Zarbalas v Vergos

[2017] NSWDC 439

District Court

New South Wales

Medium Neutral Citation:	Zarbalas v Vergos [2017] NSWDC 439
Hearing dates:	2, 3 and 6 November 2017
Date of orders:	07 November 2017
Decision date:	07 November 2017
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1)   Judgment for the plaintiff in the sum of $80,733.14 inclusive of interest. (2)   Dismiss the cross-claim for the occupation licence fee. (3)   Dismiss the claim for the caretaker fee. (4)   Defendant/cross-claimant to pay the plaintiff’s/cross-defendant’s costs of the proceedings, including the costs of the cross-claim.
Catchwords:	COMMERCE – loans – receipts - sham - caretaking fee - occupancy fee – penalty interest
Legislation Cited:	Civil Procedure Act 2005, s 100
Cases Cited:	Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; (2016) 333 ALR 569
Category:	Principal judgment
Parties:	Vasilios Zarbalas (plaintiff/cross-defendant) Kosta Vergos (defendant/cross-claimant)
Representation:	Counsel: Mr D Allen (plaintiff/cross-defendant) Mr R Goodridge (defendant/cross-claimant)   Solicitors: Slattery Thompson (plaintiff/cross-defendant) H Danalis & Co. (defendant/cross-claimant)
File Number(s):	2016/167942
Publication restriction:	None

Judgment

A. Introduction

1. The proceedings involve three claims. In the first, Vasilios Zarbalas says that he lent Kosta Vergos $66,000 and has not been repaid. Mr Vergos disputes that he received $56,000 and says that the other $10,000 was repaid. Mr Zarbalas sues for the loan moneys with interest.

2. The other part of the proceedings concerns obligations said to arise from Mr Zarbalas staying at Mr Vergos' warehouse premises from February 2012 to November 2014. Mr Zarbalas alleges that Mr Vergos promised to pay him $20 per hour for caretaking, and initially claimed an amount equal to $20 multiplied by 24 hours multiplied by the number of calendar days in that period of two years and nine months. Mr Vergos alleges that Mr Zarbalas owes him $500 per week for that same period, as an occupancy licence fee.

3. There are no documents that evidence the caretaking fee or the occupancy fee. In respect of the loan, there are documents signed by Mr Zarbalas and Mr Vergos and witnessed by Spyros Andrews, a Justice of the Peace, which confirmed the loan. Those documents are not in dispute. There are also receipts reportedly signed by Mr Zarbalas indicating that the loans were repaid. Those documents are rejected as forgeries by Mr Zarbalas. Mr Vergos does not claim that the $56,000 was repaid and admits that he signed the documents evidencing the loan. He says that apart from the $10,000 loan, which he said was repaid, the loan documents were a sham with no money changing hands and the receipts were evidence that no money was owed.

B. Issues

4. Accordingly, the issues can be listed as follows:

1. Did Mr Vergos receive loans totalling $66,000 from Mr Zarbalas, and was $10,000 repaid?

2. Did Mr Vergos agree to pay Mr Zarbalas $20 an hour and if so, for how many hours is Mr Zarbalas entitled to be paid?

3. Did Mr Zarbalas agree to pay Mr Vergos $500 per week to stay at the warehouse for his period of occupation?

5. Each issue involves a consideration of the relevant circumstances, including documents. The credit of Mr Zarbalas, Mr Vergos and the other witnesses is important. It is convenient to set out the loan documents and then deal with the questions of credit.

C. The loan documents

6. The originals of the loan documents were handwritten by Mr Zarbalas in an ornate calligraphic style and, omitting the signatures of Mr Zarbalas, Mr Vergos and Mr Andrews, and Mr Andrews' stamp of his credentials, read as follows (errors in originals):

Document 1

“This is to certify that, I Kosta Vergos of 15 Cressy street Canterbury, of N.S.W, borrow ten thousand dollars $10.000 from Vasilios Zarbalas with the promise to return the money to Mr Zarbalas within two weeks of time from today 28 of August 2013 Both agree to above.

Witness Borrower Lender”.

Document 2

“This is to verify that I Kosta Vergos of 15 Cressy street Canterbury of Sydney, N.S.W borrow sixteen thousand dollars $16.000 from V. Zarbalas, with the promise to return this money to V. Zarbalas within four weeks of time, from today.

Both parties agree to the above and sign today Tuesday 13, of January 2014, in Sydney.

Borrower Witness Lender”.

Document 3

“This is to confirm that I Kosta Vergos of 15 Cressy street Canterbury of Sydney, N.S.W borrow twelve thaousand dollars $12.000 from V. ZARBALAS, with the promise to return this money to V. ZARBALAS within two weeks of time commence from today.

Both parties agree to the above and sign today Wednesday 20 of January 2014 in Sydney N.S.W”

…
Borrower	Witness”.

Document 4

“This is to affirm that I Kosla Vergos of 15 Cressy st Canterbury of Sydney N.S.W, borrow twentyeight thousand dollars $28.000 from Vasilios ZARBALAS with the promise of returning this money to V ZARBALAS within five weeks of time, commenceing today. It is agreed that should under any cirumstance not to return the money on the right time, then I shall pay a compensation of a $1.000 each week until the day of returning all the money to V. Zarbalas. Both parties agree to above and signing today monday 12th of 5th 2014 Sydney N.S.W

Borrower Witness 12/5/2014 Lender”.

7. There was one further document which I will refer to as Document 5, handwritten by Mr Zarbalas in the same style, and signed by Mr Vergos and Mr Andrews in the following form (with the same omissions of signatures, et cetera, and errors in original):

“Statutory Declaration

I Kosta Vergos of 15 Cressy st Canterbury of Sydney N.S.W, declare that, Vasilios Zarbalas does not owe me any money neither ather material nor obligations.

Tthis declaration present only the trueness, and it is irrevocable. Signing with conscietiousness in the presence of the witness today 22nd of April 2014 Sydney N.S.W

Declaration Witness 12/5/14”.

D. Witnesses and credit

8. Spyros Andrews and Peter Nugent were called first by the plaintiff.

(a) Spyros Andrews

9. Mr Andrews, an accountant who practised in the area proximate to where Mr Vergos lived, gave evidence of witnessing the signatures on each of the five documents. He was an independent witness with no particular connection to either party. He witnessed the loan agreements, which were not disputed. His evidence included reading the documents to Mr Vergos in English and Greek and asking Mr Vergos, "Have you received the money from [Mr Zarbalas]?" On each occasion Mr Vergos answered "Yes". This evidence of the question and answer was weakened in his oral evidence. He accepted that he might not have expressly asked this question on each occasion, but stated, "[T]hat everybody understood that Mr Zarbalas had lent money to Mr Vergos". Presumably this understanding was derived from what he observed as he read out the documents in English and in Greek to Mr Zarbalas and Mr Vergos. He accepted that he might not have read out every word in Greek.

10. I would not place great reliance upon Mr Andrews' recollection in his affidavit of the words he said several years ago. Those words were of no particular significance to him. He conceded that his knowledge of the matters was more impressionistic than derived from express conversations and where at first he said the conversation occurred at least on the initial occasions, he later conceded that this was just his understanding. His affidavit had been prepared by the plaintiff's representative, although he made some minor amendments.

11. Mr Andrews' evidence concerning reading aloud the documents and the signing of them was not challenged. The authenticity of the documents and the signatures was not challenged, and I accept that no one indicated to Mr Andrews that the documents were a sham, and he understood them to be genuine.

(b) Peter Richard Nugent

12. Peter Richard Nugent gave evidence of travelling to the Warragamba warehouse property of Mr Vergos with Mr Vergos "once a week…[or] once a month". He gave evidence of Mr Vergos telling him some three years ago that Mr Zarbalas was looking after his property, feeding the dogs and sleeping in a tent seven days a week, apparently because he (Mr Vergos) was worried about break-ins.

13. Mr Nugent was an argumentative and less than impressive witness. He was challenged about his Sydney address, given that he had used a Queensland Driver Licence to establish his identity in recent times, including when he signed his affidavit, but was reluctant and unable to provide any proof of his local address. His account of the conversation used the term "the plaintiff" repeatedly as part of the direct speech used by Mr Vergos, which was anachronistic as Mr Zarbalas was not then a plaintiff. Mr Nugent also accepted that he had a bad memory. He spoke about people breaking into the warehouse and when asked how he came to know that, he said, in cross-examination, "Something along those lines was said" and in re-examination, "I think Vergos told me, it was a story going around, I'm not a mind reader".

14. I regarded it as unsafe to rely upon Mr Nugent's evidence, particularly of a conversation years past. Neither Mr Nugent’s nor Mr Andrews' evidence is especially probative of any of the issues in the proceedings.

(c) Vasilios Zarbalas

15. Mr Zarbalas generally appeared to answer questions to the best of his ability. His demeanour was not such as to persuade me to reject his evidence, however, some of his answers raised concerns. Mr Zarbalas' claim for caretaking fees was for 24 hours per day every day. He asserted in evidence that he would sleep only two hours per day from 6am to 8am, and appeared to accept that during those two hours he was not a caretaker, so that his claim would be only for 22 hours a day. He also accepted that he regularly visited the city to withdraw his pension funds from a city branch of the Commonwealth Bank. His bank statements indicated that that occurred at least fortnightly and sometimes as often as three times per week.

16. Mr Zarbalas said that the travel would take two hours each way. He would also travel to Penrith to get food for himself and the dogs on the Warragamba premises, with the round trip to Penrith taking two to three hours. How those times, when he was absent from the Warragamba property, were consistent with his claimed hours as a caretaker was not explained.

17. Mr Zarbalas said that in about 2013 he had about $60,000 or $70,000 in cash which, despite the occasional problem of thieves at the warehouse, he was content to leave outside at the site, albeit hidden, whilst he journeyed away from the warehouse. He was not asked where he would hide the cash. His explanation for the regular trips to the city to have a coffee and to withdraw his pension funds whilst he retained a large amount of cash at the Warragamba warehouse property was to the effect that it was his choice to live his life that way and that he wished to keep this large sum of cash separate and use his pension for living expenses. I did not find this explanation unbelievable. He was not asked whether the cash was disclosed to Centrelink.

18. Mr Zarbalas could not explain why, in the years after first commencing what he said was his caretaking role in February 2012, he had made no written claim for unpaid wages, not during his time at the warehouse, not after he left, and not in his original statement of claim in 2016. Only when a cross‑claim by Mr Vergos was made claiming the occupancy fee did Mr Zarbalas first raise a claim based on an agreement that he was performing caretaking duties.

19. Mr Zarbalas said that after the first four days living inside the warehouse, he was troubled by the heat. So he set up a tent and thereafter lived outside. In his affidavit, he attributed this to the heat, although in cross-examination other reasons were added: dead cats, old food, smells in the warehouse, the asbestos roof and walls of the warehouse, and that the water was cut off because Mr Vergos did not pay the bill. He said that he left his tent behind when he left in November 2014, because it was destroyed, but gave no evidence of when it was destroyed or of his means of shelter during the period between the time of his tent's destruction and his departure.

20. Mr Zarbalas said that after he moved outside, he could not access the warehouse, so he had no bathroom facilities, although he gave no explanation as to why his key with which he had been provided was taken by Mr Vergos. Mr Zarbalas not having a key to the warehouse sat uncomfortably with his claim to being a caretaker of the warehouse.

21. Mr Zarbalas also attributed his inability to use the bathroom facilities in the warehouse to them being hard or impossible to access because of the location of refrigerators and other items inside, although that would seem immaterial if he had no key. He did not accept that any of the personal items in the warehouse belonged to him, at first stating that he "did not recognise it" as his furniture. He said the dogs and cats lived outside the warehouse.

22. Mr Zarbalas received a rental subsidy from Centrelink, which continued after he had moved to Warragamba. He could not recall if he had notified Centrelink of his change of address, although he knew he was obligated to do so. He also could not recall if he had said anything to Centrelink about his rent at Warragamba, although he denied that he had any agreement with Mr Vergos to pay rent or a licence fee. He accepted that his rental assistance continued whilst he was at Warragamba. Thus, it appears, on his case though not on Mr Vergos', that he was defrauding Centrelink by claiming rental assistance for a non-existent rental obligation.

23. Mr Zarbalas was asked about the circumstances that none of the subsequent loan documents referred to any pre-existing loans. Evidence was led of another transaction involving Mr Zarbalas where pre-existing loans were mentioned in the subsequent loan, but there was no evidence, nor was it submitted by Mr Vergos that Mr Zarbalas created the document or that part of it pertaining to that transaction. Mr Zarbalas said it was the debtor who drafted it. In any event, Mr Vergos knew about and signed all the documents and did not suggest that the documents described a cumulative debt. I did not think this point, which Mr Vergos' counsel conceded was "not his biggest point", had any strength.

24. Mr Zarbalas' affidavit was not carefully prepared and contained some errors. However, the same was true of Mr Vergos' affidavit. The errors seemed to be attributable as much to the lack of care by legal representatives as by the deponents. I did not regard it as a weighty matter on credit.

25. Mr Zarbalas did appear to have a good memory for dates and the loan amounts. He readily recalled both amounts and dates in cross-examination, a matter which indicated that the loans were actual sums of his own money, which consumed his attention rather than sham documents where dates of loans might be immaterial.

26. Mr Zarbalas' concession in respect of Centrelink persuaded me that he likely was less than frank in his disclosures to them and may have been fraudulently claiming a rental rebate. I was also less than impressed with his evidence as to his caretaking hours and his evidence about his inability to use a bathroom and kitchen facilities at the warehouse, whilst he resided at Warragamba. His failure to claim caretaking fees until after the cross-claim by Mr Vergos for occupation fees had been filed is also a matter that diminishes his credit. The other matters I have mentioned were not so significant. I did not regard the proof of his regular visits to the CBD to withdraw his pension as evidence that he had little other cash. The loan of $10,000 and the documentary evidence of other loans not the subject of the present proceedings tended to show otherwise.

27. Accordingly, I have concerns about Mr Zarbalas' evidence. His evidence of an entitlement to fees as a custodian was especially weak. Apart from his evidence recalling the dates and amounts of the loans, he was not an impressive witness, but I would not reject his evidence entirely.

(d) Kosta Vergos

28. Mr Vergos' evidence included copies of the receipts he allegedly received from Mr Zarbalas. The provenance of these documents was hotly disputed. Mr Vergos made no reference to the receipts in his defence, but relied upon them as evidence that the debt of $10,000 had been repaid and that the residual debt of $56,000 never existed.

29. The originals of the receipts were said by Mr Vergos to have been provided by him to his solicitors, but they were not tendered, nor were they the subject of a call for production until the matter was raised by the Court in closing submissions, whereupon Mr Zarbalas called for the receipts. They were produced, tendered and admitted. The receipts were undated, and in the order that they appeared in the evidence, were in the following form (misspelling in the originals):

“Original	DATE	72
RECEIVED FROM KOSTA VERGOS
THE SUM OF TWENTYEIHT THOUSAND
DOLLARS	BEING FOR	OMING
$ 28.000--	[Signature of BZarbalas]
SIGNATURE”.
“Original	DATE	74
RECEIVED FROM KOSTA VERGOS
THE SUM OF TWENTYEHT THAOUSAND
DOLLARS	BEING FOR	OWING
$ 28.000	[Signature of BZarbalas]
SIGNATURE”.
“Original	Date	36
Received from KOSTA VERGOS
The sum of TEN THAOUSAND DOLLARS
being for	OWING
$ 10.000=	[Signature of BZarbalas]
Signature”.

30. Mr Vergos denied that he had created the receipts and although he was challenged, maintained his evidence that Mr Zarbalas had provided them to him.

31. Mr Vergos gave evidence that in October 2014, when Mr Zarbalas was proposing to move from Warragamba, he said to Mr Zarbalas, "I want you to give me a receipt for those documents that I signed that I don't owe you anything". To which, he said, Mr Zarbalas subsequently gave him receipt 72. He said that he complained of having signed for more money and Mr Zarbalas agreed to give him another receipt in a couple of days, which he did a few days later.

32. Mr Vergos gave no evidence in his first affidavit about receipt 36 and gave no details of the date or other circumstances of the repayment of the $10,000. He swore a second affidavit some four months later saying that the repayment was at Warragamba three weeks after the loan. In that affidavit he annexed receipt 36. When asked in cross-examination about the dates he received the receipt, Mr Vergos sometimes took time to think or reconstruct when he was given the receipts. He gave evidence that the receipt for $10,000 was given to him in January or February 2013, which was some six months prior to the first loan.

33. The loan of $10,000 was provided on 28 August 2013. Mr Vergos asserted that he sought the loan of $10,000 so that he would not need to break a term deposit. However, his term deposit started on 30 June 2013 for a term of six months. If he was obliged to repay the loan in two weeks, as the loan document said, or in three weeks, when he first asserted he repaid the loan, he may have needed to break the term deposit. Mr Vergos’ evidence that he did not buy the excavator and simply returned the money explains the second problem, of repayment, but not the first, of how he intended to repay. Further, Mr Vergos referred to the $10,000 loan and its repayment in two separate affidavits, but in neither did he mention that he did not use the funds for the equipment he needed and returned the actual cash borrowed.

34. Mr Vergos' failure to refer to receipt 36 in his first affidavit is also a concern. He gave evidence that he received the receipt in early 2013, as I mentioned, and his later evidence in re-examination that he received the receipt after he had repaid the loan (presumably about September 2013) manifested an inconsistency in his evidence. Further, he was asked in re-examination whether he received the receipt before, at the time of, or after, he repaid the loan and his response of "after" does not sit entirely comfortably with his second affidavit which implies, but does not state, that he received it at the same time.

30. Mr Vergos gave no satisfactory explanation for why none of the receipts were mentioned in the defence. Nor did he explain why he sought receipts 72 and 74 in October 2014, since having paid nothing, a receipt would be inappropriate. Some months earlier, in May 2014, Mr Vergos was content to sign an acknowledgement headed "Statutory Declaration" that Mr Zarbalas owed him no money. Yet conversely, he was signing documents (including one on the same date) proving that he did owe Mr Zarbalas money: $16,000 on 13 January 2014, $12,000 on 20 January 2014 and $28,000 on 12 May 2014. If he owed nothing to Mr Zarbalas, a declaration in a similar form to the statutory declaration at about the same time might have seemed appropriate. Just as he asserted that the loan documents he signed were misleading, so also were the receipts he propounded on his own case.

31. As to the loan documents, Mr Vergos admitted his wrongdoing in signing false documents, but gave no satisfactory explanation as to why he did. He said Mr Zarbalas originally asked for a loan agreement document referring to $100,000, which he rejected, but signed three other documents referring to a total of $56,000. The documents were in substantially the same form as the loan document in respect of the $10,000, which he accepted reflected a genuine loan. His suggestion that somehow documents showing that he owed Mr Zarbalas $56,000 would assist Mr Zarbalas in having "the money for a bond" or "will assist [him] to get a shop" was unpersuasive and never explained.

32. Mr Vergos explained the particular reference in the final loan agreement to interest at $1,000 per week (which both parties accepted was the proper construction of the document which referred to "$1.000 each week") by asserting that he had no need for the money. But that is no answer to why, even if a documesnted debt to Mr Zarbalas would somehow assist Mr Zarbalas to get a shop, the document would need to refer to an interest penalty.

33. Mr Vergos gave little detail in his belated affidavit of the circumstances of the $10,000 repayment and none at all of the provision of the receipt. The evidence of Mr Vergos’ term deposit showed that it was not used to fund any repayment. And if Mr Zarbalas owed Mr Vergos 18 months of rent as at August 2013, when the $10,000 loan was granted, Mr Zarbalas would have owed Mr Vergos much more than the $10,000 he had received, and a loan would be unnecessary; Mr Vergos could have merely required repayment of the occupancy debt or part of it. Mr Vergos' assertion that he had repaid the $10,000 because, "I am a man of my honour" lacked cogency unless he really was in debt to Mr Zarbalas because he had invented the occupancy fee claim.

34. Mr Vergos was, unlike Mr Zarbalas, unable to be particular about dates, loans and repayments. Perhaps that is to be expected, since it did not involve Mr Vergos' money. But Mr Vergos delayed and prevaricated when giving his evidence about dates.

35. Mr Vergos was challenged that he had forged Mr Zarbalas' signature. He replied "I cannot copy his signature". It was put that it was an odd answer, perhaps indicating that Mr Vergos had tried to copy Mr Zarbalas' signature, which Mr Vergos denied. Although the assertion was a somewhat peculiar response by Mr Vergos, I was not satisfied that I should regard it as a relevant admission.

36. Mr Vergos also asserted that he did not fully understand the statutory declaration document and, "[I]f I had I would not have signed it because it is not true". But on his case, he knew the loan documents were not true, but nevertheless proceeded to sign them. Further, Mr Vergos gave evidence that before signing the statutory declaration, Mr Zarbalas said to him, "I want this paper to show that I don't owe you any money", which is the substance of the meaning of the statutory declaration. In my view, Mr Vergos understood the statutory declaration when he signed it.

37. Mr Vergos also denied two previous loans provided to him by Mr Zarbalas in around 2007. But when confronted with documents apparently signed by him, Mr Vergos denied one of the signatures, but was uncertain of the other. Both signatures appeared to be the signature of Mr Vergos.

38. Overall, Mr Vergos' evidence was no more satisfactory or acceptable than Mr Zarbalas’ and in several respects more inconsistent with the surrounding circumstances. Whilst Mr Zarbalas, on his case, was dishonest with Centrelink, Mr Vergos was, on his case, dishonest in respect of the very documents at the centre of the proceedings and with the loan documents.

39. It is convenient to consider the features of the receipts in comparison to the loan documents.

E. The receipts

45. Receipt 72 misspells "OWING" as "OMING" and misspells "EIHT" for "EIGHT". A similar error appears in receipt 74, though the letters are not all together clear. "THOUSAND" is misspelt as "THAOUSAND" on receipt 74 and receipt 36. This same misspelling occurs on the third loan document, but not otherwise. The other spelling mistakes are not manifest on the loan documents. The misspelling of "thousand" in the third loan document and in two receipts might suggest a link between the receipts and Mr Zarbalas. On the other hand, Mr Vergos had access to the affidavit with the loan documents annexed, well before the receipts were produced.

46. Mr Zarbalas' signatures on the receipts do not match the signatures on the loan documents. The signatures on the loan documents, on the affidavits and on the other documents containing Mr Zarbalas' signature, which were tendered, some by Mr Vergos and some by Mr Zarbalas, contained a signature something like "BasilZfas". Basil is a commonly used first name of Mr Zarbalas and is apparently the anglicised form of Vasilios. On the receipts, the form of the signature is "BZarbalas", although the signature on receipt 36 is different in spacing and style from the other two receipts.

47. The numbers on the three receipts were written once with a horizontal dash after the number, once with a horizontal double dash or elongated "=" sign, and once with nothing after the number. On the loan agreements, there was never a dash or mark after the number.

48. As to the number “2”, which appears on the first two receipts, it was a flat horizontal line at the bottom, whereas the number 2 also appeared several times in the loan documents and on each occasion it had a turn and somewhat vertical flourish at the end of the number.

49. The number “8” also appeared twice in the receipts, once on receipt 72, apparently drawn with one circle on top of another with a gap in between, whereas on receipt 74 it was drawn with a figure 8. In the loan documents, the number appears twice, both times with a circle on top of the other, but with no gap.

50. The numerals on the loan documents and on the receipts indicated thousands by a period or full stop before the last three zeros. The zeros were noticeably smaller than the preceding number (that indicated the amount of thousands) on receipts 72 and 74, but not on 36. However, this was not especially different from the loan documents.

51. The form of handwriting on the receipts was always in capitals, apart from the signature, and bore the appearance of being a little bit fancy but requiring no particular skill. The style on the loan documents was principally in lowercase, capitals were ornately and skilfully embellished, and in a style quite different to the receipts.

52. The signatures on the receipts, although quite different from the signatures on the loan documents, do have some features in common with the handwriting on the loan documents. For example, the form of the capital "B" is different from the signature, but similar to the style on the loan documents where "Both parties" is a repeated expression. The lowercase "b" and "l" in the signatures also have similarities with those letters when used in the loan documents.

53. In conclusion, the form of the receipts has some features common to and some features dissimilar to the loan documents written by Mr Zarbalas. Whether the differences were due to Mr Vergos or someone else writing them, or Mr Zarbalas deliberately choosing a different style, or whether the similarities reflected Mr Zarbalas' handwriting, or Mr Vergos' attempt to copy the loan documents, were not questions easy to answer. The absence of dates on the receipts and the completely different signatures might be errors that Mr Vergos could not be expected to make if he were forging the documents. Or perhaps Mr Vergos was just careless, but not so careless as to fail to adopt an inferior version of the style of Mr Zarbalas' writing. And why would Mr Zarbalas sign the receipts differently from his usual signature if he intended to give them? And if he did not intend to be bound by the receipts, why give them at all?

54. Neither party submitted the receipts to expert analysis, at least so far as the evidence reveals. There are many questions about them, but few answers. Ultimately I am not persuaded that the form of the documents is especially probative in favour of either party.

F. The caretaker fee

55. Mr Zarbalas had no documents to support an agreed payment of $20 per hour. His evidence that the key was withdrawn from him within a few days of his arrival is inconsistent with his continued role as a caretaker. He made no complaint of not receiving payments, effectively wages, for several years and did not even include the unpaid caretaker's fees in the statement of claim. He initially claimed the exorbitant hours of 24 hours a day for over 1,000 days, reduced it to 22 hours a day in evidence, then to 8 hours a day in submissions. This final reduction was criticised as being too late to be allowed and I agree, the defendant having had no opportunity to meet the new case and cross-examine Mr Zarbalas on it.

56. Further, the eight hours was supposedly for the night time, but I would not, without more, be inclined to accept Mr Zarbalas' evidence that he slept only two hours per 24-hour day. Mr Zarbalas gave no evidence of the duties he performed. He never disclosed his earnings, albeit unpaid, to Centrelink. Even Mr Nugent's evidence did not provide any evidence that Mr Zarbalas was being paid, let alone a rate of pay. The onus of proving such an agreement lay on Mr Zarbalas and he failed to discharge it. I reject the claim for caretaking fees.

G. The licence fee

57. Mr Vergos claims that Mr Zarbalas was paying $450 per week for rent in Kingsford and could not pay the $500 per week proposed in a new lease, so Mr Zarbalas offered to pay $500 per week to stay at Warragamba and Mr Vergos eventually agreed. There were no documents to support this agreement and no claim by Mr Vergos for several years until he received Mr Zarbalas' statement of claim. Mr Vergos admits that Mr Zarbalas continued to receive rental assistance from Centrelink, which he said supports a rental agreement. But Mr Zarbalas' admissions on that subject support Centrelink's rights to reclaim the subsidy rather than Mr Vergos' rental claim.

58. The absence of documentary evidence weighs against Mr Vergos. So does his agreement, on his own case, to borrow $10,000 from Mr Zarbalas and then to repay it at a time when Mr Zarbalas owed him more than $30,000 on Mr Vergos' version of events. At the very least, one might expect the subject of the unpaid $500 per week to be raised with Mr Vergos, both at this time of borrowing, or at the time of the alleged repayment of $10,000, but there is no evidence of it whatsoever.

59. One other possibility was that Mr Vergos waived the occupation licence fee because Mr Zarbalas lent him some money. But that is not the case presented by Mr Vergos. There is no evidence to support it and at the time of the first loan, there was some 78 weeks of occupation fee unpaid on Mr Vergos' case. And Mr Vergos signed a written acknowledgement, presumably read to him by Mr Andrews, but in any event on his own evidence, explained to him by Mr Zarbalas, that Mr Zarbalas did not owe him any money. In my view, the evidence does not support the claim by Mr Vergos, a claim contrary to his own formal acknowledgement.

60. I am not persuaded that there was a licence agreement as alleged. I reject the claim for occupation fees.

H. The loans

61. The loan agreements have two certainties. First, Mr Zarbalas and Mr Vergos genuinely agreed, in the formality of a carefully written agreement, signed in front of an independent Justice of the Peace, that Mr Vergos borrowed $10,000 repayable in two weeks.

62. Second, both Mr Zarbalas and Mr Vergos executed three almost identical documents in front of the same Justice of the Peace in the following nine months, stating that Mr Vergos borrowed further amounts of money on similar terms.

63. Mr Vergos says the later documents were a sham, but if they were, why did he sign them? He gave evidence that he would not knowingly sign an untrue document, the statutory declaration, yet he says he did sign these documents which, although in form similar to the first genuine loan, were on his case untrue. He gives no satisfactory explanation either for why he would sign them, if they were untrue, or how they might even help Mr Zarbalas (apart from record a loan).

64. The documents are sufficient to persuade me to accept Mr Zarbalas' account over Mr Vergos' denial. In particular, the reference to interest in the fourth document is inconsistent with Mr Vergos' account. There would be no purpose in an interest provision if Mr Vergos' account is accepted. Mr Vergos accepted in his defence, by not pleading to para 2 in the statement of claim, that he "acknowledged in writing the receipt of the aforesaid sums of money", but did not plead that the acknowledgement was a sham.

65. Mr Vergos accepts that he did not repay $56,000 and that the receipts should not be taken to be evidence of repayment. I accept that. But he says that the receipts are evidence to controvert the loan documents. The receipts do not purport to do this. They are undated and as Mr Vergos and Mr Zarbalas have been involved in various transactions for many years, those receipts could possibly relate to other transactions, although Mr Zarbalas did not submit this. No doubt other possibilities about the receipts might be imagined, but I am not persuaded on the balance of probabilities that Mr Zarbalas signed them, if and when he signed them at all, as an acknowledgement effectively that the $56,000 was never lent. On their face, they tend to show a loan that is genuine. In my view, they are insufficient to displace the formal signed documents that a loan was made.

66. For all these reasons and those mentioned in dealing with the credit of Mr Zarbalas and Mr Vergos, I am persuaded on the balance of probabilities that the funds were provided in accordance with the document. That is sufficient to establish a debt of $56,000.

67. Mr Vergos asserts that he repaid $10,000. In his favour he has an undated receipt purportedly signed by Mr Zarbalas, which refers to Mr Zarbalas receiving “$10,000 owing". The receipt is from a different receipt book to the other receipts, 72 and 74, since the printed part of it is in lowercase. Mr Vergos asserts that the receipt purports to be truthful and genuine to record his repayment of the loan.

68. If this was the only receipt, that submission would have some force. But it suffers from its clear similarity and association with receipts 72 and 74. And no acknowledgement of repayment by Mr Zarbalas was asserted by Mr Vergos in the defence, whether by express reference to the receipt or otherwise, notwithstanding that an acknowledgement was pleaded against Mr Vergos in the statement of claim, and was admitted by not having been traversed.

69. One matter not specifically raised by Mr Vergos is that Mr Zarbalas gave evidence from whence came his money. Ignoring the reference to 2016 in his affidavit, which seems clearly to be a typographical mistake (since on his own case all of his money by 2016 had largely been held by Mr Vergos), Mr Zarbalas said that he received $37,920 from Victims Services, $15,000 from the sale of stock from his shop and $13,500 from savings, a total of $66,420. He also gave oral evidence that he used his pension for his weekly expenses. Thus, he had sufficient funds to lend $66,000 to Mr Vergos. But there was evidence that Mr Zarbalas had lent one Mary Leondanes a total sum of $7,250 on and prior to 14 October 2015. By what means did Mr Zarbalas make this loan once he had lent all his cash savings to Mr Vergos?

70. It may be that Mr Zarbalas did receive the $10,000, whether or not the receipt is genuine. Or it may be that he earnt money sufficient to enable a loan to Ms Leondanes. Mr Vergos gives evidence that Mr Zarbalas had "put a deposit" on a shop and in any event, Mr Zarbalas appeared to be again attempting to be engaged in some form of shop-related business in late 2014.

71. Ultimately, Mr Vergos bears the onus of proving that the loan of $10,000 was repaid. His credit as a witness was insufficient to persuade me of this, on his word alone. The receipt was important, but it was undated. It appeared late in the proceedings, first surfacing in his final affidavit. It bore a different signature to that commonly used by Mr Zarbalas and it was not supported by expert evidence to be the handwriting of Mr Zarbalas. Whilst there is much in these proceedings that raise questions, ultimately I was not satisfied on the balance of probabilities that the $10,000 was repaid.

I. Penalty interest

72. Mr Zarbalas pleaded in both iterations of his statement of claim that the $1,000 per week interest referred to in the fourth loan agreement was "penalty interest". Mr Zarbalas submitted, however, that the interest was "not contingent on a breach of agreement". How this submission can be accepted in the face of a document that provides a promise for full repayment within five weeks, and if that does not occur there is "compensation of…$1,000 per week", was not explained. Notwithstanding Mr Zarbalas' submission, it is clear that the interest was not payable in the absence of a breach of a promise to pay.

73. Mr Zarbalas submitted that the time for payment was not an essential term. That is only relevant to determine whether the agreement could be terminated for a breach. It does not say anything about damages.

74. When account is taken of the terms of the fourth loan document, the $1,000 a week is payable as "compensation" until all the money is repaid. It follows that the amount is payable even if a small amount remains payable. That would clearly amount to a penalty.

75. An alternative construction, which gives no real weight to the word "compensation", is that the provision is merely to provide for payment of instalments of $1,000 per week interest-free. But neither party submitted that construction.

76. Accordingly, I find that there was a "gross disproportion" between the compensation of $1,000 per week and the level of damages suffered by Mr Zarbalas because of delay in repayment. There was evidence that there were no real damages to Mr Zarbalas from the delay because he was keeping his money in a bag earning no interest. There was no evidence that the interest amount was somehow a genuine pre-estimate of damage. Rather, the evidence pointed to a "predominant punitive purpose" and cannot therefore be awarded. [1]

    1. See Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; (2016) 333 ALR 569 at [227].

77. Mr Vergos submitted that the plaintiff must elect if interest is an essential term, and that Mr Zarbalas had elected to continue the contract and claim the unenforceable penalty interest and therefore was not entitled to interest under s 100 of the Civil Procedure Act 2005 (“CPA”). But the election is to whether to avoid the contract, not an election to forego interest under s 100 of the CPA. Section 100(3)(b) precludes doubling up of interest and s 100(3)(c) prevents claiming more interest under s 100 than the parties have agreed. There is nothing in s 100 that precludes Mr Zarbalas from claiming the usual entitlement to pre-judgment interest from the date the loan was agreed to be repaid, in the circumstances of the present loans. Thus, interest from the payment dates specified in the various loans to today is $14,733.14, which is to be added to the claimed debt of $66,000.

J. Costs

78. The parties agreed that costs should follow the event.

K. Orders

1. Judgment for the plaintiff in the sum of $80,733.14 inclusive of interest.

2. Dismiss the cross-claim for the occupation licence fee.

3. Dismiss the claim for the caretaker fee.

4. Defendant/cross-claimant to pay the plaintiff’s/cross-defendant’s costs of the proceedings, including the costs of the cross-claim.

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Endnote

Decision last updated: 21 August 2018