Peter John Conridge v Marius Emiele Schaapveld

Background

1. These proceedings concern three loans that were made by the plaintiff: one for $500,000, one for $150,000 and one for $50,000. The loans, made in 2005, were repayable after twelve months, three months and six months respectively and included a requirement of the payment of interest at a rate of 15% per annum. The first loan was made on 17 February 2005 and was due to be repaid by 17 February 2006. The other two loans were to be repaid no later than that date.
2. Whilst the terms of the loan are not in dispute the defendants dispute that the agreements were made with them as opposed to one or other of two companies.
3. The plaintiff claims on his pleadings that he loaned the three amounts to all four defendants; the first defendant to whom I shall refer as "Max", the second defendant "Max Junior", the third "Justin" and the fourth "Annette". Max and Annette are married and Max Junior and Justin are their sons.
4. On the second day of the hearing the plaintiff resolved the proceedings against Max Junior and Justin. The proceedings against these defendants were dismissed with the defendants agreeing to pay $17,000 to the plaintiff, and it being noted in the consent orders that there be no order as to costs as between the plaintiff and these defendants and "The plaintiff releases the second and third defendants from all and any claims the subject of and arising out of these proceedings."
5. The defendants all had some involvement with a company known as Frozen Custard Australia Pty Ltd "FCA" and another company Frozen Custard Retailing Pty Ltd "FCR". The shareholders of FCA were at all relevant times Max, Max Junior and Justin: see Tab 25 Exh A. The directors of FCA at all relevant times were Max, Max Junior and Justin. The shareholders of FCR at all relevant times were Max Junior, Justin and Annette and the directors of FCR at all relevant times were Max Junior and Justin: see Tab 26 Exh A and Exh 3.
6. FCR went into liquidation in or around April 2008. FCA has been deregistered.
7. On 17 February 2005 the plaintiff handed to Max a bank cheque in the amount of $500,000 made out to, on the plaintiff's evidence, FCA.
8. On 1 July 2005 the plaintiff paid, at the request of Max (on behalf of the defendants, on the plaintiff's case, or on behalf of FCR, on the defendants' case), an amount of $150,000 in respect of the fit out of a store in Frankston, Victoria.
9. On 16 August 2005 the plaintiff paid, at the request of Max (on behalf of the defendants on the plaintiff's case), an amount of $50,000 to Unikilt Pty Ltd, a company that had invoiced FCR in respect of the Frankston store that was operated or to be operated by FCR (as a franchisee of FCA).
10. Max and Annette maintain that the plaintiff lent the three amounts to FCA and or FCR and not to them. There is no disagreement that the three amounts were paid to, or to the benefit of, FCA or FCR.
11. It might have been expected that the plaintiff, in lending such large sums of money, would require documentation of the loans recording the terms on which the money was lent including interest and the period of the loans. No such documentation was utilised and indeed the plaintiff accepts that it was his practice not to document loans that he made to Max or Max's Enterprises Pty Ltd ("MEPL") a company owned or operated by Max.
12. In respect of each of the three loans which I shall refer to as "the Frozen Custard Loans" there is a contest as to what was said between the parties. Max Junior and Justin deny being present at what the plaintiff claims were two key conversations on 17 February 2005 concerning the first loan.
13. Before the Frozen Custard loans there had been a long course of dealing between the plaintiff and Max (and MEPL). They had been neighbours and had become friends and on numerous occasions the plaintiff lent money to Max or, on Max's case, Max's companies. All of these loans were short term, at a high rate of interest and all were repaid. Max and his family were apparently quite successful in the video business and Max gave the plaintiff the benefit of advice when the plaintiff wished to commence ownership of video stores. Both Max and the plaintiff were apparently quite successful in these endeavours although Max had experienced a considerable failure in his hi-fi business. In addition, the plaintiff's wife Lidia and Annette were also friendly and there were occasions on which the two couples and their children attended at each other's homes.
14. There is no dispute that Max became enthusiastic about the possibility of becoming the Australian franchisor of "Rubees Frozen Custard", a US enterprise (which may also be known as Classic Frozen Custard), and he planned to operate an existing store at Dickson in the ACT which he wished to purchase and to establish a new store in Frankston, Victoria. Max says that he sought to interest the plaintiff as an investor on the basis of the potential of the business but the plaintiff, he accepts, did not wish to become a shareholder in the business.
15. The plaintiff did, however, accompany Max on a trip to the ACT to see the Dickson store in operation and the plaintiff did undertake some brief research on the internet concerning the concept.

The Plaintiff's Evidence

1. The plaintiff's evidence concerning the making of the $500,000 loan is as follows: 1. in January or February, and before 17 February 2005, he had a conversation with Max "[Max] said: "I need to borrow some money. What do you think about lending me $500,000 for 12 months? I have found this Franchise business opportunity. I want to set up stores to make and sell frozen custard as a full franchise operation. I will need $500,000 for about 12 months maximum and I will give you 15% interest payable monthly." I said: "Max what you are doing getting into the dessert business?" [Max] said: "Annette and I and the boys have done a lot of research on this. There are existing stores here in Australia and large franchise networks in America and we want to set up a full franchise operation in Australia. I will manufacture the product and I will sell off franchises to distributors. We believe there is a huge potential for expansion and for profit. Let's catch up and talk about it." I said: "Ok, when you've got yourself organised, let's do that."" 1. he says that subsequent to that meeting and on 17 February he, his wife Lidia, Max, Annette, Max Junior and Justin met at the plaintiff's house in Balgownie. The plaintiff and Lidia have subsequently separated and divorced. 2. in that meeting at the plaintiff's home he had a conversation with Max at which Annette, Max Junior, Justin and Lidia were present in the following relevant terms: "I said: "Max, $500,000.00 is a lot of money. I don't want to sound negative but in a worst case scenario, what's plan B?" Max said: "Well you know we have the two stores, and that they are both trading well? They're worth at least $350,000.00 each. The house is valued at $950,000.00. I owe $640,000.00 so there's $300,000.00. I also have two original Darcy Doyle paintings that are worth over $80,000.00. We have some cash plus the takings from the two stores." ….. I said: "Well ok, that's sufficient I suppose if this doesn't go according to plan. Have you thought about any locations for these stores as yet?" Max said: "The first store is going to be in Frankston, in Victoria." I said: "Frankston! Where is Frankston?" He said: "It's approximately an hour south of Melbourne." I said: "That seems like an odd place to set up a dessert business." He said: "I have been talking a lot to Gary Powell, he is the one that recommended that shopping centre and town. This is a brand new extension to an existing shopping center where they have put in a Hoyts Cineplex and there will be plenty of trade. It is also a holiday district and they get a big tourist trade. I've done my homework and looked at the population figures and floor traffic comparison figures for large successful shopping centers." …. I said: "How big is the store you're doing in Frankston?" Max said: "About 200 square meters". I said: "That's pretty big! Are you going to sell something else? That's a pretty big store? Are you going to have other products as well?" He said: "We're going to have other things there too, like hot dogs, condiments." …… [Max said] "[t]he $500,000.00 will be used for the fit-out costs; the cost of the special tiles that we need in the kitchen because of health regulations."" 1. that he went from his house with Max, Max Junior and Justin to the ANZ Bank and arranged for a bank cheque. He says he had the following conversation with all three "I said: Max do you want the cheque made out to Max Schaapveld?" Max Junior said: "Well, if you put it into that account, then we'll have to transfer the money to that account, wait for it to clear, and transfer it to the Frozen Custard account." Max Senior said: "It'll save us time if you write it straight out to the company. It's going to go to the company anyway. I said: "So what name should I put on the cheque? Max Junior said: "If you don't mind, Frozen Custard Retailing Pty Ltd" Max Senior said: "Yes, that'll save time." I said: "Okay."" 1. and then (see para 67 of the plaintiff's affidavit): "Max Senior, Max Junior, Justin and I all shook hands. Max Junior said: "Thanks, we won't let you down". Max Senior and Justin also thanked me, I recall there were multiple hand shakes and pats on the back. Max senior then handed the bank cheque to Max Junior. Max Junior said: "Ok we are going across the road to the St George bank to deposit this, we won't be long" or words to that effect."
2. In relation to the second loan the plaintiff says Max called him and said "I need a further $150,000.00 for the shop in Frankston. I need this to complete the fit out. I need it for about three months. Once the store is open we will get a rebate from the landlord of $150,000.00. I'm also going to sell our video store in Bonyrigg and I'll have money from that to be able to cover all of this. "If we can't complete the fit out - which is why we need the extra $150,000.000 - we won't be able to start trading and get the $150,000.00 Landlord rebate and that could put the $500,000.00 you've lent us in jeopardy." There was further discussion about the fact that the plaintiff was angry and disappointed that Max had exceeded the budget and he sought from Max more details about the rebate (see para 74 of Conridge 3/10/2014). He says Max offered him 50% of the Frozen Custard business but his response was "It's your business. I know nothing about it and have more than enough business interests of my own at the moment. I lent the money to your family and I know nothing about the business and I don't want to be involved."
3. In relation to the loan of $50,000 the plaintiff says that Max rang him and said: "I need another $50,000 to complete the fit out. It'll only be for about 4 months as I can pay it back by the end of January from the Christmas trade." There was discussion about the preparedness of Max and the plaintiff asked: "Max, have you thought about how you're going to repay the extra loans as they weren't in your original estimates?" and Max replied: "You know we're good for whatever I ask you for? I would never put you and Lidia at risk. I can always sell one of the video stores if the need arises."

Max's Evidence

1. Max's version of events is as follows.
2. Max says that he first broached the possibility of the plaintiff becoming an investor in the Frozen Custard business in or around December 2004 and that he and Annette went to the Dickson store and met the plaintiff there. Max told the plaintiff that he would like to invest but did not have the money. He then said "I need someone to invest about $500,000 to acquire the Dickson store and the franchise."
3. Max says that on 17 February he and Annette went to the plaintiff's home for a lunch at which Lidia, the plaintiff's ex wife was also present. During the visit the plaintiff said "I'll loan the money. Let's go to the bank before it closes."
4. Max says that he went to the plaintiff's ANZ Bank branch at Corrimal and that he had the following conversation with the plaintiff "Peter: "Do you want me to make the cheque out to Max's Enterprises?" Me: "Why would you do that? Max's Enterprises has nothing to do with it. Make it out to Frozen Custard Australia.""
5. Max says that the cheque was made payable to FCA and that the monies were used by FCA in relation to the Dickson store and the master franchise for the Classic Frozen Custard Co.
6. Max's version of the conversation in relation to the $150,000 loan (found at [11] and [12] of Max 21/4/2015) is as follows "11. In or about June or July 2005 I had a conversation with Peter during which I said: "The Builder requires $150,000 to complete the fit out of the store at Karingal. Can you help out?" 12. On 1 July 2005 the sum or $150,000 was deposited into the Business Cheque account of FCR with Westpac. The moneys were used by FCR to pay for the fit out of the store at Karingal Victoria."
7. Max's version of the conversation in respect of the $50,000 loan (found at [14] and [15] of Max 21/4/2015) is as follows "In or about August I telephoned Peter. During our conversation I said to him words to the effect: "The Builder needs a final payment of $50,000 for the fit out of the store at Karingal. Can you help?" 15. I recall our conversation was short. I do not recall all of the conversation. I believe I did say something to the effect that "you will be repaid in 3 months". I gave Peter the details of the Builder. I believe that Peter made a cheque payable to the Builder in the sum of $50,000."
8. Max, Annette, Max Junior and Justin deny that Max Junior and Justin were present at the plaintiff's home on 17 February 2005. Max, Max Junior and Justin deny that Max Junior and Justin went with Max and the plaintiff to the bank. They were not cross examined.

Issues

1. The issues for determination are: 1. can the plaintiff succeed on his pleaded case given that he has settled his claim against the second and third defendant and that he has sued all four defendants as joint promisees; 2. has the plaintiff established on the balance of probabilities that he lent each of the three amounts to the four defendants; 3. if the answer to (2) is no is that determinative of the matter; 4. if the answer to (3) is no has the plaintiff established that he lent the money to any of the defendants; 5. if the answer to (4) is yes, is his claim statute barred because he commenced proceedings on 9 July 2014; 6. in relation to (5) there are two sub issues 1. was the plaintiff suffering from a disability that prevented the limitation periods on each loan from running; 2. did the defendants make repayments of the loans (or any of them) so as to lead to the recommencement of the limitation period, by virtue of s 54 of the Limitation Act 1969 (NSW) (s 54(2)(ii) in particular) 1. if the plaintiff is not barred and can recover, for what amount should judgment be entered In relation to issue (6) Mr Robinson accepts that subject to either of 6(a) or 6(b) the limitation period had expired prior to the commencement of the proceedings and provided a complete defence to the plaintiff's claims.

Does the Plaintiff have a Remaining Action against Max and Annette?

1. The proceedings as against Max Junior and Justin have been dismissed with Max Junior and Max agreeing to pay the plaintiff $17,000. The defendants assert that the dismissal of the proceedings against two alleged co-obligees brings the proceedings against Max and Annette to an end.
2. The plaintiff has pleaded a case that all four defendants entered into the three contracts with him. No alternative case was pleaded. Mr Robinson contended that the Court should, notwithstanding the pleaded case, find that Max and Annette were the borrowers or even just Max. Max and Annette submit that that course is not open to the plaintiff.
3. A detailed and authoritative exposition of the principles relevant to the effect if the dismissal of the proceedings against two of the alleged co-obligees is found in Murray-Oates v Jjadd Pty Ltd [1999] SASC 537; (1999) 76 SASR 38, the relevant paragraphs of which I set out: "82 The release of one of several promisors whose promises are joint operates to discharge all promisors: Nicholson v Revill (1836) 4 Ad & El 675 and Deanplan v Mahmoud [1993] Ch 151 at 167. This principle applies to promisors whose debts are joint and several as well as to those whose debts are joint. Such a release is inconsistent with the other promisors being entitled to contribution from the promisor who has been released: Deanplan v Mahmoud . 83 As an alternative to the giving of a release, a promisee may enter into a covenant with one or more joint promisors not to sue. Such a covenant will not affect the right of the promisee to recover from promisors who do not have the benefit of the covenant not to sue. Of course, such a covenant is not as effective as a release as the right of contribution between joint promisors remains unaffected. The promisee could sue a promisor who does not have the benefit of the covenant not to sue. That person, having paid the debt would be entitled to recover contribution from the other promisors notwithstanding the fact that the promisee may have given them covenants not to sue. 84 It is well established that if the relevant document or agreement contains a reservation of rights as against the other joint debtor, the document is not to be construed as a release but as a covenant not to sue. 85 In Re E W A, A Debtor [1901] 2 KB 642 Collins LJ said (at 648): "It is clear that, although a document in terms purports to release one of two joined debtors yet it may contain in terms a reservation of rights against the other joint debtor. Where you find those two provisions, you construe the documents, not as a release, but merely as an undertaking not to sue a particular individual, and the result is that the right to proceed against a co-debtor is reserved and can be put in force against him. Whenever you can find from the terms of the document an agreement for the reservation of rights against the co-debtor, then I agree the document cannot be construed as an accord and satisfaction of the joint debtor and therefore as a release of the co-debtor." See also Kenworthy v Avoth Holdings Pty Ltd (1974) WAR 135 per Burt J (at 141). Burt J wrote a dissenting judgment in that case but the statement of principle set out (at 141) would appear to be correct. 86 Some cases have had resort to ambiguity in the text of the relevant clause to imply that the document may be read as a covenant not to sue rather than as a release by accord and satisfaction. In Deanplan v Mahmoud Judge Paul Baker QC held (at 170): "A covenant not to sue is not a release. It is merely a contract between the creditor and the joint debtor which does not affect the liabilities of the other joint contractors or their rights of contribution or indemnity against their co-contractor. It is a question of construction of the contract between the creditor and the joint debtor in the light of the surrounding circumstances whether the contract amounts to a release or merely a contract not to sue." 87 At common law where a promise is given to two promisees, they are treated as having a joint interest in the debt or obligation and a satisfaction to one of the promisees of a joint demand due to both puts an end to the joint demand. In equity, however, the general rule in respect of such a debt or obligation is that the promisees are treated as tenants in common and not joint tenants so that to discharge the entire debt or obligation, the signatures of both are required: Steeds v Steeds (1889) LR ; 22 QBD 537 at 541. If the instrument under which the debt or obligation arose declared the promisees to be entitled to the money as joint tenants both at law and in equity, then equity would follow the law and treat the promisees as joint tenants in equity: Bell v Rowe (1901) 26 VLR 511 at 526. In that case, Holroyd J said (at 526): "In equity the presumption is, unless there is something to show the contrary, that joint tenants are really tenants in common, and that when they lend their money each of them intends only to lend his own share of it. That presumption as to joint tenants may be rebutted, and it is rebutted in this case by the fact that they were joint tenants in equity as well as at law, being actually recited in the mortgage deed." 88 The question of whether we are concerned with a release or covenant not to sue should be approached as being one of construction having regard to the words used. At the same time one has to bear in mind the possibility of an implied reservation of rights. The fact that the plaintiff might not have intended to release the defendant, or did not realise the legal consequence of a release to one joint debtor, is not of itself of any particular significance: Deanplan v Mahmoud at 169."
4. See also the more recent exposition in Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159; (2011) 42 WAR 59 and see also Walker v Bowry [1924] HCA 28; (1924) 35 CLR 48. I take the relevant principles applicable here to be: 1. a promise by two or more persons jointly creates only one obligation 2. judgment against, or a release of, one of the obligees is not necessary to absolve the remaining obligees- accord and satisfaction will suffice (referred in the context of tortfeasors to the rule in Duck v Mayeu [1892] 2 QB 511) 3. a covenant not to sue will not be treated as a release 4. a reservation of rights against other obligees will prevent the accord and satisfaction operating as a release: Re EWA (a debtor) [1901] 2 KB 642 and see Baxter v Obacelo Pty Ltd [2001] HCA 66; (2001) 205 CLR 635 at [26] per Gleeson CJ and Callinan J 5. the question of whether there has been a release or a covenant not to sue is a question of construction having regard to the words used 6. ambiguity in the terms of the document entered into between the creditor and one of the debtors may imply that the document should be read as a covenant not to sue
5. There was here no reservation of rights and no use of a covenant not to sue. By the agreement noted in the Short Minutes of Order (see para 4) the plaintiff clearly released Max Junior and Justin from any further claims.
6. The reasons for these rules, particularly in the context of joint tortfeasors, have been questioned (see particularly Glanville Williams, Joint Obligations (1949, Butterworth & Co) pp 114- 119) but as Murray-Oates and the other Australian cases I have mentioned make clear the rules have been accepted. The High Court in Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574 held that the rule in Duck v Mayeu had been impliedly abrogated in relation to tortfeasors by the enactment of s 11 of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT). That legislation and its analogue in other states (ie in NSW the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5) did not deal with contractual obligations, and Thompson does not undermine the existence of and operation of the rule more generally.
7. I find there was accord and satisfaction as between the plaintiff and two of the four joint obligees (on the plaintiff's case); see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at pp 183- 5 per Dixon J and El-Mir v Risk [2005] NSWCA 215 at [48] per McColl JA.
8. It would follow therefore that any liability of Max and Annette was discharged with the agreement by Max Junior and Justin to pay $17,000. The plaintiff therefore has no remaining claim against Max and Annette.
9. On the assumption that that conclusion is not correct then consideration needs to be given to whether the plaintiff who has sued all four defendants can recover against only two, ie assuming there is no bar because of settlement with the sons.
10. Pleadings are important. The High Court expressed the position thus: "Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.); they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v. Cameron); and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon: Sri Mahant Govind Rao v. Sita Ram Kesho)." (p 664 Dare v Pulham (1982) 148 CLR 658 per Murphy, Wilson, Brennan, Deane and Dawson JJ) (footnotes omitted)
11. I do not accept Mr Robinson's contention that the Court can find that there was a contract with Max only when that is not the case advanced at trial by the plaintiff. The remaining defendants from the outset made clear through Mr McGovern their intention to hold the plaintiff to his pleadings.
12. The only case which the plaintiff has advanced is one against the four defendants- his case must fail since he cannot recover now against two or one of those four defendants even if he was otherwise entitled.
13. I should note that at the end of the hearing on 24 April 2015 I gave leave to Mr Robinson to provide submissions on the topic of the release of Max Junior and Justin. I received submissions within the time specified, however, the written submissions dealt with the further topic of amendment for which no leave was granted. There was objection to this course by counsel for the defendants and it was submitted that I should, in accordance with the approach adopted in Bull v Lee (No 2) [2009] NSWCA 362 at [8]- [10], ignore the submissions for which there was no leave and that is the course which I have taken.

Was the Loan made to Max and Annette?

1. Were it open to decide the case on the basis that only one or two of the four defendants was the borrower I am not persuaded that Max or Annette was the borrower for the reasons which follow. In relation to Annette, even accepting the plaintiff's version of conversations with Max with Annette present I do not think that the evidence establishes that Annette (or Max Junior or Justin) was a party to any of the loan contracts and does not establish that Max entered into the loan contracts as agent for Annette (or Max Junior or Justin). The plaintiff's claim against Annette must fail. I turn now to deal with the case solely against Max, on the assumption that such a case were open to the plaintiff.

The Credit of Witnesses

1. It was submitted by Mr McGovern that I should not accept any evidence of the plaintiff unless it was independently verified.
2. Mr McGovern drew attention to a number of features of the plaintiff's evidence to which I shall refer below but before detailing those matters I draw attention to the fact that there was recorded at T17 an exchange between counsel whereby it was agreed that no Browne v Dunn (1893) 6 R 67 point would be taken on the basis of any barrister's failure to put the whole of their clients' respective cases to the opposing witness. I have already referred to the fact that the proceedings against the second and third defendants were dismissed on 23 April 2015. When that development occurred Mr McGovern indicated that he would be calling Max Junior and Justin in his clients' case. Later in the day when it came time for the defendants to be cross examined on their affidavits Mr Robinson indicated that he did not wish to cross examine any of the defendants.
3. A question arises as to whether the credit of the defendants can be impugned at all having regard to the complete absence of any cross examination of them. Interesting as the question may be the fact is that Mr Robinson did not detail any particular respect in which I should find the defendants as lacking credibility other than a general submission that the plaintiff's case is inherently plausible and implicitly that the defendants' case is not. I proceed on the basis that there is no reason why I would not accept the defendants' evidence as truthful wherever it is in conflict with the plaintiff, except to the extent that it is improbable or implausible.
4. The matters affecting the plaintiff's credit are as follows: 1. he admitted that the claims made in two caveats which were lodged on his behalf and in respect of which he had made a statutory declaration attesting to the truth of the assertions contained therein were false claims. He asserted that he had not read the particular assertion namely, "that he contributed to the registered proprietors in relation to mortgage payments to preserve their equity in the property" and that the document had been prepared by his solicitor, Mr Autore. Whilst I accept that the document was prepared by Mr Autore it is another thing to say that the assertions contained in the documents were not based on the plaintiff's instructions to Mr Autore, and that inferentially Mr Autore made up the claims without any input from the plaintiff. I find it improbable that the material contained in the caveat was not based on the plaintiff's instructions and even more improbable that if Mr Autore had made up the claims that he did not make clear to the plaintiff what he had included in the document 1. he asserted that his statement in his affidavit that he had delivered the caveat personally to Max and Annette at her home (para 13 affidavit 20 March 2015) was a typographical error (T96). It was put to him that the reason he knew that statement was false was because he had been incarcerated at that time so it was impossible for him to have delivered it to their home. I do not accept that there was any typographical error in that. The defendants denied receiving the caveat. The plaintiff did not seek to amend his affidavit before being cross examined on it even though he says he became aware of the error a week before. The problem became compounded by his evidence that he had misunderstood what was written in the paragraph which I found difficult to accept 2. he agreed that the loans were unsecured although in his pleadings he asserted that the loans were agreed to be secured over Max and Annette's home, two video stores and some paintings, and he initially asserted in cross examination that the first loan was secured (T83.6) but he accepted that the loans were unsecured (T62.22, 99.5- 14 and T49) 3. his evidence that his sons were at the 17 February meeting became diluted to that they dropped in to the plaintiff's home (T80) 4. in para 49 of his affidavit he said that he knew the assistant manager who came out when he asked for the large cheque but in cross examination he was unable to say who that was (see T72- 74). Whether he did or did not know the assistant manager is of no significance other than that it seems he was seeking by his reference to the assistant manager to indicate how good his recollection of the day was 5. contrary to his attempt to pin his decision to loan the money on the February 17 meeting there was evidence that he had already transferred the funds to his bank account on 2 February (T72- 74). He may have wanted Lidia to agree to the loan but the inference is that he wanted to loan the money before 17 February and had put the transfer in place but did not want to admit that because Annette, Max Junior and Justin were in no way involved in those discussions and nothing Max said, on the plaintiff's evidence, on that earlier occasion pointed to them having any involvement at all 6. in his first affidavit he said nothing about having visited the Canberra store or having made any enquiries about the frozen custard industry whereas he had in fact done so: see T67- T68, T70 7. at para 86 of his first affidavit he said that "The caveat remains lodged on the first and fourth defendants title at Rouse Hill. No attempt has been made to remove it. Annexed and marked "H" and "I" are copies of caveats date 12 March 2009 and 10 December 2010 respectively." and was forced to admit that what he had said was wrong: T124 1. he denied (at T60) that previous loans he had made had been to MEPL but later said he did not remember: T63.14- 21 and see T64- T65 and T67.6- 10 2. he gave an unconvincing explanation of why he did not include the frozen custard loans on his list of assets given to Lidia

Can the Plaintiff Succeed Against Max?

1. There are reasons to doubt the veracity of the plaintiff to which I have just referred. I am not able to accept his evidence in the absence of corroboration from another witness or by documentation.
2. I accept the evidence of Max Junior, Justin and Annette (and Max) that Max Junior and Justin were not present at the plaintiff's home on 17 February and that they did not accompany Max and the plaintiff to the bank. This not only reinforces the conclusion that they were not parties to the contracts of loan but also further undermines the plaintiff's credibility since he is shown to have sought to bolster his case that they are parties by falsely alleging them to have been present when they were not.
3. Max's evidence concerning the loan is not improbable and I have no reason to doubt his veracity.
4. The loans were made ten years ago and the evidence upon which the plaintiff relies is wholly oral where the precise words used make the difference between an agreement with Max on the one hand and his companies on the other. In Watson v Foxman (1995) 49 NSWLR 315 at pp 318- 319 McLelland CJ in Eq dealing with allegations of misleading and deceptive conduct referred to the fact that "Where the conduct is the speaking of words in thecourse of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consider­ation of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." These words in my view apply equally to an oral agreement made ten years ago, even where unlike the position here, there are no doubts as to a person's veracity.
5. There is evidence of behaviour by the plaintiff which is inconsistent with him believing that there was a loan to Max, and not just his claim that the loan was with all four defendants: 1. he provided a list of debtors to Lidia which did not include the Frozen Custard Loans 2. when he sought money from Max and Annette in 2008 he did not make any reference to the pre-existing debt owed (on his case) by them to him 3. the only basis on which he has, until recently, asserted that Max and Annette were liable to him was by his assertion in the caveat that they were indebted to him because of his assistance to them by the provision of mortgage repayments- a completely false assertion
6. Although the plaintiff initially sought to resist the contention, he seemed to accept that the previous substantial loan of $400,000 which he made, was made to MEPL and not to Max personally: see T60, T67- 68, T70 and see document at Tab 1 Exh A.
7. I accept that a borrower can direct the lender as to whom the loan monies are to be paid- a very common occurrence as Mr Robinson submitted. The mere fact that Max told the plaintiff to make the cheque out to FCA is not determinative of the matter. Max says that he does not recall the precise details of his conversation in relation to the first loan. On his very limited evidence of the conversations there is a considerable degree of ambiguity as to who was actually borrowing the money but having regard to the fact that the previous large loan of $400,000 was made to MEPL coupled with the plaintiff's question as to whether the cheque should be made out to MEPL inclines me to think that the loan was probably agreed to be made to whichever corporate vehicle Max was using for the Frozen Custard enterprise. Outstanding loans of $688,000 are recorded in the report of the liquidators of FCR but the ledger of FCA (see Annex D to Annette's affidavit of 21 April 2015) shows a $500,000 loan to FCA not FCR raising doubt as to the reliability of both items of evidence. The plaintiff bears the onus of establishing on the balance of probabilities that Max, and not FCA or FCR, was the borrower and for the reasons I have given he has not done so.

Limitation Point

1. I have noted earlier the agreement of Mr Robinson that the plaintiff's claim is statute barred unless he can bring himself within s 52 or s 54 of the Limitation Act 1969 (NSW)- ie either that he was under "a disability" within the meaning of s 52(1)(c) or because the debtors made "a payment in respect of the right or title of the person to whom the payment is made", which by virtue of s 54(2)(a)(ii) recommences the limitation period.
2. S 50F(4) of the Act defines an incapacitated person as a person who is "incapable of, or substantially impeded in, the management of his or her affairs in relation to the cause of action in respect of the limitation period for which the question arises, by reason of…. (b) restraint of his or her person, lawful or unlawful, including detention or custody under the Mental Health Act 1990"
3. Mr McGovern pointed out that the evidence is that during the period of his incarceration 5 November 2008 to 28 January 2010: "a. the plaintiff consulted his lawyers (Mr Autore and a barrister Mr Pelluso). He spoke to Mr Autore about the non repayment of the loans in or about December 2008. b. the first and fourth defendants visited him; c. he was capable of giving instructions to lawyers (which he did) and friends to protect his interests; d. he requested and obtained money to make prison life more comfortable and meet legal expenses."
4. The mere fact of incarceration is not sufficient: see SW v New South Wales [2010] NSWSC 966 [195]- [200] per Johnson J, Karaagac v GRE Insurance Ltd [1989] NSWCA 116 and Morris v State of New South Wales [2005] NSWDC 10 at [15].
5. The plaintiff has not established that he was unable, whilst in gaol, to instruct his solicitors to commence these proceedings. The evidence shows that he was able to protect his interests notwithstanding his incarceration. Mr Robinson submitted that the Commercial List requires alacrity on the part of litigants and that it would not have been appropriate for the plaintiff to commence the proceedings in this list whilst in gaol. Even were that so there was no impediment to commencing the proceedings in the Common Law Division.
6. It follows that this ground of extension of the limitation period has not been made out.

Section 54(2)

1. In part this question turns on a factual question namely whether the monies handed over by Annette in almost all cases, MEPL in one case and Max in several instances were repayments of the loan at all as opposed (as Annette and Max say) to assistance in response to the plaintiff's request for help. I think there is some room for doubt as to how the monies are to be characterised because on Annette's evidence they were loans and the record keeping by Annette suggests that they were but yet no claim has been made for repayment. I have referred to the fact that the plaintiff did not, on his own evidence, say anything about the monies that he sought being a repayment. That is relevant in the context where he claims that they were repayments. He has nowhere, in such documentation as he has provided to the Court in relation to repayments, deducted the substantial amounts that were paid to the plaintiff's lawyers in connection with his representation in the criminal trial. Having regard to the ambiguity of the evidence and my doubts as to the plaintiff's credibility I am not satisfied that any of the monies paid over were repayments of the loans (strictly only a repayment by Max could be relevant if Max was the borrower).
2. Mr McGovern raised another matter which is that on the plaintiff's case there were three loans and there was no attribution of the payments to any particular loan. This he said was fatal to reliance on s 54(2) since that requires the payment to be "a payment in respect of the right or title of the person to whom the payment is made", that is the person having the cause of action. The plaintiff cannot identify for which cause of action the monies were paid on his case and has not sought to do so.
3. In his work P. Handford Limitation of Actions (2007, 2nd ed, Thomson Lawbook Co) at p 280 the learned author summaries the position thus: "A payment made to a creditor to whom more than one debt is owed is only effective to stop time running if it is made by the debtor in respect of all the debtor's debts with the creditor, appropriated by the debtor to all or some of the debts, including the debt in question or appropriated by the creditor to the sum in question. If there are two debts and the debtor appropriates the payment to only one, there is neither an acknowledgment nor a part payment of the other debt. If, however, debts arise in respect of a running account, a payment will be regarded as being made in respect of the whole balance. If the debtor has not made an appropriation to any particular debt, the creditor may at any time before the commencement of proceedings make such an appropriation to a statute-barred debt, but only if the debtor had an opportunity to make such an appropriation. If no appropriation is made either by the debtor or by the creditor, it will be presumed that the payment was made in respect of debts which are not statute barred." (Footnotes omitted)
4. It would seem that where there is more than one debt and a payment is made, a nomination by the debtor as to which debt the payment is to be applied will be effective to preclude time being restarted in respect of the other debt, and also that in the absence of a nomination by the debtor the creditor can select to which of the debts he will appropriate the payment: see Mills v Fowkes (1839) 5 Bing NC 455; 132 ER 1174. It would appear, however, that the appropriation must be made before action: Mills at p 462 and p 1177 per Tindal CJ citing Simson v Ingham (1823) 2 B & C 65, 107 ER 307. See also Deane v City Bank of Sydney [1918] HCA 42; (1918) 25 CLR 215.
5. Since no appropriation was made either before or even during the hearing here the Court cannot discern to which debt the payment is to be applied and hence to which of the three loans the bar imposed by the statute has been lifted. Different considerations apply where there is a running account: see Re Estate of Levi & Co; Ex parte Levi (1874) 8 SALR 144 (FC) at pp 165- 167 (per the Commissioner of Insolvency, pp 194- 195 per Hanson CJ, p 201 per Wearing J) and Re Footman Bower & Co Ltd [1961] Ch 443; [1961] 2 WLR 667; [1961] 2 All ER 161.
6. The plaintiff has not established that the limitation period did not continue to run and it follows therefore that his claim is statute barred.

Conclusion

1. It follows from the reasons given that the plaintiff has failed in his claim and there should be judgment in favour of Max and Annette and an order that the plaintiff pay their costs.

Amendments 17 June 2015 - Amendment of date 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 June 2015