New South Wales Supreme Court CITATION : Donelian v Donalian [2002] NSWSC 696 FILE NUMBER(S) : SC 11289/01 HEARING DATE(S) : 2/7/02 JUDGMENT DATE : 5 September 2002 PARTIES : Lita Donelian (Plaintiff) Minas Donalian (Defendant) JUDGMENT OF : Bell J at 1 LOWER COURT Local Court JURISDICTION : LOWER COURT 651/98 FILE NUMBER(S) : LOWER COURT Magistrate O'Shane JUDICIAL OFFICER : COUNSEL : J. Mundey (Plaintiff) T. Ryan (Defendant) SOLICITORS : Frances Mary Doyle & Associates, Solicitors (Plaintiff) Osborne & Brickness, Solicitors (Defendant) Justices Act 1902 LEGISLATION CITED : Local Courts (Civil Claims) Act 1970 Suitors' Fund Act 1951 Abalos v Australian Postal Commission (1990) 171 CLR 167 Balfour v Balfour [1919] 2 KB 571 Brennan v Brennan (1953) 89 CLR 129 Chua Chee Chor v Chua Kim Yong [1962] 1 WLR 1464 Coleshill v Manchester Corporation [1928] 1 KB 776 Cotogno v Lamb (No. 2) (1985) 3 NSWLR 221 CASES CITED : Devries & Anor v Australian National Railways Commission & Anor [1992-1993] 177 CLR 472 Gangemi Holdings Pty Limited v Maxwell John Salter & Ors NSWSC, unreported, 1 October 1999 Mifsud v Campbell (1991) 21 NSWLR 725 Jones v Padavatton [1969] 2 All ER 616 Riches v Hogben [1986] 1 QD R 315 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Wentworth v Rogers (No. 3) (1986) 6 NSWLR 642 DECISION : Appeal is allowed; Set aside the judgment of the learned magistrate; Proceedings are remitted to Magistrate O'Shane to be determined according to law; The defendants are to pay the plaintiff's costs of this appeal as agreed or assessed IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION BELL J Thursday 5 September 2002 11289/01 Lita DONELIAN v Minas DONALIAN & Maggie DONALIAN JUDGMENT 1 BELL J: The plaintiff appeals from the decision of Magistrate O'Shane sitting in the Local Court at Ryde given on 30 March 2001. The appeal is brought pursuant to s 69(2) of the Local Courts (Civil Claims) Act 1970 which provides: "A party to proceedings under this Act who is dissatisfied with the judgment or order of the court as being erroneous in point of law, may appeal to the Supreme Court therefrom." 2 The plaintiff relied upon four grounds of appeal: (i) The magistrate erred in law in finding that there was no contract between the plaintiff and the defendant; (ii) The magistrate erred in law by applying the wrong tests to determine if there was a contract between the plaintiff and the defendant; (iii) The magistrate incorrectly applied the law to the facts as disclosed by all of the evidence; (iv) The change in magistrate after the plaintiff had completed her examination in chief disadvantaged the plaintiff. 3 By amended statement of liquidated claim filed in the General Division of the Local Court at Ryde the plaintiff claimed from the defendants the sum of $21,013.50 together with interest. 4 The plaintiff claimed that on various dates between 25 October 1993 and 10 October 1995 she loaned to the defendants the sum of $28,012.00 and that the defendants failed to repay these loans in full. The plaintiff acknowledged repayments received from the defendants in an amount of $5,010.00 together with a further sum of $1,988.50. 5 The plaintiff's claim included a claim for interest in accordance with s 39A of the Civil Claims Act. Additionally the plaintiff claimed an amount of $2,845.65 being interest, which she had paid to the Australia and New Zealand Bank in respect of a VISA cash advance obtained by her on 10 October 1995. 6 The proceedings were commenced on 24 August 1998. Default judgment was entered on 12 October 1998. Thereafter enforcement action was commenced on the plaintiff's behalf. On 26 November 1998 the defendants filed an application for leave to pay the judgment debt by instalments at the rate of $110.00 per month. That application was heard, and refused, by Magistrate Lawson on 22 January 1999. 7 Thereafter it appears that the plaintiff pursued further enforcement action. The defendants filed a notice of motion seeking to set aside the default judgment and sought a stay of proceedings. Their application was successful and on 9 July 1999 they filed a defence. Subsequently, an amended notice of defence was filed. 8 By their amended defence the defendants admitted that the plaintiff had given various sums of money to them between 25 October 1993 and 25 July 1995. It was their case that these monies were not loans but rather that they were gifts between family members. 9 The plaintiff's amended claim was heard before the Ryde Local Court. The hearing occupied five days. It commenced on 23 October 2000 before Magistrate Abood. It continued before Magistrate Abood on 24 October 2000. The plaintiff gave evidence on both days. At the conclusion of proceedings on 24 October the cross examination of the plaintiff had not been completed. The proceedings were adjourned for further hearing to 12 February 2001. 10 On 12 February 2001 the proceedings came on before Magistrate O'Shane. The transcript recording the mention of the proceedings that morning was not in evidence on the hearing of the appeal. Ms Mundey, who appeared on the plaintiff's behalf both in the Local Court and on the hearing of the appeal, informed me that the matter was mentioned on the morning of 12 February before Magistrate O'Shane who told the parties that Mr Abood was ill and would not be able to complete the hearing of the action. Magistrate O'Shane said that she had read the transcript of the proceedings and was willing to hear the balance of the proceedings. I was told that both parties consented to that course. 11 The proceedings were continued before Magistrate O'Shane who heard the balance of the evidence over the course of a further three days. She reserved her decision. On 30 March 2001 she gave judgment for the defendants. 12 The grounds of appeal set out in the summons filed on 2 May 2001 did not include any challenge to the propriety of the proceedings being continued before Magistrate O'Shane. However, in the plaintiff's written submissions filed on 23 August 2001 a further ground of appeal was articulated: (iv) The change in magistrate after the plaintiff had completed her examination in chief disadvantaged the plaintiff. 13 On the hearing of the appeal I sought further assistance from the parties on the question of the jurisdiction of Magistrate O'Shane to complete the hearing of proceedings commenced before another magistrate in circumstances in which the parties had consented to that course. At the conclusion of the hearing of the appeal I reserved judgment upon the basis that each of the parties would furnish written submissions addressed to ground four. The plaintiff was given leave to amend her summons so as to plead as a ground of appeal the fourth ground identified in her written submissions. The evidence 14 The plaintiff's claim was that she loaned sums of money to the defendants on a number of occasions. In all there were nine occasions particularised as giving rise to the claim. I propose to extract the plaintiff's evidence in chief concerning each of these occasions. Transaction 1 – 26 October 1993 15 On or about 25 October 1993 the plaintiff said that she had a discussion with the defendants at their home: "They told me that they were having financial difficulties and they needed to borrow some money to pay towards their home loan, the repayments. Q. Was anything said about a specific sum? A. Yes. Q. How much? A. $2,000. Q. And who said that? A. Minas. Q. Was anything said in that discussion about repayment of that money? A. Yes; Minas said that he would pay it back within a month. Q. Did you give the defendants that money? A. Yes I did. Q. What form was the money in when you gave it to them? A. In cash. Q. Do you remember what day you gave it to them? A. The following day I delivered the cash to their premises." (T23/10/00 at 32). Transaction 2 – 22 February 1994 16 The plaintiff's evidence in chief concerning the second transaction was as follows: "Q. Miss Donelian, on or about 22 February 1994 did you loan to the defendant a further sum of $2,000. A. Yes. Q. Can you tell me whether you had a discussion … A. Yes. Q. … with your brother prior to giving him that $2,000? A. Yes I did. Q. Was anything said about repayment of the money? A. Yes; he said he would pay it within a couple of months. Q. Did you give him that money, that second lot of $2,000? A. Yes; I delivered it to their house the following day, in cash. (T23/10/00 at 34-35). Transaction 3 – 22 March 1994 17 The plaintiff's evidence in chief concerning the third transaction was as follows: "Q. On 22 March 1994 did you lend your brother and his wife a further sum of $1,500? A. Yes. Q. Prior to lending your brother that money did you have a discussion with him? A. Yes. Q. Can you recall where that discussion took place? A. At my office in Cammeray, sorry, the day before. Q. You had a discussion with your brother the day before? A. Before I gave them the money. Q. Was anything said between you and your brother about what that money was for? A. Yes. Q. Can you tell me what that conversation was? A. To pay money towards his home loan, repayments towards the home loan. Q. And who said that? A. Minas. Q. Was anything said at that time about repayment of that or any of the other monies that the defendants had borrowed? A. Yes. Q. What was that conversation? A. Sorry, this is the part where – can I say his words? Q. You say it in his words, yes? A. OK. He said, 'I'm sorry I have not been able to make repayments on the previous amounts I took. Thank you for understanding … ' … BENCH: Just pause there. Q. Yes? A. 'I will make repayments within a couple of months.'" (T23/10/00 at 35-36). Transaction 4 – 28 April 1994 18 The plaintiff's evidence in chief concerning the fourth transaction was as follows: "Q. On 28 April 1994 did you provide your brother with the sum of $600? A. Yes. Q. Can you tell me where that conversation took place? A. At my workplace, at the office. Q. What was the conversation that took place? A. He needed to borrow $600 to buy some paint due to his work. He's a painter. He needed to purchase some paint. Q. Was there any further discussion between you and your brother at the time that – I'm sorry I should first ask, did you give him the money? A. Yes I did. Q. And what form was that money in? A. In cash. Q. Was there any further discussion between you about it when you gave him that sum of money? A. Yes. Q. And what was that discussion? A. That he would repay it back slowly with the rest of the monies that … BENCH: Q. That he would? A. He would pay it back slowly together … Q. With the rest of the money? A. With the previous amounts – monies that were borrowed." (T23/10/00 at 37-38). Transaction 5 – 16 June 1994 19 The plaintiff's evidence in chief concerning the fifth transaction was as follows: "Q. On 16 June 1994 did you provide your brother with the sum of – I'm sorry, on or about 16 June 1994 did you provide your brother and his wife with the sum of $3,000? A. Yes I did. Q. Was there any discussion between you before you provided him with that sum of money? A. Yes. Q. Where did that conversation take place? A. Over the phone the day before I gave him the money – I lent him the money. Q. Can you tell me what was said in that conversation about you providing him with $3,000? A. He told me that he was really concerned – he was having a lot of financial difficulties and he was really concerned that he was going to lose his house. And so he asked for $3,000.00 to pay it towards the repayment of the home loan. Q. And you provided him with that money? A. Yes I did." (T23/10/00 at 38). Transaction 6 – 27 February 1995 20 The plaintiff's evidence concerning the sixth transaction was as follows: "Q. On 27 February 1995 did you provide your brother with the sum of $2,000? A. Yes. Q. Was there a conversation as to what that money was to be used for at the time? A. Yes. Q. Can you tell me what was said in that conversation? A. He needed to pay money towards his home loan. Q. Did you provide him with that money? A. Yes I did. Q. What form was that money in? A. In cash. In response to a question concerning the terms of the discussion relating to this transaction, the plaintiff said: "He needed the money to pay it towards his home loan and he promised to repay it back slowly, together with the previous amounts that I had lent .. " (T23/10/00 at 42). Transaction 7 – 25 July 1995 21 The plaintiff's evidence concerning the seventh transaction was as follows: "Q. Miss Donelian, on 25 July 1995 did you provide to the defendants the sum of $6,620? A. Yes. Q. Can you tell me whether there was any discussion between you before you provided that sum of money? A. Yes. Q. Can you tell me what was said in that conversation? A. They needed to purchase airline tickets for Syria as Maggie's father passed away and they needed to pay towards the airline tickets. Q. Where did that conversation take place? A. At their home. Q. Did you agree to provide that money? A. Yes I did. Q. And can you tell me what form that money was in? A. It was cheque, State Bank cheque. Q. That was a cheque drawn on your State Bank cheque account is that the case? A. That's right. Q. And can you tell me who you actually gave that cheque to? A. I gave the cheque to the travel agent who I met up with at my mum's house – at their house." (T23/10/00 at 43). 22 The plaintiff went on to state that she had handed the cheque to a person named Rita of the VIP Travel Agency. Rita was at the defendant's home at the time. The plaintiff's evidence in chief continued: "Q. Was anything said about any arrangement between you at the time that you handed that cheque to Rita or between you and the defendants? A. Well the defendants told me that upon Maggie's return from Syria her mother was going to send the said money to pay me back." (T23/10/00 at 44). Transaction 8 – 25 July 1995 23 The plaintiff's evidence concerning the eighth transaction was that on 25 July 1995 she provided the defendants with a further sum of $2726. "Q. Can you tell me whether there was any conversation between you and the defendants prior to you providing that further sum of money? A. Yes. Q. Can you tell me what the conversation was? A. Well they said that they didn't have enough money – to take money as pocket money overseas as spending money, and asked if I could get some money some American dollars and I said, 'Yes'. So that $2700 was transferred to US dollars which was US$2000. Q. Can you tell me where you obtained that sum of money from? A. From my State Bank savings account." (T23/10/00 at 45). 24 The plaintiff went on to say that her sister, Susie Sarafian had exchanged the Australian funds for US currency. The plaintiff provided the sum of US$2000 in cash to the defendants at their home. The evidence continued: "Q. Was there any discussion between you at the time about that issue? A. Yes … That upon Maggie's return from Syria her mother was going to send some money with her for them to repay the airline ticket and the spending money that was lent." (T 23/10/00 at 46). Transaction 9 – October 1995 25 The plaintiff's evidence concerning the eighth transaction was that on an occasion in October 1995 she had a telephone conversation with her sister, Margo Donalian. As the result of that conversation she went to the defendants' home. Sheriff's officers were loading furniture from the family home onto a truck. She went to her bank and obtained the sum of $5,000 from her ANZ Visa credit account. She withdrew a further sum of $2,566 from her State Bank savings account. She returned to the family home and handed the sum of $7,570 to one of the officers. Thereafter the first defendant returned home. The officer handed the receipt for the monies to him. There was evidence from which it was open to conclude that the officers' actions involved the execution of process against the first defendant. The plaintiff was asked: "Did you and Minas have a conversation that day after he came home about what had transpired? A. Yes. Q. Can you tell me what was said? A. Well he kissed me on the forehead and thanked us for being there and assured me that he was making payment slowly and pay the full amount, thanks for being there again, you know, 'I don't know what I could have done without you, and thanks for lending the money'." (T24/10/00 at 16). 26 It was the plaintiff's evidence that on no occasion had she and the defendants recorded their agreement in writing. She had recorded the first defendant's name next to entries recording the relevant withdrawals in her Commonwealth Bank savings account passbook or State Bank savings account statements as the case may be. 27 The plaintiff said that between 10 April 1996 and 12 February 1997 she received sums of money from the defendants, her sister, Margo, and her mother by way of repayment of the funds loaned by her to the defendants. 28 The plaintiff made a demand for the repayment of the balance of the monies by letter, dated 17 February 1998, addressed to the defendants and to Margo Donalian. The letter was sent by registered mail. The plaintiff said that thereafter she spoke with the first defendant by telephone. During this conversation she requested that they meet to discuss the matter. She said that the first defendant told her that he was going to put the house on the market for sale. She told him that she was desperate for her money and he replied, "Well I don't have any to give you at the moment. I'll give you the full amount once the property is settled, and that could happen in the next three months". 29 The plaintiff commenced proceedings for the recovery of the outstanding sum on 24 August 1998. It would appear that she obtained default judgment. Thereafter on 16 October 1998 she applied for the issue of a writ of execution. In due course she received the sum of $1,988.50 from the Office of the Sheriff. 30 Rita Slim, a travel agent, gave evidence in the plaintiff's case. She knew the defendants personally. She said that the second defendant telephoned her and told her of her father's death. The second defendant asked her to book tickets for herself, her two children and Margo Donalian to fly to Syria. Ms Slim said that she asked how the second defendant could afford the trip to which the later responded, "Lita is lending us the money." 31 Sonia Donelian, the plaintiff's sister gave evidence in her case. She said that she had spoken with the first defendant about his dispute with the plaintiff. The first defendant had told her: "he pay the money in instalment or whatever just, you know, just talking about it and he said he wants to pay the money but he doesn't want to pay the interest." 32 The plaintiff's sister, Susie Sarafian, also gave evidence in her case. She said that she had three discussions with the first defendant concerning the monies owed by him to the plaintiff. The first defendant said that he owed the plaintiff the money and that he was prepared to repay her but that he was not willing to pay interest to her. 33 The plaintiff's brother, Jack Donalian, gave evidence in her case of a conversation with the first defendant in which the latter said that he owed the plaintiff money but not interest. 34 The first defendant agreed that he had received the sums of money the subject of the first, second, third and fourth transactions. He was unsure about receipt of the monies the subject of the fifth transaction. He denied receipt of the sum the subject of the sixth transaction. He agreed that his wife had received the airline tickets and been provided with spending money in the amount of $US2,000. It was common ground that the plaintiff had paid the sum of $7,566 to the Sheriff on 10 October 1995. 35 The first defendant said that the various sums received from the plaintiff were gifts. He was cross-examined concerning the evidence given by him on his application in the Local Court to pay the judgment debt by instalments. He agreed that on that occasion he had not said that the monies were a gift to him. A certified copy of the transcript of those proceedings was tendered in the subject proceedings. The Magistrate's reasons 36 Magistrate O'Shane reserved her decision. She delivered judgment for the defendants on 30 March 2001. She found: "In all, the plaintiff detailed ten incidents when she handed money to her brother. Her evidence was that on each occasion her brother said something to the effect of repaying the money to her, however, there was nothing about the terms on which she handed over the monies to her brother nor in respect of any repayments except as I've just indicated. … In response to all of the plaintiff's claims the defendant, Minas Donalian, avers that were monies given to him by his sister, that they were given on the basis of their being family and she was doing what she could to assist him in a time of need. He denied that there was any intention on their part to create legal relations and in particular denies that he owes her a legal debt." 37 Her Worship went on to note that the onus was upon the plaintiff to satisfy the Court upon the balance of probabilities that her claim was made out. She noted as the elements of a contract the following: (i) Offer and acceptance; (ii) Consideration; (iii) Intention to assume legal obligations; and (iv) Certainty of terms. 38 Next her Worship set out a passage from Cheshire and Fifoot The Law of Contracts, 7th ed, Chap 1.28 as follows: "It is not easy to distinguish a conditional gift/promise from an exchange. The distinction must lie in the motivation of the transaction. If the promise is made by way of present, favour, grace or charity the fact that it is conditional does not make it contractual." 39 After citing the above her Worship went on to state: "In the present matter there is no suggestion from the plaintiff that she was in any way – that she was induced to hand over to the defendants the monies claimed by reason of any particular promise from him or from them. Rather, her evidence is that he asked her for money. She handed it over. He subsequently told her he would pay it back to her. Even on the rare occasions, on her evidence, when he asked for money from her, whilst at the same time stating that he would pay it back to her, it was not suggested by her that it was the latter statement which induced her to hand the money over to her brother. The promise by him came subsequently to the incident. Accordingly, the Court is of the view that the plaintiff's evidence has failed to establish the most fundamental element of contract, offer and acceptance. But even if the Court did not come to that view at this level there are other elements which are missing." 40 Magistrate O'Shane went on to discuss the requirement of consideration. In the course of so doing she observed: "In the present case there is no evidence by way of either document or oral evidence from the plaintiff that there was any consideration in the promise by her brother to pay back the monies she handed over to him. Had there been an agreement between them that he would pay interest to her for the monies for example, then there would clearly have been consideration." 41 Her Worship then referred to Jones v Padavatton [1969] 2 All ER 616 at 622 in the context of discussing the requirement that there be an intention to create legal relations. In this context she cited Lord Justice Salmon in Jones v Padavatton at 621: "As a rule when arrangements are made between close relations there is a presumption against an intention of creating any legal relationship. This is not a presumption of law but a fact. It derives from experience of life and human nature which shows that in such circumstances men and women usually do not intend to create legal rights and obligations but intend to rely solely on family ties on mutual trust and affection. There may, however, be circumstances in which this presumption like all other presumptions of fact can be rebutted." 42 Her Worship observed: "Again, it has to be said there was nothing in the plaintiff's evidence which went to rebut this long established presumption." 43 Her Worship then turned to a consideration of the requirement for certainty of terms. In this context she said: "[S]o that although it would appear that some sort of promise may have been held out by the defendant the terms of such promise or promises are uncertain; for example, when the defendant allegedly stated that he would repay the money in a month or in a couple of months, there is no indication as to when such a period would run from or until. … Even if the Court is satisfied that the plaintiff's evidence accurately recounts what was said between her and defendant nevertheless as indicated the terms of those conversations lacked the requisite certainty necessary to bring into existence a legally enforceable agreement. There being no evidence to establish on the balance of probability or at all the elements of contract the plaintiff has failed to prove her claim and judgment is entered for the defendant." The parties' submissions 44 Mr Ryan, who appeared on behalf of the defendants, submitted that ground one does not raise error of law. The magistrate's finding that there was no contract between the plaintiff and the defendant is said to be a finding of fact. In this respect the defendants rely upon Gangemi Holdings Pty Limited v Maxwell John Salter & Ors (unreported) NSWSC, Studdert J, 1 October 1999. Alternatively, it was contended that if the first ground of appeal did raise an error of law it was merely a generalisation of the more specific criticisms of Magistrate O'Shane's decision which are contained in grounds two and three. I approach the matter upon the latter basis. 45 In written submissions Ms Mundey, who appeared on behalf of the plaintiff, identified four suggested errors of law in the statement of the learned magistrate's reasons in support of Grounds 1 - 3. 46 Firstly Ms Mundey contended that the magistrate erred by approaching the matter upon the basis that the first defendant was the offeree. She drew attention to the following passage in the judgment: "Acceptance occurs when an offeree, being in this case allegedly, the defendant Minas Donalian, makes a specified counter-promise in which case a bilateral contract comes into being or, performs a specific act, in which case a unilateral contract comes into being." 47 In Ms Mundey's submission the plaintiff accepted an offer made by the first defendant (to repay the sum requested) and provided valuable consideration for the same by the payment of the sum. 48 Mr Ryan contended that the question of whether the plaintiff was the offeror or offeree is one of fact. He pointed to her Worship's reference to the passage in Cheshire & Fifoot at [38] above. In his submission upon a proper analysis of the judgment it was apparent that the magistrate found as a fact that the plaintiff was not induced to part with the monies by reason of any promise to repay. 49 Mr Ryan went on to note that the evidence concerning the transactions was dissimilar. It was not the case that in every instance the payment made by the plaintiff followed the first defendant's promise to repay the funds. Mr Ryan drew attention to transactions 5 & 9. In the former there was no evidence of any promise by the defendants to repay the sum paid to them. The evidence as to transaction 9 was that this payment was made at the request of Margo Donalian. There was no evidence that Margo was acting as the agent of either of the defendants in this respect. I will return to the question of the magistrate's failure to consider the evidence of the transactions separately. 50 The second matter upon which Ms Mundey relied as evidencing error flows from the first. She referred me to that portion of the judgment set out at [40] above. As I have noted, the plaintiff submits that the payment of the funds on each occasion was the consideration for the promise to repay. 51 Mr Ryan sought to deal with this aspect of the plaintiff's challenge by submitting that the references to the absence of consideration complained of are to be read in the context of the suggested finding that the plaintiff was not induced to pay any monies to the defendants by reason of any promise to repay. 52 Thirdly Ms Mundey submitted that the magistrate appears to have approached the determination of the proceedings upon the basis that there was no evidence capable of rebutting the presumption against the creation of legal relations between close relatives. In this respect she is said to have erred in law. Ms Mundey relied on Riches v Hogben [1986] 1 QD R 315 per Macrossan J at 326: "In circumstances of this kind, where there is a dispute whether an arrangement entered into possesses a legally binding character, the intention of the parties at the time the arrangement was entered into is said to be the determining factor – Balfour v Balfour [1919] 2 KB 571 – but it is the intention which is to be imputed and not just the actual intention which is important. The test is, 'would reasonable people regard the agreement as intended to be binding' per Lord Denning MR in Merritt v Merritt [1970] 1 WLR 1211 at 1213. In disputed cases one party will, at the trial, be stating that he intended to enter into a legal contract and the other will, no doubt be contending that he, for his part, did not so intend. For these reasons the imputed intention test becomes important and requires the surrounding circumstances to be looked at. As Devlin J said in Parker v Clark [1960] 1 WLR 286 at 293, the question whether there is a binding contract must depend 'on the intention of the parties to be inferred from the language they use and the circumstances in which they use it.'" Ms Mundey also relied on the observations of Kelly SPJ in that case at 316 – 317: "It is permissible to have regard to the subsequent of the parties for the purpose of discovering whether the intention to be attributed to them was to make a binding agreement or otherwise." 53 Ms Mundey identified a number of matters as tending to rebut the presumption against the creation of legal relations. The plaintiff's evidence was that the first defendant had promised to repay the various sums. She expected to be repaid. She denied that the sums paid were gifts. The defendants made some repayments consistent with the first defendant's promise. When the repayments ceased the plaintiff's conduct was consistent with her belief that she had a lawful entitlement to repayment. She wrote to the defendants by registered mail making a demand for repayment. When she received no reply she telephoned and sought to discuss the matter. When no further repayments were made she commenced legal proceedings. Ms Mundey also relied on what were said to be admissions as to the debt owed to the plaintiff made by both the first and second defendants. 54 Mr Ryan submitted that this aspect of the plaintiff's challenge amounted to an attack on the factual findings of the magistrate. 55 The final error identified by the plaintiffs in support of the first three grounds of appeal relates to the magistrate's finding concerning certainty of terms. In Ms Mundey's submission the learned magistrate erred in holding that the lack of precision in the terms adopted by the parties was fatal to the existence of a binding contract. Resolution 56 The right of appeal provided by s 69(2) of the Local Courts (Civil Claims) Act is a limited one. The plaintiff may only succeed if she establishes error of law. In Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 Jordan CJ enunciated the principles which govern the determination of whether a question is one of fact or law. Relevantly his Honour noted: "(d) A finding of fact by a tribunal of fact cannot be disturbed if the facts inferred by the tribunal, upon which the finding is based, are capable of supporting its finding and there is evidence capable of supporting its inferences. (e) Such a finding can only be disturbed: (i) if there is no evidence to support its inferences; or (ii) if the facts inferred by it and supported by evidence are incapable of justifying the finding of fact based upon those inferences; or (iii) if it has misdirected itself in law." 57 A finding of fact may not be disturbed upon the basis that it was against the weight of the evidence; Azzopardi v Tasman UEBI Industries Ltd (1985) 4 NSWLR 139, per Glass JA (with whom Samuels JA concurred) at 155 – 156: "To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative force of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof the finding of a jury is vitiated in this way, it will be set aside because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the findings of a Workers' Compensation Commission judge is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal." 58 In the context of the issues raised on the hearing of this appeal it is also appropriate to have regard to the observations in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 per Mahoney JA at 249 and McHugh J at 282 concerning the scope of the duty imposed on judges and magistrates to give reasons for arriving at their conclusions. 59 In this case there was a conflict in the evidence between that given by the plaintiff, and the witnesses called in her case, and the defendants. The determination of whether the whole or part of the sum claimed by the plaintiff was a debt owed to her by the defendants depended upon the magistrate's determination of the facts in dispute. 60 The magistrate did not make factual findings in this respect. At the commencement of her judgment she observed: "The evidence of the plaintiff can be shortly stated as being that she made several loans of money amounting to $25,602 to the defendant over the period of about two years between 25 October 1993 and 25 July 1995 in respect of which she further claims interest in the amount of $8,790.25 and that the defendants stated that he would repay her. On her evidence the terms of his undertaking was that general that is, that he would repay her. … The defendant Minas Donalian, in particular, asserts that the money he received from his sister was not in performance of a contract but merely assistance being given by one family member to another in accordance with culture and tradition." 61 The magistrate did not decide whether she accepted the evidence of the plaintiff or her witnesses. In Mifsud v Campbell (1991) 21 NSWLR 725 the Court did find it necessary to determine whether a judge's failure to deal with critical evidence, and to record reasons for so doing, amounted to error of law or error or another kind. In this case the magistrate appears to have approached the proceedings upon the basis that, taken at its highest, the plaintiff's claim could not succeed. In deciding the matter in this way I consider that she erred in law. There was evidence which, if accepted, established that on a number of occasions particularised in the amended statement of claim the plaintiff loaned sums of money to the first defendant (or to the first and second defendants). 62 The discussion in the judgment concerning offer and acceptance and the absence of consideration seems to me to have proceeded upon a wrong footing. If one accepted the plaintiff's evidence concerning transactions one, two, three, four, five, six, seven and eight, the consideration was fully executed. The plaintiff furnished the various sums to the defendant/s in response to a request so to do; Australian Woollen Mills Pty Ltd v the Commonwealth (1953-1954) 92 CLR 424 at 456-457. A loan of money creates a debt owing by the borrower to the lender. The debt is recoverable from the time the loan is made (subject to an agreement that it shall not be repayable until the expiration of a stipulated period or the happening of an event); Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; Ogilvie v Adams [1981] VR 1041. 63 There are passages in her Worship's reasons that suggest that she may have approached the matter upon the basis that the loan of a sum of money by one member of a family to another without some greater formality is not capable of rebutting the presumption against an intention to create legal relations. Since I propose to remit the matter to the magistrate it is appropriate to make some observations on this topic. As the magistrate rightly noted that the presumption is a rebuttable one. Jones v Padavatton [1969] 2 All ER 616 and Balfour v Balfour [1919] 2 KB 571 were both cases concerned with promises made in a family setting. In Jones a daughter sought to enforce her mother's promise to pay her an allowance while she studied for admission to the bar. In Balfour a husband promised to pay a monthly allowance to his wife while she resided in England and he returned to his employment in Ceylon. At the time the promise was made the two were on amicable terms. 64 In this case the plaintiff said (with respect to a number of the particularised transactions) that she loaned monies to the first defendant and, on one occasion, to the first and second defendants. She led evidence in her case that the first and second defendants had made admissions as to their indebtedness to her. The defendants led evidence in their case that the sums paid to them by the plaintiff were gifts. It was necessary for the magistrate to make findings with respect to this central issue. In the event that the evidence of the plaintiff and that of her witnesses was accepted there would seem to be little room for the operation of the presumption against the intention to create legal relations with respect to that part of her claim that arose out of transactions in which she paid sums of money to one or both of the defendants (or to a third party) at the request of one or both of the defendants upon the understanding that the monies would be repaid. 65 I also consider that there is force to Ms Mundey's submission that the magistrate erred in law in concluding that the evidence was not capable of establishing that the defendants were indebted to the plaintiff in one or more of the sums particularised because there was no certainty as to the terms with respect to repayment. In her reasons the magistrate said: "When the defendant allegedly stated that he would repay the money in a month or a couple of months, there is no indication as to when such a period would run from or until. In respect of a couple of months there is even less certainty in so far as there is no indication of what for the purposes of the parties involved here, was either contemplated or understood by the term 'couple'. Likewise, the reference to 'full amount of monies' is also uncertain". 66 In a case where the parties have not recorded their agreement in a formal contract the court will be disposed to imply terms necessary to give effect to their agreement. Any uncertainty about the meaning to be given to an agreement that a debt shall not be repayable until the happening of an event or the passage of a period of time is resolved by implying a term necessary for the reasonable and effective operation of the parties' agreement; Hawkins v Clayton (1988) 164 CLR 539 per Deane J at 570 – 573 and Breen v Williams (1996) 186 CLR 71 per Dawson and Toohey at 91. 67 It is appropriate to return to a consideration of the plaintiff's fourth ground of appeal. 68 In written submissions the plaintiff contended that the continuation of the proceedings before Magistrate O'Shane was an irregularity that had occasioned real prejudice to her. In her submission I should order that there be a new trial. 69 In Wentworth v Rogers (No. 3) (1986) 6 NSWLR 642 the claimant challenged the validity of a costs order made by a judge who assumed jurisdiction in respect of the proceedings when the judge who been seized of the matter was not able to deliver judgment on the question of costs due to illness. Priestley JA (in a judgment with which Glass JA agreed) said: "The circumstance of the change of judge was made the subject of a submission that Maxwell J had no jurisdiction to make the orders which he did. I do not think this can be right. If a judge is unable through absence to make an order which needs to be made for some proceeding before the court to be completed there must be jurisdiction in the court enabling another judge to make the order. The question which can present difficulties in such circumstances is the extent to which the new judge can use materials already before his predecessor in arriving at his conclusion. Very often this problem is solved by the parties' agreement to the new judge making such use of the material before his predecessor as he sees fit. What the position is in the case where the parties do not agree does not appear to be the subject of any clear authority binding on this Court. In England the only place where the matter is at all fully discussed appears to be in Sir Robert Megarry's A Second Miscellany-at-Law (1973) at 53-58. Both the Supreme Court Practice (1985) vol 1 at 24, and Halsbury's Laws of England , 4th ed, vol 37 par 61 at 53 refer to Sir Robert Megarry's work as the best discussion of the topic, showing that a stone of authority may lie concealed among flowers of anecdote." In the present case, however, I do not think it necessary to investigate the law in cases where use by the new judge of the materials before his predecessor is opposed. In the present case the inference I draw from the materials before this Court showing what happened before Maxwell J is that the applicant's representatives took part without demur in the proceedings before Maxwell J in the course of which it was transparently clear that his Honour was making use of the materials which had been before Cantor J. Once the applicant's representatives took part in those proceedings, for which as I have earlier remarked there must undoubtedly have been jurisdiction, without complaint about the procedure adopted, I do not think that the applicant, in the circumstances of the case, can later seek to make that procedure the subject of application for leave to appeal." 70 The plaintiff relied on passages in the judgment of Kirby P (as his Honour then was) in Wentworth v Roger (No. 3). His Honour reviewed the authorities touching on the continuation of proceedings by a judge or magistrate in circumstances in which the judge or magistrate who commenced the hearing was unable to complete the matter. These included Chua Chee Chor v Chua Kim Yong [1962] 1 WLR 1464;Coleshill v Manchester Corporation [1928] 1 KB 776, Orr v Holmes (1948) 76 CLR 632, Brennan v Brennan (1953) 89 CLR 129 and Cotogno v Lamb (No. 2) (1985) 3 NSWLR 221. From this review his Honour distilled the following principles: "1. If specific provision is made by statute for the reconstitution of the court following the death, illness, resignation, prolonged absence or other incapacity of a judge who has part-heard a case, the legislation will govern the substitution: Chua Chee Chor v Chua Kim Yong. 2. Statute apart, the primary rule is that once a court embarks upon the hearing of the case, prima facie the court as so constituted should conclude the hearing and any reconstitution of the court in the middle of proceedings will be an irregularity warranting intervention on appeal or review to require a new trial de novo. 3. The primary rule is subject to the exception that if an ancillary, severable and distinct matter is severed and not dealt with in an earlier proceeding, it may be determined by another judge, or an appeal court including another judge: Orr v Holmes. 4. The primary rule applies with special force where the part-heard case is before the court constituted by a judge and jury ( Coleshill ) or where, though constituted by a judge alone, there is a serious conflict of evidence: Chua Chee Chor v Chua Kim Yong; Brennan v Brennan. In such cases proper practice requires recommencement of the trial de novo. 5. The above requirements, if not followed, may result in an order for a new trial. But in certain circumstances such an order will not be made. The guiding principle is the demands of justice in the particular case. Relevant to the application of that principle is a consideration of the extent of any possible prejudice done by the procedure that was followed and risk of injustice arising from it as well as the expense and delay that would be occasioned by an order for a trial de novo in the circumstances that have occurred: Brennan v Brennan ; Cotogno v Lamb. 6. It is also relevant in this last connection to consider the conduct of the parties, and those who represented them (if any) at the trial for if they have induced, acquiesced in or waived the irregularity they will not normally thereafter be heard to complain of it; British Reinforced Concrete Case ; Brennan v Brennan ." 71 In Brennan v Brennan a wife appealed from a decree nisi made by Clancy J sitting in the Matrimonial Causes jurisdiction of this Court on the petition of her husband for the dissolution of their marriage. The suit had first come on for hearing before Edwards J. The whole of the oral evidence had been taken when his Honour died. The further hearing of the suit came on before Clancy J some months later. At that time the wife was seriously ill and for that reason, and to save expense, Clancy J was requested by all parties not to embark upon a hearing of the oral evidence de novo but to have the transcript of the evidence taken before Edwards J tendered as an exhibit and either read in open court or read in his chambers. Clancy J acceded to the application that the further hearing of the proceedings proceed upon that basis. The transcript was tendered by consent and his Honour read it in chambers. Thereafter two witnesses were recalled and gave evidence before him. He heard addresses of counsel and pronounced orders. 72 When the appeal came on for hearing in the High Court a question was raised as to whether the hearing before Clancy J had been proper. Section 77 of the Matrimonial Causes Act 1899-1951 (NSW) required that witnesses in all proceedings before the court were to be sworn and examined orally in court. The contention before the High Court was that there may have been a breach of s 77 in that Clancy J read the transcript of the evidence given before Edwards J in his private chambers instead of in open court. 73 In Brennan v Brennan the Court observed: "The real objection to the further proceedings before Clancy J was that, in a case which raised important issues of fact, as to which conflicting evidence had been given before Edwards J, his Honour decided to proceed from the stage the hearing had reached before Edwards J and not to hear the whole suit de novo. There are cases in which such a course has been pursued: Coleshill v Manchester Corporation ; In Re Application of British Reinforced Concrete Engineering Co. Ltd. (1929) 45 TLR 186; Bolton v Bolton (1949) 2 All E R 908. In all these cases the court on appeal criticised the course that had been followed but accepted what had been done and did not order a new trial. There are, we think, in most cases grave objections to such a course and the objection becomes graver when there is, as in the present case, a serious conflict of evidence. But the parties were all represented by counsel or solicitors and they all requested his Honour to take the course he did. It was open to any of the parties to apply to his Honour for leave to recall any of the witnesses for examination if they thought fit, but they all elected not to do so and the two witnesses who were further examined were recalled at his Honour's request. 'If a litigant has himself induced, acquiesced in or waived the irregularity he cannot afterwards complain of it': Marsh v Marsh (1945) AC at 285. In these circumstances it appears to us, that we should, if we can consistently with the public interests, which are involved in divorce proceedings, dispose of the appeal on the materials before us. To order a new trial at this stage would involve a great deal more expense than would have been incurred if the hearing before his Honour had proceeded de novo. After much consideration we have decided to proceed on the materials before us." 74 The plaintiff submitted, by way of contrast to the facts in Brennan v Brennan, that in this case neither party was seriously ill and no issue concerning the expense of the proceedings was raised. The parties did not request the course that was followed. Further, the transcript of the proceedings before Magistrate Abood was not tendered as an exhibit before the Magistrate O'Shane. 75 Ms Mundey acknowledged that in determining whether to direct that there be a new trial the guiding principle is the demands of justice in the particular case. She contended that there exists the possibility of real prejudice to the plaintiff by reason of the fact that the magistrate did not have the benefit of seeing and hearing her evidence in chief. Ms Mundey referred me to a number of authorities which deal with the deference paid by appellate courts to the factual findings of trial judges (recognising the latter's advantage in seeing the witnesses as they give their evidence); Devries & Anor v Australian National Railways Commission & Anor [1992-1993] 177 CLR 472; Abalos v Australian Postal Commission (1990) 171 CLR 167. 76 The defendants submitted that the circumstances in which an appellant court would intervene to order a new trial because of what is universally described in the authorities as "an irregularity" would have to be such as to cause extreme prejudice to the interests to one of the parties. In this respect Mr Ryan noted that in none of the cases referred to in Wentworth v Rogers (No. 3) did the appellate court intervene to order a new trial. He observed that Brennan v Brennan was itself a case in which there had been a serious conflict of evidence. 77 Mr Ryan submitted, in my view correctly, that the plaintiff's reliance upon the "incomparable advantage" of a trial judge over that of an appellate court in assessing evidence was misconceived. Magistrate O'Shane was the tribunal of fact. It is true that she did not have the opportunity of observing the whole of the evidence of the plaintiff. She did, however, have the benefit of seeing the plaintiff in cross-examination for more that one full day of hearing. She heard the evidence of all the other witnesses. She read the transcript of the evidence in chief and the initial cross-examination of the plaintiff. 78 In the defendant's submission the plaintiff, having consented to the course that was adopted, should not be heard now to complain. 79 The continuation of the proceedings before Magistrate O'Shane in the circumstances was irregular. No provision is made under the Local Courts (Civil Claims) Act for proceedings commenced before one magistrate to be continued before another. The irregularity is compounded by the circumstance that the transcript of the proceedings before Magistrate Abood was not an exhibit before her. 80 The provisions of Part 5 of the Justices Act 1902 apply to appeals brought pursuant to s 69(2) of the Local Court (Civil Claims) Act. Section 109 of the Justices Act provides that this Court, after hearing an appeal, may determine it by dismissing the appeal or, relevantly, by doing any one or more of the following: …. (c) making such other orders as it thinks just; (d) remitting the matter to the Magistrate who made the conviction or order, or imposed the sentence to hear and determine the matter of the appeal. 81 The scope of s 109(c) is such as to admit of me making an order directing that there be a new trial. In weighing up the demands of justice in this case significant is the consideration that both parties consented to the course that was adopted. I am persuaded that the suggested prejudice occasioned to the plaintiff is not a matter of substance having regard to the fact that Magistrate O'Shane heard the greater part of her cross examination. I am conscious that the sum in dispute (while no doubt of considerable significance to the parties) is relatively modest. The hearing in the Local Court occupied five days. In all the circumstances I am not of the view that the demands of justice favour an order for a new trial. 82 By her summons the plaintiff sought an order that this Court enter verdict and judgment for her in the sum of $21,013.50 together with interest and costs. On the hearing of the appeal Ms Mundey did not press for the making of such an order. I am not able to determine the factual issues in dispute between the parties. 83 I consider that the appropriate course is to remit the proceedings to Magistrate O'Shane for her to determine according to law. 84 I propose that the defendants should pay the costs of the appeal. The costs of the trial are in the discretion of Magistrate O'Shane. 85 I reserve the question of whether there is an entitlement to the grant of a certificate under s 6 of the Suitors' Fund Act 1951. 86 For these reasons the orders that I make are: (i) appeal is allowed; (ii) set aside the judgment of the learned magistrate; (iii) the proceedings are remitted to Magistrate O'Shane to be determined according to law; (iv) the defendants are to pay the plaintiff's costs of this appeal as agreed or assessed. ********** Last Modified: 09/06/2002 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.