Carlsund & Anor v Richmond [2007] NSWSC 1391

New South Wales Supreme Court

CITATION : Carlsund & Anor v Richmond [2007] NSWSC 1391

HEARING DATE(S) : 27/11/2007; 28/11/2007

JUDGMENT DATE : 4 December 2007

JURISDICTION : Common Law

JUDGMENT OF : Associate Justice Malpass

DECISION : I direct the entry of judgment for the plaintiffs against the defendant in the sum of $2,665,970. The defendant is to pay the plaintiffs' costs of the proceedings.

CATCHWORDS : Plaintiffs borrow from third party lenders to lend money to the defendant - claim for repayment of loans and for loan fees

Elizabeth Carlsund (1st Pl) PARTIES : Carl Carlsund (2nd Pl) Ross Richmond (Def)

FILE NUMBER(S) : SC 14851/06

COUNSEL : Mr D. M. Flaherty (Pls') Mr E. A. J. Hyde (Def)

SOLICITORS : Cameron Gillingham Boyd Solicitors (Pls') Malcolm Johns & Company Lawyers (Def)

- 15 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

ASSOCIATE JUSTICE MALPASS

4 DECEMBER 2007

14851/06 Elizabeth Carlsund & Anor v Ross Richmond

JUDGMENT 1 HIS HONOUR: This has proved to be a most unusual case. The plaintiffs are husband and wife. The defendant is a half-brother of the second plaintiff. 2 The plaintiffs were the owners of two properties (their home at Turramurra and a farm in the Canberra area). These properties were used as security by the plaintiffs to raise moneys from third-party lenders, for the purpose of the making of loans to the defendant. It appears that he had a need for money for a variety of reasons and lacked the security to enable advances of finance. 3 There were eight transactions involving the plaintiffs and the defendant (only seven of which are relevant for present purposes). It is common ground that no repayments were actually made by the defendant to the plaintiffs. At the present time, the home has been sold to satisfy mortgage repayments and the farm is now apparently also at risk. 4 The plaintiffs sue the defendant for money said to be owing under alleged loan agreements made between them (for balance loan moneys and fees) and a small sum for balance of cash advances ($4,500). The loan fees were allegedly payable in consideration for the loans. In respect of each loan, only part of the moneys advanced by the lenders were paid to the defendant (part of the moneys raised were applied in payment of other matters such as to interest payments, payments to the plaintiffs and borrowing expenses). The proceedings are defended. The defendant takes the stance that no moneys whatsoever are owing by him to the plaintiffs. 5 The proceedings were set down for hearing to commence on 27 November 2007 (an estimate of four hearing days was given). It came to be concluded within two days. 6 As a consequence of directions, the plaintiffs each deposed to an affidavit sworn on 27 April 2007. On 29 August 2007 the defendant deposed to a very large affidavit. On 2 November 2007, each plaintiff swore an affidavit in reply. 7 At the hearing, the plaintiffs relied on an Amended Statement of Claim, filed in Court on 27 November 2007. The defendant relied on the original defence. 8 In order to explain what happened after the commencement of the hearing, it is necessary to go into some detail. 9 The Court was first engaged in a lengthy exercise involving the dealing with objections to the affidavits (this involved a time consuming process dealing with the multiple objections to the affidavit of the defendant). This affidavit presented a different picture to that which appears from the plaintiffs' material. It gave rise to significant credit issues (much of the defence depended upon it). 10 After this process had been completed, the Court invited the parties to make suggestions as to how the reading process could be best achieved. There was a consensus that I should go off the bench and read the affidavits in chambers. 11 Upon resuming the hearing, the affidavit of the second plaintiff was read. To the surprise of most, Counsel for the defendant informed the Court that he did not intend to cross-examine the second plaintiff. The plaintiffs' case-in- chief was then closed. 12 Counsel for the defendant then took the course of not relying on the affidavit sworn by the defendant. At first, the stance was taken that the affidavit had not been read. Later, this stance was abandoned and an application was made to withdraw the affidavit. After taking instructions, Counsel for the plaintiffs did not oppose that happening. The defendant then closed his case and the parties moved to submissions. 13 Like his affidavit, the defence was also a lengthy document. It denied the loans. It admitted the lending of certain moneys. It pleaded express and implied terms (relating to an alleged joint venture partnership involving what was described as the Mollymook Project). These terms went to questions of liability to pay loan fees and repay loan moneys. It also raised alternative matters of defence (allegations that the contracts were unjust and unconscionable). 14 By the close of evidence, the alternative defences had been abandoned and the express and implied term defences had lost evidentiary support. Broadly speaking, what was then left to be pursued by the defendant was the putting of the plaintiffs to proof of their case (proof of the alleged loan agreements as pleaded by the plaintiffs and that the alleged loans had become repayable). 15 A further matter of taking of accounts was raised in submissions. It was not pursued as it had not been pleaded and no basis for it could be advanced. There was also the raising of a matter of discharge of loans. I will return to it in due course. 16 I shall now turn to look at the various transactions. The initial transaction took place in July 1997 (the July 1997 loan). It was not the subject of any claim made by the plaintiffs. It was not in fact made to the defendant himself. It was repaid out of the subsequent borrowing. 17 The documentation relating to the seven transactions is to be found in an exhibit to the affidavit sworn by the second plaintiff (the exhibit). A significant part of that material is either handwritten and/or illegible or, at best, difficult to read. It is in these difficult circumstances that I shall proceed to do my best to comprehend this amorphous mass of material. 18 The first of the seven transactions took place in May 2002 (the May 2002 loan). There was an advance from Magney Mortgages Limited (Magney) in the sum of $350,000, secured by way of first mortgage over the home. The relevant documents may be found at pp17-21 of the exhibit (an Agreement and a distribution sheet). 19 The Agreement contains material that is headed "Terms Of Loan". The material identifies the borrower as the defendant and the loan amount as being in the sum of $350,000. It provided for the sum of $200,000 to be paid to the defendant. It also provided that the sum of $100,000 was to be paid to the plaintiffs as being the sum of a previous loan. It further provided for a fee of $110,000, which was expressed to be payable on maturity of the facility. The term of the loan was expressed to be 31 December 2002. 20 The July 1997 loan was discharged from the moneys advanced. The sum of $200,000 was paid to Primestone Developments Pty Limited (Primestone) from those moneys (as directed by the defendant) and the plaintiffs received a sum of $108,141.95. The defence admits that the plaintiffs lent to the defendant or his nominee the sum of $200,000. 21 The second transaction took place in August 2002 (the August 2002 loan). Further moneys were advanced by Magney ($666,000) and secured by the mortgage earlier given by the plaintiffs in respect of the May 2002 loan. 22 The relevant documentation may be found at pp33-37 of the exhibit. It was effected by way of an "Addendum" dated 18 August 2002 to the Agreement for the May 2002 loan. 23 The addendum is a handwritten document, which was signed by the defendant. He provided it to the plaintiffs by facsimile. It commences with the words "This addendum supersedes the Terms of Loan dated 3 May 2002". The material contained in the addendum identifies the borrower as the defendant and the loan amount as being $666,000. It provided that there was to be a "drawdown" of $666,000 and that, inter alia, $350,000 was to be applied to refinance the existing loan and that $172,000 was to be paid to the defendant. 24 The addendum makes reference to a fee of $707,000 to be payable to the plaintiffs and the term of the loan is expressed to be 30 June 2003. Of the moneys advanced by the mortgagee, $350,000 was applied to refinance the May 2002 loan and a sum of $172,000 was paid to the defendant. The defence admits that the defendant or his nominee was lent the sum of $172,000. 25 The third transaction took place in December 2002 (the December 2002 loan). The documentation relied on by the plaintiffs may be found at pp42-49 and 103 of the exhibit. It includes facsimiles from and signed by the defendant and a distribution sheet. There is no document in the form of an agreement. The facsimile material contains the words and figures "new borrowings 862,500". 26 There is correspondence that reveals a refinancing with a discharge of the security granted to Magney and the granting of a security, by way of first mortgage over the home, to Challenger Managed Investments Limited (Challanger) and an advance to the plaintiffs in the sum of $862,500. 27 The defence admits that the defendant or his nominee was lent the sum of $112,175.