Squillacioti v Zmisa

Cases Cited: Yan v Yangdo Pty Ltd [2024] NSWSC 1250

Category: Principal judgment

Parties: Jay Squillacioti (Plaintiff)
Sasha Zmisa (First Defendant)
Julian Moufarrige (Second Defendant)
Cawdor Corner Pty Limited (Third Defendant)
Cawdor Group Holdings Pty Limited (Fourth Defendant)

Representation: Counsel:
S Lawrance SC (written submissions) / J Giles SC (25 November 2025) / M Gvozdenovic (Plaintiff)
G A Sirtes SC / M J Donohue (First Defendant)
W D B Buckland (written submissions) / M Thompson (25 November 2025) (Second Defendant)
Solicitors:
Somerville Legal (Plaintiff)
Hamilton Locke (First Defendant)
Terracon Legal (Second Defendant)

File Number(s): 2024/00232131

Publication restriction: Nil

JUDGMENT

1. This matter concerns a dispute about the validity of an expert determination.

2. Jay Squillacioti, Sasha Zmisa and Julian Moufarrige agreed to invest together in a property development in Camden, New South Wales.

3. They decided to structure their development through a unit trust arrangement. Cawdor Corner Pty Ltd was incorporated and became the trustee of the Cawdor Corner Unit Trust, which at all relevant times has 100 units. Cawdor Group Holdings Pty Ltd was also incorporated and is the trustee of three trusts that hold the units in the Unit Trust. Each of the parties effectively has interests through these structures in the ratio 50:30:20 respectively.

4. The parties’ relationship is governed by a Shareholders and Unitholders Agreement dated 14 December 2020.

5. Under the Agreement, the parties agreed to advance certain amounts towards the property development as set out in the “Camden Internal Financials”, which were the “Funding Requirements Schedule” within the meaning of clause 13(a)(ii). Clause 13(c) provided that the funding obligations were to be satisfied by external funding, or, in circumstances where that “is not practical”, either by (i) subscription by the Shareholders for new shares or units or (ii) the making of loans by the Shareholders and Unitholders “in accordance with their respective proportions”. It was not in dispute that at the time of the Agreement the parties had not contributed the amounts expected under the Funding Requirements Schedule and only 100 shares had been issued.

6. It was also not in dispute that from time to time the parties contributed funds, which became the subject of this dispute.

7. In June 2024, Mr Zmisa and Mr Moufarrige triggered a clause in the Agreement requiring their investments to be bought out. The parties fell into dispute about the appropriate price.

8. Pursuant to clause 20 of the Agreement, the determination of the price based on “fair value and market value” was to be by an expert, who “will act as an expert and not an arbitrator”, and whose determination “shall be binding on the parties”.

9. Mr Squillacioti commenced proceedings concerning the valuation process. On 4 April 2025, consent orders were made disposing of the proceedings, on the basis that chartered accountant, Mr David Mullins, would determine the market value of the relevant shares on specified dates “in accordance with the terms of the [Agreement]”. The relevant clause provides that the expert “shall have regard to the rights, privileges and limitations attached to the Shares or Units” and “such other matters as the excerpt considers necessary to arrive at a determination…”.

10. Order 2 that the expert determination process was “to be carried out in accordance with the terms of [the Agreement] … subject to the following”:

a. The expert is [to] be given a set of accounts for the companies prepared by New Wealth as at 12 December 2022 and as at 22 April 2023.

b. The expert is to be asked to verify the accounts and the expert may call upon any primary materials he thinks necessary to undertake that task.

c. Each party may provide a 3 page submission to the expert in relation to the accounts.

d. The expert is to be asked to determine any amount repayable to [Mr Zmisa] pursuant to clauses 13(c)(ii) and13(d)(iii) of the Agreement.

e. The expert is to be asked to determine any amount repayable to [Mr Moufarrige] pursuant to clauses 13(c)(ii) and13(d)(iii) of the Agreement.

f. The expert is to be asked to determine amount any payable by [Mr Zmisa] for the unauthorised withdrawals (as pleaded in … the List Statement).

11. In June 2025 the parties provided their submissions to Mr Mullins.

12. On 8 August 2025, Mr Mullins provided the parties with his expert determination, which concluded that contributions by the parties were by way of loans.

13. Mr Squillacioti seeks a declaration that the determination does not bind the parties, because of the way orders 2(d) and (e) were determined.

14. By those orders the expert was required to determine any amounts repayable to Mr Zmisa and Mr Moufarrige as “loans” pursuant to cl 13(c)(ii) (which, as indicated above, allows for the shareholders and unitholders to make loans in accordance with their respective proportions) and cl 13(d)(iii), which relevantly provides:

13(d)(iii) … any loan made by a Shareholder … is made on the following terms: … each advance is repayable on the Shareholder … ceasing to hold Shares…

15. The way the complaint was agitated orally was different to the way it was submitted in writing. In writing, the issue was identified as whether the expert adhered to the contractual task; the challenge was primarily that the expert failed to properly construe the contract, and it was submitted that the Agreement did not give the expert the role of construing it in performing the expert determination function.

16. Orally, however, it was submitted that the only complaint to be determined by the Court was whether the determination was infected with a “manifest error” in concluding that contributions by the parties were loans, rather than equity contributions: Determination [377].

17. In effect, the written submissions relating to an “error in the construction and application” of the Agreement were abandoned.

18. For the reasons that follow, I am not prepared to make any declaration to the effect that any part of the determination is not binding.

What principles apply to setting aside an expert determination?

19. The relevant principles concerning the validity of expert determinations were not in dispute.

20. In circumstances where the only complaint concerns “manifest error” it is only necessary to repeat Mr Squillacioti’s summary of the principles upon which he relied, citing Yan v Yangdo Pty Ltd [2024] NSWSC 1250 at [123]-[129] (Rees J):

An expert determination will … not be binding in the case of “manifest error”. Manifest error should be construed in its commercial context, where manifest means, in ordinary language, plain and obvious. Further, the manifest error must relate to the analysis or procedure that led to the making of the expert determination; for example, a plain and obvious error in testing or calculating matters … For this reason, the error must be apparent on the face of the determination and reasons …

21. One “manifest error” in the determination concerning an arithmetical calculation was corrected by the expert and was not in dispute.

22. The “manifest error” alleged by Mr Squillacioti was that the expert had failed to consider all the possible ways in which the parties could contribute money to the project; in Mr Giles’s words, the expert “postulated an erroneous dichotomy” between shares and loans, when the “real alternatives” were a loan, share capital, units in the unit trust, or a contribution to the trust fund.

Did the expert make a “manifest error”?

23. I do not accept that Mr Mullins failed to consider all the possible ways money might be advanced and that therefore there was a manifest error in the determination.

How did the expert carry out the determination?

24. Mr Squillacioti, in effect, appeared to complain of a lack of procedural fairness, because submissions were exchanged and he had no ability to reply to the defendants’ submissions. I do not accept that. The orders did not require exchange, and Mr Squillacioti did not seek an opportunity to respond to the defendants’ submissions, nor raise want of procedural fairness to invalidate the determination.

25. The parties had agreed that they only required three pages of submissions, which indicates they considered the task was narrow and the expert could capably determine the issues without much assistance from the parties and by an analysis of the objective records.

26. In Mr Squillacioti’s submissions to the expert, he submitted in one paragraph there were no loans for the purposes of orders 2(d) and (e) because:

27. Mr Zmisa allegedly requested the financial statements be revised to change the loan accounts to capital contributions from the respective unit holders via their trusts, the others agreed, and the records were amended.

28. The later financial records show capital contributions.

29. “As such, all contributions made by the parties are characterised as equity not loans”.

30. Mr Zmisa submitted to the expert that because no shares were issued by the company for contributions, those contributions must be loans.

31. Mr Moufarrige submitted that all his contributions were “by way of loans and not capital contributions”, essentially because no board resolutions were passed requiring further contributions to be paid to Cawdor Corner or the Unit Trust.

32. In his determination, Mr Mullins:

33. understood that he needed to determine whether money advanced was a loan that would be repaid or was equity: Determination [263].

34. outlined the relevant clauses of the Agreement and had regard to the Funding Requirements Schedule and considered the amounts advanced by each of the parties.

35. noted that there were discrepancies in how the contributions were presented in the financial statements: Determination [207].

36. considered the classification of “debt versus equity” in some detail.

37. did not accept that the emails, upon which Mr Squillacioti relied, represented an agreement as to the classification of the contributions: Determination [240].

38. did not consider the accounts had classified contributions correctly.

39. understood that funding obligations (under clause 13) could be met by “either the issuance of shares/units or provision of loans (to the extent not covered by external financing)”: Determination [243].

40. considered there had not been the issuance of any “new shares in relation to the additional contributions” and, based on his analysis, the contributions were not equity and instead were loans: Determination [245]-[246].

Does the determination demonstrate a manifest error?

30. I do not accept that merely because Mr Mullins did not in his conclusion also state that no further “units” had been issued means that there was a manifest error. No party had indicated that issuing units was an issue, yet Mr Mullins was clearly aware that funding could be met with the issuance of units, and the financial records, to which he clearly had regard, recorded that the number of units never increased. Therefore, a fair reading of his conclusion was that there was no evidence of any increase in shares or units.

31. It follows that I do not accept the expert postulated a dichotomy at all, let alone an erroneous one. There was no manifest error.

Conclusion and orders

32. For those reasons, the appropriate orders are:

33. The plaintiff’s amended notice of motion dated 5 November 2025 is dismissed.

34. The plaintiff is to pay the defendants’ costs of the motion as agreed or assessed.

35. Grant liberty to the parties to apply for an alternative costs order within seven days of today's date, setting out the application and any evidence and submissions of no more than three pages upon which they rely.

36. Should such an application be made for an alternative costs order, the responding party is to provide evidence and submissions of no more than three pages opposing any alternative costs order within seven days of receiving the first application.

37. The Court will determine any such alternative costs application on the papers, if appropriate.

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