Fiorentino v Nedeljkovic
[2018] WASC 40
•29 MARCH 2018
[2018] WADC 40
| JURISDICTION | : | DISTRICT COURT OF WESTERN AUSTRALIA IN CIVIL |
| LOCATION | : PERTH | ||
| CITATION |
| ||
| CORAM | : JUDGE STAUDE | ||
| HEARD | : 19 FEBRUARY 2018 | ||
| DELIVERED | : 29 MARCH 2018 | ||
| FILE NO/S |
| ||
| BETWEEN | : GEORGE FIORENTINO |
Plaintiff
AND
JELENA NEDELJKOVIC
Defendant
Catchwords:
Contract - Loan agreement - Whether agreement included obligation to repay interest incurred by lender - Turns on own facts
Legislation:
Nil
Result:
Judgment for the plaintiff
[2018] WADC 40
Representation:
Counsel:
| Plaintiff | : In person |
Defendant : In person
Solicitors:
| Plaintiff | : Not applicable |
Defendant : Not applicable
Case(s) referred to in decision(s):
Nil
[2018] WADC 40
JUDGE STAUDE
JUDGE STAUDE:
Introduction
The plaintiff, Mr George Fiorentino, is an accountant. The defendant, Jelena Nedeljkovic, is a former client of his practice. In 2011 they were good friends. As Mr Fiorentino put it, 'If she needed anything I would help out'. Mr Fiorentino would charge Ms Nedeljkovic for accounting services, but not for other assistance.
In 2011 Ms Nedeljkovic decided that she would subdivide her residential property in Maddington in order to sell the lot so created. However, she could not afford the expenses of subdivision. Mr Fiorentino agreed to assist her by paying the costs of the subdivision on the basis that he would be repaid from the proceeds of sale of the created lot.
The subdivision process was unexpectedly long and cost much more than anticipated. Mr Fiorentino paid out a total of $70,868.75. While not all of the sums of money comprising that amount are related to the subdivision, there is no dispute that the total sum is comprised of monies paid to or on behalf of Ms Nedeljkovic between April 2011 when the initial survey was commissioned and July 2014 when the certificates of title were issued by Landgate.
The created lot took a long time to sell. In the meantime, the relationship between Mr Fiorentino and Ms Nedeljkovic broke down, leading Mr Fiorentino to doubt that his loan would be repaid. This action was commenced on 17 April 2015.
Eventually the lot created was sold for $120,000.
Mr Fiorentino sought relief in the Supreme Court (CIV 1120 of 2017). On 2 February 2017 Kenneth Martin J granted an injunction, ordering that upon Mr Fiorentino's undertaking to pay compensation arising from the injunction, Ms Nedeljkovic be restrained from disposing of the net proceeds of sale of the lot and that the net proceeds be paid into court to abide the outcome of this action.
Upon the settlement of the sale of the created lot on 27 March 2017 the net proceeds were paid into court. The principal sum of $70,868.75 was subsequently paid to Mr Fiorentino.
[2018] WADC 40
JUDGE STAUDE
The trial of this action involves Mr Fiorentino's residual claim for $23,261.43 for interest to 30 April 2017 and a claim for $18,431.72 for legal costs in the Supreme Court proceedings.
Neither party was represented at the trial. Mr Fiorentino attended in person and gave evidence. He also called as a witness an employee, Ms Leeanne Hampson. Due to incapacity, Ms Nedeljkovic was granted leave to appear by video-link from Tasmania. She gave evidence as did her daughter Kata Sljivovac.
Although there were other matters over which the parties disagreed, the main controversy was whether the agreement between the parties included a promise by Ms Nedeljkovic that she would reimburse Mr Fiorentino for the interest he paid on the monies that he advanced to her or on her behalf.
Before turning to the conflicting testimonies of the parties and their witnesses in this respect, it is appropriate to refer to the pleadings in order to identify the issues for determination.
Pleadings
The action was commenced by a writ of summons issued on 17 April 2015 by Carlo Primerano & Associates, a firm then acting on Mr Fiorentino's behalf. The writ simply claimed the sum of $70,868.75, being the total of the various sums of money advanced by the plaintiff to or on behalf of the defendant between 29 April 2011 and 5 July 2014 and interest.
The statement of claim was lodged on 21 April 2013. It was signed by counsel. It alleged that in April 2011 an oral agreement was made between the parties at a meeting at Mr Fiorentino's office in Kewdale, as follows:
(a)
The Plaintiff would enter into a mortgage facility with his financial institution and then lend the Defendant all necessary funds for the subdivision of the property into two lots ('the Loan');
(b)
The Defendant agreed to pay the Plaintiff for all costs associated with the Plaintiff's mortgage facility incurred by the Plaintiff;
(c)
The Defendant agreed to pay the Plaintiff all interest charged to the Plaintiff on the mortgage facility; and
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(d) The Defendant agreed that all sums advanced to her for the Loan and the costs and interest specified in paragraphs 7(b) and 7(c) above would be repaid to the Plaintiff once the first subdivided block was sold (collectively 'the Contract').
Ms Nedeljkovic, acting in person, lodged a defence dated 9 May 2016 in the form of a personal statement. In it she accepted that she was indebted to Mr Fiorentino in the amount of $70,868.75 that she said would be paid to him upon settlement of the sale of the created lot. Otherwise her position was that it was during a visit to her home in or about April 2011 that she asked Mr Fiorentino if he would be willing to pay for the subdivision of her property on the basis that he would be reimbursed and given an amount of $5,000 in cash 'as a token of my appreciation'. The defence stated that Ms Nedeljkovic told Mr Fiorentino that when the subdivision was completed she would list the lot created for sale and reimburse him from the proceeds. She intended to continue to reside in her home on the remaining lot. According to the defence, Mr Fiorentino did not say that he intended to enter into a mortgage facility with a financial institution. There was no discussion regarding the payment of interest, nor any agreement on Ms Nedeljkovic's part to pay interest. She denied being in breach of the agreement.
At a pre-trial conference on 27 January 2017 orders were made that any application to amend the statement of claim be made within 14 days. At that stage Mr Fiorentino was still legally represented. Subsequently, on 21 March 2017 it was ordered that Mr Fiorentino file and serve any amended statement of claim within 28 days.
On 25 May 2017 Mr Fiorentino, acting in person, lodged a further statement of claim. This was not marked to show any amendments and was in the form of a substituted statement of claim, although not intituled as such. No objection was taken to this pleading by Ms Nedeljkovic. It may be treated as having been filed with leave of the court.
In what I will describe as his substituted statement of claim, though also in the form of a personal statement, Mr Fiorentino alleged that on an occasion prior to 29 April 2011 at his office he met with Ms Nedeljkovic and her daughter. According to the substituted statement of claim:
10. The Defendant said she was at my office to ask for assistance to develop her block of land. The Plaintiff explained he did not
[2018] WADC 40
JUDGE STAUDE
have those funds personally, but had a line Credit which could
advance 'loans' to her [sic].11. The Plaintiff made it clear it was a loan and that such loan would be accruing interest.
12. The Defendant estimated that $15,000 - $20,000 would be required for the subdivision of the Defendant's property.
13. The outcome of the development was to result in an extra block for the Defendant to sell and pay back all monies due to the Plaintiff.
14. The Defendant estimated that the subdivision and sale of the block would only take two or three months.
15. The Plaintiff made it clear at all times to the Defendant that he was not in this to make money out of her.
16. The Defendant was adamant and reassuring that the block would be subdivided and sold within a few short months and the Plaintiff would be the first to be paid back and he would not suffer financially.
17. There was no hesitation from the Defendant to accept those terms and she said she would fully repay the debt to the Plaintiff. It was expected that the loan and the interest would have been paid back within a few short months. It was accepted by the Plaintiff that this would happen immediately after the subdivided block (the reason for the loan) was sold.
Ms Nedeljkovic did not lodge an amended or substituted defence in response to the substituted statement of claim.
Issue to be determined
The main issue is whether or not it was agreed between the parties that Mr Fiorentino would be reimbursed for the interest he incurred on the sums advanced by way of a loan to and on behalf of Ms Nedeljkovic.
This determination involves findings as to the circumstances of the agreement. As the parties and their respective witnesses have given conflicting accounts of this, the findings must necessarily turn on the court's assessment of the credibility of their respective testimonies.
[2018] WADC 40
JUDGE STAUDE
Apart from the controversy as to the terms of the agreement, no issue has arisen with respect to its legal enforceability.
Evidence of Mr Fiorentino
Mr Fiorentino's evidence was that he received a call from Ms Nedeljkovic who told him that she wanted to subdivide her block and asked him for a loan. He said that he told her he had no money but did have a line of credit. She asked to come to his office.
At a later meeting in his office at which Ms Nedeljkovic attended with her daughter, Kata Sljivovac. Ms Nedeljkovic told him that she had some quotes for expenses, that she thought the subdivision would take six weeks to two months to complete and that she was hoping to sell the lot created by the subdivision. On that occasion he again told her that he had a line of credit. He said he told her, 'As long as I am not out of pocket, I'm happy to pay the expenses'. The conversation lasted 20 to 30 minutes. At the end Ms Nedeljkovic and her daughter thanked him and left.
Mr Fiorentino said he generally dealt with Ms Sljivovac in relation to the payment of expenses. Not all of the monies he advanced were for subdivision expenses. For example, he indicated a payment of $500 to buy new tyres for Ms Nedeljkovic's vehicle. (As I have noted elsewhere, there was no issue as to the quantum of the debt). He said that he drew down on his line of credit to pay the expenses and that he was charged interest at various rates from time to time as reflected in exhibit 1, a table of amounts loaned and interest calculations. No issue was taken by the defence with the accuracy of this table.
Mr Fiorentino produced emails to Ms Sljivovac which referred to him incurring interest as he drew down on his loan facility. Exhibit 4 is an email dated 6 June 2012 which mentions that interest on the borrowing probably amounted to $1,500 to $2,000 to that date. Exhibit 5 is an email dated 25 March 2013. In that email he stated that he was almost fully drawn on his loan and that he had other debts to pay off. Exhibit 6 is an email dated 14 September 2014 that refers to an attached table showing a total debt, including interest, of $93,816. He confirmed that the principal amount of $70,868.75 was repaid on 30 April 2017.
| 26 | Mr Fiorentino gave evidence that his claim for legal expenses related to legal fees paid to Carlo Primerano & Associates and Mr A J Aristei in connection with the proceedings in the Supreme Court. |
[2018] WADC 40
JUDGE STAUDE
Exhibit 2 consists of a memorandum of counsel fees by Mr Aristei and trust account statements showing fees paid to Carlo Primerano & Associates.
Mr Fiorentino gave other evidence in relation to the reasons for the time taken to complete the subdivision and his concerns that the loan to Ms Nedeljkovic would not be repaid.
Relevantly, in cross-examination, Mr Fiorentino was asked whether there had been a written or verbal agreement for the payment of interest. He admitted that there was no agreement in writing and that the verbal agreement did not make any mention of interest. It was also put to him that Ms Nedeljkovic had offered him $5,000 for helping her with the subdivision. He said that he was never offered that amount of money. Although it was not relevant, he was questioned about why he recommended a particular tradesman to Ms Nedeljkovic to render her house and why he obtained legal representation. He was also asked whether he had done his own research into the costs of subdivision and the time it would take. He accepted that he did consult a friend who was a builder, but this occurred after the date of agreement.
He agreed that interest rates were not discussed, but he said that he had mentioned that he had access to a line of credit. Mr Fiorentino denied that he told Ms Nadeljkovic and Ms Sljivovac that he had made a $100,000 profit from his clients.
Evidence of Leeanne Hampson
Ms Hampson said that she had worked for Mr Fiorentino as a bookkeeper for many years. She was introduced to Ms Nedeljkovic and her daughter as friends.
She was present in the office attending to book work when she overhead a meeting at which there was a discussion between Mr Fiorentino, Ms Nedeljkovic and Ms Sljivovac. She heard, as she recalled, Ms Nedeljkovic saying that she needed help with the subdivision. She heard Mr Fiorentino say that he would have to use his line of credit to do so. She heard him say, 'As long as I'm not out of pocket, I'm happy to help you'. She then turned her attention from the meeting. She said that she remembered the conversation because it struck her that Mr Fiorentino was very generous. She confirmed that interest was not mentioned in the conversation that she heard.
[2018] WADC 40
JUDGE STAUDE
Ms Hampson was cross-examined. It was suggested that she was never in the office at any time when Ms Nedeljkovic was there. Ms Hampson agreed that she generally worked offsite doing bookkeeping for clients of the practice, but was usually in the office on a Saturday. She rejected the suggestion that she did not in fact hear any conversations such as she described.
Evidence of Jelena Nedeljkovic
Ms Nedeljkovic's evidence was that Mr Fiorentino came to her home after work on a Friday evening. This was not unusual. She said that she would often cook dinner for Mr Fiorentino. On this occasion her daughter, Ms Sljivovac, was in the kitchen. Mr Fiorentino said, 'I have made $100,000 from wealthy clients'. He repeated this statement. Ms Nedeljkovic said that she was struggling with her mortgage payment at that time. She asked Mr Fiorentino if he would help her to subdivide her property. Mr Fiorentino agreed to do so. He said he would ask a client who was a builder what was involved.
According to Ms Nedeljkovic said, she said, 'If you help me, I'll give you $5,000 cash as a token of my appreciation'. She said there was a conversation between Mr Fiorentino and her daughter as to what needed to be done. She said there was no meeting at Mr Fiorentino's office regarding the agreement. He would often come to her house. She would attend his office to drop off papers relating to her taxation returns, but would usually see him at her home or his.
She said there was no interest mentioned. As far as she was concerned, the agreement was that she would repay Mr Fiorentino from the sale of the created lot and would pay him $5,000.
Evidence of Kata Sljivovac
Ms Sljivovac gave evidence of an occasion when Mr Fiorentino came by her mother's house and she cooked him dinner. She recalled him mentioning he had made a profit for his clients of $100,000. At that stage she had received a letter from the local authority in relation to the rezoning of her mother's property.
| 37 | She had discussed subdivision with a mortgage broker who had done a similar subdivision for $25,000, although he said that she would have to check with the local authority as each was different in terms of |
[2018] WADC 40
JUDGE STAUDE
its infrastructure requirements. When she discussed this with Mr Fiorentino at her mothers' house, she told him what the broker had told her.
Ms Sljivovac was subsequently involved in administering the subdivision project.
Interest rates
At the conclusion of the trial I inquired whether there was any dispute as to the interest rates applicable from time to time. Ms Nedeljkovic indicated that she had not received any proof of the applicable rates. I directed that Mr Fiorentino produce evidence of the applicable rates on which his claim for interest was based and directed the defendant, Ms Nedeljkovic, to indicate, upon receipt of the information, whether any dispute was taken with the rates.
Subsequently, Mr Fiorentino forwarded to my associate by email a copy of a Commonwealth Bank of Australia line of credit statement which appears to be a document compiled from other statements which have been cut and pasted to show the interest rates on his line of credit at most of the relevant times. The rates appear to correspond with the rates cited in exhibit 1.
The court has not received any notice from Ms Nedeljkovic objecting to the statement or indicating any issue with the rates to be applied. Ms Nedeljkovic has not otherwise raised any issue with the quantum of the interest claimed. The statement has been marked exhibit 7.
Findings
I find that Mr Fiorentino funded his advances to and on behalf of Ms Nedeljkovic by drawing down on a Commonwealth Bank of Australia line of credit. The advances were not paid from monies at hand. The rates set out in exhibit 2 correlate with the rates shown from time to time on the line of credit statement (exhibit 7). I am also satisfied that Mr Fiorentino did not indicate that he was otherwise able to pay the subdivision expenses.
| 43 | Whilst the word 'interest' was not specifically mentioned in the course of the discussions in which the agreement was made, wherever |
[2018] WADC 40
JUDGE STAUDE
they occurred, I am satisfied that the agreement was that Mr Fiorentino would pay the costs of the subdivision in consideration of Ms Nedeljkovic's promise to repay him from the proceeds of sale of the lot created by the subdivision. I am satisfied that it was a term of the agreement that Mr Fiorentino would not be 'out of pocket'. That term was an express oral term on the evidence of Mr Fiorentino and Ms Hampson. I accept that evidence.
I am satisfied that although this agreement was made in the context of a personal friendship, and with the intention, on Mr Fiorentino's part, of assisting Ms Nedeljkovic to realise some capital, it was, nevertheless, intended to be legally enforceable. No suggestion to the contrary has been made.
It was not a term of the agreement that Mr Fiorentino would be paid $5,000 for his financial assistance. Ms Nedeljkovic may well have intended to reward him in that way, but it would have been merely a gratuity.
I find that the meeting at which the agreement was discussed occurred at Mr Fiorentino's office and that it was overheard in part by Ms Hampson. I find Ms Hampson to be a truthful witness. She did not strike me as the sort of person who, even as a loyal employee of Mr Fiorentino, would perjure herself both in an affidavit which was filed in the court in these proceedings and in her sworn evidence at trial in order to enable the recovery of a relatively modest amount of interest.
It follows that that Ms Nedeljkovic and her daughter cannot be believed in their evidence that the agreement was made on an occasion when Mr Fiorentino attended for dinner at their home, although I do accept that it is quite likely that there were social occasions at Ms Nedeljkovic's home at which matters associated with the subdivision were discussed.
My findings in favour of Mr Fiorentino lead to a conclusion that he should have judgment for the interest he paid on the total sum advanced to and on behalf of Ms Nedeljkovic to the date of repayment of the loan.
On the basis that it was a term of the agreement that Mr Fiorentino would not be out of pocket and that it was made known to Ms Nedeljkovoic at the relevant time that he would be drawing on a line of credit, it is reasonable to construe that term to include the
[2018] WADC 40
JUDGE STAUDE
interest charged by Commonwealth Bank of Australia on Mr Fiorentino's line of credit from time to time. The interest paid by him was an expense of the subdivision. I find that that amount is validly calculated in the amount of $21,276.71 to 30 April 2017, being the date on which the advances were repaid.
As to the claim for legal costs, no cause of action has been established. There is no contractual, tortious or restitutionary basis for the claim. If Mr Fiorentino is due any costs as a result of the Supreme Court proceedings, then an appropriate order should be sought in that jurisdiction.
Mr Fiorentino is entitled to judgment in the sum of $21,276.71 plus interest pursuant to s 32 of the Supreme Court Act 1935 at the statutory rate of 6% from 30 April to the date of judgment, being a period of 11 months; $1,170.22, in total $22,446.97.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
RR
ASSOCIATE TO JUDGE STAUDE
17 APRIL 2018
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