Volonakis & Ors v Erceg & Anor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Hercegs were friends of Ivancica and Walter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The document was signed by Michael and Walter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Exhibit C included other text message exchanges:

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

At Ex. TB1/465-469:

At Ex. TB1/248-259:

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

At Ex. TB1/248-259:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In Parsonage (acting as personal representative in the estate) v Parsonage & Ors [2019] EWHC 2362 (Ch) at [32]-[38], HHJ Simon Barker QC wrote:

I should also refer to a paper by Mark L Howe and Lauren M Knott, “The Fallibility of Memory in Judicial Processes: Lessons from the past and their Modern Consequences” (2015) Memory 2015; 23(5) 633-656. In the introduction, the authors, who are academic psychologists, wrote:

Because it may be relevant, particularly to some of the evidence, what O’Loughlin J had written in Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084, at [118] and [121] is relevant:

What Kirby J, although in dissent, wrote in Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2003] HCA 48, at [119]-[120], must also be borne in mind:

In other words, a lie does not necessarily prove the opposite of the lie even though, depending on the subject matter and its significance in the case, it may indicate a consciousness on the part of the witness that the truth would not have assisted her or his case, or may amount to evidence that is corroborative of other evidence: Tobin v Ezekiel (2012) 83 NSWLR 757 at 775; [2012] NSWCA 285, at [60].

I also remember s 140 of the Evidence Act, which is a mandatory statutory requirement, to which Campbell JA referred in Brown v NSW Trustee and Guardian [2012] NSWCA 431, at [52]:

Without limiting the matters that the court may take into account, I have also taken into account the nature of the causes of action and the defences, the nature of the subject-matter of the proceeding, and the gravity of the matters alleged.

Finally, I should refer to the relevance of post contractual conduct where there is an oral contract, and what Sackar J wrote in Diransson Pty Ltd v Hassan El Dirani [2019] NSWSC 617, at [470]-[471]:

I shall now turn to each of the witnesses who was cross-examined.

It was not suggested that Patricia should not be regarded as a witness of truth. However, it is clear from her evidence that what she knew about each loan was simply what had been communicated to her by Michael. No criticism was made of her evidence and there was no suggestion that she was not a witness of truth. Indeed, much of the evidence that she gave was otherwise corroborated.

I found Patricia to be a credible witness. She has obviously remained loyal to Michael and supportive of him, but she was not a witness who was simply repeating untruths at his behest. I am satisfied that she was a witness who was giving her evidence to the best of her recollection.

Patricia knew that Michael and Walter were friends; that they had no business connection and that, in 2015 and 2016, they spent “a fair bit of time out and about”. Michael had not talked “a great deal” about “what they got up to”: Tcpt, 4 November 2019, p 50(11-17).

Patricia did not have a correspondingly close relationship with Ivancica: Tcpt, 4 November 2019, p 50(19-24).

Patricia gave evidence that in November 2015, Michael had asked her to arrange for a bank cheque for $375,000, with which request she had complied: Tcpt, 4 November 2019, p 43(28-40). (Michael admitted that he had asked her because he did not have authority and because he was not an officer of MPPA: Tcpt, 4 November 2019, p 75(31-40).)

Patricia was told by Michael that the money was to be used for part of the deposit for the purchase of a property, “their dream waterfront home”. It was to be a temporary loan “while [Walter] refinanced and when he refinanced, he would pay us back our money with the interest”. She was told that the interest rate was 4 per cent per month. She regarded the interest rate as “attractive” and understood, from Michael, that it was the rate which would have been paid if an investment had been made in Courtenay House: Tcpt, 4 November 2019, p 45(22) – p 46(2).

Patricia did not know whether Walter was making cash payments of interest in the period after the borrowing of $200,000 in November 2015. She said that she had not received any payments of interest and as far as she was concerned, no interest payments were being received: Tcpt, 4 November 2019, p 58(44) – p 59(1). She was unable to recall whether any payments of interest had been received in respect of the deposit of $100,000 in Courtenay House: Tcpt, 4 November 2019, p 59(3-7).

Finally, Patricia gave evidence that she did not know of the document signed by Michael and Walter in May 2017 until about September 2017, when she first saw the document: Tcpt, 4 November 2019, p 59(30-32).

I turn next to Frank, another witness called on behalf of the Plaintiffs. I am satisfied that he, also, was endeavouring to tell the truth. I have earlier referred to the payments that he acknowledged in his written evidence that he had received. Whilst, perhaps his evidence on this topic did not go far enough, he did not, when asked, dispute that there may have been other payments that had been made to him: Tcpt, 5 November 2019, p 126(21-24). I am satisfied that he was a straightforward and credible witness.

Frank gave evidence that he regarded himself as a friend of Patricia, Michael and Walter. He had been informed, by Walter, about the Courtenay House investment and had been told that he could receive $3,000 per month for every $100,000 that was invested: Tcpt, 5 November 2019, p 121(31-46).

He also gave evidence that Walter had told him that the investment was guaranteed by Lloyd’s of London (Tcpt, 5 November 2019, p 122(9) – p 122(28), p 132(32-35)), a statement that Walter denied having made. I accept Frank’s evidence on this topic.

Frank agreed that he started receiving $6,000, by way of interest payments, from Walter, about one month after he had paid the money into the MPPA account. He accepted that he had received about 5 monthly payments of $6,000. (This is inconsistent with part of his affidavit, but when it was raised in cross-examination, he volunteered that he had received these amounts. I accept that his affidavit evidence was inaccurate in this regard but I do not believe it was intentionally so.)

Frank also gave evidence that he had no discussions with either Michael, or Walter, about the amount of $200,000 being used to assist with the deposit for the purchase of the Cronulla property, and that his consent to its use in that way had not been sought: Tcpt, 5 November 2019, p 133(46) – p 134(2).

Frank gave evidence that he had received a number of other payments from Walter. It is likely that he received other payments, but he was unable to specify the amounts received and when each amount was received. (I shall return to this aspect of his evidence later.)

He also gave evidence that he had received other payments between 8 May 2017 and 15 August 2017, but it is not clear to what these payments relate and he was not asked any questions about these payments. A copy of his bank records, in Ex. TB1/238-240, supports other amounts having been paid into his bank account.

Michael was not a very satisfactory witness. He was unreliable in some respects. The level of hostility exhibited by Michael and Frank to Walter, who each felt had betrayed his friendship, was clear.

There are a number of matters that affect Michael’s credit. These include:

I have kept these matters in mind in weighing up all of the evidence given by Michael and in determining whether I accept his evidence, where it conflicts with the evidence of Walter.

Perhaps, the most significant oral evidence that throws considerable doubt about Walter’s truthfulness relates to a dinner that was said to have been attended by Walter, Ivancica, Michael and Patricia in early 2017. His oral evidence on this topic, although lengthy must be recorded, at Tcpt, 5 November 2019, p 208(44) – p 212(41) to demonstrate my finding that this evidence should not be accepted:

It is clear that the alleged dinner was not mentioned in any of Walter’s affidavits and no questions were asked of either Patricia, or Michael, in cross-examination, about having attended such a dinner. This would have been a very important topic upon which each should have been cross-examined had instructions been given to Walter’s legal representatives.

I am of the view that Walter intentionally gave false evidence about this dinner. I do not accept that any such dinner occurred.

(It is to be noted that because she did not give evidence, Ivancica does not corroborate Walter’s evidence on this topic.)

There were some other aspects of his evidence that also seem implausible. For example, he explained the reasons for making the payments to Frank after 16 May 2017 (when the May 2017 document was said to have been signed) “not as part of interest, because I’d been repaying the loan out. But if you couple these dates with the text messages between me and Michael, you’ll see where he sends me text messages saying that, you know … I need to help him and he’s in distress, hence why I help a friend” and that after February 2017, all payments “were one friend helping another friend out”: Tcpt, 5 November 2019, p 214(40-45).

Walter said that he made a number of cash payments to Michael which were said to have been used to pay for overnight accommodation and the deposit at The Four Seasons Hotel. The Hotel records produced did not contain a single check-in date that corresponded with the dates Walter had asserted he had paid money to Michael for that purpose. In addition, the charges shown on the document are significantly less than $1,000: Tcpt, 5 November 2019, p 160(44) – p 161(9).

Indeed, the records show that Michael’s last stay was on 25 August 2016, whereas Walter’s evidence is that he continued to pay money for Michael’s stays at the Four Seasons until November 2016. Bearing in mind the closeness of their relationship, it is highly unlikely that Michael would have taken money from Walter on the false basis that he needed cash for that purpose when he was not staying there.

Walter accepted that he needed to borrow $100,000 in April 2016. However, he asserted that in April 2016, he repaid $15,000, by cash cheque, to Michael on 21 April 2016. This seems implausible and I do not accept that he made this payment.

Walter swore that on 23 December 2015 and 21 April 2016 "I paid Michael Volonakis [$25,000 and $15,000 respectively] … by cash cheque": affidavit of 15 March 2018, par 8-9. The remaining disputed payments were either made by transfer or paid "by cash" or "in cash": see, by way of example, par 28 and par 32. Subsequently, the evidence revealed that Walter did not, in fact, give Michael a cash cheque: Ex. D.

Initially, Walter swore that he had paid Michael $2,000, in cash, on 17 July 2017. Other evidence revealed that on that date, Michael was in Bali. Walter admitted that his evidence was wrong and that was why he had left that payment out of his later affidavits: Tcpt, 5 November 2019, p 154(14-48).

There was a payment of $19,500 said to have been made to Michael. However, when asked about this payment, Walter’s evidence was very confused. I am far from satisfied that this payment was made.

Walter, in his first affidavit of 4 January 2018, at par 10, wrote that “[i]n April 2016, I borrowed a further $100,000 from Michael Volonakis”. In an affidavit sworn on 5 February 2018, in reference to the statement made at par 10 of his previous affidavit, he wrote that:

However, he gave evidence in his affidavit sworn 15 March 2018, at par 4, that he had:

Walter had asserted, in his written evidence, that Frank had asked him to make the investments in Courtenay House in order to “wash the money for tax reasons”. This serious allegation was not put to Frank in cross-examination. (No explanation for it not being put was given.)

I am not satisfied that the evidence in his first affidavit was intentionally false. However, he could, and should, have admitted that he had borrowed $100,000 from Michael in April 2016 earlier than he did.

Overall, I find it impossible to accept Walter’s evidence unless it is corroborated. He left me with no confidence at all that he had endeavoured to give truthful evidence about the matters in dispute. I found his evidence about the repayments to be vague and for the most part uncorroborated.

In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, Heydon JA (as his Honour then was) stated, at 177, [71]:

In addition, in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97, McHugh JA (Hope JA and Mahoney JA concurring), at 7-8, 11,110, wrote:

Furthermore, a loan does not have to be in writing and often loans between friends are not. That does not mean that there was no loan, or that the repayment of the loan was unenforceable.

Patricia had no conversations with either Ivancica, or Walter, about this loan. What she knew about the loan of $375,000 came from her conversations with Michael.

Patricia’s written evidence, which was not objected to, about the loan was as follows:

In her oral evidence, Patricia said at Tcpt, 4 November 2019, p 45(22-46) (in cross-examination by counsel for Ivancica):

When asked about the term of the loan, she said, at Tcpt, 4 November 2019, p 46(35-43):

Michael’s written evidence on the loan of $375,000 is as follows:

Michael’s oral evidence on this topic at Tcpt, 4 November 2019, p 73(6) – p 74(15) (in cross-examination by counsel for Ivancica) was:

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

Walter’s oral evidence on this topic at Tcpt, 5 November 2019, p 152(25-48) was:

As stated, there was no evidence, given by Ivancica, that she had not agreed to “that arrangement”. I accept that there is no written document signed by her about the loan of $375,000. I also accept that the date of the conversation between Walter and Ivancica was not disclosed in the evidence quoted above or otherwise.

However, in all the circumstances, I am satisfied that she knew of, and accepted, the borrowing of $375,000, and at least some of the terms on which that amount was borrowed. In other words, I accept that she was told about the loan and some of the terms, and she accepted the loan and the terms about which she was told. However, there is no evidence that she agreed to the rate at which interest on the loan of $375,000 was to be paid, or that she had agreed to that rate of interest. Nor is there evidence that she authorized Walter to agree, on her behalf, to that rate of interest.

It also cannot be forgotten that the whole of the principal amount was used as part of the deposit for the purchase of the Cronulla home which was registered in her name alone.

Also, as stated previously, there was no dispute that Walter borrowed this amount: Tcpt, 4 November 2019, p 10(2-10).

Patricia had no conversations with either Ivancica, or Walter, about this loan. What she knew about the loan of $100,000 also came from her conversations with Michael.

Patricia’s written evidence, which was not objected to, about the loan was:

Patricia gave the following oral evidence on this topic at Tcpt, 4 November 2019, p 61(40) – p 62(12) (in further cross-examination by counsel for Ivancica):

Michael’s written evidence on the loan of $100,000 was:

Michael’s oral evidence on this topic was at Tcpt, 4 November 2019, p 90(43) – p 91(1), p 94(14-18) and p 94(28) – p 95(6):

Walter’s written evidence, in his first affidavit, on the loan of $100,000 was as follows:

In his affidavit in reply, on the loan of $100,000, Walter averred:

Walter’s oral evidence on this topic, at Tcpt, 5 November 2019, p 161(29-43), was:

There is no specific evidence, by Walter, that he told Ivancica about the loan of $100,000, or that she knew, otherwise, of the loan. Nor is there any evidence that what was repaid to the Hercegs was a debt owed, in whole, or in part, by her, or that she had taken any part in the arrangements to repay them.

In all the circumstances, I am not persuaded that Ivancica knew about the additional loan of $100,000, or that she had agreed to the borrowing, or the terms upon which that amount was borrowed, or the use to which the amount borrowed was put.

(That the Court might conclude that the loan of $100,000 was, on a correct analysis, not one made to, or with the knowledge, or consent, of, Ivancica, was acknowledged by counsel for the Plaintiffs in their final written submissions.)

As stated previously, there was no dispute that Walter borrowed this amount: Tcpt, 4 November 2019, p 10(2-10).

In this case, the nature of the friendship between, particularly, Michael and Walter, make it clear that any agreement of loan was likely to be an informal one. The parties to any contract, as well as its terms, will be a question of fact. Whether a contract has been formed, and the terms of any contract will be determined objectively.

As was written by Spigelman CJ in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, at [7]:

Even so, the Court must be satisfied that the parties arrived at a consensus as to the terms of any agreement, that the terms were sufficiently certain to be capable of forming a binding agreement and that the parties, by their words and conduct, taken in the context of the surrounding circumstances, evinced a common intention that the consensus at which they had arrived should constitute an immediately binding agreement.

In this case, whilst each loan was for a substantial amount of money, it is clear that the parties did not intend a binding informal contract should come into existence only upon the execution of a formal document. There was never any discussion between Michael and Walter of there being a formal document evidencing each loan.

The terms of each agreement have to be pieced together, or implied, from various conversations, not recorded at all, and from what appears to be admissions made at the hearing. Common sense has a part to play in the Court’s considerations.

Whilst a significant amount of time was spent on the source of the money to enable the loans to be made, ultimately, it seems to have been accepted that Frank’s involvement was really by way of “background”. I respectfully agree.

There was no specific evidence that Walter was given express authority to act for, and on behalf of, Ivancica. However, it was submitted by counsel for the Plaintiffs that Ivancica gave Walter actual authority to act on her behalf, at least in relation to the loan of $375,000: Tcpt, 6 November 2019, p 230(30-47). There seems to be little doubt that she entrusted him with the conduct of the particular negotiations to borrow the amount required to assist in paying the deposit on the Cronulla home.

Counsel relied upon the conversation between Michael and Walter regarding the borrowing, the conversation between Walter and Ivancica, and the payment of the cheque for $375,000 as part of the deposit that Ivancica would have had to pay as the purchaser of the Cronulla property. It was this course of dealing which enabled Walter to act in a position from which it could be inferred that his actual representation of authority in himself was, in fact, correct.

Counsel also put that Ivancica had accepted the benefit of the borrowing and also that the evidence by Walter was that it was her discussion with him that had prompted the creation of the May 2017 document. In the circumstances, she could hardly assert that Walter did not have authority to borrow the amount of $375,000.

It is trite that a person may act in person or by an agent. In International Harvester Company of Australia Proprietary Limited v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644, Dixon CJ, McTiernan, Williams, Fullager and Taylor JJ, at 652, wrote:

In Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699; [2011] NSWCA 389, the judgment of the Court of Appeal was given by Allsop P (as his Honour then was), with whom Bathurst CJ and Campbell JA agreed. At [194], Allsop P wrote:

Generally, there are two kinds of authority to act: (a) actual authority; and (b) ostensible (“apparent” authority). Only actual authority is relied upon in this case. In determining whether someone has actual authority one must also consider (i) implied actual authority, (ii) incidental authority; and (iii) usual authority. Implied actual authority may emerge by acquiescence or ratification by the principal. It arises where the principal places another in a position that, according to ordinary usage, that other person would understand himself to have the principal’s authority to act on his or her behalf; or where the principal’s conduct, coming to the agent’s knowledge, is such as to lead to a reasonable inference that he is authorising the agent to act for him or her: Peter Watts and FMB Reynolds, in Bowstead & Reynolds on Agency (21st ed, 2018, Sweet & Maxwell) at [2-031].

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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