MacPhail v MacPhail

Supreme Court of NSW|2017-07-05|Before: Davies J

Solicitors: Simone Legal (Plaintiff) Dettmann Longworth Lawyers (Defendant) File Number(s): 2017/7501 Decision under appeal Court or tribunal: Local Court of NSW Jurisdiction: Civil Date of Decision: 12 December 2016 Before: Grogin LCM File Number(s): 2017/7501

Judgment

This is an appeal from a judgment of a magistrate in the Local Court given on 12 December 2016. The proceedings concerned a loan made by the Plaintiff on 7 February 2013. The lender, who is the Defendant in this Court, was the mother-in-law of the Plaintiff in this Court to whom the loan is alleged to have been made. The daughter-in-law alleged that the loan had been made by her mother-in-law to the daughter-in-law's then husband, the son of the lender.
For ease of reference and without intending any disrespect I shall refer to the present Defendant as the mother, to the present Plaintiff as the wife and to the mother's son James as the son.
I should also say at the outset that counsel for the wife was critical of the Magistrate for having used the term "loan" from the beginning of his judgment when a significant issue in the case was said to be whether the wife had a legal obligation as opposed to a moral obligation to repay the money if a loan was made to her. The suggestion was that the magistrate had pre-judged the matter he had to decide. In referring to the transaction as a loan it needs to be understood that I am using the term "loan" as a convenience on the basis that the claim in the proceedings was that a loan had been made.

Background

The son and his wife established a self-managed superannuation fund known as J & G MacPhail Superannuation Fund. The fund was subject to an Australian Taxation Office audit in or about late 2012. The fund was in breach of the law because monies from the fund were used for non-compliant purposes. The son and his wife were both trustees of the fund.
The mother alleged that in about January 2013 the son and his wife went to the mother's home in Prince Alfred Parade, Newport. The following conversation took place: The son said: Mum, we need your help to pay back our super fund the monies that we have withdrawn from the fund. Are you prepared to lend us the money? The mother said: Yes, I'm prepared to lend you and Georgia the money on the basis that you both pay me back when I request. Georgia, are you happy to borrow the money on these terms? The wife said: Yes, absolutely.
The amount specified by the accountants for the superannuation fund, F L Dunn & Associates Pty Ltd, to replace the amounts wrongfully taken was $90,357.62. On 6 February 2013 the mother wrote a cheque for that amount payable to the superannuation fund.
The wife denied that she had been present when there was any discussion with the mother about the loan. She said that the discussion was only between the son and the mother. She said that any loan was made only to the son.
On 14 May 2013 a letter was sent from the son and his wife to the ATO concerning the funds taken from the superannuation account. The letter said in part: We have also been assisted at this time by my 86 year old mother who has supplied additional loan funds to help us through this very difficult period. We have now totally repaid our super fund.
The son and the wife separated on 22 July 2014. In the family law proceedings which ensued the wife filed a Financial Statement which in the section headed "Loans" identified the mother as the lender and the wife's share of the loan as $40,000.
Demands were made by the mother to the wife for repayment of the loan. According to the mother's evidence, in July and August 2014 and on two subsequent occasions the wife said she would repay the money.
On 22 March 2016 solicitors acting for the mother forwarded a letter of demand to the wife requiring payment of the sum of $45,178.81 within seven days from the date of that letter. No response was received to that letter.
On 6 April 2016 the son paid the sum of $55,000 to the mother being $45,178.81 in respect of the loan to the superannuation fund, further monies borrowed by the son of $8,000 and interest of $1,821.19.
On 12 April 2016 the mother commenced proceedings in the Local Court against the wife claiming $45,178.81.
The Defence filed by the wife on 10 June 2016 denied that she requested a loan from the mother or that the mother loaned her the amount of $45,178.81. The wife pleaded that both the request for the loan was made by the son and the loan was advanced to him.
The matter was fixed for hearing in the Local Court on 7 November 2016.

The Magistrate's judgment

The Magistrate delivered a reserved judgment on 12 December 2016 where he found a verdict and judgment for the mother against the wife in the sum of $45,178.81 together with interest to be calculated under the Civil Procedure Act 2005 (NSW) from 25 December 2014.
In paragraphs [1]-[11] the Magistrate summarised the background, the making of the loan, the letter of demand and the denial by the wife of any liability for the loan. In the light of the grounds of appeal and matters raised in submissions, it is necessary to set out most of the rest of the judgment. The learned Magistrate went on to say: [12] The evidence of the defendant must be viewed in light of a document in which she not only acknowledges a debt to the plaintiff but also acknowledges that it was a personal loan and that her share of the personal loan was $40,000.00. The document is a Financial Statement pursuant to the Family Law Rules and the Federal Circuit Court Rules. It contains a signed affirmation that the contents are true. [13] I find that the contents of this document are compelling and were made at a time when the defendant was likely to be making a true and accurate disclosure of her financial situation including the obligations. [14] During her evidence the defendant was taken to this document. She stated that she believes that she has a moral obligation to pay her share. [15] It would appear that discussions were held between the plaintiff's son and the defendant on 5 and 6 February 2015 in an attempt to reach agreement concerning property distribution. A letter the contents of which were not challenged was prepared by Trish Culver from Cataliste Productive Conversations. At item 8 it was noted that the parties agree there was an initial liability of $90,000.00 to JM s mother - Joan MacPhail [16] In a document titled Applicants Outline of Case and Summary of Argument prepared by solicitors for the defendant for the Federal Circuit Court of Australia it is noted at G3 that there is a liability in the form of a joint loan from the plaintiff in the sum of $80,000.00. [17] The defendant was also the co-signatory of a letter dated 14 May 2013 which was sent to the Australian Taxation Office. This letter referred to the financial circumstances of both the defendant and her then son. It states, inter alia: We have also been assisted at this time by my 86 year old mother who has supplied additional loan funds to help us through this very difficult period. We have now totally repaid our super funds. [18] In her evidence the defendant attempted to distance herself from knowledge of the contents of the letter and to the actions and dealings referred within it. She stated that she should have been more careful and that she just had trust referring to her reliance on her son in business dealings. [19] I did not find the defendant to be a reliable witness during her evidence. She was at times evasive and appeared to be providing answers to assist her case rather than giving truthful and honest answers. The documentary evidence before the Court in the form of the Financial Statement and letter to the Australian Taxation Office lead me to find that the defendant was well aware of the loan to her and her then son and the purpose of it. She was a direct beneficiary of the Fund and was aware of the purpose of the loan from the plaintiff. I find that she acknowledged her indebtedness to the plaintiff on a number of occasions not only verbally but also in written document as explained earlier. [20] No agreement was provided at the time of the provision of the money by the plaintiff. The terms were not reduced to writing at any stage. The first time there appears to have been any correspondence between the parties was when the letter of demand was forwarded on behalf of the plaintiff. Pleadings [21] The statement of claim pleads an upaid (sic) debt. There is no claim for breach of contract. The defence denies the debt and the obligation to repay it. Submissions [22] The plaintiff argues that her case is a debt claim or action of indebitatus assumpsit. The defendant submits that the plaintiff's case is on the basis of the evidence a case of breach of contract. The defendant argues that the plaintiff's evidence is that the provision of the monies was as a result of an arrangement of family ties of mutual trust and affection. It is further submitted that the plaintiff needs to establish that a legally enforceable contract existed between herself and the defendant.
His Honour then set out extracts from the judgment of Ward J (as her Honour then was) in Darmanin v Cowan [2010] NSWSC 1118 from [205] to [210].
His Honour went on to say: [24] The actions of the defendant in this matter are matters which I take into account to assist in determining the intentions of the parties. I find that the defendant had assumed her obligations to repay the monies by reference to her being a co-signatory to the letter to the Australian Taxation Office and to her acknowledgment of her indebtedness in the Financial Statement. These two documents alone are sufficient to find that the defendant entered into an arrangement with the plaintiff and that a term of the arrangement was that the money was to be repaid upon demand. It was a loan. I find that the fact that the defendant has acknowledged this loan in the manner that she has does create an obligation to repay the money. Had she disavowed any knowledge or obligation in the evidence before the Court the position may have been less clear. She has, however, through her lawyers in the Federal Circuit Court proceedings and by her own declaration confirmed her knowledge and obligation of and for the debt. These circumstances are those to which Salmon J referred in Jones v Padavatton and described as the objective test. [25] Her actions do in fact provide a rebuttal to the presumption as described in Darmanin at [206]. [26] The plaintiff requested payment of the loan on 25 December 2014 during a telephone conversation between the parties. The money has never been repaid. [27] I therefore find that there was a loan to the defendant and it was made with the defendant's full knowledge. I find that the defendant was a direct beneficiary of the loan. I take into account the significant amount of money involved. I find that the defendant was aware and accepted that she had an obligation to repay her portion of the loan. I find that she accepted and communicated her obligation to repay her share to the plaintiff. I find that her actions in fact indicated that she accepted not only a moral obligation to repay the money but a legal obligation to repay it. Orders [28] Verdict and judgment for the plaintiff against the defendant in the sum of $45,178.81. [29] Interest to be calculated under s 100 of the Civil Procedure Act 2005 from 25 December 2014. (emphasis added)

The appeal

The summons set out three grounds of appeal as follows: 1. The Learned Magistrate erred in the Court below in failing to give proper reasons. Particulars (a) The Learned Magistrate failed to refer to relevant evidence. (b) The Learned Magistrate was required to set out the material findings of fact in relation to whether there was any contract of loan formed between the Plaintiff and the Defendant. (c) The Learned Magistrate was required to consider the competing evidence of the Plaintiff and the Defendant as to the formation of the alleged contract of loan and set out his findings as to how he has come to accept one over the other. (d) The Learned Magistrate failed to provide reasons for certain findings set forth in [27] of the Judgment. 2. The Learned Magistrate erred in law in treating post-contractual documents signed by the Plaintiff as admissions of the alleged debt. 3. The Learned Magistrate erred in law by finding that post-contractual acknowledgement of a loan even if made by the Plaintiff (which is denied), creates an obligation to repay the alleged loan amount.
However, in the wife's written submissions she abandoned ground 2 and sought to add two new grounds of appeal as follows: 4. The learned Magistrate erred in failing to give proper (or in fact any) weight to, or pay any regard to, the unchallenged evidence of the wife in re-examination that she viewed the items under the heading "Liabilities" set forth in her Family Law financial statement as including amounts she owed as a result of moral obligation and not legal obligation, and in particular the wife's evidence that she viewed "liabilities" to another family member, her brother, as being of that character. 5. The learned Magistrate erred in applying the legal principle that there is rebuttable presumption (sic) that when family members enter into a domestic or family arrangement they ordinarily, as a matter of objective intention, do not intend to form a legally enforceable arrangement, by erroneously failing to hold that that presumption had not been rebutted.
At the commencement of the hearing of the appeal counsel for the wife sought to file in court an amended summons which contained grounds 1 and 3 in the original summons, omitted ground 2, and contained ground 4 set out above omitting the words "give proper (or in fact any) weight to, or" in lines one and two of that ground as set out above. The new ground, therefore, read: The learned Magistrate erred in failing to pay any regard to, the unchallenged evidence of the wife in re-examination that she viewed the items under the heading "Liabilities" set forth in her Family Law financial statement as including amounts she owed as a result of moral obligation and not legal obligation, and in particular the wife's evidence that she viewed "liabilities" to another family member, her brother, as being of that character.
What had been put forward as ground 5 in the submissions was not pursued. The amended summons also added a further prayer for relief as follows: 7. To the extent any leave is necessary, grant any leave required for the plaintiff to raise a ground of appeal involving a mixed question of fact and law. Counsel made clear that the leave sought was not necessarily confined to ground 4 but was sought if the Court was of the view that either of the other two grounds involved a mixed question of fact and law.

The course of the hearing before the Magistrate

It is first necessary to set out the pleadings in the matter. The statement of claim pleaded the case as follows: 1. On or about 7 February 2013 the Defendant requested that the Plaintiff loan the Defendant the sum of $45,178.81 2. On 7 February 2013 the Plaintiff loaned the Defendant the sum of $45,178.81 conditional on it being repayable on demand. 3. On 26 July 2014, 2 August 2014 and on two further occasions in 2015 the Defendant demanded and the Plaintiff agreed to repay the amount due and owing to the Plaintiff forthwith. 4. Despite the demands by the Plaintiff and the promises by the Defendant to pay the outstanding amount owed to the Plaintiff the Defendant neglects and refuses to pay the outstanding amount of $45,178.81 owing to the Plaintiff.
The defence was pleaded as follows: 1. The Defendant denies paragraph 1. The request for the loan was made by James MacPhail. 2. The Defendant denies paragraph 2. The loan was advanced to James MacPhail by the Plaintiff. 3. As to paragraph 3, the Defendant admits that demands were made, but denies that the Defendant agreed to repay the debt. 4. The Defendant denies paragraph 4. The Defendant denies promising to repay the outstanding amount. 5. The Defendant denies that she is indebted to the Plaintiff as alleged or at all.
On 6 November 2016 the wife by Notice of Motion dated that day sought to insert a further paragraph to her defence which read: The defendant denies that there was ever any intention for the loan to create a legally binding contract between the parties. That Notice of Motion was dismissed at the outset of the hearing on 7 November. In doing so, the Magistrate provided these brief reasons: Order 2 being sought is the defendant is for the insertion (sic) of a para 6 which indicates, "The defendant denies that there was ever any intention for the loan to create a legally binding contract between the parties", the parties of course being Joan MacPhail and Georgia MacPhail. In the defence filed on behalf of the defendant the defendant denies any loan between Joan MacPhail and Georgia MacPhail. The defendant states that any loan was advanced completely to James MacPhail and was between James MacPhail and the plaintiff. To insert a clause indicating the defendant denies that there was ever any intention for the loan to create a legally binding contract between the parties, in my opinion, flies in the face of any logic which is said to be contained within the defence; the defence saying there was no loan however if there was a loan the loan was there and it was no (sic) meant to create a legally binding contract between the parties. IN MY OPINION, IT IS INCONSISTENT WITH THE PLEADINGS AND IT IS CONTRADICTORY TO THE PLEADINGS THAT STAND AND THOSE MATTERS SOUGHT IN THE NOTICE OF MOTION, BOTH ORDERS ARE REFUSED.
The first witness was the son. His evidence in chief was an affidavit that he had sworn. He was then cross-examined by Mr Hay, counsel for the wife. During the cross-examination counsel asked the son if he ever at any stage thought of having the agreement to lend him the money and repay the money reduced to writing. Counsel for the mother, Mr Phillips, objected and said: Your Honour, these questions don't go to any relevant issue in the proceedings. The only issue in the proceedings raised by the defence is whether or not the loan was made by the Plaintiff to the Defendant. The Magistrate overruled the objection and allowed the question.
A little further on in the cross-examination the son was asked whether his mother indicated to him that if he did not pay by a certain time she would send letters of demands to him. No objection was taken to that question although its relevance to what was the only issue, as Mr Phillips had earlier said, was far from clear. The transcript then disclosed the following answer and the subsequent questions as follows: A. No, because she trusted me to return the funds. Q. Because she was lending money to her son? A. She trusted me to return the funds. Q. Yes, because she was relying upon the relationship of mother and son. Do you agree with that? A. Sure. Subsequently it was put to the son, again without objection, that it was not a commercial arrangement, and the son said that it was.
When the mother gave evidence questions were put to her in cross-examination that she lent the money as a good mother to her son and his wife, to which the mother replied that it was on the understanding that they would repay it when she asked them for it.
A little later the following exchanges occurred: Q. Ms MacPhail, before lunch I was asking you questions about the discussion with James and with Georgia. While you were having those discussion, you didn't ever say to your son and his wife, "Look, this is a lot of money, I think I should see a solicitor about this." You didn't say that, did you? A. No, because my son is old enough to look after himself and his father taught him lots of things and to stand on his own two feet, and he's done everything possible to do that, you know? Q. But I'm not talking about him protecting himself, I'm talking about you wanting to see a solicitor to protect yourself. That didn't cross your mind at all, did it? A. I didn't imagine that I would need to, I expected an honourable response on both sides. Q. Because of the family connections, because of the emotional connections? A. I don't know what you mean. Q. Well, you expected people to pay the debt back because of their connection as family? A. I don't understand what you say. Q. If I asked to borrow money from you, you don't know me, do you? A. No. Q. And if you had any idea that you might want to lend me money you would want to protect your position? A. We have had honesty through the house, the whole the family, and the boys together, I've never had reason to think that they wouldn't respond in an honourable manner. Q. Yes, so you've lent money to your children before? A. No, I can't remember when and what. They've always looked after themselves with their money, and I'm very careful with money and I've taught them to be careful with money. Q. I understand. And there was nothing about this where you thought that this was a different type of arrangement? A. No, because I trusted both of them. … Q. When you received that $55,000, did you send anything to James to acknowledge receipt of it? A. No, we don't act like that in our house, we do what, you know, you expect people to do in an honourable manner.
It is difficult to see the first of those questions as being other than a question related to the matter of moral obligation as opposed to legal obligation. Again, no objection was taken by counsel for the mother to that line of questioning but that may have been because the Magistrate had earlier allowed other questioning which went outside the issue defined in the pleadings.
The affidavit sworn by the wife on 24 August 2016 said this in its entirety: 1. I am the Defendant. 2. On 14 November 1992 James MacPhail (James) and I married and on 22 July 2014 we separated. James and I are currently involved in proceedings in the Family Court with respect to our property issues. 3. The Plaintiff is James' mother. 4. During my relationship with James I have never had any conversations or discussions with the Plaintiff about loaning money. 5. If there were any discussions involving the borrowing of money they would be between the Plaintiff and James. 6. If in fact there was a request for a loan of money from the Plaintiff, this request was not made by me. 7. I am not aware of what was discussed between the Plaintiff and James at the time the funds were provided to James. I was not present. 8. If the funds were in fact a loan, to the best of my knowledge the reason that James needed the funds was because he took money out of our self-managed superannuation fund and it became necessary that these funds be repaid to the superfund. 9. The funds were not received into any bank account that I am the sole account holder. 10. There is no record in my bank account evidencing a deposit of the said loan. 11. The Plaintiff did make demands of me that I repay the funds, however I have had no discussions with the Plaintiff with regard to borrowing money.
It can be seen that, consistent with the only issue raised in the defence, the affidavit dealt only with the claim that, if there was a loan it was made to the son. The statements in paragraphs 9 and 10 were less than frank because, to the wife's knowledge, the funds from the mother went into the joint superannuation account.
When the wife was cross-examined, she was taken to the Financial Statement filed in the Federal Circuit Court in the family law proceedings. The following exchange occurred: Q. So at the time you saw [scil. swore] this affidavit, it was your belief that you owed $40,000 to the plaintiff? A. As a moral obligation, yes.
In re-examination the following questions and answers were recorded: Q. Ma'am, you were asked a number of questions about a document filed in your family law proceedings, a financial statement. Do you recall those - A. Yes. Q. Don't turn to it, ma'am. You were asked some questions, in particular, about the recording of the loan to Joan MacPhail. Do you remember those questions? A. Yes, I do. Q. Can you just tell his Honour, who is Chris Zouroudis? A. He's my brother. Q. Have you ever borrowed money from him? A. Yes. Q. Do you consider yourself legally obligated to repay it? A. No. Q. Can I ask you to turn to that document again - so the financial statement, think it was shown to you by my learned friend. Did he hand to you a document? A. There's this one. Q. Yes. Will you just turn, ma'am, to part K. A. Page 52? Q. Page 52. You see there the reference to Joan MacPhail? A. Mm-hmm. Q. Will you just turn the page please, page 53 - do you see there, at question 5 or point 5, under "Your liabilities continued"? A. Yes. Q. Who is that? A. Chris Zouroudis is my brother. Q. And the amount that's recorded there - what is that? A. 8,000. It's a loan. Q. What was that for? OBJECTION. DOES NOT ARISE FROM CROSS-EXAMINATION HIS HONOUR: Does that arise from cross-examination? HAY: Well, with respect, my learned friend wanted to draw certain inferences from the fact that this loan to Joan MacPhail was recorded in this document, and what that might mean to this lady. On the very next page, you have an amount loaned to her by her brother, which is also recorded in the document, and, with respect, it is entirely inconsistent with the proposition that was put to her in cross-examination. HIS HONOUR: I'll allow. HAY Q. Ma'am, so can you just tell the Court, what was that loan for? A. It was to pay a barrister. Q. Was it paid in one lot, multiple lots - how was it loaned to you? A. It was loaned in one sum. Q. Did you and your brother enter into any written agreement for repayment? A. No. Q. Was there any interest that was negotiated on repayment? A. No. (emphasis added)
Although objection was taken unsuccessfully that the question did not arise from cross-examination, no objection was taken earlier on the basis that the questions were irrelevant to the issue between the parties. In particular, it is difficult to see how the question "Do you consider yourself legally obligated to pay it?" in respect of a loan to her brother was admissible on any basis.
The evidence given in re-examination, if it was to be given at all in support of the issue that seemed to have emerged of whether the obligation was a legal or moral one, ought to have been evidence in chief to enable any cross-examination on it. However, it is difficult to see how counsel for the mother would have been able to cross-examine on it when it concerned an arrangement between the wife and a third party. That tended to suggest its lack of relevance even to the second issue that had emerged during the evidence.
It can be seen from the way the matter developed during the hearing, the issue that had been ruled out by the Magistrate on the preliminary application had made its way back into the hearing, partly as a result of the disallowance by the Magistrate of a perfectly proper objection by counsel for the mother that the only issue raised by the defence or even the wife's affidavit was whether the loan was made to the son only or to both of them. It should be noted, in fairness, in any event, that the case presented by the mother differed from the case pleaded in the statement of claim. There was never an agreement for a loan of $45,178.81, nor was there a request by the wife for such a loan. However, that had no effect on the one issue that the pleadings identified.
It would have to be concluded, therefore, that without any real objection, the parties came to accept that the case was to be fought on the evidence that was given, being the agreement for a loan of $90,357.62 from the mother to the son and the wife, and that, even though the Magistrate had formerly ruled against it, there was an issue about whether any such loan, if made to both the son and the wife, gave rise to a legal or only a moral obligation to repay.
Counsel for the wife submitted that the issue of whether there was a contract and a legal obligation to repay the money was within paragraph 5 of the Defendant's defence. Clearly, however, paragraph 5 is a plea of the general issue which r 14.20 Uniform Civil Procedure Rules 2005 (NSW) forbids. Such a pleading could not be relied upon to encompass a specific defence such as emerged during the hearing: r 14.14 UCPR.
It is clear that the case proceeded before the Magistrate well outside the single issue raised on the pleadings as identified by counsel for the mother when he took objection to a question asked of the son. However, as has been made clear, where a case is run in a particular fashion despite the pleadings and is decided in accordance with the way in which it was run, the results should be upheld unless some injustice is done: Southwick v Moores Stephens Melbourne Pty Ltd [2008] VSCA 164 at [30]; Commissioner of Taxation v Normandy Finance & Investments Asia Pty Ltd [2016] FAFC 180 at [143].
Accordingly, it is necessary to consider the grounds of appeal in reference to the issues that were actually litigated before the Magistrate. Broadly, those issues were, first, whether the wife was a party to the loan agreement and, secondly, if she was, was a legal obligation created by the arrangement or was it simply a moral obligation to repay the money? It should be noted, however, that the grounds of appeal did not concern themselves with the finding that the wife was a party to the arrangement. That determination by the Magistrate appears to have been accepted. The real issue concerned whether the wife had a legal obligation to repay, with considerable emphasis being placed on the evidence given by her in re-examination.

Submissions

The wife submitted that the mother failed to prove her case that the son and the wife had entered into a binding legal agreement because she failed to rebut the presumption that in the family context the parties objectively did not intend to enter into formal legal relations.
The wife submitted that the evidence upon which the Magistrate placed the greatest weight in coming to his decision was the wife's Financial Statement in the family law proceedings. However, the wife submitted that the Magistrate ignored the evidence she gave in re-examination in relation to the debt to her brother which she did not consider herself legally obligated to repay. That evidence supported the evidence she gave in cross-examination that she thought she had a moral, but not a legal obligation to repay the mother.
The wife submitted that the finding at [19] of the judgment was made before the Magistrate dealt with the presumption discussed in Darmanin v Cowan. In that way, the wife submitted, the Magistrate begged the question he had to decide which was whether there was a legal obligation to repay the money.
The wife submitted that what she described as the Magistrate's dispositive reasoning at [24] of the judgment revealed three critical errors of law. First, his Honour failed to deal with the countervailing evidence of the wife that she considered herself only morally obliged to repay the mother, and failed to mention her evidence in re-examination that she had treated the "loan" from her brother in the same way.
Secondly, his Honour erroneously reasoned that the post-contractual acknowledgement somehow created an obligation in the wife to repay the money. Thirdly, his Honour failed to apply correctly the presumption.
In relation to the third error the wife's written submissions asserted that the Magistrate failed to have regard to the son's and mother's evidence of the nature of the arrangement. Significantly, however, in oral submissions the wife said that the only relevant evidence that the Magistrate did not refer to (see particular (a) of ground 1) was the evidence in re-examination.
Ultimately, the wife submitted that the appeal grounds generally all boiled down to the first appeal ground and to what was alleged to be the failure to refer to relevant evidence, namely the wife's evidence in re-examination.

Consideration

Since counsel for the wife submitted that the appeal turned essentially on the first ground of appeal, it is convenient to deal with all of the grounds together. The wife's principal complaint was that the Magistrate's reasons were inadequate because no mention was made of the wife's evidence in re-examination concerning her perception of the type of obligation she had to repay a loan from her brother.
In Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Mahoney JA said (at 268, 270 and 271): The employer submitted that, in effect, a judge is required to state the facts which base his judgment but he is not required to give reasons why he finds those facts. I do not think that that submission, understood in its widest sense, should be accepted. The question is not whether some reasons must be given relevant to the findings of fact which are made, but what reasons are required. … However, the decision of a particular submission may be an essential part of the judge's reasoning to his final conclusion. This may be so because it is necessarily so, ie, because he cannot come to his final conclusion without deciding it; or because the reasoning which in fact he follows makes it so. In such a case, the duty of the judge will vary according to the way in which the case has been conducted and according to the reasoning which he has followed. Ordinarily he may confine his attention to the points which have been taken and the submissions made in relation to them. (I put aside cases involving, for example, constitutional or jurisdictional issues, where special considerations may apply.) In my opinion, it is not open to a party on appeal to complain that reasons were not given for the decision of a matter of fact or law which was, or must have been, decided, if the matter was not the subject of submissions made to the court below in a way which called for a reasoned consideration of them. … Nor is a judge required to make an explicit finding on each disputed piece of evidence. It will be sufficient, if the inference as to what is found is appropriately clear: see Selvanayagam v University of the West Indies [1983] 1 WLR 585 at 587, 588; [1983] 1 All ER 824 at 826. But, subject to matters such as these, the basis of the decision of a trial judge or of an intermediate court of appeal should be made apparent. This does not mean that the reasons given need be elaborate: an elaborate argument may not require an elaborate answer. Reasons need be given only so far as is necessary to indicate to the parties why the decision was made and to allow them to exercise such rights as may be available to them in respect of it." … In my opinion, the law does not require that a judge make an express finding in respect of every fact leading to, or relevant to, his final conclusion of fact; nor is it necessary that he reason, and be seen to reason, from one fact to the next along the chain of reasoning to that conclusion.
McHugh JA said (at 280): If an obligation to give reasons for a decision exists its discharge does not require lengthy or elaborate reasons: Ex parte Powter; Re Powter (1945) 46 SR (NSW) 1 at 5; 63 WN 34 at 36. But it is necessary that the essential ground or grounds upon which the decision rests should be articulated.
In Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 Basten JA (Beazley and Macfarlan JJA agreeing) said: When an appellate court is invited to find that a trial judge provided inadequate reasons, it is important to understand the nature of the function being invoked. It is not the function of an appellate court to set standards as to the optimal, or even desirable, level of detail required to be revealed in reasons for judgment. Rather it is to determine whether the reasons provided have reached a minimum acceptable level to constitute a proper exercise of judicial power. Transparency in decision-making is an important value, but it is not cost free, and may involve separate parameters of quantity and quality.
Although said in the context of administrative review, it is also relevant to note what Gleeson CJ said in Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 77 ALJR 1165; [2003] HCA 30 at [14]: Decision-makers commonly express their reasons sequentially; but that does not mean that they decide each factual issue in isolation from the others. Ordinarily they review the whole of the evidence, and consider all issues of fact, before they write anything. Expression of conclusions in a certain sequence does not indicate a failure to consider the evidence as a whole. …
An examination of the Magistrate's judgment demonstrates the following. His Honour first summarised the claim and the defence followed by setting out the factual material concerned with the making of the loan and what happened subsequently up to the time the mother demanded that the wife repay it: [1]-[11].
His Honour then went on to examine documentary material where, on the face of that material, the wife appeared to have acknowledged the loan: [14]-[17]. His Honour then dealt with the wife's evidence in relation to some of that material and made credit findings about her evidence. That led him to the conclusion on the sole issue pleaded in the case concerning whether or not she was a party to the loan: [18]-[19].
His Honour next considered the issue that emerged during the hearing which he had in any event noted at [14], that is whether any obligation to repay the mother was a moral obligation only. His Honour quoted at length from Ward J's decision in Darmanin and then went on at [24] to consider whether what had been described as the presumption in Darmanin applied or whether it had been rebutted. His Honour determined at [25] that the presumption had been rebutted. Finally, his Honour summed up his overall findings at [27].
I do not accept the wife's submission that the Magistrate prejudged the issue of the legal/moral obligation by referring early in the judgment to a "loan". It seems clear to me that the Magistrate was first determining the pleaded issue which did not in any way dispute that there was a loan but only to whom it had been made. Having determined that it was made to the wife as well as the son his Honour then went on to consider the second issue. That approach does not seem to me to differ from the approach of Austin J in Gray v Guardian Trust Australia [2002] NSWSC 1218.
In my opinion, the Magistrate was under no obligation to record and consider every aspect of the evidence. He made an assessment of the wife's evidence at [19] finding her not to be reliable, at times evasive, and providing answers to assist her case rather than giving truthful and honest answers.
There were two aspects to the evidence concerning the loan from the wife's brother. The first was the objective evidence found in the sworn Financial Statement with the Federal Circuit Court and the Applicant's outline of case and summary of argument filed in the Federal Court to the same effect. The second aspect of the evidence was the wife's assertion in re-examination that she did not consider that she was under a legal obligation to her brother in respect of that loan. That assertion was not supported by any evidence concerning the circumstances of the loan or the brother's approach to that loan.
The evidence was in the first place necessarily dependent upon the Magistrate accepting what the wife said. However, even if he had accepted that evidence as her belief, that was not the end of the matter. In fact, it was hardly the beginning. A person's subjective intentions are not admissible to determine the proper construction of a contract. In that way the evidence had little if any significance. The wife, in essence, relies on it to say that it somehow corroborates her evidence that she believed the mother's debt was only a moral obligation. However, her belief about the brother's debt, even if accepted, did not make the belief true.
The emphasis on this evidence also appeared to proceed on the false assumption that a finding about the brother's debt, based on what she said in re-examination, would flow through to the mother's debt when the issue could only be determined in each case on an examination of the circumstances of the making of each loan.
As noted, the only other evidence about the matter was the recording of the debt in the Financial Statement and the acceptance in the wife's Federal Circuit Court submissions that the brother's debt was a liability. In circumstances where her evidence was clearly not accepted, what she said about her belief in re-examination added nothing to what the Magistrate had to determine.
On the other hand, his Honour had found that the contents of the Financial Statement were compelling and were made at a time when the Defendant was likely to be making an accurate disclosure of her financial situation including her obligations. In that regard, it is difficult to avoid the conclusion that, if what was contained in the Financial Statement concerning not only the brother's loan but the loan from the mother was a moral obligation and not a legal one despite the fact that these loans appeared in a section headed "Your Liabilities", such position being reinforced in the outline of case and summary of argument, the information given to the Federal Circuit Court was dishonest.
For those reasons, the Magistrate set out the material findings of fact, he did not fail to refer to relevant evidence and did not fail to provide reasons for his findings. His Honour's reasons clearly appear at [12], [13], [19] and [24] of the judgment. Counsel for the wife drew my attention to the judgment of the Court of Appeal in Pollard v RRR Corporation [2009] NSWCA 110 and to the summary of the propositions expounded in that judgment in Dee Why Auto Clinic and Anor v Roads and Maritime Services [2017] NSWSC 377. I am satisfied that his Honour's reasons appropriately comply with those propositions.
The Defendant submitted that ground 1 was really a ground based on factual errors by reason of the assertion that the Magistrate failed to refer to relevant evidence and was required to consider competing evidence and that the ground did not amount to an error of law if made out. Whilst I think there is some force in this submission I am prepared to accept that, overall, ground 1 was concerned with a failure to provide adequate reasons for the decision and that such an error is ordinarily regarded as an error of law. Of course, it may not be an error that results in a remittal of the matter to the decision maker for a redetermination: Repatriation Commission v O'Brien (1985) 155 CLR 422 at 445-446.
In my opinion, the wife does not demonstrate that the Magistrate's reasons are inadequate nor that his Honour has failed to refer to relevant evidence.
Ground 4 raises the same matter in a different guise. Although counsel abandoned the words originally included in the ground "give proper (or in fact any) weight to, or", in order to remove or minimise any sense that this was not really an error of law, a ground alleging a failure to pay any regard to some piece of evidence will always struggle to amount to an error of law.
The substance of this ground is a challenge to the fact-finding of the Magistrate in relation to the so-called presumption referred to in Darmanin. There was some debate at the hearing of the appeal about whether there is any presumption that arrangements made in a family context are not intended to be binding. The wife had, at the hearing before the Magistrate, relied on the decision of Ward J (as her Honour then was) in Darmanin. In that case Ward J said: [206] There is a rebuttable presumption (being a presumption of fact) that arrangements or agreements made in such a context are not intended to have legal force. The rationale or justification for making an assumption that there is no intention to create legal relations in such a situation is that, at the time of making the alleged promise, the parties would not have regarded their arrangements in terms of legal consequences. [207] The presumption that, due to the nature of the relationship between the parties, they did not intend to create legal relations, has been applied beyond the family context to other social and domestic arrangements (for example, Coward v Motor Insurer's Bureau [1963] 1 QB 259; Buckpitt v Oates [1968] 1 All ER 1145; Parker v Clarke (at 292)). … [211] Nevertheless, as recognised in Bovaird v Frost [2009] NSWSC 337 (at [52]), there are many examples of cases involving promises to confer benefits on a friend or relative (in consideration of the latter taking up residence with the former or rendering household or personal services) in which the requisite intention to create legal rights and obligations has been found; Brereton J there noting that this is particularly where implementation of the arrangement involved the promisee leaving existing advantages or selling an existing residence (Wakeling v Ripley (1951) 51 SR (NSW) 183; Todd v Nicol [1957] SASR 72; Parker v Clark Schaefer v Schumann [1972] AC 572; Tanner v Tanner [1975] 1 WLR 1346; Raffaele v Raffaele [1962] WAR 29; Re Gonin (deceased) [1979] Ch 16; see also Scheps v Cobb [2005] NSWSC 455, [29]). [212] In Ermogenous v Greek Orthodox Community [2002] HCA 8; (2002) 209 CLR 95, the issue of intention to create contractual relations was considered in the following passage (at [24]): Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. [213] In determining whether the presumption has been rebutted, account is taken of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances (Ermogenous v Greek Orthodox Community, at [24]). Regard is also had to the consideration for the promise(s) in question and the certainty with which the parties have expressed their agreement. In this context, Greig and Davis in The Law of Contract The Law Book Company, 1987, refer to Thomas v Hollier (1984) 53 ALR 39 as indicating that, where a promise has been made as an act of friendship, something that otherwise might be classified as adequate consideration might not be so regarded.
The wife also relied on the judgment of Brereton J in Ashton v Pratt (No 2) [2012] NSWSC 3 where his Honour said at [32]: As Ward J has recently explained in Darmanin (at [206]), there is a rebuttable presumption of fact that arrangements or agreements made in a family are not intended to have legal force, the rationale being that, at the time of making the alleged promise, the parties would not have regarded their arrangements in terms of legal consequences. As her Honour also explained (at [207]), this presumption has been applied beyond the family context to other social and domestic arrangements.
On the hearing of the appeal the mother contended that there was no such presumption relying on what the High Court said in Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; [2002] HCA 8: [24] "It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty." To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet "[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts". [25] Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. [26] In this context of intention to create legal relations there is frequent reference to "presumptions". It is said that it may be presumed that there are some "family arrangements" which are not intended to give rise to legal obligations and it was said in this case that it should not be presumed that there was an intention to create legal relations because it was a matter concerning the engagement of a minister of religion. For our part, we doubt the utility of using the language of presumptions in this context. At best, the use of that language does no more than invite attention to identifying the party who bears the onus of proof. In this case, where issue was joined about the existence of a legally binding contract between the parties, there could be no doubt that it was for the appellant to demonstrate that there was such a contract. Reference to presumptions may serve only to distract attention from that more basic and important proposition. [27] More importantly, the use of the language of presumptions may lead, as it did in this case, to treating one proposition (that an intention to create legal relations is not to be presumed) as equivalent to another, different proposition (that generally, or usually, or it is to be presumed that, an arrangement about remuneration of a minister of religion will not give rise to legally enforceable obligations). References to "the usual non-contractual status of a priest or minister" and factors which "generally militate against" a finding of intention to create legal relations illustrate the point. The latter proposition may then be understood as suggesting, in some way, that proof to the contrary is to be seen as particularly difficult and yet offer no guidance at all about how it may be done. Especially is that so when the chief factor said to justify the proposition that an intention to create legal relations must be proved (the essentially spiritual role of a minister of religion) is then put forward as the principal reason not to find that intention in a particular case, and any other matters suggesting that there may be an intention to create legal relations are treated as dealing only with "collateral" or "peripheral" aspects of the relationship between the parties. In practice, the latter proposition may rapidly ossify into a rule of law, that there cannot be a contract of employment of a minister of religion, distorting the proper application of basic principles of the law of contract. (emphasis added, citations omitted)
It is not strictly necessary to reach a final view about whether there is such a presumption although I incline to the view that the High Court was disapproving of the use of such terminology (with all due respect to Ward CJ in Eq and Brereton J). What is clear, however, that whether the matter is approached from the perspective of presumption or from the starting point of an inquiry (referred to in Ermogenous at [25]), the determination is one of fact. What evidence is considered, given emphasis or not considered of importance is part of the fact-finding exercise.
A judge or decision-maker is not obliged to accept unchallenged evidence. The evidence may not be considered reliable or may not have significance for issues to be determined. The latter was certainly the case here as the emboldened portion of Ermogenous tends to demonstrate. On the basis of the Magistrate's credit findings concerning the wife, a lack of reliability may also have been involved. There was no error of law in dealing with this issue.
The wife's Amended Summons seeks leave to the extent that any ground is held to involve a mixed question of fact and law.
The intention of the Local Court Act 2007 (NSW) is that this Court should have supervision over Local Courts ordinarily in matters of law. A party seeking leave to appeal must point to something more than error. In Zelden v Sewell Henamast Pty Limited v Sewell [2011] NSWCA 56 Campbell JA (Young JA agreeing) said at [22]: It is of some importance to reiterate the principles that were stated in Carolan v AMF Bowling Pty Limited [1995] NSWCA 69, where Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole JA relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute.
In Jaycar Pty Limited v Lombardo [2011] NSWCA 284 Campbell JA (Young and MeagherJJA agreeing), having repeated his remarks in Zelden above, went on to say at [46]: Kirby P recognised that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what being merely arguable.
It may be accepted that these cases concerned leave to appeal to the Court of Appeal from the District Court where there was a pecuniary threshold to be crossed before a right to appeal replaced the need for leave. However, the principles are applicable here where matters involving small sums and small disputes are intended to be finalised in the Local Court.
In the present case, no general principle is involved. It is merely the application in the present case of the principles discussed in Ermogenous and the later cases. In any event, for the reasons given, the wife does not even demonstrate that the Magistrate was arguably wrong in the way his Honour applied the principles. Leave should not be given.
This ground fails.
As to ground 3, the wife relies on what might be thought to be a poor choice of words highlighted at [24] of the Magistrate's judgment. It is nevertheless clear that a reading of the whole of the paragraph make abundantly clear that the Magistrate was not suggesting the acknowledgment created the obligation. He earlier said: I find that the defendant had assumed her obligations to repay the monies by reference to her being a co-signatory to the letter to the Australian Taxation Office and to her acknowledgment of her indebtedness in the Financial Statement. (emphasis added) That sentence makes clear that what was in the two documents showed that the wife had understood at the time the loan was made that her obligation was a legal one. The word "acknowledgement" strengthens that view.
This ground is not made out.

Conclusion

I make the following orders: 1. Summons dismissed. 2. The Plaintiff is to pay the Defendant's costs.

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: 19 July 2017

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