HER HONOUR: This is a notice of motion filed on 30 July 2020 by the receiver, Mr Brian Raymond Silvia (the Receiver), appointed to the third defendant, Togumi Pty Ltd (Togumi), seeking a declaration as to the true construction of the accounts and financial records of Togumi. As I understand, it the Receiver requires guidance, or a direction, from the Court in relation to those accounts for the purpose of being able to comply with orders made by Robb J on 15 December 2017 for the taking of accounts on behalf of Togumi by the Receiver.
On this application, the Receiver has read an affidavit sworn 29 July 2020 of Geoffrey Peter Granger (and has tendered the corresponding exhibit to that affidavit). Mr Granger is a registered liquidator and is responsible for the day-to-day management of Togumi under the supervision of the Receiver. I have read the affidavit and have been taken to parts of the exhibit in relation to this matter.
Briefly, the issue before me relates to an entry that appeared in the accounts and financial records of Togumi for the first time in the financial year ending 30 June 2014, notwithstanding that the amount purports to relate to the purchase of a property located at 167 George Street Windsor (the Property) on 14 September 2006.
Mr Granger has deposed to the fact (and I note that a copy of the transfer is in evidence) that, on 14 September 2016, Togumi and the seventh defendant (Robert Angius) purchased the Property for the price of $1.4 million, and became registered proprietors as tenants in common in equal shares. Mr Granger has deposed that Togumi financed this acquisition of the property by loans from either a financier, shareholders or associated entities (see [5] of his affidavit).
I have been taken to a journal entry in the books of Togumi for the financial year ending 30 June 2014, recorded by the accountant of Togumi, Mr Moutzouris. Mr Granger is not aware when that entry was first created, but notes that the company income tax return of Togumi was lodged on 15 May 2015, and so he infers that the journal entry was created on or before that date. The journal entry purports to record the transaction, for the first time, insofar as it relates to the acquisition by Mr Robert Angius of a half interest in the Property, as a loan from Togumi to Robert Angius in the amount of $760,000.
Mr Granger has deposed to his review of the financial statements for Togumi for each of the financial years 2011 to 2014. He has deposed that he has not found any document within the books and records of Togumi prior to the abovementioned journal entry, purporting to bring the transaction to account (see at [7]), and Mr Granger has been unable to locate in his possession any document in the books or records of Togumi for the Property relating to the Property whereby Robert Angius has acknowledged his alleged indebtedness to Togumi for the amount of $760,000, or has signed any loan agreement or mortgage with respect to the same (see at [8]).
I have been taken to affidavit evidence sworn in the course of earlier proceedings by John Angius (the plaintiff in these proceedings), namely an affidavit sworn 30 April 2018, where (at [34]) Mr John Angius sets out certain matters as follows.
[34] The Third Defendant, Togumi Pty Ltd was the registered proprietor of a hotel and a 50% owner of the shop with Robert located at Windsor. The shop, which was next to the hotel was vacant from the date of acquisition and required expenditure to improve the prospect of getting a prospective tenant to let the shop. At the request of and for the benefit of the Third Defendant, I incurred expenditure amounting to approximately $171,254.55 on the basis that the Third Defendant had resolved that I would be reimbursed for such cost. I seek reimbursement of 100% of this outlay by me of $171,254.55. Robert was given a 50% share in the property where the shop was located at the insistence of my wife even though he had not contributed any monies to the purchase price. Since the purchase of the shop, he has refused to contribute 50% of the outgoings for the shop and I have had to pay for his share personally since the shop was purchased.
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I was taken also to an affidavit sworn 30 August 2019 by John Angius and specifically to [59]-[62] of that affidavit which read as follows:
[59] I wished to purchase the Adjoining Property [the Property] through Togumi. Laura had other ideas. She wanted Robert to be given 50% of the Adjourning Property with his name on title. I did not agree unless a mortgage was signed by Robert in favour of Togumi.
[60] I arranged with my solicitors to prepare a mortgage however Robert did not agree to sign it.
[61] At this time there were disagreements between Laura and me that I refer to below under the heading "Shareholder Agreement".
[62] The purchase went ahead and the Adjourning Property was purchased as to 50% by Togumi and as to 50% by Robert. There was no mortgage signed by Robert.
Inquiries have been made of the accountant, Mr Moutzouris, as to the journal entry in question. Mr Moutzouris has deposed to his practice being to act on instructions from John Angius in relation to the matter (see his affidavit sworn 29 August 2019 at [18]-[19]).
The affidavit of Mr Granger read on this application (sworn 29 July 2020) sets out various inquiries that have been made by the Receiver, including inquiries made of the other parties' respective solicitors, and Mr Granger deposes as to his attempt to comply with the directions of the Court in relation to the compilation of the report requested from the Court.
Robert Angius has denied the making of any such loan. I here refer in particular to correspondence from the solicitors acting for Robert Angius a copy of which is contained in Exhibit 1 on this application (and I have been taken also to the balance sheet of Togumi as at 30 June 2013 and 30 June 2014 which does not record any such loan).
Relevant to the question whether there remains an outstanding debt on the part of Robert Angius (i.e., a loan entered into on or about the date of purchase of the Property on 14 September 2006) is whether there was a specified loan repayment date. If there was no specified repayment date for any such loan, then, as a matter of law, the loan would be repayable on demand and the loan would have become statute barred six years from the receipt of the money (see ss 14, 63 of the Limitation Act 1969 (NSW) (Limitation Act)). In that regard I refer to the analysis of the position in In the Estate of the Late Patrick Ambrose Tunchon [2019] NSWSC 802, where (at [83]-[110]) I considered a not dissimilar situation and reviewed the relevant authorities. I refer in particular to [92]-[93] of those reasons and the conclusion at [99]-[100].
Relevantly in Ogilvie v Adams [1981] VR 1041, Fullagar J (holding that, when money is advanced on terms that it is to be repayable "on demand", then the cause of action for recovery accrues on the date of the advance without the need for any demand) said (at 1043):
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money, and this whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money. (my emphasis)
Thus, where there is a cause of action based upon an obligation to repay a loan that was repayable on demand, unless the making of the demand was a condition precedent to the obligation to pay arising (or the limited exception in banker/customer cases arises), the cause of action accrues when the loan is advanced.
In Faraday v Rappaport [2007] NSWSC 34, White J, as his Honour then was, stated at [102]:
Had I been of the view that the moneys were advanced as a loan, the loan would have been repayable on demand. A cause of action for its repayment would have arisen immediately the advance was made, not when demand was made for it on the service of the amended statement of claim (Young v Queensland Trustees Ltd (1956) 99 CLR 560; Ogilvie v Adams [1981] VR 1041; Haller v Ayre [2005] 2 Qd R 410).
In the present case, in the absence of evidence of any acknowledgement in writing by Robert Angius of the debt to confirm his liability and to extend the notional limitation period imposed by the Limitation Act (see s 54 of the Limitation Act), I accept that any debt owed by Robert Angius to Togumi in his connection with a half interest in the property purchased on 14 September 2006, must have become statute barred by 15 September 2012 (that date being well before the creation of the journal entries by Mr Moutzouris for the financial year ending 2014). Accordingly, it is not necessary to enter into the dispute as to whether there was a loan at all.
In the circumstances, therefore, I am of the opinion that it is appropriate for the following orders to be made and I so make the following orders:
1. I declare:
1. that on the true construction of the accounts and financial records of the third defendant, Togumi Pty Ltd, and in the events that have happened, Togumi Pty Ltd paid out the sum of $760,000 in connection with the acquisition by seventh defendant of a one half interest in the property at 167 George Street, Windsor, in or about September 2006;
2. that any debt or liability created by such payment is now unenforceable.
1. I direct that the Receiver is justified in striking the accounts of Togumi Pty Ltd on the basis that the seventh defendant is not indebted to Togumi Pty Ltd in respect of the said sum of $760,000.
2. Subject to order 4, I order that each party bear its own costs of the notice of motion filed on 30 July 2020.
3. Notwithstanding order 3 above, I order that the administrator of the estate have his costs of this application paid out of the estate on an indemnity basis.
[2]
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Decision last updated: 31 August 2020