Lioe v Davidson

[2019] NSWSC 721

Supreme Court

New South Wales

Medium Neutral Citation:	Lioe v Davidson [2019] NSWSC 721
Hearing dates:	12 and 13 June 2019
Date of orders:	13 June 2019
Decision date:	13 June 2019
Jurisdiction:	Equity
Before:	Pembroke J
Decision:	Judgment for plaintiff
Catchwords:	EQUITABLE CHARGE – imposed to secure repayment of indebtedness – principles applicable – flexible
Cases Cited:	Tadrous v Tadrous [2012] NSWCA 16
Category:	Principal judgment
Parties:	Rita Lestari Lioe – plaintiff Leonard Davidson – first defendant Lelly Mariana Purwa – second defendant
Representation:	Counsel: Mr V Bedrossian with Ms A Smith – for the plaintiff Mr S O’Brien with Mr C Street – for the first and second defendants   Solicitors: Kydon Segal Lawyers – for the plaintiff Fusion Legal – for the first and second defendants
File Number(s):	2018/296907

Judgment

Introduction

1. The plaintiff claims an order for the repayment of approximately $280,000 plus interest together with an equitable charge to secure that sum over an apartment property at Zetland. The registered proprietor of the property is the first defendant. The second defendant is his mother. There is no dispute about the amount of $96,893.62. The defendants consented to judgment in that amount on the first day of hearing without prejudice as to their submissions as to interest or the claimed equitable charge.

2. The remaining factual dispute relates to whether there has been satisfactory proof that the plaintiff paid the balance of the moneys to the defendants, or one of them. For reasons that I will explain, I am quite satisfied, whatever the amount, that the known or agreed purpose of the payments by the plaintiff was to assist directly or indirectly with the purchase and possibly the maintenance, of the Zetland property. I am satisfied that the first defendant knew of that purpose.

3. There were only two satisfactory witnesses. They were Mrs Rosemary Tang and her daughter, Elena Loh. They had no financial interest in the outcome and were clearly independent. Both were articulate and intelligent. I thought both were entirely honest and credible. Their evidence, taken together with the proved facts and the sequence of events, is decisive in determining what is more likely than not, having regard to the realistic probabilities. They support the plaintiff's claim. It is not possible to discount or disregard their evidence on any logical or reasonable basis.

The Plaintiff

4. The plaintiff was unsatisfactory, partly because she is elderly and was frequently confused and sometimes inconsistent. Her ability to communicate in English was poor. Her memory was not reliable and she did not understand many of the questions. She has experienced significant hardship and is entitled to sympathy for the tribulations which she has endured. Even making reasonable allowances for all of these matters, I could not be satisfied on her evidence alone of all of the payments for which she contended. Ultimately I have concluded that the core of the plaintiff's evidence should be accepted, not so much because of what she said but because of what the second defendant admitted. That conclusion is supported in essential respects by the evidence of Rosemary Tang and Elena Loh.

Second Defendant

5. Mrs Purwa, the second defendant, was unsatisfactory for different reasons. Her evidence was, in most respects, quite lacking in credibility. She denied the obvious and asserted the improbable. She was clearly intelligent but it was obvious to me that she was motivated by self-interest. I did not regard her as an honest witness. I thought she was mendacious.

6. I formed the view that she regarded her evidence as an opportunity to say whatever she thought would advance her case. In a number of important respects, her explanations defied credibility when the likely inference was reasonable and probable. Her explanations were contradicted in important respects by other evidence that was probative and objective, or by the inferences that flowed rationally from proved facts or from the probabilities. There was force in the plaintiff's characterisation of her evidence as something which she had "gone to great lengths to manufacture" as a defence to the plaintiff's claim.

First Defendant

7. The first defendant, Mrs Purwa's son, was as unsatisfactory as his mother. In my view, the evidence of both of them was little more than an elaborate fiction whose sole purpose was to defend and defeat the plaintiff's claim. Like his mother, the first defendant denied the obvious and asserted the improbable. Sometimes when faced with facts which were inconsistent with his denial of the plaintiff's claim, he resorted to lack of memory or absence of knowledge. His evidence in relation to the deposit of $87,000 was particularly unsatisfactory.

Mr Poerwanto

8. Mr Poerwanto is the father of the first defendant and the husband of the second defendant. He remains an Indonesian citizen and his first language is Indonesian. His communication skills in English were poor. He added little reliable evidence. He freely admitted that his wife dealt with all financial matters. I gained the impression that his affidavit, which was not sworn until last month, was primarily the product of his wife who advised and assisted him in its preparation. His recollection was poor. I had no confidence whatsoever in the veracity of his affidavit or his evidence generally. His evidence of banking transactions and conversations in 2014, five years before the preparation of his affidavit, is neither reliable nor plausible and there was no documentary corroboration at all.

Cash Payments

9. I should deal with some of the primary factual questions. The first issue relates to the plaintiff's cash. It is clear enough that she had a considerable amount of cash in her possession in 2014. Mrs Purwa well knew that. Indeed, I infer that the revelation that the plaintiff had a considerable amount of cash motivated her conduct in dealing with the plaintiff. She said that in April 2014 she knew that Rita had a lot of cash in her possession. She said in evidence that I found somewhat evasive that "she told me that and I trusted her." When pressed about whether she had cash of about $160,000 or more she said:

I don't remember the amount frankly but she said she put her money in my drawer all bundled up and tied up. I had never looked into it. I had never care a bit, a bit whether it's money or not but she says it's all money. So together with my cash, my foreign exchange all in that drawer, so I just trusted her. She said, 'Money here because nothing to do with me.’

10. I do not accept her denials but I do accept that she was aware of a substantial amount of cash which, for a time, the plaintiff kept in Mrs Purwa's drawer. There is some objective corroboration in the documentary record of the fact that the plaintiff had cash, although no reliable corroboration of the amount. She held a safety deposit box with the Commonwealth Bank of Australia. It was facility number 2099-129. She paid an annual fee from 2005 to 2017 for that box and the evidence included several access slips, signed by the appropriate persons, recording access being granted to her to the safety deposit box.

11. Part of the documentary record includes a number of envelopes in a form provided by the St George Bank on which the plaintiff has written amounts and dates, sometimes in English, sometimes in Chinese. I have no confidence in the contemporaneous nature of those notations or their accuracy. They could just as well have been added to the envelopes after the event.

12. Elena Loh provided further corroborative evidence that there was a large amount of cash available to the plaintiff. At some stage between April and October 2014 she accompanied Mrs Purwa and the plaintiff to the bank near her office for the purpose of exchanging a box containing substantial cash for a cheque. She said that it was "a very large sum". But she appears to have minded her own business and did not notice, or does not now recall, the amount of the cheque which was exchanged for the cash.

Bank Transfers

13. In addition to having a considerable but unknown amount of cash, the plaintiff made two admitted transfers of funds from Indonesia to or for the benefit of the second defendant. Those amounts were $52,958.62 on 15 July 2014 and $43,935 on 25 July 2014. The documents make it obvious that those moneys facilitated the settlement of the purchase of the Zetland property. The moneys were originally transferred, as to part, to Mrs Purwa's UOB account and, as to the other part, to her HSBC account on 15 July and 25 July 2014 respectively.

14. On 28 and 29 July Mrs Purwa transferred approximately $43,000 from her HSBC account to her SAM loan account. She acknowledges that this was the plaintiff's money. Between 15 August and 25 August 2014 she transferred $50,000 from her UOB account to her SAM loan account. Again she acknowledges that this was the plaintiff's money. On 15 and 16 September 2014 Mrs Purwa transferred $108,000 from her SAM loan accounts to her HSBC account, and between 18 and 23 September she transferred $108,000 from her HSBC account to her son's Qantas Credit Union Home Loan Account. Those moneys were then utilised to settle the purchase by the first defendant of the Zetland property on 9 October 2014.

Deposit of $87,000

15. It seems probable that the plaintiff provided the funds for the deposit from her cash resources. The alternative explanation given by the first defendant was completely unconvincing. He stated in his affidavit that he was provided with $87,000 in cash by his mother on 31 May 2017. His attempt to justify and explain that evidence in cross-examination was unimpressive. He had a poor recollection of events, and he prevaricated on essential aspects of his evidence. They included (1) whether it was his mother or his father who gave him the $87,000; (2) the currency in which the deposit was given to him; and (3) the date and circumstances in which his mother gave him the money.

16. When he was confronted with Commonwealth Bank of Australia bank deposit cheque dated 27 May 2017 he accepted that whether or not he was given money by his mother on 31 May, it could not have been used to pay the deposit. There is considerable force in the submission of the plaintiff's counsel that the defendants concocted an explanation designed to support the proposition that the $87,000 did not come from the plaintiff.

17. Apart from the fact that he was unwilling to answer certain questions directed to whether or not his mother gave him the money by saying at one stage "I cannot answer that right now" and then saying "I don't know", there was another aspect of the first defendant's evidence in relation to the deposit which did him no credit. He gave curious evidence about what happened to the money. He said it was cash in Singaporean dollars and that he "converted it bit by bit". There was no reasonable explanation as to why he thought it necessary to convert it bit by bit. It was not illegal money in any sense, according to his version of events. There was no reason why the whole of the $87,000 in Singapore currency could not have been taken to the bank and exchanged. He had no records of the transaction at the bank by which he converted the moneys.

18. When asked over how many days he exchanged the money "bit by bit" he answered "I cannot recall". When the proposition was put to him that "So it could have been a number of days or even longer?" he answered "I cannot recall". When asked whether he went into town with $87,000 in Singaporean currency in his pocket, and went around to exchange counters in the city through the course of the day, he answered "Sorry, I cannot remember". When the proposition was put to him that it was not every day you walk around with $87,000 worth of Singaporean currency he said "Not every day, no".

Acknowledgement of Debt

19. A crucial document in the evidentiary framework was an acknowledgement of debt signed by the second defendant. Evidence was given about the circumstances in which that document was created, but the inferences to be drawn from the face of it are themselves compelling. The document was signed by the second defendant, apparently twice. It clearly connected the debt, which the second defendant acknowledged in the document, to the Zetland property. It stated that Mrs Purwa agreed to pay back the plaintiff "20% of $870,000 plus stamp duty = $174,000 plus $34,660 = $208,660". Apart from being directly connected with the Zetland property, the terms of the document imply that the repayment included repayment to the plaintiff of the deposit which she had paid.

20. The document went on to state that Mrs Purwa agreed to repay the sum of $208,660 in three instalments, being $70,000 on 2 August, $70,000 on 4 December and $68,660 on 2 April 2018. The document was dated and signed on 27 July 2017. It was in the handwriting of Rosemary Tang. She explained fully and persuasively how the document came into existence. She said that she met with Mrs Purwa who told her that the plaintiff paid 20% of the purchase price plus stamp duty. She added that she has also been paying outgoings.

21. When Rosemary Tang inquired "How did you come to take Rita's money for the house in your son's name?" she said that Mrs Purwa responded:

I felt sorry for Rita. She has problems with her husband and she was sent to gaol. I felt sorry for her and took her home when she was released from gaol. I found out that Rita had a lot of cash in my drawer so I encouraged her to invest in the property. Rita said she could not get a loan as she could not prove income, so out of goodwill I said I would get Leonard to help with the loan. All good intentions.

22. Rosemary Tang's recollection of the events relating to the creation and execution of the acknowledgment of debt was assisted by her own contemporaneous note, which contained these statements:

When I told her [of] the allegation of $200,000 from Rita to buy property in her son's name, she admitted using her son Leonard's name to get the loan. She also admitted Rita paid all the outgoings plus stamp duty. She told me that she saw Rita had $200,000 sitting in her drawer and proposed Rita to use the money to buy a property. She suggested to use her son's name to get the loan. Rita agreed, and believ[ed] the unit belongs to her. Hence she pays all the outgoings.

23. She concluded her contemporaneous note by saying that she quickly drafted a short note, namely the acknowledgment of debt, and that Mrs Purwa signed and "me too on her copy".

24. The documentary record includes other objective evidence from which it can be inferred that the acknowledgement was intended to operate in accordance with its terms. Mrs Purwa appears to have intended to comply with the instalment repayment plan recorded in the acknowledgment of debt. The first instalment was due on 2 August 2017. Her HSBC account records that on 28 and 31 July, approximately $75,000 in separate amounts was deposited to that account. I infer that that these deposits were anticipation of paying $70,000 to the plaintiff. It appears that Mrs Purwa had a change of mind on 31 July or 1 August, which caused frustration to Rosemary Tang, who sent a text message to Mrs Purwa saying "I wash my hands and leave the matter to Peter. I thought this is the best way to save costs for all of you, looks like I am wrong, sorry." On 2, 3 and 4 August, consistent with her apparent change of mind, Mrs Purwa transferred out of her HSBC account the $75,000 which had been deposited a few days before. On 2 August the plaintiff instructed her solicitor to lodge a caveat to protect her interest in the property.

Mrs Purwa’s Explanation

25. A singular feature of the evidence was Mrs Purwa’s explanation for the acknowledgement of debt. There are numerous aspects to the implausible nature of this explanation. The first to note is that it only appeared for the first time approximately three weeks ago. The proceedings were commenced in 2018 and the dispute unfolded in August 2017. The anticipated evidence of Rosemary Tang was available in October 2018.

26. The essential feature of Mrs Purwa’s explanation was that the $208,000 represented some sort of proposed loan for the purpose of renovations yet to occur at her home in Rosebery. In order to align the figures in the acknowledgement of debt with her explanation she says that she received a builder’s quote for renovations in the sum of $870,000. This is a remarkable coincidence but it does not explain the language of the acknowledgement of debt which speaks of repaying to the plaintiff 20% of $870,000 plus stamp duty.

27. Mrs Purwa went on to say that as part of her renovation plan she intended that the property at Rosebery be transferred to her son for a sale price of $869,000 and that he would then be able to borrow 80% of that amount to assist with the payment of renovations. Subsequently, she was told there would be a delay of three to six months in commencing the renovations and, according to her version of events, the funding application was put on hold in July 2017.

28. The suggested sale price of the transfer to her son was significantly lower than the apparent value of the property and would not have enabled a loan of $870,000 or even 80% of it to be made available by a lender. The idea that Mr Davidson could have borrowed 80% of the quoted costs of renovations fails, in any event, to take into account the existing mortgages secured over the property in favour of Perpetual Trustees Victoria Limited. And the notion that she would agree to pay a substantial sum for stamp duty on the transfer of her property to her son in order to secure a bank loan in order to enable renovations to be carried out is implausible. Mrs Purwa had a keen eye for money.

29. It goes without saying that the content of the acknowledgement of debt is entirely inconsistent with an arrangement to borrow money. This is partly because it provided for the first instalment repayment of $70,000 on 2 August 2017 within a few days of supposedly obtaining access to these loan moneys from the plaintiff.

30. Finally, Mrs Purwa protested that the acknowledgment of debt was a draft. But that is an unacceptable and implausible explanation. She signed it and then she sent to Rosemary Tang on 30 July an email saying, “Regarding the agreement 27 July 2017...can I redo it to have some changes (such as date and instalment amounts but not the total amount).” I am quite satisfied that it was a binding legal obligation containing promises by her in consideration for payments that had already been made.

31. There is force in the plaintiff’s submissions – which I accept – that Mrs Purwa has manufactured a defence to the plaintiff’s claim, including in three essential respects. The first was her “nonsensical story”, as counsel for the plaintiff described it, in her attempt to explain the acknowledgement of debt. The second was her conduct in involving her son in the “manufacture” of evidence – which I wholly reject – about the provision of the deposit of $87,000 by her to him. The third was the clear and inappropriate involvement by her in the preparation of her husband’s evidence.

Contributions to Property

32. The evidence demonstrates that after the purchase of the property the plaintiff made a number of payments for maintenance and outgoings in respect of it. I accept Mrs Tang’s account of her conversation with Mrs Purwa in which the latter admitted that the plaintiff made payments for outgoings. However, only three or four payments appear to be able to be reconciled and matched with corresponding entries in the defendants’ statements.

33. It is not possible to be satisfied about the amount of the contributions made by the plaintiff for maintenance and outgoings other than those few payments. However, the fact that they were made reinforces the conclusion that the plaintiff was led to believe that in some way, short of a trust, the purchase of the property was partly for her benefit. In other words, that in return for her considerable financial contribution she had an interest which equity would protect and secure, at least by the imposition of an equitable charge.

32. I am satisfied that the plaintiff paid the sum of $208,660 recorded in the signed acknowledgement of debt. This is made up at least of the deposit of $87,000 and the two transfers of $52,958.62 and $43,935. This totals $183,893.62. The balance of the admitted sum of $208,660 is represented by other cash contributions about which I am satisfied because of Mrs Purwa’s admission. This includes, among others, the few cash contributions for maintenance and outgoings which were able to be reconciled and matched with corresponding entries in the defendants’ statements.

33. There may well have been further cash payments but I am not satisfied to the requisite standard of the fact or the amount of those further payments. I have not felt able to rely on the plaintiff’s own self-serving notes which record purported cash payments by her totalling approximately $161,000. I am not satisfied that they were objective, contemporaneous or accurate. I cannot be sufficiently confident in her evidence about them. She was, as I have said, an unsatisfactory witness and there was no convincing corroboration.

Remedy

36. This is an appropriate case for the imposition of an equitable charge to secure the repayment to the plaintiff of the sum of $208,660 plus interest. In my view, the first defendant was as knowledgeable, as his mother in the process by which the plaintiff was induced to part with her money. He took the benefit of her contributions, assisted, encouraged and facilitated by his mother. Those moneys would not have been advanced by the plaintiff in the absence of that facilitation and encouragement.

37. The plaintiff's expectation has not been fulfilled. She has neither an interest in the property recognised by the defendants nor repayment of the moneys she made available. The principles on which an equitable charge should be ordered are summarised in Tadrous v Tadrous [2012] NSWCA 16 at [43]-[53] which I adopt. There is no room for inferring the existence of an actual intention to create a trust but the principle is a flexible one and justifies the grant of a charge to protect the plaintiff's equity

38. I therefore make the following orders:

1. Order that the second defendant pay to the plaintiff the sum of $208,660 plus interest as follows:

1. interest on $70,000 from 2 August 2017 at the rate of 5.5% per annum;

2. interest on $70,000 from 2 December 2017 at the rate of 5.5% per annum; and

3. interest on $68,660 from 2 April 2018 at the rate of 5.5% per annum.

2. Order that the property belonging to the first defendant located at 642/2C Defries Avenue, Zetland, Folio Identifier 106/SP90181 be charged in favour of the plaintiff to secure the repayment of those moneys.

3. Order the defendants to pay the plaintiff's costs, subject to (4).

4. List the proceedings before me on Wednesday, 17 July 2019 for the plaintiff’s application for a special order as to costs.

Decision last updated: 14 June 2019