State Securities Pty Ltd and Karas, Tom v Dromi, Martha

[2009] VCC 833

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
BUSINESS LIST

COMMERCIAL DIVISION

Case No. CI-08-00228

STATE SECURITIES PTY LTD	First Plaintiff
(ACN 079 829 495)
and
TOM KARAS	Second Plaintiff
v
MARTHA DROMI	Defendant

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JUDGE:	HIS HONOUR JUDGE SHELTON
WHERE HELD:	Melbourne
DATE OF HEARING:	29 May, 1, 3, 4, 5 and 9 June 2009
DATE OF JUDGMENT:	26 June 2009
CASE MAY BE CITED AS:	State Securities Pty Ltd and Karas, Tom v Dromi, Martha
MEDIUM NEUTRAL CITATION:	[2009] VCC 0833

REASONS FOR JUDGMENT

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Catchwords: Claim for brokerage fees.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I W Upjohn	Lewenberg & Lewenberg
For the Defendant	Mr T J Sowden	Gary Prince
HIS HONOUR:

Introduction

1          This is a claim for procuration or brokerage fees incurred by the defendant to the first named plaintiff pursuant to two agreements which were allegedly subsequently assigned to the second plaintiff. The total sum claimed is $13,178.00, together with interest of $5,803.98 and the cost of lodging caveats of $128.00.

2          The proceeding is brought in this Court and not the Magistrates’ Court since the plaintiffs, if successful, seek an order for judicial sale pursuant to charging clauses contained in the two agreements. This remedy is not available in the Magistrates’ Court.

3          It is not in issue that the second plaintiff and the defendant had a very close business and social relationship between 2003 and 2007. They had a falling out in March or April of 2007 for some reason, to which I was not made privy, and are now involved in litigation on various fronts. The defendant, in evidence, stated that there were twelve proceedings either concluded or still current. Mr Upjohn, who appeared for the plaintiffs, indicated that there were four proceedings still on foot, two in this Court and two in the Supreme Court. There is a vendetta, it would seem, between the second plaintiff and the defendant, and they have seen fit to wage part of this vendetta on the stage of the County Court. Although the sum of less than $20,000 is in dispute, the proceeding engaged this Court over a number of days, and spawned 473 pages of transcript.

4          The first plaintiff was a finance broker. Its sole shareholder and director was the second plaintiff’s wife. The second plaintiff managed the first plaintiff. The defendant was introduced to him in 2002 or 2003 by her sister. They soon established a close business relationship, and together they operated a business known as ‘Sexy Ware’ from the first plaintiff’s premises in La Trobe Street, Melbourne.

The Brokerage Agreements

5          The brokerage agreements pursuant to which the plaintiffs sue have been referred to throughout as ‘the second agreement’ and ‘the third agreement’. There was also a ‘first agreement’, but the claim for brokerage pursuant to it was resolved prior to trial.

6          The second agreement is a two-page document. The first page is numbered ‘1 of 2’. The second page is numbered ‘7’! The first page is headed ‘Privacy Act 1988 Consent’. This authorises the plaintiff to disclose information regarding a borrower to prospective lenders and insurers. This consent carries over to the second page. There is then a heading ‘Authority of Broker Appointment’. Under this heading appears the following:

“I, the undersigned, HEREBY AUTHORISE AND REQUEST State Securities P/L, on my behalf, to procure an offer of a Mortgage Loan. I acknowledge that a Mortgage Loan offer so procured by State Securities P/L shall be deemed to be in accordance with this authority and instruction, notwithstanding the fact that such offer may be subject to the value and/or acceptability of the security, as disclosed in a valuation report, procured by the lender, or to other usual and/or proper conditions.

I, UNDERTAKE AND AGREE to pay State Securities P/L (or its nominee) a PROCURATION FEE (hereinafter called ‘the fee’) of $600 plus 2% of the loan amount plus G.S.T. The fee is due and payable upon signing this Appointment whether or not a Letter of Offer is received and regardless of whether the loan proceeds to settlement or not. At your sole discretion, payment of the fee may be deferred until settlement is effected or within 45 days of the date of the lender’s Letter of Offer. In the event, I FURTHER AUTHORISE YOU, on my behalf, to instruct any Mortgagee who may offer such Mortgage Loan, or his solicitor, to deduct and pay State Securities P/L the fee from the proceeds of the loan. If, for any reason, the fee is not deducted and paid to State Securities P/L from the settlement proceeds, I UNDERSTAND AND AGREE to pay you the fee within three working days of settlement date. If the fee is not paid when due, interest will accrue on that fee at the rate set by Section 2 of the Penalty Interest Rates Act 1983.

As legal and beneficial owners I/WE, whose signatures appear below, UNDERSTAND AGREE and do HEREBY CHARGE in favour of STATE SECURITIES P/L by way of fixed charge all property whether real or personal now or hereafter held by me/us (whether alone or jointly with any other person or entity) with payment of all monies which I/we become liable to pay under this authority or any enforcement by State Securities P/L of its rights under this authority including the costs of lodging and removing a caveat.”

7          The second agreement is purportedly signed by the defendant. Her name is printed on it, and the document is dated 26 May 2005. Strangely, no reference is made in the second agreement to the property for which the loan is sought nor the amount sought. It will be noted that the procuration fee of $600 plus 2% of the loan amount plus GST is payable upon signing of the ‘Appointment’ even if no offer of finance is received. Obviously it would be difficult to determine what procuration fee was payable if there was no amount loaned. It will be noted that the procuration fee is payable within three working days of settlement if it is not deducted at settlement, and that interest accrues from the due date. It is upon these provisions that the plaintiffs rely in making their claim. The plaintiffs rely upon the charging clause contained in the Authority in support of their claim for an order for judicial sale.

8          In the schedule to the second agreement it is stated: “The ‘Lender’ means each and every one of the following organisations”. Then appears the names ‘Interstar Securities (Australia) Pty Ltd’ and ‘State Securities P/L (and associated entities)’ and ‘State Securities Pty Ltd (and associated entities)’.

9          The plaintiffs rely upon a loan on the property at 90-92 Guest Street, Tootgarook, being the land contained in Certificate of Title Volume 9248 Folio 340 as the loan to which the second agreement relates. This loan was from Challenger Mortgage Management Pty Ltd (‘Challenge’) and was for the sum of $423,000 which was advanced as to $376,000 on 21 June 2005 and as to the balance of $47,000 soon thereafter. Under the second agreement the plaintiffs claim the sum of $9,966.00, together with interest of $4,402.33.

10        For the third agreement, the plaintiffs rely upon a document in similar form to the second agreement except that although it purports to be signed by the defendant, her name is not printed upon it, nor is it dated. The plaintiffs contend that it was entered into on or about 1 June 2005. It relates to a loan of $116,000 made by Paladin Wholesale Funding on the security of a property at 94 Guest Street, Tootgarook, being the property contained in Certificate of Title Volume 8955 Folio 980. Again, there is no reference to the property for which the loan is sought nor the amount sought. The plaintiffs claim the sum of $3,212.00, together with interest of $1,401.65 under this third agreement.

Did the Defendant sign the Second Agreement and the Third Agreement?

11        When the matter originally came on for trial before me on 4 May 2009, the defendant sought an adjournment, which I allowed with costs, to enable her to further amend her Defence. In her Further Amended Defence dated 5 May 2009, she, by leave, withdrew admissions made in her Defence dated 11 March 2008 and her Amended Defence dated 6 November 2008 that she had entered into the second agreement and the third agreement and thus had signed both documents. In paragraph 5 of the Further Amended Defence, she “does not admit” entering into the second agreement and “says that the signature on the Authority is not hers”. In paragraph 6 of the Further Amended Defence, she “does not admit” entering into the third agreement either, and states that she “has no recollection of signing an authority at the time alleged”.

12        At trial, the plaintiff called evidence from a handwriting expert, Trevor Joyce, who expressed the view, after comparing the signatures on the second and third agreements with other signatures of the defendant which were not disputed to be hers, that it was “highly probable” that the signatures on the second agreement and the third agreement were those of the defendant and that it was “probable” that she printed her name on the second agreement.

13        So far as the second agreement is concerned, the defendant stated that the signature upon it did not look like her signature and that she did not have any recollection of signing it. She states that the printing of the name “Martha Dromi” and the date were not in her handwriting. She admitted in evidence that the signature on the third agreement “looks like my signature”.

14        The defendant stated that she frequently signed documents put before her by the second plaintiff without reading them. She stated at the time she was applying for many loans.

15        In all the circumstances, and given my adverse comments upon the credit of the defendant below, I am satisfied that the defendant did sign the second agreement and the third agreement.

Do the Second Agreement and the Third Agreement relate to the transactions alleged?

16        The real issue is as to whether the second agreement and the third agreement do in fact relate to the transactions alleged: namely, for the second agreement, a loan from Challenger on the property at 90-92 Guest Street, Tootgarook, and for the third agreement, a loan from Paladin on the property at 94 Guest Street, Tootgarook.

17        Obviously, it is necessary for the second agreement and the third agreement to relate to the particular lending transactions alleged by the plaintiffs. An entitlement to a brokerage fee cannot exist in a vacuum. It must relate to a specific property.

18        As indicated, neither the second agreement nor the third agreement indicate the property for which the loan is sought, nor do they state the amount sought.

19        The second plaintiff stated that he extracted the second agreement and third agreement from the first plaintiff’s files relating to the respective transactions upon which the plaintiffs seek to rely. Further, a copy of the second agreement was found on the Challenger file produced under subpoena.

20        Much then depends upon the credit of the second plaintiff. Mr Sowden, who appeared for the defendant, not surprisingly, attacked the second plaintiff’s credit. Central to this attack were assignments of the second agreement and the third agreement from the first plaintiff to the second plaintiff, both dated 29 June 2007.

21        The second plaintiff stated that the reason for the assignments was that the first plaintiff, presumably his wife, was wearied of fighting with the defendant. Mr Sowden suggested that these assignments were a sham. If they were, this would undermine the plaintiff’s credit. He referred to the fact that when proceedings were commenced on 22 January 2008, the Statement of Claim did not refer to these assignments. They were only referred to in an Amended Statement of Claim filed on 17 October 2008. Mr Sowden relied on the fact that no consideration was paid for the assignments. Although there was no legal requirement for such payment, evidence of such a payment would have supported the assertion that the assignments in fact took place.

22        The second plaintiff stated that, strangely, the original assignments were sent to the defendant, with him retaining copies. He is not able, however, to produce a covering letter to the defendant as might be expected. He did not know to what address they were sent. The defendant stated that she never received the assignments, and first became aware of them in the course of this proceeding.

23        Mr Sowden next relied upon the fact that the assignment in the case of the second agreement referred to it as being dated 21 June 2005, and the assignment of the third agreement referred to it as being dated 18 July 2005. These are not the dates of the second agreement or the third agreement. The second agreement is dated 26 May 2005 and it is so pleaded. The third agreement, which is undated, is pleaded as having been entered into on 1 July 2006 (obviously it should be 2005). 21 June 2005 and 18 July 2005 are the dates of invoices forwarded to the defendant at 36 Auburn Avenue, Northcote, claiming the brokerage fees. The defendant states that she never received these invoices. They do not state the transaction to which they relate.

24        The assignments only assign part of the debt alleged, in each case omitting the sum of $660, being the $600 basic fee plus $60 GST. These sums are also omitted from the invoices dated 21 June 2005 and 18 July 2005.

25        On 28 November 2007, some five months after the alleged assignments, the first plaintiff lodged caveats over the defendant’s properties at 90-92 Guest Street and 94 Guest Street, Tootgarook. Caveatable interests were stated to be claimed on the basis of agreements made on 26 May 2005 for 90-92 Guest Street and 1 July 2006 (again not 2005) for 94 Guest Street. The lodging of these caveats by the first plaintiff is, of course, quite inconsistent with there having been an assignment of the second agreement and the third agreement some five months earlier. After these caveats lapsed, the second plaintiff lodged a caveat in his name over the property at 94 Guest Street, Tootgarook, in which the agreement upon which the charge was based was still stated to be “on or about 1st July 2006”. This caveat was lodged on 22 January 2008.

26        As well as assignments on 29 June 2007 of the second agreement and the third agreement, there was also an assignment on this date of the first agreement from the first plaintiff to the second plaintiff. The first agreement was between State Securities Pty Ltd and Direct One Management (actually Direct One Management Pty Ltd). Yet, on 3 April 2008, the first plaintiff served a statutory demand under the Corporations Act 2001 based on the first agreement, even though the second plaintiff conceded that, if the assignment had occurred, the first plaintiff had no interest in the brokerage fees assigned.

27        On 29 June 2007, there was also an alleged assignment from the first plaintiff to the second plaintiff of brokerage fees of $5,610 due from Nafpaktos Pty Ltd, the trustee of the defendant’s family trust, even though the second plaintiff conceded that there was no agreement to pay brokerage and therefore no debt to assign.

28        The second plaintiff made no demand for payment under the assignments of the second agreement and the third agreement. Although there was no legal requirement that he do so, one might have expected this to occur upon these agreements being assigned to him.

29        In Supreme Court proceedings headed:

“No: 5536 of 2008

IN THE MATTER of 70 NICHOLSON STREET PTY LTD (under administration)

(ACN 105 731 495)

B E T W E E N:

NAFPAKTOS PTY LTD (ACN 088 127 084)	Plaintiff
- and –
PAUL VARTELAS AS ADMINISTRATOR OF 70 NICHOLSON ST
PTY LTD (under administration) (ACN 105 731 495)	Defendant”

in an order made on 29 April 2008, Master Efthim stated under “OTHER
MATTERS”:

“The appointment of an administrator of 70 Nicholson St Pty Ltd was made at the last moment to frustrate the Plaintiff’s claim in the County Court.

The Plaintiff’s director alleges that the administrator has been introduced to her by Mr T. Karas, a director of the Defendant as his ‘mate’. Mr Karas has sworn that he appointed the administrator as the receiver manager of Australvic Property Management Pty Ltd which was a short appointment. He swears he did not appoint the administrator as the receiver manager of the Armadale YCW Rugby League Club. That appointment was made by State Securities Pty Ltd of which his wife is a director. That statement is false. There is evidence before the Court which has not been rebutted and demonstrates that the [sic] Mr Karas is the manager and in effective control of State Securities Pty Ltd. Mr Karas was given the opportunity to rebut the evidence put to the Court, but did not do so. There is a perception of bias with this administrator.

The Plaintiff has every right to apply for the removal of the Defendant as trustee in the County Court and should not be prevented from doing so.

… .”
[My emphasis.]

30        The matters to which I have referred above throw doubts upon the credit of the second plaintiff and his business practices.

31        The credit of the defendant was attacked by Mr Upjohn, who appeared for the plaintiffs. He referred to an affidavit sworn by her in the name of Martha Tsamis on 23 April 2008 in a Supreme Court application to set aside the statutory demand on Direct One Management Pty Ltd, to which I have referred above. In that affidavit she states, in relation to the name ‘Martha Dromi’:

“I do not and never have gone by that name ... .”

Dromi was in fact the surname of her longtime de facto partner. In a statutory declaration made 11 August 2005, however, in respect of a tax audit of nightclubs, she states:

“My full true and correct name is Martha Dromi.”

32        Again, the defendant, in the surname of Dromi, entered into a deed with her defacto partner on 9 July 2003. She states her name was formerly Martha Tsamis.

33        I found the defendant’s evidence to explain these contradictions evasive and unsatisfactory.

34        The later amendment to the Defence with respect to the signature of the second agreement and the third agreement also causes concern with respect to the defendant’s credit.

35        There are further matters of concern.

36        A reference for the defendant was produced by the plaintiff on discovery. It was on the letterhead of ‘Patty Malones Bar Pty Ltd’ which operated Inflation Nightclub. The reference, dated 25 May 2005, stated:

“To whom this may concern,

Ms Martha Dromi is employed by this company on a full time basis in a management position and has been for the last 3 years.

Her Salary is $120,000.00 per annum.

Should you have any further queries please contact me on 03 9614

6122.

Yours truly,

[signed]

Marcus Coloviti [sic]
General Manager”

37        Marcus Colavitto gave evidence that his name was incorrectly spelt, and that he had not signed the document.

38        Mr Colavitto was also referred to a reference on the letterhead of Patty Malones Bar Pty Ltd dated 25 March 2004 which read:

“To Whom It May Concern

Martha Dromi has been employed on a full time bases [sic] for approximately 2 years. Her gross annual income is $120,000.00.

Should you have any queries please call me on 96146122.
Yours Faithfully,
Allan White
General Manger [sic].”

39        He stated that at the time Mr White was a cleaner/maintenance man who worked a few days a week, and was certainly not general manager.

40        A copy of a passport in the name Martha Dromi was discovered by the plaintiffs. This passport purports to be issued on 22 August 2004. The defendant stated that she first saw this on discovery from the plaintiffs and that it was a forgery. Her evidence that her solicitor told her that the matter should be reported to the police after this proceeding was concluded was less than convincing.

41        Mr Upjohn relied upon the fact that the loans for 90-92 Guest Street and 94 Guest Street, Tootgarook were procured by the first plaintiff and that accordingly, it might have been expected that brokerage was payable. On the other hand, on account of the close relationship between the second plaintiff and the defendant, brokerage may not have been charged.

Conclusion

42        As will be apparent, I have considerable reservations as to the credit of both the second plaintiff and the defendant and as to where the truth lies.

43        The onus, however, lies upon the plaintiffs to satisfy me on the balance of probabilities that the second agreement relates to the loan procured for 90-92 Guest Street, Tootgarook, and that the third agreement refers to the loan procured for 94 Guest Street, Tootgarook. In all the circumstances, they have not so satisfied me.

44        There will be judgment for the defendant.

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