CIUPRYK v Thorp - [2004] WADC 229

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: CIUPRYK -v- THORP [2004] WADC 229

CORAM: MULLER DCJ

HEARD: 22-24 JUNE 2004

DELIVERED : 23 NOVEMBER 2004

FILE NO/S: CIV 2901 of 1999

BETWEEN: STEVEN DALE CIUPRYK
Plaintiff
AND
DOUGLAS HENRY ALBERT THORP
First Defendant

Catchwords:

Contract - Claim by employee against employer for arrear wages and expenses incurred by employee on employer's behalf - Additional claim for moneys loaned by employee to employer - Nature of weekly payments made by employer to employee - Admission of indebtedness by employer - Whether employer's indebtedness extinguished by set-off/counterclaim - Turns on own facts

Legislation:

Nil

Result:

Judgment for the plaintiff

Set-off/counterclaim dismissed

Representation:

Counsel:

Plaintiff: Mr P D Quinlan
First Defendant : In person

Solicitors:

Plaintiff: Lewis Blyth & Hooper
First Defendant : Not applicable

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

MULLER DCJ: In this action the plaintiff has claimed a total amount of $50,995.63 from the defendant. This total comprises a number of individual claims for fixed amounts of money said to be owed by the defendant to the plaintiff. The alleged debts arose between 1991‑1999 when the plaintiff worked for the defendant in a retail games and hobby business in Perth. The major component of the plaintiff's claim is an amount of $18,000 arising from the sale of the plaintiff's vehicle to the defendant for $28,000 and the disbursement of $18,000 from that sale to the defendant by way of a loan from the plaintiff. The second largest component of the claim is an amount of $16,499.88 which is said to be the balance of what the defendant owed the plaintiff for purchases of stock made by the plaintiff on the defendant's behalf and the supply of materials and model kits assembled by the plaintiff and sold by the defendant on consignment. The third component of the claim is an amount of approximately $14,500 reflecting wages that were allegedly owed by the defendant to the plaintiff which remained unpaid. The final and smallest claim made by the plaintiff relates to an amount of $1,995.75 allegedly paid by the plaintiff to a creditor of the defendant on the defendant's behalf.
The defendant admits most, if not all, the transactions from which the plaintiff's claims arise. He agrees that he does owe the plaintiff various amounts. He also admits owing the plaintiff various sums of money reflected in what was referred to as a "running account" over the period 3 August 1996‑20 February 1999 for the supply of stock by the plaintiff to the business or the payment of debts by the plaintiff on the defendant's behalf. The defendant claims, however, that he is owed money by the plaintiff and is entitled to set off what he owes the plaintiff against what the plaintiff owes him.

Plaintiff's account of his work history

The plaintiff, who was born on 20 November 1974, met the defendant in 1990 when he was aged 15 and was dating the defendant's daughter. He became friendly with the defendant and found they had a common interest in aviation and model aircraft. Within months of meeting the defendant the plaintiff said the defendant told him he wanted to re‑start a retail hobby business he had conducted in the past and asked the plaintiff to help him. The plaintiff, who was still in year 11 at school at the time, agreed to assist. In late 1990 or early 1991 the plaintiff began helping the defendant move stock from his home to a new location, pricing the stock and fitting out the new premises. The establishment of the new premises took place during February and March of 1991 and the plaintiff's contribution occurred in his leisure time after school and during weekends. During the initial phase of the establishment of the business the plaintiff spent approximately four hours daily working at the business premises after school and also spent the entire weekends carrying out the necessary tasks to set the business up. During this time he was not paid a wage but received free meals and was occasionally given a model aircraft from the defendant's stock.
In the middle of 1991 the plaintiff left school to work full‑time in the defendant's business. From this point of time on he worked long hours in the business beginning between 8.00‑10.00 am and finishing at 8.00 pm or, on occasions, much later. He was still not paid for his work. He said the defendant told him that he could not afford to pay him a wage but promised that when the business expanded he would be given a management role and possibly even run a branch of the business.
It was not until November/December 1992 that the defendant began paying the plaintiff a wage. This came about when the plaintiff's mother met the defendant and persuaded him to pay the plaintiff a wage to help finance an overseas holiday that the plaintiff and his mother intended taking. The defendant agreed to begin paying the plaintiff a wage. After his return from the holiday in 1993 the plaintiff re‑enrolled in year 11 at school and only worked in the shop at weekends and occasionally outside school hours. His 1993 group certificate shows that he was paid $1,750 for the tax year ending in 1993.
At the end of 1993 the plaintiff said the defendant decided to move his business location. The business premises had earlier been expanded at the end of 1991 and the plaintiff said he had played a significant role in that expansion. When the relocation occurred he began spending less time at school and working on an almost full‑time basis at the new premises. By the end of 1993 he said he was working 12‑14 hours daily, seven days a week.
The plaintiff's group certificate for the financial year ending June 1994 reveals he was paid an annual wage of $2,109.55, which, the plaintiff said, was certainly not reflective of the actual number of hours he had worked. At the beginning of 1994 he left school before the end of the first semester and began working almost full‑time in the business. He said his work during the week and over weekends totalled 40 hours. The increase in his number of working hours is reflected in his group certificate for the financial year ending June 1995 which reflects an annual income of $7,844. By this time he was being paid a regular weekly wage which initially was approximately $70 and later increased to about $400 in October 1995 as a reflection, not only of the work he was then doing, but also the unremunerated work he had done in the past. It was at about this time that he discussed his salary with the defendant whom, he claimed, agreed to increase his wage to $500 net weekly. The plaintiff said that in terms of the agreement he reached with the defendant the $500 weekly wage was fixed and was not dependent on the number of hours he worked. The first weekly wage payment of $500 was made in January 1996. His group certificate for the financial year ending June 1996 reflects a gross salary of $27,000. In 1997, which was the first year he was paid a net weekly wage of $500 for the full 12 months, he earned $33,739 gross. In 1998 his gross wage dropped to $21,318. This reduction was a result of discussions he had with the defendant in January 1998 when he agreed to accept a reduced weekly wage of $130 reflecting both a marked reduction in the number of hours he worked which, by then, was confined to the weekends and the fact that by then he considered he had been adequately compensated for his past efforts. In 1996‑1997, prior to the reduction in the number of hours he worked, he had worked every weekend from 10.00 am to 5.00 pm on Saturdays and from 1.00 pm to 4.00 pm on Sundays and also during the week when he collected stock from suppliers in the metropolitan area and delivered the stock to the business.
Although a weekly wage had been agreed and was often paid, the plaintiff said the defendant frequently asked him not to bank his wage cheque but to return it to the defendant on the understanding that he would be paid his arrear wages later. In addition to these outstanding wages the plaintiff claimed he also frequently incurred expenses on the defendant's behalf in respect of which he was entitled to reimbursement. Many of these claims remained unpaid by the defendant.
From 1998 onwards, after the plaintiff's working hours had been substantially reduced, he frequently discussed the question of the repayment of his unpaid wages and loans with the defendant and said that at the end of 1999 he agreed with the defendant to prepare what was referred to as a reconciliation with the bookkeeper employed by the business and arrange a scheme by which the defendant could repay what he owed him. The plaintiff said that he and the bookkeeper, Coralee Hales, prepared a reconciliation (exhibits 23 and 24) reflecting the unpaid cheques and the defendant agreed to repay him the amount owed in monthly instalments of $1,000 or, if he were unable to pay this amount, in $500 monthly instalments commencing on 26 April 1999. On 24 April 1999 the bookkeeper informed the plaintiff that the defendant was unable to afford to pay the monthly instalments agreed upon and shortly after that the plaintiff commenced these proceedings.

Defendant's account of plaintiff's work history

One of the principal areas of focus by the defendant was the extent to which the plaintiff contributed to the running of the business.
The defendant gave evidence that the lease for the business premises was entered into in January 1991 and the business began trading the following month. He disputed the plaintiff's assertion that large quantities of stock were moved from the defendant's home to the new business premises. The initial stock acquired by the business was, the defendant asserted, supplied by a wholesaler who owed the defendant approximately $60,000 from the sale of an earlier business owned by the defendant.
The defendant said the plaintiff was not involved in setting up the business at all between February‑October 1991. After October 1991, when the business was expanded into adjoining premises, the plaintiff began calling in after school. This, the defendant said, was done out of interest alone because there was no work for the plaintiff to do.
In August 1991 the plaintiff allegedly told the defendant he was unhappy at school and in October 1991 asked if he could live with the defendant in the home which the defendant had recently occupied with the person he then lived with. Because this was impracticable the defendant said he agreed to allow the plaintiff to sleep in the shop. From that point on the defendant began living at the business premises.
The defendant agreed that at the end of 1992 the plaintiff's mother told him her son was returning to school in 1993 and asked the defendant to pay him some wages for the last remaining weeks he was at the shop. The defendant said he made about five payments of approximately $200 net to the plaintiff in 1992.
Between 1991‑1994 the defendant said the plaintiff's pattern of casual work in the shop continued. During this time, according to the defendant, the plaintiff continued his schooling and the only work he did in the shop was done on a casual basis.
From 1995 onwards the defendant claimed the plaintiff only worked in the shop during weekends. Although he sometimes came into the shop during the week he did so principally out of interest and did little work of any significance. This situation, according to the defendant, continued throughout the remainder of the plaintiff's employment. His contribution to the business was limited to weekend work.
The defendant called several witnesses to confirm that the plaintiff's employment was principally confined to weekend work. Sally Ramsay, who was in a relationship with the defendant between the late 1980's‑ 1993, said that the plaintiff certainly helped to establish the business at the beginning but was simply one of many others, including family and friends, who combined their efforts to establish the fledgling business. She said that the plaintiff and the defendant's daughter, Tiesla Thorp, certainly helped during these initial months but that the plaintiff was not there all the time. Another employee, Sinti Ormsby, who was the defendant's daughter, said she became the store manager in March 1993. Prior to her becoming a permanent employee she said she helped with others in establishing the business including erecting shelves, book stands and partitioning. She said the plaintiff helped with the initial establishment of the business and quite frequently was on the premises with his then girlfriend, Tiesla Thorp. She agreed in cross‑examination that between 1991‑1992 the plaintiff was doing work in and around the shop but not being paid. At the time she was studying at home and recovering from an accident. She only visited the shop sporadically during this period. She was not certain if the plaintiff was living in the business premises in 1992 because she only attended the premises sporadically. When the business was moved to larger premises in 1993‑1994 she said that the plaintiff and the defendant were principally responsible for making and installing shelving, partitioning and doing the other necessary work associated with re‑establishing the business in new premises. From that point on, however, she said the plaintiff did not attend regularly. She believed he was still at school and he only came to the shop during weekends and sometimes out of school hours. She said he was regarded as one of the family and worked in the shop during weekends. After she became the store manager in March 1993 she said the plaintiff played a very limited role in the running of the business. She said that orders for software were primarily the responsibility of an employee named Paul Schrader while another employee named Terence Reddy was responsible for maintaining a supply of hobbies and kits. She said that she took on the role of being responsible for various lines of games. She confirmed the defendant's evidence that the plaintiff's contribution was really confined to weekend work.
The bookkeeper in the business, Coralee Hales, began work in October 1995 and said that the plaintiff only worked during weekends. She said she only saw him during the week if he called in.
I gained the distinct impression that the witnesses called by the defendant deliberately tried to downplay the role played by the plaintiff in the business. All the witnesses were either related to the defendant or had been in a personal relationship with him at some point in time. Sally Ramsay, for example, was involved in a relationship with the defendant until 1993 and the bookkeeper, Coralee Hales, had been married to him and continued to work for him. The other witnesses, as I have said, were the defendant's daughters.
Leaving aside the special relationship each of the witnesses enjoyed with the defendant at one time or another there are also aspects of their evidence which I found to be unsatisfactory. Sally Ramsay, for example, had very little to do with the business after 1993. Between 1994‑1998 she ran her own business and, on her own admission, was preoccupied with that. She said she only came to the store once or twice a week after she began operating her own business. Sinti Ormsby, though perhaps in a much better position to comment on the degree of the plaintiff's involvement, was unable to say much about the earlier years between 1990‑1992 because of her own commitments at home and her convalescence after her accident. I also found it difficult to reconcile her evidence of the minimal contribution made by the plaintiff with other evidence led during the trial. For example, she said that between 1996‑1997 the plaintiff was only working on weekends. She agreed, however, that the majority of local suppliers were only open for business between Monday and Friday. Having made that concession she also had to agree that any collections of stock made by the plaintiff must have been on week days between Monday and Friday when, on her evidence, he only paid casual visits to the shop after school. Her evidence in this regard is quite inconsistent with the evidence of the plaintiff, supported as it is by the various invoices and other documents which form part of exhibit 18, that he was active during the week placing and collecting orders on behalf of the business. The evidence of Coralee Hales is also questionable. While she claimed the plaintiff only worked weekends, and that she only saw him during the week if he called in briefly, she had to concede that she spent most of her time in an office at the back of the shop and was unable to see what was happening in the shop itself. Her assertion that orders were not made by the plaintiff is, in my view, open to question. While she said that she was responsible for the transmission of facsimile orders, and was able to say who had compiled them, she was unable to name anyone who had compiled orders in the years she had worked there. The most she could say was that orders were made "by other people". Her inability to name those primarily responsible for making orders casts doubt upon her assertion that the plaintiff was certainly not one of the employees who did so.
When I weigh the evidence of the plaintiff, supported as it is by the vouchers which form part of exhibit 18, the weekly cheque payments of $500 made to him and the schedule of expenses (exhibit 23) he incurred on behalf of the business which is not in dispute, I have no hesitation in reaching the conclusion that he played a significant role in the business and must have been regarded as a valuable employee. I do not believe he has exaggerated the contribution he made. Everything points against that. It was also clear to me that some of the witnesses called by the defendant, particularly Coralee Hales, were extremely hostile to the plaintiff and, in her case, described him as devious, underhanded and expressed disgust with him. All these witnesses, bearing in mind their special relationship at one time or another with the defendant, have a possible motive to downplay the contribution made by the plaintiff.
I am satisfied the plaintiff did make the contribution to the business he claimed he did and that his contribution was significant.

Credibility of the parties

The plaintiff was cross‑examined for over seven hours by the defendant. The cross‑examination ranged over a variety of matters many of which seemed irrelevant either to the issues under consideration or the plaintiff's credibility. The defendant, however, was unrepresented and necessarily had to be given a wide latitude. Given the number of discrete claims made by the plaintiff I believe it would be appropriate to relate the cross‑examination to the various heads under which these claims were made.
The plaintiff's degree of involvement in the initial phase of setting up the business was challenged by the defendant. The purpose of this line of questioning was presumably to demonstrate that the plaintiff did not make the substantial contribution in the early stages which he claimed he had done. Had he not made the contribution he claimed, for little or no payment until the situation changed in or about 1995, his claim that the defendant agreed to fix his weekly wage at $500 net to reflect in part the unpaid contribution he had made earlier would be seen to be suspect. The plaintiff countered this allegation by saying the shop was part of his life and that in the initial stages of setting up and running the business the question of what wage he should be paid was not a significant consideration. He emphasised that his earlier relationship with the defendant was not the traditional one of employer and employee and that, while he readily worked without being paid any wages, he believed the defendant's repeated promises, admittedly made in vague terms, that he would eventually be compensated for the work he was doing. It was in the context of that background that the plaintiff claimed the defendant agreed to pay him $500 weekly in early 1995.

I am satisfied that this agreement to pay the plaintiff a fixed weekly wage of $500 net was reached. I also accept the plaintiff's explanation as to how and why this was arrived at. I found the plaintiff to be a convincing witness. He gave what I consider to be an unembellished account of the history of his work with the defendant. What emerged from his evidence was the clear picture of a young person, who initially was still at school, bound in what was at first a close personal relationship with the defendant and eager to do whatever was required of him in order to acquire a stake in the business. This, in fact, was what he was promised by the defendant. The defendant told him in the early stages of the setting up of the business that he would eventually get a managerial role and possibly run one of the branches of the business if it expanded as they expected it might.
The plaintiff was also cross‑examined at length about the rather unusual alleged arrangement whereby the larger portion of his weekly wage was to be paid into what could be described as a loan account with the business to be drawn on by the plaintiff in order to acquire or purchase goods for the business. The plaintiff categorically denied having reached any such arrangement with the defendant. He also denied he had asked the defendant to deduct a weekly rate of tax based, not on the actual wage he received, but on the aggregate of the money he received and the amount paid into the so‑called loan account. I will deal with this aspect of the defendant's case at a later stage but I should mention that the plaintiff seemed surprised and perplexed, as well he might have done, at the suggestion that he surrendered the larger portion of his wage in the manner suggested by the defendant and, on top of that, agreed to pay income tax on money he did not even receive.
I should mention that when cross‑examined on the subject of the claim for wages the plaintiff's attention was drawn to a hand written document, which he admitted contained some of his handwriting, and which, it was suggested, constituted a draft list purporting to reconcile what wages he was owed and what payments he had received (MFI 29). I accept the plaintiff's evidence that, while he may have written some of the material contained in that document, it was not intended to be a reconciliation of wages earned and wages actually paid. I also accept the plaintiff's evidence that, after the defendant had asked him to prepare a reconciliation of what was owed by way of wages and what had actually been paid, the resulting schedule of wages owed and paid (exhibit 23) was approved by the defendant's bookkeeper, Coralee Hales, who signed the document as an acknowledgment that it was correct and agreed to a scheme of repayment. I am satisfied of this notwithstanding the plaintiff's admission that he may have inserted part of the handwritten material after the document had been signed by the bookkeeper. What the plaintiff is alleged to have inserted at a later stage does not detract from the probative value of the document as a true record of what was owed by the defendant and what had been paid by the defendant. The words which the plaintiff conceded he might have added after the document had been signed by the bookkeeper simply purported to summarise that the total amount owed comprised 16 cheques of $500 each making a total of $13,000 outstanding in respect of wages and a further amount of $1,995 representing the cheque originally made payable to Jerdon which the defendant had subsequently asked him not to present. These handwritten additions, even if made after the document was signed, do not, in my view, undermine or detract from the evidence of the plaintiff himself on this point or the accuracy of the document, exhibit 23. In fact the defendant agreed that, while he did not authorise Coralee Hales to agree to the repayment schedule, he was prepared to accept what had been arranged between her and the plaintiff and did not challenge the accuracy of exhibit 23 except to say it was incomplete.
It was suggested to the plaintiff in cross‑examination that he was repaid $200 a week in reduction of the debts owed to him by the defendant. In this regard the defendant relied upon the photocopy document MFI 29 which, as I mentioned earlier, the plaintiff conceded contained handwriting of his but which he was unable to explain or identify. The plaintiff denied this and also refuted the defendant's assertion that the running account had been reduced to a nil balance by 10 January 1998.
The defendant was certainly not an impressive witness. Allowing for the fact that he was unrepresented I still found him to be rambling, repetitive, inconsistent and at times argumentative. The major emphasis in his evidence was to deny that the plaintiff had made a significant contribution to the setting up and running of the business between 1991‑1994. He consistently referred to the plaintiff's attendance at the shop as being more in the nature of a regular visitor than as an employee. What work he did was more of a casual nature than anything else. This evidence contrasted starkly with that of the plaintiff who said that after leaving school in 1992 he invested nearly all his time and effort in the business. What the defendant said about the plaintiff's involvement in the business during its initial phase is difficult to accept. Not only did it conflict with what the plaintiff had to say but it was also inconsistent with what the defendant had himself said on earlier occasions. In an affidavit sworn on 17 July 2001 the defendant said:
"18.From 1995 to 1999, a period of five years, the plaintiff managed various aspects of my store, and I gave him great leeway in doing so. The plaintiff also had qasi‑ownership of the store, and both he and I viewed our common goal as growing the store. Indeed it was said to my by my family that he was like the son I never had."
These assertions, which the defendant sought to minimise in his evidence, were quite inconsistent with his claim that the plaintiff was little more than a casual visitor to the shop and a weekend employee between 1991‑1995. The admission that from 1995 the plaintiff played a leading role in the business with the ultimate goal of obtaining an interest or stake in the shop cannot be reconciled with the assertion that in the years before this period the plaintiff was nothing more than a casual visitor. The truth of the matter is that the plaintiff actually lived in the shop for the whole of 1992 before he returned to school in 1993 and, during this period, made a substantial contribution to the running of the business.
Apart from the unsatisfactory nature of the defendant's evidence as to the plaintiff's degree of involvement in the business during the earlier years I also found his testimony in other areas to be implausible. In cross‑examination his attention was drawn to an affidavit he swore on 7 May 2002. The correspondence attached to that affidavit, together with draft letters he suggested his lawyers send to the plaintiff, clearly show a continuing pattern of attempting to exert pressure on the plaintiff to withdraw his claims by counterclaiming and increasing the counterclaim to what appears to be quite arbitrary levels. I am satisfied from the correspondence attached to this affidavit that the defendant was prepared to intimidate the plaintiff into discontinuing his action even if that meant broadening the ambit of his counterclaim to quite unjustifiable limits.
There were very many other areas in the defendant's evidence which, in my view, showed him to be an unreliable witness. Perhaps no other area is more significant than his attempt to explain the $500 net weekly payment made to the plaintiff. I have already referred to his assertion in evidence that only a small portion of the payment represented the plaintiff's wage and the balance was intended to represent an investment the plaintiff was obliged to make in the business. I have already said I have found this suggestion totally implausible. But the defendant was not even consistent in describing the payment in these terms. In an affidavit dated 17 July 2001 he said that the plaintiff asked him to run his business accounts through the books together with his wages so that he would not have to pay more tax. He went on to say that he was told by the plaintiff that the plaintiff earned significant amounts of cash for conducting some form of testing on behalf of his father's company. These assertions in this affidavit were clearly designed to convey the impression that the amounts reflected as wages paid to the plaintiff included a significant monetary component earned by the plaintiff from some other source altogether. The defendant was totally at a loss to explain these assertions. They simply could not be reconciled with his defence that the weekly payments made to the plaintiff comprised a component for wages and a far more substantial amount that was required to be rolled over into the business account.
These are only some of the examples in which the evidence of the defendant was unsatisfactory in a material sense. There are many other instances as well. At times I gained the distinct impression that he was becoming increasingly desperate as the implausibility of his evidence became apparent. I cannot accept his evidence as being either truthful or reliable in those areas where it materially conflicts with that of the plaintiff.

Loan arising out of sale of plaintiff's car

On 22 November 1995, not long after the plaintiff's 21^st birthday, he purchased a Mazda vehicle for $24,500. He paid for the car from his own savings and money provided by his father. In December 1995, only one month after he had purchased the vehicle, the defendant suggested that he should purchase the car from the plaintiff for $28,000 with finance provided by Esanda Limited on the understanding that the plaintiff would loan the defendant $18,000 from the proceeds of sale and keep $10,000 for himself. The $18,000 loaned to the defendant was to be rolled back into the business. No precise time for the repayment of the $18,000 loan was fixed but the plaintiff claimed the defendant undertook to repay this amount within a period of months.
The plaintiff said he agreed to this proposal. The car was sold to the defendant who arranged finance through Esanda Limited. The plaintiff was uncertain as to how the purchase price of $28,000 was made available by Esanda but was positive the money was never paid into his account. He said he simply received $10,000 from the defendant who retained the balance of $18,000. The loan of $18,000 was, according to the plaintiff, never repaid by the defendant. In pars 2‑5 of his defence the defendant admits that he purchased the vehicle from the plaintiff with finance provided by Esanda but denied that he only paid the plaintiff $10,000 and kept the balance of $18,000.
The defendant denied the plaintiff had loaned him $18,000. He agreed he had purchased the vehicle from the plaintiff with finance provided by Esanda Limited but only to facilitate a loan of $18,000 made by the plaintiff to his brother Richard Thorp. He explained the arrangement by describing how in December 1995 the plaintiff told him he wanted to invest $18,000 in a business in which his brother was involved. The defendant said he was surprised because he knew the plaintiff was aware of his brother's business reputation. What happened after that was that both the plaintiff and the defendant's brother, Richard Thorp, asked the defendant, who apparently was the only person with an acceptable credit rating, to purchase the plaintiff's car for $28,000 with finance provided by Esanda. The defendant said he agreed to do this and arranged for the necessary transaction to be finalised.
On 10 January 1996 the defendant said the cheque for the purchase of the vehicle was brought to his business by a representative of the finance company and was given to the plaintiff. At the time the plaintiff, the defendant's brother Richard Thorp and a woman named Ilka Staschen were present. A discussion ensued as to how the plaintiff was to arrange for the $18,000 loan to be made to the defendant's brother. At first it was thought feasible that Ilka Staschen should bank the finance company cheque in her account and then draw two cheques on her account in favour of the plaintiff and the defendant's brother. Ilka Staschen, however, was apparently not anxious to use her account for that purpose. The defendant said the upshot of all this was that he agreed to deposit the finance company cheque in his business account and to draw one cheque for $10,000 on his business account in favour of Richard Thorp and another for $10.000 in the plaintiff's name. This was done but the cheque made payable to Richard Thorp was substituted for an $18,000 cheque payable to Ilka Staschen. In that way the defendant used his business account to facilitate the proposed loan of $18,000 by the plaintiff to Richard Thorp. Arrangements were made for the bookkeeper to draw the two cheques on the defendant's account as trustee for the DHAT Trust trading as Valhalla Games and Hobbies. The bookkeeper gave a $10,000 cheque to the plaintiff and an $18,000 cheque to Ilka Staschen (exhibit 34). The vehicle was kept by the defendant at the premises where he was living. His brother, Richard Thorp, apparently arranged to pay him a rental fee for the use of the vehicle at some stage in the future. The defendant said the plaintiff later asked him to contact his brother and persuade him to release the documentation relating to this loan transaction. Apparently no documentation was ever forthcoming.
The defendant's brother, Richard Thorp, was called by the defence and gave evidence in Sydney via a video link. He confirmed the defendant's account of what had occurred. He said that prior to December 1995 he had discussed the possible investment of funds by the plaintiff in his business ventures and the plaintiff had agreed on this occasion to invest $18,000 in a particular scheme managed by Richard Thorp. In discussions with the plaintiff it was agreed that the plaintiff would sell his vehicle for $28,000 and contribute $18,000 of the purchase price towards the proposed venture. The defendant was approached and agreed to use his credit rating to obtain finance from Esanda Finance and purchase the vehicle. Richard Thorp emphasised that his brother's role in the transaction was limited to providing a bank account to clear the finance company's cheque and pay the proceeds of that cheque to the plaintiff and Richard Thorp in the manner agreed. Richard Thorp emphatically denied that he had obtained $18,000 from the defendant after the defendant had obtained the money from the plaintiff by way of a loan.
I was not convinced by either the evidence of the defendant or his brother on this issue. I should point out that the plaintiff was never cross‑examined as to what it was claimed happened at the defendant's business premises. While it was suggested to the plaintiff as a general proposition that he had loaned the $18,000 directly to Richard Thorp the details surrounding the transaction were never put to the plaintiff for comment. No mention was made of this particular meeting at the plaintiff's premises when both Richard Thorp and his partner, Ilka Staschen, were allegedly present. The plaintiff was never given the opportunity to comment on the allegations as to how the payment of the alleged loan to Richard Thorp was arranged through the accounts of the defendant and Ilka Staschen. Quite apart from this oversight on the part of the defendant, which may be understandable given that he was not represented, I was not impressed by the evidence of either the defendant or Richard Thorp on this issue. I certainly gained the distinct impression that the defendant had recently discussed this issue with his brother. While Richard Thorp conceded that the alleged arrangement took place eight years ago he had a detailed recollection of every significant event which took place which corresponded exactly with the detailed account given by the defendant himself. The two accounts matched each other so perfectly in detail as to raise a reasonable suspicion that the witnesses had previously discussed what to say. The only point on which they disagreed was whether the defendant ever asked his brother for documentation to support the transaction. That point was really incidental to the whole issue. On every other point of detail their evidence tallied.
Given their close relationship at the time the alleged debt was entered into I believe I should scrutinise their evidence with great care. In cross‑examination Richard Thorp admitted that he had been an unsuccessful litigant in another action involving his signature to a deed when his brother, the defendant, had been called as a witness to support his defence. I gained the distinct impression that he was anxious to help his brother, the defendant, on this occasion just as his brother had apparently helped him on the earlier occasion referred to.
I far prefer the evidence of the plaintiff to the evidence of the defendant and his brother. He was, in my view, a far more convincing witness. I can understand how he was prepared to loan the defendant $18,000 from the sale of his car to invest in a business in which he thought he was eventually going to have a stake. I cannot understand why he would do the same for Richard Thorp when, on the evidence available, there was no particular bond between them as there clearly was between the plaintiff and the defendant and no particular interest by the plaintiff in Richard Thorp's business ventures as he undoubtedly had in the business being run by the defendant.
But the evidence as to the $18,000 loan does not end there. Coralee Hales, who was once married to the defendant and was working for him as a bookkeeper at the time of the alleged loan, said she was present in the office on the occasion Richard Thorp and his female friend, Ilka Staschen, came to the office. She said she was in her own office when she heard Richard Thorp's voice and that of the plaintiff. She also heard a female voice she did not recognise. She said the defendant asked her to write out two cheques, one for $18,000 payable to Richard Thorp and the other for $10,000 payable to the plaintiff. She said she did what she was asked and took the cheques out of the office and gave them to the plaintiff. She said she then returned to the office. The defendant then came back into her office and asked her to alter the cheque payable to Richard Thorp and make it payable to Ilka Staschen. She said she made the alteration and once again left the office and gave the cheque to the plaintiff. No sooner had she returned to her office than the defendant came in again and asked her to make a fresh cheque for $18,000 payable to Ilka Staschen. She said she made out the fresh cheque and went out of the office and gave it to the plaintiff. She said she recorded these cheque payments in the business records of the company. An extract from the business records reflecting these cheque payments, including the cancellation of the cheque made payable to Richard Thorp, was introduced into evidence as exhibit 34. The extract reveals a payment to the plaintiff of $10,000 which is designated as "capital out". It also shows a payment of $18,000 to Ilka Staschen which is also designated "capital out".
If, as the witness asserted, she gave the cheques personally to the plaintiff on each of the three occasions she claims she did it would seem he must have known the $18,000 was being given to Richard Thorp, or his partner Ilka Staschen, and not to the defendant. The evidence of Coralee Hales is critical on this point. In evaluating her evidence I must take into account that she openly expressed her dislike for the plaintiff. She described him as devious, underhanded and said she was disgusted with him. This overt hostility towards the plaintiff, coupled with her relationship with the defendant, has caused me to view her evidence with the utmost caution. An example of her attitude towards the plaintiff was her refusal under cross‑examination to accept she had signed an undertaking in exhibit 24 to commence payments of the amounts owed to the plaintiff on 26 April 1999. She seemed to suggest that the words "commencing 26.4.99" in exhibit 23 had been added without her knowledge after she had signed the document. It was only when her attention was drawn to her note (exhibit 28) in which she told the plaintiff the business could not pay the plaintiff $500 on 26 April and that the 4 May was the earliest date on which he could expect payment that she begrudgingly had to acknowledge her earlier evidence, given so emphatically, was wrong.

The other evidence relating to this transaction came from the defendant's daughter, Tiesla Thorp. She was the plaintiff's girlfriend between 1990‑1992. She said that after their relationship ended the plaintiff told her to ask her father to get his brother, Richard Thorp, to hand over the papers and money relating to the sale of the Mazda. She said he repeatedly asked her to do this. When cross‑examined she agreed that all the plaintiff had asked her to do was to ask the defendant to get his brother, Richard Thorp, to pay what he owed him. She did not mention the debt being linked to the sale of the Mazda. She agreed with counsel that was all she was asked. In re‑examination, however, she repeated what she had said in her evidence in chief that the plaintiff had asked her to tell her father to ask Richard Thorp about the money and the papers relating to the Mazda vehicle. Given the plaintiff's claim that it was only much later he was told by the defendant that the money had been given to Richard Thorp, it is not surprising he may have asked Tiesla Thorp to ask her father to get the money back from his brother.
In the end I am left in no uncertainty as to whether the loan was made by the plaintiff to the defendant or to Richard Thorp. I have grave reservations about the evidence of the defendant and some of his witnesses, and taking into account the failure of the defendant to cross‑examine the plaintiff on this issue and the details surrounding the transaction, the probabilities all point towards a loan having been made to Douglas Thorp. I find that the plaintiff, who was only a young person at the time, loaned the money to the defendant only to discover later that the defendant had apparently given the money to Richard Thorp.

22 unbanked $500 cheques of $5000 – total $11,000

I have already mentioned how at the beginning of 1996 the defendant agreed to pay the plaintiff a net weekly wage of $500. The plaintiff's weekly wage was paid by cheque signed either by the defendant or by Caralee Hales who was the bookkeeper. At first the plaintiff had no problem with his weekly payments. In mid 1996, however, the defendant asked him not to present his weekly pay cheque to the bank for payment because there might be insufficient funds in the account to meet the cheque. The plaintiff said he agreed not to bank his weekly cheques without the defendant's approval. The defendant repeatedly requested the plaintiff not to present weekly pay cheques for payment. Approximately one cheque each month was presented for payment with the defendant's approval but the remaining weekly pay cheques were not banked and began to accumulate. As time went by fewer weekly pay cheques were able to be banked.
The plaintiff said he continued to work for the defendant and received weekly pay cheques as arranged. He said he was prepared to accede to the defendant's request not to bank the weekly cheques because he wanted to assist the business to grow and believed that he would eventually be repaid.
In the latter part of 1997 the defendant told the plaintiff he intended to close the bank account on which the unpresented cheques had been drawn. By this time the plaintiff had accumulated 22 cheques that had not been presented for payment. The defendant asked the plaintiff to return these cheques on the undertaking that he would give the plaintiff a replacement cheque or cheques for an equivalent amount. The plaintiff agreed and returned the 22 unpresented cheques to the defendant. The original cheques were kept in the bookkeeper's office and were subsequently photocopied by the plaintiff in late 1998 or early 1999. The plaintiff claimed that the defendant never gave him a replacement cheque or cheques for an equivalent amount.
In par 7 and par 8 of his defence the defendant admitted that he gave the plaintiff the 22 weekly cheques in question and requested the plaintiff not to bank the cheques. In par 7 of his defence, however, he denies that each $500 cheque represented one week's wage excluding tax and asserted that only a portion of the gross amount paid weekly to the plaintiff related to his weekly wage. He further asserted that the larger portion of the gross weekly amount paid to the plaintiff was allocated towards the payment of what was referred to as the defendant's account with the plaintiff and that income tax was paid on the gross amount.

The 22 unpaid $500 cheques and the three Westbond cheques

The most critical issue in relation to this aspect of the trial, and the one upon which in the end everything seems to turn, was the nature of the $500 net weekly payment made by the defendant to the plaintiff. The critical question is whether this payment represented a wage or salary to remunerate the plaintiff for the work he was doing and also compensate him for the unpaid work he had done in the earlier years or whether only a small portion of it represented a wage component and the larger balance was intended to be ploughed back into the business as some form of investment or loan.
I have already described how in October 1995 the plaintiff's wage was increased from approximately $70 to $400 as a reflection, not only of the work he was then doing, but also, according to him, of the unremunerated work he had done in the past.
It was at this stage, according to the defendant, that the plaintiff put a proposition to him. He was interested in the business and was anxious to invest capital that could be used to purchase both new and used stock. Although no specific figures were discussed the defendant claimed the plaintiff said he was interested in investing in the business provided he received regular repayments on any loan he made. He also wanted to work during weekends at the shop. Although this idea was floated in December 1995 no specific figures were agreed to. What the plaintiff allegedly proposed was somewhat unusual. He asked the defendant to consider paying him a regular weekly amount reflecting both his wages for work he did for the business and the repayment of money he invested in the business. He also wanted the defendant to deduct income tax from both the wage and loan components of this repayment. The defendant said he was rather perplexed by this request. Knowing that the plaintiff would not have to pay income tax on any repayment of loan moneys he invested in the business he said he telephoned the taxation office for advice. Having received this advice he said he told the plaintiff that it was possible to deduct income tax from both the wage and loan components of any payment made to the plaintiff.
Up to this point it is significant that no specific figures had even been discussed. It is even more significant that the plaintiff had not told the defendant what he intended to contribute by way of a loan to the business. Without waiting for the plaintiff to make any specific commitment, however, the defendant said he agreed with the plaintiff's proposal to make a weekly payment of $500 net. Having reached this understanding the defendant said he then calculated what the appropriate gross weekly figure should be and arrived at a total of $661.55 from which he deducted income tax of $161.55 leaving a net figure of $500.
It was in this way, the defendant claimed, that the plaintiff began to be paid $500 a week from late December 1994. He was paid that amount even though he had not made any investment in the business and had not even reached any agreement as to what that investment might be.
The payments of $500 net a week continued on this basis until mid 1996. The defendant said he was preoccupied with other personal matters and had overlooked raising the issue with the plaintiff. In mid 1996, however, he discussed the situation with the plaintiff who agreed to begin making a contribution towards the expenses of the business and purchasing stock for the business. How this arrangement was reached, and the details of its implementation, are very confusing. The first schedule to the defendant's counterclaim purports to analyse the financial details of the implementation of the scheme. An examination of the schedule reveals that the plaintiff's alleged gross weekly wage was $138.25. This figure represented his entitlement for the hours he worked in the business principally over weekends. But the gross weekly payment made to the plaintiff was $661.20. According to the defendant the plaintiff agreed to contribute the difference between his gross weekly wage of $138.25 and the total gross weekly payment of $661.20 to the business. This meant he was obliged to pay the business $522.95 a week. According to the defendant this arrangement continued unchanged between 23 December 1995 and 13 December 1997 when it was suspended. According to the first schedule to the counterclaim the total amount that ought to have been paid by the plaintiff to the business pursuant to this arrangement was $39,745. It is this amount which the defendant claims the plaintiff owes him.
The defendant was unable to give any convincing explanation as to why he made the substantial weekly payment to the plaintiff on the understanding that most of it had to be reinvested in the business. The whole scheme makes no sense at all. The weekly payment to the plaintiff was nothing more than giving money to a person who was not entitled to it on the understanding that it simply had to be paid back weekly to the person who gave it in the first place. Try as he might the defendant could not explain the rationale behind the scheme. I am simply unable to accept that the plaintiff would have agreed to receive a gross weekly wage of $138.25 on the condition that he ploughed back $522.95 weekly into the business. The scheme was so detrimental to the plaintiff that no rational person could ever have agreed to it. It is also difficult to see what advantage it held for the defendant because he was, after all, only taking back into the business money which he was never obliged to pay out in the first place. Quite apart from the financial disadvantage the scheme would have put the plaintiff in it is difficult to know what benefit he would have received from his alleged insistence that tax be deducted, not only from the wage component of the payment, but also from the balance of $522.95 which he was supposed to be ploughing back into the business. The 1997 group certificate (exhibit 8) shows a "gross salary" of $33,739 and tax instalments of $8,239 deducted. The description "gross salary" clearly reflects what the nature of the payment was. Even the defendant's cheque payment book contains entries of a series of $500 cheques paid to the plaintiff described as "super and salary". Some of these entries were made by the defendant himself. Everything points to the $500 cheques being payment of the plaintiff's wages.
The evidence of Coralee Hales does not change the situation at all. Although she was the bookkeeper at the time she was not a party to the arrangement between the plaintiff and defendant. What is significant, however, is her admission that she signed the endorsement to the plaintiff's reconciliation of payments (exhibit 23). The endorsement, which was produced as a separate document (exhibit 24), read as follows:
"Repayment based upon $1,000 per month aim, with $500 minimum payment per month by end of 2^nd week of each month commencing 26^th April 99."
The witness admitted she signed this endorsement which amounted to an acceptance of the figures contained in the reconciliation document (exhibit 23) and purported to be a statement of intention in relation to the repayment of the money owed to the plaintiff.
The defendant was not asked to approve the plaintiff's reconciliation (exhibit 23) before it was seen and approved by Coralee Hales. Nor was his approval sought in relation to the repayment programme. But, when the document was eventually shown to him, he appears to have accepted the accuracy of the figures in exhibit 23 and conceded in evidence that it was his intention to pay the plaintiff what was owed to him.
Once again I am unable to reconcile the endorsement by Coralee Hales (exhibit 24), and the defendant's reaction on learning of that endorsement, to his current claim that the plaintiff was only entitled to $138 of the weekly $500 payments made to him.
I do not think the document marked for identification 29 changes anything. Coralee Hales, while asserting that the document was mainly in the plaintiff's writing, agreed that it was only the first of many drafts she was asked to examine purporting to reconcile payments the plaintiff had received from the business and what he was owed. Whatever that document may have intended to represent it was clearly superseded by a series of later documents and, in particular, exhibit 23 which was accepted as the final reconciliation.
In the end I am left in no doubt that the $500 weekly payment made to the plaintiff was what he said it was intended to be. The whole notion of the plaintiff getting a gross weekly wage of $661.20 and ploughing back all but $138.25 gross into the business, with no apparent advantage to him but, on the contrary, clearly to his detriment, is so far fetched and incapable of rational explanation that I reject it completely.
Despite admitting in par 21 of the defence that he was indebted to the plaintiff for the 22 unpresented cheques and the three cheques drawn on another bank account, but denying the accuracy of the amounts claimed, the defendant said in evidence that he was not indebted to the plaintiff at all and, in the second schedule to his counterclaim, purported to rely on a series of figures demonstrating that the plaintiff actually owed him an amount of $550.80. The defendant reached this conclusion by comparing the gross weekly wage of $138.25 he paid to the plaintiff with the tax component of $160.20 which he claims to have paid on the actual gross payment of $661.20. The difference between these figures is $22.95. The defendant claimed the plaintiff owed him $22.95 in respect of each of the 22 unpresented cheques. This resulted in a total of $550.80 said to be owed by the plaintiff to the business.
Once again this reasoning is simply unacceptable. I have already explained why the defendant is not entitled to set off moneys he claimed the plaintiff owed the company against the plaintiff's weekly wage. The whole basis of this reasoning is flawed and cannot possibly support the conclusion he has arrived at.

Three unpresented wage cheques drawn on Westbond account

After the defendant had closed his Challenge Bank account he apparently opened another account with the National Australia Bank and continued to pay the plaintiff his weekly wage with cheques drawn on the new account. The plaintiff said the arrangement remained the same as before and that he sought the defendant's approval before banking any wage cheque drawn on the new account. As was the case with the earlier bank account that had been closed the plaintiff accumulated cheques which the defendant asked him not to bank. A total of three $500 cheques drawn on the National Australia Bank and dated 20 December 1997, 27 December 1997 and 3 January 1997 were retained by the plaintiff without being presented for payment. I should point out that the cheques were erroneously dated 1997 instead of 1998. As was the case with the earlier cheques the defendant neither replaced these cheques that were withheld nor paid the plaintiff the equivalent amounts. In the end the cheques became stale and the amount of $1,500 remains outstanding.
These cheques fall into the same category as the 22 unpaid $500 cheques and I find that the defendant is indebted to the plaintiff for these amounts totalling $1,500.

Four unpaid working weeks

I have already referred to the exercise undertaken by the plaintiff to reconcile the various payments he received from the defendant and moneys that were owed in wages but were not paid. This exercise, which was undertaken with the defendant's alleged agreement, resulted in the plaintiff preparing a schedule printed on 15 February 1999 that became an exhibit in the trial (exhibit 23) This document identifies four particular weeks during which the plaintiff worked in which he was not paid at all. The weeks in question were those commencing on 15 February 1997, 20 September 1997, 27 September 1997, and 8 November 1997. The plaintiff did not receive any wage cheques or other form of payment from the defendant in respect of these four weeks. I should point out that the schedule, exhibit 23, was apparently seen and accepted by the defendant whom, as I said earlier, allegedly agreed to repay the plaintiff in instalments of $1,000 or $500. Coralee Hales, the bookkeeper employed by the defendant, signed the schedule on behalf of the defendant and apparently accepted the accuracy of its contents.
The defendant in par 9 of his Defence agreed that no cheques were given to the plaintiff for the weeks ending 15 February 1997 and 8 November 1997 but asserted that the plaintiff took leave without pay during these periods. Cheques in payment for his wages for the remaining two weeks were, the defendant alleged, given to the plaintiff and banked by him. But neither the defendant nor his bookkeeper, Coralee Hales, was able to produce any bank or business record to substantiate these claims.
Once again I prefer the evidence of the plaintiff on this issue and I would allow this aspect of his claim.

The Jerdon cheque

I have already described how, as part of his duties, the plaintiff acquired stock for the business from various wholesalers in the metropolitan area. He described how the method of payment for the purchase of stock varied from place to place. On some occasions the business gave him a cheque to purchase stock and on other occasions stock was purchased on the business account. The situation with one major supplier, Jerdon Pty Ltd, was different. After some difficulties encountered in receiving payment Jerdon apparently insisted upon payment in cash for any stock purchased from them. In August 1996 the plaintiff discussed this problem with the defendant and agreed that he would personally pay cash for stock purchased and collected by him from Jerdon. The defendant agreed to repay the plaintiff promptly for any cash purchases he made on behalf of the business and, presumably as an added incentive to the plaintiff, to include in this repayment any discount allowed by Jerdon in respect of any item purchased for cash.
On 10 September 1996 the plaintiff purchased a number of items from Jerdon and paid $1,987 in cash. The invoice, exhibit 19, was presented to the defendant for payment. The defendant gave the plaintiff a cheque dated 10 September 1996 drawn on the Westpac Bank in an amount of $1,995.75. The cheque was originally made payable to Jerdon Pty Ltd but the name of Jerdon as payee was deleted and the plaintiff's name substituted. The plaintiff said the defendant never authorised him to bank this cheque and the account on which it was drawn was eventually closed. He said he returned this cheque to the defendant with the bundle of unpresented cheques referred to earlier. He claimed the defendant undertook to pay him the amount owed by a cheque drawn on a new bank account but no such payment or cheque was ever forthcoming. The defendant said he gave the plaintiff a cheque to purchase stock from Jerdon but that the plaintiff paid cash for the order and then asked for the Jerdon cheque to be endorsed as payable to him. The defendant said he initially agreed and altered the cheque. He said he then changed his mind and told the plaintiff he had not followed the accepted practice by paying cash to a supplier and that the expense he had incurred would have to form part of the running account.
I find this is no defence to the claim and am satisfied the plaintiff is entitled to judgment for this amount.

The running account (exhibit 22) claim ‑ $16,479.88

As part of his arrangement with the defendant the plaintiff supplied model kits and assembled models to the business to be sold on consignment. The business received a commission arising out of such sales. Payments were not made by the defendant to the plaintiff immediately. As a debt arose, or a repayment was made, the plaintiff made a notation of it and subsequently transferred the information to a computer spread sheet. He also followed this practice in relation to other payments he made on behalf of the defendant to Jerdon Pty Ltd. These cash payments to Jerdon were supported by invoices produced at the trial. A major component of the plaintiff's claim against the defendant is the alleged amount owed by the defendant on what was referred to as the "running account" which is reproduced in the spread sheet prepared by the plaintiff and admitted as an exhibit (exhibit 22). The total balance said to be owing is $16,479.88. In his defence the defendant admitted an arrangement whereby a "running account" reflecting moneys owed to the plaintiff operated between 3 August 1996‑20 February 1999 but denied that the amount claimed by the plaintiff was correct. The defendant claimed the correct outstanding balance was $5,095.63 (par 17 and par 21 of Defence) and included in his pleadings a schedule purporting to reflect payments he had made to the plaintiff which he claimed the latter had omitted to take into account. In his evidence, however, the defendant conceded he was unable to verify the alleged payments reflected in this schedule. He claimed the payments were recorded on "post it" slips and entered into the computer. But he was unable to produce those slips or any computer print‑out to substantiate the alleged payments. The alleged inaccuracies were never proved. I accept the accuracy of the plaintiff's evidence on this issue and reject the defendant's allegation that exhibit 22 is incomplete.

Summary of findings

I find the plaintiff is entitled to judgment in respect of the following amounts:
1.$18,000 due in respect of the car agreement loan.
2.$11,000 in respect of the 22 $500 unpaid cheques.
3.$1,500 in respect of the three $500 unpaid cheques drawn on the Wesbond account.
4.$2,000 in respect of the four weeks when no cheques were paid.
5.$1,995.75 in respect of the Jerdon transaction.
6.$16,472 in respect of the running account.
I would award interest pursuant to the Supreme Court Act at the rate of 8 per cent per annum on each of the above amounts from 21 June 1999 being the date of demand.

Set‑off/counterclaim

I would dismiss the set‑off/counterclaim by the defendant.