Zafiris v Karydis No. DCCIV-02-539

ZAFIRIS -v- KARYDIS
[2004] SADC 36
Judge Robertson
Civil
The Plaintiff’s Claim

The Plaintiff brings these proceedings seeking to recover from the Defendant the sum of $210,510.45. It is the Plaintiff’s claim that during a period commencing on 24 May 1995 and ending on 25 September 1997, he lent to the Defendant, in a series of loans, none of which exceeded $10,000, a total of $243,500. The Plaintiff alleges that for most of the loans, it was agreed between the Defendant and himself that the Defendant would pay interest at the rate of 30% per annum. It is the Plaintiff’s case that there were two exceptions to the agreements to pay interest at 30% per annum on the loans. It is the Plaintiff’s case that for a loan of $5,000 made on 12 August 1997, it was agreed that the interest rate would be 10% per month. Furthermore, that for a loan made on 24 August 1997 of $8,000 it was agreed that there would be an interest rate of 15% per month.
It is the Plaintiff’s case that the loans were made in a series of oral agreements made at the time of each advance and that the principal and interest were payable on demand. The Plaintiff’s claim is that he orally made demand for the repayment of the money owing to him about 12 April 1998. He said that at the time he had not received any interest payments. Accordingly, the Plaintiff claims that the total amount of interest due to him on the loans for the period commencing 24 May 1995 and ending 12 April 1998 is $170,757.
The Plaintiff acknowledges that since 12 April 1998 he has received from the Defendant the sum of $9,000 on 13 October 1998. Furthermore, he has credited the Defendant with the further sum of $194,746.55 being the net equity in a house transferred by the Defendant to the Plaintiff about 5 July 2001. It is his case that the transfer of the house was only in part satisfaction of the amount owing to him.
In summary, the Plaintiff presents his claim as follows:
Total amount lent   $243,500.00
         Add total interest  $170,750.00
         Sub-total  $414,257.00
         Less payment on 13 October 1998  $9,000.00
         Less credit given about
            5 July 2001  $194,446.55
         Total amount of claim   $210,510.45
It can be seen from what has been set out above, that the Plaintiff’s claim is composed of the balance of the money alleged to have been lent to the Defendant, namely the sum of $40,053.44, together with interest of $170,757.00 alleged to be payable by the Defendant.
The Defendant’s Case
The Defendant does not dispute that in the period from 4 May 1995 to 5 September 1997 the Plaintiff advanced to him in amounts of $10,000 or less, a total of $243,500. I have deliberately chosen the neutral word “advance” as the issue between the parties is the legal character of the amounts advanced. It is the Defendant’s case that prior to 24 May 1995, being the time the first advance was made, he was conducting the business of short term money lending. It was his evidence that since about 1992 or 1993 he had been lending out moneys to persons for six months or less without obtaining security and charging rates of interest between 5% per month and 20% per month. It is the Defendant’s case that on 24 May 1995 it was orally agreed between the Defendant and the Plaintiff that they would enter into partnership for the purpose of conducting the short term money lending business previously carried on solely by the Defendant. It is the Defendant’s case that the advances made by the Plaintiff to the Defendant were contributions to the capital of the partnership. The Defendant denies that he entered into an oral agreement with the Plaintiff in which he agreed to borrow moneys from the Plaintiff and pay interest on the moneys borrowed.
I mentioned earlier that the Plaintiff has credited the Defendant with the sum of $194,746.55 being the net equity in a house transferred by the Defendant to the Plaintiff. However, it is the Defendant’s case that the transfer of the property to the Plaintiff was in full and final satisfaction of any money due and payable by the Defendant to the Plaintiff which he said was agreed to be $230,000.
Two Issues in the Trial
From what I have said, it is apparent there were two issues in the Trial. The first is whether the Defendant entered into a series of loan agreements with the Plaintiff pursuant to which he received a total of $243,500 and that a term of each loan agreement was that until the money was repaid the Defendant was to pay interest at the rates to which I have referred earlier. The second is whether the transfer of the house was in final settlement of all money due and payable by the Defendant to the Plaintiff.
Plaintiff’s Evidence Regarding the Advance of Money
The Plaintiff is a civil engineer. He had been friends with the Defendant’s father for a number of years prior to 1995. He had on occasions been employed professionally, in his capacity as an engineer, on some of the property developments undertaken by the Defendant’s father, Don Karydis. The Plaintiff said that he also developed a friendly relationship with the Defendant. It was his belief that Don Karydis and the Defendant were partners. The Plaintiff understood that both the Defendant and his father had been involved in a number of very successful development projects.
It was the evidence of the Plaintiff that from about 1991 onwards he and the Defendant would meet for coffee up to three or four times a week. He said that the Defendant had from time to time complained that whilst he ran the business of Don Karydis he only received a wage. He said that the Defendant complained that whilst he and his father held equal shares in the developments, all the profits were consumed by the father’s expenses. The Plaintiff said that the Defendant told him on more than one occasion that if he had money of his own to put into the projects then he would earn a larger share of the profits. The Plaintiff said the Defendant made these complaints in the early part of 1995. The Plaintiff said that the Defendant told him he was looking to borrow money for the purpose of funding himself in these projects as he did not have his own source of funds.
The Plaintiff said that in May 1995 the Defendant mentioned to him that he had a hot deal coming up with his father and he asked the Plaintiff if he could lend him some money. The Plaintiff said that the Defendant indicated he was happy to pay interest on any moneys borrowed. It was the Plaintiff’s evidence that the Defendant was looking for about $20,000 to $25,000 and he indicated that he was prepared to pay 30% interest per annum on the loan. The Plaintiff said he was told that deals with his father were extremely profitable. The Plaintiff said that the Defendant informed him that the money was for quick deals and that if at any stage the Plaintiff wanted his money returned the Defendant would repay him.
After this meeting, the Plaintiff said that he telephoned the Defendant and said that he could let him have about $16,000 to $17,000. The Plaintiff said the Defendant requested that the money be in cash. On being asked by the Plaintiff why it could not be paid by cheque, the Plaintiff said that the Defendant indicated that if he took a cheque to his father it would be refused because his father would not want anyone else to be involved in the business.
On 24 May 1995 the Plaintiff said he withdrew $8,800 in cash out of a bank account containing contributions he had made to a self managed superannuation fund (“the Superfund”) and a further $8,800 in cash from the bank account of a company called Articore Pty Ltd. This was a building company which was operated by the Plaintiff and his wife.
After the initial advances on 24 May 1995 the Plaintiff said that the Defendant would from time to time approach him for further funds. The Plaintiff made numerous cash payments to the Defendant over a period ending on 25 September 1997. The source of the funds was either from the bank accounts of the Superfund, Articore Pty Ltd or Zafiris & Associates Pty Ltd, which was the company through which the Plaintiff operated his civil engineering business. On each occasion that the Plaintiff advanced funds to the Defendant, the Plaintiff would withdraw the amount from the particular bank account, which was sourcing the money and would hand this money to the Defendant in cash. In all, the Plaintiff said he advanced to the Defendant the sum of $243,5000.
The Plaintiff said that on each occasion that he advanced money to the Defendant he understood that the Defendant was intending to use the moneys as a contribution to some development that the Defendant was undertaking with his father. He said that on each occasion that he advanced money the Defendant stated that he would pay a minimum of 30% per annum interest on those moneys, save for an advance of $5,000 on 12 August 1997, when it was agreed that the interest would be 10% per month, and for an advance on 25 September 1997 of $8,000, when the Defendant agreed to pay interest at 15% per month. The Plaintiff said that on each of those latter occasions, the Defendant indicated that he only needed the funds for a very short period of time. The Plaintiff said that there was no specific arrangement regarding when the payment of interest was to be made. It was the Plaintiff’s evidence that, like the money advanced to the Defendant he informed the Defendant that he would call for the payment of the interest owing when he needed it.
As I mentioned earlier, the last payment to the Defendant was on 25 September 1997. The Plaintiff said that after that time the Defendant requested further money but the Plaintiff told him that he had no further funds. It is the Plaintiff’s evidence that all of the amounts advanced to the Defendant were made by way of loan. The Plaintiff denied that he advanced the moneys to the Defendant by way of contributions to a short term money lending business in which he and the Defendant were engaged. He said that he only became aware that the funds were used by the Defendant to lend on to others at high interest rates for short periods of time when the Defendant told him in mid l998 that he had lent the money out to other people on short term loans.
The Plaintiff said that in April 1998 he became involved in the acquisition of land and the proposed development of vineyards which he referred to as “Sorrells Vineyards”. As he was in need of funds the Plaintiff said that he demanded from the Defendant the moneys owing to him. Those moneys were not forthcoming. I will return to the evidence regarding the events that took place after April 1998 shortly. However, before I come to that, I think it is appropriate that the evidence of the Defendant regarding the advance of the money should be considered.
Defendant’s Evidence Regarding the Advance of Money
The Defendant said that Don Karydis, his father, has been a builder and developer for many years. He said that prior to 1995 he had been employed as a project manager for both residential and commercial buildings, through one of his father’s companies. The Defendant said that on occasions he had also been involved in building and construction projects on his own behalf.
The Defendant said that he has known the Plaintiff for many years after being introduced to him by his father. He said that he and the Plaintiff developed a friendly relationship. He said that they would meet once or twice a week for coffee and during that time would discuss various aspects of each other’s business.
It was the Defendant’s evidence that in early 1995 the Plaintiff, at one of these meetings, suggested that they do some building work together. He said that he informed the Plaintiff that he had too many other projects to become involved with the Plaintiff in further building work. The Defendant said that at some time afterwards he mentioned to the Plaintiff that he was also involved in the business of lending money out at high rates of interest. He said when this was initially raised nothing further was discussed. The Defendant said that the Plaintiff raised the subject of the money lending business again later and the Defendant said he explained that he was lending money out without security and that he charged high rates of interest because of the high risk involved. He said that over a period of time he gave the Plaintiff further details of the business including that the period of the loans would be anywhere between one month and six months and that the interest rates varied between 5% and 20% per month depending upon the period of the loan.
The Defendant’s evidence was that at one of these meetings the Plaintiff expressed interest in becoming involved in the money lending business. He said that he told the Plaintiff that he had about $70,000 to $80,000 to lend out at the time and that if the Plaintiff wished to become involved in the business he would have to contribute that amount initially and thereafter they would each contribute equally to the capital. The Defendant said that the Plaintiff told him he could not contribute that amount of money at one time but he would be able to contribute smaller sums of money from time to time until eventually they reached parity.
The Defendant said that he agreed to the Plaintiff becoming involved in his money lending business. He told the Plaintiff that it was a cash business and he required the Plaintiff to make cash contributions. He also said the agreement was that they would share equally the interest earned on the money lent. The Defendant said that after the first cash contributions which were made on 24 May 1995, the Plaintiff would from time to time indicate that he had more cash available and would hand the money over to the Defendant.
It was the Defendant’s evidence that there were no records kept of his money lending business other than those contained in a small black book. He said that in that book he recorded details of the money lending transactions which he made. He said that he also recorded details of each contribution by the Plaintiff to the capital of the business. The black book was not introduced into evidence. The Defendant said that he destroyed the black book at the time that he transferred his Mile End house property to the Plaintiff in July 2001. He said that at that time the business arrangement with the Plaintiff had come to an end.
The Defendant said that he would also record the interest received from borrowers in the black book. He said that the interest was paid monthly by borrowers. He said that on a regular basis he would meet with the Plaintiff and hand to him in cash his share of the interest received. It was the Defendant’s understanding that the relationship between he and the Plaintiff in the business was one of a partnership.
The Plaintiff’s Evidence of Events After April 1998
As I mentioned earlier the Plaintiff said that he had not received any money from the Defendant before 1998. He said he had not called for the payment of any money prior to April 1998 because he had no need for the money before that time. However, as I mentioned, because he became involved in the Sorrells Vineyards project he demanded the payment of the money owing to him at that time. The Plaintiff said that thereafter he made regular demands of the Defendant for payment of the money owing to him but did not receive any funds other than a payment of $9,000 on 13 October 1998. He said that he received an occasional promise from the Defendant to pay him money but nothing eventuated.
The Plaintiff said that about mid-1998, after trying for some time to obtain the payment of the money, he confronted the Defendant. He said the Defendant told him that he had lent the money to other people and he could not recover it. The Plaintiff said that he had not been told of the use to which the money was put by the Defendant until that time. The Plaintiff said that the Defendant told him that he had security over motor vehicles for the return of the money. He said he requested the Defendant to proceed to sell the cars. It was the Plaintiff’s evidence that he was shocked to learn that the funds that he advanced had been directed to money lending as he understood the money was to be used by the Defendant to make contributions to developments being undertaken by the Defendant and his father.
The Plaintiff said that as he had only recovered $9,000 by April 1999 he decided to adopt a new strategy in an attempt to obtain his money. On 12 April 1999, the Plaintiff delivered a letter at the Defendant’s premises in which he stated “I have run out of waiting time for my $250,000”. In the letter the Plaintiff requested a minimum payment of $80,000 to $90,000 by the following Monday or he would approach the Defendant’s father and inform him of what had occurred.
Following that letter no money was forthcoming. The Plaintiff’s evidence was that he continued to demand payment but never received any funds. The Defendant’s father had seen the letter of 12 April 1999. The Plaintiff said a meeting was held between the Plaintiff, the Defendant and Don Karydis regarding the outstanding money but nothing positive was forthcoming. He said he continued to seek repayment from the Defendant.
The Plaintiff said that eventually the Defendant granted to the Plaintiff a second mortgage over his residential property at 6 Ebor Avenue, Mile End, securing the sum of $232,000. The Plaintiff said that he calculated the amount of $232,000, which he said was approximately the balance of the amounts which he had advanced. He said that the Defendant agreed that the total advance was $232,000.
I pause in this narrative to mention that the Defendant does not dispute that the amount of $232,000 was agreed upon at that time. The dispute lies in that the Plaintiff claims that in accordance with the agreements of loans such an amount was only the capital and did not include interest. On the other hand, the Defendant says that was the only amount he was liable to pay to the Plaintiff. I should also mention that prior to the mortgage, a contract, which was described in the evidence as a “bogus contract” was prepared, which records that the Defendant had sold his Ebor Avenue, Mile End property to others. This contract was the subject of substantial evidence in the Trial. However, I do not stay to dwell on that evidence.
A short time after the mortgage was granted the Plaintiff said that he told the Defendant he needed the money desperately. He said that after the Defendant rejected the suggestion that he put the house up for auction, the Defendant agreed to sell the house to the Plaintiff. On 8 May 2001 the parties entered into an agreement for the sale and purchase of the house in which the sale price was recorded as $370,000. On 9 July 2001 the property was transferred by the Defendant to the Plaintiff. There is a dispute on the evidence between the Plaintiff and the Defendant regarding the purchase price and how it was calculated. Furthermore, there is dispute between the Plaintiff and the Defendant regarding the purpose of the transfer of the property. The Plaintiff’s evidence is that the net equity of the property which amounted to $194,746.55 was to be credited as part payment of the total amount which the Plaintiff says was owing to him by the Defendant at that time and that the Defendant remained responsible for the remainder of the amount owing. It was the Defendant’s evidence that the transfer of the house was in full and final settlement of the money owing to the Plaintiff.
The Defendant’s Evidence Regarding the Events Following April 1998
The Defendant agreed that the Plaintiff made demand for his money in about April 1998. He said that he told the Plaintiff that it was simply not that easy to repay him because the money was lent out to various borrowers. He said that about two or three months after April 1998 he told the Plaintiff that he could obtain about $60,000 and that the Defendant should take this amount as a first instalment. The Defendant said that the Plaintiff told him that amount was not enough and that he wanted the entire amount. His evidence is that the Plaintiff said that as he could not obtain the entire amount he told the Defendant to reinvest the $60,000 again. I should mention that the Plaintiff denied this conversation.

The Defendant agreed that the Plaintiff continued to press him for payment. He also agreed that the Plaintiff requested that he grant the Plaintiff a second mortgage over the residential property at Ebor Avenue, Mile End. The Defendant said it was agreed between the two of them at the time that $232,000 was the total amount owing by the Defendant to the Plaintiff. The Plaintiff in his evidence, denied the parties agreed that the total amount owing was $232,000.
The Defendant said that shortly after granting the mortgage to the Plaintiff he suggested that the Plaintiff could take over his property at Ebor Avenue. He said that on the day of the signing of the contract of the house it was agreed between them that he, the Defendant, would take over the business and whatever funds were remaining in the business and that the Plaintiff would take over the house. The Defendant said that it was agreed that the value of the property was about $400,000 but the Plaintiff requested that the price of $370,000 be included in the Contract to save stamp duty. The Plaintiff denied this and said that the agreed value was $370,000. The Defendant said that he transferred the house to the Plaintiff on 9 July 2001. He said that he heard nothing further from the Plaintiff until he received a copy of the Summons, which he received in April 2002.
Absence of Contemporaneous Documents
It can be seen from the narrative that I have undertaken regarding the evidence of the Plaintiff and the Defendant that there is enormous conflict on the evidence. I propose to evaluate the credit of both parties shortly. However, a striking feature of the proceedings was the absence of contemporaneous documents regarding the money transactions which took place between them. The Plaintiff discovered and produced various cheque butts relevant to various bank accounts from which he said he withdrew cash to advance money to the Defendant. There was only one other contemporaneous document regarding the arrangement between the Plaintiff and the Defendant and that document was prepared some time between 18 October 1995 and the end of the year of 1995. It was Exhibit P2 in the proceedings. There was a substantial body of evidence relating to that document. I will come to that evidence shortly. That document was only discovered and produced by the Plaintiff shortly before the beginning of the Trial.
It was clear from the evidence of the Defendant that his business was conducted with very little documentary evidence. It would seem to have been an intentional strategy on the part of the Defendant. The only contemporaneous document regarding the business he conducted was the small black book, to which I have made reference earlier. The Defendant said he destroyed that book shortly after the transfer of the Ebor Avenue property in July 2001. His evidence was that he transferred the information that was relevant to outstanding loans at the time into another book. That too has been destroyed. Neither of these books were included in the Defendant’s list of discovered documents.
Further, other contemporaneous documents which were relevant to the issues in the Trial were the Defendant’s bank statements. The Defendant’s evidence was that one source of the funds that he said he contributed on a dollar for dollar basis with the Plaintiff after October 1995, to the capital of the money lending business was drawn from this bank account. These bank statements were not produced or discovered. Indeed, during the Trial the Defendant was requested to obtain copies from the bank. I was told that those copies were no longer available.
None of these documents were mentioned when the Defendant was required to swear an affidavit verifying the discovery he had made. He said he was never asked by his solicitor to produce the bank statements. This seems strange as the documents were clearly relevant. I heard nothing from the solicitors regarding this issue. The discovery process by both parties appears to have significantly imperfect. The Plaintiff discovered and produced documents close to Trial, which had not been discovered in the interlocutory discovery process. As I mentioned the Defendant has failed to adequately discover documents and his default was even greater in the sense that those documents were not discovered in the verification process. It is essential for solicitors who represent parties in litigation to fully instruct their client on the obligations to discover documents and to do all that they can to identify for their client the issues in the litigation and the nature of the documents which may be relevant to those issues. I make no criticism of the solicitors in this case because I am not privy to what occurred at the time of the discovery process. However, I am greatly disturbed by the failure of the parties to make proper discovery. From the Plaintiff’s perspective he did complete discovery, albeit late. However, the Defendant has failed to honour the obligation to give proper discovery. Failure to comply properly with the discovery process causes an element of unfairness to be introduced in the Trial.
Before I leave this topic of absence of contemporaneous documents, I wish to make some observations regarding the Defendant’s evidence about the destruction of the black book and the subsequent book. He said in his evidence-in-chief that he destroyed the black book after the transfer of the Ebor Avenue residence because the business with the Plaintiff had ceased and he had no need to retain the records of that business. In cross-examination he said there were only one or two pages left in the book and he did not think it was important to keep the book as a record because they were all cash transactions. When the Defendant was asked how he kept a record of those loans outstanding at the time of the ending of his business relationship with the Plaintiff he said that he commenced a new book. He said that he transferred records relating to outstanding loans to the new book. He said that the earlier book had become tattered and there was no reason for him to keep it.
The Defendant said he ceased being involved in money lending before Christmas 2002. The Defendant said that he threw the second book away because he had ceased his business. He said that he did not think that the information in that book would be relevant to these proceedings. These proceedings were on foot at the time that the Defendant disposed of the second book. The Defendant said that he ceased trading about December 2002 because the number of people requesting money got out of control and the quality of the people seeking to borrow money was not satisfactory.
I found the Defendant’s evidence regarding the destruction of the two books to be most unconvincing. I felt his evidence was disingenuous. Indeed, regrettably I feel that the Defendant was not telling me the truth when he gave his reasons for the destruction of the two books.
Evidence Regarding Exhibit P2
As I mentioned earlier, Exhibit P2 was one of the few contemporaneous documents relevant to the arrangement between the Plaintiff and the Defendant which was admitted into evidence. It played a significant role in the evidence at the Trial. Both the Plaintiff and the Defendant sought to use the document to support their respective cases. The evidence of the Plaintiff and the Defendant regarding the contents of the document, save for some common ground, stand in stark conflict.
There was no dispute between the Plaintiff and the Defendant that the document was likely to have been prepared in the period from 18 October 1995 (the last date nominated in the document) and the end of the year 1995. The upper section of the one page document contained three columns. The first column contained eight dates running down the column. The second column contained numbers representing amounts of money written alongside each date in the first column. The third column also contained numbers written alongside the amounts in the second column which also represented amounts of money. There was no dispute regarding the dates in the first column and the amounts in the third column. Each date in the first column and each amount in the third column on the same line as that date, represented the amount of money advanced by the Plaintiff to the Defendant on that date. The total advances during that period from 24 May 1995 to 18 October 1995 was $76,400. It was the amounts in the second column and other numbers representing amounts of money in the latter section of the document which were the subject of dispute between the parties.
As I said, there was a substantial body of evidence given regarding this document. I do not intend to spend a great deal of time on the evidence. It was not in dispute that the document was created by the Defendant during one of the coffee meetings. The tenor of the Plaintiff’s evidence is that the Defendant, in setting out the figures in the second column was indicating the amount of the loan and the interest earned on each amount advanced. In other words, each amount in the second column was the total of the amount in the third column (being the amount of the advance) plus the total interest earnt on that advance. He said that other amounts on the bottom left hand section of the Exhibit, again in the handwriting of the Defendant, represented other interest which he said the Defendant indicated had been earned by the Plaintiff. In other words, it was the Plaintiff’s evidence that this document supported his case in that the Defendant was setting out the interest which had been earnt to that time on the money the Plaintiff said he lent to the Defendant.
The Defendant’s evidence was that this was one of a number of similar documents produced by him, in the presence of the Plaintiff, during the period 24 May 1995 through to the time of the last advance by the Plaintiff on 25 September 1997. It was the Defendant’s evidence that he prepared Exhibit P2 in the presence of the Plaintiff at the time that he was paying the Plaintiff his share of the interest from the money lending business. He said those amounts indicated in the second column in the upper section of the document were a combination of the capital sum advanced by the Plaintiff to the business on the particular days and the Plaintiff’s share of the interest earned by the money lending business for those amounts of capital advanced. The Defendant said that the amounts of money, in his handwriting, in the bottom left hand corner of the document also related to the Plaintiff’s share of the interest earned in the money lending business which was paid to the Plaintiff. It was the Defendant’s position that the document supported his evidence that the Plaintiff was contributing capital to the partnership which operated the money lending business.
During the course of cross-examination of the Plaintiff with respect to Exhibit P2, it became apparent that there had been some handwriting on the right hand lower half of Exhibit P2 which had been erased. A report from Glyn Smith, a forensic scientist, who scientifically examined and analysed Exhibit P2, contained an Appendix which identified the erased writing. Most of the writing referred to amounts of money although there was another section which recorded “reinvested @ 5% per month”. The Plaintiff accepted that the erased section was in his handwriting. There was some further handwriting below that section which was not erased and was also in his handwriting.
The Plaintiff said that he wrote down the figures, which he later erased, at some time later when the Defendant was not present. He said he could not recall how long after the document, Exhibit P2, was prepared that he wrote the figures down. The Plaintiff said that in writing the erased figures down, he was calculating compound interest on the interest that he was to earn from his loan agreement with the Defendant. He acknowledged that it was not part of any agreement that he would be paid compound interest. He said that he erased the figures dealing with the compound interest calculations and the other endorsements when he realised the importance of the document and wished to maintain the document’s integrity.
The Plaintiff’s attempt to explain those erased figures which he said were referable to a calculation of compound interest was most unconvincing. I felt he was disingenuous in giving this evidence. With respect to the words written by him “reinvested @ 5% per month”, the Plaintiff’s evidence was that this was also written at a later time. Whilst he made attempts to explain the reason he had placed that endorsement on the document, in the end, the effect of his evidence is that he had no memory of the circumstances which caused him to place the words on the document.
As I said earlier, there was a substantial focus in the evidence regarding this document. Both the Plaintiff and the Defendant attempted to use the document to support their respective cases. In evaluating the evidence, I do not propose to descend into considerable detail provided by both the Plaintiff and the Defendant regarding Exhibit P2. In the end, I thought that the evidence given by the Plaintiff and the Defendant respectively regarding Exhibit P2 was most unsatisfactory.
The first point to be made about the Plaintiff’s evidence regarding the document is that it was vague. At times, he said that he had a memory of some part of the writing on the documents, for example, with respect to the figure “$4,500” which was part of the erased section of the document. He said that he had a memory that the Defendant told him this was additional interest to the interest that was identified in the figures contained in the middle column. I simply do not believe him. It was clear from his evidence regarding the document that he really had no recollection whatsoever of any discussion regarding its contents.
The Plaintiff’s attempt to explain the document was also confusing. His explanation for his inability to recall matters regarding the creation of the document and the conversations that would have taken place at the time was that it was simply a friendly discussion and that he was not very interested in the figures written down by the Defendant. He said that it was just a general conversation and that he did not actually go through the document at the time. This evidence in itself is implausible. At that time he had advanced to the Plaintiff the sum of $76,400. It would be expected that he would have been interested in any details provided to him regarding any earnings on the money advanced.
I formed the view that on the limited occasions that he said that he had an independent recollection of some of the contents of the document and of discussion with the Defendant regarding the document that in fact he had no recollection and was in fact reconstructing.
I thought the evidence of the Defendant regarding Exhibit P2 was also most unsatisfactory. As I said, it was his evidence that P2 was the first of about five or six similar documents which were created over the period of the arrangement with the Plaintiff and which were each prepared at the time he was paying interest to the Plaintiff from that business. The Defendant said that all of the erased material on the document was written down by the Plaintiff at the time of their meeting. He further said that with respect to Exhibit P2 he could recall the order in which the figures were written down by the Plaintiff and himself. However, he said he could not remember any of the conversation which took place at the time of the creation of the document. I did not believe his evidence that he could remember the precise order in which each of the parties placed figures on the document. He was reconstructing. His attempt to explain the figures on the document was vague and on many occasions confusing.
Like the Plaintiff, it was clear that the Defendant’s objective regarding the explanation of the figures was to demonstrate that it supported his case. I thought that some of his explanations of the figures, such as suggesting that he was recording interest payments made to the Plaintiff were plainly nonsense and were patently a reconstruction. An example of such evidence was his attempt to explain the interest component of the figures in the second column in the upper section of Exhibit P2. The explanation was completely inconsistent with his evidence regarding how the business, which he said he conducted with the Plaintiff, was operated. A further example was his explanation of the figures, in his handwriting, at the bottom left hand side of the document which he said were interest payments paid to the Plaintiff and his attempt to connect those figures with an amount of $13,660, which was in the handwriting of the Plaintiff and which was said to be the total of the interest component of the amounts in the second column in the upper section of the document.
Whilst both parties sought to use Exhibit P2 to support their respective cases, in my opinion, the respective evidence of the Plaintiff and the Defendant was so unsatisfactory, so confusing and so unconvincing that I have reached the conclusion that the document and the evidence relating to the document provides no assistance in determining the nature of the arrangement between the Plaintiff and the Defendant. However, the evidence given by each of them regarding the document has caused damage to the credit of both of them.
Cheque Butts for Drawn Cheques
I mentioned earlier that the only other documents created contemporaneously with the advances made by the Plaintiff to the Defendant were the cheque butts for relevant cheques drawn on the bank accounts of Zafiris & Associates Pty Ltd, the Superannuation Fund and Articore Pty Ltd. As I said earlier it was the Plaintiff’s evidence that he would draw cheques payable to cash from the various bank accounts, collect the cash and then hand the cash over to the Defendant. Some of the cheque butts drawn on the Superfund indicated that the drawer was the Plaintiff and there were on occasions a reference to a “cash loan”. There is also the endorsement on the cheque butts “loan to JK”. Also on the back of the preceding cheque butt which faced the relevant cheque butt there was a further endorsement “JK loan” and an arrow pointing to the relevant cheque butt.
On the cheque butts of Zafiris & Associates Pty Ltd were also endorsements “loan to JK” or “Loan to John Karydis”. These endorsements did not appear on every cheque butt but on a great number of them. The back of the preceding cheque butt also had the endorsement “JK Loan” and an arrow pointing to the relevant cheque butt. The same applied to the relevant cheque butts in the cheque books of Articore Pty Ltd. Some of the cheque butts had the endorsement “Cash loan to JK” with the endorsement on the back of the cheque butt facing the relevant cheque butt “JK” and an arrow pointing to the relevant cheque butt or “JK Loan” and an arrow pointing to the relevant cheque butt. Other cheque butts had an endorsement “Loan to JK” and once again on the back of the preceding cheque butt the endorsement “JK Loan” and an arrow.
In the course of cross-examination, the Plaintiff accepted that the endorsements on the face of the cheque butts referring to a “Loan to JK” and the endorsements on the back of the preceding cheque butt “JK Loan” and an arrow pointing to the relevant cheque butt were for the most part not written at the time of the drawing of the cheque. The Plaintiff accepted that all of these endorsements were generally in his handwriting and that the other writing on the cheque butts was his handwriting. There were a few exceptions where an endorsement was in the writing of the Plaintiff’s wife.
The Plaintiff’s evidence regarding the time when the endorsements referring to “loan” and “JK Loan” and the like were placed on the cheque butts and on the reverse side of the previous cheque butt was vague and uncertain. It was apparent when he gave an answer to nearly every question regarding the time the endorsements were placed on the various cheque butts that he was speculating and had really no memory of when they were written. At times he suggested it might have been the same day of the cheque or a day later. On another occasion he said it might have been a week later when he was going through his accounts. On other occasions he said he made the endorsements at the end of the use of the cheque book. The only time he responded definitely on the time period was in response to a leading question in examination-in-chief where he agreed with the assertion contained in the question that the endorsements were written on the cheque butts if not on the same day of the cheque then within a month of the cheque. His response was unqualified. His answer was “definitely”. (T.61.38). That answer was in complete contrast with the uncertainty he expressed in other answers dealing with the questions relating to the time when the endorsements were placed on the cheque butts. I do not accept it.

I thought the Plaintiff’s evidence regarding the endorsements on the cheque butts was less than satisfactory. There were other occasions when he was answering questions on the cheques and the cheque butts that I felt he was reconstructing although the answer gave the appearance that he was relying upon his memory.
A strange feature of the evidence was that the endorsements relating to a “loan” were not placed on the cheque butt at the time of the drawing of the cheque. It is something that might be expected of a drawer of a cheque. It is not as if the failure to refer on the cheque butt to a “Loan to JK” occurred on a small number of occasions. Generally the absence of such an endorsement was a feature of most of the cheque butts referable to relevant cheques. Whilst each of the cheques were drawn for the payment to the Plaintiff for cash, the Plaintiff was unable to explain satisfactorily why he did not adopt the practice of noting on the cheque butt that the funds were to go to the Defendant by way of loan, at the time that he drew the cheque.
Evidence of Dimitrios Piliouras
Mr Piliouras was called by the Defendant under subpoena. He said that he had acted as a financial advisor and stock broker for about twelve years. He said he had known the Plaintiff for about thirty years and that the Plaintiff was a good friend. Mr Piliouras said that he had been a friend of the Defendant’s father, Don Karydis, for about thirty years. He said that he also acted for Don Karydis as his stock broker in the past. Mr Piliouras said that he was also friendly with the Defendant but not to the same degree that he was with the Plaintiff and the Defendant’s father. He said that due to his friendship with the Plaintiff and Don Karydis he was uncomfortable about having to give evidence.
It was Mr Piliouras’ evidence that he had a conversation with the Plaintiff in his stock broker’s office at a time which he could not now recall, in which the Plaintiff informed him that his money was tied up at that time. He said that the Plaintiff told him that he had a friend who was able to obtain high interest rates from people who needed money desperately. Mr Piliouras said that he understood that the Plaintiff was giving his money to the friend. He said he was told by the Plaintiff that his friend would lend money out at rates of interest between 5% and 8% per month. He said that he was told that they were short term loans and that expensive cars were being held as security.
Mr Piliouras went on to say that the Plaintiff would not disclose the name of the friend. He said that when he raised the question of recovering his money the Plaintiff said that he had confidence in the friend but in any event if he could not obtain the money from the friend then he would receive it from the friend’s father. Mr Piliouras said that he later found out that the Plaintiff was advancing money to the Defendant but at the time of the conversation he was unaware of that. At one point in the conversation Mr Piliouras said that the Plaintiff suggested that he should advance some of his own money. Mr Piliouras said that he did not contribute any money.
It was clear from the evidence of Mr Piliouras that he had difficulty identifying even approximately when this conversation took place. He was certain that it took place earlier than 12 April 1999, being the date of the letter of demand by the Plaintiff to the Defendant. He said that Don Karydis had shown him that letter a short time after 12 April 1999. He mentioned that the conversation took place when he thought there was less than $100,000 advanced by the Plaintiff. However, his evidence regarding the topic appeared to be most uncertain. At one point, he conceded that he could have possibly assumed the figure of $100,000. I thought it was not evidence that could be relied upon.
It was the evidence of Mr Piliouras that there was another conversation between himself and the Plaintiff some time after the first conversation. He said that in this conversation the Plaintiff expressed concern about recovering his money. He could not remember even approximately when this conversation took place. He gave varying answers during the course of his evidence when attempting to place the conversation into a time frame.
During cross-examination Mr Piliouras was asked whether it was possible that two conversations took place within a year of April 1999, being the time of the Plaintiff’s letter of demand. His response was that he could not answer with confidence but he thought it was probably more than a year afterwards but he could not be exact. It is difficult to see how the second conversation took place before April 1998. It was only at that date that the first demand for repayment was made by the Plaintiff. Regarding the first conversation, taking into account the substance of the conversation, it is probable that it took place before April 1998. However, I am not prepared to accept that the conversation took place in late 1995 or even a little later. Mr Piliouras’ evidence was too vague on this topic to make such a finding.
I thought that Mr Piliouras’s evidence regarding the second conversation was most confusing. At one stage he mentioned that he thought the Plaintiff said at that time there was some $300,000 or more owing to him. At times he appeared to be uncertain as to whether in fact the $300,000 was mentioned and at other times he appeared more certain that the sum of $300,000 was mentioned. In this same context he appeared to give evidence that the Plaintiff had mentioned some interest that was also owing. I say “appeared” because his evidence in relation to that matter was also most confusing and uncertain. In the end, I felt that he was so uncertain and confused about the question of whether the Plaintiff mentioned $300,000 or more and the question of whether he mentioned interest in speaking about the amount owing at that time that his evidence on those maters could not be relied on.
The Plaintiff recalled having a conversation with Mr Piliouras regarding advancing money. He said that he told Mr Piliouras that he was in the business of making big interest. He said he did not remember whether he mentioned the use the other person was directing the money. He said that the only memory he had of the conversation was that he told Piliouras that he had loaned money to this other person. My impression was that the Plaintiff had little or no memory of the conversation he had with Mr Piliouras.
I will return to the evidence of Mr Piliouras when I come to evaluate the Plaintiff’s evidence and the Defendant’s evidence. At that time I will make some further observations regarding the credit of Mr Piliouras.
Sorrells Vineyards Supreme Court Proceedings.
I mentioned earlier that the Plaintiff demanded from the Defendant the return of the money owing to him in April 1998. This was the time when the Plaintiff became involved with the acquisition of land at Currency Creek with a person called John Likouresis for the purpose of developing a vineyard on the land. Throughout these proceedings, the land has been referred to as “Sorrells Vineyards”. It was the Plaintiff’s evidence that he needed the return of his money in order to meet his share of the acquisition costs of the land and his share of the initial cost of developing the land.
Later, a dispute arose between the Plaintiff and John Likouresis and the Defendant’s father Don Karydis regarding the rights to shares in the land and the development. It is alleged by the Plaintiff in the Supreme Court proceedings that Don Karydis had advanced him $160,000 because he was short of capital due to the failure of the Defendant to repay the Plaintiff. From the Statement of Claim, which was tendered in evidence, the Plaintiff alleges that he transferred one half of his half interest in the project to Don Karydis as security for repayment of the $160,000 and that Don Karydis agreed to return the interest transferred when he was repaid. It seems from the Defence filed that Don Karydis denies that there was such an arrangement and claims that he is entitled to the legal and beneficial interest in the land.
The Sorrells Vineyards proceedings were commenced on 12 June 2001. On that same day the Plaintiff swore and filed in the Supreme Court an Affidavit in support of an application for an interim injunction, to prevent Don Karydis from transferring his interest to John Likouresis. The Statement of Claim and the Affidavit were prepared by Mr George Carabelas, the Plaintiff’s solicitor both in those proceedings and in the current proceedings.
During the course of his cross-examination, the Plaintiff was referred to a number of paragraphs of his Affidavit. In paragraph 7 he deposed to the arrangement with the Defendant in which he said that the agreement was that he would advance moneys to the Defendant to be used for the purpose of investment in real estate or other projects “ … with a general understanding that I would be receiving some share of any profits that may be achieved through such investment”. It was put to the Plaintiff that such a description of the agreement with the Defendant was inconsistent with his evidence in these proceedings in that in these proceedings, he said that on each occasion he advanced the money it was by way of loan with the agreement that he would receive at least 30% interest per annum from the Defendant.
There were other paragraphs of the Affidavit to which the Plaintiff’s attention was directed which were said to be inconsistent with the evidence he had given in these proceedings. In paragraph 8 of the Affidavit the Plaintiff said that he had advanced to the Defendant approximately $230,000 for the purpose he described in paragraph 7 and as at July 1998 the Defendant was indebted to him for the sum of approximately $230,000. In paragraph 15 of the Affidavit the Plaintiff referred to the arrangement that he had with Don Karydis and deposed that part of the arrangement was that Don Karydis would provide him with money to enable him to complete his obligations under the contract to purchase the land but the amount was not to exceed $230,000 which he said was owing to him by the Defendant.
In paragraph 20 of the Affidavit the Plaintiff deposed that had not been repaid the amount of approximately $230,000 by the Defendant and that he had reached agreement with the Defendant that in lieu of him paying the sum of approximately $230,000 the Defendant would transfer the property situated at 6 Ebor Avenue, Mile End, which he said had an equity of approximately $230,000.
I found the Plaintiff’s explanations for the inconsistencies between his evidence in this Trial and the statements contained in his Affidavit of 12 June 2001 to be most unconvincing. His lame explanation for the use of the word “profits” in paragraph 7 is that his “ … understanding of profits was interest.” He said that with respect to paragraph 8, that on reflection he should have included a reference to interest in the paragraph (T. 179.8). He said that as far as he was concerned the amount of $230,000 was principal only. When confronted about the terms of paragraph 20 in which he again repeated that there was approximately $230,000 owing by the Defendant, he offered the most unconvincing explanation that it was the only amount that he was sure about as he had not sat down and calculated the interest that was owing to him. (T.233.6). I thought his explanation regarding the reference to the net equity of $230,000.00 in paragraph 20 to be both evasive and unbelievable.
During the course of cross-examination of the Plaintiff he was also referred to the Statement of Claim in the Sorrells Vineyards action and in particular paragraph 12 which pleaded the arrangement between the Plaintiff and the Defendant. Whilst there are differences between the description of the agreement between the Plaintiff and the Defendant in paragraph 8 of the Affidavit and paragraph 12 of the Statement of Claim there are also consistencies. There is no reference in paragraph 12 to the agreement including a term that the Defendant would pay 30% per annum interest on the advances. It pleads that the Defendant was to pay to the Plaintiff “… any profits or income generated …” by the investment of funds in various ventures. Whilst the words contained in the pleadings are those of the Plaintiff’s solicitor, Mr Carabelas, and not that of the Plaintiff, there are those similarities between paragraph 8 of the Affidavit and the pleadings.
Mr Carabelas, the Plaintiff’s solicitor gave evidence. He said that with respect to paragraph 12 of the Statement of Claim he used a note he made during a telephone conversation with the Plaintiff on 11 June 2001, as the basis for that pleading. He said that his note read that $230,000 was given to the Defendant to invest on the Plaintiff’s behalf. Mr Carabelas also said that he was consulted by the Plaintiff in July 2000 with respect to the moneys that the Plaintiff advanced to the Defendant. He said that his note that he took at the time of that consultation is that the Plaintiff said that he lent the Defendant money in 1995 and that he was given notice of the same. He said he was not instructed to do anything at that time. Mr Carabelas said that in February 2001 he closed the file because he had not received any further instructions from the Plaintiff in relation to the matter.
Evaluation of the Plaintiff’s Evidence
The Plaintiff’s evidence is that on each occasion that he advanced money to the Defendant it was orally agreed that the money would be repaid by the Defendant upon demand being made. In other words, that each advance was a loan to the Defendant. The Plaintiff’s evidence was also that it was agreed on each occasion that money was advanced the Defendant would pay interest at a minimum of 30% per annum.
On the other hand, the Defendant says that he and the Plaintiff entered into a partnership to carry on the business of money lending. It is his evidence that the advances made by the Plaintiff were capital contributions to the partnership. It is the Defendant’s evidence that both he and the Plaintiff shared equally in the interest earned by the lending of the money for short periods. Furthermore, the Defendant said that he paid the Plaintiff his share of the interest earned from the money lending business on a regular basis.
I regret to say that I was not impressed with the evidence of either the Plaintiff or the Defendant regarding the nature of the agreement struck between them. Earlier in these reasons, when dealing with specific topics, I have been critical of the evidence of both the Plaintiff and the Defendant. I now wish to address some additional matters relevant to the evaluation of the credit of both the Plaintiff and the Defendant. I will also briefly return to those issues that I have already considered.
I mentioned earlier that the Plaintiff’s claim was largely for the recovery of interest. His evidence regarding the agreement for the payment of interest appeared to move between the assertion that the agreement was to pay 30% per annum interest on each of the loans, and an assertion that it was agreed that the Defendant would pay a minimum of 30% per annum interest and the Plaintiff was satisfied to receive 30% interest.
On occasions, I felt that the Plaintiff’s evidence regarding recovery of the interest he said was due to him was implausible. Despite acknowledging in his evidence that the Defendant told him from time to time during the period up to April 1998 that he was making substantial profits from his investments, the Plaintiff said that he did not seek the payment of any interest due to him because he did not need it during that period. This was a period of approximately three years. Indeed, he said that at the time of the creation of a mortgage over the Defendant’s Mile End property and the sale of the property, he had not calculated the interest owing to him at that time. His evidence was that it was not until the time that he instructed Mr Carabelas to institute these proceedings that he sat down and calculated the interest.
Furthermore, a year after he first demanded repayment of the money owing to him, the Plaintiff wrote a letter on 12 April 1999 demanding a minimum repayment by the following Monday. In that letter he stated “… I have run out of waiting time for my $250,000”. The $250,000 mentioned, is clearly a reference to the advances. Again, there is no mention of any interest owing to the Plaintiff. By that time he had ample opportunity to calculate interest that was owing to him and to include that in the reference to money which he said was due to him. The whole tenor of the letter is that the Defendant was indebted to him for only $250,000.
The Plaintiff’s explanation for the creation of the document Exhibit P2, was that at the time of the last payment on 18 October 1995 he asked the Defendant how much was owing to him and in response to that question, the Defendant prepared the document P2. I have already mentioned when I was considering the Plaintiff’s evidence on P2, that he had very little memory about its contents and the conversation which took place at the time it was being prepared. In view of his poor memory of the circumstances surrounding Exhibit P2 I cannot accept his evidence regarding the purpose for which P2 was created. It is but one example of the Plaintiff reconstructing but giving the impression that he was relying on his memory. I do not stay to repeat the criticism I made of the Defendant’s evidence regarding Exhibit P2, earlier in these reasons. I found his evidence on Exhibit P2 most unsatisfactory.
With respect to the endorsements on the cheque butts, I have earlier expressed the view that the Plaintiff’s evidence regarding the timing of these endorsements was less than satisfactory. They were certainly not contemporaneous endorsements. The evidence is not of sufficient clarity for an approximate date to be identified in relation to when these endorsements were made. I certainly do not accept his evidence that they were all made within one month of the drawing of the cheques. In the end, the evidence regarding the endorsements on the cheques are of little or indeed any evidentiary assistance. Mr Manetta, Counsel for the Plaintiff, submitted that their evidentiary value was to rebut any suggestion of recent invention if it was accepted that the endorsements were made on the cheque butts within a reasonable approximate time to the drawing of the cheques. As I have been unable to reach a conclusion regarding when the endorsements were made, in my view, I do not have the necessary evidentiary value to conclude that they do rebut the suggestion of recent invention. However, I do not accept the submission of Mr Sallis, Counsel for the Defendant, that the endorsements were a fraudulent attempt to deceive the Court.
I felt the evidence of Mr Piliouras challenged the credit of the Plaintiff. I thought that Mr Piliouras tried to tell the truth, however, as I mentioned earlier, there were a number of aspects of his evidence which gave me cause for concern regarding his reliability. However, I accept his evidence that in the first conversation that he held with the Plaintiff he was told that the Plaintiff had advanced his funds to a friend; that the friend was lending the money out at rates of interest between 5% and 8% a month; that the loans were short term and cars were being used as security. It is clear that in referring to “the friend” that the Plaintiff was speaking of the Defendant.
The Plaintiff’s evidence was that he understood the moneys that he advanced were being used for development projects involving the Defendant and his father Don Karydis. He said that he had never been informed that the moneys were being used by the Defendant for short term loans at high interest rates until some time in mid-1998 when the Defendant told him where he had directed the money.

Whilst it is impossible to place a time when this conversation took place with any degree of precision, I am satisfied, as I said earlier, that it is likely that it took place prior to April 1998. It is a conversation which is inconsistent with the Plaintiff’s evidence that he was not aware that the Defendant was involved in short term money lending business.
There is further evidence which challenges the credit of the Plaintiff. That evidence is the prior inconsistent statements contained in the Affidavit of the Plaintiff sworn on 12 June 2001 in the Sorrells Vineyards Supreme Court action. I spent some time earlier referring to the contents of the Affidavit. I do not intend to revisit those matters in any detail now. All that needs to be said is that the statements contained in paragraphs 7, 8 and 15 regarding the terms of the agreement he had with the Defendant are inconsistent with the Plaintiff’s evidence in this Court. The Plaintiff’s explanations for those inconsistencies were most unsatisfactory. I do not accept such explanations. Furthermore, the Plaintiff’s statements in paragraph 20 of the Affidavit are inconsistent with his evidence in this Court regarding the transfer of the house. In my opinion these inconsistencies have a marked negative effect on the credit of the Plaintiff.
As I said earlier the substantial part of the Plaintiff’s claim is for interest. As a result his evidence regarding that claim is important. As expressed earlier in these Reasons it was not in dispute between the Plaintiff and the Defendant that at about the time the Defendant granted a mortgage to the Plaintiff over his Mile End property, it was agreed that the amount owing was about $232,000. This was the amount which was inserted in the mortgage as the amount payable pursuant to the mortgage. What is in dispute, as I said, is that the Plaintiff’s evidence is that this was an approximation of the principal owing and that the amount owing for interest was not included although it remained payable by the Defendant. He said that he did not have any amount calculated for interest and said to the Defendant that they should put the $232,000 in the mortgage and calculate the interest at a later stage. He accepted that at the time of the mortgage he was desperate to obtain all of the money owing to him, including outstanding interest.
In July 2001 the Ebor Avenue, Mile End property of the Defendant was transferred to the Plaintiff. He said that at that time the Defendant agreed that he owed additional money and that when he had some further money he would speak to the Plaintiff and at that time they would work out exactly what additional money was owing. The Plaintiff said that he did not calculate the interest outstanding until he instructed Mr Carabelas to commence these proceedings. He said he had never made a demand for payment of interest at any earlier time.
On one occasion, during cross-examination the Plaintiff said that whilst he had made no demand for interest the Defendant had indicated at one point that he owed the Plaintiff about a half a million dollars. He could not place a time on when he said that conversation took place.
I found the evidence of the Plaintiff regarding the recovery of the interest to be implausible. It would have been expected that he would have calculated the interest at the time of the mortgage and at the time of the transfer of the house. On his evidence he first began to earn interest from the time of the first loan back in 1995. It was in 2001 when the mortgage was granted and the house was transferred but the Plaintiff still did not trouble himself to calculate the amount of interest owing. Indeed, as I said, he did not calculate the interest until such time as he instructed his solicitor to bring proceedings in 2002.
I did not believe his evidence that he had discussed the outstanding interest with the Defendant in the manner he described. I should add, as I mentioned earlier that the evidence that he never called for payment of any interest in the period up to April 1998 as he had no need of the money, despite hearing the Defendant was making large profits, was also implausible.
Evaluation of the Defendant’s Evidence
I have already commented upon the absence of any documentary evidence to support the Defendant’s evidence that he and the Plaintiff were engaged in a partnership which conducted a money lending business. He gave evidence regarding a black book which recorded relevant information about what he said was the business of the partnership but this was destroyed. Another book which he used to record information following the time when he said the partnership relationship terminated was also destroyed by the Defendant. I referred earlier to the relevance of the information transferred from the original black book to that book. I accept the Defendant’s evidence that he was engaged in short term money lending. I also accept his evidence regarding the existence of the black book. I have been extremely critical of the Defendant’s evidence explaining his reasons for destroying the two books. As I said, I simply do not believe the reasons that he gave for the destruction of the books.
It might have been expected that the Defendant would produce partnership income tax returns to support his case. When he was asked in cross-examination regarding the tax returns he declined to answer on the grounds that such an answer might tend to incriminate him. He was entitled to exercise that right. No adverse inference can be drawn from the fact that he exercised such a right. During submissions, Counsel for the Defendant stated that the absence of any contemporaneous documents could indicate an intention of keeping the business secret from everyone. I suspect that included in “everyone” is the Commissioner of Taxation. Be that as it may, I have been left with a case presented by the Defendant which has no contemporaneous documents tending to support his evidence that there was a business being operated by the Plaintiff and himself.
The Defendant also exercised his right to remain silent when he was asked about the average monthly earnings on the loans arising from the business which he said he carried on with the Plaintiff. It was a relevant question going to the very issue in this case, namely the nature of the agreement. In declining to answer on the grounds that the answer might tend to incriminate him, cannot lead to any adverse inference being drawn against him. However, once again another piece of evidence relevant to the consideration of the central issue of the case is not available.
I have already mentioned Exhibit P2 which was the document containing a number of numerical calculations. As I said, apart from the cheque butts, this was the only document introduced into evidence which was contemporaneous with the agreement entered into between the Plaintiff and the Defendant. Both parties attempted to use the document to support their credit. In both cases they failed. I thought some of the evidence that the Defendant gave about the document was simply unbelievable, some of it nonsense and some of it confusing. I have mentioned my criticisms of the Defendant’s evidence earlier in these Reasons. So I do not intend to repeat them, save for one matter dealing with reinvestment.
Part of the erased section of Exhibit P2 which came to light through the expert evidence of the forensic scientist Glyn Smith, were the words and figures, “reinvested @ 5% per month”. The Defendant said that he could not recall the discussions which took place relevant to this endorsement but indicated that he and the Plaintiff “ … always used to reinvest money back in again …” (T.678.13). He said the endorsement was consistent with discussions between the Plaintiff and himself regarding reinvesting money in the business. It is clear that the Defendant thought that this was an important endorsement which supported his case.
The Defendant did not challenge the Plaintiff’s evidence that the source of the funds which were advanced to the Defendant came from the bank accounts to which I have referred earlier in these Reasons. If the Plaintiff reinvested some of the interest earned from the business, then it is clear that the Plaintiff would have returned to the Defendant part of the cash which the Defendant said that he was handing to the Plaintiff from time to time. It was not suggested to the Plaintiff that part of the money which was being sourced from the various bank accounts had its genesis in the cash payments of interest which the Defendant said he handed to the Plaintiff from time to time. Indeed, the entire tenor of the Defendant’s evidence is that this was a cash business and that the business and its proceeds were never to see the “light of day”. Furthermore, it was the Defendant’s evidence that the Plaintiff would approach him from time to time and say he had more money to advance to the Defendant.
When a closer analysis is made of other evidence regarding the source of the advances made by the Plaintiff it becomes clear that it is most unlikely that any money advanced by the Plaintiff could have been sourced by any reinvestment of cash arising from the Plaintiff’s share of interest. The amount that he did advance was accountable from the various bank accounts. In my view, the Defendant tailored his evidence regarding reinvestment to fit with the endorsement on Exhibit P2. I simply did not believe his evidence regarding reinvestment of interest.
There were a number of inconsistencies in the Defendant’s evidence. I do not stay to chronicle each one. However, I provide the following as an example. As I have mentioned the Defendant’s evidence was that he would regularly pay to the Plaintiff in cash his share of the interest from the money lending business. It was not in dispute between the Plaintiff and the Defendant, that about March 2001 a figure of $232,000 was agreed upon by the Plaintiff and the Defendant as owing to the Plaintiff. The dispute lies in the fact that the Plaintiff asserts that the amount was principal only and did not include the outstanding interest up to April 1998, the date when demand was made. However, the Defendant’s evidence is that the figure of $232,000 was a final figure agreed upon for all money owed by the Defendant to the Plaintiff. His initial evidence was that the amount of $232,000 was the Plaintiff’s contribution to the business. He then said there would have been some “… a sort of interest factor or profit …” to which the Plaintiff was entitled. (T.644.17). He said that such an interest component was also included in the amount agreed upon. However, a little later in his evidence he returned to his original proposition that the amount of $232,000 presented as owing to the Plaintiff by way of advances that he had made and did not include interest. (T.655.2-656.27). I also felt this was an example of the Defendant shifting his evidence (to include an interest component) because he thought that was his best position. However, by the time the subject was again raised he had overlooked his earlier evidence and reverted to the initial position that it was only capital.
From time to time I also found the evidence of the Defendant implausible. One example was his evidence that at one point he offered the Plaintiff payment of some $60,000 as part of the money that was owed to the Plaintiff but the Plaintiff said that as he could not obtain the total amount due to him then the Defendant should reinvest the money back into the business. It makes no sense that a person in the position of the Plaintiff being desperate to recover his money would not accept any amount offered to him in part payment.
Other Issues Relating to the Credit of the Parties
During the course of these Reasons I have referred to a number of issues which were relevant to the credit of each of the parties. There are others to which I have not referred. An example of a credit issue to which I have not referred is the Bogus Contract. I have not dealt with these other issues as I felt that those issues I have already dealt with are sufficient to enable me to reach conclusions on the credit of each party.
What was the Nature of the Agreement? – Conclusion
I have been highly critical of the evidence of both the Plaintiff and the Defendant. The onus is upon the Plaintiff to prove on the balance of probabilities that the advances were loans repayable upon demand and that until repaid the loans would bear interest at the rate referred to earlier.
There is no onus upon the Defendant to prove that the advances were capital contributions to a partnership. However, that is the finding which Mr Sallis urged upon me. He submitted that if I was concerned about the reliability of the evidence of either the Plaintiff and the Defendant then I should look outside their evidence and see if there is other evidence from an outside source that provides support. It was here that he turned to the evidence of Mr Piliouras. He submitted that his evidence supports the Defendant’s evidence in that he recounted a conversation in which the Plaintiff admitted to being engaged in money lending with the Defendant.
I mentioned earlier that I was troubled by the reliability of the memory of Mr Piliouras. He gave me the impression that he was trying to do his best. His evidence regarding the first conversation he had with the Plaintiff was at times confusing. I think the best that can be extracted from it is that he was told by the Plaintiff that his money was tied up and that he had given the money to a friend. Mr Pilouras said that the Plaintiff told him that the friend was lending money out at interest rates of 5% to 8% per month on short term loans. Further, he said that the Plaintiff mentioned that there was security by way of motor vehicles.
On one view of the evidence it might be argued that Mr Piliouras’ evidence lends some support to the Defendant’s evidence that he and the Plaintiff were in business together lending money at high interest rates. In my opinion, however, on a closer analysis of his evidence, Mr Piliouras’ evidence does not go that far. His evidence is that the Plaintiff was advancing money to the Defendant and it was the Defendant who was lending the money out at high interest rates. There is a lacuna in his evidence, in that it does not go as far as to say that the Plaintiff told him that he was receiving between 5% and 8% for the money he advanced to the Defendant. In other words that he was in business with the Defendant. It may be open to argument that this can be inferred, particularly as Mr Piliouras said that the Plaintiff suggested that he should advance some of his own money. However, on the other hand, it can also be argued that there is a sufficient ambiguity in his evidence to suggest that it is not inconsistent with the Plaintiff’s evidence that he lent the money to the Defendant at a high rate of per annum interest. In other words that the high rate of interest earned by the friend enabled the Plaintiff to return a high rate of interest from advancing the money to the friend. Certainly Mr Manetta urged me to adopt that position.
It can be seen from my evaluation of the Defendant’s evidence that I was completely dissatisfied with his evidence regarding the nature of the agreement or agreements between the Plaintiff and himself. I found it to be completely unconvincing. The evidence of Mr Piliouras does not have that quality of reliability which could pick the evidence of the Defendant up by the bootstraps to the point where I could conclude that there was a partnership agreement between the Plaintiff and the Defendant for the conducting of a money lending business.
Having reached that conclusion I return to my initial observation that the onus lies on the Plaintiff to prove his case. In my opinion the Plaintiff has not discharged his onus. I do not accept that the agreement (or agreements) was one of loan together with an agreement to pay interest at the rates specified. I suspect that the agreement was closer to that described by the Plaintiff in paragraph 7 of the Plaintiff’s Affidavit of 12 June 2001 in the Sorrells Vineyards proceedings, although I acknowledge that it can be argued that on one view the evidence of Mr Piliouras would bring that conclusion into question. In any event in the end, it is of no moment. I am not satisfied on the balance of probabilities that the Plaintiff has proved that an agreement (or agreements) of the nature described existed. Indeed, I go further in that I am satisfied on the balance of probabilities that whatever the nature of the agreement (or agreements) it did not include a term that the Defendant would pay interest on the money advanced to the Defendant at the rates specified by the Plaintiff.
Was the Transfer of the Mile End House in Satisfaction of the Defendant’s Liability?
My conclusion that the Plaintiff was never owed any interest by the Defendant undermines the Plaintiff’s evidence that the transfer of the Mile End house was not in full satisfaction of all moneys owing to him. It also tends to support the Defendant’s evidence that the transfer of the house was in full settlement of moneys owing to the Plaintiff.
As I said earlier, the evidence contained in paragraph 20 of the Affidavit in the Sorrells Vineyards proceedings is inconsistent with the Plaintiff’s evidence. Paragraph 20 of the Affidavit is largely consistent with the Defendant’s evidence that the parties, in valuing the house, reached a position where the net equity was approximate to the amount of $232,000 owing by the Defendant to the Plaintiff.
I am satisfied that the transfer of the Mile End house by the Defendant was in full satisfaction of any monetary liability which the Defendant had to the Plaintiff.
Result
There will be judgment for the Defendant. I will hear the parties on the question of costs.

[2004] SADC 36

5 March 2004