HIS HONOUR: The determinative question in this case is: did the plaintiff (to whom I will refer as George) lend the first defendant (to whom I shall refer as Simon) $170,000 in 2017?
First names are used with no disrespect intended.
The answer to the question turns on whether George is to be believed with respect to a conversation which he says he had with Simon "in or around June 2017, and after 11 June 2017", when Simon asked for a loan, which George says he then made.
Simon denies this conversation. He says that there was no loan, but that George asked him to help hide money from his (George's) estranged wife Mariana Arambasic (Mariana), and that $120,000 was paid over to Simon's company (the second defendant, Reka) and repaid to Simon in cash over time by way of five payments. Simon says that another $50,000 was given to him by George as a gift. George denies this.
George sues for repayment of the alleged loan, together with interest.
George bears the onus of establishing the loan. He asserts no other form of transaction or entitlement to payment.
The parties' respective positions are irreconcilable. There is no room on George's case for a finding of liability (in whole or in part) on Simon on any basis other than non-repayment of the loan. By the same token, in Simon's case, no question of repayment of a loan can arise, and he bears no onus to establish the existence of the alleged gift, although, if he does, it is destructive of George's case.
I am unpersuaded that George made the loan.
Far from feeling an actual persuasion that the conversation relied on by George took place, I consider that it is more probable than not that there was no loan, but that there was an arrangement under which Simon would "warehouse" money for George to hide it from Mariana. In my opinion:
1. George is not a trustworthy witness,
2. the contemporaneous objective circumstances such as they are, and the parties' subsequent behaviour, favour Simon's position rather than George's,
3. there is corroboration for Simon in the evidence of a witness who was not cross-examined, and
4. critically, Simon was only perfunctorily cross-examined and none of his evidence, including of the disputed conversations, was challenged.
In his statement of claim, George alleged that monies were lent either to Simon personally, or to Reka, or to both jointly. In argument, contentions that the borrower was Reka, or that it was joint, were abandoned. It followed that the proceedings against Reka fell to be dismissed without more. George's final position was that the loan was to Simon personally and the monies were paid to Reka at his direction.
[3]
the proceedings
These proceedings were commenced in the District Court but were transferred to this Court, despite the amount involved being well within that Court's jurisdiction. It is not necessary to deal with the reasons why this occurred, save to record that in the manner in which the case was conducted, there was no issue which justified the transfer.
The case was originally fixed on an estimate of three days. Plainly, the issues and amount involved did not justify a three-day hearing. I accordingly ordered that the hearing be conducted on a stopwatch basis and allocated to each side blocks of time for the various components of the hearing, amounting to a total of two days. The hearing was completed in one day. This was possible because of George's decision to not cross-examine Simon on the substance of the dispute.
[4]
The parties
George is a one-time dentist whose registration was cancelled in 2012 after the NSW Dental Tribunal had found him guilty of professional misconduct. Subsequently, for a while George practised in Singapore, having for that purpose forged a letter of good standing from the NSW Dental Council. George apparently suffered some mental illness, which was the basis for the receipt by him of payment under policies of insurance for permanent and total disablement he had with insurers CommInsure and TAL (sometimes called Tower). Further reference to this is made below.
Simon is a tax and financial advisor, but does not, it seems, have any accreditation. He does, apparently, have a number of degrees, including one in law. Simon says his areas of expertise are negotiating with the Australian Tax Office (ATO) on behalf of clients, assisting clients in obtaining finance for property acquisitions and construction, providing strategic advice relating to litigious matters in which clients are involved, and tax-effective business structuring.
[5]
Early dealings
Simon met George and George's then-wife Mariana in about 2011, when George was looking for a new accountant. Simon was working as a consultant to a firm of accountants, Cartwright Brown & Company. Simon later moved to Kerry Loizou & Associates, accountants practicing at Bankstown.
George had separated from Mariana and there were various disagreements between them. They were formally divorced on 12 May 2015. A consent divorce settlement was approved by the Family Court of Australia in 2015. The precise date is unclear. The settlement recognised that George was to be the recipient of insurance payouts, in which Mariana would be entitled to share. The settlement also referred to money being held in trust by George's solicitors pending a determination of outstanding taxation assessment and payment of accountancy fees. At the time, George's solicitors were Pavuk Legal. At some point, George told Simon that he had made a claim against an insurer under an income protection policy, which claim was being disputed. Simon says, and I believe him, that George asked him to make sure when he put anything in writing that it was not on Cartwright Brown's letterhead. George wanted to protect his privacy and he said he was worried that if matters went through Cartwright Brown, Mariana would find out. Simon agreed to use Reka's letterhead.
On 10 October 2014, Simon met with George and Mariana. George instructed Simon to approach the ATO to negotiate his outstanding tax obligations. In a letter dated 13 October 2014, Simon advised George to set aside at least $120,000 in a secure account with solicitors, and informed him that his fees were $35,000, payable in advance by electronic funds transfer to his (presumably Reka's) bank account.
George deposited $120,000 in trust with Pavuk Legal.
Simon says that George transferred the $35,000 fee to Reka on 19 December 2014.
Simon says (unchallenged in cross-examination) that sometime between late December 2014 and early February 2015 he had a conversation with George to the following effect:
George: I need to hide money from Mariana. If she wants more money from me, I don't have the strength to oppose her. You will need to help me.
Simon: Complicated, but not impossible.
George: How do I obtain the money without it going into my own bank account?
Simon: I will draw it out of the bank for you.
On 19 February 2015, Simon, on a Reka letterhead, on George's instructions wrote to Pavuk Legal confirming that they had determined George's outstanding taxation assessment and requiring the $120,000 to be paid to Reka. It was put to George that in fact it transpired that there was no taxation liability. He denied this. But a Notice to Produce served on him directed to obtaining information about any such liability yielded nothing. George was unable to give any details of any such liability.
Simon says that on 23 February 2015 the $120,000 was transferred to Reka and progressively paid out in cash to George thereafter.
George, apparently unhappy with Pavuk Legal, changed over to Firths Compensation Lawyers, who settled his claims with the insurers. George apparently claimed that Pavuk Legal had charged him excessively. I interpolate that there are presently proceedings pending in the District Court between George and Firths in which they are suing him for fees, and he is cross claiming against them for damages for negligent advice in connection with proceedings against George under the Dental Practice Act 2001 (NSW). Additionally, in a telephone conversation in 2020, George's solicitor asserted that George had overpaid Simon and that he was flabbergasted at Simon's exorbitant fees.
In 2014, George received $1.5 million from CommInsure. In early May 2017, George received $3.3 million from TAL. In August 2017, George received a further $650,000 from CommInsure.
[6]
George's version
George says that "in or around June 2017, after 11 June 2017" a conversation between them to the following effect took place:
Simon: I would like to help my son with this mortgage right now. I would like to borrow some money from you, you have money in the bank, and I can offer you a 5% return, which is more than what you can get at the bank at the moment.
George: How much do you need and for what period of time?
Simon: $170,000 for about 2 years.
George: Sure, give me your bank details, but I will have to do it in 2 stages as I do not have all that money in my account right now. I can transfer $20,000 over the next few days, and transfer the balance when that other money comes in.
Simon denies that any such conversation occurred.
[7]
Simon's version
Simon says (unchallenged in cross-examination) that on 15 June 2017 he met with George when a conversation to the following effect took place:
George: You remember, a few years ago you helped me with cash?
Simon: I've never given you anything.
George: I'll put $20,000 into your account and you give it back to me, just like last time.
Simon: Alright. Same bank. I can pay it out to you over time.
George: Okay, thanks.
Simon met George on 21 June 2017 in the boardroom at Kerry Loizou & Associates. He says he handed George an envelope with $13,000 in cash. George denies this.
Simon says (the significance of this will be apparent momentarily) that shortly before the meeting with George, another client of his, Erhan Uyanik (Uyanik), arrived without an appointment and waited in the reception area.
Simon says (unchallenged in cross-examination) that a conversation with George to the following effect took place:
George: Can we do another one of these? I'll put $150,000 into your account and considering all the years you've done things for me, you keep $50,000 as a gift. You get me the $100,000 the same way.
Simon: Okay. It's a larger amount and will take longer.
George: That's alright. I'm not in a big hurry.
Simon says he was not surprised by the gift because over the previous six years he had performed a large volume of work for George, Mariana, the partnership between them, tax liabilities of George Pegios Pty Limited, work relating to his TAL income protection claim, work relating to his CommInsure total and permanent disability claim, and tasks associated with a number of ventures which involved a start-up laboratory business, intellectual property, and a self-managed superannuation fund established in about 2010.
[8]
Uyanik
Simon read an affidavit of Uyanik sworn 4 September 2021, without objection. Uyanik was not cross-examined. Uyanik says he has been a client of Simon for approximately 20 years. He says that in about June 2017 he went to Simon's office and waited while Simon had a meeting. He says he overheard parts of a conversation to the following effect:
Male person: Can you help me out? If I put $150,000 into your account can you give me the hundred back later? You can keep the balance of fifty grand.
Simon: Yes, okay then. We can work out the payments later.
Male person: Yeah, that's alright. I don't want anyone in the family to hear about this.
Uyanik says that he then had a conversation with Simon as follows:
Uyanik: What's that about? $150,000? I need money too. What do I get out of it to keep quiet?
Simon: Shut up.
On Simon's version (unchallenged in cross-examination), Uyanik overheard the conversation (or part of it) Simon had with George.
[9]
Other events
On 15 June 2017, George transferred $20,000 to Reka's bank account. I find that this occurred because of the 15 June 2017 conversation as recounted by Simon.
On 10 August 2017, George transferred $150,000 to Reka's bank account. I find that this occurred because of 21 June 2019 conversation as recounted by Simon.
Simon says (unchallenged in cross-examination) that in early August 2017 he and George had a conversation to the following effect:
George: Mariana wants more money from me. You remember our discussion at the office in late June? I don't want her to know that I am transferring money to you to hide it from her.
Simon: When you do the transaction, you should add the words 'on account of purchase' to the EFT details when transferring the money.
George: Good idea.
Simon says (and George denies) that he paid George the following amounts in cash on the following dates:
$13,000 on 21 June 2017
$7,000 on 18 July 2017
$5,000 on 13 August 2017
$55,000 on 24 November 2017
$40,000 on 19 October 2018
These sums total $120,000.
George initially denied having ever received any cash from Simon in any context until, under cross-examination, he was confronted with a receipt for $55,000 signed by him and dated 13 March 2015, which he was unable to explain. The authenticity of the receipt was not placed in issue. It was put to George that Simon wanted a receipt, which George gave him, but George kept the original and gave Simon a copy. George did not dispute this.
On George's version, the two-year loan period expired at the latest at the end of August 2019. He made no demand around that time, even though, by his own admission, he was then in some financial trouble. Simon was helping him with respect to a potential tax refund. He wrote to Simon on 30 October 2019 about this but made no mention of the loan.
On 7 November 2019, George once again wrote to Simon about an ATO refund. He wrote that the refund "would make a big difference to [his] life right now". Again, he made no mention of the loan.
On 9 November 2019, he again wrote to Simon about the tax refund. He said that he was "in a bad place at the moment and would be a lot better if [he] knew that the money/refund from ATO was being processed". Yet again, he made no reference to the loan.
He first made demand for the loan, through solicitors, on 10 February 2020.
[10]
consideration
Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.
In Sergei Sergienko v AXL Financial Pty Limited [2021] NSWSC 297 at [1], I observed that:
A party asserting, and seeking to rely upon, the terms of an alleged, undocumented commercial transaction said to involve the transfer of very large sums of cash, ought not to be taken by surprise when he, she or it fails to persuade the Court of its existence.
There is no objective written material which throws light on the characterisation of $170,000 paid into Reka's bank account, made up of the two payments on 15 June 2017 and 10 August 2017 respectively.
George's case depends on the Court accepting his version of the conversation, which he says he had with Simon in or around June 2017, after 11 June 2017.
I reject George's evidence that he lent money to Simon.
George is manifestly a person who is prepared to engage in dishonesty, as is revealed by his preparedness to forge the certificate of good standing.
George was cross-examined at some length and was appropriately challenged on each of the disputed conversations. I found him to be an unconvincing witness. I have referred above to his inaccurate evidence about never having dealt with Simon in cash. George gave evidence that there was no need to have arrangements to hide money from Mariana because they had already settled their dispute at the time of the loan. I do not accept this evidence. There were still insurance payments to come, and in which Mariana was entitled to share. On 10 May 2017, Firths wrote to George seeking his authority for payment to him of over $3.3 million, and he was expecting a further $650,000 from CommInsure, which he only received in August. Despite George being in financial difficulties in late 2019, and the loan at that time, on his version, being due for repayment, he made no demand. His unconvincing explanation for this was that he was more concerned about the tax refund. His conduct was not consistent with the existence of the loan he asserts. I also found his inability to explain whether he had a tax liability or not unconvincing.
Simon's unchallenged evidence about the conversation between late December 2014 and early February 2015, and the request for and payment to Reka of the money held by Pavuk Legal, is consistent with their subsequent dealings also being a "warehousing".
George is an intelligent, sophisticated person. Whilst there is no reason for a bona fide loan not to be documented, there is good reason for a nefarious transaction or transactions intended to hide money from George's wife not to be documented. In contrast with the alleged transaction here, on 14 August 2018 George as lender entered into a documented loan with Mariana for $231,800.
Simon's evidence is corroborated by Uyanik.
A submission, which I confess I did not fully understand, was made on behalf of George that Simon's position is entirely undermined by the evidence of Uyanik because the conversation (or rather parts of it) that he says he heard was not in the same terms as the 21 June 2017 conversation as recounted by Simon. I should record that George's primary submission appeared to be a denial that he was the person with whom Simon had the recounted conversation.
The effect of the first part of the conversation recounted by both Uyanik and Simon is exactly the same. The recounted statement by Uyanik by Simon that "we can work out the payments later" is in effect the same as the recounted statement by Simon that George said "That's alright. I'm not in a big hurry."
One would ordinarily expect there to be some divergences about a conversation which took place more than a little while before it was recounted.
Finally, and critically, George chose not to challenge any of Simon's evidence in cross-examination. I accept Simon's evidence.
It is not necessary for me to consider whether $50,000 was a gift. Simon bears no onus of proving it. However, Simon's evidence on that topic remains unchallenged.
[11]
conclusion
The proceedings are dismissed.
I provisionally order that George is to pay both Simon's and Reka's costs of the proceedings. This order will solidify seven days after the delivery of this judgment, unless either side notifies the other and my Associate, in writing, that some other costs order is sought and specifying it and the basis for it, in which case I will make directions for the determination of costs.
[12]
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Decision last updated: 23 June 2022