Paul Herbert Kennedy v Mark Alexander-Erber - [2020] NSWDC 15

District Court

New South Wales

Medium Neutral Citation: Paul Herbert Kennedy v Mark Alexander-Erber [2020] NSWDC 15
Hearing dates: 6 June 2019, 7 June 2019, 5 July 2019, 2 August 2019, 21 November 2019
Date of orders: 14 February 2020
Decision date: 14 February 2020
Jurisdiction: Civil
Before: Montgomery DCJ
Decision:
(1) Judgment for the plaintiff in the sum of $130,000.00;
(2) Interest pursuant to s 100 Civil Procedure Act 2005 (NSW) on the amount of
(a) $60,000.00 for the period commencing 26 June 2015 and ending 5 June 2016;
(b) separately on the amount of $80,000.00 for the period commencing 31 August 2015 and ending 5 June 2016; and
(c) on the sum of $130,000.00 thereafter;
(3) The defendant pay the plaintiff’s costs of the proceedings on the normal basis; and
(4) I return the exhibits

Catchwords: Contract; whether orally made or written – whether copies of contracts in evidence true – whether signatures on copy contracts fabricated
Legislation Cited: Evidence Act 1995 (NSW) ss 47, 48, 55(1), 56(1), 78, and 140 (1)
Civil Procedure Act 2005 (NSW) s 100
UCPR r 42.5
Cases Cited: Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 3
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66
Re Day (2017) 340 ALR 368; [2017] HCA 2
Prime Capital Securities Pty Ltd v Calleja [2018] NSWCA 26
Effem v Lake Cumbeline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599 at 603
Bale v Mills (2011) 282 ALR 336; [2011] NSWCA 226 at [63]-[67]
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29
Category: Principal judgment
Parties:
Paul Herbert Kennedy (plaintiff)
Mark Alexander-Erber (defendant)
Representation:
Counsel:

Mr D Eardley (plaintiff)

Mr B Hemsworth (defendant)

Solicitors:

ER Solicitors (plaintiff)
Somerville Legal (defendant)

File Number(s): 2017/185571
Publication restriction: N/A

Judgment

Nature of the Case

The plaintiff sues for recovery of debt he alleges is owed to him by the defendant as repayment under 2 oral agreements of loan made on the 20th and 29th of May 2015, respectively: Statement of Claim [3] regarding the first loan, and [9] regarding the second loan. At paragraph 18 of the plaintiff’s affidavit made 20 September 2018 (the ‘plaintiff affidavit’), he says that the second loan was made on 28 May 2015.
The defendant denies personal liability. The crux of his defence is that the plaintiff entered two loan agreements with and advanced monies to Alexander and Black Equities and Investments Proprietary Limited ACN 604728985 (ABEI) and did not contract with him. ABEI was placed in liquidation on 15 December 2016. The defendant says that the loan agreements were written and made on 21 May 2015 and 29 May 2015 respectively.
The parties agree that in the first loan the plaintiff advanced $40,000, which money was deposited by the plaintiff into an account in the name of ABEI. The plaintiff says that the loan was repayable on 30 August 2015: SOC [4]. The defendant pleads the terms of the first written contract alleged which expressly provided for a term of three months; calculating to a repayment date of 21 August 2015: Defence [3]. The plaintiff says that the first oral agreement was reached over the telephone, following a meeting between the plaintiff and the defendant, and that the amount to be repaid was $80,000 (a 100% return): SOC [4]; plaintiff affidavit paragraph 14. The defendant says the written contract of loan was signed by the parties at the defendant’s office, known as “the Engine Room”, at 42 Wattle Street, Ultimo, NSW, on 21 May 2015 and provided for interest payable at 8%.
The parties agree that in the second loan the plaintiff advanced $30,000 which money was also deposited by the plaintiff into an account in the name ABEI. The plaintiff says that the second loan was for a term of 26 days, and repayment was due on 25 June 2015. The SOC [10] particularises 20 June 2015 as the date for repayment, but the case was run on the allegation of due date 25 June 2015. The defendant denied the plaintiff allegation of the oral second loan: Defence [6] and contested the case on the basis of terms of the second written contract he alleged which expressed a term of three months calculating to repayment on 29 August 2015: defendant Closing Written Submissions.
Despite the date of 29 May 2015, pleaded in the Statement of Claim, the plaintiff ran the case at hearing, as he deposed in his affidavit, on the basis of the second loan agreement having been made orally on 28 May 2015. The parties agree that the second loan was made at the Engine Room. Whereas the plaintiff says the agreed amount to be repaid was $60,000.00 (a 100% return): SOC [10]; the defendant conducted the case according to the terms of the written agreement alleged, with interest payable at 8%.
The loans were not secured.
ABEI was incorporated on 13 March 2015, a little over two months before the subject transactions. Its registered office was the defendant’s business premises at 42 Wattle Street, Ultimo, NSW. I have adopted the defendant’s nomenclature, “the Engine Room” for the office part of his premises which was generally composed of a large warehouse from which he ran his businesses and at which was stored a large collection of exotic cars. According to his affidavit made 19 March 2019, at paragraph 3, the defendant was “a director and a secretary” of ABEI at the time of making the loan agreements. The Historical Company Extract exhibited to his affidavit records him as the only director, secretary, and shareholder at that time. As the case was run, ABEI would be properly described as the defendant’s company.
The plaintiff and the defendant first met in May 2015 and for relevant purposes were strangers to each other at the time of the making of the agreements of loan.
Obviously, the central factual question in the case is: which of their two different versions of the making of loan agreements is to be believed and accepted.
The two documents (herein referred to as “Loan 1” and “Loan 2”), upon which the defendant relied to prove written contracts of loan, begin at pages 8 and 12 respectively of exhibit MAE-1 to the defendant’s affidavit (“Defendant Exhibit”). They are photocopies. They purport to bear the signatures of the plaintiff and of the defendant. The signatures are not witnessed. The documents are dated 21 May 2015 and 29 May 2015 respectively. They are in identical terms and form except that Clause 1(a) of the document dated 21 May 2015 describes the principal amount as $40,000 and Clause 1(a) of the document dated 29 May 2015 describes the principal amount as $30,000. Clause 1(c) in each of them describes the term of the loan to be “3 months”.
The plaintiff relied on the expert opinion of Ms Melanie Jane Holt, forensic document examiner; whose affidavit dated 24 May 2019 attached her report dated 8 April 2019. This report came into evidence after I granted the plaintiff leave to reopen his case in chief, limited to the addition of Ms Holt’s evidence: see Judgment 2 August 2019. The defendant did not rely on expert evidence or lay evidence in response to Ms Holt’s evidence, as he was permitted by directions for evidence, to do.
The task undertaken by Ms Holt was to express her opinion on the question of whether or not the plaintiff had signed Loan 1 and Loan 2. Her task was to examine the plaintiff’s signatures on his affidavit made 20 September 2018 with his signature on those documents. Ms Holt observed:

“The ‘P Kennedy’ signature on page 3 [of Loan 1] and the ‘P Kennedy’ signature on page 1 of [the plaintiff’s affidavit] are, for all intents and purposes, identical.”

She expressed the same opinion in relation to the ‘P Kennedy’ signature on page 3 Loan 2 and the ‘P Kennedy’ signature on page 2 of the plaintiff’s affidavit. Ms Holt observed at paragraphs 17 and 18 of her report:

“No two naturally written signatures will overlay each other to such an extent that, for all intents and purposes, they are identical and superimpose. This is due to the fact that humans cannot write with machine-like repetition and two signatures naturally written by the same person will exhibit an observable degree of variation. The degree of super imposition observed here is an indication of ‘common source’ for these two groups of signatures. In other words, one of these signatures from each group is the source for the other, or both of [the] signatures in each group derive from another signature not present in the submission.
However, as the original signatures are contained in the Affidavit held by the New South Wales District Court [examined by Ms Holt], this establishes that the two copy signatures on the questioned documents [Loan 1 and Loan 2] are the products of a ‘cut and paste’ manipulation using the two signatures on the [plaintiff affidavit] as the models.”

This observation was repeated in her final conclusion at paragraphs 20 to 23 of her report. In short, Ms Holt’s opinion is that the copy documents Loan 1 and Loan 2 exhibited to the defendant’s affidavit and described in his evidence as copies of the original written agreements for the first and second loans are not true copies of original documents signed by the plaintiff in the normal way, in his own hand.
During cross-examination Ms Holt expressed her opinion as so strongly held as to put it in the words (T p 227, line 45 to line 46):

“I fail to see how it could be done otherwise but you know, there’s always are tiny, tiny, tiny little doubt that something can happen.”

Plainly the opinion of Ms Holt weighs significantly against acceptance of the defendant case based as it is on allegations of written agreements for the two loans.
The plaintiff alone bears the onus of proof. It is for the plaintiff to satisfy the court, on the balance of probabilities, that the parties entered into contracts for loan, made orally, and in the terms for which the plaintiff contends: s140 (1) Evidence Act 1995 (NSW) (“Evidence Act”) . The defendant relies on Loan 1 and Loan 2 in answer to the plaintiff case; and asks the court not to accept that the plaintiff has satisfied its onus of proof; that answer being that there was no agreement between the parties made orally, but rather that the plaintiff contracted in writing with ABEI.
Even if the plaintiff satisfies me that Loan 1 and Loan 2 are not to be accepted as reliable proof that the plaintiff signed written loan agreements; the plaintiff still bears the onus of proof on the balance of probabilities that the monies were loaned pursuant to the terms of the oral contracts he alleges. The factual contest concerning the making of the loan agreements includes assessment of the evidence given by each of the plaintiff and the defendant by affidavit and orally. Before proceeding to that task in detail and having considered the whole of the evidence closely, I make two observations:

Each of the parties deposed by their affidavits to long passages of conversation in the first person. Those affidavits were made, by the plaintiff more than 3 years after the subject events with the aid of notes made by him contemporaneously to the events and the defendant affidavit was made a little less than 4 years after the events. In my opinion the plaintiff’s account of first person expression in those conversations is so focussed on expressions of personal lending that a degree of caution is required. However, the same caution is required when considering the defendant’s account of the conversations and what, in my opinion, appears from his affidavit his deliberate focus on expression of the agreements being made not between the parties but between the plaintiff and ABEI. It is a not uncommon feature of affidavit evidence of conversations that to some extent the reconstruction of conversations will inevitably be coloured by the deponent’s purposeful recount combined with imperfection of recollection. I have found the presentation of the conversations in each of their affidavits to be in expression equally warranting exercise of caution in that regard; and

The plaintiff evidence exposes his having made errors as to the dates of agreements. In relation to the first loan agreement, between paragraphs 8 and 18 of his affidavit the plaintiff mistakenly referred to “Thursday 15th May 2015” when by the calendar, that Thursday was the 14th of May, “Thursday morning 20th May 2015” when by the calendar that Thursday was the 21st of May and “Saturday morning 22nd May 2015”, when by the calendar the 22nd of May 2015 was a Friday. Specifically, in paragraph 10, he said the discussion of terms of the first loan agreement occurred on “Thursday 20th May 2015” and at paragraph 14 that he conveyed his acceptance by telephone at 6pm that evening. The obvious common ground between the parties is that the first loan agreement was reached on the Thursday of that week in May. That Thursday was the 21st of May 2015. As to the second loan, the Statement of Claim pleaded the second loan agreement to have been made on 29 May 2015. His affidavit at paragraph 17 says that he and the defendant on “Tuesday 25 May” discussed meeting toward the making of the second loan agreement and (at paragraph 18) they met on “Friday 28 May” and made that agreement. The calendar for the 2015 year shows that the 25th was a Monday and the 28th was a Thursday. Friday was the 29th day of May. I accept that the first loan agreement was made on 21 May 2015 and the second loan agreement on 29 May. I am of the opinion that nothing significant turns on this. The plaintiff should not be found to have been deliberately choosen 20th and 28th of May to avoid dates of Loan 1 and Loan 2 because the mistakes made in paragraph 17 and 18 of the plaintiff’s affidavit are so patent as to relieve that concern.

EVIDENCE OF ORAL AND OF WRITTEN AGREEMENTS AT TIME OF CONTRACT

Near the commencement of the hearing the plaintiff called on a Notice to Produce to Court dated 31 May 2019, which had been served on the defendant. The Notice to Produce required the defendant to produce the original document of each of Loan 1 and Loan 2. A similar Notice to Produce had earlier been called on in the proceedings. The court was informed from the bar table by Mr Hemsworth for the defendant:

“A similar notice has already been put to us and we responded that we do not have the originals. Our position is that the plaintiff has the original document. That was the response that was given, so we’ve got nothing to produce.”

Mr Eardley, counsel for the plaintiff, indicated that the plaintiff did not accept that response to the call. He informed the court that the defendant would be cross-examined and therefore required to give evidence in regard to his response: T p 12 lines 25-50; p 66, line 45 to p 67 line 19.
On the second day of the hearing, the defendant was cross-examined on his failure to produce originals in response to the Notice to Produce dated 31 May 2019. To the suggestion that “the original” was within his control, possession or custody, the defendant answered that he did not have “the original”: T p 74 lines 14-19; p 75 lines 23-29; p 77 lines 40-48; p 79 lines 37-49.The defendant said that he had retained possession, control and custody of only copies of the loan agreements at all times, somewhere in files amongst the hundreds of boxes in a large warehouse where he stored records of his several businesses: T p 75 lines 10-35; p 77 lines 40-47; p 78 lines 02-14.
In paragraph 14 of his affidavit, the plaintiff described the making of the first loan agreement by his acceptance spoken over the telephone at about 6 PM after the parties had met that day. In paragraph 14 of his affidavit, the defendant said in relation to Loan 1 that at the meeting:

“The Plaintiff and I then proceeded to sign the loan agreement and I made several copies of the signed agreement for my records.”

In paragraph 19 the defendant again referenced to the event of signing the Loan 1 document.
In paragraph 18 of his affidavit the plaintiff described the making of the second loan agreement orally at the Engine Room. He also said that the defendant wrote on a blank piece of paper calculations of principal and return relating to Loan 1 and Loan 2 and signed it. Paragraph 18 closed with the following passage:

“The defendant of his own motion then wrote on a blank piece of paper calculations of the principle and interest returned in his own hand writing relating to D1 and D2 transactions and thereupon signed same”
The Defendant the[n] said words to the following effect to me:
Defendant: “you have shown real trust and faith in me in loaning these monies to me totally in good faith trust without any formal paperwork, so it is only fair that I acknowledge these loans and the basis of what we are doing. Again, I say to you, don’t stress and don’t worry, I will not let you down and you will be very happy with the results.”

Paragraph 19 of the plaintiff’s affidavit reads:

“The Defendant then photocopied the paper in my presence and handed me a copy of same. I am unaware of what the defendant may have done with the original.”[This is a reference not to the original of Loan 2 but to the original document which is Annexure “D” to the plaintiff’s affidavit.]

In paragraph 23 of his affidavit the defendant said:

“The Plaintiff and I then proceeded to sign the loan agreement and I made a copy of the signed agreement for my records.” [This was a reference to Loan 2]

It is to be observed that nowhere in his affidavit did the defendant describe the handling of, filing of, handing over of or otherwise what was done with the original executed Loan 1 or Loan 2.
During cross-examination of the plaintiff, the defendant did not put to him that he had been provided with the original loan agreements or either of them.
Nowhere in his oral evidence did the defendant say anything about his providing to the plaintiff the original of Loan 1 or of Loan 2. His direct evidence only dealt with handling, delivery and storage of copies of loan agreements.
After reading of the affidavit evidence of the parties, completion of the oral evidence of the plaintiff and the evidence in chief of the defendant, I addressed to the parties the following observations:

in oral evidence the plaintiff said that he did not sign documents alleged by the defendant to be Loan 1 and Loan 2;

in oral evidence the plaintiff said that Loan 1 and Loan 2 said by the defendant to be copies of written contracts of the first and second loan agreements bore replicas of his signature;

the pleadings and affidavits provided a large collection of uncontested signatures written by the plaintiff;

one does not need to be an expert in signatures or handwriting to observe that signatures, even by one’s own hand, are not identical;

the many signatures by the plaintiff in the documents before the court were not surprisingly not identical;

the signature alleged by the defendant to have been written by the plaintiff and reproduced in Loan 1 (Defendant Exhibit at page 10) is obviously not identical to the signature alleged by the defendant to have been written by the plaintiff and reproduced in Loan 2 (Defendant Exhibit at page 14); and

the lending appeared to be out of the norms of commercial dealing or indeed, as the plaintiff in evidence had described it, “foolish” because it involved not insignificant sums lent and borrowed between strangers, without security, for high rates of return over very short periods, engaged between a person who was a retired solicitor on the one hand and an experienced businessman of commercial flair on the other, and on the case advanced by the defendant, where the lending was to a company about which the plaintiff possessed no information unless it be accepted that the defendant told him something of it.

Because by his affidavit and oral evidence the defendant has maintained that loan agreements were signed by the plaintiff before him and that Loan 1 and Loan 2 exhibited to his affidavit are true and correct copies of those agreements bearing the plaintiff’s signatures; the plaintiff seeks to dissuade the Court from accepting that evidence.
The plaintiff’s allegation that his signatures have been replicated on Loan 1 and Loan 2 by some person is an allegation of a grave civil wrong. During cross-examination, the plaintiff was unshaken in his denial of signing the written loan agreements. The plaintiff put to the defendant that his evidence was “a lie”: T p 156 lines 36-44. The plaintiff did not put to the defendant in cross-examination that he created false copy agreements being Loan 1 and Loan 2 and so the plaintiff cannot focus that serious allegation at the defendant personally: Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11 at [67].
The plaintiff’s onus is to persuade the court to a level of comfortable satisfaction of that some person committed that wrong. This will not be achieved by inexact proofs, indefinite testimony or indirect inferences. This does not mean that the standard of persuasion is any higher than the balance of probabilities. It does mean that the nature of the issue necessarily affects the process by which the reasonable satisfaction is reached. This allegation in the plaintiff case of proof should not be lightly found satisfied. It demands the careful weighing of testimony and the close examination of facts proved as a basis of inference. The court must feel an actual persuasion of the fact that the copy loan agreements exhibited to the defendant’s affidavit are not true copies of original documents of loan agreement signed by the plaintiff. Indeed, such a finding is intimately connected with the plaintiff case that the affidavit and oral evidence of the defendant cannot be accepted in preference to the plaintiff’s affidavit and oral evidence and the expert opinion evidence of Ms Holt. There is no direct evidence of the manufacture of false copies of the loan agreements exhibited to the defendant’s affidavit. This standard of satisfaction to which the court must come reflects a conventional perception that members of our society do not ordinarily engage in conduct such as creation of false documents of contract: s 140(2) Evidence Act; Briginshaw v Briginshaw (1938) 60 CLR 336 per Dixon J at 362; [1938] HCA 34; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66; particularly at [3] and [8]; and Re Day (2017) 340 ALR 368; [2017] HCA 2 per Gordon J. This task at hand requires consideration of the whole of the evidence.
The plaintiff did not object to the tender of the copy documents exhibited to the defendant’s affidavit. The best evidence of written loan agreements would be the originals. However, the Evidence Act facilitates the tender of copy documents as secondary evidence of documents: ss 47 and 48. Copy documents upon which the defendant relied purport to have been produced by a device that produces the contents of documents within the meaning of s 48 (1)(b) and s 47 (2). They were admissible: Prime Capital Securities Pty Ltd v Calleja [2018] NSWCA 26.

EXAMINATION OF OTHER EVIDENCE – WHO IS TO BE BELIEVED

I will now put aside the evidence of signatures on Loan 1 and Loan 2 and examine the other evidence for the purpose of assessing the credibility of the parties in the cases which they advanced.

Affidavit Evidence

In addition to the plaintiff’s affidavit, he read his affidavit dated 24 May 2019 in reply to the defendant’s affidavit dated 19 May 2019 (“plaintiff’s reply affidavit”). In his reply affidavit the plaintiff denied the defendant’s allegation that he contracted with ABEI and specifically denied signing originals of Loan 1 and Loan 2.
It is fair to say that the plaintiff and defendant deposed to conversations set out in first person speech which provide substantially opposite accounts of conversations discussing the making of the loans. On the fundamental issues of whether the agreements were made orally or in writing, whether the plaintiff contracted with the defendant personally or with his company ABEI, the terms of the loans and whether the return on investment was 100% or 8%, their evidence cannot be reconciled. Whereas the plaintiff said that the defendant characterised the transaction as his obtaining funding for his exotic car importation business; the defendant said that he told the plaintiff that the lending to ABEI was for the purpose of that company on-lending to wealthy individuals on a short term, high return basis.
The parties agree that they first met at the defendant’s warehouse complex premises at 42 Wattle Street, Ultimo on Monday on 11 May 2015. The premises included a music recording studio and the defendant described himself as a multiple record label owner; there was an impressive collection of exotic motorcars which the plaintiff estimated to number 40; and the Engine Room office which included a spacious sitting and dining area: plaintiff affidavit paragraph 4; defendant affidavit paragraph 10. The defendant showed the plaintiff the exotic cars stored at his premises: defendant affidavit paragraph 11.
The parties agree that they subsequently spoke by telephone and agreed to meet again for the purpose of discussing business together.
The plaintiff said that in the conversation the defendant invited him to meet so that they might discuss “a great business opportunity with excellent short term returns.”: plaintiff affidavit paragraph 8. The defendant said that he informed the plaintiff that he was personally importing another classic motorcar and that his company ABEI, was an investment company which did not import and sell cars but provided high yield returns on client’s short term investments. The defendant deposed that in this introductory telephone discussion he offered to discuss investment for high return and that he specifically informed the plaintiff: “Our dealings will be documented through a loan agreement. I will have a copy of this ready to show you when we meet.”: Defendant affidavit paragraph 13.
Between 11 May 2015 and the second meeting of the parties, the plaintiff researched the defendant’s background on the Internet including “the rise and fall of his PUB BOY Empire, his post hotel industry activities and his more recent financial recovery” the defendant had told him about at their first meeting on 11 May 2015. The plaintiff described his approach to their second meeting in the following terms (plaintiff affidavit paragraph 9):

“Whilst intrigued by his colourful character, I attended this meeting with great caution and reservations as to what he could say to me and what he may have been wanting to discuss with me or may have been proposing to ask me.”

The First Loan Agreement

The parties agreed that they made the first loan on the date of their second meeting. I earlier determined that date to be 21 May 2015. Whereas the plaintiff says he expressed his agreement in a telephone conversation with the defendant at about 6pm after discussing the terms of the loan at the meeting; the defendant says that he and the plaintiff signed Loan 1 at the meeting.
It was common ground that the defendant produced some form of written agreement at the second meeting when discussing the first loan agreement. In cross-examination the plaintiff conceded that the defendant produced to him a pro forma document of loan agreement but denied that he signed it: T p 37 line 47.
In cross examination the plaintiff maintained his denial of having signed Loan 1: T p 47 lines 45-50; p 39 line 33; p 40 line 20. In cross examination the defendant maintained the plaintiff did sign Loan 1: T p 156 lines 35-40.
Separately to that, the plaintiff deposed at paragraph 11 of his affidavit that at the meeting the defendant produced a plain piece of paper on which he had written about six proposed transactions in the form of calculations of funding he required, timing as to when he required the funding and a number allocated to each proposed transaction. The transactions proposed were identified on the paper as “D 1”-“D 6”. “D” meaning “Deals”. The defendant deposed that the paper he produced contained “rough notes on only two deals with approximate returns”. He identified the piece of paper with his calculations to be Annexure “D” to the plaintiff affidavit: defendant affidavit paragraph 15.
In these reasons it will be seen that I have found Annexure “D” of significance in determination of the question of credit. The plaintiff denied that Annexure “D” is a copy of the document proposing deals, produced by the defendant at the making of the first loan agreement.
At paragraph 19 of his affidavit the plaintiff deposed that the document Annexure “D” was written by the defendant at their third meeting, at the making of the second loan agreement. I earlier determined the date of that meeting to be 29 May 2015. In cross-examination of the plaintiff concerning Annexure “D”, the following questions and answers occurred (T p 54 line 43 to p 55 line 21):

“Q. Now, I'm putting to you that the numbers on this page are just numbers that pass between yourself and my client on the way to coming to a final deal.
A. Not passing through, they were the final deal. If you look at the return dates of 30 August and 25 June it refers specifically to the two loans.
Q. Sir, I'm putting to you that this certainly does not constitute a final deal.
A. It was the final deal.
Q. You certainly didn't sign it, did you?
A. No.
Q. And the reason you didn't sign it was because it wasn't a concluded agreement.
EARDLEY: I object. Letter of instruction. It's really a matter for your Honour.
HIS HONOUR: It is. It's a question being asked of somebody with a career in the law. I'll allow it.
HEMSWORTH
Q. Do you want me to ask it again?
A. No - no - no, I say that was the final deal: $40,000.
Q. But my question‑‑
A. Sorry, $40,000 giving a return of 40,000 and repayable as to an 80,000 payment on 30 August and the second one, if I put in 25, I get 50 back on, and if I put in 30 I get 60. As a consequence of that, I put in 30 and your client then initialled that.”

The plaintiff submitted that Annexure “D” as a contemporaneously created document, written by the defendant; corroborates the plaintiff’s case because the numbers and dates of the two deals are consistent with the terms of loans he alleges.
In paragraphs 10 to 13 of his affidavit the plaintiff set out over nearly 7 pages the conversation between the parties at the second meeting(21 May) in regard to the first loan in first person speech. In response to the challenge in cross-examination that over the 3 ½ years to the making of his affidavit, his recollection could not be so precise; the plaintiff conceded the logic of that proposition in normal circumstances but said that the conversations set out in his affidavit were taken from his notes made contemporaneously with the conversations: T p 26 lines 15-29. The defendant did not put to the plaintiff that he had not made the notes, did not call for production of the notes and there was no cross-examination challenging that the plaintiff created his affidavit other than with reference to his notes. It was simply acknowledged that the contemporaneous notes were not annexed.
In essence the plaintiff deposed that the defendant described his business to be his personally obtaining funding from close friends on a short term loan basis and that over “the past couple of years, they have doubled their money loaned to me on each in these short-term loans to me personally. Obviously, I have been making heaps myself and that is why I have been able to offer them such good returns on their loan monies to me.” That the defendant said to him that he had “a short term hole in my funding” for the next couple of imports of motor vehicle stocks from the USA, as the purpose of the lending. The plaintiff deposed that the defendant said:

“I wonder if you have any money available to invest on a similar basis to that which my friends have been doing so as to take up the slack for a few months.
I assure you that once you have seen in action what I can do and how I perform you will want to keep lending me this type of funding over and over as these guys have been doing for the past few years”.

The plaintiff set out his detailed response spoken to the defendant’s invitation which I abbreviate to:

the plaintiff would never lend to any company involved with the defendant because media the plaintiff had researched showed that the defendant seemed “to make a habit of putting companies into voluntary liquidation when the going gets tough and you walking away from debt”;

they had just met;

the proposals seemed too good to be true;

he was concerned for the risk of loss of the principal sum loaned to the defendant personally;

at 74 years of age he did not want to risk his funds; and

“My fear is that what you are suggesting to me from your end sounds like some sort of ‘Ponzi Scheme’ or, maybe that it comes from a return from some involvement in drugs. There is no way I would get involved in any of these types of activities.”

I will later deal with the plaintiff’s cross-examination, including that part where Mr Hemsworth put to him these concerns as “red flags”. The plaintiff’s evidence is that the defendant persuaded him, against his better judgement, to invest.
Paragraph 10 of the plaintiff affidavit contains reassuring and persuasive speech by the defendant. The final two paragraphs of the conversation set out in paragraph 10 of the plaintiff’s affidavit, for example, read:

[Defendant]“If you want to take up my offer, I hear what you say about companies I may have been involved with in the past being put into liquidation, but in what I am suggesting here you are dealing only with me personally. I have always performed whatever I undertake to do with my friends in the past and continue to do now and will in the future. I don’t let them down. It is on this same basis I offered this to you if you want to back me by funding me personally in this manner.
Me: Mark, you are very persuasive, and I truly do want to have faith in you, but I am still wary. As I said I can’t afford to expose any financial risk. I have had major financial difficulties in the past with Banks arising because I trusted people who let me down. I can’t afford to let this happen again, particularly at my age. Anyway, in any event, tell me more in detail about what you are proposing.”

At paragraph 13 the plaintiff deposed that after writing the six deals on the piece of paper, the defendant proposed that the plaintiff lend him $40K “for the first loan, it is only for 3 months? When you see how I perform as I say I can (and will), I am sure that you will then have absolute confidence in continuing forward as I will have by then proved to you that I am a man of my word and capable of performing every undertaking I may have given you.”
The defendant then said that he needed the money no later than the next week as he had a team heading off to the “States” to pick up the next group of cars which the defendant had sourced there. The plaintiff deposed that the defendant said:

“If [I] get this money from you immediately I will repay it on 30th August together with a further $40K return. This means on 30th August you will have doubled your money. You can then decide whether you want to stay in with me to do another short-term loan to me or just walk away with your Principal Loan plus profit. It’s up to you.”

The plaintiff says that he responded in words to the effect that the defendant was asking that he lend money “basically on a handshake despite your chequered past, reputation and apparent publicity of being a man who lets people down regularly”, that if the defendant was as wealthy as he said he was he didn’t need money through the plaintiff and that the defendant was proposing that the only reason he was offering the plaintiff the deal was “because of the rapport we established at our first meeting last week and the effort I had put in on the O’Donnell matter purely out of friendship for a friend over three years… I still don’t get exactly why you would offer this to me.” The reference to the O’Donnell matter was to a prior dispute of the plaintiff with O’Donnell who had, according to the defendant, defaulted on a debt of $10,000 to him. The plaintiff referred to the defendant having likened him to “almost a father figure”, the defendant having lost his father and having stated that the plaintiff’s experience as a lawyer and businessman would provide valuable guidance and make the plaintiff “a sounding board from time to time.”
Without repeating more of the long conversation deposed to by the plaintiff in paragraphs 10 to 13 of his affidavit, I note that the plaintiff responded to the defendant that he was being asked to take a plunge of absolutely trusting him. And that “If I was advising a client on this proposal I would tell him not to do it.” The plaintiff deposed that the conversation concluded with his stipulating that if he decided to go ahead with the loan of $40,000 for three months, it would be on the clear understanding that it was loaned to the defendant personally and that the plaintiff would call the defendant later that day to let him know if he would go ahead. The plaintiff evidence was that after their meeting he accepted the defendant’s offer by telephone at about 6pm.
At first blush, one would not expect the plaintiff as a retired solicitor to have entered into unsecured, undocumented advancement of a sum of $40,000 to a stranger in regard to whom the plaintiff’s researches had found reports of his being of dubious business integrity; and, more so when the stranger proposed a 100% return after only three months, being a return which the plaintiff considered to be “too good to be true”.
In cross-examination the plaintiff properly conceded imperfection of recollection and therefore imprecision when setting out the conversations even with the benefit of use of his contemporaneously made notes. That evidence was at T p 26 line 33 to p 27 line 10.
In paragraphs 14 to 17 of his affidavit the defendant denied the plaintiff’s version of their conversations, dealings and other facts set out in the plaintiffs affidavit paragraphs 10 to 13.
The defendant deposed that they discussed “ABEI’s business model and the short term loans and investments” of that company but “At no stage did I communicate to the Plaintiff that I was conducting such dealings personally.” In the conversation which he set out in his paragraph 14 he explained to the plaintiff that ABEI was an investment company, saying: “We borrow monies from lenders like yourself and invest it accordingly in an attempt to generate high yield returns for our clients. We also offer short-term loans to clients with high returns.”
To the plaintiff’s specific enquiry of “exactly” what the monies were invested in, the defendant said that he answered “Whatever yields the best result for the company and our clients. We do not invest in specific things. We look to invest in activities that will expand the operations of ABEI. We will then invest it accordingly and I will keep you updated along the way.” To this vague response which included no content whatsoever identifying investments made by the company recently or in the past, the defendant deposed that the plaintiff answered, as if satisfied:

“Okay, how much do I need to deposit? I am not in a position to lose anything; however I trust you and if worse comes to worse you will owe me five years of shoulder rubs.”

The defendant said that he then wrote the “rough notes on deals” which he identified as annexure “D” of the plaintiff affidavit. Annexure “D” includes the dates “30/8” for “D1” and “25/6” for the “D2”. Obviously those dates are consistent with the repayment dates alleged in the plaintiff case and are inconsistent with the repayment dates 21 August 2015 for the first loan and 29 August 2015 for the second alleged in the defendant case: Defence [6] and by reference to the “3 month” term provision in each of Loan 1 and Loan 2.

Whereas by his affidavit the defendant deposed in his paragraph 15 that the rough notes he wrote at the time of negotiating the first loan included “approximate returns” promised by the deals, as will be seen below; quite inconsistently his oral evidence was that Annexure “D” described only contributions of principal and not returns: defendant evidence T p 147 line 44 to p 148 line 01 (put to and denied by the plaintiff in cross examination T p 56 line 20 to p 57 line 31).
In cross-examination between T p 145 line 49 to p 148 line 01, the defendant gave the surprising evidence that whilst he recognised his signatures and the numbers written in Annexure “D” to be in his hand, he could not recall “the piece of paper being done between us” or when the document was made. I describe that evidence as surprising because it was opposite the following evidence of positive recollection given in paragraphs 14 to 16 of his affidavit, sworn by him only three months beforehand:

“I then proceeded to show the Plaintiff some rough note on the deals… This document is contained in Annexure D in the Affidavit of Paul Herbert Kennedy dated 21 September 2018.”
“I only produced a paper containing rough notes on 2 deals with approximate returns. This document is contained in Annexure D in the Affidavit of Paul Herbert Kennedy dated 21 September 2018.”

In paragraph 14 the defendant also deposed that at that second meeting, on 21 May 2015:

“The Plaintiff and I then proceeded to sign the loan agreement and I made several copies of the signed agreement for my records.
Mark: Great to have you on board.
Paul: Thanks Mark. How do you want to make payment?
Mark: Please deposit the monies into ABEI’s account as per the loan agreement.
Paul: I will attend to that shortly. I have admired all you have achieved and doing business with you would be a lot of fun and hopefully by making some money together we can take on other ventures and may be some travelling.”

In paragraph 17 the defendant denied the conversation in paragraph 13 of the plaintiff’s affidavit in which the plaintiff deposed that the defendant referred him to “the number of deals on offer” and asked the plaintiff how much he was prepared to loan before suggesting the plaintiff lend $40K for the first loan which was for three months. The defendant deposed to their conversation concerning only two deals. The defendant deposed to his having referred to those two deals as “D1” and “D2”. Paragraph 17 of the defendant’s affidavit read as follows:

“In response to paragraph 13, I deny that conversation took place. I had a conversation with the Plaintiff with words to the following effect:
Mark: As I have already explained to you in detail, I feel that the two loans D1 and D2 that ABEI is working on will suit you.
Paul: I can only afford one of the deals at the moment.
Mark: Well D1 would be perfect as D2 is still in the works.
Paul: How much is the investment on D1?
Mark: $80,000.00. This is split between you and ABEI at $40,000.00 each as ABEI will take on exactly the same risk as you.”

I do not accept the defendant’s claimed positive recollection in his affidavit paragraphs 14 to 17 of two deals only having been proposed by him, because in cross examination he claimed to be unable to recall the Annexure “D” document upon which he claimed he then wrote a rough plan of the deals. At T p 145 line 49 to p 147 line 09, for instance, he gave the following evidence:

“Q. Do you recognise this as your handwriting?
A. Yes, it looks I-I don’t think that D 1 and D 2 is but the-the-it looks like my numbers, yes, sir.
Q. You wrote all the things on this page the, didn’t you?
A. I can’t recall, sir. The numbers look like me-like me, yes.
Q. The numbers look like you but D 1 and D 2 don’t look like you?
A. Potentially not, sir, but I couldn’t be exact but the numbers look like mine; yes, sir.
Q. Did you create this document or not? I want you to think very carefully about your answer, sir.
A. Yes, I am, sir. It-it-it definitely looks like my writing, yes, sir.
Q. Did you create a document?
A. Well, did we scribble on a piece of paper? Yes, sir.
Q. Did you create the document?
A. Yes, sir. Yes, sir.
Q. And you didn't see Kennedy write on this document, did you?
A. As I say, I couldn't be exact with D1 and D2 but I will take ownership for the numbers, yes, sir.
Q. Now, in relation to this document - on the D1 - that means "Deal 1" doesn't it? That equates to line 1?
A. It sounds reasonable, yes.
Q. Well, does it or not?
A. Well, sir, I - I - you're asking me to answer honestly; I honestly don't know D1 means but it sounds fair that it's "Deal 1".
Q. And you wrote the contents of this page, didn't you?
A. The - these numbers in the middle; definitely looks like my hand - like my handwriting, yes, sir.
Q. And that's your signature to the right, isn't it?
A. Yes, sir, it looks like my signature.
Q. And there's two signatures of yours there too, isn't it?
A. Looks like it, yes, sir.
Q. Isn't that the case?
A. Yes, sir.
Q. And so I just want to understand your evidence, so D1 and D2 or D.1 and D.2‑‑
A. Yes.
Q. ‑‑you don't think that's your writing?
A. (No verbal reply)
Q. Just take a moment to look at that?
A. No, I don't think the Ds look like mine but I - I - I'm - you want me to be honest? I'm saying I don't think it looks like my writing. I could definitely say that the numbers look like my writing.
Q. You didn't see Kennedy write on this paper at all, did you?
A. Sir, I don't recall the piece of paper being done between us. It was quite a while ago.”

The defendant’s affidavit evidence of when he created Annexure “D”, the circumstances surrounding its creation and the construction of what he wrote, being not based on a real recollection, is not reliable.
In his cross-examination, the plaintiff’s evidence was unshaken that Annexure “D” to his affidavit is a copy of a document written by the defendant at the time of the making of the second loan agreement, confirming the 100% return terms of both loans. His evidence that Annexure “D” recorded the terms of the first and second loan agreements was (T 33 line 47 to p 34 line 05):

“Q. And I put to you that it was just never offered to you.
A. It’s in writing from your client.
Q. No, I’m putting to you it was never offered to you.
A. Well, with respect, I suggest you look at Annexure D to the affidavit.
Q. I’ve seen that and we’ll get to that.
A. No, I’d-of course I-he put it to me and put it in writing, with a whole series of alternatives, all of which were these sorts of returns.”

At paragraph 14 of his affidavit the plaintiff deposed that he asked for the account details “for your bank account you want me to arrange to pay it into?” to which the defendant replied with the details of a bank account of ABEI. The defendant said that “the loan is to me personally, but I am just directing you to arrange to deposit it into that company because that is the one I do the car deals”. It is agreed that the plaintiff deposited the money in two tranches of $20,000.00 to the account of ABEI.
The defendant denied that the monies were deposited at his oral direction as set out in paragraph 14 of the plaintiff affidavit. The defendant affidavit at paragraphs 14, 19, and 20 deposed that the plaintiff paid the monies into the account of ABEI because Loan 1 required it. Clause 1(d) of Loan 1 gives the ABEI bank account number.
In the result, the fact that the plaintiff deposited the monies into the bank account of ABEI does not assist in the determination of whether the plaintiff’s or defendant’s version of events should be accepted because it is consistent with both.
At paragraphs 17 and 18 of his affidavit, the defendant referred to a document which he described as a “contemporaneous checklist” he deposed to having created at the time of the making of Loan 1. Further, he deposed that it is wrongly dated 20 May 2015 and should be dated 21 May 2015. The checklist document is to be treated with caution. It is entirely self-serving. It gives the ABEI account number and bears the defendant’s markings apparently acknowledging events in a list all directed to the client understanding the loan was made with ABEI, understood the risks, and that the defendant “is only facilitator not lender”. One might ask why the borrower being ABEI and its bank account details would be required on its own checklist. This seems particularly unnecessary because those things are stated in the Loan 1 document. Anyway it is entirely self-serving as to the substantial issue in this case of whether or not the money was loaned to the defendant personally or to his company. The document contains absolutely no other content which one might expect of a pro-forma checklist for the making of such an agreement. For instance, it does not contain any contact details or addresses for the parties to the contract. Nor does the Loan 1 document. It does not include places to check off that the principal sum, interest, and term of loan have been completed in the loan contract. Loan 1 and Loan 2 show that the principal sum ((clause 1(a)) was to be inserted.
Whilst writing the wrong date (20 May 2015) on a document is a common experience, in cross examination the defendant explained that he was sure that the first loan agreement was made on 21 May because it was his birthday. That and the following facts make his claimed dating error to be less likely: the meeting was organised by appointment for 21 May 2015 at his offices; and the Loan 1 document is dated “21st May 2015”. For the reasons stated, I find the checklist document at page 11 of the Defendant Exhibit to be unpersuasive on the important question of whether or not the parties contracted orally or in writing.
The defendant put the Loan 1 terms of interest at 8% and period of the loan at 3 months to the plaintiff (T p 39 lines 05-16). Whilst at one point the plaintiff answered that the loan was “for 3 months”, he gave that answer following a question directed to the assertions in his own case. The plaintiff maintained his denial of a written agreement for the first loan and the terms of Loan 1 specifically, and denied contracting with ABEI. In cross examination the defendant maintained the first loan was made in the written agreement Loan 1 and denied it was orally agreed on terms of 100% return on the $40,000.00 advanced, due on 30 August 2015: T p 143 lines 20-30. The defendant did not specifically put to the plaintiff in cross examination that the repayment date for the first loan was 21 August 2015 (3 months from agreement) but nothing turns on this in my view, both because of the completeness of the plaintiff’s denial of making the Loan 1 contract and because counsel for the parties informed the Court that they had come to some arrangement in relation “Brown and Dunn” obligations, the terms of which were never specifically explained.

The Second Loan

By telephone on 25 or 26 May 2015, the parties agreed to meet the following Friday at 1pm at the Engine Room. Not much turns on their different accounts of the conversation organising the meeting. The conversation is set out in paragraph 17 of the plaintiff’s affidavit and paragraph 21 of the defendant’s affidavit. Whereas the defendant said he specifically referred to “Deal 2”, which would be a reference to his evidence of the discussion of the two deals at the time of making the first loan recorded in annexure “D”, the plaintiff said that the defendant spoke of “another deal” and on the same 100% return basis as ‘D1’ but for $30,000.00 lent over the shorter term of less than 3 weeks.
Just as in relation to the first loan agreement; each of the plaintiff and the defendant set out conversations leading to the making of the second loan. Just as for the first loan agreement, whereas the plaintiff deposed that the second loan was made between them personally and contracted orally; the defendant deposed that the plaintiff made a written agreement with ABEI: Loan 2 at Defendant Exhibit pages 12-14.
The plaintiff deposed that the defendant advised the repayment date of 25 June 2015. The date written by the defendant beside “D2” on Annexure “D” is “25/6”. The monies were to be deposited into the account of ABEI on Monday 31 May 2019. The plaintiff says they discussed that this would make the loan term only 26 days. The defendant case, based on Loan 1, is that the term of the loan was three months. His pleaded case was that repayment was due on 29 August 2015. Nowhere in Annexure “D” does that date appear. I observe that whilst “25/6” in Annexure “D” is consistent with the plaintiff case; “25/6” bears no consistency with the defendant case.
According to the plaintiff (paragraph 18 of his affidavit), he once again told the defendant that “It seems too good to be true” and again stipulated that he would only contract with the defendant personally. In part the conversation set out in paragraph 18 to the plaintiff’s affidavit included the following:

“Me: Mark, so what you are telling me [is] that this new deal is essentially the same format as D1 and it is a loan to you personally, you understand that? Is that correct?
Defendant: Yes, I understand that, but I still want you to pay it into the Alexander and Black account at St George. If you go ahead with this one, we will call it ‘D2’.
Me: I again stress to you that I cannot risk losing one cent of this principal just as I could not risk it with D1… It is critical, if I agree to loan you this further $30k that you pay it all back with the agreed return on 25 June and that there is no hiccup at all in you repaying D1 on 30 August as you have promised.
Defendant: Don’t stress mate, I promise you I won’t let you down.
Me: OKAY, you have convinced me again with your sincerity and the fact that in both D1 & D2 you [re] personally putting your balls on the line undertaking repayment the same as you did with D1, I can only rely on you and your confidence that nothing can go wrong with this D2.”

As I did in relation to the plaintiff’s evidence of conversations concerning the first loan agreement, I observe that at first blush, it would be surprising for a career solicitor to advance substantial monies to a virtual stranger about whom researches had caused him to be concerned that he was a con man, without security, and without even the benefit of a written contract. That said, in relation to both loans, one would be even more surprised if such a person loaned those monies to a company about which he knew virtually nothing. Indeed, in cross examination the plaintiff insisted that the first that he had heard of ABEI was when the defendant directed him to pay the principal sum of $40,000.00 in relation to the first loan agreement into the account of that company. Further, the plaintiff evidence of the meeting eight days earlier (21 May 2015) based on his internet searches, was that had spoken of his belief that the defendant had a history of putting companies into voluntary liquidation “when the going gets tough” and “walking away from debt”.
It is at this point in paragraph 18 of the plaintiff’s affidavit that he says the defendant wrote on paper, a copy of which is Annexure “D” to the plaintiff’s affidavit. The plaintiff deposed that he agreed to arrange EFT for $20,000.00 that day and to deposit a further $10,000.00 on Monday 31st. At paragraph 18 on page 20 of his affidavit the plaintiff said of the creation of Annexure “D”:

“the defendant of his own volition then wrote on a blank piece of paper calculations of the principal and interest return in his own handwriting relating to D1 and D2 transactions and thereupon signed same.
The defendant the[n] said words to the following effect to me:
Defendant: You have shown real trust and faith in me in loaning these monies to me totally in good faith trust without any formal paperwork, so it is only fair that I acknowledge these loans and the basis of what we are doing. Again, I say to you, don’t stress and don’t worry, I will not let you down and you will be very happy with these results.
Me: I appreciate your assurances. Would you please run me off a photocopy of that paper so we each have a record?”

In paragraph 23 of his affidavit, the defendant denied paragraph 18 of the plaintiff’s affidavit and set out a conversation leading to the signing of Loan 2. That conversation, according to his version, was again specific about the plaintiff lending to ABEI. The defendant set the conversation out as follows in paragraph 23 (in part) of his affidavit:

“Paul: So Mark, I hear you have an update on Deal 2?
Mark: Yes I do. ABEI was able to organise the deal and we need to source the funds.
Paul: I might be interested as I enjoy working with you, but I may not have all of the funds. It will depend on how much you need.
Mark: This deal won’t be as much as Deal 1. We only require $30,000.00.
Paul: Okay I can afford to get involved on this one. Is it the same terms as Deal 1?
Mark: Not entirely, this one will see a return within a shorter period. I have the loan agreement between you and ABEI for you to review and sign if you are happy with it.
The plaintiff and I then proceeded to sign the loan agreement and I made a copy of the signed agreement for my records.”

The defendant’s claim that he described the term of the loan as “a shorter period” is inconsistent with the identical term of the three months expressed in both Loan 1 and Loan 2. It is also inconsistent with the second loan repayment date of 29 August pleaded in Defence [6]. A shorter term than the first loan is consistent with the plaintiff’s case and with the repayment date “25/6” the defendant wrote on Annexure “D”. Nowhere in the conversation deposed to by the defendant in relation to the second loan agreement is the term of the loan stated.
Loan 2 clause 1(c) described the term as “3 Months”. An immediate observation is that if the plaintiff had looked at Loan 2 in order to see if he was “happy with it”, as the defendant deposed, he would have read that the term of the loan was three months and not for a shorter period.
In paragraph 23 (quoted above) the defendant deposed that the plaintiff asked him how much was to be lent by the second loan. The defendant answered by saying it would not be as much as for the first loan agreement and that only $30,000.00 was required. The writing on Annexure “D” for the second deal describes $30,000.00 as the maximum investment for the second loan. If prior to the discussion of the second loan agreement the Annexure “D” was in contemplation between the parties (as the defendant deposed at paragraph 14, 15 and 17 of his affidavit), the plaintiff would not have, as the defendant deposed in paragraph 23, asked whether it was to be on “the same terms as Deal 1?” and the defendant would not have had to answer that it was for a “shorter term” and the lesser sum of $30,000.00. In these ways, the conversation set out in paragraph 23 of the defendant’s affidavit does not sit comfortably with what he said of the plaintiff’s Annexure “D”, being created at the time of the making of the first loan agreement in his paragraphs 14 and 15.
In these ways, both the contemporaneous record Annexure “D” and the conversation deposed to by the defendant in paragraph 23 of his affidavit are inconsistent with the parties having contracted on Loan 2 terms.
The approach taken by the defendant affidavit was to respond to paragraphs of the plaintiff’s affidavit in order. At paragraph 19 of his affidavit, the plaintiff described the creation of Annexure “D” as follows:

“19. The Defendant then photocopied the paper in my presence and handed me a copy of same. I am unaware of what the defendant may have done with the original.
ATTACHED HERETO AND MARKED WITH THE LETTER ‘D’ IS A TRUE COPY OF THE PHOTOCOPY OF THE DOCUMENT SIGNED BY THE DEFENDANT AND HANDED TO ME BY THE DEFENDANT ON MONDAY 21 MAY 2015 (underlining added).”

The expression “Monday 21 May 2015” is an error. There was no Monday 21 May 2015 in the 2015 calendar. Thursday 21 May 2015 is the date of the making of the first loan agreement. However, the observations I above made, persuade me that Annexure “D” was created at the time of making the second loan agreement on 29 May 2015. I have determined that cross-examination of the defendant exposed that he did not possess a recollection of Annexure “D” being created before that time.

“Q. You never took any steps, even to today, to furnish a copy of loan agreement 1 or loan agreement 2 to the liquidator.
A. They haven't asked me, sir. If they‑‑
Q. You haven't done it, have you?
A. They haven't asked me, sir.
Q. Have you done it or not?
A. No, I haven't done it, sir.”

Plainly the liquidator would not know to ask, if the defendant had not informed him of the debt.

The defendant was taken to a letter from the liquidator dated 7 May 2019 and conceded that on that date he understood that the list of creditors did not include the plaintiff: T p 95 line 35. When it was then put to the defendant that the reason he had not informed the liquidator that the plaintiff was a creditor of the company was that he knew full well the truth that the plaintiff was not a creditor of the company; following his denials (T p 95 lines 36-49), he gave the following evidence (T p 96 lines 13-31):

“Q. That's a lie, isn't it, your answer? You had the documents, being loan 1 and loan 2, in your control, custody, and possession. You've accepted that.
A. Yes.
Q. And you failed to produce that to the liquidators. You accept that, don't you?
A. No, sir. I don't accept it.
Q. Are you saying to this Court, then, by inference, is that the liquidators have omitted Paul Herbert Kennedy as a creditor of the company?
A. No, sir.
Q. See, the truth of it is, is that you know and have always known, that Paul Herbert Kennedy never lent any money to the company.
A. No, that's not true, sir.
Q. Why is that document not reflected in the documents produced under subpoena, and in particular, the list of creditors?
A. You'd have to ask the liquidators, sir. I'm not sure.”

Again, I found this evidence to be given in a cavalier and evasive manner. I was concerned that the defendant was being untruthful and consciously so.

CONSIDERATION

The evidence must be considered as a whole and in the course of that process and purely for organisational purposes in this delivery of reasoning, it is convenient to recognise three areas of presentation of the plaintiff and defendant evidence in the case. Those areas are:

the persuasion of their competing versions of events given in evidence in chief;

my assessment of them as witnesses whose oral evidence when assessed with the whole of the evidence in the case was truthful, reliable and accurate; and

my assessment of the evidence of the forensic document expert, Ms Holt.

Before coming to Ms Holt’s evidence, I will deal with the first two areas. Of course it is available to the court to accept parts of the evidence of the plaintiff or the defendant and to reject parts of their evidence as relate to the facts in issue in the course of my fact finding.
In determining the issue of credit I am assisted by employing consideration of the approach described by Tamberlin J and approved by the High Court in Effem v Lake Cumbeline Pty Ltd [1999] HCA 15; 161 ALR 599 at 603. The passage of the judgment of Tamberlin J read as follows:

“Credit in this matter assumes a significant role because almost all of the representations alleged are specifically and categorically denied. There are four principal witnesses whose credit is squarely in issue, and I propose to comment on each of them in turn.
I should add that my final conclusion is that having regard to the 7 to 8 year period that has elapsed between the events and conversations raised in the evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long time.”

This case requires assessment of the evidence of the two parties as witnesses who gave evidence a little more than 4 years after the events. The plaintiff’s affidavit was made by him 3 and a half years after the events and with the assistance of notes made by him contemporaneously with the events. It was made 9 months after the plaintiff received the Defence on 22 March 2018. The Defence at [3] pleaded that the plaintiff dealt only with ABEI and made the first loan by written agreement dated 21 May 2015. The Defence, particularly at [6], denied that the second loan agreement was made between the plaintiff and the defendant and repeated that the plaintiff at all times dealt exclusively with ABEI. Unlike in response to the first loan agreement, the Defence did not plead that the second loan was by written agreement. The defendant first particularised that the second agreement was made in writing when he served his affidavit made 19 March 2019 to which was exhibited Loan 1 and Loan 2.
The plaintiff said in cross examination that whilst aware that the Defence pleaded written contract, he did not pursue production of a copy of that agreement for over approximately one year because the defendant was travelling, unavailable and delays occurred on account of the defendant’s unavailability. He also said he did not believe that the written contract existed: T p 43 lines 3-34:

“Q. But you never saw further particulars of this defence or a copy of the loan agreement, did you?
A. Not at that time, no.
Q. When you say, "not at that time," you never did, did you?
A. I'm sorry?
Q. You never saw the copy of the loan agreement, did you?
A. Only in the last few months.
Q. When it was served on you by my client with his evidence.
A. Yes, because I don't believe there was any loan agreement.
Q. Well, I'm putting to you--
A. No, I'm sorry, I mean written loan agreement.
Q. Well, I'm putting to you that you knew about his written loan agreement since 22 March 2018 and you never called for it, and the reason is because you knew of its existence and you saw no reason to call for it.
A. No, the reason was that your client was seeking extension after extension after extension because he was overseas. So, there's no point in my pursuing it at that point as far as I was concerned.
Q. Mr Kennedy, my client being overseas would have no impact on you calling for this document, was it?
A. Well, it wasn't helped by the fact that the address for service he gave for documents is an address that he vacated two years before, and acknowledged that in writing too.
Q. Mr Kennedy, I'll just put the question to you again, my client being overseas would have no impact on you calling for this document, would it?
A. No, in reality, no.”

My Judgment of 2 August 2019 gives a brief chronology of what occurred in the two and a half months between service of the defendant’s affidavit which exhibited Loan 1 and Loan 2 and the hearing. In short, the plaintiff obtained the report of expert forensic document examiner Ms Holt by affidavit, called for the originals Loan 1 and Loan 2, and subpoenaed the liquidator of ABEI for records of creditors of that company.
During cross examination, allegations of dishonesty were plainly put by each side to the other. This included each of the elements of personal contracting rather than ABEI contracting, the terms of the loan agreements and whether they were made orally or documented in Loan 1 and Loan 2. Specifically, prior to the hearing the plaintiff had served on the defendant the expert opinion evidence of Ms Holt, albeit at the commencement of the hearing the plaintiff had been denied the opportunity to rely upon it by earlier order of the Acting List Judge.
The defendant was given a fair opportunity to respond the challenges to his credit and to his honesty in the giving of his evidence and in regard to his reliance upon the Loan 1 and Loan 2 documents. This being a civil hearing the plaintiff’s onus is to satisfy on the balance of probabilities the inference that Loan 1 and Loan 2 are false productions and not true copies of original contract signed by the plaintiff: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; Kuhl v Zurich Financial Services Ltd (2011) 243 CLR 361; [2011] HCA 11 at [75]; Bale v Mills [2011] NSWCA 226 at [63]-[67].
Neither party referred the Court to section 147 of the Evidence Act 1995 (NSW); but the question here is whether Loan 1 and Loan 2 are true copies of original contracts or copies of false documents. The section is therefore not of assistance.
In detail I have observed that the plaintiff’s version of events was unshaken in cross examination, was consistent with the expression of terms of the two loan agreements written by the defendant on Annexure “D” which was created contemporaneously with the making of the loan agreements, and was corroborated not just by Annexure “D” but also by the evidence of the post contractual emails in proof of finding as fact that the two oral agreements for which the plaintiff sued had been made.
In detail I have observed that the defendant’s version of events in chief was significantly shaken during cross examination. Reluctantly he conceded the period of the two loans to be expressed in Annexure “D” such that repayment of the first loan was due 30 August 2015 and repayment of the second loan on 25 June 2015. That concession cannot be reconciled with the defendant case that pursuant to Loan 1 the date for repayment was 21 August 2015 and pursuant to Loan 2 the date for repayment was 29 May 2015. I have identified significant inconsistencies internal to the defendant’s affidavit evidence and between his affidavit evidence and his oral evidence.
There is no evidence of the plaintiff contracting with ABEI except the defendant affidavit and oral evidence, Loan 1 and Loan 2, that the plaintiff deposited the money lent into an account of ABEI and received a $10,000.00 payment on 6 June 2016 from ABEI, and the document at Defendant Exhibit page 11 which I have referred to as ‘the checklist’.
The plaintiff, of course, was unshaken in his denial of not having contracted with ABEI. The plaintiff’s version of oral contracting, being preferred to the defendant case on Loan 1 and Loan 2; there is nothing to support a finding that the plaintiff did contract with ABEI.
I have also found persuasion against acceptance of the defendant case of Loan 1 and Loan 2 contracting, from the fact that he did not as Director of ABEI, indeed as a company director with some prior experience of placing companies into Administration and Liquidation, disclose the plaintiff as a creditor to the Administrator and Liquidator and did not provide the Administrator and Liquidator with Loan 1 and Loan 2. I have found it to be unlikely that, as he claimed, the defendant simply “overlooked” those disclosures to the Administrator and Liquidator given that the plaintiff’s pursuit of him for repayment.
The defendant’s evidence of the parties signing Loan 1and Loan 2, in the context of his inability to recall his creation of the Annexure “D” document, created by him when the loan agreements were made and during the course of cross examination when he was presented with the consistency of his writing on Annexure “D” with the terms of contracts described in the plaintiff evidence; significantly reduced the persuasion of his evidence of events in the making of the loan contracts.
On the whole of the evidence I prefer the plaintiff’s version of events, particularly given its consistency with the contemporaneous document Annexure “D” and the indirect evidence of the fact of the contracts on which the plaintiff sues, observed in the post contractual emails.
I have found that the fact of the plaintiff having advanced the loan monies to an account of ABEI and to have received the $10,000.00 payment on 6 June 2016 from ABEI to be not particularly persuasive for or against either parties case. I have found the checklist to be a self-serving document of the defendant and otherwise unconvincing evidence.
Overall I have found the defendant to be either lacking in a real recollection of events and to have reconstructed his case; or a witness who was consciously untruthful in parts of his evidence and generally unreliable as a witness who gave evidence for the purpose of avoiding personal liability and attempting to divert liability to ABEI (in liquidation).
I have not found great assistance in determining between the versions of events given by the parties, from consideration of the inherent commercial probabilities of the dealings they allege. That I should not accept a career solicitor would in the circumstances of the “red flag” circumstances have contracted orally with the defendant; is, in my opinion, no more persuasive than the proposition that the such a person, possessed of the same “red flag” concerns, would contract with the company ABEI about which he knew nothing and when aware of the history of the defendant’s companies going into liquidation.
In closing, the defendant submitted that the 100% return over such short periods as alleged in the plaintiff’s case were so extraordinary as to weigh against acceptance of the plaintiff case on a worldly view of inherent commercial probabilities. I am not well persuaded by that submission because on the plaintiff’s version of events, in regard to which he was unshaken in cross examination, and indeed employing the style of personal reference expressed in the defendant’s affidavit of conversations and as seen in the post contractual emails; the plaintiff and the defendant dealt with each other in a friendly and personal manner, in which context the plaintiff version of events was that the defendant explained that he offered those returns only to friends and that he himself was making a significant profit by such loans in his exotic car importation business.
The defendant presented no evidence of the provenance of Loan 1 and Loan 2. There is no evidence of handling, dealing or storing of original contracts of which those documents purport to be copies. There is simply no evidence of what happened to original documents.
He made his defence starting on the point of copy documents of loan contract only. Whether that be deliberate falsity or uncredible reconstruction based on the usual practice in his office of copy documents of loan being created, need not be determined in order to for me to find that the copy documents, Loan 1 and Loan 2, do not persuade me on balance against accepting that the plaintiff has proven on the balance of probabilities that the contracts were made orally.
Were I left without the evidence of Ms Holt, without evidence of the provenance of Loan 1 and Loan 2 other than they being copies located from boxes stored in the defendant’s warehouse; I would not be persuaded by Loan 1 and Loan 2 to find against the plaintiff.
Now moving to consider the expert document examination opinion evidence of Ms Holt. Ms Holt’s opinion evidence takes the comfort of my satisfaction with finding in favour of the plaintiff’s case that the contracts were made orally to a high level indeed. Ms Holt’s evidence, in addition to providing that high comfort in finding that Loan 1 and Loan 2 are not copies of true, originally signed contracts also shows that such false copies are easily created by almost anyone through the unsophisticated process of technologically copying and pasting.
It is appropriate to acknowledge that those copies could have been created by anyone. It was not put to the defendant that he created Loan 1 and Loan 2 or even that he knew at the time he deposed his affidavit that they were false copies. That I find Loan 1 and Loan 2, as I do, to be not true copies of original contracts signed by the plaintiff, does not infer the defendant knew them to be false when he chose to exhibit them to his affidavit.
In closing written submissions the defendant submitted that the plaintiff case brought an allegation of fraud against the defendant which case was not pleaded. That is not so. The plaintiff pleaded and ran the case in proof of two oral contracts of loan in specific terms. The defendant introduced as a matter of evidence Loan 1 and Loan 2 in his denial of the plaintiff’s proof of his case. There was no allegation of fraud which the plaintiff was required to plead or to prove.

CONCLUSION

The plaintiff is entitled to damages for breach of each of the loan contracts by the defendant’s failure to pay. It was a term of the second loan that it be repaid on 25 June 2015. It was a term of the first loan that it be repaid on 30 August 2015. Taking into account the $10,000.00 payment made on 6 June 2016, the principal balance sum in total is $130,000.00. In closing written submissions at [61] the plaintiff has accounted that payment against the amount due under the second loan, which approach I accept because, interest is compensatory and should run longest on the lesser amount.

COSTS

In the plaintiff’s outline of closing submissions received 21 November 2019, he for the first time mentioned an application for costs to be awarded on an indemnity basis pursuant to UCPR r 42.5. Defendant’s closing written submissions received 29 November 2019 do not respond to the plaintiff’s claim for indemnity costs. Neither party has sought the matter be listed for oral argument in relation to costs.
Whilst my conclusion is that I am satisfied on the balance of probabilities that the two loans were agreed orally in the terms of the plaintiff’s case and that I am not persuaded on the balance of probabilities that Loan 1 and Loan 2 are true copies of original contracts signed by the plaintiff; in the absence of the defendant having been tested in cross examination on the assertion that he falsely created Loan 1 and Loan 2 or that he swore his affidavit untruthfully because he was aware of the fact that they were not true copies of original contracts, in my view, it should not be found that his defence was brazenly false. On the final day of the hearing, following the evidence of the expert forensic document examiner, Ms Holt, the plaintiff elected not to seek further cross examination of the defendant on that topic. Whilst I am satisfied that some person at some time must have committed the grave civil wrong of creating Loan 1 and Loan 2, there is no evidence that the defendant was aware at the time he swore his affidavit of that fact. It may have been the activity of a misguided employee involved in the processes of his office, for instance. Such possibilities were not examined and should not be dismissed on the evidence in the case. For these reasons, I do not accept that the defence run was totally frivolous and thoroughly unjustified.
Assuming that the plaintiff, by making submissions for costs on an indemnity basis in closing, has referred to the whole of the evidence upon which it would base such an application; I would refuse it and order costs on the normal basis.

ORDERS

Judgment for the plaintiff in the sum of $130,000.00;
Interest pursuant to s 100 Civil Procedure Act 2005 (NSW) on the amount of

$60,000.00 for the period commencing 26 June 2015 and ending 5 June 2016;

separately on the amount of $80,000.00 for the period commencing 31 August 2015 and ending 5 June 2016; and

on the sum of $130,000.00 thereafter;

The defendant pay the plaintiff’s costs of the proceedings on the normal basis; and
I return the exhibits.

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Decision last updated: 17 February 2020

Medium Neutral Citation:	Paul Herbert Kennedy v Mark Alexander-Erber [2020] NSWDC 15
Hearing dates:	6 June 2019, 7 June 2019, 5 July 2019, 2 August 2019, 21 November 2019
Date of orders:	14 February 2020
Decision date:	14 February 2020
Jurisdiction:	Civil
Before:	Montgomery DCJ
Decision:	(1) Judgment for the plaintiff in the sum of $130,000.00; (2) Interest pursuant to s 100 Civil Procedure Act 2005 (NSW) on the amount of (a) $60,000.00 for the period commencing 26 June 2015 and ending 5 June 2016; (b) separately on the amount of $80,000.00 for the period commencing 31 August 2015 and ending 5 June 2016; and (c) on the sum of $130,000.00 thereafter; (3) The defendant pay the plaintiff’s costs of the proceedings on the normal basis; and (4) I return the exhibits
Catchwords:	Contract; whether orally made or written – whether copies of contracts in evidence true – whether signatures on copy contracts fabricated
Legislation Cited:	Evidence Act 1995 (NSW) ss 47, 48, 55(1), 56(1), 78, and 140 (1) Civil Procedure Act 2005 (NSW) s 100 UCPR r 42.5
Cases Cited:	Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 3 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66 Re Day (2017) 340 ALR 368; [2017] HCA 2 Prime Capital Securities Pty Ltd v Calleja [2018] NSWCA 26 Effem v Lake Cumbeline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599 at 603 Bale v Mills (2011) 282 ALR 336; [2011] NSWCA 226 at [63]-[67] Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29
Category:	Principal judgment
Parties:	Paul Herbert Kennedy (plaintiff) Mark Alexander-Erber (defendant)
Representation:	Counsel: Mr D Eardley (plaintiff) Mr B Hemsworth (defendant) Solicitors: ER Solicitors (plaintiff) Somerville Legal (defendant)
File Number(s):	2017/185571
Publication restriction:	N/A