Royal v El Ali

Supreme Court of NSW|2011-04-13|Before: Macready J

Judgment 1His Honour : This is the hearing of a claim by Mr Peter Royal and Mrs Judith Royal against Mr Nathan El Ali to recover monies purportedly advanced between 2002 and 2007, together with interest.

Background 2Mr Royal had worked in banking for many years and by 1998 he was employed by Suncorp, at Parramatta. At that stage he met the defendant, who was then the assistant operations manager for New South Wales and Victoria. 3In 1999, following some rearrangement of positions in the company, Mr Royal became supervisor of the Kogarah sales centre and from that time he reported to Mr El Ali who was the regional manager. 4In 2001 Mr El Ali resigned from Suncorp and set up his own mortgage business, EasyChoice. Mr El Ali asked Mr Royal to join EasyChoice but he declined. In 2002, following Suncorp's closure of its sales centres, Mr Royal resigned from Suncorp and accepted an offer of employment with EasyChoice Home Loans Pty Limited. 5Apart from one earlier loan, it was during Mr Royal's employment with EasyChoice that Mr and Mrs Royal made various advances to Mr El Ali. The advances, which are not disputed by Mr El Ali, are as follows: Date Loan Amount February 2002 First loan agreement $20,000 4 December 2002 Second loan agreement $100,000 2 July 2003 Third loan agreement $300,000 13 August 2003 Fourth loan agreement $9,000 6 November 2003 Fifth loan agreement $20,000 13 January 2004 First of the five further loans $10,000 7 December 2004 Second of the five further loans $26,000 15 December 2004 Third of the five further loans $3,000 28 October 2005 Fourth of the five further loans $7,000 8 March 2007 Fifth of the five further loans $300,000

Total $795,000 6There is a dispute between the parties concerning a transfer by Mr El Ali to Mr Royal of a red Mercedes car in October 2004. 7Apart from the car, most of the repayments that have been made over the years are now agreed between the parties. 8Mr El Ali alleged that numerous discussions had taken place in respect of the terms of the advances. Mr El Ali suggested that the loans were to give Mr and Mrs Royal the opportunity to invest in developments that he was involved in. Although there is no doubt there were discussions about investing in developments, it is plain on the evidence and Mr El Ali accepts, that Mr and Mrs Royal did not decide to enter into such developments and that the monies were to be repaid. 9By 2007, Mr and Mrs Royal had become anxious about the failure to repay the loans, which was causing them financial hardship. On 15 June 2007, Mr Royal and Mr El Ali executed a document prepared by Mrs Royal. 10The document was as follows: "This Agreement is made on 15 June 2007 Between: Mr Nathan Elali Of: XXXXXXXXXX HURSTVILLE GROVE NSW 2221 And: Peter Paul and Judith Royal Of: XXXXXXXXXX HURSTVILLE NSW 2220 For valuable consideration, the parties agree as follows:

Mr & Mrs Royal agree to provide $957,000 in way of reinvestment or available funds.
Nathan Elali agrees to use invest $957,000 in various investment opportunities.
Loss will be absorbed by Nathan Elali at all times.
The Term of this agreement expires 31 December 2007. Hence, $957,000 is due upon expiry of this agreement. No modification of this Contract will be effective unless it is in writing and is signed by both parties. This Contact binds and benefits both Nathan Elali and Mr & Mrs Royal and any successors. This document, including any attachments, is the entire agreement between Nathan Elali and Mr & Mrs Royal. This Contract is governed by the laws of the jurisdiction in New South Wales. Signature Signature Mr Peter Paul Royal Mr Nathan Elali 15 th June 2007 15 th June 2007 Witnessed by" 11Mr and Mrs Royal allege that the sum of $957,000 included the outstanding indebtedness and included amounts due for interest up to the date of the document. 12Mr Royal gave evidence that, in respect of the further advance of $100,000 on 4 December 2002, an agreement was reached to pay interest at 3 per cent above the EasyChoice standard home loan rate. Mr El Ali denied any such agreement. 13Immediately prior to the further loan of $100,000, a document was drawn up as follows: "This Agreement is made on 28 November 2002 Between: Mr Nathan Elali Of: XXXXXXXXXX HURSTVILLE G ROVE NSW 2221 And: Peter Paul and Judith Royal Of: XXXXXXXXXX HURSTVILLE NSW 2220 For valuable consideration, the partes agree as follows:
Mr& Mrs Royal agree to provide $100,000 in way of Electronic transfer to Suncorp Metway Account No.XXXXX4284.
Nathan Elali agrees to use nominated $100,000 in various investment opportunities.
$100,000 is in addition to previously provided $20,000 advance February 2002.
Loss will be absorbed by Nathan Elali at all times.
The Term of this agreement expires 28th January 2003. Hence, $120 . 000 is due upon expiry of this agreement.
No modification of this Contract will be effective unless it is in writing and is signed by both parties. This Contract binds and benefits both Nathan Elali and Mr & Mrs Royal and any successors . This document, including any attachments, is the entire agreement between Nathan Elali and Mr & Mrs Royal. This Contract is governed by the laws of the jurisdiction in New South Wales. Signature Signature Mr Peter Paul Royal Mr Nathan Elali 28 November 2002 28 November 2002 Witnessed by" 14In respect of the $300,000 advance made in 2003, a similar document was signed as follows: "This Agreement is made on 2 nd July 2003 Between: Mr Nathan Elali Of: XXXXXXXXXX HURSTVILLE GROVE NSW 2221 And: Peter Paul and Judith Royal Of: XXXXXXXXXX HURSTVILLE NSW 2220 For valuable consideration, the parties agree as follows:
Mr& Mrs Royal agree to provide $300,000 in way of Electronic transfer to Suncorp Metway Account No.XXXXX4284.
Nathan Elali agrees to use invest $300,000 in various investment opportunities.
$300,000 is in addition to previously provided $120,000 advance February 2002.
Loss will be absorbed by Nathan Elali at all times.
The Term of this agreement expires 28th September 2003. Hence, $420 . 000 is due upon expiry of this agreement.
No modification of this Contract will be effective unless it is in writing and is signed by both parties. This Contract binds and benefits both Nathan Elali and Mr & Mrs Royal and any successors . This document, including any attachments, is the entire agreement between Nathan Elali and Mr & Mrs Royal. This Contract is governed by the laws of the jurisdiction in New South Wales. Signature Signature Mr Peter Paul Royal Mr Nathan Elali 2 nd July 2003 2 nd July 2003 Witnessed by"

Plaintiffs' claims 15Mr and Mrs Royal's primary claim is to sue on the agreement for loan dated 15 June 2007, which is referred to in the evidence and submissions as a consolidated loan agreement. 16Since that agreement, $32,000 has been repaid. Mr and Mrs Royal concede that at the time the figure of $957,000 was calculated, they did not take into account some payments Mr El Ali had made. Taking those payments into account, Mr and Mrs Royal say there was a sum of $864,203.74 owing at the date of the 2007 loan agreement. A subsequent repayment of $32,000 should be deducted. Interest at the alleged agreed rate would amount to $256,376.83 up to the date of commencement of the hearing, plus $205.20 per day to the date of judgment. 17Mr and Mrs Royal seek judgment for that combined amount. 18In the alternative, Mr and Mrs Royal sue on the individual loans together with the compound interest they say is payable. Alternatively, they sue on the loans themselves, less any part payments. 19During the course of argument, Mr El Ali abandoned a defence that concerned an alleged misrepresentation concerning the first advance. This means that the matters raised by him are as follows:

The proper construction of the June 2007 consolidated loan agreement. Mr El Ali's contention is that the agreement does not give rise to a debt.
Mr El Ali disputes that there was ever any agreement by him to pay interest.
Mr El Ali disputes that he gave Mr Royal the car and asserts that it was taken as part repayment of the loans.
Whether the claims for the individual advances are statute barred by reason of s 14 and 63 of the Limitation Act 1969. 20Whether or not there was an agreement to pay interest may be relevant to the proper construction of the agreement of 15 June 2007 and it is useful to deal first with this aspect.

Claim for interest 21Mr Royal made allegations of conversations in which interest was agreed with Mr El Ali in his affidavit dated 1 March 2010. Paragraphs 16, 24 and 50 of his affidavit are as follows: "16. In November 2002 I had a discussion with the First Defendant in his office at South Hurstville along the following lines: Nathan: "Suncorp are slow in advancing me progress payments on my development and I need $100,000 to keep the builders working until Christmas. I know it's a lot of money but we've worked together all this time, we're friends and you can trust me. I'm not going anywhere, I am good for it and there will be lots of money when the property is sold." I said "Yes I do trust you but I'll have to speak to Judith. There should be no problem" At the time I knew the first defendant was undertaking a duplex development. The first defendant then asked if we could call Judith immediately. He then rang Judith while the phone was on loudspeaker and said words to the effect: Nathan: "Judith I need to borrow $100,000 to use in my development to keep the builders working". Judith: "What's in it for us?" Nathan: "I will pay you 3% above the EasyChoice standard home loan rate. Don't worry I have plenty of equity in my properties but I just have a short term problem while I'm waiting for progress payments. Trust me, I'll be able to pay you back.' Judith: "Can you get some sort of contract drawn up between us?" Nathan: "I will have my solicitor draw up an agreement which will protect all of us and record the loan and my liability for it." ... 24. In late June 2003 I was asked to speak with the First Defendant in his office wherein he said to me words to the effect of: Nathan: 'It's about the loan. I want to put a proposition to you and Judith. If you could invest $300,000 in my property developments I can guarantee you 3% above the EasyChoice loan rate." I said: "Why do you need the money?" Nathan replied: "Development financing is expensive and it would be cheaper for me to do it this way and cost effective for me to borrow the money from you rather than borrowing from the banks. You will get a better return on your money and I will give you a bonus after the properties have been sold. It's a win win situation. I get cheaper funds and you get a good return and a bonus. I replied: "I will have to speak to Judith but I don't think there'll be a problem" ... 50. On 15 June 2007 the First Defendant handed to Judith and I an agreement, copy of which is exhibited to this Affidavit and marked "PR1S". He said words to the effect of:- Nathan said: "I have had this drawn up by my solicitor it acknowledges that I owe you both $957,000 by way of capital and interest which I will repay by 31 December 2007. I have all my properties up on the market at the moment and I will be able to pay you when they sell." 22Mr and Mrs Royal's submissions on this aspect of the matter are as follows: "The defendant's contention is improbable and the plaintiffs' evidence ought be accepted for the following reasons: The bulk of the advances to the defendant were funded by the plaintiffs from borrowings in their name from which they in turn incurred substantial interest liabilities (Peter Royal 23/12/2010 [40]-[45]; Judith Royal 23/12/2010 [75]-[77]). The defendant was aware that the plaintiffs had borrowings (concessions made during by Mr Elali during cross examination 12/4/2011). He gives evidence of assisting Peter in regard to a refinance of them in mid 2003 (Elali 30/9/2010 [40]). Mr Elali gives no evidence that he affirmatively believed that they were funding the advances from moneys on deposit or from cash reserves (concessions made during by Mr Elali during cross examination 12/4/2011). Mr Elali could not have rationally believed that they were funding loans to him while at the same time had substantial moneys on deposit. The plaintiffs give evidence of numerous conversations in which they referred to their loans and there is no reason to disbelieve them in regard to that evidence (Peter Royal 23/12/2010 [40]-[45]; Judith Royal 23/12/2010 [75]-[77]). Judith Royal's email of 18 August 2009 describes the hardships on her and her family caused by the loans they had taken to fund the advances of Mr Elali (Judith Royal 23/12/2010 annexure JR3). None of Mr Elali's replies to that email suggested surprise that they were in that financial position. Mr Elali's evidence emphasises the openness of the relationships in the Easy Choice office. It is implausible that he did not have an accurate knowledge of the financial position of the Royals. He does not assert that he lacked such knowledge and during cross-examination Mr Elali conceded that, at some point, he had such knowledge (12/4/2011). 23Mr El Ali's submissions went to whether or not there was an agreement to pay interest. The first was the obvious fact that if there had been an agreement to pay interest in November 2002, then the agreement was breached by January 2003. In an agreement made in July 2003, when another $300,000 was advanced, there was no reference to interest in that or any subsequent documents acknowledging a debt. 24Mr El Ali also raised the question of the credit of Mr and Mrs Royal in relation to this aspect and in particular their evidence in support of their argument concerning spread sheets that show the amount of interest accruing on the loan. 25Those credit issues were intertwined with the question of whether the transfer of the red Mercedes was a reduction of the loan or a gift. 26As an aside, it is interesting to note that if one looks at Schedule B to the plaintiffs' submissions, one sees small advances which were repaid shortly thereafter. Quite often they include an extra amount, which may have represented the payment of interest. 27An example of this can be seen on 6 February 2004, when $8,100 was advanced and repaid on 17 February 2004 in the sum of $8,200. Another example is seen on 30 April 2004, when $7,000 was advanced and repaid on 4 May 2004 in the sum of $7,150. On 13 and 15 October a total of $31,000 was advanced and on 11 November 2004, which was repaid in the sum of $31,500. 28So far as the Mercedes is concerned, there were discussions between Mr El Ali and Mr and Mrs Royal about buying an A-Class Mercedes. However, the Royals did not take up the offer. Another C-Class Mercedes was discussed and referred to as the "red Mercedes". The documents in respect of the transfer are in evidence and it is apparent that Mr Royal, who claimed it was transferred to him as a bonus, had not included the Mercedes in his income tax for the relevant years. 29A document of Mr Royal's was also in evidence (court book 676), which lists payments between Mr and Mrs Royal and Mr El Ali. The second to last entry is November 05 and against this entry is: "See Nathan re car how much?" 30The failure to declare the bonus as income, together with the notation in Mr Royal's document, plainly suggests that the car was being transferred to reduce the loan account. 31Questions of credit which were said to arise out of the agreement to pay interest are those referable to paragraphs 32 and 33 in Mr Royal's affidavit dated 23 December 2010, which are as follows: "32. At paragraph 33 of my first affidavit I have said that Nathan showed us the NE Spreadsheet on his computer in about November 2003 in the context of discussing the loan referred to as the Fifth Loan. He also did this in the context of this discussion in November 2002. 33. I recall clearly that the principal amount inserted into the NE Spreadsheet was $120,000. I recall this because I was happy that Nathan had included the additional $20,000 that he owed us and had not omitted it. The principal sum of $120,000 was shown on the NE Spreadsheet as accruing interest calculated daily at a rate of 3% above the EasyChoice home loan rate. Even though the $100,000 was to be drawn from my line of credit facility with Suncorp Bank, Nathan offered to pay interest at the rate of 3% above the EasyChoice rate, which was in excess of the Suncorp Bank rate." 32Mr Royal conceded that the EasyChoice rate was less than the Suncorp rate. Mr Royal explained this by stating he had written it the wrong way around. I think it is appropriate to accept that what Mr Royal was saying was that the EasyChoice rate, plus 3 per cent, was in excess of the Suncorp rate. Notwithstanding the bad use of grammar, I would not think it was something that should reflect on Mr Royal's credit. 33The other point made was the reference in the third sentence of paragraph 33 to the interest rate, where it was described as being "at a rate of 3 per cent above the EasyChoice home loan rate". It was said that one would have thought that, perhaps, the actual figure such as 9.25 per cent would have been referred to. However, as Mr Royal was looking at a screen with no doubt a number being presented to him as the interest rate, probably there is a conclusion drawn in this sentence based either on what he knew himself or what he was told. 34The next matter concerns Mrs Royal and the $100,000 that was first advanced. Mrs Royal gave the following evidence in paragraph 23 of her affidavit dated 23 December 2010, which followed a telephone conversation in November 2002 with Mr Royal, while Mr El Ali was present. "23. During the same week I met with both Nathan and Peter at the EasyChoice office at Connells Point Road. It was not a long meeting. When I arrived Nathan had already prepared a spreadsheet on his screen. I know this because during the course of the meeting Nathan showed this to Peter and I. This spreadsheet set out Nathan's calculations of the interest that would accrue on the principal sum (the NE Spreadsheet)." 35In about late June 2003, when the loan of $300,000 was discussed Mrs Royal gave the evidence of the following conversation: "44. During that week I then took an afternoon off work and met with Peter and Nathan at EasyChoice's office at King George Road. When I arrived only Peter and Nathan where at the office. The other staff member had left to go home early. Nathan and I then had a conversation to the following effect: NE: "Hello, how are you? You look well. How's the family? Thanks for coming in... Come into my office. Judith, I gather Peter has explained it all to you and the benefits?" JR: "Sort of. Can you please take me through it again?" NE: "As you know, I have many developments on the go and I need to raise some capital and we could help each other." JR: "How?" NE: "I could borrow funds from you and you would earn 3% above what you are paying. It is only a short term investment and will be repaid by October 2003." JR: "Nathan, you still have not forwarded the spreadsheet that you said you would from our last meeting." 45. At this point in the conversation Nathan quickly turned his computer screen around so that Peter and I could see what was on it. The NE Spreadsheet was again displayed on his screen and set out the funds that we had previously loaned to Nathan as well as the daily compounding interest at 3% above the EasyChoice home loan rate which at that time was 6%. While we spoke, Nathan emailed to my work email address the NE Spreadsheet. I am now unable to obtain a copy of this email or the attachment to it. 46. After receiving the NE Spreadsheet, from this point in time I kept a record of the payments made and money received from Nathan in a spreadsheet of my own (the JR Spreadsheet) that I created based on the NE Spreadsheet. In the JR Spreadsheet I recorded all repayments made by Nathan electronically, including the 4 repayments I refer to at paragraph 54 herein. A copy of the JR Spreadsheet in the form that I created it in about June 2003 (but updated to the date of swearing this affidavit) is annexed to this affidavit and marked JR1. 47. After Nathan had emailed me the NE Spreadsheet, he and I had a conversation in words to the following effect: JR: I like the spreadsheet however I would like to add an extra column so I can understand the Debit and Credit and changing interest rates." NE: "Judith, I will keep mine, which is also kept with my solicitor, and you can amend yours." 36According to Mrs Royal, the attachment of the spreadsheet to the agreement was the explanation for the agreements they signed with Mr El Ali, which included interest. Mr and Mrs Royal advanced another $20,000 on 9 October 2003 to a Mr and Mrs Djordjevic, where the same type of document was signed. However, that document showed repayment of $22,000 due on expiry, which obviously included another $2,000 for interest. 37None of the documents signed between Mr and Mrs Royal and Mr El Ali showed an additional amount for interest in this way. 38Although Mrs Royal could not locate the original spreadsheets sent to her, she gave evidence of some alterations she had made. The spreadsheet starts in December 2002 and records matters after that date. It has provision for interest at varying rates starting initially at 9 per cent, 9.2 per cent in November 2003 and 9.54 per cent in December 2003. This accords with her affidavit evidence at paragraph 45. 39Mrs Royal did not seem to me to be a person who would recreate for the purpose of this litigation a spreadsheet all the way back to December 2002 in order to support her story. It has a ring of truth about it. It is to be remembered that the agreements that were signed were not prepared or signed with legal advice on the part of Mr and Mrs Royal. 40As I have mentioned, Mr El Ali rejected the conversations and any suggestion that there was ever an agreement for payment of interest. He relied on the various documents that were signed by Mr and Mrs Royal. It is also apparent that Mr El Ali's case was that the advances were made for the purpose giving the Royals an opportunity to join in developments that he would offer them from time to time. As I have said, none of these developments eventuated. However, his claim was that the monies were advanced without interest, merely for the opportunity to invest in a good development project if there was one that appealed to them. 41It is clear that, from time to time, Mr and Mrs Royal considered such projects when Mr El Ali advanced them. 42However, it has to be noted that when one considers Mr El Ali's requests for funds it was always to meet some obligation or for some specific development project, without it actually being advanced for the purpose of the Royals investing in a development. 43The money advanced by the Royals came from a mortgage they had on their home, as well as a draw down against a share portfolio managed by Mrs Royal. The advance of funds from those sources meant that the Royals were paying interest on the moneys they advanced to Mr El Ali. 44Given Mr El Ali's involvement in refinancing by Mr and Mrs Royal, it seems clear that Mr El Ali must have been aware the advances were funded from borrowings in their names. 45Having regard to the relationship between the parties, it seems unlikely to me that the advanced funds would not incur interest. 46I am satisfied that there was an agreement for Mr El Ali to pay interest, as alleged by Mr and Mrs Royal. 47Insofar as the red Mercedes is concerned, it is unlikely that Mr El Ali gave the car to Mr Royal as a bonus. The documentary evidence suggests that there was to be a reduction in the borrowings by crediting the value of the car. In these circumstances, I accept Mr El Ali's contentions in this regard.

Construction of the agreement 48Mr and Mrs Royal contend that the agreement of 15 June 2007 contained an acknowledgment of indebtedness and a promise to repay the sum of $957,000 on 31 December 2007. They submit that the extra time granted was consideration for the promise to repay the sum. They eschewed any suggestion that the document was an account stated that would support the normal common indebitatus count upon an account stated. 49Mr El Ali's response to this claim is set out in paragraphs 9 to 11 of his written submissions in these terms: "(9) The proper construction of this document is that if the Plaintiffs had provided $957,000 to the Defendant in way of "reinvestment of available funds" for use by the Defendant in "various investment opportunities", then such monies would have been repayable. The Plaintiffs do not assert, and the evidence does not prove, that, as at 15 June 2007 being the date of the "Consolidated Loan Agreement", they had advanced to the Defendant the sum of $957,000. They did not provide any further funds thereafter. Insofar as Mr Royal's Affidavit of 1 March 2010 sought to deal with this, the Defendant has disputed that version of events. (10) The Defendant submits that both the language of this document and the circumstances leading up to it are consistent with a continuing possible involvement by the Plaintiffs in some of the properties being developed by the Defendant. Hence the language "agree to" and "reinvestment of available funds" in clause 1 and "various investment opportunities" in clause 2. (11) It is submitted that the proper construction of the "Consolidated Loan Agreement" is that proposed by the Defendant. It would not make commercial sense for the document to be construed so that the Defendant would pay to the Plaintiffs the sum of $957,000 when that amount had not been provided by them to him (even assuming there had been any agreement reached by then for interest to be payable on earlier advances). On this basis, a claim in debt based upon the "Consolidated Loan Agreement" must fail." 50Mr and Mrs Royal contend that as Mr El Ali prepared the document, it ought to be construed in accordance with the principle contra preferentum . Given the terms of the document, including the use of the words "In way of investment", it would be appropriate to have regard to the facts and circumstances surrounding the document. Mr and Mrs Royal point to the following surrounding circumstances known to the parties at the time the document was created. The circumstances include the following: (a) The defendant had very made substantial advances to the plaintiffs. (b) The defendant had made promises to pay interest in order to induce these advances. (c) These advances had not been paid in accordance with the initial promises and undertakings of the defendant. (d) The plaintiffs wanted and had sought from the defendant an acknowledgement of the debt and an undertaking to pay it in the near future. (e) At the time the 15 June 2007 document was prepared and executed, no further advances were contemplated by any of the parties. 51Apart from these matters, it is noteworthy that in paragraph 2 of the document, Mr El Ali was to use the fund in various investment opportunities. The language does not suggest that Mr El Ali and Mr and Mrs Royal were to use the funds for that purpose. This is supported by what is said in paragraph 3; that "Mr El Ali will absorb the losses". 52Having regard to these matters and the circumstances surrounding the document, which include an amount for interest, this would bring the then owing principal close to the figure in the document, if Mr and Mrs Royal's construction of the document is correct. In my view, it is the correct construction. 53Having regard to the history between the parties of continued loans with repayments, it would also be an account stated between them. 54Given that I have accepted Mr and Mrs Royal's construction of the agreement, none of the limitation points arise, but Mr El Ali should be given credit for the $32,000 paid after the date of the document and for the other amounts which Mr and Mrs Royal concede were included by mistake in the $957,000. If it were regarded as an account stated, then although such a characterisation allows the debts that make up the account stated to be considered in various circumstances, there can be no objection to the recovery of the balance struck, if some of the earlier items were barred by the statute of limitations. See Ashby v James (1843) 11 M & W 542; (1843) 152 ER 920 . 55Before leaving this aspect, I should note that Mr El Ali suggests that interest liability is precluded by the terms of clause 5 of the agreement. However, such an argument is not appropriate, given that the $957,000 includes the interest to the date of the document and is therefore incorporated in the agreement. 56In case a different view is taken on appeal of the construction of the agreement of 15 June 2007, I should refer to the alternative claims.

Plaintiffs' claims in the alternative 57The plaintiff's alternative claims are as follows: "29. In the event that the Court concludes for whatever reason that the plaintiffs are unsuccessful in their claim in respect of the 2007 Loan Agreement, the plaintiffs claim in the alternative in respect of what the plaintiffs say is the consolidated indebtedness independently of the 2007 Loan Agreement and with the compound interest as agreed between the parties. The plaintiffs in the further alternative claim each of the outstanding separate advances made to the defendant minus the part payments in the event that they fail on the interest agreements. 30. The separate advances made by the plaintiffs to the defendant between 2002 and 2007 are as follows: The loan of $20,000 advanced on 19 February 2002; The loan of $100,000 (made in 2 instalments of $40,000 and $60,000) advanced on about 4 December 2002; The loan of $300,000 advanced on about 4 July 2003; The loan of $9,000 advanced on about 13 August 2003; The loan of $20,000 advanced on about 6 November 2003; The loan of $10,000 advanced on about 13 January 2004; The loan of $26,000 advanced on about 7 December 2004; The loan of $3,000 advanced on about 15 December 2004; The loan of $7,000 advanced on about 28 October 2005; The loan of $13,000 advanced on about 28 October 2005; The loan of $300,000 advanced on about 8 March 2007. 31. As submitted elsewhere in this submission, the plaintiffs give credit for receipt of the following part payments of the principal indebtedness: The part payment of $20,000 made on 14 August 2003; The part payment of $20,000 made on 15 October 2003 (contained in a cheque in the total sum of $35,750, only $20,000 was in respect of the principal sum); The part payment of $40,000 made on 16 December 2003; The part payment of $20,000 made on 25 July 2005; The part payment of $5,000 made on 2 May 2006;and The part payment of $32,000 made in late February 2008. 33. The total of the principal advanced minus the part payments of the principal sum is in the sum of $649,200.00. The evidence in support of these advances and part payments in respect of the principal are set out in the plaintiffs' chronology of loans scheduled to this submission at A as well as the short form chronology scheduled to this submission at B." 58In addition to the part payments, it will also be necessary to give credit for the part payment of $55,000 in respect of the transfer of the Mercedes car in November 2004. 59There are a number of minor items where Mr and Mrs Royal have suggested that payments made to them by Mr El Ali were in fact salary. This appears to be the case. 60There are also other payments of small advances which were immediately repaid after an extra amount for interest and which would not affect the final balance. 61As we are not concerned with a deed, under s 14 of the Limitation Act 1969, the cause of action is statute barred if brought after the expiration of 6 years from the date on which the cause of action first accrues to the plaintiff. In this case the proceedings were commenced on 1 March 2010. 62The right to recover accrues when the debt becomes due. There are authorities, such as Young v Queensland Trustees Limited (1956) 99 CLR 560 and Ogilvie v Adams [1981] VR 1041, which indicate that a loan repayable on demand creates an immediate debt, such that the limitation period begins to run immediately. 63The other provision of the Limitation Act that is relevant in the circumstances of this case is s 54(1), (2) and (4), which is as follows: "54 Confirmation (1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation. (2) For the purposes of this section: (a) a person confirms a cause of action if, but only if, the person: (i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or (ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and (c) a confirmation of a cause of a c tion to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account. ..... (4) An acknowledgment for the purposes of this section must be in writing and signed by the maker." 64Clearly the first two written acknowledgements were before the expiry of the limitation period on 1 March 2004. One thus has to deal with acknowledgements by way of payment. 65In respect of small amounts where an amount is advanced for a week or so and then immediately repaid, Mr and Mrs Royal in their treatment of the payments appear to have appropriated the repayments to the initial advance in respect of that amount. It was not submitted by them that this was not so. 66Therefore, the relevant unappropriated payments to be considered are as follows: Date Details 14 August 2003 $20,000 was paid and should be appropriated to the $20,000 advanced on 19 February 2002. 15 October 2003 $35,750 was paid and should be appropriated in part to the advance on 4 December 2002 of $60,000 leaving $24,250 owing. 16 December 2003 $40,000 was paid and should be applied to $24,250 owing above. The balance of $15,750 applied to the $40,000 advanced on 4 December 2002 leaving $24,250 owing. 11 November 2004 $31,500 was paid. After allowing for $24,250 above, there would be $17,250 paid off the next debt of $300,000 advanced on 4 July 2003.

67The last payment was after the commencement of the limitation period and the $300,000 would therefore be acknowledged. 68There are then debts on 6 November 2003 of $20,000 and 13 January 2004 of $10,000. 69There are not sufficient unappropriated payments made thereafter which would exhaust the $300,000 and then be applied to these amounts. Accordingly, these two debts are statute barred. The total of the statute barred debts are $30,000. 70However, the above analysis does not take into account interest. So far as small amounts of advances and immediate repayments are concerned it is clear that the parties, by increasing the amount of the repayments, made an allowance for interest. Therefore, there is no need to take interest on those amounts into consideration. 71According to the evidence that I have accepted, the agreement for interest was first made in respect of the first $100,000 advance and it appears to have been applied to include the $20,000 previously advanced. Accordingly, it is necessary to see whether any interest that might have accrued on that sum (and to which one would normally appropriate the payments first before principal) would be greater than $17,250. It was not submitted that one should not apply payments to interest and then the principal. 72Using, in part, the tables attached to Mrs Royal's affidavit for the first period and simple interest for the remainder, the interest due, taking into account the repayments, would appear to be in the order of: Interest to 14.08.2003 $10,883 Interest to 15.10.2003 $ 6.000 Interest to 16.12.2003 $ 5,529 Interest to 11.11.2004 $29,521 $51,933 73The amount of repayments were: 14.08.2003 $20,000 15.10.2003 $35,750 16.12.2003 $40,000 11.11.2004 $31,500 $127,250 74Therefore out of the $127,250 paid, only $75,317 is appropriated to the repayment of principal. Therefore, as the principal owing on the first three debts is $120,000, those debts were not fully repaid. The outstanding balance of principal was then $44,683. The only other unappropriated repayment was the payment of $20,000 made on 25 July 2005. This was insufficient to discharge the principal of the first three debts, such that there was no payment on account of the $300,000 advanced on 4 July 2003. However, as a result of my findings in respect of the Mercedes there was a credit against the debt in October 2004 of $55,000. There was a part payment on account of the $300,000 debt of about $20,317. Therefore the $300,000 debt is not statute barred. 75I direct the parties to bring in short minutes to reflect my reasons for judgment and argue any question of 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: 20 June 2011

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