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[2025] NSWDC 571
District Court of NSW
2025-11-28
Andronos SC DCJ
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Barel v Barel [2025] NSWDC 571
Hearing dates: 4, 5, 6 September; 17 October 2024
Date of orders: 28 November 2025
Decision date: 28 November 2025
Jurisdiction: Civil
Before: Andronos SC DCJ
Decision: (1) Direct the parties to liaise as to appropriate orders, giving effect to these reasons and on costs, and either notify my Associate by 5pm on 12 December 2025:
(a) of agreement, by providing Short Minutes of Order; or
(b) of disagreement, whereby the proceedings will be listed for further directions on Thursday, 18 December 2025 at 2pm before Andronos SC DCJ.
Catchwords: CONTRACTS – Formation - Three agreements – Wholly oral
CONTRACTS – Parties – Identity of parties to the agreements - Family members and their related entities
CONTRACTS – Terms – When loan was due and repayable
CONTRACTS – Performance – Characterisation of payments of monies – Whether payments were advances or repayments
Legislation Cited: Evidence Act 1995, s 135 Uniform Civil Procedure Rules 2005, r 36.16
Cases Cited: Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429
Barel v Barel [2023] NSWDC 135
Barel v Barel [2024] NSWCA 257
Barel v Barel [2024] NSWDC 330
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Coote v Kelly; Northam v Kelly [2016] NSWSC 1447
Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24
Federal Commissioner of Taxation v Normandy Finance and Investments Asia Pty Ltd [2016] FCAFC 180
Fox v Percy (2003) 214 CLR 118
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407
Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm)
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303
Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 96
McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477
Reid v Brett [2005] VSC 18
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Smith v New South Wales Bar Association (1992) 176 CLR 256
Societe d’Avances Commerciales (Societe Anonyme Egyptienne) v Merchants’ Marine Insurance Co (The “Palitana”) (1924) 20 Ll L Rep 140
State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3
Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125
Watson v Foxman (1995) 49 NSWLR 315
Category: Principal judgment
Parties: Elie Barel (plaintiff)
Linda Barel (first defendant)
Linda Barel as representative of the estate of the late Raphael Barel (second defendant)
Representation: Counsel:
Mr B Smith (plaintiff)
Ms S Scott (defendants)
Solicitors:
ESY Lawyers Pty Ltd (plaintiff)
Diamond Conway (defendants)
File Number(s): 2022/00231245
Publication restriction: Nil
The plaintiff, Elie Barel, seeks to recover monies allegedly lent to his brother, the late Raphael Barel, and sister-in-law, Linda Barel, pursuant to three oral agreements. Raphael Barel died in 2023, after these proceedings were commenced, and his estate is the second defendant. The first defendant, Linda Barel, who is Raphael’s widow, represents his estate. Without intending any disrespect, I shall refer to each of the parties by their first names.
The agreements were allegedly entered in February-March 2013 (the First Agreement), May-June 2014 (the Second Agreement) and February 2015 (the Third Agreement) (together “the Agreements”). Elie alleges that it was a term of each Agreement that all of the advanced monies would be repaid on sale by the defendants of their home at Dover Heights (the Dover Heights property), which was sold in December 2017. He further alleges that it was a term of each Agreement that, on sale of the Dover Heights property, monies already allegedly owing by the defendants to Elie as at March 2013 (the pre-existing debt), would also be repaid.
The aggregate debt alleged by Elie is $153,832.76, which is comprised of $36,975.62 (the pre-existing debt), and $74,800, $29,534.46 and $19,500 under each of the respective Agreements, less a deduction in respect of the acknowledged payments of $6,977.32 made to third parties on his behalf in June 2013. Other than in respect of $20,500, there is no dispute that Elie transferred monies, made payments or caused monies to be provided to the defendants in the sums alleged in the period from March 2013.
The defendants deny that the payments of the monies from March 2013 constituted a loan. They say that Elie has not proved that any of the conversations comprising the Agreements occurred in the terms alleged and say that the payments and transfers relied upon by Elie were not advances by him but repayments of monies owed by Elie. Further, they deny that there was any pre-existing debt as at March 2013. Accordingly, they submit, Elie’s claim must fail.
The issues before me were:
What, if anything, was said between Elie and Linda on the occasion of the creation of each of the alleged Agreements, in February-March 2013, May-June 2014 and February 2015.
Do those conversations establish Agreements enforceable by Elie against Linda and/or Raphael.
Was it a term of any of the Agreements so established that:
(a) Monies advanced under the Agreements would be repaid to Elie by Linda and Raphael on sale of the Dover Heights property; and (b) Monies already then owing to Elie at the time of any of the Agreements, pursuant to an existing arrangement between himself and Raphael, would also be repaid to Elie by Linda and/or Raphael on sale of the Dover Heights property.
If any of the conversations referred to in (1) created a loan agreement, how much did Elie lend pursuant to each Agreement.
How much, if anything, was owed to Elie pursuant to the existing arrangement referred to in (3)(b) above.
For the reasons which follow, I have found that Elie has established that in each of February/March 2013, May/June 2014 and February 2015, he entered into an oral loan agreement with Linda, on behalf of Raphael and herself. I have found that he advanced the aggregate sum of $103,834.46 to the defendants pursuant to those Agreements. I have not found that there was any agreement to repay any pre-existing debt then owing. In any event, I have found that as at the time of the First Agreement, Raphael and Linda were not indebted to Elie at all.
Accordingly, I have found the defendants liable to repay to Elie the principal sum of $103,834,46.
Elie is prima facie entitled to pre-judgment interest at court rates from December 2017, costs as assessed or agreed on the ordinary basis and the release to him of the monies that he paid into Court on or about 1 May 2024 pursuant to orders made by Russell SC DCJ on 3 May 2023. I will, however, give the parties an opportunity to agree on orders and, if orders cannot be agreed, I will hear the parties in this regard.
These proceedings were commenced on 5 August 2022 and an order for substituted service was made in October 2022. Default judgment was sought against both defendants on 6 January 2023. Raphael died two days later, on 8 January 2023. The following day, on 9 January 2023, Elie obtained the order for default judgment. On 10 January 2023, Elie swore an affidavit in support of a garnishee order. Raphael was buried on 11 January 2023. On the same day as Raphael’s funeral, Elie obtained the garnishee order, pursuant to which $173,727.29 was garnisheed from the defendants’ joint bank account on 18 January 2023.
A contested motion to set aside the default judgment was heard by Russell SC DCJ on 14 April 2023. On 3 May 2023, his Honour set aside the default judgment and appointed Linda to represent Raphael’s estate: Barel v Barel [2023] NSWDC 135. Elie was ordered to pay the garnisheed monies into Court, but did not do so until 1 May 2024 – almost 12 months later – when he paid into Court the sum of $191,164.83, reflecting the principal sum and interest which had accrued in the intervening period. There was no evidence before me as to the circumstances of, or reasons for, the delay, although counsel for the defendants criticised this conduct in her closing submissions.
On 17 May 2024, the defendants filed a notice of motion seeking an order that the whole of the funds paid into Court, “or such other amount as the Court considers fit”, be paid to Linda. That application was the subject of a contested hearing on 21 June 2024 before Fitzsimmons SC DCJ, following which the Court ordered that $80,000 of those funds be paid to Linda.
On 28 June 2024, the defendants filed a motion seeking a variation of the 21 June 2024 orders of Fitzsimmons SC DCJ under rr 36.16(1) and (3A) of the Uniform Civil Procedure Rules 2005 (UCPR). On 9 August 2024, his Honour dismissed that application: Barel v Barel [2024] NSWDC 330. An application for leave to appeal to the Court of Appeal was dismissed: Barel v Barel [2024] NSWCA 257.
On 6 September 2024, I ordered a further $8,000 be released to the defendants for the payment of counsel’s fees, from the monies paid into Court.
Elie relies on affidavits sworn by him on 27 March 2023, 8 March 2024 and 8 August 2024 and the exhibits thereto. He also relies on a small number of additional documents, produced on subpoena from St George Bank and ING Bank, and inferences, he says, that may be drawn from a Notice to Produce served on the defendants, in response to which no documents were produced. He was extensively cross-examined.
The defendants rely on an affidavit sworn by Linda on 19 July 2024, the exhibits thereto and a bundle of bank statements from St George Bank. Linda was also extensively cross-examined.
MFI 4, a 2013 tax return, purportedly in relation to a partnership that owned a retail shop in Hamilton, New South Wales (the “Newcastle shop”) was tendered in the course of Linda’s re-examination but was objected to. I indicated that I would consider its admissibility in my reasons for judgment. Counsel for the plaintiff pressed the objection, on the basis of prejudice, given the stage of the proceedings at which it was tendered (after the completion of Linda’s cross-examination), relying on s 135 of the Evidence Act 1995.
The partnership that Linda referred to had not been referred to in Linda’s affidavit, the document had not been produced for inspection and there was no prospect of any further cross-examination given Linda’s emotional state by that stage of the proceedings (to which I refer again at [34] below). It was not established that the probative value of the document outweighed its prejudicial effect and I regard the prejudice that the plaintiff would have suffered to be real and incurable. In my discretion under s 135, therefore, I have determined to exclude MFI 4.
Further, at approximately 4:00pm on 17 October 2024, during final submissions, some weeks after the evidence was heard and each party had closed their case, the defendants sought to reopen their case to tender a tax return from 2012, which had apparently been produced, on subpoena, by ING Bank. Counsel for the defendants had just finished addressing.
Leave to reopen is granted according to the Court’s discretion, however, the principles by which that discretion is generally exercised are set out in Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266-267 and Reid v Brett [2005] VSC 18 at [41]. Prejudice is one of the factors to be taken into account.
The defendants contended that there was no prejudice because both parties had already had access to the documents produced by ING and the plaintiff had, in fact, already tendered documents from that production. The plaintiff strenuously objected. To my mind, the prejudice was obvious. It was, by then, too late for counsel for the plaintiff to consider the effect of that document on what he might have put to Linda in cross-examination, what he would have sought instructions from Elie on, what other evidence he might have elicited or tendered, or what written or oral submissions he would have made. I rejected the tender and the application for leave to reopen was refused.
In these proceedings, the parties relied heavily on accounts of conversations and events which took place several years or, in some cases, decades ago. As the reliability of the witnesses’ evidence of conversations, and of their beliefs as to the state of the financial arrangements between them from time to time, was in issue, I have set out below the principles on which I have relied in assessing the reliability of their evidence.
As a general proposition, all evidence, including documentary evidence, must be submitted to rational analysis, including with respect to the drawing of inferences, having regard to the whole of the evidence and the conduct of the trial: State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3 at [63], [94], [149] and [155].
Where determination of critical issues involves the evaluation of oral evidence and disputed events, the process of fact finding should be informed as far as possible “on the basis of contemporary materials, objectively established facts and the apparent logic of events”: Fox v Percy (2003) 214 CLR 118 at [30]-[31].
Inferences may also be drawn from circumstantial evidence where the whole of the facts can establish an adequate basis to infer the ultimate fact to be proved: Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 141.
I have had regard to the following well-known statement of McClelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:
“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as ‘misleading’) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction (1995) 49 NSWLR 315 at 319 rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court ‘must feel an actual persuasion of its occurrence or existence’. Such satisfaction is ‘not … attained or established independently of the nature and consequence of the fact or facts to be proved’ including the ‘seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding’: Helton v Allen (1940) 63 CLR 691 at 712.”
I have also respectfully adopted the approach of Kunc J in Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 96 at [464] to [473], the relevant elements of which (other than those which have already been addressed), may be summarised as follows:
Regard must be paid to the statutory successor of the rule in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 in s 140 of the E**vidence Act. The Court must feel an actual persuasion of the occurrence or existence of each fact to be proved.
Evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.
Where a witness has been found to be lying about one thing, that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness’s evidence in its entirety. If, on peripheral issues, the trial judge reaches conclusions adverse to the credibility of a party, it does not necessarily follow, consistently with such conclusions, that these must be findings adverse to that party on the issues that are central to the determination of the matter. There is no rule of law or practice that states that an adverse finding on any aspect in the evidence of a witness means that the whole of that witness’s evidence must be rejected.
There are risks in making global findings about the credibility of any particular witness. Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.
Disbelieving a witness that “X” was the case does not mean that “not X” has been proven.
The Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced.
As to demeanour, it is neither conclusive nor wholly irrelevant on matters of credit. Famously, in 1924, Atkin LJ observed in Societe d*’Avances Commerciales (Societe Anonyme Egyptienne) v Merchants’* Marine Insurance Co (The “Palitana”**) (1924) 20 Ll L Rep 140 at 152:
“... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.”
Nevertheless, in McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477, the UK Supreme Court emphasised that, especially in cases where a trial judge is faced with a stark choice between irreconcilable accounts, the credibility of the parties’ testimony, and the trial judge’s assessment of the character of witnesses and the manner in which the witnesses give evidence, is of primary importance. Similar observations have been made in Australian authorities: Fox v Percy at [23]; Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at [41] per McHugh J.
Contemporaneous documents, particularly of neutral origin, are obviously important. However, as Bell P, as the Chief Justice then was, said in ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24 at [28]:
“Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”
“[18] Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.”
Credit was very much in issue in this case. Each party made submissions that were highly critical of the other and invited me to reject key elements of the other party’s evidence.
In accordance with the principles set out above, I have considered the reliability of the parties’ respective accounts in light of objectively known or admitted facts, the logic of events and contemporaneous materials, particularly where those materials come from an independent source or were accepted or adopted by both parties.
I have not treated any contemporaneous document as conclusive of all issues in dispute, particularly where it was created by one party and not seen or adopted by the other and not, on its face, conclusive of all relevant matters. I have, nevertheless, taken all such documents into account in determining disputed questions of fact. Where documents relied on were neither contemporaneous nor adopted by the other party, there was a real question as to their probative value and whether their contents were known or considered at the time of the events or conversations in issue.
Both Elie and Linda were self-interested witnesses. It was clear from their demeanour that both Elie and Linda were highly emotional and invested in the outcome of these proceedings, to a degree that appeared to transcend the monetary value of the dispute. A once close family relationship has descended into bitterness and acrimony. At stake was not just the sum in dispute, but what appeared to be each party’s sense that they had been exploited and betrayed by the conduct of the other. Linda, in particular, was so overcome emotionally while giving her evidence that proceedings had to be interrupted to give her an opportunity to compose herself. Sensibly, counsel agreed on a course by which it was unnecessary for her cross-examination to resume.
Counsel for the defendants criticised Elie as being unreliable, although she did not submit that the Court ought necessarily conclude that he was dishonest. Rather, it was submitted, his purported recollections were not genuine but merely self-serving reconstructions. In particular, counsel submitted that a critical element of his claim – that it was agreed that the alleged loans would be repayable on sale of the Dover Heights property – was a reconstruction that emerged only after a potential limitations problem was identified.
I did not accept this submission. On the whole, I consider that Elie gave his evidence in a forthright and honest manner. His evidence was detailed and generally consistent. To his credit, he made some concessions. The value of those concessions was to some extent undermined, however, by his practice of excusing himself by blaming errors, inconsistencies or omissions on his inadequate English, his emotional state or his legal advisors. From time to time, his answers were non-responsive and self-serving. In answer to specific questions, he often simply restated the basis for his claim.
Bearing in mind the principles set out above, it is important to assess Elie’s evidence – particularly with respect to the conversations comprising the Agreements – in the light of the context, other available evidence and the consequences of accepting the truth of the allegations. For reasons which are set out more fully below, even taking into account matters on which I have found his evidence to be unreliable, I consider that his evidence ought, nevertheless, be accorded some considerable weight. His affidavit evidence was not undermined to any significant degree in cross-examination and, as set out below, it generally accords with the logic of events.
Linda, it was freely conceded, harbours anger and resentment towards Elie. Counsel for the defendants raised Elie’s conduct, in obtaining and defending default judgment and being slow to comply with the order to pay money into Court, as an explanation for what was admitted to be Linda’s argumentative and combative conduct in the witness box. While not conceded, it was also clear that Linda’s evidence was frequently non-responsive. It was nevertheless submitted on her behalf that her evidence was honest and ought be treated as reliable.
Linda was criticised by Elie’s counsel as lacking both credit and reliability, who submitted that she ought be disbelieved for many reasons. First, Linda appeared to be unfamiliar with the contents of her own affidavit. As addressed below, much of the hearing was occupied by the consideration of three schedules (the Schedules, see paragraphs 67 and following below) apparently prepared by Linda (or at her direction) and which purported to record the state of indebtedness between the parties. In cross-examination, Linda denied ever having seen the Third Schedule, which was exhibited to her affidavit and was relied on to identify the parties to the Arrangement (see paragraph 56 below) and the state of indebtedness under it from time to time. The Third Schedule was not some minor data point of corroboration. I consider the point to be well taken and that the reliability of Linda’s affidavit evidence was shaken by her denial of ever having seen, or considered, a document she had relied on in it.
Further, Linda’s affidavit evidence was contradicted, on occasion, by documents put to her in cross-examination, such as with respect to whether Elie had paid a mortgage broker’s fee on behalf of her and Raphael in 2014. Linda’s evidence was also speculative and propounded explanations for discrepancies between the contemporaneous accounting material and evidence of transactions (such as with respect to the Newcastle shop) that had not been addressed in her affidavit evidence, notwithstanding their obvious importance. Similarly, the failure of the defendants – without satisfactory explanation – to produce documents in answer to a Notice to Produce, some of which were eventually produced, was also raised as a matter relevant to the assessment of the reliability of the preparation of Linda’s affidavit evidence.
On the whole, I consider Linda’s evidence to be less than wholly reliable. In reaching this conclusion, I have had regard to specific instances, addressed below, where I have found her evidence to be implausible in respect of significant matters, contrary to the logic of events, contradicted by other evidence she has given, or contradicted by objective contemporaneous evidence.
The principal issues before me concerned whether the Agreements, as alleged by Elie, had been formed and, if so, what their terms were. The relevant legal principles are not controversial.
As to formation of an oral contract, in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [93] to [96], Hammerschlag J, as the Chief Judge then was, stated:
“[93] A binding agreement is made when a reasonable person would believe that, based on their words and behaviour, the parties intended to contract. This is an objective test, which in most cases can be administered by determining whether there has been an offer by one party to be bound on certain terms accompanied by an unqualified acceptance of that offer communicated by the other party to the offeror. See generally: Paterson, Robertson, and Duke, Principles of Contract Law, (4th ed 2011, Thomson Reuters) at [1.15] and [12.10]; J W Carter, Contract Law in Australia, (6th ed 2013, LexisNexis Butterworths) at [3.06].
…
[96] John Holland has the onus of establishing the agreement for which it contends. This entails proving to the reasonable satisfaction of the Court that the words said to give rise to the agreement were actually said, and that the alleged consensus was capable of forming a binding agreement and was intended by the parties to be legally binding.”
“The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.”
“Intention” is ascertained objectively according to what is conveyed by what is said or done, having regard to the circumstances in which those statements and actions occurred: Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [25]. The objective intention of the parties is that which a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had concerning the subject matter of the contract: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [262].
Subsequent conduct is admissible on the question of whether a contract was formed: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25]. It is also admissible on the question of what the terms of a wholly or partly oral contract are. In Lym International Pty Ltd v Marcolongo [2011] NSWCA 303, Campbell JA stated at [143]:
“… the task in ascertaining what are the terms of a contract that is not wholly in writing … is finding as a fact what the parties have agreed. A range of post-contractual conduct could be relevant to ascertaining what the parties have agreed. For example, their conduct in carrying out the contract could itself be objective evidence of what they had agreed, an admission of one of the parties could assist in ascertaining what they have agreed, and business records created to record or report on the contract rather than carry it out could also assist in that task.”
The onus of establishing that a particular person is a party rests on the party alleging that to be so: Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54]. Identification of the parties to the contract also abides the objective theory of contract: Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429 at [28]. Subsequent conduct is admissible in respect of this issue where the contract in question is wholly or partly oral: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [324]-[325].
In this case, a question also arises as to the characterisation of the movements of money. The movement itself is not determinative. How it is to be characterised depends on the legal context surrounding those movements: Federal Commissioner of Taxation v Normandy Finance and Investments Asia Pty Ltd [2016] FCAFC 180 at [172].
As set out above, Elie and Raphael (also known as Raphi or Rafi) were brothers and Linda was Raphael’s wife. Elie and Raphael had other brothers, Issac and Danny. Raphael and Linda had three children: Caroline, Jonny and Renati. Both Caroline and Renati have worked in the accountancy practice founded by Raphael. Jonny is a doctor, who obtained his medical degree from the University of Tasmania between about 2013 and 2018. While he was away studying, his living expenses were largely met by Raphael and Linda.
Elie conducted business as an electrician, and from 1983, did so through a company, most recently known as Chit Chat Communications Pty Ltd (CCC). From 1 July 2003, CCC traded as trustee of the Lily Settlement, a family trust.
Since about 1979, Raphael was the principal of the accountancy practice he founded, known as “R Barel & Associates” (RBA). The practice was incorporated as R Barel & Co Pty Ltd (RBC) in 2000 and Raphael was a director and secretary of RBC until 1 July 2015. He remained a certified practicing accountant and principal of the accountancy practice conducted by RBC until he retired due to ill health. RBC was deregistered on 14 February 2020.
Raphael and Linda also were beneficiaries in a family trust known as the Barel Family Trust (the BFT). The trustee was not RBC, but was another entity controlled by Raphael and Linda, Pimtoka Pty Ltd (Pimtoka). Pimtoka was also the trustee of the Provident Fund, a family self-managed superannuation fund. Pimtoka was incorporated, with Raphael and Linda as directors, in June 1982 and was deregistered on 1 November 2021.
Linda was employed by RBC as a bookkeeper from 2000 until December 2013, when she became Raphel’s full-time carer. Although she described herself as a bookkeeper, she also professed to have knowledge of accounting practice and in cross-examination, described herself as “an accountant for over 40 years, and I know what I’m doing” (at Tcpt, 5 September 2024, p 166(29)-(30)). Whether or not she was qualified as an accountant, she clearly had a good, working knowledge of accounting practice, understood the nature of record keeping and was able to make decisions with respect to the keeping of accounts without instruction from Raphael.
Raphael suffered a stroke in September 2009. He returned to work about a month later. From about 2012, he also exhibited symptoms of dementia, and in time, lost the ability to work, to drive or to manage his affairs. By early 2013, he was no longer practising but came into RBC’s offices for physiotherapy and because he still enjoyed being in that work environment.
Linda looked after Raphael with the aid of full-time outside assistance from 2017. In June 2017, Raphael fell, broke his hip and was hospitalised. On his discharge from hospital, Raphael and Linda moved into the Mark Moran Retirement Village (Mark Moran). Raphael lived out his life at Mark Moran and Linda has remained there to date.
“From on or about 1980, there was an arrangement whereby I (or my related entities) would lend money to Rafi and Linda (or their related entities), and vice versa. Rafi would also pay tax debts due to the ATO on my behalf and I would reimburse him. Rafi would provide accountancy services to me and my businesses would provide electrical services to him. I would not charge Rafi for my own labour. There was a spreadsheet that was maintained to record these transactions. Rafi maintained it. Linda was not involved with the spreadsheet and knew very little what was done and what was discussed between Rafi and myself. Every year Rafi and I would look at his schedule, update the last amount, and then start from that outstanding amount at the top of a new page. We would discard previous calculations. It was never more than a one page schedule.”
“… If you have losses I can load some of my turnover onto you, and vice versa. I can claim more tax deductions for you and me in that process. If I see a bargain in shares or tools for sale I will purchase them for you. You do the same. Also our personal lives will be easier knowing we can depend on one another if the need arises. If you are short of money to go on holiday or whatever the reason may be I can lend you the money and vice versa.”
| “[Elie]: | For how long do we have to do this? | | Rafi: | If it’s beneficial who says it has to stop. [It] could continue indefinitely until we retire. | | [Elie]: | What if I get married and my wife will refuse to continue this agreement? | | Rafi: | Then we balance the account and separate from our agreement. We are brothers there will never be issues between us. | | [Elie]: | Okay.” |
The key elements of the Arrangement, so described, were that services were provided without charge, monies were lent by one party to the other or were paid on account of liabilities to third parties (such as the Australian Taxation Office (ATO) or for trade disbursements) and those monies would be accounted for in a running account in a schedule maintained by Raphael and updated annually. The brothers, themselves, were parties and they would perform the services through corporate entities. At some point, it was contemplated, that there would be a final accounting, either through their retirement or because one of them would withdraw because of their marital circumstances.
Elie said that each year, he and Raphael sat down together and updated the schedule that Raphael maintained, which was never longer than a page, discarded the previous year’s schedule and relied on the newly updated schedule as a record of the current state of the Arrangement. No schedule answering that description was in evidence and Elie denied that any of the three Schedules, which were created in 2014 or 2015 and were not created by Raphael, accurately recorded the state of indebtedness under the Arrangement.
Linda did not dispute either that the Arrangement existed or that its terms were broadly as described by Elie. I accept Elie’s evidence as to its existence and terms in accordance with paragraph 59 above, that it did record and reflect the relations between the brothers and, for reasons which follow, the entities controlled by them. I also accept that Raphael maintained a schedule of the indebtedness between the Arrangement’s parties, which was not replicated in any of the Schedules.
Elie alleged in these proceedings that he and Raphael were personally parties to the Arrangement and, therefore, the state of indebtedness between them from time to time was a personal debt. A key element of the defendants’ defence was that the whole of the financial relationship between the brothers was subsumed, from no later than 2003, in a relationship between the respective trusts, being BFT and Lily Settlement.
In her role as bookkeeper at RBC, Linda was responsible for recording the transactions between each entity for the purpose of preparing their accounts and tax returns. For Linda, those entities were Lily Settlement and BFT.
Linda was not personally involved in any of the communications between Elie and Raphael that gave effect to the Arrangement. Until 2012, her role was confined to recording transactions communicated to her by Raphael as having occurred between Elie and his entities (such as CCC and the Lily Settlement) and Raphael and his entities (such as RBC, Pimtoka and the BFT). She was not a party to the conversations comprising individual transactions under the Arrangement and there was no evidence that she was involved in transferring any funds on Raphael’s direction. Her role was very limited and depended on communication of the position to her by Raphael.
I accept Elie’s allegation that he and Raphael remained personally liable under the Arrangement for the following reasons:
The Arrangement pre-dated the incorporation of CCC and RBC and the creation of Lily Settlement and the BFT. There was no contemporaneous evidence that established that Elie and Raphael were ever released from their obligations or gave up any rights thereunder. Objectively, this would appear unlikely, given the informal nature of the relationship and the level of trust between the brothers.
Raphael’s schedules were not in evidence. The defendants’ contention relies heavily on the Schedules and accounts prepared by Linda. However, Linda conceded that the records she maintained were not conclusive of all the transfers and payments made between Elie (and his entities) and Raphael (and his entities) and that she was aware that there were likely to be other transfers and payments of which she was unaware. In cross-examination, she said:
“A. Yeah, but usually if it tells me, I take it, because it’s a private account. So, I can’t see - it’s not in Lilly Settlement or the - the Barel Family Trust - Trust, so, if it’s not in the book, and they don’t tell me it’s cash, I wouldn’t know about it, and I wouldn’t refer to the other account - the other account, the private account, because it’s private. It’s private, I mean, if he wants to give his brother money or the other way around, it’s a private thing. It’s nothing to do with the business.
…
Q. They’re in your schedule, aren’t they?
A. Yeah. That means they’re reducing his loan.
Q. Well, that’s what you say. But you were suggesting before, as I understood it, that those payments wouldn’t be in the schedule, because they weren’t to do with the business.
A. Yeah, but if I knew from it - if I knew, I’ll take it from the business account.
Q. Well, here they are in the schedule, aren’t they?
A. Yeah, but not everything I know about if - if I don’t check the other account, because it’s mainly private. So, if you put it there, I wouldn’t know unless Raphi said to me, ‘Listen, he paid something to the other account.’
Q. Well, you knew--
A. Because really, I was - I was looking after the business accounts. This was a private account, which I remember we used to pay for the interest mainly, the - the - Johnny’s expenses, and renovations. So, if he gave money, which you see here, and I knew about it, I put it on - in the schedule to reduce his loan.
Q. Yes, even though it went into your private ING account, correct?
A. Yeah, because sometimes I know about it, so I put it there.”
I cannot accept the Schedules, even where corroborated by more contemporaneous records, such as tax returns or financial statements, as conclusive of the state of indebtedness under the Arrangement. The Arrangement was an overarching agreement that applied to all advances or financial accommodation between the brothers and the entities they controlled. The Schedules were not created for the purpose of recording those transactions. Each of the Schedules appears to have been created for a different purpose, which reflected Linda’s incomplete understanding of the relationship between the entities for which she prepared accounts and which had to balance.
I do not consider that Linda ever became a party to the Arrangement. In any event, Elie says that she undertook, as an obligation under each Agreement, to pay Raphael’s debts (or those of his controlled entities) under the Arrangement. I consider this question separately below.
As indicated above, three Schedules, purporting to record the state of indebtedness between the parties or interests associated with them, were in evidence. It was common ground that the Schedules recorded payments as between the parties or their associated entities, however, Elie said that they were each erroneous in fundamental ways.
The First Schedule (which was at page 104 of tab 4 of the Court Book (Exhibit P1)) was prepared by Linda and provided by her to Elie. Elie says that she did so in May 2015, whereas Linda says that she must have done so prior to April 2014. I prefer Elie’s account, which accords with the context, in particular a letter he sent to Linda on 31 May 2015, which is considered below.
The following aspects of the First Schedule are notable:
It purported to record a loan from “RBC Group” to “Chit Chat Group”. No such groups existed as legal or, so far as the evidence went, accounting entities.
It commenced in 1999 with debt from Chit Chat (CCC) to RBA carried forward in the sum of $29,000 (this was recorded as $29,500 in the Second Schedule). This preceded the incorporation of RBC. The first entries purport to record transactions between CCC and RBA.
In FY2003, a loan to “Electrical & Energy” was transferred to CCC.
In FY2004, it records a change from “Loan RBA & Chit Chat” to “Loan RBC P/L & Lily Settlement”. A further subheading records “Loan R.Barel Property and Lily Settelment [sic]”, although it is not clear whether “R.Barel Property” is a different entity to RBC.
From FY2005 to FY2011, transactions are recorded under the sub-heading “Loan RBC & Lily Settlement”.
An entry following FY2011 records “Transfer from Loan with RBC to Loan PIMTOKA”.
From FY2012 to FY2013 (when the Schedule ends), transactions are recorded under the heading “Loan Lily Settlement & Loan PIMTOKA (Barel family Trust)”. Entries referring to existing loans by Pimtoka to Lily Settlement in FY2008 and FY2009 are also included in the aggregate debt recorded due by Lily Settlement to Pimtoka.
Payments by Elie totalling $59,000 between 6 March 2013 and 10 April 2013, by way of cash payments by Elie or cheques to RBC, were recorded as repayments by Elie.
The total debt recorded as owing by Lily Settlement to Pimtoka as at 30 June 2013 was $103,001.70.
The Second Schedule (which was at tab 6, page 12 of the Court Book (Exhibit P2)) was provided by Linda to Elie in about June 2015. The transactions recorded in it largely mirror those in the First Schedule, however, the Second Schedule differs from the First in the following ways:
It was a new document, prepared in a different tabular format.
The heading and document footer record that the Second Schedule records loans between Raphael, Linda and Elie personally. The columns record “Raphael & Linda Barel Paid to Elie Barel” and “Elie Barel Paid to Raphael & Linda Barel”.
It records payments up to, and including, 26 March 2015.
Some of the entries refer to other entities, however the debt recorded as at 26 March 2015, in the sum of $29,017.24, was recorded as due by Elie to Raphael and Linda. It records the discharge of debts due by Elie to Raphael and Linda by payments in the sum of $132,984.46 between 6 March 2013 and 26 March 2015, $73,984,46 of which was credited to Elie after 1 July 2013. It also records payments by Raphael and Linda of debts on Elie’s behalf in the sum of $6,977.32 on 30 June 2013. The net sum of payments recorded to have been made by Elie during this time was, therefore, $126,007.14.
The Third Schedule (which was at tab 9 page 308 of the Court Book (Exhibit D1)), which Linda denied ever having seen before, was largely identical to the Second Schedule. It differed from the Second Schedule in that its heading referred to “Loan from RBC/Pimtoka Pty Ltd ATF Barel Family Trust to Chit Chat Communications/Chit Chat Communications Pty Ltd ATF Lily Settlement”. The footer and details of entries are consistent with the heading. The transaction dates and amounts are identical to the Second Schedule. For reasons already discussed, I have not relied on it.
In my view, the Schedules are unreliable as records of the parties’ respective obligations under the Arrangement. The First Schedule depended for its accuracy on communication by Raphael to Linda of all transactions between him and Elie. Linda knew that there may have been transactions of which she was unaware. Moreover, Linda’s concern was the accounts of the trusts and, for this reason, excluded transactions which she considered did not fall within the trusts’ relationship, even where she knew that they accorded with the purpose of the Arrangement.
Linda said in cross-examination that she prepared the Second Schedule to explain her position to Elie in June 2015. This seems likely and it appears to update and reduce the debt she said she and Raphael were owed. However, its recording of the transactions depended on the accuracy of the First Schedule and it was therefore infected by the same errors and omissions.
Subject to four exceptions, Elie accepts that the First and Second Schedules accurately record the movement of monies as between Elie and his entities, on the one hand, and Raphael and his entities, on the other, in the period to March 2013. He says that those four exceptions were errors or omissions and ought to be taken into account in establishing, first, that Raphael was indebted to him as at February 2013 and, secondly, that Linda was more likely than not to have been aware of, and offered to repay, that debt when asking Elie for money at that time.
The relevant transactions involve:
the purchase of Telstra shares in 1999;
payment for electrical work performed by Elie on RBC’s Bondi Junction offices in 2001;
payment for the transfer to Linda of a one-third interest in the Newcastle shop in 2004; and
what Elie alleges was a loan of $100,000 to Raphael in June 2009.
In 2000, Raphael bought shares in Telstra for Elie at the cost of $1,800. Elie says that he did not request the shares, which either he, or CCC, likely still owns. Elie says that he paid Raphael $1,800, in cash, for those shares on the same day that they were acquired. There is no independent, objective evidence corroborating the payment.
Elie’s evidence in this regard was unchallenged. It was consistent with the occasional dealings of the brothers in cash, particularly when the sums were comparatively small. Nevertheless, there was nothing to corroborate Elie’s account. Although I consider Elie generally to be a witness of truth, that particular transaction was for a small sum, took place a long time ago and would have been only one amongst many cash payments between the brothers.
There is no claim by the defendants for payment of any monies in respect of the Telstra shares. It is only relevant because the Schedules record that Elie owed the defendants or Pimtoka $1,800 in respect of them, which was a debt relevant to the calculation of a sum allegedly owed as at February-March 2013. Elie bears the onus on this issue and, given the small sum, the absence of corroboration and the length of time since the shares were purchased, I do not consider that he has discharged it.
Accordingly, I find that Elie has not demonstrated any error in the Schedules with respect to the non-payment of $1,800 for the Telstra shares.
Between December 2000 and February 2001, Elie performed electrical work and building renovations, or arranged others to do such work, on RBC’s offices in Bondi Junction. According to the Schedules, he was credited under the Arrangement with $8,635.72 for expenses incurred in doing so.
Elie says, however, that he actually incurred $37,000 in expenses. In a meeting with Raphael, Elie says that $37,000 was credited to him for those expenses. After Raphael calculated Elie’s expenses for the renovations and deducted amounts he had paid to the ATO on Elie’s behalf between July 1999 and June 2000, there was a difference of $7,255 in Raphael’s favour. Elie says that, a few weeks later, he gave Raphael $7,225 in cash and the account was balanced.
The First and Second Schedules do not record either the credit of $37,000 or the cash payment of $7,225. They do not record a zero balance at around this time. Rather, they record a debt in favour of RBC (or Raphael and Linda, as the case may be) of $38,800 as at 30 June 2000, $56,028 as at 30 June 2001 and $68,456.38 as at 30 June 2002.
There were no contemporaneous documents that established either that $37,000 was incurred or that any credit in that sum was agreed between Elie and Raphael. Although I accept that the brothers dealt with each other in cash from time to time, there was no evidence to corroborate the alleged payment. The events took place a long time ago.
Although the sum is more significant than with respect to the Telstra shares, for similar reasons as above, I am not satisfied that Elie has discharged his burden of proving the $37,000 credit or the $7,225 cash payment in respect of the Bondi Junction offices renovation.
Accordingly, I find that Elie has not demonstrated any error in the Schedules with respect to the electrical work on the Bondi Junction offices.
CCC (then known as Elie’s Electrical Pty Ltd) was a co-owner, together with Raphael and a Mr Peter Fritz (or entities controlled by each of them), in the Newcastle shop. In about April 2004, Elie agreed, on behalf of CCC, to sell a one-third share in the Newcastle shop to Linda. According to the transfer, the value of the one-third share was $53,200. Stamp duty on an estimated value of $40,000 was paid on 23 March 2005 and the transfer was registered in 2019. The transfer was not recorded in either the First or Second Schedules.
Elie says that prior to the transfer, he and Raphael had a conversation to the following effect:
| Raphael: | “Elie to date I have paid close to $100,000 on your behalf to the ATO. If you wish to reduce the amount, I will buy your share of the shop in Newcastle from you. I will reduce your debt to me by whatever the value of your share is, which I think will be at least $40,000. Please transfer it to Linda. When the transfer goes through we will get your share valued and we will use that value.” | | Elie: | “I am happy to do that. Let’s treat the value of my share as $40,000 until valuation is received.” |
“Q. You were aware, in 2004, that there was an arrangement between Raphael and Elie for the share in the shop held by Chit Chat to be transferred to you to offset some of those payments that have been made to the ATO on Chit Chat’s behalf. Correct?
A. I don’t understand it. Can you rephrase the question?
Q. You were aware, when the share in the shop was transferred to you, that the reason that was happening is because there was an arrangement between Elie and Raphael to offset the value of the share transferred to you against the tax liabilities RBC have paid on Chit Chat’s behalf?
A. Yeah.
Q. Correct? That’s right, isn’t it?
A. Yeah.”
Nevertheless, the defendants did not accept that the Schedules were inaccurate in this respect. Linda insisted that it was part of a different commercial and financial arrangement, being a tripartite partnership between Raphael, Elie and Mr Fritz. Accordingly, it was accounted for in the books of that partnership and was irrelevant to the state of indebtedness under the Arrangement, which was by this time an arrangement only between the trustees of the Lily Settlement and the BFT.
I do not accept this argument. First, Linda personally was the transferee and there is no evidence that she ever held her interest in the Newcastle shop on behalf of the BFT.
Secondly, the admitted purpose of the transfer was squarely within the parameters of the Arrangement: Raphael had caused payments to be made to the ATO on CCC’s behalf and Elie was conferring a benefit on Linda, at Raphael’s direction, in order to discharge indebtedness to Raphael or an entity controlled by him in respect of those payments. The fact that it may have been recorded in a different set of accounts because it was part of a different commercial structure does not affect this conclusion.
I accept Elie’s account of the circumstances of the transfer of the interest in the Newcastle shop. It accords with the probabilities in light of the Arrangement. There is no reason for the transfer not to affect the accounts as between them. Although Linda says that Elie denied having ever invested in the Newcastle shop, immediately prior to the transfer, CCC was a one-third shareholder and there does not appear to be any basis to infer that the transfer was ever intended by either party to have been gratuitous.
Finally, I have generally accepted Elie’s evidence and in this case, his account also accords with the objective circumstances at the time, the logic of events, such documents as exist, the likelihood that the transaction was recorded elsewhere and Linda’s admission above.
Accordingly, I consider Elie has established that the Schedules were in error in recording the state of indebtedness between the parties in this respect and that Elie ought to have been credited with $53,200 in them.
The final transaction on which Elie relies to establish the alleged pre-existing debt is the transfer of $100,000 from Elie to Raphael on 26 June 2009. There is no dispute that the transfer was made. Elie says that it was a loan from him to Raphael. Linda says that it was a gift.
According to Elie, there was a conversation to the following effect:
| Raphael: | “I am desperate. I need $100,000 urgently transferred to Linda and my St George Bank Account – R&L Barel.” | | Elie: | “Okay, I will transfer the money to you.” |
And:
“I have $700,000 in my super fund but I don’t want to touch it unless I really have to do so. I am going to continue to pay the BAS and taxes to the ATO on your behalf. Your loan will be repaid in two years”.
| Elie: | “I have money at the moment let me pay you something for all the accounting work you have done for me over 20 years that you never charged me for.” | | Raphael: | “No I don’t have any invoices for you to pay. I don’t charge you because you are my youngest brother and I love you.” | | Elie: | “Okay I want to give you $100,000 as a present then.” |
According to the First Schedule, Elie was then indebted to Raphael in the sum of $10,703.21 (comprised in two sums of $7,852.36 and $2,850.85). According to the Second Schedule, the debt was $25,703.21. Immediately prior to the transfer of $100,000 on 26 June 2009, $87,776.69 stood to the credit of Raphael and Linda in their St George account xxxx2874. Some $50,000 was withdrawn on 29 June 2009 but there is no evidence as to whether any further monies were withdrawn thereafter as the statement, produced by Westpac on subpoena, ends on 30 June.
I do not accept Linda’s account, which I consider to be a self-interested reconstruction. It had never been part of the Arrangement that accounting work would be paid for (in the same way that electrical work performed by Elie was not paid for) and the suggestion that Elie would decide to pay $100,000, as a gift, on account of such services appears both unlikely and out of character with the Arrangement. It appears even less likely in circumstances where, according to the First and Second Schedules, Elie was then in debt to Raphael and that debt was not reduced in either Schedule at all. If Elie was making a gratuitous payment to Raphael and this was known to Linda, it seems glaringly improbable that it would not have cleared that debt and put Elie into credit.
I have considered separately whether I am persuaded by Elie’s account. At the time, the Arrangement had been in place for almost 30 years. In June 2009, Elie was indebted to Raphael. In these circumstances, given the objective evidence of the fact of the payment, the most likely explanation for how the parties characterised the payment was as a loan within the parameters of the Arrangement. There is nothing in the context or the history of the parties’ relationship to suggest that it was a gift.
Finally, although I have not accepted Elie’s evidence on everything, I do accept it on this issue.
Accordingly, I accept that Elie advanced the sum of $100,000 to Raphael in June 2009, which monies ought to have been taken into account in any accounting of the true state of indebtedness or otherwise between the parties as at February-March 2013.
| “Linda: | Elie you must lend me $70,000 immediately otherwise the bank will repossess the house and throw your brother and me into the street. | | Elie: | Linda calm down, it is not that easy, the banks cannot throw people onto the street overnight. You know my financial position, I lost all my money and my house due to my crook lawyers. | | Linda: | I know but I have no one to help me. Your brother does not function any more. He is an invalid and it is very difficult for me. Can you borrow the money from Isaac and Dany [his and Rafi’s brothers]. They are millionaires and only care about themselves. Rafi has done so much for them. They must help their brother or we will be thrown into the streets. Lend the money from them and I will repay you soon as I sell the house. I am touching up the house so I can sell it for a good price. The renovations should take about 3 to 6 months and I will give your money back to you after I sell. | | Elie: | Ok leave it with me. I will do my best to lend you as much money as I can without drowning.” |
| “Elie: | I am lending you the money. Please add all the amounts you owe me so you can repay me in full when you sell the house. | | Linda: | Yes, don’t be silly. I’ll pay you. I’m surprised you talk like that. That is why we are selling the house so we can clear our debts.” |
Linda denies any such conversation took place. She says that she did not ask Elie to lend money to her or to anyone else. She says that, at the time of the alleged conversation, she did not have any intention of selling the Dover Heights property and had not even thought about undertaking any renovations. She denies saying that she would repay the funds to Elie on the sale of the Dover Heights property.
Further, Linda has a completely different account of the parties’ conversations at this time. According to her, as at 30 June 2012, CCC owed RBC over $150,000. She says that she had a conversation with Raphael in which they agreed that CCC owed RBC this sum and that it was time for Elie to start repaying some of it. She says that she and Raphael then had a conversation with Elie to the following effect:
| Raphael: | “We would like Chit Chat to pay down as much of the loan amount owing that it can” | | Elie: | “I am waiting on some funds to come into Chit Chat shortly and then can slowly make repayments to pay down the outstanding amount” | | Raphael: | “That’s fine, just make repayments as soon as possible”. |
The date and circumstances of the conversation alleged by Linda are not identified in her evidence, which was one matter on which counsel for Elie relied on the question of whose account is to be believed.
I prefer Elie’s account to Linda’s. Dealing first with Linda’s version, I consider it to be a self-interested reconstruction that is inconsistent with the objective circumstances, subsequent conduct of the parties and logic of events. I have found that neither Elie nor CCC was indebted to the defendants or any of their related entities in the sum of over $150,000 as at 30 June 2012. While the First and Second Schedules (which were not in existence at that time) recorded such a debt, which was also reflected in BFT’s tax return for 2013, I have found that those documents do not record the true state of indebtedness under the Arrangement as between Elie and Raphael. I have found that Elie was only indebted to Raphael in the sum of $1,824.38 (see [103] above).
Moreover, there would have been practically zero chance that Elie would have acquiesced to a demand to pay down the loan at that time. When an allegation that he owed the defendants $103,001.70 was made in May 2015, his response was swift and angry. He refuted the claim and advanced a claim of his own. There is no reason to believe that he would not have reacted the same way had a conversation to that effect occurred in 2012 or 2013. Accordingly, I reject Linda’s account of the conversation.
In separately considering Elie’s account, I have had regard to the objective circumstances in which Raphael and Linda found themselves, to Elie’s knowledge at the time. I consider it highly likely that Linda, at least, was by February 2013, very concerned about the defendants’ financial outlook.
First, the income position of the defendants looked very weak. The accountancy practice conducted by RBC was the defendants’ main source of income disclosed in the evidence. However, over the period from January 2010 to 11 March 2013, it had become a net drain and the defendants had provided net financial support to it in the sum of at least $83,000, including $25,000 on 11 March 2013. It was common, according to Linda, for RBC to fall into rental arrears during low cashflow times of the year, indicating that it was unable to retain sufficient working capital to manage its outgoings without financial support from the defendants.
Further, by then the outlook for RBC’s practice was poor. Raphael, whom Linda described as one of only two accountants at the practice whom clients wished to handle their affairs (the other being herself), had suffered a stroke and had already started to show symptoms of dementia. Although disputed, I accept Elie’s evidence that Raphael’s symptoms commenced in 2012. By March-April 2013, Raphael had ceased to perform any remunerative work even though he continued to attend the office because he liked to be there and received physiotherapy there. I consider that, by about the time of the alleged First Agreement Raphael’s ability to perform remunerative work was compromised and this affected the outlook for the practice.
Secondly, the defendants’ outgoings do not appear to have reduced. They continued to bear their ordinary living expenses. The defendants’ son, Jonny, had started studying medicine in Tasmania and was supported by the defendants. His living expenses were, Linda accepted, substantial.
Thirdly, the evidence indicated that the defendants had no other source of funds. Although Linda denied that the defendants were in such need, there was no reliable evidence of any alternative source of funds on which the defendants could rely, at this time. There was evidence of four bank accounts – an account with St George Bank that had a $0 balance, a Portfolio Loan (also with St George) that had a debit balance of $68,052.72 as at March 2013 and a home loan (St George), which required monthly repayments, the amount of which was not in evidence.
Further, for the reasons set out at paragraph 128(4) below, I accept that Elie and Linda had a conversation in April 2013, on the occasion of Elie giving Linda a cheque in the sum of $25,000 made out to RBC, to the following effect:
| “Linda: | Make the cheque out to Pimtoka provident fund. | | Elie: | Linda why the provident fund? I thought you need the money for renovations of the house? | | Linda: | Really? what does it matter? How do you think I manage to exist? I use whatever money I have to block holes. I take money from the business to exist then when I can I give money back to the business to keep it running. I do the same for the superfund. One day I lean to the right one day I lean to the left. I need to exist until I sell the house so I don’t care from where the money comes.” |
This provides further support for the conclusion that the defendants were in need of funds.
Fourthly, I am satisfied that the defendants, or at least Linda, had decided to renovate the Dover Heights property by the end of 2012. Linda admitted that there were elements of the property that needed to be repaired or improved because she found living in the property, as it was, to be unsatisfactory. In cross-examination, Linda admitted this to be so:
“Q. And I want to suggest that you, in fact, began renovating the Dover Heights property in late 2012.
A. Yeah. Yeah.
Q. You did?
A. Yeah, because we wanted to fix the place. But we, at - at the moment - at the time, we didn’t decide to sell it yet.
Q. Right. But you did begin renovating it in late 2012?
A. Could be.
Q. And you upgraded the kitchen appliances. That’s right, isn’t it? At the time?
A. Yeah. Yep.
Q. And you removed the pergola. That’s right, isn’t it?
A. I don’t have a pergola.
Q. And you began landscaping works on the property at that time. Correct?
A. I don’t know if it was that time, but I remember doing the landscaping which my son-in-law did.
Q. But certainly, you’ve begun renovations on the property by late 2012. That’s right, isn’t it?
A. It could be. Yeah.”
“Q. By March 2013, you had already started undertaking renovations to the house, hadn’t you?
A. Yeah, because things were broken and I had to correct a few things. I didn’t want to live like this.”
The evidence of renovations being either started or contemplated, in the context of Raphael’s declining health, the ongoing, deteriorating financial outlook of the defendants as at February-March 2013 and apparent lack of any other source of funds, all provide contextual support for the conversation occurring to the effect as set out at paragraph 105 above. In this factual context, I accept Elie’s account of his conversation with Linda in February-March 2013.
I do not, however, accept that the conversation continued in terms to the effect set out in paragraph 106 above. For similar reasons to those on which I relied in rejecting Linda’s account of the conversation, I reject this aspect of Elie’s evidence. Raphael and Linda were not then indebted to Elie at all. There is no evidence that suggests she would have believed that they were. I do not see how Linda could have agreed to such a demand. She would not have agreed to repay any such alleged debt as a condition of obtaining further funds from Elie.
It was submitted that Linda’s subjective belief that the defendants were owed a significant sum of money by Elie militates against any factual finding that she asked for a loan at all. It was submitted that, even if the defendants were in dire financial straits, Linda would only have asked for repayment of monies she believed were due. This argument has some force. However, I do not accept it. I do not believe that there was any conversation between Linda and Elie in February-March 2013 in which any existing debt was discussed, one way or the other. If it had been, it would have brought the parties’ disagreement to a head there and then. It is far more likely that existing debts were simply not discussed or considered and the conversation related only to prospective advances by Elie.
I accept, on the basis of Elie’s evidence and the factual context as I have found it, that the parties discussed the funds in terms of a loan, repayable on the sale of the Dover Heights property. The poor outlook for RBC and Raphael’s condition made it clear that the Arrangement could not continue much longer, if at all. Indeed, the last payments made on Elie’s behalf, by RBC to the ATO, to ASIC or for superannuation and utilities ($6,977.32), were made in June 2013.
It also would have been clear to the parties, in February-March 2013, that the Dover Heights property would need to be sold as it was an ongoing cost, a realisable asset and, at some point, would become unsuitable for Raphael and Linda’s housing needs. It would have been equally clear that if Elie lent any funds to the defendants, the funds with which to repay Elie would have to come from that sale.
Accordingly, I consider that Elie’s account accords with the probabilities and the logic of events.
I, therefore, find that there was an Agreement between Elie and Linda and Raphael, pursuant to which Elie would lend $70,000 to Linda and Raphael, which would be repayable on sale of the Dover Heights property.
Elie alleges that, pursuant to the First Agreement, he advanced to the defendants the sum of $74,800 by way of cash and cheque between 6 March 2013 and 22 April 2014. The characterisation of each of the payments is disputed, and the question of whether $11,000 of the payments were made at all is also disputed. Each is addressed below:
On 6 March 2013, Elie paid $10,000 cash, he says, to Linda. The payment is acknowledged in each of the Schedules, although Linda denies that she personally received the payment, suggesting that it may have been received by Raphael. Whoever received it, there is no dispute that it was received. Given the state of Raphael’s health and the fact of the conversation comprising the First Agreement, I prefer Elie’s evidence.
On 27 March 2013, Elie provided to the defendants a cheque made out to RBC in the sum of $9,000. Linda denies that it was an advance, but says that it was a payment of monies due under the Arrangement. As Elie was not indebted to the defendants in this sum, and did not believe himself to be so indebted, I do not accept Linda’s evidence in this regard and find that it was an advance pursuant to the First Agreement.
On 28 March 2013, Elie provided to the defendants a cheque made out to RBC in the sum of $5,000. For the same reasons as applied to the payment in sub-paragraph (2) above, I find that it was an advance pursuant to the First Agreement.
On 2 April 2013, Elie provided Linda with a cheque for $25,000 made out to Pimtoka. This was the occasion on which Elie and Linda had the conversation I found at paragraph 117 above to have occurred. The bank statements of RBC and Pimtoka lend support to the factual finding as to that conversation and to the factual finding that the defendants were under pressure financially. On 11 March 2013, $25,000 had been transferred from Pimtoka to RBC. On 2 April 2013, the cheque for $25,000 was deposited into Pimtoka’s account. On Pimtoka’s bank statement, a hand drawn line links the debit on 11 March 2013 with the deposit on 2 April 2013. As this was the defendants’ document, I infer that the annotation reflects the working out of accounts. In Linda’s evidence, she alleges that the deposit of the cheque into Pimtoka’s account was in error. I do not accept this evidence. It is far more likely that the payment into the Pimtoka account was to reimburse it for monies transferred to RBC three weeks earlier, to meet RBC’s obligations. I find that the cheque to Pimtoka was an advance by Elie pursuant to the First Agreement.
On 10 April 2013, Elie paid $8,000 in cash to Linda. Linda does not deny that the payment was received, although she says it was paid to Raphael, and not her. I consider it more likely that the money was paid to Linda, however, in either case, it was recorded in the First and Second Schedules and the fact of payment is not disputed. I find that the payment was an advance pursuant to the First Agreement.
On 12 April 2013, Elie says he paid $5,000 in cash to Linda. Linda says that she has no recollection of receiving the payment, which was not recorded in any Schedule. She denies Elie’s allegation that, at the time, she refused his offer of a cheque and said that she was too busy to go to the bank as she was looking after Raphael so would prefer cash instead. In support of his own evidence, Elie relies on a bank statement which shows that he withdrew that sum by cashing a cheque on that day. The bank statement (other than a handwritten annotation, the date of which is not established and which I have disregarded for the purpose of determining this issue) only records the fact of the withdrawal, not its purpose. There was no evidence to corroborate Elie’s stated purpose being to pay the proceeds of the withdrawal to Linda.
Although I have generally accepted Elie’s evidence, I also give weight to the fact that Linda kept records of payments which she attributed to the affairs of RBC and Pimtoka. I have not accepted her characterisation of the payments made in 2013. However, I do accept that she recorded all payments of which she was aware. In this circumstance, I find that Elie has not made out his claim with respect to the $5,000 cash payment he alleges on 12 April 2013.
Elie alleges that on 18 April 2013, he paid Linda $1,000 cash. He supports his allegation by reference to a bank statement which shows the withdrawal of $1,000 on that day. Linda does not recall the receipt of those funds. The alleged payment was not recorded in the Schedules. For the same reason that I did not find that Elie made out his allegation with respect to the alleged payment on 12 April 2013, I find that Elie has not made out his allegation in respect of this payment.
Elie alleges that on 26 April 2013, he paid $5,000 cash to Linda. Linda does not recall the payment and it was not recorded in any Schedule. For the same reason that I did not find that Elie made out his allegation with respect to the two payments alleged in the last two sub-paragraphs above, I do not find this allegation made out.
On 2 April 2014, Elie gave $2,000 cash to Jonny, he says, at Linda’s request. Linda denies directing Elie to pay any monies to Jonny, although the cash payment is recorded as having been made in the Schedules. I do not accept Linda’s evidence in this regard. There would be no reason for the payment to be so recorded unless there was a communication between Linda and Elie directing such payment pursuant to an agreement to do so. I find that the cash payment to Jonny was an advance pursuant to the First Agreement.
On 22 April 2014, Elie provided to the defendants a cheque made out to RBC in the sum of $4,800. Linda denies that it was an advance but says that it was a payment of monies due under the Arrangement. I do not accept Linda’s evidence characterising the payment and find that it was an advance pursuant to the First Agreement.
Payments in the sum of $63,800 are also recorded in each of the three Schedules.
Accordingly, having found the First Agreement comprised an agreement for a loan, I find that Elie advanced to the defendants the sum of $63,800 pursuant to it, which was repayable on sale of the Dover Heights property.
| “Linda: | Elie I am in desperate need of help. Your stupid brother was never worried about his family. As an accountant he guided all his clients how make millions while he himself remained broke and poor. | | Elie: | Don’t say that Rafi was ever an idiot or poor. He sent the children to private schools. You own a 6-bedroom 4-bathroom massive nice house in Dover Heights. Rafi owns the office unencumbered valued over 2 and a half million dollars. There is always kosher food on the table. You have a comfortable standard of living. | | Linda: | Bull shit you don’t know anything about your brother. He was the black sheep of your family. Your mother only favoured Isaac and Danny. She treated Rafi like rubbish. Anyway, the renovations are costing me more than what I expected. I know you don’t have any money to help me but get it from your brothers. All I need is a $50,000 loan urgently. Renati has been in touch with a real estate agent and we can get $4,500,000 for the sale of the house. I will repay you all the money back on the same day that I settle on the sale of the house. Please talk to your brothers and remind them of everything Rafi did for them. | | Elie: | I will see what I can do.” |
Linda denies this conversation took place at all. She does not advance an alternative version of any conversation at this time.
Elie relies on objective circumstances and contemporaneous documentary evidence. He particularly relies on the evidence of the defendants’ financial position, contemporaneous communications between Linda and her daughter, Caroline, and the state of renovations to the Dover Heights property.
By 1 June 2014, the balance of the defendants’ St George offset account was $35,599.04 and their Portfolio loan had a debit balance of $70,382.29. RBC continued to trade. As at June 2014, the cumulative net amount that had been advanced by the defendants to RBC since 1 January 2010 was $70,000. The defendants continued to bear their own living expenses and to fund Jonny’s studies in Tasmania. Between March 2013 and April 2014, as I have found, they received $63,800 from Elie. Their financial position was, if anything, worse than it was in February-May 2013.
The evidence did not establish any regular income from any other source. When it was put to Linda that the defendants were in desperate need of funds at this time, she referred to the offset account, which she said had $180,000 in it at the time. This was incorrect. The defendants’ Freedom cheque account only briefly held a balance of $180,000, on the refinance with ING in September 2014, after which those monies were transferred to an ING transaction account. There was no bank statement or other evidence to corroborate the assertion that $180,000 was available to the defendants in an offset account in May or June 2014. I do not accept Linda’s evidence in this regard. At the time, the Portfolio account had only about $35,000 available which was, as submitted, “hardly a substantial buffer given the extent of the expenses the defendants were meeting each month at the time”. Absent a new source of funds, it would not have lasted long.
Further, it was at about this time that the defendants sought to refinance their St George home loan with ING. This would have been one source of such funds. Indicative approval for an interest only, five-year loan in the sum of $1,900,000 was granted on 12 June 2014 and the loan, itself, was drawn down on about 1 September 2014. Of the funds drawn down, all but about $147,010 was applied to retiring the St George debt in the Portfolio loan and the home loan. The defendants say that the balance was sufficient to finance the renovations to the Dover Heights property and, therefore, Elie’s account of the conversation ought be rejected because it was contrary to the objective circumstances at the time.
As set out above, I am satisfied that the renovations to the Dover Heights property had commenced by early 2013 at the latest. However, according to Elie’s account of the conversation, Linda told him that she was aware that a second, more expensive phase of the renovations meant the defendants needed funds to meet those further costs.
The evidence does not show that any of the more expensive renovation work was performed in or before June 2014. The evidence as to expenses incurred in renovating the Dover Heights property was set out in Linda’s affidavit. That evidence shows that $84,673.55 was incurred between 18 September 2014 and 21 April 2015 and a further $106,827.13 was incurred between October 2016 and July 2017. The ING loan would not have been sufficient to pay for all of the renovation expenses, although further funds were later drawn down pursuant to a subsequent refinance.
Further, the ING loan could not have been sufficient to fund the defendants’ ongoing living expenses as well as the renovation costs. Between 10 September 2014 and 21 April 2015, the ING transaction account was used not just to pay the renovation costs but to pay other expenses as well. For example, interest payments from the account were, by 1 April 2015, $48,849.72. Payments for various expenses incurred by, or for, Jonny were $30,020. A payment of $3,000 was made to Renati on 4 March 2015. Over the same period, some $20,000 was transferred to RBC. The drawdown from the ING refinance would have been exhausted but for $6,000 transferred from “Sydney CU” and $10,000 received from Elie on 25 and 26 March 2015. The living expenses of the defendants do not appear to have been paid directly from the ING account.
I do not accept Linda’s evidence that she had not decided, as at June 2014, to undertake the renovations and that the decision to sell the Dover Heights property was made in July or August 2014. Linda conceded that the purpose of the refinance with ING was to fund the renovations so the Dover Heights property could be sold for the best possible price. The refinancing process was commenced no later than May 2014. The decision to renovate and sell was clearly taken at or before that time.
Although no substantial renovation costs had been incurred by May- June 2014, it is clear that they were, by then, contemplated. Moreover, work likely commenced prior to mid-September 2014 because the first payment to a builder is recorded as having been made on 18 September 2014 in the sum of $12,000.
The evidence establishes that, as at May-June 2014, the defendants were faced with the prospect of expensive renovations, poor income prospects and significant ongoing expenses in maintaining their own lives, the business of RBC and their family’s expenses. They had sought to refinance their St George loan accounts but, by the time other debts were paid out and the balance was added to the balance of their Portfolio account, they had $180,000 to fund interest payments, and ongoing business, personal and family expenses from September 2014. This would have been apparent at the time the approval was granted and the amount of the loan was known.
In the circumstances, I accept Elie’s evidence as to the essential components of the conversation he alleges occurred in May-June 2014. I consider it likely that Linda spoke to Elie and sought a further advance from him. I consider it likely that she was aware of the likely range of costs of the renovation. While it may be that certain irrelevant particulars of the conversation alleged by Elie are inaccurate, or have conflated other conversations with that conversation of May-June 2014, I consider it likely that Linda and Elie spoke, that she asked him to procure further funds in contemplation of the further renovation of the Dover Heights property and that she undertook to repay those monies, together with the monies advanced under the First Agreement, on sale of the Dover Heights property. The objective need to sell the Dover Heights property would have still existed and I consider it likely that it was discussed.
I, therefore, find the Second Agreement was entered and provided that Elie would advance further monies, up to $50,000, to the defendants and on settlement of sale of the Dover Heights property, all monies then owing by the defendants, including monies owed pursuant to the First Agreement, would be repaid to him.
| “Linda: | Elie I want to thank you for all the financial and emotional support that you gave to us. You know Renati is regularly helping me she is an angel. I do not know what I would have done without her? I need you to talk to Caroline. She is more likely to listen to you than to me or to Renati. Tell her that she needs to purchase new clothes, do her hair put on some make-up find another man and dump that lazy good for nothing husband of hers. | | [Elie]: | Linda this is not my call or any one’s business. There is nothing wrong with Jason. He is too busy taking care of Jeremy who you know is not an average child. Caroline earns more money than him and therefore she works and he does the other tasks. | | Linda: | No Caroline is scared from him. He gets bitchy and screams at her. You don’t know everything. I am her mother.” | | “[Elie]: | Linda stop. This is not my business I am sure that Caroline can take care of herself. I have seen her stand up to Jason. | | Linda: | No she is petrified from him I asked her to lend me $250,000 she refused and said that Jason will not allow it. What kind of a girl says that to her mother? Her father got dementia and now became an invalid. I am working like a dog taking care of him. Her parents are in trouble and she refuses to help. Tell her that if she will not lend me the money, I will empty the business and the business will go down the drain and she will lose her Job. No one will employ her with the way she looks and the way she behaves. | | Elie: | Caroline is a Chartered Accountant I have seen her speak to people. She is very coherent and it is lovely to converse with her. She is very capable of running any accounting business on her own. Do you need the money to finish the house renovations or do you need it for the business? | | Linda: | It doesn’t matter for what. I already told you. The house the business is all the same. We need it for both. Your brother ruined the business and Renati is saving it. We urgently need some cash flow otherwise we cannot pay wages. It is all one bank. Money is regularly going in and out of the business. How do you think we are surviving? I am also using most of the money from the business to renovate the house. At the end of the day, it is all the same. Tell Caroline that I only have a few more months to complete the renovations and then sell the house. The same day I settle from the sale of the house I will give her back her stinking $250,000 with interest. If she still scared from her husband and refuses to assist tell her she can take a caveat against the house. Please Elie this is very important talk to her, I am sure you can persuade her to do the right thing.” |
| “Linda: | Did you speak to Caroline about lending me and her father $250,000? | | [Elie]: | Yes but she is reluctant to do that. I think the main obstacle is Jason. He seems adamant and against lending any money to you and Rafi or anyone else. I don’t think it’s personal. | | “Linda: | Oh yes, it is personal. He hates me and Renati. Don’t worry leave it to Renati. She will convince Caroline to lend me the money. She won’t take no for an answer. She knows how to handle Caroline. In the meantime, please see if you can help with whatever money you can lend me. I want to finish the house, pay the bills and move on with our lives. As you can see Rafi’s condition is worsening. I need the house out of my head so I can concentrate on taking care of him. Don’t worry there is not much left to do. Renati has a few real estates on the line. Soon as we sell, I will pay you back your money”. | | [Elie]: | I will see what I can do to help you.” |
Linda denies that she ever said words to the effect that she was in desperate need of help but accepts that she may have said that the renovations were costing more than she had expected.
The objective circumstances support Elie’s account. By this time, as set out above, the defendants had spent more on renovations, living expenses and other costs than they had borrowed from ING on the refinance of the Dover Heights property the previous year. The renovations were completed by about 21 April 2015.
At the time, Caroline had not advanced to the defendants any money. Linda denied that she had ever asked for a loan from Caroline. However, as set out below, on 2 June 2015, Linda sent Elie a text message in which she referred to Caroline promising to lend the defendants money to tide them over. Caroline did transfer $250,000 to the defendants, however, the character and terms of that transfer were disputed and eventually Caroline and Linda agreed that Linda would repay $225,000 from the proceeds of sale of the unit at Mark Moran and a caveat would protect Caroline’s interest.
Moreover, I consider it clear that, by February 2015, Linda had decided to sell the Dover Heights property imminently. Linda says that she had been approached by a real estate agent in February 2015 and, again, in April 2015 in relation to selling it and that her decision to list the Dover Heights property in April 2015 was in response to the second approach. This seems unlikely to have triggered the decision. It far more accords with the surrounding circumstances – including the renovations, the defendants’ need for funds, Raphael’s poor health – that the defendants had decided before then, of their own accord, to list the Dover Heights property for sale.
Indeed, text communications between Linda and Elie on 9 April 2015 indicate that Linda sought Elie’s help in maintaining the Dover Heights property and its kitchen appliances. The decision to sell had clearly been made by then.
Accordingly, I accept Elie’s account that he and Linda had a conversation in about February 2015 in which Linda asked him to lend the defendants whatever money he could spare on the basis that the defendants would repay him out of the proceeds of sale of the Dover Heights property.
The Dover Heights property was listed for auction shortly thereafter, however, it failed to generate much in the way of buyer interest and was withdrawn from sale.
Linda admits that Elie made two bank transfers of $5,000 each on 25 March 2015 and 26 March 2015. She denies, however, that they were advances under the Third Agreement.
For the same reasons that I have accepted Elie’s characterisation of payments under the First and Second Agreements, I am satisfied that Elie made these payments pursuant to the Third Agreement.
Elie also says that on 25 February 2015, he paid $3,000 in cash to Linda, having cashed a cheque in that sum to generate the cash. Linda does not admit receiving any such payment, saying that she would have recorded that payment in a Schedule if she had done so. As Elie’s purpose for cashing in the cheque is not corroborated by any contemporaneous objective evidence and was not recorded by Linda in circumstances where I consider it likely that she would have recorded the payment if she had received it, I am not satisfied that Elie made this payment.
For the same reasons, I am not satisfied that the payment of $6,000, allegedly made on 3 April 2015, was made.
I do accept, however, that Elie paid $500 to the defendants’ mortgage broker on 1 February 2015 pursuant to the Third Agreement.
Accordingly, I find that Elie advanced $10,500 to Linda pursuant to the Third Agreement.
There was considerable evidence as to the relationship between the parties following the advances, which was admitted on the basis that subsequent conduct is relevant on the questions of the existence, terms and parties to the Agreements. I have taken that evidence into account in determining each of the matters above.
Disagreement as to the existence and extent of debt as between the parties appears to have commenced in May 2015, although the animosity that developed appears to have arisen only in about 2018. Elie says he visited the defendants at the Dover Heights property in early May, when Linda handed him the First Schedule, saying:
“Here Elie I prepared a reconciliation for all the money that Rafi and I paid on your behalf and the money that you returned. You still owe $103,001.70. See if you can pay it soon as I am desperate for money.”
“Dear Raphy and Linda I often hear from Issac and my mom is that I owe you lots of money.
I would like to clear that matter finally.
You gave me a list of accounts under the heading Loan RBC Group & chitcha group.
Copy attached. There is an error in that list.
In paragraph 1 I very clearly paid Ralph cash $1800 for the shares.
[He also challenged another recorded transaction not presently relevant and calculated a new sum of $92,565.96 as owed by him].
Money I paid you.
| 2003 I transferred my share of new castle shop to you. Value | $40,000 | | If you think it’s not worth $40,000 give it back to me and I will credit you for $40,000 | | | 26/6/2009 I gave Raphy cheque | $100,000 |
[He then set out payments the subject of the alleged Agreements as well as other payments and claims for monies received by Raphael from the ATO on Elie’s behalf but retained by him, unpaid sums for work performed at his own expense].
All of the above at my expense.
Where do I stop If I need I can prepare a $250,000 list without difficulties.
I also clearly remember giving Raphy 2000 and 7,000 cash in his office at different days a long time ago but I am hazy as to details. I am not going to worry about it.
If you inspect any of my past tax returns due to me have been retained in your accounts I am sure you will find a cheque or two this would have been with my request.
The above is only some of my free services and expenses I made to Raphy and his family and his properties. So forget charging me $100,000 for accounting fees and I will not charge you $250,000 for money I spent on your behalf.
Conclusion you owe me 138,878
So dear Raphy Please stop telling our mother and Issac that I owe you hundreds of thousands of dollars.”
Linda says that she must have given Elie the First Schedule at an earlier date, given that it was not current to May 2015. Elie’s letter was sent on 31 May 2015 and was in response to having been provided with the First Schedule. I accept that he was only provided with the First Schedule shortly before sending that letter.
Linda also says that on or about 28 May 2015, she had a telephone conversation with Elie to the following effect:
| “Elie: | Linda you need to sell your house so you can put money in the business. | | Linda: | Elie I can’t keep putting money in the business, I have lost so much money, the business owes me over $100,000 in rent and I am only charging them half the market rent. I have lent the business money and it owes me over $150,000 in unpaid loans. | | Elie: | don’t be selfish Linda, you have the money, you have an office with 2.5 million you can afford to lose some money on the house and put money in the business to help your daughter. | | Linda: | but I can’t sell it so cheap I have a mortgage and I have to be able to buy a suitable unit for me and Rafi. I can’t keep putting money in the business when the business already owes us more than $250,000 in unpaid rent and loans. | | Elie: | She is your daughter, she needs the job, her husband doesn’t work, you can’t close the business it’s your responsibility to keep the business running, you always put money in before. | | Linda: | Caroline said she may lend the business money or by the clients herself, it will be good for me and good for her if she buys the clients, she will have the business and can move to a small office that she can afford and I can get my unpaid rent and rent the office out for much more money. I am not there anymore I don’t even know what’s going on. | | Elie: | you are a horrible mother you are a crazy woman, that is why Rafi got sick, Rafi is also a criminal like you. You owe me money, I did a lot of work on your office. I will take you to court and finish with you after I finish with [name of solicitor] in the crook lawyers in court. | | Linda: | why are you saying this you know your brother always paid your tax and let you money all the time I have a letter of it. The office renovations that you did have been included in the ledger but you still owe us money. Why are you picking on me? I am very upset, my husband is sick, he almost ruined our financial situation always paying your tax and lending you money and not charging his clients enough. I am just trying to do the right thing so that we don’t lose more money in the business. | | Elie: | my mother was right, you are crazy and screaming all the time and Issak knows Rafi owes me money, you will see I will finish you in court after I finish with [solicitor] and the crook lawyers. | | Linda: | Elie please stop abusing me. I am going to hang up the phone.” |
Elie denies that this conversation occurred. He says that his advice to Linda at the time was that she should not rush the sale of her house in order to ensure that she obtained a good price. He denies making “such terrible comments” about Rafi and says that he understood that she was in a precarious financial position and so would not have asked her to lend money to Caroline.
Elie’s version of events is supported by the fact that the Dover Heights property was already on the market. It is also supported by the contemporaneous text messages. Although there was some friction between the parties, they had not, by then, fallen out. On 2 June 2015, Linda sent Elie the following text message:
“Elie, just to get things straight I did not tell issac or your mother that you owe me money on the contrary issac said you owe him money and said other not nice things about you. I am not talking to issac or your mother and Rafi does not say much to them either. Issac does not see or speak to rafi and he would never talk about you to your mother or anyone else. It is a shame that you have decided to listen to lies about me and blame rafi based on lies from the real liars. Your mother and issac tell me and rafi that you always complain that we bother you and we say nothing to them and always tell you when they say things about you. Im surprised that you are so easily tricked by them as you know they often lie not me. I dont have time to make up stories and gossip like they do. I have to work and care for my husband (your brother) who is terminally ill. I am disappointed that rather than assist and support our family at this time you decided to side with your brothers who you told me yourself are not even nice to you. Im upset because I thought out of all the brothers you were the only good one.”
“Dear Linda
There is no need to be upset I do not mean to upset u or any one it is just both Issac and Renee told me that raphy banged on the table and said that I am a thief and I stoll [stole] all his super Anuation money from him
when I saw him on Monday I understood that I should not get upset with him that paperwork was for him to stop accusing me as I believe he did a number of times. Any way I am not upset with u Renati or any one from ur family I am sad for the difficult time ur having I think that u are good and kind people but very stressed indirectly I love all of u and I care as I told raphy next week I will receive $10,000 I can lend it to him or u
u have to stop getting upset from every reaction u get
keep me updated with the real estate do not reduce the price from what I see on the market the house is worth about 3,5 mill the prices have not dropped
Mandy my secretary told me that there is a South African influx coming into the country in 2 weeks demand will increase prices will rise a little more In wall angora road a house needed 1 mill renovation got offers 2.9 mill the owner waited 3 month later he got 3.76 mill we will spk soon if u need anything text or call Me”.
“No problem Elie. I always did appreciate and still appreciate your help. I heard him screaming on the phone to your mother last week and didn’t understand what they were saying about superannuation and I told you about it. You have to know that your brother has dementia and doesn’t know or understand things. I just got a shock when I saw your letter and didn’t understand where you coming from and to tell you the truth I was very worried and couldn’t sleep. It didn’t look like it came from you as it was very nasty and worrying. At the moment I have lots of other problems to take care of including taking care of him even so he doesn’t deserve it. He has always been against me and never cared about his own family as much as he cared about others. He destroyed our financial situation with his stupidity and never listen or consulted me and did things behind my back. But even so he doesn’t deserve me I still feel sorry for him and can’t help it (I don’t have a black heart). I’m happy to know that the letter was meant for him and I assure you that I never said anything bad about you. It’s Issac that you have to be worried about and I wouldn’t trust your mother either. She goes with the wind and with whats is good for her. Thank you for your advice regarding the sale of my property. I don’t indent [intend] to sale it cheap and if necessary I wait until I get a good price. (Caroline promised to lend us money to tie us over until we sell). Talk to you later. Have a good nite.”
“Also I forgot to mention; when he screamed to your mother on the phone, I shouted at him (your mom probably heard me screaming) I think your mum worms [works] him up as she always attack and accuse him for the benefit of another brother and thats why he react badly. He is very anxious and sick. (he was always the black sheep in your mothets [mother’s] eyes) and I think thats why he tries very much to please her as he always did on my account and still does even so he is dying and I’m the only one who cares for him.”
The objective evidence of the contemporaneous communications accords far more with Elie’s account than Linda’s. Elie’s account is further corroborated by further texts from June 2015, in which he and Linda discuss the pending auction of the Dover Heights property and a dispute with the real estate agent.
On about 12 June 2015, Linda sent Elie the Second Schedule in response to Elie’s letter of May 2015. It updated the payments and reduced the amount of claimed indebtedness to her and Raphael. It also identified the personal parties as creditors and debtor. Linda says that she did so to assist Elie to understand her position. This seems likely. It also appears to have been a conciliatory document in that it substantially reduced the amount she said she and Raphael were owed.
Linda says that Elie did not cavil with her claim that he remained indebted to her and Raphael in the sum of $29,017.24 and that this ought be taken into account in assessing whether the debt claimed by him existed at all. I do not consider that Elie’s conduct has that effect. I return to this question below, however, I consider that the overall factual context of the period May-June 2015 establishes that Linda asserted a debt to her by provision of the First Schedule, which Elie refuted by his letter of 31 May 2015. Elie made a number of claims in that letter from which he did not resile. Linda then appears to have created a document which accounted for the payments made by Elie since March 2013, but which still did not address his claims, amongst other things, with respect to the Newcastle shop and the 26 June 2009 $100,000 cheque.
It appears that the parties simply let go of all of this at the time. In the circumstances where Linda was seeking to sell the Dover Heights property and was under financial pressure and the parties had not fallen out, this appears to be the most likely explanation for each party’s conduct.
The circumstances, and the communications between the parties, in April to June 2015 support Elie’s submission that Linda and Raphael were under financial pressure. The Dover Heights property was unsuccessfully listed for sale and Linda was relying on an expected advance from Caroline, in the sum of $250,000, to tide her and Raphael over until the property could be sold. The business of RBC was still a financial drain on them.
The provision by Linda to Elie of the First and Second Schedules and her request for payment was made in the context of a critical need for funds. Elie disputed the First Schedule, causing Linda to revise it by preparing the Second Schedule. In the circumstances, I do not consider that Elie’s response to the Second Schedule derogates from his claim.
From about June 2016, the defendants incurred a further $106,827.13 in renovation costs for the Dover Heights property. These were funded by an increase in the ING home loan of $160,000. The renovations were complete in about July 2017.
In March 2017, Linda secured a unit at Mark Moran for herself and Raphael. It seems that they did not move into that unit, but eventually moved into a different one. In June 2017, Raphael suffered a fall and broke his hip. He was accepted into a rehabilitation facility at Mark Moran and in August 2017, the Dover Heights property was again listed for sale. At about that time, Raphael moved into Mark Moran, and Linda joined him in October 2017. Sale of the Dover Heights property settled in December 2017.
According to Elie, the loans under the Agreements became repayable in December 2017, on settlement of the sale of the Dover Heights property. He says he did not make any immediate demand because he wished to afford Linda an opportunity to settle her affairs and he did not wish to place any pressure on her.
By October 2018, the parties had fallen out. The likely trigger was Linda’s dispute with Caroline, in which Elie sided with his niece. He first made a type of demand in October 2018, although he did not demand repayment of the monies allegedly due under the Agreements, nor did he specify that they were repayable on sale of the Dover Heights property. In his demand of 18 October 2018, Elie made serious allegations against Linda, Renati and Renati’s husband, which do not need to be recorded here. He asserted that he was due $136,000, but was willing to forego repayment if Linda repaid to Caroline $290,000 less $50,000 that Caroline would forego from a superannuation fund.
The 18 October 2018 demand was an assertion of entitlement but was not a claim for repayment.
Similarly, on 24 October 2018, having received no response, Elie sent Linda a further letter, by email, in which he sent a further copy of his 18 October 2018 letter and threatened to publish his earlier letter to their family.
On 3 November 2020, Elie’s then solicitors demanded repayment of the sum of $137,479, pursuant to the Arrangement, which they alleged had been taken over and guaranteed by Linda in about March 2013. The demand expressly alleged that the monies were repayable on sale of the Dover Heights property, which it was noted had been sold in December 2017.
It was submitted for the defendants that the history of demands shows that the allegation that the advances were loans, repayable on sale of the Dover Heights property, was only a recent invention. I do not agree. The October 2018 correspondence was not directed towards repayment, but towards payment by Linda of monies claimed by Caroline. I do not draw any adverse inference against Elie in this regard.
In my view, Elie has established that the three Loan Agreements were entered and, pursuant to them, monies were advanced by Elie to the defendants. I accept both that the Agreements were entered between Elie and Linda, on behalf of herself and Raphael, and that the Agreements provided for the loan of monies by Elie to them, repayable on sale of the Dover Heights property. The fact that he made payments in the sum of $103,834.46 was not in issue. However, where Elie’s evidence of cash payments under the First and Third Agreements is not corroborated by any contemporaneous objective evidence, I do not find the payments proved.
I have concluded that the Agreements were entered and performed on the basis that generally I have preferred Elie’s account of disputed conversations over Linda’s. Elie’s account conforms more with the logic of events and the objective circumstances known to the parties at the time of each Agreement and the advances made under them. It was not undermined by evidence of subsequent events.
Those objective circumstances include the long-standing conduct of Elie and Raphael in providing financial assistance to each other and in doing business together, including but not limited to, the Arrangement. They include Raphael’s dementia from 2012 and the poor prospects of RBC, which was the only recurring source of income for the defendants disclosed on the evidence. I have also taken into account the defendants’ living expenses (including those of Jonny) and what appears to me to have been the obvious requirement to renovate the Dover Heights property, if it was to realise the best return possible in order to fund the purchase of a new home for the defendants and to provide a financial cushion for their retirement. These matters appear obvious and I find that they would have been known and understood by the parties over the whole period from 2013 to 2015.
The logic of events does not extend, however, to a finding that Linda agreed to repay any monies that may have been due under the Arrangement. Foremost, this is because I do not find that Linda ever believed that Raphael, or the BFT, was indebted to Elie as at February-March 2013 or anytime thereafter. I do not accept that she would have said the words attributed to her by Elie insofar as they record an acceptance that Elie was, at that time, a substantial creditor under the Arrangement or constitute an undertaking to repay them. She did not believe this to be the case and she would not have said so.
However, I also reject Linda’s account of the entire conversation in respect of the First Agreement. In the same way that Linda would not have conceded any indebtedness under the Arrangement, I do not believe Elie would have done so and agreed to pay back monies in accordance with the conversation deposed to by Linda. He did not believe he was a debtor and could readily identify specific transactions which he considered established that he was not. When Linda informed Elie in May 2015 that she considered that Elie owed the defendants $103,001.70, and Elie became aware that Raphael had been telling members of the extended Barel family that Elie owed them money, Elie rejected the allegation. He would not have been any more amenable to a claim for repayment at that earlier time than he was in May 2015.
Finally, I note in respect of the alleged pre-existing debt that there was no occasion on which Elie and Raphael, or Elie and Linda, ever attempted to reconcile the position. This allowed the parties to carry on without ever confirming with the other, and agreeing, what the true position was. On the evidence before me, I have found that, as at February 2013, Elie owed a very modest sum to Raphael. The objective circumstance contradicts Elie’s account of an undertaking to pay back a pre-existing debt as well as Linda’s account that she and Raphael asked Elie to pay back a debt owed to them.
The lack of any apparent reconciliation, where the parties could have agreed on the true state of any indebtedness under the Arrangement, also explains the accounts and Schedules on which Linda placed so much weight in these proceedings. Linda relied on the accounts she prepared for the trusts, as well as tax returns and the Schedules, to prove that Elie was never a creditor.
I do not find either the Schedules or the accounts and tax records of the trusts to be dispositive in this regard. The accounting documents, which include the First Schedule, do not record the totality of the financial relationship between the parties. Linda knew this. They are records of the state of indebtedness between the trusts and, as Linda acknowledged, there were private transactions of which she was unaware. I do not consider that they can be relied on as recording the true financial position of the parties inter se. So much was clear from the Newcastle shop transfer in 2004, which was recorded elsewhere. It was also clear from Linda’s evidence as to cash payments between the brothers, which she accepted she could not know about unless Raphael told her, and her implausible evidence concerning the June 2009 payment of $100,000, which I rejected.
Nevertheless, the defendants say that the creation of the Schedules and the failure of Elie to dispute the accuracy of the Second Schedule, in particular, is evidence of the subjective state of mind of the parties in 2015, which is post-contractual conduct that can be taken into account in determining the factual question of what Elie and Linda said to each other in 2013, 2014 and 2015. The argument has some force. However, I ultimately cannot accept it. As was clear from the conduct of the hearing, and the course of communications between the parties from 2015, in particular, neither was very consistent in their characterisation of events or reliable in their recollection of what they believed at any point in time. It was put against Linda that the Second Schedule was a concession that she was personally a party to the Arrangement; it was, at the same time, put against Elie that his failure to press his allegations concerning the Newcastle shop and the June 2009 cheque, or to challenge the characterisation in the Second Schedule of certain payments being repayments of loans to him, contradicted his case.
Ultimately, I do not consider that these communications say very much at all about what had been agreed in the conversations alleged to comprise the Agreements. The subsequent communications came at about the time when the parties’ relationship had not yet broken down, the Dover Heights property was first on the market and Caroline had agreed to lend the defendants a substantial sum to tide them over pending sale of the Dover Heights property. Although Elie and Raphael were commercial men, and Linda was not naïve in matters related to business, neither was on guard nor taking a position with a view to protecting their interests. In his May 2015 letter, Elie specifically said that he was not making a demand. Time for repayment under the Agreements had not yet arrived in any event. Similarly, Linda likely prepared the Second Schedule specifically to be provided to Elie to enable him to understand its contents, as she volunteered for the first time in cross-examination. Its identification of the parties, for example, is not replicated in any other document and it appears only to have been provided to Elie.
In these circumstances, there is very little which can be inferred about the contractual conversations from the subsequent conduct or communications relied on. While I have had some regard to them, I do not consider that they much affect the likelihood of each version of events in light of the objective circumstances at the time.
Accordingly, I find that each of the Agreements was entered between Elie and Linda, on her own behalf and on behalf of Raphael, for the advance of monies by Elie to the defendants, which were repayable on sale of the Dover Heights property. I do not find that any of the Agreements extended to repayment of the alleged pre-existing debt. I do not find that Linda ever undertook to repay any such monies or that she ever personally became a party to the Arrangement.
I consider that when Linda recorded the advances by Elie to her and Raphael under the Agreements as adjusting liabilities between the trusts, she was not taking into account the whole of the relationship between the parties and did not correctly record the true position. She did not do so dishonestly, however, she knew that there were dimensions to the relationship of which she was unaware and she could not have believed that the Schedules she had prepared reflected the complete picture.
The advances made by Elie from March 2013 were personal advances to Raphael and Linda, at the end of the Arrangement and were made in anticipation of the sale of the Dover Heights property, which they helped to facilitate.
I will direct the parties to formulate orders to give effect to these reasons. The monies paid into Court, together with any interest accrued thereon, should be released to Elie in satisfaction of his claim. As to any balance, I will hear the parties on whether it should remain in court pending determination of any costs application. If the defendants foreshadow an appeal and no agreement is reached as to the treatment of the monies, I will hear the parties as to what orders are appropriate.
The orders of the Court are:
Direct the parties to liaise as to appropriate orders, giving effect to these reasons and on costs, and either notify my Associate by 5pm on 12 December 2025:
(a) of agreement, by providing Short Minutes of Order; or (b) of disagreement, whereby the proceedings will be listed for further directions on Thursday, 18 December 2025 at 2pm before Andronos SC DCJ.
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Barel
Barel [2025] NSWDC 571
(2001) 53 NSWLR 153
(1938) 60 CLR 336
(2002) 209 CLR 95
(2003) 214 CLR 118
(2001) 205 CLR 434
(2007) 69 NSWLR 603
(1992) 176 CLR 256
(1995) 49 NSWLR 315
(1940) 63 CLR 691