Allen v Ryan
[2011] VSC 118
•4 April 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 10939 of 2009
| ROSEMARY ALLEN | Plaintiff |
| v | |
| DAMIAN GERARD RYAN | Defendant |
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JUDGE: | BEACH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29-30 March 2011 | |
DATE OF JUDGMENT: | 4 April 2011 | |
CASE MAY BE CITED AS: | Allen v Ryan | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 118 | |
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CONTRACT – Money paid pursuant to an agreement – Whether agreement a loan agreement or an investment agreement.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E.F. Wheelahan | Trumble Szanto Lawyers |
| For the Defendant | Mr D.G. Robertson | Moores Legal |
HIS HONOUR:
Introduction
On 17 December 2007, Rosemary Allen, the plaintiff, transferred $400,000 from an account held by her at the Westpac Bank into a Macquarie cash management trust account held by Damian Gerard Ryan, the defendant. On 20 February 2008, the plaintiff transferred a further sum of $90,000 from her Westpac account to the defendant’s Macquarie cash management trust account. The plaintiff contends that she lent these two sums of money to the defendant pursuant to loan agreements.
The defendant denies the amounts deposited in his account were loans. He contends that the plaintiff agreed to deposit the sums she deposited for the purpose of investing. According to the defendant, the plaintiff was to receive any profit on money deposited by her, but equally had to bear any losses. The defendant then contends that, not only were no profits made, “substantial losses” were suffered. Whatever be the position, it would appear that no money has ever been returned by the defendant to the plaintiff.
In this proceeding, the plaintiff seeks the repayment of the sums of $400,000 and $90,000, together with interest and costs. The defendant disputes the plaintiff’s entitlement to the relief she claims, contending that the investments made by him of the plaintiff’s money were lost.
The parties
The defendant is by profession a dentist, although he is not practising at the moment. At present, he is attempting to find premises from which he wishes to run a wellness centre. From 2002 onwards, the defendant traded extensively in put and call options.
The plaintiff is a mother of three children, whose previous occupation (18 years ago) was that of a medical secretary. She completed her schooling to the end of Year 11.
The plaintiff and the defendant first met in October 2007. At that time, the plaintiff had recently reached a financial settlement with her husband. The defendant was divorced and going through a settlement with his ex-wife. The plaintiff and the defendant commenced a relationship in approximately November 2007. The plaintiff described the relationship in the following terms:
“We hit it off, he was charming and charismatic. He said everything – said just the right things at the time. I was fairly emotional, and he just seemed like one in a million.”
The relationship between the parties continued through December 2007 and 2008, and into 2009. However, the parties did not live together. The plaintiff described their living arrangements in the following terms:
“He was working part-time, Monday, Tuesday as a dentist, he would stay in Carlton where his practice was, and we would get together on weekends either at his place at Sorrento or my place at Portsea, but pretty much his place in Sorrento.”
During the week, the plaintiff lived at her home in Toorak with her three children.
It is not necessary to set out all of the financial circumstances of the parties. So far as the plaintiff is concerned, it is sufficient to say that as at mid December 2007, she had approximately $2 million in a Westpac Max-I direct account, a property in Portsea and a half share of her home in Toorak. So far as the defendant is concerned, it is sufficient to say that he had properties which the parties referred to as “Sorrento”, “High Street” and “Carlton”. Additionally, financial records tendered at trial disclose that the defendant engaged in significant trading of put and call options, using a Macquarie cash management trust account to fund shortages caused by trading or margin calls, and into which any excess of funds was paid. The Macquarie cash management trust account statements covering July 2007 to March 2008 showed that the balance ranged from zero up to slightly in excess of $500,000 during this period.
The critical events in this case occurred on 17 December 2007 and 20 February 2008. The only witnesses to give viva voce evidence in this proceeding were the plaintiff and the defendant. I turn now to consider the competing versions of what occurred during this period.
17 December 2007 – 20 February 2008: Plaintiff’s version
The plaintiff gave evidence that on 17 December 2007 she was driving the defendant to the airport. The plaintiff said the defendant was going to Chiang Mai in Thailand to play cricket. On the way to the airport, the defendant received a telephone call. The plaintiff described the defendant as being quite angry and short with the person on the other end of the telephone. She took it to be the defendant’s broker, because, after he hung up, he made a disparaging comment about brokers.
The plaintiff said that on arrival at the airport, they went to the Qantas Club. Whilst the plaintiff initially said that it was the international Qantas Club, she later agreed it must have been the domestic Qantas Club.[1] In the Qantas lounge, the defendant went to a computer. The plaintiff said that he then came back and said, “I don’t suppose you could lend me some money?”. The plaintiff asked how much, and the defendant said, “Half a million”, before then saying, “No, no, make it 400”. The plaintiff described her reaction in the following terms:
“I was a little bit taken aback, but at the same time was in love with him and he explained that he had some shares, he mentioned Macquarie Bank, he mentioned that if he put money into this it would fix this and none of it made any sense to me.”
[1]When it was pointed out to her that the international Qantas Club is beyond immigration and passport control.
The plaintiff gave evidence that the defendant said that if she lent him the money, it would solve some big worries for him. He then said, “Ten days, two weeks tops”, “Short term loan, ten days, two weeks, tops”.
The plaintiff gave evidence that she agreed to lend the money. As to why she agreed to lend the defendant the money, she said, “Because I was helping him out. I was stupid, I was in love with him and it was going to fix some problems, and I figured for a short period of time it will get him out of a sticky situation …”.
The defendant wrote the details of his bank account on an envelope.[2] The plaintiff and the defendant agreed to meet in Brisbane upon the defendant’s return from overseas. Having agreed to deposit the sum of $400,000 into the defendant’s account, the plaintiff said that the defendant asked her specifically to “do it today”.
[2]Exhibit “A”.
Subsequently, the plaintiff left the airport. She drove to her local shopping centre where her bank was and transferred $400,000 from her Westpac Max-I account to the defendant’s Macquarie cash management trust account.[3] Later, when the plaintiff arrived home, she said she spoke to the defendant and told him she had deposited the money. The plaintiff gave evidence that the defendant then said, “Babe, you’re fantastic, you’re a good sport, thanks a lot”.
[3]The local telegraphic transfer request form (CB14) times this transaction at 2.28pm on 17 December 2007.
The plaintiff then gave evidence about her contact with the defendant over the next few days, flying to Brisbane, meeting the defendant and returning to Melbourne. She was asked and answered the following question:
“When did you first raise the money that you had lent to him?---Look, it was brought up on odd occasions, ‘How’s it going?’. The first sort of serious conversation we had about it, and I was sort of getting a bit worried, was later in January … at my place in Portsea … . I asked him, ‘What was happening with the money’, I was getting a bit anxious about it and he in his charismatic charming way said, ‘Babe, don’t worry, I will get it back to you, I’ve just had a bit of a hiccup’ …”.
On 20 February 2008, the plaintiff met the defendant at her place. The plaintiff said the defendant was in a bad mood. They went to have coffee at a place that was a few doors down from the plaintiff’s bank in Toorak Village. The plaintiff gave evidence that the defendant “asked me, again as a matter of urgency if I could loan him $100,000 extra”. She said “There was desperation in his voice and again it was robbing Peter to pay Paul, and he had to do this and if he didn’t he was going to lose everything”. The plaintiff said:
“I didn’t have $100,000 which was not true, I said I had 90 and he said, ‘That’s OK I’ve got $10,000 on my credit card to make the 100 up’.”
As to the plaintiff receiving her money back, the plaintiff gave evidence that the defendant said that if she lent him this extra money, she would get all of her money back within a matter of days, if not a week or two at the most. Again, the plaintiff said, she believed him.
The plaintiff and the defendant then went from the coffee shop to the bank. The plaintiff then gave this evidence:[4]
“Whilst we were in the bank I made gestures about interest, there was a big sign for my particular account as to the interest.
When you say your particular account, do you mean the account – - -?---A Max-I account which I had my cash in, which you earn more interest on the Maxi-I account, and there was a big sign, interest sign of which I touched on and said to Damian, ‘I will need interest and that’s what I’m getting so at the very least that’s what I want’, and there was never - - -
What did he say?---He said, ‘Yeah, babe, no problem’. There was never a hesitant voice from him as to – he’s very confident.
Had you discussed interest prior to pointing to the sign?---Yes.
Or was that the first time?---In the bank, yes.
You first discussed interest in the bank?---Mmm yes. I’m a bit vague. I know I was getting to the stage where I hadn’t made anything very clear with him as far as interest.”
[4]T15.10 - .29.
Whilst at the bank on 20 February 2008, the plaintiff transferred $90,000 from her Maxi-I account to the defendant’s Macquarie cash management trust account.
17 December 2007 – 20 February 2008: Defendant’s version
The defendant agreed that he and the plaintiff went to the airport on 17 December 2007. He said he was going to Singapore for his brother’s 50th birthday. He said he did not specifically remember any conversation with his broker on the way to the airport, but that it was “quite possible”. He said that he and the plaintiff had a conversation at the airport. He described the conversation in the following terms:[5]
“We were at the airport and I had done a trade that day in a Macquarie position, and the rumour if you like going around is the Macquarie shares had pulled back and there was a very good chance they were going to have a large rise over the Christmas period which is quite typical when the Americans come back after the holiday period usually in a better mood, and a lot of the share market fundamentals are based on emotion if you like rather than on cold hard facts, and I told her, and I thought she might be interested in it and I knew she had cash lying around because I knew she was interested in buying a sports car with the money.”
[5]T64.2 - .14.
The defendant agreed that in the Qantas Club he checked the computers to see where the market was. He then said that he suggested to the plaintiff that if she was interested in investing in the market, he would be happy to do that on her behalf. He said he then wrote down his account details on the envelope to which the plaintiff had already referred. The defendant was asked and answered the following questions:
“While you were in the Qantas Club, did Ms Allen say anything to you as to whether she would or would not put any money in your account for any purpose?---There was no surety of that, she didn’t say she was going to put it in or not put it in.
You now know that she did put money in on that day?---Yes.
How did you find out that she had done that?---First of all I got a text message when I got off the plane at the other end.
Where’s the other end?---In Singapore and a text message saying, ‘I’ve put the money into your account’.
What was your reaction to that?---I was surprised because having known her for such a short period of time, I didn’t really think that she would do it.”[6]
[6]T66.18 - .31.
The defendant denied that he asked the plaintiff for a loan, saying he had no reason to ask for a loan, nor any history of ever asking anyone for a loan, and he “certainly wouldn’t have asked anybody [he] had known for such a short period of time for such a substantial amount of money”.[7]
[7]T67.11 - .16.
Later, the defendant was asked and answered the following questions:[8]
“Were you at any risk at that time of anything in the nature of a margin call?
---No.Were you at any risk of losing the lot if the $400,000 or anything like it was not paid in?---No, I had that covered.
Did you need a loan of any kind at that time?---No, I was very solvent then.
Did anyone from Macquarie ask you for any payment into the account at that time?---No, not at all.”
[8]T69.20 - .28.
The defendant then gave evidence that he used the plaintiff’s money to do a trade on 3 January 2008 and that on the following day a debit of $52,969.49 was taken out of the cash management trust account.
The defendant then gave evidence of amounts coming in and out of the cash management trust account. He said there were margins going out because the share price would have been fluctuating down at that point, and amounts coming in when the share price was fluctuating up during January.[9] He described the market in January and February of 2008 as “started up all right and started to deteriorate in the middle of January then stabilised a bit, and then February was a bad month, the share market started to go down quite suddenly and quite unexpectedly as this thing with the global financial crisis started to affect Australia”.[10]
[9]T70.
[10]T71.6 - .11.
The defendant gave evidence that whilst he did not specifically discuss the $400,000 in January 2008, the plaintiff knew (he said) that he had done some trading for her and he was “matching the same trades” himself. He also said that he thought that the plaintiff was aware that the share market had started to deteriorate.
As to February 2008, the defendant said that towards the middle of February, the share market was getting into “dire areas” or “unchartered waters”. He said that on 20 February he received a telephone call from his broker. It was a margin call. His broker said he needed approximately $90,000 to cover his positions. Later that day, the defendant said he had a conversation with the plaintiff in the following terms:[11]
“I said that the market had moved down and we were at risk of our positions being closed out unless we could put money in to cover that margin, so if you’ve got the margin it’s best if we cover it, so we can have more time to minimise loss if you like or make a profit, continue to stay in the market.”
[11]T74.4 - .9.
It was the defendant’s evidence that after this conversation (rather than any conversation about a loan[12]), the plaintiff transferred $90,000 into his cash management trust account.
[12]Which loan was, in any event, denied.
The events after 20 February 2008
The defendant gave evidence that he continued trading “trying to improve the situation”. He said “It went from bad to worse”.[13] He said the market kept falling right through to March 2009, and eventually all moneys (his and the plaintiff’s) were lost.[14]
[13]T74.
[14]In fact, the defendant gave evidence that all funds were lost by November 2008.
The plaintiff gave evidence of continuing to be concerned about the defendant’s failure to repay the moneys she said she had lent him. Ultimately, this culminated in the plaintiff asking the defendant to write a letter acknowledging his debt to her. The plaintiff said:[15]
“I was concerned, I had nothing in writing and that’s why I – I said to him, I need something in black and white. If something happened to him, I had nothing to prove.”
[15]T20.10 - .13.
In September 2008, the defendant wrote a letter[16] in the following terms:
“Dear Rosie
I promise to pay you all the money I owe you as soon as I can i.e. once I sell Sorrento High Street or Carlton property.
You are my first creditor + I am sorry it has taken so long. I guarantee you will get your money back - $500,000 even if it is from my estate (if I die!!)
Love
Damian Ryan”
[16]Exhibit “C”.
The defendant gave evidence that at the time he wrote this letter he had plans to marry the plaintiff. The defendant said, “I felt morally in a bad situation for having to invest on my behalf, at my behest if you like, but I was in love with her, I thought we were going to stay together forever, if you like, and I wrote that to appease her, really. She had been asking me for a letter for several months”.[17] He said he broke up with the plaintiff in either late February or early March 2009.[18] In cross-examination, the defendant denied that at the time he wrote this letter, he owed the plaintiff $500,000.[19] He was asked and answered the following questions:
“So what you wrote here was inaccurate?---Yes.
Were you conscious that it was inaccurate?---Yes, I wrote it as a type of love letter, if you like.”
[17]T76.4 - .9.
[18]T76.
[19]T99.
The defendant (consistently with his case that there was no loan and that the plaintiff had made investments) never repaid the sum of $490,000, nor any part thereof. Further, and again consistently with his case that all moneys were lost, no dividend or profit or any amount was ever paid to the plaintiff. Ultimately, the plaintiff instructed solicitors, a letter of demand was written, and this proceeding was commenced on 23 December 2009.
Subsequently, the parties met in March 2010. The plaintiff gave evidence that she arranged the meeting. She said that she arranged the meeting because she “wanted to see his face”.[20] She gave evidence about the meeting as follows:[21]
“I actually wanted to make eye contact with this man that supposedly cared about me that could put me through hell, because that’s what he’s done and my children and the grief and I couldn’t believe it. So I arranged the meeting, we met at the Botanical and he rode his bike there. He was – he couldn’t care less. I was very teary and emotional … . He told me that he was going to take his chances with the judge and hopes that the judge turns around and says, ‘Well, you’re both stupid, split it half and half’ … . I said, ‘You’re going to perjure yourself in court in front of a judge’ and he said, ‘Yes, he would take his chances’, and I was gobsmacked, because even to that point, up until that point I actually thought he would pay me …”.
[20]T25.24.
[21]T25.24 – T26.9.
Initially, the defendant objected to evidence of this meeting being given on the basis that it was a without prejudice settlement discussion. However, during final addresses, both parties agreed that evidence of what was said at the meeting (apart from any offer to resolve the proceeding) could be given.[22]
[22]T134.17 – T135.12; T154.5 - .9.
The defendant’s description of the March 2010 meeting was in the following terms:[23]
“Well, the purpose of meeting, I was wanting to discuss settling with her and having been through the experience with my divorce, I made a point of … saying it was a without prejudice meeting, that we have an informal discussion, what we are talking about wouldn’t be used in a court of law … .
…
I said to Rosie I was very sorry for the situation I had gotten us both into and I thought my intention was always that we would both make some money out of the whole thing and we had reached a point where the positions had been closed and she knew there was significant losses involved … .”
[23]T79.31 – T80.23.
The defendant denied at any time saying that he proposed to perjure himself in court.[24] After the meeting, the plaintiff went home. She rang her solicitor and she wrote a note of her conversation.[25] The note makes no reference to the defendant admitting that he proposed to commit perjury. In final submissions, the defendant made much of that point.[26] It was said that this evidence of the plaintiff “casts enormous doubt … on the credibility of the plaintiff generally”. Indeed, it was submitted that this was a “strong reason” for not accepting the plaintiff as a credible witness.
[24]T80.28.
[25]Exhibit “D”.
[26]T133.23 – T134.16.
The defendant’s use of the plaintiff’s money
Immediately before the plaintiff transferred the sum of $400,000 into the defendant’s Macquarie cash management trust account on 17 December 2007, the balance in that account was $107,098.76. Between 30 November 2007 and 17 December 2007, the balance in that account had fluctuated from $67,313.15 up to $127,050.52. The balance in this account fluctuated as a result of trades made by the defendant from day to day. It also fluctuated as money was put into it from, or taken out of it by, the defendant’s Macquarie Equities Limited current account. The defendant was required to retain a balance in his Macquarie Equities current account sufficient to give security for and support the positions he took when trading put and call options. As the market fluctuated, more or less security would be required. After each day’s trading, any excess in the Macquarie Equities current account would be transferred back to the cash management trust account; and any shortfall would be made up by a payment (call) from the same account.
After the plaintiff transferred $400,000 to the defendant’s cash management trust account, and on the same day, $15,672.55 was taken out of the account for trades done on the previous working day (14 December). Subsequently, further amounts of $76,105.93 and $25,864.38 were deducted as calls from this account on 18 and 19 December 2007 respectively. These deductions brought the balance in the cash management trust account down to $389,455.90 as at 19 December 2007.
The defendant gave evidence that he did not do any trading on behalf of the plaintiff until 3 January 2008. Immediately one sees that, at least for part of December 2007, the defendant used part of the plaintiff’s money as security for trading done solely for his own benefit.
On 3 January 2008, the defendant performed some trades which he said were for the benefit of the plaintiff. On the following day (4 January), $52,969.49 was deducted from the defendant’s cash management trust account in respect of these trades. The defendant’s evidence was that, subsequent to 3 January 2008, trading continued. However, by February 2008 (and beyond), trades were being made in an attempt to stay in the market and/or rescue positions previously taken. In making these trades, the defendant used the plaintiff’s money. An examination of the accounts discloses that the plaintiff’s money was used as security (and ultimately lost) supporting positions taken by the defendant for the plaintiff (if the defendant’s evidence is accepted), and positions taken by the defendant (some of which were taken by the defendant before 17 December 2007). That is, whilst there might have been some using of part of the plaintiff’s money for her benefit, the defendant also used (at least) part of the plaintiff’s money solely for his own benefit. It was no answer for the defendant to say that, had his trades been successful, it would have benefited both of them and they both would have made money.
Before turning to the question of whether the plaintiff’s transfers of $400,000 and $90,000 were loans or investments, it is necessary to say something about the plaintiff and the defendant as witnesses.
The plaintiff and defendant as witnesses
Generally speaking, I formed a favourable impression of the plaintiff as a witness. In my view, she was a witness who attempted to give as accurate an account of matters as she was able to give.
In final addresses, it was submitted on behalf of the defendant that the plaintiff’s evidence displayed a combination of “an unsatisfactory kind of precision in some areas and very great vagueness in other areas”. I reject that submission. There were certainly areas where the plaintiff’s evidence was a little vague, and there were certainly matters about which she spoke with some precision. However, none of that was, in my view, surprising. In any case where a witness is required to recollect events going back over three years, there are likely to be parts that are recollected in greater detail than other parts. Some of this will depend upon whether or not there is a reason for a witness to have a specific recollection. For example, any so-called “vagueness” in the plaintiff’s recollection of matters in December 2007 or February 2008 is explained by the fact that the parties were not in dispute at that time, and there was no reason to anticipate any dispute.
The defendant also sought to make something of the plaintiff’s errors in recollection of peripheral matters. First, the plaintiff was criticised for giving evidence that the conversation in the Qantas lounge on 17 December 2007 was in the international lounge, rather than the domestic lounge. Secondly, the plaintiff was criticised for giving evidence that the defendant was travelling to Chiang Mai, when he was in fact travelling to Singapore. Thirdly, the plaintiff was criticised for giving evidence that the purpose of the defendant’s trip was to play cricket, when it was in fact to celebrate the defendant’s brother’s 50th birthday. Fourthly, the plaintiff was criticised for saying that her relationship with the defendant started on Derby Day, 2007 at the Botanical Hotel, when it was in fact Oaks Day.
It can be accepted that the plaintiff got these matters wrong. However, the giving of such incorrect detail does not, in my view, make the plaintiff an unreliable witness on central issues.
I was less impressed with the defendant as a witness. At times, his demeanour in the witness box did not make his evidence easy to believe. At no time did he give a satisfactory explanation for treating at least part of the plaintiff’s money as his own and using it to keep himself in the market in respect of positions taken by him, and in which the plaintiff had no interest. The defendant impressed me as a person who was prepared to say whatever he thought he could get away with saying.[27] I was particularly unimpressed by the defendant’s evidence as to whether he included amongst the capital losses claimed in his tax return for 2008 the loss of the $490,000. Whilst the defendant initially said that he did not think that he made any attempt to separate out that loss in his tax return, he later gave the following evidence:[28]
“Does that mean in your tax return $490,000 lost by the plaintiff was in fact claimed as a capital loss by you?---No, I don’t think so. That would have been her accountants.”
Whilst the question of whether the defendant would produce his tax return was raised in the defendant’s case, ultimately no tax return was produced and no further evidence was given as to its contents.[29]
[27]For example, see T78 - T79, T89.21 - .24, T90.11 - .15, T91.6 - .19 and T92.19 - .22.
[28]P93.
[29]Cf Jones v Dunkel (1959) 101 CLR 298; O’Donnell v Reichard [1976] 916, 929 and Transport Industries Insurance Co Limited v Longmuir [1997] 1 VR 125.
It is trite to say that giving evidence in court can be a stressful experience. Due allowance needs to be given to this fact in relation to both parties. To some extent, the stressful nature of the experience might explain the unfavourable impression the defendant left me with. On the other hand, there were times when he appeared quite relaxed and at ease in the witness box. Ultimately, I was left with an uneasy feeling about the defendant’s evidence. It seemed either that he was being untruthful in his evidence or was a person who was not particularly troubled either by writing a false letter[30] and/or making a false claim in his tax return (if his evidence as to the plaintiff making investments is to be accepted, but yet he claimed the $490,000 as a capital loss in his tax return – if that is what he did, as appears to be suggested by his initial answers to questions on that topic[31]).
[30]Exhibit “C” (see paragraph 32 above).
[31]Although, ultimately the resolution of this case does not require me to make a concluded finding in relation to content of the plaintiff’s tax return.
Were the payments loans or investments?
It was submitted on behalf of the defendant that the probabilities demonstrated that the plaintiff’s transfers were investments, rather than loans. First it was put that, contrary to the plaintiff’s evidence, the defendant was not short of funds on 17 December 2007, and had no need for an injection of $400,000. That statement may be literally true. However, without the injection of some funds in mid December 2007, the cash management trust account would have been in the red between 19 and 24 December 2007. In evidence, the defendant answered this issue by saying that it would not have been a problem as he would have had three days to put sufficient funds in the cash management trust account so as to maintain his positions. Indeed, at one stage in his evidence, the defendant cavilled with the proposition that he had “needed to utilise” any of the plaintiff’s money in December 2007 because the three day grace period had not expired.[32] However, it is to be noted that the balance of the cash management trust account was below $400,000 between 19 and 24 December.
[32]T89.21 - .24.
Secondly, it was put on behalf of the defendant that the defendant would not have entered into the trades that he entered into on 17 December 2007 (which resulted in the $76,105.93 transfer out of the cash management trust account on 18 December 2007) without having any assurance that $400,000 or any similar sum would be forthcoming from the plaintiff. There is a bootstraps aspect to this argument, as it involves accepting the defendant’s evidence that he did not know that the plaintiff would make a transfer until he received a text from her later in the day. However, the plaintiff’s evidence was that she in fact agreed to make the transfer when they were both in the Qantas lounge.
Thirdly, it was put that it would be most unlikely that a person would lend money without any real upside to someone they had only known for 2½ months. However, in the context of the relationship between the parties that existed as at 17 December 2007, I reject that submission. In my view, it is no more likely or unlikely that, in the circumstances of the relationship between the parties, the plaintiff might agree to a short term loan on the one hand, or to permit the defendant to invest moneys on her behalf on the other hand. Indeed, if anything, a short term loan seems to me to be slightly more likely than the so-called investment agreement.
Fourthly, it was put that the plaintiff’s own financial circumstances in December 2007 made an investment more likely than a loan (with or without bank interest). The argument was that as at mid December 2007, the plaintiff had a little over $2 million in her Max-I account. On 19 December 2007, the plaintiff transferred $600,000 into a term deposit, upon which she would earn more interest than would be earned in the Max-I account. It was then suggested that what the plaintiff was more probably doing (rather than lending money to the defendant) was splitting her money into investments of different risks (the lowest risk being the Max-I account, the medium risk being the term deposit and the higher risk being the investment in put and call options). The plaintiff denied any such investment strategy. I accept her denial. The argument was, at best, mere speculation. There was nothing to suggest that the plaintiff had ever, in the past (or at any other time), sought to split her assets in the way contended for by the defendant.
In addition to the criticisms of the plaintiff’s evidence referred to above, counsel for the defendant also criticised the plaintiff’s evidence that at one stage she said to the defendant (when asking about repayment), “It’s not a gift, it’s a loan”. It was said on behalf of the defendant that these were “not natural words when there’s no suggestion that my client ever contended that it was a gift”. I reject that submission. In my view, it is just as likely that a person who was continuously seeking repayment of a loan might, in frustration, say “It’s not a gift, it’s a loan”.
During the course of his final address, counsel for the defendant submitted that the letter of September 2008[33] could not change the arrangement that was actually entered into between the parties in December 2007 and February 2008. I agree. However, the plaintiff relies upon the letter as an admission that the arrangements entered into between the parties were loans, rather than investments. On its face, the letter constitutes such an admission. I have already set out the defendant’s explanations in relation to the letter (wrote it to appease her, a type of love letter et cetera). I did not find any of these explanations likely or persuasive. It was, at least, curious that at no time between the writing of the letter and the meeting in March 2010, did the defendant tell the plaintiff that he did not consider he owed her any money. Specifically, in cross-examination, the defendant was asked and answered the following question:[34]
“Can you come back to the question and tell me when you first told the plaintiff that you did not consider you owed her the money?---Probably at the café meeting in March [2010].”
[33]Exhibit “C”.
[34]T100.19 - .22.
As I have said above,[35] a further criticism of the plaintiff’s evidence relates to the failure to record in her note of the café conversation in March 2010, the defendant’s admission that he was prepared to commit perjury. There is no doubt that this is a significant omission. In my view, the probabilities are that the defendant did not in terms admit that he was prepared to commit perjury. However, it is to be remembered that the suggestion that he was going to commit perjury was put to him by the plaintiff (according to her) and that he is alleged to have responded with words to the effect, ”Yes, I will take my chances”. Further, the note (which contains in excess of 30 lines of handwriting) largely records what the defendant said (only two lines are devoted to what the plaintiff said). Additionally, the note records the defendant as saying, “He is going to take his chances with a judge …” and “He hopes the judge says we are both stupid and splits the difference”. In substance, the note records statements by the defendant as to how he would defend this proceeding, which statements disclosed he was going to give evidence which the plaintiff knew the defendant knew would be false. A fair characterisation of the note is that it recorded the defendant’s intention to give evidence which he knew was false. In such circumstances, I am not prepared to criticise the plaintiff for giving evidence that the defendant said he would take his chances in answer to the plaintiff’s suggestion that he was going to perjure himself – even though the plaintiff’s allegation as to perjury was not recorded in the note.
[35]Paragraph 38.
So far as the $90,000 transfer is concerned, it was put on behalf of the defendant that the defendant’s version of this transaction was more probable than the plaintiff’s version. Indeed, it was submitted that the plaintiff’s version was “inherently improbable”. Specifically, the defendant did not need $100,000 and was unlikely to have said that $90,000 would be all right – with him putting $10,000 on his credit card. The relevant accounts do not show any $10,000 deposit into the cash management trust account. There were previous deposits by the defendant of $20,000 – but it was put that the $90,000 transfer by the plaintiff was more likely to have been as a result of the broker’s request for $90,000 to cover then current positions.
For the reasons I have already given, I largely accept the plaintiff’s evidence (save as to some specific items of detail, reference to which has already been made). The defendant needed $90,000. If the defendant had told the plaintiff that $90,000 was needed to cover positions (in circumstances where she had given him $400,000 only two months earlier), it is much more likely that the plaintiff would have asked a number of questions as to what had happened to her $400,000, what were the chances of getting it back, why was $90,000 needed and what were the chances of this sum being lost or more money being required. No such questions were asked, and there was no such discussion between the parties. In the circumstances, it seems far more probable to me that in fact the defendant asked for a loan. Whether he asked for $90,000 or $100,000 is not of great moment. Whilst it might be said that if he only asked for $90,000 then the plaintiff’s recollection of this conversation is unreliable, the fact remains that it is more likely than not that he asked for money as a loan, rather than as a payment to recoup what would have been regarded as a considerable reversal in such a short period of time.
The telling point in this case is that there was no discussion between the plaintiff and the defendant as to how profits and losses were to be calculated or assigned to each of them. As I have said above, the plaintiff’s money was intermixed with the defendant’s money and then used by the defendant for his own purposes (as well as for the plaintiff’s purposes, if the defendant’s evidence is to be accepted). There was never any accounting by the defendant to the plaintiff in relation to her so-called “investments”. The plaintiff was not involved in any of the decision-making process (either to take initial positions, or in relation to the later trades to try and rescue what were deteriorating positions). The defendant’s evidence that, in effect, there was no need to account to the plaintiff because everything was lost, and that (had there been a profit) their respective shares could have been easily calculated, was unconvincing.[36]
[36]T78.2 – T79.19, T88.14 – T89.6 and T92.19 - .22. See further, the defendant’s final address at T122.28-T124.8.
If the plaintiff had truly given her money to the defendant for investing on her behalf, then one would have expected there to have been some discussion as to how profits or losses were to be apportioned, and some accounting to the plaintiff of the decisions made by the defendant and the market changes that led to her money being lost. The absence of any such discussion or accounting makes it far more likely that what the plaintiff says is true – namely, the transfers were short term loans, and not investments.
In summary, and for the reasons given above, I accept the plaintiff’s evidence that the amounts of $400,000 and $90,000 were short term loans to the defendant. Put shortly, I believe the plaintiff. I do not believe the defendant.
Interest
There was no discussion of interest on 17 December 2007. However, according to the plaintiff, there was a discussion about interest on 20 February 2008. I have already set out the plaintiff’s account of this.[37] I accept the plaintiff’s evidence concerning the discussion of interest in the bank on 20 February 2008. However, the plaintiff’s evidence is vague as to the question of whether interest was to apply only in respect of the $90,000 loan, or also in respect of the earlier $400,000 loan. The issue may be somewhat academic as it would appear that the plaintiff made demands for repayment of the loans commencing in April or May 2008. In such circumstances, it may be that statutory interest pursuant to s 58 of the Supreme Court Act 1986 might calculate out at an amount greater than bank interest for the relevant periods prior to the institution of this proceeding. However, that said, it is necessary to determine the plaintiff’s claim for interest.
[37]Paragraph 19.
In the statement of claim, the plaintiff calculated interest on the sums of $400,000 and $90,000 at rates equivalent to that applicable to her Max-I account. The amount, calculated to 14 December 2009 (nine days before the issuing of the writ) is $52,319.02. There is no dispute about the arithmetic.[38] At trial, the plaintiff was content to limit her claim for contractual interest to the figure set out in the writ.[39]
[38]T1.13 - .23.
[39]T149.1 - .6.
The issue is whether the evidence discloses an agreement between the plaintiff and the defendant entered into on 20 February 2008 that, in consideration of the second loan ($90,000), the defendant would pay the plaintiff the equivalent of the interest she would have received on the $490,000, had that amount remained in her Max-I account. The plaintiff gave evidence that there were many discussions concerning interest and paying the money back. In cross-examination, she was asked and answered the following question:[40]
“I want to suggest to you, Ms Allen, at no time before the time of the letter of September 2008 and discussions about that, was there any discussion of interest between you?---There was lots and it was a kiss on the lips, ‘Don’t worry babe, I’ll pay all the money back, plus interest’, in his charming, charismatic way, ‘I’ve got visions’. It happened a number of times. He acknowledged the fact that he was going to pay me bank interest.”
[40]T46.25 – T47.2.
I accept this evidence. Further, consistently with this evidence, I infer that there was an agreement entered into between the parties on 20 February 2008, for the defendant to pay the plaintiff the interest she would have received in her Max-I account on the amounts that were outstanding from time to time from 17 December 2007.
Conclusion
It follows from what I have said above that the plaintiff is entitled to judgment against the defendant in the sum of $542,319.02. I will hear the parties on the question of statutory interest and costs.
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