Smith v Shortland

[2007] NSWSC 1404

CITATION:	Smith v Shortland [2007] NSWSC 1404
HEARING DATE(S):	20/11/07
JUDGMENT DATE :	6 December 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Plaintiffs are entitled to a lien over the defendants' property for $201,494. Defendants to pay the plaintiffs' costs of the proceedings.
CATCHWORDS:	CONVEYANCING [175]- Torrens title- Instruments generally- Attestation and execution- Forgery- On facts, forgery proved- Orders made for restitution.
PARTIES:	Frank John Smith (P1) Mark William Smith (P2) Steven Robert Smith (P3) Darren Robert Shortland (D1) Lynda Jane Smith (D2)
FILE NUMBER(S):	SC 6923/04
COUNSEL:	J S Drummond (P) D1 in person D2 in person
SOLICITORS:	Michael Atkinson & Associates (P) D1 in person D2 in person

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 6 December 2007

6923/04 – SMITH v SHORTLAND

JUDGMENT

1 HIS HONOUR: These are essentially proceedings between three brothers and their sister over the property, 32 Elliott Street, Kingswood, formerly owned by their parents.

2 Prior to 13 October 1999, that property was owned, as tenants in common, by Frank William Smith and Shirley Mary Smith. On that day, a one-third interest as tenant in common was transferred to the second defendant, Lynda Jane Smith, the transfer showing a purchase price of $45,000. On the same day the property was mortgaged to Aussie Home Loans for $60,000, the $60,000 being a loan made to Lynda Jane Smith.

3 It would seem that the involvement of Lynda Jane Smith as a one-third owner of the Kingswood property was so she could borrow on the property (with the permission of her parents).

4 It would seem from the Aussie Home Loans documents, that Aussie Home Loans valued the Kingswood property at $150,000 in 1999.

5 The Aussie Home Loan application form suggests that the $60,000 borrowed by Lynda Smith was used as to at least $38,000 to pay her parents.

6 The probabilities, accordingly, are that Lynda Smith acquired her one-third share bona fide and for consideration. Furthermore, the signatures on all the relevant documents appear to be genuine.

7 In April/May 2000, Lynda Jane Smith and her de facto husband, the first defendant, Darren Robert Shortland, wished to purchase property at St Clair. The following transactions were effected:

(a) Transfer 6857616A whereby Mr Shortland became an equal holder as tenant in common with the other three holders in the Kingswood property;

(b) Mortgage 6857617X in favour of Aussie Mortgages Ltd for $120,000 advanced to Lynda Jane Smith and Darren Shortland.

8 The figures from Aussie Mortgages Ltd show that the $120,000 was used to discharge the previous mortgage ($60,223.68), to pay the defendants $29,946.33 in cash and to pay Permanent Custodians Ltd $29,480.

9 It is clear that the reason why Darren Shortland was added as a proprietor was because Aussie Home Loans required it as a condition of granting the further loan.

10 The defendants purchased the St Clair property with a mortgage of $166,500 advanced by Aussie Mortgages Ltd.

11 The signatures of F W Smith and S M Smith on the documents to effect the above transactions are in dispute. I will seek to resolve that dispute later in these reasons.

12 Frank William Smith died on 27 November 2000. No probate has ever been taken out of his estate; however, the further amended statement of claim pleads that by his last will and testament, Frank William Smith had devised all his property to his wife, Shirley Mary Smith, and this is admitted in the defence.

13 On 1 August 2003, one of the defendants listed the Kingswood property for sale and instructed solicitors, Adams & Partners, to prepare a contract for sale.

14 On 11 August 2003, the four registered proprietors of the Kingswood property purportedly entered into a contract of sale of that property for $280,000.

15 On 16 September 2003, Lynda Jane Smith collected from Adams & Partners, a form of memorandum of transfer and authority.

16 On or about 21 September 2003, one of the defendants caused to be delivered to Adams & Partners, those documents which appeared to be duly signed by the registered proprietors.

17 Settlement of the sale of the Kingswood property took place on 22 September 2003 and the balance of the purchase price, $153,731.63 was paid to Aussie Mortgages Ltd to reduce the indebtedness of the defendants.

18 It is clear that the signatures of Frank William Smith on these documents were forgeries because he had died three years earlier.

19 Shirley Mary Smith died on 30 December 2003 intestate.

20 On 7 July 2004, letters of administration in the estate of Shirley Mary Smith were granted to the three plaintiffs, her three sons.

21 The plaintiffs say that the signature of Shirley Mary Smith on the transfer of Kingswood and the authority to pay moneys was forged, either by their sister, the second defendant, or by someone in her interests and to her knowledge.

22 Although the transfer gave the purchasers an indefeasible title, the plaintiffs say that the $153,731.63 plus interest must be repaid to the estate and that as that money can be traced into the St Clair property, the St Clair property is charged with repayment of that money.

23 At an early stage of these proceedings, the plaintiffs put a caveat on the St Clair property and that caveat has been kept in force by order made in these proceedings.

24 The case came on for hearing before me on 20 November 2007. Mr J S Drummond of counsel appeared for the plaintiffs, and the defendants represented themselves.

25 The principal evidence consisted of documents and the expert report of Mr Anderson, document examiner. Mr Anderson was cross-examined by Mr Shortland, but there was no contrary evidence put before the Court by any other expert. Mr Shortland’s main attack on Mr Anderson was that he had made assumptions which may not be correct.

26 Mr Anderson examined a number of signatures of Frank William Smith and Shirley Smith, most of which were originals, but some were reproductions. In the usual way that document examiners proceed, he magnified these signatures and pasted them on his data sheets which formed the annexures to his report.

27 As to Frank William Smith, he noted that the signatures on the 2000 and 2003 documents (which he classified as “questioned signatures”) were inconsistent with the undisputed signatures.

28 He noted that the questioned signatures were inconsistent with the specimens in regards to the formation of the letters “F, W, t, h” and the consistent use of a pen lift between the “m” and the “i”. There is also often a pen lift between the “S” and “m” of Smith which never occurs with the questioned signatures.

29 Indeed, the construction of the “F” in the undisputedly genuine F W Smith signatures is distinctive even to the lay eye: it is absent from the questioned signatures.

30 Mr Anderson also says that there is no material at all to suggest that Mrs Smith ever wrote the signatures “F W Smith” on any of the disputed documents.

31 This is significant because the defendants, in their defence, say that whilst they acknowledge that the signature “F W Smith” was forged on the 2003 documents (which was obvious as he had been dead for three years), it was Mrs Smith who signed “F W Smith”. On Mr Anderson’s evidence, that just cannot be right.

32 Mr Anderson reports that the genuine signatures of Shirley Smith have at least two distinctive attributes. First, the “S” of “Shirley” is written with a final loop overlapping the initial upward stroke of the “S”. Secondly, at the end of the “h” the writer continues the line on in a curve going anti-clockwise in a semi circle and at the top of the semi circle she makes a horizontal stroke to the left and then comes back to cross the “t” in one continuous stroke. Mr Anderson referred to this as causing an eyelet formation.

33 Mr Anderson said that the formation of the questioned “S M Smith” signatures showed a completely different pen movement to her genuine specimen signatures.

34 He also notes that as Mrs Smith got older her signature became less fluent. Furthermore, in most of the specimen signatures, but not all, there is a dot after the initial “S”. However, in the documents of May 2000, that is, the transfer and mortgage to Mr Shortland and the mortgage for $120,000, the feature of the initial “S” is absent and the “h” in Smith ends in a downstroke or ends in what might be a capital “d”.

35 Both with the aid of Mr Anderson’s specimens and his evidence where he points out the distinctive features of Mrs Smith’s signature and by looking at the documents myself, it seems clear to me that none of the vital 2000 documents, nor any of the 2003 documents other than the transfer to Darren Robert Shortland of the one-quarter interest, were signed by Mrs Smith.

36 Mr Anderson has also looked at unquestioned signatures of Lynda Jane Smith. He notes that there is a very marked similarity between the way in which Lynda Smith ends “Smith” with a squiggle that looks like a capital “d” and some of the questioned signatures of Mrs Smith. He considers that it may well be the case that Lynda Smith wrote the questioned signatures.

37 Possibly because the defendants were litigants in person, Mr Anderson was not closely cross-examined on his report. However, it is difficult to see what meaningful cross-examination could have taken place other than what is obvious, and that is, that there are some genuine signatures of Mrs Smith which do not exactly correspond with her standard genuine signature. However, this is to be expected because people do sign documents under different conditions and one would naturally expect there to be some variation.

38 Lynda Smith gave evidence. There was nothing in her demeanour which would make one disbelieve her evidence and she was not affected by cross-examination. However, her credibility must be affected by the fact that, at the very least, she knew that someone other than F W Smith had signed the documents and never ever disclosed that fact to the solicitors involved, or to the lender.

39 It was also a little difficult to accept everything she said. She seemed to indicate that she and her de facto husband felt themselves oppressed by her brothers’ attitude and that she had been in a position where she had offered to settle the case. However, she never made any offer during the course of the proceedings and, although I encouraged them, it did not appear that the parties held any discussions during the case. While Miss Smith maintained that she was more than amenable to a fair distribution of her parents’ estate, there is no material to suggest that she was ever intent on, or was capable of, giving up the gain by taking the whole of the proceeds of her parents’ major asset, namely, the house at Kingswood.

40 In the light of Lynda Smith’s complicity in the false signature of her dead father and uttering the documents, and in the light of the strong evidence of Mr Anderson, I must disbelieve Miss Smith when she says that her mother signed the signature “F W Smith” to the documents, and that her mother, in fact, signed the questionable documents.

41 It follows that there was no warrant for Lynda Smith and the first defendant to appropriate the $153,731.63, the net purchase price of Kingswood.

42 Accordingly, had it not been for the frauds of 2000 and 2003, the proceeds of sale of $271,079.16 (which in fact were distributed as to $153,731.63 to the defendants and $117,347.53 to mortgagees on account of debts owed by the defendants) would have passed to the second defendant as to one-third and to the estate of Mrs Smith as to two-thirds. This amounts, on my calculation, to the estate receiving $180,719.44.

43 As Shirley Smith died intestate, her four children would each receive one-quarter of her estate. If the only asset in the estate were the value of the Kingswood property, then Lynda Smith would be receiving from the estate $45,180. However, it may be that the estate’s solicitor and client costs will exceed its party and party costs, and there may be other expenses. In any event, before Lynda Smith can claim from the estate her benefaction she has to pay what is due to the estate or at least set it off.

44 Of the $180,719, approximately $153,731 found its way into the defendants’ St Clair property. Mr Drummond says that that sum is charged on the St Clair property. The defendants provide no answer to this, and this is explicable on the basis that they appeared in person, but I cannot for myself see any answer to it.

45 There is then the question of interest. There is no reason why the ordinary rule does not apply and that interest runs from 22 September 2003. At 9% for 1,228 days until the 1 February 2007 and 10% for 100 days since, on my calculations this amounts to $59,672. The amount of the charge would appear to be $153,794 plus interest of $47,700 being a total of $201,494 and there should be an order that the plaintiffs are entitled to a lien over the St Clair property for $201,494. The defendants must pay the plaintiffs’ costs of the proceedings. The exhibits may be retained for 28 days and thence returned to the party producing them unless an appeal is lodged in which case the exhibits are to be held until the conclusion of the appeal.

46 In case there is some mathematical miscalculation I will direct that these orders not be entered for three days with liberty to apply to any party within those three days.

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