Bakovski v Lenehan
[2014] NSWSC 671
•27 May 2014
Supreme Court
New South Wales
- Summary available
Medium Neutral Citation: Bakovski v Lenehan [2014] NSWSC 671 Hearing dates: 15-18 April 2013; 1-3 May 2013 Decision date: 27 May 2014 Jurisdiction: Common Law Before: Hall J Decision: (1) Subject to orders and directions set out below, I propose entering judgment in favour of the plaintiffs against the second defendant for breach of duty under the retainer with the plaintiffs, and the first defendant, as vicariously liable for the acts and omissions of the second defendant in respect of the following:
(a) Loss and damage in the amount of $243,278.41.
(b) Pre-judgment interest on that amount, calculated in accordance with s 100 of the Civil Procedure Act 2005, Part 6 r 6.12 of the Uniform Civil Procedure Rules 2005, and Practice Note SC Gen 16, calculated from 11 December 2004 to 27 May 2014 and thereafter to date of entry of judgment. I note interest on the above basis from 11 December 2004 to 27 May 2014 is calculated at $201,234.57.
(2) Leave granted to the parties to make an application and submissions in relation to:
(a) The calculation of the amounts referred to in (1)(a) and/or (1)(b) above.
(b) Costs and any ancillary or consequential orders.
(3) The parties are to bring in short minutes of order to give effect to this judgment.
(4) The proceedings will be re-listed in respect of orders (2) and (3) at 9.30am on Monday, 2 June 2014.
Catchwords: NEGLIGENCE - professional negligence - breach of retainer - plaintiffs were borrowers under a loan/mortgage transaction - plaintiffs mistakenly believed they were guarantors to the mortgage and not the borrowers under the loan - plaintiffs would not have entered into the transaction had they known they were the borrowers - plaintiffs had limited understanding of English - failure by defendant solicitor to advise plaintiffs as to the legal effect and risks of the mortgage transaction - solicitors required to give such advice as called for in the circumstances of each case - harsh and oppressive terms of the loan/mortgage required the defendant solicitor to give specific and strong advice to the plaintiffs not to accept the loan offer and warn of the risks in doing so - solicitor breached duty to exercise reasonable care, skill - consequential loss incurred by plaintiffs refinancing mortgages - defence of contributory negligence not established - apportionable claim in accordance with Part 4 of the Civil Liability Act 2002 (NSW) - apportionment of liability between concurrent wrongdoers Legislation Cited: Civil Liability Act 2002
Civil Procedure Act 2005
Fair Trading Act 1987
Uniform Civil Procedure Rules 2005Cases Cited: Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6
Briginshaw v Briginshaw (1938) 60 CLR 336
Chandra v Perpetual Trustees Victoria Limited [2007] NSWSC 694
Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216
Fox v Percy (2003) 214 CLR 118
George v Webb [2011] NSWSC 1608
Ghunaim v Bart [2004] NSWCA 28
Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60
Hungerfords v Walker (1988) 171 CLR 125
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613
Kayteal Pty Ltd v Dignan [2011] NSWSC 197
Perpetual Trustee Company Limited v Ishak [2012] NSWSC 697
Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529
Provident Capital Ltd v Papa [2013] NSWCA 36; (2013) 84 NSWLR 231
Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187
Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505
Watson v Foxman (1995) 49 NSWLR 315.
Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463Texts Cited: Revised Professional Conduct and Practice Rules 1995 Category: Principal judgment Parties: George Bakovski (First Plaintiff)
Vera Bakovski (Second Plaintiff)
Norman Rutherford Lenehan t/as Lenehan & Co (First Defendant)
James Socrates Arkoudis (Second Defendant)Representation: Counsel:
E Finnane (Plaintiffs)
G Curtin SC (Defendants)
File Number(s): 2010/269931
Judgment
Introduction
The Proceedings
These proceedings involve a claim for damages by Mr and Mrs George Bakovski against the first defendant, Norman Rutherford Lenehan, solicitor, trading as Lenehan & Co, and the second defendant, James Socrates Arkoudis, solicitor, who was, at the material time, employed by the first defendant.
The plaintiffs allege professional negligence in respect of legal services provided by Mr Arkoudis on 13 August 2004, including the provision of legal advice in relation to a loan and mortgage transaction that they entered into on that date with a company, Accom Finance Pty Ltd ("Accom"). The mortgage was granted by the plaintiffs in favour of Accom in respect of a property located in Rockdale owned by the plaintiffs ("the Accom mortgage").
Mr Lenehan is sued upon the basis that as employer of Mr Arkoudis he is vicariously liable for the alleged negligence of his employee, the second defendant.
Mr Edmund Finnane of counsel appeared on behalf of the plaintiffs. Mr Greg Curtin SC appeared on behalf of the defendants.
The plaintiffs' case is that they understood that they were providing the property as security for a loan to be made to a Mr Mitrevski, when in fact the documents make it clear that the loan was to them as borrowers. There is no mention in the documents of Mr Mitrevski, or to the fact that the loan funds were to be applied for his benefit.
On or about 16 August 2004 the Accom mortgage was settled. The loan was in the amount of $386,250 and the loan monies were paid to a company, Demar Investments Pty Ltd ("Demar Investments"), of which Mr Mitrevski was director and manager.
The pre-transaction dealings between the plaintiffs and Mr Mitrevski are significant in the history that led to the Accom loan. The issue as to whether Mr Mitrevski's conduct towards Mr and Mrs Bakovski was misleading or deceptive within s 42 of the Fair Trading Act 1987 will be discussed later in this judgment. However, no claim is made against him in these proceedings.
The plaintiffs held no legal or beneficial interest in Demar Investments.
On or about 20 August 2004 the Accom mortgage was registered on the title to a property owned by the plaintiffs, referred to in the judgment as "the Rockdale Property".
The Amended Statement of Claim filed in these proceedings on 22 December 2010 also included a claim against Stephen Grant Sharpe, solicitor, trading as LJ Sharpe and Co. Those proceedings, however, were subsequently dismissed by consent on 18 October 2012.
The plaintiffs allege that Mr Arkoudis failed to advise them as to the risk and consequences of the relevant transactional documents for the Accom loan signed by them in his presence.
The procedure to be followed by a solicitor in giving advice in relation to a loan transaction is, in part, governed by the Revised Professional Conduct and Practice Rules 1995, in particular, Rule 45. That rule requires a solicitor to take certain steps when asked to give independent advice to a proposed signatory on loan or security documents. Rule 45.6.1 specifies that a solicitor in such circumstances should give advice as called for in the circumstances of the particular case.
The plaintiffs contend that in consequence of the alleged breach of the retainer which they entered into with the first and second defendants, the Rockdale property was mortgaged in favour of Accom without any benefit to them, the loan monies being paid to Demar Investments. Indeed as later events were to show, they suffered substantial loss as a consequence of the harsh and oppressive contractual conditions that were binding on them.
Some months after the transaction Accom commenced proceedings in this Court against the plaintiffs for possession of the Rockdale property. It obtained judgment for possession on 26 October 2004.
The plaintiffs' case is that they were unable to repay the principal sum and the exorbitant interest owing under the Accom mortgage and they were required to enter into refinancing arrangements with Liberty Financial which produced further loss to them.
On 13 December 2004 they paid the amount of $526,133.94, including interest in advance and fees, in order to obtain a discharge of the Accom mortgage.
The plaintiffs, accordingly, claim damages in respect of the following:
(i) Expenses and interest on the Accom loan;
(ii) A proportion of the interest, including compound interest, incurred in further refinancing of the original loan;
(iii) Expenses incurred in having brought proceedings with a view to recovering their losses against Mr Mitrevski.
Joint Statement of Issues in Dispute
The parties completed a Joint Statement of Issues in Dispute which was in the following terms:
"1. Whether, on 13 August 2004, the plaintiffs understood that the documents executed by them on 13 August 2004 were in the nature of a loan of monies to them as borrowers rather than a loan in relation to which they were guarantors.
2. Whether the defendants' retainer, and/or their duty of care, imposed on them, in the circumstances (including the circumstances that are the subject of the central dispute of fact), duties:
a. to consider whether or not the underlying transaction for which the Accom loan was to be used, was in the interests of the plaintiffs, and if not, to so advise them; and
b. to insist, as a precondition to providing services to the first plaintiff, that a Macedonian interpreter be present.
3. The central issue of fact relates to the conference between the plaintiffs and the second defendant on 13 August 2004 at which the "Accom loan documents" were executed. The issue is which version of events, that of the plaintiffs or that of Mr Arkoudis, should be preferred.
4. Following determination of issue 4, the next issue is whether the defendants breached their duty of care and/or their retainer. If so, the following questions then arise.
5. The amount of loss and damage suffered by the plaintiffs.
6. Whether the plaintiffs are entitled to compound interest as part of their damages.
7. Whether the plaintiffs were guilty of contributory negligence.
8. Whether Robert Mitrevski's representations to the plaintiffs (as pleaded) were misleading or deceptive.
9. Whether, Robert Mitrevski was guilty of misleading or deceptive conduct as alleged in paragraphs 26 to 37 of the Amended Defence.
10. In the event that Robert Mitrevski was guilty of misleading or deceptive conduct, whether this caused loss to the plaintiffs.
11. In that event, whether the loss or damage caused by the defendants is the same loss or damage as that caused by Robert Mitrevski, so as to constitute the defendants and Robert Mitrevski concurrent wrongdoers.
12. In that event, what is the proper apportionment of responsibility between the defendants and Robert Mitrevski." (Plaintiffs' Tender Bundle, vol 1 at pp 50-51)
Evidence of Mr George Bakovski
Mr Bakovski swore two affidavits, the first on 22 November 2011 and the second on 27 April 2012. In the course of cross-examination he conveyed the impression of being an unsophisticated but sincere witness.
Background
Mr Bakovski was born on 19 April 1942. He married the second plaintiff, Vera Bakovski, on 3 June 1968.
Mr Bakovski was born in Macedonia and arrived in Australia on or about 14 November 1964. He lived firstly in Melbourne until approximately January 1996. He then moved to Wollongong.
He completed Secondary Vocational High School - Technical Skills in Macedonia. Following migration to this country, he continued his Technical and Electrical Education through an apprenticeship program whilst working in the steelworks in Port Kembla. In Melbourne he worked as a spot welder in the Melbourne Ford Factory until January 1966.
Mr and Mrs Bakovski have two adult children.
Mr Bakovski's evidence was that he is not proficient in English and that he cannot read English very well. He said that if he does read anything in English it takes him some time to read each word. He said that he often cannot pronounce words that he is able to read or understand.
He said that generally he relied on his wife to read any mail or other documents written in English. She then explains it to him in the Macedonian language.
He said that if required to sign a document written in English, he is not able to read and understand the contents of the document.
After migrating to Australia Mr Bakovski's employment history was as follows:
(i) From 1966 to 1968 he was employed as an apprentice electrician at BHP Steelworks, Port Kembla.
(ii) From 1969 to 1970 he worked as an electrician at the Central and Darling Harbour Railway Depots.
(iii) For a period after 1970 he was employed in the glass factory in South Dowling Street, Moore Park.
(iv) From about 1971 to 1981 he worked as an electrician for Chloride Battery.
On 21 May 1977, while working at Chloride Batteries, Mr Bakovski suffered an electrical shock. That, he said, has affected his ability to remember things and has resulted in some memory loss. He has not worked since his employment was terminated on 16 February 1981.
Property Acquisitions
The plaintiffs over the years purchased two residential properties and acquired a third by way of an inheritance. They also owned adjoining residential properties in Belmont ("the Belmont properties").
According to Mr Bakovski, prior to 2004 he and his wife had been interested in selling the Belmont properties over a period about 10 years. He said the main reason they wished to sell them was because they were experiencing "...a lot of issues with people stripping the old houses in the Belmont area": Mr Bakovski's first affidavit at [20]. He said that the properties had been vandalised and damaged. They had been managed by a real estate agent in Belmont for a period of time.
The properties were on two separate titles and had two old style cottages situated on them. They had acquired them as separate lots but subsequently consolidated them into one lot.
They placed the properties at some stage in the hands of a local agent for sale and subsequently another agent in Newcastle was retained to market them for sale.
Mr Bakovski said the Belmont properties were waterfront properties that looked out onto Lake Macquarie.
Meeting with Mr Mitrevski
Mr Bakovski knew a Mr George Mitrevski, also known as Robert Mitrevski. Mr Bakovski came to know him in 2003 through Mr Mitrevski's sister, Mrs Jovanovski.
The plaintiffs said that in about 2001 Mr Mitrevski and his brother-in-law, Mr Dragi Jovanovski, were carrying out construction work on a property in Smithfield. He said he had become aware of that fact through discussions with friends of the family and members of the Macedonian community in Sydney.
In about September 2003 Mr Bakovski and his wife attended the home of Mrs Jovanovski for a birthday party. On that occasion, after having eaten dinner, Mr Bakovski went out to the front of the house with some other men who wanted to have a cigarette. At some point Mr Mitrevski joined the group. Mr Mitrevski's sister was a friend of the Bakovskis and they had known her for some years. A discussion between the men turned to matters of work and Mr Bakovski's family situation. He said that in the course of a conversation with Mr Mitrevski, the latter told him that he was a builder and developer and that he was developing 36 home units in Malua Bay. Mr Mitrevski claimed that he had completed 18 of the home units and he had 18 more to construct.
In this conversation Mr Bakovski said that he told Mr Mitrevski that he owned a property in Belmont which was a water frontage property and asked him whether that might be a property he would be interested in purchasing and developing. Mr Mitrevski replied that he would be very interested.
Visits to Belmont
Subsequent arrangements were made for a visit by Mr Mitrevski in company with Mr Bakovski to Belmont. Mr Bakovski showed him the properties and the nearby area. Mr Bakovski said that Mr Mitrevski said: "I really like the property a lot. I will think about it and let you know. It is very good because of the water frontage": Mr Bakovski's first affidavit at [34].
Some weeks later Mr Mitrevski contacted Mr Bakovski at his home and asked if he could see the property again. Mr Bakovski agreed.
They again travelled to Belmont in Mr Bakovski's car. When at the Belmont properties Mr Mitrevski said that he liked them a lot and wanted to buy them. He said he was very serious about buying and did not want Mr Bakovski to go and sell them to anyone else. Mr Bakovski said the following conversation then took place:
"Mr Mitrevski and I then travelled back to [Rockdale]. Vera was present, and we had a conversation to the following effect:
Mr Mitrevski said: 'I will give you $100,00 up front payment.'
I said: 'The price we are selling Belmont is $5 million.'
He said: 'I like the place so much I will give you $7 million. Just don't sell the property.'
I said: 'Ok.'
He said: 'I have finished 18 units and they are sold in Malua Bay. I will give you $100,000 deposit from this. When I sell the rest of the units I will give you another $300,000 as a further deposit. When I sell the properties I will pay you the rest of the $7 million. I like the land, I like the place. Please don't sell it.'
Vera said: 'Ok. Go ahead.'" (at [37])
Deposit of $100,000 is Paid
Subsequently Mr Mitrevski, according to Mr Bakovski, paid a total of $100,000 supposedly as a form of deposit for the Belmont properties. The money was paid in three separate instalments into a bank account in the name of Mr and Mrs Bakovski which was held at the National Australia Bank ("NAB"). They were as follows:
Date of Payment
Amount of Payment
30 March 2004
$10,000
25 June 2004
$20,000
5 July 2004
$70,000
Loan Documents
Exhibited to Mr Bakovski's first affidavit were documents "GB1-1" to "GB1-5", being copies of account statements for the relevant NAB joint account showing the payments made by Mr Mitrevski: Mr Bakovski's first affidavit at [39].
Mr Bakovski said that at the time he trusted Mr Mitrevski because he thought he was an honourable family man from within the Macedonian community in Sydney. He said that he did not think about making a written or a formal agreement with him for the sale of the properties because, he said, things were a little rushed and he did not fully understand what was going on: Mr Bakovski's first affidavit at [40].
Mr Bakovski said a few weeks later Mr Mitrevski again came to his house. He handed to his wife a document which appeared to be "like a preliminary plan": Mr Bakovski's first affidavit at [42]. He then set out a conversation in which Mr Mitrevski said he had done some research with the Council and he really liked the Belmont properties. He said that the document he had with him was a plan of them which showed how many units he would build on it. Additionally, it is said Mr Mitrevski said:
"I want you to help to get some money to finish off my Malua Bay development. Look at what I want to do with Belmont. I have spent money on searches at the Council and some other things. Please don't sell Belmont to anyone else."
Mr Bakovski said that Mr Mitrevski handed him a document and that he said: "Can you help me with some money so I can finish my Malua Bay project?" Mr Bakovski said he responded: "We can help you. We can give you the deeds from one of our properties and you can borrow money to finish off the units in Malua Bay". He said he agreed and that his wife in effect also said she agreed: Mr Bakovski's first affidavit at [42].
The document "GB1-6" was identified as a copy of the document Mr Mitrevski handed to Mr Bakovski.
Mr Bakovski said that Mr Mitrevski did not mention how much money he wanted to borrow. He said his understanding from the conversation he had with him was that Mr Mitrevski would use the title deeds for one of their properties as security to borrow money to finish his Malua Bay development. Mr Bakovski said he understood that if the loan money was not paid back that the lender could then try and take their property. Mr Bakovski said:
"...However, I did not believe that this would happen because I thought that Mr Mitrevski was going [sic] pay everything back, because he had other businesses and property. I also believed that he would pay me back because he had already paid a $100,000.00 deposit. I also believed that Mr Mitrevski was going to pay everything back because he had already paid $100,000 as a deposit": Mr Bakovski's first affidavit at [45].
Mr Bakovski said that his wife subsequently gave the Certificate of Title to the property in question to Mr Mitrevski. He said it was around this time that Mr Mitrevski paid the $100,000 deposit for the purchase of the Belmont properties: Mr Bakovski's first affidavit at [46].
Mr Bakovski's evidence was that he was not involved in organising finance for Mr Mitrevski. He said his understanding from discussions he had with Mr Mitrevski was that he, Mr Mitrevski, was going to organise the loan finance and that any loan would be taken out in Mr Mitrevski's name and not in the name of Mr Bakovski or his wife: Mr Bakovski's first affidavit at [47].
Mr Bakovski said that he never retained or dealt with Accom Finance, nor to his knowledge had his wife.
ProPex Loan Documents
Documents "GB1-7" to "GB1-13", the exhibits to Mr Bakovski's affidavit, are copies of documents subsequently received by the plaintiffs from ProPex Pty Ltd ("ProPex") a broker "Property and Finance Specialists":
(a) A Loan Summary;
(b) An Assets and Liabilities Statement;
(c) A Loan Approval;
(d) "Lo Doc Loan Customer Declaration"; and
(e) Privacy Act 1988 and General Consent form.
Mr Bakovski said he recognised his signature on those documents. He said he did not know who ProPex was at that time and he had no recollection of signing the documents.
The Loan Summary of ProPex recorded Mr and Mrs Bakovski's personal details, in particular, their names, address, phone number, and additionally, particulars as to the security property. The value attributed to the security property in handwriting was $550,000. Under "First Mortgage Amount" there is a handwritten figure of $350,000.
In paragraph [4](a) of the document the purpose of the loan was stated in handwriting to be "for business purposes".
"GB1-9" is a "Loan Approval" on the letterhead of ProPex dated 11 August 2004. It records the plaintiffs' names and address and lists them as "borrower(s)". It also contains a description of the security property.
Document "GB1-14" records in handwriting the name "Bransgroves" and a copy of that document contains handwritten entries including, the name "Lenehan & Co Solicitors", and under that the name "James S. Arkoudis BA LLB Solicitor". Underneath that appears a date in handwriting, "13/8/04".
The ProPex documents containing the signatures of the plaintiffs bear the date 10 August 2004.
The document "GB1-15" dated 13 August 2004 records the name at the top of it, "Accom Finance Pty Ltd (Lender")".
It is entitled "Letter of Offer" and was addressed to the plaintiffs. The Letter of Offer is entitled "Re: Accom Finance Pty Ltd Mortgage Advanced to Bakovski".
The security property was noted.
The terms and conditions are then set out. They include the following:
(1) Loan advance: $386,250 or an unspecified percentage of the valuation (whichever is lesser).
(2) Interest rate: 96% reducing to 60% per annum upon payment within seven days of the due date, payable monthly. The lender reserves the right to vary this rate prior to settlement.
(3) Term: 2 months.
(4) Security: First mortgage over the Rockdale property.
(5) Interest payments: Interest in arrears.
(6) Loan purpose: This loan is subject to being for business purposes only. The mortgagor will be obliged to sign a Consumer Credit Code Declaration prior to entering into the mortgage.
(7) Adequate security required: The lender's solicitors must be satisfied on all matters which in their opinion are necessary to give the lender adequate security, including the signing and execution by you of all mortgage and security documents as required.
At the foot of the Letter of Offer is the printed name of the first and second plaintiffs with their signatures.
On the second page of the Letter of Offer are clauses numbered 8 to 15 which I do not here set out. An Establishment Fee was specified as a fee of $12,746.25 including GST payable to Accom Finance Pty Ltd. A Late Redemption Fee is specified if the mortgage was discharged early for any reason, being a fee of $19,312.50.
The third page of the Letter of Offer contains clauses numbered 15 to 17.
It recorded the total amount payable for the loan, including the establishment fee, legal fees and stamp duty, at $17,410.25.
Document "GB1-18" is the first page of the Mortgage which contained an Office of State Revenue stamp dated 16 August 2004. The document was signed by the plaintiffs as mortgagors and the witness is specified as James Arkoudis whose signature appears above his printed name.
Annexure "A" to the Mortgage set out the date (16 August 2004), and the principal amount of the loan as $386,250, the term being 2 months, a lower interest rate of 60% per annum and a higher interest rate of 96% per annum, and the interest type as "compound". The expiry date is noted as 16 October 2004. The first instalment due date was specified as 16 September 2004. The borrowers were specified as the plaintiffs. The guarantors were specified as "N/A". The damages for Late Repayment were specified as $19,312.50. The document bore the signature of Matthew Bransgrove, solicitor for the lender and was signed off by the plaintiffs and by Mr Arkoudis as witness.
Conference with Mr Arkoudis
Mr Bakovski, in his affidavit sworn 22 November 2011, at paragraphs [54] and following provided an account of the events that occurred involving Mr Arkoudis whom he had not met prior to 13 August 2004.
He said that in about that month Mr Mitrevski came to his home and there was a conversation between Mr Mitrevski, his wife, and himself. He said:
"Mr Mitrevski said: 'I have organised the finance. Let's go to my solicitor, Mr Arkoudis, for you to sign some documents.'
I said: 'Ok.'"
Mr Bakovski then said that Mr Mitrevski, his wife and he all drove together into the Sydney CBD in Mr Mitrevski's car.
He said that Mr Mitrevski drove to York Street and stopped the car. Mr Mitrevski then handed him $250 in cash and said words to the effect of: "This is the money for my solicitor for the documents that you need to sign. Give the money to him. When you go in the office over there ask for Mr Arkoudis". Mr Bakovski then said "Ok".
Mr Bakovski said he did not take any loan documents with him to the meeting with Mr Arkoudis. Nor did he see his wife with any documents.
Mr Mitrevski dropped Mr and Mrs Bakovski off outside the offices of Lenehan & Co in York Street, Sydney.
Mr and Mrs Bakovski went up in the lift to the offices of Lenehan & Co. He said there he and his wife were introduced to the people sitting in reception. He asked to see Mr Arkoudis.
He said that Mr Arkoudis met them in the front reception area and directed them into an office.
He said that prior to this he had never met, retained, or dealt with Mr Arkoudis or Lenehan & Co, nor had his wife.
His account of what then took place is as follows:
"62. Vera and I sat on two chairs that were situated in front of the desk that was in this office. Mr Arkoudis then brought some document over to the desk and said words to the following effect:-
Mr Arkoudis said: "Sign there, there, there, there, there, there."
63. As he said this Mr Arkoudis was pointing to an area on the document that was in front of me and I signed the documents where Mr Arkoudis was pointing. Mr Arkoudis did not say anything to me about the documents.
64. I did not read the document that I was signing and I do not recall the appearance of the documents that I signed.
65. Mr Arkousdis [sic] then asked Vera to sign the documents. Mr Arkoudis did not say anything to Vera about the documents.
66. Mr Arkoudis did not say very much during the meeting. He did not talk to me or Vera about what documents we were signing. He just had us sign the documents and that was all.
67. Mr Arkoudis did not say anything other than "sign here" when we were signing the documents. He did not advise me what the documents were or what their effect was. It all happened very quickly.
68 I thought that Mr Arkoudis seemed very serious throughout the meeting.
69. At the time I did not read any of the documents and I didn't notice Vera reading anything.
70. I remember signing and initialling a number of times on the documents that Mr Arkoudis placed in front of me during the meeting on 13 August 2004. I signed the documents where Mr Arkoudis told me to sign them. I did not read them at all. As Mr Arkoudis placed each document in front of me on the desk he would point to the document and say "Sign there, sign there".
71. Mr Arkoudis did not read any part of the documents to me or Vera, or give any explanation about the documents or the reason that Vera and I were signing these documents.
72. Mr Arkoudis did not say anything to me about the fact that he would need my consent and my wife's consent to give both of us advice about the documents that we were signing.
73. Mr Arkoudis then asked me for identification, I handed over my licence. I think Vera brought passports and some other identification documents, but I don't know what they were. I then saw Vera hand the identification documents that she had brought to Mr Arkoudis.
74. Then Mr Arkoudis left the room with the identification documents and the other documents that Vera and I had just signed. I presume that he was photocopying the documents because a short time later, Mr Arkoudis returned to the room and handed back my identification. He also gave Vera back the identification documents that she had handed to him earlier.
75. At the end of the meeting, and immediately before Vera and I left the offices of Lenehan & Company, Mr Arkoudis handed some documents to Vera and said words to the following effect:-
Mr Arkoudis said: "I don't ever want to see you again in my life. Take these documents to Bransgrove. Here is the address."
76. Mr Arkoudis then handed Vera a piece of paper.
77. Exhibited at "GB1-14" is a true copy of that document.
78. When Mr Arkoudis said this it did not seem like he was saying a type of a joke he looked and sounded very serious in the way that he said this.
79. Vera and I did not respond to Mr Arkoudis' comment.
80. At the time I didn't think much of what Mr Arkoudis said.
81. The meeting did not last very long and it seemed to me like Mr Arkoudis just wanted Vera and I to sign the documents all as quickly as possible and for us to be out of that office.
82. Vera and I then left the offices of Lenehan & Company and met Mr Mitrevski downstairs. Vera, Mr Mitrevski and I then went to the offices of Bransgrove Mortgage Solicitors ("Bransgroves") in Mr Mitrevski's car. This was only a short drive from the offices of Lenehan & Company.
83. Vera handed the documents to someone at Bransgroves and then we left and went back home. Mr Mitrevski was also present when the documents were handed over.
84. After this Mr Mitrevski drove us home.
85. I did not keep any documents from the meeting with Mr Arkoudis on 13 August 2004, and to my knowledge Vera did not retain any documents after that meeting either.
86. I did not keep any documents after attending Bransgroves, and to my knowledge Vera did not retain any documents after that attendance either."
Mr Bakovski then gave evidence in his affidavit concerning the "Crown & Gleeson Loan" which came into existence in late August 2004.
The Crown & Gleeson Loan
In paragraphs [90] to [94] of his first affidavit Mr Bakovski stated:
"After this Mitrevski attended [XXX] Farr Street. On that occasion, Vera, Mr Mitrevski and I had a conversation to the following effect:-
Mr Mitrevski said: 'Please I'm delaying with selling my properties. So that they do not taking your properties to repossess, can you give me another Deed to borrow money to pay off the Accom loan? If you give me another deed I can pay off 146 properties from Accom?'
I said: 'Ok. We will help you. We will give you the deed to [XXX] Watkin Street'.
Vera and I agreed to help him by giving him the Deed to the property at [XXX] Watkins [sic] Street for him to borrow more money in his own name.
The Certificates of Title for all of our properties was always kept at my house because I had previous bad experiences with banks holding onto my title.
I cannot remember if we gave him the deeds immediately or at a later date. To my knowledge Vera was the one who would have organised that.
I was not involved in Mr Mitrevski organising this finance or loan. It was my understanding from my discussions with Mr Mitrevski that he was organising everything himself and that the loan would be in his name."
Mr Bakovski described an occasion that occurred later in August 2004. Mr Mitrevski came to the plaintiffs' home on this occasion. He subsequently drove them and their son, Nicholas, to an office in Parramatta where they met a man named Mr Alan Elbadar, whom they had not met before.
When they arrived at the Parramatta office and met Mr Elbadar, Mrs Bakovski produced a number of identification documents and asked "why do we need all these documents?" He could not remember Mr Mitrevski's response. This meeting related to a further refinancing/loan transaction.
A discussion took place between Mr Elbadar and Mr Mitrevski. After that Mr Mitrevski said, "we need to go to Manly to see some people".
Mr and Mrs Bakovski and their son Nicholas then travelled to Manly in Mr Mitrevski's car. Mr Elbadar travelled to Manly in his own car.
Subsequently, on about 26 August 2004, Mr Bakovski said he met a man who he believed was a broker who came to their home and met with him and his wife. His name, he thought, was "Walter". He could not remember his surname.
"Walter" arrived alone. On entering the house there was some general conversation. They did not talk about Mr Mitrevski or about any loan at that stage. "Walter" had some documents with him. Subsequently, Mr Mitrevski and Mr Elbadar arrived and they sat in the dining room. Mr Mitrevski did not stay long. After he left, there was discussion between Mr Bakovski and his wife and Mr Elbadar and "Walter" to the following effect:
"Mr Walter said: 'I'm a little early so we will wait for the others to arrive. I'm coming to get the documents signed for Mr Mitrevski. Mr Mitrevski wants to borrow money. I need you to sign some documents'.
I said: 'Ok'." (at [111])
Mr Bakovski said he then signed some documents during the meeting, being the documents that "Walter" had brought with him. He did not know what the documents were. He said he did not read anything and none of the documents were read or explained to him.
He said he did not receive any legal advice in relation to these documents, nor to his knowledge, did his wife. He said it was never suggested by anyone that they should obtain legal or financial advice before signing the documents. There was no interpreter present at the time of signing the documents.
Mr Bakovski said that he believed that in signing them he was helping Mr Mitrevski to get a further loan in his own name.
He said they were not given the documents they signed to read, nor did his wife read the documents. He said he thought that Mr Mitrevski was borrowing the money, not him or his wife.
Exhibited to Mr Bakovski's affidavit were documents "GB1-29" to "GB1-198". These documents include copies of a mortgage to Crown & Gleeson Securities Limited, and other documents as specified in paragraph [118] of his affidavit.
Mr Bakovski said that after the meeting Mr Mitrevski had come to see him and his wife and said: "Now we have to go to the city to get the money. We need to transfer the documents to give them the Deeds to get the money": Mr Bakovski's first affidavit at [123].
Mr Bakovski in his affidavit sworn 22 November 2011 at paragraphs [132] to [134] set out the service of documents concerning the possession proceedings brought by Accom in respect of the Accom loan.
Mr Bakovski: Cross-Examination
Mr Bakovski was mainly cross-examined in English although an interpreter was available to assist as required. Such assistance was necessary on only limited occasions.
He therefore was capable of giving evidence in English with some limitations on matters of expression.
A number of issues were raised with him in cross-examination. These included:
(i) His property acquisitions, including his dealings with solicitors in relation to loan/mortgage transactions.
(ii) The plaintiffs' financial position in 2004.
(iii) His association and dealings with Mr Mitrevski.
(iv) His acceptance of Mr Mitrevski's assertions concerning the Malua Bay project, the number of units allegedly sold and the number of units remaining, without having obtained verification of the matters asserted in relation to that project.
(v) His dealings, if any, with LaTrobe (finance company).
(vi) His attendances on the following occasions:
- 16 August 2004 - attendance on Mike Hastie, a finance broker.
- 30 August 2004 - the authority given by the plaintiffs dated 30 August 2004 to Crown & Gleeson to pay monies to Demar Investments NSW Pty Ltd (Exhibit 1, p 980).
- 30 August 2004 - attendance on Mr Sharpe, solicitor (T 49 and 51).
- 18 October 2004 - attendance on Mr Hastie (T 50).
- 5 November 2004 - attendance on Mr Sharpe, solicitor (T 49), during which he signed documents for further loans.
- 12 November 2004 - the plaintiffs' attendance with Mr Sharpe upon police regarding Mitrevski.
Mr Bakovski presented, as earlier indicated, as a relatively unsophisticated man. In giving evidence he appeared at times as earnest in his responses to questions in cross-examination. I gained the impression that he was reasonably direct in answering questions and did not demonstrate evasiveness.
In cross-examination it was put to him that in 2004 he and his wife had some financial hardship. He disagreed: T 22:40-50.
He agreed that they attended on Mr Hastie in the first six months of 2004, but would not agree that he conveyed to Mr Hastie that they were experiencing financial hardship.
He agreed that they had taken out a loan from LaTrobe Finance but could not remember when that occurred. It was some time before the Accom loan: T 23.
His attention was taken to a letter from he and his wife addressed to Mr Hastie dated 13 July 2004: Exhibit 1 at p 39. In that letter, they had stated that his help was of great assistance to them and referred to the fact that they wanted him to help because he knew of their financial hardship which they had discussed many times before. There was in fact no evidence in the form of financial or banking records that established that the plaintiffs at that time had any financial difficulties or pressures. They owned more than one unencumbered residential property.
On the question put to him suggesting financial difficulty, Mr Bakovski responded by saying that was a matter for his wife to answer as he indicated that he did not know what was being referred to.
He agreed that in early 2004 he had some problems with the local council at Belmont: T 26. He said that at that stage that Mike Hastie suggested that they engage a Newcastle lawyer, Mr Nick Coren, in relation to that matter: T 27:1-20.
He agreed that prior to 2004 he and his wife had entered into mortgages with different companies and that they had used a solicitor, Mr LJ Sharpe, over a period of many years: T 27.
In May 2004, the council had sent letters requiring the plaintiffs to clean up the Belmont properties: T 28:10-15.
In relation to Mr Mitrevski, he said that he and his wife had been good friends with Mr Mitrevski's sister. He said that he was the best man for his sister and that by marriage he was related to Mr Mitrevski who he knew as George Mitrevski: T 29.
He agreed that Mr Mitrevski had come to him and proposed a deal whereby he would buy Belmont. He said he trusted the man: T 30:40-50.
It was put that part of the deal was that Mr Mitrevski would pay the money back. Mr Bakovski agreed with the proposition that Mr Mitrevski said he would pay it back on the basis that he had a development at Malua Bay.
He said he had never seen the Malua Bay project and did not ask for confirmation to prove that he in fact had a development. He did not seek any confirmation that he had, as he had asserted, sold 18 townhouses, did not seek proof that he had in fact owned those townhouses, nor proof that he had more to sell: T 31:25-50. When asked why he did not, Mr Bakovski responded:
"A. Because he told me what he told me, that's it. I trust him and I believe it. I think he's a family man so he's not going to trick or he's not going to do something silly." (T 31:45-50)
He agreed that he understood what a mortgage was in 2004.
It was put to him that before he went to see Mr Arkoudis on 13 August 2004, he or his wife had given Mitrevski a Certificate of Title: T 32:5-10. I have earlier referred to the fact that Mrs Bakovski did give a Certificate of Title to Mr Mitrevski.
He said he could not recall having given Mr Mitrevski copies of his driver's licence.
It was put to him that before he saw Mr Arkoudis on 13 August 2004, Mr Mitrevski had given him a number of documents to sign. Mr Bakovski responded:
"A. Not Mitrevski never give me nothing, just Mitrevski took me to York Street on front of the Lenehan office and give me - when we went to there, stopped the car and Mr Mitrevski gave me $250 and he said 'This money, give it to my solicitor, Arkoudis'." (T 32:25-30)
He said he could not remember Mr Mitrevski giving him any documents before that day. In particular, he could not remember receiving any blank documents from him: T 32:25-40.
He agreed that when Mr Mitrevski asked to borrow money he said that he would be selling some properties to repay the loan monies and in that context the plaintiffs agreed to offer one of their properties as security: T 33:1-6.
When it was put to him that he understood that if Mr Mitrevski did not repay the loan the finance company could take his property, Mr Bakovski responded:
"Not on that time because I trust him and that's why I gave my deeds." (T 33:5-15).
It was put to him that he understood that if Mr Mitrevski did not repay the loan the finance company would take his property. He responded:
"A. On that time I never think about what you ask me. Because I was trust him and how they say is going to pay me everything with no problem because he's got so many units in already, another 18 to finish off. But now, it's different. I can understand.
Q. Whether you thought about it or not when you gave Mr Mitrevski the certificate of title for the loan you understood that if he did not repay the loan the finance company would take the property?
A. That time I didn't recollect what going be in the future." (T 33:10-25)
He said that he understood that if loan monies were not repaid then the mortgagee would take action but at the time he thought differently and confirmed that he trusted Mr Mitrevski and in particular, he trusted him to repay the money: T 33:25-35.
He was then questioned on the visit to Mr Arkoudis on 13 August 2004. He agreed that he signed a number of documents with Mr Arkoudis present. He was then asked:
"Q. Did you ask Mr Arkoudis what was in the documents you were signing?
A. I never ask.
Q. Why not?
A. Was no interest. That was Mitrevski papers and I was not have any interest. Because we're in the hands of the lawyers, that's it.
Q. When you say you are in the hands of the lawyers, do you mean in the hands --
A. The lawyer who's going to represent the papers, they should explain to you what ever is made or not, whatever.
Q. And why should the solicitor explain that to you?
A. Because that papers is not belongs to me ...
Q. And you believe the lawyer's job was to explain what was in the papers that you signed?
A. Well, if you're a professional you should explain to people because that is not in my trade ..." (T 34:5-30)
Mr Bakovski later stated that he believed that lawyers should explain what is "in the papers" and considered that that was important.
He was then asked as to why he did not ask Mr Arkoudis to explain what was in "the papers", to which he responded:
"A. I never ask the lawyer. I never asked the lawyer to please, for that papers because that papers was Mr Mitrevski papers we talking about.
Q. But you were signing them?
A. That's why I said I didn't know what kind of papers we sign. That's where the lawyer should explain to me. This papers is on new name to get the loan, not Mitrevski. But I give him the deeds to Mr Mitrevski to get the money for his own way, not Mr Bakovski get the loan. Because I don't need the money. I've got the property to sell, nothing else. But Mitrevski ask me to help him, we help him. But not on this way what Mr Arkoudis doing with Mr Mitrevski. That we should understand, everybody. Very easy for to you tell me what you say but if you been in my position then I'm going to ask exactly and you tell me who's right, who's wrong ..." (T 35:1-25)
In a number of other answers Mr Bakovski repeated that he considered that the documents did not belong to him but that they belonged to Mr Mitrevski. See, for example, T 35:34-50 to T 36:1-10.
Mr Bakovski was taken to the "Acknowledgment of Legal Advice by Borrower": (Exhibit 1 at p 51), and to the "Declaration by Borrower" Exhibit 1 at p 55.
It was put to him that he, before signing the document, would have seen the word "borrower" in the heading of the document "Declaration by Borrower":
"Q. And when you signed this page you saw the word "Borrower" at the top?
A. I never saw nothing. Just signed. "Sign here", "Sign here", "Sign here", "Sign here", thank you." (T 36:40-50)
A little later it was put to him:
"Q: And you understand the word "borrower" in this document was talking about you borrowing the money from Accom Finance?
A. They should be for Mitrevski, not for us ..." (T 37:35-40)
A little later it was put to him:
"Q. When you read this document now in the witness box you know it is talking about you and your wife being the borrowers of the money?
A. Yes.
Q. And if you had read this document in front of the solicitor in 2004 you would have understood that you and your wife were the borrowers?
A. Correct." (T 37:45-T 38:1)
Mr Bakovski in his evidence indicated that irrespective of what the documents said, "we never have independent legal advice": T 38:6.
Later when it was put to him that there was nothing stopping him from asking the solicitor, Mr Arkoudis, questions about the documents, Mr Bakovski repeated that they trusted Mr Mitrevski and that the papers "belongs to him. That's it": T 38:35-36, and at T 40-42.
It was put to him that Mr Arkoudis gave him advice, to which Mr Bakovski responded, "He never told me nothing": T 43:25-26. A series of questions were put to him as follows:
"Q. He told you that the interest rate of 60 per cent was ridiculous?
A. He never told me nothing, thank you.
Q. And you told him you needed the money, otherwise you were going to lose a business opportunity?
A. That is not true.
Q. And he told you that if you signed those documents you were, in effect, signing up to lose your house if you didn't make the repayment?
A. He never said nothing.
Q. And then he explained what was in these documents before you signed them?
A. He never explained nothing.
Q. You told him that you wanted him to hurry up?
A. For what?
Q. He told you this was not a good deal?
A. He never said nothing, thank you.
Q. He told you that he could write to the solicitor and ask for some changes to the documents that made it easier for you?
A. Never said nothing, thank you.
Q. He said to you that maybe you could negotiate some better terms?
A. He said nothing, thank you.
Q. And then you said to him, "No, we have to hurry up. We don't want to get into legal games and waste more time"?
A. I never said that, thank you." (T 43:25-T 44:1-6)
Mr Bakovski was asked as to whether he understood what amount of money was being borrowed:
"Q. ... And can I ask this question: when you saw Mr Arkoudis, did you know how much the loan was for?
A. Can we understand this: I never ask for money. I never borrow any money. And how can I know what the figure is? This is a commonsense.
Q. All right. Putting aside who the loan was for, just --
A. I didn't know nothing about it.
Q. ... You believe Mr Mitrevski was borrowing money?
A. Correct.
Q. And did you know how much he was borrowing?
A. I don't know nothing about it." (T 55:33-47)
He said that when he saw Mr Arkoudis he believed that he and his wife were providing security for Mr Mitrevski's loan: T 56:10-15.
He agreed that in the past he had taken out several loans to purchase property and that he had repaid every one of the loans: T 57:5-10.
He agreed that he and his wife had unsuccessfully attempted to sell the Belmont properties for many years up to 2003: T 58:40-50. He agreed that the property had been vandalised: T 59:25-30.
He agreed that in early 2004 he had some financial difficulties which arose out of council chasing him for some money to pay for the cleanup of the Belmont properties: T 60:10-20.
He also agreed that Mr Mitrevski told him that he was prepared to buy the properties and that he asked for a price of $5 million and that Mr Mitrevski had said "No, I want to buy them for $7 million": T 59:40-50. Mr Bakovski said that he thought that the Belmont properties were worth more than $7 million, but that he had offered $5 million in order to "get out of that problems": T 60:1-5.
He also agreed that he was prepared to do anything to make a deal with Mr Mitrevski: T 60:30-35. He said that he understood that Mr Mitrevski needed the money to complete the Malua Bay development and the only way he was going to get it was if the plaintiffs helped him in some way: T 60:40-50.
He said that he was going to do anything he could to help Mr Mitrevski get the money: T 61:1-5. However, he said he did not consider this was the only opportunity to make so much money from the properties at Belmont: T 61:5-10.
It was put to him that he was uninterested in the amount of money that Mr Mitrevski was seeking to borrow and that was because he was 100% determined to make sure Mr Mitrevski got his money, to which Mr Bakovski replied "Because I tried to help him to give the debts, nothing else": T 61:15-21.
Evidence of Vera Bakovski
Mrs Bakovski was born on 11 November 1944 in Macedonia. She arrived in Australia on or about 13 April 1962.
Mrs Bakovski was educated in the Teachers' College in Bitola, Macedonia. She completed two years of this course but did not complete the remaining two years because she migrated to Australia.
She confirmed that she met her husband in 1967 and they married on 3 June 1968 and had two children.
She stated that her husband is not proficient in the English language. Her evidence is that he has a lot of difficulty reading English and often needs her to read and explain any document that he reads in English for him. She said that her husband has a lot of difficulty understanding words spoken in English and said that she often explains things to him in Macedonian, as he is better able to understand things that way.
She said that she and her husband speak Macedonian at home and they also do so with their children. Sometimes they use English words that they know if that is easier, but that is not often.
Mrs Bakovski said that her proficiency speaking English is good. However, she said that she finds it difficult to read and understand written English, especially if the words and sentences are long or complex. She said, however, that generally she can read and write in English reasonably well although she said she often misspells some words or she does not fully understand the meaning of complex words or sentences that are in English.
Mrs Bakovski said she attended Beginners English classes at Arncliffe in 1962 for approximately two months. She worked in the Streets Ice Cream Factory in Turella NSW for about one year. She said that she then moved to the position of Quality Control Officer for about seven years. When she was pregnant with her daughter she stopped working in about May 1969. She did not work for a few years after that.
Mrs Bakovski presented as an intelligent and articulate witness. She readily understood what was asked of her in cross-examination and, I considered, that she answered questions without any sign of evasion or obstruction. Overall I considered that she presented as a very genuine person.
Mrs Bakovski has had a lengthy history in the work force. In the early 1970s she began working for Turner Brothers in Kogarah, Sydney, as a cutter for a manufacturer of curtains.
In 1979 she commenced work with Youngers Jewellery . She worked there for 15 years.
Since leaving Youngers Jewellery in about 1990 she has not worked on a full-time basis, except for a five-year period when she worked as a casual assistant at a nursing home in Kogarah, working there three days per week.
Mrs Bakovski set out the history of the property acquisitions by her husband and herself commencing on or about 22 December 1987: Affidavit of Mrs Bakovski sworn 22 November 2011, at [15] to [38].
Mrs Bakovski said that she and her husband have lived in their own home in the one suburb since about 1968.
She said that in about 1994 they became interested in selling the Belmont properties and retained an agent for that purpose. She said she also retained Mr Sharpe, solicitor, to prepare contracts for the sale of the properties. She could not recall how much money they were asking for them at that time. They did not get any offers to purchase the properties.
After 1994 they retained another agent to market the properties. They continued to market the property between 1999 and 2003. However they did not receive any offers that were acceptable to them.
Mrs Bakovski gave an account of the party she and her husband attended on or about 13 September 2003 at the Jovanovski household. She stated that Vesela Jovanovski, who was the sister-in-law of George Mitrevski (also known as Robert Mitrevski) was a family friend.
Mrs Bakovski then set out a history as to the events that thereafter took place with Mr Mitrevski expressing interest in the Belmont properties: at [52]-[60].
Mrs Bakovski referred to a meeting that took place following payment of the $100,000 "deposit" by Mr Mitrevski, and prior to August 2004, at their home. In that conversation Mr Mitrevski stated:
"I need you to help me to finish off my Malua Bay development. I am building 36 town houses at Malua Bay. I've finished 18 of the town houses and I've got another 18 to finish off. In October I'm expecting to finish Malua Bay and when it's finished I'll give you another $300,000 deposit towards Belmont. I am expecting to be able to pay you this money in October": (at [66]).
She said that her husband replied: "Ok, we will help you".
Mrs Bakovski said Mr Mitrevski then said: "I need you to give me money on one of your properties. I want to borrow money on one of your properties so that I can finish my Malua Bay development".
She said her husband replied: "Ok, we will let you use the deeds to [the Rockdale property] so that you can borrow the money".
She said Mr Mitrevski then said that he would organise everything and pay off all the expenses and that he would be responsible for "everything". He additionally said that he would borrow the money in his name and that the plaintiffs did not need to worry about a thing and did not need to get involved. Mr Mitrevski said that he would pay all the costs and interest and would claim it on his tax, he having, he said, so much tax to pay: at [66].
Mrs Bakovski, in her first affidavit sworn on 22 November 2011, referred to documents brought to her and her husband by Mr Mitrevski, and in paragraph [77] she listed the "ProPex" documents. She said she did not have copies of the documents in her possession in about August 2004 and that it was not until about 8 November 2004 that she and her husband obtained copies of the documents from a Ms Thanudchang who was associated with ProPex: at [79]-[80].
Mrs Bakovski said that she did not, nor to her husband to her knowledge, engage ProPex to seek any finance for them. She recalled giving a copy of her husband's driver's licence to Mr Mitrevski and a copy of the Certificate of Title for one of their properties in response to a request from Mr Mitrevski to do so.
Mrs Bakovski in her first affidavit gave her account of the meeting with Mr Arkoudis on 13 August 2004: at [88]-[121].
Mrs Bakovski stated that prior to 13 August 2004 Mr Mitrevski contacted her and her husband saying that he had organised the finance and was going to pick them up and take them to see his solicitor to sign some documents: at [89].
She said that on 13 August 2004 Mr Mitrevski picked them up and took them to Sydney CBD. He told them that he was taking them to see his solicitor to sign documents.
He then handed $250 in cash to her husband. She said that on arrival at the offices of Lenehan & Co they introduced themselves to two females in the reception area and asked to see James Arkoudis. She said she had never heard of, met, retained, or dealt with Mr Arkoudis before this time, or with his firm, nor to her knowledge had her husband.
She said that Mr Arkoudis spread out some papers on the desk. She and her husband sat in two chairs in front of the desk. Mr Arkoudis sat in the chair behind the desk facing them.
He placed the papers in front of her on the desk and said words to the effect, pointing to the documents, "Sign here".
She said that he repeated these words, pointing to particular parts of the documents, and she continued to sign until Mr Arkoudis told her that she did not need to sign any more: at [96].
After she completed signing the documents she then saw Mr Arkoudis follow the same procedure with her husband, saying "Sign here" a number of times, pointing to the areas in the documents where he was to sign. She saw her husband sign them as directed.
She said that neither she nor her husband read any of the documents. She said she did not recall the appearance of the documents they signed: at [98].
According to her evidence, Mr Arkoudis did not ask her to read any of the documents. He did not ask her to write anything other than her signature on each page as directed: at [99].
She said that Mr Arkoudis did not provide any explanation about the documents. She said "Mr Arkoudis did not say very much during the meeting, and the meeting was very rushed": at [100].
After signing the documents she recalled Mr Arkoudis said words to the effect "I want you to give me your IDs. I need as many as you have". She agreed. He then took her identification documents and those of her husband. He left the room, went into the adjoining room with them, taking the documents that they had just signed as well. She believed that the identification documents consisted of her Australian passport, her husband's Australian passport, his driver's licence, and their Medicare card.
A short while later Mrs Bakovski said Mr Arkoudis returned to the room and that when he came back he was holding a bundle of papers in his hands. He handed the papers to her and said words to the effect, "Here are the papers. These are the papers for you to take to Bransgroves": at [104].
She said that Mr Arkoudis then took a pen in his hand and began to write something down on a piece of paper. He handed the piece of paper to her and said words to the effect:
"Take the documents to Bransgroves Solicitors. You will meet a girl called Aida. You should give them the documents. Once you walk out of here, I never want to see you again in my life."
Ms Bakovski annexed to her affidavit (VB 1-288) a copy of a note which she said Mr Arkoudis handed to her as well as a copy of his business card.
She said, "I found it strange that Mr Arkoudis would be saying something like this but I did not respond": at [107].
(6) The cost of borrowing money to avoid a loss caused by a breach of contract is recoverable and not too remote.
The High Court in Hungerfords v Walker (1988) 171 CLR 125 at 142-145 reviewed this development of the law in relation to the above principles. Mason CJ and Wilson J in that case observed (at p 145):
"The cost of borrowing money to replace money paid away or withheld, in consequence of the defendant's breach of contract or negligence is directly related to the wrong and is not too remote in the sense in which the common law regarded the loss attributable to late payment of damages as being too remote ..."
In Hungerfords v Walker it was held that s 30C of the Supreme Court Act 1935 (SA) (which conferred a power to award interest on damages) did not foreclose the authority of the courts to award damages in accordance with the principle established in Hadley v Baxendale and the measure of damages governing claims in tort.
The Court referring to the broad approach Equity adopted in awarding interest noted that courts of equity had awarded not only simple interest but also compound interest when justice demanded, for example, money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary (at p 148).
In Hungerfords v Walker the High Court noted that the respondent's damage was within the reasonable contemplation of the parties and had they had the money lost they would have used it to pay down high interest loans of the business (20%).
Damages were properly awarded by way of compound interest for the added cost of funding the business with borrowed money as a result of the loss of the use of the money overpaid in tax.
I have concluded that the plaintiffs are entitled to an order for interest under s 100.
Civil Procedure Act 2005
Under s 100, the Court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the Court thinks fit on the whole or any part of the money, and for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.
As the award of damages will not include an award of compound interest, then the appropriate order is that the plaintiff is entitled to an award of interest at the prescribed rates in accordance with the Uniform Civil Procedure Rules, Civil Procedure Act, and applicable Practice Notes for the whole of the period calculated from 10 December 2004 to the date of judgment.
On the latter basis, the calculation of interest at the prescribed rates on the total sum referred to above, namely, $608,196.02, is as follows:
Date from
Date to
Base
Days in Period
Rate per annum
Rate per day
Interest accrued
11/12/2004
31/12/2004
$608,196.02
21
9.25%
$154.13
$3,236.77
1/01/2005
30/06/2005
$608,196.02
181
9.25%
$154.13
$27,897.87
1/07/2005
31/12/2005
$608,196.02
184
9.50%
$158.30
$29,126.76
1/01/2006
30/06/2006
$608,196.02
181
9.50%
$158.30
$28,651.86
1/07/2006
31/12/2006
$608,196.02
184
9.75%
$162.46
$29,893.25
1/01/2007
30/06/2007
$608,196.02
181
10.25%
$170.79
$30,913.85
1/07/2007
31/12/2007
$608,196.02
184
10.25%
$170.79
$31,426.24
1/01/2008
30/06/2008
$608,196.02
182
10.75%
$179.13
$32,600.97
1/07/2008
31/12/2008
$608,196.02
184
11.25%
$187.46
$34,492.21
1/01/2009
30/06/2009
$608,196.02
181
8.25%
$137.47
$24,881.88
1/07/2009
31/12/2009
$608,196.02
184
7%
$116.64
$21,461.82
1/01/2010
30/06/2010
$608,196.02
181
7.75%
$129.14
$23,373.89
1/07/2010
31/12/2010
$608,196.02
184
8.50%
$141.63
$26,060.78
1/01/2011
30/06/2011
$608,196.02
181
8.75%
$145.80
$26,389.88
1/07/2011
31/12/2011
$608,196.02
184
8.75%
$145.80
$26,827.28
1/01/2012
30/06/2012
$608,196.02
182
8.25%
$137.47
$25,019.35
1/07/2012
31/12/2012
$608,196.02
184
7.50%
$124.97
$22,994.81
1/01/2013
30/06/2013
$608,196.02
181
7%
$116.64
$21,111.90
1/07/2013
31/12/2013
$608,196.02
184
6.75%
$112.47
$20,695.33
1/01/2014
27/05/2014
$608,196.02
148
6.50%
$108.31
$16,029.71
TOTAL:
$503,086.42
On the basis of the above conclusions on apportionment, damages are to be awarded as to 40% of the amount of $608,196.02 (namely, $243,278.41), together with interest calculated on that amount. On my calculations, as set out below, the interest amount is $201,234.57.
Date from
Date to
Base
Days in Period
Rate per annum
Rate per day
Interest accrued
11/12/2004
31/12/2004
$243,278.41
21
9.25%
$61.65
$1,294.71
1/01/2005
30/06/2005
$243,278.41
181
9.25%
$61.65
$11,159.15
1/07/2005
31/12/2005
$243,278.41
184
9.50%
$63.32
$11,650.70
1/01/2006
30/06/2006
$243,278.41
181
9.50%
$63.32
$11,460.75
1/07/2006
31/12/2006
$243,278.41
184
9.75%
$64.99
$11,957.30
1/01/2007
30/06/2007
$243,278.41
181
10.25%
$68.32
$12,365.54
1/07/2007
31/12/2007
$243,278.41
184
10.25%
$68.32
$12,570.50
1/01/2008
30/06/2008
$243,278.41
182
10.75%
$71.65
$13,040.39
1/07/2008
31/12/2008
$243,278.41
184
11.25%
$74.98
$13,796.89
1/01/2009
30/06/2009
$243,278.41
181
8.25%
$54.99
$9,952.75
1/07/2009
31/12/2009
$243,278.41
184
7%
$46.66
$8,584.73
1/01/2010
30/06/2010
$243,278.41
181
7.75%
$51.66
$9,349.56
1/07/2010
31/12/2010
$243,278.41
184
8.50%
$56.65
$10,424.31
1/01/2011
30/06/2011
$243,278.41
181
8.75%
$58.32
$10,555.95
1/07/2011
31/12/2011
$243,278.41
184
8.75%
$58.32
$10,730.91
1/01/2012
30/06/2012
$243,278.41
182
8.25%
$54.99
$10,007.74
1/07/2012
31/12/2012
$243,278.41
184
7.50%
$49.99
$9,197.92
1/01/2013
30/06/2013
$243,278.41
181
7%
$46.66
$8,444.76
1/07/2013
31/12/2013
$243,278.41
184
6.75%
$44.99
$8,278.13
1/01/2014
27/05/2014
$243,278.41
148
6.50%
$43.32
$6,411.89
TOTAL:
$201,234.57
I propose to permit the parties the opportunity to make submissions on the calculation of the judgment amount, including pre-judgment interest, to be awarded on the above bases.
Costs
I will hear submissions as to costs.
The proceedings will be re-listed in relation to the outstanding issues of pre-judgment interest and the making of final orders.
Orders
(1) Subject to orders and directions set out below, I propose entering judgment in favour of the plaintiffs against the second defendant for breach of duty under the retainer with the plaintiffs, and the first defendant, as vicariously liable for the acts and omissions of the second defendant in respect of the following:
(a) Loss and damage in the amount of $243,278.41.
(b) Pre-judgment interest on that amount, calculated in accordance with s 100 of the Civil Procedure Act 2005, Part 6 r 6.12 of the Uniform Civil Procedure Rules 2005, and Practice Note SC Gen 16, calculated from 11 December 2004 to 27 May 2014 and thereafter to date of entry of judgment. I note interest on the above basis from 11 December 2004 to 27 May 2014 is calculated at $201,234.57.
(2) Leave granted to the parties to make an application and submissions in relation to:
(a) The calculation of the amounts referred to in (1)(a) and/or (1)(b) above.
(b) Costs and any ancillary or consequential orders.
(3) The parties are to bring in short minutes of order to give effect to this judgment.
(4) The proceedings will be re-listed in respect of orders (2) and (3) at 9.30am on Monday, 2 June 2014.
**********
Decision last updated: 27 May 2014
1
4