Supreme Court New South Wales

• Medium Neutral Citation: Perpetual Trustee Company Limited v Stojcevski [2014] NSWSC 1718
• Hearing dates: 24, 25 and 26 November 2014
• Decision date: 03 December 2014
• Jurisdiction: Common Law
• Before: Adamson J

Decision

1. Dismiss the cross-claim.

2. Order that, unless any party makes an application in writing to my Associate within seven days, the cross-claimant pay the cross-defendant's costs of the proceedings.

• Catchwords: TORTS - professional negligence - cross-claim against solicitor - cross-claimant husband and wife received legal advice from cross-defendant in relation to signing a loan agreement and mortgage - solicitor was not obliged to advise husband to obtain independent advice - mere fact that the solicitor had been told two years previously that parties were separated did not give rise to a duty to interrogate clients about the state of their marriage - parties living separately for benefit of son - joint loan secured over joint property for apparently mutual benefit; LIMITATION OF ACTIONS -causes of action statute-barred; DAMAGES - no proper evidence to make findings on the calculation of damages - loan increased by unrelated refinance - quantum of benefit retained by cross-claimant from loan unclear - costs of retaining a handwriting claimed by cross-claimant were incurred as a result of the cross-claimant's false instructions to solicitor
• Legislation Cited: Consumer Credit (New South Wales) Code 1995 (NSW), s 80; Civil Liability Act 2002 (NSW), s 35; Civil Procedure Act 2005 (NSW), s 56; Real Property Act 1900 (NSW), s 57
• Cases Cited: Forster v Outred & Co. [1982] 1 WLR 86; Hawkins v Clayton (1988) 164 CLR 539; Wardley Australia Limited v Western Australia (1992) 175 CLR 514
• Category: Principal judgment
• Parties: Perpetual Trustee Company Limited (Plaintiff); Branko Stojcevski (First Defendant/ Cross Claimant); Lesley Alexandra Stojcevski (Second Defendant); Frank Mathey (Cross Defendant)
• Representation: Counsel: J Wilson (Cross Claimant); AR Zahra (Cross Defendant); Solicitors: RMB Lawyers (Cross Claimant); Sparke Helmore (Cross Defendant)
• File Number(s): 2013/60807
• Publication restriction: Nil

Judgment

Introduction

1 By statement of claim filed in 2013, Perpetual Trustee Company Limited (Perpetual) sought an order for possession of a property of which Branko and Lesley Stojcevski were joint registered proprietors at Balgownie (the property), a suburb of Wollongong. Perpetual also sought judgment for the amounts outstanding under a loan and mortgage they entered into in 2002.

2 Judgment for possession was entered against Mrs Stojcevski on 9 July 2013. Mr Stojcevski joined Frank Mathey, solicitor, to the proceedings by cross-claim filed on 4 March 2014. Mr Stojcevski alleged that Mr Mathey had breached his contract of retainer and was negligent in failing to require him to obtain separate legal advice and failing to explain the transaction documents to him in a meeting that occurred on 22 October 2002. Mr Mathey denied breach of contract and negligence and contended further that any cause of action against him was statute-barred.

3 On the first day of the hearing I made orders by consent which resolved the proceedings between Perpetual and Mr Stojcevski. I ordered that there be judgment for possession of the property but that the writ of possession not be enforced until after 1 February 2015. The parties agreed that if the property was sold prior to 1 February 2015, the amount owing to Perpetual would be $589,952.32 but that, if it was not sold by that date, Perpetual would be entitled to sell the property and retain from the proceeds of sale the amount of $709,952.32 for the loan balance. Perpetual reserved its right to deduct costs and expenses from the proceeds of sale and otherwise to recover them from Mr Stojcevski.

4 Mr Stojcevski's cross-claim against Mr Mathey proceeded. Mr and Mrs Stojcevski remain in possession of the property.

Facts

5 Mr Stojcevski was born in Macedonia. He arrived in Australia in 1970 when he was about 18. After a short time in Melbourne he moved to Wollongong and worked in the BHP steel works.

6 In 1972 Mr Stojcevski met his future wife, Lesley, who was then employed as a book-keeper at Volvo. She had migrated to Australia from South Africa in 1964 at the age of 10. They have only ever spoken with each other in English. Although his name is Branko, Mrs Stojcevski always called him Brian. They began a de facto relationship in 1974 and purchased the property in September 1977 for $25,000. Its purchase was financed by a mortgage granted to the Port Kembla Co-operative Society which secured a loan over the property. Subsequent loans from the National Australia Bank Limited (the NAB) were secured over the property. In 1982 Mrs Stojcevski obtained employment in the accounts department of Southern Mines Rescue Station at Russell Vale. The following year Mr Stojcevski left the steelworks. He later began his own tiling business.

7 Mr and Mrs Stojcevski were married in September 1984. Their only child, Logan, was born in March 1985. Mr Stojcevski looked after Logan when he was young and Mrs Stojcevski continued to work at the Southern Mines Rescue Station. In January 1985 Mr Stojcevski borrowed the full amount of the purchase price for a Mazda motor vehicle, $17,000, from the NAB. In 1990, Mr Stojcevski borrowed $15,000 from the NAB to buy a new Toyota HiLux.

8 Mr Mathey had been in practice as a solicitor since his admission in 1974 and has conducted his own practice in Corrimal since 1 July 1977. Conveyancing work comprised a substantial part of his practice although he also helped clients with the preparation of wills. He also provided general advice and did some litigation work. Since the requirements of, principally non-bank, lenders, to have solicitors explain such documents, Mr Mathey's practice has also involved advising clients on the nature and effect of mortgages and associated loans before their execution.

9 At some time in the 1990's Mr Mathey was retained as the solicitor for Southern Mines Rescue Station, as a result of which he met Mrs Stojcevski. She was the person from whom he obtained instructions in debt recovery matters for the Southern Mines Rescue Station.

10 In 1993, Mr and Mrs Stojcevski retained Mr Mathey to prepare their wills. Mrs Stojcevski's will provided that her estate was to be held on trust by her husband and that he was to receive the income from the estate until he died, remarried or entered into a de facto relationship. His will provided for the whole of his estate to go to Mrs Stojcevski. In both cases, in the event that the other does not survive the testator for 30 days, the estate is to be held on trust for Logan. Mrs Stojcevski executed her will on 28 May 1993. Mr Stojcevski executed his will on 22 July 1993. I accept that on that occasion Mr Mathey followed his usual practice of asking him to read the will in the waiting room and then bringing him into the office, summarising the will and asking the testator, in this case Mr Stojcevski, what his understanding of its terms was. Mr Mathey then brought another staff member into the room for the purposes of obtaining a second witness to the client's signature on the will. I accept that Mr Mathey was satisfied that Mr Stojcevski could read and understand his will. Neither Mr nor Mrs Stojcevski ever asked Mr Mathey to draft new wills or revoke the old wills.

11 At about the same time as Mr Mathey prepared the wills, he was retained by Mr Stojcevski to act on his behalf in a dispute with a client who had engaged him to perform tiling work. Mr Stojcevski sought payment for the work and materials; the client refused to pay on the basis that the goods or work were defective. Mr Stojcevski provided Mr Mathey with an example of a tile used on the job. Mr Mathey still retained the tile although he has long since disposed of his paper file. Mrs Stojcevski was not involved in this matter and did not give instructions to Mr Mathey. Although English was not Mr Stojcevski's first language, he was able to converse adequately in English. Mr Mathey did not observe him to lack any understanding of what was going on. Nor did he discern any difficulties in his expression. I reject the evidence of Mr and Mrs Stojcevski that she was required to act as his mouthpiece because his English was not of a sufficient standard to communicate with Mr Mathey about the dispute.

12 In 1997 Mr Stojcevski purchased a Holden Statesman for $62,000. He paid for it with $30,000 of his own cash savings and $32,000 which he had borrowed from the NAB. The loan was repaid in full in 2002. In 1998 the couple tried, unsuccessfully, to sell the property.

13 In 1999 Mrs Stojcevski resigned from her employment and took Logan away from the Wollongong area as he was being bullied at school because of his sexuality. Mr and Mrs Stojcevski accepted that it was better for Logan to live away from the area with Mrs Stojcevski.

14 On 31 May 2000 Mrs Stojcevski consulted Mr Mathey and told him that she had separated from Mr Stojcevski in July 1999 and had applied for a pension. She also told him about the difficulties she was having with Logan and that they had moved to Melbourne and later Bowral. I accept Mr Mathey's evidence that she did not provide him with any indication or instructions that she intended to divorce Mr Stojcevski. She accepted in cross-examination that this was the only occasion on which she had any discussion with Mr Mathey about a separation between herself and her husband. Mrs Stojcevski continued to do the accounts of her husband's business and attend to the payment of bills associated with the property.

15 Mrs Stojcevski also instructed Mr Mathey to act on her behalf on the sale of an investment property she owned at Corrimal, which settled in April 2001 for the price of $245,000. She told him at the time that she was engaging in share trading. Mr Mathey and Mrs Stojcevski had spoken occasionally between 2000 and 2002 in the course of which Mrs Stojcevski had sought free, off the cuff legal advice from Mr Mathey. He no longer recalled the detail of those conversations but accepted that he was told that Logan was still having difficulties and that Mrs Stojcevski had moved with him to Sydney. He was not aware that she was in receipt of the carer's pension. He recalled one occasion when they spoke on the telephone when she told him that she was in front of the computer screen trading in shares at the time.

16 Although Mrs Stojcevski resided with Logan away from the property she retained a key and came and went from the property at will. Mr and Mrs Stojcevski would see each other regularly. Sometimes she would stay for a few nights, a week or on other occasions a few months.

The loan from Perpetual

17 In 2002 Mr and Mrs Stojcevski decided to borrow money from Perpetual through Mortgage House and use the property as security. The property was still encumbered by a mortgage granted to the NAB. It was intended that the NAB mortgage be paid out and that a further amount be borrowed.

18 On 9 September 2002 they each signed a Mortgage House loan application in which they applied for two loans, one for $100,000 and the other for $200,000, each for a term of thirty years. They gave their address as the property and indicated that they were married. Their taxable income was said to be $104,000. Mr Stojcevski also made a statutory declaration entitled "Borrower Income Declaration" in which he represented his income to be $104,000. His signature was witnessed by Bill Kwok, who gave an address in Pyrmont.

19 On 1 October 2002 Mrs Stojcevski rang Mr Mathey and told him that she and her husband were borrowing money through Mortgage House to be secured over the property. She asked him to send a title search to Sanjay at Galilee & Associates, the lender's solicitors, and told him that Joanna was the contact at Mortgage House. She told him the loan documents would be sent to him for them to sign. She did not inform him of the purpose of the loan, except that some of it was to be used to discharge the mortgage to the NAB. She did not tell him that she intended to use some of the proceeds of the loan for share trading. Mr Mathey documented this conversation in a contemporaneous file note. On 3 October 2002 he sent the title search by facsimile to Galilee & Associates.

20 Galilee & Associates sent the transaction documents to Mr Mathey's office under cover of letter dated 14 October 2002 addressed to Mr and Mrs Stojcevski. These documents also included a Certificate of Advice to Borrowers and a Declaration by Borrower as well as a Direct Debit Authority. On 15 October 2002 Mr Mathey wrote to Mr and Mrs Stojcevski at the property informing them that he had received the documents and invited them to arrange an appointment to sign them. He had no other address for Mrs Stojcevski other than the address of the property. I accept his evidence that he believed, as was the case, that correspondence sent to that address would come to her attention.

Mr Mathey's usual practice

21 I accept Mr Mathey's estimate that as at 2002 he advised clients once a week on average about transactions of the type into which Mr and Mrs Stojcevski proposed to enter. He developed a usual practice and followed it whenever he was required to explain such documents, including when he saw Mr and Mrs Stojcevski on 22 October 2002. I accept his evidence of his usual practice, which was to advise clients in a separate meeting room, apart from his own work room. He prepared for such meetings by reviewing the documents himself first thing in the morning and arranging them in a pile in the meeting room, ready for him to explain them to the clients. He was careful to ensure that the clients were focussed and maintained eye contact with him during the explanation so that he could be satisfied that they were paying attention to what he was saying. He adjusted the words used for the explanation by reference to the least sophisticated person present.

The meeting at Mr Mathey's offices on 22 October 2002

22 When Mr and Mrs Stojcevski attended Mr Mathey's offices on 22 October 2002, they appeared to be getting along well and making eye contact with each other. There was no indication that their relationship had soured or that the separation, of which Mr Mathey had been informed over two years previously, had resulted in any estrangement. Indeed, Mr Mathey understood from what Mrs Stojcevski had told him during that period that she was living in Sydney for reasons associated with Logan's welfare. Mr and Mrs Stojcevski sat next to each other, opposite the desk from Mr Mathey at the meeting on 22 October 2002. The meeting took at least half an hour and may have taken up to fifty minutes. I reject the evidence of Mr and Mrs Stojcevski that it was over in ten minutes.

23 I accept Mr Mathey's evidence that he explained each of the documents carefully to Mr and Mrs Stojcevski. He identified the amount of the loan, $300,000 and referred to the fact that it was split into two portions of $100,000 and $200,000. He asked them the reason for the split. Mrs Stojcevski responded by saying that they did not want to be paying interest on the whole amount because they only needed an amount to discharge the NAB mortgage to start with, and wanted to use the balance as a line of credit on which they could draw as and when the need arose. Mr Mathey told them that he would check with Mortgage House about whether interest would run only on the money drawn down. He also explained the meaning of variable interest rate and they confirmed that they understood.

24 Mr Mathey accepted that he did not turn his mind to whether Mr and Mrs Stojcevski would be capable of repaying the loan. The expert evidence relied on by Mr Stojcevski confirmed that it was no part of the obligations of a solicitor to provide financial advice on a transaction.

25 Mr Mathey also directed their attention to the terms of the loan agreement and the specified repayments. He explained that they were both responsible for the repayments. He also explained the fees that were payable. They signed the Loan Agreement Details which specified, under each of their names, that the property was their residential address.

26 Mr Mathey then explained the mortgage to them and what would occur in the event of default. He witnessed their signatures. He took them through the balance of the documents and made sure that they understood them. When he handed the Declaration by Borrower, he explained that the document said that they agreed that they had obtained their own legal advice on the loan agreement and mortgage and had signed them voluntarily.

27 When Mr Wilson, who appeared on behalf of Mr Stojcevski, put to Mr Mathey in cross-examination that there were stickers saying "Please sign here" where the documents were to be signed, he accepted that they may have been there because the solicitors for Perpetual may have put them there. He said that he never used them and, indeed, that he "hated" them. I regard this evidence as an indication that he did not apply a mechanical approach to the execution of documents. Rather, he took care to make sure that a client understood the effect of the document before signing it.

28 He also handed them a direct debit request form and asked them to sign it. He told them that it was needed to enable Perpetual to take the loan repayments straight from their bank account (which was an account in both of their names). He told them that he would write in the bank account details later when they had provided them to him.

29 During the meeting Mr Stojcevski gave no indication whatsoever that he did not fully appreciate the nature of the documents or understand the explanation that Mr Mathey had given. I am satisfied that he actually signed every document provided to Mr Mathey on which his signature appears. I am satisfied that, although his English is not as good as his wife's, he is able to converse, as well as read and understand written English. Although he may not have been able to understand every clause of the legal documents shown to him, he was able to read and understand the words "loan" and "mortgage", the nature of such documents and the explanation given by Mr Mathey.

30 Nor was there any sign that there was any difficulty in the relationship between Mr and Mrs Stojcevski. I am satisfied that if there had been any indication of the latter, Mr Mathey would have explored the question further to ascertain whether there was any conflict of interest between them. Mr Mathey regarded the circumstance that they were borrowing money to be secured against jointly owned property under a loan which was to be repaid over thirty years as a strong indication that there was no relevant conflict between them or that their marriage was in jeopardy. He did not ask about the state of their marriage or whether they were separated.

31 I reject the evidence of Mrs Stojcevski that she had engaged in an elaborate ruse with both Mr Mathey and her husband at the former's offices on 22 October 2002 to distract them so that Mr Mathey would not have an opportunity to explain the documents to Mr Stojcevski. It is glaringly improbable that she would have chosen to adopt such a strategy with a solicitor as careful and conscientious as Mr Mathey. Furthermore I do not accept that Mr Mathey would have allowed, or did allow himself, to be diverted from the task of explaining the documents. I regard Mrs Stojcevski's evidence on this matter as dishonest.

32 I reject the evidence of Mr Stojcevski that he believed that all that was happening was that the NAB mortgage was being refinanced and a cheaper loan obtained instead. His signature on the loan application is sufficient to dispose of that evidence. I do not accept Mr Stojcevski's version of what occurred in that meeting, except where it accords with Mr Mathey's evidence or amounts to a statement against interest. I am satisfied that Mr Mathey mentioned the loan amount and the structure of the loan and that Mr Stojcevski heard and understood what he said. In these circumstances it cannot be accepted that Mr Stojcevski was under any misapprehension about the nature of the transaction or the loan amount. Mr Stojcevski accepted that Mr Mathey spoke clearly and carefully in the course of the meeting on 22 October 2002.

33 Mr Wilson submitted that I ought not accept that Mr Mathey mentioned the loan amount because Mr Stojcevski would not have contemplated taking out such a loan, having regard to his limited income. I reject this submission. The amount of Mr Stojcevski's income has not been established to my satisfaction. He and his wife were prepared to make declarations as to their income at a level ample to service the loan. Furthermore Mrs Stojcevski was engaging in share trading and gave her husband to understand that she was having some success. There is nothing obviously imprudent about the loan or to suggest that Mr Stojcevski would not have been willing to borrow that sum of money with his wife.

34 After the meeting Mr Mathey did not immediately send the executed loan and mortgage documents to Perpetual because he had been instructed to investigate the situation regarding the interest that would be charged. On 22 October 2002 he wrote to Mortgage House to inquire as to whether interest would be charged on the whole amount of the facility or only on that part of the loan that had been drawn down. Mortgage House confirmed in a telephone call to Mr Mathey on 31 October 2002 that interest would be calculated and charged only on the outstanding balance.

Further events concerning Mr Mathey relating to the loan and the mortgage

35 There was further correspondence relating to the discharge of the NAB mortgage. On 20 November 2002 Mrs Stojcevski sent a facsimile to Mr Mathey enclosing a document entitled a NAB pro forma document entitled "Letter of Instruction- Surrendering Deeds". It had been filled in by hand and was signed by Mrs Stojcevski. Mrs Stojcevski wrote on the facsimile cover sheet:

"Brian will drop in sometime tomorrow to sign form. Could you please then fax to Daniel Armstrong at National on [fax number provided]."

36 Mr Mathey left the document at the reception of his office in case Mr Stojcevski called to sign it when he was not available. Mr Stojcevski came in to sign the form, which Mr Mathey then faxed to the NAB.

37 On 26 November 2002 Galilee & Associates wrote to Mr Mathey enclosing an Undertaking relating to property insurance to be signed by Mr and Mrs Stojcevski whose signatures had to be witnessed. Mr Stojcevski signed the document in the presence of Mr Mathey. Mrs Stojcevski signed the document elsewhere. Her signature was witnessed by Brian Laurie, who was not known to Mr Mathey. Although the document is dated 24 November 2002, it was signed after that date.

38 On 27 November 2002, Mrs Stojcevski sent a NAB bank statement by facsimile to Mr Mathey so that he could fill in the details on the direct debit form that they had signed in his office on 22 October 2002. He sent this and other documents to Galilee & Associates under cover of letter dated 3 December 2002.

39 Settlement of the mortgage occurred on 12 December 2002. Mr Mathey confirmed settlement and enclosed an invoice for his costs and disbursements of $1,917.40 under cover of letter dated 17 December 2002.

40 The first deductions for repayments were made on 31 January 2003 from the joint account held by Mr and Mrs Stojcevski at the NAB. Monthly bank statements for the joint account were sent to Mr Stojcevski at the property. I do not accept Mr Stojcevski's evidence that he never looked at a single one of these statements. My impression was that he refused to admit that he looked at one because he appreciated that, had he looked at one, the inference would be drawn that he must have known about the loan.

41 After the settlement of the transaction in December 2002, Mr Mathey heard nothing more from the Stojcevskis until 2013 when Mr Stojcevski's solicitor contacted his office to obtain his file for the purposes of these proceedings.

Increase in loan amount

42 In 2004 Mr and Mrs Stojcevski applied to increase the amount of the loan from Perpetual. In September 2004 they both signed a Borrower Income Declaration in which they represented that Mr Stojcevski's income was $100,000 and Mrs Stojcevski's income was $50,000. In the loan application they stated that they each lived at the property. His occupation was said to be tiler for LBL Improvements; her occupation was said to be building construction labourer.

43 On 16 October 2004 Mr Stojcevski signed an income declaration verifying his income of $100,000. His signature was witnessed by "N. Markowski", who was working with him on paving for a swimming pool at the time. Mrs Stojcevski signed a similar document verifying that her income was $50,000. Her signature was also witnessed by "N. Markowski". On 4 November 2004, they executed a variation agreement which increased the amount of the first portion of the loan from $100,000 to $200,000 and kept the amount of the second portion of the loan at its original level of $200,000. Mr Stojcevski accepted that he had signed that document. He also signed a Borrower's Certificate on 4 November 2004 which was required to be completed by borrowers who chose not to have legal advice and certified that he had read the documents, understood them and signed them voluntarily. He also signed other documents associated with the variation in November 2004.

Service of default notices on Mr Stojcevski in February 2008

44 On Thursday 14 February 2008 a process server, Andrew Jones, came to the property and served Mr Stojcevski with a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) and a Default Notice under s 80 of the Consumer Credit Code. The s 57(2)(b) notice specified that the loan was $4,714.29 in arrears and that if the default was not rectified within 31 days of service, the mortgagee would exercise its power of sale over the property.

45 I accept Mr Stojcevski's evidence that he opened the envelope, read the documents, appreciated their consequences and, within a few minutes, rang his wife and threatened to kill her. Although he has given different versions about what occurred (including that he did not open the envelope at all), I am satisfied that he not only opened it but knew what it meant and that it related to the loan he and his wife had taken out in 2002 and which had been varied in 2004 to increase the amount by a further $100,000. I reject his suggestion, and Mr Wilson's submission, that this occurred in 2009. I am satisfied that these events occurred on 14 February 2008. Not only was Mr Stojcevski unable to identify any other occasion on which documents had been served on him before 2013, but the journal record of the lender does not record any other occasion. For the reasons given below I do not accept Mrs Stojcevski's evidence that he did not find out about the loan until early 2009.

46 I do not accept his evidence that this was the first occasion on which he appreciated that there was a mortgage over the property since I am satisfied that he knew full well that there was such a mortgage as a result of the explanation Mr Mathey had given him on 22 October 2002. The threat he made could well have arisen by reason of his annoyance that his right to continue to live on the property, which had been his home for some decades, was in jeopardy.

47 The evidence established that an arrangement was made to repay the arrears as a result of which foreclosure action proposed by the mortgagee did not proceed. Mrs Stojcevski gave evidence that she borrowed money from friends and relatives and obtained credit cards in various names, including Mr Stojcevski's, to obtain money to keep making the mortgage repayments. Because of the adverse view I have formed of her credibility I am not disposed to accept this evidence. In any event, for present purposes, it is immaterial how the mortgage payments were made since this post-dates Mr Mathey's involvement in advising the parties to the transaction.

48 The journal notes of Resimac, who acted for Perpetual, were tendered. They recorded that Mr Stojcevski telephoned Resimac on 17 March 2010 and told a Mr Lorenzo that the loan, which was in arrears, had been applied for without his consent and that it was fraudulent. Mr Lorenzo advised him that someone from the arrears department would call him back about the arrears of the loan. Later that day Mr Stojcevski spoke to Ms James at Resimac who made the following record of the conversation:

"B1 [Mr Stojcevski] rang. updated his contact details, he said B2 [Mrs Stojcevski] did this loan without his consent, he admits may have signed L/A, but she proboly slipped it between other paperwork. He said found out about loan and arrs few days ago. She was hiding mail & he never recd statement, as went to her post box .Updated his address to 124 - neighbour, leave B2 to go to post box. He confirmed they both reside in house. Him in main, her in back, they separated 10 yrs ago, but 6 mths ago she came back, destitute, no money. He confirmed not a couple. Advised both of you are liable for this. If you believe she mislead you or fraudulent, see legal advise, he said no point she has no money, gambling problems, & he wants keep house. Confirmed status of loan, & default expires 22/3. He said he will make loan repayments from now on, sent him deposit book. Advised must clear default by 22/3 to avoid SOC. Supplied details, he will bank $6529 on 22/3 & $2700 on 26/2 for arrs he said 31/3 will be late a few weeks. Advised if clear arrs next week, will agree to arrgt for 31/3. Asked him to call once payment made, as can not fax...10.36 am." [sic]

49 In my view, Mr Stojcevski's representations to Resimac in March 2010 were untrue to his knowledge. They demonstrated that he was prepared to do and say anything to retain possession of the property which was his home. The defence of the proceedings by Perpetual for possession and judgment and his bringing of the cross-claim against Mr Mathey are further manifestations of the same preparedness.

Further default in 2013

50 The loan fell into arrears again in 2013. Mr and Mrs Stojcevski were served with notices dated 10 January 2013 under s 57(2)(b) of the Real Property Act 1900 in which arrears of $30,599.57 were specified.

The proceedings commenced by Perpetual in 2013

51 Perpetual commenced these proceedings against Mr Stojcevski by statement of claim filed on 25 February 2013.

Credibility of witnesses

Credibility of Mr Stojcevski

52 I regard Mr Stojcevski as a dishonest witness. I do not accept his evidence except where it is against interest or corroborated. It was also internally inconsistent. For example, in examination in chief he said that a tall, slim man had come to deliver some documents to him in an envelope in 2008. Mr Stojcevski also said that he had left the documents in the dining room at the property and that Mrs Stojcevski had come a couple of days later to collect them. He said that he neither read the documents nor opened the envelope. Nor did he ask her any questions about the documents. However, in his affidavit, he admitted that he had read the documents with which he had been served.

53 I do not accept his evidence that he "never even discuss one word" with his wife about the proceedings or that "we never talk". Further, his evidence is, in any event, at odds with a reference in one of his affidavits where he refers to his wife reminding him "recently" that Mr Mathey had acted for them. I regard their evidence in the proceedings as a collaboration designed to enable Mr Stojcevski to stay in the house and obtain funds from Mr Mathey, or his insurer, to pay out Perpetual or to purchase another dwelling. Although Mr Stojcevski insinuated that he had to provide shelter for his wife as she had two heart attacks and had attempted suicide twice, I am satisfied that, whatever other emotion has inclined them to stay married, it is their joint financial interest that binds them for the purposes of their evidence in these proceedings. Indeed Mr Stojcevski admitted as much in the following exchange in his cross-examination:

"Q. So she's come back into the house with the intention to help you get out of this mess?

A. That's right."

54 Mr Stojcevski endeavoured to stick to the story about what had occurred in the meeting on 22 October 2002 that his wife had come up with for the purposes of the cross-claim, as appears from the following exchange:

Q. Could you tell the Court, please, how did the meeting start? What was said by who?

A. Mr Mathey came in, Lesley was there, I was here, the papers, they're all lined up like sardines, they started to talk something, I don't know what was it they're talking about his property and Robinson and this and that. My wife obviously is trying to distract him for whatever reason. We signed the papers and we went home.

55 His wife used the same word, "distract", in her affidavit. I regard this as a further indication of their collaboration.

56 In any event, Mr Stojcevski made various concessions in the course of the cross-examination conducted by Mr Zahra, who appeared on behalf of Mr Mathey, which were inconsistent with this version. One of the more significant concessions was that he knew he was signing a mortgage. When he was shown the page he had signed which had "Loan Agreement- General Terms" in large, bold letters, he said that he did not recall seeing those words. He had difficulty explaining how he could have signed the document and not appreciated that he was borrowing money, as appears in the following exchange:

Q. Did you close your eyes while you were signing this document?

A. I was - like, probably, I was just daydreaming, you know, I just went there and sign the papers.

57 When Mr Zahra reminded him that he said (in his affidavit) that he had been paying attention in the meeting, he raised deficiencies in his capacity to express himself in, and understand, the English language.

58 Mr Stojcevski has also been dishonest in the conduct of these proceedings, which reflects adversely on his credibility. By Calderbank letter dated 15 May 2013 Mr Stojcevski's solicitors wrote to Perpetual's solicitors offering to settle the proceedings. The letter read in part:

"We have been instructed by our client as follows:

1. The Second Defendant, Mrs Stojcevski, has engaged in fraudulent conduct by forging our client's signature on various loan and credit applications and documents.

2. With reference to the dates of the Loan Agreement Mortgage and Variation Agreement, Mr Stojcevski was separated from Mrs Stojcevski at all relevant times.

3. The First Defendant received no benefit of any advances alleged to have been made by the Plaintiff.

4. The First Defendant was not aware that the alleged debts existed prior to these proceedings being commenced.

5. It is clear that the authenticity of the signature on the various documents is in doubt and if the matter proceeds the First Defendant proposes to have the signature examined by an expert."

59 The first matter was irrelevant to the instant case, in light of Mr Stojcevski's admissions that he signed all loan and mortgage documents in the present case. The second matter is misleading having regard to the facts as I have found them as to the reason Mrs Stojcevski lived with Logan away from the Wollongong area. The third matter is false as the NAB mortgage was discharged. The fourth matter is false since, even on Mr Stojcevski's own admission he knew of the debt when he was served by Mr Jones, which the evidence established occurred on 14 February 2008. The fifth matter ought be seen in light of the admissions I have referred to above. It can reasonably be inferred that these instructions were given to delay the proceedings or to incline Perpetual to resolve them on a false basis. The evidence established that no evidence of forgery was served because the expert evidence obtained was inconclusive. Mr Stojcevski's solicitors informed Perpetual's solicitors that this allegation would not be pursued on a letter dated 9 December 2013.

Credibility of Mrs Stojcevski

60 Mrs Stojcevski was histrionic, unresponsive, loud and discourteous in the witness box. Mr Wilson relied on her demeanour to support the proposition that she was controlling, domineering and got her own way. I do not regard her presentation while giving evidence as an accurate reflection of how she appears in ordinary life, or how she would have conducted herself in the meeting on October 2002 in Mr Mathey's offices. I accept Mr Mathey's evidence that she did not take control of him when they were conversing and, indeed, that they were "even" in their discussions.

61 Notwithstanding the considerable, and apparently reconcilable, differences between them, Mr and Mrs Stojcevski shared a common interest in retaining the property. I am satisfied that they concocted a version of events that she distracted Mr Mathey and deflected him from giving any explanation or indicating in any way that the documents were loan and mortgage documents. As she said in cross-examination:

A. I was hoping to God Frank wouldn't say anything at this meeting because Brian would have just jumped up and left. You think I went through all that trouble for it all to fall apart?

62 Apart from the fact that this version is belied by Mr Mathey's evidence and the documents themselves, which Mr Stojcevski signed and which were, on their face, loan and mortgage documents, it beggars belief that Mrs Stojcevski, having achieved her "goal" of having the transaction documents executed, would have Mr Stojcevski attend Mr Mathey's offices again by himself on a later occasion to sign documents. Her response in cross-examination when the improbability of such a scenario was put to her, was telling:

Q. Why on earth would you send him there alone to sign another document at Mr Mathey's offices?

A. Frank would not have spoken to him whatsoever about it. Brian would have just run into the office, signed it on the front counter and run out.

63 Mrs Stojcevski has given considerable evidence about her dishonesty over the years, including the fraud she has committed to cover her share-trading losses and also as to her forging various signatures, including her husband's. Although statements against interest are generally regarded as more credible than those that are self-serving, I am not disposed to accept the truth of Mrs Stojcevski's admissions. In the context of these proceedings her admissions of fraud and deception are self-serving in that they are intended to assist her husband's case. Their evidence is, in my view, the result of a dishonest pact between them, and is not a truthful account of what actually occurred.

Credibility of Mr Mathey

64 From the time the transaction settled in December 2002, Mr Mathey heard nothing more from either Mr or Mrs Stojcevski about it, or at all, until he was contacted by Mr Stojcevski's solicitors in these proceedings in May 2013 with an authority to release his file. As he was overseas at the time, his staff attended to the request and provided the file. His staff copied some documents before relinquishing it, but not the whole file. It was not until late 2013 or early 2014 that he turned his mind to what had occurred in 2002, since it was at this time that he was asked by Perpetual's solicitors to swear an affidavit to be relied upon by Perpetual in the principal proceedings for possession. It was not until he was served with the cross-claim in March 2014 that he realised that the claim was to be made against him in respect of his conduct in 2002.

65 Despite the passage of time since the relevant events, Mr Mathey still had a recollection of them, albeit a patchy one. I was impressed with the care with which Mr Mathey gave evidence. He presented as a diligent, conscientious and careful solicitor who had adopted practices which were designed to ensure that he fulfilled his obligations to his clients to explain documents which, once they had signed them, would affect their legal rights. He accepted the difficulties in remembering events that occurred over twenty years ago. However I am satisfied that he has some recollection of his contact with the Stojcevskis over the years and in particular the meeting on 22 October 2002. Nonetheless he was frank in accepting that his evidence was a mixture of recollection, unaffected by documents; recollection which had been refreshed by reference to documents; reconstruction by reference to documents and usual practice and recollection of his usual practice.

66 For example, he had forgotten that he had been told by Mrs Stojcevski when she met with him on 31 May 2000 that she and Mr Stojcevski were separated until a copy of his file note was shown to him. He had also forgotten that the conversation regarding the direct debit form until he was provided with the document. This is understandable. It would indeed be remarkable if his recollection were better.

67 I reject Mr Wilson's submission that I should draw an inference against Mr Mathey by reason of the fact that Mr Mathey did not call his secretaries or other clients who could give evidence of his usual practice. Such evidence would hardly have been consistent with s 56 of the Civil Procedure Act 2005 (NSW), even if it had been admissible. Furthermore there may have been difficulties distinguishing aspects of the particular transactions in respect of which an explanation was required as distinct from common features of such transactions. In addition, as Mr Mathey pointed out, his secretaries did not sit in on such meetings with clients. Furthermore he did not record his time to bill such clients and therefore it would be unlikely that there would be a reliable record of the time usually taken by such meetings.

68 Mr Wilson submitted that I ought not accept Mr Mathey's evidence of what occurred during the conference on 22 October 2002 because he did not make a file note of the meeting. I do not consider this to be a basis for impugning his evidence in the circumstances of the present case. His correspondence with his clients and also with Galilee & Associates as well as the documents themselves were sufficient to constitute relevant aides-memoires. Furthermore it is difficult to see what a file note would necessarily have added, apart from, perhaps, the duration of the meeting and a notation that he followed his usual practice.

Whether Mr Mathey breached his contract of retainer with Mr Stojcevski or was negligent

69 Mr Rickards, solicitor, gave expert evidence in the form of a report tendered on behalf of Mr Stojcevski. The disparity between the narrative of facts that he had assumed and my findings is so great that I cannot accept his opinion. Not only was he asked to assume that Mr Mathey did not explain the documents, but also he was asked to assume that they had been separated for three years at the time the documents were executed. This description does not accord with the fact, which was that Mr and Mrs Stojcevski maintained different residences for Logan's benefit.

70 Mr Tzannes, solicitor, was retained on behalf of Mr Mathey. His evidence was based, in part, on the proposition that Mr Mathey was unaware that Mr and Mrs Stojcevski had separated. At the time Mr Tzannes was preparing his report, he was not aware of the file note of 31 May 2000 referred to above, and Mr Mathey had forgotten about it. The facts as I have found them to be are more nuanced than those which Mr Tzannes was asked to assume. Accordingly, although I have found his report helpful, it does not fully address the issue with which I am concerned. Nonetheless the determination of the duties owed by solicitors to their clients does not require expert evidence.

71 The principal basis on which Mr Mathey was said to be negligent was that he did not require Mr Stojcevski to get independent advice in relation to the loan and the mortgage. The circumstance which was relied upon to support the proposition that he was obliged to send Mr Stojcevski away was that he had earlier been told (on 31 May 2000) that Mr and Mrs Stojcevski had separated. Mr Wilson contended that, in these circumstances, Mr Mathey was obliged to make enquiries of the couple in October 2002 to satisfy himself of the state of the relationship before advising them jointly.

72 I reject this submission. I do not consider that the duties owed by a solicitor to clients required such interrogation about the state of clients' marriages. It is a matter of common experience that couples, including those who, like Mr and Mrs Stojcevski, have been married for a long time, may go through periods of relative disharmony. Such dissatisfaction, which may be mutual, can lead to complaints being made by one or other of the parties to the marriage to third parties. At times a husband and wife might have separate residences, either because of disharmony, or for other reasons, including those associated with work or with children. In the present case, there was a pressing need for Logan to reside away from the Wollongong area.

73 At the time the loan and mortgage to Perpetual was settled, Logan was still a minor. In these circumstances, Mr Mathey was entitled to assume, having regard to his knowledge of the difficulties relating to Logan, that Mrs Stojcevski was living away from Mr Stojcevski because she was living with Logan in Sydney, for Logan's best interests. Although he had been told of their separation over two years previously, he also knew that nothing had been done to change their wills and that the only residential address he had for Mrs Stojcevski was that of the property. He was also entitled to infer, when they approached him jointly about the joint loan to be secured over jointly owned property, that there was no relevant conflict. I accept Mr Mathey's evidence that, from time to time, a party to a marriage seeks advice from him about divorce and that, on average, only about a quarter of such marriages proceed to separation and divorce. In the present case Mrs Stojcevski did not even ask Mr Mathey for advice about a divorce. Further there were separate, and significant, reasons for her living separately from Mr Stojcevski, which, as I have set out above, related to Logan.

74 It would, in my view, be at least impertinent, if not offensive, for a solicitor to be required to examine the state of his clients' relationship in these circumstances. Reasonable care did not require such an inquiry. I am not satisfied that Mr Mathey's conduct fell short in any way of the standards expected of reasonably competent solicitors advising clients of such transactions. Indeed the evidence established that he met the standards of care and diligence that is expected of solicitors.

75 Mr Stojcevski's allegation that Mr Mathey was negligent because he did not explain the documents to him on 22 October 2002 is not made out. For the reasons given above, I am satisfied that Mr Mathey carefully explained the documents to him in the course of that conference.

Proportionate liability of Mrs Stojcevski

76 In light of my findings set out above, it is unnecessary to make findings about Mrs Stojcevski's proportionate liability for the purposes of s 35 of the Civil Liability Act 2002 (NSW). She may have been guilty of wrongdoing on other occasions but I am not satisfied that in October 2002 she did other than arrange a loan with which her husband fully concurred, to be secured over jointly owned property, and obtain a comprehensive explanation and advice for both of them from Mr Mathey, who is, and was at that time, a very experienced and competent practitioner.

The Limitation defence

77 It is not necessary to deal with the limitation defence as I have found that Mr Mathey was neither negligent nor in breach of contract. However, for completeness I shall make findings referable to the defence.

78 The cause of action for alleged breach of contract accrued on the date of breach, which was 22 October 2002. The claim became statute-barred on 22 October 2008. A cause of action in tort accrued when damage was first suffered. This occurred at least by the time the loan and mortgage transaction was settled on 12 December 2002. At that time there was an immediate effect on the value of Mr Stojcevski's interest in the property: Forster v Outred & Co. [1982] 1 WLR 86; approved in Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 528-531 per Mason CJ, Dawson, Gaudron and McHugh JJ.

79 If one were to assume, contrary to my findings set out above, that Mr Stojcevski was unaware of the loan and mortgage transaction at the time of his execution of the documents, it would be arguable that time would not run in respect of his action against Mr Mathey on the basis that a solicitor ought not be permitted to profit from his own breach: see Hawkins v Clayton (1988) 164 CLR 539, at 590 per Deane J. In that event, time would start to run on 14 February 2008, being the date on which Mr Jones served Mr Stojcevski with the documents which, even on his version, alerted him to the fact that there was a loan secured by mortgage on the property. In that event, the limitation period would have expired on 14 February 2014. The cross-claim was not filed until 4 March 2014 and is therefore out of time. Accordingly, even if Mr Stojcevski had a claim in negligence against Mr Mathey, his claim would have been statute-barred.

Assessment of damages

80 For completeness I shall address the assessment of damages. Mr Stojcevski bears the onus of proving loss. No proper basis has been articulated which would permit me to make such a calculation. Mr Wilson submitted that Mr Stojcevski ought receive half of the amount for which the couple is liable to Perpetual, together with all the costs and disbursements he has incurred in these proceedings. Mr Wilson also submitted that he was entitled to an indemnity against Mr Mathey for half of Perpetual's costs, being the amount for which Mr Stojcevski is liable under the loan and mortgage agreements.

81 The first difficulty is that Mr Stojcevski obtained some benefit from the loan since the NAB mortgage was paid out and the settlement sheet for the completion of the transaction in December 2002 indicated that other loans were paid out. The evidence does not permit me to make a finding as to whether these amounts benefited Mr Stojcevski. Furthermore, it is not known what the property will be sold for and whether it will be sold. The evidence of Mr Stojcevski was that their money was held jointly. When it was put to him that his wife had effectively stolen money from him, he responded:

"Well, not just my money, it was her money, earned together, what was there, so it was combined thing for 40 years of marriage. . .

When you live together obviously you share things together, so in my view, together money . . ."

82 The second difficulty is that the amount claimed by Perpetual which is secured by the mortgage includes the further $100,000 which was borrowed by Mr and Mrs Stojcevski in 2004. Mr Mathey had nothing to do with this further advance and cannot be causally responsible for any loss flowing from it.

83 The third difficulty is the amount claimed by way of damages in respect of the costs of the proceedings. Mr Wilson read the affidavit of Nazley Khan in support of this claim. She deposed that the legal fees incurred by Mr Stojcevski in the order of $22,000 as at 15 May 2013; $98,000 as at 14 November 2013; $177,000 as at 28 February 2014; and $313,000 as at 21 November 2014. Mr Zahra did not object to Ms Khan's affidavit or require Ms Khan for cross-examination having regard to the agreement he reached with Mr Wilson on the following matters:

(1) The figures for costs in the affidavit include disbursements;

(2) The professional fees have not been billed to Mr Stojcevski;

(3) The final figure includes the costs of the cross-claim;

(4) Mr Stojcevski has, to date, paid no more than $500 to his solicitors.

84 As referred to above, the costs incurred by Mr Stojcevski in defending the proceedings included the costs of retaining a handwriting expert. These costs are wasted costs and were incurred as a result of Mr Stojcevski's false instructions to his solicitor that he had not signed the transaction documents in 2002.

85 It is not clear why Mr Stojcevski defended the proceedings from the time of their commencement in February 2013 and then consented to judgment on the Friday before they were due to start in November 2014. The inference is open that his defence of the proceedings was unreasonable. Had he consented to judgment on Perpetual's claim he would not have incurred any, or any substantial, costs of the proceedings. His costs incurred in the cross-claim do not amount to damages. Further, the figures for costs do not appear to be reasonable having regard to the issues in the proceedings and the amount at stake.

86 It is not possible, having regard to the evidentiary deficiencies referred to above, to quantify the damages to which Mr Stojcevski would have been entitled had I found in his favour on liability.

Orders

87 I make the following orders:

(1) Dismiss the cross-claim.

(2) Order that, unless any party makes an application in writing to my Associate within seven days, the cross-claimant pay the cross-defendant's costs of the proceedings.

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Decision last updated: 03 December 2014