G Woodham Investments Pty Ltd (ACN 141 703 700) ATF The Woodham Family Trust v Matthews

Pleadings

1. By Amended Statement of Claim filed on 11 May 2018, the plaintiff, GWI, brought proceedings against the first defendant, Ms Melinda Matthews, and the second defendant, Ms Nicole Woodham.
2. Default judgment was entered against the second defendant, Ms Woodham, in favour of the plaintiff on 11 July 2018 in the sum of $22,033.86 inclusive of costs. Material on the court file shows that one component of the default judgment amount sought was an amount of interest claimed from 24 November 2017 to 26 June 2018 at the pre-judgment rate of 5.5% per annum. Although default judgment was entered for an amount less than the amount sought it seems clear that at least part of the default judgment amount was constituted by interest.
3. It was conceded by counsel for the plaintiff that at least the amount of $20,000 paid to the second defendant by the first defendant has been paid to the plaintiff.
4. Under the Amended Statement of Claim, the plaintiff pleads its case against the first defendant as follows: 1. On and with effect from 24 December 2012, the plaintiff and the first defendant entered into a deed pursuant to which the first defendant as borrower borrowed $20,000 from the plaintiff for a minimum period of two months from 24 December 2012 which two-month period could be extended by mutual consent. It was pleaded that the first defendant Ms Matthews would pay the plaintiff interest on the funds advanced at the rate of 3% per month for the first two months and thereafter at 5% per month every month or part thereof during which the loan remained in default; 2. The first defendant, through her husband and agent, Mr Stephen Matthews, drafted and proposed the terms of the December 2012 deed. It is also pleaded that the first defendant authorised Mr Matthews to deal with the plaintiff's principal Mr Woodham on her behalf; 3. On or by 24 December 2012 pursuant to the December 2012 deed, the plaintiff advanced $20,000 to the first defendant, being $15,000 advanced on 21 September 2012 and $5,000 advanced on 24 December 2012. These advances by the plaintiff are not in dispute; 4. On or about 31 August 2013, the plaintiff and the second defendant orally agreed that the plaintiff GWI would lend the second defendant Ms Woodham the sum of $26,000 to assist her with reducing her interest payments on her mortgage. The $26,000 advanced was held in a mortgage offset account. The $26,000 would be repayable to the plaintiff by the second defendant on the plaintiff's demand. On or about 2 September 2013, the plaintiff advanced the sum of $26,000 to the second defendant pursuant to that agreement; 5. In January 2014, the plaintiff agreed to lend to the first defendant a further sum of $20,000 pursuant to an oral conversation between Mr Woodham on the plaintiff's behalf and Mr Matthews as agent for Ms Matthews; 6. The plaintiff pleads that the material terms of the January 2014 agreement were that the plaintiff would lend the first defendant the sum of $20,000, the plaintiff would direct the second defendant to pay the first defendant the sum of $20,000 from the $26,000 lent by the plaintiff to the second defendant in September 2013 pursuant to the agreement made in August 2013, and that the terms of the loan of $20,000 from the plaintiff to the first defendant would otherwise be the same as the terms of the December 2012 deed, being that it was for a term of two months which could be extended by mutual agreement, with an interest rate payable at the rate of 3% per month for the first two months and 5% per month thereafter; 7. The plaintiff alleges that the second defendant Ms Woodham also agreed to lend to the first defendant a further $20,000 in January 2014. As a result of the agreement, $40,000 was transferred by the second defendant to the first defendant being $20,000 of the second defendant's money and $20,000 of the plaintiff's money which had been borrowed by the second defendant. The direction to advance $20,000 given by the plaintiff to the second defendant was stated to partially discharge the second defendant's liability to the plaintiff pursuant to the August 2013 agreement; 8. The plaintiff pleads that on or about 1 October 2014, the first defendant paid the sum of $20,000 to the second defendant in satisfaction of the loan from the second defendant to the first defendant. A further sum of $20,000 was paid by the first defendant to the second defendant on 23 November 2017. It is said that the two $20,000 repayments were made by the first defendant to the second defendant without the plaintiff's knowledge or authority; 9. The plaintiff pleads that on or about 27 February 2018, the plaintiff demanded that the second defendant restore to the plaintiff the sum of $20,000 paid to her by the first defendant. As stated above, it is conceded that this amount has been repaid by the second defendant to the plaintiff; 10. The plaintiff claims that although some payments have been made by the first defendant to the plaintiff pursuant to the December 2012 deed, substantial sums are still owed both under the December 2012 deed and the oral agreement made in January 2014. It is claimed in the Amended Statement of Claim that the amount owed as at 15 April 2019 is $148,600.
5. The first defendant filed an Amended Defence on 30 May 2018. Under the Amended Defence, the first defendant: 1. Admits that the December 2012 deed was entered into; 2. Says that the "Default Interest Penalty" in the 2012 deed is a penalty and is void and unenforceable; 3. Says that the second defendant agreed to lend the first defendant $40,000 and that no amount was lent by the plaintiff to her in January 2014; 4. Says that on 1 October 2014, she paid the second defendant $20,000 in partial satisfaction of the loan from the second defendant to the first defendant; 5. Says that on 23 November 2017, she paid the sum of $20,000 in further satisfaction of the loan made by the second defendant to the first defendant in January 2014; 6. Denies that she owes any moneys to the plaintiff pursuant to the January 2014 agreement.

Factual background

1. It is important to set out the factual background to these proceedings. Unless I indicate otherwise, the following constitute my factual findings in the matter: 1. In the year prior to the December 2012 deed, Mr Woodham met the first defendant Ms Melinda Matthews and her husband Mr Stephen Matthews, who were known to Mr Woodham's ex-wife, Ms Nicole Woodham. A business and social relationship developed between Mr Woodham and Mr and Ms Matthews; 2. At the time, Mr Matthews was a financial consultant who was also engaged in the trading of derivatives including options, foreign currency and gold trading. Mr Woodham agreed with Mr Matthews to advance moneys to him to enable him to engage in trading in his name; 3. On 20 September 2012, following discussions between Mr Matthews and Mr Woodham, a deed of agreement was signed between the plaintiff and the first defendant, Ms Matthews ("the September 2012 deed"). This document was prepared by Mr Matthews and forwarded to Mr Woodham prior to execution. Pursuant to the September 2012 deed, $15,000 was advanced by the plaintiff to Ms Matthews: Exhibit B; September 2012 deed. This money was on-lent by Ms Matthews for investment purposes; 4. In summary, under the September 2012 deed Ms Matthews agreed to pay the plaintiff interest of 10% for the first month then 5% per month after that. The advance was for a period of one month but the period could be extended by mutual consent: clause (f) of the September 2012 deed. Mr Woodham asserts, and I accept, that the reason the September 2012 deed involved borrowing in the name of the first defendant, was to provide further security for the loan. It is not disputed that the first defendant signed the September 2012 deed; 5. In October 2012, by an addendum to the September 2012 deed, the period of the September 2012 deed was extended by the parties by two months; 6. Mr Matthews discussed with Mr Woodham, on behalf of the plaintiff, extending the term of the loan for an additional two months with a further advance of $5,000; 7. On 24 December 2012, a deed of agreement (the December 2012 deed) was executed by Mr Woodham on behalf of the plaintiff GWI, and Ms Matthews. There is no issue as to the execution of the December 2012 deed by these parties. The recitals noted that GWI had agreed to advance $20,000 to Ms Matthews for a period of two months from the date of the loan which could be extended by mutual consent. The operative part of the 24 December 2012 deed was as follows: "OPERATIVE PART: a. The Advancer agrees to provide to the Borrower funds in the amount specified in Item 2 of the Reference Schedule. b. The Advancer agrees to pay the said funds directly to the Borrower upon execution of this loan agreement. c. The borrower acknowledges that the funds will be used for various personal and investment purposes, however the funds are predominantly being used for investment and business purposes. d. The Borrower agrees to pay interest on the borrowed funds as set out in Item 3. e. The Borrower agree to repay to the Advancer the total amount specified in Item 2 within 2 month of the date of this agreement. f. The term of this contract is for a period of 2 months from the date of this agreement. This period may be extended by mutual consent. g. The guarantor agrees to guarantee the obligations of the Borrower contained in the agreement and the obligations specified in this Agreement. h. In the event that the Borrower fails to repay the said funds to the Advancer within seven (7) days from the date specified in this contract, the Borrower shall pay to the Advancer a default interest Penalty amount being the amount specified in Item 5 of the Reference Schedule and the Advancer shall be entitled to take any recovery action necessary to protect their interest. This action can include but is not limited to the registering of Caveatable Interests over Real Estate Assets and sale of the assets of the Borrower and Guarantor. i. The guarantors shall guarantee the proper performance of all obligations of the Borrower under this clause and this Agreement. j. The parties hereby agree and acknowledge that this Agreement shall be governed and construed in accordance with the laws of New South Wales and the parties hereby submit to the exclusive jurisdiction of its Courts. k. In the event that any of the provisions contained in this Agreement is or becomes legally ineffective, under the general law or by force of legislation, the parties agree that the Ineffective provision shall be severed from this Agreement which otherwise continues to be valid and operative." 1. The reference schedule in the December 2012 deed was as follows: "ITEM 1: NAME OF ADVANCER G Woodham Investments Pty Ltd atf The Woodham Family Trust ITEM 2: Advance Amount $20,000.00 ITEM 3: Interest Payments 1. The sum of $600 being due no later than 31st December 2012. 2. The sum of $600 being due no later than 24th February 2012. ITEM 4: Penalty Interest Rate 5% per month for every month or part thereof during which the loan remains in default. ITEM 5: Settlement Date - 2 months from the date of signing of this agreement." 1. Accordingly, under Item 3 of the Reference Schedule, interest payments were to be made by the payment of $600 due no later than 31 December 2012 with a further $600 being due no later than "24 February 2012" with the item for "Penalty Interest Rate" being 5% per month or part thereof during which the loan remains in default (the reference to Item 5 in Clause (h) should clearly have been a reference to Item 4). The usual interest rate was thus 36% per annum. It is submitted by the plaintiff that the second date should be 24 February 2013 and should be read as thus; 2. On 24 December 2012, GWI advanced the further $5,000 under the December 2012 deed: Exhibit C and the annexures at pages 40-41 to Mr Woodham's 20 December 2017 affidavit; 3. Subject to the argument as to a penalty, the principal amount owed under the December 2012 deed and the interest owed under the deed has not been repaid on the due dates by the first defendant. This constitutes a breach of contract by her; 4. On 2 September 2013, the plaintiff lent $26,000 to the second defendant Ms Woodham by way of loan which it was intended be placed in an offset account of hers to assist her with her mortgage payments; 5. In January 2014, a meeting occurred between the plaintiff, through Mr Woodham, the second defendant and Mr Matthews. What occurred at this meeting is highly disputed. This will be considered further below; 6. On 15 January 2014, the second defendant, Ms Woodham, transferred $40,000 to the first defendant, Ms Matthews. At issue is whether this advance constituted $40,000 of her (Ms Woodham's) money or $20,000 of her money and $20,000 of the money owed by her to the plaintiff being transferred at the plaintiff's direction; 7. In the period from early 2013 to the present, only small amounts were repaid sporadically by the first defendant to the plaintiff; 8. On 1 October 2014, the first defendant paid the second defendant $20,000. Depending on which account is accepted, this either discharged the loan to the first defendant Ms Matthews from the second defendant Ms Woodham, or only partially discharged that loan; 9. Between February 2014 and May 2017, there were extensive text messages exchanged between Mr Matthews and Mr Woodham which were in evidence; 10. By letter dated 15 June 2017, the plaintiff's current solicitors issued a letter of demand on the first defendant Ms Matthews. The letter sought the payment of $112,100 which was said to be the balance due to the plaintiff. The letter included the following: "In its capacity as trustee for The Woodham Family Trust, our client has lent to you a total of $43,000. The initial loan was for $20,000 pursuant to a deed of agreement dated 24 December 2012 between our client and you. There have been subsequent advances which bring the total lent to $43,000. The agreement was varied to the extent that the settlement date specified in Item 5 of the Deed of Agreement was extended. The duration of the extension of the term was not specified. In the circumstances it must be inferred that the loan became repayable on demand"; 1. On 7 August 2017, the plaintiff commenced proceedings by way of a Statement of Claim which was filed on that date; 2. On 23 November 2017, the first defendant paid the second defendant a further $20,000. Depending on the version accepted, this was either a complete repayment of the $40,000 advanced by the second defendant to the first defendant in January 2014 (the first defendant's contention) or a purported repayment by the first defendant to the second defendant of $20,000 which was in fact owed by the first defendant to the plaintiff (the plaintiff's contention); 3. As stated above, on 11 July 2018 default judgment was entered in favour of the plaintiff against the second defendant which included an amount for interest.

Evidence on behalf of the plaintiff

1. The plaintiff read three affidavits of Gareth Robert Woodham affirmed 20 December 2017, 2 March 2018 and 16 May 2018.
2. In his first affidavit affirmed 20 December 2017, Mr Woodham sets out the background detail in relation to his various dealings with Mr Matthews and the transactions which he states that GWI entered into with Ms Matthews. These include the September 2012 deed advance (paragraphs 6-8), an addendum to the September 2012 deed on 20 October 2012 to extend the term of the September 2012 deed loan for an additional two months (paragraphs 9-10), the December 2012 deed dated 24 December 2012 (paragraph 13), the further advance of $5,000 on 24 December 2012 (paragraph 14), defaults in payment under the December 2012 deed by Ms Matthews (paragraphs 15 and 19-21), the September 2013 $26,000 advance to Ms Woodham (paragraph 22) and the January 2014 meeting.
3. In paragraphs 23-25 of Mr Woodham's first affidavit he states as follows: "23. In January 2014 Stephen [Matthews] met with Nicole and me at Nicole's apartment in Mortdale. The discussion was to the following effect: Stephen said: "I'm so sorry that we have not been making repayments on the loans you have made to Polymax. Melinda and I have a problem. If we can't come up with $40,000 today then we will lose our house because the mortgage is in default. Can you to help us [sic] by each lending us a further $20,000 on the same terms as the existing funds. We'll definitely be in a position to repay all the money in a short time." There was a further discussion after which Nicole said: "Gareth and I will lend you the $40,000. I'll send you the money from my loan offset account. $20,000 of the $40,000 will come from the $26,000 that Gareth lent me on 2 September 2013. Stephen said: "Thank you so much. I'm sure we'll be able to repay you on time. Gareth, your $20,000 will be on the same terms as before. I will send you some updated documents for the additional $20,000." Nicole did not request any documentation from Stephen, nor did she require any interest payments. 24. The updated documents were never forthcoming. 25. On 15 January 2014 Nicole transferred to Melinda the $40,000 from her offset account."
4. In paragraph 27 of his first affidavit, Mr Woodham states that on 1 October 2014 "Stephen repaid Nicole the $20,000 she lent him" (emphasis added). This is inconsistent with the plaintiff's pleaded case that the $20,000 was lent by Ms Woodham to Ms Matthews not Mr Matthews.
5. In paragraph 28 of his first affidavit, Mr Woodham refers to text messages between him and Mr Matthews between 2014 and 2017 which he exhibits to his affidavit. He also annexes a table which he claims sets out the amounts allegedly due from Ms Matthews and says that the she has not made any loan repayments since 22 December 2016.
6. In his second affidavit dated 2 March 2018, Mr Woodham responds to various affidavits served from Ms Matthews, Mr Matthews and Ms Woodham.
7. In relation to the January 2014 meeting, Mr Woodham stated the following in paragraphs 34 to 36 and 42 of his second affidavit: 34. In response to paragraph 32, I deny that I was only present at the meeting between Mr Matthews and Ms Woodham as part of the money Ms Woodham offered to lend to Mr Matthews belonged to me. I was specifically involved in the meeting in January 2014 as I was required to authorise the lending of $20,000 of my money that was held in Ms Woodham's bank account. I also dispute the alleged conversation set out in paragraph 31. The conversation during the meeting was as set out in paragraph 23 of my affidavit dated 20 December 2017. 35. In response to paragraph 33, I was aware that Mr Matthews did some mortgage broking from time to time. Mr Matthews approached me directly to meet with Ms Woodham and him as a solution to him not making repayments on the initial 20 September 2012 loan. We had a conversation to the following effect: Mr Matthews said: "Gareth, Melinda and I are in some trouble. We don't have the money to refinance our home and if we can't make the repayments we stand to lose it. I won't be able to repay anything of what I owe you. Could you help us out with the refinance? If we lose the house then there will be no way I will be able to repay you any of the money we owe you." 36. I said: "Sure. I can loan you $20,000 that I recently loaned to Nicole to assist with the interest on her home loan." … 42. In response to paragraph 3, and further to paragraph 35 above, the true sequence of events is: a) I was invited to Ms Woodham's apartment to meet with Mr Matthews and her. Mr Matthews, Ms Woodham and I had a conversation to the following effect Mr Matthews said to me: "Can you lend me a portion of the $26,000 you deposited with Nicole on 2 September 2013?" I replied: "I'll lend you $20,000 of those funds." Ms Woodham said to Mr Matthews: "I'll lend you another $20,000 to help you out."
8. A number of matters should be noted. First, these specific conversations were not referred to in Mr Woodham's first affidavit in the terms set out. Secondly, paragraph 36 has Mr Woodham saying to Mr Matthews "Sure. I can loan you $20,000 that I recently loaned to Nicole…" (emphasis added). The conversations referred to in paragraph 42(a) set out by Mr Woodham have Mr Matthews asking the plaintiff to lend "me" the funds deposited with Ms Woodham by the plaintiff and Mr Woodham responding that he would lend "you" $20,000 of those funds. Thirdly, it is not disclosed in paragraph 42 of Mr Woodham's second affidavit how Mr Matthews was aware of the advance from the plaintiff to Ms Woodham of the $26,000.
9. In paragraph 39 of his second affidavit, Mr Woodham disputes that the plaintiff's half of the loan "to Mr Matthews" was repaid "by Mr Matthews" to Ms Woodham. Again, this strongly suggests that the loan was made by the plaintiff to Mr Matthews and not Ms Matthews, contrary to the plaintiff's pleaded case. At paragraph 43 of his second affidavit, Mr Woodham refers to the default interest rate of 5% per month and states that otherwise "there would be no financial benefit for me in loaning the money to Mr Matthews" (emphasis added). In paragraph 44, Mr Woodham states "that half of the $40,000 transferred by Nicole to the defendant's bank account belonged to the plaintiff and was lent by the plaintiff to Mr Matthews" (emphasis added). Again, these references are completely contrary to the plaintiff's pleaded case.
10. In his third affidavit affirmed 16 May 2018, Mr Woodham gives more detailed evidence with supporting documentation in relation to the December 2012 deed and the September 2013 loan to Ms Matthews. Annexed documents confirm that the plaintiff paid $15,000 to Ms Matthews on 21 September 2012 and a further $5,000 to Ms Matthews on 24 December 2012. They also establish that the plaintiff advanced $26,000 from the plaintiff's account to Ms Woodham in September 2013.
11. In paragraphs 10 and following of his third affidavit, Mr Woodham gives evidence in relation to repayments made by the first defendant. He notes that although paragraph 2 of item 3 in the 24 December 2012 deed records that interest of $600 was due no later than "24 February 2012", that date is claimed by him to be a typographical error and it should refer to 24 February 2013. This seems to be clearly correct when the December 2012 deed is read as a whole.
12. In paragraphs 35-41 of his third affidavit, Mr Woodham states as follows: 35. Prior to the commencement of these proceedings in August 2017, I had no knowledge of any amount having been paid by the first defendant to the second defendant in satisfaction of the agreements entered into between the plaintiff, the first defendant and the second defendant in January 2014. 36. In the second half of February 2018, the plaintiff was served with the first defendant's affidavit evidence which included affidavits by Stephen Matthews dated 16 February 2018 and Nicole Woodham (the second defendant) dated 21 February 2018. 37. At paragraph 5 of Ms Woodham's affidavit, she has stated that Stephen Matthews has repaid the $40,000 that she lent to the first defendant in full. 38. At paragraphs 36 and 37 of Mr Matthews' affidavit, he has stated that: (a) on 1 October 2014, $20,000 was paid to the second defendant; and (b) on 23 November 2017, a further $20,000 was transferred from the first defendant's account (I assume the reference to "Nicole" is an error and should refer to "Melinda") to the second defendant's bank account. 39. Prior to receipt of these affidavits, I had no knowledge of the above matters. 40. I note that the second payment of $20,000 made in November 2017 was made a few months after the commencement of these proceedings by the plaintiff in August 2017. 41. Neither the October 2014 payment nor the November 2017 payment to the second defendant was made with my or the plaintiff's knowledge of authority."

Mr Woodham's oral evidence

1. Mr Woodham gave oral evidence on behalf of the plaintiff. He stated that he was a property valuer by occupation. He confirmed that he had sworn three affidavits in the proceedings the contents of which were correct.
2. In cross-examination, Mr Woodham confirmed that he was a director of the plaintiff (T16.5) and the purpose of the establishment of the plaintiff and the trust was to invest (T16.12; T16.31). Mr Woodham said it was to engage in no other commercial activities (T16.34). He also confirmed that prior to his dealings with Mr Matthews, the plaintiff had made other investments. Mr Woodham confirmed that the plaintiff had a bank account and he was the only person who made decisions on behalf of the plaintiff (T17.21). He said the plaintiff had no employees.
3. Mr Woodham stated that he met the Matthews through his ex-wife who had been friends with them for some time. He said that he knew the Matthews for about a year before the September 2012 deed (T18.29). He agreed that he attended the Matthews' home for dinner on one or two occasions.
4. Mr Woodham confirmed that he had discussions with Mr Matthews about his work office at home and the investments he made and the returns he received. He said that this interested him. As at September 2012, he said he had about $50,000 in cash available to be invested: T19.4.
5. Mr Woodham confirmed that the plaintiff made the original loan to Ms Matthews on 20 September 2012. This was as a result of discussions with Mr Matthews in which he referred to other "riskier" investment options being available which may generate a regular income for the plaintiff: T19.37. The first loan was the result of discussions with Mr Matthews about investing in a recycling business called Polymax (T19.41) which needed money for a short term loan of two months. Mr Matthews offered for the loan to be made in the name of Ms Matthews and there were indications also that the plaintiff would not only get paid interest but also have equity provided in the Polymax business as a reward for the investment: T20.12.
6. Mr Woodham said that he understood the purpose of the $15,000 20 September 2012 loan was to invest but he did not know whether it would be on lent by Ms Matthews: T21.7. He said that at the time, $15,000 was a substantial amount of money to him and he agreed that it was sensible to document the loan: T21.10; T21.35. He said it was the first time that the plaintiff had lent money and that the documentation for the loan had been offered to him and he regarded it as sensible to record the agreement and that it had provided "comfort" to him. Mr Woodham agreed that the agreement was signed on 20 September 2012, that he had attended the Matthews' home to sign it and the next day he had transferred the $15,000 to Ms Matthews' account: T22.39.
7. In relation to the addendum to that agreement dated 20 October 2012, Mr Woodham could not recall the reason for meeting at the Matthews' home on that date but accepted that he attended the home on that date. He agreed that the 20 September 2012 loan had come up in discussions and that an extension of the loan period had been sought. He said that no payments had been received pursuant to the September 2012 loan by this stage and that the period was extended and that an addendum to the deed was signed: T23. This addendum included the payment of further interest with the completion date of the loan being 20 December 2012. Under this agreement, if there was a default, the interest rate would be increased to 5% per month.
8. Mr Woodham agreed that it was sensible to record the change in the agreement and he regarded it as important. He said all parties were putting their "cards on the table" and were having the agreement with its extended terms in writing: T24.25. Mr Woodham said that Mr Matthews offered the agreement to him and it gave him comfort. When it was suggested that the plaintiff was willing to invest in Polymax, Mr Woodham said he knew he was lending the money to Ms Matthews. Mr Woodham said he did not know whether the Matthews were lending to Polymax or what the terms of any loan were: T25.5-.25.
9. Mr Woodham agreed that under the 24 December 2012 deed between the plaintiff and Ms Matthews, this involved extending the $15,000 amount already lent and advancing a further $5,000. He stated that Mr Matthews had prepared a draft of the documents which the parties signed: T25.50. He said the documentation was offered to him and he regarded it as an additional benefit and comfort: T26.30. He said he thought he was dealing with someone that he could trust and the receipt of the documentation reinforced the trust which he had: T26.43. Mr Woodham gave evidence that at the time he did not regard the documentation as being important but that it provided him with some additional comfort: T27.8. He agreed that his understanding of the 24 December 2012 deed was that $600 was to be paid per month for the first two months in interest and thereafter interest was to be paid at 3% per month (36% per annum) and if there was a default, that the interest rate would be increased to 5% per month (60% per annum). The 60% per annum rate was the rate described as "a default interest Penalty amount" in Clause (h) of the 24 December 2012 deed (see page 37 of the annexures to Mr Woodham's first affidavit). However, Mr Woodham said that the loan was not supposed to be for a period of more than two months: T28.7.
10. After some cross-examination, Mr Woodham accepted that if there was a default there would be no additional administration or other costs to the plaintiff in relation to the loan other than making phone calls and text messages which involved time. He said that he thought the loan would be repaid and he did not foresee further costs being incurred by the plaintiff: T28.40-T29.14.
11. Mr Woodham was then cross-examined in relation to payments made by Ms Matthews. He stated that the reference to 24 February 2012 in item 3 of the schedule to the 24 December 2012 deed should be a reference to 24 February 2013: T29.34. Mr Woodham gave evidence that his understanding was that from 24 February 2013, the plaintiff was entitled to $1,000 interest per month on the 24 December 2012 loan. He confirmed that only some payments were received throughout 2013. He said he had regular conversations and dealings with Mr Matthews in that period in relation to the payment of interest and it was a matter of concern to him, although his concerns were often allayed by the reasons for the delays put forward by Mr Matthews: T31.15.
12. As at January 2014, Mr Woodham confirmed that the plaintiff had money which had been advanced to Ms Woodham to assist her in an offset account. It was put to Mr Woodham that in January 2014 he lent money to Mr Matthews and not Ms Matthews. Mr Woodham denied that and said that he regarded the plaintiff as lending money to Ms Matthews to assist her with the mortgage on her house. He said he regarded Mr Matthews as acting for both himself and his wife: T32.3-.19.
13. When Mr Woodham was taken to paragraph 23 of his first affidavit, he agreed that the conversation set out there had Ms Woodham saying that the plaintiff and her would lend money. However, Mr Woodham said that he regarded both Mr and Mrs Matthews as having a problem with the mortgage on the house and Ms Matthews was not in the room at the time. Mr Woodham said that he regarded the loan as relating to the mortgage on the house and the house was owned by Ms Matthews. Accordingly, he believed the loan was to her: T33.23.
14. Mr Woodham confirmed that his best recollection of what occurred in the meeting in January 2014 was recorded in his first affidavit: T34.7. He confirmed that the conversation set out in his first affidavit did not involve him saying anything (T34.27), but following the service of the defendant's affidavits, he agreed that he prepared additional affidavits which added further conversations with Mr Matthews in paragraphs 35, 36 and 42 of his second affidavit: T35.23. In explaining the additions, Mr Woodham said that he put a lot of thought into it and it occurred a long time back and this was the reason for the additions: T36.29. When it was put to Mr Woodham that he did not include in the December 2017 affidavit the contents of his 2 March 2018 affidavit which had him agreeing to lend the money to Mr Matthews, Mr Woodham said that he believed it was not clear in the original affidavit and his recollection was of lending the money to Ms Matthews: T36.43. He said he was being truthful in preparing his affidavit. He accepted that he expanded on the conversations set out in the first affidavit.
15. Mr Woodham denied the suggestion that Mr Matthews did not approach him in January 2014 for any further loan and that there was never a conversation between himself and Mr Matthews about lending $20,000: T37.47. He denied that there was no agreement to lend a further $20,000 to either Mr or Mrs Matthews: T38.26. However, he accepted that previously it had been his view that it was sensible to document financial advances and that comfort had been provided to the plaintiff in doing so. Mr Woodham suggested that the money was advanced on an oral agreement as he regarded the Matthews as close friends of Ms Woodham and they were trusted. He agreed that on his case $20,000 had been advanced without a signed document and that this was inconsistent with his previous interactions with Mr Matthews: T39.33. He denied that the money was lent by his ex-wife, Ms Woodham, and not by him: T39.37-.43.
16. Although initially stating that he did not know whether he was aware at the time that $20,000 had been repaid by Ms Matthews to Ms Woodham on 1 October 2014 (T40.13), in re-examination his attention was brought to paragraphs 36 to 41 of his third affidavit where he states that he was not aware of this until commencing proceedings. He confirmed the accuracy of those paragraphs of his affidavit.
17. When it was put to him that his second affidavit had the plaintiff lending the money to Mr Matthews and not Ms Matthews, Mr Woodham said that he regarded it as being lent to Ms Matthews for the house as Ms Matthews was the owner of the property: T40.45. When paragraph 43 of his 2 March 2018 affidavit was brought to Mr Woodham's attention where he states that he was lending the money "to Mr Matthews", he said that this was a typographical error and that he would not have lent the money without receiving interest: T41.18-.32. He said he understood that the $20,000 was transferred at his direction to Ms Matthews by Ms Woodham. He confirmed that this had not been repaid to him and he thought it would be paid to him by Ms Matthews.
18. Mr Woodham was taken to a series of text messages on 9 January 2016 in which he texted to Mr Matthews information which included the following: "Current outstanding exceeds $90,000. With reference to your email, please confirm at which milestones the following amounts will be repaid. The first $20,000 that you have been promising for the past month is to come to me directly. Following this, the next $20,000 will need to be paid directly to my superannuation account to repay the funds that were withdrawn over the past two years in lieu of your payments. Then the amount of $30,000 is to be paid to me, with the remaining $20,000 channelled back through Nicole."
19. It was put to Mr Woodham that it would not be necessary to "channel back" $20,000 through Nicole if she had advanced only $20,000. Mr Woodham said that he regarded Ms Woodham as having a better chance of getting the last $20,000 owed to him and he did not include Ms Woodham as merely being a conduit to receive the money. He accepted sending the text disclosed his thinking to Mr Matthews: T43-47.
20. Mr Woodham conceded that the plaintiff had obtained default judgment against Ms Woodham, that she was taking no further part in the proceedings and that he had received on behalf of the plaintiff $20,000 from her: T48.18.
21. As stated above, in re-examination Mr Woodham confirmed paragraphs 35-41 of his 16 May 2018 affidavit, that prior to the service of the evidence he did not know that any payment had been made by Ms Matthews to Ms Woodham. He also confirmed that at the time the text messages were sent by him, including the text messages at pages 42-44 of the exhibit to his first affidavit, he believed that neither the plaintiff nor Ms Woodham had been paid any money lent in the January 2014 loan: T48-49. In relation to the text message at page 43 of the exhibit, Mr Woodham confirmed that when he referred to "I am to receive my money first. I have been waiting for three years" he was referring to the January 2014 loan. This was also the case with his text message at page 44 of the exhibit. By "channelling back", Mr Woodham confirmed that he meant channelling back through Ms Woodham to him.
22. Mr Woodham impressed the court as an honest witness who was doing his best to answer the questions put to him. He made concessions where appropriate. However, I did form a view that he did not have a good recollection of the detail of his interactions with Mr Matthews in 2012-2014. Mr Woodham had a clear view as to what had been agreed but did not appear to have a recollection of the detail of the discussions despite what appears in his affidavits. I also found his assertion that the reference to the loan being made to Mr Matthews was "a typo" to be not persuasive: see paragraph 43 of his second affidavit. There were a number of references in this affidavit to the money being lent by the plaintiff in January 2014 to Mr Matthews as opposed to Ms Matthews. I will consider this further below.

Evidence for the first defendant

1. As stated above, the second defendant Ms Woodham took no active role in the proceedings. Default judgment was entered against her and I was informed from the bar table that the $20,000 paid by the first defendant to the second defendant had been repaid to the plaintiff. This was not disputed.

Evidence of Ms Nicole Woodham

1. Ms Nicole Woodham gave evidence for the first defendant. Ms Woodham was the former wife of Mr Woodham.
2. Ms Woodham swore an affidavit dated 21 February 2018. Ms Woodham gives evidence that Mr Matthews has assisted her with several investments over the past seven years (paragraph 2). She also notes in paragraph 6 of the affidavit that Mr and Ms Matthews and her have often assisted each other to achieve certain economic "milestones". Ms Woodham gives evidence that in late 2014 she purchased a cafe in Oatley in Sydney and Mr and Ms Matthews assisted her with the purchase by providing her with a bank cheque for $80,000 to allow her to settle the purchase as her investments had not yet matured.
3. Ms Woodham gives evidence in relation to the meeting which occurred in January 2014 between her, Mr Woodham and Mr Matthews at her house.
4. Paragraph 3 of Ms Woodham's affidavit is as follows: "In January 2014 Mr Matthews came to my house (Gareth Woodham was also present) and we had a conversation as follows: Mr Matthews: 'I mentioned to you before that our home lender is in receivership. Well the receivers have just screwed us over and I need your help. Bottom line is if we don't come up with $40,000 in the next 24 hours then we could lose the house. Is there any chance I can ask for a favour and get a loan from you?" Me: 'Of course. You have helped me so much in the past that I will help you. How much do you need? Mr Matthews: 'If you could lend us $40,000 that would be fantastic.' Me: 'Ok. Mr Matthews: 'Thanks. We will pay you back as soon as I can with interest.' Me: 'Stephen there is no need to pay me interest. I am happy to help you out.' Mr Matthews: 'Thank you, I will look after you though, especially given you are paying interest on the funds.'"
5. Ms Woodham states that on 15 January 2014 she transferred $40,000 from her overdraft account to Ms Matthews' account and that since that time Mr Matthews has repaid the $40,000 to Ms Woodham "in full".
6. It should be noted from the affidavit that the crucial conversation at the 2014 meeting did not involve Mr Woodham speaking at all. Further, the conversation has Ms Woodham lending the $40,000 without a requirement for interest. This is inconsistent with Mr Woodham's evidence of the same meeting.
7. In her oral evidence, Ms Woodham was taken to a handwritten letter which is Annexure C to Gareth Woodham's 2 March 2018 affidavit.
8. In paragraph 43 of his affidavit, Mr Woodham states that he disputes that the entire $40,000 loaned "to Mr Matthews" in January 2014 belonged to Ms Woodham. He asserts, consistently with the plaintiff's case, that Ms Woodham loaned half of the $40,000 and he loaned the other half. He appears in this evidence to identify himself with the plaintiff. The evidence in paragraph 43 also identifies the loan as being to Mr Matthews as opposed to Ms Matthews.
9. In her evidence, Ms Nicole Woodham confirmed that the handwritten letter which is Annexure C to Mr Woodham's 2 March 2018 affidavit is in her handwriting, is signed by her, is directed to her former mother-in-law (Mr Woodham's mother) and was written by her in about August 2016 in response to a letter apparently from Mr Woodham to his mother and other members of his family: T3-4 (17/4/19).
10. Ms Woodham was taken to that part of the handwritten letter which states as follows (page 13): "He [Mr Woodham] met with Steve in December 2013 and asked me to transfer his money to Steve which I did".
11. Ms Woodham confirmed that the "Steve" in the passage quoted was Mr Stephen Matthews and that the "he" commencing in the passage was Mr Woodham. Initially, Ms Woodham denied that the meeting could have been in January 2014 (T5.7) but later conceded that the meeting which was at her house could have been in January 2014 (T5.15).
12. Ms Woodham said that she intended by this letter to convey that Mr Woodham met with Mr Matthews in December 2013 and later he requested Ms Woodham to transfer money to Mr Matthews which she did: T5.29; T6.15. By the reference to "his money" Ms Woodham understood it to be Mr Woodham's money but after further cross-examination she accepted that the money was part of the $26,000 lent to her by the plaintiff which was placed on an offset account on her mortgage: T5.46-T6.47.
13. It should be noted that this is inconsistent with paragraph 4 of Ms Woodham's affidavit which states that she transferred the $40,000 to Ms Matthews' account as opposed to Mr Matthews account as the letter suggests.
14. Ms Woodham in further cross-examination accepted that Mr Woodham had asked her to transfer some of his money to Ms Matthews for her mortgage: T7.20: T6.49.
15. Ms Woodham was taken to paragraph 4 of her affidavit and confirmed that she transferred the money in the sum of $40,000 from her account to Ms Matthews account but said some of the money was Ms Woodham's money and some of the money was Mr Woodham's money: T7.34.
16. Ms Woodham was then asked some questions about the conversation appearing in paragraph 23 of Mr Woodham's first affidavit. In relation to the first quote from Mr Matthews in paragraph 23 of Mr Woodham's first affidavit, Ms Woodham said that she remembered $40,000 being mentioned but believed she probably "tuned out" in relation to the details about the mortgage being in default: T8.13. However, she recalled that the conversation related to a default in a mortgage by the Matthews.
17. Ms Woodham was then taken to the second conversation in paragraph 23 of Mr Woodham's first affidavit where she is recorded as saying "Gareth and I will lend you the $40,000". Ms Woodham said that she understood $40,000 would be lent to Mr Matthews. She said Mr Woodham was sitting at the same table during the discussion. She said she did not recall that part recorded in Mr Woodham's affidavit where it states, "Gareth and I will lend you the $40,000". Ms Woodham said that she was lending the $40,000 sought. She said she had a conversation with Mr Woodham after the meeting in which he said he was happy for her to lend $20,000 of her own money and $20,000 of his money which he had advanced to her. However, at the meeting at which the three of them attended, she recalled Mr Woodham nodding as she spoke. In the end, Ms Woodham said that she did say that "we will lend you the $40,000" but she did not say that the money would be sent from the loan offset account: T8.46-.1.
18. Ms Woodham was then taken to the third conversation from Mr Matthews in paragraph 23 of Mr Woodham's first affidavit. She denied that Mr Matthews in the meeting said words the effect "I'm sure we'll be able to pay you on time. Gareth, your $20,000 will be on the same terms as before": T9.25-.34.
19. Ms Woodham stated that in her discussion with Mr Woodham later after the meeting with Mr Matthews, Mr Woodham said that he and Mr Matthews would work out the terms relating to his part: T10.25-.40.
20. I formed a positive view in relation to Ms Woodham. She appeared to be an honest witness doing her best to give her evidence truthfully. I did not perceive her giving her evidence with any animosity towards Mr Woodham having regard to the fact that they were previously married. However, I formed the view that Ms Woodham did not have a good recollection in relation to the detail of discussions at the meeting. Her firm recollection seemed to be limited to the fact that she would be advancing $40,000 from her account, that she did say that "we will lend you the $40,000", and that there was a later discussion between her and Mr Woodham as to the detail of how the $40,000 would be constituted. She also denied there was any discussion that $20,000 of the $40,000 would be advanced from Mr Woodham or the plaintiff or that it would be "on the same terms as before".

Evidence of Ms Melinda Matthews

1. The first defendant read an affidavit of hers sworn 15 February 2018. Ms Matthews gives evidence that her husband Mr Matthews is involved in various other investments and "is often approached to document investment opportunities for different companies". She also gives evidence that Mr Matthews trades in the currency and share markets. Ms Matthews gives evidence that in certain circumstances, Mr Matthews will ask her to execute Deeds of Agreement pursuant to which she will borrow money from his investors. She notes that the Deeds of Agreement are usually to protect Mr Matthews' clients, although several of them have been taken for personal use. It is noted that Ms Matthews does not say in her affidavit that she has given any general authority to Mr Matthews to enter contracts or agree to commercial transactions on her behalf whether at present or in the period 2012 to 2014. Similarly, there was nothing said in her affidavit about a more confined authority being given to Mr Matthews to bind her to a loan with the plaintiff in January 2014.
2. In paragraphs 4 to 8 of her affidavit, Ms Matthews gives the background to the various Deeds of Agreement which she signed with the plaintiff on 20 September 2012, 20 October 2012 and on 24 December 2012. In paragraph 8 of her affidavit, Ms Matthews states: "However, I trusted Stephen and I was prepared to sign the [24 December 2012] Deed of Agreement".
3. Ms Matthews gives evidence that in early 2013, her home loan lender Provident Capital which she states was in liquidation caused her mortgage to be in default. How this occurred is not made clear in her affidavit. She asserts that the receiver of the lender was making threats to take possession of her home. She continues that "we were in desperate need of approximately $40,000 and Stephen and I did not have the money to make this payment. I understood that if the payment was not made, the settlement could not proceed and we may lose our home."
4. In paragraph 15 of her affidavit, Ms Matthews states the following: 15. In about January 2013, I had a conversation with Stephen as follows: Stephen: 'I have spoken with Nicole [Woodham] and she has agreed to lend us the money to pay to provident' Me: 'Thank heavens for that.'
5. This evidence is inconsistent with the plaintiff lending money in January 2014 to anyone. In particular, Ms Matthews said that she did not enter into any agreement with the plaintiff. There is nothing in her affidavit which suggests that her husband had her authority to enter into the agreement which Mr Woodham on behalf of the plaintiff asserts that Mr Matthews did on her behalf.
6. In her oral evidence, Ms Matthews amended paragraphs 14 and 15 of her affidavit to correct that the year referred to in each paragraph should be 2014 and not 2013: T13.14.
7. Ms Matthews confirmed that her husband Stephen asked her to enter into the September 2012 deed for the purposes of investment and asked her to sign that deed which he had prepared: T13.48. Ms Matthews said she assumed that Mr Matthews was sending a draft of the deed to Mr Woodham: T14.1. She confirmed that she allowed Mr Matthews to do this on her behalf as she trusted him and left it to him to handle the detail of the terms of the deed: T14.10.
8. In relation to the October 2012 addendum (page 24 of Mr Woodham's first affidavit), Ms Matthews also agreed that she left it to Mr Matthews to take care of the arrangements for that deed. She did this as she trusted him: T14.26.
9. Ms Matthews was asked whether she was aware that the December 2012 deed was entered into for the purposes of a loan to Polymax. Ms Matthews said that she was aware that Mr Matthews and Mr Woodham were talking about Polymax: T15.22. She agreed that she let Mr Matthews decide the loan, draft it and organise the loan terms: T15.30. She accepted that she made a number of payments in relation to the December 2012 loan: T15.33. She also stated that she left the loan to Mr Matthews and did not speak to Mr Woodham in relation to it: T15.40. She could not recall whether she made payments under the December 2012 loan herself as it was a long time ago. She accepted that most payments were made for her by Mr Matthews: T15.50.
10. In relation to the mortgage loan in January 2014, Ms Matthews said that she trusted her husband to make the arrangements for it: T16.7. When it was put to her that if she did not receive the loan that she would be in default under her mortgage, Ms Matthews said that she understood that the mortgagee Provident Capital was in receivership and the money was needed to pay fees to roll the mortgage over. She said that she believed there was a slight risk that she would lose her house if these fees were not paid: T16.16.
11. Ms Matthews confirmed her understanding that the money was advanced by Ms Woodham to her but she did not know whether it was placed in her bank account: T16.22. She said she was not at the meeting where the loan was discussed but trusted her husband to arrange the loan and knew that he was meeting with Ms Woodham in relation to the loan: T16.31-.45. When it was put to her that she would agree to any agreement made on her behalf, Ms Matthews denied this and said that she thought Mr Matthews was just going to ask Ms Woodham to lend them the money: T17.27; T21.27. When it was suggested to her that she knew that the loan was going to be in her name, Ms Matthews denied this: T17.42. Ms Matthews stated that she thought her husband was meeting with Ms Woodham.
12. Ms Matthews agreed that she was the owner of the family home and believed that she owed money to Provident Capital in relation to the mortgage. In response to the suggestion that she discussed with Mr Matthews the need to raise more money, Ms Matthews agreed that they needed to find more money in relation to the mortgage. When it was suggested that she knew Mr Matthews was going to speak to Mr Woodham and Ms Woodham, Ms Matthews said that she only understood he was going to speak to Ms Woodham: T21.27. She accepted that she knew that Mr Matthews was going to speak to Ms Woodham and see her for the purpose of asking if she had any money which they could borrow: T21.36.
13. Ms Matthews gave evidence that she did not discuss with Mr Matthews any of the terms of any agreement in relation to the borrowing of money: T21.43. When asked why she did not attend the meeting, Ms Matthews said that she was probably at work. She agreed that she allowed her husband to represent her at the meeting: T21.48-22.2.
14. Ms Matthews said that she believed that $40,000 was obtained and understood that it was paid to the liquidator of Provident Capital. She said she knew that the money came from Ms Woodham as a result of the meeting and accepted the funds that were advanced. When it was put to her that she accepted that her husband had made an agreement for her, Ms Matthews said that she agreed for her husband to borrow the money but was not aware of "how it was to be returned": T22.25. She agreed that she was not there and did not know what occurred but assumed that if there was anything other than borrowing from Ms Woodham as friends that there would be "paperwork" for her to sign. She agreed that there has never been "paperwork" between her and Ms Woodham in relation to the loan: T22.40.
15. Ms Matthews impressed the court as an honest witness who was doing her best to give her evidence truthfully and completely. It is clear to me from Ms Matthews' evidence that she trusted her husband in relation to financial matters and left it primarily to him to arrange them. Again, I formed the view that Ms Matthews did not have a good recollection of the discussions which occurred at the time. However, there was nothing in her evidence to establish that she was aware in January 2014 that her husband was meeting or talking with Mr Woodham about a loan from the plaintiff or Mr Woodham.
16. In paragraph 2B of the Amended Statement of Claim filed on 11 May 2018 the following is pleaded: "At all relevant times, the first defendant [Ms Matthews] had authorised her husband, Stephen Matthews to deal with the plaintiff's principal, Gareth Woodham, on her behalf."
17. Ms Matthews denies this allegation in paragraph 4 of her Defence filed 30 May 2018. Paragraph 6 of the Amended Statement of Claim pleads that "in or about January 2014, the plaintiff agreed to lend to the first defendant the sum of $20,000 (January 2014 Agreement)". The particulars to paragraph 6 state that the agreement was oral and the result of a conversation between Mr Woodham on the plaintiff's behalf and Mr Matthews as agent for the first defendant.
18. The clear implication from the Amended Statement of Claim is that there was general authority provided by the first defendant to her husband Mr Matthews to deal with Mr Woodham on her behalf and that that authority extended to the entry into of the January 2014 oral agreement.
19. It is clear that Ms Matthews signed the 20 September 2012 agreement, the October 2012 addendum and the 24 December 2012 agreement that had been prepared by Mr Matthews and negotiated with Mr Woodham on behalf of the plaintiff. Mr Matthews later gave evidence, which was not contested, that he had entered about six other loans, besides the loans with the plaintiff, on Ms Woodham's behalf with the plaintiff's loans being treated in summary by him as one loan.
20. It is also clear that Ms Matthews trusted her husband and knew that he was going to see Ms Woodham to see whether she had any money available which she could lend to them. There is no evidence that Ms Matthews was aware that Mr Matthews was going to enter into any agreement in relation to the mortgage loan with the plaintiff or Mr Woodham or as to the terms of any loan.
21. The plaintiff's case turns on establishing that either there was authority granted by Ms Matthews to Mr Matthews to enter into loan agreements on her behalf or that there was authority granted by Ms Matthews to Mr Matthews to deal with Mr Woodham on behalf of the plaintiff and enter into agreements or that there was specific authority granted by Ms Matthews to Mr Matthews to enter into a loan such as the January 2014 oral agreement alleged by the plaintiff. Paragraph 2B of the Amended Statement of Claim is somewhat vague. It is unclear what is meant by the pleading that Ms Matthews had authorised Mr Matthews "to deal with the plaintiff's principal, Gareth Woodham, on her behalf". However, I think it is appropriate to infer from the particulars and pleading in paragraph 6 of the Amended Statement of Claim that Mr Matthews is alleged to have been the agent for Ms Matthews in entering into the agreement with the plaintiff through Mr Woodham.
22. I will consider the question of any authority granted by Ms Matthews to her husband further below. This appears to be a significant issue in the case as the authority alleged in the Amended Statement of Claim is denied. Paragraph 6 of the Amended Statement of Claim is also denied by Ms Matthews in paragraph 8 of her Defence.

Evidence of Mr Stephen Matthews

1. The first defendant read an affidavit of Mr Stephen Matthews sworn 16 February 2018. As stated above, Mr Matthews is the husband of the first defendant. Mr Matthews gives evidence in his affidavit that since around 2007 he has been self-employed as a financial consultant and derivatives trader with a particular interest in binary options, foreign exchange and gold trading. He notes that he has set up an office in his home where he conducts his business, generally on behalf of clients in their name where he would charge an amount of any profits that are made on the clients' accounts. Mr Matthews notes that in around 2009 (well before the time Mr Woodham noted in his evidence) he met Mr Woodham who was introduced to him through Ms Woodham.
2. In paragraphs 7 to 8 of his affidavit, Mr Matthews gives evidence of certain trading which he undertook on behalf of Mr Woodham.
3. In paragraphs 9 to 17 of his affidavit, Mr Matthews gives the background to the 24 December 2012 deed entered into between the plaintiff and Ms Matthews. Although there are some differences between Mr Matthews and Mr Woodham in relation to the relevant conversations, there is no disagreement that the deed was entered into, that the money was required on a short-term basis and that the loan was placed in Ms Matthews' name to provide further security to the plaintiff. The evidence supports the fact that the deed was in Ms Matthews' name to provide some comfort to Mr Woodham on behalf of GWI: see paragraph 12 of Mr Matthews' affidavit.
4. In paragraphs 27 to 31 of his affidavit, Mr Matthews gives evidence of his close relationship with Ms Woodham and the fact that they had assisted each other financially, where possible, including Mr Matthews providing Ms Woodham with $80,000 to assist her to purchase a cafe in Oatley on 1 October 2014. This same evidence was also given by Ms Woodham. It is also noted that Ms Woodham had provided Ms Matthews with funds for investment purposes. Mr Matthews notes that Ms Woodham has since repaid the moneys he loaned her for the purposes of the purchase of the cafe in Oatley.
5. Mr Matthews gives evidence of the January 2014 meeting in dispute between the parties. Paragraphs 32 to 34 of Mr Matthews' affidavit are as follows: "32. In January 2014, I met with Mrs Woodham at her home. Mr Woodham was also present. We had a conversation to the following effect: Me: 'Nicole, our current home lender has gone into liquidation and the liquidators are refusing to honour deals previously arranged with the lender and are demanding that we pay some $45,000 in fees or they will foreclose on the loan. If we don't come up with the money within 24 hours they will simply force the sale of the property. I don't like to ask but could you please help me out?' Mrs Woodham: 'I have the overdraft which you set up for me. Some of it belongs to Gareth though. That's why he is here. I could give you the money and you can pay me back when you can.' Me: 'I really appreciate it Nicole. I will pay you back with interest at the home loan rate.' Mrs Woodham: 'Don't be silly. You have helped me out before and I am more than happy to help you.' Me: 'I really appreciate this. As I don't want to know about your personal business, I will just repay Nicole and you guys can sort out your finances.' Mrs Woodham: 'OK' Mr Woodham: 'Sure.' 33. I was involved in setting up the overdraft account for Mrs Woodham. Whilst I was aware that Mr Woodham also had money held in Mrs Woodham's overdraft account I was unaware how much money he had in the account."
6. This version of the conversation at the meeting is somewhat different to that of Ms Woodham and substantially different to that of Mr Woodham. In particular, Mr Matthews says that he referred to an amount of $45,000 whereas Ms Woodham and Mr Woodham state that the amount of $40,000 was referred to. Mr Matthews also has Mr Woodham speaking in the conversation whereas both Ms Woodham and Mr Woodham in his first affidavit have him saying nothing. What is clear from Mr Matthews' version is that the loan was from Ms Woodham. Mr Matthews denies that he had any agreement with Mr Woodham to borrow any money from him to assist with the Matthews' home loan.
7. Mr Matthews also relies on an email dated 5 July 2014 from Mr Woodham to him in which Mr Woodham states the following: "Nicole mentioned that you would be in Canberra this week, however can you please transfer the funds from the loan made for your mortgage to Nicole sometime this week? The total outstanding for that account is now $23,000. The last payment was made when you transferred money to Nicole in April."
8. In my view, this email is at the least equivocal. First, it suggests that the mortgage loan attracts interest which is inconsistent with Mr Matthews' and Ms Woodham's account. However, contrary to Mr Woodham's evidence, the email has him seeking money paid to Ms Woodham and not to him directly. Overall, I see the email as being somewhat contrary to both cases of the plaintiff and the defendant.
9. Mr Matthews gives evidence that on 1 October 2014 $20,000 was paid to Ms Woodham with a further $20,000 being transferred from Ms Matthews' account to Ms Woodham's bank account on 23 November 2017.
10. In paragraph 38 of his affidavit, Mr Matthews gives evidence of repayments which have been made to GWI. It should be noted that these repayments are different to the Notice to Admit Facts which was served by the first defendant Ms Matthews on the plaintiff which became part of Exhibit A in the proceedings. The Notice Disputing Facts which is also part of Exhibit A is relevant. In effect, the amounts in the Notice to Admit Facts are not disputed, apart from the fact that they are said to be repayments of interest and not principal and that the payment for 10 April 2015 was $800 instead of $400. As this is against the interest of the plaintiff, I accept that the Notice Disputing Facts figure should be accepted.
11. Accordingly, I accept that the repayments were made as set out in the Notice to Admit Facts which is part of Exhibit A as qualified by the Notice Disputing Facts. I will consider below whether the repayments were payments of interest or principal.
12. In his oral evidence, Mr Matthews stated that he was currently a chief analyst of a company but had substantial work experience since the 1990s in relation to running trusts, trading, putting investment vehicles together, dealing with mortgages and financial planning products.
13. Mr Matthews agreed that from time to time he had arranged for investors to enter into investment loans with his wife: T27.7. He confirmed that this involved investing money for a short period of time and that the loans were for both personal and business purposes. As stated above, Mr Matthews gave evidence that he had arranged more than six loans for his wife with the loans considered in these proceedings treated as one loan: T27.21. Mr Matthews gave evidence that his wife knew of this practice and she let him negotiate on her behalf. He said that she was not involved in the negotiation of the deals herself: T27.33.
14. In relation to the September 2012 deed loan appearing at page 18 of Mr Woodham's first affidavit, Mr Matthews agreed that he arranged the loan with the plaintiff, drafted the deed and said that he "would have" sent the deed to Mr Woodham for his review: T28.1-.6. Mr Matthews agreed that the September 2012 deed loan involved a similar template to that used in other loans: T29.6. Mr Matthews stated that he altered the recitals and the operative part of the deed to suit the circumstances: T29.25.
15. Mr Matthews stated that at the time the September 2012 deed was entered into he believed that the amount lent would be paid back within a month: T29.42. Mr Matthews stated that he understood that the money borrowed by Ms Matthews was "passed on" to the business of Polymax and was utilised in its business: T30.3. Mr Matthews agreed that he managed his wife's investments (T30.26) and that he chose the 10% per month interest rate referred to in item 3 of the 20 September 2012 agreement: T31.1. Mr Matthews also agreed that the loans he arranged for his wife were usually for a short-term and included a "penalty interest rate". In the case of the 20 September 2012 loan, Mr Matthews accepted that the penalty interest rate was half that of the interest rate for the one month of the loan and that his wife was financially better off under the penalty interest rate because it was less than the interest rate for the month of the loan: T31.22. He accepted that if Ms Matthews was in default under the September 2012 loan that the interest rate she would pay on the money borrowed would be less than the interest rate for the month of the loan.
16. In relation to the October 2012 addendum to the 20 September 2012 deed (page 24 of Mr Woodham's first affidavit), Mr Matthews agreed that he drafted the deed and that it extended the term of the loan under the September 2012 deed by two months with the interest rate being reduced per month from 10% to $500 per month: T32. Mr Matthews confirmed that he expected the loan as extended to be repaid by Ms Matthews on time: T32.48. He agreed that it was not repaid and he expected that he would be able to negotiate a further contract with Mr Woodham.
17. Mr Matthews agreed that the 24 December 2012 deed was a new agreement and related to the investment in Polymax. At this time Mr Matthews said that he and Mr Woodham were looking at investment opportunities "overall": T33.49. Mr Matthews agreed that on 17 December 2012 he suggested to Mr Woodham an investment in Polymax: see the email at page 30 of Mr Woodham's first affidavit. Mr Matthews agreed that from the email chain attached to Mr Woodham's first affidavit (see page 32), although Mr Woodham was talking about "a loan at first", he was interested in longer term equity opportunities: T35.24.
18. Mr Matthews was asked questions about the document headed "Without prejudice explanation of intentions as per deed of agreement dated 24 December 2012" at page 34 of Mr Woodham's first affidavit. Mr Matthews agreed that he drafted the document and gave it to Mr Woodham on behalf of Ms Matthews: T35.38. He agreed that the document formalised the discussions between him and Mr Matthews and set out the purpose of the deed. Mr Matthews agreed that there would be a back to back loan between Ms Matthews to Polymax Recycling and that he had discussed the loan with Ms Matthews: T36.19.
19. In relation to the fourth paragraph of the document which provides that if capital is not raised to allow a source of repayment that Polymax "will sell a redundant Recycling Machine which we are told has a fire sale liquidation value of approximately $50,000", Mr Matthews agreed that the machine was available and was later sold: T36.33. He gave evidence that Polymax never repaid the loan to Ms Matthews but that he was managing the investment of Ms Matthews with Polymax. Mr Matthews agreed that he gave this document to Mr Woodham and assumed that he read it: T36.47. He could not recall whether he gave the document to Mr Woodham at a meeting on 24 December 2012.
20. Mr Matthews gave evidence that he and Mr Woodham in December 2012 expected that the Polymax investment would be lucrative and that the 24 December 2012 deed was the first step in that potential return.
21. Mr Matthews agreed that in the December 2012 deed the term interest rate had been reduced from the earlier two deeds but that the penalty interest rate was left at 5% per month. He also agreed that Mr Woodham had told him prior to the deeds that he needed to obtain an income stream from an investment and that the purpose of the loan deeds was to generate income for the plaintiff: T39.1-.10.
22. Mr Matthews agreed that the 24 December 2012 deed term expired in February 2013 and that from the expiry date of the loan that the default interest rate arose and that Ms Matthews was in default as she had not repaid the principal: T39. Mr Matthews agreed that Mr Woodham was asking for the return of the money but that he was able to convince him that the money would be repaid in time. Mr Matthews also agreed that he met Mr Woodham from time to time to make payments for Ms Matthews but did not negotiate an extension of the loan between the plaintiff and Ms Matthews: T39.39.
23. Mr Matthews was then asked a number of questions about two emails from Mr Woodham to him dated 5 July 2014 and 12 August 2014 which are at page 55 of the annexures to Mr Woodham's first affidavit. In the first email dated 5 July 2014, Mr Woodham relevantly states to Mr Matthews: "Great news that both of the matters have now settled so we can wrap up both the loans and get back to the real trading. Nicole mentioned that you would be in Canberra this week, however can you please transfer the funds from the loan made for your mortgage to Nicole sometime this week? The total outstanding for that account is now $23,000. The last payment was made when you transferred money to Nicole in April. I have also attached a current schedule for the loan to Polymax. Will you be able to finalise this at the same time?"
24. The 12 August 2014 email relevantly included: "Following from our chat this morning, I just wanted to clarify what I was after. This Friday the interest on the loan for your mortgage will be $5,000 and the Polymax interest will be $16,600 until 24/8. The total interest is $21,600, and I need a further $10K to help Nic with her purchase. If you still need the $30K balance of the principal that's okay under the same deal, but it's my preference that this would be back in the account and used for trading. My long-term goal is still $200-300K for a property purchase, and I believe the only way I can get there is through trading or property. I really need this by the weekend as I have been pushing back for the past couple of months."
25. Mr Matthews agreed that the reference to the loan to Polymax was a reference to the loan recorded in the deed dated December 2012. He also agreed that Mr Woodham was referring to the mortgage loan as a separate loan: T43.23. Mr Matthews said that there were not any other mortgage loans with Mr Woodham: T40.18; T41.7.
26. Mr Matthews stated that he did not recall the email and did not recall reading the emails at the time: T44. However, he conceded that he had a practice of reading emails at the time they were received: T44.50. Mr Matthews said that he did not recall whether he responded to Mr Woodham's emails. He agreed that he had put in his affidavit all evidence which he had which he regarded as relevant to the loans (T45.49) but stated that he did not check his emails for the period: T46.2. However, Mr Matthews conceded that the email dated 5 July 2014 at page 42 of his affidavit was the same as the 5 July 2014 email at page 55 of Mr Woodham's first affidavit. He agreed that he did not include the second 12 August 2014 email even though it was part of an email chain. He could not recall why he did not include the second email in his affidavit: T46.42.
27. Mr Matthews conceded that there was no evidence that he had denied the claims of Mr Woodham in his emails in relation to the claimed outstanding balance for the mortgage loan: T47.22. He also accepted that if Mr Woodham claimed to be owed money and he believed that money was not owed that he would deny it: T47.30. Mr Matthews confirmed that Mr Woodham did not lend any money to Ms Matthews in January 2014.
28. Mr Matthews was then taken to Exhibit "GRW1" to Mr Woodham's first affidavit which consisted of a large bundle of text messages between Mr Woodham and Mr Matthews. A review of these text messages for the period 2014 to 2017 shows that they consist largely of Mr Woodham pressing Mr Matthews for money alleged to be owed to him usually without success and with Mr Matthews pointing to various reasons or excuses for the delays in payment.
29. Counsel for the plaintiff took Mr Matthews to a series of text messages relating to payment of money by Mr Matthews. These text messages at pages 42-44 of Exhibit GRW1 to Mr Woodham's first affidavit are relevantly as follows: "[Mr Woodham] did you find out what happened? … So I'm assuming the funds were never deposited last Wednesday as they would absolutely be available by now … What's the result? Nicole is screaming for money [Mr Matthews] I've been told all will be resolved today including forward transfers. They r having a coffee in Toronto and waiting on physical result. [Mr Woodham] OK Do you know what the outcome was? What's the update. Will anything becoming today? … What is going on? What are you hiding for? Why is it taking so long??? [Mr Matthews] Sorry. Got caught up on a pear-shaped settlement. But had been communicating via Nicole who told me that's the way you said it was set up and was to come back. Anyhow, Nicole will either receive funds Saturday or Monday. I will copy any further correspondence to both of you. [Mr Woodham] No that's not correct. I am to receive my money first. I have been waiting for three years. The last of the money can go to Nicole. Do not give anything to her until you have cleared the bulk of the debt with me. … [Mr Matthews] Gareth. Cut out the crap comments. I didn't even receive your email. Just checked spam. Not there either. Also, there was nothing in the Nicole issue. She was simply going to pass through to you because you were apparently saying that's the way it came in and that's where it had to come back from. Please resend email. [Mr Woodham] Sent again to both your email addresses. … [Mr Woodham] Here is the text of the email anyway. Steve See attached spreadsheet. Current outstanding exceeds $90,000. With reference to your email, please confirm at which milestones the following amounts will be repaid. The first $20,000 that you have been promising for the past month is to come to me directly. Following this, the next $20,000 will need to be paid directly to my superannuation account to repay the funds that were withdrawn over the past two years in lieu of your payments. Then the amount of $30,000 is to be paid to me, with the remaining $20,000 channelled back through Nicole Understand? Please reply. Gareth … [Mr Woodham] Just sent it from another address to both yours. [Mr Matthews] OK ta. … [Mr Matthews] Straight thru to that one. Will get back to you after checking figures. The rest is understood. Wasnt trying to be difficult. Was told that you wanted it that way too."
30. Mr Matthews was cross-examined in relation to these text entries: T48 and following. Mr Matthews agreed that Mr Woodham had provided money to Ms Woodham who then provided the money by way of loan to Ms Matthews and that Mr Woodham wanted the last of the repaid money to go to Ms Woodham. However, Mr Matthews denied that the reference was to money that the plaintiff had lent to Ms Matthews in relation to the mortgage loan as opposed to money which Ms Woodham had lent to Ms Matthews in relation to the mortgage loan.
31. Mr Matthews said that he understood that part of the money from Ms Woodham which was lent to Ms Matthews originated with the plaintiff but he never knew the amount: T53.23. He accepted that the plaintiff had provided some money for the purposes of the mortgage loan to his wife: T53.27. Mr Matthews said that he was aware "from day one" (T53.46) that part of the money that was lent from Ms Woodham to his wife had originated from money of Mr Woodham. Mr Matthews said that he understood this as he had a prior conversation with Ms Woodham before the January 2014 meeting in which she told him that some of the money in the line of credit which she had, had originated from Mr Woodham: T54.3. He said this conversation occurred earlier on the day of the meeting in January 2014: T54.9. When asked to confirm that he understood that the loan was from both of them, Mr Matthews said that he understood there was a potential for that to occur but in the end the loan was from Ms Woodham: T54.13. Mr Matthews conceded that nowhere in his texts did he deny that the current outstanding amount owed to Mr Woodham was $90,000 (see the texts at page 44 of Exhibit "GRW1"): T56.13; .46.
32. Mr Matthews was then shown the email versions of the text sent by Mr Woodham on 8 January 2016 with the attached loan spreadsheet which became Exhibit D in the proceedings. The spreadsheet appeared to be divided into two loans, one commencing 24 December 2012 for $20,000 which appears to coincide with the loan recorded in the 24 December 2012 deed and what is described as a "Second loan" made on 15 March 2014 in the sum of $20,000 which was asserted in the spreadsheet to have a balance after interest of $1,000 monthly from 15 April 2014 of $41,000 as at 15 December 2015 with a total balance with the 24 December 2012 loan of $91,350 as at 8 January 2016.
33. Mr Matthews conceded that the email in Exhibit D was in the same form as the text at the top of page 44 of Exhibit "GRW1" to Mr Woodham's first affidavit: T57.32. He accepted that he received the email with the spreadsheet. He said the email and spreadsheet was "what Gareth was saying": T59.2. He agreed that the reference to the "Second loan" in the spreadsheet was a reference to the mortgage loan made in early 2014: T59.12. He also agreed that the $1,000 per month set out in the schedule under the "Second loan" amounted to 5% of the $20,000 loan amount and amounted to interest of $1,000 dollars per month. Mr Matthews said that this was Mr Woodham's interpretation of the second loan and the total balance due was his claim: T60.7. He agreed that the reference to $90,000 in the text at page 44 of Exhibit "GRW1" was a reference to the total in the spreadsheet attached to the emails and that he did not deny the assertion from Mr Woodham that $90,000 was owing: T60.31. He again confirmed his practice at the time of checking his emails, including schedules to the emails: T61.2. He also confirmed his practice of denying a debt if he believed it was not owed: T61.5. Despite this, he denied that as at 15 December 2015 $41,000 was owed to the plaintiff by Ms Matthews in accordance with the spreadsheet: T61.9.
34. Mr Matthews was then taken to further texts in Exhibit "GRW1". These texts covered the period 1 November 2016 to 5 November 2016 and are found at pages 85-87 of Exhibit "GRW1". These texts, where relevant, are as follows: "1 November 2016 … [Mr Woodham] Where are the funds that were deposited into the Westpac account on Friday 14 October and withheld due to suspicious activity? They have to have been reinstated by now so unless you have spent them elsewhere, they were never there. It is difficult to believe any more excuses without evidence, which you have also been unable to provide. Do you Intend paying me back my money or not? You would have received the schedule I sent on Saturday too. It is clear how much you owe but there has been no effort to repay or even acknowledge. … 2 November 2016 [Mr Matthews] Gareth, I can't keep this elongated email trail going. I glanced at your spreadsheet. Thank you for sending. RE: The evidence of what I have told you, I am happy to show you. I agree its hard to believe, but unfortunately true, I intend to pay what is fairly owed. The delays on the back to back loan to eps has caused the main issues and that restructure is due to settle any day now which stops the scrapping for pennies once and for all. I still expect to be able to get some funds to you today. Will keep you posted. … 3 November 2016 [Mr Woodham] Steve I need to explain to my partner why I can't pay my debts. And what do you mean by fairly owed? You agreed to borrow funds at a rate of interest to be repaid monthly until the debt is cleared. They repayments haven't been forthcoming so the debt has increased. I haven't compounded the interest so the rate is now less than halved. And I'm still not even receiving the payments. I need money to pay my bills now. 4 November 2016 [Mr Matthews] week or so. … [Mr Matthews] In regard to the 2nd question, the fairly owed comment was because I need to review agreements. The first investment which was a back to back investment to eps is whatever it is and the finance will settle on that in the next week or so, so we both get our funds back from there. I have put in over $100k so add interest to it and it frees up a lot of personal money as well as pays you back your. In regards to the funds you loaned that saved the house, which I concede was meant to be for a short time, I am surprised that I offered 5% per month. I usually offer that for first month and then 2 - 3% thereafter, but I haven't gone back yet to check the above which is the only reason for saying "fairly owed'". I know this has caused issues for you and I wish it could be different. We are owed over $300k (excluding interest) that I thought would be liquid cash more than 12 months ago. It now appears that much if it is coming In through November. 5 November 2016 [Mr Woodham] Steve the issue I have is that I have been constantly believing I would be receiving a regular income from these funds. And the only reason I proceeded with the loan was that the expected income would be at a rate in excess of my outgoings, particularly the interest payments on multiple credit card debts. By the time I left Susie I had over $75k of debts to service. And I still expected that the repayments from you would resume and I would be able to manage a reasonable lifestyle. So by assuming that I would be receiving either the repayments or the capital after countless assurances, I had mistakenly based my lifestyle choices on these payments eventuating. This has cycled me in and out of financial hardship over the past four years, and has also been the catalyst for the break down of my relationship with Nicole and the subsequent loss of contact with Annika. When I advanced the second loan for your home loan you confirmed the terms would be the same as the first loan. Neither of us expected this would have taken so long, however I have been without my capital and most of the interest repayments for almost four years I need to resolve this so I can move forward with my life. I am counting on these funds to repay the debts I have incurred. Do you honestly believe you will be able to repay the full amount by the end of this month? I am at the end of my wits and I have no other options so please help me Steve."
35. Mr Matthews agreed that he intended to repay to Mr Woodham what was "fairly owed" to him: T62.35. He also agreed that in his longer text of 4 November 2016 (page 85 of Exhibit "GRW1") that he did not dispute the interest which Mr Woodham asserted was owing on the amount advanced under the December 2012 deed: T64.1. In relation to the reference to the "funds you loaned that saved the house", Mr Matthews denied that this was a reference to money lent by the plaintiff to Ms Matthews but stated it was a reference to the money lent by Ms Woodham to Ms Matthews of which part was the plaintiff's money of which amount Mr Matthews was not aware at the time: T64.3-.28. When asked why he used the words "In regards to the funds you loaned that saved the house", Mr Matthews denied that it was an acknowledgement that the plaintiff had loaned the funds. He said the money was lent by Nicole Woodham but part of the money lent was the plaintiff's money in the sense that it had emanated from Mr Woodham: T64.27.
36. When asked about that part of his text in relation to the mortgage loan where he states "I am surprised that I offered 5% per month", Mr Matthews agreed that he did not offer any interest on the loan to Ms Woodham as she did not ask for it: T64.38; T65.14. Mr Matthews accepted that in the text he did not deny the assertion by Mr Woodham that he offered a 5% return on the mortgage loan although stating that he "was surprised" by the suggestion of a 5% interest rate: T65.16-.26. In his text he said that he "usually" offered 5% interest for the first month and then 2%-3% per month thereafter: T65.
37. After cross-examination in relation to the three 2012 deeds, Mr Matthews accepted that he had no standard practice in relation to the interest rate which he inserted for the term of the various loans as opposed to the default rate: T68.49.
38. After further cross-examination, Mr Matthews stated that he did not recall offering any interest on the mortgage loan and said that he did not believe it was ever offered: T69.8-.13. He denied that he negotiated the loan in January 2014 with Mr Woodham (T69.16) and although he did not deny the schedule forwarded to him by Mr Woodham he said it was sent two years after the loan. Mr Matthews said that he accepted that Mr Woodham asserted that he was owed interest in relation to the mortgage loan made in January 2014: T70.19. Whilst Mr Matthews conceded that he did not deny in his text that $20,000 plus a 5% interest default rate in relation to the mortgage loan was owed to the plaintiff, he emphasised that no mortgage loan was made with the plaintiff as alleged: T70.49. Mr Matthews also agreed that in his reply of 8 November 2016 to Mr Woodham's text that he did not deny the assertions of Mr Woodham: T72.38. He accepted that it was natural for someone to deny something if it did not confirm their understanding of the position: T72.40-T73.1. He also said it would have been natural for him to say that the loan was with Ms Woodham as opposed to the plaintiff: T73.6. Mr Matthews again denied that there were two separate loans to his wife and said that the only loan was by Ms Woodham: T73.11; T73.23; T75.9.
39. For some of his oral evidence, I accept that Mr Matthews was attempting to give accurate, truthful and complete evidence. He made a number of concessions where appropriate. However, I found his evidence in relation to the text messages in Exhibit "GRW1" relating to the December 2012 deed loan and the January 2014 mortgage loan to be unlikely and evasive. He was unwilling to make ready concessions in relation to the effect of his and Mr Woodham's texts where it was clear that Mr Woodham was asserting that the plaintiff had made a $20,000 loan in January 2014 in relation to the mortgage and that interest had been agreed by Mr Matthews to be paid in relation to it: see the texts at "GRW1" pages 85-87 and T64.3-T65.26 especially at T65.14; T69.1-.27; T70.8-.35. The absence of denials by Mr Matthews in the texts in relation to Mr Woodham's claims as to the agreement to pay interest concerning the January 2014 loan is in my view significant. I will consider this further in my findings below.

Submissions

1. The plaintiff relied on both written and oral submissions. In general summary, the plaintiff's submissions were as follows: 1. The first defendant, Ms Melinda Matthews, has a debt to the plaintiff company to repay the principal and interest owing under two short-term loans; 2. Each loan from the plaintiff was for $20,000 and the default interest rate was 5% per month for each month, or part thereof, that the principal remained unpaid after the expiry of the term of the loan. The first defendant has made sporadic payments of interest from time to time; 3. Taking into account the interest payments which have been made by the first defendant, the total debt owed to the plaintiff at the time of trial was $148,600. This had increased to $151,600 at the time of final submissions; 4. The first loan was made under the December 2012 deed. The second loan was made in January 2014 pursuant to an oral agreement between the plaintiff and Ms Matthews which was entered into by Mr Matthews on her behalf. The purpose of the January 2014 loan was to assist Ms Matthews in paying her mortgage; 5. Whilst the 2014 mortgage loan has been repaid, the question is whether Ms Matthews owes the plaintiff for the repayment of outstanding interest on the loan; 6. The December 2012 deed loan has to be seen in the context of the plaintiff seeking opportunities to generate income. The interest on loans entered into in 2012 was intended to provide the plaintiff with an income stream; 7. The terms of the September 2012 deed were not negotiated and the plaintiff signed the September 2012 deed in the form proposed by Mr Matthews; 8. The December 2012 deed was entered into on 24 December 2012 and it replaced the earlier agreements. The plaintiff sues on the December 2012 deed (written submissions paragraph 20); 9. In relation to the December 2012 deed, the default interest rate is set out in Item 4 of the deed (although paragraph (h) of the deed erroneously refers to Item 5); 10. As the first defendant did not repay the principal due under the December 2012 deed loan, or the second interest instalment under that deed, on 3 March 2012 the plaintiff became entitled to receive payments at the default interest rate. Sporadic payments of interest have been made from time to time by the first defendant (written submissions, paragraphs 26-27); 11. The only issue arising in relation to the December 2012 deed is whether the default interest rate is an unenforceable penalty. The plaintiff submits that it is not (written submissions paragraph 28); 12. A good summary of the principles applicable in relation to penalties is set out in Arab Bank Australia Ltd v Sayde Developments Pty Ltd [2016] NSWCA 328; (2016) 93 NSWLR 231. The penalties doctrine is an exception to the principle of freedom of contract: at [104]. In order to be a penalty there must not be mere disproportion of the sum to be paid on default but extravagant and unconscionable disproportion before a particular stipulation can be seen as punitive or penal in character: at [105]. The default interest rate in the December 2012 deed was not a penalty applying this test to the facts; 13. The deeds were entered into in 2012 for the purposes of investment. The principal sum was loaned in the December 2012 deed to facilitate investment in the company called Polymax. It was contemplated that a successful investment might lead eventually to the acquisition of equity in the company. The December 2012 deed was an investment vehicle for the plaintiff because the interest rate gave the plaintiff an income stream. This was acknowledged by Mr Matthews who negotiated the loan. The income under the deeds "merely increased after the term of the deeds expired" upon default (written submissions paragraph 34); 14. The law requires that the purpose (or at least a purpose) of the default interest rate provision must be to punish the defaulting party. The evidence shows objectively that the parties intended nothing of the sort in the present case and the agreement was merely an investment vehicle. It is relevant that the borrower's agent Mr Matthews drafted the term alleged to be a penalty and accordingly, it is inconsistent to find that the parties subjectively intended the term to act as a penalty. The mere use of the word "penalty" in the default clause was not conclusive. The court had to consider whether it was a penalty applying relevant principles (written submissions paragraphs 35-37); 15. The default penalty rate in the December 2012 deed is not, in all the circumstances, unconscionable. The default interest rate in the three deeds entered into was consistently 5% per month of the principal sum. The subsequent loans after the September 2012 loan merely continued to apply the original rate. Further, there is nothing unconscionable, per se, in a short term loan that imposes a higher rate of interest upon default: Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 at [47]-[54] (see also Wu v Ling [2016] NSWCA 322 at [118] per Bergin CJ in Equity); 16. This was a short term loan which is relevant. The parties contemplated that GWI would be repaid within a short period of time. The annualisation of the interest of the default amount "unfairly exaggerates the true burden of the default provision." There was no security provided and no guarantee by a third party: See Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [15]; 17. The precise loss that would be suffered by GWI on default could not be assessed accurately. Having regard to the size of the loan it was unreasonable to expect the plaintiff to obtain expert evidence as to the market for short term loans at high rates and the likely damage which would be suffered through default in payment. See Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [17]; 18. It is established principle that courts can consider not only the economic reality that being kept out of money due is to suffer real economic loss but also the consequences must be considered of the fact of non-payment of the sum due on the due date being an increased credit risk. The increase from the simple interest rate to the default rate was, in the context, minimal and was quite different to the very considerable increase in the Bay Bon case: see in the Bay Bon case at [55] (written submissions paragraphs 41-44); 19. Lost opportunities for other investments must also be taken into account. The contract in question was made between people who on the face of the arrangements were capable of understanding and protecting their respective interests. The higher rate was a cost of doing business. There was nothing extravagant or exorbitant about the default interest rate in the deeds and accordingly the provision is enforceable (written submissions paragraphs 45-47); 20. In relation to the mortgage loan, the court should accept the submissions of the plaintiff that the first defendant, through Mr Matthews, orally agreed with the plaintiff to enter into a loan of $20,000 for a period of two months on the same terms as the December 2012 deed. This is supported by Mr Woodham's affidavit evidence as well as objective evidence including the August 2016 letter from Ms Woodham to her mother-in-law, Mr Matthews' failure to deny the loan and the SMS exchanges in evidence (written submissions paragraphs 49-50); 21. In relation to the question of agency and the authority of Mr Matthews to enter into the 2014 loan on behalf of his wife, a considerable number of the facts were not disputed. Ms Matthews gave evidence that she trusted her husband to arrange a loan on her behalf and that she left him to arrange the terms of the loan. There was no dispute that an agreement was made and that $40,000 was transferred from Ms Woodham to Ms Matthews. The court should infer that Mr Matthews acted as Ms Matthews' agent with actual authority in entering the loan. This finding is consistent with the evidence given by Ms Matthews in relation to the deeds. Looking at the conduct of Mr and Ms Matthews as a whole, the court should infer that Ms Matthews gave her husband authority in arranging the loan with the plaintiff (this submission of a specific actual authority was stated in oral submissions. A "general agency" with respect to arranging loans for Ms Matthews was asserted in the plaintiff's written submissions). While there was no evidence of an actual conversation giving that actual authority, there is a consistent pattern of conduct from which the court should imply agreement (written submissions paragraphs 54-55). Also Ms Matthews knew Mr Matthews was attending a meeting to see if money could be borrowed; 22. The preferred view of the evidence is that the agreement alleged in relation to the January 2014 meeting by the plaintiff should be accepted. At the January 2014 meeting, the attendees at the meeting agreed the terms of the loan. There was different evidence as to what was said at the meeting. This was understandable having regard to the time which has elapsed; 23. The changes and additions to Mr Woodham's evidence in relation to what was said at the meeting were understandable and his explanation should be accepted. He was a credible witness (written submissions paragraphs 60-61); 24. There was no logical reason for Mr Woodham to attend the meeting in relation to the 2014 loan unless he was there to approve a loan on the plaintiff's behalf (written submissions paragraph 62). The fact Ms Woodham would be using the plaintiff's money to advance the loan to the first defendant was not a credible reason for Mr Woodham being present. If, as the first defendant claims, the loan was made by Ms Woodham alone, Mr Woodham's presence was "redundant" (written submissions paragraph 63); 25. The plaintiff's version is supported by Ms Woodham's 2016 letter to her mother-in-law, Mr Matthews' failure to deny the existence of the mortgage loan as alleged and the SMS and email evidence (written submissions paragraphs 64-68). It is "human nature to deny the existence of a debt if the money is not owing" and there was no denial by Mr Matthews in the present case. Ms Matthews played no active role in the negotiation or performance of the loans and Mr Matthews' conduct is the best indicator to the court of the existence of the agreement (written submissions paragraph 69). The 4 November 2016 text message supports the plaintiff's contentions (written submissions paragraphs 70-74); 26. The alternative of a loan to Mr Matthews by the plaintiff should be rejected as inconsistent with the context despite the contents of Mr Woodham's second affidavit. Ms Woodham had the mortgage and the need for the money not Mr Matthews; 27. The plaintiff should be awarded the amount which it claims.
2. The first defendant also relied on both written and oral submissions. In general summary, the first defendant's submissions were as follows: 1. The background to the December 2012 deed was relevant: written submissions dated 3 June 2019 paragraphs 10-11 and 17-23; 2. The default payment provisions in the December 2012 deed amounted to penalties. This was also the case if the terms were incorporated into the January 2014 loan alleged (the plaintiff disputed in its oral submissions that this submission could be made as it was outside the pleadings); 3. The standard interest rate under the December 2012 deed was 36% per year. The default rate under the deed was 60%: written submissions paragraphs 18 and 23; 4. Whilst whether a stipulation amounts to a penalty is a question of construction to be decided upon the terms and "inherent circumstances judged as at the time of making the contract", a provision which provides that in the event of a failure in punctual payments, the rate of interest to be paid is increased over the period in which it is to be charged, has been regarded in the authorities as a penalty: written submissions paragraphs 25-27; 5. The plaintiff was not a usual lender and had not paid any profits from its investments: written submissions paragraphs 33-34. No additional costs were incurred by the plaintiff in the event of a failure to repay. The interest it received on the $5,000 additionally invested was very modest. On application of the relevant principles, the default rate was out of all proportion to the interests said to be damaged in the event of default and the rate was exorbitant and unconscionable. The increase in interest was properly characterised as having no purpose "other than to punish". The increase was extravagant: written submissions paragraphs 38-42; 6. As to the January 2014 loan, the plaintiff has not established that Ms Matthews was the borrower and that the plaintiff was the lender or the terms of the loan alleged: oral submissions; 7. The evidence of Mr Matthews, Ms Matthews and Ms Woodham was consistent as to the lender. Ms Woodham is independent of the parties, was consistent and should be accepted: written submissions paragraphs 44-46; 8. The agreement was reached between Ms Woodham and Mr Matthews to lend the $40,000. The amount of money lent which originated from the plaintiff was never known by Mr Matthews and there was no agreement between Mr Matthews and Mr Woodham: written submissions paragraphs 56-58; 9. On Mr Woodham's evidence there was an agreement between Mr Matthews, not Ms Matthews, and Woodham Investments. This was confirmed in several places in Mr Woodham's affidavit evidence. The suggestion by Mr Woodham that a reference was "a typo" should be rejected as it was confirmed by other references in his affidavits: written submissions paragraphs 60-75. A finding in the plaintiff's favour would disregard Mr Woodham's clear evidence as to the contractual discussions. This was the evidence the plaintiff principally relied upon to prove its case. Ms Matthews as the borrower is not mentioned in the later texts between Mr Matthews and Mr Woodham; 10. The alterations in Mr Woodham's affidavit evidence were not properly explained by him and gave rise to concerning inconsistencies: written submissions paragraphs 77- 80; 11. An oral contract with Ms Matthews was inconsistent with the prior dealings between the parties in 2012 where written documents had been executed. However, it is consistent with the history of contractual dealings with Ms Woodham. She and the Matthews had a history of loaning substantial amounts of money to each other without any loan documentation: written submissions paragraphs 81-86; 12. As Mr Woodham states that the agreement was with Mr Matthews not Ms Matthews, agency is irrelevant. On Mr Woodham's first affidavit, he was silent in the meeting conversation and therefore he would need to establish that Ms Woodham acted as the plaintiff's agent as she agreed the loan details: written submissions paragraphs 87-88. This has not been pleaded or advanced by the plaintiff; 13. The post contractual text messages cannot be admissible to establish the terms of the contract. The 9 January 2016 email which required the $20,000 to be "channelled back through Nicole" was inconsistent with the plaintiff's case and consistent with the evidence of Mr Matthews and Mr Woodham. Mr Woodham's evidence on this issue was not persuasive: written submissions paragraphs 89-95; 14. In the alternative, it was submitted orally that Ms Matthews' evidence did not support the actual agency alleged by the plaintiff in Mr Matthews. Ms Matthews thought Mr Matthews was meeting with Ms Woodham not Mr Woodham in January 2014. There can accordingly be no actual authority granted by Ms Matthews to Mr Matthews to enter on her behalf the loan alleged by the plaintiff. See T16.31-T17.27 and T21.27. To determine agency one has to look at the instructions or directions from the principal. A loan entered with the plaintiff did not bind Ms Matthews, the first defendant.

Factual findings

1. Having regard to the evidence and the submissions made by the parties, I make the following findings of fact in addition to those which I have already made and set out earlier in paragraph 9 in these reasons: 1. At all relevant times, Mr Matthews was a person experienced in financial matters and undertook various investments including on behalf of clients. His activities included trading in shares, options and foreign exchange and other commercial investments. 2. Mr Matthews is married to the first defendant, Ms Matthews. There is no evidence that they did not live together in the period from at least 2012 to date. At all relevant times, Ms Matthews trusted her husband in relation to financial matters. On a number of occasions, Mr Matthews negotiated agreements on behalf of Ms Matthews to borrow money for short terms which were ultimately recorded in documents signed by Ms Matthews as borrower. I accept Mr Matthews' evidence that such loans occurred in Ms Matthews' name on about six occasions with the various transactions in the present case with the plaintiff being regarded as one of those transactions. Ms Matthews was happy for her husband to negotiate the loans on her behalf. There was no evidence as to whether the other transactions were documented or not. Other than the January 2014 loan alleged in the present case, all the loans between the plaintiff and Ms Matthews were documented in 2012 in deeds of loan which were signed by her. 3. As at 2012, Mr Woodham had about $50,000 to invest on behalf of the plaintiff but wished to find investments which would generate an income. It is clear that in the period from 2014 to at least 2017 that Mr Woodham was pressed financially and made many requests of Mr Matthews to repay money which he believed was owed to the plaintiff. 4. I have already set out factual findings above in relation to the various deeds which were executed by Mr Woodham on behalf of the plaintiff and by Ms Matthews. These were all for short term loans and are constituted by the 20 September 2012 deed, the 20 October 2012 addendum to the September 2012 deed and the 24 December 2012 deed. I find that these three documents were drafted by Mr Matthews and forwarded to Mr Woodham. I also find that the three deeds were drafted in the terms in which they were executed by the plaintiff and Ms Matthews. I find that $15,000 was transferred by the plaintiff to the first defendant pursuant to the terms of the 20 September 2012 deed on 21 September 2012 (minus a bank transfer fee) and $5,000 was transferred by the plaintiff to the first defendant (minus a bank transfer fee) on 24 December 2012; 5. When the further $5,000 was advanced on 24 December 2012, it came from an account at Westpac. This account paid 0.3% per annum on balances over $19,999 to $49,999: third Woodham affidavit pages 11 and 13. However, the $5,000 had been transferred into the account from another account also on 24 December 2012; 6. I will consider the question of the authority, if any, granted by Ms Matthews to her husband further below; 7. As stated above, I find that on 2 September 2013 the plaintiff through Mr Woodham lent $26,000 to Ms Woodham to place in her mortgage offset account to assist her in reducing her mortgage payments. There is no suggestion this was held by her on trust. It was her money; 8. I will make my findings in relation to what occurred at the meeting in January 2014 further below; 9. On 15 January 2014, the second defendant transferred $40,000 to the first defendant's bank account. This $40,000 consisted of $20,000 of her own money and $20,000 of the money lent by the plaintiff to the second defendant which was sitting in the second defendant's mortgage offset account. I find that the second defendant lent any money (whether $20,000 or $40,000) on terms which included that no interest was to be paid by the borrower to her; 10. As stated above, I find that Ms Matthews paid Ms Woodham $20,000 on 1 October 2014 and a further $20,000 on 23 November 2017; 11. I accept the evidence in paragraphs 10-20 of Mr Woodham's 16 May 2018 affidavit in relation to his calculation of the amounts owing to the plaintiff as set out in the schedules to the Amended Statement of Claim. In particular, I accept Schedule A of the Amended Statement of Claim as accurately stating, subject to the penalty argument, the amount owing pursuant to the 24 December 2012 deed. The documents before me, including the emails and schedule which are part of Exhibit D, establish to my satisfaction that Mr Woodham was keeping a careful balance of moneys received from or on behalf of Ms Matthews and the relevant interest. There did not appear to be any real dispute in relation to the repayments made: see Exhibit A. However, where there is any inconsistency as to the repayments, I prefer the contents of Exhibit A; 12. I find that the January 2014 meeting was attended by Mr Matthews, Mr Woodham and Ms Woodham. I find that Ms Matthews did not attend this meeting. In relation to what she was told and what she was made aware of, I accept Ms Matthews' affidavit evidence and her oral evidence. I accept that she believed Mr Matthews was meeting with Ms Woodham in relation to a loan. It seems that Ms Matthews had little to do with the various loans other than signing the 2012 legal documents and being aware that money was lent in the sum of $40,000 by, she believed, Ms Woodham in January 2014, which she received shortly thereafter in her account.

Consideration

1. I turn to consider the various issues raised by the parties in the proceedings.

Contractual principles applicable

1. The following general principles are applicable to the task of contractual construction facing the court.
2. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court stated the following at paragraph [35]: "[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"."
3. In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (in liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]: "[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]-[52]."
4. In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty (2017) 261 CLR 544; [2017] HCA 12 the majority stated as follows at paragraphs [16]-[17]: "[16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it. [17] Clause 4 is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon cl 4 be consistent with the commercial object of the agreement."
5. See also Management Services Australia Pty Ltd t/as Peak Performance PM v PM Works Pty Ltd [2019] NSWCA 107 at [59] per Sackville AJA (with whom Bathurst CJ and Gleeson JA agreed).

Effect of repayments

1. It is accepted by all parties that certain repayments were made by the first defendant in relation to the December 2012 deed loan from the plaintiff.
2. An issue arises whether the payments made should be treated as reducing interest only or the principal.
3. In Falk v Haugh (1935) 53 CLR 163 at 173, Rich, Dixon, Evatt and McTiernan JJ stated as follows: "It has long been a rule that when payments are received generally on account of a debt, which is in part interest and in part principal, they are treated as applicable to interest in priority to principal."
4. There was nothing in the December 2012 deed that indicated that any different treatment should occur to repayments made relating to that deed. The principles stated in Falk v Haugh have been accepted in numerous later authorities: French v Smith [2005] VSCA 114 at [35] is an example. Accordingly, any payments made by the first defendant or on her behalf under the December 2012 deed reduced interest and not the principal owed first.

The penalty issue

1. The first defendant submits that the default interest provision in the December 2012 deed and, to the extent that it was incorporated as a term in the alleged January 2014 oral loan agreement, amounted to a penalty and thus the term was void and unenforceable. The plaintiff submits that the term did not amount to a penalty. It is further submitted by the plaintiff that the first defendant cannot raise the penalty issue in relation to the January 2014 oral agreement as it was not pleaded by her or referred to in the first defendant's opening in the case. The term was for the payment of interest of 5% per month on default. As the amount owed was $20,000, that equals $1,000 in interest per month whilst the loan is in default. The loan under the December 2012 deed was for a term of two months.
2. A number of matters should be noted: 1. The operative clauses in the various deeds entered into in 2012 relating to the payment of default interest were relevantly in the same terms: see clause (h) in the 20 September 2012 deed, clause (g) in the addendum to that deed and clause (h) in the 24 December 2012 deed. I reject the submission of the first defendant that the court can only consider the December 2012 deed in isolation. The three deeds were clearly connected. The December 2012 deed must be seen in its context. That context included the two earlier deeds. Whilst the third deed increased the amount of the loan from $15,000 to $20,000, the second and third deeds both involved extensions of the payment terms; 2. The three deeds were all drafted by Mr Matthews on behalf of Ms Matthews. There is no evidence to suggest that the terms were altered or negotiated by the parties and I have found that they were executed in the terms put forward by Mr Matthews. There is no evidence that Ms Matthews had any difficulty with the clauses. In particular, it is not suggested that Mr Woodham on behalf of the plaintiff had any role in suggesting the default interest clauses or that the parties intended the default interest clauses to operate as some form of punishment in the event that payment was not made on time by Ms Matthews. I accept the plaintiff's oral submission that Mr Woodham took a substantially passive role in relation to preparation of the loan deeds; 3. Mr Matthews gave oral evidence that he expected each of the moneys owed under each deed to be repaid at the end of the term of the loan. There was no evidence from Ms Matthews as to this matter. Having regard to the terms of the December 2012 deed, the parties must have expected that the loan would be repaid in full at the end of the term of two months or within a relatively short period: see Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [15]; 4. Although the default interest is referred to in each deed as "default interest Penalty amount" that description is not conclusive and the court must look at the true legal effect of the clause. I accept the parties' submissions on this issue. See also Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 14 at [46]; 5. As I have found, Mr Woodham had limited funds to invest and wished any investment to provide a regular income from the investment. He thus had a legitimate commercial purpose on behalf of the plaintiff in ensuring that the principal and any interest owing under any investment was repaid on time; 6. There is no evidence relating to pre-contractual matters which provides more specific background information or context as to the objective purpose of the default interest clause; 7. In the event the loan was not repaid on time, the default would not result in any additional costs to the plaintiff: T28.40-29.2 (Day 1); and 8. There was no evidence as to the plaintiff's actual loss (including of alternative commercial investment opportunities) if the December 2012 deed loan was not repaid on time and default interest was payable. I do not accept the first defendant's submission that the annual rate of 0.3% is the only evidence of alternative earnings for the plaintiff and should be determinative: see the third Woodham affidavit at pages 11 and 13. It seems clear from the relevant bank statement that money was transferred into the relevant account from another account as needed. There is no evidence as to the interest rate on the other account or the origin of the money. Thus I see the analysis of White J in Bay Bon Investments v Selvarajah [2008] NSWSC 1251 at [51] to be distinguishable, particularly in the case of a relatively modest short term loan. See also his Honour's comments at [55]. Whilst there was no evidence of the quantum of the damage that would arise to the plaintiff as a result of a breach in payment under the December 2012 deed, this may be difficult and expensive to obtain and may require expert evidence of the market rates for short term loans at the time: see the comments of Chernov JA (with whom Warren CJ agreed) in Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [14]-[17]. This difficulty is relevant in assessing whether the agreed higher interest rate is a penalty: Yarra Capital, above, at [16]-[17]. The plaintiff did not run a sophisticated business of making short term loans.
3. In Mansfield Corporation Pty Ltd v Chengcheng (Aust) Enterprise Melbourne Pty Ltd [2018] NSWDC 12 I considered the principles relating to whether a contractual provision amounts to a penalty in paragraphs 149-154 of that judgment following an examination of the recent authorities. In paragraph 154 I stated the following summary of the relevant principles: "Accordingly, the relevant principles are as follows: (a) The essence of a penalty is a contractual provision for the payment of money in terrorem, stipulated to intimidate or punish the offending party; (b) A penalty is a stipulation that has no purpose other than to punish. The real objection to a penalty clause as a matter of public policy is that it is not the part of the law of contract to allow one party to punish the other for non-performance; (c) A critical issue is whether the sum agreed to be paid is commensurate with the interests protected by the bargain. The test is whether the impugned provision is a secondary obligation which imposes a detriment on the defendant out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The reasoning is that the innocent party can have no proper interest in simply punishing the other party; (d) In determining whether the agreed sum is commensurate with the interest protected by the contractual bargain, whether the sum or remedy stipulated is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract is relevant."
4. The decision in Mansfield Corporation was upheld by the Court of Appeal: [2018] NSWCA 244. However, the penalty issue was not considered in the appeal. Here, the alleged penalty term in question must be considered in the light of the principles relating to penalties at common law because the obligation to pay default interest is conditioned on an anterior breach of contract being the obligation to repay the principal sum on the due date. However, in substance, similar principles apply to the law of penalties both at common law and in equity.
5. The authorities make clear that the burden rests with the party alleging a penalty to demonstrate that the impugned provision is a penalty: Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd [2017] NSWCA 99 at [357]. The law of penalties is an exception to the parties' freedom to contract on the terms they wish.
6. What must be undertaken in the present case is a characterisation of the contractual provisions which does not depend on an evidentiary enquiry into the motivation or subjective intention, purpose or calculations of the parties: Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 at [243] per Keane J. In Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2010) 247 CLR 205 the High Court described at [75] the critical issue as being whether the sum agreed was commensurate with the interest protected by the bargain.
7. The Linfield case was referred to without criticism by the Court of Appeal on a point relating to relief against forfeiture in Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2018] NSWCA 114 at [23]. It stated similar principles to those stated in Arab Bank Australia Ltd v Sayde Developments Pty Ltd [2016] NSWCA 328 at [71]-[76], referred to in the first defendant's written submissions: see at [32].
8. It is accepted that the relevant clauses in the deeds impose an additional liability on Ms Matthews by way of a contractual stipulation in circumstances where Ms Matthews fails to observe the primary stipulation in the deeds to repay the relevant money by the due date. Whilst this is relevant, this alone does not mean the provision is a penalty: Bay Bon case, above, at [47]-[54] cited with approval in Wu v Ling, above at [118]. It is clear from the authorities that the question of construction to determine if the clauses are penalties depends upon the terms of each particular contract judged as at the time of the making of the contract, not as at the time of the breach.
9. In Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 Kyrou JA and Cameron AJA stated as follows at paragraphs [167]-[170] and [176]: "167 The principles in Dunlop have been adopted by the High Court on numerous occasions. However, while those principles remain authoritative with respect to the law of penalties in Australia, they are not exhaustive and are not to be treated as either rules of law or equivalent to statutory provisions. In recent years, the High Court has clarified some aspects of those principles. 168 In Ringrow, the High Court considered proposition 4(a) in Dunlop and stated that, in considering whether a sum is extravagant and unconscionable and thus a penalty, it is not enough that it be 'lacking in proportion' to the loss likely to be suffered as a result of the breach of the contract. Rather, in order to be a penalty, the sum must be 'out of all proportion' to the likely loss. 169 In Andrews and Paciocco v Australia and New Zealand Banking Group Ltd, the High Court emphasised that a penalty is in the nature of a punishment for non-observance of a contractual stipulation. 170 In Andrews, the High Court held that, where the impugned contractual term requires the payment of an agreed sum, the critical issue in deciding whether the term is a penalty is 'whether the sum agreed was commensurate with the interest protected by the bargain.'" … 176 In deciding whether a term of a contract is a penalty, the operation of the term must be considered as a matter of substance. Labels and statements of intention that are used by the parties are not determinative of the question. If the term, considered objectively, operates as a penalty then it will be unenforceable, regardless of the intention of the parties in making it."
10. In my view, applying the principles stated above, the challenged contractual provision in the present case in the December 2012 deed does not amount to a penalty at common law for the following reasons: 1. The clear context in which each agreement was made, including the December 2012 deed, was that the parties expected the relevant loans to be repaid at the end of the term. There is nothing to suggest objectively any contrary imputed intention. The loan was a short term loan for only two months. To concentrate on the annualised figure of the default interest has a tendency to "unfairly exaggerate" the true burden of the default interest provision at the time the December 2012 deed was entered into: see Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [15]. Each month or part thereof in default created an additional liability to pay $1,000 in default interest; 2. In reviewing the December 2012 deed at the time it was entered into, a contrast must be made between the rate charged as the usual interest rate per month and the default rate. The default rate under the 20 September 2012 deed was less than the agreed interest rate. Under the 24 December 2012 deed, the agreed usual interest rate was itself very considerable. The penalty interest rate as described was in excess of the usual monthly interest rate but not in my view disproportionately and unfairly so having regard to the short term nature of the loan. See Bay Bon at [54]. The default rate was also the same under all the deeds executed in 2012; 3. I do not infer from the various deeds in their contractual context that the default interest rate in the December 2012 deed was a stipulation that had no purpose other than to punish Ms Matthews if she did not repay the primary sum owed on time or was objectively the substantial purpose of the provision: see Paciocco, above, at [165]-[166]. That is inconsistent with the context in which the December 2012 deed was made as a short term loan; 4. The fact there was no actual attempt to calculate the loss which would be suffered by the plaintiff on default is not decisive: Yarra Capital Group Pty Ltd v Goldberg [2006] VSCA 109 at [13]. The loan was a short term loan for a fairly modest amount. I have considered this issue above in relation to the difficulty and expense which would arise in calculating the quantum of the damage involved, particularly where expert evidence may be required; 5. The December 2012 deed had no formal security to secure the repayment of the loan. There was no third party guarantor of the loan. The first defendant pointed to clause (h) of the December 2012 deed which provided that "the Advancer shall be entitled to take any recovery action necessary to protect their interest. This action can include but is not limited to the registering of Caveatable Interests over Real estate Assets and sale of the assets of the Borrower and Guarantor." First, there was no third party guarantee to enforce. Secondly, it is unclear what is meant by the "sale of the assets of the Borrower and Guarantor." Thirdly, there is no evidence of the equity which Ms Matthews had in her home. Registering of a caveat merely protects an interest. It does not necessarily achieve an earlier repayment of the loan; 6. In my view, the sum agreed to be paid as default interest was commensurate with the commercial interest protected by the bargain of the plaintiff. The evidence is clear that the plaintiff sought a regular income out of its investment. The default interest rate under the 24 December 2012 deed does not appear to me to be out of all proportion to the legitimate interest of the plaintiff in the enforcement of the primary obligation to ensure that the principal sum was paid at the end of the very short term. It is also significant that the deeds were drafted not by the plaintiff but by Mr Matthews on behalf of the first defendant; 7. The default interest payable does not appear to me to be exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract and the short term nature of the agreement: see also Bay Bon at [55]. The evidence discloses that the plaintiff had limited moneys to invest, approximately $50,000 according to the oral evidence of Mr Woodham. Both the plaintiff and Mr Woodham sought a regular income from the investment. In those circumstances, the plaintiff had a real interest in ensuring the performance of the relevant deeds by the amounts advanced pursuant to them being repaid on time. When compared with the amount of interest to be paid under the deeds during the term and also the plaintiff's commercial interests in prompt payment, the default interest in the context of a short term loan does not appear to me to be exorbitant or unconscionable. There is not present a "degree of disproportion" between the default rate and any likely loss suffered to suggest oppressiveness: Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at [32]; 8. The interest was also calculated on a simple not a compound basis and not on a daily basis. The default rate was also not retrospective on default; 9. There was no evidence of any attempt by Ms Matthews or Mr Matthews to extend the term of the December 2012 deed to avoid the default rate. See clause (f) of the December 2012 deed which permitted an extension by mutual agreement; 10. Another relevant factor is that the same default interest was agreed by the parties in three successive deeds within a relatively short period of time. In my view, taking into account all of the background circumstances and the terms of the deeds, the default interest clause in the December 2012 deed is not out of all proportion to any likely loss and is not unconscionable. The plaintiff had a legitimate interest in ensuring that its income from its investment was maintained through the timely repayment of moneys advanced; 11. Both parties were also fairly sophisticated. Ms Matthews had Mr Matthews protecting her interests; 12. The costs of enforcement must also in my view be taken into account. The loan was for a relatively small amount. The interest rate on default and the amount to be paid each month must be considered in the context of the costs of enforcement including the costs of potential litigation. This is a legitimate commercial matter to be taken into account.
11. For these reasons, I find that the clause in question does not amount to a penalty.

The authority of Mr Matthews

1. I have set out above the issue relating to the authority of Mr Matthews to enter into the agreement alleged by the plaintiff to have been entered into by him on Ms Matthews' behalf in January 2014.
2. There can, of course, be no issue about the various deeds in 2012 as each was executed by Ms Matthews and no question has been raised about their validity.
3. Although I have set out the issues in relation to the authority question above, I repeat them here for convenience. In the Amended Statement of Claim filed 11 May 2018, the plaintiff pleads in paragraph 2B as follows: "At all relevant times, the first defendant had authorised her husband, Stephen Matthews to deal with the plaintiff's principal, Gareth Woodham, on her behalf".
4. In paragraph 6 of the Amended Statement of Claim it is pleaded that in or about January 2014, the plaintiff agreed to lend to the first defendant the sum of $20,000. Particulars are provided in this paragraph as follows: "The agreement was oral and the result of a conversation between Mr Gareth Woodham, on the plaintiff's behalf, and Mr Stephen Matthews, as agent for the first defendant".
5. The liability of the first defendant is pleaded in paragraph 17 of the Amended Statement of Claim.
6. In the Amended Defence filed 30 May 2018, paragraphs 2B, 6 and 17 of the Amended Statement of Claim are denied: paragraphs 4, 8 and 19 of the Amended Defence.
7. It is noted that the allegation of authority in paragraph 2B of the Amended Statement of Claim is in general terms. However, the particulars and the content of paragraph 6 of the Amended Statement of Claim clearly suggest, as was the plaintiff's case, that whatever agreement was entered into in January 2014 between the plaintiff and the first defendant was entered into with the first defendant's authority through her agent Mr Stephen Matthews. The evidence establishes clearly that Mr Matthews drafted the deeds entered into in 2012 and agreed the terms of the loans with Mr Woodham on behalf of the plaintiff. Ms Matthews was not involved in that process. She executed the deeds when they were presented to her. The evidence clearly is that she trusted her husband and left to him the negotiation of matters where she needed to enter into agreements. However, as stated, all of the 2012 loans were signed by her in deeds. The alleged January 2014 agreement was an oral agreement.
8. The evidence of Ms Matthews, which I accept, is that she believed her husband was seeking to borrow money from Ms Woodham: see T16.32 and T17.32 (Day 2). She regarded her as a friend and left it to Mr Matthews to meet with Ms Woodham and discuss whether she could lend the money sought. This is consistent with paragraphs 14 to 15 of Ms Matthews' affidavit sworn 16 February 2018 which I accept.
9. The circumstances of the various loans may be contrasted. The loans agreed in 2012 were negotiated between Mr Matthews and Mr Woodham on behalf of the plaintiff but in due course they were set out in writing in the deeds which the first defendant executed. The alleged oral loan in January 2014 was never later reduced or recorded in writing and signed by the first defendant. The 2012 loans were for investment purposes. The alleged January 2014 loan related to Ms Matthews' mortgage on her home. It was a home which she shared with Mr Matthews.
10. The question arises whether Mr Matthews had authority from Ms Matthews to enter into the alleged January 2014 loan with the plaintiff on her behalf on the terms alleged by the plaintiff in the Amended Statement of Claim. The plaintiff initially alleged in its written submissions that Ms Matthews had given Mr Matthews "a general agency with respect to arranging loans": written submissions paragraph 55. This submission was altered in oral submissions. The submission appeared to be made that Ms Matthews had given actual authority to Mr Matthews to enter into a loan on her behalf in relation to the amount sought concerning her mortgage. This included authority to attend the relevant meeting and negotiate the terms of the loan. It was submitted that there was no evidence the possible lender was limited to Ms Woodham.
11. Authority granted to an agent by a principal may be either actual (express or inferred/implied), usual or apparent/ostensible. There is no evidence that Mr Matthews had usual authority to enter into the alleged January 2014 loan on Ms Matthews' behalf.
12. Having regard to all the evidence, I am not satisfied that Mr Matthews had actual or ostensible authority from his wife to enter into the loan alleged with the plaintiff in January 2014 or any authority from her created through a course of dealings.
13. I cannot infer from the evidence that Ms Matthews executing the deeds prepared by her husband in 2012 constituted the granting of actual authority by her to him to enter into any loan transaction on her behalf with any person on any terms which he thought appropriate. The 2012 deeds were for loans for limited periods and were for investment purposes. Ms Matthews also had the opportunity to review the deeds to approve them before she executed them.
14. There is no evidence that there was an express grant of actual authority by Ms Matthews to Mr Matthews to enter into the alleged January 2014 loan with the plaintiff. Nor in my view can any actual authority as alleged by the plaintiff be inferred or be implied in the circumstances through conduct. Ms Matthews, on the evidence, believed her husband was going to approach Ms Woodham for the purposes of the loan. Ms Woodham was a close friend of the Matthews. Ms Matthews believed her husband was meeting with Ms Woodham. On the evidence, it appears established that the money was transferred from Ms Woodham's account to Ms Matthews account in the sum of $40,000. There is no evidence of any dealings (including meetings or discussions) between Mr Woodham and Ms Matthews in relation to the January 2014 loan.
15. In my view, the actual authority submitted is not established. Ms Matthews only knew about a potential loan from Ms Woodham in January 2014. Mr Woodham or GWI was not mentioned to her prior to the meeting. The fact Ms Woodham was a friend was relevant. The fact there had been dealings between the Matthews and Ms Woodham previously was relevant. I cannot infer from the background circumstances the grant of actual authority (inferred or implied) to negotiate a loan agreement with the plaintiff on her behalf including as to the terms alleged.
16. In order for Mr Matthews to have had apparent or ostensible authority to enter into the alleged January 2014 loan on Ms Matthews' behalf with the plaintiff, there must have been a representation from Ms Matthews that Mr Matthews had that authority. An implied representation from Mr Matthews alone is not sufficient.
17. In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72 the High Court stated as follows at page 80: "… a person with no actual, but only ostensible, authority to do an act or to make a representation cannot make a representation which may be relied on as giving a further agent an ostensible authority. Hence the stress by Diplock LJ [in Freeman & Lockyer] on the need that the person or persons making the representation must have actual authority to make the representation."
18. Clearly, Ms Matthews herself could make a representation that Mr Matthews had authority on her behalf to enter into the January 2014 agreement as alleged. Was such a representation made by her?
19. In Wilh Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32, the Court of Appeal considered what is required to establish ostensible authority including through a course of dealings: see at [74]-[87] and [168]-[178]. Beazley ACJ noted at [74], following Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, that apparent or ostensible authority is a legal relationship created by a representation, made by the principal to the contractor, intended to be acted upon that the agent has authority to enter into on behalf of the principal a contract of a kind within the scope of the apparent authority so as to render the principal liable to perform any obligations imposed upon him or her by such contract. Ostensible authority, Beazley ACJ noted, operates as an estoppel "preventing a principal from denying an agent's authority": at [76]. At [78], Beazley ACJ noted that a course of conduct or dealing may constitute a relevant representation. Her Honour noted that in terms of estoppel, ostensible authority "arising out of a course of dealing is a form of conventional estoppel": at [79]. At [84], Beazley ACJ noted that the authorities made clear that the representation of authority must come from the principal and not from the agent, but can arise from a course of dealings.
20. White JA also accepted that ostensible or apparent authority arising as a representation could be inferred through a course of dealings. In that case his Honour found that conduct allowing persons with certain titles to order products from the respondent without conveying to the respondent that there were any limitations on authority over a lengthy period amounted to ostensible or apparent authority through a course of dealings conveyed by conduct.
21. The question which therefore arises is whether there was a sufficient course of conduct in the present case by Ms Matthews to give rise to a form of estoppel that there was authority in Mr Matthews to enter into the January 2014 alleged loan on behalf of Ms Matthews with the plaintiff.
22. In my view, the conduct of Ms Matthews prior to January 2014 did not amount to any representation to the plaintiff that Mr Matthews had authority to agree on her behalf any loan with it entered irrespective of the terms. It would be extraordinary to infer such a general authority being granted by a wife to a husband to bind her to a commercial loan agreement on the limited number of transactions established in the present case. This is particularly the case where the agreement in question was unclear in the sense that Ms Matthews is not shown to have been aware of the lender (allegedly the plaintiff), the amount agreed, or the terms of the loan. The course of dealings in the present case was limited in time and number of transactions and concluded in December 2012, 13 months previously. The case is quite different to the Wilhelmsen Investments case, above.
23. In the end, in my view, the evidence does not establish that if a loan was entered into with the plaintiff by Mr Matthews on behalf of Ms Matthews, that he had her authority to do so. It is therefore not binding on the first defendant.
24. No question of ratification has been raised on the pleadings or was put forward in submissions on behalf of the plaintiff.

January 2014 loan

1. The plaintiff's case as set out in the Amended Statement of Claim is that at the January 2014 meeting between Mr Matthews, Mr Woodham and Ms Woodham, the plaintiff agreed to lend to Ms Matthews the sum of $20,000 on the same terms as the terms of the December 2012 deed. That is a term of two months which could be extended by mutual agreement with interest payable at the rate of 3% per month for the first two months and 5% thereafter on default. The plaintiff alleges that also at that time Ms Woodham agreed to lend to Ms Matthews the sum of $20,000. The plaintiff states that its $20,000 was to come from the $26,000 lent by the plaintiff to Ms Woodham in September 2013 pursuant to the agreement made at that time to assist Ms Woodham with the offset account for her mortgage.
2. The first defendant's case is that the amount of $40,000 was agreed to be lent by Ms Woodham to Ms Matthews without interest being payable but that it was understood that the source of some of the funds was to be the moneys which had been previously advanced by the plaintiff to Ms Woodham: see paragraphs 6-10 and 17 of the Amended Statement of Claim and paragraphs 8-12 of the Defence.
3. There is a substantial difference between the evidence of the various witnesses in relation to the January 2014 meeting. It is clear from the evidence that the only persons attending the meeting were Mr Matthews, Mr Woodham and Ms Woodham.
4. In her affidavit, Ms Matthews states that in January 2014 (as corrected in her oral evidence) in a conversation with her husband, he told her that Ms Woodham had agreed to lend the money to pay to their mortgagee. I accept that evidence. It was, however, a summary of his view of the outcome of the meeting. It thus must be given somewhat limited weight.
5. Ms Woodham's affidavit evidence is that the loan agreed was between her and the borrower. It is somewhat unclear from her evidence as a whole whether the agreed borrower was Mr Matthews or Ms Matthews or possibly both. Paragraph 3 of Ms Woodham's affidavit seems to suggest that the loan was with Mr Matthews but the money was transferred from her overdraft account to Ms Matthews' account and she does not seem to dispute that the ultimate borrower was Ms Matthews, although she notes that Mr Matthews not Ms Matthews has repaid the $40,000 to her in full: see paragraphs 3-5 of Ms Woodham's affidavit.
6. In her oral evidence, Ms Woodham was not as clear. She appeared to accept that she said words to the effect that "we will lend you the $40,000": T8.48; T9.42. It must be recalled that she was talking to Mr Matthews when she said this and Mr Woodham was present. She denied mentioning the details of where the money came from to Mr Matthews, being that part was from her money and part was from money that was lent by the plaintiff that was sitting in her loan offset account: T8.35-T9.7. Mr Matthews said in cross-examination that he was aware that part of the $40,000 came from money originally lent by Mr Woodham to Ms Woodham but did not know the amount: T53.23.
7. Mr Matthews' account is set out in paragraph 32 of his affidavit. As stated above, it differs from the versions of Ms Woodham and Mr Woodham in that the figure of $45,000 is mentioned instead of $40,000. It also differs from Ms Woodham's account as Mr Matthews has Mr Woodham talking in the relevant conversation whereas Ms Woodham has him silent. A further difference is that Mr Matthews has Ms Woodham mentioning that some of the money in her overdraft account belonged to Mr Woodham. That is not mentioned in Ms Woodham's affidavit but Mr Matthews gave oral evidence that there was another conversation earlier in the day where she told Mr Matthews this: T54.3-.14. Both Mr Matthews and Ms Woodham's accounts have Ms Woodham saying that it is unnecessary for interest to be repaid on the loan.
8. In his first affidavit, Mr Woodham's account is essentially consistent with the plaintiff's case: see paragraph 23. In his second affidavit dated 2 March 2018, Mr Woodham referred to further conversations in paragraphs 35-36 and 42. These conversations are surprisingly in somewhat different terms to the conversation set out in paragraph 23 of Mr Woodham's first affidavit. The explanation given by Mr Woodham for not including them in his first affidavit was not particularly clear but it seems that he recalled further details upon reading the affidavits filed for the first defendant: T36.26-T37.41.
9. Having reviewed the affidavits and heard from each of the relevant witnesses being cross-examined as to the meeting, I form the view that none of the witnesses had a particularly good recollection of what was said in the meeting in January 2014 at which Mr Woodham, Ms Woodham and Mr Matthews were present. The meeting was over five years ago. The differences in the various versions were considerable, although the thrust of the meeting, that $40,000 would be provided from Ms Woodham's account, was consistent.
10. Complicating the issue are the numerous references in Mr Woodham's second affidavit to the loan being to Mr Matthews as opposed to being to Ms Matthews: see paragraphs 39, 42(a) and 43. These appear to have been Mr Woodham's considered responses after having read the other affidavits served from the first defendant.
11. Considering the evidence as a whole, the following is what I find likely occurred: 1. A meeting occurred between Mr Matthews, Mr Woodham and Ms Woodham in January 2014 at Ms Woodham's home; 2. Ms Woodham informed Mr Matthews prior to the meeting that she held in her offset account $26,000 which had been lent to her by the plaintiff. She also said she had other money of her own: see Mr Matthew's evidence at T53.47-54.14 (Day 2). I find this conversation occurred prior to the meeting as otherwise Mr Woodham's presence at the meeting would have been inexplicable; 3. Mr Matthews informed Ms Woodham in that conversation prior to the meeting that he and his wife needed $40,000 because of problems with Ms Matthews' mortgage; 4. Ms Woodham said to Mr Matthews that there needed to be a meeting with Mr Woodham present because part of the funds she possessed in her account which she could lend had originated from him; 5. At the crucial meeting held later that day, Mr Matthews said words to the effect that he and Ms Matthews had a problem and that if they could not come up with $40,000 that day then they may lose their house because the mortgage was in default. He asked Mr Woodham and Ms Woodham whether they could help him; 6. Ms Woodham said that she could lend Mr Matthews $20,000 from her account: this is consistent with Ms Woodham's affidavit. Mr Woodham said that the plaintiff could lend him a further $20,000 from the money which he had lent to Ms Woodham so that the total sum lent was $40,000; 7. Ms Woodham said that she did not want any interest from Mr Matthews for her $20,000 loan; 8. Mr Woodham said that he would lend $20,000 of the money held for the plaintiff by Ms Woodham to Mr Matthews but it would be on the same terms as in the previous loan.
12. It will be seen that, to a major extent, I have in substance accepted the revised account of Mr Woodham of what occurred as set out in his second affidavit together with some aspects of Mr Matthews' evidence and Ms Woodham's evidence.
13. In my view, Mr Woodham correctly saw the borrower as being Mr Matthews. The version in his first affidavit is varied. In some places it has Ms Woodham saying she will lend to both Mr and Mrs Matthews and in other places it has her appearing to say she will lend to Mr Matthews. After careful consideration of the first defendant's affidavits served, Mr Woodham puts forward conversations in his second affidavit which clearly have the loan between the plaintiff and Mr Matthews. Mr Matthews was the person that he was dealing with in the January 2014 meeting and it was Mr Matthews who asked for the loan. From Mr Matthews' perspective, the loan was from both Ms Woodham and Mr Woodham in the sum of $20,000 each but he was aware that the source of the funds would be from Ms Woodham's account. It was this source of funds from Ms Woodham's account that was the basis for the conversation he later had with Ms Matthews as reflected in her affidavit.
14. Accordingly, the loan agreed by Mr Matthews was from Ms Woodham as to $20,000 and from the plaintiff as to $20,000 to Mr Matthews.
15. I have in substance preferred Mr Woodham's version of the meeting as set out in his second affidavit together with aspects of Mr Matthews' and Ms Woodham's oral evidence for the following reasons: 1. I consider Mr Matthews and Ms Woodham did not have a good recollection of the detail of the meeting; 2. The evidence is clear that the purpose of the plaintiff lending moneys was to generate an income for it and for Mr Woodham; 3. Accordingly, in my view it is unlikely that Mr Woodham would have agreed on behalf of the plaintiff to advance or lend moneys without interest being payable by the borrower. The most readily available terms were those which had previously been agreed with the 24 December 2012 deed and that is why there was agreement for the loan to be on the same terms; 4. It seems unlikely that Mr Woodham would sit by without saying anything at the meeting as Ms Woodham suggests in her affidavit in circumstances where Ms Woodham was agreeing to lend $40,000 without interest and where it was likely that he may have difficulties securing interest from Ms Woodham to whom he was no longer married; 5. Mr Woodham's second affidavit is clear and was prepared after reviewing the affidavits served from the first defendant. Accordingly, his affidavit evidence was carefully considered in the context of the first defendant's evidence; 6. My finding is also consistent with Ms Woodham's oral evidence at T8.48-T9.15 (Day 2); 7. The finding is consistent with my finding that Mr Matthews had no authority from Ms Matthews to enter the loan alleged; 8. My finding is consistent with the letter written by Ms Woodham to her mother in law which is annexed to Mr Woodham's second affidavit ("He met with Steve in December 2013 and asked me to transfer his money to Steve which I did"). Although the money was transferred to Ms Matthews, the letter has Mr Matthews as the apparent borrower; 9. Whilst Ms Matthews was the owner of the house and thus legally had the mortgage difficulty, Mr Matthews also resided in the house and thus a loan to him had a legitimate purpose. The December 2012 loan to Ms Matthews was also in default; 10. Where there is an oral contract alleged, the court can look at post-contractual conduct to determine whether a contract was formed and the terms of that contract: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [136]-[145]; Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [124]. The various text messages which I have referred to above are consistent with $20,000 of the $40,000 loan coming from the plaintiff on the same terms as the December 2012 deed. I think it very likely that Mr Matthews would have denied the suggestions made by Mr Woodham in the text messages as to the terms of the loan and the amount outstanding if they did not accord with his recollection of the agreement in the January 2014 meeting. I accept the plaintiff's submissions on that matter. The reference to interest being owed in the text messages, the emails and the attached spreadsheet is particularly relevant. I do not see the reference to money being "channelled back through Nicole" in the 9 January 2016 text by Mr Woodham as being inconsistent with a loan from the plaintiff. However, it is relevant that the only person referred to as owing the money in the texts between Mr Matthews and Mr Woodham is Mr Matthews not Ms Matthews.
16. In the alternative, I am not satisfied in the light of the evidence in Mr Woodham's second affidavit as to the relevant conversations and the identity of the borrower, that the contract was between the plaintiff and Ms Matthews. The assertion by Mr Woodham of a typographical error in his second affidavit does not explain the other similar references in that affidavit. I accept the submissions made in paragraph 75 of the first defendant's written submissions on this issue.
17. Further, I find, as set out above, that Mr Matthews did not have authority from Ms Matthews to enter into any agreement on her behalf on the terms allegedly agreed with Mr Woodham on behalf of the plaintiff as to the $20,000 loan in January 2014.
18. In the light of my findings, I do not need to consider whether the first defendant can rely on the doctrine of penalties in relation to the January 2014 oral loan as it does not arise.

Summary

1. Accordingly, to summarise my findings: 1. The default interest terms in the 24 December 2012 deed did not amount to a penalty; 2. Mr Matthews did not have authority from Ms Matthews to enter into the loan with the plaintiff in January 2014 as alleged by the plaintiff in the Amended Statement of Claim. Any loan from the plaintiff to Ms Mathews in January 2014 is therefore not binding on her; and 3. Mr Matthews agreed in January 2014 to a loan to him in the sum of $20,000 from the plaintiff on the same terms as the 24 December 2012 agreement.

The moneys owed by the first defendant

1. Ms Matthews is therefore liable in relation to the amount outstanding under the December 2012 deed only. This should be calculated by the parties having regard to my factual findings as to the amount owed.

Disposition

1. Accordingly, I make the following orders: 1. Judgment for the plaintiff against the first defendant. 2. I will hear from the parties as to the appropriate costs order. 3. The parties are to bring in agreed Short Minutes of Order reflecting the amount found in these reasons together with appropriate interest within 7 days. 4. Liberty to the parties to approach the Associate to Dicker DCJ in the event that agreement cannot be reached as to the appropriate orders.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 June 2019