Re Giannilivigni
[2019] VSC 800
•5 December 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUST, EQUITY AND PROBATE LIST
S ECI 2018 00567
| ANTHONY JASON GIANNILIVIGNI and STEPHEN DANIEL GIANNILIVIGNI | Plaintiffs |
| -and- | |
| LUCIA SANVINCENTI (who is sued as the executrix of the estate of STEFANO GIANNILIVIGNI deceased) and ORS (according to the Schedule attached) | Defendants |
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JUDGE: | McMillan J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 February 2019 | |
DATE OF RULING: | 5 December 2019 | |
CASE MAY BE CITED AS: | Re Giannilivigni | |
MEDIUM NEUTRAL CITATION: | [2019] VSC 800 | |
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PRACTICE AND PROCEDURE — Application for whereabouts of proceeds of sale, alternatively, a freezing order — No point of principle — Supreme Court Act 1986 (Vic) s 37 — Supreme Court (General Civil Procedure) Rules 2015 (Vic) ord 37A — Zhen v Mo [2008] VSC 300.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr BJ McCullagh | Spencer Law Partners |
| For the Defendants | Mr JD Catlin | MCK Legal |
HER HONOUR:
Introduction
Stefano Giannilivigni died on 3 April 2016. He was survived by his former domestic partner (‘the first defendant’) and his two adult children (‘the plaintiffs’).
By his will dated 20 February 2003, the deceased appointed the first defendant as his executor and bequeathed his estate to her. On 6 June 2016, probate of the deceased’s will was granted to the first defendant. In her affidavit filed 11 May 2016, in the probate proceeding, the first defendant deposed that the assets of the estate were eight ordinary shares in Blue Bird Products Pty Ltd (ACN 087 566 890) (‘Blue Bird Products’) valued at $965,000.[1] The first defendant repeated this value of the shares in a further affidavit sworn by her on 2 February 2017.
[1]Blue Bird Products is now named ACN 087 566 890 Pty Ltd (ACN 087 566 890), which is the second defendant in this proceeding.
The plaintiffs allege that, prior to his death, the deceased was the sole director of Blue Bird Products and two other companies, Blue Bird Products Australia Pty Ltd (‘Blue Bird Australia’)[2] and Messina Properties Pty Ltd (ACN 605 080 993) (‘Messina’),[3] save for the periods 7 December 1999 to 28 August 2001 and 16 March 2005 to 15 July 2005, when the first defendant was a director. As from 3 April 2016, the first defendant was the sole director and shareholder of the three companies.
[2]Blue Bird Australia is now named ACN 099 913 112 Pty Ltd (ACN 099 913 112), which is the third defendant in this proceeding.
[3]Messina is the fourth defendant in this proceeding.
Blue Bird Australia is the trustee of the Blue Bird Trust No 1 established by deed on or around 14 May 2002. According to the defendants, the Blue Bird Trust No 1 is a unit trust comprising 1000 units held by Giannilivigni Nominees Pty Ltd in its capacity as trustee of the Lucia Trust. Messina is the trustee of the Campbellfield Trust established by deed on or around 4 April 2015. The plaintiffs allege that at all material times they were beneficiaries of the two trusts. The defendants deny that the plaintiffs were beneficiaries of the Blue Bird Trust No 1 and admit that the plaintiffs were in the class of additional beneficiaries of the Campbellfield Trust.
Blue Bird Products is the registered proprietor of the property known as 23 Centofanti Place, Thomastown (‘the Thomastown property’). Blue Bird Australia, as trustee of the Blue Bird Trust No 1, conducted the business of importation, manufacture, wholesale, sale and export of Italian style foodstuffs at the Thomastown property.
From 2015 to 30 October 2017, Messina, as trustee of the Campbellfield Trust, was the registered proprietor of Units 1 and 2, 155 Northbourne Road, Campbellfield. On 30 August 2017, the Campbellfield property was sold for the sum of $1,155,000. The plaintiffs allege that the defendants have failed or refused to advise of the whereabouts of the proceeds of sale. In their defence, the defendants set out what they allege to be the dispersal of all of the sale proceeds of the Campbellfield property.
Plaintiffs’ claims
In their statement of claim filed 31 July 2018, the plaintiffs allege, inter alia, as follows:
(a) they worked full time in the various businesses operated by the deceased from 1991 onwards without being paid a regular wage or salary and were not sufficiently paid on the basis of representations made by the deceased regarding his gifting of shares and entitlements and the business to them upon his retirement from the business;
(b) pursuant to an oral and implied agreement made in 2002 with the deceased, on his own behalf and on behalf of the business and in consideration of the plaintiffs’ working for the deceased, Blue Bird Products, the business and/or any other company or entity started or controlled or operated by the deceased without payment of a regular wage or salary, the deceased would transfer his shares in Blue Bird Products, the business and any other company or entity started or controlled and operated by him to the plaintiffs;
(c) pursuant to a further agreement made in 2011 with the deceased, the plaintiffs would move to Thailand and establish and operate an agri-business growing and processing vegetables for the benefit of the deceased, Blue Bird Products, the business and Messina.
The plaintiffs allege that the first defendant refuses to recognise both agreements and, therefore, is in breach of the agreements and that she refuses to recognise the plaintiffs’ entitlements to a transfer of the shares in Blue Bird Products and Blue Bird Australia and the business and associated corporate entities. Alternatively, the plaintiffs allege a common intention constructive trust. They seek orders that the first defendant holds the shares, the deceased’s entitlements in Blue Bird Products and Blue Bird Australia, the business and Messina on trust for the plaintiffs, alternatively, their value as at the date of death of the deceased.
The defendants deny the plaintiff’s claims, in particular, where they worked and for whom they worked, and allege that, while working in Thailand, the plaintiffs were not working for the benefit of the business.
In separate proceedings, the plaintiffs seek provision from the estate of the deceased, pursuant to Part IV of the Administration and Probate Act 1958,[4] and the removal of the first defendant as the executor of the estate of the deceased.[5]
[4]Proceeding S CI 2016 03656.
[5]Proceeding S CI 2018 01357.
Plaintiffs’ application
By summons filed 14 February 2019, the plaintiffs seek orders that the defendant file and serve an affidavit addressing the current whereabouts of the proceeds of sale of the business and of the stock and the amount of the balance and each and every amount deducted from the settlement amounts received for the sale of the business and the stock and the reasons for each such deduction. In the alternative, the plaintiffs seek a freezing order pursuant to r 37A.02 of the Supreme Court (General Civil Procedure) Rules 2015.
At a hearing on 22 February 2019, Ms Mirka Carmelli, the solicitor for the defendants, filed an affidavit sworn 22 February 2019 detailing what she understood to be the whereabouts of the proceeds of the sale of the business and the stock. Ms Carmelli filed a further affidavit sworn 26 February 2019 addressing further matters arising from the earlier hearing. As a result of this further information, the plaintiffs confined their relief to seeking a freezing order only.
Background to the plaintiffs’ application
The plaintiffs’ affidavits filed during 2018 and 2019 set out the efforts made by them to obtain the relevant information in respect of the issues in dispute. The following is a summary of these efforts.
By an affidavit sworn 17 November 2017, the defendants’ accountant, Mr Karafili, sought to address what he then believed to be the assets of the ‘estate and of the deceased’. He deposed that the estate comprised all the shares in ‘Blue Bird’ valued at $965,000 and that Blue Bird owns the Thomastown property. This is unclear and incorrect in part. Blue Bird Products owned the Thomastown property and Blue Bird Australia operated the business from the Thomastown property. The exhibited title shows a mortgage to the ANZ Bank and a caveat lodged by ‘the defendant’ in July 2017 by the defendants’ solicitor. Mr Karafili deposed to Blue Bird having entered into equipment leases with the Bank of Queensland and to a County Court proceeding by the Bank of Queensland financial arm against, among others, Blue Bird Australia, and the first defendant as guarantor. He deposed that the defendants had joined the deceased’s former accountant, Mr Battista, and the financial advisory arm of Mr Battista's firm as third parties to the proceeding. Subsequently, the proceeding against the third parties was resolved by Mr Battista's interests paying the sum of $25,000 to the Bank of Queensland.
Mr Karafili deposed that his belief was that the estate comprised the shares in ‘Blue Bird’ and that it owns the Thomastown property, that there is a disputed liability to Macolive of $562,000 and a mortgage debt of $360,000 to the ANZ Bank, debts of $200,000 for outstanding equipment leases and costs of the litigation and administration. He also deposed that, as at 1 November 2017, there was a debt to Macolive in relation to a dispute that commenced in around 2007. The plaintiffs dispute this debt on the grounds that it is statute-barred and that the quantum is incorrect in any event as the first defendant deposed that the Macolive debt was $347,654.
In an affidavit sworn 5 March 2018, the first defendant deposed as to the assets and liabilities of the estate. She described various loans from the ANZ Bank, including $255,172 from an overdraft facility, $13,430 owed on a separate account, $275,214 on another account and $2,314 on another account. She described the assets of the estate as being loan moneys owed by the Lucia Trust to the deceased of $374,269 and $204,310. She then described the financial position of the estate as assets of $1,866,428 and liabilities of $1,330,514, including the alleged debt to Macolive of $347,654 and equipment leases of $383,876.
In 2018, Blue Bird Australia sold the business to SACM Pty Ltd for the sum of $1,265,000, including plant, equipment and stock. Settlement of the sale took place on 23 or 24 May 2018. SACM Pty Ltd also entered into a lease of the Thomastown property for a period of five years, presumably with Blue Bird Products. Since the sale of the business, the plaintiffs have sought the whereabouts of the sale proceeds of the business and an account of the rental from the lease with SACM Pty Ltd. The defendants assert that the net proceeds of sale have been retained to meet liabilities, ongoing legal and accounting costs, the quantum of which is still being ascertained. In this regard, they refer to a proceeding in the Count Court issued by BOQ Equipment Finance Ltd against Blue Bird Australia and the first defendant.[6]
[6]Proceeding CI 18-01070.
At the directions hearing on 24 September 2018, the plaintiffs raised their concerns as to the whereabouts of the sale proceeds from the sale of the business and the stock. The defendants informed the Court that the proceeds of sale were in a fixed-term deposit with the ANZ Bank and that their solicitor would provide the particulars of the sale and the whereabouts of the proceeds of sale in writing to the plaintiffs. On 3 October 2018, the first defendant provided copies of ANZ Bank term deposit maturity statements for Blue Bird Australia from 8 June to 28 September 2018. The amount invested on 28 September was $1,119,339.75 was maturing on 28 October 2018. Although the defendants provided that information, they did not inform the plaintiffs of the whereabouts of the balance of the proceeds of sale or of the sale of the stock. Subsequently, the plaintiffs sought information from the defendants as to reinvestment of the funds upon their maturity during October and November 2018, but the information was not provided. As at 28 November 2018, the plaintiffs had not been informed of the whereabouts of the proceeds of sale of the business or the stock.
On 10 December 2018, the plaintiffs sought particulars of the rental received for the factory premises at Thomastown and an assurance that the mortgage over the premises had been paid. The defendants did not respond to the request.
On 23 January 2019, the plaintiffs sought advice as to the whereabouts of the sale proceeds by 29 January 2019, otherwise they would issue a summons.
On 30 January 2019, the plaintiffs received an email from the defendants to the effect that the sale proceeds invested in Blue Bird Australia had been removed from the ANZ Bank by the first defendant and invested with the Commonwealth Bank and that they would provide bank statements. No bank statements from the Commonwealth Bank were provided to the plaintiffs.
On 4 February 2019, the plaintiffs informed the defendants that a summons would be issued unless the bank statements were provided to them. The bank statements were not provided, and on 14 February 2019 the plaintiffs issued their summons.
On 14 February 2019, a mediation of the County Court proceeding took place but failed to resolve.
The affidavits sworn by Ms Carmelli on 22 and 26 February 2019 referred to many matters told to her by Mr Karafili, who is her husband and was said to work from the same premises as Ms Carmelli. In the circumstances, no explanation was provided as to the failure of Mr Karafili to file an affidavit, rather than by Ms Carmelli, who deposed to many matters of second-hand knowledge and belief.
In her affidavit sworn 22 February 2019, Ms Carmelli deposed that settlement of the sale of the business took place on 23 May 2018. The consideration for the sale was $1,265,000 plus stock. A deposit of $126,500 and $97,405 paid to the agent and $29,095 paid into the trust accounts of the defendants’ solicitors. Adjustments of $22,350.55 were deducted from the purchase price and the vendor received $1,116,895.27 which was paid into an ANZ Bank term deposit in the name of Blue Bird Australia. The sum of $1,116,895.27 was reinvested and matured at the end of October 2018 when the amount was then $1,119,339.75. The first defendant then removed the funds from the ANZ Bank. On 29 October 2018, she deposited $900,000 on term deposit with Westpac Bank in her own name and transferred a further $100,457.14 into another Westpac account in her own name. This was contrary to earlier information provided to the plaintiffs on 30 January 2019 that the funds were deposited with the Commonwealth Bank. Ms Carmelli exhibited a document relating to the deposit if $900,000, but not for the $100,457.14, and said nothing about the shortfall of funds.
On 21 February 2019, Mr Karafili received a letter from the ANZ Bank indicating that it had inadvertently released the funds to the first defendant without applying them to repayment of the secured indebtedness of Blue Bird Products to the ANZ Bank. The bank sought the urgent return of the funds for the purpose of discharging the security and repayment of the debts, otherwise it threatened to issue notices seeking recovery of the funds. The bank informed Mr Karafili that $666,393.02 was required to discharge the indebtedness.
Mr Karafili informed Ms Carmelli that Westpac Bank refused to release the funds unless it received 30 days’ notice of the first defendant’s intention to withdraw the funds.
Ms Carmelli also referred to the stock being sold for $308,903.05. Of that amount, the sum of $150,000 was retained by the purchaser’s solicitor in trust for building defects relating to the factory. On 31 May 2018, a further amount of $88,896.52 was paid into the trust account of the defendants’ solicitor and the balance of $70,006.53 was retained by the purchaser for unpaid stock.
Ms Carmelli next referred to a mediation of the County Court proceeding said by her to be in respect of equipment and motor vehicles purchased by the deceased under six financial arrangements with the Bank of Queensland with a debt alleged to be in excess of $330,000. She also referred to accounting fees of about $90,000 payable to Mr Karafili’s firm and a caveat lodged by another legal firm on the Thomastown property said to secure legal fees of about $220,000.
In her second affidavit sworn 26 February 2019, Ms Carmelli deposed to matters raised at the hearing on 22 February 2019. Most of the details deposed to by her do not appear to be within her personal knowledge. She deposed that she was unaware of the balance of the funds held in the two Westpac accounts and set out how the funds from the sale of the business ended up in the name of the first defendant and what she had been told as to the liabilities or expenses yet to be paid by one or other of the defendants. She deposed that Mr Karafili agreed, on behalf of the first defendant, to pay the outstanding balance to the ANZ Bank in exchange for the ANZ Bank releasing the securities over Blue Bird Australia and the assets of the first defendant. This appeared to include funds of about $49,000 used to pay out a loan on a motor vehicle used by the first defendant, although the exhibited financial agreement was between the first defendant and Blue Bird Products, and not Blue Bird Australia. While it is not clear from the affidavit, at the hearing it was said that the payments would also discharge borrowings secured over the first defendant’s home, leaving it unencumbered. Ms Carmelli deposed that the ANZ Bank was now owed $655,147.06 and the Bank of Queensland’s claim was now $330,000.
On 22 February 2019, the plaintiffs proposed that consent orders be made permitting payment of the ANZ bank debts from the sale proceeds. At the hearing, the plaintiffs agreed to around $655,000 being paid from the proceeds of sale to satisfy the ANZ Bank liabilities. This was agreed on the basis that the defendants provide the details of the debts being discharged and the securities released, including reference to the first defendant’s home. Further details were also provided as to the County Court proceeding, with the plaintiffs noting that they had contacted the solicitors for the Bank of Queensland and were informed that the bank had offered to settle the proceeding for $285,000 inclusive. On the basis of these further details and information, the plaintiffs agreed to no more than $285,000, or whatever lesser sum was agreed, being paid from the sale proceeds to resolve the proceeding. Otherwise, the plaintiffs sought that no further sums be paid from the sale proceeds, that the Thomastown property not be encumbered, save for a proposed caveat being lodged by the plaintiffs, and that the plaintiffs be provided details of the rent paid under the lease of the Thomastown property.
Consideration
The Court’s power to make freezing orders derives from s 37 of the Supreme Court Act 1986 and Order 37A of the Supreme Court (General Civil Procedure) Rules 2015, and the Court’s inherent power.[7] The relevant legal principles relating to the making of freezing orders are not in dispute and are conveniently summarised by J Forrest J in Zhen v Mo & Ors in the following terms:
[7]See, for example, PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1.
First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish —
(a) an arguable case against the defendant; and
(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.
Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.[8]
[8][2008] VSC 300, [22]–[29] (citations omitted). See also Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd [2009] VSC 418 (J Forrest J); Rail Plus Australasia Pty Ltd v Ng [2013] VSC 429 (Ginnane J); Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd [2015] VSC 59 (Hargrave J).
The factual background sets out the failures of the defendants to communicate promptly or accurately with the plaintiffs over a lengthy period of time. This has raised the plaintiffs’ suspicions and eventually caused them to seek the relief in their summons. As a result of the further information now provided by the defendants, the plaintiffs have a substantial amount of the information sought in their first ground of relief. This has given them a much clearer understanding of what has occurred in the administration of the estate and the financial position of the defendants. Once appraised of the details concerning the liabilities to the ANZ Bank and the County Court proceeding, the plaintiffs agreed to those liabilities being paid from the sale proceeds on the basis of the further details being provided as set out at [31] above.
The plaintiff also sought their alternative relief of a freezing order over the balance of the sale proceeds. Applications for freezing orders must be approached with a high degree of caution. It is a drastic remedy. Before making such an order, the plaintiffs must establish an arguable case against the defendants and that there is a danger that a prospective judgment will be wholly or partly unsatisfied as a result of the defendants’ actions in removing or disposing of assets or dealing with them in a manner that diminishes their value. While the pleadings set out the plaintiffs’ claims, it is apparent from them that the proceeding will centre on various conversations between the plaintiffs and the deceased from as long ago as 2002 and then onwards. Most of the evidence will be viva voce evidence. In those circumstances, the Court is not in a position to determine whether the plaintiffs have an arguable case against the defendants. On balance, the circumstances do not favour the granting of a freezing order.
The parties are to forward proposed minutes of orders reflecting these reasons to the Court. If the parties are unable to agree on the costs of the summons, short written submissions should also be forwarded to the Court.
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SCHEDULE OF PARTIES
S ECI 2018 00567
| ANTHONY JASON GIANNILIVIGNI | First Plaintiff |
| -and- | |
| STEPHEN DANIEL GIANNILIVIGNI | Second Plaintiff |
| -and- | |
| LUCIA SANVINCENTI | First Defendant |
| -and- | |
| ACN 087 566 890 PTY LTD (ACN 087 566 890) | Second Defendant |
| -and- | |
| ACN 099 913 112 PTY LTD (ACN 099 913 112) | Third Defendant |
| -and- | |
| MESSINA PROPERTIES PTY LTD (ACN 605 080 993) | Fourth Defendant |
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