Kempe v Grine

Category: Principal judgment

Parties: Plaintiff:
Ms Bridget Anne Kempe
Defendant:
Ms Rosa Grine

Representation: Counsel:
Plaintiff:
Mr G McGrath
Defendant:
Self-represented
Solicitor:
Plaintiff: Sparke Helmore Lawyers

File Number(s): 2024/00263563

Publication restriction: Nil

Judgment

The claim before the court

1. By statement of claim filed on 17 July 2024, the plaintiff brings proceedings for recovery of a loan in the sum of $300,000 which she made to the defendant on or about 2 December 2018, together with interest at the rate of 20%, this being the rate of interest stipulated in the contract drafted by the defendant’s accountant, Mr Cyril Quek.

2. The defendant denies that any money is due or owing or alternatively says that she should only be ordered to pay $176,091.80.

3. The claim is notable for the lack of documentation provided by the defendant for the variations she asserted were made to this contract. The plaintiff says she signed a loan agreement which was identical to a draft document emailed to her earlier on the day it was signed (2 December 2018). It was never put to her that any other contractual document was shown to her, let alone signed. The defendant denies the contract was ever signed or even agreed to but cannot produce documentation in support of her claim of a gift or a variation or a new contract. She says that most of her documentary evidence (including banking records) was destroyed in a house fire on 21 October 2021. The defendant’s two accountants claim never to have seen the document identified by the plaintiff as the loan agreement and claim that an oral account of its contents was given to them by Mr Cyril Quek, the accountant who prepared the agreement. The solicitor, Ms McAllister, was not called.

The parties enter into a contract

4. The defendant, who is the office manager for a member of Parliament and an elected Councillor, conducted a business known as “Happi Chicken” from the premises in which she resided.

5. During 2018, the plaintiff had some challenges in her life. First, she was undergoing a difficult divorce and subsequent property settlement. She had to move out of her home, which was sold; the sum of $300,000 which she advanced to the defendant represented the whole of her property settlement proceeds. As well as the financial and emotional concerns arising out of the termination of her marriage, the plaintiff was concerned for the welfare of her brother, Paul Sylvester, who was residing with the defendant up until his death, following a long illness, on 16 May 2018.

6. After the death of her brother, in June 2018, the plaintiff stayed with the defendant in her home for two consecutive weekends. The defendant had negotiated a partnership with a Ms Reanna Payne-Ball in June 2018 which required Ms Payne-Ball to assist in the course of providing café and restaurant services under the name “Happi Kitchen”. This agreement, although unrelated to the December transaction involving the plaintiff, was also drafted by Mr Cyril Quek, who was not only an accountant but also the chief financial officer of the corporate entities running the business, Happi Chicken Pty Ltd.

7. The defendant’s proposed partnership agreement with Ms Payne-Ball fell apart in about November 2018, and the defendant commenced to contact the plaintiff, who was working at the defendant’s restaurant at Kurri Kurri, seeking a loan to assist in repayment of outstanding bills as well as to establish a Happi Chicken shop at Wickham (affidavit of plaintiff, paragraph 13). The defendant already knew that the plaintiff’s marriage had broken down and that the plaintiff was to receive a sum representing her interest in the matrimonial home. The sum the defendant initially sought to borrow it was $120,000. The defendant added that she “probably won’t need all the money” (affidavit of the plaintiff, paragraph 13) and told the plaintiff, “Perhaps gifting the money would be better” (affidavit of the plaintiff, paragraph 13). After discussion on 30 November 2018, the plaintiff said to the defendant, “I’ll loan you the money if we have a contract drawn up”, to which the defendant replied “yes, I’ll organise it and send you my bank account details to transfer the money”.

8. The parties exchanged text messages on 30 November 2018, in the course of which the defendant told the plaintiff that a loan that was being drawn up by Mr Quek. In her text message, the defendant confirmed to the plaintiff that “He’s doing a contract”, adding that “I will send it to you as soon as I have it. Give him a call if you like.” The plaintiff responded that “it’s cool, I’m just feeling doubt I fucking hate him”. Mr Quek was married to the plaintiff’s sister, and the plaintiff’s relationship with both her sister and Mr Quek was poor.

9. On 30 November 2018 the plaintiff transferred $300,000 into her own Greater Bank cheque account from another account (Court Book (“CB”) 84). The plaintiff was unable to transfer these funds to the defendant’s account because her Internet banking arrangements did not permit its transfer (CB 41).

10. On 1 December 2018 Mr Quek sent an email to the defendant attaching the draft loan agreement (CB 85 – 89). In cross-examination, the defendant agreed that she read this loan agreement prior to emailing it to the plaintiff, which she did on 2 December 2018 at 1:25 PM. Although that email is addressed to “Bridget Sylvester”, and not “Bridget Kempe”, this is because the plaintiff surname before her marriage was the same as that of her brother, Paul Sylvester. It is not suggested that this contract was mailed to any third party.

11. In anticipation of receiving the loan agreement, the plaintiff had purchased a bank cheque in favour of the defendant in the sum of $300,000 on 1 December (CB 41, 83 and 84). Having received and read the contract, she then travelled to the defendant’s home where she met the defendant and Mr Quek. Mr Quek was living at the defendant’s home at this period, for part of the week at least, but I consider that his presence at this meeting was because of his role as the drafter of the contract and the position of chief financial officer that he held in the company, and not merely as someone living in the premises.

12. When the plaintiff arrived, the defendant had already printed out a copy of the loan agreement for signature by both parties. The plaintiff checked with the she was given was in the same form as the draft of the loan agreement. As she was reading the contract, she says the defendant said something to the effect to hurry up. The defendant then signed, according to the plaintiff, although this is disputed by the defendant.

13. The plaintiff, after being satisfied that the terms had not been changed, says that she signed as well. Again, this is denied by the defendant.

14. The plaintiff says that the defendant then told the plaintiff “I will take this to the solicitor, Lee Anne, and send you a copy”. It is unclear whether the defendant acknowledged this to be the case, but there is no doubt that the defendant did in fact send a copy of a contract (whether signed or unsigned) to Ms McAllister, her solicitor; the relevant correspondence is set out below.

15. The plaintiff then handed over the $300,000 bank cheque to the plaintiff, expecting to receive a signed copy of the loan agreement. No such document has been produced by the defendant, either in signed or unsigned form; the plaintiff has only her own unsigned copy. Significantly, given that much of the hearing was devoted to claims that there were discussions about varying the interest rate in the contract, no revised contractual documentation, signed or unsigned, was produced by the defendant, her accountant or her solicitor, Ms McAllister.

Loan Agreement

16. The terms of the loan agreement were as follows:

“Loan Agreement

Between

Rosa Grine

(the Borrower)

and

Bridget Anne Kempe

(“the Lender”)

December 2018

Page 1 of 4

This Loan Agreement (“the Agreement”) is made on this day of December 2018

between

Rosa Grine (Rosa) of 223 Northcote Street, Kurri Kurri, NSW 2327

(“the borrower”)

and

Bridget Anne Kempe (“Bridget”) of 22 Northcote Street, Kurri Kurri, NSW 2327

(“the Lender”)

RECITALS

A Rosa owns and operates a business in 200 Barton Street, Kurri Kurri NSW 2327 Known as Happi Chicken;

B Rosa has developed plans to restructure and establish additional outlets to other locations in the Hunter Region and now requires funding to undertake the development ;

C Bridge has agreed to provide Rosa with a loan facility of $300,000 to undertake the development;

D This agreement sets out the terms and conditions of this loan agreement between Rosa (“the Borrower”) and Bridget(“the Lender”) and there are no further items or provisions, either oral or otherwise.

It is agreed as follow:

1.0 LOAN AMOUNT

Bridge will loan Rosa the sum of $300,000.

2.0 TERM OF LOAN & REPAYMENT

The loan of $300,000 will be repayable on 1st December 2022 unless otherwise agreed between Rosa and Bridget.

3.0 INTEREST RATE

An interest rate of 20% per annum ($5,000 per month) will be charged and payable monthly in advance into an account nominated by Bridget.

Page 2 of 4

4.0 SECURITY

Rosa will provide her 100% shareholding in the business known as Happi Chicken as security for the loan provided by Bridet.

5.0 OPTION TO CONVERT THE LOAN

5.1 Rosa will also grant Bridget an option to convert the loan of $300,000 provided by Bridget to a 35% shareholding in the business owned by Rosa known as Happi Chicken.

5.2 This option can be exercised by Bridget at anytime by giving Rosa 2 weeks’ notice of intention to exercise prior to the expiration date as set out in para 5.3.

5.3 This option to convert the loan to a shareholding in the business expires on 1st December 2019.

6.0 BINDING EFFECT

This Agreement will pass to the benefit of and being binding upon the respective heirs, executors, administrators, successors and permitted assigns of the Borrower and Lender.

7.0 DEFAULT

If the Borrower defaults in the performance of any obligation under this Agreement the Lender may declare the principal amount owing and interest due under this Agreement to be due and payable immediately.

8.0 GOVERNING LAW

This Agreement will be construed in accordance with and governed by the laws of the State of New South Wales.

Executed by the following parties on this day of December 2018

Rosa Grine Witness

(“the Borrower”) Name:

Page 3 of 4

Bridget Anne Kempe Witness

(“the Lender”) Name:

Page 4 of 4” (CB 86-89)

The defendant changes accountants

17. A few days later, on 5 December 2018, the defendant ceased the retainer of Mr Quek and retained the services of Linda Day Mobile Tax and Accounting. There was a meeting on 5 December 2018 attended by Linda Day and her daughter Jasmine, who worked in her office as an accountant.

18. Both Linda day and her daughter Jasmine gave evidence and were cross-examined. There are substantial problems with their credibility. They contradicted themselves and each other, gave implausible evidence (such as claiming never to have seen the contract Mr Quek signed) and, perhaps most importantly, gave evidence inconsistent with contemporaneous documentation.

19. As to inconsistency, great confusion arose because Linda Day conflated the events occurring in meetings she claimed to have had. For example, she said that both the plaintiff and defendant were present at the first meeting, as was an employee named Elizabeth McDonald. In the course of this meeting where the plaintiff was said to be present, Linda Day claimed she told the defendant that the 20% interest rate was too high, according to her evidence, and that Division 7A tax may apply (CB 143, 164).

20. It was put to Linda Day that the plaintiff had not been at the first meeting, which she denied, but which she later admitted was the case (T 26 lines 10 – 40), Even if the plaintiff had been there, the plaintiff says, and the defendant acknowledges, that the defendant made the first payment to the plaintiff under the loan agreement on or about 8 or 9 December 2018. These payments were in cash. The actual sum in question is in doubt (the plaintiff says it was $1200 per week and the defendant says it was $1250 per week) but, whatever the precise sum, it was close to the 20% interest identified in the agreement, a surprising step for the defendant to take if she was in fact disputing her obligation to pay 20% from early December 2018 onwards.

21. Two examples of their inconsistency with contemporaneous documentation are particularly relevant. First, Linda Day states in her affidavit and oral evidence that, after at least the first meeting and prior to February 2019, the defendant’s solicitor, Ms McAllister, asked her to prepare a new loan agreement for signature.

22. What was in this new agreement? The Court Book contains two vital contemporaneous records, both produced by the defendant. The first is dated 1 February 2019, and is an email her solicitor, Ms McAllister, sent to Linda Day, the defendant’s new accountant, headed “draft Loan Agreement”:

“Hi Linda

Please find attached draft Loan Agreement between Bridget and Happi chicken for your assistance. Call me if you need me.

I have spoken to R[o]sa today who has advised that Bridget has to make an unexpected trip overseas for a week or so and I advised we shall sign the Loan Agreement once she is back. I therefore won’t need to go to Rosa’s on Monday.

I’m still working on a new lease for the Wickham property but we have now arranged a first right of refusal should the property be sold.” (CB 133-134)

23. No “loan agreement”, draft or otherwise, was produced by Ms Day or the defendant, despite calls for it, so the first question is whether the document both Linda Day and Ms McAllister were discussing was the document the plaintiff saw and said she signed on 2 December 2018 or some other document where the other party was “Happi Chicken Pty Ltd”. The reference to the loan in the heading identifies the parties to the loan as “Happi Chicken Pty Ltd” and the plaintiff, not the defendant.

24. The difficulty is that whatever this draft loan agreement says, it appears more likely than not that it referred to an interest rate of more than 5% or Linda Day would not have made the comments she did about interest rates in her reply.

25. Linda Day’s response indicates not only that she saw and read this draft agreement, but saw nothing wrong with its contents, as she replied by raising two issues only with this agreement (both of which confirm that any draft she was sent must have been Mr Quek’s agreement or something very similar thereto, and not any new or substantially different document prepared by Ms McAllister):

“Hi Leeanne,

Two points I just want to check/confirm….

1. the $300000 is a 35%share, or was it a 30% share?

2. the current interest rate range from 5.5% for statutory to 16.84% for higher end unsecured commercial finance.

Thoughts on these?

Thanks for your help.

Kind regards,

Linda” (CB 133)

26. No further correspondence was produced by the defendant or her accountants or Ms McAllister.

27. Linda Day’s evidence is wholly inconsistent with these emails. First, she claimed to have challenged Mr Quek about the interest rate and told him that any interest above 5% would attract the attention of the ATO:

“A. Okay, so we were in, we were told, Ms McAllister had told and reaffirmed a discussion that had been previously had that Mr Quek, Mr Cyril Quek who was holding himself out, per his words, to be the chief financial officer of the takeaway and café, which I found unusual. He had proposed, he had proposed a contract of 20% interest being paid to his sister‑in‑law, Ms Kempe. I immediately had said, "That will not fly", because at the time RBA rates were under 1% and the ATO has very specific legislation in relation to preferential interest and preferential treatment around what is regards a division 7A issue, and that would be anything above 5% per se, 7% at the time, and definitely 20% would trigger a division 7A issue with the tax office. Because at the time most of the statutory rates were between two and a half, two and a half to around that 5/7 at a high penalty rate. As we said, the RBA rate at that time was below 1%, so, and the tax office's very specific about that. So there were immediate concerns about that interest rate triggering huge tax issues, and possibly audit and other serious allegations and issues at the time.” (T5 lines 9 – 23)

28. Second, she claimed that the way Mr Quek set this proposal up was “ridiculous” and amounted to “substantial compensation” for the plaintiff:

“Q. This is at the time that you're having these discussions.

A. Oh, okay. So the other thing was that in relation to that, some of the conditions that were brought up that Mr Quek had felt that should be involved in this contractual arrangement was a minimum payment of 12 hundred and fifty dollars, plus this ridiculous interest on top, and at the end of the event he was assuming that that would buy in as a partner in the business, give Ms Kempe 35% ownership of the business, but also her loan would be her "loan" to buy into the business would be repaid with an additional 20% interest. My concern was that is not a business buy in. Again, we would be looking at possibilities of flagging statutory issues with those kind of arrangements because to buy into a business you pass over funds to purchase a share or a percentage and you bare the risk that comes with that purchase.

The way that Mr Quek had setup this original proposal would count that Rosa would have, in fact, being paying Ms Kempe a substantial compensation in

addition to giving her over a third of her business. She would be giving her 35% of the business plus repaying her the 300,000 with 20% interest on top of that, so that was a in my mind, that was a ludicrous proposition. It was non financial and was triggering alarm bells from ATO's perspective as well. So, you know, risking things of is this a money laundering position.” (T 5 line 37 – T 6 line 5)

29. It was put to her that s 7A required only that a person borrowing from an associate must pay a minimum interest, and was not a bar to excessive interest claims:

“Q. Okay. I think you can stop there. Isn't division 7A as it applied, that say, in terms that if a person borrows money from an associate, that person must pay a minimum interest rate for it or at least ‑ is that the case?

A. That is not all of division 7A. That is a portion, but division 7A is a broad ATO instrument that is due to ‑ basically used to restrict excessive gains; to avoid FBT issues; to avoid things like money laundering or things that are excessive, preferential, or could be deemed as tax avoidance issues by an entity.” (T 24 lines 3 – 10)

30. Linda Day’s descriptions, in her evidence, of the interest rate as “ridiculous” and “money laundering” are not merely at variance with her email to Ms McAllister, which acknowledged the rates appropriate for unsecured loans at a much higher figure than 5%, but they misstate the relevant principles of division 7A, which I am satisfied are as summarised by Mr McGrath.

31. I drew the attention of the defendant to these documents and adjourned these proceedings part-heard so that she could set out her explanation in submissions in reply. Those submissions did not refer to these documents but raised new matters which were not put to the plaintiff.

32. Linda Day also gave a very different version of the 35% shareholding and then attempted to blame the plaintiff’s changing her mind constantly as the reason for this asserted inconsistency:

“Q. You understood that there was no question of it being both alone and a 35% shareholding going to Ms Kempe; correct?

A. No. It was an either/or situation. She was to either buy in as a 35% shareholder, or they could engage in a loan agreement, and there was some to-ing and fro-ing. There was a very wishy-washy position. Ms Kempe had not made up her mind and a number of months later, we still had no clear determination on whether - ” (T 21 lines 23 – 29)

33. Another example of Linda Day’s evidence being inconsistent with contemporaneous documentation is her description of the correspondence she received from the plaintiff’s solicitors. As is set out below (where the text of these letters is set out in full) she dismissed these letters and their contents in the most disparaging terms as being vague claims from different solicitors who clearly did not have proper instructions. These letters clearly and cogently set out the plaintiff’s claim and the only response they received was a claim that the interest claim was “illegal”. The plaintiff did, however, acknowledge her indebtedness in that response from a solicitor she consulted, and claimed to be repaying $300 per week, which was at best a misrepresentation and at worst a lie. Linda Day’s claim to have seen and been consulted about these documents means that she was on notice of the plaintiff’s claims.

34. The most significant conflict between Lina Day’s email exchange with Ms McAllister is, however, that she claimed never to have seen the original contractual document prepared by Mr Quek:

“Q. Have you ever read the draft agreement that is a feature of this case?

A. No. The difficulty was I had not seen that document.

HER HONOUR

Q. Wait a moment. How did you know that it had 20% in there?

A. Because Cyril had insisted it was 20% and they were the figures bandied about.

Q. Am I right in thinking that all you knew about this contract was what Cyril told you?

A. Yes.

Q. You never saw it?

A. That's correct.

Q. How could you possibly give advice to your client without seeing the document?

A. The we had requested to see copies of

Q. No

A. the document

Q. How could you advise your client about this contract when you hadn't even seen it?

A. We had been given advice by the man who drew it up.

Q. That's all you had?

A. That's all we had, and the interest rate was basically preposterous. So the interest rate was” (T 22 lines 3 – 32)

35. She claimed that Mr Quek had not told her about the 35% at all:

“Q. Are you aware that the loan agreement authored by Cyril Quek in fact provided for either a loan or conversion of that loan into 35% of the equity, but‑‑

A. No, I was not aware of that.

Q. You was not aware of that.

A. No, I wasn't.

Q. Did Mr Quek not point that out to you.

A. No.” (T 24 lines 12 – 21)

36. She also repeatedly stated that the plaintiff kept changing her mind and saying that the $300,000 was a gift:

“Q. Are you really saying that paragraph 6 through 12 refer to two meetings?

A. Paragraph 6 through 12 is generally that one meeting.

Q. Right, okay.

A. But there was an original meeting before then, on 5 December, and that was the one that I had mentioned originally. That one did not have everybody there, that was just Rosa and the solicitor. So the second meeting was the meeting, the first meeting with everybody as a collective.

Q. And Ms Kempe didn't say at that first meeting, either at the paragraph 6 point or at the paragraph 12 point that she wanted the money to be a gift, did she?

A. Yes, she did, repeatedly.

Q. You've acted as her bookkeeper or accountant and tax agent, have you?

A. With Ms Kempe, I did assist her with her taxes.

Q. So you're aware that that $300,000 was pretty much all she had in the world.

A. That's correct. One of the reasons I was concerned about it being a gift - .

HER HONOUR: Remember what I said about answering the question and just stopping there. All right, so she said, "Yes", what's your next question Mr McGrath.

MCGRATH

Q. Wouldn't you as her advisor have said, "You absolutely mustn't give away your only asset in the world; it would be crazy".

A. That would be crazy, yes.

HER HONOUR

Q. Why didn't you say it then?

A. We had, my push was that it be a reasonable interest loan, or a buy in. Not to be a gift. My concern was very much about gifting; you never end up with a friend if you gift.

MCGRATH

Q. But you were dealing with a client here.

A. That's correct.” (T 27 lines 10 – T 28 line 2)

37. Mr McGrath’s reference to “client” was because Linda Day said that the plaintiff was her client, as well as the defendant; she was seeking instructions from both of them at the same time.

38. For purposes that were not entirely clear, but most probably as a result of letters of demand sent by the plaintiff’s solicitor, Linda Day created an interest amortization schedule which showed that the plaintiff was not entitled to any repayment at all. In order to arrive at that result, she made a series of assumptions and deductions as follows:

(a) Although the interest rate was 20%, she put it at 5% (T 28) because that was agreed “after that first meeting with the collective” (T 28) although she conceded she had “thrown it out there as a reasonable expectation” (T 29). She effectively admitted that the plaintiff had never agreed to it (indeed, her main criticism of the plaintiff was that she never gave clear instructions to her about anything). (b) Second, she put in amounts the defendant said were owing and claimed to have seen these from the defendant’s bank accounts. These banking records were never produced either by Linda Day or the defendant. The explanation was that there was a fire at the defendant’s home but these records would have been obtainable from the bank, or Ms Day, or both and would have been necessary in order to answer correspondence from the plaintiff’s solicitor. (c) Third, a weekly sum of $400 for accommodation from 1 December 2018 was deducted even though the plaintiff did not live there at the time, and she made no allowance for the rent the plaintiff did pay for part of the period when she did live at the defendant’s home. Even when she was shown the defendant’s Newcastle Permanent banking records evidencing these payments (T 35 – 38) she kept repeating that she had been told to the contrary by the defendant. When it was put to her that the plaintiff had never told her there was an agreement to pay $400 rent, she said that more often than not when she saw the plaintiff she had been “imbibing” (T 39). It was put to her that, if this was so, this made the plaintiff a vulnerable target, to which she replied. “I don’t think a vulnerable target because she was very confident within herself” (T 39).

39. The amortization schedule prepared by Linda Day was also inconsistent with the information provided by her daughter Jasmine, who acknowledged that for most of the relevant period she had been on maternity leave.

40. I am comfortably satisfied that this schedule is false from beginning to end and that Linda Day prepared it to help the defendant, knowing that many of the entries were based on speculation at best and that some of them (such as the $400 per week and the interest rate of 5%) were false.

41. An additional difficulty in relation to the credit of Linda Day and her daughter is that their evidence was word for word identical apart from those portions dealing with their separate responsibilities in the transactions. Linda Day was taken through the similarities in the course of cross-examination. She first attempted to save this coincidence because since they were mother and daughter they thought alike (T 9) that they had similar mindsets (T 11) or that it was simply a coincidence because they were describing the same events. Examination of the transcript from pages 7 to 18 show Linda Day saying anything other than admitting the obvious fact that she had worked from a script which she and her daughter had been given.

42. I take into account that the defendant was acting for herself, and Linda Day and her daughter Jasmine may not have had the advantage of consulting a solicitor about how to draft their affidavits. Although courts have been critical of affidavits prepared in this fashion, that has generally been in the context of those affidavits being prepared by a solicitor. If a frank answer had been given to the effect that there had been sharing of information, a degree of understanding for a litigant in person calling witnesses nut not explaining to them how to draft their affidavits may have gone some way towards an explanation. Instead, Linda Day resolutely denied at every turn that there was any similarity at all.

43. In Douglas v Mickhael & Ors [2023] NSWSC 979 at [53] – [55], Richmond J noted that while solicitors have prepared the final version of affidavits for two witnesses, these witnesses claimed to have put the material in their respective affidavits together themselves, and the solicitors had merely revised their drafts to correct grammatical errors. Richmond J considered that whichever witness had copied from the other witness, the result was that the evidence of both witnesses was entirely undermined and should be rejected. In Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Hearing) [2023] FCA 420, Thawley J was critical of evidence that had clearly been put together in a “cut and paste” fashion similar to that used in these proceedings.

44. Linda Day’s evidence as a whole was unsatisfactory. She did not provide responsible direct answers to questions and so often continued in monologue that it was necessary for me to order the transcript. Mr McGrath reminds me at paragraph 46 of his submissions that she ignored my warning not to talk to her daughter during the luncheon adjournment and in fact not only had lunch with her but discussed the case. One should make allowances for members of the public not understanding the undesirability of this course, but Linda Day presented as a witness who is determined to achieve success for the defendant in this litigation at the expense of the truth.

45. Jasmine Day had the benefit of giving evidence after her discussion with her mother about the dangers of “cut and paste” evidence in their respective affidavits. She said that her mother must have had the opportunity to read her affidavit as she had left it on the desk at work and they share the same desk. She was very vague in many of her answers and said she was on maternity leave for most of the time in question.

46. Neither Linda Day nor Jasmine Day should be regarded as a witness of credit. I propose to disregard their evidence entirely.

47. The defendant was a similarly unreliable witness. Her claims of not having any documents are hard to credit when it is clear that she would have been aware of the need to provide this material from the date the plaintiff’s solicitors first wrote to her.

48. In contrast, the plaintiff gave evidence in a frank and straightforward manner, making concessions where appropriate, and giving precise and pertinent responses.

Ms McAllister

49. Ms McAllister was not called to give evidence. The defendant said that this was because Ms McAllister had “a conflict of interest”.

50. Ms McAllister had never acted for or advised the plaintiff. No claim of legal professional privilege (which was the right of the defendant, not Ms McAllister) was made and indeed the defendant repeatedly referred to and repeated the advice Ms McAllister had given to her in circumstances that would have amounted to waiver.

51. The most important documents in this case are the exchange of emails between Linda Day and Ms McAllister, the text of which exchange is set out above.

52. Mr McGrath submits that I should draw a Jones v Dunkel inference (Jones v. Dunkel (1959) 101 C.L.R. 298) from the defendant’s failure to call her and I accordingly propose to conclude that if she had been called, her evidence would not have assisted the defendant’s case.

Post-contractual conduct by the parties

53. The plaintiff relies upon the following post-contractual conduct:

(a) Even Linda and Jasmine Day acknowledge that immediately following the 2 December 2018 handing over of the cheque, the defendant made cash payments to the plaintiff. This strongly supports contract formation. In total, 15 weekly payments were made of a sum equalling around 20%. (b) The defendant (and, although reluctantly, by Linda and Jasmine Day) accepted that the plaintiff had an option to convert the loan into a share in the business.

54. The defendant was well aware of the contents of the draft loan agreement and agreed in her evidence that she had read it before sending it to the plaintiff. She also agreed that she continued making cash payments to the plaintiff up until mid-March 2019. This is confirmed by the evidence of Jasmine Day.

55. In April or May 2019, the plaintiff moved into the defendant’s home. It is not in dispute that the plaintiff did not pay rent at this point (CB 40, 165). The defendant made irregular payments to the plaintiff from October 2019 to 2 September 2022 totalling $23,915 (CB 119). On 2 April 2020, the plaintiff commenced paying rent to the defendant in the sum of $210 per week. However, the relationship appears to have become acrimonious at this stage and the defendant terminated the plaintiff’s employment at the shop, whereupon the plaintiff moved out of the defendant’s property.

56. On 1 October 2021, Sparke Helmore Lawyers sent a letter of demand to the defendant as follows:

“Dear Ms Grine

Notice of Default and Demand for repayment

Our ref: EBM/KEM882-00001

We act for Ms Bridget Kempe.

The debt

We are instructed that in December 2018, Ms Kempe loaned to you the sum of $300,000 (the Loan amount) on the terms of the Loan Agreement attached hereto. Our client was informed by you in March 2021 that the original signed Loan Agreement was held by Mss Lee Anee-McAllister, solicitor.

Our client was informed by your accountant, Ms Day, during a meeting in March 2021 attended by you, that there was a schedule of funds which recorded the funds paid to Ms Kempe. Ms Day informed our client that she would be sent a copy of this schedule, however, to date, it has not yet been received. We request a copy of the schedule of payments in relation to the Loan Agreement as prepared by Ms Day by 4PM on 15 October 2021.

The Loan Agreement provides at clause 3.0 for the payment of interest at a rate of 20% per annum ($5,000 per month) payable monthly in advance by you to Ms Kempe. We are instructed that you have failed to pay the Interest as required under the Loan Agreement over the course of the term of the loan. We calculate the interest due over the term of the Loan to date (33 months) to be $165,000 (the interest). We are instructed that you made interest payments total $5,000. Int those circumstances, the interest is currently in arrears in the amount of, at least, $160,000 (the interest owing).

As a result, you are in breach of clause 7.0 of the Loan Agreement. We are instructed to demand repayment of the Loan Amount and Interest Owing under the Loan Agreement immediately.

The Total amount immediately due and payable is $460,000 (the debt)

Payment of the Debt can be made to the following account:

[redacted]

Ms Kempe requires payment of the Debt by 4PM on 15 October 2021.

In the event that payment of the Debt is not received at the lapsing of this date, we are instructed to pursue the claim in the District Court of New South Wales for full recovery of the Debt.

Personal Property

We are instructed that Ms Kempe owns items of personal property that were stored in boxed in the garage of the property located at [redacted]. We are instructed that these items were moved by [sic] from the Northcote Street property by you without her consent. Ms Kempe requires return of these items by 4PM on 15 October 2021.

Our client reserves all their rights.” (CB 90 – 91)

57. A further letter of demand was sent to Ms McAllister on 5 November 2021 and, when this was not answered, a reminder email was sent on 6 December 2021 and 12 January 2022. On 27 January 2022, Sparke Helmore received correspondence from a firm claiming the parties had agreed that the interest on the loan was to be 5% and that the 20% claimed was “illegal”:

“Dear Sir/Madam

Grine -v- Kempe

W confirmed we have received instructions from Rosa Grin[e] in response to your letter of the 1st October 2021.

We would indicate in accordance with the summary sheets involved and confirmation of repayment, that any interest in regard to the loan was accepted by both parties as being five percent (5%). Your client’s entitlement to enforce a rate of twenty percent (20%) is deemed to be illegal.

Our client has continued and will continue to make the repayments of Three Hundred Dollars ($300.00) per week.

We note that you have indicated that our client is raining property of Kempe.

We are instructed that any items that were retained have been removed tad there are no items of personal property remaining at 23 Northcote Street, Kurri Kurri.

Yours faithfully,

Smyth Turner Wall.” (CB 97)

58. No further correspondence was received from this firm despite reminders.

59. The principal amount became the payable under the terms of the loan agreement on 1 December 2022. On 15 December 2022, Sparke Helmore Lawyers sent a letter of demand to Ms Rosa Grine:

“15 December 2022

Ms Rosa Grine Express Post

200 Barton Street also by email [defendant: redacted]

Kurri Kurri NSW 2327 Private and Confidential

Dear Ms Grine

Loan default by Rosa Grine – Final notice to repay principal and interest

Our ref: RJH/KEM882-00001

We refer to our previous correspondence to you and your legal representatives in this matter.

Smyth Tuner Wall has advised they no longer hold instructions to act as your legal representative. Accordingly, we are no corresponding direct with you.

We note that on 1 December 2018 our client withdrew $300,000 from her bank, via a bank cheque, which she provided to you (the Loan Funds).

We have in our possession an unexecuted copy of the loan agreement (Loan Agreement) prepared for and provided by you to our client via email on 2 December 2018. We attach at Appendix 1 a copy Loan Agreement and cover email.

We are instructed that the Loan Agreement was signed without amendment by our client and provided to you in early December 2018.

The acceptance of the Loan Funds by you combined with the provision of the executed loan Agreement by our client to you constitute a binding contract between you and our client on the terms set out in the Loan Agreement.

The following conduct by you and your advisers is consistent with enforceability of the Loan Agreement.

(a) In late November 2018 you proposed to our client that the parties enter into the Loan Agreement;

(b) You then accepted an advance of the Loan Funds from our client on about 1 December 2018 by way of receipt of a bank cheque;

(c) You prepared the Loan Agreement and sent it by email to our client on 2 December 2018 for execution;

(d) You, your accountant or legal adviser accepted receipt of the executed Loan Agreement from our client;

(e) You accountant, Ms Linda Day, confirmed during a meeting held on 2 March 2020, which our client attended, that she and/or Ms Leanne MacAllister (your initial former lawyer) were in possession of the Loan Agreement by you.

(f) During that meeting Ms Day undertook to forward a copy of the executed Loan Agreement to our client along with a copy of the spreadsheet summarising the amount of interest owed.

(g) Initial interest repayments were made by you to our client which in more recent times have made regular at $300.00 per week.

We are instructed that the payments referred to in (f) above cease being paid you to our client at the end of September 2022.

Interest rate

Clause 3 of the Loan Agreement provides:

An interest rate of 20% per annum ($5,000 per month) will be charged and payable monthly in advance into an account nominated by Bridget.

We remind you that I was you that

(a) initially proposed to enter into the Loan Agreement with our client with an interest rate of 20% per annum; and

(b) drafted the Loan Agreement inclusive of an interest rate of 20% per annum.

Such conduct supports the position that you offered to pay interest at a rate of 20% per annum, as specified at clause 3 of the Loan Agreement, which was accepted by our client in part consideration for advancing the Loan Funds.

Albeit our client has repeatedly requested that you, your accountants (Linda Day) and lawyers (formerly McAllister Legal services and more recently Smyth Tuner Wall, both of which no longer act for you) provide:

(a) A copy of the signed Loan Agreement, and

(b) summary of your repayments.

The same has not been provided to our client by you or your (former) advisors.

Interest payments to date and amount outstanding

We not that for a period you made repayment of $300.00 per week. While this has occurred over the past twelve months you have failed to pay any interest over a significant period of time and remain in breach of the Loan Agreement.

Attached at Appendix 2 is

(a) A historical reconciliation of payments received by our client from your [advisor]; and

(b) a calculation as to interest owing pursuant to the Loan Agreement.

Expiry of the Loan

The Loan Agreement expired on 1 December 2022 at which date the $300,000 principal amount also became due for repayment.

Default under the loan agreement

Pursuant to clause 7 of the Loan Agreement, you are in default of the Loan Agreement having persistently failed to pay the interest in advance at the prescribed rate of 20% per annum.

The Default amount in unpaid interest currently owed by you to our client is $202,885.00.

Our client, as lender, declares the loan principal plus the interest to be immediately repayable.

As at 1 December 2022, $502,885.00 is immediately due and payable by you to our client.

We are instructed to commence debt recovery proceedings on behalf of our client in the event that repayment of the Loan Funds and interest in the sum of $502,885.00 is not received into the Sparke Helmore trust account on 1 December 2022.

[redacted]

The debt recovery process will commence without further notice.

Our client reserves all rights.

Yours faithfully.” (CB 71-73)

60. Linda Day described this correspondence as follows:

“Q. Can you tell us what the process was by which you went about preparing your affidavit?

A. Yes. I had received a request to present an affidavit. We had I had made, based on the information there I'd gone back. We had received a number of correspondences from various solicitors representing Ms Kempe over the last few years, and they were all asking the same thing, like, would have one solicitor contact us, ask for information on this 20% loan agreement issue, ask us about the loan, and then we would send back our information, things would go quiet in a couple of months. We would hear from a new solicitor, so in preparing my affidavit, I went back to the requests from the preceding solicitors that we kept getting information from because I had no idea what to sort of put or say, or what I was supposed to do per se.

So I went back to our office correspondents and communication that had come in, and tried to formulate my record of events, and thought what will they be wanting, or this is what these solicitors were asking about.” (T 6 line 39 – T 7 Line3)

61. Linda Day had in fact received correspondence from only one solicitor and things did not “go quiet”; reminders were sent and unanswered, apart from the brief note from Smythe Tuner Wall describing the interest rate as “illegal”. If Linda Day did indeed consult these emails from the plaintiff’s solicitors, she should have identified that correspondence and answered its claims in her affidavit, which she did not do.

Was there a loan?

62. The defendant first submits that the money was advanced as a gift (defence, paragraphs 3, 4(c) and the second paragraph 3 on page 3), and/or that there was never any agreement because the contract was never signed (defence, paragraphs 6, 7, 8, 9, 11, 12, and the second paragraph 5).

63. The contractual document before the court is unsigned, but there is oral evidence and contemporaneous documentation to the effect that the parties were in agreement at the time that the $300,000 which was handed over on terms reflecting the contents of the draft that Mr Quek provided to the defendant, which she passed on a day later to the plaintiff.

64. The following is evidence of there being a contract:

(a) The text messages between the plaintiff, the defendant and Mr Quek are consistent in terms of the form and contents of the unsigned document. There is no documentary evidence to support a claim that this document was revised in any way at the time that the plaintiff handed over the bank cheque. (b) There is a pattern of repayment in the form of 15 cash payments to the plaintiff in a manner which supports the content of clause 3 of the contract concerning the interest rate, in that they amount to making payments as stipulated by that clause. This evidence of post-contractual conduct establishes that a contract was entered into: see the decision is referred to in Esanda Finance Corporation Limited v Atanasivska [2014] NSWDC 169 at [29].

65. These two contemporaneous sources of documentation are more than sufficient to establish that the draft contract set out above, which was prepared at the behest of the defendant, represented the parties’ agreement upon which the tender of the $300,000 bank cheque was based.

66. These documents are consistent with the plaintiff’s evidence as set out in her affidavit. The defendant’s evidence on this issue was less than satisfactory, in that she described the plaintiff as having no idea what she was doing and as making inconsistent statements about whether it was a gift or a loan.

67. Other contemporaneous documentation, including the emails the defendant received from Ms McAllister and Linda Day, the texts of which are set out above, confirms that they saw the contractual document prepared by Mr Quek and that they raised no challenge to its contents, beyond querying the two matters of the interest rate and whether the sum advance was a 30% or 35% share. Neither of these matters was taken any further. The failure of the defendant to explain this inconsistent correspondence in her submissions, despite requests to do so, do not reflect well on her credit.

68. Mr Quek was not called to give evidence, but there can be no doubt that he was the defendant’s accountant and that he had drafted the contract on her behalf, just as he had drafted the earlier contract for the defendant with Ms Payne-Ball. Linda Day was not retained until 5 December 2018, by which time the contract had crystallised and the sum of the loan had been paid to the defendant by the plaintiff. Linda Day told the court that she had never seen any contract in writing between the plaintiff and defendant, but her own correspondence with Ms McAllister makes it very clear that this is not the case.

69. I am comfortably satisfied that not only did the plaintiff sign the contract, but that the defendant did so as well. The failure of the defendant to identify the contractual document she showed to Linda Day and to Ms McAllister is not to her credit. Linda Day denied ever seeing any contract, let alone the unsigned contract.

Conclusions: there is a valid contract, and the loan was not a gift

70. The defendant’s pleading that there could be ‘no valid contract’ unless it was signed is misconceived.

71. Even if I were satisfied that there is insufficient evidence to find that the loan agreement was in fact signed by the parties, it is clear from their conduct that they reached agreement on 2 December 2018 that the loan was to be on the terms set out in the agreement drafted by Mr Quek. The parties’ actions confirm their acceptance of those terms and absence of a signature in such circumstances would not mean that no contract was in existence: PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310; 20 VR 487.

72. The defendant alternatively submitted that the monies were advanced as a gift. There is no evidence to support any such contention. The plaintiff denied in cross examination that the money had been advanced as a gift and the exchange of text messages between the plaintiff, the defendant and Mr Quek confirm this. The inherent implausibility in the plaintiff making a gift of what amounted to her entire worldly possessions to a person with whom she did not have a close relationship must also be taken into account.

73. In making this finding, I also take into account issues relevant to the credit of the plaintiff, the defendant, Linda Day and Jasmine Day. This is addressed in more detail below.

Were the terms of the contract varied?

74. A contract may be varied by conduct and can be established by inference or implication: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd at [489]; New South Wales Land and Housing Corporation v Diab [2015] NSWCA 133.

75. In paragraphs 4 – 11 of pages 3 and 4 of the defence, the defendant appears to suggest variations had been agreed to and, in particular, that there was a subsequent variation of any agreement to reduce the interest rate from 20% to 5%.

76. For a variation to be contractually binding, the variation must satisfy all the legal requirements to form a valid contract, including certainty of terms, proof of offer and acceptance and the provision of valuable consideration.

77. The defendant’s vague references to agreements by the plaintiff to waive some or all of her entitlements fail to establish that any such variation ever was suggested, let alone that it occurred, and no consideration of any kind was provided: W & K Holdings (NSW) Pty Ltd v Laureen Margaret Mayo [2013] NSWSC 1063 at [163]. The claim that the consideration was free board and lodging for the plaintiff for over a year or for having her family stay for “months on end” fails because not only were such matters not put to the plaintiff but the specific variation engendered by this consideration is simply not ascertainable.

78. The claims that Mr Quek was employed at the plaintiff’s insistence, that she put pressure on the defendant to hire other family members and that she would “help herself” (paragraph 6) to store goods are not the subject of any evidence, even from the defendant.

Was this a contract for a loan or an investment in a business?

79. The terms of the contract are clear. This was a loan for the purpose of opening a new shop and paying off debt. The plaintiff had an option to go into the business if she wished, but it was only an option.

80. It is difficult to know what to make of the reference to the company in the headnote of the email exchange between Linda Day and Ms McAllister. As Linda Day is a wholly unreliable witness and Ms McAllister was not called, I propose to disregard any claim that the plaintiff was contracting with any other party than the defendant. I note that there would have been documents prepared by the company if in fact there had been a proposal to borrow some of this size, and that no corporate documentation has been produced. The company is in liquidation, but it would not be difficult to obtain these documents from the liquidator.

Conclusions

81. The evidence demonstrates the following:

(a) the plaintiff and defendant entered into an agreement prior to 2 December 2018 that the plaintiff lend the defendant $300,000 on terms that the defendant proposed in the written loan agreement that she sent to the plaintiff by email on 2 December 2018. (b) I accept the evidence of the plaintiff that she signed the loan agreement and left the signed copy with the defendant. Although the defendant denies signing the loan agreement, I am satisfied that it is more likely than not that she did sign the agreement, as the loan terms provided by the defendant had been accepted by the plaintiff and were not at that stage in dispute. (c) I am satisfied that once this signing occurred the plaintiff provided the bank cheque for $300,000 and for a time the parties proceeded in accordance with the terms of the written loan agreement. It was only after the defendant commenced to have financial difficulties that she consulted her new accountant Linda Day and sought to resile from some of the terms in the agreement, notably the interest component, and to make claims that the loan was a gift, that the loan was made to a company, that the terms of the contract had been varied for the interest-rate to be 5%, that the plaintiff had agreed to pay $400 per week for accommodation even for periods when she was not living there and that the defendant waived repayment on the basis that she was going to come into or take over the business. (d) I am satisfied that cash payments were made up until March 2019 and that thereafter small amounts were paid into the plaintiff’s account for a period of time. (e) I am satisfied that despite letters of demand from the plaintiff’s solicitors, the defendant allowed the repayment date of 1 December 2022 to pass without the principal being repaid or any meaningful response to the letters of demand beyond a claim that the interest rate was “illegal”.

82. The plaintiff is entitled to recovery of the principal of $300,000 less cash repayments and payments into the plaintiff’s account. She will be entitled to judgement for that sum.

Quantum

83. The plaintiff seeks recovery of $300,000 less cash repayments totalling $18,000 and payments into the plaintiff’s account totalling $23,915, being a total of $258,085. The plaintiff has deducted these payments from the gross amount as if all payments were made on day one of the loan, which is to the benefit of the defendant. Simple interest, not compounded interest, is sought at the 20% rate in the loan agreement, which is calculated as follows:

| Loan | | | Principal | $300,000 | | Prepaid in cash ($1,200*5) | ($18,000) | | Paid into Plaintiff account Irregular repayment for the period of Oct 2019 to Sep 2022 | ($23,915) | | | $258,085.00 | | Interest | | 1/12/2018-30/11/2024 (6 years x 20% simple interest not compounded) | | $258,085 x 1.2% x 6= $30,9702.00 | | 1/12/2024-02/06/2025 (183 days simple interest not compounded) | | 183/365 x 0.2% x $258,085= $25,879.21 | | 335,581.21 |

84. The plaintiff submits that the amount owned by the defendant to the plaintiff totals $593,666.21.

85. Mr McGrath did not provide a daily interest rate to calculate the pre-judgment amount for the period of 2 June 2025 and 23 June 2025 (21 days). The total amount adopting the principal amount used in Mr McGrath’s schedule of damages would be $2,969.75 (21/365 x 20% x $258,085=$2,969.75).

86. However, the plaintiff (in my view, incorrectly) considered the payment of $41,915 (the total amount of $18,000 and $23,915) as a repayment of the principal amount instead of interest payment.

87. I set out what I consider to be the correct amount:

| Loan | | | Principal | $300,000 | | Interest | | 1/12/2018-30/11/2024 (6 years x 20% simple interest not compounded) | | $300,000x20%x6= $360,000.00 | | 1/12/2024-23/06/2025 (204 days simple interest not compounded) | | 204/365 x 20% x $300,000= $33,534.24 | | $393,534.24 | | Repayment | | Prepaid in cash ($1,200*5) | ($18,000) | | Paid into Plaintiff account Irregular repayment for the period of Oct 2019 to Sep 2022 | ($23,915) | | ($41,915) |

88. I consider the quantum should be in the sum of $651,619.24 (the principal $300,000 plus interest $393,534.24 minus the repayments made by the defendant $41,915).

89. However, I propose to award the sum sought by the plaintiff, and not the sum that could have been claimed. I take into account that Mr McGrath was in fact providing a benefit to the defendant by coming to this calculation. I am content to award this sum sought by Mr McGrath on that basis. It is a very substantial reduction. The fact that Mr McGrath client has been prepared to adjust the sums she claims is to her credit and confirms the good opinion I formed of her honesty during these proceedings. I have nevertheless included the sum that I consider or to have been awarded, in the event that this is of assistance or relevance in any continuation of these proceedings.

90. I have made a costs order, but granted liberty to apply in relation to interest and costs. If there is to be an application for a gross sum costs order, information about the nature of the plaintiff’s pro bono representation will need to be included as this was not a referral arranged by the court (E1 v E2; E Pty Limited v E2 [2023] NSWDC 411).

Orders

1. Judgment for the plaintiff for the sum of $593,666.21.
2. Defendant to pay plaintiff’s costs.
3. Liberty to apply in relation to interest and costs.

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