Cassaniti v Katavic

Background

1. His Honour addressed in detail the parties' discussions in November 2016 concerning the proposed development (at J[46]-[100]), the establishment of the Antalija Unit Trust (at J[101]-[118]), the purchase of the Moncrieff land in February 2017 and the communications between Mr Katavic and Mr Cassaniti in relation to funding that purchase (at J[135]-[151]), the circumstances of the execution of the unitholders' agreement on 10 May 2017 and completion of the purchase of the Moncrieff land on 12 May 2017 (at J[161]-[163], [182]-[208]) and the communications between Mr Katavic and St George Bank leading to the grant of the mortgage over the Moncrieff land in June 2017 (at J[225]-[242]). His Honour made an adverse credit finding in relation to Mr Cassaniti (at J[345]-[354]) and was otherwise satisfied that each other witness, including Mr Katavic, Ms Katavic and Ms Price gave evidence in a satisfactory manner (J[342]).
2. The following summary of the primary facts is drawn from the primary judge's findings.
3. Mr Katavic was a builder who conducted business through Antalija Constructions Pty Ltd (Antalija Constructions). Between mid-2014 and May 2016, he had undertaken three residential development projects in the Canberra region using separate companies for each development, with funding for those developments arranged through a bank. By November 2016, Mr Katavic through Antalija Constructions had a substantial amount of work ongoing, with two development projects under construction and one ready for commencement: at J[67]. However, he had no available money to carry out any further development projects at that time; the capital available for engaging in any new development was limited until the sale of the units in the developments he had carried out had been sold.
4. As at November 2016, Ms Price and her husband Mr Phil Arcidiacono were under enormous financial pressure due to action taken against them by the Australian Taxation Office. They sought advice from Mr Cassaniti who was a consultant to an accounting firm, Accolade Services Pty Ltd (Accolade). Mr Cassaniti had developed a friendship with Ms Price and Mr Arcidiacono, which grew to include Ms Price's daughter, Jocelyn Katavic, and her husband, Dennis Katavic. The primary judge characterised the relationship as being one of mutual trust: at J[82]. Mr Arcidiacono passed away in September 2018.

November 2016 discussion

1. In November 2016, Mr Katavic, Mr Cassaniti and Mr Arcidiacono had a discussion at a bar before a dinner at the QT Hotel in Canberra in relation to a possible development in which Mr Katavic, Ms Price and Mr Cassaniti would participate with a view to generating profit for each of them, and importantly, assisting Ms Price and her husband in dealing with their then financial difficulties. Mr Katavic's motivation was more than profit; he wanted to financially assist Ms Price. There was a dispute at trial as to the terms of this conversation. The primary judge accepted Mr Katavic's version of the conversation: at J[99], [395]. There is no challenge to that finding.
2. The primary judge observed that the November 2016 conversation was brief and did not deal with the terms of the proposed venture in detail; it was an informal conversation in a family context where the discussion was convivial, and the participants consumed a number of alcoholic drinks: at J[355]. His Honour found that the discussion probably did not give rise to a binding agreement: at J[357]. He also found that the agreement matured into a binding one at a later stage by reason of steps taken by the parties to commit funds to the venture and by the signature of various documents: at J[357]. He found that the "informal" agreement reached between the parties to that discussion in November 2016 had the following material features (at J[358]): � The parties acted upon the basis of reposing a high level of trust in the other parties. � The parties other than Mr Katavic relied upon Mr Katavic to plan and execute the development competently and diligently in the interests of all of the parties. � The parties other than Mr Cassaniti relied upon Mr Cassaniti to deal with all legal and accountancy matters in the mutual interests of the parties. � Mr Katavic and Mr Cassaniti were aware of their responsibilities to the venture and of what was expected of them by the other parties. � Mr Katavic and Mr Arcidiacono understood that Mr Cassaniti was an experienced business consultant who had access to finance for the purposes of the proposed venture, and Mr Cassaniti conveyed to the other parties the impression that he was a man of substance. � A substantial purpose of the development was to alleviate the financial difficulties of Ms Price and Mr Arcidiacono (which ultimately manifested in Ms Price being permitted to contribute her superannuation balance of $740,000 on the basis that she would be carried by the other parties). � The parties would share in the proposed venture on the basis of an entitlement of 50% to Mr Katavic, 25% to Ms Price and 25% to Mr Cassaniti. This share would naturally mature into an equivalent proportionate right to receive any net profits from the venture. � The agreement was that, between them, Ms Price and Mr Cassaniti (by his nominee Ms Morvillo) would contribute 50% of the initial capital required to acquire the development site (leaving the construction finance to be dealt with later as organised by Mr Katavic). � Mr Katavic would arrange for the other half of the initial capital to be borrowed from a bank. � Mr Katavic would not be spared the need to contribute a substantial amount of capital to the proposed development, but by reason of his current shortage of funds, he would make his contribution during the construction phase of the development.

Incorporation of Antalija No 4 and execution of trust deed

1. Mr Cassaniti caused Antalija No 4 to be incorporated on 29 November 2016 with Mr Katavic as the sole director and shareholder. He also caused a trust deed for the Antalija Unit Trust to be prepared and signed by Antalija No 4 as trustee bearing the date 29 November 2016, although the deed was not signed until February 2017 shortly prior to a certified copy being provided by Mr Katavic to the Commonwealth Bank at which Antalija No 4 had opened a bank account: at J[101], [152]: at J[101].
2. The trust deed recited that it was made with the intent that each registered unitholder shall take and hold units in the trust fund on the terms and conditions of the deed (recital D). Clause 2(a) provided that the trust fund shall comprise the initial $100 subscribed by the settlor, Mr Duardo, together with all other monies and property forming part of the trust fund. Clause 2(b) provided: With the consent of the Trustee other monies and property may be paid or transferred to, vested in and accepted by the Trustee as additions to the Trust Fund and to be held by the Trustee as part of the Trust Fund.
3. Clause 3(a) provided that the trustee shall hold the capital and income of the trust fund upon trust for the registered unitholders in proportion to the number of units held by them. Clause 5 dealing with units, provided by cl 5(a) that the beneficial interest in the trust fund should be divided into units; cl 5(c) provided that all units shall be of equal value; cl 5(d) provided that the beneficial interest in the fund as originally constituted by the sum of $100 paid to the trustee by the settlor shall be divided into 100 Units having an initial value of $1 each which units shall be held subject to the deed by the persons identified in that provision as the registered unitholders of those units; and cl 5(e) provided that as and when any addition is made to the trust fund under cl 2(b), additional units shall be thereupon created.
4. The registered unitholders specified in cl 5(d) were:

• Mr Katavic, as trustee for the Katavic Discretionary Trust (50 units).
• Ms Price, as trustee for the Price-Arcidiacono Discretionary Trust (25 units).
• Ms Morvillo, as trustee for the Cassaniti Discretionary Trust (25 units).

Events between January and May 2017

1. In late January 2017, Mr Katavic had a conversation with Mr Cassaniti and Mr Arcidiacono in which he told them he had found two suitable sites for the proposed development and they agreed to continue. In response to Mr Katavic seeking an assurance from Mr Cassaniti that he would have his money for settlement because Mr Katavic had none, Mr Cassaniti replied that he "got it sorted and don't stress".
2. On 22 February 2017, Antalija No 4 entered into a contract to purchase land at Moncrieff for a price of $4.15 million and a deposit of $415,000. The date for completion was 12 May 2017. The deposit was paid out of the capital contribution of $740,000 made by Ms Price to the Antalija Unit Trust on 21 February 2017 from her self-managed super fund.
3. On 14 March 2017, Mr Katavic sent an email to Mr Cassaniti, copied to Ms Katavic and Ms Price, with the subject heading "Cash required - Moncrieff". After setting out details of the cost of the land purchase and other expenses, such as stamp duty, the email continued (although incorrectly referring to completion on 15 May 2017, rather than 12 May 2017): at J[143]. … What we need by the 15th of may is $2,701,235. We already put in $415,000 so we only need $2,286,235 While this is all taking shape we also need the other money to push the project along so another total of aprox $250k will be required The bank looks at this as cash into the project, so once the QS dose (sic) his report this is all taken into consideration. Construction cash in will also be around the $2,000,000 mark, but this is about 12months (sic) away I will have my cash available by the end of may, as discussed earlier you will have to put the cash up until I have mine back for a few weeks So by the 15th of May we will need around 2.3m in the account

The draft unitholders' agreement

1. His Honour addressed Mr Cassaniti's involvement in the preparation of the draft unitholders' agreement (at J[182]-[186]), and dealt with the circumstances in which the unitholders' agreement was signed by Mr Katavic and Ms Price on 10 May 2017 (at J[187]-[208]). His Honour found that the substantive terms of the unitholders' agreement were composed by someone unknown, possibly a lawyer employed by Accolade, or more likely some unknown person who was involved with Mr Cassaniti raising the funds to make the necessary payment to Antalija No 4: at J[184].
2. After noting Mr Cassaniti's evidence that he did not read the draft agreement, his Honour continued at J[185]: Consequently, not only is there no evidence that clause 9 was agreed between the parties to the Unit Holders Agreement before the document was executed, but on the evidence even Mr Cassaniti was not aware that the agreement contained that term. Mr Cassaniti was therefore not in a position to inform Mr Katavic whether the draft agreement only contained "standard" terms or was just a simple agreement.
3. Clause 9 of the draft unitholders' agreement provided: PROPERTY AND BUSINESS FUNDING The parties contemplate and agree as follows: (a) There will be a cost associated with the Company purchasing a Property (principally a purchase price and stamp duty); (b) There will be regulatory costs, taxes, fees, duties and charges associated with the Company owing (sic) a Property; (c) There will be regulatory costs, taxes, fees, duties and charges associated with the Company gaining approval for the development of the Property; (d) There will be costs, fees and expenses (including building costs) associated with the development of the Property; (e) Subject to the ability of the Company to obtain third-party finance (such as from a bank) to pay for the amounts referred to in clause 9(a) - (d) and/or otherwise associated with the Business, those amounts are to be met by the Securityholders according to their respective Proportionate Shares; (f) Unless agreed otherwise between the Securityholders, to the extent any Securityholder contributes money with the agreement of the other Securityholders in excess of what is required by that Securityholder's Proportionate Share, then: (i) That excess is to be treated as a loan to the Company by that Securityholder with: (1) A one year term, and (2) An (sic) attracting interest rate of 8.5% per annum (compounding); and (ii) Subject to the terms of any priority security over the Property, the Company (as trustee of the Unit Trust) charges in favour of the relevant Securityholder all its right, title and interest in the Property to secure repayment of amounts referred to in clause 9(f)(i); (g) For the purposes of undertaking the development (building) of the Property, the Company will engage Antalija Constructions Pty Ltd (ACN 134 351 787) (Builder) of [address inserted], being a company of which Securityholder Dennis Katavic is associated and of which he is director, and the Builder is entitled to be paid arms-length commercial rates for its work; (h) For the purpose of undertaking: (i) Book-keeping work relating to the Business, the Company will engage Jocelyn Katavic by (sic), who is entitled to be paid arms-length commercial rates for that work; and (ii) Accounting, tax and advisory work, the Company will engage a firm nominated by Securityholder Nancy Morvillo, presently nominated as Accolade Advisory Pty Ltd (ACN 604 214 100) of [address inserted] who is entitled to be paid its standard fees and charges for that work. (i) By the above provisions, it is contemplated that there will be no need for the unit structure under the Unit Trust Deed or the Proportionate Share of Securityholders to be varied. In circumstances where the Company is only to act as trustee of the Unit Trust, it is contemplated that there will be no legitimate circumstances in which the Company will or should issue, or agree to issue, any further Shares. Any such issue, or offer to issue, requires unanimous agreement of the Securityholders.

10 May 2017 - the signing of the unitholders' agreement

1. Mr Katavic gave affidavit evidence that the following conversation took place on 10 May 2017 at Ms Price's office in Fyshwick (at J[191]): Cassaniti: Hurry and sign I need to get back. Katavic: Sam, I don't even know what I am signing here. Do I need to get my team to look over anything? Cassaniti: No, it's all just standard contracts. Dennis, you can trust me. We're family. All you are signing is unit holder's agreements and trusts, I am sure you've seen these types of documents before. Katavic: Yes, I have, but my accountant sends me away with these documents to read over before I sign. Cassaniti: Well if you want the money you need to sign. Once the paperwork is signed, I'll get my office to transfer the money.
2. Mr Katavic also gave evidence that he flicked through the documents and skimmed over each page, that he did not read each document word by word, but he ran his eye over them, looking for things that stood out as unusual. He said that Mr Cassaniti appeared to be impatient and said on at least two occasions "[h]urry up, I've gotta go": at J[194]. His Honour found that there was no discussion as to what the documents contained, and that Mr Cassaniti accepted that he had not read the unitholders' agreement: at J[196].
3. Ms Price corroborated Mr Katavic's evidence describing him having "flicked through" the documents and then signed: at J[197]. She gave evidence that in response to Mr Katavic's question, "[d]o I need to take this and have it looked at?", Mr Cassaniti replied, "Dennis, it's just a standard contract. You don't need to get legal advice": J[199].
4. Ms Price raised with Mr Cassaniti that the document stated that she was a 25 per cent shareholder and said, "[y]ou know I only have $740,000", to which Mr Cassaniti replied, "I'm looking after you": at J[198]. In cross-examination, Ms Price gave evidence that Mr Cassaniti answered her question as to whether she needed to have the document looked at and did she need to take it to someone by saying, "[n]o it's just a simple contract": at J[201].
5. Although Mr Katavic agreed in cross-examination that he knew he had no choice but to sign, if he wanted to get the money from Mr Cassaniti for half the purchase price of the Moncrieff land, his Honour found that it did not follow that Mr Katavic would have signed the unitholders' agreement "come what may" and irrespective of the contractual obligations that it imposed on him, if he had understood the true effect of its terms: at J[203]-[206]. His Honour also found that Mr Katavic understood that the money he was borrowing from St George Bank would be treated as his contribution to the capital of the Antalija Unit Trust: at J[205].

Completion of the purchase of the Moncrieff land

1. In March and April 2017, Mr Katavic dealt with Mr Jason Claudianos at St George Bank in relation to borrowing one half of the purchase price of the Moncrieff land. At a meeting on 8 May 2017, Mr Claudianos told Mr Katavic that the bank was not quite ready for settlement. Mr Katavic replied, "I don't care what you've got to do, just get the money": at J[156].
2. On 11 May 2017, St George Bank transferred $2.075 million from the account of Antalija Developments No 2 Pty Ltd (Antalija No 2), a company owned and controlled by the Katavics, to Antalija No 4's bank account and Accolade transferred $2.25 million to Antalija No 4's bank account: at J[157], [161]. Mr Katavic checked Antalija No 4's bank account on 11 May 2017 and saw that the money for settlement had been deposited. His evidence was that he believed that the money included the amount that had been borrowed from St George Bank in accordance with his discussions with Mr Claudianos: at J[162]. Settlement of the purchase of the Moncrieff land occurred on 12 May 2017.

The giving of security over the Moncrieff land

1. His Honour found that Mr Katavic did not know that Mr Claudianos had arranged for the payment of the $2.075 million to Antalija No 4 to be made out of an existing facility of Antalija No 2. The consequence was that when Antalija No 2 submitted a progress claim to St George Bank on around 16 May 2017 to draw down on its construction loan facility for another development at Lawson in the ACT, there was an insufficient borrowing limit under that loan facility to pay the progress claim: at J[226].
2. On 30 May 2017, after he had checked Antalija No 2's bank account and noted that the money for the drawdown of the progress claim was not available, Mr Katavic sent an email to Mr Claudianos stating that he was unable to pay the subcontractors for the project on time: at J[225]. On 1 June 2017, St George Bank sent a facility offer to Antalija No 4 as trustee of the Antalija Developments Property Trust No 4 offering a business loan of $2.075 million for the stated purpose of assisting with the purchase of the Moncrieff land for a term of 12 months: at J[227]. A condition of the draw down of the facility was that the proceeds be directed to the construction loan facility in the name of Antalija No 2. A further condition was that security for the facility include a first registered real property mortgage by Antalija No 4 over the Moncrieff land and a guarantee and indemnity from Mr and Ms Katavic. On 7 June 2017, Mr Katavic, on behalf of Antalija No 4 in its own right and as trustee for the Antalija Developments Property Trust No 4 signed the facility offer. He also signed on behalf of Antalija Constructions and for himself, as did Ms Katavic: at J[233].
3. On 17 June 2017, Antalija No 4 gave a mortgage over the Moncrieff land securing the loan of $2.075 million to Antalija No 4 as trustee of the Antalija Developments Property Trust No 4. On 22 June 2017, St George advanced $2.075 million to an account styled "AD Property Trust No 4" which amount was immediately transferred to the account of Antalija No 2: at J[245].

Events in 2018

1. On 24 April 2018, Antalija No 4 entered into a building contract with Antalija Constructions for the construction of the development on the Moncrieff land for a fixed price of $9,134,304: at J[254]. On 14 August 2018, Antalija No 4 in its own right and as trustee for the Antalija Unit Trust accepted a facility offer from St George Bank with a limit of $9.89 million to refinance the existing site finance of $2.075 million and provide construction funding for the proposed development on the Moncrieff land. The facility offer was also signed by Antalija Constructions as guarantor and Mr Katavic, Ms Price and Ms Morvillo as trustee for their respective family discretionary trusts as proportional guarantors: at J[310]. A condition of the facility offer was the provision of a first registered mortgage by Antalija No 4 over the Moncrieff land.
2. It is not necessary to summarise the remainder of his Honour's judgment which dealt with the development of the Moncrieff land, the purported amendment to the development funding agreement, and the matters giving rise to the breakdown in the relationship between Mr and Mrs Katavic and Mr Cassaniti.

Misleading conduct claim

1. The amended cross-claim by Antalija No 4 and Mr Katavic alleged that Mr Cassaniti engaged in misleading or deceptive conduct, as the agent of Ms Morvillo, by representing to Mr Katavic on 10 May 2017 that the draft unitholders' agreement was a "standard" contract and by failing to specifically bring to Mr Katavic's attention that the draft contained cl 9(e) and (f). Antalija No 4 and Mr Katavic alleged that these clauses imposed new obligations on the unitholders which had not been the subject of prior discussion, let alone agreement in the sense of a consensus or understanding.
2. By reference to what his Honour considered to be the extent of the actual agreement between the parties to the unitholders' agreement, his Honour found that cl 9 should not be regarded as "standard" or "simple", at least for the following reasons (at J[378]): � The clause did not manifest a term that had actually been agreed between the parties to the Unit Holders Agreement. � Mr Katavic's obligation was to procure a bank loan for half of the price of the development site, which was to be treated in effect as his contribution. In fact, clause 9(e) had the effect that any amount that Mr Katavic was able to borrow would be for the benefit of all unit holders, and their obligations to contribute to all of the costs listed in clause 9(a) to (d) would be calculated on the basis of the amounts required to be funded after allowing for the amount that was borrowed. This had the effect of requiring Mr Katavic to fund from his own resources 50% of the costs that were not funded by the borrowing: …. � Clause 9(f) made Antalija No 4, the trustee, liable to pay the 8.5% per annum interest compounding annually in respect of any excess contribution by a unit holder. That made the interest obligation an expense of the Unit Trust, not an expense of the unit holder responsible for the shortfall. Consequently, unit holders who had paid their full contribution might share responsibility for the shortfall of another unit holder.
3. His Honour concluded that Mr Cassaniti engaged in misleading or deceptive conduct, giving reasons which included: [387] The starting point for determining this issue is the finding made above that the parties to the November 2016 agreement at the QT Hotel entered into the agreement in an informal way in a quasi-family context in which they relied upon trust in each other rather than formal legal advice and documentation. [388] A party to such an agreement is likely to be significantly more susceptible to misleading or deceptive conduct by another party because their guard will be down, and they are unlikely to adopt a self-defensive approach. [389] Mr Cassaniti must have understood that Mr Katavic was a builder by occupation who was not experienced in the complexities of commercial transactions and ordinarily relied upon accounting and legal advice. Mr Katavic informed Mr Cassaniti of his usual reliance upon professional advice at the time the Unit Holders Agreement was signed. 1. … [391] As found above, there was no actual agreement that Antalija No 4 would pay interest at 8.5% per annum compounding annually to unit holders who contributed more than their Proportionate Share. [392] As also found above, the effect of clause 9 of the Unit Holders Agreement was neither "standard" nor "simple". 1. … [394] This is not a case of misleading or deceptive conduct by mere silence, although it is true that Mr Cassaniti did not draw Mr Katavic's attention to the inclusion or effect of clause 9 in the Unit Holders Agreement. [395] Rather, Mr Katavic specifically asked Mr Cassaniti whether there was any reason that Mr Katavic should only sign the draft Unit Holders Agreement after he received accounting and legal advice from his usual professional advisors. Mr Katavic should have been told to obtain independent advice, but instead he was led to believe that the draft Unit Holders Agreement embodied the terms of the true agreement between the parties, by reason of being told that it only contained "standard" or perhaps "simple" terms. [396] Mr Cassaniti's evidence was that the draft Unit Holders Agreement was prepared by a solicitor employed by Accolade. While that solicitor was not retained by Mr Katavic, Mr Cassaniti had accepted the task of arranging for the legal work relevant to the Moncrieff land venture to be done through Accolade. The likelihood that Mr Katavic would be misled or deceived by Mr Cassaniti's conduct was therefore enhanced by the fact that Mr Katavic was relying upon the lawyer chosen by Mr Cassaniti to draft the Unit Holders Agreement in a way that included the terms agreed between the parties and did not insert any other significant terms that were not brought to Mr Katavic's attention. [397] It was in my view misleading or deceptive for Mr Cassaniti to respond to Mr Katavic's question as to whether he should arrange for his solicitor and accountant to look at the draft Unit Holders Agreement by saying that it only contained 'standard' or 'simple' terms. It was misleading or deceptive for Mr Cassaniti to fail to specifically bring to Mr Katavic's attention that the draft contained clause 9 that imposed new obligations on the unit holders. [398] The misleading or deceptive nature of the conduct was enhanced by the fact that Mr Cassaniti himself had not read the draft Unit Holders Agreement and did not know all of the terms contained in it. Mr Cassaniti's own evidence of the conversation that he said took place in early March 2017 in which Mr Cassaniti claimed that he informed Mr Katavic of the loan to be made by Reliance supports the conclusion that Mr Cassaniti also was unaware of the effect of clause 9. [399] Had it been necessary to do so, I would have found that Mr Cassaniti's mere failure to inform Mr Katavic that the draft Unit Holders Agreement included clause 9, and of the broad effect of that term, was misleading or deceptive. I am satisfied on the basis of the evidence of how the Unit Holders Agreement was executed that Mr Cassaniti was aware that Mr Katavic was relying upon him to advise whether there was any unusual term that warranted Mr Katavic obtaining independent accounting and legal advice.

Breach of trust claim

1. Given the scope of the grounds of appeal, and the application to amend the relief sought on appeal with respect to the breach of trust claim, it is of assistance to refer to his Honour's summary of the pleadings and the defence to this claim.
2. His Honour summarised Ms Morvillo's initial pleading of the breach of trust claim that had continued relevance (at J[26]): … There were allegations that Ms Price had provided $740,000 in capital, rather than the $1,090,308.75 that was required, and Mr Katavic had provided $2,180,617.50 in capital. Ms Morvillo alleged that Antalija No 4 had breached its obligations as trustee of the Unit Trust in three ways: namely (1) by borrowing $2,075,000 on 1 June 2017 from the St George Bank on the security of the Moncrieff land and paying that amount to Antalija Developments No 2 Pty Ltd (Antalija No 2); (2) by entering into a construction contract with Antalija Constructions on 24 April 2018 and paying $9,134,304 to Antalija Constructions; and (3) by returning Ms Price's capital of $740,000 to Ms Price. The statement of claim also contained allegations of knowing participation in Antalija No 4's breaches of trust against Mr and Ms Katavic, Antalija Constructions and Antalija No 2 (even though the last-mentioned company was not a party to the proceedings). As already noted, Ms Morvillo abandoned ground (2) of her breach of trust claim against Antalija No 4.
3. His Honour next summarised the relevant allegations in the second further amended statement of claim (at J[32]): The basis of this new claim was pleaded in pars 99A to 99D. As I have noted above, the plaintiffs pleaded in the initial statement of claim that Mr Katavic had contributed capital of $2,180,617.50 to the Unit Trust. The defendants responded by pleading that the payment attributed to Mr Katavic by the plaintiffs was not a capital payment by Mr Katavic but was an amount borrowed from the St George Bank. That was consistent with the defendants' case that 50% of the capital needed to buy the Moncrieff land would be paid to Antalija No 4 by Ms Morvillo and Ms Price and the remaining 50% would be borrowed by Antalija No 4. This new claim by Ms Morvillo appears to be a response to this claim by the defendants. Ms Morvillo alleged that clause 9 of the Unit Holders Agreement obliged each unit holder to contribute a proportionate share of the costs and expenses towards the purchase of the Moncrieff land and its development by way of payment of capital to Antalija No 4. That proportionate share was 50% by Mr Katavic, 25% by Ms Morvillo and 25% by Ms Price. That was because the number of units held by those unit holders were respectively 50, 25 and 25. The plaintiffs alleged Mr Katavic breached clause 9 by not contributing his proportionate share of the capital. The amount of the default was alleged to be $1,143,117.50, being 50% of the purchase price and stamp duty for the Moncrieff land of $4,361,235, less the amount of the $2,075,000 loan from the St George Bank. Ms Morvillo alleged that, pursuant to clause 9, Antalija No 4 is obliged to pay compound interest at 8.5% per annum to Ms Morvillo.

Leave to appeal

1. The parties diverged on whether the declaration made on 15 June 2022 is interlocutory, and whether an appeal can be brought with leave against the primary judge's rejection of the breach of trust claim in the absence of a formal order dismissing that claim.

Whether the declaration is interlocutory or final order?

1. Distinguishing between final and interlocutory judgments and orders is often difficult. The test to be applied is whether the judgment or order "finally determines the rights of the parties": Triden Properties Ltd v Capita Financial Group Ltd [1993] NSWCA 272 at 3 (Clarke JA, Meagher and Sheller JJA agreeing); Bienstein v Bienstein [2003] HCA 7; (2003) 195 ALR 225 at [25]. In Singh v Khan [2021] NSWCA 281; (2021) 363 FLR 88 at [27], Brereton JA stated the test as "whether the order is a conclusive declaration of the respective rights and liabilities of the parties". In applying the test the Court must have regard to the legal rather than the practical effect of the judgment: Computer Edge Pty Ltd v Apple Computer Inc [1984] HCA 47; (1984) 54 ALR 767 at 767-768.
2. The appellants say that the declaration finally determined the rights of the parties on the cross-claim, being the terms which govern their bargain, and therefore is unequivocally final, referring to A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1985) 1 NSWLR 701. The respondents say that the declaration is interlocutory because it cannot be viewed in isolation from the case management directions and other orders made by his Honour with respect to the further conduct of the proceedings below on 15 June 2022.
3. Viewed by itself and apart from the rest of the judgment, the declaration in par [5] was arguably a final order as it produced a state of finality as to the terms of the unitholders' agreement. However, the result of the judgment as a whole was that some of the questions in issue in the case were determined and others were not. Where a judgment finally determines some issues, but leaves others unresolved, the judgment is properly classified as interlocutory: Computer Edge v Apple at 768; Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd [2012] NSWCA 61 at [26] (Young JA).
4. Applying that test, I incline to the view that the declaration is interlocutory. The whole judgment left undetermined the question whether any, and what, amounts were payable by the trustee to the unitholders or by any unitholders to the trustee, including by way of equitable compensation or upon the taking of accounts if an account was ordered, and what other relief Ms Morvillo was entitled to with respect to the affairs of the trust.

Whether leave should be granted to challenge case management directions

1. As to the second issue, no formal order was made dismissing the breach of trust claim in relation to the giving of security over the Moncrieff land in June 2017. Since an appeal is against judgments or orders not against reasons, the notice of appeal as framed did not permit the appellants to challenge his Honour's rejection of the breach of trust claim in relation to the giving of security over the Moncrieff land in June 2017: Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45 at 64 (Barwick CJ and Kitto J); McGuirk v University of New South Wales (2009) 75 NSWLR 224; [2009] NSWCA 321 at [16] (Basten JA, Ipp and Macfarlan JJA agreeing).
2. After this difficulty had been raised by the Court, the appellants belatedly sought leave by an oral application at the hearing to amend the notice of appeal to challenge the case management orders on the basis that his Honour erred in not including in the matters the subject of further evidence and submissions, the alleged breach of trust in giving of security over the Moncrieff land in June 2017.
3. The case management orders are interlocutory, and leave is required to challenge these orders. Leave should be granted as sought by the appellants but limited to the alleged breach of trust in relation to the giving of security over the Moncrieff land in June 2017. The reason for this limitation is addressed below when addressing the appellants' wider application to amend the notice of appeal to include a claim for relief in relation to a new and unpleaded allegation arising from the giving of security over the Moncrieff land in August 2018 in connection with the construction loan: see [184]f.

Issues on appeal

1. It is convenient to address the issues on appeal in the following order: (1) the challenge to the findings of misleading conduct, reliance and the grant of relief; (2) the respondents' notice of contention; (3) the breach of trust claim; (4) the application to amend the notice of appeal; and (5) the disposition of the appeal, including the appropriate relief.
2. To the extent that the appellants' challenged several factual findings, these challenges are conveniently dealt with when addressing the grounds of appeal to which the challenges relate.

Misleading Conduct

1. Conduct will be misleading or deceptive if, viewed as a whole, it has a tendency to lead a person into error: ACCC v TPG Internet Pty Limited (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ).
2. In this regard, it is first necessary to identify to whom the conduct in question is directed: Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [102]-[103]; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [36]-[37]. In the present case, the focus of attention is on the impact of the impugned conduct on Mr Katavic being the person alleged to have been led into error by Mr Cassaniti's conduct, including in his capacity as the sole director of Antalija No 4: Campomar at [100]; Butcher at [37].
3. The required analysis is objective: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102], citing with approval the statement by McHugh J in Butcher at [111]. Whether conduct is misleading or deceptive or likely to mislead or deceive is a question of fact to be determined having regard to all the contextual circumstances within which something was said or done: Butcher at [112] (McHugh J). As the plurality in Butcher explained at [37] (Gleeson CJ, Hayne and Heydon JJ), in assessing whether the conduct is misleading, regard must be had to the nature of the parties, the character of the transaction contemplated, the facts that each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known.

Was Mr Cassaniti's conduct misleading or deceptive?

1. The appellants rely upon five reasons, which are said to demonstrate error in his Honour's finding that Mr Cassaniti engaged in misleading or deceptive conduct.
2. The first reason is that Mr Cassaniti's conduct was not misleading or deceptive unless the Court also finds that an agreement was in fact reached in November 2016 and his Honour erred in failing to make that finding at J[387] (ground 3). The premise of this complaint is flawed. As the appellants correctly accepted in oral argument, there was no need for there to be a binding agreement in November 2016 for Mr Cassaniti's conduct to be misleading or deceptive. Moreover, his Honour's reference at J[387] to an agreement reached in November 2016 is not to be read in isolation from the finding at J[357] that the November 2016 discussion did not give rise to a binding agreement.
3. The appellants challenge his Honour's factual finding at J[357] that although the discussion at the QT Hotel did not give rise to a binding agreement, the agreement matured into a binding one at a later stage by reason of the steps taken by the parties to commit funds to the venture and from the signature of various documents. There was no error in this finding. The documents to which his Honour was referring included the unitholders' agreement. Further, as his Honour correctly observed, it is possible that the parties did not become bound by all of the written terms of the documents by reason of the circumstances in which they were executed: at J[357].
4. The second reason is that his Honour erred in finding at J[395] that Mr Cassaniti misled Mr Katavic by characterising the unitholders' agreement as either "standard" or "simple" and thereby induced Mr Katavic to believe that the unitholders' agreement embodied the terms of the "true agreement" they had reached in November 2016 (ground 2).
5. It is said that his Honour ought to have found that the evidence did not establish with the required certitude what was said by Mr Cassaniti to Mr Katavic. The short answer is that given the favourable credit and reliability findings in relation to Mr Katavic and Ms Price, it was well open to his Honour to be satisfied based on their evidence that when Mr Katavic asked Mr Cassaniti on 10 May 2017 whether he should arrange for his solicitor and accountant to look at the unitholders' agreement, Mr Cassaniti responded that the draft unitholders' agreement was "standard", as Mr Katavic recalled in his evidence, or "simple" as Ms Price recalled in her evidence. Nothing turns on which descriptor was used by Mr Cassaniti.

Reliance

1. The appellants challenge in various ways his Honour's conclusion that Mr Katavic relied on Mr Cassaniti's representation in signing the unitholders' agreement.
2. First, it is said that his Honour erred in finding at J[389] that Mr Katavic was not experienced in the complexities of commercial transactions (ground 6). This contention relies upon Mr Katavic's evidence that he was an experienced property developer. But there is no inconsistency between that evidence and the finding at J[389] that Mr Katavic was a builder by occupation who was not experienced in the complexity of commercial transactions and ordinarily relied upon accounting and legal advice. That finding was well-supported by Mr Katavic's evidence, which his Honour accepted, that he informed Mr Cassaniti of his usual reliance upon professional advice at the time the unitholders' agreement was signed: at J[389].
3. Second, it is said that his Honour erred in finding at J[388] that Mr Katavic was significantly more susceptible to misleading conduct by reason that the parties entered into an informal agreement (ground 7). This finding was based on the unchallenged findings that Mr Katavic let his guard down and was unlikely to adopt a self-defensive approach given the informal way in which in a quasi-family context the parties relied upon trust in each other rather than formal legal advice and documentation: at J[387]. No error has been established in this finding.
4. Third, it is said that the direct reliance evidence was weak and unconvincing, and the type of evidence given by Mr Katavic was self-serving. I do not agree. Mr Katavic gave oral evidence-in-chief that he would not have signed the unitholders' agreement if he had been told that the agreement required him to contribute half of the purchase price of the Moncrieff land or required interest to be paid on contributions. The reasons he gave were rational and credible and were not directly challenged in cross-examination. He said that cl 9 was inconsistent with the arrangement he had discussed with Mr Cassaniti and he had no cash at the time. Mr Katavic adhered to this evidence in cross-examination. He explained that the project would involve approximately two years' work, that he did not need the work as he had plenty of work on at the time and it would not have been worthwhile. Again, there was no direct challenge to this evidence in cross-examination.

Relief under ss 237, 242, ACL

1. The relief granted by his Honour was statutory rescission of part of the unitholders' agreement, exercising the Court's power under ss 237(1)(a)(i) and 243(a)(ii) of the ACL. It is convenient to reproduce in full his Honour's reasons at J[401]-[403]: [401] I am satisfied in these circumstances that the Court should exercise its power under ss 237(1)(a)(i) and 243(a)(ii) of the Australian Consumer Law to make an order declaring clause 9(e) and (f) of the Unit Holders Agreement to be void ab initio. [402] That is a proper remedy, even though the effect will be that Ms Morvillo will lose any right to receive any interest on any contribution made by her above her Proportionate Share. In fact, the loss will fall on whichever party associated with Mr Cassaniti actually advanced the funds, as Ms Morvillo was only a nominal unit holder. The making of the declaration will have the effect that the Unit Holders Agreement will conform with the real agreement between the parties to that document. [403] It would not be appropriate for the Court to make an order that entitled Ms Morvillo to some amount of interest less than the 8.5% per annum compounding annually provided for in clause 9(f). The actual agreement made between the parties was a complex one that is not capable of transparent analysis, and it would not be just for the Court to impose upon Antalija No 4 or the other unit holders an interest obligation for which they did not bargain.
2. The appellants challenge his Honour's grant of declaratory relief on three grounds. The first relates to causation. It is said that there is no evidence, and no reasons given, as to whether Mr Katavic and Antalija No 4 "suffered or is likely to suffer loss or damage because of" Mr Cassaniti's conduct, nor were reasons given explaining how the orders of 15 June 2022 prevented such loss or damage (ground 11). The appellants also complain that the causation point was raised in their submissions at trial but was not addressed by his Honour.
3. The second and third reasons challenge his Honour's exercise of discretion in different ways. It is said that his Honour erred in making the declaration without considering what was required to do justice to Ms Morvillo (ground 12) and in the absence of finding that damages were not an adequate remedy (ground 13).
4. It is convenient first to address the causation issue.

Causation

1. Section 237 is a discretionary power to make orders which will compensate for loss or prevent or reduce loss: Jonval Builders Pty Ltd v Commissioner for Fair Trading (2020) NSWLR 1; [2020] NSWCA 233 at [41] (Leeming JA, Bathurst CJ and Meagher JA agreeing). A claimant for relief under s 237 is required to identify the actual or likely loss or damage caused by the contravening conduct before the Court makes orders under s 237 of the ACL, but it is not necessary to quantify the actual or likely loss or damage: Jonval at [39]. The kinds of relief available under s 237 include a declaration under s 243(a)(ii) of the ACL that the whole or any part of a contract made between a person who has engaged in misleading or deceptive conduct and the injured person is void ab initio.
2. The ultimate question in this case is whether Antalija No 4 and Mr Katavic suffered actual or likely loss because of Mr Cassaniti's contravening conduct. This requires identification of the contravening conduct and of the claimed actual or likely loss, and the establishment of a causal connection between them, which may be provided by reliance: Zong v Wang [2022] NSWCA 80 at [21] (Brereton JA, Leeming and White JJA agreeing). The issue is one of causation, not one of reliance, and reliance is not a substitute for the essential question of causation: Campbell v Backoffice Investments at [143].
3. The pleaded loss was the financial detriment to Antalija No 4 and Mr Katavic if Ms Morvillo's interest claim was successful in the proceedings (amended cross-claim, par 25Q). Although it was not necessary to quantify the likely loss (Jonval at [39]), the quantum was readily apparent from the third amended statement of claim: Ms Morvillo claimed interest of $471,920.22 as 31 January 2022 on her excess contributions.
4. In granting relief by way of statutory rescission of cl 9(e) and (f) of the unitholders' agreement, his Honour did not expressly say that the declaration was made to prevent the actual or likely loss caused by Mr Cassaniti's contravening conduct. Nevertheless, it is tolerably clear from his Honour's reasons at J[378] and [402] that he accepted that entry into the unitholders' agreement containing cl 9(e) and (f) caused loss to Antalija No 4 and Mr Katavic, being the financial detriment to Antalija No 4 of incurring of an expense, and the consequential detriment to Mr Katavic of a reduction in any profit distributed to unitholders.

New point on appeal

1. The question of whether there is procedural unfairness in Antalija No 4 and Mr Katavice advancing a new point on appeal, directs attention to the pleadings and the way the case was run at trial.
2. On 10 February 2022, shortly before the commencement of the trial, the appellants obtained leave to file a second further amended statement of claim which introduced the "interest" claim by Ms Morvillo under cl 9(e) and (f) of the unitholders' agreement. Leave was granted on the basis that Antalija No 4 and Mr Katavic had leave to file an amended cross-claim to join Mr Cassaniti as a cross-defendant and add the misleading or deceptive conduct claim. Leave was also given to adduce supplementary oral evidence from Mr Katavic on the issue of reliance. A draft of the amended cross-claim was before his Honour on 10 February 2022 which pleaded in par 25P (as did the filed document) that Mr Katavic would have obtained advice and would not have signed the unitholders' agreement if he had known of the impugned clauses.
3. The trial commenced on 14 February 2022 and Mr Cassaniti was cross-examined on 15 February 2022 about the meeting that took place on 10 May 2017. It was not put to Mr Cassaniti in cross-examination that he would have proceeded with the development without the unitholders' agreement. On 24 February 2022, Mr Cassaniti filed his defence to the amended cross-claim (par 25P) in which he denied the pleading of reliance in par 25P of the amended cross-claim filed 22 February 2022, and asserted in support of that denial that the provision of legal advice would not have made a difference. Mr Katavic gave evidence on 2 March 2022, including supplementary oral evidence-in-chief on reliance. Mr Cassaniti did not give further evidence after Mr Katavic had been cross-examined on reliance.
4. Antalija No 4 and Mr Katavic say that the counterfactual does not contradict any evidence given by Mr Cassaniti or suggest that any evidence he gave should not be believed and there was no need to cross-examine Mr Cassaniti on the matter because he had not addressed it in his evidence. That submission should be rejected for several reasons.
5. First, the submission ignores the pleadings. Antalija No 4 and Mr Katavic did not plead on the issue of causation that Mr Cassaniti would have proceeded with the development without the unitholders' agreement. Thus, there was no obligation on the appellants to plead in their defence to something not pleaded in the amended cross-claim.

Notice of contention

1. By way of a notice of contention the respondents seek to uphold the declaration that cl 9(e) and (f) of the unitholders' agreement were void ab initio on two grounds: (1) the unitholders' agreement in its entirety was not binding, and (2) alternatively, the transfer of $2.25 million by Accolade to the Antalija Unit Trust on 11 May 2017 was not a payment by Ms Morvillo as the "Securityholder" referred to in cll 9(e) and (f) of the unitholders' agreement.
2. The appellants correctly complain that these contentions do not seek to support the declaration based on relief for misleading conduct, but instead purport to seek alternative new orders. It is said that if the respondents had filed a notice of cross-appeal, the appellants would have responded with a notice of contention asserting that the primary judge's findings in respect of the enforceability of the unitholders' agreement could have been supported by ratification by Ms Morvillo. It is also said that the unitholders' agreement is binding because Mr Katavic and Ms Price accepted the offer made by Mr Cassaniti on 10 May 2017 to pay the sum of $2.25 million to Antalija No 4 if they executed the unitholders' agreement.

Was the unitholders' agreement binding?

1. At trial, the respondents first raised the "no agreement" case in their closing submissions. The contention advanced was that the unitholders' agreement did not come into effect or was not binding on the unitholders because the agreement was not signed by Ms Morvillo until 24 February 2022, being after the proceedings had commenced. It was said that it was too late for Ms Morvillo to accept the terms of the unitholder's agreement at that time.
2. Ms Morvillo took a pleading point that this contention had not been pleaded in the respondents' defence. Ms Morvillo also made substantive submissions as to why this contention should be rejected. It is not said in this Court that Ms Morvillo was prejudiced by the unpleaded "no agreement" case. In my view, it is appropriate to deal with the substance of the respondents' contention.
3. Ms Morvillo points to the unchallenged finding that she was Mr Cassaniti's nominee (at J[386]), and submits that the correct analysis is that Mr Cassaniti, as principal, made an offer to Mr Katavic and Ms Price on 10 May 2017 that the sum of $2.25 million would be paid to Antalija No 4 for part of the purchase price of the Moncrieff land if the unitholders' agreement was executed by Mr Katavic and Ms Price, which offer was accepted by Mr Katavic and Ms Price by signing the unitholders' agreement. It is said that whether Ms Morvillo signed the unitholders' agreement is irrelevant, as the contract had already been formed when the other unitholders accepted Mr Cassaniti's offer on 10 May 2017. The appellants' submission should be accepted. It is a complete answer to ground 1 of the notice of contention.
4. Alternatively, the appellants say that Ms Morvillo's "acceptance" of the unitholders' agreement was established by performance, which is a sufficient means of demonstrating acceptance of the terms of a written agreement (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535D), or the inferring of such an agreement (Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [81]). The performance relied upon by Ms Morvillo is the provision of the sum of $2.25 million which Mr Cassaniti caused Accolade to make on behalf of Ms Morvillo to Antalija No 4 on 11 May 2017 as Ms Morvillo's capital contribution to the Antalija Unit Trust. If it were necessary to decide, I would also accept this alternative submission.

Were cl 9(e) and (f) engaged on the facts?

1. Alternatively, the respondents contend that the transfer of $2.25 million which Mr Cassaniti caused Accolade to make to Antalija No 4 as trustee of the Antalija Unit Trust on 11 May 2017 was not a payment by Ms Morvillo as "Securityholder" and therefore cll 9(e) and (f) of the unitholders' agreement were not engaged in relation to that payment.
2. Again, the appellants take a pleading point. It is not in dispute that the "securityholder" case was not pleaded by the respondents; the point was only referred to in passing in a single dot point in the respondents' 7-page skeleton of argument in closing submissions. No oral submissions were advanced on the point. Ms Morvillo correctly submits that the respondents should not be permitted to raise a new point on appeal, which could have been met by further evidence at trial: Whisprun Pty Ltd v Dixon at [51].
3. In any event, if it was necessary to address the "securityholder" point, it should be rejected. There are unchallenged findings that the sum of $2.25 million was advanced by Accolade, an entity associated with Mr Cassaniti, and Ms Morvillo was Mr Cassaniti's nominee: at J[402]. Mr Cassaniti accepted in cross-examination that Ms Morvillo did not put up any money and said, "[n]o, I do it for her". His evidence was not challenged. The contention that there was no evidence that Ms Morvillo made the contribution to the capital of the trust is untenable in light of the objective evidence that a contribution of $2.25 million was made to the trust on behalf of the Cassaniti Discretionary Trust.
4. First, the MYOB accounts of Antalija No 4 maintained by Ms Katavic record the $2.25 million as Mr Cassaniti's contribution, with a memo recording "Sam's deposit". That is consistent with Mr Cassaniti being the principal and Ms Morvillo being his nominee. Similarly, the balance sheet of Antalija No 4 as at June 2018 recorded the sum as being "Sam's contribution", though the figure is combined with Ms Price's contribution. Second, the accounts of Antalija Unit Trust, which were given to St George Bank on 22 June 2018, record $2.25 million as being from the Cassaniti Discretionary Trust as a secured loan. Third, the accounts of the Antalija Unit Trust, prepared after the commencement of the proceedings and signed by Mr Katavic and Ms Price, record the money as "beneficiary funds loaned" by the Cassaniti Trust to the Antalija Unit Trust.

Conclusion on challenge to declaratory relief

1. The appeal against the declaratory relief granted by his Honour should be allowed and the declaration set aside. In lieu, the amended cross-claim against the appellants should be dismissed.

Breach of trust

1. The appellants rely upon three related reasons which are said to demonstrate error in his Honour's finding that the giving of security over the Moncrieff land in June 2017 was not a breach of trust.
2. The first reason is that his Honour erred in failing to hold that the sum of $2.075 million was property of the Antalija Unit Trust as it was used to purchase trust property and recorded as a contribution made by Mr Katavic in the books of the Antalija Unit Trust (ground 15).
3. The second reason is that his Honour erred in finding at J[407] that the sum of $2.075 million was paid to Antalija No 4 by mistake on the part of the Commonwealth Bank (ground 16). The reference in this ground to the Commonwealth Bank is an error; this ground should be read as referring to a payment by mistake on the part of the St George Bank.
4. The third reason is that his Honour erred in finding at J[408] that because the sum of $2.075 million had been paid by mistake, this money did not become property of the Trust (ground 17).
5. Ms Movillo contends that this Court ought to hold that: 1. the sum of $2.075 million was property of the Antalija Unit Trust which was paid as Mr Katavic's proportionate contribution (ground 18); and 2. Mr Katavic and Ms Katavic procured or were knowingly involved in a breach of trust in causing the trustee to borrow $2.075 million and paying that money to Antalija No 2 and accordingly they ought to pay $2.075 million to the trustee of the Antalija Unit Trust as equitable compensation (ground 19).
6. As indicated, the appellants did not press the knowing assistance claim against Ms Katavic.

The pleadings and the way the breach of trust case was run at trial

1. The starting point is an understanding of the way in which the breach of trust claim was pleaded and run at trial.
2. His Honour's summary of the pleadings has been referred to at [53]-[56] above. In closing submissions at trial, Ms Morvillo contended that (1) the payment of $2.075 million by Antalija No 2 to Antalija No 4 on 11 May 2017 was a "contribution by Dennis", and (2) the breach of trust involved Antalija No 4 paying to Antalija No 2 on 22 June 2017 the amount of $2.075 million, as the effect of this payment was that Mr Katavic obtained an early return on his contribution of capital to the trust.

Submissions on appeal

1. As the argument was put in this Court, the breach of trust claim relies on four essential propositions. First, the payment of $2.075 million to Antalija No 4 on 11 May 2017 was a capital contribution by Mr Katavic. Second and related to the first point, the payment was not made by mistake on the part of the St George Bank. Third, even if the payment was made by mistake, the amount of $2.075 million became an asset of the Antalija Unit Trust. Fourth, it was a breach of trust for Mr Katavic to prefer his own interests to the interests of the other unitholders by causing his capital contribution to be repaid early on 22 June 2017, using the Moncrieff land as security for the June 2017 loan.

The character of the $2.075 million payment

1. As to the characterisation of the payment, Ms Morvillo says that the finding at J[378] that Mr Katavic's obligation was to procure a bank loan for half of the price of the development site, which was to be treated "in effect as his contribution", is to be read as a reference to Mr Katavic's capital contribution to the Antalija Unit Trust. For the following reasons, that is not a fair reading of his Honour's reasons.
2. First, his Honour was careful not to describe the payment of $2.075 million to Antalija No 4 as a "capital" contribution by Mr Katavic. The reference at J[378] to the payment being "his contribution" is properly understood as a reference to Mr Katavic arranging for the other half of the initial capital to be borrowed from a bank, which his Honour found at J[358] was one of the material features of the informal agreement reached in November 2016.
3. Second, contrary to the submission of Ms Morvillo, the finding at J[378] is not in substance in different terms to the finding at J[358] that Mr Katavic would arrange for the other half of the initial capital to be borrowed from a bank and his capital contribution would be deferred to later during the construction phase.
4. Third, there is no challenge to his Honour's finding rejecting Ms Morvillo's submission that a principal term of the November 2016 agreement was that Mr Katavic would himself contribute half of the initial capital to acquire the proposed development site: at J[362].
5. Fourth, characterising the payment as a capital contribution would be inconsistent with the terms of the informal agreement reached in November 2016. That informal agreement recognised that Mr Katavic would not be spared the need to contribute a substantial amount of capital to the proposed development, but by reason of his current shortage of funds, he would make his contribution during the construction phase of the development. His Honour found that Mr Katavic did later make his contribution through Antalija Constructions in the amount of $1.39 million.

The $2.075 million was paid by mistake

1. The finding by his Honour that the payment of $2.075 million to Antalija No 4 on 11 May 2017 was made by mistake on the part of the St George Bank was based on an acceptance of Mr Katavic's evidence that he understood that the advance from St George Bank on 11 May 2017 was a new one made to Antalija No 4 in its own capacity and that he did not learn of the mistake until the Bank failed to pay a progress claim on behalf of Antalija No 2 later in May 2017.
2. It was well-open to his Honour to accept Mr Katavic's evidence on this matter given his favourable credit and reliability finding in relation to Mr Katavic's evidence. Further, the email which Mr Katavic sent to St George Bank on 30 May 2017 was contemporaneous evidence supporting his Honour's finding that Mr Katavic did not know that the Bank had arranged for the advance to be made from Antalija No 2: at J[239].
3. Nevertheless, Ms Morvillo says that there was objective evidence to the contrary, pointing to seven matters. First, that Ms Katavic who kept the books of Antalija No 4 recorded the sum of $2.075 million as Mr Katavic's capital contribution, which his Honour found was Mr Katavic's understanding: at J[205]. Second, that on 20 June 2018 Ms Katavic emailed Mr Cassaniti stating that Mr Katavic "… has so far contributed $3,275,000", a figure which the appellants say had to include the $2.075 million. Third, that Mr Katavic later wrote to his lawyer, referring to the $2.075 million as "money we took from Antalija No 2 to settle on the land". Fourth, the initial defence admitted that Mr Katavic caused Antalija No 2 to make the payment to Antalija No 4 of $2.075 million. Fifth, the defence was drafted on clear instructions from Mr Katavic to his solicitor in writing. Sixth, Mr Katavic never told Mr Cassaniti of the mistake. Seventh, Mr Katavic obtained the June 2017 loan secretly.
4. It is said that whilst his Honour addressed the first four matters, he failed to mention the last three matters and that undermines the finding that the payment was made by mistake by St George Bank. That complaint should be rejected.
5. His Honour addressed the significance of the first four matters: at J[238]-[240]. As to the first two matters, the subjective understanding of Ms Katavic when performing her role as bookkeeper was not determinative of the character of the payment.

The mistaken payment did not become an asset of the trust

1. Accepting that the payment of $2.075 million to Antalija No 4 on 11 May 2017 was made by mistake, the payment was not accepted by Antalija No 4 as an asset of the Antalija Unit Trust. As his Honour correctly found, Antalija No 4 did not consent to this payment as an addition to the trust fund for the purposes of cl 2(b) of the trust deed.
2. It is said by Ms Movillo that the payment became an asset of the Antalija Unit Trust because it was used to pay part of the purchase price of the Moncrieff land. I do not agree. The correct analysis is as follows. Antalija No 4 was personally liable for liabilities incurred in the authorised conduct of the Antalija Unit Trust, which included liabilities incurred under the contract to purchase the Moncrieff land. Of the credit balance of Antalija No 4's bank account with the Commonwealth Bank on 11 May 2017, the amount of $2.075 million received on that date from the St George Bank was not trust money but was applied by Antalija No 4 on 12 May 2012 in part payment of the purchase price of the Moncrieff land.
3. Having discharged a trust liability partly using its own monies, Antalija No 4 had a right of indemnity by way of reimbursement or "recoupment" from the trust fund in an amount of $2.075 million, and, for the purpose of enforcing the indemnity possessed a charge or equitable lien over those assets: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61 at 367; Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth of Australia (2019) 268 CLR 524; [2019] HCA 20 at [29], [31] (Kiefel CJ, Keane and Edelman JJ), [80] (Bell, Gageler and Nettle JJ).
4. Thus, when Antalija No 4 completed the purchase of the Moncrieff land on 12 May 2017 it became the legal owner of that land which it held on trust for the unitholders, subject to a charge or equitable lien over the Moncrieff land to enforce its right of reimbursement in respect of its own contribution to the purchase price of $2.075 million.

No breach of trust in giving security in June 2017

1. Accepting that the payment by mistake to Antalija No 4 of $2.075 million on 11 May 2017 was not a capital contribution by Mr Katavic, nor an asset of the Antalija Unit Trust, there is no error in his Honour's finding that it was not a breach of trust for Mr Katavic to cause Antalija No 4 to obtain the June 2017 loan on security of the Moncrieff land and pay those monies to Antalija No 2 on 22 June 2017.
2. First, contrary to Ms Morvillo's contention, the June 2017 loan was obtained by Antalija No 4 as trustee of the Antalija Developments Property Trust No 4, not as trustee of the Antalija Unit Trust. Hence, the monies the subject of the 2017 loan were never trust monies of the Antalija Unit Trust and no trust monies were "lost" by the Antalija Unit Trust, as asserted by Ms Morvillo, when Antalija No 4 as trustee of the Antalija Developments Property Trust No 4 paid $2.075 million to Antalija No 2 on 22 June 2017.
3. Second, as his Honour correctly found, the informal agreement made at the QT Hotel in November 2016 was indefinite as to how Mr Katavic would arrange a bank loan to cover half of the purchase price of the Moncrieff land and the basis on which Mr Katavic would raise the bank loan and secure repayment was left open: J[410].
4. Third, when he became aware in late May 2017 that St George Bank had not made a new loan of $2.075 million to Antalija No 4 on 11 May 2017, Mr Katavic arranged for the June 2017 loan to repay Antalija No 2. Mr Katavic did not prefer his own interests by causing Antalija No 4 to give security over the Moncrieff land in respect of the June 2017 loan. Contrary to Ms Morvillo's contention, the June 2017 loan was not used to repay a capital contribution by Mr Katavic. Rather, the June 2017 loan was the way in which Mr Katavic effectively arranged for a bank loan for half of the purchase price of the Moncrieff land. That St George Bank obtained security over the Moncrieff land for the June 2017 loan was not a breach of trust.
5. For completeness it should be noted that when the June 2017 loan was refinanced in August 2018 by Antalija No 4 as trustee of the Antalija Unit Trust upon terms which included the giving of security over the Moncrieff land (see [45] above), Antalija No 4 in its own right recouped the amount of $2.075 million from the trust fund, as it was entitled to do, pursuant to its right of indemnity as trustee in respect of its payment of $2.075 million to the vendor of the Moncrieff land on completion of the purchase on 12 May 2017.

Whether amendments to relief claimed in notice of appeal should be permitted

1. The proposed amendments to the relief sought in the notice of appeal concern two matters: (1) costs issues, and (2) the case management orders for the further conduct of the proceedings.

Costs issues

1. By notice of motion filed 2 February 2023, the appellants sought leave in par 5 to add additional claims for relief in the amended notice of appeal against Antalija No 4 and Mr Katavic seeking to restrain them from using trust monies to pay the costs of the appeal or the proceedings at first instance, in the following terms: 8 The Second Respondent is not permitted to access or apply any trust monies to pay its costs of these proceedings or the proceedings at first instance. 9 The Second Respondent pay the Appellants' costs of these proceedings and the proceedings at first instance in relation to the parts of the proceedings that concern the administration of the Antalija Unit Trust. 10 The First Respondent, the director of the Second Respondent, to indemnify the Second Respondent for the costs order being Prayer 9 above.
2. The respondents opposed the proposed amendment to the claims for relief pointing to the limited issues raised by the appeal, the part-heard nature of the proceedings below, and notably, the primary judge has deferred all questions of costs, observing at J[424] that it was premature to determine whether Antalija No 4 ought to be indemnified from the assets of the trust and the amount of any payment that is justified. That approach is consistent with Ludwig v Jeffrey (No 4) [2021] NSWCA 256 at [83] where it was held that the question of the trustee's right of indemnity in respect of the cost of proceedings commenced or defended by the trustee is to be determined "at the end of the day".
3. Since the assessment of the cost indemnification issues is to occur after the determination of the outstanding matters in the proceedings below, it is unnecessary and inappropriate for this Court to deal with those issues. Leave to amend the notice of appeal to include new pars 8-10 in the claims for relief should be refused.

Breach of trust

1. The appellants sought leave orally at the hearing to amend the notice of appeal with respect to the claims for relief by deleting par 3 of the claims for relief, which sought an order that Mr Katavic and/or Antalija No 4 provide an account of the receipts and expenses of the Antalija Unit Trust. In substitution, the appellants seek new orders 14A and 14B and a variation to orders 15-17 made by the primary judge on 15 June 2022 relating to case management and other matters. The proposed amendments as marked up with underlining are: 14A An order the Dennis Katavic and/or Antalija Developments No 4 Pty Ltd provide an Account pursuant to Part 46 rules 4 to 8 of the UCPR of the receipts and expenses of the Antalija Unit Trust, including the source/recipient and purpose of transactions on St George Account 478174966 in the name of 'Antalija Developments No 4 Pty Ltd ATF Antalija Developments Property Tr No 4' in the period 1 June 2017 to 14 December 2019." 14B The Account treat the following transactions as breaches of the Antalija Unit Trust by Antalija Developments No 4 Pty Ltd, procured by Dennis Katavic: (a) on 1 June 2017, the use by Antalija Developments No 4 Pty Ltd of trust property to secure a mortgage given to St George Bank by it as trustee of the Antalija Development Property Trust No 4 for the purposes of paying to Antalija Developments No 2 Pty Ltd the sum of $2,075,000; and (b) on 1 August 2018, the consequential use by Antalija Developments No 4 Pty Ltd of trust property to secure the repayment of the loan described above. [14] ... [15] Within 28 14 days, direct the 1st, 3rd and 4th Defendants, to file and serve any further evidence on which they seek to rely in respect of: a. the assets and liabilities of the Antalija Unit Trust as at 18 November 2019; including: i. any receivables for any amounts that had not yet been received from the sale of the properties at the Moncrief development; and ii. any deferred tax liabilities setting out the GST liabilities that became owing to the ATO after the completion of the sales of the properties at the Moncrieff development; b. the current assets and liabilities of the Antalija Unit Trust; c. the steps that remain outstanding to wind up the Antalija Unit Trust; d. the accounting process that will be necessary in order to provide a formal account of the affairs of the Antalija Unit Trust. [16] Within 14 days of the Defendants complying with Order 15, direct the Plaintiffs to file and serve any evidence in reply. [17] Within 21 days of the Defendants Plaintiffs complying with Order 16, direct the Plaintiffs Defendants to file and serve any written submissions in relation to any of the matters referred to at Order 13, at Orders 14A to 14B, and as to: a. whether repayment of capital contributions to Ms Price and Mr Katavic on 18 November 2019, as described at [413]-[420] of the judgment given by Robb J on 2 May 2022, involved a breach of trust by Antalija 4; b. the appropriate orders to be made regarding: i. the Plaintiffs' claims for replacement of Antalija 4 as trustee of the Antalija Unit Trust; ii. the winding up of the Antalija Unit Trust; c. whether the Court should make an order for a formal account of the affairs of the Antalija Unit Trust to be taken.

Conclusion

1. The appellants' oral application to amend the claims for relief in the amended notice of appeal should be refused, except to permit the challenge to the omission in the case management orders of reference to the giving of security over the Moncrieff land in June 2017. For the reasons already given, that challenge to the case management orders should be rejected.

Disposition of the appeal

1. The appeal has succeeded in part in relation to the misleading conduct claim and otherwise failed in relation to the breach of trust claim. The applications to amend the claims for relief in the amended notice of appeal to include additional matters should be refused, except to permit an amendment to challenge the case management orders insofar as those orders did not include the asserted breach of trust in giving security over the Moncrieff land in June 2017.
2. Given the mixed outcome on appeal, the parties should be afforded an opportunity to make submissions on the question of costs in this Court. The question of costs in the underlying proceedings having been deferred by his Honour, no occasion arises to consider the effect of the result on appeal on the question of costs below.

Orders

1. I propose the following orders: CA 2022/261720 (Leave to appeal) 1. To the extent necessary, grant leave to appeal against the first and second respondents. 2. The summons seeking leave to appeal against the third respondent is dismissed, with costs. CA 2022/204856 (Appeal proceedings) 1. The appellants' notice of motion filed 2 February 2023 (par 5) is dismissed, with costs. 2. Refuse the appellants' oral application to amend par 3 of the claims for relief in the amended notice of appeal to include proposed orders 14A and 14B and the reference in order 17 to proposed orders 14A and 14B. Otherwise grant leave to amend the claims for relief in the amended notice of appeal to include in order 17 in substitution for the proposed words "Orders 14A and 14B", the words "the giving of security over the Moncrieff land in June 2017 as referred to in sub-par (a) of proposed Order 14B". 3. Appellants to file an amended notice of appeal consistent with order (2) above within 7 days. 4. Appeal allowed in part in relation to the misleading conduct claim. 5. Set aside the declaration made by the primary judge on 15 June 2022 in par 5, and in lieu, dismiss the first and second respondents' further amended statement of cross-claim filed 22 February 2022. 6. Otherwise dismiss the appeal against the first and second respondents. 7. Dismiss appeal against the third respondent. 8. The appellants to pay the third respondent's costs of the appeal. 9. Direct the appellants to file and serve short written submissions on the question of costs in this Court within 14 days, the first and second respondents to file and serve their response within a further 14 days, and the appellants to file and serve any reply within a further 7 days. Any such submissions are not to exceed 3 pages. Note that the question of costs in this Court will be determined on the papers.
2. KIRK JA: I agree with Gleeson JA.
3. ADAMSON JA: I agree with Gleeson JA.

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