G Woodham Investments Pty Ltd (ACN 141 703 700) Atf the Woodham Family Trust v Matthews

[2019] NSWDC 279

District Court

New South Wales

Medium Neutral Citation:	G Woodham Investments Pty Ltd (ACN 141 703 700) ATF The Woodham Family Trust v Matthews [2019] NSWDC 279
Hearing dates:	16-17 April 2019, 10 May 2019, 24 May 2019 (written submissions), 3 June 2019 (written submissions), 13 June 2019
Date of orders:	21 June 2019
Decision date:	21 June 2019
Jurisdiction:	Civil
Before:	Dicker SC DCJ
Decision:	(1) Judgment for the plaintiff against the first defendant. (2) I will hear from the parties as to the appropriate costs order. (3) The parties are to bring in agreed Short Minutes of Order reflecting the amount found in these reasons together with appropriate interest within 7 days. (4) Liberty to the parties to approach the Associate to Dicker DCJ in the event that agreement cannot be reached as to the appropriate orders.
Catchwords:	Contract - moneys advanced pursuant to deeds of loan - whether default interest clause in the last deed amounts to a penalty - further moneys allegedly advanced pursuant to an oral agreement - identity of lender and borrower pursuant to oral agreement in dispute - terms of alleged loan in dispute – authority of alleged agent in dispute – whether actual authority – whether ostensible authority through a course of dealings
Cases Cited:	Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2010) 247 CLR 205 Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328 Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2018] NSWCA 114 Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 Bay Bon Investment v Selvarajah [2008] NSWSC 1251 Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (in liquidation) [2016] NSWCA 165 Crabtree–Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty (2017) 261 CLR 544; [2017] HCA 12 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Falk v Haugh (1935) 53 CLR 163 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 French v Smith [2005] VSCA 114 Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 Management Services Australia Pty Ltd t/as Peak Performance PM v PM Works Pty Ltd [2019] NSWCA 107 Mansfield Corporation Pty Ltd v Chengcheng (Aust) Enterprise Melbourne Pty Ltd [2018] NSWDC 12 Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 Wilh Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32 Wu v Ling [2016] NSWCA 322 Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109
Category:	Principal judgment
Parties:	G Woodham Investments Pty Ltd (ACN 141 703 700) ATF The Woodham Family Trusts (Plaintiff) Melinda Matthews (First Defendant) Nicole Woodham (Second Defendant)
Representation:	Counsel: L Robb-Vujcic (Plaintiff) J Raftery (First Defendant)   Solicitors: Cohen & Krass (Plaintiff) DPH Lawyers (First Defendant)
File Number(s):	2017/00240268

Judgment

1. In these proceedings, the plaintiff, G Woodham Investments Pty Ltd (“GWI”) which is a trustee company of The Woodham Family Trust, brings proceedings against the first defendant, Ms Melinda Matthews, to recover moneys allegedly advanced to her by way of loan together with interest. The directing mind and will of GWI and the beneficiary under the trust is Mr Gareth Robert Woodham.

2. There is no dispute that the plaintiff GWI advanced the sum of $20,000 to the first defendant. However, the first defendant asserts that the default interest provision in the deed pursuant to which the money was advanced amounts to a penalty and is unenforceable. The first defendant also disputes a further alleged loan pursuant to an oral agreement which the first defendant asserts was not made with GWI but was made with the former wife of Mr Woodham, Ms Nicole Woodham, the second defendant, who was not legally represented at the hearing.

3. At the commencement of the trial, the plaintiff's counsel handed up a document entitled “Plaintiff’s Schedule of Issues”. That document stated that the plaintiff believed the issues to be determined in the proceedings were as follows:

“1.  Whether the default interest rate in a loan agreement made between the plaintiff and first defendant on 24 December 2012 (the December Deed) is a penalty.

2.  If the answer to 1 is negative, whether the first defendant owes the plaintiff approximately $67,600 under the December Deed (being $20,000 principal plus interest calculated at 5%, less interest payments already made).

3.  Whether the plaintiff and the first defendant entered into an oral agreement in January 2014, pursuant to which the plaintiff agreed to lend the first defendant $20,000 on the same terms as the December Deed, in order to enable the first defendant to meet mortgage repayments on her house (the Mortgage Loan).

4.  If the answer to 3 is affirmative, whether the first defendant defaulted under the Mortgage Loan.

5.  If the answer to 4 is affirmative, whether the first defendant owes the plaintiff approximately $81,000 under the Mortgage Loan (being $20,000 principal plus interest calculated at 5% per month).”

Pleadings

4. By Amended Statement of Claim filed on 11 May 2018, the plaintiff, GWI, brought proceedings against the first defendant, Ms Melinda Matthews, and the second defendant, Ms Nicole Woodham.

5. Default judgment was entered against the second defendant, Ms Woodham, in favour of the plaintiff on 11 July 2018 in the sum of $22,033.86 inclusive of costs. Material on the court file shows that one component of the default judgment amount sought was an amount of interest claimed from 24 November 2017 to 26 June 2018 at the pre-judgment rate of 5.5% per annum. Although default judgment was entered for an amount less than the amount sought it seems clear that at least part of the default judgment amount was constituted by interest.

6. It was conceded by counsel for the plaintiff that at least the amount of $20,000 paid to the second defendant by the first defendant has been paid to the plaintiff.

7. Under the Amended Statement of Claim, the plaintiff pleads its case against the first defendant as follows:

1. On and with effect from 24 December 2012, the plaintiff and the first defendant entered into a deed pursuant to which the first defendant as borrower borrowed $20,000 from the plaintiff for a minimum period of two months from 24 December 2012 which two-month period could be extended by mutual consent. It was pleaded that the first defendant Ms Matthews would pay the plaintiff interest on the funds advanced at the rate of 3% per month for the first two months and thereafter at 5% per month every month or part thereof during which the loan remained in default;

2. The first defendant, through her husband and agent, Mr Stephen Matthews, drafted and proposed the terms of the December 2012 deed. It is also pleaded that the first defendant authorised Mr Matthews to deal with the plaintiff's principal Mr Woodham on her behalf;

3. On or by 24 December 2012 pursuant to the December 2012 deed, the plaintiff advanced $20,000 to the first defendant, being $15,000 advanced on 21 September 2012 and $5,000 advanced on 24 December 2012. These advances by the plaintiff are not in dispute;

4. On or about 31 August 2013, the plaintiff and the second defendant orally agreed that the plaintiff GWI would lend the second defendant Ms Woodham the sum of $26,000 to assist her with reducing her interest payments on her mortgage. The $26,000 advanced was held in a mortgage offset account. The $26,000 would be repayable to the plaintiff by the second defendant on the plaintiff's demand. On or about 2 September 2013, the plaintiff advanced the sum of $26,000 to the second defendant pursuant to that agreement;

5. In January 2014, the plaintiff agreed to lend to the first defendant a further sum of $20,000 pursuant to an oral conversation between Mr Woodham on the plaintiff's behalf and Mr Matthews as agent for Ms Matthews;

6. The plaintiff pleads that the material terms of the January 2014 agreement were that the plaintiff would lend the first defendant the sum of $20,000, the plaintiff would direct the second defendant to pay the first defendant the sum of $20,000 from the $26,000 lent by the plaintiff to the second defendant in September 2013 pursuant to the agreement made in August 2013, and that the terms of the loan of $20,000 from the plaintiff to the first defendant would otherwise be the same as the terms of the December 2012 deed, being that it was for a term of two months which could be extended by mutual agreement, with an interest rate payable at the rate of 3% per month for the first two months and 5% per month thereafter;

7. The plaintiff alleges that the second defendant Ms Woodham also agreed to lend to the first defendant a further $20,000 in January 2014. As a result of the agreement, $40,000 was transferred by the second defendant to the first defendant being $20,000 of the second defendant's money and $20,000 of the plaintiff’s money which had been borrowed by the second defendant. The direction to advance $20,000 given by the plaintiff to the second defendant was stated to partially discharge the second defendant's liability to the plaintiff pursuant to the August 2013 agreement;

8. The plaintiff pleads that on or about 1 October 2014, the first defendant paid the sum of $20,000 to the second defendant in satisfaction of the loan from the second defendant to the first defendant. A further sum of $20,000 was paid by the first defendant to the second defendant on 23 November 2017. It is said that the two $20,000 repayments were made by the first defendant to the second defendant without the plaintiff's knowledge or authority;

9. The plaintiff pleads that on or about 27 February 2018, the plaintiff demanded that the second defendant restore to the plaintiff the sum of $20,000 paid to her by the first defendant. As stated above, it is conceded that this amount has been repaid by the second defendant to the plaintiff;

10. The plaintiff claims that although some payments have been made by the first defendant to the plaintiff pursuant to the December 2012 deed, substantial sums are still owed both under the December 2012 deed and the oral agreement made in January 2014. It is claimed in the Amended Statement of Claim that the amount owed as at 15 April 2019 is $148,600.

8. The first defendant filed an Amended Defence on 30 May 2018. Under the Amended Defence, the first defendant:

1. Admits that the December 2012 deed was entered into;

2. Says that the “Default Interest Penalty” in the 2012 deed is a penalty and is void and unenforceable;

3. Says that the second defendant agreed to lend the first defendant $40,000 and that no amount was lent by the plaintiff to her in January 2014;

4. Says that on 1 October 2014, she paid the second defendant $20,000 in partial satisfaction of the loan from the second defendant to the first defendant;

5. Says that on 23 November 2017, she paid the sum of $20,000 in further satisfaction of the loan made by the second defendant to the first defendant in January 2014;

6. Denies that she owes any moneys to the plaintiff pursuant to the January 2014 agreement.

Factual background

9. It is important to set out the factual background to these proceedings. Unless I indicate otherwise, the following constitute my factual findings in the matter:

1. In the year prior to the December 2012 deed, Mr Woodham met the first defendant Ms Melinda Matthews and her husband Mr Stephen Matthews, who were known to Mr Woodham's ex-wife, Ms Nicole Woodham. A business and social relationship developed between Mr Woodham and Mr and Ms Matthews;

2. At the time, Mr Matthews was a financial consultant who was also engaged in the trading of derivatives including options, foreign currency and gold trading. Mr Woodham agreed with Mr Matthews to advance moneys to him to enable him to engage in trading in his name;

3. On 20 September 2012, following discussions between Mr Matthews and Mr Woodham, a deed of agreement was signed between the plaintiff and the first defendant, Ms Matthews (“the September 2012 deed”). This document was prepared by Mr Matthews and forwarded to Mr Woodham prior to execution. Pursuant to the September 2012 deed, $15,000 was advanced by the plaintiff to Ms Matthews: Exhibit B; September 2012 deed. This money was on-lent by Ms Matthews for investment purposes;

4. In summary, under the September 2012 deed Ms Matthews agreed to pay the plaintiff interest of 10% for the first month then 5% per month after that. The advance was for a period of one month but the period could be extended by mutual consent: clause (f) of the September 2012 deed. Mr Woodham asserts, and I accept, that the reason the September 2012 deed involved borrowing in the name of the first defendant, was to provide further security for the loan. It is not disputed that the first defendant signed the September 2012 deed;

5. In October 2012, by an addendum to the September 2012 deed, the period of the September 2012 deed was extended by the parties by two months;

6. Mr Matthews discussed with Mr Woodham, on behalf of the plaintiff, extending the term of the loan for an additional two months with a further advance of $5,000;

7. On 24 December 2012, a deed of agreement (the December 2012 deed) was executed by Mr Woodham on behalf of the plaintiff GWI, and Ms Matthews. There is no issue as to the execution of the December 2012 deed by these parties. The recitals noted that GWI had agreed to advance $20,000 to Ms Matthews for a period of two months from the date of the loan which could be extended by mutual consent. The operative part of the 24 December 2012 deed was as follows:

“OPERATIVE PART:

a.  The Advancer agrees to provide to the Borrower funds in the amount specified in Item 2 of the Reference Schedule.

b.  The Advancer agrees to pay the said funds directly to the Borrower upon execution of this loan agreement.

c.  The borrower acknowledges that the funds will be used for various personal and investment purposes, however the funds are predominantly being used for investment and business purposes.

d.  The Borrower agrees to pay interest on the borrowed funds as set out in Item 3.

e.  The Borrower agree to repay to the Advancer the total amount specified in Item 2 within 2 month of the date of this agreement.

f.  The term of this contract is for a period of 2 months from the date of this agreement. This period may be extended by mutual consent.

g.  The guarantor agrees to guarantee the obligations of the Borrower contained in the agreement and the obligations specified in this Agreement.

h.  In the event that the Borrower fails to repay the said funds to the Advancer within seven (7) days from the date specified in this contract, the Borrower shall pay to the Advancer a default interest Penalty amount being the amount specified in Item 5 of the Reference Schedule and the Advancer shall be entitled to take any recovery action necessary to protect their interest. This action can include but is not limited to the registering of Caveatable Interests over Real Estate Assets and sale of the assets of the Borrower and Guarantor.

i.  The guarantors shall guarantee the proper performance of all obligations of the Borrower under this clause and this Agreement.

j.  The parties hereby agree and acknowledge that this Agreement shall be governed and construed in accordance with the laws of New South Wales and the parties hereby submit to the exclusive jurisdiction of its Courts.

k.  In the event that any of the provisions contained in this Agreement is or becomes legally ineffective, under the general law or by force of legislation, the parties agree that the Ineffective provision shall be severed from this Agreement which otherwise continues to be valid and operative.”

8. The reference schedule in the December 2012 deed was as follows:

“ITEM 1:   NAME OF ADVANCER

G Woodham Investments Pty Ltd atf The Woodham Family Trust

ITEM 2:   Advance Amount

$20,000.00

ITEM 3:   Interest Payments

1. The sum of $600 being due no later than 31st December 2012.

2. The sum of $600 being due no later than 24th February 2012.

ITEM 4:   Penalty Interest Rate

5% per month for every month or part thereof during which the loan remains in default.

ITEM 5:   Settlement Date - 2 months from the date of signing of this agreement.”

9. Accordingly, under Item 3 of the Reference Schedule, interest payments were to be made by the payment of $600 due no later than 31 December 2012 with a further $600 being due no later than “24 February 2012” with the item for “Penalty Interest Rate” being 5% per month or part thereof during which the loan remains in default (the reference to Item 5 in Clause (h) should clearly have been a reference to Item 4). The usual interest rate was thus 36% per annum. It is submitted by the plaintiff that the second date should be 24 February 2013 and should be read as thus;

10. On 24 December 2012, GWI advanced the further $5,000 under the December 2012 deed: Exhibit C and the annexures at pages 40-41 to Mr Woodham's 20 December 2017 affidavit;

11. Subject to the argument as to a penalty, the principal amount owed under the December 2012 deed and the interest owed under the deed has not been repaid on the due dates by the first defendant. This constitutes a breach of contract by her;

12. On 2 September 2013, the plaintiff lent $26,000 to the second defendant Ms Woodham by way of loan which it was intended be placed in an offset account of hers to assist her with her mortgage payments;

13. In January 2014, a meeting occurred between the plaintiff, through Mr Woodham, the second defendant and Mr Matthews. What occurred at this meeting is highly disputed. This will be considered further below;

14. On 15 January 2014, the second defendant, Ms Woodham, transferred $40,000 to the first defendant, Ms Matthews. At issue is whether this advance constituted $40,000 of her (Ms Woodham’s) money or $20,000 of her money and $20,000 of the money owed by her to the plaintiff being transferred at the plaintiff's direction;

15. In the period from early 2013 to the present, only small amounts were repaid sporadically by the first defendant to the plaintiff;

16. On 1 October 2014, the first defendant paid the second defendant $20,000. Depending on which account is accepted, this either discharged the loan to the first defendant Ms Matthews from the second defendant Ms Woodham, or only partially discharged that loan;

17. Between February 2014 and May 2017, there were extensive text messages exchanged between Mr Matthews and Mr Woodham which were in evidence;

18. By letter dated 15 June 2017, the plaintiff's current solicitors issued a letter of demand on the first defendant Ms Matthews. The letter sought the payment of $112,100 which was said to be the balance due to the plaintiff. The letter included the following:

“In its capacity as trustee for The Woodham Family Trust, our client has lent to you a total of $43,000. The initial loan was for $20,000 pursuant to a deed of agreement dated 24 December 2012 between our client and you. There have been subsequent advances which bring the total lent to $43,000.

The agreement was varied to the extent that the settlement date specified in Item 5 of the Deed of Agreement was extended. The duration of the extension of the term was not specified. In the circumstances it must be inferred that the loan became repayable on demand”;

19. On 7 August 2017, the plaintiff commenced proceedings by way of a Statement of Claim which was filed on that date;

20. On 23 November 2017, the first defendant paid the second defendant a further $20,000. Depending on the version accepted, this was either a complete repayment of the $40,000 advanced by the second defendant to the first defendant in January 2014 (the first defendant’s contention) or a purported repayment by the first defendant to the second defendant of $20,000 which was in fact owed by the first defendant to the plaintiff (the plaintiff’s contention);

19. As stated above, on 11 July 2018 default judgment was entered in favour of the plaintiff against the second defendant which included an amount for interest.

Evidence on behalf of the plaintiff

10. The plaintiff read three affidavits of Gareth Robert Woodham affirmed 20 December 2017, 2 March 2018 and 16 May 2018.

11. In his first affidavit affirmed 20 December 2017, Mr Woodham sets out the background detail in relation to his various dealings with Mr Matthews and the transactions which he states that GWI entered into with Ms Matthews. These include the September 2012 deed advance (paragraphs 6-8), an addendum to the September 2012 deed on 20 October 2012 to extend the term of the September 2012 deed loan for an additional two months (paragraphs 9-10), the December 2012 deed dated 24 December 2012 (paragraph 13), the further advance of $5,000 on 24 December 2012 (paragraph 14), defaults in payment under the December 2012 deed by Ms Matthews (paragraphs 15 and 19-21), the September 2013 $26,000 advance to Ms Woodham (paragraph 22) and the January 2014 meeting.

12. In paragraphs 23-25 of Mr Woodham's first affidavit he states as follows:

“23.  In January 2014 Stephen [Matthews] met with Nicole and me at Nicole's apartment in Mortdale. The discussion was to the following effect:

Stephen said:

"I'm so sorry that we have not been making repayments on the loans you have made to Polymax. Melinda and I have a problem. If we can't come up with $40,000 today then we will lose our house because the mortgage is in default. Can you to help us [sic] by each lending us a further $20,000 on the same terms as the existing funds. We'll definitely be in a position to repay all the money in a short time."

There was a further discussion after which Nicole said:

"Gareth and I will lend you the $40,000. I'll send you the money from my loan offset account. $20,000 of the $40,000 will come from the $26,000 that Gareth lent me on 2 September 2013.

Stephen said:

"Thank you so much. I'm sure we'll be able to repay you on time. Gareth, your $20,000 will be on the same terms as before. I will send you some updated documents for the additional $20,000.”

Nicole did not request any documentation from Stephen, nor did she require any interest payments.

24.  The updated documents were never forthcoming.

25.  On 15 January 2014 Nicole transferred to Melinda the $40,000 from her offset account.”

13. In paragraph 27 of his first affidavit, Mr Woodham states that on 1 October 2014 “Stephen repaid Nicole the $20,000 she lent him” (emphasis added). This is inconsistent with the plaintiff's pleaded case that the $20,000 was lent by Ms Woodham to Ms Matthews not Mr Matthews.

14. In paragraph 28 of his first affidavit, Mr Woodham refers to text messages between him and Mr Matthews between 2014 and 2017 which he exhibits to his affidavit. He also annexes a table which he claims sets out the amounts allegedly due from Ms Matthews and says that the she has not made any loan repayments since 22 December 2016.

15. In his second affidavit dated 2 March 2018, Mr Woodham responds to various affidavits served from Ms Matthews, Mr Matthews and Ms Woodham.

16. In relation to the January 2014 meeting, Mr Woodham stated the following in paragraphs 34 to 36 and 42 of his second affidavit:

34.  In response to paragraph 32, I deny that I was only present at the meeting between Mr Matthews and Ms Woodham as part of the money Ms Woodham offered to lend to Mr Matthews belonged to me. I was specifically involved in the meeting in January 2014 as I was required to authorise the lending of $20,000 of my money that was held in Ms Woodham's bank account.

I also dispute the alleged conversation set out in paragraph 31. The conversation during the meeting was as set out in paragraph 23 of my affidavit dated 20 December 2017.

35.  In response to paragraph 33, I was aware that Mr Matthews did some mortgage broking from time to time. Mr Matthews approached me directly to meet with Ms Woodham and him as a solution to him not making repayments on the initial 20 September 2012 loan. We had a conversation to the following effect:

Mr Matthews said:

“Gareth, Melinda and I are in some trouble. We don't have the money to refinance our home and if we can't make the repayments we stand to lose it. I won't be able to repay anything of what I owe you. Could you help us out with the refinance? If we lose the house then there will be no way I will be able to repay you any of the money we owe you.”

36.  I said:

“Sure. I can loan you $20,000 that I recently loaned to Nicole to assist with the interest on her home loan.”

…

42.  In response to paragraph 3, and further to paragraph 35 above, the true sequence of events is:

a)  I was invited to Ms Woodham's apartment to meet with Mr Matthews and her. Mr Matthews, Ms Woodham and I had a conversation to the following effect

Mr Matthews said to me:

"Can you lend me a portion of the $26,000 you deposited with Nicole on 2 September 2013?"

I replied:

“I’ll lend you $20,000 of those funds.”

Ms Woodham said to Mr Matthews:

“I’ll lend you another $20,000 to help you out.”

17. A number of matters should be noted. First, these specific conversations were not referred to in Mr Woodham's first affidavit in the terms set out. Secondly, paragraph 36 has Mr Woodham saying to Mr Matthews “Sure. I can loan you $20,000 that I recently loaned to Nicole…” (emphasis added). The conversations referred to in paragraph 42(a) set out by Mr Woodham have Mr Matthews asking the plaintiff to lend “me” the funds deposited with Ms Woodham by the plaintiff and Mr Woodham responding that he would lend “you” $20,000 of those funds. Thirdly, it is not disclosed in paragraph 42 of Mr Woodham’s second affidavit how Mr Matthews was aware of the advance from the plaintiff to Ms Woodham of the $26,000.

18. In paragraph 39 of his second affidavit, Mr Woodham disputes that the plaintiff’s half of the loan “to Mr Matthews” was repaid “by Mr Matthews” to Ms Woodham. Again, this strongly suggests that the loan was made by the plaintiff to Mr Matthews and not Ms Matthews, contrary to the plaintiff’s pleaded case. At paragraph 43 of his second affidavit, Mr Woodham refers to the default interest rate of 5% per month and states that otherwise “there would be no financial benefit for me in loaning the money to Mr Matthews” (emphasis added). In paragraph 44, Mr Woodham states “that half of the $40,000 transferred by Nicole to the defendant’s bank account belonged to the plaintiff and was lent by the plaintiff to Mr Matthews” (emphasis added). Again, these references are completely contrary to the plaintiff’s pleaded case.

19. In his third affidavit affirmed 16 May 2018, Mr Woodham gives more detailed evidence with supporting documentation in relation to the December 2012 deed and the September 2013 loan to Ms Matthews. Annexed documents confirm that the plaintiff paid $15,000 to Ms Matthews on 21 September 2012 and a further $5,000 to Ms Matthews on 24 December 2012. They also establish that the plaintiff advanced $26,000 from the plaintiff's account to Ms Woodham in September 2013.

20. In paragraphs 10 and following of his third affidavit, Mr Woodham gives evidence in relation to repayments made by the first defendant. He notes that although paragraph 2 of item 3 in the 24 December 2012 deed records that interest of $600 was due no later than “24 February 2012”, that date is claimed by him to be a typographical error and it should refer to 24 February 2013. This seems to be clearly correct when the December 2012 deed is read as a whole.

21. In paragraphs 35-41 of his third affidavit, Mr Woodham states as follows:

35.  Prior to the commencement of these proceedings in August 2017, I had no knowledge of any amount having been paid by the first defendant to the second defendant in satisfaction of the agreements entered into between the plaintiff, the first defendant and the second defendant in January 2014.

36.  In the second half of February 2018, the plaintiff was served with the first defendant's affidavit evidence which included affidavits by Stephen Matthews dated 16 February 2018 and Nicole Woodham (the second defendant) dated 21 February 2018.

37.  At paragraph 5 of Ms Woodham's affidavit, she has stated that Stephen Matthews has repaid the $40,000 that she lent to the first defendant in full.

38.  At paragraphs 36 and 37 of Mr Matthews' affidavit, he has stated that:

(a)  on 1 October 2014, $20,000 was paid to the second defendant; and

(b)  on 23 November 2017, a further $20,000 was transferred from the first defendant's account (I assume the reference to "Nicole" is an error and should refer to "Melinda") to the second defendant's bank account.

39.  Prior to receipt of these affidavits, I had no knowledge of the above matters.

40.  I note that the second payment of $20,000 made in November 2017 was made a few months after the commencement of these proceedings by the plaintiff in August 2017.

41.  Neither the October 2014 payment nor the November 2017 payment to the second defendant was made with my or the plaintiff’s knowledge of authority.”

Mr Woodham's oral evidence

22. Mr Woodham gave oral evidence on behalf of the plaintiff. He stated that he was a property valuer by occupation. He confirmed that he had sworn three affidavits in the proceedings the contents of which were correct.

23. In cross-examination, Mr Woodham confirmed that he was a director of the plaintiff (T16.5) and the purpose of the establishment of the plaintiff and the trust was to invest (T16.12; T16.31). Mr Woodham said it was to engage in no other commercial activities (T16.34). He also confirmed that prior to his dealings with Mr Matthews, the plaintiff had made other investments. Mr Woodham confirmed that the plaintiff had a bank account and he was the only person who made decisions on behalf of the plaintiff (T17.21). He said the plaintiff had no employees.

24. Mr Woodham stated that he met the Matthews through his ex-wife who had been friends with them for some time. He said that he knew the Matthews for about a year before the September 2012 deed (T18.29). He agreed that he attended the Matthews’ home for dinner on one or two occasions.

25. Mr Woodham confirmed that he had discussions with Mr Matthews about his work office at home and the investments he made and the returns he received. He said that this interested him. As at September 2012, he said he had about $50,000 in cash available to be invested: T19.4.

26. Mr Woodham confirmed that the plaintiff made the original loan to Ms Matthews on 20 September 2012. This was as a result of discussions with Mr Matthews in which he referred to other “riskier” investment options being available which may generate a regular income for the plaintiff: T19.37. The first loan was the result of discussions with Mr Matthews about investing in a recycling business called Polymax (T19.41) which needed money for a short term loan of two months. Mr Matthews offered for the loan to be made in the name of Ms Matthews and there were indications also that the plaintiff would not only get paid interest but also have equity provided in the Polymax business as a reward for the investment: T20.12.

27. Mr Woodham said that he understood the purpose of the $15,000 20 September 2012 loan was to invest but he did not know whether it would be on lent by Ms Matthews: T21.7. He said that at the time, $15,000 was a substantial amount of money to him and he agreed that it was sensible to document the loan: T21.10; T21.35. He said it was the first time that the plaintiff had lent money and that the documentation for the loan had been offered to him and he regarded it as sensible to record the agreement and that it had provided “comfort” to him. Mr Woodham agreed that the agreement was signed on 20 September 2012, that he had attended the Matthews’ home to sign it and the next day he had transferred the $15,000 to Ms Matthews’ account: T22.39.

28. In relation to the addendum to that agreement dated 20 October 2012, Mr Woodham could not recall the reason for meeting at the Matthews’ home on that date but accepted that he attended the home on that date. He agreed that the 20 September 2012 loan had come up in discussions and that an extension of the loan period had been sought. He said that no payments had been received pursuant to the September 2012 loan by this stage and that the period was extended and that an addendum to the deed was signed: T23. This addendum included the payment of further interest with the completion date of the loan being 20 December 2012. Under this agreement, if there was a default, the interest rate would be increased to 5% per month.

29. Mr Woodham agreed that it was sensible to record the change in the agreement and he regarded it as important. He said all parties were putting their “cards on the table” and were having the agreement with its extended terms in writing: T24.25. Mr Woodham said that Mr Matthews offered the agreement to him and it gave him comfort. When it was suggested that the plaintiff was willing to invest in Polymax, Mr Woodham said he knew he was lending the money to Ms Matthews. Mr Woodham said he did not know whether the Matthews were lending to Polymax or what the terms of any loan were: T25.5-.25.

30. Mr Woodham agreed that under the 24 December 2012 deed between the plaintiff and Ms Matthews, this involved extending the $15,000 amount already lent and advancing a further $5,000. He stated that Mr Matthews had prepared a draft of the documents which the parties signed: T25.50. He said the documentation was offered to him and he regarded it as an additional benefit and comfort: T26.30. He said he thought he was dealing with someone that he could trust and the receipt of the documentation reinforced the trust which he had: T26.43. Mr Woodham gave evidence that at the time he did not regard the documentation as being important but that it provided him with some additional comfort: T27.8. He agreed that his understanding of the 24 December 2012 deed was that $600 was to be paid per month for the first two months in interest and thereafter interest was to be paid at 3% per month (36% per annum) and if there was a default, that the interest rate would be increased to 5% per month (60% per annum). The 60% per annum rate was the rate described as “a default interest Penalty amount” in Clause (h) of the 24 December 2012 deed (see page 37 of the annexures to Mr Woodham's first affidavit). However, Mr Woodham said that the loan was not supposed to be for a period of more than two months: T28.7.

31. After some cross-examination, Mr Woodham accepted that if there was a default there would be no additional administration or other costs to the plaintiff in relation to the loan other than making phone calls and text messages which involved time. He said that he thought the loan would be repaid and he did not foresee further costs being incurred by the plaintiff: T28.40-T29.14.

32. Mr Woodham was then cross-examined in relation to payments made by Ms Matthews. He stated that the reference to 24 February 2012 in item 3 of the schedule to the 24 December 2012 deed should be a reference to 24 February 2013: T29.34. Mr Woodham gave evidence that his understanding was that from 24 February 2013, the plaintiff was entitled to $1,000 interest per month on the 24 December 2012 loan. He confirmed that only some payments were received throughout 2013. He said he had regular conversations and dealings with Mr Matthews in that period in relation to the payment of interest and it was a matter of concern to him, although his concerns were often allayed by the reasons for the delays put forward by Mr Matthews: T31.15.

33. As at January 2014, Mr Woodham confirmed that the plaintiff had money which had been advanced to Ms Woodham to assist her in an offset account. It was put to Mr Woodham that in January 2014 he lent money to Mr Matthews and not Ms Matthews. Mr Woodham denied that and said that he regarded the plaintiff as lending money to Ms Matthews to assist her with the mortgage on her house. He said he regarded Mr Matthews as acting for both himself and his wife: T32.3-.19.

34. When Mr Woodham was taken to paragraph 23 of his first affidavit, he agreed that the conversation set out there had Ms Woodham saying that the plaintiff and her would lend money. However, Mr Woodham said that he regarded both Mr and Mrs Matthews as having a problem with the mortgage on the house and Ms Matthews was not in the room at the time. Mr Woodham said that he regarded the loan as relating to the mortgage on the house and the house was owned by Ms Matthews. Accordingly, he believed the loan was to her: T33.23.

35. Mr Woodham confirmed that his best recollection of what occurred in the meeting in January 2014 was recorded in his first affidavit: T34.7. He confirmed that the conversation set out in his first affidavit did not involve him saying anything (T34.27), but following the service of the defendant’s affidavits, he agreed that he prepared additional affidavits which added further conversations with Mr Matthews in paragraphs 35, 36 and 42 of his second affidavit: T35.23. In explaining the additions, Mr Woodham said that he put a lot of thought into it and it occurred a long time back and this was the reason for the additions: T36.29. When it was put to Mr Woodham that he did not include in the December 2017 affidavit the contents of his 2 March 2018 affidavit which had him agreeing to lend the money to Mr Matthews, Mr Woodham said that he believed it was not clear in the original affidavit and his recollection was of lending the money to Ms Matthews: T36.43. He said he was being truthful in preparing his affidavit. He accepted that he expanded on the conversations set out in the first affidavit.

36. Mr Woodham denied the suggestion that Mr Matthews did not approach him in January 2014 for any further loan and that there was never a conversation between himself and Mr Matthews about lending $20,000: T37.47. He denied that there was no agreement to lend a further $20,000 to either Mr or Mrs Matthews: T38.26. However, he accepted that previously it had been his view that it was sensible to document financial advances and that comfort had been provided to the plaintiff in doing so. Mr Woodham suggested that the money was advanced on an oral agreement as he regarded the Matthews as close friends of Ms Woodham and they were trusted. He agreed that on his case $20,000 had been advanced without a signed document and that this was inconsistent with his previous interactions with Mr Matthews: T39.33. He denied that the money was lent by his ex-wife, Ms Woodham, and not by him: T39.37-.43.

37. Although initially stating that he did not know whether he was aware at the time that $20,000 had been repaid by Ms Matthews to Ms Woodham on 1 October 2014 (T40.13), in re-examination his attention was brought to paragraphs 36 to 41 of his third affidavit where he states that he was not aware of this until commencing proceedings. He confirmed the accuracy of those paragraphs of his affidavit.

38. When it was put to him that his second affidavit had the plaintiff lending the money to Mr Matthews and not Ms Matthews, Mr Woodham said that he regarded it as being lent to Ms Matthews for the house as Ms Matthews was the owner of the property: T40.45. When paragraph 43 of his 2 March 2018 affidavit was brought to Mr Woodham's attention where he states that he was lending the money “to Mr Matthews”, he said that this was a typographical error and that he would not have lent the money without receiving interest: T41.18-.32. He said he understood that the $20,000 was transferred at his direction to Ms Matthews by Ms Woodham. He confirmed that this had not been repaid to him and he thought it would be paid to him by Ms Matthews.

39. Mr Woodham was taken to a series of text messages on 9 January 2016 in which he texted to Mr Matthews information which included the following:

“Current outstanding exceeds $90,000.

With reference to your email, please confirm at which milestones the following amounts will be repaid.

The first $20,000 that you have been promising for the past month is to come to me directly.

Following this, the next $20,000 will need to be paid directly to my superannuation account to repay the funds that were withdrawn over the past two years in lieu of your payments.

Then the amount of $30,000 is to be paid to me, with the remaining $20,000 channelled back through Nicole.”

40. It was put to Mr Woodham that it would not be necessary to “channel back” $20,000 through Nicole if she had advanced only $20,000. Mr Woodham said that he regarded Ms Woodham as having a better chance of getting the last $20,000 owed to him and he did not include Ms Woodham as merely being a conduit to receive the money. He accepted sending the text disclosed his thinking to Mr Matthews: T43-47.

41. Mr Woodham conceded that the plaintiff had obtained default judgment against Ms Woodham, that she was taking no further part in the proceedings and that he had received on behalf of the plaintiff $20,000 from her: T48.18.

42. As stated above, in re-examination Mr Woodham confirmed paragraphs 35-41 of his 16 May 2018 affidavit, that prior to the service of the evidence he did not know that any payment had been made by Ms Matthews to Ms Woodham. He also confirmed that at the time the text messages were sent by him, including the text messages at pages 42-44 of the exhibit to his first affidavit, he believed that neither the plaintiff nor Ms Woodham had been paid any money lent in the January 2014 loan: T48-49. In relation to the text message at page 43 of the exhibit, Mr Woodham confirmed that when he referred to “I am to receive my money first. I have been waiting for three years” he was referring to the January 2014 loan. This was also the case with his text message at page 44 of the exhibit. By “channelling back”, Mr Woodham confirmed that he meant channelling back through Ms Woodham to him.

43. Mr Woodham impressed the court as an honest witness who was doing his best to answer the questions put to him. He made concessions where appropriate. However, I did form a view that he did not have a good recollection of the detail of his interactions with Mr Matthews in 2012-2014. Mr Woodham had a clear view as to what had been agreed but did not appear to have a recollection of the detail of the discussions despite what appears in his affidavits. I also found his assertion that the reference to the loan being made to Mr Matthews was “a typo” to be not persuasive: see paragraph 43 of his second affidavit. There were a number of references in this affidavit to the money being lent by the plaintiff in January 2014 to Mr Matthews as opposed to Ms Matthews. I will consider this further below.

Evidence for the first defendant

44. As stated above, the second defendant Ms Woodham took no active role in the proceedings. Default judgment was entered against her and I was informed from the bar table that the $20,000 paid by the first defendant to the second defendant had been repaid to the plaintiff. This was not disputed.

Evidence of Ms Nicole Woodham

45. Ms Nicole Woodham gave evidence for the first defendant. Ms Woodham was the former wife of Mr Woodham.

46. Ms Woodham swore an affidavit dated 21 February 2018. Ms Woodham gives evidence that Mr Matthews has assisted her with several investments over the past seven years (paragraph 2). She also notes in paragraph 6 of the affidavit that Mr and Ms Matthews and her have often assisted each other to achieve certain economic “milestones”. Ms Woodham gives evidence that in late 2014 she purchased a cafe in Oatley in Sydney and Mr and Ms Matthews assisted her with the purchase by providing her with a bank cheque for $80,000 to allow her to settle the purchase as her investments had not yet matured.

47. Ms Woodham gives evidence in relation to the meeting which occurred in January 2014 between her, Mr Woodham and Mr Matthews at her house.

48. Paragraph 3 of Ms Woodham's affidavit is as follows:

“In January 2014 Mr Matthews came to my house (Gareth Woodham was also present) and we had a conversation as follows:

Mr Matthews:   'I mentioned to you before that our home lender is in receivership. Well the receivers have just screwed us over and I need your help. Bottom line is if we don't come up with $40,000 in the next 24 hours then we could lose the house. Is there any chance I can ask for a favour and get a loan from you?”

Me:   ‘Of course. You have helped me so much in the past that I will help you. How much do you need?

Mr Matthews:   ‘If you could lend us $40,000 that would be fantastic.’

Me:   ‘Ok.

Mr Matthews:   ‘Thanks. We will pay you back as soon as I can with interest.’

Me:   ‘Stephen there is no need to pay me interest. I am happy to help you out.’

Mr Matthews:   ‘Thank you, I will look after you though, especially given you are paying interest on the funds.’”

49. Ms Woodham states that on 15 January 2014 she transferred $40,000 from her overdraft account to Ms Matthews’ account and that since that time Mr Matthews has repaid the $40,000 to Ms Woodham “in full”.

50. It should be noted from the affidavit that the crucial conversation at the 2014 meeting did not involve Mr Woodham speaking at all. Further, the conversation has Ms Woodham lending the $40,000 without a requirement for interest. This is inconsistent with Mr Woodham’s evidence of the same meeting.

51. In her oral evidence, Ms Woodham was taken to a handwritten letter which is Annexure C to Gareth Woodham’s 2 March 2018 affidavit.

52. In paragraph 43 of his affidavit, Mr Woodham states that he disputes that the entire $40,000 loaned “to Mr Matthews” in January 2014 belonged to Ms Woodham. He asserts, consistently with the plaintiff's case, that Ms Woodham loaned half of the $40,000 and he loaned the other half. He appears in this evidence to identify himself with the plaintiff. The evidence in paragraph 43 also identifies the loan as being to Mr Matthews as opposed to Ms Matthews.

53. In her evidence, Ms Nicole Woodham confirmed that the handwritten letter which is Annexure C to Mr Woodham’s 2 March 2018 affidavit is in her handwriting, is signed by her, is directed to her former mother-in-law (Mr Woodham’s mother) and was written by her in about August 2016 in response to a letter apparently from Mr Woodham to his mother and other members of his family: T3-4 (17/4/19).

54. Ms Woodham was taken to that part of the handwritten letter which states as follows (page 13): “He [Mr Woodham] met with Steve in December 2013 and asked me to transfer his money to Steve which I did”.

55. Ms Woodham confirmed that the “Steve” in the passage quoted was Mr Stephen Matthews and that the “he” commencing in the passage was Mr Woodham. Initially, Ms Woodham denied that the meeting could have been in January 2014 (T5.7) but later conceded that the meeting which was at her house could have been in January 2014 (T5.15).

56. Ms Woodham said that she intended by this letter to convey that Mr Woodham met with Mr Matthews in December 2013 and later he requested Ms Woodham to transfer money to Mr Matthews which she did: T5.29; T6.15. By the reference to “his money” Ms Woodham understood it to be Mr Woodham's money but after further cross-examination she accepted that the money was part of the $26,000 lent to her by the plaintiff which was placed on an offset account on her mortgage: T5.46-T6.47.

57. It should be noted that this is inconsistent with paragraph 4 of Ms Woodham's affidavit which states that she transferred the $40,000 to Ms Matthews’ account as opposed to Mr Matthews account as the letter suggests.

58. Ms Woodham in further cross-examination accepted that Mr Woodham had asked her to transfer some of his money to Ms Matthews for her mortgage: T7.20: T6.49.

59. Ms Woodham was taken to paragraph 4 of her affidavit and confirmed that she transferred the money in the sum of $40,000 from her account to Ms Matthews account but said some of the money was Ms Woodham’s money and some of the money was Mr Woodham’s money: T7.34.

60. Ms Woodham was then asked some questions about the conversation appearing in paragraph 23 of Mr Woodham’s first affidavit. In relation to the first quote from Mr Matthews in paragraph 23 of Mr Woodham’s first affidavit, Ms Woodham said that she remembered $40,000 being mentioned but believed she probably “tuned out” in relation to the details about the mortgage being in default: T8.13. However, she recalled that the conversation related to a default in a mortgage by the Matthews.

61. Ms Woodham was then taken to the second conversation in paragraph 23 of Mr Woodham’s first affidavit where she is recorded as saying “Gareth and I will lend you the $40,000”. Ms Woodham said that she understood $40,000 would be lent to Mr Matthews. She said Mr Woodham was sitting at the same table during the discussion. She said she did not recall that part recorded in Mr Woodham’s affidavit where it states, “Gareth and I will lend you the $40,000”. Ms Woodham said that she was lending the $40,000 sought. She said she had a conversation with Mr Woodham after the meeting in which he said he was happy for her to lend $20,000 of her own money and $20,000 of his money which he had advanced to her. However, at the meeting at which the three of them attended, she recalled Mr Woodham nodding as she spoke. In the end, Ms Woodham said that she did say that “we will lend you the $40,000” but she did not say that the money would be sent from the loan offset account: T8.46-.1.

62. Ms Woodham was then taken to the third conversation from Mr Matthews in paragraph 23 of Mr Woodham’s first affidavit. She denied that Mr Matthews in the meeting said words the effect “I'm sure we’ll be able to pay you on time. Gareth, your $20,000 will be on the same terms as before”: T9.25-.34.

63. Ms Woodham stated that in her discussion with Mr Woodham later after the meeting with Mr Matthews, Mr Woodham said that he and Mr Matthews would work out the terms relating to his part: T10.25-.40.

64. I formed a positive view in relation to Ms Woodham. She appeared to be an honest witness doing her best to give her evidence truthfully. I did not perceive her giving her evidence with any animosity towards Mr Woodham having regard to the fact that they were previously married. However, I formed the view that Ms Woodham did not have a good recollection in relation to the detail of discussions at the meeting. Her firm recollection seemed to be limited to the fact that she would be advancing $40,000 from her account, that she did say that “we will lend you the $40,000”, and that there was a later discussion between her and Mr Woodham as to the detail of how the $40,000 would be constituted. She also denied there was any discussion that $20,000 of the $40,000 would be advanced from Mr Woodham or the plaintiff or that it would be “on the same terms as before”.

Evidence of Ms Melinda Matthews

65. The first defendant read an affidavit of hers sworn 15 February 2018. Ms Matthews gives evidence that her husband Mr Matthews is involved in various other investments and “is often approached to document investment opportunities for different companies”. She also gives evidence that Mr Matthews trades in the currency and share markets. Ms Matthews gives evidence that in certain circumstances, Mr Matthews will ask her to execute Deeds of Agreement pursuant to which she will borrow money from his investors. She notes that the Deeds of Agreement are usually to protect Mr Matthews’ clients, although several of them have been taken for personal use. It is noted that Ms Matthews does not say in her affidavit that she has given any general authority to Mr Matthews to enter contracts or agree to commercial transactions on her behalf whether at present or in the period 2012 to 2014. Similarly, there was nothing said in her affidavit about a more confined authority being given to Mr Matthews to bind her to a loan with the plaintiff in January 2014.

66. In paragraphs 4 to 8 of her affidavit, Ms Matthews gives the background to the various Deeds of Agreement which she signed with the plaintiff on 20 September 2012, 20 October 2012 and on 24 December 2012. In paragraph 8 of her affidavit, Ms Matthews states: “However, I trusted Stephen and I was prepared to sign the [24 December 2012] Deed of Agreement”.

67. Ms Matthews gives evidence that in early 2013, her home loan lender Provident Capital which she states was in liquidation caused her mortgage to be in default. How this occurred is not made clear in her affidavit. She asserts that the receiver of the lender was making threats to take possession of her home. She continues that “we were in desperate need of approximately $40,000 and Stephen and I did not have the money to make this payment. I understood that if the payment was not made, the settlement could not proceed and we may lose our home.”

68. In paragraph 15 of her affidavit, Ms Matthews states the following:

15.  In about January 2013, I had a conversation with Stephen as follows:

Stephen:   ‘I have spoken with Nicole [Woodham] and she has agreed to lend us the money to pay to provident’

Me:   ‘Thank heavens for that.’

69. This evidence is inconsistent with the plaintiff lending money in January 2014 to anyone. In particular, Ms Matthews said that she did not enter into any agreement with the plaintiff. There is nothing in her affidavit which suggests that her husband had her authority to enter into the agreement which Mr Woodham on behalf of the plaintiff asserts that Mr Matthews did on her behalf.

70. In her oral evidence, Ms Matthews amended paragraphs 14 and 15 of her affidavit to correct that the year referred to in each paragraph should be 2014 and not 2013: T13.14.

71. Ms Matthews confirmed that her husband Stephen asked her to enter into the September 2012 deed for the purposes of investment and asked her to sign that deed which he had prepared: T13.48. Ms Matthews said she assumed that Mr Matthews was sending a draft of the deed to Mr Woodham: T14.1. She confirmed that she allowed Mr Matthews to do this on her behalf as she trusted him and left it to him to handle the detail of the terms of the deed: T14.10.

72. In relation to the October 2012 addendum (page 24 of Mr Woodham’s first affidavit), Ms Matthews also agreed that she left it to Mr Matthews to take care of the arrangements for that deed. She did this as she trusted him: T14.26.

73. Ms Matthews was asked whether she was aware that the December 2012 deed was entered into for the purposes of a loan to Polymax. Ms Matthews said that she was aware that Mr Matthews and Mr Woodham were talking about Polymax: T15.22. She agreed that she let Mr Matthews decide the loan, draft it and organise the loan terms: T15.30. She accepted that she made a number of payments in relation to the December 2012 loan: T15.33. She also stated that she left the loan to Mr Matthews and did not speak to Mr Woodham in relation to it: T15.40. She could not recall whether she made payments under the December 2012 loan herself as it was a long time ago. She accepted that most payments were made for her by Mr Matthews: T15.50.

74. In relation to the mortgage loan in January 2014, Ms Matthews said that she trusted her husband to make the arrangements for it: T16.7. When it was put to her that if she did not receive the loan that she would be in default under her mortgage, Ms Matthews said that she understood that the mortgagee Provident Capital was in receivership and the money was needed to pay fees to roll the mortgage over. She said that she believed there was a slight risk that she would lose her house if these fees were not paid: T16.16.

75. Ms Matthews confirmed her understanding that the money was advanced by Ms Woodham to her but she did not know whether it was placed in her bank account: T16.22. She said she was not at the meeting where the loan was discussed but trusted her husband to arrange the loan and knew that he was meeting with Ms Woodham in relation to the loan: T16.31-.45. When it was put to her that she would agree to any agreement made on her behalf, Ms Matthews denied this and said that she thought Mr Matthews was just going to ask Ms Woodham to lend them the money: T17.27; T21.27. When it was suggested to her that she knew that the loan was going to be in her name, Ms Matthews denied this: T17.42. Ms Matthews stated that she thought her husband was meeting with Ms Woodham.

76. Ms Matthews agreed that she was the owner of the family home and believed that she owed money to Provident Capital in relation to the mortgage. In response to the suggestion that she discussed with Mr Matthews the need to raise more money, Ms Matthews agreed that they needed to find more money in relation to the mortgage. When it was suggested that she knew Mr Matthews was going to speak to Mr Woodham and Ms Woodham, Ms Matthews said that she only understood he was going to speak to Ms Woodham: T21.27. She accepted that she knew that Mr Matthews was going to speak to Ms Woodham and see her for the purpose of asking if she had any money which they could borrow: T21.36.

77. Ms Matthews gave evidence that she did not discuss with Mr Matthews any of the terms of any agreement in relation to the borrowing of money: T21.43. When asked why she did not attend the meeting, Ms Matthews said that she was probably at work. She agreed that she allowed her husband to represent her at the meeting: T21.48-22.2.

78. Ms Matthews said that she believed that $40,000 was obtained and understood that it was paid to the liquidator of Provident Capital. She said she knew that the money came from Ms Woodham as a result of the meeting and accepted the funds that were advanced. When it was put to her that she accepted that her husband had made an agreement for her, Ms Matthews said that she agreed for her husband to borrow the money but was not aware of “how it was to be returned”: T22.25. She agreed that she was not there and did not know what occurred but assumed that if there was anything other than borrowing from Ms Woodham as friends that there would be “paperwork” for her to sign. She agreed that there has never been “paperwork” between her and Ms Woodham in relation to the loan: T22.40.

79. Ms Matthews impressed the court as an honest witness who was doing her best to give her evidence truthfully and completely. It is clear to me from Ms Matthews’ evidence that she trusted her husband in relation to financial matters and left it primarily to him to arrange them. Again, I formed the view that Ms Matthews did not have a good recollection of the discussions which occurred at the time. However, there was nothing in her evidence to establish that she was aware in January 2014 that her husband was meeting or talking with Mr Woodham about a loan from the plaintiff or Mr Woodham.

80. In paragraph 2B of the Amended Statement of Claim filed on 11 May 2018 the following is pleaded:

“At all relevant times, the first defendant [Ms Matthews] had authorised her husband, Stephen Matthews to deal with the plaintiff’s principal, Gareth Woodham, on her behalf.”

81. Ms Matthews denies this allegation in paragraph 4 of her Defence filed 30 May 2018. Paragraph 6 of the Amended Statement of Claim pleads that “in or about January 2014, the plaintiff agreed to lend to the first defendant the sum of $20,000 (January 2014 Agreement)”. The particulars to paragraph 6 state that the agreement was oral and the result of a conversation between Mr Woodham on the plaintiff's behalf and Mr Matthews as agent for the first defendant.

82. The clear implication from the Amended Statement of Claim is that there was general authority provided by the first defendant to her husband Mr Matthews to deal with Mr Woodham on her behalf and that that authority extended to the entry into of the January 2014 oral agreement.

83. It is clear that Ms Matthews signed the 20 September 2012 agreement, the October 2012 addendum and the 24 December 2012 agreement that had been prepared by Mr Matthews and negotiated with Mr Woodham on behalf of the plaintiff. Mr Matthews later gave evidence, which was not contested, that he had entered about six other loans, besides the loans with the plaintiff, on Ms Woodham's behalf with the plaintiff’s loans being treated in summary by him as one loan.

154. In my view, the actual authority submitted is not established. Ms Matthews only knew about a potential loan from Ms Woodham in January 2014. Mr Woodham or GWI was not mentioned to her prior to the meeting. The fact Ms Woodham was a friend was relevant. The fact there had been dealings between the Matthews and Ms Woodham previously was relevant. I cannot infer from the background circumstances the grant of actual authority (inferred or implied) to negotiate a loan agreement with the plaintiff on her behalf including as to the terms alleged.

155. In order for Mr Matthews to have had apparent or ostensible authority to enter into the alleged January 2014 loan on Ms Matthews’ behalf with the plaintiff, there must have been a representation from Ms Matthews that Mr Matthews had that authority. An implied representation from Mr Matthews alone is not sufficient.

156. In Crabtree–Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72 the High Court stated as follows at page 80:

“… a person with no actual, but only ostensible, authority to do an act or to make a representation cannot make a representation which may be relied on as giving a further agent an ostensible authority. Hence the stress by Diplock LJ [in Freeman & Lockyer] on the need that the person or persons making the representation must have actual authority to make the representation.”

167. Clearly, Ms Matthews herself could make a representation that Mr Matthews had authority on her behalf to enter into the January 2014 agreement as alleged. Was such a representation made by her?

168. In Wilh Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32, the Court of Appeal considered what is required to establish ostensible authority including through a course of dealings: see at [74]-[87] and [168]-[178]. Beazley ACJ noted at [74], following Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, that apparent or ostensible authority is a legal relationship created by a representation, made by the principal to the contractor, intended to be acted upon that the agent has authority to enter into on behalf of the principal a contract of a kind within the scope of the apparent authority so as to render the principal liable to perform any obligations imposed upon him or her by such contract. Ostensible authority, Beazley ACJ noted, operates as an estoppel “preventing a principal from denying an agent's authority”: at [76]. At [78], Beazley ACJ noted that a course of conduct or dealing may constitute a relevant representation. Her Honour noted that in terms of estoppel, ostensible authority “arising out of a course of dealing is a form of conventional estoppel”: at [79]. At [84], Beazley ACJ noted that the authorities made clear that the representation of authority must come from the principal and not from the agent, but can arise from a course of dealings.

169. White JA also accepted that ostensible or apparent authority arising as a representation could be inferred through a course of dealings. In that case his Honour found that conduct allowing persons with certain titles to order products from the respondent without conveying to the respondent that there were any limitations on authority over a lengthy period amounted to ostensible or apparent authority through a course of dealings conveyed by conduct.

170. The question which therefore arises is whether there was a sufficient course of conduct in the present case by Ms Matthews to give rise to a form of estoppel that there was authority in Mr Matthews to enter into the January 2014 alleged loan on behalf of Ms Matthews with the plaintiff.

171. In my view, the conduct of Ms Matthews prior to January 2014 did not amount to any representation to the plaintiff that Mr Matthews had authority to agree on her behalf any loan with it entered irrespective of the terms. It would be extraordinary to infer such a general authority being granted by a wife to a husband to bind her to a commercial loan agreement on the limited number of transactions established in the present case. This is particularly the case where the agreement in question was unclear in the sense that Ms Matthews is not shown to have been aware of the lender (allegedly the plaintiff), the amount agreed, or the terms of the loan. The course of dealings in the present case was limited in time and number of transactions and concluded in December 2012, 13 months previously. The case is quite different to the Wilhelmsen Investments case, above.

172. In the end, in my view, the evidence does not establish that if a loan was entered into with the plaintiff by Mr Matthews on behalf of Ms Matthews, that he had her authority to do so. It is therefore not binding on the first defendant.

173. No question of ratification has been raised on the pleadings or was put forward in submissions on behalf of the plaintiff.

January 2014 loan

174. The plaintiff's case as set out in the Amended Statement of Claim is that at the January 2014 meeting between Mr Matthews, Mr Woodham and Ms Woodham, the plaintiff agreed to lend to Ms Matthews the sum of $20,000 on the same terms as the terms of the December 2012 deed. That is a term of two months which could be extended by mutual agreement with interest payable at the rate of 3% per month for the first two months and 5% thereafter on default. The plaintiff alleges that also at that time Ms Woodham agreed to lend to Ms Matthews the sum of $20,000. The plaintiff states that its $20,000 was to come from the $26,000 lent by the plaintiff to Ms Woodham in September 2013 pursuant to the agreement made at that time to assist Ms Woodham with the offset account for her mortgage.

175. The first defendant's case is that the amount of $40,000 was agreed to be lent by Ms Woodham to Ms Matthews without interest being payable but that it was understood that the source of some of the funds was to be the moneys which had been previously advanced by the plaintiff to Ms Woodham: see paragraphs 6-10 and 17 of the Amended Statement of Claim and paragraphs 8-12 of the Defence.

176. There is a substantial difference between the evidence of the various witnesses in relation to the January 2014 meeting. It is clear from the evidence that the only persons attending the meeting were Mr Matthews, Mr Woodham and Ms Woodham.

177. In her affidavit, Ms Matthews states that in January 2014 (as corrected in her oral evidence) in a conversation with her husband, he told her that Ms Woodham had agreed to lend the money to pay to their mortgagee. I accept that evidence. It was, however, a summary of his view of the outcome of the meeting. It thus must be given somewhat limited weight.

178. Ms Woodham's affidavit evidence is that the loan agreed was between her and the borrower. It is somewhat unclear from her evidence as a whole whether the agreed borrower was Mr Matthews or Ms Matthews or possibly both. Paragraph 3 of Ms Woodham's affidavit seems to suggest that the loan was with Mr Matthews but the money was transferred from her overdraft account to Ms Matthews’ account and she does not seem to dispute that the ultimate borrower was Ms Matthews, although she notes that Mr Matthews not Ms Matthews has repaid the $40,000 to her in full: see paragraphs 3-5 of Ms Woodham's affidavit.

179. In her oral evidence, Ms Woodham was not as clear. She appeared to accept that she said words to the effect that “we will lend you the $40,000”: T8.48; T9.42. It must be recalled that she was talking to Mr Matthews when she said this and Mr Woodham was present. She denied mentioning the details of where the money came from to Mr Matthews, being that part was from her money and part was from money that was lent by the plaintiff that was sitting in her loan offset account: T8.35-T9.7. Mr Matthews said in cross-examination that he was aware that part of the $40,000 came from money originally lent by Mr Woodham to Ms Woodham but did not know the amount: T53.23.

180. Mr Matthews’ account is set out in paragraph 32 of his affidavit. As stated above, it differs from the versions of Ms Woodham and Mr Woodham in that the figure of $45,000 is mentioned instead of $40,000. It also differs from Ms Woodham's account as Mr Matthews has Mr Woodham talking in the relevant conversation whereas Ms Woodham has him silent. A further difference is that Mr Matthews has Ms Woodham mentioning that some of the money in her overdraft account belonged to Mr Woodham. That is not mentioned in Ms Woodham's affidavit but Mr Matthews gave oral evidence that there was another conversation earlier in the day where she told Mr Matthews this: T54.3-.14. Both Mr Matthews and Ms Woodham's accounts have Ms Woodham saying that it is unnecessary for interest to be repaid on the loan.

181. In his first affidavit, Mr Woodham's account is essentially consistent with the plaintiff’s case: see paragraph 23. In his second affidavit dated 2 March 2018, Mr Woodham referred to further conversations in paragraphs 35-36 and 42. These conversations are surprisingly in somewhat different terms to the conversation set out in paragraph 23 of Mr Woodham's first affidavit. The explanation given by Mr Woodham for not including them in his first affidavit was not particularly clear but it seems that he recalled further details upon reading the affidavits filed for the first defendant: T36.26-T37.41.

182. Having reviewed the affidavits and heard from each of the relevant witnesses being cross-examined as to the meeting, I form the view that none of the witnesses had a particularly good recollection of what was said in the meeting in January 2014 at which Mr Woodham, Ms Woodham and Mr Matthews were present. The meeting was over five years ago. The differences in the various versions were considerable, although the thrust of the meeting, that $40,000 would be provided from Ms Woodham's account, was consistent.

183. Complicating the issue are the numerous references in Mr Woodham's second affidavit to the loan being to Mr Matthews as opposed to being to Ms Matthews: see paragraphs 39, 42(a) and 43. These appear to have been Mr Woodham’s considered responses after having read the other affidavits served from the first defendant.

184. Considering the evidence as a whole, the following is what I find likely occurred:

1. A meeting occurred between Mr Matthews, Mr Woodham and Ms Woodham in January 2014 at Ms Woodham’s home;

2. Ms Woodham informed Mr Matthews prior to the meeting that she held in her offset account $26,000 which had been lent to her by the plaintiff. She also said she had other money of her own: see Mr Matthew’s evidence at T53.47-54.14 (Day 2). I find this conversation occurred prior to the meeting as otherwise Mr Woodham’s presence at the meeting would have been inexplicable;

3. Mr Matthews informed Ms Woodham in that conversation prior to the meeting that he and his wife needed $40,000 because of problems with Ms Matthews’ mortgage;

4. Ms Woodham said to Mr Matthews that there needed to be a meeting with Mr Woodham present because part of the funds she possessed in her account which she could lend had originated from him;

5. At the crucial meeting held later that day, Mr Matthews said words to the effect that he and Ms Matthews had a problem and that if they could not come up with $40,000 that day then they may lose their house because the mortgage was in default. He asked Mr Woodham and Ms Woodham whether they could help him;

6. Ms Woodham said that she could lend Mr Matthews $20,000 from her account: this is consistent with Ms Woodham’s affidavit. Mr Woodham said that the plaintiff could lend him a further $20,000 from the money which he had lent to Ms Woodham so that the total sum lent was $40,000;

7. Ms Woodham said that she did not want any interest from Mr Matthews for her $20,000 loan;

8. Mr Woodham said that he would lend $20,000 of the money held for the plaintiff by Ms Woodham to Mr Matthews but it would be on the same terms as in the previous loan.

185. It will be seen that, to a major extent, I have in substance accepted the revised account of Mr Woodham of what occurred as set out in his second affidavit together with some aspects of Mr Matthews’ evidence and Ms Woodham's evidence.

186. In my view, Mr Woodham correctly saw the borrower as being Mr Matthews. The version in his first affidavit is varied. In some places it has Ms Woodham saying she will lend to both Mr and Mrs Matthews and in other places it has her appearing to say she will lend to Mr Matthews. After careful consideration of the first defendant’s affidavits served, Mr Woodham puts forward conversations in his second affidavit which clearly have the loan between the plaintiff and Mr Matthews. Mr Matthews was the person that he was dealing with in the January 2014 meeting and it was Mr Matthews who asked for the loan. From Mr Matthews’ perspective, the loan was from both Ms Woodham and Mr Woodham in the sum of $20,000 each but he was aware that the source of the funds would be from Ms Woodham’s account. It was this source of funds from Ms Woodham's account that was the basis for the conversation he later had with Ms Matthews as reflected in her affidavit.

187. Accordingly, the loan agreed by Mr Matthews was from Ms Woodham as to $20,000 and from the plaintiff as to $20,000 to Mr Matthews.

188. I have in substance preferred Mr Woodham's version of the meeting as set out in his second affidavit together with aspects of Mr Matthews’ and Ms Woodham's oral evidence for the following reasons:

1. I consider Mr Matthews and Ms Woodham did not have a good recollection of the detail of the meeting;

2. The evidence is clear that the purpose of the plaintiff lending moneys was to generate an income for it and for Mr Woodham;

3. Accordingly, in my view it is unlikely that Mr Woodham would have agreed on behalf of the plaintiff to advance or lend moneys without interest being payable by the borrower. The most readily available terms were those which had previously been agreed with the 24 December 2012 deed and that is why there was agreement for the loan to be on the same terms;

4. It seems unlikely that Mr Woodham would sit by without saying anything at the meeting as Ms Woodham suggests in her affidavit in circumstances where Ms Woodham was agreeing to lend $40,000 without interest and where it was likely that he may have difficulties securing interest from Ms Woodham to whom he was no longer married;

5. Mr Woodham’s second affidavit is clear and was prepared after reviewing the affidavits served from the first defendant. Accordingly, his affidavit evidence was carefully considered in the context of the first defendant’s evidence;

6. My finding is also consistent with Ms Woodham’s oral evidence at T8.48-T9.15 (Day 2);

7. The finding is consistent with my finding that Mr Matthews had no authority from Ms Matthews to enter the loan alleged;

8. My finding is consistent with the letter written by Ms Woodham to her mother in law which is annexed to Mr Woodham’s second affidavit (“He met with Steve in December 2013 and asked me to transfer his money to Steve which I did”). Although the money was transferred to Ms Matthews, the letter has Mr Matthews as the apparent borrower;

9. Whilst Ms Matthews was the owner of the house and thus legally had the mortgage difficulty, Mr Matthews also resided in the house and thus a loan to him had a legitimate purpose. The December 2012 loan to Ms Matthews was also in default;

10. Where there is an oral contract alleged, the court can look at post-contractual conduct to determine whether a contract was formed and the terms of that contract: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [136]-[145]; Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [124]. The various text messages which I have referred to above are consistent with $20,000 of the $40,000 loan coming from the plaintiff on the same terms as the December 2012 deed. I think it very likely that Mr Matthews would have denied the suggestions made by Mr Woodham in the text messages as to the terms of the loan and the amount outstanding if they did not accord with his recollection of the agreement in the January 2014 meeting. I accept the plaintiff’s submissions on that matter. The reference to interest being owed in the text messages, the emails and the attached spreadsheet is particularly relevant. I do not see the reference to money being “channelled back through Nicole” in the 9 January 2016 text by Mr Woodham as being inconsistent with a loan from the plaintiff. However, it is relevant that the only person referred to as owing the money in the texts between Mr Matthews and Mr Woodham is Mr Matthews not Ms Matthews.

189. In the alternative, I am not satisfied in the light of the evidence in Mr Woodham’s second affidavit as to the relevant conversations and the identity of the borrower, that the contract was between the plaintiff and Ms Matthews. The assertion by Mr Woodham of a typographical error in his second affidavit does not explain the other similar references in that affidavit. I accept the submissions made in paragraph 75 of the first defendant’s written submissions on this issue.

190. Further, I find, as set out above, that Mr Matthews did not have authority from Ms Matthews to enter into any agreement on her behalf on the terms allegedly agreed with Mr Woodham on behalf of the plaintiff as to the $20,000 loan in January 2014.

191. In the light of my findings, I do not need to consider whether the first defendant can rely on the doctrine of penalties in relation to the January 2014 oral loan as it does not arise.

Summary

192. Accordingly, to summarise my findings:

1. The default interest terms in the 24 December 2012 deed did not amount to a penalty;

2. Mr Matthews did not have authority from Ms Matthews to enter into the loan with the plaintiff in January 2014 as alleged by the plaintiff in the Amended Statement of Claim. Any loan from the plaintiff to Ms Mathews in January 2014 is therefore not binding on her; and

3. Mr Matthews agreed in January 2014 to a loan to him in the sum of $20,000 from the plaintiff on the same terms as the 24 December 2012 agreement.

The moneys owed by the first defendant

193. Ms Matthews is therefore liable in relation to the amount outstanding under the December 2012 deed only. This should be calculated by the parties having regard to my factual findings as to the amount owed.

Disposition

194. Accordingly, I make the following orders:

1. Judgment for the plaintiff against the first defendant.

2. I will hear from the parties as to the appropriate costs order.

3. The parties are to bring in agreed Short Minutes of Order reflecting the amount found in these reasons together with appropriate interest within 7 days.

4. Liberty to the parties to approach the Associate to Dicker DCJ in the event that agreement cannot be reached as to the appropriate orders.

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Decision last updated: 21 June 2019