Cannuli v Cannuli

These proceedings were commenced by Summons filed on 18 May 2018. The plaintiff is the executor of the estate of the late Caterina Cannuli. The relief sought included a declaration that the transfer of a property owned by Caterina Cannuli was unconscionable such that the relevant transaction should be set aside; a declaration that the sum of $150,000 payable to the first and third defendants pursuant to an agreement made on 9 May 2018 and noted by orders made on that day in this Court in earlier proceedings is subject to a charge in favour of the plaintiff; and damages and equitable compensation. The defendants are John Cannuli, Kirsten Tucker and Cannuli Investments Pty Limited.

On 18 May 2018 the plaintiff was granted leave to file the Summons and a Notice of Motion, and obtained orders ex parte for short service. The plaintiff also obtained interlocutory relief in respect of the sum of $150,000. That sum has since been paid into Court.

On 22 May 2018 the defendants filed a Notice of Motion seeking various orders including orders that the Summons be summarily dismissed and that, in the alternative, the proceedings be permanently stayed. An order was also sought that the money paid into Court be paid out to the first and third defendants.

In brief, the defendants contend that by reason of the earlier proceedings in this Court and the manner in which those proceedings were brought to a conclusion, it is not open to the plaintiff to bring and prosecute these proceedings to seek the relief claimed. It is submitted that the principles of res judicata, issue estoppel and Anshun estoppel operate so as to bar the plaintiff from seeking to agitate its claims in the present proceedings, and that those claims are accordingly untenable and bound to fail.

In response, the plaintiff submitted that the defendants have failed to identify how and why those principles operate in this case and that, in any event, s 91 of the Civil Procedure Act 2005 (NSW) means that the dismissal of the plaintiff's application in the earlier proceedings does not prevent, or at least arguably does not prevent, the plaintiff from advancing its claims in these proceedings.

Since the filing of the defendants' Notice of Motion the plaintiff has filed a Statement of Claim. The relief claimed in the Statement of Claim is for judgment for about $111,000 against the first and third defendants, an order that the $150,000 paid into Court be paid to the plaintiff, and equitable compensation.

It is evident from the pleading that the claims concern a property at Glenfield, formerly owned by the late Caterina Cannuli, who died on 11 January 2018. The plaintiff is the legal personal representative of her estate. It is alleged that a transaction entered into in about late 2010 or early 2011, involving the sale of the property by the plaintiff to Cannuli Holdings Pty Limited for $750,000, was an unconscionable bargain procured by the defendants. It is further alleged that Cannuli Holdings Pty Limited failed to pay the full purchase price under the contract, such that a vendor's lien arose in the plaintiff's favour. The plaintiff alleges that in the circumstances Cannuli Holdings Pty Limited held the property on trust for the plaintiff. Cannuli Holdings Pty Limited (which was also the trustee of the Cannuli Family Trust) was later wound up and, in 2015, title to the property was transferred to the third defendant (Cannuli Investments Pty Limited), which had been appointed as the new trustee of the family trust.

The property was sold in 2017 by Michael Smith, a Court-appointed receiver of the property, for $2.4 million. Mr Smith is also the liquidator of Cannuli Holdings Pty Limited. Out of the net proceeds of sale a sum of about $1.25 million was held in a controlled monies account, pending determination of claims to the money. Various claims were the subject of interlocutory applications filed in the proceedings concerning the liquidation of Cannuli Holdings Pty Limited. Those proceedings, being proceedings number 214659 of 2015, are henceforth referred to as "the earlier proceedings".

On 24 July 2017 Accolade Advisory Pty Limited (“Accolade”) and Reliance Financial Services Pty Limited (“Reliance”) filed an interlocutory process in the earlier proceedings against Mr Smith and others (including the present plaintiff) claiming, inter alia, that the net proceeds of sale were subject to charges in their favour to secure amounts allegedly owing to them.

On 27 November 2017 the present first and third defendants filed an interlocutory process in the earlier proceedings against Accolade and Reliance seeking, inter alia, declarations that the charges asserted by those companies were void. (A Statement of Claim was later filed on 11 December 2017.)

On 8 December 2017 Caterina Cannuli filed an interlocutory process in the earlier proceedings against Mr Smith and unnamed others seeking a declaration that the net proceeds of sale were charged to the extent of unpaid purchase money owed to her under the contract for sale of the Glenfield property, and an order that the amount owing to her be paid out of the net proceeds of sale. As mentioned earlier, Caterina Cannuli died on 11 January 2018. The various applications came on for hearing before Leeming JA on 8 May 2018. An order was made on 9 May 2018 substituting the present plaintiff for Caterina Cannuli.

On 9 May 2018 Leeming JA made a number of other orders by consent of the parties. In brief summary, the orders embodied various agreements to the following effect:

I note, however, that the present plaintiff did not give any release to the present first and third defendants; the present second defendant was not involved in the earlier proceedings.

Leeming JA delivered an ex tempore judgment on 9 May 2018 (see In the matter of Cannuli Holdings Pty Ltd (in liq) [2018] NSWSC 638) in relation to the seeking by the liquidator of a direction under s 479(3) of the Corporations Act 2001 (Cth) that he was justified in compromising the company's claim for indemnification out of the assets of the Cannuli Family Trust in accordance with the consent orders made by the Court.

Leeming JA stated (at [2]-[4]):

His Honour continued (at [10]):

The defendants, in support of their motion for dismissal, placed emphasis upon the subject matter of the earlier proceedings, including the interlocutory process filed by Caterina Cannuli, and the consent orders that involved the acceptance by the plaintiff of $50,000 out of the proceeds of sale and the dismissal of that interlocutory process. It is contended that the present proceedings are an impermissible attempt to re-agitate matters that were finally determined in the earlier proceedings.

There is considerable force in that submission, at least insofar as the present proceedings seek relief in respect of the proceeds of the sale of the Glenfield property. In particular, it seems to me that there is a strong argument that an issue estoppel has arisen that prevents the plaintiff from now asserting rights in respect of those proceeds, including the $150,000 that has been paid into Court.

In this regard the defendants referred to Ekes v Commonwealth Bank of Australia [2014] NSWCA 336, especially at [110]-[115] in the judgment of the Chief Justice. Having regard to the principles there set out, it is strongly arguable that, viewed objectively, the making of the consent orders that included payment of $50,000 out of the proceeds of sale to the estate of Caterina Cannuli in full and final settlement of her costs, coupled with her interlocutory process being otherwise dismissed, was intended to "put to rest" any issue concerning the claims of the estate of Caterina Cannuli over the proceeds of the sale of the property (see Ekes v Commonwealth Bank of Australia (supra) at [117]).

However, as pointed out by the plaintiff, Ekes v Commonwealth Bank of Australia (supra) did not consider the operation of s 91 of the Civil Procedure Act in this context. That was because the earlier proceedings under consideration in that case were in the Federal Court of Australia, and the dismissal was effected pursuant to former Federal Court rules which are not the same as s 91 of the Civil Procedure Act. Those rules envisaged that an application could be made for a dismissal to be made without prejudice to any right of the claimant to claim the same relief in fresh proceedings. The claimant in that case had not sought such an order (see Ekes v Commonwealth Bank of Australia (supra) at [39]).

Section 91 of the Civil Procedure Act provides:

The plaintiff referred to the decision of Hamilton J in Ferella v Otvosi (2005) 63 NSWLR 523; [2005] NSWSC 678. That case concerned Supreme Court Rules Part 40 r 8. That rule may be regarded as a predecessor of s 91 of the Civil Procedure Act. Part 40 r 8(1) provided, relevantly:

Hamilton J referred (at [11]) to the judgment of Needham J in Newmont Pty Limited v Laverton Nickel NL (No 2) [1981] 1 NSWLR 221, which Hamilton J considered indicated that an order for dismissal after a hearing on the merits prevented the matter being re-agitated despite Part 40 r 8. Hamilton J continued at [12]:

Hamilton J then stated (at [13]) that, unlike the position under the Federal Court rules, under the Supreme Court rules:

I note that in Mimi's Fine Foods Pty Limited v Cimino [2011] NSWSC 158, White J, as his Honour then was, cited s 91 of the Civil Procedure Act and Ferella v Otvosi in stating (at [17]) that a concession was rightly made that because there had been no hearing on the merits, a consent dismissal of proceedings did not prevent the plaintiff from bringing fresh proceedings or claiming the same relief in new proceedings.

Ferella v Otvosi was also referred to by Barrett J (as his Honour then was) in Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2008] NSWSC 185. In that case his Honour expressed the view (at [57]) that Part 40 r 8 in speaking of an order for dismissal "under these rules" contemplated cases "where proceedings are dismissed because they are frivolous or vexatious, or where the plaintiff does not appear or diligently prosecute the proceedings, as well as other cases explicitly dealt with by rules allowing dismissal".

His Honour considered that the dismissal in question before him was not of that kind. His Honour continued (at [61]):

His Honour then referred (at [63]-[64]) to certain authorities for the proposition that orders made by consent, including orders for dismissal, can create an estoppel. That proposition is, of course, supported by the reasoning in Ekes v Commonwealth Bank of Australia (supra). It was not relevant to consider s 91 of the Civil Procedure Act in Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited (supra).

Section 91 was considered in NSW Trustee & Guardian v Philpott [2017] NSWSC 472. In that case the relevant dismissal was a consent order, made in this Court in June 2016 in earlier proceedings, that the "matter" be dismissed. Davies J referred to the reasoning contained in Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited (supra) at [63]-[65], and Ekes v Commonwealth Bank of Australia (supra) at [110]-[115]. His Honour then referred to s 91 of the Civil Procedure Act, noting (at [31]) that s 91(2) was not engaged because there was no determination on the merits. At [32], his Honour noted that the position was similar to Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited (supra), and (at [37]-[38]) concluded:

It is implicit in his Honour's conclusion that he considered s 91 not to preclude the estoppel, even where the dismissal was not one following a determination on the merits.

I was also referred to the recent decision of the Federal Court of Australia in Deep Investments Pty Limited v Casey [2018] FCA 603. That case involved a situation where, in earlier proceedings in this Court, orders were made by consent, including judgment for the defendants on the Further Amended Commercial List Statement, and dismissal of the Amended Summons and Further Amended Commercial List Statement.

After considering an argument concerning the effect of the consent judgment in favour of the defendants, Gleeson J turned (at [246]) to deal with “a separate question concerning the effect of the dismissal order apart from the judgment order”. Her Honour referred to Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited (supra at [61]) and to the earlier unreported decision of Santow J (as his Honour then was) in Minero Pty Ltd v Redero Pty Limited (Supreme Court of New South Wales, unreported, 29 July 1998). At [249], Gleeson J stated that she was satisfied on those authorities "that s 91 does not affect the operation of the dismissal order in this case".

The reasoning in both NSW Trustee & Guardian v Philpott (supra) and Deep Investments Pty Ltd v Casey (supra), seems to proceed on the basis that s 91 should be construed as having an operation essentially the same as that formerly possessed by Part 40 r 8 of the Supreme Court Rules. There is much to be said for that view although, unlike Part 40 r 8, s 91 is not in terms confined to orders for dismissal made under the rules of court. Neither of those decisions dealt with any argument to the effect that this was a material difference.

The language of s 91 appears to mean that the section applies to the dismissal of any proceedings, not merely to certain types of dismissals. Further, White J seems to have considered in Mimi's Fine Foods Pty Limited v Cimino (supra) that where there was no determination on the merits, the section operated so that a consent dismissal made pursuant to an agreement did not prevent the plaintiff from bringing fresh proceedings and claiming the same relief as was claimed in the dismissed proceedings.

There does not appear to be any decision which deals comprehensively with the question of whether, and if so the extent to which, s 91 on its true construction applies to consent dismissals made pursuant to settlements of proceedings.

I accept, as submitted by the defendants, that the question of construction needs to be answered having regard to the overriding purpose referred to in s 56 of the Civil Procedure Act. That factor may favour a construction that the section does not apply to consent dismissals made pursuant to settlements. However, in the absence of a comprehensive decision on the question, and given that there appears to be some divergence of views on the matter, I am not satisfied that the plaintiff's claims with respect to the proceeds of sale of the Glenfield property (including in relation to the $150,000 that has been paid into Court) ought be considered plainly unarguable or untenable.

In addition, it is clear that in determining whether consent orders give rise to an estoppel, regard can be had to the background leading up to the making of the order (see Ekes v Commonwealth Bank of Australia (supra) at [114]-[115]). In the present case, it may be relevant to consider evidence as to how the consent orders came about. Leeming JA referred in his ex tempore judgment to a "series of settlements". The plaintiff proposes to adduce evidence to the effect that he (or his legal representatives) did not engage in any negotiations with the first and third defendants (or their legal representatives) prior to the making of the consent orders. In this context it should be recalled that the plaintiff did not provide any releases to the first or third defendants. It may be, as submitted by the defendants, that an estoppel arises even if the plaintiff is found not to have entered into any settlement agreement with the first and third defendants. However, it seems to me that an issue is raised and the determination of the issue may itself turn upon matters of fact.

For these reasons, I do not consider that the plaintiff's claims in relation to the proceeds of sale (including the $150,000 in Court) are either plainly untenable or raise no triable issue. It is of course necessary, in seeking to summarily dismiss a plaintiff's claim, that the claim is so obviously untenable that it could not possibly succeed (see Ekes v Commonwealth Bank of Australia (supra) at [88] and the authorities there cited). The defendants have not discharged that demanding test in the present case.

The defendants seemed to accept that the plaintiff would not be precluded from bringing the claims for equitable compensation. Even if that concession was not made, I would not conclude that the dismissal of the interlocutory process in the earlier proceedings was likely to preclude the bringing of those claims in these proceedings, let alone render them untenable. The subject matter of the various applications in the earlier proceedings concerned claims to the proceeds of sale. The claims were made in the context of the liquidation proceedings and did not extend to any personal claims for compensation. In those circumstances I do not think any issue estoppel arising from the dismissal would extend to the claims for equitable compensation, and it is unlikely that the failure to advance such claims in the liquidation proceedings would give rise to any estoppel based upon the principles discussed in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602.

Accordingly, the defendants' application for summary dismissal or permanent stay of the proceedings must be refused.

The first and third defendants' application for payment out of the $150,000 that has been paid into Court will also be refused. It seems to me that in circumstances where there are arguable grounds to conclude that the plaintiff is entitled to those funds, akin to a serious question to be tried, and no matters going to the balance of convenience indicating that the first and third defendants would suffer prejudice if the money is not paid to them now, the funds should at least at present remain in Court pending the determination of the plaintiff's claims.

The defendant's Notice of Motion filed on 22 May 2018 will be dismissed with costs.

I should note that the defendants also made some complaints about the plaintiff's Statement of Claim. Whilst those complaints may have substance, and it seems to me that aspects of the pleading could be made much clearer, the adequacy of the pleading was not encompassed within the motion presently before the Court. The Court will do no more in that regard than direct that any Amended Statement of Claim be filed and served within twenty-one days.

Finally, the subject matter of the proceedings seems to me to be suitable for the General List rather than the Real Property List, so I will also make an order removing the proceedings from the Real Property List.