Millane v Harry
[2018] WADC 58
•16 MAY 2018
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MILLANE -v- HARRY [2018] WADC 58
CORAM: JUDGE LONSDALE
HEARD: 14-18 DECEMBER 2017
DELIVERED : 16 MAY 2018
FILE NO/S: CIV 3496 of 2016
BETWEEN: GARRY MICHAEL MILLANE
KAYE PATRICIA MILLANE
Plaintiffs
AND
PAUL HARRY
Defendant
Catchwords:
Deed - Mortgage - Section 9 Property Law Act 1969 - Section 85 Transfer of Land Act 1893 - Whether unregistered mortgage a deed - Whether mortgage a contract for valuable consideration - Whether parties had an intention to create legal relations
Legislation:
Property Law Act 1969 (WA), s 9, s 9(1), s 9(4), s 12
Transfer of Land Act 1893 (WA), s 85
Result:
Judgment for the plaintiffs
Representation:
Counsel:
| Plaintiffs | : | Mr P Monaco |
| Defendant | : | Ms P A Martino |
Solicitors:
| Plaintiffs | : | GV Lawyers |
| Defendant | : | P A Martino |
Case(s) referred to in decision(s):
400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302
Australian Regional Wholesalers Pty Ltd v Gardiner [2014] WASC 439
Brown v Turner (1911) 13 GLR 417
Dean & Westham Holdings Pty Ltd v Lloyd (1991) 3 WAR 235
Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92
Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361
McKinlay v Dodds (1984) 3 BPR 97
Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310
Re Wilson's Settlements [1972] NZLR 13
Selen v Selen [2011] FamCA 310
Wakim v Wakim [2017] NSWSC 1283
TABLE OF CONTENTS
Introduction
Summary of facts
The mortgage
The plaintiffs' pleadings
The defence
Summary of issues
Evidence of Mr Millane – as to the offer to advance $100,000
Mr Millane's evidence as to the transfer of $387,600 to the Kagy Investments account
Mr Millane's evidence as to the mortgage
Mr Millane's evidence as to the various amounts claimed in exhibit 5
Mr Millane's evidence as to the demand for payment
Mrs Millane's evidence as to as to the offer to advance $100,000
Mrs Millane's evidence as to the transfer of $387,600 to the Kagy Investments account
Mrs Millane's evidence as to as to the mortgage
Mrs Millane's evidence as to the various amounts claimed in exhibit 5
Mrs Harry's evidence as to as to the offer to loan $100,000
Mrs Harry's evidence as to as to the transfer of the $387,600 to the Kagy Investments account
Mrs Harry's evidence as to as to the various amounts claimed in exhibit 5
Mrs Harry's evidence as to as to the mortgage
Mrs Harry's evidence as to as to the demand for payment
Valma Jean Finde's evidence
Mr Harry's evidence as to the offer to loan $100,000
Mr Harry's evidence as to the transfer of $387,600 to Kagy Investments account
Mr Harry's evidence as to the mortgage
Mr Harry's evidence as to the demand for payment of $100,000
Findings of fact
Is the mortgage a deed?
Section 9 of the Property Law Act 1969 (WA)
Section 12 of the Property Law Act 1969 (WA)
The use of the language of covenants in the mortgage
The relevance of the reference to consideration in the mortgage
The relevance of the provision for the payment of interest in the mortgage
Extrinsic evidence of the intention of the parties
Conclusion as to whether the mortgage is a deed
The relevance of the mortgage not being registered – s 85 of the Transfer of Land Act 1893 (WA)
The relevance of the interest earned on monies held in the Bradshar account
In the alternative the mortgage is an agreement for valuable consideration
The relevance of the existence of family relations
Conclusion
Conclusion as to whether amounts listed in exhibit 5 are now payable
Calculation of interest
Orders
JUDGE LONSDALE:
Introduction
The plaintiffs (Mr and Mrs Millane) contend that in 2011 they offered to advance $100,000 to Mr Millane's daughter Sharon Harry and her husband, the defendant (Mr Harry) in order to assist them to fund the construction of their new home.
The Millanes claim that the proposed advance was a loan which was secured by a mortgage dated 7 June 2017 and signed by them and the Harrys. The Millanes claim they then paid various sums of money either to or on behalf of the Harrys amounting to at least $100,000.
The Millanes now seek repayment of the total amount advanced together with interest, according to the terms of the mortgage. They claim that the mortgage is enforceable as a deed - or in the alternative is enforceable as a contract.
Summary of facts
In 2011 Mr and Mrs Harry were living in their family home in Woodlands (the Woodlands property) with their three children. They decided to demolish the existing house and build a new home in its place.
The Harrys planned to finance the construction of the new home with their own funds including funds obtained from the sale of a commercial property in Balcatta (the Balcatta property) out of which Mr Harry had operated a signwriting business called Landmark Signs.
After obtaining a quote for the construction of their new home sometime in late 2011, Mr and Mrs Harry discussed their plans with Mrs Harry's father and stepmother, Mr and Mrs Millane.
Mr and Mrs Millane contend that after discussing the proposed construction with the Harrys it was apparent that the Harrys did not have sufficient funds to meet the cost ‑ so they offered to advance $100,000 to them by way of a loan which the Harrys then accepted. This is denied by Mr Harry and is a central area of dispute between the parties.
It is common ground that on 4 April 2012, the Harrys entered into a contract with Lo Presti Homes to build their new home for the sum of $469,525.[1] The contract provided for a graduated payment arrangement with invoices to be rendered at various stages of the construction process.
[1] exhibit 1
Although the Harrys had decided to build a new family home, cracks had started to appear in their relationship. This became starkly apparent when, not long after they had signed the contract with Lo Presti homes, Mrs Harry became aware that $100,000 had been withdrawn from their joint bank account without her knowledge and consent.
Although Mr Harry denies he was responsible for the withdrawal of that money (and claims it was a bank error) Mrs Harry did not trust his explanation. She became concerned that if he were to withdraw any further sum or sums of money from their account they would be unable to honour the contract with Lo Presti Homes.
Mrs Harry discussed her fears with the Millanes and decided that she would transfer the funds that she and Mr Harry had earmarked to pay for the construction of their new home to the Millanes. She asked them if they would take care of paying the invoices to Lo Presti as they became due. The Millanes agreed to do so.
On 25 May 2012, Mrs Harry transferred of $287,000 (made up of some cash and the drawing down of overdrafts from accounts in her and her husband's name) into an account in the name of Kagy Investments Pty Ltd, being an entity owned and controlled by the Millanes.[2] On 28 May 2012 (having convinced Mr Harry to repay the $100,000) she arranged for a further $100,000 to be paid into the Kagy Investments account.
[2] exhibit 4
On 25 May and 8 June 2012 Mrs Millane transferred the amounts of $287,600 and $100,000 respectively from the Kagy Investments account to an interest bearing account in the name of Bradshar Nominees Pty Ltd (an account which Mr Millane had previously set up for the benefit of his two children Bradley and Sharon).
Demolition of the old home and construction of the new home commenced in mid‑2012 with the first invoice being rendered on 1 June 2012.
Sometime after the Millanes agreed to advance up to $100,000 to the Harrys they sought advice and instructed solicitors to prepare a mortgage over the Woodlands property. The Millanes contend that the sole purpose of the mortgage was to protect their interest in the $100,000 to be advanced.
On 7 June 2012, the Millanes and the Harrys signed a mortgage which purported to secure up to $100,000 against the Woodlands property in favour of the Millanes. Mr Harry denies that the mortgage was ever intended to have that effect; he contends that the Millanes' purpose in having the mortgage was for accounting purposes and to ensure that Mr Millane's business dealings (which were in property development) were clearly delineated from his involvement in managing the construction of the Harrys new home.
After the signing of the mortgage on 7 June 2012 construction of the new home progressed and Lo Presti Homes sent regular invoices to the Harrys.
It is common ground that Mrs Harry forwarded all of the Lo Presti Home invoices to Mrs Millane for payment. Save for one invoice (dated 18 October 2012) Mrs Millane paid the invoices out of funds from the Bradshar account. The first was paid on 1 June 2012 and the last was paid on 1 February 2013.
The invoice dated 18 October 2012 (for the sum of $93,905) was paid by Mrs Millane out of the Millanes' own funds, made up of $50,000 from their superannuation fund[3] and $43,905 from their own funds in the Kagy Investments account.
[3] exhibit 24
At the time construction commenced, Mr Harry retained a bank account for the Landmark signs business[4] as well as an overdraft account attached to that business.[5]
[4] exhibit 32
[5] exhibit 33
As a consequence of Mrs Harry having transferred the $387,600 to the Millanes, the Harrys did not have access to funds which could have been used to reduce the overdraft on the Landmark signs account. By June 2012, Mr Harry was unable to service the interest on that account.[6] He requested that the Millanes compensate him for the interest which he was required to pay.
[6] exhibits 8, 9, 10, 11, 32, 33 and 24
Mr Harry contends that they agreed to compensate him and did so by the payment of two amounts of $1,000 on 26 June 2012 and 16 July 2012 and one amount of $1,100 on 19 August 2012. The Millanes do not dispute that these payments were made but claim that they were made pursuant to their agreement to loan the Harrys up to $100,000.
The construction of the home was completed in the early part of 2013.
Mr and Mrs Harry separated in 2014 and Family Court proceedings ensued.
The Millanes had never registered the mortgage but on 29 December 2014 they lodged a caveat against the Woodlands property in order to protect what they submit was a caveatable interest, according to the terms of the mortgage, in the amount of $100,000.[7]
[7] exhibit 16
As part of the Family Court settlement agreement, the Harrys agreed that they should sell the Woodlands property. In order for the sale to proceed it was necessary for the caveat to be removed.
The Millanes agreed to the withdrawal of the caveat on the condition that $100,000 of the Harrys' funds be sequestered in a trust account pending the outcome of the present dispute. Consequently, $100,000 was paid into the trust account of law firm Culshaw Miller, being Mr Harry's family lawyers.
The mortgage
The preamble to the mortgage provides that the purpose of the mortgage is to secure repayment of the principal sum with interest. It reads:
IN CONSIDERATION of the advance of the principal sum specified above (hereinafter called 'the principal sum') now owing or loaned or agreed SUBJECT TO the registration of this mortgage and any security collateral herewith to be lent in the manner on the date specified above to the persons specified above by the abovenamed Mortgagee AND for the purpose of securing to the Mortgagee payment in the manner specified above of the principal sum and interest thereon and due performance of the covenants conditions and agreements herein and in every security collateral herewith contained expressed or implied.
Clause 1 of the mortgage provides for the repayment of the principal sum (or however much is owing of the principal sum with interest) to be paid 'on demand'. It reads:
THAT the Covenantor will on demand in manner herein mentioned pay to the Mortgagee at the address of the Mortgagee aforesaid or as otherwise specified the principal sum or so much thereof as shall have been advanced or as shall remain owing TOGETHER with interest thereon as is hereinafter provided SUBJECT HOWEVER to the provisions of clause 21 hereof.
Clause 2 of the mortgage provides for when interest is to be payable on the principal sum (or what is owing of the principal sum). It reads:
THAT until demanded as aforesaid and so long as the principal sum or any part thereof shall remain unpaid the Covenantor will pay to the Mortgagee interest on the principal sum or on so much thereof as shall be then advanced or as shall for the time being remain unpaid at the rate (if any) and calculated and payable in the manner set forth above (hereinafter called 'the said interest rate').
The reference in cl 2 to the payment of interest on the principal sum unpaid 'in the manner set forth above (hereinafter called the 'said interest rate') is a reference to the part of the cover page of the mortgage which specifies that interest is to be payable in consecutive monthly payments on the first day of each month commencing on 1 August 2012 at:
… equal to the rate from time to time charged by Westpac Banking Corporation ABN 33 007 457 in respect to commercial secured overdrafts in the sum of $100,000 and in the event of such rate not being published shall be such rate as shall be determined by the mortgagee being not greater than 12 per centum (12% per annum).
Clause 21 of the mortgage provides that if interest and periodic payments are paid at a time appointed or seven days thereafter, then repayment could not be demanded before 30 June 2020. It reads:
THAT if the Covenantor shall make every payment of interest upon the several days for payment thereof hereinbefore appointed or within seven days thereafter and shall perform and observer all of the covenants conditions and agreements herein or in any security collateral herewith contained expressed or implied AND shall duly and punctually pay to the Mortgagee the periodic instalment or other payments (if any) set out above on the day or days therein appointed or within seven days thereof as and by way of repayment of the principal sum THEN and in such case the Mortgagee will not demand repayment of the principal sum or the balance thereof then remaining unpaid or any part thereof before 30 June 2020.
The reference to the 'day or days therein appointed' under cl 21 of the mortgage is a reference to the day or days 'set out above' (on the cover page of the mortgage), which specifies the time as the 'first day of each month commencing 1 August 2012'.
It is common ground that neither periodic payments nor interest were paid by the Harrys 'on the day or days therein appointed' or at all. Therefore, provided that the Millanes had advanced all or part of the principal sum to the Harrys, the principal sum (or however much of the principal sum that was due) would, according to cl 1, cl 2 and cl 21 of the mortgage read together, have become payable 'on demand' and with interest.
At the trial, the Millanes tendered a schedule of payments (exhibit 5) which they submit were made pursuant to the alleged agreement to advance $100,000 to the Harrys. It is convenient to reproduce the schedule below.
Item Date Details Amount Total sum due 1. 24.10.11 Lo Presti Homes – payment to Lo Presti Homes for survey fees (SurveyTech Surveying & Mapping Inv. 10264 dated 25.07.11) $550.00 $550.00 2. 26.04.12 Advance payment of Berry Consultancy fees in relation to the Bali Hut structure installed at the Woodlands property $110.00 $660.00 3. 26.06.12 Housing Loan – interest payment $1,000.00 $1,660.00 4. 11.07.12 Mack & Co – payment of accountancy fees $1,144.00 $2,804.00 5. 16.07.12 Housing Loan – interest payment $1,000.00 $3,804.00 6. 19.08.12 Housing Loan – interest payment $1,100.00 $4,904.00 7. 12.11.12 Payment to Lo Presti Family Trust for building construction fee in respect to 9 Hakea Road, Woodlands, (Invoice 25113142 dated 18.10.12) $93,905.00 $98,809.00
8. 18.12.14 City of Stirling – payment of rates for 9 Hakea Road, Woodlands $1,700.50 $100,509.50 9. 18.12.14 Synergy account for 9 Hakea Road, Woodlands $248.75 $100,758.25 10. 31.03.15 Interest due for financial year 1.07.2012 to 30.06.2013 $11,845.00 $112,603.25 11. 31.03.15 Interest due for financial year 1.07.2013 to 30.06.2014 $14,096.00 $126,699.25 12. 31.03.15 Interest for period 1.07.2014 to 26.03.2015 $12,015.90 $138,715.15 13. *Conditional waiver subject to resolution of dispute by 30 April 2015 ($38,715.15) $100,000.00 Amount payable by 30.04.2015 $100,000.00
Plus interest accrued on trust deposit
Amount payable after 30.04.2015 $138,715.15
Plus interest to date of payment
The plaintiffs' pleadings
The Millanes plead that the mortgage signed on 7 June 2012 is a deed and seek to enforce the terms of that deed by the repayment of $100,000 with interest.
Alternatively, the Millanes plead that the mortgage is a contract for valuable consideration, such consideration being the payment of interest on the advance of $100,000.
The defence
Mr Harry denies that there was ever an agreement that the Millanes would loan $100,000 to him and Mrs Harry or that the mortgage was ever intended to create an obligation in debt to them. Mr Harry denies that he is indebted to the Millanes for $100,000, or at all.
Despite his signature being on the mortgage as mortgagor, he pleads that he never accepted an offer to advance $100,000, and nor did he receive any advance in that amount either directly or indirectly.
He denies that the mortgage signed on 7 June 2012 meets the appropriate formalities of a deed in s 9 of the Property Law Act 1969 (WA) (or is a deed at all).
Further, he asserts that if the mortgage is not a deed, then it is not an enforceable contract because there is an absence of valuable consideration. Although this is not specifically pleaded as a defence, he claims that the mortgage is not enforceable as contract because the parties did not intend to create legal relations.
Summary of issues
The principal factual dispute is whether there was an agreement that the Millanes would advance $100,000 by way of a loan to the Harrys. Mr Harry does not deny having signed the mortgage but denies that it had anything to do with an agreement by the Millanes to advance $100,000 to him and Mrs Harry. He claims that the purpose of the mortgage was to satisfy a request by Mr Millane's accountant who wanted to ensure that there was documentary evidence to delineate Mr Millane's business dealings in the area of property development from his work in assisting the Harrys to project manage the construction of their new home.
The Millanes contend that, in addition to the terms of the deed, previous oral discussions between the parties, together with their subsequent conduct provide evidence of a common understanding that the mortgage was to operate as a deed in which the Harrys covenanted with them to repay the sum advanced on demand.
Mr Harry denies that there was such an understanding or that the mortgage operated as a deed.
There is a clear conflict between what the Millanes and Mr Harry assert was the understanding between the parties as to whether there was an agreement for a loan and whether the mortgage was intended to be enforceable either as a deed or a contract for valuable consideration.
Evidence of Mr Millane – as to the offer to advance $100,000
Mr Millane gave evidence that in 2011, when the Harrys decided to demolish their existing home and build a new home in its place[8] they invited him to discuss the quote they had received. He came to the conclusion that they did not have enough money to complete the proposed works[9] and suggested that he loan them $100,000.[10]
[8] ts 14
[9] ts 15
[10] ts 16
Mr Millane said that they did not accept his offer immediately but had thanked him very much and said they would think about it and get back to him. He said that Mrs Harry later rang him to tell him that she appreciated what he had offered and they were going to accept (the offer).[11]
[11] ts 16
He was not sure when the offer of the loan was accepted but believes that Mrs Harry phoned him within a week and invited him over to the Woodlands property to discuss it.[12]
[12] ts 34
Mr Millane agreed that when Mrs Harry had telephoned him to accept the offer of the loan, he did not speak to Mr Harry. He was sure, however, that Mr Harry knew that she had accepted the offer on their behalf because when he later went over to their place to discuss the loan, both he and Mrs Harry were present.[13]
[13] ts 17, 18, 37 ‑ 38
He disagreed with the proposition that Mr Harry did not accept the offer of the loan[14] and said that they had both thanked him very much for the offer of the loan to them.[15]
[14] ts 37 - 38
[15] ts 42 - 43
In cross‑examination he agreed that in his witness statement[16] dated 30 October 2017 (filed in advance of the proceedings) he had not mentioned having had a meeting with the Harrys following the telephone call with Mrs Harry in which she conveyed an acceptance of the offer[17] but was adamant that they had both accepted the offer of the loan.
[16] exhibit 6
[17] ts 43 - 45
He agreed that he had sought a quote for the demolition and construction of the property (on their behalf) and said that he went through it with them after they had invited him to have a look at it. He said that the quotation of $469,500 included both demolition and construction.[18]
[18] ts 30
He agreed that the written quote[19] did not include an allowance for demolition but claimed he did have evidence that the quote included demolition.[20] He denied the suggestion that he had agreed to pay for the cost of demolition himself.
[19] exhibit 1
[20] ts 31
Mr Millane's evidence as to the transfer of $387,600 to the Kagy Investments account
In about May 2012 Mr Millane came to understand that Mr Harry had withdrawn $100,000 from his and Mrs Harry's joint bank account which was 'totally unrelated to the building which obviously made [Mrs Harry] panic immensely'.[21] Consequently, Mrs Harry asked him if he and Mrs Millane would manage the funds set aside for the building contract and pay any outgoings at the builder's request. He said that he and Mrs Millane agreed to Mrs Harry's request, albeit reluctantly.[22]
[21] ts 18
[22] ts 19
She said Mrs Harry then transferred a total of $387,000 to them to manage the building project but that this amount of money had nothing to do with the agreement to advance $100,000.[23]
[23] ts 20
Mr Millane's evidence as to the mortgage
Mr Millane said he took advice about the decision to loan the Harrys the $100,000 from his accountant who suggested to him that they register a mortgage against the Woodlands property. He then took legal advice from his solicitors who drew up a mortgage document with the intent of protecting his money.
He arranged for the mortgage to be signed by him, Mrs Millane and the Harrys and to be witnessed by Valma Jean Finde, his former wife and the mother of Mrs Harry. The signing of the mortgage was to take place on 7 June 2012 at the place where the Harrys were then living (and incidentally leasing from him).
He invited Mr and Mrs Harry to read the mortgage and seek their own advice from a solicitor or accountant before signing it. He said that Mr Harry answered by saying 'I've signed mortgages before. I don't need anybody telling me about a mortgage'. He said the mortgage was then signed by all parties after they had read the document.[24]
[24] ts 22
He gave evidence that he decided not to register the mortgage on the Woodlands property because it already had two mortgages registered against it.[25] However, he later decided to lodge a caveat against the property to protect his interest in the $100,000 and did so on 29 December 2014.[26]
[25] ts 24
[26] exhibit 16
He agreed to the caveat being withdrawn when the Harrys decided to sell the house on the condition that $100,000 of the settlement proceeds of the sale of the home was sequestered pending the outcome of the present dispute.[27]
[27] ts 26
Mr Millane's evidence as to the various amounts claimed in exhibit 5
Mr Millane claims that the 'interest calculations' set out in exhibit 5 were calculations prepared by the bank[28] and represented payments made by him and Mrs Millane (pursuant to the agreement to advance them up to $100,000).
[28] ts 26
He agreed that he did not initially discuss with the Harrys what interest, if any, was to be paid on the $100,000 loan. Because Mrs Harry was his daughter he 'was not going to do anything untoward as far as the interest was concerned'. He said that the discussion of interest came later when the mortgage was 'put in place'.[29]
[29] ts 39
In relation to the first item claimed on exhibit 5, being for a payment on 24 October 2011 for $550 for a block survey,[30] Mr Millane said that, although this was paid prior to the offer to advance the $100,000, he understood that this amount would 'come off' the $100,000 (they had agreed to advance).[31] He conceded however that this $550 was paid before the offer to advance $100,000 was contemplated.[32]
[30] ts 46 - 47
[31] ts 47
[32] ts 51
Mr Millane agreed that the $387,000 which had been transferred into the bank account of Kagy Investments Pty Ltd in two lots ($287,600 on 25 May 2012 and $100,000 on 28 May 2012)[33] had then been transferred into an interest‑bearing account in the name of a company called Bradshar Nominees, being an account he named after his two children, Bradley and Sharon.[34]
[33] ts 56
[34] exhibit 4, ts 57
Mr Millane could not say what the interest rate on the Bradshar account was but said it would have been 2.2% or 2.7%. He believes he 'would have' told Mrs Harry that he was transferring the monies into an interest bearing account.[35]
[35] ts 58-59
In relation to the claim for the repayments of interest being item numbers 3, 5 and 6 on exhibit 5, he said that he thought that they were interest payments on Mr and Mrs Harry's loan account that they (the Millanes) had paid.[36]
[36] ts 61
Mr Millane agreed that the terms of the mortgage suggested that payment of interest was to be made by consecutive monthly payments on the first day of each month with the first payment being due and payable on 1 August 2012.[37]
[37] ts 73
It was put to Mr Millane in cross‑examination that in order for Mr and Mrs Harry to pay any interest they would need notification of what the interest was for that month and that no such notice had been given. Mr Millane responded that they had no intention of charging them interest on a monthly basis'[38] and that at the signing of the mortgage the Harrys did not raise the question of the interest rate.[39]
[38] ts 74
[39] ts 79
He agreed that progress payments to Lo Presti in June, July and August 2012 were all paid from the Harrys funds held in the Bradshar account[40] but the invoice dated 18 October 2012 in the sum of $93,500[41] was paid by him and Mrs Millane.
[40] ts 89
[41] ts 90, exhibit 15
Mr Millane's evidence as to the demand for payment
Mr Millane gave evidence that in a letter dated 23 March 2015 his solicitors had written to Mr Harry's solicitors and requested payment of $128,124 in full and final settlement of principal and interest pursuant to the mortgage and offering to withdraw the caveat.[42]
[42] exhibit 36
He said that the Harrys agreed to withdraw the caveat to permit the sale to proceed provided that $100,000 was sequestered pending the outcome of negotiations as to how it should be distributed.[43]
[43] ts 26
Mrs Millane's evidence as to as to the offer to advance $100,000
Mrs Millane's evidence as to whether there was an agreement to advance $100,000 to the Harrys was essentially the same as that of her husband. She said that once the Harrys had obtained a quote to demolish and build, they had offered to loan them the money. Mrs Millane said that the agreement to loan $100,000 to Mr and Mrs Harry would have been made in December 2011 or January 2012.[44] She said that both Mr and Mrs Harry were present when the offer was put and had said that they would think about it. She understood that Mrs Harry had got back to Mr Millane to say that they would like to go ahead with the proposal. She believed that the Harrys had funds of their own of about $380,000.[45]
[44] ts 106
[45] ts 102
Under cross‑examination, Mrs Millane said that she could not honestly recall when she was first invited to the Woodlands property to discuss the plans and make the offer of a loan.[46] She said that the meeting may have been earlier than January or February 2012 but it was before the quote was obtained and Mr and Mrs Harry were present. She said she found out about the offer being accepted from Mr Millane who she believes had been told by Mrs Harry that the offer was accepted. She said Mrs Harry had then called again to invite them down for an informal chat.[47]
[46] ts 131
[47] ts 132
Under cross‑examination, Mrs Millane said there had been an initial attendance for them to look at the quote, then a telephone call between Mrs Harry and Mr Millane, then another telephone call (but not straightaway) and then another meeting. She could not recall when the second meeting occurred but thought it was 'maybe up to a week' (after the first meeting). At the second meeting she and Mr Millane and Mrs Harry and Mr Harry were present. During that meeting, Mr and Mrs Harry had thanked them and expressed their appreciation for what she and Mr Millane were doing.[48]
[48] ts 133
Under cross‑examination, Mrs Millane agreed that in her witness statement of 30 October 2007, there was no reference to their having been a second meeting to discuss the loan.[49] She agreed that Mr Harry had never spoken to her personally about accepting the offer of the loan and that she never received a telephone call from him about it.[50] However, she denied the suggestion that Mr Harry had never agreed to the offer. Although he did not specifically say 'I agree to this offer' she recalls that the acceptance of the offer was a 'joint thing'.[51]
[49] ts 136, exhibit 25
[50] ts 136
[51] ts 137
Mrs Millane's evidence as to the transfer of $387,600 to the Kagy Investments account
Mrs Millane was responsible for paying all of her and her husband's accounts.
She said that (in about May 2012) Mrs Harry had asked her to manage their funds because Mr Harry had been frivolously disposing of money. Mrs Millane agreed that she had not spoken to Mr Harry personally about Mrs Harry's request that they manage their money for the building works.[52]
[52] ts 103
She confirmed that Mrs Harry paid a total of $387,600 into the Kagy Investments account. She said Mrs Harry emailed her the invoices from Lo Presti Homes and she then paid them.[53]
[53] ts 104
Mrs Millane said neither Mr nor Mrs Harry had asked her what was to happen with any interest being earned on their money.[54]
[54] ts 104
Mrs Millane agreed under cross‑examination that, as at 8 June 2012, she and Mr Millane held $387,600 for the benefit of the Harrys in an interest‑bearing account in the name of Bradshar Nominees. She believed that Mr Harry approved of them managing the funds because Mrs Harry had indicated that he did.[55]
[55] ts 150
Mrs Millane's evidence as to as to the mortgage
Mrs Millane said that their accountant had recommended that they get a legal document in place for the money that was to be loaned. They engaged a lawyer and a mortgage was prepared.
Mrs Millane recalled that at the signing of the mortgage on 7 June 2012 Mr Harry had disavowed the suggestion that he obtain legal advice about the document and had said, 'well, I know what a mortgage document is. I don't need to get anybody's legal advice'. She said he signed the mortgage whilst they were all sitting there.[56] Mr Harry had flipped through the pages of the mortgage but had not asked any questions about it.[57] Valma Finde witnessed all of their signatures.[58]
[56] ts 109
[57] ts 110
[58] ts 110
Under cross‑examination Mrs Millane said she had not issued invoices for interest on any monies advanced because she 'didn't see it necessary at that time'.[59]
[59] ts 139
She did not recall having discussed the question of interest with the Harrys but said that they had read the mortgage prior to signing it.[60] Mrs Millane said she was fully aware that interest was to be paid on the loan but understood that it would be charged when they 'called on the money'.[61] Her understanding was that money was payable 'on demand'.[62]
[60] ts 139
[61] ts 140
[62] ts 142
Mrs Millane said that the caveat which she signed on 29 December 2014 was registered because they were not able to register the mortgage[63] because of the state of the Harry's marriage.[64] Mrs Millane said that the decision to lodge a caveat on the property was made later with the object of protecting their money.[65]
[63] ts 164
[64] ts 165
[65] ts 111
Mrs Millane's evidence as to the various amounts claimed in exhibit 5
Mrs Millane agreed under cross‑examination that the entry on 24 October 2011, being item number 1 and the entry on 26 April 2012, being item number 2, were payments made before the offer to advance $100,000 was made and pre‑dated the mortgage.[66]
[66] ts 147
In relation to payment numbers 3, 5 and 6 on the schedule in exhibit 5 (described as 'housing loan interest repayments'), Mrs Millane agreed that this represented the interest payable by Mr Harry on one of his accounts. She said that Mrs Harry had asked her to make that payment out of the funds that the Millanes had been given to manage because Mr Harry had been 'at her' to reimburse him.[67] Mrs Millane said '[Mr Harry's] bank was chasing him for money because his Landmark Signs account was overdrawn'.[68]
[67] ts 111 - 112
[68] ts 112, 114, 118, exhibit 21
In relation to item 4, being for accountancy fees for Mack & Co, Mrs Millane's evidence was that this was paid by her at Mrs Harry's request and because there was no money in Mr Harry's Landmark Signs account.[69]
[69] ts 115, exhibit 20
In relation to item number 7, being for an account from Lo Presti in the sum of $93,905 dated 18 October 2012, she paid that by transferring $43,905 from the Kagy Investments account and $50,000 from the privately managed super fund held by her and Mr Millane (Gakaye Pty Ltd as trustee for the Millane Investment Trust)[70] to her private account. She then paid the $93,905 from her private account to Lo Presti Homes on 12 November 2012.[71]
[70] ts 121
[71] ts 123
In relation to entry numbers 8 and 9, being accounts for the City of Stirling in the sum of $1,700.50 and a Synergy account for $248.75, Mrs Millane said that she made those payments on 18 December 2012 at Mrs Harry's request using her own Visa card account.[72]
[72] ts 119 - 120, exhibit 23
Under cross‑examination, Mrs Millane agreed that she made progress payments to Lo Presti for June, July and August totalling $332,101. By the time the 18 October 2012 invoice was due the Harrys still had funds in the Bradshar account of $54,499. She said that the money remaining in the Bradshar account at that time was ultimately used to pay for the 'extras' bill, made up of two amounts of $30,519 and $23,980.[73]
[73] ts 159 - 160
In relation to the Millanes' claim for interest set out in items 10, 11 and 12 on exhibit 5, being a total of $37,986.90 for the period 1 July 2012 to 26 March 2015, Mrs Millane said that the bank had made those calculations.[74]
[74] ts 126
Mrs Harry's evidence as to as to the offer to loan $100,000
Mrs Harry said that she and her husband had met with the builder to look at the costs of building a house sometime in 2012. She said the cost of demolition was included in the contract with Lo Presti Homes and she denied that the demolition was to be paid by her father.[75]
[75] ts 157
At the time of the demolition, she was working at Hollywood Hospital as a nurse and studying and Mr Harry was working sporadically. She said that she and Mr Harry had gone to the bank and were advised they could loan a certain amount of money but that it was not going to be enough. Mrs Harry said she said she was 'pretty sure' that they were told they could borrow $320,000 but cannot recall when that was.[76]
[76] ts 224
She said her father offered to loan the extra money and she and Mr Harry had agreed to accept the offer.[77]
[77] ts 173
She said after obtaining a quote from the builder, she and Mr Harry met with the Millanes. They had a couple of meetings to discuss the proposal to advance the $100,000. She could not be specific as to the date of the meeting.[78]
[78] ts 174
Mrs Harry was vague as to whether or not the question of interest was discussed at the meeting. She said that it was not discussed at the first meeting but possibly at the second meeting held at the Woodlands property.[79]
[79] ts 176
She agreed that the second meeting must have been sometime before April 2012 when the construction contract was signed. She could not recall whether it was before Christmas 2011 but recalled it being before they commenced building.[80]
[80] ts 234
She denied the proposition that Mr Harry had never agreed to accept the offer of the $100,000 loan.[81] She agreed that when she accepted the offer by telephoning her father, Mr Harry was not a party to the call. However, she said his acceptance of the offer was confirmed at a subsequent meeting.[82]
[81] ts 234
[82] ts 235
Mrs Harry's evidence as to as to the transfer of the $387,600 to the Kagy Investments account
Mrs Harry said that she had transferred $387,600 to Mr and Mrs Millane to be managed by them because Mr Harry had previously taken $100,000 out of the account and she did not trust him. Mrs Harry was somewhat vague as to the chronology of payments but agreed under cross‑examination that, as at May 2012, $387,600 had been transferred to the Millanes. She said that some of that money had been obtained by drawing down on existing loans or overdrafts belonging to her and her husband.[83] Mr Harry did not object to what she did.[84]
[83] ts 211
[84] ts 183
Mrs Harry said that the arrangement was that she would tell Mrs Millane what needed to be paid and she would pay it on their behalf.[85] She did not specifically recall having discussed the Lo Presti invoice with her husband but said that he knew about them and had agreed they should be paid.[86]
[85] ts 178
[86] ts 186
She denied that Mr Harry raised the issue of the Millanes holding $387,600 of their money or making any complaint about that in her presence or that he ever complained about the Millanes earning interest on that amount.[87]
[87] ts 191
Mrs Harry denies that she transferred the $387,600 to the Millanes without his knowledge.
Mrs Harry's evidence as to as to the various amounts claimed in exhibit 5
Under cross‑examination, Mrs Harry accepted the proposition that there was a liability to pay interest on the accounts that she had drawn down on to pay the $387,600 over to the Millanes.[88] She agreed that Mr Harry was not happy about interest payments coming out of the (Landmark Signs) overdraft account.[89]
[88] ts 216
[89] ts 217
She agreed that the Landmark Signs account[90] showed debits for various payments of interest after the $387,600 had been transferred to the Millanes but that, to her knowledge, Mrs Millane was 'putting that money back in' to compensate for the lost interest.[91] She agrees that items 3, 5 and 6 on exhibit 5, all represent reimbursements of interest that she and Mr Harry had to pay on their accounts as a consequence of the $387,600 having been transferred to the Millanes for management.[92]
[90] exhibit 32
[91] ts 218 - 219
[92] ts 220
Mrs Harry's evidence as to as to the mortgage
Mrs Harry gave evidence that the Millanes wanted her and Mr Harry to sign a mortgage in relation to the offer of the $100,000 loan and understood that interest would be payable.
Mrs Harry said that on the day of the signing of the mortgage on 7 June 2012 the Millanes arrived first and Mr Harry came in after that. She recalls the document being stapled together. She cannot recall who dated the document.[93] She did not carefully read it but did read through it.[94]
[93] ts 239
[94] ts 240
She said her understanding of the document is that the loan would be paid 'on demand' but there was no set time that they had to pay it back.
She did know that they had to pay interest at a later date but not on that particular day; the question of interest was discussed about a month later. She did not know that the documents stated that there was to be an interest repayment[95] and did not read the rate of interest.
[95] ts 241
By November 2014, she had separated with Mr Harry. She agreed that in December 2014 she asked Mrs Millane to pay for the rates for the City of Stirling and the Synergy account.[96] She agreed that in relation to items 8 and 9 on exhibit 5, being the payments for the City of Stirling and Synergy, she did not consult Mr Harry before requesting Mrs Harry to make the payments.[97]
[96] ts 246
[97] ts 248
Mrs Harry's evidence as to as to the demand for payment
Mrs Harry separated from Mr Harry in November 2014 but they stayed living together in the same house until it was sold in March 2015.
She said that she first became aware of the Millanes having lodged a caveat in 2015 when she and Mr Harry had separated and were trying to sell the property.
As part of the separation agreement, $100,000 was deposited into a trust account of the law firm of Mr Harry's solicitors Culshaw Miller, pending resolution of the dispute over repayment of monies owing to the Millanes. She agreed with the proposition that interest was owing to the Millanes on that amount.[98]
[98] ts 192
Valma Jean Finde's evidence
Valma Jean Finde gave evidence that she was present when the signing of the mortgage took place. She recalls Mr Millane saying to Mr and Mrs Harry that they could get an independent lawyer. She said Mr Harry went through the papers and had said that he 'knew all about lawyers and mortgages' and then signed it. She witnessed him signing it.[99]
[99] ts 263
Mr Harry's evidence as to the offer to loan $100,000
Mr Harry gave evidence that the suggestion to build came from Mr Millane. He said the budget for demolishing the old house and re‑building was about $400,000 ‑ $450,000.[100] Mr Harry denies that he would have agreed to borrow money from the Millanes because he believed they had sufficient funds made up of cash from the sale of the Balcatta property and access to funds from pre‑existing overdrafts.
[100] ts 278
He said that the sale of the Balcatta property meant they were able to pay $60,000 owing on the mortgage on the Woodlands property and would be able to draw back down on the loan associated with it. In relation to the Balcatta property he retained an overdraft facility of $190,000 and his intention was to redraw on that. In addition to the overdrafts, they had cash of about $146,000 from the sale of the property in Balcatta and about $30,000 in additional cash.
He said that their bank manager, Troy Lyons, suggested that they should loan a bit more and they ended up taking out a loan for $320,000 which gave them $146,000 in cash plus the $320,000 that would become available when required.[101]
[101] ts 279
Mr Harry identified a Westpac loan document for $320,000 dated 9 April 2013.[102] He said that this loan document came about after they had sold the Balcatta property and after they had seen Troy Lyons and obtained the quote from Lo Presti Homes.[103]
[102] ts 280, exhibit 35
[103] ts 280
He said prior to getting the quote, Mr Millane had offered to pay to demolish the place and do the site works for them. He said that they had agreed so that all of their funds could therefore be allocated to the construction of the house. He said for this reason there was no need to borrow from the Millanes.[104]
[104] ts 282
It was put to him in cross‑examination that bank records show that the $320,000 did not come to them until April 2013. He said that it was not needed until then because the plan was to first use the $146,000 in cash they had, then the $190,000 from their Equity Access loan and then $60,000 from their Premium Option home loan. He said that the proposed $320,000 loan from the bank would only become necessary once those funds had been exhausted.
Mr Harry's evidence as to the transfer of $387,600 to Kagy Investments account
Mr Harry said that after they signed the construction contract on 4 April 2012, they moved to an address in Leederville. After that Mrs Harry had told him that Mr Millane had offered to manage the building project. Mr Harry said he was a bit reluctant but then thought it was a great idea because of Mr Millane's experience.[105]
[105] ts 283
He said that he 'took a bit of a backseat' in relation to the construction and allowed Mr Millane to become involved because he did developments with Lo Presti.[106]
[106] ts 281 - 282
In relation to the invoices for Lo Presti Homes, he said that he was fairly 'hands off' with the process and had left it to Mrs Harry and her father to manage. He said that after Mrs Harry transferred the funds to the Millanes' account he 'sort of stepped out of it'.[107]
[107] ts 291
He said that when he found out about Mrs Harry transferring all the money on the redraw facility on the Landmark Signs account to the Millanes he was not overly happy. He found out about it when he went to make a purchase and found that the overdraft account was overdrawn. Inquiries with the bank revealed to him that interest had been charged on the account causing it to become overdrawn. He asked Mrs Harry to arrange reimbursement for the interest because otherwise he was going to be paying $1,000 a month in interest.[108]
[108] ts 285, items 3, 5 and 6 on exhibit 5
When asked about the $100,000 which his wife claimed he had withdrawn from their joint account without her knowledge[109] he denied that he was responsible and suggested that the bank may have taken the $100,000 out of the account and transferred it to the overdraft account.[110]
[109] ts 308
[110] ts 309
He said he did not want it in the Landmark Signs overdraft account because he used (the interest payable on the overdraft) as a tax deduction and did not want to mix the building money with his trading account. He said he was angry that the bank had made a mistake. It was put to him that his lawyer had not cross‑examined Mrs Harry about the bank being responsible for the $100,000 being withdrawn by the bank but he denied that he had failed to tell his lawyer about the suggestion that the bank withdrew the $100,000.[111]
[111] ts 310
He denied that he authorised Mrs Harry to withdraw $387,600 and transfer it to the Millanes.[112]
[112] ts 311
He agreed that the Lo Presti invoice dated 18 October 2012 for $93,905 was paid by the Millanes out of their funds.[113]
[113] ts 313
Mr Harry agreed that at no time did he complain to the Millanes that they held funds belonging to him and Mrs Harry or about whether the money was earning interest. He denied discussing the building accounts as they came in with Mrs Harry.[114]
[114] ts 316
Mr Harry's evidence as to the mortgage
Mr Harry agreed that his signature was on the last page of the mortgage but he 'can't be 100% sure' how he came to sign that document. His understanding was that Mr Millane's accountant had asked him to get them to sign a document for the purpose of a possible future tax audit.[115] He thought the document was needed to ensure the building project was clearly identified as separate from Mr Millane's business operations.
[115] ts 289
He said he was not given the mortgage before he signed it and denies that it was given to him to read. He said that when they came over for the documents to be signed they did not even sit down as they were in a hurry to get going. By his reckoning the whole process took no longer than five minutes or 10 minutes.[116]
[116] ts 290
He could not recall if there was anything said about the document but said it was more like idle chitchat; there was no discussion about interest rates.
In relation to the signing of the mortgage, he thought it was the document that the accountant 'wanted [Mr Millane] to ask us to sign'. He said he looked at the document as he signed it but denies saying 'I don't need to get a lawyer's advice because I know all about mortgages'.[117]
[117] ts 323
He says he would never have signed a mortgage without taking it away and reading it carefully. To his understanding the document was 'a simple document' to give Mr Millane some 'indemnity' if the taxman audited his books; in his mind he had not signed a mortgage[118] but conceded that the document[119] has the title as 'mortgage' in large capitals and it referred to the Woodlands property as the property to be mortgaged.[120]
[118] ts 323
[119] exhibit 2
[120] ts 324
He agreed that he understood that if he signed a mortgage this meant that he had borrowed money off somebody.[121] He agreed that when he borrowed money off somebody there was an obligation to repay it and that there was usually an obligation to pay interest.[122] He disagreed with the proposition that his prospect of being able to borrow money at the time that they had entered into the contract with Lo Presti Homes was fairly limited.[123]
[121] ts 300
[122] ts 301
[123] ts 306
He agreed he had the option of not signing it.[124] He said he could not remember Valma Finde being there although he would not deny it.[125] He said that he did not see the part about consecutive monthly payments for interest being due and payable on 1 August 2012.[126]
[124] ts 325
[125] ts 326
[126] ts 327
Mr Harry's evidence as to the demand for payment of $100,000
The construction of the home was completed in December 2013. Mr Harry said that the first he had heard about owing $100,000 to the Millanes was a couple of weeks after Mrs Harry sent him a text saying that the marriage was over.[127]
[127] ts 293
He identified letters between his solicitors Culshaw Miller and his wife's solicitor Wayne Dawkins around about the time of the sale of the house in March 2015 which referred to the caveat lodged by the Millanes.[128] He agreed the caveat was lifted to enable the sale of the property.[129]
[128] exhibits 36 and 37
[129] ts 296
Findings of fact
Whilst there were some minor discrepancies between the accounts given by Mr and Mrs Millane, mostly relating to the precise timing of discussions between the various parties, I found them to be credible and reliable witnesses. Each of them gave a clear account of there having been an offer by them to advance $100,000 to Mr and Mrs Harry to help them fund the construction of their new home. Further, they were both clear about the offer being accepted by Mr and Mrs Harry in subsequent discussions.
The Millanes' account was supported by Mrs Harry's evidence. Although Mrs Harry was less clear about the number of discussions between the parties, their precise timing and the details of those discussions, she impressed me as a witness doing her best to recall events from some years ago. Her account of being offered a loan by her father and stepmother and being accepted by her on behalf of her and her husband was credible: I find the suggestion that she did not discuss accepting the offer of $100,000 with her husband to be implausible because at the time that the idea of the $100,000 advance was floated, they were both still married and were both committed to the project of building their new home together.
I find that there was a discussion between Mr and Mrs Millane and the Harrys sometime in late 2011 in which Mr Millane offered to advance $100,000 to the Harrys to help fund the construction of their new home.
I do not accept Mr Harry's evidence that there was no such offer or that (if there was) then he did not accept that offer, either directly or indirectly, for the following reasons.
It was common ground that in June 2012 Mrs Harry transferred $387,600 to the Millanes with instructions that they manage the construction process by paying for the invoices as they were due.
On 18 October 2012 Lo Presti rendered an account in the sum of $93,905. At that date, of the $387,600 which had been transferred to the Bradshar account from the Harrys' funds, only just over $59,000 of the Harrys' funds remained. This was insufficient to cover the cost of that invoice. There was no attempt by either Mr Harry or his wife to access their own funds to pay for it. Mrs Millane said in her evidence that those funds were ultimately used to pay for the 'extras' bill.
Mrs Millane's evidence, which I accept, was that she paid that invoice by using $43,905 of the Millanes own personal funds and $50,000 from their superannuation fund. The $93,905 in total is close to the amount of $100,000 which the Millanes say that they agreed to advance.
It is implausible in my view that the Millanes would make that payment if they had not discussed it first with the Harrys or if the Harrys had sufficient funds to cover the cost of that invoice because Mrs Millane had, up until that point, been using the Harrys' money to pay the invoices. It is highly likely in those circumstances that, had the Harrys had sufficient funds to cover the cost of the invoice, then Mrs Millane would have utilised those funds first.
Mr Harry's claim that they did not need to borrow from the Millanes because the bank had loaned them $320,000 to help fund the build I find to be untrue. A loan of $320,000 was granted to the Harrys but this was until not until 9 April 2013[130] (just over a year after the construction contract was signed on 4 April 2012) and well after the Millanes had paid $93,500 to cover the cost of the October 2012 invoice.
[130] exhibit 35
Mrs Harry's evidence (which was not contradicted) was that at the time construction was to commence neither she nor Mr Harry were in full‑time employment. This makes it more likely that the Harrys would have accepted an offer of financial assistance by the Millanes.
The fact that the Harrys and Millanes signed a formal document, namely the mortgage, whether or not that was enforceable as a deed or a contract for valuable consideration, is clear evidence that the Harrys intended that the Millanes would loan them up to $100,000.
Mr Harry's account of the signing of the mortgage and his claim that he did not know what he was signing lacks credibility ‑ particularly his claim that he did not know how his signature came to be on the document and his claim not to have remembered the presence of Mrs Finde.
The Millanes account of the signing of the mortgage was corroborated by Mrs Finde and Mrs Harry. Each of those witnesses testified that Mr Harry had indicated that he knew what a mortgage was. Mr Harry himself conceded that he knew that a mortgage carries with it an obligation to repay money and usually involves the payment of interest.
I find that the Millanes did offer to loan the Harrys up to $100,000 and that the Millanes advanced $93,500 to them when they paid the October invoice.
I turn now to consider whether the mortgage is enforceable as a deed or a contract.
Is the mortgage a deed?
The common law definition of a deed is contained in 12 Halsbury's Laws of England (4th ed) par 1301 which reads:
Common law definition of a deed. At common law, for an instrument to be a deed it must comply with the following requirements. First, it must be written on parchment paper. Secondly, it must be executed in the manner specified below by some person or corporation named in the instrument. Thirdly, as to subject matter, it must express that the person or corporation so named makes, confirms, concurs in or consents to some assurance (otherwise than by way of testamentary disposition) of some interest in property or of some legal or equitable right, title, or claim, or undertakes or enters into some obligation, duty or agreement enforceable at law or in equity, or does or concurs in some other act affecting the legal relations or position of a party to the instrument or of some other person or corporation.
To be executed by a party as his deed, the instrument must be sealed with a seal which is, or can be regarded as, his seal, and must be delivered as his act and deed. An individual, that is a party not a corporation, executing a deed after 1925 must also either sign or place his mark on it; sealing and delivery alone are insufficient execution by such a party. Delivery by a party is constituted by any words or conduct expressly or impliedly acknowledging that he intends to be bound immediately and unconditionally by the provisions of the deed …
A power of attorney under seal is a deed, and so is a transfer of land to which title is registered.
Any document which does not comply with all the requirements for a deed may nevertheless, if it complies with the relevant requisites for an instrument under hand, be effective as such an instrument, even though it was intended to be a deed.
It is common ground that the mortgage did not comply with the common law requirements of a deed.
Section 9 of the Property Law Act 1969 (WA)
Section 9 of the Property Law Act dispenses with some of the formal requirements of the common law. It provides:
Formalities of deed
(1)Every deed, whether or not affecting property -
(a)shall be signed by the party to be bound thereby; and
(b)shall be attested by at least one witness not being a party to the deed but no particular form of words is required for the attestation.
(2)It is not necessary to seal any deed except in the case of a deed executed by a corporation under its common or official seal.
(3)Formal delivery and indenting are not necessary in any case.
(4)Every instrument expressed or purporting to be an indenture or a deed or an agreement under seal or otherwise purporting to be a document executed under seal and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.
The effect of s 9 of the Property Law Act is that for an instrument to be a deed it must be signed and attested by a person who is not a party to it and that it is 'expressed or purporting to be … a deed'. If those requirements are satisfied then it has 'the same effect as a deed'.
In this case the mortgage was signed by Mr and Mr Millane and Mr and Mrs Harry. It was witnessed by Ms Finde who was not a party to the deed. The instrument therefore meets the formal requirements of s 9(1) of the Property Law Act.
I turn now to consider whether the mortgage is an instrument expressed or purporting to be a deed within the meaning of s 9(4) of the Property Law Act.
No particular form of words is necessary for an instrument to constitute a deed: Dean & Westham Holdings Pty Ltd v Lloyd (1991) 3 WAR 235, 251 (Ipp J).
Section 12 of the Property Law Act 1969 (WA)
Mr Harry submits that the mortgage is not a deed because the word 'deed' does not appear in the mortgage.
The fact that the word 'deed' does not appear in the document and it is described as something else does not mean that it is not a deed: Re Wilson's Settlements [1972] NZLR 13, applying Brown v Turner (1911) 13 GLR 417 and Domb v Owler [1924] NZLR 532, 537 (Salmond J). See also Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, 373 (Young J).
Section 12 of the Property Law Act contemplates that the use of the word 'deed' in an instrument is not necessary for it to have the efficacy of the deed because it permits a deed to have any one of various characterisations including that of a mortgage. It provides:
12. Description of deeds
Any deed, whether or not it is an indenture, may be described (at the commencement thereof or otherwise) as a deed simply or as an agreement under seal, or as a conveyance, deed of exchange, settlement, mortgage, charge, transfer of mortgage, appointment, lease or otherwise according to the nature of the transaction intended to be effected.
As s 12 of the Property Law Act provides that a deed can be described as a mortgage then a mortgage can be a deed (regardless of whether the word deed appears in the mortgage).
In Dean & Westham Holdings Pty Ltd v Lloyd the approach of having regard only to the form of an instrument (and not its substance) in considering whether it was a deed, was specifically disapproved of. In that case it was held that the fact that an instrument is not distinctly stated to be a deed is not determinative. Ipp J said (252):
Before considering that material it is necessary to determine whether the instrument is expressed or purports to be a deed, as required by s 9(4) of the Property Law Act. Unless this requirement is fulfilled, the document will not have effect as a deed, irrespective of the parties' intention.
As the learned trial judge pointed out:
'The meaning of "expressed" is obvious enough. It means, clearly indicated or distinctly stated, rather than implied'.
'Purport' according to the Macquarie Dictionary means 'to profess or claim … to convey to the mind as the meaning or thing intended; express, imply, … tenor, import or meaning, … purpose or object …'. In the context of s 9(4) of the Property Law Act 'purporting' is used in contra‑distinction to 'expressed'. Thus, in my view, an instrument which is not clearly indicated or distinctly stated to be a deed, but which otherwise conveys to the mind, by implication, through its tenor and the words used therein, that it is intended to be a deed, is an instrument purporting to be a deed.
Where an instrument is clearly indicated or distinctly stated to be a deed, absent any extrinsic evidence to the contrary, it would ordinarily be inferred that the parties intended that it should have effect as a deed. The question whether an instrument purports to be a deed is closely bound up with the question whether an instrument purports to be a deed is closely bound up with the question whether it appears from the words used in the instrument that the parties intended it to be a deed. Thus the resolution of the questions whether there has been compliance with s 9(4) of the Property Law Act and whether the parties intended the instrument to be a deed depend, in the circumstances of this case, upon a construction of the instrument itself.
The learned trial judge held that in determining whether an instrument was expressed or purported to be a deed, in terms of s 9(4), regard should be had to the form of the instrument alone, and not its substance. He said that it was unnecessary 'to determine whether the document is in substance a deed. Subsection (4) provides no justification for such an exercise.' With great respect I differ from that view. I have already pointed out that, in my opinion, s 9 of the Property Law Act does not dispense with the requirement of intention, and, 'purporting', in the context of s 9(4), does not mean convey to the mind by form alone, but, rather, convey by the instrument as a whole, including both its form and its tenor or substance.
As I have already said, it is my view that the description of the instrument as a mortgage is sufficient for it be characterised as a mortgage and therefore a deed by virtue of s 12 of the Property Law Act.
If I am wrong about the effect of that section, I would then need to consider whether the parties intended the instrument to be a deed, by reference to the document itself and whether it is expressed or purported to be a deed. The question of whether it was expressed or purported to be a deed requires consideration of whether it 'conveys to the mind by implication, through its tenor and the words' (Dean v Lloyd [252]) that it is intended to be a deed.
I turn now to consider whether the terms of the instrument have that effect.
The use of the language of covenants in the mortgage
The terms of the mortgage refer to the Harrys as covenantors and impose obligations to pay the Millanes the principal sum conditional upon the 'principal sum or so much thereof' having been advanced.
The use of the language of covenants may provide a strong indication of an intention that the document is a deed: See: Re Wilson's Settlements (23).
I consider that the use of the word covenant or its derivatives throughout the instrument does suggest that the instrument is intended to operate as a deed.
The relevance of the reference to consideration in the mortgage
One of Mr Harry’s principal contentions in support of his submission that the instrument is not a deed, is that the use of the words 'IN CONSIDERATION OF the advance of the principal sum…' is suggestive of the language of agreement and therefore inconsistent with it being executed as a deed: Australian Regional Wholesalers Pty Ltd v Gardiner [2014] WASC 439 [17] ‑ [18]. Although the reference to consideration can be suggestive of an agreement rather than a deed, this is not conclusive: It is a misconception that a deed dispenses with the need for consideration as a deed would not be enforceable if the remedy is in equity: see Seddon, Nicholas C, Seddon on Deeds (2015) [2.5], [6.2] ‑ [6.22].
In my view there is no merit in the submission that a reference to consideration in the mortgage is conclusive that the instrument is not intended to be a deed.
The relevance of the provision for the payment of interest in the mortgage
The mortgage imposes an obligation on the part of the mortgagors to pay interest on the amount advanced up to $100,000.
Mr Harry contends that the fact that the mortgage contains provision for consideration in the form of the payment of interest is more consistent with the language of agreement and therefore inconsistent with the language of a deed.
The fact that the instrument may contain indicia of an agreement in its terms such as, provision for the payment of interest is not determinative of the question whether the document was intended to be a deed: Dean v Westham Holdings v Lloyd [254].
Whilst provisions relating to the payment of interest in an instrument might be suggestive of it being a contract rather than a deed, it is my view that (in the context of the facts of this case) the provision for the payment of interest is not fatal to the question of whether the mortgage is a deed. This is because it is a common feature of a mortgage that there is provision for the payment of interest. Further, as I have already found, s 12 of the Property Law Act provides that a mortgage can be a deed.
Extrinsic evidence of the intention of the parties
The intent of the parties can be inferred from the words of the document itself or by extrinsic evidence: see Dean and Westham Holdings Pty Ltd v Lloyd (251) (Ipp J); Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310, 353 ‑ 354 (Kennedy J).
Regard can be had the parties' subjective intentions in determining the question of whether a document is intended to be executed as a deed: See 400 George Street (Qld) Pty Ltd v BGInternational Ltd [2012] 2 Qd R 302, 312 [53] citing Butt, Land Law (6th ed 2010), Lawbook Co at par 19141.
Conclusion as to whether the mortgage is a deed
As I have explained, the evidence establishes that the Millanes agreed to loan the Mr and Mrs Harry $100,000 and that they intended to secure that loan by obtaining a mortgage on the Woodlands property. Mr and Mrs Harry both agreed to accept the loan on the understanding that the loan would be secured against the Woodlands property. They indicated acceptance of that offer both orally and by the signing of the mortgage on 7 June 2012. Mr Harry would well have understood that the purpose of the mortgage was to protect the Millanes' interest in the money which he had agreed would be loaned: his evidence was that he understood what a mortgage was and that a mortgage usually contained an obligation to pay interest.
Although the mortgage clearly provided for the payment of interest, I find (consistent with the evidence of Mr Millane) that the Millanes did not intend to pursue Mr and Mrs Harry for the payment of interest until a demand was made for the repayment of the principal. Consistent with that understanding, the Millanes did not render accounts for the payment of interest, nor did they demand that it be paid.
The fact that invoices for the payment of interest were not rendered however does not change the fact that the purpose of the mortgage was to protect the Millanes interest in the principal sum advanced. This is clear (not only from the terms of the mortgage), but from the Millanes conduct in seeking financial and legal advice and arranging for the mortgage to be drafted by a solicitor.
The relevance of the mortgage not being registered – s 85 of the Transfer of Land Act 1893 (WA)
Mr Harry submits that the Millanes failure to register the mortgage is fatal to their claim that the document is a deed.
Section 85 of the Transfer of Land Act 1893 (WA) provides as follows:
85.Signed and registered instruments have efficacy of deeds
Every transfer or other instrument shall be deemed of the same efficacy as if under seal; and when signed by the proprietor and registered shall be as valid and effectual to all intents and purposes for conveying passing or conferring the estates interests or rights expressed to be thereby transferred leased or created respectively as a deed duly executed and acknowledged by the same person would have been under any law heretofore or now in force in Western Australia or as any other form of document would have been either at law or in equity.
Whilst it is true that, by virtue of s 85 of the Transfer of Land Act a registered instrument such as a mortgage will have the efficacy of a deed, there is nothing in the language of that section or any other statute or rule of common law which provides that an unregistered document cannot be a deed.
I find that the failure of the Millanes to register the mortgage is not fatal to their contention that the document is a deed.
For the reasons already stated, including the fact that the document is described as a mortgage, the use of the language of covenants and my findings as to the intention of the parties when the mortgage was signed, I conclude that the document is a deed and the Mr Harry is now liable for repayment of however much of the principal sum is outstanding together with interest.
The relevance of the interest earned on monies held in the Bradshar account
By happenstance, the Millanes had begun to earn interest on the $396,000 belonging to the Harrys and held in the Bradshar account (although that interest has not yet been calculated).
At the same time the Harrys were incurring a detriment because they were not able to earn any interest on those funds and were liable to pay interest on an increased overdraft in the Landmark Signs account.
The relevance of this is to explain the proper characterisation of the sums of money claimed in items 3, 5 and 6 on exhibit 5.
I find that the three payments, being $1,000 on 26 June 2012 and 16 July 2012 and $1,100 on 19 August 2012 were not amounts paid by the Millanes as part of the proposed advance. These payments in fact represented amounts of compensation to Mr Harry for the financial detriment that I have just identified.
I find that the evidence of Mrs Millane and that of Mr and Mrs Harry supports a conclusion that Mr Harry had requested that the Millanes compensate him once he became aware that the Landmark Signs become account had been overdrawn and he was unable to service the interest on that overdraft.
But the question of the Millanes earning interest on the Harrys' funds, the Harrys losing interest on savings and having to pay interest as a consequence of Mrs Harry's decision to transfer the money to the Millanes is irrelevant to the question of whether the mortgage is a deed.
The present dispute ultimately comes down to a question of whether there was an understanding that the Harrys would repay on demand monies advanced by the Millanes up to the sum of $100,000 and whether the parties intended to formalise that understanding by the execution of a deed in the form of a mortgage over the Woodlands property.
As I have found, the parties clearly intended that Harrys would repay so much of $100,000 that the Millanes had advanced and they formalised that understanding by the execution of a deed.
In the alternative the mortgage is an agreement for valuable consideration
If I am wrong in my conclusion that the intention is not a deed, then I would conclude that the mortgage constituted an agreement for valuable consideration, that consideration being the payment of interest as identified in the cover page and in cl 21.
The relevance of the existence of family relations
Mr Harry asserts that there was no intention that the parties intended to create legal relations.
If I find that the instrument is a deed, then the question of whether there was an intention to create legal relations is not a relevant consideration. This is because a document that appears to be a deed cannot be executed with the claim 'I did not intend it to have legal consequences': Seddon on Deeds [2.5]; Selen v Selen [2011] FamCA 310 [48] ‑ [84] (Austin J); McKinlay v Dodds (1984) 3 BPR 97,183, 9259.
If I am wrong about the mortgage being a deed, I turn to consider whether it is an agreement in which the parties intended to create legal relations.
There is a presumption that family arrangements are generally not intended to give rise to legal obligations (Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 [26]). The parties intentions are to be inferred from surrounding circumstances: Wakim v Wakim [2017] NSWSC 1283 [56].
Having regard to the evidence of the Millanes (whose evidence I prefer), I conclude that there was an intention to create legal relations and that the purpose of the mortgage was to protect their interest in the money they had agreed to loan.
Conclusion
In my view, the terms of the instrument evince a clear intention by the parties to enter into a deed for repayment of a loan for an amount up to that of the principal sum, such amount, in default of the payment of interest from time to time, to be repayable on demand.
In the alternative, I am satisfied that the failure of the Harrys to pay interest to the Millanes in accordance with mortgage is a breach of the terms of the agreement, the consequences of which entitles the plaintiffs to bring an action for breach of contract.
Conclusion as to whether amounts listed in exhibit 5 are now payable
I find that $93,500 having been advanced to Mr and Mrs Harry and demand having been made for its repayment, that sum is now due and payable to the Millanes.
In relation to the other items listed in exhibit 5, I find as follows.
Items 1 and 2 were not payments made pursuant to the agreement to advance $100,000 as they were paid before any agreement was entered into.
Items 3, 5 and 6 are not properly characterised as payments made pursuant to the $100,000 loan and represent compensation to Mr Harry for his liability to pay interest on his Landmark Signs account.
Item 4 was a payment which was made at the request of Mrs Harry and had nothing to do with any agreement to advance $100,000 for the construction of the new home.
Items 7 and 8 were not part of any agreement to advance $100,000 as they were made after the Harrys had separated at the request of Mrs Harry.
Calculation of interest
I find that, as only $93,500 was advanced, then interest is payable only on that amount from the date that the amount was advanced (ie 12 November 2012).
I will hear further submissions from the parties as to the calculation of interest and costs.
Orders
1.The defendant pay the sum of $93,500 to the plaintiffs together with interest.
2.The defendant pay the plaintiffs' costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
IG
ASSOCIATE TO JUDGE LONSDALE16 MAY 2018
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