John Khoury v Fouad El Khoury
[2013] NSWSC 14
•31 January 2013
Supreme Court
New South Wales
Medium Neutral Citation: John Khoury & Ors v Fouad El Khoury & Ors [2013] NSWSC 14 Hearing dates: 19.11.12, 20.11.12, 21.11.12, 22.11.12, 23.11.12 Decision date: 31 January 2013 Before: Nicholas J Decision: Par 75
Catchwords: REAL PROPERTY - mortgage - mortgagee sale of plaintiff's property - plaintiff denied signing mortgage and related documentation - turns on facts - no question of general principle Legislation Cited: Real Property Act 1900 Category: Principal judgment Parties: John Khoury - first plaintiff/first cross-defendant to first cross-claim
Charbel El Khoury - second plaintiff/second cross-defendant to first cross-claim
Daniel El Khoury - third plaintiff/third cross-defendant to first cross-claim
Romeo El Khoury - fourth plaintiff/fourth cross-defendant to first cross-claim
Zeina El Khoury - fifth plaintiff/fifth cross-defendant to first cross-claim
Fouad El Khoury - first defendant/sixth cross-defendant to first cross-claim/first cross-defendant to second cross-claim
Sandra El Khoury - second defendant/second cross-defendant to second cross-claim
National Australia Bank Limited - third defendant/cross claimant to second cross-claim
Commonwealth Bank of Australia - fourth defendant/cross claimant to first cross-claimRepresentation: Counsel:
D Allen - plaintiffs/cross-defendants
No appearance - first defendant/sixth cross-defendant to first cross-claim/first cross-defendant to second cross-claim
No appearance - second defendant/second cross-defendant to second cross-claim
P D Reynolds - third defendant/cross claimant to second cross-claim
A A Henskens SC/S W Aspinall - fourth defendant/cross claimant to initial cross-claim
Solicitors:
Leverage Australia Solicitors - plaintiffs
No appearance - first defendant/sixth cross-defendant to first cross-claim/first cross-defendant to second cross-claim
No appearance - second defendant/second cross-defendant to second cross-claim
National Australia Bank Limited- third defendant/cross claimant to second cross- claim
Henry Davis York - fourth defendant/cross claimant to first cross-claim
File Number(s): 10/152984
Judgment
By amended statement of claim filed 18 January 2011 the first plaintiff (Hanna/John) claims against the third defendant (NAB) the amount of $175,118.31 as money had and received as part of the proceeds of the mortgagee sale of his property at Wentworthville (the Wentworthville property).
Hanna was the sole registered proprietor of the property. NAB contended that it held a registered mortgage (the Wentworthville mortgage) over the property which secured money advanced pursuant to a loan agreement between it, Hanna, and his wife (Zabad/Elizabeth) signed by them on 8 December 2005. NAB contended that the borrowers defaulted under the agreement, resulting in the sale of the property in exercise of its powers under the mortgage. The sale was by auction on 29 September 2009 for the price of $550,000.
It is Hanna's case that he did not sign the Wentworthville mortgage and accompanying loan documentation and, accordingly, the mortgage secured nothing. He claims that he had no knowledge of either the Wentworthville mortgage or the loan at the time of these transactions.
The amended statement of claim (par 9) included an allegation that the Wentworthville mortgage and the loan were arranged fraudulently by the first defendant (Fouad) and the second defendant (Sandra). The supporting particulars included the statement that Hanna had no knowledge of the transaction, did not sign the mortgage dated 8 December 2005, and that Hanna's signature was forged by Fouad and/or Sandra, or at their direction. The allegation was abandoned (T p 255) during final submissions, when Hanna's counsel stated (T p 254) that his case was limited to the proposition that he did not sign the mortgage documents. He conceded (T p 257) that the claim must fail if he failed to prove that he did not sign the mortgage documentation.
By a second cross-claim filed on 17 August 2011, NAB claims relief against Fouad and Sandra should Hanna succeed against NAB. No defence has been filed to this claim.
Background
Hanna was born on 1 January 1946 in Lebanon. He and his wife, Zabad, moved to Australia in 1974. They are the parents of the second to fifth plaintiffs and of the first defendant, Fouad. The second defendant, Sandra, is the wife of Fouad. Hanna and Zabad and members of their family have been living at a property at Kemps Creek (the Kemps Creek property) since they purchased it in December 2005.
In about March 1998 Hanna purchased the Wentworthville property with funds secured by a registered mortgage to Westpac Banking Corporation (Westpac). There Hanna and Zabad operated a shop for some years. Their family home was at another location in Wentworthville.
On about 15 October 2001 Hanna, Fouad, and the second plaintiff, Charbel, purchased a property at Kenthurst for the price of $740,000. Funds were derived from the sale of the home at Wentworthville, and a loan of $596,000 from NAB secured by a registered mortgage over the property.
By contract dated 5 April 2005 Hanna, Fouad, Charbel, Daniel El Khoury, and Zeina El Khoury (the purchasers) agreed to purchase the Kemps Creek property from Sharon Judith Sorensen, the vendor, for the price of $3,050,000, for completion on 14 November 2005.
By facsimile of 2 December 2005 addressed to the purchasers care of Mr David Francis (Mr Francis) of DIB Finance (DIB), NAB advised of the availability of a loan facility in the amount of $2,135,000 to assist with the purchase, to be secured by first registered mortgage over the Kemps Creek property. This transaction was not disputed.
By facsimile of 2 December 2005 to Hanna and Zabad addressed to them at Kenthurst, NAB advised approval of a loan of $390,000 to be secured by registered mortgage over the Wentworthville property. Confirmation of the loan and the relevant terms and conditions, including the requirement for a mortgage over the Wentworthville property, was provided by letter of 8 December 2005 from NAB to Hanna and Zabad.
On 14 December 2005 the purchasers executed the mortgage to NAB over the Kemps Creek property to secure the loan of $2,135,000.
By letter of 19 December 2005 to Hanna and Zabad, NAB advised that the loan facility of $390,000 had been disbursed by the payment of the amount of $154,411.96 to Westpac on settlement, and by the payment of $231,224.10 to the trust account of CK Lawyers, the solicitors for the purchasers.
On 21 December 2005 Hanna executed a mortgage and related documentation over the Wentworthville property in favour of Ms Sorensen to secure a loan from her of the sum of $800,000 to fund the purchase of the Kemps Creek property. Although denied by Hanna in evidence, this transaction was accepted by his counsel in final submissions (T p 263, 264).
On 21 December 2005 settlement of the purchase of the Kemps Creek property took place.
By letter of 28 February 2008 to Hanna and Zabad, Ms Julie Kennedy (Ms Kennedy) of NAB advised that the conduct of the $390,000 loan account was unsatisfactory, and outside the approved limits.
On about 1 July 2008 NAB sent a notice to Hanna and Zabad demanding payment of the amount due under the loan of $402,024.39 failing which the exercise of its rights of enforcement under the mortgage was threatened.
By letter of 2 July 2008 to NAB, Blackstone Waterhouse Lawyers (BWL) advised that they acted for Hanna and Zabad. They disputed proper service of the s 57(2)(b) Real Property Act 1900 notice and entitlement to take enforcement action in reliance upon it. Opposition on the ground of insufficient service was repeated in their letters to NAB of 30 July 2008.
On 21 August 2008 NAB sent Hanna and Zabad a demand for payment, including a notice under s 57(2)(b).
By letter of 16 September 2008 to NAB, BWL advised their clients had accepted an offer of finance to refund the loan, and requested preparation of a discharge of mortgage in anticipation of settlement.
On 19 November 2008 NAB issued a notice to the occupants of the Wentworthville property of its intention to enter into possession, and for rent to be paid to NAB.
By letter of 13 February 2009 to NAB, BWL requested that no further action be taken pending approval of a loan for refinancing. The letter included:
"My clients have also asked whether, if they were to bring any arrears up to date, the bank would consider holding any further action for a period of 12 months provided that payments were made as and when required during that period."
By letter of 30 June 2009 to NAB, BWL advised:
"Our clients are adamant that they will have unconditional loan approval within 30 days of the date of this letter.
Our clients propose that in consideration of NAB halting enforcement action for 30 days our clients will provide NAB with a letter of unconditional finance approval and will immediately pay $15,000.00 to service the current indebtedness to NAB. The letter of unconditional finance approval referred to will be for an amount sufficient to pay our client's total indebtedness to NAB. Such a short period will not prejudice the NAB as it will receive an additional $15,000.00 to offset any interest that will accrue during the 30 days.
We also note that all rental income is currently being deposited into the loan account by the tenant."
By letter of 10 July 2009 to NAB, BWL, in anticipation of refinance, requested a payout figure.
By contract dated 29 September 2009 NAB, under its power of sale as mortgagee, sold the Wentworthville property for the price of $550,000.
By letter of 7 October 2009 to NAB, Russo and Partners, solicitors, advised:
"We ... confirm we have taken over the file from Blackstone Waterhouse Lawyers and now act on behalf of Mr & Mrs El Khoury.
We have to hand the entire file of the El Khoury's previous solicitors and confirm that our client was in the process of obtaining a valuation yesterday to conclude financing arrangements; our clients were advised by the tenant of the premises that the property had been sold for $550,000 by auction on 29th September, 2009.
Our clients were not advised of this at all and the previous solicitors have confirmed they were not placed on notice. The property has been sold at a considerable undervalue, given the valuations which our clients have obtained for finance purposes and further we believe that all the necessary and requisite notice have not been properly served."
Information was sought concerning the sale to enable advice to be given to the clients. The letter concluded:
"If the sale has occurred in the vacuum of service of the appropriate notices, our clients have suffered damage of a substantial nature and the Bank will be held liable for the shortfall in respect of the failures by the Bank to properly carry out the correct procedure and protocol necessary for a mortgagee sale."
By letter of 20 October 2009 to NAB, Russo and Partners questioned the validity of NAB's notices of 8 May and 27 June 2008, and its entitlement to rely upon them. Complaint was also made that the property had been sold at an under value.
On 3 November 2009 Moscardo Lawyers, then solicitors for Hanna and Zabad, wrote to NAB concerning the sale of the Wentworthville property. The letter included the following:
"We act for the mortgagors Mr and Mrs El-Khoury.
We enclose for your attention our clients authority in relation to the above matter.
We advise that no person or firm is authorised to deal with this matter on behalf of our clients save as to this firm.
Our clients expressly forbid any information about their affairs whatsoever being made available to one Sandra El-Khoury or any other person who purports to be acting on their behalf.
We understand that you are mortgagee in possession and have exercised your power of sale (which is not admitted). We are notified that the above stated property which you have undertaken to sell is said to be settling on 10 November 2009.
There are various other matters to which we will refer shortly but in the interim, please provide us with the details of when and where settlement is to take place. We understand that the tenant is the purchaser and if so please advise us accordingly. Our clients have property remaining at the premises which they are entitled to remove and which does not form any part of the sale. Please provide us with a copy of the sale contract so that we may address these matters. Please advise whether NAB has any fixed and floating charge coveting any other assets of our clients in relation to the above stated facility.
...
We look forward to hearing from you shortly given the urgency with the pending settlement."
By letter of 5 November 2009 to NAB, Moscardo Lawyers advised that their clients claimed entitlement to some property remaining at the Wentworthville property, and requested a copy of the contract for consideration. Also requested were details of the settlement, including the proposed balance amount to be available on settlement.
The letter of 9 November 2009 to NAB from Moscardo Lawyers, included:
"In relation to the caveatable interest claimed by Union Fidelity Capital Funding our clients deny any such interest or consent to any such caveat was at any time given to the Caveator.
...
You are trustee for the proceeds of sale of the subject property and therefore have a duty to our clients in relation to their equitable interest.
...
Our clients will provide a list of items to be removed from the subject property prior to settlement and in this regard we require from you the date for settlement so that our client can make the appropriate arrangements for the removal of their property prior to settlement taking place."
By letter of 10 November 2009 to NAB, Moscardo Lawyers disputed the caveatable interest over the Wentworthville property claimed by Union Fidelity Capital Finance Pty Ltd. The letter included:
"It is not the equity of the bank that you are dealing with in relation to the caveatable interest claimed as the bank holds their equitable interest as first registered mortgagee. Save as to the costs of the sale and enforcements proceedings our client holds the balance of equity remaining. Our client does not consent to the caveator being paid any sum at all and as such the money claimed by the caveator should be paid into court pending the outcome of the dispute."
On 4 December 2009 settlement of the sale of the Wentworthville property took place.
On 8 December 2009 NAB sent to Moscardo Lawyers an accounting statement for the settlement, and a bank cheque in the amount of $99,826.42 drawn in favour of Hanna being the surplus funds after the sale of the Wentworthville property.
The evidence
It is Hanna's case that he did not sign the Wentworthville mortgage dated 8 December 2005, nor the related documentation. His evidence was supported to some extent by Zabad who denied that the signature on the mortgage was Hanna's, and that the signatures on the related documents were his and hers. It is contradicted by the evidence of Ms Maria Iatrou (Ms Iatrou) a loan administrator then employed by DIB, and Ms Kennedy an officer of NAB that they witnessed Hanna and Zabad sign the documents on 8 December 2005.
The crucial question is whether the Wentworthville mortgage was signed by Hanna. The evidence on this issue is to be understood in the following context. By letter of 29 November 2005 Mr Francis applied to NAB on behalf of the purchasers of the Kemps Creek property for a loan of $2,240,000 towards the purchase price of $3,050,000. On 2 December 2005 NAB notified the purchasers and Mr Francis of the availability of a loan facility in the amount of $2,135,000 to assist with the purchase. At the time the Wentworthville property, owned by Hanna, was subject to a mortgage to Westpac. There was thus a shortfall of funds in the amount of $915,000. By letter of 2 December 2005 NAB informed Hanna and Zabad of approval of a loan facility in the amount of $390,000 to be secured by a mortgage over the Wentworthville property.
The Wentworthville mortgage and related documentation were all dated 8 December 2005, and were said by NAB to have been signed by Hanna and Zabad, and witnessed by Ms Kennedy (then Ms McAneny) the bank's relationship manager. The documents consisted of a letter of offer from NAB to Hanna and Zabad; the NAB business letter of offer to Hanna and Zabad; the Wentworthville mortgage; a letter to NAB of acknowledgement and consent; an insurance undertaking to NAB; a statutory liabilities declaration; and the letter of instruction for drawdown.
Hanna's evidence was given orally. Although his affidavit of 9 June 2011 was not read in chief, in cross-examination he accepted that it set out the details of the evidence relied upon in support of his claim.
In his affidavit Hanna swore that he did not know of the loan or mortgage over the Wentworthville property. He denied signing any of the documents referred to. He denied authorising the refinancing of the Wentworthville property, and that he had received any money from NAB for it. In his oral evidence in chief Hanna denied signing the acknowledgement and acceptance of the business letter of offer, the statutory liabilities declaration, and the mortgage. He identified the signatures on each of the insurance undertaking and the letter of instruction for drawdown as those of himself and Zabad. He said he could not recall in December 2005 leaving home to sign documents because the family were busy with his son's wedding.
In cross-examination, Hanna asserted he did not know Mr Francis, and had never been to his office. With regard to the mortgage to Ms Sorensen to secure vendors' finance in the amount of $800,000, Hanna initially accepted the possibility that he had signed the pages of the document but subsequently denied that she had provided funds for a mortgage secured over the Wentworthville property.
Hanna denied meeting Mr Francis at the Wentworthville property and seeking his assistance to borrow $390,000 for the purchase of the Kemps Creek property. He accepted he attended Mr Francis' office with Zabad on an occasion in December 2005 and there met Ms Kennedy, and signed a document or documents in front of her.
In cross-examination he was taken to letters and notices from NAB addressed to him and Zabad at Kemps Creek, sent on and after 28 February 2008. These included complaints of unsatisfactory conduct of the loan account for $390,000, a notice threatening enforcement of 7 April 2008, and notices of default of 8 May and 27 June 2008. Hanna denied receiving them. His position was that he had no knowledge that NAB intended to foreclose and sell the Wentworthville property until after it had done so.
In maintaining his case of ignorance of the Wentworthville mortgage he denied retaining the solicitors BWL to write the letter of 2 July 2008 to Ms Kalyani Kaneshalingam (Ms Kaneshalingam) of NAB with regard to the notice of 7 April 2008, and subsequently to act in respect of NAB's claims. He denied a telephone conversation with Ms Kaneshalingam in May 2008 about the loan. He denied retaining the solicitors, Russo and Partners, in October 2009 in place of BWL to complain to NAB that the Wentworthville property had been sold on 29 September 2009 at an undervalue, and to provide information as to settlement.
Hanna agreed that on 3 November 2009 he and Zabad retained Moscardo Lawyers to act in relation to the sale, and that their letter of 3 November 2009 to NAB was written on their instructions.
Zabad's evidence in chief was contained in her affidavit of 9 June 2011. She swore she did not know of the loan secured by the Wentworthville property. She denied signing the business letter of offer dated 8 December 2005, the acknowledgement and consent letter, the insurance undertaking, and the letter of instruction. She denied authorising the refinancing of the Wentworthville property.
In cross-examination, she denied knowing that Mr Francis applied on behalf of Hanna and herself to NAB for a loan of $390,000. She agreed that on 8 December 2005 she and Hanna went to Mr Francis' office and there met Ms Kennedy. When taken to the business letter of offer she accepted that she signed one document in front of Ms Kennedy. She denied that the signatures on the acknowledgement and acceptance form, the acknowledgement and consent letter, and the insurance undertaking were those of herself and Hanna. Her evidence continued (T p 190, l 10 - l 32):
"Q. But you accept don't you, that you signed something in front of Julia Kennedy, don't you on that day?
A. Yes.
Q. And you would agree wouldn't you ...
A. I don't know how I signed, for what I signed. I'm going for Kemp's Creek.
Q. I see. So you thought you were signing something to assist in the finance of Kemp's Creek, isn't that right?
A. I am telling you I don't know where I am going other than I know where my son he says, we're going for Kemp's Creek. He didn't mention to me any National Australia Bank for that. He never mentioned it to me. Just he said sign here and don't worry everything's going to be okay.
Q. And the purpose of what you signed is for the purpose of raising money for Kemp's Creek?
A. Like I told you, I'm not sure where I'm going. I know we're buying in Kemp's Creek.
Q. So you're saying that you just went along to the office of DIB Finance and you say you just signed something without knowing what it was, in front of the woman called Julia Kennedy, is that what your evidence really is?
A. She didn't tell me for what I am signing, yes."
and (T p 192, l 4 - p 193, l 35):
"HIS HONOUR
Q. Ms El Khoury, I want to ask you about the time you went to the office of David Francis?
A. Yes, your Honour.
Q. And that is where you told us you signed some documents, correct?
A. Yes, your Honour.
Q. Who of your family came with you on that occasion?
A. Just me and my husband. And we saw Fred and Sandra over there already.
Q. Were Fred and Sandra over there at the same time?
A. Same time.
Q. And were you all sitting down at her desk together?
A. Yes, your Honour.
Q. And did either your husband or Fred or Sandra ask you to sign the documents?
A. Yes, your Honour.
Q. Who asked you to sign the documents?
A. Sorry, your Honour, I asked what are we doing here?
Q. Who did you ask that to?
A. Julia Kennedy and Sandra and Fred.
Q. And what did they say?
A. They said, don't worry everything's going to be fine. Just sign.
Q. Who said just sign?
A. Sandra and Julia Kennedy. Everything prepared, just sign.
Q. And you signed, did you?
A. Yes, your Honour.
Q. Did you know what you were signing?
A. No, your Honour.
Q. Did you know what the documents were for?
A. Maybe for Kemp's Creek, your Honour.
Q. What do you mean by that?
A. We were buying in that time, Kemp's Creek, your Honour.
Q. Somebody must have told you that it was for Kemp's Creek?
A. Yes.
Q. Who told you that?
A. My husband and my boys, they're working on it by themselves but I am not on it your Honour.
Q. And did you sign it because they asked you to sign it?
A. Yes, your Honour.
Q. Who asked you to sign it?
A. That people in the room.
Q. Was that your husband, he asked you to sign it?
A. We are family your Honour.
Q. I am asking you, who asked you to sign it?
A. Sandra and Julia Kennedy, your Honour. My husband he is going same me, same thing. We don't know where we're going.
Q. So you trusted --
A. I trust my son and Sandra.
Q. And if they said it was okay, it was okay by you?
A. Yes, your Honour. But I didn't know why I sign, me and my husband your Honour.
Q. But is this the position, that as far as you were concerned you were happy to sign it if they asked you to?
A. What do you mean? Sorry, I can't understand.
Q. You were happy to sign the document?
A. Yes.
Q. Because they asked you to do so?
A. Yes, your Honour. I want to help the family.
Q. And you wanted to help the family to buy Kemp's Creek?
A. Yes, your Honour we are big family and where we want to live yes, your Honour."
Zabad denied receiving bank statements, notices and letters from NAB after settlement of the Kemps Creek property purchase.
Zabad denied that she and Hanna retained BWL, and, later Russo and Partners. She denied a telephone conversation in May 2008 with Ms Kaneshalingam, and authorising her to speak to Sandra about the loan, and that she and Hanna signed an authority for NAB.
As to when she first knew of the sale of the shop she was uncertain whether it was in September or October, or in December when Daniel told her that it had gone. However, she accepted that it was prior to 3 November 2009, the date of the letter from Moscardo Lawyers to NAB.
Mr Francis at relevant times was the director and manager of DIB, a mortgage broker. His evidence in chief was contained in his affidavit sworn 9 March 2012. In court he recognised and identified both Hanna and Zabad. He said that prior to December 2005 he had met and assisted them, Fouad, Charbel and Sandra on various loan applications. He deposed to a conversation with Hanna at the Wentworthville property prior to December 2005 in which Hanna said (par 37):
"I then had a discussion over the course of approximately an hour. Over the course of this conversation, Hanna said to me words to the following effect:
'I would like to borrow about $390,000 to refinance my Westpac loan and to take cash out for the Kemps Creek purchase secured by a mortgage over this property.'"
In cross-examination Mr Francis said that he met Hanna in 1998 or 1999. In substance he adhered to his evidence of the conversation, and rejected the proposition that he was unable to identify Hanna, or was mistaken about such identification.
Ms Iatrou at relevant times was a loan administrator employed by DIB. Her evidence in chief was contained in her affidavit of 9 March 2012, which was read without objection, and supplemented orally.
She deposed that she arranged a meeting with Hanna and Zabad for 8 December 2005 following notification on 2 December 2005 from Ms Kennedy of approval of the loan. She said that on 8 December 2005 Hanna and Zabad came to DIB's office with Fouad. Hanna was known to her, and she recognised him. She was introduced to Zabad. Ms Kennedy also attended. The affidavit included :
"18 I then observed Julie verify the identity of Hanna and Zabad. By this I mean that I saw her carry out what is known as a '100 point identity check' whereby she examines various documents produced which each have a point 'weighting' until each applicant has produced over '100 points' of identification. I do not recall all of the documents that Hanna and Zabad produced to Julie as part of the '100 point identity check', however, I have a specific recollection of watching the process and of Hanna and Zabad showing Julie forms of identification. I further specifically recall that I took those forms of identification, took a photocopy of each of them, gave the photocopies to Julie, and returned the identification to Hanna and Zabad. I did not take a further copy for DIB's own records.
19 After Julie carried out the identity check, I saw Julie go through the loan and mortgage documentation with Hanna and Zabad. I cannot recall what the documents were and DIB I did not retain a copy for its records. I also cannot recall precisely what words Julie used. I do recall, however, seeing her going through each of the documents that she later requested them to sign (as to which see below) and discussing each of them in turn.
20 After Julie went through each of the documents, she variously said to Hanna and Zabad words to the following effect in relation to the documents:
'Please sign here'.
21 I then observed Hanna and Zabad sign the documents that Julie asked them to sign and Julie witnessed their signatures.
...
23(a) ... The purpose of the loan referred to above was to refinance Hanna's loan with Westpac and to obtain additional funds for the purpose of a property in the name of Hanna and a number of his children situated at ## ### Kemps Creek, and Mr Chahoud was the solicitor acting for the vendor in respect of the purchase."
Ms Iatrou described the various administrative tasks she undertook after the meeting which were necessary to complete the loan. The documentation to which she referred was in evidence. It included her letter to CK Lawyers of 8 December 2005, the purchasers' solicitors, for trust account details, and her letter to Ms Kennedy of 12 December 2005 as to payment of funds on settlement of the purchase. She also described her involvement in obtaining the loan from NAB for $2,135,000. She arranged a meeting in the offices of DIB on 14 December 2005 for the purpose of signing the documentation which was attended by Hanna and the other purchasers, and Mr Darren McLeod of NAB. She reiterated that Hanna was known to, and recognised by, her.
Her cross-examination was principally directed to the issue of her identification of Hanna at the meeting on 8 December 2005 but, in my assessment, it raised no doubt that Hanna was then known to her.
Ms Kennedy at relevant times was employed by NAB as a manger at its Bankstown business centre. Her evidence in chief was contained in her affidavit of 21 December 2011.
She deposed that in November 2005 she received an application for a business loan for $390,000 from DIB on behalf of Hanna to be secured by a first registered mortgage of the Wentworthville property. She identified the supporting documentation, which was in evidence, sent by DIB on behalf of Hanna. Following her assessment of the application, she approved the loan in early December 2005.
She deposed that on 8 December 2005 she attended the offices of DIB for the signing of the loan documentation. She was introduced to Hanna, Zabad, and another man she thought was Fouad. She said she went with Hanna and Zabad into a conference room, and there had a conversation in which, as was her usual practice, she explained the documents to be signed by them. She said (par 25) she then observed Hanna and Zabad sign, in her presence, the following documents:
(a) the acknowledgement and acceptance of the business letter of offer dated 8 December 2005, signed by Hanna and Zabad, witnessed by her;
(b) the Wentworthville mortgage, signed by Hanna, witnessed by her;
(c) the statutory liabilities declaration, signed by Hanna;
(d) the insurance undertaking, signed by Hanna and Zabad, witnessed by her;
(e) the letter of instruction for drawdown, signed by Hanna and Zabad.
Ms Kennedy referred to the correspondence concerning the payout to Westpac of $154,411.96 for the discharge of its mortgage over the Wentworthville property, and to her letter of 19 December 2005 to Hanna and Zabad advising of the disbursement of the loan on settlement. She also referred to the bank statements relating to the loan account sent to Hanna and Zabad in accordance with NAB's usual practice, and to the letters sent to them by her between 31 August 2006 and 28 February 2008.
In cross-examination she adhered to her evidence that on 8 December 2005 she followed her usual procedure as described in her affidavit. Ms Kennedy confirmed that she saw Hanna sign the Wentworthville mortgage and she signed as the witness. She also confirmed that she saw Hanna and Zabad sign the form of acknowledgment and acceptance, and that she signed as the witness in each case. She said that the handwriting of the names and the date was hers made at the time she witnessed the signatures.
Ms Kaneshalingam at relevant times was employed by NAB with its Strategic Business Services branch. She was responsible for the management and collection of monies owing by Hanna and Zabad under the loan facility secured by the Wentworthville mortgage. Her evidence in chief was contained in her affidavit of 23 December 2011.
She deposed that she caused the notices of cancellation and of default, which were in evidence, to be sent to Hanna and Zabad from 7 April 2008. She said that on 8 May 2008 she had a telephone conversation with Hanna and Zabad following which she received a facsimile signed by them authorising Sandra to act on their behalf in relation to the loan account. Ms Kaneshalingam identified the correspondence with BWL between 2 July 2008 and 24 July 2009, and with Russo and Partners between 7 October 2009 and 2 November 2009, and with Moscardo Lawyers between 3 November 2009 and 8 December 2009. She referred to NAB's letter to Moscardo Lawyers of 8 December 2009 which enclosed an accounting statement in respect of the sale of the Wentworthville property, and a cheque in favour of Hanna for $99,826.42.
Her cross-examination was confined to the telephone conversation on 8 May 2008, and the authorisation of Sandra. She confirmed her evidence in chief, which I accept.
Consideration
For Hanna, his counsel submitted that his denials that he signed the Wentworthville mortgage and related documentation, and that he authorised and/or knew of the mortgage and the NAB loan should be accepted. It was put that support was given to such a finding by his evidence of what were described as objective circumstances, namely that he was not told by Fouad that the Wentworthville property had to be mortgaged to complete the Kemps Creek purchase; Sandra successfully raised the amount of $100,000 required for stamp duty; the Wentworthville property (shop) was the retirement fund for him and Zabad; and the income from the Wentworthville property was to be used to make repayments in respect of the Kemps Creek purchase.
Furthermore, it was submitted that the recollection of each of Ms Iatrou and Ms Kennedy concerning the meeting on 8 December 2005 was faulty and unreliable. It was put that Hanna's denial of a conversation with Mr Francis concerning a loan to be secured on the Wentworthville property should be accepted, and Mr Francis' version be rejected. Accordingly, it was put that the evidence of Hanna and Zabad should be preferred, and Hanna's claim that he did not sign the Wentworthville mortgage should be upheld.
The resolution of the conflict in this case turns on the evaluation of the evidence of the witnesses, and the evidence conveyed by the documents.
My findings about Hanna and Zabad as witnesses may be shortly stated. By the time each had concluded his and her evidence I was firmly of the view that neither was a witness upon whose evidence any reliance should be placed where contested unless supported by, or consistent with, independent and accepted documentary or other evidence. As a fair reading of the transcript discloses, on many occasions they prevaricated, and endeavoured to avoid answering a question directly when perceived that to do so might harm Hanna's case. With regard to numerous issues I found that their evidence was patently implausible, which generated grave doubts about their truthfulness generally. Relevantly, Hanna maintained until final submissions an allegation of fraud against Fouad and Sandra without evidentiary support. That these allegations were so maintained and not abandoned until late in the trial was indicative of a willingness to make serious, but baseless, allegations, hence justifying careful scrutiny of all of the evidence for assessment of his case.
Significantly, the combined effect of their evidence is that Hanna and Zabad eventually accepted they signed a number of documents on 8 December 2005 in the presence of Ms Kennedy at the office of DIB. In her affidavit Zabad denied signing the documentation, but Hanna's affidavit and oral evidence was that they both signed the insurance undertaking and letter of instruction for drawdown, although denying the signatures elsewhere. No attempt was made to identify the person or persons who, if not them, signed the documents, or to show that the persons who attended the meeting on 8 December 2005 and signed the documents in the presence of Ms Kennedy were not Hanna and Zabad. No explanation was proffered for the presence of the signatures which were, obviously, similar to theirs, or to suggest that the signatures were the creation of someone else. Indeed, no reason for attending the meeting was proffered until Zabad acknowledged that she and Hanna signed the documents in Ms Kennedy's presence for the purpose of the purchase of the Kemps Creek property. Also without explanation in circumstances where explanation was relevant to credibility, was the source of funds other than the NAB loan necessary to overcome the shortfall for completion of the Kemps Creek purchase.
Overall, in my assessment, their uncorroborated case of ignorance of the transaction, and denial of signatures, as presented in chief was inherently implausible.
On the other hand, I found Mr Francis, Ms Iatrou, Ms Kennedy, and Ms Kaneshalingam to be reliable and truthful witnesses, whose evidence was corroborated by the documentary material. None were shaken in cross-examination. I found the evidence of each to be entirely credible, and I accept it. On matters about which there was a conflict between the evidence of Hanna and Zabad and the evidence of these witnesses, I am well satisfied that the evidence of the latter should be preferred.
In final submissions, Hanna, through his counsel, correctly agreed (T p 276) that it would be fatal to his case if Ms Kennedy's evidence was accepted. This acknowledgement, coupled with the evidence of Ms Iatrou, provides ample support for the findings, which I make, that on 8 December 2005 Hanna signed the Wentworthville mortgage before Ms Kennedy who signed as the witness, and Hanna and Zabad signed the related documentation witnessed by Ms Kennedy where required. It follows that I reject, without qualification, Hanna's denials that he signed the Wentworthville mortgage and the documentation he contested.
My assessment of the unreliability of Hanna and Zabad as witnesses took into account the whole of the evidence. Without being exhaustive, some examples will suffice. Hanna's denial that he mortgaged the Wentworthville property to secure vendors' finance for the Kemps Creek purchase was maintained in the teeth of the documents, although in final submissions it was accepted that he did. Other examples were Hanna and Zabad's uncorroborated denials that BWL and Russo and Partners were retained to act for them in respect of NAB's enforcement action. Absent some rational explanation, I find it impossible to accept that both these firms would embark on correspondence with NAB upon the representation that they were doing so on behalf of Hanna and Zabad unless it was true. In my opinion, the denials were false. It is reasonable to infer that they were inspired by an understanding that the solicitors' letters and related correspondence were predicated on the existence of the Wentworthville mortgage, and thus were destructive of Hanna's case. Furthermore, the denials were inconsistent with the acceptance by Hanna and Zabad that the letter of 3 November 2009 from Moscardo Lawyers to NAB was written on their instructions. As the letter shows, Hanna and Zabad were described as the mortgagors, on whose behalf enquiries were made of the progress of the sale, and the claim was made for property remaining on the premises. Consistent with the letters from the previous solicitors, no challenge was made to the existence or validity of the Wentworthville mortgage, or to the legitimacy of the sale under it. In my opinion, this letter and the subsequent correspondence until settlement on 4 December 2009 amount to insurmountable evidence of Hanna's acceptance, and knowledge, of the Wentworthville mortgage in contradiction of the claim in these proceedings.
Accordingly, I propose to order that Hanna's claim against NAB be dismissed.
As NAB's second cross-claim against Fouad and Sandra is contingent upon Hanna succeeding in his claim against NAB it follows that it, also, should be dismissed.
As to the question of costs, my present view is there should be an order that Hanna pay NAB's costs of the proceedings. However, failing agreement, I will afford the parties the opportunity to address me on this issue. Arrangements should be made with my associate by 13 February 2013 for the relisting of the matter.
Orders
The court orders:
(1) the statement of claim is dismissed; and
(2) the second cross claim is dismissed.
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Decision last updated: 31 January 2013
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