Bukewitsch v Goodman
[2020] TASSC 31
•3 July 2020
[2020] TASSC 31
COURT: SUPREME COURT OF TASMANIA
CITATION: Bukewitsch v Goodman [2020] TASSC 31
PARTIES: BUKEWITSCH, Marie Lynette
(by her litigation guardian Troy Bukewitsch)
v
GOODMAN, Stanley
JACOBS, Anthony (Tony) Ronald
FILE NO: 2846/2018
DELIVERED ON: 3 July 2020
DELIVERED AT: Hobart
HEARING DATES: 2, 3 March, 2, 7 April 2020
JUDGMENT OF: Marshall AJ
CATCHWORDS:
Evidence – Proof – Burden of proof – Generally – Acknowledgment of deed under seal – Defendant must allege and prove payment by way of discharge as a defence to an action for indebtedness in respect of executed consideration – No documentary proof that payment was made - Failure of creditor to complain did not displace the onus – Defendants failed to satisfy the onus – Defendants' failure to subpoena bank documents a significant factor.
Young v Queensland Trustees Limited (1956) 99 CLR 560, followed.
Aust Dig Evidence [1203]
Deeds – Deed poll – Unilateral acknowledgment of debt under seal – Deed a speciality – Argued debt merged in deed and deed's terms conclusive.
Netglory Pty Ltd v Caratti [2013] WASC 364, followed.
Aust Dig Deeds [11.5]
Interest – Agreements to pay interest – Where no clear agreement to pay compound interest, interest is taken to be simple interest
TSB Developments Pty Ltd v HCH & K Fisheries Pty Ltd [2003] TASSC 136; Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 1396, followed.
Aust Dig Interest [1]
Limitation of Actions – Limitation of particular actions – Specialty debts and debts on statutes – Accrual of cause of action and when time begins to run – Cause of action only arose when demand for payment was made under the deed within the terms of the deed.
Limitation Act 1974 (Tas), ss 4(3), 29(4).
Barker v Duke Group Limited (in Liq) [2005] SAFC 81, 91 SASR 167, followed.
Krueger v Jansen [1991] NTSC 27, not followed.
Aust Dig Limitation of Actions [1037]
REPRESENTATION:
Counsel:
Plaintiff: B R McTaggart SC
First Defendant: W A Ayliffe SC
Second Defendant In person
Solicitors:
Plaintiff: Blissenden Lawyers
First Defendant: E R Henry Wherrett & Benjamin
Judgment Number: [2020] TASSC 31
Number of paragraphs: 88
Serial No 31/2020
File No 2846/2018
MARIE LYNETTE BUKEWITSCH (By her litigation guardian Troy Bukewitsch)
v STANLEY GOODMAN and ANTHONY (TONY) RONALD JACOBS
REASONS FOR JUDGMENT MARSHALL AJ
3 July 2020
By writ filed on 22 October 2018, the plaintiff claims against the defendants a sum of $902,669.90 being money allegedly due and owing to the plaintiff by the defendants by virtue of a deed dated 10 March 1987 ("the deed"). The claim includes interest to 30 September 2018, with interest at the rate of 15% compound per annum. A demand was made for payment on 28 June 2018 and no payment was made after the demand.
It is common ground that by the deed dated 10 March 1987, made under seal, the defendants, as well as the now deceased, Scott Goodman, acknowledged they were jointly and severally indebted to the plaintiff in the sum of $17,557 being principal of $14,281 and interest to 31 March 1987 in the sum of $3,296.
The deed stated that the defendants and Mr Scott Goodman agreed to pay the above sum:
"... with interest thereon in the meantime at the rate of Fifteen Per Cent per annum in the following manner:-
1The sum of $2,000 on Demand.
2A further sum of $2,000 upon seven (7) days' Notice.
3A further $3,000 upon one (1) Month's Notice, and
4The balance upon a further three (3) Months' Notice."
The issues for determination in this proceeding are:
1 Have the defendants paid the money owing under the deed?
2 If they have not paid the money owing under the deed, on what basis should interest be calculated?
3 Is the action statute barred?
Is the money owing under the deed or has it been paid to the plaintiff?
The plaintiff contends that no repayments under the deed were made from 1 July 1989. The defendants contend that the debt was fully repaid in late June 1990.
In Young v Queensland Trustees Limited (1956) 99 CLR 560 at 569-570, Dixon CJ, McTiernan and Taylor JJ said:
"The law was and is that, speaking generally, the defendant must allege and prove payment by way of discharge as a defence to an action for indebtedness in respect of an executed consideration."
Later, at 570, the Court referred to the "burden of proving payment" falling upon the defendant.
Accordingly, the onus in this proceeding is upon the defendants to prove payment of the amount owing under the deed.
The deed in this case is a unilateral deed by deed poll. It "can be sued upon by any person for whose benefit a covenant in a deed poll is expressed to be made, if named or sufficiently identified in it": Netglory Pty Ltd v Caratti [2013] WASC 364 at [75] per Edelman J.
As counsel for the plaintiff submitted, the deed is a speciality, that is, a contract or debt under seal. The deed is the foundation of the action in this proceeding. The original debt has merged in the deed of acknowledgement and its terms are conclusive: see Netglory at [262].
The defendants submit that the debt was completely paid off on or about 28 June 1990 by paying off the plaintiff's mortgage loan at Equitable Building Society ("the EBS"). They contend that Scott Goodman paid the money into the EBS on a cheque written on the business account of Ye Old Red Lion Hotel ("the Red Lion") in which hotel the defendants had an interest. The cheque was said to be from an account held with the ANZ Bank by Red Lion. There is no documentary proof that payment was made. The defendants contend that all their receipts in relation to the Red Lion have been destroyed. However, they did not attempt to subpoena records of the ANZ Bank regarding the relevant cheque which was said to discharge the debt. The defendants have submitted that the ANZ Bank would not have kept records for any longer than seven years, but there is no evidence to support that contention. EBS was able to supply records going back to the 1980s. Although there is no statutory obligation on banks to keep records for more than seven years, that does not mean that they may not have old records on microfiche as EBS did. The solicitor for the plaintiff noted in correspondence that he would make inquiries of ANZ. There is no evidence that he did, or that anyone associated with this proceeding did. It must be borne in mind that the defendants have the onus of proving that the debt was paid.
The defendants submit that the debt was paid off by the making of a payment by cheque into the plaintiff's EBS mortgage account. At the time the plaintiff resided in premises in West Moonah. The property contained a house and a flat. The plaintiff rented out the flat as a source of income. The defendants contend that the plaintiff's mortgage loan was split in two, one loan in relation to her house and land, and one in relation to the flat. They submit that the loan in relation to the house and land was paid off in early 1987, but that the loan in relation to the flat was extant as at June 1990. They have given evidence that the second defendant and Mr Scott Goodman each inquired with the EBS about how much was owing to discharge the loan.
The Bank of Us is a successor to the business of EBS. There is in evidence a letter from Bank of Us to the Registrar dated 28 May 2019 regarding a subpoena served on the bank. At par 5 of that letter, the following is set out:
"Our microfiche records indicate [the plaintiff] held a membership with [EBS] ... and that at the time the microfiche was produced, mail generated for [the plaintiff's] client number was sent to [the plaintiff] care of S Goodman ... The microfiche records indicate there was a loan account in existence under [the plaintiff's] name that was paid in full on 30 Jan 1987 and the loan was subsequently closed sometime prior to 30 June 1988. This is indicated by a cash deposit of $618.59 on the loan account which reduced the outstanding balance to zero and the heading on page one of the microfiche record which states 'L99 – CLOSED LOAN A/C'. This statement was produced on 30 June 1988 as indicated on the bottom of page three of the microfiche records which reads '30JUN88**Balance as at Microfiche Date**$0.00'."
At par 6 of the letter the bank confirmed that it had no other files or information relating to the plaintiff which it was able to locate. Given that it located information about an account which was open in 1988, it would be surprising if it could not locate an account allegedly open in 1990.
The microfiche records produced by Bank of Us do not show that any payment was made into an account of the plaintiff in June 1990 or thereabouts. The only loan that Bank of Us could find that was relevant to the plaintiff was one paid off before 30 June 1988.
The first defendant gave evidence that the defendants purchased the Red Lion in 1984. He said that in 1986 the Sheraton Hotel (now Grand Chancellor) was being constructed. He said that the rear side of the Sheraton was next to the Red Lion and that there was an issue concerning noise from the Red Lion's beer garden. Red Lion's beer garden was to be enclosed. He said that the plaintiff suggested she could lend money received from her mother's estate to enable Red Lion to enclose the beer garden.
The second defendant said he prepared a short memorandum of debt dated 29 January 1987 which recorded what was owed to the plaintiff. The memorandum is in the handwriting of the second defendant and was addressed to the plaintiff in her name, and stated:
"Owed by Goodman and Jacobs to Marie at 31/12/86 approx $17,000 including interest (at 15%)."
It is signed by the defendants and after those signatures the words "Interest therefore is approx. $2,550.00 pa" are written. At some later time the words "Home debt paid off" were inserted on the memorandum.
The first defendant said he prepared the deed to formalise the loan. He said that Scott Goodman was responsible for payments and that the loan was paid down by cheque from Red Lion paid into the EBS loan account for the plaintiff. The first defendant said that the plaintiff complained about the loan being paid out because she was unable to get a tax deduction arising from the payments.
The first defendant said that his son, Scott Goodman, died on 23 May 2014 and that he and his other son, Matthew, shredded all of Scott's documents, including documents relevant to the Red Lion.
The first defendant said he received a phone call from the plaintiff in 2011 in which she alleged that he had a power of attorney over her financial affairs and that he controlled her financial affairs. He said that he denied having a power of attorney over her financial affairs and recalled that the plaintiff called him a liar.
Under cross-examination the first defendant was taken to a letter in evidence in the trial from EBS to the plaintiff dated 3 February 1987, after the 30 January 1987 payment was made to discharge her mortgage with EBS. The letter referred to a request from a "Mr S Goodman" to release the deeds of the property into his custody. The first defendant had no memory of making such a request. He also denied going into the EBS to get the title deeds for the West Moonah property. He said he did not get an acknowledgement in writing that the Red Lion debt to the plaintiff was paid, but said he "verbally got an agreement".
The second defendant said that in June 1990 he made inquiries with EBS about how much was owing on the plaintiff's loan account and was told by an EBS employee how much was owing, including an amount payable due to an early discharge of the mortgage. He said he signed a cheque which had been pre-signed by the first defendant and that the cheque was made out to EBS. He gave the cheque to Scott Goodman, according to his evidence, and he said the cheque cleared from the Red Lion account the day after he gave it to Scott. He said that he was "very clear" that Scott paid the cheque into EBS the same day he gave it to him.
Under cross-examination the second defendant was referred to a letter which gave approval for the Red Lion for work to be undertaken at the hotel for the enclosing of a beer garden. The letter was dated 5 February 1988.
The first defendant had no role in the alleged payment by cheque to EBS other than pre-signing cheques in accordance with the evidence of the second defendant. The second defendant did not pay the cheque into EBS or receive confirmation that the cheque had been paid. The defendants allege that the timing of the payment related to the imminent sale of the Red Lion and the desire to clear all debts.
The second defendant subpoenaed business records from EBS regarding accounts held by the plaintiff. However neither defendant sought to subpoena any records from the ANZ Bank which is a very large corporation which would be presumed to have a great capacity for storage of historical information, including Red Lion accounts and payments in 1990.
Counsel for the plaintiff submits that the ANZ Bank records may have been able to establish that the first defendant's borrowings from the plaintiff were deposited into the Red Lion ANZ Bank account. Counsel also contends that those records may have shown payments to EBS appearing in the microfiche records between October 1985 until the account went to zero in January 1987. He further states that such records may have shed light on whether statements prepared by the second defendant regarding what was owing to the plaintiff were paid to EBS or the plaintiff personally. There is in evidence a handwritten letter from the second defendant to the plaintiff dated "6/1/88" which refers to a payment of "principal" on 24 August 1987 in the sum of $2,000. Counsel also referred to the fact that when the cheque which the second defendant claimed to provide to Scott Goodman for about $14,000 on or about 28 June 1990 was paid to EBS would have been discernible from ANZ records.
Counsel submits that a Jones v Dunkel [(1959) 101 CLR 298] inference should be drawn that the ANZ documents would not have assisted the defendants' case.
Although the second defendant prepared a statement detailing a progress payment made in 1987, there was no attempt by the second defendant to prepare and issue a final statement to the plaintiff, or to obtain an acknowledgement from her in writing that the final payment had been made.
Counsel for the plaintiff submitted that the acknowledgment of the debt by the second defendant and Scott Goodman, although the debt is initially that of the first defendant, is explained by either the loan being of benefit to Red Lion or that the owners of Red Lion wished to enjoy a tax advantage from paying interest to the plaintiff.
A statement prepared by the second defendant dated 9 January 1989 also refers to additional payments of principal made to the plaintiff. They were:
· 24 April 1988 $2,000.00
· 28 June 1988 $1,050.00
· 5 August 1988 $500.00
· 20 August 1988 $680.49
This left a balance of $8,050.51 principal plus approximately $7,456 interest, leaving a balance owing as at 31 December 1988 of $15,507 approximately.
A further statement prepared by the second defendant as at 30 June 1989 referred to two further payments of principal on 16 January 1989 in the sum of $1,000 and on 6 February 1989 in the sum of $500, leaving a balance of $6,550.50 principal and $8,556.39 interest, making a total owing of $15,106.89. No further statements of this nature are in evidence.
The second defendant claimed that the deed was prepared by him in reliance on information contained in an EBS statement provided to him by one of the Goodmans. He also said he relied on EBS statements to calculate the amounts owing in written records prepared by him in early and mid-1989. However, as counsel for the plaintiff pointed out, the interest rate in the deed of 15% did not reflect the EBS rate in late 1986 and early 1987 of 16%.
Counsel for the plaintiff submitted that the calculation in the deed would have been ascertained by the second defendant from the banking records of the Red Lion to see what had been paid off the principal from the time of the loan until January 1987. Counsel referred to the $2,500 interest being a figure which is the amount of interest on $15,000. That calculation was contested by counsel for the first defendant. Counsel also referred to the lack of correlation between the repayments recorded by the second defendant and amounts paid off the EBS mortgage account. As counsel suggests, more payments appear to be randomly made.
Counsel further submits that in the absence of evidence of any repayments between June 1989 and June 1990, the amount required to repay the loan to the plaintiff would have been about $17,500. The evidence of the defendants was that the cheque drawn in June 1990 to pay off the debt was about $14,000. Counsel submitted that the first defendant was in all likelihood the one who borrowed $15,000 from the plaintiff on 14 October 1985 (consistent with a withdrawal from the plaintiff's ANZ account on that day) and that that loan was unrelated to the mortgage loan of the plaintiff at that time.
Counsel contended that the deed does not refer to repayments being linked to any mortgage loan and that the obligation to repay only arose from a demand and notice. He submitted that the plaintiff's loan acknowledged by the deed was a personal loan unconnected to EBS.
Counsel for the plaintiff rejected the assertion of the defendants that the plaintiff had two loans – one in respect of the house which was paid off in January 1987, and one in respect of the flat which remained on foot until June 1990. Counsel notes that there is no evidence of two loans.
There is in evidence an ANZ Bank statement in the plaintiff's name dated 25 February 1986 of a payment into that account on 27 August 1985 of about $46,000. This is about the time the plaintiff received money from her deceased mother's estate. The statement shows the run down of those funds on 11 and 14 October 1985 with withdrawals in the sums of approximately $6,000, $25,000 and $15,000 respectively. For some reason, the second defendant had access to a copy of that statement and wrote notes on the back of it consistently with what one would need to do to obtain a discharge of mortgage, including the payment of "duty", being a reference to stamp duty.
To support the submission that there was only ever one mortgage loan taken out by the plaintiff with EBS, counsel for the plaintiff referred to a letter to her dated 18 March 1987 from EBS and enclosing a cheque for the sum of $390.54 "being net adjustment to your loan". The letter only refers to a single loan. There is also a letter from EBS dated 19 February 1988 which recorded the balance owing as at 30 June 1987 as zero. At 30 June 1988, according to EBS microfiche, the balance was also zero and was the same at 30 June 1989.
The defendants rely on the existence of two loans or a split loan by reference to the notation on the EBS letter of 19 February 1988 that $3,604.62 was debited for interest in 1987. However, as counsel for the plaintiff notes, that figure of $3,604.62 should relate to the year 1986 because that is how much interest the plaintiff paid to EBS that year.
The second defendant relied on a journal credit entry disclosed on the EBS microfiche to point to the existence of a second loan. That entry is dated 9 March 1987. Whatever that entry represents it was made on the same account that was reduced to zero as at 19 March 1987 and is not evidence of a second loan.
The second defendant called Mr Nigel Henry. Mr Henry is a retired solicitor. Mr Henry gave evidence that he was engaged in conveyancing over a long period of time and had dealings with EBS. Mr Henry said that if a borrower obtained a loan secured by a mortgage from EBS and the security being purchased was a dwelling to be used by the owner and a flat, he would have expected EBS to register one mortgage, but to separate the loan debt into two parts, with the part attributed to the flat incurring a higher rate of interest. However, his evidence does not support the assertion that this is actually what happened in the plaintiff's case. His evidence that a discharge of mortgage is required to be stamped, combined with the first defendant seeking a discharge of mortgage, tends against the likelihood that there was a split loan in the plaintiff's case.
The plaintiff's counsel contends that, given the mortgage loan had been paid off, the sum the subject of the debt in the deed is referable to money lent by the plaintiff to the first defendant, being the $15,000 withdrawn from the plaintiff's ANZ account on 14 October 1985. The funds must have been received prior to the second defendant's memorandum of January 1987. The first defendant gave evidence that the plaintiff's mother's property was sold in 1985 and that he assisted the plaintiff with the sale. He said that she suggested she could lend the money from her mother's estate so he could enclose the beer garden at the Red Lion. He said he initially thought not, but then thought that he could arrange a tax deduction for her. He said he suggested the Red Lion would pay off the mortgage on her house. He said he had a rough idea what was owing and thought there were two loans, one for the house and one for the flat, and that they had different interest rates. His idea was that she would not be paying for anything but should have a tax break. The first defendant suggested the loan was made in late 1986 but it is a matter of public record that negative gearing was abolished in 1985 and reinstated in the 1987 Federal Budget.
The first defendant thought the plaintiff owed between $17,000 and $20,000 on her loan. He said he later ascertained the precise amount and she lent him more than the amount to pay off the loan, which sum he recorded in an exercise book at the hotel and allowed her to draw it down by occasional cash withdrawals from hotel money. He said he had telephoned EBS to find out what was owing on the loan. It is difficult to imagine someone in a financial institution breaching the privacy of a borrower in such a fashion.
The first defendant said that in mid-1990 with the imminent sale of the hotel, the defendants wanted to discharge all debts. He said he asked the second defendant to find out what was owing on the plaintiff's mortgage and was given a figure, including a penalty amount for early repayment.
The first defendant said that a few months after the sale the plaintiff rang him and said, "Now that the loan's been paid off I can't claim anything for tax on the flat." He said that she accepted nothing could be done about that. After the sale he said he made payments for her on household items she needed and that all was good with the relationship between them until 2019 when she called him, one October night, and claimed that he half owned her West Moonah property. That was after she discovered he had a caveat on her house. The caveat was placed on the property when she purchased it in 1985 to prevent any future partner from attempting to cheat her out of her property, as she alleged her former husband had done. In 2011 she rang him, complaining that he had a power of attorney over her financial affairs, which he denied. He denied that she said, "What has happened to mum's money." He said he helped her with her financial affairs but did not manage them, and said he had nothing to do with an ANZ account which she opened for the proceeds of her mother's estate to go into. Under cross-examination he said that he assisted her to apply for home insurance with TGIO. He said he told the plaintiff's lawyers, through his lawyers, that the loan had been paid off. He said that that happened in October 2018.
The second defendant said that his then partner, who was working at the Red Lion, told him that the plaintiff had complained in or about early January 1987, about him and his partner going on a holiday to Sydney "using my money". He asked the first defendant what that comment related to and was told that the plaintiff had loaned the first defendant money and that it equalled a mortgage loan over the premises, to EBS. He said he considered that the loan merited a document "setting out everyone's rights". He said he used figures from EBS that had been supplied to him. Again it is difficult to imagine a financial institution caring less about the privacy of its borrowers. He also said he had access to the plaintiff's ANZ Bank statement and wrote notes on the back of it. He said he believed the plaintiff was "paid off" on or about 28 or 29 June 1990 and the hotel was sold on 4 July 1990. He said he gave a cheque to Scott Goodman, made out to EBS for, in the vicinity of $14,500, which cleared the next day. He said that he could not explain why the interest rate on the moneys owing had not gone up to 16% when that was the rate charged by EBS.
Mr Ty Bukewitsch ("Ty") is one of the plaintiff's two sons. The other is Troy, the plaintiff's litigation guardian. Ty gave evidence that his brother Troy sent him a photo of the deed in late 2016. He asked his mother about it and said he was told that the first defendant took his mother's money. He knew of this litigation but did not say anything about the conversation until late in the week before the trial when he told the plaintiff's solicitors. He said he rang the first defendant and asked for the plaintiff's money back and was told that he did not look after the plaintiff's financial affairs. He said his mother told him that the first defendant had arranged for the sale of her mother's property and for the proceeds to be deposited in an ANZ account.
Ty said that the plaintiff's first husband was a man called Max Pearce. They had a son called Mark. He died as a result of a motorcycle accident while on duty as a policeman in 1979. The plaintiff was friendly with the Goodmans and Ty was friendly with their sons. The first defendant helped the plaintiff by arranging Mark's funeral and helped with the administration of his estate and with the sale of his personal effects, according to Ty. Ty alleged that the first defendant managed all of her financial affairs thereafter (which he denied) and that they were very close friends.
Ty said that his mother was not good with financial matters. He said she was a cook and worked for her entire adult life before becoming ill with a blood disease in the mid-1990s and went on a disability pension. She told Ty, according to his evidence, that she had said that the first defendant took her mother's money (being money obtained from the sale of her mother's house in Taroona). She told Ty she called the first defendant a liar and a thief and hung up on him in a telephone call. She told Ty that the first defendant managed everything for her after her mother's death. Ty said that his mother told him that the first defendant told her to go to the ANZ Bank to put in the money from her mother's estate. She normally banked with the Police Credit Union. She said nothing about a loan arrangement. Much of this evidence of Ty, and all of it that related to what his mother allegedly told him, was received subject to objection to be resolved after submissions. The evidence will only be received if it is determined that the plaintiff is unavailable. I consider for reasons to be discussed later in this judgment, that the plaintiff should be considered to be unavailable by reason of her dementia, notwithstanding that counsel for her made her available for cross-examination and she was cross-examined.
Counsel for the first defendant submitted that the plaintiff's case was a weak one. He referred to the fact that the plaintiff gave no oral evidence that the debt has not been paid. He pointed to the sworn evidence of the defendants that it had been repaid. He said that there is no evidence from any bank officer saying that the debt had not been paid. These submissions purport to place an onus of proof on the plaintiff in respect of the payment of money under a deed contrary to Young. They are rejected to the extent that they do so. The evidence of the defendants needs to be assessed in light of their failure to subpoena records from the ANZ Bank and their claim that the plaintiff could receive a tax deduction for negative gearing in late 1986, when that was not available until mid-1987 after legislative changes to that regime. Their claims also have to be considered in light of the inherent unlikelihood that EBS staff would willingly give information about money owing on the loan of a customer to third parties.
In support of the case of the first defendant, counsel refers to the plaintiff, as late as 22 November 2016, not making allegations about the loan not being repaid. Counsel also referred to the plaintiff's failure to call Troy, who has had a role in instructing her solicitors. However there is no reason to assume that Troy would be able to add anything useful to the evidence given by Ty.
Counsel for the first defendant also urged caution on the Court in finding that the debt had not been repaid when no non-repayment had been alleged for 28 years and most of the contemporaneous documents had been destroyed or lost. This submission again fails to grapple with the question of onus and with the failure of the defendants to subpoena the ANZ Bank, and the difficulties caused by the plaintiff's ill-health from the mid-1990s.
Counsel for the first defendant referred to the fact that the plaintiff did not tell Ty about the loan. This does not mean that the loan was repaid. It is equally consistent with the ill-health of the plaintiff from the mid-1990s. Counsel notes that fraud was not pleaded. This is correct. Fraud is not claimed. What is claimed is that the defendants have not satisfied their onus of proving that the debt was repaid.
The first defendant points to repayments made between 31 March 1986 and 30 June 1989 reducing the debt to the extent of $2,470.13. He refers to the fact that the plaintiff does not say how the repayments were made. However there is no evidence from the defendants about how the payments were made or why they were made in apparently random amounts at random times. It also begs the question as to whether the balance of the debt as at 30 June 1989 was ever repaid. The same applies to the plaintiff's receipt of the few periodical accounting statements given to her by the second defendant.
The defendants contend that they would not "hoodwink" the plaintiff, especially given the trouble taken to document the loan, and given all the altruistic deeds performed by the first defendant for the plaintiff over the years. However it is possible that no further payments were made after February 1989 because the defendants neglected or overlooked the debt, and the plaintiff did not press it. One can never know for sure. Statements from the ANZ Bank of the account of the Red Lion may have provided the answer.
Counsel for the first defendant submits that there is no reason why the defendants would cheat the plaintiff and perjure themselves. However it is possible that the defendants' recollection of the events of 1987 to 1990 is faulty, given the passage of time. The best documentary evidence of the repayment of the balance of the loan would come from the records of the ANZ Bank, but the defendants did not seek that information.
Counsel for the first defendant referred to a passage in a letter to the defendants from the plaintiff's solicitors dated 24 March 2017 which referred to their instructions that the first defendant would pay her mortgage instalments when they fell due. It is likely that an agreement to pay mortgage instalments was a condition of the loan. It is possible that this agreement occurred when there was still money owing on the mortgage loan before it was paid out.
The defendants rely on the absence of evidence by the plaintiff about complaint about non-payment up to 7 December 2017. The failure to complain does not necessarily mean that the debt was not repaid. The plaintiff may have been reluctant to press for repayment, given her relationship with the first defendant and the deterioration in her health over the years. Her failure to complain does not displace the onus on the defendants to prove that the debt was repaid.
The first defendant relies on the statement in cross-examination that the plaintiff presumed the loan was paid off. A precise examination of the transcript showed that her answer followed two questions, the last of which was "The loan is referrable to the flat?" The answers was, "I presume so." The evidence of the plaintiff cannot be relied on in this case in any event for the reasons I discuss below.
The separate submissions of the second defendant did not address any issue of substance that was not addressed by the comprehensive submissions of the first defendant.
Ty gave evidence about conversations he had with his mother about matters relevant to her dealings with the first defendant. That evidence was received subject to objection. Objection was taken to it by counsel for the first defendant in his submissions. That is because the plaintiff was made available to be cross-examined and was cross-examined. However it was apparent from the demeanour of the plaintiff when cross-examined and the way she gave her answers, that her evidence is not reliable and that she is unavailable as someone who is not competent to give evidence, or is mentally unable to give evidence, and it is not reasonably practical to overcome that inability: see s 3B(1)(b) and (c) of the Evidence Act 2001.
The plaintiff was diagnosed with dementia in 2017 by Dr Adamczewski, a geriatrician at the Royal Hobart Hospital ("RHH"). A letter from Dr Adamczewski to the plaintiff's solicitors raised the prospect of Alzheimer's disease. The plaintiff was assessed by Dr Skelton in her clinic on 14 November 2019. Dr Skelton is also a geriatrician at the RHH. She prepared a report in which she described the plaintiff as having significant dementia. Dr Skelton noted that Dr Adamczewski gave the plaintiff a score of 17/30 on the Montreal Cognitive Assessment Scale.
Dr Skelton gave evidence that when she asked the plaintiff about her court case she became distressed and said that she might be asked to be on a jury or meet a murderer. She was unaware that she was involved in a court case and said her memory had deteriorated over the last three years. She had no recollection of loaning money several years ago. Dr Skelton said it was probable that her evidence would be affected by mental illness and that there is evidence of cognitive decline which is getting worse over time.
When cross-examined, the plaintiff answered several questions with the response, "I must have". At one point she appeared ready to agree with everything put to her. Many of her answers contained the words, "I presume so", and some contained the words, "I can't remember".
In his submissions, counsel for the plaintiff accurately describes her as "little more than a deer caught in the headlights" when describing her evidence. Apart from the matters I referred to in the previous paragraph, counsel also correctly stated that some of her answers were that some things "ring a bell" and that many of them were non-responsive.
The manner of her giving her evidence, combined with the evidence about her given by Dr Skelton, lead me to the conclusion that the plaintiff's evidence cannot be relied on.
For the foregoing reasons discussed in dealing with the submissions of the parties, I conclude that the defendants have not satisfied their onus of proving that the balance of the debt owing under the deed was paid to the plaintiff. Their failure to subpoena the records of the ANZ Bank is a significant factor, in my conclusion. There is no evidence that a cheque allegedly given to Mr Scott Goodman was ever paid for the benefit of the plaintiff. There is no satisfactory evidence that the plaintiff had two loans with the EBS. There is only satisfactory evidence of one loan which was paid in full on 30 January 1987. Accordingly, the Court upholds the plaintiff's claim that the defendants owe her the balance of the amount owing under the deed from 30 June 1989, and interest. The rate of that interest and the question whether the action is statute barred, will now be addressed.
The appropriate calculation of interest – simple or compound?
Counsel for the plaintiff submits that the quantum of the debt ought to be calculated based on compound interest, either at the EBS mortgage loan rates or the 15% referred to in the deed. The deed refers to interest at the rate of 15%. There is no basis for subscribing a different figure from that set out in the deed.
The deed simply refers to "with interest thereon in the meantime at the rate of Fifteen Per Centum per annum". It does not say whether the interest rate should be calculated based on compound interest or based on simple interest.
The first defendant submits that the proper interpretation of the deed is that it was agreed that the plaintiff should be paid the debt with variable interest in accordance with the EBS loan rate which he says was 15% when the deed was entered into. However the rate at the relevant time was 16%. The reference to 15% in the deed is unequivocally clear. The fact that the relevant EBS interest rate at the time was 16% shows that it cannot be demonstrated that the defendants intended to apply the then EBS rate. The deed is not a contract to which the plaintiff was a party, although it was a document intended to protect her. The principles of construction of written instruments agreed by parties to them as discussed in cases such as Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 and the like are not relevant.
The defendants submit that interest should be calculated on a simple interest basis. In TSB Developments Pty Ltd v HCH & K Fisheries Pty Ltd [2003] TASSC 136 at [24], Cox CJ said:
"It has been held that 'unless there is a clear agreement to pay compound interest, interest is taken to be simple interest' (Bakker v Chamdri (1986) 4 BPR 9234 at 9236; Farrow Mortgage Services Pty Ltd (in Liq) v Victor Tunevitsch Pty Ltd (1998) 8 Tas R 65 at 73)."
This approach has been followed in the Supreme Court of New South Wales. See El Khoury v Harsany [2018] NSWCA 1774 at [48], applying Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 1396.
Therefore I consider the appropriate rate of 15% interest on the unpaid portion of the loan should be applied on the basis of simple interest.
Is the action statute barred?
Section 4(3) of the Limitation Act 1974 provides that:
"An action upon a specialty shall not be brought after the expiration of 12 years from the date on which the cause of action accrued ...".
In Barker v Duke Group Limited (in liq) [2005] SAFC 81, 91 SASR 167 at [168], White J said:
"There is old authority for the proposition that a cause of action for breach of a specialty accrues at the date of the breach. This is consistent with the principle that ordinarily the cause of action for breach of contract accrues as at the date of the breach, rather than the date on which damage is suffered as a result of that breach."
His Honour then footnoted two New South Wales authorities to support that proposition. They are:
· The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547.
· Sheldon v McBeath (1993) Aust Torts Reports 81-209 at 62,076.
The deed provides for repayment of the loan on the following basis:
· $2,000 on demand.
· A further $2,000 on 7 days' notice.
· A further $3,000 on 1 month's notice.
· The balance on a further 3 months' notice.
Although the defendants and Scott Goodman acknowledged the debt on 29 January 1987 by memorandum, once the deed became operative the debt was payable in accordance with the terms of the deed.
On 24 April 1988, $2,000 was paid off the debt. On various days in July 1988 and February 1989 (referred to in [28], a further $2,230.49 was paid off the debt. The last date of payment being 6 February 1989. An additional $1,500 was referred to in [29] above.
The first defendant relied on s 29(4) of the Limitation Act to say that the action is statute barred. That subsection provides:
"(4) Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgement or the last payment."
The first defendant submits to the effect that the right of action to recover the debt accrued as at the date of the last payment, being 6 February 1989, and therefore if a 12 year limitation applied to proceedings for recovery of the remainder of the debt, an action for recovery was barred after February 2001.
Counsel for the plaintiff submitted that the defendants' reliance on s 29(4) of the Limitation Act is misplaced. He contended that the purpose of s 29(4) is to provide a fresh accrual of a cause of action in debt where a person liable for the debt acknowledges the claim or makes any payment in respect of it. The plaintiff submitted that the underlying foundation of the action is not the debt which the first defendant owed the plaintiff, but the deed itself. The plaintiff sued on the deed. Counsel contended that the cause of action did not accrue until notice was given that payment was required in accordance with the deed. The plaintiff submitted that the giving of notice is a condition precedent to the liability to repay the money referred to in the deed. A demand for repayment in accordance with the deed was made on each defendant by letter from the plaintiff's solicitor dated 28 June 2018. The letter made a demand for the balance of the debt. The plaintiff submits that the cause of action did not accrue until the expiry of that notice, which inferentially occurred on 28 September 2018, and the action was commenced one month later.
Counsel for the first defendant submitted that "the deed itself is payable on demand". However that is not what the deed says. If the plaintiff did not ever choose to make a demand for payment, as the deed is written, the defendants would not be obliged to make payment of money owing under it. The reference to Seddon on Deeds, Federation Press, 2015, [6.5] and [6.10], supplied generously by counsel for the first defendant, supports the view that to be entitled to repayment under a deed, the non-executing party (in this case the plaintiff), must comply with conditions or constraints in the deed.
Counsel for the first defendant referred to the case of Ogilvie v Adams [1981] VR 1041, to support the proposition that an acknowledgement of a debt makes the debt repayable instanter. In that case there was a written acknowledgement of a debt which was payable on demand. That case did not concern a deed which set out how the money owing under it could be recovered.
The first defendant also relied on Krueger v Jansen [1991] NTSC 27. In that case the plaintiff lent $40,000 to the defendant. The parties entered into a deed which acknowledged that the plaintiff contributed $40,000 to the defendant to allow him to purchase a house. The deed provided for the repayment of $40,000 to the plaintiff on the sale of the house, after the payment of any mortgages, rates, taxes or other debts attaching to the property. The net proceeds of the sale of the house were insufficient to meet the mortgages on the house so that the plaintiff sued for her $40,000. The judge (Martin J (as he then was)), found the deed to be ambiguous and lacking certainty. He noted that it also provided for half the proceeds of the sale of the house to go to the plaintiff after the discharge of the mortgage and the payment of $40,000 to her. His Honour also observed that requests had been made by the plaintiff to the defendant to repay the $40,000 prior to the execution of the deed and that the deed did not extinguish her right to press that demand which she had earlier made.
Martin J said:
The plaintiff's cause of action for the recovery of the loan had occurred prior to the signing of the deed. Was the defendant's obligation to repay the loan upon request extinguished by the provisions of the deed? A clear intention to bring an obligation to an end is intrinsic to contractual discharge, but such an intention may be inferred by the parties' conduct. There is nothing in the deed to suggest that the pre-existing liability to repay the debt had been terminated. Here again the intention of the parties is to be observed ... The effect of the deed was not to release or discharge the defendant from the obligation to repay the loan to the plaintiff upon request and did not release the cause of action which had arisen prior to its execution At its highest it was a variation of the defendant's obligation conditioned upon the sale of the property ...".
In his written submissions counsel for the first defendant quotes from some of the above passage from the judgment of Martin J, and ends the quote with "The on-going part payments appear also consistent with such a proposition." I take it that the addition of those words to what the judge actually said was unintended and rather a statement made by way of submission. There were no prior payments in Krueger. In any event, Krueger is distinguishable from the current action because, unlike the plaintiff in that case, this plaintiff made no demand for repayment after lending money to the first defendant. It was not her idea to be the subject of a deed, and the first defendant in particular was under no obligation to repay the money lent to him prior to the execution of the deed in the absence of a demand for it. After the execution of the deed, the plaintiff made no demand of the defendants until 2018, and it could be only from then that they were in breach of an obligation to pay after an actual demand for payment had been made.
For the foregoing reasons I do not consider that the action is statute barred. The cause of action only arose when a demand for payment was made under the deed within the terms of the deed. However the first defendant submits that the first $2,000 and the interest on that sum is statute barred as it is a demand debt and is repayable instanter. The basis of the claim is that the plaintiff was entitled to be paid that sum on demand. However there is no evidence that she made such a demand, but there is evidence that an initial sum of $2,000 was paid to her on 24 April 1988, thereby extinguishing that part of the debt. I do not consider that the first $2,000 of the money owing and interest thereon is statute barred because it has already been paid. What is owing is the balance after the last payment made on 6 February 1989.
Although not addressed in his pleadings, the first defendant submitted that the demand made in June 2018 for the balance of the debt was not made in accordance with the deed. Counsel notes that part payments made up to 1989 were not made in accordance with a demand. The first $2,000 was paid without a demand. There was no need to demand it. The other part payments were in excess of the next $2,000 which was payable on seven days' notice. It appears that the balance of the next $3,000 or that amount less the $1,500 paid in January and February 1989, should have been claimed prior to a demand for the rest of the money owing. Acceptance of the claim that the money was not demanded in accordance with the deed would give the defendants a pyrrhic victory. The plaintiff would be able to make demands in the way suggested above, issue a new proceeding if those demands were not met, and recover the same amount which she claims in this action.
I accept the submission of counsel for the plaintiff that the defendants should have pleaded clearly that the 2018 notice was defective in the sense referred to in the submissions of the first defendant to avoid surprise. I agree that the Court should not permit the defendants to make a submission which should have been the subject of their pleadings. As counsel for the plaintiff contended, if such a claim had been pleaded, the plaintiff could have issued a fresh demand or demands. The second defendant observed in reply that his defence, in the alternative, stated that the period of notice only meant that $5,000 could be claimed. That submission is inconsistent with the analysis in the preceding paragraph given that in excess of $4,000 had been paid by February 1989.
Orders
The parties are requested to bring in short minutes of the orders required to give effect to these reasons including orders as to quantum. Unless any submission to the contrary is intended to be made by the defendants, the orders should also include an order that the defendants pay the plaintiff's costs.
Orders:
1That there be judgment for the plaintiff against the defendants in the sum of $81,973.41 plus interest at the daily rate of $6.21 until payment.
2 That the plaintiff have 92.5% of her costs of the proceeding, as taxed or as agreed.
3 I certify the Senior Counsel.
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