Baira v Egisto & Ors [2013] NSWSC 1023

Supreme Court New South Wales

Medium Neutral Citation: Baira v Egisto & Ors [2013] NSWSC 1023 Hearing dates: 26 July 2013 Decision date: 26 July 2013 Jurisdiction: Common Law Before: Beech-Jones J Decision: Proceedings transferred. Catchwords: PRACTICE AND PROCEDURE - transfer of proceedings from District Court to Supreme Court - degree of connection with existing proceedings. Legislation Cited: - Civil Procedure Act 2005 Cases Cited: - Baira v RHG Mortgage Corporation Ltd [2012] NSWCA 387 - Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 - Reichel v Bishop of Oxford (1889) 14 App Cas 259 - Reichel v McGrath (1889) 14 App Cas 665 Category: Procedural and other rulings Parties: Rosa Baira (Plaintiff) Pompeo Joseph Egisto (First Defendant) Lazzaro Calvitto (Second Defendant) Frederick Forster (Third Defendant) Representation: Counsel: P.G. Bolster (Plaintiff) W. McManus (Defendants) Solicitors: Frank Legal (Plaintiff) Colin Biggers & Paisley (Defendants) File Number(s): 2013/111958

EX TEMPORE Judgment 1Before me is a summons seeking the transfer of proceedings commenced in the District Court (the "District Court proceedings") into this Court. The transfer is said to be justified because of the "connection" between those proceedings and proceedings already commenced in this Court which are due to be heard in March 2014.

Background 2The District Court proceedings were commenced in 2010 by the plaintiff, Rosa Baira, against a firm of solicitors. They alleged negligence by two members of that firm in respect of two transactions. The first transaction concerns the execution of a consent by Ms Baira in 2004 to an increase of the amount of a guarantee she had given in favour of the St George Bank of and concerning debts owed by a company associated with her daughter, Sandra Ianni, and her then husband, Joe Ianni. It is alleged that a solicitor, Mr Calvitto, was negligent in advising Ms Baira of the nature of the documents that she signed. 3The second transaction the subject of the District Court proceedings took place in October 2005. As I will explain, it was said to be part of a restructure of her daughter's and husband's financial affairs and those of their business. As part of that, Ms Baira is said to have executed a consent as guarantor to the removal of certain properties owned by others as security for the principal debt that she guaranteed. Although this included a reduction in the amount the subject of her guarantee it is said that overall the effect of the transaction was to significantly and materially increase her exposure. 4Ms Baira alleges that a solicitor who is one of the defendants, Mr F. Forster, provided a certificate to the St George Bank in which he incorrectly asserted that he had given advice to Ms Baira concerning those documents. She states she never met him and did not give him any such advice. At the time of the second transaction both Ms Baira and the parents of her son-in-law, Dominic and Rosa Ianni, provided security in support of the debts of their children's business. 5In Baira v RHG Mortgage Corporation Ltd [2012] NSWCA 387 at [208] to [214] Basten JA described the restructuring that the second transaction formed part of and the subsequent events as follows: "[208] Mr and Mrs Ianni then owned properties at Castle Hill, Milsons Point and Pyrmont. They financed their business and property purchases through St George Bank Ltd The total value of the properties and the outstanding loans was at that time about equal, in an amount a little over $3 million. The Bank held various securities, including a fixed and floating charge over the assets of Jencon and mortgages over the three properties. In addition, the Bank was the beneficiary of third party guarantees from Sandra Ianni's mother, Mrs Rosa Baira, secured by a mortgage over her Marrickville property. The bank also held a third party guarantee from Mr Rosario Ianni and his wife Mrs Domenica Ianni (Mr and Mrs Ianni senior), the parents of Joe Ianni, secured over their Drummoyne property. [209] In about July 2005 Mr and Mrs Ianni junior decided to purchase a house at Dural for a little over $2.2 million. In order to obtain the funds, they engaged in a major restructuring of the outstanding debts of Jencon and themselves, apparently to extract larger borrowings against the equity in their own properties and, particularly, the properties owned by their respective parents. The restructuring involved two stages, the first having three elements. The first element was to remove from the securities in favour of St George Bank both their property at Pyrmont and the property owned by Mr and Mrs Ianni senior at Drummoyne. The result was that the remaining securities held by St George Bank were the Castle Hill and Milsons Point properties owned by Mr and Mrs Ianni junior and the third party guarantee and mortgage secured over Mrs Baira's property at Marrickville. The Bank was willing to accept that arrangement on the basis of a reduction in the amount owing to it from a little over $3 million to a little over $2 million. [210] The second element was a loan to Mr and Mrs Ianni junior to purchase the Dural property, with additional financial accommodation provided by the National Australia Bank Ltd ("NAB") involving a total of $3.5 million, secured by mortgages over both the Dural and the Pyrmont properties, the latter having been released by St George. [211] The third element of the restructuring involved Mr and Mrs Ianni senior 'borrowing' $910,000 from RHG Mortgage Corporation Ltd ('RHG'), formerly known as RAMS Home Loans Pty Ltd, in exchange for a mortgage over their Drummoyne property. The total indebtedness then amounted to $6.5 million, in round figures. However, Jencon and Mr and Mrs Ianni junior nominally had primary responsibility for only $5.6 million. [212] Stage two occurred on 14 March 2006. It involved a further reduction of approximately $550,000 in the liability to the St George Bank, in exchange for which St George released the third party mortgage over the property of Mrs Baira. That arrangement was financed by a "loan" to Mrs Baira from RHG in an amount of $650,000. On the basis that the beneficiaries of all loans were Mr and Mrs Ianni junior, either directly or through Jencon, their total liabilities were then $6.56 million. [213] The Jencon business had apparently declined sharply by 2008 and Jencon and Mr and Mrs Ianni junior were unable to meet the obligations under the loans and, relevantly for present purposes, RHG sought possession of the homes of the parents, namely the Marrickville property owned by Mrs Baira and the Drummoyne property owned by Mr and Mrs Ianni senior. Mr Joe Ianni was declared bankrupt. [214] On 3 June 2011 Grove AJ gave judgment in favour of RHG against Mrs Baira in an amount in excess of $846,000 and ordered that she give RHG possession of the land at Marrickville. In respect of the proceedings against Mr and Mrs Ianni senior, he gave judgment under the loan in favour of RHG in an amount in excess of $1.2 million and ordered that they give RHG possession of the land at Drummoyne." 6An appeal from the judgment of Grove AJ referred to in [214] was successful and a re-trial was ordered (see Baira at [206] per Bathurst CJ and at [336] per Basten JA, Tobias AJA dissenting at [559]). As I stated, the re-trial of those proceedings is listed to commence in March 2014. 7The proceedings before Grove AJ referred to by Basten JA in Baira at [214] also involved a number of cross claims brought by Mr and Mrs Ianni and Ms Baira against parties that included financial brokers and their own children. At that time Ms Baira did not bring any cross claim against the solicitors who are the defendants in the District Court proceedings. 8However, the evidence before Grove AJ traversed in considerable detail a number of the guarantees and similar documents that Ms Baira had executed in respect of the business of her daughter and son-in-law over a number of years. In particular, both Mr Calvitto and Mr Forster were called to give evidence before Grove AJ. The circumstances concerning the two transactions the subject of the District Court proceedings were extensively canvassed before his Honour. 9As I stated, the District Court proceedings were commenced in 2010. That was before the hearing before Grove AJ took place. At the time those proceedings were commenced, the second transaction was not referred to in the Statement of Claim. At some point the District Court proceedings were allocated a trial date in December 2011. However, in October 2011 the trial date was vacated and the proceedings were stayed pending the outcome of Ms Baira's appeal. 10It also appears that Ms Baira was granted leave to amend the Statement of Claim to add a complaint concerning the second transaction. She served a proposed amended pleading to that effect. I am informed that, by an oversight, that form of amended pleading has not yet been formally filed.