Mezzapica v Mezzapica

[2017] NSWSC 1553

Supreme Court

New South Wales

Medium Neutral Citation:	Mezzapica v Mezzapica [2017] NSWSC 1553
Hearing dates:	12 and 13 October 2017
Decision date:	20 November 2017
Jurisdiction:	Equity
Before:	Emmett AJA
Decision:	1.   Declare that the funds standing to the credit of the account in the name of Giuseppa Mezzapica in trust for Daniel, Alessandra and Matthew Mezzapica, from which payments of $20,000, $20,000 and $22,010 were made on 11 March 2014, 16 May 2014 and 18 August 2014 were, at the respective times of the withdrawals, funds held on trust by the late Giuseppa Mezzapica for her three grandchildren. 2.   The payment of the proceeds of those cheques to the credit of the account of Giuseppa Mezzapica with the Commonwealth Bank of Australia constituted a breach of trust. 3.   Stand the proceedings over for further argument on the question of costs on a day to be fixed by the Court.
Catchwords:	SUCCESSION – executors and administrators – proceedings by co-executor against fellow co-executor
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW), rr 7.9, 7.10(2)(b)
Cases Cited:	Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Category:	Principal judgment
Parties:	Anthony Robert Mezzapica (Plaintiff) Renato Mezzapica (Defendant)
Representation:	Counsel: J Raine (Plaintiff) AS Maroya (Defendant)   Solicitors: Hall Partners (Plaintiff) Photios Vouroudis & Co (Defendant)
File Number(s):	2015/371565

Judgment

1. These proceedings are concerned with a somewhat unseemly dispute between two brothers, concerning the dealings of one of them with the affairs of their late mother. The plaintiff, Anthony Robert Mezzapica (Robert), and the defendant, Renato Mezzapica (Renato), are the only children of Giuseppa Mezzapica and Giuseppe Mezzapica. Giuseppe died on 6 April 2004 and Giuseppa died on 19 August 2014. Without intending any disrespect, it is convenient to refer to the members of the Mezzapica family by the names by which they are known in the family.

2. By her last will dated 23 February 1999 (the Will), Giuseppa appointed Giuseppe as her executor and trustee and gave the whole of her estate to him. However, the Will provided that, in the event that Giuseppe should pre-decease Giuseppa, her two sons, Robert and Renato, were to be joint executors and trustees. On 14 April 2015, probate of the Will was granted to Robert and Renato. The inventory of property annexed to the Probate disclosed that Giuseppa had property as follows:

Real property situated in Highgate Street, Strathfield	$1,600,000
Real property situated in The Boulevarde, Strathfield	$2,000,000
Furniture and contents	(No commercial value)
Jewellery	$3,000
Account with the Commonwealth Bank of Australia (the CBA Account)	$36,774
Shares in publicly listed companies	$3,799
Total:	$3,643,573

3. The property situated in Highgate Street (the Highgate Street Property) was the Mezzapica family home. Renato lived there with Giuseppa. Robert lived elsewhere with his wife and children.

4. By the Will, Giuseppa devised the Highgate Street Property, together with all the contents and furniture therein, to Renato. The property situated at The Boulevarde was devised to Robert, as to an undivided 55% share, and to Renato, as to an undivided 45% share. The jewellery was bequeathed to any granddaughters of Giuseppa living at the date of her death, in equal shares. In the events that have happened, Giuseppa was survived by only one granddaughter, Alessandra. The residue of Giuseppa’s estate was given to Robert and Renato in equal shares.

5. On 23 February 1999, the date on which the Will was made, Giuseppa appointed Giuseppe and Robert to be her attorneys jointly and severally to do on her behalf anything she may lawfully authorise an attorney to do. However, that power was revoked on 27 May 2010. On the same day, 27 May 2010, Giuseppa appointed Robert and Renato as her attorneys, jointly and severally, to do on her behalf anything she may lawfully authorise an attorney to do (the Power of Attorney). On 21 July 2010, Giuseppa completed an authority to the Commonwealth Bank for Renato to sign cheques drawn on the CBA Account.

6. Following Giuseppa’s death, disputation developed between Robert and Renato concerning Renato’s dealings with Giuseppa’s bank accounts. On 25 June 2015, Messrs John Fisicaro & Co, solicitors acting for Robert, wrote to Renato. The letter said that Robert had concerns in relation to the CBA Account, in that there were withdrawals that required an explanation. The letter also said that Robert had concerns in relation to a bank account in the name of “Giuseppa Mezzapica in trust for Daniel, Alessandra and Matthew Mezzapica” (the Trust Account).

7. The letter of 25 June 2015 said that, as Renato was in charge of both the CBA Account and the Trust Account, Robert would like an explanation. It said that it may well be that proper accounting for all withdrawals had been kept in which case there would be no issue. The letter suggested that Renato appoint a solicitor to represent him and that an informal meeting be held to discuss the matters. The letter then said that if it was ignored, or if the matter could not be resolved amicably, it was likely that “the Estate [would] be frozen” and consideration would be given to an application to the Supreme Court seeking a full accounting for all withdrawals and separately for a full accounting of all monies spent under the Power of Attorney.

8. There is no evidence of any response to the letter of 25 June 2015. It may be that further evidence will be adduced concerning that matter when the question of costs of the proceedings is considered. I shall revert to that question below.

9. These proceedings were commenced on 18 December 2015 by the filing of a statement of claim. An amended statement of claim was filed on 20 January 2017 and a defence to that amended statement of claim was filed on 7 February 2017. By the amended statement of claim, Robert sought, relevantly, declarations that Renato’s dealings with the CBA Account and the Trust Account involved an abuse of power by Renato and constituted misfeasance. Robert claimed an order that Renato file an affidavit setting out in detail all of the dealings that he caused to be carried on in relation to the funds and assets of Giuseppa pursuant to the Power of Attorney. The amended statement of claim also sought the taking of accounts.

10. The proceedings were fixed for hearing on 12 and 13 October 2017. After commencement of the hearing, orders were made by consent as follows:

1. Order that, for the purposes of r 7.10(2)(b) of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR), Robert Mezzapica be appointed to carry on the proceedings.

2. Order that, for the purposes of r 7.9 of the UCPR, orders and judgment in the proceedings bind the parties, the estate of Giuseppa and the beneficiaries under the Will.

11. In the course of case management of the proceedings, Robert filed a schedule of the payments in respect of which he required Renato to account. The schedule contained some 157 items and, in accordance with the Court’s directions, Renato provided a response in relation to each of those items.

12. In written submissions filed on behalf of Robert prior to the commencement of the hearing, the 157 items were categorised under five headings as follows:

• Garden makeover            $17,528.50

• New Kitchen               $43,847.80

• Periodic withdrawals of $800      $86,400.00

• Withdrawals from the Trust Account   $62,010.00

• Six payments to Renato         $31,000.00

13. During the course of the hearing, counsel for Robert informed the Court that the first three of those categories were no longer pursued. Later, in the course of oral argument, counsel for Robert informed the Court that the claim in relation to the fourth category, the withdrawals from the Trust Account, would not be pursued further. It is therefore unnecessary, at this stage, to say anything more about the first four categories of disputed payments. However, it may well be necessary to examine the categories and the responses to them in considering the question of costs.

14. In the result, the remaining dispute for determination by the Court concerns the fifth category – that is, six payments made by cheque drawn on the CBA Account of Giuseppa payable to Renato, which were signed by Renato and were presented and paid to the credit of a bank account of Renato. That is to say, the only question remaining is whether the six payments in question were made in circumstances whereby Renato should be required to repay the amounts to the estate of Giuseppa.

15. It is fair to say that the state of the evidence is unfortunately inadequate. It is highly undesirable that the dispute that remains falls to be determined on the basis of inadequate evidence from both Robert and Renato.

16. The thrust of the complaint made in the amended statement of claim is that the six payments in question were made in circumstances in which:

• Renato afforded priority to himself and his own interests over the interests of Giuseppa to whom he was bound to afford priority by virtue of his role as trustee and pursuant to the Power of Attorney.

• Renato profited and benefitted his own interests over the interests of Giuseppa to whose interests he was obliged to afford priority.

• Renato exercised his powers under the Power of Attorney in disregard of the real financial interests of Giuseppa.

• Renato’s conduct arose in circumstances of a conflict of interest.

• Renato failed to keep Giuseppa’s property and money separate from his own property and money and used Giuseppa’s money as if it was his own.

• Renato was in a position of power and exercised undue influence over Giuseppa.

• Giuseppa’s wishes and her will were overborne by reason of the exercise of the actions by Renato and the undue influence exercised by him over Giuseppa.

• Renato failed to keep proper records of all his dealings with Giuseppa’s assets, of all her funds and of all her money that he dealt with and purported to deal with in furtherance of the Power of Attorney.

17. It is common ground that the six payments still in question were made by cheques drawn on the CBA Account and signed by Renato. The six impugned cheques were payable to Renato and were as follows:

Cheque No	Amount	Drawn	Paid
002614	$2,000	26 May 2011	26 May 2011
002641	$5,000	25 Dec 2011	28 Dec 2011
002668	$9,000	24 May 2012	24 May 2012
002695	$5,000	25 Dec 2012	28 Dec 2012
002712	$5,000	26 May 2013	28 May 2013
002750	$5,000	26 May 2014	18 August 2014

18. Renato’s birthday is 26 May. 25 December is Christmas Day. Renato contended that the payments in question were gifts by Giuseppa to him on the occasion of his birthday, in four cases, and for Christmas, in two cases. Robert did not accept that the payments were gifts made by Giuseppa or with her consent. As I have said, the evidence on the question is unfortunately flimsy.

19. An affidavit sworn by Robert on 11 March 2016 was filed in the proceedings. However, that affidavit was not read in the proceedings. Robert also swore an affidavit on 8 May 2017, parts of which were read in the proceedings. Renato swore three affidavits, parts of which were read in the proceedings. Relevantly for present purposes, Renato swore an affidavit on 9 May 2016, in which he referred to Robert’s affidavit of 11 March 2016. Paragraph 6 of Renato’s affidavit was in the following terms:

“I deny that I ‘solely operated the cheque account’ as alleged by [Robert], and say that at all times I operated the [CBA Account] under my mother’s instructions. By an Authority to Operate executed on 21 July 2010, my mother nominated herself and me as the two persons authorised to operate [the CBA Account]. ... My purpose in signing [that Authority] was to assist my mother in operating the account, and to facilitate her access to funds which were required for household and other expenses.”

20. Paragraph 9 of Renato’s affidavit of 9 May 2016 was relevantly in the following terms:

“For the purposes of these proceedings, I retained [my late mother’s accountants], and instructed them to prepare a schedule of the withdrawals from [the CBA Account] … I have considered the schedule [prepared by the accountants], and am satisfied that it accords with my instructions to [the accountants], and that it reflects the purposes for which the withdrawals from [the CBA Account] were made.”

21. Renato annexed a copy of the accountants’ schedule to his affidavit. Attached to the accountants’ schedule of payments was a “disclaimer” by the accountants, confirming that they had prepared the schedule on the basis of information provided to them by Renato. The schedule included the following notations opposite the six impugned cheques:

Cheque No	Reason
002614	Renato’s Birthday
002641	Renato’s Xmas
002668	Renato’s Birthday
002695	Renato’s Xmas
002712	Renato’s Birthday
002750	Renato’s Birthday

22. There was no objection to pars 6 and 9 of Renato’s affidavit of 9 May 2016. Had there been an objection, those paragraphs would have been rejected or would not have been admitted to prove the truth of the two essential assertions made in them, namely:

• At all times Renato operated the CBA Account under Giuseppa’s instructions.

• The schedule prepared by the accountants reflects the purposes for which the six impugned cheques were drawn on the CBA Account.

The question is whether those paragraphs support a finding that four of the payments were made with the authority and at the direction of Giuseppa to Renato by way of birthday gifts and that two were made with her authority and at her direction as Christmas gifts.

23. Renato contends that an inference should be drawn that the payments were made with the authority of Giuseppa by reason of the dates on which the cheques were drawn. I would not be prepared to draw such an inference in circumstances where Renato gave evidence, both by affidavit and viva voce, but did not offer any specific evidence as to the circumstances in which the cheques were drawn. For example, it might have been possible for him to give evidence that, on the occasions when the cheques were drawn, Giuseppa had told him to draw the cheques by way of gift to himself. However, the Court should not draw inferences favourable to Renato as to the circumstances of the cheques being drawn when no attempt was made by him to prove those matters by direct evidence and no question was asked of him when he gave evidence viva voce.[1]

    1. See Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

24. On the other hand, the assertions made by Renato in pars 6 and 9 of his affidavit of 9 May 2016 were not the subject of objection and were not challenged in cross-examination, except in relation to one aspect of one payment. Cheque No 002750 dated 26 May 2014 for $5,000 was not presented for payment until the day before Giuseppa’s death. Renato was asked in cross-examination whether there was something that he did on 18 August 2014 involving Giuseppa’s bank accounts. His response was that Giuseppa had given him a cheque for his birthday on 26 May 2014 and that he had had a bad bicycle accident and had forgotten about the cheque and did not cash it until 18 August 2014. That evidence was not challenged. For example, it was not suggested that his evidence that Giuseppa had given him the cheque for his birthday was untrue.

25. I consider that, having regard to the unchallenged evidence in pars 6 and 9, the evidence as to the schedule prepared by the accountants and Renato’s evidence about the last cheque in cross-examination, it is more likely than not that, prior to each of the six impugned cheques being drawn and signed by Renato, Giuseppa expressly authorised the making of the payments. It is inherently likely that Giuseppa would have wished to make gifts to her son on the occasion of his birthday and at Christmas. In that regard, it is material that cheques for the sum of $5,000 were drawn on the CBA Account on 25 December 2006, 25 December 2007, 25 December 2008 and 25 December 2009. Cheque butts for those cheques, which were made out by Robert or Robert’s wife, suggest that they were Christmas gifts to Robert and his family. Those payments suggest a longstanding practice on the part of Giuseppa to make payments of $5,000 to each of her sons by way of Christmas gift.

26. Notwithstanding the unsatisfactory state of the evidence, I am persuaded that it is more likely than not that the six impugned cheques were drawn and the payments were made to Renato with the consent and authority of Giuseppa. The cheques were not drawn in the exercise of the power conferred by the Power of Attorney. Rather, the payments were made at the request and with the express authority of Giuseppa. In the light of that conclusion, there is no basis upon which Renato should be required to repay the amounts of the six cheques.

27. The letter from Messrs John Fisicaro & Co referred to the Trust Account. The beneficiaries, Daniel, Alessandra and Matthew Mezzapica, are Giuseppa’s grandchildren, being Robert’s children. It is common ground that the Trust Account was a trust account, although the circumstances in which the Trust Account was created are not in evidence. It is also common ground that three payments were made from the Trust Account into the CBA Account by cheques drawn by Renato and that those payments constituted a breach of trust on the part of Giuseppa, such that Giuseppa’s estate has a liability to her three grandchildren for the amounts that were paid away. However, there was no suggestion that any claim has been made by or on behalf of the grandchildren. Further, it has not been suggested that Giuseppa suffered any loss as a consequence of the payments. Rather, she received the benefit of the funds.

28. In the circumstances, Robert seeks a declaration that the three payments totalling $62,010 represented funds held on trust by Giuseppa for each of her grandchildren, Alessandra, Daniel and Matthew Mezzapica. Such a declaration may serve to avoid dispute in the future and it is appropriate to make it.

29. Apart from such a declaration, Robert has not established that the estate of Giuseppa is entitled to any relief against Renato. However, Robert contends that it was necessary for these proceedings to be brought in order to obtain the information that has now been made available as to the items that have been in dispute between the parties. That is relevant to the question of the costs of the proceedings. The parties requested that I make no determination of the question of costs until after publishing the reasons for my conclusions as to the six impugned payments and that they be given the opportunity of making further submissions and, if need be, adducing further evidence, as to the question of costs and, in particular, whether any costs should be paid from Giuseppa’s estate.

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Endnote

and Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8.

Decision last updated: 20 November 2017