Papantoniou v Papantoniou

[2025] NSWSC 269

Supreme Court

New South Wales

Medium Neutral Citation:

Papantoniou v Papantoniou [2025] NSWSC 269

Hearing dates:

21 February 2025

Date of orders:

21 February 2025

Decision date:

21 February 2025

Jurisdiction:

Equity

Before:

Hmelnitsky J

Decision:

[31]

Catchwords:

EQUITY — Trusts and trustees — Judicial advice — Application by trustee for sale for advice on construing court orders — Where orders were made by consent between parties and directed trustee on how to distribute proceeds of sale

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 73

Conveyancing Act 1999 (NSW), s 66G

Trustee Act1925 (NSW), s 63

Cases Cited:

Atchison v Holloway & Anor; Holloway & Anor v Atchison [2024] NSWSC 1523

Texts Cited:

Nil

Category:

Procedural rulings

Parties:

Peter John Papantoniou (Plaintiff)
Christodoulos John Papantoniou (First Defendant)
Gerard John Basha (Second Defendant)

Representation:

Counsel:
D Barlin (Plaintiff)
J Eun (First Defendant)
S Clemmett (Second Defendant)

Solicitors:
HWL Ebsworth Lawyers (Plaintiff)
Hunt & Hunt Lawyers (First Defendant)
Bartier Perry Lawyers (Second Defendant)

File Number(s):

2021/305117

Publication restriction:

Nil

JUDGMENT - EX TEMPORE (REVISED)

1. This is an application for judicial advice by a trustee for sale falling under s 66G of the Conveyancing Act 1999 (NSW). The parties to the proceedings are Peter and Christodoulos (Chris) Papantoniou who are brothers. The applicant for judicial advice is the second defendant, who was joined to the proceedings at the time of settlement for the purpose of acting as trustee for the sale of two properties that I will mention shortly. I will refer to members of the Papantoniou family, without any disrespect, by their preferred first names.

2. Peter and Chris were at the time of settlement also parties to three other proceedings in the Court. Final settlement of all four sets of proceedings occurred in September 2022. On 23 September 2022, Peter and Chris entered into a deed of settlement. That deed was entered into following a heads of agreement that had been entered into and recorded in writing on 5 May 2022. The deed, however, superseded the heads of agreement.

3. The deed contemplated that final orders would be made resolving all four proceedings and it annexed a form of consent orders for each proceeding as annexures A through to D. Annexure C was a document recording short minutes of order to be made by consent in these proceedings. Those orders were duly made on 26 September 2022 and I will refer to them as the consent orders.

4. The second defendant is also in another capacity the administrator of the estate of the parties' late mother, Styliani (Stella) Papantoniou. The consent orders provided for the second defendant to be joined to the proceedings in this capacity, and as mentioned before, for him also to be appointed as trustee for sale, pursuant to s 66G of the Conveyancing Act, of two properties. One of those properties, the Nabiac property, was owned by Peter and Chris as co-owners in equal shares. The other property, the Rydalmere property, was owned by Peter as to 25% and by Stella's estate as to 75%. The consent orders made provision for the sale of the properties and the manner in which the second defendant was required to deal with the proceeds.

5. Some uncertainty has now arisen as to two aspects of the process described in the consent orders and in the associated deed. It is in relation to those two issues that the second defendant seeks judicial advice. Section 63(1) of the Trustee Act1925 (NSW) provides that a trustee “may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument”. The Court is able in these circumstances to give advice as to how the proceeds of sale by the trustee should be dealt with, but as will become apparent the plaintiff and the defendant are themselves clearly in dispute about the subject matter of at least the first issue upon which the second defendant seeks advice.

6. The parties agreed that in these circumstances it was appropriate for the Court not just to give advice, but also to resolve that issue between the parties on its merits by making an order under s 73 of the Civil Procedure Act 2005 (NSW). Section 73 is as follows:

73  Power of court to determine questions about compromises and settlements

(1) In any proceedings, the court—

(a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and

(b) may make such orders as it considers appropriate to give effect to any such determination.

(2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question.

7. I also refer to what Faulkner J stated at [29] in Atchison v Holloway & Anor; Holloway & Anor v Atchison [2024] NSWSC 1523 on the purpose of this section:

“The purpose of s 73 is clear: to permit the Court to take steps to enforce agreements to settle proceedings before the Court. The power of the Court in s 73 is to be exercised having regard to the overarching purpose of the Civil Procedure Act as set out in s 56(1): to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Subject to the precise terms of the orders to be made, in this case the power under s 73 is to be exercised by making orders today in accordance with the consent orders that were previously prepared and based on the terms of the agreement made on 27 May 2024. In view of the attitude taken by the Registrar on a previous occasion some amendment is required although not in a way which alters the substance of what was agreed upon by the parties.”

8. Both the Nabiac property and the Rydalmere property have now been sold. The Rydalmere property was subject to a mortgage, which was discharged by the second defendant at the time of settlement of the sale. Both issues raised by the second defendant concern the consequential distribution of the proceeds of sale of these properties. Order 7 of the consent orders requires the second defendant to distribute the proceeds in the following way:

“7. The trustee distribute the proceeds of the sales of the Properties as follows:

a. from the proceeds of the sales of the Nabiac Property and the Rydalmere Property, to the trustee, the amount of the trustee’s remuneration and expenses;

b. from the proceeds of the sale of the Nabiac Property, the costs of sale of the Nabiac Property, council rates, insurance premiums and Local Land Services changes payable in respect of the Nabiac Property and reimbursement of each of the plaintiff and the first defendant for any council rates, insurance premiums and Local Land Services charges in respect of the Nabiac Property paid by him (subject to presentation of documentation substantiating the payment of the same);

c. from the proceeds of the sale of the Rydalmere Property (after the payment pursuant to paragraph (a) above), the costs of sale of the Rydalmere Property;

d. from the proceeds of the sale of the Rydalmere Property after the payments pursuant to paragraphs (a) and (c) above that are distributable to the Estate of Styliani Papantoniou, moneys for the discharge of loans secured against the Rydalmere Property, the costs of discharge of any mortgage and any charge secured over the Rydalmere property pursuant to clause 3.3 of the Deed of Settlement between the plaintiff and first defendant dated 23 September 2022; and

e. from the proceeds of the sale of the Rydalmere Property (after the payments pursuant to paragraphs (a), (c) and (d) above), to the plaintiff at settlement, one quarter of the net proceeds;

f. from the proceeds of the sales of the Nabiac Property and the Rydalmere Property after the payments in paragraphs (a) to (e) above, to the administrator of the Estate of Styliani Papantoniou to be dealt with in accordance with the Deed between the plaintiff and the first defendant made on 23 September 2022 and any orders of the Court in Supreme Court of New South Wales case number 2020/343370.”

9. The first aspect of these consent orders that the second defendant identifies as involving some uncertainty concerns paragraph (d) of order 7. A difficulty arises because of the inclusion in paragraph (d) of the words, "that are distributable to the estate of Styliani [Stella] Papantoniou". As Peter contends, and as counsel suggests in the advice tendered by the second defendant, the presence of those words means that the "moneys for the discharge of loans secured against the Rydalmere Property, the costs of discharge of any mortgage and any charge secured over the Rydalmere Property pursuant to clause 3.3 of the Deed of Settlement between the plaintiff and the first defendant dated 23 September 2022" must be paid out of, in effect, Stella's estate's share of the proceeds of sale of the Rydalmere property.

10. They each contend in effect that Peter is entitled to one quarter of what is left from the proceeds of sale of the Rydalmere property after paying the amounts referred to in paragraphs (a) and (c) of order 7, namely the trustee's remuneration and costs of sale. They say that that is consistent with the terms of the deed. Chris, on the other hand, who is the first defendant, contends that that is not what the consent orders say and says that the construction of order 7, for which the plaintiff contends and is as proposed by the second defendant, is entirely inconsistent with the terms of the heads of agreement by which the dispute between the parties was settled in the first place.

11. The second aspect of uncertainty surrounding order 7 of the consent orders concerns paragraph (f). In terms, that order seems to require the proceeds of sale of both the Rydalmere property and the Nabiac property to be paid to the second defendant in its capacity as administrator of Stella's estate. However, the ordinary position in relation to the proceeds of sale of a property under s 66G of the Conveyancing Act is that they are held for the benefit of, and ordinarily paid to, the owners. Stella's estate has no apparent entitlement to the proceeds of sale of the Nabiac property so it is not entirely clear what is meant in 7(f) by the requirement to pay the proceeds of sale of the Nabiac property to the administrator of Stella's estate.

12. I will deal with these two issues in turn. The first issue concerns the meaning of order 7(d) of the consent orders. I have already described this issue in general terms. There is some slight difference between the way the plaintiff presents this issue and the way the second defendant identifies it. So far as the second defendant is concerned, it is submitted that the question involves some ambiguity within order 7(d) itself, which it is said to be resolved ultimately by giving all of the words of that provision some work to do.

13. The plaintiff says that there is no ambiguity in paragraph 7(d) of the consent orders and that the ordinary meaning of the words used in that paragraph are clear in that they require the moneys for the discharge of loans secured against the Rydalmere property to be paid from those proceeds of sale of the Rydalmere property that are distributable to Stella's estate.

14. On the other hand, he does point out the difficulty that then arises as to the references in both orders 7(e) and 7(f) to the circumstance that the trustee was apparently required to pay out the loans under 7(d). That is to say, the plaintiff acknowledges that orders 7(e) and 7(f) do appear to contemplate that the trustee was required to pay out the loans pursuant to order 7(d), before moving on to calculate the next payments required to be made under the waterfall of payments in order 7. In that respect the plaintiff suggests that the only real difficulty in the consent orders is that, in order for them to make sense, the references in 7(e) and 7(f) to payments being made under paragraph (d) should effectively be ignored.

15. Both the second defendant and the plaintiff have pointed me to language in the deed which tends to support the construction of the consent orders for which they contend. In particular I have been referred to clauses 4.4 and 4.5, which are as follows:

“4.4 In the Section 66G Proceedings, the Parties will do all things reasonably necessary on their respective parts to have orders to the effect of those set out in Annexure C to this Deed made by the Supreme Court of New South Wales by consent, to have such orders carried out and to cause the trustee for sale to distribute the proceeds of the sales of the Properties in the manner set out in Annexure C to this Deed.

4.5 The Parties will do all things reasonably necessary on their respective parts to cause the Administrator so to expend and distribute the net proceeds of the sales of the Properties paid to the Administrator and any funds in the Estate of Stella or the Estate of John that:

a) all mortgages affecting property in Stella’s Estate and John’s Estate will be discharged and all liabilities of Stella’s Estate (including without limitation any capital gains tax liability falling on Stella’s Estate, all loan repayments, fees, charges and other expenses payable in connection with the sale of the Rydalmere Property) will be paid;

b) any charge over the Rydalmere Property in Peter’s favour pursuant to clause 3.3 above is to be paid from the net proceeds of sale of the Rydalmere Property;

c) any tax liability arising in respect of the amount of $1,450,000 payable to Peter and secured by the Carlingford Property pursuant to orders made in the Family Provision Proceedings in accordance with clause 4.1 above (“the Charge Amount”) will be paid;

d) the Parties will be allocated equal portions from the distributable Estate of Stella (excluding, for the avoidance of doubt, the Carlingford Property) (payment of the same being in accordance with paragraphs (e) and (f) below);

e) so far as moneys are available from Chris’ allocated portion of Stella’s Estate and from his share of the net proceeds of the sale of the Nabiac Property, the Charge Amount will be paid to Peter and any part of the Charge Amount unpaid will remain charged against the Carlingford Property; and

f) after payment of all the liabilities of the Estate of Stella, the Charge Amount, any interest on the Charge Amount payable in accordance with the proposed orders set out in Annexure A and the liabilities of the Estate of John (including without limitation all tax liabilities of the Estate and all loan repayments, fees, charges and other expenses payable in connection with the Carlingford Property and 3 Omaru Place, Summerland Point), any remainder will be paid to Peter and Chris according to their respective remaining shares.”

16. The second defendant and plaintiff both argue that clause 4.5 makes clear that the administrator of Stella's estate is required to discharge the mortgage on the Rydalmere property with its share of the proceeds of sale. This, they say, is the effect of clause 4.5(d) of the deed. In their submission it is this circumstance that is contemplated by order 7(d) of the consent orders. In particular it is why that order refers to the payment of those liabilities out of amounts that are “distributable” to Stella's estate.

17. The problem of construction in relation to these consent orders is somewhat confounding. Applying the ordinary rules that are applicable to the interpretation of orders – which are similar to the rules applicable to the construction of contracts – and about which the parties all seem to be in agreement, yields difficulties regardless of the construction adopted.

18. The plaintiff's submission as to what order 7(d) means has the consequence that there must be a mistake in order 7(e) and order 7(f). It also means that there is, at the very least, some blurring of the lines between what the trustee is required to do under order 7(d) and what the parties understood the administrator would do under clause 4.5 of the deed. By that I mean the consent orders on their face contemplate that the trustee will pay the mortgage from the proceeds of sale of the Rydalmere property and then, having done so, and having paid out Peter's one quarter share, will pay the remaining balance to the administrator. At the same time, however, on that same submission the administrator is then required to use that amount, that is, the amount net of payment of the mortgage, in order to discharge the mortgage pursuant to clause 4.5(a) of the deed. That view of the consent orders seems to me to involve some blurring of the obligations of Mr Basha in his separate capacities.

19. However, that is also a difficulty that arises even if the consent orders are construed in the manner for which the first defendant contends. Either way it seems to me clause 4.5 of the deed does appear to contemplate that the payments referred to in order 7(d) were in fact contemplated to be paid by the administrator out of Stella's estate's share of the proceeds.

20. There is much force in Chris' submission that the ordinary meaning of the language of order 7 suggests that the trustee was required to work out the amount to be paid to the plaintiff only after taking into account the discharge of the mortgage and the other payments mentioned in order 7(d) and that he was then required to take those payments into account in working out the amounts to be paid to Stella's estate pursuant to order 7(f). However, that is a construction that essentially requires me to ignore the reference in order 7(d) to the payments mentioned therein being made from the proceeds “that are distributable to the Estate of Styliani Papantoniou”.

21. In all of these circumstances, there is real ambiguity as to what order 7, read together with the deed (as it must be), means.

22. The first defendant drew my attention to the terms of the heads of agreement that was executed by the parties in May 2022. Clause 4 of the heads of agreement is as follows:

"The parties agree that Mr Basha (or any substitute administrator) be appointed trustee for sale pursuant to s 66G Conveyancing Act 1919 to sell:

(A) [XX] Antoine Street, Rydalmere;

(B) [XX] Elliott Road, Nabiac

and with the net proceeds of sale of (A) + (B) pay off all mortgages + any CGT of the estate of Stella and pay any balance to Peter in reduction of the charge of $1,450,000.00 referred to in clause 3 above; and

pay any remaining funds to Peter + Chris in equal shares after payments of all liabilities of the estates of John + Stella.”

23. The first defendant particularly drew my attention to what clause 4 of the heads of agreement says about the payment of the mortgage from the proceeds of sale prior to there being any distribution to Peter. Read in isolation, that reference to the mortgage over the Rydalmere property being paid out of the proceeds before any payment is made to the plaintiff would strongly support the conclusion, for which Chris contends.

24. However, when the language of clause 4 of the heads of agreement is read as a whole and when it is compared to the language of the deed and to order 7 of the consent orders, it is clear that the overall arrangement as to the distribution of the proceeds of sale of the Rydalmere property changed in some relevant respects between the making of the heads of agreement and the entry into the deed. For a start the heads of agreement contemplated that a number of payments would be paid out of the proceeds of sale of the Rydalmere property before any share of those proceeds would be paid to Peter and Chris. Those payments included the tax payable by the estate on the sale of its interest in the Rydalmere property. I also note that what was contemplated after these payments was simply a distribution of the residue to Peter and Chris in equal shares.

25. The deed, however, proceeds in a very different way. It contemplates that the tax payable by the estate would be paid only out of its share of the proceeds. The deed also contemplates, through the consent orders, that Peter is entitled to a quarter of the proceeds of sale of the Rydalmere property (leaving aside the issue about payment of the mortgage) before the balance is paid to the estate. There are, therefore, some quite significant differences between what was contemplated in relation to the distribution of the proceeds under the heads of agreement compared to what was contemplated by the deed and the associated consent orders.

23. If I were able to conclude that the deed was in these various respects consistent with the arrangement contained in the heads of agreement, then I would be prepared to give weight to what the heads of agreement says about the payment of the mortgage in determining what the deed and the consent orders mean when they deal with that same subject. In other words, if I could see some real consistency between the terms of the heads of agreement and those terms of the deed that are not in dispute then I would be inclined to read the disputed language in the deed and the consent orders consistently with the heads of agreement. But, as I have explained, that is not possible.

24. Although I have some misgivings about this conclusion, I am persuaded that the construction of the consent orders for which the plaintiff contends is correct. I will, therefore, make a declaration pursuant to s 73 of the Civil Procedure Act to that effect.

25. Although I don't really see the utility of granting or giving judicial advice in circumstances where I have otherwise declared what the parties’ rights are, the second defendant asked that I do so and the other parties did not suggest otherwise. I will therefore give judicial advice to the second defendant that he is justified in distributing the funds in that way I have indicated.

26. As to the second issue, order 7(f) of the consent orders contemplates that payment of the proceeds of the Nabiac property would be paid to the second defendant in his capacity as administrator of Stella's estate. I note that the references in the deed to the administrator meeting expenses and discharging liabilities do not generally distinguish between funds obtained by the administrator from the sale of the Rydalmere property or the Nabiac property or in fact from any other source. The deed appears to me to contemplate that the administrator will deal with the proceeds of the Nabiac property in the ordinary course of administration of Stella's estate. That is, it contemplates that those proceeds should be available to meet the liabilities and the expenses of Stella's estate and the costs of administration of the estate and that any balance remaining would simply form part of the residue to be distributed among the beneficiaries.

27. That does represent a departure from the ordinary rule as to the distribution of proceeds of sale when a property is sold by a trustee appointed pursuant to s 66G of the Conveyancing Act, but it is nevertheless quite clearly the agreement that was reached by the parties and which was embodied in the consent orders.

ORDERS

31. The orders of the Court will therefore be as follows:

1. The Court declares, pursuant to s 73 of the Civil Procedure Act 2005 (NSW) that on its proper construction, paragraph 7(d) of the orders made on 26 September 2022 in these proceedings (the Consent Orders) requires that the second defendant distribute to the plaintiff one quarter of the net proceeds required to be paid pursuant to paragraph 7(e) without reduction on account of:

1. Moneys for the discharge of the loan given by the Uniting Church (NSW) Trust Association Limited secured against the property at [XX] Antoine Street, Rydalmere (the Rydalmere Property); and

2. The costs of discharge of the mortgage in favour of the Uniting Church (NSW) Trust Association Limited so that those amounts are to be paid solely from the proceeds of sale of the Rydalmere Property that are distributable to the estate of Styliani Papantoniou.

2. The Court declares pursuant to s 73 of the Civil Procedure Act that on its proper construction paragraph 7(f) of the Consent Orders requires that the second defendant distribute the whole of the net proceeds of the sale of the property at [XX] Elliot Road, Nabiac (the Nabiac Property) to the estate of Styliani Papantoniou, to form part of and be accounted for as an asset of the estate to be allocated in accordance with clause 4.5(d) of the deed entered into between the plaintiff and the first defendant on 23 September 2022.

3. Pursuant to s 63 of the Trustee Act 1925 (NSW) the Court advises the second defendant that he is justified in distributing the proceeds of sale of the Rydalmere property and the Nabiac property in accordance with the declarations that I have made in orders 1 and 2 above.

4. The second defendant's costs of this application be paid on the indemnity basis from the proceeds held by the second defendant on trust on account of the sale of the Nabiac Property and the Rydalmere Property, so that those costs are to be borne equally by each of those two trusts.

5. The first defendant is to pay the plaintiff's costs accrued on 21 February 2025.

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Decision last updated: 28 March 2025