Peter John Conridge v Marius Emiele Schaapveld

These proceedings concern three loans that were made by the plaintiff: one for $500,000, one for $150,000 and one for $50,000. The loans, made in 2005, were repayable after twelve months, three months and six months respectively and included a requirement of the payment of interest at a rate of 15% per annum. The first loan was made on 17 February 2005 and was due to be repaid by 17 February 2006. The other two loans were to be repaid no later than that date.

Whilst the terms of the loan are not in dispute the defendants dispute that the agreements were made with them as opposed to one or other of two companies.

The plaintiff claims on his pleadings that he loaned the three amounts to all four defendants; the first defendant to whom I shall refer as “Max”, the second defendant “Max Junior”, the third “Justin” and the fourth “Annette”. Max and Annette are married and Max Junior and Justin are their sons.

On the second day of the hearing the plaintiff resolved the proceedings against Max Junior and Justin. The proceedings against these defendants were dismissed with the defendants agreeing to pay $17,000 to the plaintiff, and it being noted in the consent orders that there be no order as to costs as between the plaintiff and these defendants and

The defendants all had some involvement with a company known as Frozen Custard Australia Pty Ltd “FCA” and another company Frozen Custard Retailing Pty Ltd “FCR”. The shareholders of FCA were at all relevant times Max, Max Junior and Justin: see Tab 25 Exh A. The directors of FCA at all relevant times were Max, Max Junior and Justin. The shareholders of FCR at all relevant times were Max Junior, Justin and Annette and the directors of FCR at all relevant times were Max Junior and Justin: see Tab 26 Exh A and Exh 3.

FCR went into liquidation in or around April 2008. FCA has been deregistered.

On 17 February 2005 the plaintiff handed to Max a bank cheque in the amount of $500,000 made out to, on the plaintiff’s evidence, FCA.

On 1 July 2005 the plaintiff paid, at the request of Max (on behalf of the defendants, on the plaintiff’s case, or on behalf of FCR, on the defendants’ case), an amount of $150,000 in respect of the fit out of a store in Frankston, Victoria.

On 16 August 2005 the plaintiff paid, at the request of Max (on behalf of the defendants on the plaintiff’s case), an amount of $50,000 to Unikilt Pty Ltd, a company that had invoiced FCR in respect of the Frankston store that was operated or to be operated by FCR (as a franchisee of FCA).

Max and Annette maintain that the plaintiff lent the three amounts to FCA and or FCR and not to them. There is no disagreement that the three amounts were paid to, or to the benefit of, FCA or FCR.

It might have been expected that the plaintiff, in lending such large sums of money, would require documentation of the loans recording the terms on which the money was lent including interest and the period of the loans. No such documentation was utilised and indeed the plaintiff accepts that it was his practice not to document loans that he made to Max or Max’s Enterprises Pty Ltd (“MEPL”) a company owned or operated by Max.

In respect of each of the three loans which I shall refer to as “the Frozen Custard Loans" there is a contest as to what was said between the parties. Max Junior and Justin deny being present at what the plaintiff claims were two key conversations on 17 February 2005 concerning the first loan.

Before the Frozen Custard loans there had been a long course of dealing between the plaintiff and Max (and MEPL). They had been neighbours and had become friends and on numerous occasions the plaintiff lent money to Max or, on Max’s case, Max’s companies. All of these loans were short term, at a high rate of interest and all were repaid. Max and his family were apparently quite successful in the video business and Max gave the plaintiff the benefit of advice when the plaintiff wished to commence ownership of video stores. Both Max and the plaintiff were apparently quite successful in these endeavours although Max had experienced a considerable failure in his hi-fi business. In addition, the plaintiff’s wife Lidia and Annette were also friendly and there were occasions on which the two couples and their children attended at each other’s homes.

There is no dispute that Max became enthusiastic about the possibility of becoming the Australian franchisor of “Rubees Frozen Custard”, a US enterprise (which may also be known as Classic Frozen Custard), and he planned to operate an existing store at Dickson in the ACT which he wished to purchase and to establish a new store in Frankston, Victoria. Max says that he sought to interest the plaintiff as an investor on the basis of the potential of the business but the plaintiff, he accepts, did not wish to become a shareholder in the business.

The plaintiff did, however, accompany Max on a trip to the ACT to see the Dickson store in operation and the plaintiff did undertake some brief research on the internet concerning the concept.

The plaintiff’s evidence concerning the making of the $500,000 loan is as follows:

In relation to the second loan the plaintiff says Max called him and said

In relation to the loan of $50,000 the plaintiff says that Max rang him and said:

Max’s version of events is as follows.

Max says that he first broached the possibility of the plaintiff becoming an investor in the Frozen Custard business in or around December 2004 and that he and Annette went to the Dickson store and met the plaintiff there. Max told the plaintiff that he would like to invest but did not have the money. He then said

Max says that on 17 February he and Annette went to the plaintiff’s home for a lunch at which Lidia, the plaintiff’s ex wife was also present. During the visit the plaintiff said

Max says that he went to the plaintiff’s ANZ Bank branch at Corrimal and that he had the following conversation with the plaintiff

Max says that the cheque was made payable to FCA and that the monies were used by FCA in relation to the Dickson store and the master franchise for the Classic Frozen Custard Co.

Max’s version of the conversation in relation to the $150,000 loan (found at [11] and [12] of Max 21/4/2015) is as follows

Max’s version of the conversation in respect of the $50,000 loan (found at [14] and [15] of Max 21/4/2015) is as follows

Max, Annette, Max Junior and Justin deny that Max Junior and Justin were present at the plaintiff’s home on 17 February 2005. Max, Max Junior and Justin deny that Max Junior and Justin went with Max and the plaintiff to the bank. They were not cross examined.

The issues for determination are:

The proceedings as against Max Junior and Justin have been dismissed with Max Junior and Max agreeing to pay the plaintiff $17,000. The defendants assert that the dismissal of the proceedings against two alleged co-obligees brings the proceedings against Max and Annette to an end.

The plaintiff has pleaded a case that all four defendants entered into the three contracts with him. No alternative case was pleaded. Mr Robinson contended that the Court should, notwithstanding the pleaded case, find that Max and Annette were the borrowers or even just Max. Max and Annette submit that that course is not open to the plaintiff.

A detailed and authoritative exposition of the principles relevant to the effect if the dismissal of the proceedings against two of the alleged co-obligees is found in Murray-Oates v Jjadd Pty Ltd [1999] SASC 537; (1999) 76 SASR 38, the relevant paragraphs of which I set out:

See also the more recent exposition in Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159; (2011) 42 WAR 59 and see also Walker v Bowry [1924] HCA 28; (1924) 35 CLR 48. I take the relevant principles applicable here to be:

There was here no reservation of rights and no use of a covenant not to sue. By the agreement noted in the Short Minutes of Order (see para 4) the plaintiff clearly released Max Junior and Justin from any further claims.

The reasons for these rules, particularly in the context of joint tortfeasors, have been questioned (see particularly Glanville Williams, Joint Obligations (1949, Butterworth & Co) pp 114- 119) but as Murray-Oates and the other Australian cases I have mentioned make clear the rules have been accepted. The High Court in Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574 held that the rule in Duck v Mayeu had been impliedly abrogated in relation to tortfeasors by the enactment of s 11 of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT). That legislation and its analogue in other states (ie in NSW the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5) did not deal with contractual obligations, and Thompson does not undermine the existence of and operation of the rule more generally.

I find there was accord and satisfaction as between the plaintiff and two of the four joint obligees (on the plaintiff’s case); see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at pp 183- 5 per Dixon J and El-Mir v Risk [2005] NSWCA 215 at [48] per McColl JA.

It would follow therefore that any liability of Max and Annette was discharged with the agreement by Max Junior and Justin to pay $17,000. The plaintiff therefore has no remaining claim against Max and Annette.

On the assumption that that conclusion is not correct then consideration needs to be given to whether the plaintiff who has sued all four defendants can recover against only two, ie assuming there is no bar because of settlement with the sons.

Pleadings are important. The High Court expressed the position thus:

I do not accept Mr Robinson’s contention that the Court can find that there was a contract with Max only when that is not the case advanced at trial by the plaintiff. The remaining defendants from the outset made clear through Mr McGovern their intention to hold the plaintiff to his pleadings.

The only case which the plaintiff has advanced is one against the four defendants- his case must fail since he cannot recover now against two or one of those four defendants even if he was otherwise entitled.

I should note that at the end of the hearing on 24 April 2015 I gave leave to Mr Robinson to provide submissions on the topic of the release of Max Junior and Justin. I received submissions within the time specified, however, the written submissions dealt with the further topic of amendment for which no leave was granted. There was objection to this course by counsel for the defendants and it was submitted that I should, in accordance with the approach adopted in Bull v Lee (No 2) [2009] NSWCA 362 at [8]- [10], ignore the submissions for which there was no leave and that is the course which I have taken.

Were it open to decide the case on the basis that only one or two of the four defendants was the borrower I am not persuaded that Max or Annette was the borrower for the reasons which follow. In relation to Annette, even accepting the plaintiff’s version of conversations with Max with Annette present I do not think that the evidence establishes that Annette (or Max Junior or Justin) was a party to any of the loan contracts and does not establish that Max entered into the loan contracts as agent for Annette (or Max Junior or Justin). The plaintiff’s claim against Annette must fail. I turn now to deal with the case solely against Max, on the assumption that such a case were open to the plaintiff.

It was submitted by Mr McGovern that I should not accept any evidence of the plaintiff unless it was independently verified.

Mr McGovern drew attention to a number of features of the plaintiff’s evidence to which I shall refer below but before detailing those matters I draw attention to the fact that there was recorded at T17 an exchange between counsel whereby it was agreed that no Browne v Dunn (1893) 6 R 67 point would be taken on the basis of any barrister’s failure to put the whole of their clients’ respective cases to the opposing witness. I have already referred to the fact that the proceedings against the second and third defendants were dismissed on 23 April 2015. When that development occurred Mr McGovern indicated that he would be calling Max Junior and Justin in his clients’ case. Later in the day when it came time for the defendants to be cross examined on their affidavits Mr Robinson indicated that he did not wish to cross examine any of the defendants.

A question arises as to whether the credit of the defendants can be impugned at all having regard to the complete absence of any cross examination of them. Interesting as the question may be the fact is that Mr Robinson did not detail any particular respect in which I should find the defendants as lacking credibility other than a general submission that the plaintiff’s case is inherently plausible and implicitly that the defendants’ case is not. I proceed on the basis that there is no reason why I would not accept the defendants’ evidence as truthful wherever it is in conflict with the plaintiff, except to the extent that it is improbable or implausible.

The matters affecting the plaintiff’s credit are as follows:

There are reasons to doubt the veracity of the plaintiff to which I have just referred. I am not able to accept his evidence in the absence of corroboration from another witness or by documentation.

I accept the evidence of Max Junior, Justin and Annette (and Max) that Max Junior and Justin were not present at the plaintiff’s home on 17 February and that they did not accompany Max and the plaintiff to the bank. This not only reinforces the conclusion that they were not parties to the contracts of loan but also further undermines the plaintiff’s credibility since he is shown to have sought to bolster his case that they are parties by falsely alleging them to have been present when they were not.

Max’s evidence concerning the loan is not improbable and I have no reason to doubt his veracity.

The loans were made ten years ago and the evidence upon which the plaintiff relies is wholly oral where the precise words used make the difference between an agreement with Max on the one hand and his companies on the other. In Watson v Foxman (1995) 49 NSWLR 315 at pp 318- 319 McLelland CJ in Eq dealing with allegations of misleading and deceptive conduct referred to the fact that

There is evidence of behaviour by the plaintiff which is inconsistent with him believing that there was a loan to Max, and not just his claim that the loan was with all four defendants:

Although the plaintiff initially sought to resist the contention, he seemed to accept that the previous substantial loan of $400,000 which he made, was made to MEPL and not to Max personally: see T60, T67- 68, T70 and see document at Tab 1 Exh A.

I accept that a borrower can direct the lender as to whom the loan monies are to be paid- a very common occurrence as Mr Robinson submitted. The mere fact that Max told the plaintiff to make the cheque out to FCA is not determinative of the matter. Max says that he does not recall the precise details of his conversation in relation to the first loan. On his very limited evidence of the conversations there is a considerable degree of ambiguity as to who was actually borrowing the money but having regard to the fact that the previous large loan of $400,000 was made to MEPL coupled with the plaintiff’s question as to whether the cheque should be made out to MEPL inclines me to think that the loan was probably agreed to be made to whichever corporate vehicle Max was using for the Frozen Custard enterprise. Outstanding loans of $688,000 are recorded in the report of the liquidators of FCR but the ledger of FCA (see Annex D to Annette’s affidavit of 21 April 2015) shows a $500,000 loan to FCA not FCR raising doubt as to the reliability of both items of evidence. The plaintiff bears the onus of establishing on the balance of probabilities that Max, and not FCA or FCR, was the borrower and for the reasons I have given he has not done so.

I have noted earlier the agreement of Mr Robinson that the plaintiff’s claim is statute barred unless he can bring himself within s 52 or s 54 of the Limitation Act 1969 (NSW)- ie either that he was under “a disability” within the meaning of s 52(1)(c) or because the debtors made “a payment in respect of the right or title of the person to whom the payment is made”, which by virtue of s 54(2)(a)(ii) recommences the limitation period.

S 50F(4) of the Act defines an incapacitated person as a person who is

Mr McGovern pointed out that the evidence is that during the period of his incarceration 5 November 2008 to 28 January 2010:

The mere fact of incarceration is not sufficient: see SW v New South Wales [2010] NSWSC 966 [195]- [200] per Johnson J, Karaagac v GRE Insurance Ltd [1989] NSWCA 116 and Morris v State of New South Wales [2005] NSWDC 10 at [15].

The plaintiff has not established that he was unable, whilst in gaol, to instruct his solicitors to commence these proceedings. The evidence shows that he was able to protect his interests notwithstanding his incarceration. Mr Robinson submitted that the Commercial List requires alacrity on the part of litigants and that it would not have been appropriate for the plaintiff to commence the proceedings in this list whilst in gaol. Even were that so there was no impediment to commencing the proceedings in the Common Law Division.

It follows that this ground of extension of the limitation period has not been made out.

In part this question turns on a factual question namely whether the monies handed over by Annette in almost all cases, MEPL in one case and Max in several instances were repayments of the loan at all as opposed (as Annette and Max say) to assistance in response to the plaintiff’s request for help. I think there is some room for doubt as to how the monies are to be characterised because on Annette’s evidence they were loans and the record keeping by Annette suggests that they were but yet no claim has been made for repayment. I have referred to the fact that the plaintiff did not, on his own evidence, say anything about the monies that he sought being a repayment. That is relevant in the context where he claims that they were repayments. He has nowhere, in such documentation as he has provided to the Court in relation to repayments, deducted the substantial amounts that were paid to the plaintiff’s lawyers in connection with his representation in the criminal trial. Having regard to the ambiguity of the evidence and my doubts as to the plaintiff’s credibility I am not satisfied that any of the monies paid over were repayments of the loans (strictly only a repayment by Max could be relevant if Max was the borrower).

Mr McGovern raised another matter which is that on the plaintiff’s case there were three loans and there was no attribution of the payments to any particular loan. This he said was fatal to reliance on s 54(2) since that requires the payment to be

In his work P. Handford Limitation of Actions (2007, 2nd ed, Thomson Lawbook Co) at p 280 the learned author summaries the position thus:

It would seem that where there is more than one debt and a payment is made, a nomination by the debtor as to which debt the payment is to be applied will be effective to preclude time being restarted in respect of the other debt, and also that in the absence of a nomination by the debtor the creditor can select to which of the debts he will appropriate the payment: see Mills v Fowkes (1839) 5 Bing NC 455; 132 ER 1174. It would appear, however, that the appropriation must be made before action: Mills at p 462 and p 1177 per Tindal CJ citing Simson v Ingham (1823) 2 B & C 65, 107 ER 307. See also Deane v City Bank of Sydney [1918] HCA 42; (1918) 25 CLR 215.

Since no appropriation was made either before or even during the hearing here the Court cannot discern to which debt the payment is to be applied and hence to which of the three loans the bar imposed by the statute has been lifted. Different considerations apply where there is a running account: see Re Estate of Levi & Co; Ex parte Levi (1874) 8 SALR 144 (FC) at pp 165- 167 (per the Commissioner of Insolvency, pp 194- 195 per Hanson CJ, p 201 per Wearing J) and Re Footman Bower & Co Ltd [1961] Ch 443; [1961] 2 WLR 667; [1961] 2 All ER 161.

The plaintiff has not established that the limitation period did not continue to run and it follows therefore that his claim is statute barred.

It follows from the reasons given that the plaintiff has failed in his claim and there should be judgment in favour of Max and Annette and an order that the plaintiff pay their costs.