Mastromanno v Mastromanno
[2011] VCC 327
•21 March 2011; Revised 29 March 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
Case No. CI-10-02159
| PIERO ANDREW MASTROMANNO | Plaintiff |
| v | |
| ALESSANDRO MICHAEL MASTROMANNO | First Defendant |
| (also known as ALEX MASTROMANNO) | |
| THIRTY EIGHTH GARLAND PTY LTD | Second Defendant |
| ( A.C.N.063 215 118) | |
| CALMENA PTY LTD (A.C.N. 006 538 138) | Third Defendant |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 21 March 2011 |
| DATE OF JUDGMENT: | 21 March 2011; Revised 29 March 2011 |
| CASE MAY BE CITED AS: | Mastromanno v Mastromanno & Ors |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 327 |
REASONS FOR JUDGMENT
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Catchwords: COSTS – Trustee joined as necessary party – Proceeding settled as between other parties – Entitlement of Trustee to costs
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | L E P Magowan | Hicks Oakley Chessell Williams |
| For the Second Defendant | S A Rowland | Dermenzies Lawyers |
| HIS HONOUR: |
1 In this proceeding, I have been assisted by the clear submissions of counsel in being able to reach a decision.
2 The proceeding was commenced in May 2010 and concerns a claim by the plaintiff, the younger brother against the first defendant, who is the older brother, concerning his entitlement to half of the older brother’s units in the Golden Gate Unit Trust. The third defendant is a company controlled by the older brother. The second defendant is the trustee of the Golden Gate Unit Trust and the registered proprietor of land in South Melbourne, on which there is a hotel.
3 The relief sought against the second defendant, Thirty Eighth Garland Pty Ltd, includes an order that it change the register of unit holdings in the Golden Gate Unit Trust. This change would follow an order that the plaintiff seeks that the first defendant, or, alternatively, his company the third defendant, transfer one-half of the units in the Golden Gate Unit Trust registered in his, or its, name to the plaintiff.
4 After various interlocutory hearings, the second defendant, the trustee company, filed a Notice of Appearance and a Defence. The Defence was preceded by a letter sent by the solicitors for the second defendant to the plaintiff’s solicitors stating:
“ …My client does however oppose the orders sought by your client in paragraph B of the Prayer for Relief. Whilst my client has no issue with the First Defendant holding half (or some other portion) of its units in the Golden Gate Unit Trust (“Trust”) on trust for your client, my client does not consent to a transfer of the First Defendant’s units to your client or to an increase in the number of unitholders in the Trust which would arise if your client became the registered owner of half (or some other portion) of the First Defendant’s units in the Trust. An increase in the number of unitholders would, amongst other things, affect the existing rights of the other unitholders under Clause 13 of the Trust Deed on matters which require the consent of a majority of unitholders.”
5 The proceeding between the two brothers has been resolved. The Terms of Settlement are in evidence and were executed last Friday. In Recital 3, the first defendant, now acknowledges that at all material times he held, and continues to hold, 50 per cent of his units in the Trust, (being 12.5 per cent of the total units in the Golden Gate Unit Trust) on trust for the benefit of the plaintiff.
6 Recital 4 states that the parties are desirous of settling the proceedings without further recourse to litigation.
7 The method of settlement is for the first defendant to pay the plaintiff the sum of $367,500 inclusive of the claim, interest, any GST and costs. The Terms repeat recital 3.
8 As a result of the settlement, there was no point in the plaintiff and the first and third defendants continuing the litigation. I have made orders by consent earlier this afternoon giving effect to the ending of the litigation between those parties.
9 The second defendant, the trustee company, however remains ready and willing to fight the litigation on the terms mentioned in the letter of 4 August 2010.
10 The only pleading against the second defendant is paragraph 15, which pleads that it has been joined as a necessary party only. There is also a claim for relief seeking to require a change to the register of unit holders. That having been said, once sued, the second defendant entered an appearance and filed a Defence, and would have, so far as I can tell, argued a case as outlined in the letter of 4 August 2010.
11 The second defendant’s defence pleads various reasons as to why such relief should not be granted.
12 The plaintiff stated this afternoon that he does not wish to pursue the proceeding against the second defendant. Accordingly, I made orders that the plaintiff’s proceeding against the second defendant be dismissed without a hearing on the merits. The question of the costs of the plaintiff’s proceeding against the second defendant remained.
13 The plaintiff sought costs for reasons that I consider below. The second defendant relies on the traditional rule that costs should follow the event. The plaintiff, having chosen not to pursue his claim against the second defendant, and not having notified the second defendant until the Terms of Settlement were either executed or almost executed of the settlement of the proceeding, should pay the costs of the second defendant on the normal basis that costs follow the event.
14 The plaintiff’s submission is two fold. First, that the second defendant, the trustee company, has acted unreasonably; alternatively, the Court should be confident that the plaintiff would have succeeded if the matter was fully tried, such that the costs ought to be awarded against the second defendant. Reliance is placed on the judgment of McHugh J in Re The Minister for
Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai
Qin[1]. His Honour accepted that there will be appropriate cases where a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The Court could not try a hypothetical case, but in some cases may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.
[1] (1997) 186 CLR 622 at 624-625.
15 I do not consider that this case falls into that category. The trustee has been joined, as was required. The trustee is normally a necessary party to be sued on behalf of the Trust where orders are sought in respect of the Trust, as the cases cited in Young, Croft and Smith ‘On Equity’, at page 967 attest.
16 As stated, McHugh J also referred to the category of case where, a judge may feel confident that although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. That is a more relevant principle in this matter.
17 The plaintiff put that if the case had gone to judgment and the plaintiff had succeeded against the first or third defendant, then almost inevitably the plaintiff would have obtained orders against the second defendant of the sort claimed under Prayer for Relief B. The basis of those orders would have been a vesting order, in particular, based on s.58 of the Trustee Act 1958, and by analogy, reliance was placed on cases dealing with vesting orders in respect of alterations to share registers. Reference was made to the judgment of Santow J in Andco Nominees Pty Ltd v Lestato Pty Ltd; George v Andco Nominees Pty Ltd[2].
[2] (1995) 17 ACSR 239 at 253
18 The second defendant disputes these contentions and submits that there is a distinction between the property interest in units and property interests in shares. It concedes that while the plaintiff may well have had an equitable interest in a share of his brother’s units, that is a distinct equitable interest and does not establish a right to have the trustee register him as holder of, in effect, 12.5 per cent of the units. This is because it is said there is a regime in the Trust Deed, in such clauses as Clauses 7.4, 8 and 9. Those clauses leave it to the trustee to ensure that the parties seeking to be registered are qualified and to ensure that the voting rights of the unit holders are not diminished because of the transfer. They in essence are the propositions, that the Trustee company wishes to advance at the trial, but the occasion for that argument has been removed by the agreement reached between the two brothers. That agreement involves a paying out of the plaintiff’s claim, rather than an agreement that might have necessitated the assistance of the trustee company to alter the register.
19 The question is whether on the material and submissions before me, this case falls within the principle that I should be confident that the plaintiff would have succeeded if the matter had been fully tried.
20 I do not have that confidence for the following reasons:
(i)
While it is true that there are acknowledgements of the plaintiff’s interest in the Deed of Settlement, that Deed recites the traditional term that the parties were desirous of avoiding litigation. If the matter had not settled, I have no means of judging whether the Court would have been satisfied of the claim brought by the plaintiff against the first and/or third defendants. To attempt to predict how such a Court case would have been decided on the limited material before me, involves an undesirable hypothetical exercise. It requires reasoning along the following lines: because on 18 March 2011, the parties, other than the second defendant, reached an agreement in which various acknowledgements were made, if the case had gone to trial, without such Terms of Settlement, and without such acknowledgments, that the plaintiff would have succeeded against the first and third defendants. It is tempting to assume that that would have occurred, but that temptation is brought about by the Terms of Settlement. Self-evidently, the case would only have gone to trial in the absence of those Terms of Settlement. It would have been decided, like all trials, on the evidence presented to the Court. So, although I consider there is some force in the plaintiff’s submissions about the analogy drawn from the share transfer cases, I do not consider that I can be confident to the requisite degree that the plaintiff would have succeeded if the matter had gone to trial;
(ii)
Secondly, I note that a claim for a vesting order was not pleaded in the Statement of Claim or the Prayers for Relief;
(iii)
Thirdly, and connected to the first point, to reach the requisite degree of confidence to award costs to the plaintiff, I would have had to be satisfied that the arguments which the trustee wished to advance were not likely to be accepted by the Court. I am not so satisfied.
21 Therefore, I do not consider that the second defendant should have to pay the plaintiff’s costs of the litigation.
22 The alternative basis that the plaintiff advanced was that there should be no order as to costs. Again, reliance was placed on McHugh J’s judgment in Ex parte Lai Qin where, to quote the submission by counsel at paragraph 19 on behalf of the plaintiff:
“In circumstances in which it cannot be said that one party capitulated, the court should make no order as to costs, in circumstances in which it cannot be said that one party acted unreasonably in bringing or defending the proceedings.”
23 That principle is often applied in cases where there has been a resolution of the proceeding or, as in Lai Qin, the proceeding had become otiose and neither party wished to pursue it. That is not the case here, so far as the second defendant is concerned. It stands ready to contest the litigation, but the occasion for that contest has been removed because of the settlement reached between the other parties.
24 I see no reason why a trustee company, having decided, in accordance with its assessment of its duties, to participate in the litigation on the terms stated in the letter of 4 August 2010, should not be entitled to its costs when the plaintiff decides not to pursue the claim against it, because it has reached a commercial settlement that removes the need to obtain orders against the second defendant.
25 In those circumstances, I consider that the second defendant is entitled to its costs. I will therefore order that the plaintiff pay the second defendant’s costs, including any reserved costs of the proceeding, to be taxed on Scale D in default of agreement.
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