Elovalis v Anastasios Vasilios Elovalis as trustee of Mike's Gardening Trust - [2006] WASC 291

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ELOVALIS & ANOR -v- ANASTASIOS VASILIOS ELOVALIS AS TRUSTEE OF MIKE'S GARDENING TRUST & ANOR [2006] WASC 291

CORAM: MASTER SANDERSON

HEARD: 3 NOVEMBER 2006

DELIVERED : 20 DECEMBER 2006

FILE NO/S: CIV 2056 of 2004

BETWEEN: HELEN ELOVALIS
VICKI MICHELE TOT
Plaintiffs
AND
ANASTASIOS VASILIOS ELOVALIS AS TRUSTEE OF MIKE'S GARDENING TRUST
First Defendant
CHRISTOS VASILIOS ELOVALIS
Second Defendant

Catchwords:

Summary judgment - Application by defendants - Turns on own facts

Legislation:

Nil

Result:

Action dismissed
Judgment for defendants

Category: B

Representation:

Counsel:

Plaintiffs:     Dr P R MacMillan
First Defendant             :     Mr T Lampropoulos
Second Defendant         :     Mr T Lampropoulos

Solicitors:

Plaintiffs:     Friedman Lurie Singh & D'Angelo
First Defendant             :     Ilberys Lawyers
Second Defendant         :     Ilberys Lawyers

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Anderson v Effexseven (1998) 10 ANZ Ins Cas 61424
Burton v Shire of Bairnsdale (1908) 7 CLR 76
Forster v Davies (1861) 4 De G F & J 133
Gava v Grljusich, unreported; SCt of WA; Library No 960010; 11 January 1996
Karger v Paul [1984] VR 161
Michael v Nicolson, unreported; FCt SCt of WA; Library No 950660S; 1 December 1995
Porteous v Rinehart (1998) 19 WAR 495
Tallents v Caine [2001] WASC 63

MASTER SANDERSON: This is the defendants' application for summary judgment. An appearance in this matter was filed on 24 November 2004 and the application for summary judgment was made on 16 October 2006. The application is near enough to two years out of time. The first order sought by the defendants is an order for extension of time to bring the application.
There is no affidavit from the defendants dealing directly with the question of delay. However, an amended statement of claim was only filed on 28 September 2006. This document was filed after considerable correspondence passed between the parties. The defendants submitted, and I accept, that the plaintiffs' claim really only crystallised once the amended statement of claim was filed. That being so, there is no real or significant delay between the filing of the statement of claim and the filing of the application for summary judgment. Accordingly, I am prepared to extend the time within which the defendants can bring this application.
The first defendant is, as the title to the action suggests, presently the trustee of Mike's Gardening Trust ("the Trust"). The Trust was established by a deed on 19 September 1980. The first defendant became the trustee of the Trust on 10 September 2004. He was appointed to that position by the second defendant who is the appointor of the Trust. The principal asset of the Trust is a property at 134 Chelmsford Road, North Perth. By this action, the plaintiffs seek the removal of the first defendant as trustee of the Trust. They do not say who ought be appointed trustee in the first defendant's stead. Prior to amending the statement of claim they had sought to be appointed as trustees. No orders are sought against the second defendant. Whatever else is done in these proceedings, the action against the second defendant ought be terminated.
On 27 October 2004, the plaintiffs obtained an injunction against the defendants. That injunction remains in place. The purpose of the injunction was to maintain the status quo. By its terms, the injunction restrains the first defendant from exercising his power under the trust deed and, relevantly, restrains him from "dealing with, transferring, selling or in any way disposing of, or encumbering in any way, any assets" of the Trust. The effect and operation of this injunction is central to the first defendant's application for summary judgment.
Before dealing with the plaintiffs' claim, I should say something about the terms of the trust deed. By its terms, it permits the trustee at his absolute discretion to lend any sum out of the trust fund to any general beneficiary with or without interest. The trustee has power at his absolute discretion to lend or advance any moneys to the trustee in his personal capacity. As if these powers were not wide enough, the deed directs that the discretion vested in the trustee shall be absolute and uncontrolled and every power vested in him shall be exercisable at his absolute discretion. The trustee is given the like discretion in deciding whether or not to exercise any such power.
The trustee may at his absolute discretion allow any beneficiary to occupy or use any immovable property forming part of the trust fund on such terms and conditions as the trustee shall think fit. The trustee has at his uncontrolled discretion the further powers and authorities to advance and lend moneys to any person. This includes the trustee personally. The loans can be made upon such terms and conditions as the trustee may in his absolute discretion think fit. The trustee is authorised to act on the opinion or advice or information obtained from any financial advisor, lawyer or other professional.
It is doubtful whether a trust could ever better fit the description of a discretionary trust. The powers given to the trustee are wide and unfettered. In determining this application, the Court is required to assess the proper administration of the Trust by reference to the terms of the trust deed.
The amended statement of claim gives seven grounds which the plaintiffs allege make the first defendant unfit to act as trustee. First, there is an alleged failure to properly account. In dealing with this complaint, it must be borne in mind that the first defendant was trustee for only just over six weeks before the injunction was granted against him. The amended statement of claim complains about the failure of the first defendant to provide information during the whole of the period he has been trustee. Given the restraint he is under, it is difficult to see how he could have supplied that information.
Nonetheless, the first defendant has provided to the plaintiffs information he has available to him. An accountant prepared a balance sheet and profit and loss statement for the Trust for the year ending 30 June 2004. Those accounts were prepared on the instructions of the previous trustee. But they were passed on by the first defendant to the plaintiffs. So the plaintiffs had a clear picture of the financial position of the Trust as at 30 June 2004, some four months before the injunction was issued.
The amended statement of claim complains that there has been no accounting for funds the property of the Trust. The evidence shows that the available funds of the Trust were, after the grant of the injunction, deposited in the defendants' solicitors' trust account. Communications between the parties' solicitors then followed with a view to having the available funds transferred from the trust account to an interest‑bearing account. That was not done until 26 May 2006. But, as the evidence makes clear, no complaint can be made against the first defendant for the delay in transferring the moneys to the interest‑bearing account.
The plaintiffs complain that the first defendant has not caused accounts for the financial years ending 2005 and 2006 to be prepared. But given the restraint imposed by the injunction, there is no way the first defendant could have done so. There was a request by the first defendant to the plaintiffs that the injunction be varied to allow accountants to be engaged to prepare the accounts. But the plaintiffs would not agree.
In my view, there is no basis at all upon which it can be said that the first defendant has failed properly to account to the plaintiffs.
The second ground for removal of the first defendant is his alleged failure to observe the requirements of the trust deed. This claim refers back to the failure to prepare proper accounts. The same argument applies - the trustee can hardly be expected to follow the terms of the trust deed when he is restrained by the Court from doing so.
In any event, the express terms of the Trust envisage that the trustee may choose not to prepare accounts. It is all part of the wide discretion given to the trustee by the terms of the deed. In my view, there is no basis for saying that the first defendant has failed to observe the requirements of the deed.
The third ground is alleged mala fides. This allegation rests on two grounds. The first is a conversation or series of conversations said to have taken place between the first defendant and the plaintiffs. Essentially, it is alleged that the first defendant said that the second defendant could occupy the property until his death, that he, in conjunction with the second defendant, intended to preserve the assets of the Trust and that the plaintiffs did not deserve to benefit from the Trust. It is further alleged that the first defendant said that on the second defendant's death, the plaintiffs might benefit from the Trust but that would depend upon the first defendant's views as to their conduct. He is also alleged to have said that the plaintiffs would get nothing from the Trust and he was not obliged to repay any loan made to him by the Trust. All of these statements are disputed but, for the purposes of a summary judgment application, it must be assumed that they will be made out by the plaintiffs at trial.
In my view, none of these statements could be taken to demonstrate mala fides. All of the statements are alleged to have been made before the date upon which the first defendant became a trustee of the Trust. That fact, in itself, renders the relevance of the statements doubtful. But what the plaintiffs must establish is that in his capacity as trustee, the first defendant has acted in bad faith. It serves no purpose for the plaintiffs to establish that they suspect if given the opportunity the first defendant will act with bad faith. That could never be the basis for removing a trustee.
There are a further series of allegations put against the first defendant which are said to show mala fides. In relation to the property, he is said to have allowed the home to remain unoccupied and in a dilapidated and deteriorating state, and he has left the block adjacent to the house non‑productive of revenue for the Trust. Two things can be said about these allegations. First, the trust deed authorises the first defendant to effectively do what he likes with the property. Second, there is nothing the first defendant can do with the house or the adjacent property at present because of the terms of the injunction.
It is further alleged, as an alternative, that the first defendant has allowed the second defendant to occupy the property without agreeing terms as to rent, insurance, repairs, maintenance and outgoings. Again, he is authorised by the trust deed to do what he likes with respect to the property. There is then the matter of the injunction. This allegation does not establish mala fides.
It is further alleged that the first defendant has failed to maintain separate capital and income accounts as required by the terms of the trust deed. Even assuming that were correct (and given the terms of the injunction it is doubtful whether the first defendant was in a position to create such accounts), there is nothing to suggest that this was done in bad faith. The evidence shows that the Trust has no or very little income. Keeping separate accounts is hardly an issue.
Other complaints repeat matters to do with the accounts. Nothing need be said on this issue. In all, the plaintiffs have not pleaded matters which could establish mala fides on the part of the first defendant.
The fourth allegation is of a conflict of interest. It is said there is a conflict between the first defendant's position as trustee and as a borrower from the Trust. There is no merit in that allegation. The loan account pre‑dates the appointment of the first defendant as trustee of the Trust. Even if that were not the case, the trust deed expressly permits the trustee in his absolute discretion to lend money to himself. That is a complete answer to the allegation.
Fifthly, it is alleged that the first defendant has failed to act impartially. All of the allegations made in relation to this aspect of the plaintiffs' claim have to do with the way in which the first defendant has managed the property. Again, there are two answers to these complaints. First, the injunction places a restraint on the extent to which the first defendant can deal with the property. Second, the terms of the trust deed are so wide as to allow him to do virtually anything with it. There is no merit in this allegation.
The sixth allegation is an alleged failure to exercise reasonable care. In essence, this repeats the complaints with respect to the property. For the reasons I have outlined above, there is no merit in this claim.
Finally, there is an allegation of friction. What is pleaded is that the relationship between the plaintiffs and the first defendant has broken down or deteriorated to such an extent that it is appropriate to remove the first defendant as trustee of the Trust. The particulars of this breakdown of the relationship are scanty and it is open to question whether, if the matters particularised were established, there is sufficient to establish a dysfunctional relationship. But for the purposes of this application, it can be assumed that there is an unhappy relationship between the first defendant and the plaintiffs.
But for friction to give rise to grounds for removing a trustee there needs to be evidence of the trustee doing something other than what he is permitted to do by the trust deed or doing what he is not permitted to do by an injunction. It is not enough that the trustee is not doing what he has been told to do by beneficiaries or some of them. In this case, there is nothing in the pleaded facts which could establish that there is friction and that the proper course is to remove the first defendant as trustee of the Trust.
Dismissing an action in a summary fashion is not a step to be taken lightly. It is necessary for a defendant to establish that there is no reasonable cause of action available to the plaintiff. That, of course, must be done by reference to the pleaded case. In this matter, after careful consideration of all the allegations raised by the plaintiffs and giving them every consideration, I am not satisfied that they have a claim against the first defendant. I would dismiss the plaintiffs' claim.
I will hear the parties as to the precise form of orders and as to costs.