Krikorian v. Medeiros [1999] NSWSC 160

New South Wales Supreme Court CITATION : Krikorian v. Medeiros [1999] NSWSC 160 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 4628/97 HEARING DATE(S) : Friday, 5 March 1999. JUDGMENT DATE : 5 March 1999

PARTIES : Teresa Krikorian (P) Caroline Medeiros (D) JUDGMENT OF : Master McLaughlin

COUNSEL : Mr. S. Donaldson (X-Resp) Mr. N. A. Confos (Resp) SOLICITORS : Giles Payne & Co (P) Swaab Attorneys (D) CATCHWORDS : DECISION :

- 10 - SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 5 March 1999

4628/98 TERESA KRIKORIAN -v- CAROLINE MEDEIROS JUDGMENT

1 MASTER: By notice of motion filed on 3 February 1999 the cross-defendants seeks an order that the cross claim against them be struck out. That order is sought pursuant to the provisions of Part 15 rule 26 of the Supreme Court Rules. Subrule (1) of that rule provides relevantly: Where a pleading --- (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; the Court may at any stage of the proceedings, on terms, order that the whole or any part of the pleading be struck out. 2 It is submitted on behalf of the applicants that the cross claim discloses no cause of action against them. The cross claim was filed pursuant to leave in that regard granted by Master Macready on 2 July 1998. The Master, after a contested hearing, gave such leave, but also stated in the course of his judgment as follows: By allowing the cross-claim I do not want in any way to foreclose what steps the cross-defendants might take once they have been advised as to whether or not they wish to bring action to strike out the cross claim. 3 The cross-claim was filed on 14 July 1998. The substantive proceedings were instituted by the plaintiff Teresa Krikorian by summons filed on 4 November 1997. That summons sought declarations as to the existence of a trust and certain consequential relief. Subsequently the plaintiff filed a statement of claim on 4 June 1998. The defendant filed a defence to that pleading on 14 July 1998, that being the same date as the cross-claim was filed. 4 The cause of action relied upon by the plaintiff was that she being the mother of the defendant (Caroline Medeiros) advanced to the defendant certain moneys for the acquisition of a house property at 38 Burke Street, Chifley. That house property was registered in the name of the defendant. Subsequently the plaintiff advanced additional moneys which were used for extensions and improvements to that house property. 5 The defendant executed a mortgage securing the advance of $120,000 by the plaintiff. That mortgage was dated 10 April 1985, the purchase of the property having taken place in December 1984. 6 Subsequently on 14 December 1989 the defendant executed a variation of mortgage which increased the amount of the principal sum, and a further variation of the mortgage was executed by the defendant on 3 September 1991 increasing the principal sum to yet a further amount. The mortgage was discharged on 2 September 1993. 7 The cross-defendants are the members of a firm of solicitors which acted for the defendant and also for the plaintiff in relation to the mortgage and the two variations of the mortgage and the discharge of the mortgage. The relief which is sought by the plaintiff in the statement of claim consists of declarations that the defendant holds the house property on trust for the plaintiff, certain consequential relief by way of the appointment of a statutory trustee for sale and an order for what is described as an equitable charge to secure payment to the plaintiff of the amount of expenditure and interest and moneys contributed by the plaintiff towards the purchase price of the property and any improvements thereon by the plaintiff. 8 The plaintiff asserts by the statement of claim and by the various items of relief sought that the defendant holds the house property on a resulting trust for the plaintiff upon the basis that it was the plaintiff who provided the purchase price and the cost of improvements, or alternatively that the defendant holds the property on a constructive trust for the plaintiff upon the basis that there was a common intention of the parties that, as a result of the payment by the plaintiff of the purchase price and of the other moneys to which I have referred, the property should be held by the defendant for the benefit of the plaintiff and further that, in consequence of the moneys expended by the plaintiff on the improvements to the property, it is equitable that there should be a charge upon the property protecting the entitlement of the plaintiff to those moneys. 9 The cross-claim is in the form of a pleading. The relief sought therein is (1) contribution or indemnity in respect to the costs of the plaintiff; (2) further, and in the alternative, damages, and (3) costs. 10 Essentially, it is the assertion of the defendant against the cross-defendants that the cross-defendants in acting as solicitors for her acted either negligently or in breach of the terms of their retainer in such a way that any relief which might be granted to the plaintiff against the defendant should ultimately be borne by the cross-defendants. That is, as the cross claim itself recognises, that if the plaintiff be successful against the defendant then (so it is asserted by the cross-claim) the defendant herself should not have to bear the financial consequences of the plaintiff's success, but that those consequences should be borne by the cross-defendants. 11 In the cross-claim it is alleged on behalf of the defendant that the solicitors firstly advised and induced the defendant to execute a mortgage and two variations of the mortgage and secondly failed properly to advise the defendant as to the nature and effect of those documents. The consequences or the potential consequences of this alleged failure on the part of the cross-defendants are set forth in paragraph 15 of the cross claim. That paragraph is in the following terms: In the event that the Court finds that by reason of the cross-claimant having executed a mortgage, first variation and second variation, the cross-claimant has created or otherwise granted an interest in the property in favour of the plaintiff, the cross-claimant is denied the benefit or the opportunity to submit that she did not create and/or grant or did not intend to create and/or grant an interest in the property in favour of the plaintiff. 12 In substance the cross-claimant by that paragraph alleges that in consequence of the conduct of the cross-defendants she will suffer loss, that loss being that the plaintiff will succeed against the defendant. Paragraph 16 of the cross-claim is in the following terms: In the premises the cross-claimant claims as against the cross-defendants and each of them on the basis that they are jointly and severally liable for such damages as the Court deems fit and appropriate in the event that the Court finds that the cross-claimant granted an interest in the property to the plaintiff by reason of her having executed the mortgage, the first variation and the second variation. 13 The cross-defendants submit that the cross-claim discloses no cause of action against them. The principles relating to an application such as the present to strike out a pleading are well recognised. It is not necessary for me to repeat those principles here. Suffice it to say that it is not for the Court on a summary application such as the present to deprive the cross-claimant/defendant of her entitlement to have her claim heard at a final hearing of the proceedings if she has any arguable case. It is not necessary that the Court at this stage be satisfied that the defendant will necessarily succeed on her cross-claim. It is required only that the Court be satisfied that the cross-claim is not doomed to failure. If, however, the Court is satisfied that there is no arguable case for the defendant upon the cross-claim and that the cause of action which she raises by that cross-claim is doomed to failure, then the cross-defendants are entitled to have the cross- claim struck out at this stage of the proceedings. 14 The summons which was filed on 4 November 1997 seeks, so it is submitted on behalf of the cross-defendants, no relief based upon the existence of the mortgage or the variations of the mortgage. The defendant, however, disputes that fact. More importantly the statement of claim filed on 4 June 1998 clearly reveals that the cause of action which the plaintiff asserts by that pleading does not claim any interest under the terms of the mortgage and its variations. 15 The references in that pleading to the mortgage and its variations are as particulars supporting (presumably, in an evidentiary fashion) the assertions by the plaintiff concerning the advances made by the plaintiff to the defendant. 16 It does not seem to me, despite the submissions made in that regard on behalf of the defendant, that the basis of the claim of the plaintiff that the defendant holds the subject property on trust --- be it on a resulting trust or on a constructive trust --- for the plaintiff is grounded in any way upon the fact that the defendant executed the mortgage and the two variations of the mortgage. Neither does it seem to me that the relief which is sought by the plaintiff against the defendant concerning the expenditure upon improvements giving rise to what is described as an equitable charge over the property can be regarded as being grounded in any way upon the mortgage or the variations of mortgage. 17 It must be recognised that the mortgage was discharged on 2 September 1993, that being long before the institution of the present proceedings. The fact of the discharge removes the legal security which under the mortgage existed over the house property. It does not deprive the parties of the personal rights which may have arisen as a result of the mortgage documents themselves. (In this regard see the decision of Kearney J in Grundy v. Ley (1984) 2 NSWLR 467 at 473.) 18 It may be (as has been submitted on behalf of the defendant) that after the discharge of the mortgage there still remained rights between the plaintiff and the defendant giving rise to actions in personam, actions on personal covenants and personal equities. None of these actions or rights in themselves create any interest in the house property. 19 It is basic and fundamental to the claim of the plaintiff that it is the conduct of the plaintiff in advancing the moneys used to purchase the house and to effect the improvements which has given rise to the plaintiff's claim that the defendant holds the property on trust for the plaintiff. The existence of the mortgage and its variations do not constitute any facts which give rise to the claim of the plaintiff asserted in the statement of claim or to the relief to which by that pleading the plaintiff says she is entitled. 20 Since the cause of action alleged by the defendant against the cross-defendants by the cross-claim is firstly a cause of action seeking that she be indemnified by the cross-defendants in respect of any relief which might be awarded to the plaintiff against the defendant or that there be contributions by the cross-defendants to meet any such relief, it will be appreciated that the cross-claimant/defendant cannot succeed against the cross-defendants unless she is able to establish that by reason of the conduct of the cross-defendants she is liable to the plaintiff. But the only role of the cross-defendants in the transactions which occurred and in the relationship between the plaintiff and the defendant concerning this house property was in respect to the mortgage and the two variations of mortgage. Unless the claim of the plaintiff against the defendant is one which is somehow based upon those documents, I do not see how --- irrespective of whether or not the cross-defendants advised the defendant concerning those documents or improperly or inadequately or negligently advised her --- any cause of action can exist at the instance of the defendant against the cross-defendants. 21 At most, the execution of the mortgage documents could only be regarded as evidence of the intention of the defendant. But her intentions are not relevant when it comes to the question of whether there was a resulting trust or whether the presumption of advancement (which is one of the defences raised by the defendant to the plaintiff's claim) can be rebutted. What is relevant here is the intention of the party supplying the purchase money, that is the plaintiff, not the intention of the party receiving the purchase money and receiving the benefit of the improvements. 22 So far as the presumption of advancement is concerned and the suggestion by the plaintiff that that presumption should be rebutted, then even if the conduct of the defendant in executing the mortgage or its variation is relevant in rebutting that presumption (and it is submitted on behalf of the cross-defendants that it is not relevant), I am not satisfied that the execution of those documents could in any way rebut that presumption. The execution of the mortgage and its variations is entirely consistent with, and indeed supports, the suggestion that the legal title was intended to vest in the defendant, and that is what was done. 23 Further, the existence of the mortgage and the variations cannot assist the defendant in meeting the claim of the plaintiff that there came into existence a resulting trust in favour of the plaintiff. The mortgage and its variations evidence loans. It is clear beyond doubt that where moneys are advanced by way of loan no resulting trust arises. In meeting the plaintiff's claim concerning the resulting trust the defendant can only be assisted by the existence of the mortgage. To that extent she cannot complain of any losses resulting to her by the mortgage. By reason of the mortgage and its variations she has evidence which will assist in rebutting the plaintiff's claim. 24 But in all the circumstances it seems to me quite clear from the form of the cross-claim that it does not disclose any reasonable cause of action against the defendant solicitors. No conduct of the defendant's solicitors, be it by way of advice given negligently or incompetently or be it by way of absence of advice, was such that is in any way relevant to the claim of the plaintiff against the defendant. It is only if the plaintiff succeeds against the defendant upon a claim grounded in some way or supported in some way by the existence of the mortgage and its variations that the defendant is then entitled to seek from the solicitor indemnity or contribution. 25 Since I am satisfied that the plaintiff's claim against the defendant is not in any way grounded upon rights arising out of the mortgage or its variations, it follows in consequence that the defendant does not have a sustainable cause of action against the cross-defendants. In those circumstances therefore I propose to order that the cross-claim be struck out. 26 It should be recorded that at the commencement of today's hearing, Mr Green of Counsel appeared for the plaintiff. He stated that the plaintiff supported the present application by the cross-defendants and sought to be excused. Accordingly he was excused from further attendance at today's hearing. 27 I make the following orders: (1) I order that the cross-claim against the cross-defendants be struck out. (2) I order that the cross-claimant pay the costs of the cross-defendants of the notice of motion filed on 3 February 1999 and of the proceedings against them by way of cross-claim. (3) I note that in regard to order (2) that the appearance before me on 19 February 1999 was for the purpose of fixing today's hearing date.