Jomima Pty Ltd v Palermo

[2014] WADC 24

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   JOMIMA PTY LTD -v- PALERMO [2014] WADC 24

CORAM:   FENBURY DCJ

HEARD:   4-6 FEBRUARY 2014

DELIVERED          :   28 FEBRUARY 2014

FILE NO/S:   CIV 1354 of 2013

BETWEEN:   JOMIMA PTY LTD

Plaintiff

AND

ANTHONY PALERMO
Defendant

Catchwords:

Claim for moneys lent - Whether payments were loans or reconciliations of earlier transaction - Turns on own facts

Legislation:

Nil

Result:

Plaintiff's claim dismissed

Representation:

Counsel:

Plaintiff:     Ms W F Gillan

Defendant:     Mr J C Giles & Mr N W Kalmund

Solicitors:

Plaintiff:     Gadens Lawyers

Defendant:     Hotchkin Hanly

Case(s) referred to in judgment(s):

1. FENBURY DCJ:  This is a claim for moneys lent and not repaid that arises from disputation between two brothers.

2. John Palermo (John) is an accountant and company director of many years' experience.  John's brother Anthony Palermo (Tony), the defendant, is a qualified real estate salesman who has never plied his trade but who operates as a settlement agent amongst other things.

3. From about 1976 John and Tony worked closely together in various and numerous business enterprises.  The two men were successful in their ventures.  They rarely if ever documented their affairs in any formal way.  They often communicated by handwriting notes on scraps of paper.  Informality was the theme.

4. This approach worked well for them for many years.

5. From about 2006, John and Tony's relationship began to deteriorate.  By March 2011 John only trusted Tony 52% (ts 108).

6. On 19 September 2011 Tony moved out of the office from which both brothers worked, without notice, taking more than he should have in the nature of documentation and records.  The reasons for the collapse in their relationship do not really matter much so far as these proceedings go.  Suffice it to say that the two gentlemen soon reached the stage where their relationship, as a family lawyer might put it, irretrievably and irreconcilably broke down.  This has been, and apparently will continue to be, of great benefit to the legal profession.  John's evidence was that 23 legal actions had been commenced since he and Tony parted.

7. The plaintiff (Jomima) is a proprietary limited company the sole director and shareholder of which is Lida Palermo (Lida) who is John's wife.  Lida said that Jomima was 'like our bank; and internal equity bank' (ts 37).  By 'our' she meant her immediate family.

8. John was able to access Jomima's bank account, and sign cheques.  Lida said he would tell her or discuss it with her first.  She agreed John 'did things with Jomima's money, from time to time, at the office' (ts 37).

9. It is common ground that on eight occasions in 2011 John wrote cheques on Jomima's account in favour of Tony or his nominee as follows:

Date	Amount	Payee
1 March 2011	$20,000	Mark DD Trust
16 June 2011	$31,118.60	Anthony Palermo
16 June 2011	$48,882.00	Anthony Palermo
14 July 2011	$10,000.00	Anthony Palermo
16 July 2011	$10,000.00	Anthony Palermo
30 August 2011	$20,000.00	Anthony Palermo
19 September 2011	$20,000.00	M Palermo
23 September 2011	$15,000.00	Anthony Palermo
Total:	$175,000.60

1. It is common ground that each cheque was banked and either Tony or his nominee received the proceeds shortly thereafter.

2. This action brought by Jomima asserts that each of the eight payments to Tony or his nominee were loans to him that were to be repaid within 12 months.  Although it was not clearly explained, the time for repayment according to the affidavit of John and Lida was assumed to be 12 months after the last payment.  The last cheque was drawn by John in the sum of $15,000 on 23 September 2011.

3. The 23 September 2012 passed without any demand being made by Jomima for repayment of the alleged loan or loans.  It was not until 13 March 2013, nearly six months thereafter, that a form of demand was issued (exhibit JP 19 to John's affidavit set out below).

4. It is Tony's case that the eight payments made by Jomima were not loans but payments in the nature of adjustments.  Specifically, it was alleged they related to moneys owed by John to Tony following the sale of an office block at 284 Oxford Street which settled, interestingly, on 1 March 2011, being the date of the payment of the first cheque by John to Tony's nominee, Mark DD Trust.

5. After the seventh cheque was drawn on 19 September 2011, and before the last and eighth cheque was drawn four days later on 23 September, John listed the seven payments in black biro on a piece of scrap paper, exhibit 14.

6. John headed the document with the word 'Paid'.  He then accurately listed below it the amounts of the first seven cheques although not in chronological order of drawing.

7. John then ruled off the column and wrote an accurate subtotal of $160,000.  He then wrote underneath that the word 'Due $175,000' and ruled that off.  He then wrote 'Balance $15,000' and ruled that off.  This latter sum corresponds with the amount of the last cheque written on 23 September.

8. Underneath the ruled off 'Balance $15,000' appear two short sentences at the foot of the document, one underneath the other.  The first is 'Is this correct?'  Beneath that is the sentence 'Let me know'.

9. John sent or gave exhibit 14 to Tony at about the time he wrote it.

10. There is also writing on the note in blue biro comprising:

    •two question marks beside the allegedly specifically sought irregular payments of $31,118.60 and $48,882; and

    •the number '284' and beneath that 'office' on the right‑hand side of the document.

11. John referred to this document in his affidavit of 15 October 2013 from par 40 as follows:

    40.A few days before 19 September 2011, Anthony told me in words to the effect that he needed $20,000 to pay for his living and medical expenses.

    41.I then asked Anthony in words to the effect how long is this going to go on for and how much more he intended to borrow.  I do not recall Anthony's response.

    42.I recall that I prepared a note which sets out the amounts that were lent to Anthony in the past, together with the $20,000 he asked for a few days before 19 September 2001.  I calculated the total amounts already lent to Anthony, including his last request for a $20,000 loan, to be $160,000.

    43.A few days before 19 September 2011, but following my conversation with Anthony referred to at paragraph 40 above, Lida and I had a conversation during which I said words to the effect that Anthony needed a further $20,000 and I asked her in words to the effect as to whether Jomima can lend him that money.  I recall that I told Lida in words to the effect that Anthony already borrowed $140,000 by that time.  Lida asked me in words to the effect how long this was going to go on for and how much more he intended to borrow.  Lida also told me in words to the effect that Jomima can lend Anthony the $20,000 and that I can sign a cheque from Jomima's bank account if he agrees to repay the money within one year.

    44.On 19 September 2011, I showed Anthony the note I had prepared and again asked Anthony in words to the effect how long is this going to go on for and how much more he intended to borrow.  Anthony responded and said in words to the effect, let's call it $175,000 all up.

    45.I then proceeded by writing the amount $175,000 beneath the amount of $160,000 on my note and calculated that if the total loan is $175,000, Anthony will receive another $15,000 under the loan.

    46.A copy of my note is annexed to this affidavit and marked 'JP14'.

    47.On the note, the two question marks and the numbers '284', the letters 'offic', the words 'is this correct' and 'let me know' on the note are not in my handwriting.  I recognise that handwriting as Anthony's.

    …

    51.On or about 19 September 2011 after my conversation with Anthony, Lida and I had a conversation during which I said words to the effect that Anthony wants the total loan to be $175,000.  Lida told me in words to the effect that the total loan can be $175,000.

    Eighth loan agreement

    52.On 23 September 2011 Anthony asked me in words to the effect whether he can borrow the $15,000 which was left on the loan.  He also told me in words to the effect that he did not have any money to pay his mortgage, his medication and that he had no money to eat.

    53.I do not recall speaking to Lida on 23 September 2011 in relation to the request by Anthony for the remaining $15,000.  As deposed to above, I had already discussed this with Lida.  Lida had already told me in words to the effect that the whole loan can be $175,000 and that the final amount of $15,000 would only be provided if Anthony agreed that it would be repaid on the same terms as the loans provided previously.  I also knew there were sufficient funds in the Jomima account.  I would have told Lida of the cheque being written for $15,000 following my meeting with Anthony.

    …

    58.On or about 13 March 2013 I had a conversation with Lida in words to the effect that Anthony has not repaid the moneys that were lent to him.  Lida told me in words to the effect to prepare a demand.

    59.On 13 March 2013 I sent a demand to Anthony by email on behalf of Jomima.  Annexed hereto and marked 'JP 19' is a copy of the demand.

12. John's cross-examination concerning exhibit 14 commences at ts 111 ‑ ts 117.  It is not necessary to cite transcript.  John stuck to his explanation that exhibit 14 was a record of loan payments to Tony.  Counsel pressed John on the improbabilities and he floundered in his responses.  John was unconvincing in that part of his evidence.  His difficulty is, of course, the absence of any other documentation evidencing his assertion that payments were loans.  John and Lida say they were loans.  But nowhere were any terms recorded.  No security was ever sought.

13. John asserted in his affidavit that the words 'Is this correct' and 'Let me know' on exhibit 14, were not in his handwriting and, furthermore, that he recognised them as having been written by Tony.

14. These assertions were quite wrong.

15. When John swore his affidavit on 15 October 2013, he had before him a photocopy of exhibit 14 which did not reveal the colour differences in the writing.  Once John saw the original document whilst being cross‑examined (ts 113 and following) he agreed that the words, 'Is this correct?  Let me know' were written by him.

16. It is curious that, according to John, the colour difference not only caused him to fail to identify his own hand, but also to mistakenly identify his brother's, the defendant's!  This is concerning, in my view, on the issue of John's reliability as a witness, if not his honesty.

17. Be that as it may, there can be no doubt that this development greatly changed the forensic significance of the document from that which John thought it had when he swore his affidavit.  It now being conceded by John that it was he who wrote out the entire document save for the question marks, the number 284 and the word 'office', Jomima's assertion that the document is probative of the allegation the payments were by way of loans is not supported by the document.  One needs only ponder the terminology John used in the document to see that.  The language of the document is far more consistent with an enquiry about whether repayments made by John were acceptable to Tony than the document being a record of loans.  This is self‑evident.

18. Furthermore it is the fact that John and Tony were in significant dispute at the time the payments were being made but, particularly, prior to the last payment.  As I have mentioned, Tony had moved out of their office, taking significant business items including various records, on 19 September.  This occurred to the obvious upset of John.  And yet, Jomima's case is that at John's request it makes another loan to Tony four days after he has moved out.  This is improbable.

19. I also think if the payments were loans, given the heightening disputation thereafter and Lida's 'reluctance' concerning the issue generally, it is unlikely that the alleged repayment date of, say, 12 months after the last payment, being 23 September 2012, would arrive and pass without notice or demand from Jomima, the alleged lender.  As I have mentioned, the demand was not made until six months after arguably the latest date for payment had passed, being 13 March 2013.

20. The terms of exhibit JP 19 to John's affidavit being the demand were as follows:

    Anthony Polermo

    During the period between January and August 2011, a number of advances and payments were made to you and your family members by Jomima Pty Ltd following your requests for funds to meet your personal commitments.

    These advances, amounting to $175,000.60 still remain outstanding and you have made no effort or arrangements to repay these monies.

    Please advise as to what arrangements you are considering for the repayment of these monies.

    Unless I receive a response that is to my satisfaction by Friday, 15 March 2013, I may well have to revert to recovery proceedings against the respective borrowers.

    Sent for and on behalf of Lida Polermo

    Director and Secretary
    Jomima Pty Ltd

21. Before proceeding, it is notable that the terms of the demand do not appear to be consistent with the history of the matter.  It misstates the period referring to 'January to August 2011' when in fact the payments span the period of time between 1 March and 23 September 2011.

22. The demand also makes no mention of the alleged term in each loan agreement relating to the repayment date, being within 12 months of 'the loan'.  The demand is also non‑specific on the number of 'advances and payments made'.  Nevertheless it was common ground that this was the demand made by Jomima for repayment of the loan.

23. There was some issue in the case relating to the odd amounts in two of the payments.  The first such amount was the sum of $31,118.60.  The plaintiff asserts that the fact that that payment was in that sum is supportive of the assertion that it was a loan.

24. Tony was asked about this in cross‑examination (ts 248 – 249).  It was being put to him that the only reasonable explanation for the cheque being in that amount was because he asked for it, which is consistent with it being a loan.  Tony responded (ts 248):

    A:Those amounts have no relevance at all to anything that I have done in any of my financial affairs.  But I can take a fairly, I think, calculated, educated, correct guess as to why those amounts are wrong if you want to know … do you want me to explain it?

    Q:Yes sure go ahead

    A:… ok.  Look, John was always concerned about marriage and – of his children and whether they would end up in divorce.  I mean one out of every three ends up in divorce and chances are one of his and one of mine are probably doing to be in that position one day.  And he went to extreme lengths to actually do documents.  Like, for instance, when Junior bought his house, they had quite some row where John and, I imagine his wife, gave money to Junior and they wanted to take a second mortgage or third mortgage or whatever in case there was a separation.

    …

    A:Now, those amounts, I think, relate to, in some way, beneficiary entitlement clearances.

    Q:Okay so that's a bit of speculation on your part as to why?

    A:Well, it's not speculation.

    Q:You don't put up that …

    A:I said I'd taken an educated guess.  I don't know because I haven’t seen the account.  But John and I used to talk … about these things often…

    Q:That was a calculated determination on the part of John to give you odd amounts was it?

    A:So that he could clean up some beneficiary entitlement account on his part, to me.

    Q:Why would you be entitled as a beneficiary under Jomima?

    A:No, no, no, no, no, that's not what I'm saying.  As far as his beneficiary entitlement accounts for his children for distributions he made to them through his trusts …

25. And later:

    A:You've asked me as to what I thought and I think I'm pretty right but I can't be exactly 100% sure unless I see the accounts … if I was to look at the accounts I would tell you immediately.

26. It was then suggested by counsel for John that Tony had taken an opportunity somehow to blacken his name gratuitously to which Mr Tony Palermo said (ts 251):

    A:Sir, can I add that if I was in his position with beneficial entitlement accounts, I would have done exactly the same thing.  So I'm not trying to blacken his name.  I think it’s a good thing that he did.

27. It seemed to me that Tony's explanation for that cheque may well have had some credence.  However, the matter was not pursued or resolved.  I do not agree that the odd amount in the first mentioned cheque bolsters Jomima's assertion that it was a loan.  It was agreed at trial, tacitly if not explicitly, that the second odd cheque amount being $48,882 simply rounded the first amount up to $80,000.

28. A great deal of time was spent during the trial exploring the brothers' various dealings in order, somehow, to identify with certainty what the particular basis was for the defendant's assertion that debts were being repaid by the alleged payments.  The evidence was quite complex and there were various issues of disputation.  There was much mention in post facto documentation generated by Tony that he had a grievance about and felt he was owed money arising out of the sale of the office building in 284 Oxford Street. 

29. I have already noted that exhibit 14 records the payment of the first cheque on 1 March 2011 being the date of the settlement of 284 Oxford Street.  It is also the case that, apparently, Tony wrote '284' and office on exhibit 14, presumably after he received it, it being given to him by John.  These two aspects of exhibit 14 are consistent with Tony's case in my view, as is Tony's evidence (undisputed by John … 'he did not recall') that exhibit AP11 to Tony's affidavit was sent to John in response to receiving exhibit 14.  In exhibit AP11, Tony writes in response to John's question about correctness, that the sum of $175,000 was 'not correct'.  He then sets out calculations that assert further unpaid monies owed by John.

30. I make the following final comments about exhibit 14.  The plaintiff's case is that it is the note of 'a lender' to 'a debtor'.  In my view, putting aside the other inconsistent headings on the document, it is odd for a lender to be asking a borrower (debtor) whether he agrees with the lender's list of loans.  Furthermore, it would be expected, if this was so, that there be some reference to repayment and the very important dates related thereto.

31. On the other hand, obviously, it would be quite normal for a debtor to enquire whether the creditor agreed with the debtor's list of amounts paid and amounts outstanding.

32. This action was commenced in the belief that exhibit 14 was a very helpful contemporaneous note.  I have found that it is not, and further, that it supports Tony's case.  Jomima has brought this action against Tony asserting that all the admitted payments were by way of loan.  I am unable to accept that assertion on the balance of probabilities.

33. Obviously the inevitable implication is that I was not able to accept John's evidence in the case.  I have found for Tony for that reason.  Jomima failed to prove its case.

34. Consequently I have no need to make a finding about Tony's evidence that the payments were in satisfaction of moneys owed to him by John.  If I do need to, I would say the documentation tended to support Tony's evidence and I would be inclined to accept his evidence on key aspects, although it was not unblemished.

35. Whatever the possible reason there may have been for John to be paying Tony by way of settlement of debts that existed between them, and the issue of the shortfall on the sale agreement for 284 Oxford Street may well have been the basis of it, Jomima's case that the payments were loans has not been proved to the required standard.  As I have mentioned, the business dealings between Jomima/John and Tony are largely unsupported by useful documentation.  This was their choice.  Jomima relies on exhibit 14 and it is of no assistance.  I do not accept Jomima's case in the matter.  There must be judgment for the defendant, Anthony Palermo in this matter with costs.