Holstein v RTS Super Pty Ltd [2012] NSWSC 346

Supreme Court New South Wales

Medium Neutral Citation: Holstein v RTS Super Pty Ltd [2012] NSWSC 346 Hearing dates: 13 and 14 March 2012 Decision date: 10 April 2012 Jurisdiction: Equity Division Before: Gzell J Decision: Restitution granted. Catchwords: INTEREST- Recoverability of interests - whether loans made - restitution - recovery of interest on refinance to repay alleged debt - question of fact only Category: Principal judgment Parties: Maxim Joseph Holstein (First Plaintiff) Kim Holstein (Second Plaintiff) RTS Super Pty Ltd (Defendant) Representation: Counsel: P Gormly (Plaintiffs) M Izzo (Defendant) Solicitors: MacLean & Curtis Solicitors (Plaintiffs) Stacks/Business (Defendant) File Number(s): SC 2009/290601

Judgment

Introduction 1The dispute in this case is over $52,000.00 that the defendant, RTS Super Pty Ltd, alleges was lent to the plaintiffs Maxim Joseph Holstein and Kim Holstein. The Holsteins say they never received loans totalling that amount and nor did they direct that payments totalling that amount be made to third parties. 2Raymond Thomas Stack practised as a solicitor in Taree, New South Wales under the name Stacks The Law Firm. Mr Stack is a director of RTS Super, the trustee of a superannuation fund for himself and his wife.

The history 3The Holsteins needed to refinance a mortgage over their property at Nowendoc, New South Wales. Stacks Managed Investments Ltd trading as Stacks Finance lent them $400,000.00. 4Some time later, the Holsteins wished to purchase an adjoining property and sought a loan of $400,000.00 from Stacks Finance, $350,000.00 to buy the property and $50,000.00 for running costs. 5Stacks Finance would only lend $250,000.00 but Mr Stack lent the Holsteins $100,000.00 from RTS Super to cover the cost of the property. 6Before settlement of the purchase, Mr Holstein asked Mr Stack for a further $50,000.00 urgently and Mr Stack obliged with a loan of $58,000.00 on 21 September 2001 also from RTS Super. The $8,000.00 was to cover all expenses including those in relation to the $250,000.00 loan from Stacks Finance. 7The Holsteins had only one bank account into which all receipts were banked and from which all expenses were paid. Their bank statements show the receipt of $50,000.00 on 5 October 2001. The purchase of the adjoining property settled on 30 November 2001 and the $250,000.00 loan from Stacks Finance together with the $100,000.00 loan from RTS Super were dispersed in accordance with the settlement statements. 8Mr Holstein said he had a telephone conversation with Mr Stack in June 2002 when he asked for an additional $70,000.00. Mr Stack confirmed a loan from RTS Super of $72,000 including fees of $2,000.00 by letter dated 27 June 2002. 9Mr Holstein said he then realised that he needed $100,000.00 rather than $70,000.00 and he met with Mr Stack on 29 July 2002 when he says Mr Stack agreed to the loan but said he could give him $50,000.00 then with two cheques for $20,000.00 and one cheque for $10,000.00 to come later. 10The banking records of the Holsteins show that $50,000.00 was deposited to their account on 29 July 2002. Mr Holstein said he received two cheques each for $20,000.00 by mail that the bank statements show were deposited to the Holstein's account on 27 September 2002 and 5 November 2002. There was then a direct deposit of $10,000.00 to the account on 24 December 2002. 11Mr Stack said there was a discussion about a $100,000.00 loan but it occurred on 13 June 2002 and not on 29 July 2002. 12But why, if Mr Stack agreed to loans totalling $100,000.00 on 13 June 2002 would he write on 27 June 2002 confirming a loan of $72,000.00 including an establishment fee of $2,000.00 with $50,000.00 payable immediately and $20,000.00 in a couple of months? 13Mr Stack had little independent recollection of events. Without being critical of him, Mr Stack did the best he could to recall events by reference to the documents available to him. His evidence was largely reconstruction. 14Mr Holstein also suffered from loss of memory, but to a lesser extent. He had a recollection of some events and had more extensive records than did Mr Stack. 15Mr Stack destroyed records after seven years and destroyed documents earlier than that if he thought them unimportant. In a move of his office a large number of documents were destroyed. 16Mr Stack's evidence that the conversation about the $100,000.00 loan took place on 13 June 2002 was based on a diary note of that date. It has a reference to "70" with an arrow to "50K" and "20" below that. There is an arrow from the "70" down to "100" with an arrow from it to "30" below the "50K" and the "20." 17The improbability that Mr Stack would write confirming a loan of $72,000.00 if he had on 13 June 2002 agreed to a loan of $100,000.00 leads me to accept Mr Holstein's version of events that his request for $100,000.00 came later and on 29 July 2002. 18Mr Stack kept documents relating to the Holsteins' loans in a manila folder that contained pieces of paper on which he had written notes. The file note of 13 June 2002 is such a piece of paper. 19The explanation for the reference to "100" in it is likely to be that on 29 July 2002 Mr Stack took out his file note of 13 June 2002 and added to it references to a further loan of $30,000.00 to bring the total to $100,000.00 exclusive of fees. 20The parties agree that on 29 July 2002 Mr Stack gave Mr Holstein a cheque for $50,000.00 drawn on one of his companies with further payments totalling $50,000.00 to come later. 21Mr Holstein said he received in the mail a cheque for $20,000.00 on 27 September 2002 and he deposited it in the Holstein bank account that day. 22Mr Stack said he met with Mr Holstein in his office on 26 September 2002 when Mr Holstein asked for $20,000.00 that had been approved and said he would still like to borrow the other $30,000.00 that had been discussed. Mr Holstein denied going to Mr Stack's office. 23Mr Stack said he gave Mr Holstein a cheque for $20,000.00 as a loan of $22,000.00 including the establishment fee of $2,000.00 to which reference was made in the letter of 27 June 2002. 24Mr Stack said he believed that he gave Mr Holstein a further cheque for $30,000.00. He said he did not recall the form in which the payment of $30,000.00 was made but it may well have been that this cheque was made out to a third party at the direction of the Holsteins. 25Mr Holstein denied receiving $30,000.00. There is no record of a receipt of $30,000.00 on 26 September 2002 or immediately thereafter in the bank records of the Holsteins. There is an entry for a deposit of $20,000.00 on 27 September 2002. 26It is a matter of sheer conjecture on Mr Stack's part that $30,000.00 may have been payable to a third party. Both Mr and Mrs Holstein swore that they did not have Mr Stack make payments to third parties at their direction. I have no reason to doubt their evidence. 27In the absence of a payment by direction to a third party of the $30,000.00, there is no logic in Mr Stack having made out two cheques on 26 September 2002, and the likelihood is that the $30,000.00 was not lent to the Holsteins on that day and the extent of the loan on that day was $22,000.00 including the establishment fee of $2,000.00. If there was an advance of $30,000.00 on 26 September 2002 it was to someone other than the Holsteins. Mr Stack's record keeping was such that mistakes were made. 28 A cumulative loan card with respect to the borrowings by the Holsteins was made up by Tania Lee McMullen, a clerk employed by Stacks Financial Services Pty Ltd, from epitomes of mortgage the information for which came from Mr Stack as a rule. She may have got information from other sources occasionally. It was prone to and did contain mistakes. 29It had an entry that on 27 June 2002 the principal of the loans increased to $230,000.00 and that figure was changed to $260,000.00. 30Mr Stack said that these entries were clearly incorrect because as at 27 June 2002 no portion of the $72,000.00 loan had been advanced. He said that his staff probably assumed from the terms of the letter of 27 June 2002 that $72,000.00 had been advanced on that day. 31Mr Stack did not know why the further amendment to $260,000.00 was made. This line on the loan card was struck out. But it may account for the mistaken additional loan of $30,000.00 on 26 September 2002. 32The loan card also noted an increase in the principal sum to $280,000.00 on 29 July 2002. Mr Stack said that this entry was incorrect as the sum advanced to the Holsteins on 29 July 2002 was $50,000.00 and the total stood at $208,000.00. 33Mr Stack had a file note dated 2 October 2002 in which he recorded that Mr Holstein wanted to borrow an additional $30,000.00 to buy a travelling irrigator. Mr Holstein said he had not purchased a travelling irrigator. 34Mr Stack said this file note related to a meeting he had with Mr Holstein on 26 September 2002. But the request for an additional $30,000.00 was not made on 26 September 2002. Mr Holstein said he requested the additional money on 29 July 2002 and on Mr Stack's version it was on 13 June 2002 that the additional $30,000.00 was requested. 35The file note or its date is dubious and I prefer the evidence of Mr Holstein that he received $20,000.00 by mail on 27 September 2002. 36Mr Stack says there was a loan of $20,000.00 made on 21 October 2002. Mr Holstein denies any loan on that date. There is no deposit recorded in the Holstein bank statements on that day. 37Mr Stack said that he met with Mr Holstein on 21 October 2002 when Mr Holstein asked for a loan and he gave him a cheque for $20,000.00. Mr Holstein said he did not go to Mr Stack's office on 21 October 2002. 38I prefer the evidence of Mr Holstein supported as it is by the bank statements. 39The parties agree that a further $20,000.00 was advanced to the Holsteins on 5 November 2002, a further $10,000.00 was advanced on 24 December 2002 and $2,100.00 was lent on 17 May 2004. 40The difference between the parties is $52,000.00, including the establishment fee of $2,000.00, alleged to have been made by Mr Stack on behalf of RTS Super. $30,000.00 was said to have been paid to Mr Holstein on 26 September 2002 and $20,000.00 was said to have been advanced on 21 October 2002. 41As the establishment fee was part of the approval of the loan of $72,000.00 in the letter of 27 June 2002, it seems to me that it is a legitimate debt due to RTS Super. The claim of the Holsteins should be limited to $50,000.00.