Spiteri v Roccisano [2009] VSC 132

Spiteri v Roccisano [2009] VSC 132 - VSC 2009 case summary — Zoe

[34]

32 Ultimately, it was arranged that a meeting would be held at the offices of the defendant on the morning of 31 July 2003. The defendant stated that the plaintiff arrived before Calabro and Agushi. By that time, Calabro had sent to the defendant, by facsimile, a new agreement, which was identical to the agreement ultimately signed on that day. The defendant conferred with the plaintiff in his office. They went through the agreement. The defendant identified to the plaintiff the parts of the agreement which were the same as the previous version, and the parts which had been changed. The defendant also undertook a Title search of the Maribyrnong Road property, to ensure that there were no further encumbrances placed on the Title. In particular, the defendant discussed clause 6 of the agreement with the plaintiff, relating to the transfer of shares in Park West Developments to be held in escrow. The plaintiff remarked that he had heard from Agushi that that company had $4 million "equity" in it. Agushi and Calabro then entered the room. The parties discussed Park West Developments. The defendant said to Agushi and Calabro: "I understand there's $4 million in Park West, is that correct?", and they replied: "Yes". The defendant then asked Calabro to give him some details of the Park West properties, so he could undertake Title searches. The defendant undertook a search of the Titles of the properties held by Park West, and he also did an ASIC search of Park West. He stated that he gave one of the copy Title searches to the plaintiff. The parties then executed the joint venture agreement. Calabro and Agushi each signed transfers of their shares in Park West Developments, and handed those transfers to the defendant. They also signed the guarantee annexed to the joint venture agreement. Agushi and Calabro then left, and the plaintiff stayed for a short time. The plaintiff stated that he was very happy that he was going into the joint venture agreement, and he believed he was going to make a lot of money. He then departed.

[61]

58 In response, Mr Palmer submitted that the defendant breached his contractual, and tortious, duty of care, in failing to give proper advice to the plaintiff as to the nature of the "security" constituted by the provision by Calabro and Agushi of the transfers of shares in Park West Developments, to be held in escrow by the defendant. Mr Palmer submitted that, from a legal point of view, any "security" provided by the transfer of the shares was illusory. First, the only documentation to be provided to the defendant was signed transfers of shares by Calabro and Agushi. The defendant did not know, nor had he inquired, whether share certificates had been issued in respect of the shares which were the subject of the transfers, and, if so, in whose possession the certificates were. Thus, if the plaintiff had found it necessary to enforce the "security" constituted by the transfers, he would have been required to sue, on the joint venture agreement, to enforce that security. Secondly, the joint venture agreement did not contain any restriction on Park West Developments issuing further shares, thus diluting the "security" afforded by the share transfers. Thirdly, insofar as the share transfers provided to the plaintiff any rights to the shares held by Agushi and Calabro in Park West Developments, the defendant failed to advise the plaintiff, or to take properly into account, that, in a winding up of Park West Developments, as shareholder, the plaintiff would rank last in priority behind all secured and unsecured creditors. In addition, the agreement did not contain any restriction preventing Park West Developments from executing further securities over its property or over its assets. Mr Palmer submitted that, in advising the plaintiff as to the adequacy of the "security" afforded by the transfer of shares in Park West Developments, the defendant should, in performance of his retainer, have warned the plaintiff that the "quality" of that security was highly suspect. Mr Palmer submitted that that advice was of particular importance to the plaintiff, given his concern, expressed as recently as 30 July, that Maribyrnong Road Developments was not proffering sufficient security for him to wish to proceed with the transaction. Mr Palmer submitted that it was clear to the defendant that the plaintiff was seeking to obtain further, and better, security, before he entered into the joint venture agreement.

[108]

96 However, that failure of the defendant has not been proven to have caused any loss and damage to the plaintiff. First, the question whether, having given the matter consideration, such an application should be made to the Court, was a matter for judgment of the practitioner. If the defendant had given the matter due consideration, as a prudent solicitor, it is feasible that he may have reasonably decided that there were insufficient grounds upon which the plaintiff might succeed in an application for a Mareva injunction. Such a decision would clearly be a matter of judgment.[24] Secondly, as matters then stood, it is problematic whether a court would, in any event, have granted the plaintiff such an injunction. Thirdly, if the defendant had been successful in obtaining a Mareva injunction on behalf of the plaintiff against Calabro and Agushi before October 2005, to restrain them from disposing of their assets, there is insufficient evidence to satisfy me that that would have secured to the plaintiff any assets, against which he might later have executed a judgment on the guarantees against Calabro and Agushi. Before October 2005, Calabro only had a one percent interest in his family home at Pascoe Vale South. No proper evidence was led to prove the value of that interest. In November 2005 he transferred it to his wife. Agushi stated that, before he transferred his fifty percent interest in his Parkville home to his wife in November 2005, the home was worth about $1,000,000. However, Agushi is not a qualified property valuer, and his evidence as to its value was no more than a "guesstimate". At the same time, he said that the mortgage debt secured over the property was approximately $800,000. However, the plaintiff did not lead any proper evidence (such as bank statements) as to the amount of that debt. Further, both Calabro and Agushi had extensive debts. Agushi estimated that, when he executed the Part X arrangement in November 2005, his debts amounted to approximately $9,000,000. Thus, in any event, I am not satisfied that a Mareva injunction against Calabro and Agushi would have secured to the plaintiff any funds against which he might have executed a judgment, subsequently obtained by him against Agushi and Calabro on the guarantees. In all probability, it would not have.

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Judgment (158 paragraphs)

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Cases Cited (18)