Polacsek v Patek - [2018] VCC 24

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-16-02991

EMMA ELIZABETH POLACSEK (by her litigation guardian)	Plaintiff
v
GEORG PATEK	Defendant

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JUDGE:	Her Honour Judge Marks
WHERE HELD:	Melbourne
DATE OF HEARING:	28 November 2017 and written submissions dated 30 November, 5 & 7 December 2017
DATE OF JUDGMENT:	1 February 2018
CASE MAY BE CITED AS:	Polacsek v Patek
MEDIUM NEUTRAL CITATION:	[2018] VCC 24

REASONS FOR JUDGMENT

CONTRACT – Loan made by stepmother to stepson – Whether loan forgiven – Document purporting to record forgiveness of loan not in form of deed – Consideration required for forgiveness of loan – Dobrinski v Slade [2010] NSWDC 297 – Judgment for plaintiff.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms L Barrett	McKean Park Lawyers
For the Defendant	Mr B Gillies	Direct brief by defendant

CONTENTS

Background

Issues

Witnesses
The loan agreement and release
Was the release signed by Mrs Polacsek in 2009?
Can the release operate to forgive the loan?
Other defences

Abuse of process
Laches

Conclusion

HER HONOUR:

Background

In June 2005, Emma Polacsek lent her stepson Georg Patek $160,000. They signed a written loan agreement dated 29 June 2005 (the loan agreement). The loan agreement provided:
(a)The monies loaned by Mrs Polacsek to Mr Patek were to be repaid on or before 1 August 2010;
(b)Mr Patek was to pay simple interest on the monies loaned, at a rate of 5% per annum, payable quarterly in arrears.
The loan has not been repaid.
Prior to retiring, Mrs Polacsek worked as a laboratory supervisor at Commonwealth Serum Laboratories. However, from about 2014 onwards, her mental functioning has steadily decreased. She is 89 years old now, and has dementia. She is no longer able to look after her own interests and could not give evidence, as she lacks capacity.
In October 2012, Mrs Polacsek appointed Ines Kallweit and Peter Waller as her enduring financial guardians. On 12 July 2016 they commenced this proceeding in Mrs Polascek’s name, suing Mr Patek for recovery of the loan and interest.
At the beginning of the trial, I made an Order appointing Herbert Hoffmann as Mrs Polascek’s litigation guardian for the proceeding nunc pro tunc (on the basis that the Order was effective from the commencement of the proceeding). There was no objection to the Order by Counsel for Mr Patek.

Issues

There is no dispute that the loan was made and that is has not been repaid. Mr Patek says he does not need to repay the loan. He says his stepmother forgave the loan approximately four years after it was made, on 29 May 2009. He relies on a written diary note which he says records her agreement to release him from the loan, which he says he and his wife, Suzanne Patek, witnessed (the release). The release is not in the form of a Deed.
The principal dispute is whether or not the loan has been forgiven. To decide that, I need to consider:
·Was the release entered into on 29 May 2009?
·Is the signature which appears on the release Mrs Polacsek’s?
·If so, is the release effective to discharge Mr Patek’s obligations under the loan agreement, given that it is not in the form of a Deed and does not provide for any consideration for the discharge?
Counsel for Mr Patek also raised the statute of limitations, abuse of process, and laches by way of defence, although these were not referred to in the defence filed on 6 June 2017.

Witnesses

Ms Kallweit is a solicitor at Tolhurst Druce & Emmerson. She gave evidence that Mrs Polacsek was a client of the firm, and of various conversations Ms Kallweit had with Mrs Polacsek about the loan in 2012 and 2013. She said that Mrs Polacsek was consistent in stating that the loan remained outstanding.
To the extent that Ms Kallweit’s evidence falls within the definition of hearsay, the exception contained in s63(2) of the Evidence Act 2008 (Vic) applies. The evidence was that Mrs Polacsek is presently suffering from dementia, and is no longer capable of holding a conversation. She was therefore not an ‘available’ witness – see s4 of Part 2 of the Dictionary of the Evidence Act. A notice was served upon Mr Patek in compliance with s67 of the Evidence Act. It was not put to Ms Kallweit in cross-examination that her evidence about what Mrs Polascek said to her was incorrect.
Ms Kallweit said she did not receive instructions from Mrs Polacsek to commence proceedings. However, Ms Kallweit believed that Mrs Polascek no longer had capacity to give instructions to issue proceedings, and Ms Kallweit was aware that the limitations period for suing for the money due was running out. She and Mr Waller, in their capacity as Mrs Polacsek’s financial guardians, instituted this proceeding to recover the loan and interest.
Trevor Joyce, a forensic document examiner, gave evidence that Mrs Polacsek is unlikely to be the author of the signature which purports to be hers on the release.
Mr Patek and Mrs Patek both gave evidence that Mrs Polacsek signed the release on 29 May 2009 in front of them.

The loan agreement and release

The context in which the loan agreement was entered into, and the release was purportedly signed, follows.
In 1960, Mrs Polascek married Mr Patek’s father. Mr Patek was then twenty years old. She became stepmother to him and his siblings, and he describes their relationship as close.
On 29 June 2005, Mrs Polacsek and Mr Patek entered into a written loan agreement. Mr Patek said a few different things about this in giving evidence. He said that the $160,00 ‘was a gift to buy a house at the time’, and that he did not know why there was a loan agreement. He initially said he drafted the loan agreement; then, in cross-examination, he said he could not remember who drafted it.
The loan agreement states:
Recitals:
A. An Amount of $150,000 (“Loan”) is to be advanced by the Lender to the Borrower for the period from 2 August, 2005 to 1 August 2010.
B. The Loan will then be due and owing by the Borrower.
C. The Lender and the Borrower wish to formalise the arrangements between them by the execution of this agreement.
IT IS AGREED THAT in consideration of the money to be loaned by the Lender to the Borrower and of the forbearance of the Lender from suing for same in writing.
1. The Borrower will pay simple interest at the interest Rate shown in the Schedule, quarterly in arrears on the balance of the Loan outstanding as at the relevant date of payment, adjusted for any advances or repayments made by the Borrower.
2 If requested by the Lender in writing, the Borrower will execute such documents as the Lender may require for securing the repayment of the Loan.
3 The provisions of the Schedule form part of this agreement and words defined in the Schedule have that meaning in this agreement.
EXECUTED by the Borrower and the Lender as an agreement.
SCHEDULE
Interest rate: 5 percent per annum
FINAL REPAYMENT DATE: 1 August, 2010 or as agreed by the Lender and Borrower.
In February 2009 Mr and Mrs Patek’s farm in Alexandra was destroyed in the Black Saturday fires. They lost everything on the property but the house. Their son’s nearby property was also destroyed.
Mr Patek gave evidence it was in the context of him having lost so much in the fires that his stepmother forgave him from repaying the loan a few months later. Mr and Mrs Patek said that her forgiveness of the loan was recorded in Mr Patek’s 2009 year diary, on the diary page for 29 May 2009.
The diary in which the release is set out is a year-long diary with a page for each day in the year 2009. The page for 29 May has an entry relating to an appointment from 10:00 to 10:30 with ‘Ron’ on an unrelated matter. The next line states, in Mr Patek’s handwriting:
Visit Emma Re: LOAN
TO WHOM IT MAY CONCERN
I, Emma Elisabeth Polacsek of 31-41 Elizabeth Street Bayswater 3153
Forgive the Loan of $160,000.00 plus 5% Interest and give this Loan as a gift to Georg Martin Patek and Family
This loan does not have to be repaid.
The diary entry is purportedly signed by Mrs Polacsek and Mr Patek. Below those signatures is a note that it is ‘witnessed by’ Mrs Patek, with her signature. It then says ‘Date: 29/5/09’.
Mr Patek did not tell Ms Kallweit or Mr Weller, or any legal representative for Mrs Polacsek about the release until 2016. This is discussed below.
On 3 October 2012 Mrs Polacsek provided instructions to Ms Kallweit in respect of her Powers of Attorney and Will.
An Enduring Power of Attorney (Medical Treatment) was given by Mrs Polacsek to her niece Ingrid Uhlherr, and her brother-in-law Peter Uhlherr. Mr Weller and Ms Kallweit witnessed the Enduring Power of Attorney stating they each believed Mrs Polacsek to be of sound mind and to understand the importance of the document.
An Enduring Power of Attorney (Financial) was given by Mrs Polacsek to Mr Weller and Ms Kallweit jointly and severally. It was witnessed by another lawyer. It authorised them to do anything on her behalf that she may lawfully authorise an attorney to do. It stated:
5. I declare that this power of attorney begins on this occasion upon the original of this Power of Attorney or certified copies of it being handed to any of my attorneys.
6. I declare that this power of attorney will continue to operate and have full force and effect even if I subsequently become legally incapable.
Neither of the other two people at this meeting gave evidence. Counsel for Mr Patek says it should be presumed their evidence would not assist. However, there is no need for them to give evidence. Ms Kallweit’s evidence about that discussion is unchallenged and uncontradicted.
Ms Kallweit made a note of her meeting with Mrs Polacsek that day:
Loan to Georg: $150k
Emma said that only very few repayments had been made.
But she said pursuing it would be hopeless. That family member is a complete disaster.
In June 2013, Mr Patek wrote a letter to Mrs Polacsek and acknowledged the loan (the acknowledgment letter). It is a typed letter, with space for each of Mr Patek and Mrs Polascek to sign (above their typed names) at the bottom. It is unsigned. It states:
Ref: 013/015
…
Dear Emma,
To Whom it may Concern
Subject: Personal Loan
In reference to the loan of $160,000 I borrowed from you with 5% interest P.A.
Due to various circumstances I have not kept my obligations.
I kindly ask you to accept an extension of 5 years to repay this loan.
As agreed on     Day    Month    Year
and signed in the presents [sic] of:-
…..  ………
Emma Polacsek  Georg Patek
Ms Kallweit gave evidence that at a meeting on 10 July 2013, Mrs Polacsek said she had received a letter from Mr Patek saying he acknowledged the loan and he needed some more time to pay it. Her contemporaneous note states:
Step-son, George, has sent her a ltr [sic] acknowledging that he owes her $150k but he cannot pay it back at the moment because of a property in Portugal that doesn’t sell.
I told her that the letter is very important as an acknowledgment of debt and that she should send it in to me. She will.
In 2014, Mrs Polacsek’s mental capacity began to deteriorate.
In March 2015, a medical report noted that Mrs Polacsek presented with dementia and other cognitive impairments.
On 15 January 2016, Mr Weller sent a letter to Mr Patek requesting him to sign a copy of the acknowledgment letter Mr Patek had sent in June 2013. The letter said this information was asked for so that his request for an extension of time to repay the loan could be considered. The one page letter has a note handwritten by Mr Patek at the bottom of the page. It says:
File copy.
Original taken to Emma Jan. 25, 2016 to discuss the Loan, which I understood was given to me by Emma, not having to repay same.
The reverse of the letter has more handwritten notes. The reverse was not in the court book presented at the outset of the trial. Mr Patek was taken to the reverse page in cross-examination. The reverse page states:
Jan. 25, 2016 13:00
Emma has no knowledge of any demand to repay $160,000.00. She has no idea and said there are many Peter Weller [sic] she knows. Her solicitor is on vacation and will discuss this outrages [sic] claim.
She also maintains that in her last Will that Natasha and Nikolas and I are beneficiaries.
I did not take this letter to show her and told Emma I will bring it next visit and she will discuss this with her solicitor upon her return from vacation.
Feb 08, 2016. 15:00h Visited Emma and she absolutely rejected the letter she signed, her cousin told her to sign and she witnessed this letter and posted this on Emma’s behalf. Mrs Birkner did not explain to E. what she was signing.
E. asked me to see my own solicitor to release this loan and E. will sign this Document
According to Mr Patek’s handwritten note on the front page of the letter, he visited Mrs Polacsek on 25 January 2016 and took the letter. However, according to the reverse page, he did not take the letter to show her on that day but told her it he would bring it on the next visit.
According to the handwritten note at the bottom of the reverse page, Mr Patek visited Mrs Polacsek on 8 February 2016. He wrote that she had ‘rejected the letter she signed’. It is not clear what letter this statement is a reference to. The letter of 15 January 2016 was not signed by Mrs Polacsek.
In February 2016, Mr Patek wrote to Ms Kallweit and Mr Weller in a typed letter with a reference number at the top: Ref: 016/005:
I am in receipt of your letter dated Januarey [sic] 15, 2016
In 2013, Emma forgave this loan of $160,000.00 including interest and never signed the letter
Ref.: 013/015 dated June 20, 2013.
I frequently visit Emma at Tabulan & Templer Homes and visited her yesterday and again she absolutely confirmed again that I do not have to repay anything and said this is a gift.
Please speak to Emma to confirm this.
In June 2016, Mr Patek’s solicitors wrote to Mrs Polacsek’s solicitors. They asserted, for the first time, that the loan had been forgiven in May 2009 by way of the release:
Thank you for your letter dated 17 June, 2016. We are instructed as follows.
Ms Polacsek agreed to forgive the loan and interest on 29 May, 2009. Attached is a true and correct copy of the agreement with Mrs Polacsek’s signature.
We note that the Enduring Power of Attorney (Financial) is dated 3 October, 2012, some three (3) years after the document.
Our client maintains his position that the loan has been forgiven.
Kindly advise what steps you have taken to ascertain Ms Polacsek’s wishes in relation to this matter as Ms Polacsek has no intention of pursuing the loan as it is forgiven.

Was the release signed by Mrs Polacsek in 2009?

I am not satisfied, on the balance of probability, that Mrs Polascek signed the release in May 2009.
Trevor Joyce, a forensic document examiner and expert witness, gave careful and considered evidence that Mrs Polacsek is unlikely to be the author of the signature which purports to be hers on the release. The basis for this opinion is that the signature on the release is poorly written, with a general lack of detail, and characterised by overwrites and touch-up strokes. It does not show the level of motor control her specimen signatures do. He said that the signature departs from Mrs Polacsek’s usual signature in terms of spatial proportions, structure and apparent motor control.
Mr Joyce did not give expert evidence as to the date that the release was written. He was not permitted, until he was in the witness box, to examine the pages of Mr Patek’s 2009 diary adjacent to the relevant diary page. Although he was able to look at these in Court, he did not have the tools with him to assist in that task.
In explaining his opinion, Mr Joyce said that on examination of the disputed signature under stereo microscope, it appeared quite ‘scratchy’ and was written with quite extensive hesitation. He said that it appeared that the writing of the signature was laboured and characterised by pauses, which was not typical of the other specimens of Mrs Polacsek’s signature he examined. Mr Joyce said that whilst there were variations between the specimen signatures provided to him, none exhibited the same extent of overt impact on motor control as was observed in the disputed signature.
Mr Joyce said that the disputed signature showed various alterations, which were indications of mistakes that may have been made, or corrections that may have been made to try to correct visual deficiencies. There were a number of ‘overwrites’ (or strokes over the top) of the components of the signature.
Mr Joyce said that in his opinion, the signature area of the release where the purported signature by Mrs Patek was set out was written with a different black ballpoint ink than the balance of the document. Both Mr Patek and Mrs Patek gave evidence that she had witnessed Mrs Polascek’s signature just after it was signed by Mrs Polascek at her nursing home in 2009, and denied that the signature block had been written with different ink. However, having examined the diary, I find that the visual appearance of the original release is consistent with Mr Joyce’s opinion about the different ink.
Mr Joyce’ evidence was not affected materially in cross-examination. I accept his opinion that the disputed signature is unlikely to be that of Mrs Polascek.
Mr Patek and Mrs Patek both gave evidence that Mrs Polacsek signed the release on 29 May 2009. In the light of other evidence given, and having observed their demeanour in giving evidence, I do not accept that they saw her sign the release in 2009.
The suggestion that the release was signed in 2009 is not consistent with the following.
In October 2012, when providing instructions to Ms Kallweit in respect of her Powers of Attorney and Will, and in the context of Ms Kallweit assisting her from then on with her financial affairs, Mrs Polacsek informed Ms Kallweit that the loan remained outstanding.
Mrs Polacsek had carefully maintained records about the loan since 2005, including the loan agreement itself. She gave these to Ms Kallweit during that discussion. These records did not contain a photocopy of the release or any reference to the loan having been forgiven. Even more significantly, she said it was owing. Ms Kallweit’s evidence was that at that stage, Mrs Polascek’s mental capacity was good. She had occasion to test her a number of times.
In June 2013, Mr Patek wrote the acknowledgment letter to Mrs Polacsek and requested an extension of five years in which to repay the loan. This is completely inconsistent with the loan having been forgiven in 2009. He gave evidence that at that stage he had forgotten about the release, but said he had always understood the loan to be a gift. Mrs Patek said she was unaware of the acknowledgment letter. She could not recall whether or not they had discussed that letter prior to him sending it, but agreed that it would be ‘odd’ for him to send it if the loan had been forgiven in 2009.
Mrs Polacsek gave the acknowledgment letter to Ms Kallweit shortly afterwards. At no time did she tell Ms Kallweit that she had forgiven the loan.
Nearly three years later, in February 2016, Mr Patek asserted the loan was forgiven in 2013, in a letter to Ms Kallweit and Mr Weller.
In giving evidence, he said that the reference to 2013 ‘may have been a typing error’.
I reject this as a possibility. Some thought has clearly gone into the February 2016 letter. It is typed and includes a reference number. Tellingly, in referring to the 2013 letter it states:
In 2013, Emma forgave this loan of $160,000.00 including interest and never signed the letter
Ref.: 013/015 dated June 20, 2013.
The February 2016 letter contains a clear assertion by Mr Patek that the loan was forgiven in 2013, and specifically refers to the date and reference number of the acknowledgement letter of 20 June 2013, and to the fact that the acknowledgement letter was not signed. The acknowledgement letter does not refer to forgiveness of the loan in any event, but it is clearly this letter that was being referred to by Mr Patek in February 2016. This was not a typing error. He did not intend to refer to forgiveness of the loan having occurred in 2009, as recorded in an entry in Mr Patek’s 2009 diary.

It was not until June 2016 that the assertion was made, for the first time, that the loan was forgiven in May 2009 and recorded in the diary note in May 2009. In that letter from Mr Patek’s solicitors to Mrs Polacsek’s solicitors, it was noted that the Enduring Power of Attorney (Financial) is dated 3 October 2012, ‘some three (3) years after’ the release. No evidence was given by Mr Patek as to how at some point between February and June 2016 he suddenly came to remember that in 2009 the loan had been released, or why he went looking for the release in his 2009 diary. The highest his evidence about finding the release came was in re-examination, when the following exchange took place between Mr Gillies, and Mr Patek:
When did you go and look for that release for the first time? --- I can’t remember.
When you got the letter and you went to see Mr Block of John Keating and Associates did he ask you to look for the release?--- I think he did, yes.
Was that the time you turned the release up? --- Yes, that is correct, yes.
You went through the diaries to find where that was. Is that correct? --- Yes.
Mr Patek’s lack of recall was said to be as a result of a stroke he suffered in 1997. No medical evidence was called in support of this being a symptom he suffered. The precise nature and detail of those problems is unclear. Accepting that he has some memory difficulties, there nonetheless remain serious inconsistencies in his evidence, and in the matters he wrote to Mrs Polascek and her representatives from 2013 on.
I am not satisfied that the release was entered into in May 2009.
No case was advanced for Mr Patek that the release was entered into sometime after 2009. Had such an argument been advanced, I could not have been satisfied on the evidence before me that, if the release were signed by Mrs Polascek at some unknown time after 2009, she signed the release at a time when she had capacity.

Can the release operate to forgive the loan?

Even if I were to accept that the release is genuine (both as to timing and as to Mrs Polacsek’s signature), the release would still need to be legally effective to forgive the loan.
In May 2009 (at the time the release was purportedly entered into), Mr Patek’s obligations to repay the loan had not yet crystallised as the loan was not due for repayment until June 2010.
In order to be an effective agreement, the release must either:
(a)Meet the requirements of a Deed; or
(b)If it is a contract, provide for consideration.
The release does not meet either of those requirements:
(a)It is not a Deed, as it does not meet the formal requirements of ss73 and 73A of the Property Law Act 1958 (Vic). It is not expressed to be a Deed, nor is it expressed to be ‘signed, sealed and delivered’ by Mrs Polacsek (see Paulet v Stewart [2009] VSC 60 at [269]-[270]).
(b)It is not a contract as there is no consideration for it.
Dobrinski v Slade [2010] NSWDC 297 involved a series of loans given by the plaintiff to the defendant, some of which were not repaid by the defendant. The defendant claimed that these loans had been forgiven by the plaintiff, despite there being no Deed of Forgiveness or consideration indicating that the loan had been forgiven.
Gibson DCJ said at [117]-[118]:
The question of “forgiveness”
The defendant claims that the plaintiff “forgave” the balance of outstanding loans and they are therefore extinguished.
There is no defence of forgiveness of this kind known to the law and the debts have not been extinguished. Representations of this kind were explained by Gummow, Hayne and Kiefel JJ in Agricultural and Rural Finance Pty Ltd v Gardner [2008] HCA 57 at [95]-[96], as follows:
… But if, as is the case here, there was no election between inconsistent rights, there was no variation of the contract, and there was no detrimental reliance upon the representation, no reason is given for holding the party concerned to its earlier expressed attitude beyond the fact that the representation was made. To hold that the making of the representation, without more, suffices to alter the rights and obligations for which the parties stipulated by their contract is a step that should not be taken.

It should not be taken for two reasons. First, to hold that the making of a representation, without more, alters the rights and obligations of parties to a contract would be to supplant accepted principles governing whether an estoppel is established and whether a contract has been varied. It would supplant those principles by dispensing with the need to show detrimental reliance to establish an estoppel and by discarding as irrelevant the need to show consideration for an agreement to vary an existing contract. The second reason, which in a sense is no more than the obverse of the first, is that no reason is proffered to hold the person making the representation to it. The person to whom the representation is made has not relied on it; it is not demonstrated that departure from the representation would be unjust; there was no consideration to support a bargain.

Other defences

The defence filed in this proceeding relies only on the release. However, in submissions, Counsel for Mr Patek raised other matters. These were responded to by Counsel for Mrs Polacsek, and I deal with them below.

Abuse of process

Counsel for Mr Patek submitted that these proceedings were commenced in circumstances where Mrs Polacsek had not given instructions to sue, and that they constitute an abuse of process.
He also says that Mrs Polacsek had a close relationship with her stepson, and that her attorneys did not understand the family dynamic or the reason that the reason that the money was loaned, which was to purchase a house ‘as any mother would do for a child’.
He also says that for some time, Ms Kallweit and her co-attorney, Mr Weller, were making decisions on Mrs Polacsek’s behalf without an independent litigation guardian being appointed.
Counsel for Mr Patek says it is an abuse of process to commence a proceeding for a person under a disability without a next friend having been appointed, without clear instructions from Mrs Polacsek as to her intentions, and without responding to or investigating the matters set out in a letter from Mr Patek’s solicitors.
Counsel for Mrs Polacsek says these submissions are mischievous, without any proper basis and should be withdrawn. The onus of proving that there is an abuse of process is a ‘heavy one’: Williams v Spautz (1992) 174 CLR 509 at 529.
Generally, an abuse of process requires one of the following:
a. The Court’s procedures are invoked for an illegitimate purpose;
b.The use of the Court’s procedures is unjustifiably oppressive to one of the parties; or
c.The use of the Court’s procedures would bring the administration of justice into disrepute: Rogers v The Queen (1994) 181 CLR 251 at 286.
None of the matters raised by Mr Patek are of this nature.
Once Mrs Polascek no longer had capacity, it was up to her attorneys to look after her financial interests, which they did by instituting this proceeding. By that stage, Mrs Polascek did not have capacity to give instructions, and the fact that she had not given instructions in the past to sue was irrelevant. The loan had been made, and was outstanding.
The appointment of Mr Hoffmann as litigation guardian was made nunc pro tunc. It thus has effect from the initiation of the proceeding.

Laches

Counsel for Mr Patek also asserted that the doctrine of laches applies.
Counsel for Mrs Polacsek says that the doctrine of laches can only be said to apply if there are circumstances which exist to make any award inequitable. There are not. Mr Patek relies on Mrs Polacsek’s ‘inaction’ to take proceedings whilst she was competent. However, that could not amount to laches. The loan was not due to be repaid until August 2010. No cause of action arose until then. By about March 2015, Mrs Polacsek was suffering from moderate mixed dementia with significant deficits to executive functioning. It is unlikely that that occurred overnight. Further, Ms Kallweit’s evidence was that Mrs Polacsek had no capacity by early 2016, and that the attorneys issued proceedings because of the impending expiration of the limitations period.
In any event, laches is only a defence to an equitable claim.
This is succinctly put in Orr v Ford (1989) 167 CLR 316 at 340, by Deane J:
The availability of a defence of laches and what will suffice to make it good depends upon the nature of the claim. Laches is an equitable defence and is not available in answer to a legal claim.
The point is usefully summarised in LexisNexis, Halsbury’s Laws of Australia, (at 29 October 2015), 185 Equity, ‘1835 Defence of laches’:
…A plaintiff is said to be barred by laches when, by reason of his or her having slept on his or her rights and acquiesced in the defendant’s conduct, a court of equity will refuse its assistance. If a plaintiff establishes prima facie grounds for relief, the question whether he or she is defeated by delay must itself be governed by the kind of considerations upon which the principles of equity proceed. The defence applies only where there is no statutory bar operating either expressly or by way of analogy. Laches is not available to answer a legal claim…[Citations omitted]

Conclusion

The loan remains outstanding. I am not satisfied that it was ever forgiven by Mrs Polascek as a matter of fact. Even if it were, that forgiveness was ineffective as a matter of law.
The amount due is $160,000 plus interest.
The statement of claim sought interest from 1 August 2010 to 30 July 2016 of $48,000. At the outset of the trial, Counsel for Mrs Polacsek sought leave to rely on an amended statement of claim which claimed interest of a higher amount over a longer period:
5. Interest has accrued on the sum of $160,000 for the period 1 August 2005 to 30 July 2016 in the sum of $82,500.
Counsel for Mr Patek did not object to the amendment and leave was given. No amended defence was filed.
Counsel for Mr Patek submitted in written submissions filed after the hearing that ‘the debt’ was statute barred, without saying why. He did not specifically refer to interest (submissions dated 7 December 2017 at [14]).
This proceeding was instituted on 12 July 2016, and it presently seems to me that interest payments due more than six years earlier, before 12 July 2009, may be statute barred. The amount now sought by the plaintiff dates back to 1 August 2005.
The quantum of interest due, in the event of a finding in favour of Mrs Polacsek, was not the subject of submissions.
I will give judgment for the plaintiff for $160,000.
If the parties are unable to agree on the amount of interest and consequential orders regarding costs, I will list the matter for a hearing on those matters.

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Certificate

I certify that these 18 pages are a true copy of the reasons for decision of her Honour Judge Marks, delivered on 1 February 2018.
Dated: 1 February 2018
Liz Main
Associate to Her Honour Judge Marks