Arnautovic & Sutherland t/as Jirsch Sutherland & Co v Cvitanovic

The Facts 9I find the facts to be as follows. Where a particular finding has required the resolution of a controversy or it is otherwise necessary, I have included a cross-reference to where in this judgment my reasons or the evidence for that finding are set out. 10Reliance Management Services Pty Limited was registered on 21 March 1988. 11On 11 September 1989 Reliance Management Services Pty Limited changed its name to Reliance Investment Services Pty Ltd. 12Ms Vickers and Mr Rogic were married in 1990. 13From about 1990 Mr Rogic was involved in the business of property maintenance and building involving the construction and odd job maintenance of properties. 14Mr Rogic had been a client of Cassaniti & Associates from about 1992. Ms Vickers' mother, Ms Carol Clarke, had introduced Mr Rogic to Mr Cassaniti. Ms Clarke conducted various cleaning businesses and Mr Cassaniti was her accountant. Ms Vickers' brother and Ms Clarke's son, Mr Robert Vickers, also had some involvement in Ms Clarke's cleaning businesses. Ms Vickers met Mr Cassaniti through Mr Rogic. 15By deed of settlement made on 1 July 1994 the Reliance Discretionary Trust was established with Reliance Investment Services Pty Ltd as its trustee. The beneficiaries of the Reliance Discretionary Trust included Mr Cassaniti and his family. 16From about 1995 until about 2005, Reliance Investment Services Pty Ltd, as trustee of the Reliance Discretionary Trust, lent money to clients of Mr Cassaniti's accounting practice. 17On 25 March 1997 Reliance Investment Services Pty Ltd changed its name to Reliance Financial Services Pty Ltd ("Reliance"). Hereafter in these reasons all references to Reliance are in its capacity as trustee for the Reliance Discretionary Trust. 18From about 1998 Mr Rogic conducted his property maintenance business through his company Group A Maintenance Pty Ltd. 19In 1999 and 2000 Reliance loaned $25,000 to Ms Vickers and $11,500 to Mr Rogic. Those amounts were never repaid. See further paragraph [90] below. 20As at 16 May 2002, Group A Maintenance Pty Ltd and other entities owed Cassaniti & Associates $67,930 in professional fees. That amount was never repaid. See further paragraph [90] below. 21As at 16 May 2002, Cassaniti & Associates operated through a company, subsequently placed into liquidation, called Quest Enterprises (NSW) Pty Ltd ("Quest"). 22On 16 May 2002 the Deed was entered into between Reliance, Quest trading as Cassaniti & Associates, Mr Rogic, Ms Vickers and Group A Maintenance Pty Ltd. See further paragraphs [79] to [89] below. The Deed included: THIS DEED dated 16th May 2002 2002(sic) PARTIES: RELIANCE FINANCIAL SERVICES PTY LTD A.C.N. 003 478 966 as Trustee for THE RELIANCE DISCRETIONARY TRUST of Suite 1, Level 1, 106 Moore Street, Liverpool, NSW, 2170 ("the Lender"); and QUEST ENTERPRISES (NSW) PTY LTD Trading as CASSANITI & ASSOCIATES, ACN 095 080 372 of Suite 1, Level 1, 106 Moore Street, Liverpool, NSW, 2170 ("the Accountants") AND MARK MLADEN ROGIC of XXX, Cecil Hills, NSW, 2771; HAYLEY ROGIC of XXX, Cecil Hills, NSW 2771; and GROUP A MAINTENANCE PTY LTD (A.C.N. 083 894 053) of Suite 1, Level 1, 106 Moore Street, Liverpool, NSW, 2170 (collectively referred to as "the Clients") WHEREAS A. The Clients have engaged the Accountants, to perform accounting services on their behalf. B. The Lender has also advanced monies to the some of the Clients as referred to in Schedule A of this Deed. The outstanding amount is currently $36,500.00. The Clients agree that this amount is correct as at the date hereof. C. The Lender has guaranteed and indemnified the Accountants of all their past and ongoing accountancy fees. D. The Clients have entered into costs agreements with the Accountants to perform the work. The Clients also have guaranteed the debts of various other parties. E. The Clients acknowledge that the current outstanding accountancy fees owed to the Accountants is $67,930.00 as per Schedule B to this Deed. The Clients agree that this amount is correct as at the date hereof. F. The Clients have agreed to pay interest on all outstanding amounts. G. The Clients collectively owe the Lender, as at the date hereof, $104,430.00. H. In consideration for the Accountants continuing to do the Clients' accounting work, and the Lender not demanding immediate payment, the Clients agree to the conditions of this Deed. ... 5. Interest The Clients agree to pay interest to the Lender and the Accountants on any amounts outstanding at the rate of 10% (ten percent) per annum calculated daily on the outstanding balance. 6. Security for Costs and Loans The Lender may at any stage require the Clients to give the Lender and Accountants security for the costs of providing accounting and financial services to them. To achieve this: (a) The Lender and Accountants may require the Clients to pay to the Lender a sum of money to be determined in their sole discretion on account of costs and disbursements and to be held in the Lender's or Accountants' Trust account. (b) The Clients hereby grants (sic) to the Lender and Accountants a charge over any real property owned by them either in their sole name or jointly with any other person, persons or entities from time to time in respect of any monies owing by them to the Lender. (c) The Clients agrees (sic) to grant to the Lender and Accountants a legal mortgage of (sic) any real property which they may own either solely or jointly with any other person, persons or entities from time to time to secure payment of any monies. (d) Such Mortgages shall: (i) incorporate the terms of the Memorandum lodged with the Land Titles Office numbered $860000. (ii) incorporate a power to appoint a receiver to any property subject to such mortgage (such receiver to be remunerated at such rate as the Lender and Accountants agree with a receiver), or to exercise powers as mortgagee in possession, with the powers conferred on a receiver by s420 of the Corporations Act 2001, mutatis mutandis (which provisions shall prevail to the extent of any inconsistency with the said Memorandum), (iii) to the maximum extent allowed by law the notice requirements of s57 of the Real Property Act 1900 and s111 of the Conveyancing Act 1919 are waived and (iv) all monies payable to the Lender and Accountants are payable as provided in this Deed. (e) Such charge shall in addition to the provisions already set out above: (i) incorporate a power to appoint a receiver to any property subject to such mortgage (such receiver to be remunerated at such rate as the Lender and Accountants agree with the receiver), or to exercise powers as mortgagee in possession, with the powers conferred on a receiver by (sic) of the Corporations Law (which provisions shall prevail to the extent of any inconsistency with the said Memorandum); and (ii) All monies payable to the Lender are payable as provided in this Deed. (i) Sam Peter Cassaniti and/or David Salvatore Cassaniti is appointed as the attorney for any party granting a mortgage or a charge by this Deed to the Lender and Accountants for the purpose of: (i) executing on behalf of such person or company such mortgage or a charge; and (iv) (sic) any documentation relating or incidental to having such charge or mortgage stamped or registered. ... 6. (sic) Guarantee and Indemnity In consideration of the Accountants performing accounting, taxation and other work at the Clients' request for the following persons, companies, trusts, superannuation funds or other entities the Clients unconditionally and irrevocably guarantee to the Accountants payment of all the past, present and future professional fees, disbursements and loans of the following persons, companies, trusts, superannuation funds or other entities: Carole Lilian Clarke Robert Dale Vickers Rogic Concreting Pty Ltd ACN 0732 821 557 Royale Olympic Group Pty Ltd ACN 082 093 141 Top C Property Maintenance Services Pty Ltd ACN 063 911 446 Top C Pty Ltd ACN 059 161 401 The indemnity covers all costs on an indemnity basis incurred in pursuing recovery of money from the Clients and from the guarantors and indemnifiers. 23The Deed was signed by Mr Cassaniti on behalf of Quest, Mr Rogic on his own behalf and on behalf of Group A Maintenance Pty Ltd and by Ms Vickers (at that time signing "H. Rogic"). Each signature was witnessed by Mr Carmelo Duardo. See further paragraphs [79] to [89] below. 24By a transfer registered on 5 April 2004 Mr Rogic and Ms Vickers were registered as the proprietors of the Property as joint tenants. The certificate of title was then held by their conveyancer, Wade Burns and Associates. 25In October 2004 Ms Vickers and Mr Rogic separated, but continued to live under the one roof in their former matrimonial home in the suburb of Mount Vernon. 26On 19 January 2005 Ms Vickers left the former matrimonial home with the two children of her marriage to Mr Rogic. They moved to the United Kingdom. 27On or shortly before 1 April 2005 Mr Cassaniti and Mr Rogic had a conversation in words to the following effect (see further paragraph [100] below): Cassaniti: "We need to talk about what you are going to do to repay what you owe us. You owe a heap of money and we've been very accommodating." Rogic: "OK." Cassaniti: "I've done a search and see you've got a property in Parramatta." Rogic: "Yeah. That's our investment property." Cassaniti: "Well we're entitled to put a mortgage on any property you own. I don't want to register a mortgage if I don't have to but I need to be able to just in case. So in the meantime, I need you to give me the title deed. If it comes (sic) necessary to lodge a mortgage, the title deed is needed so it can be registered." Rogic: "Look, ok. I'll bring it in next week." 28On 1 April 2005 Mr Rogic took the certificate of title for the Property from Wade Burns and Associates (see further paragraph [100] below). On either that day or the next, Mr Rogic provided the certificate to Mr Cassaniti. 29Ms Vickers first instructed Mr Cohen in relation to her matrimonial matters in early to mid-2005. On 25 July 2005 Mr Cohen obtained a property search of the Property, which did not disclose any mortgage or caveat registered against the title. Mr Cohen obtained the search to assist him in acting for Ms Vickers in relation to a proposed property settlement with Mr Rogic. 30During 2005 both Ms Vickers and Mr Rogic prepared statements of financial circumstances for the purposes of their divorce proceedings. Neither statement disclosed any liability to Reliance. 31On 16 October 2005 a mortgage was executed over the Property in favour of Reliance (the "October 2005 Mortgage"). It was purportedly executed on behalf of Ms Vickers and Mr Rogic as mortgagors and on behalf of the mortgagee by Mr Cassaniti under powers of attorney from each of those parties. In relation to Ms Vickers and Mr Rogic the power of attorney purportedly relied upon was that conferred by Clause 6(i) of the Deed. See further paragraph [106] below. 32In or about December 2005 Ms Vickers entered into the Costs Agreement, which included: 13. Grant of Charge over Real Estate as Security for Costs. 13.1 The Client agrees to charge the Client's share of any real property owned by the Client with the Costs, Charges or expenses due to the Lawyers. 33The "Client" was Ms Vickers and the "Lawyers" referred to Mr Cohen. 34Mr Cohen did not undertake a further title search of the Property before entering into the Costs Agreement. Nor did he rely on the title search of the Property he had obtained on 25 July 2005 or any other search in entering into the Costs Agreement. See further paragraph [97] below. 35On 27 February 2006 Ms Vickers and Mr Rogic entered into a Deed of Financial Agreement (the "Family Law Deed") in accordance with s 90C of the Family Law Act 1975 (Cth) (the "FLA"). That agreement made provision for the sale of the Property: 4B. That within a period of forty two (42) days from the date hereof, the Husband shall do all such things, acts, deeds and sign all documents necessary to transfer to the Wife, or as otherwise directed by her in writing, all of his right, title and interest in and to the investment unit at XXXX, Parramatta in the State of New South Wales ("the investment unit") being more particularly described as the property contained in Certificate of Title Folio Identifier XXXX. ... 8. That the Wife shall pay to the Husband the sum of THIRTY THOUSAND DOLLARS ($30,000.00) forthwith upon the sale of the investment unit in accordance with the provisions of Clause 10 hereof. ... 10.1(a) That the husband and wife do all such things, acts and deeds and sign all documents necessary to list for sale and sell the investment unit and, for that purpose, if they have not already done so, to appoint an agent or agents for sale and to agree upon a sale price at which that property is to be listed for sale, such sale to proceed, in the first instance, by private treaty provided however the parties may, at any time by agreement in writing bring forward or extend the date upon which that property is otherwise listed for sale. (b) That in the event that the parties are unable to agree upon an agent or agents for sale that they or either of them may request the President for the time being of the Australian Property Institute to appoint an agent or agents for sale; and/or (c) In the event that the parties are unable to agree upon the amount at which the former matrimonial home is to be listed for sale, they or either of them may request the President for the time being of the Australian Property Institute to carry out a valuation of that property and the valuation so determined shall be the amount at which that property is listed for sale. (d) The parties bear equally the costs of the aforesaid Presidents and the Valuer, such Valuer to act as an expert and not as an arbitrator. 10.2 That in the event that the investment unit has not been sold by private treaty within three (3) months of the date upon which it is first listed for sale, that the parties or either of them may request the agent or agents to list that property for sale by auction, such auction to take place within six (6) weeks of it being so listed for auction sale, the parties to agree upon a reserve price or failing that agreement ... 36Mr Rogic and Ms Vickers divorced in 2006. 37Quest was wound up by order of the Court on 4 August 2006. 38On 21 April 2008 an administrator was appointed to Reliance. 39On 26 June 2008 Reliance was wound up and a liquidator was appointed by order of the Court. 40Reliance Financial Services (NSW) Pty Ltd ("Reliance NSW") was incorporated on 26 June 2008. 41By a deed of appointment made on 26 June 2008 Mr Cassaniti, as appointor of the Reliance Discretionary Trust, removed Reliance as trustee of the Reliance Discretionary Trust and appointed Reliance NSW as trustee. Hereafter in these reasons all references to Reliance NSW are in its capacity as trustee for the Reliance Discretionary Trust. 42On 4 November 2008 the deed of appointment of 26 June 2008 was registered with what was then Land Property and Information (NSW) ("LPI"). 43Mr Rogic was made bankrupt on 3 March 2009 and one of the plaintiffs, Mr Sutherland, was appointed as trustee of Mr Rogic's bankrupt estate. Mr Rogic sought to pre-empt matters by filing his own Debtor's Petition shortly before that date. His Statement of Affairs, which was prepared with the assistance of Cassaniti & Associates and accompanied his Debtor's Petition, listed "Reliance Financial Services" as a secured creditor and referred to a mortgage. 44By a caveat registered on 23 March 2009 Mr Sutherland registered his interest, as Mr Rogic's trustee in bankruptcy, in Mr Rogic's interest in the Property. 45On 8 October 2009 stamp duty of $89.00 was paid on the Deed to secure an amount of up to $36,500 (the amount of Ms Vickers' and Mr Rogic's personal debt recorded in the Deed). 46On 9 October 2009 Mr Cassaniti attempted to lodge the October 2005 Mortgage for registration. 47On 21 October 2009 the Deed was registered insofar as it contained a power of attorney in Clause 6(i). 48On 22 December 2009 the Registrar General wrote to the plaintiffs' registration agent: ... I note that an unregistered mortgage to Reliance Financial Services Pty Ltd was lodged for registration at the LPMA, being dealing No. AF60355 ("the Mortgage"), together with the Certificate of Title to the subject land ("the CT") which was produced to enable registration of the same. ... 49Reliance was deregistered on 8 February 2010. 50On 1 September 2010 LPI rejected the October 2005 Mortgage. 51On 20 October 2010 a withdrawal of caveat and bankruptcy application filed by Mr Sutherland were registered with the effect that Ms Vickers and Mr Sutherland became registered as the proprietors of the Property as tenants in common in equal shares. 52On 6 July 2011 the Court appointed the plaintiffs as trustees for the sale of the Property. The sale was ordered to be subject to any encumbrances affecting the entirety of the Property. 53On 28 March 2012 the Property was sold at a public auction for $297,000. 54On 9 May 2012 the sale of the Property was settled. 55Mr Cohen has rendered fees to Ms Vickers of $102,406.89, which she has not disputed. 56On 13 July 2012 the plaintiffs filed their summons in relation to the Fund under the payment into Court provisions of Part IV of the Trustee Act 1925 (NSW) and UCPR Part 55 Division 3. 57On 5 September 2012, Reliance NSW filed a notice of motion for relief which included: 2. Pursuant to: a. Part 55 rule 11 of the Uniform Civil Procedure Rules 2005, b. section 98 of the Trustee Act 1925, and/or c. section 58(3) of the Real Property Act 1900, all (or such other amount as the Court determines) the monies paid into Court by the plaintiff on or about 13 July 2012 or otherwise in these proceedings, together with all interest accrued thereon, be paid to Reliance Financial Services (NSW) Pty Ltd (ACN 131 889 766) forthwith. 58On 31 January 2013 Mr Cohen and Ms Vickers filed a notice of motion which sought relief including: (5) An order pursuant to Pt 55 r 11 of the Unified (sic) Civil Procedure Rules and/or s 98 of the Trustee Act 1925, and/or s 58 of the Real Property Act (NSW) that all such monies paid into court by the plaintiff together with all interest accrued thereon be paid in the following manner: (a) the sum of $102,406.89 to David H. Cohen & Co; (b) the balance to Hayley Rogic. 59Quest was deregistered on 29 March 2013. Although ASIC has been notified of these proceedings, no claim has been made by ASIC on behalf of Quest. 60On 12 and 13 June 2013 (the latter being the first day of the hearing) stamp duty was paid on the Costs Agreement to a security amount of $102,406. 61As at the first day of the hearing, the amount owing under the Deed (including interest) was $316,439.56.

Did Ms Vickers sign the Deed? - Legal principles 62The direct methods of proving handwriting (including signatures) are summarised in the Hon. J.D. Heydon QC, Cross on Evidence, Australian Edition (Looseleaf; LexisNexis) at [39095]: The testimonial or hearsay evidence may take one of the following forms: the testimony of the person whose handwriting is to be proved; an admissible hearsay statement of that person; the testimony of someone who saw the document executed (whether the witness be an attesting witness or a bystander); and an admissible hearsay statement by someone other than the person whose handwriting is in question. Nothing need be said with regard to any of these forms of direct evidence except that it is unusually unnecessary, in the first instance, for a witness to the signature to do more than to testify to having seen someone sign in a particular name. The name will, in itself, be sufficient evidence of the identity of the signatory with the person whose handwriting is to be provided, unless there are circumstances calling for investigation, or unless, perhaps, the name is a very common one. 63The question of the standard of proof where an allegation of forgery is made was most recently considered by Martin J in Groves v Groves [2013] QSC 277: [122] The onus is on Dr Groves to establish that the signatures in question are not hers: Damjanovic v York Agencies Pty Ltd [2003] NSWCA 222. What, then, is the requisite standard? With respect to each of the documents relied upon by the defendants the plaintiff pleads that the signature appearing on the document, which purports to be that of Dr Groves, was not written by Dr Groves. While there is no pleading as to who, on the plaintiff's case, might have written those signatures it is obvious that Dr Groves contends that her signature on those documents was forged. As has been noted above the strong flavour of Dr Groves' evidence was that the "forger" was Mr Groves. But that was not pleaded and Mr O'Shea QC admitted that there was not a sufficient basis to plead that. Nevertheless, it is an allegation of forgery by some unidentified person or persons. As such, it engages the requirement summarised in Jeans v Cleary [2006] NSWSC 647. In that case, it was alleged that the defendant had forged the plaintiff's signature on a personal guarantee. I respectfully agree with what Johnson J said when he dealt with the appropriate standard of proof: "[28] ... the standard of proof to be applied is the civil standard, proof on the balance of probabilities, being qualified having regard to the gravity of the questions to be determined. The test has been said to be whether the issue has been proved to the reasonable satisfaction of the Court, such satisfaction not being produced by inexact proofs, indefinite testimony or indirect inferences: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362; Helton v Allen [1940] HCA 20; (1940) 63 CLR 691 at 701; Rejfek vMcElroy [1965] HCA 46; (1965) 112 CLR 517 at 521. The Court should be comfortably satisfied on the balance of probabilities before such a finding is made: Bannister v Walton (1993) 30 NSWLR 699 at 711-712. [29] The rationale for this approach was explained in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 where Mason CJ, Brennan, Deane and Gaudron JJ said at 170-171 (footnotes excluded): 'The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involved criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.'" 64I respectfully adopt as correct the statement of principles in the preceding paragraph noting only that, for the purposes of these proceedings, the so called "Briginshaw standard" has been supplanted by s 140(2) of the Evidence Act 1995 (NSW): 140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence; and (b) the nature of the subject-matter of the proceeding; and (c) the gravity of the matters alleged. 65Three other matters are relevant. First, the onus is on the party alleging a forgery to show that the signature was a forgery. The onus is not on the other party to show that the signature was not a forgery: Damjanovic v York Agencies Pty Ltd [2003] NSWCA 222 at [25] per James J; RP Meagher and Beazley JJA agreeing. 66Second, I respectfully adopt what fell from Holland J in Sumner v Booth [1974] 2 NSWLR 174 at 178, where his Honour made reference to "... the great dangers in the field of handwriting or in the expression of opinions by handwriting experts in acting upon insufficient samples of genuine signatures, including evidence of the date at which those samples came into existence". 67Third, I respectfully adopt what Johnson J said about the approach to expert handwriting evidence in Jeans v Cleary [2006] NSWSC 647: 155 The handwriting expert evidence forms one part of the body of evidence, both oral and documentary, upon which I must base my findings of fact. It would be erroneous to treat the expert evidence as being, in some way, decisive on its own in a case such as this: Gawne v Gawne (1979) 2 NSWLR 449 at 453A-B, 455-456. In Gawne v Gawne, Glass JA (Reynolds JA agreeing) said at 453A-B: "I am satisfied that his Honour fell into error in his evaluation of the evidence before him. In conceding a dominant role to the expert testimony, he misapprehended the weight of the remaining evidence which, in a cogent way, established the probability that the signatures were genuine, and the improbability that they had been forged. If the opinion evidence of the handwriting experts were put to one side, the whole of the lay evidence made out a strong circumstantial case that the documents of the 9th August, 1968, had in fact been executed by F. C. Gawne." ... 157 As the tribunal of fact, I am entitled to make a comparison between handwriting that is disputed and admitted, although I should pay particular attention and regard to expert testimony on the issue: R v Doney (2001) 126 A Crim R 271 at 280 [61] (Ipp AJA, Hidden and Barr JJ agreeing).

Did Ms Vickers sign the Deed? - The evidence 68The original Deed was admitted into evidence and had been provided to the handwriting experts. It is signed in the manner set out in paragraph [23] above. All of the signatures and other handwriting on the execution pages of the Deed appear to the naked eye to be in the same black pen. 69Mr Carmelo Duardo gave evidence that as at 16 May 2002 he was employed by Cassaniti & Associates as an accountant. He said that by 2002 he had worked for Mr Rogic but not for Ms Vickers. He could not be sure if he had met her before 16 May 2002. While he no longer had any actual recollection of the execution of the Deed, he identified his signature as the attesting witness to all of the signatures on the Deed. He said it was always his practice only to sign his signature as a witness to a document when the person signing the document did so in his presence. He also gave evidence that it was his practice, he thought even in 2002, to ask for identification from any person whose signature he had been asked to witness if he did not have independent knowledge as to the identity of that person. Nothing arose from Mr Duardo's cross-examination which would justify any qualification to his evidence as I have summarised it in this paragraph. 70Like Mr Duardo, Mr Rogic's evidence was that he had no actual recollection of signing the Deed. He said that over time he and Ms Vickers had attended Cassaniti & Associates on numerous occasions to sign documents. He identified his signature where it appears on the Deed and said that the signature "H. Rogic" appeared to his observation to be Ms Vickers' signature. He had no actual recollection of Ms Vickers being present with him at the time he signed the Deed. In cross-examination he denied the suggestion that he had forged Ms Vickers' signature on the Deed. 71Mr Cassaniti gave evidence that Mr Duardo had commenced his employment with Cassaniti & Associates in about 2000 as a junior accountant. From time to time during his employment Mr Cassaniti would ask Mr Duardo to come into the former's office to witness signatures. His best recollection of Mr Duardo's practice in 2002 was that if Mr Duardo did not know the person whose signature he was to witness, he would ask for some form of identification to check who they were. 72Mr Cassaniti said that he recalled that the Deed was executed at the offices of Cassaniti & Associates. At the time of its execution, he, Mr Rogic, Ms Vickers and Ms Duardo were present. 73Ms Vickers vehemently denied that she had signed the Deed. She said that from time to time Mr Rogic signed her name on documents and would subsequently tell her that he had done so. She believed Mr Rogic must have forged her signature on the Deed. 74Two well-qualified handwriting experts gave evidence: Ms Michelle Novotny for Mr Cohen and Ms Vickers and Mr Gary Storey for Reliance NSW. 75Ms Novotny's conclusions in relation to Ms Vickers' signature on the Deed were: 30. With respect to the questioned signature on [the Deed], I confirm that this signature is an original ink handwritten signature, not a machine generated reproduction. While there are a number of similarities observed between this questioned signature and the Rogic specimens, there are also a number of differences between them. The differences are: (a) the almost square form of the central valley in the letter "H", whereas the corresponding elements in the Rogic specimens are more rounded or pointed forms; (b) the proportions of the letter "R" above and below the central looped element, where the lower portion is less than half the height of the upper portion; (c) the rising (from left to right) axis of the central loop in the letter "R"; (d) the close proximity of the left and right feet of the letter "R"; (e) the middle left commencement and conclusion point of the letter "o"; (f) the form of the introductory portion of the letter "g" which approximately (diagonally) bisects the bowl of the letter "g"; (g) the open tented form caused by the gap between the bowl and the right stem of the letter "g"; (h) the small curved (incomplete loop) form of the tail of the letter "g"; (i) the structure and form of the i-dot; and (j) the overall lack of dynamic fluency and pen pressure variations throughout this questioned signature. 31. Within the limitations discussed at paragraphs 11 to 13 and on the basis of the assumption that the Rogic specimens were written by one person, my observations are supportive of a proposition that the questioned signature on [the Deed] was not written by the writer of the Rogic specimens. 76Mr Storey's original conclusion on the same question was that there was "very strong support that the writer of the H Rogic signatures on the specimen documents .... wrote the H Rogic ... [signature] on the [Deed] compared to the support for the alternative proposition that another writer completed" the signature on the Deed. However, as a result of a conclave with Ms Novotny prior to the hearing, Mr Storey subsequently modified his opinion to there being "strong support" rather than "very strong support" for his conclusion in relation to Ms Vickers' signature on the Deed. 77It was common ground between Ms Novotny and Mr Storey that their enquires were hampered by the lack of any specimen signatures written by Ms Vickers contemporaneously with the date of the Deed and that the specimen signatures attributed to Ms Vickers that had been provided to them, while they conformed to the same general pattern, exhibited a wide range of variation between them. These matters were two of the three limitations referred to by Ms Novotny in her conclusion (see paragraph [75] above). Her third limitation was that because the form of Ms Vickers' signature was relatively simple, such a signature was easier to simulate without necessarily leaving evidence that simulation had occurred. 78Finally, all of the samples of Ms Vickers' signature that were provided to the experts, including some original documents such as the Deed, were admitted into evidence. I reviewed all of these myself.

Did Ms Vickers sign the Deed? - Resolution 79In the first instance, Reliance NSW bears the onus of satisfying the Court on the balance of probabilities that Ms Vickers signed the Deed. I accept Mr Duardo's evidence. In the absence of Ms Vickers' denial and relying on Mr Duardo's evidence I would find that Ms Vickers signed the Deed. I would be fortified in that conclusion by the evidence of Messrs Cassaniti and Rogic. 80However, given Ms Vickers' denial, in accordance with the principles set out in paragraphs [63] to [65] above Ms Vickers bears the onus of satisfying the Court on the balance of probabilities (but applying that test bearing in mind the seriousness of the allegation to be proven) that what is apparently her signature on the Deed is in fact a forgery. Her evidence ultimately came to be that she asserted that her signature had been forged on the Deed by Mr Rogic. 81Ms Vickers has failed to satisfy the Court to the requisite standard that her apparent signature on the Deed is a forgery for these reasons: (1)The Court accepts the evidence of Mr Duardo supported by that of Messrs Cassaniti and Rogic. (2)Ms Rogic is not a reliable witness. (3)The expert handwriting evidence viewed as a whole is not persuasive. (4)The Court's own examination of the Deed and the other samples of Ms Vickers' signature does not persuasively support the conclusion of forgery. 82While the Court's conclusion is ultimately a product of taking all of these reasons into account, I will deal with them individually. 83In order to comply with the formalities for a deed, execution of the Deed by the parties to it had to be attested. This requirement was considered by Young J (as his Honour then was) in Ellison v Vukicevic (1986) 7 NSWLR 104 at 112: The formalities of a deed are set out in the Conveyancing Act, 1919, s 38, which probably reproduce in most part the pre-existing law, and these requirements include (1), that the deed must be attested by a person who is not a party to the deed. Although the word "attested" is not defined in the statute in Wickham v Marquis of Bath (1865) LR 1 Eq 17 at 24 Lord Romilly discussed the question of attestation under the general law and saw: ... it means, as I understand it, that one or more persons are present at the time of the execution for that purpose, and that as evidence thereof they sign the attestation clause, stating such execution. That statement is adopted by Norton on Deeds, 2nd ed (1928) at 24, and see also the article on deeds by Needham J Deeds - Formalities in (1985) 1 Aust Bar Rev 3 at 12 and cases there cited. 84Mr Duardo was a credible witness. His evidence that he could not actually recall the execution of the Deed was unsurprising but did not detract from the persuasiveness of his identification of his signature and his evidence of his practice as an attesting witness. No realistic basis was identified either in his cross-examination or in submissions to suggest Mr Duardo should be disbelieved. As the word "attest" itself suggests, the purpose of an attesting witness is to witness the execution of the deed and to give evidence of that by signing the attestation clause. In the absence of good reasons to disbelieve an attesting witness, including taking account of the possibility that the attesting witness was duped as to the identity of the person executing the Deed, it would undermine the policy of requiring an attesting witness to do other than to accept their evidence. 85The Court infers, on the basis of Mr Duardo's evidence of his signature and his practice (including the possibility of his having sought identification if he was unsure as to the identity of Ms Vickers), that Mr Duardo was present and witnessed Ms Vickers signing the Deed. Mr Duardo's evidence would, of itself in these circumstances, be sufficient. However, that evidence is also supported by Messrs Cassaniti and Rogic. The evidence adduced by Ms Vickers is insufficient to persuade the Court to a conclusion which would require it to disbelieve not one but three witnesses. 86I have concluded that Ms Vickers is not a reliable witness. That conclusion does not entail a finding that she was dishonest. Rather, I was left with the strong impression at the conclusion of her evidence that she could no longer recall one way or the other whether she had signed the Deed, but that self-interest as to the outcome of these proceedings meant she had persuaded herself that she had not. My reasons for this assessment are: (1)Ms Vickers was inconsistent in the recognition of her own signature. She was taken to a number of documents in crossexamination which she initially accepted included her signature but later denied were her signature and vice versa. Even allowing for innocent explanations such as the simplicity of her signature and the consequences of the Meniere's disease from which she suffers and other bouts of ill-health, she was unable to identify her own signature with any consistency or reliability. Her own evidence was that she had sought to block this part of her life (which I understood to mean the period of her marriage to Mr Rogic and their subsequent divorce) from her memory. (2)Her evidence underwent significant shifts in the witness box. The tenor of her affidavit evidence was to attempt at every turn to distance herself from having had anything to do with Mr Cassaniti or ever attending Cassaniti & Associates. However: (a)She ultimately accepted that she had attended the offices of Cassaniti & Associates from time to time with her husband to sign documents in at least the 1990s (although she maintained her denial for the period from 2000). This was an acknowledgement she had to make in the witness box when confronted with contemporaneous records from Cassaniti & Associates of telephone and other attendances by her during the 1990s. (b)Notwithstanding her initial and strident assertion in her oral evidence that in the months following the birth of her daughter Tia in March 2002 that Tia's serious health problems meant that she (Ms Vickers) never went anywhere outside the house except to the hospital, Ms Vickers ultimately accepted that there was no physical impediment (either hers or Tia's ) to her attending Cassaniti & Associates in May 2002 if she had wanted to. (3)Ms Vickers' evidence of her daughter's illness in the period following March 2002 and of her husband's alleged practice of signing her signature on commercial documents was not referred to in her affidavit evidence but emerged in the witness box. When challenged about the late introduction of this evidence Ms Vickers sought to explain it on the basis of having had inadequate opportunity to give instructions to her lawyers (Ms Vickers being a resident of the United Kingdom). I do not find that explanation particularly persuasive. Even if true, it does not give the Court any confidence about Ms Vickers' reliability as a witness. (4)Allowing for the possibility that she acquiesced in Mr Rogic signing her name on commercial documents from time to time, that matter again only casts doubt on the reliability of her recollection after many years as to whether or not she personally signed any particular document. 87The evidence of the handwriting experts, viewed as a whole, was ultimately inconclusive for these reasons: (1)The experts agreed that they were hampered by the absence of any samples of Ms Vickers' signature from around the time of the execution of the Deed in 2002. The samples that had been made available to them had a gap between 1999 and 2004. (2)Both experts agreed that there was considerable variability in the specimen signatures that had been provided to them. That variability was especially apparent in the shape of the "H" when Ms Vickers signed "H. Rogic" and in the fact that the dot on the "i" in Rogic would sometimes be a pronounced circle and in other cases looked like a flat stroke. Ms Novotny considered the variability of the specimen signatures to be so great that she was unable to satisfy herself which, of any of them, might be genuine and so had to assume for the purposes of her report that they were. (3)The difficulty of variability to which I have just referred caused both experts to exclude three signatures from being signatures which they accepted were specimens of Ms Vickers' signature. However, it was clear from the evidence before me that at least one of those signatures which they excluded (a 2004 mortgage application for the purchase of the Property and witnessed by the conveyancer Mr Burns) had to have been a genuine signature of Ms Vickers. (4)Ms Novotny's conclusion that the "H. Rogic" signature on the Deed had not been written by Ms Vickers was heavily qualified. As set out in paragraph [75] above, her conclusion was expressed in terms of her observations being "supportive of a proposition that the questioned signature ... was not written" by Ms Vickers. Ms Novotny's report included an appendix explaining the terminology which she customarily uses to express her conclusions for handwriting and signature comparisons. The explanation of the conclusion which she expressed in this case was: Evidence supportive not written by Significant differences were found between the questioned and specimen writings/signatures and I found no significant evidence to connect the writer of the specimens with having written the questioned entry, but there are limitations which preclude the expression of a conclusion in probability terms. This often occurs when the amount of writing in question is quite small and/or when the questioned document is a reproduction. Please note that this conclusion is far from a certain one. (highly qualified negative conclusion). There are situations where the phrase "no evidence written by" is more appropriate, for example, where there is evidence if possible distortion, and/or where the writings are in a pictorially quite different style. There is a realistic possibility that the specimen writer may have, for whatever reason, written the questioned entry in a style different to their normal writing/signature. Please note that this conclusion does not mean that the writer of the specimens did not write the questioned writing/signature. "..there is evidence supportive of a proposition/to suggest that the writer of the specimens did not write...but not enough to express a conclusion in probability terms..." (sometimes the phrase "there is no evidence to suggest that the questioned entry was written by the writer of the specimens" is used)

(5)It will be noted that this conclusion is described by her to be a "highly qualified negative conclusion" which is used, amongst other things, when "there are limitations which preclude the expression of a conclusion in probability terms". Without intending to express a statement of principle, if taken as a standalone piece of evidence such a heavily qualified conclusion would generally not enable a court to be satisfied to the requisite standard of a matter such as forgery. That is the present case, although the Court's ultimate lack of satisfaction is informed by all of the matters referred to in paragraph [81] above. (6)Mr Storey's conclusion that the questioned signature on the Deed was written by Ms Vickers ("strong support") was not as decisive in the circumstances of this case as it might be in others. That is because in the course of cross-examination it became apparent that when confronted with examples which did not support his opinion, Mr Storey resolutely categorised such examples as variations within the range of signatures written by Ms Vickers rather than as differences which might take the signature outside of that range. At the heart of the difference between Ms Novotny and Mr Storey was the extent to which the former saw differences and the latter saw variations. 88Finally, as the Court is entitled to do (see paragraph [67] above), I carefully examined all of the specimens of what was said to be Ms Vickers' signature that had been reviewed by the experts. That examination confirmed there was considerable variety among the signatures both as to the shape of the "H" and the dot of the "i" in the various iterations of "H. Rogic". Nevertheless, my visual comparison of the various signatures did not permit me to conclude that the signature on the Deed had any features so different from admitted signatures of Ms Vickers to justify being satisfied to anywhere near the requisite standard that the signature on the Deed was not hers. 89On the basis of the matters set out in paragraph [85] above, the Court therefore finds that Ms Vickers signed the Deed.

Does the Deed raise an estoppel as to the amount Ms Vickers owes under the Deed? 90It was submitted for Reliance NSW that the Deed, in particular Recitals B, E and G (see paragraph [22] above) raised an estoppel which prevented Ms Vickers from denying the existence of her liability under the Deed in respect of the sum of $104,430. The court accepts that submission: see Dabbs v Seaman (1925) 36 CLR 538 at 549 (per Isaacs J); Caboche v Ramsay (1993) 119 ALR 215 at 237-238 (per Gummow J); Lescap Group Pty Ltd v Pacific Resort Holding Pty Ltd [2012] NSWSC 580 at [39] (per White J). Mr Cohen and Ms Vickers, correctly, did not dispute the existence of such an estoppel if it were found (as I have) that Ms Vickers signed the Deed.

Was Reliance disentitled from asserting the priority of its rights under the Deed? 91There can be no doubt that in its terms Clause 6(b) gave Reliance a charge over the Property. Furthermore, Clause 6(c) of the Deed, which contained an agreement to grant a legal mortgage, thereby created an equitable mortgage: Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612 at [26]. Both of those interests arose upon Ms Vickers and Mr Rogic becoming registered proprietors of the Property on 5 April 2004. 92Furthermore, the certificate of title for the Property was provided to Reliance by Mr Rogic with the intention of it being held by Reliance as security for the debt which was acknowledge by the Deed (see further paragraph [101] below). Because the deposit of the certificate of title was not called in aid by Reliance as a separate source of its rights, it is unnecessary for me to decide whether the deposit by Mr Rogic with the intention of the certificate of title being held as security would also bind Ms Vickers. However, Reliance's possession of the certificate of title is relevant to Reliance's argument that its interests should not be postponed to Mr Cohen's (see paragraphs [99] to [101] below). 93There is also no doubt that, in accordance with its terms, the Costs Agreement gave Mr Cohen a charge over Ms Vickers' interest in the Property from December 2005. Because the debt with interest under the Deed ($316,439.56 as at 13 June 2013) exceeds the Fund, and Ms Vickers is liable under the Deed for the whole of that amount, it makes no difference to the outcome of these proceedings that Mr Cohen's charge under the Costs Agreement relates only to Ms Vickers' interest in the Property. 94It follows that these proceedings concern a competition between two unregistered equitable interests in the Property. In accordance with basic equitable principles, in the absence of some disentitling factor the earlier interest prevails over the later interest. It was submitted for Mr Cohen and Ms Vickers that Reliance's failure to lodge a caveat to protect its interest in the Property was such disentitling conduct. I disagree. 95The relevant legal principles were, with respect, correctly and succinctly summarised by Ball J in Barlin Investments Pty Ltd v Westpac Banking Corp [2012] NSWSC 699; (2012) 16 BPR 30,671, which I gratefully adopt: 31. The traditional principle employed to determine priority between competing equitable interests is that, where the merits are equal, the earlier in time prevails over the later: Rice v Rice [1853] EngR 1102; (1853) 61 ER 646 at 648. However, later cases have emphasised that that principle should not be applied mechanically and that the real task of the court "is to determine where the better equity lies": Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liquidation) [1965] HCA 17; (1964-1965) 113 CLR 265 at 276 per Kitto J; approved in Heid v Reliance Finance Corporation Pty Ltd [1983] HCA 30; (1983) 154 CLR 326 at 333 per Gibbs CJ (Wilson J agreeing), 339 per Mason and Deane JJ. 32. One circumstance in which the later interest holder will be held to have a "better equity" than the earlier is where the earlier interest holder is guilty of an act or omission which had or might have had the effect of inducing the later interest holder to act to his or her prejudice: Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78 at 91 per Griffith CJ. In the case of Torrens Title land, one omission which has been held to be of particular relevance is the failure to lodge a caveat. Where that failure has led a subsequent interest holder to assume that there are no interests in the land besides those recorded on the Register, the prior interest may be postponed by the failure of the interest holder to lodge a caveat promptly to protect his or her interest: Butler v Fairclough at 91-92. Similarly, a person may be guilty of postponing conduct if the person withdraws a caveat in circumstances where the withdrawal has led a subsequent interest holder to believe that the person no longer seeks to protect his or her interest or no longer has an interest to protect: Perpetual Trustee Company Ltd (original plaintiff), Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd [2010] NSWSC 429 at [35] per Windeyer AJ, referring to Elderly Citizens Home of SA Inc v Balnaves (1998) 72 SASR 210. However, the mere failure to lodge a caveat is not itself enough to postpone an earlier interest if some other action has been taken to protect the unregistered interest, such as retention of the certificate of title: J & H Just (Holdings) Pty Ltd v Bank of NSW [1971] HCA 57; (1971) 125 CLR 546. 96In applying those principles to determine who has the "better equity" as between Reliance and Mr Cohen, the latter must demonstrate an act or default on the part of Reliance which makes it inequitable as between them for Reliance to retain its original priority, such act or default in some way having contributed to an assumption upon which Mr Cohen acted in acquiring his equity that Reliance's equity was not in existence. Posing the question in this way is a paraphrase of the relevant principle as expressed by Barwick CJ in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1970) 125 CLR 546 at 554-555. 97Mr Cohen and Ms Vickers were ultimately unable to point to any assumption on the part of Mr Cohen on the state of the register, let alone an assumption contributed to by some act or default on the part of Reliance. Their case that Reliance's interest should not take priority came to an end when Mr Cohen gave this evidence: Q. Are you saying Mr Cohen-- A. I am saying that when we do the actual settlement then I do the search to see whether - to make sure everything is correct. I don't necessarily do property searches when I sign a costs agreement not when I am given instructions that there is ample equity. Q. That is because you are not relying upon anything that is in the results of the property search when you are entering into a costs agreement, are you? A. No. Q. Thank you. Indeed, after you entered into this costs agreement you did not attempt to lodge a caveat to protect any proprietary interests that might have been created in your favour as a result of entering into the costs agreement, did you? A. No, I have never done so in 32 years. Q. So it is not correct to say that you relied upon the state of the title search of this property when you entered into the costs agreement with Ms Rogic, is it? A. No, it is not - it wasn't - that wasn't the only thing I relied on. Q. It wasn't the only thing - you did not rely on that at all? A. No, I didn't. 98Given that there is no evidence of any particular assumption by Mr Cohen and that it is clear, by his own admission, that he was not relying on a search of the register in entering into the Costs Agreement, it is strictly unnecessary for me to go on to take into account the effect of the certificate of title for the Property being delivered to Reliance by Mr Rogic. However, I will do so because it goes on to provide a further and alternative answer as to why Mr Cohen's and Ms Vickers' argument for the postponement of Reliance's interest fails. 99On their behalf Mr Stomo submitted that the decision of the High Court in J & H Just (Holdings) Pty Limited was of no assistance because, first, there was no basis for concluding that the certificate of tile had been provided to Reliance by way of security and, second, the discussion in that case about relying upon holding the certificate of title in lieu of lodging a caveat was confined to particular practices of banks as lenders. Neither of those reasons survives scrutiny. 100It is clear from the evidence referred to in paragraphs [27] and [28] above, and I find, that the certificate of title was provided to Reliance by way of security. Mr Cassaniti was not cross-examined on the conversation set out in paragraph [27] above. In addition, the conversation seems to me to be quite probable in circumstances where at that time Mr Cassaniti is likely to have known of Mr Rogic's marital difficulties and would have been interested to secure further the debt which was the subject of the Deed. While I accept the conversation occurred, I should note that Mr Cassaniti dated the conversation to mid-April 2004. A late piece of evidence tendered at the trial, being an authority to release the certificate of title from Wade Burns and Associates signed by Mr Rogic on 1 April 2005 makes it far more probable, as I have found, that the conversation occurred shortly before that date. 101Mr Stomo submitted that the certificate of title was being held by Wade Burns and Associates by way of safekeeping and that its transfer to Cassaniti & Associates was for the same purpose. That is implausible in all the circumstances. Reliance was a lending vehicle for Cassaniti & Associates. While delivery of a certificate of title by a debtor to their creditor might of itself be equivocal as to the purpose of the delivery, when the conversation set out in paragraph [27] above is also taken into account the Court is well satisfied on the balance of probabilities that the certificate of title was provided to and received by Cassaniti & Associates as further security for the sum the subject of the Deed. That conclusion is supported by the fact that Mr Cassaniti lodged the certificate of title when he tried to register the October 2005 Mortgage in 2009 (see paragraph [48] above). 102Second, J & H Just (Holdings) Pty Limited cannot be read down in the way Mr Stomo contended. There is no suggestion in the judgment that the Court's conclusions depended upon or approved a practice only engaged in by or available to banks. Rather, observations of general principle were applied in a case where the lender happened to be a bank. 103The judgment of Barwick CJ at pages 554-556 (with whom McTiernan and Owen JJ agreed) makes clear that this aspect of the matter was decided on two bases. The first was the learned Chief Justice's conclusion at page 556 (emphasis added): In any case the failure by such a person to lodge a protective caveat cannot of itself properly be held to be an act fulfilling the requirements to which I have referred of conduct which will deprive a prior equity of its priority. As I have said, the purpose of the caveat is protective: it is not to give notice. The holder of the subsequent equity in my opinion could not properly rely upon the absence of any notification in the register book of the lodgement of a caveat as a representation or as the basis for a conclusion that no equitable interest in the land existed in any person. In my opinion the conclusion and the reasoning of the Court of Appeal Division were correct on this aspect of the case. 104The Chief Justice also gave a second, and distinct, reason for the same conclusion at page 555 (with the words to which emphasis has been added making it clear that the application of the principle was not confined to banks): Mention should now be made of a second reason why in this case the failure to lodge a caveat could not be held to be prohibitive of the Bank's priority. The Bank held the certificate of title and the memorandum of mortgage in registrable form. Whilst there is no express provision of the Act which forbids the registration of a dealing without the production of the duplicate certificate of title, it is practice of the Registrar-General's office to refuse to accept an instrument of transfer or mortgage for registration without production of the duplicate certificate of title, unless the certificate is already in the Registrar-General's hands. ... Thus a person in the situation of the Bank could reasonably rely upon this practice and his possession of the duplicate certificate of title as a reasonably sufficient protection. 105Mr Cohen and Ms Vickers have failed to demonstrate any conduct on the part of Reliance that would entitle the Court to conclude that they have the "better equity" that should prevail notwithstanding that their equity arose after Reliance's equity. In addition, I apply the decision of the High Court in J & H Just (Holdings) Pty Limited to conclude that failure to lodge a caveat was not disentitling conduct when Reliance held the certificate of title for the Property as additional security. 106Before leaving the topic of priorities I should say something about the October 2005 Mortgage because a great deal of evidence was devoted to it. The evidence about its execution under power of attorney and Mr Cassaniti's ultimately unsuccessful attempts to register it in 2005 and 2009 was convoluted. Because no party relied on the efficacy of the October 2005 Mortgage in these proceedings, there is only one finding I need to make. That finding, based on the letter referred to in paragraph [48] above, is that when Mr Cassaniti lodged the October 2005 Mortgage for registration in 2009, it was lodged with the certificate of title for the Property.

Is there any other reason why Reliance NSW's claim should not prevail? 107The Deed was entered into by Reliance as trustee of the Reliance Discretionary Trust. Mr Cohen and Ms Vickers, correctly, did not dispute that whatever rights Reliance had against Ms Vickers and Mr Rogic were now vested in Reliance NSW as the new trustee of the Reliance Discretionary Trust (see paragraphs [41] and [42] above). 108However, Mr Stomo submitted that there were other reasons why Reliance NSW's claim to the Fund should fail. They were: (1)The effect of the Family Law Deed. (2)The effect of one or both of Mr Rogic's bankruptcy and the sale of the Property. (3)The fact that the Deed had only been stamped up to an amount securing $36,500.

The Family Law Deed 109Mr Stomo's argument in relation to the Family Law Deed did not depend upon the effect of any provision of the FLA. Rather, he submitted that the Family Law Deed should be read in accordance with what was described as "the purpose which is mandated by" the FLA which, in this case, was to give the Property to Ms Vickers. He submitted that Clause 4B of the Family Law Deed (see paragraph [35] above) should be read in that manner creating, in effect, a legal interest which prevailed over any prior equitable interest. 110Mr Ashhurst SC responded by submitting that the FLA did not confer a power on the Court to make an order altering interests in the Property to the extent that a secured creditor's rights in that property were affected, citing Australian Security and Investments Commission v Rich [2003] FamCA 1114; (2003) 31 FamLR 667 at [35]. 111With respect, Mr Ashhurst SC's response is inapt because I did not understand Mr Stomo's argument to rely upon any particular provision of the FLA. Nor was he suggesting that the Family Law Deed relied upon or otherwise was effective pursuant to an order of the Family Court of Australia. He did draw to my attention that in April 2007 in proceedings between Ms Vickers and Mr Stomo a judge of that court made a declaration in relation to the Family Law Deed that "for the purposes of Part VIIIA of the Family Law Act, a binding financial agreement exists between [Mr Rogic and Ms Vickers]". But nothing turns on that declaration having been made. 112The answer to Mr Stomo's submission is that the Family Law Deed takes effect in accordance with its terms. Clause 4B required Mr Rogic to transfer to Ms Vickers "all of his right, title and interest in and to" the Property. It further provided that he was to receive $30,000 from the sale proceeds of the Property. 113The Family Law Deed was silent as to Ms Vickers' share in the Property. To the extent her share was subject to Reliance's equity, that position remained unchanged. Because Clause 4B of the Family Law Deed gave Ms Vickers (as one joint tenant) a specifically enforceable right to require Mr Rogic (as the other joint tenant) to transfer his interest in the Property to her, it severed the joint tenancy in equity: Penny Nominees Pty Ltd v Fountain (No 3) (1990-1991) NSW ConvR 55-561 at 59,157. Given they had jointly charged the Property, so there can be no question that Ms Vickers did not have notice of Reliance's equity, Ms Vickers would take Mr Rogic's legal and equitable interest in the Property subject to Reliance's equity. However, Clause 4B did not create a legal interest in the way submitted by Mr Stomo that would prevail over any prior equitable interest. 114There is no evidence that Mr Rogic ever complied with his obligations under Clause 4B of the Family Law Deed. The sale of the Property was effected by the plaintiffs as set out in paragraphs [52] to [54] above. Upon execution of the Family Law Deed the joint tenancy was severed in equity and Ms Rogic held an equitable estate in fee simple of the Property. However, that equitable interest was later than and therefore subject to Reliance's equity derived from the Deed. 115It follows that the Family Law Deed does not operate to destroy Reliance's prior equity in the Property. Insofar as any part of the Fund may be said to represent Mr Rogic's share in the Property, Ms Vickers is entitled to it by reason of the Family Law Deed (subject to payment of the $30,000 to Mr Rogic, which has been done). However, her entitlement remains subject to Reliance's prior equity.

Mr Rogic's bankruptcy and the sale of the Property 116Upon Mr Rogic's bankruptcy, his legal estate in the Property vested in Mr Sutherland as Mr Rogic's trustee in bankruptcy. He no longer had the equitable estate for the reasons set out in paragraphs [113] and [114] above. However, in accordance with s 58(5) of the Bankruptcy Act 1966 (Cth), that vesting did not affect Reliance's rights as a secured creditor in respect of the Property. Mr Stomo did not suggest otherwise. 117However, he went on to submit that the security provided by Clause 6 of the Deed was security over the Property and that when the Property was sold the security was converted to money and was lost. It was submitted that the security did not extend to the proceeds of sale of the Property unless the sale was pursuant to the security. Rather, the proceeds of sale became subject to the Family Law Deed and belonged solely to Ms Vickers. 118Mr Ashhurst SC submitted that there was no basis to suggest that the holder of an equitable charge or mortgage in land loses the right to the proceeds from the sale of that land simply because the land has been sold. He went so far as to submit that it would be a "monumental change to Australian property law if that were the case". I agree. 119The fact that when the plaintiffs were appointed trustees for sale by the Court, the order vesting the Property in them was expressed to be "subject to any encumbrances affecting the entirety thereof" is a complete answer to Mr Stomo's submission. Furthermore, one secured creditor does not lose their rights to the proceeds of sale if the security property is sold by some means other than pursuant to that creditor's security. The conversion of the Property into money meant no more than that anyone who had a security interest in the Property now had an entitlement to so much of the proceeds as reflected their interest. It is undoubtedly true that the proceeds of sale of the Property were subject to the terms of the Family Law Deed. However, as I have set out in paragraphs [113] to [115] above, Ms Vickers took her interest under the Family Law Deed in so much of the Property as had been Mr Rogic's subject to Reliance's equity. Her own interest in the Property also continued to be subject to Reliance's prior equity.

Stamp duty 120Finally, Mr Stomo submitted that because the Deed had only been stamped to an amount securing the loans in Schedule A of the Deed for $36,500 it could only be enforced, if it was otherwise enforceable, to that amount. The submission continued that even if one accepted that there will be a retrospective effect to the validity and enforceability of the Deed once it was stamped to its full extent, that would not assist Reliance on the question of priorities because that had to be determined by comparing the current situation with the circumstances which pertained at the time the Property was sold. As at the date of sale of the Property by the plaintiffs, so the argument ran, Reliance had an unenforceable charge beyond the stamped amount. 121Mr Ashhurst SC accepted that in order to recover the full amount which Reliance NSW claimed, the Deed would have to be up-stamped accordingly. He gave an undertaking on behalf of his client for that to occur once the original of the Deed could be made available. He submitted that course would overcome any of the difficulties which had been raised by Mr Stomo. I agree. 122It is convenient to deal with the second part of Mr Stomo's argument first. Mr Stomo's contention was that, in determining priorities, the Deed was only enforceable, and therefore effective, to secure the amount for which it had been stamped. However, effectiveness and enforceability are not the same thing. This distinction was recognised by Hodgson CJ in Eq (as his Honour then was) in Official Trustee in Bankruptcy v D'Jamirze [1999] NSWSC 1249; (1999) 48 NSWLR 416 at 427, where his Honour considered the effect of the High Court's decision in Shepherd v Felt & Textiles of Australia Pty Ltd [1931] HCA 11; (1931) 45 CLR 359 (emphases in original): [58] Plainly, this means that an unstamped instrument is not of absolutely no effect until it is stamped: the use of the word "until" in some of the cases noted earlier is obiter, and contrary to the ratio of Shepherd. Until stamped, an instrument has whatever effect is consistent with the proposition that, if stamped, it will be fully effective ab initio. To put this another way, Shepherd must mean that an instrument is effective from the start conditionally upon being stamped before relied on in court, or alternatively, from the start carries the potentiality of being so effective. 123It follows from that analysis that, notwithstanding its limited stamping, the Deed was at all times effective in accordance with its terms to create an equitable interest in the Property for the full amount of the debt the subject of the Deed. However, to be enforceable for that amount required it to be stamped accordingly. 124Although Hodgson CJ in Equity was considering the effect of the Stamp Duties Act 1920 (NSW), a similar conclusion has been reached in authorities which have considered the legislation which applies to the Deed, the Duties Act 1997 (NSW). Those same authorities also support Mr Ashhurst SC's answer to the first part of Mr Stomo's argument that if otherwise entitled to the Fund, Reliance NSW will be able to recover the Fund in these proceedings once the Deed has been up-stamped. This was the conclusion reached by Katzmann J after an extensive consideration of the authorities in Arnautovic & Sutherland t/as Jirsch Sutherland & Co v Cvitanovic (as trustee for the bankrupt estate of Adrian Lawrence Rosee) [2011] FCA 809; (2011) 199 FCR 1. Her Honour's decision was considered by Ward J (as her Honour then was) in In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676, which I respectfully adopt as a correct expression of the current state of the law: 48. In this regard I note that s 211 of the Duties Act 1997 (NSW) concerns the effect of failing to pay duty on a mortgage: Consequences of non-payment of duty A mortgage on which duty is required by this Chapter to be paid is unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid. (my emphasis) 49. For the purposes of s 211 (and Ch 7 of the Duties Act), a mortgage is defined by s 205: What is a mortgage? For the purposes of this Chapter, an instrument is a "mortgage" if it is: (a) a security by way of mortgage or charge over property wholly or partly in New South Wales at the liability date, or (c) a security by way of a transfer or conveyance of any property in New South Wales that is held in trust to be sold or otherwise converted into money, redeemable before such a sale or conversation either by express stipulation or otherwise, except where the transfer or conveyance is made for the benefit of creditors who accept the transfer or conveyance in full satisfaction of debts owed to them, or (d) an instrument that, on the deposit of documents of title to property in New South Wales or instruments creating a charge on property in New South Wales, becomes a mortgage or evidence the terms of a mortgage. [Note: (b) is omitted in the legislation] 50. Section 304 deals with the question whether an instrument evidencing a dutiable transaction can be admitted into evidence. 51. The effect of s 211, therefore, is that if duty has only been paid for a mortgage sum less than the sum Nadalan Enterprises now claims is secured by the mortgage, the mortgage will be enforceable only to the extent of the lesser sum upon which duty has been paid. (Evidence of compliance with the undertaking proffered by Nadalan Enterprises through Mr Quickenden would be required in this regard.) 52. With respect to a document on which no duty, or an inadequate amount of duty had been paid, McDougall J held in Boral Recycling Pty Ltd v Wake [2009] NSWSC 712, in the context of an application for the extension of a caveat, in which it was necessary to establish that when lodged there was a caveatable interest, (at [12]) that: Not having been stamped, the consequences prescribed by s 211 must follow. A mortgage that is required to be stamped is enforceable only to the extent of the amount secured by it on which duty has been paid. In this case, no duty having been paid, the relevant amount, for the purposes of s 211(1) is zero. (my emphasis) 53. There is some dispute in the authorities as to whether allowing the matter to stand down so as to pay the appropriate duty on the instrument would have any effect for the purposes of a determination of the existence at the relevant time of a proprietary interest (Neoform Developments and Interiors Pty Ltd v Town and Country Marketing Pty Ltd [2002] NSWSC 344, Boral Recycling, McKensey v Hewitt [2004] NSWSC 636; Arnautovic t/as Jirsch Sutherland & Co v Cvitanovic (as trustee of the Bankrupt Estate of Adrian Lawrence Rosee) [2011] FCA 809). The question arises before me only in the context that (until up-stamped) the Credit Application would at most seem to be enforceable as a charge only to the amount of $101,000. 54. In Jirsch, Katzmann J referred to Boral Recycling, before considering a number of cases which held that, under the Stamp Duties Act 1920 (NSW), the effect of subsequent stamping was retrospective and the instrument was valid ab initio (Electricity Meter Manufacturing Co v Manufacturers' Products Pty Ltd (1930) 30 SR (NSW) 422; Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359; Official Trustee v D'Jamirze [1999] NSWSC 1249; (1999) 48 NSWLR 416). Her Honour noted that Hodgson CJ in Eq, as his Honour then was, had said (at 426-527 in D'Jamirze) that: Plainly, this means that an unstamped instrument is not of absolutely no effect until stamped... Until stamped, an instrument has whatever effect is consistent with the proposition that, if stamped, it be fully effective ab initio. To put this another way, Shepherd must mean that an instrument is effective from the start, conditionally upon being stamped before relied on in court, or alternatively, from the start carries the potentiality of being so effective. 55. Where the dispute has arisen in the context of caveats, the question is relevant in that if no enforceable interest arises until the claimed interest is enforceable, then retrospective stamping or registration does not mean there was a caveatable interest when lodged (ACN 075 911 410 Pty Ltd (t/as Acuity Funding) v Almaty Pty Ltd [2011] NSWSC 333 at [18]). 56. Katzmann J (referring there to CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384) noted the predecessor to s 211 under the previous legislation (then being s 84(4)), which was considered in McCallum (aka Hain) v National Australia Bank [2000] NSWCA 218, and concluded (at [52]-[53]) that: Section 211 does not use the word "unless". This might point to a deliberate legislative intention to overcome the interpretation given to s 29. But the language is not clear. It certainly does not exclude the possibility of "retroactive operation". And the inconvenience of the alternative interpretation to which Heydon J referred in McCallum remains. The Explanatory Note on the Duties Bill is silent on the question. And there is nothing in the second reading speech that throws any light on it. The Minister delivering the second reading speech, the Hon RJ Debus MP, said that the main purpose of the legislation was to replace the Stamp Duties Act with "simple, clear and equitable legislation drafted in contemporary language and modern style": Hansard, Legislative Assembly, 12 November 1997, p 1612. He said nothing about the question of enforceability of unstamped mortgages. Whatever the reason for the change in the statutory language concerning the unenforceability of mortgages, I very much doubt that the change from "unenforceable unless it has been stamped" to "unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid" was intended to have the effect that the mortgage was only enforceable from the time of stamping and not retrospectively from the time of execution, contrary to the previous authorities. In the light of the authorities, if the effect were to prevent a mortgage from operating ab initio one might have expected either the substitution of "unless" with "until" or some express statement to the effect that the stamping only operated prospectively. I am therefore inclined to follow the approach in McCallum and to hold that s 211 operates retrospectively to make the charge enforceable from the time it was executed. 57. On both views of s 211, a later stamping has at least prospective effect. If, in the present case, a greater debt is claimed to be secured by the Credit Application than that upon which duty has been paid (being a sum greater than that shown on the face of the instrument stamped), then Nadalan Enterprises is liable (on its undertaking) to pay the difference between the duty paid and the duty which would be payable on a mortgage securing the greater sum. This would have the prospective effect that the entire mortgage debt is the [scil. then] enforceable at least from the date of payment of the difference in duty. (Until up-stamped, any equitable charge would be enforceable only to the amount so stamped - a matter that may well be of significance in the District Court proceedings.)

Conclusion 125Reliance is entitled to the whole of the Fund, including any interest accrued thereon, subject to two matters. First, if the plaintiffs as trustees did not recover their costs of the proceedings before paying the Fund into Court, then they should be permitted to do so now from the Fund on the indemnity basis. Second, Reliance will have to up-stamp the Deed. 126I will give the parties an opportunity to bring in short minutes of order to give effect to these reasons and, if unable to be agreed, to make submissions as to costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 June 2014