Volonakis & Ors v Erceg & Anor

[2019] NSWSC 1875

Supreme Court

New South Wales

Medium Neutral Citation:	Volonakis & Ors v Erceg & Anor [2019] NSWSC 1875
Hearing dates:	4 – 6 November 2019
Date of orders:	20 December 2019
Decision date:	20 December 2019
Jurisdiction:	Equity
Before:	Hallen J
Decision:	The parties, if possible, are to agree upon the quantum of the Plaintiffs’ entitlement, and the form of the orders, reflecting these reasons. A form of orders, if agreed, should be forwarded to the Associate to Hallen J, in hard and soft copy, by 4:00 p.m. on 28 January 2020. If there is no agreement as to the form of orders, by 4:00 p.m. on 28 January 2020, the matter is to be re-listed, by arrangement made no later than 4:00 p.m. on 31 January 2020, with the Associate to Hallen J, for the purpose of obtaining a date for any argument on the form of orders or the quantum of the judgment made in favour of the first and third Plaintiffs or the third Plaintiff respectively.
Catchwords:	CIVIL PROCEDURE – Debt recovery – Undocumented loans – Dispute arising over payment of two undocumented loans – Loan agreements made between friends – Loan agreement between the three Plaintiffs, or one or more of them, and the two Defendants, or one of them – Dispute about identity of the other parties to each of the two loan agreements – Dispute about who advanced the loan monies and about to whom the loan monies were advanced – What the terms of repayment of each loan were – Whether loans repaid – Whether there was accord and satisfaction in respect of the loan agreements   JUDGMENTS AND ORDERS – Interest – Pre-judgment interest – Rate applicable
Legislation Cited:	Civil Procedure Act 2005 (NSW) Contracts Review Act 1980 (NSW) Evidence Act 1995 (NSW) Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Ashton v Pratt [2015] NSWCA 12 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Ballantyne v Phillott (1961) 105 CLR 379 Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 Brown v NSW Trustee and Guardian [2012] NSWCA 431 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466; [2007] FCAFC 132 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084 Diransson Pty Ltd v Hassan El Dirani [2019] NSWSC 617 Duck v Mayeu [1892] 2 Q.B. 511 El-Mir v Risk [2005] NSWCA 215 Ermogenous v Greek Orthodox Community of SA Inc (2002) 2009 CLR 95; [2002] HCA 8 Falk v Haugh (1935) 53 CLR 163; [1935] HCA 35 Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 Harbour Port Consulting v NSW Maritime [2011] NSWSC 813 Hughes v St Barbara Mines Ltd (No 4) [2010] WASC 160 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97 International Harvester Company of Australia Proprietary Limited v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644 Jingalong Pty Limited v Todd [2015] NSWCA 7 John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd [2019] NSWSC 1006 Jones v Dunkel (1959) 101 CLR 298 at 305; [1959] HCA 8 Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 Parsonage (acting as personal representative in the estate) v Parsonage & Ors [2019] EWHC 2362 (Ch) Poniatowska v Channel Seven Sydney Pty Ltd [2019] SASCFC 111 Stein v Torella Holdings Pty Ltd ACN 086 346 614 [2010] NSWSC 1445 The Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20 The Mecca [1897] AC 286 Tobin v Ezekiel (2012) 83 NSWLR 757 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699; [2011] NSWCA 389 Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354; [1943] HCA 4 Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) (2011) 297 ALR 56; [2011] FCA 1123 Watson v Foxman (1995) 49 NSWLR 315 West v Government Insurance Office of New South Wales (1981) 148 CLR 62 at 66; [1981] HCA 38 Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2003] HCA 48 Wilton v Farnworth (1948) 76 CLR 646; [1948] HCA 20 Young v Queensland Trustees Ltd (1956) 99 CLR 560
Texts Cited:	Mark L Howe and Lauren M Knott, "The Fallibility of Memory in Judicial Processes: Lessons from the past and their Modern Consequences" (2015) Memory, 2015 Peter Watts and FMB Reynolds, Bowstead & Reynolds on Agency (21st ed, 2018, Sweet & Maxwell)
Category:	Principal judgment
Parties:	Patricia Volonakis (first Plaintiff) MPPA Pty Ltd formerly trading as GTS Logistics Pty Ltd (second Plaintiff) Michael Volonakis (third Plaintiff) Ivancica Erceg (first Defendant) Walter Erceg (second Defendant)
Representation:	Counsel: Mr S Lawrance with Mr A Jordan (Plaintiffs) Mr J Ireland QC (solicitor) (first Defendant) Mr M Southwick (second Defendant)   Solicitors: Korn MacDougall Legal (Plaintiff) McGirr James Hall & Associates (first Defendant) Mavrakis & Associates (second Defendant)
File Number(s):	2017/387961

Judgment

Introduction

1. HIS HONOUR: This is far from a simple and straightforward case despite the fact that it arises out of a dispute between former friends over money that is agreed was loaned. The claim is by the three Plaintiffs, or one or more of them, against the two Defendants, or one of them, for what is said to be the unpaid balance of two undocumented loans, the first of $375,000, made in November 2015, and the second of $100,000, made in April 2016, together with simple interest, calculated at the rate of 4 per cent per month, on the unpaid balances of each loan. In relation to the claims, there is no dispute about at least these matters: Tcpt, 4 November 2019, p 1(30) – p 2(14), p 6(30-31).

2. Although it was not disputed that the second Defendant was one borrower in respect of each loan (Tcpt, 4 November 2019, p 10(3-10)), the contest relates to the identity of the other parties to each of the two loan agreements, respectively, that is by, and to, whom the loan monies were advanced and what the terms of repayment of each loan were.

3. Also for determination by the Court are the defences of the full repayment of the loans (in 2016 and 2017). This will involve the Court is satisfied that the amounts said to have been repaid, were repaid, by the Defendants, to any of the Plaintiffs or at the direction of one of them.

4. There is also a question concerning whether there was an accord and satisfaction, which is said to have occurred in February 2017, between the third Plaintiff and the second Defendant.

5. The Plaintiffs have calculated the amount that is said to remain owing, taking into account amounts that they accepted, prior to the hearing, had been repaid. In the calculations, they attributed all of the amounts that they accept were repaid to unpaid interest: Tcpt, 4 November 2019, p 7(36-44). There is a question, then, about their calculations, but neither of the Defendants made any submissions, in writing, or orally, about this question. It will be necessary for calculations to be done to determine the amount for which judgment is to be entered following these reasons being published.

6. Initially, there were also questions involving whether a valid equitable charge was created over real property owned by the first Defendant, which was said to have been given by way of security for repayment of the loan of $375,000 and whether the absence of writing defeats any such claim to an equitable charge. However, in the Plaintiffs’ written outline of submissions, it was made clear that the Plaintiffs did not press the claim for an equitable charge, or other caveatable interest, over real property. It follows that this part of the Plaintiffs’ claim will be dismissed.

7. There is also an amended Cross-Claim, filed on 18 April 2019, brought by the second Defendant, against the third Plaintiff, in which he seeks recovery of $115,600, being the total of 16 advances said to have been made between about February 2017 and August 2017, to the third Plaintiff, or on his behalf, together with interest and costs. All of the advances said to have been made by the second Defendant are disputed by the third Plaintiff. The Court will need to be satisfied that the amounts said to have been advanced, were advanced by the second Defendant to the third Plaintiff.

8. Rarely nowadays, in the age of extensive data retention, does the Court encounter a claim, particularly a claim for several hundred thousand dollars, based on agreements that are not only oral, but which appear to be unsupported, for the most part, by contemporaneous documentary records such as letters, emails, text messages, or diary entries. This is one such case. Any documents that do exist do not clearly reveal the terms of the agreement for each loan, the repayments that were made, or, in the case of the Cross-Claim, the advances that were made.

9. For example, there are some text messages passing between the third Plaintiff and the second Defendant and others that are relied upon but these are well after some of the events that are the subject of the claims, and there is also some dispute about the meaning of these text messages.

10. There are some bank statements that are said (by the Defendants) to demonstrate the repayments that were made, but these are said (by the Plaintiffs) to not establish such repayments. They submit that they simply record withdrawals from the bank account identified, but do not show amounts being paid to the Plaintiffs, or one of them, or as directed.

11. There is one document, dated 16 May 2017 (“the May 2017 document”), signed by the third Plaintiff and the second Defendant, to which I shall refer (Ex. TB1/501). Whilst it is admitted that this document was signed, its real purpose, and the reason why it was signed, are in dispute between the parties.

12. To make matters even a little more complicated, the two Defendants, who are now estranged wife and husband, are separately represented in the proceeding, although there are no claims by one against the other. The precise financial relationship, if any, between them, at the date of hearing, is not the subject of any evidence. They are said to have been living apart for some time: Tcpt, 4 November 2019, p 4(28-34).

13. Consideration of the credibility of the witnesses called by the parties and the determination where there is dispute of what was said and their evidence otherwise, particularly in relation to the relevant transactions, will be very important.

Procedural History

14. I shall after introduction, hereafter, without undue familiarity or disrespect, refer to the natural parties, by her, or his, first name respectively.

15. The proceeding, initially, was commenced by Summons filed in Court on 22 December 2017, in which there were two Plaintiffs named. It first came before Ball J, as the Vacation Duty Judge, who upon the undertaking of the Plaintiffs to pay the filing fees, granted them leave to file the Summons and an affidavit of the first Plaintiff in Court; abridged the time for service of the Summons; and made the Summons returnable, before the Vacation Duty Judge, Black J, on 5 January 2018.

16. In the Summons, the first Plaintiff was Patricia Volonakis and the second Plaintiff was MPPA Pty Limited (“MPPA”), a company said to be controlled by her. The only Defendant named in the Summons was Ivancica Erceg. (Throughout the course of the hearing, and in the evidence, Ivancica was also referred to as “Ivana”. She will be referred to by either first name.)

17. The relief claimed in the Summons included an order for the extension of the operation of a caveat lodged on a property, situated at Darook Park Road, Cronulla (“the Cronulla property”), which is owned solely by Ivancica; alternatively, the grant of leave to file a further, or additional, caveat on the title to the Cronulla property; an injunction to restrain Ivancica from disposing of her interest in the Cronulla property; a declaration that her interest in the Cronulla property was subject to an equitable charge in favour of Patricia in respect of the loans that had been made; a claim for judgment for the outstanding balance of the loans and interest; and an order for the appointment of trustees for sale, the sale of the Cronulla property and the payment out of the proceeds of sale, of the judgment amount, to Patricia and MPPA.

18. On 5 January 2018, Black J, as the Vacation Duty Judge, made various orders, by agreement of the parties, including that the matter proceed by way of pleadings.

19. On 31 January 2018, Patricia and MPPA filed a Statement of Claim (that was not the final version of the pleading relied upon) joining the second Defendant, Walter Erceg, the now estranged husband of Ivancica. Patricia and MPPA maintained the claims for the declarations as to the Cronulla property being subject to an equitable charge, and sought judgment for the amount of $768,200, together with interest thereon, accruing at the rate of $29,200 per month, from the date of the filing of the Summons. They also sought an order for the judicial sale of the Cronulla property.

20. On 6 February 2018, Ivancica and Walter filed a joint defence to the Statement of Claim.

21. Patricia and MPPA filed and served a Reply on or about 18 February 2018. The Reply was not referred to at the hearing.

22. On 24 July 2018, Patricia and MPPA filed an amended Statement of Claim in which not all the claims for relief were repeated. In addition, Michael Volonakis, the husband of the first Plaintiff, was joined as the third Plaintiff. The amended Statement of Claim sought judgment in the amount of $759,720, as at 31 January 2018, and interest accruing at $29,220 per month thereafter. (It seems from the whole of the evidence that Michael was the person who had the discussions about the two loans with Walter. The role each played is discussed, in more detail, later in these reasons.)

23. On 10 August 2018, Walter filed a Defence to the Amended Statement of Claim.

24. Each of Ivancica and Walter, subsequently, filed a separate amended Defence to the amended Statement of Claim. In that amended Defence, filed in Court on 8 May 2019, Ivancica asserted that she did not participate in any of the conversations that took place between Michael and Walter; that she did not authorise Walter to act on her behalf, or to make any representations, or statements, to Michael, on her behalf, concerning the proposed purchase of the Cronulla property, or to make any loan agreement, on her behalf, with any of the Plaintiffs.

25. On 8 April 2019, Registrar Walton listed the proceeding for hearing, commencing on 4 November 2019, with an estimated duration of 3 days.

26. In the amended Defence, filed on 18 April 2019, by Walter, he admitted that he had a conversation with Michael about borrowing $375,000 which was to attract an interest rate of 4 per cent per month; that, in April 2016, he had asked Michael to lend a further $100,000, and that interest on that loan was also to be charged at 4 per cent per month, in respect of each loan. He asserted that neither agreement of loan was evidenced in writing and that no security was to be given.

27. Walter asserted that the loan amounts had been repaid, in full, to Michael, or at Michael’s direction, and that Michael had signed a document dated 16 May 2017, acknowledging that the loans had been repaid. (As I have stated, the circumstances in, and the purpose for, which, the May 2017 document was signed are in dispute between the parties.)

28. Walter filed an amended Cross-Claim on 18 April 2019 in which he sought judgment for $115,600, together with interest and costs. In the Cross-Claim, he asserted that after about 24 February 2017, Michael had requested him to make certain advances to him, or to Francesco Masci (hereafter called “Frank”), who was a close friend of Patricia and Michael, and who was also a friend of Walter.

29. No part of either amended Defence, or the amended Cross-Claim, referred to, or sought relief under, the Contracts Review Act 1980 (NSW), upon the basis that the interest provision of 4 per cent per month (or 48 per cent per annum) was unjust “in the circumstances relating to the time at which it was made” (s 7 of the Act) by reason of it being “unconscionable, harsh or oppressive” (s 4 of the Act).

30. Michael filed a defence to the amended Cross-Claim on 26 April 2019. He admitted a number of payments made by Walter but said that they related to the two loans to which reference has been made. Mostly, he denied the claims made on behalf of Walter.

31. Every opportunity was given to the parties to resolve their disputes, as it was clear that the costs of the proceedings were likely to exceed the principal amounts in dispute between them. Other matters were also raised in the affidavits, and at the hearing, that must have caused some distress to one, or more, of the parties. However, those efforts proved futile. It will be necessary, in due course, to consider how the burden of the costs of the proceedings should be borne.

The Hearing

32. The hearing of the proceedings commenced on 4 November 2019 and concluded three days later. Mr S Lawrance, with Mr A Jordan, of counsel appeared for the Plaintiffs; Mr J Ireland QC, now a solicitor, appeared for the first Defendant; and Mr M Southwick of counsel appeared for the second Defendant.

33. The witnesses called on behalf of the Plaintiffs were Patricia, Michael, and Frank. They had known each other for many years. Each was cross-examined.

34. Although Ivancica had sworn two affidavits, neither of those affidavits was read at the hearing. The Plaintiffs’ counsel were informed that the affidavits would not be read by Mr Ireland QC only shortly before the commencement of the hearing: Tcpt, 4 November 2019, p 26(23-26). It will be necessary to return to the consequences, if any, that flow from the failure to read the affidavits of Ivancica, which had been served.

35. Then, only Walter was cross-examined. He had stated that he intended to rely upon material served by Ivancica. Since he, also, chose not to read Ivancica’s affidavits, there was no material from her upon which he could rely.

36. For the most part, directions that had been made for the preparation of the hearing, the provision of a tender bundle of documents (tendered as Ex. TB1), a Court Book, and the service of a written outline of submissions, were complied with. In addition, the legal representatives conducted the hearing with ss 56 to 60 of the Civil Procedure Act 2005 (NSW) in mind. I am grateful to the legal representatives of the parties for the manner in which the case was prepared and presented.

Some established facts

37. It is convenient, next, to recite certain salient facts that were not in issue, or which I find to have been established on the balance of probabilities.

38. Patricia and Michael, the first and the third Plaintiff, respectively, are wife and husband.

39. MPPA is a company that traded as GTS Logistics. It was registered as an Australian Proprietary Company, limited by shares, in New South Wales, on 28 May 2009. Between that date and 11 February 2013, its corporate name was GTS Logistics Pty Limited: Ex. TB1/273-277.

40. MPPA is a transport company used in the business with which Michael worked. It transported shipping containers from Port Botany to other parts of New South Wales: Tcpt, 4 November 2019, p 72(15-29).

41. Between 28 May 2009 and 22 August 2011, Frank was the sole director, secretary, and shareholder of, and in, MPPA. Since then, Patricia has been the sole director and secretary of, and the shareholder in, MPPA, having been appointed on that date. (The circumstances surrounding transfer of the ownership of MPPA from Frank to Patricia were not explored in detail in the evidence.)

37. Patricia performed some accounting work for MPPA under the overall supervision of the company’s accountant. It seems that Michael, in the past, exercised some influence over the management of MPPA even though he was not a director.

38. In about August 2010, Patricia and Michael had some financial difficulties. They each entered into a personal insolvency agreement, at about that time, the details of which were not in evidence.

39. Ivancica and Walter, respectively, are wife and husband (although they are now estranged).

40. Patricia met Ivancica in “around late 2015”: Tcpt, 4 October 2019, p 41(18-19). They would see each other, sometimes, on weekends, but, generally, not during the week. She knew that Michael and Walter were good friends, they having met through a mutual friend. She knew that they did not have a business association: Tcpt, 4 October 2019, p 49(43) – p 50(28).

41. Patricia and Ivancica were friends, but they did not see each other as much as Walter and Michael did.

42. Before the events that resulted in the dispute between them, Michael and Walter were genuinely close friends. They would socialise together and see quite a lot of each other. It is clear that they enjoyed each other's company. There is no evidence of them having done any business together. Some of the evidence reveals that each trusted the other with private personal information. Walter admitted that he regarded both Patricia and Michael as very close friends. (These matters are, or may be, relevant to the status of the parties and their relationship to one another.)

43. In September 2015, Michael had been told by Walter that he had "invested some money in a company which gives me 7% interest a month. It's a foreign exchange company called Courtenay House. If you invest money in my account I can give you 4% interest per month." The entity referred to was, in fact, Courtenay House Capital Trading Group Pty Ltd (“Courtenay House”).

44. At about the same time, either Michael, or Walter, told Frank about Courtenay House. (There is a dispute about who told Frank, but nothing turns on the determination of that factual dispute.)

45. Frank gave written evidence that, in September 2015, he requested Michael to invest $200,000 “in Courtenay House through Walter” and Michael had agreed to do so, having requested Frank to send the money to the bank account of MPPA. Michael agreed that the amount, which had been deposited into MPPA’s bank account, was for investment with Courtenay House.

46. (Although bank records show that the amount of $200,000 came out of the account of Luciana Masci, Frank’s mother, the whole of this amount was said, by Frank, to be his money. Nothing really turns on this but it is discussed, in more detail, later in these reasons.)

47. In October and November 2015, there were discussions between Michael and Walter, in which Walter asked Michael to assist with the payment of the deposit of 10 per cent ($825,000) for the purchase of the Cronulla property by Ivancica, by making a loan of $375,000. There is some dispute about the conversations, so it will be necessary to return to the precise evidence of each of the witnesses on this topic later in these reasons. However, as stated, there was no dispute that there had been a loan of that amount.

48. Following his discussions with Walter, Michael arranged for a bank cheque, for $375,000, to be drawn, by Patricia, from the Business Cheque Account of MPPA (which account was shown to be conducted in the name of GTS Logistics Pty Limited) (Ex. TB1/233), in favour of the vendors of the Cronulla property. Both Ivancica and Walter admitted that the bank cheque had been given by Michael to Walter on 11 November 2015. That is the date on which the contracts for the purchase of the Cronulla property were exchanged: Ex. TB1/426. The bank cheque was used in part payment of the deposit for the purchase of the Cronulla property, which was purchased in Ivancica’s sole name: Ex. TB1/361.

49. The bank cheque was presented for payment by the vendors of the Cronulla property and was accounted, for Ivancica’s benefit, as part of the payment of the purchase price of the Cronulla property: Ex. TB1/272.

50. As will be clear, the amount of $375,000 was only part of the total deposit required to be paid on the exchange of contracts. How the balance of the deposit was paid by Ivancica was not the subject of evidence.

51. Ivancica played no role in the negotiations to borrow $375,000, but there can be little doubt that she would have been aware of what was occurring. Walter gave evidence that he had told her: Tcpt, 5 November 2019, p 152(43-48). As her evidence was not read, it must be inferred that she did not dispute this evidence.

52. The source of the amount of $375,000 (perhaps, other than it came from Michael and Patricia) was not known to Ivancica, or Walter, at the time the bank cheque was obtained. There is no evidence that Michael represented MPPA, or Patricia, in the discussions that he had with Walter. Michael did agree that he repeated the details of the conversation to Patricia.

53. Of the amount of $375,000 that was loaned, $200,000 had been transferred into the bank account of MPPA, on 29 September 2015, from an account in the name of Luciana (Ex. TB1/229). The balance ($175,000) was “savings and profit from the [MPPA’s] business”: Tcpt, 4 November 2019, p 46(47-50). Patricia also described the balance as “our money that we had saved to buy our own family home and we’d lent that to them to use temporarily for the deposit of their home”: Tcpt, 4 November 2019, p 54(26-34).

54. There had been no discussions between Patricia and Frank, or Patricia and Luciana, at any time prior to the deposit into MPPA’s bank account, or at all. Patricia gave oral evidence that she did not know the reason for the payment of $200,000 into MPPA’s account, or the terms of the deposit: Tcpt, 4 November 2019, p 54(49) – p 53(1), p 60(9-16).

55. Patricia gave evidence that she did not record the amount of $200,000 transferred into MPPA’s bank account as a loan, or otherwise, in the financial records of the company: Tcpt, 4 November 2019, p 52(42-43).

56. The amount of $200,000 remained in the bank account of MPPA between 29 September 2015 and about 11 November 2015. During this period, no interest was paid to Frank or Luciana: Tcpt, 4 November 2019, p 53(7-13).

57. Prior to it being withdrawn from MPPA’s bank account, Michael admitted that he did not seek, or obtain, Frank’s consent to use the amount of $200,000 to assist in enabling the payment of part of the deposit on the Cronulla property: Tcpt, 4 November 2019, p 85(12-44). Frank corroborated this evidence: Tcpt, 5 November 2019, p 133(46) p 134(2), but went on to say that had his consent been sought, he would probably have given it: Tcpt, 5 November 2019, p 134(4-36).

58. There was no contemporaneous written record, passing between any of the parties, of the loan of $375,000, the person or persons to, or by, whom, or which, the loan was made, the terms upon which the bank cheque for $375,000 was provided, or precisely when it was to be repaid. However, it was agreed, at least between Michael and Walter, that the interest that was to be paid was 4 per cent per month, which was to be paid monthly. When asked when the amount borrowed would be repaid, Walter said that it would be repaid in about 9 to 12 months.

59. Michael gave this evidence in his affidavit of 22 November 2018, at par 12. He confirmed the evidence at Tcpt, 4 November 2019, p 101(21-31). He agreed that there was a subsequent conversation, in which Walter had said that “effectively, by that stage, the Ercegs would have sorted out their finances and sold the existing home and bought the new one” and that the loan would be repaid when the sale was completed, that is in February 2017: Tcpt, 4 November 2019, p 101(37) – p 102(18).

60. Frank gave written evidence that, in December 2015, he requested Michael to invest another $100,000 in Courtenay House. Michael confirmed that he could do so and he asked Frank to deposit that amount “in the company’s account”. Subsequently, on 23 December 2015, that amount was deposited into MPPA’s bank account. It was paid to Courtenay House on 30 December 2015: Ex. TB1/235.

61. The amount of $100,000 also came from Luciana’s bank account: Ex. TB1/237. Frank gave evidence that this amount was Luciana’s, not his, money: Tcpt, 5 November 2019, p 135(8-13).

62. Patricia was aware that the $100,000 that had been deposited was from Luciana’s account. However, she had no conversation with Luciana, or with Frank, about the reasons for the deposit into the MPPA bank account. Michael, however, told her that “they wanted us to transfer it to Courtenay House to invest”: Tcpt, 4 November 2019, p 60(22-31).

63. In April 2016, there were further conversations between Michael and Walter, which resulted in Michael arranging to loan an amount of $100,000 on the same terms as the previous loan that had been made.

64. In an email dated 6 April 2016, Michael wrote to a representative of Courtenay House, David Sip, in the following terms (Ex. 2D1):

“As per our conversation this morning followed on from last night I urgently require my $100k withdrawn from your trading account and transferred to my account, details are as follows…

As discussed this is an emergency situation and I have $30,000 of deposit at risk so please arrange a transfer tomorrow so the funds are available and clear on Friday.

Thank you in advance for your assistance in this most urgent matter.”

70. The “details” provided in the email were the bank details of MPPA.

71. The amount of $100,000 is shown as a credit in MPPA’s bank account on 8 April 2016. Patricia could not recall whether she had recorded the amount in the books and records of MPPA: Tcpt, 4 November 2019, p 55(19-23).

72. Michael then requested Patricia to transfer $100,000 to a bank account nominated by Walter, which she did. Between 11 and 18 April 2016, five payments, each of $20,000, were made from MPPA’s bank account to a bank account in the names of Rita and Natasha Herceg: Ex. TB1/236; Ex. TB1/330-340. (I shall return to the evidence about this topic when I deal with the credibility of Walter.)

73. The Hercegs were friends of Ivancica and Walter.

74. There was no contemporaneous written record made of the loan of $100,000, the terms upon which the amount was loaned, or precisely when this amount was to be repaid. However, it was not in dispute, at least between Michael and Walter, that the interest that was to be paid was 4 per cent per month, which interest was to be paid monthly. When asked when the amount borrowed would be repaid, Walter said that it would be in about 9 to 12 months. I am satisfied that Walter and Michael agreed that the loan would be repaid in about February 2017.

75. Michael did not obtain the consent of Luciana, or of Frank, to withdraw the amount from Courtenay House, or to lend that amount to Walter and/or Ivancica prior to that being done.

76. (Much was made of the failure by the Plaintiffs to obtain the consent of both Frank and Luciana. However, in my view, nothing turns on this, as it is clear that Frank came to know of the two transactions and did not make any complaint about either.)

77. In addition, between November 2015 and April 2016, Michael told Walter that $200,000 of the amount of $375,000 had come from Frank: Tcpt, 5 November 2019, p 182(5-25). It is likely to have been closer to November 2015, because it was accepted, at the hearing, that Walter paid interest that was due, between December 2015 and April 2016 to Frank: Tcpt 5 November 2019 p 182(31-46). Walter gave evidence that Michael had directed him to pay these amounts directly to Frank.

78. It was accepted by counsel for Ivancica that the amounts paid in that period could only have been referable to the amount of $200,000, provided by Frank which formed part of the loan of $375,000 made in November 2015: Tcpt 5 November 2019 p 144(41-45).

79. Furthermore, Michael admitted that he, or MPPA, was obliged to repay to Frank the money that had been put into MPPA’s account, to the extent that it had not been repaid by Walter: Tcpt, 4 November 2019, p 100(15-38).

80. On 3 August 2016, the purchase of the Cronulla property, by Ivancica, was completed, and the title to that property was registered in her name: Ex. TB1/405.

81. In 2016, four payments were made to Frank by Walter. The amounts repaid were $9,000 (on 5 August 2016), $20,000 (on 14 October 2016), $40,000 (on 10 November 2016 apparently paid to “Kalkallo”, which appears to have been a reference to Kalkallo Transport Pty Limited: Ex. TB1/439) and $8,500 (on 6 or 7 December 2016). (Whilst these payments are admitted, the purpose of the payment of $40,000 is in dispute.)

82. (Kalkallo Transport Pty Limited is an Australian proprietary company limited by shares. Frank was the sole director and shareholder of this company: Ex. TB1/550-558.)

83. Frank received $12,000 on 17 May 2016, $9,000 on 7 July 2016, $9,000 on 5 August 2016, $10,000 on 7 October 2016, $20,000 on 14 October 2016, $8,500 on 7 December 2016, $7,500 on 5 January 2017, $7,500 on 6 February 2017, $7,500 on 20 March 2017, $7,500 on 10 April 2017, $7,500 on 7 June 2017, $6,000 on 8 July 2017 and $12,000 on 15 August 2017.

84. Frank’s bank records reveal that deposits were made by either Ivancica, or Walter, on each of those dates, with the exception of the deposit made on 14 October 2016. The deposit made on 14 October 2016 was simply referred to as “Chq” (presumably “cheque”) in the “transaction details” section of the bank record, with neither Ivancica, Walter, nor any other drawer of the cheque identified: Affidavit, Francesco Masci, 22 January 2019 at par 14 and Annexure “C”; Ex. TB1/238-40, Ex. TB1/397.

85. (I note that Ex. TB1 does not include the final page of bank records referred to as Annexure “C”, p 9, in the affidavit of Francesco Masci made 22 January 2019, perhaps in error, as the contents of that page were not objected to and were otherwise read in the proceeding. I have, therefore, made reference to those bank transactions.)

86. In oral submissions, on the final day of the hearing, leading counsel for the Plaintiffs accepted that the amounts referred to above had been paid by Walter to Frank and that they were payments made at the direction of the Plaintiffs. Leading counsel also accepted that there had been a payment of the amount that had been referred to in par 10 of Frank’s affidavit made 22 January 2019 ($40,000, received by way of cheque in November 2016) “in reduction of the Volonakis loan”: Tcpt, 6 November 2019, p 221(38-44). However, he did not accept that another payment of $40,000 had been made on 17 May 2017, stating “the payment of $40,000 on 17 May 2017 which is para 14(l) [of Frank’s affidavit made 22 January 2019, to which reference has been made] that’s the odd one out”: Tcpt, 6 November 2019, p 221(38-49).

87. By Transfer dated 15 February 2017, Ivancica sold a property that she owned in Grand View Parade, Caringbah South for $3,309,000. It had been the family home of Ivancica and Walter.

88. On 14 or 15 February 2017, an amount of $38,000 was paid into the account of MPPA. On 20 February 2017, an additional amount of $54,000 was paid into that account. On 24 February 2017, a further amount of $108,000 was paid into that account: Ex. TB1/244. There is no dispute that these amounts were paid by Walter. The source of the amounts paid is not known.

89. On 28 February 2017, an additional amount of $8,500, in cash was made to Michael by Walter: Tcpt, 4 November 2019, p 3(17-37).

90. During oral submissions, it was accepted by leading counsel that the amount of $380,500 had been repaid: see Tcpt, 6 November 2019, p 222(50) and par 6(a) of counsel for the Plaintiffs’ written submissions. However, in their written final submissions, counsel for the Plaintiffs accepted that payments totalling $410,000 had been repaid either to the Plaintiffs, or on their behalf, to Frank. This also appears to have been accepted at Tcpt, 6 November 2019, p 222-223.

91. In Frank’s affidavit made 22 January 2019, to which reference has already been made, he also wrote that he had had a conversation in November 2016 during which time he said “Walter, I need $40,000 to fix my truck. Can you return $40,000 to me from the money I gave you the other day?” and that Walter had provided him with a cheque for that amount in November 2016.

92. Frank gave evidence in his affidavit, at par 12, that on 28 April 2017, he had deposited $136,000 into Walter’s bank account “to be invested into Courtney [sic] house”, and on or about 26 May 2017, had handed Walter a cheque for $54,000 to be invested into Courtenay House. Those amounts appear, on those dates, in Walter’s bank transactions for that period: Ex. TB1/386.

93. In October 2017, Patricia lodged a caveat on the title to the Cronulla property: Ex TB1/261-262. The proceeding was commenced, urgently, as a lapsing notice of the caveat had been issued. On 5 January 2018, this caveat was removed.

94. Another caveat was lodged on 7 February 2018: Ex. TB1/313-314. In this caveat, the interest claimed was “an equitable interest in the lands pursuant to a charge for the principal sum of $475,000 together with all interest payable, and totalling $768,000 as is particularised in the statement of claim filed by the Caveator as Plaintiff …on 31 January 2017”. Notice of this caveat was given by letter dated 9 February 2018 from the NSW Land Registry Services. The second caveat has also been removed from the title to the Cronulla property.

The document dated 16 May 2017

95. Before dealing with the evidence of the loans, the repayments and the advances, I shall deal with the May 2017 document upon which Walter and Ivancica relied as evidence that the whole of the two loans had been repaid.

96. The document dated 16 May 2017 was headed “Erceg Borrowings from Volonakis”, and was in the following terms (at Ex. TB1/501):

“Walter Erceg borrowed $375,000 originally and borrowed a further $100,000 making a total of $475,000.

For the use of this money an interest rate was paid to the Volonakis’ over a period of 15 months.

The total loan of $475,000 was paid back in full over a period of 2 weeks in the month of February 2017.”

97. The document was signed by Michael and Walter.

98. As stated earlier, the circumstances surrounding the creation, and the execution, of the May 2017 document are the subject of dispute. However, on the present undisputed evidence, it is clear that the fact stated in the last sentence was inaccurate as $475,000 was not repaid “over a period of 2 weeks in the month of February 2017”. (Indeed $410,000, which is the total amount that the Plaintiffs admit was repaid, was repaid between December 2015 and August 2017.)

99. Michael’s written evidence on this topic is as follows:

“27   On about 16 May 2017, I signed a receipt provided to me by Walter Erceg following a discussion with Walter …. Walter attended my office on about 16 May 2017 and said to me words to the following effect:

‘My wife and I are on bad terms because of the financial issues we’re having. She found out that I haven’t paid back the money I borrowed from you and she’s threatened to leave me. I don’t know what else to do. Can you please sign this receipt so that I can show her and tell her that I don’t owe you any money? She said if I don’t come home with this receipt signed that she will kick me out. I need you to help me out.

Please sign the receipt to help me out.’

28   Walter asked me to sign the receipt and I signed it, to assist him in his marriage.

29   I did not tell Patricia, (my wife), that I was signing the receipt. The entire loan balance was not repaid as stated in the receipt, and never has been paid in the month of February 2017, or at all.

30   I would not have signed the receipt if I knew that Walter would later seek to rely upon it to assert repayment of the loan and interest concerning the loan.”

100. Michael repeated this evidence in his second affidavit sworn 22 November 2018 at pars 39 to 41.

100. Michael’s oral evidence on this topic was as follows at Tcpt, 4 November 2019, p 109(16) – p 110(30):

“Q. If I could take you to paragraph 39 of your affidavit? That’s a discussion you say occurred on about 16 May 2017?

A. On 16 May, yes.

Q. And that after the February payments of $208,500 were made?

A. Yes.

Q. Mr Erceg told you his wife and he were on bad terms?

A. Correct.

Q. That wasn’t particularly news to you, was it?

A. To the extent of she was going to kick him out, yeah, that part, that, to that extent that was news.

Q. To that extent it was news?

A. Yeah.

Q. You knew that if you signed that document that it appeared to say that you’d been paid in full for the loan?

A. No, I signed that document because I had a, a, what I considered a close friend come in extremely distraught, extremely desperate, scared for his marriage, and asking me basically to sign it.

Q. So the purpose of the document was to mislead Mr Erceg’s wife as to whether there was any money outstanding?

A. Yes, yes, if you want to put it on that path, yes, that’s correct.

Q. You happily co-operated in trying to mislead her?

A. Happily is probably not the right word. Grudgingly perhaps but I did it.

Q. But you did it.

A. Yes.

Q. You kept that document secret from your wife?

A. Yes, I did.

Q. You kept it secret from your wife until after these proceedings were commenced?

A. Yeah, about that time, for about that time.

Q. You didn’t think it was important to tell your wife that?

A. No, because I didn’t think, again, that this, that document would be put up against me the way it has been. That’s not, for my, for what I saw at the time, that wasn’t the purpose of that document.

Q. What about Mr Masci? Did you tell him that you’d signed this document?

A. No.

Q. So--

A. I never considered it as what it’s being deemed as today.

Q. Well, you’re a business person, aren’t you?

A. Yeah, I’m also a, a very good friend. Perhaps gullible but at least a very good friend.

Q. But by May of 2017, you on your case had received very small amount of the money that was owed to you or the company.

A. Correct.

Q. But nevertheless you signed this document?

A. Nevertheless.

Q. See, what I’d suggest to you is you signed that document because the debt had been settled.

A. I can understand why you say that but it’s not correct.”

102. From this evidence, it is the Plaintiffs’ case that the document was not what it purported to be; that it had been created by Walter for the purpose of quelling the fears of Ivancica and to reassure her that she and Walter were not in financial difficulty; and that it was not intended to be relied upon in relation to the loans that had been made.

103. Walter’s written evidence on this topic was as follows:

“17.   In May 2017 my wife expressed a concern to me:

I Erceg:   ‘Walter I am concerned that if something happens to me I have no proof you repaid the loan to Michael Volonakis’

18.   I spoke to Michael Volonakis

W Erceg:   ‘Hey buddy my wife wants a receipt for the payment of the loan. Can you sign this?’

I handed him four copies of a draft receipt one for him, one for Patricia, one for myself and one for Ivancica.

M Volonakis:   ‘No worries’.

He proceeded to sign all four copies in my presence. I also signed the documents.”

104. Walter’s oral evidence on this topic was at Tcpt, 5 November 2019, p 213(3) – p 214(1):

“Q. In May 2017, you had conversations with Ivana in which she expressed concern about her liability in respect of the money that had been lent to the Volanakis'?

A. We did. We did have a conversation. But she didn’t say it was a liability. She just said didn’t you know, there’s no - there’s nothing in writing to prove that, that I paid the loan, that I paid the moneys out.

Q. You went to Michael Volonakis’ office at South Strathfield and you took this document with you?

A. Yes, I did.

Q. When you got there, you were distraught?

A. No.

Q. What you said to him was that you and Ivana were on bad terms because of financial issues that you were having, do you agree with that?

A. No.

Q. You said that she had found out that you hadn't paid back the money that had been borrowed and had threatened to leave you?

A. No.

Q. You asked him to sign the receipt so that you could show it to her and tell her that you didn’t owe the Volanakis' any money?

A. No.

Q. You said that if you didn’t come home with the receipt signed, she was going kick you out?

A. No.

Q. Mr Volonakis then signed the receipt that’s at page 501?

A. Yes, he signed. That was - I, I, I, I came there with four sheets.

Q. I’m sorry I missed that?

A. I came there with four identical sheets.

Q. Yes, Mrs Erceg was anxious, as you understood it, to have a sheet herself, to have a copy herself?

A. No, no, we just wanted everyone to have a copy.

Q. But you understood that Mrs Erceg wanted to have a copy?

A. Yeah, of course. Both our copies sit in the safe at home, Ivana’s and mine.”

105. There was no evidence, from Ivancica, corroborating Walter’s version of the events and the two original documents that were, supposedly, returned to them, and which were held “in the safe at home” were not produced to the Court.

106. In the written submissions made on behalf of Walter, counsel described this document as a “release”. At the commencement of the hearing, counsel for the Plaintiffs submitted that “that case has not been pleaded and it’s not open to him in any event, it wouldn’t be a very good case”: Tcpt, 4 November 2019, p 5(34-37).

107. Presumably, the reference to “that case has not been pleaded” was a reference to Uniform Civil Procedure Rules 2005 (NSW), rr 14.14(2) and 14.14(3), which, relevantly, provide that one of the matters that must be pleaded specifically, in a defence is “release”.

108. No application was made to further amend the defence of either Defendant. In these circumstances, and as none of the amended defences comply with the requirements of UCPR r 14.14(3), I do not propose to consider the document as a “release” as it was not pleaded as such.

109. In the final written submissions made by counsel for Walter, the document was described as a “Receipt/Acknowledgement”. It was submitted that:

“the Court is entitled to treat the admission contained in that document at face value. If 2 businessmen sign a formal document with obvious commercial effect the court should not lightly go behind the document in the absence of one of the recognised category of defence. The debt & interest were repaid.

The document was signed by Michael Volonakis the person with whom W Erceg had all his dealings with respect to this transaction. There is no suggestion that Mr Volonakis did not understand the significance of the document. He was a business man and manager for Swift Pty Ltd and his admissions clearly indicate he knew the significance of the document. He was the principle [sic] contact Walter Erceg had all dealings with respect to the loan.”

110. The Plaintiffs also contended that the May 2017 document was factually wrong and that the loans had not been repaid then, and have still not been repaid in full.

111. For reasons to which I shall come, I accept Michael’s evidence on this topic in preference to Walter’s. I am not satisfied that the May 2017 document was intended by Michael and Walter to evidence the repayment of the whole of the debt and interest. On the evidence, I find that it was brought into existence to serve some purpose other than that of constituting a receipt or acknowledgement of the repayment of both loans.

112. Nor am I satisfied, for reasons to which I shall come, that the whole of the two loans, had been repaid.

Some of the text messages

113. There were a large number of electronic messages between Michael’s and Walter’s, and Walter’s and Frank’s, mobile telephone devices, which formed part of the evidence. It is only necessary to refer to a few of them.

114. Exhibit A set out the following text message exchanges between Michael and Walter (with editorial corrections for ease of reading).

“…

Wednesday, 17 May 2017

Walter 12:14 am:    Call me please

Michael 12:25am:    What’s up

Walter:       Anthony is at your place waiting for the money

Where are you

Michael 12:29am:    Home

Walter 12:29am:   Can you call Anthony

Michael 12:29   am:   He’s here now

Chill

Walter 12:30am:   Ok I am chilling but he called me that he can’t find you

Michael 12:30am:   Did you think I ran off

Walter 12:31am:   No he was calling me

Walter 12:32pm:   I have just been to the bank the money will be in Frank’s account just after 2 o’clock

Michael 12:33pm   Thanks.

CBA account?

Walter 12:34pm:   Yes

Michael 12:36pm:   Excellent

Come over

Walter 5:06pm:   I am going past Beverly Hills

Michael 5:19pm:   [thumbs up emoji]

Walter 8:02pm:   Call me when you can

Michael 8:16pm:   Will do

Walter   Can you talk

[time indecipherable]:

…

[undated]

Michael 9:10pm:   Can you send me the photos of the spending log please

Walter 9:12pm:   I will buddy, just at Father Tom’s

Friday, 16 June 2017

Michael 12:11am:    Thanks buddy.

Greatly appreciated.

Saturday, 17 June 2017

Michael 9:50am:   Your figures are wrong buddy,

Same as they were last ledger.

This needs to be sorted out properly.

Walter 9:55am:   Send me your ledger

Michael 10:01am:   I can’t believe it Walter, seriously.

Walter 10:09am:   Can’t believe what?”

115. Exhibit C included other text message exchanges:

“…

Thursday, 27 April 2017

Michael 8:29am:   Are you up?

Walter 11:53am:   Out back

Walter 12:02pm:   You ready

Michael 12:05pm:   5 mins

Walter 12:05pm:   [image of four lines of white powder on sheet of paper]

Walter 12:17pm:   For you

Walter 12:25pm:    Long 5 minutes

Walter 1:46pm:   BSB ###-###

AcNo ####-####

Walter Erceg

Walter 4:09pm:    Hi

Michael 11:51pm:   You up?

Walter 11:59pm:   Yes

Michael 11:59pm:   Why?

Walter 11:59pm:   Call me

…

Wednesday, 6 May 2017

Michael 6:44pm:   How did you go with the dentist?

Walter 6:45pm:   Can you talk

Michael 6:46pm:   Carefully only

Michael 6:49pm:   I’m with Pat. Do I need to walk out?

Walter 6:49pm:   All is good the lemonade is coming tomorrow

Michael 6:50pm:   Any at all in stock?

…

Wednesday, 17 May 2017

Walter 12:24am:   Call me please

Michael 12:25am:   What’s up

Walter 12:26am:   Anthony is at you [sic] place waiting for the money Where are you

Michael 12:29am:   Home

Walter 12:29am:   Can you call Anthony

Michael 12:29am:   He’s here now

Chill

Walter 12:30am:   Ok I am chilling but he called me that he can’t find you

Michael 12:30am:   Did you think I ran off

Walter 12:31am:   No he was calling me

I have just been to the bank the money will be in Frank’s account just after 2 o’clock

Michael 12:33pm:   Thanks. CBA account ?

Walter 12:34am:   Yes”

116. Exhibit TB1 included a large number text message exchanges. Some of the text messages included in evidence were, at Ex. TB1/434. Some of the dates identified appear in the American date format, beginning with the month and ends with the year (MM/DD/YYYY)):

“Date: 10-26-2016 15:12

Michael:   Please call urgently I need a credit card with $500 on it right now please

Date: 10-26-2016 17:13

Michael:   Frank paid bud?

Date: 10-26-2016 17:46

Michael:   ??

Date: 10-26-2016 18:57

Michael:   Come on bud…

Date: 10-26-2016 19:05

Walter:   I am going to Rossco’s house now

Date: 10-26-2016 20:48

Michael:   Give me good news Mr E….

Date: 10-27-2016 10:50

Michael:   Call me pls urgent

Date: 10-27-2016 10:51

Walter:   5 min”

117. At Ex. TB1/465-469:

“05-23-2017 08:57

Michael:    Hey can you pick up $3k today and come around later thi morning Mr E?

05-23-2017 13:28

Michael:    If you have a spare can of lemonade bring along

Please”

…

05-24-2017 22:10

Michael:    Call me in the morning please Mr E.

05-24-2017 22:13

Michael:    Ok will do.

06-06-2017 09:45

[two missed calls from Michael]

06-06-2017 10:40

[missed call from Michael]

06-06-2017 14:38

Walter:   Ivana has transferred Frank’s money for you today he should have it tomorrow. Let him know

06-06-2017 21:50

Michael: Thanks mate

06-06-2017 21:50

[missed call from Michael]

Michael:   Did you get to the bank for me. Drivers are waiting on it now

06-10-2017 13:51

Michael:   YOU ALIVE BROTHER?

06-10-2017 15:35

[missed call from Michael]

06-11-2017 15:18

[missed call from Michael]

06-13-2017 10:32

[missed call from Michael]

06-13-2017 11:02

[missed call from Michael]

Michael:   Call me without fail fuck ya

06-13-2017 11:09

[missed call from Michael]

06-13-2017 11:21

[missed call from Michael]

06-13-2017 12:29

Walter:   Can I call you later?

Michael:   Will you?

06-13-2017 13:41

[missed call from Michael]

06-13-2017 13:41

Michael:    I NEED THE CASH I ASKED FOR A WEEK AGO AND I NEED IT NOW CALL ME NOW WALTER…. NOW.”

118. At Ex. TB1/248-259:

“…

Thursday, 6 July 2017

Michael 3:15pm:   Won your battle as yet?

Can you transfer $6k now to Frank please, as in before 5pm latest, and we can chat tomorrow about the difference…..

Michael 5:13pm:   Did you get Frank’s payment of $6k paid today?

Michael 8:41pm:   Why can’t you simply reply to my messages. It is very rude and disrespectful. I don’t deserve that kind of disregard regardless of what you may be going through.

Friday, 7 July 2017

Michael 9:19am:   Just get the $6k to Frank TODAY please and let me know once done.

Saturday, 8 July 2017

Michael 3:02pm:   Man up and call or reply.

Friday, 11 August 2017

Michael 8:25am:   One if [sic] my darkest nights ever and not even a reply. Need $12k to Frank ASAP before he asks for $50k to be withdrawn si [sic] he out a deposit on a run he is buying. Neither of us can afford to put him off side. Please help to avoid it happening to us. Please.

Walter 8:32am:   Sorry buddy I didn’t know what to really reply. Somehow I had trust in you and your strength to get through this. Welcome to my world buddy but I needed to find between $160,000 and $200,000 every month for the past 14 months.

Michael 8:44am:   So basically you’re all good now and I who got you into your house and kept you propped up for 2 years and stood between you and bullets can be discarded, left in the gutter abandoned. Is that who you are Walter, if you don’t help now that I need you then you were never the friend you made out you w...”

119. At Ex. TB1/471-472 (following from the conversation above):

“…

08-11-2017 08:32

Walter:    Sorry buddy I didn’t know what to really reply. Somehow I had trust in you and your strength to get through this. Welcome to my world buddy but I needed to find between $160,000 and $200,000 every month for the past 14 months.

08-11-2017 08:45

Michael:   So basically you’re all good now and I who got you into your house and propped you up for 2 years and stoof between you and bullets can be discarded, left in the gutter abandoned. Is that who you are Walter, if you don’t help now that I need you then you were never the friend you made out you were. $12k a month to spend is not as big a deal for you and all things being equal I can’t believe you’re not willing to hrko [sic] me. Who did you call when your wirkd [sic] collapsed time and time and who was there for you everytime. I need help for a few months, I also have a 25 year friendship at stake, does that not matter to you. This is the last time I ask Walter. If this fucks up Frank will take ut [sic] out in me first and then you and you know that is the case regardless of what you ir I [sic] tell him. Last time, please help.

08-11-2017 08:57

Walter:   Buddy I will call you in 30min

08-11-2017 12:36

Walter:   I haven’t forgotten you all will be good for [sic] Frank

08-11-2017 15:30

Michael:   Good man Good move. Thank you Walter.

…

08-14-2017 15:32

Michael:   Hey buddy I have Frank calling me saying he hasn’t got the funds showing or even pending. Can you check that it was done and not forgotten perhaps. Thanks.

…

08-15-2017 14:10

Michael:   I’m not here and won’t be back today. I am truly exhausted and will see you tomorrow. I have a lot to consider and friendships in the middle of more money that I can think of right now.

08-15-2017 15:38

Walter:   Michael is this the friend who I thought YOU were??? I can’t believe that you feel you have the right or the nerve and audacity to think you’ve done for me more than I’ve done for … who has been there for u time and time again, whether it was money, a boat to use, a friend to run after you from place to place catering to your every whim! How can you throw in my face that you helped me time and time again even after I paid back every cent plus some! How can YOU call yourself a friend? Buddy I haven’t stopped trying to find $200,000 a month… it’s not over for me yet. Had I been able to give you the money I would without even blinking an eye but I can’t and you know this. We all have our issues and we are all in the same boat. I don’t have the money, I can’t go to Ivana even because she doesn’t have the money either. I’ve rang around to see who I can burrow [sic] from and no one is helping me. Michael I’m shaking my head at your words but I know you can’t be thinking straight because of the situation. I know how it feels. I wish I could help but my hands are tied!”

120. At Ex. TB1/248-259:

“…

Monday, 28 August 2017

Walter:    Frank it’s Walter I will call you in 20 min my phone has reset itself, I will call in 20 rest assured

Sunday, 3 September 2017

Frank:   When is my funds going in Walter or do come to your please and pick up my cheque let me know

…

Tuesday, 22 August 2017

Walter 12:08pm:   I need you to call me today also need that money back as I have commitments

Michael 4:29pm:   I am out this afternoon and tonight but will call you early tomorrow morning around 9am. Will talk to you then.

Walter 4:47pm:   I am in court tomorrow from 8:30am until 2pm. I was arrested on Saturday night by the police. I am living at my father [sic] house for know [sic] and possibly for the next few months. I now need your help as you needed mine last week. I am down to my last few dollars and have no way of getting money from anywhere else. I need to get that $12,000 back so I can first and foremost buy food and deposit $6,000 into my barristers [sic] trust account.

Yours sincerely

Walter Erceg

AKA homeless and broke

Monday, 28 August 2017

Walter 5:11pm:   Can you call me please

Walter 6:53pm:   Are you going to call me back or do I call Frank. I do not know what you have told him I assume the truth but I am not sure because Ivana couldn’t explain what you had told her on the phone a few hours ago. Can you call me back asap please.

Walter 7:13pm:   Michael please this is not from you. Yesterday Frank and you came to Cronulla and Woolooware looking for me. I have listened to Frank’s voice messages and he doesn’t sound very happy and was getting frustrated with me for not calling him back. The aggression seems to be directed towards me.

Walter 7:36pm:   It’s not the time to put your head in the sand buddy. I have sent Frank a text message that I will only have a conversation if the three of us are together but I still have to talk to you and ascertain what is the context of the situation here. Please call me asap buddy.

Michael 7:44pm:   I am with clients

Frank knows everything

Just call him like you said earlier

Walter 7:50pm:   By everything you mean what I don’t understand.

Can you please step out for two minutes and explain the everything because I am not walking into a shit fight after he has heard your explanation first.

Michael:   I’m working and not stepping out but if you need it explained answer your phone tomorrow morning. You can then call Frank afterwards if you prefer

Wednesday, 30 August 2017

Walter 11:53am:   Good day buddy can you please come past my place today some time as we have a lot to talk about

Michael 1:32pm:   We do have a lot to discuss but I am so fucken busy at work and have been for a while. I also have Feank [sic] calling me constantly but I xan [sic] only do what I can do. I will see you soon as I have a few hours up my sleeve.

Walter 1:51pm:   can you call me please. we can discuss this today at my place today.

Walter 1:57pm:   Call me urgently.

Michael 2:26pm:   Cannot do today so will see you tomorrow night.”

121. The significance of these text messages is that some of them demonstrate the continued requests for payment, particularly payments to Frank, even after the May 2017 document had been prepared and signed.

122. However, whilst Michael accepted in cross-examination, that he had not demanded repayment of principal in any of the text messages (at Tcpt, 4 November 2019, p 99(23-26)), he had, in June 2017, that is well after the payments in February 2017 had been made, and when the 17 May 2017 document was signed, maintained Walter’s figures were wrong, and had requested a “ledger”, claiming that the figures had not been agreed: Tcpt, 5 November 2019, p 215(16-34).

121. An interesting aspect of the hearing was that despite the contents of many of the text messages, nothing further was adduced in evidence about what happened, between Michael and Walter, after the text messages were received.

122. Some of the text messages, particularly after 16 May 2017, support the conclusion that the whole of the amount and interest had not been repaid.

The failure to read Ivancica’s affidavits

125. As already stated, Ivancica’s two affidavits were not read.

126. Her amended Defence was referred to, but the Court, otherwise, does not have a verified account of her version of the events. Furthermore, the assertions made in her amended Defence could not be tested and must be regarded as no more than assertions by her.

127. The other evidence, included as Ex. TB1/265, is a letter dated 12 December 2017, from Mavrakis & Associates (Ivancica’s then solicitors) to Hall Partners and Solicitors (the solicitors for Patricia and Michael), in which it is relevantly asserted:

“2.   In February 2017, your client received $475,000 in repayment of a loan and full satisfaction of any other monies. Separate interest payments were made before this date.”   

128. It is clear that the assertion that $475,000 was received in February 2017 is incorrect, as the amounts received in February 2017 were the amounts totalling $208,500 to which reference has already been made.

129. There is no need to resolve any differences that might have existed between her affidavits and the affidavits of the Plaintiffs and of Frank.

130. Ivancica was in Court throughout the proceedings and, usually, she and Walter sat together. No specific explanation was given for the failure to read her affidavits at the hearing. There was no evidence of any impediment to her giving evidence.

131. As was recently written in Poniatowska v Channel Seven Sydney Pty Ltd [2019] SASCFC 111, by Blue JA, at [428]-[434]:

“Questions of onus of proof and inferences made because of the absence of evidence from a particular witness or on a particular topic are closely interrelated. If a party bearing the onus of proof fails to call particular evidence, depending on the circumstances, it might result in that party having failed to discharge the onus of proof and/or result in the Court not drawing the requisite inference when that party’s case depends on the drawing of inferences.

In Blatch v Archer Lord Mansfield said:

All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

This principle applies to the party on whom the onus of proof lies on a particular issue (the proponent) and has particular force in that application because, if that party does not adduce evidence that discharges the onus of proof on that issue, the proponent will fail on that issue. This principle also applies to the opposite party on whom the onus of proof does not lie (the opponent) but obviously it is less potent because the onus of proof does not lie on the opponent.

In Jones v Dunkel, the High Court (by majority) applied this principle against an opponent in a case in which the plaintiff’s husband was killed in a motor vehicle collision. The plaintiff’s case was circumstantial because there were no surviving witnesses to the collision (apart from the defendant driver) and the defendant driver did not give evidence. Kitto J, Menzies J and Windeyer J expressed the application of the principle in somewhat differing terms. For example, Kitto J said:

It was right enough [for the trial judge] to point out [to the jury], in effect, that the evidence given might be the more readily accepted because it had been left uncontradicted, and that the omission to call Hegedus as a witness could not properly be treated as supplying any gap which the evidence adduced for the plaintiff left untouched. But what should have been added, and not being added was in the circumstances as good as denied, was that any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation of his absence. The jury should at least have been told that it would be proper for them to conclude that if Hegedus had gone into the witness-box his evidence would not have assisted the defendants by throwing doubt on the correctness of the inference which, as I have explained, I consider was open on the plaintiff's evidence.

Menzies J said:

In my opinion a proper direction in the circumstances should have made three things clear: (i) that the absence of the defendant Hegedus as a witness cannot be used to make up any deficiency of evidence; (ii) that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence; (iii) that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference.

Windeyer J said:

… his Honour should … have given an answer in accord with the general principles as stated in Wigmore on Evidence as follows: "The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted.

In Ho v Powell Hodgson JA (with whom Beazley JA agreed) said:

… it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so. As stated by Lord Mansfield in Blatch v Archer:

All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

The case of Jones v Dunkel is a particular application of this principle. That case itself related to a situation where there was evidence supporting an inference against a party, and that party did not give or call evidence, which that party was plainly in a position to have given or called, in order to explain or contradict the material presented. In my opinion, a similar principle applies where a person bearing the onus of proof does not give or call evidence which that person is plainly in a position to give or call; and unless some explanation is given of this failure, the tribunal of fact is entitled to infer that this evidence would not have assisted that person’s case.

In State Bank of New South Wales v Brown Hodgson JA (with whom Handley JA agreed) said:

… although Jones v Dunkel itself applies only to circumstances where a party fails to call evidence to rebut an inference that otherwise might be drawn against that party, a similar principle applies to a party who bears an ultimate or evidentiary onus to prove something. If such a party, without explanation, fails to call evidence which the party would be expected to have and to call in order to discharge that onus, a court is justified in approaching the matter on the basis that such evidence would not have assisted the party's case.

Although the case of Jones v Dunkel involved circumstances in which it was the opponent who did not adduce evidence, it is common practice to refer to the broader principle articulated by Lord Mansfield in Blatch v Archer in its application to proponents and opponents alike as ‘the rule in Jones v Dunkel’ and to refer to an inference drawn under that ‘rule’ as a ‘Jones v Dunkel inference’.” (Omitting footnotes)

132. As a party who does not give evidence, any inferences would normally be drawn against her. Furthermore, to the extent that Walter had stated that he was to rely upon her evidence, her absence from the witness box warrants the inference that anything about which she might have been able to give evidence, would not have assisted Walter’s case.

133. Naturally, I have also considered what was written in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17, at 412, [165]:

“Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles which do not permit the course taken by the Court of Appeal of discounting the cogency of the evidence tendered by ASIC.”

134. I have also remembered that a failure to call a witness cannot “fill gaps in the evidence, or convert conjecture and suspicion into inference”: The Legal Practitioner v Council of the Law Society of the ACT [2015] ACTCA 20, per Murrell CJ, Burns and Perry JJ, at [56].

135. It seems to me that Ivancica’s involvement was seminal to the defence raised of Walter’s lack of authority, particularly in circumstances where Walter gave the evidence earlier referred to, to which no objection was made, namely at Tcpt, 5 November 2019, p 152(43-48):

“Q. You told Ivana that Michael and Patricia had agreed to lend you both some money for the deposit?

A. Yes.

Q. And she agreed to that arrangement?

A. Yes.”

136. Section 81(1) of the Evidence Act 1995 (NSW) relevantly provides that the hearsay rule does not apply to evidence of an admission. “Admission” is defined in Part 1 of the dictionary in the Evidence Act as being a previous representation that is: (a) made by a person who is, or becomes, a party to a proceeding; and (b) adverse to the person’s interest in the outcome of the proceeding.

137. Section 82 of the Evidence Act, which is headed “Exclusion of evidence of admissions that is not first-hand” provides that s 81 does not prevent the application of the hearsay rule to evidence of an “admission” unless (a) it is given by a person who saw, heard or otherwise perceived the admission being made, or (b) it is a document in which the admission is made. The evidence of Ivancica’s admission was given by Walter, who heard it being made.

138. The absence of evidence from Ivancica, contradicting Walter’s evidence on this topic, results in such evidence being more likely to be an accurate account of what Walter had told Ivancica and to what she had agreed. In any event, the conversation appears to have occurred at, or about, the time of the events, and is consistent with those events. Furthermore, it must not be forgotten that Ivancica received the benefit of the $375,000, the sum borrowed, which, itself, throws light upon the circumstances of the making of the statement that she is said to have made and its reliability.

139. However, the conversation to which reference is made between Walter and Ivancica relates only to the loan of $375,000 and not to the loan of $100,000. As already stated, there was no evidence of any conversation, between Walter and Ivancica, in relation to the loan of $100,000 and there is no evidence that she received the benefit of that amount.

140. The failure to read any evidence from Ivancica is also important to the acceptance, or otherwise, of Walter’s evidence concerning the May 2017 document. Whilst it was acknowledged, by Michael, that Patricia did not know about the document because Michael did not tell her until at, or about, the commencement of the proceedings, Ivancica, on Walter’s evidence, had raised the question which had prompted the creation of the May 2017 document. One might have expected Ivancica to give evidence corroborating Walter’s evidence, particularly, about what had happened to the document after it had been prepared, and signed, by Michael and Walter.

The assessment of credibility and the witnesses who did give evidence

141. It was necessary to read quite a lot of affidavit evidence, to hear the oral evidence of four witnesses, and to consider a large number of documents (principally in Ex. TB1). Three of the witnesses (the parties), and, perhaps, the fourth (Frank), have an interest in the outcome of the litigation.

142. However, the resolution of the relevant factual disputes in this matter will turn, principally, on the reliability of Michael and Walter. Each made a sustained attack on the other's veracity. As will be read, there is some justification for the attacks and it is necessary to treat the evidence, respectively, with considerable caution. Both gave evidence about conversations of critical transactions, based on recollection, which was unaided by contemporaneous records, some years after the conversations had occurred, and in the context of these proceedings. The failure to keep proper records also leads to a degree of scepticism in respect of both, although that view, perhaps, applies more to Walter who is said to have made the repayments and the advances. (There was no dispute about the two loan amounts of $375,000 and $100,000). Neither was a naive person in terms of business dealings.

143. Before turning to each of the witnesses who was cross-examined, I set out some principles regarding the assessment of the evidence and the credibility of the witnesses that I have borne in mind.

144. Dixon CJ in Jones v Dunkel (1959) 101 CLR 298 at 305; [1959] HCA 8, noted that “[t]he facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied” (a statement cited with approval by the majority in West v Government Insurance Office of New South Wales (1981) 148 CLR 62 at 66; [1981] HCA 38).

145. In assessing the evidence, written and oral, what was said by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liquidation) (No 2) (2011) 297 ALR 56 at 69; [2011] FCA 1123 at [48] should be noted:

“... When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-2).”

146. And as was observed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315, at 318-319:

“Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances … Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

147. In that case, his Honour was talking of a cause of action founded on s 52 of the Trade Practices Act 1974 (Cth) or s 42 of the Fair Trading Act 1987 (NSW): see the discussion by McDougall J in Harbour Port Consulting v NSW Maritime [2011] NSWSC 813, at [10]-[18]. However, as McLelland CJ in Eq also pointed out in the passage referred to above, the views apply to all types of litigation.

148. In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466; [2007] FCAFC 132 Weinberg, Bennett and Rares JJ, wrote, at 479-482, [29]-[38], that a mere mechanical comparison of probabilities, independent of any belief in the reality of a fact, cannot justify a finding that it occurred.

149. In John Ljubomir Atanaskovic and the persons named in Schedule A trading as Atanaskovic Hartnell v Birketu Pty Ltd [2019] NSWSC 1006, Hammerschlag J wrote at [366]:

“Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.”

150. Also, a Court in cases involving events, some of which occurred some years before the litigation, usually prefers to rely upon contemporaneous, or near contemporaneous, documents, which will often provide valuable and, usually, more revealing, information than what may be flawed attempts at recollection of those facts by persons with an interest in the outcome of the litigation: Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 at [1247] (Jagot J). Greater weight is usually accorded to such documents, as often they provide a safer repository of reliable fact, particularly when it is clear that they have been prepared by a person with no reason to mis-state those facts in the documents and where there is no suggestion that the documents are other than genuine: Hughes v St Barbara Mines Ltd (No 4) [2010] WASC 160, at [157] (Martin J); Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm) at [15]-[22].

232. It was submitted that the evidence given by Walter did not establish that Ivancica gave him authority to act on her behalf in relation to the loan of $375,000. In my view, the principle expressed in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72; [1975] HCA 49, at 78, [13] applies in this case:

“There are circumstances where the actual representation of authority may be made by the agent but in such cases it will be found that the relevant representation is made by the principal (or by the person to whom the principal has given actual authority) either by a previous course of dealing or by putting the agent in a position or by allowing him to act in a position from which it can be inferred that his actual representation of authority in himself is in fact correct. It is therefore always necessary to look at the conduct of the principal (or the person to whom he has actually delegated authority).”

234. In my view, that is precisely what happened in this case. Ivancica appears to have left it to Walter to arrange the borrowing of $375,000 and she cannot now say, without giving evidence on this topic, which can be challenged, that she did not do so.

235. However, this does not mean that she knew, or authorised, Walter to agree to pay interest at 4 per cent per month payable monthly.

236. It seems to me, having heard all of the evidence that the loan of $375,000 was made, in part by Michael (as to $200,000) and as to the balance by Patricia and Michael. There was no suggestion that Patricia had any obligation to repay Frank’s money to him. That obligation was accepted by Michael to be his obligation. As to the balance of $175,000, there was no challenge to Patricia’s evidence that it came from both her and Michael, part of the balance being from their savings and the other part being profit from the business (to which she was entitled).

237. It seems to me, having heard all of the evidence that the loan of $100,000 was made by Michael to Walter. Again, he accepted the responsibility to repay Frank (who may have an obligation to repay Luciana).

238. On balance, I find that the loan of $375,000 was one made to Walter and Ivancica whilst the loan of $100,000 was made to Walter alone. I do not accept the submission that the loan of $375,000 was made to Walter alone. The whole of the conversation between Michael and Walter was in relation to both. In this regard, the conversation was:

“You know this place at Cronulla that we have found, it is fantastic, the one that I’ve been talking about and Ivana and I have been looking at? Ivana has fallen in love with the place. She really wants it. We can get it for just over $8 million. The vendor will agree to a 5% deposit, so we need 400,000. Can you lend us 400,000? We really love the place. It’s the dream home that Ivana and I have been looking for a long time now.”

239. Whilst the conversation between Walter and Ivancica to which reference has been made may have occurred after the conversation quoted above, it was before the handing over of the cheque for that amount, which she also knew came from Michael and Patricia. So much was accepted by counsel for Ivancica: Tcpt, 6 November 2019, p 247(46) – p 248(44).

240. The more difficult question relates to whether she knew about the terms of the borrowing, namely that interest was payable on the amount borrowed at the rate of 4 per cent per month, payable monthly. I suspect that she did, but there is no evidence to convert that suspicion to a finding of fact.

241. Accordingly, I am not satisfied that Ivancica knew that Walter had agreed to pay interest at 4 per cent per month payable monthly.

The May 2017 Document

242. The law ordinarily operates upon documents and other evidentiary materials that attempt to express intended legal consequences according to the words used.

243. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ held at 180-181, [45] and at 182, [47]:

“It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it [Wilton v Farnworth [1948] HCA 20; (1948) 76 CLR 646 at 649], whatever they might be.

…

Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.”

244. I have considered the May 2017 document very carefully as well as the evidence of each of Michael and of Walter. I am satisfied that I should accept Michael’s evidence on this topic rather than Walter’s. The latter’s evidence, particularly about the alleged dinner in early 2017, makes me doubt the truthfulness of Walter’s evidence. That doubt is heightened when Ivancica was not called as a witness to corroborate Walter’s evidence on such an important topic.

245. I have not forgotten the submission by Walter’s counsel that the 2017 document is one of the very few documents that the parties actually signed and exchanged. I also remember that accepting Michael’s version of the reasons for, and why he signed, the May 2017 document, means that I must also find that Walter and Michael intended to deceive Ivancica, and that Michael did keep the document secret from Patricia.

246. It was also accepted that the May 2017 document was not entirely accurate, as it ought to have been if its real intention was to record the receipt of payment of the whole of the amounts that were loaned.

247. Regrettably, following the examination of all of the evidence, I have formed the view that this is precisely what each intended to do. As I put to counsel during submissions, it was necessary to consider the evidence of each of them in the context of the whole transaction and bearing in mind that Michael and Walter were very close friends at the time the May 2017 document was signed.

248. Counsel for Walter submitted that once the May 2017 document was signed, there was no need for Walter to keep any records. The problem with this submission is that Walter did not ever give evidence that he had kept written records or that he had destroyed them following the signing of the May 2017 document.

249. It follows that I do not give the May 2017 document the significance that was referred to by Walter and by Ivancica. I do not regard it as a document that truly reflects the events that occurred, and, as importantly, I do not regard it as a document upon which Ivancica and Walter can rely in defending the case upon the basis that the whole of both loans were wholly repaid and, thereby, each debt discharged. The conduct of Michael and Walter, after this document was signed, also supports that conclusion.

Dispute about repayment of the loans

250. Having dealt with the lack of effect of the May 2017 document which was relied upon by Ivancica and Walter to demonstrate that both debts were repaid, I turn now to the other evidence of the repayments of the loan.

251. Walter asserted that, in addition to the repayments that have been admitted, there were a total of another 53 payments that were made to, or for the benefit of, the Plaintiffs. A large number of the repayments are said to have been made in cash, sometimes, in quite large amounts.

252. Bank records are relied upon, but whilst they record cash withdrawals, they do not identify to whom the cash withdrawals were paid. Nor are there any corresponding bank records, of any of the Plaintiffs, which show deposits that correspond to the cash withdrawals the subject of dispute.

253. Counsel for Walter accepted that was so and that Walter said that he paid the various amounts, Michael denying that he had received many of them, and really nothing more: at Tcpt, 6 November 2019, p 228(29-43).

254. In his affidavit made 4 January 2018 at par 11, Walter set out the following payments he said he made to Michael. Annexed to the affidavit was a series of bank statements that were said to show the corresponding withdrawals and payments:

“I set out those payments made between December 2015 and July 2017 to Michael Volonakis at his direction:

23 December 2015:   $25,000.00

21 April 2016:      $15,000.00

20 June 2016:      $ 1,000.00

20 June 2016:    $ 1,000.00

21 June 2016:    $ 1,000.00

24 June 2016:    $ 1,000.00

30 June 2016:    $ 1,000.00

1 July 2016:       $ 1,000.00

5 July 2016:       $ 500.00

11 July 2016:      $ 500.00

21 July 2016:      $ 500.00

5 August 2016:   $ 9,000.00

11 August 2016:   $ 1,000.00

3 October 2016:   $ 1,000.00

14 October 2016:   $ 20,000.00

7 November 2016:   $ 9,000.00

7 November 2016:   $ 1,000.00

11 November 2016:   $ 7,000.00

14 November 2016:   $ 40,000.00

30 November 2016:   $ 12,000.00

6 December 2016:   $ 8,500.00

8 December 2016:   $ 20,000.00

23 December 2016:   $ 34,000.00

30 December 2016:   $ 12,000.00

5 January 2017:   $ 7,500.00

10 January 2017:   $ 500.00

17 January 2017:   $ 19,500.00

23 January 2017:   $ 10,000.00

24 January 2017   $ 11,000.00

6 February 2017:   $ 7,500.00

7 February 2017:   $ 10,000.00

8 February 2017:   $ 1,000.00

10 February 2017:   $ 23,500.00

14 February 2017:   $ 30,000.00

16 February 2017:   $ 10,000.00

17 February 2017:   $ 6,000.00

28 February 2017:   $ 5,000.00

1 March 2017:      $ 6,000.00

3 March 2017:      $ 8,500.00

8 May 2017:      $ 7,500.00

7 June 2017:      $ 1,500.00

8 July 2017:      $ 6,000.00

17 July 2017:      $ 2,000.00

28 July 2017:      $ 1,600.00”

255. As has been stated earlier in these reasons, the bank records referred to above do not identify to whom cash withdrawals were paid, and there are no corresponding bank records of the Plaintiffs, or either of them, which indicate that deposits of corresponding amounts that were said to be made, were actually made.

256. Walter, in his final written submissions accepted that “in the ordinary way a debt once proved to have existed, is presumed to continue unless payment, or some other discharge be either proved or established by the circumstances”.

257. It was also accepted that the onus of establishing that a payment was made is on the party who allegedly made the payment: Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51, per Dixon CJ, McTiernan and Taylor JJ, 569‑570; [1956] HCA 51:

“… The law was and is that, speaking generally, the defendant must allege and prove payment by way of discharge as a defence to an action for indebtedness in respect of an executed consideration. It is interesting to notice that it was soon settled that upon a plea of payment the defendant had the right to begin at the trial: see ‘An Exposition of the Practice in relation to the Right to Begin and to Reply’, by W. M. Best (1837) pp. 60, 61. The same author in his well known work on Evidence treats the rule placing upon the defendant the burden of proving payment as a special application of the presumption of continuance. Writing of this presumption he includes as a case requiring special consideration, ‘the presumption of the continuance of debts, obligations etc. until discharged or otherwise extinguished’. And he says ‘a debt once proved to have existed, is presumed to continue unless payment, or some other discharge, be either proved, or established by circumstances.’ – Best on Evidence 12th ed. (1922) p. 346, s. 406. Though this no doubt supplies a rationale that it is not unsatisfactory, the truth is that the rule arises from the nature of debt itself.

Once it is seen that the burden of proving payment falls upon a defendant setting it up as a defence the present appellant’s case assumes a different aspect. …”

258. Thus, Walter and Ivancica were required to prove the payments said to have been made by way of discharge of the loans as a defence to the Plaintiffs’ action for indebtedness. They bear the burden of proving each of the repayments said to have been made unless it is accepted, as it was, that some repayments were made. It is fair to say that Walter attempted to do so in a somewhat haphazard fashion. Merely pointing to bank statements that show withdrawals of cash does not go far enough.

259. Nor did Walter endeavour, since the case began, to reconstruct, as it were, any records to demonstrate how he had reached the calculation of $208,500 that had been acknowledged as having been paid in February 2017. There was simply no evidence, oral or written, that demonstrated how this amount had been calculated. I cannot speculate that it was the amount then left to be repaid. Of course, there was no dispute that the amount had been paid.

260. The evidence in my view has been left in an unsatisfactory state of uncertainty. For the reasons I have outlined, I am not satisfied that Ivancica and Walter have established, on the balance of probabilities, in respect of those that are disputed, that all of the cash repayments were made to Michael or otherwise.

261. Turning then to the amended Cross-Claim, I am also not satisfied, based upon the evidence relied upon by Walter and Ivancica, that all of the amounts said to have been paid to Michael, or as he directed, were, in fact, paid.

262. A large number of the alleged payments are annotated "Alexa" in Walter’s evidence. It is alleged, by Walter, that he and Michael agreed that Walter would assume liability for the wages of Walter’s personal assistant, during the period that she drove for Michael while he was disqualified from driving from November 2015: Affidavit, Walter Erceg, 4 January 2018, at par 9. That agreement was denied by Michael: Affidavit, Michael Volonakis, 22 November 2018 at par 16-20.

263. Walter’s oral evidence about this aspect is found at Tcpt, 5 November 2019, p 198(34-45), which is in the following terms:

“Q. And in it you were saying that you had been paying Alexa’s wages, hadn’t you?

A. Correct.

Q. And you wouldn’t have sent that if in fact you’d reached an agreement with Michael for him to pay Alexa’s wages.

A. He wasn’t. I was paying them, Alexa’s wages.

Q. You wouldn’t have sent that text if you’d had the conversation you purport to have had in paragraph 9 of your first affidavit.

A. No, I, I, I always paid Alexa’s wages and we were going to fix it up at the end.”

264. The payments made to Alexa totalled $32,000 during the period when she drove Michael around following the loss of his driver licence. Counsel for the Plaintiffs submitted that any conversation about the set-off of the amount paid for Alexa’s wages did not rise as high as an agreement between Michael and Walter, because apart from anything else, there had been no evidence about any agreement about the rate at which Alexa’s wage was to be paid. It was not in dispute, however, that the total amount of $32,000 had been paid to her for the period of 32 weeks: Tcpt, 4 November 2019, p 9(11-49), Tcpt, 6 November 2019, p 225(41-45).

265. There was actually no specific evidence of any conversation about the payment for Alexa driving Michael around. Walter’s response to the last question in cross-examination referred to above does not assist.

266. Accordingly, whilst I accept that, because of their friendship, there was informality in their discussions, I simply cannot be satisfied that there was any binding agreement made between Michael and Walter about setting off any amounts paid by Walter to Alexa as Walter asserted. The amount of $32,000, or any part thereof, cannot be included in the amounts to be set-off.

How the acknowledged payments should be treated

267. No submissions were made as to how the proved repayments should be treated. As set out earlier, the Plaintiffs have treated the repayments accepted to have been made, as payments of interest first. Doing so, they say that there is still a significant debt owing.

268. How moneys said to repay a loan are to be treated is governed by the intention of the parties, if that can be ascertained. There was no evidence at all of any discussions between the parties about how any amounts that were repaid should be treated. Nor do any of the documents referred to reveal any intentions. Accordingly, it is impossible to glean the intention of the parties.

269. Lord Macnaghten held in The Mecca [1897] AC 286, 293:

"When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor."

270. The principle was applied in Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354; [1943] HCA 4, at 371. In that case, Latham CJ wrote:

“… The debtor has the right when he makes a payment to appropriate the money to any of the debts owing to his creditor as he pleases, and, if the creditor takes the money, he is bound to recognize this appropriation. If the debtor does not make any appropriation when he makes the payment, the creditor is then entitled to make an appropriation, and he may do this at any time up to "the very last moment". In the present case the debtor appropriated all payments by the receiver in the first place to principal. If it could be held that for any reason such an appropriation of moneys in the hands of the receiver was ineffectual then the appropriation by the creditor to principal governs the case.”

271. Appropriation as an ordinary English word refers to the assignment or allocation of something to a particular purpose. It is a matter of fact to be determined on the evidence.

272. In this case, there was no appropriation by either Walter, or Ivancica, of the repayments made by Walter. Then, the Plaintiffs have appropriated the payments first to interest, and then to principal. It appears, because of the state of the evidence, they are entitled to do so.

273. That the Plaintiffs are entitled to do so also accords with what was written in Falk v Haugh (1935) 53 CLR 163; [1935] HCA 35, Rich, Dixon, Evatt and McTiernan JJ, at 173:

“It has long been a rule that when payments are received generally on account of a debt, which is in part interest and in part principal, they are treated as applicable to interest in priority to principal. In Crisp v Bluck, a bond creditor received some payments, and afterwards recovered judgment. It was decreed that the payments ought to go in discharge of the interest first. The rule was again enunciated by Lord Keeper Wright in Chase v Box . It has, however, been little discussed. The most recent statement of the rule is contained in Venkatadri Appa Row v Parthasarthi Appa Row. There Lord Buckmaster said:- "There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied in payment of capital. That rule is referred to by Rigby L.J. in the case of Parr's Banking Co.v Yates (1898) 2 Q.B. 460, at p. 466. in these words:—The defendant's counsel relied on the old rule that does, no doubt, apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid, would be depriving the creditor of the benefit to which he is entitled under his contract." (See too Bamundoss Mookerjea v Omeish Chunder Raee .) The rule affords only a presumption in the absence of any actual or express appropriation by the debtor or the creditor.” (Omitting citations).

274. I referred to the authorities in Stein v Torella Holdings Pty Ltd ACN 086 346 614 [2010] NSWSC 1445 at [68]-[72].

275. When the calculation is done, the Plaintiffs assert the total of the payments does not extinguish the loans or the interest. I find that the sums of money that have been said to be repaid by the Defendants that the Plaintiffs accept have been paid, may be appropriated as instalments of interest as this was how they have been treated by Patricia and Michael.

The calculation of interest if Ivancica did not know about the rate of interest

276. In view of my conclusion that Ivancica did not agree to the interest rate on the loan of $375,000, a question arises as to whether interest is payable by her.

277. Neither party made any submissions on the effect of s 100 of the Civil Procedure Act which relevantly provides that in proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit on the whole or any part of the money, and for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

278. The Court has power under s 100(2) to award interest on the amount payable before the partial repayments were made. That being so, I shall allow the parties the opportunity to agree upon the interest rate, if any, payable by Ivancica on the unpaid part of $375,000 and if agreement is unable to be reached, I shall hear further submissions on this aspect.

Accord and Satisfaction

279. Walter asserted that Michael had provided him with a schedule of monies loaned to, and received from, Walter; that the schedule allocated the monies received to various funds, such as “Frank Masci”, “wages” and “cash; Walter and Michael negotiated to adjust the final repayments of the two loans (the accord) and he paid an agreed amount of $200,000 into an account nominated by Michael and gave $8,500 in cash to him (in total satisfaction) on or by 24 February 2017.

280. The question whether an accord and satisfaction exists depends upon an objective assessment of the conduct of the parties, viewed in the context in which such conduct took place (see, for example, Ermogenous v Greek Orthodox Community of SA Inc (2002) 2009 CLR 95; [2002] HCA 8 at [25]; Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]). Also see: Jingalong Pty Limited v Todd [2015] NSWCA 7, particularly [63]-[72].

281. I do not accept Walter’s evidence on this topic. I have earlier referred to his evidence, which I regard as false, about the conversation said to have taken place at a dinner.

282. Also, in this case, there is no suggestion that either Patricia, or Ivancica, was a party to any agreement of the type said to have been made between Michael and Walter. Indeed, Ivancica did not rely upon accord and satisfaction in her defence.

283. In this case, Walter also relies upon the May 2017 document as evidencing an accord and satisfaction. I have made findings about that document.

284. Bathurst CJ in Ashton v Pratt [2015] NSWCA 12, at [173], observed that in order for an agreement to constitute an accord and satisfaction, the agreement in question must clearly demonstrate an intention to release claims in consideration of that which is to be provided in satisfaction of the claims.

285. In view of the conclusions I have reached Walter’s evidence and also about the May 2017 document, I am not satisfied that there was an accord and satisfaction constituted in this case.

Summary of conclusions

286. In summary, and for the assistance of the parties, the principal findings of the Court are:

1. In respect of the loan of $375,000,

1. There was an agreement for loan made in November 2015.

2. The agreement for loan was made between Michael and Walter.

3. The amount of $375,000 was used as part of the deposit on the purchase of real property at Cronulla by, and registered in the sole name of, Ivancica.

4. Ivancica knew of the loan agreement and permitted Michael to make the agreement for loan.

5. Both Patricia and Michael were the lenders and Ivancica and Walter were the borrowers.

6. The loan was to be repaid by February 2017.

7. The interest on the loan of $375,000 was to be calculated at the simple interest rate of 4 per cent per month, and was payable monthly.

8. The whole of the loan and interest has not been repaid.

9. Both Ivancica and Michael are liable to repay the amount of principal of the loan that remains unpaid.

10. Walter is liable to repay simple interest calculated at the rate of 4 per cent per month.

11. Ivancica is not liable to pay simple interest at the rate of 4 per cent per month, but may be liable for interest on the loan of $375,000 pursuant to s 100(2) Civil Procedure Act2005 (NSW).

2. In respect of the loan of $100,000,

1. There was an agreement for loan made in April 2016.

2. The agreement for loan was made between Michael and Walter.

3. Patricia and Michael were the lenders and Walter was the sole borrower.

4. The loan amount was paid by Michael to Walter by depositing 5 amounts of $20,000 into a bank account nominated by Walter.

5. There was insufficient evidence to satisfy the Court, on the balance of probabilities, that Ivancica agreed, or authorised, Walter to agree on her behalf, to borrow the amount of $100,000, or that she had knowledge of the loan agreement, or that she received a benefit from the amount that was borrowed.

6. The interest on the loan of $100,000 was to be calculated at the simple interest rate of 4 per cent per month, and was payable monthly.

7. There is no evidence that Ivancica agreed, or authorised, Walter to agree on her behalf, to pay interest on the loan of $100,000 calculated at the simple interest rate of 4 per cent per month payable monthly.

8. The loan was to be repaid by February 2017.

9. The whole of the loan and interest has not been repaid.

10. Only Walter is liable to repay any amount of principal and interest on the loan of $100,000.

3. Repayments,

1. Various amounts, totalling $410,000, were repaid by Walter and/or Ivancica to the Plaintiffs.

2. There is no evidence of the intention of the parties to each loan as to the way in which the repayments made by Walter and/or Ivancica were to be treated.

3. The Plaintiffs have treated, and are entitled to treat, or appropriate, the repayments that have been made, as instalments of interest in respect of one or other of the loans.

4. The 16 May 2017 document,

1. The document is not one upon which reliance can be placed by the Defendants to demonstrate the full repayment of both of the loans and the interest payable thereon.

5. Accord and satisfaction,

1. The Court was not satisfied that the alleged agreement said to constitute an accord and satisfaction, clearly demonstrated an intention to release claims in consideration of that which is to be provided in satisfaction of the claims.

6. Other relief claimed,

1. The relief claimed in the Plaintiffs in paragraphs 1, 2, 3, 4 and 7 of the amended Statement of Claim filed 24 July 2018 should be dismissed.

2. The amended Cross-Claim of the second Defendant filed 18 April 2019 should be dismissed.

Orders

287. The parties, if possible, are to agree upon the quantum of the Plaintiffs’ entitlement, and the form of the orders, reflecting these reasons. A form of orders, if agreed, should be forwarded to the Associate to Hallen J, in hard and soft copy, by 4:00 p.m. on 28 January 2020. If there is no agreement as to the form of orders, by 4:00 p.m. on 28 January 2020, the matter is to be re-listed, by arrangement made no later than 4:00 p.m. on 31 January 2020, with the Associate to Hallen J, for the purpose of obtaining a date for any argument on the form of orders or the quantum of the judgment made in favour of the first and third Plaintiffs or the third Plaintiff respectively.

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Decision last updated: 20 December 2019