New South Wales Supreme Court CITATION : Dehsabzi v Khaliqi [2008] NSWSC 848 28 July 2008 HEARING DATE(S) : 1 August 2008 13 August 2008 JUDGMENT DATE : 15 August 2008 JUDGMENT OF : Smart AJ DECISION : See paragraph 30 CATCHWORDS : Loan of money - No question of principle - Issues of fact CATEGORY : Principal judgment Marina Dehsabzi Minyar Dehsabzi PARTIES : Abdul Khaliqi Qudsia Khaliqi Harown Khaliqi Majeed Khaliqi FILE NUMBER(S) : SC 6088/2008 Mr M Lawson (plaintiffs) COUNSEL : 1st and 2nd defendants self represented 3rd and 4th defendants unrepresented Stephen Bullivant (plaintiffs) SOLICITORS : 1st and 2nd defendants self represented 3rd and 4th defendants unrepresented IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SMART AJ FRIDAY 15 AUGUST 2008 6088/07 MARINA DEHSABZI & 1 ORS v ABDUL KHALIQI & 3 ORS JUDGMENT 1 This is a dispute between a brother and sister and their spouses. The bitterness that has developed was evident throughout the proceedings. It was a case in which it was difficult to ascertain where the truth lay. All parties came from Afghanistan. Two of the sons of the first defendant were also involved as parties to the proceedings but neither of the sons appeared, although served. 2 The capacity of all parties to speak and understand English was an issue both as at August/September 2004 and currently. The first and second defendants contended that in August/September 2004 they could not speak or understand English and depended on the first plaintiff to guide if not direct them. They said that they trusted her in what she said. They accepted her recommendations as to the persons with whom they should deal and as to the management of their financial affairs. 3 The plaintiffs contended that they entered into an agreement with all four defendants, Mr and Mrs Khaliqi and their sons Harown and Majeed Khaliqi, and that they are currently owed $48,337 by way of capital and $8,320.41 by way of arrears of interest. There is no written instrument which covers the matter and there is a dispute as to the agreement and how it arose. 4 According to the first plaintiff in about August 2004 all of the defendants were living with her in her house. The first defendant, her brother, said to her: "We want to buy a house, we have about $30,000 for the deposit." 5 Arrangements were made for a broker, Mr Andrew Vaughan of Mortgage Choice, to come to the house. The meeting was attended by Mr and Mrs Dehsabzi and the Khaliqis. Mr Vaughan was known to the first plaintiff but she denied that he was favouring the plaintiffs. His task was to assist the defendants in raising finance. 6 According to the first plaintiff she observed Mr Vaughan right down the defendant's financial details as disclosed to him by the first defendant. She recalled Mr Khaliqi stating that they wanted to buy a house for around $400,000 and that they had some money they could use as a deposit. He asked how much they could borrow. Mrs Dehsabzi states that Mr Vaughan returned to her house a few days later and met with her, her husband and Mr and Mrs Khaliqi senior. Mrs Dehsabzi says that Mr Vaughan told the Khaliqis that they could borrow up to $400,000 but they did not come within the lending criteria, that they did not have enough money for a deposit without mortgage insurance, and that if someone gave them $10,000 they could buy the house without spending money on mortgage insurance. 7 Mrs Dehsabzi stated that her brother said if his sister and her husband would lend him some money he would pay that money back as soon as the loan was approved. Mrs Dehsabzi stated that following this meeting she deposited the sum of $10,000 into Mr Majeed Khaliqi's bank account. There is evidence of the deposit of this sum on 16 August 2004. 8 Mrs Dehsabzi stated that following this meeting there was a further meeting attended by Mr Vaughan, both plaintiffs and all four defendants. She then deposed to the following: She said that Mr Vaughan stated: "Harown already has a loan that I don't know about. He needs to repay this money to bring you within the lending criteria. Marina, you need to lend your brother and his family more money otherwise they cannot borrow enough money to buy the house they want." Mr Abdul Khaliqi then said: "We want to borrow another $130,000, we have found a house for $530,000 that we want to buy." Mr Vaughan then commented: "You cannot borrow any more money because of Harown's loan. The only way to finance that purchase is if someone else gets the loan and then lends you the money. If you don't do it this way you will lose your deposit money." Mrs Dehsabzi says that she understood that at that stage the defendants had already put a holding deposit on the house that they ultimately purchased at 10 Lanceley Avenue Carlingford. Mrs Dehsabzi said that Mr Vaughan then looked at her and her husband and the conversation continued as follows: Mr Vaughan: "Marina and Minyar can borrow the money and then lend it to you." Mr Abdul Khaliqi: "That would be good. If you will lend the money to us then I will go overseas in about a year and get the money back to repay you." Mrs Dehsabzi: "If we borrow the money then we have to pay interest on the loan and we will also have to pay some money to arrange the new loan, we don't want to pay that out of our own pocket. " Mr Abdul Khaliqi: "If you will do that for us then we will pay for the interest and the refinancing costs. " Mr Vaughan speaking to Mrs Dehsabzi said: "I can organise the loan for you, I can get you an interest only loan. You can then lend the money on to your brother and his family and they can owe you the amount that you lend them plus the costs that you incur in obtaining the loan. Any interest that you have to pay under your loan can be paid by your brother and his family until they repay the principal." Mr Vaughan then turned to the first defendant and continued: "Abdul, you and your family can put the interest that will be charged on Marina's account into her bank account prior to the bank deducting the interest. You can also keep paying the interest on Marina's loan until it is paid off or reduced. If you pay some of the principal off to Marina then the interest you pay each month into Marina's account will be reduced proportionately because the bank will not charge Marina as much interest." Mr Abdul Khaliqi said: "We have to pay interest on the $10,000 that Marina put into Majeed's bank account also because we can't pay that back as quickly now." Mrs Dehsabzi says that Mr Vaughan then looked at the defendants and said to them words to the effect: "Will you agree to borrow money from your sister and her husband on the basis you will owe them the money that they lend to you or pay on your behalf including the $10,000 that they have already lent you, plus the costs that they incur in taking out their loan and that you pay interest on the loan as I outlined." Mrs Dehsabzi says that each of the defendants responded: "We agree to that." Mr Vaughan then looked at Mr Dehsabzi and said words to the effect: "Will you agree to that?" Mrs Dehsabzi said that she and her husband each responded to the effect: "We will agree to that." 9 This version of events was disputed by Mr and Mrs Khaliqi. They contended that they did not understand English and that Mrs Dehsabzi selectively translated the conversation with Mr Vaughan from English into Dari. They contended that Mrs Dehsabzi found the house at 10 Lanceley Avenue Carlingford. They agreed that they inspected the house but they said Mrs Dehsabzi took them on the inspection. 10 In his affidavit of 19 April 2008, Mr Khaliqi gives this account of events. "In approximately July 2004 July I was at home with the second defendant and the first plaintiff. We had a conversation in words to the following effect: AK: "We have received a letter from the real estate agent telling us we have to leave this house as the agreement with the landlord is over." MD: "You don't have to rent you can buy a house." AK: "I have money but it is not enough to buy a house." MD: "I can arrange a loan for you." AK: "Okay." 11 Two days later according to Mr Abdul Khaliqi his sister telephoned him and they had a conversation to the following effect: MD: "I am at home with Minyar and Andrew, the person who can arrange the loan for you to buy you a house, are you free to come over?" To which Mr Khaliqi replied: "Okay." 12 Mr Khaliqi said that his wife and he went to the plaintiffs' home and met Andrew Vaughan from Mortgage Choice. Mr Khaliqi said that as his wife and he had no understanding of the English language neither of them understood anything that was discussed between the plaintiffs and Mr Vaughan. At the end of the discussion the plaintiffs provided them in Mr Vaughan's presence with an explanation in the Afghani language of what they said was discussed. "I recall that both plaintiffs spoke together so I cannot remember who said what but the effect of the explanation was as follows: Andrew can give you a loan. Can you give me the pay slips for Majeed and Harown so that he can calculate how much the loan will be." Mr Abdul Khaliqi said that he said: "I have $80,000." 13 Mr Vaughan then left the home according to Mr Khaliqi. The plaintiffs and he had a conversation to the following effect. Mr Khaliqi said that he said: "It is difficult for me to get a loan. Neither Qudsia nor I work so we cannot pay the loan." MD: "No it is not difficult, I can arrange everything for you. Both your children work." Abdul Khaliqi: "Okay." 14 Mr Khaliqi said that two days later his sister came to his home and they had a conversation in words to the following effect. His sister said: "Andrew called me, Harown already has a bank loan, you have to deposit $10,000 into any of the Khaliqi family bank accounts. I will deposit $10,000 into Majeed's account, can you give me the bank details for his account. After a few days we can take the money back from out from the account." Mr Khaliqi said that he replied "Okay", that he proceeded to give her the bank details. He said that he did not understand why this had to be done and did not ask her the reason. He said he also did not know why she volunteered to deposit the sum of $10,000 as he had told her a few days ago that he had $80,000 and was and was quite capable of depositing the money into that account himself. He then annexes a page from the bank statement of the fourth defendant indicating a deposit of $10,000 on 16 August 2004. 15 Mr Khaliqi said that on 16 September 2004 the fourth defendant, the first plaintiff and he went to the Carlingford Branch of the Commonwealth Bank at which time the fourth defendant withdrew $11,000 from his account and gave him a thousand dollars and the remaining $10,000 to his sister. There is an entry in the bank statement of the fourth defendant indicating a withdrawal of $11,000 on 16 September 2004. Mrs Dehsabzi denies that any of the $11,000 withdrawn from the account of the fourth defendant on 16 September 2004 was paid to her. 16 Apparently all four defendants signed the contract to purchase the property 10 Lanceley Avenue, Carlingford in September 2004. Mr and Mrs Khaliqi senior asserted that they signed documents which they were told had to be signed without appreciating their effect. The deposit of $53,000 became due and payable on 17 September 2004. Mrs Dehsabzi stated that her brother said to her: "I do not have enough money to pay the deposit on the house." Mrs Dehsabzi said that she agreed to and handed her brother $6,700 in cash. He agreed to pay interest on this sum. 17 Mr and Mrs Khaliqi disputed that they did not have enough money to pay the deposit on the house, and that the payments of $10,000 and $6,700 were on account of the deposit on 10 Lanceley Avenue. The bank statement of Mrs Qudsia Khaliqi shows that as at 16 August 2004 she had a closing balance of $30,523 in her account. However they maintain that they had an additional $68,000 in cash which they kept in their bedroom. Thus they contended that they had no reason to borrow any money and they were able to pay the deposit. 18 I was sceptical about the assertion of additional cash resources and the explanations given as to why they were not used. Mrs Khaliqi asserted that Mrs Dehsabzi was aware of these cash resources and suggested how they should be employed. Mrs Dehsabzi denied any knowledge of it. 19 Mrs Dehsabzi said that Mr Vaughan re-arranged finances on the home of her husband and herself at 29 Eyles Avenue Epping with Suncorp by way of a loan of $512,000, of which slightly less than $380,000 was used to discharge the existing mortgage. 20 Settlement of the purchase of 10 Lanceley Avenue took place on 29 October 2004. The Commonwealth Bank advanced by way of loan $364,822. It also had access to the first homeowner's grant of $7,000. Mrs Dehsabzi delivered to the solicitors acting for the purchasers a bank cheque for $112,987.47 being the balance of the monies required for settlement. She also attended to payment of the solicitor's costs and disbursements of $1,349.85. 21 Upon settlement Mr and Mrs Khaliqi and their two sons moved into 10 Lanceley Avenue. That property was not sold until the two sons moved out. Mr and Mrs Khaliqi were unemployed. He was on a Centrelink pension. A great deal was made during the hearing of Mr Khaliqi's medical condition. He suffers from epilepsy and this was said to affect his memory and his ability to comprehend and speak English. He endeavoured to paint a picture of being largely, if not totally dependent, in 2003 and 2004 upon his sister in business matters. At times during the hearing he seemed subdued and at other times very alert and anxious to make a point. He seemed to follow financial matters. He was ever ready to attribute his difficulties to what he asserted was his sister's misconduct. 22 In court Mrs Qudsia Khaliqi was the principal spokesman for her husband and herself. She was very self possessed, strong-willed, astute, alert, and forceful. She had to be asked not to communicate with her husband in Dari while he was giving evidence. She and her husband realised that they were purchasing a house in which to live. Mrs Qudsia Khaliqi would not agree to purchasing a house in which she did not wish to live. Mr A and Mrs Q Khaliqi knew they were purchasing a house for $530,000 and to enable them to do this the plaintiffs were refinancing and increasing their mortgage on their home at 29 Eyles Avenue and lent the Khaliqis the extra money needed. Their sons also agreed. The Suncorp settlement sheet reveals that the plaintiffs were charged $2,814 by way of credit fees and charges for the new loan. This was deducted from the loan amount of $512,000. 23 In her affidavit of 27 March 2008 Mrs Dehsabzi asserts that the total monies advanced to the defendants including the expenses they agreed to pay totalled $133,337. 24 By letter of 10 November 2004 Mr A Vaughan of Mortgage Choice wrote to the four defendants at 10 Lanceley Avenue, Carlingford, stating that Mrs Dehsabzi had asked him to forward them a letter detailing their required loan repayment to her. The letter continues: "Based on an outstanding amount of $133,337 your interest only monthly repayment will be $785.58. This payment is due on the 28th of each month ...." The letter specified the account of Mr Dehsabzi at Westpac into which the payment was to be made. 25 By letter of 17 March 2005 to the four defendants Mr Vaughan acknowledged the payment of $25,000 from 25 February 2005 and a new outstanding loan account of $108,337. He advised them of the amount of their next interest only monthly payment and the amount of their regular monthly repayment. Settlement of the sale of 10 Lanceley Avenue by the Khaliqis occurred about 7 August 2007. The plaintiffs concede that about 19 September 2007 the defendants repaid to them $60,000 thereby reducing the principal indebtedness to $48,337. 26 From the Statement of Claim and her affidavit of 27 March 2008 of Mrs Dehsabzi, it appears that the Khaliqis did not make the following interest payments: February 2005 $ 785.58 March 2005 $ 785.58 December 2006 $ 708.00 Total $ 2,279.16 27 Mr and Mrs Khaliqi produced to the court a deposit book butt showing a deposit on 28 December 2006 of $660.65 into the account of Mrs Dehsabzi. The butt bears the bank stamp, however an examination of the bank statements of Mrs Dehsabzi for December 2006 and January 2007 with Suncorp shows that this amount of $660.65 was not received. The bank statement for the period 1 March to 31 March 2005 does not show the deposit of $785.58. 28 The plaintiff's claim for interest is made up as follows: (a) Interest repayments not made as per paragraph 22 of Statement of Claim (see above) $2,279.16. (b) Interest from 28 June 2007, interest payments being suspended after May 2007 to 19 September 2007, date of $60,000 payment, 3 x $728.55, $2,185.65. (c) Interest from 19 September 2007 to date, $3,855.60. These sums total $8,320.41. If this figure of $8,320.41 is added to the principal of $48,337 it means that there should be judgment for the plaintiffs against Mr A and Mrs Q Khaliqi of $56,657.00. The plaintiffs have proved their entitlement to this sum. 29 Initially I had some reservations whether judgment against the third and fourth defendants should include the amount of $6,700.00 Mr A Khaliqi borrowed from his sister about 16 September 2004, as this was subsequent to the third meeting held with Mr Vaughan in which they agreed in relation to the purchase of 10 Lanceley Avenue that they would owe the plaintiffs the money that they lent to the defendants or paid on their player behalf, including the $10,000 already lent plus the costs they incurred in taking out their loan and pay interest on the loan as outlined. The agreement was prospective and not just retrospective and the monies were used to purchase 10 Lanceley Avenue. 30 There will therefore be judgment against each of the four defendants for $56,657 and the defendants must pay the costs of the plaintiff of these proceedings. I order the defendants to pay the costs of the plaintiffs of these proceedings. 31 HIS HONOUR: Mr Interpreter would you explain to Mr and Mrs Khaliqi unfortunately they have lost 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.