New South Wales Supreme Court CITATION : Bruin v Larney [2006] NSWSC 636 HEARING DATE(S) : 22 June 2006 JUDGMENT DATE : 29 June 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Malpass at 1 DECISION : The appeal fails. The Summons is dismissed. The Plaintiff is to pay the costs of the proceedings. CATCHWORDS : Claim for debt evidenced by IOU - appeal - no error in point of law - decision of Magistrate founded on findings of fact supported by ample evidence. CASES CITED : Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 PARTIES : Hans Ten Bruin (Plaintiff) Brian Larney (Defendant) FILE NUMBER(S) : SC 16054/05 COUNSEL : J S Mitchell (Plaintiff) J P Mrsic (Defendant) SOLICITORS : Sydun & Co, Solicitors (Plaintiff) CBD Law (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 1944/05 LOWER COURT JUDICIAL OFFICER : Lulham LCM LOWER COURT DATE OF DECISION : 25/11/04 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass Thursday, 29 June 2006 16054 of 2005 Hans Ten Bruin v Brian Larney JUDGMENT 1 His Honour: The Defendant provided services as a contractor to a company known as Professional Printing Pty Limited (which is now in liquidation). The services included work in relation to the preparation of certain financial statements. The Plaintiff was the Managing Director and Principal of the company. 2 An external auditor provided accounting services for the company (inter alia in relation to the financial statements). Since 1991, those services were provided by Mr Mar. The financial statements were signed by the Plaintiff as a Director of the company. The material showed an indebtedness to the Defendant in the sum of $25,267.65. 3 The company ceased trading (about July 2002). Thereafter, the company went into liquidation (in about August 2003). 4 On 27 August 2003, a document which has been described as an IOU, came into being (the "IOU"). The document was signed by the Plaintiff and his signature was witnessed. It acknowledged indebtedness in the sum of $25,268 (the "sum"). The contents thereof are set forth later in this judgment. 5 In September 2003. Mr Mar received instructions and then prepared draft financial statements for the liquidator to reflect what had been brought about by inter alia the IOU. 6 The Defendant sought to recover the sum. He commenced proceedings in the Local Court. His process pleaded a cause of action for moneys lent by the Defendant to the Plaintiff as acknowledged by the IOU. 7 A contested hearing took place by Lulham LCM. Evidence was given by the Defendant, the Plaintiff and Mr Mar. The IOU, the financial statements and other material was also adduced in evidence. Broadly speaking, there were two issues before the Magistrate. The Plaintiff contended that there was no antecedent debt (that there was no debt owing by the company to the Defendant). He also contended that there was no consideration for the promise to pay acknowledged by the IOU. The Magistrate delivered an Ex Tempore judgment on 25 November 2005. He found in favour of the Defendant. 8 The Magistrate was not impressed by the Defendant as a witness. However, he was persuaded by the documentary material. This led him to reject the contentions argued by the Plaintiff. 9 The Magistrate in his judgment made inter alia the following observations:- "HIS HONOUR: In this matter, the plaintiff, Brian Larney sues the defendant, Hans Ten-Bruin, seeking to recover an amount of $25,268. The amended statement of claim refers to that amount and whilst the statement of claim refers to a request by the defendant to loan the sum of $25,268 on or about in August 2003, that pleading is imprecise, but in my view, when the statement of claim is taken as a whole, is sufficient to enable the plaintiff to proceed with his claim today. Today, there was no dispute as to the basis of the claim and as to how it was said to arise and all of the evidence, generally, went to the matters in dispute. The plaintiff's claim is that from 1991 he carried out work on behalf of Professional Printing Pty Ltd, in the nature of secretarial, administrative, financial work. Some of the work was undertaken under a business name. It would appear that he was not employed by Professional Printing Pty Ltd, but acted as a contractor. He gave evidence that some time, in about 1994, when it appeared that the company may have been going to make a taxable profit, that an agreement was reached whereby money which was due to him would be shown as a debt owed to him by the company and on that basis, an amount of money was shown in the accounts showing the plaintiff as being owed a sum of money. Mr Larney was unable to give evidence with any precision as to how the amount came to be owing to him. He said it was for work done, and he said that the agreement that it would be shown in a loan account was agreed to with Mr Ten-Bruin. Mr Ten-Bruin denied any such agreement or arrangement, and indeed said that he was not aware of the amount in the loan account. I have not, up to now, indicated the amount in the loan account because the affidavit of Jeffrey Marr (sic) , filed on behalf of the defendant, at para 9 indicated that: "In the financial statements prepared for the year ended 30 June 1997, there were transactions in the computerised ledger provided by BL in respect of accounting entries for Professional Printing. One set of transactions related to payments made on behalf of an entity called Umbai Holdings. I knew this entity was related to BL. These payments were applied to reduce the loan account with BL to $25,267.65". This is the same amount for which the plaintiff now sues. Attached to the affidavit of Brian Larney were the financial documents for Professional Printing Pty Ltd, dated 30 June 1998, 1999 and 2000. It would seem that the 1999 and 2000 accounts were prepared, or signed on 14 May 2001. Each of the financial statements include, under the title "creditors and borrowings", a reference to the plaintiff, B Larney, and as being owed an amount of $25,268. That is the amount I will refer to, the amount was obviously rounded up to the nearest dollar. The defendant conceded that he had signed off on those documents and the documents tendered to the Court appear to bear his signature on some pages of the accounts, although not on all. The defendant said in evidence that he did not look carefully at the accounts, and said he never realised that there was an amount in there showing the plaintiff as being entitled, under a loan account, to the sum of $25,268. The evidence indicates that Professional Printing Pty Ltd went into liquidation and it is not in dispute that subsequent to the liquidation, a meeting was held on 27 August 2003 and in that meeting, it was not in dispute that the defendant asked the plaintiff to transfer the loan account to his account. The plaintiff said that he said he was only prepared to transfer the amount in his loan account if the plaintiff signed a document indicating the plaintiff would pay him personally the sum of $25,268. A document was prepared by the defendant saying, in the following terms: "As per discussions, I Hans Ten-Bruin owe Brian Larney $25,268 regarding Professional Printing Pty Ltd". It was signed by Mr Ten-Bruin and witnessed by his then girlfriend. It is clear, in the circumstances, that that document was intended to be a proper legal document. The fact that he had his signature witnessed adds to that finding. Subsequently, the plaintiff called upon the defendant to pay that amount, he has not done so, and hence these proceedings. It is, however, important for me at this stage to indicate something else which was not in dispute, and that is that the accounts for the year ending 30 June 2000, and it appears that they may have been the last accounts prepared, showed Mr Ten-Bruin as being indebted to the company for $59,757. It is clear from the evidence regarding the meeting which was held on 27 August '03 that the liquidator was pressing Mr Ten-Bruin for payment of that amount. What Mr Ten-Bruin wanted to achieve was the offsetting of the loan by Larney of $25,268 to the company and have that amount treated as if it had been paid to Ten-Bruin and therefore reduce his indebtedness to the company by the same amount. The evidence from the accountant indicated that the necessary entries were made to achieve that result, so that in return for signing the document that he then owed Brian Larney $25,268 personally, Mr Ten-Bruin received the benefit of having his debt to the company then in liquidation reducing by the same amount. That was the consideration passing to Mr Ten-Bruin. The plaintiff claimed that the document was in effect an IOU, that they had made demand on their IOU, had not been paid and therefore sought to recover the amount. … In my view, on all of that evidence, and for all those reasons, I am satisfied of the existence of the loan account as alleged by the plaintiff. It follows from that finding that at the time of the signing of the document, on 27 August '03, that there was an antecedent debt to Mr Larney of $25,268 owed by Professional Printing Pty Ltd and that the consequence of the agreement which was entered into on that day was that Mr Larney would be no longer owed that amount by the company, that the plaintiff's debt to the company would be reduced by $25,268, he therefore obtaining that benefit, and that Mr Ten-Bruin, for his consideration, would be indebted to and owe Brian Larney the sum of $25,268." … 10 The Plaintiff now brings an appeal from that decision. It is contended that there has been error in point of law. 11 Essentially, there are three grounds of appeal:- (a) The Magistrate erred in holding that Mr Ten Bruin: (i) was bound to the Plaintiff by representations made in the financial statements of that company; or (ii) represented to the Plaintiff that he had read and approved the contents of the financial statements; or (iii) was willing to take the chance of being bound to the Plaintiff by the contents of the financial statements. (b) There was no evidence upon which the Magistrate could find that there existed a debt that was due and payable to the Plaintiff by Professional Printing Pty Limited in the amount of $25,268. (c) The Magistrate erred in finding that the Plaintiff provided consideration for the document dated 27 August 2003 and signed by the Defendant. 12 The appeal was heard on 22 June 2006. Both parties were represented by Counsel. Counsel for the Plaintiff relied on a written outline of submissions which were supplemented by oral argument. Counsel for the Defendant made submissions orally. 13 At the outset, I should make certain general observations. The decision of the Magistrate was one that was founded on findings of fact. Largely, the case for the Plaintiff on appeal was presented as one where there had been no evidence to support the findings made concerning the matters of the existence of the antecedent debt, and, of consideration for the IOU. In reality, the submissions were directed to questions of the correctness of the findings of fact and the quality of the evidence relied on to make those findings. It is another one of those cases where it may be said that the appeal has been brought because the Plaintiff was unhappy with the result and submissions have been "dressed up" to give the impression of there being an error of law. 14 The first ground of appeal (although it is relevant to other grounds) was said to give rise to a different type of error of law. I should make some express comments concerning it. 15 In his judgment, the Magistrate referred to a decision "of, I think it is FCT Holding". The Plaintiff argues that by such reference the Magistrate had in mind the High Court decision in Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. If that be the case, the observations made did reflect misunderstanding. Be that as it may, any such misunderstanding was not of significance in the decision that was reached. 16 In any event, it seems to me, that the ground of appeal misconceives what was done by the Magistrate. He was either rejecting or giving no weight to the Plaintiff's evidence. In my view, he had before him powerful evidence (including the documentary material) to sustain his findings of fact. 17 What has already been said effectively disposes of all grounds. It might be helpful to add that whether or not it was thought by the Plaintiff that his evidence should have been preferred, it was unarguable to contend that there was no evidence to support the findings that were made. 18 Both before the Magistrate and in this Court, mention was made of a question involving the statute of limitations. The question was not one that was raised in the pleadings and the Magistrate put it aside inter alia on that basis. It was not raised by the grounds of appeal and accordingly it was not open to the Plaintiff to ventilate the question in this appeal. 19 The Plaintiff bears the onus of demonstrating error in point of law that justifies the disturbing of the decision of the Magistrate. In my view, the Plaintiff has failed to discharge their onus. 20 The appeal fails. The Summons is dismissed. The Plaintiff is to pay the costs of the proceedings. ********** 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.