Baxter v Baxter
[2010] VCC 203
•31 March 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-09-03502
| RAYMOND JOHN BAXTER | Firstnamed Plaintiff |
| and | |
| JUDITH RAE BAXTER | Secondnamed Plaintiff |
| v | |
| DARREN JAY BAXTER | Firstnamed Defendant |
| and | |
| SUSAN LINDY WHITE | Secondnamed Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 11, 12, and 15 March 2010 |
| DATE OF JUDGMENT: | 31 March 2010 |
| CASE MAY BE CITED AS: | Baxter & Anor v Baxter & Anor |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0203 |
REASONS FOR JUDGMENT
Catchwords: Contract - series of four loans allegedly made by plaintiff parents - whether plaintiffs established that first loan given by them personally to their son in amount claimed - whether second loan given by plaintiffs or related company to son and former daughter-in- law- whether former daughter-in-law was a party to the third and fourth loans
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. N. Pane | Vadarlis & Associates |
| For the Defendant | Ms. E. H. Ruddle | Herbert Geer |
| HER HONOUR: |
1 Mr and Mrs Baxter seek an amount of $31,746 from their son, Mr Darren Baxter, which they say was loaned to him to purchase a property at 55 Erica Avenue Glen Iris in January 1989 (the first loan). This is constituted by an amount advanced of $203,826 less a total amount of $172,080 they claim was repaid in various amounts of alleged repayments over the period 1990 to 2007.
2 They also seek an amount of $117,500 from both Mr Darren Baxter and his former wife, Ms Susan White, in respect of three further loans they claim were made to the couple as follows:
(a) an amount of $41,000 in 1995 (the second loan);
(b) an amount of $54,500 in 1999 (the third loan); and
(c) an amount of $22,000 in 2006 (the fourth loan).
3 A claim relating to a further loan of $1,170 in 1997 was abandoned at trial. The Baxters also abandoned their former claim that Ms White was jointly and severally liable with Mr Darren Baxter in relation to the first loan.
4 Despite being served with the writ, Mr Darren Baxter has never filed a notice of appearance or defence. He was called as a witness by his parents, and said that he was satisfied that the amounts said to be owing in the statement of claim are correct. He otherwise took no part in the proceeding.
5 Despite the fact that the Baxters would have been entitled to enter a default judgment, they had not elected to do so. Rather, Counsel for the Baxters asked the Court to determine Mr Darren Baxter’s liability “on the evidence.” This course was agreed to by Counsel for Ms White. Although the Baxters no longer directly sought the first loan from Ms White, it was still potentially relevant to her position as all of the repayments had been attributed to that first loan alone. I was also informed that Ms White and Mr Darren Baxter were currently involved in Family Court proceedings so that any finding about the first loan might somehow be relevant.
6 In any event, in the light of the approach of both Counsel, I will make a finding on each of the alleged loans on the basis of the evidence before me.
7 Ms White seeks to defend the claims made against her and says:
(a) although she now admits that the second loan was made (although she was not a party to the discussions relating to it) she denies it was made by the Baxters personally and says it was made by First Mount Cope Pty Ltd (Mount Cope) as trustee of the Baxter Family Trust;
(b) she was not a party to the third loan. She also claims that any advance was made by Kimdara (Investments) Pty Ltd, a related family company, and not the Baxters personally; and
(c) she had no knowledge of the fourth loan and was not a party to it.
8 Ms White further claims a defence based on the operation of s5(1)(a) of the Limitations of Actions Act 1958 in relation to the second and third loans.
9 Finally, Ms White has filed a Contribution Claim pursuant to rule 11.15(a) dated 8 October 2009 seeking an order that Mr Darren Baxter indemnify her in respect of any amount she is ordered to pay the Baxters.
10 Accordingly the issues are:
(a) whether the amounts alleged were advanced by the Baxters;
(b) what were the terms of any such advances;
(c) what repayments have been made and how they should be treated;
(d) whether the Baxters’ claims against Ms White are statute barred; and(e) whether Ms White is entitled to any contribution from Mr Darren Baxter in
the event she is found to be liable to the Baxters in any amount.
Background Facts[1]
[1] This background is generally derived from an Agreed Chronology filed by the parties, as well as from affidavits filed in the proceeding
Parties
11 In 1983, Mr Darren Baxter executed a contract to play football for the Footscray Football Club. He was 18 years old at the time and living with his parents and two younger sisters. He commenced playing with the Senior Team in 1984 while engaged in study at Monash University. His services to Footscray were contracted “via” Mount Cope.[2]
[2] Affidavit of Darren Jay Baxter of 26 October 2009 at para 4
12 He later completed a Bachelor of Economics and Law. He described himself as a “tax partner” at the National Australia Bank.
13 Mr Baxter is retired but had formerly been employed as a General Manager of Mazda, and, as Managing Director of Lease Plan Australia (later becoming a part time Board member). His services in these positions were contracted “via” Mount Cope. [3]
[3] Affidavit of Raymond John Baxter of 26 October 2009 at para 4; but cf Affidavit of Raymond John Baxter of 24 December 2009 at para 13
14 Mount Cope was the trustee of the Baxter Family Trust which was set up in 1980; the directors of Mount Cope were Mr Baxter, his wife and his children. [4]
[4] Affidavit of Raymond John Baxter of 24 December 2009 at para 3
15 As well as being the trustee of the Baxter Family Trust, Mount Cope also traded in its own right and engaged employees including Mr Darren Baxter. It had also acted as a trustee of the Vimvite Pty Ltd Employees Superannuation Fund.[5]
[5] Affidavit of Raymond John Baxter of 24 December 2009 at para 12
16 Mr Baxter claimed that the Baxter trust was wound up in June 2004 and has not traded or existed since that date.
17 The only documentation provided in relation to the operation of the trust was the tax return for 1995. This showed that, at least in the year ended 1994, as well as making distributions to beneficiaries (including Mr Darren Baxter), the trust made direct loans to various family members. Otherwise, the court was not provided with any financial records of the Baxter trust, nor any trust deed.
18 There were other related family entities referred to in the evidence, including Kimdara (Investments) Pty Ltd as indicated already. This company was incorporated on 18 February 1976. It was also said to be owned and controlled by Mr Baxter and his wife and operated as a travel agency[6] although no evidence was adduced about its structure. It was said to have been liquidated in February 2009.
[6] Affidavit of Raymond John Baxter of 24 December 2009 at para 15
19 Ms White was married to Mr Darren Baxter in 1991 until the couple divorced in 2009. She is a medical practitioner and said she had no knowledge of the family trust arrangements of the Baxters.
Loans
20 In January 1989 Mr Darren Baxter purchased a property at 55 Erica Avenue Glen Iris for $240,000 plus costs.
21 As indicated already, the Baxters claim that an amount of $203,826 was advanced to Darren Baxter to enable him to purchase this property (the first loan). The evidence of Mr Darren Baxter was that the loan would be interest free and would be paid back “as I went or when they needed the money if asked for.”[7] The evidence of Mr Baxter was to similar effect.[8]
[7] Affidavit of Darren Jay Baxter of 26 October 2009 at para 12
[8] Affidavit of Raymond John Baxter of 26 October 2009 at para 14
22 The Baxters rely on extracts from a handwritten ledger to substantiate this claim notwithstanding that Mr Baxter did not prepare this ledger until some time in 1990 when he felt it was necessary for him to record the information “in a more logical way” (emphasis added) than what he had with the initial part of Mr Darren Baxter’s loan.
23 Mr Baxter said that he used another summary book which had information about the purchase of the property to prepare the balance of the loan at the time which he recorded as $203,826.
24 Ms White later moved into Erica Avenue and the couple married in October 1991.
25 The Baxters allege that various repayments were made between 1990 and 1994.[9] They again rely on entries in the ledger for this claim.
[9] 1990:$6138;1991: $16,434; 1992: $15,344; 1993: $30,500; 1994: $40,864.
26 In 1995 the Baxters claim they advanced the sum of $41,000 (the second loan) to enable Ms White to purchase a share in the Olympic Park Sports Medicine Centre. Ms White was a fully qualified medical practitioner by this time.
27 As indicated already Ms White now accepts that this advance was made, although she says the conversations to enable it to occur took place between Mr Darren Baxter and his parents. She further says that the loan was made by Mount Cope.
28 The share in the centre was subsequently sold in March 2000. An amount of $48,252.60 is shown to be deposited in the couple’s bank account on 7 March 2000. Ms White claims that she understood the proceeds were to be returned to the Baxters. However the Baxters allege that, by this time the only further repayments were amounts of $4,300 in 1997 and $12,500 in 2000.
29 In 1999 Mr Darren Baxter and Ms White purchased a property at 4 Young Street Glen Iris at auction for $545,000. They later sold Erica Avenue for $380,000.
30 The Baxters allege that the deposit amount of $54,500 was advanced to fund the deposit on this purchase (the third loan). There is conflicting evidence as to Ms White’s knowledge of this alleged loan.
31 The Baxters allege a repayment of $14,000 in 2003 and a repayment of $10,000 in 2005.
32 Further, during 2006 Mr Darren Baxter and Ms White undertook building works at Young Street by building a pool and cabana. The Baxters allege that they loaned $22,000 to the couple to assist these works (the fourth loan). There is also conflicting evidence as to Ms White’s knowledge of this alleged loan.
33 The Baxters allege receiving further repayments in 2006 and 2007 of $2,000 and $20,000 respectively. Again primary reliance is placed on the ledger for these claims.
34 In April, 2008 Ms White and Mr Darren Baxter separated.
35 On 19 February 2009 solicitors for the Baxters forwarded a letter demanding repayment of $150,416 from both Mr Darren Baxter and Ms White which sum included an amount for the loan allegedly given in 1989.
36 On 13 June 2009 the couple divorced and Family Court proceedings were commenced in relation to both property and custody also in June 2009.
37 These proceedings commenced on 28 July 2009.
Witnesses
38 Mr Baxter and his son Mr Darren Baxter were called as was Ms White.
39 Despite the fact that Mr Baxter said he had had the same adviser/accountant, Mr Tim Kelly (now of WHK Horwath) since 1978, Mr Kelly was not called as a witness in the proceeding. Further, although Counsel indicated at the end of the first day that inquiries were being made as to the availability of Mr Kelly and he would like to reserve his position to call him, the plaintiffs’ case was closed at the commencement of the second day without further explanation.
Mr Baxter
40 Mr Baxter gave evidence by way of two affidavits of 26 October 2009 and 24 December 2009.
41 He was also called and presented as a competent businessman with a generally confident demeanour. Nevertheless, at times, his evidence lacked precision and he demonstrated a tendency to over simplify.
42 Thus he regularly described his companies as being run on a “loan funds basis” so that “our loans went into the companies, our money went into the companies and we operated on a loan fund basis with the company so we were able to use those funds for the benefit of our family”. Later he also said that “the whole operation of the companies was based on our loan funds.” (emphasis added)
43 However, this explanation failed to distinguish between advances to family members by way of loans (using the “loan funds”) as opposed to distributions of money to family members by Mount Cope as a trustee. More particularly, insofar as payments to Mr Darren Baxter were concerned, even on the limited evidence available to the court, it appeared that Mr Darren Baxter might have received payments in a number of different ways apart from the making of a direct loan by his parents sourced from company “loan funds.” Such options included:
(a) a direct loan from one of the company entities, particularly Mount Cope (various loans are recorded from Mount Cope to family members and other persons in the tax return of the Baxter Family trust of 1995);
(b) a distribution of funds by Mount Cope as trustee of the Baxter Family Trust (the 1995 tax return records distributions to DJ Baxter and other family members);
(c) the payment of some superannuation entitlement (as will be seen below, it appears that moneys from a superannuation fund were utilised to purchase the Erica Avenue property); and
(d) as an employee (given, as indicated above, Mr Darren Baxter was
engaged as an employee by Mount Cope).44 The lack of precision as to the basis on which funds were advanced to Mr Darren Baxter is exemplified in his father’s evidence as to the payment of the deposit for Erica Avenue. Thus Mr Baxter initially claimed that “we paid the deposit” which was “from Darren’s funds.” This was because “all of Darren’s funds went into the company. He was a contract to the company” which company was Mount Cope.
45 When queried whether this was because Mr Darren Baxter was entitled to seek a distribution of the money in Mount Cope, he claimed that the payments from his football “were totally his, his money” thus apparently ignoring the trustee corporate structure.
46 Mr Baxter also later sought to resile from his earlier position suggesting that the $24,000 deposit needed to be added to the funds he and his wife advanced and denying that Mr Darren Baxter earned the deposit funds through his football career at all.
47 There was also some divergence between evidence given in his affidavit and that given in oral evidence. For example:
(a) in his affidavit he suggested that he had conversations with Ms White about the second loan.[10] This conflicted with his oral evidence in chief wherein he could not recall any discussion with Ms White (although he later claimed to have such a recollection under cross-examination);
(b) he also said that he did not remember attending the auction of Young Street in his affidavit[11] but in oral evidence maintained that he went to the auction and believed he, Darren and Susan undertook some discussions. Nevertheless “who said what, no, I’m sorry, I can’t tell you. I don’t know.”
[10] Affidavit of Raymond John Baxter of 26 October, 2009 at paras 26, 27 & 28
[11] Affidavit of Raymond John Baxter of 26 October, 2009 at para 35
48 Such inconsistency in recollection may not be surprising given the effluxion of time in this case. Nevertheless, I am unable to be satisfied that I can generally rely on Mr Baxter’s evidence as to what amount or amounts were advanced and by what entity. In those circumstances, any objective evidence becomes significant.
Mr Darren Baxter
49 Mr Darren Baxter gave evidence by way of affidavit of 26 October 2009 and also orally.
50 He appeared to be motivated by considerable hostility towards his former wife and was at times argumentative. He was not generally forthcoming and appeared uncomfortable in the witness box.
51 Mr Darren Baxter was also prepared to give evidence that the amounts alleged in the statement of claim were owing without question or qualification. This despite the fact that, as will be seen below, there are considerable gaps in the evidence in terms of establishing what was advanced and by which entity. Even the Baxters themselves do not now pursue all of the amounts originally sought in the statement of claim.
52 Mr Darren Baxter also gave vague evidence that he had “discussions at times” with Ms White wherein he “sort of analysed” how much was to be repaid and when they were going to be making repayments. This claim was denied by Ms White and lacked plausibility. Thus, there was nothing produced to suggest any analysis was made by Mr Darren Baxter which claim was also inconsistent with the somewhat haphazard pattern of repayments claimed.
53 As in the case of Mr Baxter, there was also some divergence between Mr Darren Baxter’s oral evidence and his affidavit. For example, although there was nothing in his affidavit to suggest that Ms White spoke to his parents about the second loan, in oral evidence he attempted to suggest that Ms White spoke to his parents “at some [unspecified] family functions.”
54 Although some inconsistencies are inevitable in a case such as this, I have treated the evidence of Mr Darren Baxter with some caution and, again, have considered that evidence in the light of any objective material available.
Ms White
55 Ms White presented as a straightforward, measured witness who did her best to recall the events in question, but made appropriate concessions when she was unable to recall matters.
56 I also accept the submissions of her Counsel that she undertook genuine attempts to locate relevant information as demonstrated in the fact that she personally obtained documents from Elite Pools which, as will be seen below, ultimately assisted the Baxters.
57 Criticism was made of her evidence that she left most of the financial affairs to her husband whose background was in finance and economics. Further, that although she was aware that money was moving between the two families she was reassured that this was a tactical move to put money into family trusts. She said she was never told “a whole lot other than that was their family businesses.”
58 I do not accept these criticisms. Rather I accept that as the primary carer of three young children a person without financial qualifications might choose to leave the financial affairs to her spouse. This is made more probable given the relatively complex financial affairs of the Baxter family’s companies.
59 It is true that there were some annotations which Ms White admitted to making to the bank statements involving payments to builders involved in the works for the pool/cabana. However, I accept her evidence that although she generally did not take time with the financial statements she did note these amounts because that was something she actually knew about (the builder was her brother-in-law).
60 Overall I found Ms White to be an honest, forthcoming witness and am satisfied that I can generally rely on her evidence.
First Loan
Whether making of advance proved
61 The first issue to determine is whether an advance of $203,826 was made by the Baxters.
62 The ledger said to be prepared by Mr Baxter contained the notation “Summary 1990” and next to that an entry reading “Balance $203,826.”
63 In oral evidence Mr Baxter said that this figure comprised the purchase of the home, plus the costs, less the amount Mr Darren Baxter contributed. It was further said to include the payment of the Royal Bank loan which Mr Baxter claimed came out of his and Judy’s “loan funds.”
64 However, neither the ledger nor the oral evidence provided any breakdown as to how this summary “balance” of $203,826 is calculated.
65 The only other piece of documentary evidence relevant to this alleged advance was a letter from the Royal Bank dated 25 January 1989 in relation to the settlement of 55 Erica Avenue. The Royal Bank provided a loan of $80,000 subject to a mortgage which was later discharged.[12]
[12] An undated discharge of mortgage was produced.
66 The letter of 25 January confirmed that bank cheques were issued in favour of various entities (including the Commonwealth Bank which was a previous mortgagee) in relation to the property at 55 Erica Avenue in an amount of $227,211.99.
67 It further detailed drawings in an amount of $227,211.99 “from the following accounts” :
Savings bank Term Loan $80,000 First Mount Cope Pty Ltd Super Fund $36,552.45 DJ Baxter a/c 606040263 $3,089.67 DJ and JR Baxter a/c 705775176 $27,400.24 DJ Baxter a/c 606040307 $34,989.50 DJ & JR Baxter a/c 663040014 $45,180.09
68 It should be noted at the outset that, if the Baxters provided a direct loan with funds sourced from another entity (as they allege), there seems no reason as to why the funds would be deposited into a number of different accounts as is suggested, above.
69 In any event, Mr Baxter was cross-examined at some length about these figures.
70 Mr Baxter claimed that the amounts recorded in this document were the amounts left over after paying the deposit of $24,000. However, as indicated already, his evidence in relation to the deposit was unsatisfactory.
71 When asked how the figures in this document reconciled with the $203,826 recorded in the ledger he claimed that the $203,826 figure was some 12 months later but they had actually lent Darren “some figure more than that.” Such an amount was unspecified.
72 In terms of some of the specific figures, he conceded that the $3,089.67 said to be from an account in Mr Darren Baxter’s own name was not lent to Darren at the time.
73 He also appeared to initially concede that he also did not lend the amount of $34,989.50 either because it came out of an account solely in Mr Darren Baxter’s own name.
74 He then agreed that the $36,552.45 was lent by the company Mount Scope but then later sought to suggest that this money was in fact Darren’s “money in the company” and “his only entitlement” in terms of football money. This despite the fact that it appears to have been drawn from a superannuation fund.
75 However, he then alleged that the two “accounts” being referred to (which accounts were unclear but appeared to be the two in Mr Darren Baxter’s name alone) contained amounts which “came out of the company into Darren’s account.”
76 As is apparent from this summary, Mr Baxter’s evidence on the first loan was vague and confusing and did not adequately particularise whether some or all of the alleged funds were actually provided by the Baxters personally by way of a “loan,” or were advanced by some other entity on some other basis, including the bases already set out in paragraph 43, above.
77 Counsel for the Baxters suggested that the ledger was sufficient evidence that by 1990 an amount of $203,826 was outstanding.
78 I accept that I have this evidence and that there is generally no reason why loans agreed to by family members cannot be created orally or by conduct and sufficiently evidenced by book entry.[13]
[13] VL Finance Pty Ltd v Francesco Legudi & Anthony Legudi [2003] VSC 57 at para 30
79 However, in the light of the cross-examination described above I cannot be satisfied that Mr Baxter would have accurately recorded an amount of a loan given by the Baxters personally as opposed to an amount that was constituted in whole or part by money advanced on some other basis by some other entity.
80 It is true that Mr Darren Baxter generally claimed to be “satisfied” that the amount claimed in the statement of claim was correct. He further gave evidence that he would have only provided some “$40,000 equity” in the house.
81 However, Mr Darren Baxter’s evidence did not suggest that he had any detailed knowledge of his family’s corporate arrangements. Additionally, in the light of my general concerns as to his evidence, it did not appear that he had truly satisfied himself as to the correct amount advanced by his parents. Although he appeared ready to accept that his parents provided funds, his evidence did not shed light as to the precise basis on which any funds were advanced and/or by which entity.
82 There was also evidence of Ms White that Mr Darren Baxter had told her that he had bought Erica Avenue “with footy money” which evidence I accept. This evidence suggests that any statement by Mr Darren Baxter as to the funding of Erica Avenue should be treated with some care.
83 Moreover, although the accountant, Mr Kelly, was the Baxter’s accountant in 1999/2000, and would be expected to be able to explain/reconcile the figures in the Royal Bank correspondence, he was not called. In these circumstances, I draw the inference that anything which he might have to say on the subject would not have assisted the Baxters.[14]
[14] Jones v Dunkell (1959) 101 CLR 298
84 I accept that it appears likely that something was advanced by some family entity to assist the purchase of Erica Avenue. This is consistent with the subsequent repayments and Mr Darren Baxter’s own admissions. Nevertheless, the plaintiffs have simply not discharged their onus of proof in establishing that the amount of $203,826 was advanced by way of loan by the Baxters personally in 1989/1990.
85 In such circumstances it is not appropriate to “guess” some alternative amount and no such option was suggested by Counsel.
86 On the evidence before the court, the claim based on the first loan is not made out.
Second Loan
87 As indicated already, Ms White accepted that a loan was made as alleged but claims it was made by Mount Cope.
88 In terms of the identity of the creditor, the handwritten ledger records an amount of $41,000 “from Company to Sue Business”.
89 The tax return of the Baxter Family Trust for 1995 also records a loan to Susan Baxter of $44,000. On being shown this entry Mr Baxter accepted that although it should have been $41,000, the entry showed that the Baxter family trust loaned the money to Susan Baxter (as she then was).
90 The Baxters claim that I should reject the suggestions in these documents given they wrongly record the debtor as being Susan Baxter (White) alone.
91 However, although there were some suggestions in the evidence that this loan was to be given to both, the affidavit of Mr Darren Baxter was to the effect that the loan was given “to enable Susan” to purchase the share.[15]
[15] Affidavit of Darren Jay Baxter of 26 October 2009 at para 24
92 Given the effluxion of time, the tax return and ledger provide sound contemporaneous evidence of the way the parties regarded the transaction at the time. This is to be preferred in my view to any oral evidence given many years later, particularly given my concerns previously expressed.
93 Although a party may provide a loan with funds sourced from a third party, the objective evidence in this case suggests that the second loan was actually made by the trust to Ms White and not by the Baxters personally and I accept this evidence.
94 However, there was brief oral evidence of Mr Baxter that the winding up of the Baxter trust commenced in 1996 and was completed in 2004. He further claimed that on the winding up, “all assets, liabilities et cetera, were all transferred to Judy and my account.” (emphasis added).
95 Counsel for the Baxters claimed that, on the basis of this evidence, I should find that there was an “in specie distribution” by the trustee of all of the assets including the chose in action constituting the second loan prior to the liquidation. This was said to be “akin to an equitable assignment.”
96 Firstly, there was nothing beyond a fairly cursory statement of Mr Baxter to suggest that the chose in action was “distributed” to the Baxters and certainly no contemporaneous evidence of such a “distribution.”
97 There was correspondence from the accountant, Mr Kelly of 7 August 2009 which suggests the last income tax return lodged for the Baxter family trust was for the year ended 30 June 2004 “following which the trust was abandoned with no assets or liabilities.” Thus the accountant appears to have taken the view that no assets or liabilities remained but it was unclear how or whether this had really been achieved and Mr Kelly was not called to shed light on these matters.
98 It is also unclear how any “transfer” of both liabilities and assets could occur since liabilities to pay debts are not assignable.[16]
[16] Federal Commissioner of Taxation v Orica Ltd (1998) 194 CLR 500 at [19] per Brennan CJ and [67]- [68] per Gaudron, McHugh, Kirby and Hayne JJ
99 In terms of the assets, including this chose in action, there was no documentation to show any effective transfer at the time.
100 It is also unclear what was meant by the reference to an “in specie” distribution which commonly refers to a distribution of a physical asset “in kind” rather than by conversion of the asset to cash. In any event, there was simply no such evidence of any distribution being effected prior to the liquidation of the company.
101 If there was a “distribution” of a chose of action it would also need to be effectively transferred to have any effect. A chose in action may be transferred by a legal assignment but this could not be suggested since there was nothing in writing nor was there any evidence of notice being given to the debtor, Ms White, pursuant to section 134 of the Property Law Act 1958.
102 In order for a transfer “akin to an equitable assignment” to take place no formalities are generally required but the crucial question is whether there clearly appeared an intention upon the part of the assignor to divest itself of the relevant contractual right so that it became the property of the assignee.[17]
[17] Comptroller of Stamps (Victoria) v Howard-Smith (1936) 54 CLR 614 at 619-20 & 622
103 There is nothing to suggest such an intention on the part of Mount Cope at the time.
104 In the case of an equitable assignment, the legal interest in the chose in action would also remain with Mount Cope. The assignor, Mount Cope, should generally be joined in the action by the Baxters in this case. Although in some cases it may be appropriate to exercise the discretion to dispense with such joinder, no request was made for me to do so. Moreover, I have insufficient evidence on which to exercise such a discretion.
105 Finally, and in any event, it appears that any transfer was made without consideration. Although equity might step in to perfect a gift if an intending donor has done everything which it is necessary for him to have done to effect a transfer of legal title,[18] Mount Cope appears to have taken no such steps at all in this case.
[18] Corin & Anor v Patton (1990) 169 CLR 540 at 559 per Mason CJ and McHugh J; see also at 564 per Brennan J; at 582 per Deane J and at 589 per Toohey J
106 In the absence of any writing evincing a clear intention to transfer the chose in action, in my view the maxim that equity will not help a volunteer should apply.
107 The absence of Mr Kelly is also again noteworthy. Thus he appears to have knowledge of the winding up of the trust and the state of its assets and liabilities. In these circumstances, I draw the inference that anything which he might have to say on the alleged transfer would not have assisted the Baxters.[19]
[19] Jones v Dunkell (1959) 101 CLR 298
108 The Baxters have not discharged their onus of proof in establishing that they are properly entitled to sue on the second loan.
109 The claim based on the second loan is not sustained.
Third Loan
Whether advance made
110 There appears to have been an advance made of $54,500. There was evidence of a receipt in the name of Marshall White & Company dated 1 March 1999 showing the amount of $54,500 being a 10% deposit for 4 Young Street “received from Kimdara Pty Ltd.”
111 Mr Baxter maintained that this amount did not come up in the accounts of Kimdara as a loan by that company. Rather it formed part of the parents’ loan account at the end of that year.
112 Although this is less than satisfactory, Mr Baxter’s evidence was not effectively challenged. Kimdara was also at the time a business operation under the control of the plaintiffs with no suggestion of a trustee role until 2001. In these circumstances, it is plausible that there were loan funds available for the Baxters to personally lend.
113 I therefore accept that the Baxters advanced an amount of $54,500 to pay for the deposit on Young Street. However, it remains to be determined on what terms this was done and whether Ms White was a party to any such loan.
Terms on which deposit advanced
114 In terms of the basis on which the funds were advanced, Mr Baxter claimed in his affidavit that both Mr Darren Baxter and Ms White asked for the Baxters to lend them some money for a deposit on a house. The Baxters agreed. He could not recall if he attended the auction.[20]
[20] Affidavit of Raymond John Baxter of 26 October 2009 at paras 34 and 35
115 In oral evidence, however, he claimed that the initial discussion was with Mr Darren Baxter only but that he attended the auction wherein discussions took place. He could not recall the detail of such discussions. Despite this lack of recollection he later maintained that there was discussion about repayment which was that it “would just form part of the normal loan.”
116 In his affidavit, Mr Darren Baxter claimed that he spoke to Ms White prior to the auction and they agreed that he would approach his father for a loan on the basis that it would be “added on and that we would pay him back when we could or when my parents asked for it.”[21] That he then spoke to his father about the loan and they all attended the auction. Nevertheless, there was nothing in his affidavit to suggest that any discussions took place between Ms White and his parents at the auction day or otherwise.
[21] Affidavit of Darren Jay Baxter of 26 October 2009 at para 35
117 In oral evidence, Mr Darren Baxter maintained that he had spoken to Ms White about borrowing the money from his parents to pay for the deposit. He also attempted to suggest that there were “a number of conversations where the whole family talked.”
118 Ms White’s evidence was that she had a discussion with Mr Darren Baxter about buying Young Street wherein he said that he would organise the finances. Under cross-examination about where she thought the deposit would come from, she said that she assumed that Darren would have organised the deposit when he was organising finance for the house.
119 Ms White attended the auction but could not recall much about the auction day as she was three months pregnant with an eight month old toddler and was quite unwell. She denied having any conversations with the Baxters about the purchase of Young Street.
120 The evidence of the Baxters was not consistent as to whether and what discussions took place directly with Ms White. As such I am not satisfied that anything was said directly by the Baxters to Ms White about the advance of the Young Street deposit.
121 However, the evidence of Mr Darren Baxter suggested that conversations took place between his former wife and himself wherein she was apprised of the making of the third loan.
122 Even if this is correct, knowledge alone would not make Ms White a party to the third loan. However, I prefer the evidence of Ms White to that of Mr Darren Baxter on this matter. Thus I accept that she had little interest, time or background for financial affairs. In those circumstances, it is more probable that no detailed discussion took place about the obtaining of a loan as suggested by Mr Darren Baxter. Instead I accept that Darren simply said he would organise the “finance” as suggested by Ms White.
123 Repayments were recorded after the making of this loan in 1999. However, even if properly classified as “repayments” and even if Ms White knew about such repayments, this again would not make her a party to the Young Street loan.
124 In any event, for reasons already expressed, I accept her evidence that although she was generally aware of amounts moving between the families she believed this was because of payments to and from family trusts.
125 In the light of these findings the claim against Ms White in relation to the third loan is not sustained as she was not a party to any such loan.
126 However, the unchallenged evidence of Mr Darren Baxter (which is generally supported by his father) is that he sought and obtained the third loan “as the previous loans had been made.”[22] In these circumstances, the presumption of advancement[23] is thereby rebutted (which presumption was not raised by Mr Darren Baxter in any event).
[22] Affidavit of Darren Jay Baxter of 26 October 2009 at para 35
[23] Equity may presume that a transfer between a parent and child is a transfer by way of gift subject to a contrary intention: see Halsbury’s law of Australia at [430-555]
127 Given the advance of $54,500 is clearly established and the unchallenged evidence of the Baxters (insofar as Mr Darren Baxter’s liability is concerned) I find that the claim against Mr Darren Baxter in the amount of $54,500 is therefore established.
Fourth Loan
Whether advance made
128 Two Bendigo Bank cheque butts were produced of $10,000 each; one for “DJB” dated 10 September 2006 numbered 203 and one for Elite Pools dated 22 November 2006 numbered 209.
129 There was also a Bendigo Bank statement in the name of RJ Baxter showing a withdrawal by way of cheque 203 in the amount of $10,000 on 15 September 2006 and a further withdrawal by way of cheque 209 in the sum of $10,000 on 28 November 2006.
130 Finally an Elite Pools customer quick report showed amounts received of $11,000 on 18 September 2006 and $10,000 received on 28 November 2006. The $11,000 has a notation of “cash” next to it which Ms White said she wrote on advice from Elite Pools.
131 In these circumstances I accept that there was an advance of $20,000 by the Baxters in 2006.
132 There was a suggestion in Mr Baxter’s evidence that a further amount of $2,000 cash was advanced at this time. However, there was no corroborating evidence of such a claim other than the evidence of Mr Darren Baxter who stated that his father paid $22,000 “directly to the pool builder.”[24] This was clearly not the case since the $10,000 cheque in September was made payable to “DJB” as indicated already.
[24] Affidavit of Darren Jay Baxter of 26 October 2009 at para 46
133 In those circumstances I am satisfied only as to an amount of $20,000.
Terms on which money advanced
134 The evidence of Mr Baxter was that Mr Darren Baxter asked his parents to lend the couple some money for renovations. This was because they had applied for an extension to their loan which had not come through. After “discussion” the Baxters agreed to lend them $22,000 to pay for the contractors.[25]
[25] Affidavit of Raymond John Baxter of 26 October 2009 at para 42
135 In oral evidence, Mr Baxter described discussions with Mr Darren Baxter only in that Darren was short of funds for the pool and that the funds would be supplied “on the same basis as our normal discussion. That it would be part of the loan.”
136 Mr Darren Baxter claimed that he “agreed with” Ms White to ask his parents for another loan while a loan review was taking place which he did. [26]
[26] Affidavit of Darren Jay Baxter of 26 October 2009 at para 45
137 His oral evidence was to similar effect.
138 The evidence of Ms White was that they paid for the pool out of their bank account and that she had no discussions with the Baxters or her husband about obtaining money from the Baxters to pay for the pool works.
139 Ms White agreed that she now realised that $10,000 had been advanced directly to Elite pools by Mr Baxter which she found out about the day before she came to court when she approached the pool builder to be clear about where the money had come from.
140 She was also cross-examined at some length on the basis that, given the shortfall in the funds and invoices from the builders, she must have discussed the need for Mr Darren Baxter to approach his father pending approval of an uplift in their bank loan. However, although she fairly conceded that “anything’s possible” she said that she would have remembered something like that which happened only a few years ago. She maintained that Mr Darren Baxter had said he would organise things and get an extension on the mortgage.
141 For similar reasons as previously expressed I have generally accepted Ms White’s evidence that she was not paying close attention to the state of the couple’s financial affairs.
142 I moreover accept that she had no conversations with either her parents-in- law or her husband in relation to obtaining money for the pool works from his parents. This finding is consistent with the oral evidence of Mr Baxter and, to the extent it diverges with that of Mr Darren Baxter, I prefer Ms White’s evidence.
143 In the light of these findings the claim against Ms White in relation to the fourth loan is also not sustained as she was not a party to this loan.
144 However, the evidence of both Baxters suggest that a request was made by Mr Darren Baxter for funds in relation to the pool works. Given the clear evidence of advance, and Mr Darren Baxter’s admissions the presumption of advancement is rebutted and I accept that Mr Darren Baxter is liable in the amount of $20,000 advanced in respect of the fourth loan.
Treatment of Repayments
145 It is for the defendants to prove that any debt had been satisfied by way of repayment.[27]
[27] Gray v O’Donnell [2009] NSWSC 259 at 14
146 In terms of the alleged repayments the evidence adduced to support such repayments was generally the ledger which attributed the repayments to the original first alleged loan.
147 Although I am not satisfied that the starting “balance figure” was accurate, the evidence of Mr Baxter was that he made entries on a progressive basis from 1990.
148 There was also independent evidence to support at least two of the repayments as follows:
(a) there was a bank cheque payable to Ray Baxter dated 18 March 2000 for
an amount of $12,500 purchased by Darren Baxter; and(b) there was a bank cheque payable to Judy Baxter dated 15 December
2005 for an amount of $10,000 purchased by D Baxter.149 Given there was nothing to show then that the recordings in the ledger insofar as they related to repayments was inaccurate and given the “progressive” nature of the recordings made, I accept that payments were made in the amounts alleged.
150 The Baxters then submitted that I should find that the repayments as set out should be allocated on the basis of the oldest debt first, being the first alleged loan. This was based on the premise that there was a “running account” commencing with the first loan.[28]
[28] Devaynes v Noble; Clayton’s Case (1816) 1 Mer 572; 35 ER 781; [1814-23] All ER Rep 1 at 792
151 However, given my findings above, I do not accept that there was truly any “running account.” I do not accept that the first loan can be substantiated. The second loan was made by a different entity and to Ms White alone, while the last two loans were made to Mr Darren Baxter alone. In these circumstances the circumstances do not suggest a running account.
152 It remains to be determined what, if anything, should be done with the payments recorded by Mr Baxter, particularly in relation to the two loans I have found are payable by Mr Darren Baxter (the third and fourth loans).
153 Firstly, as indicated already, Mr Darren Baxter made no submissions on his own behalf in relation to this or any other matter in issue.
154 Counsel for Ms White suggested that it might be logical for the $12,500 payment made shortly after the shares were sold to be attributed to the second loan; further that the $22,000 paid soon after the fourth advance be attributable to the fourth advance. However, because Ms White had no knowledge of the repayments at the time she was unable to take it further.
155 Although there is some force in this submission, there is simply no evidence to suggest that this is an appropriate attribution. Mr Baxter gave specific evidence that he had not received any repayment in respect of the second loan (or the third loan). Moreover, as indicated already, there appeared to be no clear pattern in the repayments which appear to have been paid as and when Mr Darren Baxter felt obliged and was able to do so. It is moreover unclear which entity and which loan any payment was to be directed towards.
156 In these circumstances, I am simply unable to attribute any repayments to the third and fourth loans I have found sustained. Beyond that it is unnecessary to say more.
Limitation of Actions Act 1958
157 It is strictly unnecessary to consider Ms White’s defence[29] that the second and third loans would be statute barred given no claim has been sustained against her. I will therefore not consider this issue comprehensively but will express only a summary of my views.
[29] No such defence was pleaded by Mr Darren Baxter and a defendant must plead the provision in order to rely on it: Williams, Civil Procedure at [13.07.210] and cases cited therein
158 Pursuant to section 5(1)(a) of the Limitation of Actions Act 1958 actions founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.
159 Where there is a loan of money and nothing is said as to repayment the money is payable instanter. Thus the common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor’s money. Further, in order to prevent a cause of action arising instantly on paying the money the parties must expressly contract out of that situation by words clearly inconsistent with that situation.[30]
[30] Ogilvie v Adams [1981] VR 1041 at 1043 and VL Finance Pty Ltd v Francesco Legudi & Anthony Legudi [2003] VSC 57 at para 44.
160 Reference in the contract to repayment on request or demand does not generally alter this although in more complex contracts references to a demand are usually construed as meaning what they say, so that the need for a demand has substance.[31]
[31] Gleeson v Gleeson [2002] NSWSC at [44] cited in VL Finance at [47]
161 In this case, the Baxters suggested that the debts were payable only on satisfaction of a condition: the condition being that notice would be given of the “need” to repay. In so doing they sought to rely on Gray’s[32] case.
[32] Gray v O’Donnell [2009] NSWSC 259
162 However, in my view the case is distinguishable from Gray’s case.
163 Thus, the evidence of the Baxters to the effect that money should be repaid when “needed” tended to confirm that the funds would need to be immediately available at call. In those circumstances the debt should be regarded as immediately due and no “contracting out” has occurred.[33]
[33] VL Finance Pty Ltd v Francesco Legudi & Anthony Legudi [2003] VSC 57 at para 57
164 The situation is quite different to Gray’s case wherein the trial judge found a condition was spelt out that the obligation to repay was actually conditioned upon the service of a written demand.
165 The Baxters then rely on section 24(3) to suggest that the time period in relation to the second and third loans would be re-enlivened by reason of each of the repayments.
166 However, for reasons already expressed I am not satisfied that any such repayment was attributable to either the third or fourth loans. The evidence is similarly equivocal with regards to the second loan (if it was found to be substantiated contrary to my findings above). As indicated already, Mr Baxter gave specific evidence that he had not received any repayment in respect of either the second loan or the third loan.
167 Accordingly, if I needed to so determine, I would find that the claims against Ms White in relation to the second and third loans were statute barred.
Notice of Contribution
168 It is unnecessary to consider this notice given no amount has been found due by Ms White.
Conclusion
169 There will be judgment against Mr Darren Baxter in an amount of $74,500 in respect of the third and fourth loans.
170 The claim against Ms White is dismissed.
171 I will otherwise hear from the parties as to the form of final orders, including the question of costs.
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