Paul Herbert Kennedy v Mark Alexander-Erber

Nature of the Case

1. The plaintiff sues for recovery of debt he alleges is owed to him by the defendant as repayment under 2 oral agreements of loan made on the 20th and 29th of May 2015, respectively: Statement of Claim [3] regarding the first loan, and [9] regarding the second loan. At paragraph 18 of the plaintiff's affidavit made 20 September 2018 (the 'plaintiff affidavit'), he says that the second loan was made on 28 May 2015.
2. The defendant denies personal liability. The crux of his defence is that the plaintiff entered two loan agreements with and advanced monies to Alexander and Black Equities and Investments Proprietary Limited ACN 604728985 (ABEI) and did not contract with him. ABEI was placed in liquidation on 15 December 2016. The defendant says that the loan agreements were written and made on 21 May 2015 and 29 May 2015 respectively.
3. The parties agree that in the first loan the plaintiff advanced $40,000, which money was deposited by the plaintiff into an account in the name of ABEI. The plaintiff says that the loan was repayable on 30 August 2015: SOC [4]. The defendant pleads the terms of the first written contract alleged which expressly provided for a term of three months; calculating to a repayment date of 21 August 2015: Defence [3]. The plaintiff says that the first oral agreement was reached over the telephone, following a meeting between the plaintiff and the defendant, and that the amount to be repaid was $80,000 (a 100% return): SOC [4]; plaintiff affidavit paragraph 14. The defendant says the written contract of loan was signed by the parties at the defendant's office, known as "the Engine Room", at 42 Wattle Street, Ultimo, NSW, on 21 May 2015 and provided for interest payable at 8%.
4. The parties agree that in the second loan the plaintiff advanced $30,000 which money was also deposited by the plaintiff into an account in the name ABEI. The plaintiff says that the second loan was for a term of 26 days, and repayment was due on 25 June 2015. The SOC [10] particularises 20 June 2015 as the date for repayment, but the case was run on the allegation of due date 25 June 2015. The defendant denied the plaintiff allegation of the oral second loan: Defence [6] and contested the case on the basis of terms of the second written contract he alleged which expressed a term of three months calculating to repayment on 29 August 2015: defendant Closing Written Submissions.
5. Despite the date of 29 May 2015, pleaded in the Statement of Claim, the plaintiff ran the case at hearing, as he deposed in his affidavit, on the basis of the second loan agreement having been made orally on 28 May 2015. The parties agree that the second loan was made at the Engine Room. Whereas the plaintiff says the agreed amount to be repaid was $60,000.00 (a 100% return): SOC [10]; the defendant conducted the case according to the terms of the written agreement alleged, with interest payable at 8%.
6. The loans were not secured.
7. ABEI was incorporated on 13 March 2015, a little over two months before the subject transactions. Its registered office was the defendant's business premises at 42 Wattle Street, Ultimo, NSW. I have adopted the defendant's nomenclature, "the Engine Room" for the office part of his premises which was generally composed of a large warehouse from which he ran his businesses and at which was stored a large collection of exotic cars. According to his affidavit made 19 March 2019, at paragraph 3, the defendant was "a director and a secretary" of ABEI at the time of making the loan agreements. The Historical Company Extract exhibited to his affidavit records him as the only director, secretary, and shareholder at that time. As the case was run, ABEI would be properly described as the defendant's company.
8. The plaintiff and the defendant first met in May 2015 and for relevant purposes were strangers to each other at the time of the making of the agreements of loan.
9. Obviously, the central factual question in the case is: which of their two different versions of the making of loan agreements is to be believed and accepted.
10. The two documents (herein referred to as "Loan 1" and "Loan 2"), upon which the defendant relied to prove written contracts of loan, begin at pages 8 and 12 respectively of exhibit MAE-1 to the defendant's affidavit ("Defendant Exhibit"). They are photocopies. They purport to bear the signatures of the plaintiff and of the defendant. The signatures are not witnessed. The documents are dated 21 May 2015 and 29 May 2015 respectively. They are in identical terms and form except that Clause 1(a) of the document dated 21 May 2015 describes the principal amount as $40,000 and Clause 1(a) of the document dated 29 May 2015 describes the principal amount as $30,000. Clause 1(c) in each of them describes the term of the loan to be "3 months".
11. The plaintiff relied on the expert opinion of Ms Melanie Jane Holt, forensic document examiner; whose affidavit dated 24 May 2019 attached her report dated 8 April 2019. This report came into evidence after I granted the plaintiff leave to reopen his case in chief, limited to the addition of Ms Holt's evidence: see Judgment 2 August 2019. The defendant did not rely on expert evidence or lay evidence in response to Ms Holt's evidence, as he was permitted by directions for evidence, to do.
12. The task undertaken by Ms Holt was to express her opinion on the question of whether or not the plaintiff had signed Loan 1 and Loan 2. Her task was to examine the plaintiff's signatures on his affidavit made 20 September 2018 with his signature on those documents. Ms Holt observed: "The 'P Kennedy' signature on page 3 [of Loan 1] and the 'P Kennedy' signature on page 1 of [the plaintiff's affidavit] are, for all intents and purposes, identical."
13. She expressed the same opinion in relation to the 'P Kennedy' signature on page 3 Loan 2 and the 'P Kennedy' signature on page 2 of the plaintiff's affidavit. Ms Holt observed at paragraphs 17 and 18 of her report: "No two naturally written signatures will overlay each other to such an extent that, for all intents and purposes, they are identical and superimpose. This is due to the fact that humans cannot write with machine-like repetition and two signatures naturally written by the same person will exhibit an observable degree of variation. The degree of super imposition observed here is an indication of 'common source' for these two groups of signatures. In other words, one of these signatures from each group is the source for the other, or both of [the] signatures in each group derive from another signature not present in the submission. However, as the original signatures are contained in the Affidavit held by the New South Wales District Court [examined by Ms Holt], this establishes that the two copy signatures on the questioned documents [Loan 1 and Loan 2] are the products of a 'cut and paste' manipulation using the two signatures on the [plaintiff affidavit] as the models."
14. This observation was repeated in her final conclusion at paragraphs 20 to 23 of her report. In short, Ms Holt's opinion is that the copy documents Loan 1 and Loan 2 exhibited to the defendant's affidavit and described in his evidence as copies of the original written agreements for the first and second loans are not true copies of original documents signed by the plaintiff in the normal way, in his own hand.
15. During cross-examination Ms Holt expressed her opinion as so strongly held as to put it in the words (T p 227, line 45 to line 46): "I fail to see how it could be done otherwise but you know, there's always are tiny, tiny, tiny little doubt that something can happen."
16. Plainly the opinion of Ms Holt weighs significantly against acceptance of the defendant case based as it is on allegations of written agreements for the two loans.
17. The plaintiff alone bears the onus of proof. It is for the plaintiff to satisfy the court, on the balance of probabilities, that the parties entered into contracts for loan, made orally, and in the terms for which the plaintiff contends: s140 (1) Evidence Act 1995 (NSW) ("Evidence Act") . The defendant relies on Loan 1 and Loan 2 in answer to the plaintiff case; and asks the court not to accept that the plaintiff has satisfied its onus of proof; that answer being that there was no agreement between the parties made orally, but rather that the plaintiff contracted in writing with ABEI.
18. Even if the plaintiff satisfies me that Loan 1 and Loan 2 are not to be accepted as reliable proof that the plaintiff signed written loan agreements; the plaintiff still bears the onus of proof on the balance of probabilities that the monies were loaned pursuant to the terms of the oral contracts he alleges. The factual contest concerning the making of the loan agreements includes assessment of the evidence given by each of the plaintiff and the defendant by affidavit and orally. Before proceeding to that task in detail and having considered the whole of the evidence closely, I make two observations: 1. Each of the parties deposed by their affidavits to long passages of conversation in the first person. Those affidavits were made, by the plaintiff more than 3 years after the subject events with the aid of notes made by him contemporaneously to the events and the defendant affidavit was made a little less than 4 years after the events. In my opinion the plaintiff's account of first person expression in those conversations is so focussed on expressions of personal lending that a degree of caution is required. However, the same caution is required when considering the defendant's account of the conversations and what, in my opinion, appears from his affidavit his deliberate focus on expression of the agreements being made not between the parties but between the plaintiff and ABEI. It is a not uncommon feature of affidavit evidence of conversations that to some extent the reconstruction of conversations will inevitably be coloured by the deponent's purposeful recount combined with imperfection of recollection. I have found the presentation of the conversations in each of their affidavits to be in expression equally warranting exercise of caution in that regard; and 2. The plaintiff evidence exposes his having made errors as to the dates of agreements. In relation to the first loan agreement, between paragraphs 8 and 18 of his affidavit the plaintiff mistakenly referred to "Thursday 15th May 2015" when by the calendar, that Thursday was the 14th of May, "Thursday morning 20th May 2015" when by the calendar that Thursday was the 21st of May and "Saturday morning 22nd May 2015", when by the calendar the 22nd of May 2015 was a Friday. Specifically, in paragraph 10, he said the discussion of terms of the first loan agreement occurred on "Thursday 20th May 2015" and at paragraph 14 that he conveyed his acceptance by telephone at 6pm that evening. The obvious common ground between the parties is that the first loan agreement was reached on the Thursday of that week in May. That Thursday was the 21st of May 2015. As to the second loan, the Statement of Claim pleaded the second loan agreement to have been made on 29 May 2015. His affidavit at paragraph 17 says that he and the defendant on "Tuesday 25 May" discussed meeting toward the making of the second loan agreement and (at paragraph 18) they met on "Friday 28 May" and made that agreement. The calendar for the 2015 year shows that the 25th was a Monday and the 28th was a Thursday. Friday was the 29th day of May. I accept that the first loan agreement was made on 21 May 2015 and the second loan agreement on 29 May. I am of the opinion that nothing significant turns on this. The plaintiff should not be found to have been deliberately choosen 20th and 28th of May to avoid dates of Loan 1 and Loan 2 because the mistakes made in paragraph 17 and 18 of the plaintiff's affidavit are so patent as to relieve that concern.

EVIDENCE OF ORAL AND OF WRITTEN AGREEMENTS AT TIME OF CONTRACT

1. Near the commencement of the hearing the plaintiff called on a Notice to Produce to Court dated 31 May 2019, which had been served on the defendant. The Notice to Produce required the defendant to produce the original document of each of Loan 1 and Loan 2. A similar Notice to Produce had earlier been called on in the proceedings. The court was informed from the bar table by Mr Hemsworth for the defendant: "A similar notice has already been put to us and we responded that we do not have the originals. Our position is that the plaintiff has the original document. That was the response that was given, so we've got nothing to produce."
2. Mr Eardley, counsel for the plaintiff, indicated that the plaintiff did not accept that response to the call. He informed the court that the defendant would be cross-examined and therefore required to give evidence in regard to his response: T p 12 lines 25-50; p 66, line 45 to p 67 line 19.
3. On the second day of the hearing, the defendant was cross-examined on his failure to produce originals in response to the Notice to Produce dated 31 May 2019. To the suggestion that "the original" was within his control, possession or custody, the defendant answered that he did not have "the original": T p 74 lines 14-19; p 75 lines 23-29; p 77 lines 40-48; p 79 lines 37-49.The defendant said that he had retained possession, control and custody of only copies of the loan agreements at all times, somewhere in files amongst the hundreds of boxes in a large warehouse where he stored records of his several businesses: T p 75 lines 10-35; p 77 lines 40-47; p 78 lines 02-14.
4. In paragraph 14 of his affidavit, the plaintiff described the making of the first loan agreement by his acceptance spoken over the telephone at about 6 PM after the parties had met that day. In paragraph 14 of his affidavit, the defendant said in relation to Loan 1 that at the meeting: "The Plaintiff and I then proceeded to sign the loan agreement and I made several copies of the signed agreement for my records."
5. In paragraph 19 the defendant again referenced to the event of signing the Loan 1 document.
6. In paragraph 18 of his affidavit the plaintiff described the making of the second loan agreement orally at the Engine Room. He also said that the defendant wrote on a blank piece of paper calculations of principal and return relating to Loan 1 and Loan 2 and signed it. Paragraph 18 closed with the following passage: "The defendant of his own motion then wrote on a blank piece of paper calculations of the principle and interest returned in his own hand writing relating to D1 and D2 transactions and thereupon signed same" The Defendant the[n] said words to the following effect to me: Defendant: "you have shown real trust and faith in me in loaning these monies to me totally in good faith trust without any formal paperwork, so it is only fair that I acknowledge these loans and the basis of what we are doing. Again, I say to you, don't stress and don't worry, I will not let you down and you will be very happy with the results."

EXAMINATION OF OTHER EVIDENCE - WHO IS TO BE BELIEVED

1. I will now put aside the evidence of signatures on Loan 1 and Loan 2 and examine the other evidence for the purpose of assessing the credibility of the parties in the cases which they advanced.

Affidavit Evidence

1. In addition to the plaintiff's affidavit, he read his affidavit dated 24 May 2019 in reply to the defendant's affidavit dated 19 May 2019 ("plaintiff's reply affidavit"). In his reply affidavit the plaintiff denied the defendant's allegation that he contracted with ABEI and specifically denied signing originals of Loan 1 and Loan 2.
2. It is fair to say that the plaintiff and defendant deposed to conversations set out in first person speech which provide substantially opposite accounts of conversations discussing the making of the loans. On the fundamental issues of whether the agreements were made orally or in writing, whether the plaintiff contracted with the defendant personally or with his company ABEI, the terms of the loans and whether the return on investment was 100% or 8%, their evidence cannot be reconciled. Whereas the plaintiff said that the defendant characterised the transaction as his obtaining funding for his exotic car importation business; the defendant said that he told the plaintiff that the lending to ABEI was for the purpose of that company on-lending to wealthy individuals on a short term, high return basis.
3. The parties agree that they first met at the defendant's warehouse complex premises at 42 Wattle Street, Ultimo on Monday on 11 May 2015. The premises included a music recording studio and the defendant described himself as a multiple record label owner; there was an impressive collection of exotic motorcars which the plaintiff estimated to number 40; and the Engine Room office which included a spacious sitting and dining area: plaintiff affidavit paragraph 4; defendant affidavit paragraph 10. The defendant showed the plaintiff the exotic cars stored at his premises: defendant affidavit paragraph 11.
4. The parties agree that they subsequently spoke by telephone and agreed to meet again for the purpose of discussing business together.
5. The plaintiff said that in the conversation the defendant invited him to meet so that they might discuss "a great business opportunity with excellent short term returns.": plaintiff affidavit paragraph 8. The defendant said that he informed the plaintiff that he was personally importing another classic motorcar and that his company ABEI, was an investment company which did not import and sell cars but provided high yield returns on client's short term investments. The defendant deposed that in this introductory telephone discussion he offered to discuss investment for high return and that he specifically informed the plaintiff: "Our dealings will be documented through a loan agreement. I will have a copy of this ready to show you when we meet.": Defendant affidavit paragraph 13.

The First Loan Agreement

1. The parties agreed that they made the first loan on the date of their second meeting. I earlier determined that date to be 21 May 2015. Whereas the plaintiff says he expressed his agreement in a telephone conversation with the defendant at about 6pm after discussing the terms of the loan at the meeting; the defendant says that he and the plaintiff signed Loan 1 at the meeting.
2. It was common ground that the defendant produced some form of written agreement at the second meeting when discussing the first loan agreement. In cross-examination the plaintiff conceded that the defendant produced to him a pro forma document of loan agreement but denied that he signed it: T p 37 line 47.
3. In cross examination the plaintiff maintained his denial of having signed Loan 1: T p 47 lines 45-50; p 39 line 33; p 40 line 20. In cross examination the defendant maintained the plaintiff did sign Loan 1: T p 156 lines 35-40.
4. Separately to that, the plaintiff deposed at paragraph 11 of his affidavit that at the meeting the defendant produced a plain piece of paper on which he had written about six proposed transactions in the form of calculations of funding he required, timing as to when he required the funding and a number allocated to each proposed transaction. The transactions proposed were identified on the paper as "D 1"-"D 6". "D" meaning "Deals". The defendant deposed that the paper he produced contained "rough notes on only two deals with approximate returns". He identified the piece of paper with his calculations to be Annexure "D" to the plaintiff affidavit: defendant affidavit paragraph 15.
5. In these reasons it will be seen that I have found Annexure "D" of significance in determination of the question of credit. The plaintiff denied that Annexure "D" is a copy of the document proposing deals, produced by the defendant at the making of the first loan agreement.
6. At paragraph 19 of his affidavit the plaintiff deposed that the document Annexure "D" was written by the defendant at their third meeting, at the making of the second loan agreement. I earlier determined the date of that meeting to be 29 May 2015. In cross-examination of the plaintiff concerning Annexure "D", the following questions and answers occurred (T p 54 line 43 to p 55 line 21): "Q. Now, I'm putting to you that the numbers on this page are just numbers that pass between yourself and my client on the way to coming to a final deal. A. Not passing through, they were the final deal. If you look at the return dates of 30 August and 25 June it refers specifically to the two loans. Q. Sir, I'm putting to you that this certainly does not constitute a final deal. A. It was the final deal. Q. You certainly didn't sign it, did you? A. No. Q. And the reason you didn't sign it was because it wasn't a concluded agreement. EARDLEY: I object. Letter of instruction. It's really a matter for your Honour. HIS HONOUR: It is. It's a question being asked of somebody with a career in the law. I'll allow it. HEMSWORTH Q. Do you want me to ask it again? A. No - no - no, I say that was the final deal: $40,000. Q. But my question‑‑ A. Sorry, $40,000 giving a return of 40,000 and repayable as to an 80,000 payment on 30 August and the second one, if I put in 25, I get 50 back on, and if I put in 30 I get 60. As a consequence of that, I put in 30 and your client then initialled that."

The Second Loan

1. By telephone on 25 or 26 May 2015, the parties agreed to meet the following Friday at 1pm at the Engine Room. Not much turns on their different accounts of the conversation organising the meeting. The conversation is set out in paragraph 17 of the plaintiff's affidavit and paragraph 21 of the defendant's affidavit. Whereas the defendant said he specifically referred to "Deal 2", which would be a reference to his evidence of the discussion of the two deals at the time of making the first loan recorded in annexure "D", the plaintiff said that the defendant spoke of "another deal" and on the same 100% return basis as 'D1' but for $30,000.00 lent over the shorter term of less than 3 weeks.
2. Just as in relation to the first loan agreement; each of the plaintiff and the defendant set out conversations leading to the making of the second loan. Just as for the first loan agreement, whereas the plaintiff deposed that the second loan was made between them personally and contracted orally; the defendant deposed that the plaintiff made a written agreement with ABEI: Loan 2 at Defendant Exhibit pages 12-14.
3. The plaintiff deposed that the defendant advised the repayment date of 25 June 2015. The date written by the defendant beside "D2" on Annexure "D" is "25/6". The monies were to be deposited into the account of ABEI on Monday 31 May 2019. The plaintiff says they discussed that this would make the loan term only 26 days. The defendant case, based on Loan 1, is that the term of the loan was three months. His pleaded case was that repayment was due on 29 August 2015. Nowhere in Annexure "D" does that date appear. I observe that whilst "25/6" in Annexure "D" is consistent with the plaintiff case; "25/6" bears no consistency with the defendant case.
4. According to the plaintiff (paragraph 18 of his affidavit), he once again told the defendant that "It seems too good to be true" and again stipulated that he would only contract with the defendant personally. In part the conversation set out in paragraph 18 to the plaintiff's affidavit included the following: "Me: Mark, so what you are telling me [is] that this new deal is essentially the same format as D1 and it is a loan to you personally, you understand that? Is that correct? Defendant: Yes, I understand that, but I still want you to pay it into the Alexander and Black account at St George. If you go ahead with this one, we will call it 'D2'. Me: I again stress to you that I cannot risk losing one cent of this principal just as I could not risk it with D1… It is critical, if I agree to loan you this further $30k that you pay it all back with the agreed return on 25 June and that there is no hiccup at all in you repaying D1 on 30 August as you have promised. Defendant: Don't stress mate, I promise you I won't let you down. Me: OKAY, you have convinced me again with your sincerity and the fact that in both D1 & D2 you [re] personally putting your balls on the line undertaking repayment the same as you did with D1, I can only rely on you and your confidence that nothing can go wrong with this D2."

PLAINTIFF ANNEXURE "D"

1. The starting point for consideration of Annexure "D" is the undisputed fact that it was created by the defendant. Whilst at T p 145 line 50 the defendant refused to concede he wrote the letters "D" appearing as "D1" and "D2"; in paragraph 14 he used precisely these references for the two loan deals.
2. As already quoted, in cross examination the plaintiff maintained that the defendant's handwriting on Annexure "D" recorded the terms of the loans orally agreed; T p 54 line 43 to p 55 line 21: "Q. Now, I'm putting to you that the numbers on this page are just numbers that pass between yourself and my client on the way to coming to a final deal. A. Not passing through, they were the final deal. If you look at the return dates of 30 August and 25 June it refers specifically to the two loans. Q. Sir, I'm putting to you that this certainly does not constitute a final deal. A. It was the final deal. Q. You certainly didn't sign it, did you? A. No. Q. And the reason you didn't sign it was because it wasn't a concluded agreement. EARDLEY: I object. Letter of instruction. It's really a matter for your Honour. HIS HONOUR: It is. It's a question being asked of somebody with a career in the law. I'll allow it. HEMSWORTH Q. Do you want me to ask it again? A. No - no - no, I say that was the final deal: $40,000. Q. But my question‑‑ A. Sorry, $40,000 giving a return of 40,000 and repayable as to an 80,000 payment on 30 August and the second one, if I put in 25, I get 50 back on, and if I put in 30 I get 60. As a consequence of that, I put in 30 and your client then initialled that."
3. The writing on annexure "D" appeared as follows:
4. At T p 56 it was put to the plaintiff in cross examination that the writing in relation to "D1 $40-$80 30/8" and "D2 $25↓$50, 30↓60 25/6" in Annexure "D" represented that the plaintiff and ABEI would contribute equally. At T p 56 line 23 his answer was that he did not know that ABEI was going to contribute equally and at T p 56 line 27 that it was the defendant who was taking the risk to match him. These answers are consistent with his case that he contracted personally with the defendant but that the defendant might have raised the money though his company ABEI.
5. There is no reference to ABEI in Annexure "D".
6. The plaintiff was not cross examined on the meaning of the further writing in relation to 'D1' being numbers and letters within parenthesis or the © under the number 60 in relation to 'D2'. Neither party gave evidence relating to or made submissions on the meaning of that further writing. This was so even though I addressed it to the parties: T p 55 line 50 to p 56 line 10.

Subsequent Performance

1. The different version of telephone conversations on 14 June and 17 June 2015 deposed to by the plaintiff in paragraphs 23 and 24 of his affidavit and by the defendant in paragraphs 27 and 28 of his affidavit are consistent with the defendant informing the plaintiff that repayment of the second loan would be delayed beyond 25 June 2015. They are inconsistent with the Loan 2 term repayment on 29 August 2015.
2. Annexure 'F' to the plaintiff affidavit is his email sent 18 June 2015 to the defendant at "mark@theengineroomaustralia.com.au" ('the Defendant's Engine Room Email'). It refers to repayment of the second loan being due on 25 June 2015 as claimed by the plaintiff and inconsistent with the defendant case. At paragraph 28 of his affidavit, the defendant denied receiving the email and said "it appears the email was sent to an old email address which was not being monitored. At this time I was using the email that I currently still use being mark@goldenrobotrecords.com". The email is a contemporaneously created document referring to the discussion between the plaintiff and the defendant on 17 June 2015. It asks what the extra amount of repayment would be if the repayment were delayed from 25 June to 15 July as suggested by the defendant. That enquiry is consistent with the effect of the conversations set out in the plaintiff's affidavit at paragraphs 23 and 24.
3. Repayment of the second loan agreement was not made on 15 July 2015. Annexure 'G' to the plaintiff's affidavit is his email dated 31 July 2015 directed to the Defendant's Engine Room Email. There was no suggestion in the cross examination focussed on the plaintiff's annexure 'F' and 'G' of error of address for the Defendant's Engine Room Email. Annexure 'G', like the annexure 'F', is consistent with the style of assurances given by the defendant to the plaintiff of repayment set out in the plaintiff's paragraph 18 concerning the making of the second loan agreement. Nowhere in annexures 'F' or 'G' is there reference to ABEI. In annexure 'G', reference is made to "getting these funds back from you by no later than". The overall reading of emails annexures 'F' and 'G' is consistent with the fact of the existence of a second loan agreement made between the parties personally and repayable on 25 June 2015, although the plaintiff conceded against interest, common parlance personalised expression when dealing with the principal of a company: T p 28 lines 35-39.

PLAINTIFF SIGNATURE ON LOAN 1 AND LOAN 2

1. Throughout oral examination the plaintiff was unshaken in his denials of having signed loan agreements. He conceded that the signatures on Loan 1 and Loan 2 were his, meaning replications of his signatures: T p 40 line 25. Because one week before trial the Acting List Judge had refused the plaintiff leave to rely on the expert opinion evidence of Ms Holt, which leave the plaintiff obtained in the course of the trial, the approach taken by the plaintiff was to cross examine the defendant with use of transparencies.
2. The defendant was shown two clear plastic sheets on each of which was a tracing of the copy signature of the plaintiff on Loan 1 and on Loan 2 respectively. In the witness box he positioned one transparency above the copy plaintiff signature on Loan 1 and then that transparency over a document described as a copy of the plaintiff's signature on page 1 of his affidavit. This exercise was repeated with a transparency positioned over the signature on Loan 2 and over a copy of the plaintiff's signature on page 2 of his affidavit. The copies of what were said to be pages 1 and 2 of the plaintiff's affidavit and the transparencies were not tendered. They are all contained in MFI 5. They not being evidence, the Court does not express an opinion as to the accuracy of the overlay of signatures.
3. This whole process was objected to by the defendant on the basis that the defendant was being asked to give expert opinion evidence. I allowed it because the evidence was not tendered for evaluation as would best be done by a forensic document examiner. The evidence was not more than the defendant describing what he actually saw. The plaintiff referred to this as "pictorial". In my opinion, the oral evidence was relevant evidence because if likeness of signatures (even without there being precise tracing to be seen) were accepted, it could rationally affect the assessment of the probability of whether or not the plaintiff did sign Loan 1 and Loan 2: ss 55(1); 56(1); and 78 Evidence Act 1995 (NSW).
4. The defendant conceded that the signatures on the transparencies were of close appearance to the plaintiff's signatures on Loan 1 and Loan 2 and on pages 1 and 2 of his affidavit respectively but not to accurately trace any of those signatures: T p 107 line 45; p 112 line 40; p 114 line 25; and p 118 line 05.

THE RED FLAGS

1. The plaintiff was fairly cross examined on the proposition that he being a retired solicitor with a working life experience in that profession, would not have contracted the loans orally, given his red flag concerns listed in paragraph 10 of his affidavit. It was put to him that he was not being truthful in saying that he entered into oral loan agreements rather than agreements the terms of which were recorded in writing.
2. It was put to the plaintiff that he had fabricated the "red flag" conversation in order to "disparage" the defendant in the proceedings, which proposition the plaintiff denied: T 29, 49. I select from the cross examination the following passages as characteristic of the defendant's challenge to the veracity of the plaintiff's affidavit evidence and his responses: (T p 29 lines 20-26) "Q. Okay, well if you were really worried about the bad publicity that my client had received, I'm putting to you that you wouldn't lend any money at all, whether it be a company or a personal loan? A. I couldn't agree with you more. Q. But you did, didn't you? A. I did. He's very persuasive." (T p 29 line 50 to p 30 line 4) "Q. The reason that you lent my client's company the money was because these red flags simply didn't exist at the time; you're making them up now, three and a half years later. A. Well firstly, I did not loan it to his company; and secondly, I'm not making it up three and a half years later. " (T p 30 line 21 to p 31 line 14) "Q. I'll repeat it. I'm putting to you that with this many red flags that you're alleging, and being an ex solicitor, that you would ensure that this loan agreement is in writing. A. I should have, other than the representations of your client, yes. Q. And I'm putting to you that you did put it in writing. A. I did not. Q. And you signed a written agreement with my client's company, Alexander and Black Equities and Investments. A. I did not. Q. I'll take you over to page 11 at the top [a reference to plaintiff affidavit paragraph 10]. If I could take you to the subparagraph F there. Do you see that? A. Yes. Q. You allegedly say, "My fear is that what you are suggesting to me, from your end, sounds like some sort of Ponzi scheme or maybe that it comes from a return from some involvement in drugs. There's no way I'd get involved in anything like that." A. That's exactly what I said. Q. Again, this is a self‑serving recollection by you to get into evidence disparaging remarks about my client. A. No, sir. That was exactly what was said by me at the time, because of my concern of the red flags you've - you've just mentioned. Q. So is that seriously your evidence to his Honour that you've just met my client, you've known him for approximately seven days, you're talking about lending $40,000, and you formed an opinion that he could be involved in a Ponzi scheme or some type of drug dealing enterprise, but you still lent the money? A. Firstly, that was my concern. He was pushing me for the money. I didn't go to lend him money. He was trying to borrow money from me and persuade me. Q. Mr Kennedy, that's not my question. My question is: is it seriously your evidence here today that you formed an opinion that my client was involved in a Ponzi scheme and/or some sort of drug dealing enterprise and despite all of that, you lent him 40,000 or lent the company $40,000? A. No, I did not suggest that he was involved in a Ponzi scheme or any drug - I said to him, "This seems so extraordinarily a good investment that you're asking me to do. I hope it is not involved," and that was done and said at the time." (T p 31 line 46 to p 32 line 09) "Q. And I'm putting to you, in the real world, if you have those concerns about my client, that you say in this paragraph, there is no way you would have lent $40,000? A. Correct. Q. Right, so that what you've done here is made it up and put it in there to disparage him? A. Absolutely denied, absolutely. Q. I'm putting to you, you never thought that and you never said that? A. (A) the thought went through my mind; (B) I said it at the time, exactly, and that was why he continued his - gaining my confidence by giving me all the nonsense that he did, that caused me to lend him the money." (T p 34 lines 14-23 and p 34 lines 45-47) "Q. You say, "You're asking me to lend you money basically on a handshake, despite your chequered past, reputation and apparent publicity of being a con man who lets people down regularly." A. Yes. Q. Now, I'm saying to you this is just another example of you putting in comments to disparage my client and get them into evidence in these proceedings. A. I disagree with that. ….. Q. Well, something that obviously you were thinking and that he had to quell, to satisfy your concern about it? A. Yes."

DEFENDANT'S FAILURE TO INFORM LIQUIDATOR OF THE DEBT

1. The defendant was cross examined on documents produced by ASIC of the liquidation of ABEI. The defendant conceded that he did not include the plaintiff among the list of creditors of ABEI nor did he provide the liquidator with Loan 1 and Loan 2. Obviously, one would normally expect the defendant as director and secretary of ABEI and being the person who placed it into administration and subsequently it going into liquidation, to have done so. Indeed, the defendant had prior experience of placing other companies into liquidation. He exposed some understanding of the process with his answer at T p 82 lines 02-08: "A. Into administration more than liquidation, yes, sir. Q. You knew that you had an obligation to provide to either the liquidator - actually, I'll do it in two parts. When you placed companies into administration, did they then go to liquidation? A. Potentially, yes."
2. He claimed an inability to recall how many companies he as a director had placed into administration, His evidence in this regard was (T p 82 lines 13-18): "Q. How many companies do you recall that you placed into administration as a director which then went to liquidation? A. I wouldn't - I couldn't be sure, sir. Q. More than five? A. Again, I couldn't be sure."
3. When taken in the Court Book to the ASIC Form 509 "Summary of assets and liabilities" the defendant agreed that he understood that he was to provide a list of creditors to the liquidators of the company, they being people to whom the company owed money and that he signed the document, dating it 15 December 2016. He agreed that he realised he was to apply "the best of my ability" to that task and yet, faced with the plaintiff not being included in the list of creditors, his evidence was that he had simply overlooked the plaintiff as a creditor of the company: T p 85 line 45 . This evidence by the defendant is to be considered in the context of his evidence that the plaintiff pursued him for repayment frequently up to the time of the company was placed into administration.
4. On the whole I found this evidence to be further reason to be concerned that he was being untruthful and consciously so in relation to his assertions that the loans were agreed between the plaintiff and ABEI and not with himself personally. This in turn caused further concern that Loan 1 and Loan 2 were not true copies of contracts signed by the plaintiff. I considered his following passage of evidence to again show him to be deliberately evasive when the question called for a concession against his interest (T p 134 lines 41-49): "Q. You never took any steps, even to today, to furnish a copy of loan agreement 1 or loan agreement 2 to the liquidator. A. They haven't asked me, sir. If they‑‑ Q. You haven't done it, have you? A. They haven't asked me, sir. Q. Have you done it or not? A. No, I haven't done it, sir." Plainly the liquidator would not know to ask, if the defendant had not informed him of the debt.

CONSIDERATION

1. The evidence must be considered as a whole and in the course of that process and purely for organisational purposes in this delivery of reasoning, it is convenient to recognise three areas of presentation of the plaintiff and defendant evidence in the case. Those areas are:

• the persuasion of their competing versions of events given in evidence in chief;
• my assessment of them as witnesses whose oral evidence when assessed with the whole of the evidence in the case was truthful, reliable and accurate; and
• my assessment of the evidence of the forensic document expert, Ms Holt.

1. Before coming to Ms Holt's evidence, I will deal with the first two areas. Of course it is available to the court to accept parts of the evidence of the plaintiff or the defendant and to reject parts of their evidence as relate to the facts in issue in the course of my fact finding.
2. In determining the issue of credit I am assisted by employing consideration of the approach described by Tamberlin J and approved by the High Court in Effem v Lake Cumbeline Pty Ltd [1999] HCA 15; 161 ALR 599 at 603. The passage of the judgment of Tamberlin J read as follows: "Credit in this matter assumes a significant role because almost all of the representations alleged are specifically and categorically denied. There are four principal witnesses whose credit is squarely in issue, and I propose to comment on each of them in turn. I should add that my final conclusion is that having regard to the 7 to 8 year period that has elapsed between the events and conversations raised in the evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long time."

CONCLUSION

1. The plaintiff is entitled to damages for breach of each of the loan contracts by the defendant's failure to pay. It was a term of the second loan that it be repaid on 25 June 2015. It was a term of the first loan that it be repaid on 30 August 2015. Taking into account the $10,000.00 payment made on 6 June 2016, the principal balance sum in total is $130,000.00. In closing written submissions at [61] the plaintiff has accounted that payment against the amount due under the second loan, which approach I accept because, interest is compensatory and should run longest on the lesser amount.

COSTS

1. In the plaintiff's outline of closing submissions received 21 November 2019, he for the first time mentioned an application for costs to be awarded on an indemnity basis pursuant to UCPR r 42.5. Defendant's closing written submissions received 29 November 2019 do not respond to the plaintiff's claim for indemnity costs. Neither party has sought the matter be listed for oral argument in relation to costs.
2. Whilst my conclusion is that I am satisfied on the balance of probabilities that the two loans were agreed orally in the terms of the plaintiff's case and that I am not persuaded on the balance of probabilities that Loan 1 and Loan 2 are true copies of original contracts signed by the plaintiff; in the absence of the defendant having been tested in cross examination on the assertion that he falsely created Loan 1 and Loan 2 or that he swore his affidavit untruthfully because he was aware of the fact that they were not true copies of original contracts, in my view, it should not be found that his defence was brazenly false. On the final day of the hearing, following the evidence of the expert forensic document examiner, Ms Holt, the plaintiff elected not to seek further cross examination of the defendant on that topic. Whilst I am satisfied that some person at some time must have committed the grave civil wrong of creating Loan 1 and Loan 2, there is no evidence that the defendant was aware at the time he swore his affidavit of that fact. It may have been the activity of a misguided employee involved in the processes of his office, for instance. Such possibilities were not examined and should not be dismissed on the evidence in the case. For these reasons, I do not accept that the defence run was totally frivolous and thoroughly unjustified.
3. Assuming that the plaintiff, by making submissions for costs on an indemnity basis in closing, has referred to the whole of the evidence upon which it would base such an application; I would refuse it and order costs on the normal basis.

ORDERS 1. Judgment for the plaintiff in the sum of $130,000.00; 2. Interest pursuant to s 100 Civil Procedure Act 2005 (NSW) on the amount of 1. $60,000.00 for the period commencing 26 June 2015 and ending 5 June 2016; 2. separately on the amount of $80,000.00 for the period commencing 31 August 2015 and ending 5 June 2016; and 3. on the sum of $130,000.00 thereafter; 1. The defendant pay the plaintiff's costs of the proceedings on the normal basis; and 2. I return the exhibits.

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: 17 February 2020