Kogan v Beliavski
[2019] VCC 940
•28 June 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-00130
| BORIS KOGAN | Plaintiff/ Defendant by Counterclaim |
| v | |
| BORIS BELIAVSKI | First Defendant/ Plaintiff by Counterclaim |
| and | |
| SVETLANA BELIAVSKI | Second Defendant |
---
JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 – 22, 25 – 28 February, and 4 March 2019 | |
DATE OF JUDGMENT: | 28 June 2019 | |
CASE MAY BE CITED AS: | Kogan v Beliavski | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 940 | |
REASONS FOR JUDGMENT
---
CONTRACT – whether moneys advanced were a loan to the defendants or a contribution to a joint venture – whether second defendant was party to loan – where moneys advanced by corporate entity – where individual sued on basis he had lent the money – turns on own facts.
---
APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | G J Burns | Christopher William Legal |
| For the defendants | J Searle | Tisher Liner FC Law |
Contents
OVERVIEW
BACKGROUND
EVIDENCE
IS KOGAN ABLE TO SUE?
BASIS MONEY ADVANCED
EFFECT OF PLEADING NOT MATCHING EVIDENCE
NO ACCORD AND SATISFACTION
AMOUNT LENT
Items 1-13 – Cheques to Svetlana or cash
Item 2 – Cheque for $2,380 to Svetlana
Items 14-18 – Internet transfers
Items 17 and 18
Items 19-23, 34, 35, 39, 42 and 52 – Payments to Aleksey Avdeev
Items 24, 25, 33, 36, 50 and 53 – Rococo Stone payments
Item 26 – Beyond Tiles
Items 27, 28 and 51 – Elite Painting Services
Item 29 – Touchwood Cabinetry
Item 30 – Visual Candy
Item 31 – AB Plastics
Items 32, 37, and 41 – The Good Guys
Item 38 – E & S Trading
Item 40 – No Pressure Plumbing
Item 43 – the Beliavskis
Item 44 – Rhino Bins
Item 46 – Levchenko
Item 47 – Padalka Metal Supplies
Item 48 – Renox
Item 49 – ODS Glass
Item 54 – Trident Concrete
COUNTERCLAIM
CONCLUSION
HER HONOUR:
OVERVIEW
In 2015 Boris Beliavski purchased a property with an old California bungalow on it in Leopold Street, South Caulfield. It was developed, and sold in 2017 with what was described as a ‘high end’ modern house built on it.
The dispute at the centre of this case is whether Boris Beliavski and his wife Svetlana Beliavski owe Boris Kogan[1] any money. Money was borrowed to construct the house, but it ran out before the house was completed. Kogan says he lent money to both the Beliavskis in 2016 to enable the house to be finished, on the basis that he would be repaid when the property was sold. He says he is still owed $286,791 of the money he lent.
[1]There are two people called Boris at the centre of this dispute. I will refer to Boris Beliavski as ‘Beliavski’ in this judgment, and to Boris Kogan as ‘Kogan’. I will refer to Svetlana Beliavski as Svetlana.
The Beliavskis admit $323,000 was advanced to their joint bank account and that $73,000 of that sum has not been repaid.
However, they deny owing Kogan anything.
They defend his claims on a number of bases:
·They say any moneys advanced was advanced by AB Studio Pty Ltd, a different legal entity to Kogan, albeit one associated with Kogan (he is its sole director and shareholder). They say Kogan cannot sue for the return of moneys AB Studio advanced.
·They allege that the underlying background to whatever moneys were advanced is that Kogan, Beliavski and Timur Gubaydullin were involved in a joint venture to buy and develop the Leopold Street property. (Kogan denies this.) They say that initially Beliavski and Gubaydullin agreed to raise the finances for the development, and did do this, but when more money than they could obtain was required to complete construction, Beliavski asked Kogan to contribute to the joint venture. They say that any moneys he advanced were a contribution to that joint venture, not a loan by him to the Beliavskis. They say Kogan agreed with Beliavski that he would only be repaid that money on two conditions: if the Leopold Street property was sold for more than $3.5 million, and if there were surplus sale proceeds after the loans Beliavski and Gubaydullin had arranged had been repaid. They say the conditions for repayment of that contribution never eventuated: the property was sold for only $3 million and there were no surplus sale proceeds after the arranged loans were repaid.
·If the money advanced was a loan (which they deny), they say that the loan was only to Beliavski. It was not to Svetlana.
·Much of Kogan’s claim is made up of payments he says he made to tradesmen working on the Leopold Street property, and for goods for the house. The Beliavskis say that the Court cannot be satisfied that these alleged payments, if made, related to the Leopold Street property.
·Finally, they say that after the property was sold, there was a further agreement between Beliavski and Kogan – effectively an accord and satisfaction. By it, they say that Kogan agreed to accept payment of $250,000 in full and final settlement of any amount owed to him. The $250,000 was paid, and so there is now nothing owing. (Kogan denies there was an accord and satisfaction.)
The Beliavskis counterclaim against Kogan, seeking to have accounts taken in relation to the alleged joint venture, and damages.
For the reasons given below, I will give judgment for Kogan against the Beliavskis in the sum of $126,323, and interest.
I will dismiss the counterclaim.
BACKGROUND
Kogan and his company, AB Studio, are in the business of building luxury residences.
Beliavski and Gubaydullin are electricians. They met when Gubaydullin first arrived in Australia in 2008. Beliavski was Gubaydullin’s boss for some time. They then established their own company, TB Electrics Pty Ltd, becoming its two directors and shareholders. They provided their work on various building sites as electricians through that company.
From 2013, Kogan, Beliavski and Gubaydullin worked side by side at a number of construction sites.
In late 2014, Gubaydullin suggested to Beliavski that they buy a property to develop it, build a house on it like the ones they had observed Kogan build, and then sell the property for a profit. They wanted to earn some money outside what was available to them as electricians.
Beliavski and Gubaydullin had never developed a property before. They approached Kogan to see if he would get involved.
Beliavski, Kogan and Gubaydullin reached an agreement about the basis on which Kogan would be involved in the development. (The parties disagree as to the terms of the initial agreement, and I deal with this below.) They agree, however, that Kogan was to be paid $2,000 a week for ‘managing’ – or ‘managing and attending to’ – construction,[2] that he was to provide building items at cost (via the margins AB Studio could obtain), and that Beliavski, Kogan and Gubaydullin were each to receive one third of profit when the property was sold.
[2]Kogan pleads that it was agreed he was to ‘manage’ construction; the Beliavskis plead he was to ‘manage and attend to’ construction. See [64] of this judgment regarding the dispute about the extent of Kogan’s involvement as builder.
In early 2015, Gubaydullin found a suitable property at Leopold Street, South Caulfield. He sent a link with its details to Beliavski.
Beliavski and Gubaydullin visited their accountant, Anna Eydlish, for help with arranging finance.
Kogan, Beliavski, Svetlana and Gubaydullin all attended the auction of the Leopold Street property on 15 March 2015. (Svetlana and Kogan had not met until the auction). Kogan did the bidding, because he had some experience in bidding at auctions.
Beliavski signed the contract of sale. The deposit for the property of $108,900 was paid from funds provided by Svetlana.
At settlement, Svetlana contributed a further $171,429.28. The balance of the purchase price came from a loan the Beliavskis took out from Westpac. Svetlana mortgaged the three properties she owned as security for that loan.
After settlement, the Leopold Street property was registered in Beliavski’s name.
Money was then needed to enable the construction of the new house. Beliavski and Gubaydullin had trouble finding finance for this phase, and Kogan introduced them to David Lyall of Millbrook Finance Pty Ltd to help with this. Beliavski and Gubaydullin arranged for Millbrook Finance to lend money for the construction to their company, TB Electrics.
Beliavski, Gubaydullin and Svetlana guaranteed the Millbrook Finance loans. As further security, Beliavski mortgaged the Leopold Street property, and Svetlana mortgaged her three properties. Gubaydullin had no property to provide as security.
All the loan money – from Westpac and from Millbrook Finance – was paid into the Beliavskis’ joint bank account. Kogan was not involved with any of these loans.
Construction commenced in late 2015.
Kogan generally oversaw the construction of the new house, arranging various tradesmen to work at the property, and buying necessary items for the house.[3]
[3]The extent of Kogan’s involvement as builder is discussed at [64] of this judgment.
At least until May 2016, when the money TB Electrics had borrowed ran out, invoices were sent to Kogan (sometimes directed to AB Studio) or to Beliavski. Kogan gave Beliavski or Svetlana invoices given to him by tradesmen or told them how much was required to be paid to tradesmen that week, sometimes sending SMS messages about it. Sometimes, Kogan paid tradesmen in cash, or paid for goods in cash, and then sought reimbursement. The Beliavskis had also given him a low rate Visa card which he was entitled to use to pay for tradesman and goods on the site.
Svetlana paid tradesmen and suppliers from the Beliavskis’ joint account, or by cash taken from that account. Where she paid cash, it was sometimes by bringing cash to the construction site and giving it to Kogan to repay him for payments he had made, or giving it to him to pay the tradesmen.
Svetlana also paid Kogan $2,000 cash per week, from the commencement of construction, until August 2016. She brought this cash to the property and handed it to him each week.
By about May 2016, the loans arranged to pay for the construction were exhausted, and the house still required a great deal more work before it was complete.
Beliavski made enquiries, but was unable to arrange further finance from Millbrook Finance or others.
Beliavski and Svetlana were extremely worried. Svetlana had mortgaged the three properties she owned (including their family home) to secure the loans that Westpac and Millbrook Finance had given. If the house was not sold at a good price, and the loans were unable to be fully repaid, those mortgages would be called on.
Kogan was approached. He was told that the money borrowed to finance building the house had run out, and that the financiers would not lend more. He was asked to provide money so that the interest on the loans could be paid, tradesmen paid and the construction of the house could be completed. The parties disagree as to whether Svetlana was involved in these requests or agreements, whether there was one agreement for the advance of money or a series of agreements, and the basis on which the money was agreed to be advanced. (I deal with this below.)
There is no dispute that from around May 2016, Kogan arranged $323,000 to be paid from AB Studio’s bank account to the Beliavskis’ joint account. Kogan arranged this via internet transfers and by giving cheques to Svetlana or Beliavski. The cheques were then paid into the Beliavskis’ joint account by Svetlana. The money advanced was used to repay interest on the loans from Westpac and Millbrook Finance, and to pay other costs associated with the property.
Kogan claims that from May 2016, he also paid – on behalf of the Beliavskis – over $200,000 directly to tradesmen, and for goods in connection with the construction of the Leopold Street property. He claimed he paid these sums on the basis that the Beliavskis had agreed to pay him back when the property was sold.
With the benefit of Kogan’s advances, construction of the house was able to be finished some time toward the end of 2016.
The property was due to be auctioned on 25 February 2017.
On 16 February 2017, Beliavski signed a contract for sale of the property for $3 million.
Kogan thought the property had been sold for too low a price. He thought it could obtain up to $3.5 million and said his father-in-law would have paid that. He was very upset. He had advanced hundreds of thousands of dollars to enable construction to be completed, and he was anticipating a one third share of profits made on the sale, so he was affected by a low sale price. He tried, without success, to get Beliavski to have the sale overturned.
He then told the Beliavskis that he wanted his money back, repeatedly, in strong terms.
At a meeting which Gubaydullin was also present at, Beliavski told Kogan that the project had made losses, and the maximum he could give Kogan was $250,000 and ‘we are square’. Kogan said it was not enough and reiterated he wanted his money back.
Beliavski paid Kogan $250,000: $150,000 on 14 June 2017 and $100,000 on 16 June 2017. Both payments were by cheque, drawn on the Beliavskis’ joint account. Kogan took the cheques, but made it clear he wanted his money back.
The parties disagree about whether an accord and satisfaction was reached, such that payment of $250,000 brought an end to Kogan’s entitlement to be repaid. I deal with this below.
Throughout construction, Svetlana was the only person keeping a record of payments made – and payments she was told Kogan had made – in relation to construction. She had a handwritten exercise book for that purpose. It includes a three page list headed ‘Boris’, in which she wrote various dates, amounts advanced from AB Studio’s account to the Beliavskis’ joint account, and amounts Kogan said he had paid tradesmen for goods, and descriptions of various payments (the Boris List).
Kogan asked Beliavski to send him a copy of the record relating to him which Svetlana had kept. On 3 July 2017 Beliavski emailed Kogan a copy of the Boris List.[4]
[4]The emailed version of the Boris List has a minor difference to what is now in the exercise book. One $5,000 payment recorded had been removed since the email was sent; and what appears to be a total figure of $527,111 at the end of the list has been amended to reduce it to $522,111. The parties agreed that whatever the reason for the change, it was irrelevant to the issues to be determined.
After receiving the emailed copy of the Boris List, Kogan kept demanding repayment, and, on 15 August 2017, Kogan’s lawyers sent the Beliavskis a letter of demand.
On 18 January 2018 Kogan commenced this proceeding. The Beliavskis filed their defence and counterclaim on 22 February 2018. Various amendments to both pleadings were filed, including through the course of the trial.
Kogan’s case by the close of the trial was pleaded in the third further amended statement of claim. It is mostly based on the contents of the Boris List.
The Beliavskis’ defence by close of trial was pleaded in the defence to the third amended statement of claim.
Beliavski’s counterclaim was filed on 3 August 2018.
EVIDENCE
The principal witnesses were not born in Australia. English is not their first language. Their discussions with each other were in Russian. This necessarily meant that in giving evidence of their recollection of what had been said between them in conversations which took place up to four years earlier, they first had to translate what they remembered of those conversations into English. As stated by Kogan at one point, the words used in Russian do not necessarily translate directly. None of the witnesses gave evidence through a translator, and the witnesses’ command of English was not generally strong.
In the circumstances, I am not satisfied that any of the evidence given as to precise words that were used in conversations can be relied on as any person’s recollection of the exact words used.
As McLelland CJ observed in Watson v Foxman (1995) 49 NSWLR 315 at 319:
… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the process of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
In the English High Court of Justice decision of Blue v Ashley (No 2) [2017] EWHC 1928 (Comm), Leggatt J said at [67]:
… I expressed the opinion in the Gestmin case (at para 22) that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.
I put primary emphasis on the objective facts surrounding what occurred, including the contemporary documents and inferences to be drawn from these.
I note the following about the principal witnesses.
Kogan’s first language is Russian. His conversational English is in broken English. He gave evidence that he has difficulty reading and writing in English. His evidence was often given in very broad brush, and inclined to exaggeration and hyperbole. For example, he said repeatedly words to the effect that he did not recall what happened ‘this morning’ or ‘I don’t remember what happened five minutes ago’. He said Beliavski threatened heart attacks or strokes many times, if Kogan did not lend him money to let him finish construction.
Kogan’s credit was challenged.
As discussed below, some of his claims fail because I am not satisfied of the evidence provided of individual payments having in fact been made in relation to the Leopold Street property. However, having observed him, I am satisfied that he was telling the truth generally, including about the basis on which he made payments: he was asked to lend money to Beliavski and Svetlana when the money which had been borrowed via TB Electrics was exhausted, and he agreed to lend them money, and made payments to tradesmen and for goods himself, on the basis that he would be repaid when the property was sold.
His credit was challenged in other ways. For example, at some stage the Beliavskis gave Kogan a credit card to use in paying tradesmen and to buy goods for the house, and gave him the PIN for it. The credit card named Beliavski as cardholder, but was a card associated with a low rate Visa account in Svetlana’s name.
Kogan charged various items associated with construction at the Leopold Street property to that card. He was cross-examined about charging some amounts to that credit card on the basis that they did not relate to the Leopold Street property. He said that there were many lunches and coffees during the construction and if he went to a café with ‘Boris and Timur, or Svetlana and Timur it would be a proper payment on this card’. He admitted that an entry on the credit card statement for Dan Murphy’s was for alcohol. More significantly, more than $1,800 was charged in a series of transactions on one day, to a company name which Kogan gave evidence he did not recognise. Under cross-examination, Kogan was told that company ran a brothel under another name: he said he had no idea of that. He said he had given the Visa card to a married friend:
I was giving him this credit card because he could not use his and I didn’t want to give him mine because mine had a much higher limit than that.
Kogan gave evidence that ‘any unauthorised expenses, Svetlana would know and I would reimburse them by cash’, and ‘those expenses, Svetlana knew about them and they were reimbursed’.
Svetlana denied they were reimbursed. There was no record of reimbursement. However, there are no records of many matters between these parties, who dealt in cash to a considerable degree. And there was evidence of arrangements between Kogan and the Beliavskis going both ways and involving other people – for example, the parties agree that one payment of $100,000 Kogan made to the Beliavskis was intended in part to repay a $30,000 loan to one of Kogan’s friends, as well as repaying a $10,000 loan to Kogan. I am not satisfied that Kogan was lying about Svetlana’s knowledge of unauthorised expenses, or about reimbursement by cash.
The Visa card statements were addressed to, and sent to, Svetlana. She paid the amounts due on the statements from the Beliavskis’ joint account, recording payments in her exercise book. I am satisfied that she kept her records fairly carefully – as the only person keeping records of what was spent on construction. I am satisfied that Svetlana read the statements before paying them, and she was seeing Kogan at least once a week throughout that period in order to pay him his $2,000 payment and to pay tradesmen. It seems likely that there would have been discussions between them about amounts charged, as Svetlana was keeping a record of payments relevant to construction in an excel spreadsheet and in her exercise book.
Kogan was also cross-examined about the extent of his involvement on the Leopold Street property as builder, in circumstances where Beliavski signed a building contract with RMP Home Builders. This dispute was, in the end, a red herring, as I did not need to determine how much building work Kogan did. However, since some time was spent on this issue, I note that I am satisfied that RMP Home Builders became involved (and Beliavski signed a building contract with them) at Kogan’s suggestion because Kogan was not a registered builder and RMP Home Builders was. A registered builder was required in order to obtain building insurance. The contract provided for RMP Home Builders as builder being entitled to hundreds of thousands of dollars in payment but, in fact, it was paid just $20,000. It was only involved in building up to frame stage, and was paid additional amounts for work done by its contractors. I am satisfied that Kogan, Gubaydullin, Beliavski and Svetlana were all well aware of the limited extent of RMP Home Builders’ involvement, and agreed to it. It was Svetlana who arranged payment of the $20,000 cash to RMP Home Builders, giving the cash to its director, Ross Pizzo. The cash came the Beliavskis’ joint account.
Although Kogan prevaricated in his explanation about RMP Home Builders’ involvement, I am satisfied that he was generally an honest witness (albeit prone to exaggeration as set out above).
Beliavski and Svetlana came to Australia in 2001. He is quietly spoken, with broken English.
His evidence was contradictory at times. On occasion, it appeared rehearsed, for example when giving evidence that Kogan had agreed to only be repaid if the property sold for more than $3.5 million.
Svetlana is a secondary school maths and physics teacher who speaks English fairly well.
From observing them give evidence, I formed the view that both Beliavski and Svetlana gave evidence with a view to seeking to minimise the extent of Svetlana’s involvement in relation to the Leopold Street property generally, and particularly in relation to the loans Kogan made. I prefer Kogan’s evidence about these matters.
I found Gubaydullin to be a careful and honest witness. He speaks in broken English and he had difficulties with some English expressions. However, he paused when uncertain how to put something in English and gave the questions put to him careful consideration before answering. He was willing to concede when he did not remember something. He supported Kogan’s evidence generally in relation to the basis of Kogan’s involvement with the Leopold Street property.
Anna Eydlish is an accountant who Beliavski and Gubaydullin talked to when planning to buy a property to develop and after it had been purchased. She gave evidence of those discussions. She and Kogan were previously in partnership and they are now in dispute in the Supreme Court.
Kogan said that given their dispute Eydlish ‘would say anything’ against him. I am not satisfied it goes that far, but I am also not satisfied that she remembers the conversations she gave evidence about. She had no notes of them, they took place years ago, and some of her evidence was contradictory. (For example, she first said she did not tell Beliavski and Gubaydullin she was in dispute with Kogan when they consulted her, then she said she did tell them that.)
IS KOGAN ABLE TO SUE?
The payments for which Kogan sues were made in three ways. Some were paid by internet transfer from AB Studio’s bank account. Some were paid by cheque drawn on AB Studio’s bank account. Others were paid by Kogan in cash in circumstances where he said in cross-examination that was also from AB Studio.
The Beliavskis say that if anyone was to sue it should have been AB Studio, which made the payments. They say that if money was to be successfully claimed which AB Studio had paid, either it needed to sue for the return of that money or Kogan needed to plead a legal reason why moneys paid by AB Studio could be claimed as owing to Kogan. They refer to the fact that Kogan did not plead, or argue, that AB Studio made the payments it made as Kogan’s agent. They say that the fact that Kogan is AB Studio’s sole director and shareholder, and caused it to make the payments, does not mean that he is entitled to claim moneys that may be due to AB Studio (a separate legal entity to Kogan).
I am satisfied that Kogan is entitled to sue. It was he who agreed to lend money to the Beliavskis. He then arranged for AB Studio – a company of which he is sole director and shareholder – to advance the payments on his behalf.
The Beliavskis argue that a person cannot discharge a debt owed to another in the absence of special circumstances. However, this is not a case where money is due to AB Studio. It is due to Kogan.
Both sides to this dispute have throughout this proceeding filed pleadings alleging that relevant agreements were with Kogan (not AB Studio), with the exception of a fourth version of the Beliavski’s defence, filed in the midst of the trial.
In his first statement of claim, Kogan pleaded that the initial agreement he had with Beliavski involved Kogan personally being paid $2,000 per week, and then 33 per cent of any profit made after the sale of the property. From the second version of the statement of claim he changed that, so far as profit was concerned, to allege that the agreement between him and Beliavski was that he would be paid $2,000 per week, but that AB Studio would receive the 33 per cent profit.
The Beliavskis plead that it was agreed in the initial agreement (which they say was between Kogan, Beliavski and Gubaydullin) that Kogan was to be paid $2,000 per week, and receive 33 per cent of any profit at the end.
Both Kogan and the Beliavskis plead that it was Kogan who agreed to make the advances – not AB Studio – even though they disagree as to who he agreed with, and the terms of the agreement.
In relation to the payments themselves, Kogan pleads (at paragraph 5 of the current statement of claim):
In accordance with the Agreements, the plaintiff, either by himself or from his company AB Studio Pty Ltd ACN 086 107 299, advanced $536,791.00 to or at the direction of the defendants in payment of the accounts and/or invoices and the money advanced [sic].
In the first three defences they filed, the Beliavskis admitted that Kogan made the payments they admit were made, and do not mention AB Studio in that context. It was not until the fourth version of that defence – filed during the trial – that they mention AB Studio, pleading then that AB Studio (alternatively, Kogan) made the payments.
In the first three defences they filed, the Beliavskis pleaded that the alleged accord and satisfaction agreement was also made with Kogan. In the fourth version of the defence, they changed that to plead that the final agreement was made with Kogan ‘in his capacity as a director of AB Studio’. (This change is made despite the fact that the fourth defence does not plead that the advances agreement itself was made with AB Studio. It is not clear how it is put that AB Studio could have entered an accord and satisfaction of an agreement it was not alleged to be party to.)
It was clear from his evidence that Kogan did not distinguish between himself and his company, AB Studio, when referring to things done or payments made. For example, Kogan commented in evidence that architect Robert Buckerfield ‘always renders his invoices to me but they were passed on to the client’. In fact, Buckerfield’s invoice was directed to AB Studio, then passed on to Beliavski.
In her exercise book Svetlana recorded the amounts of the cheques which she or her husband had been handed by Kogan. Those cheques were drawn on AB Studio’s account. She recorded internet transfers from AB Studio’s account which were banked into the Beliavskis’ joint account, and details of other payments Kogan told Beliavski and her that he had made in relation to the Leopold Street property. Svetlana carefully wrote Kogan’s first name ‘Boris’ at the head of that list. She did not write ‘AB Studio’.
Beliavski gave evidence of agreements made with Kogan. Gubaydullin said that he and Beliavski agreed with Kogan for Kogan to be the builder.
When Beliavski paid Kogan the two cheques totalling $250,000 – allegedly as an accord and satisfaction of amounts advanced – the cheques were made out to Kogan, not AB Studio.
I am satisfied that Kogan is entitled to sue the Beliavskis in relation to the money advanced to them.
BASIS MONEY ADVANCED
The next issue is the basis on which the money was advanced: was it a loan, and if so, was it a loan only to Beliavski or to Beliavski and Svetlana?
I am satisfied, on the balance of probabilities, that the money Kogan advanced was loaned to both the Beliavskis, and repayable once the Leopold Street property was sold (as he says). I do not accept the Beliavskis’ defence that the various sums advanced were a contribution to a joint venture between Kogan, Beliavski and Gubaydullin, and only repayable if certain conditions were met.
The parties had two different versions of the initial agreement in relation to the development of the property.
Kogan alleges that in early 2015 he and Beliavski agreed that Kogan, through AB Studio, would manage construction of a house on a property to be purchased by Beliavski. He alleges they also agreed that Beliavski would pay Kogan for ‘the expenses incurred in the cost of construction of the house’; that Kogan would be paid $2,000 per week as a supervisor’s fee; and if there was a profit on the sale AB Studio would be paid a fee of 33 per cent of the net profit of the sale.
Early in the course of the trial, counsel for Kogan sought leave to rely on a draft amended statement of claim which pleaded that the initial agreement was that Beliavski and Svetlana, along with Gubaydullin, would pay for all expenses. That application to amend was withdrawn, and the final version of the statement of claim did not mention Svetlana or Gubaydullin in relation to the initial agreement.
Although Kogan’s pleading was that the agreement was only between Kogan and Beliavski, Kogan’s evidence was that his initial agreement was with Gubaydullin as well as Beliavski. He said they employed him to manage construction of a property they purchased.
The Beliavskis, on the other hand, said there was a joint venture at the outset between Kogan, Beliavski and Gubaydullin.
The Beliavskis’ claims about this altered in different defences they filed. By the final defence, they pleaded that Beliavski, Kogan, and Gubaydullin entered into a joint venture agreement in March 2015. The terms included:
· Beliavski would purchase the property for the joint venture;
· Gubaydullin and Beliavski would arrange loans to fund the joint venture;
· Gubaydullin and Beliavski would meet the repayments on the joint venture loans;
· Kogan would manage and attend to the construction of the home on the joint venture property;
· Kogan would be paid $2,000 a week while managing construction;
· Kogan would:
o complete the construction of the home on the joint venture property within six months of commencement of construction which later became one year of the property being purchased;
o construct the home for a maximum total cost (inclusive of holding costs and interest) (“total construction costs”) of $1,200,000;
· the joint venture partners would share equally in any profits or losses of the joint venture.
In United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 the majority, Mason, Brennan and Deane JJ at 10, spoke of the difficulty of defining the term joint venture, due in part to the variety of arrangements for which the term is used:
The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. … The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a "joint venture" and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred. Thus, where one party contributes only money or other property, it may sometimes be difficult to determine whether a relationship is a joint venture in which both parties are entitled to a share of profits or a simple contract of loan or a lease under which the interest or rent payable to the party providing the money or property is determined by reference to the profits made by the other.
Crennan J stated in Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749 at [80] that the ‘recognisable and common characteristics of joint ventures’ include:
(1)participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common;
(2)participants exercise joint control of the undertaking;
(3) participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate;
(4) participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made;
(5) participants have a joint (or community of) interest in the performance of the undertaking’s purpose; and
(6) participants associate in the undertaking for mutual commercial gain which can be mutual profits. [citations omitted]
It is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain.
There was no evidence, other than the Beliavskis’ allegation, to support the existence of a joint venture between Beliavski, Gubaydullin and Kogan. I am not satisfied that Kogan was ever part of a joint venture in relation to buying the Leopold Street property and constructing a house on it for a profit.
In my view, the initial arrangement was different to that put forward by either side.
Kogan was employed on the basis that part of the price paid to him for his work in managing and directing the construction was one third share of any profit made once the house was built and the property sold.
I am satisfied that initially Beliavski and Gubaydullin agreed to buy a property together and to develop it, and then sell it. They asked Kogan to build or manage the construction of the new house they wanted to build on it. Kogan agreed to provide supplies at cost, at the rates he could obtain through AB Studio, and not charge a mark-up of the costs as would normally have been passed on to property owners. They agreed to pay him $2,000 cash per week, and to pay him one third of profits made in developing the property, once it was sold.
I am satisfied on the evidence that Kogan made it clear at the outset he would not put a cent into the project. He gave this evidence, and Gubaydullin agreed with it. Gubaydullin was quite clear the Kogan was just the builder who was engaged to build an ‘AB Studio’ type house.
I am satisfied that in the course of construction, both Beliavski and Kogan described themselves (and Gubaydullin) as ‘partners’ on some occasions in describing their relationship in building the house on the property. Kogan used this word sometimes whilst giving evidence (though he denied that he was ‘partners’ with Beliavski and Gubaydullin). Kogan gave evidence that as Svetlana ended up being the one that he had conversations with about design, and the most financial conversations with, and who was paying him, he realised during construction that he was ‘partner with Svetlana’ or working for Svetlana more than with Beliavski.
Gubaydullin did not use the word ‘partner’ in giving evidence, and rejected the suggestion Kogan was in partnership with Beliavski and Gubaydullin.
In my view, describing themselves in conversation as ‘partners’ does not mean that Kogan, Beliavski and Gubaydullin were formally in a relationship involving profit and loss sharing or members of a joint venture. I am satisfied that, to the extent any of them used the word ‘partner’, this was simply a colloquial use of language by people who are not highly educated, indicating that they were all involved in building the house, and all hoped to earn money out of the profit to be made.
Whilst Kogan occasionally used the word ‘we’ in giving evidence about what was planned for the property when it was being constructed, that was consistent with the fact that he was involved in building it and stood to make a profit on sale. An example of this use of the word ‘we’ was when Kogan gave evidence that he said to Gubaydullin after Beliavski sold the property:
I think it’s undersold. We can’t sell the property – there’s no point selling something and signing a contract if we are two weeks away from the day of the expression of interest because none of the real buyers would come out and offer anything two weeks before the expression of interest is going to run out.
Cross-examined about the use of the word ‘we’, on the basis that his use of the word ‘we’ included him, he said he was including himself as a creditor:
At that stage I already had $600,000 which they owed me and at $3 million they would be selling this property at a loss.
He also used the word ‘we’ in reference to who owed money to those who had worked on the Leopold Street property:
White goods couldn’t be issued because we still owe them money for this project….she was paying but we still owed them money for this project and I’m paying off this debt now.
He explained this by saying that the tradesmen’s accounts were with AB Studio, so Kogan regarded himself as owing the money at first instance.
Beliavski owned the property, and the Beliavskis had control of the moneys lent to TB Electrics through their joint account. They then sold the property, without consultation with Kogan. And they decided to pay Kogan a final $250,000, again without any discussion.
By May 2016, Beliavski was no longer able to borrow further money to finance construction. Gubaydullin had not been able to provide any property as security and had left raising money to Beliavski. The security pledged for the loans to TB Electrics was at risk if the house had to be sold without being finished. Svetlana and Beliavski were both very worried.
I am satisfied that both Beliavski and Svetlana asked Kogan to lend them money so the construction could be completed, on the basis the money would be repaid on the sale of the property. I am satisfied that Svetlana was involved in these requests. Both she and her husband were well aware of the cheques Kogan provided and of the internet transfers deposited into their joint account.
The Beliavskis pleaded various terms in the later versions of their defences, as to how and when it was agreed that money was to be repaid. All of them depended on there being a joint venture which Kogan was part of, with the money he advanced from May 2016 being capital contributions and there being conditions to the repayment of that ‘capital’. As set out above, I am not satisfied there was a joint venture.
I note that even if I had considered there was initially a joint venture with Kogan, I would not have been satisfied that there was any condition that, before moneys Kogan arranged to be advanced were repaid, the property needed to be sold for $3.5 million and all the costs associated with the finance Gubaydullin and Beliavski had arranged first be repaid.
Beliavski claimed Kogan had made promises about how quickly the house could be built, what the costs of development would be, and how much it would realise on sale. I am not satisfied promises were made, as opposed to Kogan expressing his belief about those matters.
Further, Beliavski gave the only evidence about an alleged condition of repayment that the property be sold for $3.5 million. His evidence was unconvincing. No evidence was given of any discussion giving any reason Kogan would agree to be repaid money he advanced only after money lent to TB Electrics (and guaranteed by the Beliavskis and Gubaydullin) had been repaid. There was no evidence that Beliavski ever said to Kogan, when Kogan demanded repayment ‘but you agreed only to be repaid if we sold for $3.5 million and we didn’t get $3.5 million’, or words to that effect.
I am satisfied the money was advanced as a loan made to both Beliavski and Svetlana.
Although Svetlana was not involved in the initial discussions between Beliavski, Gubaydullin and Kogan, it is clear that subsequently she became heavily involved in the purchase and development of the property. Her money was invested in the property from the time it was purchased, and her assets were at risk in relation to the loans provided by Westpac and Millbrook Finance. Every cent that was borrowed to buy the property in the first place, and to fund the construction, was guaranteed by her, and secured by mortgages over her properties.
Svetlana stood to benefit from the money advanced by Kogan both because she had put money into the purchase of the Leopold Street property, and because she had guaranteed the money lent by Westpac and Millbrook Finance to TB Electrics. Her finances and those of her husband were interlinked.
Svetlana gave evidence that since they came to Australia, she and her husband only had joint accounts. The money used to purchase the three properties she owned all came from those joint accounts.
Svetlana gave evidence in relation to the deposit that she paid for the Leopold Street property that:
I had some savings which I agreed to give to my husband and he promised to give me it – to pay me everything back.
She said she agreed to provide the mortgages and guarantee as security for the Westpac loan to TB Electrics, and when her husband asked her to, after first saying no. She gave evidence she told Beliavski:
If you can guarantee me that TB Electrics, Mr Gubaydullin, will pay me back dollar for dollar and I want to make sure my house will be free from mortgage again I would consider but my first reaction was no. Then I agreed.
The fact is that Svetlana personally contributed all the money which was put to the purchase of the Leopold Street property, other than what was borrowed by TB Electrics. Svetlana guaranteed the loans to TB Electrics. She gave mortgages over the three properties – including the family home – which were in her name.
It was she who was most at risk if the loans were not able to be repaid if the house could not be finished before it was sold. Whilst Gubaydullin also guaranteed the loans, he did not have any property to mortgage. And although Beliavski mortgaged the Leopold Street property as security for the loans, he had no other assets in his name at risk if the loans were not repaid.
Svetlana is a secondary school maths and physics teacher who understands basic Excel. The records about the payments made for the construction of the house were maintained by her, and her alone. She kept an excel spreadsheet of payments (not in evidence) and records of payments in an exercise book (in evidence).
I am satisfied she was keeping careful account of what the potential liability of both her husband and herself was in relation to the Leopold Street property, and that she was well aware that more money was needed to finish construction in around May 2016. Both of them were concerned to meet interest payments due, and very worried as debts mounted. They wanted to make sure they could sell the property for sufficient money to clear the Westpac and Millbrook Finance loans.
In giving evidence, Beliavski and Svetlana sought to downplay her control and involvement in the Leopold Street property. Beliavski said he had control of the joint account, and she just did what he said. She described herself as a ‘link’ between her husband and Kogan.
I do not accept that Svetlana was no more than a link, or simply a conduit of payments, who wrote out a list of payments and paid cheques at her husband’s direction, made transfers of money when he told her, and met Kogan each week with money her husband had told her to take, then later obtained cheques from Kogan as directed by her husband. She is better educated than he; and presented as an intelligent and thoughtful person. She clearly understood their finances and how money had been contributed and disbursed relating to the property. Her husband did not.
It was Svetlana who visited Kogan at the site to obtain cheques from him. On some occasions, he handed her the cheque book (in the name of AB Studio), and she wrote out cheques to herself. It is significant that she gave no explanation for this in her evidence. Had she been of the view that there was a distinction to be made such that the money Kogan was advancing had nothing to do with her – but was in fact being provided to ‘the project’ or to Beliavski and Gubaydullin – I am of the view that she would have written the cheques naming her husband as payee. She could still then have put the cheques into their joint account.
Kogan’s evidence about the basis on which cheques were written was as follows. He often works on a number of building sites at a time, moving between them. He may make many payments to tradesmen a day at the sites. He said he very often just hands his cheque book to whoever happens to be next to him at a building site and gets that person to fill in some details. The cheque book butts which are in evidence are consistent with this evidence – various entries have been made in different handwriting, many entries are incomplete, and often the numbers and the names of payees are in different writing including in different pens. This is the case in relation to payments unrelated to this dispute, as well as some of the payments relevant to this dispute. Further, both Svetlana and the architect who worked on the Leopold Street property, Robert Buckerfield, gave evidence of completing cheques and information on cheque butts for Kogan at the Leopold Street property building site.
Notably the word ‘loan’ (often spelt as ‘lone’) is written on some of the cheque butts by Kogan – sometimes with the word Leopold added. It is clear from the different pens being used and in some instances different handwriting appearing on particular butts that on occasion this word may have been added at a different time than when the original cheque was written – and Kogan admitted he could not remember when he added all the details but said something could have been added at a different time.
The notation on the cheque butt of the first payment claimed, of $100,000 on 10 May 2016 says in Kogan's writing: 'Svetlana Beliavski Lone'. A week later on 17 May, a cheque butt for $15,000 to Rococo Stone also says 'Leopold Lone'. It is in Kogan’s handwriting and the same pen is used on all entries on it.
I am satisfied that he wrote the word ‘loan’ (often spelt as ‘lone’) around about the time the cheque butts were written (and before he was aware there was a dispute about the nature of the payments made). It was not put to him in cross-examination that he only wrote that word on some cheque butts in a self-serving way to bolster his own case when he knew there was a dispute. If he had been trying to create a paper trail to suit his case at a later date, I consider that a much more comprehensive job would have been done of it. Many of the cheque butts do not mention the word ‘loan’ or ‘lone’.
Although in her evidence generally she was careful to distance herself from the decisions made regarding the Leopold Street property, I am not satisfied that at the time Svetlana kept such a distance. Referring to contact with Anna Eydlish about borrowing money to purchase the Leopold Street property, she said:
We went to Anna to get funds.
In giving evidence about endeavours to sell the property, she also referred to ‘we’:
Unfortunately, because of delay of finishing house we missed the most important – how I know now, the best opportunity to sell which is June, July, August. Occupancy permit was given at end of October.
Referring to the time the property was first put on the market, she said:
… we didn’t have the occupancy permit yet.
Svetlana was with her husband when the agent came to discuss the $3 million sale. She said:
We have the only one potential buyer who can give us $3 million top.
I am satisfied that by the time Kogan advanced the money, he knew that Svetlana was the one who owned the properties and had given security over them for the loan from Westpac and Millbrook Finance. He worked most days on site with Beliavski and Gubaydullin and I am satisfied they discussed the general financial details of how they had obtained finance with him. They clearly had a friendly relationship with him at that time, and sought his guidance and trusted him. It will be borne in mind that he introduced them to Millbrook Finance. He presents, as stated by the Beliavskis’ counsel, as ‘street smart’. I consider he would not have agreed to lend the money only to Beliavski, when he knew that Svetlana was the one with assets. He wrote the cheques out to her name.
My finding that the money was loaned to both is not dependent on the specific words Kogan gave in evidence of having been said. Although Kogan continually asserted he loaned the money to Svetlana, his evidence was vague and generalised.
In relation to the provision of cheques, Kogan gave generalised evidence of Beliavski, Svetlana or ‘they’, asking him at different times to ‘borrow’ or lend them some money, without detailing specific requests related to specific sums. He said, for example:
The thing was it was always done during the busiest hours at my work and most of the time when Boris would come to the site requesting for money it was either he was having a heart attack or he was having a stroke and then I would give him a cheque …
He was asked if he could recall each occasion when he gave a cheque to Beliavski or Svetlana. He answered:
I can recall a few occasions but I can't recall all of them.
Asked if he could recall the amounts of the cheques, he said:
There were $50,000, $60,000, $20,000, $10,000, $5,000; it was various cheques. It was various cheques. I can't remember. I need to take my cheque book to see.
…
They would come to me, Boris or Svetlana, Boris, "Please lend us money. We will pay you everything back." Boris would say, "I will sell my kidney, I will pay you back." It was always a drama, it was always something there. He come faking the heart attack. Then as soon as I give him a cheque, he was off to the bank.
For each of the cheques that were provided, was there a separate request?---Definitely, yes.
Can you recall who made each of those requests?---No, I cannot recall. Some of them were made by Svetlana, some of them were made by Boris. It was Svetlana and Boris because I wasn't easy giving those cheques so Boris have to come and Svetlana is going to call and Boris - - -
…
What they done is basically, it was separate occasions, "Boris, we need $20,000 right now, right now. We need $20,000", then, "We need $12,000 to pay the interest. We've got no money. We've got no money, we need $12,000. We need to pay for this but they are going to stop because they haven't been paid. Can you pay for it?" That's how it was.
…
MR SEARLE: … Apart from telling you that money was needed to pay an invoice and you providing that money, as you say, there was no further discussion on each of those occasions?---Well, they assured me on each of the occasions they are going to pay the money back and Boris is going to sell his kidney to pay this money back.
In cross-examination Kogan stressed Svetlana’s involvement:
You never had any conversations at all with Svetlana in relation to the need to borrow money to pay the invoices?---Of course I did. I didn't have many conversations with Boris because there was no point talking to him about anything because he does not do anything without Svetlana. With Svetlana, I had all the money conversations, basically, with Svetlana. Not with Boris.
…
The process was that you would tell Boris money that you said you had spent?---No. I don't talk to Boris about money. I was talking about that with Svetlana. I was never talking to Boris about money because he is not very competent in this department.
…
HER HONOUR: Who do you say you lent the money to?---To Svetlana and Boris but all the cheques were written to Svetlana so they were lent to Svetlana. There was no Boris' name on it because in my opinion, Boris, really, he wasn't actually very competent in anything he was doing. He could put two ‘i’s’ together but that's about it.
I reject the Beliavskis’ submission that it is important to match up specific payments with either Svetlana or Beliavski in determining liability. I am satisfied that each was well aware of what was being requested by the other, and of what was being paid, and that the arrangement was that both were liable for all that was lent.
EFFECT OF PLEADING NOT MATCHING EVIDENCE
Kogan’s evidence about the agreements which led to him advancing money did not match up precisely with his statement of claim. And what he had pleaded in different versions of his statement of claim changed. The Beliavskis submitted that therefore Kogan should not succeed on his claim.
However, Kogan’s claim, in simple terms, is that the money was loaned by him to the Beliavskis.
I am satisfied from the evidence that it was.
The fact that Kogan’s oral evidence of the conversations giving rise to the loans did not mirror the particulars pleaded in relation to the oral agreements does not disentitle him to recovery.
In the first version of the statement of claim, filed 15 January 2018, Kogan pleaded one agreement with both Beliavskis for the advance of money:
[3]By an agreement made in or around July 2016 the plaintiff offered and the defendants accepted to finance the cost of renovations to the Property (the Agreement).
PARTICULARS
The Agreement was oral and comprised conversation between the plaintiff and the defendants to the effect alleged.
[4]The terms of the Agreement comprise the following:
(a) the plaintiff would advance moneys to the defendants;
(b)the moneys advance would be used to pay for the cost of the renovation and sale of the Property;
(c)on the sale of the Property the defendants would pay the plaintiff money advanced; and
(d) on the property being sold at a profit the first defendant would pay the plaintiff 33% of the net profit from the sale of the Property.
In the amended statement of claim filed 24 April 2018, Kogan pleaded two relevant agreements: an initial ‘management agreement’ between him and Beliavski, and a later agreement for the advance of money, between him and both Beliavskis:
[2A]By an agreement made in or about early 2015 between the plaintiff and the first defendant it was agreed that the plaintiff through design and management company AB Studio Pty Ltd ACN 086 107 299 would manage the construction of a house on a property to be purchased by the first defendant (the Management Agreement).
PARTICULARS
The Management Agreement was oral and comprised a conversation between the plaintiff and the first defendant to the effect alleged.
[2B] The terms of the Management Agreement were that:
(a) the construction of the house would be undertaken under the management of the plaintiff's design and management company AB Studio Pty Ltd;
(b) the first defendant would pay for the expenses incurred in the cost of construction of the house;
(c) the plaintiff would be paid a supervisors fee of $2,000 per week; and
(d) if there was a profit on the sale of the property AB Studio Pty Ltd would be paid a fee for constructing the house being 33% of the net profit.
…
[3]By an agreement made in or around July 2016 the plaintiff offered and the defendants accepted to provide finance to assist in the payment of expenses incurred in the cost of construction of the house being built on the Property (the Agreement).
PARTICULARS
The Agreement was oral and comprised conversation between the plaintiff and the defendants to the effect alleged.
[4]The terms of the Agreement comprised the following;
(a) the plaintiff would advance moneys to the defendants;
(b)the moneys advanced would be used to assist to pay expenses incurred in the cost of construction of the house; and
(c) on the sale of the Property the defendants would pay the plaintiff money advanced
In the second further amended statement of claim filed 21 February 2019 Kogan’s pleading about what was agreed in relation to the advance of money changed to refer to a series of agreements with the Beliavskis. This remained the claim put in the final version of the statement of claim:
[3] At various times during the construction of the house the plaintiff and the defendant entered into a series of agreements (the Agreements) by which the plaintiff agreed to pay certain accounts and/or invoices incurred in the construction of the house then being built on the property and/or make available to the defendants funds to enable them to meet their obligations to make payment of interest on the loans that had been taken out to finance the construction of the house (the defendants' loans).
PARTICULARS
(i)Each of the Agreements was oral and comprised by conversations had between the plaintiff and one or other of the defendants;
(ii)the conversations took place shortly before the payment of each of the accounts and/or invoices or the advance of funds were made by the plaintiff;
(iii)Where the agreements were comprised by conversations had between the plaintiff and the first defendant those conversations generally took place face to face between the plaintiff and the first defendant at either the property or at 5 Nola Court, Toorak;
(iv)Where the agreements were comprised by conversations had between the plaintiff and the second defendant, those conversations were either by telephone calls made by the second defendant to the plaintiff and/or face-to-face conversations had between the second defendant and the plaintiff at either the property or at five Nola Court Toorak.
(iv)The substance of each of the conversations comprising each of the agreements was to the effect that the first defendant and/or the second defendant would request the plaintiff to pay a particular account and/or invoice, or to advance to the defendants funds sufficient to enable them to pay interest on the defendants' loans.
[4]The terms of each of the Agreements comprised the following:
(a) the plaintiff would advance moneys to the defendants and/or pay the accounts and/or invoices requested on their behalf;
(b) the moneys advanced would be used by the defendants to pay expenses incurred in the cost of construction of the house or to meet their obligation to make payments of interest on the defendants' loans; and
(c)on the sale of the Property the defendants would re-pay the plaintiff all money advanced
Whilst the pleading refers to conversations in which Beliavski or Svetlana would request Kogan to pay a particular account or invoice, and then him paying it, there was no evidence of either of the Beliavskis ever requesting Kogan to pay any particular account or invoice.
Rather, the evidence about payments he made to others was that Kogan told Beliavski, or Svetlana, that he had paid particular accounts or people; and Svetlana then recorded in the Boris List in her exercise book what she was told by Kogan about what he had paid, or what her husband told her Kogan had been told.
It was common ground that Kogan never gave the Beliavskis any invoices or accounts or receipts in relation to the payments Kogan claimed to have made, which were recorded in the Boris List. Obviously, the Beliavskis could not have requested Kogan to pay particular accounts or invoices they had never seen.
However, I am satisfied that the funds in the joint account ran out, Kogan was asked by the Beliavskis if he would lend them money and pay tradesmen and buy goods for the Leopold Street property, so that construction could be completed. They said they would repay him the money he advanced when the property was sold. The details of the conversations themselves – how many, precisely what was said, which of them said what, whether at them Svetlana spoke on behalf of herself, her husband or vice-versa – are lost in the mists of time. But that was the basis Kogan agreed to make payments to the Beliavskis and pay tradesmen for them.
I am also satisfied that on many occasions after that request Kogan told Beliavski or Svetlana that he had paid specific accounts of tradesmen, or for goods relating to the Leopold Street property, and Svetlana recorded the amounts he said he had paid soon after each time he said he had made the payments. On Svetlana’s Boris List, the amounts Kogan claimed to have paid tradesmen, and for goods for the house, are intermingled with the amounts of the internet transfers he definitely made, and the cheques he definitely gave, which were paid into the Beliavskis’ joint account.
I am satisfied that Svetlana and her husband regularly discussed the mounting construction costs and amounts being paid. Svetlana wrote a total of all the amounts in the Boris List. I am satisfied that this total indicated the amount that – at least at that stage – represented the total amount the Beliavskis thought Kogan had paid them and was claiming to have paid tradesmen and suppliers.
So what is to be made of the fact the evidence of the details of how the money came to be lent does not match the pleading?
The general rule is that parties are bound by their pleadings at trial. The rule ensures procedural fairness and avoids trial by ambush. But the rule is not strict and the courts have held it appropriate in certain circumstances to decide a case on its merits rather than the pleadings.
This can occur where a cause of action is pleaded but the particulars of that cause of action do not match the evidence related to the cause of action.
It is particularly so where the particulars pleaded of a verbal contract do not match the evidence given precisely. In Dominion Factors Pty Ltd v L. J. Hooker Limited, Same v Foster [1963] NSWR 573 the Full Court of the Supreme Court of New South Wales needed to consider if interpleader proceedings were available in relation to two verbal contracts. Walsh J stated at 577:
… When the evidence in each action is given it may appear that it does not accord precisely in its language with what was stated in the particulars given. It would not necessarily follow, if that should turn out to be so, that the plaintiff would fail. It seems to me it is not right to treat the particulars given relation to a verbal contract in the same way one would treat a clause in a written contract in seeking to determine with certainty what the contract really was. …
In Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437, the majority of the High Court said at 446:
…If in the cause of action upon which the plaintiff sued there had emerged at the conclusion of the evidence facts which, if accepted, established that cause of action, then it was the duty of the trial judge to leave the issue of negligence to the jury. The pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conformed to the evidence which had emerged. ... Now, and for many years past, the plaintiff does not fail by being refused leave to amend or through failure formally to apply for amendment, where the evidence has disclosed the case in the cause of action fit to be determined by the tribunal of fact. Particularly is this so when the action finally determines the rights of the parties in the cause of action.
The majority in Leotta held that how the plaintiff’s case changed after the evidence was only the expression of the breach of duty pleaded. They noted that it was not submitted on behalf of the defendant in the case that the new case proposed to be submitted to the jury by the plaintiff required the giving of further evidence, or an adjournment to meet it.
In Dare v Pulham (1982) 148 CLR 658, the High Court allowed a deviation from the particulars pleaded of a statement of claim. The case involved a personal injury claim and, under Order 19 rule 5A of the relevant Supreme Court rules, the plaintiff was required to give particulars of any loss of earnings and loss of earning capacity. At trial, the plaintiff gave evidence of loss substantially above the amount of loss set out in the particulars. The jury assessed damages according to the evidence. On appeal at first instance the Full Court held that the jury’s assessment of loss could not stand because of the way the plaintiff had particularised his loss of earnings. On appeal to the High Court, the plaintiff was successful. The High Court held that Order 19 rule 5A did no more than extend the ambit of particulars the plaintiff was required to give.
On the issue of the binding force of pleadings the High Court said at 664:
Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) (1916) 22 CLR 490, at p 517; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v. Cameron (1936) 54 CLR 572, at pp 576-577; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon (1916) 22 CLR, at pp 517, 518; Sri Mahant Govind Rao v. Sita Ram Kesho (1898) LR 25 Ind App 195, at p 207 ). But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v. Irvings Pty. Ltd. (1956) 96 CLR 99, at pp 111, 112, 127 ), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v. Public Transport Commission (N.S.W.) (1976) 9 ALR 437, at p 446; 50 ALJR 666, at p 668).
It was very clear that Kogan’s claim was that he had lent a series of different amounts which were either directly paid by different methods to the Beliavskis, or paid to others on their behalf in relation to the construction of the house. The Beliavskis were in Court for everything Kogan had to say about the agreements that led to the money being advanced, and gave their own evidence of the discussions which led to the money being advanced. There is no prejudice to them dealing with the case on the evidence given.
NO ACCORD AND SATISFACTION
The Beliavskis also defend Kogan’s claims on the basis that an accord and satisfaction agreement was reached. They say that $250,000 was paid to Kogan in full and final settlement of everything owing to Kogan; Kogan banking the cheques constituted his acceptance; and there was an accord and satisfaction. But Kogan did not accept the cheques in full and final settlement. Even when he was handed them, I find that he continued to demand repayment of all his money. There was no accord and satisfaction.
In Gadens Lawyers v Beba Enterprises Pty Ltd [2012] VSC 519, Emerton J summarised the principles of an accord and satisfaction, by reference to the reasons of McColl JA in El-Mir v Risk [2005] NSWCA 215. Her Honour stated at [35]:
(a) The essence of accord and satisfaction is the acceptance of something in place of a cause of action; the accord is the agreement or consent to accept the satisfaction; upon provision of the satisfaction, there is a discharge which extinguishes the cause of action;
(b) Where there is an agreement to accept a promise in satisfaction of a cause of action, the original cause of action is discharged from the date on which the promise is made;
(c)Where there is an accord and satisfaction, only the agreement for compromise may be enforced because the previous cause of action has gone; it has been ‘satisfied’ by the making of the new agreement constituted by abandonment of the earlier cause of action in return for the promise or other benefit;
(d) In other words, the role of an accord is to replace the former contract with a new one;
(e) The question of whether there has been an accord and satisfaction is one of fact. It turns upon determining the parties’ intentions, which may be discerned from the terms of the document said to constitute all or part of the agreement or from the surrounding circumstances. [citations omitted]
An appeal of Emerton J’s decision was dismissed in Beba Enterprises Pty Ltd v Gadens Lawyers [2013] VSCA 136. The Court of Appeal – Ashley JA, with Redlich and Priest JJA agreeing – stated at [56] that the accuracy of the above principles was not in dispute.
As stated by Bowen LJ in Day v McLea (1889) 22 QBD 610:
If accord is a question of agreement, there must be either two minds agreeing or one of the two persons acting in such a way as to induce the other to think that the money is taken in satisfaction of the claim, and to cause him to act upon that view. In either case it is a question of fact.
In FT Jeffrey v Evington Holdings Pty Ltd (Receiver and Manager Appointed) (Supreme Court of Victoria, Full Court, 24 November 1977, unreported) Young CJ, referring to Day v McLea, stated at 12 and 13:
When a cheque sent in full settlement of existing liabilities is retained, the mere retention is not conclusive that there is an accord between the parties: it is a question of fact to be determined by the tribunal of fact what are the terms upon which the cheque is retained. Put in another way, it is a question whether the recipient of the cheque agreed to take it in satisfaction of his claim.
The relevant facts relied on by the Beliavskis relate to the two cheques Beliavski gave Kogan, one for $150,000 on 14 June 2017 and another for $100,000 on 16 June 2017.
The Beliavskis allege that, following a relevant conversation between Kogan and Beliavski, Beliavski paid Kogan the cheques in full and final settlement of Kogan’s claim that he was owed more money by Beliavski, and in settlement of the claim Beliavski alleges he had that Kogan contribute to the losses of the ‘joint venture’.
Beliavski gave evidence of the following conversation:
What did you say to Mr Kogan in that conversation?---I and Timur told him we have huge losses on this project and in the matter of three parties be eligible to get equal profit, so three parties should share the equal losses.
What did Mr Kogan respond to you?---He says he wants his money back.
What did you say to him?---I said maximum what I can give him is $250,000 and we are square. I cannot give any more.
Did Mr Kogan respond to that?---Yes.
How did he respond?---He says he wants all his money back.
Did you say anything further to him?---Yes.
What else did you say to him?---Maximum what I can give is 250. The rest is losses. Equal losses for each party.
Did you say anything else?---No.
Kogan gave evidence that when Beliavski gave him each cheque Kogan reiterated that he still wanted the rest of his money:
What occurred at the time that he delivered those cheques, or before he delivered those cheques?---When he delivered the first cheque I ask why it's only $100,000 or $150,000 - I don't remember what was the first cheque. I wasn't very polite, to be honest, Your Honour, and I just said, "Where's my money?" and, "What did you pay me $100,000 for", or $150,000, "if it's a different amount owing".
HER HONOUR: Pardon?---I wasn't very polite to him and I asked him, "Why are you paying me that much if it's that much owing?"
How much did you think was owing?---It was close to $600,000 all up.
…
What occurred when he brought that [second] cheque to you?--- I took the cheque and I was asking the same question, "Where's the rest of my money?" He could not give me a straight answer. So then I think later in the day I called Svetlana and asked the same question, "Where's the rest of my money?" I couldn't get a straight answer off her.
For an accord and satisfaction to be found, I need to be satisfied that Kogan accepted $250,000 in the place of the higher amount he alleged was owed to him by Beliavski. I am not satisfied that he did accept it on that basis.
I accept that Beliavski said to Kogan that he would give him $250,000 and that would be the end of it. However, Kogan did not agree to this, nor did he act in a way consistent with such an agreement. On the contrary, Kogan gave evidence that he continued to ask Beliavski, and Svetlana, for the ‘rest of my money’.
After the alleged accord and satisfaction, Kogan asked Beliavski to send him the record of payments Svetlana had kept. An email with the three page Boris List was sent on 3 July 2017. I do not accept that someone with the poor record-keeping abilities of Kogan would have bothered asking for that, had he thought that he had agreed to accept $250,000 in full payment.
The first time the Beliavskis alleged the accord and satisfaction agreement was in a proposed amendment to their defence just before the start of the trial.
I am not satisfied that the final agreement was entered into or that there was an accord and satisfaction.
AMOUNT LENT
The amounts Kogan claimed to have paid to or on behalf of the Beliavskis fell into the following two categories:
·Payments paid into the Beliavskis’ joint account. By the end of trial, $323,000 of the amount claimed in this regard was admitted to have been paid into their joint account. Deducting the $250,000 they paid back to Kogan from their joint account, the Beliavskis admitted $73,000 was outstanding (subject to their defence of accord and satisfaction). The $323,000 consisted of $308,000 paid by cheques drawn on AB Studio’s account and made out to Svetlana, and an internet transfer of $15,000 (item 15 in the Agreed Schedule). One cheque payment, for $2,380, was disputed (item 2 of the Agreed Schedule).
·Payments Kogan claimed to have made to others. Kogan claimed he had paid $79,651 in cheques and internet transfers, and $105,248 in cash payments, to tradesmen or suppliers in relation to the construction of the Leopold Street property. These were all disputed.
For the reasons discussed below, I am satisfied on the balance of probabilities that some of the disputed payments were made and related to the Leopold Street property, but not satisfied as to others.
The detail of Kogan’s claims were not well pleaded. They were presented to the Court in a messy, incomplete, and evolving way. The claim of what had been paid, and in some instances to whom payments had been made, changed in the course of the trial. This made it hard to follow the claims made, and particularly time consuming to match those up with what evidence there was.
A series of schedules were provided during trial, setting out Kogan’s itemised claims, as they evolved, and the Beliavskis’ admission or denial of those claims. The final agreed payment schedule was filed on 28 February 2019 (Agreed Schedule). Finally, with the provision of this, Kogan’s claims and the Beliavskis responses were set out. These details ought to have been apparent from the pleadings before the trial started.
It appeared to me that Kogan had not prepared for the trial on the basis that there would be an issue as to whether the relevant payments had in fact been made by him to the people he claimed they were made to in relation to the Leopold Street property. The case appears to have been prepared on the basis that the relevant dispute was about the basis on which money was advanced: as a loan or as a capital contribution to a joint venture. It seemed that Kogan had come to Court in large part relying on the items listed in the Boris List in the email Beliavski sent him on 3 July as being effectively an acknowledgment by the Beliavskis that these sums had been advanced.
However, at trial the Beliavskis said that Svetlana only wrote those figures in the exercise book because Kogan told Beliavski that he had in fact made those payments at different times, and Beliavski told Svetlana to record them. They say Kogan never provided any proof of those amounts being due, or of the payments being made.
There is no doubt that many payments were made by cash to various tradesmen associated with construction, by the Beliavskis as well as Kogan. The Beliavskis knew that Kogan was saying he was making cash payments to tradesmen. Svetlana was involved in making cash payments herself.
But the question is whether I can be satisfied on the evidence provided that the payments claimed were in fact made in relation to the Leopold Street property.
The limited records relied on by Kogan as evidence of the payments included the Boris List (kept by Svetlana in her exercise book), cheque butts and a few cheques, some invoices and receipts, various bank statements, and some emails.
As discussed above, Svetlana was the only person keeping any record listing costs spent on construction, and only some of her records were in evidence. She said that she entered some details of payments made initially in an Excel spreadsheet. How that spreadsheet related to the information she entered in handwriting in the exercise book was not explored in evidence. Invoices relating to the many payments made before Kogan’s funds were sought were not in evidence; nor was the first page or two of the statements for the Beliavskis’ joint account.
It is not clear when Svetlana started keeping records in the exercise book but the earliest date of a payment being recorded in it was 8 November 2015, being $8,816.00 for ‘swim pool’. Given that construction started in late November, it may be that this is the first payment made but no evidence was given to this effect.
Svetlana said she entered different entries at different times.
In the first fourteen pages, the exercise book records various payments under the heading ‘Cash’, starting with the 8 November 2015 entry and finishing on 28 July 2016. The columns are headed date, sum and description. There are then a number of blank pages. Scattered throughout the exercise book are separate lists of payments made to various tradesmen for differing dates from between 7 December 2015 and 22 July 2016. There are blank pages between each such list. After a number of other blank pages at the end of the book there is a series of recordings of payments of $2,000 which appear to correlate to at least some of the payments made to Kogan but there is no heading. On 4 and 11 July $2,000 payments are written for each date with the notation ‘for visa’ written. This correlates to payments shown in the statements for the Visa card in Svetlana’s name which Kogan was given.
About half way through the exercise book the Boris List appears. Included in this list was a record of various payments which there is no doubt were made from AB Studio’s account to the Beliavskis’ joint account, with each such amount described in Svetlana’s handwriting as ‘Interest’.
The Boris List also includes items that Kogan said he had paid for directly, noted by such descriptions as ‘video’, ‘stone’, ‘ipad’, ‘architector’ [sic]. These records were all in date order, with the ‘interest’ and the other payments intermingled. Ticks have been put next to some figures, and others have been highlighted but Svetlana could not remember why or when these markings occurred. After the first two pages of the Boris List, which have items mostly in date order, – along with a few without dates – on the third page of the list there are pencilled figures and names, mostly without dates. The figure $522,111 is presently written in black pen after all those entries.[5]
[5]See footnote 4 re a change to the Boris List since it was emailed to Kogan.
After another blank page, there is a page headed ‘Svetlana’ which has some entries from 10 May ‘$10,000’, ‘27.07 $6,000’, ‘01.08 $4,000 TV’, ‘19.07 2,000 low rate visa’, ‘$1500 salary from classic’; and others. It has a total of $51,650 written in; and also notes on the page ‘$20,000 TB Electrics’. It sets out some payments under ‘stil [sic] to pay’. A later page also headed ‘Svetlana’ states ‘10.05.16 $10,000 from Tular Ave into Leopold’; ‘27.07.16 $6,000 from Tular’ and other items. A further heading ‘Boris’ further down on that page lists some items including ‘$15,000 kitchen – paid’ in black pen, then the word back written in blue pen. It also sets out a $16,000 payment ‘Ben stone 010816’. It is not clear what any of these items are. It seems likely to me that they represent Svetlana’s accounting of additional money she has put into the Leopold Street property.
On the inside cover at the back of the exercise book there is a notation ‘I need to pay’, then various items set out, including ‘$15,000 – Boris Stone’. Next to these is the notation ‘paid’.
Kogan’s evidence about payments he claimed to have made to tradesmen and suppliers was given in very generalised terms, and was unsatisfactory to establish that the payments he claimed were made related to the construction of the Leopold Street property.
As discussed above, Kogan had not kept his own record of payments he said he had made relating to the Leopold Street property. His recordkeeping generally was clearly very poor. It was clear that Kogan had based his claims in relation to the cash and cheque payments on the Boris List kept by Svetlana. However, he had no independent memory of the circumstances of most of the claims and at least one of the entries in the Boris List was incorrect.
The Boris List included the sum of $14,062 next to the word ‘architector’ [sic]. One of the claims made by Kogan in this case was that he had made a cash payment of $14,062 to Robert Buckerfield for architectural services.[6] In giving his own evidence, however, Kogan said he did not now recall if he made this cash payment to Buckerfield. And when Buckerfield subsequently gave evidence, he said that whilst he had sent some invoices for the architectural work he carried out in relation to the Leopold Street property, and was paid a certain amount by Beliavski by cheque, he had never been paid any amount in cash. So the entry for $14,062 for ‘architector’ did not represent a payment of that amount that Kogan had made for architecture services. It may have represented some other payment Kogan made – and told the Beliavskis about – and there may have been a slip in how it was recorded; but without evidence on any of these matters I cannot be satisfied the amount related to a payment made by Kogan in relation to the Leopold Street property.
[6]Item 45 in the Agreed Schedule.
The fact that at various times Kogan may have told Svetlana or Beliavski that he had made particular payments is not sufficient to establish that he did make them, and that they were associated with the Leopold Street property. The figures noted by Svetlana in the Boris List may not even be correct in terms of recording amounts Kogan may have told Beliavski or Svetlana he had paid. The process by which she came to write figures down apparently involved Kogan telling Beliavski he had made a certain payment (presumably while they were working at the building site), then Beliavski going home and telling Svetlana at some point, and Svetlana then writing a figure down either then or at a later point. Or Svetlana herself noting an alleged payment at some point after Kogan told her about it. No cross-checking of the amounts ever took place (and no invoices were provided). As noted above, at least one of those figures – $14,062 for ‘architector’ – was wrong.
Other than Buckerfield, no other person whom Kogan said he had paid cash to was called to give evidence. This was despite the fact that at one stage in the trial, counsel for Kogan advised that eight witnesses would be coming to give evidence of various cash payments.
Kogan repeatedly said, whilst giving evidence, that he had documents at home which would establish payment, or invoices from those he said he had paid, but in fact only a few further documents were later produced. These were produced by Kogan after he had given evidence.
On day seven of the trial, copies of two cheques were produced, which Kogan had obtained from his bank. One related to Kogan’s claim for $12,000, claimed to be paid on 6 January 2017 (this was item 11 on the Agreed Schedule). It had not been admitted as paid; once the cheque was produced it was admitted. The cheque butt, which was already in evidence, had ‘Sveta’ written on it in Kogan’s writing, but the figure of $12,000 and the date was not in his writing, and as with some other cheques, he did not know whose writing it was. The Beliavskis had not admitted receipt of that cheque. Their counsel had said that there was no deposit of that amount into their joint account (which they said was the only place they deposited these cheques). Once the cheque was produced, they admitted receipt of that payment. It seems to me to obviously match the deposit into their account of $12,000 of 9 January 2017 (three days after the 6 January date the payment was claimed to be made) which was of course shown on their joint account bank statement. Further, one of the entries in Svetlana’s Boris List was for 9 January 2017, $12,000, for ‘Interest’. Not only was it listed, but a tick had been put next to the figure.
I turn now to consider the claims, by reference to the item numbers in the Agreed Schedule.
Items 1-13 – Cheques to Svetlana or cash
The first 13 items on the Agreed Schedule set out claims for $310,380 worth of cheques.
The payee was Svetlana in relation to twelve of them. She wrote out her own name and the details on many of these cheques. Even when the cheques were written out in someone else's handwriting, including by Kogan, she was named as payee. All of them were deposited into the Beliavskis’ joint bank account. Those have all been admitted as having been paid (item 11 belatedly, as discussed above).
Item 2 – Cheque for $2,380 to Svetlana
The sum of $2,380 is claimed as having been paid by cheque on 26 May 2016. It is disputed.
No details of the payee are set out in AB Studio’s bank statement. The cheque book butt has the numbers 2380 written on it by Svetlana. In Kogan’s handwriting, in a different pen to the one used by Svetlana the date and the word ‘Leopold’ is written.
Kogan did not give evidence of what this payment related to. Asked if he could recall giving a cheque that corresponded to the cheque butt he said:
The problem is there were so many cheques. It was four years ago. I can't remember every cheque. I write sometimes up to 20 cheques a day. Like, for five, six days a week.
Svetlana gave evidence that she does not recall the circumstances in which she wrote the numbers on this cheque, nor does she recall receiving or cashing it. She said she banked every cheque she received into the joint account.
‘2,380’ is one of the figures Svetlana wrote in pencil on the third page of the Boris List in the exercise book. That suggests at least that either Kogan told her (or Beliavski) that he had paid that sum regarding the Leopold Street property, or possibly she wrote that figure after writing out a cheque to cash herself when Kogan gave her the AB Studio cheque book at the site. If the latter, she may have thought at that time that the cheque was something to do with the Leopold Street property.
However, the figure in the Boris List is recorded without any context, such as date or description. Svetlana was not asked in cross-examination about the coincidence of that figure in the Boris List being the same as the figure claimed by this cheque.
There was no invoice or receipt or detail to establish what the $2,380 was payment of.
In the circumstances, I cannot be satisfied on the balance of probabilities that this cheque was given either to Svetlana (to cash herself), or to someone else related to the Leopold Street property after she wrote the figure out. I will not allow this claim.
Items 14-18 – Internet transfers
Items 14-18 were claimed initially as being internet transfers made to Svetlana. The transfer details for these items in the AB Studio bank statements refer to 'Leopold' or '29 Leopold'.
One of the documents produced on day seven of the trial, was an email dated 26 February 2019 from someone at Kogan’s bank setting out who these payments were transferred to. The Beliavskis objected to the receipt of the email into evidence, because in the form it was sent was not proper evidence, and did not match up to Kogan’s claim at that point which was that those payments had been made to Svetlana – not to third parties. I allowed the email into evidence but give it little weight in the circumstances. Even if those transfers were made to the third parties indicated there, evidence is required to establish that they were made in relation to the Leopold Street property.
Item 14 claims $15,000 as transferred to Touchwood Cabinetry. There are no invoices or receipts to establish what this payment was for. I will not allow this claim.
Item 15 is a $15,000 payment which is part of the $73,000 the Beliavskis admit was received and is outstanding (subject to the accord and satisfaction defence).
Item 16 is a payment to Aleksey Avdeev of $15,000. There is no invoice or receipt to indicate what the payment was for. I will not allow this claim.
Items 17 and 18
The Agreed Schedule has an error for items 17 and 18. A careful examination of the details in the Agreed Schedule for those items, including the court book references noted for them, shows that payee details have been inverted accidentally on the list for items 17 and 18. The payee details were inserted after the bank’s email of 26 February 2019 had been produced by Kogan (previously these items were included in the list of those payments claimed to have been transferred to Svetlana). The relevant bank statements, and invoice (in the case of item 18), associated with these claims match up only if the names are swapped. In other words, those claims should be:
· Item 17 - a claim by Kogan that a payment was made on 26 October 2016 for $2,552 to T Levchenko and Associates (not to Devinder Sharma).
· Item 18 - a claim by Kogan that a payment was made on 29 September 2016 for $3,960 to Devinder Sharma (not T Levchenko and Associates).
I turn to deal with these items (with that name change).
Item 17 is a claim for a payment on 26 October 2016 of $2,552 to T Levchenko and Associates. The AB Studio bank statement shows a transfer on that date with the narrative ‘Leopold’ without showing who it went to. No invoice of that amount is in evidence.
Taken to the bank statement, Kogan said:
I paid someone. I definitely paid someone.
He could not recall who. Asked further about it in cross-examination, he said:
By the look of this, it looks like wages – I paid construction. By the look of this, by amount, it looks like one of the plasterers.
….One of the plasterers' wage.
I am satisfied that this suggestion that it looked like a plasterers’ wage was no more than a guess by Kogan.
Levchenko was the engineer engaged for the construction. Beliavski conceded in evidence that the accounts paid by Kogan ‘probably’ included paying Levchenko. The email from the bank states that on 26 October 2016 $2,552 was transferred to ‘T Levchenko and Assoc’.
There is an invoice from Levchenko to Kogan dated 8 September 2016 for $2,552. Kogan gave evidence that Levchenko always renders his invoices to him but they were passed onto the client. (Confusingly, the court book reference for this invoice was noted in the Agreed Schedule next to item 46: a claim that a cash payment was made to Levchenko for $1,650.) There is no receipt in evidence.
Svetlana has noted 2,552 as an item in the Boris List. That figure does not have a date next to it, and not all dated items are in precise date order. From its proximity to other dated entries, I infer that Svetlana noted it – as a result of what she was told by Kogan or by her husband who had been told by Kogan – in September or October. Given that her note is for exactly the same amount, noted at about the same time, I am satisfied that Kogan transferred the money on 26 October 2016, noting it was a payment regarding the Leopold Street property, told one of the Beliavskis he had made that payment, and Svetlana noted it as one of the items he had told them he had paid.
I will allow this claim.
Item 18 is a payment on 29 September 2016 to Devinder Sharma for construction costs for $3,960. The AB Studio bank statement shows a transfer on that date with the narrative ‘Leopold’ without showing who it went to. The email from the bank records payment to Sharma.
An invoice from Devinder Sharma for $3,960 dated 6 September 2016 is in evidence. The invoice states it is for ‘Rejuvenation of Pretra Girgio Stone’ in the powder room, ensuite bathroom and ‘bathroom with cracked tile’ at the Leopold Street property’s address. It is made out to Rococo Stoneworks Pty Ltd.
I am satisfied that Rococo Stoneworks passed this invoice to Kogan who paid it. I will allow this claim.
Items 19-23, 34, 35, 39, 42 and 52 – Payments to Aleksey Avdeev
Five cheque payments are listed as having been made to this tradesman (items 19-23). On cheques from the AB Studio’s account some of the cheque butts refer to Leopold in Kogan’s writing. Some are noted on the Boris List but not all.
Five cash payments are also claimed to have been made (items 34, 35, 39, 42 and 52). Some – but not all – of these payments are or may be on the Boris List: it is not clear how they relate to the cheque payments. There are no invoices or receipts in evidence. I am not satisfied on the evidence that any of these payments in fact related to particular work done on the Leopold Street property.
I will not allow these claims.
Items 24, 25, 33, 36, 50 and 53 – Rococo Stone payments
Kogan claims to have made five payments to Rococo Stone.
There are a number of invoices from Rococo Stoneworks in evidence. The first in time is also a receipt. It is dated 17 May 2016 for $10,000. It is directed to AB Studio and has the customer reference 'Leopold St'. There is then an invoice and receipt on 29 June 2016 (with the same reference and direction) for $18,000. A further invoice and partial receipt on 27 August 2016 with the same reference records charges of $27,500 but reduces it by $9,000 ‘paid’ so that the balance owing is $18,500.
The Boris List notes: a $2,244 payment on 27 July with the notation 'stone’;
an $18,000 payment on 1 August 2016 with the note ‘Ben (stone)’; an undated $5,000 payment with the notation ‘Ben Stone’ – apparently between 23 October 2016 and 8 November 2016, given where it is placed on the list; a $2,000 payment on 27 January 2017 with the note 'Ben'; and an undated $15,000 payment with the note ‘Stone’.Item 24 is claim for a cheque for $15,000 paid on 17 May 2016. The cheque butt says ‘Leopold Lone’. Kogan gave evidence that he never lent money to Rococo Stone, that they were paid for work they did. I am satisfied that the notation is to record that he considered this payment a loan related to the Leopold Street property. In giving evidence, he could not recall what it was for – he guessed it was probably for an island bench but said they also do fireplaces. As noted above, there is an invoice and receipt of the same date from Rococo Stone for $10,000. I am satisfied that $10,000 of this cheque related to the Leopold Street property. There is nothing to show if the other $5,000 also related to Leopold Street as there is no invoice relating to it.
I will allow $10,000 of this claim.
Item 25 is for an internet transfer for $18,000 paid on 1 August 2016. The notation on AB Studio's bank statement says 'Ab Studio'. There is an invoice for the same amount noted as ‘paid’ (the fact the invoice/receipt is dated 29 June may simply reflect the date it was issued rather than it was paid). The fact that the $18,000 is noted in the Boris List for 1 August 2016 suggests that Svetlana was told that day that Kogan had made this payment. I will allow this claim.
Item 33 is an alleged cash payment for $2,244 described as being for marble. The Boris List notes a $2,244 payment on 27 July with the notation 'stone.' There is no invoice that matches this amount in evidence.
I am not satisfied this payment was made or related to the Leopold Street property. I will not allow this claim.
Item 36 is an alleged cash payment for $5,000 on 1 August 2016 described as for ‘marble’.
There is no evidence to satisfy me that this was made or related to Leopold Street. I will not allow this claim.
Item 50 is a cash payment of $15,000 said to have been made on 14 February 2016. This is three months before May 2016 when the $100,000 (first) loan to the Beliavskis was made by cheque to Svetlana (and before the Beliavskis requested money to be advanced to enable them to complete construction). This may correlate to the undated $15,000 amount on the Boris List, but the evidence is inadequate for me to be satisfied that cash of $15,000 was paid by Kogan on 14 February. There is no invoice or receipt to back up that claim.
I am not satisfied this payment related to the Leopold Street property. I will not allow this claim.
Item 53 is a cash payment of $2,000 said to be for marble, made on 27 January 2017. It is on the Boris List, but there is no invoice or receipt correlating to this.
I am not satisfied this payment related to the Leopold Street property. I will not allow this claim.
Item 26 – Beyond Tiles
Item 26 is a claim for $5,000 paid by cheque on 30 November 2016 to Beyond Tiles for tiling supplies and services. The cheque butt has an unknown person’s writing for ‘Beyond Tiles’ and the sum, but Kogan's writing for the word ‘Leopold’. An email is in evidence, dated 29 November 2016. It is to Kogan, from Mio Contos of Beyond Tiles, and demands immediate payment of $12,979.71 as per attached statement. A payment to Beyond Tiles for $5,000 on 30 November is noted in the Boris List.
I am satisfied that this payment was made in relation to the Leopold Street property. I will allow this claim.
Items 27, 28 and 51 – Elite Painting Services
There are two invoices from Audrious Naujalis in evidence. They refer to these being progress payments for painting. The first invoice is dated 1 February 2016 for $4,000 (three months before the Beliavskis asked Kogan to assist with payments related to construction). The second invoice is on 19 July 2016 for $7,000. The Boris List indicates a claimed payment of $7,000 for render, with no date mentioned. There are no receipts to show payment was made
Item 27 is a claim of $4,000 paid by cheque on 2 August 2016. The amount claimed was initially $7,000 – not $4,000 – but it was clear this it was a misreading of the amount on the cheque butt, and the claim was reduced. The cheque butt says 'Leopold Renda'. Kogan gave evidence that the note on the cheque butt meant 'render' and related to painting. The cheque butt does not say who it was paid to. The AB Studio statement does not say who it was paid to.
I am not satisfied this payment related to the Leopold Street property. I will not allow this claim.
In item 28, Kogan claims $1,760 was paid by cheque on 31 January 2017. The cheque butt says AB Elite Painting. The AB Studio bank statement shows this amount being paid out on 14 February 2017. Kogan said it is not his handwriting on the cheque butt. There is no invoice or receipt to substantiate this payment.
I am not satisfied this payment related to the Leopold Street property. I will not allow this claim.
In item 51, Kogan claims $4,000 in cash was paid on 14 February 2016.
I am not satisfied this payment was made, or related to the Leopold Street property. I will not allow this claim.
Item 29 – Touchwood Cabinetry
Kogan also makes a claim that $1,941 of a cheque for $21,379, paid on 6 September 2016 $1941 was paid for the supply of cabinets for the Leopold Street property.
The relevant cheque butt has various figures scrawled on it, including ‘1941’ with a notation that is hard to read.
$1,941 is noted in the Boris List on 6 September 2016.
On 19 August 2016 an email was sent from Shay Sidelman of Touchwood Cabinetry to Kogan. It says the amount still outstanding of the total amount on two projects, including the Leopold Street property, was $21,374.64. It said that the amount still owing on the Leopold Street property for three invoices was $1,941.50. The email attached three invoices made out to AB Studio for the Leopold Street property totaling $1,941.
Kogan admitted under cross-examination he was not sure what amount of any of his cheque related to the Leopold Street property. Given the email from Touchwood Cabinetry specifying that $1,941.50 was still owning in relation to the Leopold Street Property and attaching the three invoices, and the notation in the Boris List, I am satisfied that $1,941 of the amount paid in the cheque for $21,379 related to the Leopold Street property.
I will allow this claim of $1,941.
Item 30 – Visual Candy
Kogan claims $3,000 was paid by internet transfer to Visual Candy for a promotional video on 19 September 2016.
The Boris List records ‘video’ with the amount of $3,000 on that date. AB Studio's bank statement says ‘advertising’ in relation to that payment. Kogan gave evidence this was definitely for the Leopold Street property. Svetlana gave evidence she saw a promotional video which had been made for the Leopold Street property. An invoice sent by Visual Candy for $3,000 on 18 September 2016 was in evidence. It described what was provided as an ‘extended property’ video. A later copy of the invoice notes that it was paid in full.
I am satisfied this payment was made in relation to the Leopold Street property.
I will allow this claim for $3,000.
Item 31 – AB Plastics
Kogan claims $5,000 was paid by internet transfer on 11 August 2016 to AB Plastics as relating to the Leopold Street property. The notation on the account statement says 'Ab plastic Leopold'. An invoice to AB Studio from AB Plastics refers to delivery 'to site Caulfield.' It claims $5,759.60 as owing.
I am satisfied that this $5,000 payment related to the Leopold Street property. Kogan made that notation at the time he electronically transferred the money. The invoice is for a higher amount, and I am satisfied that this was part payment.
I will allow this claim for $5,000.
Items 32, 37, and 41 – The Good Guys
Kogan claims that three cash amounts were paid to the Good Guys.
Item 32 is a claim of $3,900 paid on 14 July 2016 for two televisions. There is an invoice (recording full payment) from The Good Guys on 21 July 2016 for two televisions for $3,870 in evidence. It refers to 29 Leopold Street and to delivery instructions being required. The Boris list also has $3,900 for 'TV' noted. No date is mentioned but it is between entries of 14 July 2016 and 27 July 2016.
Kogan was cross-examined to establish that he had paid for one television at The Good Guys using a credit card later, on 1 August 2016. I am not satisfied that that means he would not have paid for the televisions in question by cash. He could well have paid in different ways at different times. He clearly often dealt in cash in his business dealings. Although the claim said the payment was made by cash on 14 July, I am satisfied this date was referred to simply because the relevant entry is straight after a 14 July entry on the Boris List. I am satisfied Kogan did not have an independent memory of making the payment when he made the claim, but was relying on the Boris List. The invoice found supports all but $30 of the claim.
I will allow $3,870 of this claim.
Item 37 is for $1,090 paid to The Good Guys in cash for ‘iPads installed in landing and kitchen’. Giving his evidence, Kogan said that he thought he paid for things at The Good Guys by credit card. I am satisfied this was the case in part – as mentioned above, there is an invoice in evidence of him paying for a television by card. This does not rule out him paying in a different fashion for iPads. But no invoice was produced for the iPads. Kogan gave evidence that he recalled they were about ‘$600 each, $500 each, something like that’. There were two of them. It appears that the claim is made simply because $1,090 is set out in the Boris List.
I am not satisfied, without an invoice or other evidence, of this cash payment. I will not allow this claim.
Item 41 is $6,500 is claimed to have been paid in cash on 29 August 2016 for air conditioning units. There was no invoice in relation to these. The Boris List records $6,500 on 29 August for 'air condision [sic] (bill)’. In cross-examination, Kogan said he had no idea about this claim, and specifically stated, 'I never bought air conditioning units from The Good Guys.'
I will not allow this claim.
Item 38 – E & S Trading
Item 38 claims $2,700 cash paid to E & S Trading (initially Kogan’s claim was that this sum was paid to The Good Guys) on 1 August 2016 for ‘barbecue on rooftop’. The Boris List records a payment of $2,700 for ‘BBQ (roof)’. No date is mentioned but it appears in the list where the latest preceding date is 1 August 2016. The next date which appears in that list is 29 August 2016.
There is an invoice for $2,582 from E & S Trading on 16 August 2016 directed to AB Studio. This figure does not match the amount in the Boris List. There is no receipt in evidence.
Kogan gave evidence that the barbecue on the rooftop was purchased either from The Good Guys or E & S Trading. He said he purchased it, he thought, on his credit card and 'it was around $3,000 if I recall it'.
I am not satisfied on the balance of probabilities that $2,582 was paid for the barbecue.
I will not allow this claim.
Item 40 – No Pressure Plumbing
This is a claim for $3,740 cash said to have been paid on 11 August 2016 for plumbing. It is recorded in the Boris List, which says ‘plumbing (bill)’.
There is an invoice dated 4 July 2016 from No Pressure Plumbing to AB Studio which refers to the Leopold Street property. It says $3,861 is due. There is no receipt.
I am not satisfied, without more, that this invoice was paid in relation to the Leopold Street property. I will not allow this claim.
Item 43 – the Beliavskis
Item 43 is for $200 cash said to have been borrowed by the Beliavskis on 11 September 2016. In the Boris List, $200 is recorded, with nothing to indicate what it is for or who it was given to, and with no date. It appears immediately under an entry dated 11 September 2016. Kogan gave evidence he had no idea what this claim was about.
I will not allow this claim.
Item 44 – Rhino Bins
Item 44 is for $2,730 cash said to have been paid to Rhino Bins for rubbish removal on 19 September 2016. The Boris List records this figure as having been paid for 'rubbish bin'. The entry is undated and the last preceding date is 19 September 2016. The next recorded date is 11 September 2016 so these particular entries are not in date order.
Kogan relies on an invoice dated 25 August 2016 for $2,230 from Rhino Bins relating to bin hire at the Leopold Street property. However, that invoice records $2,000 as paid. Kogan was cross-examined about the fact that other invoices stamped 'paid' had been sent from Rhino Bins. There is no invoice/receipt to show $2,730 was paid.
I am not satisfied that the amount claimed was paid in relation to the Leopold Street property. I will not allow this claim.
Item 46 – Levchenko
Kogan makes a claim for $1,650 which is claimed as paid by cash to Tony Levchenko on 23 October 2016. The Levchenko invoice of 8 September 2016 for $2,552 is noted in the Agreed Schedule for this item, but as discussed above, in my view it clearly relates to the payment for $2,552 noted in item 17 above.
Asked about the alleged cash payment for $1,650, Kogan said:
I remember paying him that, yes…. I don’t remember the amount….I have a recollection I paid him but I don’t remember the amount.
There is no invoice with an amount of $1,650 correlating to that alleged payment.
$1,650 is noted in the Boris List without a date, between an entry dated 23 October 2016 and one dated 8 November 2016. The name next to it is written in Russian, but it is the same as the name written next to the $2,552 payment on the earlier page. I am therefore satisfied that Svetlana noted a $1,650 payment claim by Kogan on a date around 23 October.
I am not satisfied, however, that $1,650 was paid in cash to Levchenko in relation to the Leopold Street property. Other than the notation in the Boris List there is no evidence of this. Kogan simply remembers paying an amount.
Item 47 – Padalka Metal Supplies
$5,322 is said to have been paid on 29 November 2016 to Padalka Metal Supplies. It is recorded in the Boris List. An illegible invoice was produced after Kogan had given evidence. There is no receipt in evidence.
I will not allow this claim.
Item 48 – Renox
A payment is listed in the Agreed Schedule to ‘unknown’ for $1,010 for 'Renox towel rod for bathroom'. An invoice from Renox Pty Ltd, dated 28 July 2016 (with a delivery address of 37 Leopold Street) is in evidence. It is for $1,010. A demand was sent to Kogan on 6 November 2016.
$1,010 is noted in the Boris List with the date 20 December 2016; the description is 'Renox – heated towel rail’. Unlike any of the other entries in the list – and for a reason that was not explained – that entry has square brackets written around it. Evidence was produced that Svetlana paid this invoice by cheque on 2 December 2016 from the Beliavskis’ joint account.
I will not allow this claim.
Item 49 – ODS Glass
Item 49 is $10,000 cash claimed as paid on 21 December 2016 to ODS Glass. The Boris List has an entry of $10,000 with the description 'Marty'. Kogan relies on emails sent to him in July and October 2016 by Marty O'Donnell of ODS Glass Pty Ltd, referring to glass prices for the Leopold Street property. He also relies on a text message of 20 December 2016 sent by Marty Okna to him, which says, 'hi mate can I please come up and grab that money off you this afternoon'. The following morning Kogan sent a text to Beliavski which said (in Russian) 'Marty' and '10000'. The message included a picture of a wad of notes (the copy in evidence is very dark and hard to decipher, but appears to include at least one $50 note). No evidence was called from ODS Glass, and no receipt produced. I cannot be satisfied about what was paid to Marty.
I will not allow this claim.
Item 54 – Trident Concrete
Item 54 is a claim for $5,000 on 9 December 2015 to Trident Concrete. Kogan relied on an email from Marc Carafa of Trident Concrete on 9 December 2015. It referred to a quote that had been sent and an amount of $22,400. It then said 'I agreed to a lesser amount of $17,500. You paid $10k cash and still owe $7500 cash or $8250 including GST to cover the blinding portion of the job’.
Svetlana gave evidence – supported by a Westpac customer receipt print out – that she withdrew $20,000 on 23 December 2015 and paid $5,000 for concrete. It is possible that Kogan paid $5,000 as well – but I cannot be satisfied of this on the balance of probabilities given the lack of evidence.
I will not allow this claim.
COUNTERCLAIM
The counterclaim was premised on findings that the joint venture alleged by the Beliavskis was entered into, and Kogan made his payments as a capital contribution to that joint venture.
In the counterclaim, Beliavski sought a declaration that the funds Kogan provided were Kogan’s contribution to the joint venture. He pleaded that the joint venture resulted in a loss, and claimed that Kogan should bear one third of that cost. He claimed to be:
…entitled to the taking of accounts and the making of inquiries to ascertain the extent of the loss and to a consequential order or Declaration that Kogan is obliged to bear one third thereof after accounting for the joint venture partners' respective monetary contributions to the joint venture
I do not find the joint venture was entered into or that the payments were capital contributions.
Even if I had found the joint venture was entered and the payments were capital contributions, it would not have been appropriate to make such a declaration or order when the third member of the alleged joint venture agreement – Gubaydullin – is not a party to this proceeding. There also would have been no utility in the declaration sought.
I will dismiss the counterclaim.
CONCLUSION
I am satisfied that Kogan loaned the Beliavskis a total of $126,323, which was agreed to be repaid after the Leopold Street property was sold, but remains outstanding. This is made up of the following amounts, discussed in detail above:
· $73,000 [the agreed amount].
· $2,552 [item 17].
· $3,960 [Item 18].
· $10,000 [item 24].
· $18,000 [item 25].
· $5,000 [item 26].
· $1,941 [item 29].
· $3,000 [item 30].
· $5,000 [item 31].
· $3,870 [item 32].
I will give judgment for the plaintiff against the defendants in the sum of $126,323, together with interest. I will dismiss the counterclaim.
I direct the parties to consider the orders that should be made as a result of these reasons, including as to interest and costs. If the proposed orders are not agreed, submissions as to the proposed orders should also be provided by each party. If a hearing is required on these matters, it will then be listed.
---
Certificate
I certify that these 62 pages are a true copy of the reasons for decision of her Honour Judge Marks, delivered on 28 June 2019, and revised on 4 July 2019.
Dated: 4 July 2019
Samantha Marinic
Associate to Her Honour Judge Marks
0
11
0