New South Wales Supreme Court CITATION : Cavallaro v Egisto [2002] NSWSC 880 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1532/01 HEARING DATE(S) : 14/08/02 JUDGMENT DATE : 27 September 2002 Angelino Cavallaro - Plaintiff/Second Cross-Defendant PARTIES : Pompeo Joseph Egisto - First Defendant/First Cross-Defendant Santa Giunti, Leopoldo Antonio Giunti and Pietra Alfia Giunti - Second Defendants/Cross-Claimants JUDGMENT OF : Barrett J Mr M R Aldridge SC - Plaintiff COUNSEL : Mr L Calvitto, Solicitor - First Defendant Mr C J Bevan/Mr J G Azzi - Second Defendants Anderson Lawyers SOLICITORS : Egisto Solicitors - First Defendant Turner Freeman CATCHWORDS : PROCEDURE - costs - no question of principle DECISION : See paragraph 10 - 5 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY, 27 SEPTEMBER 2002 1532/01 – ANGELINA CAVALLARO v POMPEO JOSEPH EGISTO (ADMINISTRATOR OF THE ESTATE OF AGATINO GIUNTI) & ORS JUDGMENT 1 The background to these proceedings may conveniently be outlined by repeating the first six paragraphs of my judgment of 6 March 2002: "1. The plaintiff is the sister of the late Agatino Giunti and the daughter of the late Santa Uccino Giunti. The second defendants are the children of Agatino Giunti. The first defendant is the administrator of the as yet unadministered estate of Agatino Giunti. 2. The second defendants are residents of Italy, as was their late father, Agatino Giunti, who, according to the evidence, made a visit to Australia in 1987 during which he opened a deposit account with the Commonwealth Bank. A sum of $8,000 was paid into that account. Ownership of the $8,000 had been the subject of a dispute among family members and, by way of resolution, was placed in the account on the basis that it would be used to care for Santa Uccino Giunti, the then elderly mother of Agatino Giunti and of the plaintiff. The mother died about eight years later. 3. The plaintiff, who had authority from her brother, Agatino Giunti, to operate the Commonwealth Bank account, says that she deposited money of her own into that account over a period of years without the knowledge of Agatino Giunti. He died in January 2000 and the plaintiff at least for some period thereafter continued to pay money into the account in his name. 4. The first defendant, a solicitor, obtained a grant of letters of administration in respect of the estate of Agatino Giunti and now hold the funds in the Commonwealth Bank account. The plaintiff asserts that she is solely entitled to the whole of those funds. 5. The second defendants, the children of Agatino Giunti, now adopt, in relation to the proceedings, a stance stated in an affidavit sworn by their solicitor on 28 February 2002. Basically they say that they make no claim to any beneficial interest in the funds and concede that the funds to belong to the plaintiff or perhaps the plaintiff and her sister. 6. There are, however, concerns on the part of the second defendants about exposure they may have, as beneficiaries in the estate of their late father, to claims by the Commissioner of Taxation upon the funds. For that reason the second defendants seek leave to file a cross-claim and to forward the pleadings and affidavits in the proceedings to the Commissioner. The main relief sought in the cross-claim is a declaration that the administrator holds the funds in trust for the plaintiff, 'but subject to the due payment in full of any claim or claims made or to be made upon it by the Deputy Commissioner of Taxation at Sydney or the Commissioner of Taxation of the Commonwealth of Australia.'" 2 By way of up-date, I note that the second defendants confirm that they make no claim to the funds and concede that the plaintiff is entitled to them. In addition, the taxation position has been clarified by rulings and assessments received by the plaintiff following submission by her to the Australian Taxation Office of relevant facts and matters. The result, in summary, is that she has been required to pay tax for past periods on income generated by the bank account in the deceased's name plus interest on that tax. The possibility of some claim by the Commissioner of Taxation upon the estate which might have rebounded upon the second defendants was thereby laid to rest. 3 The substantive order that should be made is an order that the plaintiff is entitled to the funds and that they should be paid to her by the administrator (first defendant). First, however, it is necessary to deal with the issue of costs and, in particular, whether any costs should be ordered to be paid out of the funds. 4 I consider first the position of the first defendant. Because the bank account stood in the name of the deceased, it was necessary and appropriate that a grant of letters of administration be sought and that the administrator take control of the funds pending resolution of disputes as to their ownership. It is true that the plaintiff's claims eventually succeeded but a grant of administration and the minimal conduct of the administrator in obtaining and retaining the funds were, as I see it, essential parts of the chain of events which culminated in that position. 5 The administrator entered a submitting appearance except as to costs and, despite suggestions by the plaintiff to the contrary, I do not think that the administrator resiled from that position by becoming an active party to the dispute. The administrator should be awarded costs on the indemnity basis, particularly in light of his essentially custodial and passive role. In the ordinary course, those costs would come out of the residue of the estate but this, of course, is not the ordinary course because it has emerged that the deceased was in essence a bare trustee for the plaintiff. Since all the funds will pass to the plaintiff (who was the beneficial owner all along) and it is she who has ultimately benefited from the role taken by the administrator, his costs, assessed on the indemnity basis, should be paid by the plaintiff and the convenient course, in the circumstances, is to order that those costs be paid out of the funds in his hands. 6 Beyond that, the principle that costs follow the event would say that the costs of the plaintiff should be paid by the second defendants, they being the real parties to a dispute which was eventually resolved in the plaintiff's favour. The plaintiff presses for an order for costs against the second defendants or their solicitors. The possibility of an order against the solicitors is raised because, it is said, there was never any substance in the defence and, in particular, the second defendants' actions in delaying matters to have the tax position (and, in particular, their own lack of tax exposure) clarified by assessment or ruling was unnecessary. That, to my mind, puts things too high. I do not regard the solicitors' conduct as warranting any such course. 7 The second defendants resist an order for costs. They do so essentially on the basis that actions of the deceased and the plaintiff combined to obscure the true position as to the ownership of the funds and that it was necessary for them to take steps to ensure that they were not left with an exposure to tax liability. There is some substance in the second defendants' contentions but the fact remains that the taxation concerns were satisfactorily resolved by the plaintiff herself, once the second defendants had flagged the issue of their possible tax exposure. 8 In all the circumstances, I consider the appropriate outcome to be that the costs of the plaintiff, assessed on the party and party basis, should be paid by the second defendants. 9 I make the following declaration and orders: 1. Declare that the first defendant holds Commonwealth Bank term deposit no 2198-50004-7418 at the Maroubra Junction Branch of the bank (hereafter "the term deposit") in trust for the plaintiff but subject to the claims on the term deposit referred to in order 3. 2. Order that the first defendant redeem the term deposit and hold the proceeds of redemption thereof in trust and, after the due payment out of that trust fund of the costs and expenses the subject of order 3, pay the proceeds thereof to the plaintiff by way of a distribution of, and in complete satisfaction of, the plaintiff's beneficial interest in the term deposit. 3. Order all the costs and expenses incurred by the first defendant/first cross defendant in respect of his administration of the estate of the late Agatino Giunti, together with the costs of the first defendant/first cross-defendant of and incidental to these proceedings assessed on the indemnity basis, be paid by the first defendant/first cross-defendant out of the proceeds of redemption of the term deposit. 4. Order that the costs of the plaintiff/second cross-defendant of and incidental to these proceedings assessed on the party and party basis be paid by the second defendants/cross-claimants. 5. Order that the second defendants/cross-claimants cause these orders to be entered in the Registry within seven (7) days of the date of these orders and cause a sealed copy of these orders to be served on the first defendant/first cross-defendant at his address for service in these proceedings within fourteen (14) days of the date of these orders. ********** Last Modified: 09/30/2002 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.