Damjanovic v York Agencies Pty Ltd

[2003] NSWCA 222

CITATION:	Damjanovic v York Agencies Pty Ltd & Ors [2003] NSWCA 222
HEARING DATE(S):	7/08/03
JUDGMENT DATE:	10 September 2003
JUDGMENT OF:	Meagher JA at 1; Beazley JA at 2; James J at 3
DECISION:	Appeal dismissed with costs
CATCHWORDS:	Appeal from findings of fact by trial judge - ND
LEGISLATION CITED:	Bankruptcy Act 1966 (C'th), s153(1) & (2) District Court Rules, PtIIA r 3 Evidence Act 1995, s140(2)
CASES CITED:	Briginshaw v Briginshaw (1938) 60 CLR 336 Damjanovic v Maley (2002) 55 NSWLR 149 Damjanovic v Sharpe Hume & Co (CA 23/11/01) Fox v Percy (2003) 77 ALJR 989
PARTIES :	Mojmir Damjanovic (Appellant) York Agencies Py Ltd Sharpe Hume & Co (Services) Pty Ltd Peter William Rosier Jeffrey James Meads Frank Bronco Zobec Ivan Spehar Zelka Spehar (Respondents)
FILE NUMBER(S):	CA 41124/02
COUNSEL:	In Person - Appellant P Rosier, solicitor (1,3,5-7) N Gye (2 and 4) - Respondents
SOLICITORS:	In Person - Appellant Rosier Partners - Respondents

LOWER COURTJURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	2408/00; 2409/00; 2410/00; 4293/00; 3930/99
LOWER COURT JUDICIAL OFFICER :	Sorby DCJ

41124/02

MEAGHER JA
BEAZLEY JA
JAMES J

Wednesday 10 September 2003

MOJMIR DAMJANOVIC v YORK AGENCIES PTY LTD & Ors

JUDGMENT

1 MEAGHER JA: I agree with James J.

2 BEAZLEY JA: I agree with James J.

3 JAMES J: This is an appeal by Mojmir Damjanovic from a decision of his Honour Judge Sorby given in the District Court on 8 November 2002 in five actions in the District Court, all of which had been brought by Mr Damjanovic as the plaintiff. The five District Court actions were commenced in the Parramatta District Court but were later transferred to the Sydney District Court and it will be convenient to refer to them by the court numbers they were allocated upon being transferred to the Sydney District Court.

4 The respondents to the appeal are the parties who were the defendants in the five District Court actions. The first respondent York Agencies Pty Ltd, an investment company, was the defendant in action No. 2408/00. The second respondent Sharpe Hume & Co (Services) Pty Ltd, a company providing accountancy services, was the defendant in action No. 2409/00. The third respondent Peter William Rosier, a solicitor, and the fourth respondent Jeffrey James Meads and the fifth respondent Frank Bronco Zobec, both of whom were associated with the second respondent, were the defendants in action No. 2410/00. The sixth respondent Ivan Spehar was the defendant in action No. 4293/00 and the seventh respondent his wife Zelka Spehar was the defendant in action No. 3930/99. On the hearing of the appeal Mr Gye of counsel appeared for the second and fourth respondents and Mr Rosier solicitor appeared for himself and for the first, fifth, sixth and seventh respondents.

5 Mr Damjanovic was not legally represented either at the hearing before Judge Sorby or on this appeal. In the District Court Judge Sorby gave leave to Ms Ena Vukic, who has no legal qualifications, to appear for Mr Damjanovic and Ms Vukic represented Mr Damjanovic at the hearing before Judge Sorby. Judge Sorby made the grant of leave to Ms Vukic before this Court gave its decision in Damjanovic v Maley (2002) 55 NSWLR 149, in which this Court dismissed an appeal from a decision of another District Court judge refusing to grant leave to Ms Vukic to appear for Mr Damjanovic in those proceedings.

6 At the commencement of the hearing of this appeal Ms Vukic applied for leave to appear for Mr Damjanovic on the appeal but the Court, in conformity with its earlier decision in Damjanovic v Maley, refused leave. After Ms Vukic had been refused leave to appear for him, Mr Damjanovic appeared for himself and addressed the Court. Lengthy written submissions on behalf of Mr Damjanovic had already been filed and were taken into account by the Court. After she had been refused leave to appear for Mr Damjanovic, Ms Vukic was permitted to remain sitting at the bar table during the hearing of the appeal and to act, if necessary, as an interpreter for Mr Damjanovic.

7 The hearing before Judge Sorby, although it lasted several days, was not intended to be a full hearing of the five District Court actions. At a directions hearing held on 25 March 2002 before the commencement of the principal hearing Judge Sorby, on the application of all the defendants and with the consent of Mr Damjanovic, directed that the hearing before him would be limited to the separate determination of two questions which the parties agreed arose in all the actions and were crucial to Mr Damjanovic’s claims in all the actions.

8 The two questions to be separately determined were stated by Judge Sorby in his judgment of 8 November 2002 as being:-

1. Was the signature purporting to be that of the plaintiff Mr Damjanovic on a deed of assignment of debt dated 22 July 1996 a forgery.

2. Is the deed of assignment of debt dated 22 July 1996 valid and binding upon the plaintiff.

9 In his judgment his Honour referred to a further question, whether, if the answer to the first question was “no” and the answer to the second question was “yes”, the defendants should be granted leave to apply for summary dismissal of the actions pursuant to Pt IIA r 3 of the District Court Rules.

10 It was Mr Damjanovic’s case that he had not signed the deed of assignment of debt and that the signature on the deed purporting to be his was a forgery and that, even if the signature on the deed was his genuine signature and not a forgery, the deed was not valid and binding on him.

11 It was the case of all the defendants that Mr Damjanovic had signed the deed of assignment of debt, that is that the signature on the deed purporting to be Mr Damjanovic’s was a genuine signature and not a forgery, and that the deed was valid and binding on Mr Damjanovic.

12 Judge Sorby found that Mr Damjanovic had signed the deed of assignment of debt and that the signature on the deed purporting to be his was not a forgery. His Honour further found that Mr Damjanovic had signed the deed after discussions with and advice from his solicitor and accountants and that the deed was binding upon Mr Damjanovic.

13 The hearing before Judge Sorby was not the first hearing in the District Court for the determination of these two questions. At a previous hearing before her Honour Judge Gibb, Judge Gibb had determined that each of the two questions should be answered adversely to Mr Damjanovic. However, an appeal from her Honour’s decision was allowed by the Court of Appeal (Damjanovic v Sharpe Hume & Co 23 November 2001), on the ground that there might be a reasonable apprehension of bias on her Honour’s part by reason of pre-judgment and other conduct. The Court of Appeal set aside the orders made by Judge Gibb and ordered that there be a new trial before a judge other than Judge Gibb.

14 In his judgment of 8 November 2002 Judge Sorby made a number of findings of fact and it is useful to set out some of these findings as a background for the consideration of the grounds of appeal. It has to be borne in mind that some of these findings were on contentious matters and are the subject of grounds of appeal.

15 At p 4 of his judgment (red book 23) Judge Sorby said:-

“Following meetings between the plaintiff and Mr Ivan Spehar, after Mr Spehar learned that the plaintiff might be able to assist Mr Spehar’s financially troubled wholesale butchery businesses, the plaintiff agreed to lend Ivan Spehar, his wife Zelka Spehar and the business Ivan’s Butchery Pty Ltd the sum of $1,450,000.00. The meetings and agreement occurred in late 1992 or early 1993…”

16 His Honour found that a loan agreement dated 3 February 1993 had been drawn up and that repayment of the loan had been secured by a floating charge from Ivan’s Butchery Pty Ltd and a mortgage over Mr and Mrs Spehar’s home.

17 Also at p 4 of his judgment his Honour said:-

“The repayments in the ensuing months became irregular and by February 1995 repayments of the principal sum had ceased, but certain payments of interest continued until about June 1996”.

18 At pp 11 and 12 of his judgment (red book 30-31) Judge Sorby made the following further findings:-

“1. The plaintiff first found out about the financial difficulties of the Spehars and their business with the consequences for him as to the monies he advanced in mid 1995; and
2. He sought the assistance of Mr Frank Zobec and through Mr Zobec Sharpe Hume & Co Accountants to work out what he could do; and
3. Mr Zobec obtained all the relevant books of account relating to the Spehar’s business to discover it was ‘insolvent’; and
4. Mr Zobec and Mr Meads from Sharpe Hume & Co devised a scheme of arrangement whereby, once agreement with creditors had been obtained, losses incurred by the company Kisoro Pty Limited would be used to offset tax as profits of a ‘new’ butchering and small goods operation Ivan’s Butchery (NSW) Pty Limited, operated by the Spehars, but ultimately controlled by the plaintiff through a company structure (Mojmir Pty Limited) in which the plaintiff had the controlling interest; and
5. The plaintiff had been advised of and knew of the proposed scheme of arrangement and instructed Mr Zobec and through him, Sharpe Hume & Co to proceed; and
6. The scheme involved the Administrator of the Spehar’s business, Mr Hamilton (appointed 11.12.1995) be involved, and he became involved, not through any direct instructions from the plaintiff, but through Mr Zobec and Mr Meads of Sharpe Hume & Co; and
7. That the scheme as devised by Messrs Meads and Zobec was done with the knowledge of the plaintiff and with the aim of ultimately benefiting the plaintiff; and
8. That, had the scheme proceeded, and the ‘new’ business of Ivan’s Butchery (NSW) Pty Limited generated profits such that the tax losses of Kisoro Pty Limited had been utilised, then the plaintiff would have recovered some of his money”.

19 At pp 21-23 of his judgment (red book 40-42) Judge Sorby made the following further findings:-

“1. With the knowledge of and upon instructions from the plaintiff a Deed of Arrangement was entered into in May of 1996 with the Administrator to enable Ivan’s Butchery (NSW) Pty Ltd to trade and utilise tax benefits from losses of Ivan’s Butchery; and
2. Again with the knowledge and consent of the plaintiff, Ivan’s Butchery (NSW) Pty Ltd was to operate out of the plaintiffs’ Nelson Street premises on a verbal lease with the Spehars and any profits after the utilisation of tax losses would go to repaying the plaintiff; and
3. That, with the knowledge of the plaintiff, the Administrator was to be paid, in regular instalments, the sum of $101,024 and that sum was paid, probably by Sharpe Hume & Co; and
4. For reasons not explained by the plaintiff, he decided after the scheme commenced in May 1996, to exercise his power as mortgagee and remove Ivan’s Butchery (NSW) Pty Limited from the Nelson Street premises and divest himself of his shareholdings in Mojmir Pty Limited which held 1000 of the 1002 shares in Ivan’s Butchery (NSW) Pty Limited and resign as a director of Mojmir Pty Limited this rendering the scheme unworkable in any practical sense; and
5. That Sharpe Hume & Co in its own right and through work done by Mr Zobec was owed approximately $100,000 in fees; and
6. When Mr Damjanovic was advised he owed fees to Sharpe Hume & Co and possibly the monies to the Administrator Mr Hamilton, he refused to pay; and
7. Mr Meads and Zobec devised a further scheme whereby for the consideration of the fees and monies owed to Sharpe Hume & Co and the Administrator, Mr Damjanovic would assign the debts owed to him totalling $680,000 to Uralla Holdings Pty Limited; and
8. This scheme was put to Mr Damjanovic by Messrs Meads, Zobec and Maley as an alternative to Mr Damjanovic paying the outstanding amounts in the days leading up to 22.7.1996; and
9. Mr Meads instructed Mr Rosier of Rosier Accountants to draft the Deed of Assignment which was drafted engrossed by Mr Rosier and forwarded to Mr Meads and a copy given to Mr Zobec who took that copy to Mr Damjanovic at his residence at Eastern Creek and left it there”.

20 At p 32 of his judgment (red book 51) Judge Sorby made the following further findings:-

“1. A meeting was scheduled for around 7am on 22.7.1996 at Mr Maley’s office at Merrylands; and
2. Messrs Damjanovic, Meads and Zobec were advised to attend and did so with Mr Damjanovic bringing along a friend, Mr Jelcic; and
3. Before all parties attended upon Mr Maley he had a separate short conference with the plaintiff of between 20 minutes and half an hour; and
4. The purpose of the meetings with Mr Maley was to, at first instance discuss the Deed of Assignment of debt drawn up by Mr Rosier with the plaintiff; and
5. Advise the plaintiff that the Deed was an alternative to him paying the fees they said were owed to Sharpe Hume and Co and monies due to Mr Hamilton; and
6. Messrs Zobec (in Croatian) Meads and Maley having advised the plaintiff as to the Deed’s purpose, advised him not to execute the Deed but to stay with the scheme of arrangement set up in conjunction with the Administrator Mr Hamilton”.

21 Against this background I will now proceed to consider the grounds of appeal.

22 The notice of appeal contains forty-six grounds of appeal and the written submissions lodged on behalf of the appellant contain ninety-eight paragraphs. There is a great deal of repetition in both the grounds of appeal and the written submissions and it is sometimes difficult to determine to which ground of appeal a submission is intended to relate. Mr Gye provided the Court with tables in which he endeavoured to correlate the grounds of appeal and the appellant’s written submissions and the Court is indebted to him for his endeavours. Mr Gye also endeavoured to divide the many grounds of appeal into groups or classes and in this judgment I will largely, but not entirely, adopt his classification of the grounds of appeal.

23 Before proceeding to consider the groups of grounds of appeal, it is convenient to state some general matters which are relevant to the determination of many of the grounds of appeal.

24 In many of the grounds of appeal it is alleged that the trial judge erred in making some finding of fact. However, a finding of fact made by a trial judge as a result of the trial judge preferring the evidence of witnesses of one party over those of another party cannot be set aside by an appeal court, unless “incontrovertible facts” or uncontested testimony demonstrate that the trial judge’s finding is erroneous or the trial judge’s finding is “glaringly improbable” or “contrary to compelling inferences”. See Fox v Percy (2003) 77 ALJR 989 at 995 (28, 29) per Gleeson CJ, Gummow and Kirby JJ and the cases there cited.

25 As to the first question for determination, whether the signature on the deed of assignment of debt purporting to be Mr Damjanovic’s signature was a forgery, the onus of proof was on Mr Damjanovic to prove, as he alleged in his statements of claim, that the signature purporting to be his was a forgery, and not on the defendants in the District Court actions to prove that the signature purporting to be Mr Damjanovic’s was not a forgery. It is clearly in accordance with principle that the onus on this question should lie on Mr Damjanovic and it was so held by the Court of Appeal on the previous appeal from Judge Gibb (at par100).

26 I will now proceed to consider the various groups of grounds of appeal.

1. Grounds of appeal 1-8

27 In each of these grounds of appeal it was alleged, in various ways, that Judge Sorby had not limited the hearing before him and his judgment to the determination of the two separate questions. It was alleged, for example, that the trial judge had erred “by straying away from pre-agreed procedural schedule” (ground of appeal 1); that the trial judge had “ambushed” Mr Damjanovic by springing upon him a full hearing of the actions, for which Mr Damjanovic was not prepared (ground of appeal 2); and that the trial judge had acted with procedural unfairness in not limiting the hearing to the determination of the two agreed questions (ground of appeal 3).

28 Many of the appellant’s written submissions (pars 1-41) would appear to relate to these grounds of appeal.

29 In my opinion, all of these grounds of appeal should be rejected.

30 Subject to two minor qualifications, Judge Sorby did limit the hearing and his judgment, in accordance with the agreement of the parties and his Honour’s directions of 15 March 2002, to a consideration of the two questions for separate determination. It is true that his Honour in the course of his judgment made many findings of fact, some of which I have already quoted or referred to. However, as his Honour observed at p 3 of his judgment (red book 22) it was necessary to put the two questions for determination “in context”. Furthermore, the determination of the two questions required his Honour to consider and make findings about events leading up to the execution of the deed and the circumstances in which the deed was executed.

31 The first minor qualification to which I have referred is that in his judgment his Honour considered the further question whether, if the two questions were answered favourably to the defendants, his Honour should grant the defendants leave to apply for summary dismissal of the various proceedings. His Honour declined to make such orders, holding that there would be no point in making such orders.

32 The second minor qualification is that his Honour near the end of his judgment gave separate consideration to the effect of Mr Spehar’s bankruptcy and discharge from bankruptcy on any claim Mr Damjanovic might have had against Mr Spehar. His Honour had allowed Mr Spehar, who was not legally represented, to file a defence pleading his bankruptcy and discharge, notice of the defence having previously been given to Mr Damjanovic. There was no dispute that Mr Spehar had become bankrupt in 1997 and had been discharged from bankruptcy in 2000. Mr Damjanovic relied on evidence which had been given before Judge Sorby by Mr Zobec as showing that the debt from Mr Spehar to Mr Damjanovic had been incurred by means of fraud. His Honour found that there had been no fraud on the part of Mr Spehar and accordingly any claim Mr Damjanovic might have had against Mr Spehar did not fall within par (b) of s 153(2) of the Bankruptcy Act 1966 (C’th) and, consequently, by virtue of s 153(1) Mr Spehar’s discharge from bankruptcy operated to release him from any claim Mr Damjanovic might have had against him.

2. Grounds of appeal 8, 9 and 10

33 These grounds of appeal were based on the passage in his Honour Judge Sorby’s judgment, in which, after referring to the loan agreement of 3 February 1993, his Honour said:-

“The repayments in the ensuing months became irregular and by February 1995 repayments of the principal sum had ceased…”

34 In grounds of appeal 8, 9 and 10 it was alleged that his Honour had erred in finding that by February 1995 repayments of principal had ceased, that there was no evidence before his Honour that there had ever been any repayments of principal and that his Honour should have found that there had not been any repayments of principal.

35 Paragraphs 42 – 45 of the appellant’s written submissions related to these, as well as to other, grounds of appeal. It was submitted that his Honour should have accepted evidence given by Mr Damjanovic that he had received payments, which were payments of interest only, up to July or August 1996. It was submitted that his Honour had erred in treating as evidence statements made from the bar table by Mr Spehar, when Mr Spehar, who was unrepresented, was himself cross-examining Mr Damjanovic. In response to questions asked by his Honour, Mr Spehar had said from the bar table “I paid in principal and interest”.

36 When Mr Spehar gave evidence in his own case, he gave evidence in narrative form, apart from answers to occasional questions asked by his Honour. In his evidence Mr Spehar said that he had made payments to Mr Damjanovic but it was left unclear whether the payments were of interest only or included any repayments of principal.

37 The possible relevance of grounds of appeal 8, 9 and 10 to the questions his Honour had to determine was that, if it was not the case that some repayments of principal had been made and that repayments of principal had then ceased, then it might be less likely that in May 1995 Mr Damjanovic would have approached Mr Zobec to assist him in trying to recover the loan.

38 In my opinion, it is not material whether his Honour erred in saying in his judgment that “by February 1995 repayments of the principal sum had ceased”. There was much evidence, quite apart from any cessation of repayments of principal, that by May 1995, if not earlier, the borrowers were unable to repay the loan and that Mr Damjanovic was aware that the borrowers were unable to repay the loan. Under the loan agreement dated 3 February 1993 the term of the loan was for a period of two years, which would have expired in February 1995. Mr Spehar gave evidence that his business was “getting even slower… I started having a problem with the creditors” (black book 514 D-E). His Honour was entitled to accept evidence by Mr Zobec that in May 1995 Mr Damjanovic had approached him “about recouping the money from Mr Spehar” and that soon afterwards in May 1995 Mr Zobec and Mr Damjanovic had a meeting with Mr Spehar “and the question was put to Mr Spehar, is he able to repay the loan or not, and he stated, he can’t pay it”. (black book 249 X-Z).

3. Grounds of appeal 11, 12 and 13

39 In these grounds of appeal it was alleged that his Honour had erred in finding that Mr Damjanovic had approached Mr Zobec in May 1995 to try and recoup the money Mr Damjanovic had lent to Mr and Mrs Spehar and their company, because payments of interest under the loan continued up to about June 1996 and his Honour should have found that Mr Damjanovic became concerned about the financial position of Mr and Mrs Spehar and their company, only when the payments of interest ceased.

40 Paragraphs 42 – 49 of the appellant’s written submissions related to these, as well as to other, grounds of appeal.

41 I do not consider that there is any substance in these grounds of appeal. In his judgment his Honour expressly noted that certain payments of interest had continued until about June 1996. Even if some payments of interest did continue up to about June 1996, there was a large amount of evidence which his Honour was entitled to accept, and clearly did accept, that by May 1995, if not earlier, the borrowers were unable to repay the loan and that Mr Damjanovic was aware that the borrowers were unable to repay the loan. His Honour was also entitled to accept the direct evidence of Mr Zobec that in May 1995 Mr Damjanovic had approached Mr Zobec to try and recoup the money Mr Damjanovic had lent to Mr and Mrs Spehar and their company.

4. Grounds of appeal 14 and 15

42 In these grounds of appeal it was alleged that his Honour Judge Sorby had erred in accepting Mr Zobec’s evidence that the National Bank, to which Mr and Mrs Spehar’s home had been mortgaged, had sued Mr Damjanovic and that his Honour should have accepted Mr Hamilton’s evidence that the National Bank had become a party to litigation by being sued by Mr Hamilton.

43 On the hearing of this appeal it was conceded by the respondents that Mr Hamilton’s evidence was correct, that Mr Zobec’s evidence was incorrect and that his Honour should not have accepted Mr Zobec’s evidence.

44 In pars 50 – 57 of the appellant’s written submissions it was submitted inter alia that his Honour should not have accepted Mr Zobec’s evidence on the important issue of whether Mr Damjanovic had approached him in May 1995, because Mr Zobec’s general credibility as a witness was damaged by his error in giving evidence that the National Bank had sued Mr Damjanovic. However, in my opinion, this one error by Mr Zobec in the course of giving quite extensive evidence could not reasonably have been regarded as damaging Mr Zobec’s general credibility as a witness.

45 Even if it was incorrect that the National Bank had sued Mr Damjanovic, it was well open to Judge Sorby to accept Mr Zobec’s other evidence in preference to Mr Damjanovic’s evidence and find that Mr Damjanovic had approached Mr Zobec in May 1995 to try and recoup the loan. Judge Sorby’s finding that the National Bank had sued Mr Damjanovic was not an essential, or even an important, part of his Honour’s reasoning process.

5. Grounds of appeal 16 and 17

46 These grounds of appeal were based on a part of his Honour Judge Sorby’s judgment, in which his Honour said that “the scheme, according to the evidence, required that Mr Hamilton be appointed administrator”. (red book 27 A-B).

47 In grounds of appeal 16 and 17 it was alleged that his Honour had erred in making this finding, which was based on evidence given by Mr Zobec, that Mr Hamilton had been appointed administrator as part of a scheme to assist Mr Damjanovic to recoup the money he had lent, and that his Honour should have found that Mr Hamilton had been appointed administrator of Kisoro Pty Limited by resolution of the directors of that company (Mr and Mrs Spehar) after a petition for the winding up of the company had been presented by a creditor of the company.

48 In my opinion, his Honour was justified in saying what he did in his judgment. It is true, as was submitted on behalf of Mr Damjanovic, that Mr Hamilton was appointed administrator by a resolution of the company’s Board of Directors after a petition had been presented for the winding up of the company. However, the scheme devised by Mr Zobec and Mr Meads to assist Mr Damjanovic to recover the money he had lent included the preparation and execution of a deed of company arrangement for Kisoro Pty Limited pursuant to Pt 5. 3A of the Corporations Law, the parties to which included the company itself, Mr Hamilton (and a partner of Mr Hamilton) and the creditors of Kisoro Pty Limited. By this deed of company arrangement Mr Hamilton and his partner were appointed administrators of the company for the purposes of the deed of company arrangement, with the powers conferred on them as administrators by the deed of company arrangement.

49 I would reject these grounds of appeal. As I have found that Mr Zobec’s evidence was not incorrect, I would also reject a submission that was made that Mr Zobec’s credibility as a witness was adversely affected by his giving of this evidence.

6. Grounds of appeal 18, 19 and 20

50 In these grounds of appeal it was alleged that his Honour Judge Sorby had erred in finding that Mr Damjanovic was the only person liable to pay Mr Hamilton’s fees as administrator of Kisoro Pty Limited and to pay Sharpe Hume & Co (Services) Pty Limited’s accountancy fees, because Mr Damjanovic was not the only creditor of Kisoro Pty Limited and the other creditors would also have benefited from the scheme devised by Mr Zobec and Mr Meads.

51 It is true that Mr Damjanovic was not the only creditor of Kisoro Pty Limited. However, he was by far the largest creditor. The next largest creditors were Mr and Mrs Spehar jointly, to whom a much smaller sum was owed. His Honour was entitled to find (and no other finding was open) that Mr Zobec and Sharpe Hume & Co (Services) Pty Limited had been instructed by Mr Damjanovic, and not by the creditors generally, to work for Mr Damjanovic and not for the creditors generally and that, even if the interests of the other creditors of Kisoro Pty Limited could not be disregarded, the scheme Mr Zobec and Mr Meads devised was a scheme devised for the benefit of Mr Damjanovic.

52 I would reject these grounds of appeal.

7. Grounds of appeal 23-26

53 In his judgment his Honour Judge Sorby said (red book 39 F-40 G):-

“It was the evidence of Mr Meads that due to a system failure, the firm’s computer records kept by Sharpe Hume and Co could not be recovered, including the work done for the Plaintiff prior to 1999. Mr Meads said that by July 1996 a work in progress report had been prepared to ascertain what was owed by Mr Damjanovic. He said that the records were ‘with Mr Hamilton’ and they had been sent to Mr Hamilton ‘before the creditors meeting’. No document was before me. Apparently no account of monies owed by Mr Damjanovic to Sharpe Hume & Co was sent to the Plaintiff at the time or at any time. I accept, on the balance of probabilities that both Mr Zobec and Sharpe Hume &Co had done a considerable amount of work by July 1996 for the Plaintiff. Mr Hamilton agreed Sharpe Hume and Co were involved ‘quite significantly and intimately’ with the Administration and acting for the Plaintiff in attempting to bring together the scheme. On the basis of the evidence of Mr Meads and Mr Zobec I find that the Plaintiff owed fees to Sharpe Hume & Co, including work done by Mr Zobec and billed through Sharpe Hume & Co, totalling approximately $100,000. Further I find that as at July 1996 the Plaintiff while advised by Mr Zobec and Mr Meads of the outstanding fees, but was never given a statement of account either by Mr Zobec or Mr Meads leading up to July 1996 or after”.

54 In grounds of appeal 23 – 26 it was alleged that his Honour had erred in finding that there no document before him regarding the accountancy fees allegedly owed by Mr Damjanovic to Sharpe Hume & Co (Services) Pty Limited. It was alleged that exhibits R and U were such documents. It was alleged that Sharpe Hume & Co (Services) Pty Limited had lodged a “proof of debt” with the Administrator of Kisoro Pty Limited, claiming that Kisoro Pty Limited owed it the sum of $64,780. and that Sharpe Hume & Co (Services) Pty Limited had subsequently “pinned” this debt to Mr Damjanovic as part of the total claim against Mr Damjanovic of $100,000. It was disputed that Mr Damjanovic had any liability to Sharpe Hume & Co (Services) Pty Limited for its fees.

55 In the appellant’s written submissions (pars 61-68) submissions to a similar effect were made.

56 I do not consider that these grounds of appeal should be upheld. It was clearly open to his Honour to accept the evidence of Mr Meads and Mr Zobec, which was confirmed by the evidence of Mr Hamilton, that Sharpe Hume & Co (Services) Pty Limited had done a considerable amount of work for Mr Damjanovic, for which fees would be payable by Mr Damjanovic.

57 Exhibit R, one of the documents referred to in the grounds of appeal and written submissions, was a letter dated 19 January 1996 from Sharpe Hume & Co (Services) Pty Limited to Mr Hamilton, enclosing a list of creditors of Kisoro Pty Limited (Administrator appointed) whose debts were to be assigned to Mr Damjanovic. The list of creditors included Sharpe Hume & Co (Services) Pty Limited with an amount owing of $64,780. Exhibit U, the other document referred to in the grounds of appeal and written submissions, includes a copy of exhibit R.

58 Although Sharpe Hume & Co (Services) Pty Limited in its letter of 19 January 1996 included itself as a creditor of Kisoro Pty Limited for the amount of its accounting fees, its ultimate client was clearly Mr Damjanovic, not Kisoro Pty Limited. If the accounting fees could not be met out of income generated by Kisoro Pty Limited (and in the event Kisoro Pty Limited did not generate any or any sufficient income) then Sharpe Hume & Co (Services) Pty Limited would look to Mr Damjanovic as its client for the payment of its fees.

8. Grounds of appeal 31-33

59 In these grounds of appeal it was alleged that the deed of assignment of debt of 22 July 1996 was “not what it was intended to be, or what it purported to be”.

60 In the deed of assignment of debt of 22 July 1996 Mr Damjanovic is described as the “assignor” and Uralla Holdings Pty Limited is described as the “assignee”.

61 In cl 1 of the deed there are definitions of inter alia the following terms:-

‘Assigned Debts’ means the debts assigned by various creditors of the Debtor to the Assignor. These debts are set out in Schedule III of this Deed.
…
‘Debt’ means all present indebtedness of the Debtor to the Assignor howsoever arising including all moneys due in respect of principal and costs arising from and secured by Loan Agreement dated February 3, 1993 and the Charge (which moneys include the Assigned Debts).
‘Debtor’ means Kisoro Pty Limited (Administrator Appointed) CAN 002 202 084;
‘Purchase Price’ means in consideration of the agreement of the Assignee and Sharpe Hume & Co (Services) Pty Limited to forgive the Assignor debts owing to them in respect of certain fees and other charges to which the Assignee and Sharpe Hume & Co (Services) Pty Limited would otherwise, but for this Deed, be entitled and which the Assignor, the Assignee and Sharpe Hume & Co (Services) Pty Limited have agreed is $100,000”

62 By cl 2 of the Deed the assignor (Mr Damjanovic), in consideration of the payment by the assignee of the purchase price, assigned to the assignee all his right title and interest in the Debt (including, but not limited to, all his right title and interest in the loan agreement and charge). In cl 4 of the deed Sharpe Hume & Co (Services) Pty Limited by its execution of the deed agreed to be bound by the forgiveness of the debts owed to it.

63 It is clear that according to the terms of the deed of assignment of debt Mr Damjanovic, in consideration of Sharpe Hume & Co (Services) Pty Limited forgiving him the debts owing to Sharpe Hume & Co (Services) Pty Limited for fees and other charges, assigned to Uralla Holdings Pty Limited all his right title and interest in the debt arising under the loan agreement and in the assigned debts.

64 It is unclear in the grounds of appeal or in the written submissions in support of the grounds of appeal (written submissions 71-78) what the appellant claims was the effect the deed was intended to have, but did not have. Different parts of the written submissions suggest that what Mr Damjanovic claims was to be assigned was to be limited to:-

(i) The right to the previously assigned debts.

(ii) Insofar as the debt under the loan agreement was concerned, only the right to be paid by the corporate debtor, as distinct from the right to be paid by Mr and Mrs Spehar.

(iii) The amount of certain tax losses (reliance was placed on a letter dated 4 December 1996 written by a solicitor Christine McPhillips to Sharpe Hume & Co (Services) Pty Limited.

65 Whatever effect Mr Damjanovic contends the deed was intended to have but did not have, no claim for rectification of the deed was ever brought and the effect of the deed is to determined by interpreting its terms.

66 These grounds of appeal should be rejected.

9. Grounds of appeal 34-41

67 At pp32-33 of his judgment (red book 51-52) his Honour Judge Sorby said:-

“I now turn to the question of whether or not Mr Damjanovic put his signature on the Deed, at the meeting in Mr Maley’s office on 22.7.1996.
It is the Plaintiff’s case that the signature on the Deed of Assignment, represents his ‘signature’ but is a forgery. In determining this question I will again apply the test of Briginshaw (supra).
The Plainitff relies on his denial that he never signed the Deed of Assignment and that the first time he became aware of the Deed was in 1998 when it was ‘mailed’ to him. He also relies on an expert witness in handwriting, Mr Steve Dubedat.
The Defendants (other than the Spehars) rely on the evidence of what they claim they saw the Plaintiff do in Mr Maley’s office on 22.7.1996, that is place his signature at the bottom of three copies of the Deed. They also rely on the evidence of a handwriting expert, Mr Paul Westwood.
I have made certain findings about the meeting in Mr Maley’s office in the morning of 22.7.1996. At best the Plaintiff was ambivalent about his attendance at that particular meeting. He did acknowledge signing a document or ‘papers’ at a meeting in Mr Maley’s office, but not the Deed of Assignment”.

68 In his judgment his Honour then dealt with parts of Mr Damjanovic’s evidence in which Mr Damjanovic denied signing the deed of assignment of debt and in which Mr Damjanovic would appear to have agreed with a question put to him in cross-examination that he did not know what the document was that he admitted he had signed at a meeting at Mr Maley’s office.

69 His Honour then referred to evidence which had been given by Mr Maley, Mr Meads and Mr Zobec.

70 His Honour accurately summarised evidence which had been given by Mr Maley at pp 382-384 of the trial transcript (black book 393-395). His Honour said (red book 54):-

“It was the evidence of Mr Maley that at the meeting on 22.7.96, after some discussion (to which I have referred earlier), ‘the document was executed’ [T 382]. He agreed he saw the Plaintiff affix his signature to the Deed. Mr Maley said he thought there were more than two copies of the Deed in his office that morning [T 383] and that the Plaintiff signed each. Because of this fact Mr Maley said he would not be surprised if there were two ‘original’ Deeds in existence [T. 383]. Mr Maley said that Mr Zobec and Mr Meads were present but he could not remember if Mr Jelcic was present at the time. At T. 384, in response to a question by myself, Mr Maley said he pointed out to Mr Damjanovic where to sign the documents. He said he had seen Mr Damjanovic sign documents in his presence before. Mr Maley was taken to the signatures in the Deed and said he recognised those of the Plaintiff [T. 384]. He said he had acted for Mr Damjanovic in conveyancing transactions in the past and those involved the Plaintiff affixing his signature to various documents”.

71 His Honour then referred to evidence which had been given by Mr Meads at pp 443-444 of the trial transcript (black book 454-455), that he had seen Mr Damjanovic sign the deed of assignment of debt and that he had seen Mr Damjanovic sign a total of three copies of the deed.

72 His Honour then referred in his judgment to evidence which had been given by Mr Zobec at pp 279-280 of the trial transcript (black book 290-291) that he saw Mr Damjanovic sign the deed of assignment of debt and that Mr Damjanovic had definitely signed two copies of the deed, and, Mr Zobec thought, three copies.

73 Having referred to the evidence of Mr Damjanovic and to the evidence of Mr Maley, Mr Meads and Mr Zobec his Honour said (red book 55-56):-

“Having heard the evidence of the Plaintiff, watched him and listened carefully I have reached the conclusion on the balance of probabilities that the document he remembers signing in Mr Maley’s office, but denies was the Deed of Assignment, was in fact the Deed of Assignment. I further find, on the balance of probabilities, based on the evidence of Messrs Maley, Zobec and Meads, which I accept, that the signatures on Ex C are in fact the signature of the Plaintiff placed there by him, during the course of the meeting in Mr Maley’s office on the morning of 22.7.1996. The signatures are not forged but are the signatures of the Plaintiff and were placed on the Deed by the Plaintiff. In view of this finding it is not necessary for me to consider the expert evidence on the handwriting on the Deed. However having read both experts reports and heard their evidence, it appears to me that both experts reach the conclusion that the signatures they were asked to examine on the Deed were not forgeries. This is particularly so of the Plaintiff’s expert, Mr Dubedat who said:
‘When each questioned ‘Mr Damjanovic’ signature on the questioned document is compared individually, no evidence was found to suggest that anyone other than the writer of the specimen ‘Mr Damjanovic’ signatures wrote each questioned signature. Furthermore, based on the assumption that the questioned ‘M Damjanovic’ signatures on pages 4 & 7 of the document Q1 have been written by the one writer, I have concluded that these signatures are probably genuine when compared to the ‘M Damjanovic’ signatures on the specimen documents S1 to S19 [Ex 2 p. 4]’.

Like Mr Westwood (the Defendant’s expert) he is unable to exclude the possibility of another person having simulated one or more genuine ‘M Damjanovic’ signatures onto the questioned document Q1 but he considered it ‘unlikely that another person attempting to simulate a genuine ‘M Damjanovic’ signature would introduce such a wide range of natural variation into the questioned signatures (Ex 2 p.4].
I am therefore able to conclude on the balance of probabilities that the signatures on the Deed of Assignment are not forgeries but are those of the Plaintiff…”.

74 In grounds of appeal 34-41 it was alleged that his Honour ought not to have found that Mr Damjanovic had signed the deed of assignment of debt; that in assessing the reliability of the evidence of Mr Maley, Mr Meads and Mr Zobec his Honour had failed to give proper weight to inconsistencies in their evidence about who was already at Mr Maley’s office, when each of them arrived on 22 July 1996; that there was no evidence on which his Honour could have found that Mr Jelcic, a friend of Mr Damjanovic, had attended the meeting; that there was an inconsistency between Mr Damjanovic’s evidence and Mr Maley’s evidence about whether Mr Maley had advised Mr Damjanovic to sign, or had advised him not to sign, the Deed; and that his Honour had erred in not giving due weight to the opinions of the handwriting experts that they could not exclude the possibility of another person having simulated one or more of the signatures purporting to be Mr Damjanovic’s signatures.

75 Paragraph 79-93 of the appellant’s written submissions related to these grounds of appeal.

76 It was submitted in the written submissions that Judge Sorby had not given appropriate weight to inconsistencies between the evidence of Mr Zobec, Mr Meads and Maley. Mr Zobec had given evidence that when he arrived at Mr Maley’s office with Mr Meads, Mr Jelcic was in the waiting room and Mr Damjanovic was in another room with Mr Maley. (Trial transcript 275-277 black book 286-288). Mr Meads had given evidence that he, Mr Zobec and Mr Damjanovic had met in the foyer of Mr Maley’s office, before Mr Damjanovic went into another room with Mr Maley. Mr Jelcic had been at Mr Maley’s office. (Trial transcript 440 black book 451). Mr Maley had given evidence that when he arrived at his office Mr Zobec, Mr Meads and Mr Damjanovic were waiting outside in the street in front of his office, that he unlocked the office and let the others inside. Mr Maley was not sure whether a fourth person, a friend of Mr Damjanovic, was present but a friend of Mr Damjanovic had often attended meetings. After letting the other person into the foyer of his office, Mr Maley had taken Mr Damjanovic into his office.

77 It was submitted that there were inconsistencies between the evidence of the various defence witnesses as to who had given instructions for the drawing up of the deed of assignment of debt. Mr Zobec had given evidence that Mr Maley had asked Mr Meads to ask another lawyer to prepare the deed. (Trial transcript 270 black book 281). Mr Meads had given evidence that Mr Maley had asked Mr Meads to arrange the preparation of the deed and that Mr Meads and Mr Zobec had asked Mr Rosier to prepare the document. (Trial transcript 438-439 black book 449-450). Mr Maley had given evidence that he did not draft the deed. He had been against the whole notion of the transaction. (Trial transcript 381-382 black book 392-393).

78 It was also submitted that his Honour’s finding that the document Mr Damjanovic admitted signing at Mr Maley’s office was the deed of assignment of debt was contrary to Mr Damjanovic’s evidence that the document he remembered signing did not physically resemble the deed of assignment of debt and had been on different paper.

79 In my opinion, all of these grounds of appeal should be rejected.

80 As previously stated, on the issue of whether the signature (signatures) purporting to be that of Mr Damjanovic on the deed of assignment of debt was a forgery, the onus of proof was on Mr Damjanovic to prove, as he alleged, that the signature purporting to be his was a forgery, and not on the defendants in the District Court actions to prove that the signature purporting to be Mr Damjanovic’s was not a forgery.

81 Insofar as the principles enunciated by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362-3 were applicable (see now s 140(2) of the Evidence Act), the application of those principles in a case where Mr Damjanovic was alleging that his signature had been forged made it more difficult for him to discharge the onus of proof.

82 His Honour was entitled to accept the evidence of Mr Maley, Mr Zobec and Mr Meads that a meeting had been held at Mr Maley’s office on 22 July 1996 and that at that meeting those three witnesses had seen Mr Damjanovic sign the deed of assignment of debt.

83 In deciding to accept the evidence of Mr Maley, Mr Zobec and Mr Meads, his Honour expressly took into account (judgment p 31 red book 50) inconsistencies in their evidence, for example whether Mr Damjanovic was already at Mr Maley’s office when Mr Meads and Mr Zobec arrived. His Honour was entitled to regard these inconsistencies as “minor” and as not affecting the general reliability of the evidence of these three witnesses.

84 On the basis of the evidence of Mr Zobec and Mr Meads his Honour was entitled to find that Mr Jelcic had attended at Mr Maley’s office on 22 July 1996. Mr Maley in his evidence did not deny that Mr Jelcic had been at Mr Maley’s office. His Honour said in his judgment that he would not draw any inference from Mr Jelcic not having been called to give evidence at the trial.

85 There would not appear to me to be any inconsistency between the evidence of the three defence witnesses about the giving of instructions for the preparation of the deed of assignment of debt.

86 His Honour was entitled to reject Mr Damjanovic’s evidence that the document he did remember signing in Mr Maley’s office did not physically resemble the deed of assignment of debt and that the advice Mr Maley had given with respect to the document he did remember signing was that he should sign the document and not that he should not sign the document.

87 The expert handwriting evidence was not disregarded by his Honour and was, in general, favourable to the defendants, not Mr Damjanovic.

88 I have already set out the part of his Honour’s judgment in which he quoted a conclusion by Mr Dubedat in his report. That part of Mr Dubedat’s report was favourable to the defendants, not to Mr Damjanovic.

89 The part of Mr Dubedat’s report sought to be relied on by Mr Damjanovic is a part where Mr Dubedat said:-

“It should also be noted that the simplistic nature and wide range of variation in the specimen ‘M Damjanovic’ signatures also make them relatively easy for another person to simulate. As such, I am unable to exclude the possibility of another person having simulated one or more genuine ‘M Damjanovic’ signatures onto the questioned document.”

90 However, it is to be noted that all that Mr Dubedat was saying in this part of his report was that, because of the simplicity and the wide range of variation in the specimen signatures of Mr Damjanovic, his signature would be relatively easy to simulate and that Mr Dubedat was “unable to exclude the possibility” of another person having simulated the signature on the deed purporting to be Mr Damjanovic’s. An inability to exclude that possibility falls far short of being evidence establishing that the signatures were in fact simulated or forged.

91 In his report of 15 April 2002 Mr Westwood concluded that, while the available evidence did not permit him to dismiss the hypothesis that the disputed signatures were the product of some person attempting to imitate the genuine signature style of Mr Damjanovic, Mr Westwood’s observations on balance supported the hypothesis that the disputed signatures were written by the writer of the specimen signatures (that is Mr Damjanovic).

92 By way of summary, I consider that the various matters sought to be relied on by Mr Damjanovic in his challenge to Judge Sorby’s finding, which was made after hearing the evidence adduced by Mr Damjanovic and the evidence adduced by the defendants, that the signature on the deed of assignment of debt purporting to be that of Mr Damjanovic was not a forgery, cannot be set aside on any of the grounds permitted by the principles stated in Fox v Percy.

10 Grounds of appeal 42-45

93 In these grounds of appeal it was alleged that his Honour had erred in finding that any claim Mr Damjanovic might have had against Mr Spehar did not fall within s 153(2)(b) of the Bankruptcy Act, as being a debt incurred by means of fraud. It was alleged that the debt owed by Mr Spehar to Mr Damjanovic arising out of the loan had been incurred by means of fraud on the part of Mr Spehar. It was submitted that, when the loan was made and the floating charge and the mortgage were given, Mr Spehar had fraudulently misrepresented the extent and value of the assets of his company and had fraudulently failed to disclose the securities which had already been given to the National Bank.

94 In his judgment his Honour, after reviewing some of the evidence given by Mr Spehar, said at p 40 (red book 59):-

“There was no evidence of fraud on the part of Mr Spehar in any respect at all that I could see. Mr Spehar presented in the witness box as a business man who, struggling financially in late 1992 accepted generous help from the Plaintiff through the loan agreement of February 1993. The Plaintiff apparently did no investigations into the business of Mr Spehar before advancing considerable sums of money which had the effect of postponing the inevitable for Mr Spehar and his businesses. By the time Mr Zobec looked at the books the Spehar butchery business was ‘insolvent’”.

95 After referring to the provisions of s 153 of the Bankruptcy Act his Honour said at p 43 of his judgment (red book 62):-

“Unless the debts owed by Mr Spehar fit within the exceptions set out in Section 153 above, Mr Spehar is released absolutely from the debt owed to the Plaintiff at the date of his bankruptcy. He does not in my opinion come within the exceptions under Section 153(2)(a)-(d). In particular there was no evidence, as I have found to suggest section 153(2)(b) was applicable, that is, the debt was ‘incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud’. Having considered all the evidence in particular that of the Plaintiff and Mr Spehar I find there was no evidence that the debt owed by Mr Spehar was incurred by means of fraud nor that Mr Spehar in any way acted fraudulently to prevent the recovery of the debt”.

96 In my opinion, his Honour’s finding that the debt owed by Mr Spehar had not been incurred by means of fraud cannot, consistently with the principles stated in Fox v Percy, be successfully challenged. What Mr Zobec discovered about the financial position of Mr and Mrs Spehar and their company in the investigation he carried out in 1995 does not give rise to a “compelling inference” that Mr Spehar had been guilty of fraud in incurring the debt in 1993 or make it “glaringly improbable” that Mr Spehar had not been guilty of fraud.

11. Miscellaneous grounds of appeal and submissions

97 I have not specifically referred to some grounds of appeal including grounds of appeal 21, 22 and 27-30. These grounds of appeal would appear to be no more than marginally relevant to the two questions which his Honour had to determine and, even if established, would be incapable of invalidating his Honour’s principal findings.

98 In supplementary written submissions on behalf of Mr Damjanovic it was submitted that there had been a number of procedural irregularities on the part of the respondents, such as omitting to file appearances, omitting to file notices of change of solicitor and filing written submissions out of time. While any such irregularities as occurred should not have occurred, they cannot affect the determination of the merits of the appeal. The appellant himself was not blameless in this regard. His own written submissions were filed well out of time.

Conclusion

99 In my opinion, the appeal should be dismissed.

100 His Honour judge Sorby, while clearly intending that there should be a verdict and judgment for the defendants in action No. 2410/00, as well as in the other actions, omitted to make any order in that matter and this Court should make an order that in action No. 2410/00 there should be a verdict and judgment for the defendants and that the plaintiff should pay the defendants’ costs of the trial in the District Court.

101 Mr Rosier submitted that, if the appeal was dismissed, more extensive costs orders should be made than the usual order that the appellant pay the respondents’ costs of the appeal but in my opinion only the usual costs order should be made.

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Last Modified: 09/15/2003