WOODS v HARWIN and ANOR

Mahoney AP In 1982 Mr and Mrs Harwin made a loan of $20,000. They sued Mrs Woods for return of the principal of the loan plus interest. The sole issue in the proceeding has been: to whom was the loan made.

On 22 October 1992 his Honour McLachlan DCJ held that the loan had been made to the defendant Mrs Woods and gave judgment for the plaintiffs accordingly. The court has been informed that judgment was formally entered. Mrs Woods has appealed to this Court against his Honour's judgment.

As I have indicated, there has been no contest but that Mr and Mrs Harwin made $20,000 available to someone. On their account, the loan was made to Mrs Woods. On the account given by her and her witnesses, the money was given to her son Glen Woods either personally or for his company GMW Prestige Auto Refinishers Pty Ltd. But the evidence given for the plaintiffs and for the defendant differed widely. For the plaintiffs it was said that the loan was made at a time when Mr Glen Woods and the daughter of Mr and Mrs Harwin were friendly. Mrs Woods asked Mr and Mrs Harwin to lend money to her because she was in financial difficulties and feared losing her home. The matter was discussed in more detail at a dinner at the Black Stump Restaurant. Mrs Woods asked whether Mr and Mrs Harwin could lend her $40,000 and they offered to lend her $20,000. Subsequently, Mr Harwin arranged with his bank for the advance to him of $20,000. Of this, $10,000 was handed to Mrs Woods at her home in cash, a further $5,000 was handed to her in cash, and the final $5,000 was given to her in the form of a cash cheque for that amount.

The loan was, the plaintiffs claimed, made upon terms that she would repay it with interest equivalent to the bank interest payable by Mr and Mrs Harwin and would do so by periodical payments. The plaintiffs had a separate account for receiving such payments and a deposit book to record them. Repayments of $341.20, the relevant amount, were made by Mrs Woods in each of the months from and including May 1982 to January 1983. The notations in the deposit book were, the evidence suggested, in the writing of Mrs Woods. Subsequently, in October 1984 and in July 1986, she made payments respectively of $1,000 and $600. Thereafter, no further repayments were made. In 1987, the plaintiffs commenced the present proceeding in the District Court.

The case for the defendant Mrs Woods was that no such discussion was held or arrangement made at the dinner at the Black Stump Restaurant. What occurred was that Mr or Mr and Mrs Harwin wished to help Mr Glen Woods by investing in his company. They did this more or less voluntarily, in due course handing him cash in a brown paper bag and making other payments totalling $20,000. The company subsequently went into receivership and it appears accepted that if it was the debtor nothing was able to be recovered from it.

The proceeding was fought at considerable length. It was initially before an arbitrator and subsequently came before the judge. The oral evidence extended over some 230 pages of transcript. The documentary evidence tendered comprised over 280 pages. The hearing extended over some four days and his Honour delivered a written judgment. His Honour said:

"The evidence of the various witnesses of which there were many is so diametrically opposed depending upon whether the witness was for the plaintiffs or the defendant that it is difficult to avoid the conclusion that someone or more than one are lying but the test must be as to whether on the balance of probabilities I am satisfied that the plaintiffs have proved their case.

To test that question I must look again at the evidence of the various witnesses. I shall not attempt to re state all of the evidence but merely remind myself that at some stage during the space of the four day hearing the witness gave evidence. In the case of the litigants themselves I will go into a little detail."

This, in my opinion, was a substantially correct assessment of the central issue. Mr Hodgekiss, counsel for Mrs Woods, formally accepted that the decision of the case required a conclusion to be drawn as to which of the parties was "lying". For myself, I prefer to categorise the issue as one of acceptance of one or other of the accounts which essentially the opposing sides put to the judge: see Bannister v Walton (Court of Appeal, 4 June 1993, not yet reported); Petkovski and Anor v Government Insurance Office of New South Wales (Court of Appeal, 20 September 1993, not yet reported), and the cases there referred to. But essentially, the decision of the case turned upon the acceptance and rejection of evidence.

His Honour, after referring to the evidence of the main witnesses, said:

"The conclusion I reach is that the plaintiffs have made out a case. I simply cannot dismiss the implications I draw from the two independent witnesses as to the defendant's financial position. Whilst criticism can be levelled at the naivety of the plaintiffs in loaning the money in the first place without proper security, I am not prepared to conclude that the plaintiffs invented the story they presented to the court with the corroboration of their daughter who was an excellent witness. I believe that the defendant's health may well have been a factor at the time of the making of the loan. It must also be remembered that the fateful dinner party took place nearly ten and a half years ago." His Honour gave judgment for the plaintiffs accordingly.

Mr Hodgekiss, for Mrs Woods, prepared detailed and helpful written submissions and these were supplemented by oral argument. He put the case for Mrs Woods in a number of ways. It is no disrespect to his argument to say that, in general, his submissions fell into two groups: those suggesting that his Honour had misunderstood the oral and other evidence; and those suggesting that his Honour had failed to take into account the documentary material or had failed properly to give weight to it. I shall confine what I say to these submissions.

It is not necessary for the purposes of the decision of this appeal to canvass the whole of the factual material or to re examine in detail the evidence given by each of the witnesses. Mr and Mrs Harwin each gave evidence that Mrs Woods had sought the loan for herself because she was in financial difficulties, that the arrangement was made at the restaurant dinner, and that the moneys were subsequently handed to her. Their evidence as to that dinner party and what occurred at it was supported by their daughter Mrs Lavender. A Mrs Mitchell and a Mrs Bottell gave evidence suggesting that Mrs Woods had said to them things which supported the claim that at the time Mrs Woods was in financial difficulties.

Mrs Woods and her two sons, Glen Woods and Richard Woods, contested the plaintiffs' case. Their evidence involved the denial of the conversations alleged in respect of the restaurant dinner and a claim that Mr Harwin had admitted to Mr Richard Woods that "I have lost $20,000 in" Mr Glen Woods' business "and I do not know if I will get it back". A chartered accountant Mr White gave evidence that Mr Harwin had told him that he had lent money to Mr Glen Woods. Mr White was not able to identify the loan in question or to say whether Mr Harwin was referring to a loan of some $3,000 which admittedly he had made to Mr Glen Woods or the loan of $20,000 here in question.

It is apparent from this summary of the main oral evidence given before the judge that what was said by the witnesses could not be effectively reconciled and that it was necessary for the judge to decide which witness's evidence he accepted and which he rejected. His Honour accepted the evidence adduced for the plaintiffs.

If the evidence had been confined to the oral evidence given, there could, in my opinion, have been no effective complaint about what the judge did. He was correct in concluding that the essential issue was whether the account of the plaintiffs as to what happened at the restaurant dinner and consequent on it was to be accepted. His conclusion that it was was clearly affected by what he saw of the witnesses: Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178. There was, I think, nothing in the oral evidence to suggest that, in the relevant sense, his preference for the plaintiffs' evidence was wrong or based upon a failure to appreciate the thrust of it: cf in this regard Powell v Streatham Manor Nursing Home (1936) AC 243 per Lord Wright. See generally Louth v Diprose (1993) 67 ALJR 95 at 105 to 106. It was not necessary for the judge to conduct an elaborate analysis and comparison of the various oral accounts. He has, I think, effectively drawn from the evidence of each witness referred to the main matters of significance. I see no error in this regard such as would vitiate his Honour's conclusion.

Mr Hodgekiss submitted that his Honour had failed to examine and give effect to the documentary material and that for this reason his conclusion as to the credibility of the respective witnesses could and should be set aside.

I do not infer that his Honour did not take into account the documentary evidence. His Honour indicated that he had taken care in his review of the evidence and he was, as he said, "conscious... that my decision either way will hurt someone". But the submission was that his Honour, in his judgment, did not analyse and draw out the effect of the documentary evidence and that if he had done so, that could or would have led him to a different conclusion. This involves consideration of two related questions: what was the true effect of the

documentary evidence; and how that evidence should have been taken into account in assessing the credibility of the witnesses.

Mr Hodgekiss took the court through the documentary evidence in some detail. It is sufficient for present purposes if I deal with two of the main matters to which he referred.

Mr Hodgekiss submitted, first, that Mrs Harwin had said that the money or a substantial part of it was paid into a bank at Avalon by Mrs Woods; this, it was submitted, was shown by the documentary material to be wrong; and that therefore Mrs Harwin should not be accepted as a credible witness.

The evidence of Mrs Harwin to which reference was made was that given by her in chief as follows:

"Q. In respect of that $10,000 that Mrs Woods was going to pay off the mortgage on her house, pressing mortgage, are you able to tell us whether you have a further role in respect of that?

A. Yes, a few days after I drove Des Woods to Avalon bank, the State Bank in Avalon and I parked and Des got out and went to the bank and paid a sum of money, which I'm not sure how much and when she came out she said "Thank goodness for that, that relieves my home'.

A. 'Relieves, the pressure on my home'." Subsequently Mrs Harwin adhered firmly to what she had said in that regard.

Mr Hodgekiss submitted, in my opinion correctly, that the documentary material established that the only relevant account with the Avalon bank was an account of the company of Mr Glen Woods and that at the relevant time no moneys were paid into that account at the bank. The evidence showed that at the time some $6,000 or more was paid into another account in which Mr Glen Woods had an interest in a bank at Hornsby and that a substantial part of that was transferred from the Hornsby bank to the Avalon bank. The inference suggested for the defendant was that this represented, or could represent, part of the $10,000 which, it was said, had been given to Mr Glen Woods by Mr and Mrs Harwin.

I accept that the documentary material casts doubt upon the accuracy of Mrs Harwin's evidence to the extent that she said that Mrs Woods, at Avalon, "... went to the bank and paid a sum of money, which I'm not sure how much..." into that account. Mr Hodgekiss contended that Mrs Woods was a guarantor of that account, that the account had been overdrawn beyond the limit of $8,000 allowed for it and that the transfer from the Hornsby bank had had the effect of reducing the overdraft to below that limit. There was, he correctly contended, no question of Mrs Woods paying money into the account.

Mr Watt, for the plaintiffs, pointed out that Mrs Harwin did not say that she had gone into the bank and therefore did not know what had happened there. It is possible that Mrs Woods went to the bank in relation to the guarantee given by her of the overdraft. But the thrust of Mr Hodgekiss' submission was correct; insofar as Mrs Harwin said what she did and adhered to it, that was a matter to be taken into account by the judge in assessing her credibility.

Second, Mr Hodgekiss contended that the documentary evidence established that the repayments had been made, not by Mrs Woods, but by Mr Glen Woods. I do not think that that contention has been established. The record shows that there was tendered before the arbitrator the deposit book to which I have referred. That book was, in an unexplained way, lost and was not available to be tendered before the judge. However, the barrister who was the arbitrator said in an affidavit that the book had been lost, that the entries made in it in respect of the deposits

were made by or with reference to handwriting, and that the handwriting was to be inferred to be that of Mrs Woods. There was at the trial apparently some difficulty in respect of the tender of that affidavit. However, it is part of the record placed before this Court and no exception has been taken to it as such. The suggestion appears to be that it may have been tendered at a time when a shorthand record of the proceeding was not made. The material in the affidavit, if accepted, provides evidence from which it would be proper to infer that the repayments were in fact made by the hand of Mrs Woods.

The contention for the defendant was, I think, that those repayments were provided by Mr Glen Woods and/or his company. It was, for example, submitted that the larger payments made at later dates had been made by Mrs Woods with money provided by her son and had been made by her only because he was overseas. This evidence is, of course, to be taken into account. But I do not think that it required the judge to conclude that the repayments were not made by Mrs Woods on her own account or precluded him from drawing the inferences which that fact would warrant in this regard.

This being the effect of the documentary evidence, I do not think that I should accept the contention that it was inconsistent with the evidence of Mr and Mrs Harwin and their witnesses, to the extent that the judge should not have accepted them as credible witnesses. He was, I think, entitled to take into account the lapse of time between, for example, the event at the Avalon bank to which Mrs Harwin referred, to see what she said as to the payment of money and otherwise as an error of recollection rather than a conscious misstatement and to conclude that that did not warrant the rejection of her as a witness generally.

One further matter may be mentioned in this regard. One of the matters in contest was whether at the relevant time Mrs Woods was in financial difficulties. She had, to an extent which I think is not entirely clear, been involved with the affairs of her sons and, the suggestion was, she had guaranteed some of their obligations. Very shortly after the date of the restaurant dinner, the son Richard Woods had obtained or finalised a loan of some $40,000 from a building society and a substantial part of this had been used to reduce a mortgage indebtedness secured on Mrs Woods' home by some $35,000. A debt of some $10,000 remained. It is also clear from the evidence in relation to the Avalon bank account that she had guaranteed and that the bank required it to be reduced by a substantial amount. It is at least arguable that portion of the $20,000 was used by her son Mr Glen Woods to achieve this. On the other hand, witnesses for Mrs Woods denied that she was in financial difficulties and sought to explain otherwise what had been done.

His Honour was influenced by what was said by Mrs Mitchell and Mrs Bottell as to statements made by Mrs Woods suggesting that she was then in financial difficulties. His Honour was not wrong in taking that evidence into account in arriving at the conclusion that he did. I do not think that the evidence as a whole relating to her financial position was such that it was inconsistent with the acceptance of the plaintiff's account or such as warranted the rejection of it.

I am conscious of the problems involved in the fact finding process. I have referred to the fact that proper regard is to be had to the evidence as a whole when determining the credibility of a witness or witnesses: see Fabre v Arenales (1992) 27 NSWLR 437 at 446 to 451. Mr Hodgekiss' argument has relied upon matters of this kind. He has submitted, in effect, that the learned judge, in considering whether the plaintiff's evidence should be accepted, did not weigh the overall effect of the documentary evidence. The judge did not do so in terms, but, as I

have indicated, I do not doubt that he had it in mind in his assessment of the witnesses. If it be accepted, as I think it should, that the judge was conscious of the effect of the documentary evidence, and if the effect of it be generally that to which I have referred, I do not think that the judge erred in what he did.

Ihave dealt with the appeal by reference mainly to the arguments presented to the court. These go, in my opinion, to the main matters which can be or were raised in support of the appeal. In the end, having reviewed the evidence as a whole, I have come to the same conclusion as that arrived at by the judge.

Before parting with this appeal, it is proper to mention one matter. Practice Note 65 provides that the appellant shall prepare a chronology of the matters there referred to. It so provides because a properly prepared chronology is of assistance to the court in understanding the issues, particularly issues of fact, and in deciding the appeal. The chronology should be an objectively correct statement of "the principal events leading up to the litigation" and should not be a chronology merely of those matters of assistance to one party or the other. The rules do not provide, in terms, a sanction for failure to comply, or comply properly, with the Practice Note. However, in the event of non compliance, it is open to the court to mark the non-compliance and the effect of it by making an appropriate order in respect of costs.

In my opinion, the appeal should be dismissed with costs.

Clarke JA I agree with Mahoney JA. Meagher JA I agree with Mahoney AP.

Counsel for the Appellant: WR HODGEKISS Instructed by: KARAGEORGE and Co Counsel for the Respondents: OG WATT Instructed by: PETER C PRIOR and Co