Ange v Contos

Background

1. The following background facts are uncontroversial.
2. At the relevant times, the first plaintiff (Mr Ange) was the proprietor of a number of outlets that sold "adult products". He operated the businesses from premises in Crows Nest, which constituted a warehouse, office and residential quarters occupied by him and Ms Ange. From around 2007 or 2008 Mr Ange operated two of the outlets, in Liverpool, in partnership with the defendant.
3. In 2016 differences arose between Mr Ange and the defendant which culminated in proceedings in the Equity Division of this Court commenced by Mr Ange. Those proceedings concerned the termination of the partnership and the purchase of the defendant's interest in the partnership by the first plaintiff. This was resolved by a Deed of Settlement and Release executed in December of that year.
4. It is common ground that on 3 December 2011 Mr Ange provided to the defendant a cheque in the sum of $50,000, drawn on an account in the name of Ms Ange (who is also known as Ms Chungsuwathananon). The circumstances in which the cheque was paid are disputed and are the subject of the proceedings in the Local Court and in this Court.

The Pleadings 1. The Amended Statement of Claim

1. In the amended statement of claim Mr Ange pleaded that he made the payment to the defendant pursuant to an agreement between them for a loan of $50,000. He pleaded that the terms of the agreement were that the loan would be subject to interest at the rate of 10% per annum on any unpaid part of the loan principal and would be repayable within 12 months. He further pleaded that the defendant had failed to repay the loan or the interest owing. In the alternative, he pleaded that the loan was repayable within a reasonable time or, in the further alternative, on demand, and that, on 1 May 2017, he and Ms Ange had demanded repayment of the loan principal and the interest payable pursuant to the agreement and that the defendant had failed to comply with the terms of agreement by failing to repay the loan principal and interest.
2. As a further alternative, the second plaintiff, Ms Ange, asserted that she had advanced $50,000 by way of loan, or in the alternative, on the understanding that it would be repaid, to the defendant which he failed to repay. She pleaded her claim in debt or as monies had and received.
3. (ii) The Defence
4. By way of defence to the amended statement of claim the defendant denied virtually every fact pleaded therein, other than that Mr Ange had, on 3 December 2011, provided him with a cheque in the sum of $50,000 drawn on the account of Ms Ange, and that the defendant received demands for payment. He denied that a loan had been made to him by either Mr or Ms Ange. He pleaded, instead, that in August 2011, he and Mr Ange had entered into a loan agreement pursuant to which he (the defendant) advanced, by way of loan to Mr Ange, the sum of $100,000 (interest free) on terms that that amount would be used to pay a supplier, and that it would be repaid within one month. He further pleaded that, "around November 2011" Mr Ange repaid $50,000 and that, around 3 December 2011, Mr Ange repaid the balance of the loan of $50,000 by the cheque in question.
5. He further pleaded that Mr Ange's claim was fraudulent and alternatively that the claim was subsumed and encompassed in the Deed of Settlement and Release of December 2016.

The Evidence

1. Evidence in the Local Court proceedings was given in the first instance by affidavit. Both plaintiffs and the defendant affirmed affidavits and were cross examined.
2. Mr Ange's evidence was substantially in accordance with the pleading in the amended statement of claim. He said that, on 3 December 2011, the defendant asked to borrow $50,000, to which he agreed, saying that it would need to be repaid within 12 months and that 10% interest would be payable on repayment. He said that he then asked Ms Ange to write a cheque in that amount, and that Ms Ange handed him the cheque book, and that he himself wrote a cheque which Ms Ange signed and he handed to the defendant. He said that from about November 2012 he began reminding the defendant of the need to repay the loan and that the defendant assured him that "your money is coming".
3. Mr Ange's account was supported by an affidavit affirmed by Ms Ange, who said that, at Mr Ange's request, she handed him a cheque book, and that he wrote a cheque that she signed. In an affidavit affirmed on 22 December 2017 Ms Ange deposed to a letter of demand having been sent by the plaintiffs' solicitors to the solicitors acting for the defendant, dated 1 May 2017. This is the only evidence of any written demand or request for repayment of a loan asserted to have been made on 3 December 2011, with a repayment period of 12 months (although the letter dated the asserted loan at 4 December 2011).
4. The defendant gave a diametrically different account of the transaction. In his first affidavit (affirmed 21 November 2017) he said that, "around December 2010", Mr Ange told him that he was going through a "messy divorce" and asked him for a loan of $100,000. The defendant said that he agreed to make the loan, which Mr Ange promised to repay within four weeks. He said that he "offhanded over $100,000" in cash from personal savings that he had accumulated since 1979. He said that Mr Ange repaid the money, by cheque, on "or around" 10 February 2011. The cheque was drawn on an account in the name of "Spagnolo Nominees Pty Ltd" and was made payable to the defendant.
5. He said that, in or about August 2011, Mr Ange again asked him for a loan of $100,000, to which he again agreed and which he again paid in cash from his personal savings. He said that, in or about November 2011, Mr Ange repaid half of the loan by giving him $50,000 in cash. He said that the two men had a conversation in which he asked Mr Ange when the balance would be repaid, to which Mr Ange replied: "You get the rest soon [sic]".
6. He then said that, around 3 December 2011, while he was at the Crows Nest premises, Mr Ange requested his presence in the residence upstairs. When he attended Mr Ange presented him, in the presence of Ms Ange, with a personal cheque in the amount of $50,000 drawn on the account in the name of Ms Chungsuwathananon (Ms Ange). He said that, in presenting him with the cheque, Mr Ange apologised for its lateness.
7. In a subsequent affidavit (dated 2 August 2018) the defendant revised his account of the repayment of the first half of the loan. He did this after reviewing his financial records, including bank statements. He then said that the first half of what he affirmed as the August 2011 loan in his 21 November 2017 affidavit had actually occurred in May 2011 and had been repaid into two tranches, the first (on or about 4 July 2011) by cheque in the amount of $30,000, the second (on or about 6 October 2011), by cheque in the amount of $20,000. He said that he asked when the balance would be repaid to which Mr Ange replied: "You will get the rest soon".
8. In an affidavit in reply, Mr Ange denied allegations that he borrowed any money from the defendant.
9. Having regard to the grounds of appeal, it is convenient here to mention that, in his first affidavit, the defendant gave evidence of apparent financial difficulties in the business. He said that, around 2010 - 2012, a supplier of stock to the Liverpool stores had ceased delivering product, and that he had approached Mr Ange "multiple times" during 2010 about late payment or non-payment of wages to staff and non-delivery of product to the Liverpool stores by their biggest supplier, Calvista Pty Ltd. He said that in one conversation with Mr Ange, Mr Ange told him that there was a "misunderstanding" and that he owed Calvista "over 100 grand", but that the dispute did not involve the Liverpool stores and that he would "sort it out". He said that an employee of Calvista told him that the account was "on hold" and that no more stock would be released until at least part of the debt was paid.
10. The defendant filed a later affidavit (3 May 2018) in which he recalled a conversation with his brother, in which his brother asked him for a loan of $5,000. He said that he replied that he could not make the loan, as he had just lent cash to his business partner. An affidavit to similar effect affirmed by his brother was filed but not read in the defence case because Mr Contos' brother was not available for cross examination. Ultimately, however, the affidavit was tendered in the plaintiffs' case.

The Hearing in the Local Court

1. The hearing in the Local Court took place over four non-consecutive days in May, August and October 2018. On the first day the plaintiffs were represented by Mr Rose of counsel. On the second day they were represented by Mr Di Carlo (who also appeared in the present proceedings). On the third day the plaintiffs were represented by Mr White. The defendant was represented throughout by Mr M Newton, who also appeared in this Court.
2. At the outset counsel agreed that the issue for determination was a purely factual one involving ascertaining the terms of any oral agreement that preceded the provision of the cheque by Mr Ange to the defendant. It was made clear that there was no issue that the cheque of $50,000 had been paid by Mr Ange to the defendant. The issue was as to the circumstances in which the cheque was paid.
3. Mr Newton provided the magistrate with what he called a "brief note" of relevant authority with respect to the admissibility of evidence of surrounding circumstances in aid of the determination of such an issue. The authorities to which he referred were Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382 at 401-403 and Lym International Pty Ltd v Marcolongo [2011] NSWCA 303. The salient principle drawn from Masterton was stated in the note as: "(c) In determining what are the terms of a contract that is oral or partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are (at [90] (5)] (CB 561)."
4. Counsel then representing the plaintiffs (Mr Rose) agreed that the principles were fairly quoted although he reserved rights to object later.
5. Mr Ange was then cross examined. From time to time objection was taken to the questioning. For example counsel objected on the ground of relevance to questions asking whether Mr Ange sometimes failed to pay employees on a weekly basis. Counsel for the defendant relied on the admissibility of evidence of surrounding circumstances in accordance with the principles stated in Masterton, in support of admission of the evidence. The magistrate determined that the evidence would be "provisionally" admitted.
6. Counsel for the defendant then proceeded to cross examine Mr Ange about a number of matters. These included:

• issues arising out of the breakdown of a previous marriage that resulted in protracted litigation (apparently in both the Family Court of Australia and Victoria, and the Supreme Court of Victoria - the evidence is not clear);
• artworks purchased by Mr Ange;
• a garnishee order that had been made against an account held by Mr Ange in favour of a Child Support Agency;
• delayed payment of staff wages;
• delayed payment of rent on the Liverpool stores;
• Mr Ange's engagement in gambling activities;
• commercial dealings with Calvista that resulted in the cessation for the supply of produce for the Liverpool businesses;
• the proceedings in the Equity Division of this Court.

1. Objection was taken to cross examination of some of these topics on the ground of relevance. Counsel for the defendant again relied on the cross examination as relevant to the surrounding circumstances capable of throwing light on whether a loan had been made by the defendant to Mr Ange in order to tide him over for a period of financial difficulty in circumstances (inter alia) in which he was involved in "a messy divorce".
2. After hearing argument the magistrate ruled that this evidence, too, would be admitted "provisionally", with its weight to be assigned at the conclusion of the hearing when its relevance could be more clearly ascertained.
3. One aspect of the cross examination of Mr Ange bears particular mention. It was suggested to him that the Supreme Court proceedings in 2016 were intended to resolve all outstanding issues between the two men and that, had he lent money to the defendant in 2011 as he asserted, that loan would have been included in the proceedings and the settlement. Mr Ange explained his failure to mention the loan in that context by saying that he was in fear for his life. The clear implication in the lengthy answer he gave was that the defendant (or somebody acting on his behalf) had intimidated and assaulted him and had set fire to his house. He said that he was prepared to proceed with the more significant matters involved in the Supreme Court proceedings and leave the relatively less significant issue of a debt of $50,000 to be dealt with later.
4. Ms Ange also gave oral evidence and was cross examined, but on matters that do not significantly bear on the issues raised in these proceedings.
5. That concluded the hearing on the first day. The hearing resumed on 9 August 2018, with the plaintiffs represented by Mr Di Carlo. On that day counsel for the defendant sought and was granted leave to rely on the further affidavit of the defendant, in which he changed his position with respect of the circumstances of the repayment of the first half of what he asserted was a cash loan of $100,000.
6. In direct repudiation of the position adopted by his predecessor, Mr Di Carlo submitted that the magistrate had been "misled" into admitting evidence relating to "surrounding circumstances" said to cast light on the arrangement between Mr Ange and the defendant. He argued that the position taken was "clearly wrong" and had led to the admission of inadmissible evidence. Counsel advanced the extraordinary proposition that: "The fact that somebody needs a loan is not in any way, shape, or form evidence of the fact that somebody gave them a loan."
7. Counsel went on to say: "In peripheral matters that essentially go to whether Mr Ange needed $100,000. And in that regard, for the purpose of showing that he needed it, to show that he hadn't paid at that particular time his child welfare, to show that he hadn't paid Calvista allegedly - none of which we suggest is true by any stretch of the imagination - that he hadn't paid rent. Even if that were the case, how can that operate on the issue of whether Mr Contos gave him $100,000? How is it relevant?"

The decision of the magistrate

1. The following day (18 October 2018) the magistrate gave judgment. She dealt first with the evidence that had been "provisionally" admitted, specifically the evidence concerning payment of employees and the garnishee orders. Applying the test of relevance stated in s 55(1) of the Evidence Act 1995 (NSW), she rejected the evidence on those two subject matters. She proceeded to deal with the substance of the proceedings, which resulted in her dismissing the amended statement of claim and entering judgment for the defendant.
2. The magistrate's reasons were stated briefly. She recounted the substance of the evidence given by the plaintiffs, and by the defendant. She noted that the only objective evidence of any demand or a request for repayment of the loan the plaintiffs claimed to have made was the letter of demand of 1 May 2017, five and a half years after the date on which the loan was said to have been made and four and a half years after the date it was claimed to have been repayable.
3. She noted the deterioration in the business relationship between Mr Ange and the defendant, and the Supreme Court proceedings. She found Mr Ange's explanation for his failure to incorporate the asserted loan in the Supreme Court proceedings to be "unsatisfactory". That explanation was that he was in fear for his life, with a clear implication that it was the defendant whom he feared. In effect, the magistrate found it inconsistent that Mr Ange would litigate in the Supreme Court against the defendant over the ownership of the businesses but withhold any claim for repayment of the loan because of fears for his safety.
4. The magistrate also found inconsistencies in Ms Ange's evidence which, again, she considered "unsatisfactory in parts".
5. The magistrate took an equally dim view of the defendant's evidence. She found it difficult to accept his evidence that he had accumulated the large sums of money which he claimed to have accumulated, and to have kept this under his bed or in a drawer at his home. In this respect she noted that the defendant was not a person who distrusted banks, since he held significant sums in bank accounts.
6. The magistrate said that she had closely observed both Mr Ange and the defendant as they gave their evidence. In short, she did not believe the evidence of either. The same applied to the evidence of Ms Ange. In those circumstances she decided (as she had to) that the plaintiffs' claim had to be determined on the burden of proof. They having failed to establish that the cheque for $50,000 was paid in the circumstances alleged by them, the magistrate was not satisfied that the plaintiffs had discharged their burden of proof. Accordingly, the magistrate dismissed the amended statement of claim. After hearing further argument on costs, she ordered the plaintiffs to pay the defendant's costs as agreed or as assessed.

The application in this court

1. As indicated at the outset, there is a question as to whether the plaintiffs appeal as of right (which they can do only on a question of law alone) or whether their proposed grounds involve questions of mixed law and fact (in which case they need the leave of this Court). If no question of law is involved, the plaintiffs have no avenue of appeal.
2. As also indicated above, the grounds stated in the summons are varied. Four involve the admissibility of evidence. In Williams v The Queen (1986) 161 CLR 278; [1986] HCA 88 the High Court had under consideration whether a ruling on the admissibility of certain confessional evidence involved a question of law alone. Gibbs CJ observed that the grounds as pleaded depended in part on the facts of the case and therefore did not raise a question of law alone: at 287; Mason and Brennan JJ, to like effect, held that an appeal on the wrongful rejection of evidence by a trial judge in the exercise of discretion is not an appeal on a question of law alone: at 301-2; and Wilson and Dawson JJ held, also, that the grounds as pleaded did not raise a question of law alone: at 314.
3. A plain reading of each of the relevant grounds pleaded by the plaintiffs demonstrates clearly that the complaints made by them the concern rulings that depend substantially on the facts of the case and the exercise of discretionary judgement. At best, they raised questions of mixed law and fact, for which the plaintiffs require leave before they can appeal. That leave must be refused.
4. In written submissions Mr Di Carlo, who, it will be recalled, had appeared for the plaintiffs on the second day of the hearing in the Local Court, again contended that the propositions of law made to the magistrate in respect of the admission of evidence of surrounding circumstances were wrong and resulted in the admission of inadmissible evidence. Further, he submitted that the ruling made by the magistrate at the commencement of her decision that evidence that had been provisionally admitted would not be taken into account: "… cannot cure the damage that was done by the extraneous material to the plaintiffs and their case and it cannot be said that any reasonable person could have excluded this material from their mind, especially when having to determine competing versions of fact which resulted in a finding that her Honour could not accept either version of fact." (Plaintiffs WS [18])
5. This submission is a direct repudiation of the submissions quoted above that he himself had made at the hearing. It should not be countenanced.
6. The evidence of which complaint is made is evidence of surrounding circumstances capable of throwing light on whether the cheque for $50,000 was paid in circumstances asserted by the plaintiffs, or whether it was paid in circumstances asserted by the defendant. By way of example, the defendant alleged that, when he first asked for a loan, Mr Ange said that he was going through a "messy divorce". That Mr Ange was, at a time shortly before 3 December 2011, involved in protracted matrimonial litigation was clearly relevant to whether that explanation had in fact been given for his request; so was also evidence of difficulties meeting commercial financial obligations to Calvista, to employees and others. All of these circumstances were capable of supporting the case made by the defendant.
7. There is no possible substance in the grounds that raise evidentiary issues amounting to errors of law or of law and fact and leave to appeal on those grounds is refused.
8. Grounds 5, 6, 8 and 9 all involve attacks on the magistrate's reasoning process. These do not raise any question of law alone. It is doubtful that they raise even a question of mixed law and fact, but, to the extent (if any), to which they do, leave must be refused. There is no discernible error in the manner in which the magistrate went about the task committed to her, which was to determine which of two competing versions to accept. In this regard the magistrate was fully aware that she was not required, in order to dismiss the plaintiffs' case, to accept the alternative put forward by the defendant. She did not accept either version of events. That was why she ultimately decided the case on the basis that the plaintiffs had failed to discharge the burden of proof that they bore.
9. The remaining ground is that the magistrate failed to give adequate reasons for her decision. In the ordinary course, inadequacy of reasons may be considered to raise a question of law: see, for example, Mifsud v Campbell (1991) 21 NSWLR 725 at 726; Campbelltown City Council v Vegan (2006) 87 NSWLR 372; [2006] NSWCA 284 at [130]; New South Wales Police Force v Winter [2011] NSWCA 330 at [26]. It does not follow, however, that the error asserted in the appeal grounds is an error of law alone. It is necessary to examine the context in which the error is asserted. Here, the ground is particularised as a failure to refer to large amounts of evidence in cross examination of Mr Ange and the defendant and identifying that any regard was had to that evidence in making the decisions. Properly understood, the ground is not, in truth, one of inadequacy of reasons, but, again, of the reasoning process, and is therefore not a question of law alone.
10. In any event, the ground must fail. The reasoning of the magistrate is clearly discernible and called for no further explication. She did not accept the evidence of any witness; she gave reasons for her rejection of the evidence of each. In those circumstances she had no alternative other than to decide the plaintiffs' case by reference to the onus of proof. Having found that she could not accept the evidence of either Mr or Ms Ange, she could not find their case proved.
11. The final ground concerned the order for costs. It is complained that, in ordering as she did, the magistrate failed to give any consideration to what was said to be significant court time taken as a result of the wrongful admission of "extraneous and/or irrelevant and/or prejudicial evidence" - the subject of the earlier grounds of appeal. It is now apparent that this ground is based on a false premise (the wrongful admission of evidence) and, in any event, does not raise a question of law alone.
12. No ground pleaded raises a question of law alone. To the extent that any of the grounds raises a question of mixed law and fact, leave to appeal is refused.
13. The plaintiffs' summons is dismissed with costs.

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