Scaffidi v Montevento Holdings Pty Ltd - [2011] WASCA 146

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: SCAFFIDI -v- MONTEVENTO HOLDINGS PTY LTD [2011] WASCA 146

CORAM: BUSS JA
MURPHY JA
HALL J

HEARD: 12 APRIL 2011

DELIVERED : 7 JULY 2011

FILE NO/S: CACV 70 of 2010

BETWEEN: GIUSEPPE DIEGO SCAFFIDI
Appellant
AND
MONTEVENTO HOLDINGS PTY LTD
First Respondent
EUGENIO SCAFFIDI
Second Respondent
MARIA SCAFFIDI by her guardian ad litem THE PUBLIC TRUSTEE
Third Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :EM HEENAN J
Citation  :MONTEVENTO HOLDINGS PTY LTD -v- SCAFFIDI HOLDINGS PTY LTD [No 2] [2010] WASC 180
File No  :CIV 1522 of 2010

Catchwords:

Trusts and trustees - Construction of power of appointment in trust deed - Whether corporate entity eligible for appointment as a trustee - Where sole director and shareholder of corporate entity is appointor and beneficiary - Power of court to remove and appoint new trustee

Legislation:

Death Duty Assessment Act 1973 (WA), s 10(1), s 10(2)(i)
Estate Duty Assessment Act 1914 (Cth), s 8(1), s 8(3)
First Corporate Law Simplification Act 1995 (Cth)
Stamp Duties Act 1920 (NSW), s 100, s 101, s 102(2)(j)
Trustees Act 1962 (WA), s 77

Result:

Appeal allowed
Notice of contention dismissed

Category: A

Representation:

Counsel:

Appellant:     Mr C L Zelestis QC
First Respondent           :     Ms K A Vernon
Second Respondent      :     Ms K A Vernon
Third Respondent          :     Mr B W Ashdown

Solicitors:

Appellant:     Oldfield Legal
First Respondent           :     Butcher Paull & Calder
Second Respondent      :     Butcher Paull & Calder
Third Respondent          :     Public Trustee

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

Armitage v Nurse [1998] Ch 241
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814; (2006) 153 FCR 509
CPT Custodian Pty Ltd v Commissioner of State Revenue of the State of Victoria [2005] HCA 53; (2005) 224 CLR 98
Duke of Portland v Topham (1864) 11 HLC 32
Elovalis v Elovalis [2008] WASCA 141
Elovalis v Elovalis [2008] WASCA 141(S)
Esso Australia Ltd v Australian Petroleum Agents' and Distributors' Association (1999) 3 VR 642
Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (1990) 3 ACSR 183
Hobkirk v Ritchie (1933) 29 Tas LR 14
In re Brockbank [1948] Ch 206
In re Christina Brown (1921) 22 SR (NSW) 90
In re Gadd (1883) 23 Ch D 134
In re John Gibbon's Trusts (1882) 30 WR 287
In re Newen (1894) 2 Ch 297
In re Norris (1833) 27 Ch D 333
In re Power's Settlement Trusts [1951] Ch 1074
In re Skeats' Settlement (1889) 42 Ch D 522
In re Spencer's Settled Estates (1902) 1 Ch 75
In re Tunstall [1921] VLR 559
In the Marriage of Davidson (No 2) [1991] FLC 92‑197; (1990) 101 FLR 373
In the Marriage of Goodwin [1990] FLC 92‑192; 1990) 101 FLR 386
Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90
Kearns v Hill (1990) 21 NSWLR 107
Kent v SS 'Maria Luisa' (No 2) [2003] FCFCA 93; (2003) 130 FCR 12
Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363
Letterstedt v Broers (1884) 9 App Cas 371
Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Maria Scaffidi (by her next friend the Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29
Marshall v Sladden (1849) 7 Hare 428
Montefiore v Guedalla (1903) 2 Ch 723
Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [No 2] [2010] WASC 180
Nicholls v Louisville Investments Pty Ltd (1991) 10 ACSR 723
Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343; (2001) 38 ACSR 57
O'Reilly v Alderson (1849) 8 Hare 101
Pope v DRP Nominees Pty Ltd [1999] SASC 337; (1999) 74 SASR 78
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589
Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 48
R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59
Re Burton [1994] FCA 1146; (1994) 126 ALR 557
Re Cunningham's Settled Estates (1909) 27 WN (NSW) 28
Re Friend's Trusts (1904) 21 WN (NSW) 166
Re Hay's Settlement Trusts [1982] 1 WLR 202
Re Manisty's Settlement [1974] Ch 17
Re Penrose [1933] Ch 793
Re Tempest [1866] LR 1 Ch App 485
Re Triffitt's Settlement [1958] Ch 852
Saul v Lin (No 2) [2004] NSWSC 332; (2004) 60 NSWLR 275
Scaffidi v Scaffidi Holdings Pty Ltd [2010] WASC 29
Schmidt v Rosewood Trust Ltd [2003] 2 AC 709
Smith v Smith [2006] WASC 166
Tatham v Huxtable [1950] HCA 56; (1950) 81 CLR 639
Thompson v Commissioner of Stamp Duties [1969] 1 AC 320
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Vagliviello v Vagliviello [2003] WASC 61
Webb v The Earl of Shaftesbury (1802) 7 Ves Jun 480
Wilding v Bolder (1855) 21 Beav 222

BUSS JA: This is an appeal by Giuseppe Diego Scaffidi (Giuseppe) against a decision of EM Heenan J. His Honour dismissed Giuseppe's claim for declaratory and other relief. Giuseppe had claimed a declaration that the appointment of Montevento Holdings Pty Ltd (Montevento) as the trustee of a discretionary trust was invalid and, alternatively, an order for the removal of Montevento as trustee.
I would dismiss Giuseppe's appeal. My reasons are as follows.

The background facts and circumstances

The background facts and circumstances are set out in the reasons of Murphy JA and Hall J. I will not repeat them except to the extent necessary to explain my reasons.

The Scaffidi Family

Giuseppe and Eugenio Scaffidi (Eugenio) are brothers. They are the children of Antonio Scaffidi (Antonio) and Maria Scaffidi (Maria).
Antonio died on 29 August 2004.
On 7 November 2008, the State Administrative Tribunal declared Maria to be a person in need of representation under the provisions of the guardianship laws. On that date, the Tribunal appointed the Public Trustee as her plenary administrator.

Corporations related to one or more of the Scaffidis

Scaffidi Nominees Pty Ltd (Scaffidi Nominees) was incorporated on 27 April 1977. Giuseppe and Eugenio were the original directors. Antonio and Maria were appointed as directors of Scaffidi Nominees on 3 May 1977. All of them continued as directors until 10 May 2000. There were no other directors between 27 April 1977 and 10 May 2000. Antonio, Maria, Giuseppe and Eugenio held shares in the company.
Scaffidi Holdings Pty Ltd (Scaffidi Holdings) was incorporated on 29 June 1995. Giuseppe and Eugenio have been directors since 29 June 1995. Antonio was a director between 29 June 1995 and 29 August 2004. Maria was a director between 29 June 1995 and 30 June 2006. There have been no other directors. Antonio, Maria, Giuseppe and Eugenio held shares in the company.
Montevento was incorporated on 27 March 2007. Since that date, Eugenio has been the sole director and shareholder.
Pursuant to amendments made under the First Corporate Law Simplification Act 1995 (Cth), proprietary companies may have only one director and one member or shareholder. Before the commencement of that Act, proprietary companies were required to have not less than two directors and not less than two members or shareholders.

The Scaffidi Family Trust and its trustees

By a deed of settlement dated 2 May 1977 (the Trust Deed) and made between Salvatore Scaffidi as settlor and Scaffidi Nominees as sole trustee, a discretionary trust by the name of The Scaffidi Family Trust (the Trust) was created.
By a deed dated 16 August 1995, Scaffidi Nominees ceased to be the sole trustee of the Trust and Scaffidi Holdings was appointed as the new sole trustee.
By a deed poll dated 18 February 2009, Eugenio, in his capacity as the appointor under the Trust Deed, removed Scaffidi Holdings as the sole trustee and appointed Montevento as the new sole trustee.
The Trust Deed is designed to regulate the acquisition, management and disposal of assets of the Scaffidi family. Broad powers are conferred on the trustee. No doubt, these powers were designed to facilitate the maximum flexibility in dealing with the trust fund to enable the trustee to adapt to changing economic and revenue circumstances. See the observations of Meagher JA (Mahoney & Clarke JJA agreeing) in Kearns v Hill (1990) 21 NSWLR 107, 109. Some of the powers of the trustee, in the present case, are, however, circumscribed by the requirement in the Trust Deed that the trustee not exercise the powers in question without the express written consent of the holder of the office of guardian created by the Trust Deed.

The Supreme Court proceedings and the appeal to this court

By an originating summons filed in the Supreme Court on 19 April 2010, Giuseppe commenced proceedings against Montevento, Eugenio and Maria by her guardian ad litem the Public Trustee. In the summons, Guiseppe claimed, relevantly, a declaration that the appointment of Montevento as the sole trustee of the Trust was invalid in that the appointment breached cl 11.03 of the Trust Deed; alternatively, an order for Montevento's removal as trustee pursuant to s 77 of the Trustees Act 1962 (WA).
On 9 June 2010, EM Heenan J heard the originating summons. His Honour decided that the summons should be dismissed. See Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd[No 2] [2010] WASC 180.
Giuseppe has appealed against this decision.

The Trust Deed: its basic structure

As I have mentioned, the Trust Deed was executed on 2 May 1977.
The original settled sum was $100.00.
The 'Terminating Date' (as defined in cl 1.07) is the date on or by which the Trust vests. The default Terminating Date is 1 May 2030, but the Trustee may specify, in certain circumstances, that the Trust is to vest on any date prior to 2 May 2057.
The Trust Deed makes provision for the offices of Trustee, Guardian and Appointor. It will be necessary, later in these reasons, to refer in some detail to the rights, powers and duties of the holders of these offices.
The 'Class of Beneficiary' is defined with considerable breadth and by reference, principally, to the 'Specified Members', who are Giuseppe and Eugenio.
The 'Trust Fund' comprises the real and personal property which is from time to time given or transferred to or otherwise held by the Trustee for the time being on the trusts created by the Trust Deed.
The Trust Deed created a discretionary trust. 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 the present case, the Trust Deed does not confer on any of the beneficiaries a vested interest in the capital or income of the Trust Fund. The Trust Deed grants the Trustee a discretionary power, within prescribed limits, to distribute capital or income in favour of one or more of the beneficiaries, as determined from time to time by the Trustee in its discretion. None of the beneficiaries has any right or entitlement to any capital or income unless and until the Trustee exercises its power to make a distribution in his or her favour.

The Trust Deed: the office of Trustee

The relevant provisions of the Trust Deed in relation to the office of Trustee are as follows.
Clause 2.1 provides:
The Settlor declares and directs that the Trustee shall and the Trustee acknowledges and declares that the Trustee holds and will hold the Settled Sum upon the trusts and with the powers and authorities and subject to the provisions set out in this Deed concerning the same.
Clause 3.1 makes provision for future accretions of real and personal property to the Trust Fund by gift or conveyance to the Trustee.
The Trust Deed confers very extensive powers on the Trustee to deal with the capital and income of the Trust Fund.
Clause 11 makes provision in relation to the appointment and removal of an individual or corporation as Trustee:
11.01The First Trustee is the individual or corporation described in Item 3 of the Schedule. A trustee may be a corporation.
11.02Subject to the provisions of this Deed the Appointor may by instrument in writing at any time and from time to time:‑
11.02.01remove any Trustee hereof;
11.02.02appoint any additional Trustee or Trustees;
11.02.03appoint 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.
11.03If, and so long as any individual Appointor is a Beneficiary that individual shall not be eligible to be appointed as a Trustee.
11.04If there is no Appointor named in the Schedule or if at any time there is no one entitled to exercise the power hereinbefore conferred the statutory and other rights of removing and appointing Trustees hereof may be exercised by the Trustees or by the legal personal representatives or (if the Trustee be a corporation) the Liquidator of the last surviving Trustee.
11.05Any Trustee being a natural individual may with the consent of the other Trustee or Trustees appoint any person to be an alternate Trustee in the place of that individual and so that any such appointment shall have effect during such period only as such Trustee may from time to time be absent from the place where the Trust Fund is being administered and each of the Trustees may by power under hand revoke or alter such appointment as alternate Trustee.
11.06The office of a Trustee shall be ipso facto determined and vacated if such Trustee being an individual shall be found to be a lunatic or of unsound mind or if he shall become subject to any bankruptcy law or if such Trustee being a company shall enter into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purposes of amalgamation or reconstruction).
11.07Any person becoming a Trustee of the Trust Fund may accept the account rendered and the property delivered to such new Trustee by the continuing Trustee or the predecessors in office of the new Trustee without being bound to enquire further as to the assets of the Trust Fund and any person ceasing to be a Trustee hereof may be given a full and complete discharge by the Appointor.
11.08Any person who is one of the persons who are the Trustee and any person who may by succession become a Trustee may resign or renounce such position by notice in writing to the remaining Trustee and forthwith upon the giving of such notice the person giving the same shall for all purposes hereunder cease to be a Trustee or to be a person who may by succession become a Trustee.
11.09If at any time there is no Appointor a sole surviving Trustee shall not resign except upon appointing a new Trustee or [sic] in the place of the retiring Trustee.
Clause 12 is concerned with the rights, powers, duties and liabilities of the Trustee.

The holders of the office of Trustee

Scaffidi Nominees was the sole Trustee of the Trust between 2 May 1977 and 16 August 1995.
Scaffidi Holdings was the sole Trustee between 16 August 1995 and 18 February 2009.
Since 18 February 2009, Montevento has been the sole Trustee.

The Trust Deed: the office of Guardian

In cl 1.08 of the Trust Deed, 'Guardian' is defined to mean 'the person or persons (if any) named and described as the Guardian in Item 8 of the Schedule'.
Clause 14 makes provision in relation to the office of Guardian, including the appointment and resignation of the Guardian, as follows:
14.01The Guardian may be a corporation.
14.02Any Guardian and any person who may by succession become a Guardian may resign or renounce such position by notice in writing to the Trustee and forthwith upon the giving of such notice the person giving the same shall for all purposes hereunder cease to be a Guardian or to be a person who may by succession become a Guardian.
14.03The office of a Guardian shall be ipso facto determined and vacated if the Guardian being an individual shall be found to be a lunatic or of unsound mind or if the Guardian shall become subject to any bankruptcy law or if the Guardian being a company shall enter into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purposes of amalgamation or reconstruction).
Clause 15 is concerned with the rights and powers of the Guardian. It reads:
15.01The Trustee shall not if there is a Guardian exercise any of the power [sic] and rights given to the Trustee under: ‑
(15.01.01)Clause 1.07.01;
(15.01.02)Clause 1.11.05;
(15.01.03)Clause 5.02.01;
(15.01.04)Clause 8.01.01;
(15.01.05)Clause 9.01;
(15.01.06)Clause 9.02;
except with the express written consent of the Guardian.
15.02If at any time there is no Guardian the Trustee shall not exercise any of the powers and rights referred to in the preceding paragraph in a manner which will diminish or impair the vested contingent or expectant share of any Specified Member.
15.03The Trustee may notwithstanding the provisions of the two preceding paragraphs of this clause make a declaration under clause 1.07.01 in respect of a Beneficiary who is adult and sui juris at the request of that Beneficiary.
15.04The Guardian may by Deed revocably or irrevocably provide that:-
15.04.01any or all of the powers or rights referred to in paragraph 15.01 may thenceforth be exercised without reference to the Guardian;
15.04.02any or all of the powers or rights referred to in paragraph 15.01 may be exercised thenceforth by the Trustee.
15.05Where no guardian is named in the Schedule the Trustee may unless otherwise expressly provided in the Schedule exercise all the powers and rights referred to in clause 15.01 in the absolute and uncontrolled discretion of the Trustee and without the consent of any other person.
Clause 1.07.01 (referred to in cl 15.01.01) relevantly empowers the Trustee to specify a Terminating Date prior to 2 May 2057, other than the default Terminating Date of 1 May 2030.
Clause 1.11.05 (referred to in cl 15.01.02) relevantly empowers the Trustee to exclude any person specified in writing by the Trustee from membership of the Class of Beneficiary.
Clause 5.02.01 (referred to in cl 15.01.03) relevantly empowers the Trustee to pay to, apply or set aside for any one or more of the beneficiaries the whole or any part of the net income of the Trust Fund in each year.
Clause 8.01.01 (referred to in cl 15.01.04) relevantly empowers the Trustee to distribute the Trust Fund on the Terminating Date to any one or more members of the Class of Beneficiary as the Trustee may in writing appoint.
Clause 9.01 and cl 9.02 (referred to in cl 15.01.05 and cl 15.01.06) relevantly empower the Trustee, at any time before the Terminating Date, to appoint the whole or any part of the Trust Fund to or for the use or benefit of any beneficiary.
The reference in cl 15.03 to cl 1.07.01 is an obvious error. The reference should be to cl 1.11.05.

The holders of the office of Guardian

In Item 8 of the Schedule to the Trust Deed, Antonio was appointed as the Guardian. Item 8 reads:
The said ANTONIO SCAFFIDI and failing any other appointment by him during his life time then after his death the said MARIA SCAFFIDI.
Antonio died on 29 August 2004 without making any appointment as to a new Guardian.
By a deed poll dated 30 June 2006, Maria, in her capacity as the successor Guardian, declared pursuant to cl 15.04 of the Trust Deed that any or all of the powers or rights referred to in cl 15.01 may be exercised by the Trustee without reference to the Guardian.

Trust Deed: the office of Appointor

Clause 13 of the Trust Deed makes provision with respect to the office of Appointor, as follows:
13.01The Appointor may by instrument revocable or irrevocable or by Will appoint an Appointor to succeed him.
13.02A person appointed to act as an Appointor by an Appointor named in the Schedule shall have the same right of appointing a person to act as an Appointor as the person who appointed him.
13.03On the death of the last surviving Appointor his legal personal representatives shall be the Appointor.
13.04The Appointor and any person who may by succession become an Appointor may resign or renounce such position by notice in writing to the Trustee and forthwith upon the giving of such notice the person giving the same shall for all purposes hereunder cease to be an Appointor or to be a person who may by succession become an Appointor.
13.05The office of an Appointor shall be ipso facto determined and vacated if the Appointor being an individual shall be found to be a lunatic or of unsound mind or if he shall become subject to any bankruptcy law or if the Appointor being a company shall enter into liquidation whether compulsory or voluntary (not being merely a voluntary liquidation for the purposes of amalgamating [sic] or reconstruction).

The holders of the office of Appointor

In Item 9 of the Schedule to the Trust Deed, Antonio was appointed as the Appointor. Item 9 is identical to Item 8. It states, in effect, that the Appointor is Antonio and, failing any other appointment by him during his life time, then after his death Maria is to be the Appointor.
Antonio did not make any appointment during his life time as to a new Appointor.
By a deed dated 30 June 2006 and made between Maria and Eugenio, Maria (in her capacity as the successor Appointor) appointed Eugenio to be the Appointor of the Trust in her place. The appointment was expressed to be irrevocable. Eugenio accepted the appointment as the new Appointor.

The Trust Deed: the Class of Beneficiary

The terms 'Class of Beneficiary' and 'Class of Beneficiaries' are used interchangeably in the Trust Deed.
Item 5 of the Schedule to the Trust Deed states, in effect, that Giuseppe and Eugenio are the 'Specified Members' of the Class of Beneficiary.
Item 6 of the Schedule states, in effect, that Antonio and Maria are 'Additional Members' of the Class of Beneficiary.
The term 'Class of Beneficiary' is defined in cl 1.04 of the Trust Deed to mean the class of persons comprising each and every one of:
1.04.01the Specified Members;
1.04.02the brothers, sisters, present and former spouses, widows, widowers, children, grandchildren and great‑grandchildren of the Specified Members;
1.04.03the present and former spouses, widows, widowers, children, grandchildren and great‑grandchildren of any of the persons described in the previous paragraph;
1.04.04the Trustees (as such trustees) of any trust in which any member of the Class of Beneficiary has any interest (vested or contingent);
1.04.05any corporation of which any member of the Class of Beneficiary is a member or of which a trustee which is a member of the Class of Beneficiaries is (as such trustee) a member;
1.04.06any trust or body (incorporated or unincorporated) which is established wholly for charitable purposes;
1.04.07the persons described in Item 6 of the Schedule as Additional Members of the Class of Beneficiaries.
In cl 1.05, it is stipulated that 'Beneficiary' means any member of the Class of Beneficiaries.

The validity of Montevento's appointment: the primary judge's reasons

The primary judge found that Eugenio was the sole director and shareholder and, hence, the sole controller of Montevento [31]. His Honour said that Montevento had no apparent commercial purpose or history other than acting in the role of Trustee [31].
The primary judge held that Montevento had been validly appointed as Trustee. His Honour rejected the submission by counsel for Giuseppe that the appointment was made in breach of cl 11.03 of the Trust Deed.
The primary judge said:
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 [38].

The alternative application for Montevento's removal as Trustee: the primary judge's reasons

Counsel for Giuseppe also submitted to the primary judge that even if Montevento had been validly appointed as Trustee, it should be removed because it was controlled solely by Eugenio and, having regard to the animosity of Eugenio towards Giuseppe, it was not a suitable Trustee.
His Honour said:
It is, of course, the case that there has been a long history of animosity, and one must conclude deeper [sic] 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 [39].
A little later, the primary judge stated emphatically that there was no basis for concluding that Montevento would jeopardise the welfare of the Trust Fund or the interests of the beneficiaries [41]. Indeed, his Honour was satisfied that, on the evidence, Montevento, as Trustee, had advanced the welfare of the Trust Fund and the interests of the beneficiaries by making efforts to identify, collect and preserve the assets of the Trust, including by demanding payment of a large debt owing by a company associated with Giuseppe [41]. His Honour was of the view that the evidence suggested that criticisms made by Giuseppe of the potential role of Montevento as Trustee were prompted more by concern for his own personal interests and those of his associated company than concern about the welfare of the Trust Fund and the interests of the beneficiaries [41].

The grounds of appeal

Giuseppe relies on two grounds of appeal.
Ground 1 alleges that the primary judge erred in law in failing to find that:
(a)on the proper construction of cl 11.03 of the Trust Deed, it was not open to an Appointor who was a beneficiary to appoint a Trustee where the effect of the purported appointment was to give the Appointor/beneficiary control of the office of Trustee;
(b)because such was the effect of the purported appointment of Montevento as Trustee (as his Honour found at [31]), that purported appointment was invalid and of no effect.
Ground 2 alleges, in the alternative to ground 1, that the primary judge erred in fact and in law in failing to find that:
(a)the intention manifested in the Trust Deed was that the Appointor, if a beneficiary, should not be, or be in control of the office of, the Trustee;
(b)an appointment made contrary to that intention, in circumstances where there was uncontested and deep‑seated animosity between the Appointor/beneficiary, and the other main beneficiary, constituted grounds for removal of the Trustee, in exercise of the court's inherent jurisdiction or under s 77 of the Trustees Act;
(c)in those circumstances, and there being no counter‑veiling discretionary factor, it was expedient to remove Montevento as Trustee and replace it with a Trustee that is independent of the Appointor/beneficiary.

Ground 1 of the appeal: the proper approach to construction

The construction of an instrument involves ascertaining what a reasonable person would have understood the parties to the instrument to mean. Consideration should ordinarily be given not only to the language of the instrument, but also to the surrounding circumstances known to the parties when the instrument was executed, and the apparent purpose and object of any transaction created by or evidenced in the instrument. These propositions were enunciated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ) in the context of an instrument that was a contract. However, the propositions are applicable to instruments generally, subject to any particular rules of construction which have been developed in relation to a particular kind of provision or instrument.
If a clause in an instrument is to be construed, the words of the clause are to be given their natural and ordinary meaning in the context of the language of the instrument as a whole, and also the surrounding circumstances known to the parties when the instrument was executed, and the apparent purpose and object of any transaction created by or evidenced in the instrument. The words of the clause are to be given the most appropriate meaning which they can legitimately bear. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, where Gibbs J elaborated:
If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop ((1888) 39 Ch D 387, at p 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch D 681, at p 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument (109).
A transaction created by or evidenced in an instrument includes any relevant business or ownership structure established pursuant to the instrument. The surrounding circumstances known to the parties when an instrument was executed include the background knowledge which would reasonably have been available to the parties at that time. This knowledge includes, at least where the instrument was prepared by solicitors, any legislative or regulatory framework applicable to any relevant business or ownership structure or other transaction created by or evidenced in the instrument.

Ground 1 of appeal: legislation relevant to the Trust when the Trust Deed was executed

As I have mentioned, the Trust Deed was executed on 2 May 1977. Lavan & Walsh, solicitors, prepared the Trust Deed.
In the 1970s discretionary trusts flourished in Australia. They were a taxation avoidance device. In addition to reducing the amount or incidence of income tax, and gift, estate and death duties, discretionary trusts offered flexibility and procedural simplicity. See Hardingham and Baxt, Discretionary Trusts, 1975, chapters 7, 8 and 9; Grbich, Munn and Reicher (eds), Modern Trusts and Taxation, 1978, 1-2; GL Davies, 'Some Problems with Discretionary Trusts', (1974-75) 9 Taxation in Australia 415; DH Bloom, 'The Discretionary Trust ‑ Some Practical Implications', (1974-75) 9 Taxation In Australia 586; DKL Raphael 'Problems in Discretionary Trusts - What? Why? and How?', (1975-76) 10 Taxation in Australia 662; DG Hill, 'Comments on "Problems in Discretionary Trusts"', (1975-76) 10 Taxation in Australia 674; TW Magney, 'A Comparative Analysis of Estate Planning Vehicles', (1977-78) 12 Taxation in Australia 222.
In his article, 'A Comparative Analysis of Estate Planning Vehicles', Mr Magney made these observations in relation to the power under a discretionary trust deed to appoint and remove the trustee:
The person who has the power to appoint and remove the trustee of a discretionary trust (and whom I will refer to as the 'appointor') may be thought of as the person in whom the ultimate control resides. This, of course, is only true in a limited sense because, although the appointor may keep appointing and removing trustees until he eventually finds a trustee prepared to act in accordance with his directions, he cannot, in any legal sense, direct the trustee how to act.
A trustee must carry out his duties and exercise his powers personally and make up his own mind, after due consideration of the relevant factors (see eg, Hardingham & Baxt, Discretionary Trusts, Chapter 2).
It is true that the trust deed could be so drafted as to vest the discretions in the appointor, but in these circumstances the appointor would become the holder of the special powers of appointment constituted by the discretionary trust which could have serious death duty consequences ‑ see later. In this situation the trustees would be in the position of a 'custodian trustee' only and the appointor might be described as a 'management trustee' (237 ‑ 238). (emphasis added)
Later in his article, Mr Magney made these comments about the death and estate duty consequences arising from the existence of a power of appointment in a discretionary trust deed:
A 'general power of appointment' is defined in section 100 of the Stamp Duties Act [1920 (NSW)] as a power which enables the holder thereof to appoint or dispose of any property as he thinks fit for his own benefit but does not include a power exercisable by a person in a fiduciary capacity for the benefit of others only arising under a disposition not made by himself. The definition of general power of appointment would include many powers which apart from the definition would be only special powers of appointment.
If the power of appointment contained in a discretionary trust falls within the above definition then the property the subject of the power may be included in the estate of the person possessing the power by virtue of section 102(2)(a), (b) or (j) ‑ see Hill, Stamp Death & Estate Duties, page 234, and Silk's case (1976), Aust Estate and Gift Duty Reporter.
A sole trustee who is also one of the objects of the discretionary trust will clearly have a 'general power of appointment' as defined. It is for this reason that I advocate use of a corporate trustee and strongly advise against an object being a trustee of the trust. (emphasis added)
The Estate Duty Assessment Act [1914 (Cth)] only includes in the estate of a deceased person property over which he had a general power of appointment exercised by will. General power of appointment is not defined and would therefore have its ordinary meaning (245 ‑ 246). (original emphasis)
In a 1978 supplement to Discretionary Trusts, Dr Hardingham and Professor Baxt included a 'draft settlement' of a discretionary trust. In the precedent, 'John Doe' is the settlor and 'Roe Nominees Pty Ltd' is the trustee. The controller of the trust is 'Donald Doe' (Don) and the deed recites that the settlor desires to make provision for Don and his family. Don is a beneficiary (cl 1.5) and the appointor (cl 8.1). As appointor, Don is given the power, exercisable at any time and from time to time, to remove any trustee and to appoint 'any person or persons to be new and additional Trustees hereof (other than the Settlor or Don)' (emphasis added).
As at 2 May 1977, being the date of execution of the Trust Deed, s 10(1) of the Death Duty Assessment Act 1973 (WA) (the WA Act) provided that, for the purposes of the Act, the estate of a deceased person comprised:
(a)his real and personal property in the State; and
(b)his personal property situate outside the State if he was domiciled in the State at the time of his death.
By s 10(2)(i) of the WA Act, for the purposes of s 10(1), 'any property over which the deceased person had at the time of his death a general power of appointment, if that power is exercised by his will' was deemed to be property of the deceased person.
The WA Act did not define the term 'general power of appointment'.
As at 2 May 1977, the Estate Duty Assessment Act 1914 (Cth) (the Commonwealth Act) contained provisions similar to s 10(1) and s 10(2)(i) of the WA Act. The provision in the Commonwealth Act with respect to personal property referred to the deceased being domiciled in Australia at the time of his death. See s 8(1) and s 8(3) of the Commonwealth Act. Like the WA Act, the Commonwealth Act did not contain a definition of 'general power of appointment'.
Powers of appointment over property can be divided into general powers, special powers and intermediate powers. A general power confers on the holder the right to appoint to anyone in the world (including himself or herself). A special power entitles the holder to appoint to anyone within a specified class of individuals. An intermediate power entitles the holder to appoint to anyone in the world except a specified class of individuals. See Re Penrose [1933] Ch 793, 805 ‑ 808; Re Triffitt's Settlement [1958] Ch 852, 860; Thompson v Commissioner of Stamp Duties [1969] 1 AC 320, 337 ‑ 339; Re Manisty's Settlement [1974] Ch 17, 21; Re Hay's Settlement Trusts [1982] 1 WLR 202, 208 ‑ 209; Schmidt v Rosewood TrustLtd [2003] 2 AC 709 [35], [42]; Snell's Equity, 2010, (32nd ed), 11-001.
In R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59, Owen J expressed the opinion, in the context of contempt proceedings for alleged breach of an interlocutory injunction, that it was 'clearly arguable' that a combination of powers held by a natural person (Lombardo) 'may amount to a general power of appointment' even though the class of beneficiaries did not comprise everyone in the world. His Honour summarised the powers in question, as follows:
[Lombardo] was a beneficiary and not a member of the 'excluded class' as that term is defined in cl 1(3) of the Trust Deed. Accordingly, he was eligible to be appointed as trustee of the Trust. Lombardo was the appointor of the Trust. Under cl 21 of the Trust Deed he could, as appointor, remove Anchorage as trustee and appoint himself as trustee in its place. As a trustee, Lombardo had the power to deal with the trust fund in any way authorised by the Trust Deed. Clause 10 indicates that the discretions vested in the trustee by the Trust Deed 'shall be absolute and uncontrolled and every power vested in [the trustee] shall be exercisable at [the trustee's] absolute and uncontrolled discretion.' There is an exception where a guardian is in office. That exception does not apply because prior to 9 August 1991, no guardian had been appointed. Once Lombardo had become trustee, or in any event through his ability to control the actions of Anchorage, Lombardo was in a position, counsel for R & I submitted, to use the trust fund for his own purposes. He could, for example, appoint income to himself (cl 3(1)(a)) or advance the vesting date and vest the whole or part of the trust fund to himself beneficially (cl 4(1)(a)). Even before the vesting date he could pay any sum from the capital of the trust fund for his own use and benefit (cl 6(1)) or permit any beneficiary (including himself) to have the custody or use of immovable property (cl 6(6)). Further wide ranging powers are set out in cl 7 including the power to borrow monies from the Trust, to use Trust assets as security for his own borrowings and to cause the trustee to give guarantees for his obligations. Lombardo also had the power to cause the Trust Deed to be varied or supplemented (cl 28) (80).

As at 2 May 1977, pt 4 of the Stamp Duties Act 1920 (NSW) (the NSW Act) imposed death duties. By s 101, in the case of every person who died after the passing of the Act, whether in New South Wales or elsewhere, and wherever the deceased was domiciled, death duty was assessable and payable upon the final balance of the estate of the deceased, as determined in accordance with the Act.
In general, the estate of a person who died domiciled in New South Wales attracted duty on the whole of his or her real property in New South Wales and his or her personal property wherever situated as at the date of death. In general, the estate of a person who died domiciled outside New South Wales attracted duty on his or her real and personal property in New South Wales as at the date of death.
By s 102(2)(j) of the NSW Act, the property of a deceased was deemed to include any property over or in respect of which the deceased had at the time of his or her death 'a general power of appointment'. The term 'general power of appointment' was defined in s 100 to include 'any power or authority which enables the donee or other holder thereof … to appoint or dispose of any property … as he thinks fit for his own benefit, whether exercisable by instrument inter vivos or by will or otherwise'. This definition included within the concept of a general power of appointment numerous powers which would ordinarily be classified as special powers of appointment.

Ground 1 of the appeal: its merits

It is convenient to reproduce here the critical provision of the Trust Deed, namely cl 11.03:
If, and so long as any individual Appointor is a Beneficiary that individual shall not be eligible to be appointed as a Trustee.
Clause 11.01 expressly stipulates that a Trustee may be a corporation.
Clause 11 distinguishes between an 'individual' and a 'corporation' or 'company'. This distinction is also made in other clauses of the Trust Deed. The word 'individual' is used in the Trust Deed to denote a natural person.
The word 'individual', and the distinction between an 'individual' and a 'corporation' or 'company', are to be found in numerous provisions of the Trust Deed.
I will begin with cl 11, which is concerned with the office of Trustee and the appointment, removal and resignation of a Trustee or Trustees:
(a)Clause 11.01 states that the First Trustee is the 'individual or corporation' described in Item 3 of the Schedule.
(b)Clause 11.05 states that any Trustee, 'being a natural individual', may, with the consent of the other Trustee or Trustees, appoint any person to be an alternate Trustee 'in the place of that individual'.
(c)Clause 11.06 states, relevantly, that the office of a Trustee shall be ipso facto determined and vacated if such Trustee 'being an individual shall be found to be a lunatic or of unsound mind or if he shall become subject to any bankruptcy law' or if such Trustee 'being a company shall enter into liquidation whether compulsory or voluntary'.
I turn now to cl 12, which is concerned with the duties, rights and liabilities of the Trustee:
(a)Clause 12.04 states that if 'an individual Trustee' is a solicitor or accountant, 'that individual or any firm of which that individual may be a member' shall be entitled to make all usual and proper charges for both professional and other services in the administration of the Trust.
(b)Clause 12.09.03 states that any exercise by the Trustee of any power, discretion or authority conferred on the Trustee by the Trust Deed may be made 'in the case of a single corporate Trustee in the manner set out in paragraph 12.11 below'.
(c)Clause 12.11 and cl 12.12 refer to a Trustee which is 'a corporation or company' and deal with the manner in which such Trustee may exercise or concur in exercising any discretion or power conferred on the Trustee by the Trust Deed, and authorise such Trustee to appoint a representative for the purpose of attending meetings of the Trustees.
I turn now to cl 13, which is concerned with the office of Appointor and the appointment and resignation of the Appointor. Clause 13.05 states, relevantly, that the office of an Appointor shall be ipso facto determined and vacated if the Appointor 'being an individual shall be found to be a lunatic or of unsound mind or if he shall become subject to any bankruptcy law' or if the Appointor 'being a company shall enter into liquidation whether compulsory or voluntary'.
I turn now to cl 14, which is concerned with the office of Guardian and the appointment and resignation of the Guardian. Clause 14.03 contains in relation to the Guardian a provision that is relevantly identical to cl 13.05.
I turn now to cl 10, which is concerned with the powers of the Trustee in relation to the Trust Fund. Clause 10.03.04 states that the Trustee has power, in the Trustee's absolute discretion, to carry on or carry out any profit making undertaking or scheme in partnership with the Trustee or 'any individual comprising the Trustee in his personal capacity or in the capacity of the Trustee or any individual comprising the Trustee as trustee of other trust funds or otherwise howsoever'.
There is a consistent pattern in cl 11, and the Trust Deed as a whole, in relation to the use of the word 'individual' and the distinction between an individual on the one hand and a corporation or company on the other. The drafter has used the word 'individual' solely and exclusively to denote a natural person.
Clause 11.03 does not contain any relevant ambiguity. There is no relevant patent ambiguity; for example, the language of cl 11.03 is not self‑contradictory, or intrinsically of doubtful meaning, or obscure as a result of grammatical or syntactical deficiencies. Also, there is no relevant latent ambiguity; for example, no uncertainty arises upon the language of cl 11.03 being applied to the facts (in particular, the appointment by Eugenio of Montevento as the sole Trustee of the Trust).
The essence of the prohibition in cl 11.03 is that an Appointor who is an individual (or natural person) is ineligible for appointment as a Trustee while he or she is a beneficiary. The language of cl 11.03, in its natural and ordinary meaning, confines the prohibition to the appointment of a Trustee who is an individual (or natural person). The language, in its natural and ordinary meaning, does not embrace or extend to the appointment of a Trustee that is a corporation. In particular, the language does not permit a construction to the effect that the prohibition embraces or extends to the appointment of a corporate entity that is controlled by an individual (or natural person) Appointor/beneficiary or to the appointment of a corporate entity in respect of which an individual (or natural person) Appointor/beneficiary is the directing mind and will.
The words 'as a', in the phrase 'shall not be eligible to be appointed as a Trustee', in cl 11.03 are concerned with appointment to the specified capacity; that is, the office of Trustee (either as sole Trustee or as co‑Trustee). An individual (or natural person) Appointor who is a beneficiary is ineligible to be appointed to the office of Trustee. Clause 11.03 is not concerned with the control of corporate entities.
The Trust Deed (including, in particular, cl 11.03) was prepared by solicitors. If it had been intended that the prohibition in cl 11.03 should embrace or extend to corporations (whether controlled by an individual (or natural person) Appointor/beneficiary or not) provision to that effect could easily have been made. The drafter readily appreciated and applied the distinction between an individual (or natural person) on the one hand and a corporation or company on the other. In some provisions of the Trust Deed the drafter referred to an individual Trustee, in other provisions to a corporate Trustee, and in other provisions merely to the neutral term 'Trustee'.
The construction of cl 11.03 which I prefer does not produce an outcome that is absurd, unreasonable or unjust. Indeed, it produces an outcome that is highly likely to have been intended. It is apparent from my examination of revenue legislation relevant to the Trust when the Trust Deed was executed, and of contemporary legal writings, that drafters of discretionary trust deeds, in about the mid‑1970s, were advised to ensure that there was no reasonable possibility that powers of appointment over the capital and income of the trust fund would be characterised by the revenue authorities as general powers of appointment for the purposes of the estate and death duties legislation. There was a real (as distinct from a fanciful) risk that if a natural person who was a beneficiary under a discretionary trust, was also the trustee, the guardian and the appointor, then he or she would be the holder of a 'general power of appointment', at least for the purposes of the NSW Act. As I have mentioned, in general, the estate of a person who died domiciled outside New South Wales attracted death duty in New South Wales on his or her real and personal property in New South Wales as at the date of death. It is highly likely that in about the mid‑1970s, solicitors who prepared discretionary trust deeds for their clients would have been aware of and, where possible, guarded against adverse revenue consequences, including those consequences flowing from the estate and death duties legislation in operation throughout Australia.

In my opinion, Montevento was eligible for appointment as Trustee of the Trust.
Finally, in relation to ground 1, I merely note, for completeness, that before the primary judge and this court counsel for Giuseppe did not challenge the validity of Eugenio's appointment of Montevento as Trustee on the basis of the doctrine of a fraud on the power.
Ground 1 fails.

Ground 2 of the appeal

I agree with Murphy JA and Hall J, generally for the reasons they give, that ground 2 is without merit.

The notice of contention

Eugenio and Montevento filed a notice of contention seeking to uphold the primary judge's decision on the additional ground that, by virtue of the doctrine of res judicata or the doctrine of issue estoppel, Giuseppe is precluded from asserting that Montevento's appointment as Trustee was invalid. Counsel for Eugenio and Montevento relied on the decision of the primary judge in Maria Scaffidi (by her next friend the Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29.
I agree with Murphy JA and Hall J, generally for the reasons they give, that the notice of contention is hopeless.

Conclusion

The appeal should be dismissed.
MURPHY JA & HALL J:

Introduction

This is an appeal from EM Heenan J's decision in Montevento Holdings Pty Ltd v Scaffidi Holdings Pty Ltd [2010] WASC 180. The proceedings below are part of a long‑running dispute between certain members of the Scaffidi family over the control of the Scaffidi Family Trust. On different sides of the dispute are the appellant (Mr Scaffidi) and the second respondent (Mr Scaffidi's brother). The first respondent (Montevento) was incorporated by Mr Scaffidi's brother, who is the sole director and shareholder of that company.

In the court below, Mr Scaffidi applied for a declaration to the effect that Montevento was not validly appointed as trustee of the Scaffidi Family Trust and ought be removed on the grounds that it was ineligible for appointment or, alternatively, for orders that Montevento be removed under s 77 of the Trustees Act 1962 (WA) and for related orders.
The third respondent (Mrs Scaffidi) appears by her guardian ad litem, the Public Trustee. Mrs Scaffidi is the mother of Mr Scaffidi and his brother.
The judge found [31] that Mr Scaffidi's brother is the 'sole controller' of Montevento, and that Montevento 'has no apparent commercial purpose or history other than acting in the role of trustee'. His Honour thereby found, in effect, that Mr Scaffidi's brother is the directing mind and will of Montevento, and that the appointment of Montevento gave Mr Scaffidi's brother the control of the trustee.
The judge also found, in effect, that there was a long history of deep animosity between Mr Scaffidi and Mr Scaffidi's brother (reasons [39]).
The foundation for Mr Scaffidi's claim in the court below was cl 11 of the trust deed, which provides, relevantly:
The First Trustee is the individual or corporation described in Item 3 of the Schedule. A trustee may be a corporation. [cl 11.01]
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. [cl 11.02]
If, and so long as any individual Appointor is a Beneficiary that individual shall not be eligible to be appointed as a Trustee. (emphasis added) [cl 11.03]
Mr Scaffidi contended, in effect, that cl 11.03, properly construed, precludes an individual beneficiary with powers of appointment from appointing a corporation of which they are the sole shareholder and director, as trustee of the trust, and that Montevento was, accordingly, ineligible for appointment as trustee.
The judge rejected Mr Scaffidi's application for the removal of Montevento as trustee. It is that decision against which Mr Scaffidi now appeals.
For the reasons which follow, we would allow the appeal on the basis that Montevento was not eligible for appointment as a trustee.

Grounds of appeal

Mr Scaffidi contends:
1.The judge erred in law in failing to find that:
(a)on the proper construction of cl.11.03 of the trust deed, it was not open to an appointor who was a beneficiary to appoint a trustee where the effect of the purported appointment was to give the appointor/beneficiary control of the office of trustee;
(b)because such was the effect of the purported appointment of Montevento Holdings Pty Ltd as trustee (as the judge found at [31]), that purported appointment was invalid and of no effect.
2.In the alternative to ground 1, the judge erred in fact and in law in failing to find that:
(a)the intention manifested in the trust deed was that the appointor, if a beneficiary, should not be, or be in control of the office of, the trustee;
(b)an appointment made contrary to that intention, in circumstances where there was uncontested and deep-seated animosity between the appointor/beneficiary, and the other main beneficiary, constituted grounds for removal of the trustee, in exercise of the Court's inherent jurisdiction or under s 77 of the Trustees Act 1962;
(c)in those circumstances, and there being no countervailing discretionary factor, it was expedient to remove Montevento Holdings Pty Ltd as trustee and replace it with a trustee which is independent of the appointor/beneficiary.
Mr Scaffidi's brother has filed a notice of contention to the effect that even if Mr Scaffidi succeeds in his grounds of appeal, the primary judge's decision stands because Mr Scaffidi, by the operation of the doctrines of res judicata or issue estoppel, is precluded from contending that Montevento has been invalidly appointed as trustee of the trust. In this regard, Mr Scaffidi and Montevento rely upon EM Heenan J's decision in Maria Scaffidi (by her next friend the Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29 [33].

The primary judge's reasons

The trial judge rejected Mr Scaffidi's arguments on the following bases. First, his Honour referred to a corporation being a separate legal entity from its incorporators and said that there was nothing unusual or suspicious in a corporation being formed and controlled by one person. His Honour said that it could not be said that Montevento had been formed in order to avoid or evade some legal obligation resting on Mr Scaffidi's brother (reasons [32] ‑ [33]). Secondly, his Honour noted that by cl 11.01 and cl 11.03, the trust deed contemplates that the trustee may be a corporation. Thirdly, his Honour considered it to be not insignificant that the former trustee, Scaffidi Holdings, was appointed and acted as a trustee when its only two directors were Mr Scaffidi and his brother, both of whom were beneficiaries (reasons [34]). In this regard, his Honour said [34]:
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.
Next, his Honour said that Montevento, as trustee, is subject to the legal duties and obligations resting upon a trustee and there was no suggestion that Montevento has committed, or is threatening or likely to commit, any breach of trust (reasons [35]).
At [38], his Honour said:
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.
In relation to the application under s 77 of the Trustees Act, his Honour held that the existence of the deep animosity between the beneficiaries was not on its own a reason for removing Montevento as a trustee (reasons [37]).
In addressing a submission by Mr Scaffidi 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, his Honour said [41]:
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 [sic] 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.

The trust deed and background circumstances

The trust deed is a deed of settlement dated 2 May 1977 between Salvatore Scaffidi as settlor, and Scaffidi Nominees Pty Ltd as trustee. By cl 4.01 and schedule item 10, the name of the trust fund is 'The Scaffidi Family Trust'.
The trust deed establishes, in effect, a discretionary family trust. As already noted, the deed provided for Scaffidi Nominees to be the original trustee. The deed designated Mr Antonio Scaffidi (Mr Scaffidi senior, the father of Mr Scaffidi and his brother) as 'Appointor' during his lifetime, and Mrs Scaffidi (the mother of Mr Scaffidi and his brother) as Appointor after Mr Scaffidi senior's death: cl 1.09, schedule item 9.

The term 'Beneficiary' is defined (cl 1.05) as any member of the 'Class of Beneficiaries'. (The term 'Class of Beneficiaries' seems to be used interchangeably with the term 'Class of Beneficiary'.) The term 'Class of Beneficiary' (cl 1.04) is defined, relevantly, to mean, in effect, the 'Specified Members', the families of the 'Specified Members', trusts and companies associated with the 'Specified Members' and their families, and the 'Additional Members'. The 'Specified Members' are Mr Scaffidi and Mr Scaffidi's brother (cl 1.03, schedule item 5). The 'Additional Members' are defined as Mr Scaffidi senior and Mrs Scaffidi (cl 1.04.07, schedule item 6). By cl 1.11.05, the trustee may, in writing, with the consent of the Guardian, exclude a person from membership of the Class of Beneficiaries.
The deed designated Mr Scaffidi senior in his lifetime and, after his death, Mrs Scaffidi, as the 'Guardian' (cl 1.08, schedule item 8).
By cl 1.07, read with cl 8, the trust vests, relevantly, on a date prior to 2 May 2057 specified by the trustee with the consent of the 'Guardian' and, in the event that no such date is specified, on 1 May 2030. The vesting date is referred to as the 'Terminating Date'.
Clause 5 deals with the distribution of income. By cl 5.02, the trustee may, but only with the consent of the Guardian (if any), pay to or apply any of the income to one or more of the Beneficiaries, or determine to accumulate the whole or any part of the income, or set aside income as a provision to pay income tax. By cl 5.03, the trustee is to hold all the income in respect of a trust year which has not been paid or set aside or determined to be accumulated in accordance with cl 5.02, in trust for the Specified Members then living in equal shares absolutely.
Clause 8 provides for distribution of the trust fund at the 'Terminating Date'. By cl 8.01.01 and cl 8.06, the trustee may distribute the fund at the 'Terminating Date' to one or more of the members of the 'Class of Beneficiary', subject to the written consent of the 'Guardian' (if any), but otherwise in the absolute discretion of the trustee. By cl 8.01.02, any part of the fund not distributed under cl 8.01.01 is to be distributed to the 'Specified Members' living at the Terminating Date as tenants in common in equal shares.
By cl 9, the trustee may, with the consent of the Guardian, but otherwise in its absolute discretion, pay the whole or any part of the trust fund to a Beneficiary at any time before the Terminating Date.
Clause 10 gives the trustee very wide powers to deal with the trust fund 'as if the Trustee was the beneficial owner of the Trust Fund'. By cl 10.02.29, the trustee may deal with himself or herself or itself in their personal capacity as if there were two separate persons to the dealings.
Clause 11, dealing with the office of trustee, and appointment to and termination from that office, then appears. Its terms are set out earlier.
Clause 12 provides:
12.No Trustee shall be responsible for:-
12.02.01any loss or damage occasioned to the Trust Fund or any part thereof or to any person by the exercise of any discretion or power hereby or by law conferred on the Trustees or by any alleged failure to exercise any such discretion or power, or -
12.02.02any breach of duty or trust whatsoever unless the same shall be proved to have been committed made or omitted in personal conscious and fraudulent bad faith by the Trustee charged to be so liable. All persons claiming any interest in the income or capital of the Trust Fund shall be deemed to take notice of and to be subject to the protection hereby conferred on the Trustees.
Clause 15.01 provides that certain powers and rights are not to be exercised by the trustee except with the written consent of the Guardian (if any). These include the trustee's powers to specify a Terminating Date (cl 1.07.01), to exclude persons from the members of the Class of Beneficiaries (cl 1.11.05), to distribute income to Beneficiaries (cl 5.02.01), to distribute the trust fund at the Terminating Date (cl 8.01.01) and to distribute capital to a Beneficiary prior to the Terminating Date (cl 9.01).
Clause 15.02 provides that if there is no Guardian, the trustee shall not exercise any of those rights and powers 'in a manner which will diminish or impair the … share of any Specified Member'.
By cl 15.04, the Guardian may by deed provide that the powers referred to in cl 15.01 may be exercised without reference to the Guardian.
Each of Mr Scaffidi senior and Mrs Scaffidi, as Appointors were entitled to appoint a successor: cl 13.01 and schedule item 9.
There is no general power of amendment.
When the deed was entered into, the directors of the original trustee, Scaffidi Nominees, were Mr Scaffidi and Mr Scaffidi's brother. The company search indicates that each of Mr Scaffidi senior, Mrs Scaffidi, Mr Scaffidi and Mr Scaffidi's brother, was an equal shareholder in that company. By deed dated 16 August 1995, Mr Scaffidi senior, as appointor, appointed Scaffidi Holdings Pty Ltd as trustee. Mr Scaffidi senior and Mrs Scaffidi, Mr Scaffidi and his brother were directors of and shareholders in Scaffidi Holdings.
On 29 August 2004, Mr Scaffidi senior died, and consequently Mrs Scaffidi became the Appointor and Guardian under the trust deed.
On 30 June 2006, Mrs Scaffidi, as Guardian, executed a document declaring that the powers referred to in cl 15.01 could be exercised without reference to the Guardian. Also on 30 June 2006, Mrs Scaffidi appointed Mr Scaffidi's brother as the Appointor for the Scaffidi Family Trust.
On 27 March 2007, Mr Scaffidi's brother incorporated Montevento as a corporation with a sole shareholder and sole director.
In 2008, Mr Scaffidi's brother exercised certain powers conferred on him under a power of attorney given by Mrs Scaffidi. Mr Scaffidi applied to the State Administrative Tribunal to revoke the power of attorney. That application was successful and the Public Trustee was appointed plenary administrator for Mrs Scaffidi on 7 November 2008.
In 2008, there was a deadlock in the management of Scaffidi Holdings as a result of the animosity between Mr Scaffidi and his brother. On 14 October 2008, Mr Scaffidi applied to wind up Scaffidi Holdings. That application did not proceed, according to Mr Scaffidi, having regard to a subsequent application by the Public Trustee, on behalf of Mrs Scaffidi, for the Public Trustee to be appointed as trustee of the Scaffidi Family Trust. (The Public Trustee's application was ultimately not pursued - see [143] below.)
On 18 February 2009, Mr Scaffidi's brother executed a deed which provided for the removal of Scaffidi Holdings as trustee of the Scaffidi Family Trust, and the appointment of Montevento as the new trustee.
In March 2009, Montevento applied (CIV 1487 of 2009) for orders for the vesting in it of the trust property of the Scaffidi Family Trust. In early 2009, the Public Trustee also applied (CIV 1450 of 2009), on behalf of Mrs Scaffidi, to have itself appointed as trustee. On 13 January 2010, EM Heenan J made orders in favour of Montevento vesting the trust property in Montevento: Maria Scaffidi (by her next friend the Public Trustee) v Scaffidi Holdings Pty Ltd [2010] WASC 29. In those reasons for judgment, his Honour noted that the Public Trustee had withdrawn its application to become trustee.

The power to remove trustees and appoint new trustees

Clause 11 of the trust deed confers a power to remove trustees and appoint new ones. It is convenient to note at the outset certain principles relating to powers of that kind.
Whether the power given in an instrument to remove trustees and appoint new trustees is, by its terms, wide enough in scope to allow an appointor to appoint himself or herself as trustee, is a question as to the proper construction of the language of the power: Montefiore v Guedalla (1903) 2 Ch 723, 725 ‑ 726; In re Christina Brown (1921) 22 SR (NSW) 90, 93 ‑ 94.
Even where the language is wide enough to permit the appointor to appoint himself or herself as trustee, it is a 'very salutary' or 'most salutary' rule that the power should only be exercised to that end in 'exceptional circumstances' or 'special circumstances': Montefiore v Guedalla (725, 726); In re Christina Brown (93 ‑ 94); In re Power's Settlement Trusts [1951] Ch 1074, 1080.
In a discretionary trust (and subject to the terms of the instrument) the power to appoint trustees may be construed as a 'fiduciary power': In re Skeats' Settlement (1889) 42 Ch D 522, 526; In re Newen (1894) 2 Ch 297, 309; Re Burton [1994] FCA 1146; (1994) 126 ALR 557, 559 ‑ 560; Pope v DRP Nominees Pty Ltd [1999] SASC 337; (1999) 74 SASR 78 [46] ‑ [48].
In Re Skeats' case, Kay J said (526 ‑ 527):
The ordinary power of appointing new trustees, under a settlement such as this is, of course imposes upon the person who has the power of appointment the duty of selecting honest and good persons who can be trusted with the very difficult, onerous, and often delicate duties which trustees have to perform. He is bound to select to the best of his ability the best people he can find for the purpose. Is that power of selection a fiduciary power or not?
...
Now what is the rule, the universal rule, observed in Courts of Justice as to a duty of that kind? The universal rule is that a man should not be judge in his own case; that he should not decide that he is the best possible person, and say that he ought to be the trustee. Naturally no human being can be imagined who would not have some bias one way or the other as to his own personal fitness, and to appoint himself among other people, or excluding them to appoint himself, would certainly be an improper exercise of any power of selection of a fiduciary character such as this is. In my opinion it would be extremely improper for a person who has a power to appoint or select new trustees to appoint or select himself, for that principal reason. Has, then, the practice of such a person appointing himself been sanctioned by conveyancers or the profession in general? The answer must be, certainly not.
Even if not correctly technically described as a 'fiduciary power' (see the discussion in Finn PD (as his Honour then was), Fiduciary Obligations (1977) [627], [644]), such a power must nevertheless be exercised bona fide for the purpose for which it was conferred: Re Burton (559); Duke of Portland v Topham (1864) 11 HLC 32, 54. The purpose of the power of removing and appointing trustees is ascertained by reference to the fiduciary nature of the office the object of the appointment. The trustee is the 'archetype' fiduciary: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 473. The office exists for the benefit of the beneficiaries: Letterstedt v Broers (1884) 9 App Cas 371, 386. It is an essential element of the trust that the trustee is under a personal obligation to deal with the trust property for the benefit of the beneficiaries, an obligation giving correlative rights to the beneficiaries. There is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by the beneficiaries which is fundamental to the concept of a trust: Heydon JD and Leeming LJ, Jacobs' Law of Trusts in Australia (7th ed, 2006) [110], [1620]. If these do not exist, or if the beneficiaries have no rights to enforce them, there is no trust. The minimum duty is the duty to perform the trust honestly and in good faith, for the benefit of the beneficiaries. See Armitage v Nurse [1998] Ch 241, 253 ‑ 254.
Accordingly, notwithstanding the breadth of the discretion conferred on the trustee in an instrument such as the one in this case, the discretion is to be exercised by reference to the objects and purposes of the trust, having regard to the competing interests of the various potential beneficiaries, and without taking into account improper, irrelevant or irrational considerations. The discretions must be exercised personally and not in conjunction with, or under the direction of, somebody else. See Elovalis v Elovalis [2008] WASCA 141 [51], [70]. For a case illustrating a breach of trust in such circumstances, see for example, Nicholls v Louisville Investments Pty Ltd (1991) 10 ACSR 723.
If, however, on the proper construction of the instrument, the power of the appointor to remove and appoint trustees may be exercised for the purpose of controlling the trust estate for the appointor's benefit, the trust property may be regarded, at least for certain statutory purposes, as effectively owned by the appointor, or as property in which the appointor has a contingent interest: Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814; (2006) 153 FCR 509 [19], [29], [37] ‑ [46]; Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 48; [108] ‑ [138]; In the Marriage of Goodwin [1990] FLC 92‑192; 1990) 101 FLR 386, 392; In the Marriage of Davidson (No 2) [1991] FLC 92‑197; (1990) 101 FLR 373.
It has been held that it is not proper to appoint new trustees without communicating with beneficiaries and hearing their objections, at least where it is likely that they would oppose the appointment: Marshall v Sladden (1849) 7 Hare 428 [439]; O'Reilly v Alderson (1849) 8 Hare 101 [103]. However, beneficiaries cannot dictate or control the exercise of the power: Inre Brockbank [1948] Ch 206, 209 ‑ 211.

Disposition of the appeal - ground 1

Construction - principles

The first ground of appeal concerns the proper construction of the power in cl 11 of the trust deed. The power of appointment in cl 11 is to be construed bearing in mind the significance of the purpose for which it is conferred.
The legal construction of an instrument is the same in equity as at law: Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509, 524. The nature of the instrument as a trust and the evident purpose of the trust may nevertheless inform the true meaning of its terms: Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343; (2001) 38 ACSR 57 [19]; Esso Australia Ltd v Australian Petroleum Agents' and Distributors' Association (1999) 3 VR 642 [16]. The court's primary task in construction is to discover the intention of, relevantly, the settlor from the words used in the instrument, read as a whole. Where an instrument is capable of more than one meaning, that interpretation will be preferred which avoids consequences which are, in the circumstances, capricious or unreasonable. The meaning so ascertained may not necessarily be the most obvious or most grammatically correct: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109. For example, in Tatham v Huxtable [1950] HCA 56; (1950) 81 CLR 639, Fullagar J considered that, as a matter of construction of the instrument as a whole, a power given to an executor to distribute residuary estate to the 'beneficiaries', where the beneficiaries included the executor, did not authorise the executor to give himself all or any part of the residue.

Construction of cl 11

Clause 11.03 provides, in effect, that the appointor may not appoint himself or herself as a trustee for as long as he or she is also a beneficiary. The prohibition is to be considered against the background that, in substance, the primary objects of the exercise of power are the 'Specified Members', being Mr Scaffidi and Mr Scaffidi's brother and their respective families.
It is one of a number of provisions from which it can be seen that the settlor has been cautious in seeking to maintain, subject to control by the guardian, an even‑handedness in relation to the treatment of 'Specified Members'. In a number of provisions, the settlor intends that in the parents' lifetimes, the parents (or their nominees), as guardians, may, in effect, ultimately control the application of trust funds amongst the Specified Members: cl 15.01 and the clauses to which it refers, and cl 15.04. If there is no guardian, the trustee shall not exercise the powers referred to in cl 15.01 in a way which would impair or diminish the vested, contingent, or expectant, share of any Specified Member: cl 15.02. Other terms provide, in effect, that if the guardian does not exercise control, the Specified Members are to be treated equally: cls 5.03, 8.01.02, 8.04.
Provisions of this kind have additional significance where the trustee's scope for being liable for breach of trust is significantly curtailed by the provisions of cl 12 of the trust deed.
Clause 11.03 appears to be intended to serve at least three related purposes. The first purpose is, it may be presumed, to ensure that the office of trustee is seen as wholly separate from the position of an appointor/beneficiary, in order to avoid the risk that the appointor is treated as effectively owning, or having a contingent interest in, the trust property. The second is to maintain an even‑handedness in the treatment of Mr Scaffidi and Mr Scaffidi's brother under the trust. The third is to provide for the express observance of the general law's 'most salutary rule' that an appointor should generally not appoint himself or herself as trustee. Although the general law rule is not given its fullest scope by the terms of cl 11.03, in that cl 11.03 does not expressly or by necessary implication contain a general prohibition on the appointor appointing himself or herself as a trustee, nevertheless it does so in a way which serves to promote the performance by the trustee of its core obligations under the trust. In this regard, the prohibition is directed specifically to preventing a conflict of interest arising on the appointment of the appointor as a trustee, where the appointor is also a beneficiary of the trust.
The construction favoured by the primary judge would tend to undermine, if not subvert, those three purposes. That construction is not compelled by the language of cl 11.
Mr Scaffidi contended that the language of cl 11.03 ought to be construed broadly to give effect to its intended purposes, bearing in mind the role which the trustee is required to perform under the trust deed. We accept the thrust of that submission. In our view, the following matters inform the proper construction to be given to the clause.
Clause 11.03 provides, in effect, that the individual, who is both appointor and beneficiary, 'shall not be eligible to be appointed as a Trustee'. It does not say 'shall not be eligible to be appointed a Trustee'.
The preposition 'as' in the phrase 'shall not be eligible to be appointed as a Trustee' signifies 'in the role, function, status or manner of' a trustee (Macquarie Dictionary definition of 'as'). The word 'function' in this context means the 'kind of action or activity proper to' the 'institution' of trustee (Macquarie Dictionary definition of 'function').
The words in cl 11.03, in their ordinary usage, are capable of meaning that a beneficiary/appointor is ineligible to be appointed to a position involving the performance or the functions of a trustee under the trust deed, or involving the performance of activities proper to the institution of a trustee under the trust deed.
Clause 11.03 is to be read in the context of cl 11.01, which provides that a trustee may be a corporation. The principal focus in cl 11.03 is on the eligibility of the individual appointor/beneficiary for appointment 'as' a trustee. The eligibility of that person for appointment is to be considered in a context where cl 11.01 contemplates that a trustee may be a natural person or a corporate entity. Clause 11.03 is designed to operate in circumstances where the trustee is envisaged, by the settlor, to be either a natural person (an 'individual') or a corporate entity.
Where an individual who is an appointor and beneficiary appoints to the office of trustee a corporate entity which he controls and of which he is the directing mind and will (in this case by virtue of his position as its sole shareholder and sole director), the effect of the appointment is that the individual will exclusively exercise the powers and rights exercisable by the office of trustee, although in point of law the officeholder (ie, the corporate entity) is the trustee. In our view, the language of cl 11.03 is wide enough to preclude such an appointment. The contention that such a person may appoint himself to the position of exercising the powers and rights of the trustee by appointing as trustee a company of which he is the sole director and shareholder involves, in our view, assigning a meaning to the word 'Trustee' which it cannot reasonably bear when cl 11.03 is read as a whole, in that it treats the office of trustee as entirely separate from the powers and rights exercisable by the officeholder. It disregards the 'wishes of the settlor of the trust … expressed or clearly implied in the trust instrument': Saul v Lin (No 2) [2004] NSWSC 332; (2004) 60 NSWLR 275 [48].

Conclusion

The first ground of appeal succeeds, but not the second. The notice of contention fails. The question of final orders should be deferred pending the parties' consideration of these reasons.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: SCAFFIDI -v- MONTEVENTO HOLDINGS PTY LTD [2011] WASCA 146 (S)

CORAM: BUSS JA
MURPHY JA
HALL J

HEARD: 12 APRIL 2011 & ON THE PAPERS

DELIVERED : 7 JULY 2011

SUPPLEMENTARY
DECISION :11 OCTOBER 2011

FILE NO/S: CACV 70 of 2010

BETWEEN: GIUSEPPE DIEGO SCAFFIDI
Appellant
AND
MONTEVENTO HOLDINGS PTY LTD
First Respondent
EUGENIO SCAFFIDI
Second Respondent
MARIA SCAFFIDI by her guardian ad litem THE PUBLIC TRUSTEE
Third Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :EM HEENAN J
Citation  :MONTEVENTO HOLDINGS PTY LTD -v- SCAFFIDI HOLDINGS PTY LTD [No 2] [2010] WASC 180
File No  :CIV 1522 of 2010

Catchwords:

Costs - Whether costs should be awarded according to success on grounds of appeal - Whether costs should be recovered from the trust property - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(3), r 4(1), r 9(2)
Supreme Court Act 1935 (WA), s 37(1)
Trustees Act 1962 (WA), s 77(1)

Result:

The appellant's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs
The third respondent's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs
Pursuant to O 66 r 4(1) of the Rules of the Supreme Court 1971 (WA), the costs taxed pursuant to orders 1 and 2 shall be recovered out of the property of the Scaffidi Family Trust, without recourse against any other party

Category: B

Representation:

Counsel:

Appellant:     Mr C L Zelestis QC
First Respondent           :     Ms K A Vernon
Second Respondent      :     Ms K A Vernon
Third Respondent          :     Mr B W Ashdown

Solicitors:

Appellant:     Oldfield Legal
First Respondent           :     Butcher Paull & Calder
Second Respondent      :     Butcher Paull & Calder
Third Respondent          :     Public Trustee

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

Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)
Currie v Glen [1936] HCA 1; (1936) 54 CLR 445
Fowler v Nield (1961) 61 SR (NSW) 152
Gale v Gale [1914] HCA 53; (1914) 18 CLR 560
Gava v Grljusich (Unreported, WASC, Library No 960082, 22 February 1996)
In re Beddoe [1893] 1 Ch 547
Macedonian Orthodox Community Church St Peka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Medical Board of Western Australia v A Medical Practitioner [2011] WASCA 151 (S)
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572
Murdocca v Murdocca (No 2) [2002] NSWSC 505
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146
Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
Stanley v Layne Christensen Company [2006] WASCA 56
Trustees, Executors and Agency Company Ltd v Ramsay [1920] HCA 2; (1920) 27 CLR 279
Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646

BUSS JA: On the basis of the decision and reasons of the majority (Murphy JA & Hall J) in Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146, the orders as to costs proposed by Murphy JA are appropriate, for the reasons he gives, and should be made.
MURPHY JA:

Introduction

On 7 July 2011, this court delivered its substantive reasons for allowing the appeal. The matter was then adjourned for the parties to consider what final orders should be made in light of the court's reasons. The parties were able to agree to the appropriate orders and filed a minute of consent orders on 27 July 2011, which included an order programming the filing of submissions as to costs. The parties agreed that the question of costs could be determined on the papers, without the need for a further hearing. These reasons deal with the parties' submissions concerning costs.

Background

The background to the dispute and grounds of appeal are summarised in the substantive reasons: Scaffidi v Montevento Holdings Pty Ltd[2011] WASCA 146 [104] ‑ [114].
The appellant was successful on the first ground of appeal, but not the second. A declaration was made in the terms sought by the appellant, namely that the appointment of the first respondent as trustee was invalid for breaching cl 11.03 of the trust deed. Further, the court determined that it was expedient to appoint a new trustee under s 77(1) Trustees Act 1962 (WA), and made an order for the appointment of a 'proper person', allowing the second respondent (Eugenio Scaffidi) as appointor the opportunity to nominate a person, the intention being that if no objection were taken to the nomination, the court could then confirm the nomination and make an order for the person's appointment.
The first and second respondents had filed a notice of contention seeking to uphold the primary judge's decision on the basis that the appellant was precluded, by reason of estoppel or res judicata, from asserting that the appointment of the first respondent was invalid. The notice of contention was dismissed unanimously.

Parties' submissions on costs

The appellant

The appellant submits that as he is the successful party in the appeal, the first and second respondents should pay his costs of the originating summons below and of the appeal, including his costs relating to the notice of contention which was dismissed. Further, the appellant seeks an order that, to the extent that his costs are not recovered from the first and second respondents, his costs be recovered from the trust property pursuant to O 66 r 4(1) Rules of the Supreme Court 1971 (WA).
Contrary to the first and second respondents' submission, the appellant says that it would be inappropriate in the circumstances for the court to exercise its discretion under O 66 r 1(3) to make a costs order according to parties' success or failure on particular issues. He says that the issues raised by the two grounds of appeal are incapable of being separated 'except on a quite tortured analysis'.
In relation to the third respondent, the appellant says, in effect, that she ought not be permitted to recover her costs, given that she had actively opposed the appellant's position below and at all times up until she withdrew from the hearing of this appeal.

The first and second respondents

The first and second respondents submit that all of the appellant's costs should be paid out of the trust property pursuant to O 66 r 4(1) as the appellant is a beneficiary exercising his right of due administration of the trust.
Further, the first and second respondents say, in effect, that because the appellant succeeded only on the first ground of appeal, the appellant should be denied half of his costs in the exercise of discretion under O 66 r 1(3). They submit that the two grounds of appeal were not mere alternatives and were discrete grounds for relief.
The first and second respondents also say that the appellant should not be entitled to recover, as part of his costs of the appeal, costs thrown away by reason of his amendments to his submissions and grounds of appeal.
In relation to the third respondent, the first and second respondents say that she ought to bear her own costs because her interests could have been adequately protected by filing a notice of intention to abide by the decision of the court. It is said that the trust should not be burdened with the costs of the third respondent's decision to be positively involved in the proceedings, and then withdraw at the last minute.

The third respondent

The third respondent submits that the conduct and administration of the trust, including the removal and appointment of trustees, has a significant impact on her interests as a beneficiary and creditor of the trust and, on that basis, she was a necessary and proper party to take part in the proceedings. She was joined by the appellant as a separate defendant to the primary proceedings and as a respondent in the appeal, and took part in the appeal to protect and represent her legitimate interests. The third respondent submits that her costs should be paid either by the unsuccessful party who is to bear costs generally, or by the trustee with a right for the trustee to be indemnified out of the trust.

Order 66 r 1(3) - costs of issues

The court has a wide discretion to award costs: s 37(1) Supreme Court Act 1935 (WA).
Subject to the express provisions of any statute and of the Rules of the Supreme Court, and without limiting the generality of the discretion to make a costs order, the court will generally order that the successful party to any action or matter recover his costs: O 66 r 1(1). Order 66 r 1(1) reflects the common law principle that costs should generally follow the event.
Order 66 r 1(3) provides that the court may depart from the general rule where the successful party in the action has failed on particular issues. It provides:
1.General rules as to costs
…
(3)Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
This court has recently considered the principles concerning the exercise of discretion to make an order under O 66 r 1(3). In Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S), the court said [5] ‑ [8]:
It is clear that while the court has a broad discretion as to costs, generally costs will follow the event: Rules of the Supreme Court 1971 (WA), O 66 r 1(1). It is incumbent upon the unsuccessful party to satisfy the court that there are good reasons why it should not pay the other party's costs: Nikolaou v Papasavas, Phillips & Co (No 2) [1989] HCA 11; (1989) 166 CLR 394, 407.
The court may, in the exercise of its discretion, order that a successful party recover only a portion of its costs where that party has been unsuccessful in respect of certain discrete issues. But that should not be done as a matter of course. To embark as a general practice upon an analysis of which party was successful on each issue, or necessarily to deprive a successful party of some portion of its costs if it has lost on a particular issue, would be likely to add further uncertainty and complexity to the outcome of litigation, derogate from the prospect of settlement, and oblige the court to hear lengthy and frequent arguments in relation to costs as an additional burden on its resources and the costs of the parties: see MacKinnon v Petersen (Unreported, NSWSC, 19 April 1989) (Cole J); Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [67] - [68] (McHugh J). Litigation is time-consuming, expensive and burdensome enough already.
In addition, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case: Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 [24].
In Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S), the position was put as follows:
'[T]he power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the cost of the proceedings in a significant and readily discernible way [7].'
See also Medical Board of Western Australia v A Medical Practitioner [2011] WASCA 151 (S) [4].
The starting point is that the appellant was the generally successful party in the appeal having succeeded on ground 1 and would, therefore, ordinarily be entitled to his costs.
Grounds 1 and 2 were expressed in the alternative and the appeal was argued on that basis. The second ground of appeal did not provide an independent basis for success in the appeal had the first ground failed (substantive reasons [84]). Further, the court having upheld the first ground, the second ground did not strictly fall to be considered.
Ground 2 was to the effect that if cl 11 of the trust deed did not preclude the appointment of the first respondent as trustee (as contended in ground 1), the deed as a whole nevertheless manifested an intention that the appointor, if also a beneficiary, ought not control the office of trustee. That being so, both grounds of appeal were broadly directed to the same question, namely, whether the appointment of the first respondent was invalid or otherwise inappropriate on the proper construction of the trust deed. In the circumstances, in my view, it cannot be said that the two grounds raised discrete and severable issues so as to enliven the court's discretion under O 66 r 1(3).
Moreover, the first and second respondents have not established that the inclusion of the second alternative ground increased costs in a significant and readily discernible way. The submissions concerning the second ground were relevant to the disposition of the appeal, insofar as they addressed issues concerning the proper construction of the trust deed and the principles in relation to s 77 Trustees Act, pursuant to which section the court ultimately made an order. In the circumstances I do not consider that the inclusion of ground 2 can be said to have significantly increased the costs of the appeal.
For the above reasons, this is not a proper case in which to depart from the general rule that costs should follow the event.

The notice of contention

The first and second respondents' notice of contention contended that the primary decision should be upheld because the appellant was precluded from seeking a declaration that the first respondent was invalidly appointed by reason of estoppel or res judicata. The court unanimously held that the notice of contention had no merit. In the circumstances, costs would ordinarily follow the event in the notice of contention. The first and second respondents do not submit otherwise. The appellant should be entitled to his costs of the notice of contention.

The appellant's amendments

The appellant sought leave to amend his grounds of appeal and file amended submissions three weeks prior to the hearing. The first and second respondents submit that the appellant ought not recover, as part of his costs of the appeal, costs associated with the preparation of the amended grounds and submissions. It is said that the amendments were so extensive that the grounds of appeal and submissions were, in substance, substituted by new grounds and submissions following the appointment of new counsel.
The general rule is that where leave to amend is granted, the amending party is liable to pay the costs of the application to amend and any consequential costs 'thrown away'. However, the court will still have regard to the nature and extent of the amendments, together with the reasonableness of the other party's conduct. In Stanley v Layne Christensen Company [2006] WASCA 56, Wheeler JA explained [52], [55]:
The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party's conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. That is implicitly recognised in Briggs at 14, where Owen and Parker JJ appear to accept that an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the 'normal rule' relating to indulgences. However, in that case their Honours considered that it could not be said that the other party was unreasonable to require that the proposed amendment be justified to the satisfaction of a judicial officer.
...
I should add that the respondents submit that, as a general principle, the 'normal rule' upon a successful application to amend pleadings should be that the Court orders costs in the cause, since whether or not the amendments prove to be necessary and appropriate will depend upon whether the amending party ultimately succeeds at trial. I would not go so far as to hold that that should be the usual or normal order. There are a number of factors to balance. One is that, since it would generally be possible for a party to avoid the need to seek any indulgence by accurately formulating its pleading or otherwise complying with the rules, the fact that the party is seeking an indulgence will be relevant. As I have already noted, the degree of conferral and the reasonableness of conduct of the party opposing such an indulgence will also be relevant. Where amendments are not substantial, or where they serve simply to further clarify an otherwise broadly satisfactory pleading, it may be appropriate simply to order costs in the cause. Such a course may also be appropriate where an amendment adds a substantial, different, but apparently arguable cause of action, on the basis that it is always possible for a trial Judge to make a special order in relation to the costs of such an issue, if it should ultimately be found that the party is unsuccessful in relation to that new cause. It is appropriate that the discretion in such cases should remain unfettered in the interests of efficient case management.
In the present case, the solicitors for the appellant sent a letter to the other parties on 4 March 2011 which attached the proposed amendments, explained that the amendments were sought as a result of advice from (newly briefed) senior counsel that the amendments would simplify the issues and that the substance of the appeal remained unaltered, and invited the parties to consent to the amendments within one week. The first and second respondents did not reply to the letter. The third respondent sought more time to seek instructions.
In light of the proximity to the hearing, the appellant applied to the court for leave to amend on 14 March 2011. The court directed that any affidavits and/or submissions in opposition to the application be filed by 21 March 2011. No affidavits or submissions were filed. The court granted the appellant's application on 24 March 2011. The respondents were given time within which to make any consequential amendments to their respective submissions. The first and second respondents did not make any amendments. The third respondent made some minor amendments.
It is important to note that the unopposed orders made, when granting the application to amend, included an order that 'the costs of the application be costs in the appeal'. That order still stands. Like the amendments, that order was not opposed.
As the successful party in the cause, the appellant is, accordingly, entitled to have his costs of the application to amend included in his overall costs.
In any event, the amendments did not alter the substance of the appellant's case, reflected by the fact that the first and second respondents considered it unnecessary to make any consequential amendments to their submissions. On the contrary, the amendments clarified the appellant's arguments and contributed to the efficient disposition of the appeal. This is a case where it would have been reasonable for the respondents to consent to the amendments sought when invited to do so.

Order 66 r 4(1) - costs out of the trust property

General principles

Section 37(1) Supreme Court Act provides that the court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent costs are to be paid.
Order 66 r 4(1) provides:
4.Costs out of fund or property
(1)Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the Court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party: Provided that no such order shall be made unless the Court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
The appellant seeks an order pursuant to O 66 r 4(1) that, to the extent that the appellant's costs are not recovered from the first and second respondents, his costs be recovered from the trust. On the other hand, the first and second respondents submit that all of the appellant's costs should be paid out of the trust.
The third respondent submits that her costs should be paid either by the unsuccessful party who is generally to bear costs or, alternatively, that the trustee pay her costs with a right to be indemnified out of the trust.
A helpful summary of the broad principles under the general law concerning costs in matters involving trust disputes is found in the judgment of Finkelstein J in Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119. His Honour said [5] ‑ [9]:
The best place to begin is with some basic rules. Re Buckton [1907] 2 Ch 406 contains a classic statement of the principles upon which costs are awarded in cases involving trustees. There Kekewich J (who was a master of Chancery procedure) said that, broadly speaking, there are three kinds of disputes involving trustees. The first is an action brought by trustees relating to the construction of the trust instrument or some other question arising in the course of an administration. In Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 at 1223; [1995] 1 All ER 431 at 434 (Alsop Wilkinson), Lightman J broadened this category by including within it '[every] dispute as to the trusts upon which [the trustees] hold the subject matter of the settlement'. For convenience he labelled these cases as 'trust disputes'.
When a 'trust dispute' has come about because there is a dispute between two beneficiaries concerning the construction of the trust instrument or their respective rights in the trust estate, the duty of the trustee as the trustee for all beneficiaries is to treat the beneficiaries impartially and remain neutral: Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 137 CLR 252 at 264‑5, 270; 15 ALR 287 at 296‑8, 301‑2; Alsop Wilkinson at WLR 1225; All ER 435‑6; Re Patton (1971) 19 DLR (3d) 497; Jones v Heritage Pullman Bank & Trust Co 518 NE 2d 178 (1987) at 182‑4 (Jones); Northern Trust Co v Heuer 560 NE 2d 961 (1990) at 964 (Northern Trust Co). Thus, unless the trust instrument itself provides otherwise, the trustees should bring the dispute into court for resolution but in the proceeding they are not entitled to favour one party over another by advocating a party's cause: Re Hughes' Will 5 NW 2d 791 (1942); Re James' Estate 86 NYS 2d 78 (1948) at 89; Re Duke 702 A 2d 1008 (1995); A W Scott and W F Fratcher, Scott on Trusts, 4th ed, Little, Brown, Boston, 1987, § 183; Restatement (Second) of Trusts, American Law Institute, Philadelphia, 1959, § 183. To do otherwise would be a breach of the trustees' duty to deal impartially with all beneficiaries and to protect their interests. Of course, if the case is not properly presented by the beneficiaries the trustees may, indeed probably should, provide the court with their views.
In a trust dispute the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the fund either on a solicitor and client or indemnity basis: E R Daniell, S E Williams and F Guthrie‑Smith, Daniell's Chancery Practice 7th ed, Stevens, London, 1901, vol 1, pp 953, 955 ‑ 7, 987; Re Buckton at 414; McDonald v Horn [1995] 1 All ER 961 at 970 ‑ 1. One possible exception is the case of a 'timid trustee' who unnecessarily approaches the court for advice when the answer to the problem raised by the dispute is sufficiently clear. Even then the trustee usually gets his (or her) costs. Another exception is where the trustees breach their duty to act impartially, even if the breach is technical in nature, done in good faith, and causes no harm: Alsop Wilkinson at WLR 1225; All ER 435 ‑ 6; Jones; Northern Trust Co. At best the trustees will be entitled to the costs incurred in submitting to the court's direction. That may include the costs of a defence, a discovery and an appearance: Alsop Wilkinson at WLR 1225; All ER 435 ‑ 6. Interestingly, while it is proper and sometimes obligatory for trustees to bring a trust dispute to court, in the United States it is said that a trustee who is a party to a trust dispute has no standing to appeal from the judgment, except in limited circumstances: Scott, 1987, § 183.
The second kind of dispute is a trust dispute in which the application is made by someone other than the trustee (usually a beneficiary) but raises the same kind of issue as in the first class and would have justified an application by the trustees. Here the same rule in relation to costs applies because, as in the first class, the application is for the benefit of the estate.
The third class identified by Kekewich J (which Lightman J refers to as a 'beneficiaries dispute') is where a beneficiary brings a hostile claim against the trustees (for example as to the propriety of any action taken or omitted to be taken) or another beneficiary. As between the parties the costs in this kind of case are treated in the same way as in ordinary litigation, that is, they follow the event. However, if the trustees properly (albeit not necessarily successfully) defend the claim for the benefit of the estate they will be entitled to their costs out of the estate to the extent they are not recovered from the other party.
See also Murdocca v Murdocca (No 2) [2002] NSWSC 505 [71] ‑ [78] (Campbell J).
In Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, Latham CJ said (578 ‑ 579):
Certainly, as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken. In the ordinary case a trustee brings or contests legal proceedings on behalf of the trust and not on his own behalf. He is often a necessary party to proceedings where he ought to be present even though he may do no more than submit to the judgment of the Court. In such a case the trustee receives his costs. The position is admittedly different in a case of misconduct.
Further, consistently with a trustee's general right of indemnity out of the trust for expenses reasonably incurred in the execution of the trust or powers (see In re Beddoe [1893] 1 Ch 547, 555 ‑ 556, 560; s 71 Trustees Act), O 66 r 9(2) provides, relevantly, that unless otherwise ordered, a trustee shall 'be entitled to the costs of ... proceedings, in so far as they are not recovered from or paid by any other person, out of the [trust] fund'. Under O 66 r 9(2), the court may only order otherwise where the trustee has acted unreasonably, or for his or her own benefit rather than for the benefit of the trust.
Where a trustee has acted unreasonably in defending proceedings, particularly in relation to the trustee's removal, the court is more likely to favour the view that the costs should not be borne by the estate: Gava v Grljusich (Unreported, WASC, Library No 960082, 22 February 1996) 4. See also Macedonian Orthodox Community Church St Peka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [148] ‑ [152].
In relation to appeals by a beneficiary, the general rule is that a beneficiary who unsuccessfully appeals a decision concerning the proper construction of a trust instrument is liable to pay costs, unless there are circumstances which warrant a relaxation of the general rule: Gale v Gale [1914] HCA 53; (1914) 18 CLR 560, 574 (Rich J); Trustees, Executors and Agency Company Ltd v Ramsay [1920] HCA 2; (1920) 27 CLR 279, 285; Fowler v Nield (1961) 61 SR (NSW) 152, 161 (Walsh J). If the circumstances warrant a relaxation of the general rule, the court may order, for example, that the costs of the other parties be paid out of the trust with the appellant to bear its own costs (see Currie v Glen [1936] HCA 1; (1936) 54 CLR 445, 451, 461), or that the costs of all parties be paid out of the trust (see Gale v Gale (574) (Griffith CJ); Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646, 654, 657). The general rule does not apply here of course as the appeal succeeded.

The beneficiaries' costs in these proceedings

The question of whether parties' costs should be paid out of the trust, or in accordance with the ordinary rules, essentially involves a characterisation of the nature of the proceedings, and a consideration of the position each party adopted in the proceedings. In my view, properly characterised, these proceedings fall within the second class of dispute referred to above (see [35]), namely, a dispute between beneficiaries concerning the administration and proper construction of the trust, and, in my view, the beneficiaries were acting reasonably to protect their interests.
The originating summons filed by the appellant (plaintiff) below sought a declaration that the appointment of the first respondent was invalid and consequential orders for, in effect, the appointment of a new trustee and vesting of the trust property. The disposition of the summons, and of this appeal, turned on the proper construction of the trust deed, in particular on the proper construction of cl 11. The resolution of that question is a matter concerning the administration of the trust and may be seen to affect the interests of both of the Scaffidi brothers and their mother in their capacity as beneficiaries. For the reasons expressed in [189] of the substantive reasons, which outline why it is expedient to order the appointment of a new trustee under s 77 Trustees Act, it is to be accepted that the resolution of this question of construction has ultimately served the best interests of the trust. I do not understand any of the parties to contend otherwise. That being so, in the exercise of discretion, I would order that the appellant's costs be paid out of the trust pursuant to O 66 r 4(1).
In relation to the third respondent's costs, I am satisfied that it was appropriate for her to take part in the proceedings below and, to the extent that she did, in this appeal. The question of construction raised concerned

the proper administration of the trust and consequently had the potential to affect her interests as a beneficiary and creditor of the trust. As such, she was entitled to make submissions which sought to protect those interests. It is apparent from her counsel's submissions below, and her written submissions in this appeal, that her main concern was the financial position of the trust and the financial implications of the appellant's orders sought below, and initially in this appeal, to the effect that the trust property be vested in a number of insolvency practitioners. Upon the appellant filing an amended minute of proposed orders on the morning of the hearing which instead sought an order pursuant to s 77 Trustees Act for the appointment of a new trustee, the third respondent appropriately sought, and was granted, leave to withdraw. In the circumstances, the third respondent should also have her costs paid out of the trust.

Neither the appellant nor the third respondent sought an order under O 66 r 9(2) that the first respondent should not be entitled to its costs out of the trust, even though it might be said that, as trustee, it effectively sided with the second respondent in the dispute.

Conclusion - orders

I would make the following orders:
1.The appellant's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs.
2.The third respondent's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs.
3.Pursuant to O 66 r 4(1) of the Rules of the Supreme Court 1971 (WA), the costs taxed pursuant to orders 1 and 2 shall be recovered out of the property of the Scaffidi Family Trust, without recourse against any other party.
HALL J: I agree with Murphy JA.