Ward v Loumbos - [2017] NSWCA 35 - NSWCA 2016 case summary — Zoe

NSWNSWCA

Ward v Loumbos

[2017] NSWCA 35

Court of Appeal (NSW)|2016-11-22|Before: Meagher JA, Lindsay J

View original source

At a glance

Source facts

Court

Court of Appeal (NSW)

Decision date

2016-11-22

Before

Meagher JA, Lindsay J

Source

Original judgment source is linked above.

Judgment (20 paragraphs)

[1]

Background facts

The primary Judge described the relationship between Mr Loumbos and Ms Ward and its subsequent breakdown in rather colourful terms. The background facts can, however, be stated more circumspectly.

[2]

Events leading to the deed of gift

In 2007, Ms Ward commenced living with her adult disabled daughter at a residential property in Lilyfield (Lilyfield Property). She occupied the Lilyfield Property as a tenant but, according to the primary Judge, "longed" to own the residence. [2]
In February 2011, Mr Loumbos and Ms Ward commenced their relationship. At that time, Mr Loumbos was 65 years old and Ms Ward was aged 43.
Within a few weeks of the relationship beginning, Mr Loumbos bought Ms Ward a necklace worth about $10,000 and other expensive gifts.
In April 2011, Mr Loumbos offered to purchase the Lilyfield Property from the owner for $1.3 million. The offer was accepted and Mr Loumbos so informed his solicitor.
On 21 April 2011, the Commonwealth Bank of Australia (CBA) sent letters to Mr Loumbos offering to provide finance totalling about $9 million. The various offers were made to Mr Loumbos personally, two of Mr Loumbos' companies and to the trustees of the Loumbos Family Trust. The CBA loans were primarily intended to refinance existing loans from the National Australia Bank (NAB), but apparently included an advance of $1.12 million to facilitate the purchase of the Lilyfield Property. Each letter of offer required the grant of a mortgage over the Lilyfield Property as part of the CBA's security for the advances.

[4]

The Deed of Indemnity

The Deed of Indemnity contained the following recitals under the heading "BACKGROUND": "A The National Australia Bank (NAB) has made various Loans to the Borrowers under the Transaction Documents. B The Guarantor has agreed under the Transaction Documents to guarantee the obligations of the Borrower to the maximum amount of $1,050,000, which guarantee is secured by the Securities. C The Other Guarantors have agreed to indemnify the Guarantor against any loss the Guarantor incurs as result of having to comply with any obligations under the Transaction Documents after the date of the Transaction Documents." It will be seen that Recital A erroneously referred to NAB, the outgoing lender, rather than to CBA, the incoming lender. The same error occurred in three other places in the Deed of Indemnity.
Clause 3.1 of the Deed of Indemnity provided that each of the "Other Guarantors" jointly and severally indemnified the Guarantor for any liability she might incur under the "Transaction Documents". This expression was defined to mean "each of the Facility Agreements annexed at Annexure A to this Deed and any other documents which give effect to the Loans". The copy of the Deed of Indemnity in the Blue Appeal Book does not include Annexure A, but it can be inferred that the Facility Agreements were those entered into between the Loumbos entities and the CBA.
On 13 July 2011, Ms Ward sent an email to Mr Beattie advising that she was using her own solicitor to handle the purchase of the Lilyfield Property. Mr Beattie replied immediately, noting that the CBA had advised him that day that the purchase was to settle the following day (14 July 2011). Mr Beattie stated in his reply that he had informed the CBA that he was unaware of any settlement. Mr Beattie also recorded that Mr Loumbos had advised his firm that "he signed some other documents including a loan agreement". Mr Beattie asked Ms Ward to get her solicitor to forward him a copy.
At 5.31 pm on 13 July 2011, Ms Ward emailed Ms Kerry of ClarkeKann asking for copies of the documents signed the previous day. Ms Kerry responded by forwarding to Ms Ward copies of the contract of sale of the Lilyfield Property, the Deed Poll and the Deed of Indemnity.
At 5.45 pm on 13 July 2011, Ms Ward emailed Mr Beattie advising that she would forward a "copy". This was presumably intended to be a reference to the documents requested by Mr Beattie. However, it appears that Ms Ward did not at any stage forward copies of the Deed Poll or the Deed of Indemnity to Mr Beattie.
The purchase of the Lilyfield Property was completed on 14 July 2011. Completion took place simultaneously with exchange of the signed counterparts of the contract of sale which, as I have noted, were dated 14 July 2011. The cover sheet of the contract struck out Mr Beattie's name as the solicitor acting for the purchaser and substituted ClarkeKann Lawyers as the solicitors for the purchaser, Ms Ward.
In November 2011, Mr Loumbos and Ms Ward became engaged. Shortly thereafter Mr Loumbos gave Ms Ward several valuable rings. (Mr Loumbos sought the return of the rings as part of his claim in the proceedings but the primary Judge rejected the claim. [6] There has also been no appeal from this decision.)
From about mid-2012, Mr Loumbos caused Ms Ward to be paid a fortnightly fee for "consultancy services". The primary Judge characterised these payments as "more readily seen as an attempt to provide [Ms Ward] with a layer of financial security". [7]
In January and early February 2013, discussions took place between Mr Loumbos and Ms Ward concerning Mr Loumbos' desire to refinance his business loans. These discussions led to the execution, on 8 February 2013, of a second Deed of Indemnity between Ms Ward and the various Loumbos entities.
The second Deed of Indemnity was drafted by Mr Anderson of ClarkeKann. Mr Anderson subsequently lodged caveats on Ms Ward's behalf over properties owned by Mr Loumbos and one of his companies.
On 19 March 2013, the relationship between Mr Loumbos and Ms Ward came to an end following an exchange of emails.
On 11 April 2013, Mr Anderson of ClarkeKann emailed Mr Loumbos about a proposed refinancing transaction. In the email, Mr Anderson said this: "With the 'gift' of the house I have located a Deed Poll which you signed back in 2011 (copy attached). You will note that under this document you gifted to Deborah [Ward] the purchase price of the property. This is presumably the document that Deborah is referring to."
Mr Loumbos responded as follows: "Miles this document I recall signing to be held by one of your. Other [sic] solicitors and not to be released without my consent how did it get out"
On 1 May 2013 (well after the Parties' relationship had broken down), Mr Loumbos sent Ms Ward a text, as follows: "The loan on your house is approved so what's your problem?? Your [sic] the owner I'm the guarantor!!!!"
On 10 May 2013, Mr Loumbos' new solicitors wrote to Ms Ward asserting that Mr Loumbos had been prepared to purchase the Lilyfield Property in 2011: "in your name on the clear understanding and agreement that you would only receive a beneficial interest in the Property (a) after you and Mr Loumbos married and (b) if he pre-deceased you. The Deed [Poll] was then later signed on 14 [sic] July 2011." The letter claimed that Mr Loumbos was the "true and beneficial owner" of the Lilyfield Property and demanded that Ms Ward execute a transfer of the Lilyfield Property in favour of Mr Loumbos.
Mr Loumbos' solicitors lodged a caveat over the title to the Lilyfield Property on or about 17 October 2013. The caveat claimed that Mr Loumbos had an equitable interest by way of a "Constructive/Resulting Trust". The facts justifying the claimed interest were said to be the following: "Oral promise by [Mr Loumbos] to give [Ms Ward] a property to be purchased in the name of [Ms Ward] at … Justin Street, Lilyfield in contemplation of marriage and for her to hold the property as a Trustee for the benefit of [Mr Loumbos] until [they] were married."
Mr Loumbos commenced the Equity Division proceedings on 3 December 2013.

[8]

Findings as to credit

The primary Judge made the following observations concerning the credit of the witnesses who gave evidence: [14] "[28] Subject to one qualification, I am prepared to accept that, despite substantial conflicts and inconsistencies in the evidence, all witnesses endeavoured to tell the truth as far as it has been given to them to see truth. That said, there was a substantial amount of reconstruction in the evidence of most witnesses, and much of it related to particular recollections of casual conversations, a recipe for unreliability. [29] Significantly (in the absence of contemporaneous file notes) the evidence of the solicitors who acted for [Ms Ward] in connection with the critical conference of 12 July 2011 at which the Deed Poll-Gift was executed, Mr Gray and Ms Kerry of Clarke Kann [sic], involved substantial reconstruction of events. [30] For their part, both [Mr Loumbos] and [Ms Ward] remain blinkered by the emotional trauma of a soured relationship and an unconscious bias of self-interest. Neither was entirely consistent in their recollections. Neither was an entirely reliable witness. [31] The foreshadowed qualification on my general observations about credit (which has an important bearing on a critical issue in the proceedings) is that I do not accept, as reliable, [Ms Ward's] protestations of innocence about the course of events surrounding the preparation and execution of the Deed Poll-Gift, or about the withholding of a copy of that deed from [Mr Loumbos] and his solicitor (Mr Beattie), in the critical period between 12-14 July 2011 inclusive. That is the period between execution of the Deed Poll-Gift and the day upon which the contract for purchase of the Lilyfield property was exchanged and settled as part of [Mr Loumbos'] refinancing transactions. [Ms Ward's] conduct appears to have been a misguided endeavour to bind [Mr Loumbos], immediately, to a deed which he was led to believe, mistakenly, could and would only operate upon the solemnisation of a marriage between [Ms Ward] and himself." (Emphasis added.)
The primary Judge found that when the parties were introduced in 2011, Mr Loumbos presented as a successful businessman but was in truth a lonely, comparatively unsophisticated person. [15] His Honour also found that both parties had expensive tastes and a tendency to indulge them. [16]
His Honour seems to have accepted that Mr Loumbos provided the resources necessary to fund the parties' expensive lifestyle, since he found that Ms Ward "lacked the wherewithal to purchase the [Lilyfield Property] from her own resources". [17]

[9]

Findings as to the Conference

The primary Judge observed that a "fundamental flaw" in the Deed of Indemnity was that it identified Mr Loumbos' financier as the NAB rather than the CBA. This error, in his Honour's view, corroborated Mr Loumbos' evidence that he did not read any of the documentation presented at the Conference and, more importantly, that he was offered only a minimal explanation of "it" (presumably the documentation). [18]
The primary Judge noted that the resolution of what occurred at the Conference was not assisted by the absence of contemporary file notes prepared by the two solicitors in attendance. [19] Estimates of the length of the Conference varied, but his Honour considered that it could not have lasted more than 30 minutes, most of which was taken up with Ms Kerry explaining the terms of the contract of sale of the Lilyfield Property.
His Honour found that ClarkeKann had been instructed by Ms Ward and not by Mr Loumbos and thus the two solicitors present at the Conference were not acting on his behalf. [20] His Honour also found that at the Conference little, if anything, was said to explain the contents of the two Deeds. [21]
The primary Judge, in substance accepted Mr Loumbos' account in his affidavit as to what happened at the Conference. The account was as follows: [22] "[50] … [Ms Ward] and I went to the offices of ClarkeKann … [Ms Ward] introduced me to an elderly male lawyer … After exchanging pleasantries [Ms Ward], the lawyer … and I entered a meeting room and had a conversation that included an exchange of words to the following effect: Me: 'My children do not get on well with [Ms Ward] and do not like her. She is concerned that if we do get married, any assets which I have will be taken by my kids and she will miss out in the event that I die or something happens to me. I would like to put in place something that will give her the house at … Lilyfield if we get married and something goes wrong, such as me passing away or going broke. The document is not to take effect until we are married though. Is this possible to do?' Lawyer: 'Yes. You can gift the house to [Ms Ward]. I have already spoken to her and we have prepared the necessary documents for you to sign.' Me: 'Fine. So long as it doesn't see the light of day until we are married.' Lawyer: 'That's right.' [51] [Ms Ward] and I then signed some documents which the lawyer provided to us. I did not read the documents properly. I just signed where I was told to by the lawyer. [52] We then left the office of Clarke Kann. As we were leaving the office, I said to [Ms Ward] words to the effect: 'There you go, you are covered.' … [The] Deed Poll-Gift signed by [Ms Ward] and myself … was subsequently dated 14 July 2011. [53] I observed that [Ms Ward] seemed very pleased upon leaving the Clarke Kann offices. [54] [Ms Ward] and I continued to have many discussions regarding our commitment to each other and getting married to each other. These conversations would include statements in day to day discussions between the two of us with [Ms Ward] saying words to the following effect; 'When we are married …', 'When you win this court case we will get married.' [At about that time, I was involved in [a] criminal proceeding]." (Emphasis added by the primary Judge.)
His Honour acknowledged that this finding was contrary to the evidence of Ms Ward, whose denial was "ostensibly corroborated" by the two solicitors, Mr Gray and Ms Kerry. [23] His Honour gave a number of reasons for accepting Mr Loumbos' version in preference to the other three witnesses: [24] "[69] Mr Smith, the plaintiff's mortgage broker, gave evidence, which I accept, of a conversation with the parties in which [Ms Ward] explained, as the rationale for a change in the identity of the purchaser (from [Mr Loumbos] to [Ms Ward]), a desire on the part of the parties, contemplating marriage, to protect [Ms Ward] against claims by his children in the event of his death. That is consistent with what [Mr Loumbos] says he told Mr Gray. It is independently plausible even if, as [Ms Ward] says, she had not had material contact with [Mr Loumbos'] children. [70] On their own evidence, the Clarke Kann solicitors did not really engage with [Mr Loumbos], or listen to him meaningfully. They ought to have heard what he said, digested it and confronted him with contrary terms of the deed, and an insistence that he obtain independent legal advice before signing anything. They ought to have done that as much in the interests of [Ms Ward] as in the interests of [Mr Loumbos]. [71] They did not do so, in my assessment, because Mr Gray (the senior solicitor, under whom Ms Kerry worked) failed to appreciate that there was any conflict of interest between the parties; he regarded his professional duties as owed only to [Ms Ward], to the exclusion of [Mr Loumbos]; he did not reflect upon the possibility that performance of his professional duties to [Ms Ward] required him to ensure that [Mr Loumbos] gave a fully informed consent to the documentation presented for signature; although he has no precise recall of what happened at the conference, he believes that he would have made an opening statement to the effect that his firm acted only for the defendant and, consequently, he believes he would have disregarded any statements made by [Mr Loumbos]. Ms Kerry's attention was narrowly focussed on explaining the terms of the purchase contract, and on the mechanical exercise of obtaining signatures on the documentation to be signed to facilitate the purchase. [72] The formalities of an introduction to [Mr Loumbos] having been attended to in a perfunctory way, the solicitors relegated him to the background, focusing their attention on [Ms Ward], the only one they recognised as a client. By a wilfully blind indifference to his rights, they marginalised his participation in the conference and disregarded anything he said, thereby failing to protect either party. [73] Besotted as he was with [Ms Ward], [Mr Loumbos'] mind was preoccupied with the purchase transaction as a means of facilitating his intended marriage to [Ms Ward]. That was necessarily in the context of the broader refinancing transactions proceeding in tandem. They, in combination with the $1.3 million purchase price he had negotiated for the Lilyfield property, compelled him to retain an element of sobriety in his thought despite his implicit, ongoing trust of [Ms Ward]. In funding purchase of the property in [Ms Ward's] name, [Mr Loumbos] committed himself to a regime for repayment of debt over time, a fact consistent with a belief on his part that he had a future with [Ms Ward]. This was not a one-off transaction. It was part of an ongoing relationship in contemplation. [74] Although the property was to be purchased in [Ms Ward's] name, it formed part of the security available to [Mr Loumbos] for business purposes, a fact corroborated by the Commonwealth Bank mortgage and related documentation, as well as security documentation attending his subsequent refinancing with JWH Nominees. The parties proceeded on the basis that, although the property was to be and was purchased in [Ms Ward's] name, it was available to [Mr Loumbos] for his business purposes. [75] I am satisfied that, in his execution of the Deed Poll-Gift and in his acquiescence to purchase of the Lilyfield property in the name of [Ms Ward], [Mr Loumbos] believed that the deed could have and would have no operative effect unless and until he and [Ms Ward] were married and that, in the meantime, although the property was purchased in the name of [Ms Ward], it remained beneficially his. Statements made by [Mr Loumbos] in a social setting (before and after 12 July 2011, before the parties' relationship breakdown), to the effect that [Mr Loumbos] proposed to give the property to [Ms Ward] when they were married, corroborate the existence of this belief. [76] I am also satisfied that, had [Mr Loumbos] not held this belief, he would not have agreed to fund purchase of the property in [Ms Ward's] name. He could not afford simply to give away $1.3 million even if disposed to do so. He cannot reasonably be thought to have been so disposed. He borrowed the whole of the purchase price. He relied upon what he perceived to be a common understanding, of future marriage, with [Ms Ward]. [77] I am satisfied, further, that [Ms Ward] procured [Mr Loumbos'] execution of the Deed Poll-Gift, and his provision of the whole of the purchase price and associated acquisition costs, knowing that this was [Mr Loumbos'] state of mind, believing him to be mistaken and doing nothing to correct his mistake. [78] Far from disabusing [Mr Loumbos] of a mistaken belief, she fostered it. She appears, deliberately, to have taken steps to ensure that the settlement of 14 July 2011 proceeded without either [Mr Loumbos] or his solicitor (Mr Beattie) obtaining a copy of the documentation signed at the conference of 12 July 2011. [79] [Ms Ward] arranged for Clarke Kann, as her solicitors, to prepare the Deed Poll-Gift without forewarning [Mr Loumbos] of its terms, or allowing him an opportunity (before or after its execution) to obtain timely, independent advice." (Italics in original; emphasis added.)
The primary Judge further found that Ms Ward's conduct appeared: [25] "misguidedly, to have been calculated to ensure that [Mr Loumbos] not be kept fully informed of the terms, nature and purported effect of the Deed Poll-Gift or her intention to rely upon it unconstrained by any condition about future marriage".
Ms Ward had not been saved from error, as she should have been, by legal advice that insisted that Mr Loumbos obtain independent advice before the Deeds were executed. Instead: [26] "without that advice, she encouraged [Mr Loumbos] to purchase the property, in her name, in the belief, regarded by her as mistaken, that the property would be owned by him unless and until they married. On the basis of that belief, and not otherwise, he signed the Deed Poll-Gift and funded purchase of the property in her name."

[10]

Primary Judge's conclusions

On these findings, the primary Judge concluded that the case fell "comfortably" within the jurisdiction of the Court to order that the Deed Poll be set aside and declare that Ms Ward held the Lilyfield Property on trust for Mr Loumbos. [27] It was also appropriate to order Ms Ward to transfer the Lilyfield Property to Mr Loumbos.
Since Mr Loumbos told ClarkeKann at the Conference that the Deed Poll was not to take effect until he and Ms Ward were married and the lawyers ought to have heard and paid heed to what Mr Loumbos said, ClarkeKann had no authority to take the Deed Poll or to allow Ms Ward to treat it as operative before the marriage took place. [28] It followed that the Deed Poll was delivered by Mr Loumbos to ClarkeKann, as agents for Ms Ward, in escrow: [29] "in the sense that it could not be recalled by [Mr Loumbos], but it was not operative according to its terms unless and until a particular condition [the marriage] occurred".
The fact that the document was a Deed Poll was no impediment to it being delivered in escrow. Nor was the Deed Poll an impediment to a declaration that Ms Ward held the Lilyfield Property on trust for Mr Loumbos. Even so, the Deed Poll remained a "transactional document" liable to be set aside. [30] Mr Loumbos had signed the Deed Poll in the mistaken belief that it could not and would not be given effect immediately. [31]
Furthermore, because a reasonable time for the satisfaction of the escrow condition had passed, equitable relief was available, even in the absence of a mistake, to have the Deed Poll delivered up for cancellation. [32] An order setting aside the Deed Poll was not inconsistent with an order requiring the Deed Poll to be delivered up for cancellation.
The orders made by the primary Judge included:

an order that the Deed Poll be set aside;
an order that the Deed Poll be delivered up for cancellation;
a declaration that Ms Ward held the Lilyfield Property on trust for Mr Loumbos; and
an order that Ms Ward convey title to the Lilyfield Property to Mr Loumbos.

[12]

Mr Loumbos' submissions

Mr Insall SC, who appeared with Mr Smith for Mr Loumbos, submitted that the primary Judge's findings were credit-based and supported by the evidence. Having regard to the advantages enjoyed by the primary Judge in evaluating the evidence, particularly as to the events at the Conference, Ms Ward had not satisfied the requirements for appellant intervention.
Mr Insall relied on the primary Judge's acceptance of Mr Loumbos' account of what transpired at the Conference and his Honour's rejection of Ms Ward's "protestations of innocence" about the withholding of a copy of the Deed Poll from Mr Loumbos and his solicitor during the period between 12 and 14 July 2011. Mr Insall also relied on the finding by the primary Judge that both Mr Gray and Ms Kerry had substantially reconstructed the events at the Conference. Mr Insall submitted that the primary Judge had given cogent reasons for finding that neither Mr Gray nor Ms Kerry confronted Mr Loumbos in relation to his statement at the Conference that the Deed Poll was to be conditional on his marriage with Ms Ward taking place.
Mr Insall submitted that the primary Judge's findings were supported by objective circumstances. These included the failure of the solicitors to make file notes of the Conference, their failure to perceive the obvious conflict between Mr Loumbos' interests and those of Ms Ward and the "fundamental flaw" in the description of the finances in the Deed of Indemnity.
In his oral submissions to this Court, Mr Insall advanced an alternative contention that, if accepted, would support the primary Judge's orders even if the findings as to the events at the Conference were set aside. Mr Insall relied on the primary Judge's finding that Ms Ward procured Mr Loumbos' execution of the Deed Poll and his payment of the purchase price knowing that he held the mistaken belief that the Deed Poll would be effective only if the marriage took place. [34] This finding, so Mr Insall submitted, was not dependent on anything that was said at the Conference, and justified the relief granted to Mr Loumbos.

[14]

Conflicting evidence

In the present case, the primary Judge identified the critical factual question to be whether Mr Loumbos said anything at the Conference to the effect that the Deed Poll was not to take effect until the parties were married and that he would sign the document only if it was not to "see the light of day" until he and Ms Ward were married. [41] In answering this question in the affirmative, his Honour did not accept Mr Loumbos as an entirely reliable witness. He considered that although all witnesses endeavoured to tell the truth as they saw it, there was a "substantial amount of reconstruction in the evidence of most witnesses". [42] Mr Loumbos, like Ms Ward, "remain[ed] blinkered by … emotional trauma … and an unconscious bias". His evidence was neither entirely consistent nor entirely reliable. [43]
There was a stark contrast between the evidence of Mr Loumbos and that of Mr Gray and Ms Kerry concerning the events at the Conference. In his cross-examination, Mr Loumbos maintained that neither Mr Gray nor Ms Kerry gave him a word of explanation about the Deed Poll and that he signed the Deed Poll without reading it. He said that he was not concerned about executing the Deed Poll because of the "instructions" he gave during the Conference. Mr Loumbos' recollection was that Ms Kerry's only involvement in the Conference was that she entered the room late in order to witness his signature.
Mr Gray accepted that during the Conference he had not given advice to Mr Loumbos, since the firm had been retained only by Ms Ward. But Mr Gray denied that Mr Loumbos had said anything in the Conference about the Deed Poll being conditional on the marriage between Ms Ward and Mr Loumbos taking place. According to Mr Gray, if Mr Loumbos had said anything to that effect he (Mr Gray) would not have accepted Mr Loumbos' assertion or instruction.
Mr Gray's cross-examination included the following passage: "Q. Do you have any recollection of the engagement or impending marriage between Mr Loumbos and Ms Ward being mentioned in the conference? A. No. Q. But it's the case, isn't it, that you don't have a very good recollection of what occurred in the conference? A. I said I don't remember every word that was said. Q. You wouldn't have thought it was relevant, would you? A. No. Q. Even if it was said, you would have just dismissed it as irrelevant. A. Yes."
In his re-examination, Mr Gray gave the following evidence: "Q. You were asked a question about your recollection of whether any advice was given to Mr Loumbos during the conference that you were at. Do you recall whether any advice was given at that conference - to anybody at this stage - about the deed of gift and the deed of indemnity? A. Advice in the sense that the documents were explained at some length to Ms Ward. Q. Was Mr Loumbos present when the explanation was given? A. Yes. Q. Was he sitting right next to Ms Ward? A. Yes."
Ms Kerry's evidence was notable for its specificity. She estimated that the Conference lasted for about 30 minutes. She said that apart from a few minutes at the beginning, when Mr Gray spoke to Ms Ward and Mr Loumbos, the time was taken up by her explanation of the documentation. She recalled that she took about 10 to 15 minutes to explain to Ms Ward the material provisions of the contract of sale of the Lilyfield Property. In the remaining time, which she estimated to be "at least 15 minutes", she explained the terms of the Deed Poll and the Deed of Indemnity. She explicitly stated that she gave the explanation to both Ms Ward and Mr Loumbos, even though she appreciated that Mr Loumbos was not a client of the firm.
Mr Loumbos' counsel asked Ms Kerry how she was able to recall in such detail what happened at the Conference, bearing in mind that four years had passed and Ms Kerry had no contemporaneous notes. Ms Kerry gave the following answers: "A. I recall the meeting because I'd practiced [sic] it beforehand and - I can't tell you why I remember it, but I do. Q. How many matters would you have been involved in since July 2011 in conveyancing and commercial matters? Hundreds? A. Yes. As any lawyer in my position would have been. HIS HONOUR Q. Have you been involved in many conveyancing transactions in which a man gifts1.3, $1.4 million to a lady? A. Very, very few. I can't recall any others. Q. Before or after this event? A. None before, and none after."
The cross-examination returned to the topic a few questions later and the following exchange took place: "Q. I'm suggesting to you that you equally have a poor recollection of this meeting on 12 July 2011. A. That's incorrect. Can I tell you why? Q. Sure. A. Because I hadn't done documents of this nature before, I had practiced [sic] the meeting beforehand, and it was something that I remember because it was an usual [sic: unusual] situation. One, that a man was gifting a house to a lady, and two, that these documents were not something that I was familiar with prior to the situation. So, I remember it. Q. You were keen, were you, to ensure that you explained it to your client, Ms Ward. That's correct, isn't it? A. I was keen that I explain the documents, yes. HIS HONOUR Q. What do you mean by, you practiced it? A. In my head, I ran through what I was going to say, ran through what the document said so that I could explain it properly. Q. When you say you practice [sic] it, you mean that you practiced it in private? You didn't practice it in front of somebody; for example, the partner? A. Yes. No, I didn't have an audience. I, you know, prepared for the meeting."
Ms Kerry rejected a suggestion in cross-examination that she was focussed on explaining the documents to Ms Ward. She insisted that "rightly or wrongly" she had taken it on herself to explain the contents of both the Deeds of Indemnity and the Deed Poll to Mr Loumbos, as well as to Ms Ward.

[15]

A misapprehension of the evidence

The primary Judge gave a number of reasons for preferring Mr Loumbos' account of what was said at the Conference over the version given by the other three participants. His Honour rejected Ms Ward's account insofar as it corroborated the evidenced given by Mr Gray and Ms Kerry. For present purposes, Mr Ward's evidence can be put to one side, since the primary Judge considered that she had not acted innocently in withholding a copy of the Deed Poll from Mr Loumbos and his solicitor and concluded that her evidence was unreliable.
The evidence of Mr Gray and Ms Kerry, however, cannot be treated in the same way. In order to find that Mr Loumbos expressly stated at the Conference that the Deed Poll was not to take effect until the marriage took place, the primary Judge had to reject the evidence of Mr Gray and Ms Kerry that Mr Loumbos made no such statement at the Conference. There was no suggestion that the solicitors were party to some kind of arrangement with Ms Ward to mislead Mr Loumbos or to ignore anything he said. Moreover the primary Judge accepted that both Mr Gray and Ms Kerry were endeavouring to tell the truth as they saw it.
As I have noted, the primary Judge found that the evidence of both solicitors involved "substantial reconstruction of events". However, his Honour clearly appreciated that a general finding of this kind could not, of itself, justify rejecting the evidence of the solicitors. This is particularly so in relation to Ms Kerry's detailed and apparently plausible account of why she had a good recollection of the Conference despite the absence of contemporaneous notes.
One key plank in the primary Judge's evaluation of the evidence was his statement that "[o]n their own evidence the Clarke Kann [sic] solicitors did not really engage with [Mr Loumbos], or listen to him meaningfully". [44] A second key plank was his Honour's view that Mr Gray believed that "he would have disregarded any statements made by [Mr Loumbos]", and that Ms Kerry's "attention was narrowly focussed on explaining the terms of the purchase contract, and on the mechanical exercise of obtaining signatures on the documentation". [45]
This analysis does not reflect the evidence given either by Mr Gray or by Ms Kerry. Both solicitors, but particularly Mr Gray as the more senior, can legitimately be criticised for failing to advise Mr Loumbos to obtain independent legal advice before he executed the Deed Poll and the Deed of Indemnity. But the failure to appreciate the conflict of interest between Ms Ward and Mr Loumbos does not provide a sound basis for attributing to the solicitors evidence that they did not give.
The primary Judge appears to have interpreted the passage in Mr Gray's cross-examination to which I have referred [46] as demonstrating that he would have ignored anything Mr Loumbos said at the Conference, including any statements or instructions to the effect that the Deed Poll should not take effect unless and until Mr Loumbos and Ms Ward were married. Mr Gray's evidence, fairly interpreted, simply amounted to an acknowledgement that if the engagement or impending marriage of Ms Ward and Mr Loumbos had been "mentioned" in the course of the Conference he would have thought it irrelevant.
The trial was conducted on the basis that neither party would take a Browne v Dunn [47] point against the other, since the affidavits indicated sufficiently where the witnesses were in disagreement. Nonetheless, it was not put to Mr Gray that he would have regarded as irrelevant an instruction or statement by Mr Loumbos prior to the signing of the Deed Poll that it was not to take effect unless and until the marriage took place. Nor was it put to Mr Gray that he appreciated that Mr Loumbos understood that the Deed Poll would not be operative unless the marriage took place. Each of these propositions would have been directly contrary to Mr Gray's affidavit evidence. Moreover, it would have been remarkable if an experienced solicitor, even if he was insensitive to an apparent conflict of interest, would have dismissed as irrelevant a statement or instruction by Mr Loumbos suggesting that he understood the Deed Poll would not take effect until he and Ms Ward were married. It is true that Mr Gray saw himself as acting for Ms Ward and not Mr Loumbos. But a statement by Mr Loumbos that the Deed Poll was not to take effect until the marriage occurred would not merely have been inconsistent with the clear terms of the Deed Poll itself, but directly inconsistent with the instructions given by Mr Gray's client (Ms Ward), who was present in the room and signed both Deeds.
Contrary to the primary Judge's reasoning, Ms Kerry at no stage accepted that she did not "engage with" Mr Loumbos. It was certainly not Ms Kerry's evidence that she was "narrowly focussed" on explaining the contract of sale. The primary Judge asked Ms Kerry whether it was "possible" that she was focussed on the contract of sale because she was nervous. Ms Kerry disagreed with the suggestion and maintained that she had been "less nervous" because she had practised what she was going to say at the Conference. The following exchange also took place between the primary Judge and Ms Kerry: "Q. Is it possible that you were so focused on what you had practised that you were not open to hearing something that might have been said to you by Mr Loumbos? A. No, I don't think so, because I would have been aware at the time that that changed the nature of what was happening in front of me. I don't expect that that happened. Q. Did you notice that there is a large discrepancy between the age of Mr Loumbos and the age of Ms Ward? A. Yes. Q. Did that strike you as anything unusual? A. If anything, that was part of the reason why I remembered the meeting a little bit better than you might other meetings that you attend."
In my opinion this is a case in which the primary Judge's findings of fact, although credibility based, were seriously affected by a misapprehension as to the evidence given by Mr Gray and Ms Kerry. That evidence had to be addressed before his Honour could properly conclude that Mr Loumbos had stated at the Conference that the Deed Poll was not to take effect until he and Ms Ward were married. This required the primary Judge to give an adequate explanation as to why he rejected the accounts given by Mr Gray and Ms Kerry. With respect, the explanation given by his Honour was flawed because it misapprehended the solicitors' evidence and attributed to them concessions that they did not make. The error clearly played an important part in his Honour's reasoning process, leading to the finding that Mr Loumbos' evidence was to be preferred over that of Mr Gray and Ms Kerry.

[16]

Can the finding be otherwise supported?

The primary Judge's misapprehension of the evidence given by Mr Gray and Ms Kerry might not warrant this Court ordering a new trial if other evidence provides sufficient independent support for the findings made by his Honour. Mr Insall relied on a number of matters as providing such support, but in my view they do not detract from the significance of the error.
One matter relied on by Mr Insall was the primary Judge's finding that Mr Loumbos could not afford to give away $1.3 million. [48] However, the evidentiary basis for this finding is unclear. It is true, as the primary Judge found, that Mr Loumbos borrowed the funds to finance the purchase of the Lilyfield Property. But Mr Loumbos himself gave evidence that in April 2011 the CBA offered advances to him and his companies totalling $9 million on the security of various properties (including the Lilyfield Property). Presumably at that stage the assets of Mr Loumbos and his companies were of sufficient value to support very large loans from a major institutional lender on apparently conventional commercial terms. Moreover, not only did Mr Loumbos make substantial gifts to Ms Ward earlier in 2011, but (as Mr Insall accepted) he did not give any evidence as to his overall financial position at the time he executed the Deed Poll.
The primary Judge gave some weight to the incorrect identification of the lender in the Deed of Indemnity. His Honour said that if the document had been read to Mr Loumbos, the error would have been exposed. [49] However, Ms Kerry, who drafted the Deed of Indemnity did not say that she had read out its terms at the Conference. There is no necessary inconsistency between Ms Kerry's evidence and the failure of all parties at the Conference to identify the error.
The fact that neither Mr Gray nor Ms Kerry considered that they were acting for Mr Loumbos is clearly a matter to be taken into account in assessing their evidence (as is their failure to recognise the conflict between the interests of Mr Loumbos and Ms Ward). However, their understanding that only Ms Ward was their client does not make it probable that both solicitors would have simply ignored a statement by Mr Loumbos that plainly contradicted the terms of the Deed Poll and was directly inconsistent with the instructions given by their client.
Mr Insall also relied on the primary Judge's acceptance of the evidence of Mr Smith, Mr Loumbos' mortgage broker. Mr Smith said that in a conversation with Ms Ward in April 2011, in Mr Loumbos' presence, she said this: "We want to change the name on the contract for Lilyfield. We don't want to purchase it in Val's name anymore. Val and I have discussed the future and we want the Lilyfield property to be in my name. We are planning to be engaged to be married and if something happened to Val the property would go to his children. I want the property to be for us when we're married."
The primary Judge thought that Ms Ward's comments in the April 2011 conversation supported Mr Loumbos' account of the Conference held three months later. [50] Ms Ward's comments clearly assume that a marriage would take place, but they do not appear to be directed to whether Mr Loumbos' gift to her was intended to be conditional on the marriage taking place. Mr Smith's response to Ms Ward's comments, as recorded in his affidavit, does not suggest that he interpreted Ms Ward as indicating that the gift was to be conditional on marriage.
Finally, Mr Insall submitted that the primary Judge was entitled to take into account that the affidavits made by Mr Gray and Ms Kerry were brief and did not address Mr Loumbos' claims in detail. One difficulty with this submission is that his Honour did not place any reliance on the form of the affidavits. In any event, as Mr Ashhurst explained, the form of the affidavits reflected, at least to some extent, the circumstances in which they came to be prepared.
Mr Loumbos was permitted to file an amended statement of claim shortly before the hearing. In order to address the fresh issues raised by the amended pleading, Ms Ward's representatives asked Mr Gray and Ms Kerry to prepare affidavits dealing with events leading up to and at the Conference. Initially both refused. They ultimately complied with the request after being served with subpoenas and their affidavits were filed in Court on the second and third days of the hearing.
It is also necessary to bear in mind that any assessment of the competing versions of events at the Conference must take into account objective circumstances that appear to give support to the evidence of Mr Gray and Ms Kerry. Not all of these matters were referred to by the primary Judge. They include the following:

the suggestion for a document evidencing Mr Loumbos' gift did not come from Ms Ward, but from Ms Kerry in her email to Ms Ward of 30 June 2011;
ClarkKann's memorandum of fees indicated that Ms Kerry drafted the Deed Poll and the Deed of Indemnity and attended Ms Ward and Mr Loumbos to sign the documents;
Mr Gray gave uncontradicted evidence that his time sheets showed that he spent 24 minutes at the Conference (evidence the primary Judge appears to have accepted);
As Mr Insall acknowledged, Mr Loumbos was aware at the Conference that Ms Ward was to be registered as the proprietor of the Lilyfield Property, as in fact occurred following completion of the purchase; and
On 1 May 2013, at a time when Mr Loumbos knew that Ms Ward was asserting that she was the owner of the Lilyfield Property, Mr Loumbos sent a text to her in terms that do not seem to have taken issue with her claim: "The loan on your house is approved so what's your problem?? Your [sic] the owner I'm the guarantor!!!!"

[18]

The alternative contention

Mr Insall correctly submitted that the primary Judge justified the orders he made on the basis that Mr Loumbos, to Ms Ward's knowledge, executed the Deed Poll in the mistaken belief that the gift would not be effective unless and until he and Ms Ward were married. However, when the Primary Judgment is read as a whole, it is clear enough that this conclusion rested on his Honour's findings as to what was said at the Conference. Once these findings are set aside, the conclusion that Mr Loumbos was mistaken as to the import of the Deed Poll also cannot stand.
As has been noted, the primary Judge identified the critical factual question to be whether Mr Loumbos stated at the Conference that the Deed Poll was not meant to take effect until the parties were married. The finding that Mr Loumbos did make that statement provided the factual foundation for the conclusion that he executed the Deed Poll under a mistake as to its operation. The finding also provided the basis for his Honour's conclusion that Ms Ward was aware that Mr Loumbos was proceeding under a mistake. His Honour appears to have found that although Mr Gray and Ms Kerry did not pay attention to what Mr Loumbos said at the Conference, Ms Ward did.
The primary Judge did not make any finding that Ms Ward and Mr Loumbos reached an arrangement or understanding prior to the Conference that the Deed Poll would be conditional on the marriage taking place. When asked to identify evidence of any such arrangement or understanding, independent of the events of the Conference, Mr Insall pointed to Mr Loumbos' account of a conversation with Ms Ward in May 2011 (well before Ms Kerry's email of 30 June 2011 suggesting that the gift be documented). However, the passage in the affidavit relied on does not indicate that the parties, at that stage, were contemplating anything other than an immediate gift to Ms Ward, enabling her to become the registered proprietor of the Lilyfield Property.
In any event, unless Mr Loumbos' account of the Conference was accepted, the primary Judge could not have concluded that he executed the Deed Poll under a mistake as to its effect. On the evidence of Mr Gray and Ms Ward, the contents of the Deed Poll were explained to Mr Loumbos and he said nothing to suggest that his understanding of its terms was any different.
For these reasons, the alternative contention advanced on behalf of Mr Loumbos must be rejected.

[20]

Endnotes

The primary Judge set out the orders he proposed to make in a judgment delivered on 28 June 2016: Loumbos v Ward [2016] NSWSC 885 (Primary Judgment) at [92]. The formal orders were made on 4 July 2016.
Primary Judgment at [35].
Primary Judgment at [8].
Primary Judgment at [41].
Primary Judgment at [42].
Primary Judgment at [46].
Primary Judgment at [39].
Primary Judgment at [14].
Primary Judgment at [15]. The CBA was subsequently replaced by another mortgagee when Mr Loumbos refinanced the CBA loan in 2013.
Primary Judgment at [18].
Primary Judgment at [20].
Primary Judgment at [22].
Primary Judgment at [25].
Primary Judgment at [28]-[31].
Primary Judgment at [34].
Primary Judgment at [38].
Primary Judgment at [35].
Primary Judgment at [58].
Primary Judgment at [60].
Primary Judgment at [63].
Primary Judgment at [62].
Primary Judgment at [65].
Primary Judgment at [67].
Primary Judgment at [69]-[79].
Primary Judgment at [80].
Primary Judgment at [81].
Primary Judgment at [82].
Primary Judgment at [83].
Primary Judgment at [84].
Primary Judgment at [86].
Primary Judgment at [87].
Primary Judgment at [88].
(2003) 214 CLR 118; [2003] HCA 22.
Primary Judgment at [77], [78].
Fox v Percy at [26] (Gleeson CJ, Gummow and Kirby JJ).
Fox v Percy at [29].
Butt v Mrowka [2010] NSWCA 108 at [22]-[24] (Sackville AJA, Tobias and McColl JJA agreeing).
Fox v Percy at [27].
Fox v Percy at [24].
Baira v RHG Mortgage Corporation Ltd [2012] NSWCA 387 at [175] (Bathurst CJ), citing Fox v Percy at [104]; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3; 73 ALJR 306 at [60] (Gaudron, Gummow and Hayne JJ), [90], [94] (Kirby J). See also Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [62]-[67] (McColl JA, Ipp JA and Bryson AJA agreeing).
Primary Judgment at [66].
Primary Judgment at [28].
Primary Judgment at [30].
Primary Judgment at [70], reproduced at [48] above.
Primary Judgment at [71], reproduced at [48] above.
See at [68] above.
(1893) 6 R 67.
Primary Judgment at [76].
Primary Judgment at [58].
Primary Judgment at [69].
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) at [65]. 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: 09 March 2017

Ward v Loumbos

At a glance

Court

Decision date

Before

Source

Judgment (20 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (7)

Cited By (2)