Shearer v Shearer
[2012] NSWSC 939
•31 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Shearer v Shearer [2012] NSWSC 939 Hearing dates: 31 May 2012 Decision date: 31 August 2012 Jurisdiction: Equity Division Before: Davies J Decision: 1. Judgment for the Plaintiff against the First Defendant in the sum of $628,234.95.
2. Judgment for the Plaintiff against the Second Defendant in the sum of $20,041.66.
3. The Court declares that the Defendants hold the property situated at 17/135-146 Fryar Road, Eagleby Queensland 4207 being Lot 17, SP146810 with title reference 50397725 (the "Queensland Property") on trust for the Plaintiff.
4. If at the date of making this Order, the Queensland Property has not been sold in accordance with the Orders of the Court dated 14 July 2011 and 10 August 2011, then within 28 days of the date of this Order, the Defendants are to undertake at their cost all steps necessary to transfer the Queensland Property to the Plaintiff.
5. In the event that at the date of making this order the Queensland Property has not been sold and within 28 days of the date of this Order the Defendants have not undertaken all steps necessary to transfer the Queensland Property to the Plaintiff pursuant to paragraph 4 above, the Registrar in Equity is authorised to give effect to paragraph 4 of these Orders, including executing documents.
6. Paragraphs 8 to 10 of the Court's orders dated 10 August 2011 are set aside.
7. Further to paragraph 7 of the Court's Orders dated 14 July 2011, the passports of the First Defendant which are in the custody of Allan McEwen of Miller & Young, the former solicitor for the First Defendant, are to be transferred into the custody of Richard Smallwood, the solicitor for the Plaintiff, or his agent and held by Mr Smallwood only until the requirements of the First Defendant imposed by these Orders are satisfied.
8. Any party has liberty to apply to Davies J on 2 days' notice in relation to these Orders.
9. The Plaintiff's costs of the proceedings are to be paid by the First Defendant.
Catchwords: REAL PROPERTY - resulting trust - misuse of Plaintiff's funds to purchase property in Defendant's name - misappropriation of Plaintiff's funds generally by estranged wife - forged loan variations. Legislation Cited: Duties Act 1997
Family Law Act 1975Cases Cited: Black Uhlans Incorporated v New South Wales Crime Commission & Ors [2002] NSWSC 1060
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
In re Kerrigan; ex parte Jones (1947) 47 SR (NSW) 76
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165Category: Principal judgment Parties: Barry David Shearer (Plaintiff)
Delia Amelia Shearer (also known as Delia Amelia Sanchez Garcia) (First Defendant)
Graham Colin Radnedge (Second Defendant)Representation: Counsel:
D Klineberg (Plaintiff)
In person (First Defendant)
No Appearance (Second Defendant)
Solicitors:
Smallwoods Lawyers (Plaintiff)
In person (First Defendant)
No Appearance (Second Defendant)
File Number(s): 2011/214754
Judgment
This is a claim by the Plaintiff against his estranged wife and her present partner alleging that she misused and misapplied money belonging to him which she was managing on his behalf, and that both defendants hold property on trust for the Plaintiff which was acquired using his money.
The Plaintiff's accident and marriage
On 15 July 1983 the Plaintiff suffered severe personal injuries as a result of being hit by a motor vehicle at Palm Beach in New South Wales. These injuries included brain damage. The Plaintiff was in a coma for three months after the accident.
As a consequence of the accident and injuries the Plaintiff, in 1995, received damages of approximately $650,000 clear of legal fees and expenses. By reason of the nature of the Plaintiff's injuries (presumably the brain injury) the Plaintiff's financial affairs were first managed by the Office of the Protective Commissioner of NSW (as the NSW Trustee and Guardian was then known) until about August 1999.
In the course of managing the Plaintiff's funds the Protective Commissioner purchased on the Plaintiff's behalf a property at 92 Central Road, Avalon for $315,000. The purchase price was paid in cash from the monies the Protective Commissioner was managing.
Approximately three months after the purchase of the property the Plaintiff met the First Defendant. The First Defendant was born in Peru and grew up there.
On 19 April 1997 the Plaintiff and the First Defendant were married. After the marriage the First Defendant attended to those of the Plaintiff's financial affairs that were not managed by the Protective Commissioner.
From about September 1999 the Protective Commissioner ceased management of the Plaintiff's financial affairs and the First Defendant commenced to manage them although the First Defendant said that the Plaintiff partly managed them himself by paying some bills.
In about January 1999, whilst the Protective Commissioner was still managing the Plaintiff's financial affairs, the Plaintiff borrowed $70,000 from Wizard Home Loans secured by a mortgage over the Avalon property. The mortgagee was Permanent Custodians Ltd.
The Plaintiff borrowed the money because the First Defendant wanted money to complete the building of a house which she had in Peru. The Plaintiff said that the arrangement was that the First Defendant was going to repay the money to Permanent Custodians. The Plaintiff said that he does not know what happened to the borrowed funds. The First Defendant agreed that the money was borrowed to complete the house in Peru but she said that she repaid the loan from her own monies.
The Plaintiff and the First Defendant lived at the Avalon property from soon after they met until about 2001 when they moved to Cowra. Prior to moving to Cowra the first child of the Plaintiff and the First Defendant, Joshua, was born on 25 May 2000.
Shortly before moving to Cowra the Plaintiff provided approximately $50,000 to his mother to enable her to acquire the interest of her former de facto partner in a farm at Cowra.
After moving to Cowra in 2001 the Plaintiff and the First Defendant had two further children, Sophia born 6 April 2004 and Selena born 13 April 2006.
When the Plaintiff and the first Defendant moved to Cowra the Plaintiff said that the First Defendant attended University in Wagga Wagga as a residential student for four years. Presumably this must have been interrupted since Sophia was born on 6 April 2004. Whilst the First Defendant was at University the Plaintiff looked after the children.
The Plaintiff said that in 2006 the First Defendant moved to Charles Sturt University at Orange where she lived on campus and completed her Bachelor of Pharmacy Degree. Again, this must have been interrupted because Serena was born on 13 April 2006.
The First Defendant said that she did not move to Cowra until 2003 because there was no work for her there, and she had a job in Sydney. She disputed that she was a residential student at Wagga Wagga. She only stayed on campus during residential schools that arose as part of the course which she variously described as biomedical science and biological science. She said that at the conclusion of that course she decided to study Pharmacy which could not be studied by distance education, and she moved to Orange in 2007 for "work and/or study purposes".
The Plaintiff said that in about December 2006 the First Defendant took the three children to Peru. The First Defendant said that this happened in April 2007. The First Defendant returned to Australia in early 2007 (she said May 2007) but without the children. The Plaintiff understands that the children were left with the First Defendant's parents, and they have lived in Peru ever since.
In the middle of 2007 the Plaintiff and the First Defendant permanently separated. The Plaintiff remained living at his mother's house in Cowra. It seems that it was about this time that the First Defendant moved to Orange.
The Plaintiff said that he had no money to go to Peru to see the children. Subsequently, in October 2009 the Plaintiff sold a motor vehicle that he owned to the First Defendant's sister to raise funds to go to Peru. After arriving in Peru he lived with the First Defendant's parents for approximately three months with his children and then lived in a hotel for approximately a month. After that he stayed with other people he knew in Peru until he returned to Australia on 6 June 2011.
The Plaintiff said that he does not know what happened to the money transferred from the Protective Commissioner to the First Defendant. Some of the matters referred to below have been pieced together from papers given to him by the First Defendant's sister after the Plaintiff returned from Peru. His sister-in-law told him that the First Defendant had given them to her to look after. However, as will become clear, I am not asked to enquire into the disposition of all of these funds. Rather, the present dispute involves limited matters.
Sale of the Avalon property
Whilst in Peru, in early 2010, the Plaintiff received a phone call from the First Defendant, who was in Australia. She said words to the effect:
You should sell the property at Avalon and transfer the funds to South America so that you can use the funds to buy a business. I think you can get about $900,000.
The Plaintiff agreed to that because he wanted to stay with his children. He provided an authority to the First Defendant to handle all aspects of the sale of the Avalon property.
After contracts were exchanged and prior to completion the Plaintiff said that he had a conversation with the First Defendant on the telephone where he said:
I have done my research and I want you to put the money from the sale into Citibank for me. They're offering the best interest.
The Plaintiff said that the First Defendant agreed to do that. In her affidavit the First Defendant agreed that there was some discussion about putting money into a Citibank account.
Contracts were entered into on 24 June 2010 for a sale price of $865,000. The sale of the property was settled on 5 August 2010. The Plaintiff said that he has not received the proceeds from the sale of the property whether in a Citibank account or otherwise.
Peninsula Conveyancing acted for the Plaintiff and the First Defendant on the sale of the Avalon property. The Plaintiff obtained a copy of the letter Peninsula Conveyancing wrote to the solicitors for the purchaser containing the direction to pay. Apart from small sums directed to be paid to such expected recipients as the Office of State Revenue, the local council, Sydney Water etc the bulk of the funds were directed to be paid as follows:
Westpac Banking Corporation: $330,504.90
Delia Shearer [the First Defendant]: $481,284.73
There was in evidence a deposit slip showing the payment of the $481,284.73 into an account of the First Defendant at the ANZ Banking Group in Mona Vale. In addition, there was material showing that after deduction of the agent's commission, the balance of the deposit was directed to be paid to the same ANZ Bank account in the name of the First Defendant. A copy of the First Defendant's bank statements with ANZ Banking Group showed deposits of $481,284.73 and $24,292.60 on 6 August 2010. The latter amount was said to be the deposit less agent's commission.
The Plaintiff said that he has no recollection of directing that the monies be paid to the First Defendant and he did not believe that he did so.
After the sale of the property he said that he had a further telephone conversation with the First Defendant where he asked her where the money was from the sale. She told him that it was in a Westpac account but that she was later going to put it into a Citibank account.
In her affidavit the First Defendant said that she had a subsequent discussion with the Plaintiff whilst he was in Peru. She told him that Citibank was not paying better interest than other banks. She asserted that he agreed the money could be put in any other bank at her discretion or cold be used to buy a property in Peru. The Plaintiff denied that this conversation occurred.
When the First Defendant was asked questions in cross-examination about this conversation she denied that there was ever a conversation about where the money was to go, whether to Citibank or elsewhere. When I asked her why she had deposed to the conversation in her affidavit if it never occurred she said, first, that maybe there was such a conversation, and then she said she had just remembered that there was such a conversation.
It was put to her that the Plaintiff never authorised her to pay the sale proceeds to her personally. She said that he did. The following exchange then occurred:
Q. And he never authorised you to keep the sale proceeds once they had been paid to you; he never did that, did he?
A. He never authorised that. But the best way I can say is that he authorised me to sell the property.
The ANZ statements disclose that on 9 September 2010 an amount of $368,967.34 was withdrawn from the account with the description reading "Card Entry at Young Branch". The Plaintiff submitted that that money went to Peru to purchase a property in Lima, but said that it is not necessary for me to make any finding in that regard. The First Defendant said in her affidavit that she used the balance of the proceeds of sale to purchase a property in Lima for approximately $380,000.
The mortgage to Westpac
The Plaintiff exhibited documents to his affidavit showing that the mortgage from Permanent Custodians was discharged on about 24 April 2007, and on 6 March 2007 a new mortgage in favour of Westpac was given over the property. The mortgage was stamped in the amount of $145,000 and appears to indicate that the new loan from Westpac was used to pay out a consolidation of debts amounting to $123,000.
The mortgage appears to contain the signature of the Plaintiff and is said to be witnessed by Garth Collins of 67 Jukes Lane, Cowra. The Plaintiff said nothing in his principal affidavit about his signature on the mortgage. He said only that he did not recall applying for the mortgage or for any loan which it might secure, and he did not believe that he did so.
In an affidavit replying to the First Defendant's affidavit where she asserted that she and the Plaintiff had gone to see the manager of Westpac at Cowra to obtain the loan, the Plaintiff said that he recalled attending at Westpac at Cowra but thought the loan was for $50,000. He said that he did not read anything he was asked to sign.
As nothing was said about this mortgage in his affidavit I permitted the Plaintiff to give some oral evidence about the mortgage and loans from Westpac. In that oral evidence he said that he had not approved any loans from Westpac, that he had not signed any documents relating to loans from Westpac and, particularly, that he had not signed any mortgage documents. He was asked to look at his signature on the Westpac mortgage and say if it was his. His answer was "I don't think so". When I asked why he had answered in that way, he said it was not his signature and he had not signed the mortgage.
He was cross-examined by the First Defendant who suggested to him that he had been with her at the Westpac branch in Cowra and talked to the manager in his office. He denied those matters.
The Plaintiff's solicitor arranged for this Mortgage and a number of other documents purportedly signed by the Plaintiff to be examined by a handwriting and document examiner, Steven Dale. In relation to this mortgage Mr Dale's conclusion was that he was unable to come to any conclusion about the authenticity of the Plaintiff's signature. He said that although there were significant differences with specimen signatures from the Plaintiff there were also substantial similarities.
By a Westpac document, purportedly signed by the Plaintiff and the First Defendant, called a Top-Up Existing Loan Application, the Plaintiff and the First Defendant sought an extra amount of $20,000 said to be for home renovation. The Plaintiff did not mention this document in his affidavit apparently because it was obtained by subpoena after his affidavit was sworn. Mr Dale said that he could not reach any conclusion on the authenticity of the signature of the Plaintiff on this document.
The Plaintiff also drew attention to a Letter of Variation from Westpac dated 9 November 2009 addressed to "Mr and Mrs Shearer". The letter approved an increase of $20,000 on the loan. The borrowers were said to be the Plaintiff and the First Defendant. The letter also disclosed that the then current arrangement was a mortgage of $190,441.70 increased to $210,441.70. The letter contained what purports to be the signature of the Plaintiff and the First Defendant with the date 14 November 2009. In addition there was a Declaration of the same date concerning the purpose of the loan. Again this was purportedly signed by the Plaintiff and the First Defendant.
The Plaintiff said that he was not in Australia on that date, that he did not recall signing any request for a Variation of Mortgage or authorising the disbursement of the funds referred to in the letter, and he did not believe that he did so. He did not understand how the previous outstanding amount of $190,441.70 had been reached.
The First Defendant said in her affidavit that in relation to this and every loan increase she sent the documents to Peru, the Plaintiff signed them and then sent them back. As far as this particular increase was concerned the First Defendant said that she recognised the signature of the Plaintiff on the documents. She said that she inserted the date "12.11.09", although the date shown is actually 14 November.
At the conclusion of her cross-examination when I asked the First defendant if she wished to explain anything from the questions asked she said, in relation to this variation, that the Plaintiff signed the application before he left for Peru.
Mr Dale concluded that the purported signatures of the Plaintiff on these documents was in each case "a simulation based upon copying using some example of the genuine B D Shearer signature as a model". I have inferred that this is Mr Dale's formal expression of what he concluded was a forgery.
There was a further Letter of Variation from Westpac dated 16 December 2009 addressed only to "Mrs Shearer" although the borrowers were said to be the Plaintiff and the First Defendant. The letter approved the increase of $100,000 taking the new indebtedness to $302,693.70.
The Plaintiff said that he was in Peru at the time of this variation, that he did not apply for the loan and did not execute the document or any of its attachments. He said he was unaware of where the funds raised by the variation went or how they were used.
The First Defendant confirmed in her oral evidence what she had said in her affidavit regarding this variation, namely, that the documents were sent to Peru for the Plaintiff's signature, he signed them and sent them back.
The document itself does not contain any signatures but there is a Declaration in the same terms as the one dated 14 November 2009 (paragraph 39 above) purportedly containing the signature of the Plaintiff and the First Defendant made on 30 December 2009. Mr Dale's conclusion was, similarly to what was said above, that the signature was forged.
It will be recalled that when the Avalon property was sold an amount of $330,504.90 was directed to be paid to Westpac.
On 11 December 2009 the Second Defendant wrote to CSM Conveyancing in Queensland asking if he could have what looks to be a four week extension to pay the sum of $100,358.95 for a property at 17/145 Fryar Road, Eagleby. He also asked if settlement could be kept in his name. The Plaintiff said that the letter was in the First Defendant's handwriting although signed by the Second Defendant.
In that regard it is to be noted that Mr Dale said that this letter was in the same handwriting as the person who wrote a letter to Raine & Horne dated 23 March 2010 informing them that the Management Agency Agreement with them for the Avalon property was being terminated. That letter was purportedly from, and signed by, the Plaintiff and the First Defendant. The Plaintiff made no reference to this letter in his evidence although he did say that whilst he was in Peru and unknown to him the authority to Raine and Horne was changed. He said further that he did not know where the rent from the Avalon property was deposited after Raine and Horne ceased managing the property.
Mr Dale examined the purported signature of the Plaintiff on this letter. His conclusion was that the signature was forged. He also concluded that certain questioned lettering and numbering on the letter was by the writer of the specimen signature attributed to the First Defendant.
It is reasonable to conclude, and I do so conclude, on the balance of probabilities that the person who wrote the letters to CSM Conveyancing of 11 December 2009 and the letter to Raine and Horne of 23 March 2010 was the First Defendant.
Mr Dale also examined a purported signature of the Plaintiff on a typed letter to Raine and Horne dated (probably) 25/01/2010 which said that since the Plaintiff was overseas he authorised his wife to handle all matters associated with the Avalon property and the cancellation of the agreement with Raine and Horne. The Plaintiff did not mention this document. However, Mr Dale's conclusion was that the signature was a forgery.
On 2 December 2009 the owner of the property 17/145 Fryar Road, Eagleby signed a transfer to the Second Defendant for the sum of $97,500. The transfer was signed on behalf of the Second Defendant and stamped on 13 December 2010.
On 29 July 2010 the Second Defendant transferred the property to himself and the First Defendant as joint tenants in consideration of natural love and affection.
In her affidavit the First Defendant appeared to say that the initial loan from Westpac (which she describes as re-finance) was for $145,000. Neither she nor the Plaintiff was working at the time and the monies were spent on living expenses. She said that the increases in the Westpac Loans were as follows:
(a) What she described as the "second increase" of $38,000 was because the Plaintiff wanted to buy a quad bike and hunt kangaroos. She said the quad bike cost $18,000 or more. The balance was spent on living expenses;
(b) There was in an increase of $20,000 spent on the property in Peru;
(c) There was a further increase of $20,000 spent on the property in Peru;
(d) In December 2009 the loan was increased by $100,000 (from $202,693.70 to $302,693.70) and the monies were used to purchase the property at 17/145 Fryar Road, Eagleby, Queensland.
Rent from the Avalon property
After the Plaintiff and the First Defendant moved to the farm in Cowra in 2001 they rented the Avalon property through Raine & Horne Palm Beach. Up until November 2009 rental payments were deposited into the Plaintiff's account at the Commonwealth Bank. As noted above the Plaintiff said that whilst he was in Peru the authority was changed without his knowledge and thereafter rental payments were paid elsewhere, and he does not know where they are.
The Plaintiff points to his Commonwealth Bank statements and said that they show that the last deposit in respect of rent was made on 30 October 2009 for $2,414.25. However, a comparison of that statement with the Raine & Horne ledger shows that there was one further payment made into the Plaintiff's account on 12 November 2009 for $829.32. Thereafter both the Plaintiff's Commonwealth Bank statements and the Raine and Horne ledger show that the rental money was paid thereafter to the First Defendant.
The First Defendant said that the Plaintiff authorised Raine and Horne to deposit the rent into the First Defendant's ANZ Access Card Account, and that she gave the Plaintiff access to that account by providing him with a card and a PIN. She said that the Plaintiff used funds from that account whilst he was in Peru. As noted above, Mr Dale found that the Plaintiff's signature on the typed letter to Raine and Horne was forged.
The First Defendant agreed that she sent money to Peru from time to time, and that she continued to send $1000 to $1500 per month for the upkeep of the children. The Plaintiff accepted that some of the residue of the funds which had been held by the Protective Commissioner may have been used for the general welfare and support of the family, including the children, over a number of years.
However, he said that loans from, and the concomitant mortgages to, Westpac were not related to the general welfare and support of the family and that those matters occurred without his knowledge or authorisation.
Commencement of proceedings
When the Plaintiff returned from Peru in June 2011 he commenced these proceedings on 1 July 2011 seeking an account of the proceeds of sale of the Avalon property. At the same time he filed a Notice of Motion seeking an ex parte freezing order against the First Defendant's assets to an unencumbered value of $829,089.63. Bergin CJ in Eq made an order restraining the First Defendant from dealing with any funds that she had received from the sale of the Avalon property.
On the return date of the Notice of Motion Rein J made a freezing order in the form requested.
When the matter came back on 14 July 2011 consent orders were made that relevantly provided:
THE COURT ORDERS:
3. That within 28 days of the date of these Orders the Defendant do all acts and things necessary and execute all documents, instruments and writings to put to sale (in accordance with Order 4) the property at JR Los Sauces 345, Lima, Peru ("the Lima property") and upon settlement of the sale the proceeds shall be disbursed as follows:
(a) in payment of agent's fees (including auction expenses if applicable) and legal costs on sale;
(b) in payment of $150,000 to the Plaintiff, such payment to be made to the Plaintiffs solicitor (Richard Smallwood, Smallwoods Lawyers, Suite 146, 117 Old Pittwater Road, Brookvale 2100); and
(c) in payment of the remainder to Smallwoods Lawyers (Suite 146,117 Old Pittwater Road, Brookvale 2100) to be deposited into a controlled moneys account with the Commonwealth Bank of Australia in the names of the solicitors for the parties ("the controlled moneys account"), in trust for the Plaintiff and the Defendant pending further Order.
4. For the purpose of the implementation of Order 3 hereof:
(a) within 28 days, the Defendant shall list the Lima property for sale with such agent as the parties may agree to appoint and in default of agreement as to an agent to be appointed by the relevant governing body responsible for registration of agents in respect of real estate sales, the costs of and incidental to such appointment to be borne by the Defendant as and when same fall due;
(b) the Defendant will provide to the solicitor for the Plaintiff (Richard Smallwood, Smallwoods Lawyers, Suite 146,117 Old Pittwater Road, Brookvale 2100) copies of documents signed by her in connection with the sale together with copies of advertisements published or issued related to the sale;
(c) the Defendant will place a reserve price as agreed between the parties or if not agreed at a price not less than the price for which the property was purchased by the Defendant;
(d) the Defendant shall co-operate with the agent including (without limiting the generality of the foregoing):
(i) making the key available to the agent;
(ii) allowing and organising inspection of the Lima property at all reasonable times requested by the agent;
(iii) doing or saying nothing to hinder or prevent a sale being effected;
(iv) ensuring the Lima property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and
(v) signing all documents requested by the agents in relation to the listing for sale of the Lima property;
(e) the Defendant shall execute a contract for sale in the form prepared by the solicitors or legal agents having the conduct of the sale;
(f) the Defendant shall instruct such solicitor and/or legal agent as the parties above agree upon to have the conduct of the sale or, in the absence of agreement reached within fourteen (14) days of the date of these orders, shall instruct such solicitor or legal agent as may be appointed by the person having the equivalent position in Lima, Peru as does the President for the time being of the Law Society of New South Wales the costs of and incidental to such appointment to be borne by the Defendant as and when the same falls due; and
(g) the Defendant will not confer on any agent without the consent of the other party any right to any sole or exclusive agency in respect of the Lima property or to any commission.
5. That within 28 days of the date of these Orders the Defendant do all acts-and-things necessary and execute all documents, instruments and writings to put to sale by private treaty or auction (in accordance with Order 6) the property at Lot 17, SP 146810, County Ward, Parish Boyd, Title Reference 50397725 ("the Queensland property") and upon settlement of the sale the proceeds shall be disbursed as follows:
(a) in payment of agent's fees (including auction expenses if applicable) and legal costs on sale; and
(b) in payment of the remainder to Smallwoods Lawyers (Suite 146, 117 Old Pittwater Road, Brookvale 2100) to be deposited into the controlled moneys account, in trust for the Plaintiff and the Defendant pending further Order.
6. For the purpose of the implementation of Order 5 hereof:
(a) the Defendant shall list the Queensland property for sale by private treaty or, if such contracts have not been exchanged within two months, by public auction with such agent as the parties may agree to appoint and in default of agreement with such agent as is appointed by the President of the Real Estate Institute of Queensland, or his nominee, the costs of and incidental to such appointment to be borne by the Defendant as and when same fall due;
(b) the Defendant will provide to the solicitor for the Plaintiff (Richard Smallwood, Smallwoods Lawyers, Suite 146, 117 Old Pittwater Road, Brookvale 2100) copies of documents signed by her in connection with the sale together with copies of advertisements published or issued related to the sale;
(c) the Defendant will place a reserve price as agreed between the parties or failing agreement a price of $97,000 dollars on the Queensland property for the purpose of such auction;
(d) the Defendant shall co-operate in every way with the agent including (without limiting the generality of the foregoing),
(i) making the key available to the agent;
(ii) allowing and organising inspection of the Queensland property at all reasonable times requested by the agent;
(iii) doing or saying nothing to hinder or prevent a sale being effected;
(iv) ensuring the Queensland property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and
(v) signing all documents requested by the agents in relation to the listing for sale of the Queensland property;
(e) the Defendant shall each execute a contract for sale in the form prepared by the solicitor or conveyance agreed to by the parties or failing agreement by a solicitor appointed by the Law Society of Queensland to have the conduct of the sale, at a price agreed or not less than of $97,000 dollars;
(f) the Defendant shall instruct such solicitor/conveyancer as the parties agree upon to have the conduct of the sale or, in the absence of agreement reached within fourteen (14) days of the date of these orders, shall instruct such solicitor as appointed by the President, for the time being of the Law Society of Queensland, the costs of and incidental to such appointment to be borne by the Defendant as and when same fall due; and
(g) the Defendant will not confer on any agent without the consent of the other party any right to any sole or exclusive agency in respect of Queensland property or to any commission.
It appears that nothing happened pursuant to those orders, and on 10 August 2011 there were further orders by consent extending the time for compliance with paragraphs 3 and 4 (above) to 26 August 2011.
Further orders were made on 26 August 2011, seemingly by consent, which relevantly provided:
13. The Defendant has advised the Plaintiff that:
(a) The Lima property (as referred to in the orders dated 14 July 2011) has been advertised for sale and the Defendant is to provide to the Plaintiff's solicitor the advertising and other documents referred to in, and in compliance with, paragraph 4(b) of the orders dated 14 July 2011;
(b) The Queensland property (as referred to in the orders dated 14 July 2011) has been listed for sale with an agent and the Defendant is to provide the Plaintiff's solicitor the advertising and other documents referred to in, and in accordance with, paragraph 6(b) of the orders dated 14 July 2011;
When the Queensland property had not been sold by 16 March 2012 the Plaintiff obtained leave and filed on 23 March 2012 an Amended Summons which added Graham Rednedge as the Second Defendant and added a prayer that both the First and Second Defendants held the Queensland property on trust for the Plaintiff, with ancillary prayers that that property be transferred to the Plaintiff together with all rent received from it.
Consideration
There are a number of difficulties involved in deciding this case. First, it is apparent that injuries to the Plaintiff which necessitated the involvement of the Protective Commissioner in the first place were severe brain injuries. No medical evidence was led suggesting that there had been an improvement in the cognitive functioning of the Plaintiff from the time that the Protective Commissioner looked after the Plaintiff's funds. There is some evidence to suggest that the Protective Commissioner was opposed to the transfer of the funds from his management to the Plaintiff and/or the First Defendant.
Both from reading the affidavits of the Plaintiff and from the short time I had to observe him in the witness box I formed the impression that the Plaintiff had memory problems which were likely to impact on the reliability of his evidence.
Secondly, the First Defendant was unrepresented at all times during the hearing. She had previously been represented by a solicitor who was responsible for preparing her affidavit sworn in answer to the Plaintiff's principal affidavit. The First Defendant's affidavit contained large amounts of inadmissible material. I was conscious of the fact that, when objections to her affidavit were being considered, there was no lawyer as the contradictor for the Plaintiff. Accordingly, where there was some doubt, I erred in the First Defendant's favour in admitting some of the challenged evidence.
Thirdly, not only was the First Defendant unrepresented but it was apparent that English was not her first language. Although her English was reasonably good there were occasions when she had difficulty understanding what was said to her or what was put to her in the witness box. She also seemed to have an imperfect understanding of what was required when Court orders were made requiring her to do certain things. For example, she had failed over a 12 month period to provide information and documents to the Plaintiff's solicitors concerning the Queensland property and, more particularly, the property in Lima, Peru.
Another difficulty associated with the First Defendant's being unrepresented was that the Plaintiff was never effectively cross-examined. In circumstances where I had initial misgivings about the reliability of the Plaintiff's evidence because of his injuries and memory problems, the lack of any effective cross-examination of the Plaintiff is a significant matter.
Fourthly, and this is a subsidiary matter, there is a report from only one handwriting expert engaged by the Plaintiff. When that handwriting expert was unable to reach a view about some significant documents I would have been assisted by a report from a handwriting expert engaged by the First Defendant. It is not apparent why such an expert was not engaged by the solicitor who acted for the First Defendant until shortly before the hearing. Further, probably because the First Defendant was unrepresented, the expert was not cross-examined.
Fifthly, although it was entirely appropriate for the present proceedings to be brought in this Court, particularly because of the alleged use of the Plaintiff's money by the First Defendant to purchase properties without his knowledge, many aspects of the present proceedings were more suited to resolution in the Family Court. Certainly, the First Defendant contended that some of the Plaintiff's funds were used for the support of the family and particularly the children of the Plaintiff and the First Defendant. The Plaintiff, as I have noted, accepted that some of the funds may have been used for precisely that purpose.
Moreover, even if the Plaintiff is entitled to the return of the funds used to purchase the Queensland and Lima properties, it seems likely that there will be an adjustment pursuant to the Family Law Act 1975 not the least reason for which is the that the children of the parties have lived in Peru for most of their lives and, it would seem, have been looked after partly by the First Defendant's family. In a sense, therefore, these proceedings will only resolve in a very preliminary way what will finally be decided by the Family Court if agreement can not ultimately be reached between the Plaintiff and the First Defendant.
Issues and findings
The Plaintiff submitted that there were three issues in dispute.
(1) Is the Plaintiff entitled to the proceeds of sale of the Avalon property which were paid the First Defendant?
(2) Is the Plaintiff entitled to a sum of money representing the amount paid to Westpac on the sale of the Avalon property?
(3) Is the Plaintiff entitled to the Queensland property?
It is appropriate to make factual findings when considering each of those issues. Before doing so I note that three significant matters are not disputed because the First Defendant admitted them in either or both of her affidavit and her oral evidence. The first is that the First Defendant used funds ($100,000) without the Plaintiff's knowledge to purchase the property in Queensland. Secondly, some funds, probably $368,967.34 but maybe $380,000 (see para 31 above), were used without the Plaintiff's knowledge to purchase a property in Lima. Thirdly, some of the amount borrowed from Permanent Custodians, perhaps all of the funds but that is not clear, were used in relation to the renovation of another property in Peru although that was done with the knowledge of the Plaintiff.
(1) Proceeds of sale of Avalon
The Avalon property was bought with the Plaintiff's money. He accepted the First Defendant's suggestion that the property should be sold in early 2010. He provided an authority to the First Defendant to handle all aspects regarding the sale of the property. So much is undisputed.
The dispute in relation to this issue is what was to be done with the proceeds of sale. I accept the Plaintiff's account of the conversation where he asked the First Defendant to put the money into a Citibank account for him. I do not accept the First Defendant's evidence that there was a subsequent discussion where the Plaintiff agreed that the money could be put into any other bank at her discretion or used to buy a property in Peru.
My reasons for not accepting the First Defendant's account are principally twofold. First, although she deposed in her affidavit to the fact that there had been a conversation about the money being placed with Citibank, and deposed to a subsequent conversation where the Plaintiff was said to have changed his mind, in the witness box she denied that there ever was a conversation about where the money was to go. Even when the paragraph of her affidavit concerning the subsequent conversation was pointed out to her she maintained her denial. It was only when I asked her why she had said what she did in her affidavit that she eventually agreed that there was such a conversation and asserted that she had just remembered it. Secondly, during the course of making submissions the First Defendant said that she did not have the Plaintiff's agreement to use the balance of the proceeds to purchase the property in Peru and that she had used the proceeds in that way without telling him. That was entirely inconsistent with her evidence of a subsequent conversation where the Plaintiff agreed that the money could be put into any bank or used to buy a property in Peru.
I am strengthened in this view by what can only be described as the dishonest use of the Westpac funds to buy the property in the Second Defendant's name and by the conclusion which I reach that the forgery of the Plaintiff's signature on a number of documents was by the First Defendant. Her motive for doing so was to enable her to obtain control of the funds of the Plaintiff, including funds borrowed from Westpac on security of the Avalon property, so that she could use them to buy, build or improve properties in names other than the Plaintiff over which she had some control. This dishonesty means that unless other evidence supports her account of events then that account should not be accepted.
Further, it is difficult to see why the Plaintiff would have authorised the First Defendant to deposit the funds into her own account and use them as she pleased. The parties had, by that time, been separated for about three years. There was no suggestion from the First Defendant that the Plaintiff had done so because of the money that the First Defendant said that she had provided to the Plaintiff over the years or had provided for the children whilst she was working and the Plaintiff was not.
The Avalon property belonged to the Plaintiff and he was entitled to the proceeds of sale.
(2) Moneys paid to Westpac
It will be recalled that on the sale of the Avalon property $330,504.90 was paid to Westpac to discharge the mortgage over the Avalon property. The issue to be resolved is what if any of those funds were borrowed with the knowledge and approval of the Plaintiff and whether he was truly a party to the Westpac mortgage.
In my opinion, the Plaintiff signed the mortgage to Westpac at the Cowra branch of the Bank. Although the Plaintiff denied that the signature on the mortgage was his he did not receive support from Mr Dale in that regard, although I accept that Mr Dale was not able to conclude affirmatively one way or the other whether the signature was the Plaintiff's signature.
I found the Plaintiff's evidence regarding the mortgage to be unsatisfactory. First, he said nothing in his principal affidavit about whether the signature was his or not. Given that this was a significant matter in dispute it might have been expected that the Plaintiff would have given evidence about it. A failure to lead evidence on the matter would entitle the drawing of Jones v Dunkel inference that evidence on the matter would not have assisted the Plaintiff: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418.
I did, however, permit the Plaintiff to give oral evidence about the matter. The evidence that he gave, namely that he had not signed any documents relating to loans from Westpac, that the signature on the mortgage was not his and that he had never been with the First Defendant at the Westpac branch in Cowra talking to the manager in his office was inconsistent with the affidavit he swore in reply to the First Defendant's affidavit. He there said that he recalled attending Westpac at Cowra about a loan but did not read anything that he signed. He thought the loan that was being obtained was $50,000.
I consider that the Plaintiff was telling the truth in his affidavit in reply. I infer from these matters that one of the documents that the Plaintiff signed whilst at Westpac in Cowra was the mortgage.
Ultimately, it appears to have been accepted on behalf of the Plaintiff that he ought to give credit for the $50,000 loan that he thought was being obtained. Implicit in that is an acceptance that he signed the mortgage as the First Defendant contended.
I do not consider, however, that $50,000 is the appropriate amount for which the Plaintiff should give credit. The mortgage was stamped in respect of a loan of $145,000 and the Plaintiff said in his affidavit that the document appeared to indicate that the new loan was used to pay out a consolidation of debts amounting to $122,000. Whether that is so is open to doubt but the fact that the mortgage is stamped to the extent of the $145,000 strongly suggests that that was the amount of the loan obtained. The Plaintiff cannot rely on the fact that he did not read the documents that he signed: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40] - [49]. There is no suggestion by the Plaintiff of misrepresentation or any other ground that might render the mortgage void: Toll at [49] and [57].
I can place little weight on the Plaintiff's statement that he thought a loan of $50,000 was being obtained. He does not say why he thought that or what the $50,000 was being obtained for. Given that the loan from Permanent Custodians was for $70,000, a loan from Westpac of $50,000 would not without more be sufficient to discharge the mortgage to Permanent Custodians. There is no suggestion that $20,000 was found from the Plaintiff's and/or the First Defendant's own funds to enable such a discharge. Further, it is difficult to see what the benefit would have been in merely swapping one mortgagee for another with no extra funds being provided to the Plaintiff.
In the first place, the Plaintiff is required to give credit for $145,000.
With regard to the other variations of the loan it is clear that all of the documentation is not available. It is impossible to ascertain how the ultimate figure that was paid to Westpac of $330,504.90 was reached by the variations.
I accept Mr Dale's evidence that the variation of $20,000 in November 2009 and the variation in respect of $100,000 were both obtained by the forging of the Plaintiff's signature.
In addition, I reject the First Defendant's evidence about the circumstances of the second variation of $20,000 in November 2009. She said in her affidavit that in respect of all variations the documents were sent to Peru for the Plaintiff to sign, that he signed them and sent them back and the variation was thereafter processed. However, in her oral evidence in relation to this variation she claimed that the Plaintiff signed the documents before he left for Peru.
I note also that the First Defendant agrees that both variations for $20,000 was spent on the property in Peru. This was a property in which the Plaintiff had no interest but was in the name of the First Defendant's father. I bear in mind also that the First Defendant ultimately used the bulk of the Avalon sale proceeds to buy a property in Peru without the Plaintiff's knowledge and that she used the variation for $100,000 to buy a property in the Second Defendant's name without the Plaintiff's knowledge.
There are no documents about what the First Defendant described as the "second increase" in the loan of $38,000 because the Plaintiff wanted to buy a quad bike. I do not accept the First Defendant's evidence about this variation. It is inconsistent with her evidence that in respect of all loan increases she sent the documents to Peru for his signature. If that is correct the Plaintiff was not in Australia, yet on her account he wanted part of the increase to buy a quad bike to hunt kangaroos on a property in Lyndhurst near Cowra. More particularly, if $38,000 had been borrowed the amount outstanding to the bank at the time of the second $20,000 variation would have well exceeded what was said to be owing, namely $190,441.70. If the Plaintiff obtained money for a quad bike it is far more likely that it formed part of the initial loan of $145,000.
Given that I found the First Defendant's evidence concerning the loan variations generally to be unreliable I find on balance that the Plaintiff should be accepted when he says that he was unaware of any of the variations after the initial advance.
Accordingly, the Plaintiff is entitled to $185,504.90 ($330,504.90 - $145,000) in respect of the mortgage to Westpac.
(3) The Queensland property
The First Defendant admitted that, without the Plaintiff's knowledge, she used the $100,000 obtained from Westpac in December 2009 to purchase the property in Queensland in the Second Defendant's name. Thereafter the property was transferred into the names of the First and Second Defendants.
Although the funds used were borrowed from Westpac they were borrowed by varying a mortgage given by the Plaintiff over a property owned solely by him. In that regard it can be said that the Queensland property was purchased with funds belonging to the Plaintiff. In those circumstances a resulting trust in favour of the Plaintiff arises: In re Kerrigan; ex parte Jones (1947) 47 SR (NSW) 76 at 81; Black Uhlans Incorporated v New South Wales Crime Commission [2002] NSWSC 1060; (2002) 12 BPR 22, 421 at [129]-[134].
Since this property was purchased with funds obtained from Westpac it seems to me that the Plaintiff may elect either to claim the sum of $97,500 as part of the sale proceeds of the Avalon property or to have declared a resulting trust in respect of the Queensland property, taking the risk that the property will now be worth and/or will realise less than the sum of $97,500. The Plaintiff has elected to have an interest declared by way of resulting trust in the Queensland property. The result is that he must give credit for the sum of $97,500 in his claim for the proceeds of sale of the Avalon property.
The First Defendant admitted that the property had been rented for $250 per week. In those circumstances the Plaintiff is entitled to a sum representing half the rent for the period 29 July 2010 (the date she became a co-owner) to the present. The Plaintiff is also entitled to judgment against the Second Defendant for the same amount plus a further sum for the period from January 2010 to 29 July 2010 when he was sole owner.
Conclusion
The Plaintiff is entitled to a judgment against the First Defendant in the sum $628,234.95 made up as follows:
(a) the sale price of the Avalon Property in the sum of $865,000;
(b) less net disbursements paid in the sum of $11,660.08 (excluding the payment to Westpac);
(c) less the amount of $70,000, being the amount of the loan from Wizard Home Loans secured by the mortgage to Permanent (the Plaintiff accepts this would have been discharged had the Westpac loans not been made);
(d) less the amount of $145,000 on account of loans obtained from Westpac which were authorised by the Plaintiff;
(e) plus net adjustments on settlement of $1,669.71;
(f) less the agent's commission for the Avalon Property which the Plaintiff understands to be the sum of $18,957.40 (calculated as the deposit amount of $43,250 less the amount of $24,292.60 being the sum the First Defendant received from Barrenjoey Properties on settlement in respect of the deposit);
(g) less the sum of $97,500 being the purchase price of the Queensland Property;
Subtotal: $523.552.23
(h) plus interest of $91,141.06 on the subtotal amount $523,552.23 calculated to 28 August 2012;
(i) plus the sum of $13,541.66 representing the First Defendant's half share of the rental income earned on the Queensland Property
The Plaintiff is entitled to a judgment against the Second Defendant in the sum of $20,041.66 calculated as follows:
(a) the sum of $13,541.66 representing the Second Defendant's half share of the rental income earned on the Queensland Property for 25 months (from 29 July 2010 when the Queensland Property became owned by the Defendants jointly until 28 August 2012), which totals $27,083;
(b) plus the sum of $6,500 representing the 6 months from January 2010 to 29 July 2010 when the Second Defendant owned the Queensland Property entirely.
The Plaintiff seeks an order that the First Defendant should pay his costs on an indemnity basis from 19 April 2012. The basis of that claim is that on that day an open letter was written by the Plaintiff's solicitors to the solicitors then acting for the First Defendant. The letter was a response to an open letter from the First Defendant's then solicitors of 17 April 2012. The first half of the letter constituted an answer to numbered paragraphs of that letter. That letter was not put into evidence.
The letter then went on to say that the Plaintiff continued to be willing to resolve the matter without proceeding to trial. In that regard the solicitors attached draft orders which provided a judgment for the Plaintiff in the sum of $677,652.23 against the First Defendant, a declaration that the First Defendant held her interest in the Queensland property for the Plaintiff and two ancillary orders concerned with the Queensland property. The basis for the judgment sum was explained in detail and was similar, but not identical, to what the Plaintiff put forward at the hearing and which appears in para [104] above. There was one significant difference in that the Plaintiff did not give credit for any amounts paid to Westpac to obtain a discharge of its mortgage. During the course of the hearing the Plaintiff conceded that he should give credit for the $50,000 which he believed had been borrowed from Westpac at the outset of the mortgage. I have determined, however, that the amount of credit that ought to be given is $145,000.
It will observed, in any event, that the amount that the Plaintiff has now established is due from the First Defendant is a sum a little under $50,000 less than the offer contained in the letter of 19 April 2012. It could not be said that the First Defendant acted unreasonably by not accepting the offer of 19 April 2012: Jones v Bradley (No 2) [2003] NSWCA 258.
The only other basis upon which indemnity costs could be ordered is if some unreasonable behaviour or delinquency on the part of the First Defendant could be pointed to in the way the defence of the proceedings was conducted: Oshlack v Richmond River Council (1998) 193 CLR 72 at 89. Although there was a strong argument that the First Defendant behaved unreasonably in relation to the Queensland property by resisting the claim until the hearing when she effectively accepted that her use of the Plaintiff's funds to buy that property was wrongful, that was only one aspect of the claim that was made. The First Defendant resisted the remainder of the claim and, although I have found against her, I do not consider that her conduct of the defence of the remainder of the claim was unreasonable or involved delinquency. Moreover, I must have regard to the fact that at very short notice the First Defendant lost the benefit of the solicitor who had been acting for her with the result that she was required to conduct the defence of the proceedings by herself.
In my opinion, no order for indemnity costs should be made.
Accordingly, I make the following orders:
1 Judgment for the Plaintiff against the First Defendant in the sum of $628,234.95.
2 Judgment for the Plaintiff against the Second Defendant in the sum of $20,041.66.
3 The Court declares that the Defendants hold the property situated at 17/135-146 Fryar Road, Eagleby Queensland 4207 being Lot 17, SP146810 with title reference 50397725 (the "Queensland Property") on trust for the Plaintiff.
4 If at the date of making this Order, the Queensland Property has not been sold in accordance with the Orders of the Court dated 14 July 2011 and 10 August 2011, then within 28 days of the date of this Order, the Defendants are to undertake at their cost all steps necessary to transfer the Queensland Property to the Plaintiff.
5 In the event that at the date of making this order the Queensland Property has not been sold and within 28 days of the date of this Order the Defendants have not undertaken all steps necessary to transfer the Queensland Property to the Plaintiff pursuant to paragraph 4 above, the Registrar in Equity is authorised to give effect to paragraph 4 of these Orders, including executing documents.
6 Paragraphs 8 to 10 of the Court's orders dated 10 August 2011 are set aside.
7. Further to paragraph 7 of the Court's Orders dated 14 July 2011, the passports of the First Defendant which are in the custody of Allan McEwen of Miller & Young, the former solicitor for the First Defendant, are to be transferred into the custody of Richard Smallwood, the solicitor for the Plaintiff, or his agent and held by Mr Smallwood only until the requirements of the First Defendant imposed by these Orders are satisfied.
8. Any party has liberty to apply to Davies J on 2 days' notice in relation to these Orders.
9. The Plaintiff's costs of the proceedings are to be paid by the First Defendant.
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Decision last updated: 31 August 2012
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