Mark Gregory Hull and Noela Ann Hull as Trustees for the Hull Superannuation Fund v Gavranic
[2017] WADC 21
•17 FEBRUARY 2017
MARK GREGORY HULL and NOELA ANN HULL as Trustees for THE HULL SUPERANNUATION FUND -v- GAVRANIC [2017] WADC 21
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WADC 21 | |
| Case No: | CIV:796/2012 | 25, 27-29 JANUARY, 4 FEBRUARY & 10 OCTOBER 2016 | |
| Coram: | SCOTT DCJ | 17/02/17 | |
| PERTH | |||
| 29 | Judgment Part: | 1 of 1 | |
| Result: | CIV 796 of 2012 - Judgment for the plaintiffs against the first defendant CIV 797 of 2012 - Judgment for the first named plaintiff against the first defendant | ||
| PDF Version |
| Parties: | MARK GREGORY HULL and NOELA ANN HULL as Trustees for THE HULL SUPERANNUATION FUND PETER GAVRANIC JOANNE MARIE GAVRANIC KAPLAN PTY LTD WILTSLOW HOLDINGS PTY LTD MARK GREGORY HULL NOELA ANN HULL |
Catchwords: | Agreements for loan Identity of borrowers Terms of each loan Turns on own facts |
Legislation: | Nil |
Case References: | Ermongenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Vantage Systems Pty Ltd v Priolo Corporation Pty [2015] WASCA 21 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
PETER GAVRANIC
First Defendant
JOANNE MARIE GAVRANIC
Second Defendant
KAPLAN PTY LTD
Third Defendant
WILTSLOW HOLDINGS PTY LTD
Fourth Defendant
- NOELA ANN HULL
Plaintiffs
AND
PETER GAVRANIC
First Defendant
KAPLAN PTY LTD
Third Defendant
WILTSLOW HOLDINGS PTY LTD
Fourth Defendant
Catchwords:
Agreements for loan - Identity of borrowers - Terms of each loan - Turns on own facts
Legislation:
Nil
Result:
CIV 796 of 2012 - Judgment for the plaintiffs against the first defendant
CIV 797 of 2012 - Judgment for the first named plaintiff against the first defendant
Representation:
CIV 796 of 2012
Counsel:
Plaintiff : Mr B L Nugawela & Mr H Chew then Mr P Lafferty from 10 October 2016
First Defendant : Mr M Strbac
Second Defendant : Mr M Strbac
Third Defendant : Mr M Strbac
Fourth Defendant : Mr M Strbac
Solicitors:
Plaintiff : Success Legal then Phillip Lafferty
First Defendant : Delta Legal
Second Defendant : Delta Legal
Third Defendant : Delta Legal
Fourth Defendant : Delta Legal
CIV 797 of 2012
Counsel:
Plaintiffs : Mr B L Nugawela & Mr H Chew from 10 October 2016
First Defendant : Mr M Strbac
Third Defendant : Mr M Strbac
Fourth Defendant : Mr M Strbac
Solicitors:
Plaintiffs : Success Legal
First Defendant : Delta Legal
Third Defendant : Delta Legal
Fourth Defendant : Delta Legal
Case(s) referred to in judgment(s):
Ermongenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Vantage Systems Pty Ltd v Priolo Corporation Pty [2015] WASCA 21
- SCOTT DCJ:
Introduction
1 The issues in each of these actions are substantially the same. At trial an order was made that each of the actions be heard together and the evidence in each action be treated as evidence in the other.
2 It is common ground that:
(a) on about 7 February 2007 the sum of $80,000 was transferred into the account of Wiltslow Holdings Pty Ltd (Wiltslow) by electronic transfer (796 of 2012) the payee being described as 'deposit Hull Superannuat';
(b) on or about 21 February 2007 the sum of $100,000 was paid into the account of Wiltslow by bank cheque (797 of 2012);
(c) at all material times:
(i) Mr and Mrs Gavranic were directors of Kaplan Pty Ltd (Kaplan);
(ii) Mr Gavranic was the sole director of Wiltslow.
3 The statements of claim in each action have been the subject of amendment on a number of occasions including significant amendments at trial. Even then the further amended statements of claim failed to concisely articulate causes of action upon which the respective plaintiffs initially sought to rely.
4 After closing submissions, the respective plaintiffs abandoned a number of these causes of action.
796 of 2012
Statement of claim
1. In or about February 2007 Mr and Mrs Hull, as trustees for The Hull Superannuation Fund (Fund) of the one part and Mr Gavranic for and on behalf of himself and Mrs Gavranic of the other part, entered into an agreement (to which I will refer as the first agreement) by which the Fund agreed to lend Mr and Mrs Gavranic the sum of $80,000 upon the following terms:
(i) the Fund would lend the sum of $80,000 to Mr and Mrs Gavranic prior to the end of February 2007;
(ii) Mr and Mrs Gavranic would repay the sum of $80,000 to the Fund within three years of it being advanced;
(iii) to secure Mr and Mrs Gavranic's obligation to repay the sum of $80,000 to the Fund Mr and Mrs Gavranic would execute a mortgage (mortgage) over the property at 72 Hamilton Road, Hamilton Hill (Hamilton Hill property);
(iv) Mr and Mrs Gavranic would pay to the Fund interest on the sum of $80,000 or any unpaid balance at the rate of 8% per annum until repayment in full;
(v) Mr and Mrs Gavranic would pay the costs of and incidental to the preparation of the mortgage over the Hamilton Hill property.
2. On or about 7 February 2007 the sum of $80,000 was advanced by the Fund to Mr and Mrs Gavranic by it being transferred into Wiltslow's bank account by electronic transfer at the request of Mr Gavranic.
3. In about December 2008 the Fund engaged Messrs Lewis Blyth & Hooper to prepare the mortgage and thereby incurred legal fees in the sum of $467.51.
4. In breach of the first agreement, Mr and Mrs Gavranic failed and/or refused to execute the mortgage and/or to repay the sum of $80,000 and the interest thereon.
5. Alternatively if the first agreement was not made by the Fund with Mr and Mrs Gavranic then the Fund advanced the sum of $80,000 on the terms of the first agreement without knowing that Mr and Mrs Gavranic were acting or purporting to act as undisclosed agents for Kaplan as undisclosed principal by reason of which:
(i) Mr and Mrs Gavranic as undisclosed agents were liable to repay the sum of $80,000 to the Fund and/or;
(ii) Kaplan as undisclosed principal was liable to repay the sum of $80,000 to the Fund.
By the defences:
1. Mrs Gavranic denied that she was a party to the first agreement in her own right or as undisclosed agent for Kaplan.
2. Mr Gavranic:
(i) says that Mr Hull in his personal capacity agreed to lend the sum of $80,000 to Mr Gavranic in his capacity as the director of Wiltslow;
(ii) says that the terms of that agreement were that Wiltslow would repay the sum of $80,000 to Mr Hull when the 'business conditions improve';
(iii) says that pursuant to that agreement on or about 7 February 2007 Wiltslow received the sum of $80,000 into its bank account by electronic transfer;
(iv) says that on or about 28 February 2007 Wiltslow paid Mr Hull $10,000 in part repayment of the sum of $80,000;
(v) otherwise denies each of the allegations made by the Fund.
3. Kaplan denies that it was a party to the first agreement as undisclosed principal or at all.
4. Wiltslow's defence mirrored that of Mr Gavranic.
797 of 2012
Statement of claim
1. Prior to February 2007, Mr and Mrs Hull of the one part, and Mr Gavranic on the other part, entered into an agreement (to which I will refer as the second agreement) by which Mr and Mrs Hull agreed to lend to Mr Gavranic the sum of $100,000 upon the following terms:
(i) Mr and Mrs Hull would lend the sum of $100,000 to Mr Gavranic prior to the end of March 2007;
(ii) The term of the second agreement was for a period of 12 months commencing in March 2007;
(iii) Mr Gavranic would repay to Mr and Mrs Hull the sum of $100,000 or any part thereof outstanding at the expiration of the term.
2. Pursuant to the terms of the second agreement, in February 2007 Mr and Mrs Hull advanced the sum of $100,000 to Mr Gavranic by it being paid into Wiltslow's bank account by bank cheque at the request of Mr Gavranic.
3. In breach of the terms of the second agreement, Mr Gavranic failed and/or refused to pay the sum of $100,000 to Mr and Mrs Hull at the expiration of the term or at all;
4. Alternatively, if the second agreement was not made by Mr and Mrs Hull with Mr Gavranic then Mr and Mrs Hull advanced the sum of $100,000 on the terms of the second agreement without knowing that Mr Gavranic was acting or purporting to act as agent for Kaplan as undisclosed principal by reason of which:
(a) Mr Gavranic as undisclosed agent was liable to repay the sum of $100,000 to Mr and Mrs Hull; and/or
(b) Kaplan as undisclosed principal was liable to repay the sum of $100,000 to Mr and Mrs Hull.
By the defences
1. Mr Gavranic:
(i) says that Mr Hull agreed to lend the sum of $100,000 to Mr Gavranic in his capacity as the director of Wiltslow;
(ii) says that the terms of that agreement were that Wiltslow would repay the sum of $100,000 to Mr Hull when the 'business conditions improve';
(iii) says that in or about March 2007 Wiltslow received the sum of $100,000;
(iv) denies that he was a party to the second agreement in his own right or as undisclosedagent for Kaplan;
(v) says that in or about May 2007, Mr Gavranic for and on behalf of Wiltslow paid Mr Hull the sum of $10,000 in part repayment of the sum of $100,000.
(vi) otherwise denies each of the allegations made by Mr and Mrs Hull.
2. Kaplan denies that it was a party to the second agreement as undisclosed principal or at all.
3. Wiltslow's defence mirrored that of Mr Gavranic.
7 In neither action:
(a) is there a plea in the defences that the sum of $80,000 or $100,000 had not fallen due because 'business conditions' had not improved; and
(b) is there a reply by the plaintiffs denying receipt of the sum of $10,000 alleged to have been paid in part payment.
8 As unsatisfactory as this is, at trial these issues were canvassed in evidence and argument without objection, and I will deal with them.
Issues
9 The issues which fall to be determined in each action can be conveniently distilled as follows:
1. the identity of the lender and borrower;
2. the terms of the first and second agreements pursuant to which, respectively, the sums of $80,000 and $100,000 were advanced and were to be repaid;
3. whether and to what extent there has been any repayment.
Evidence from the parties relating to the loans
Mark Hull
10 Wiltslow built houses under the business names Daintree Exclusive Homes (Daintree) and Intamos (Intamos). Kaplan operated a cabinet making business and primarily built and supplied cabinetry to Wiltslow.
11 In about 2006 he began subcontracting to Wiltslow as a business development consultant for which he was paid an hourly fee. He rendered invoices to Wiltslow.
Loan of $80,000
12 Shortly after commencing work as a consultant, Mr Gavranic told him that Daintree was in a bit of trouble and he needed to borrow some money to put into the business. Mr Hull knew that the businesses conducted by Wiltslow urgently needed money.
13 He could understand why that was so but his view was that Daintree was a solid business having regard to the contracts on hand and the new contracts which were coming in. He told Mr Gavranic that he was prepared to support him.
14 John Pearce (Mr Pearce) of Gilpear was the superannuation manager of the Fund. Mr Hull spoke to Mr Pearce who told him that he could pass Mr Gavranic onto one of his (Mr Pearce's) associates for a loan with a financier or he (Mr Hull) could probably do something through the Fund.
15 There were at least two meetings between him, Mr Gavranic and Mr Pearce at Mr Pearce's office. At the first meeting:
(a) Mr Gavranic said that monies were needed urgently for the business. Mr Hull said he thought that the business was a great proposition and he was more than happy to lend Mr Gavranic money. He told Mr Gavranic that he was only prepared to go to $80,000 and Mr Gavranic agreed to that sum.
(b) Mr Pearce said that the money could be lent through the Fund and Mr Hull said he was happy with that. Mr Pearce said that because it was from a super fund there would need to be interest paid. Mr Pearce suggested interest at 12% and Mr Hull said that he was happy with 8%. Mr Gavranic said that would not be an issue.
(c) There was discussion that the loan had to be secured. Mr Hull's recollection was that he said that they could lend the money as long as there was security and 'to the best of his recollection' Mr Gavranic said 'yes'. Mr Gavranic said that the only security he could come up with was a block of land in Hamilton Hill. He said Mr Gavranic was happy to take the $80,000 and to 'go along' with a mortgage over the Hamilton Hill property.
(d) They talked about when the money would be repaid and he said he wanted it back within three years and Mr Gavranic agreed.
(e) There was no discussion about the cost of preparing a mortgage document.
16 He said in evidence that had Mr Gavranic not agreed to give security the money would not have been paid over. Mr Pearce was going to set up the loan agreement.
17 He did not give any evidence about what, if anything, was discussed at a second meeting.
18 Gilpear deposited $80,000 into the account of Wiltslow on 8 February 2007 by electronic transfer. He said that was at the request of Mr Gavranic. In the Westpac bank statement of Wiltslow (exhibit 1) the credit was described as 'deposit Hull Superannuat'. He knew that the $80,000 would immediately be used by Wiltslow to pay various suppliers and contractors.
19 At the time the $80,000 was advanced, there was no written agreement for the loan or any mortgage which had been prepared. He said he relied on Mr Pearce to arrange for the documents to be prepared. Those documents were not prepared until late 2008 or early 2009. He said he paid Blyth & Associates about $1,400 to prepare a loan agreement and mortgage. He did not say when that payment was made however it appears not to have been paid until late 2008.
20 He was shown an unsigned document headed 'Loan Agreement' which bore the year 2009 on the face sheet with respect to the loan of $80,000 (MFI 6). He said he and his wife had signed a loan agreement. From reading the schedule to this document he said it was a copy of the loan agreement he and his wife had signed. There was no evidence that this or any loan agreement was signed by Mr and/or Mrs Gavranic.
21 He said that he did not know what had happened to the document he said they signed.
22 He was shown an unsigned mortgage bearing the year 2009 on its face (MFI 12) which he said he had not seen. He said that he had chased up Mr Pearce to get the documents prepared.
23 He said that Mrs Gavranic was not at any meeting with respect to this loan, he did not have any communication with her, she did not give any guarantee, she made no promises to him and was not involved.
Admissibility of documents marked for identification
24 During his examination-in-chief Mr Hull referred to a number of emails, a letter from Lewis Blyth and Hooper to Gilpear Group, a copy of an unsigned loan agreement, a copy of an unsigned mortgage and a letter from iFinancial to the trustees of the Fund.
25 To that end there were:
(a) emails between Mr Hull and Mr Pearce on 7 February 2007 in which there was communication about (inter alia) the description of the Hamilton Hill property, the bank account details for Wiltslow and terms of the $80,000 loan (MFI5);
(b) emails between Ms Buckley of Lewis Blyth and Hooper, Mr Hull and Mr Pearce between 17 December 2008 – 3 February 2009 with respect to the drawing of a loan agreement and mortgage and clarification as to the provisions of each document (MFI7.1);
(c) a letter from Lewis Blyth and Hooper to Gilpear dated 9 February 2009 attaching a draft loan agreement and draft mortgage for review of the parties (MFI7.2);
(d) an email from Mr Pearce to Mr Hull dated 11 February 2009 by which Mr Pearce confirmed that he had received the draft documents and inquired whether they were to be posted or whether Mr Hull was calling past (MFI8);
(e) an unsigned loan agreement (MFI6) and unsigned mortgage (MFI12); and
(f) a letter from iFinancial to the trustees Hull Superannuation Fund dated 4 November 2009 enclosing a number of financial statements for the Fund and noting that in the 2008 accounts they had reflected the Fund's investment in the Hamilton Hill property as a first mortgage, however given that the trustees' names did not appear on the certificate of title, they had re-classified the investment as 'loan – 72 Hamilton Hill' (MFI16).
26 Objection was taken by counsel for the defendants to the admission of all of these materials.
27 As to the emails dated 7 February 2007 counsel said that they were between Mr Pearce and Mr Hull following a meeting or meetings at Mr Pearce's office and that Mr and/or Mrs Gavranic were not parties to them or copied in.
28 As to the other correspondence counsel submitted that they were not materials to which Mr and/or Mrs Gavranic were parties or copied in, they post-dated the loans by nearly two years and were not thereby relevant.
29 As to the draft documents counsel said that they were not signed by either party and there was no evidence that they were seen by Mr and/or Mrs Gavranic.
30 After argument I told counsel that I would deal with the admissibility of those items marked for identification in the judgment and that counsel should supplement their oral submissions at trial in their written closing submissions if they wished.
31 Counsel for the plaintiffs in 796 of 2012 made further submissions in his written closing.
32 In those submissions counsel submitted that each of the emails dated 7 February 2009 (MFI 5) were not sought to be tendered on the basis that they constituted evidence of the intention of the parties as to the formation of the loan agreement.
33 The emails are, counsel submitted, admissible to contradict the contention put by counsel for the defendants to Mr Hull that he was reconstructing events in hindsight and/or to contradict recent fabrication.
34 To that end it was put to Mr Hull in cross-examination that he did not contemplate asking any of the defendants for any security, that he made two unsecured loans and when things did not go the way he expected he attempted to obtain security after the fact which Mr Hull denied.
35 It was also contended by counsel that the emails formed part of the factual matrix as historical facts and were therefore relevant to Mr Hull's credibility.
36 In my view:
(a) The emails the subject of MFI 5 are not admissible. They are self-serving materials to which neither Mr or Mrs Gavranic were parties. Nor were either of them copied in. They are irrelevant. Counsel rightly concedes that they were not admissible as to the terms of the first agreement because they amounted only to the subjective intentions of Mr Hull. That is an impermissible basis for admissibility. See Vantage Systems Pty Ltd v Priolo Corporation Pty [2015] WASCA 21 [98]; Ermongenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 [25].
The cross-examination of Mr Hull did not amount to an assertion that he was fabricating his evidence. Mr Hull's evidence as to the terms of the first agreement was being tested having regard to the fact that the sum of $80,000 was advanced without any loan agreement or mortgage being in place and that these documents were not drafted until nearly two years after the payment into Wiltslow's account.
(b) The emails marked MFI 7.1, 7.2 and 8 and the letter from iFinancial to the Fund (MFI 16) are not admissible. They are items of correspondence post-dating the first agreement by almost two years. Mr and Mrs Gavranic are not parties to any of them nor were they copied in. They are merely self-serving in nature and are not relevant.
(c) The unsigned loan agreement (MFI 6) and unsigned mortgage (MFI 12) are irrelevant and inadmissible.
Loan for $100,000
37 In mid-February 2007, shortly after the $80,000 was paid into Wiltslow's account, Mr Hull said Mr Gavranic told him that he needed more money for the business and if he (Mr Hull) could afford it, whether he could lend him some money. He had a number of conversations with Mr Gavranic. Mr Pearce was not involved in any of these conversations. He said Mr Gavranic did not specify an amount. He said he offered Mr Gavranic $100,000 and Mr Gavranic thanked him.
38 He told Mr Gavranic that he would want it back within a couple of years and Mr Gavranic said that wasn't an issue. They did not discuss interest being paid.
39 Mr Gavranic asked him to put the $100,000 into the name of Wiltslow so it could be drawn on.
40 On 21 February 2007 a bank cheque for the sum of $100,000 was paid from a joint account held by him and his wife (exhibit 2) into Wiltslow's Westpac account (exhibit 3). The payee was, in the Westpac account, described as 'deposit Clarkson WA'.
41 He said that with respect to both loans there was no discussion between him and Mr Gavranic about any specific project for which the monies were to be used. As far as he was concerned the monies in Wiltslow's account could be used as the company saw fit. He said that he was aware that the borrowed monies in each case were to be used by Wiltslow to pay creditors and accounts in order to get it out of difficulty.
42 He said both sums were paid to Mr Gavranic who directed him where to put the monies.
43 He said that Mr Gavranic did not at any stage tell him with respect to either loan that he was borrowing the money as agent for Wiltslow.
44 He agreed in cross-examination that he made these loans in order to save Wiltslow from going under.
45 He said that from about a year after the loans were made he asked Mr Gavranic on about six occasions when he could get his money back or when Mr Gavranic could pay him some money. On each occasion Mr Gavranic told him that he didn't have the money.
Joanne Gavranic
46 She said she was a director of Kaplan but had no involvement in the businesses conducted by Kaplan or Wiltslow.
47 As a director of Kaplan she was provided with documents by her husband which, when she was asked to sign, she would do so. She did not know about any of the events for which she was being sued.
Peter Gavranic
Loan of $80,000
48 In late 2006 he said he could see that things were not going too well financially with Wiltslow. In early 2007 he said he had discussions with Mr Hull in which Mr Hull offered to put some money into Wiltslow so that it could carry on and once the business improved obviously the money would have to be returned from Wiltslow to him. Mr Hull said 'make sure you look after me' and Mr Gavranic said 'of course I will'.
49 He said in January 2007 Mr Hull made an appointment with Mr Pearce, a financial advisor. He said that when he first met with Mr Pearce and Mr Hull in Mr Pearce's office they spoke about the difficulties of Wiltslow and Mr Pearce said he was going to put a business plan together. When they discussed the money that Mr Hull was going to put in, there were no terms discussed.
50 He was asked by Mr Pearce what assets he had and he told Mr Pearce that he had a block in Hamilton Road. He had no idea why Mr Pearce was asking and he told them everything that he had.
51 Mr Hull said that there was $80,000 coming in for now. Mr Gavranic said he was not aware where it was coming from. He saw on the Wiltslow bank statement that $80,000 had been paid on 8 February 2007 and on the statement it said 'Hull Superannuation Fund'. He received bank statements on a weekly basis. The money was used to pay creditors and wages.
Loan of $100,000
52 He said that between 8 February 2007 until the $100,000 was received the financial situation of Wiltslow had not improved. He was referred to the Westpac statement for Wiltslow on 21 February 2007 and to the entry 'deposit Clarkson $100,000' (exhibit 18). He said he would have known where the money was coming from because Mr Hull would have said that the money was put in. He said the reason why the money was put in was, like the $80,000, to prop up Wiltslow until the situation improved.
53 As to the assertion in the defences filed in each action that it was an express term of each agreement that the monies loaned were not to be repaid until the business improved, he said it was Mr Hull who said that the monies would be repaid when the business improved. Mr Gavranic was asked when it was that Mr Hull made reference to loans being repaid when the business improved.
54 There was then this exchange:
…
All I'm saying is that Mr Hull gave me the or put the money into the account and he said when the business improved so whether it was on the day the money went in, the first lot or the second lot, I don't – I don't recall that bit when that was exactly said but I do remember when he said make sure – when – when I improve the business make sure that obviously the money was going to repaid to him and to look after him.
So this is after the event?---After the money was put in.
55 Mr Gavranic was referred to a number of special purpose balance sheets for Wiltslow for the financial years ending 30 June 2007 – 2011 (exhibits 22 - 26) and the special purpose profit and loss account for the financial year ended 30 June 2012. He said that the financial position of Wiltslow did not improve over that period.
56 He said Mr Hull left his company in 2010 or 2011. He said that the business by then had continued to operate badly and there was never any improvement year after year - just accumulating losses. As Mr Hull left he said to Mr Gavranic 'We'll have to get together and talk about the money that's owed' and he replied, 'not a problem'. The next he heard was from a friend who warned him that he would be getting a letter from Mr Hull's lawyers in regards to the money and he did.
57 In cross-examination he said that apart from completing existing work and maintenance Wiltslow could not take on new jobs since in or about 2010 or 2011 because it could not get indemnity insurance.
58 He was referred to exhibit 30 being the financial statements for the Zlinje Trust and said that it was the trust of which Kaplan was the trustee.
59 He was referred to the balance sheet for each of the financial years ended 30 June 2007 – 2009 which he agreed he signed confirming 'In the opinion of the trustees the accompanying balance sheet gives a true and fair view of the state of affairs of the trust as at the end of the financial year'. Under current liabilities in each financial year there was an entry 'loan – Mark Hull $160,000'.
60 He said that he did not have copies of the accounts for the trust for the financial year ending June 2010 but identified in the left-hand column of the 2011 balance sheet the figures for June 2010. In both 2010 and 2011 the non-current liabilities included 'loan - Mark Hull $160,000'. In the balance sheet as at 30 June 2012 the loan by Mark Hull of $160,000 no longer appeared as a non-current liability but appeared for the first time in the 2012 balance sheet for Wiltslow.
61 Mr Gavranic was asked how it was that the debt of $160,000 was shown in the Kaplan balance sheets until 2011 and thereafter in the Wiltslow balance sheet. He said that all he knew was that the money was put into Wiltslow by Mr Hull. He said that the accountant prepared the accounts and he went on the advice of the accountant.
Whether $20,000 was repaid
62 Mr Gavranic said that on 28 February 2007 the sum of $10,000 was paid to Mr Hull from the Wiltslow account. On 25 May 2007 the sum of $10,000 was paid to Mr and Mrs Hull from the Wiltslow account. To that end he was referred to:
(a) exhibit 15.1 being a screen shot of an MYOB accounting record dated 28/2/2007 addressed to M Hull as payee for the sum of $10,000 described as 'Loan to Daintree Homes';
(b) exhibit 19 being a copy of Wiltslow's business options overdraft for the period 23 February 2007 – 2 March 2007 in which there does not appear to be a debit entry for the sum of $10,000 on 28 February 2007 for which Mr Gavranic could not give an explanation;
(c) exhibit 15.2 being a screen shot of an MYOB accounting record dated 25/05/2007 addressed to M Hull as payee for the sum of $10,000 described as 'Loan to Daintree Homes';
(d) exhibit 15.2 (p 008) being a payment confirmation from Wiltslow to MG and NA Hull in the sum of $10,000 being part of a total payment on 25 May 2007 of $94,576.69;
(e) exhibit 20 being a copy of the Wiltslow business options overdraft statement for the period 18 May 2007 – 25 May 2007 in which a debit of $94,576.69 on 25 May 2007 is recorded;
(f) exhibit 15.3 (p 8.1) being a document headed 'Daintree Exclusive Homes bank register 1/02/2007 – 31/12/2007' in which payments to M Hull on 28/02/2007 and on 25/05/2007 each for the sum of $10,000 were recorded.
63 Mr Gavranic said that these documents were created by Wiltslow's accounting system in the ordinary course of business. He said that both sums of $10,000 were paid to Mr Hull in part payment of the sums loaned. He was unable to say to which loan each sum referred.
64 Mr Hull on the other hand accepted that each payment was made but denied that either sum was paid in part repayment of either loan.
65 Mr Hull said that it appeared to him that these were monies in payment of subcontract invoices rendered from him to Wiltslow. He said that if either sum was in part repayment of either loan he could not understand why it had been paid against his ABN because he would then have to pay tax. If it was a loan repayment he would not have been liable to pay tax on it.
66 Having said that, he was unable to point to any specific amounts which were then owed to him at the time these payments were made.
Letters of demand
67 Exhibits 14.1 – 14.5 comprise correspondence to and from the solicitors acting for the parties.
68 Relevant excerpts of those letters are as follows.
Letter Irdi Legal to Mr P and Mrs JM Gavranic dated 17 October 2011 (exhibit 14.2)
Dear Mr & Mrs Gavranic
LOAN FROM HULL SUPERANNUATION FUND
We act on behalf of Mark Gregory Hull a trustee for the Hull Superannuation Fund.
We are instructed by our clients as follows:
1. In or about February 2007 you entered into an agreement with our client in his capacity as trustee of the Hull Superannuation Fund (Fund) whereby our client agreed that the fund would loan to you certain moneys (Loan Agreement).
2. It was a term of the Loan Agreement that our client would cause the fund to loan to you the sum of $80,000 (Principal Sum).
3. It was further a term of the Loan Agreement that you would execute a mortgage in favour of our client over your respective interests in 72 Hamilton Road, Hamilton Hill … (Mortgage) … to secure the Principal Sum.
4. It was a further term of the Loan Agreement and mortgage that you would repay to our client, the Principal Sum together with interest at that rate of 8% per annum on the Principal Sum … .
5. Pursuant to the terms of the Loan Agreement and at Peter Gavranic's direction our client deposited the Principal Sum into Wiltslow's Holdings Pty Ltd's bank account on or about 7 February 2007.
…
69 In that letter, demand was then made for payment of the principal sum of $80,000 and interest together totalling $109,555.58 within seven days failing which the solicitors advised they were instructed to commence proceedings against Mr and Mrs Gavranic without further notice.
Letter Irdi Legal to Mr P and Mrs JM Gavranic dated 17 October 2011
Dear Mr & Mrs Gavranic
LOAN FROM MARK HULL
We act on behalf of Mark Hull.
We are instructed by our clients as follows:
1. In or about March 2007, you entered into an agreement with our client whereby he agreed to loan to you certain moneys (Loan Agreement).
2. There were terms of the Loan Agreement that:
2.1 Our client would loan to you the sum of $100,000 (Funds);
2.2 The term for repayment of the Funds would not exceed twelve months; and
2.3 You would repay the whole of the Funds upon demand made by our client.
3. In or about March 2007 and pursuant to the express terms of the Loan Agreement, the Funds were transferred to you by our client by bank cheque.
…
70 In that letter demand was then made for the sum of $100,000 within seven days failing which the solicitors advised they were instructed to commence proceedings immediately against Mr and Mrs Gavranic without further notice to them.
Facsimile Delta Legal to Irdi Legal dated 24 October 2011
Dear Mr Molony
LOAN FROM MARK HULL
We act for Mr Peter Gavranic.
We refer to your letter to our client dated 17 October 2011.
Our client advises that he wishes to resolve this matter without resorting to unnecessary and lengthy litigation.
We are in the process of obtaining instructions from our client and we will be in position to make informed response within next 14 days.
Email from Damian Molony to Mario Strbac dated 7 November 2011
Subject: RE: LOAN FROM MARK HULL
Dear Mario,
I refer to your letter dated 24 October 2011 and to our subsequent telephone conversation.
Please confirm that you are now in receipt of your client's instructions such that you may provide a substantive response, if any, to our letter to your client by close of business Wednesday 9 November 2011.
…
Email Mario Strbac to Damian Molony dated 8 November 2011
Subject: RE: LOAN FROM MARK HULL
Dear Damian
I confirm that I will provide a response by close of business tomorrow.
…
Letter Delta Legal to Irdi Legal dated 9 November 2011
Dear Mr Molony
LOAN FROM MARK HULL
I refer to your letters to our client dated 17 October 2011.
We are now instructed by our client as follows:
1. In our [sic] about February/March 2007 our client discussed with your client general conditions of our client's business.
2. Your client offered to help our client by lending him some money.
3. It was agreed that:
a. Your client will lend to my client the sum of $180,000;
b. Our client will return the monies to your client when the business conditions improve.
As the result of the above agreement:
4. Your client transferred to our client the sum of $180,000 in 2 separate transactions.
5. Our client paid back to your client the sum of $20,000 in 2 separate transactions in 2007 thus reducing the sum borrowed to $160,000.
Our client expressly denies:
6. That he negotiated any loan with your client in his capacity as trustee of the Hull Superannuation Fund.
7. That he agreed to execute any mortgage documents.
8. The existence of terms of loan other than in paragraph 3 above.
…
Our client is currently in process of organising his finances and will instruct us within two weeks.
…
Email Damian Molony to Mario Strbac dated 10 November 2011
Subject: RE: LOAN FROM MARK HULL
Dear Mario
I refer to your letter to me attached to your email below.
I note that your client does not deny owing my client note [sic] less than the sum of $160,000.00. However, your client suggests that he has paid my client the sum of $20,000.00. Kindly provide particulars of the alleged payments by your client to my client in 2007.
I further note that your client 'is currently in the process of organising his finances', am I to infer that your client is endeavouring to be in a position to repay my client the sum owing pursuant to the agreement within 2 weeks of the date of your letter?
…
Email Mario Strbac to Damian Molony dated 18 November 2011
…
In your email of 10 November 2011 you sought details relating to the sums totalling $20,000. My client advises that the first $10,000 was paid on the 28th February 2007 and the second $10,000 was paid on the 25th May 2007 into account No 086420675440880 in the name of MH & NA Hull.
Mr Gavranic advises that he will endeavour to fully resolve this matter in accordance with the agreement between the parties as soon as possible and he reiterates his willingness to resolve this matter by negotiation as soon as possible without resorting to legal proceedings.
He further advises that he in the process of securing funds and will advise as soon as that become [sic] certainty. Although he is not in a position to guarantee a deadline he does not expect for the process to take more than 4 weeks.
Could you please advise what is the amount you [sic] client would accept in full satisfaction of the debt.
Email Damian Molony to Mario Strbac dated 18 November 2011
…
I note your client has provided dates of the alleged payments to my client. I assume then that your client will be able to produce bank statements and alike evidencing the alleged payments given the accuracy of the dates of the alleged payments stated in your email below. To that end please have your client produce documents evidencing the alleged payments without delay as this will assist me in obtaining my client's instructions with respect to responding to the balance of your email. …
71 In cross-examination Mr Gavranic said that he could not then remember receiving copies of specific items of correspondence from his solicitors but said he would have received some but he did not know which.
72 In October 2011 he said that he had no doubt that the parties to the two loans were Mr Hull and Wiltslow.
73 He said that when he got the letter of 17 October 2011 there was reference to a loan agreement and he rang Mr Hull and asked him for a copy of the loan agreement because he had been to his office and could not find any loan agreement. He told Mr Hull that he did not recall signing or seeing any. He said that he asked for a copy and Mr Hull said that he would send it to him which he never did.
74 He agreed that the letters of 17 October 2011 were addressed to him personally. After receiving them he sought advice from Mr Strbac. He said that when he got these letters he did not tell Mr Strbac the whole story.
75 Counsel for Mr Gavranic then said that he apprehended that Mr Gavranic was likely to be asked about instructions which he gave to him in respect to which the issue of privilege would arise. Counsel said that Mr Gavranic had not received advice in that event.
76 After Mr Gavranic took independent advice concerning legal professional privilege and the consequences of any waiver, he refused to answer questions relating to the instructions he gave to his solicitor.
77 Mr Gavranic agreed that in the letters from his solicitor to the solicitors for Mr Hull there was no reference to either loan being made to Wiltslow.
78 He was shown copies of the letter from his solicitor dated 9 November 2011 and the letter from the solicitors for Mr Hull dated 10 November 2011 and was asked in cross-examination whether he had received copies of them. He said he remembered seeing a couple of emails but he did not, then, remember seeing these emails.
79 He said that he was trying through Wiltslow, as its director, to see if he could get the money to pay Mr Hull.
Findings as to the parties to each loan and the terms of each agreement
80 Given that each of the first and second agreements were oral, the identity of the lender and borrower and the terms under which the sums of $80,000 and $100,000 were loaned primarily falls to be determined upon a consideration of the evidence given by Mr Hull and Mr Gavranic. Mr Pearce did not give evidence.
First agreement – loan for $80,000
81 The claim against Mrs Gavranic in 796 of 2012 must fail. She played no role in the negotiations for this loan nor any agreement relating to it. Not only did she deny playing any role but that is made clear from the evidence of Mr Hull.
82 With respect to both loans, I am satisfied that the evidence of Mr Hull is to be preferred over the evidence of Mr Gavranic. I did not find Mr Gavranic to be a credible witness.
83 My reasons are as follows:
(a) I am satisfied that at the first meeting between Mr Pearce, Mr Hull and Mr Gavranic, Mr Pearce said that the Fund could loan the sum of $80,000 provided interest was paid. In the event the Fund advanced that sum as is made clear in exhibit 1. Mr Gavranic confirmed that he saw the entry in the bank statement and, understandably perhaps, made no objection. It would have been of no moment to him whether the lender was the Fund or Mr Hull.
(b) I am satisfied that Mr Hull told Mr Gavranic that he was prepared to loan the monies to 'you' which referred to Mr Gavranic and that Mr Gavranic directed the monies to be deposited in the Wiltslow account.
It is true that Mr Hull gave evidence that he knew that the money was going to be used to pay Wiltslow's debts and that he was content for Wiltslow, of which Mr Gavranic was the sole director, to use the money in any way it wished. However I do not accept that in any discussion Wiltslow was referred to as the borrower.
(c) Mr Gavranic's evidence was that he assumed in each case that Wiltslow was the borrower. I do not accept his evidence in that regard. He was the principal of Wiltslow and Kaplan and the person who made decisions as to the disposition of funds from time to time. That is made clear from the financial records of the Zlinje Trust of which Kaplan was the trustee and Wiltslow to which I have already referred. Until the 2012 financial year the two loans were not brought to account in the books of Wiltslow but were brought to account in the books of the Zlinje Trust. By then Wiltslow had ceased trading and demand had been made against (inter alia) Mr Gavranic for repayment of the balance of each loan.
(d) In addition, the correspondence in late 2011 between the solicitors for the parties is compelling. With respect to both loans the letters from the solicitors for the plaintiffs dated 17 October 2011 were addressed to Mr and Mrs Gavranic. In the responses from the solicitors for Mr Gavranic there was at no time any reference made to Wiltslow being the borrower of either loan. This was so notwithstanding that Mr Gavranic in evidence maintained that at the time of the exchange of correspondence he was well aware that Wiltslow was the borrower.
Mr Gavranic admitted that he received copies of correspondence from his solicitors. Even though he said he did not at the time of his evidence remember the specific copies he received, I am satisfied, given the importance of the letters and emails sent on his behalf by his solicitors, he would have received copies. The letters from his solicitors constituted an express or at least implied admission on behalf of Mr Gavranic that he, not Wiltslow, was the borrower of each loan. I consider that the only reasonable inference capable of being drawn is that the correspondence from the solicitors for Mr Gavranic reflected his instructions to them.
(e) When he was asked in cross-examination about correspondence from his solicitors in which reference was made to him raising monies, he said that he was trying to do so through Wiltslow as its director. I reject that explanation as being untrue. Wiltslow had by then ceased trading and was hopelessly insolvent such that it would not have been possible for funds to be sourced by Wiltslow to pay any sum due.
84 I accept the evidence of Mr Hull that the agreed term of the loan of $80,000 was three years at an interest rate of 8%.
85 I do not accept that it was a term of either loan that it would be repayable when the business conditions (of Wiltslow) improved. The evidence of Mr Gavranic was that after the monies were loaned, Mr Hull said that when the business improved to make sure the money was repaid to him and to look after him.
86 I do not accept that this statement by Mr Hull was, when it was made and by its tenor, intended by either party to be a term of either agreement.
87 For the sake of completeness I do not accept that it was a term of the first agreement that Mr Gavranic would execute a mortgage over the Hamilton Hill property or that Mr Gavranic would pay the costs incidental to the preparation of a mortgage. To that end:
(a) Mr and Mrs Gavranic were joint tenants as to one half of the property. Mrs Gavranic was not a party to the first agreement.
(b) I consider it inherently unlikely that if such a term was agreed that the sum of $80,000 would have been advanced before any mortgage was executed and registered.
(c) In any event even if there was an agreement to grant a mortgage that agreement would relate to an interest in land. To that end there was no note or memorandum in writing such that any term would be unenforceable in any event.
Second agreement - loan of $100,000
88 For the reasons to which I have referred I prefer the evidence of Mr Hull where it is in conflict with the evidence of Mr Gavranic. I am satisfied that Mr Gavranic told Mr Hull that he needed more money for the business, Mr Hull offered to lend a further $100,000 to him and Mr Gavranic agreed.
89 The sum of $100,000 was advanced from a joint account held by Mr and Mrs Hull however there was no evidence that Mrs Hull was a party to the second agreement. As a consequence Mrs Hull cannot maintain any claim.
90 As to the date upon which the sum of $100,000 or any amount remaining unpaid fell due, the evidence of Mr Hull was that he told Mr Gavranic that he would 'want it back within a couple of years' and that Mr Gavranic said that 'wasn't an issue'. However the further amended statement of claim pleads a term that the loan would be for a period of 12 months commencing in March 2007. I infer that plea to have been on instructions from Mr Hull. It is not consistent with his evidence.
91 In view of that inconsistency I am not satisfied that Mr Hull and Mr Gavranic agreed any date by which this loan was repayable.
92 In the circumstances my view is that it was an implied term of the second agreement that the loan of $100,000 or such sum as remained unpaid was repayable by Mr Gavranic on demand but no earlier than two years from the date of its advance. That being the case the loan or any unpaid balance fell due, in accordance with the demand, 7 days from 17 October 2011, namely 24 October 2011.
Whether any sum was repaid with respect to either loan
93 Mr Hull admits that sums of $10,000 were paid on 28 February 2007 and 25 May 2007 and that those sums were received by him.
94 Mr Gavranic said in his evidence that although he could not recall the circumstances under which those amounts were paid, when monies came in from debtors he paid the sums to Mr Hull given that monies had been advanced.
95 On the other hand, although Mr Hull said he considered it likely that those sums were paid in respect to monies otherwise due to him, he was unable to point to any sums then due pursuant to invoices rendered to him or other loans made by him.
96 In the circumstances I am satisfied that the sums of $10,000 ought to be credited in part payment of these loans or one of them.
97 The appropriate course is to allocate $10,000 in part payment of each loan in order by advance. That is, the sum of $10,000 paid on 27 February 2007 will be allocated to the loan of $80,000 and the subsequent payment to the loan of $100,000.
98 Given my findings it is not necessary for me to deal with the remaining causes of action pleaded in each action.
Summary
CIV 796 of 2012
1. There be judgment for the plaintiffs as trustee of the Fund against the first defendant for the sum of $70,000 together with interest at the rate of 8% per annum on $80,000 as and from 8 February 2007 until 27 February 2007 and thereafter on $70,000 until judgment.
2. The plaintiffs' claim against the second, third and fourth defendants be dismissed.
CIV 797 of 2012
1. There be judgment in favour of the first named plaintiff against the first defendant for the sum of $90,000 together with interest at the rate of 6% per annum pursuant to s 32 of the Supreme Court Act 1935 as amended as and from 25 October 2011 until judgment.
2. The second named plaintiff's claim against the defendants be dismissed.
3. The plaintiffs claim against the third and fourth defendants be dismissed.
99 I will hear counsel with respect to the formal orders and costs.
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