Damdounis v Recorder of Titles; Damdounis v Hatzis

[2002] TASSC 69

[2002] TASSC 69

CITATION:Damdounis & Anor v Recorder of Titles & Ors; Damdounis & Anor v Hatzis & Ors [2002] TASSC 69

PARTIES:  DAMDOUNIS, Nickolas
  DAMDOUNIS, Victoria
  v

THE RECORDER OF TITLES
FOR THE STATE OF TASMANIA
HATZIS, Nick

HATZIS, Dimitrios

DAMDOUNIS, Nickolas
DAMDOUNIS, Victoria
v
HATZIS, Tony
HATZIS, Maria
HATZIS, Koula
HATZIS, Nick
HATZIS, Dimitrios

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  M56/2002

150/2002

DELIVERED ON:  17 September 2002
DELIVERED AT:  Hobart
HEARING DATES:  17 September 2002
JUDGMENT OF:  Underwood J
[Edited edition of reasons delivered orally]
CATCHWORDS:

Conveyancing - Land titles under the Torrens system - Indefeasibility of title: certificate as evidence - Exceptions - Fraud or forgery - Alleged fraud by solicitor for vendor - Purchasers allegedly unaware of fraud.

Land Titles Act1980 (Tas), s40.
Assets Company, Limited v Mere Roihi [1905] AC 176; Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576, followed.
Aust Dig Conveyancing [155]

REPRESENTATION:

Counsel:
           Applicants:  J E Green                  
           Respondents T & M Hatzis:         A B Walker
           Respondents K, N & D Hatzis:     M R Chambers  
Solicitors:
           Applicants:  John Green                
           Respondents T & M Hatzis:         Dobson Mitchell and Allport
           Respondents K, N & D Hatzis:     Shields Heritage                   

Judgment Number:  [2002] TASSC 69
Number of Paragraphs:  20

Serial No 69/2002
File Nos M56/2002

150/2002

NIKOLAS DAMDOUNIS and VICTORIA DAMDOUNIS
v THE RECORDER OF TITLES FOR THE STATE OF TASMANIA,
NICK HATZIS, DIMITRIOS HATZIS
NIKOLAS DAMDOUNIS and VICTORIA DAMDOUNIS
v TONY HATZIS, MARIA HATZIS, KOULA HATZIS,
NICK HATZIS, DIMITRIOS HATZIS

REASONS FOR JUDGMENT  UNDERWOOD J
(DELIVERED ORALLY)  17 September 2002

1. The plaintiffs in action No 150/2002 are also the applicants in M56/2002.  The respondents to the application are the Recorder of Titles and Nick Hatzis and his son Dimitrios Hatzis.  The Recorder is not a party to the action, but there are five defendants, all related by blood or marriage, to Mrs Damdounis, the second named plaintiff.  In order, they are:

·   Mrs Damdounis' brother, Tony Hatzis;

·   Tony Hatzis' wife, Maria Hatzis;

·   the wife of another of Mrs Damdounis' brothers, Koula Hatzis;

·   Nick Hatzis, Koula's husband; and, lastly

·   Nick and Koula Hatzis' son Dimitrios Hatzis.

1. Why there are two sets of proceedings is not clear to me.  They both concern a shop at Margate.  Presently there are two applications, one in each proceeding, both seeking interlocutory injunctions.  In essence, the order sought in each case is a restraint upon the defendants from dealing with any interest that they might have in the shop at Margate.

1. It seems to be common ground that the shop was, at all relevant times prior to April 1997, leased to people who are not parties to these proceedings.

1. In about 1993, Mr Damdounis left Australia to live in Greece.  About the same time, his wife also went to Greece.  She returned in 1996.  Upon her return, she was introduced to a solicitor, Mr Harry Serpanos.  He has since been struck off the roll of practitioners.  Mrs Damdounis gave him some instructions.  At this stage I interpolate to say that having the heard the plaintiffs and Mr Nick Hatzis give oral evidence, I have no confidence in any of their evidence with respect to contentious matters.  However, this deficit does not hinder the determination of the interlocutory applications. 

1. The plaintiffs' case is that in about March 1996, Mr Serpanos forged their signatures upon a power of attorney from them to him.  Their case is that Mr Serpanos used the forged power of attorney to execute a contract of sale of the Margate land to Tony Hatzis, Maria Hatzis, Koula Hatzis and the plaintiffs' son (not a party to any proceedings), Aristidi Damdounis.  The purchase price was $342,500.

1. To finance the purchase, a mortgage was obtained from Butler McIntyre & Butler in the sum of $413,000.  The purchase was duly completed.  After discharging the plaintiffs' mortgage and other liabilities, there remained $64,492.  The plaintiffs claim that this money has never been paid to them.  This is disputed by the defendants.

1. In about April 1997, a company was formed with Koula Hatzis, Nick Hatzis, Tony Hatzis, Maria Hatzis and Ari Damdounis as shareholders.  The company purchased the business carried on at Margate from the tenants.

1. About this time, the plaintiffs returned to Tasmania and lived above the shop for a period of time.  The second plaintiff became the secretary of the company to which I have just referred.  Neither plaintiff did anything about the alleged fraud until a year later when they saw a solicitor who put a caveat on the title.  For reasons not disclosed by the evidence, this caveat was withdrawn about a year later.  Thereafter, the plaintiffs did no more to prosecute their claim of fraud and loss until these proceedings were commenced in March 2002.  Curious behaviour, one might think, on the part of persons living and working with the people who, to their knowledge, were the beneficiaries of the fraudulent conduct by a disgraced solicitor by which they were deprived of their property that earned income.

1. It was claimed by Nick Hatzis that at some point of time Ari Damdounis ceased to pay his share of the mortgage instalments following the purchase of the property.  Accordingly, Tony and Maria Hatzis sold their interest in the company running the business and their interest in the land, to Nick and Koula Hatzis.  Nick Hatzis then bought the Butler McIntyre & Butler mortgage, issued a notice of sale and exercising the mortgagee's power of sale, sold the Margate land to his son, Dimitrios.

1. In consequence, the plaintiffs' son no longer has any interest in the land and Tony and Maria Hatzis no longer have any interest in either the land or the business being carried on there.

1. Again, curiously, the transfer of Koula Hatzis' interest in the land to Nick and Maria Hatzis is not registered, but the mortgagee sale by Nick Hatzis to Dimitrios Hatzis has been lodged with a priority notice.  A caveat lodged this year has held the status quo.

1. With respect to the application for interlocutory injunctions, I direct myself in accordance with the High Court decision Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622, 623.

1. Although there is no expert handwriting evidence, both plaintiffs have pledged their oaths to the fact that it is not their signatures on the registered power of attorney used by Mr Serpanos to sell the Margate land.  There is no contrary evidence.  Mr Green, for the plaintiffs, initially submitted that accordingly there is a strong prima facie case of fraud and that the indefeasibility of title provisions in the Land Titles Act 1980 ("the Act"), do not operate in the case of fraud. Relevantly, the Act, s40, provides:

40 ¾ (1)  For the purposes of this section 'indefeasible', in relation to the title of a registered proprietor of land, means subject only to such estates and interests as are recorded on the folio of the Register or registered dealing evidencing title to the land.

(2)   Subject to subsections (3) and (4), the title of a registered proprietor of land is indefeasible.

(3)   The title of a registered proprietor of land is not indefeasible –

(a)in the case of fraud, in which case the person defrauded has, except as otherwise provided in sections 41 and 42 all rights and remedies that he would have had if the land were not registered land;

…".

1. It has been held in cases dealing with sections in similar terms that the only material fraud is that which has the power to disturb current proprietorship.  In Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576, Street J (as he then was) considered a section indistinguishable from the Act, s40, set about above. With respect to what is a material fraud his Honour adopted, the following passage from the Privy Council decision Assets Company, Limited v Mere Roihi [1905] AC 176 at 582:

"Passing now to the question of fraud, their Lordships are unable to agree with the Court of Appeal. Sects 46, 119, 129, and 130 of the Land Transfer Act, 1870, and the corresponding sections of the Act of 1885 (namely, ss 55, 56, 189, and 190) appear to their Lordships to shew that by fraud in these Acts is meant actual fraud, ie, dishonesty of some sort, not what is called constructive or equitable fraud ¾ an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud.  Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he buys from a prior registered owner or from a person claiming under a title certified under the Native Land Acts, must be brought home to the person whose registered title is impeached or to his agents.  Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents.  The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part.  But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him.  A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon."

1. Schultz is particularly apposite to the present matter because in that case the fraud was committed by the mortgagee's solicitor and the mortgagee had no knowledge of it. See also Stuart v Kingston (1923) 32 CLR 309.

1. There is no evidence in this case that any of the defendants were a party to Mr Serpanos' alleged fraud or knew of it at the time they acquired an interest in the land.  In this respect it might be noted that the defendants Nick Hatzis and Dimitrios Hatzis were not even parties to the transfer from the plaintiffs allegedly affected by the fraudulent conduct.  Mr Green relied upon a letter dated 18 December 1996 from Messrs Butler McIntyre & Butler to Mr Howes, solicitor for the purchasers, in which the former advised the latter that the power of attorney was not sealed and that Butler McIntyre & Butler were concerned that the plaintiffs had not consented to the sale.  Mr Green also relied upon Annexure "F" to Mr Kimber's affidavit, a document purportedly signed by the plaintiffs and being a consent to the sale.  He submitted that Mr Howes should have compared the signatures on annexure "F".  The submission concluded that had he done so he would have noticed that they were different, and Mr Howes' failure to do so constituted fraud in the sense enunciated by the Privy Council in Assets Company, Limited v Mere Roihi, in particular by this extract from the passage cited above:

"But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him."

1. Even accepting Mr Green's submission that when Mr Howes received Annexure "F" to Mr Kimber's affidavit, he should have compared the signatures with those on the impugned power of attorney, and even accepting that had he done so he would have noticed that they were different, this only means at best, that Mr Howes was not as diligent as he should have been.  There is no evidence that Mr Howes noted a difference in the signatures and wilfully declined to inquire for fear of learning the truth.  The evidence falls far short of evidence of moral wrongdoing or turpitude necessary to constitute the kind of fraud that will defeat an otherwise indefeasible title.  I might add that for my part although there appears to be a difference between the signatures of Mr Damdounis on the power of attorney and that on Annexure "F", I can see no such difference between the signature of Mrs Damdounis on the two documents.

1. Absent the existence of relevant fraud, the title cannot be impeached and there is no point therefore, in granting injunctive relief sought.  For completeness, I add that there is pending a further application to be dealt with by the plaintiffs.  This application is to amend the statement of claim.  The proposal is to amend it to claim an equitable lien on the Margate land arising by reason of the unpaid balance purchase price.  Also there are claims for equitable damages for fraud and trespass.  Obviously the latter two claims sound only in damages and injunctive relief would not be appropriate or, perhaps better expressed, damages would be an adequate remedy.  With respect to the claim for an equitable lien, there is, as I have said, a dispute about whether the plaintiffs have been paid the net proceeds of sale.  The state of the evidence is such that I am totally uncertain as to whether or not any, and if so what part, of the proceeds of sale remain unpaid.  At best, from the plaintiffs' point of view, the unpaid sum is approximately $64,000.  The difficulty in this case is that there are two mortgagees who require their security to be registered, that is, the Perpetual Trustee Company and Mr Nick Hatzis, who financed the purchase by Dimitrios Hatzis.  That registration is held up by the temporary injunctions which are in force and which, in effect, are the subject of this application.

1. Having regard to the uncertainty of the evidence, the effect on the unregistered mortgagees, and the delay on the part of the plaintiffs in prosecuting their claim, I am not persuaded that I should exercise my discretion in their favour and grant injunctive relief to protect any claimed equitable lien that they might have in the subject land. 

1. For those reasons the applications are both dismissed.  At the hearing I did not make formal orders discharging the temporary injunctions that are in force, although their discharge is clearly intended by this decision.  To make that position clear I order that the injunction ordered on 13 March 2002 in application M56/2002 and the injunction ordered on 26 March 2002 in action no 150/2002 be discharged.