Cassaniti v Katavic

[2023] NSWCA 32

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Cassaniti v Katavic [2023] NSWCA 32

Hearing dates:

27 February 2023

Date of orders:

28 February 2023

Decision date:

28 February 2023

Before:

Gleeson JA; Kirk JA; Adamson JA

Decision:

(1)   That paragraphs 2, 3 and 4 of the notice of motion filed 2 February 2023 be dismissed with costs.

(2)   That further to order 3 made by Macfarlan JA on 10 November 2022, of the funds held in Court for the second respondent, Antalija Developments No 4 Pty Ltd, as trustee for the Antalija Unit Trust, the amount of $100,000 be paid out of Court to the second respondent.

Catchwords:

APPEALS — Procedure — Injunction pending appeal — application to restrain respondent trustee using monies ordered to be paid out of Court for payment of legal costs in defending appeal — Where no application to discharge or vary orders made by single judge of appeal for payment of monies out of Court to the trustee — Whether circumstances had materially changed since order made — Supreme Court Act 1970 (NSW), s 46(4)

Legislation Cited:

Supreme Court Act 1970 (NSW), s 46(4)

Cases Cited:

McGinn v Cranbrook School [2016] NSWCA 226

Reliance Financial Services Pty Ltd v Antalija Developments (No 4) Pty Ltd [2022] NSWSC 519

Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; [2004] NSWCA 136

Category:

Procedural rulings

Parties:

Sam Cassaniti (First appellant)
Nancy Morvillo (Second appellant)
Dennis Katavic (First respondent)
Antalija Developments No 4 Pty Ltd (Second respondent)
Jocelyn Katavic (Third respondent)

Representation:

Counsel:
Mr M Ashhurst SC / Mr D A Allen
Mr T Alexis SC / Mr A L Oakes

Solicitors:
McEvoy Legal (Appellants)
Kamy Saeedi Law (Respondents)

File Number(s):

2022/204856; 2022/261720

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2022] NSWSC 519

Date of Decision:

2 May 2022

Before:

Robb J

File Number(s):

2022/204856; 2022/261720

Judgment

1. THE COURT: Before the Court on the concurrent hearing of an application for leave to appeal and an appeal is a notice of motion filed 2 February 2023 by which the appellants seek interlocutory relief in relation to funds paid into Court pursuant to the asset preservation orders made in the proceedings below (presently totalling $1,022,846.70). Paragraphs 2, 3 and 4 of the motion seek the following orders:

2.   The Second Respondent be restrained from applying any of the funds paid into Court in the first instance proceedings 2019/00372019 by Westpac, the sixth defendant in those proceedings, on 29 November 2019 (Funds in Court) for the legal costs of these proceedings in the Court of Appeal and the proceedings at first instance, until the determination of the appeal.

3.   In order to give effect to order 2, the Funds in Court be retained by the Court until determination of the appeal.

4.   The Second Respondent, the trustee of the Antalija Unit Trust, be restrained from applying any trust property of the Antalija Unit Trust towards the legal costs of these proceedings in the Court of Appeal and the proceedings at first instance, until the determination of the appeal.

2. The context of this application is as follows. The second respondent, Antalija Developments (No 4) Pty Ltd (Antalija Developments), is the trustee of the Antalija Unit Trust, which was formed to undertake a development of land at Moncrieff in the Australian Capital Territory. The unit holders in that trust include the second appellant, Ms Nancy Morvillo, who is the sister of the first appellant, Mr Sam Cassaniti, and the first respondent Mr Dennis Katavic. Each hold their units as trustee for a discretionary trust. The third respondent is Ms Jocelyn Katavic, the wife of Mr Katavic.

3. By their appeal, the appellants challenge the decision of the primary judge (Robb J) delivered on 2 May 2022 declaring void ab initio relevant provisions of the unit holders’ agreement upon which Ms Morvillo relied for a claim to be paid interest on the excess of her proportionate contribution to the capital of the Antalija Unit Trust, and rejecting a claim that Antalija Developments had breached its duties as trustee of the Antalija Unit Trust by using an asset of the trust (the Moncrieff land) as security for a loan to Antalija Developments in its capacity as trustee of another trust associated with Mr Katavic, the Antalija Property Development Trust No 4: Reliance Financial Services Pty Ltd v Antalija Developments (No 4) Pty Ltd [2022] NSWSC 519. There were also allegations that Antalija Developments had breached its duties as trustee of the Antalija Unit Trust in two other respects. His Honour deferred consideration of these and other claims for relief relating to removal of Antalija Developments as trustee of the Antalija Unit Trust.

Background to the appellants’ motion

4. By notice of motion filed 5 October 2022, the respondents sought orders, relevantly, that:

• Antalija Developments be discharged from an undertaking proffered during the hearing in the proceedings below (to the effect that Antalija Developments would not use the assets of the Antalija Unit Trust to pay legal fees without a court order) (the undertaking).

• the sum of $199,319.65 or such other sum as the Court deems appropriate from the funds held for Antalija Developments as trustee for the Antalija Unit Trust, be paid out of court and into the trust account of Kamy Saeedi Law and used only by the second respondent to pay its reasonable legal costs of defending the appeal.

5. After a hearing on 7 November 2022, Macfarlan JA made orders on 10 November 2022, which included relevantly orders 2 and 3 set out below:

(2)   To the extent that the second respondent is restrained by the undertaking, proffered during the hearing in the Court below, from using funds paid into Court to pay its reasonable legal costs of defending the appeal proceedings, order that the second respondent be released from that undertaking.

(3)   Order that the funds held in Court for Antalija Developments No 4 Pty Ltd, as trustee for the Antalija Unit Trust, be paid out of Court to the trustee, in such amounts as the trustee states to the Registrar of the Court that it considers necessary and appropriate for payment of its reasonable legal costs of the appeal proceedings.

6. His Honour gave the following reasons at [17]-[18] for making those orders:

[17]   In his principal judgment of 2 May 2022, Robb J concluded that the plaintiffs in the proceedings before him, who included Ms Morvillo, “appear[ed] to have misled Kunc J on the grounds that they put forward [matters] ex parte that persuaded his Honour to make the asset preservation orders”. In consequence, and as a result of the respondents’ success on the matters that were determined by his Honour on 2 May 2022, his Honour discharged the orders on 15 June 2022.

[18]   It should follow that funds paid into Court pursuant to the asset preservation orders (presently totalling $1,022,846.70) would be paid out to the Antalija Unit Trust but Antalija Developments does not seek a general order to that effect at this stage. Instead, it seeks a more limited order permitting it to use those funds, and any other assets of the Antalija Unit Trust, for the purpose of payment of its reasonable legal fees of the proceedings. It seeks such an order because in the course of the hearing at first instance, when the asset preservation orders were on foot, it gave an undertaking that it would not use any of the funds of the Unit Trust for that purpose unless and until authorised by the Court. There is no reason now to hold the Trust to that undertaking. Accordingly, I propose to make appropriate orders as sought by the respondents but I point out that they are made in recognition of the absence of any reason having been established before me for imposing or retaining a relevant restriction. It does not involve an expression of this Court’s view, one way or the other, as to whether any particular expenditure, or the use of the Trust funds for payment of the trustee’s legal costs of the proceedings, is authorised or justified.

7. On 16 November 2022, the respondents’ solicitors made a request by email that the Registrar release of funds in the amount of $199,319.65 to their trust account. That request was in the following terms:

In accordance with Order 3, the Trustee states to the Registrar of the Court that it considers the sum of $199,319.65 necessary and appropriate for payment of its reasonable legal costs of the appeal proceedings.

8. It seems that the Registrar was unwilling to act on that request in the absence of a court order specifying that sum of money be paid out of monies held in court. After further email exchanges with the Registrar, the respondents’ solicitors submitted proposed short minutes of order to the Associate to Macfarlan JA on 24 January 2023 to facilitate the payment out of court. The appellants’ solicitor requested an opportunity to be heard. Directions were given by Macfarlan JA allowing them two business days to indicate their position by email, with Antalija Developments given a further two business days to respond.

9. The appellants’ response was to file the notice of motion seeking the interlocutory relief indicated above. Ultimately, the appellants’ motion was stood over to the concurrent hearing.

10. The appellants candidly acknowledge that they do not challenge the orders made by Macfarlan JA. It is well-established that an application under s 46(4) of the Supreme Court Act 1970 (NSW), to discharge or vary orders made by a single judge of appeal is not an appeal. Further, an applicant for review must show that there has been a material error of law or fact, or a disregard of material considerations in the exercise of the power or that the decision was plainly unreasonable and therefore wrong: Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; [2004] NSWCA 136 at [4], [6]; McGinn v Cranbrook School [2016] NSWCA 226 at [4].

11. The appellants say that as the orders of Macfarlan JA are interlocutory, they may seek the relief in their 2 February 2023 motion on the basis that there has been a material change in circumstances, since those orders were made.

12. In writing the appellants essentially relied upon the following matters:

1. the use of trust property by Antalija Developments to fund litigation is “arguably” a breach of trust and it is “arguable” that the sum of $199,319.65 is sought to enable a breach of trust;

2. the “impasse” in Antalija Developments obtaining payment out of Court of the amount requested, “coupled with the proximity of the hearing”, and the threat to use the fund for legal costs of Mr and Mrs Katavic;

3. the issue of the trustee’s indemnity for legal costs has been now raised in the relief sought in the appellant’s proposed amended notice of appeal (the application for leave to amend the notice of appeal is currently before the Court, but not yet been determined), and the indemnity issue should first be determined on the appeal before any funds are released to Antalija Developments.

13. None of these matters constitutes a material change in circumstances. Each matter was substantively relied upon by the appellants before Macfarlan JA when opposing the respondents’ application to be released from the undertaking and for an order for payment of moneys out of Court. In their written submissions dated 2 November 2022, the appellants’ submitted that “trust money cannot be used to pay expenses personal to the other respondents” (par 30), “the Court cannot know or determine to what extent any money paid out of Court will be applied only to meet the proper costs of the trust” (par 32), and “the right to indemnity and the extent of the right will not be known until the appeal is determined” (par 33). As indicated, the appellants do not say that in making orders 2 and 3 on 10 May 2022, his Honour erred in principle or that his decision was plainly wrong.

14. In oral argument, the appellants said that as this Court is now hearing the appeal, it is better apprised of the appellants’ case than was Macfarlan JA, and that this is also a material change in circumstances. This submission ignored that his Honour proceeded on the basis (at [9]) that the appeal was reasonably arguable, including the grounds relating to the character and consequences of the payment of $2.075 million to Antalija Developments and the alleged breach of trust. That the appellants have now advanced oral argument on the appeal in support of those grounds is not a material change in circumstances. Nor should the Court be drawn into a consideration of the likely merits of the appeal.

15. For these reasons, the appellants’ application for interlocutory relief in pars 2, 3 and 4 of the notice of motion should be dismissed with costs.

16. Addressing the respondents’ request that this Court make a supplementary order specifying the amount of money to be paid out of Court in conformity with order 3 made by Macfarlan JA, the respondents accept that the sum sought by Antalija Developments represented the trustee’s estimated legal costs of the defending the appeal, in circumstances where the trustee and Mr and Ms Katavic were jointly and severally liable for those legal costs.

17. Given that the dispute on appeal concerns Mr Katavic’s and Ms Morvillo’s rights and interests qua unit holders in Antalija Unit Trust as much as Ms Morvillo’s claim against Antalija Developments for breach of trust, (the relief sought against Ms Katavic was not pressed), we consider the appropriate supplementary order is that an amount of $100,000 be paid out of Court to Antalija Developments.

18. For completeness we reiterate, as Macfarlan JA said at [18] of his reasons, that the order for payment out of court of monies held for the trustee does not involve any expression of opinion by the Court as to whether any particular expenditure, or the use of the trust funds for payment of the trustee’s legal costs of the appeal proceedings, is authorised or justified.

Orders

19. The Court makes the following orders:

1. That paragraphs 2, 3 and 4 of the notice of motion filed 2 February 2023 be dismissed with costs.

2. That further to order 3 made by Macfarlan JA on 10 November 2022, of the funds held in Court for the second respondent, Antalija Developments No 4 Pty Ltd, as trustee for the Antalija Unit Trust, the amount of $100,000 be paid out of Court to the second respondent.

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Decision last updated: 28 February 2023