In a decision handed down on Friday, Master Craig Sanderson of the Western Australia Supreme Court tossed the objection to the confidential settlement between EY and family trust Rojoda Pty Ltd, rejecting arguments that the sum was too low.

Master Sanderson found it was “clear” the settlement should be allowed, saying Rojoda had fully investigated the claim against EY, took comprehensive advice and properly assessed the claim’s prospects of success. He also rejected an argument that Rojoda failed to consider an alleged breach of fiduciary duty by EY. 

“Finally, it is time this matter was brought to a conclusion. The whole sorry business has extended over 10 years. To push these proceedings on even if it was only to obtain further advice would not objectively be in the interests of the parties. It is best the matter is terminated and the affairs of the two partnerships are concluded,” the judge said. 

EY partner’s advice not ‘clearly and obviously wrong’, judge says

Married couple Anthony and Maria Scolaro established several partnerships for investment that were governed by deeds. The partnerships purchased real estate that was registered in the couple’s names and held on trust for the partnership. 

After Anthony died in February 2011, Maria was granted options under the partnership deeds to acquire her husband’s share by a specified time or the partnerships would dissolve. Maria never exercised the rights and the partnerships dissolved. She became the sole owner of the properties and held them on trust. 

Anthony’s children, John, David and Rosana Scolaro, were meant to receive their father’s estate divided into three equal shares, to form trusts for their benefit. 

In August 2013, John Scolaro died and his eldest daughter, Diana, became the trustee of his share. Diana approached an employee of EY, Graeme Cotterill, in 2013 for legal advice about the properties held by Maria. 

Cotterill drafted two deeds in which Maria resigned as trustee and Anthony’s children were appointed in Maria’s place through their trustee, Rojoda Pty Ltd. 

The court heard the 2013 deeds were drafted on the basis that only a nominal duty would be paid, rather than a duty on the full value of the properties, but the commissioner of state revenue imposed the full duty, finding the deeds created new trusts and changed the beneficial ownership.

The decision was appealed and the case was eventually resolved by the High Court, with a majority  upholding the commissioner’s decision. 

Master Sanderson said the “torturous litigation history” showed the issues were complex but boiled down to whether the deeds created a new trust or merely recorded an existing obligation Maria had under the general law. The High Court decided the deeds created a new trust, against the advice Cotterill had given. 

In November 2019, Rojoda brought a negligence case against EY, alleging it failed to exercise reasonable care and skill in providing legal services or engaged in misleading or deceptive conduct. 

Rojoda alleged that EY’s breach of duty occurred when it failed to “warn or properly advise” of the tax implications caused by executing the 2013 deeds. It claimed damages, including the duty imposed by the commissioner and its legal costs. 

Master Sanderson found the case was not one where Cotterill’s advice was “clearly and obviously wrong”, saying it was eventually shown to be incorrect but “it took the High Court to determine that was the case”.

The negligence case went to mediation and Rojoda reached a settlement with EY, which acted for the trust at all times, including in the High Court appeal. 

While Master Sanderson said it could be considered “odd” that EY continued to act for Rojoda despite having been accused of negligence, even during the High Court appeal, the accounting firm had a vested interest — aligned with the trust  — in the outcome of the litigation.

“It is difficult to see how the interests of EY diverged from the interests of the plaintiff.  It was in EY’s interest to establish the 2013 deeds were not dutiable,” the judge said.

Rojoda is represented by Jesse Winton, instructed by MDS Legal. Diana Scolaro is represented by Steven Wong, instructed by Stoddart & Co.

The case is Rojoda Pty Ltd v Scolaro. 

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