Draffen v Rooney
[2009] VCC 207
•25 March 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
Case No. CI-08-01302
| HELEN DRAFFEN | Plaintiff |
| v | |
| DIANNE ROONEY | Firstnamed Defendant |
| & | |
| PETER ROONEY | Secondnamed Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 20, 21 and 22 January 2009 and 23 March 2009 |
| DATE OF JUDGMENT: | 25 March 2009 |
| CASE MAY BE CITED AS: | Draffen v Rooney & Anor |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 0207 |
REASONS FOR JUDGMENT
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Catchwords: Loan agreement for purchase of property- plaintiff claims to be entitled to 50% of the profit on sale of property- whether agreement sufficiently certain- whether any defence established based on estoppel or waiver- appropriate quantum of plaintiff’s claim
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms. K. Anderson | Cornwall Stodart Lawyers |
| For the Defendant | Mr. A. D. Robertson 20, 21 & | Law 554 |
| 22 January 2009 No appearance 23 March 2009 | ||
| HER HONOUR: |
1 The plaintiff claims that she loaned the sum of $20,000 for the purchase of a property at 15 Thorn Street, Barwon Heads (“the property”) to her sister and brother-in-law (“the Rooneys”) pursuant to an agreement entered into on 15 December 1998. She further claims that the agreement provided that the Rooneys would repay the loan with interest at six per cent per annum to be paid quarterly and further that on the sale of the property the Rooneys would pay half of the net sale proceeds.
2 The plaintiff claims that the Rooneys purchased the property on 18 December 1998 for $85,000 and repaid the loan on 21 November 1999. The plaintiff claims that only $100 was paid in interest. The property was sold on 30 May 2005 for $365,000.
3 The plaintiff claims that she is entitled to the sum of $140,000 being 50 per cent of the profit made on the sale of a property ($365,000 - $85,000 divided by two). She further claims the sum of $1024.38 as constituting the unpaid interest calculated on the basis of the six per cent rate specified in the agreement. She finally claims to be entitled to interest on the unpaid profit share from the sale of the property on 30 May 2005.
4 These amounts remain outstanding notwithstanding demands (orally on 13 October, 2007 and, through solicitors on 10 December 2007).
5 The case has an unfortunate history. The two sisters are elderly and infirm. The plaintiff gave her evidence while seated in a wheel chair. Further at the beginning of the trial the court was informed by Mr Roberston, Counsel for the Rooneys, that Mrs Rooney suffered from a condition known as myasthenia gravis. This was said to be a life threatening condition although there has been no affidavit adduced in support of this suggestion.
6 Despite these difficulties the case proceeded to the point where the plaintiff had closed her case and the cross examination of Mrs Rooney was almost complete (by the afternoon of 21 January). Evidence of Mr Rooney was also foreshadowed.
7 However on 22 January Mr Robertson announced that he was not ready to proceed given “a couple of issues had arisen, one of which might require me to seek a ruling from the Ethics Committee.” The case was then stood down for a short time. On the resumption of the hearing Mr Robertson requested that the matter be adjourned given Mrs Rooney had suffered an “episode” and needed to get to medical treatment as a matter of urgency. Further that he was informed by Mr Rooney that “there’s no risk of her coming back” apparently because of Mrs Rooney’s condition.
8 The case was then adjourned part-heard until 23 March 2009. Orders were also made to the effect that if the defendants wished to apply for any further adjournment this should be supported by affidavits filed on or before 16 March. In the result, no further affidavits have been filed.
9 In the meantime, solicitors acting for the defendants, Law 554, purported to file notice of ceasing to act on 26 February 2009. This notice was a nullity in the absence of leave given the matter was already listed for trial.[1] On becoming aware of this notice the Court listed the matter for directions and for any application for leave to withdraw by the solicitors for the defendants on 20 March.
[1] See rule 20.03(b) of the County Court Civil Procedure Rules 2008
10 On 20 March I heard a formal application for leave to withdraw by Law 554. In an affidavit in support of that application dated 17 March, 2009, Mr Milsom swore that he had informed the defendants that they were required to attend Court on the return date of the hearing being 23 March.[2] Further, he had informed them that they were required to attend Court at the Directions Hearing on 20 March.[3] However, the defendants did not appear on the date fixed for directions.
[2] Affidavit of Mr James George Milsom of 17 March 2009 at paragraph 5
[3] Ibid at paragraph 6
11 On 20 March I granted leave to Law 554 to file notice ceasing to act.
12 On the date of the resumed hearing on 23 March neither defendant appeared.
13 Ms Anderson, Counsel for the plaintiff, sought to proceed pursuant to Order 49.02(1)(b)[4]. This provides that if, when the trial of a proceeding is called on, any party is absent, the Court may proceed with the trial generally or so far as concerns any claim for relief in the proceeding.
[4] County Court Civil Procedure Rules 2008.
14 Ms Anderson supported this application, inter alia, on the basis of a further letter from her instructor of 4 March.[5] This correspondence also confirmed that the part heard trial was “scheduled to continue on 23 March 2009.”
[5] Addressed to the defendants at the last known address given in the Notice ceasing to act being 1/34 Sheepwash Road Barwon Heads.
15 Given:
− the matter was adjourned and refixed for trial at a time when the
defendants had solicitors and counsel acting on their behalf;
− the evidence of Mr Milsom to the effect that the defendants were
informed of the trial date;
− the further notification from the solicitors for the plaintiff of 4 March; − that the defendants have not supplied any affidavits in support of any
further adjournment;− the suggestion of Mr Rooney that “there’s no risk of [Mrs Rooney]
coming back”;
there is no reason to suppose that the defendants have any interest in
contesting this matter at some other future date or at all.16 Accordingly, I was satisfied that it was appropriate to proceed with the trial on Monday pursuant to Order 49.02(1)(b).
[6] See paragraph 1 of Amended Notice of Defence dated 20 January 2009.
[7] Ibid at paragraph 2.
[8] Ibid at paragraphs 3 and 7(a).
[9] Ibid at paragraph 4.
[10] Ibid at paragraphs 5 and 6.
[11] Ibid at paragraph 7(b).
[12] Ibid at paragraph 8.
[13] See paragraphs 9 and 10 of the Amended Notice of Defence. The allegation in paragraph 10 that they
[14] Ibid at paragraphs 11 and 12.
[15] Ibid at paragraphs 13 and 14.
[16] Ibid at paragraph 15.
Issues 17
By their Amended Notice of Defence filed pursuant to Orders of 20 January 2009:
(a) the defendants admit the terms of the agreement save that the loan was to
assist completion of the purchase and not for the deposit;[6](b) the defendants admit that they purchased the property for $85,000;[7] (c) the defendants admit that they repaid the loan on 21 November 1999 but
say that all interest was also paid;[8](d) the defendants admit that the property was sold on 30 May 2005 for
$365,000;[9](e) the defendants admit that the plaintiff did request a share of the proceeds on 13 October 2007 but deny her claim was particularised; however they admit that a further demand was made through the plaintiff’s lawyers on 10 December 2007;[10]
(f) the defendants deny any entitlement to interest on any profit share.[11] 18
Significantly, the defendants further allege that a representation was made to them by the plaintiff in or around November 1999 that “the agreement was at an end and that the document signed by the firstnamed defendant would be destroyed once she had located it”.[12] This was said to be relied upon by the defendants who expended time and money in maintaining and improving the property.[13]
19
Further, it was said that between advancing the loan monies and the sale of the property the plaintiff never asserted any rights to profits which silence encouraged and fostered a belief on the part of the defendants that such improvements and maintenance was carried out for the benefit of the defendants alone.[14]
20
“In the premises” the defendants were said to be estopped or alternatively had waived any entitlement to profits.[15]
21
Finally, the defendant alleged that by reason of the uncertainty of the term “profit” the agreement was void.[16]
22 In these circumstances the following issues arise: (a) the nature of the loan agreement of 15 December 2008 and whether it was
sufficiently certain;(b) whether the defendants have established any defence based on estoppel
or waiver;(c) the quantum of the plaintiff’s claim including: (i) whether the interest based on the rate specified in the agreement of six per
cent is outstanding;(ii) whether the plaintiff is entitled to interest on the profit share. Evidence
23 As indicated already, the evidence was well advanced notwithstanding the non attendance of the defendants at the resumed hearing.
24 Ms Anderson submitted that the evidence of Mrs Rooney was inadmissible given she was unable to complete her cross examination.[17]
[17] Citing the cases cited in J D Heydon; Cross on Evidence, 6th Australian edition at [17480] at footnote 639 - see Anon (1901) 45 Sol Jo 569; see also Meyer v Hall (1972) 26 DLR (3d) 309 (Alb App Div) and Allen v Allen [1894] P248 at [254]
25 However, this is not a case where there has been no cross examination at all. To the contrary, Ms Rooney had been in the witness box for the entire afternoon of 21 January and under cross examination from 2:34pm to 4:35pm. This included cross examination on the pivotal issues in the case. Indeed the case had proceeded to the point where Ms Anderson agreed that a further hour would be ‘”a generous estimate.”
26 In those circumstances, I prefer an approach wherein the evidence of Mrs Rooney should continue to be admissible though its weight is diminished. This latter view “appears to have strength”[18] - at least in the context where a witness subsequently becomes unfit to testify. It is also generally consistent with the approach courts are likely to take in the future given the terms of s13(7) of the Evidence Act 2008.
[18] Ibid at [17480] particularly the cases at footnotes 640 and 641 – O’Callaghan v Murphy (1804) 2 Sch & Lef 158; Jones v Fort (1828) 1 M & W 196; 173 ER 1129 (but perhaps admissions involved); R v Doolin (1832) 1 Jebb Cr Cas 123, cited in Stephen’s Digest, 12th ed, 1893, p 143, n 1; R v Mitchell (1892) 17 Cox CC 503; Randall & Atkinson (1899) 30 Ont R 242 at 255; R v Solomon and Thumbler (1958) 25 WWR at 316 (Man CA).
27 It accordingly becomes necessary to consider and compare the evidence of both the plaintiff and Mrs Rooney.
28 Mrs Draffen was the only witness called on behalf of the plaintiff. She was an impressive and straightforward witness despite her infirmity. Having observed her demeanour and considered her responses, despite some memory lapses, she was essentially a conscientious and honest witness, whose evidence should generally be accepted.
29 By way of contrast, I am unable to consider Mrs Rooney a forthcoming and impressive witness. I cannot be confident that her account of events and issues is complete and substantially accurate. In the course of giving evidence she made minimal eye contact and appeared influenced by a considerable hostility to her sister.
30 As will be seen below I am further satisfied that she wrongly and belatedly sought to make a claim of a further term in the agreement which claim was not made in any of the pleadings and was inconsistent with the written agreement.
31 Her evidence was also inconsistent at times. For example, her claim that she did not tell Mrs Draffen the price at which the property was sold because she “did not discuss finance with people” lacked credibility and was inconsistent with her own evidence. Thus her own account was that she discussed finance since she and her husband were so desperate that they asked Mrs Draffen whether it was possible to borrow some money.
32 To the extent the evidence of Mrs Rooney conflicts with the evidence of Mrs Draffen I therefore generally accept the evidence of Mrs Draffen.
The nature of the loan agreement
33 The loan agreement was in writing.
34 The plaintiff relied on a handwritten document dated 15 December 1998 which read as follows:
“We, the undersigned, have borrowed the sum of $20,000 (twenty thousand dollars) from Helen Draffen. The interest (paid quarterly) is set at 6%. “SHE” is also entitled to half the profit- if any!- when the property is sold.”
35 The document is signed by Dianne M Rooney and Peter B Rooney.
36 Mrs Draffen gave evidence which was generally consistent with the terms as alleged save that she could not recall any conversation about whether the money was for a deposit. Her evidence was that she was advised by her bank manager to get a written agreement.
37 As indicated already the terms of the agreement were also generally admitted by the defendants.
38 However, in the course of examination Mrs Rooney stated:
“We said at the time the whole thing had been settled if we paid back the
$20,000 before the property was sold, but it unfortunately isn’t in writing.”
39 This allegation had not been raised in the original defence or amendments to the defence including the amended form of the defence filed pursuant to leave given on 20 January. The allegation was also never put to Mrs Draffen.
40 Mrs Rooney accepted that she didn’t mention it to her counsel to raise with Mrs Draffen but denied the suggestion that it was a recent invention. However she was unable to explain why it did not appear in the defence.
41 I do not accept this evidence which is against the terms of the written document above.
42 There was also admitted into evidence a letter dated 21 November 1999 from the Rooneys which states that they were forwarding a cheque (which apparently paid off the loan). If the agreement had been to the effect alleged by Mrs Rooney the letter would be expected to make reference to the fact that the agreement would be “at an end” on the repayment. However, there is no such reference made.
43 Given the objective evidence as well as the evidence of Mrs Draffen I accept the plaintiff’s evidence as to the terms of the agreement which are, in any event, admitted in the pleadings by the defendants.
44 In terms of the suggestion that the agreement was uncertain, the modern approach is to uphold contracts despite any lack of clarity.
45 In any event, the concept of “profit“ is not ambiguous and the courts are generally well able to determine and construe the concept of profit in commercial contracts in cases involving more complexity than the present.[19]
[19] See e.g. Prenn v Simmonds [1971] 1 WLR 1381
46 Accordingly I reject the suggestion in the Amended Defence that the agreement should be found to be uncertain by reason of the uncertainty of the term “profit”.
47 Accordingly I find that an agreement was entered into by the parties as alleged by the plaintiff.
Estoppel/ Waiver
48 The defendants alleged that in or around November 1999 at the time of repayment of the loan “the plaintiff acknowledged payment of both the loan and interest and on request by the Defendants for the return of the written agreement dated 15 December 1998, the plaintiff claimed not to be able to locate the document but assured the defendants the document would be destroyed, as the plaintiff confirmed the loan and interest had been settled in full”.[20]
[20] Particulars to paragraph 3 of the Amended notice of defence dated 20 January 2009.
49 In evidence Mrs Rooney stated that following on from the time the Rooneys gave the plaintiff the balance Mr Rooney then said “well, what about the note, and Helen just gestured towards the roll top desk, and said well, it’s over there, it’s a bit of a mess, and Peter said “well, will you find it and destroy it?” and Helen said “Yes.”
50 Mrs Draffen denied this conversation took place and, in particular, denied that Peter made any such request.
51 I accept the evidence of the plaintiff on this matter which evidence is consistent with the objective evidence in the case. Thus although the agreement was documented there is no such documentation of any such representation as alleged by the defendants. As indicated already I also generally preferred Mrs Draffen’s evidence to that of Mrs Rooney’s whose evidence is also incomplete and has been given less weight.
52 It will also be recalled that there is simply no evidence from Mr Rooney of any such conversation. Given the unexplained failure of the defendants to call Mr Rooney I am entitled to, and do find that his evidence would not have assisted the defendants’ case.[21]
[21] Jones v Dunkel (1959) 101 CLR 298
53 I therefore reject the suggestion that Mrs Draffen promised to destroy the agreement as alleged.
54 The defendants however also alleged there was an estoppel and/ or waiver on the basis of the “silence” of the plaintiff in asserting her rights to profits.
55 However, the plaintiff’s evidence was:
− that Mrs Rooney offered her some money in a wallet but she took only $100 in interest saying she was “waiting for Barwon Heads to be sold” before she got her share; and − that every time she asked about her share “I was blocked”. Mrs Rooney never confirmed it was sold. Further the only time the plaintiff found out about the particulars of sale was after she rang Mrs Rooney upon receiving a copy of figures from an estate agent. 56 Given I accept the plaintiff’s evidence as set out above, her conduct was not “silence” as alleged by the defendants. Moreover, even if it was, the circumstances did not give rise to any obligation on the plaintiff to speak particularly in circumstances where the defendants were in control of the property and the timing of any sale.[22]
[22] Cf Greenwood v Martins Bank Ltd [1933] AC 51
57 In these circumstances the evidence does not establish any foundation for an estoppel or waiver as alleged.
58 Moreover I accept the submission of Ms Anderson that there is no detriment suffered by the defendants who have made a profit in selling the property. The arrangement was that profits would only be paid after taking into account any expenditure incurred. Any expenditure would thereby be already taken into account in calculating any profits to be shared by the parties.
59 Moreover, for reasons expressed below[23], there is simply no evidence which substantiates any detriment at all.
[23] at paragraphs [63] - [69]
60 This lack of detriment then provides an additional reason for rejecting any estoppel.[24]
[24] And see Commonwealth v Verwayen (1990) 170 CLR 394
61 In terms of waiver, which is regarded as a form of election, detriment is not necessary. However there must be some express election which requires knowledge of the right waived or the rights which give rise to the right.[25]
[25] Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 29 CLR 305; Deaves v CML Fire & General Insurance Co Ltd (1979) 143 CLR 24
62 In this case, for reasons already given, there was no express election made as alleged. Rather the evidence of Mrs Draffen, which I accept, was that she specifically refused to take any further monies but instead said she would wait for the property to be sold.
Quantum
Amount of profit share
63 The plaintiff’s position is that she is entitled to a 50 per cent share in the net proceeds of sale constituted by the difference between the amount the property was sold for ($365,000) and the cost of the purchase ($85,000) being $140,000 (50 per cent of $280,000).
64 The Amended Defence did not directly challenge this figure.[26] However, the defendants filed a document entitled “Defendants’ Particulars of the Defence” pursuant to Orders made on 20 January 2009. This document purported to list various dollar amounts said to be expended in reliance on the alleged representation for improvements and other outgoings in respect of the property. It appeared that these amounts were prepared by Mr Rooney who had direct knowledge of the expenditure involved although, in the result, he did not attend to give any evidence in support of the various amounts claimed.
[26] See paragraph 7(c) which has been crossed out
65 There was further no documentation tendered to support the particulars alleged, apparently because the documents were lost or destroyed.[27]
[27] See paragraph 4 of affidavit of documents of Mr Rooney of 20 January 2009.
66 Mrs Rooney did attempt to give some evidence but it was vague and unsatisfactory. Thus she gave evidence that she undertook many of the improvements herself and further that Mr Rooney “probably” paid the tradespeople. She further used words such as “possibly”; “I’m not entirely sure”; and that various estimates were “possibly” correct.
67 Thus, in relation to the purchase of tanbark she gave an estimate of $50 a trailer load but that “that’s a guess.” She also stated that the kitchen stove was “possibly about $800 or something like that.” In terms of the kitchen bench her evidence was “I’m only guessing, it was a few hundred.”
68 Given the unreliability of Mrs Rooney’s evidence (generally and more particularly in relation to expenditure incurred by the defendants) as well as the total lack of documentation adduced on behalf of the defendants, I am satisfied that the 50 per cent share of the sale proceeds is the figure of $140,000 relied on by the plaintiff. More particularly I am satisfied that the figure claimed should not be reduced by any of the amounts claimed in the Defendants’ Particulars of 20 January which amounts have not been the subject of any evidence of probative value.
69 The plaintiff is therefore entitled to the sum of $140,000 being 50 per cent of the profit on the sale of the property.
Interest at six per cent under the agreement
70 Mrs Draffen gave evidence that she never received quarterly interest payments as stated in the agreement. However she conceded that she took $100 for interest as set out above.
71 Mrs Rooney on the other hand claimed that the interest payments were paid quarterly by cheque unless they were visiting Mrs Draffen in which case they would have been made in cash.
72 However, this should be compared with the defendants’ further and better particulars dated 15 July wherein the defendants stated that they were “unable to say whether the payments were made by cash or by cheque.” Under cross examination Mrs Rooney also resiled from her original position and suggested that “I think they were” paid by cheque.
73 Given my general preference for the evidence of Mrs Draffen; the unsatisfactory evidence of Mrs Rooney on this matter and the absence of any documentary evidence of such payments[28], I accept the plaintiff’s evidence as to the non-payment of interest.
[28] The particulars suggest that the defendants “have not located our records in relation to the interest payments”
74 It follows that the plaintiff is entitled to interest at six per cent on the loan agreement for the period 15 December 1998 to 21 November 1999 less the $100 received calculated at $1,024.38.
Interest on the profit share of $140,000
75 The plaintiff claimed an entitlement to this interest pursuant to s58(1) of the Supreme Court Act 1986 or, alternatively at common law.
76 Sub-section 58 (1) reads:
Interest to be allowed when debts or sums certain recovered
“58(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.”
77 Sub-section 58(3) provides that a debt or sum payable or a date or time is to be taken to be certain if it has become certain.
78 I was taken to the decision of Ashley J (as His Honour then was) in the case of Anchen v Mendes da Costa[29] wherein His Honour applied s58 so as to award interest on an amount found to be held by the defendant on a constructive trust in favour of the plaintiff.
[29] [2005] VSC 191
79 His Honour referred to the case of Dimos v Willetts & Anor[30] which was said to be authority for the proposition that ordinarily a beneficiary is not the creditor of his or her trustee in which circumstances section 58 could not apply. Nevertheless, Ashley J considered that there was a significant difference between the relationship of trustee and beneficiary and between parties one of whom has so conducted himself as leads the Court to impress the property with a constructive trust. In the latter case the court is saying, really, that one has wrongfully kept the other out of his property.[31]
[30] (2000) 2 VR 170
[31] [2005] VSC 191 at [13]
80 Applying similar principles, as His Honour applies[32] to the present case - which case is concerned with moneys owing pursuant to a simple contract:
[32] Ibid at [17]
−
the amount payable to the plaintiff for a share of profits was a sum certain. It was capable of ascertainment having regard to the amount recovered on the sale of the property less the costs of acquisition;
− the sum certain was payable by reason of the agreement evidenced by the
document dated 15 December 1998;− the sum certain was payable at a certain time being “when the property is
sold” pursuant to the written document of 15 December 1998; and− the plaintiff should therefore be characterised as a ‘creditor” for the purposes of s58(1).
81 It follows that the plaintiff is entitled to interest under s58(1) at the Penalty interest rate from the date of settlement unless good cause is shown to the contrary. No such cause has been shown.
82 It further appears to have been within the contemplation of the parties at the time the contract was made that the plaintiff would suffer detriment if she did not receive the proceeds after the sale in 2005. This much was ultimately conceded by Mrs Rooney - although she initially refused to even entertain the question stating that “I’m not answering that question”.
83 As such, if I am wrong as to interest being allowed under s58(1), I would have allowed interest under common law principles.[33]
[33] Kollman v Watts [1963] VR 396
Conclusion
84 There will be judgment for the plaintiff in the sum of $140,000 together with outstanding interest pursuant to the loan agreement of $1,024.38 together with interest on $140,000 under s58(1) of the Supreme Court Act 1986 from 30 May 2005 at the Penalty Interest Rate.
85 I will hear from the plaintiff as to the appropriate form of final orders.
also borrowed further money was later abandoned by the defendants.
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8
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