Markham v Nyberg
[2013] VCC 1759
•3 December 2013
| Revised Not Restricted |
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE |
CIVIL DIVISION
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-13-00259
| HELEN LOUISE MARKHAM & ANOR (ACCORDING TO THE SCHEDULE ATTACHED) | Plaintiffs |
| v | |
| JODIE LYNETTE NYBERG | Defendant |
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JUDGE: | HER HONOUR JUDGE KENNEDY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12, 13, 14, 15, 18 November 2013 | |
DATE OF JUDGMENT: | 3 December 2013 | |
CASE MAY BE CITED AS: | Markham & Anor v. Nyberg | |
MEDIUM NEUTRAL CITATION: | [2013] VCA 1759 | |
REASONS FOR JUDGMENT
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Catchwords: contract – claim for monies advanced pursuant to alleged loan agreement to be used for a development– whether moneys instead advanced pursuant to “investment” agreement (as varied by subsequent agreement)- terms upon which the money was advanced – whether implied term that amount advanced to be returned upon sale of undeveloped lots.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr B. Carew | White & Mason Lawyers |
| For the Defendant | Mr R.D. Shepherd | Mason Sier Turnbull Lawyers |
HER HONOUR:
1. In this proceeding the plaintiffs seek the return of monies they advanced to the defendant in the amount of $150,000 (plus outstanding instalment payments) pursuant to an alleged loan agreement which loan was to be repaid upon completion of a project for the construction of nine townhouses at 15-17 Inverness Street, Clarinda (the Clarinda development). They allege that the loan agreement was reached as a result of oral discussions in April 2011.
2. The defendant denies that the monies were advanced pursuant to a loan agreement. Rather, she says that the monies were advanced as capital for an investment into the Clarinda development. This development was to be carried on by a trustee of a unit trust in which Nycetri Projects Pty Ltd, a company associated with the defendant, was a unit holder. The defendant alleges that the agreement (reached in the oral discussions in April 2011) was that, if any amount was returned to Nycetri, amounts would be returned rateably on the basis of the proportions contributed by the plaintiffs and the defendant. Further that any amounts returned beyond the total contributed were to be divided equally until the plaintiffs were paid $78,000 with any balance to be paid to the defendant. This, however, was subject to a deduction for monthly instalment payments agreed to be paid by the defendant.[1]
[1] Defence to Amended Statement of Claim dated 14 November 2013 paragraph 9.
3. The defendant further alleges, however, that once it became apparent that the project would not be completed, this oral agreement was subject to a further agreement (or variation) effected at a meeting on 24 July 2012. Pursuant to those discussions it was allegedly agreed that the parties would take half of the proceeds received by Nycetri for the sale of the undeveloped lots (less the instalments advanced).[2] This was said to be an amount of $14,907.64[3] which the defendant remains ready willing and able to pay to the plaintiffs.
[2] Defence to Amended Statement of Claim dated 14 November 2013 paragraph 15.
[3] See Parties’ Statement of Facts dated 12 November 2013 paragraph 3: $68,815.28 (proceeds of sale of Lots)) ÷ 2 (= $34,407.64) - $19,500 (15 x $1,300 instalments) = $14,907.64.
4. The primary issue between the parties is therefore what were the terms upon which the $150,000 was advanced. This turns critically on what occurred at the two meetings in April 2011 and July 2012.
5. A second issue arises if the plaintiffs are correct, and the monies were advanced by way of loan. That issue is what, if any, term should be implied as to the date for the repayment of the funds advanced given the town houses were not constructed and the project did not proceed as anticipated.
Background
Parties
6. The first and second plaintiffs were in a domestic relationship together. The first plaintiff is a paramedic and the second plaintiff is a nurse.
7. The first plaintiff and the defendant were close friends and met when they were undertaking ambulance paramedic training together in about 2003 with the defendant describing the plaintiffs as her “family”.[4]
[4] Text messages, Exhibit B, DCB 199
8. The defendant has been involved in various property investments and was a director of Nycetri which entity was the trustee of a family trust. She had also trained with a group called “Results Mentoring” since 2008 which trained people in property investment and property development ideas and had aimed to make property development her fulltime career.
Other developments prior to Clarinda
9. In about October 2010, the plaintiffs invested with the defendant in an option on a backyard with a view to building a townhouse at Tambet Street, Bentleigh East. The arrangement was a 50/50 joint venture with a view to making profits (with no loans involved). To this end, both Ms Markham and the defendant opened a joint bank account to contribute equal amounts for the project for plans and council fees.[5] Ms Markham also saw plans, met the builder, picked materials and even met an objector. Ms Markham’s’ interest was subsequently sold in late 2011 to the defendant’s former husband whereupon Ms Markham received $10,000 back (though the costs of the project had been some $17,000).
[5] Commonwealth Bank Statements, Exhibit 2.
10. Ms Nyberg had also been involved in developing five townhouses at Smythe St, Mount Waverley. A Mr Flynn Snell was also involved with this project. The evidence of both sides was that Ms Markham provided a loan to Ms Nyberg of around $55,000 in February 2010 to complete the project in circumstances where Ms Nyberg was short of funds. Ms Markham also asked Ms Nyberg to cover the increased mortgage repayment costs at seven point seven per cent. In the result both the principal and interest (of about $2,839) were repaid on 11 October 2010.
11. Finally, it appeared that Ms Markham had also requested the defendant to invest in some shares for the plaintiffs. Ms Markham transferred $48,000 to the defendant for this purpose in February 2011. However the evidence of the defendant was that the market then went down and Ms Markham advised the defendant that Ms Schulz was “nervous” and wanted her money back. The defendant therefore returned these funds on 15 March 2011.[6]
December 2010 – April 2011
[6] Police Credit Co-Op Statement, Exhibit 4.
12. In late 2010 the evidence of the defendant was that a property settlement occurred between herself and her ex-husband, in which she received around one million dollars.
13. It was around this time that the defendant, through Nycetri, entered into formal arrangements for conducting the Clarinda development.
14. Thus, by a deed dated 20 December 2010, Nycetri executed a unit holder’s deed[7] as a unit holder of the “Saw Property Unit Trust No. 2.” The trustee of that trust was Ink Road Pty Ltd.[8] The unit holders were Nycetri and Double Black Developments Pty Ltd (controlled by David Hinde, Andrew Allan and Stjepan Vranesic). The units were held as to 50 per cent each[9], with no other Unit Trust holders recorded.
[7] Unit Holders’ Deed of the Saw Property Unit Trust No. 2, Exhibit 13.
[8] Ibid, recital A.
[9] Ibid, clause 3.
15. The deed was said to be designed to put in place arrangements concerning the day-to-day running and management of the “Business”, the decision-making in the Business, and the procedures to be adopted with respect to the sale of units in the trust or the sale of the Business.[10] The Business was defined as the business conducted in connection with the Clarinda development and potentially subsequent multi unit developments.[11]
[10] Ibid, recital E.
[11] Ibid, clause 1.1.
16. Pursuant to clause 6.1 of the deed, funding for projects was to be by way of bank finance and unit holder loans. Where funding was procured by loans from unit holders, it was intended that such loans were to be contributed on a basis proportionate to the unit holding.[12]
[12] Ibid, clause 4.3.
17. The evidence of the defendant was that Nycetri commenced making contributions to the Clarinda development in December 2010 by provision of a cheque for $266,177.65. By 1 April, 2011, the records of the Inkroad Saw Property Trust No. 2 show that Nycetri had contributed $306,177.65 to the Clarinda project with a total amount ultimately contributed of $331,998.45.[13]
[13] Extract from accounts for the Inkroad Saw Property Trust No. 2, Exhibit 24.
18. The defendant gave evidence that she also had stock losses of approximately $26,000 in March 2011. The three March statements from a broker, IG Markets, also confirm a net loss of approximately $27,000.[14]
Meeting(s) April 2011
[14] IG Markets Statements, Exhibit 8.
19. It is the plaintiffs’ case that there were three relevant meetings between the parties in about April 2011 whereas it is the defendant’s case that there was only one.
20. The matters are in dispute and will therefore be referred to in more detail below.
21. In any event, it was agreed by the parties that the sum of $150,000 was advanced by the plaintiffs by way of three payments; $50,000 on 6 May 2011; $90,000 on 10 May 2011; and $10,000 on 12 May 2011.[15]
[15] Parties’ Statement of Facts dated 12 November 2013 paragraph 1.
22. These amounts are each recorded under the heading “loans – Schulz” in the annual general ledger of the 11 Nyberg Trickey Family Trust next to a handwritten notation “Sue Schulz”.[16] The evidence of the defendant was that this ledger was prepared by her accountant, MVA Partners, after she gave them all relevant bank statements and other documents “with my notations on the side as to what they are…”.
[16] Extract from the Annual General Ledger of the 11 Nyberg Trickey Family Trust, Exhibit 9.
23. It was also agreed that the defendant paid the plaintiffs 15 instalments of $1,300 each totalling $19,500 from June 2011 to August 2012.[17]
9 May 2011 Document
[17] Parties’ Statement of Facts dated 12 November 2013 paragraph 2.
24. At some time after the first payment on 6 May 2011 and before 9 May 2011, Ms Markham’s evidence was that she requested that the defendant provide the plaintiffs with “something in writing” to substantiate that they had loaned the defendant the $150,000 in case the defendant was “hit by a bus” so that the defendant’s ex-husband would know about the loan. Her evidence was that Ms Nyberg then came to their house with a document. The defendant also brought a power of attorney which she asked Ms Markham to sign because the discussion had made her think that, given her ex was no good with money, it would be good if Ms Markham would help with the kids, with school fees and things like that if anything happened to her. Ms Markham did not recall any earlier discussion about the power of attorney, but accepted that it could have been raised earlier.
25. The evidence of the defendant was that it was Ms Markham who asked her for an enduring power of attorney so that if something happened to the defendant they would have the security of being power of attorney. Ms Markham also asked for some sort of simple document that outlined their investment in the project. The defendant therefore arranged for an enduring power of attorney to be drawn up; it being enduring rather than general because it was tied to the project. She executed it and then provided both documents to Ms Markham (at her house) on 9 May 2011.
26. An enduring power of attorney is in evidence. It is dated 3 May 2011, but accepted by Ms Markham on 9 May 2011.
27. In relation to the other document, the evidence of Ms Nyberg was that she had drafted a “letter” on the morning of 9 May 2011 herself and printed it off her computer.
28. The “letter” provided to Ms Markham is dated 9 May 2011 and is executed by the defendant (being exhibit A). It reads as follows:
I, Jodie Lynette Nyberg agree to borrow the sum of $150,000.00 from Sue Schulz and Helen Markham. This represents Sue and Helen’s share of the proposed development at 15–17 Inverness St, Clarinda.
At the completion of the project, (estimated to be late 2012), I agree to $78,000 in profit plus original $150,000, less $1,300 which will be paid per month until completion.
This letter is legally binding in the event that I become incapacitated and am unable to administer my own affairs. At such time, Helen as my financial POA may elect to withdraw the money as needed.
29. The evidence of Ms Markham was that the document provided basically said the things she had asked for; that the defendant borrowed the $150,000; that it was being used for the Clarinda development; and that they were expected to get it back.
30. In relation to the second sentence, her evidence was that they had asked the defendant to mention the Clarinda development so that the defendant’s ex-husband would know what it was that they had loaned the money for. Further that she did not read it with “solicitor’s eyes”.
Post May 2011
31. As indicated already, Ms Nyberg commenced paying the instalment payments of $1300 in June 2011 which she continued to pay until August 2012 (inclusive).
32. In August 2011 the defendant’s evidence was that the Council rejected the build of nine townhouses and downgraded the project to eight. The defendant claimed she kept Ms Markham up to date with this and with what was “happening” generally (although there is no objective evidence to support this).
33. By mid 2012 it was apparent that the Clarinda development had failed such that Double Black Developments Pty Ltd was not able to sell any townhouses off the plan.
34. Commencing from around this time, a series of text exchanges were in evidence between the first plaintiff and the defendant wherein the defendant communicates news from “the boys” (the representatives from Double Black Developments Pty Ltd) that they were facing a loss. These will be referred to further, below.
35. The defendant went to New Zealand around this time (in July 2012). The evidence of Ms Markham was that she therefore sought more direct information from Mr Hinde, a director of Double Black Developments Pty Ltd, as to the details of the Clarinda development. By email of 17 July 2012, Mr Hinde provided Ms Markham with documents about the Clarinda development which included accounting details and plans. The two then met for the first time at a café on 17 July 2012 to discuss the development.
Meeting 24 July 2012
36. After the defendant returned from New Zealand, the first plaintiff and defendant met at the Brew Café in Hughesdale on 24 July 2012.
37. As indicated already, the parties disagree as to what occurred at this meeting. The defendant alleges that an agreement was reached to go 50/50 on any proceeds (less the instalments paid) and the plaintiffs allege that no finalised position was reached.
38. However, immediately following that meeting, on 24 July, Ms Markham forwarded a text message to Ms Nyberg as follows:[18]:
Tearful angry Sue, here is what she wants, 100k back from the personal loan of 150k you borrowed, guaranteed regardless of what comes from sale of land, she said you have paid 18k over the last year, so she will count that, so you would still owe us 32k but she said if you paid that back monthly at whatever you can manage that’s acceptable. Even if that’s $100 a month, just a token toward the fact we would have given you 32k effectively. I am so sorry we are all in this mess. X
[18] Ibid DCB211- a message of 28 July is of similar effect, see DCB 215
39. The response of Ms Nyberg of 24 July contains no reference to any agreement but reads:
I‘m very disappointed as this will leave my family with nothing but will do my best.[19]
Post July 2012
[19] Ibid DCB 211
40. The defendant then made a further payment of $1,300 for the month of August in 2012 which was the last instalment paid.
41. By correspondence of 18 October 2012 the plaintiffs’ solicitors, CBP Lawyers, sought the principal together with the further two instalments (for September and October 2012) at $152,600.
42. In the result, the townhouses were never built. Instead, seven lots of vacant land were sold over the course of 2013. The evidence of the defendant was that the last lot, Lot 5, was settled on 23 July 2013 with a Westpac banking statement of Nycetri showing a receipt of a payment of $68,815.28 from Ink Road Pty Ltd on 30 July 2013.[20]
[20] Extract from Westpac Account in the name of Nycetri Projects Pty Ltd, Exhibit 17.
43. The defendant’s position is therefore that it only owes half of this amount returned ($34,407.64) less the amount already paid to the plaintiffs of $19,500, being $14,907.64.
Witnesses
44. Ms Markham and Ms Schulz gave evidence for the plaintiffs with Ms Nyberg and Mr Hinde being called for the defendant.
45. The defendant made some criticisms of the evidence of Ms Markham. However, having had an opportunity to observe her demeanour, I consider that Ms Markham presented as an honest, straightforward witness who gave credible evidence. Contrary to the defendant’s suggestion, I also did not find her to be argumentative; rather I considered that she generally made reasonable concessions where called for. Although there were some gaps in her memory consistent with the effluxion of time, I am satisfied that her evidence can be reasonably relied upon.
46. Ms Shulz was unable to recall the relevant conversations given she stated that she was responsible for the children at the time. The defendant criticised her on this basis and suggested that her evidence was hesitant and unreliable. However, it is to her credit that she did not purport to give positive evidence on matters she could not recall. To the extent she was able to recall matters, however, her evidence was forthright and credible.
47. Save for the tender of documents, Mr Hinde gave little evidence of any probative value, with one exception, which will be referred to below.
48. This left the evidence of the defendant, Ms Nyberg.
49. Having had an opportunity to assess her demeanour under examination and cross examination, I am unable to be satisfied that the defendant’s evidence can generally be relied upon.
50. The defendant purported to give detailed precise recollections which presented as somewhat artificial and rehearsed, given the lapse of time. However, her memory appeared to be somewhat selective. Thus, although she proffered detailed testimony of the pivotal meetings, she was less than forthcoming on other matters. For example, she was unable to satisfactorily explain what she did with the proceeds of the $150,000 advanced by the plaintiffs. When pressed as to where the money had gone, her evidence was that “the girls bought into the investment, so that was their share of the investment, that money was now considered to be mine.” This statement was apparently designed to support the defendant’s case and was not responsive.
51. The defendant also appeared intent on giving evidence to support her case, particularly her contention that an “investment” was made, wherever possible. Her evidence on the meaning of the term “borrow” in the 9 May 2011 document was also less than satisfactory and argumentative. Thus, the defendant unconvincingly attempted to avoid the natural meaning of the word (in a document she herself had prepared) by suggesting that the word “loan” was not in the document.
52. The defendant also appeared to be unable to justify claims she made as to her success and experience with property development in a video she made for Results Mentoring and admitted making an incorrect statement therein.
53. I have therefore generally preferred the evidence of Ms Markham over that of Ms Nyberg. However, given the effluxion of time, I will also consider her evidence in the light of all the surrounding evidence in this case.
Principles
54. The plaintiffs bear the onus of establishing the agreement contended for.
55. The parties also accepted that, given the agreement alleged was oral, the surrounding circumstances were generally admissible.
56. This was an appropriate stance to take.[21]
Evidence of what occurred at meetings
[21] Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [136] – [146] (per Campbell JA); Deane v The City Bank of Sydney (1905) 2 CLR 198 at [209]; County Securities Pty Limited v Challenger Group Holdings Pty Limited & Anor [2008] NSWCA 193 especially at [17].
Ms Markham
April 2011
57. The evidence of Ms Markham was that there were two meetings leading up to the critical meeting in April 2011.
58. At the first meeting at the plaintiffs’ home at 1 Fintonia Street, Hughesdale, the defendant told the plaintiffs that she had lost a significant amount of money on the stock market which had taken a “massive hit” and she was really upset. They discussed selling Tambet Street in order to relieve her of her monetary pressures. Ms Markham believed it was approximately $250,000 she told her she had lost but never saw “anything” in the way of documentation.
59. At the second meeting, again at Fintonia Street, the plaintiffs and defendant were present as well as Dean Sirianni (an estate agent) and the children. They again discussed the sale of Tambet Street. However, Ms Markham also suggested that the defendant pull out of the Clarinda development. The defendant said that she was already committed since she had paid a certain amount of money and still owed “the remainder of the money to complete the deposit”. To the best of Ms Markham’s recollection this was about $150,000. The defendant asked if they knew of anyone who might be interested in joining the project.
60. The plaintiffs then spoke together and decided to help her by loaning the defendant the money.
61. The plaintiffs then went to the defendant’s house (with their twin children) for a further meeting.
62. The evidence of Ms Markham was as follows:
MR CAREW: On your recollection what was said in this meeting?‑‑-To the best of my recollection I said, and this Sue would have joined in the conversation, that we could loan Jody the $150,000 in order to complete the Inverness Street project, so that she could realise the profit she was hoping for and get back on her feet again. Amongst the discussions between the three of us, we talked about the way we'd done the loan for Smythe Street, where we loaned her the $55,000 and she covered the cost of increased mortgage payments.
Who was actually talking about the Smythe Street project?‑‑-Most of the time it would have been me.
What did you say about it?‑‑-That we could loan Jody the money for Inverness Street based in a similar style to the way we'd done it for Smythe Street. So we would loan her the lump sum and she would cover the extra cost of the mortgage repayments, so not what we were already paying but what it cost us extra.
63. The evidence of Ms Markham was that the defendant replied that if this was something they could do for her it would be “awesome”.
64. When asked specifically about whether anything was said about how they would be paid back the $150,000, her evidence was as follows:
MR CAREW: What was said, if anything, in these meeting about how you would be paid back the $150,000?‑‑-Jody indicated that the project was expected to finish towards the end of 2012, November/December 2012, and as the project finished and completed then the lump sum of the $150,000 would come back.
Was there any discussion about what would happen if it wasn't completed towards the end of 2012?‑‑-As with Smythe Street in loaning the lump sum of capital we made it clear that it wasn't something we could afford to lose.
But what was actually said by anybody to that effect?‑‑-The actual lump sum would never be at risk, it would come back.
Did someone say that or is that just your understanding?‑‑-To the best of my recollection Jody said that. I may not have the words correct.
It would come back?‑‑-Yes.
Is that your words?‑‑-Yes.
65. Under cross examination, Ms Markham denied being shown paperwork or any plans or studies. She also denied saying that she wanted to “put in” $150,000 and maintained the money was a loan.
66. She did however give evidence that the defendant herself also offered to give them some of any profit. She could not remember when they found out that the profit figure was $78,000 (as reflected in the 9 May 2011 document) as they were not looking for profit. However, they discussed that the instalment payments would be an amount of $1300 per month using a mortgage calculator. The defendant said that the $1,300 would be taken off any profit as “lesser profit”. Otherwise, if there was no profit, these instalment payments were not to be returned to the defendant.
Meeting 24 July 2012
67. The evidence of Ms Markham was that she and the defendant met at the Brew café. She started the meeting by explaining that she had met with Mr Hinde (while the defendant was in New Zealand) who had suggested that the defendant might get $165,000 back from the project. She then left it open to the defendant to respond, hoping she would say they would get their $150,000 back.
68. The defendant then discussed giving them half of what she was getting back (some $84,000) to which Ms Markham said this was “a great place to start” and better than the $60,000 (which had been referred to in the text messages) but that she would “have to go and have a chat to Sue”.
69. The defendant also said she was struggling with the interest payments of $1,300 but Ms Markham made no response to this.
70. They were both upset and tried to have a more normal “friend type” conversation as well.
71. Under cross examination, she maintained that the suggestion of 50/50 was a “good place to start” but confirmed she needed to speak to Ms Schulz. She denied any agreement to take 50 per cent each, less the $1300 payments. Rather, the $1300 was not discussed in circumstances where there was no profit to be “knocked off” and they did not know what they were looking at in relation to loss.
Ms Schulz
72. Ms Schulz was generally unable to recall any particulars of the meetings because she was looking after the children and the discussions were between Ms Markham and Ms Nyberg.
73. She did confirm that, while Ms Markham would show her plans and report progress with Tambet Street, Bentleigh East, she was never shown any financial information or plans for the Clarinda development.
74. Under cross examination she generally rejected the suggestion that the discussions in April that Ms Markham said she had had with Ms Nyberg concerning the $150,000 advance were about “investment”.
75. In relation to the 9 May 2011 document,[22] she also explained that the obtaining of a document was more her idea because of the industry she worked in wherein they saw lots of “death and mayhem”. She therefore wanted something to show that they had loaned the money if Ms Nyberg was killed. Under cross examination, she said that the reference to “incapacity” in the 9 May 2011 document was so that if the defendant was unable to tell anybody what had occurred, there was a document to say that they had loaned her the money.
[22] Letter from Jodie Nyberg dated 9 May 2011, Exhibit A.
76. In relation to the meeting in July 2011, her evidence was that Ms Markham was going to the meeting to get information to come back and relay to her. She denied that Ms Markham spoke “on her behalf” maintaining that “she speaks for herself, I speak for myself”. She rejected the suggestion that Ms Markham had entered any agreement in the July meeting.
Ms Nyberg
April 2011
77. The evidence of the defendant was that the topic of the Clarinda development came up when she and Ms Markham were having one of their walks wherein Ms Markham said she and Ms Schulz would like to “invest” in the project. The defendant claims to have provided a general overview and “details” during the walk and said she would be happy to have Ms Markham and Ms Schulz “invest” with her.
78. The defendant says Ms Markham and Ms Schulz then came to her house and she showed them the plans and feasibility study. She claimed that there looked to be around $500,000 to $600,000 profit. Ms Markham said the maximum they could afford to invest was $150,000 and she therefore worked out the percentages of profit at $78,000. Ms Markham was excited and said it meant that Ms Schulz would not have to work night shifts anymore.
79. Ms Markham then said they would need help to pay off their mortgage at $1,300 to put the maximum of $150,000 into the investment and the defendant said she would help with that but any amounts paid would have to “…come off the amount at the - the 150,000 that they put in at the completion of the project, that that [sic] amount would have to be returned to me”.
80. The defendant said there was only one formal meeting as she described.
81. She further denied that she indicated she wanted to sell Tambet Street, Bentleigh East in April 2011. She said that it was Ms Markham’s idea later in August, at which time she also suffered a large stock loss of $139,719.
82. Under cross examination she maintained there was only one meeting and denied the plaintiffs’ version of events, maintaining that they wanted to “invest” up to $150,000.
24 July 2012 meeting at Brew café
83. The defendant’s evidence was that she met with Ms Markham with both saying that they were disappointed. Ms Markham said she had been in contact with Mr Hinde and had also been to a solicitor to see if she and Ms Schulz could sue “the boys” and had been told no, they could only sue the defendant but they would never do that.
84. The defendant’s evidence continued:
I said to Helen, you know, "What do you want to do now?" Helen said, "Look we need to get the money back a.s.a.p.", and she said that "We'll go halves, babe, in whatever we get back", and I said to her that, you know, that would have to be less any moneys I paid, the $1,300, as we'd agreed at the start, and she said, "Yeah, we'll do that, babe." I said to Helen that obviously, you know, what about the 1,300 and she said that - Helen said that her and Sue would take over paying that 1,300 now from now on, and I said to Helen, "Well, look I can help you out once more." I'd sold my house, it had settled, so I could help you out once more with that, and she said that'd be great.
How did the meeting end?‑‑-It ended amicably. We had a hug and we had a coffee and so we agreed that that's what we were going to do, that whatever money came back we'd go halves in.
Findings on what occurred at meetings
Defendant’s submissions
85. The defendant placed much reliance on the three earlier transactions. In particular it was submitted that the Smythe St, Mount Waverley property transaction was distinguishable (which was said to be contrary to the plaintiffs’ evidence that the transaction was along the “same” lines as the Clarinda development); that Ms Markham was incorrect about the involvement of an entity Sunbeam Properties Pty Ltd with Tambet Street, Bentleigh East; and that the share transaction (when taken with the incorporation of Sunbeam Properties Pty Ltd in early 2011) suggests that the parties had “taken steps to join together with a view to making profits”.[23]
[23] Defendant’s Outline of Final Submissions dated 18 November 2013 at paragraph 6.
86. I do not generally regard the evidence of the other transactions of great assistance in resolving the terms on which the advance of $150,000 was made in this case. Thus, although the parties had clearly invested together in Tambet Street, Bentleigh East, they had also previously entered a loan transaction in terms of Smythe Street, Mount Waverley. The incorporation of Sunbeam Properties Pty Ltd was also of little significance of itself, with no suggestion that it was actually involved in the Clarinda development transaction.
87. Firstly, in terms of Smythe Street, Mount Waverley, although there were some features that were different (e.g. the interest was not paid along the way and was seven point seven per cent, with no discussion about profit), the essential features were similar (as Ms Markham said) to the basis on which the plaintiffs allege they advanced the $150,000 in this case. That is, a loan transaction wherein the defendant covered something for the costs of obtaining the funds.
88. In terms of Sunbeam Properties Pty Ltd, it is true that Ms Markham gave some evidence to suggest that this entity was involved at the commencement of the Tambet Street, Bentleigh East project where this could not have been the case given its registration in February 2011. However, I do not regard any such error as significant. In any event, Ms Markham maintained that the company was incorporated for tax purposes for when the time came to sell Tambet Street. This was consistent with some of the defendant’s evidence who conceded that part of the reason for formation of Sunbeam Properties Pty Ltd was for “property”.
89. In terms of the share transaction, although it showed that the plaintiffs were open to the possibility of investing, it also showed that, as at early 2011, they were quite “nervous” given they asked for their funds to be returned. If anything, this “nervous” state made it less likely that the plaintiffs would risk the large sum of $150,000 as the defendant now contends they did, particularly in circumstances where the plaintiffs had to borrow money to do it and where the defendant says that risk was not even discussed.
90. However, in closing, the defendant placed primary reliance on the following other matters to support her case:
· That share records show no trading loss of $250,000 as at April 2011, but only around $26,000 contrary to the suggestion of the plaintiffs;
· That there was nothing to suggest the defendant was in a poor financial position in April 2011. More particularly, the documents showed she had already largely paid for Nycetri’s investment in the Clarinda development;
· That the discussion about Tambet Street, Bentleigh East alleged by Ms Markham in April was unlikely given the development continued and the property was not sold until later in the year;
· That it was probable that plans were shown given the content of one of the text messages;
· That it was improbable that any loan would be given at a higher rate (10%) than what was actually being paid (7%);
· That there was some variation between evidence given under examination and cross examination by Ms Markham;
· That the evidence of Mr Hinde supported the defendant’s case; and
· That the plaintiffs’ case was affected by memory problems.
91. Firstly, in terms of finances, the plaintiffs could only give evidence about what they were told. They could give no evidence about the reality of the defendant’s financial position. It is perfectly possible that the defendant sought to downgrade her actual financial position in order to obtain funds from the plaintiffs.
92. Secondly, I am unable to be satisfied that the documents produced provide a complete picture of the defendant’s financial position. Thus, extra documents were produced during the course of the trial without the filing of any affidavit of documents. Even on their face, the documents produced do not purport to provide a complete picture of the defendant’s financial position. For example, only an extract of a police credit co-op account from 28 February to 31 March was produced[24]; further, although the defendant said she had three accounts with IG Markets, there are only two produced for April.
[24] Police Credit Co-Op Statement, Exhibit 4.
93. As indicated already, the defendant was also unable to give a full account of where the $150,000 went.
94. Finally, to the extent the defendant’s financial position was in evidence, it does not appear to have been strong as at April 2011. Although it is true that Nycetri appears to have paid most of what was necessary for this particular project, a Commonwealth bank account in the defendant’s name discloses a credit balance of only some $5,600 as at 15 April 2011.[25] This is despite the fact that her own evidence was that she had been paid some one million dollars by her ex-husband in late 2010. Given the admitted share loss of $26,000 , the expenditure of funds on the project, as well as this small balance, it may well be the case that she desired funds.
[25] Commonwealth Bank Statement in the name of the defendant, Exhibit 20.
95. At the very least, it is impossible to say on the evidence before the court that the defendant had no need and/or desire for funds such as to make the plaintiffs’ account unlikely.
96. In terms of Tambet Street, Bentleigh East, it is true that this property was not sold until later in the year. However, this of itself does not mean that the subject was not discussed earlier as Ms Markham maintained. I also do not regard the non-calling of Mr Sirianni as giving rise to any adverse inference as suggested by the defendant. Thus, he could not be described as someone the plaintiffs would naturally be expected to call.
97. In terms of plans, there is a text message[26] to the effect that Ms Markham had not looked at the plans “properly” thereby potentially suggesting that she had looked at some plans. However, this particular entry was never put to her in cross examination. Moreover, there is no clear contemporaneous evidence of any email or other communication wherein the plans were conveyed.
[26] Text messages, Exhibit B, DCB 195
98. The defendant suggested that the fact that the interest rate was around 10% was significant since it weighed against the benevolent picture painted by the plaintiffs and suggested that the defendant’s version was preferable. However, there was no evidence that the plaintiffs deliberately set out to charge the higher amount and/or that the defendant was prevented from checking the calculation for herself. On either version, the instalments were intended to cover the costs of obtaining the funds and I do not consider the higher rate of much assistance in determining the terms on which the $150,000 was advanced.
99. There was some extra evidence given under cross examination as earlier referred to. In particular, that the defendant offered to provide some profit but with the instalments (in the amount of $1,300) taken off. However, Ms Markham’s explanation was that the point of the loan was to help out one of her closest friends with any profit being a “bonus”. This explanation was generally credible in the context of this “family” relationship and in circumstances where a loan in similar circumstances had been made previously.
100. The evidence of Mr Hinde was that Ms Markham told him she had “invested” with Ms Nyberg in his project. This (unchallenged) evidence was said to be contrary to the evidence of Ms Markham that she had told him she had loaned monies to Ms Nyberg. However, although this may give some limited support for the defendant, it needs to be weighed against some of the other factors below. The loose terms of the word “investment” is also not highly probative of the issues in the case, particularly in circumstances where the context of the discussion was that Ms Markham was endeavouring to elicit information from a project manager about what would be coming back from the development.
101. Finally, I accept that there were gaps in the memory of Ms Markham. However, as indicated already, she presented as an honest witness who attempted to give a genuine account of what she could remember.
102. Overall, then, I do not consider the matters raised by the defendant as weighing significantly against the plaintiffs’ account of events. Moreover, there were other objective matters, below, which support the plaintiffs’ case.
Other factors
103. Firstly, as indicated already, the evidence of the annual general ledger of the 11 Nyberg Trickey Family Trust recorded the three advances comprising the sum of $150,000 received in May 2011 as “Loans – Schulz”. The defendant herself gave evidence that this ledger was a business record prepared by her accountant on her instructions. The recording of the transaction as a loan provides strong support for the plaintiffs’ account of events.
104. Secondly, there is exhibit A. It is true that this document contains a reference to the sum of $150,000 as “representing” the plaintiffs’ “share”, which is somewhat ambiguous. However, contrary to the suggestion of the defendant, I do not consider that the explanation of Ms Markham that she did not read the document “with solicitor’s eyes” to be disingenuous. Rather, consistent with the close relationship of the parties at the time, her evidence on this was highly credible.
105. Moreover, a natural reading of the reference to the “share of the development” is that, consistent with the plaintiffs’ case, it is designed to highlight what the funds were used for. This is particularly so given the unit holders’ deed does not include the plaintiffs as holding any share whatsoever in the units of the trust. Although exhibit A also refers to profit, there is also no suggestion whatsoever that the parties were to share any profits or loss with reference to the proportions of their contributions (as the defendant now contends). Instead, consistent with the plaintiffs’ account, the profit appears to be something that comes on top of the “original $150,0000” which is intended to be returned regardless of the outcome of the project.
106. One word is also highly significant. Thus, Ms Nyberg (who completed the document) expressly describes herself as agreeing to “borrow” the sum of $150,000. The use of the term “borrow” by the defendant (who had some experience in commerce generally) is unequivocal and was not adequately explained by the defendant. This reference supports the plaintiffs’ case notwithstanding that the document suggests it is only binding in the case of incapacity. Thus there was no reason to record that the money was “borrowed” if it was not, regardless of incapacity. Moreover, the defendant herself accepted under cross examination that the obligations she had undertaken were not dependent on whether she was incapacitated.
107. This leaves the issue as to the instalments. However, the document presumes that a profit of $78,000 was made (with the instalments to come off a total that is constituted by the $150,000 plus the profit). It is therefore open to read the document as providing that the instalments are only to be returned in circumstances where there is in fact a $78,000 profit. The evidence of Ms Markham was also clear that the instalments were not intended to be returned in the absence of any profit. I accept this evidence. It is consistent with the notion that the plaintiffs were to be covered for the costs of obtaining the $150,000 for the defendant as a “borrower.”
108. I should add that I do not consider the issues surrounding the associated power of attorney as particularly significant. I accept that the defendant appears to have completed her side on 3 May 2011 ( as the defendant highlighted). Nevertheless, even if the topic came up earlier as this might suggest (and which Ms Markham accepted could have occurred), there appeared to be no reason why Ms Markham would have been the person wanting to be an attorney as the defendant alleges. It is more likely that she simply wanted a “document” as she claims.
109. A third objective matter of significance is that the ongoing payments of $1,300 (which were designed to cover the costs of obtaining the money on either version) have the flavour of a loan transaction as contended for by the plaintiffs. The payment in August 2011, after the alleged “agreement” is made, is also highly significant and weighs against the making of the agreement as alleged by the defendant.
110. Fourth, there was also no suggestion of any joint bank account (as with Tambet Street, Bentleigh East) nor of any involvement with the builder prior to July 2012. This weighs against the notion of the plaintiffs being “equitable unit holders” as the defendant suggests.
111. Fifth, there is an absence of any documentation to support the arrangement contended for by the defendant, including an absence of any transfer of units. This despite the relatively large amount involved and the fact that the arrangement contended for was less than straightforward (as exemplified by the terms of paragraph nine of the Defence). Although this is partly explained by the defendant on the basis that the plaintiffs did not want to spend money on solicitor’s fees, a “document” was clearly sought by 9 May 2011. Additionally, by the time of the alleged “agreement” of 24 July 2012, the evidence of Ms Nyberg was that the plaintiffs had spoken to solicitors in circumstances where she was identified as a potential defendant. In those circumstances it is improbable that the defendant would not document any agreement reached at the Brew café.
112. Finally, there are the text messages.
113. The text messages occur in the context of an emotional relationship described as “family” which suggests that some care should be taken in constructing them. However, they were referred to by both Counsel and warrant some attention.
114. There are some messages which are ambiguous as to the precise original arrangement. Thus, as highlighted by the defendant, on 5 July 2012 there is reference to Ms Markham suggesting that “it’s absolutely not your responsibility”. The evidence of the plaintiffs was that this reference was intended to convey that Ms Nyberg had not caused the failure of the project in the context of both sides trying to salvage a long standing friendship. I accept this evidence which is consistent with the tenor of the messages generally wherein the friends are desperately trying to hold on to an emotional relationship notwithstanding the failure of a business project.
115. There are also a number of text messages wherein the plaintiffs suggest that the the $150,000 was advanced by way of loan which position is not directly challenged by the defendant. Thus:
· There is a text message from Ms Markham on 3 July 2012 which states that “our original thingy was loan till end of 2012 and then capital back with share of profit made less interest…”[27];
[27] Text messages, Exhibit B DCB 194
· There is a reference to there having been a “personal loan” in a text message from Ms Markham of 24 July 2012[28];
· A text message of 27 July 2012 from Ms Markham suggests that their position is “as per the letter, you borrowed the money, as happened with Smythe St, when you were stuck, only this time we were hoping to make profit on it. And as per the letter the entire capitol was meant to come back. We would never have risked $150K. No profit would be worth that risk. We loaned you, our friend the money, because we trusted your guarantee….”[29]; and
·On 20 August 2012 Ms Schulz also states that “our original agreement was that you would return our original loan plus profit, it was not conditional on your financial situation…… we trusted you jode, we lent you money….”.[30]
[28] Ibid DCB 211
[29] Ibid DCB 214-5
[30] Ibid DCB 223-4
116. The text messages also weigh against the making of the “agreement” alleged by the defendant at the Brew café.
117. Thus, as indicated already, there is no reference to the alleged agreement in the text messages immediately following the meeting of 24 July.
118. Indeed, no reference is made to any agreement being reached until 20 August after the defendant spoke to a solicitor.[31] Even then, the message does not allege an enforceable agreement but suggests it would be “reasonable” for Ms Markham to “honour agreement”.
[31] Ibid DCB 223
Summary
119. I have generally preferred the evidence of Ms Markham and Ms Schulz over that of the defendant. When the objective matters referred to above are also considered, I am satisfied, on the balance of probabilities, that the plaintiffs’ evidence should be accepted. Those matters include the recording of the transaction as a loan in the general ledger of the family trust; the reference to “borrow” in exhibit A; the ongoing instalment payments even after the July meeting; the absence of any involvement with the project; the absence of documentation to support any “investment”; and the text messages.
120. It follows that I reject the suggestion that any agreement was made in April 2011 for the plaintiffs to “invest” in the project on the terms alleged in paragraph 9 of the Defence. Rather, I accept that the parties agreed that the plaintiffs would advance the amount of $150,000 to the defendant by way of a loan. The defendant would also pay the plaintiffs monthly instalments of $1300 for the duration of the period that the defendant retained the $150,000 so advanced.
121. I also accept that the defendant agreed that she would provide profit estimated at $78,000 and that if there was a profit then the instalment payments would be deducted. In the absence of any profit, however, I accept the evidence of Ms Marham. Thus, notwithstanding some ambiguity in exhibit A, I accept that the amounts were not intended to be returned where there was no profit as the plaintiffs were not intended to be out of pocket.
122. I also reject that any agreement was made at the July 2012 meeting at the Brew café for the plaintiffs to take only half of the net proceeds. Such an agreement is not supported by any objective evidence and is against the contemporaneous text messages at the time.
123. I also reject the suggestion that Ms Markham always spoke on behalf of her partner. Although she may have been the spokesperson at the April 2011 meeting, Ms Schulz was still present and the two had previously spoken and agreed a position. There were also references in the text messages that Ms Markham liaised with Ms Schulz before taking things further.[32] By way of contrast, there was no evidence they had agreed a position prior to the meeting at the Brew café. I therefore accept the evidence of Ms Markham that she advised the defendant at the close of the meeting that she would “have to go and have a chat to Sue” and that no finalised agreement was in fact reached.
[32] Ibid DCB 197,199
Whether term should be implied
124. A remaining issue is when the loan funds should be repaid.
125. The evidence of Ms Markham was that the parties explicitly agreed that as “the project” finished and completed then the $150,000 was to be returned.
126. An issue arises as to what was to occur given the Clarinda development did not proceed as planned, with the townhouses never being constructed.
127. The plaintiffs alleged that a term should be implied as follows:
(e) the Defendant shall repay the Principal Sum to the Plaintiffs upon completion and sale of the Development, or in the event that the Property is sold as undeveloped upon the sale of the Property.[33]
[33] Amended Statement of Claim dated 13 November 2013 at paragraph 2(e).
128. Pursuant to Hawkins v Clayton & Ors,[34] a term may be implied if it is “… necessary for the reasonable or effective operation of a contract”.
[34] Hawkins v Clayton (1988) 164 CLR 539 at [573] (per Deane J).
129. Once characterised as a loan, it is necessary for the reasonable or effective operation of that loan that some provision be made as to when it should be returned. Although this might generally be that it be repayable on demand, this was not intended here where the parties wanted the funds to be utilised for a particular project and where the plaintiffs agreed that repayment was to await completion of the “project.” In circumstances where that project did not proceed as intended, but instead, proceeded by way of the sale of the undeveloped lots, I consider that it was necessary to imply the term that the principal be repaid upon the completion of the sale of the lots (as contended for by the plaintiffs).
130. Given the last lot was settled on 23 July 2013, it therefore follows that the principal is returnable from that date.
Conclusion
131. The plaintiffs are entitled to judgment in the sum of $150,000 together with monthly instalment payments of $1300 from September 2012.
132. I will hear from the parties as to the precise form of final order.
| SCHEDULE | |
| HELEN LOUISE MARKHAM | First Plaintiff |
| and | |
| SUSANNE MARIA SCHULZ | Second Plaintiff |
| and | |
| JODIE LYNETTE NYBERG | Defendant |
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