Mostafa v Sherif
[2020] VCC 1784
•13 November 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-06259
| SEHAM MOSTAFA | Plaintiff |
| v | |
| ALIAA MOHAMMAD ELMETWALLY SHERIF | First Defendant |
| FARID AHMED MOHAMED MOHARRAM | |
| Second Defendant |
---
JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 2,3,4 and 9 September 2020 | |
DATE OF JUDGMENT: | 13 November 2020 | |
CASE MAY BE CITED AS: | Mostafa v Sherif and Anor | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1784 | |
REASONS FOR JUDGMENT
---
Subject: CONTRACT
Catchwords: Breach of contract – oral agreement – credit – whether loan was made – whether loan or investment – burden of proof
Cases Cited:Dickinson v Minister of Pensions [1953] 1QB 228; Kuligowski v Metrobus (2004) 220 CLR 363
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Mukherji | Zouki Lawyers |
| For the Defendants | The defendants appeared in person | |
| Amicus Curiae | Mr H Mazoulm for the defendants |
HIS HONOUR:
Introduction
1 The main issue in this case is whether the first defendant (“Sherif”) and second defendant (“Moharram”) are liable to repay the plaintiff (“Mostafa”) for four loans which Mostafa allegedly advanced them between about November 2016 and October 2018. The loans total AUD (“Australian dollars”) 303,130.
2 There were several notable features of this case:
· the dispute was between two Egyptian trained doctors;
· neither doctor spoke English as her native tongue – each had an idiosyncratic grasp of the spoken language and an obvious accent. Due to uncommon pronunciation or syntax, parts of the evidence were difficult to follow;
· the proceeding was more volatile than usual. Although conducted remotely via Zoom, the parties reacted obviously and sometimes noisily on screen to evidence being given or comments made. Even when a party was on mute, there were times when the gesticulations and facial expressions made their reactions plain. I found this especially with Mostafa;
· there was considerable hostility between the parties. I attributed this to the combination of the failed personal relationship and the money in issue. Both Mostafa and Sherif appeared upset by events, albeit for different reasons;
· significant parts of Mostafa’s evidence were unintelligible and lacked coherence. I was so concerned about her evidence and its failure to outline a comprehensive chronological account of her claim and the issues relevant to its resolution, that at the end of the first day of the hearing, I specifically drew her counsel’s attention to the problem – something I have not previously done in a trial. Mostafa did not explain all the relevant financial dealings between her and the defendants. For example, it appears that some of the dealings involved loans to be made or money to be made available partly in Egypt. Also, parts of the loans were to be made in different currencies. However, Mostafa never explained the full situation. This was unhelpful, especially when the defendants relied upon events or dealings in Egypt which they say affected Mostafa’s position;
· significant parts of Sherif’s evidence were unsatisfactory also. She too failed to give a comprehensive chronological account of her defence to the claim. At least with Sherif, she was a self-represented litigant[1] and to that extent, it was not surprising that she posed the usual problems frequently associated with unrepresented litigants: lack of familiarity with the process and procedure of the court; an inability to provide well organised evidence-in-chief; a limited sense of relevance; no appreciation of the rule in Browne v Dunn; an inability to make helpful closing submissions whether oral or written;
[1]A pro-bono barrister acted for the defendants to conduct the cross-examination of the plaintiff.
· the contemporaneous documents in the court book were not especially helpful. This was quite often due to the original documents being in Arabic and the court having to rely upon translations. The translations were frequently unclear and ambiguous or not readily understood. I am unable to say whether this was due to a lack of clarity in the original document or the inability of the translator to render the original into intelligible English. Whatever the reason, the documents were generally less helpful than they might otherwise have been;
· even assuming that the court accepts Mostafa’s version of events and finds that she lent money rather than invested it, the parties appear to have drawn no distinction between Sherif and her husband as individuals and the company which they control, The Good Life Antiaging Company Pty Ltd (“TGL”). This was potentially significant because Mostafa paid over AUD 280,000 into an account in the name of TGL.
· I was informed by the parties that in Egypt, until possibly a year or two ago, a person who gave a cheque which was dishonoured was liable to be imprisoned. It appears that businesses and borrowers gave investors and lenders cheques as security for, or in recognition of, the principal invested – rather than enter into a written loan or other agreement. According to Sherif, the two cheques in the court book from a clothes manufacturing business in Egypt (“the Business”), Mostafa’s for EGP (“Egyptian Pounds”) 3.3 million and hers for EGP 4.4 million, reflected this. The parties followed the same approach here in Australia.
Background
3 Mostafa is an Egyptian born medical doctor who practises as a general practitioner from premises in Sydney Road, Brunswick. She graduated from Cairo University with a master’s degree in general medicine and a doctorate in nuclear medicine. She came to Australia around late 1978. Having worked for some time in the Health Commission of Victoria, she decided to go into private practice in about 1986.
4 Sherif, too, is a medical doctor who qualified as a specialist haematologist in Egypt. She arrived in Australia in September 2015 with her husband, Moharram, and two children, a daughter Dana and son Amir. Sherif has not yet qualified under Australian law to work as a medical practitioner and she has been conducting a skin clinic business.
5 Mostafa and Sherif first met at a medical conference in November 2015. They began chatting after Sherif sought guidance on whether the food provided at lunch was halal.
6 After this initial meeting, Mostafa and Sherif became increasingly friendly and they spoke often on the telephone. Because Mostafa was an older lady who was well established in Melbourne and an influential figure in the Egyptian expatriate community here, Sherif looked to her, not only for guidance and advice, but also for friendship. Mostafa regarded Sherif as a younger sister. She sought to advise and guide Sherif. For example, she counselled her against working for a particular Egyptian male doctor.
7 It appears that Sherif has an entrepreneurial nature. In Egypt, she owned a pathology business. Having come to Australia, she was planning to import collagen from overseas for skin or beauty products. Sheriff also spoke of an investment which she and members of her extended family had in the Business. The Business was run and managed by a woman called Omneya Soliman (“Omneya”).
8 Sherif and Moharram, together with various relatives, had invested in the Business. Moharram retired in 2014. He held senior positions with substantial corporations in Egypt. However, he is now in his sixties and his health is not optimal. Sherif and Moharram invested their life savings in the Business. They relied upon it as their initial source of income in Australia. The investment realised a quarterly return of approximately 12 – 15%, amounting to quarterly payments of about AUD 150,000.
9 Sherif spoke to Mostafa about the proposed collagen business, the Business and other business opportunities which she and her husband were looking at developing in Australia. In 2016, Mostafa was aware of Sherif’s investment in the Business and the financial return which it generated.
10 Mostafa seemed keen to accumulate wealth. Apart from owning the building from which she conducts her medical practice in Brunswick, she also owns a home in North Road, Brighton and three units. She mostly stays at a small flat in the city. She also has two apartments in Egypt. They are leased to tenants.
11 Mostafa alleged that she made four loans to the defendants:
(a) the first loan agreement – an amount of AUD 223,130, comprising a bank transfer of AUD 100,000 and cheques of AUD 90,000 on 4 November on 2016, AUD 10,000 on 9 November 2016, and AUD 23,130 on 27 February 2017;
(b) the second loan agreement – an amount of AUD 60,000 comprising 3 transfers each of AUD 20,000 in May 2017;
(c) the third loan agreement – an amount of AUD 17,000 transferred in August 2017;
(d) the fourth loan agreement – an amount of AUD 3,000 transferred in October 2018.
Early in the trial, the defendants acknowledged their liability for the third and fourth loans in the sum of AUD 28,096. This number represented the principal plus interest and fees for both loans They deny that they made the first and second loan agreements with Mostafa. They said that the money which Mostafa paid over totalling AUD 283,130 represented investments rather than loans.
Credit
12 In this case, the question of witnesses’ credit is crucial and, as a result, I paid special attention to the witnesses when they gave evidence. This arises from a couple of factors.
13 First, broadly speaking, the parties have very different characterisations of the critical facts. While no one disputes that Mostafa put money in a bank account in the name of TGL, Mostafa says the moneys constituted a loan, while the defendants say that the moneys were an investment.
14 Secondly, as noted above, the documentation in the court book is not particularly helpful. Often, the contemporaneous documents provide a context which makes one party’s account rather more likely than another. I have not found the documents here particularly helpful.
Mostafa
15 Mostafa is plainly an intelligent and formidable woman. Having qualified as a doctor and worked in academia for some time in Egypt, she moved to Australia. While she gave no specific evidence about her reasons for moving or her family situation at the time, I imagine the move to settle here was a life changing and challenging event. In due course, she obtained the qualifications needed to practise medicine in this State and, after approximately 40 years here, has achieved a prominent position within the Egyptian expatriate community.
16 In giving her evidence, Mostafa was garrulous, often unwilling to answer questions directly and prone to move easily into areas of little or no relevance to the question asked. My attempts to have her simply answer the question asked without straying into irrelevant areas or providing unnecessary commentary proved largely unsuccessful. Mostafa presented as a confident, independent, and self-reliant person who was disinclined to take directions from others. Mostafa’s manner was quite assertive. She did not come across as the kind of person who responds well to having her views challenged.
17 Apart from having difficulty in understanding parts of Mostafa’s evidence and making sense of the documents in the court book, there were some specific issues raised in Mostafa’s evidence which troubled me:
(a) Mostafa insisted the two initial advances were loans but the minutes recording the meeting between the parties did not clearly support this;
(b) payment which Mostafa received seemed more consistent with an investment return rather than a loan;
(c) Mostafa never raised any complaint about a cheque for AUD 200,000 which she says Sherif stole from her briefcase;
(d) while Mostafa claimed to be unfamiliar with the Business, she gave quite detailed evidence about it.
I deal with each of these matters in turn.
18 First, Mostafa insisted that when she met with the defendants in November 2016, it was in a coffee shop in South Melbourne. She said that she agreed to provide the defendants with a loan. She referred to two cheques, one for AUD 90,000 and another for AUD 10,000, each dated in the cheque butt of her cheque book as 4 November 2016. In addition, a bank statement evidenced a debit of AUD 100,000 from Mostafa’s bank account to TGL. Mostafa said that she agreed to lend the defendants AUD 250,000 to invest in a pathology business. I infer that by this, Mostafa meant the collagen business which Sherif had previously spoken about with her. Sherif planned to import collagen and potentially sell it to Sigma, the pharmaceutical company or start her own beauty and health care business consistently with the written business plan which she had already given to Mostafa.
19 Part of Mostafa’s evidence was to the effect that Sherif would also borrow a further sum from her equivalent to EGP 3.3 million. This loan would be split equally between Egyptian pounds and Australian dollars.
20 After the meeting between Mostafa, Sherif, and Moharram, Moharram prepared minutes which he later sent to Mostafa. The minutes do not refer in terms to any loan. In the “Cheques Exchanges” section of the minutes, there was reference to the AUD 200,000 given in cheques and the AUD 50,000 which was to be transferred in the future. But in that section there is no basis to differentiate between a loan and an investment. After receiving the minutes, Mostafa took no steps in any later email or conversation with either defendant to promptly clarify the position.
21 The “Next steps” section of the minutes referred to both interest and profit. This is prima facie unhelpful because the concept of interest is often more consistent with the idea of a loan, while the concept of profit is more consistent with an investment. Part of the minutes appeared to be consistent with Sherif’s version of events to the extent that there is mention of a cheque for EGP 3.3 million and EGP 1.65 million to ‘Omnia co.’. References on the one hand to interest being paid after one year and every six months if possible in the first year at a yearly rate of 15% and, on the other hand, to profits are confusing at best and conflicting at worst.
22 Secondly, in late December 2016, Mostafa was in Egypt. In a text message to Sherif, she said that she would transfer into Sherif’s bank account in Egypt a sum of EGP 1.65 million, less an amount of EGP 165,000. The EGP 165,000 referred to here by Mostafa appears to be two months’ interest which Mostafa claimed. According to Sherif, Mostafa took the interest when changing her investment from one in the proposed collagen business to one in the Business.
23 In cross-examination, Mostafa said that, with Sherif’s concurrence, she took the payment which represented 10% interest on the loan amount of EGP 1.650 million. While the so called interest payment represented a 10% annual return on the loan, the actual period of the loan over which interest accrued was only about two months. The extent of the payment was more consistent with Mostafa having made an investment in the Business and having obtained a return of 12 – 15% per quarter. The payment Mostafa took appears to support Sherif’s case and demands a cogent explanation from Mostafa. It concerns me that Mostafa failed to provide an acceptable explanation.
24 Mostafa said that she discussed the payment of EGP 165,000 with Sherif who agreed that Mostafa could take the money. Mostafa said that she needed the money. While Mostafa may have wanted the money, I do not accept that she had a discussion about it with Sherif and that Sherif agreed to her taking it. I note that Mostafa failed to put to Sherif that she agreed to her deducting the money. This is an important point and should have been covered. It is not readily apparent why Sherif would have agreed to the payment. Assuming Sherif borrowed the equivalent of EGP 3.3 million, why would she agree to pay 10% interest on EGP 1.65 million (being half the principal) after only two months? Further, Mostafa gave no evidence that the balance was ever lent. Indeed, on one interpretation of her evidence, she said that she specifically decided not to lend the balance. If Mostafa failed to lend the whole of the EGP 3.3 million, the evidence does not disclose any basis upon which she was entitled to a cheque in that amount by way of security.
25 Mostafa suggested that possibly Sherif agreed to the payment in order to induce Mostafa’s cooperation. This comment was vague and unhelpful. If the parties had agreed on some course of action, then Mostafa should have been committed to perform the obligations which she assumed under the agreement without requiring any additional inducement. The suggestion by Mostafa was no more than speculation. The failure to put the conversation and conjecture to Sherif in cross-examination did nothing to clarify the position.
26 There is a related payment which is also significant. Sherif was in Egypt around June/July 2017. Sherif tried to contact Omneya to, inter alia, find out exactly what was happening with the Business and to inquire about the cheque payable to Mostafa for EGP 396,000. According to a text message which Sherif sent Omneya, Mostafa tried five times to deposit the cheque but the cheque was not honoured. EGP 396,000 is 12% of EGP 3.3 million. Mostafa’s cheque represented the quarterly investment return from the Business. According to Sherif, the usually quarterly return was in the range of 12-15%. Mostafa’s receipt of this cheque, even though it was dishonoured, strongly suggests that Mostafa had invested in the Business and was not lending money to the defendants. Again, although the text was in the court book, Mostafa failed to provide any evidence explaining her position on this point.
27 Thirdly, Mostafa gave evidence that, at the meeting on 4 November 2016 with the defendants, she received from them a cheque in the sum of AUD 200,000 dated 1 June 2017. In November 2018, Mostafa went to Sherif’s house in Wheelers Hill to ask about the money she claimed to be entitled to. Mostafa said that Sherif made excuses for not paying her. Mostafa said that, at the time of the visit, she had the AUD 200,000 cheque with her in her briefcase. Mostafa claimed in court that, before leaving the defendants’ property, she went to the toilet and left her briefcase in another room. Mostafa alleged that she had not seen the cheque again since that day and that Sherif must have removed the cheque from her briefcase while Mostafa was in the bathroom.
28 Although the alleged theft of the cheque occurred about two years ago, Mostafa never made any complaint or raised the issue with Sherif before giving evidence at the trial. In particular, it was not referred to in the letter of demand which Mostafa’s solicitors sent to TGL dated 8 May 2019. AUD 200,000 is a substantial amount of money. Had it been taken by Sherif in the circumstances outlined, Mostafa’s nature is such that I would have expected her to pursue Sherif if she had stolen the cheque. Mostafa offered no explanation for her conduct.
29 The cheque for AUD 200,000 was, according to Sherif, exchanged with Mostafa for the EGP 3.3 million cheque in early 2017 after Mostafa and Sherif’s children returned from Egypt. If that were so, then Mostafa could not still have held that cheque in November 2018 and Sherif could not have stolen it from her briefcase at that time. I note that Mostafa, for her part, said in evidence that Sherif mailed her the cheque for EGP 3.3 million. But Mostafa did not put this to Sherif in cross-examination. Nor did Mostafa challenge Sherif’s evidence about the exchange of cheques.
30 Fourthly, in her evidence, Mostafa said that the Business (which was known as Scope and Beyond), was related to the defendants. She also said twice that she did not know anything about that company in Egypt. This proposition seems doubtful because Sherif claimed to have spoken to Mostafa about the Business because it was the main source of the defendants’ income in Australia. Further, in early 2017, Mostafa received a cheque for EGP 3.3 million signed by Omneya drawn on the Business. Also, on a visit to Egypt in late 2016 or early 2017, Mostafa expressly arranged to meet Omneya at the factory. Later in her evidence, Mostafa stated that she was told, presumably by Sherif, that the defendants worked with Scope and Beyond in Egypt and that when the defendants came to Australia, they had the same import/export business. According to Mostafa, the defendants had the Scope and Beyond business in Australia but their original involvement was with the Business in Egypt. Mostafa said that through their work in the Business, the defendants derived interest, profit, and money.
31 Mostafa also accepted that she visited the factory from which the Business operated and met Omneya. She spoke to Sherif in Australia about the Business. In addition, she had some conversations with Dana about the factory, its location, and Omneya when they were both in Egypt in and after December 2016.
32 While Mostafa insisted that she knew nothing about the Scope and Beyond Business, Mostafa gave evidence in relation to it, including the connection and involvement of Sherif and her family.
33 Mostafa plainly dislikes Sherif and I have little doubt that she would say or do whatever she thought necessary to inflict harm on Sherif. I could imagine from her manner and demeanour that Mostafa would be vindictive and would carry out any threat to damage or destroy Sherif’s reputation and standing within the Egyptian expatriate community.
34 I accept that Mostafa saw Sherif and her family as wealthy and successful immigrants. Accordingly, after the Business collapsed, Mostafa would not have readily accepted Sherif’s claim that her family had been financially devastated by the failure of the Business and she had virtually no money in the bank. Mostafa said that Moharram was from a well-known family in Egypt. Similarly, I accept that Mostafa would have been keen to take advantage of whatever benefit she could from her association with Sherif and her family.
35 My assessment of Mostafa is that I have no confidence that all her evidence was truthful and that she was a reliable witness who could be trusted. Generally, I would not accept her evidence without corroboration. She presented in court as someone who would say whatever she thought might advance her interests. She was not a credible or convincing witness. The factors I took into account in reaching this view were:
· Mostafa often failed to answer questions directly;
· Mostafa was frequently evasive and gave answers which were not relevant to the question asked;
· as part of her answers, Mostafa would make gratuitously critical comments about Sherif;
· even though I directed Mostafa to simply listen to and answer the question asked rather than straying into irrelevant areas or providing needless commentary, she largely ignored the directions;
· although Mostafa had a simple case to run, her evidence was convoluted, unclear, and often unintelligible. It concerned me that, especially having retained experienced counsel, she could not clearly explain her case and give the necessary evidence. Even after an explicit warning about the state of her evidence, Mostafa did not seek to take any corrective measures by, for example, applying to lead more evidence or clarifying particular aspects of her case. I infer that she was unable to give a more detailed and accurate account of her case because it was inconsistent with the truth;
· my concerns about Mostafa’s evidence were intensified by her failure to grapple with and explain matters which were inconsistent with and harmful to the case she was propounding;
· Mostafa presented in court as a forceful and determined personality who was focused on recovery of her money and determined to say or do whatever she thought necessary to attain that objective.
Sherif
36 Sherif was similar to Mostafa in some ways. Both women are intelligent and strong willed. It would have been a major disruption in Sherif’s life to move from Egypt to Australia at the time she did. Sherif had to leave behind her professional career and long established personal and work-life connections.
37 Also like Mostafa, Sherif failed to give a detailed and coherent account of the financial dealings between the parties. At a general level, I understand her case to be that Mostafa invested in the Business in Egypt rather than lending money to the defendants or their company in connection with the collagen business. However, Sherif did not explain well the chronological flow of events or the various documents which were created in and after 2016.
38 There were two particular aspects of Sherif’s evidence which caused me concern.
39 First, it appears that Sherif provided what she says herself was a false declaration in order to assist Mostafa when Mostafa was in Egypt. According to Sherif, when Mostafa, together with a colleague, went to the bank in late December 2016, Mostafa had trouble at the bank as it would not allow her to transfer money. Sherif said that Mostafa called her from the bank asking her to send an email to the bank stating that she wanted to borrow money from Mostafa and then Mostafa would be able to arrange the transfer of funds. As a result of this request, Sherif said that she sent an email to the bank in which she said that she was borrowing EGP 1.485 million from Mostafa in order to buy property in Egypt. She said that she would repay the money by quarterly instalments beginning in April 2017.
40 In her oral evidence, Sherif said that the declaration was untrue but necessary for Mostafa to get her money out of the bank. She described the bank as refusing to lend the money to Mostafa but from the context, I understood Sherif to mean that the bank would not allow Mostafa to access her own money. As Mostafa argued, apart from showing that Sherif is unprincipled and will make false declarations, the borrowing is consistent with Mostafa’s version of events – namely, that part of the loan funds she said she would provide were to be made available in Egypt. While Mostafa contends that the explanation given by Sherif was weak because there was a text from Mostafa to Sherif on 27 December 2017 where Mostafa said that obtaining her money in Egypt was not a problem, I am not so sure. Mostafa says that she applied for a loan of EGP 1.3 million which seemed to be the limit prescribed by the bank. The text said that there was no problem but the money could not be transferred until 30 December 2016. If there were a need for Mostafa to provide EGP 1.465 million for Sherif, then there would be a shortfall and Mostafa might have experienced a different problem – that is, getting the full amount needed for the loan.
41 Secondly, Sherif initially said in her evidence that on 4 November 2016, she and Moharram gave Mostafa the cheque for AUD 200,000 dated 1 June 2017. Later, she realised that the account name on the cheque was “Scope and Beyond” and that she did not seek to register that name in Australia until about 22 November 2016. Sherif claimed that the Australian business was created with Mostafa’s knowledge.
42 Sherif changed her evidence to say that on 4 November 2016, she and Moharram gave Mostafa a cheque drawn on TGL for AUD 180,000. The explanation given was that at the time, Mostafa was taking products from Sherif so the cheque was written for the lesser amount. Later when Mostafa changed her investment from the collagen business to the Business, the cheque was changed and she got the cheque for AUD 200,000.
43 While on some matters I would be willing to accept Sherif’s evidence, on any contentious matters central to the case, I would be a little hesitant to accept her evidence without corroboration. There is some uncertainty about her reliability and credibility.
44 The defendants’ children, Dana and Amir, gave evidence. Their evidence was clear and readily understood. Each of them presented in a straightforward manner, answering the questions asked of them directly and without hesitation or evasion. Their bearing and demeanour was positive and I am satisfied that each was an honest and reliable witness. The evidence each gave was limited in scope. Neither of them sought to give evidence about matters which were not within their actual knowledge. For example, while Amir said he heard Mostafa’s voice sufficiently clearly to recognise her when she called his sister on the phone in the car, he did not claim to hear the detail of the calls. Because I found both Dana and Amir to be reliable and honest, where their testimony conflict with another witness, I would prefer their evidence.
45 Having regard to the whole of the evidence, the demeanour of the witnesses and how they gave evidence, I consider that the defendants’ evidence was a little more credible and consistent. Although they had an interest in the outcome, Dana and Amir were important. Due to problems with the evidence of the main protagonists, especially Mostafa, the children’s evidence was significant both in relation to its truth and the implications flowing from it.
Issues
46 The issues which the court must determine are as follows:
(a) Did the parties enter the first and/or second loan agreements?
(b) If yes, what were the terms of the agreement?
(c) What, if any, damages is Mostafa entitled to?
Did the parties enter the first and/or second loan agreement?
47 Neither the first nor second loan agreements are written. If they exist, they must be established from the oral and documentary evidence.
48 The versions of events which the parties presented to the court were significantly different.
49 Mostafa’s case, broadly speaking, is that she did not take up Sherif’s offer to invest in the proposed collagen business which she was planning to establish but agreed to provide a loan for the business. Sherif took the loan and said that she would repay the principal amount of AUD 250,000 in 6 – 12 months with an interest rate of 15% per annum. Mostafa said that she transferred money in EGP to Sherif too so that she could buy a property in Egypt. Mostafa says this use of the money is confirmed by the document which Sherif sent to Egypt confirming her intent to borrow for the purpose of buying property. Mostafa says that she was told, I infer by Sherif, that Mostafa would receive a cheque drawn on the Business, Scope and Beyond, to secure the loan funds which Mostafa provided to Sherif in Egypt.
50 Mostafa met Omneya at her factory on about 2 January 2017 for a brief meeting. Mostafa wanted to meet Omneya because she was the person who had signed the security cheque in her favour. Mostafa returned to Australia on about 27 February 2017. After that, she received the cheque for EGP 3.3 million drawn on Scope and Beyond.
51 Mostafa says that in May 2017, Sherif told her about an opportunity to invest in a business called Tikatap. Sherif asked for a loan of AUD 200,000 but Mostafa could only afford AUD 60,000. Sherif agreed to borrow this amount on the basis that she would repay the funds by the end of 2017 or 2018[2] with an interest rate of 15% per annum. Mostafa provided the loan by 3 payments of AUD 20,000, each made in May 2017.
[2]The transcript was unclear as to which year Mostafa meant.
52 The defendants’ case, in contrast, was that they had an investment in the Business. The defendants were investors only and not involved in the operation of the Business. They say that soon after Mostafa intitially agreed to invest in the collagen importing business, she changed her mind and wanted to invest instead in the Business in Egypt. The defendants agreed, in effect, to sell Mostafa a part of their investment in the Business for EGP 3.3 million. The defendants said that Mostafa invested the initial sum of AUD 200,000 plus the later AUD 60,000. Apart from the cheque which Dana obtained from Omneya when she went to the factory, there was no specific documentation to evidence Mostafa’s investment in the Business. The Business collapsed in 2017 and investors like Mostafa and the defendants lost the whole of their investment.
Common ground
53 It was common ground between the parties that:
· Mostafa paid over AUD 280,000 into a TGL bank account;
· Mostafa received payments back of approximately EGP 165,000;
· there is no written loan agreement between the parties and no clear documentary evidence of a loan in respect of the first and second loans.
Browne v Dunn
54 Because of the central role of the oral evidence in this case and the absence of helpful contemporaneous documentary evidence, examination and assessment of the oral evidence was critical in this case. I have already made some comments about the witnesses and their credit. Another issue of some importance was the need for each side to put to the other the major aspects of their case. Although the defendants had pro-bono counsel appearing to conduct the cross-examination of Mostafa, for some reason there were various matters raised by Sherif in her evidence which were not raised with Mostafa. Those matters which were not raised included the following:
· before May 2017 when Sherif went to Egypt, she and Mostafa exchanged cheques. Sherif gave Mostafa a cheque for EGP 3.3 million and Mostafa gave to Sherif a cheque for AUD 200,000 which she had received in November 2016;
· Mostafa had told Sherif she was impressed by her visit to Omneya’s factory around Christmas 2016 and that Mostafa had bought a lot of clothes at the factory;
· in late June 2017, Sherif told Mostafa that there was a problem with Omneya’s business and that Omneya was struggling to pay investors. Also, she did not put to her that Sherif advised Mostafa not to pay into the Business a further amount of about AUD 70,000 when Omneya was asking for more funds and Mostafa was keen to invest more;
· in late 2017 after returning from Egypt, Mostafa said that it was a mistake to invest with Omneya, Mostafa was crying and upset about the money which she had lost and she told Sherif that she wanted her to repay the money which Mostafa had invested;
· Mostafa threatened to destroy Sherif within the expatriate Egyptian community by using her many connections and influence against Sherif if she did not repay the money which Mostafa had lost;
· the meeting between them in November 2016 which was the subject of the minutes took place at Sherif’s house and not a café;
· at the meeting between them in November 2016, the defendants gave Mostafa a cheque for AUD 180,000, not AUD 200,000;
· between November 2016 and January 2017, Sherif provided to Mostafa a Google search of the Scope and Beyond business which provided some information about the Business. The search was included in the court book.[3] In this context, Sherif also said that Mostafa joined the Facebook page which was set up for the factory. The page was not in evidence and the court did not know whether Mostafa joined the Facebook group or why.
[3]I note that while the parties referred to this document as a “Google search”, it appears the document could be more accurately described a screen shot of the Business’ LinkedIn page.
55 Given the lack of organisation which commonly afflicts cases conducted by self-represented litigants, and the problems of properly briefing pro-bono counsel, it was not surprising that there were gaps in the case presented by the defendants.
56 More puzzling was Mostafa’s failure to raise matters with the defendants. Matters not put in cross-examination included[4]:
[4]See also paragraphs 24, 25, 29 and 80 of this judgment.
· The rationale for the payment of a 15% interest rate on the first and second loans;
· Sherif’s theft of the cheque for AUD 200,000;
· Sherif sending Mostafa the cheque for EGP 3.3 million by mail and the cheque itself being issued in December 2017;
57 The failure of the parties to give the other side the chance to comment upon these various matters creates problems for the court. The court does not have the benefit of knowing what Mostafa might have said about the matters raised in paragraph 54. Some of these matters are potentially important. For example, if Omneya asked investors including the defendants and Mostafa, to contribute more funds to the Business, this could affect the strength of Mostafa’s case and her credit. The same applies to the comment that Mostafa cried about her lost money and wanted Sherif to repay to her the money “invested”. Again, the same might apply to the issue of Mostafa joining the Facebook group.
58 From the opposite perspective, the court lacks the benefit of Sherif’s response about the theft of the cheque and whether Mostafa received the cheque for EGP 3.3 million around May 2017 or December 2017.
The grandmother comment
59 Fortunately, the defendants did address with Mostafa the grandmother comment. By this, I refer to the comment made by Mostafa to Dana Ezzat in a call to her in Egypt. I shall examine this part of the evidence in some detail.
60 Dana said that, as a 19 year old, she returned to Egypt for the first time in December 2016 after moving to Australia. Her evidence was primarily related to a day in Egypt in late 2016 or early 2017 when, at her mother’s request, she travelled to the factory from which Omneya conducted the Business. Dana said that she travelled to the factory in an Uber – it was a long trip and took 2-3 hours to reach the factory from where she was staying at her grandmother’s house. Dana’s younger brother, Amir, accompanied her in the car.
61 Dana said that her mother told her to take to Omneya a cheque which Dana had brought from Australia in order to exchange it for two separate cheques. Sherif asked her daughter to take a video of Omneya signing and handing over the cheques. Dana went to Omneya’s factory, met Omneya and exchanged the cheques. Dana videoed the relevant events and sent the video to her mother.
62 Dana spoke of the phone calls which she received in the Uber after leaving the factory. Dana received two calls from an unknown number. She did not answer these calls but answered the third time that number called. The caller was Mostafa. After some inconsequential talk, Mostafa told Dana that she had received the video from Sherif. Mostafa asked about Omneya, how things went with her, and about the factory.
63 Shortly thereafter, Dana received another call while still in the car. Mostafa asked Dana whether she said anything to Omneya about her or whether Omneya said anything about Mostafa. Dana said that Mostafa told her that if Omneya contacted Dana again she was to tell her that Mostafa was her grandmother. Mostafa said that she wanted Omneya to think that she was Dana’s grandma and not just her mother’s friend. Mostafa wanted to be treated well so she could get as good a rate of interest as Sherif and her family. Dana said that she was surprised by this request from Mostafa and found it a bit odd. Nonetheless, because she did not expect to have further dealings with Omneya, she agreed to do so.
64 Dana later texted the factory address to Mostafa at her request.
65 Apart from these phone calls in the car, Dana gave evidence about the high level of phone contact between Mostafa and her mother.
66 Both children gave some evidence about the family’s financial position and the effect of the demise of the Business. While neither of the children had any more than a very general awareness of the family’s financial situation and investments when they first came to Australia, the position changed dramatically after the collapse of the Business. Dana and Amir both had to stop attending university and find work to support the family. Since that time, they have paid greater attention to the detail of the family’s finances.
67 Amir is Dana’s younger brother. He is a student at Deakin University and works part time. He gave some evidence about phone calls in 2016 and subsequently between his mother and Mostafa. He also spoke about the main elements of the car trip with his sister to Omneya’s factory: the long journey in the car to and from the factory; his sister dealing with Omneya in relation to the cheques; and the phone calls in the Uber on the way home.
68 Amir said that in 2016, he heard Mostafa and his mother talking on the phone about Omneya and the investment in the Business. He could hear their conversation at times because his mother had the phone on loudspeaker. On other occasions his mother told him about phone calls she had with Mostafa. Amir said there were plenty of calls from Mostafa to his mother and some were more than one hour long.
69 Amir spoke also of the trip he took in the car with his sister to the Business. He said that he accompanied his sister on a lengthy car trip to see Omneya to exchange cheques with her. The return trip was about six hours long. He said that on the way home Mostafa rang his sister several times. There were probably three calls. Not only did his sister identify the caller as Mostafa but Amir said he could hear her voice on the phone. He said he laughed when his sister told him about Mostafa’s request that they refer to her as their grandma.
70 Amir’s manner and recollection rang true to me. As the younger brother who went for a car trip to keep his sister company but had no responsibility for the cheques, he was aware of main events but not the details.
71 Both children gave evidence about Mostafa’s request that, in any future contact with Omneya, they refer to her as their grandmother.
72 Mostafa’s counsel applied successfully to recall Mostafa for the purpose of re-opening her case and giving additional evidence in response to the evidence of Dana and Amir. Mostafa agreed that she had not more than three phone calls with Dana on 2 January 2017. She said that one call concerned the address of the factory because it was hard for the driver to find and he lost his way.
73 When asked whether she told Dana to tell Omneya that she was her grandma, Mostafa said that this did not happen – it was “rubbish” and “an absolute lie”.
74 I do not accept Mostafa’s evidence on this issue. Her denial was unconvincing. I accept the evidence of Dana and Amir. Dana’s testimony on the point was compelling. Amir recalled laughing about the idea of Mostafa being his grandmother. The kind of unusual suggestion which Mostafa made is the type of comment which a person might readily remember. It could well stand out in a person’s memory.
75 Apart from reflecting further on Mostafa’s credit, this evidence is also significant because of its implications for Mostafa’s case. Mostafa’s position was that she lent money to the defendants. She did not invest in any business. On Mostafa’s case, as long as she recovered her principal and interest from the defendants, the actual performance of the Business was irrelevant. There was no need for Mostafa to obtain the same rate of interest, or more accurately, the same investment return as Sherif and her family from the Business. That was so unless Mostafa too was an investor in the Business and sought to maximise the likelihood of receiving identical treatment from Omneya. In my view, the reason Mostafa gave Dana for wanting to be her grandma gravely compromises the theory underpinning her case.
Mostafa’s arguments
76 Apart from the problems with Mostafa’s credibility, parts of Mostafa’s argument were unsound.
77 Mostafa submitted[5] that Amir’s evidence supported the conclusion that the defendants told Mostafa that they had a role in controlling and were intimately involved in, the Business. I do not accept that as an accurate characterisation of Amir’s evidence. He did not say that. Further, Sherif denied it also. The defendants and members of the extended family, including Sherif’s mother and Moharram’s daughter by an earlier marriage, were investors in the business but the defendants did not manage or control the Business.
[5]Plaintiff’s closing submissions paragraph 23.
78 Mostafa also contended[6] that the defendants conveyed to her before November 2016 that they were involved in the operation of the Business and somehow controlled it. Mostafa submitted that nothing else would explain why she would have accepted a cheque in the name of Scope and Beyond for AUD 200,000. Apart from any other issues, there were other possible explanations – for example, Mostafa could have bought an interest in the Business and was happy to accept the cheque. Mostafa did not give evidence to the same effect as that in her submission.
[6]Plaintiff’s closing submissions at paragraph 27.
79 Mostafa’s case in regard to the first and second loans allegedly made to the defendants is that the applicable interest rate was 15% per annum. Sherif is an intelligent person and by 2016 was experienced in business. By the time the alleged loan agreement with Mostafa was made in November 2016, Sherif had been living in Australia for more than one year. While there was no specific evidence on the point, through living and working Australia for many years and also through my work as Head of the Banking and Finance List in this court, I consider it reasonable to take judicial notice of the fact that in recent years interest rates in Australia, and indeed around the world, have been at historic lows. In late 2016, I doubt any of the major banks in Australia were charging more than 5 – 6% interest. In the circumstances, I am a little sceptical that a person would agree to an interest rate approximately three times higher.
80 Mostafa said in her evidence that Sherif asked her to be a partner in the collagen business. She claimed that Sherif said she expected to make 100% profit and she could give Mostafa up to 40% but she guaranteed a minimum interest rate of 15%. Apart from my doubts about Mostafa’s credibility, this rationale for arriving at the 15% rate was not put to Sherif. The failure to do so was not explained.
81 The issue of the rate of return also helps explain why Mostafa might have acted as the defendants allege. From watching her and listening to her give evidence, I am satisfied that Mostafa regarded the defendants as wealthy newcomers to Australia. This attitude to the defendants was justified in circumstances where they had an annual income of around AUD 600,000 simply through their investment in the Business and without having to work. Mostafa was keen to maximise the benefit of her friendship with Sherif. That was why she wanted to be spoken of as the children’s grandmother and get the same investment return as the defendants. Again, from one perspective, this was entirely logical. It made no sense to lend money at an interest rate of 15% per annum when investing money in the Business could return 12-15% per quarter. Adopting this approach, Mostafa received one payment of EGP 165,000 and a subsequent cheque from the Business for EGP 396,000. However, as noted earlier, this later cheque was not honoured by the bank.
82 Mostafa submits that text messages sent by Sherif to Mostafa in November 2017 set out the money which Sherif owed Mostafa. In the submissions, the debt is said to total AUD 475,000.[7] This comprises amounts relating to Omneya, collagen products, Tikatap, university fees, and cosmetic products. Sherif denied that she owed AUD 470,000 to Mostafa. She sought to explain the various matters. Mostafa contended that Sherif’s explanation should be rejected.
[7]Plaintiff’s closing submissions at paragraph 50. The document at court book 82 says AUD 470,000.
83 Mostafa also argued that the defendants’ case depended upon a finding that the EGP 3.3 million cheque was a security for Mostafa representing the investment she made in the Business. This was equivalent to the amounts advanced under the first and second loans. However, she pointed out that the total of these advances was inconsistent with the amount when translated into Egyptian pounds. Using the calculations made by the defendants’ pro-bono counsel in cross-examination, there was a difference of about AUD 32,000 between the security given by the cheque and the amount invested in the Business. Mostafa submitted that the court should not accept the explanation which Sherif proffered – namely, that the difference was accounted for by Mostafa taking cash. I note that this point was not raised with Mostafa in cross-examination.
84 While there are, as I acknowledged earlier in the judgment, problems with the defendants’ case, they do not have the burden of proof. Mostafa bears that burden. That is why it is important for a plaintiff to put forward a coherent and consistent case for the court’s consideration. It has been held that:
“It is…axiomatic in the administration of our law that, if a person thinks he has a claim against another person…the duty is on him to establish that claim.”[8]
[8]Dickinson v Minister of Pensions [1953] 1QB 228, 232.
85 To prove her case, Mostafa needs circumstances raising a more probable inference in favour of what she claims. The circumstances must give rise to a reasonable and definitive inference in her favour and do more than give rise to conflicting inferences which reflect an equal degree of probability. The choice between competing alternatives is not to be a matter of mere conjecture.
86 In reaching this view, I am not endorsing the whole of the version of events put forward by Sherif. Finding that a plaintiff has not discharged the burden of proof does not automatically mean that all the detail of the opposing case is true as alleged.[9]
[9]Kuligowski v Metrobus (2004) 220 CLR 363 at [60].
87 In the present case, I am not satisfied that Mostafa has discharged her duty to prove the case to the requisite standard. By reason of:
(a) major concerns about the credibility and reliability of Mostafa;
(b) matters which do not sit comfortably or consistently within the framework of Mostafa’s case;
(c) Mostafa’s failure to convincingly address relevant issues and concerns regarding her case;
I reject Mostafa’s case that there was a first or second loan made pursuant to any agreement with the defendants.
What were the terms of the loan agreements?
88 Because I have found that there were no first or second loan agreements, there are no terms to be dealt with.
What damages is Mostafa entitled to?
89 Mostafa is not entitled to any damages in respect of the first or second loan agreements. Mostafa is entitled to judgment only in relation to the third and fourth loans totalling an agreed sum of AUD 28,096.
Alternate scenario
90 Even if I were wrong about Mostafa’s case and she did lend the money rather than invest it, I would still have two reservations about granting Mostafa judgment in respect of the first and second loan agreements.
91 First, pro-bono counsel raised the issue of the payments going into the TGL account. The defendants controlled TGL. Although Mostafa insists the loans were made personally to the defendants, the contemporary evidence suggests otherwise.
92 The minutes of the meeting on 4 November 2016 are headed “The Good Life (TGL)”. Mostafa raised no comment or complaint about this to the effect that it was incorrect or irrelevant because the defendants were the borrowers. Also, Mostafa’s letter of demand dated 8 May 2019 was addressed to Sherif, not at home, but at TGL’s registered office. Again, if TGL were irrelevant because the loan was personal, there was no need to refer to the company.
93 Secondly, as noted before, apart from the meeting on 4 November 2016, Moharram was virtually never involved in any of the discussions and dealings between Mostafa and Sherif. For that reason, I was unlikely to find that Moharram was party to the alleged loan agreement.
Conclusion
94 In summary, I find that Mostafa is entitled to judgment against the defendants in the sum of AUD 28,096. I will hear the parties on the form of final order and costs. I direct the parties to confer on these matters in an effort to agree on orders giving effect to this judgment. If they cannot agree, then by 4.00pm on 23 November 2020, each party is to file with my chambers and serve written submissions setting out the orders sought and the reasons therefor. The submissions are not to exceed five A4 pages, a minimum of 12 point typeface and 40mm margins on both sides of the page. By 4.00pm on 26 November 2020, each party may file a reply submission limited to no more than three A4 pages. Unless I regard it as necessary or a party persuades me otherwise, I intend to determine the final orders and costs without a further hearing.
0
2
0