Philip Milton Rundell as trustee for the M.M. Trust v Palermo
[2023] WASC 318
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PHILIP MILTON RUNDELL as trustee for THE M.M. TRUST -v- PALERMO [2023] WASC 318
CORAM: SOLOMON J
HEARD: 15 AUGUST 2023
DELIVERED : 22 AUGUST 2023
FILE NO/S: CIV 2147 of 2022
BETWEEN: PHILIP MILTON RUNDELL as trustee for THE M.M. TRUST
Plaintiff
AND
THE EXECUTOR OF THE ESTATE OF JOHN PALERMO
First Defendant
PALERMO GROUP PTY LTD
Second Defendant
DPM CONSULTING (AUS) PTY LTD
Third Defendant
JOHN JOSEPH PALERMO
Fourth Defendant
ANTHONY PALERMO
Fifth Defendant
Catchwords:
Application for directions under Trustees Act 1972 (WA) s 92 - Whether trustee justified in not assigning claim to a beneficiary - Prospects of claim - Where no indemnity provided to trustee - Where long-standing animosity between beneficiaries
Legislation:
Trustees Act 1962 (WA) s 92
Result:
Directions given
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J Winton |
| First Defendant | : | No appearance |
| Second Defendant | : | Ms G Cooper |
| Third Defendant | : | Mr C Birbeck |
| Fourth Defendant | : | Ms G Cooper |
| Fifth Defendant | : | Mr C Williams |
Solicitors:
| Plaintiff | : | Williams & Hughes |
| First Defendant | : | No appearance |
| Second Defendant | : | Clyde & Co (Perth Office) |
| Third Defendant | : | Meridian Lawyers (Perth) |
| Fourth Defendant | : | Clyde & Co (Perth Office) |
| Fifth Defendant | : | Solomon Brothers |
Cases referred to in decision:
Australian Executor Trustees Ltd v Attorney General (WA) [2015] WASC 439
Blatchford v Laine [2018] WASC 207
Boyle v Farano [2023] WASC 303
Gore v Justice Corporation [2002] FCA 354; 189 ALR 712
Knight v F P Special Assets (1992) 174 CLR 178
Macedonian Orthodox Community Church v The Diocesan Bishop [2008] HCA 42; 237 CLR 66
Mighty River International v Hughes [2018] WASC 368
Plan B Trustees Limited v Parker [No 2] [2013] WASC 216
Wood v Wood [No 4] [2014] WASC 393
SOLOMON J:
This is an application under s 92 of the Trustees Act 1962 (WA) (Act) by the plaintiff, Mr Phillip Rundell, who is the trustee (Trustee) of a trust known as the MM Trust. Only the fifth defendant, Anthony Palermo, opposed the application.
The MM Trust
The MM Trust was established by deed of settlement dated 18 March 1992.[1] The MM Trust's business activities involved mainly property development and other commercial endeavours. Prior to the appointment of the Trustee, the trustee of the MM Trust was a company by the name CMT Pty Ltd.[2]
[1] Supplementary affidavit of Philip Milton Rundell sworn 3 May 2023, "PMR-7".
[2] Supplementary affidavit of Philip Milton Rundell sworn 3 May 2023, "PMR-7", 28.
The MM Trust arose out of business activities between Anthony Palermo, and his late brother, John Palermo. Anthony Palermo and John Palermo were the directors of the trustee CMT Pty Ltd.[3] Anthony Palermo and his brother John fell into dispute in around 2011. The dispute has led to considerable litigation as a result of which, on 23 September 2013, the plaintiff Mr Rundell was appointed by this court as the independent trustee of several trusts associated with Anthony Palermo and John Palermo, including the MM Trust.[4] Notwithstanding the appointment of an independent trustee, the acrimony and disputation has continued between beneficiaries of the various trusts, including the MM Trust. The Trustee has sought to undertake his role in the context of that hostility, which has led to a number of prior applications for directions under s 92 of the Act.
[3] Plaintiff's outline of submissions dated 2 May 2023, [64.1].
[4] Affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-1".
The Trustee's evidence on this application was that the MM Trust presently comprises approximately $3,000,000 in cash, and those funds have been held since 2014.[5] The Trustee's evidence was that he has been hampered in his efforts to vest the MM Trust (and other trusts) and paying out the funds, because of the ongoing disputation. The broader disputes relate to issues that go beyond the matters the subject of this application.
[5] Affidavit of Philip Milton Rundell sworn 1 November 2022, [28].
Background to application
The present application for directions arises out of the following circumstances. In 2015, the Australian Taxation Office (ATO) conducted an investigation into various transactions of entities associated with Anthony and John Palermo.[6] In particular, the ATO advanced claims arising from distributions made from capital gains from the 1999/2000 financial year to the 2004/2005 financial year and a large capital gain in the 2005/2006 financial year.[7] Ultimately, the Trustee negotiated, on behalf of the MM Trust, a settlement with the Commissioner of Taxation to resolve the claim by the ATO.[8] The MM Trust paid a significant sum to the Commissioner of Taxation as part of that settlement. By the time that settlement was finalised in 2015, John Palermo had died.[9]
[6] Affidavit of Philip Milton Rundell sworn 1 November 2022, [19].
[7] Confidential affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-2".
[8] Confidential affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-1".
[9] Plaintiff's outline of submissions dated 2 May 2023, [13].
Notwithstanding John Palermo's death, it appears that the acrimony continued between Anthony Palermo and John Palermo's son, the fourth defendant, John Joseph Palermo.
In January 2021, Anthony Palermo approached the Trustee, contending that the MM Trust had, and ought to pursue, a claim against John Joseph Palermo.[10] In short, the claim is as follows. One of the various commercial enterprises of Anthony and John Palermo was an accounting practice, which at various times they operated on their own account or through the corporate structures of the second and third defendants. The accounting practice undertook general accounting and advice work for the business enterprises of Anthony and John Palermo. From about 1999 or 2000, John Joseph Palermo worked as a relatively junior accountant at that practice. Anthony Palermo alleges that in that capacity John Joseph Palermo undertook accountancy and related work and provided advice in relation to the commercial entities of Anthony and John Palermo. It is alleged by Anthony Palermo that the transactions entered into that ultimately gave rise to the liability to the ATO were undertaken on the advice of John Joseph Palermo, which was given from about 2004. The MM Trust therefore has a claim against John Joseph Palermo for the loss it suffered by reason of the negligent advice.
[10] Affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-3".
On 17 June 2021, in light of the looming limitation period and in order to preserve the action while assessing the merits of the claim, the Trustee filed a writ commencing the action that became known as CIV 1540 of 2021.[11] The writ was served prior to the expiration of 12 months to prevent it becoming stale. In June 2022, a scheduled case management conference was vacated, and the matter was adjourned sine die.[12] No further steps appear to have been taken in that action at this stage.
[11] Affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-4".
[12] Order of Registrar Griffin dated 29 June 2022.
The Trustee engaged in correspondence with Anthony Palermo's solicitors to obtain information regarding the potential claim. The Trustee received considerable documentation from Anthony Palermo, including a signed witness statement by Anthony Palermo setting out in some detail the circumstances said to give rise to the claim.[13] The Trustee also met with John Joseph Palermo and his solicitor to discuss the potential claim. John Joseph Palermo denied the allegations.
[13] Affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-6".
The Trustee provided all relevant documentation and information in his possession to senior counsel and junior counsel at the independent Bar to obtain advice on the merits of the potential claim. That advice was updated by the same counsel upon receipt of further information from Anthony Palermo. The comprehensive written advices of counsel were provided to the court in a confidential affidavit so as to maintain legal professional privilege attaching to the advices.[14]
[14] Confidential affidavit of Philip Milton Rundell sworn 1 November 2022, "PMR-3".
Once the Trustee indicated that it was not inclined to prosecute the proceedings, Anthony Palermo, through his solicitors, proposed that the Trustee assign the claim to him. The Trustee was not inclined to do that either.
On 2 November 2022, the Trustee issued this proceeding in which he seeks the following directions pursuant to s 92 of the Act:[15]
1.That the Trustee is justified in not assigning any cause of action the subject of proceedings CIV 1540 of 2021 to Anthony Palermo.
2.That the Trustee is justified in discontinuing proceedings CIV 1540 of 2021.
[15] Originating Summons dated 2 November 2022.
Following the issuing of this application, in a letter to the Trustee's solicitors dated 14 December 2022, Anthony Palermo's solicitors proposed an agreement to include the following terms:[16]
The Trustee shall assign all claims the subject of the proceedings to our client;
The Trustee shall provide our client with copies of all documents in the Trustee's possession, including any legal advice, that relate to the claims the subject of the Proceedings;
Our client shall pay his costs of the proceedings from the date of assignment;
Our client shall be entitled to progress the proceedings, and/or discontinue or compromise the proceedings as he sees fit and, in his absolute discretion, at any time; and
Upon reviewing any payment pursuant to any monetary judgment in his favour in, or any settlement of, the proceedings ('Resolution Sum'), our client shall pay to the Trustee the sum that is 25% of the Resolution Sum, minus all legal costs incurred by our client.
[16] Affidavit of Adam Forrest Roberts sworn 10 February 2023, "AFR-1".
The Trustee's solicitors did not respond to that offer and maintained this application.
Evidence
The Trustee filed three affidavits in support of the application. The first affidavit set out the background to the matter and explained the circumstances leading to this application.[17] That affidavit was supplemented by a subsequent affidavit annexing the MM Trust trust deed and making some minor corrections to the first affidavit.[18] As noted, the Trustee also filed a confidential affidavit which annexed the written advices from senior and junior counsel in respect of the prospects of CIV 1540 of 2021.[19] It also contained confidential documentation in respect of the claim from the ATO. A short affidavit was filed on behalf of Anthony Palermo by a lawyer from the firm representing him simply annexing the correspondence of 14 December 2022 referred to above setting out the terms on which Anthony Palermo proposed that the claim be assigned to him.[20]
[17] Affidavit of Philip Milton Rundell sworn 1 November 2022.
[18] Supplementary affidavit of Philip Milton Rundell sworn 3 May 2023.
[19] Confidential affidavit of Philip Milton Rundell sworn 1 November 2022.
[20] Affidavit of Adam Forrest Roberts sworn 10 February 2023.
Legal principles
The broad principles are well settled and are explained in Macedonian Orthodox Community Church v The Diocesan Bishop [2008] HCA 42; 237 CLR 66.[21] The principles have been applied many times in this court, including relevantly in Plan B Trustees Limited v Parker [No 2][2013] WASC 216;[22] Wood v Wood [No 4] [2014] WASC 393, Blatchford v Laine [2018] WASC 207[23] and in the context of parallel legislation in Mighty River International v Hughes [2018] WASC 368.[24] The principles were set out very recently by Quinlan CJ in Boyle v Farano [2023] WASC 303. It is sufficient to refer to those principles of particular relevance to this application.
[21] (Macedonian Orthodox Community Church).
[22] (Plan B).
[23] (Blatchford).
[24] (Mighty River).
The court has a discretion as to whether to provide the advice sought. It does not have to be provided. The advice when given is ordinarily permissive in nature, framed in terms that a trustee would be justified in adopting or not adopting a particular course. Framed in that manner, the advice does not bind the trustee to take that course. That is indeed how the advice sought in this application is framed.
In Australian Executor Trustees Ltd v Attorney General (WA), Martin CJ referring to the High Court decision in Macedonian Orthodox Community Church summarised the position as follows:[25]
All members of the High Court in the case to which I have referred considered that the powers conferred by provisions like s 92 of the Act should generally be exercised for the purposes for which they are conferred, which are the protection of the property of the trust and the protection of a trustee acting properly and in accordance with the directions of the court. Subject to conformity with those overarching purposes, the exercise of the powers conferred by such provisions is discretionary and will depend upon the particular facts and circumstances of each case, unconstrained by inflexible rules or prescriptive standards.
Nevertheless, the cases do provide some guidance with respect to the exercise of the discretion conferred upon the court. In exercising its powers, the court will generally endeavour to act in the best interests of the beneficiaries of the relevant trust and, where appropriate, will take account of the views of those beneficiaries. Further, ordinarily the court will not exercise its jurisdiction in such a way as to usurp the roles and responsibilities of trustees in relation to the making of commercial decisions or with respect to the conduct of litigation. Rather, the court will be concerned to ensure that the trustee has taken proper advice and given full consideration to all relevant matters before arriving at a reasoned and appropriate decision. If satisfied of those matters, in appropriate cases the court will give the directions sought and thereby confer protection upon a trustee taking action in accordance with those directions.
[25] Australian Executor Trustees Ltd v Attorney General (WA) [2015] WASC 439 [32] - [33].
As to what constitutes an appropriate case for directions, in Mighty River, Le Miere J made the following observations:[26]
A court will not generally give directions where the directions sought relate to the making and implementation of a business or commercial decision, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to the decision: Re Ansett Australia Ltd and Korda (2002) 115 FCR 409 [66] (Goldberg J). It is insufficient to justify giving directions that the administrator wants reassurance about a commercial decision; some issue such as a question of law or procedure, or power, propriety or reasonableness, is required to justify approaching the court for directions: In the Matter of AWA Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2014] NSWSC 249 [14] (Brereton J).
[26] Mighty River [45].
It follows that where a trustee's commercial decision is reasoned and appropriate, having taken proper advice and given full consideration to all relevant matters, directions from the court confirming that the decision is justified are likely to be warranted where there is a foreseeable prospect of attack on the propriety or reasonableness of the decision.
Prospects of the claim
A focus of the submissions in this application was directed to the prospects of the claim sought to be advanced against John Joseph Palermo. It is therefore necessary to give some consideration to the significance of that factor in an application for directions under s 92 of the Act.
Essentially, the Trustee contended that a preliminary assessment of those prospects was an important if not a critical consideration. The Trustee provided fairly comprehensive submissions, both orally and in writing, and contended that the prospects were negligible. The confidential affidavits contained comprehensive advice as to prospects from senior and junior counsel. The Trustee avoided any possible waiver of privilege attaching to those advices, and did not rely on their content in the submissions relating to prospects of the claim. Rather, counsel for the Trustee, in both written and oral submissions, advanced reasons for the weakness of the claim independent of the privileged advices. The advices were provided not for their substantive content, but rather to demonstrate that the Trustee had taken fulsome advice and thereby acted appropriately.
In contrast, counsel for Anthony Palermo submitted that it could not be said that the claim was hopeless. Beyond that, it was contended that it was not appropriate to make findings in respect of the strengths and weaknesses of the claim.
The principles applicable to an application under s 92 were summarised by Vaughan J in Blatchford. In relation to assessing the prospects of a potential claim, those principles included the following:[27]
The judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings. The process is meant to be a summary one.
The court is not bound to investigate the evidence and make a finding as to whether the proposed proceedings would be successful. The question is whether the litigation is justified. The court is not finally resolving the merits of the underlying proceedings.
[27] Blatchford [57].
Following the summary of principles, Vaughan J made the following observations regarding the assessment of prospects on such an application:[28]
It is important to emphasise that examination of the trustee's likely prospects in the litigation at an 'exhaustive level' is neither necessary nor appropriate. The assessment is made at a 'preliminary level'. The court's role is not to try the issues themselves. The court's function is limited to being satisfied that the material before it is sufficient to determine the general range of the prospects of success; and determining whether it is appropriate to pursue the proceedings having regard to the prospects of success, the benefits of the litigation and the resources available. But there must be sufficient information before the court for it to be satisfied that the proposed action would be for the benefit of the beneficiaries as a whole and otherwise would be prudent to pursue.
[28] Blatchford [58].
Vaughan J then went on to consider the necessity of the provision of an opinion from counsel (ordinarily on a confidential basis) and the different approaches manifest in various cases. His Honour concluded:[29]
I accept that the court cannot abdicate to counsel the task of determining whether a proposed claim or defence has sufficient prospects of success to justify a trustee in proceeding with proposed litigation. But that does not mean that counsel's advice has become supernumerary in the context of an application for judicial advice. Where, as here, the directions sought are couched in terms that the applicant is 'justified' in defending and taking proceedings, the obtaining of counsel's advice is almost always necessary to demonstrate that the applicant has taken reasonable steps before approaching the court.
[29] Blatchford [63].
Vaughan J later observed:[30]
A trustee who obtains a direction from the court to the effect that he or she would be acting properly and justifiably in commencing or defending litigation obtains significant protection. Before making application for directions it is expected that, among other things, the trustee will take reasonable steps to identify whether, and give proper consideration to whether, he or she has reasonable prospects of succeeding in the proposed litigation; and that the likely benefits to be obtained by the litigation exceed its likely costs - weighing in that mix the risk of loss and its attendant costs. Accordingly, in the normal case it will be necessary for the trustee to obtain a legal opinion - preferably from counsel - before approaching the court for directions. The opinion should address the prospects of success and merits of the proposed litigation. If that course is not undertaken the reason for choosing not to follow the usual course should be explained.
[30] Blatchford [67].
I respectfully agree with the analysis in Blatchford. In order to obtain the protection of the court, it is generally necessary for the trustee to obtain advice from counsel and to have regard to the prospects of the claim. What is required is an assessment at a preliminary level sufficient to enable the court to appreciate the general range of prospects of success and to be satisfied that the proposed litigation will be of benefit to the beneficiaries as a whole and prudent to pursue.
In that regard, there is authority that a lesser burden of satisfaction or appreciation of prospects is required when the proposed course is not to commence legal action. That is because there are likely to be other reasons for not commencing legal action independent of the strength of the claim.[31]
[31] Plan B [49]; Mighty River [119].
Here, the Trustee is seeking orders justifying a decision not to pursue litigation. It might therefore be thought that less regard need be paid to the prospects of success. In these particular circumstances, I do not think that would be an appropriate approach. That is because the other reasons that ordinarily bear upon the assessment relate to concerns that are ameliorated by Anthony Palermo's proposal. For example, the risk of costs and the burden of the conduct of litigation is proposed to be borne entirely by Anthony Palermo. In those circumstances, I do not consider that the Trustee can take the more liberal approach suggested by Edelman J in Plan B. The context of Edelman J's comments was different. Here it is not a case of the Trustee resolving simply not to pursue difficult litigation. It is rather a case of the Trustee adopting a course that will preclude the pursuit of a claim that may have some value to the MM Trust and if prosecuted, is offered to be pursued at no risk or burden to the Trustee or the MM Trust. In the circumstances, in my view, the Trustee was correct and acted appropriately in undertaking a comprehensive assessment and seeking fulsome advice in relation to the prospects of the claim.
Competing contentions
As noted, counsel for the Trustee submitted that the prospects of the claim were 'negligible'. That proposition was developed in both written and oral submissions. It is not necessary to canvass those submissions in these reasons in any detail. Broadly, counsel for the Trustee submitted that the claim confronted the obstacle that there were no written documents directly supporting the claim of negligent advice. The documentation provides no direct corroboration of John Joseph Palermo having given the relevant advice at the material time. In the circumstances, the prospects of the claim will be wholly dependent on the oral evidence of Anthony Palermo and John Joseph Palermo. That means the court will be deciding on competing versions of events in relation to matters that, by the time of the trial, will be more than 20 years old and that emerged in the context of long-standing familial hostility and acrimony, in circumstances where the matters appear to have been first alleged almost six years after the payment to the ATO.
Counsel for the Trustee further submitted that there was an inherent unlikelihood to the claim given the circumstances. Anthony Palermo and John Palermo were both vastly more experienced than John Joseph Palermo, who at the time was a relatively junior accountant. Counsel for the Trustee pointed to other issues that would impact upon the credibility of Anthony Palermo's evidence. Counsel for the Trustee also directed attention to difficulties relating to causation of loss, particularly the counterfactuals of alternative distributions that might have been made in a manner that would have been lawful but nevertheless avoided taxation liabilities to the same extent. Counsel submitted, in my view with some force, that if there were non-fraudulent distribution options otherwise available and under the control of Anthony and John Palermo to absorb trust profits that were equally as tax-effective as the distributions which were made, it is unlikely that the distributions which were made would have been effected.[32] Counsel also submitted that even if successful, the net value of the claim was uncertain and most unlikely to be significant.
[32] Plaintiff's outline of submissions dated 2 May 2023, [72].
For the reasons advanced by counsel for the Trustee, I agree that the claim as a whole appears to be weak.
In further support of the application, the Trustee contended that to assign the claim to Anthony Palermo would inevitably maintain the long-standing hostility between the parties, which would undermine at least part of the rationale for the Trustee's appointment in the first place. The Trustee further submitted that the litigation would lead to credibility findings, within the class of beneficiaries, particularly as between Anthony Palermo and John Joseph Palermo. This would pitch one beneficiary of the MM Trust against the other and require the Trustee 'to take a position'. The Trustee also submitted that maintenance of the claim would further impede his ability to wind up and vest the MM Trust.
The Trustee also pointed to the fact that the terms of the assignment proposed by Anthony Palermo do not include an indemnity, notwithstanding that the Trustee raised its importance shortly after Anthony Palermo first raised the suggestion of an assignment to him of the claim. There was some debate between the parties in relation to the necessity for an indemnity. There was no dispute that the Trustee had raised a requirement for an indemnity early in the piece and that it had not been proffered. However, the parties were in dispute as to whether it was realistically required in the circumstances.
On the evening before the hearing, counsel for the Trustee drew the attention of the court and of counsel for Anthony Palermo to the decision in Gore v Justice Corporation.[33] In that case, a litigation funder agreed to fund litigation in return for 8% of the damages awarded. The claim for damages was ultimately unsuccessful and cost orders were made against the plaintiff. The Full Court referred to the decision in Knight v F P Special Assets in which the High Court considered the circumstances in which a power to award costs against a non-party may be exercised.[34] The Full Court observed that the High Court did not close the door to the categories of persons who may be found so liable.[35] It found the litigation funder liable for costs. While not controlling the litigation, the funder had a direct interest in the outcome. Its only interest was as a commercial investment.
[33] Gore v Justice Corporation [2002] FCA 354; 189 ALR 712 (Gore).
[34] Knight v F P Special Assets (1992) 174 CLR 178.
[35] Knight v F P Special Assets (1992) 174 CLR 178 [23].
Counsel for the Trustee argued that the Trustee may be similarly vulnerable to an adverse costs order if he facilitates the assignment of the claim in return for a percentage of the damages. The Trustee therefore reasonably required an indemnity, and the absence of an indemnity was a significant factor.
Counsel for Anthony Palermo explained that in this matter the choice for the court was not the usual binary alternative; it was not a matter of whether the Trustee prosecuted the claim or discontinued the claim. The option advanced by Anthony Palermo was that the claim would be assigned to him. Anthony Palermo would bear entirely the burden and risk of prosecuting the claim, and the Trustee and the MM Trust itself would be immunised from any risk. The MM Trust could only stand to gain by receiving a percentage of the net proceeds, if the claim were successful. In short there was nothing to be lost and something to be gained. In those circumstances, provided the prospects of the claim are not hopeless, it is not appropriate to assess further the strengths or weaknesses of the claim. The Trustee could not be justified in declining to assign the claim to Anthony Palermo and the directions sought should not be granted.
As to the absence of an indemnity, counsel for Anthony Palermo was critical of the late reference to the decision in Gore and the last-minute submission as to the potential exposure said to emanate from that decision. The point had not previously been raised in that way and counsel submitted there were distinguishing features in Gore such that it would take some creativity to imagine that the Trustee could have any exposure as a result of accepting Anthony Palermo's offer. In short, the Trustee's concern, on proper analysis, was illusory.
Consideration
I do not consider the Trustee's concerns to avoid the continuation of the hostility between the parties to be persuasive on this application. If there was indeed a sound and valuable claim against a beneficiary, the maintenance of long-standing animosity and conflict between beneficiaries would not generally be sufficient reason for the MM Trust to abandon a prospective opportunity of some value.
Further, the Trustee's concern not to prolong the vesting of the MM Trust is, in my assessment, only of marginal significance. It seems to me on the evidence that discontinuing the claim may provide some resolution to the conflicts surrounding the MM Trust but may yet not clear the path entirely so as to permit the Trustee to complete his tasks in respect of the MM Trust.
However, in my view, the Trustee's assessment that the claim is weak is sound. As I have noted, I do not accept that the potential for conflict between beneficiaries, the prospect of adverse credibility findings between the beneficiaries, or the maintenance of long-standing hostilities between the parties, would of themselves justify a decision to decline the assignment of a claim with some reasonable prospect of success for one beneficiary to prosecute against another. However, here the Trustee has gone to some considerable length and effort to assess the merits of the claim and has formed a considered view. The Trustee is in receipt of comprehensive advice from reputable counsel based on the available (and not insignificant) documentation and information. It is difficult to imagine what more the Trustee could have done to give earnest and fulsome consideration to the claim. Those endeavours have led the Trustee, correctly, in my respectful view, to the conclusion that the claim is weak and therefore not worth pursuing; by him or anyone else. In those circumstances the concerns identified by the Trustee assume a different quality. The maintenance of conflict, the absorption of public and private resources in the prosecution of the claim, the difficulties that claim will create in the Trustee's ongoing dealing with beneficiaries locked in litigious combat, all combine to support the reasonableness of the Trustee's proposal in circumstances where the claim, on proper consideration, has little or perhaps even no substantive value. Counsel for Anthony Palermo may be correct that the claim is not 'hopeless', but for reasons that I have explained, I consider that the Trustee has acted appropriately in concluding that it is not sufficient that the claim rises above the level of hopeless.
The Trustee could of course simply discontinue the claim without the advice and imprimatur of the court. However, given the history of unrelenting acrimony between the parties the Trustee is concerned to receive the protection of the court's sanction for the course he proposes. The history of the matter has made the Trustee particularly cautious and concerned for the remotest of risks. It may be that counsel for Anthony Palermo is justified in suggesting that it takes some creativity to foresee how a decision by the Trustee not to assign could expose the Trustee or the MM Trust to any liability or claim. Yet experience of hostile familial litigation, including the history of this matter, suggests that the parties involved generally do not lack capacity for creativity of that kind. The aphorism that 'necessity is the mother of invention', is widely known. The curial equivalent is that acrimonious familial litigation is the mother of legal ingenuity. In my respectful view, the concern and caution of the Trustee is understandable and not unreasonable.
In my assessment the Trustee's conclusion and proposed conduct is appropriate and reasonable in all the circumstances. There is a foreseeable prospect of attack on the propriety or reasonableness of the decision. In the circumstances in my view the court ought to make the directions sought.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
YM
Associate to the Honourable Justice Solomon
22 AUGUST 2023
0