Paul Verteouris v Kerry Verteouris

Main contentions of the parties 5The plaintiffs allege that the obligation to pay an amount equivalent to two thirds of the value of the Property arises from certain transactions which were entered into in November 2005 and March 2006. Prior to that time, the Property had been held by the first and second plaintiffs and the deceased as joint tenants. However, in November 2005, the first and second plaintiffs transferred their interests in the Property to the deceased for a stated consideration of $483,333 (a sum which is approximately two thirds of $725,000, the then value of the Property) and the deceased granted a mortgage in favour of the first and second plaintiffs which secured repayment to them of a sum equivalent to two thirds of the value of the Property at the time of the demand for payment. 6In March 2006, the first and second plaintiffs and the deceased entered into a deed ("the Deed") which contained certain acknowledgements by the deceased, including that he was indebted in an amount equivalent to 66.66% of the value of the Property from time to time, and provided that the moneys due and owing shall be repayable to the first and second plaintiffs upon demand. 7The defendant's principal defence is that the Deed, at least insofar as it provides for the continued existence of the deceased's indebtedness, is a sham, the true intention of the parties being that the loan was to be forgiven. That forgiveness (or, as put by counsel for the defendant, that gift of any moneys due under the mortgage) was said to be part of a plan by the first and second plaintiffs to divest themselves of most of their assets so as to facilitate the obtaining of social security benefits in their retirement. 8The defendant raises various arguments in the alternative in the event that the Deed is enforceable according to its terms. First, the defendant contends that the demand for payment (which was dated 18 June 2012 but not made until 19 June 2012 at the earliest) is ineffective as it is not in accordance with clause 4 of the Deed. It is put that the demand failed to give "not less than six months notice of the requirement for repayment" in circumstances where the demand stated that repayment was required "not later than six months from the date hereof". 9Secondly, the defendant contends that the demand, which was made by the third and fourth plaintiffs as assignees of the rights of the first and second plaintiffs under the Deed, is ineffective because the debt owed to the first and second plaintiffs was created under the November 2005 mortgage, not the Deed, which merely contained acknowledgements of a debt which was created elsewhere. 10Thirdly, the defendant contends that no entitlement to repayment had arisen when the proceedings were commenced on 5 October 2012.

Relevant facts 11Most of the facts in this matter were not the subject of any dispute. The main factual controversy concerns the events of March 2006, around the time that the Deed was entered into and a different property (a shop adjacent to the Property in Rowley Street) was transferred by the first and second plaintiffs to the third and fourth plaintiffs. The evidence establishes the following relevant matters. 12In 1965, the first and second plaintiffs (hereafter referred to as Mr Verteouris and Mrs Verteouris respectively) migrated to Australia from Greece. They both became Australian citizens in 1975. It appears that prior to his retirement in about 2006, Mr Verteouris operated his own small businesses. 13In 1998, Mr and Mrs Verteouris sold a property in Hurstville (which I infer was an investment property) for $365,000. They decided they would invest the proceeds of sale in the purchase of another property. They were aware, at that time, that their son Dennis had "a bit of money", and it was further decided that if he contributed his money towards the purchase of a property, then he could be put on the title for a one third share. 14In about February 1999, Mr and Mrs Verteouris and Dennis Verteouris entered into a contract to buy the Property for $450,000. Mr and Mrs Verteouris paid the $45,000 deposit and a further $290,000 towards the purchase price of the Property out of the proceeds of sale of their Hurstville property. Dennis Verteouris contributed $45,000 towards the purchase price. The balance of the purchase price was funded by mortgage finance from the State Bank of New South Wales in the sum of $70,000. In April 1999, the Property was conveyed to Mr and Mrs Verteouris and Dennis Verteouris as joint tenants. They became registered proprietors of the Property accordingly, and the mortgage in favour of the State Bank of New South Wales was registered. 15Shortly following the acquisition of the Property, Mr Verteouris undertook some renovations to the Property. Mr Verteouris was assisted to some extent in this task by Dennis Verteouris, but Mr Verteouris paid for the works. The total cost of the works is estimated by Mr Verteouris to be approximately $9,000 - $10,000. He does not have any records which would verify such expenditure. 16In about July 1999, the Property was let to a tenant. That tenant remained in occupation until June 2005. The rent received was applied towards the loan from the State Bank of New South Wales. That loan was fully repaid in 2002 and a Discharge of Mortgage was then obtained, although not registered until late 2005. It appears that the rental income was not sufficient to meet the entirety of the mortgage loan repayments, so Mr Verteouris made additional repayments as required. The extent of those additional payments is not clear. There was also no evidence of how the rental income was dealt with after the loan had been repaid. Presumably, it was shared equally amongst the joint owners. 17Dennis Verteouris and the defendant started going out together in about October 1999. The defendant says that at about that time Dennis Verteouris told her that he had purchased the Property for $450,000, and that the Property was being rented out, with the rent paying off the mortgage. The defendant also says that at no time did he tell her that his parents had any interest in the Property, or that he had entered into any loan or mortgage arrangement with them. 18In January 2005, the couple became engaged to be married. They planned to live in the Property. The defendant says that at about that time, Dennis Verteouris told her that if the house was ever sold, he would have to give his father "a quarter of the value because he has helped me financially over the years". 19Evidently, it was agreed that Dennis Verteouris and the defendant would move in and live at the Property after they were married. From about June 2005 to September 2005, Mr Verteouris embarked upon a further round of renovations to the Property. These renovations included, at least, the installation of new kitchen appliances, the tiling of the bathroom, the replacement of some ceilings and floorboards, the repainting of the entire house, the installation of air conditioning, and general maintenance and handyman tasks. Dennis Verteouris provided some assistance to his father in the carrying out of the renovations but this assistance was limited, due, at least in part, to a back condition from which he suffered. Some of the work was also undertaken by tradesmen, and the air conditioning was installed by the defendant's brother, but I accept that the majority of the work was carried out by Mr Verteouris himself. 20Mr Verteouris estimates that he spent approximately $60,000 on these renovations. Again, there are no records which would verify such expenditure. The defendant gave some evidence to the effect that Dennis himself may have contributed significant sums towards the renovations, but yet again, there are no records which would verify such expenditure. In these circumstances, it is not possible to make precise findings as to what expenditure was incurred. However, I generally accept the evidence of Mr Verteouris on this issue, which was not attacked in cross-examination, and conclude that he incurred most, although perhaps not all, of the expenditure on the renovations, and that his expenditure was of a magnitude in the order of his estimate. The hearsay evidence adduced by the defendant on this issue cannot, in my view, carry much weight in circumstances where it is clear from other evidence given by the defendant that Dennis Verteouris made statements to her in relation to the Property which were clearly inaccurate, including that he had purchased the Property for $450,000, and also failed to mention that his parents were initially joint owners of the Property and later held a mortgage over the Property. 21Dennis Verteouris and the defendant were married on 3 September 2005. Shortly thereafter, they moved into the recently renovated Property. 22According to Mr Verteouris, he had a conversation in about October 2005 with Dennis Verteouris, in which the latter said words to the following effect: "Dad, I am upset. Both of my brothers own units and have done very well for themselves, I have got nothing. Can you and mum transfer the Rowley St house to me so that I own it? I'll give you a mortgage to protect your two thirds share." 23Mr and Mrs Verteouris gave evidence to the effect that, at about that time, they agreed between themselves that they would transfer the Property into their son's name, but subject to a mortgage in their favour to protect their interest in the Property. 24A file, opened on 14 March 2005 by Mr Danny Simpson, a solicitor at Redmond Hale Simpson Solicitors of Kogarah, indicates that a transfer of the Property was in contemplation much earlier than October 2005. The file indicates that in March 2005, steps were taken to obtain a valuation of the Property for stamp duty purposes. There is no valuation on the file, or otherwise in evidence, but it appears likely, from a file note made by Mr Simpson on 4 October 2005, that the valuation opinion obtained was that the Property was worth $725,000. That conclusion is reinforced by the fact that the subsequent transfer of the interests of two of the three joint tenants to the third joint tenant was expressed to be for a consideration of $483,333 which is about two thirds of $725,000. 25Mr Simpson's file note dated 4 October 2005 is in the following terms: "Wants to transfer interest in property to Dennis Verteouris Mortgage on title in favour of Paul and Helen in an amount equivalent to 2/3 of the value at any time * No interest payable * Mortgage discharged on the death of both of them * 725,000 x 2/3 = 483,333" 26This file note provides corroboration for Mr Verteouris' evidence to the effect that, following a discussion with Dennis Verteouris, Mr and Mrs Verteouris decided to transfer the Property into their son's name, but subject to a mortgage which would effectively reflect their two thirds interest. It was submitted by the defendant that the conversation Mr Verteouris alleges he had with Dennis Verteouris in October 2005 should not be accepted as occurring because it made no sense. That is, it was put that such a transfer and mortgage transaction would not provide any real financial benefit to Dennis Verteouris and thus would not cure his upset at his perceived inferior position vis-à-vis his brothers. However, Mr Verteouris gave evidence in cross-examination to the effect that Dennis Verteouris wanted the Property placed in his own name. That evidence, which seems to me to be plausible, suggests that Dennis Verteouris saw a value or benefit in achieving that status even if such a transfer and mortgage transaction would not have any real or immediate effect upon his financial position. This is further supported by the evidence of the defendant that Dennis Verteouris told her that he had purchased the Property for $450,000, yet made no mention of any interest in the Property held by his parents. That conduct suggests that Dennis Verteouris would indeed find the prospect of having the title to the Property solely in his own name (albeit subject to a mortgage) an attractive one. I therefore conclude that a conversation to the effect of that deposed to by Mr Verteouris did in fact occur, although it is likely to have taken place earlier than October 2005. 27After Mr Simpson received the instructions the subject of his file note, he set about preparing the necessary documents, including a Transfer and a Mortgage. He informed Mr and Mrs Verteouris that it was preferable that Dennis Verteouris have his own legal representation for the purpose of execution of the mortgage. Mr Simpson offered to recommend a solicitor to him. It is likely that Mr Simpson made such a recommendation, and that such a recommendation included the firm Johnston Vaughan, which occupied offices next to Redmond Hale Simpson. There are letters on Mr Simpson's file to Johnston Vaughan in relation to the transaction. Those letters are marked to the attention "Emil" or "Amil". I infer from those letters and from the identity of the witness to Dennis Verteouris' signatures on the Transfer and Mortgage documents, that an employee of Johnston Vaughan named Amil Dlakic assisted Dennis Verteouris in relation to his execution of those documents. There is no evidence of any wider retainer of Johnston Vaughan in the matter. Indeed, on 30 August 2012, Johnston Vaughan sent a letter to the defendant's solicitors stating that they had no knowledge of Dennis Verteouris as a client of the firm. 28Execution of the Transfer and Mortgage had occurred by 1 November 2005. The Transfer, which is dated 1 November 2005, provides for the transfer by Mr and Mrs Verteouris of their two thirds share in the Property as joint tenants to Dennis Verteouris in consideration of $483,333 (receipt of which was acknowledged). 29The mortgage between Dennis Verteouris as mortgagor and Mr and Mrs Verteouris as mortgagee is also dated 1 November 2005. Annexure "A" to the mortgage includes a covenant given by the mortgagor to the mortgagee in the following terms: "Firstly, to repay to the Mortgagee upon demand (provided that not less than three months written notice of the requirement for such a repayment has been given) an amount equivalent to two thirds of the value of the security property on the date of such demand. The value of the property for the purpose of this clause shall be such value as may be agreed by the parties or, failing such agreement, shall be the value as determined by a nominee of the President for the time being of the Australian Institute of Valuers (or if such Institute shall have ceased to exist, by the President for the time being of the Law Society of NSW). The parties shall, in such event, be jointly responsible for the cost of such valuation. Notwithstanding anything hereinbefore contained, this Mortgage shall be discharged upon the date of death of the later survivor of the mortgagees." 30Stamp duty of $17,243 was paid on a dutiable amount of $483,333 in respect of the Transfer, and stamp duty of $1,877 was paid in respect of the mortgage. A trust account receipt in Mr Simpson's file suggests that the stamp duty was paid by Mr and Mrs Verteouris, along with an amount for the firm's professional costs and disbursements. 31Steps were then taken by Mr Simpson for the registration of the Transfer and the Mortgage as well as for the discharge of the earlier mortgage held by the State Bank of New South Wales. 32The defendant accepts that, as a result of the transactions in November 2005, Dennis Verteouris owed money to his parents pursuant to the terms of the mortgage in their favour. Those transactions are not said to be a sham. 33Mr Verteouris deposes that, prior to entry into the Deed on 29 March 2006, he had a conversation with Dennis Verteouris in which his son said words to the following effect: "I need you to get rid of the mortgage that you have on the property. If I need to borrow any money to start my own business I've been told that I cannot borrow any money if you have a mortgage over the property. We'll make some other agreement so that you will be repaid the money that I owe you." 34That evidence was not directly challenged in cross-examination. However, it was pointed out in submissions on behalf of the defendant that in March 2006, Dennis Verteouris was already conducting his own business, namely, Chasa Enterprises Performance Products, and that he did not commence any new business until about late 2008 or early 2009 when he and the defendant established a company called Kinetic Cams Pty Limited for the purpose of conducting a business. The defendant also gave evidence to the effect that in March 2006, her husband did not discuss with her the prospect of starting his own (or a new) business. 35Nevertheless, in the absence of a direct challenge to the evidence, I accept that a conversation to the effect of that deposed to by Mr Verteouris did in fact occur prior to entry into the Deed. The conversation is consistent with the Deed which was later prepared and executed. The removal of the mortgage from the register would make it easier for Dennis Verteouris to borrow against the Property. Even if Dennis Verteouris did not have any immediate plans to borrow, such a change would likely, in my view, have been seen by him to be of some advantage to himself even if he remained liable to pay money to his parents in the event that they demanded it. 36The defendant contends that such change to the arrangements was not truly in contemplation in March 2006 but, rather, Mr and Mrs Verteouris were then intending to divest themselves of most of their assets (including the benefit of the repayment obligation owed to them by Dennis Verteouris) in order to facilitate the obtaining of social security benefits once Mr Verteouris retired. In this regard, the defendant adduced evidence of statements made by Mr Verteouris at a family meeting held in about March 2006, which was attended by Mr and Mrs Verteouris, their three sons and three daughters in law. The defendant deposed that Mr Verteouris said words to the following effect at the meeting: "I am retiring and want to get a pension and want to make plans to make sure that you boys will be treated equally. I will be transferring the shop and attached dwelling to Bill and Peter. 50% of this house will go to Dennis through our will and 25% each will go to Bill and Peter through our will. I have come to this view because Dennis' and Kerry's house is worth more than Bill's property in Kingsgrove and Peter's property in Peakhurst." 37That evidence was not dealt with by Mr Verteouris in any affidavit in reply, but he was questioned about the family meeting during his cross-examination. Only he and the defendant gave direct evidence about what was said at the meeting. Whilst Mrs Verteouris accepted in cross-examination that there was a family meeting in March 2006 where her husband discussed his retirement plans, she did not appear to have any recollection of, or even involvement in, any of the discussion which took place. She said that such discussions between Mr Verteouris and the sons was left to him. Neither the third plaintiff nor the fourth plaintiff gave evidence about the family meeting. They swore affidavits which were essentially directed to their execution of the Deed of Assignment, the making of the demand upon the defendant, and the fact that no money had been paid to them as demanded. They were not required for cross-examination, and no submission based on Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 was made in respect of them. 38In cross-examination, Mr Verteouris accepted that a family meeting was held in about March 2006 prior to the signing of the Deed. He also accepted that at that time, he wanted to retire and go on the pension. Mr Verteouris accepted that one reason he wanted to transfer the shop property to his other sons (the third and fourth plaintiffs) at that time was that it would relieve him of a land tax burden of about $5,000 - $6,000 per year. However, he denied that he told his sons that he wanted to retire and get rid of his assets. Mr Verteouris asserted, in effect, that by transferring the shop property to the third and fourth plaintiffs, he would be treating his three sons equally. He explained his reasoning to be that when account was taken of the one third of the Property given to Dennis Verteouris, and the money spent on the renovations to the Property, the transfer of the shop property (worth about $500,000) to the other two sons worked out to be about the same amount to each. Mr Verteouris accepted that he told his sons at the meeting that he would treat them equally but did not accept that he went on to say "I'm going to give my assets to you boys". 39The defendant's version of what was said at the meeting, which was not directly challenged in cross-examination, does not in terms suggest that Mr Verteouris said anything to the effect that he wanted to get rid of his assets, although, in one answer in cross-examination, the defendant suggested that Mr Verteouris said that he wanted to free himself of all his assets. It is also noteworthy that the defendant's version does not suggest that there was any mention of the mortgage over the Property in favour of Mr and Mrs Verteouris, nor that the amount owing to Mr and Mrs Verteouris was to be forgiven. The reference to "Dennis' and Kerry's house", whilst capable of suggesting a gift, is somewhat vague. If said, it would most likely refer generally to the Property in which they lived, rather than to the ownership of the Property, particularly where Kerry (the defendant) would not have been thought by Mr Verteouris to have any interest in the Property. The defendant's version suggests that Mr Verteouris believed that the Property was worth more than the properties currently owned by the third and fourth plaintiffs. It also suggests that this was thought to be a reason to make greater testamentary provision for Dennis Verteouris than for his brothers. The logic of that is elusive to say the least. 40I accept the thrust of Mr Verteouris' evidence about these matters. Overall, Mr Verteouris created a reasonably favourable impression as a witness. In particular, he appeared to me to be a witness attempting to give his honest recollection of the events of March 2006, and his answers concerning his desire to treat his sons equally appeared credible. It is true, as pointed out by counsel for the defendant, that it is not correct to state that Dennis Verteouris was given one third of the Property. He undoubtedly contributed 10% of the purchase price, and the rental income which he was entitled to share as a joint tenant was applied towards the loan from the State Bank of New South Wales. However, if the matter is viewed broadly, Dennis Verteouris' contribution to the acquisition of the Property must be regarded as relatively minor. The position was, as described by Mr Verteouris in the witness box, that he "gave Dennis with very little money one third of the house". If Mr Verteouris' additional contribution of substantial expenditure on renovations to the Property is taken into account, the value of the benefits provided to Dennis Verteouris is greater still, particularly in circumstances where the Property had been made available to Dennis Verteouris and the defendant to live in. 41The details of Mr Verteouris' reasoning process, in coming to the conclusion that by transferring the shop property he was treating his sons equally, was not explored in any detail in cross-examination. It was not put to him that he did not hold that view, or that he could not reasonably have come to that view. His stated conclusion does not seem to me to be unreasonable, particularly in the context of an assessment of benefits provided over time by parents to children who are likely to be in various circumstances. Such an assessment does not lend itself to precision. I conclude that Mr Verteouris, in wishing to transfer the shop property to the third and fourth plaintiffs, was motivated by a desire to assist the third and fourth plaintiffs, and to do so in a manner which he thought was consistent with his treatment of Dennis Verteouris. It is clear that this transfer was partly motivated by a desire to eliminate a land tax liability, but I do not accept the suggestion that such transfer formed part of a wider process of asset dissipation pursued in order to obtain social security benefits. 42In reaching these conclusions about Mr Verteouris' evidence, I have not overlooked the evidence that neither he nor his wife disclosed to Commonwealth social security agencies their rights under the Deed. Various forms were submitted, which called for details of assets and loans. The defendant submitted that the forms reflected the true position, namely, that the loan to Dennis Verteouris had been surrendered in March 2006 as part of a general dissipation of assets, and that the Deed (which did not reflect that position) was a sham. It was put that the Court should reach that conclusion rather than the alternative conclusion which, it was submitted, must otherwise follow, that Mr and Mrs Verteouris have attempted to defraud the Commonwealth. 43On the assumption that the Deed was always intended by Mr and Mrs Verteouris to operate in accordance with its terms, there is no doubt that its existence should have been disclosed to the social security authorities. The apparent lack of disclosure certainly raises questions which the relevant Commonwealth agency may see fit to pursue. 44Mr Verteouris maintained in his evidence that the forms were filled in correctly to the best of his understanding. As I understood his evidence, Mr Verteouris claims that for two reasons he did not understand that he had to disclose the amount outstanding in relation to the Property. These were, first, that no income was being received on the amount outstanding and, secondly, that the transaction was too old to be of concern to the social security authorities. In that regard, Mr Verteouris pointed to an affirmative answer initially given on a form in October 2009 to the question whether, in the last five years, he had given away or sold for less than market value, or surrendered any right to, any cash, assets, property or income. Mr Verteouris claims that he asked for a form in which to declare details of the transfer of the shop property, and in a discussion with a departmental officer, he was informed that as the transaction was three and a half or four years ago, he need not worry about declaring it. 45I have considerable reservations about the accuracy of that evidence. The crossing out of the affirmative answer originally given, and the initialling of the change, is perhaps some indication that there was a discussion with a departmental officer. However, it does not seem to be the case, and Mr Verteouris does not seem to suggest, that the question to which he referred called for an affirmative answer due to the transactions in November 2005 and March 2006 concerning the Property. Rather, it seems that he had in mind the transfer of the shop property which, unlike the transfer of the two thirds interest in the Property, was given for no consideration. It is therefore questionable why any discussion with a departmental officer about that question would lead to the conclusion that the interests under the Deed need not be disclosed. Moreover, an earlier part of the October 2009 form required details not only of bank accounts but also of "any other assets ... that you have not already advised us about", and that question was answered "no". Further, in a form completed in March 2011, Mr Verteouris answered "no" to the question whether he had any money on loan to another person. The form specifically called for the inclusion of all loans, including loans to family members. 46However, in the absence of a direct challenge during cross-examination to Mr Verteouris' explanation, and given the possibility of confusion arising from his dealings with departmental officers, I am not prepared to entirely reject his evidence on this topic and conclude that Mr Verteouris (or his wife, who was not cross-examined on this topic at all) sought to defraud the Commonwealth. Whilst this aspect of his evidence has caused me to treat with caution his testimony more generally, it has not caused me to reject Mr Verteouris' evidence concerning the events of March 2006 leading up to entry into the Deed. 47In summary, I conclude in relation to the family meeting that Mr Verteouris said that he wanted to retire and go on the pension, and further said that he wanted to transfer the shop property to the third and fourth plaintiffs. He also stated that he was treating the three sons equally. I do not accept that he said that he wanted to get rid of his assets. Insofar as the defendant suggested that Mr Verteouris said that he wanted to free himself of all his assets, I reject that evidence. I am also not satisfied that anything was said about the mortgage over the Property in favour of Mr and Mrs Verteouris, or to the effect that the amount owing to them was to be forgiven. Finally, I do not accept that Mr Verteouris said anything to the effect that he had decided upon his course because the Property was worth more than the properties owned by the third and fourth plaintiffs. 48On 29 March 2006, Mr and Mrs Verteouris and Dennis Verteouris entered into the Deed. The Deed was drafted by Mr Simpson. The Deed is in the following terms: "WHEREAS A. The Lenders have lent certain monies to the Borrower. B. The parties wish to document the arrangements between them. NOW THIS DEED WITNESSETH that it is hereby agreed and declared as follows:- 1. This Deed shall be binding on the heirs, executors and assigns of the parties. 2. The parties acknowledge that the Lenders have lent certain monies to the Borrower and that such loan has been made to the Borrower free of interest. 3. The Borrower acknowledges that the amount in which he is indebted is an amount equivalent to 66.6% of the value from time to time of the property known as 20 Rowley Street Brighton le Sands (being the whole of the land comprised in Folio Identifier 15/E/6718) (hereinafter referred to as "the Property"). 4. The monies due and owing to the Borrowers shall be repayable to the Lenders upon demand in writing served by the Lenders on the Borrowers, provided that not less than six months notice of the requirement for repayment shall be given. 5. The Borrowers agree that the loan secured as hereinbefore set out shall create a charge on the property and the Lenders shall be entitled to lodge a Caveat on the title of the property. The Borrowers shall do all such things and execute all such documents as may be necessary to allow the lenders to lodge such a Caveat. 6. The loan hereinbefore referred to shall otherwise be payable on the sale of the property. 7. The Borrowers shall not further encumber the property without the consent of the Lenders first had and obtained. 8. Upon the death of the survivor of the Lenders the loan shall be treated as discharged in full and no monies shall be payable to the estate of either Lender. The executor of each Lender shall do all things and execute all such documents as may be reasonably necessary to evidence the discharge of the said loan." 49Also on 29 March 2006, Mr and Mrs Verteouris executed a transfer of their interests in the shop property to the third and fourth plaintiffs (as tenants in common in equal shares). It appears from the Transfer itself that Mr Simpson was also involved in that transaction. 50On about 6 April 2006, a Discharge of Mortgage in respect of Mr and Mrs Verteouris' mortgage over the Property was lodged by Redmond Hale Simpson for registration. Whilst such Discharge of Mortgage was not expressly required under the terms of the Deed, it is consistent with it in that the Deed contemplated that Mr and Mrs Verteouris would have a charge over the Property and would be entitled to lodge a caveat on the title to the Property. Those provisions indicate that Mr and Mrs Verteouris would no longer have the benefit of the registered mortgage. 51Dennis Verteouris died on 28 April 2012. It is clear that not long thereafter, serious strains emerged in the relationship between Mr Verteouris and the defendant. The questions of when and why this came about were explored to some extent in the evidence. However, I do not think that it is necessary to answer those questions. 52On 15 June 2012, Mr and Mrs Verteouris of the one part, and the third and fourth plaintiffs of the second part, entered into a deed in the following terms: "WHEREAS: A. On 29th March, 2006 Dennis Verteouris "Dennis" acknowledged in writing that he was indebted to the Assignors in an amount to be calculated in accordance with the provisions of the Agreement executed on that date by the Assignors and by Dennis. A copy of the Agreement is attached hereto and marked "A". B. Dennis died on or about 28th April, 2012. C. Dennis and/or his estate remain indebted to the Assignors in the amount to be calculated in accordance with the provisions of the said Agreement. D. The Assignors have agreed for valuable consideration to assign the Assignors interest and rights under the said Agreement to the Assignees. NOW THIS DEED WITNESSETH that it is hereby agreed and declared as follows:- 1. This agreement will be binding on the heirs executors and assigns of the parties. 2. In consideration of the payment of the sum of $100.00 paid by the Assignees to the Assignors (receipt of which is acknowledged) the Assignors as beneficial owners assign all their interest and rights pursuant to the Agreement dated 29th March, 2006. 3. Both the Assignors and the Assignees agree to do all such things and to execute all such documents as may be necessary to perfect assignment of the Agreement." 53A copy of that Deed of Assignment was sent to the defendant's solicitors on 18 June 2012 by Redmond Hale Simpson. On the same day, a Notice of Demand was signed by the third and fourth plaintiffs. The Notice of Demand is in the following terms: "As Assignees of the benefit of the Deed dated 29 March 2006 between Paul Verteouris and Helen Verteouris and Dennis Verteouris, we hereby give you notice in accordance with Clause 4 of that Deed that repayment of the amount due (such amount to be calculated in accordance with Clause 3 of that Deed) is required not later than six months from the date hereof. Please contact our Solicitors, Redmond Hale Simpson (telephone 9587 3866) to make mutually convenient arrangements for the valuation of the property known as 20 Rowley Street Brighton le Sands. Dated: 18th June 2012" 54On 19 June 2012, Redmond Hale Simpson sent letters, enclosing the Notice of Demand, to the defendant and also to her solicitors. Mr Simpson gave evidence that the letter addressed to the defendant's solicitors was sent to them by facsimile on 19 June 2012.

Is the Deed of 29 March 2006 a sham? 55In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [46], the High Court stated: "'Sham' is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences." 56As explained by Leeming JA in Lewis v Condon; Condon v Lewis [2013] NSWCA 204 at [59] in order for there to be a sham, it is essential that there be an intention that the true transaction is different from that which would ordinarily be attributed to the transaction on the face of the documents. Leeming JA further observed (at [62]) that the sham doctrine is one of those relatively rare doctrines in the law where legal meaning is given to a document by reference to a subjective intention, and that the doctrine must accordingly be kept within narrow limits because otherwise the objective theory of contract would be undermined. It is for that reason, as well as the reason that a finding of sham involves a finding of an intent to deceive, that a cautious approach is called for (see Lewis v Condon; Condon v Lewis (supra) at [63]). 57There was a degree of imprecision in the defendant's case on this issue. It was submitted, and put to Mr Verteouris in cross-examination, that the intention of the parties was to forgive Dennis' obligations under the loan the subject of the November 2005 mortgage. Such an intention would be entirely inconsistent with the provisions of the Deed having operative effect. If that intention could be made out to the requisite standard, a conclusion of sham would follow. However, suggestions were also made in the cross-examination of Mr Verteouris to the effect that whilst there was no intention to call upon Dennis to repay the loan, there was an intention to be able to rely on the Deed in the event that there was a divorce between Dennis and the defendant, or in the event of Dennis' death. If that was the intention, I would have great difficulty in concluding that there was a sham. The Deed provided that the loan was only repayable if a demand was made. An intention to only call for repayment if certain circumstances arose is not in any way inconsistent with the Deed having operative effect. 58In any event, as should be clear from the findings I have made, I am not satisfied that any shamming intent has been established. In particular, I do not accept that Mr Verteouris (or the other parties to the Deed) had any intention to forgive the loan in March 2006. There was no evidence of any discussion to that effect. Rather, I conclude that Mr Verteouris entered into the Deed as a means to remove the mortgage over the Property whilst preserving the loan and securing it in another way. To do so was in accordance with the request which Dennis made to him. I do not find any intention inconsistent with the notion that the Deed should operate in accordance with its terms. For these reasons, the defendant's case on sham cannot be accepted. The Deed of 29 March 2006 was enforceable against Dennis and remains enforceable against his estate. 59In the light of that conclusion, it is not necessary to consider the plaintiffs' alternative argument for the existence of a resulting trust over the Property in favour of the first and second plaintiffs.

Was the Notice of Demand effective? 60By clause 4 of the Deed of 29 March 2006, the moneys due and owing under the loan become repayable upon written demand to the Borrower "provided that not less than six months notice of the requirement for repayment shall be given". 61Even if it was assumed, in the plaintiffs' favour, that the Notice of Demand was served on the Borrower on 19 June 2012 when it was received by the defendant's solicitor, the notice stated that payment was required "not later than six months from the date hereof." As the notice was dated 18 June 2012, it called for payment not later than six months from 18 June 2012; that is, not later than 18 December 2012. 62In my view, to make a demand on 19 June 2012 for repayment no later than 18 December 2012 is not the making of a demand which accords with the proviso to clause 4 of the Deed, as less than six months notice of the requirement for repayment would thereby be given. I do not accept the plaintiffs' submission to the effect that the critical question is whether it would be clear to the recipient of the demand that it was a purported exercise of the Lenders' rights under clause 4 of the Deed. Rather, the critical question is whether the demand satisfies the requirements of clause 4, properly construed. The demand gave less than six months notice of the requirement for repayment, which is contrary to the clear meaning of the language employed in clause 4. Accordingly, the Notice of Demand dated 18 June 2012 was not effective to make the loan moneys repayable. Service of a fresh Notice of Demand would be necessary to achieve that purpose.

Other arguments relied upon by the defendant 63It is not necessary to consider the other argument raised by the defendant as to the ineffectiveness of the Notice of Demand. Moreover, as that argument raises questions concerning the subject matter of the Deed of Assignment entered into on 15 June 2012 by the first and second plaintiffs on the one hand, and the third and fourth plaintiffs on the other, I do not think it is desirable to express any views about it. I would merely observe that if all four plaintiffs desire that the rights under the Deed of 29 March 2006 should be held by the third and fourth plaintiffs, and if it is considered that there is any doubt as to the effectiveness of the Deed of Assignment to achieve that outcome, it would be open to the plaintiffs to take steps to remove any such doubt. 64I turn now to consider the defendant's argument that the plaintiffs must fail unless an entitlement to repayment had arisen prior to the commencement of the proceedings on 5 October 2012. When the proceedings were commenced, declaratory relief was sought as to the rights of the parties in relation to the Deed of 29 March 2006. The proceedings were not confined to a claim based upon an existing entitlement to repayment of the moneys the subject of that Deed. In these circumstances, I do not see how the lack of any such entitlement at the time of commencement of the proceedings could in any way invalidate them. Of course, the absence of a present entitlement to repayment limits the scope of relief which may be granted to the plaintiffs.

Relief 65I have concluded that the Deed of 29 March 2006 is valid and enforceable in accordance with its terms. It is not a sham. I have also concluded that, as the Notice of Demand dated 18 June 2012 is ineffective, the defendant is under no present obligation to repay the moneys the subject of the Deed. 66In these circumstances, I consider that the plaintiffs' are entitled to declaratory relief as to the validity and enforceability of the Deed of 29 March 2006, but not in the form of the declarations as sought in the Amended Statement of Claim. 67I direct the parties to bring in Short Minutes to reflect these reasons. In addition to declaratory relief, the Short Minutes should also deal with costs. On that issue, I observe that whilst the defendant has succeeded on one of the issues litigated, that issue occupied only a very small proportion of the time spent at the hearing. Accordingly, at least as presently advised, I do not see any reason why the plaintiffs should not obtain an order for costs in their favour. 68If the parties are unable to agree as to the form of relief, the matter will need to be re-listed for further argument.

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: 27 March 2014