Elovalis v Elovalis - [2008] WASCA 141

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: ELOVALIS -v- ELOVALIS [2008] WASCA 141

CORAM: MARTIN CJ
BUSS JA
NEWNES AJA

HEARD: 6 MARCH 2008

DELIVERED : 4 JULY 2008

FILE NO/S: CACV 38 of 2007

BETWEEN: HELEN ELOVALIS
VICKI MICHELE TOT
Appellants
AND
ANASTASIOS VASILIOS ELOVALIS as Trustee of Mike's Gardening Trust
First Respondent
CHRISTOS VASILIOS ELOVALIS
Second Respondent

ON APPEAL FROM:
For File No               :  CACV 38 of 2007
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :ELOVALIS & ANOR -v- ANASTASIOS VASILIOS ELOVALIS AS TRUSTEE OF MIKE'S GARDENING TRUST & ANOR [2006] WASC 291
File No  :CIV 2056 of 2004

Catchwords:

Trusts - Discretionary trust - Whether primary judicial officer applied the correct test when summarily dismissing application to appoint new trustee - Obligations of a trustee when conferred with wide discretionary powers

Legislation:

Trustees Act 1962 (WA), s 77

Result:

Appeal allowed

Category: B

Representation:

Counsel:

Appellants:     Mr S Penglis
First Respondent           :     Mr T Lampropoulos SC
Second Respondent       :     Mr T Lampropoulos SC

Solicitors:

Appellants:     Freehills
First Respondent           :     Ilberys Lawyers
Second Respondent       :     Ilberys Lawyers

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

Armitage v Nurse [1998] Ch 241
Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384
Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226
Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82
CPT Custodian Pty Ltd v Commissioner of State Revenue of the State of Victoria [2005] HCA 53; (2005) 224 CLR 98
Edell v Sitzer (2001) 55 OR (3d) 198
Edge v Pensions Ombudsman [1998] 3 WLR 466
Edge v Pensions Ombudsman [2000] Ch 602
Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547
Forsayth NL v Northern Gold NL (Unreported, WASCA, Library No 940012, 20 January 1994)
Gartside v Inland Revenue Commissioners [1968] AC 553
Gisborne v Gisborne (1877) 2 App Cas 300
Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10
Kent v SS 'Maria Luisa' (No 2) [2003] FCFCA 93; (2003) 130 FCR 12
McLaughlin v Prince [2002] WASC 274
Miller v Cameron (1936) 54 CLR 572
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
Passingham v Sherborn (1846) 9 Bav 424; 50 ER 4076
Porteous v Rinehart (1998) 19 WAR 495
Re Beatty [1990] 1 WLR 1503
Re Estate of Roberts (1983) 20 NTR 13
Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74
Sargeant v National Westminster Bank PLC (1991) 61 P & CR 518
Securities and Exchange Commission v Chenery Corporation (1943) 318 US 80
Smith v Smith [2006] WASC 166
Tempest v Lord Camoys (1882) 21 Ch D 571
Vegners v Federal Commissioner of Taxation (1991) 21 ATR 1347

MARTIN CJ:

Summary

Helen Elovalis and Vicki Michele Tot (the daughters) appeal from the decision of the master granting summary judgment and dismissing proceedings which they had brought against their uncles, Anastasios Vasilios Elovalis (Steve Elovalis) and Christos Vasilios Elovalis (Chris Elovalis) in which they sought the appointment of a new trustee to Mike's Gardening Trust (the Trust). In my opinion, in dismissing the daughters' proceedings the master erred in two material respects:
(a)he applied the wrong legal test to assess whether there was an arguable case for the appointment of a new trustee to the Trust; and
(b)he misconstrued the powers and duties imposed upon the trustee by the Trust.
For the reasons which follow, in my opinion the master's decision should be set aside, the application for summary judgment dismissed and the proceedings reinstated.

The factual background

The daughters are the children of Michael Vasilios Elovalis and Sophie Elovalis. Michael and Sophie Elovalis separated in the late 1970s. They were unable to agree as to the disposition of the assets which had been acquired during the course of their marriage and ultimately proceedings were commenced in the Family Court of Western Australia relating to the disposition of that property. In 1980, before those proceedings were resolved, the Trust was created by deed dated 19 September 1980.

The Trust

The settlor of the Trust was George Henry Playford. The initial trustee of the Trust was Mike's Nominees Pty Ltd. That company issued two shares - one to Chris Elovalis and one to Michael Elovalis. The primary beneficiaries of the Trust are the children of Michael Elovalis - namely, the daughters. The Trust Deed provides that Michael Elovalis and the grandparents, uncles, aunts, nephews, nieces, cousins, spouses and children of the primary beneficiaries are also additional members to the class of general beneficiaries. Accordingly, Steve and Chris Elovalis are each additional members of the class of general beneficiaries. The appointor of the Trust is Chris Elovalis.
The Trust Deed confers unusually broad powers upon the trustee. By cl 3 of the deed, the trustee may apply any of the income of the Trust to or for the benefit of any of the general beneficiaries of the Trust 'in such shares as the trustee shall in the trustee's absolute discretion deem fit'. Further, by cl 5 of the deed, the trustee may 'at the trustee's absolute discretion' apply any of the capital of the Trust to or for the benefit of any of the beneficiaries of the Trust 'in such manner as the trustee in the trustee's absolute discretion shall think fit'. The same clause empowers the trustee to lend any moneys held by the Trust to any of the general beneficiaries 'either with or without security and upon such terms and conditions as to repayment and with or without interest as the trustee shall in the trustee's absolute discretion think fit'.
The same clause empowers the trustee to 'allow any beneficiary to occupy, have custody of, or use any immovable property or chattels' forming part of the Trust 'on such terms or conditions as to inventories, repair, replacement insurance, outgoings or otherwise at all as the trustee shall think fit'. Clause 6 of the Trust Deed confers a variety of powers upon the trustee relating to investment, the acquisition of land or business interests or personal property and the sale of any of the property of the Trust, which powers are said to be exercisable 'at the trustee's uncontrolled discretion'. Clause 7 of the Trust Deed confers powers upon the trustee 'with respect to any company in which the trustee holds shares, stocks or debentures or is otherwise interested or concerned' and which are also said to be 'at the trustee's uncontrolled discretion'. Clause 8 provides that the trustee is entitled to act and exercise all the powers conferred upon him notwithstanding that the trustee may be interested in the relevant transaction, and notwithstanding any conflict of interest. Clause 10 provides that the trustee is to have power 'at his absolute discretion' to sell, hire or lease any real or personal property of the Trust, or to lend or advance any Trust moneys to the trustee in his personal capacity, and to participate in a variety of other transactions which would ordinarily give rise to a conflict of interest.
Clause 14 of the deed provides:
Subject always to any express provision to the contrary herein contained every discretion vested in the Trustee shall be absolute and uncontrolled and every power vested in him shall be exercisable at his absolute discretion and the Trustee shall have the like discretion in deciding whether or not to exercise any such power. No trustee shall be responsible for any loss or damage occasioned by the exercise of any discretion or power hereby or by law conferred on the trustee or by failure to exercise any such discretion or power or for any loss or damage accruing as a result of concurring or refusing or failing to concur in any exercise of any power or discretion.
Clause 20 provides that the appointor is to be entitled 'in his absolute discretion at any time and from time to time' to remove any trustee and to appoint any additional trustee or trustees.
A number of assets were settled upon the Trust. They included the family home in North Perth, an interest which Michael Elovalis had in a car yard in Albany Highway, Victoria Park, and the business operated by Michael Elovalis at the time, being Mike's Gardening Service. Each of the daughters has deposed that the Trust was set up in an attempt to prevent their mother from receiving any property from the proceedings in the Family Court.
Michael Elovalis became unwell during the 1980s. Chris Elovalis gave up his employment to move in with Michael and care for him. He performed that role for almost 20 years, prior to the death of Michael Elovalis on 19 March 2002. In the meantime, the interest which the Trust held in the car yard in Victoria Park had been sold. The proceeds of sale were deposited with a bank, giving the Trust an asset of approximately $200,000 in the form of that deposit, together with its interest in the former family home in North Perth.
Following the death of Michael Elovalis, on 16 June 2002 the daughters met with Steve Elovalis to discuss their father's estate. There is a dispute as to what was said on that occasion. The daughters have deposed that they met with Steve Elovalis because Chris Elovalis had refused to discuss the Trust or the estate of their late father, or to provide any records or information relating to those matters. They have each deposed that Steve Elovalis said to them that he had been approached by Chris and that both he and Steve were going to protect their father's assets. They assert that Steve Elovalis said to them that they 'didn't deserve something for nothing'. They further depose that Steve Elovalis said that it was their mother's fault that their father had died, and it was their mother's fault that the family had broken down. They further assert that Steve Elovalis said that their father 'had written on a piece of paper that he wanted [them] to have everything if they were good girls, but that Chris had decided that he wanted to wait until he [(Chris) had] died'. According to the daughters, Steve also asserted that they were not allowed into the family home in North Perth without the prior approval of Chris Elovalis.
Steve Elovalis has denied, in an affidavit, that any conversation took place in those terms. He accepts that he may have said that it was appropriate for Chris Elovalis to continue to occupy the property for the time being, and that the assets of the Trust would be looked after, but otherwise denies the statements attributed to him by the daughters.
On 21 December 2003, Mike's Nominees Pty Ltd was deregistered by the Australian Securities & Investments Commission for failing to file relevant documents.

The proceedings

On 17 August 2004 the daughters commenced proceedings against Mike's Nominees Pty Ltd by originating summons, seeking the removal of that company from the position of trustee of the Trust, and the appointment of the daughters in its place, and in addition, seeking to restrain Chris Elovalis from exercising the power of the appointor of the Trust to remove or appoint a trustee, or alternatively, seeking his removal as appointor. Affidavits sworn in early August 2004 by each of the daughters in virtually identical terms were filed in support of their originating summons. Those affidavits contain the assertions with respect to the conversation on 16 June 2002 to which I have referred.
By deed dated 10 September 2004, Chris Elovalis exercised his powers as appointor to remove Mike's Nominees Pty Ltd as trustee of the Trust (if indeed it was still trustee of the Trust following its deregistration) and appointed Steve Elovalis as trustee of the Trust. Following his appointment, Steve Elovalis gave instructions to his solicitors to procure the reinstatement of Mike's Nominees Pty Ltd for the purpose of executing a transfer of the North Perth property to him in his capacity as trustee of the Trust. That transfer was registered on 17 October 2005.
In the meantime, on 26 October 2004, the originating summons was amended to delete Mike's Nominees Pty Ltd as a defendant, and to substitute Steve Elovalis as first defendant and Chris Elovalis as second defendant. At the same time, alternative relief in the form of the winding up of the Trust was also sought.
On 27 October 2004 the daughters applied for orders restraining Steve Elovalis and Chris Elovalis from dealing with the assets of the Trust, and interim orders were made to that effect. On 3 November 2004 the orders restraining Steve Elovalis from dealing with the assets of the Trust were continued. On 21 February 2005 the master varied the injunctive orders to allow for the payment of certain accounts and for funds held by the Trust to be deposited into an interest‑bearing account. On 23 May 2005, following argument, Justice McKechnie continued the injunctive relief restraining Steve Elovalis from dealing with the Trust property, but on terms which allowed for the transfer of the land to which I have referred, and the deposit of funds standing to the credit of the Trust in an interest‑bearing deposit, and allowing for the ordinary expenses of the Trust to be met by the trustee from Trust funds.
Directions were made for pleadings to be filed. On 28 September 2006, the daughters filed an amended statement of claim. Under the substantive heading 'Grounds for Removal' are seven separate sub‑headings, supported by differing factual allegations. The subheadings are:
(a)failure to account;
(b)failure to observe the requirements of the Deed;
(c)mala fides;
(d)conflict of interest;
(e)failure to act impartially;
(f)failure to exercise reasonable care in managing Trust assets;
(g)friction.
In that pleading, the daughters sought relief in the form of removal of Steve Elovalis as trustee of the Trust and the appointment of a new trustee. They did not seek their own appointment as trustees of the Trust.
In argument in support of their appeal, the daughters relied only upon the allegations of fact unfortunately grouped under the heading 'Mala fides'. The allegations relevantly relied upon in this appeal are in the following terms:
19(a)The first defendant on or about 16 June 2002 informed the plaintiffs orally that he and the second defendant had determined that:
(i)it was appropriate that the second defendant occupy the property until the second defendant's death;
(ii)they intended to protect the deceased's assets and that the plaintiffs did not deserve something for nothing particularly as their mother had caused the breakdown of the deceased's family and the deceased's death;
(iii)on the second defendant's death the plaintiffs might, depending whether their conduct had in the interim met with the first and/or second defendants' approval, receive some or all of the Trust Fund.
(b)The first defendant on the same occasion told the plaintiffs that:
(i)when he became trustee of the Trust the plaintiffs would get nothing from the Trust;
(ii)he was not obliged to repay the loan made to him by the Trust as the Deceased had told him that the money was a gift.
20During the period the first defendant has been trustee:
…
(c)… he has failed to adhere to and carry out the terms of the Trust … by allowing the second defendant to occupy the property without agreeing terms as to rent, insurance, repairs, maintenance, or outgoings as required pursuant to the term of the Trust … alternatively by failing to require the second defendant to comply with such terms as may have been agreed as to those matters;
…
21Pursuant to the facts pleaded in paragraphs 8, 19 and 20 the first defendant has acted:
(a)to provide a benefit to the second defendant by making the property available to him for his lifetime without due regard to the requirements of the Trust …;
(b)without due regard to the Trust Deed;
(c)on the basis that the plaintiffs are undeserving of any benefit from the Trust;
(d)on the basis that before the plaintiffs receive any benefit from the Trust their conduct should meet with the first and/or second defendants' approval.
22Pursuant to the facts pleaded in paragraphs 19 to 21 the first defendant has acted without due consideration for the purpose for which his power was conferred being to benefit the Primary and General Beneficiaries and on the basis of the impermissible purposes pleaded in paragraphs 21(c) and 21(d).
I describe the heading to those assertions of fact as unfortunate because, when regard is had to their content, it is clear that they are not, in fact, assertions of bad faith but rather, allegations of past and prospective breaches of trust, including assertions to the effect that Steve Elovalis, as trustee, had a predetermined view as to the manner in which the powers of trustee should be exercised, and would not give due and proper consideration to the competing claims of the various beneficiaries of the Trust, and that he would not exercise the discretion conferred upon him as trustee personally, but in conjunction with, or perhaps under the direction of, his brother.
It will be noticed that the allegations made in par 19(b) of the amended statement of claim were not included within the assertions made by the daughters in their affidavits sworn in early August 2004. That discrepancy has given rise to an application by the daughters to adduce further evidence in the appeal, to which I will refer below.
On 13 October 2006, Steve and Chris Elovalis applied for summary judgment. After hearing argument, on 20 December 2006 the master upheld that application, and following further argument with respect to the orders to be made following that decision, on 27 February 2007, ordered that the injunction be discharged, and that the originating summons be dismissed, with corresponding costs orders.

The decision of the master

After setting out the background to the proceedings the master referred to the terms of the Trust Deed. He then observed ([7]):
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.
In his reasons the master then assesses the allegations made by the daughters by reference to each of the seven sub‑headings which I have set out above. The relevant portion of his reasons dealing with the assertions upon which the daughters rely in the appeal is as follows ([15] ‑ [18]):
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.

The master's reasons then address the other allegations made under the remaining headings used in the amended statement of claim. In the course of considering the assertion that Steve Elovalis had failed to act impartially, because of the way in which he had managed the property, the master observed ([22]):
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.
In relation to the allegations grouped under the heading 'Friction' the master observed ([25]):
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.
The master concluded that the daughters did not have an arguable case for the removal of Steve Elovalis as trustee and indicated that he proposed to grant summary judgment and dismiss their claim.
At no point in his reasons did the master enunciate the legal test or criteria which he considered the daughters would need to satisfy in order to make out a case for removal of the trustee. However, it is to be inferred from the passages of his reasons which I have set out above, that the master considered that it was necessary for the daughters to establish that the trustee had acted in bad faith, or that he had done something other than what he was permitted to do by the Trust Deed or something prohibited by an injunction. It is also clear from the passages to which I have referred, that, in addressing those issues, the master took the view that the Trust Deed authorised the trustee to 'effectively do what he likes' with Trust property ([17]) or 'to do virtually anything with it' ([22]). For the reasons which follow, in my opinion the master erred in each of these respects.

The removal of a trustee

There are two sources of the court's jurisdiction to remove a trustee. One such source is the inherent jurisdiction of the court. However, the daughters eschewed reliance upon that source of jurisdiction for the purposes of their appeal. Another source of jurisdiction is s 77 of the Trustees Act 1962 (WA) which provides:
The court may, whenever it is expedient to appoint a new trustee or new trustees and it is inexpedient, difficult or impracticable so to do without the assistance of the court, make an order for the appointment of a new trustee or new trustees either in substitution for, or in addition to, any existing trustee or trustees, or although there is no existing trustee.
The authorities establish that the jurisdiction conferred upon the court by this section is remedial rather than punitive. By that I mean that the dominant consideration in the exercise of the jurisdiction is the welfare of the beneficiaries of the Trust, not the imposition of a sanction or punishment upon the trustee as a consequence of misconduct (see McLaughlin v Prince [2002] WASC 274, [14]). That proposition is reinforced by the terms of s 77(2) which provide a number of instances in which a new trustee may be appointed 'without limiting the generality of subsection (1)', including instances which do not involve misconduct or reflect discredit upon the part of the trustee.
The leading case in the area is the decision of the High Court in Miller v Cameron (1936) 54 CLR 572. In that case, Latham CJ observed (575):
It has long been settled that, in determining whether or not it is proper to remove a trustee, the Court will regard the welfare of the beneficiaries as the dominant consideration (Letterstedt v Broers). Perhaps the principal element in the welfare of the beneficiaries is to be found in the safety of the trust estate. Accordingly, even though he has been guilty of no misconduct, if a trustee is in a position so impecunious that he would be subject to a particularly strong temptation to misapply the trust funds, the Court may properly remove him from his office as trustee. (footnote omitted)
In the light of the observations made by the master to the effect that removal would only be justified in this case if misconduct had been demonstrated in fact, it is pertinent to observe that in this passage Latham CJ countenances the removal of a trustee because of a propensity or temptation to which the trustee might succumb in the future.
In Miller v Cameron, Dixon J observed (580 ‑ 581):
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
Dixon J went on to conclude, on the facts of Miller's case, that a lack of confidence in the trustee's further administration of the Trust was sufficient to justify his removal, without the necessity of establishing misconduct.
In Porteous v Rinehart (1998) 19 WAR 495, White J made a number of observations with respect to the proper construction and application of s 77 of the Trustees Act (WA). He cited with approval the observations made by O'Leary J with respect to the meaning to be given to the word 'expedient' in a similar context in the Trustees Act (NT) in Re Estate of Roberts (1983) 20 NTR 13 at 17:
'Expedient' here, I think, may be taken to mean 'conducive to advantage in general, or to a definite purpose; fit, proper, or suitable to the circumstances of the case'; OED, vol III, v 426. In the context of appointing a new trustee in substitution for an existing one, I take it to mean then conducive to, or fit or proper or suitable having regard to, 'the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee.
White J went on to refer with approval to the decision in Passingham v Sherborn (1846) 9 Bav 424; 50 ER 4076, in which trustees were removed without misconduct having been established on their part (in circumstances in which a conflict of interest arose). White J went on to refer to a New Zealand authority in the following passage at 508:
It was held in Hunter v Hunter[1938] NZLR 520 that the jurisdiction of the court to remove a trustee is ancillary to its principal duty to see that the trusts are properly executed and, if the court is satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee may be removed. The main guide in the exercise of this jurisdiction must be, not whether the trustee has committed breaches of trust, but the welfare of the beneficiaries.
More recently, in Smith v Smith [2006] WASC 166, Murray J observed, with respect to the use of the word 'expedient' in s 77 of the Trustees Act that ([3]) ‑ [4]):
It has been held that in the context the word 'expedient' is one which carries the meaning that the action of appointment would be fit, or proper, or suitable, having regard to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee.
As I have said, the jurisdiction is a remedial one but it is a power which, because it interferes with the appointments, by deed ordinarily, by the parties, will be exercised cautiously and only where the Court is satisfied that there is a clear need for the appointment to be made.
On the subject of misconduct, Murray J observed ([9]):
The question of misconduct is, on the authorities as I understand them, not a matter which necessarily carries an implication of fault or deliberate misconduct. It is a term which may be applied to a trustee who has failed to understand what are the obligations properly imposed upon him or her in the administration of the trust.
In Smith's case, the evidence established that there were significant disputes between the parties to the proceedings for the removal of a trustee. Murray J concluded that it would be inappropriate for the trustee to be a person who may have an interest in the outcome of those disputes, which led him to the conclusion that if the proper administration of the trust was to be advanced, independent trustees had to be appointed. Significantly, he exercised the power to appoint an independent trustee without considering it necessary to determine the rights or wrongs of the disputes which were identified in the evidence before him.
These various decisions establish that the jurisdiction to remove a trustee and appoint a substitute can be exercised whenever it is expedient to do so, in the sense described in the cases, and without it being necessary to establish bad faith, misconduct, or breach of trust.
It is clear from the passages in his reasons which I have set out, that the master did not apply the criterion of expedience, in the sense described in the cases, to the allegations made by the daughters in their amended statement of claim. It is clear from his reasons that the master assumed that the daughters had to establish that Steve Elovalis had been guilty of misconduct which could be characterised as actions taken in bad faith. He excluded from consideration the propensity of the trustee to act in bad faith in the future, both expressly and in his view that the relevance of statements made by Steve Elovalis before his appointment as trustee of the Trust must be doubtful. The fact that Steve Elovalis made the statements which the master was, for the purposes of the application, prepared to assume that he made, prior to his appointment as trustee, is a matter which might go to the weight of those statements, but not to their relevance if, as the daughters allege, they support the conclusion that he is unlikely to bring a fair and objective mind to the consideration of the competing interests of the beneficiaries of the Trust.
No doubt the master was induced to take the approach which he took by the unfortunate heading to the allegations of fact grouped under the heading 'Mala fides' in the amended statement of claim. However, as I have observed, the heading is not appropriate to those allegations of fact, nor was it necessary for the daughters to make out an arguable case of bad faith in order to sustain their claim for removal of the trustee.
The master having assumed, for the purposes of the application before him, that the daughters would make out the allegations made by them in their amended statement of claim, applying the criterion of expedience provided by s 77 of the Trustees Act, he should have concluded that the daughters had an arguable case for removal of the trustee.
The uncles advance two lines of argument in support of the approach taken by the master. The first is to point to the fact that the allegations made in par 19(b) of the amended statement of claim were not sustained by evidence before the master. However, the master proceeded upon the basis that he should assume that all the assertions attributed to Steve Elovalis in par 19 of the statement of claim could be made out at trial. The uncles have not filed any notice of contention to the effect that the master was wrong to take that approach.
The second line of argument relies upon observations made by Franklyn J in Forsayth NL v Northern Gold NL (Unreported, WASCA, Library No 940012, 20 January 1994) to the effect that:
It is not for the Court, on an O 16 application, to identify or accept some other cause of action, not pleaded, which the evidence before it might arguably support and which, possibly for good reason, was not relied on by the plaintiff in his statement of claim and to then allow the statement of claim to remain on foot in reliance on a possible subsequent amendment.
In reliance upon that passage, the uncles argue that the daughters have pleaded a case based on bad faith, and that their action should not be allowed to proceed on the basis of some other cause of action which they have not pleaded. However, the circumstances in which Franklyn J made the observation (set out above) are very different to the present circumstances. It is clear, when the context of the observation made by Franklyn J is taken into account, that his Honour was referring to an entirely separate and discrete and unpleaded cause of action, and not to a nuance or variant of the basic cause of action pleaded.
In this case the cause of action pleaded is for removal of the trustee under s 77 of the Trustees Act (WA). A number of allegations of fact are made in the pleading which are said to sustain that cause of action. Despite the unfortunate heading to which I have referred, there are in fact no allegations of bad faith made in the pleading. Rather, as I have observed, the allegations of fact, if made out, are capable of enlivening the jurisdiction of the court to remove a trustee on the grounds that it is expedient to do so. Because those allegations of fact have been pleaded, the observations made by Franklyn J in Forsayth have no application.
For these reasons, in my opinion the master erred in applying the wrong legal standard to his assessment of whether the facts alleged by the daughters gave rise to an arguable case.

The powers of the trustee

In evaluating the significance of the allegations made against the trustee, the master proceeded upon the basis that the Trust Deed empowered the trustee to 'do what he likes' with Trust property or 'to do virtually anything with it'.
As I have observed, the Trust Deed confers wide discretionary powers upon the trustee, often preceded by adjectival descriptions such as 'absolute' or 'uncontrolled'. The Trust Deed also specifically authorises the trustee to act in circumstances of conflict between his duties as trustee, and his personal interests. While these provisions of the Trust Deed certainly modify the precise content of the duties and obligations to which the trustee is subject, they do not alter the fundamentally fiduciary nature of the trustee's role. So, notwithstanding that the trustee is given a very broad discretion, and is expressly empowered to exercise it in circumstances of conflicting interest and duty, the discretionary powers are nevertheless given for the purposes of the due administration of the Trust. Notwithstanding the breadth of discretion conferred, each beneficiary of the Trust has a right to require its due administration, which includes a right to require the discretionary trustee to consider from time to time whether or not to exercise the discretionary powers conferred by the Trust in his or her favour (see Gartside v Inland Revenue Commissioners [1968] AC 553, 575; Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226; Commissioner of State Revenue v Serana Pty Ltd [2008] WASCA 82).
In Edge v Pensions Ombudsman [1998] 3 WLR 466 (decision affirmed in Edge v Pensions Ombudsman [2000] Ch 602), Vice‑Chancellor Scott expressed the opinion that it was meaningless to speak of a duty to act impartially in the context of a discretionary power to choose which beneficiaries, or which classes of beneficiaries should be the recipients of Trust benefits (486). In his view, because the trustees were entitled to exclude some beneficiaries from particular benefits and to prefer others, they were entitled to be partial. However, Vice Chancellor Scott observed that when exercising a discretionary power to choose between beneficiaries, trustees must not take into account 'irrelevant, irrational or improper factors', or arrive at a decision that can be said to be so unreasonable that no body of trustees properly directing themselves could have arrived at that conclusion (486 ‑ 487). It follows that, notwithstanding the breadth of discretion conferred upon the trustee by the Trust Deed in this case, it is nevertheless a discretion which has to be exercised by reference to the objects and purposes of the Trust, having regard to the competing interests of the various potential beneficiaries of the Trust, and without taking into account improper, irrelevant or irrational considerations. The discretions are, of course, to be exercised from time to time, having regard to all relevant circumstances as they exist from time to time. The discretions must also be exercised personally by the trustee, and not in conjunction with, or under the direction of, somebody else.
Accordingly, in concluding that the Trust Deed authorised the trustee to 'do what he likes' with Trust property, the master misconstrued the obligations to which the trustee is subject. The allegations made by the daughters in their amended statement of claim could, if made out at trial, arguably sustain the proposition that the trustee had a closed mind with respect to the exercise of the discretionary powers conferred upon him, or misunderstood the nature of those powers and the obligations to which he was personally subject. If those propositions were made out, they could arguably sustain the removal of the trustee on the grounds of expedience.
For these reasons, in my opinion, the master erred in the view which he took of the powers conferred upon the Trustee by the Trust Deed.

The application to admit fresh evidence

For the reasons which I have given, in my opinion the conclusion at which the master arrived was vitiated by legal error. Because appeals to this court are by way of rehearing, it thus falls to this court to either determine the application for summary judgment itself or remit the matter to the master for further consideration. The daughters urge the court to take the former course and, in that regard, seek to adduce further evidence to be used by the court not for the purpose of evaluating whether or not the master erred, but rather for the purpose of the court itself determining the application consequent upon a conclusion that the master's decision was vitiated by error.
The evidence sought to be tendered takes the form of affidavits explaining why the evidence was not adduced before the master, and affidavits to the effect that at the meeting on 16 June 2002, Steve Elovalis said words to the effect of the allegations made in par 19(b) of the amended statement of claim.
The principles that govern the reception of fresh evidence in appeals to this court are not in doubt. A recent convenient summary is to be found in the decision of Pullin JA in Goninan & Co Pty Ltd v Direct Engineering Services Pty Ltd [2007] WASCA 10.

For the reasons which I have given, in my opinion the evidence before the master was quite sufficient to preclude a conclusion to the effect that the daughters did not have an arguable claim for removal of the trustee. Accordingly, on the view which I take, the additional evidence is unnecessary to sustain the conclusion that the application for summary judgment should be dismissed and the proceedings restored. On that view of the matter, it is unnecessary to grant the application to adduce further evidence.
However, in case a different view is taken elsewhere, having regard to the interlocutory nature of the proceedings, the evidence as to the reason for the evidence not being adduced before the master, and the fact that the defendants had put on all the evidence which they wished to adduce before the master on that topic and are not therefore prejudiced by the late reception of this evidence, I would exercise the discretion in favour of receiving the evidence. In arriving at that conclusion, I take into account the submissions made on behalf of the uncles to the effect that notice was given of the lack of evidence to sustain the allegations in par 19(b) of the amended statement of claim by the written submissions filed on behalf of the uncles in the course of the proceedings before the master, and the submission that doubt must attach to the most recent affidavit evidence because of the failure of the daughters to refer to those assertions at the time their affidavits were sworn in August 2004. However, the latter submission seems to me to go to weight, and to be a matter properly investigated at trial. The former submission, which would support the conclusion that a conscious decision was taken not to lead the evidence now sought to be adduced before the master would ordinarily tell strongly against the reception of the evidence. However, in the somewhat unusual circumstances of this case, for the reasons I have given, I would nevertheless be inclined to allow it.

Conclusion

In my opinion this appeal should be allowed and the decision of the master set aside, and the defendants' application for summary judgment dismissed. Those orders would have the effect of restoring the daughters' proceedings. I would further direct that those proceedings be entered into the CMC List with a view to them being managed to trial as soon as possible.
BUSS JA: I agree with the Chief Justice, for the reasons he gives, that the appeal should be allowed. I have some additional observations

concerning the discretionary powers of the trustee under the Trust Deed generally including where the trustee is also a beneficiary.

The parties have referred to the trust as a 'discretionary trust'. That is a convenient and, in general, accurate description. It is important to emphasise, however, that the term 'discretionary trust' does not have a constant, fixed normative meaning, in the absence of an applicable statutory definition. See CPT Custodian Pty Ltd v Commissioner of State Revenue of the State of Victoria [2005] HCA 53; (2005) 224 CLR 98 [15] (Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ). It has been held that a discretionary trust, strictly so called, of its nature, confers on the beneficiaries no more than a right of due administration. See Kent v SS 'Maria Luisa' (No 2) [2003] FCFCA 93; (2003) 130 FCR 12 [59] (Tamberlin and Hely JJ). A beneficiary of a so-called discretionary trust will have an equitable proprietary interest in the assets of the trust fund only if the provisions of the trust instrument create that result. See CPT Custodian [15]; SS 'Maria Luisa' (No 2) [60].
In Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547, Gummow J examined the distinction between fixed and discretionary trusts and the distinction between general, special and hybrid powers. His Honour said:
A fixed trust is used to describe a species of express trust where all the beneficiaries are ascertainable and their beneficial interest[s] are fixed, there being no discretion in the trustee or any other person to vary the group of beneficiaries or the quantum of their interests. The expression 'discretionary trust' is used to identify another species of express trust, one where the entitlement of beneficiaries to income, or to corpus, or both, is not immediately ascertainable. Rather, the beneficiaries are selected from a nominated class by the trustee or some other person and this power may be exercisable once or from time to time. The power of selection is a special or hybrid power; a power exercisable in favour of any person including the donee of the power would be a general power and thus would be tantamount to ownership of the property concerned, whilst the objects of a special power would be limited to some class, and the objects of a hybrid power would be such that the donee might appoint to anyone except designated classes or groups.
The trust will be 'purely discretionary' where income and capital may be withheld altogether, but this would not be so where the donee of the power of selection had a discretion only as to the time or method of making payments to or for beneficiaries: see Scott on Trusts, 4th ed, s155. In this regard, the special or hybrid power would be further classified, or sub-classified, as a trust power or a bare power within the meaning of those expressions as discussed by the House of Lords in Whishaw v Stephens [1970] AC 508 and McPhail v Doulton [1971] AC 424. However, some courts and commentators have used the expression 'discretionary trust' only to describe cases where the power involved is a trust power rather than a bare power: see, for example, Re Baden's Deed Trusts (No 2) [1973] Ch 9 at 26 and Hanbury & Maudsley, Modern Equity, 12th ed, 1985, p 199.
It will be apparent that, unlike the division of trusts between purpose trusts and non-purpose trusts, and between express trusts, implied or resulting trusts and constructive trusts, and the classification of powers between general, special and hybrid powers, and between trust and bare powers, the usage of the term 'discretionary trust' is essentially descriptive rather than normative. The meaning of the term is primarily a matter of usage, not doctrine (551 ‑ 552).
His Honour's judgment was affirmed on appeal: Vegners v Federal Commissioner of Taxation (1991) 21 ATR 1347.
Where a trust instrument confers on the trustee discretionary powers which are described as 'absolute' or 'uncontrolled', that description does not authorise the trustee to 'do what he likes' with the trust fund. Where the trust instrument confers on the trustee an 'absolute and uncontrolled' discretion in relation to the exercise of a power, the court will not compel the trustee to exercise it, but if the trustee proposes to exercise it, the court will ensure that it is not exercised improperly or unreasonably. Further, where the power is combined with a trust or duty, the court will enforce the proper and timely exercise of the power, but will not interfere with the trustee's discretion as to the particular time or manner of his or her bona fide exercise of it. See Gisborne v Gisborne (1877) 2 App Cas 300, 305 ‑ 307 (Lord Cairns), 309 ‑ 310 (Lord Penzance); Tempest v Lord Camoys (1882) 21 Ch D 571, 578 (Jessel MR), 579 (Brett LJ), 580 (Cotton LJ).
A trustee may hold the trust fund on trust for himself or herself and others. Where the trust instrument authorises or does not prohibit the appointment of a beneficiary as the trustee, issues may arise as to the nature and extent of the fiduciary standards which govern the trustee's exercise of discretionary powers; in particular, those empowering the distribution of income or capital.
In Securities and Exchange Commission v Chenery Corporation (1943) 318 US 80, Frankfurter J said:
To say that a man is a fiduciary only begins analysis; it gives direction to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary? In what respect has he failed to discharge these obligations? And what are the consequences of his deviation from duty? (85 ‑ 86).
In other words, to describe someone as a fiduciary, without more, is meaningless. See Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74, 98.
Where a fiduciary relationship is constituted by, or arises out of, a trust instrument which specifies the fiduciary's powers and duties, the terms of the instrument must be examined for the purpose of determining the nature and scope of the fiduciary's undertaking. See Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384, 408 (Dixon J); Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15 ‑ 17 (Bryson J); Meagher Gummow & Lehane's 'Equity Doctrines & Remedies', 4th ed [5-075].
The nature and scope of the fiduciary duties of a trustee; for example, the duties to avoid conflicts of interest, to act with reasonable prudence and to observe impartiality, may be limited by the terms of the trust instrument. See Re Beatty [1990] 1 WLR 1503, 1506 (Hoffmann J); Armitage v Nurse [1998] Ch 241, 251 ‑ 256 (Millett LJ, Hirst and Hutchison LJJ agreeing); Edge v Pensions Ombudsman [2000] Ch 602, 621, 627 ‑ 630 (Peter Gibson, Ward and Chadwick LJJ); Edell v Sitzer (2001) 55 OR (3d) 198 [158] ‑ [159] (Cullity J).
In Re Beatty, Hoffmann J said:
The rule that a trustee cannot profit from his trust would ordinarily exclude the trustees themselves from the ambit of the powers, but clause 12(c) of the will allows the trustees to exercise any power conferred by the will, notwithstanding that they may have a direct personal interest in the mode of its exercise. This arguably allows the trustees, subject to having proper regard to their overall fiduciary duties, to make gifts or payments to themselves. They have in fact paid themselves £10,000 each in accordance with the express wish of Mrs Beatty that they should do so (1506).
In Sargeant v National Westminster Bank PLC (1991) 61 P & CR 518, cl 11(iv) of a testator's will permitted any trustee on his own or two trustees jointly to purchase the trust property. The English Court of Appeal (Nourse and Bingham LJJ and Sir George Waller) held that the effect of the provision was to exclude a purchase by the trustees from the operation of the rule which disabled a trustee from purchasing the trust property. Their Lordships also held:
It cannot be doubted that the trustees have ever since been in a position where their interests as tenants may conflict with their duties as trustees to the estate of Charles. But the conclusive objection to the application of the absolute rule on which Mr Romer relies is that it is not they who have put themselves in that position. They have been put there mainly by the testator's grant of the tenancies and by the provisions of his will and partly by contractual arrangements to which Charles himself was a party and of which his representatives cannot complain. The administrators cannot therefore complain of the trustees' continued assertion of their rights as tenants (523).
In summary:
(a)The fact that a trustee is also a beneficiary does not preclude discretionary powers conferred on the trustee (including powers in relation to the distribution of income or capital) from being fiduciary in character. See Snell's Equity, 31st ed [9-01].
(b)Where the trustee is also a beneficiary and the trust instrument dispenses with the no conflict rule, the trustee may distribute income or capital to himself or herself provided the power is exercised properly; that is, in good faith and for the purposes for which the power was given (and not for any ulterior purposes) including giving proper consideration to matters which are relevant and excluding from consideration matters which are irrelevant. See Edge in relation to pension funds and Re Beatty in relation to private trusts.
In the present case, the Trust Deed does not expressly authorise or expressly prohibit a beneficiary from being appointed or acting as a trustee or the sole trustee.
The original trustee, Mike's Nominees Pty Ltd, was a general beneficiary in consequence of additional members of the class of general beneficiaries, namely, Michael Elovalis and Chris Elovalis, holding shares in that company. See the definition of 'general beneficiaries' in cl 1(b) of the Trust Deed and the descriptions of the primary beneficiaries and the additional members of the class of general beneficiaries in the schedule to the Deed.
The Trust Deed confers broad powers on the trustee and excludes some fiduciary duties which would otherwise apply to the trustee's exercise of its discretionary powers. For example, cl 8 authorises the trustee to act and exercise all the powers conferred upon him notwithstanding that the trustee is a vendor or otherwise interested in the relevant transaction and notwithstanding that the trustee's interest or

duties in any particular matter or matters may conflict with his duties to the trust fund or the beneficiaries. Clause 10 provides that the trustee may, amongst other things, sell, transfer, hire, lease or dispose of any real or personal property of the trust fund or lend or advance any moneys to the trustee in his personal capacity or in his capacity as trustee of other trust funds or 'otherwise howsoever'. Also, cl 10 empowers the trustee to buy, transfer, acquire, hire or lease any real or personal property or to borrow any moneys from the trustee in his personal capacity or in his capacity as trustee of other trust funds or 'otherwise howsoever'.

Curiously, cl 19, which deals, relevantly, with the resettlement of the whole or any part of the capital of the trust fund, contains a proviso in these terms:
no part of the corpus of the Trust Fund shall be transferred to the Trustee or Trustees of any settlement under which the Settlor or any person who is or has been a Trustee of these presents is a Beneficiary whether absolutely contingently presumptively or prospectively.
Clause 19 is curious in that it is not easy to reconcile the absence of a prohibition in the Trust Deed against a beneficiary being appointed or acting as a trustee or the sole trustee, on the one hand, with the prohibition in cl 19 against any part of the capital of the trust fund being transferred to the trustee of any settlement under which any person who is, or has been, a trustee of Mike's Gardening Trust is a beneficiary, on the other. Counsel did not identify or make any submissions on this issue, and it is unnecessary, in this appeal, to resolve it or express an opinion on its significance.
NEWNES AJA: I agree, for the reasons given by Martin CJ, that the appeal should be allowed and with the orders the Chief Justice proposes.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: ELOVALIS -v- ELOVALIS [2008] WASCA 141 (S)

CORAM: MARTIN CJ
BUSS JA
NEWNES AJA

HEARD: 6 MARCH 2008

DELIVERED : 4 JULY 2008

SUPPLEMENTARY
DECISION :19 SEPTEMBER 2008

FILE NO/S: CACV 38 of 2007

BETWEEN: HELEN ELOVALIS
VICKI MICHELE TOT
Appellants
AND
ANASTASIOS VASILIOS ELOVALIS as Trustee of Mike's Gardening Trust
First Respondent
CHRISTOS VASILIOS ELOVALIS
Second Respondent

ON APPEAL FROM:
For File No               :  CACV 38 of 2007
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :ELOVALIS & ANOR -v- ANASTASIOS VASILIOS ELOVALIS AS TRUSTEE OF MIKE'S GARDENING TRUST & ANOR [2006] WASC 291
File No  :CIV 2056 of 2004

Catchwords:

Trusts - Appointor joined as defendant - Necessary to ensure that all matters in dispute are effectually and completely determined - Rules of the Supreme Court 1971 (WA), O 18 r 6(2)

Costs - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 18, r 4, r 6

Result:

Judgment entered in favour of the second respondent should not be allowed to stand
Costs of the appeal follow the event