Ge Capital Mortgage Insurance Corporation (Australia) Pty Limited v Sokol; Ge Capital Mortgage Insurance Corporation (Australia) Pty Limited v Boguch

[2010] NSWSC 1444

CITATION:	GE Capital Mortgage Insurance Corporation (Australia) Pty Limited v Sokol; GE Capital Mortgage Insurance Corporation (Australia) Pty Limited v Boguch [2010] NSWSC 1444
HEARING DATE(S):	5 November 2010
JUDGMENT DATE :	5 November 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Rein J
DECISION:	In proceedings 2008/278704, the second plaintiff is entitled to be paid the full amount of funds paid into Court in respect of file 2008/278704 in satisfaction of the judgment obtained by it against Mr Boguch in relation to file 2008/278852. In proceedings 2008/278852: 1. Leave granted to the plaintiffs to proceed against the defendant under rule 11.4 of the Uniform Civil Procedure Rules 2005 (NSW). 2. Judgment for the second plaintiff in the amount of $74,000.00, plus interest of $30,893.32 and a lump sum for costs of $20,000.00. 3. Note that the award of the lump sum in order 2 is not intended to preclude a claim for a further amount for costs should an entitlement to such a further amount be established.
CATCHWORDS:	CONVEYANCING - breach of contract for sale and remedies - entitlement to deposit - on abandonment of contract - forfeiture to vendor - where plaintiffs paid deposit and called on indemnity provided by defendant under bond agreement - plaintiffs' application for payment of funds paid into court in satisfaction of judgment obtained against defendant
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 (NSW
CATEGORY:	Principal judgment
CASES CITED:	Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679
PARTIES:	In proceedings 2008/278704: GE Capital Mortgage Insurance Corporation Pty Limited (first plaintiff) Genworth Financial Mortgage Insurance Pty Limited (second plaintiff) Marina Sokol (defendant) In proceedings 2008/278852: GE Capital Mortgage Insurance Corporation Pty Limited (first plaintiff) Genworth Financial Mortgage Insurance Pty Limited (second plaintiff) Louri Boguch (defendant)
FILE NUMBER(S):	SC 2008/278704; 2008/278852
COUNSEL:	SB Docker (plaintiffs) no appearance (defendants)
SOLICITORS:	Kemp Strang (plaintiffs) no appearance (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Rein J

Date of Hearing: 5 November 2010
Date of Judgment: 5 November 2010

2008/278704 GE Capital Mortgage Insurance Corporation (Australia) Pty Limited and anor v Marina Sokol

2008/278852 GE Capital Mortgage Insurance Corporation (Australia) Pty Limited and anor v Louri Boguch

JUDGMENT (EX TEMPORE)

1 REIN J: These two matters have been listed today for hearing. The first matter is the claim against Mr Boguch by GE Capital Mortgage Insurance Corporation Pty Limited (which I will refer to as “Gemico”) and the second plaintiff, Genworth Financial Mortgage Insurance Pty Limited (which I shall refer as “Genworth”).

2 The proceedings concern a deposit bond which was arranged by Mr Boguch originally with Gemico then, as I shall explain, subsequently with Genworth, in respect of a property in Bondi that Mr Boguch wished to purchase and for which he required a deposit, the deposit being 10 percent of the purchase price.

3 The vendor of that property called on the deposit bond when Mr Boguch failed to complete the contract in 2005. The money was paid by Genworth to the vendor, and the original bond which had been provided by Gemico was returned to Gemico. I have sighted that bond today, but a copy is contained in an affidavit of Mr George David Tzelepis sworn 8 May 2008, in which he sets out the history of the matter.

4 Following payment out to the vendor, Genworth sought payment from Mr Boguch of the amount of $74,000. It did so by letter dated 3 May 2005.

5 That amount was not paid. Subsequently, Genworth and Gemico commenced proceedings in the District Court seeking recovery of that money. The matter was properly brought in the District Court. However, by that stage, Mr Boguch had left Australia and returned to his homeland, Russia. Attempts were made to serve Mr Boguch and it became necessary to attempt service overseas in Russia, and accordingly an application was made for the transfer of the proceedings from the District Court to this Court.

6 Mr S Docker of counsel, who appears for the plaintiffs, has quite properly drawn my attention to rule 11.4 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), which provides that:

“(1) If originating process is served on the defendant outside Australia, and the defendant does not enter an appearance, the plaintiff may not proceed against the defendant except by leave of the Supreme Court.”

7 In this case, there was service outside Australia. There has been no appearance filed by Mr Boguch. However, this is a case which clearly falls within Schedule 6 to the UCPR because it is an originating process in respect of proceedings founded on a cause of action arising in New South Wales. The cause of action arose in respect of the agreement for a bond, the issuing of the bond, and a debt incurred in New South Wales. It is only Mr Boguch’s subsequent departure from Australia to Russia that has led him overseas. Accordingly, this is a very clear case for the grant of leave, and I grant leave to the plaintiffs to proceed.

8 That Mr Boguch was subsequently served is established by the affidavit of Mr Phillip Noel Parker sworn 5 November 2010, served in Russia. Mr Boguch has never appeared in the proceedings to defend himself.

9 It is clear beyond doubt that one or another of Genworth or Gemico is entitled to judgment against Mr Boguch in that claim. Mr Docker has drawn my attention to an issue which arises given the following circumstances. The Gemico bond agreement included an indemnity, the terms of which contained a promise by Mr Boguch to charge property owned by him. The indemnity was against

“all loss, damage, costs and legal expenses howsoever incurred by GEMICO under or in connection with the Deposit Guarantee Documents including any breach of any of the conditions contained or implied by the Deposit Guarantee Documents including interest on any amount due under the Deposit Guarantee Documents at 2% above the prevailing Bank Bill Rate as published by the Reserve Bank of Australia.”

10 Clause 3.3 provided under the heading “In the event of claim”:

“You acknowledge by signing this indemnity if You fail to pay any amount when due that you agree to grant a charge over any assets that You own to secure these obligations and consent to the lodgement of a caveat over any property the subject of that charge to notify our interests of our chargee.”

11 Mr Boguch had not completed the purchase of the Bondi property at the time when the bond expired (it had a life of six months). He therefore applied to Gemico for an extension of the bond. In the meantime, there had been an internal restructuring within the GE group of companies which lead, in effect, to Genworth becoming the company responsible for the issuing of bonds and for arranging bonds. The bonds are actually issued by another company, Deposit Bond Australia (“DBA”). DBA continued to be the issuing authority for the bond, but at first it had been the agent of Gemico, and from the time of the restructuring it became the agent of Genworth.

12 When Mr Boguch applied for an extension of the bond, what actually happened was that Genworth issued a new bond. A copy of that bond was part of annexure J to the affidavit of Mr Tzelepis.

13 Mr Boguch wrote to DBA on 24 January 2005 in the following terms:

“I understand that my Deposit Bond issued for the purchase of property at xxxxx, Bondi has expired today. I confirm that this matter is still to be settled once strata plan registration has taken place within the next 6 months. I hereby authorise you to have the Deposit Guarantee extended for a further six months and to deduct the fee payable in the sum of $2,376.00 for the extension from the account details below”

14 The following day, DBA issued a letter to Mr Boguch confirming that “an Extension for the Genworth Financial Deposit saver has been approved”. The letter went on to explain the relevant details of the extension “as it affects you”. Included in that under the heading “Indemnity to Continue” was “Your Indemnity under the GE Deposit Guarantee continues”.

15 A letter was also sent on the same day to Mr Boguch’s solicitors M. Sokol & Co. Subsequently, Mr Boguch entered into a new contract for the purchase of the Bondi property. An inference can readily be drawn that the new bond was necessary for the entry into that contract, and indeed it was in respect of that new contract that the vendor sought to rely on the bond.

16 In my view, the appropriate construction of what occurred is that Genworth, not Gemico, had DBA issue the new bond as its agent. It was a contract with Genworth, and not Gemico, that led to the issuing of a new bond by DBA on behalf of Genworth. It is clear on the evidence that Genworth paid the $74,000.

17 It is my view that the material supports the conclusion that it was agreed between Genworth and Mr Boguch that the previous indemnity which had been given in relation to the original bond was a part of the contractual arrangements for the issue of the second bond. Accordingly, that bond is subject to, and contains, the indemnity that was previously contained in the first bond, or in connection with the first bond.

18 Accordingly, Gemico was entitled to lodge a caveat on the property of Mr Boguch, as it did. That property was subsequently sold by a mortgagee, Perpetual Trustee, and following satisfaction of the debt owed to Perpetual Trustee, money was paid into court. That is dealt with in an affidavit of Mr Simon Singer sworn 21 December 2007 filed in proceedings 6201/07, a copy of which was provided to me for the purpose of today’s applications.

19 So far as interest is claimed, interest is payable on the debt, as I have already outlined. Interest is to be calculated in accordance with the specified terms, and a document has been prepared by solicitors for the plaintiffs which sets out the interest in accordance with those rates: see Exhibit B.

20 The interest calculated up to 31 October is $30,893.32. I propose in a short while to give judgment for the Genworth on its claim for $74,000 and for the interest that I have just referred to.

21 However, there is another matter, which is that according to the agreement, Mr Boguch is required also to pay costs. Mr Tzelepis’ affidavit provides evidence that the costs incurred in relation to the proceedings up until the date of that affidavit were $67,176.99. This seems to be a significant figure for costs. However, the evidence before me includes evidence of attempts to serve Mr Boguch in Russia, and the matter, as we know was commenced in the District Court and had to be transferred to the Supreme Court. The file, including the District Court transfer proceedings, is not insubstantial and appears to have approximately 20 appearances.

22 The application today is not for costs in the amount to which I have referred. It is for effectively the difference between the $104,000 that the deposit bond amount and interest add up to and the amount actually paid into court by Perpetual Trustee, which in the order of $121,000.

23 Even excluding the claims on the fund, I have no difficulty in concluding that the amount of costs in the recovery proceedings exceed $20,000. Mr Docker’s fees alone, to date, are at least $4,000.

24 Accordingly, I would make an order that the plaintiff is entitled to costs, and to a lump sum for costs of at least $20,000. This conclusion is not to preclude the plaintiff from seeking an assessment of costs to establish a greater entitlement, but rather only to say that Genworth is entitled, at this stage, to the sum of $20,000. Therefore, there will be judgment for Genworth on its claims in the amount of $74,000, plus interest calculated to the end of October of $30,893.32 and a lump sum for costs of $20,000.

25 I turn to the second matter before me today, which is an application by Genworth for payment out of the funds in court. Mr Singer’s affidavit establishes that the parties with an interest in the property in Kensington are Gemico and Ms Marina Sokol, Mr Boguch’s former solicitor.

26 Ms Sokol has, by letter, advised that she does not seek to be heard in relation to the plaintiffs’ claims for payment out of the funds in court. I am satisfied that Mr Boguch has been given adequate notice of this proceedings, even though he was not served personally with the material. He has been served by email and by delivery to him of the documents, including Mr Tzelepis’ affidavit. He has chosen not to take part in these proceedings. He has advised of no other persons having a claim in relation to the funds.

27 Although Mr Singer’s affidavit identifies Gemico and correctly does so because it is the party that lodged the caveat pursuant to the original bond, as I have indicated, I am of the view that the charge was given in support also of the second bond and that Genworth is entitled, in lieu of Gemico, to a charge over Mr Boguch’s property.

28 Accordingly, I think that the conditions necessary to be established by an applicant for funds laid down in Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 by Young J (as his Honour then was) have been established: first, that there is a valid claim by the applicant, and secondly, that the possible or potential other claimants have been advised of the proceedings. The third requirement, which deals with a situation of competing claims, is not relevant here.

29 Accordingly, and having regard to the fact that I have just entered judgment in favour of Genworth, I am satisfied that Genworth is entitled to be paid out the full amount of the funds that were paid into court in respect of file 2008/278704 in satisfaction of the judgment obtained by it against Mr Boguch in relation to file 2008/278852.

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