Ristevski v Markovski

[2010] NSWDC 173

CITATION:	Ristevski v Markovski [2010] NSWDC 173
HEARING DATE(S):	10, 11 and 12 August 2010
JUDGMENT DATE:	13 August 2010
JURISDICTION:	Civil
JUDGMENT OF:	Gibson DCJ
DECISION:	1. Judgment for the plaintiffs in the sum of $166,984.36 inclusive of interest. 2. Defendant pay plaintiffs’ costs, including the costs of the vacated hearing date of 3 May 2010. 3. Application for the 3 May 2010 hearing date to be paid by the defendant’s former solicitor refused. 4. Liberty to apply. 5. Exhibits retained for 28 days.
CATCHWORDS:	CONTRACT - breach of contract - loan to member of extended family - whether made to that person or his company
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 286 and 596
CASES CITED:	Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607; (1983) 70 FLR 447; (1983) 83 ATC 4015; (1983) 13 ATR 825 Bickel v John Fairfax & Sons Ltd [1981] 2 NSWLR 474 Commercial Union v Ferrcom (1991) 22 NSWLR 389 Jones v Dunkel (1959) 101 CLR 298; [1959] ALR 367; (1959) 32 ALJR 395; (1959) 76 WN (NSW) 278 Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70; (1990) 93 ALR 435; (1990) 64 ALJR 412; [1990] HCA 31 Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 510 R v Aldridge (1992) 20 NSWLR 737 R v Jovic [2008] QCA 278 R v Markovski [2009] QCA 299 Singleton v John Fairfax & Sons Ltd (Supreme Court of New South Wales, Hunt J, 30 July 1982)
TEXTS CITED:	Wigmore, 3rd ed (1940) Volume 2
PARTIES:	First Plaintiff: Kosta Ristevski Second Plaintiff: Jordanka Ristevski Defendant: Cecil Markovski (also known as Cele Markovski)
FILE NUMBER(S):	3863 of 2008
COUNSEL:	Plaintiffs: Mr P Barham Defendant: Mr R Johnson
SOLICITORS:	Plaintiffs: Markham Geikie Farrugia Defendant: Burt & Allen Lawyers

Judgment

Introduction

[1] The plaintiffs bring proceedings for breach of contract against the defendant arising out of the circumstances in which they assert they made a loan of $100,000 on 7 June 2002. The plaintiff and defendant are part of an extended family; the plaintiffs regard the defendant as their nephew and the defendant refers to them as “uncle” and “aunt”. The defendant has also had a longstanding friendship with the plaintiffs’ son, Zoran.

[2] The sole issue raised by the defendant in his defence is that the loan (the quantum of which is admitted) was a loan to a company of which he was a director, Tihana Group Pty Ltd, and not to him personally. In addition, although not pleaded, the defendant said in evidence that the loan was not made by the plaintiffs, but by their son, Zoran.

The circumstances in which the loan was made

[3] The circumstances surrounding the loan were as follows. In 2001, the plaintiffs took out a line of credit with the Colonial State Bank, secured by registered first mortgage on their home, to purchase a truck and contract with Visyboard Limited for their son, Zoran. In 2002 Zoran decided he did not want to do this work any more. The plaintiffs sold the truck and the contracts in about June 2002 for $160,000 and on 7 June 2002 they received a Commonwealth Bank of Australia cheque for this sum.

[4] On 7 June 2002, the plaintiffs went with their son Zoran to bank the cheque. While they were in the bank, Zoran received a telephone call on his mobile phone from the defendant, who knew from a previous conversation with Zoran that Zoran’s business had been sold for $160,000. The defendant (referred to hereafter as “Mr Markovski” in order to make this judgment easier for Mr Markovski to understand) asked to borrow $100,000 for six months. Zoran said in evidence that he replied that it was his parents’ money, not his, and put his father on the phone.

[5] Mr Ristevski, the first plaintiff, had a discussion with Mr Markovski and agreed to this loan, he said, on the understanding that Mr Markovski would not only repay this sum in six months but also pay all interest payments (at 6.2%, the bank’s interest rate), bank fees and charges incurred by the plaintiffs for their existing line of credit. Zoran then obtained from the defendant the details of the bank account into which the $100,000 was to be paid. This bank account was the account for Tihana Group Pty Ltd, a company of which Mr Markovski was a director.

[6] The plaintiffs then told the clerk in the bank they wanted to deposit only $60,000 and to put $100,000 into this other account. However, the plaintiffs were then told by the bank officer it was not possible to split up the order bank cheque they wished to deposit. The first plaintiff and Zoran each had another conversation with the defendant. He told the first plaintiff if he deposited the whole cheque for $160,000 in the nominated bank account, he would repay the sum he did not require ($60,000) to the plaintiffs’ account in the following week. The plaintiffs went ahead and banked the $160,000 cheque and a week later received a cheque from Tihana Group Pty Ltd for $60,000. Clearly the plaintiffs must have provided these bank details to Mr Markovski, although no evidence was given about this.

[7] Mr Markovski asserts the plaintiffs had notice prior to 7 June 2002 of his wish to borrow $100,000, and that they knew that the borrower would be Tihana Group Pty Ltd, and not him.

[8] The interest was never paid. According to the evidence of the first plaintiff and Zoran, the following sums were given to the plaintiffs in response to their requests for repayment:

(a) In 2002, Mr Markovski came to the plaintiffs’ home and gave the plaintiffs $5,000 in cash (T-17; particular 4(b) of the defence);

(b) In 2003, a tenant living in a property owned by Mr Markovski personally was behind in the rent. By arrangement with Mr Markovski, this tenant gave $10,000 in cash to the plaintiffs;

(c) Also in 2003, the defendant gave Zoran papers to enable Zoran to sell a Toyota 4 Runner motor vehicle. Zoran sold this vehicle for $4,500 and gave the money to the plaintiffs. Although the defendant said this vehicle was registered in the name of Tihana Group Pty Ltd, it was in fact in his own name, as counsel for the plaintiff pointed out in a further submission to me.

[9] The first plaintiff, Mr Kosta Ristevski and his son both went to Queensland in December 2003 to help the defendant build his new home. Mr Kosta Ristevski was there for 18 days and received payment for travelling expenses and buying paint (T-37); Zoran was there for two weeks putting up house frames, and was not paid. During the time he was in Queensland working on the defendant’s house, Mr Kosta Ristevski had a conversation with the defendant as follows (T-19-20):

“Q. Did you have a conversation with the defendant while you were there?
A. INTERPRETER: Yes, I did have a conversation.

Q. Can you tell the court what was said in that conversation.
A. INTERPRETER: The conversation was for him to pay the money in toto that he owed, otherwise to pay it bit by bit.

Q. What did he say?
A. INTERPRETER: He said, "Momentarily, I can't do anything. He mentioned that his wife that was living - or the woman that he was living with had purchased furniture costing $100,000, and that she had also bought a 70,000 BMW.

Q. What, if anything, have you tried to do to get the money paid to you?
A. INTERPRETER: We were talking about his ability to pay the money. He said, "I can't do it at the moment," but he also mentioned that his business wasn't doing well but he said, "If I come to some money then I will return it to you."”

[10] Zoran had further conversations with the defendant in 2004 seeking return of the loan. He said at T-46-47:

“Q. Do you recall having a conversation with him about paying money back?
A. Sorry, yes. About when his assets got frozen, yes.

Q. Can you tell the court what happened in that conversation?
A. Well, he told me that the Crime Commission had seized all his assets.

Q. Can I ask, first of all, can you tell the court what you asked him, or what you said to him?
A. We were asking for money and his excuse at that time was, "Look," he goes, "The Crime Commission are on my case. Once they're done and I'm clear of that," he goes, "I'll give you your money." That's when we really got concerned after that. That's when we started freaking out.

Q. Do you remember when that conversation was?
A. It would have been 2004.”

[11] To whom did the plaintiffs lend the money – to the defendant, or to his company? Why was there such delay in seeking its return? An analysis of the evidence and an assessment of the plaintiffs and defendant as witnesses is necessary.

Mr Kosta Ristevski

[12] Mr Ristevski is a truck driver. He is unable to read English. He was unable to answer even simple questions in English and gave answers through an interpreter. Witnesses who can speak English but give evidence through an interpreter sometimes show an ability to understand the question by answering before the question is translated into English, or answering in English. That was not the case with Mr Ristevski.

[13] Mr Ristevski’s knowledge not only of English but of business practices is very limited. Although he and his son run a business in the form of a company structure as truck drivers, it emerged in his evidence that his lack of business acumen (which was not challenged in cross-examination) was significant.

[14] Mr Ristevski’s explanation for lending the money to the defendant without documentation was as follows (T-30):

“Q. Why did you not have the agreement between - the agreement you say you have between Mr Markovski and yourself written down?
A. INTERPRETER: Yes. At that moment, I couldn't make a decision but I had trust.

…

Q. Why did you have trust? What was it about your relationship with the defendant that made you have this trust? Can you explain that?
A. INTERPRETER: I thought he was an honourable, decent man, and that he needed some money for - I trusted him as a human being.”

[15] The back of the cheque for $160,000 contained a note of his driver’s licence and the details of the account into which the cheque was to be paid. Mr Ristevski said that he signed the cheque, but that the details of the account number were written on the cheque by “my boy” (his adult son, Zoran) and not by him. His drivers licence number was written by the bank teller or by his son. He signed the back of the cheque without being able to read the account name details as he does not read English

[16] When asked why he signed when the name of the account did not include the defendant’s name, he answered:

“Well, the name that he [the defendant] gave us, I thought that was his own account and his name.” (T-33)

[17] Mr Risetvski was uncertain what further discussions there had been with the defendant about repayment, saying that he had left this, as well as consulting solicitors, up to his son and his wife (T-35).

[18] It was put to Mr Ristevski that the defendant asked for the money in order to pay a tax bill for Tihana Group Pty Ltd (T-37-38):

“Q. Sir, did you ever have a conversation with your son about Mr Markovski asking for money to pay a tax bill for his company Tihana?
A. INTERPRETER: From whom did he ask this?

Q. I'm asking whether you ever had a conversation with your son, Zoran, about that.
A. INTERPRETER: Of what, about what?

Q. About money being lent to Tihana group to pay the company's tax bill.
A. INTERPRETER: I don't recall anything about him asking for moneys to pay tax for that company.

Q. You say in your statement of claim that this money was for the purposes of constructing the defendant's home at 11 King Charles Drive, Sovereign Islands, Queensland. Paragraph 3, your Honour.
A. INTERPRETER: I recall that at that time he was building a house.

Q. What was the source of your information whereby you allege that this money was for that purpose?
A. INTERPRETER: Me or him?

Q. I'm asking you, because your document says that that's why you lent the money to him.
A. INTERPRETER: He was building the house at that stage and I was under the impression that he needed the money for something.

Q. You told your lawyers that that was the reason why you gave him the money, wasn't it?
A. INTERPRETER: That was my opinion. He didn't ask me what for. I don't know how and what for he used the money. That was my impression, my - that because he was building the house he was going to use the money for that.

Q. But that's what you said in your statement of claim, that that's why you lent it to him.
A. INTERPRETER: That was my opinion.

Q. So you didn't know. You just guessed when you were instructing your lawyers.
A. INTERPRETER: Because he didn't tell me directly what for, it was just my impression.”

[19] Mrs Jordanka Ristevski, the second plaintiff was not called. She was not a party to these telephone conversations about the loan. Her receipt of one of the payments of the sum owed was conceded in the defence.

[20] Counsel for the defendant asks me to draw the appropriate inference from her failure to give evidence. However, although the loan moneys came from a security (the family home) that the plaintiffs jointly owned, and she was thus a joint owner of the sum loaned, the second plaintiff was not an active participant in these events. She was present while her husband and son spoke on the telephone to Mr Markovski. She did not play any part in subsequent events, such as the visit by her husband and son to Queensland to work on Mr Markovski’s house. Although the defendant denied in his evidence that Mr and Mrs Ristevski were the lenders, and denied giving one payment to Mrs Ristevski, these matters were conceded in the pleadings. Taking these circumstances into account I decline to draw a Jones v Dunkel inference (Jones v Dunkel (1959) 101 CLR 298; [1959] ALR 367; (1959) 32 ALJR 395; (1959) 76 WN (NSW) 278).

Mr Zoran Ristevski

[21] Mr Zoran Ristevski gave evidence in English, but his knowledge of business affairs generally was limited, as the following exchange shows:

“Q. So when you say that you understood that it was being lent only to him, you clearly understood that when you endorsed the bank cheque, didn't you?
A. What's "endorsed"?” (T-54)

[22] Mr Zoran Ristevski’s evidence about when the request for the loan was made was the same as that of his father. As to why it was made, he explained that the defendant was not only his friend, but someone he looked up, and believed to be wealthy:

“Q. And what was the purpose of you telling him when it was going to settle?
A. He was asking me questions. He was ringing me.

Q. Why did you tell him?
A. Because we were friends, as you put it earlier. I looked up to the man. He was a rich man and I looked up to him. So we did speak.

Q. And his company appeared to be doing well.
A. Well, he was in Queensland, so how am I supposed to know what his company was doing?

Q. Well, you described him as a rich man.
A. Yeah, well, so, I, well, he had a Lamborghini at the time. So anyone that can own a Lamborghini can - you think has got money.” (T-53-54)

[23] Mr Zoran Ristevski’s evidence concerning the account on the cheque was as follows:

“Q. You wrote those words so that your father could sign the cheque.
A. That's right. My father can't write English. He struggles - writing and reading, sir.

Q. Not only did you address it - that is, the words that you wrote - you wrote not only, "Tihana Group Pty Ltd" - that is, "Please pay to Tihana Group Pty Ltd" - you also wrote the words, "Trading as AVFX." Are they your words?
A. That's what I was told to write by him and by the bank teller because the bank teller was instructing me in what we had to do to give this man the money. So I've never done this in my life before, I was going on instructions what was required to happen on that day for him to get the money, and then to return the 60, because he only wanted the 100.

Q. You told your father what you'd written, didn't you?
A. Yes.

Q. You told him that it was being - what you were writing on there was asking for the money to be paid--
A. Into that account.

Q. To that - No. You were asking him to pay the money to the company. That's what you were telling your father, wasn't it?
A. I was - I told my father what he wanted to happen - what Cess wanted to happen. And then after that, my father signed for it.” (T-55)

[24] Mr Zoran Ristevski summarised this evidence as follows:

“A. Cess said he wants the money transferred into this account; and the lady from the teller gave me a piece of paper and wrote - I wrote down everything and then the lady at the teller said to me that - "For you to be able to put that into an account, you have to put, 'Please pay', on the back of the cheque." So that's what happened.” (T-55)

[25] He was asked what he told his parents, who were the lenders:

“Q. My point being is, did you explain to your father what you'd written on the cheque?
A. Probably not.

Q. You didn't?
A. Because I - trusted the man so - I know what you're getting at but I don't know whether what happened at - exactly at that time. He just asked us for the money and he said, "Put it in this account." That was the end of it. The money was lent to him, not to his company.” (T-56)

[26] Both the first plaintiff and Zoran trusted and looked up to Mr Markovski as a family member and as a man of affluence. However, their trust was misplaced.

Mr Cecil Markovski

[27] Mr Markovski, the defendant, has been in custody since his conviction in March 2008, and gave evidence by videolink from the Woodford Correctional Centre, Queensland. I have made significant allowances for the difficulties he has had in the preparation and presentation of his case in these difficult circumstances.

[28] Mr Markovski’s evidence was that his company, Tihana Group Pty Ltd, borrowed the money from Zoran, not from the plaintiffs, on a short term loan. He said he had never spoken to the plaintiffs. He denied there had ever been any requests by either the plaintiffs or Zoran for the return of the money.

[29] Mr Markovski said that the company’s secretary had provided details of the Tihana Group Pty Ltd account to Zoran, and that he had not done so. Mr Markovski said that the repayment of $60,000 to the plaintiffs the week after the money was placed in his account was also done by this secretary and not by him. He could not explain why the money had been sent to the plaintiffs and not to Zoran and said it was a matter for the secretary. He identified this secretary as Michelle Howard (T-87):

“Q. You made the company pay $60,000 back, didn't you?
A. No. The agreement was to pay the $60,000 back to the Ristevskis by the company.

Q. And you say it was back to the Ristevskis.
A. Yes. Zoran Ristevski.

Q. And it was being paid back to the Ristevskis because you knew, didn't you, that the money had been leant by the Ristevskis, not by Zoran, didn't you?
A. No. Zoran Ristevski.

Q. The company paid it back to his parents, didn't it?
A. Don't know. I can't recall that.

Q. You don't know? Did you say you don't know?
A. Or the money went back to - the money went back to Zoran far as I'm aware.

Q. I suggest, sir, that you caused a direct debit to the parents' account on 14 June 2002, didn't you?
A. It would have been the secretary who done it.

Q. It was the secretary. Is this the same Michelle Howard, is it?
A. That's correct.

Q. She would have done it on your instructions though, wouldn't she?
A. I don't know who was - that time, who was running the actual - who was the manager of the company then. Don't know.”

[30] The purpose of the loan had been to pay tax owed by Tihana Group Pty Ltd, according to Mr Markovski. He could not explain what those tax obligations were, and when shown this company’s financial records (revealing that the company in fact carried forward a loss of $173,962 for the 2001 year, meaning no tax was payable) he said that this was a matter for his former de facto partner or for his accountant, as he was “not an accountant” and did not understand accounts. When shown his bank statements and the withdrawal of $50,000 from the sum borrowed from the plaintiffs on the same date, he could not identify what that payment was for, or confirm whether it was a company or a personal expense. He initially said it was a personal expense and then changed his evidence, saying he had a separate account for his personal expenses.

[31] As for the $5,000 cash the first plaintiff gave evidence that Mr Markovski paid personally, Mr Markovski denied that he had paid this to the second plaintiff, even though this had been conceded in his verified defence. He asserted that these were company funds. Mr Markovski was unable to explain why, if the loan was to Zoran, he said in his verified defence that he paid $5,000 to the second plaintiff, Mrs Ristevski (T-87-88):

“Q. At the end of June you paid $5,000 back to Mr and Mrs Ristevski, didn't you?
A. I can't recall it.

Q. You've got your defence in front of you, haven't you? Could you have a look at that bundle of documents at page 12.
A. Page 12?

Q. Yes. Do you see in paragraph D in page 12 you say, "$5,000 was paid to the plaintiff, Jordanka Ristevski, about the end of June 2002," don't you?
A. What? Yes, that's what it says on the paper.

Q. Yes, and that's because that's what you told your solicitor, wasn't it?
A. (No verbal reply)

HER HONOUR: Do you want to put 18 as well? Can you put 18 as well. Just let him answer for this.

BARHAM: I thought I did. That was about the direct debit.

HER HONOUR: I don't think you did. You didn't put it to him that it's in his pleadings.

BARHAM: No, Thank you, your Honour.

WITNESS: Well, the company must have paid. I don't recall.

Q. You don't recall it? You don't recall going around to the Ristevskis and paying $5,000 to Mrs Ristevski in the end of June 2002, do you?
A. No.

Q. You got any idea how that ended up in your defence if you don't remember it?
A. Well, the company must have paid the money. I don't recall the paying the money, going to Ristevskis.

Q. Can you just have a look at particular A where it says, "$60,000 was paid to the plaintiffs within a few days of the loan being made."
A. Yes.

Q. You told your solicitor that as well, didn't you?
A. Yes.

Q. Do you recall that the $5,000 that was paid - that was paid in cash, wasn't it?
A. I can't recall.”

[32] Mr Markovski said that this transaction was also the responsibility of Michelle Howard, but made the following admission at T-87:

“Q. I suggest, sir, that you caused a direct debit to the parents' account on 14 June 2002, didn't you?
A. It would have been the secretary who done it.

Q. It was the secretary. Is this the same Michelle Howard, is it?
A. That's correct.

Q. She would have done it on your instructions though, wouldn't she?
A. I don't know who was - that time, who was running the actual - who was the manager of the company then. Don't know.

Q. At the end of June you paid $5,000 back to Mr and Mrs Ristevski, didn't you?
A. I can't recall it.”

[33] Mr Markovski’s assertions about the other payments made in reduction of the loan and interest contradicted both the particulars in his verified defence and the matters put in cross-examination of the first plaintiff and his son.

[34] Mr Markovski also could not explain why he had signed an ASIC document to deregister Tihana Group Pty Ltd in 2005 in which he stated the company had no outstanding liabilities if the company still owed the balance of the $100,000 plus interest. In fact, this statement was not true, but for other reasons. The company had accrued a debt to the Australian Taxation Office of $85,000 some time prior to 2005, and had deregistered itself without paying it. The company was then restored to the register to be put into liquidation some time after 2006. It was at this time that the financial documents showing $100,000 owing to the plaintiffs were prepared. Mr Markovski could not explain why this debt was listed as owed to the plaintiffs if it was in fact owed to Zoran.

[35] Finally, and most tellingly, Mr Markovski’s explanation why a loan of $100,000 to him personally by the plaintiffs was listed in a statement of his personal liabilities in de facto property proceedings in the Supreme Court of Queensland was entirely unconvincing. He said that he thought he had to set out debts from Tihana Group Pty Ltd in this document, and that this was a debt for which he was liable because it was an unpaid Tihana debt. Leaving aside the fact that it is listed as a personal and not a company debt, the only Tihana debt for which Mr Markovski was personally liable would be in circumstances where he gave a guarantee or by operation of law (e.g. monies outstanding to the Australian Taxation Office).

[36] Nor was Mr Markovski able to explain why the debt was listed as a debt payable to the plaintiffs and not to Zoran. Zoran is in fact mentioned elsewhere in Mr Markovski’s affidavits; Mr Markovski claimed, as a contribution towards the assets of his de facto relationship, that he and Zoran had built the home in which the parties resided. Zoran’s evidence was that he spent about two weeks in Queensland helping Mr Markovski put up frames for the house.

[37] Zoran was not cross-examined about whether he had in fact assisted Mr Markovski to build his house, or any of the claims that he, and not his parents, loaned the money to Mr Markovski. Nor was such a claim put to the first plaintiff when he gave evidence.

[38] There were a number of other statements in Mr Markovski’s affidavits which were incorrect. For example, he stated that two companies were used by him to conduct his business during the de facto relationship from 2000 until February 2007. He agreed that one of these companies never operated at all and the other, Tihana, was the subject of deregistration proceedings in 2004 and was restored to the register only to be put into liquidation in 2005.

[39] Although I have given it very little weight, it is also of relevance that Mr Markovski is in prison after having been convicted of serious criminal offences (R v Markovski [2009] QCA 299) and his de facto partner was also convicted of related (although lesser) offences (R v Jovic [2008] QCA 278). The appellate court noted that Mr Markovski appeared to be near the top of a large drug supply empire in 2003 to 2004, and it would appear likely that this business, rather than the activities of the company Tihana Group Pty Ltd, were occupying the defendant’s time.

[40] The principal difficulty Mr Markovski has with his claim is that his evidence contradicts the documentary evidence. I have set out above his oral evidence concerning these documents; I shall now set out what those documents say.

The documentary evidence

[41] There are contemporaneous references to sums being owed to the plaintiffs in company documents and in affidavits sworn by the defendant in proceedings in the Queensland Supreme Court.

[42] The company documents for 2002 list a loan of $100,000 as being “loan from K & J Ristevski” (Exhibit 1). This sum is reduced to $93,000 in the 2003 balance sheet, and the same figure appears in the 2004 and 2005 balance sheet. Counsel for the plaintiff points out that these documents appear to have been prepared in 2006. Counsel for the defendant tendered a 2002 annual return which, although unsigned and undated, contains a typed date of 18 August 2002.

[43] In apparent conflict with these documents, when the company was deregistered on or about 13 August 2005, the plaintiff signed a document which stated, inter alia, that “the company has no outstanding liabilities” (Exhibit E). As indicated earlier, this was not correct. There was an outstanding ATO debt. The company had to be re-registered and wound up, which occurred in August 2005 and the supplementary report of the liquidator to the ASIC (Exhibit J) dated 9 August 2005 makes sobering reading. The liquidator notes at p. 5 of his lengthy report that the directors’ Report as to Affairs (“RATA”) failed to address any issues pertaining to the affairs of the company. All that the liquidator knew was that there were unsecured (and unnamed) creditors for $855,000, a loan by “Kosta Risevski” [sic] for $100,000 and claims of loans by the defendant for $440,000 and by his de facto wife for $180,000 as well as the amount of approximately $85,000 owed to the ATO.

[44] The liquidator states in his 2005 report that “Mr Markovski and his former de-facto, Ms Jovic, have hindered my investigations into the affairs of the company” (Exhibit J, p. 9), as had the company accountant, and that company assets appeared to have been transferred without consideration. Amongst the matters of concern were that the directors had failed to keep financial records as required by s 286(1) Corporations Act 2001 (Cth) and engaged in conduct resulting in the concealment or removal of company property. The causes of failure of the company, as listed in Form EX01, include “fraud” and the numerous contraventions of the Corporations Act 2001, e.g. fraud (s 596) and criminal offences (s 184).

[45] There is a transcript of an interview by the liquidator’s staff with Mr Markovski on 26 September 2005 (Exhibit L). In the course of this interview, Mr Markovski answered questions about the activities of the company in 2005 by saying he could not remember and that he had no idea what was happening within his own business because he could not read or write (page 3), adding “I can’t even turn on a computer”.

[46] Counsel for the defendant objected to the tender of this document on the basis that its contents were not put to Mr Markovski in cross-examination. A document showing that he gave the same answer to the liquidator on 26 September 2005 is not a document that fairness required counsel for the plaintiff to put to him formally, for the reasons explained by Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607; (1983) 70 FLR 447; (1983) 83 ATC 4015; (1983) 13 ATR 825.

[47] The company tax return for Tihana Pty Ltd for 2002 (Exhibit F) does not refer to this purported loan at all. The company balance sheet for 30 June 2004 (with comparison figures for the previous financial year) similarly does not record this sum (Exhibit G). It would appear that Mr Markovski is giving very different information to the Australian Taxation Office. Accordingly, given the unsatisfactory nature of Tihana Pty Ltd’s company documentation generally, I am not prepared to regard documents claiming this “loan” as a company debt as either contemporaneous or genuine.

[48] An additional problem is that the same loan to the plaintiffs is listed as a personal debt of Mr Markovski in two Supreme Court affidavits. These affidavits, filed in the Queensland Supreme Court, relate to property settlement proceedings between the defendant and his former de facto wife. As well as setting out the financial history of the parties, these affidavits, sworn by the defendant, set out the defendant’s assets and liabilities.

[49] The defendant states as paragraph 38 that he constructed the family home with “my cousin Zoran Ristevski” which resulted in the saving of considerable expenses. More relevantly, he refers at paragraph 61, under the heading “assets and liabilities” to a loan of “Est $100,000” from “Kosta Ristevski”.

[50] The explanation given by Mr Markovski in cross-examination for listing a company debt for a company that had been in liquidation for some years as a personal debt in his de facto proceedings is implausible, particularly since other company debts totaling more than $1 million have not also been included.

[51] Mr Markovski also denied the truth of a number of other statements in his affidavits, such as denying that he gave furniture to his former de facto’s mother-in-law. He said that it was difficult for him to prepare affidavits while in gaol, but I note the complaints by the liquidator of Tihana Group Pty Ltd relate to the period before his imprisonment.

[52] In addition, I note the inconsistencies between his verified defence and his evidence before me. There is no statement in the defence that the monies were lent to Zoran, and the list of repayments alleged to have been made has been resiled from.

Conclusions concerning the evidence of the parties

[53] Unlike statements in pleadings, evidence that a witness has given untruthful evidence in other proceedings is receivable and may tell against a witness’s credit: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70; (1990) 93 ALR 435; (1990) 64 ALJR 412; [1990] HCA 31; cf Singleton v John Fairfax & Sons Ltd (Supreme Court of New South Wales, Hunt J, 30 July 1982). Mr Markovski has made untruthful statements in affidavits in the Supreme Court, and also in documents he has prepared for the liquidator of his companies. These documents have been signed by him and were adopted as truthful by him in his cross-examination.

[54] Taking all of the above matters into account, I find that the evidence Mr Markovski has given in these proceedings is untruthful. Where a party’s falsehood in the preparation and presentation of his case can be demonstrated, such evidence is “receivable against him as an indication of his consciousness that his case is a weak or unfounded one; and from that consciousness may be inferred the fact itself of the causes lacks truth or merit. The inference thus does not apply itself necessarily to any specific fact in the cause but operates, indefinitely though strongly, against a whole mass of alleged facts constituting his cause” (Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 510 at [40] per Levine J, noting this statement of principle from Wigmore, 3rd ed (1940) Volume 2, paragraph 278).

[55] As to the documents which purport to show a loan to the company, there is no explanation by the defendant as to how or by whom instructions were given for the preparation of those documents. Counsel for the plaintiff draws my attention to Commercial Union v Ferrcom (1991) 22 NSWLR 389 and asks me to draw the appropriate inference, particularly since tax returns and other company accounts in 2004 (for which a balance sheet was tendered) show no such loan liability from the company to the plaintiffs.

[56] In addition, the lengthy sentence imposed upon the defendant (twelve years non-parole) is a matter going to his credit: R v Aldridge (1992) 20 NSWLR 737 at 741 per Hunt J.

[57] Individually, each of the above matters is of such a character as to tend logically and rationally to weaken confidence in Mr Markovski’s veracity and his trustworthiness as a witness of truth: Bickel v John Fairfax & Sons Ltd [1981] 2 NSWLR 474 at 494 per Hunt J.

[58] By contrast, the first plaintiff and his son gave clear accounts of the circumstances in which they believed they were lending money to Mr Markovski, and that the account into which they were to place the money was Mr Markovski’s business account. There is no evidence they had any prior knowledge of Mr Markovski’s business. They knew that he was building a house, and in fact both travelled to Queensland to help him to so, and the first plaintiff’s belief that Mr Markovski was going to use the money to buy furniture (see paragraph 16 of the first plaintiff’s affidavit) was understandable in those circumstances.

[59] I am satisfied that the plaintiffs lent the sum of $100,000 to the defendant, Mr Markovski, on or about 7 June 2002, by banking an order cheque made out to them for $160,000 into what they believed was his business account on that day, and by accepting, one week later, a refund of $60,000. I am satisfied that apart from the sums identified by the plaintiffs as constituting payments as set out above, the loan remains outstanding, and that the defendant in breach of his agreement has failed to pay the principal and interest for the period identified by the plaintiffs in their submissions.

[60] The plaintiffs have succeeded on liability, and I now consider the issue of quantum of the claim.

Quantum of the claim

[61] The plaintiffs claim $83,637.94 if the rate of interest they claim is applied, which is arrived at as follows:

Period	Rate	Calculation	Interest over the period	Balance
Up to 30 June 2008	Various rates as calculated in schedule to statement of claim (as per Colonial bank statements and correspondence from Bluestone	$52,830.69	$137,830.69
Deduct from this the account service fees included in calculation in schedule to statement of claim (4 @ $144 = $576)	($576.00)	$137,254.69
1.7.08-26.11.08	11.79%	149/365 x $137,254.69 x .1179	$6,605.93	$143,860.62
27.11.08-14.12.08	10.04%	18/365 x $143,860.62 x .1004	$712.28	$144,572.90
15.12.08-27.2.09	9.29%	75/365 x $144,572.90 x .0929	$2,759.75	$147,332.65
28.2.09-29.4.09	9.19%	60/365 x $147,332.65 x .0919	$2,225.73	$149,558.38
30.4.09-22.9.09	9.69%	145/365 x $149,558.38 x .0969	$5,757.18	$155,315.56
23.9.09-22.10.09	9.99%	28/365 x 155,315.56 x .0999	$ 90.27	$156,505.83
23.10.09-10.11.09	10.24%	18/365 x 156,505.83 x .1024	$790.33	$157,296.16
11.11.09-12.8.10	10.49%	275/365 x 157,296.16 x .1049	$12,431.78	$169,727.94
Total	$83,637.94

[62] As to the account service fees referred to at point (1) above, though this would change the total interest, the difference is only marginal. Interest under the mortgage would be compounded on daily interests, while these calculations are made on a flat (not compounded) rate of interest.

[63] Alternatively, if the court rate of interest is applied, this sum would be $62,697.64.

[64] The defendant made no submissions as to interest.

[65] The amount outstanding is $80,500. I am satisfied that the terms of the contract, including the agreement to pay interest at the same rate as the plaintiffs were doing, have been made out, and accordingly I propose to order payment of interest in accordance with the plaintiffs’ calculations, namely $83,637.94.

[66] Although not itemised in the statement of claim, or addressed in submissions, the plaintiffs notified the defendant in a note sent after the hearing concluded this morning noting the claim for expenses incurred by them in refinancing the mortgage as set out on the front page of Exhibit 2. The first plaintiff gave evidence about having to refinance because of the financial hardship caused when the defendant defaulted on his loan and was not cross-examined on this issue. These expenses arise as a result of the defendant’s breach of agreement and I propose to award this sum as well, which comprises the following:

Lawpoint stamping - $ 717.00
Land & Property information - $ 180.00
Gadens - $ 55.00
Valuation fee - $ 307.50
Completion fee - $ 990.00
Documentation fee - $ 495.00
Title insurance - $ 101.92
Total - $ 2846.42

[67] When this sum is added to the principal outstanding of $80,500 and the interest of $83,637.94, the total is $166,984.36.

Costs order against solicitor

[68] This matter was first listed for hearing on 3 May 2010 for two days. The hearing could not proceed because the solicitor on the record had filed a Notice of Motion seeking leave to withdraw, and because no arrangements had been made for the defendant to give evidence by videolink. The hearing date was vacated by the List Judge, Judge Balla, after hearing evidence from the defendant’s sister and telephone evidence from the solicitor then acting for the defendant, Mr Santo Scarfone. Judge Balla ordered Mr Scarfone to file an affidavit setting out why he should not pay the costs thrown away by the vacating of the hearing date.

[69] I have read the affidavit of Mr Scarfone of 18 June 2010. Mr Scarfone says, in essence, that both before and after the hearing date was set down for 3 and 4 May at the January 2010 callover, he sent letters seeking instructions which were unanswered. As contact with Mr Markovski in gaol was very difficult, he dealt with Mr Markovski’s sister. Mr Markovski in fact told him to do this on the one occasion he was able to have telephone contact with him. Mr Scarfone made a number of telephone calls to the plaintiff’s sister (paragraph 36 of Mr Scarfone’s affidavit) as she was actively involved in preparing the defence of the defendant, but she never returned his calls. The defendant had not contacted him again after 23 November 2009.

[70] As well as leaving messages for the defendant’s sister to telephone him concerning fees and the briefing of a barrister, Mr Scarfone also attempted to contact a barrister who had acted for the defendant in criminal proceedings, as the defendant said he wanted this barrister to appear in these proceedings as well, but this barrister did not return his calls.

[71] Mr Scarfone took the view that as he was not receiving proper instructions and that there was a breach of the terms of his retainer and costs agreement. He accordingly filed a Notice of Motion seeking leave to file and serve a Notice of Ceasing to Act on 16 April, having foreshadowed this in a telephone message he left on 7 April for Mr Markovski’s sister. This was approximately three weeks before the trial. He had not made any arrangements for the taking of Mr Markovski’s evidence by videolink by that date, but says that three weeks was ample time in which to make such arrangements.

[72] The hearing could not go ahead on 3 and 4 May, partly because the defendant had no representation, and partly because nobody had made any arrangements for the defendant to give evidence by videolink.

[73] Mr Scarfone had another problem, and that was that the instructions he did obtain from his client, in the form of a statutory declaration of 4 January 2010, were significantly different not only from the defence as pleaded but from the court and company documents tendered by both parties. This difference is essentially the claim the defendant made in his evidence, namely that Zoran and not the plaintiffs loaned the money.

[74] Mr Scarfone submits that he had not “dumped” the defendant a few days before the hearing. He had tried to obtain instructions and when he could not get them he sought leave to withdraw from the case.

[75] Mr Scarfone was in a very difficult position in terms of preparation for the trial. He had a client who insisted on a particular line of defence and on retaining a particular barrister, but he was unable to obtain instructions or assistance from the defendant, his sister or this barrister to enable him to answer particulars, or to enable him to point out problems about the changed defence. In my opinion, he had no option other than to withdraw from the case.

[76] In an ideal world, Mr Scarfone would have written more letters to the defendant, and withdrawn sooner. However, his client and Ms Simonovski were well aware of the hearing date, as Ms Simonovski acknowledged to Judge Balla (paragraph 22 of Mr Scarfone’s affidavit) and they were told about this hearing date immediately after the January callover. Mr Scarfone wrote to them diligently in 2009 and did his best to deal with a client who could not be contacted and his authorized representative and counsel of choice failing to return his calls.

[77] The responsibility for the hearing not being able to proceed on 3 May should lie upon the defendant, and accordingly I decline to make a costs order against Mr Scarfone.

1. Judgment for the plaintiffs in the sum of $166,984.36 inclusive of interest.
2. Defendant pay plaintiffs’ costs, including the costs of the vacated hearing date of 3 May 2010.
3. Application for the 3 May 2010 hearing date to be paid by the defendant’s former solicitor refused.
4. Liberty to apply.
5. Exhibits retained for 28 days.

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