Fari Isai v the Registrar of Titles
[2014] VCC 325
•26 March 2014
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
BANKING & FINANCE DIVISION
Case No.CI-14-00570
CI-14-00574
CI-12-05559
| Fari Isai | Plaintiff |
| v | |
| The Registrar of Titles for Victoria (and others according to Schedule A attached) | Defendants |
| AND | |
| Mane Isai and Zushe Isai | Plaintiffs |
| v | |
| The Registrar of Titles for Victoria (and others according to Schedule B attached) | Defendants |
| AND | |
| Dominic Cullia (and others according to Schedule C attached) | Plaintiffs |
| v | |
| Leigh Isai (and others according to Schedule C attached) | Defendants |
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JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 21 March 2014 | |
DATE OF RULING: | 26 March 2014 | |
CASES MAY BE CITED AS: | Fari Isai v The Registrar of Titles & Ors | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 325 | |
REASONS FOR RULING
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Subject: TRANSFER OF LAND
Catchwords: TRANSFER OF LAND – Caveats – Removal of caveats – Fraud – Where purchaser on notice of fraud.
Legislation Cited: Transfer of Land Act 1958 (Vic)
Cases Cited:Assets Co Ltd v Mere Roihi [1905] AC 176; Bradto Pty Ltd v State of Victoria (2006) 16 VR 65; Macquarie Bank Ltd v Sixty-Fourth Throne (1998) 3 VR 133; Piroshenko v Grojsman (2010) 27 VR 489; Re South Brisbane Motors Pty Ltd’s Caveat [1981] Qd R 416; Vassos v State Bank of South Australia (1993) 2 VR 316.
Ruling: The caveats remain in place, subject to certain conditions.
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Fari Isai v The Registrar of Titles for Victoria & Ors
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J McKay | Casonato Lawyers |
| For the Second Defendant | Ms K Hamill | Thomsons Lawyers |
| For the Third Defendant | Mr N Hopkins SC with Mr P Little | Norton Rose Fulbright |
| For the Fifth and Sixth Defendants | Mr M Clarke with Mr K Hickie | Hunt & Hunt Lawyers |
Mane Isai & Anor v The Registrar of Titles for Victoria & Ors
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr M Clarke with Mr K Hickie | Hunt & Hunt Lawyers |
| For the Second Defendant | Ms K Hamill | Thomsons Lawyers |
| For the Third Defendant | Mr N Hopkins SC with Mr P Little | Norton Rose Fulbright |
| For the Fourth Defendant | Victorian Government Solicitors | |
| For the Fifth Defendant | Mr J McKay | Casonato Lawyers |
Dominic Cullia & Ors v Leigh Isai & Ors
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N Hopkins SC with Mr P Little | Norton Rose Fulbright |
| For the Second and Fourth Defendants | Mr M Clarke with Mr K Hickie | Hunt & Hunt Lawyers |
| For the Third Defendant | Mr J McKay | Casonato Lawyers |
HIS HONOUR:
1 This case, together with several related cases, concerns members of the Isai family and their attempts to maintain caveats which prevent the registration of certain documents in relation to land at 5 Carlton Court, Templestowe (“the Templestowe property”) and 197-9 Moreland Road, Coburg (“the Coburg property”).
2 The level of disagreement and dispute between the interested parties is reflected in the large number of affidavits filed in connection with the application – about 18 at last count.
Background
3 Mane Isai (“Mane”) and Zushe Isai (“Zushe”) are an elderly married couple. At all material times, each of them has been a one third registered proprietor of the Templestowe Property with their son, Fari Isai (“Fari”), who is the other one third registered proprietor.
4 Mane and Zushe live with Fari and his wife, and two of their children, Marita and Issa Isai, at the Templestowe Property. Mane and Zushe are 84 and 82 years old respectively. They are both retired and speak very basic English. Mane and Zushe cannot read or write English. Mane and Zushe speak Albanian (Tusk dialect). They have very limited education.
5 On the basis of Mane and Zushe’s old age and very limited English, Mane and Zushe have given a power of attorney in favour of another one of their sons, Fanol Isai, to instruct their solicitors.
6 On 18 February 2012, a Loan and Security Deed was purportedly executed between four lenders, Dominic Cullia (“Cullia”), Stephen Camerlengo (“Camerlengo”), Joe Cavallaro (“Cavallaro”) and Andrew Locantro (“Locantro”) (together, “the Lenders”), and Leigh, Fari, Mane and Zushe as borrowers and guarantors (“Loan and Security Deed”).
7 Under the terms of the Loan and Security Deed, Leigh, Fari, Mane and Zushe borrowed $350,000 at a fixed interest amount of $150,000 repayable within 6 months. Fari, Mane and Zushe purportedly agreed to provide the Templestowe Property as security.
8 On 15 November 2012, the Lenders filed a writ and statement of claim (“Writ and Statement of Claim”) in the County Court in relation to the recovery of the monies and interest under the Loan and Security Deed.
9 On 30 November 2012, Leigh filed a notice of appearance in the County Court proceeding on behalf of himself, Fari, Mane and Zushe as defendants to that proceeding.
10 On 4 December 2012, affidavits of service were sworn in the County Court proceeding by Mal Abrahamsen, a process server, alleging that he personally served upon each of Mane and Zushe a sealed copy of the Writ and Statement of Claim on 21 November 2012 at the Templestowe Property (“Affidavits of Service of Writ”).
11 On 5 April 2013, a default judgment was entered against Leigh, Fari, Mane and Zushe in the County Court proceeding in the sum of $532,168.92 together with interest of $23,927.48 and costs of $2,029.50, with a total sum of $558,126.30 (“Default Judgment”). The Default Judgment was entered because no defence to the Statement of Claim was filed.
12 On 17 April 2013, a warrant of seizure and sale (“Warrant of Seizure and Sale”) was issued against Leigh, Fari, Mane and Zushe by the court authorising the Sherriff to seize and sell their property, including the Templestowe Property.
13 On 1 October 2013, an affidavit of service (“Affidavit of Service of Advertisement”) was sworn in the County Court proceeding by Mal Abrahamsen, a process server, alleging that he served a copy of the “Advertisement of auction by the Sheriff” (“the Advertisement”) upon each of Mane, Zushe and Fari on 27 September 2013.
14 The Advertisement stated that the Sherriff would conduct a public auction of the Templestowe Property on 17 October 2013 (as well as the Coburg property).
15 On about 17 October 2013, the Templestowe Property and the Coburg property were sold by the Sheriff at public auction. Jackie Locantro, or her husband Andrew, purchased the Templestowe Property and the Coburg Property.
16 On about 9 January 2014, a transfer of land was lodged at the Land Titles Office by the nominee of the purchaser, Cotemple Pty Ltd (“Cotemple”), for registration. On about 9 January 2014, Westpac Banking Corporation (“Westpac”) lodged a mortgage at the Land Titles Office for registration.
17 On 28 October 2013, the County Court issued a warrant of possession in respect of the Templestowe Property. However, on 16 January 2014 the plaintiffs’ solicitors received notification that the warrant of possession in respect of the Templestowe Property had been recalled by the County Court on the basis the warrant was irregularly issued.
18 In an affidavit provided by Leigh Isai (Fari’s son and Mane and Zushe’s grandson) (“Leigh”) sworn 23 December 2013, Leigh deposed that:
(a)On or around 22 February 2012, he entered into a loan agreement to borrow money;
(b)He executed the loan on his behalf, and forged the signatures of Mane, Zushe and Fari on the loan as guarantors;
(c) Mane, Zushe and Fari had no knowledge of:
(i) the existence of the loan or any other loan;
(ii) the forgery of their signatures;
(iii) the existence or execution of any personal guarantee;
(iv) the existence or execution of any mortgage or real property; or
(v) that he was attempting to borrow money;
(d)Mane and Zushe never received any of the benefit or any money from the loan; and
(e)He understands Mane, Zushe and Fari only became aware of the loan from the Lenders when he visited them in November 2013, when the Sheriff attended the Templestowe Property to deliver a letter advising that they would be executing a warrant for possession against the Templestowe Property.
19 The Isais’ position (except for Leigh) is that at all material times they had no knowledge of any loan with the Lenders, no knowledge of any County Court proceeding, and no knowledge of any seizure and sale of the Templestowe Property. In addition, they alleged non-compliance with the law regarding the service of documents relating to the County Court proceeding and the seizure and sale of the Templestowe Property.
20 A company search of Cotemple indicates that the current directors are Cullia and Cavallaro, two of the Lenders and plaintiffs in the County Court proceeding. Also, the shareholders of Cotemple are Cullia, Cavallaro and Camerlengo. Camerlengo is also one of the Lenders and a plaintiff in the County Court proceeding.
Issues
21 There are many contentious issues in the case, including the following:
(a) Was the Loan and Security Agreement procured by fraud?
(i)did Leigh forge the signatures of Mane, Zushe and Fari as borrowers and guarantors on the execution page of the Loan and Security Deed?
(ii)did Leigh procure the signatures of Mane, Zushe and Fari in the solicitor’s certificate by fraud?
(iii)did Mane and Zushe have knowledge of the loan, or otherwise consent to the loan?
(b) Is the Loan and Security Agreement unconscionable?
(i) was a letter of offer provided to Fari, Mane and Zushe?
(ii)did the Lenders know or were they aware that Mane and Zushe were elderly, retired and did not speak English?
(iii)did the Lenders arrange for interpreters to explain the terms and conditions of the loan to them?
(iv)did the Lenders properly consider whether Fari, Mane and Zushe could repay $500,000 (the combined amount of the loan and interest) in a 6 month period?
(v)did the Lenders properly consider the effect of calling in the security of the Templestowe Property against the owners?
(vi)to what extent did Luke Faba (Australian Legal Practitioner who prepared the Solicitor’s Certificate) provide independent legal advice to Fari, Mane and Zushe in respect of the Loan and Security Deed, and to what extent did Fari, Mane and Zushe understand that advice? Was an interpreter in fact used in the provision of this advice?
(vii)have any of Fari, Mane or Zushe received the benefit of any of the loan monies loaned under the Loan and Security Agreement?
(c)In any event, is the Loan and Security Agreement void or unenforceable?
(i)have the Lenders complied with all applicable lending laws and regulations in respect of the Loan and Security Deed?
(ii)is the Loan and Security Deed possibly captured by the National Consumer Credit Protection Act 2009 (Cth) (despite recital C providing that the loan is not a personal loan and is strictly for business or investment purposes)?
(iii)if the Lenders assert that the loan was for business or investment purposes, what did the Lenders know to be the borrowers’ business or investment purposes as borrowers and/or guarantors under the loan?
(d)Were Fari, Mane and Zushe served with, or otherwise on notice of, the Writ and Statement of Claim, the Default Judgment, the Warrant of Seizure and Sale of the Templestowe Property?
(e)Has the Sheriff properly executed its statutory powers in respect of the execution of the Warrant of Seizure and Sale of the Templestowe Property, and its powers in respect of selling the Templestowe Property to the purchaser? In particular, is there any defect in the process of seizure and sale which might render the sale of the Templestowe Property void?
(f)Has the purchaser and/or nominee acquired good title to the Templestowe Property, having regard to their relationship to the Lenders and Plaintiffs in the County Court proceeding? Did the purchaser and/or nominee purchase the Templestowe Property “in good faith”, or without notice of the alleged fraud?
(g) Were the relevant Isais personally served with court documents?
(h)Did Leigh Isai advise two of Cotemple’s directors that the underlying transaction giving rise to the Sheriffs’ sale was procured by fraud?
22 To maintain the caveats, the caveator must establish:
(a) a prima facie case giving rise to a serious question to be tried; and
(b) that the balance of convenience favours maintenance of the caveat.
23 If the evidence filed by or on behalf of the caveator is accepted, there is a sufficient likelihood of ultimate success to justify the preservation of the status quo if the balance of convenience is also favourable. Given the extent of the opposing affidavit evidence, I could not and should not attempt to make any factual findings. However, if there has been fraud regarding the use of the Templestowe property and the Coburg property as security for moneys advanced to, or at the direction of Leigh Isai, and if Cotemple through its directors or solicitor were aware of the fraud, then it seems to me there is a sufficient probability that the caveator has the interest or rights asserted.
24 In assessing the balance of convenience, I have regard, on the one hand, to the permanent loss of the Isai family home for members of the family who might prove entirely innocent victims of a fraudulent scheme. I also recognise, on the other hand, the financial pressure faced by Cotemple whose directors lent money to Leigh Isai, bought the Templestowe and Coburg properties from the Sheriff at a Sheriff’s sale, and has paid in excess of $2 million thus far in connection with its dealings with the Isai family (or at least one member of it). This sum includes the $1.6 million paid to the ANZ Bank as prior mortgagee. Cotemple has borrowed from Westpac as its financier. Currently, Westpac, due to the caveats over the properties, is unable to obtain the security it expected to receive in support of the loan advanced to Cotemple.
25 Courts have traditionally recognised caveat removal applications as analogous to applications for interlocutory injunctions.[1] As the Court of Appeal stated in Bradto Pty Ltd v State of Victoria:
“In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.” [2]
[1]Piroshenko v Grojsman (2010) 27 VR 489, [7]
[2](2006) 16 VR 65, [35]
26 In this case, if there is no continuation of the order, then Cotemple will become the registered proprietor of the Templestowe and Coburg properties and Westpac will have a registered first mortgage over those properties. The operation of the Torrens Law system is such that the registered proprietor of the land and registered mortgagee will have unimpeachable title subject, on the allegations here, to the exception of fraud referred to in s42 of the Transfer of Land Act. To dispute or reverse that title, the Isais would have to prove fraud in the sense of actual fraud and moral turpitude.[3] While there might be some possibility of doing this with respect to Cotemple, depending upon the exact nature of Leigh Isai’s evidence and its acceptance by the court, there appears to be no basis to impugn the conduct of Westpac. To that extent there is a risk that the Isai family would be at a significant and permanent disadvantage if the caveats were removed.
[3]See, eg, Vassos v State Bank of South Australia (1993) 2 VR 316; Macquarie Bank Ltd v Sixty-Fourth Throne (1998) 3 VR 133; Assets Co Ltd v Mere Roihi [1905] AC 176, 210
27 If the caveats remain, then Cotemple faces financial pressure and the risk of having the loan recalled by Westpac. During the hearing last Friday, Cotemple filed a further affidavit by Dominic Cullia in which he said that he had been in regular contact with Con Dimopoulos, relationship manager at Westpac’s Tullamarine office regarding the situation. He said that due to the good relationship with the bank, Westpac had been willing to continue the loan facility on a short term basis without any security provided Cotemple paid the interest payments on the loan. As part of the agreement, Westpac required Cotemple to pay the legal fees of its solicitors, Thomsons Lawyers. Mr Cullia said that, on 19 March 2014, he had a conversation with Mr Dimopoulos in which he informed Cullia that Westpac would not continue the agreement for much longer. Mr Dimopoulos said that if the transfers of land and mortgage were not able to be registered after the court hearing on 21 March 2014, Westpac would require the loan to be paid out or other security to be provided. Mr Cullia said that Cotemple did not have any available security. He expected that if the transfers and mortgage were not registered, Cotemple would have to repay the Westpac loan in the next 7-14 days.
28 Notwithstanding the affidavit by Dominic Cullia, I note that Westpac was represented by Counsel at the hearing before me and the bank’s barrister made no clarifying comment and adduced no evidence regarding this issue.
29 Mr Cullia said that Cotemple borrowed $1.45 million from Westpac Banking Corporation on about 10 December 2013. At settlement of the transaction, ANZ gave Westpac the title deeds to the Coburg property and the Templestowe property. Cotemple paid $1,678,887.87 to ANZ and $9,505.69 to ANZ’s lawyers, HWL Ebsworth. On 11 December 2013, Cotemple paid a total amount of $116,867.29 comprising:
· $1,581.60 to the Land Registry for the registration of the Templestowe and Coburg properties;
· $53,350 to the State Revenue Office for stamp duty on the Templestowe property; and
· $56,650 to the State Revenue Office for stamp duty on the Coburg property.
30 On about 16 December 2013, Cotemple paid $3,463.82 for the insurance on the properties.
31 Between 10 December and 21 March, Cotemple paid the following interest and fees pursuant to its Westpac loan as follows:
Fees
· $1,724.10 on 2 January 2014
· $1,557.26 on 3 February 2014
· $1,724.10 on 3 March 2014
Interest
· $3,188.24 on 31 December 2013
· $4,706.44 on 31 January 2014
· $4,250.98 on 28 February 2014
Other fees included
· A lodgement fee of $140 on 12 December 2013
· An establishment fee of $5,000 on 12 December 2013
· A loan service fee of $35.00 on 31 December 2013
32 In weighing the competing interests in this case, I have decided that subject to certain conditions, the least harm will flow if the caveats remain in place. The conditions are as follows:
(a)The Isai interests must act promptly to have the substantive issues underlying the caveat heard and determined. To that end, I suggested during the hearing that a trial date is available for five days commencing on 5 May 2014.
(b)The Isai interests must pay to Cotemple a sum which reflects the fees, interest and costs incurred to date in relation to the Westpac loan and the likely further interest and costs to be incurred in the next few months. The Isais can pay the amount in cash or give suitable security to, or at the direction of, Cotemple as approved by Cotemple. An amount of $50,000 should be adequate for this purpose until the end of July, at which time a further application can be made if necessary. In providing Cotemple with such payment or security for costs and expenses, both already incurred and to be incurred, I refer to the decision of Dunn J in Re South Brisbane Motors Pty Ltd’s Caveat.[4]
(c)The relevant members of the Isai family, namely the registered proprietors of the Coburg property, are to use their best endeavours and to cooperate with Cotemple in requiring the tenant at the Coburg property to pay rent and any other fees or outgoings due into a bank account nominated by Cotemple. Such moneys are to be held in trust in the account pending the outcome of this litigation or further order.
[4][1981] Qd R 416, 419
33 These suggested conditions will be made subject to hearing from the parties as to the final form of orders. Those orders should include a timetable for the future carriage of the litigation, assuming a trial date of 5 May 2014. The orders will be made subject to further order, especially any order by the Duty Judge and the trial judge. I invite the parties to submit orders in accordance with these reasons.
SCHEDULE A
FARI ISAI
Plaintiff
and
THE REGISTRAR OF TITLES FOR VICTORIA
First Defendant
and
WESTPAC BANKING CORPORATION LIMITED
(ACN 007 457 141)
Second Defendant
and
COTEMPLE PTY LTD
(ACN 166 419 067)
Third Defendant
and
LEIGH ISAI
Fourth Defendant
and
MANE ISAI
Fifth Defendant
and
ZUSHE ISAI
Sixth Defendant
SCHEDULE B
MANE ISAI
First Plaintiff
and
ZUSHE ISAI
Second Plaintiff
and
THE REGISTRAR OF TITLES FOR VICTORIA
First Defendant
and
WESTPAC BANKING CORPORATION
(ACN 007 457 141)
Second Defendant
and
COTEMPLE PTY LTD
(ACN 166 419 067)
Third Defendant
and
THE SHERIFF FOR THE STATE OF VICTORIA
Fourth Defendant
and
FARI ISAI
Fifth Defendant
SCHEDULE C
DOMINIC CULLIA
First Plaintiff
and
STEPHEN CAMERLENGO
Second Plaintiff
and
JOE CAVALLARO
Third Plaintiff
and
ANDREW LOCANTRO
Fourth Plaintiff
and
LEIGH ISAI
First Defendant
and
MANE ISAI
Second Defendant
and
FARI ISAI
Third Defendant
and
ZUSHE ISAI
Fourth Defendant
and
FARI ISAI
Plaintiff by Counterclaim
and
THE SHERIFF FOR THE STATE OF VICTORIA
First Defendant by Counterclaim
and
COTEMPLE PTY LTD
(ACN 166 419 067)
Second Defendant by Counterclaim
and
WESTPAC BANKING CORPORATION LIMITED
(ACN 007 457 141)
Third Defendant by Counterclaim
and
LEIGH ISAI
Fourth Defendant by Counterclaim
and
DOMINIC CULLIA
Fifth Defendant by Counterclaim
and
STEPHEN CAMERLENGO
Sixth Defendant by Counterclaim
and
JOE CAVALLARO
Seventh Defendant by Counterclaim
and
ANDREW LOCANTRO
Eighth Defendant by Counterclaim
and
MANE ISAI
Ninth Defendant by Counterclaim
and
ZUSHE ISAI
Tenth Defendant by Counterclaim
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