Wyse & Young International Pty Limited v Sanna

[2019] NSWSC 683

Supreme Court

New South Wales

Medium Neutral Citation:

Wyse & Young International Pty Limited v Sanna [2019] NSWSC 683

Hearing dates:

12, 13, 14 September, 25, 26, 27, 31 October 2017, 14, 15, 16 February, 8 March 2018

Date of orders:

07 June 2019

Decision date:

07 June 2019

Before:

Brereton J

Decision:

See paras [259]–[272]

Catchwords:

CONTRACT – formation of contract – acceptance – whether contract executed by offeree – whether signature forged - question of fact – held, contract executed

 

CONTRACT – formation of contract – acceptance – whether offer accepted by conduct – whether offeree had notice of terms – question of fact – held, offer accepted

 

CONTRACT – construction – where contract provided for broker to earn “saving fee” of 20% of “saved debt” – where broker negotiated discharge of mortgage for less than amount secured but no reduction in personal indebtedness – held, the definition of “saved debt” upon which entitlement to a “saving fee” depended was concerned with personal indebtedness not amount of any encumbrance – the fee was not earned

 

CONTRACT – unjust contracts – relief under Contracts Review Act not available to a corporation – whether defendants’ application for relief made within time – whether contract for the purpose of a business carried on by personal defendant – whether provision of contract relating to interest rate unjust – where upon refinance of pre-existing liability defendants not specifically informed of significantly higher interest rate – held, provision was unjust and interest varied to pre-existing default interest rate as against personal defendant only

  FIDUCIARY OBLIGATIONS – whether relationship between accountant/financial adviser and client was fiduciary – held, at least in connection with lending transaction it was not – whether refinance transaction in interests of adviser and contrary to interests of client – held, it was not – whether restitution possible – held, it was not, but if there was a breach of fiduciary obligation and restitution was possible there should be a just allowance by way of interest

Legislation Cited:

(CTH) Family Law Act 1975, s 90C
(NSW) Civil Procedure Act 2005, s 95
(NSW) Contracts Review Act 1980, s 6, s 7, s 16

Cases Cited:

Barisic v Devenport [1978] 2 NSWLR 111
Breen v Williams (1996) 186 CLR 71; [1996] HCA 57
DCL Construction Group Pty Ltd, In the matter of [2017] NSWSC 839
Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32
Haywood v Roadknight [1927] VLR 512
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64
Matouk v Entrance Seabreeze Pty Ltd [2010] NSWSC 649
McKenzie v McDonald [1927] VLR 134
Mirzikinian v Tom & Bill Waterhouse Pty Ltd [2009] NSWCA 296
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
NZ Netherlands Society “Oranje” Inc v Kuys [1973] 2 All ER 1222
Phipps v Boardman [1967] 2 AC 46
Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904
Sanna v Wyse and Young International Pty Limited (No 2) [2015] NSWSC 581
Speirs v Caledonian Collieries Ltd (1956) 57 SR (NSW) 483
Spicer v Carmody (1948) 48 SR (NSW) 348
Torlonia v Wright [2016] NSWSC 1139
West v AGC (Advances) Ltd (1986) 5 NSWLR 610

Category:

Principal judgment

Parties:

Wyse & Young International Pty Ltd (ACN 146 329 008) (P1)
Defined Property Investment Pty Ltd (ACN 146 084 451) (P2)
Wolgan Consulting Pty Ltd (ACN 056 986 586) (P3)
Corrado Sanna (D1)
DCL Construction Group Pty Ltd (ACN 158 381 821) (D2)

Representation:

Counsel:
G Dimitriou, director (self-represented, by leave) (Ps)
J C Lee (Ds)

  Solicitors:
Self-represented (Ps)
Kekatos Lawyers (Ds)

File Number(s):

2015/217506

Judgment (REVISED 17 june 2019)

1. Before the court are proceedings brought by three corporate plaintiffs, each of whose controlling mind is George Dimitriou.

2. The first plaintiff Wyse & Young International Pty Limited (“WYI”) sues the first defendant Corrado Sanna (“Mr Sanna”) and the second defendant DCL Construction Group Pty Limited (“New DCL”), a company controlled by Mr Sanna, for debts totalling $136,472.64, said to arise as a result of professional services provided by WYI to Mr Sanna and New DCL, pursuant to two costs agreements, one (to which New DCL was not a party) bearing the date 21 October 2011 (“the First Costs Agreement”), and the other (to which New DCL was a party) bearing the date 16 May 2012 (“the Second Costs Agreement”).

3. The second plaintiff Defined Property Investments Pty Limited ACN 146 084 451 (“DPI”) sues Mr Sanna and New DCL for $1,670,714.26 under a Deed of Loan and a General Security Agreement both dated 26 July 2012. Mr Sanna and New DCL cross claim for rescission of the Deed of Loan and the General Security Agreement; and DPI claims rectification of an attestation clause in them.

4. The third plaintiff Wolgan Consulting Pty Limited (“Wolgan”) sues Mr Sanna for a sum of $78,000, said to be the balance due pursuant to a Saving Fee Agreement dated 15 December 2011 (“the Saving Fee Agreement”).

5. For present purposes, no relief is sought against the (former) third defendant, Mr Sanna’s wife Lepa Sanna (“Ms Sanna”), [1] or the fourth defendant, Domenic Sanna (“Domenic”).

   1. Ms Sanna became a bankrupt prior to commencement of the proceedings, and no plaintiff sought leave to proceed against her. The Amended Statement of Claim removed all references to her as a named defendant. She was discharged during the pendency of the proceedings, but a very late suggestion by the plaintiffs that she should be reinstated as a party was rejected.

6. The plaintiffs' claims, as finally formulated, are pleaded in a Second Amended Statement of Claim filed on the last day of the hearing, namely 8 March 2018, which added certain claims for rectification, referred to below, to the earlier pleading of 17 November 2016 (“ASOC”), on which most of the hearing had proceeded. Mr Sanna and New DCL relied on an Amended Defence and Cross Claim, filed pursuant to leave granted by me on 23 August 2017. On 23 August 2017 I ordered that the issue of whether the defendants, or one of them, owed moneys to the plaintiffs, or any of them, should be determined separately to and before the remainder of the claims advanced by the plaintiffs in the proceedings generally.

Background

7. Prior to 26 July 2012, Ms Sanna was the registered proprietor of a residential property which she and Mr Sanna had occupied as their family home at Copacabana, subject to a mortgage to Australian Executor Trustee Limited (“AETL”), and also of a property at Green Valley. Ms Sanna had purchased the Copacabana property in or about December 1999 for a price of $740,000, part of which was borrowed from Permanent Custodians Limited (“Permanent”) on a mortgage loan secured on the Copacabana property. The property was refinanced on 6 November 2006, when the mortgage to Permanent was replaced by the mortgage to AETL. The AETL mortgage secured a principal sum of $1,650,000 and interest at 7.70% per annum, for a term of 30 years. The default interest rate was an additional 4%, thus 11.7%. The mortgage was guaranteed by DCL Constructions Pty Ltd ACN 072 499 426 (“Old DCL”) and Danic Holdings Pty Ltd (“Danic”), and also secured other loans provided to Ms Sanna or any guarantor, including a facility of $1,352,000 provided to Ms Sanna under a loan agreement dated 30 October 2006. The purpose was stated to be “to refinance owner occupied residence from Colonial/CBA … Approx. payout $550,000”.

8. According to Ms Sanna’s affidavit evidence, she and Mr Sanna separated in or about March 2011, although this became uncertain, with her later evidence diverting from that position.

9. By mid-2011, Ms Sanna and her companies were in financial difficulty, and she was having difficulty in meeting her mortgage obligations to AETL. On 1 September 2011, AETL issued a default notice.

10. According to Mr Dimitriou, on or about 21 October 2011, WYI and Mr Sanna, Ms Sanna and Old DCL entered into the First Costs Agreement. According to Mr Sanna, he and Mr Dimitriou had met in or about 2010, when they were introduced by a mutual friend. Mr Sanna denied having received or executed the First Costs Agreement. While he concedes having engaged WYI, he maintains that the retainer was oral only, and that he had never received a tax invoice from WYI in relation to the accounting services said to have been provided for him or his companies.

11. In her affidavit evidence, Ms Sanna said that she was introduced to Mr Dimitriou, by Mr Sanna, in or about November 2011; in her oral evidence she ultimately said that it was on 2 December 2011.

12. In late 2011, AETL commenced proceedings in the Common Law Division against Ms Sanna for possession of the Copacabana property. She provided the Statement of Claim to Mr Dimitriou, and sought his assistance to save the Copacabana property.

13. Wolgan contends that on 15 December 2011, it entered into the Saving Fee Agreement with Mr and Ms Sanna, entitling it to a fee if it negotiated a reduction in Ms Sanna’s liability to AETL. Mr and Ms Sanna deny having executed the Saving Fee Agreement.

14. Two slightly different versions of a Binding Financial Agreement, under s 90C of the (CTH) Family Law Act 1975, between Mr Sanna and Ms Sanna, bear the date 16 December 2011. Whether that was the date on which either of them was executed is doubtful, but ultimately does not have to be resolved.

15. On 9 January 2012, Arcadia Property Holdings Pty Limited (“APH”) was incorporated. At all material times, Danny Kalischer was its sole director. It had its registered office at Mr Dimitriou’s Bella Vista office, and I infer was incorporated through Mr Dimitriou or one of his entities.

16. A writ of possession in respect of the Copacabana property issued in February 2012 and Ms Sanna received a Notice to Vacate dated 23 February 2012. The Sannas deposed that they vacated the Copacabana property in about April 2012, but as will emerge I do not accept this. On 2 April 2012, lawyers retained for Ms Sanna by Mr Dimitriou procured a stay of execution of the writ until 10 April, and on 10 April the stay was further extended until 2 May 2012.

17. On 14 April 2012, with the consent of AETL, Ms Sanna engaged George Brand Real Estate to sell the Copacabana property. By letter of that date, George Brand Real Estate advised Ms Sanna that a higher price would be achieved if necessary repairs were carried out. Although it seems that at one stage the property was listed for auction, the auction did not proceed.

18. On 28 April 2012, a valuation of the Copacabana property at $950,000 was provided, by valuers retained by WYI “on behalf of Lepa Sanna”.

19. Ms Sanna deposed that in or about May 2012, Mr Dimitriou had a conversation with her in which he said that he liked the Copacabana property and was intending to negotiate to purchase it himself. As will appear, I do not accept this.

20. On 14 May 2012 Gadens, the solicitors acting for AETL, sent a letter to Mr Dimitriou, stating that they were proceeding with the eviction on 13 June at 1130, but would seek instructions if provided with an exchanged unconditional contract for sale.

21. New DCL was incorporated on 16 May 2012 and on the same day (according to Mr Dimitriou) WYI mailed the Second Costs Agreement (which included New DCL) to the Sannas. It is not suggested that Mr Sanna or New DCL ever executed the Second Costs Agreement, but WYI contends that Mr Sanna and New DCL accepted it, by conduct, by continuing to give instructions with notice of its terms. The Sannas deny having ever received it.

22. On 7 June 2012, the selling agent George Brand Real Estate wrote to Ms Sanna that the property was not selling, and recommended that she reduce the asking price.

23. A cover page of a contract for sale of the Copacabana property, from Ms Sanna to APH, which is purportedly signed by Mr Kalischer and Ms Sanna and witnessed by Mr Sanna, was provided by Mr Dimitriou to Gadens; it nominates Grays Legal as the vendor’s solicitor, and Russo & Partners as the purchaser’s solicitor. On 7 June 2012, Grays Legal sent a letter, addressed to Ms Sanna (at Copacabana), reporting that the sale of Copacabana to APH had gone through and contracts had been exchanged unconditionally, dated 9 June 2012, and a deposit of $47,426 (being 5% of price of $948,520) paid. A retainer letter dated 13 June 2012 from Russo & Partners addressed to APH at Mr Dimitriou’s business address refers to a sale of Copacabana to APH. However, as will appear, I do not accept that any such contract was in fact exchanged or deposit paid.

24. Ms Sanna says that around this time, in May to June 2012, she and Mr Sanna vacated Copacabana and moved to rental accommodation at Daley’s Point, and a rental schedule for the Daley’s Point property commences from 8 June 2012. For reasons explained below, if they or either of them did indeed move, it was not a complete nor permanent move. It ultimately, if very belatedly, emerged that at least Mr Sanna understood from his conversations with Mr Dimitriou that the reason for Mr Dimitriou’s intervention was to “save” the property, so that there would be an opportunity for the Sanna’s to re‑acquire it, and that if Ms Sanna was not party to those conversations, Mr Sanna informed her of them.

25. On 13 June 2012 at 0945, Mr Dimitriou sent an email to Gadens (which had been drafted the previous evening), requesting a further stay on order to complete the sale and discharge the mortgage. A Gadens file note of 13 June records “t/a Mr Dimitriou have we received anything from George Brand? No. He thinks contract has been exchanged. Our client’s consent is required and as we have received nothing eviction is proceeding tomorrow”.

26. AETL sought to proceed with the eviction, and most of the locks had been changed when Mr Dimitriou and lawyers retained by him procured a further stay from Campbell J, until 21 July 2012. Ms Sanna was by that stage outside the property, but their furniture and effects were still inside. The Sheriff returned the keys to Ms Sanna.

27. On 18 June 2012 at 1707, Mr Dimitriou sent an email to Gadens, enclosing a letter to “the vendor’s solicitor”. On the same day at 1729, Russo & Partners transmitted by facsimile to Grays a letter confirming that the transaction would settle on 21 July 2012. A statutory declaration dated 20 June 2012 and purportedly signed by Mr Kalischer states that the transaction was at arm’s length, which was purportedly witnessed by “Gauci” at 236 George Street, Sydney. Also on 20 June 2012, to which date the possession proceedings had been adjourned, the Court noted that the parties had reached an agreement.

28. On 25 June 2012, Pepper on behalf of AETL wrote to Ms Sanna with reference to the November 2006 loan of $1,650,000, seeking her acknowledgement that the proceeds of the security property (Copacabana) would not clear the debt, and that she would remain liable for the balance. Ms Sanna signed the acknowledgment on 28 June 2012.

29. On 26 June 2012, Russo sent a fee note to APH (addressed care of Mr Dimitriou’s office).

30. On 28 June 2012, Mr Dimitriou sent an email to Gadens, stating that Hancocks (solicitors) were no longer acting, and referring to statutory declarations and a settlement sheet from “the purchaser’s solicitor”. On 29 June 2012, Mr Dimitriou sent an email to Gadens enclosing correspondence from “the vendor’s solicitors” relating to settlement adjustments. On 10 July 2012, Mr Dimitriou sent an email to Gadens, referring to the settlement scheduled for 20 July 2012.

31. On 17 July 2012, Russo issued a further fee note to APH, for $1,009, presumably for additional work done.

32. On 18 July 2012, Gadens sent an email to Mr Dimitriou, requesting documents in preparation for settlement on 20 July. On 19 July 2012, Mr Dimitriou sent an email to Gadens providing some documents, and objecting to providing others. Also on 19 July, Grays issued an invoice to Ms Sanna, for acting on “your sale to [APH]”.

33. On 20 July 2012, Gadens sent a letter to WYI, stating that they were ready to proceed at 2pm, upon receipt of cheques to Gadens for $10,016 and to AETL for $913,473. A settlement sheet dated 20 July 2012 refers to a “sale to APH”. Also on 20 July 2012, at 1039, Mr Dimitriou sent an email to Gadens, stating that he would advise “the purchaser’s solicitor” and seek to book settlement for Monday, while Ms Sanna explored raising further funds. On the same day, Gadens made a file note: “att Mr Dimitriou they have come up with the extra funds and will be able to settle Monday between 2 and 3”.

34. A Gadens file note dated 24 July 2012 at 1015 records “att Mr Dimitriou he is on his way has been waiting for purchaser’s solicitor”. Then, at 1145 “left detailed message where are you matter must settle soon”. At 1312, Mr Dimitriou sent an email to Gadens: “just about to head into town please provide total amount owing to AET under mortgage”. Gadens replied at 1425: “Balance of loan is $1,981,353. When will you be arriving for settlement?”.

35. On 24 July 2012 Mr Dimitriou instructed Mr Foley, solicitor, to “drop everything and prepare security documentation urgently in order to save the Sannas’ property”. Mr Foley went to Mr Dimitriou’s office later that day and began work. Mr and Ms Sanna were there; they arrived separately. He finished the documentation by 1800 on 25 July, when he had to leave to attend a dinner in Glebe, and expected that they would be signed that evening. Mr Sanna, but not Ms Sanna, was in the office that day. However, on 26 July he had a further conversation with Mr Dimitriou, and was told the documents had not been signed “last night”. Later that evening he returned to Mr Dimitriou’s office for the purpose of researching the Personal Property Securities legislation, which he had not previously encountered. By then, to the best of his recollection, the security documents had been executed, and multiple copies had been signed. Only Mr Dimitriou was there.

36. Meanwhile, on 25 July 2012 at 1036, Gadens noted that Mr Dimitriou had “just received okay for settlement from purchaser’s solicitor, booked for 3pm”. At 1621, they received by facsimile “copy Gadens b/c and AET b/c. Settlement will now need to be tomorrow”. This was a reference to the bank cheques in favour of AETL and Gadens. On 26 July 2012 at 0959 Gadens sent an email to Mr Dimitriou, stating “we will be available when you come in”.

37. The plaintiffs allege that in the course of 26 July 2012 the Sannas (and New DCL) executed the Deed of Loan, the General Security Agreement and other security documents which are dated 26 July 2012 – including a settlement direction letter which directs the application of the proceeds of the $1.2 million advance, apparently signed by Ms Sanna. The signatures of Mr Sanna and Ms Sanna appear to be witnessed by Ms Thelma Gray of Grays Legal, and she testified that she had indeed witnessed those signatures. In their affidavit evidence, Mr and Ms Sanna denied executing any of those documents, but by the end of the trial they accepted that at least some of the signatures which appear on those documents might be theirs.

38. On 1 August 2012 at 2114, Mr Dimitriou sent an email to Gadens “can you facilitate settlement Thursday 2 August at 2pm?”. Gadens responded on 2 August 2012 at 1111 “we can do 2pm today upon condition of bank cheques”.

39. Gadens’ settlement instructions record settlement on 2 August 2012 at 1400, when Gadens received two bank cheques totalling $923,490.27. Stamp duty was paid on the Deed of Loan on 3 August 2012.

40. On 20 November 2012, the Professionals Ettalong (Real Estate agents) sent a letter to the Sannas “re notice to vacate 35 Daley Ave”, which evidently responded to notice from the Sannas that they proposed to vacate that property. Mr Sanna deposed that in November 2012 he and Mr Dimitriou had a conversation in which Mr Dimitriou asked Mr Sanna to buy the Copacabana Property back from him, for the same amount as he had paid, as Mr Dimitriou needed funds. Ms Sanna deposed that Mr Sanna informed her of the content of that conversation after it occurred. However, in the light of Mr Sanna’s ultimate concession that it had always been his understanding that it was with returning it to the Sannas in mind that Mr Dimitriou had procured the release of the property from AETL in the first place, this was less than a frank description.

7. On 17 April 2013, Mr Sanna executed a mortgage of Copacabana to Westpac. On 8 May 2013, a transfer of Green Valley by Ms Sanna to Mr Sanna (said to be pursuant to Family Law Act, s 90C (which refers to binding financial agreements)) was witnessed by Carlos Moreno, an employee of WYI. This appears to have coincided with a Westpac loan to Mr Sanna, which included the refinance of a debt to Permanent Mortgages secured on Green Valley, and a partial repayment of the loan from DPI. On 9 May 2013, the Westpac refinance was completed, and from it DPI received $820,662.60 which was applied in reduction of the amount owing under the Deed of Loan, and Mr Sanna received a transfer of the Copacabana property from Ms Sanna, expressed to be pursuant to s 90C of the Family Law Act. On 19 June 2013, Mr Dimitriou sent an email to Mr and Ms Sanna: “As you are aware DPI had discharged the facility and undertook to discharge the mortgage partially”. However, the Sannas characterised this transaction as a purchase by Mr Sanna from APH.

8. On the application of a creditor unconnected with these proceedings, a sequestration order made against Ms Sanna, by the Federal Circuit Court, on 10 December 2013, pursuant to which Paul Gerard Weston became her trustee in bankruptcy. It was indicated to the Court that she had been discharged by the conclusion of the hearing, but if so, this has no impact on the current issues in these proceedings.

9. On 7 December 2013, Mr Dimitriou sent an email to Mr Sanna “I am doing my best … would you be kind enough to wack $10k into DPI”. On 9 December 2013, Mr Sanna sent an email to Mr Dimitriou “We will sort something next week just paid ACE … appreciate your efforts if only we didn’t have Damien’s costs right now it would have went to you anyway”.

Procedural history

44. These proceedings were commenced on 24 July 2015, initially to extend the operation of caveats in respect of the Green Valley property. By their summons of that date, DPI (and other plaintiffs) claimed (inter alia) declarations that the Deed of Loan and the General Security Agreement of 26 July 2012 are valid and subsisting, and judgment (including against New DCL) for $1,123,333.39 pursuant to the Deed of Loan. The initial defendants included Ms Sanna’s trustee in bankruptcy, but he ceased to be a party on 27 November 2015. The ASOC of 17 November 2016 claimed, in substance:

1. declarations that the Deed of Loan and associated security documents between DPI as lender, New DCL as borrower, and Mr Sanna and Ms Sanna are valid and enforceable;

2. declarations that the mortgage of the Green Valley property between Ms Sanna and Mr Sanna as mortgagors and DPI as mortgagee dated 26 July 2012 is valid, and that the property is charged for the outstanding loan;

3. judgment for the loan, for professional costs pursuant to the Costs Agreements, and for the Saving Fee under the Saving Fee Agreement;

4. an order setting aside or declaring void the transfer of Ms Sanna’s interest in Green Valley to Mr Sanna; and

5. judgment for possession and orders for sale of Green Valley.

45. Relief was also claimed in respect of the Copacabana property, but this was abandoned at a relatively early stage.

46. The defence filed 20 December 2016 denied execution of all relevant documents and alleged that the apparent signatures of Mr Sanna, Ms Sanna and their entities were forgeries.

47. On 7 June 2017, the proceedings were fixed for hearing for two days commencing on 5 December 2017. An amended defence filed on 3 June 2017 made only minor amendments, and none to the substance of the defence.

48. On 13 June 2017, I heard New DCL’s application to set aside a creditors statutory demand served on it by DPI for the debt under the Deed of Loan. The transcript of Mr Sanna’s evidence in those proceedings (“the creditor’s statutory demand proceedings”) was received in evidence in these proceedings. For reasons then given, the demand was set aside on the footing that there was a genuine dispute as to the existence of the debt. [2] However, in order to expedite the resolution of the underlying dispute, with the consent of both parties I vacated the previous appointment for hearing and fixed the proceedings for hearing to commence on 12 September 2017 for three days, appointed 8 August for pre-trial directions, and granted leave to adduce forensic handwriting expert evidence in respect of the disputed signatures.

    2. In the matter of DCL Construction Group Pty Ltd [2017] NSWSC 839.

49. The defendants filed a motion on 18 August 2017 seeking an order for transfer of the proceedings pursuant to the cross-vesting legislation to the Federal Court of Australia – where Ms Sanna’s trustee in bankruptcy had commenced proceedings in the Federal Court of Australia, inter alia to have the purported transfer of her interest in Green Valley to Mr Sanna declared void – and leave to amend their defence and to file a cross claim, propounding a case for relief for breach of fiduciary duty, and under the (NSW) Contracts Review Act 1980 (“CRA”), essentially on the basis that Mr Dimitriou as the Sannas’ financial adviser counselled or permitted them to borrow from his related entities in preference of his interests over theirs, at interest rates which were manifestly excessive and unreasonable.

50. For reasons then given I concluded that, for want of parties (in particular the trustee in bankruptcy) claims for relief in respect of the Green Valley property could not, at least at that stage, proceed; but that claims for monetary judgments against the extant defendants could, and that those claims should not be transferred to the Federal Court. As to amendment, I concluded that the proposed amended defence, although very late, did not appear to raise issues which were incapable of being dealt with at the imminent hearing; and that while the proposed cross claim would, without satisfactory explanation, raise a case which there had been ample opportunity to raise earlier, involved a significant change to the case which had been conducted to that point (which was very clearly one of forgery, alone) and sat uncomfortably with evidence previously given by Mr Sanna (in the creditor statutory demand proceeding) in which he denied the possibility that he had been tricked; nonetheless the amendment should be allowed, as the contention that there was a fiduciary relationship was arguable, and amendments to enable the real issues to be presented and adjudicated should be allowed if they would not be causative of unacceptable prejudice. While there was a real risk that delay would defeat the plaintiffs’ claim in the context of the pressure they were then under, the fact that the defendants would adduce no additional evidence on the new issues, and that the plaintiffs would be permitted to adduce evidence on the new issues up to and orally at trial, the interests of justice favoured permitting the defendants to propound their cross claim. I therefore granted leave to amend the defence and to file the cross claim, ordered that the plaintiffs’ claims for judgment for a monetary sum or sums against the defendants be determined separately and before the other claims for relief in the proceedings, and adjourned the application for transfer of the proceedings to the Federal Court until the determination of those claims.

51. The final hearing of the proceedings commenced on 12 September 2017. Mr Dimitriou appeared, by leave, for the plaintiffs. Mr Lee of counsel appeared for the defendants, and much assisted the Court. Unfortunately, the three day estimate proved grossly optimistic, and the proceedings had to be adjourned from time to time, until oral submissions were completed on 8 March 2018, when judgment was reserved.

The forgery issue

52. As has been observed, until very late in the proceedings, the sole defence advanced by the defendants was that they had never executed the documents relied on by the plaintiffs – namely the First and Second Costs Agreements, the Deed of Loan and the General Security Agreement, and the Saving Fee Agreement – and that what appeared to be their signatures on them were forgeries, probably made by Mr Dimitriou. That allegation was pleaded in their defences, verified by their affidavits. In their affidavit and oral evidence in the proceedings – and in the case of Mr Sanna also in his evidence in the creditor’s statutory demand proceedings – they repeatedly denied having executed those and other documents, referred to below.

The First Costs Agreement

53. The First Costs Agreement appears to have been signed by Mr Sanna, on his own behalf and on behalf of DCL Constructions (NSW) Pty Ltd (“DCL(NSW)”) and Coastwide Concrete Panels Pty Ltd (“Coastwide”), and by Ms Sanna, on her own behalf and as sole director of Danic, DLD (NSW) Pty Ltd (“DLD”), and Old DCL (a different company from the second defendant New DCL, which was not incorporated until May 2012). Against each signature appears the date “21/10/2011”, in what seems to be the same handwriting, the inference being that the one person has inserted the date multiple times, once for each signature.

54. Mr Sanna and Ms Sanna each also appear to have signed, in the body of the document, a clause which stated:

Witness: I was witness to the fact that this mandate was explained in detail and in full to the clients mentioned above.

55. Also bearing the date 21 October 2011 is an authority, addressed to WYI, to “prepare, assess and lodge my/our finance application”, apparently signed by Ms Sanna, and apparently witnessed by Andrew Jetson, who was an employee of WYI.

56. Mr and Ms Sanna denied that the signatures which appeared to be theirs on the First Costs Agreement were in fact their own, and alleged that they were forgeries. Alternatively, it was submitted that if the First Costs Agreement was executed by the Sannas at all, it was not executed in October 2011, and at the very least must have been backdated, which was said to be highly relevant to Mr Dimitriou’s credit overall.

The Saving Fee Agreement

57. The Saving Fee Agreement bears the date 15 December 2011. The named parties are Ms Sanna (called the “Client”), and Wolgan; Danic, DCL(NSW), DLD and Mr Sanna are named as guarantors. It is apparently executed:

1. by Ms Sanna personally, witnessed by Thelma Gray, solicitor;

2. on behalf of Danic by Ms Sanna, witnessed by Thelma Gray, solicitor;

3. on behalf of DCL(NSW) by Mr Sanna, witnessed by Thelma Gray, solicitor;

4. on behalf of DLD by Ms Sanna, witnessed by Thelma Gray, solicitor;

5. on behalf of DLD in its trustee capacity by Ms Sanna, witnessed by Thelma Gray, solicitor;

6. on behalf of Wolgan, by Mr Dimitriou, witnessed by Andrew Jetson.

58. The Saving Fee Agreement was not separately executed by Mr Sanna in his personal capacity, but he did apparently sign Schedule A (Authority to Disburse), above the description “Signature of Guarantor”.

59. Mr and Ms Sanna denied that the signatures which appeared to be theirs on the Saving Fee Agreement were in fact their own, and alleged that they were forgeries.

The 26 July documents

60. An extensive suite of documents bear the date 26 July 2012. They relate to the alleged advance by DPI of $1.2 million to New DCL, and although they have wider relevance on questions of credit, they are relevant chiefly to the second plaintiff DPI’s claim, which is founded on the Deed of Loan and the General Security Agreement.

61. The Deed of Loan, which bears the date “26th day of July 2012” (26th having been inserted in handwriting in a space left in the printed document before “day of July 2012”), is expressed to be between DPI (ACN 146 084 451) as lender, APH, New DCL, DCL(NSW) and DLD (as borrower), and Lepa  Sanna and Corrado Sanna (as guarantor), and is apparently executed by:

1. Defined Property Holdings Pty Ltd (ACN 155 050 285), by Mr Dimitriou as Sole Director. The non-correspondence of this with the named party Defined Properties Investment Pty Ltd (ACN 146 084 451) gives rise to another issue, which is dealt with later;

2. APH, by Mr Kalischer as Sole Director;

3. New DCL, by Mr Sanna as Sole Director;

4. DCL(NSW), by Mr Sanna as Sole Director;

5. DLD, by Ms Sanna as Sole Director;

6. Mr Sanna personally, whose signature appears to be witnessed by Thelma Gray, solicitor; and

7. Ms Sanna personally, whose signature also appears to be witnessed by Thelma Gray, solicitor.

62. The General Security Agreement, which also bears the date “26th day of July 2012” (26th again having been inserted in handwriting in a space left in the printed document before “day of July 2012”), is expressed to be between APH, New DCL, DCL(NSW) and DLD (as the Grantor), DPI (ACN 146 084 451) (as the Secured Party), and Corrado Sanna and Lepa Sanna (as the Guarantor), and purports to be executed by:

1. APH, by an unidentified signatory as Sole Director;

2. New DCL, by Mr Sanna as Sole Director;

3. DCL(NSW), by Mr Sanna as Sole Director;

4. DLD, by Ms Sanna as Sole Director;

5. Defined Property Holdings Pty Ltd (ACN 155 050 285), by Mr Dimitriou as Sole Director. Again, the non-correspondence of this with the named party Defined Properties Investment Pty Ltd (ACN 146 084 451) gives rise to another issue, which is dealt with later;

6. Mr Sanna personally, whose signature appears to be witnessed by Thelma Gray, solicitor; and

7. Ms Sanna personally, whose signature also appears to be witnessed by Thelma Gray, solicitor.

63. Mr and Ms Sanna denied that the signatures which appeared to be theirs on the Deed of Loan and the General Security Agreement were in fact their own, and alleged that they were forgeries.

64. In addition, in the course of their evidence (and Mr Sanna’s evidence in the creditor’s statutory demand proceedings), Mr and Ms Sanna denied the authenticity of what appeared to be their signatures on a number of other documents which also bore the date 26 July 2012, including:

1. a document entitled “Where no legal or financial independent advice obtained Acknowledgement and Undertaking”, apparently signed by Mr Sanna and Ms Sanna, with both signatures apparently witnessed by Thelma Gray, solicitor;

2. a document entitled “Declaration of the trustee” apparently signed by Ms Sanna as Sole Director and Secretary of DLD, annexing Minutes of a Meeting of Directors of DLD, also apparently signed by Ms Sanna;

3. a Statutory Declaration, apparently signed by Mr Sanna and Ms Sanna and witnessed by Thelma Gray, solicitor;

4. a document entitled “Declaration to the Lender and to its Solicitors”, apparently signed by Mr Sanna for himself and as Sole Director of New DCL and DCL(NSW), and by Ms Sanna, for herself and as Sole Director of DLD, with both signatures apparently witnessed by Thelma Gray, solicitor;

5. a mortgage of Folio 41/875272 (the Green Valley property) by Mr and Ms Sanna as mortgagor to DPI (ACN 146 084 451) as mortgagee, apparently executed both on the cover page and on the annexure by Mr Sanna and Ms Sanna personally, witnessed by Thelma Gray, solicitor (whose address was shown as 8/32 Albert Street, Parramatta), and on behalf of DPI by Mr Dimitriou as Sole Director;

6. a mortgage of Folio 33/718953 (the Copacabana property) by Ms Sanna as mortgagor to DPI (ACN 146 084 451) as mortgagee, apparently executed both on the cover page and on the annexure by Ms Sanna personally, witnessed by Thelma Gray, solicitor (whose address was shown as 8/32 Albert Street, Parramatta), and on behalf of DPI by Mr Dimitriou as Sole Director;

7. a Business Purpose Declaration; and

8. a Direction letter, to DPI by APH, New DCL, DCL(NSW), and DLD, expressed to be signed on behalf of New DCL, DCL(NSW), and DLD by Mr and Ms Sanna as Sole Directors but in fact apparently signed only by Ms Sanna, and making provision to be expressed to be signed, but in fact unsigned, on behalf of APH by Danny Kalischer as Sole Director.

65. In addition to the last-mentioned Direction letter, many other of those documents also provided for execution on behalf of APH by Danny Kalischer, but were not in fact executed on behalf of APH. This is consistent with there being a contemplation, until a very late stage of the transaction, that APH would be involved in the transaction, in a capacity associated with the Sanna interests (that is, as a co-borrower, guarantor or provider of security).

The Family Law documents

66. Relevant to the resolution of these issues are additional documents which appear to be binding financial agreements (“BFAs”) under Family Law Act, s 90C, and which appear to have been signed by Mr and Ms Sanna, who again disputed the authenticity of their respective signatures.

67. The first BFA is expressed to be between Mr Sanna and Ms Sanna, and on the front page bears a date in 2011 which is difficult to decipher, the month having been overwritten; however, both the annexed certificates of independent advice are dated 16 December 2011. It recites that they separated on 1 March 2011, and provides inter alia for Ms Sanna to transfer her interest in both Green Valley and Copacabana to Mr Sanna. Copacabana was described as the former matrimonial home. Mr Sanna’s apparent signature was apparently witnessed by Mr Russo, solicitor, who also apparently signed his certificate of independent advice. Ms Sanna’s signature was apparently witnessed by Thelma Gray, solicitor, who also apparently signed her certificate of independent advice.

68. There is another version of the BFA, which also bears the date 16 December 2011, and is in identical form and terms, save that it defines Green Valley rather than Copacabana as the former matrimonial home. Like the other version, it provides for Ms Sanna to transfer her interest in both properties to Mr Sanna. Again, Mr Sanna’s apparent signature was apparently witnessed by Mr Russo and Ms Sanna’s by Ms Gray, and those solicitors apparently signed their respective certificates of independent advice.

69. In connection with the BFAs, there is also an unregistered transfer of Green Valley by Ms Sanna to Mr Sanna, undated, stated to be pursuant to Family Law Act, s 90C, apparently signed by Ms Sanna as transferor and witnessed by Mr Dimitriou, and by Mr Sanna as transferee, also witnessed by Mr Dimitriou; and a (further) stamped transfer of Green Valley, bearing the date 8 May 2013, from Ms Sanna to Mr Sanna, expressed to be pursuant to Family Law Act, s 90C on which Ms Sanna’s apparent signature is witnessed by Carlos Moreno (an employee of WYI), who also witnessed Mr Sanna’s apparent signature.

Mr and Ms Sanna

70. Originally, both Mr and Ms Sanna were adamant that they had not and could not have signed the disputed documents. In respect of both Costs Agreements, Mr Sanna deposed:

I have never seen, signed, or received these costs agreements.

71. In her affidavit, Ms Sanna deposed to having been introduced to Mr Dimitriou “in or around November 2011”. When asked whether she had then been given a retainer agreement, she said “You gave me a lot of documents that day”. When asked what day, she said “In November approximately”; she confirmed this was November 2011. She did not recall what the documents were, but did not dispute that they could have been or included a retainer. Later, when shown the First Costs Agreement, she said that she did not recall signing it, and that she was not sure whether what appeared to be her signature on it was in fact hers, “because I met you at the end of November … but this is dated 21 October”. She confirmed she had met Mr Dimitriou “earlier than December 2011”, and, when asked why, said “Because I went to a friend’s funeral the day he came up”: she said that Mr Dimitriou had come to her office, at Somersby, and then asked in future to meet at his office (at Bella Vista), which they thereafter did. She said the name of the person whose funeral she had attended was Kate (possibly Kathryn) Fletcher. She thought the funeral was around 25 or 26 November, at Kincumber.

72. A day or so later, while still in cross-examination, she volunteered that Ms Fletcher had died on 27 November, and the funeral was on 2 December 2011; I infer that this was after she had found the funeral notice, referred to below. Ultimately, in re-examination, she said that she first met Mr Dimitriou on 2 December 2011, after the funeral of Kathrine Maer Brophy Hall that day, when she says she proceeded directly to her office (at Somersby) and met Mr Dimitriou and his associate, and not long after met Mr Dimitriou again in his office (at Bella Vista). She produced a copy of the funeral notice of that day. She said that Fletcher was the name of a man Ms Hall had dreamed that she might marry after getting a divorce.

71. As to the Saving Fee Agreement, Ms Sanna deposed that she had never before seen it, and that the signature that appears on it was not hers.

72. In respect of the transfers of both properties, Mr Sanna deposed:

I do not recall executing the transfers for both Green Valley Property and Copacabana Property.

75. He said that “on or around early 2013” he and Ms Sanna attended Mr Dimitriou’s office, and Mr Dimitriou “put some documents in front of Lepa and myself and he said sign here” and then said words to the effect that he would ensure that they did not have to pay stamp duty on the transfer of properties. He further deposed that he had been shown the two BFAs, and:

94. I have been shown 2 family law agreements.

95. Exhibited at page 165 of “CS1” are true copies of the agreements.

96. I have never met Salvatore Russo or Thelma Grey [sic].

97. The first time I saw these documents were when they were referred to in an affidavit of George in these proceedings, and relied on in these proceedings.

76. Ms Sanna deposed that she did not know who Thelma Gray was and had never met anyone by that name. She said that the signature on the BFAs appeared to be hers, but she did not recall signing it, that no-one explained it to her, and that she had never met Thelma Gray, who appeared to have witnessed her signature.

77. As to the Deed of Loan, the General Security Agreement, the mortgage to DPI of Green Valley, and the Direction letter, Mr Sanna deposed that he did not sign them, and that the signatures that appear on them were not his; that he had never seen the Direction letter; and that the first time he saw those documents was when they were referred to in an affidavit of Mr Dimitriou in these proceedings. He repeated that he had never met Thelma Gray, who had purportedly witnessed his signature on the Saving Fee Agreement, the Deed of Loan, the General Security Agreement, and the mortgage to DPI of Green Valley.

78. Ms Sanna deposed that she had never before seen the Deed of Loan, the General Security Agreement, or the mortgage of Green Valley to DPI; that the signatures appearing on them were not hers, and that she had never met Thelma Gray, who appeared to have witnessed her apparent signatures. She deposed that she could not recall whether she had seen the Direction letter before, and that the signature on it could be hers but she was not entirely sure. She also said that when in Mr Dimitriou’s office, she had seen him “cut out signatures from documents and sticky tape those signatures onto different documents, which were then photocopied”, and also saw him use tracing paper and trace over signatures, which he would then transfer to another document “to give the impression that the document had been signed by that person”. She said that when she saw this, she was extremely shocked, and no longer engaged Mr Dimitriou’s services. She was strongly challenged about that evidence. She said that the documents in question were unrelated to her affairs, but related to some different client.

79. In the creditor’s statutory demand proceedings, Mr Sanna gave this evidence:

Q. I am sorry Mr Sanna, I may rephrase that question. In so far as the documents that I have tendered thus far, bar the mortgage document to Perpetual which you may understand is La Trobe, I asked you whether you are able to look at his Honour and tell his Honour and swear before his Honour that you did not execute these documents that were tendered in evidence in this cross examination and I remind you Mr Sanna ---

A. I did not sign any documents to do with a $1.2 million loan or in advance of any of my companies, ever.

80. Concerned that perhaps Mr Sanna had signed the documents hurriedly, not knowing what they were, or mistaken as to what they were, on one of the occasions on which he and Ms Sanna had admittedly signed documents, in haste, at Mr Dimitriou’s office, I intervened:

HIS HONOUR: Q. Not even unknowingly?

A. Your Honour we were given, on the run, some documents that Mr Dimitriou said "sign here" 7.30 at night. There was thrown in front of my wife and I, a couple of times, I don't know if it was these documents or whatever it was, "Just give us a signature. I'll sort it out” and that was the end of it, but I've never seen these documents.

Q. So are you saying that these documents you could have signed them at 7 o'clock one night in the circumstances you have just described?

A. I don't think I'm sure if it was, if it had to do anything with a $1.2 million loan I wouldn't have done it on the run. There's things that we were signing on part of the because Wise & Young International was our accountant firm looking over the group of companies. Now, we could have been signing a tax returns on the run. We could have been signing other things. But it came to a $1.2 million loan, which we have never, ever received from Defined and that's all I can say. Now, if Mr Dimitriou wants to hang his hat on all these documents, by all means please show us a transfer of $1.2 million to our company or our companies and then I can say: Okay, well, you know, hands up I've taken the money. He has never advanced that. The only money that was advanced was from Westpac Bank and we have statements to prove that. Now, you can show me where the $1.2 million was given to our companies.

81. However, some of the 26 July documents – in particular, the “Acknowledgement and Undertaking”, the Statutory Declaration, and the Declaration to Lender and its Solicitors – referred very conspicuously and in bold type at or near their head to “LOAN $1,200,000 (One Million Two Hundred Thousand Dollars)”.

82. In the course of their oral evidence, Mr and Ms Sanna maintained, when shown a range of documents with what appeared or purported to be their signatures on them, that some of them were definitely authentic, some were definitely not, and as to others they were uncertain. In the case of some documents, they expressed different views about the authenticity of their signatures on different pages of the same document, in that each said that some signatures which purported to be his or hers on some documents were his or her authentic signature, while others on the same document were not.

83. Perhaps most strikingly, Mr Sanna was shown what appeared to be his signature on a number of pages of a document, the nature and content of which was concealed, and said that some were definitely not his. When it was revealed that this document was an affidavit sworn by him in the presence of his solicitor Mr Kekatos, the authenticity of his signatures on which was beyond question, he retreated to a less categorical position:

HIS HONOUR Q. I just want you to have a look at the document I now show you. I am showing the witness page 927 of volume 3. Please – no – please only look at the part I've shown you–

A. Yep.

Q. Do you see that there are two sets of initials on that document?

A. Yes.

Q. Are either of those initials yours?

A. No.

Q. Are you adamant about that?

A. Yes.

Q. No–

A. I don't do my Ss like – well – yeah, go on?

Q. No possibility of doubt about that?

A. Not like those, no.

Q. I now show you–

A. The second one, your Honour, is very close, but–

Q. But it's definitely not yours?

A. To my knowledge, no.

Q. I'm not asking you to your knowledge–

A. Well, no. No. No.

Q. It's yours or not?

A. No.

Q. I now show you page 928 also folded over just to reveal the signatures?

A. Yeah.

Q. There are two initials there. Are either of them yours?

A. The first one, no. The second one could be.

Q. Could be?

A. Yeah. Close.

Q. I now show you page 929?

A. The first one no, the second one, yes.

Q. It is yours?

A. The second one?

Q. Definitely yours?

A. Very close. Yes.

Q. I now show you page 930. That only shows one signature or one initial, at least. Is that yours or not?

A. No.

Q. Definitely not?

A. I don't break my S. I do my S all in one go.

Q. Definitely not yours?

A. No.

Q. Do you agree that you've said that the signature on 930 – I'm sorry – I will get this back into order – 927 is definitely not yours, that 928, I think you said may be, 929 may be, 930 – I'm sorry 929 – 927 you said definitely?

A. Yeah.

…

Q. 927 you said no, 928 maybe, 929 yes and 930 no?

A. Yes.

Q. I'll now show you the documents together with the pages unfolded?

A. Yes.

Q. Do you now recognise that the document I'm showing you is an affidavit sworn by you in the presence of Mr Kekatos on I think it was 4 May 2015?

A. Well, like I said that could – maybe. That's a maybe. So, yeah.

Q. Sir, you didn't say maybe to the first page. You said no. In fact, I asked are you adamant about that and you said yes. Do you accept that you have denied that at least two of the initials on that document are yours when they plainly are yours because they were witnessed by Mr Kekatos?

A. I think I – I don't know, your Honour. I mean this one here – the first one is not mine. Are you talking about the second signature?

Q. Yes?

A. Right. Look, doesn't look like it, but, anyway, if I signed it, I signed it. I don't know.

84. To like effect, Mr Dimitriou showed Ms Sanna (who was adamant that she only ever executed documents at the request of Mr Dimitriou in his office) four documents, being Electronic Lodgement Declarations, apparently signed be her; she maintained that the apparent signatures on two (PX12 and PX14) were not hers, but that those on another two (PX13) appeared to be hers. As to the signature on a fifth document (PX18), when asked whether or not it was her signature, she said “I don’t know”. However, all five were clearly transmitted by facsimile from her office to Mr Dimitriou’s office on the evening of 22 March 2012, four of them in a single, 4-page facsimile transmission. The context makes clear that they must have been signed by her in her office and transmitted to Mr Dimitriou’s office, but she would not accept this.

Mr Anderson

85. Mr Chris Anderson, forensic document examiner, was retained by the plaintiffs to examine the following documents on which there were disputed “Corrado Sanna” and “Lepa Sanna” signatures:

1. the First Costs Agreement of 20 October 2011;

2. a General Power of Attorney of 20 July 2012;

3. the Statutory Declaration of 26 July 2012;

4. the Deed of Loan of 26 July 2012;

5. the Declaration to Lender and its Solicitors of 26 July 2012;

6. the Mortgage of Green Valley of 26 July 2012;

7. the Mortgage of Copacabana of 26 July 2012;

8. the General Security Agreement of 26 July 2012;

9. the Business Purpose Declaration of 26 July 2012;

10. the Direction as to payment of 26 July 2012; and

11. the Acknowledgement and Undertaking re independent advice of 26 July 2012.

86. Having compared the disputed signatures with specimen signatures of Mr Sanna and Ms Sanna, he reported:

1. In respect of the disputed Corrado Sanna signatures, there was no evidence of the indicia of forgery, and no evidence to support the hypothesis that the disputed signatures had been made by copying, but there was evidence that the writer of the specimen signatures also wrote the disputed signatures. He concluded, with “practical certainty”, that the writer of the specimen Corrado Sanna signatures was the person who wrote the disputed Corrado Sanna signatures.

2. In respect of the disputed Lepa Sanna signatures, there was no evidence of the indicia of forgery and no evidence to indicate that the disputed signatures were other than genuine. However, he did not express a formal conclusion, for want of a sufficient range of specimen signatures.

87. Mr Anderson’s evidence was not challenged, nor was expert evidence to contradict it called.

Mr Foley

88. Mr Foley, solicitor, gave evidence that on or about 24 July 2012 he was asked by Mr Dimitriou urgently to prepare a set of security documents “to save the Sannas’ property”, and went over to Mr Dimitriou’s office to do so later that day. He recalled that both Mr and Ms Sanna were in Mr Dimitriou’s office during 24 July, having arrived separately. Over that and the following day, in Mr Dimitriou’s office, he completed the documentation and produced multiple sets, and it was ready to be signed by late on 25 July, when he had to get away to a dinner commitment, leaving Mr Dimitriou’s office at about 1800. At that stage nothing had been signed. He recalls Mr Sanna being at Mr Dimitriou’s office on 25 July.

89. The next day – 26 July – he was surprised to learn that the documentation had not yet been signed. In the course of that day he returned to Mr Dimitriou’s office for the purpose of researching aspects of the Personal Property Securities legislation, which he had not previously encountered, and as best he recalls by then the documentation had been executed. Neither of the Sannas, but only Mr Dimitriou, was there when he returned on 26 July.

Ms Gray

90. Ms Gray gave evidence that on 15 December 2011, she witnessed Mr and Ms Sanna sign the Saving Fee Agreement, in front of her, at Mr Dimitriou’s Bella Vista office, he having called her and asked her if she would attend to witness some signatures. In an affidavit (an unsigned copy of which was in evidence before me, but which the evidence established had been filed in other proceedings before Darke J, such that it was established that it had been sworn), Ms Gray deposed that on 16 December 2011, she witnessed Ms Sanna sign the BFAs, which had already been executed by Mr Sanna and Mr Russo.

91. In her oral evidence, Ms Gray confirmed that she signed the BFA as a witness, and gave the certificate of independent advice in respect of Ms Sanna. She said that when she signed it, it had already been dated 16 December 2011, and that the date was not in her handwriting; that accords with the appearance of the document. She said that she did not recall the date on which she saw and advised Ms Sanna and witnessed her signature on the BFA, and she did not recall whether it had already been executed by Mr Sanna (and Mr Russo).

92. Ms Gray also confirmed that her signature appears on the Deed of Loan and the General Security Agreement as witness to the signatures of Mr Sanna and Ms Sanna, and that she in fact witnessed them sign those documents, and the associated mortgages, at Mr Dimitriou’s office at Bella Vista. She said that she merely witnessed their execution of those documents (the Deed of Loan and the General Security Agreement) and did not give advice about them, as distinct from the BFA in connection with which she had given advice to Ms Sanna; she explained that she practised family law and criminal law, not commercial law. She did not recall whether she was present when the Sannas signed on behalf of their various corporate entities (which signatures she did not attest), as distinct from when they signed in their personal capacities, which signatures she did attest.

93. It was put to her that she did not see the Sannas sign the documents on which her signature appeared as a witness; she responded that it was not worth her practising certificate to purport to witness signatures that she had not seen. She firmly rejected, as “absolute nonsense”, the suggestion that she had not witnessed the signatures against which her signature appeared as a witness. She also firmly rejected the proposition that she would take instructions from Mr Dimitriou without meeting her clients personally. Her office moved from 275 Church Street Parramatta to 8/32 Albert Street sometime in the first half of 2012.

94. As to the sale of Copacabana, she had a vague recollection of her office having acted, by a clerk, on the conveyance for Ms Sanna, and that the sale did not complete.

95. She identified Mr Sanna in court, said that she recalled Ms Sanna (who was not in court) quite well, for reasons that were credible, and gave an accurate description of her.

Mr Russo

96. Mr Russo recalled having met Mr Sanna, at Mr Dimitriou’s office, in the company of Ms Sanna, and provided advice to him and “signed him up” to the BFA. He confirmed having witnessed Mr Sanna sign the BFA and that he certified it. However, the dates on the document are not his writing. He issued an invoice on 7 August 2012, which confirmed 7 August as the date of the attendance.

97. Mr Russo was prompted to recall that there had been a problem with the BFA, and for some reason it had to be changed; he was not sure whether there was a misdescription, or whether the parties agreed to change it, but it resulted in the matrimonial home being changed from the Green Valley property to the Copacabana property. He said that he could not understand why both BFAs bore the same date, “because they definitely weren’t done the same day”. It was his recollection that they were not dated when he saw Mr Sanna, because at that stage “the wife had not yet signed”. His recollection, however, is that the second was done within a few weeks of the first.

98. It was Mr Russo’s recollection that Mr Sanna “almost lived at” Mr Dimitriou’s office, and at least was there “pretty often”.

99. He opened a file for a purchase by APH from Ms Sanna of Copacabana. In that respect he received instructions mainly from Mr Dimitriou, but initially from Mr Kalischer or Mr Sanna; he accepted that it was more likely Mr Kalischer, but he has some recollection of Mr Sanna have some association or connection with APH. He said “Mr Kalischer is a person of means and I am aware that Mr Dimitriou has used him on many occasions for the purposes of assisting people who are in financial difficulty. And he buys the properties and pays out mortgages and whatever in order to be able to give some stability to the system and then six, 12, 18 months later, or years later, if the client can afford it they buy it back, and if they can’t he sells it”. As has been noted, on 26 June 2012, he issued a tax invoice to APH, care of Mr Dimitriou’s office, and on 17 July, he issued a further invoice. As best he can tell, his firm did not complete the matter, and there is no record of any settlement. He has no recollection of any deposit or purchase money being paid.

Discussion

100. The submission that the First Costs Agreement could not have been executed on the date it bore – namely 21 October 2011 – and at the least must have been backdated, was founded on Ms Sanna’s evidence, summarised above, that she did not meet Mr Dimitriou before 2 December 2011.

101. Mr Dimitriou deposed:

On or about 21st October 2011 I saw Andrew Jetson give Corrado Sanna and Lepa Sanna the originals of the “first cost agreement” document … . I saw them read that document. I believe that both of them signed the document at the places indicated. Each I believe signed their own document separately. After signing the documents they were handed to me and I signed them.

102. In cross-examination it was put to him that he had said that the agreement was made by Andrew Jetson. Mr Dimitriou said that in 2011 Mr Jetson “was in consultation with the Sannas more often than not”, which I take to mean that Mr Jetson rather than Mr Dimitriou was their most usual point of contact at that stage. Ms Sanna’s evidence did not address when she first met Mr Jetson, and whether that was before she met Mr Dimitriou.

103. Mr Dimitriou said that though he would probably have been in the office when the agreement was executed, he did not have an actual recollection of it. To the proposition that, had he witnessed the Sannas execute the agreement, he would have included that in his affidavit, he answered:

Yes, but I didn’t say that I witnessed them executing the affidavit [sic, agreement].

104. In other words, he did not assert that the First Costs Agreement was executed in his immediate presence such that he was a witness. The reference in his affidavit to “on or about 21 October” is suggestive that the date has been reconstructed from the document, as distinct from being a matter of recollection.

105. The First Costs Agreement was not stamped until 3 August 2012; the explanation proffered for this was that it was only then that it was decided to lodge a caveat, which made it necessary to have it stamped. That explanation being quite plausible, the date of stamping does little to assist in resolving the date of execution.

247. Wolgan’s claim under the Saving Fee Agreement must therefore be dismissed.

248. The plaintiffs contended that, in the alternative, WYI was entitled to the Saving Fee under the provisions of the First and/or Second Costs Agreement. [33]

     33. ASOC [43].

249. The First Costs Agreement included, under the heading “Finance Fee Referral Mandate Reduction in Mortgage Discharge, discharge in Reduction to outgoing Mortgagee”, the following provision:

I/we Danic Holdings Pty Ltd, DLD(NSW) Pty Ltd ATF Danic Unit Trust, D C L Constructions Pty Ltd, D C L Constructions (NSW) Pty Ltd, Coastwide Concrete Panels Pty Ltd, Corrado Sanna and Lepa Sanna authorise Wyse & Young International Pty Ltd to negotiate the discharge from the current 1st Registered Mortgagee and the Second registered Mortgagee or Caveator, all charges over any companies, and any other security over any other goods or chattels to make way for Finance to a new incoming Mortgagee. In doing this we agree to pay a fee payable of no less than 20% plus GST of the amount negotiated off the current balance of debt payable and the negotiated amount paid (“the saved debt”).

254. The authority dated 21 October 2011 signed by Ms Sanna included the following:

I/we hereby give my/our irrevocable authority to have (3%+GST) of the total loan amount, plus G.S.T, deducted from the proceeds of the loan, payable to Wyse & Young International Pty Ltd, and any or at all out of pocket expenses and save as to cost 20% + GST of the saved debt amount.

255. The Second Costs Agreement contained a substantially identical provision:

RECONSTRUCTION DIVISION

6. Finance Fee Referral, Mandate, Reduction in Mortgage Discharge, Debt negotiation, discharge in Reduction to outgoing first Mortgagee, Any Legal Support Referral Work, Consultancy Works, Separation Consultancy Business advisory, Relevant searches and all travel expenses

…

I/we Corrado Sanna of … …, Copacabana, NSW 2251, Lepa Sanna of … …, Copacabana, NSW 2251, DLD(NSW) Pty Ltd ATF Danic Unit Trust, DCL Construction Group ABN 70 158 381 821 T/As DCL Construction Group, DCL Constructions Pty Ltd ABN 35 072 499 426 & DCL Constructions (NSW) Pty Ltd ABN 71 085 544 627 authorise Wyse & Young International Pty Ltd to negotiate the discharge from the current 1st Registered Mortgagee, all charges over any companies, and any other security over any other goods or chattels to make way for Finance to a new incoming Mortgagee. In doing this we agree to pay a fee payable of no less than 20% plus GST of the amount negotiated off the current balance of debt payable and the negotiated amount paid (“the saved debt”).

256. Unlike the Saving Fee Agreement, those provisions of the Costs Agreements are not expressly limited in time to a term of six months, or any other period. If WYI were otherwise entitled to a saving fee under these provisions, it would be necessary to consider how those provisions of the more general retainers operate, in the context that there is a Saving Fee Agreement which specifically provided for Wolgan to receive the same saving fee, but only during a limited term, which had expired before the fee was earned.

257. However, WYI is not otherwise entitled to a saving fee under the Costs Agreements, because under both Costs Agreements, the basis for entitlement to a saving fee is that there is a “saved debt”, which is defined as “the amount negotiated off the current balance of debt payable and the negotiated amount paid”. Unless an amount was “negotiated off” the current balance of the debt payable, there is no “saved debt”. As I have explained, although the mortgage was discharged for less than the total amount secured, the debt was not reduced, and Ms Sanna remained liable for the total outstanding balance after the mortgage was discharged. Nothing was “negotiated off” the debt, and so there was no “saved debt”, and no entitlement to the saving fee.

258. It follows that the alternative claim to a saving fee, on the part of WYI, must also fail.

Conclusion

259. My conclusions may be summarised as follows.

260. Mr Sanna entered into the First Costs Agreement and is bound by it, and WYI is entitled to judgment against Mr Sanna for $45,509.72, and interest.

261. The Sannas and DCL had notice of the terms of the Second Costs Agreement, which was posted to them as the mail log records on 17 May 2012. WYI is entitled to judgment against them for $89,395.20, and interest.

262. It is unnecessary to consider the alternative claim for a quantum meruit. However, as there is a submission that there were additional amounts paid which have not been credited, I will reserve leave to make further submissions on that point when short minutes are brought in.

263. Mr and Ms Sanna executed the Deed of Loan and General Security Agreement, and Ms Gray witnessed them do so. Subject to their other defences, the defendants are bound by the Deed of Loan and the General Security Agreement.

264. The references in the attestation clauses in the Deed of Loan and the General Security Agreement to Defined Property Holdings as distinct from Defined Property Investments were clearly mistakes, and the plaintiffs are entitled to rectification. It follows that the submission that DPI was not a party to the Deed of Loan and does not have standing to sue on it is rejected. It is therefore unnecessary to resolve whether, if it had not executed the Deed, DPI could nonetheless sue on the Deed of Loan.

265. The 26 July 2012 transaction was, in its ultimate form, a refinance (by DPI) and not a sale (to APH or Mr Dimitriou), and Mr Sanna at least knew it to be so in substance.

266. DPI advanced the $1.2 million referred to in the Deed of Loan. However, the sum of $149,223.39 advanced by part satisfaction of the Saving Fee must be regarded as paid in error, on account of my conclusion that Wolgan was not entitled to the Saving Fee. The correct amount for the purpose of calculation of interest and repayments is therefore $1,050,776.61.

267. At least in respect of the transactions embodied in the Deed of Loan and General Security Agreement, the relationship between the defendants and Mr Dimitriou (and his companies) was not a fiduciary one. And even if it had fiduciary aspects, I do not accept that entry into the Deed of Loan and the General Security Agreement involved any breach of fiduciary duty on the part of Mr Dimitriou or his companies: it was not “in the interests of Mr Dimitriou but contrary to the interests of Mr Sanna and DCL”, because there was benefit for both sides of the transactions, and the benefit for the plaintiffs was not disproportionate to the risk they incurred.

268. In any event, rescission is not now available, because restitution is not possible. But if it were, restitution would require, as well as return of principal, payment of interest at the default rate that would otherwise have been payable to AETL, of which the transactions relieved the property and Ms Sanna. Alternatively, DPI would be entitled to interest at that rate by way of “just allowance”.

269. The Contracts Review Act is not available to New DCL, being a corporation. As to Mr Sanna, although he was far from commercially unsophisticated, and although he (and Ms Sanna) were content to sign documents in haste and without a detailed explanation in the urgency of saving their home, and although he understood broadly that DPI was “taking out” the AETL mortgage, I do not believe that he understood that this involved replacing an interest rate of 11.7% with one of 20%, which would rise to 30% after a month. That was something which, in fairness, ought to have been specifically brought to his attention, and if (as DPI knew was the case) he chose not to obtain independent advice, then DPI ought to have alerted him to it. To that extent only, the contract contained in the Deed of Loan and the General Security Agreement was unjust. The appropriate relief, to address that injustice, is to vary the applicable interest rate as against Mr Sanna (but not against New DCL), to 11.7%, being the default rate under the AETL mortgage.

270. While it is clear that, as some of the Principal Sum remains outstanding, DPI will be entitled to a judgment on this claim, it will be necessary to recalculate the amount, using as the starting point a principal sum of $1,050,776.61, and adding interest at the rate of 11.7% against Mr Sanna (but at 20% and 30% against New DCL), and debiting repayments. I will afford the parties an opportunity to make submissions in respect of that recalculation. Had the claim to set aside the transaction for relief for breach of fiduciary duty succeeded, the consequences (given the requirement for restitution or a just allowance) would have been the same, save that the interest rate applicable would have been 11.7% in respect of DCL as well as Mr Sanna.

271. Wolgan’s claim under the Saving Fee Agreement, and the alternative claims for a saving fee under the Costs Agreements, fail, essentially because there was no saved debt: the debt which Ms Sanna owed to AETL was not reduced, but was preserved, notwithstanding the discharge of the mortgage, and the definition of saved debt upon which entitlement to a saving fee depended was concerned with personal indebtedness, not the amount of any encumbrance.

272. I direct the parties to bring in short minutes to give effect to this judgment, on a date to be fixed, upon which occasion submissions may be as to:

1. any amounts said to have been paid in respect of WYI’s claim for which credit has not been given;

2. the total amount of repayments made in respect of the Principal Advance under the Deed of Loan;

3. the recalculation of the debt under the Deed of Loan in conformity with this judgment;

4. interest;

5. costs; and

6. any issues arising from New DCL having (as the Court has been informed) gone into liquidation, which might necessitate that leave to proceed be obtained before judgment could be entered.

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Endnotes

Decision last updated: 18 June 2019