Mercanti v Mercanti

[2015] WASC 297 (S)

JURISDICTION	:	SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS
CITATION	:	MERCANTI -v- MERCANTI [2015] WASC 297 (S)
CORAM	:	LE MIERE J
HEARD	:	20 AUGUST 2015
DELIVERED	:	18 JANUARY 2017
FILE NO/S	:	CIV 1262 of 2013

BETWEEN : MICHAEL ANGELO MERCANTI

Plaintiff

AND

TYRONE KANE MERCANTI

First Defendant

SLONDIA NOMINEES PTY LTD

Second Defendant

CITYCOURT PTY LTD

Third Defendant

FILE NO/S : CIV 2186 of 2013

BETWEEN : MICHAEL ANGELO MERCANTI

Plaintiff

AND

TYRONE KANE MERCANTI

First Defendant

PARRADELE PTY LTD
Second Defendant

[2015] WASC 297 (S)

SLONDIA NOMINEES PTY LTD

Third Defendant

CITYCOURT PTY LTD

Fourth Defendant

FILE NO/S : CIV 1276 of 2014

BETWEEN : JASON DEAN MERCANTI

Plaintiff

AND

SLONDIA NOMINEES PTY LTD

First Defendant

CITYCOURT PTY LTD

Second Defendant

TYRONE KANE MERCANTI

Third Defendant

PARRADELE PTY LTD

Fourth Defendant

Catchwords:

Costs - Trusts - More successful party - Turns on own facts

Legislation:

Nil

Result:

Plaintiff to pay two thirds of defendant's costs

[2015] WASC 297 (S)

Category: B

Representation:

CIV 1262 of 2013

Counsel:

Plaintiff	:	Mr S Penglis
First Defendant	:	Mr B G Grubb & J Burnside QC (trial only)
Second Defendant	:	No appearance
Third Defendant	:	No appearance

Solicitors:

Plaintiff	:	Herbert Smith Freehills
First Defendant	:	Metaxas & Hager
Second Defendant	:	No appearance
Third Defendant	:	No appearance

CIV 2186 of 2013

Counsel:

Plaintiff	:	Mr S Penglis
First Defendant	:	Mr B G Grubb & M Burnside QC (trial only)
Second Defendant	:	Mr B G Grubb & Mr J Burnside QC (trial only)
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance

Solicitors:

Plaintiff	:	Herbert Smith Freehills
First Defendant	:	Metaxas & Hager
Second Defendant	:	Metaxas & Hager
Third Defendant	:	No appearance
Fourth Defendant	:	No appearance

[2015] WASC 297 (S)

CIV 1276 of 2014

Counsel:

Plaintiff	:	Mr S Penglis
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	Mr B G Grubb & Mr J Burnside QC (trial only)
Fourth Defendant	:	Mr B G Grubb & Mr J Burnside QC (trial only)

Solicitors:

Plaintiff	:	Herbert Smith Freehills
First Defendant	:	No appearance
Second Defendant	:	No appearance
Third Defendant	:	Metaxas & Hager
Fourth Defendant	:	Metaxas & Hager

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

Mercanti v Mercanti [2015] WASC 297
Mercanti v Mercanti [2016] WASCA 206

[2015] WASC 297 (S)

LE MIERE J

LE MIERE J:

Background

1              These proceedings are brought by and against members of the

Mercanti family and companies controlled by members of the family. On 20 August 2015 I determined who was the trustee and appointor of two trusts, the Michael Mercanti Family Trust (MMF Trust) and the Footwear Wholesale Trust (FW Trust), and therefore who has practical control of the trusts and hence of the businesses owned and operated by those trusts: Mercanti v Mercanti [2015] WASC 297. An appeal by the plaintiff was dismissed by the Court of Appeal: Mercanti v Mercanti [2016] WASCA 206 (the appeal decision).

The proceedings

2              The proceedings are principally concerned with the validity of deeds

of variation of two trust deeds and notices of the removal of trustees and appointment of new trustees of the two trusts. The trusts own and operate a wholesale and retail shoe repair business. These proceedings determined who is the trustee and appointor of the trusts and therefore has practical control of the trusts and hence of the businesses.

My findings

1. In my reasons for decision I found as follows:

1.	On the proper construction of the MMF Trust Deed the trustee is empowered to vary the contents of the schedule so as to replace the Appointor and Guarantor and appoint a new Appointor and Guarantor.
2.	The MMF Trust Deed of Variation was validly executed by Slondia.
3.	The variation of the MMF Trust effected by the MMF Trust Deed of Variation was not made by Slondia in breach of trust.
4.	Michael, as Guardian of the MMF Trust, consented to the exercise by Slondia of reserved powers to amend the MMF Trust deed to replace the Appointor and Guardian.
5.	Tyrone did not procure Michael to sign the MMF Trust Deed of Variation or Slondia to execute the MMF Trust Deed of Variation in circumstances constituting equitable fraud or undue influence of Tyrone over Michael.
6.	The MMF Trust Deed of Variation is of legal force and effect.

[2015] WASC 297 (S)

LE MIERE J

7.          The notice of removal of Slondia and acceptance of appointment of Parradele as trustee of the MMF Trust is valid and of legal force and effect.

8.          The removal of Slondia and appointment of Parradele as trustee of the MMF Trust was not in breach of Tyrone's duties as Appointor of the MMF Trust.

9.          Parradele is and has been trustee of the MMF Trust since the execution of the notice of removal of Slondia and acceptance of appointment of Parradele as the trustee of the MMF Trust.

10.        Tyrone is, and has been since the execution of the MMF Trust Deed of Variation the Appointor and Guardian of the MMF Trust.

11.        On the proper construction of the FW Trust Deed the trustee from time to time is not empowered to vary the trust deed by amending or replacing the Appointor.

12.        The FW Trust Deed of Variation is of no force or effect.

13.        The notice of removal of Citycourt and acceptance of appointment of Parradele as trustee of the FW Trust is of no legal force or effect.

14.        Citycourt is and at all material times has been the trustee of the FW Trust.

15. Michael is and at all material times has been the Appointor of the FW Trust [201].

Costs orders sought

4              The court has a general discretion in relation to costs. Counsel for

the defendant submitted that they are entitled to the costs of the action as they were the largely successful party. Counsel for the plaintiff submitted that the result of the trial was that the parties split the trusts in dispute and were therefore equally successful and resultantly the parties should bear their own costs.

Issues in dispute

1. In the appeal decision Buss P stated the following:

   The primary proceedings were concerned principally with the validity of:

(a) a deed of variation (the MMF Trust Deed of Variation) executed in 2004 by Slondia, in its capacity as Trustee of the MMF Trust, pursuant to which Slondia deleted provisions in the MMF Trust Deed with respect to the appointment of Michael Mercanti as the Guardian and Appointor of the MMF Trust and substituted new

[2015] WASC 297 (S)

LE MIERE J

provisions appointing Tyrone Mercanti as the Guardian and

Appointor;

(b)	a written notice executed on 31 July 2013 by Tyrone Mercanti and Parradele, pursuant to which Tyrone Mercanti, in his capacity as Appointor of the MMF Trust, removed Slondia as Trustee and appointed Parradele as the new Trustee of the MMF Trust;
(c)	a deed of variation (the FW Trust Deed of Variation) executed in 2004 by Citycourt, in its capacity as Trustee of the FW Trust, pursuant to which Citycourt deleted provisions in the FW Trust Deed with respect to the appointment of Michael Mercanti as the Appointor of the FW Trust and substituted new provisions appointing Tyrone Mercanti as the Appointor; and
(d)	a written notice executed on 31 July 2013 by Tyrone Mercanti and Parradele, pursuant to which Tyrone Mercanti, in his capacity as Appointor of the FW Trust, removed Citycourt as Trustee and appointed Parradele as the new Trustee of the FW Trust [43].

6              The defendant was successful on the issues relating to the MMF

Trust and the plaintiff was successful in relation to the FW Trust. However, those were not the only issues in dispute. Counsel for the defendant submitted that there were seven causes of action in CIV 1262 of 2013 and the plaintiff was only successful in one of those causes of action, and only on half of it. Counsel for the plaintiff accepted that on an assessment of causes of action then it must be noted that the defendant was successful on far more than the plaintiff, although they failed on their counterclaim.

7              Counsel for the defendant also submitted that the main issue at trial

was who had authority to have control of the two trust deeds and the major trust in issue was the MMF Trust. The trust which the defendant gained control of was the MMF Trust and the trust which the plaintiff was found to control was the FW Trust.

8              The assets within the MMF Trust include the real property in issue

between the parties, the leases of the retail stores in what could be described as the retail business. I found that the trustee of the MMF Trust owned and operated the retail shoe repair business founded by Michael, the plaintiff in CIV 2186 of 2013 and CIV 1216 of 2013. The assets in the MMF Trust include the following real estate assets which are held on trust for the MMF Trust by Slondia Nominees Pty Ltd (Slondia Nominees): a property at 5 Broderick Street valued in 2013 at $900,000 - $1,100,000; a warehouse at 33 Gladstone Street, Perth valued in 2013 at $985,000 and given a realistic maximum price at around

[2015] WASC 297 (S)

LE MIERE J

$1,200,000 to $1,300,000; a House at 1 Granadilla Street, Duncraig valued in 2013 at $750,000; and a unit at 34/6A Valley Road, Halls Head valued at $350,000 in 2013. The residential properties were therefore worth somewhere between $2,985, 000 and $3, 500, 000. Sales for the MMF Trust in 2012 were recorded at $5,095, 734. The value of the net assets of the MMF Trust, which does not include the real estate assets held on trust by Slondia Nominees, was $721,845 at 2012.

9              In the main action I found that the FW Trust owns and operates the

wholesale shoe repair supplies business. The FW Trust does not own any real estate. The value of the sales of the FW Trust was recorded at $1,465,755. The value of the net assets of the FW Trust was $1,069,034 in 2012.

Conclusion

10            I am satisfied that the defendants are the more successful party in this

action. The defendants gained control of what was the more significant of the two trusts at the time of the trial. The defendants were also the more successful party in relation to the issues determined in my reasons for decision. In taking those factors into account in the exercise of my discretion in relation to costs orders I consider the appropriate order is that the defendants should have two thirds of their costs of the action. The appropriate costs order in this case is that the plaintiff should pay two thirds of the defendant’s costs of the action.