Lemezina v The Registrar General for the ACT [2010] ACTSC 12 (19 February 2010)

Last Updated: 16 March 2010

JURE LEMEZINA v THE REGISTRAR GENERAL for the ACT & ORS

[2010] ACTSC 12 (19 February 2010)

REAL PROPERTY – caveats – caveat supported by deed of loan – deed acknowledging receipt of loan amount – Court satisfied loan amount not paid or received – no caveatable interest – application for order that Registrar General not remove caveat dismissed

No. SC 106 of 2010

Judge: Master Harper

Supreme Court of the ACT

Date: 19 February 2010

IN THE SUPREME COURT OF THE )

) No. SC 106 of 2010

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: JURE LEMEZINA

Plaintiff

AND: THE REGISTRAR GENERAL for the ACT

First Defendant

ANTON ALAN LEMEZINA and MARIANA KAREN LEMEZINA

Second Defendants

ORDER

Judge: Master Harper

Date: 19 February 2010

Place: Canberra

THE COURT ORDERS THAT:

1. The originating application be dismissed.

2. The plaintiff pay the costs of the second-named second defendant.

1. This is an application for an order restraining the first defendant, the Registrar General, from removing a caveat.
2. The second defendants are the registered proprietors as joint tenants of the unexpired portion of a Crown lease over a house block at Gungahlin. They purchased the property from Lemezina Bros Pty Ltd by contract dated 23 April 2002. The purchase was completed in October 2002.
3. The purchase price was $160,000.00. The solicitors presenting acting for the plaintiff acted for buyer and seller.
4. In February 2003, the plaintiff lodged a caveat over the title to the block, describing his estate or interest in the land as “pursuant to a deed of loan between the parties and dated 4 October 2002”. The caveat was prepared and lodged by the same solicitors, and indeed signed by, and supported by a statutory declaration by, a partner in the firm.
5. The plaintiff, in an affidavit in support of the present application, says that he is a director and principal shareholder in Lemezina Bros Pty Ltd, and has been for many years. He says that he has the management authority to determine how the company disposes of its assets. The business of the company involves buying land, building houses and selling them.
6. The plaintiff says that in 2002 he agreed that the company would build a house for his son and new daughter-in-law, the present second defendants. They did not have any savings at the time and could afford to borrow only $160,000.00 from a bank. The plaintiff says that they discussed the issue, and he agreed to build them a house much larger and more lavish than could be purchased for $160,000.00. He says that he built the house on the block the subject of the caveat. His estimate is that the house might have sold for as much as $400,000.00 on the open market at the time. The affidavit continues:

The arrangement which I made with Tony and Mariana in 2002 was that I would arrange for Lemezina Bros to sell them the house at . . . Gungahlin for $160,000.00 if they acknowledged a debt of a further $160,000.00 to me to cover the balance of a nominal value of $320,000.00.

7. The plaintiff says that he did not intend “the additional sum of $160,000.00” to be a gift to his son and daughter-in-law. He says “as a result our conversations at that time [sic] both Tony and Mariana were well aware that the money was not a gift.”
8. The plaintiff says that he instructed his solicitors to prepare a deed of loan, which was executed by all parties on 4 October 2002.
9. The deed, also prepared by the present solicitors for the plaintiff, is in evidence. It is expressed to be a deed of loan between the plaintiff as lender and the second defendants as borrowers. The signatures of the second defendants were witnessed by Christine Bartly, an employee of the solicitors. Relevant provisions of the deed are as follows:
   1. The lender shall lend to the borrowers the sum of $160,000.00 upon the terms set out herein, the receipt of which sum is acknowledged by the borrower’s [sic] execution of this deed.
   2. The term of the loan shall be for an indefinite period subject to the terms of this deed.
   3. The lender may call up the payment of the loan in full at any time subject to the three months written notice of the call to the borrower [sic].
   4. Interest shall run upon the loan and shall be payable in a lump sum upon the date of repayment of the loan at the greater of the following rates, either:
      • (i) 5.5% per annum calculated as a simple, non-cumulative interest rate, or
      • (ii) 50.% of the value of the property . . . less the amount of the original advance

. . .

7. The borrower’s [sic] charge their property . . . with the full repayment of the loan and grant to the lender a right to caveat the property in further evidence of this transaction.

10. The plaintiff says that one of the reasons for the deed and the caveat was that he had formed the view that his son and daughter-in-law did not manage money well and “might dissipate the additional money if I did not retain ownership of it”. The plaintiff then deposes that the second defendants “ran up a further debt of about $66,000.00 over the next couple of years and I paid that sum to their bank in order to protect their house from a mortgagee in possession sale in any event”.
11. The plaintiff then deposes that the second defendants lived in the house until they separated in 2007. Since then, his daughter-in-law and the two children continue to live in the house while his son lives in other premises which the plaintiff owns. The plaintiff says that he does not have any current intention of calling up the loan but does not intend of making a gift of it to the second defendants. He has considered making a trust for their two children and assigning the loan to the trust. He wishes to maintain his caveat over the property, and believes that any dispute over ownership of the house should be determined by the Family Court of Australia. He intends to intervene in any Family Court proceedings “to protect the funds which I have placed at the disposal of Tony and Mariana”.
12. The plaintiff’s son has sworn an affidavit in which he says that he has read his father’s affidavit and agrees with its contents. He says that both his wife and he understood that his father was making a loan of $160,000.00 to them “when he transferred the house at . . . Gungahlin . . . to us in 2002.” He deposes that he and his wife executed the deed of loan in 2002 of their own free will and without any form of duress.
13. The plaintiff’s daughter-in-law says in her affidavit that she and her husband separated in March 2008. She and her six-year-old daughter and three-year-old son are living with her at the property the subject of the proceedings. She says that she married her husband in April 2002. To begin with they lived in a unit at Palmerston owned by her husband and his father. Her father-in-law told her that Lemezina Bros Pty Ltd had acquired ten house blocks in Gungahlin. He asked her to choose one for a house for her husband and herself. She selected the block and designed the house, which was built by Lemezina Bros in accordance with plans drawn up by a draftsman. She says that sometime during April 2002 the plaintiff said that the company would sell the house to her husband and herself for $160,000.00. He did not say anything about a debt of a further $160,000.00. He arranged the bank finance of $160,000.00.
14. She says that on 4 October 2002, having arranged to have furniture delivered to the house, she received a telephone call from the delivery man. He told her that the house was locked. She telephoned the plaintiff to ask for the keys. He said, “No, you have to go to Civic and see Christine Bartly and sign, I won’t give you key until after you sign.” She and her husband went to the office of the solicitors. They told the receptionist that they were there to see Christine Bartly “to sign something”. They were shown into Ms Bartly’s office. Ms Bartly produced a document which she opened at the execution page. Mrs Lemezina noticed that the plaintiff had already signed it. Ms Bartly said, “Sign here and I will ring Jure to tell him you have signed.” She and her husband signed the document in Ms Bartly’s presence. They were at the office of the solicitors for less than two minutes. They then drove to the house where the plaintiff gave her two keys, and she arranged for the furniture to be moved in. She says that she believed that if she did not sign the document she would not be given the keys to the house.
15. She says in her affidavit that she did not receive $160,000.00, or any money, from the plaintiff as acknowledged in clause 1 of the deed of loan. Her understanding was that the purchase price of the house was $160,000.00 as set out in the contract.
16. On 12 January 2010, the solicitors for Mrs Lemezina wrote to the solicitors for the plaintiff. They foreshadowed an application for lapsing of the caveat. They said that the caveat was unsustainable in the circumstances surrounding the execution of the deed of loan. They asserted that no funds had been advanced by the plaintiff as acknowledged in the deed, and effectively, almost all of the purchase price had been advanced by the National Australia Bank. They said that on their instructions Mrs Lemezina had executed the deed under duress.
17. The plaintiff’s solicitors responded by letter two days later. They asserted that the plaintiff had built the house for a sum considerably in excess of $320,000.00. Originally the house was to be sold to them at that discounted price, but they were unable to afford it. After discussions, they (the son and daughter-in-law) proposed that the house be sold for half of the discounted price of $320,000.00 and that they acknowledge a debt for another $160,000.00 over and above the purchase price. Duress was denied. The plaintiff had subsequently paid a further $66,000.00 on their behalf “to rectify their financial affairs”. The deed of loan supported a real transaction and the caveat was justified.
18. On 21 January 2010, both of the second defendants attended at the Office of Regulatory Services and signed an application for lapsing of caveat. Mrs Lemezina does not go into much detail about how this came about, though she does say that the application was explained to them by a Deputy Registrar General. Her husband says that his wife asked him to go to the office to sign the form. She said words to the effect, “We need to sign a piece of paper to work out who really owns our house. We have to sort out the title.” He says that he did not read the form or understand its nature at the time he signed it. He thought that it was an application for a replacement certificate of title, or something similar. He concluded, in an affidavit which he swore on 11 February 2010, prepared by the plaintiff’s solicitors and witnessed by the senior partner of that firm, that he did “not make any claim for my father’s $160,000.00 and I do not challenge his rights under the deed of loan which we signed.”

Findings of fact

19. The application is to be determined on affidavit evidence, there having been no oral evidence and specifically no cross-examination of any of the deponents to the affidavits, notwithstanding the factual inconsistencies.
20. Mrs Lemezina’s evidence about the events of 4 October 2002 is unchallenged and I accept it. I am not satisfied that anything about the plaintiff’s conduct on that day amounted to duress, but I am satisfied that the solicitors for the plaintiff took no adequate steps to ensure that Mrs Lemezina was properly advised about the effect of the deed she was signing. The evidence does not disclose whether Ms Bartly was a solicitor or not. It is apparent that she had instructions from the plaintiff to obtain the signatures of the second defendants to the deed and to let the plaintiff know when she had done so. It is clear that the plaintiff took advantage of this position of pressure on the second defendants to have his solicitors obtain their signatures to the deed, without independent representation or advice, and without a proper explanation of the effect of the deed. I accept that he withheld handing the keys over to the second defendants until they had signed the deed, and that these events took place under conditions of considerable practical pressure for Mrs Lemezina in particular.
21. I am equally satisfied that the plaintiff at no time paid out $160,000.00 to the second defendants or to anyone else in the context of the purchase. It is apparent that Lemezina Bros Pty Ltd contracted to sell the house to the second defendants for a price of $160,000.00, and did so, with funds largely provided by the National Australia Bank by way of loan secured by first mortgage.
22. I am not satisfied by the broad and general statements made by the plaintiff in his affidavit that Mrs Lemezina ever agreed to borrow an additional $160,000.00 from the plaintiff, or to be jointly liable to the plaintiff for a notional loan of that amount, or for interest upon it. The plaintiff was not a party to the contract for sale. There is no evidence that he had any interest in the property at any time. I find on the evidence before me that the plaintiff did not lend $160,000.00 to the second defendants at the time of the purchase, and made no contribution to the purchase price. Notwithstanding the acknowledgement contained in clause 1 of the deed of loan, the plaintiff as lender did not lend to the second defendants as borrowers the sum of $160,000.00, or any other amount.
23. In the light of the recent events surrounding the signature by the plaintiff’s son of the application for lapsing of the caveat, I can more readily accept that he also signed the deed of loan without reading it in detail or understanding it, and that in signing it he simply acceded to a request by his father.
24. I am not asked to make any order or declaration about the deed. I am, however, satisfied for the purposes of the present application that it would be unconscionable to allow the plaintiff to rely upon it to the detriment of the second second defendant or either of the second defendants.

The position of the plaintiff’s solicitors

25. No criticism was made by counsel for the second defendants about the conduct of the solicitors for the plaintiff, and counsel for the plaintiff, perhaps understandably in the circumstances, found it unnecessary to say anything in justification of it. Nevertheless, I cannot conclude these reasons without observing that they appear to have preferred the interests of the plaintiff to those of his daughter-in-law, for whom they acted in 2002. I make no criticism of the fact that they acted for both buyer and seller on the conveyancing transaction, but it is apparent with the benefit of hindsight that the second defendants, and in particular Mrs Lemezina, should have been independently advised in relation to the deed of loan.
26. It is also clear that the solicitors should not have accepted instructions to act for the plaintiff on the present application. The application is supported by the plaintiff’s affidavit, which contains evidence patently inconsistent with the instructions of Mrs Lemezina’s solicitors about the circumstances of the execution of the deed of loan. My provisional view, not having heard submissions on behalf of the solicitors, is that it would be inappropriate for them to continue to act for the plaintiff in proceedings against the second defendants jointly, or against Mrs Lemezina individually, having regard to her status as a former client of the firm.

Conclusion

27. The application will be dismissed with costs.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 19 February 2010

Counsel for the plaintiff: Mr WL Sharwood

Solicitors for the plaintiff: J. S. O’Connor Harris & Co

Counsel for the second defendant: Mr JR Colquhoun

Solicitors for the second defendant: Wood Fussell Solicitors

Date of hearing: 17 February 2010

Date of judgment: 19 February 2010