New South Wales Supreme Court CITATION : Criticos v Kapeleris [2003] NSWSC 1229 HEARING DATE(S) : 1 July 2003 - 4 July 2003, 13 August 2003, 8 September 2003 JUDGMENT DATE : 19 December 2003 JURISDICTION: Equity JUDGMENT OF : Master Macready at 1 DECISION : See paragraph 57 CATCHWORDS : Deeds -- Whether deed handed over in escrow pending the making of a loan -- Held not as it was merely a recording of an existing indebteness -- Setting aside of deed under Contracts Review Act as one covenantor had not recieved any of the funds lent and acknowledged in the deed LEGISLATION CITED : Contracts Review Act 1980 Cook v Bank of New South Wales (1982) 2 BRP 9580 National Australia Bank v Sampson (No. 2) Unreported CASES CITED : O'loughlin & Ors v Mount & Anor Unreported Phillips v Ward (1863) 2 H.C. 717; 159 ER 297 Shomat v Rubenstein Unreported Angelo Criticos first plaintiff PARTIES : Katina Criticos second plaintiff Theo Kapeleris first defendant Katrina Kapeleris second defendant FILE NUMBER(S) : SC 1047/03 COUNSEL : M Gorrick for the plaintiffs A Rogers for the defendants SOLICITORS : GJ Gooden Solicitor for the plaintiffs David Hand Solicitor for the defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Master Macready Friday 19 December 2003 1047/03 Angelo Criticos and Katina Criticos v Theo Kapeleris and Katrina Kapeleris JUDGMENT 1 Master: This is the hearing of proceedings originally commenced in the District Court in which the plaintiffs sue to recover the sum of $110,400 and interest said to be owing under a deed dated 20 October 1998. A judge of the court has directed that a Master hear all issues in the proceedings. 2 The deed, excluding the signatures, was in the following form: ACKNOWLEDGMENT OF DEBT THIS DEED made the Twentieth day of OCTOBER 1998. BETWEEN ANGELO CRITICOS AND KATINA CRITICOS of 31 Jarrett Street, Campsie in the State of New South Wales (hereinafter called "the Creditor") of the one part AND THEO KAPELERIS AND KATRINA KAPELERIS of 37 Sandringham Drive, Carlingford (hereinafter called "the Debtor") of the other part WHEREAS the said Creditor has agreed to loan to the Debtor at his request the sum of ONE HUNDRED AND TWENTY THOUSAND DOLLARS ($120, 000.00) . The Debtor acknowledges his indebtedness to the Creditor for the sum of $120,000.00 which the Debtor has agreed to pay on or before the 1st August, 2000. NOW THIS DEED WITNESSETH AS FOLLOWS:- (1) The Debtor hereby acknowledges that he is indebted to the Creditor in the sum of $120,000.00. (2) The Debtor warrants that he shall pay to the Creditor the sum of $120,000.00 on or before the 1st August, 2000. (3) If the principal sum has not been re-paid by the 1st August, 2000 then the Debtor shall pay interest at the rate of eight percent (8%) per annum on the amount remaining outstanding. (4) It is agreed and declared that the production of this Deed shall be absolute and conclusive evidence in any Court at any time of the Debtors indebtedness. IN WITNESS WHEREOF the parties hereto have hereunto set their hands and seals on the, day and year hereinbefore written. SIGNED SEALED AND DELIVERED by the said ANGELO CRITICOS ) and the said KATINA CRITICOS ) in the presence of:) ............... SIGNED SEALED AND DELIVERED by the said THEO KAPELERIS ) and the said KATRINA KAPELERIS ) in the presence of : ) 3 There is no dispute that the parties executed the deed and I will return to the circumstances latter. The evidence before me makes it plain that the plaintiffs claim that the following monies were advanced to at least one of the defendants. 27 November1990 $70,000 13 October 1993 $25,000 13 September 1995 $30,000 25 March 1996 $20,000 18 June 1997 $7,000 Total $152,000 The payment of $25,000 in 1993 was for a proposed investment in a Concrete Company, which did not proceed. Those funds were repaid in two amounts shortly after they were provided namely by 9 December 1993. There is no doubt that the amounts of $70,000 and $30,000 were paid but there is a dispute about the advance of the last two amounts. 4 The defendants raise the following matters in respect to the plaintiffs claim: - (a) That the earlier loans were substantially repaid prior to the deed, (b) That the execution of the deed dated 12 October 1998 was in anticipation of the plaintiffs advancing a further sum of $120,000 referred to in the deed and that sum was not advanced. The defendants have filed a cross claim in which they seek relief under the Contracts Review Act and in Equity to set aside or declare void the deed. History of the earlier Loans 5 The 1990 loan was the subject of a written agreement which, excluding signatures, is in the following terms: - THIS LOAN AGREEMENT made the day of 1990 BETWEEN: THEO KAPELERIS of 25 Howley Street, Five Dock in the State of New South Wales, Chartered Accountant (herein called "the Borrower") of the first part AND: ANGELO CRITICOS and KATINA CRITICOS of 31 Jarrett Street, Campsie in the said State (herein called "the Lenders") of the second part WITNESSETH: 1. In consideration of the sum of seventy thousand dollars ($70,000.00) (herein called "the Principal Sum") hereby lent by the Lenders to the Borrower (the receipt whereof the Borrower hereby acknowledges) the Borrower hereby agrees to repay the Principal Sum to the Lender at the expiration of one year from the date hereof. 2. No interest shall be payable by the Borrower to the Lenders on the Principal Sum. 3. The terms of this Agreement shall be binding upon the Borrower and the Lenders and their respective executors,administrators and assigns. IN WITNESS WHEREOF the parties hereto have executed this Agreement. SIGNED by the said) THEO KAPELERIS ) In the presence of: ) The plaintiffs alleged that after the first year when the principal sum was not repaid the defendant orally agreed to pay interest at the rate of 15%. The defendant says that the question of interest was not raised until the events of October 1998. 6 The loan of $30,000 in September 1995 was made to help the defendant who was then engaged in setting up his new accountancy practice. According to the plaintiffs the loan was to be repaid in 3 months failing which interest would be payable at the rate of 10%. 7 In March 1996 there were further discussions in which reference was made to funds belonging to the plaintiffs' daughter Helen. At the plaintiffs request the first defendant and the second plaintiff, apparently on behalf of Helen, executed a loan document. The borrower was shown as the first defendant and the lender as Helen Criticos. The amount of the principal was shown as $20,0000 and interest was 25%. The period of the loan was 10 months and the final repayment date was 26 January 1997. The plaintiffs say that this was a fresh advance whereas the first defendant says that it was only a recording of part of the earlier advance of $30,000. Apparently a sum of $20,000 was money belonging to the plaintiffs' daughter Helen. It was in an account that allowed both Helen and her mother to make withdrawals on one signature. 8 The first defendant acknowledges receipt of $5,000 in May 1996 but denies receipt of the amount of $7,000 in June 1997. The plaintiffs suggested that this later sum was a short-term loan. Strangely the first defendant made two repayments of $3,500 in July 1997. The plaintiffs' claim 9 In the absence of any claim to set aside the deed the plaintiffs would be entitled to succeed against the defendants. There is evidence of delivery of the deed after execution in the offices of the first defendant. The second defendant in the presence of her husband, the first defendant, gave the deed to the plaintiffs after execution and they took it away with them. 10 On the face of the deed in particular the operative provisions it is clear that there is an acknowledgement of an existing debt. It will be recalled, of course, that the defendants' claim is that it was executed in anticipation of the provision of $120,000. If one looks at the first recital, "Whereas the said Creditor has agreed to loan to the Debtor at his request the sum of One Hundred and Twenty Thousand Dollars" it is noticeable that it uses language of a present agreement for a future loan. 11 Normally the operative part of the deed should prevail where there is ambiguity in the recitals. See Halsbury's Laws of Australia paragraphs 140-615 and O'Loughlin & Ors v Mount & Anor Supreme Court of South Australia Full Court 8 May 1998 unreported Butterworths 9801628. To my mind the operative provisions are perfectly clear. The other matters that assist in the construction are the deed as an acknowledgement of a debt are: (a) The heading of the deed which is "Acknowledgement of Debt" supports the nature of the deed. (b) The characterisation of the parties to the deed as "the creditor" and "the debtor" rather than "borrower" or "lender" is consistent with an existing obligation to pay a debt. 12 There were some payments made after the execution of the deed on 20 October 1998. The parties are agreed that $120,000 should be reduced by $9,600 to $110,400. The defendants' claim 13 The defendants' claim that the deed was handed over in anticipation of a new loan of $120,000. 14 The whole basis of the first defendant's claim for the arrangement to make a further loan of $120,000 was predicated upon him having substantially repaid the earlier loans. There is no doubt that the first defendant had made payments to the plaintiffs in respect of the loans over the years from May 1990. The first defendant's record keeping in respect of those repayments was, for an accountant, appalling. His only records in respect of the $70,000 loan were two scrappy bits of paper which he kept in a Philofax. In respect of the loan of $30,000 there are two small pages from his Philofax diary which record agreed payments. The primary material to prove the payments referred to in these documents were in large part unavailable although the first defendant tried to reconstruct and point to what might be primary materials. In many instances these were cash cheques for which there was no reference identifying the funds as being repaid in respect of these loans. This is a real problem given that in recent years the first defendant has been borrowing amounts in a similar way from a number of his clients. 15 Even accepting the first defendant's evidence at its highest it is plain that the repayments which were made could equally be consistent with an agreement to pay interest on the loan. The parties are at issue on this matter. If there was interest payable the amount of the payments made by the first defendant would have been nothing more than payment of interest leaving the principal still outstanding at the time the October 1998 deed was signed. If the first defendant's contention was correct there was no interest payable. If one accepted his evidence there would be only a small amount owing at the time of the October 1998 deed the amount being in the order of slightly in excess of $10,000 according to his calculations and taking his view of the loans. 16 With this background in mind it worth noting the parties' accounts of the circumstances leading up to the execution of the deed in October 1998. 17 According to the plaintiffs they were to go to Greece for a holiday in 1998 and they discussed getting a document from the first defendant confirming the amount of the debt that he owed so that they could make a record for their children if anything were to happen to them. They approached the first defendant and according to them he suggested they get their solicitor to draw up a document. That solicitor, Mr Andresakis, drew up a document which apparently was a mortgage and that was taken to the first defendant. He refused to sign a mortgage and asked them to get some other document prepared. That led to the preparation of the document by Mr Andresakis which subsequently was executed on 20 October 1998. 18 The first defendant's version took into account the difficult time he had with his business and him withdrawing from several accountancy partnerships. In 1998 he commenced trading as a sole trader and still had litigation to manage in respect of his previous partnerships. He had discussed the matter with his wife and, according to him, for the first time informed her that he had previously borrowed money from the plaintiffs. He suggested that he approach them again to borrow some further amounts. His account of what transpired appears at paragraphs 40 to 42 of his affidavit which are in the following terms:- 40. Later in September 1998 I contacted Mr Criticos and invited Mr and Mrs Criticos to come to my office. They came soon after and we had a conversation. I said. "I'm sorry to ask again but I need to borrow money from you". They were both silent as I explained to them the reasons. I said. "I will need $120,000.00". Both appeared troubled about it. They looked at each other and Mrs Criticos said. "It's a lot of money. We would have to discuss it with our daughters." I said. "Please do and let me know." 41. I did not speak with the Criticos' about the matter but in October Katrina walked into my office and said. "Mr & Mrs Criticos are here for us to sign a loan agreement, they are going to lend us the money." I said. "Ask them to leave the agreement so I can read it later." Katrina went outside then came back to my office and said. "They insist that we sign it now." I walked out to the reception area and welcomed Mr & Mrs Criticos. I quickly read the agreement and said. "Uncle have you brought the money?" He said. "No." I said. "Why do you want us to sign the agreement without the money." Mrs Criticos said. "Sign the loan agreement and we will bring the money later." I said. "No" and walked back to my office. Katrina followed behind me and said. "They are willing to help us, do you want the money or not? I have already signed it." I then signed the agreement. 42. About a week later I came back to my office after an outside appointment and found Mr Criticos sitting in the waiting room. I took him into my office. He was edgy. He seemed almost embarrassed to be in my office. I said to him. "Is everything ok, you look stressed?" He replied. "Excuse me but can I be open with you? I said to him. "Of course you can." Mr Criticos said to me. "I have heard disturbing comments from various people, including the Greek boy that works with your ex partners at Bankstown about you being in financial trouble." I said to him. "But I explained it all to you." He said to me. "I know but there's also the question of interest all these years." I said to him. "What interest? What are you saying and how much are we talking about?" He said to me. "At least $50,000.00" I said to him. "That amount is ridiculous but we can come to an arrangement." We continued to talk and finally Mr Criticos said. "Anyway, think about it before we proceed any further." 19 He says that thereafter he decided to raise the money in other ways. He gave some evidence which was admitted provisionally that in fact he did borrow some money from other people. Although admitted provisionally I do not think that evidence particularly assists as it is perfectly plain from the evidence that ultimately emerged that the first defendant had a need to borrow further funds at the time. 20 It is immediately apparent that the two versions cannot sit together, they being diametrically opposed. The second defendant supported the first defendant's version but it is to be noted that she did not know of any of the earlier history prior to this occasion in October 1998. Having regard to the evidence before me I think it is highly unlikely that the second defendant knew anything about the earlier loans prior to this time. Her reaction, as recorded by other others indicates the shock which this caused her. The evidence in respect of the earlier loans makes it clear that the sums were received and paid by the first defendant who, of course, executed all the relevant documents that do exist and maintained what records that do exist of the repayments. Indeed, the second defendant's involvement only comes about in respect of the loans as a result of her execution of the document and the inclusion of her name as a party. It was only at about this time that she worked for the first defendant for a few days each week. Repayment of the $70,000 and $30,000 loans 21 It was fundamental to the defendants' case that they had substantially repaid the loans made to them by the plaintiffs at the time of the execution of the October 1998 deed. At the time of the $70,000 loan the second plaintiff said to the first defendant that since they did not have a regular income could he pay some amounts monthly in cash until the debt is paid out and then they can apply for a pension later. The first defendant says that he then started making payments to them apparently notwithstanding the fact that the agreement provided that there were to have been no repayments as the amount was repayable one year after execution. According to the first plaintiff he says that the first he knew of repayments were in September 1991 when the first defendant came to his home and gave him a cheque for $3500. He asked what it was for and he was told that the first defendants business was going well and he was going to give some payment to represent interest on the $70,000. He also says that when it was not repaid on the 26 November he and his wife attended on the first defendant and asked when it would be paid. They were told, according to them, that the first defendant did not have the money but could pay interest at 15%. 22 The first defendant's record in respect of repayment of the $70,000 loan is an interesting document and is Exhibit 3 before me. The first page of that clearly in respect of what appears on the top half of the document is nothing more than a photocopy of some other document. This is so except for two signatures which he alleges are signatures of the first plaintiff on the document acknowledging receipt of monies. According to the first defendant he had two copies of the document and gave one to the plaintiffs. He says that he wrote out the first half which dealt with repayments from December 1990 to November 1991 at the one time, that time being 1 December 1990. The amounts listed for each month namely $875 are precisely the amount of interest which that would be paid on a monthly basis at 15% on $70,000. It will be noted that the notes of when matters are paid cover dates from December 1990, January 1991, July 1991 and September1991. Given that the top half is a photocopy it is just as consistent with the document being a reconstruction made at some stage once there was agreement for payment of interest. Although I appreciate that the first plaintiff denies his signature on the document and clearly there is different handwriting to the first defendant's who prepared the original document from which the photocopy was made, the original signature must have been placed on the document after January 1991 as that appears to be the last photocopy entry of the paid amounts on the document. The paid amounts for 16 July, 10 September 1991 appear to be in a fresh handwriting and not part of the photocopy. 23 I note that the first defendant says that the figure of $875 was mentioned by one of the plaintiffs but that he cannot recall who said it or if a reason was given. 24 Both sides account of how the figure was arrived at has inconsistencies. Even on the face of Exhibit 3 the first defendant's claim that he had the first plaintiff sign the document at the time the payment was made on 1 December 1990 and 10 January 1991 cannot stand as it must have been placed there later, after a photocopy was made. 25 It will be recalled that the loan for $30,000, on the plaintiffs' evidence, was clearly one at interest. A high rate was offered, on their version of events, by the first defendant but the plaintiffs indicated that they only wanted 10%. Importantly the document regarding the $20,000, which on the defendants' evidence, was merely a recording of the existing advance of the $30,000 (presumably after some had been repaid) clearly provided for interest. This is quite consistent with the original loan for $30,000 bearing some interest or indeed after the date of the document carrying interest. 26 None of the parties impressed me in respect of their giving of evidence. Accordingly the matter has to be approached carefully and having regard to documents and the likelihood of events occurring. The first defendant's claim that the request for interest was first made in 1998 is highly unlikely given that he signed a document in March 1996 which provided for the payment of interest. 27 It seems to me highly likely that the amount of the repayments for the $70,000 loan was structured by reference to an interest rate and I would accept the plaintiffs' assertion that there was agreement for the payment of interest at some time on or before November 1991 when it became clear that the loan was not to be repaid. It hardly needs noting that there may be reasons why it was not of advantage to the plaintiffs to have interest payable but the parties have not descended to the level of tendering evidence as to how repayments were treated in their tax returns over the years. 28 These conclusions mean that I am of the view that the monies borrowed by the first defendant from the plaintiffs had not been substantially repaid by the time of 1998. Was there an escrow condition? 29 It follows from my conclusion above that a very substantial basis for accepting the defendants' story is absent. If loan had not been substantially repaid then there could have been no suggestion of a fresh loan. There are a number of other things that should be noted in respect of the defendants' suggestion as to this escrow condition. 30 The evidence disclosed that prior to the signing of the 1998 the first defendant had borrowed a number of amounts. In connection with those borrowings the first defendant signed acknowledgements of his indebtedness in respect of the loans. The concept of an acknowledgement, therefore, in respect of the loan, was not a new matter for the first defendant. The particular document in this case was also plainly an acknowledgement of the debt. 31 As I have recounted there was evidence given by the plaintiff, that was not rejected by the defendant, that in fact there had earlier been a mortgage produced which he had rejected because he was not prepared to give a mortgage. If he was prepared to take such a stance in respect of a mortgage there would be absolutely no reason why he should not have refused to hand over the signed acknowledgement until he received the funds, which on his story, were to be advanced. Any refusal by him not to hand it over until the money was available could, in the circumstances if there was in fact to be the provision of funds, have only appeared to be quite reasonable to the plaintiffs. It is unlikely that they should demand the handing over of the document in those circumstances. 32 Another matter which is strange is that the first defendant once, on his story, he had been told that the funds were not going to be advanced did not make any demand to have returned the document which he had signed and delivered acknowledging receipt of the loan. There was evidence given by a Mrs Jackson who was a former employee of the first defendant. She was the person who witnessed the signatures of the parties to the deed, although the operative provisions of the deed were covered up so that she would not see them. Although she was in dispute with the first defendant following her leaving his employ it seemed to me that she was prepared to give her evidence in a dispassionate way. There is no reason not to accept her evidence that there was a large argument in the first defendant's office between the parties immediately before the document was signed. This is quite at odds with the way the matter is described by the first defendant in his affidavit evidence. 33 In the result I do not accept the defendants' evidence that there was an escrow condition contended for by the defendants or that there was any agreement to advance a further sum of $120,000 which was to be governed by the deed. The defendants' cross claim 34 The defendants filed a cross claim which referred to the deed and the fact that it contained a provision, in clause 4, that certain matters were conclusively proved in certain circumstances. Paragraph 3 of the cross claim and the claim for relief are as follows: "3. The deed and the said provision were unjust at the time that the deed was executed. Particulars of the unjust nature of the deed The deed was unjust in that it purported to impose a liability upon the cross claimants to pay moneys in the nature of a debt in the sum of $120,000 to the cross defendants when the cross claimants were not so indebted to the cross defendants. Particulars of the unjust nature of clause 4 The purported effect of the said clause 4 was not explained to the defendants and was not otherwise known to the defendants. AND THE CROSS-CLAIMANTS CLAIM (i) An order in equity or under section 7 of the Contracts Review Act that the said deed be set aside or declared void or, in the alternative, varied to provide that the obligation of the cross claimants to pay any moneys to the cross defendants was dependant upon the cross defendants advancing the moneys referred to in the deed. (ii) In the alternative, an order under section 7 of the Contracts Review Act that clause 4 of the deed be declared void. 35 No particular evidence was given by the first defendant as to his understanding of the document. The second defendant gave evidence to the following effect: 19. Mr and Mrs Criticos and I exchanged pleasantries in Greek and then Mrs Criticos handed me a document and said: "This is the agreement to lend Theo the money, is Theo in to sign it and can you fill out the details?" 20. I took the document and filled out the date of 20 October 1998 in handwriting. I read over the document quickly and signed it without giving the matter a moments thought. The document looked legal in form but at some point, either then or later before they left, Mrs Criticos said: "My daughter typed this up." I took the document into Theo's office. 28. There was no explanation to me by anybody of Annexure A. It appeared to me to be the sort of document I would sign if someone was going to lend me money, which is what was to occur. I read the document before signing it but it did not occur to me that I was admitting some existing debt I have never previously borrowed money off Mr and Mrs Criticos. I did not owe them one cent and I never had. 29. I was not told, and did not understand, that the effect of Annexure A, and paragraph 4 of Annexure A in particular, might have the effect of rendering me liable for money that I did not owe and prevent me from denying the existence of the debt in court. 30. If I had been told that I might be making myself liable for money that I did not owe I would not have signed the document. I simply thought that I was obtaining a loan. 36 I accept, of course having regard to the evidence of Mrs Jackson and the other evidence in the case, that there was no explanation given to the second defendant of the deed. Given my non acceptance of the defendants evidence for the promised further loan I do not accept the second defendant when she says that she simply thought she was obtaining a loan. 37 Even though I do not accept what she says about her expectation of the loan, there is firstly the question of the inclusion of clause 4 in the deed. Why it is sought to be set aside is not clear because the other clauses and the recital is would be evidence of the then indebtedness. There is no doubt that the Courts have, in appropriate cases, set aside under the Contracts Review Act conclusive evidence clauses. See generally Cook v Bank of New South Wales (1982) 2 BPR 9580; National Australia Bank v Sampson (No. 2) Unreported Young J 9 September 1999; and Shomat v Rubenstein Unreported Young J 4 December 1995. 38 So far as the first defendant is concerned consideration of the various factors in section 9 are as follows. 39 Section 9 (2)(a) of the Act. Clearly in the present circumstances there was no material inequality which is referred to in the section. 40 Section 9 (2)(b). The negotiations that occurred included the rejection of the mortgage that had been produced prior to this document. There was adequate opportunity for negotiation between the parties and indeed this seems to have occurred. 41 Section 9 (2)(c). There would seem to be no reason why a party could not have been able to negotiate for an alteration of the document. The plaintiffs were clearly not in the position of dominance over the defendants. 42 Section 9 (2)(d). Given the circumstances which must flow from my findings, namely there had been no substantial repayment of the loan and that there was some doubt about how much was precisely owing as a result of the lack of record keeping on both sides of the contract, the insertion of that clause, I would have thought, would be reasonably necessary for the protection of the legitimate interests of the plaintiffs in establishing the amount owed to them. If anyone was to have kept records it was the first defendant. 43 Section 9 (2)(e). There is nothing in respect of the first defendant which is relevant. 44 Section 9 (2)(f). In the circumstances of this case both the first and second defendants had a substantially better educational background and literacy than the plaintiffs. The plaintiffs did not read English and have virtually no education. The first defendant was an accountant and the second defendant a bookkeeper. 45 Section 9 (2)(g). There is nothing in the contract which makes it unintelligible and the language is reasonably clear. 46 Section 9 (2)(h). No independent or other legal advice was obtained by the parties. 47 Section 9 (2)(i). So far as the first defendant is concerned there is no suggestion of any explanation. Given the first defendant's history of signing acknowledgements and his qualifications I would have thought that it was unnecessary. 48 Section 9 (2)(j). There was no undue influence or unfair pressure or tactics exerted against the first defendant. 49 Section 9 (2)(k). The first defendant has signed a number of other acknowledgements of debt but these did not contain clauses similar to the present one. 50 Section 9 (2)(l). The clear purpose and effect of the contract was to resolve any uncertainty as to the amount that was owed and set out a regime for the future repayment of that amount. In the circumstances of that purpose I would have thought that the present clause was most appropriate. 51 Having regard to the matters I have mentioned above certainly the clause should not be set aside as against the first defendant. As far as the second defendant is concerned having regard to matters that I will now mention I think it is preferable to deal with her position separately. 52 One of the matters that is very plain on a consideration of all the evidence is that none of the earlier loans were made to the second defendant. She was not involved in any of the discussions for the loans. As I have earlier recounted I accept that she did not know of the borrowings until 1998. In these circumstances a real question arises under the first ground for review referred to in the cross claim. In the circumstance where all the document is doing is recording an existing indebtedness and I am satisfied that there was no indebtedness by the second defendant in respect of the earlier loans then the contract may well be unjust. The genesis for the second plaintiff being a party seems to be a demand from the second plaintiff that she wanted the deed in both of their names. The motivation appears to be that she was concerned that the first defendant was in financial difficulty. 53 It seems fairly plain from the evidence given by the second plaintiff about this matter in her affidavit of 3 October 2002 that the second defendant went along with what the first defendant was prepared to agree to, namely his wife being a party to the document, because his financial situation was somewhat unsound. It is not surprising that the first defendant wanted the document signed because clearly it resolved a problem for him in relation to the debt as it gave another two years to repay it. Effectively the second plaintiff agreed as a result inter alia of the pressure placed upon her by the first defendant who was not able to meet his obligations in respect of loans made to him. She had no opportunity to obtain advice and was not in a position where she could negotiate without causing a substantial breach in their relationship. The benefit she obtained was small compared to the liability she assumed. In these circumstances the deed should be set aside as against the second defendant. There are no grounds to set aside the deed as against the first defendant given my acceptance that there had been no substantial repayment of the debt by the time of the deed. Conclusion 54 Having regard to my conclusions above the deed is to be set aside as against the second defendant. The claim by the plaintiffs is only made on the deed itself and it is plain that the deed creates a joint liability for both defendants. The usual rule is that a promise is joint when a single promise is made by two or more persons without words indicating that each is to be bound individually as well as jointly. See Williams on Joint Obligations at 35. 55 Normally it is necessary in respect of a joint debt to give a judgment against both joint debtors. Where one of the debtors is successful in a defence that operates to discharge all, his success would normally enure to the benefit of the others, even though they have not pleaded the particular defence. Where, however, the decision in favour of one defendant proceeds on a ground peculiar to him the other contractors are not discharged and a joint judgment can be given against them. See Phillips v Ward (1863) 2 H.C. 717 and 159 ER 297. Examples of such a defence include lack of jurisdiction, contractual incapacity, discharge in bankruptcy or operation of the statutes of limitation. The situations in the present case is very similar as the deed has been set aside as against the second defendant on grounds peculiar to her situation. Accordingly I am satisfied that judgment can be given against the first defendant. 56 The agreement of 20 October 1998 provided for interest at 8% on the amount remaining outstanding. Accordingly, the plaintiff should have interest on the amount outstanding at that rate. 57 The orders that I make are as follows: 1. I set aside the deed made 20 October 1998 between the plaintiffs and the defendants only as against the second defendant. 2. Give judgment against the first defendant in the sum of $110,400. Together with interest on the sum of $110,400 at the rate of 8% per annum on and from 1 August 2000. 58 I will hear the parties on costs. ********** Last Modified: 12/22/2003 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.