Fastwedge Pty Ltd v Kontogonis
[2011] VCC 213
•31 March 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
(Not) Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST – GENERAL DIVISION
Case No. CI-10-04137
| FASTWEDGE PTY LTD | Plaintiff |
| v | |
| PATRICIA KONTOGONIS | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 7-11 March 2011 |
| DATE OF JUDGMENT: | 31 March 2011 |
| CASE MAY BE CITED AS: | Fastwedge Pty Ltd v Kontogonis |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 213 |
REASONS FOR JUDGMENT
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| Catchwords: | Loan agreement – Executed by defendant – Alleged representation that document was merely an acknowledgment of receipt of money. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Pennell | Chiodo & Madafferi |
| For the Defendant | Mr A. Sandbach | Lennon Mazzeo |
| HIS HONOUR: |
1 Fastwedge Pty Ltd (Fastwedge) lends money for short periods at high interest rates. It is Mr Tony Campania’s company. He was formerly known as Eris Censori. In the proceeding, Fastwedge sues Ms Patricia Kontogonis to recover $380,000, which it says the company loaned her in two transactions in August and October 2007. At the time, Ms Kontogonis was involved in the establishment of a new hair products supply business through the company, Pink Circle Group Pty Ltd (Pink Circle Group). She had, for many years, conducted a fashion accessory business through the company, Savvi Pty Ltd (Savvi).
2 Fastwedge relies upon two documents which are signed by Ms Kontogonis:
a. a document dated 2 August 2007 by which she purported to accept a loan of $200,000 from Fastwedge for a period of two months at an interest rate of five per cent per month secured by an unregistered second mortgage over Ms Kontogonis’ home at Pascoe Vale; b. a document dated 5 December 2008 by which she purported to accept the consolidation of loans from Fastwedge totalling $380,000 for a further period of 30 days at an interest rate of 15 per cent per annum secured by a registered second mortgage over the Pascoe Vale property and further secured by a factory owned by Ms Kontogonis at Campbellfield. 3 Fastwedge alleges that the $380,000 comprised the $200,000 advanced in August 2007, a further advance of $150,000 made in October 2007 and $30,000 retained at the time of the second advance as accrued interest on the first advance of $200,000.
4 There is no dispute in the proceeding that:
a.
Ms Kontogonis signed an “acceptance” of the terms and conditions contained in each document;
b.
on 3 August 2007, the sum of $200,000 was deposited into the bank account of Savvi. The money came from Fastwedge;
c.
Savvi and Pink Circle Group made payments of interest to Fastwedge following the signing of the Fastwedge document by Ms Kontogonis in August 2007;
d.
on 19 October 2007, the sum of $150,000 was deposited into the bank account of Savvi. The money had come by cheque from All Vic Taxi Trucks Removals and Storage Pty Ltd (All Vic Taxi Trucks), a company of which Mr Harry Amanatidis was a director and shareholder;
e.
in the 2009 financial records of Savvi for the year ended 30 June 2009 the balance sheet records, under the heading “Non current liabilities”, the following:
“Loans – Fastwedge $200,000
Loans – All Vic Taxi Truck $150,000”
5 On behalf of Fastwedge it was said that in October 2007, when Mr Amanatidis through All Vic Taxi Trucks advanced the sum of $150,000 to Ms Kontogonis’ company Savvi, Mr Amanatidis through his company, Iraklis Boys and Girls
Backintown Pty Ltd (Iraklis), owed a similar amount to Fastwedge. Effectively Mr Amanatidis’s loan to Ms Kontogonis was transferred to Fastwedge and it was the total liability of $380,000 (including accrued interest) that Ms Kontogonis
acknowledged in the document she executed in December 2008.
6 Ms Kontogonis, whilst acknowledging that the sum of $200,000 had been paid to Savvi by Fastwedge and the sum of $150,000 had been paid to Savvi by All Vic Taxi Trucks, denied any liability to Fastwedge and relied upon the following matters:
a.
each payment was intended to be a capital injection in the Pink Circle Group by her accountant and business partner, Mr Trifon Gouvas;
b.
Mr Gouvas had induced her to sign the 2 August 2007 document by telling her that, although he had personally borrowed the money as his contribution to the business to be conducted by Pink Circle Group, she needed to sign the document as an acknowledgment that the money had been paid by Fastwedge into Savvi’s bank account;
c.
she had never intended to assume personal responsibility for the borrowings from Fastwedge or Mr Amanatidis’ company;
d.
interest payments totalling a substantial sum had been paid by Savvi and Pink Circle Group to Fastwedge;
e.
on about 11 December 2007 the sum of $150,000 had been repaid by a cheque from Pink Circle Group to All Vic Taxi Trucks;
f.
there were certain technical defences relied upon including the formalities of the acceptance of the terms and conditions of both the 2 August 2007 and 5 December 2008 agreements and the alleged failure by Fastwedge to comply with the requirements of the Consumer Credit (Victoria) Act 1995;
g.
initially, Fastwedge had sought to recover the amounts from Savvi and Pink Circle Group rather than Ms Kontogonis. The service of statutory demands resulted in both companies being placed into liquidation. It was said by Ms Kontogonis that, in the circumstances, Fastwedge was estopped from
pursuing Ms Kontogonis in respect of the advances.
Credibility of Mr Gouvas
7 The central figure in this dispute is Mr Gouvas. In 2007, he was a tax accountant employed by a firm of accountants, David Owens & Co. He was connected with each of the other key participants:
a. Mr Campania (formerly Eris Censori) had been a client of Mr Gouvas at David Owens & Co. for many years. On a number of occasions Mr Gouvas had arranged short-term loans for his clients, and for his own personal projects, through Fastwedge; b. Ms Kontogonis and her company, Savvi, had been clients of Mr Gouvas at David Owens & Co. for about 10 years; c. Mr Amanatidis had been a client of Mr Gouvas at David Owens & Co. for a number of years, was an occasional business partner of Mr Gouvas and had provided short-term loans to clients of Mr Gouvas at his request. 8 Mr Tony Habib was also a client of Mr Gouvas. In about June 2007, he approached Mr Gouvas with a business proposition for which he needed partners with capital to invest. The Hairhouse Warehouse was a hairdressing franchisor with over 100
franchised outlets. Mr Habib had secured the distribution rights for hair care products to the franchised businesses. Mr Gouvas put Mr Habib in touch with Ms Kontogonis. The proposal was to run the business through Pink Circle Group, a company
incorporated by Mr Gouvas in late July 2007. Mr Habib had done the groundwork and
that was to be his contribution. Ms Kontogonis was to provide a capital sum which
would be used to purchase stock and she would also use her expertise as an
importer gained through Savvi.9 Soon afterwards, Mr Gouvas was also regarded as a potential shareholder. He was to perform the accounting work and was also to contribute financially. The exact basis of the arrangement was unclear. It is likely that the shareholding was initially kept solely in Ms Kontogonis’ name as she had a stable financial position with a successful business (Savvi) and a factory and home which were substantially debt free. The new business was to obtain bank finance and the banks, apparently, preferred to deal with one owner.
10 than one day. He was a most unsatisfactory witness. It is difficult to give any
Mr Gouvas was the principal witness at the trial. He was cross-examined for more the central issue in the case, the circumstances in which Ms Kontogonis signed “the acceptance” sections of the 2 August 2007 and 5 December 2008 documents, depends to a large extent on the view I take of the evidence of Mr Gouvas and Ms Kontogonis. I will examine the evidence on those issues in some detail.
11 In regard to Mr Gouvas’ credibility, it is important to note the following matters:
a.
Mr Gouvas had been the accountant of Ms Kontogonis and Savvi for about 10 years;
b.
Ms Kontogonis appeared to have given Mr Gouvas a completely free hand in running the financial aspects of the business of Pink Circle Group and, where the business of Savvi impacted on the new business, the financial affairs of
that company as well. The Savvi bookkeeper, Mrs Lena Kontogonis, had no
professional qualifications and took her direction from Mr Gouvas;
c.
although Mr Gouvas was not a signatory to the Pink Circle Group bank account (Ms Kontogonis and the bookkeeper, Mrs Lena Kontogonis, were), Mr Gouvas was frequently given signed blank cheques which he would later complete and pay to creditors of the company, to himself or to third parties to whom he was indebted;
d.
there was an absence of any real system for recording these transactions. The cheque butts were occasionally left completely blank. Often the only information recorded was the amount of the cheque. Where the other details completed included the date and payee, that information was not always consistent with the cheque or, on occasions, the details on the cheque butt were crossed out and completely different information inserted;
e.
often Mr Gouvas would pay creditors or the expenses of Pink Circle Group and later “reimburse” himself by completing cheques to his own account or in favour of third parties to whom he owed money. Mr Gouvas produced a schedule showing that he had made payments totalling $502,023.40 on behalf of Pink Circle Group and had been reimbursed the sum of $537,999.62;
f.
the accounts of Pink Circle Group were later reconstructed by Mr Gouvas on MYOB software using the cheque butts, bank statements and Mr Gouvas’ own recollection of the transactions;
g.
the bookkeeper, Mrs Lena Kontogonis, attempted to keep the company’s bank account in credit. Occasionally Mr Gouvas would bank or complete cheques without regard to the absence of funds in the account;
h.
the dealings by which Mr Gouvas sought to obtain finance for the company, both from banks and private lenders, were clothed in mystery;
i. on occasions, participants including Ms Kontogonis and bank officers, were instructed by Mr Gouvas as to what they should say to third parties to give a more favourable position of the finances of the business than was actually the
case;
j.
Ms Kontogonis had primary responsibility for the trading activities of the business although she left the financial matters substantially in the hands of Mr Gouvas.
First loan - $200,000 advanced by Fastwedge and paid to Savvi
12 In July 2007, Mr Gouvas was attempting to raise capital for the new business. Ms Kontogonis had two properties, both encumbered with small mortgage loans. Ms Kontogonis valued her Pascoe Vale home at about $550,000 to $625,000 and the
Campbellfield factory at about $750,000 to $800,000. In addition, there was approximately $193,000 in Savvi’s bank account. Mr Gouvas discussed further borrowings with the National Australia Bank and later, when that approach was unsuccessful, from Westpac. There was an urgent need for money to enable the business to participate in an industry launch on 14 August 2007 and to place orders for stock from overseas so that it might be delivered by Christmas.
13 Mr Gouvas said that he discussed various avenues for raising money with Ms Kontogonis and Mr Habib. These included the possibility of the Hairhouse Warehouse contributing funds and borrowings through a finance broker. Mr Gouvas said that he then approached Tony Campania and explained the business’s need for short-term finance until Westpac was able to restructure the borrowings of the business. Mr Gouvas told Mr Campania that Ms Kontogonis was willing to put up her house property as security. Mr Campania wanted to be sure that there was enough equity available. Mr Gouvas said that Mr Campania “left everything up to me”. Mr Gouvas contacted Mr Campania’s solicitor, Mr Madafferi of Chiodo & Madafferi. Mr Madafferi sent a pro forma loan agreement to Mr Gouvas electronically. Mr Gouvas said he printed the document and discussed it with Ms Kontogonis. The agreement provided for an interest rate of five per cent per month. Mr Gouvas said that this was in fact a mistake as the interest rate should have been 10 per cent per month. He was not concerned with the high rate of interest as he anticipated paying the loan back quickly within a period of two months.
14 Mr Gouvas said that Ms Kontogonis looked at the document and signed on two pages. Firstly, a disbursement authority for $200,000, and on a second page headed, “Acceptance”. The “Acceptance” read as follows: “I, Patricia Kontogonis of … Pascoe
Vale, Vic., 3044 have hereby read the terms and conditions of the letter of offer attached hereto and confirm that I have read and understood the terms of the offer and agree I will be bound by same. I further warrant that all information provided to you in applying for the loan is true and correct and acknowledge that you have relied on the information in making the offer herein and that the terms and interest rate reflect the urgency of the loan. I further confirm that I have been advised to seek
independent legal advice and I have chosen not to do so”.
15 Mr Gouvas witnessed Ms Kontogonis’ signature. Mr Gouvas said he gave the original time, Ms Kontogonis signed a mortgage of her Pascoe Vale property in favour of Fastwedge. On 3 August 2007, $200,000 was paid to Savvi upon instructions given to Mr Gouvas by Ms Kontogonis.
16 Ms Kontogonis said in evidence that in July 2007 Mr Gouvas was involved in every aspect of the new business. His specific responsibilities were to look after the accounting side, without charging for his work, and to pay all the bills. He had said he wanted to be a shareholder and that he would make a financial contribution.
17 Ms Kontogonis said that Mr Gouvas told her that he was “going to put in the kitty around $200,000”. Mrs Lena Kontogonis confirmed this saying that, from conversations with Mr Gouvas, she understood that he was going to be a shareholder in the business and was putting up $200,000 or $250,000 and would provide free accounting services.
18 Ms Kontogonis said that one Friday in July 2007, after the $200,000 had been paid into the bank account of Savvi, she and Mr Gouvas were the only persons at the factory. Mr Gouvas presented two pages to her – the “disbursement authority” and the “acceptance”. He said to her, “This is just to guarantee that you acknowledge that $200,000 has gone into the account”. Ms Kontogonis said that she “didn’t really” receive the complete document and that she had not asked Mr Gouvas for “a loan of money to put into the company”. Ms Kontogonis said that it was one of many documents she signed at Mr Gouvas’ request without reading it.
Second loan - $150,000 advanced by Mr Amanatidis and paid to Savvi
19 Mr Gouvas said that in mid-October 2007 the business was struggling to raise funds with the bank, the expenses of the business were starting to blow out and there had been no sales. Mr Gouvas said he again spoke to Mr Campania and told him the
business required funding for further stock. Mr Campania told him that he had funds Fastwedge through Mr Gouvas to help purchase a property at Safety Beach. Mr Amanatidis’s company, Iraklis, had granted a mortgage to Fastwedge. Mr Gouvas said he told Mr Amanatidis that Pink Circle Group needed funds. Mr Amanatidis agreed to a loan to the business of $150,000 and on 19 October 2007 the sum was paid by a cheque from All Vic Taxi Trucks into the bank account of Savvi.
coming, although money was not immediately available. Mr Gouvas then approached
Mr Amanatidis whom he knew had Fastwedge money, and in respect of which Mr20 Mr Gouvas said that, when he initially spoke to Mr Amanatidis about providing funds to Pink Circle Group, there had been no discussion about Fastwedge. It was a week or two later that Mr Gouvas told Mr Amanatidis that Mr Amanatidis would need to pay
money with Pink Circle Group as the repayment of the loan to Fastwedge. Mr
Gouvas said that he then told Mr Campania that he would not need to fund the
further requirements of Pink Circle Group and that the Amanatidis money would now
be owing by Ms Kontogonis to Fastwedge on the same terms as the earlier advance.back Fastwedge. At that time Mr Amanatidis told Mr Gouvas that he would leave the had been advanced on the same terms.
21 A substantial number of emails have been put in evidence. Most were written by Mr Gouvas. The emails confirm the chronology of events, although that is better recorded by deposits shown in bank statements. The emails are written in a shorthand slang which at times makes them difficult to understand. The emails at times appear to be inconsistent with the oral evidence of Mr Gouvas.and Ms Kontogonis.
22 An email on 19 October 2007 to Savvi confirmed the receipt of $150,000 as an interim measure to pay for stock until the bank finance would allow this and other amounts to be repaid. Mr Gouvas said that when the money was advanced, Mr Amanatidis had required security in the form of a cheque from Savvi in the sum of $150,000 which Mr Amanatidis could bank when Mr Gouvas told him that the Pink Circle Group loan had been restructured. Mr Gouvas said he told Ms Kontogonis of this arrangement and the relevant cheque butt records “6/12/07 $150,000 loan to PCG. TG to clear out, on hold”. The cheque was payable to All Vic Taxi Trucks and was dated 11 December 2007. Mr Amanatidis presented the cheque on 11 or 12 December 2007. Mr Gouvas telephoned him and Mr Amanatidis told him he had banked the cheque. Mr Gouvas said, “That was not the agreement”. Mr Amanatidis told him that “he needed money”. The cheque left the Pink Circle Group bank account overdrawn.
23 Mr Amanatidis gave evidence that for at least 10 years he had been providing short- term finance to clients of Mr Gouvas at his request. Only rarely would be know the actual name of the borrower. In early October 2007, Mr Gouvas had told him a client needed to borrow $150,000 for a period of two weeks and would pay $20,000 interest. Mr Gouvas had explained that the money was needed to purchase stock for a hair franchise business. The time for repayment passed and Mr Gouvas “came up with excuses”. Eventually, the $150,000 was repaid in December 2007. Mr Amanatidis said that it was only recently that he had become aware of the assertion that the monies advanced to Savvi were to be a “contra” against money owed to Fastwedge. Mr Amanatidis had not heard of Fastwedge at the time and had always borrowed from banks.
24 Mr Amanatidis said that he had met Tony Campania, whom he knew as “Little Tony”, and had moved house for him through his taxi truck business on more than one occasion. Mr Amanatidis did not recall signing a mortgage from Iraklis to Fastwedge. Mr Amanatidis said the document in evidence was a forgery. He said he had never received money from Fastwedge and had never paid interest to the company. Mr Amanatidis said that Mr Gouvas had got him involved with a transaction involving property at Safety Beach. At Mr Gouvas’ request, a mortgage had been given to the bank over three properties. $1.4 million had been advanced by the bank which was more than the value of the properties. Mr Amanatidis denied that his company, Iraklis, had borrowed $115,000 as bridging finance from Fastwedge in April 2007 or that, in October 2007, as a contra arrangement, he had assigned to Fastwedge the $150,000 loan he had made to Savvi.
25 Ms Kontogonis said that in late 2007 there were no discussions about anyone putting more money into the business. She said that there was no discussion about $150,000 and she did not realise that the money had gone into the company until the end of 2008. She said that she did not speak to Mr Amanatidis, and Mr Gouvas did not tell her about the loan. There is, however, an email dated 19 October 2007 from Mr Gouvas to Mr Habib and copied to Ms Kontogonis in which Mr Gouvas advised, “I
have $150,000 cheque from my guys, will go and bank it into Savvi’s account around
10.00 today”.
5 December 2008 – acknowledgment of earlier loans
26 Mr Gouvas said that between December 2007 and December 2008 the business was struggling with cash flow. He said that “everyone chipped in” and put money into Pink Circle Group and Savvi. A number of interest payments were made to Fastwedge. Mr Gouvas said that on occasions he made payments and they were reimbursed from
the companies.
27 Ms Kontogonis said that the interest payments on her loans were paid from the business. Mr Gouvas had said to her, that in these circumstances, it was only fair that the interest on his $200,000 loan should also be paid by the business. Mr Kontogonis said that she had agreed to this.
28 In a schedule to the Statement of Claim attached to the Writ, the plaintiff alleged that a total of $253,194 in interest payments had been made to Fastwedge between 4 September 2007 and 20 June 2008. No attempt was made during the trial by either party to systematically prove this sum. It was clear, however, that both parties accepted that substantial interest payments had been made as recorded in the schedule.
29 Mr Gouvas said that in late 2008 the cash situation of the business was poor. Sales had been less than expected and the bank had not approved further loans. On about 3 November 2008, a cheque for $25,000 payable to Fastwedge had been dishonoured. Mr Gouvas said that he spoke with Mr Campania. Mr Campania was very unhappy as the previous payment to Fastwedge had been made in June. Mr Campania told Mr Gouvas that he wanted a further payment by Christmas and that he wished to talk to the bank himself to clarify the stage that had been reached in the finance application. Mr Gouvas sent an email on 1 December 2008 to Ms Maria Fakiris, the Westpac manager handling the finance application, imploring her to give a positive response in relation to the progress of the application. Mr Gouvas said that he needed Ms Fakiris, “to cover me please, this guy is one tough man”. Mr Gouvas referred to Mr Campania in the email as a “private investor”.
30 Mr Gouvas said he told Ms Kontogonis that Mr Campania wished to speak with her and he understood a conversation had later taken place. Mr Gouvas said the result was that Ms Kontogonis had executed the document dated 5 December 2008 and had returned it to Mr Gouvas. An email dated 8 December 2008 appeared to confirm
this. The email was sent to Mr Censori (Campania) and copied to Mr Madafferi and
purported to attach “signed confirmation of loan agreement” and noted that Mr
Gouvas would pick up the original “from her” and drop it off tomorrow.31 The email then included what appeared to be a copy of an email from Ms Kontogonis which read, “Hey! The signed copy is attached. Trif you need to be assertive with
Joseph and get their hand in their pocket and if that means speaking with Louis to take it to that level then that is what we are going to do. My licence number is
……..Px”. Mr Gouvas said that “Joseph” and “Louis” were bank officers involved in
the loan application.32 In cross-examination, it was suggested by defendant’s counsel, Mr Sandbach, that the copied email, at the end of Mr Gouvas’ email to Mr Censori, was an email which had been sent by Ms Kontogonis to Mr Gouvas prior to August 2008. It was further suggested that the attachment was not the document dated 5 December 2008 and the reference to being assertive related to Mr Gouvas’ dealings with Hairhouse Warehouse. Notwithstanding this suggestion, Ms Kontogonis was not immediately asked by her legal advisers to specifically search for what she had instructed them was the original email, not sent in December 2008 but prior to August 2008.
33 the request of Mr Gouvas, being documents relating to tax or superannuation
In her evidence, Ms Kontogonis said that she was constantly signing documents at page of the document dated 5 December 2008. She said that she had never seen the document and Mr Gouvas had never given her copies of the agreements dated 2 August 2007 or 5 December 2008.
34 Mrs Lena Kontogonis said that in 2009, when Ms Kontogonis had decided to employ other accountants, she had a conversation with Mr Gouvas. He had referred to Ms Kontogonis as a “lying bitch” and had produced a copy of an agreement that referred to Tony Campania and said, “look, she’s even signed it”. Mrs Lena Kontogonis considered she may have been misled by Ms Kontogonis and phoned her. Mrs Lena Kontogonis told Ms Kontogonis that she had just seen a contract. Ms Kontogonis denied knowledge of it. Mrs Lena Kontogonis took it to Ms Kontogonis’ house and showed the document to her. Ms Kontogonis burst into tears and Mrs Lena Kontogonis was persuaded that Ms Kontogonis had no previous knowledge of the document. Ms Kontogonis had not referred to this incident in her evidence.
35 Ms Kontogonis said that on a weekday towards the end of 2008, Mr Gouvas phoned her and said, “Little Tony wants to speak to you to know that we are working on the loan application and that it is going ahead”. Ms Kontogonis had earlier met Mr Campania at a social function and Mr Gouvas had later told her that he was “the one who lent me the money”.
36 Ms Kontogonis said that Mr Campania phoned her and had a short conversation in which he told her that he was the person who had lent money for the business and that he was aware that the business was putting together an application to the bank for more finance.
37 Ms Kontogonis said that she had a further conversation with Mr Campania in about late February 2009. Mr Campania telephoned her and said, “I know Trif has misled you but your agreement is with me”. Ms Kontogonis said she replied, “I have no
agreement with you”. She said there was no further conversation.
38 Ms Kontogonis said that the copied email beginning, “Hey!” would have been sent by her to Mr Gouvas at around the time of the launch of the Hairhouse Warehouse products earlier in 2008 when she was suggesting that Mr Gouvas should try to persuade Joseph Lattouf of Hairhouse Warehouse to share in the marketing costs and to have Mr Louis Tachki, an associate of Mr Habib and shareholder in the business, assist in that process.
39 Mr Kontogonis said she had no idea to what document the attached “signed copy” referred. She said that she had searched her personal computer. It contained emails going back to April 2008 but she could not locate a document that contained the text of a message from her as copied in Mr Gouvas’ email to Mr Campania and Mr Madafferi on 8 December 2008.
40 Mr Madafferi gave evidence that the 5 December 2008 document was prepared upon Mr Campania’s instructions. Mr Campania told Mr Madafferi that he had had a conversation with Ms Kontogonis. Mr Campania said he had told Ms Kontogonis that Mr Gouvas had told him a number of “stories”. However, Mr Campania had said that Ms Kontogonis had “acknowledged” what she owed and Mr Campania was prepared to give her a discount on the interest rate because she was refinancing.
41 After December 2008, Mr Gouvas’ efforts to obtain finance from Westpac continued to be unsuccessful. Mr Kontogonis’ understanding was that he was seeking an additional $100,000 on her behalf and $380,000 for his own purposes.
42 The application floundered, according to the bank manager, Ms Fakiris, because Mr Gouvas failed to identify specific properties he would provide as security for the advances. Ultimately, Mr Kontogonis decided in March 2009 to change accountants because of the unsatisfactory performance of Mr Gouvas and the suspicion that he was trying to use her properties as security for advances for his own purposes.
43 Mr Campania did not give evidence at the trial despite plaintiff’s counsel, Mr Pennell, indicating during his opening that Mr Campania would be a witness. No satisfactory explanation was offered for his absence.
44 In the circumstances, I should assume that nothing Mr Campania might have said would have assisted the Fastwedge case. Further, where evidence was given of matters about which Mr Campania might have given evidence, for example, the telephone conversation in December 2008 with Ms Kontogonis, I should more readily accept the evidence that was given and which was uncontradicted. There was also no evidence from Mr Campania contradicting the evidence of Mr Gouvas that he was acting with Mr Campania’s full authority, including in relation to the transactions in August and October 2007 and obtaining Ms Kontogonis’s signature to the relevant documents.
Findings 45
Ordinarily, a person is bound by the terms of a written agreement they have executed unless there is a legal basis for setting aside those obligations. In the present case, Ms Kontogonis asserts that when she signed the “Acceptance” and “disbursement authority” pages of the 2 August 2007 document she was misled by Mr Gouvas into believing that she was simply acknowledging that the sum of $200,000 had been received by Savvi. This is a matter in respect of which Ms Kontogonis bears the onus of proof.
46 There are a number of aspects of her evidence which were unsatisfactory including:
a.
her failure to recall signing a mortgage in respect of the property offered as security for the purported loan of $200,000;
b.
in an email dated 19 October 2007 copied to Ms Kontogonis, Mr Gouvas stated that he had obtained a “$150,000 cheque”. Ms Kontogonis claimed no knowledge of the payment;
c.
the lack of any explanation for her signature appearing on the document dated 5 December 2008;
d.
the email dated 8 December 2008 indicating that she had returned the documents and her belated investigation of her email records;
e.
the failure to refer to the copy “contract” provided by Mr Gouvas and shown to her by Mrs Lena Kontogonis.
47
I am required to determine these issues on the balance of probabilities giving appropriate weight to the seriousness of the allegations made by Ms Kontogonis. In this case they include allegations that Mr Gouvas deliberately misled her about the reason she needed to sign the 2 August 2007 document, his failure to provide an appropriate explanation when she executed the mortgage of her Pascoe Vale property and the 5 December 2008 agreement and Mr Gouvas allegedly falsifying the email dated 8 December 2008 to suggest that Ms Kontogonis had voluntarily executed and returned the 5 December 2008 agreement.
48
These are very serious allegations. It is unlikely, however, that Ms Kontogonis would be simply mistaken in her recollection as to whether she had knowingly executed these documents. There was a direct clash between what was said by Mr Gouvas and by Ms Kontogonis. On the basis of the evidence, I consider that it is more likely than not that Mr Gouvas deliberately misled Ms Kontogonis as to what she was signing and the reason the documents were required. Perhaps his motives at the time were more innocent; he may have believed that short-term finance was required and would have been repaid from the expected bank loans and that the anticipated profits from the business would have covered the high rate of interest that was the price of the short-term finance.
49
Later, at the end of 2008, Mr Campania would understandably have been angry at the fact that his loan was unpaid and no interest payments had been made since June 2008. At that stage, it is apparent that Mr Gouvas was prepared to do and say anything to get Mr Campania off his back as is evidenced by the email to Ms Fakiris dated 1 December 2008.
50
I consider that Ms Kontogonis’ account of the critical transactions should be accepted. I rely primarily on the following matters:
a. Mr Gouvas was an unreliable witness with no credibility; b.
Mr Gouvas had, for many years, been Ms Kontogonis’ accountant and therefore a person whom she trusted as a professional adviser;
c.
there is independent evidence that Mr Gouvas was given free rein in handling financial matters for the business. He was given blank cheques and his word was accepted as to how, when, to whom and in what amount payments were made;
d.
it is likely that Ms Kontogonis did not bother to exercise any independent control or consideration of the appropriateness of the financial administration of the business until early 2009;
e.
Mrs Lena Kontogonis supported Ms Kontogonis’ evidence that Mr Gouvas had promised to make financial contributions of around $200,000 to the business in return for his shareholding;
f.
the advance of $150,000 from Mr Amanatidis to Savvi and the subsequent repayment of that sum bore little relationship to the pleading of that transaction as “the second loan agreement” in the Further Amended Statement of Claim dated 4 March 2011;
g.
Ms Kontogonis’ financial position in August 2007 made it unlikely that she would knowingly have agreed to further mortgage her home to obtain short- term finance at an interest rate of five per cent per month;
h.
all the parties who had dealings with Mr Gouvas in late 2007 and in 2008, including Ms Kontogonis, Mrs Lena Kontogonis, Ms Maria Fakiris, Mr Amanatidis and even Mr Campania, at some stage formed the view that he was unreliable and could not be taken at his word.
51
I consider in the circumstances that the court should not enforce the agreement purportedly contained in the document dated 2 August 2007 on the basis that Ms Kontogonis only signed the pages of that document. As a result of being misled by Mr Gouvas.
52
If, however, I were minded to enforce that document as a valid agreement between Fastwedge and Ms Kontogonis, I would not consider that the failure by Ms Kontogonis to initial “each page in the bottom right hand corner” would affect the validity of the document if it were otherwise enforceable.
53 annum) would offend s.39(1) of the Consumer Credit (Victoria) Act 1995 and render
the transaction void as the loan was not “provided wholly or predominantly [for]
personal, domestic or household purposes” or for another relevant purpose. TheI also do not consider that the interest rate of five per cent per month (60 per cent per “unconscionable” in law.
54
Further, I would need to have regard to the payments totalling $253,194 apparently made between 4 September 2007 and 20 June 2008. Whilst a loan of $200,000 would, at five per cent interest per month, have accrued interest payments each month of $10,000, by December 2008 a substantial portion of the capital would have been repaid. The plaintiff did not address these matters in evidence or submissions and in the light of the findings made it would not now be appropriate to permit the plaintiff to do so.
55
The advance of $150,000 in October 2007 was made by Mr Amanatidis to Savvi. The sum was repaid two months later. Mr Amanatidis was satisfied to accept the repayment without interest. There is no credible evidence to support the alternative contentions put forward on behalf of Fastwedge, either as pleaded in the most recent version of the Statement of Claim or, as the story developed during Mr Gouvas’ evidence.
56
In regard to the 5 December 2008 agreement or acknowledgment, Mr Campania failed to give evidence about the supposed “contra” agreement with Mr Amanatidis or the telephone conversation with Ms Kontogonis in early December 2008. In the absence of this evidence, Mr Gouvas’ testimony falls far short of establishing that there was a debt of $380,000 that Ms Kontogonis might appropriately have acknowledged even if she were aware of what she was signing.
57
Ms Kontogonis’ financial position in December 2008 made it unlikely that she would have consolidated borrowings in this sum for a further period of 30 days, even at a substantially reduced rate of interest.
58
In the circumstances, there is no basis for enforcing the supposed “agreement” between Fastwedge and Ms Kontogonis contained in the document dated 5 December 2008.
59
If I had been minded to enforce the agreements contended for by Fastwedge, it was submitted on behalf of Ms Kontogonis, that Fastwedge should be estopped from doing so because it served statutory notices upon Savvi and Pink Circle Group, which resulted in the liquidation of those companies. The evidence in this regard was most unsatisfactory and reflected very poorly upon Fastwedge.
60 Mr Campania instructed Mr Stephen O’Neill, a consultant in insolvency, to recover to Savvi and Pink Circle Group, a statutory demand on those companies would “bring them to the negotiating table”. Mr O’Neill said that Mr Campania had asked him whether he could replace him as a director of the company. Mr O’Neill installed his domestic partner, Ms Sandra Pollock, who swore affidavits as to the companies’ indebtedness. In my judgment, she had no idea as to her responsibilities as a director or the matters she attested to in the affidavits she swore. She simply did as she was directed by Mr O’Neill.
61
Savvi and Pink Circle Group were liquidated. Ms Kontogonis swore a summary of affairs of Savvi on 23 April 2010. The company had an estimated deficiency of $892,720 (subject to the cost of the liquidation). A loan to Fastwedge of $200,000 was included in the list of unsecured creditors of the company.
62
There was no evidence from Ms Kontogonis as to why the statutory demands had not been contested. It may be that it suited the financial circumstances of Ms Kontogonis for the companies to be liquidated, although Westpac, as a secured creditor of Savvi in the sum of $550,000, apparently held her factory as security for their bank loan.
63 In any event, whilst by the statutory demands Fastwedge represented that it regarded evidence that Ms Kontogonis relied upon these representations or altered her position in any way. I do not consider that Fastwedge would have necessarily been estopped from pursuing an otherwise enforceable claim against Ms Kontogonis.
64
Fastwedge lodged caveats over Ms Kontogonis’ two properties at Pascoe Vale and Campbellfield. The basis for the caveat over the Pascoe Vale property was the unregistered mortgage executed by Ms Kontogonis and the agreements dated 2 August 2007 and 5 December 2008. As the principal agreements which gave validity to the security documents have been held to be unenforceable, the caveats must fail. In any event, the document dated 5 December 2008 provided little basis for supporting a charge over the Campbellfield property.
65
compensation pursuant to s.118 of the Transfer of Land Act. Ms Kontogonis said that
after Fastwedge lodged caveats (on about 30 March 2010), she had tried to refinanceIn addition to the removal of the caveats, Ms Kontogonis counterclaimed for refinance it. She said that, if she had been able to refinance, there would have been cheaper loans available and she would have saved about $1,500 to $1,700 per month in interest charges for a period of about 11 months.
66
Although Mr Pennell did not cross-examine Ms Kontogonis about this evidence, I consider that it does not provide a proper basis for assessing appropriate compensation. At the very least, evidence would have been necessary as to:
a.
the nature of the finance secured by the Pascoe Vale and Campbellfield properties in March 2010, including any loan to Savvi by Westpac;
b. any attempts made to obtain further finance and to pay out the existing loans; c.
alternative finance that might have been available using the properties as security;
d.
the relative interest charges for the existing finance and the alternative finance.
Orders 67 The orders that follow from the conclusions I have reached are:
a. the plaintiff’s claim will be dismissed; b.
on the defendant’s counterclaim, judgment for the defendant for an order that caveat number AH131218H in respect of Certificate of Title, Volume 10316 Folio 262 and caveat number AH131413K in respect of Certificate of Title, Volume 10880 Folio 576 shall be removed.
68 I will hear further from the parties before making final orders.
Certificate
I certify that these 23 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 31 March 2011.
Dated: 31 March 2011
Hannah Christensen
Associate to His Honour Judge Anderson
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