New South Wales Supreme Court CITATION : Cassaniti v Paragalli [2006] NSWSC 50 HEARING DATE(S) : 9 February 2006 JUDGMENT DATE : 9 February 2006 JURISDICTION : Equity JUDGMENT OF : Campbell J EX TEMPORE JUDGMENT DATE : 02/09/2006 DECISION : Contract for monies to remain in controlled monies account still on foot. CATCHWORDS : PRACTICE – judgments and orders – consent orders – consent orders settling Supreme Court litigation on terms of payment of money into controlled monies account to abide resolution of a dispute – Supreme Court proceedings dismissed – District Court proceedings commenced to determine the dispute – whether order for payment of money into controlled monies account was interlocutory – interlocutory orders terminating upon determination of the proceedings – consent orders as both orders and embodiment of a contract – whether contractual aspect of consent orders terminated by dismissal of Supreme Court proceedings – construction of consent orders by reference to surrounding circumstances LEGISLATION CITED : Supreme Court Act 1970 Uniform Civil Procedure Act 2005 Athens v Randwick City Council [2005] NSWCA 317 Green v Pulsford (1830) 2 Beav 69; 48 ER 1105 Harvey v Phillips (1956) 56 CLR 235 CASES CITED : Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567 Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 Paino v Hofbauer (1988) 13 NSWLR 193 Daniell's Chancery Practice, 7th edition Kerr on Injunctions, 6th edition Sam Peter Cassaniti - Plaintiff/Respondent Michele Paragalli - First Defendant PARTIES : Rocco Paragalli - Second Defendant Antonio Paragalli - Third Defendant Joseph Paragalli - Fourth Defendant/Applicant FILE NUMBER(S) : SC 5011/04 COUNSEL : I Young - Plaintiff/Respondent M Oakes SC; D Bertini - Fourth Defendant/Applicant SOLICITORS : Leonard Legal - Plaintiff/Respondent Galluzzo Andriano Solicitors - Fourth Defandant/Applicant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST CAMPBELL J THURSDAY 9 FEBRUARY 2006 5011/04 SAM CASSANITI v MICHELE PARAGALLI JUDGMENT – Ex Tempore 1 HIS HONOUR: Proceedings were begun in this Court on 13 September 2004 by the plaintiff against four defendants. 2 The plaintiff had at one stage, according to his own case, performed various services for the fourth defendant, in consequence of which he was entitled to a charge over certain property, including future property of the fourth defendant. He sought a declaration in the proceedings that he had a valid equitable mortgage over a particular item of property, a declaration that he was entitled to receive a mortgage in registrable form over that property, and an order for execution and delivery of such mortgage. He also sought an interlocutory order restraining the fourth defendant from encumbering his interest in the property, or alternatively, an order extending the caveat which had been placed over the property claiming that beneficial interest. 3 The matter was one concerning which there was an order for short service. It came back before me as Duty Judge on 15 September 2004. On that occasion, the legal representatives for the parties wrote out short minutes of order, as follows: "By consent the Court orders: 1. Upon sale of the property situated at 93 North Liverpool Road, Mount Pritchard being Lot 101 DP 843052 ("the Property") the defendants will cause to be paid into a bank account opened in the joint names of Solicitors for the Plaintiff and Solicitors for the Defendants an amount of money representing the fourth Defendant's beneficial interest in the Property (whether the amount arises from the sale of the Property or the disposal of his beneficial interest in the Property arising under the will of the late Francesco Antonio Paragalli). 2. The said sum of money is to remain in such account pending resolution of a dispute between the Plaintiff and the fourth Defendant in relation to loans and fees alleged to be owing by the fourth Defendant to the Plaintiff, or such other order of the Court. 3. Costs reserved. 4. Liberty to apply on 7 days notice. The Court notes that if the dispute is not resolved within 28 days the Plaintiff undertakes to commence an action in the District Court and prosecute those proceedings without unreasonable delay." 4 On 15 September 2004, I made orders in accordance with those short minutes of order, and also made a note on the court file "that the only question outstanding is one of costs". 5 On 17 September 2004, the solicitors for the plaintiffs wrote to the solicitors for, amongst others, the fourth defendant, enclosing a copy of those consent orders, and saying: "You will note that the orders require that 1/7th of the net proceeds of sale of the property be paid into an account opened in the joint names of your firm and ourselves, and that those monies remain there pending a resolution of the dispute between our client and Mr Joseph Paragalli. The only issue that remains unresolved in relation to the Supreme Court Proceedings is costs. The Court had wanted to close its file and dismiss proceedings. In the event an order was made that the matter be stood over to the Registrar's List on Thursday 14 October so that the question of costs can be resolved." 6 The solicitors for the fourth defendant replied on 22 September 2004, saying: "We refer to your letter of the 17th September 2004. We have been instructed to seek costs in relation to the matter unless the matter can be resolved on the basis of each party paying their own costs. In this regard we enclose a copy of a letter dated 17th August 2004 that had been sent to your client Mr Sam Cassaniti. We await your reply." 7 On 7 October 2004 the solicitors for the plaintiff replied, saying: "We acknowledge receipt of your letter of 7 October 2004 and note the contents therein. Our client agrees that the issue of costs be resolved on the basis that each party bear their own costs. We look forward to receiving details as to when we can expect the property to settle. We await your reply." 8 On 14 October 2004 the Court made orders in accordance with consent orders signed by the parties, which provided: "1. Each party bear their own costs. 2. These proceedings be dismissed." 9 The proceedings in the District Court which had been foreshadowed by the consent orders of 15 September 2004 were commenced. Those proceedings were initially ones which claimed a monetary sum under the agreement with the fourth defendant which the plaintiff asserted had been entered. They have subsequently been amended, to widen the claim to a claim for a lien over the sum of money which still sits in the trust account of the fourth defendant's solicitor. 10 On 23 June 2005 the fourth defendant's solicitor wrote to the solicitors for the plaintiff, saying that the sum of money remained in his trust account, and that "The funds will remain in our trust account until such time as all relevant parties have agreed on an interest bearing account." 11 Such an agreement was never arrived at, and so the moneys are still in the trust account of the fourth defendant's solicitor. 12 The fourth defendant has made a demand on his solicitor to be paid the amount standing in the trust account. The fourth defendant has filed a Notice of Motion in these proceedings, which seeks the following orders: "1. A declaration that the orders of 15 September 2004 were interlocutory orders and cease to have any effect after the making of the final orders of the 14th of October, 2004. 2. In the alternative, the orders of the 15th of September, 2004 be vacated." 13 Mr Oakes of Senior Counsel reminds me that an interlocutory order is discharged by dismissal of the action in which it was made: Daniell's Chancery Practice, 7th Edition, page 1369; Green v Pulsford (1830) 2 Beav 69; Kerr on Injunctions, 6th Edition page 663. That proposition is a fundamental one, and is indisputably correct. 14 The order on 15 September 2004 was, in my view, clearly an interlocutory order. 15 The question between the parties is not completely resolved by my findings so far. Consent orders have a double aspect - they are both orders of the Court, and the embodiment of a contract between the parties: Harvey v Phillips (1956) 95 CLR 235; Paino v Hofbauer (1988) 13 NSWLR 193; Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573. The mere fact that, considered as an order, the interlocutory order ceases to have effect at the time the proceedings are dismissed, does not mean that the contract which underlies it is necessarily discharged, unless that is the intention of the order which dismisses the proceedings. 16 In my view, as a matter of construction of the consent orders of 15 September 2004, the parties were agreeing that the amount of money which represents the fourth defendant's beneficial interest in the property would be retained. The specific agreement that it was to "remain in such account pending resolution of a dispute between the Plaintiff and the fourth Defendant in relation to loans and fees alleged to be owing …" was cast in terms capable of having a wider reference than to a dispute which was embodied in the proceedings which were then on foot in this Court. Indeed, the note which appears at the end of the short minutes of order expressly contemplated that the dispute might be resolved in two different ways - either by agreement outside Court within 28 days, or alternatively in the District Court. In my view, the contract contained in the short minutes of order, to have the money remain in the account pending resolution of the dispute, was capable of having reference, and in the circumstances, did have reference, to the resolution of the dispute by taking proceedings in the District Court. 17 The proceedings in the District Court are still on foot. In my view, the effect of the fourth defendant being able to receive the money now held in his solicitor's trust account is that these Supreme Court proceedings would have been settled, and the fourth defendant would escape paying the price which he agreed to pay for settlement of them. 18 The preferable view is that there was nothing in the consent orders of 14 October 2004 which showed any intention to terminate the contract which underlay the consent orders of 15 September 2004. However, if I were wrong in that view, and the orders of 14 October 2004 were regarded as ambiguous on the question of whether there was any intention to terminate that contract, it is permissible to look to surrounding circumstances to construe a consent order: Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567; Athens & another v Randwick City Council [2005] NSWCA 317 at [28] – [29], [36] – [37] per Hodgson JA, [129] – [140] per Santow JA, [141] per Tobias JA. The correspondence between the parties leading to the making of the orders on 14 October 2004 demonstrates that parties were contemplating the money remaining frozen pending a resolution of the dispute, even though the Supreme Court proceedings were dismissed. In so far as it might be relevant, the letter of the fourth defendant's solicitor of 23 June 2005 demonstrated that that was his understanding. 19 For those reasons, I will not make the first declaration which is sought in the Notice of Motion. 20 While it is the case that the orders of 15 September 2004 were interlocutory orders, making a declaration saying so will not solve the real dispute between the parties. Section 63 Supreme Court Act 1970 (which remains on foot even after the commencement of the Uniform Civil Procedure Act 2005) provides: "The Court shall grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided." 21 The real dispute between the parties is better solved by the making of a declaration which I now propose to make. 22 I declare that the plaintiff and the fourth defendant remain bound by an agreement that the defendants will cause to be paid into a bank account opened in the joint names of the solicitors for the plaintiff and solicitors for the defendants an amount of money representing the fourth defendant's beneficial interest in the property, and by their agreement that the said sum of money is to remain in such account pending resolution of a dispute between the plaintiff and the fourth defendant in relation to loans and fees alleged to be owing by the fourth defendant to the plaintiff, or such other order of the Court. * * * * * * * * * * 23 In light of the reasons I have just delivered, Mr Oakes does not seek to advance argument in support of the second prayer for relief in the Notice of Motion. Save for the declaration I have made, the Notice of Motion is dismissed. * * * * * * * * * * 24 The plaintiff seeks costs of the motion. I see no reason to depart from the principle that costs should follow the event. I order the fourth defendant to pay the costs of the plaintiff of the Notice of Motion. ********** 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.