The system hdd is just one partition, windows 7 installed and the whole partition encrypted by TrueCrypt. Should I remove that before making new partition and installing Ubuntu on it (dual boot) infact will i even be able to make new partition?
The TrueCrypt documentation mentions that you can decrypt system partitions and system drives and to do this select System > Permanently Decrypt System Partition/Drive. After having the partition decrypted, resize the HDD manually (with partition manager of your choice) or just allow Ubuntu installation to handle it (install alongside Ubuntu). You may then re-encrypt the windows partition.
These links should help: