Fleming v Calpis

[2023] NSWDC 237

District Court

New South Wales

Medium Neutral Citation:

Fleming v Calpis [2023] NSWDC 237

Hearing dates:

28, 29 June 2023

Decision date:

29 June 2023

Jurisdiction:

Civil

Before:

Newlinds SC DCJ

Decision:

1.   Judgment in favour of the plaintiff in the sum of $131,857.00;

2. Interest on the said sum pursuant to s 100 of the Civil Procedure Act 2005, such interest to be calculated from 23 September 2022; and

3.   Defendant to pay the plaintiff’s costs of the proceedings.

Catchwords:

Contracts; informal: vague conversation

Category:

Principal judgment

Parties:

George Fleming (plaintiff)
Luke Calpis (defendant)

Representation:

Counsel:
B Phillips (plaintiff)
D Green (defendant)

Solicitors:
Deutsche Partners (plaintiff)
Green & Associates (defendant)

File Number(s):

2022/295938

Publication restriction:

None

REASONS: EX TEMPORE

1. HIS HONOUR: I find in favour of the plaintiff. These are my reasons.

2. For some years prior to December 2021, the plaintiff and defendant were in the business of property development together. The structure of their business historically was that each had a corporate vehicle: for the plaintiff, Gemi Pty Ltd, and for the defendant, Calp Investments Pty Ltd. Those companies which were owned and controlled by the plaintiff and the defendant, respectively, in turn were the shareholders in Goulburn Street Developments Pty Ltd, the directors of Goulburn Street Developments were the plaintiff and the defendant.

3. By December 2021, Goulburn Street Developments had successfully completed a property development at Crown Street, Surry Hills. The defendant continued to manage that project and was being paid a wage for his services, however the property, which I understand was either finished or close to finished, had not yet been sold.

4. Over the years, the parties, and I infer more often than not the plaintiff, had provided cash by way of loans through corporate vehicles to Goulburn Street Developments to allow it to continue to trade.

5. This case concerns an amount of $131,857 transferred at the direction of the plaintiff to an account controlled by the defendant on 21 December 2021.

6. By a statement of claim filed on 5 October 2022, the plaintiff alleges that the money represented a loan by him to the defendant. He contends that there was an express oral agreement that the money would be an advance between the two individuals as a loan, and that that agreement occurred in a discussion on 18 December 2021, although he cannot recall now whether it was in telephone or in person.

7. In para 3 of his affidavit of 6 March 2023, the plaintiff gives evidence to the following effect:

On or about 18 December 2021, the defendant said words to me to the following effect:

‘I have an opportunity to do a development in Flinders Street, but I need 131,000 to pay an option fee. It will be paid back to you as I’ve got a potential partner in the development, George Karageorge, who has agreed to refund the option fee once the option is secured. I’ll only need the money for a couple of weeks, then I will pay it back to you.’

To this the plaintiff replied “Okay”.

8. Later on the same day, the plaintiff received an email from the defendant which included the following:

This is a really positive meeting I had yesterday with George Karageorge, a big land owner in the Surry Hills area. This partnership we (sic will) probably work out better for me due to the fact he doesn’t want anything on his equity and we split the profits down the middle. See below an email I sent to him.

9. Attached to that email is an email, also of 18 December 2021, sent by the defendant to George Karageorge. It includes relevantly the following:

“Hi George.

Good meeting yesterday. Just to recap with regards to potential JV.

With our discussions…

Partnership (49% Freehold) (51% Stasia)

• joint branding on the development

• all equity provided by Stasia (including $2,750,000 middle Jan 2022) paid back directly to George Fleming that he has paid towards deposit as a personal loan to me…”

10. Stasia was an entity controlled by George Karageorge. Freehold is not a legal entity; rather, it is what the defendant described as his brand. His evidence, which I accept, was that he often refers to himself as Freehold, thus giving himself the flexibility to use whatever corporate arrangement he wishes, if he proceeds with a transaction. He does this also so that he can keep some level of confidentiality when dealing with people.

11. On 21 December 2022, the defendant emailed the plaintiff a screenshot of the defendant’s solicitor’s trust account details, and, as I have said, on 21 December, the money was transferred. On that day, Danielle Patterson (the plaintiff’s bookkeeper and daughter) wrote to the defendant in the following terms:

Hi Luke, confirming funds have been transferred as per the attached.

George - can you please advise the interest rate, et cetera, so I can set up the system?

12. The “system” was, it seems, the records of one of the plaintiff’s corporate vehicles which carried on business as, amongst other things, a money lender.

13. The plaintiff gave evidence that his daughter mistakenly thought the money was to be a loan from one of his companies and entered the transaction in the books of Gemi Investments Pty Ltd. Having booked it as a loan from Gemi Investments Pty Ltd to Goulburn Street Developments, Ms Patterson caused interest to be debited on that notional debt at a rate of 25% per annum, and statements were sent on a monthly basis by Gemi Investments to Goulburn Street Developments.

14. Unsurprisingly, having regard to the issue in this case, the defendant places significant weight on that course of conduct.

15. As I have said, the plaintiff says this was a mistake and that there was an email at some point in time from the defendant pointing out the mistake, and thereafter he instructed Danielle Patterson to reverse the entry, which she did. Neither Danielle Patterson has been called to give evidence to corroborate that evidence, nor have I seen any email from the defendant to that effect. As far as I can tell such evidence was readily available to the plaintiff.

16. Mr Green, who appears for the defendant, submits that I should infer from the failure of the plaintiff to tender that September email or to call Danielle Patterson that nothing that email may say or any evidence that Danielle Patterson could give could assist the plaintiff's case in this regard.

17. That is an initially attractive submission, however, the problem I think is that the plaintiff's case does not need assistance in that regard. The plaintiff gave unchallenged evidence that Danielle Patterson made the mistake. True it is the plaintiff could have confirmed that evidence by calling further evidence to the same effect, but I do not think his failure to call further evidence on the topic in those circumstances means that I should draw any inference against the plaintiff and I decline to do so.

18. The plaintiff says the money trail is now correctly recorded and is in fact as follows. He borrowed money personally from Gemi Investments Pty Ltd which was recorded by way of an entry on his loan account - he in turn advanced personally to the defendant that money in accordance with the oral agreement made 18 December 2021, upon which he relies. If that be the correct analysis, then the money the subject of this case is repayable to the plaintiff by the defendant either after a reasonable time had elapsed following its advance (and no‑one suggested that such a time has not elapsed) or upon demand which has been made.

19. Mr Phillips, for the plaintiff, points out that the evidence before me demonstrates that as a matter of policy when Gemi Investments made loan advances, it had various "mandates" which required security and the like - none of which was satisfied in this instance. There are in evidence examples of the suite of documents used by Gemi Investments when it made loans, including a loan from Gemi Investments to Calp Investments Ltd (a company controlled by the defendant), which loan was the subject of a personal guarantee by the defendant and also was secured by real property at security.

20. That suite of documents is comprehensive and formal and, as I have said, includes security by way of mortgage, a formal guarantee, and of course is in writing.

21. The context of the 18 December 2021 discussion was that the defendant had secured for himself (i.e. in his name) an exclusive due diligence period (effectively an option to enter into an option in relation to a property at Flinders Street, Darlinghurst). He had paid $25,000 for that business opportunity but it expired in December. He had negotiated an extension or perhaps a new agreement with the owner of the Victoria Street property, but the fee for the extended period of 16 December 2021 to 28 January 2022 was $100,000.

22. The defendant did not have that amount of money and it is common ground that he asked the plaintiff for an advance. In answer to that request the money was advanced on 21 December 2021.

23. The issue for me to determine is what is the correct legal characterisation of that advance of money.

24. Significantly, following on from the email to which I have referred to concerning the really positive meeting with George Karageorge, the plaintiff wrote back to the defendant and said:

Yep, as I have said, I think he will suit your style better than Simon. I don't know him, and you should make inquiries. Do you want me to ask...about him?

To this, the defendant responded:

Not just yet, thank you, but I agree. Can you just get your hands on 135,000K? I don't want to have to borrow some money off Bikkies (sic money off bikies) LOL (laugh out loud).

25. The defendant denies the conversation as recounted by the plaintiff on 18 December.

26. However, the defendant honestly and candidly, in my view, did not deny that a conversation took place on 18 December, nor did he deny that the topic was whether $130,500 could be advanced to him in large part for the purpose of entering into the extended due diligence deed for which he needed $100,000 (he has no memory of what the balance was used for but accepts that he did ask for it).

27. In his affidavit, prepared by himself during a period when he was acting for himself but nonetheless clear enough, he said:

I did not borrow the sum of $130,500 from George Fleming in about January 22. Furthermore, I did not borrow the money in my capacity as Luke Calpis, rather George Fleming was a business partner and a joint venture partner in another dealing, and we had and still have, I simply asked if he could 'come up with the money' within the timeframe for the certain deal and discussion...

The affidavit continues:

Mr Fleming did not make it clear at all his money was a loan. There were no loan/documents, dates on return, the capital and interest attached to the loan, or any other condition stipulated.

28. Some time in early 2022, I cannot quite pinpoint when and why, the parties' relationship began to deteriorate. As of today, they have had a spectacular falling out. Various of the corporate entities they controlled are in liquidation and there is, it seems, a very serious dispute between them as to how whatever remaining assets of their ventures can be identified should be divided up between them.

29. By February 2022, however, things were not so bad. The defendant on 1 February 2022 wrote to the plaintiff in the following terms:

Hi George, just to keep you in the loop (please see below), the vendor has increased the sale price to 50K and wants 150K tomorrow for another extension.

I have a final meeting with IPN to finalise our deal. It's already been through board approval on Friday and should be quick to document.

I will let you know the outcome and hopefully have something in concrete so we can finalise, can I just borrow the money of (sic off) you quickly for a week if that's okay?

30. This was after the plaintiff had written on 25 January 2022 to the defendant in the following terms concerning the Flinders Street project:

Luke, I have thought a lot about Flinders Street and, as I said originally, I am not interested...

You want me to pay 2.85 million on 31 January, but you think your joint venture partners will take me out and pay you 1 million plus $17,000 per month plus a share of the profits?

Luke, that's a great deal for you and good luck to you, but I'm not prepared to put up the 2.75 million unless there is 100% exit from me in the next month, which there will not be.

You're not going to suck me in again on this one, I am not negotiable."

31. It is clear from the various email communications to which I have referred that the defendant and the plaintiff did, from time to time, in late 2021/early 2022, speak in terms of loans as between the two of them personally rather than as between corporate vehicles.

32. That being said, they also spoke often in terms which can be fairly described as ambiguous where they simply talked of moneys being borrowed or advanced and the like, without really putting any details at all as to precisely who it was that was going to advance and borrow the money or what the arrangement was going to be.

33. No doubt that was because, as far as they were concerned, that was something that could be sorted out.

34. Both the plaintiff and the defendant gave sworn evidence which was tested in cross‑examination.

35. I was impressed with both of them. I have no doubt that both honestly and strongly believe in their subjective understanding of what the arrangement was following the 18 December discussion and the advance of the money. However, I am not convinced that either has a clear recollection of what was said. I think they are both unconsciously seeking to reconstruct from what they can remember, the documents that they have seen, and what they think their ordinary arrangements were at the time, all looked upon from a distance through the prism of what has been a deteriorating relationship.

36. I have reached the conclusion that the conversation that occurred on 18 December 2021 was actually couched in extremely vague terms, was probably rushed, with neither party really turning their minds to the true legal basis of the transaction.

37. That is not to say that I think the plaintiff is not telling the truth when he now tells me what his memory is as to what was said on 18 December. However, honest but inaccurate memories can become entrenched in the most honest witnesses. Such memories are not necessarily reflective of what actually happened.

38. As the defendant quite candidly said a number of times throughout his evidence in various ways, his position really was that the money was to be transferred and that the two gentlemen would "work it out later" when things settled down.

39. That may well be what he thought at the time, and it may well be what the plaintiff thought as well, although I think it much more likely that neither turned their mind to details at all. The problem is there is no suggestion that it was ever worked out later, and I have to judge what the parties' objective intention by their words and conduct on 18 December 2021 was by reference to the objective setting known to both of them at that time.

40. I put to one side as being unreliable each witness's subjective belief of what was agreed from their conversation of 18 December 2021 and proceed upon the basis that there was a rushed conversation, couched in extremely vague terms, with no real focus at all in terms of express words as to what the transaction actually would be.

41. I find nothing more was said than is recorded in the contemporaneous emails, that is, something to the effect by the defendant that he needed the money quickly to secure an extension of the option agreement and he asked the plaintiff for that money. The plaintiff agreed and the money was advanced.

42. I am satisfied that the common understanding of the parties at the time was that the advance would be a loan between the two of them. This is because of the emails that had been sent earlier in the day and, in particular, the email concerning the report by the defendant of the discussion he had had with George Karageorge which referred to a personal loan for the entirety of the equity investment then contemplated to secure the Victoria Street property, not by way of a further due diligence deed, but by entry into a more formal put and call option. That email is couched in clear terms as a personal loan.

43. I appreciate and accept the defendant's evidence, when he explained that what he said to Mr Karageorge in that email was not necessarily the true position. I understand that businesspeople, when they are negotiating, do not always speak with full candour and there is no criticism of the defendant that is what he may have done, but that is not the point. The point is that as between the plaintiff and the defendant, when I assess the context of their conversation on 18 December, they had before them, as part of the mutually known "matrix" of facts that some of the cases talk about, that email which does speak in terms of a personal loan, and even though the amount being discussed is the full amount of a hoped for future put and call option, included in that amount would be, if the put and call option proceeded, credit for the $100,000 that had been paid for the second due diligence deed.

44. This is confirmed in my mind by the later conduct of the defendant where again, in February, he asks the plaintiff for a short-term loan. I understand that the defendant today believes that the plaintiff would never have lent him money personally, but it does seem clear from the objective evidence created by him at the time that he at least, in February 2022, lived in hope that perhaps the plaintiff might be prepared to lend him money on a personal basis. To my mind, that is consistent with there having been already in place such an arrangement, that is the arrangement made on 18 December.

45. I do understand and accept that the defendant subjectively expected that in the future, there would be some sort of renegotiation of the arrangements so that the loan would perhaps become a loan between two of the corporate vehicles or perhaps some sort of injection of equity by the plaintiff into a new venture or some other arrangement, but that never eventuated.

46. I also think it is an important fact objectively known to both parties as at 18 December that the due diligence agreement then in place and the new one contemplated, being the legal method to secure the business opportunity being the chance of purchasing the Victoria Street property, was in the name of the defendant personally and not in the name of any corporate vehicle. I understand the defendant's answer to this, that it was because of the urgency, but I do think that again forms part of the objective setting by which I must determine what was the party's common intention by the 18 December 2021 conversation.

47. I have not overlooked that thereafter, the plaintiff's corporate entity recorded the transaction as a loan between companies, but I accept the plaintiff's evidence that this was a mistake which was later reversed. I am fortified in accepting that evidence by the lack of any formal documentation emanating from the plaintiff's company recording that loan which was its usual practice at the time.

48. I have concluded that a reasonable bystander observing the conversation between the parties on 18 December 2021 in the context of the mutually known facts recorded in the emails and documents to which I have referred would have concluded that it was the common intention of the parties that the moneys being advanced were being advanced as a loan between the two gentlemen, the terms of which were that it would be for a very short term, that it would be repayable within a reasonable time which time has long since expired.

49. For those reasons, I find in favour of the plaintiff and make the following orders:

1. Judgment in favour of the plaintiff in the sum of $131,857.00;

1. Interest on the said sum pursuant to s 100 of the Civil Procedure Act 2005 to be calculated from 18 January 2022;

2. I order the defendant to pay the plaintiff's costs of the proceedings.

HIS HONOUR: That's the end of the judgment. Before those orders are entered, I'll hear from either of you as to whether you suggest a variation to that costs order.

GREEN: Could I just get that date, your Honour, from--

HIS HONOUR: I said 18--

GREEN: --the second order?

HIS HONOUR: I said 18 January, and where does that come from?

PHILLIPS: No, it's a later date. It's September. I think it's 22 September.

HIS HONOUR: Was that the letter of demand?

PHILLIPS: Yes.

HIS HONOUR: I think I got that from the statement of claim. What's the date that you seek?

PHILLIPS: 23 September 2023. Sorry, 2022. I've just reread my typo.

HIS HONOUR: Understood. Does anyone want to say anything about an ordinary costs order?

GREEN: No, your Honour.

PHILLIPS: No, your Honour.

HIS HONOUR: I'll just revise the order.

50. The orders are:

1. Judgment in favour of the plaintiff in the sum of $131,857.00;

2. Interest on the said sum pursuant to s 100 of the Civil Procedure Act 2005, such interest to be calculated from 23 September 2022; and

3. I order the defendant pay the plaintiff's costs of the proceedings.

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Decision last updated: 04 July 2023