Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd (No 2)

[2010] WASC 180

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   MONTEVENTO HOLDINGS PTY LTD -v- SCAFFIDI HOLDINGS PTY LTD [No 2] [2010] WASC 180

CORAM:   EM HEENAN J

HEARD:   9 JUNE 2010

DELIVERED          :   9 JUNE 2010

PUBLISHED           :  23 JULY 2010

FILE NO/S:   CIV 1487 of 2009

BETWEEN:   MONTEVENTO HOLDINGS PTY LTD

Plaintiff

AND

SCAFFIDI HOLDINGS PTY LTD
First Defendant

GIUSEPPE DIEGO SCAFFIDI
Second Defendant

MARIA SCAFFIDI By Guardian Ad Litem THE PUBLIC TRUSTEE
Third Defendant

FILE NO/S              :CIV 1522 of 2010

BETWEEN             :GIUSEPPE DIEGO SCAFFIDI

Plaintiff

AND

MONTEVENTO HOLDINGS PTY LTD
First Defendant

EUGENIO SCAFFIDI
Second Defendant

MARIA SCAFFIDI By Guardian Ad Litem THE PUBLIC TRUSTEE
Third Defendant

Catchwords:

Corporations - Solicitors - Costs - Costs of proceedings issued without proper authority of a corporation
Contempt of court - Insufficiency of compliance  with order of court - Order for examination of defendant in relation to compliance with order
Trusts and trustees - Eligibility for appointment of trustee - Application for removal of trustee

Legislation:

Supreme Court Act 1935 (WA), s 16(1)(d), s 24
Trustees Act 1962 (WA), s 77, s 78, s 93, s 94

Result:

Order for examination of defendant before Registrar  in relation to the extent of his compliance with previous order of court
Order for solicitors to pay costs of proceedings personally with right of indemnity against director who wrongly purported to give instructions on behalf of corporation
Applications for removal of trustee and for declaration of ineligibility to act dismissed

Category:    B

Representation:

CIV 1487 of 2009

Counsel:

Plaintiff:     Ms K A Vernon

First Defendant            :     No appearance

Second Defendant        :     Mr C M Slater

Third Defendant           :     Mr B W Ashdown

Solicitors:

Plaintiff:     Butcher Paull & Calder

First Defendant            :     No appearance

Second Defendant        :     Oldfield Legal

Third Defendant           :     Public Trustee (WA)

CIV 1522 of 2010

Counsel:

Plaintiff:     Mr C M Slater

First Defendant            :     Ms K A Vernon

Second Defendant        :     Ms K A Vernon

Third Defendant           :     Mr B W Ashdown

Solicitors:

Plaintiff:     Oldfield Legal

First Defendant            :     Butcher Paull & Calder

Second Defendant        :     Butcher Paull & Calder

Third Defendant           :     Public Trustee (WA)

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

Ascot Investments v Harper [1981] HCA 1; (1981) 148 CLR 337

Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549; (1989) 7 ACLC 841

Burswood Catering & Entertaining Pty Ltd v Australian Liquor, Hospitality & Miscellaneous Workers Union, Western Australian Branch [2002] WASCA 354; (2002) 131 IR 424

Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; (2006) 71 NSWLR 9

Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326

Elovalis v Elovalis [2008] WASCA 141

Gilford Motor Co Ltd v Horne [1933] Ch 935

Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121

Hobart Bridge Co Ltd v Federal Commissioner of Taxation (1951) 82 CLR 372; (1951) 25 ALJR 225

Industrial Equity Ltd v Blackburn (1977) 137 CLR 567; (1977) 17 ALR 575

Jones v Lipman [1962] 1 WLR 832; [1962] 1 All ER 442

Kennon v Spry; Spry v Kennon [2008] HCA 56; (2008) 238 CLR 366

Maria Scaffidi (by her next friend The Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29

McMahon v National Foods Milk Ltd [2009] VSCA 153; (2009) 259 ALR 20

Miller v Cameron [1936] ALR 301; (1936) 54 CLR 572

Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [2010] WASC 132

Parkin v Thorold (1852) 16 Beav 59; (1852) 51 ER 698

Pioneer Concrete Services Limited v Yelnah Pty Ltd (1986) 5 NSWLR 254; (1986) 11 ACLR 108

Porteous v Rinehart (1998) 19 WAR 495

Positive Endeavour Pty Ltd v Madigan [2009] SASC 281; (2009) 105 SASR 109

Re Wrightson [1908] 1 Ch 789

Salomon v Salomon & Co Ltd [1897] AC 22; [1895 ‑ 9] All ER Rep 33

Smith v Smith [2006] WASC 166

Walker v Wimborne (1976) 137 CLR 1; (1976) 50 ALJR 446

1. EM HEENAN J:  The issues raised by the two causes before the court are sequels to earlier decisions and orders in these and related proceedings, namely, the decision in Maria Scaffidi (by her next friend The Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29, heard and delivered on 13 January 2010 and published on 18 February 2010, and Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [2010] WASC 132, heard and delivered on 28 April 2010 and published on 10 June 2010. The reasons for those two decisions outline the background of the disputes concerning the Scaffidi Family Trust. Each reserved for future consideration some matters then still outstanding. Some of those outstanding matters have come back for consideration again now.

2. The two causes are originating summons numbers CIV 1487 of 2009 and CIV 1522 of 2010.  The matters outstanding together with a further application which has since been brought by Mr Giuseppe Diego Scaffidi (Mr Giuseppe Scaffidi) as plaintiff in CIV 1522 of 2010 are, respectively:

   (a)the liability for the costs occasioned by solicitors and counsel acting for Scaffidi Holdings Pty Ltd (Scaffidi Holdings) in both CIV 1487 of 2009 and CIV 1522 of 2010 when there were no lawful instructions given by that company to engage solicitors or counsel;

   (b)the application in CIV 1487 of 2009 that the second defendant Mr Giuseppe Scaffidi be committed or otherwise punished for contempt of court for alleged failure to comply with the order of 13 January 2010 to join in causing the delivery of titles, papers and documents relating to the affairs of the Scaffidi Family Trust to the newly appointed trustee, Montevento Holdings Pty Ltd (Montevento); and

   (c)a new application by Mr Giuseppe Scaffidi in CIV 1522 of 2010 for declarations or orders that Montevento was invalidly appointed as trustee of the Scaffidi Family Trust on the grounds that it was ineligible for such appointment or, alternatively, that it be removed as trustee and new trustees be appointed under s 77 of the Trustees Act 1962 (WA).

Costs occasioned by representation of corporation without proper authority

1. I deal first with the question of the liability for costs occasioned by solicitors and counsel appearing for Scaffidi Holdings without proper authority.

2. By order of 28 April 2010 I directed that the solicitors who had appeared and engaged counsel for Scaffidi Holdings should file and serve an affidavit or affidavits addressing the question of why they should not be ordered personally to pay the costs related to the appearance and submissions of Scaffidi Holdings when they had acted without the proper authority of the company.  An affidavit by the principal of the firm of solicitors (dated 11 May 2010) was duly filed and read on this application.  It contains an explanation of how the solicitors had accepted instructions from Mr Giuseppe Scaffidi, who had represented to them that he was a director of the company, authorised to give instructions on behalf of the company, and how the solicitors, when Mr Giuseppe Scaffidi's authority was queried by their opponents, took advice from counsel and were led to believe that there was an arguable basis upon which Mr Giuseppe Scaffidi had authority to give instructions on behalf of the company.

3. For reasons which I gave in Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [2010] WASC 132 that was not the case. There were then sufficient indications available that the board of Scaffidi Holdings had been deadlocked for a long time and that there was, therefore, no power for an individual director to give instructions or to incur liabilities on behalf of the company. For those reasons, I concluded that the costs caused to other parties by Scaffidi Holdings bringing that unsuccessful application should not be borne by that company, nor by Montevento or by Mrs Maria Scaffidi, represented by her guardian ad litem the Public Trustee, or by Mr Eugenio Scaffidi. I consider that all of those parties are entitled to their costs of the proceeding insofar as they were caused by action taken by Scaffidi Holdings.

4. It has long been established that where a solicitor acts in proceedings without authority he or she may be answerable for the costs occasioned by that conduct even if that was the result of an innocent mistake by the solicitors concerned.  There is ample authority for that approach and the following description of the position is to be found in an earlier edition of the Supreme Court Practice (the White Book) at [3874] which says:

   This principle applies where proceedings are instituted without authority or an appearance entered:  Re Gray (1891) 65 LT 745; The Neptune [1919] P 21, or the proceedings are defended without authority or an authority once given comes to an end. For example, the plaintiff may be non‑existent: Simmons v Liberal Opinion Ltd [1911] 1 KB 966 or may die: Tetlow v Orelia Ltd [1920] 2 Ch 24 or may be an infant: Geilinger v Gibbs [1897] 1 Ch 479 or may be or become of unsound mind: Younge v Toynbee [1910] 1 KB 210, CA, or may be a limited company which has no directors properly appointed or other officers capable of giving instructions to institute proceeding: West End Hotels Syndicate v Bayer [1912] 29 TLR 92 or the instructions may have come from minority directors: Fergus Navigation Co v Kingdon (1861) 4 LT 262, or directors not properly appointed: John Morley Building Co v Barras [1891] 2 Ch 386, or dissident directors acting mala fide: Marshalls' Valve Gear Co v Manning Wardle & Co [1909] 1 Ch 267. The jurisdiction exists even where the solicitor bona fide believes he has authority and if there is a substantial dispute as to facts, may in a proper case leave the party asking for costs to bring his action for damages for breach of warranty of authority: Young v Toynbee (supra).  Usually it will, if necessary inquire or direct an inquiry into the facts ‑ for example, whether a plaintiff alleged to be of unsound mind, was capable of instructing a solicitor …

5. In the present case the very controversy raised in the proceedings, and the position advanced by Mr Giuseppe Scaffidi, on behalf of Scaffidi Holdings, revealed the dysfunctional condition of the company and the inability of its directors to reach any agreement.  This, therefore, is clearly an occasion where this principle applies and where orders should be made accordingly.

6. For these reasons, therefore, I am satisfied that the solicitors purporting to act for Scaffidi Holdings and Mr Giuseppe Scaffidi himself should be jointly and severally responsible for those costs.  Because it is clear that the solicitors were led into this erroneous position by the insistence of Mr Giuseppe Scaffidi, who still attempted to assert his authority to give instructions on behalf of the company after it was challenged, he should indemnify the solicitors for all costs or liability which they themselves are called upon to discharge because of this order.

Application for committal or other orders for alleged contempt of court in failing to comply with the order of 13 January 2010

1. In CIV 1487 of 2009, for reasons set out in Maria Scaffidi (by her next friend the Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29 I ordered that Mr Giuseppe Scaffidi and Scaffidi Holdings should do all things necessary to deliver to Montevento all indicia of title, all trust records and other documents formerly held by Scaffidi Holdings relating to the affairs of the Scaffidi Family Trust without prejudice to any right of indemnity which Scaffidi Holdings might have in respect of trust assets for liabilities which the company properly incurred on behalf of the trust estate. This order, on the basis of the evidence which had been canvassed at that hearing, required that the title deeds, share certificates, if any, bank account records and similar documents apparently in the possession of Mr Giuseppe Scaffidi on behalf of Scaffidi Holdings, should be delivered to the new trustee, Montevento. The order, however, contained provisions to the effect that so far as the trust estate assets consisted of certain specified real property, or where bank accounts were held on behalf of the trust estate, that a registrar of this court could execute a transfer or other document in order to transfer the title or right to control of the asset or assets concerned should it be necessary to do so.

2. From the affidavits read on this application, being the affidavits of Mr Eugenio Scaffidi, sworn 17 March 2010, Mr Giuseppe Scaffidi, sworn 27 April 2010, Mr Giuseppe Scaffidi, sworn 1 June 2010 and Mr Eugenio Scaffidi, sworn 9 June 2010, it is apparent that there is a real controversy as to whether Mr Giuseppe Scaffidi has fully or sufficiently complied with the order of 13 January 2010 in relation to the transfer or delivery up of trust assets and records.

3. These affidavits reveal that there are significantly contested versions of facts relating to whether or not there has been compliance with the order of 13 January 2010.  By his affidavit of 17 March 2010, Mr Eugenio Scaffidi, the director of Montevento, describes the steps which have been taken by the current trustee's solicitors to enforce the orders of 13 January 2010.  He describes alleged inaction by Mr Giuseppe Scaffidi which, so it is submitted, reveals that the latter is reluctant, or is delaying, to comply with that order.  According to Mr Eugenio Scaffidi, Montevento had not then received from Mr Giuseppe Scaffidi or any other source the records or documents referred to in the order of 13 January 2010.  At his instructions, the solicitors for Montevento, on 14 January, 15 January and 4 February 2010 sent correspondence to Mr Giuseppe Scaffidi calling for compliance with the order of 13 January 2010 and the solicitors provided a copy of that extracted order to the second defendant.  Again, according to Mr Eugenio Scaffidi, there was no reply received from Mr Giuseppe Scaffidi's solicitors until 13 February 2010 but by letter of that date the solicitors asserted that since Scaffidi Holdings was entitled to be indemnified by the Scaffidi Family Trust in relation to liaibilities incurred in its capacity as trustee of the trust, Scaffidi Holdings 'intends to retain possession of the Trust records as security for the payment of the amounts owed'.  The solicitors for Montevento responded by letter of 15 February 2010 demanding compliance with the orders of 13 January 2010 and received a response from the solicitors for Mr Giuseppe Scaffidi the next day but no time was given by or within which compliance would occur.

4. Then, in an affidavit sworn 27 April 2010 in opposition to the application that he be dealt with for alleged contempt, Mr Giuseppe Scaffidi asserted that he had complied with the orders of 13 January 2010 as best he could, describing the actions which he had taken in that respect.  He prepared a diary spreadsheet (annexure GDS‑1) detailing the work performed.  His efforts to recover relevant documents in the period to 9 March 2010 had been set out in his earlier affidavit of 9 March 2010 which had been sworn and filed in support of an unsuccessful application to suspend enforcement of the orders of 13 January 2010.  By his affidavit of 9 March 2010, Mr Giuseppe Scaffidi said that he had experienced difficulties in locating the material records because he had changed offices twice over the preceding two years and that all his records, not of immediate relevance, had been stored offsite without being properly catalogued.  He said that he had commenced the process of retrieving these records and asked for additional time of about 10 weeks to complete that work.  I observe that there had been no mention of difficulties or delays in obtaining material records at the hearing leading to the orders of 13 January 2010.

5. By a further affidavit sworn 1 June 2010, Mr Giuseppe Scaffidi outlined efforts which he had made since 28 April 2010 to comply with the orders of 13 January 2010.  In this affidavit he swore that on 14 May 2010 he had delivered to the solicitors for Montevento all of the documents he had identified as being the records of the Scaffidi Family Trust.  He also said that since that date his personal assistant had found a bundle of Bendigo Bank statements and bank reconciliations for the Scaffidi Family Trust covering the period from 1 May 2003 to 31 May 2006.  He said that he believed that those documents had been misfiled and had given instructions to his assistant to send them by post to Montevento.  By letter from the solicitors for Montevento dated 19 May 2010, Mr Giuseppe Scaffidi was asked to provide additional documents, including the original Trust deed and a deed of variation and Trust records relating to wages, superannuation and similar matters.  He explained that on 1 June 2010 his solicitors had replied to this correspondence, stating that he had none of the documents requested and saying that some of the documentation was merely historical.  Mr Giuseppe Scaffidi said in this affidavit that he has only limited storage facilities and does not keep documents for more than seven years and, accordingly, some documents may have been lost due to several office relocations.  He concluded by asserting his belief that he had caused to be delivered to Montevento all of the documents identified as relating to the Scaffidi Family Trust.

6. Montevento has, therefore, only had very limited opportunity before the hearing of this matter to respond to these assertions by Mr Giuseppe Scaffidi.  However, in an affidavit sworn 9 June 2010, Mr Eugenio Scaffidi confirmed that Montevento has received two boxes of Scaffidi Family Trust records from Mr Giuseppe Scaffidi and from these has prepared an inventory of documents received.  According to him, the records provided do not amount to anywhere near the total volume of Trust records.  Mr Eugenio Scaffidi also refers to the exchange of correspondence between the solicitors for Montevento and Mr Giuseppe Scaffidi and said that at 9 June 2010 Montevento had not received the original additional Bendigo Bank statements and reconciliations for the period 1 May 2003 to 31 May 2006 referred to by his brother.  According to Mr Eugenio Scaffidi, he had in May 2007 seen a number of original Trust records at the office of Scaffidi Holdings' then solicitors during a meeting.  According to him, these included original mortgage documents, original bank statements, original cheque books and the like, and copies were made by the solicitors present.  Mr Eugenio Scaffidi believes that these documents are still in the possession or under the control of Mr Giuseppe Scaffidi and have not been provided to Montevento.  Mr Eugenio Scaffidi also believes that there should be detailed financial records and books in computerised form available because of the need to keep such records for taxation purposes.  He asserts that because of the volume of Trust records, which he believes remain in the possession or control of Mr Giuseppe Scaffidi or which have not been accounted for, this demonstrates that Mr Giuseppe Scaffidi does not intend to comply with the order of 13 January 2010.

7. It is not possible to make any final findings about this controversy on the basis of the evidence as it presently stands.  It is necessary that this controversy should be more fully investigated before such findings could be made.  For that reason, therefore, at this stage I will do no more than describe the situation which has now been reached and the major factual controversies outstanding.  Since the order of 13 January 2010 shares held by the trustee company in Central City Pty Ltd (Central City) and the control of the trust estate's bank accounts have been transferred to Montevento as a result of instruments executed by a Registrar pursuant to the terms of that order and without involvement by Mr Giuseppe Scaffidi.  Apart from that, there has been little in the way of documents, records or papers relating to the affairs of the Scaffidi Family Trust that has been delivered to the new trustee.  For example, past taxation returns, bank accounts and records, documents dealing with the estate real property and investments were not supplied.  However, after the plaintiff, Montevento, instituted the applications for sanctions against Mr Giuseppe Scaffidi for alleged contempt of court arising from non‑compliance or insufficient compliance with the order of 13 January 2010 a number of other documents were assembled and delivered to the representatives for Montevento but only after that delay.  Again, these have not been comprehensive and counsel for the applicant submits that one would expect that there would be in existence bank records, taxation returns and other financial documents relating to the affairs of the Scaffidi Family Trust in existence and under the control of the former trustee or Mr Giuseppe Scaffidi which should have been supplied.

1. From the evidence, it appears that there are records and other documents accessible to Mr Giuseppe Scaffidi which have not been produced or examined and which may contain materials which should be delivered to the new trustee.  He asserts, in his affidavit of 9 March 2010, that such is the volume of this material that he has not, with his other pressing commitments, had a sufficient opportunity to examine it but is prepared to do so in the near future if given a further opportunity.  He also submits that such past records of the Scaffidi Family Trust as may exist are not necessary or essential for the current administration and control of the trust.

2. It may be premature to suggest that these submissions are tendentious but the evidence is sufficient to satisfy me that there are reasons to believe that the delivery of the documents, records and materials of the Scaffidi Family Trust has not been complete and that a real question arises as to whether there has been compliance, or adequate compliance, by Mr Giuseppe Scaffidi with the order of 13 January 2010.  This is an unsatisfactory position.

3. On the present application there has been no opportunity for further investigation or cross‑examination of Mr Giuseppe Scaffidi upon his affidavits.  No request has been made for cross‑examination of the deponent of the affidavits relied upon by the applicant, nor would there seem to be any reason for him to be cross‑examined as his affidavits simply describe the correspondence and point to the absence of documents or materials which one would reasonably suppose to be in existence and be held by or on behalf of the trust estate.

4. Accordingly, I am satisfied that the question of whether or not there has been a contempt of court and, if so, one warranting sanctions of the kind sought against Mr Giuseppe Scaffidi, should not be pursued without more detailed investigation of these unresolved issues of fact.  Accordingly, I concluded that I should order that Mr Giuseppe Scaffidi be examined on oath or affirmation before a Registrar of this court on a date to be fixed where he can be cross‑examined upon the contents of the affidavits which he has filed and upon the extent to which he has complied with the order of 13 January 2010. 

5. The Registrar conducting that examination should have the power to issue, on the application of any interested party, a witness summons or subpoena to any such other person or body as may reasonably be expected to have information or records relating to the affairs of the Scaffidi Family Trust, such as solicitors, accountants, real estate agents, stockbrokers, bankers and the like, to require attendance before the Registrar by such persons and the production of such records as may assist in the resolution of the issues to be inquired into at that examination.

6. I also directed that counsel for the Public Trustee should be at liberty to attend at the examination of Mr Giuseppe Scaffidi and to participate in that examination to the extent allowed by the Registrar.  I have directed, however, that the focus of this examination should be restricted to identifying the existence, location and accessibility of trust documents or other Trust assets and should not extend to a review of the course of the administration of the trust other than as may be necessary to identify trust documents and records now in existence which should be delivered to the new trustee.  At the time I announced that I would settle the terms of the orders after minutes had been provided by counsel, and that has since been done.

Application for declaration that Montevento Holdings Pty Ltd was invalidly appointed trustee or, alternatively, for an order for its removal as trustee

1. This application is made on originating summons CIV 1522 of 2010 by Mr Giuseppe Scaffidi. As a potential beneficiary of the Scaffidi Family Trust, he claims he has the standing to bring the application notwithstanding that his interest is only as a potential beneficiary and is dependent upon the exercise of a discretion to distribute income or capital by the trustee. No challenge to his standing to bring the application was raised and it is, therefore, unnecessary for me to go into any such issue. The powers of the court to grant relief of the kind sought by Mr Giuseppe Scaffidi, at least in relation to the removal of a duly appointed trustee, were identified as s 77, s 78, s 93 and s 94 of the Trustees Act 1962 (WA) and the inherent jurisdiction of the court, the latter apparently being intended as a reference to s 16(1)(d) and s 24 of the Supreme Court Act 1935 (WA).

2. Therefore, upon the uncontested assumption that Mr Giuseppe Scaffidi has the standing to obtain such relief, I turn to the submission advanced on his behalf that Montevento was invalidly appointed as trustee of the Scaffidi Family Trust by the deed of 18 February 2009 because it was not eligible to be appointed as trustee.  In advancing this submission counsel for Mr Giuseppe Scaffidi relies upon cl 11 of the deed of settlement, which provides in part:

   Subject to the provisions of this Deed the Appointor may by instrument in writing at any time and from time to time:

   remove any Trustee hereof;

   appoint any additional Trustee or Trustees;

   appoint a new Trustee or Trustees in the place of any Trustee who resigns his Trusteeship or ceases to be a Trustee by operation of law.

   If, and so long as any individual Appointor is a Beneficiary, that individual shall not be eligible to be appointed as a Trustee.

3. As described in the reasons for decision in [2010] WASC 29 at [14] ‑ [17], the appointment of the present trustee, Montevento, was effected by a deed dated 18 February 2009 by which the newly appointed appointor, Mr Eugenio Scaffidi, pursuant to the powers conferred by cl 11 of the deed of settlement, removed Scaffidi Holdings as trustee and appointed, in its stead, Montevento as trustee. Montevento is not, and was not at any material time, a beneficiary or potential beneficiary of the Scaffidi Family Trust and, therefore, on the face of it at least, is not ineligible to be appointed as trustee.

4. This separate legal identity of a corporation is basic in company law and has long been established.  Its origins antedate the decision of Salomon v Salomon & Co Ltd [1897] AC 22; [1895 ‑ 9] All ER Rep 33. It has been recognised repeatedly at the highest level, for example, in Hobart Bridge Co Ltd v Federal Commissioner of Taxation (1951) 82 CLR 372; (1951) 25 ALJR 225; and Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121. A company as a separate legal entity is not to be regarded as an agent for its controller ‑ Industrial Equity Ltd v Blackburn (1977) 137 CLR 567; (1977) 17 ALR 575; and Walker v Wimborne (1976) 137 CLR 1; (1976) 50 ALJR 446.

5. In this case, however, the submissions for Mr Giuseppe Scaffidi are that there is but one director and shareholder of Montevento; namely his brother, Mr Eugenio Scaffidi, and that for present purposes Montevento should be regarded as the alter ego of, or otherwise be identified with, Mr Eugenio Scaffidi who, as a beneficiary of the Scaffidi Family Trust, is ineligible for appointment as trustee.  For that reason, the appointment of Montevento is said to be invalid so as to give rise to a need to vest the trust property in new trustees or, if the appointment be valid but defective, for the trustee to be removed and new trustees appointed.  Mr Giuseppe Scaffidi has proposed two independent accountants as suitable trustees for appointment to that role.

6. Counsel for Montevento submitted that this issue raised by Mr Giuseppe Scaffidi was not open and could not be pursued because in [2010] WASC 29, in proceedings to which Montevento and Mr Giuseppe Scaffidi were parties and in which they appeared and were heard, I had held that Montevento was the current trustee of the Scaffidi Family Trust, having been appointed in the manner already described. Counsel for Montevento, therefore, submitted that the question of the validity of the appointment and the status of Montevento as trustee had become a matter of res judicata as between Montevento and Mr Giuseppe Scaffidi and could not be reopened or further challenged on this current application.

7. It is the case that in that previous decision I held that Montevento was the current trustee of the Scaffidi Family Trust but no attempt had been made in those proceedings to allege that it had been invalidly appointed and no evidence was presented to suggest that it had.  Certainly, Mr Giuseppe Scaffidi did not raise the present ground as a basis for any alleged invalidity of appointment, although there does not appear to be any reason why he could not have raised that issue then.  Nevertheless, I am conscious that in [44] of my reasons for decision on that previous occasion I adverted to the possibility that nothing in those proceedings would prevent any person with an interest in this trust estate, whether that be Scaffidi Holdings or Mr Giuseppe Scaffidi himself, from challenging in independent proceedings the validity of the appointment of Montevento or its suitability to continue as trustee.  I, therefore, proceeded on the basis that the responsibility of such a challenge remained open and, in those circumstances, I do not see how it would be right to conclude that there is now an estoppel preventing Mr Giuseppe Scaffidi from making such a challenge.  However, in view of the conclusion which I have reached upon the merits of the challenge to the validity of the appointment of Montevento and its eligibility to be trustee, it is not necessary to pursue to the end the question of whether or not that challenge is precluded by that earlier decision.  I have, therefore, proceeded on the basis that Mr Giuseppe Scaffidi is still entitled to pursue this aspect of the relief which he is seeking.

8. Counsel for Mr Giuseppe Scaffidi began his submissions with the proposition that equity looks to substance over form:  Parkin v Thorold (1852) 16 Beav 59; (1852) 51 ER 698 [66] and Kennon v Spry; Spry v Kennon [2008] HCA 56; (2008) 238 CLR 366 He further referred to the doctrine of piercing the corporate veil, as discussed in Ford's Principles of Corporations Law at [4.250] ‑ [4.260], particularly at [4.250]; Gilford Motor Co Ltd v Horne [1933] Ch 935; and Jones v Lipman [1962] 1 WLR 832; [1962] 1 All ER 442. He submitted that this doctrine can be applied where a company structure is being used for the sole or dominant purpose of evading an existing obligation. The applicant further submitted that there is authority in Australia to the effect that in certain cases the corporate veil can be disregarded: Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549. 575 ‑ 576; (1989) 7 ACLC 841 (Rogers AJA); Burswood Catering & Entertaining Pty Ltd v Australian Liquor, Hospitality & Miscellaneous Workers Union, Western Australian Branch [2002] WASCA 354 [37] ‑ [38]; (2002) 131 IR 424 (Scott J); and Pioneer Concrete Services Limited v Yelnah Pty Ltd (1986) 5 NSWLR 254, 264; (1986) 11 ACLR 108 (Young J). The submission proceeded that the separate legal identity of the company would be disregarded on occasions where it is apparent that the company was formed or used to facilitate the evasion of legal obligations of which the situation in Gilford Motor Co v Horne is an example.  Counsel referred to cases in which the Gilford Motor Co decision was cited or followed, including Positive Endeavour Pty Ltd v Madigan [2009] SASC 281; (2009) 105 SASR 109; McMahon v National Foods Milk Ltd  [2009] VSCA 153; (2009) 259 ALR 20; Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326; and Cactus Imaging Pty Ltd v Peters [2006] NSWSC 717; (2006) 71 NSWLR 9. Further, he submitted that cases where intervention to disregard the corporate entity had been refused by a court could be explained because of the presence of a consistent theme that either the controller was not deemed to be in control or that control was not without doubt or exception: Ascot Investments v Harper [1981] HCA 1; (1981) 148 CLR 337, or that the corporate entity had an apparent commercial context and purpose identifiably separate from the impugned circumstance: Pioneer Concrete Services Ltd v Yelnar Pty Ltd.  However, I do not consider that those are the only circumstances or occasions in which such disregard of the separate legal identity of a corporation may occur.  Failure to recognise the separate legal corporate identity is very much the exception rather than the rule and occurs essentially in cases where this is necessary to prevent what amounts to fraudulent conduct.

9. The applicant submits that Montevento is simply a contrivance to avoid the obligation owed by Mr Eugenio Scaffidi, as appointor, to observe the terms of the deed of settlement or, in other words, that Mr Eugenio Scaffidi's sole or dominant purpose is for Montevento to act as trustee under his influence to achieve an object which he could not achieve personally. 

10. It is not in doubt that Mr Eugenio Scaffidi is the sole director and shareholder and hence the sole controller of Montevento and that the latter company has no apparent commercial purpose or history other than acting in the role of trustee.  This latter point, however, is of very little significance because acting as trustee for a trust estate of any magnitude which has, or is likely to have, substantial commercial activities in the form of investments, shareholdings or the like, is an important commercial purpose itself.  Furthermore, there are many substantial reasons which render it desirable for such a company to act solely as trustee and so avoid any potential conflict of interest or risk of mixing trust property with other property which the company might itself own both legally and beneficially.

11. There is nothing anomalous or suspicious about a corporation being formed or controlled by only one person.  By the First Corporate Law Simplification Act 1995 (Cth) it became possible for one person to form a proprietary company (s 114) and, with other changes (and further simplified by the Company Law Review Act 1998 (Cth)) included provisions that a corporation which has only one member may pass a resolution by that member satisfying the requirements of holding a directors' meeting.

12. Nor is it possible to say, in any meaningful sense, that Montevento has been formed in order to avoid or evade some legal obligation resting upon Mr Eugenio Scaffidi.  This is not an example of those cases in which a corporation has been formed in order to deflect or assign an actual or potential liability of an individual such as, for example, a liability for taxation, or to deflect a liability to creditors or others.  It is simply incongruous to assert that Mr Eugenio Scaffidi has or had a liability or obligation in respect of the Scaffidi Family Trust.  He is and was a beneficiary.  He became appointor.  He was and is ineligible to be a trustee but that does not mean that he is under any obligation or liability to refrain from being a director, shareholder or controller of a corporation which is trustee.  As submitted by counsel for Montevento, the deed of settlement itself contemplates that the trustee may be a corporation and this recognition is to be found in cl 11 itself ‑ cl 11.01 and cl 11.03.

13. There is simply no evidence which would justify a finding that Mr Eugenio Scaffidi has appointed Montevento for an improper purpose.  Montevento as a corporation is an eligible candidate for trustee and its incorporation was for that very purpose, to take over and assume the administration of this trust from a previous corporate trustee which, because of disagreement between the directors, was incapable of discharging those obligations.  It is by no means insignificant that Scaffidi Holdings was appointed and acted as trustee when its only two directors were  Mr Giuseppe Scaffidi and his brother, Mr Eugenio Scaffidi, both of whom were beneficiaries.  It has not been suggested that Scaffidi Holdings was ineligible to act as trustee because its only two directors were beneficiaries.  The design of the deed of settlement is that of a typical family trust in which the trustee will be, or will be controlled by, respected members of the family for whose benefit the trust has been created.  Where an existing trustee company turns out to be unable to perform that role, because of deadlock between its directors, it is inevitable that another trustee should be appointed.  The power of replacing a trustee given to the appointor obviously is designed to be used in such a contingency.  If a new trustee has to be appointed there are no restrictions or exclusions in the deed of settlement other than that contained in cl 11, which excludes an individual beneficiary being a trustee.  As the deed obviously contemplates a corporation being trustee, the absence of any disqualification upon a beneficiary being a director, shareholder or controller of the trustee corporation is itself significant as an indication that no such prohibition was intended or created.

14. As trustee, Montevento is subject to the duties and obligations resting upon any trustee at law and in this case as also set out in the deed of settlement.  There are ample avenues of redress available to any aggrieved beneficiary to challenge or review the actions of the trustee.  More significantly, there is no allegation that Montevento has admitted, or is threatening or likely to commit, any breach of trust.  There is simply no reason to conclude that Montevento will do anything other than perform the obligations of trustee according to law and be subject to all the controls to which any such trustee is susceptible.  Accordingly, I am satisfied that at all material times Montevento is and was eligible for appointment as trustee of the Scaffidi Family Trust and that there has been no invalidity in its appointment to that office.

15. The ultimate submission on behalf of Mr Giuseppe Scaffidi was that, even if validly appointed as trustee, Montevento should be removed because being controlled solely by Mr Eugenio Scaffidi and having regard to the animosity existing towards  him by Mr Eugenio Scaffidi, it is not a suitable trustee. 

16. Nor is the existence of the alleged animosity a reason for removing Montevento as a trustee.  Unfortunate as it no doubt is that animosity exists between brothers, it is obvious that it is at least part of that animosity which has led to the deadlock between the directors of the former trustee, Scaffidi Holdings, which precipitated the need for the appointment of a new trustee.  That animosity cannot be allowed to prevent the future due administration of the Scaffidi Family Trust or to exclude, as a trustee, a company controlled by Mr Eugenio Scaffidi when no basis in fact has been established to suggest that the new trustee will act otherwise than in accordance with all the obligations of that office.

17. I am satisfied that in this case the deed of settlement draws a clear distinction between individuals and corporations, recognises that a corporation may be a trustee or co‑trustee of this trust, and contains no actual or implicit prohibition upon a corporation, even if controlled by a beneficiary, from being such a trustee.  Because the corporation is distinctly and legally separate from the individual, I do not consider that the prohibition in the deed of settlement against an individual beneficiary being a trustee prohibits the appointment of Montevento and, accordingly, I dismiss the application by Mr Giuseppe Scaffidi seeking declarations or other relief on the basis that Montevento was invalidly appointed.

18. It is, of course, the case that there has been a long history of animosity, and one must conclude deeper animosity, unfortunately existing between Mr Eugenio Scaffidi and his brother, Mr Giuseppe Scaffidi, but there are many possible reasons and explanations for that which underlie the disputes concerning the affairs of the Scaffidi Family Trust as administered by Scaffidi Holdings in the past years.  I am not satisfied by the evidence in these proceedings that there is any reason to conclude that Montevento will not properly discharge its new role as trustee.  The evidence is to the effect that there were substantial commercial and financial concerns about the safety and security of trust assets which led to the deadlock in Scaffidi Holdings and the removal of that company as trustee.  I am not in the least persuaded that the refusal by Mr Eugenio Scaffidi to accept the policies and approaches towards the administration of the trust estate proposed by his brother, Mr Giuseppe Scaffidi, are prompted by anything other than a well‑founded concern for the safety and security of the trust estate.  Even assuming that this deep‑seated animosity is likely to continue for some time, there is no reason to suppose that this will prevent Montevento, under the directorship of Mr Eugenio Scaffidi, or any others, from performing conscientiously its fiduciary and trust obligations. 

1. By his counsel, Mr Giuseppe Scaffidi submits that the prime consideration on an application for a removal of a trustee is the welfare of the beneficiaries and that this is inextricably associated with the preservation of the welfare of the trust estate:  Miller v Cameron [1936] ALR 301; (1936) 54 CLR 572; and Elovalis v Elovalis [2008] WASCA 141 [29] ‑ [40] (Martin CJ). His submission is that the jurisdiction to remove a trustee and appoint a substitute can be exercised whenever it may be expedient to do so without it being necessary to establish bad faith, misconduct or breach of trust, and relies further on the observations of White J in Porteous v Rinehart (1998) 19 WAR 495.

2. Here, however, there is no evidence to establish or suggest that the welfare of the trust estate or the interests of the beneficiaries is, or is likely to be, jeopardised with Montevento as trustee.  Rather, the reverse is the case for the evidence establishes that under the trusteeship of Montevento, efforts are being made to identify, collect and preserve the assets of the trust estate and to call up a large debt due by a company associated with Mr Giuseppe Scaffidi, namely Central City.  So far as inferences go, the evidence suggests that the criticisms levelled at the potential role of Montevento by Mr Giuseppe Scaffidi are prompted more by concern for his own personal interests and those of Central City than concerns about the welfare of the trust assets and estate.  There is simply no basis to conclude that continuation in office by Montevento as trustee would prevent or inhibit the proper execution and administration of the Scaffidi Family Trust.  That being the case, there is no necessity of justification for its removal as trustee:  Re Wrightson [1908] 1 Ch 789, 797 ‑ 798. As Murray J observed in Smith v Smith [2006] WASC 166 [4], the power to remove a trustee under s 77 of the Trustees Act should be exercised cautiously.

3. One must be careful not to cast a jaundiced eye over the motives of an applicant for relief under s 77 of the Trustees Act, or be too ready to draw adverse inferences but, in this present case, it must not escape attention that the applicant for the removal of Montevento as trustee, is a person whom that trustee had to bring before the court for the purpose of obtaining orders requiring him to deliver to the new trustee titles, documents and papers relating to the trust estate and property and that on the evidence at this present hearing, including his own affidavit, it is apparent that Mr Giuseppe Scaffidi has failed in due time and completely to perform that obligation.

4. I see no basis upon which Montevento should be removed as trustee.  The application made by Mr Giuseppe Scaffidi for an order that Montevento should be removed as trustee must also be dismissed.