District Court New South Wales Medium Neutral Citation: Ante Tasovac v Franka Vlasic [2011] NSWDC 195 Hearing dates: 17 October 2011 Decision date: 09 December 2011 Jurisdiction: Civil Before: Judge M Sidis Decision: 1 Verdict for the plaintiff on his claim that the defendant owes him $175,000 together with interest. 2 The cross claim is dismissed. 3 Determination of the plaintiff's claim to payment of the value of his interest in the Zrnovska Banja development remains outstanding. Catchwords: CONTRACT: undocumented commercial transactions; cash payments; credit; evidentiary deficiencies Category: Principal judgment Parties: Ante Tasova (Plaintiff) Franka Vlasic (Defendant) Representation: Mr C P Heazelwood for the Plaintiff Mr P Barber for the Defendant Nikola Velcic & Associates (Plaintiff) Arnotts Lawyers (Defendant) File Number(s): 2010/114069 Judgment 1The plaintiff and the defendant met in Australia some time between 1997 and 2001. They became good friends and they entered into commercial transactions that were based on trust and good faith rather than formally documented contracts. Their friendship ended in 2010. Each claimed to be owed money by the other. The determination of their claims depended substantially on which of them I accepted as a witness of credit. 2The plaintiff and the defendant were both born in Croatia. They are both now Australian residents. The plaintiff, aged 75, is a retired builder. The defendant owns and operates a boarding house at Chatswood. 3In 2000 or 2001, after separating from his wife, the plaintiff took a room in the defendant's boarding house. He continued to occupy a room there until 5 February 2010. He claimed that he undertook maintenance and handyman work on behalf of the defendant as well as substantial renovations at the boarding house. He claimed that the defendant paid for the materials used in this work and promised to pay him for his time and labour when all the work was finished. He claimed he was paid nothing for the work. 4The plaintiff owned two parcels of land on the Croatian island of Korcula. One parcel of land was at Tri Zhala. He built a house on this parcel, using the services of a local builder to build the s hell and undertaking the internal fit out work himself. This parcel of land with the house was sold for 220,500 in June 2004. Bank records indicated that the plaintiff received $306,111.81 from this sale. 5Another parcel was at Zrnovska Banja. In May 2 002 the plaintiff transferred title to this parcel to the defendant. The document recording this transfer was titled Gift Contract and was dated 6 May 2002 but the plaintiff claimed that the defendant agreed to pay him $27,000 for the land. 6In September 2002 the defendant contracted with Probik Constructions, the building company that built the plaintiff's house at Tri Zhala, to erect the shell of a four apartment building on the land at Zrnovska Banja. The plaintiff claimed that he completed the building by undertaking the internal fit out work. The defendant claimed that she organised and paid for the fit out work. 7The plaintiff claimed that the defendant owed him: (1)$175,000 plus interest, being money he claimed he lent the defendant in June 2004; and (2)$250,000 in payment for the land and his work on the development at Zrnovska Banja and his work at the Chatswood boarding house and for his share of the proceeds of the development. 8The defendant denied that she owed any money to the plaintiff. She denied that she owed the plaintiff any money for his work at the boarding house or the Zrnovska Banja development. She claimed that the Zrnovska Banja land was given to her as a gift, although subject to certain conditions. She cross claimed that she was in fact owed considerable sums of money made up of: (3)advances of various parcels of cash; (4)interest on a loan of $175,000 that she took out at the request of the defendant and for his benefit; (5)penalty costs incurred when the loan was repaid prior to the expiry of its five year term; (6)unpaid rent for his room at the boarding house; (7)amounts paid on behalf of the defendant for airline tickets to Croatia; mobile telephone services; private health insurance and other miscellaneous expenses. 9The defendant agreed that the plaintiff repaid $175,000 but claimed that he owed her a balance of these amounts totalling $138,407.62. 10There were some facts on which the parties agreed and others that were established by objective documentary material. The established facts were: 1 The plaintiff contracted with Probik Constructions to build the house at Tri Zhala to lock up stage. This construction work was undertaken in 2000 and 2001. The plaintiff fitted out the house in 2002 and 2003. The plaintiff sold the house in June 2004. 2 The plaintiff transferred the Zrnovska Banja land to the defendant under a document that recorded the transfer as a gift in May 2002. 3 The defendant took out a loan of $175,000 with Royal Guardian Mortgage Management Pty Limited on 2 Septemb er 2002. She received $173,342.20 net from this transaction. The loan was secured against the title to the Chatswood boarding house. 4 The defendant entered into a contract with Probik Constructions to build an apartment building at Zrnovska Banja on 21 September 2002 for the sum of 71,196 or $110,000. 5 The plaintiff undertook some work at the Zrnovska Banja apartments. 6 The plaintiff undertook some work at the boarding house. 7 Between October and December 2002 the defendant paid Probik Constructions about 43,400 out of the loan funds provided by Royal Guardian. 8 The defendant paid various amounts for the plaintiff for airfares, mobile telephone and health insurance between 2002 and 2010. 9 The plaintiff sold the Tri Zhala house for 220,500 on 11 June 2004. 10 On 22 June 2004, the plaintiff paid $175,000 to the defendant. 11 On 15 September 2004 the defendant paid Royal Guardian $184,632.77 in repayment of the loan and penalty charges and costs. 12 The defendant granted a power of attorney to the plaintiff on 8 November 2004 that permitted him to deal with the sale of her assets. 13 Between 2002 and 2008 the defendant regularly deposited money into the plaintiff's bank account. The plaintiff withdrew funds from this account in Croatia and Australia. 14 The Zrnovska Banja apartment building was completed in 2008. 15 Both the Zrnovska Banja apartment building and the Chatswood boarding house have been placed on the market for sale but no offers acceptable to the defendant have been received. Disputed facts 11The plaintiff claimed that he agreed to transfer the Zrnovska Banja land to the defendant for the sum of $27,000 of which she paid him only $9,700 in cash. He said she asked him to assist her in the construction of a building on the land. His role, he said, was to supervise the construction of the shell of the building and then undertake the internal fit of the four apartments. 12He said the defendant agreed that on completion of the building work she would transfer two of the apartments to him and retain two for herself. 13He did not pursue payment of the balance of the price for the land because he was satisfied with the arrangement that resulted in his owning two of the apartments. 14The plaintiff claimed that he fulfilled his part of the bargain but that in 2007 the defendant decided that she wished to retain all of the apartments so that, after some discussion, they agreed that she would pay him $250,000 for his interest in and work on the Zrnovska Banja development and for work he undertook at the Chatswood boarding house. 15The plaintiff said he paid $175,000 to the defendant in June 2004 when she told him she was in difficulty in meeting the interest payments on the money she borrowed from Royal Guardian. He was in Korcula at the time so he forwarded money to his Australian bank account and arranged for his former wife, with whom he remained on good terms and who held his power of attorney, to forward money to his Australian bank account to enable her to draw a bank cheque in favour of the defendant. The cheque was left in the mail box of his former wife's home and was collected from there by the defendant. These arrangements were confirmed by evidence of the plaintiff's former wife. 16The plaintiff said he became concerned that there was no written contract detailing the agreement between him and the defendant. He said the defendant asked him to accept her as a woman of her word and that they attended at the Croatian Embassy in Sydney where the defendant signed a power of attorney in his favour. He understood that this in some way provided him with security that the defendant would meet her obligations to him. 17The defendant denied that the financial arrangements between the parties were as described by the plaintiff. 18She said that in 2002 the plaintiff said he needed money to complete construction of his house at Tri Zhala and asked her to lend him $175,000. He told her he could not borrow this amount because he had no assets against which to secure a loan. She agreed to put up the boarding house as security. 19She said the plaintiff transferred the land at Zrnovska Banja as consideration for her taking out the loan. They agreed that if she was unsuccessful in arranging the loan, the land would be transferred back to the plaintiff. 20The defendant said she paid for the cost of constructing the Zrnovska Banja building partly by accessing the loan of $175,000 with the agreement of the plaintiff. This was to be set off against cash she had already advanced to the plaintiff. She said the balance came from cash deposits held by her mother in Croatia on her behalf. 21The defendant denied that the plaintiff undertook any significant work at Zrnovska Banja. She said she paid him $5,000 for the work that he did undertake. 22The defendant acknowledged that the plaintiff undertook some building work at the boarding house but said that he was paid for his work, either in cash, or through a reduction in the weekly rent charged to him. She challenged the extent of the work that the plaintiff claimed that he undertook at the boarding house. 23The defendant denied that there was any agreement to divide the property equally with the plaintiff or to pay him $250,000. She denied that a figure of $250,000 was arrived to include sums owed to the plaintiff for his work at Zrnovska Banja or at the boarding house. 24The defendant acknowledged that the plaintiff paid her $175,000 in June 2004 in part repayment of the funds she provided on his behalf. 25At first blush, it appeared somewhat incredulous that two independent and mature persons, both experienced in business, should engage in transactions that put at risk such large amounts of money with no written record of the terms of their arrangements. However the evidence established that this was in fact how the parties to this litigation conducted their transactions. They were both disadvantaged by this conduct. 26I note at the outset that it was apparent that neither of the parties was fully frank with the Court. I have therefore searched for independent corroborative evidence in deciding the extent to which each is to be believed. Even so, much of the result depended on my assessment of the likelihood that one or other version of events was correct. The Loan Funds The plaintiff's needs 27The defendant claimed that she borrowed $175,000 from Royal Guardian in September 2002 at the request of the plaintiff. She said he gave two separate reasons for the need of the funds. The first was that he needed money to pay the builder and to complete the construction of his house at Tri Zhala. The second was that he owed money to his creditors who were pressing him and he was concerned that he might lose his family house at Dundas. 28The plaintiff's evidence was that the shell of the house at Tri Zhala was completed by Probik Constructions to lock up stage by early 2001 and that owed no money in respect of that building work. He said that he completed the fit out of the two bedroomed house, including the installation of a kitchen and two bathrooms within two months. He said the defendant stayed at the house on four occasions when she came to Korcula. Thus, he said, he needed no money in September 2002 to finish the house. 29The plaintiff was shown photographs of the Tri Zhala house (Exhibit 7) said to illustrate that it was incomplete. He agreed that they indicated that at that stage the house was not rendered externally. He disputed that the photographs were taken in 2002, stating that they were most probably taken at the end of 2000 or early 2001. 30The defendant said that she took the photographs when she stayed at the Tri Zhala house in November 2003 for one night. She denied that she stayed there in 2002 but said that she visited the house and that it was incomplete, without a kitchen and using electricity provided by a connection from the adjoining property. 31The plaintiff's son visited Korcula in May 2004. He stayed at Tri Zhala and said that at that time the house was fully completed except for some landscaping. His evidence added little to the extent to which funds were required in September 2002 to complete the building work. 32Even if I accepted the defendant's evidence that in November 2003 the house was constructed but incomplete, there was no indication that a sum as large as $175,000 was required to complete its fit out. Nor was it confirmed that any amount was owed to Probik Constructions. 33The plaintiff denied that he had other financial problems. He said he had no interest in the former matrimonial home at Dundas, having transferred his interest in that property to his former wife. The transfer of this interest was in evidence as Annexure E to the defendant's affidavit of 26 September 2011. It confirmed that the property was transferred on 1 September 2002 for a consideration of $1. 34The plaintiff said he had cash available to him in Korcula and there was evidence that in December 2002 he received about $19,000 as compensation arising out of a motor vehicle accident. 35The defendant obtained a statement from the managing director of Crescent Timber & Hardware that confirmed that in 1995 the plaintiff purchased timber for a building project in the course of which he accumulated a debt of $79,000. After pressing for payment, Crescent Timber threatened to take legal proceedings in October 2002. Those proceedings were not commenced because the plaintiff promised to take steps to reduce the debt when he sold some land in Croatia. The plaintiff subsequently said, when questioned about the progress of the sale of the land, that someone over there had pinched his land. 36The plaintiff agreed with the facts set out in this statement and said that he paid down the account whenever he could. He said the managing director of Crescent Timber was his good friend. 37The managing director was called to give evidence. He said that by mid 2002 the debt had been reduced to about $40,000 and that the plaintiff told him in 2002 that he was about to sell a property. He confirmed that the plaintiff told him later that the land had been pinched. He confirmed that recovery proceedings were never commenced because he expected the plaintiff to pay him whenever he could. 38The result of this evidence was that the only support for the defendant's assertion that the plaintiff told her in May 2002 that he was unable to pay his creditors came from the managing director of Crescent Timber. He confirmed entirely the plaintiff's evidence that they entered into an arrangement for the plaintiff to pay down the debt as and when he could. By mid-2002 the amount outstanding was about $40,000 and nothing like the $175,000 the defendant said the plaintiff asked her to lend him. 39The only evidence concerning the disposition of land in Croatia at that time was the transfer of the Zrnovska Banja property to the defendant. The evidence that the plaintiff told Crescent Timber that the land had been pinched lent credibility to his claim that, although the transfer was recorded as a gift, he expected the defendant to pay him $27,000 for the land. 40Further it was apparent that very little, if any, of the $175,000 found its way to Crescent Timber. A substantial amount of the debt was paid off before the loan funds were received in September 2002 and very little afterwards. 41I was not satisfied therefore that the plaintiff asked the defendant to borrow on his behalf to complete the building at Tri Zhala or to meet pressing financial commitments. There was no other material before me to indicate that the plaintiff needed loan funds in an amount so substantial as $175,000. The defendant's needs 42The defendant denied that any part of the $175,000 loan was applied to the cost of constructing the apartment building at Zrnovska Banja. She said she paid $35,001 from those funds to Probik Constructions with the agreement of the plaintiff and to reimburse herself for money she had already advanced to the plaintiff. The plaintiff denied that any such agreement was entered into. 43She said that, apart from the sum of $35,001 paid out of the loan funds to Probik Constructions, she paid for the construction of the apartment building with cash that was held on her behalf by her mother in Croatia. The defendant's mother died prior to the hearing. 44Probik Constructions provided a quotation for the construction and fit out of the apartment building in two parts. The cost of the building was $110,000 and of the fit out $70,000. This indicated that the total cost of construction was in the vicinity of $180,000. On the defendant's version of events, this required that she establish the availability of $145,000 in cash held on her behalf in Croatia. 45The defendant's children stated that she gave each of them $10,000 when they travelled to Europe, in the case of her son in 1996 and in the case of her daughter in 2002. Remarkably neither of them spent this money. They both said that they gave it to their grandmother in Croatia. Neither said they did so on the basis that it was to be held by her on be half of the defendant. The defendant's son said he added a further 4,000 to the amount given to his grandmother and stated: I felt like it was an important gesture given the tough life I thought she led. This comment suggested that the money was provid ed for the grandmother's purposes. 46Aside from the boarding house at Chatswood, there was no evidence that the defendant had other assets. She stated that her income from rents from the boarding house and from employment in a sandwich bar were about $1,000 per week and that it was from this income that she was able to take $10,000 a year to Croatia to leave with her mother until she accumulated a fund of about $100,000. 47In cross examination the plaintiff was asked about her income. She said she could not recall the amount of her taxable income but she accepted that her income in 2001 was $23,678, considerably less than $1,000 per week, and hardly sufficient, after payment of living expenses, to put aside $10,000 per annum to be held in cash in a foreign country for an unspecified purpose. 48It was suggested that the dealings of both the plaintiff and the defendant in cash funds indicated that tax records might not necessarily reflect their actual incomes. This was a suggestion only. If accepted, it would indicate some form of tax avoidance, a conclusion that I could not draw in the absence of clear evidence. 49I therefore did not find it credible that the defendant in fact had available to her in Croatia cash funds that she applied to the construction of the apartments at Zrnovska Banja. 50The defendant rejected the proposition that the figure of $175,000 was coincidentally close to the quotation provided by Probik Constructions of $180,000 to build and fit out the apartments at Zrnovska Banja. This figure also closely matched the total of the sums paid to Probik Constructions of $110,000 and the amounts deposited into the plaintiff's bank account of $60,400. 51The coincidence of these figures and the absence of evidence of any other source of the money necessary to make these payments, lead me to the conclusion that the loan funds provided through Royal Guardian and subsequently by the plaintiff were applied by the defendant to the costs of construction of the apartment building at Zrnovska Banja. 52I find the plaintiff paid to the defendant the sum of $175,000 to allow her to discharge the loan from Royal Guardian and to provide funds for the construction of the Zrnovska Banja apartment building. 53I find the defendant liable to the plaintiff for the repayment of $175,000 together with interest to the date of repayment. Other aspects of concern arising from the defendant's evidence 54There were other elements of the defendant's evidence that caused me to question the defendant's claims that the plaintiff was indebted to her. The application to set aside judgment 55I considered that some of the factual material set out in the affidavit (Exhibit 6) prepared for the purposes of the application to set aside the judgment entered against the defendant was untrue. Although the affidavit was not presented to the Court at the time the application was dealt with, it was a document that the defendant swore on oath to be true as to its facts. I was satisfied that the defendant lied about the circumstances of service of the statement of claim and the difficulties of communication between herself and her family. The loan arrangement 56The defendant's evidence concerning the terms on which she agreed to take out the loan on the plaintiff's behalf was confused, contradictory and changed over the course of the hearing. 57Her affidavit of 21 October 2010 (Exhibit 6) suggested that the plaintiff showed her a vacant block of land at Tri Zhala in 1999 and that between then and 2002 he approached her several times asking her to lend him the money to develop it. They agreed that when the house at Tri Zhala was sold, he would repay the loan, interest to the date of repayment, break costs associated with early repayment of the loan and rent unpaid for his room at the boarding house. 58In her affidavit on 26 September 2011, the defendant said she was shown a vacant block of land at Tri Zhala in mid-2000. She said that he asked her for money to complete the building of a house on the land when they were in Sydney in 2002. They went to Korcula where he told her that he owed money to the builder and that without further funds he would not be able to complete construction of the house. He showed her the land at Zrnovska Banja and told her that if she took out a loan for him he would give her the Zrnovska Banja land, repay the loan, interest and costs and expenses when he sold the completed development at Tri Zhala. 59In her affidavit of 21 October 2011, the defendant said she had a conversation with the plaintiff as follows: I said to him: "After I borrow the sum of $175,000 from the bank, I will lend you these monies to build your house in Tri Zala". He said to me words to the effect: "I will pay back these monies that you lend me when I sell my house at Tri Zala and I will also pay you back all interest on your loan to me, plus any break costs for early repayment, plus unpaid rent that I owe you for occupying a room at the Chatswood boarding house, and also my mobile phone bills that you are paying for me and also for the airline tickets to and from Croatia." 60She said this represented the agreement between the parties. This affidavit did not state where this conversation took place. 61The defendant told the Court that the plaintiff asked her for the money in Australia for the purpose of finishing his house. She paid his fare to Croatia in 2002 because he did not have the necessary funds. He said he would repay this money if she helped him out. She said this had nothing to do with the subsequent loan arrangement. She said further that when they arrived in Korcula in May 2002, before the transfer of the land at Zrnovska Banja, he said he had insufficient funds to finish his house and if the defendant lent him money he would finish the house and repay it with interest, the cost of the ticket and expenses such as unpaid rent. 62The defendant subsequently added a further term to the agreement, namely that the plaintiff would look after the progress of the development at Zrnovska Banja, not as her project manager, but in a supervisory role for which she offered to pay him $5,000. 63The defendant subsequently added a further term to the agreement, namely that if she was unable to negotiate the loan she would transfer the land at Zrnovska Banja back to the plaintiff. 64The defendant subsequently added a further term to the agreement, namely namely that if she was unable to negotiate the loan she would transfer the land at Zrnovska Banja back to the plaintiff and he would repay $15,000 that she lent him in Croatia. 65Not one of these three terms appeared in the affidavit evidence that the defendant swore on 21 October 2011 immediately before she was called to give evidence. Record keeping 66The defendant's evidence concerning the way in which she recorded the payments allegedly made to the plaintiff was unsatisfactory. She produced a number of bank records that she claimed to have marked to indicate a payment to the plaintiff. In response to questions concerning her record keeping the defendant initially said: Q. And you must have had a ledger or some other account bookkeeping system which enabled you to work out on any given day how much was owed? A. I didn't use the ledger, I only have a statement and cash withdrawal, I circle it, and also I deposited, I keep the receipt but I deposit on his account, I keep the receipt and I work it out later, stage by stage when in '04 I work it out. (T.286.26) 67After the weekend break, her evidence changed as follows: Q. And I suppose you kept a record somewhere of all these monies that you lent to Mr Tasovac that you say arose out of this $175,000; you must have kept a ledger or a book of some sort about that, did you? A. I kept a record, circle in the statements. Q. So is that your only record, was it, circling the statements? A. I did work it out in end of 2004, I did. Q. And where is that working out? A. Must be in one book, I can't find, I just can't find. Q. So you tell her Honour it must be in one book? A. Yeah. Q. Now what does that mean? A. It usually I have a book what I write some what is important and that book I cannot find, I only find the statement. I couldn't find that book, just can't find. (T.320.43) and Q. And what did this book look like? A. This is ordinary ledger book with the lines on it, it's nothing just Q. Did you say letter or ledger? A. Ledger. Q. Ledger book? A. Yeah. Q. With lines on it? A. Just with ordinary lines. Q. Yes, right, okay and what happened to that book? A. I don't know. I misplaced it or I just can't find it. Q. And so when was the last time you saw it? A. I saw it in a few years back, two years ago. Q. Two years ago? A. Yeah, two, three years ago, two years ago. Q. And what colour was the book? A. Red. Q. And did you have other entries in the book or just entries relating to this loan? A. It's I have entry only relating what has to be with Ante Tasovac. (T.322.3) 68I considered that this evidence was so obviously an invented afterthought that it was not to be believed. Probabilities 69The defendant said she was satisfied that the plaintiff would have the capacity to repay the loan because, after looking at the advertisement of properties for sale in Korcula, she believed he would receive at least $300,000 from the sale of the Tri Zhala property. She did not explain why she continued to advance substantial sums of money to the plaintiff after this asset was sold and she was paid only $175,000 except to state that she felt intimidated by his conduct towards her. 70If the defendant's evidence were to be accepted it would establish that: 1 She borrowed $175,000 on behalf of a retired builder whose only asset was a partially constructed house on a block of land on an island off the coast of Croatia and whose only reliable source of income was an age pension; 2 She did not readily recall the terms on which she agreed to do so. 2 She accepted the obligation to pay interest on the loan at the rate of $7.25% per annum or $1,193.61 per month for up to 60 months and the obligation for the penalty payment if the loan was repaid before the expiration of its five year term; 3 She paid the plaintiff cash advances both before and after the loan funds were borrowed; 4 She met substantial personal expenses on behalf of the plaintiff, including the funding of his annual flights to Croatia; 5 She continued to make cash advances after the Tri Zhala property was sold and the principal sum repaid and at a time when the plaintiff was without assets or substantial income. 6 She maintained no separate accounting record of substantial cash payments to the plaintiff and the purpose of those payments. 71Taking these factors into account, I considered her claims to have borrowed on the plaintiff's behalf to be improbable. The Cross Claim Cash Payments 72The loan funds were paid at the defendant's request into two separate accounts with the National Australia Bank. She was unable to produce copies of the bank statements recording the deposits of $153,000 and $20,000 respectively into these accounts. She stated that she lost her copies of the statements and was unable to arrange for copies to be supplied by the Bank. The defendant said the plaintiff asked her to keep the money in multiple bank accounts. She offered no explanation for this request or her compliance with it. She said the money was gradually transferred from one National Bank account to the other and to a Commonwealth Bank account. 73The defendant said she paid some of the funds to or on behalf of the plaintiff by direct deposits to the St George Bank account that he nominated, keeping a receipt of payment as a record of the transfer of the funds. She also withdrew cash amounts from her bank account, giving the cash to the plaintiff or to his daughters. She marked her bank statements to record these cash transactions. She was also asked to use the money to pay for his mobile telephone accounts and flights to Croatia. The mobile telephone account was in her name because the plaintiff told her that his credit rating was so poor that he could not open an account in his own name. 74The defendant listed the amounts allegedly paid on the plaintiff's behalf in Annexure A to her defence and Annexure A to her cross claim. She swore affidavits to the effect that the allegations of fact contained in these pleadings were true. She subsequently acknowledged that claimed cash advances to the extent of $35,001 were not true. 75As evidence of the payments made to the plaintiff, the defendant produced bank statements and relied on the plaintiff's bank statements. Those records clearly indicated that money was deposited into the plaintiff's account with St George that matched with amounts drawn from the defendant's accounts. There were 19 of these deposits. They were debited directly into the plaintiff's account between April 2003 and June 2003, April 2004 and July 2004 and April 2005 and May 2005. These were all periods when, according to the plaintiff's passport, he was in Croatia. The total of these sums was $60,400. 76The defendant claimed to have paid the plaintiff $159,401 in cash. She conceded that she was in error in claiming to have paid the plaintiff $35,001 in cash between October and December 2002, these payments in fact having been made to Probik Constructions for the construction of the Zrnovska Banja apartment building. 77To explain the error in her calculations, the defendant and her son said that they found the documents evidencing these payments to the builder amongst other documents in her son's garage. They said the defendant's documents became intermingled with those of her son after a flood destroyed many of the documents destroyed in his garage. The Probik Constructions material was discovered by chance over the weekend prior to the commencement of the hearing. 78The evidentiary basis for the claim that the balance of this amount was paid to the plaintiff was provided through reference to a number of the defendant's bank accounts that recorded cash withdrawals of various amounts against which the defendant recorded the letter 'T', said to represent Tony , the name by which she referred to the plaintiff, or which were circled as the defendant's record that they represented cash withdrawals made on behalf of the plaintiff. 79There was no corresponding bank record to indicate that these amounts were paid into the plaintiff's bank account. The evidence as to how these amounts were paid to the plaintiff was: Q. So what you mean is that you put the cash in his hand, here is the cash? A. Yeah, yeah. (T.372.45) 80The records indicated that cash was withdrawn in June 2003, March 2004, July 2004, April 2005 and May 2005, amounting to $49,800. These were periods when the plaintiff was in Croatia and could not have received cash withdrawn from an account in Australia directly into his hand. The defendant herself was in Croatia in November 2003 and could not have withdrawn the sum of $15,800 recorded as having been withdrawn from her account in Australia on 11, 17 and 19 November 2003. 81When questioned concerning these amounts, the defendant said she paid sums of money in cash to the plaintiff's daughters at his request. She said she paid $9,000 to one of his daughters and amounts of cash to the other on a number of occasions. Her evidence was: A. No, it's - this 1,000 was coming it's I give in a lump sum about - there was thousand by thousand here but I put it, it's there but I give the lump sum; like they were coming very often and I said to them, "I'll give you this lump sum and please don't come back." I told Tony, "Please, do not send any more daughters in my place. I have enough." (T.376.24) 82The defendant said she had a clear recollection of only one of those transactions. This occurred on 2 or 3 July 2004 when the plaintiff telephoned her from Croatia and told her that one of his daughters would come and collect the money she withdrew and put into an envelope. The daughter telephoned her and said she was coming. She had seen a photograph of this daughter so that she knew her when she came to her door at the boarding house. She gave her the money and she left. 83Both of the plaintiff's daughters gave evidence. One of them denied that she received any cash payments from the defendant. She was not cross examined on this evidence. The other denied that she had ever met the defendant or received any cash or cheques on behalf of the plaintiff from her. She said she did not know where the defendant's boarding house was located. 84She denied that she was instructed by the plaintiff to go to the boarding house to collect $9,000. She denied that the defendant opened the door to the boarding house and gave her $9,000 to meet her debts. 85It was not put to either of the plaintiff's daughters that they received cash payments from the defendant on multiple occasions. 86Both of the plaintiff's daughters gave their evidence in a straight forward and direct manner. This was in marked contrast to the evasive and contradictory nature of the defendant's evidence. I preferred their evidence that they received no cash payments from the defendant. 87The result was that of the $159,401 allegedly paid by the defendant to the plaintiff in cash, $35,001 was paid to Probik Constructions and it was demonstrated that $65,600 was not paid into the hand of the plaintiff. This left a balance of $58,800. 88It having been established that the defendant was mistaken in her claim to have paid $100,601 in cash into the hands of the plaintiff and having rejected the contention that cash was handed over to the plaintiff's daughters, I was not satisfied, in the absence of supporting evidence, that any of the remaining balance was paid to him. 89I was therefore not satisfied that any of the cash withdrawals identified in the defendant's banking records were paid to the plaintiff. The plaintiff's rent 90The defendant claimed rent in the sum of $35,960 for the plaintiff's boarding house room from 2002 to 2010. She provided no detailed accounts to explain the calculations of the amounts claimed. She stated that the plaintiff stopped paying rent from the time they agreed that she would borrow $175,000 on his behalf. She said they agreed that she was to take the money for his rent from these borrowed funds. 91The defendant demonstrated considerable confusion in recollecting when precisely this agreement was reached. She said the plaintiff stopped paying rent in March 2002, or May 2002 or perhaps later in 2002. 92The defendant was unable to state the amount of rent that was being charged at various times over the period of her claim or the amount by which the plaintiff's rent was reduced to take account of his services as a handyman. She thought a reduction of $10 per week was allowed. 93Asked why she did not, in accordance with the agreement she claimed was reached with the plaintiff, take rent from the $175,000 borrowed on his behalf, she said that in fact she paid herself $7,000 for unpaid rent at the end of 2004. She could not explain how she did this when, by this date, the loan was repaid. 94The defendant's only record of rent charged to the plaintiff was a series of rent receipts, some of which were in evidence (Exhibit P). These receipts indicated that rent charged between 2 June 2008 and 8 September 2008 was $120 per week. The receipts were written on sequentially numbered dockets, suggesting either that no other tenant paid rent during that period or that they were all written at the same time. The defendant said it was her practice to keep a separate receipt book for each tenant and write up the receipts, handing the original to the tenant when the rent was paid. If the book contained the original, she knew the rent was not paid. 95It was on this basis that she calculated the amount of rent owed by the plaintiff. 96I did not regard these receipts, limited to a period of three months in 2008, as adequate evidence that the plaintiff failed to pay rent over such an extended period or of the amount of rent that was owed to the defendant. They provided no indication of whether the plaintiff was allowed a credit for the $7,000 the defendant said she withdrew from funds she held on his behalf. 97All of the uncertainties concerning the rent claim could easily have been resolved by the production of the books of account of the boarding house. The defendant claimed that she kept a book into which she entered the $7,000 that she paid herself at the end of 2004. This book was not in evidence. She said she provided records annually to her accountant who used them to prepare her tax returns. These records and her tax returns were not in evidence. 98Having regard to the confused state of the defendant's evidence and the absence of supporting information, I find that this part of her cross claim was not made out and it was rejected. The Zrnovska Banja arrangement 99This left the issue of the basis upon which the apartment building at Zrnovska Banja was constructed. The alternatives were that the property was developed for the defendant's purposes only with the assistance of the loan from Royal Guardian and subsequently the plaintiff or that it was undertaken as some form of joint venture between the parties. 100Although the defendant sought to minimise the work undertaken by the plaintiff at Zrnovska Banja, there was a substantial amount of evidence to support his claim that he undertook the fit out work. There was no independent support for the defendant's claim that she personally organised tradespersons and contractors and the goods necessary to perform this work. 101The defendant argued that the work the plaintiff undertook was limited to the upper level apartment that he occupied from time to time when he was in Korcula. Support for the plaintiff's contention that he went to Korcula annually over a number of years to complete the fit out of the apartments came from: 1 The plaintiff's son and daughter, both of whom travelled to Korcula and provided graphic evidence through DVD recordings of the condition of the building and, in the case of the his son, the work that remained to be undertaken. 2 The records of the plaintiff's travel to Korcula that placed him on the island in periods in 2003, 2004 and 2005 when money was transferred by the defendant to his bank account, consistent with the cost of completing the work on the building. 3 The evidence of Mr Prizmic, solicitor, Mr Jerko Skokandic and Mr Enes Barkaric, residents of the island of Korcula, all of whom stated that they observed the plaintiff at work on the Zrnovska Banja apartment building. 102I was satisfied by this evidence that the plaintiff carried out the work of fitting out the apartment building at Zrnovska Banja. 103On the basis of this finding I concluded that the construction of the apartment building was undertaken through a joint venture between the plaintiff and the defendant. The reason why it was necessary to transfer the land to the defendant was not clear, except to provide her with some form of security since funding for the development was initially provided against the title to the Chatswood boarding house. 104The plaintiff asserted that the parties agreed that they would each take ownership of two of the four apartments in the building. Support for the proposition that the parties were to share the result of the development equally was provided by Mr Prizmic who said that the plaintiff, in the presence of the defendant, told him that they intended to sell the apartment building and divide the proceeds of sale equally. His evidence on this aspect was not challenged in cross examination. 105I was satisfied therefore that this was the arrangement between the parties pursuant to which they embarked on the joint venture. 106The plaintiff claimed that this arrangem ent was subsequently varied because the defendant wished to retain ownership of the whole of the apartment building. He claimed that she agreed to pay him $250,000 for his interest in the building. 107Mr Prizmic stated that the parties told him the price for the building at the time they wished to sell it was between 250,000 and 300,000. At current conversion rates these figures equate to between $345,000 and $420,000. 108These figures were of concern to me because, after deducting the money borrowed to con struct the building all of which will be returned to the plaintiff, they suggested that the net value of the development to the parties was between $170,000 and $245,000. The result would be that the plaintiff would receive more than 100% of the net value of the development. 109I appreciated that he claimed that the figure of $250,000 included the value of his work at Zrnovska Banja and at the Chatswood boarding house. I accepted that it was clear from the evidence that he undertook work on both of the properties. The evidence, however, was insufficient to provide me with any basis upon which to value that work. 110Acceptance that the defendant agreed to vary the agreement in this fashion would also mean that no account would be taken of the amounts that the plaintiff agreed she expended on his airfares, telephone accounts and health insurance, all of which appeared to me to be expenses of the joint venture. 111I was therefore not prepared to accept that the defendant agreed to a variation of this nature. 112I did however consider that the evidence established that the plaintiff was entitled to a one half share in the net value of the development. I would expect that the amount of his entitlement could be calculated by deducting from the current market value of the Zrnovska Banja apartment building the costs of the development. Summary 113I find that the defendant borrowed $175,000 from Royal Guardian and subsequently from the plaintiff for the purpose of construction of the Zrnovska Banja apartment building. The defendant was therefore indebted to the plaintiff in the sum of $175,000 and interest. 114The defendant's claims that she borrowed these funds and expended them on the plaintiff's behalf were rejected. 115The defendant's claims that she advanced further cash sums to the plaintiff were rejected. 116I find that the defendant transferred $60,400 to the plaintiff's St George account to allow him to complete the fit out of the Zrnovska Banja apartments. 117The defendant's claim for unpaid rent was not made out and was rejected. 118The plaintiff's claim for payment for work at Zrnovska Banja and Chatswood was insufficiently itemised to allow it to be assessed and, if established, valued. 119I find that the parties undertook the development of the Zrnovska Banja property on the basis that they would divide equally the proceeds of the development. 120I reject the plaintiff's claim that their agreement was varied to provide for him to be paid $250,000. 121The value of their respective interest in the Zrnovska Banja property remains to be established. ORDERS 122Verdict for the plaintiff on his claim that the defendant owes him $175,000 together with interest. 123The cross claim is dismissed. 124Determination of the plaintiff's claim to payment of the value of his interest in the Zrnovska Banja development remains outstanding. 125The proceedings are adjourned to allow the parties to deal with this outstanding aspect of the claims, either by agreement or by the presentation of further evidence. ********** 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. Decision last updated: 09 December 2011