Cassaniti v Katavic

1. [1]

   THE COURT: Before the Court on the concurrent hearing of an application for leave to appeal and an appeal is a notice of motion filed 2 February 2023 by which the appellants seek interlocutory relief in relation to funds paid into Court pursuant to the asset preservation orders made in the proceedings below (presently totalling $1,022,846.70). Paragraphs 2, 3 and 4 of the motion seek the following orders:

2. [2]

   The context of this application is as follows. The second respondent, Antalija Developments (No 4) Pty Ltd (Antalija Developments), is the trustee of the Antalija Unit Trust, which was formed to undertake a development of land at Moncrieff in the Australian Capital Territory. The unit holders in that trust include the second appellant, Ms Nancy Morvillo, who is the sister of the first appellant, Mr Sam Cassaniti, and the first respondent Mr Dennis Katavic. Each hold their units as trustee for a discretionary trust. The third respondent is Ms Jocelyn Katavic, the wife of Mr Katavic.

3. [3]

   By their appeal, the appellants challenge the decision of the primary judge (Robb J) delivered on 2 May 2022 declaring void ab initio relevant provisions of the unit holders’ agreement upon which Ms Morvillo relied for a claim to be paid interest on the excess of her proportionate contribution to the capital of the Antalija Unit Trust, and rejecting a claim that Antalija Developments had breached its duties as trustee of the Antalija Unit Trust by using an asset of the trust (the Moncrieff land) as security for a loan to Antalija Developments in its capacity as trustee of another trust associated with Mr Katavic, the Antalija Property Development Trust No 4: Reliance Financial Services Pty Ltd v Antalija Developments (No 4) Pty Ltd [2022] NSWSC 519. There were also allegations that Antalija Developments had breached its duties as trustee of the Antalija Unit Trust in two other respects. His Honour deferred consideration of these and other claims for relief relating to removal of Antalija Developments as trustee of the Antalija Unit Trust.

4. [4]

   By notice of motion filed 5 October 2022, the respondents sought orders, relevantly, that:

5. [5]

   After a hearing on 7 November 2022, Macfarlan JA made orders on 10 November 2022, which included relevantly orders 2 and 3 set out below:

6. [6]

   His Honour gave the following reasons at [17]-[18] for making those orders:

7. [7]

   On 16 November 2022, the respondents’ solicitors made a request by email that the Registrar release of funds in the amount of $199,319.65 to their trust account. That request was in the following terms:

8. [8]

   It seems that the Registrar was unwilling to act on that request in the absence of a court order specifying that sum of money be paid out of monies held in court. After further email exchanges with the Registrar, the respondents’ solicitors submitted proposed short minutes of order to the Associate to Macfarlan JA on 24 January 2023 to facilitate the payment out of court. The appellants’ solicitor requested an opportunity to be heard. Directions were given by Macfarlan JA allowing them two business days to indicate their position by email, with Antalija Developments given a further two business days to respond.

9. [9]

   The appellants’ response was to file the notice of motion seeking the interlocutory relief indicated above. Ultimately, the appellants’ motion was stood over to the concurrent hearing.

10. [10]

    The appellants candidly acknowledge that they do not challenge the orders made by Macfarlan JA. It is well-established that an application under s 46(4) of the Supreme Court Act 1970 (NSW), to discharge or vary orders made by a single judge of appeal is not an appeal. Further, an applicant for review must show that there has been a material error of law or fact, or a disregard of material considerations in the exercise of the power or that the decision was plainly unreasonable and therefore wrong: Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; [2004] NSWCA 136 at [4], [6]; McGinn v Cranbrook School [2016] NSWCA 226 at [4].

11. [11]

    The appellants say that as the orders of Macfarlan JA are interlocutory, they may seek the relief in their 2 February 2023 motion on the basis that there has been a material change in circumstances, since those orders were made.

12. [12]

    In writing the appellants essentially relied upon the following matters:

    1. (1)

       the use of trust property by Antalija Developments to fund litigation is “arguably” a breach of trust and it is “arguable” that the sum of $199,319.65 is sought to enable a breach of trust;

    2. (2)

       the “impasse” in Antalija Developments obtaining payment out of Court of the amount requested, “coupled with the proximity of the hearing”, and the threat to use the fund for legal costs of Mr and Mrs Katavic;

    3. (3)

       the issue of the trustee’s indemnity for legal costs has been now raised in the relief sought in the appellant’s proposed amended notice of appeal (the application for leave to amend the notice of appeal is currently before the Court, but not yet been determined), and the indemnity issue should first be determined on the appeal before any funds are released to Antalija Developments.

13. [13]

    None of these matters constitutes a material change in circumstances. Each matter was substantively relied upon by the appellants before Macfarlan JA when opposing the respondents’ application to be released from the undertaking and for an order for payment of moneys out of Court. In their written submissions dated 2 November 2022, the appellants’ submitted that “trust money cannot be used to pay expenses personal to the other respondents” (par 30), “the Court cannot know or determine to what extent any money paid out of Court will be applied only to meet the proper costs of the trust” (par 32), and “the right to indemnity and the extent of the right will not be known until the appeal is determined” (par 33). As indicated, the appellants do not say that in making orders 2 and 3 on 10 May 2022, his Honour erred in principle or that his decision was plainly wrong.

14. [14]

    In oral argument, the appellants said that as this Court is now hearing the appeal, it is better apprised of the appellants’ case than was Macfarlan JA, and that this is also a material change in circumstances. This submission ignored that his Honour proceeded on the basis (at [9]) that the appeal was reasonably arguable, including the grounds relating to the character and consequences of the payment of $2.075 million to Antalija Developments and the alleged breach of trust. That the appellants have now advanced oral argument on the appeal in support of those grounds is not a material change in circumstances. Nor should the Court be drawn into a consideration of the likely merits of the appeal.

15. [15]

    For these reasons, the appellants’ application for interlocutory relief in pars 2, 3 and 4 of the notice of motion should be dismissed with costs.

16. [16]

    Addressing the respondents’ request that this Court make a supplementary order specifying the amount of money to be paid out of Court in conformity with order 3 made by Macfarlan JA, the respondents accept that the sum sought by Antalija Developments represented the trustee’s estimated legal costs of the defending the appeal, in circumstances where the trustee and Mr and Ms Katavic were jointly and severally liable for those legal costs.

17. [17]

    Given that the dispute on appeal concerns Mr Katavic’s and Ms Morvillo’s rights and interests qua unit holders in Antalija Unit Trust as much as Ms Morvillo’s claim against Antalija Developments for breach of trust, (the relief sought against Ms Katavic was not pressed), we consider the appropriate supplementary order is that an amount of $100,000 be paid out of Court to Antalija Developments.

18. [18]

    For completeness we reiterate, as Macfarlan JA said at [18] of his reasons, that the order for payment out of court of monies held for the trustee does not involve any expression of opinion by the Court as to whether any particular expenditure, or the use of the trust funds for payment of the trustee’s legal costs of the appeal proceedings, is authorised or justified.

Orders

1. [19]

   The Court makes the following orders:

   1. (1)

      That paragraphs 2, 3 and 4 of the notice of motion filed 2 February 2023 be dismissed with costs.

   2. (2)

      That further to order 3 made by Macfarlan JA on 10 November 2022, of the funds held in Court for the second respondent, Antalija Developments No 4 Pty Ltd, as trustee for the Antalija Unit Trust, the amount of $100,000 be paid out of Court to the second respondent.