Re Yiangos Arcadiou Ex Parte Guardian Investments Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA	No. 68 of 1977
VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

159 77

JUDGMENT No. ..... ,..- .....

"...,......

: YIANGOS ARCADIOU

Bankrupt

Ex parte : GUARDIAN INVESTMENTS

PROPRIETARY LIMITED Applicant

and

ALEX NEVILLE BIRD the Trustee

of the property of Yiangos

Arcadiou a bankrupt Respondent

REASONS FOR JUDGMENT

C. A. Sweeney, J

22 May, 1979.

The appllcant, Guardlan Investments Pty. Ltd.,

seeks the following declarations and orders :-

"l.

A declaration that the appllcant is a mortgagee

of the land described in Certlficate of Tltle

Volume 8702 Folio 229 in the Reglster Book of

the Office of Titles at Melbourne and known as

Lot 417 San Remo Drive Avondale Heights and

havlng been the property of the bankrupt until

hls bankruptcy and that the appllcant holds such

mortgage as securlty for a debt of $82,322.82

due by the bankrupt to the appllcant or as

securlty for such other sum as nay be found to

be due to the appllcant pursuant to such mortgage.

2. A declaration that the appllcant is a mortgagee of the land described in Certlficate of Tltle Volume 6055 Follo 902 in the said Reglster Book and known as 127 Anderson Road Sunshlne and havlng been the property of the bankrupt untll

his bankruptcyand that the appl~cant

holds such

mortgage as security for a debt of $147,425.16

due by the bankrupt to the appllcant or as

securlty for such other sun as may be found to be

due to the applicant pursuant to such mortgaqe.

3. A declaratlon that the appllcant is a mortgagee

of the land described in Certificate of Tltle

Volume 9151 Follo 993 and in Certlficate of

Title Volume 9151 Folio 999 in the said Register

Book and known as 1 and 2 Hendry Street Sunshine

and having been the property of the bankrupt

until hls bankruptcy and that the appllcant holds

such mortgage as security for a debt of $21,152.69

due by the bankrupt to the appllcant or as

security for such other sum as may be found to be

due to the appllcant pursuant to such mortgage.

4. A declaration that the appllcant at all material times prior to the sale by the respondent of the land described in Certlflcate of Title Volume

8526 Folio 718 in the said Reglster Book and known as Lot 111 Sheppards Lane Lilydale and having been the property of the bankrupt untll

hls bankruptcy was a mortgagee of the said land

and that the appllcant at all materlal tlmes prlor

to the said sale held such mortgage as securlty for

a debt of $25,609.31 due by the bankrupt to the

applicant or as security for such other sum as may

be found to have been due to the applicant pursuant

to such mortgage prior to the sald sale.

5. A declaration that the applicant is entitled to

have paid to it the proceeds of sale of the said

land described in Certlficate of Tltle Volume

8526 Folio 718 and known as Lot 111 Sheppards

Lane Lllydale and lnterest thereon now held by

the respondent in an interest bearlnq term deposit

with the Commercial Bank of Australia Limited.

5A A declaratlon that the Applicant at all material tlmes prior to the sale by the respondent of the land described in Certificate of Tltle Volume

8655 Follo 524 in the said Reglster Book and known

as Lot 14 Ballan Road Werribre and havlng been

the property of the bankrupt untll hls bankruptcy

was a mortgagee of the said land and that the

appllcant at all materlal times prior to the sald

sale held such mortgage as security for a debt of

$17,928.00 due by the bankrupt to the appllcant

or as security for such other sum as may be found

to have been due to the appllcant pursuant to such

mortgage prlor to the sald sale.

5B A declaratlon that the applicant is entltled to

have pald to it the proceeds of sale of the said respondent.

land described in Certificate of Tltle Volume

8655 Follo 524 and known as Lot 14 Ballan Road

6.	lndebtedness of the bankrupt to the

A declaration as to the amounts of the referred to in paragraphs 1, 2 and 3 hereof and a declaration that such amounts are charged on the land referred to in paragraphs 1, 2 and 3 hereof.

7. Such further or other declarations or orders as to the Court seems flt."

The applicatlon was served on Alex Nevllle

Bird, the trustee of the property of Ylangos Arcadlou, a

bankrupt, whose own petltlon was accepted by the Rcg~strar	in
Bankruptcy on 17 March 1977.

On 13 June 1978, when the applicatlon was first

llsted for mention, the sollcltor for the trustee and counsel

for the appllcant agreed that there should be a perlod of

elght weeks for the flllng by the trustee of an affidavit by

the bankrupt, who was belng independently advlsed by Messrs.

Sotos, Vertes & Co., solicitors, who were aware of the

proceedings. After giving agreed directions in respect of

interlocutory matters, lncludlng mutual discovery, the

application was fixed for hearlng in September, 1978.

On 18 September, Mr. Vertes made application that the bankrupt be granted leave to intervene in the

application and for an adjournment of the hearing.

The

solicltor for the trustee supported the grant of leave but bankrupt had his account, and to 10 November for the general

opposed the ad~ournment. Leave to Intervene was granted, and

directions were glven for the flllng of further affidavits,

including a further affidavit of documents on behalf of the

appllcant. The further hearlng of the appllcatlon was adjourned

to 23 October for the purpose of taklng the evldence of James

hearing .

On 23 October Mr. P. A. Wilson and

Mr. A. D. Vassie of Counsel appeared for the applicant, as was granted to amend the application by Inserting paragraphs 5A and 5B, which have been set out above. Mr. Sherar was called on behalf of the applicant, and commenced to glve evidence. After a short time it became clear that it would be preferable to have hls evidence on affidavit. The hearlng was adjourned to permit this to be done, and certain other interlocutory directions were given. The case was adjourned to 5 February, 1979, as was the further hearlng of an applicatlon by the bankrupt, dated 13 October, 1978, seeking extension of the time earller flxed in which the bankrupt was to flle and serve further material and other interlocutory orders.

they continued to do throughout the further hearings. Mr.

F. G. Beaumont of Counsel appeared for the trustee and Mr.

When the hearing commenced on 5 February

1979, Mr. Vertes announced that he sought leaye to wlthdraw a party to the appllcatlon. The bankrupt has taken no further part in the hearing other than as a wltness.

this appllcatlon by his cllent, whlch leave was granted. Mr.

The respondent had glven notice of hls

intention to oppose the maklng of the orders souqht by the

appllcant on the following grounds :-

"l.

That no agreement was entered into by the

bankrupt that the appllcant be granted an equltable

mortgage over the properties referred to in the

application or any of then.

2. That no Tltles of the properties referred to

In the sald appllcatlon came lnto possesslon of

the appllcant, or alternatlvely no such Tltles came

into possesslon of the appllcant at the tlme of the

advancement of any sums of money wlth respect to

which a claim is being made by the appllcant as

having been secured by equltable mortgages.

3.	That alternatlvely to paraqraph 2, if any

Tltle of the said property came lnto possesslon of the applicant whlch is not adrnlttcd, but specifically denied, none came into its possesslon at the request of or at the direction of the bankrupt.

4. That further or alternatlvely to paragraphs 1,

2 and 3 the Respondent says that if any agreement to grant equitable mortgages to the appllcant was entered lnto by the bankrupt and the appllcant hyhlch

is not admitted, but expressly denled,) then no note or memorandum in writlng of such an Agreement wlthln the meaning of Sectlon 126 of the Instruments Act

or at all was signed by the bankrupt, and consequently

the applicant's rlghts ( ~ f

any) are rendered

unenforcible by the said Section.

5. That the bankrupt did not authorise anyone to

deposit the Tltle Deeds to the properties, the subject

matter of the application wlth the appllcant."

Noel Geoffrey Tregent gave evidence that at

all material times he was a member of the firm of DudleyTregent

6 Co., solicitors, and a director of the applicant, which

carrled on the buslness of lendlng out monles at interest. He

described the company's principal oblect as being to asslst

clients of the firm who had small amounts of money to invest and to assist other clients by lendlng to them. Between 1968 and 1975 Dudley Tregent & Co. acted qenerally as sollcltors for the

bankrupt, who carried on buslness as a builder. It was hls practlce to purchase vacant blocks of land, and to bulld a house on each block of land for sale. Mr. Tregent deposed that

between 1960 and 1975, in hls capaclty as a dlrector of the

applicant, he used to asslst the bankrupt wlth finance for the

completion of the contracts into whlch he had entered for the

purchase of the vacant blocks and for the costs of bulldlng

houses on them. The firm of Dudley Tregent & Co. attended to

the conveyancing work involved and Mr. Tregent frequently

handled this work hlmself. He stated that between 1969 and 1974

there were about 60 transactions in whlch the appllcant acted

as financier for the bankrupt.

Mr. Tregent described the system that was

followed in relation to the advances made by the appllcant to the bankrupt. He went to an employee of the flrm, Mrs. Grant, who attended to the files of the applicant, or someone in her place, and told her that he had agreed to make the loan on the

property specifled. He then sald "I would glve her Arcadlou's name and his address and the address of the property whlch we are lendlng on and I would ask her to make out a cheque" for

the amount required.

"I would say whatever the rate would be

andshe would mark it on the side of the ledger sheet or on the top of the ledger sheet." He then descrlbed how, by uslng the Kalamazoo peg board system, there would be produced in the one operation a cheque by the applicant to the bankrupt, on the

butt of whrch the particulars of the property and the rate of

interest were shown, together with the entry of those

partlculars on the ledger sheet maintained for the bankrupt

and the dally bank sheet kept for the appllcant. The cheque

wlth the butt attached was handed to the bankrupt. He would

have the partlculars on the cheque butt as a record, and the

appllcant would have the same partlculars on its records.

The procedure so descrlbed was followed at the

time of each advance made to the bankrupt, wlth two exceptions. as an advance against the San Remo Drlve property on 22 April

1974. In relation to that amount Mr. Tregent gave evldence that there had been an earl~er	advance on a property at Lot 45
Queensvllle Street, and said -

"Queensville Street was sold, I cannot remember that tlme it had sufflclent securlty, and he agreed and so we did a cross entry from the sheet descrrbed as Lot 45 Queensvllle Street to the sheet marked Lot 417 San Remo Drlve."

whether it was sold or the tltle handed over to

the ANZ Bank. It has an amount of $2000 in it and

when Arcadiou came in I said 'we have given up

the securlty for 45 Queensvllle Street and there

is $2000 owrng on that property and I have got no

securlty for it' and I sald. 'Is it all right if

The second exception related to a credlt

entered on the ledger card for Lot 14 Ballan Road, Werrlbee in

the amount of $15,780.57 whlch Mr. Tregent explarned was an

error, as it should have been credlted against a property at

Lot 1216 Derrimut Road.

The error was,' he said, corrected by

altering the heading of the Derrlmut Road property card to

"14 Ballan Road" and by writing the following letter to the

bankrupt :-

11 October 1976

Dear Mr. Arcadiou,

r e Lot 1 4 Ballan Road Werribee

frun Borella

re Lot 1216 Cerrimut Road

W refer you to our l e t t e r of

27 Nwember 1975 m which he

advised that we had paid off the m u n t owing on 1216 Derrimut m d ,

namely $15,780.57.

Actually this armunt was put on the wrong card - namsly the amunt owing cm 1 4 Ballan Road, Werrkee , whch was thus fmnalised, as per a p y of Ledger Card enclosed.

As we b l d a clear Certificate of Tit le to the property a t Lo t 1 4 Ballan Road, Werrihee, W are now transferring to that property the amunt of $17,047.53 awinq a s a t 4th October 1976 on

the praperty a t Lot 1216 Cerrimut Road, a s dnm on copy of our

Ledger

C a n l herewith.

Yours faithfully,

DUDLFY TREClENT & '33."

The

a p p l i c a n t ' s

r eco rds

r e l a t l n g

t o each of

t h e properties

t h e

s u b j e c t

t h e p r e s e n t

application

were

tendered in evidence.

M r .

Treqent

gave

evidence

t h a t q u a r t e r l y s t a t a p n t s

were

posted

r e g u l a r l y

t o t h e bankrupt ,

showlng

d e t a i l s of

t h e

p r o p e r t i e s

concerned,

and

s t a t l n g i n r e s p e c t of

each of

t h e

p r o p e r t i e s ,

t h e amount

p r i n c i p a l ,

t h e per lod

involved ,

whether

i t was

t h e whole

t h e q u a r t e r

o r a

s p e c i f l e d p o r t i o n

i t ,

and t h e amount

i n t e r e s t being charged

i n r e s p e c t of

each advance

due t o Guardian

Investments

P ty .

Ltd.

M r .

T r e g e n t ' s evldence was

t h a t cop ie s of

t h e s e

s t a t emen t s were

i n spec t ed on

beha l f

t h e

t r u s t e e

and

t h e s o l i c i t o r f o r t h e bankrupt

a f t e r they were

d i s c l o s e d

i n t h e

a p p l i c a n t ' s

affidavit

documents.

Except

f o r

t h e amount

$2000 t r a n s f e r r e d

t o t h e San

Remo

Drlve p rope r ty ,

no cha l l enge

was

made t o t h e evldence t h a t t h e amounts specified

i n t h e agreed

chronology and

i n t h e a p p l l c a t l o n were

i n f a c t

rece lved by

t h e bankrupt.

Copies of

t h e s t a t emen t s which ran

from 1 May

1973 t o 15 February 1977 were tendered i n evldence.

M r .

Tregent described

t h e p r a c t l c e

i n t h e

o f f l c e

Dudley Tregent & Co.

i n r e l a t i o n t o t h e keeping of

deed c a r d s .

The

deed

ca rd s e c t i o n of

t h e o f f i c e had

two

sections,

t h e c u r r e n t

s e c t i o n and

t h e documents

removed

s e c t l o n .

Whlle

decc? ca rd

remained

i n t h e c u r r e n t s e c t l o n ,

indicated

t h a t Dudlcy

Treqent

& Co.

should have a t i t l e f o r t h e c l l e n t concerned,who wasentltled

t o c a l l f o r it t o be

d e l i v e r e d t o hlm.

I f

a p rope r ty was

s o l d t h e

card would

moved

from

t h e c u r r e n t

s e c t i o n t o t h e document

removed

s e c t i o n .

I f

money

had

been

l c n t on

t h e p rope r ty ,

e l t h e r

by Guardlan Investments Pty. Ltd. or by another lender, the

card would be taken out of the current sectlon and put in the

documents removed sectlon, indlcatlng that the owner of the

property was not entitled to call for it to be delivered to

him. An entry in the deed card would show the particulars

of any loan made upon the property.

In addition to this Dudley Tregent & Co. system, a collection of cards was kept by the appllcant in respect of

propertles on whlch it had lent monles.

Deed cards were kept in respect of all properties that

When the certlflcates of title of these properties were received,

Mr. Tregent stated that he placed them in the envelope in the

Guardlan Investments Pty. Ltd. section of the safe. Hls evidence

in relation to the system followed was broadly corroborated by

are the subject of these proceedings and were tendered inevidence. the part she played inside the offlce in relation to some of the transactions in question.

In his oral evidence Mr. Tregent said that when he

deposited documents in relatlon to any of the properties whlch are the sublect of thls application among the documents of the applicant in the deed safe of Dudley Tregent & Co., he asked

the bankrupt on each occasion "if he wanted money from that

particular property and that he would have to have security for

contract of sale. I would ask him to slgn a transfer. I sald 'I

will have the authority to get the title when it becomes due'.

it. He would say 'of course', and he would firstly give me the applicant lent money to the bankrupt. In answer to the question "Did he know that Guardlan was holdlng the certificate of title?" he replied, "Yes he was well aware of that fact, it was repeated over and over again, by me."

Mr. Tregent said that he told the bankrupt that the

appllcant was holding "these securltles for monles advanced, and

you cannot take them away, they are the same as a mortgage" and

he replied that he understood perfectly.

In respect of the propertles referred to in the

application, the parties agreed on a chronological table in the

following form:-

CHRONOLOGY

LOT 417 SAN REMO DRIVE AVONDALE HEIGHTS

24.8.73

Certificate of Title Volume 8702 Follo 229

received at conveyanclng settlement.

Certificate of Title showlng Arcadiou as registered proprietor lssues from Titles Offlce.

Flrst advance - $6,000.00 - 11%

Second advance - $3,000.00 - 11%

Thlrd advance - $2,000.00 - 11%

Fourth advance - $3,000.00 - 11%

Fifth advance - $3,000.00 - 134%

Slxth advance - S10,000.00 - 14%%

Seventh advance- $10,000.00 - 144%

Eighth advance - $9,000.00 - 144%

Ninth advance - $10,000.00 - 144%

Caveat lodged

Bankruptcy

Request for loan made. with respondent - $10,000.00.

127 ANDERSON ROAD SUNSHINE

7. 6.74

Date of Contract of Sale.

12.74

Contract of Sale recelved by N. Tregent.

Request for loan made.

First advance - $10,000.00 - 144%

Second advance - $10,000.00 - 144%

Thlrd advance - $10,000.00 - 14+%

Settlement letter.

Fourth advance (for

purposes of settlement)

- $25,175.33 - 141%

Certificate of Tltle Volume 6055 Follo 902

recelved at conveyanclng settlement.

Fifth advance - $10,000.00 - 14$%

Slxth advance - $10,000.00 - 144%

Seventh advance - $10,000.00 - 144%

Elghth advance - $10,000.00 - 14+%

127 ANDERSON ROAD SUNSHINE (Cont.)

14. 5.75

Ninth advance

- $10,000.00 - 14+%

2. 6.75

Tenth advance

- Sl0,OOO.OO - 14+%

"mid" 75

Alleged conversation relating to execution

of a mortgage (see paragraph 42 of Affidavit

of N. G. Tregent sworn 24.5.1978).

5. 3.76

Flrst receipt of rentals from flats.

29. 7.76

Final receipt of rentals from flats.

21. 9.76 Caveat lodged.

15.11.76

Mortgages executed.

17. 3.77 Bankruptcy.

12. 8.77 Mortgages stamped and lodged.

1 and 2 HENDRY STREET SUNSHINE

18. 7.74

Contract of Sale exchanged.

8.74	Request for loan made.

30. 8.74

First advance

- $12,000.00 - 14%

22. 1.75 Settlement letter.

31. 1.75

Second advance (for purposes of settlement)

- $22,779.21 - 149

31. 1.75

Certlflcate of Tltle Volume 8465 Folios

063 and 064 recelved at conveyancing

settlement.

12. 2.75

Third advance

- $16,000.00 - 14%

7. 3.75

Fourth advance

- $20,000.00 - 14%

23. 3.75

Fifth advance

- $10,000.00 - 14%

16. 4.75

Certificate of Title showing Arcadlou as

registered proprietor 1s-

from Titles

Off ice.

24. 4.75

Slxth advance

- $10,000.00 - 14%

8. 5.75 Seventh advance - $20,000.00 - 14%

23. 5.75 Mortgage executed.

23. 5.75	Account rendered for mortgage costs.
26. 5.75	Eighth advance (for mortgage costs)

- $1,621.00 - 14%

11. 9.75 payment recelved - $20,000.00

17. 9.75 Payment received - $1,639.50 - balance

of deposit from sale of Unlt 5.

17. 9.75

Settlement letter as to the sum of $1,639.50

11. 2.76

Nlnth advance (for surveyors' fees)

$731.00 - 14%

1 and 2 HENDRY STREET SUNSHINE (Cont)

Plan of Strata Subdlvlslon lodged,

following which new Certlflcates of

Tltle issue for each flat, including

Certlflcate of Title Volume 9151 Folios

993 and 999 relatlng to Unit 6.

Payment recelved

- $4,589.50 - from

sale of Unlt 5.

Settlement letter as to sale of Unlt 2

Tenth advance (for land tax)

-	$38.43 - 14%

Settlement letter as to sale of Unit 5. Settlement letter as to sale of Unlt 4. Settlement letter as to sale of Unit 1. Settlement letter as to sale of Unlt 3. Bankruptcy.

LOT 111 SHEPPARDS LANE LILYDALE

Date of Contract of Sale to Y. Arcadiou of 541 Bambara Court Sunshine.

Contract of Sale recelved by N. Tregent.

Request for loan made.

Flrst advance - $8,000.00 - 10k2

Second advance - $6,000.00 - 13+%

Thlrd advance (for purposes of

settlement)

$6,923.82 - 144%

Fourth advance (for purposes of

settlement)

$25.00 - 14+%

Certificate of Tltlc Volume 8940 Follo 430

(to 541 Bambara Court Sunshine) recclved at

conveyancing settlement).

Certificate of Tltle to 541 Bambara Court proprietor Issues from Tltles Offlce.

Alleged agreement to substitute Certlflcatc of Title to Lot 111 Sheppards Lane Lllydale in place of Certlflcate of Title to 541

Bambara Court Eunshlne.

Certificate of Tltle Volume 8526 Follo 718

(to Lot 111 Sheppards Lanc Lilydale) received

by N. Tregent.

Certificate of Tltle to 541 Bambara Court

Sunshine delivered up at a conveyancinq

settlement.

Settlement letter.

Bankruptcy.

LOT 14 BALLAN ROAD WERRIBEE

8.74	Certificate of Title Volume 8655
Folio 524 received by N. Tregent from J. Borella.
8.74	Request for loan made.

9. 9.74

First advance (for purposes of

settlement)

- $6,054.40 - 14+$

9. 9.74

Letter to Y. Arcadiou re settlement.

9. 9.74

Second advance (for purposes of

settlement : stamp duty and legal

costs)

- $232.00 - 14+%

8.75	Request for further advances.

22. 8.75 Second advance - $10,000.00 - 14%

11. 9.75 Thlrd advance - $8,000.00 - 14$%

20.10.75 Fourth advance - $5,000.00 - 14%

27.11.75	Conveyancing settlement for sale of Lot 1216 Derrlmut Road Werrlbee
- Dudley Tregent & Co. recelved
$19,245.00.
27.11.75	Letter to Y. Arcadlou as to disbursement of proceeds lncludlng cheque to him for $3,464.43.
11.10.76	Letter to Y. Arcadlou notlfylng hlm of erroneous disbursement.
22.10.76	Caveat lodged.

17. 3.77 Bankruptcy.

From

t h i s table t h e

f o l l o w i n g

l i s t

a d v a n c e s

i s compllecl

lot 417 San

127 Anderson

1 6 2 H e n d r y

111 shpprds

1 4 Ballan

W d

Drive,

Street,

A v m d a l e	-.	Lane.	ilydale.	-7-	W~LY*.
Helshts .

13.2.74 $8,000.00

13. 3.74 $6,000

9. 4.74 $3,000

22. 4.74 $2,000

10. 5.74 $3,000

30. 5.74 $3,000

27.6.74 $6,000.00

30.8.74 $12,000.00

9.9.74

$6,054.41

9.9.74

$232.01

9.12.74 $10,000.00

16.12.74 $1O,WO.00

20.12.74 $10,000.00

31.1.75 $22,779.21

7. 2.75 $25,175.33

12.2.75 $16,000.00

19.2.75 $10,000.00

29.2.75

$10,000.00

7.3.75 $20,000.00

12.3.75

$10,000.00

23.3.75 $10,000.00

22.4.75 $10.000.00

24.4.75 $10.000.00

28.4.75 $10,000 30.4.75 $10,000

8.5.75 $20,000.00

14.5.75 $10,000,00

26.5.75

$1,621.00

2.6.75 $10,000.00

14.7.75 $6,923.82

14.7.75

$25.00

22.8.75 $10,000.01

11. 9.75 $9,000	11.9.75 $8,000.01 20.10.75 $5,000.01
11.11.75 $10,000

11-2-76

$731.00

25.8.76

$38.43

- .

./ 1 4

The applicant prepared in relatlon to each of the properties referred to in the appllcatlon a document headed

"Statement of Account between the Applicant and the Bankrupt" This Statement of Account was verlfled on oath by Mr. Tregent and was prepared as the result of a suggestion made by me

at an earlier hearing that all partles concerned should see

~f agreement could be reached as to the state of the accounts

between the applicant and the bankrupt, rather than requlrlng

evidence of every debit and cxedlt.

It became common ground between the partles that,

with the exception of the sum of $2000 in respect of the alleged that it made to or on behalf of the bankrupt at hls

request were in fact so made.

I am satisfied that thls sum of

$2000 was money owed by the bankrupt to the applicant in respect

of the Queensvllle Street property.

The earliest transactlon between the appllcant and

as a dealing in relatlon to a vacant block of land at 541

the bankrupt of those whlch are the subject of thls case began this transaction in hls affidavit, as follows :-

" In February 1974 the bankrupt brought lnto my

office a terms contract of sale into whlch he had

entered for the purchase of a vacant block of land

at 541 Bambara Court Sunshlnc. He told me that he

had pald the deposit for the purchase from hls own

funds. He said that he wanted to bulld a dwelllng

house on the vacant land and asked me whether I

could arrange for Guardlan to lend hlm the necessary

money to pay for the cost of constructlon. I told

him that sublect to satisfactory results from the

usual investigations Guardlan would be prepared to

lend him the cost of constructing a dwelllng house

and that Guardlan was to hold the contract of sale

as securlty until the Certlflcate of Tltle became

available to be held as further securlty followlnq

settlement of the purchase. He agreed.

On 13th February 1974 Guardlan made a flrst

advance to the bankrupt in relatlon to 541 Bambara

Court Sunshine by a cheque for $8,000. I handed

the cheque to the bankrupt and also handed to hlm

at the same time a cheque butt on whlch was

recorded the date of the cheque the amount of the

loan the land in respect of which the loan was

made and the interest rate whlch was payable in

respect of the sum so lent. The lnterest rate

shown on the cheque butt was 10% per annum. The

contents of the cheque were recorded on a ledger

card kept by Guardlan for the purposes of the

transaction. Now produced and shown to me and

marked 'J' 1s the sald ledger card relating to 541

Bambara Court Sunshlne.

On 27th June 1974 Guardlan made a further

advance of $6,000 to the bankrupt by means of a cheque for that sum in relation to the building work at 541 Bambara Court Sunshlne. I handed the

said cheque to the bankrupt together wlth a cheque

butt on whlch the approprlate lnterest rate was

stated to be 134% per annum. I Informed the

bankrupt that the lnterest rate of 134% per annum

would be approprlate from 15th May 1974 but from

15th August 1974 the approprlate lnterest rate

would be 144% per annum.

On 14th July 1975 Guardlan pald to Dudley Tregent & Co. Trust Account a bank cheque made payable to R. C. Henderson Pty. Ltd. which was the vendor from which the bankrupt had purchased

the land at 541 Bambara Court Sunshlne. The bank

cheque was for $6,923.82. The sald cheque was

recorded on the sald ledger card marked 'J'. I

on behalf of Dudley Tregent & Co. at the comeyancmg

settlement on 14th July 1975 delivered the sald

cheque and received in return Certificate of Tltle

Volume 8940 Follo 430 and a reglsterable transfer

of the land to the bankrupt. I lodged the sald

Certificate of Tltle and the said transfer at the

Offlce of Tltles. In due course the Offlcc of Tltles

Issued to Dudley Tregent & Co. Certlflcate ofTltle

Volume 8940 Follo 430 upon whlch the bankrupt was

shown as registered proprietor. I placed the sald

Certificate of Title in an envelope in the name of

Guardian and placed the envelope in the section of

the deed safe whlch held documents over whlch

Guardian had security.

The bankrupt had entered Into a terms contract of sale of the land at 541 Bambara Court Sunshine to a Mrs. Avgoulls In March 1974. In about September 1976 the bankrupt informed me that hls terms of

sale to Mrs. Avgoulls was due to be completed

shortly. He lnformed me that Mrs. Avgoulls had

been maklng payments to him in reductlon of the

purchase money whlch she had contracted to pay.

Mrs. Avgoulls I ascertained that the balance

o f purchase money which she would be obllged

to pay at settlement was only about $3,500

whereas the balance of prlnclpal and lnterest

owing by the bankrupt to Guardlan as at 15th

After making enqulrles from the sollcltors for marked 'J' at $26,728.59. I therefore lnformed

the bankrupt that if he w~shed

Guardlan to

release the Certificate of Tltle to the land

at 541 Bambara Court Sunshlne to Mrs. Avgoulls

at her conveyanclng settlement Guardlan would

need to be given addltlonal securlty for the

continuance of the loans whlch had been made

in relatlon to 541 Bambara Court Sunshlne. The

bankrupt then lnformed me that Mrs. Avgoulls

had agreed to transfer to hlm by way of

satisfaction of part of the balance of purchase

money a block of land whlch she had owned at

111 Sheppards Lane Lllydale. The bankrupt sald

that he was prepared to offer thls land as

securlty for the continuance of the loans in

substitution for the Certiflcate of Title to

the land at 541 Bambara Court Sunshine. I

agreed to this.

The conveyanclng settlmnt of the sale by the

Bambara Court Sunshine occurred on 4th October

1976. At the settlement I delivered a transfer

from the bankrupt to Mrs. Avgoulls and also

certlflcate of Title Volume 8940 Follo 430. In

return I took delivery of a cheque for $3,500

Certiflcate of Title Volume 8526 Follo 718

(whlch more particularly described the land at

111 Sheppards Lane, Lllydale) and a reglsterable

transfer from Mrs. Avgoulls to the bankrupt of

the land at 111 Sheppards Lane Lllydale. I

lodged the said transfer and sald Certlflcate

of Title Volume 8526 Follo 718 at the Offlce

of Tltles. In due course the Offlce of Tltles

lssued to Dudley Tregent & Co. Certlficate of

bankrupt to Mrs. Avgoulis of the land at 541 the bankrupt as registered proprietor. I placed the sald Certlficate of Tltle in an envelope in the name of Guardlan and placed the envelope in that section of the deed safe of Dudley Tregent

& Co. whlch held documents over whlch Guardlan

had security.

From the sald sum of $3,500 the amount

available to be credlted to the bankrupt was setting out how the sald sum of $2,707 was calculated and lnformlng hlm that the amount had been transferred to Guardlan in reduction of the loans whlch had been made to hlm in respect of 541 Bambara Court Sunshlne. Now produced and shown to me and marked 'L' 1s a copy of the said letter dated 5th October

$2,707. On 5th October 1976 Dudley Tregent &

1976."

Exhibit "L" was in the following terms,

re Sale Lot 541 Bambara Court Sunshlne

to Avgoulls

Settlement of the above matter was completed

yesterday and we now set out hereunder a statement of

your account thereon -

Balance of Purchase moneys paid

$3,500.00

LESS

Our costs re sale as per S.R.O.

1976

$244.00

Stamp Duty on Transfer Into

your name in 1975

$96.00

Registration Fee

22.00

118.00

Our costs re Purchase of Lot 111 Sheppards Lane Lllydale as per enclosed

account

431.00 793.00

AMOUNT TRANSFERRED TO GUARDIAN

INVESTMENTS PTY. LTD. In

reduction of your loan on 541

Bambara Court

$2,707.00

Please note that the balance of the loan on

Lot 541 Bambara Court has now been transferred in commencing 4th October, 1976.

Guardian Investments Pty. Ltd. to Lot 111 Sheppards

Would you please advlse us what you are doing about the sale of the property at Lilydale, also please call at our offlce to sign the transf-r

into your name so that we may reglster this."

In his oral evldence Mr. Tregent stated that at no tlme between the recelpt of the letter of 5 October 1976 and the lnstltution of these proceedings dld the bankrupt

dispute what was set out in the letter.

Mr. Tregent's account of the facts in hls

affldavlt continued as follows :-

On 6th October 1976 Dudley Tregent & Co.

pald to Guardian the sald sum of $2,707. The balance of principal and Interest due by the bankrupt under loansmade in respect of 541

Bambara Court Sunshlne was $26,728.59 as at

4th October 1976.

After deduction of the

said sum of $2,707 there remained an amount outstanding of $24,021.59 whlch represented an advance made by Guardian to the bankrupt in respect of and upon the security of the

land at 111 Sheppards Lane Lllydale.

As at 17th March 1977 the amount owing

by the bankrupt to Guardlan under the said loan made in respect of 111 Sheppards Lane Lilydale was $25,609.31."

Mr. Tregent gave his account of the transactions in relation to the Lot 417 San Remo Drlve property in hls affidavit sworn 24 May 1978, in these

terms :

"	In 1973 I acted as solicltor for the

a block of vacant land described as Lot 417 San Remo Drive Avondale Helghts whlch land was more particularly descrlbetf in Certificate of Tltle Volume 8702 Follo 229. The bankrupt had bought the land under a cash contract of sale and paid the balance of purchase moneys from his own funds. Settlement of the purchase occurred on 4th September 1973 and I received the sald Certiflcate of Title on that date in my capacity as solicitor for the bankrupt.	bankrupt in relatlon to a purchase by him of registerable transfer of the lad to the hnkru$.
I then lodged for reglstratlon the sald transfer
of the said Certificate of Title. In due course the Office of Tltles issued the sald Certlflcate of Tltle to Dudley Tregent & CO. whlch then showed the bankrupt as belng registered
proprietor. Dudley Tregent continued to hold
the sald Certiflcate of Tltle on behalf of thc? bankrupt.
On 13th March 1974 the bankrupt informed 417 San Remo Drlve Avondalc Heights and asked me whether I could arrange for Guardlan to lend hlm the money necessary to pay for the bullding works. He said that he wanted a short term loan for long enough for hlm to be able to build a house upon the land and to sell it. He told me that I was holding the Certlflcate of Tltle to the land at Lot 417 San Remo Drive and that if
me that he wanted to bulld upon the land at Lot could use the Certificate of Tltle as securlty for the loan.

t h e n

t o l d t h e b a n k r u p t

t h a t Guardlan would

p r e p a r e d

t o l e n d

him moneys

f o r a

s h o r t

t e r m

l o a n

f o r t h e pu rpose

which

had

s p e c i f l e d and

would want t o u s e t h e Certificate o f T l t l e t o

t h e l a n d a t L o t

417

San

Remo

Dr ive a s s e c u r l t y .

The

b a n k r u p t a g r e e d t o t h l s .

1 3 t h March

1974

Guardlan p r e p a r e d

and

s i g n e d a

cheque

f o r

$6 ,000.00

made

p a y a b l e

t o t h e b a n k r u p t .

handed

t h e cheque t o t h e b a n k r u p t and

a l s o handed

t o

hlm a t t h e same t i m e a cheque b u t t upon whlch

w a s identified

t h e description

t h e l a n d t h e

d a t e o f

t h e cheque t h e sum advanced and t h e

i n t e r e s t r a t e which

w a s

11%

p e r annum.

A copy o f

t h e c o n t e n t s o f

t h e cheque was

w r l t t e n on

l e d g e r

c a r d k e p t by

Guardian

f o r t h e pu rpose

o f

t h e

t r a n s a c t i o n .

Now

produced and

shown

t o m e and marked

' A '

t h e s a i d l e d g e r c a r d r e l a t i n g t o Lot

417

San

Remo

D r l v e

Avondale

H e i g h t s .

o r s h o r t l y a f t e r 1 3 t h March

1974 I

removed

C e r t i f i c a t e of

T i t l e Volume

8702 Volume

229

b e l n g

Lot 417 San Remo

Dr lve from t h e deed s a f e o f

Dudley T r e g e n t

Co.

and p l a c e d

it i n an enve lope

b e a r i n g

t h e name

o f

Guardian

and

d e p o s i t e d

it i n

t h e s e c t l o n o f

t h e deed

s a f e whlch

r e l a t e d

t o

documents

o v e r which

Guardlan

h e l d

s e c u r l t y .

Guardlan

p a i d

t o t h e

b a n k r u p t

f u r t h e r

cheques

f o r $3 ,000,00 on 9 t h A p r i l 1974,

$2,000.00

on 22nd

A p r i l 1974 and $3 ,000.00 on 1 0 t h May

1974 i n

r e l a t l o n t o Lot

417

San Remo

D r l v e .

Each

o f

t h c s e

sums

was

f u r t h e r advance

f o r

t h e b u l l d l n g b c l n g

c a r r l e d on

t h e b a n k r u p t

upon

t h e s a i d

l a n d

and

were instalments o f

t h e moneys

a g r e e d t o be

l e n t

t h e

p r o p e r t y

r e f e r r e d

t o i n p a r a g r a p h

1 3 h e r e o f .

Each

t h e payments was

r e c o r d e d

on t h e s a i d leclqer

c a r d marked

' A '

and

t h e b a n k r u p t was

g l v e n

t h e

c o r r e s p o n d i n g

cheque

b u t t .

3 0 t h May

1974 Guardlan made an advance t o

t h e b a n k r u p t

a t h i s r e q u e s t o f

$3,000.00

cheque

upon

t h e s e c u r i t y o f

Lot

417

San Remo

Dr lve .

t h l s o c c a s l o n

lnformed

t h e b a n k r u p t

t h a t t h e

l n t e r e s t r a t e had

been

l n c r e a s e d t o 1 3 f % p e r

annum.

The

cheque b u t t whlch

handed

t o t h e b a n k r u p t

t o g e t h e r

w l t h

t h e cheque

s t a t e d t h a t

t h e

i n t e r e s t

r a t e was

13k% p e r annum.

2 8 t h A p r i l 1975 Guardlan p a l d by way

o f

advance

t o t h e b a n k r u p t

a t h l s r e q u e s t a

cheque

f o r

$10,000

i n r e l a t l o n t o t h e b u l l d i n g work

a t L o t

417

San Remo Dr lve . When delivering t h l s cheque t o t h e b a n k r u p t I lnformed him t h a t t h e i n t e r e s t r a t e had

a g a l n been

I n c r e a s e d

t o 14$% p e r

annum.

The

cheque

b u t t which I

handed t o t h e bankrup t on t h a t day

r e c o r d e d

t h e

l n t e r e s t

r a t e a s b e l n g

14$% p e r

annum.

F u r t h e r

advances were

made

t o t h e b a n k r u p t

l n t h e

same manner

i n t h e sums o f

$10,000 on

3 0 t h A p r l l

1975, $9,000 on llth September 1975 and $10,000

on llth November 1975 on the securlty of ~ o t

417

San Remo Drlve, On each of these occasions the bankrupt informed me that he requlred additlonal advances to meet the continuing costs of the bullding work.

On 17th February 1975 and on each succeeding

quarter date Guardian posted to the bankrupt a

statement setting out the interest which had been

charged in relatlon to the sums advanced to that

date. These statements reflected the amounts of

lnterest which are recorded on the sald ledger

card mrked 'A'.

By about September 1975 I was becoming worried about the apparently slow progress of the building works. I informed the bankrupt that the loan had

been extended for well beyond the short term which to me that he did not know why I was worrled because Guardian had adequate securlty for the money it had advanced and that the property would be worth more than $80,000 when it was completed.

By the date of his bankruptcy the bankrupt had advanced by Guardian in relation to that property amounted to $56,000 and lnterest which had accrued to that date totalled $16,322.82. still not completed the bullding works at Lot 417

On 21st September 1976 Guardian lodged a

caveat in relation to the interest which it clalmed marked 'B' is a copy of the said caveat.

to have in the land at Lot 417 San Remo Drlve

By reason of the matters set out above the

appllcant clalms that it is equitable mortgagee of

the land described in Certificate of Tltle Volume

8702 Folio 229. However the respondent does not

admit the fact that the appllcant became or is

equltable mortgagee of the said land.

After the sald date of bankruptcy I had a

telephone conversatlon with the respondent. In that telephone conversatlon we agreed that the applicant could employ a bullder to complete the house whlch

the bankrupt had left uncompleted on the land at

Lot 417 San Remo Drlve Avondale Helghts and that if

the appllcant established that it was equltable

mortgagee of the land in question the moneys pald

out by the applicant to such builder could be added

to the principal and lnterest secured by such

equltable mortgage. It was further agreed that any

deficiency between the amount paid by the appllcant

to such builder and the amount recoverable by the

appllcant pursuant to its equitable mortgage (after

discharge of the indebtedness of the bankrupt to

the appllcant secured by the equltable mortgage)

should be borne and pald to the appllcant in full

out of the assets of the estate of the bankrupt.

It was further agreed that if the applicant was

unable to establish its equitable mortgage the

moneys paid out by the appllcant to such bullder

as aforesaid for the benefit of the estate of

the bankrupt would be reimbursed to the applicant

if he could prove the amount spent was reasonable.

Pursuant to the agreements referred to in

paragraph 23 hereof the appllcant engaged a firm of bullders J. & S. Smollc to complete the house on the land at Lot 417 San Remo Drive. The

applicant has paid to J. L S. Smolic the sum of the said sum of $10,000 was recorded by Guardlan on its ledger card as a further advance to the bankrupt. The total amount whlch the appllcant therefore claims to be secured by an equitable mortgage over the land at Lot 417 San Remo Drlve

$10,000 being the cost of completion of the house.

is $82,322.82."

In his affldavit sworn 13 June 1978, Mr. Tregent

referred to his earlier statement that the applicant had pald on the property would not exceed $8,000. The amount unpa~d will be settled when the air-condltlonlng unlt is installed."

In his affldavit sworn 24 May 1978, Mr. Tregent

gave hls account of the transaction relatlng to the property

at Nos. 1 and 2 Hendry Street, Sunshlne, in these terms :-

" During August 1974 the bankrupt brought lnto

the offlces of Dudley Tregent L Co. a terms

contract of sale whlch he had signed and in respect

of which he had pald the deposlt. The contract was

for the purchase of vacant land which was then

described in Certificate of Tltle Volume 8465 Pollo

063 and Volume 8465 Folio 064 and whlch was situate2

at Nos. 1 and 2 Hendry Street Sunshlne. The bankrupt

informed me that he wanted to bulld upon the land

and asked me whether I could arrange for Guardlan

to lend him the money necessary to pay out the

balance owlng under the terms contract of sale and

necessary to pay for the bu~ldlng

works. He sald

that he wanted to build slx units upon the land and thought that it would take about six months for them to be completed.

After making whatever lnvestlgatlons of

tltle and plannlng requirements were necessary

I decided that Guardian would lend to the

bankrupt the amounts which he was seeking. On

30th August 1974 Guardlan prepared and I slgned

a cheque for $12,000 made payable to the

bankrupt. This was the amount whlch he lnformed

me would be the costs of the flrst stage of

erectlon of the proposed buildings on the land

at 1 and 2 Hendry Street Sunshlne. I told the

bankrupt that Guardian would retaln the contract

of sale whlch he had left in my possession as

security and that I would retain it untll such

time as I obtained better securlty by paylng

out the amount due and obtalnlng the Certlflcate

of Title. I handed the cheque to the bankrupt

and I also handed to hlm at the same tlme a

cheque butt upon whlch was identified the

description of the land the date of the cheque

the sum advanced and the interest rate which

was 14% per annum. A copy of the contents of

the cheque was wrltten on a ledger card kept

by Guardian for the purpose of the transaction.

Now produced and shown to me and marked 'C' 1s

the said ledger card relatlng to 1 and 2 Hendry

Street, Sunshlne.

On 31st January 1975 the conveyanclng

settlement took place for the completion of thc purchase by the bankrupt of the land at 1 and 2 Hendry Street Sunshlne. Guardlan paid to Dudley Tregent & Co. Trust Account on that day a

cheque for $22,779.21 being the amount necessary

to effect settlement and to pay the stamp duty

reglstration fees and legal costs lnvolved in

the reglstration of the transfer of the land to

the bankrupt. At settlement I recelved the sald

Certificates of Title to the land at 1 and 2

Hendry Street and a registerable transfer of

the land to the bankrupt. On the same day Dudley

Tregent & Co. sent to the bankrupt a settlement

letter in which the total sum paid by Guardlan

to Dudley Tregent & Co. upon trust for hlm for

the purposes of effecting settlement and paylng

costs was set out. Now produced and shown to me

and marked 'D' 1s a copy of the settlement

letter sent in relation to 1 and 2 Hendry Street

Sunshlne."

Thls letter, omlttlng formal parts,

was as follows :-

re: Purchase from Zafiropoulos

P'Pty: Lots 1 & 2 Hendry Street,

Sunshine West

Settlement of the above matter has been arranged

for Friday 31st January next and the amount we require

from you for such settlement is $22,779.21, detalls

of which are as set out hereunder -

Purchase Prlce

Less Deposit

Less Adjustments of Rates as per

attached statement

161.19

$21,438.81

PLUS: Interest due from 30/11/74

to 31/1/1975

$539.90

Our costs herein	251.00
Search fees &

certlflcates

16.50

Stamp Duty on Transfer

480.00

Registration on Transfer	42.00
Registration on Dlschargf

of Mortgage

11.00

1,340.40

AMOUNT REQUIRED

$22,779.21

Please note that you are liable for both the

current M.M.B.W. and Sunshlnc Rates, the Vendor

havlng allowed hls share in the adlustments."

In his affldavlt, Mr. Tregent's

narrative resumes as follows :-

I then lodgee for reg~stratlon

the sald

transfer and the said Certlflcates of Tltle. In of the deed safe whlch related to documents over whlch Guardlan held security.

due course the Offlce of Titles lssued to Dudley

Tregent & Co. Certlflcates of Tltle Volume 8465

Folio 063 and Volume 8465 Folio 064 upon whlch

the bankrupt was registered as proprietor. I then

placed them in an envelope bearing the name of

Thereafter the bankrupt came lnto my

office on several occasions and on each of

these occasions Informed me that the buildlng

works upon the land at 1 and 2 Hendry Street

Sunshine had reached a further stage and that

he needed more money to continue. As appears

from the sald ledger card marked 'C' Guardian

made further advances to the bankrupt pursuant

to the sald requests between 12th February

1975 and 8th May 1975 totalllng $76,000. By

8th May 1975 the total amounts of prlnclpal

advanced by Guardlan to the bankrupt were

$110,779.51. As also appears from the said

ledger card marked 'C' the amount of interest

charged by Guardian and due by the bankrupt

to 15th May 1975 totalled $3,731.06. Guardian

sent to Arcadiou on each quarter date a

statement as to the amount of interest then

due.

th May 1975 I was Lecaning concerned about the delay in the construction of the

By 15

bulldlng. I enquired from the bankrupt as to

the reasons for the delay and he lnformed me

that the delay was occurring because the

local council was delaying its approval of

his bullding works. I informed the bankrupt

that because the buildlng works were takinq

longer than he had originally lnformed me

they would take Guardlan would requlre hlrn

to execute a flrst mortgage over the land at

1 and 2 Hendry Street Sunshlnc to secure

advances totalllng $120,000. The bankrupt

stated that he was prepared to slgn such a

mortgage document whenever I reyulred him to

do so. However, such mortgage was never in fact

prepared or slgned."

In hls affidavit sworn 13 June, 1978, Mr. Tregent referred to this statement that "such mortgage was never in fact prepared or signed" as erroneous and deposed as follows :-

On 23rd May 1975, I prepared a mortgage

never executed by Arcadlou. Marked wlth the

letter 'M' IS a copy of the account we sent

for $120,000.00. The mortgage was however the next Guardlan Investments account quarterly statement, and thereafter sent to the bankrupt.The stamp duty and registration fee are held in Dudley Trcgent L Co. trust

account.

Exhibit "M" read as follows :-

re Mortgage over Lots 1 & 2 Hendry

Street, Sunshine to Guardlan

Investments Pty. Ltd.

1975 To our Costs on Mortgage as

per S.R.O. 1974

May

Procuration fee on $120,000.00

@ 4%

600.00

Stamp Duty on Mortgage

$451.00

and counterpart

.50

Registration fee on Mortgage

11.00 462.50

Mr. Tregent resumed his narrative in his

affidavit sworn 24 May 1978, as follows :-

Early in 1976 the bankrupt instructed me

strata subdivlslon in relation to the six villa

units which he was building upon the land at 1

and 2 Hendry Street Sunshine so that he could

sell each unlt separately. He asked me to

arrange for Guardlan to lend him whatever amount

was necessary to pay the surveyor's fee and to

add the amount to the total sums which had been

advanced to him. I engaged a firm of surveyors

Meudell Gillesple & Co. to prepare the plan of strata

subdivision. The fee of the sald flrm was $731.

Guardian pald the sald sum as appears from the

said ledger card marked 'C' rccorded on 11th

February 1976 as an advance to the bankrupt.

to arrange for a surveyor to prepare a plan of me to arrange for Guardian to advance the amount necessary to pay land t x c;r. the land at 1 and 2 Hendry Street, Sunshine. Guardian dld so. The amount of land tax paid was $38.43 and as appears from the said ledger card marked 'C' Guardian recorded this amount on 28th August 1976 as an advance to the bankrupt.

On 3rd June 1976 I lodged at the Office

of Titles the plan of strata subdivision which

had been prepared in respect of the land at 1

and 2 Hendry Street Sunshlne and lodged to~ther

with the sald plan Certificate of Title Volume

8465 Follos 063 and 064. The plan of strata

subdlvislon was registered and in due coursethe

Office of Tltles Issued to Dudley Tregent & Co. fresh certificates of title in relation to the six individual villa units and the

common property. The Certlflcates of Title was Volume 9151 Folio 999.

ln relatlon to the six indlvldual vllla

unlts were Volume 9151 Folios 993, 994,

995, 996, 997 and 998. The Certificate of

The vllla unlts were completed in about

August 1976. As each villa unlt was sold

Dudley Tregent & Co. would recelve at the

conveyancing settlement the balance of

purchase moneys from each purchaser. Dudley

Tregent & Co. would then pay such balance

of purchase moneys to Guardlan by way of

reduction of the prrncipal and interest

then owing by the bankrupt. As appears frm

the said ledger card marked 'C' Guardian

received on 11 September 1975 an amount of

$20,000 in reduction of the prlnclpal and

interest and between 15th July 1976 and 9th

December 1976 received sums totalling

$95,977.30 in reduction of principal and

interest.

By December 1976 five of the six vllla

purchase moneys in respect of them pald.The

only villa unit not sold was Unit 6 whlch

was described in Certificate of Title V o l w

9151 Folio 993 which Guardlan stlll retained.

units had been sold and the balance of Volume 9151 Folio 999 whlch related to the common property. At the date of his salcl bankruptcy the bankrupt was still registered proprietor of Unit 6. "

In hls affldavlt sworn 13 June 1976 Mr.

Tregent referred to thls statement - "Guardlan also retalned a Certificate of Tltle Volume 9151 l'ollo 999 whlch relatei to the common property" and deposed as follows :-

"3.	On page 34, paragraph 14 of my affldavit,

I refer to the fact that Guardian Investments

Pty. Ltd. hold Certificate of Tltle Volume

9151 Folio 999 as security for the common

property. This should have been as securlty

for the accessory unlt, that is car space, to

Lot 6 and known as Lot 12."

In hls affidavlt sworn 16 August 1978 Mr. l'regent deposed that slnce swearing hls affldavlt of 13 June 1978 he had made a further search among the files relatlng to the

bankrupt and had located a mortgage slgned in dupllcate by

the bankrupt over the property in question. The said mortgage

was exhibited to the affldavlt and Mr. Tregent went on to

depose that it was, he believed, slgned by the bankrupt on or

about 15 May 1975. Hls bellef was based upon the fact that

he sent to the bankrupt an account for its preparation on or

about that day, and on the fact that the commencing date of

the mortgage was 15 May, 1975.

In his affidavit sworn 14 May 1978, Mr. Treqent

stated that,as appeared from the ledger card marked "C", the

balance of principal and interest owed by the bankrupt to

the applicant in respect of advances made relatlng to the

land at 1 and 2 Hendry Street was $21,152.69.

In his affidavlt sworn 16 August 1978 Mr. Tregent referred to the Ballan Road property, as follows :-

In the inltlal stages of thls matter I 2ld

not belleve that I had any mcans of establlshlng that the property at 14 Ballan Road Werrlbee was held by the Applicant as securlty. Accordingly I delivered up the dupllcate Certlflcate of Tltlc

whlch the Applicant dld hold by way of securlty.

to the Respondent. The property was however one have recorded on it 14 Ballan Road but in error was headed Derrimut Road. T h c monles advanced had in fact been advanced on 14 Ballan Road not Derrlmut Road. Now produced and shown to me ancl marked wlth the letter 'N' 1s a copy letter dated 11th October 1976 whereln I notifled the bankrupt of the error. I now bellcve from the evldence whlch I belleve can be glven bythe salcl James Sherar (the bankrupt's bank manager) that the bankrupt was at all materlal tlmes aware of the true position."

The letter of l1 October 1976 has been set out

above.

In hls affldavlt sworn 7 September 1978, Mr.

Tregent deposed as follows :-

" In August 1974 the bankrupt brought Into the

of Title of a vacant block of land at Lot 14

offices of Dudley Tregent & Co., a Certlflcate buylng from a friend. He sald that he wanted to build a dwelllng house on the vacant land and asked me whether I could arrange for Guardlan to pay out the purchase money to the vendor and also later to lend him the necessary money to pay for the cost of construction of the dwelllng house.

I told hlm that subject to satisfactory results

prepared to pay out the balance of purchase

money and lend hlm the construction costs and

that Guardian was to hold the Tltle as security.

from the usual lnvestlgatlons Guardlan would be solicitor and there was no contract of sale. The vendor wanted cash immediately. It was agreed he could not get cash lmmedlately as the searching would take a few weeks. Arcadlou agreed to pay the vendor interest at 14% untll I had completed my searching and Guardian pald over the balance of purchase money.

On 9th September 1974 Guardlan pald to Dudley Tregent & Co. trust account a bank cheque made

payable to J. N. & J. M. Borella who were the

vendors from whlch the bankrupt had purchased the

land at Lot 14 Ballan Road, Werrlbee. The bank

cheque was for $6,054.40. The sald cheque was

recorded on a ledger card kept by Guardlan for the

purposes of the transaction. Now produced and shown

to me and marked '0' 1s the sald ledger card

relating to Lot 14 Ballan Koad Werrlbee.

conveyanclng settlement took place on 9th September

1974 at which I on behalf of Dudley Tregent & Co.

delivered the said cheque to the sollcltors for

the sald vendors and received in return a Certlflcate

of Tltle Volume 8655 Follo 524 and a reglsterable

transfer of the land to the bankrupt. I lodqed the

sald Certlflcate of Tltle and the sald transfer at

the Offlce of Tltles. In due course the Offlce of

Tltles lssued to Dudley Tregent & Co. Certlflcate

of Tltle Volume 8655 Follo 524 upon whlch the

bankrupt was shown as registered proprietor. I placecl

the sald Certificate of Tltle in an envelope in the

name of Guardlan and placed the envelope in thc!

sectlon of the deed safe whlch held documents over

which Guardian had security. On 9th September 1974

as appears from the said ledger card marked '0'

Guardlan also paid at the request of the bankrupt

to Dudley Tregent & Co. legal costs of $232 belng

the costs of actlng for the bankrupt in the

conveyanclng settlement together wlth stamp duty

on the said transfer and its reglstratlon fee. The

sald sum of $232 was recorded on the sald ledger

card marked '0' as an advance by Guardlan to the

bankrupt. When I agreed to make advances to the

bankrupt as aforesaid I informed hlm that Guardlan

would charge lnterest at the rate of 14.5% per

annum calculated quarterly.

As appears from the sald ledger card marked '0' the balance of the prlnclpal sum advanced

together wlth interest to 15th August 1975

totalled $7,234.69.

In about August 1975, the bankrupt came to

my offlce and told me that he was bulldlng a

house on land at Lot 1216 Derrimut Road Werrlbee

which was owned by a Mr. Srnec. He asked me

whether I could arrange for a loan of $23,000

upon the security of a bulldlng agreement lnto

whlch he had entered with the sald Srnec. I sald

that Guardian would not lend upon the mere securlty

of a building agreement. The bankrupt then sald

that the said Srnec had mortgaged the land to hlm

for $23,500 and that the mortgage had been prepared

by and was held by a Mr. Sotls a solicltor in

Sunshine. He asked me whether Guardian would lend

upon the security of this mortgage and the Certlflcate

of Tltle in the name of Srncc if he were to brlng

the mortgage and the Certlflcate of Tltle to me. I

sald that Guardlan would not because I did not know

the owner and the fact that a bulldlng agreement

was involved mlght mean that the loan would be more

than a short term loan. The bankrupt then remlnded

me that Guardlan had lent only a small amount in

respect of the land at Lot 14 Ballan Road Werrlbee

In respect of which Guardlan was holdlng the

Certiflcate of Tltle. He sald that the land at Lot

14 Ballan Road, Werribee was worth $15,000 and that

the holding by Guardlan of the Certlflcate of Tltle

In respect of it would secure an advance of a

further $8,000. He requested me to arrange for

Guardian to lend a further $8,000 upon the securlty

of the Certiflcate of T ~ t l e

in relatlon to Lot 14

Ballan Road Werribee and to lend $15,000 upon the Certlflcate of Tltle in the name of Srnec inrelation to Lot 1216 Derrlmut Road, Werrlbee and the mortgage to the bankrupt over that land. I agreed that Guxdlan would make advances of $23,000 in the manner requested and upon the securltles so offered.

Pursuant to the requests described in paragraph bankrupt. I handed the cheque to the bankrupt and I also handed to hlm at the same tlme a cheque butt upon which was identified the descrlptlon of the land (that is to say Lot 1216 Derrlmut Road Werrlh) the date of the cheque the sum advanced and the lnterest rate whlch was 14% per annum. A copy of the contents of the cheque was wrltten on a ledger card kept by Guardlan for the purposes of the 13 hereof on 22nd August 1975 Guardlan prepared and

transaction. Now produced and shown to me and

marked 'P' 1s the sald ledger card relating to Lot

1216 Derrlmut Road Werrlbee.

1 1 t h September

1975 p u r s u a n t

t o t h e

r e q u e s t s

d e s c r l b e d

i n p a r a g r a p h

1 3 h e r e o f

Guard lan

p a i d

t o t h e b a n k r u p t

f u r t h e r cheque

f o r

$8 ,000

upon

t h e

s e c u r l t y o f

C e r t l f l c a t e

T i t l e Volume

8655 F o l l o 524

r e l a t l n g t o

t h e l a n d s a i d cheque was

a t L o t

1 4 B a l l a n

Road

Wer r lbee .

The

r e c o r d e d

upon

t h e

s a i d

l e d g e r

c a r d marked

'0 '

as a n advance made

t o t h e

b a n k r u p t

i n r e s p e c t

o f

Lo t

1 4 B a l l a n

Road,

Wer r ibee .

A s

a p p e a r s

f rom

t h e

s a l d

l e d g e r

c a r d marked

' 0 '

t h e b a l a n c e o f

p r i n c i p a l

sums

advanced

t o g e t h e r

w i t h

i n t e r e s t a s a t 3 7 t h

November 1975 was $15,780.57.

2 0 t h Oc tobe r

1975 a s a p p e a r s f rom t h e

s a l d

l e d g e r

c a r d marked

' P '

and

i n a c c o r d a n c e

w i t h

t h e

r e q u e s t s

d e s c r i b e d

i n p a r a g r a p h

1 3

h e r e o f

Guard ian p a i d by way

advance

t o t h e

b a n k r u p t a

cheque

f o r $5,000

i n r e l a t i o n t o

t h e l a n d A s a l s o a p p e a r s

a t Lo t

1216 Der r lmut

Road,

Wer r lbee .

f rom

t h e

s a l d

l e d g e r

c a r d

marked

' P '

t h e b a l a n c e of

p r l n c l p a l sums

advanced

t o g e t h e r

w l t h

i n t e r e s t i n r e l a t l o n

t o t h e l a n d a t L o t

1216 Der r imut

Road

Wer r lbee a s a t 1 5 t h November

was

$15 ,375 .88 .

When

a g r e e i n g

t o t h e r e q u e s t s

d e s c r l b e d

i n

p a r a g r a p h

1 3 h e r e o f

had

ln fo rmed

thebankrupt

t h a t l n t e r e s t i n r e l a t l o n t o t h e advances

o f

$15,000 would

be c h a r g e d a t t h e r a t e o f

1 4 %

p e r

annum

c a l c u l a t e d

q u a r t e r l y .

2 7 t h November

1975 t h e Commonwealth

Bank

p a i d

I n t o t h e

t r u s t a c c o u n t o f

Dudley

Tregent

C o .

on b e h a l f

o f

M r .

S r n e c $19,245

by way

o f

d i s c h a r g e of

t h e mor tgage by

hlm

t o t h e b a n k r u p t .

t h e same day

handed

o v e r

t o t h e Commonwealth

Bank

d i s c h a r g e o f

t h e mor tgage

s l g n e d

t h e

b a n k r u p t ,

t h e

duplicate mor tgage ,

and t h e Certificate o f

T i t l e i n r e l a t i o n t o Lo t

1216 Der r imut

Road,

Werr ibee .

had

I n t e n d e d t h a t t h e

s a l d amount

o f

$19,245

s h o u l d be

a p p l l e d f l r s t t o s a t l s f y

t h e amount o f $15,375.88

owed t o Guard lan by

t h e b a n k r u p t

i n r e s p e c t o f

Lo t

1216

Derr imut

Road

Wer r lbee

and

t h a t t h e b a l a n c e

s h o u l d

a p p l i e d

i n p a r t s a t i s f a c t i o n of

amounts

owed

t h e b a n k r u p t

t o Guard lan

i n r e l a t l o n t o

Lo t

1 4 B a l l a n Road

Wer r ibee .

However,

what

happened was t h a t on 2 7 t h November

1975

Guard lan

e r r o n e o u s l y

a p p l l e d

t h e

s a i d

sum

o f

$19 ,245

f i r s t i n p u r p o r t e d

satisfaction

o f

t h e whole o f

t h e amount

owed

t h e b a n k r u p t

t o Guard ian

i n r e s p e c t of

Lo t

1 4 B a l l a n

Road

Wer r lbee

(whlch p u r p o r t e d

application

shown on

t h e s a i d l e d g e r c a r d marked

' P ' )

and instructed Dudley T r e g e n t & Co.

t o pay

t h e

b a l a n c e

namely

$3 ,464 .43

t o t h e

b a n k r u p t .

Now produced and shown t o me and marked ' Q '

i s a

copy

o f

l e t t e r

d a t e d

2 7 t h November

1975 s e n t by Dudley T r e g e n t &

Co.

t o t h e

b a n k r u p t	and	whlch	e n c l o s e d	a	cheque	f o r
$3 ,464 .43 .

On llth October 1976 Dudley Tregent

& Co. sent a letter to the bankrupt pointing

out the error referred to in paragraph 18

and notifying hlm that the two ledger cards

involved would be amended accordingly. Now

produced and shown to me and marked 'N' is

a true copy of the said letter dated llth

October 1976.

On 22nd October 1976 Guardlan lodged at the Office of Titles a caveat in relation to the interest which it clalmed to have in the land at Lot 14 Ballan Road Werribee described

In Certificate of Title Volume 8655 Folio

524. Now produced and shown to me and marked

'S' is a copy of the said caveat. A few days

after 22nd October 1976 I had a conversation

with the bankrupt in which I informed him

that Guardian had lodged the said caveat and

explained the reason.

As appears from the ledger card marked '0' the balance of principal sums advanced

together with interest to 17th March 1977 in

relatlon to the land at Lot 14 Ballan Road

Werribee totalled $17,928.

By reason of the foregoing the applicant

claims to have become equitable mortgagee of Ballan Road Werrlbee and to have held such equitable mortgage as securlty for the repayment of $17,928.

the land described in Certlflcate of Tltle

In August 1977 after havlng attended the

publlc examination of the bankrupt and havlng given evldence thereat I formed the view that because of the said error Guardlan would not

be able to maintain the existence of any

equitable mortgage in respect of Certificate

of Title 8655 Folio 524 and I therefore at

the request of the respondent handed the

said Certificate of Tltle to his sollcltors.

I have recently been lnformed by the

solicitors for the respondent that the respondent has sold the land at Lot 14 Ballan Road, Werribee and no longer possesses Certificate of Title

Volume 8655 Folio 524 but that the respondent holds proceeds of sale of the sald land in excess of $17,928."

The applicant has demanded of the

respondent payment of the sald sum of $17,928

but the respondent refuses to pay the sald sum

and denies that the applicant is a secured

creditor in respect of the sald sum.

The evldence relatlng to the Ballan Road

property was the subject of submissions by Mr. R. Glllard, counsel for the bankrupt, in additlon to those made by hlm in relation to the properties generally. He referred to the

fact that,ln about August 1977, after belng requested to do

so by the respondent, Mr. Tregent had delivered the

certificate of tltle to the property to the respondent, who

later sold the property wlthout reference to the applicant or

to Mr. Tregent.

He was asked by Mr.Glllard :-

"You gave it over because you thought at the

time that the monies you had advanced to the

bankrupt were secured by another property,

is that the situation?"

to whlch he replied :-

"Yes, that is correct but I made a mistake."

Prlor to the dellvery of Lhe certlflcate

of tltle to the respondent, Mr. Tregent, in the course of a

publlc examlnatlon under s.81 of the Bankruptcy Act 1966,

expressed a doubt that the applicant had a mortgage over thls

property. In answer to Mr. Glllard, Mr. Tregent sald that he

was very confused at that stage of hls examination, addlng

"I thought we had securlty or we had lent on

lt but when I was asked thls questlon I became

very confused. I dropped my glasses, I could

notcollect my thoughts and I did not want to

waste the court's time in flndlng out from the

records exactly what did take place."

Later hc told Mr. Glllard :-

"After the case, after the examlnatlon, I was

stlll in a very hlghly nervous state and I

have been asked by Neville Bird to hand over

that title, that I had no rlght to hold on to

~ t ,

and I handed it over in error."

In re-exammation, Mr. Tregent sald that he handed over the certificate of tltle because the letter he had written to the bankrupt on 11 October 1976 had been within slx months of his becoming bankrupt on 17th March

1977, when hls own petltlon was accepted.

Mr. Tregent was asked -

"What effect did you think your notlflcation

therefore had?"

to whlch he replied :

"I thought that I could not prove that he

had knowledge of the error. There was no way

that I could prove that he had knowledge of

the mistake. "

In his affidavit sworn 24 May 1978 Mr.

Tregent gave the following account of the Anderson Road

In December 1974 the bankrupt brought into my office a contract of sale into whlch he had entered for the purchase of a vacant

block of land at 127 Anderson Road Sunshine. the balance of the purchase moneys was payable in 90 to 120 days. The bankrupt had

paid the deposlt from hls own funds.

The

bankrupt informed me that he proposed to

bulld seven flats upon the said block and

asked me whether Guardlan could lend hlm

money for the purpose. I told hlm that

subject to satisfactory results from the

usual investigations Guardian could lend

hlm the moneys but that Guardlan would need

to have the securlty of holding the Contract

of Sale and Certificate of Tltle as I%. usually

did; The txnkrupt-mld that of course Guardlan could do thls. The bankrupt then left the Contract of Sale in my possCSSlOn."

Mr. Tregent, in hls affldavlt, later also

On 9th December 1974 Guardlan made

its flrst advance to the bankrupt by a

cheque bearing that date for $10,000

pursuant to his said request in relatlon

to the land at 127 Anderson Road Sunshlne.

On 16th December 1974 and 20th December

1974 Guardlan pald two further cheques

for $10,000 each to the bankrupt by way

of advance on the proposed buildlng

works in relation to the land at 127

Anderson Road Sunshine. I handed each of

these cheques to the bankrupt. At the same

time as I handed the cheques to hlm I also

handed to hlm the cheque butts upon whlch

was ldentlfled the description of the land

the date of the cheque the sum advanced

and the interest rate whlch was 14f% per

annum. I had informed the bankrupt that

the lnterest rate was to be 14f% because

the loan was to be for a short term and

on a temporary basls only. A copy of the

contents of each cheque was wrltten on a

ledger card kept by Guardlan for the

purpose of thls transaction. Now produced

and shown to me and marked 'F' 1s the sald

ledger card relatlng to 127 Anderson Road

Sunshlne.

On 7th February 1975 Guardlan paid

Into the trust account of Dudley Tregent &

Co. $25,175.33 whlch was the balance of

purchase money necessary to be pald at the

conveyancing settlement of the purchase of

127 Anderson Road Sunshlne together wlth

anticipated stamp duty and legal costs.

The sald sum was recorded on the sald ledger

card marked 'F' as an advance by Guardlan

to the bankrupt. At the conveyanclng

settlement Dudley Tregent & Co. recelved

the Certificate of Tltle Volume 6055 Follo

902 which more particularly described the

land at 127 Anderson Road Sunshine and also

received a reglsterahle transfer of the

land to the bankrupt. Dudley Treqent

r, Co.-lodged the transfer and certificate

of tltle for registration and in due

course the Office of Tltles lssued to

Dudley Tregent & Co. the said Certlficate of bankrupt was then described as registered

proprietor. I then placed the Certlficate of

Title in an envelope in the name of Guardian

and placed the envelope in the section of

the deed safe which held documents over whlch

Guardian held securlty.

As appears from the said ledger card

marked 'F' Guardlan between 7th February 1975

and 2nd June 1975 made further advances by

way of cheques to the bankrupt totalling

$60,000. As each amount of Interest accrued

due on the relevant quarter day the amount

was recorded on the sald ledger card marked

'F' and Guardian sent to the bankrupt a

statement on each quarter date as to the

amount of lnterest whlch had by then accrued

due.

By about the mlddle of 1975 the bankrupt

stopped work on the constructlon of the flats at 127 Anderson Road Sunshlne. I Informed the bankrupt that I was concerned that the

constructlon of the flats was taklng longer

than he had first led me to believe. I told the

bankrupt that Guardian mlght rcqulre him to

execute a reglsterable first mortgage over the

land at 127 Anderson Road Sunshlne for better

securlty of the princlpal and Interest then

outstanding. The bankrupt stated that he was

prepared to execute such a mortgage if and

when requlred to do so.

By March 1976 the flats at 127 Anderson

Road Sunshine were completed and were let to

tenants. The bankrupt informed me that he had

instructed his estate agents John Kontek & Son

Pty. Ltd. to pay to Guardian the net balance

of rentals received from tlme to tlme and

informed me that Guardian could apply these

rentals in reduction of the balance of princlpal

and lnterest due. As appears from the sald ledger

card marked 'F' Guardlan received various sums

from John Kontek & Son Pty. Ltd. and applled them

In reduction of the indebtedness 01 the bankrupt.

On 21st September 1976 Guardlan lodged at the office of Tltles a caveat in relatlon to the lnterest whlch it claimed to have in the land at 127 Anderson Road Sunshine described in Certlflcate

of Tltle Volume 6055 Folio 902. Now produced and shown to me and marked 'G' 1s a copy of the sald caveat.

In a b u t November 1976 I prepared on behllf executed each of these mortgages. Now produced and shown to me and marked 'H' and of Guardian a flrst mortgage over the land	at 127 Anderson Road Sunshlne to secure $100,000 and a second mortgage over the said land to secure $41,000. At that tlme the total indebtedness of the bankrupt to Guardian for advances made in respect of 127 Anderson
'I' respectively are true coples of the flrst
mortgage and the sald second mortgage. Each of the said mortgages has been lodged at the Office of Titles but was lodqed after the
sald date of bankruptcy.

As at 17th March 1977 the total

indebtedness of the bankrupt for principal

and lnterest in relation to moneys advanced

to him for building works at 127 Anderson

Road Sunshlne was $147,425.16.

The applicant claims to be equltable

mortgagee over the land at 127 Anderson Road 6055 Folio 902 and to hald such mortgage as security for repayment of the said sum of $147,425.16. The respondent does not admit that the applicant is equltable mortgagee of the said land."

In each of these mortqages, the hlgher rate

of Interest was stated to be 15% and the acceptable rate to

be 14%.

James Sherar, as the manager of the branch

of the A.N.Z. Bank at whlch the bankrupt had an acconnt between

1971 and 1977 had frequent dlscusslons wlth the bankrupt

concerning his account and the securities available from tlme

to time to secure his overdrafts. Durlng that tlme he sald

that he also had numerous telephone conversations wlth Mr.

Tregent. In his affidavit he gave the following account of his discussions with the bankrupt :-

"The bankrupt's flnanclal position was frequently belng reviewed by me and it was necessary for me to inform myself about the measures taken by the bankrupt to finance his buslness ventures through

Guardlan Investments Proprietary Llmlted and other sources of finance. I also needed to know from tlme to time what moneys would be paid to the credit of the bankrupt's account in order to ensure that the account was kept in order.

I diarized my discussions wlth the bankrupt or other people concerning hls flnanclal positlon whenever I considered it was desirable to keep a note of a dlscusslon. My dlary notes do not, however, purport to be a record of all

conversations.

My discussions with the bankrupt were in the

context that on the 18th October, 1974, hls

overdraft limit was fixed at $5,000.00 but

that this was increased to $10,000 on the 22nd

November, 1974, such limlt to apply to the

18th October, 1975. On the 25th September,

1974, the bankrupt's account was overdrawn to

$8,324.00. On the 30th September, 1974, t h ~ been lodged to his account were returned "present again". These cheques had been drawn by Guardian Investments Proprietary Limited. Mr. Noel Tregent had telephoned me in the prevlous week concerning the bankrupt. When I saw the bankrupt on the 30th September, according to my dlary note he confirmed that there was approximately $200,000.00 owlng to his solicitors and that thls borrowing was covered by good tanglble security.He requested further assistance from the Bank. I explalncd to him that at thls time there was nothlng we could do except offer the facillties of Esanda. The bankrupt lndlcated to me that Esanda's rates of lnterest would be too hlgh and also that because of the nature of hls buslness fresh security was frequently belng obtained and that they would be consistently up for 2.1% bankrupt called and discussed his account.

Victorian Government Stamp Duty. On the 29th

May, 1975, the bankrupt was overdrawn to the extent of $30,062.00. I telephoned Mr. Noel Tregent and as a result of what I was told, I spoke to the bankrupt and informed hlm that there were funds available through his sollcltor but that hls solicltor required hlm to call at the offlce before further funds could be issued.

I was at that tlme instructed by the Bank's

lending department that the bankrupt's account

had to be reduced to withln hls limlt of $10,000.00.

On the 30th May, 1975 I telephoned Mr. Noel

Tregent and offered to meet the bankrupt and Mr.

Tregent in the latter's offlce.

of the bankrupt was such that cheques had to be

returned and it was not possible at that tlme

to obtain further funds from Mr. Tregent. On thc

llth June, 1975 I dld however agree to release

the Certificate of Tltle to two blocks of land

and also a mortgage worth $22,000.00 from I. & M.

On the 10th and the llth June, 1975, the account order to enable the bankrupt to lncrease the margln of securlty for hls borrowings through Mr. Tregent.

On the 1st July, 1975 the bankrupt requested

accommodat~on up to $25,000.00 from the Bank.

but that if he oould provlde satlsfactory

security I would seek $20,000.00 to $25,000.00

from Esanda on speclal advance for slx months.

In the presence of the bankrupt I telephoned

I told him that there was no hope of thls, hls knowledge no satlsfactory securlty available.

I informed the bankrupt of this but hls respnsc

was that he would have llttle alternative but

to seek accommodation from another bank and he

left my offlce.

On the 17th September, 1976 the bankrupt and his son Phllllp called at my offlce. His son's home had been completed and I was informed that in order to assist his father Phllllp would obtain a loan of $40,000.00 from Beneficial Finance Company. I was further Informed that there was also $26,000.00 to come from Beneflclal Finance as the progress payment for work done

on the Werribee Estate.

These moneys were

expected the followlng week and also a settlement

for $12,000.00.

The bankrupt's account had

been reduced to $32,000.00 and I agreed to pay

a few cheques whlch could cause the overdraft to

rise to between $35,000.00 to $40,000.00.

On 28th September, 1976, the bankrupt called

and he lodged three cheques totalling $100,000.00

to hls account.

These cheques were drawn by

Guardian Investments Proprietary Zlmlted.

$50,000.00 had been obtalned on the securlty of

the home of the bankrupt's son, Phlllip, and a

further $10,000.00 was to be obtalned upon thls

securlty the followlng week. I was Informed by

the bankrupt that $25,000.00 had been obtalned

on the securlty of the home of hls son George

and $25,000.00 from flats. On thls occasion the

bankrupt also gave me details of other substantial

amounts of money whlch he expected to get from

various sources including flnancc companles.

I further have put in the file relatlng to the bankrupt a letter dated the 7th February, 1975, written to him by Guardian Investments Proprletary Llmlted enclosing a llst showing the indebtedness of the bankrupt to Guardian Investments Proprletary

Limited in respect of properties llsted.

NOW

produced and shown to me and marked with the lette?r

' A ' IS a photocopy of the sald letter, and now

produced and shown to me and marked wlth the letter

'B' is a photocopy of the sald llst whlch was

enclosed with the said letter. Now produced and

shown to me and marked with the letter 'C' IS a

photocopy sumnary of the bankrupt' s f

inancial

positlon as at the 19th February, 1975.

The

originals of exhibits ' A ' , 'B' and 'C' have already

been tendered as Court exhibits. Thls summary 1s

has been held to be implled from the fact that on former

occasions the accounts between the parties have been stated

and settled on that footing (see Bruce v. Hunter (1913) 3 Camp

467; Newal v. Jones (1830) 1 M. and M. 449). In Domaschenz v. -

"Compound lnterest will not k allowed except where

there 1s an agreement, express or implied, to pay

it, or where the debtor has employed the money in

trade and has presumably earned it, or unless its

allowance is in accordance with a usage of a

particular trade or business."

Quarterly statements and settlement letters sent

to the bankrupt were plainly based upon compound lnterest

belng charged. Mr. Tregent gave evlderice that the bankrupt on

frequent occasions inspected copies of the applicant's ledger

sheets, and asked for copies of ~IXYP, whlch showed that compound

lnterest was belng charged. The bankrupt accepted the charging

of compound interest when the applicant was repaid from

settlements made on sales of properties and when interest was

capitalised when mortgages were executed in respect of the

Anderson Road and Hendry Street properties. Mr. Tregent gave

evidence that compound lnterest has been charged at least as

early as 1969, and that, before the commencement of any of the

transactions involved in this application, the bankrupt had

been told that compound interest would be charged and had

agreed to this being done.

Belng satisfied, as I have sald, that there was

an express agreement between the appllcant and the bankrupt,

giving rise to an equitable mortgage over each of the properties

covered by the application, I have not found it necessary to

turn to the further submissions made hy the appllcant in

respect of the Hendry Street properties that the unregistered

mortgage s~gned	by the bankrupt constituted a further equ~table
mortgage.

By reason of these equitable mortgages, the

appllcant would be entltled to the declarations sought wlthout

more, but for the fact that the respondent has pleaded the

Statute of Frauds, as enacted in s.126 of the Victorian Instnmnts

Act, whlch provides :-

"126.

No actlon shall be brought whereby to charge

any executor or admlnlstrator upon any special promlse to answer damages out of his own estate, or whereby to charge the defendant upon any spec~al promlsc to answer

for the debt default or miscarriages of another person,

or to charge any person upon any agreement made upon

consideration of marrlage or upon any contract of sale

of lands tenements or heredltaments or any Interest in

or concerning them or upon any agreement that is not

to be performed within the space of one year from the

making thereof unless the agreement upon wh~ch

such

action shall be brought or some memorandum or note

thereof shall be in wrltlng and slgned by the party

to be charged therewith or some other person thereunto

by him lawfully authorized."

To this plea, the appllcant has replled that

lt relles upon the doctrlne of part i~erformance.

Knox C.J.

30 C.L.R. 216 at p.221 that "the rules to be applled in

determining whether a glven act or serles of acts amounts to

such part performance as obvlates the necessity for a memorandum

observed, in his dissenting judgment in Cooney v. Burns (1922) these rules to a particular statc of facts."

As was stated in Fry on Specific Performance

6th Edition p.276 -

"In order thus to withdraw a contract from the

operation of the statute, several circumstances

must concur : 1st the acts of part performance

must be such as not only to be referable to a

cmtract such as that alleged, but to be referable

to no other title; 2ndly, they must be such as to

render it a fraud in the defendant to take advantage

of the contract not belng in wrlting; 3rdly, the

contract to which they refer must be such as in

its own nature is enforclble by the Court; and

4thly, there must be proper par01 evidence of

the contract which is let in by the acts of

part performance."

In Broughton v. Snook, 1938 1 Ch. 505 at 512, Farwell J. quoted this passage, saying

"That statement is not only a statement by a very

learned author but has recelved judicial approval

and undoubtedly it is the law which I have to

apply.

The qeneral prlnclples governing a case where the

doctr~ne

of part performance is relled upon in order to overcome

the difficulty of the Statute of Frauds were set out in the joint judgment of Isaacs & Rich JJ. in McBride v. Sandlland (1918) 25 C.L.R. 69 at p.77-9 in these terms :-

, In Maddison v. Alderson (8 App. Cas., at p.469)

Lord Selborne L.C., in a passage now classical, stated the result of the authorltles to be that In a suit founded on part performance of a par01

contract relating to land the defendant 1s really

charged 'upon the equlties resulting from the

acts done in execution of the contract, and not

(withln the meaning of the Statute) upon the

contract itself.'

It 1s clear from what the

case the Court is not asked to give a bcttcr remdy in aid of a legal right, based on the contract, but is called upon to enforce an equlty (independent of the Statute, as Story observes -	learned Lord Chancellor says, that in such a by force of circumstances subsequent to the contract itself, namely, by acts of part performance sufficient to attract the equitable
jurisdiction of the Court. Lord O'Hagan, in the
same case, pursues the prlnclple further by pointing out that the proper course in such proceeding is that of 'seeklng to establish
primarily such a performance as must necessarily
inply the existence of the contract, and then

proceeding to ascertain its terms,' and that

the Court below had erred in reversing that

order. No harm can arise from reversing the

order as a matter of convenlcnce in taklng

evidence, provlded the necessary elements of

part performance are borne in mind and properly

applied to the circumstances when the facts

come under consideration. But if the terms of

the oral bargain are flrst ascertained and then

the alleged acts of part performance are judged

of merely by their consistency with and

appllcabillty to that bargaln, grievous error

may result. Much of the argument of the respondent

ran upon that erroneous line, and to some extent

the judgment under appeal is affected by it.

It will conduce to precision in dealing wlth

the voluminous and complicated circumstances detalled in the evidence to state, so far as materlal to the present case, certain elements

of part performance essential to raise the

equity :

(1) The act relled on must be unequivocally and at p. 479.

in its own nature referable to 'some such

agreement as that alleged'. That IS, it must

be such as could be done wlth no other view

than to perform such an agreement (Maddison v.

Alderson 8 App. Cas., at p. 479; Gunter v.

(2) By 'some such agreement as that alleged' 1s

meant some contract of the general nature of

that alleged (Maddison v. Alderson 8 App.Cas.,

at p.485; Savage v. Carroll 1 Pall & B., 265,at

p.282; Fry on Specific Performance, 5th ed., at

p. 292).

(3) The proved circumstances in which the 'act'

was done must be considered in order to judge expressions, if literally read appear to be too wlde, because, so read, they would confllctwith the requirement that the act must unequivocally refer to some such contract as is alleged, and because bare possession does not necessarily connote trespass, or, alternatively, a contract at all; indeed, some contracts would not justify the act done. Possession may be the result of mere permission. But if the circumstances undcr which the possession was glven are proved, thcll

whether it refers unequivocally to such an

agreement as is alleged (Savage v. Carroll, 1

Pall & B., 265, at p. 282; Hodson v. Heuland,

(1896) 2 Ch., 428.). Expressions are found in

some cases which, if literally read, are to the

effect that mere possession by a stranger is

sufficient to let in par01 evidence of any

contract alleged. Those cases were prlor to

then the Court may judge whether the act whatever.

indicates permission or contract, and, if

contract, its general character. For

instance, i n Frame v. Dawson, 14 Ves., at

p.388 the expression 'some agreement' 1s

used, we think, in contradistinction to the

specific terms of the agreement, and not

(4) It must have been in fact done by the

party relying on it on the falth of the

agreement, and further the other party

must have permitted it to be done on that

footing. Otherwise there would not be

'fraud' in refusing to carry out the agree-

ment, and fraud, that is moral turpitude,

is the ground of jurisdiction (Fry on

Spific Performance, 5th ed., par. 5 8 8 ;

McCormick v. Grogan L.R. 4 H.L., 82, at p.

97; Whltbread v. Brockhurst, 1 Bro. Ch.,

404, at p.417; Phllllps v. Alderton, 24

W.R., 8.).

agreement (Fry on Speclflc Performance,

par. 589).

These requirements must be satisfled before

the actual terms of the alleged agreement

are allowed to be deposed to.

(5) It must be done by a party to the it still remains to be shown :-

(6) That there was a completed agreement

(Thynne v. Glengall 2 H.L.C., 131 at p.158.).

(7) That the act was done under the terms of

that agreement by force of that agreement

(Thynne v. Glengall, 2 H.L.C., 131, at p. 158.

)

In Cooney v. Burns (clted above) Knox C.J.

at pp. 224-5 sald :-

It is well settled that a verbal agreement

to glve a mortgage is valid, notwithstandlng

the Statute of Frauds, if the tltle-deeds

are in the possesslon of the proposed mrtgagee.

According to Lord Selborne (Maddlson v. Alderson,

(1883) 8 App. Cas., at p. 480) the law of

equltable mortgage by deposit of tltle-deeds

depends on the same prlnclples as the doctrlnc

of part performance regarded as an answer to

the defence of the Statute of Frauds. The

decisions in cases relatlng to quitable mortgage

establish : (1) that a valld equltable mortgage

cannot be created by a mere par01 agreement to

give a legal mortgage if the deeds remaln in the

possesslon of the proposed mortgagor;

.	. / 5 4

created by a mere parol agreement to give

a legal mortgage if deeds have been handed

over to the proposed mortgagee where hls

possession of the title deeds cannot be

otherwise explained (Russel v. Russel (1783)

1 Bro. C.C., 269; James v. Rlce (1854) 5 DeG.

(2) that a valld equitable mortgage can be of the title deeds in cases of agreement to glve a security over land 1s therefore apparent."

When one turns to the facts of the present

case to decide the questlon whether the appllcant has an

effective answer to the plea of the Statute of Frauds, it 1s

first necessary, in the words of Smlth J. ln Francls v. Francls

(1952 VLR 321 at 340), "to exclude from conslderatlon the

evldence of the alleged parol agreement between the parties and

to look at the act relied upon in the llght of the surrounding

clrcumstances as revealed by the rest of the evldence."

Whlle mere deposlt of documents of tltle has been held to be an answer to the plea of the Statute of Frauds, (see ex parte Pegler, No. 17/1964 XII, F.C. of B. 17/12/1968,

per Glbbs J.) lt is not unhelpful to look at the circumstances

surroundlng the deposlt which, in the present case, Include

the following :-

l.	the applicant frequently Inspected the progress of the work belng carrled out on each property;

2. ln relatlon to each property, the applicant made progress payments to the bankrupt, as the work proceeded and as hls financial needs increased;

3. the sums advanced by the appllcant to the bankrupt grew to very substantlal amounts;

4. the applicant accepted rates of Interest approprlate to loans madc on flrst mortgage security, but conslderably below the rates one would have expected to have been charged In respect of unsecured advances, especially as they reached very substantlal totals.

I n my

o p i n i o n ,

t h e a p p l l c a n t h a s effectively

answered

t h e p l e a o f

t h e

S t a t u t e o f

F r a u d s

i n r e s p e c t

o f

e a c h

p r o p e r t y .

I t

i s n o t

n e c e s s a r y

t o c o n s l d e r

i t s f u r t h e r

c o n t e n t i o n

t h a t

t h e r e

e x i s t e d documents

c o n s t l t u t l n g

n o t e s

o r memoranda

o f

t h e

e q u i t a b l e m o r t g a g e s ,

w i t h l n

t h e meaning

s .126 .

I n r e s p e c t

o f

t h e

B a l l a n

Road

p r o p e r t y

t h e

r e s p o n d e n t

h a s

s o u g h t

t o r e l y upon

t h e

f a c t

t h a t

t h e a p p l l c a n t ,

a f t e r b a n k r u p t c y ,

handed

o v e r t o him

t h e c e r t l f l c a t e o f

t i t l e

t o t h i s p r o p e r t y .

I n t h l s c o n n e x l o n ,

i s u s e f u l

t o c o n s i d e r

t h e r u l e s i n Ex p a r t e James

(1874 L . R .

9 Ch.

6 0 9 ) .

I n t h a t

c a s e t h e C o u r t o f

Appeal

h e l d

t h a t a

t r u s t e e i n b a n k r u p t c y

t o

whom

a n e x e c u t i o n c r e d l t o r had

p a l d o v e r t h e f r u i t s o f

h l s

e x e c u t i o n ,

unde r

v iew

o f

t h e

l a w s h o r t l y a f t e r w a r d s

shown

t o have been

e r r o n e o u s ,

was

bound

t o r e f u n d t h e money

s o p a i d .

I n Ex p a r t e Simmonds,

i n re Carnac

(1885 1 6

Q.B.D.

308)

t h e C o u r t o f

Appeal was

h e a r l n g a n

a p p e a l a g a i n s t

a n

o r d e r

i n b a n k r u p t c y

t h a t t h e

t r u s t e e

i n

t h e

l l q u l d a t l o n

o f

S i r John

Carnac

s h o u l d ,

o u t o f

any

a s s e t s t h e n

i n h l s h a n d s ,

n o t disturbing

any

dividends

a l r e a d y d e c l a r e d ,

o r o u t o f

t h e

f i r s t a s s e t s t h e r e a f t e r t o come

t o h l s hands ,

r e p a y

sum

o f

money which had been p a i d t o hlm under

a m l s t a k e o f

law.

The

a p p e a l

was

d l s m l s s e d .

Co t ton

L . J .

o b s e r v e d

( a t pp .

3 1 3 - 4 ) :

"But

t h e

f u n d s applicable

t o t h e payment

o f

d l v l d e n d s

t o

t h e

c r e d i t o r s have

been

e r r o n e o u s l y

l n c r e a s c d

means

t h a t payment

t o t h e t r u s t e e ,

and

t h e q u e s t i o n

i s whe the r

t h e sum

t h u s p a l d

i n e r r o r o u g h t n o t t o be

r e p a i d o u t o f

t h o s e

f u n d s .

I n my

o p i n l o n

p a r t e

James ,

Law

Rep.

9 Ch.

609

l a y s down

t h i s p r o p o s l t l o n ,

t h a t when

t h e o f f l c e r o f

t h e C o u r t h a s

i n h i s hands

sum

o f

money

which h a s beer1 p a l d t o hlm

e r r o n e o u s l y

u n d e r

m l s t a k e

o f

law,

t h e o r d l n a r y r u l e as

between

a d v e r s e

l i t i g a n t s d o e s n o t

a p p l y ,

b u t

h e w i l l be

o r d e r e d

t o r e p a y

i t .

I t

h a s

been

u r g e d ,

and

rightly

u r g e d ,

t h a t i n Cx

p a r t e James ,

Law Rep.

9 Ch.

609

t h e money

was

s t i l l i n t h e hands o f

t h e t r u s t e e ,

whereas

i n t h e p r e s e n t

c a s e t h e money has been dls t r lbuted

among

t h e creditors,

and t h a t o u r d e c l s i o n w l l l L e a

development of

t h e p r l n c i p l c o f

p a r t e James ,

Law

Rep.

9 Ch.

609.

Bu t ,

i n my

o p l n i o n , w e must

r e g a r d

the funds available for distrlbutlon among the creditors under a bankruptcy or liquidation as one entlre fund, and, if that fund has

erroneously increased, I thlnk it is a just extension of Ex parte James,Law liep.9 Ch.609 to say that, out of any moneys whlch may

hereafter be in the hands of the trustee and

applicable to the payment of dividends to the

creditors, the amount which has come Into his

hand by mistake ought to be repaid. If the

trustee desires it the registrar's order m y

be qualified by saying, that the repayment is

to be made out of any moneys whlch may now

or hereafter be in the hands of the trustee

and applicable to the payment of dlvldends."

In re Rhodes ex parte Rhodes (1899 2 Q,B. 347) the Court of Appeal held, in the flrst place, that an executrlx had a right to retaln her debt out of the assets whlch she had got in, and went on in the words of Llndley, MR. (at p.355) as follows :-

The second question presents no real difficulty.

The executrlx, not knowing her rlghts, paid the

whole 1100~.over to the trustee. He, however, has

not distributed the assets, and no injustice wlll

be done to hlm or to any one if he is ordered to

repay to her the amount whlch she was entitled to

retain. Ex parte James, (1874) L.R. 9 Ch. 609 and

Ex parte Simmonds (1885) 16 Q.B.D. 308 are distinct

authorities to shew that mlstakes of thls kind,

although attributable to ignorance of law, can

and will be set right by the Court so long as the

offlcer of the Court stlll has the money in hls

hands. Still less can the proof by the executrix

In the bankruptcy, withdrawn, as it was, when she

discovered her error, deprive hcr of her right to

have her money back. "

In the present case, no dlvldend has been

declared and no injustice wlll be done to the respondent, or to

anyone, if the applicant 1s not prevented by its mlstake from

obtalnlng the order to whlch it is entitled, declaring that

lt was a mortgagee.of the Ballan Road property and oreering

that the respondent should pay to the applicant a s U m

equal to the nett proceeds of the sale by hlm of that property

and Interest hereon. If the partles are unable to agree upon

the amount of interest to be pald, application may be made

to the Court pursuant to the general liberty to apply reserved

hereunder.

The Court declares that -

1. the applicant is a mortgagee of the land known as Lot 417 San Remo Drlve, Avondale Heights, belng the whole of the land more particularly described in Certificate of Tltle Volume 8702 Folio 229 in the Reglster Book of the Office

of T~tles

at Melbourne, and having been the

property of the bankrupt until his bankruptcy, and holds such mortgage as security for a debt of $82,322.82 due by the bankrupt to the

applicant;

as 127 Anderson Road, Sunshine, being the whole

of the land more particularly described in

Certificate of Title Volume 6055 Follo 902 in

the said Reglster Book. and havinq been the

property of the bankrupt untll his bankruptcy,

and holds such mortgage as security for a

the applicant is a mortgagee of the land known applicant;

as 1 and 2 Hendry Strcct, Sunshine, belng the

whole of the land more particularly described

in Certificate of Title Volume 9151 Follo 993

and in Certificate of Tltle Volume 9151 Folio

999 in the sald Reglster Book, and having been

the applicant is a mortgagee of the land known and holds such mortgage as security for a debt of $21,152.69 due by the bankrupt to the applicant;

4. the applicant at all materlal tlmes prlor to the sale by the respondent of the land known as 111 Sheppards Lane, Lllydale,

being the whole of the land rrore particularly

described in Certificate of Tltle Volume

8526 Folio 718 in the sald Register Book,

and havlng been the property of the bankrupt

until his bankruptcy, was a mortgagee of the

said land, and that the appllcant at all

material times prior to the sald sale held

such mortgage as security for a debt of

$25,609.31 due by the bankrupt to the

applicant, and that the applicant is entltled

to have paid to it the proceeds of sale of

the said land and interest thereon now held

by the respondent in an Interest bearing

deposit with the Comrnerclal Bank of Australia

Llmited;

5. the applicant at all materlal times prior to the sale by the respondent of the land known as Lot 14 Ballan Road, Werribee, king the

whole of the land more particularly described In Certlflcate of Title Volume 8655 Follo 524 In the said Register Book, and having been the

property of the bankrupt untll his bankruptcy,

was a mortgagee of the said land and that the

applicant at all material tlmes prior to the

sald sale held such mortgage as a securlty for

a debt of $17,928.00 due by the bankrupt to the

appllcant, and that the appllcant is entltled

to have pald to it the proceeds of sale of the

said land now held by the respondent, together

wlth lnterest thereon in such amount as nay

be agreed between the applicant and the

respondent, and in default of such agreement,

as shall be declded by the Court on appllcatlon

made pursuant to llberty to apply hereunder.

The Court orders that the taxed costs of the

applicant of and Incldental to the appllcatlon be paid by the

respondent, and that the amount so pald, together wlth the

taxed costs of the respondent of and lncldental to the

application, be recovered by the respondent from the estate

of the bankrupt. General llberty to apply is reserved to

the applicant and to the respondent.

[1979] FCA 158

22 May 1979