account

Marc passes away

Philip discusses Mae's living expenses

Washburn appointed trustee of Washburn Trust

Communications between Mae and Philip in early 2016

31 March 2016 meeting

Communications between 31 March 2016 meeting and 18 May 2016 meeting

Mae starts new relationship

18 May 2016 meeting

Events in late May and early June 2016

Mae and Philip arranged to meet on 16 June at the Wild Fig Café

Washburn Trust and Marc's Testamentary Trust 2016 distributions

13 July 2016 meeting

Emails between Mae and Philip after 13 July 2016 meeting

Settlement negotiations after Philip's 13 July 2016 offer

Marc's estate administered in bankruptcy

Philip causes Rectangular to replace Ongold as trustee of Marc's Testamentary Trust

Leone restructure

Mae commences the Trust action

Events after commencement of Trust action

The evidence

Documentary evidence

Plaintiff's witnesses

Mae

Dr Van Hagan

Charlotte Spence

Defendants' witnesses

Philip

Angela Florido

Christopher Smith

Anthony Cipriano

Dominico Macri

Tony Monisse

Kaye Bailey

Gary Same

The issues

Issues in CIV 1750 of 2017 (Trust action)

Issues in CIV 3186 of 2016 (Family Provision action)

Trust Action Issue 1: Should Washburn and Rectangular be removed as trustees of Washburn Trust and Marc's Testamentary Trust?

The plaintiff's case

Power of court to remove trustee

Trustee's duty in exercise of discretionary power

The circumstances of the Washburn Trust

Philip's statement of intention with respect to exercise of distribution powers

18 May 2016 meeting

13 July 2016 meeting

Philip's intention in making his settlement offer

Philip's conduct and management of the trusts

Repayment of the Duporte loan on 10 November 2015

The payment made on 10 November 2015

Marc's estate is not indebted to Marc's Testamentary Trust

Philip caused Ongold to breach its duty by making or ratifying the payment

Philip's conduct in asserting and accepting the alleged liability of Marc's estate to Marc's Testamentary Trust of $1,280,714

Philip's conduct in asserting and accepting the Powercity loans

Philip's entry into the Leone Shareholders Agreement

Agreement contravenes cl 27 of the Washburn Trust deed

Philip's failure to provide disclosure

Assertion of loans owing by Mae to Marc's Testamentary Trust

The payments to or on behalf of Mae from Marc's Testamentary Trust

Were the amounts advanced by way of loan?

The basis on which Philip decided the Payments were loans

It is expedient that Washburn and Rectangular be removed as trustees

Trust Action Issue 2: Should Mae be trustee of Washburn Trust and Marc's Testamentary Trust?

The issue

General approach to selection of new trustee

The rival proposals

Functions of the trustees

Factors for and against appointing Mae as replacement trustee

Competence to be trustee

Cost of professional trustee

The wishes of the creator of the trust

Conflict of interest as beneficiary

Conflict of interest – the litigation funding agreement

Philip's express concerns about Mae being appointed trustee

Acceptability of Mae as trustee to other beneficiaries

Impeding execution of the trusts

Mae should be appointed trustee

Trust Action Issue 3: Removal of Ongold and appointment of Rectangular As Trustee of Marc's Testamentary Trust

The Deed of Dismissal and Appointment of Trustee

The removal and appointment is beyond power

No improper purpose

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?

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?

The rival contentions

Deed of Trust

Deed of Variation

Deed does not nominate Mae as Guardian

Trust Action Issue 7: Should the court appoint a receiver of Philip's powers as guardian?

The issue

Power to appoint a receiver

Over what property a receiver may be appointed

The appointment of a receiver is inherently temporary

Court will not appoint receiver

Family Provision Action Issue 1: The Powercity loans

The issue

Powercity loans are due and payable

Family Provision Action Issue 2: The alleged liability of Marc's Testamentary Trust for $1,280,714

The issue

Marc's estate is not indebted to Marc's Testamentary Trust

Family Provision Action Issue 3: Philip's alleged breaches of duty as executor

The pleaded breaches of duty

Alleged breach of duty in relation to Powercity loans

Alleged breach of duty in relation to amount of Duporte loan

Alleged breach of duty by making settlement offer

Alleged failure to properly deal with net proceeds of sale of assets

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

The merits of this case

Family Provision Action Issue 5: Is Philip is liable in damages and/or to account to the estate?

Mae's claim

Powercity loans

Amount of Duporte loan

Expenses incurred by estate

Philip should be relieved of any liability

Family Provision Action Issue 6: Marc's will should be amended under the Family Provision Act 1972 (WA)

Family Provision Act

Jurisdiction established

Exercise of discretion

LE MIERE J:

Summary

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.

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

People and entities

The parties

1. 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.

2. 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.

The plaintiff

1. 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.

2. 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.

3. 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.

4. 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.

Cardaci family

1. 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.

2. 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.

3. 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.

4. 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.

5. Angela has not worked in the family businesses.

Cardaci family businesses

1. 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).

2. 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.

3. 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.

4. Cape operates in the resources, utilities and infrastructure sectors. It supplies civil, mining services and underground utility installation and maintenance services.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. 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.

13. 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).

14. 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.

15. 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.

16. 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.

17. 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.

Washburn Trust

1. 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.

Distributions by Washburn Trust

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. Marc died on 7 November 2015 and control of the trustee of the Washburn Trust, Ongold, passed to Philip.

The 2017 restructure

1. 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.

Assets of Washburn Trust

1. 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.

1. 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.

Assets of Marc's Testamentary Trust

1. 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.

Marc's finances

1. 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.

2. 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.

Factual overview

1. Before addressing the issues in these actions, I will outline the facts giving rise to those issues

Marc meets Mae

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

Mae becomes a beneficiary of Washburn Trust

1. 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.

Marc and Mae marry

1. 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.

2. 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.

3. 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

1. On 21 December 2012, Marc executed a deed of variation of the Washburn Trust, a new will and a Memorandum of Wishes.

2. 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.

3. 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.

4. 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.

Marc diagnosed with cancer

1. 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.

2. 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.

3. 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.

Frank dies

1. After a lengthy illness, Frank died on 6 January 2014.

Marc's condition deteriorates

1. 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.

2. 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.

Grace dies

1. Grace died on 20 November 2014. Her death was sudden and unexpected.

2. 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.

3. 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.

4. In examination‑in‑chief, Philip said that the three trusts established under Grace's will were 'one for each of her three children'.

Shimmer and the Duporte loan

1. 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.

2. 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.

3. On 22 October 2015, Philip sent Ms Bailey an email, copied to Marc, with the subject line 'Duporte dividend' which stated:

   Kaye

   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.

4. 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'.

5. 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.

6. 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.

Mae purchases Watermans Bay property

1. 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.

2. 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.

Marc undergoes operation

1. 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.

2. Marc survived the operation but was hospitalised again on 13 October and was again admitted to hospital on 30 October for surgery.

3. Marc returned home. On 3 November 2015, Mae hosted a Melbourne Cup function at Marc and Mae's house.

Marc deposits $1.8 million to joint account

1. 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.

Marc passes away

1. On 7 November 2015, Marc dies. Marc was admitted to Sir Charles Gairdner Hospital and subsequently transferred to St John of God Hospital.

2. 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.

3. 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.

Philip discusses Mae's living expenses

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

Washburn appointed trustee of Washburn Trust

1. 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

1. 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.

2. 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.

3. On 8 February 2016, Mae sent an email to Philip stating:

   Sorry to bother you again about finance issues.

   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.

1. Philip replied:

   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.

2. 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.

3. 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'.

4. On 19 February 2016, at Mae's request, Ms Bailey paid $93,304 to Ultimo Interiors for furniture for the Watermans Bay property.

5. 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.

6. 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.

31 March 2016 meeting

1. 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.

2. 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.

3. 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.

   [1] Exhibit 1118.

   [2] Exhibit 1119.

   [3] Exhibit 1120.

4. 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.

5. 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.

   [4] Exhibit 1118.

6. 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]

   [5] The March spreadsheet with Mae's handwritten notes is exhibit 1128.

7. 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.

   [6] Exhibit 1131.

8. 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.

   [7] Exhibit 1130, page 3.

9. 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.

10. 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.

11. 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

1. 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.

2. 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.

3. 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.

4. 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.

Mae starts new relationship

1. Mae first went on a date with Sean Hughes in mid‑April 2016. They started a romantic relationship shortly afterwards.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

18 May 2016 meeting

1. 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.

2. 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.

3. Mae says that she was shocked and distressed by what Philip said.

4. 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.

5. 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.

Events in late May and early June 2016

1. 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.

2. 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.

3. 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.

4. 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.

5. 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

1. 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.

2. 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.

1. 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].

   [170] Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd [2007] VSCA 309.

2. 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).

   [171] McFadzean v Construction, Forestry, Mining and Energy Union [2007] VSCA 289; (2007) 20 VR 250.

3. 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.

4. The appropriate order is that Phillip, Washburn and Rectangular pay 90% of Mae's costs of the proceeding.

5. There should be no order as to costs between Mae on the one hand and Ongold,  Powercity and Angela on the other.

6. Mae failed in her initial claim against Duporte. Mae should pay Duporte's costs.

Mae's application to amend statement of claim

1. Mae moved to amend the SOC as follows:

   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)

2. I refused leave to amend.

3. 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.

4. 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).

   [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.

5. 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.

   [174] Barnes v Addy (1874) LR 9 Ch App 2.

6. 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.

   [175] See National Trustees Executors & Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268 [71] ‑ [73].

7. 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

1. 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.

2. 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.

Family Provision proceeding

Entitlement of Philip to indemnity from Marc's estate

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

   [176] See, for example, Trapani v Ciocca [No 2] [2013] VSC 510 [11].

7. 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.

8. 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.

9. 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.

Costs of the proceeding

1. 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]

   [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).

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

Special order as to costs

1. 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.

2. 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.

3. The costs of each action should be assessed as if the proceedings were commenced by writ of summons.

4. 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.

Assessment of the costs of the two proceedings

Mae's proposal

1. 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.

Costs should be taxed together

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

BR
Associate to the Honourable Justice Le Miere

23 DECEMBER 2021