Braham v Catalano
[2013] VSC 437
•30 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List D
No. S CI 2010 5588
BETWEEN
| DR SIMON BRAHAM | Plaintiff |
| BRAHAM PROPERTIES PTY LTD (ACN 103 667 554) | Second Plaintiff |
| and | |
| JOE CATALANO | First Defendant |
| STRATEGIC PROPERTY ACQUISITIONS PTY LTD (ACN 134 251 513) | Second Defendant |
| KEROVPE MARDIRIAN | Third Defendant |
| THE REGISTRAR OF TITLES | Fourth Defendant |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29-31 July, 1 August 2013 | |
DATE OF JUDGMENT: | 30 August 2013 | |
CASE MAY BE CITED AS: | Braham v Catalano & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 437 | |
CONTRACT – Retainer – Whether first defendant was acting as solicitor – Scope of retainer in conveyancing transaction – Property not registered in name of purchaser – Breach of retainer.
SOLICITORS – First defendant not holding a practising certificate – Undertaking a conveyancing transaction for purchaser – Nature and extent of duties – Duty of care – Fiduciary duties – Property not registered in name of purchaser – Breach of duties.
FRAUD – Dishonesty and moral turpitude on part of first and third defendants inferred from conduct of parties, unusual features of transaction and failure of third defendant to participate in trial.
REAL PROPERTY – Torrens system – Loss or damage – Indemnity – Entitlement – Fraud of agent acting altogether outside scope of authority – Transfer of Land Act 1958 (Vic) s 110(1)(c), 110(3)(a), Registrar of Titles v Fairless [1997] 1 VR 404 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the First and Second Plaintiffs | M Gronow | B2B Lawyers |
| For the First Defendant | Self represented | |
| For the Fourth Defendant | W Gillies | Land Victoria Legal |
HIS HONOUR:
A. Introduction
Simon Braham (‘Dr Braham’) is a surgeon. Joseph Michael Catalano (‘Catalano’) is a duly qualified solicitor. In 1998 Catalano was suspended from practising as a solicitor and since that date he has not held a practising certificate.
By a contract of sale dated 16 September 2006, Dr Braham purchased, from the estate of Heather Marion James, a residential apartment in Mitford Street, St Kilda (‘the Property’) for $400,000 (‘Contract of Sale’). The Contract of Sale was entered into by Dr Braham ‘and/or nominee’; Dr Braham subsequently nominated Braham Properties Pty Ltd (‘Braham Properties’) as purchaser, a company of which he was and remains the sole director.
Dr Braham and Braham Properties allege that they retained Catalano to act for them as their solicitor for the purpose of the acquisition. As a result of what Catalano told him, Dr Braham believed that Catalano was a practising solicitor, and did not realise (nor did Catalano disclose) that he was in fact a solicitor who had not been entitled to practice since 1998.
Catalano disputes that he was acting as a solicitor. He alleges that he was merely assisting a friend and agreed to attend settlement but did not agree to attend to the completion of the conveyance into the name of the purchaser, Braham Properties. This was to be attended to by someone else on the instructions of Dr Braham.
In relation to settlement, Catalano, among other things, arranged settlement cheques, attended settlement on 16 November 2006, and thereafter notified Body Corporate Services Pty Ltd, South East Water Ltd and the City of Port Phillip of the purchase of the Property by Braham Properties.
What occurred after settlement is the subject of much dispute, debate and speculation. It is common ground that Catalano did not take any further steps to ensure the Property was registered in the name of Braham Properties. The Property was never registered in the name of Braham Properties. According to Catalano, on the instructions of Dr Braham, he gave the duplicate certificate of title and other relevant documents to Toni Miller (‘Miller’) and played no further part in the conveyance. Dr Braham disputes that he gave any such instructions. He gave evidence that he had never heard of Miller and expected Catalano to complete the conveyance. Indeed he said that he was surprised to learn, years later, that Braham Properties was not the registered proprietor of the Property.
Dr Braham and Braham Properties contend that Catalano is liable for the loss suffered by Braham Properties. The claim is for breach of fiduciary duty, breach of contractual and tortious duty of care and fraud. Catalano is an undischarged bankrupt.
The registered proprietor of the Property was in fact the second defendant (‘SPA’), a company which was incorporated on 19 November 2008. SPA is in liquidation and the claim against SPA has been resolved by agreement. SPA became the registered proprietor of the Property on 24 December 2009, on which day the third defendant and SPA’s sole director, Mr Kerovpe Mardirian (‘Mardirian’), the fourth defendant, lodged with Land Victoria the certificates of title and mortgage discharge, being documents collected by Catalano at settlement, together with a transfer in favour of SPA purportedly signed by the deceased Heather Marion James (who at that time remained registered proprietor of the Property despite her death).
It is not entirely clear how or when the certificates of title and mortgage discharge came into Mardirian’s possession.
Mardirian subsequently produced to the Plaintiffs an alleged contract note for the purchase of the Property dated 21 November 2008, being two days after the incorporation of SPA, and also purportedly signed by the deceased Heather Marion James.
The Plaintiffs allege that the facts and circumstances surrounding the acquisition and registration of SPA as registered proprietor of the Property point conclusively to fraudulent conduct on the part of Catalano, SPA and Mardirian. It is alleged that those parties deliberately acted so as to deprive Braham Properties of the benefit of the Property for which it had paid. The conduct and relevant circumstances are set out in detail below.
The claim against Mardirian is for fraud. Mardirian is bankrupt. Although Mardirian was aware of the trial date he elected not to participate in the trial despite serious allegations being made against him. The Plaintiffs contend that they are entitled to proceed against Mardirian because the present claim against him is for unliquidated damages arising otherwise than from a contract promise or breach of trust and is not a “provable debt” in his bankruptcy. [1]
[1]Bankruptcy Act 1966 (Cth), ss 58(3), 82(2). On the same basis the Plaintiffs contend they are entitled to proceed against Catalano for fraud.
In addition to claims against Catalano and Mardirian, Braham Properties makes a claim against the Registrar of Titles under s 110 of the Transfer of Land Act 1958 (Vic) (‘the Act’). The Registrar of Titles contends that the claim does not fall within the indemnity provisions of the Act.
B. Background
(i) Sale of the Property and Settlement
On 16 September 2006 the Contract of Sale in respect of the Property was executed by the State Trustees Ltd, as legal personal representatives of the estate of Heather Marion James (deceased), and Dr Braham. The Property is more fully described as unit 1 and car park 24, 10A Mitford Street, St Kilda, Melbourne (more specifically units 1 and 24 on Plan of Subdivision 013050 being the whole of the land described in Certificates of Title volume 9309, folios 510 and 523). Dr Braham subsequently nominated Braham Properties as the purchaser. Dr Braham is and was the sole director of Braham Properties.
In September 2006, Dr Braham engaged Catalano, to act in the purchase of the Property. Dr Braham and Catalano were known to one another and based on previous discussions and other work done by Catalano, Dr Braham believed Catalano to be a practising solicitor.
On 15 November 2006 Catalano wrote to Dr Braham’s bank enclosing a statement of adjustments, advising that he would attend settlement and requesting that various cheques be drawn. The letter was on the letterhead of ‘Bion Conveyancing’.
On 16 November 2006 Catalano collected, from Dr Braham’s bank, cheques debited to the account of Braham Properties made out to:
(a)Body Corporate Services Pty Ltd;
(b)South East Water Ltd;
(c)the City of Port Phillip;
(d)the State Revenue Office for payment of stamp duty;
(e)State Trustees Ltd, for payment of the balance of the purchase price;
(f)the Registrar of Titles for payment of the registration fee on transfer; and
(g)Bion Conveyancing for fees charged.
On 16 November 2006 Catalano attended settlement on behalf of Dr Braham and collected the certificate of title for the Property, a discharge of the mortgage against the Property and a transfer of the Property signed by State Trustees Ltd in favour of Braham Properties. Following settlement Catalano notified Body Corporate Services Pty Ltd, South East Water Ltd and the City of Port Phillip that Braham Properties had purchased the Property.
From November 2006 to June 2010 the Property was under Dr Braham’s control. At various times over this period Dr Braham lived in, renovated and leased the Property. Dr Braham said that he assumed that Braham Properties was the registered proprietor.
(ii) Sale of the property to SPA
On 19 November 2008 SPA was incorporated. Mardirian controlled SPA. Mr Mardirian and Catalano were known to one another.
On 21 November 2008 a contract of sale was executed by Mardirian, as the director of the purchaser, and Heather Marion James as vendor, for the Property to be purchased by SPA. For reasons unknown Heather Marion James had remained the registered proprietor of the Property following her death and the administration of her estate by the State Trustees Ltd.
On 24 December 2009 Mardirian lodged with the Titles Office the certificates of title for the Property, the discharge of the mortgage against the Property and the contract of sale executed on 21 November 2008. SPA became the registered proprietor of the Property.
(iii) Mortgages over the Property
On 22 January 2010, SPA borrowed $225,000 from Alcor Nominees Pty Ltd (‘Alcor’) secured by a registered mortgage over the Property. On 12 March 2010 SPA borrowed an additional $50,000 from Alcor secured by a further registered mortgage over the Property.
(iv) Discovery that Braham Properties had not been registered as proprietor of the Property
In June 2010 Dr Braham’s bank discovered that the Property had not been transferred to either Dr Braham or Braham Properties but that SPA was the registered proprietor. In a chain of emails dated 10 to 13 June 2010 Catalano informed Dr Braham that:
(a)Mardirian, who was known to him, told him that SPA had purchased the Property from ‘the “vendor” on terms through a woman named Toni Miller, who was acting as an estate agent;’
(b)Miller was known to him and was not a person to be trusted and that Miller may have removed the original file from his possession in circumstances that required investigation by the police; and
(c)he would arrange a conference with a barrister to discuss how to proceed and, at Dr Braham’s request, lodge a caveat against the Property.
(v) Default by SPA and sale of the Property
On 17 June 2010, Thexton Lawyers, acting for Braham Properties, lodged a caveat against the Property .
On 1 September 2010 default notices were served by Alcor on SPA as SPA had made no payments towards the mortgage. In October 2010 Alcor entered into possession of the Property and brought proceedings in this Court[2] against Braham Properties to have the caveat lodged by Braham Properties removed. The caveat was removed by order of this Court and Braham Properties was ordered to pay Alcor’s costs.
[2]Supreme Court of Victoria proceeding S CI 2010 5868.
In February 2011, pursuant to leave granted by this Court, the Plaintiffs discontinued proceedings against Alcor, which had been named as a defendant in the proceedings.
In July 2011 Alcor, as mortgagee in possession, sold the Property at public auction for $591,000. The sale was completed in September 2011 and in November 2011 Alcor paid $152,366.28 into Court being part of the net proceeds of sale after the amount owing to Alcor and the costs of sale were deducted.
(vi) SPA goes into liquidation
In November 2011 a liquidator was appointed to SPA.
In December 2011 Alcor paid $37,978.84 into Court being the balance of the net proceeds of sale.
In May 2012 partial terms of settlement were entered into by Dr Braham, Braham Properties, SPA, SPA’s liquidator and the Registrar of Titles whereby funds in Court totalling $190,345.12 were to be paid, $25,000 to SPA’s liquidator and the balance to Braham Properties.
On 24 August 2012 orders were made in the proceeding brought by Alcor against Braham Properties for the release of the funds held in Court in accordance with the partial terms of settlement entered into in May 2012. Orders were also made in these proceedings to remove SPA as a party.
C. Claim against Catalano
The Plaintiffs claim that, having held himself out as a ‘lawyer’, Catalano owed the Plaintiffs fiduciary duties, as well as tortious and contractual duties of care to act for them with due care and skill in handling the legal aspects of the purchase of the Property, including the conveyancing, and ensuring Braham Properties was registered as proprietor of the Property in accordance with the Act.[3]
[3]Hawkins v Clayton (1988) 164 CLR 539; Astley v Austrust Ltd (1999) 197 CLR 1; Professor Gino Dal Pont, Lawyers’ Professional Responsibility (Lawbook Co, 4th ed, 2010), 73-79 [4.05]-[4.65].
Catalano contends that he did not represent that he was a practising solicitor and that he was only engaged to attend the settlement of the Property and had no role to play after settlement had occurred. He contends that he did what he agreed to do and has no further responsibility or liability (the ‘limited instruction version’).
Dr Braham and Catalano met at a wedding where Catalano introduced himself to Braham as a lawyer. As a result of what Catalano told him, Braham believed that Catalano was a practising solicitor. Catalano has been (and remained at the time of trial) an undischarged bankrupt since 1997 and not entitled to practice as a solicitor since 1998, neither of which Catalano disclosed to Dr Braham.
Catalano admitted that he had referred to himself as a lawyer without saying that he was no longer entitled to practice.
Although disputed by Catalano, Dr Braham contends that Catalano had previously purported to act as Braham’s solicitor in both drawing a document and giving legal advice in relation to a domestic de facto dispute between Dr Braham and his partner at the time. There is no dispute that Catalano prepared the document (called a Separation Financial Deed) and discussed it with Dr Braham. The capacity in which he did this and whether he charged a fee of $3,000 as alleged by Dr Braham are disputed matters.
In my opinion Catalano clearly held himself out as a solicitor and undertook for reward to act for the Plaintiffs in relation to the legal aspects of the Plaintiffs’ purchase of the Property, including the conveyance. In addition to introducing himself as a lawyer without qualification, and his involvement in the Separation Financial Deed, Catalano did so by, amongst other things:
(a)requesting and arranging settlement, duty and lodgement cheques;
(b)requesting the vendor, State Trustees Ltd, or its solicitors, to prepare a statement of adjustments, transfer of land and statutory declaration and giving the adjustments statement to the Plaintiffs bank;
(c)attending settlement of the purchase on 16 November 2006, handing over the required cheques and collecting the duplicate certificate of title, signed transfer of land and discharge of mortgage; and
(d)preparing notifications of transfer of ownership into the name of Braham Properties and thereafter notifying Body Corporate Services Pty Ltd, South East Water Ltd, the City of Port Phillip and the State Revenue Office of Braham Properties’ purchase of the Property.
Catalano’s contention that he was only engaged to attend the settlement of the purchase of the Property is contrary to Dr Braham’s evidence, is highly unusual and improbable and is inconsistent with:
(a)Catalano’s fax to Dr Braham’s personal banker at Dr Braham’s bank on 15 November 2006 (the day before settlement) requesting cheques required for payment of duty and lodgement fees, and Catalano’s subsequent collection of those cheques, which cheques he would not have required unless he was also attending to (whether personally or otherwise) the payment of duty and lodgement of the title documents;
(b)Catalano’s knowledge prior to settlement that Dr Braham’s bank would not be attending settlement and that he would have to collect the cheques and title documents;
(c)Catalano’s admission that, in addition to arranging and attending settlement on 16 November 2006, he:
(i)obtained a statement of adjustments, a statutory declaration and a transfer of land from the vendor or its solicitors; and
(ii)prepared and provided notifications of purchase to the vendor’s representatives, Body Corporate Services Pty Ltd, South East Water Ltd, the City of Port Phillip and the State Revenue Office;
(d)Catalano’s assertion in a chain of emails dated 10 to 13 June 2010 that Miller had “removed” the title documents from Catalano’s possession in circumstances which warranted police investigation. Catalano did not assert at this time that he had only been retained to attend settlement and not to pay duty and lodge the title documents for registration or that he had given the documents to Miller at Dr Braham’s request; and
(e)Catalano’s admission that he arranged for the payment of duty and the lodgement of the title documents without seeking or requesting further payment.
Further, Catalano’s contention that after settlement he retained Miller, at Dr Braham’s request, to pay the duty and lodge the title documents is highly improbable and is inconsistent with:
(a)emails exchanged between the parties, in which Catalano’s allegation that Miller was retained at Dr Braham’s request was not mentioned, an allegation which was only raised in 2011 as part of Catalano’s defence in this proceeding; and Catalano’s omission in the chain of emails dated 10 to 13 June 2010 (where he asserted that Miller had “removed” the title documents from his possession in circumstances that warranted police investigation) to refer to the fact that Miller had been retained by Catalano to stamp and lodge the documents at Braham’s request, undermines his case and his credit;
(b)what Catalano has pleaded in his defence (that having provided the documents to Miller for lodgement he subsequently spoke to her and she told him that she had attended to lodgement of the documents and forwarded the new certificate of title to Dr Braham) and the conflicting evidence he gave at trial where Catalano said that he did not again think about the lodgement of the documents after having provided Miller with them;
(c)Catalano’s seeking and obtaining bank cheques for duty and lodgement fees, cheques which would not have been required at settlement unless Catalano was to also subsequently attend to the stamping and lodgement of the title documents; and
(d)Catalano’s arrangement of notifications of Braham Properties’ purchase of the Property to be prepared and provided to Body Corporate Services Pty Ltd, South East Water Ltd, the City of Port Phillip and the State Revenue Office.
The Property was never registered in the name of Braham Properties because Catalano failed to do what he was required to do. Having held himself out to Dr Braham and others as a practising solicitor, Catalano owed the Plaintiffs the same duties as a solicitor would ordinarily owe. He failed to discharge the duties and is liable to Braham Properties. It follows that the Plaintiffs succeed in their claims for breach of fiduciary duty and tortious and contractual duties of care to act for them with due care and skill in handling the legal aspects of the purchase of the Property.[4]
[4]These claims, other than the tort claims may be provable debts in Catalano’s bankruptcy.
Further, if, as he claims, Catalano gave the title documents to a third party (Miller or anyone else) to lodge he did so without Dr Braham’s knowledge or agreement and was grossly negligent in not checking that the documents had been lodged and that registered title had been transferred into the name of his client.
The Plaintiffs submitted further that the evidence established fraudulent conduct on the part of Catalano. Fraud was pleaded but not directly put to Catalano. It is obvious from his answers and conduct in the witness box that he would have categorically denied any such conduct.
I do not regard Catalano as a witness of truth. I am not prepared to accept his evidence unless it is specifically corroborated by other cogent evidence or reasonable inferences. His answers were evasive, general and on key points entirely unsatisfactory and unconvincing. The fact that there is absolutely no documentary or written evidence to support his case and version of events is compelling but not surprising. His version of events (so far as it goes) is unrealistic and highly improbable. The grounds for rejecting his evidence and in particular his account of the relevant events, go some way to establishing his fraudulent conduct.
I find as a fact, having considered the whole of the evidence, that Catalano and Mardirian and perhaps others, conspired to defraud Braham Properties of its interest in the Property. Precisely how it took place and the identity of the other party or parties (if any) involved is a matter of speculation. No acceptable explanation was given by Catalano. Mardirian did not participate in the trial. Nevertheless the conclusion that they conspired to defraud Braham Properties is not only open but compelled by the evidence and reasonable inferences that may be drawn.
In addition to the matters referred to above (paras 39 and 40) and the general observations made in relation to his evidence, the following matters are relevant.
First, although Catalano accepted that the Separation Financial Deed was a legal document designed to have legal effect and that he gave his opinion from his ‘knowledge and experience’ and that ‘it was a fine line’, he persistently denied that he gave legal advice or was acting as a solicitor.
Secondly, I do not accept Catalano’s explanation as to why he used the name Bion Conveyancing. Having categorically denied that there was anything deceptive in the letter from Bion Conveyancing dated 15 November 2006 he agreed that he could have changed the name and put his email address and that anyone receiving the letter would think they were dealing with a conveyancing business. Catalano said that his ex-wife was hoping to start a conveyancing business and would use the name Bion Conveyancing. However his ex-wife did not give evidence.
Thirdly, as noted, the inconsistency, described above, between the June 2010 emails and the defence points clearly to the recent invention of the limited instructions version. Further, the attempted explanation and exculpation by Catalano of the different versions of events in the witness box was both farcical and comical and severely affects Catalano’s credit.
Fourthly, Catalano’s evidence to the effect that he was unaware that Mardirian or a company associated with him (SPA) had acquired the Property and was the registered proprietor, until he was told by Dr Braham in June 2010 is entirely unconvincing. The evidence is that during the period 21 November 2008 (when SPA purchased the Property) and June 2010 (when Catalano was told of this acquisition) Catalano and Mardirian were friends and from time to time discussed Mardirian’s business affairs and investments. Indeed over this period there were many phone calls between them.[5] Further they both knew Miller, the alleged (by Catalano) fraudulent intermediary. In these circumstances it is unrealistic and unconvincing to suggest that they did not discuss the acquisition by SPA of the Property particularly given the peculiar nature and features of the transaction as referred to below. I do not accept Catalano’s evidence on this aspect.
[5]During the period 1 October 2009 and 30 April 2010 there were 380 phone calls between Catalano and Mardirian. (About 180 calls were under 20 seconds.)
Fifthly, Catalano’s evidence as to when, how and on what terms Miller was engaged to lodge the relevant documents is entirely unconvincing and improbable. There is nothing in writing to either Miller or Dr Braham. Although Miller was ‘involved in property’ there is no evidence that this extended to the registration of a conveyancing transaction. Catalano was ‘not sure to what extent she was involved’. However, because she ‘needed some work’ he engaged her without discussing a fee. I do not accept the evidence of Catalano to the effect that the fee was to be negotiated between Dr Braham or his accountant and Miller. This is highly improbable and rejected by Dr Braham. It is also inconsistent with Catalano’s evidence. He gave evidence that he never told Dr Braham at any time that he had engaged Miller. Finally, on this point, if Miller was engaged by Catalano this had nothing to do with Dr Braham and if and to the extent that Miller was negligent or fraudulent, Catalano is liable.
I will deal with my conclusion as to fraud after dealing with the claim for fraud against Mardirian.
D. Claim against Mardirian
The Plaintiffs allege that Mardirian and SPA acted fraudulently in entering into a contract of sale for the Property and in lodging the certificate of title and discharge of mortgage.
SPA went into liquidation in November 2011 and is no longer a party to these proceedings. Mardirian elected not to participate in the trial despite serious allegations made against him. He did however file a defence and make discovery. Relevantly, he knew that a case of fraud was being made against him.
On 24 December 2009, SPA, and Mardirian as its sole director, lodged the certificates of title and mortgage discharge relating to the Property with the Titles Office, and became registered proprietor.
No coherent account has been put forward as to how SPA, rather than Braham Properties, came to be the registered proprietor of the Property, without Dr Braham’s knowledge or agreement, and notwithstanding that the Plaintiffs had paid for the Property and SPA had not. Despite repeated requests Mardirian failed to make discovery of or provide any information or evidence of making any payment in respect of SPA’s acquisition of the Property.
The Plaintiffs submitted that the Court should infer from the following facts that Mardirian acted with dishonesty and moral turpitude:
(a)The alleged contract note for the purchase of the Property, dated 21 November 2008, which was two days after the incorporation of SPA, was purportedly signed by Heather Marion James, who was in fact deceased.
(b)Mardirian never inspected the Property internally prior to the purported purchase.
(c)The purported contract of sale provided that the purchase price was $430,000, with $30,000 to be paid on 21 November 2008, and the balance to be paid over the following year. Despite the fact that Mardirian discovered a large number of bank statements of the relevant period (and made three affidavits relating to discovery) there is no evidence of payment of the balance of $400,000.
(d)The Property was occupied by Braham Properties or its tenant at all times subsequent to the settlement on 16 November 2006, and until the alleged fraud was discovered in June 2010. At no stage did Mardirian or SPA get the keys or take possession of the Property.
(e)However, Mardirian did use the Property to raise over $250,000, none of which was repaid.
The Plaintiffs also submitted that the purchase price of $430,000 was lower than the market price. The Plaintiffs relied on the evidence of Mr David Manders, an expert valuer.[6]
[6]Mr Manders provided valuations of the Property as to three different dates in his affidavit, sworn 18 April 2013: at 21 November 2008, the date of the alleged contract of sale to SPA, the value given was $580,000; at 24 December 2009, the date on which SPA became registered owner of the property the value given was $600,000; at 18 October 2010, the date on which Alcor took possession of the Property, the value given was $650,000.
Further, the Plaintiffs pointed to certain ‘odd’ features of the purported contract of sale which, it was submitted, required explanation. These included:
(a)paragraph 4 of the special conditions which states that all payments were to be made to Miller as the vendor’s representative, however Miller’s contact details or address are not provided; and
(b)the payment schedule set out in the special conditions is inconsistent with what is stated on the first page of the contract note.
In this proceeding, Mardirian has made affidavits of documents in the usual form, swearing amongst other things that the documents being discovered constitute all the documents in his or SPA’s possession, custody or power relating to questions in the proceeding. The Plaintiffs submitted that if SPA or Mardirian did pay the purported purchase price, it would be most unlikely that there would be no documentary evidence as to this fact. In the absence of any bank statement or other document evidencing payment for the Property, it was submitted, the Court should infer that no payment was made. I agree and make such a finding.
Further, the Plaintiffs argued that the fact that Mardirian did not appear in Court to give evidence in defence of the serious allegations made against him gives rise to an inference that he does not consider that any evidence he may give would have assisted his case.[7] I agree.
[7]Jones v Dunkel (1959) 101 CLR 298; Booth v Bosworth (2001) 114 FCR 39, [41]; Stephen J Odgers, Uniform Evidence Law, (Thomson Reuters, 2013) [1.3.110].
The Plaintiffs’ case is that, despite the Plaintiffs’ lack of direct knowledge of what really occurred, the claim against Mardirian for fraud is made out, by inference from the objectively established facts. I agree. The matters relied on by the Plaintiffs as set out in this section justify an inference of fraud on the part of Mardirian. In addition to the matters referred to it is extremely strange that Mardirian lodged the discharge of mortgage given much earlier. This is most unusual. Mardirian must have known that something was wrong.
Although the relevant standard of proof is on the balance of probabilities, because the Plaintiffs’ claims in this case are serious ones, the Court should take into account the seriousness of the allegations in determining whether it is reasonably satisfied that they have been proven.[8] The authorities establish that in civil cases involving allegations of fraud, the standard is satisfied if the circumstances raise a more probable inference in favour of what is alleged.[9]
[8]Briginshaw v Briginshaw (1938) 60 CLR 336, 361-362 (Dixon J); Stephen J Odgers, Uniform Evidence Law (Thomson Reuters, 2013) [1.4.100].
[9]Chamberlain v R (No 2) (1984) 153 CLR 521, 536 (Gibbs CJ and Mason J). See also Jones v Dunkel (1959) 101 CLR 298, 304 – 305 (Dixon CJ); Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; 110 ALR 449, 450 (Mason CJ, Brennan, Deane and Gaudron JJ); Palmer v Dolman [2005] NSWCA 361 (18 October, 12 December 2005) [33]-[47] (Ipp J).
Having regard to these reasons, the whole of the evidence of Catalano, the relationship between Catalano, Mardirian and Miller, the nature and peculiarity of the SPA acquisition and the failure on the part of Mardirian to give evidence or produce any documents to support his case, I am satisfied to the requisite degree that Catalano and Mardirian acted together in order to deprive Braham Properties of its rights to be registered as the proprietor of the Property. The case of fraud is made out against each of them.
E. Claim against the Registrar of Titles
The Plaintiffs submit that they are entitled to recover their loss, together with interest and costs, from the Registrar of Titles pursuant to the indemnity provisions contained in s 110 of the Act.
Section 110 of the Act relevantly provides:
110 Entitlement to indemnity
(1)Subject to this Act any person sustaining loss or damage (whether by deprivation of land or otherwise) by reason of—
…
…
(c)any error omission or misdescription in the Register or the registration of any other person as proprietor;
…
(2)Any person claiming to be so entitled may bring an action against the Registrar as nominal defendant for recovery of damages or join the Registrar as nominal co-defendant in any action brought by such person in respect of such loss against any other person and the Registrar may join any other person as co-defendant in any such proceedings.
(3)No indemnity shall be payable under this Act—
(a)where the claimant his legal practitioner, conveyancer or agent caused or substantially contributed to the loss by fraud neglect or wilful default or derives title (otherwise than under a disposition for valuable consideration which is registered in the Register) from a person who or whose legal practitioner, conveyancer or agent has been guilty of such fraud neglect or wilful default (and the onus shall rest upon the applicant of negativing any such fraud, neglect or wilful default);
…
The Registrar contends that no indemnity is available because of the exclusion in s 110(3)(a). It was contended that the claimant (Dr Braham and as a consequence Braham Properties) ‘caused or substantially contributed to the loss by … neglect or wilful default’.
The Registrar contended further that Catalano, as agent of the claimant, also ‘caused or substantially contributed to the loss’ by neglect or wilful default and perhaps even fraud.
For the reasons set out hereunder I do not accept that Dr Braham caused or substantially contributed to the loss by neglect or wilful default.
In Registrar of Titles v Fairless[10] Phillips JA said:
What I have just said serves to point up both the purpose and the scheme of section 110. Its purpose is, I think, to compensate a person who is deprived of an estate or interest in land by reason of the operation of a system of registration of land titles which is established under the Act. Accordingly, indemnity is afforded where loss is sustained when land is brought under the Act, or if some error is made in the Register and so on, as provided in sub-section (1). This is then subject to sub-section (3) by which an indemnity is denied if loss or damage has been brought about (or is not shown not to have been brought about) wholly or substantially by the conduct of the claimant himself or of his agent, in cases where such conduct is regarded as sufficiently culpable. And what is sufficiently culpable is embraced by the phrase (“fraud neglect or wilful default”). So understood, the scheme of the legislation seems to me to be plain enough. …[11]
[10](1997) 1 VR 404 (‘Fairless’).
[11]Ibid 418.
In relation to ‘neglect’ Phillips JA said –
It may be accepted readily enough that “neglect” includes a failure to take reasonable care for one’s own interests, particularly in a context where, in order to be relevant, such “neglect” must have “caused or substantially contributed to the loss”: where the taking of due care for one’s own interests might have prevented the loss, it could perhaps be said, at least in certain circumstances, that the failure to take that care caused or substantially contributed to the loss which might otherwise have been prevented.[12]
[12]Ibid 419.
In relation to the submission that Mr Fairless had been guilty of neglect, Phillips JA agreed with the following passage from the reasoning of the trial judge:
Whether Mr. Fairless failed to take reasonable care must be judged in the context of the facts as I have found them to be. The failure to read the documents, or take them away, or obtain advice, may in themselves be regarded as indicating a lack of care, or as a cause of the loss. But the wider context explains why such things occurred. And, as Smith J. said of the plaintiff in Eade, at 65,393, “The question whether there was neglect or wilful default on her part is to be considered in the light of her knowledge of what was happening at the time”. And there is the key, for Mr. Fairless’ knowledge was that which had been represented or induced by Mr. Doran. He was led by fraud into a false sense of understanding and accordingly signed the relevant documents without exercising that degree of scrutiny and care which may otherwise have been the case. The false sense of understanding was brought about by a complex of factors including what was said, his sense of trust and the manner of presentation of the documents to him.[13]
[13]Ibid.
In both Fairless and Eade v Vogiazopoulos and Others[14] (the case referred to in the above passage) the claimants were held not to have caused any loss by reason of neglect or wilful default. In each case the relevant claimant had placed trust and confidence and relied on others where the circumstances and context suggested that it was entirely appropriate to do so. The same may be said of the context, facts and circumstances of this case.
[14](1993) V ConvR 54-458; [1999] 3 VR 889 (‘Eade’).
The cases relied upon by the Registrar[15] are clearly distinguishable on the facts. In each case the neglect of the claimant was clearly evident.
[15]Vassos v State Bank of South Australia (1993) 2 VR 316, 333 (Hayne J); Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16.
Having engaged Catalano as a solicitor, in the circumstances referred to, to attend to the conveyance, I do not consider that Dr Braham was neglectful at any stage. He was not required to verify whether Catalano was a practising solicitor. He was told that he was and was entitled in the circumstances to accept and rely on this. He was also entitled to leave everything to his solicitor in the belief that in discharging his duties Catalano would do all that was necessary to achieve registration of the Property in the name of Braham Properties. After settlement, Dr Braham moved into the Property and effected renovations. There was nothing to indicate that Braham Properties was not the registered proprietor of the Property. In fact, the contrary is the position. I do not accept that Dr Braham has failed to look after his own interests or that of Braham Properties. None of the matters suggested demonstrate any neglect or wilful default as required.
It was submitted that other than the word of Catalano there were no external manifestations to suggest that he was a practising solicitor. There was no letterhead or correspondence suggesting that Catalano was a practising solicitor and the suggested home office did not, it was suggested, have any signage or other indication that this was the law office of a practising solicitor. In these circumstances it was contended that Dr Braham should have made further enquiries. I do not accept the submission. The factors referred to are negated by the representation made by Catalano and the fact that he discussed legal aspects of certain legislation with Dr Braham and prepared a draft deed of settlement to be executed by Dr Braham and his former partner. Further, Dr Braham was aware that Catalano had acted for other parties as a solicitor. In these circumstances, signage, books and letterheads are of less relevance and lose their significance.
Three related matters require some elaboration. First, it is common ground that Catalano said prior to the engagement that he was a solicitor. Catalano submitted that this did not carry with it any representation that he was entitled to practise as a solicitor. I do not agree. Given the context in which Catalano made the statement and the absence of any words to indicate that he was not entitled to practise, it was understandable that Dr Braham thought that Catalano was a practising solicitor. Of course whether he was or was not is not relevant to this point. Dr Braham thought that he was, and in my view he was entitled to form this view. Having formed the view, he was entitled to rely on ‘his solicitor’.
The second matter relates to advice given by Catalano. It is clear that Catalano discussed legal matters with Dr Braham. Again, in this specific context it matters not whether it was strictly legal advice or advice involving legal matters given by a friend. The point is that it was understood by Dr Braham as being legal advice in relation to a de facto property settlement with his former partner. It was discussed and Catalano prepared the Separation Financial Deed. Further, Dr Braham gave evidence that he was aware that Catalano had acted as a solicitor for others. The point is that the evidence establishes that Dr Braham had more than a sufficient basis for concluding that as far as he was concerned Catalano was a practising solicitor. In the circumstances there was no need to investigate or obtain any confirmation of this position and the failure to do so does not constitute neglect or wilful default.
The third matter relates to the signage and letterhead point. Medical and legal practices operate very differently today and the lack of signage and letterheads and other minor related points should be considered in light of these developments. Home offices or facilities and electronic communication significantly reduce the relevance of these points.
In relation to the position post settlement, I do not regard any conduct or lack of enquiry or investigation by Dr Braham as being neglectful or constituting wilful default. After settlement, Dr Braham obtained the keys and moved in. He made renovations. He acted on the basis that Braham Properties was registered proprietor and had no reason in the circumstances to think otherwise. Whilst it may have been prudent to obtain a copy of the duplicate certificate of title or make enquiries in relation thereto, the failure to do so in the circumstances does not go as far as being neglectful. Further, and so far as may be relevant I do not consider that, if the conduct be considered neglectful, that it was a substantial cause of the loss. The fraud, neglect and wilful default lies elsewhere.
Counsel for the Plaintiffs, Mr Gronow, submitted that in relation to Catalano the Registrar is not entitled to rely on the ‘neglect or fraud of agent’ defence in s 110(3) of the Act, since on any possible combination of events, the fraud cannot have been within the scope of Catalano’s authority or anyone else who was an agent of the Plaintiffs.
Although Catalano was engaged by the Plaintiffs to act for them as (they thought) their solicitor, the conduct engaged in by him as the Plaintiffs’ solicitor or agent (whether giving the title documents and cheques to Miller so she could attend to the payment of duty and lodgement or acting in concert with SPA and Mardirian to deprive the Plaintiffs of the benefit of the Property) was not authorised by them, either actually or ostensibly, and being outside the retainer does not, it was submitted on the authorities, constitute fraud of an agent.[16]
[16]Reference was made to Registrar of Titles v Fairless [1997] 1 VR 404 (CA); Eade v Vogiazopoulos and Others [1999] 3 VR 889; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group [1998] 3 VR 16; Vassos v State Bank of South Australia [1993] 2 VR 316; Solak v Registrar of Titlesand Others (2011) 33 VR 40; [2011] VSCA 279.
The starting point for any consideration of this issue is Fairless. Upholding the decision of the trial judge the Court of Appeal held that s 110 of the Act only disentitled a claimant to indemnity if the fraud of the agent was committed in the course of the retainer. In Fairless the fraud was not committed in the course of the retainer. Although Mr Fairless had engaged Mr Doran to do some building works and renovations, the engagement did not include any transfer of the property of Mr Fairless to Mr and Mrs Doran. Mr Doran duped Mr Fairless into signing contracts of sale and transfers in favour of Mr and Mrs Doran for no consideration. In these circumstances Phillips JA said:
It is for these reasons that I agree with the conclusion of the trial judge on this second aspect of the case also. The registrar contended that the fraud practised by Mr. Doran and which “caused or substantially contributed to” the loss suffered by Mr. Fairless was the fraud of one who was the “agent” of Mr. Fairless, within the meaning of subs. (3)(a). In my opinion, the answer is that given by the trial judge: that is, that the fraud lay altogether outside the scope of any authority given by Mr. Fairless to Mr. Doran and on that account did not serve to disentitle Mr. Fairless to the indemnity otherwise afforded him under s.110(1).[17]
[17]Fairless, 424.
The Registrar in Fairless submitted that the scope of the agency was irrelevant. The Court of Appeal disagreed. Phillips JA referred to the example of a client engaging a solicitor to act in a personal injury case who leaves a certificate of title with the solicitor as security for costs. The solicitor then forges the client’s signature and obtains a transfer in the solicitor’s own name. The fraudulent conduct of the solicitor would be ‘otherwise than in the course of his retainer and s 110(3)(a) would not apply.
After referring to the example of the solicitor referred to in the previous paragraph Phillips JA identified the wider and narrower views and said:
On that question, views may differ. On the one hand, it can be contended with some force that, in the case of fraud by an agent, the fraud should be relevant to disentitle a claimant to indemnity under subs. (3)(a) only where the agent was acting in the course of his retainer. The example has already been given of a solicitor who acts in fraud of his client but altogether outside the scope of his retainer; and that example provides the reason for recognising some limitation in the operation of subs. (3)(a). On the other hand, the context in which the reference to fraud of an agent occurs suggests that the claimant might fairly be regarded as disentitled through fraud of an agent, not only if the fraud is committed within the scope of the agency, but also if, when the fraud is committed, the agent is acting with the ostensible authority of the claimant so that the claimant himself could not have recovered his property irrespective of the effect of registration under the statute. Between these two, a choice must be made – and in my view the first is to be preferred.[18]
[18]Ibid.
To the extent that Catalano was the agent of the Plaintiffs any relevant conduct engaged in by him, to use the words of the court in Fairless ‘lay altogether outside the scope of any authority’ given by the Plaintiffs to Catalano[19] and consequently Braham Properties is not disentitled to indemnity under s 110(1) of the Act.
[19]Counsel for the Registrar of Titles did not submit that this case was different to either Fairless or the example of the solicitor given in Fairless by virtue of the context or nature of the conduct that was outside the scope of the authority.
F. The remaining claims
By Notice of Contribution or Indemnity under Rule 11.15 dated 31 August 2011 the Registrar of Titles claims indemnity from Catalano, SPA and Mardirian in the event that the Registrar is held to be liable.
Given the findings made, the Registrar may be entitled to Contribution or Indemnity from Catalano and Mardirian and also presumably SPA. Given the status of these parties and the nature of this claim I will hear from the Registrar in relation to the form of order appropriate in the circumstances.
Catalano claims that in the event that he is liable, any damages suffered by the Plaintiffs should be reduced on the basis that their negligence contributed to their loss. For the same reasons given in relation to a similar submission made by the Registrar of Titles, I do not consider that any of the Plaintiffs have been negligent. The claim fails.
Catalano further relies on the proportionate liability provisions of the Wrongs Act 1958 (Vic) (‘the Wrongs Act’).[20] He claims that Miller (but strangely not Mardirian) is a concurrent wrongdoer and he should only be liable for that percentage that relates to his wrongdoing. Although pleaded, no argument was made in relation to this point. The claim in any event fails for a number of reasons. Two reasons are sufficient. Under s 24AM of the Wrongs Act there is no apportionable claim in the event of a finding of fraud. In such a case the liability is joint and several. Further Miller was not a party to this proceeding.[21]
[20]Part IVAA of the Wrongs Act 1958 (Vic).
[21]See ss 24AI(3) and 24AL of the Wrongs Act 1958 (Vic).
G. Disposition
The second plaintiff is entitled to damages as against each of Catalano, Mardirian and the Registrar of Titles.
I will hear from the parties as to the precise amount of the judgment and the form of order and costs.
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