Sydney Markets Credit Services Co-operative Limited ABN 67503292864 v Barry Anthony Taylor as Trustee of the Bankrupt Estate of Natale Piscuineri; A.C.N 123849883 Pty Limited v Sydney Market Credit Services Co-Operative Limited

The ACN 123 Proceedings 15On 13 September 2012 ACN 123 commenced the ACN 123 proceedings against Mr Taylor as trustee of Natale Pisciuneri's bankrupt estate as first defendant, against Ferdinando Pisciuneri as second defendant, and against Sydney Markets as third defendant. 16The second defendant, Ferdinando Pisciuneri died on 6 April 2013. His personal representatives for the purposes of these proceedings are Mr Samuel Galluzzo and Mrs Rita Pisciuneri. Neither Mr Taylor nor the personal representatives of Ferdinando Pisciuneri have taken any active role defending the ACN 123 proceedings. 17ACN 123 claims to be the trustee of the Superannuation Fund. Sydney Markets disputes it is the trustee of the Superannuation Fund, a dispute dealt with later in these reasons. 18ACN 123 claims that the Superannuation Fund funded the purchase of the Goulburn property in 1998, at a time when Natale and Ferdinando Pisciuneri were the trustees of the Superannuation Fund. 19The Superannuation Fund trustees changed in late 2003. On 30 September 2003 Ferdinando Pisciuneri retired as trustee and Dominic Pisciuneri was appointed in his place. On 17 December 2003 Jennelle Piscuineri became a member of the Superannuation Fund and was appointed as an additional trustee. 20ACN 123 claims that Jennelle, Natale and Dominic Pisciuneri all retired as trustees of the Superannuation Fund on 14 July 2011, when it replaced them, becoming the corporate trustee of the fund. 21In mid 2012 ACN 123 decided to sell the Goulburn property. On 19 July 2012 it entered into a contract for sale of the property to Stanley and Anne Moore for the consideration of $380,000. The sale contract seems partly to have precipitated these proceedings. ACN 123 cannot complete the sale of the Goulburn property until it becomes registered proprietor of the property achieved removal of Sydney Markets' caveat. This situation explains why the lapsing notice was served on Sydney Markets in August 2012. 22Once the Sydney Markets proceedings commenced, ACN 123 launched the ACN 123 proceedings seeking relief as follows: (1) A declaration that the Goulburn property is held in trust by the first defendant (Mr Barry Taylor, as trustee of the bankrupt estate of Natale Pisciuneri) and the second defendant (Ferdinando Pisciuneri), for the benefit of the Superannuation Fund; (2) An order pursuant to Real Property Act, s 74M for withdrawal of the Sydney Markets caveat; and (3) An order for the first and second defendants to sign the requisite documents for the transfer of the Goulburn property to ACN 123. 23On 5 October 2012 ACN 123 filed an Amended Summons, seeking further relief. Procedural issues in relation to the ACN 123 proceedings will be considered later in these reasons. 24Finally, on 5 November 2013 Samuel Galluzzo and Rita Pisciuneri were appointed to represent the deceased estate of Ferdinando Pisciuneri. 25These proceedings were efficiently conducted by the legal practitioners on both sides over the course of two days on 10 and 11 March 2014. The Court allowed further opportunity for written submissions after the hearing because of issues that arose in oral submissions. Those written submissions were exchanged on 24 March and 1 April 2014. Mr D.Roberts of counsel appeared for ACN 123 and Mr A.J.Bulley of counsel appeared for Sydney Markets.

The Issues 26These proceedings raise two groups of issues: entitlement issues and priorities issues. 27The first group are entitlement issues. Sydney Markets contends: that the Superannuation Fund does not own the land; that Natale and Ferdinando Pisciuneri purchased it beneficially; and that ACN 123 has no equitable entitlement to the land on behalf of the Superannuation Fund. Likewise, ACN 123 says that Sydney Markets acquired no interest in the land under the 1996 Guarantee. This group of issues will be resolved first. If either party loses on this issue then priorities questions do not arise. 28The next group are priorities issues. If both Sydney Markets and ACN 123 are successful in establishing an equitable interest in the Goulburn property a question arises as to which has priority at general law and which has priority under the Real Property Act. 29The entitlements issues require the Court to examine the circumstances in which Sydney Markets took the 1996 Guarantee and the circumstances in which the Goulburn property was purchased in 1998. The priorities issues then require an examination of some circumstances between 1998 and 2012. 30The parties advanced a range of legal submissions to deal with many possible factual findings that the Court might make in these proceedings. But as the precise combination of detailed findings that the Court has made below may not have been fully anticipated by the parties the Court has decided to give a short further opportunity to the parties to add supplementary submissions of law to their existing submissions based upon these findings, the Court applies the law to these findings. This opportunity is being allowed so that no party will be denied the chance to put legal submissions on the precise combination of circumstances found by the Court. Directions for these further legal submissions are set out at the end of this judgment. 31As indicated this judgment makes all the factual findings that underpin these two groups of issues. What follows is the Court's factual findings, expressed in the form of an historical narrative. Whether or not expressed formally as findings, all that follows is findings.

The 1996 Guarantee 32Mr Natale Pisciuneri's liability under the 1996 Guarantee is not in contest. The District Court default judgment was entered against him on the basis of his liability on the 1996 Guarantee. He has now been made bankrupt on the basis of that judgment. 33The 1996 Guarantee was taken on 22 February 1996 in routine and unremarkable circumstances so Duffy Bros could become a registered buyer under the Scheme. 34Limited aspects of the 1996 Guarantee are relevant to the present issues of whether it may impose any charge on land held in the name of Ferdinando and Natale Pisciuneri. The 1996 Guarantee refers to Sydney Markets as "the Co-op" and to Natale Piscuineri as "Nick Pisciuneri" and Ferdinando Pisciuneri as "Fred Pisciuneri": 35Clause 1(a) of the 1996 Guarantee provides: "When more than one person is named in the First Schedule hereto those persons are jointly and severally liable under this Deed and a reference to a 'Guarantor' is a reference to those persons jointly and severally." 36Clause 2 of the 1996 Guarantee provides: "The Guarantor hereby unconditionally and irrevocably guarantees to the Co-op the punctual payment to it by the Registered Buyer of the Co-op Monies". 37Clause 13 of the 1996 Guarantee provides: "The obligations of the Guarantor, the rights of the Co-op in its own right, the rights of a Participating Member and the rights of the Co-op as an agent for a Participating Member shall not be affected in any way by any indulgence, extension of time, forbearance, release or any other thing done or agreed to be done between the Registered Buyer and the Co-op (in its own right or as agent for the Participating Member), or between the Registered Buyer and a Participating Member, in relation to any amount owed at any time by the Registered Buyer. The Guarantors each hereby charge their respective interests in any land now or hereafter held by them for all monies guaranteed pursuant to this Deed'." 38Sydney Markets did not immediately search the properties Natale or Ferdinando might hold in their names at the time of the 1996 Guarantee. Nor did Sydney Markets lodge caveats at that time against the title of any property held in either of their names. Such action then would not, in any event, have brought the Goulburn property to Sydney Markets' attention. The Goulburn property was not purchased for another two years.

The 1998 Purchase of the Goulburn Property 39ACN 123 contends the Superannuation Fund funded the 1998 purchase of the Goulburn property. Analysis of the available records shows that this contention is correct. 40The Superannuation Fund was established by trust deed on 27 June 1991. On 18 February 1995 some inconsequential amendments were made to the June 1991 Trust Deed to give effect to current superannuation laws. Mr Dominic Fedele, the Superannuation Fund's accountant, explained the sequence of application of funds in relation to the purchase of the Goulburn property. Much can also be inferred from the Superannuation Fund's primary and secondary financial records. 41ACN 123 seeks to characterise the monies used in the purchase of the Goulburn property as Superannuation Fund monies. The history of this purchase in part depends upon the evidence of the accountant for the Superannuation Fund, throughout these years, Mr Dominic Fedele. I found him to be a reliable witness. His account of the advice he gave to Messrs Pisciuneri and the financial steps he took to set the fund up was consistent and persuasive. It was thoroughly challenged in cross-examination but the challenge fails. 42Setting Up the Superannuation Fund. In 1990 Mr Fedele commenced discussions with the Pisciuneri brothers about their setting up a superannuation fund to give them the taxation benefits of superannuation over time. When he did so he was an accountant working for Mr Samuel Galluzzo, a partner, at the firm of accountants Galluzzo & Partners Pty Limited. Mr Samuel Galluzzo is the brother of Mr Vince Galluzo a legal practitioner who later acted on the purchase of the Goulburn property and who also later acted for Mr Ferdinando Pisciuneri in relation to Sydney Markets' guarantee claims in these proceedings. 43The Superannuation Fund trust deed of 27 June 1991 (the 1991 deed) recited the agreement of Mr Ferdinando Pisciuneri and Mr Natale Pisciuneri to be the first trustees of the Fund and to administer it in accordance with the terms of the 1991 deed. The 1991 deed declared (clause 2) that the trustees should "henceforth hold all assets, investments or other property of the Fund upon and according to the trust contained in this deed and the funds shall consist of" employer contributions from Duffy Bros, members contributions deducted by the employer, voluntary members' contributions and investments. The Fund was set up with an initial contribution of $10. And the Fund was said in a statutory declaration of Mr Ferdinando Pisciuneri at the time to be: "solely for the benefit of members"; and are where "the rights of members for the dependents to the whole of the capital income are fully secured"; and, that "the entitlement of each individual beneficiary is defined and has been communicated to him for her". The precise rules of the Superannuation Fund are generally not material for the determination of the issues in these proceedings. 44But a few will be mentioned. The 1991 deed provided for the possibility of minimum contributions by the employer, Duffy Bros, or the Fund's members. But those parts of the deed were not completed and it appears that therefore the Funds operated on an informal basis, such that its contributions were made from time to time as agreed (clauses 2.1, 2.2 and 2.3) with the trustees of the 1991 trust deed. The trust was not a discretionary trust but one which entitled members to particular superannuation benefits based on what was contributed on account of their membership: 1991 deed, clause 5.2. Mr Ferdinando Pisciuneri and Mr Natale Pisciuneri became members of the Superannuation Fund in June 1991. The trustees were given broad powers to invest the fund "as the trustees may in their absolute discretion determine", including in a wide variety of named investments: 1991 deed, clause 8.1. 45The Superannuation Fund was set up before the passage of the Superannuation Industry (Supervision) Act 1993. That Act and the consequent introduction of the Superannuation Industry (Supervision) Regulations 1994, required the 1991 deed to be amended in due course so that it was compliant Self Managed Superannuation Funds (SMSF). 46The 1991 deed was amended on 18 February 1995. One effect of the amended trust deed of 18 February 1995 was to make the Superannuation Fund compliant SMSF with the Superannuation Industry (Supervision) Act 1993, s 17A. One of the effects of compliance, in turn was that the Superannuation Industry (Supervision) Regulations 1994 applied to the Fund. Relevantly, regulation 13.14 of those regulations provided as follows: "Charges over assets of funds For the purposes of subsections 31(1) and 32(1) of the Act, it is a standard applicable to the operation of regulated superannuation funds and approved deposit funds that, subject to regulations 13.15 and 13.15A, the trustee of a fund must not give a charge over, or in relation to, an asset of the fund." 47This well known feature of SMSF's applied to this Superannuation Fund before the purchase of the 1996 Guarantee and the 1998 purchase of the Goulburn property. 48I accept that Mr Fedele is familiar with the handwriting of Mr Vince Galluzzo and Mr Samuel Galluzzo and that assists him to recognise documents from them. In 1994 Mr Fedele later became an equity partner in the firm Galluzzo Fedele Zaccagnini Pty Limited ("Galluzzo Fedele"). From the time that Mr Fedele commenced with this firm he had the conduct of the accounting affairs of both Mr Natale and Mr Ferdinando Pisciuneri. Duffy Bros established the Superannuation Fund on Mr Fedele's advice. And he was present when Duffy Bros resolved to establish the Superannuation Fund, as a Self Managed Superannuation Fund. 49Mr Fedele says, and I accept, that in June 1991 he instructed the initial trustees of the Superannuation Fund, the Pisciuneris, to open a Superannuation Fund bank account, to pay their contributions into that account, and to pay the Superannuation Fund's expenses from that account. From then on Mr Fedele says, and I accept, that he prepared (and supervised after 1994, when he became an equity partner in Galluzzo Fedele) the preparation of the Superannuation Fund's general ledger documents, financial statements, financial reports and Australian Taxation Office returns. When he prepared his principal affidavit in these proceedings he was not able to locate all the Superannuation Fund's financial and taxation documents for the period 1990-1998, but sufficient of them were available at the hearing for relevant reliable inferences to be drawn about the Superannuation Fund's affairs during this period. 50Mr Fedele was close professionally to the affairs of the Superannuation Fund. I accept his evidence that he annually perused Superannuation Fund bank statement, working account, interest bearing deposit statement and other certificates in order to audit the Superannuation Fund's financial statements. 51Initial contributions were made into the Superannuation Fund on 28 June 1991. A term deposit of $76,000 was invested with the Commonwealth Bank of Australia. I accept that with the accrual of interest that term deposit had grown by 16 May 1997 to a principal sum of $155,649.43. With the accumulation of further interest by 5 June 1997 the Superannuation Fund's total fund on term deposit was $157,703.97. That together with another cheque of $6,891.27 was aggregated into a term deposit of $164,595.24 the Superannuation Fund made with the St George Bank on 6 June 1997. These reasons discuss below the application of that term deposit to the acquisition of the Goulburn property. 52Purchasing the Goulburn Property. In 1997-1998 Mr Fedele discussed with both Mr Natale and Mr Ferdinando Pisciuneri the purchase of a number of parcels of land in the Goulburn area, amounting in all to some 2,500 acres of land. The Pisciuneri brothers instructed Mr Fedele to incorporate a company, Adore Pty Limited ("Adore"), to purchase some of these parcels of Goulburn land, and to set up another trust (distinct from the Superannuation Fund) of which Adore Pty Limited ("Adore") was to be the trustee. 53Mr Fedele recalls, and I accept, that in the second half of 1998 Messrs Pisciuneri discussed with him the purchase of two adjacent parcels of land: Lot 5 of the Gundillawah Park North Estate at Goulburn; and, Lot 6, which is adjacent to Lot 5 and is the Goulburn property the subject of these proceedings. 54Mr Fedele identified the front page of the Contract for the Sale of the Goulburn property, which records a sale of the property on 5 June 1998 for $165,000, with a 10 per cent deposit of $16,500, and a balance payable on completion of $148,500. The purchaser is described in the Contract for Sale as "Ferdinando Pisciuneri and Natale Pisciuneri as trustees for Duffy Bros Fruit World Pty Limited Staff Superannuation Fund". 55Before the purchase of the Goulburn property I accept that Mr Natale Pisciuneri asked Mr Fedele whether the Superannuation Fund could be used to purchase the Goulburn property, or "Lot 6" as it was called in their discussions. He advised Mr Natale Pisciuneri "It is a permissible investment by the Super Fund". 56Mr Fedele had nothing to do with the legal work the conveyance of the Goulburn property, which was eventually transferred by a Real Property Act Transfer on 1 February 1999, expressing a consideration of $165,000. Mr Fedele was criticised as not being sufficiently close to the contract for sale to be able to vouch for it. But it is clear that he saw the front of the contract at the time. And Mr Fedele was not the kind of witness who would have been mistaken that he was actually involved in the accounting side of this transaction. I find he was given the front page of this contract at the time. Notwithstanding that the front page of the contract in evidence is not signed, I find that this front page was the front page of the contract for sale of the Goulburn property in June 1998. 57The 1 February 1999 Transfer records the transferees as "Ferdinando Pisciuneri and Natale Pisciuneri" as tenants in common in equal shares. Some words after their names have been crossed out on the form of transfer. The crossed out words can just be discerned underneath the crossing out as the same as the description of the purchasers in the contract. Also crossed out is the name of the company, Adore. This crossing out is consistent with Adore being rejected as the purchaser and the reference to the Superannuation Fun being crossed out in order for the information on the Transfer to conform with Real Property Act, s 82(1), that the Registrar-General "shall not record in the Register any notice of trusts whether express implied or constructive". The Transfer was signed by the solicitor for Messrs Pisciuneri, Mr Vince Galluzzo. 58Sydney Markets submitted that Mr Fedele could not produce any document recording a resolution of the trustees of the Superannuation Fund to purchase Lot 6. That remained the situation at the end of the trial. But that does not undermine the overall effect of Mr Fedele's evidence. Mr Fedele was a plainly competent accountant who had well documented the setting up of the Superannuation Fund. A compliant SMSF would ordinarily have passed a trustee's resolution to acquire this asset. But the absence of this document is a minor omission in all the circumstances. 59The funding of this conveyance was controversial. But the Court finds the following occurred. 60Funding the Deposit. The $16,500, 10 per cent deposit on the sale at $165,000 was paid out of the Superannuation Fund's cheque account with St George Bank, account 072 (referred to in these reasons only by its last three digits). Although contracts were not exchanged until 5 June 1998, the cheque for the deposit was drawn on 7 April 1998 for the exact sum of $16,500. Account 072 with St George Bank is entitled "Duffy Bros Fruit World Pty Limited Superannuation Fund" at a post office box address at Flemington Markets. The drawing of the cheque occurs on the same day as term deposit proceeds of $12,500 are made available into account 072, 7 April 1998. Mr Fedele verified this was the Superannuation Fund's bank account. I not only accept his evidence, because of his familiarity with Duffy Bros financial affairs, but the title for the account is also consistent with that conclusion. Mr Fedele also verified that his own handwriting appears on the statement of account on which this entry appears. The account statement covers the period 31 March 1998 to 30 June 1998. He says, and I accept, he placed notes on the bank statement whilst he was undertaking auditing work for the Superannuation Fund at the end of that financial year. His handwriting describes this entry on 7 April for $16,500 as "Deposit Goulburn property". I infer he wrote that because that was what he believed the money was for at the end of FY98. 61Sydney Markets challenged Mr Fedele's evidence on the deposit. Mr Fedele certainly wrote the words "Deposit Goulburn Property" some months after 7 April 1998. But he only wrote it only because, in his professional opinion, the evidence satisfied him that was what the payment was for. He was performing the duties of an auditor of this SMSF in this accounting work. The absence of original cheque butts and primary accounting records to substantiate this payment is not at all surprising after the passage of time. There is no requirement to keep such primary accounting records for more than about 5 years and it is not a valid criticism of either the Superannuation Fund or Mr Fedele that they are not presently available. 62Funding Stamp Duty. Subsequent amounts were paid from the Superannuation Fund account 072 to fund stamp duty and the balance of the purchase price. The stamp duty was paid on 29 October from that account (cheque number 6) in the sum of $4,269 and appears as an entry on the quarterly account statement for account 072 for the period 30 September 1998 to 31 December 1998. Again I accept that Mr Fedele scrutinised this bank statement in the course of auditing the Superannuation Fund at the end of FY99 and had written "stamp duty" next to the entry and crossed out the word "Adore". He did this to correct an error in which he had originally associated the writing of this cheque with the parallel purchase of Lot 5 by Adore. Adore's simultaneous purchase of Lot 5, which as earlier indicated, was adjacent to Lot 6 in the same rural locality outside the City of Goulburn, became a source of confusion, which I accept Mr Fedele steadfastly tried to correct. Mr Fedele was across the detail. He visited Lot 6. He understood that it was different from Lot 5 and was not confused himself. And the stamp duty of $4,269.00 paid out of the account 072 was the correct amount for the Goulburn property, Lot 6, not for Lot 5. The same amount of stamp duty of $4,269 appears in the Galluzzo Golotta Adriano Simone Statement of Account in respect of the Goulburn property, Lot 6, issued on 20 October 1998 for the completion of the transaction, describing the amount of $4,269 as paid due for "stamp duty". 63Funds for Completion. The Superannuation Fund account 072 was also the source of the funds that completed the purchase of the Goulburn property. In preparation for the ultimate settlement of the purchase, the Superannuation Fund placed money on fixed deposit with St George Bank, on 6 June 1997, the day after contracts were exchanged. This first fixed deposit had a 90-day maturity date of 4 September 1997. This term deposit account was opened in the name of the Superannuation Fund: the bank's receipt for the funds deposited shows the account holder as "Duffy Bros Fruit World Pty Limited Superannuation Fund" care of the same post office box address used for account 072. The St George Bank allocated a separate account number for the term deposit, namely account 727. But when St George Bank generated later statements of account for account 072, those statements for some unknown reason did not include any reference to the Superannuation Fund. 64This created controversy in the proceedings. Mr Bulley for Sydney Markets contended that account 727 did not hold Superannuation Fund monies. But I conclude that account 727 did hold the monies of Superannuation Fund. First, Mr Fedele says they were Superannuation Fund monies, and I accept his evidence. But the objective circumstances of the earlier investment of these funds with the Commonwealth Bank of Australia also support that conclusion. The amount of $164,595.24 deposited on 6 June 1997 at an interest rate of 5.3 per cent was to mature on 4 September 1997. Account 072 shows a matured deposit on 4 September 1997, which was then reinvested on 5 September 1997, in an amount of $166,647.49. This is very closely approximate (within $130) to quarterly interest up to 5 September 1997 at 5.3 per cent on a principal amount of $164,595.24. This is very close and I infer that account 727 represents the maturing and reinvestment of the original deposit in the name of the Superannuation Fund. I do not accept Sydney Markets' submission that Mr Fedele is only "speculating" that the amounts in account 727 and Superannuation Fund monies. 65Moreover, there is another link between account 072 and account 727. Account 727 is the source of the $12,500 which was used to substantially fund the deposit on 7 April 1998. The running balance of account 727 immediately prior to 7 April 1998 was $171,295.34. This was rolled over between 7 and 8 April 1998 and the amount of only $158,795.34 was reinvested. The balance of $12,500 was transferred from account 727 into account 072 to fund the deposit. The amount of $158,795.34 which was later matured after successive monthly reinvestments between April and November 1998, became $163,212.42. All but $15,000 of this amount was redeemed on 5 November 1998. The difference of $148,212.42 (being $163,212.42 minus $15,000) is marginally greater than the amount required in the next, and final, step of the conveyancing settlement. 66The Superannuation Fund had received, shortly after 20 October 1998, a Statement of Account from Galluzzo Golotta for the purchase of Lot 6, the Goulburn property, which required a balance of $146,833.30 to complete this purchase. I infer that the redemption of the slightly greater fixed deposit of $148,212.42 on 5 November was used for that purpose. Mr Fedele says it was, and I accept his evidence. The Galluzzo Golotta Statement of Account was addressed to the then trustees (Mr F & Mrs N Pisciuneri) (sic) "ATF Duffy Bros Fruit World Staff Superannuation". 67The Superannuation Fund's Accounts. Mr Fedele's post-purchase accounting for the Goulburn property is consistent with its beneficial ownership by the Superannuation Fund rather than ownership by Mr Ferdinando and Natale Pisciuneri personally. Mr Fedele provided accounting services to Duffy Bros in conjunction with an internal group accountant, Mr Kevin Roach. Duffy Bros had about 5 or 6 employees during this period. Duffy Bros practice in this period was for Mr Roach to do the day-to-day accounting and Mr Fedele did the overall advisory and of end of year accounting work using the management accounts that Mr Roach had prepared. In the course of preparing annual trial balances for the Superannuation Fund for FY99 (which included the financial year in which purchase of the Goulburn property was completed) Mr Roach recorded Lot 6 at cost at $171,871.30. The same figure appears in the annual general ledger. This figure approximately coincides with the total purchase price of the land, together with stamp duty, legal fees and disbursements. In conformity with the Galluzzo Golotta Statement of Account (Exhibit A) the entry for Lot 6 in the Superannuation Fund's FY99 trial balance and general ledger is described as "Gundillawah Park South, Bungonia Road Goulburn". I accept that it was Mr Fedele's practice to use addresses rather than title details to describe land within accounts of the Superannuation Fund. 68Mr Bulley cross-examined Mr Fedele, to suggest that it the Superannuation Fund may indeed have purchased Lot 5 and that Lot 6, the Goulburn property, may have been the Pisciuneri's purchase for themselves, beneficially. But I do not accept this contention. The entries in the trial balances and general ledgers for FY99 correspond with the Galluzzo Golotta Statement of Account description of the same property. The separate Galluzzo Golotta Statement of Account for the Adore's purchase of Lot 5 is for a higher purchase price of $183,000. Thus the purchase consideration recorded in the Superannuation Fund's accounts does not correspond with Lot 5. Moreover, the address for the Adore Lot 5 purchase is "Gundillawah Park North Estate" a different address from Lot 6. Finally, and perhaps most importantly, I accept Mr Fedele's evidence that he was familiar with both these properties and knew which one was in the Superannuation Fund. 69Mr Bulley rightly pointed to some difficulties in reconciling the logic of Exhibit D, being DP 880227, showing Lots 5 and 6, with the idea that Lot 6 has an address in Bungonia Road. Lot 6 really does seem, according to Exhibit D, to front a Kooringaroo Road, not Bungonia Road. But notwithstanding this anomaly, it is quite evident from the Galluzzo Golotta solicitors' 20 October 1998 statement of account in respect of this sale that they too were using "South Bungonia Road, Goulburn" as the address of Lot 6. If the Superannuation Fund's solicitors were using this address, for Lot 6, Mr Fedele can hardly be criticised for doing so. 70As a partner in his accounting firm, Mr Fedele audited the Superannuation Fund's accounts for FY99. The financial statements for that year show freehold land at $171,871.30 as an "Investment-Freehold Land", an amount corresponding with the entries for Lot 6 in the trial balances and general ledger for that year. Mr Fedele gave a formal audit opinion that the FY99 financial report was presented "fairly in accordance with the accounting policies described in the notes to the financial statements" for FY99. And Mr Ferdinando Pisciuneri verified as trustee his receipt of Mr Fedele's auditor's report. 71Nor do I find persuasive Sydney Markets' submission on funding issues that ACN 123 should have called Mr Roach, the Duffy Bros in house accountant, to explain the financial detail of these transactions directly as he drew the cheques for them. The transactions make reasonable sense without him.

The Superannuation Fund Changes Trustees - 1998 to 2010 72The trustees of the Superannuation Fund changed between the time the Superannuation Fund purchased the Goulburn property and when Duffy Bros fell into default on its running account to Sydney Markets, Mr Ferdinando Pisciuneri retired from the business in 2003. The events in this 12-year period bear upon the issues in the proceedings in two main ways. First, Mr Fedele was corresponding with public authorities in relation to the change of trustees in a way that confirms his conviction that the Goulburn property was owned by the Superannuation Fund and not by Mr Ferdinando and Mr Natale Pisciuneri. Secondly, Sydney Markets contends that the Superannuation Fund's change of trustees was defective and that ACN 123 has no status to bring these proceedings on behalf of the Superannuation Fund. Before these issues are considered though, the events of this period need to be examined. 73The June 1991 Superannuation Fund Trust Deed was varied after 1998. Rule changes were made by a deed of amendment on 29 March 2000, but leaving Mr Ferdinando and Mr Natale Pisciuneri as trustees. These were inconsequential amendments to update the deed to comply with then current superannuation laws. 74But in the last quarter of 2003 trustee changes occurred. Mr Ferdinando Pisciuneri retired as trustee. On 30 September 2003 a deed of amendment recited the resignation of Mr Ferdinando Pisciuneri under the June 1991 Deed and the appointment of Mr Dominic Pisciuneri as a new trustee in his place. Then on 21 December 2003 the continuing trustees, Mr Natale Pisciuneri and Mr Dominic Pisciuneri resolved to appoint Ms Jennelle Pisciuneri as an additional trustee. Finally by deed of amendment on 21 December 2007 Natale, Jennelle and Dominic Pisciuneri adopted new rules for the Superannuation Fund to conform with current superannuation law. The last change in this series occurred on 14 July 2011 when by deed, Natale, Jennelle and Dominic Pisciuneri all resigned and ACN 123 was appointed a new trustee of the Superannuation Fund in their place. 75In the midst of the late 2003 Superannuation Fund deed changes, Mr Ferdinando and Mr Natale Pisciuneri briefly dealt with the St George Bank on the basis that they were both beneficial owners of the Goulburn property. But I accept that this was a mistake, and was soon corrected. 76The Goulburn property was mortgaged to St George Bank Limited on 24 April 2003. This mortgage remained on the title for approximately two and a half years, being discharged on 29 November 2005. The mortgage incorporated St George Bank's standard memorandum of terms (Memorandum Number 7239702) for commercial mortgages. By clause 1.5 of those terms the mortgagors declared as follows: "1.5 You declare that: (a) you own the property or are in the process of becoming the owner of it; and" (b) you have told us about all rights that affect, or are proposed or likely to affect, the property (such as easements, leases, security interests, the rights of a beneficiary under a trust or proposals to compulsorily acquire it); and" 77This declaration appears to be inconsistent with ACN 123's present case. The parties advanced competing submissions as to the effect of this mortgage. But I accept Mr Pisciuneri's evidence that the 2003 mortgage with St George Bank was taken in error over Lot 5 and Lot 6 and was only intended to be taken over Lot 5. Although I have not found his evidence to be generally reliable, there was a high inherent likelihood of error by lawyers and bankers dealing with these two adjacent rural properties purchased at the same time. 78Mr Bulley contended that Mr Pisciuneri could not have made a mistake in entering the April 2003 mortgage of the subject land to the St George Bank. It is clear that neither Mr Ferdinando or Mr Natale Pisciuneri seemed to have then declared to the St George Bank that the land was held in trust. But I accept Mr Pisciuneri's evidence on this. Galluzzo Golotta had already shown considerable confusion in 1998 about the correct addresses of Lots 5 and 6. An error five years later about whether one of the two properties was in or not in the Superannuation Fund is quite a likely error. As observations elsewhere in this judgment make clear, Mr Natale Pisciuneri seemed to have little understanding of the difference between his own assets and those in the Superannuation Fund. So, he was hardly likely to be a source of enlightenment to his lawyers on this issue. And it is consistent with Mr Pisciuneri's evidence of a mistake that the mortgage was discharged by the end of 2005. The fact that a Guarantee and Indemnity was signed for St George Bank at the same time does not take Sydney Markets' contention any further. 79On 11 July 2005 Mr Fedele warned the Superannuation Fund trustees by letter that the names of the Registered Proprietors on Lot 6, no longer coincided with the names of the current trustees, Natale, Dominic, Jenelle Pisciuneri. Nothing was done to respond to this advice. When Mr Fedele gave his advice the Goulburn property was still mortgaged to St George Bank. The Sydney Markets contention is that nothing was done to rectify the title problem because the existing trustees well knew that Mr Ferdinando and Natale Pisciuneri well knew that they owned the Goulburn property beneficially and not the Superannuation Fund. 80There is a fundamental problem with this contention. It fails to give any credit to Mr Fedele's professional competence and integrity. It is difficult to conceive that he could be writing letters like that of 11 July 2005 (and continued to do) unless not only he genuinely believed that the Superannuation Fund was the beneficial owner of the Goulburn property, Lot 6, but he received similar confirmation from the trustees. The better explanation for the delay is a problem with locating the Certificate of Title for Lot 6. 81Mr Fedele was required periodically to report contraventions of the Superannuation Industry (Supervision) Act 1993 by trustees of SMSF, such as the Superannuation Fund. Mr Fedele issued contravention reports relating to the Goulburn land for the Superannuation Fund for FY08 and FY09, FY10 and FY11. The problem was the one reported in Mr Fedele's 11 July 2005 letter: the land remained in the names of Mr Ferdinando and Mr Natale Pisciuneri, although the Superannuation Fund trustees had changed. For the FY08 year Mr Fedele reported to the ATO on 5 June 2009 a contravening event as follows: "Farmland of the fund of Goulburn has been held in the name of the two previous trustees and not in the name of the three current trustees as trustees for the Fund." 82This, of course, could only be a report about Lot 6, not Lot 5, which was held in the name of Adore. It is continuing confirmation: that Mr Fedele's view was that the Goulburn property was held in the Superannuation Fund; and, that he was not engaging in some pointless exercise of co-operating with trustees who did not believe their Superannuation Fund was beneficially entitled to this land. 83Mr Fedele reported this contravention as not having been rectified in FY09, FY10 and FY11. Mr Fedele reported in FY11 to the ATO that "a solicitor has been instructed to transfer the title of the property. Declaration of trust is in place". The report to the ATO went on to describe what the Court finds to be the fact: that St George Bank had not returned the certificate of title to the Goulburn property, so the title could not be transferred from the name of Mr Ferdinando and Mr Natale Pisciuneri into names of the new trustees. I accept Mr Fedele's evidence that the delay was caused by St George Bank's loss of the certificate of title. 84The effect of the delay was that from 30 September 2003 until the present time the registered proprietors of the Goulburn land have been different from the trustees of the Superannuation Fund. It is very difficult to accept that this not very complicated problem could not have been rectified in something less than 9 years by the application of modest diligence on the part of the trustees. If a certificate of title were lost at a financial institution, no doubt an application for a replacement could have been made. That being said, although the trustees of the Superannuation Fund were criticised for this delay in these proceedings, their delay in this respect is probably not ultimately material. There is very little reliable evidence before the Court as to what steps were taken to rectify this problem. But the Court accepts such evidence as there is from Mr Fedele on this subject. Mr Natale Pisciuneri gave some evidence on the issue that the certificate of title was located by St George Bank but it was second hand evidence and not reliable, except to the extent that it can explain how the St George Bank mortgage over Lot 6 was discharged in November 2005.

Duffy Bros Defaults - April 2010 to September 2012 85For the fourteen-year period between 1996 and March 2010 Duffy Bros discharged its financial obligations to the satisfaction of Sydney Markets. But on 30 April 2010 Duffy Bros defaulted on its obligations. Duffy Bros rectified that default but defaulted again in May 2010. Applying his standard procedure, Sydney Markets' manager, Mr Jaime Mendonca, then undertook a real property search, to determine what real property Ferdinando or Natale Pisciuneri owned that may be captured by the charge in the 1996 Guarantee. Mr Mendonca reviewed the Duffy Bros account and arranged a meeting with Natale Pisciuneri to discuss the state of accounts between Duffy Bros and Sydney Markets. 86The 19 May 2010 Meeting. The meeting took place on 19 May 2010. I fully accept Mr Mendonca's account of this meeting. He took notes of the encounter for reporting to his company's directors. I do not accept Mr Pisciuneri's account to the extent that it is inconsistent with that of Mr Mendonca. Mr Mendonca asked Mr Natale Pisciuneri why the account had not been paid. Mr Pisciuneri explained that their bank had refused to extend further credit facilities to Duffy Bros and had refused to release other funds from the sale of properties to enable Duffy Bros to pay existing accounts. Natale Pisciuneri promised that Duffy Bros would sell other properties to generate funds to pay the account. He explained "this is a temporary issue and the company will be in a better position, particularly when other assets are sold". 87Mr Mendonca then set out the situation. He said to Mr Natale Pisciuneri, "we will do what we can to assist you, however because it is a big account we need to secure our position to determine your financial position to allow the account to continue to operate". He tabled his land title searches over four properties. He explained to Mr Natale Pisciuneri that these were all properties that Sydney Markets had identified as being held in his name. 88Mr Mendonca remembers, and I accept as accurate, the exchange between himself and Mr Natale Pisciuneri at his mention of the Goulburn property. Natale Pisciuneri said to him "it is my property [the Goulburn property]....my brother does not own it at all...the solicitor made a mistake when it was purchased and Fred [Ferdinando] has nothing to do with that property". Mr Mendonca then warned Mr Natale Pisciuneri "we have to treat it [the Goulburn property] as half owned by you and half owned by Fred until he is removed from the title". 89Mr Natale Pisciuneri has a different version of this meeting. But I do not accept it. He says that he said to Mr Mendonca "I don't know why my brother's name is on the land. The land doesn't belong to him, it belongs to the Super Fund. I don't know why it's there. Dominic Fedele would be able to explain that to you". Mr Mendonca says he cannot recall Mr Fedele's name being mentioned at this meeting at all. But apart from my general preference for Mr Mendonca's evidence over Mr Natale Pisciuneri's evidence, two other circumstances make it improbable that such a thing was said. First, if Mr Pisciuneri had said this, that would have meant there was no equity in the Goulburn property available to be mortgaged. According to Mr Mendonca then "the figures would not stack up", so "we would most likely not continue to deal with them". Mr Pisciuneri had claimed equity in a property in Canberra of about $300,000 and claimed equity, after a first mortgage, of about $1 million in another property at Brownlow Hill. The Goulburn property, Lot 6, did make a difference to Mr Mendonca, because Mr Natale Pisciuneri represented to Mr Mendonca that he owned it on his own, not with his brother, and it was said to be worth about $400,000. Thus it represented an equity in his name of about $400,000. I accept, contrary to ACN 123's submissions, that Mr Mendonca was very sceptical of the equity said to be in the Brownlow Hill property, because of what he believed was probably an "all monies" first mortgage. According to Mr Mendonca, and I accept, it would have been "a different ball game" if he had been told at that point the Goulburn property was with the Superannuation Fund. 90Mr Pisciuneri propounds a wrong and rather absurd conversation occurring at this meeting. He says he was asserting that the property was in a superannuation fund and Mr Mendonca was asserting that it was not. Mr Mendonca's probable reaction in this situation, if he had been told the property was in a superannuation fund, would have been immediately to suspend the provision of any more credit to Duffy Bros. As it was Duffy Bros continued trading with credit from Sydney Markets from 19 May until 10 July of that year. The precise quantum of the credit extended in this period is not clear on the evidence, but it clearly resulted in the incurring of a part of the debt the subject of the District Court judgment. Mr Roberts submits for ACN 123 that there is no evidence that Sydney Market's extended any credit to Duffy Bros on the strength of this conversation. But Mr Mendonca says that Sydney Markets did so and I accept his evidence on the topic. 91The other difficulty with Mr Natale Pisciuneri's version of this meeting was that neither he nor Mr Ferdinando Pisciuneri immediately asserted in correspondence after 19 May that the Goulburn property was owned by the Superannuation Fund. The correspondence on his behalf after that meeting takes a far less definite position. If that is what he had said on 19 May it is to be expected that he would have made the position clear in lawyers' correspondence soon after. But he did not. For example even much later Mr Ferdinando Pisciuneri's letter of 11 August 2011 says nothing about the Superannuation Fund. This is curious of course: as the Court now finds that the property was beneficially owned by the Superannuation Fund. The explanation for this in my view is that Mr Natale Pisciuneri had a very casual attitude to the difference between his own assets and those of the Superannuation Fund, if he even understood the difference then, and more importantly in my view he did not want to reveal to Mr Mendonca too early this ultimate line of defence. In short, he concealed the Superannuation Fund's possible claim over the Goulburn property at this time because he wanted Mr Mendonca to keep dealing with him. Because I believe Mr Fedele's evidence I infer Mr Pisciuneri was well aware Lot 6 was probably a Superannuation Fund property. 92Sydney Markets lodged the caveat the next day, 20 May. The Superannuation Fund made no immediate attempt to remove the caveat. It was to be about two years before an attempt was made to sell the property, prompting the need to remove the caveat. 93But in the meantime negotiations continued between the Pisciuneris and Sydney Markets about Duffy Bros' outstanding account. On 28 May 2010 Sydney Markets alerted Natale and Ferdinando Pisciuneri as guarantors of the state of Duffy Bros account and informed them: "We are informed by Mr Nick [Natale] Pisciuneri that the company will soon be in a position to again make payments by the due dates. For your information we have taken steps to secure our interest against property as allowed under the personal guarantee and will consider further steps based on future events." 94This letter was apt to put Ferdinando and Natale Pisciuneri on notice of a future claim on the guarantee. This seems to have been a precaution taken because Mr Mendonca had been dealing only with Natale Pisciuneri and wished to put Ferdinando on notice of the situation. 95Ferdinando quickly denied liability on the guarantee. His solicitors Galluzzo Adriano claimed by letter of 1 June 2010 the guarantee had been terminated in 2003 and that he did not have any continuing liability as guarantor for the obligations of Duffy Bros. He also had ceased being a director of Duffy Bros back in 2003. Again this letter said nothing about the Superannuation Fund. 96On 2 June 2010 Sydney Markets wrote back to Galluzzo Adriano disputing Mr Ferdinando Pisciuneri's assertion of a guarantee termination date of 2003 and giving him notice he would be held liable for all amounts due up to and including 1 June 2010. But Sydney Markets was prepared to accept Mr Ferdinando Pisciuneri's 1 June notice that no additional credit would be advanced on the strength of his guarantee for further purchases on the Duffy Bros account. Sydney Markets confirmed the effect of their recent conversation with Natale Pisciuneri about his ownership of the Goulburn property in the following terms: "For your information we have commenced negotiations with Duffy Bros Fruit World P/L and its Directors in respect to its ongoing account. To assist us in our dealing with Mr Natale Pisciuneri could you please confirm that [the Goulburn property] in Goulburn Mulwaree which currently lists Natale and Ferdinando Pisciuneri as its proprietors is actually is actually owned solely by Natale Pisciuneri and that this will be rectified with the Land Titles Office. " 97This was entirely consistent with nothing having been said to Mr Mendonca about the Superannuation Fund in May 2010. The same day Galluzzo Adriano solicitors advised Mr Mendonca that "our client should transfer the [the Goulburn property] to Natale Pisciuneri once Ferdinando's release requirements and security issues are satisfied". This rather confirmed that as between the Pisciuneri brothers there was an understanding that Natale was to receive a transfer of this property. 98In about June 2011 Sydney Markets engaged solicitors, Messrs Manion McCosker to act to enforce the guarantee. Manion McCosker commenced the District Court proceedings and obtained default judgment against Duffy Bros. 99On 22 February 2011 Manion McCosker sent a follow up letter to Galluzzo Adriano enquiring whether the Goulburn property "has been transferred as stated to Natale Pisciuneri solely and, if not, when it will be so transferred as our client is about to commence enforcement proceedings against the property". As earlier indicated, the enforcement proceedings commenced and resulted in judgment against Natale Pisciuneri and Duffy Bros on 9 May 2011 in the sum of $635,553.03. 100The 26 July 2011 Telephone Conversation. Before a bankruptcy notice issued to Natale Pisciuneri on 18 July 2011, Mr Mendonca had a telephone conversation with him. This conversation is disputed. But I prefer Mr Mendonca's version. Mr Mendonca was a careful and reliable witness who did not overstate or exaggerate any aspect of his evidence. He clearly managed Sydney Markets' relationship with this creditor, cautiously and thoroughly documented his actions. 101The conversation took place on 26 July 2011. Mr Mendonca and Mr Natale Pisciuneri discussed how Mr Natale Pisciuneri would satisfy his obligations to Sydney Markets by selling another property in Brownlow Hill to Mr Natale Pisciuneri's son. Mr Mendonca's focus then turned to the Goulburn property: hardly a probable scenario if he had been told over a year before that the Superannuation Fund owned the property. Mr Mendonca offered to take a mortgage over this property as a basis for a short-term stay of action against Mr Natale Pisciuneri. He said: "The Goulburn property which lists Fred [Ferdinando Pisciuneri] as a half owner is free of encumbrance...we would be satisfied with a first mortgage over the property so if you fail to pay us, we will be able to sell the property. In return for the mortgage we would not take any action against you for 6 months which will give you an opportunity to arrangement payment on the sale of your assets." 102Mr Natale Pisciuneri was not happy at the suggestion that his brother had an interest in the Goulburn property. He said "Fred [Ferdinando] does not own that property and he has nothing to do with me". Again Mr Natale Pisciuneri said nothing about the Superannuation Fund owning Lot 6. It is improbable that Mr Mendonca would have engaged with Mr Pisiuneri at all from this time if he was aware that Mr Pisciuneri was alleging that the Superannuation Fund was the beneficial owner of the land. 103Mr Mendonca returned to the issue. He seemed keen to try and procure a mortgage. He replied: "we have had correspondence from Fred's [Ferdinando Pisciuneri's] solicitor which indicates he was to transfer his interest in the property to you but as he may have a claim on it, we will, while he is on the title, consider him to be an owner so you will have to have him removed from the title so we can register the mortgage or we may have a fight on our hands at a later date which we would prefer not to have." 104Mr Natale Pisciuneri went along with the proposal. In the following terms he authorised Mr Mendonca to speak to his solicitor, Mr Charles Parisi: "I will give you the mortgage...please send it to my solicitor Mr Parisi so he can organise to remove Fred [Ferdinando Pisciuneri] from the title and organise the mortgage. I will get something from Fred [Ferdinando Pisciuneri] to clarify that he does not own the property." 105Somewhat confirming the tenor of this 26 July 2011 conversation, on 11 August 2011 Mr Ferdinando Pisciuneri forwarded a letter to Sydney Markets concerning the Goulburn land stating: "This is to confirm that I, Ferdinando Pisciuneri, have no right title of interest in the above property. My name is being deleted from the title deeds. I have no mortgage, or any charge whatsoever over the above property." 106Mr Mendonca met Mr Natale Pisciuneri face-to-face on 17 August 2011. At the offices of Sydney Markets they discussed the requirements for the mortgage Mr Mendonca wanted over the Goulburn property. I accept Mr Mendonca's evidence that at this meeting Mr Natale Pisciuneri said to Mr Mendonca, "I will have Fred [Ferdinando] removed from the title and make the deed available if you do not stand in the way of the sale of my home [the Brownlow Hill property] to my son". Again Mr Natale Pisciuneri said nothing about the Superannuation Fund owning Lot 6. 107The same day, Manion McCosker forwarded a form of mortgage to Parisi to secure all monies owing to Duffy Bros to Sydney Markets up to 1 February 2012, the expiry of the proposed mortgage period, when the monies would become immediately due and payable. Manion McCosker asked for execution within 5 days. 108But the executed mortgage was not returned. Mr Mendonca's followed up Mr Natale Pisciuneri by telephone on 2 September 2011. Mr Natale Pisciuneri explained he had instructed Parisi to finalise the mortgage "but for some reason he has not done so", that as a result he had asked Mr Parisi to send the file to another solicitor. 109So Manion McCosker followed up again. On 2 September 2011 they complained that Parisi had not been in contact and foreshadowed that the bankruptcy petition would proceed from the following Monday, 5 September 2011 without further notice. 110Manion McCosker did not receive any written reply to their 2 September 2011 email. For safe measure Manion McCosker sent another facsimile letter on 5 October 2011 to Parisi, pointing out that Manion McCosker had not heard back since the 17 August and asking "would you please confirm by return whether you still act for Mr Pisciuneri". Nothing was heard back. 111In the result, neither Natale or Ferdinando Pisciuneri ever granted this mortgage to Sydney Markets. 112Mr Natale Pisciuneri explains this failure/refusal to give requested mortgage to Sydney Markets as prompted by a concern that he knew at that time that he was not allowed to give a mortgage over property owned by the Superannuation Fund. But in my view the correct conclusion is more sinister. Mr Pisciuneri by then did know (as he says he did) that the Goulburn property was owned beneficially by the Superannuation Fund. And he had known this for some time. But he was nevertheless prepared to treat with Mr Mendonca on the basis that he (Mr Pisciuneri) was the beneficial owner. He was happy to string Mr Mendonca along.

Statement on Factual Conclusions 113Set out above are all the factual findings which are sufficient for the Court to draw conclusions both as to the entitlement issues and the priorities issues identified earlier in these reasons. 114As has been indicated the parties have advanced a range of legal submissions to deal with the many possible factual findings the Court might make in these proceedings. But the precise combination of detailed findings the Court has made above may not have been fully anticipated by the parties. So the Court has decided to give the parties a short further opportunity to add supplementary submissions of law based upon these findings, to their existing submissions. Then the Court will apply the law to these findings in light of those submissions. This opportunity is being afforded to the parties so that no party will be denied the chance to put legal submissions on a precise combination of circumstances found by the Court. 115Directions for these further legal submissions are explained, as follows. These are only supplementary legal submissions based upon the factual findings now already made. The Court is not inviting any party to make contentious submissions as to these findings of fact. The submissions must be short and should not re-visit or repeat the substance of submissions already made. For that reason the submissions will be limited on each side to no more than 7 pages, which should be quite sufficient for this purpose. 116Accordingly, the Court makes the following further orders and directions: (1) Direct the parties to provide to my Associate and serve by 4pm on Friday, 4 July 2014 any supplementary written submissions of no more than 7 pages in light of the Court's present judgment on factual questions. (2) Direct the parties to provide to my Associate and serve by 4pm on Friday, 18 July 2014 submissions of no more than 7 pages in reply to the submissions served on 4 July 2014. (3) Direct the parties that the submissions in directions (1) and (2) should only contain submissions on issues of law and should not contain contentious submissions about findings of fact already made. (4) Upon receipt of these submissions after 18 July, or an indication from parties that no further submissions will be filed, the Court will reserve the remaining further issues in the proceedings for judgment. (5) The Court notes that unless any party applies by Motion, the Court will not afford the parties any further opportunity to put oral submissions or adduce any further evidence before the balance of the Court's reasons for decision are delivered.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 June 2014