Grossman v Gepp
[2024] VCC 909
•25 June 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-04636
| LISA GROSSMAN | Plaintiff |
| v | |
| SIMON ANDREW GEPP | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26, 27, 28 April 2023, written submissions filed 26 May, 21 June and 29 June 2023 | |
DATE OF JUDGMENT: | 25 June 2024 | |
CASE MAY BE CITED AS: | Grossman v Gepp | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 909 | |
REASONS FOR JUDGMENT
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Subject:LOAN AGREEMENT - DEBT
Catchwords: Plaintiff lent funds to the defendant under two loan agreements – further funds advanced in cash and by use of credit facilities – extent of repayments in dispute – whether default interest claimed is a penalty – appropriation of repayments considered – counterclaim for damages and return of chattels
Cases Cited: Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54; APX Projects Pty Limited v The Owners - Strata Plan No. 64025 [2015] NSWSC 1250; Aspdin v Austin (1844) 114 ER 1402; Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251; Bhundia v Sommers (No 4) [2021] NSWSC 455; Cory Brothers & Company v Owners of Turkish Steamship ‘Mecca’ [1897] AC 286; Dawes v Tredwell (1881) 18 Ch D 354; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79; Isaacson v Hardwood (1868) LR 3 Ch App 225; Jones v Dunkel (1959) 101 CLR 298; Re Walsh (1982) 42 ALR 727; Ringrow Pty Ltd v BP Australia Pty Ltd (2005) CLR 656
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Coombes | Harwood Andrews |
| For the Defendant | Mr A Richardson | R D Silverstein |
HER HONOUR:
Introduction and summary
1The plaintiff provided various forms of financial assistance to the defendant by way of:
(a) monies advanced under two written loan agreements;
(b) further cash advances;
(c) the use of an ANZ credit card; and
(d) access to a Westpac bank account and a credit card held in the name of LSG Holdings Pty Ltd (“LSG”), being a company owned by the plaintiff.
2The plaintiff seeks an order that the defendant pay her the total sum of $227,834.78.[1] In addition to her monetary claim, the plaintiff seeks a declaration that the defendant charged his assets under a charging clause contained in the loan agreements.
[1] Plaintiff’s closing submissions, paragraphs 96 – 98 set out calculations of the indebtedness
3For his part, the defendant accepts that various sums were advanced but says he is not indebted to the plaintiff because he has repaid the sums in question. The defendant claims he made a number of cash repayments to the plaintiff which the plaintiff has refused to acknowledge. Assuming some, or all, of the alleged repayments were made, then an issue arises as to how those payments should be appropriated towards the various advances. The defendant further argues that the default interest rate claimed of 20 per cent under the loan agreements is an unenforceable penalty.
4The defendant seeks to set off the sum of $4,000, being the value of his Ford Prefect motor vehicle which the plaintiff sold without his permission. The plaintiff concedes this amount is owed to the defendant.
5The defendant brings a counterclaim for the return of various chattels and damages. The defendant seeks an order for delivery up of two items held by the plaintiff, being an E27 Fordson Major Tractor and a 1926 Lister mobile shearing plant. The claim for damages was abandoned at trial. In addition, the defendant made a claim for $3,201.36 in restitution associated with the plaintiff’s use of two hook bins.
6For the reasons that follow, there should be judgment for the plaintiff on her claim for the balance of the principal sums outstanding under the two loan agreements, together with default interest to be assessed. The overall indebtedness of the defendant should be reduced by a total sum of $68,141.76, representing amounts adjusted in his favour. I am also satisfied that the declaration sought regarding a charge over the defendant’s assets should be made.
7As for the counterclaim, I will make an order that the plaintiff deliver up the two chattels identified but will otherwise dismiss the counterclaim.
8The parties will be asked to confer and provide minutes of orders to reflect these reasons.
Background
9The plaintiff met the defendant at her bookkeeper’s office in around March or April 2016. The plaintiff had sold a business in Darwin and attended her bookkeeper’s office to finalise some documents. She was looking to invest in another business and was introduced to the defendant by the bookkeeper.
10At the time they met, the defendant was involved in a business conducted by Victoria Crushing & Waste Management Pty Ltd (“Victoria Crushing”), which he ran with two other partners. The defendant also operates an earth moving business called Gepp Excavation & Plant Hire (“Gepp Excavation”).
11The parties embarked on a romantic relationship sometime after they first met in 2016 which ended acrimoniously in around February 2018.
12In about May 2016, the defendant asked the plaintiff for a loan to assist him in acquiring an interest in a property situated at 132-16 Point Henry Road, Moolap (the “property”). The defendant had purchased an interest in the property in 2014 and paid $225,000. The defendant had a private loan with a Mr Mick Janoski which was due to be repaid. The money the defendant sought to borrow for the plaintiff was to bridge the balance of what was owed to Mr Janoski. The plaintiff agreed to provide him with a loan as requested.
13On 1 June 2016, the plaintiff and defendant entered into a written loan agreement (“First Loan Agreement”). The plaintiff agreed to advance the sum of $137,648.21 for the purpose of the defendant acquiring an interest in the property, alternatively, an interest in a unit trust which owned the property. The due date for repayment was 20 December 2017.
14On 3 June 2016, the plaintiff paid the loan monies under the First Loan Agreement into a bank account nominated by the defendant. There is no dispute that the plaintiff advanced these monies.
15On 11 June 2016, the plaintiff and defendant entered into a further loan agreement (“Second Loan Agreement”), whereby the plaintiff agreed to lend the defendant the sum of $25,000 by way of a short-term loan. The defendant needed the money to pay clean-up costs at the property. It is accepted by the parties that the sum of $25,000 was advanced to the defendant by the plaintiff in cash. The due date for repayment was 5 August 2016, although the defendant disputes this date.
16Both agreements contained the same express terms relating to the calculation of interest, namely:
(a) interest would accrue at the rate of 5 per cent per annum payable monthly in arrears; and
(b) on late payments of interest and to any balances whatsoever outstanding after the due date for repayment at the rate of 20 per cent.
17From September 2016 onwards, the plaintiff made numerous cash advances to the defendant. This is admitted by the defendant but there is a dispute as to how much of these further cash advances were repaid. After reconciling the payments and repayments, the plaintiff concedes that she owes the defendant the sum of $24,000, whereas the defendant claims he has overpaid by an amount of $40,000.
18In around December 2016, the plaintiff gave the defendant permission to use her credit card held with the ANZ Bank to cover his expenses from time to time, on the basis that he would repay her the costs incurred. The defendant made a number of repayments but the plaintiff claims there is a shortfall owing on the ANZ credit card in the sum of $7,576.26.
19In October 2016, the plaintiff and defendant had discussions about setting up a hook bin business, the purpose of which is to recycle crushed glass. The defendant suggested to the plaintiff that they purchase a truck to be used in the business. She agreed to this proposal. The defendant said he was told by the plaintiff that they would both be directors and shareholders of the business.
20LSG was incorporated in March 2017 to conduct the hook bin business. The plaintiff is the sole director and shareholder of LSG. The intention was for LSG to own machinery and then down the track, hire out the machinery. The parties agreed that the hook bins would be built by the defendant but owned by LSG. The defendant took the next steps in the LSG business by contacting companies who were interested in hiring hook bins. He travelled to Brisbane on 8 February 2017 to collect a hook truck purchased by the plaintiff. The truck was subsequently recorded as asset owned by LSG and was used in the hook bin business. The plaintiff gave the defendant authority to use the LSG credit card. In June 2017, the defendant completed the construction of four hook bins.
21In approximately June or July 2018, Victorian Crushing was put into administration. A liquidator was appointed to the company on 24 July 2018. As a result, all the machinery on the premises of the business was confiscated by the liquidator and sold to recoup money owed by the defendant’s business.
22In May 2019, the plaintiff ceased the arrangement whereby the defendant could make use of the LSG credit card.
23On 5 June and 15 October 2020, the plaintiff’s solicitors sent letters of demand to the defendant.[2]
[2] Exhibits “P2” and “P3”, respectively
24This proceeding was commenced by writ on 16 October 2020.
25A significant feature of this case was the way in which the claims and cross claims constantly changed. The pleadings underwent frequent amendment so that it was very difficult to know what was claimed, what was admitted and what was denied at any time. For example, the defendant filed a fourth amended defence and counterclaim. This state of affairs continued even throughout the trial with many items being abandoned or conceded during the hearing. All of this was very unsatisfactory and suggests that neither party knew precisely what was owed by the other. Given a number of the figures in pleadings at the start of the trial did not ultimately marry with the evidence as it emerged, I have treated the parties’ closing submissions as representing the final way in which each party put their respective cases and the figures they ultimately relied upon. As the plaintiff’s counsel stated in opening, the resolution of the competing claims largely ended up being an accounting exercise.
26Whilst it can be accepted with the passage of time that memories fade and there were a large number of cash transactions involved, nevertheless, I did have concerns about the reliability and accuracy of the oral evidence given by the key protagonists about the various sums paid and repaid. To that end, where there is objective evidence of payments and repayments made, I have placed more weight on that evidence.
First Loan Agreement
27The First Loan Agreement is dated 1 June 2016 pursuant to which the defendant borrowed the sum of $137,648.21. The agreed contractual interest rate of 5 per cent amounts to $6,882.40. Therefore, the total sum payable was $144,530.61. The plaintiff says that the defendant agreed to repay this amount via 18 monthly payments comprising the principal and interest. Compliance with these terms required the defendant to make 18 monthly payments of $8,029.47. The defendant was required to pay the principal sum and interest by 20 December 2017.
28The express terms of the First Loan Agreement are as follows:
(a) the defendant, as borrower, agreed to borrow the sum of $137,648.21 (“Principal Sum”) in accordance with the terms of the First Loan Agreement (clause 1);
(b) the borrower and lender agreed that the Principal Sum shall bear interest at the rate of 5 per cent per annum payable monthly in arrears (clauses 3 and 4, and Schedule item 1, clause 4);
(c) the borrower agreed to pay interest at a default interest rate of 20 per cent calculated annually in the event of ‘late payment’ (Schedule item 1, clause 5);
(d) the borrower agreed to repay the outstanding Principal Sum monthly in arrears by telegraphic transfer to the plaintiff’s bank account with the final payment due no later than 20 December 2017 (Schedule item 1, clause 3);
(e) the Principal Sum together with the interest shall be payable by the borrower on demand by the lender without the need for any period of notice (clause 5);
(f) the Principal Sum together with the interest shall become immediately repayable by the borrower to the lender without demand if an event of default occurs (clause 5);
(g) the failure of the borrower to fail to pay interest in accordance with clause 3 of the First Loan Agreement constitutes an event of default (clause 6(f)); and
(h) as security for the repayment of the Loan Monies (otherwise defined as the Principal Sum) and all interest payable, the borrower granted the lender an unregistered charge over all the assets of the borrower (recital B).
Second Loan Agreement
29The Second Loan Agreement is dated 11 June 2016. The sum of $25,000 was advanced. The agreed contractual interest rate of 5 per cent amounts to $1,250. The total loan amount claimed by the plaintiff is $26,250. The plaintiff submits that the defendant was required to make three monthly payments of $8,750. The terms were otherwise the same as the First Loan Agreement. The plaintiff pleads that the defendant made repayments under the Second Loan Agreement totalling $18,823.81 and has failed to pay the balance outstanding in the sum of $6,864.11 by 5 August 2016. As the defendant is in default, the plaintiff also seeks default interest at the rate of 20 per cent under clause 2 of the Second Loan Agreement.
30The schedule to the Second Loan Agreement contains a handwritten amendment to clause 3, being the due date for final payment of the second loan. The date of 20 December 2017 is struck through and the new date of 5 August 2016 is handwritten in its place. The signatures of the plaintiff and the defendant are next to the amendment.
31The plaintiff gave evidence that her recollection of the amendment was to provide a new due date for the final payment, being 5 August 2016. The defendant said he did not recall signing the document.
32The plaintiff submits that having regard to the objective interpretation of this amendment, the effect is to substitute one date for another. The plaintiff contends that there was no evidence from the defendant to support his submission that the intention of the clause was to remove any date for the final payment to be due.
33The short answer to this debate is that the parties are bound by the document they signed. The clause speaks for itself – the subjective views of the parties are irrelevant. The due date for repayment of the final sum due under the Second Loan Agreement is as stated, 5 August 2016.
34The defendant argues that whilst there was clearly an obligation to repay each of the written loans by a completion date, on a proper construction of the documents there was no obligation on the defendant to ensure that he made a minimum monthly payment to the plaintiff or that equal monthly repayments had to be made. The defendant submits a reasonable businessperson standing in the shoes of the parties would not have interpreted the loan agreement to impose a minimum monthly repayment term or for there to be equal monthly instalments. The proper construction of the term is that some amount is payable monthly.
35The defendant says further the plaintiff never gave notice to the defendant that he was in default. However, the plaintiff’s lawyers did send letters of demand in June and October 2020. But in any event, the sums became payable without the need for a demand upon an event of default as provided for in clause 5. There is no question the defendant defaulted in his obligations under both loan agreements as demonstrated by the chronological list of payments prepared by the plaintiff and marked Schedule A to the closing submissions. In July 2016, the defendant paid $20,000 in compliance with these loan agreements and thereafter made a further payment of $5,000 on 6 September 2017.[3] The defendant has otherwise been in breach of his obligations and has not repaid the balance of the sums advanced to the plaintiff under either loan or paid any interest. The plaintiff’s case is that he was in breach of his obligations as at August 2016 which triggered the higher default interest rate of 20 percent thereafter.
[3] Plaintiff’s opening – Transcript (“T”) 10
36Self-evidently, the parties are bound by the documents they signed. It is not open as a matter of construction for the defendant to say, in effect, that he could pay off whatever sum he felt like each month. The loan agreements clearly state that repayments are to be paid monthly over the term of the loan. Whilst the monthly figure is not specified, the relevant clause says the repayment of the principal sum is to be paid monthly in arrears and there is a due date specified for the final payment. Therefore, there was a contractual obligation placed upon the defendant to pay off the loans by the due date by paying off the principal sum monthly in arrears together with the interest specified, which he did not do.
Issues relevant to both loan agreements
(a) recital B in loan agreements – charging clause
37Both loan agreements contain an identical recital provision. Recital B reads:
B. To secure repayment of the Loan Monies and all interest payable thereon the borrower has agreed to give the lender an unregistered charge (herein after called the Charge) over all assets of the borrower.
38The plaintiff submits that the meaning of this recital, like other clauses, is construed objectively. The objective approach requires reference to the text and its ordinary meaning, together with the context, being the entire text of the loan agreement including matters referred to in the text and the purpose.
39The plaintiff contends recital B creates an obligation, namely, the granting of an unregistered charge by the defendant to the plaintiff over all the defendant’s assets. That term is part of the bargain struck between the parties and is an enforceable covenant in the loan agreements.
40For a recital to amount to an enforceable covenant, it must be ‘plain upon the deed’ that it was the intention of the parties to create the covenant. In Isaacson v Hardwood, Lord Cairns LJ observed that the question will be what the parties to the subject agreement intended. Lord Cairns LJ goes on to say:[4]
Now it is well settled that there is no magic in the words of a covenant. Whatever words are used by a party to a deed, if he intends that they shall operate as a covenant, he will be held liable.
[4] (1868) LR 3 Ch App 225
41The plaintiff submits that the words in the charging clause are deliberate and clearly convey an intention to create a covenant or an agreement between the parties. There is no ambiguity or inconsistency between a recital and an operative part of a deed for the court to reconcile.
42The defendant denies that the charge, in respect of both loan agreements, has the effect alleged by the plaintiff because a recital does not constitute a term of the agreement.[5]
[5] Defendant’s fourth amended defence dated 17 April 2023, paragraph 6
43In my view, although expressed in the recital, this does not preclude it from being enforceable in circumstances where, as is the case here, there is no express covenant in the body of the loan agreements. This follows from the commentary in Heydon on Contract:[6]
[6]Lawbook Co 2019, [8.1480]
a. In general, since a recital is not within the operative part of the deed, it does not have any operative effect except for one qualification as stated by Mason J:
[W]here in the recitals to a deed or an agreement it is acknowledged that the parties have agreed to do, or will do certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect. Then, there being no indication of a contrary intention, it may be safely inferred that the absence of contractual provision was due to oversight or inadvertence.[7]
b. However, this exception is not triggered where:
i.the recital merely sets out the objects of the parties as stated by Mason J:[8]
A recital which expresses the object of the parties, as distinct from the terms of an agreement, is open to the construction that the parties intended to secure the announced object by means of the express provisions contained in the agreement and not otherwise. It is reasonable to suppose that their agreement is limited to the specific stipulations set out in the contract and that they did not intend to be bound by other and unexpressed stipulations even though the stipulations would or might enhance the attainment of the object. It would be a bold step to infer from the mere presence of the recital that the parties, to use the words of Denman CJ in Aspdin v Austin,[9] were impliedly covenanting “for every act convenient or even necessary for the perfect attainment of” that object.
ii.there is an express covenant relating to the same subject matter.[10]
[7]Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54, 72. Aitkin J citing similar principles at page 103 (Barwick J agreeing). Murphy J does not address whether recitals can be construed as a covenant
[8] ibid 73
[9] Aspdin v Austin (1844) 114 ER 1402, 683-684
[10] Dawes v Tredwell (1881) 18 Ch D 354, 358-9
44As a matter of construction, I am satisfied that the covenant contained in the recital to both loan agreements is enforceable. The covenant is clear in its terms. The effect of the covenant is that the defendant agreed to give an unregistered charge in the terms expressed in order to secure his indebtedness to the plaintiff.
(b) default interest rate of loan agreements
45Both loan agreements contain a provision relating to default interest contained in clause 5 of Item 1 in the Schedule to the loan agreements. The provision reads:
Interest would accrue at a default interest rate of 20% calculated annually in the event of ‘late payment.
46The defendant claims the default interest rate constitutes a penalty and, on that basis, is unenforceable.
47The defendant maintains that the default interest of 20 per cent should not apply as it bears no resemblance of proportionality to the greatest loss that could ever be proven by the plaintiff. The plaintiff admitted in her evidence that she is not in the business of lending money and the money was provided entirely from her savings. The defendant argues that the rate of 20 per cent is extravagant considering the likely loss that was sustained by the plaintiff, given the cash loan money was not invested and the money paid under the First Loan Agreement was held in savings.
48Both parties referred to case law outlining the well-known principles to be applied when considering penalties such as Ringrow Pty Ltd v BP Australia Pty Ltd (“Ringrow”)[11] and Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd (“Dunlop”).[12]
[11] (1959) 101 CLR 298, [9]
[12] [1915] AC 79
49The principles relating to the law of penalties were set out in Lord Dunedin’s speech in Dunlop:[13]
2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage…
3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach…
4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach…
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid…
[13]ibid 86-87
50In Ringrow, the court held as follows:[14]
Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is, and is expressed to be, an exception from the general rule. It is why it is expressed in exceptional language. It explains why the propounded penalty must be judged ‘extravagant and unconscionable in amount.’ It is not enough that it should be lacking in proportion. It must be out of all proportion.
[14] (1959) 101 CLR 298, [32]
51The plaintiff submits that the default interest will only be a penalty if it is “extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach”.
52The plaintiff argues the defendant has failed to adduce any evidence that the default interest rate was “out of all proportion” particularly, given the nature of the loans to the defendant and the risk which those loans presented to the plaintiff. The onus is on the defendant to demonstrate that a stipulation in a contract is a penalty.
53In Bhundia v Sommers (No 4), Adamson J made the following observations:[15]
The first defendant has not adduced any evidence of the cost of refinance with another lender…the plaintiff (who does not bear the onus) has not adduced evidence as to what its loss was as a consequence of the money not being repaid on the due date…Nor has the first defendant sought to adduce such evidence.
[15] [2021] NSWSC 455, [34]
54His Honour continued:[16]
The first defendant bore the onus of persuading me that the interest rate of 30% per annum compounding monthly, was ‘out of all proportion’ to a genuine pre-estimate of the plaintiff’s damages. In the absence of evidence, I am not persuaded that he has discharged the onus.
[16] ibid [39]
55The plaintiff submits that this is not a case akin to Bay Bon Investments Pty Ltd v Selvarajah[17] where the interest rates of 240 per cent and 360 per cent payable on default were held to be penalties. Those rates were considered manifestly excessive.
[17] [2008] NSWSC 1251
56The default interest clause is binding unless it amounts to a penalty. A higher rate of interest payable upon late payment is customary in commercial agreements. I am not satisfied that the default interest rate on late payment agreed upon at 20 per cent is a penalty. I do not consider the agreed default rate is unconscionable or so out of proportion as to render it unenforceable. In my view, the defendant has not discharged the onus placed upon him to show that this rate constitutes a penalty. Therefore, the plaintiff is entitled to recover default interest on both loans calculated in accordance with the loan agreements.
Estoppel defence
57The defendant argues the plaintiff should be estopped from claiming default interest because at no time during the term of the loan did the plaintiff inform the defendant that he was in breach. Instead, the plaintiff provided further advances, specifically for the joint business venture. The defendant notes the plaintiff’s one page reconciliation document which incorporates repayments up until 12 April 2020 but does not apply default interest.
58The defendant submits that the plaintiff’s conduct in failing to enforce the terms of the two written loan agreements, whilst simultaneously advancing further money to the plaintiff, created an assumption that there would be no action taken for the defendant’s breach of the loan agreements.
59The estoppel argument goes nowhere and is misconceived. The plaintiff made no representation by conduct that she would not take any action if the defendant failed to repay monies due under the loan agreements. Further, as the plaintiff’s submissions identified, there can be no evidence of any detrimental reliance by the defendant in continuing to borrow monies from the plaintiff because it was a benefit to him. Further, there was no evidence that the defendant might not have borrowed the further funds if he knew that the plaintiff would rely upon her rights under the terms of the loan agreements. It was not suggested or pleaded that the plaintiff was willing to waive any entitlement to default interest under the loan agreements which might have a been a different case. The estoppel defence fails.
Further cash advances
60The plaintiff’s claim includes further cash advances made to the defendant, between the period of 30 September 2016 and October 2018 for various items. Annexure B to the amended statement of claim sets out the lists of payments made by the plaintiff, repayments made by the defendant and a running balance. In opening, counsel for the plaintiff identified the total of the further advances as being $131,010.
61During the trial, the plaintiff conceded various repayments were made with the result she accepts there is a shortfall of $24,000 owing to the defendant which can be offset against the sums due under the loan agreements.
62The plaintiff said in opening that there were five cash advances that remained in dispute. If these were resolved in the defendant’s favour, then an adjustment would be required with the potential result that the defendant was owed an additional $40,000.[18] The five disputed payments are as follows:
(a) $12,210 paid on 30 September 2016 for a second-hand Toyota forklift;
(b) $10,806 paid on 24 January 2017 for credit card debt;
(c) $3,310 paid on 9 June 2017 for credit card debt;
(d) $3,000 paid on 3 November 2017 for credit card debt; and
(e) $14,764.33 paid on 22 December 2017 for credit card debt for truck repairs.
[18] Plaintiff’s opening – T 16
63Regarding the Toyota forklift, the plaintiff said she paid in cash for the item. Although there is an invoice for LSG, this entity did not exist at the time of purchase. The plaintiff said the defendant did not have money to buy the forklift, so she used her own money to purchase it at the defendant’s request. The plaintiff said the only person who used the forklift was the defendant, in his business, Victoria Crushing. Upon liquidation of this business, the liquidator seized the forklift as an asset of the business.
64The defendant’s evidence was that the forklift was originally going to be purchased by him. He gave the plaintiff $8,000 towards the purchase price. He was unable to pay the balance of $4,210 at the time. He said the plaintiff purchased the forklift under the name of LSG. The defendant admits to being the main user of the forklift. However, he argues that the plaintiff has not established that he should pay for it and instead has demonstrated that LSG had assumed ownership of it.
65The defendant maintains that the plaintiff’s evidence and conduct indicate that the forklift was owned by LSG. Specifically, the plaintiff’s email to the liquidators of Victorian Crushing and LSG’s 2017 and 2018 financial returns which recorded the forklift as an item of plant and equipment. The plaintiff admitted in cross-examination that this was the information she had given her accountant, and she regarded the item as an asset of LSG. The defendant contends that there is evidence that LSG was invoicing third parties for forklift hire.
66In reply submissions, the plaintiff acknowledges the forklift was an asset owned by LSG. The liquidator of the defendant’s other business took this item. But the plaintiff’s point is that she entered into agreement with the defendant whereby she agreed to pay for the forklift, and he agreed to reimburse her.
67I accept the defendant’s evidence that he paid the sum of $8,000 to the plaintiff as his contribution towards the cost of the forklift. The balance of the purchase price of $4,210 was paid by the plaintiff. The plaintiff treated the forklift as an asset of LSG. Given the parties’ agreement to set up LSG as a joint venture business and the forklift was treated as an asset of that business, it seems reasonable that the cost of it should be borne equally by the parties. It is also clear that the defendant paid $8,000 towards its purchase price. In these circumstances, I am not persuaded the plaintiff has made out her claim that the defendant should now pay her $12,210 representing the full cost of this item.
68It is agreed that the plaintiff paid $14,764 out of her personal Commonwealth Bank account for the repairs to the Hino truck on 22 December 2017. The truck was owned by LSG and LSG did not have the funds to pay for the repairs at the time.
69The plaintiff said the truck was in the defendant’s possession when damaged. She said the damage was caused by the defendant using contaminated fuel. As the defendant and LSG did not have the funds to pay for the repairs, the plaintiff and defendant decided the plaintiff would pay as the repairs were urgent. The defendant conceded that the plaintiff was the only one with the funds to pay for the repairs.
70The defendant said the damage to the truck occurred when the truck was on hire to a company called Rural Construction and Maintenance Pty Ltd (“RCM”), which hired the truck from 1 July 2017 for six months. He said the cost of the repairs should have been paid by RCM. He denied that the plaintiff asked him to pay for the cost of the repairs at the time but later did so. He said it was not his responsibility. He told her he did not have the truck at the time and that RCM was responsible.
71The defendant submits that the truck was owned by LSG. This is confirmed in on page 2 of the Agreement for Hire of Hook Truck and Bins which identifies LSG as the registered owner.
72The defendant contends the plaintiff’s evidence was unreliable about this topic. The plaintiff gave evidence that she had received a text message or email from Mr D’Andrea, the director of RCM who said he was not responsible for the costs of the repairs as the truck was in the possession of the defendant over the weekend when the truck broke down. The plaintiff was unable to produce any email to this effect when called upon to do so. The defendant submits the failure to call Mr D’Andrea or produce emails to support the plaintiff’s evidence indicates a Jones v Dunkel[19] inference that the evidence would not have assisted her case. The defendant says her evidence about this should not be accepted and that he was not obliged to pay for repairs to an asset owned by LSG.
[19](1959) 101 CLR 298
73The plaintiff’s evidence was that the defendant had promised her that he would pay for the repairs as he had caused the damage by putting contaminated fuel into the truck. She agreed to pay for the urgent repairs out of her own funds in her Commonwealth Bank account as neither the defendant nor LSG had the funds at the time to do so.
74The plaintiff’s view was that as the defendant was using the truck in his own business, he should pay for repairs. She also said he agreed he would pay her back. There is a dispute on the evidence as to whether it was the defendant or RCM who caused the damage to the truck. The defendant denies it was him. Overall, I am not persuaded the plaintiff has discharged the onus placed upon her to establish there was a binding oral agreement made with the defendant whereby he agreed to repay her for the costs of the truck repairs. He denies he agreed to do so. It was not put to him in cross-examination that the plaintiff said he had promised to pay her back for the repairs. I accept and prefer his evidence on this topic. I find that the defendant did not enter into a binding agreement to repay the plaintiff the costs of the truck repairs. Objectively, it is unlikely he would have done so in circumstances where he said the damage was caused by another party; the truck did not belong to the plaintiff or himself but was owned by LSG and being hired out to a third party, namely RCM at the time.
75The credit card debt refers to amounts paid by the plaintiff on the ANZ credit card account, which is in her name, so that the defendant could continue to use the card. She gave evidence that her practice was to pay off her credit card each month so as to avoid incurring fees.
76The plaintiff alleges that the defendant agreed to repay her for these amounts. She told the defendant the credit card needed to be paid every month. When he refused or did not pay, the plaintiff told him she was going to put money on the card, and he had to pay her back.
77The defendant disputes three other advances of payments made by the plaintiff onto her ANZ credit card totalling $17,116, being:
(a) $10,806 on 24 January 2017;
(b) $3,300 on 9 June 2017; and
(c) $3,000 on 3 November 2017.
78The plaintiff’s case is that she made these three payments to reduce the balance of the credit card debt in circumstances when the defendant was unable to pay the minimum monthly payments due. The defendant asked the plaintiff to pay these amounts off the card so that he could continue using it and he proposed to repay her these amounts in due course. The defendant’s evidence was that he could not recall asking the plaintiff to make these payments and saying that he promised to pay her back. When cross-examined, he said it may have occurred but he did not recall.
79The defendant submits that to allow these claims is ‘double dipping’ as the plaintiff will recover the money from the defendant for the charges he incurred on the credit card, as well as the money applied to the credit card.
80It is put by the defendant that the plaintiff incurred charges herself from time to time on the same credit card. To avoid double dipping and confusion, the defendant submits the plaintiff should have provided an analysis in a way that considered the parties’ respective payments and respective charges. If this method is applied, the defendant has charged $97,604.28 to the card and paid $96,000 back; therefore, he owes $1,604.28.
81The plaintiff says there is no double dipping as alleged. This issue is separate from the transactions concerning use of the credit cards. The plaintiff made these payments to prevent the card from ‘maxing out’ and enabled the defendant to keep using it for further transactions. The amounts owed by the defendant on the credit card were repaid by the plaintiff with the result that the defendant then owed a debt to the plaintiff for extinguishing his liability for the sums due on the card. In other words, the credit card debt was replaced with a debt owed to the plaintiff.
82The difficulty with this part of the claim is that no break up has been provided of the charges which were paid off on behalf of the defendant by the plaintiff when she reduced the monthly credit card debt. It is accepted that the plaintiff also incurred charges on the card for which she should be liable and no break up is given of these charges in respect of these three sums now claimed. As can be seen with the figures set out below relating to the ANZ credit card debt, the defendant claims he has, in fact, over paid the plaintiff. It may well be that charges he incurred were paid back to the plaintiff with the result that here was nothing owed, in which case the sums now claimed by the plaintiff under this category are not recoverable. In the absence of any reconciliation between the sums paid off the credit card by the plaintiff with the amounts paid by the defendant, I cannot be satisfied that the plaintiff is owed this money, particularly, when some of the charges incurred would also be her responsibility. This claim was not proved in my view.
ANZ credit card transactions
83From December 2016, the plaintiff entrusted the defendant with her ANZ credit card, initially to purchase steel for the construction of hook bins to be used in the LSG business. The defendant had possession and use of the ANZ credit card for a period of two years. The plaintiff said she had a verbal agreement with the defendant whereby he used the card and paid for its usage which included fees and interest. It is not in dispute that both parties used the card.
84The plaintiff said the defendant needed a credit card because his previous one was indebted. The plaintiff gave the defendant her card to enable him to “run his business and virtually run his life”. The plaintiff confirmed there was only one physical card which the defendant had in his possession.
85Between 8 December 2016 and 26 December 2018, the plaintiff alleges the defendant incurred charges on the credit card account in the sum of $148,950.24. He made repayments directly onto the credit card account in the amount of $119,645.35.
86In closing submissions, the plaintiff’s total claim for the sum owing under the ANZ credit card agreement was reduced to $7,576.26.
87The defendant submits this sum should be further reduced by:
(a) the figure of $5,150.32, being the amount paid to VicRoads’ Geelong for stamp duty, registration and transfer fees; and
(b) the figure of $821.66, being a combined total of the expenses incurred on the credit card deemed necessary for the collection of the hook truck in Queensland.
88The defendant claims that the arrangement between the parties was that the defendant would be responsible for his own personal charges and not any of the plaintiff’s charges. The registration of the hook truck was not an expense for the benefit of the defendant as it was purchased by the plaintiff and registered to LSG. The plaintiff later sold the truck with two hook bins and the defendant did not receive any financial benefit from this sale.
89The defendant denies responsibility for charges on the card such as insurance and credit card fees as these were to be met by the plaintiff because it was her card. He denied that he agreed to cover the expenses related to the use of the card. The plaintiff said that the defendant was responsible for paying for the registration as he used the truck to run his business. The defendant would hire the truck, bins and forklifts out from his personal business. The plaintiff submits that as the defendant was earning money off the truck, he could pay for the registration and its running costs. The plaintiff’s position at trial was that the registration cost should be split.[20]
[20] T 94, lines 11-12
90The defendant submits that the first deposit of $9,500 into LSG’s Westpac account on 14 March 2017 has not been accounted for in the total payments made towards the ANZ credit card agreement and it should be. The defendant’s evidence is that the amount of $9,400 had been withdrawn from the account four days later with the description “visa card payment”.
91Therefore, the defendant submits that there has been an overpayment by the defendant in the amount of $7,875.72 for the credit card agreement. The defendant contends that this amount must be attributed to the other outstanding loan balances and, where there are more than one, it should first be applied to the First Loan Agreement and then the Second Loan Agreement.
92The reality is that it is simply impossible to reconcile the position with the ANZ credit card given the differing figures put by each side, which may or may not be accurate. I am unable to decide with any certainty whether the plaintiff or the defendant is owed money in respect of the ANZ credit card given the unsatisfactory state of the evidence. Accordingly, I am not satisfied that the amount sought by her of $7,576.26 was proved to be owing. Conversely, I am not satisfied the defendant proved he is owed money in respect of the ANZ credit card agreement.
Repayments asserted by the defendant – denied by the plaintiff
93There were a number of cash repayments which the defendant alleged he made to the plaintiff which she denied receiving. The number of these repayments fluctuated wildly before, during and after the case as set out in the parties closing submissions. I will rely upon the defendant’s case as put in closing, namely that the defendant says he made 13 cash repayments as set out in Schedule C to the written submissions totalling $40,141.76.
94The defendant said he would attend the Torquay branch of Westpac Bank and withdraw cash from his Westpac account. He would then drive to the plaintiff’s home and hand her the cash. As evidence of these payments, the defendant relies on his bank statements showing cash withdrawals and corresponding diary entries.
95The plaintiff denies receipt of these cash payments, noting that there is no evidence to support receipt, the diary evidence is not reliable and that the asserted transactions were advanced without adequate forensic judgment regarding the context of the transaction.
96The plaintiff submits that the defendant was not able to recall any of these payments without being taken to his diary entries.
97On 23 July 2018, the defendant claimed to have paid the plaintiff two sums of $1,000 and $9,000. The defendant did not offer an explanation why the $9,000 was not recorded in his diary originally. Discovery was made twice of the defendant’s diary. On the second time, there had been an amendment on the page of 23 July 2018 to add payment of “+9000”. The plaintiff submits that this highlights the unreliability of the diary.
98The plaintiff notes that the diary entry of 2 August 2017 asserts a payment to the plaintiff of $9,000. However, the defendant’s bank statements show this payment was made on 4 August 2017.
99The defendant did not provide a copy of the diary extract for the date 4 August 2017. Further, there was no diary entry provided for the payment made into the LSG credit card account of $1,800. This was alleged to have been withdrawn on 4 August 2017 and deposited into the LSG account on the same day.
100The defendant claims to have paid the plaintiff $4,000 on 22 November 2017. There is no corresponding diary entry for this payment.
101The diary entry dated 16 September 2016 alleges that the defendant paid the plaintiff $11,000 in cash. The plaintiff denies receiving these funds.
102The defendant’s diary entry on 16 September 2016 alleges that he paid the plaintiff $3,000 in cash and $8,000 into one of the two accounts. However, the plaintiff submits that no deposit was made into her Commonwealth Bank account or ANZ Bank account on 16 September 2016.
103The defendant submits that the plaintiff fails to make any submissions at all as to what cash payments were received, when there is clear evidence that there had been cash payments.
104In assessing this issue, I have also had regard to the matters set out regarding the evidence given by the parties referred to in paragraph 34 of the defendant’s closing submissions. The defendant’s oral evidence was bolstered by the contemporaneous diary records he kept recording payments to the plaintiff. The plaintiff herself acknowledged that he kept a diary and wrote in it each day. I formed the view that the defendant was being truthful when he gave evidence about these cash payments. The plaintiff was somewhat equivocal and, although saying she knew exactly what was owed at any time, did not produce any contemporaneous documentary evidence recording payments received by her despite a call to do so. It was also clear that she held a degree of animosity towards the defendant which may well have coloured her evidence. Overall, I am satisfied that the defendant did make the cash payments to the plaintiff set out in Schedule C totalling $40,141.76.
Appropriation of accepted payments
105The plaintiff accepts the defendant made the following payments:
(a) 14 payments to the ANZ credit card account in the name of the plaintiff totalling $96,000;
(b) 13 payments to the Westpac account in the name of LSG, totalling $41,650; and
(c) 20 payments into the CBA account held by the plaintiff, totalling $131,010.
106The plaintiff says none of the accepted payments can be attributed to either of the written loan agreements because these payments were attributed to their respective accounts by the defendant at the time he made the payment.
107The plaintiff referred to the legal principles relating to appropriation summarised by Slattery J in APX Projects Pty Limited v The Owners - Strata Plan No. 64025:[21]
Firstly, a debtor has the right, in the first instance, to declare in respect of which debt he pays money: Mills v Fowkes (1839) 5 Bing (NC) 455; 132 ER 1174. However as noted by the authors in E Tyler, P Young and C Croft, Fisher & Lightwood’s Law of Mortgage (3rd ed 2013, LexisNexis) at 32.52, the debtor’s direction must be in clear terms. For example, entries made by the debtor in his or her own books are not sufficient evidence of a particular appropriation of money paid on a general account.
Equally, it is possible that in circumstances where a debtor fails expressly to communication to the creditor the appropriation of a debt, the circumstances of payment may be such that the proper appropriation of the debt is implied. This may be the case, for example, where two debts of different amounts are owing and the amount paid equates to one of them.
Secondly, where the debtor does not appropriate his or her payment to a particular debt, the credit enjoys the right of choosing the debt to which the payment is appropriated.
[21] [2015] NSWSC 1250, 30
108As Lord McNaughten in Cory Brothers & Company v Owners of Turkish Steamship ‘Mecca’:[22]
When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not making any appropriation at the time when he makes the payment the` right of application devolves on the creditor.
Thirdly, where neither the debtor nor the creditor acts upon their successive entitlements to choose how the debt will be appropriated, the default position is that the payment will be applied to the oldest debts first.
[22] [1897] AC 286, 293
109In applying the above authorities, the plaintiff argues the defendant had the first opportunity to appropriate the payments he was making. The defendant’s conduct in making each payment into each account is to be assessed objectively, regardless of his subjective intention at the time. The plaintiff, as creditor, has the right to make the appropriation if the defendant does not do so.
110The plaintiff submits that Clayton’s Case[23] is relevant only to three payments totalling $25,000 made by the defendant:
(a) $13,500 on 5 July 2016;
(b) $6,500 on 21 July 2017; and
(c) $5,000 on 6 September 2017.
[23]Devaynes v Noble (1816) 35 ER 767, 781; (1816) 1 Mer 529, 572
111The plaintiff submits that these amounts should be appropriated against the First Loan Agreement.
112The defendant referred to the decision of Lockhart J in Re Walsh:[24]
A debtor who owes two debts to a creditor is entitled to appropriate a payment which he makes to his creditor to one debt rather than to the other. If he omits to do so, the creditor may make the appropriation. If neither makes any appropriation, the law appropriates the payment to the earlier debt. If there is specific appropriation by the debtor cadit quaestio. In the absence of a specific appropriation it is a question of fact whether there was any appropriation by the debtor. To constitute an appropriation there must be more than an intention to appropriate by the debtor.
[24] (1982) 42 ALR 727, 728-729
113The defendant submits that the plaintiff relies on correct legal principles but has relied on an incorrect interpretation of them.
114The defendant’s evidence was that he was told by the plaintiff which account to pay into and the money paid into the Commonwealth Bank were monies attributed to that loan. Although it should be noted that this account was also the one into which the further cash advances were repaid.
115The defendant notes that clause 3 of the Schedule of the First Loan Agreement requires the defendant to repay the loan into the Commonwealth Bank account.
116Clause 3 reads:
The outstanding Principal Sum shall be repaid monthly in arrears by telegraphic transfer to the Lender bank account with the final payment no later than 20 December 2017.
117It is the defendant’s argument that if the Court determines that the defendant did not make any appropriation in respect of these payments, then it could hardly be said that the plaintiff made an appropriation. The defendant submits that there is no evidence of the plaintiff appropriating any of these payments at any time during the relationship. The appropriations made by the plaintiff now are doubtful given the plaintiff’s lack of appreciation for the actual amounts repaid.
118The defendant also raises that the plaintiff’s memory of cash payments was vague and unreliable, with no detailed records being kept.
119The defendant submits that the cash reconciliation provided by the plaintiff does not indicate what cash payments or payments generally were applied to the loans, what interest amounts are applicable and what is owing.
120The plaintiff gave evidence in cross-examination that her one page note regarding cash payments was made when she sat down with her solicitor and went through all her paperwork.
121The defendant submits that he made 13 cash payments totalling $41,357.90 between the period of 3 July 2016 and 7 February 2019. In evidence, the plaintiff largely denied receipt of these.
122The defendant contends these payments, being either cash or paid to third parties on behalf of the plaintiff, were attributed by him to monies owing under the Second Loan Agreement.
123The defendant says the sum of $5,000 paid in cash to the plaintiff on 7 May 2018 has clearly been attributed by the plaintiff to the Second Loan Agreement as it is an amount referred to in the plaintiff’s cash payment reconciliation document. The defendant notes that other payments noted in the diary entries specified whether they were to CBA or ANZ credit card.
124The defendant submits that any surplus funds available after satisfaction of the Second Loan Agreement would then be applied to the third situation identified in Re Walsh, with monies being applied to the First Loan Agreement (if any remained owing), thereafter to the ANZ credit card agreement, and any balance to be paid back to the defendant on the basis that the plaintiff has been unjustly enriched. If the Court decides that each of the amounts are to be attributed to the Second Loan Agreement, then there would be a surplus available to meet the other facilities of $14,952.89.
125The defendant contends that if the Court finds that there has been no attribution by either of the parties, then it should apply the third stage of the rule in Re Walsh, with those monies being applied to the First Loan Agreement, thereafter to the Second Loan Agreement and then the ANZ credit card, and any balance to be paid back to the defendant based on restitutionary principles.
126The defendant’s evidence was to the effect that he made payments to the plaintiff as and when he was able to do so. The defendant made various payments into different accounts as he saw fit as against each of the five facilities. The repayments made by the defendant were done so intermittently and in varied sums such that no pattern emerged either as to timing or in amount. This method of repayment was consistent with the very informal arrangements between the parties. For example, the defendant made various repayments into the plaintiff’s Commonwealth Bank account to pay off sums under the two loan agreements as well as reimbursing the plaintiff for cash advances. There was, in effect, a running account between the parties. The plaintiff gave evidence that she applied the repayments made into this account towards the repayment of the various further cash advances she made from time to time as opposed to the loans. In the circumstances, I am not persuaded that the accepted amounts repaid by the defendant should be directed towards payment of the first loan and then the second loan ahead of the other debts, contrary to the defendant’s submission.
Appropriation of payments made into the LSG account
127The plaintiff claims that the defendant has made repayments into the LSG account totalling $41,650.
128In about March 2017, a bank account was opened for LSG at the Westpac Torquay branch. The defendant gave evidence that this was to enable him to easily transfer funds to the plaintiff. The plaintiff did not recall this being part of their discussion.
129The plaintiff submits that there are many similarities with the charges the defendant incurred against the plaintiff’s ANZ credit card and charges incurred on the LSG credit card. For example, there are many charges referencing Spotswood. This is the location where the defendant worked.
130The plaintiff said she never had the credit card for the LSG account. The defendant incurred everyday expenses on the LSG account. Therefore, any money transferred into the LSG account is repayment of those charges and not against the loan agreements. The defendant argues that the payments he made into the LSG account were to be applied against the first and second loan agreements. When questioned, the defendant could not recall any particular discussions with the plaintiff where this arrangement was supposedly made.
131Between August and December 2017, a total of $5,800 in payments was deposited into the LSG account. The defendant said he paid:
(a) $1,800 on 4 August 2017 for repayment of cash loans;
(b) $1,000 on 15 August 201 for repayment of cash loans, made on his behalf by Mr D’Andrea for the hire of a generator through Gepp Excavation;
(c) $1,000 on 31 August 2017 for the repayment of cash loans, made on his behalf by Mr D’Andrea for the hire of a generator through Gepp Excavation;
(d) $1,000 on 13 October 2017 for the repayment of cash loans, made on his behalf by Mr D’Andrea for the hire of a generator through Gepp Excavation; and
(e) $1,000 on 1 November 2017 for the repayment of cash loans, made on his behalf by Mr D’Andrea for the hire of a generator through Gepp Excavation.
132Between 14 November 2017 and 21 November 2017, $13,600 was deposited into the LSG account by the defendant.
133On 18 January 2018, the defendant deposited a further deposit of $3,250 into the LSG account. The defendant gave evidence that this was a work skill subsidy that he had directed to the LSG account as a repayment of the loans.
134The defendant notes that on 2 March 2017, the plaintiff transferred herself $5,000 and used the description “PYMT Lisa S Rog Loan”.[25]
[25] The plaintiff’s former married name was ‘Rogers’
135In April 2018, $9,500 was paid by the defendant into the LSG account.
136The plaintiff withdrew $8,000 from the LSG account on 2 May 2018 with a description of “PYMT Lisa S Rog Loan”. The plaintiff gave evidence that it was a repayment towards the hook truck.
137The defendant lists in Schedule C to his written submission the 13 repayments he made into the LSG account which total $41,357.90, which he says were recorded in his diary. This figure matches up closely with the figure put forward by the plaintiff.
138The defendant submits that the amount of $32,150 paid into the LSG account should be applied to either the First Loan Agreement or Second Loan Agreement.
139I am not actually persuaded that the sum of $32,150 went towards repayments of the loan agreements, contrary to the defendant’s submission. The loans were owed to the plaintiff – it does not follow then that payment into a company’s bank account would satisfy that debt. LSG is a separate legal entity. There is no evidence available to support a finding that any agreement was reached between the parties that repayment to the plaintiff could take place in this way. I accept and prefer the plaintiff’s evidence that amounts paid into the LSG account by the defendant were paid by him to reimburse everyday expenses and charges he had incurred using the LSG credit card. He used this card in a similar way to the ANZ credit card. Consequently, I do not accept that the payments made by the defendant into the LSG account constituted repayments under either of the loan agreements.
Counterclaim and set-off
Ford Prefect
140The plaintiff concedes she sold the defendant’s Ford vehicle left on her property for $4,000 and this amount can be deducted from the amount the defendant owes the plaintiff.
Equipment
141The defendant seeks orders for delivery up of two items of equipment, being an E27 Fordson Major Tractor and the 1926 Lister mobile shearing plant motor engine.
142The plaintiff’s stance in closing submissions was that the defendant may collect items belonging to him held at her property but not the mobile shearing plant motor engine. However, during her evidence-in-chief, the plaintiff conceded that the defendant owned both pieces of equipment and that he could come and collect them from her property.[26] Given this concession, it is appropriate to make the orders sought for delivery up of these two pieces of equipment.
Hook bins
[26] T 55-56
143The defendant seeks to recover from the plaintiff the amount of $3,201.36 in restitution on the basis that this was an expense incurred by him in purchasing the steel for two hook bins held by LSG. The defendant submits that he made those purchases on the understanding that he was about to embark on a business endeavour with the plaintiff and that he would profit from it.
144The plaintiff agreed that the defendant constructed four hook bins. The plaintiff said these were always owned by the LSG entity. Two of the four hook bins were in the possession of the defendant’s business, Victoria Crushing, and taken by the liquidator. The other two were assets of LSG and sold by LSG along with the truck. The proceeds were reimbursed into the LSG account, noting there was a significant loss on the sale of the truck.
145The materials used to construct the hook bins were purchased on or around 20 December 2016. The LSG entity was registered on 2 March 2017. The defendant did not establish the bins were constructed before the incorporation of LSG. There was no evidence of any agreement that the plaintiff took beneficial ownership of any of the hook bins. The plaintiff denied any discussion with the defendant that she would pay for the hook bins. She did not use the bins nor derive any benefit from them.
146I am not persuaded that an order for restitution should be made as is sought by the defendant. It was clear that the hook bins were to be used and were used in the business conducted by LSG – there is no suggestion that the plaintiff personally benefited directly from the provision of the hook bins or has been unjustly enriched in some way. Any benefit, if indeed there be a benefit, was conferred on LSG, which is not a party to the proceeding. This aspect of the counterclaim fails.
Conclusion
147I am satisfied on the evidence that funds advanced by the plaintiff under the two loan agreements remain due and payable. The defendant failed to repay monthly sums due on the loans and did not repay the loans by the due dates, nor the interest payable. The defendant, therefore, is in breach of the loan agreements. Accordingly, the plaintiff is entitled to judgment for the balance of the principal sums owing under the first and second loan agreements. The principal sums claimed are $137,648.21 and $25,000, respectively. The plaintiff accepts the defendant made three loan repayments under the First Loan Agreements totalling $25,000.[27] Therefore, the principal outstanding under that loan agreement is $112,648,21. No repayments were made towards the Second Loan Agreement with the result that the principal advanced of $25,000 remains owing.
[27] Schedule A to the plaintiff’s closing submissions, page 9
148The plaintiff is also entitled to interest on the outstanding loan monies at the default interest at the rate agreed of 20 per cent. The plaintiff will be directed to provide revised calculations of the default interest payable under both loan agreements.
149The plaintiff concedes there is $24,000 owed to the defendant arising from the over-payments made by him relating to the further cash advances which should be set-off against the debt claimed under the loan agreements. I am satisfied that the defendant made further cash repayments to the plaintiff in the sum of $40,141.76, thereby reducing his overall indebtedness. The defendant is also entitled to a set off for the sum of $4,000, being the amount conceded as owing by the plaintiff for the defendant’s Ford vehicle. Taking these three sums into account, the amount owing by the defendant should be reduced by the sum of $68,141.76.
150I will also make the declarations sought by the plaintiff regarding the unregistered charge granted by the defendant over his assets as security for the sums payable under the first and second loan agreements.
151As for the counterclaim, I will order that the plaintiff deliver up to the defendant the E27 Fordson Major Tractor and the 1926 Lister mobile shearing plant motor engine but, otherwise the counterclaim will be dismissed.
152Subject to hearing from the parties, I will order the defendant pay the plaintiff’s costs of and incidental to the proceeding on the standard basis to be taxed in default of agreement.
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Certificate
I certify that these 35 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 25 June 2024.
Dated: 25 June 2024
Associate to Her Honour Judge A Ryan
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