Supreme Court New South Wales Medium Neutral Citation: Cassaniti v Ruse NSW Pty Limited [2017] NSWSC 499 Hearing dates: 26 April 2017 Date of orders: 01 May 2017 Decision date: 01 May 2017 Jurisdiction: Equity Before: Pembroke J Decision: Separate question answered in the negative Catchwords: DEED – construction and implication – reasonable and effective operation – commercial purpose – neither obvious nor necessary DEED – mere contractual obligation by entities not having interest in land – not capable of creating equitable interest in land in favour of promisee Legislation Cited: Real Property Act 1900 (NSW) Cases Cited: Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Category: Principal judgment Parties: Ivana Cassaniti – first plaintiff Gino Robert Cassaniti – second plaintiff Ruse NSW Pty Limited – first defendant Armstrong Scalisi Holdings Pty Limited – second defendant Raptor (Aust) Pty Ltd – third defendant Leumeah (NSW) Pty Ltd – fourth defendant Newton Road WP Pty Ltd – fifth defendant David Salvatore Cassaniti – sixth defendant Sam Peter Cassaniti – seventh defendant Representation: Counsel: J Thomson with K Young – for the plaintiffs M Ashhurst SC with L Corbett – for the defendants Solicitors: Dormer Stanhope – for the plaintiffs Kemp Strang – for the defendants File Number(s): 2015/377309 Judgment Introduction 1. This is the hearing of a separate issue of construction. The parties have proposed it as a convenient mechanism for resolving the underlying substantive issue. That issue is whether the first plaintiff (Ivana) acquired an equitable interest in certain land at Ruse in Western Sydney pursuant to the terms of a deed of release and indemnity dated 16 January 2013, and whether in the events that have occurred, the registered title of the first defendant is subject to that equitable interest. 2. Although the consolidated statement of claim does not say so, the claim assumes the perpetration of fraud within the meaning of Section 42(1) of the Real Property Act 1900 (NSW). That there was fraud seems tolerably clear, even on the limited evidence that was before me. The transfer of the title to the land to the first defendant was intended to deprive, cheat and subvert the intention disclosed in the deed that Ivana have a first ranking mortgage over the land to secure the payment to her of $300,000. 3. The critical question however, the question on which the claim falters, is whether Ivana ever acquired an equitable interest in the land; one capable of being specifically enforced and receiving the protection provided by Section 42(1) of the Real Property Act 1900 (NSW). I have regrettably concluded that the answer is 'No' and that the separate question must be answered in the negative. 4. I will shortly set out the relevant terms of the deed but, properly analysed, Ivana received nothing more that the benefit of a promise from two corporate entities, known as ASH and Raptor, neither of which owned or had an interest in the land, that they would 'provide' a mortgage to her. It is possible that the parties contemplated that ASH and Raptor would, in due course, acquire the land and be in a position to provide a mortgage. Or it is possible that they contemplated that they would take steps to ensure that someone else with an interest in the land would provide the mortgage. In that event, the drafter would have been more precise if he had used the word 'procure' rather than 'provide'. On either view however, Ivana did not acquire an equitable interest in the land. She acquired a contractual right as against ASH and Raptor – one that has now been subverted. Her remedy is damages. 5. The one person who appears to have had an interest in the land, possibly the entire beneficial interest, was David Cassaniti, the sixth defendant. He could easily have made a promise to Ivana pursuant to the deed to provide her with a mortgage or to procure the registered proprietor to do so. But the deed is silent on the issue. The inference is that he was unwilling to do so, or was not asked to do so. And in any event, there was no evidence that Ivana even knew that David Cassaniti was the beneficial owner in whole or in part of the land. Senior counsel for the defendants specifically disputed any such proposition and the limited evidence did not resolve the question. The Context 1. The issue for resolution arises against the backdrop of an avalanche of internecine family conflict arising out of the affairs of an accountancy practice. David and Sam Cassaniti and Gino and Ivana Cassaniti and their associated corporate entities had been involved in litigation and disputation since 2008. On 16 January 2013, they executed a deed of release and indemnity. The deed appears to represent an exhaustive and comprehensive attempt to finally and conclusively resolve all remaining issues between the parties. It sets out specific obligations on David (clause 3), Sam (clause 4), Gino (clause 14) and Ivana (clause 15). It also stipulates specific obligations to be performed by ASH and Raptor, companies which were then owned and controlled by David. The deed was clearly drafted by or with the assistance of solicitors. 2. The relevant obligations of ASH and Raptor are set out in clause 5 as follows: 5 OBLIGATIONS OF ASH AND RAPTOR 5.1 ASH and Raptor must: (a) execute the following short minutes of orders: (i) annexed and marked "A" in Supreme Court of New South Wales Proceedings No. 2009/288392; (ii) annexed and marked "B" in Supreme Court of New South Wales Proceedings No. 2010/45094; (b) cause withdrawals of caveats over the Gino and Ivana Properties to be lodged with the LPI upon simultaneously providing a mortgage in favour of Ivana as referred to in clause 14.1(d) of this Deed; (c) pay Ivana $300,000 within 18 months of the date of this Deed being properly executed. For the avoidance of doubt, ASH and Raptor are jointly and severally liable to pay Ivana $300,000. (emphasis added) 1. To reinforce the point, clause 14.1(d) provided that Gino would execute and provide to David certain transfers of land: (d) Upon Ivana receiving a first ranking mortgage, without delay, over the property situated at and known as 47 Leichhardt Street, Ruse, in the State of New South Wales, and having folio identifier 10/245609 to secure the payment of the $300,000 referred to in clause 5.1(c)… (emphasis added) The Issue 1. The relief sought in the pleading makes no mention of Section 42 of the Real Property Act 1900 (NSW), although its application would seem to be implicit in the cause of action. The primary declaration sought is that: '(T)he first defendant, Ruse NSW Pty Ltd, holds its title as registered proprietor of the Ruse Property subject to the first plaintiff's entitlement to receive from the registered proprietor a first registered mortgage over the Ruse Property to secure the payment of the $300,000 referred to in clause 5.1(c) of the Deed, interest thereon since 17 June 2014 and the first plaintiff's costs and expenses of enforcing the mortgage including these proceedings.' 1. At the date of the deed, the registered proprietor of the land was a Mr Ip. When the certificate of title was lost, David Cassaniti's father and uncle, who were co-registered first mortgagees of the land, swore statutory declarations in which they stated that David was or had been in possession of the original certificate of title. Mr Ip stated in his declaration that he handed the certificate of title to David in 1995. And David himself swore that 'the mortgaging of the Ruse Property to Giuseppe and Francesco occurred at my direction. I held the certificate of title on behalf of both Giuseppe and Francesco, my nominees for the purpose of being mortgagees.' The Fraud 1. On 16 July 2014, the mortgage to Giuseppe and Francesco Cassaniti was discharged. On the same date the land was transferred to the first defendant and the transfer was registered. The first defendant was not a party to the deed. Indeed, it only came into existence on 14 July 2014. David Cassaniti was its sole director and shareholder at the time of the transfer. He must have engineered the transfer of the land to the first defendant with knowledge of Ivana's rights under the deed (such as they were), intending to defeat them to the extent that he could, or needed to. 2. Notwithstanding the dishonest conduct of David Cassaniti, Ivana cannot base her claim on something she never had. She cannot convert her contractual right into an equitable interest in the land. Her right under the deed to have ASH and Raptor procure a mortgage in her favour, never gave her an interest in the land. She did not have an interest capable of specific enforcement and protection by Section 42(1) of the Real Property Act 1900 (NSW). The following succinct submissions on behalf of the defendants are apt in the circumstances and I accept that: 79 It was known to all parties at the time the Deed was executed that ASH and Raptor were not the legal owners of the Ruse Property. The legal owner, Mr Ip, was not a party to the Deed, so he cannot have agreed to transfer or assign his estate or interest in the Ruse Property. How can there be an equitable mortgage in such a case? 80 The agreement in the Deed can only be one that meant when ASH or Raptor acquired the legal title to the Ruse Property they will grant a mortgage. Such an agreement will, upon the satisfaction of the condition that the putative mortgagor acquire the tile, give rise to an equitable mortgage (because a court would grant specific performance) [Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4, [30]-[33]). But, until the mortgagor acquires their interest, it is just a contractual promise. Construction of Deed 1. Counsel addressed the question of construction arising on the separate issue solely by reference to the provisions of the deed and certain limited objective facts known to the parties. I heard no evidence from Ivana or David Cassaniti. This was an orthodox and appropriate approach. We adhere to the objective theory of contract. The subjective intentions, aspirations and hopes of the parties are of no assistance in construing the terms of a contract. That is because they are 'superseded by, and merged in, the contract itself': Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 (Mason J). The investigation of those intentions, hopes and aspirations is as unrewarding as it is futile. The reality is that a party's subjective considerations may be, frequently are, misguided or erroneous. What matters is the contractual language that the parties or their solicitors have chosen. 2. Similar principles influence the proper approach to the implication of a term of a contract. For 'the implication of a term is an illustration of the process of construction': Codelfa at 353. And, as is well known, it is often the case that 'what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made': Codelfa at 346. 3. As is equally well known, the 'more detailed and comprehensive the contract, the less ground there is for supposing that the parties have failed to address their minds to the question at issue': Codelfa at 346. And then, of course, there is the difficulty of identifying with any degree of certainty the term to which the parties would have agreed, if they had considered the question. Hence the essential threshold requirements of obviousness and necessity. It is an error to 'replace necessity with desirability': see Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124 (CA). 4. It is not at all obvious that David Cassaniti would have agreed to a personal obligation to provide or procure a mortgage. Nor is it clear what was contemplated in relation to ASH and Raptor or why Ivana agreed to accept a promise from them in relation to land in which they had no interest. But the reasonable and effective operation of the deed does not necessarily require the imposition, by a process of implication, of an obligation on David to procure a mortgage. ASH and Raptor, controlled by David, could have procured or provided a mortgage of the land. They simply chose not to do so. 5. For those reasons, it is not possible, by resort to the need to give effect to the commercial purpose of the deed, to construe or imply an obligation that creates an equitable interest in the land in favour of Ivana. To do so would be a bridge too far. David Cassaniti, who had an interest in the land, gave no relevant promise. And Ivana took a risk with ASH and Raptor, neither of which, at the date of the deed, had an interest in the land, although she may well have assumed that they did, or would do so in the future. The risk that Ivana took may have been imprudent but she has only herself, or perhaps her solicitors, to blame. Orders 1. For those reasons: 1. the separate question should be answered in the negative; 2. the plaintiffs should pay the defendants' costs of the hearing of the separate question; 3. all other costs should abide the outcome of the proceedings. 1. The balance of the proceedings, if any, should be listed before the Registrar in Equity on 18 May 2017. My decision on the separate question does not render me part-heard. The Registrar may allocate any further hearing to another judge of the division. 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: 01 May 2017