Tereshchenko v Geromeo Constructions Pty Ltd ACN 088 915 137
[2013] SADC 61
•16 May 2013
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TERESHCHENKO v GEROMEO CONSTRUCTIONS PTY LTD ACN 088 915 137 & ANOR
[2013] SADC 61
Judgment of Her Honour Judge Cole
16 May 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS
The plaintiff loaned a sum of money to the first defendant - a mortgage was granted by the first defendant to the plaintiff as security for the loan with a guarantee given by the second defendant to the plaintiff in relation to the loan - dispute between the parties as to the amount of the loan and the amount repaid - illegal purpose - finding for the plaintiff.
Controlled Substances Act 1984 (SA), referred to.
Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Ltd [2010] NTSC 3; Briginshaw v Briginshaw (1938) 60 CLR 336; Goudias v Akasios (2007) 97 SASR 93; Leipner v McLean (1909) 8 CLR 306, considered.
TERESHCHENKO v GEROMEO CONSTRUCTIONS PTY LTD ACN 088 915 137 & ANOR
[2013] SADC 61
This matter concerns a loan of money by Ms Tereshchenko to Geromeo Constructions Pty Ltd (“Geromeo”), a mortgage granted by Geromeo to Ms Tereshchenko as security for the loan and a guarantee given by Mr G Romeo, the sole director of Geromeo, to Ms Tereshchenko in relation to the loan.
There is a dispute between the parties about how much money was advanced to Geromeo by Ms Tereshchenko. There is also a dispute about how much of the money that was advanced has been repaid to Ms Tereshchenko on behalf of Geromeo. Ms Tereshchenko seeks an order against the defendants for the amount that she says is outstanding on the loan, together with interest. She also seeks declarations in relation to the mortgage and guarantee. The defendants oppose the making of the orders sought.
At the trial, Ms Tereshchenko and Mr Peter Campbell gave evidence in the plaintiff’s case and Mr G Romeo, Mr B Romeo, Mr Panayotov and Mr Spilios gave evidence in the defendants’ case.
The Loan
In 2005, Ms Tereshchenko owned a residential property in Woodforde. There was no mortgage on the property. Ms Tereshchenko lived at the property with three other people, one of whom was Mr Peter Campbell (also known as “Peter Wohar” and “Pacer”). Until 2000, Ms Tereshchenko had worked for about 20 years as a youth worker. She left work in 2000 to become her mother’s carer, and went onto a carer’s pension. In 2005, she was still in receipt of a carer’s pension. By the time of the trial, Ms Tereshchenko was in receipt of the disability support pension.
In evidence, Ms Tereshchenko said that she and Mr Campbell were good friends, but did not have a sexual relationship. Mr Campbell had an association with Mr G Romeo from the 1970s. Mr Campbell introduced Ms Tereshchenko to Mr G Romeo.
The accounts of Ms Tereshchenko and Mr Campbell, on the one hand, and Mr G Romeo on the other hand as to how the loan came to be made, differed.
The Purpose of the Loan
Ms Tereshchenko’s evidence, in summary, was that Mr G Romeo asked her for a loan to help him make payments to people to whom he owed money.[1] Ms Tereshchenko said that Mr G Romeo told her that he was temporarily short of funds, and that he needed a loan for three months, at which time settlement would occur on the sale of a property in Queensland, and he would be able to repay her out of the proceeds of that settlement. Ms Tereshchenko said that she formed the impression that Mr G Romeo’s wife and children were frightened of the people to whom he owed money.[2] Mr Campbell, in evidence, basically supported Ms Tereshchenko’s account, except that he said that the meeting between Mr G Romeo and Ms Tereshchenko to discuss the loan took place at Ms Tereshchenko’s house,[3] whereas it was Ms Tereshchenko’s evidence that the discussion took place at Mr G Romeo’s house.[4]
[1] Transcript p 24
[2] Transcript p 23
[3] Transcript p 133
[4] Transcript p 23
Mr G Romeo said that threats made against his family had nothing to do with the loan he arranged with Ms Tereshchenko. He indicated that there had been an occasion involving threats which pre-dated the loan and did not relate to it, and a further, also unrelated set of threats some time after the loan.[5] Mr G Romeo, under cross-examination, gave the following account of the circumstances leading up to the loan:
[5] Transcript p 206
Q.Why did you ask Ms Tereshchenko for money.
A.We put together as a deal I needed $100,000 by a certain date and discussions with Peter over a period of a long time, he knows or he knew and we discussed about things, we could put certain money together, we could do certain things with it. He introduced me to Lena, and said to me there’s a source, maybe there’s a source of money as long as we do the right thing we can utilise the cash, put it back and utilise it again.[6]
…
A.No, look it was a straight deal. They had to give me $100,000 or [sic] we’d get $200,000 in return in three months; end of story. Discussions were with Peter Wohar to – he could find the money, she come along, that’s how he found the money. “I’ve found the money, here she is. I want 100 grand, you get 200 grand back in three months”. But as a back up, because they asked “What about if something goes wrong?”, “If something goes wrong, as a backup, I have a property selling in Queensland and you should still be okay”; or words to that effect.[7]
…
Her Honour
Q.So that was the agreement.
A.That was my agreement with Peter. And I stand firm that she was a party of [sic] that agreement. They knew what they were getting into. Why would she put her house up that’s completely free of any mortgage because she heard someone scream at by family? That’s ludicrous.
Q.So just to be clear, in March of 2005, it was your intention to pay Ms Tereshchenko 200,000 in June of 2005.
A.That was the secret men’s business deal, yes, your Honour.[8]
[6] Transcipt p 206-207
[7] Transcript p 210
[8] Transcript p 210
Mr G Romeo indicated that the $100,000, which he said was to be loaned, would be applied toward a project that he could not describe on the basis of possible self incrimination. Mr G Romeo said that all of his dealings in relation to the securing of the loan were conducted with Mr Campbell, although Ms Tereshchenko was sometimes in the room. Mr G Romeo implied that Ms Tereshchenko was aware that the purpose of the loan was “something out of the ordinary”[9], but he said that it was his practice not to discuss projects “with females in the room”, so that he could not know what Ms Tereshchenko’s precise understanding of the project was.[10] Mr G Romeo was very clear that he dealt with Mr Campbell and Ms Tereshchenko for all purposes as if they were a single entity:
A.Like I said, to me they were one entity. But my discussions were firmly with Mr Peter Wohar at all times. She was present, let’s say 50, 60% of the time so I must assume that she knew what was going on. I wouldn’t discuss business like that with her.
Q.When you say ‘business like that’ are you then talking about the purpose for what the loan was going to be used for.
A.Yes, the pine trees.
Q.Now you’re referring to ‘pine trees’; what does that mean.
A.Well, I’ll use that as a phrase of pine trees because I can’t answer that question any further because it might incriminate me. So for just the – for the exercise of this court I’ll refer that to pine trees from now on.[11]
[9] Transcript p 212
[10] Transcript p 212
[11] Transcript p 211
Enforceability of the Loan – Illegal purpose
Mr G Romeo implied, in his answers in cross examination quoted above, that the purpose of the loan to Geromeo from Ms Tereshchenko was to finance either the cultivation of controlled plants for sale[12] or some other illegal activity to do with the production of an illicit drug.
[12] see Controlled Substances Act 1984 s 33B
Subsequent to Mr G Romeo’s evidence, I raised with counsel the issue of whether the contract had been entered into for an illegal purpose. This issue was not pleaded, and Mr Hoile did not apply to amend the defence. Both parties agreed, and it is clear, that this is an issue which may properly be raised by the Court without being pleaded.[13]
[13] N C Seddon and M P Ellinghaus Cheshire and Fifoot's Law of Contract Ninth Australian Edition Lexis Nexis Butterworths Australia 2008 at para 18.3
In some circumstances, where a contract is made for an illegal purpose, in the full knowledge and with the participation of all of the parties, the contract may be void with the obvious consequence that no remedy can be granted in the event of its breach; in other words, the Courts will not enforce it.[14]
[14] Infra at para 18.22
There are many ways in which a contract may be affected by illegality.[15] In the present case, there is nothing illegal about the making of the loan itself. The suggestion raised by Mr G Romeo was that the loan contract was entered into for the purpose of engaging in illegal conduct for profit. Such a contract may be void.[16] However, the standard of proof required is the standard described in Briginshaw v Briginshaw.[17]Consequently, in considering whether proof of illegal purpose arises from the evidence, I must give consideration to the seriousness of the allegation and to the gravity of the consequences of a finding of illegality. I must bear in mind the presumption of innocence. Before I can make a finding on the balance of probabilities that there was an illegal purpose, I must arrive at a state of reasonable satisfaction or actual persuasion. In this matter, the only evidence that the loan was entered into for an illegal purpose arises as an inference which can be drawn from the answers of Mr G Romeo in cross examination. That inference is rebutted by the evidence given by Ms Tereshchenko and Mr Campbell, both of whom said that the loan was made to assist Mr G Romeo in paying creditors who were threatening his family. Both Ms Tereshchenko and Mr Campbell were recalled after Mr G Romeo gave his evidence. This was Ms Tereshchenko’s further evidence:
[15] Infra at Chapter 18
[16] See Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Ltd [2010] NTSC 3 at para 28.
[17] (1938) 60 CLR 336 at 361-363. See Goudias v Akasios (2007) 97 SASR 93.
QThe questions I want to ask you are quite limited and the first one related to what Mr Romeo has said was the true deal involving you. Mr Romeo said that the agreement was you would lend $100,000 but repaid $200,000; do you agree that that was something that was discussed with Mr Romeo.
AThat was never discussed with me.
QSecondly, he said that you knew that the – this is probably paraphrasing him, not his actual words – but the effect of what he said was that you knew that there was a particular purpose for the loan. He didn’t say what the purpose was but that that particular purpose was an illegal purpose; what do you say about that.
AAll I was told was that he was financially in dire straits at that moment because people wouldn’t wait to be paid. I didn’t know what the details of that was at all. I mean, I didn’t even know about these kind of people then. I didn’t have a criminal record or anything until I unfortunately met Mr Joe Romeo, I had nothing like that in my past and I wouldn’t be interested in anything illegal. It’s not my thing. I’d rather own my own house than put money at risk. I could do blue chip investments rather than that if I was going to mortgage my house for something. No, there’s no way. I’ve barely spoken to him, he doesn’t – about anything except trying to get my money retrieved. All I want is my home paid back.
QThe other suggestion was that if Mr Romeo didn’t make it clear to you himself, the precision that the money was going to be used for an illegal purpose, that Mr Campbell made it clear to you that the money was going to be used for an illegal purpose.
AWell we’ve never had any such conversation.
+ FURTHER CROSS-EXAMINATION BY MR HOILE
QYou’ve said in evidence and you’ve repeated today that you say that the purpose of the loan that you made to Mr Romeo was to enable him to pay some other people.
AYeah, to pay creditors.
QI suggest to you that that was not the true purpose of the loan.
AThat’s not true. How much money can you – how can you make all that money in three months anyway, I would have no idea how he’d do such a thing, to make so much more money.
This was Mr Campbell’s further evidence:
QMr Romeo has suggested in his evidence that you made clear to Lena Tereshchenko that the money that she was going to lend would be used for an illegal purpose but you didn’t say what that purpose was; did you ever tell - sorry, what’s your comment on that.
ANo conversation ever took place with Lena like that.
QDid a conversation ever take place in your presence with Mr Romeo and in the presence of Lena where the topic of using the money for an illegal purpose was discussed.
ANo.
+ FURTHER CROSS-EXAMATION BY MR HOILE
QYou told us when you gave evidence last time that the purpose of the loan was to enable Mr Romeo to pay some money to people to whom he owed money who wouldn’t wait.
AThat’s right.
QI suggest to you that that was not the true purpose of the loan.
AI’m afraid you’re wrong, it is.
Before a finding could be made that a contract was entered into for an illegal purpose, it must be clearly established that the plaintiff knowingly entered into the contract for that purpose.[18] Even were I to accept Mr G Romeo’s evidence on this issue, I could not be satisfied on the Briginshaw onus that Ms Tereshchenko was aware of the illegal purpose which Mr G Romeo had in mind for the funds loaned to Geromeo by her. Additionally, there is no evidence that the funds were, in fact, applied to an illegal purpose.[19]
[18] Goudias v Akakios (2007) 97 SASR 93 at para 52.
[19] Infra at para 52.
No adequate basis has been established on the evidence upon which I could find, on the Briginshaw onus, that the contract was entered into by Ms Tereshchenko with knowledge that the funds were to be used for an illegal purpose.
The Loan from Capital Access
The money loaned by Ms Tereshchenko to Geromeo was borrowed by her from Capital Access Australia Pty Ltd (“Capital Access”) on the security of her property.[20] In evidence, Ms Tereshchenko said that she had a conversation with Mr G Romeo about the amount to be loaned to Geromeo prior to going to visit Capital Access to apply for the loan.
He [ie Mr G Romeo] wasn’t very clear, but I knew it would – well somewhere around a hundred thousand, he said, but he told me when we got there “Might as well take it to the limit; you’ll have it back in three months anyway”. So I took it to a hundred and twenty five, which is what he wanted.[21]
[20] Exhibit P1 Tab 55
[21] Transcript p 24
It was not disputed, and I find, that the amount of the loan to Ms Tereshchenko from Capital Access was $125,000. A loan agreement was executed by Ms Tereshchenko before Mr Bruce Weir, a solicitor.[22] The loan agreement provided for an interest rate of 4% per month, with a default interest rate of 9% per month. The commencement date was 3 March 2005 and the termination date was 3 May 2005. Capital Access took a mortgage over Ms Tereshchenko’s property, securing the sum of $125,000.[23] However, only $113,500 in cash was then advanced by Capital Access to Ms Tereshchenko. The balance of the loan was withheld by Capital Access, by agreement, to pay fees, charges, stamp duty and two months interest.[24] Ms Tereshchenko and Mr Campbell opened a joint account at the Commonwealth Bank and, on Friday 4 March 2005, Capital Access paid the sum of $113,500 into that account.[25] Both Ms Tereshchenko and Mr Campbell had a card for that account. The loan agreement between Capital Access and Ms Tereshchenko, the attached Consumer Credit declaration and the mortgage of Ms Tereshchenko’s property to Capital Access[26] were all prepared by Mr Weir prior to the funds being transferred into the Commonwealth Bank account.
[22] Exhibit P1 Tab 56
[23] Exhibit P1 Tab 55
[24] Exhibit P1 Tab 54
[25] Exhibit P1 Tab 8
[26] Exhibit P1 Tabs 55 and 56
In May of 2005, the loan from Capital Access was refinanced by La Trobe Financial Services Pty Ltd (“La Trobe”).[27] Ultimately, on account of the level of default in relation to the loan, La Trobe took possession of the property in about October 2011 and sold it in December 2011.
[27] Exhibit P1 Tab 56A
The amount of the loan from Ms Tereshchenko to Geromeo
There is some inconsistent evidence about the amount of the loan agreed between Ms Tereshchenko and Mr G Romeo on behalf of Geromeo. Mr G Romeo said, in evidence, that the amount that he agreed with Mr Campbell, who he considered to be acting on Ms Tereshchenko’s behalf, was $100,000.[28] As quoted above, Ms Tereshchenko said, in evidence:[29]
Q...in the lead-up to going to Capital Access did Mr Romeo say how much money he wanted to borrow.
A.He wasn’t very clear, but I knew it would – well somewhere around a hundred thousand, he said, but he told me when we got there “Might as well take it to the limit; you’ll have it back in three months anyway”. So I took it to a hundred –and-twenty-five, which is what he wanted.
[28] Transcript p 210
[29] Transcript P24
Mr Campbell, in evidence, when speaking of the discussions prior to the loan, indicated that the amount agreed “ended up $125,000.[30]
[30] Transcript P134
The mortgage entered into on 8 March 2005 between Geromeo as mortgagor and Ms Tereshchenko as mortgagee, on its face, secured the sum of $125,000 against a property of which Geromeo was the registered proprietor. Mr G Romeo executed the mortgage as the sole director of the mortgagor.[31] Mr G Romeo, as guarantor, executed a Deed of Guarantee and Indemnity[32] in respect of the loan of $125,000 secured by the mortgage.
[31] Exhibit P1 Tab 1
[32] Exhibit P1 Tab 5
I find that the agreement was that Ms Tereshchenko would lend Geromeo the sum of $125,000.
The terms of the loan
The documents recoding the terms of the loan by Ms Tereshchenko to Geromeo were prepared by a Conveyancer, Mr Nisyrios, who acted for both parties, with their acknowledgment.[33].
[33] Exhibit P1 Tabs 2, 3 and 4
The memorandum of mortgage referred to above, which mortgaged a property owned by Geromeo to Ms Tereshchenko, was signed by Mr G Romeo on behalf of Geromeo, apparently on 8 March 2005. The panel form of the mortgage said that the consideration for the grant of the mortgage was $125,000, to be repaid on 8 June 2005. An interest payment was due on the 9th day of each month. The interest rate was 18% per annum, with a default interest rate of 4% per month.[34] The mortgage was not registered. It was stamped. A caveat was prepared, but it was not lodged with the Registrar-General for noting on the title until 29 June 2005. It was entered on the title on 5 August 2005.[35] A deed of guarantee and indemnity, by which Mr G Romeo guaranteed the repayment of the amount secured by the mortgage entered into by Geromeo in favour of Ms Tereshchenko, and promised to indemnify Ms Tereshchenko, among other things, against loss, damage, costs and expenses arising from the non-performance by Geromeo of any of the terms of the mortgage, was executed by Mr G Romeo on 9 March 2005.[36]
[34] Exhibit P1 Tab 1
[35] Exhibit P1 Tab 7
[36] Exhibit P1 Tab 5
An alternative version of the terms of the loan from Ms Tereshchenko to Mr G Romeo was advanced by Mr G Romeo in cross examination. It is set out in detail above. Mr G Romeo said that the loan was to be for $100,000, for a term of three months, with an interest rate of 100% over that three months so that $200,000 would be repaid. This evidence was not corroborated. It is contrary to the documentary evidence signed by Mr G Romeo, and to the evidence of Ms Tereshchenko and Mr Campbell.
Ms Tereshchenko gave evidence that it was her agreement with Mr G Romeo that she would not be “out of pocket or inconvenienced in any way” in relation to the loan. [37] In cross examination on this topic, the following exchange took place between Mr Lazarevich and Mr G Romeo:
Q.That was because your deal with Lena was that she was not going to be out-of-pocket for borrowing from Capital Access, do you agree with that.
A.Yes.
Q.That because she was borrowing 125,000, you were going to pay her back 125,000 plus interest.
A.Correct, that’s how it started, that’s not how it ended.
Q.The figure of 125,00 was, even though you weren’t going to get $125,000 in the hand because Capital Access were holding some of the money for interest, you’d agreed to Lena that you would pay Capital Access the 125 because that’s what she would be liable to Capital Access for plus interest.
A.I can see the point you’re trying to make. Am I responsible for the 10 grand interest? Yes. But I’m not responsible for the money they decided to keep and not pay me for the rest of the 125 grand. So I acknowledge and I can see that the interest paid to Capital Access is my responsibility, to save you going through this for another hour. But no, they didn’t give me 116 grand. Had they given me 116,000, I’d be liable for the whole 125.[38]
[37] Transcript p 36
[38] Transcript p 236
I find that the terms of the loan agreement between Geromeo and Ms Tereshchenko and the guarantee and indemnity provided by Mr G Romeo are the terms set out in the documents prepared by Mr Nisyrios and duly executed,[39] with the additional term, orally agreed, that Geromeo would be liable to repay to Ms Tereshchenko money withheld by Capital Access by way of an advance payment of interest as if that money had been paid to Geromeo.
[39] Exhibits P1 tabs 1 and 2
The amount actually loaned
There is a dispute about how much cash was actually handed to Mr G Romeo by Ms Tereshchenko on account of the loan.
The statement for the Commonwealth Bank Account opened by Ms Tereshchenko and Mr Campbell for the period 4 March 2005 to 18 April 2005 was tendered in evidence.[40] The statement shows that Capital Access paid $113,500 into the account on 4 March 2005. On the same day, there was a withdrawal of $50,000 from the account. The statement then shows a series of withdrawals of amounts in the thousands of dollars; $10,000 on 7 March 2005 and then a series of withdrawals on 8 March 2005, of $4,000, $10,000, $15,000, a further $15,000 and $5,000 (a total of $49,000 for 8 March). On 9 March there was one withdrawal of $200, on 10 March, a further single withdrawal of $200, on 11 March three separate withdrawals totalling $700, on 14 March 2005 twelve separate withdrawals totalling $3,200. On 15, 17 and 21 March 2005 there were withdrawals of $50, $100 and $20 respectively. Ms Tereshchenko conceded that the withdrawals of $50, $100 and $20 were not given to Mr G Romeo. Bank fees were taken from the account throughout the period of the statement. By 1 April 2005, the account was $12.50 in debit.
[40] Exhibit P1 Tab 8
A further statement from the Commonwealth Bank account for the period 1 June 2005 to 22 August 2005 was tendered.[41]
[41] Exhibit P1 tab 11
Ms Tereshchenko gave evidence that she withdrew $50,000 in cash from the account on Friday, 4 March 2005 from the Commonwealth Bank branch in Hutt Street, got into her car and was driven by Mr Campbell across the road where she met Mr G Romeo and handed him the entire amount of $50,000.[42] In cross examination, Ms Tereshchenko said that a person called Nick, who was a friend of her son’s and was living in her house at the time, was also present on this occasion.[43] It was Mr Campbell’s evidence that Ms Tereshchenko handed over $50,000 to Mr G Romeo in his presence on the same day that the money was withdrawn.[44] Mr Campbell did not mention Nick in this context, and Nick did not give evidence.
[42] Transcript p 29
[43] Transcript p 81, 82, 83 and 85
[44] Transcript p 138
Ms Tereshchenko said that, on 7 March 2005, she went to a different branch of the Commonwealth Bank, which she thought may have been the Campbelltown or Firle shopping centre.[45] She said that after she gave Mr G Romeo the $10,000 from the second withdrawal, she insisted that documentation be arranged. She said that Mr G Romeo arranged for a land broker, Mr Jim Nisyrios, to prepare the paperwork, which included a mortgage in her favour. She said that Mr Nisyrios told her that there was already a mortgage and a caveat over that property, but that Mr G Romeo had interjected that the mortgage was “a very small one”. Mr Campbell’s recollection was that Mr G Romeo said that the existing mortgage was for $30,000.[46]
[45] Transcript p 29
[46] Transcript p 136
Ms Tereshchenko said that, after signing the paperwork, she felt more comfortable about handing over the money. She said that on 8 March 2005, after signing the paperwork, she went to a series of different banks. Ms Tereshchenko said that she was driven from bank to bank by Mr Campbell, and that Mr G Romeo was telling them where to go. Mr G Romeo was in his own car, following them.[47] As Ms Tereshchenko made each withdrawal, she would give the cash to Mr G Romeo, in the presence of Mr Campbell. It was Ms Tereshchenko’s evidence that all of the money withdrawn from the account on 8 March 2005 was handed directly to Mr G Romeo.[48]
[47] Transcript p 88
[48] Transcript p 33
Ms Tereshchenko said, in evidence, that the sum of $200 withdrawn on 9 March from the ATM at the Golden Grove Tavern was handed by her to Mr G Romeo in the Golden Grove Tavern carpark. By this stage, the account was still more than $4,000 in credit. She said that the same thing occurred with respect to the withdrawal of $200 from the Golden Grove Tavern ATM on 10 March 2005. Ms Tereshchenko said that the amount of $300 was withdrawn by her from somewhere in Holden Hill on the 11 March 2005, with two further separate withdrawals by her at Golden Grove Village Tavern on 11 March 2005, all of which she said she gave to Mr G Romeo.[49] Ms Tereshchenko said that all of the withdrawals of 14 March 2005 were given by her to Mr G Romeo, but conceded that she could not be sure that she gave any of the money withdrawn on or after 15 March 2005 to Mr G Romeo.
[49] Transcript p 34
The Commonwealth bank account statement for 1 June 2005 to 22 August 2005 shows that the account was in debit in the amount of $17.63 on 1 June 2005. There was a deposit of $1,000 on 24 June 2005. On 27 June 2005 there was a withdrawal of $40 from the Aldinga Beach Shopping Centre ATM, a withdrawal of $70 from the Village Tavern ATM at Golden Grove, a further withdrawal of $50 from the Village Tavern ATM at Golden Grove and then a series of four withdrawals of $200 each at the Gepps Cross Hotel, Blair Athol ATM.[50] In evidence, Ms Tereshchenko said that the four lots of $200 withdrawn from the Gepps Cross Hotel ATM were given to Mr G Romeo.
[50] Exhibit P1 Tab 11
Mr Campbell frankly admitted that he lacked a detailed recollection of each of the withdrawals. In examination in chief, Mr Campbell was taken to the payments that Ms Tereshchenko says that she made to Mr G Romeo, and, in response to questions, Mr Campbell stated his belief that he was present at each withdrawal and that the money was given by Ms Tereshchenko to Mr G Romeo.
In evidence, Mr G Romeo gave a different version of events from Ms Tereshchenko and Mr Campbell.[51] Mr G Romeo said that he had an arrangement to meet with Ms Tereshchenko and Mr Campbell on a Friday. I infer that this was Friday 4 March 2013. Mr G Romeo said, in summary, that he had arranged to meet Ms Tereshchenko and Mr Campbell on Hutt Street because they were to withdraw money from the Hutt Street branch of the Commonwealth bank and give it to him. He said that he waited in his car in Hutt Street until about 5:30pm, but no contact was made with him. He said that he called Ms Tereshchenko and Mr Campbell, but their phones were off and they did not respond. Mr G Romeo said that he next made contact with Ms Tereshchenko and Mr Campbell on the following Monday. Mr G Romeo said that a meeting was arranged in Hutt Street for that day, and that it took place at a table outside the General Havelock Hotel. He said that he was given $40,000 in cash at that meeting, but that he expressed dissatisfaction to Ms Tereshchenko and Mr Campbell because he had expected to be given $100,000. They discussed the difficulty of obtaining large quantities of cash from a bank without pre-ordering and said that they would go to several different banks. Mr G Romeo said that the three of them met again the next day, which was Tuesday, in Hutt Street, and Mr G Romeo was given $10,000 in cash. He gave evidence that he met them again on the Wednesday of the same week, again in Hutt Street, and they gave him $35,000 in cash. Mr G Romeo said that this was the last time they gave him money, so that he received a total of $85,000 from them. Mr G Romeo said that he raised with Ms Tereshchenko and Mr Campbell his expectation that he would be given more cash, and he related the following conversation:[52]
Well, the gist of it was they still must have had 10, 15, 20 grand to put away, and Peter told me they needed about 10 grand for themselves to pay a heap of bills and whatever, and they did say that they were thinking of changing cars and they wanted 10 grand put aside for a car, for a newer car, and they said they were going to spend some on their own personal selves.
[51] Transcript p 184
[52] Transcript p 188
Mr G Romeo said that he was given the following explanation for their failure to meet with him on the Friday:[53]
Look, we’ve just had enough stress, booked a room and switched the phones off for a few days and had a good time.”
[53] Transcript p 189
All of the occasions on which Ms Tereshchenko alleges that she withdrew cash from automatic teller machines subsequent to Tuesday 8 March 2005 and gave the money to Mr G Romeo were put to Mr G Romeo, and he denied them. He said that the places in question were “entirely out of my area”[54] He also said:[55]
I wouldn’t even bother driving down that far to get $100 or $200.
[54] Transcript p 189
[55] Transcript p 190
Findings of fact as to the amount actually loaned
I am satisfied, on the balance of probabilities, on the basis of the Commonwealth Bank account statement of 4 March 2013 to 18 April 2013,[56] together with the evidence of Ms Tereshchenko, that the cash withdrawn from the Commonwealth Bank account on Friday 4 March 2005, Monday 7 March 2005 and Tuesday 8 March 2005, totalling $109,000, was given to Mr G Romeo by Ms Tereshchenko as part of the loan to Geromeo Constructions Pty Ltd on the days it was withdrawn from the bank. The fact that Mr G Romeo executed the mortgage on behalf of Geromeo, and his own guarantee and indemnity on the Tuesday or Wednesday of that week fortifies me in that conclusion. Had matters unfolded on the Monday and Tuesday in the manner attested to by Mr G Romeo, it seems to me that it would have been unlikely that he would have executed the documents.
[56] Exhibit P1 Tab 8
However, I am not satisfied, on the balance of probabilities, that any further cash was given to Mr G Romeo by Ms Tereshchenko and Mr Campbell subsequent to 8 March 2005. The locations of the ATMs from which the cash was withdrawn subsequent to 8 March 2005, in combination with Mr G Romeo’s responses in evidence when Ms Tereshchenko’s version of events for those days was put to him, leave me to doubt Ms Tereshchenko’s and Mr Campbell’s evidence that the cash withdrawn on 9, 10, 11, 14 March 2005 and 27 June 2005 was given to Mr G Romeo. It was conceded on behalf of the plaintiff that the cash withdrawn on 15, 17 and 21 March 2005 was not given to Mr G Romeo.
I find that Ms Tereshchenko gave to Mr G Romeo cash in the sum of $109,000 in the period from 4 March 2005 to 8 March 2005 pursuant to the loan agreement between Ms Tereshchenko and Geromeo. Geromeo is also liable for the amount of $11,500 held back by Capital Access on 5 March 2005 on account of the first two months interest.
The total sum loaned pursuant to the agreement between Ms Tereshchenko and Geromeo was $109,000 in cash plus $11,500 in interest withheld by Capital Access: a total of $120,500.
Repayments
It is common ground among the parties that, in January and February of 2006, Mr G Romeo made two payments to the trust account of Nicholls Gervasi by way of part repayment of the loan. Those payments were of $4,000 and $4,609.60.
It is also common ground that, in 2006, 2007, 2009 and 2010, Mr G Romeo made a series of payments to La Trobe by way of repayment of the loan to Geromeo Constructions Pty Ltd from Ms Tereshchenko. It seems that a small fee was taken by La Trobe on each occasion that a repayment was received by it.
It was admitted on behalf of the plaintiff that three cash payments were made by Mr G Romeo on account of the loan, being $15,000 on 28 January 2009, $15,000 on 6 February 2009 and a further $2,000 on 6 February 2009.
It was pleaded on behalf of the defence that Mr G Romeo gave a series of payments in cash to Mr Campbell on account of the loan on 31 October 2005, 10 November 2005, 24 November 2005, 7 December 2005, 22 December 2005, 18 January 2006, 16 February 2006, 20 March 2006, 3 April 2006, 16 April 2006, 15 August 2006, 14 May 2007, 14 August 2007, 20 December 2007, 8 February 2009, 9 March 2010 and 8 April 2010. Mr Campbell denied, in effect, that cash was given to him on account of the loan on the dates pleaded (except for those admitted to have been made on 28 January 2009 and 6 February 2009).[57] Ms Tereshchenko denied that those amounts were given to her (except for the amounts admitted). She said that the only cash Mr G Romeo gave her were the amounts for which she gave receipts.[58]
[57] Transcript p 168
[58] Transcript p 103 Exhibit D2
Mr G Romeo said that he dealt with Ms Tereshchenko and Mr Campbell as one entity, and believed that a payment to Mr Campbell amounted to a payment to Ms Tereshchenko. Mr Lazarevich argued that, in order to succeed with this argument, the defendants would have to show that Ms Tereshchenko actually or ostensibly held Mr Campbell out as having her authority to accept repayments. Mr Lazarevich argued, and I accept, that it is the principal, and not the agent, who must do the holding out.[59] There was no evidence of anything done by Ms Tereshchenko which amounted to the explicit or implicit holding out of Mr Campbell as her agent for the receipt of repayments, or for any other purpose. I accept Ms Tereshchenko’s evidence that the amounts Mr G Romeo said that he gave to Mr Campbell on account of the loan, on the dates listed in the paragraph above, were not given to her. I find that, in the context of all of the circumstances, none of the repayments alleged to have been made on the above dates were actually made to Ms Tereshchenko or to anyone authorised to accept payments on her behalf. Mr Campbell frankly conceded that he and Mr G Romeo were still engaged in dealings together over the years in question, and he may have received cash from Mr G Romeo in relation to some of those dealings, but those dealings were separate from the loan. Mr Panayotov gave evidence that he observed Mr G Romeo give Mr Campbell $15,000 in cash outside the Marryatville Hotel in early February 2008. Mr Panayotov said that he was told by Mr G Romeo that he had a “problem” to do with a house, which involved Mr Campbell. Mr Panayotov may have inferred that the money handed over was referrable to the “problem” involving a house. His evidence, however, fell well short of persuading me on the balance of probabilities that a payment, if made, was referrable to the loan. Ms Tereshchenko was not present, and I accept that she had no knowledge of this incident. Mr Spilios gave evidence that he was present in late 2007 on an occasion when Mr Romeo gave Mr Campbell $10,000 in cash in the carpark of the Firle shopping centre. He was unable to say for certain whether Ms Tereshchenko was in the car with Mr Campbell or not. Again, this evidence fell well short of proof on the balance of probabilities that this payment, if it took place, was referrable to the loan the subject of these proceedings. Ms Tereshchenko denied being present. Mr Campbell denied being given money as loan repayments on the occasions described by Mr Panayotov and Mr Spilios.
[59] Leipner v McLean (1909) 8 CLR 306 at 315
I reject the submission that the payment by Mr G Romeo of the registration for Mr Campbell’s motorcycle on 19 November 2007 and 23 November 2007 and the provision of a utility motor vehicle to Mr Campbell by Mr G Romeo can be brought to account in any way in relation to the loan to Geromeo Constructions Pty Ltd by Ms Tereshchenko.
There remains a payment of $5,000 by Mr B Romeo, the father of Mr G Romeo on 23 December 2008. It is common ground that in December of 2008, Mr B Romeo and Mr G Romeo were living at the same address. It is common ground that Ms Tereshchenko and Mr Campbell visited that address on two occasions in relation to the repayment of the loan. On 23 December 2008, Mr B Romeo gave Mr Campbell $5,000, in the presence of Ms Tereshchenko. Ms Tereshchenko then wrote a receipt, which said:
23.12.08
BRUNO ROMEO
Five thousand dollars
---------------------------------
Part payment of loan5,000
Ms Tereshchenko signed the receipt. Mr Campbell did not sign it. Three subsequent receipts in the receipt book in relation to payments by Mr G Romeo, which are admitted to be payments on account of the loan, are in identical terms (except for the amount). In evidence, Mr B Romeo said that the money was intended to be part payment for the loan Ms Tereshchenko had provided. He denied that Mr Campbell had ever done any work for him. Mr Campbell and Ms Tereshchenko both claimed that the $5,000 was a payment by Mr B Romeo to Mr Campbell for something unrelated to the loan by Ms Tereshchenko. I prefer the evidence of the receipt, together with Mr B Romeo’s evidence to the evidence of Ms Tereshchenko and Mr Campbell on this point. I find that the amount of $5,000 was given by way of a loan repayment on behalf of Geromeo Construction Pty Ltd and should be brought into account. I note that there were two payments made to La Trobe on 5 January 2009, of $1,500 and $2,500.
In summary, I find that the following repayments and no others were made by or on behalf of the defendant on account of the loan:
25 January 2006 $4,000 paid to Nicholls Gervasi Trust Account
6 February 2006 $4609.90 paid to Nicholls Gervasi Trust Account
22 May 2006 $3,000 paid to La Trobe
22 May 2006 $1,200 paid to La Trobe
24 May 2006 $1060 paid to La Trobe
21 June 2006 $2,453.36 paid to La Trobe
21 June 2006 $1060 paid to La Trobe
21 June 2006 $1060 paid to La Trobe
8 August 2006 $1060 paid to La Trobe
28 September 2006 $3,000 paid to La Trobe
28 September 2006 $1060 paid to La Trobe
20 December 2006 $5171 paid to La Trobe
20 April 2007 $4,000 paid to La Trobe
15 October 2007 $4,010.55 paid to La Trobe
23 December 2008 $5,000 paid by Mr B Romeo
28 January 2009 $15,000 receipt given
6 February 2009 $15,000 receipt given
6 February 2009 $2,000 receipt given
23 February 2009 $1,123 paid to La Trobe
20 March 2009 $1,123 paid to La Trobe
20 April 2009 $1,123 paid to La Trobe
20 May 2009 $1,123 paid to La Trobe
22 June 2009 $1,123 paid to La Trobe
22 July 2009 $1,123 paid to La Trobe
24 August 2009 $1,123 paid to La Trobe
23 September 2009 $1,123 paid to La Trobe
21 October 2009 $1,123 paid to La Trobe
30 November 2009 $1,200 paid to La Trobe
29 December 2009 $1,150 paid to La Trobe
2 February 2010 $800 paid to La Trobe
4 May 2010 $1,250 paid to La Trobe
The repayments by or on behalf of Geromeo total $88,251.81. The amount advanced by Ms Tereshchenko to Geromeo, including the two months interest payments withheld by Capital Access, was $120,500 ($109,000 plus $11,500). The shortfall in capital repayments is therefore $32,248.19.
Geromeo did not repay the whole of the sum advanced to it on or by 8 June 2005, contrary to the loan agreement recorded in the memorandum of mortgage. As a consequence of Geromeo’s default, La Trobe exercised its power of sale with respect to Ms Tereshchenko’s house in December 2011. Ms Tereshchenko said in evidence that she has subsequently been homeless, and relying on friends to permit her to stay with them.
Orders
It is common ground, and I find, that a loan agreement was entered into between the plaintiff and Geromeo on the terms set out above. That contract remains on foot, notwithstanding that there is a small shortfall in the performance of it by the plaintiff. Geromeo is in breach of its obligation to repay the money loaned pursuant to the agreement. Mr G Romeo gave a guarantee and indemnity under which he remains liable to the plaintiff.
In her statement of claim, the plaintiff seeks the following:
1.An order that judgment be entered for the plaintiff as against the defendants:
1.1 The Outstanding Amount [sic]
1.2 Interest; and
1.3 The plaintiff’s Further Costs and Expenses. [sic]
2.A declaration that the Mortgage and the Guarantee are valid and enforceable.
3.A declaration that the first defendant is in default of the terms and conditions of the Mortgage.
4.A declaration that the second defendant is in default of the terms and conditions of the Guarantee.
The plaintiff is entitled to the orders sought in her statement of claim in accordance with these reasons. I will hear the parties as to the precise terms of the orders now sought.
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