Poulakos v Katiforis
[2017] VSC 287
•8 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
COMMERCIAL COURT
S CI 2015 06474
| ANDRIA POULAKOS | Plaintiff |
| v | |
| STEVEN EFSTATHIOS KATIFORIS | Defendant |
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JUDGE: | EMERTON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 May 2017 |
DATE OF JUDGMENT: | 8 June 2017 |
CASE MAY BE CITED AS: | Poulakos v Katiforis |
MEDIUM NEUTRAL CITATION: | [2017] VSC 287 |
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CONTRACT — Partly oral and partly implied loan agreement — Whether the agreement included terms for the payment of interest — When the first demand of payment occurred — Statutory interest pursuant to Supreme Court Act 1986 s 58.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Tim Sowden of Counsel | Robinson Gill |
| For the Defendant | Mr Dennis Baker of Counsel | Cash and Stavroulakis |
HER HONOUR:
In late 2011, the plaintiff and the defendant were either ‘dating’ or having a ‘fling’.[1] The defendant wished to buy a property in Port Melbourne, but did not have the funds to do so. The plaintiff advanced him $227,414.12 to buy the property. The property was acquired, but the funds were not repaid.
[1]Transcript of Proceedings, Poulakos v Katiforis (S CI 2015 06474, Justice Emerton, 11 May 2017) 9 line 20 (Ms Poulakos) (‘Transcript’); Transcript, 71 line 2 (Mr Katiforis).
On 22 December 2015, the plaintiff initiated proceedings alleging a loan agreement between the plaintiff and the defendant, and claiming repayment of loan funds in the sum of $227,414.12 and interest in the amount of $106,785.71.
In her statement of claim, the plaintiff alleges a loan agreement made in or around October 2011 pursuant to which the plaintiff loaned the defendant the sum of $227,414.12 on the following terms:
(a)the loan funds were to be used solely for the purchase of the property identified as volume 10876, folio 029, otherwise known as Unit 11, 88 Wirraway Drive, Port Melbourne in the State of Victoria;
(b)the loan funds were to be repaid in full to the plaintiff within 30 days;
(c)in default of payment of the loan funds, interest would become due and payable, and be calculated at the rate of $500 per week if the total loan funds remained outstanding or an amount equivalent to 11.43% per annum of any balance;
(d)the defendant would provide the property to the plaintiff as security for his obligations should any default continue for a period in excess of 90 days; and
(e)the defendant would do all things necessary to complete the purchase of the property and become registered as the owner on title.
The defendant filed a defence in which he denied that there was a loan agreement between the plaintiff and the defendant, but admitted that the plaintiff had lent him the sum of $227,414.12.
On 1 August 2016, Mukhtar AsJ ordered that there be summary judgment partially of the claim in the amount of $227,414.12. In ‘Other Matters’, his Honour recorded that the defendant admitted liability to the plaintiff in the sum of $227,414.12, but denied the loan agreement as alleged or at all and, in particular, denied liability for the payment of interest as claimed by the plaintiff.
There has now been a trial on the question of interest.
At trial, the plaintiff modified her claim, seeking interest pursuant to the alleged loan agreement up to the date of the first demand for payment and, thereafter, statutory interest pursuant to s 58 of the Supreme Court Act 1986.
There is no documentary evidence about the terms of any loan agreement. Each of the plaintiff and the defendant gave evidence about the circumstances in which the sum of $227,414.12 was advanced by the plaintiff to the defendant. The circumstances described by the plaintiff and the defendant were quite different.
The plaintiff gave evidence that in October 2011 the plaintiff and the defendant were ‘seeing each other, like dating’.[2] She had just received funds from the sale of a marital property. She had no use for the funds at that time because she was still looking at properties and did not have enough money to purchase anything new. The defendant was looking to purchase a warehouse and he was upset that his loan was not approved in time and that he was going to miss out on the property. It came up that she had funds that could be used temporarily until the defendant’s loan was approved.[3]
[2]Transcript, 9 line 19.
[3]Ibid 7, lines 17-25.
The plaintiff gave evidence that she and the defendant discussed the terms of the loan ‘a couple of months’ before the money was actually advanced.[4] The terms were that the defendant would repay her the full amount of the loan within 30 days, unless she did not need it.[5] The defendant would pay her $500 interest per week, which was just a little bit more than the bank was paying her. If she needed the funds, she would give the defendant 30 days’ notice and, after 30 days, if the defendant did not pay her back, he would pay her a penalty of $500 per day interest up until ‘the 90 day mark’. If, after the 90 day mark, the defendant still did not have the funds to repay the plaintiff, he would hand over the keys to the property and it would be hers.
[4]Ibid, line 7.
[5]Ibid 8, line 8.
The plaintiff told the Court that the $500 interest a day proposal came from the defendant, as did the proposal that the property would be transferred to her if she was not repaid within 90 days.[6]
[6]Ibid 9, lines 1-3.
The plaintiff gave evidence that the defendant agreed to have a contract drawn up reflecting this agreement, but then went away to China for a month and, when he came back, ‘it’ was rushed.[7] He did not have the document ready, but he needed the funds to purchase the warehouse that day and he dragged the plaintiff off to the bank before the contract could be prepared.
[7]Ibid, lines 7-13.
The plaintiff gave evidence that the property was purchased, but she did not receive any interest payments. She said that she asked for payment but there were always excuses and delays.[8]
[8]Ibid, lines 24-30.
The plaintiff told the Court that on or around 22 August 2012, she and the defendant had an argument and agreed that the defendant would repay the whole amount of the loan so that their friendship could be dissolved.[9] After that, they stayed friends for a while, but the relationship broke down a few months after the argument.[10]
[9]Ibid 10, lines 6-7.
[10]Ibid, lines 15-18.
The plaintiff gave evidence that she made further frequent demands for payment after the August 2012 argument. Some of these demands were made by text message; some involved going to the defendant’s house or to the property. She said she ‘messaged’ him when she was desperate because she could not afford to pay school fees or had difficulty paying the rent.[11] She would let the time between demands stretch out because the defendant always made excuses, but every now and then, every three months or so, she would be in a really bad state, and she would message to say that she needed the money, that she was coming over, and ask ‘could they organise something’. Then there would be another excuse.[12]
[11]Ibid 21, lines 5-8.
[12]Ibid, lines 13-16.
The plaintiff produced screen shots of text messages that she said were to and from the defendant in November 2014 and February 2015.[13] They were copied onto a single page handed up in court. The screen shots record five separate exchanges between a contact named in the mobile phone as ‘Manipulative Prick’ and the plaintiff (‘Andrea’). They show the plaintiff demanding payments from ‘Manipulative Prick’, including for interest.
[13]Exhibit A.
These screenshots were not discovered in the plaintiff’s affidavit of documents. They were produced from the plaintiff’s handbag at trial. The plaintiff gave evidence that these were the only messages that she still had concerning demands for payment. She said she lost the rest of the messages when she changed phones.[14]
[14]Transcript 39, lines 23-30.
The defendant’s evidence was that the moneys were advanced by the plaintiff to enable him and his wife to purchase the property because he was heavily in debt at the time and knew that he could not get a loan. He did not even bother applying for a loan.[15] At the time, he had no ability to pay interest on a loan or to repay the loan within 30 days or even within 90 days. He was researching an overseas venture in China and was not earning any income. He was living on a line of credit.[16]
[15]Ibid 54, lines 19-28.
[16]Ibid 55, line 10.
The defendant gave evidence that the plaintiff was a friend of his wife. He had heard his wife speak about the plaintiff, but had never met her. While he was overseas, his wife called to tell him that the plaintiff had heard they were looking to buy the property and had offered the money to help them out. When he said, ‘Well, what’s the catch?’, he was told that the plaintiff needed to get the money out of her account so her ex-husband could not get his hands on it.[17] When he got back from overseas, he and his wife invited the plaintiff to dinner, and they spoke about the loan over dinner.[18] He told the plaintiff he was grateful that she was offering the loan, and that once he had paid it back, he would be taking her and her kids with his family on holiday. Interest was never mentioned, and he did not expect to have to pay interest.[19] He would not have purchased the property had he known that he would have to pay interest.
[17]Ibid 56, line 7.
[18]Ibid, line 18.
[19]Ibid, line 27.
The defendant gave evidence that, until the statement of claim was served on him in January 2016, he had received no demand for payment.[20] He denied ever receiving text messages from the plaintiff demanding payment.[21] When he was shown the text messages that had been produced at trial, he denied receiving them and stated that the phone number in question was not his.[22]
[20]Ibid 58, line 8.
[21]Ibid 70, line 26.
[22]Ibid 73, line 18.
According to the defendant, he and the plaintiff had a romantic relationship briefly at the end of 2011 when he was having marital issues and then again in 2015.[23]
[23]Ibid 58, lines 17-24.
I find the defendant’s evidence to be implausible. It was to the effect that the plaintiff advanced him the sum of $227,414.12 on no terms whatsoever, other than that he would repay it when he could. In other words, the plaintiff agreed to advance the funds for no recompense in circumstances where there was no date for repayment and no evidence that the defendant would ever have the means to repay. Furthermore, according to the defendant, the plaintiff made no inquiries about repayment of the loan until she served on him her statement of claim in January 2016, more than four years after the funds were advanced.
This beggars belief.
Furthermore, having regard to the content of the text messages that were produced at trial, I do not accept the defendant’s evidence that they were not his and that he knew nothing about them. The messages from the plaintiff (‘Andrea’) involve demands for the repayment of money and these demands are generally in the terms that the plaintiff described in her oral evidence. The first message attributed to the defendant refers to a person having the same name as his wife, to the fact that she is in hospital and the writer’s priority being ‘my kids ability to cope with everything’. The defendant told the Court that his wife died in late 2014, which corresponds to the information in the text message. A second message acknowledges that money is owed and refers to the sale of a house in order to make repayment. The defendant told the Court that he hopes to sell his house to repay the principal sum of the loan. There are demands for interest, disputed by the writer, which is again consistent with the evidence in this trial. Although one of the messages refers to the writer having a car accident on the way to the bank, and the defendant gave evidence that he did not drive, I do not consider that this negates the otherwise fairly clear indications that the defendant is the author of the relevant text messages.
On the balance of probabilities, I find that the text messages produced by the plaintiff were between the plaintiff and the defendant. They support the evidence given by the plaintiff about her repeated demands for repayment of the loan.
Generally, I found the defendant to be an unimpressive witness. His answer to a question in cross-examination about why he is currently in gaol was, at the very least, evasive. It was also implausible. He told the Court that he is serving a custodial sentence — apparently for a term of 18 months or more — because he used the identity of another person to travel interstate by plane.[24] It would be most unusual, to my knowledge, for a person to receive a lengthy custodial sentence for such an offence.
[24]Transcript 71-72, lines 23-11.
The defendant made a poor impression in the witness box, showing himself to be evasive and careless with the truth. However, the onus of proving the defendant’s obligation to pay interest rests with the plaintiff.
The plaintiff’s evidence about the terms of the loan differed in a number of respects from the agreement that was pleaded. This may reflect her lawyers’ misunderstanding her instructions when drafting the pleading or it may reflect uncertainty as to what precisely was agreed about the terms of the loan.
In the course of her oral evidence, the plaintiff was reasonably consistent about the terms of the loan, namely, that $500 per week interest was payable from the outset; the plaintiff would give the defendant 30 days’ notice to repay the loan and, in the event that the loan was not repaid within the 30 days, the defendant would be liable to pay interest at a rate of $500 per day for 60 days, on the effluxion of which, if the default continued, the defendant would transfer the property to the plaintiff.
It was submitted on behalf of the defendant that the plaintiff’s evidence about the interest that was to be paid was ‘all over the place’. Moreover, it differed from the pleading, and the plaintiff could give no reasonable explanation for this difference. According to the defendant, any contract for the payment of interest failed for uncertainty, as there was no evidence of any meeting of minds. The defendant also submitted that the plaintiff’s evidence lacked credibility in that she gave no explanation for why she did not insist that the agreement be reduced to writing and why she waited until late 2015 or early 2016 to take legal action.
I formed the impression, on hearing the evidence of both the plaintiff and the defendant, that there is much that the Court was not told about their relationship and the circumstances in which the funds were advanced. However, I accept the plaintiff’s evidence that the payment that she made on behalf of the defendant to buy the property was a loan and she made repeated oral demands for its repayment.
Section 58 of the Supreme Court Act 1986 provides that where a debt or sum certain is recovered in a proceeding, interest at the specified rate must be allowed, relevantly, ‘from the time when demand of payment was made’.
In Balanced Securities Limited v Dumayne Property Group,[25] the Court of Appeal recently considered when a demand is made for the purposes of s 58 and reviewed the relevant authorities. One of the principal authorities identified was AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd,[26] which in turn referred to certain observations of Kirby J in Victorian WorkCover Authority v Esso Australia Limited.[27]
[25][2017] VSCA 61.
[26][2009] VSCA 310 (‘Lucas’).
[27](2001) 207 CLR 520 (‘VWA v Esso’).
In VWA v Esso, Kirby J was concerned with the meaning of the phrase ‘the recovery of debt or damages’ in s 60 of the Supreme Court Act, but considered more generally interest entitlements under ss 58, 59 and 60, observing that the relevant legislative provisions providing for interest had the beneficial purpose of compensating parties who had been obliged to take proceedings to recover money and who had been kept out of moneys on which they could otherwise have earned interest. As a result, the provisions should not be given a narrow meaning.[28]
[28]Ibid 546.
In Lucas,[29] the Court of Appeal confirmed that s 58 should not be given a narrow meaning; as it has the same beneficial purpose as s 60, it should be given a similarly broad application. Their Honours referred with approval[30] to the oft-cited passage from the judgment of Walker LJ in The Colonial Finance, Mortgage, Investment and Guarantee Corporation Limited,[31] where his Honour said:[32]
There must be a clear intimation that payment is required to constitute a demand; nothing more is necessary, and the word ‘demand’ need not be used; neither is the validity of a demand lessened by its being clothed in the language of politeness; it must be of a pre-emptory character and unconditional, but the nature of the language is immaterial provided it has this effect.
[29][2009] VSCA 310, [171].
[30]Ibid [172]–[177].
[31](1905) 6 SR (NSW) 6.
[32]Ibid 9.
Finally, the Court Appeal reviewed a series of English decisions on the provision from which s 58 is derived and said:[33]
That line of authority establishes that a demand need not be in any particular form, or specify the exact some due, so long as it contains a distinct demand of payment.
We accept that constitution of a demand may vary according to the circumstances of a particular case. For example, words which would not suffice to constitute a demand for the purposes of a guarantee, might be sufficient for the purposes of s 58 of the Supreme Court Act.
[33][2009] VSCA 310, [179] – [180] (citations omitted).
The parties did not have a written agreement. They did not have lawyers acting for them. Their arrangements were relatively informal, which was unsurprising if they were romantically involved. According to the plaintiff, the loan was made on the basis that the defendant would repay it relatively quickly, as soon as his loan from the bank was approved.
The plaintiff’s evidence about her demands for payment was not particularly clear. When asked about conversations between her and the defendant concerning interest, the plaintiff said:[34]
about a year later was when we had an argument and we agreed that, and he called it, that he’ll be repaying the whole amount so we can dissolve our friendship and – and just not have anything to do with each other
[34]Transcript 10.
When asked when she first demanded the money back, the plaintiff said:[35]
that initial amount was owed about a year after … it was loaned out – when we had the argument. That’s when, it was meant to be paid – the whole amount was meant to be paid back.
..
I have 22 August in my head, when the argument happened and the date that the actual money was called to be returned … that’s August 22 2012, I think it was.
[35]Ibid 11.
When asked whether there was any confirmation of that by letter, the plaintiff said:[36]
there were text messages stating that he was gonna return it, and just to give him some time to get it together. He was applying for loans, told me he was selling his house that he was living in, and that he would be repaying me, but he never did
[36]Ibid 12.
Later in her evidence, the plaintiff was asked when her demands commenced and she said:[37]
Well, they were from August the 22nd back in 2012 when I asked for the funds and the interest to be returned so that we can dissolve our friendship and go our own way, and I need my funds.
[37]Ibid 21.
The plaintiff also gave evidence that the defendant asked her to open a bank account and give him the details and told her that he said he was going to deposit the money it there, but he never did.[38]
[38]Ibid 22.
The plaintiff did not give evidence of what precisely she said to demand payment from the defendant. Her evidence was not as clear as it might have been as to what she said and did to secure the repayment of the loan. Nonetheless, I find, on the balance of probabilities, that the first demand for payment of at least the principal sum occurred, as the plaintiff asserted, on or about 22 August 2012 when the plaintiff and the defendant had an argument and decided to go their separate ways. Given the context in which the demand for payment was made, namely, an argument resulting in the decision that the parties would end their relationship, the demand must have been well understood by the defendant to be definitive, that is, he must have understood it to be a distinct demand for the immediate repayment of at least the principal sum. The circumstances, in my view, gave the plaintiff’s demand the necessary pre-emptory and unconditional character. I am satisfied that there was a ‘demand’ for the purposes of s 58 of the Supreme Court Act on 22 August 2012.
A demand for payment having been made on 22 August 2012, the plaintiff is entitled to statutory interest from that date under s 58 of the Supreme Court Act.
The question remains as to whether the plaintiff is entitled to $500 per week interest for the period between the advance of the loan and the demand.
The proposition that interest was payable at that rate from the date of the advance is not consistent with the pleading. The pleading describes interest as payable upon the expiry of 30 days. It describes the interest as a percentage as well as a dollar figure. The percentage was amended from 9.37% per annum to 11.43% per annum, presumably to more accurately reflect the $500 per week.[39] Given the informal way in which the terms of the loan were negotiated by the parties, it seems unlikely that they spoke in percentages. I take the percentage figure to have been calculated by the plaintiff’s lawyers as the equivalent of $500 per week.
[39]No explanation was given for the amendment. However, I assume that it reflects a mathematical error.
The plaintiff gave evidence that the $500 per week represented what her funds would have earned if left on deposit in the bank, plus a little bit more. Her evidence was, in substance, that she advanced the funds to the defendant on the basis that she would be no worse off than had she left them on deposit at the bank. There was no evidence about interest rates on bank deposits in 2011 and 2012. However, the Court can be fairly confident that they were not as high as 10%, which is what is claimed.
It is unnecessary to make any finding about bank interest rates. However, the discrepancy between the pleadings and the plaintiff’s oral evidence, and the substance of the plaintiff’s evidence about the rate of interest gives rise to a real doubt that there was a meeting of minds between the plaintiff and the defendant that the defendant would pay the plaintiff $500 per week as interest from the date of the advance. In my view, the alleged term of the loan agreement providing for interest is too uncertain to be given legal effect.
As a result, I have concluded that the plaintiff has not made out an entitlement to interest from the date of the advance to the date of the demand on 22 August 2012.
Conclusion
The Court will order that the plaintiff is entitled to interest on the amount of $227,414.12 pursuant to s 58 of the Supreme Court Act from 22 August 2012.
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