Amann as Executor of the Estate of Chin deceased v Dulihanty [2003] ACTSC 2 (30 January 2003)

Last Updated: 5 February 2003

GREGORY DIETER AMANN as Executor of the Estate of NORMA CHIN deceased

v RICK NATHAN DULIHANTY [2003] ACTSC 2 (30 January 2003)

CATCHWORDS

MONEY - terms of oral agreement to lend money - lender commenced action but died before hearing - disagreement over terms as to obligation to make regular payments and amount of such payments - disagreement over length/period of loan - disagreement over whether loan was to be interest free - whether debt repayable on demand in absence of specific condition (written or oral) - whether breach of terms so as to entitle plaintiff to repayment of balance remaining unpaid.

CONTRACT - agreements - terms of oral agreement to lend money - lender deceased.

EVIDENCE - evidence of deceased (person not available) - admissible as first-hand hearsay relating to deceased's intentions, knowledge or state of mind.

Evidence Act 1995 (Cth)

Norton v Ellam (1837) 2 M & W 461

Re George; Francis v Bruce (1890) 44 Ch D 627

No. SC 192 of 2001

Judge: Higgins J

Supreme Court of the ACT

Date: 30 January 2003

IN THE SUPREME COURT OF THE )

) No. SC 192 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: GREGORY DIETER AMANN as Executor of the Estate of NORMA CHIN deceased

Plaintiff

AND: RICK NATHAN DULIHANTY

Defendant

ORDER

Judge: Higgins J

Date: 30 January 2003

Place: Canberra

THE COURT ORDERS THAT:

1. There be judgment for the plaintiff in the sum of $173,064.00 plus interest less payments made to date.

2. The plaintiff be granted leave to bring in draft minutes of orders to give effect to these reasons including, if necessary, evidence to support any specification of the sum due for interest, if not agreed and bringing up to date the credit to be allowed for payments to date.

3. The parties will be heard as to costs.

1. This action was originally commenced by Norma Chin (the deceased) dated 29 March 2001 but not filed until 18 April 2001. The defendant is her great-nephew. The deceased, regrettably, passed away on 30 May 2001. Probate of her Will was granted to her son, Gregory Dieter Amann, on 24 July 2001. He was named in the Will as the executor of Estate.

2. On 5 October 2001, Mr Amann was substituted as plaintiff in a representative capacity. The originating application has been amended accordingly.

3. The claim by the Estate of Ms Chin alleged that, on or about 7 March 2000, the deceased had advanced monies to the defendant. The debt, as at the date of the claim, was alleged to be $173,064.46. It was further alleged that, despite several demands for payment, the defendant had failed to repay that debt.

4. By his Defence, dated 18 October 2001, the defendant admitted that he had been, in or about April 2000, advanced $178,944.46 by the deceased for the purpose of purchasing a residential property at 117 Eggleston Crescent, Chifley in the Australian Capital Territory (the property). It is common ground that the purchase was completed with the defendant being registered as proprietor of a 99% interest in the Crown Lease thereof and the deceased a 1% interest.

5. The defendant asserted that the terms of the advance were that the sum loaned would be free of interest but repayable at $150.00 per week until fully repaid.

6. He claimed to have by then repaid $8,580.00. He was, he alleged, not in default of his promise to pay $150.00 per week, though he had been unable, his Defence asserted, to pay monies into the deceased's bank account after it was frozen a few weeks after her death until 7 September 2001 when he paid $1,500.00 in a lump sum.

7. He further denied that it was a term of the agreement that the debt was repayable on demand.

8. By his Reply, dated 18 April 2002, the plaintiff agreed that the loan was made on the date particularised (11 April 2000) and for the purpose alleged.

9. He denied, however, that the terms of the agreement were as asserted by the defendant. He alleged that it had been agreed that the loan was to have been repaid at no less than $1,200.00 per month. Issue was also taken with the defendant's assertion as to the quantum of payments actually made. The plaintiff conceded credit for $5,880.00 received between August 2000 and February 2001 and alleged that as at 18 April 2002, a further $7,950.00 had been received.

The factual background - plaintiff's evidence

Christopher Geoffrey Chenoweth

10. Mr Chenoweth is a solicitor, highly experienced and well-regarded. He deposed that he had been contacted by the deceased by telephone on 7 February 2001. His file note indicated that she wished to make a will, appointing her son, the plaintiff, as executor. His note concerning the loan to the defendant, which I accept as accurate, records:

"She has lent money to a nephew to buy a house. She had a win on the lottery some time ago and has lent practically all of the $180,000 that her nephew wanted, to buy a house. The house is in the name of herself and her nephew but the loan has not been documented. Terms of it are quite unclear and the nephew is refusing to make reasonable payments to her. He is not making any payments on account of interest. Nephew is only working 30 hours a week, and she is having to continue work at home on a 50 hour a week basis. Very upset about the nephew's conduct. Explained that I did not do litigation, but explained that I would meet with her and discuss the case and try and clarify the issues for her. It may be that in the absence of any documentation the loan is repayable on demand and this may serve as a lever to get it documented on a reasonable commercial basis. Further, there may be an argument that the house is in joint names then the extent of the interest is in equivalent (sic) to the extent of the contribution. However, if there has been talk of a loan, then this would probably mean that the residual equity was owned by him.

She is now kicking herself for proceeding without properly documenting the transaction and for leaving it so unclear - we will see what we can do to sort it out."

11. The deceased and Mr Chenoweth met in conference on 13 February 2001. As Mr Chenoweth recalled the conversation, the deceased told him:

"Rick [the defendant] had told me of a house that he wanted to buy. I wanted to help him because at the time he was not in regular full time work. Rick was working about thirty hours a week, where I was working longer hours, about fifty hours a week or more. He wanted me to provide him with a loan on a short term basis which would see him through until he got full time employment. Some time has passed and Rick is not making the effort to obtain regular full time work. I am upset that he has made no effort and does not seem inclined to do anything to obtain a job. At the moment he is paying me off at the rate of One Hundred and Fifty dollars ($150.00) per week which does not even cover the interest that he should pay on the loan."

12. She went on to say:

"I have a one percent (1%) interest in the property but I cannot fix the situation." ..."A bank charges interest rates of eight to nine percent (8% - 9%), and this is what I expected when I gave him the loan."

13. And, further:

"Eight and a half percent interest would be satisfactory."

14. In consequence Mr Chenoweth, on 15 February 2001, wrote the following letter of advice to the deceased:

"[re Loan to Defendant] ... You have advised me that you have advanced $179,000 to him for the purchase of a residential property. In the title you have been shown as tenant in common to the extent of 1%. There is no documentation relating to this loan. Your nephew is refusing to pay sufficient amounts back to you to cover the costs of the funds, and the situation is very unsatisfactory.

In the absence of any documentation as to the loan, it appears to me that the money is repayable on demand. While a small amount may be attributable to your 1% interest in the property, the bulk of the money must be treated as a loan to yourself and Mr Dulihanty as the owners of the property. To my mind, the fact that you have 1% of the property is nothing more than giving you the power to prevent the sale of the property without reference to your loan, and to that extent may be seen as a form of security device rather than giving you a significant equity interest.

As there is no documentation for this loan, you can either negotiate with your nephew or if he does not negotiate a reasonable arrangement with you (including proper monthly payments and a registered mortgage under which if the payments are not made you are entitled to sell up and recover the whole of the loan) then I think that you should consider instituting proceedings against him for recovery of the money and if necessary force the sale of the house through his bankruptcy. You could force him into bankruptcy if he did not pay, and then his trustee and yourself (as to 1%) could agree to sell the house and then repay you in your capacity as a lender."

15. Mr Chenoweth conceded in cross-examination that it was "possible" that his recollection of what the deceased had told him was "inaccurate or incomplete" and that the deceased could, in instructing him, have related the events to which she referred incompletely or inaccurately.

16. Whilst conceding those possibilities, Mr Chenoweth considered that his recollection was, in fact, accurate. I think that his recollection was unlikely to have been inaccurate or incomplete to any substantial or relevant extent.

17. I recognise that what the deceased told him of her arrangement with the defendant was hearsay. The accuracy and completeness of those statements can only be judged on the whole of the evidence.

18. Mr Chenoweth referred the deceased to Mr Rodney Barnett of Rod J Barnett & Associates, solicitors, for litigious advice.

Rodney John Barnett

19. Mr Barnett is, likewise, a solicitor of great experience and well-regarded. He saw the deceased on 20 February 2001. She provided him with a copy of Mr Chenoweth's letter of advice and a copy of a Title Search of the property.

20.

21. The file note records the deceased's instructions that:

"... Mr Dulihanty was not in anyway (sic) prepared to make an effort to reduce the debt. I told her that I would write Mr Dulihanty a letter and arrange for him to make arrangements for alternative finance."

22. He recalled a statement by the deceased at that time to the following effect:

"5. ... `Mr Barnett, I wish you to pursue Mr Dulihanty for monies which I lent to him when he acquired property at Chifley. He knew that I had won Tattslotto, and approached me requesting that I assist him with the purchase of a property. He told me that he would be prepared to treat any monies I gave him as a loan, as it was his intention to obtain employment and pay the loan under normal rates which would apply to loans of this nature from a normal bank.'

`In spite of the fact that I have asked him on a number of occasions to get a job, he has not done so. He has made payments of approximately $150.00 from time to time, but that is all. I am extremely concerned that he never intends to obtain another job so that he can pay me on a regular basis as would happen if he had obtain a loan from a building society or bank.'

6. ...`I thought somewhere between Eleven and Twelve Hundred dollars per month would be fair, taking into consideration the current repayment rate of a loan of that size if it was taken out with the Colonial State Bank. I have made enquiries with the Colonial State Bank and was advised that Twelve Hundred dollars would be the normal monthly repayment rate of both principal and the interest over a period of some twenty five years. I was prepared to accept this at the time of making the loan.'

...

10. ...`It was never discussed expressly but I made it clear throughout my conversations with him [Dulihanty] that I would want my money back.'"

23. On 22 February 2001, Mr Barnett wrote a letter of demand to the defendant. It was in the following terms:

"We act on behalf of Norma Chin who has recently consulted us in relation to an outstanding loan due to her in respect of the assistance which she rendered you at the time you purchased your house in or about April 2000.

It would appear, that the total amount of the funds advanced at that time, aggregated the sum of $178,944.46.

Since the 16^th August, when you made an initial repayment of $1,550.00 nominal amounts have only been repaid, totalling the sum of $5,880.00. Hence we calculate that you are indebted to our client in the sum of $173,064.46. We enclose herewith for your attention a Statement of Account reflecting these calculations.

It is our client's instructions that the original monies were loaned upon the basis that the debt would be repayable on demand and accordingly our client now makes demand upon you for the full amount of the debt outstanding to date of $173,064.46.

Pursuant to this demand, our client requires repayment within 10 days or alternatively your notifying us that satisfactory arrangements for repayment have been made through an alternative financial institution.

Our client notes that she holds a 1% interest in the property and is prepared to transfer in your favour that interest, in consideration of the loan being discharged.

We must also advise you, that it is our instructions that unless this loan is discharged or alternatively satisfactory arrangements are made for its repayment, within the time stipulated above, we are to instigate legal proceedings against you for the recovery of the full amount outstanding together with statutory interest accruing from the date of this letter without further notice to you.

As you will appreciate if such proceedings are instigated, further legal and court costs, will become payable by you upon Judgment being entered.

Furthermore, we anticipate that statutory interest at the rate of 8.45% will be applied towards the loan and will accumulate on a monthly basis.

We therefore suggest that you give this matter your urgent attention and provide us with your immediate proposals as to repayment."

24. Those instructions were confirmed in writing by the deceased. Also provided was a statement setting out payments she acknowledged receiving between 16 August 2000 and 19 February 2001, allegedly totalling $5,880.00. However, one payment, though listed, was not added. The total was in fact $6,030.00.

25. On or about 7 March 2001, a response, date stamped 5 March 2001, was received via Mr James A Horniblow, solicitor. He reported the defendant's version of the terms of the agreement as follows:

"My instructions are that the loan in this matter was made to my client on the basis that it would be interest free and that repayments by my client would be at the rate of $120.00 per week, being the amount that he was then paying for his Housing Commission home. He has in fact been making payments of $150.00 per week and instructs me that he will continue to do so."

26. On 8 March 2001, Mr Barnett put these allegations to the deceased. His recollection of her response, and the conversation concerning it, was in the following terms:

"16. ... `There was definitely no arrangement to pay at $120.00 or even $150.00 per week between Rick and myself.' ...`I had always understood, that Rick would obtain gainful employment at the earliest opportunity which would allow him to obtain alternative finance through a bank.' ... `That was definitely not the case. I never told him he could have an interest free loan, or pay the loan off at $150.00 per week. Please take proceedings against him as soon as possible.'"

27. As a result, Mr Barnett wrote to Mr Horniblow, in the following terms:

"Whilst we acknowledge your client's instructions in this matter, we wish to advise that our client originally made arrangements to provide a deposit of $60,000 to your client, upon the basis that he would then obtain gainful employment, arrange for a loan and register as an owner/builder.

The position was changed somewhat when your client decided to purchase a house for which he had no means to do so. Our client then came up with sufficient funds to effect the purchase, strictly on the understanding that your client was to obtain gainful employment and arrange for an appropriate mortgage as soon as practicable.

As you will see, this loan has been continuing since the 11^th April last, with very few payments being made off the debt.

Your client's proposal is hardly in accordance with commercial reality. Furthermore, your client's interpretation of events and agreements reached, albeit on an oral basis, are not in accord with our client's instructions. At no time did she indicate that the loan would be open-ended and that in the interim she would accept $120 per week. Our client is dependent upon these moneys for her livelihood and in the circumstances, would seek an alternative investment with a return which is in accordance with commercial rates.

Hence, our client has absolutely no alternative but to advise your client that unless a satisfactory arrangement for the discharge of this debt can be made within seven (7) days, it is our client's intention to act on her original letter of demand and issue proceedings in the Supreme Court for the recovery of the sum owed."

28. Proceedings were commenced accordingly on 18 April 2001. $173,064.46 plus interest was claimed.

29. In cross-examination Mr Barnett also conceded the possibility that his recollection might not be "fully correct or complete". He conceded also the possibility that the deceased's story to him might be similarly flawed.

30. Again, as with Mr Chenoweth, I consider that Mr Barnett has, without relevant or significant omission or inaccuracy, recorded and recounted what the deceased told him. Again, whether what the deceased told Mr Barnett was accurate may be tested by other accounts, including, of course, that of the defendant.

31. I turn to the supporting evidence.

Gregory Dieter Amann

32. Mr Amann is the son of the deceased and, as noted, the executor of her Estate. As such he is now the plaintiff. He was aware that, around 20 January 2000, the deceased won $750,000.00 in "Powerball" (a lottery). She had said to him that she would use the money, first, to pay off her own debts. She intended to pay off her daughter's (his sister's) mortgage, pay for his (the plaintiff's) education (up front) and make "small gifts" to other close family members. An exception was that she proposed a "temporary loan" of $250,000.00 to her brother, Michael Chin.

33. In about June 2000, he deposed, the deceased told him:

"5. ... `I have loaned [the defendant] the money to purchase a house. The loan is in the order of $175,000.' At the time I said to my mother, `Mum, why would you do such a thing. I think that you could have made a better use of the money by investing it to look after yourself.' My mother said `There isn't a written agreement, but there's definitely a verbal agreement between me and Rick. Rick has agreed to make regular payments and pay off the loan in less than ten years. Interest will be applicable at the same rate as the Colonial State Bank's rate of interest. He has agreed that if he can't meet the repayments then we will sell the house so that the loan will be repaid to me in full'."

34. Thereafter, he deposed, the deceased expressed to him concern that the defendant had not been making repayments as agreed. In September 2000, she told him that she intended to commence proceedings against the defendant.

35. The plaintiff took issue with the defendant's assertion in his affidavit as to the frequency and nature of the contact between the defendant and the deceased. The plaintiff's impression was that they were not particularly close, though after the lotto win, the defendant and his family visited the deceased more frequently.

36. I have to say that, although I do not doubt the plaintiff's honesty, his impression may not be accurate, either because he did not observe (nor could he) all relevant contact or because he is adversely influenced by the undoubted falling out between the deceased and the defendant as from August/September 2000 and the adverse view the plaintiff held of the defendant, at least thereafter.

37. The plaintiff did confirm that, following the death of the deceased, he closed her bank account and opened one in his name to receive the assets of the Estate. He caused the defendant to be notified of the new account details. Clearly, at that time, some delay in payments being received might be regarded as excusable.

38. Although challenged on his account of the conversation with the deceased concerning the loan, the plaintiff did not resile from it.

39. Subject to the reservation I have mentioned and acknowledging the plaintiff's direct interest in the outcome of these proceedings, I could detect no reason to doubt the plaintiff's honesty. I accept that he has, with substantial accuracy, recounted what the deceased told him of the arrangement with the defendant.

Victor Michael Norman Chin

40. Mr Chin is the brother of the deceased. He is a solicitor in practice in Darwin. He is usually known as "Michael Chin". He had, between most of the period 1983 to 8 March 2002, resided in Canberra near the deceased. He had moved to Canberra in 1970. He had frequent contact with the deceased and was often asked by her for advice on a range of matters including legal matters. For most of his time in Canberra, Mr Chin worked as a government lawyer. If the deceased required formal legal advice, he would refer her to solicitors of his acquaintance, depending on the nature of the matter concerned.

41. He deposed that it was not unusual for substantial sums of money to be loaned between the deceased and himself. He had repaid the temporary loan referred to in the plaintiff's affidavit prior to the death of the deceased.

42. He had a number of conversations with the deceased after 23 January 2000 when she first told him of her tattslotto win. Over the next two weeks he recalled statements by the deceased to the following effect:

"a `I am going to pay off my debts, including the mortgage over my home in Aranda, and the investment property I have in Giralang.'

b `I am going to get a new car. I think it will be a Holden, because I think I would like to have a new car. I will also get a car for Gregory. I think he wants a Honda which costs about $52,000.00.'

c `Fran (my sister's daughter, Frances Sankey) has a mortgage of about $45,000.00, and I want to pay that off for her.'

d `I am going to give small amounts, $1,000.00 or $2,000.00 to each of our brothers and sisters.'

e `I will give you a loan of $250,000.00. I want you to repay the loan by the end of November this year, but if I need it sooner you will have to pay it back to me if I ask you to.' I said `that would be great because I can pay you back in November when I get a refund of my superannuation and payout for my long service leave when I resign from the public service.' She said `if you pay it back before the end of November, I won't charge any interest.' I said `great, thanks.' She said `I suppose if you wanted to we could extend the loan after the end of November, but if we did you would have to pay interest at the Colonial Bank residential home loan rate.'

f `I think I will invest the money I have left over with the Colonial Bank, after making the loans and gifts I want, and I will get some advice from the bank and maybe an investment adviser as well.'"

43. Then, in early to mid-February 2000, there was a conversation between himself and the deceased concerning a loan to the defendant which he recollected as follows:

"19. On a date between early and mid February 2000 my sister and I had a further conversation. She said: `Rick has asked me to lend him some money to help him buy a house.' Rick Dulihanty is her grand nephew, being the son of our niece, Pamela Dulihanty - nee Chin. She said `Rick and his partner, Jackie, and their child from Jackie's previous relationship are living in a government house. He asked me for a loan of about $150,000.00, depending on the cost of the house that he and Jackie find. I would like to help Rick although it might mean that I may not be able to discharge the mortgages on both of my houses in Aranda and Giralang until he repays the loan.'

20. I said to my sister: `I don't think that is a very good idea. I believe that Rick doesn't have a history of secure employment and he may therefore have some difficulty in repaying the loan.' My sister said: `I would like to lend him the money. He has promised me that he will repay the loan in under ten years. He told me that he would be able to get more work and that Jackie would find a job. They would really like to get out of the government house that they are in and get their own home.'

21. A day or two later I had a further conversation with my sister. She said: `I have decided to make that loan to Rick. He is now looking for a suitable house and when he finds one he will take me to have a look at it.' I said to Norma, `Are you sure that is a good idea?' She replied, `I know there is a risk involved, but I do want to help Rick. At the present time he hasn't got a full-time job and can't make an application for finance because he wouldn't qualify. I am prepared to give him a loan on similar terms as a bank would if he qualified for a bank loan, so that when he gets a full-time job, he will repay it quickly or refinance it through a bank at normal rates.'

22. In about the middle of February 2000 my sister said to me: `Rick has found a house in Eggleston Street, Chifley. The purchase price is $173,000.00. That is more than I had intended to lend Rick, but it seems to be a nice house and they can pay the loan off quickly. I am going to get Mun Ng [a solicitor] to do the conveyancing. I have called Mun and told him that I will provide all of the funds for the purchase of the property and I will pay his legal fees, but the transfer will be into the name of Rick. Rick told me that he would make repayments of at least $1,200.00 per month. I said to Rick that if he defaulted, the full amount of the loan would be repayable, even if he had to sell the house. He said, `OK'.'

23. I said: `I don't think that that's a good idea. Rick doesn't have steady employment. If you do lend him the money then you should take a mortgage over the property in order to secure the loan. Don't forget about the problem that our brother had when he bought a service station for his sons and they sold it and then kept the proceeds of sale.' She said: `yes I suppose that's a good idea. I'll ask Mun to prepare a mortgage and I'll tell Rick that's what I want.'

24. I said to my sister: `what are the terms of the loan?' She said: `Rick has agreed that he will pay off the loan in less than ten years. He will start with repayments of at least $1,200.00 per month, but he will increase those repayments after he gets steady work. We will add interest at the variable interest rate on home loans that the Colonial State Bank charges. If he doesn't meet the monthly repayments when they're due then the full amount of the loan will become payable. She said: `if he repays the loan in under ten years then I will forgive him the interest.' I said: `there will be stamp duty in addition to the purchase price, registration and other charges and solicitors' costs. Do you really think Rick can repay a loan of that size within ten years? Why don't you ask your contact at the Colonial State Bank what would be the repayments over ten years and twenty years?' She said: `He will pay it within ten years. Twenty years would be much too long, because I'm not sure how my health will be after this cancer I have had. I said that I wanted the loan repayable on demand, and he agreed.'

25. I said: `but even if he pays it off at $1,200.00 per month that wouldn't meet the full amount of the loan over ten years. She said `he has told me that he will increase the amount of the repayments so that it will all be repaid over the ten years or earlier.'

26. A few days later she telephoned me at my office and said: `I have decided not to get Mun to prepare a mortgage. Rick has been very nice to me lately and I believe that I can trust him to make the repayments as he has promised. I don't think it is necessary to have a formal mortgage over the property, even though he is willing to sign a mortgage. I would like to keep it as simple as possible. You and I have been making loans to each other for many years without the need for writing and there haven't been any problems. I don't expect to have any problem with Rick.'

27. I said: `well it worries me that he doesn't have a history of secure employment. If he had a good credit rating then he could get the money from the bank and wouldn't have to be asking you for a loan. What if he takes the loan now and later on claims that it was a gift and not a loan?' She said: `well nobody would believe that it was a gift rather then a loan because I'm only giving a $52,000.00 car to Gregory and I'm only paying Fran's $45,000.00 mortgage.'

...

29. My sister called me about a week later at my office. She said: `I have spoken to Rick about setting out the terms of the loan in a letter and he has agreed to do that. He says draft the letter and he will sign it. Have you drafted the letter for me?' I said: `no, I haven't had the time to draft it yet because I have been too busy and I also haven't had time to call the Colonial State Bank.'

30. About two weeks later my sister called me and said: `have you drafted that letter you were talking about?' I said: `I'm sorry, I haven't done it.' She said: `well I don't think I can wait any longer because I am just about to go to Darwin to spend some time looking after our mother who isn't very well. I am going to relieve our brother and his wife because they want to go to Malaysia to visit her family.' She also said: `I think that I can trust Rick and won't need to have him sign a letter.'

31. She also said: `I have been speaking to Mun Ng and he suggested that he write in the title documents that I have a 1% interest in the property so that I have to be involved in any dealing that there is with the property. I think that that is a good idea and I have told Mun to go ahead.' Contracts were exchanged on 20 March 2000 and settlement of the purchase was scheduled for 10 April 2000."

44. After settlement of the purchase of the property Mr Chin had further conversations with the deceased, relevantly these were, he deposed:

"34. During June, July and August 2000 my sister said to me on several occasions: `my bank account statements show that Rick has not made the payments that he agreed to make. I am getting quite concerned about that.'

35. At the end of that period she said to me: `I have spoken to Rick about the repayments and have reminded him that our agreement was that he pay not less than $1,200.00 per month.' She also said: `Rick told me that he is still only working part-time because he wants to spend time with the children and he could not afford to make those payments. He also told me that Jackie hadn't got a job because she wanted to look after the children full time.' She said: `all of us may want to spend time with our children, but he made an agreement with me that he and Jackie would both work full-time so they could make the repayments, and they have to stick to the agreement.'

36. In early September 2000 my sister said to me: `Rick has started making repayments at the end of August but it's only about $150.00 a week which is half the minimum repayments that he agreed to make. I have spoken to Rick and reminded him that he agreed to pay at least $1,200.00 a month and that he and Jackie would get full time employment and increase the repayments. I said that because he had not stuck to his agreement, I wanted the loan to be repaid in full now. I said that that he can either sell the house or refinance the loan, but I want him to pay me back now.' He said to me `don't worry about it Auntie Norma.'

37. Shortly after that my sister said to me: `I have asked Mun Ng to get Rick to repay me the whole amount of the loan, but Mun said that he can't help because he only does conveyancing and he doesn't deal with disputes.'

38. On about 4 December 2000 I arranged for my sister to attend a meeting with Tony Cibiras, then a solicitor with Minter Ellison and I went to the meeting with her. At the meeting my sister said to Mr Cibiras: `I want you to send a letter to Rick demanding repayment of the loan in full and to draft a will for me. The property market has gone up since the house was purchased and if necessary the house should be sold and Rick can keep the difference after I get my money back.'

39. My sister called me several times in January 2001 and said: `I haven't heard anything from Minter Ellison, I am getting quite worried.'

40. In early February 2001 I said to my sister: `It's time to give up on Minter Ellison, I think you should go and see Chris Chenoweth. He is the President of the Law Society, he has done some good legal work for our mother.' She later called me and said: `I can't get in to see Mr Chenoweth for a week so I have seen Michael Cranswick and asked him to prepare a will and write a letter of demand.'

41. About a week later my sister called me and said: `I have now seen Mr Chenoweth who has given me a written advice. But he has also suggested that I go to see Rod Barnett to recover the loan from Rick.'"

45. Mr Chin, by way of supplementary evidence, expressed the opinion that although there was no adverse relationship between the defendant and the deceased, it was no closer than with many other of her relatives. He noticed that the defendant did, after the deceased's lotto win, appear to come around more frequently and do jobs for the deceased.

46. In cross-examination, Mr Chin rejected the suggestion that the loan was represented to him by the deceased as "interest-free" and repayable at no more than the weekly rental the defendant was paying on his government house. He also rejected the suggestion that the deceased had told him that she had initiated the request for the loan.

47. Whilst also challenged on the other statements attributed by him to the deceased, Mr Chin did not resile from his recollection.

48. It may be commented that the latter conversations, following the settlement of the property are consistent, though challenged, with the fact that the deceased did consult solicitors, first Mr Mun Ng, then Mr Cibiras, next Mr Chenoweth and, finally, Mr Barnett to enforce payment of the loan.

49. Again, whilst I accept, as Mr Chin conceded, that the statements he attributed to his late sister are not recorded verbatim, I consider that they do represent the substance of what he was told by her.

50. Indeed, he fairly conceded that it was "self evident" that the deceased thought well enough of the defendant to make the loan to him that she did. That, in my view, supported the favourable impression I had of Mr Chin's honesty and accuracy.

The defendant's evidence

Jacqueline Megan Read

51. The defendant's evidence came first from his (de facto) wife. She deposed that the deceased rang their home and told her that she had won the Powerball tattslotto. The deceased said (according to Ms Read):

"I want to buy you a house because you're having another baby [as Ms Read was]. I want to help you out." [Ms Read] said: "You don't have to do that."

52. The deceased then requested that the defendant phone her. Ms Read was aware that the deceased had assisted in the purchase of the property by way of a loan. As to repayments, Ms Read said:

"... she [the deceased] asked Rick, in my presence, how much rent we were paying. Rick replied `About $120.00 per week.'

She said: `That will be fine. I don't want to make your life harder by higher repayments than your rent.'

She further said: `I don't want Greg [the plaintiff] to find out about this loan. I don't want him telling me what to do with my money'."

53. Ms Read then identified a number of deposit stubs she described as "receipts of payments that have been put into Greg's account or Norma's account when she was still here, or payment of our loan to her".

54. These were, in due course, tendered as evidence of the quantum and frequency of payments made in reduction of the loan.

55. Ms Read's perception of the relationship between the defendant and his great-aunt were that it was "close" and, before the lotto win, the defendant would visit his great-aunt and do some chores (for example, clear rubbish or trees) perhaps monthly.

56. In cross-examination, Ms Read deposed that the defendant had, for the previous two years, from about one month after settlement of the purchase of the property, worked full-time as a waterproofer. She herself was employed as a carer for persons with disabilities and was studying nursing.

57. She was adamant that the deceased had offered "to buy" a house for them. She said that the deceased had continued to repeat the offer in that form during March 2000. She acknowledged that, according to a fax printout, the purchase of the property had been agreed by 17 February 2000. Clearly, that was inconsistent with the evidence that, during March 2000, the deceased, if ever she had, was offering a gift of a house, unencumbered by any loan obligation, to the defendant. It is clear that, by the time the property was sought and found, all parties were clear that it was a loan that was offered and accepted.

Rick Nathan Dulihanty

58. The defendant himself next gave evidence. His counsel, Mr Hassall, sought to adduce additional evidence to the effect that, according to the payment receipts (payment stubs - exhibits A and B) more had been paid than the plaintiff had acknowledged in his evidence.

59. Indeed, the "Statement of Agreed and Disputed Facts" proffered by the defendant's solicitor asserted that it was agreed that $17,700.00 had been paid up to 20 September 2002. In fact, no such agreement had been made.

60. Mr Lunney, for the plaintiff, took the defendant to a number of the payment stubs, particularly, those in "loose-leaf" form (exhibit B) rather than in the payment book contained pre-printed deposit forms for the deceased's bank account (exhibit A).

61. The deceased's bank account had been in the name of "The Proprietor Alpha-Zeta Typesetting", account number "402 726: 19188881" at 52 Martin Place, Sydney NSW. That account was closed once the bank, initially Colonial State Bank of New South Wales Ltd then Commonwealth Bank of Australia, became aware of the death of the deceased. The executor, the plaintiff, then set up a new account in the name of "The Executor" (Norma Chin), account number 06 2909 2800 2618, at Fyshwick ACT. The plaintiff himself had an account with the same bank, numbered 06 2913 1043 2979, at Belconnen Mall ACT.

62. It is apparent from exhibit B that some payments were directed to an account with the Commonwealth Bank no 2913 2802 4527. These were:

8/6/01 $150.00

15/6/01 $150.00

22/6/01 $150.00

63. Another was directed to "R Dulihanty" at account number 5602 79087 5675 4318:

6/7/01 $300.00

64. Another two were directed to account number 2908 1030 4952 the second adding as the account name "Rick Dulihanty":

19/7/01 $300.00

30/8/01 $300.00

65. Another two, which recorded no account number, purportedly were directed to an account in the name of "Rick Dulihanty" being:

3/8/01 $300.00

17/8/01 $150.00

66. The first deposit to account number 06 2909 2800 2618, the account operated by the plaintiff for the purposes of the Estate, was on 7/9/01 for $1,500.00. The earlier deposits referred to above totalled $1,800.00. It is certainly possible that those deposits were intended to "set aside" repayments of $150.00 per week until a new account became available. They were not, however, then credited to the deceased or the Estate as the defendant in his evidence (and Ms Read in hers) represented them to have been. It is apparent that there was an attempt by the plaintiff and Ms Read during the hearing before me to pass off the above detailed deposits before September 2001 as additional repayments of the loan.

67. The final deposit recorded, dated 18 September 2002, is for $300.00. It is directed to an account named "Jacqui Read" but it also cites account no 06 2913 1043 2979, the plaintiff's personal account, and the plaintiff acknowledges receipt of that sum as a repayment of the loan. The use of that account name was, I am satisfied, an innocent error.

68. As to his relationship with the deceased, the defendant deposed that he and the deceased had been "close". He asserted that the deceased had often said that she would one day buy him a house "when I win lotto".

69. He says that when he spoke to the deceased after her lotto win, she had said to him "I want to buy you a house". That was, of course, ambiguous as to whether the proposal was for a loan or a gift.

70. The conversation proceeded, he stated:

"I said `You don't have to buy me a house'. She said words to the effect of: `No, I want to. You need a bigger home, you're having another baby. It'll be an interest-free loan'."

71. It will be observed that, contrary to Ms Read's oral evidence, from the very first it was made clear to the defendant that the proposal was for a loan not an outright gift.

72. As to repayment rates, the defendant deposed:

"5. Over the next few months the deceased was in regular communication and kept asking me if I had found a house. She also actively assisted in looking for one, including attending on my de facto wife and I at Farrer with a `Realtor' guide and looking at prospective houses.

6. On another occasion at our house in Farrer she asked me, in Jackie's presence, how much rent we were paying. I replied `About $120.00 per week'. She said words to the effect: `That will be fine. I don't want to make your life harder by higher repayments than your rent'. She was further anxious her son not be informed of the loan. She said words to the effect: `I don't want Greg to find out about this loan. I don't want him telling me what to do with my money'."

73. A point was made that the reference to "over the next few months" was clearly an exaggeration as solicitors had been instructed to act on the sale as early as 17 February 2000 (exhibit 1). A further point made was that, if no more than $120.00 per week was expected, the loan would take nearly 29 years to repay.

74. The defendant further asserted that he had requested the solicitor Mr Mun Ng to "document the terms of the loan precisely". The deceased had, accordingly to Mr ichael Chin, also said she intended to ask Mr Ng to document the terms of the loan. Mr Ng was not called by either party. There is, therefore, no evidence from either party as to whether he knew or not of the terms of the loan or why he advised the 99% - 1% allocation of the leasehold interest.

75. In cross-examination, the defendant conceded that, whilst he asserted that $120.00 per week was the agreed sum based on the rent payable for their government house, that rent was in fact $129.00 per week. His Defence had asserted, apparently on his instructions, that the agreed rate of repayment would be $150.00 per week. His explanation for that apparent contradiction was:

"I thought I'd pay 150 because it was more than what we'd agreed on and I could afford to pay it."

76. The Defence, paragraph 2, was unequivocal:

"The terms of the said advance were that the sums lent would be free of interest and would be repaid at the rate of $150.00 per week until repaid in full."

77. Even at that rate the loan would have taken 23 years to repay in full. The defendant further stated, when asked why he paid at the rate (usually) of $150.00 per week:

"... I told her I would try and pay more, so I did try and pay more".   (Transcript 90)

78. He agreed that he regarded $120.00 per week as a minimum not a fixed payment.

79. Thus it seems there is common ground that it was a term of the agreement that the payments to be made were not fixed but were to be at a minimum rate, albeit that there is no agreement as to the level of that minimum rate.

80. The defendant also agreed that he understood that, if the house was to be sold, the loan, so much as remained unpaid, would be then repayable in full.

81. The defendant was also asked:

"Mr Dulihanty, wasn't the agreement that you had with Norma Chin that she would finance you into this house until such time as you got a job? ---Yes. Yes."

82. He denied, however, that it was ever stipulated that, when he got a job and could afford a commercially available loan, he would refinance and pay back the sum then outstanding.

83. I have to say that such a term would seem implicit in the concession the defendant made in his evidence.

84. The defendant explained that he had not paid anything until 16 August 2000 because the deceased had not given him, despite his requests, a deposit book. Eventually, he says, she gave him exhibit A. He says that he had put money aside in a "sock drawer" prior to that date.

85. Certainly, the first payment of $1,550.00 does indicate that monies had been set aside as the defendant suggests.

86. Nevertheless, even at $120.00 per week, the sum to be paid on that occasion ought to have been $2,160.00 or, if the defendant had regarded the sum he could afford as $150.00 per week, $2,700.00.

87. He said that the deceased had not expressed to him any dissatisfaction with his efforts at repayment and could not explain her reported expressions of dissatisfaction made to others nor her later expressions of dissatisfaction made directly to him.

88. As to the payment slips, wrongly included so as to apparently inflate the total paid, the defendant, whilst conceding the error, blamed Ms Read for it.

89. I do not conclude that the defendant deliberately attempted to mislead the court, nor that Ms Read did so. Indeed, neither their solicitor nor their counsel noticed the error, so carelessness and wishful thinking is a more likely explanation than deliberate deceit.

90. However, it does betray on the part of the defendant and Ms Read a willingness to believe, contrary to the truth, in a state of affairs more favourable to themselves than was the case. It is consistent with a belief on the defendant's part that he could interpret the loan as he chose and that the deceased would not mind. I believe he just ignored or disregarded terms stipulated by the deceased which he found inconvenient.

91. He conceded that "some time" after he had received the payment book but before the solicitor's letter of 22 February 2001, the deceased, when he saw her at her house, "did not recall the interest-free arrangement". I conclude that to have been because it never was so stipulated.

92. He further conceded that the deceased's first expression of dissatisfaction was before February 2001. She had, apparently, illustrated her point by showing him her bank statements. He was vague as to how long before February 2001 that dissatisfaction was first expressed.

93. Indeed, there would have been grounds for the deceased's dissatisfaction. Even assuming that it was agreed that his repayments would commence after he had the relevant deposit book, his repayments fell significantly short of the minimum that would have been expected had it been $120.00 per week that had been agreed let alone the higher figure referred to in the Defence or the figure said to have been expected by the deceased of $1,200.00 per month. He claimed to have been unaware of the extent to which he had been in arrears.

Pamela Ann Dulihanty

94. The defendant's mother, Pamela Ann Dulihanty, a niece of the deceased, deposed that her son was the deceased's "favourite nephew". Such an opinion does not carry much weight, based as it is on unstated factual premises. It may convey no more than that the defendant was not regarded adversely by the deceased, at least until the falling-out which I am satisfied occurred in the latter part of the year 2000.

95. Ms Dulihanty did say that, after the house at Chifley had been located, she had asked the deceased how she expected to be repaid. The deceased said, she deposed:

"It's an interest-free loan with no time limits. He can pay it back as he can afford to."

96. I do not consider that Ms Dulihanty's purported recollection is accurate. Indeed, I am persuaded that the deceased said nothing of the kind to her. She may well have confused what others later alleged with what the deceased actually said.

Mark Jonathon Dulihanty

97. There was an affidavit from Mark Jonathon Dulihanty, a brother of the defendant, but, insofar as it was admissible, (and paragraphs 5 and 6 were not), it stated nothing of relevance.

The Submissions of Counsel

98. Mr Lunney, for the plaintiff, identified the central issue as being the identification of the terms upon which the deceased had loaned the original sum of $178,944.46 to the defendant and, then, whether the latter had breached those terms so as to entitle the plaintiff to judgment for the whole of the balance of the loan now remaining unpaid.

99. The first factual issue was whether the terms of the agreement were as the defendant had asserted them to be or the alternative as reported by those who had deposed to the contemporaneous and later utterances of the deceased.

100. Unsurprisingly, Mr Lunney attacked the credit of the defendant and, indirectly, so far as might be relevant, that of his corroborative witnesses, insofar as they gave evidence of utterances by the deceased contrary to those referred to by Mr Michael Chin and the plaintiff. The evidence of the utterances deposed to by the latter two deponents are consistent with the later utterances made to Messrs Chenoweth and Barnett, albeit the latter are more remote in time from the making of the loan itself.

101. It was pointed out by Mr Lunney that the defendant had asserted in evidence that the repayment rate was but $120 per week, whereas he had pleaded that the rate was $150 per week. He pointed to the inherent improbability that a loan stretching over more than 28 years would be offered by a person as astute as the deceased had been. In any event, the deceased had already been diagnosed with cancer. It was unlikely, as she herself had been reported as asserting, that she would enter into such a long-term arrangement.

102. The errors and exaggerations conceded by the defendant under cross-examination, particularly the carelessness, if not positive deceit, in producing misleading deposit stubs, the lack of regular payments, the shortfall in payments, even on his own case, Mr Lunney submitted, demonstrated a "very casual approach" by the defendant to his obligations and to truth and accuracy.

103. On the basis of the admitted shortfall in repayments alone, Mr Lunney submitted, a repudiation of the agreement had been established. A fortiori if the terms were as the plaintiff has asserted.

104. Mr Hassall, for the defendant, contended that, given the family relationships, the defendant's assertions were not improbable. The defendant, far from repudiating his obligations, had paid some $15,930.00. Further, he submitted, it should be accepted that the deceased had volunteered the offer of a loan. It was not to be regarded as repayable on demand but only in accordance with the minimum terms and even that was not mandatory. The defendant should be regarded as having promised that he would, in essence, use his "best endeavours" (my paraphrase) to repay the loan.

105. It was conceded that the retention by the deceased of a 1% interest in the property was intended to secure her right to be repaid, at least if the premises were sold or alternative finance was, for whatever reason, obtained.

106. Mr Hassall contended that the reported utterances of the deceased to her brother and her son could well have been to avoid them interfering. The subsequent statements to solicitors were after she had, plainly, had a falling out with the defendant for some unknown reason. They should be regarded as a purported redefinition by the deceased of the terms of the agreement, even if the court should, in its discretion, admit that evidence.

107. The discrepancy in the deposit stubs was conceded, but Mr Hassall submitted that it should be seen as an innocent error.

108. Further, he submitted, it was unlikely that the defendant would have committed himself to $1,200.00 per month when he had secure government-provided accommodation at $129.00 per week (admittedly with no capital asset).

Findings of fact

109. Whilst I find that each of the plaintiff's witnesses, including the plaintiff, have been both truthful and accurate, that does not necessarily lead to the conclusion that the deceased's utterances accurately reflected the arrangement she entered into with the defendant. I also bear in mind that the deceased might not have wished to inflame jealousy if it was thought she was favouring unduly a then under-employed great-nephew who could have been regarded by other family members as undeserving of such generosity.

110. Insofar as objection was taken to the admission of evidence of those utterances, it is at least arguable that the deceased's utterances were admissible as an exception to the hearsay rule by virtue of s 61 Evidence Act 1995 (Cth) (the Act) insofar as they revealed her intentions, knowledge or state of mind. There was no issue about her competency.

111. It was, in any event, first-hand hearsay. It is, therefore, as the deceased is "not available" to give evidence, admissible by virtue of s 63 of the Act. Reasonable notice of intention, on each side, to adduce such evidence had been given.

112. Accordingly, I dismiss the objections raised to the admission of such evidence.

113. I take account, in so ruling, s 165 (1)(a) and, by analogy, s 165 (1)(g) of the Act. That is, I bear in mind that the evidence is hearsay and that the Estate of the deceased would benefit if the plaintiff's evidence (and that of Mr Chin and the solicitors) was accepted, not only as accurate, but as representing the truth concerning the deceased's dealings with the defendant.

114. I do not accept that the probative value of the evidence so admitted is so affected by such potential unreliability as to require its exclusion pursuant to s 135 of the Act.

115. I have concluded, also, that there are serious reasons to doubt the accuracy of the evidence of the defendant, Ms Read and Ms Dulihanty. I do not think any of them is deliberately dishonest. I do think they have reconstructed and re-interpreted such utterances as the deceased may have made to them. A large element of wishful thinking has entered into it.

116. It is my conclusion from the evidence of the deceased's utterances and subsequent actions based on the recollections of the plaintiff and Mr Chin, corroborated by her later utterances to solicitors that:

§ She did stipulate that repayments should be made at not less than $1,200.00 per month.

§ She was prepared to postpone commencement of such repayments until the defendant obtained full-time employment. Until then, I think she probably would have been content with the then current level of rent being paid by the defendant.

§ She did stipulate that she expected the loan to be repaid within 10 years and that, once the defendant had established a good employment record, he would re-finance and hence repay the loan.

§ That she had an intention, which may have been conveyed to the defendant in some form, that the loan would be interest-free in the sense that interest would be waived if repayment was made as anticipated.

§ She did not expressly stipulate the consequences of breach.

117. I also accept that each party understood that if the property was sold, the deceased would be entitled to repayment forthwith out of the proceeds of sale of the balance of the sum loaned. I am satisfied the deceased would have waived the interest component if the defendant had complied with the terms for repayment, including refinancing at the earliest opportunity (in any event, within ten years).

118. It is also apparent to me that, whilst it was a reasonable excuse that repayments were held up whilst details for an account to pay the funds into were pending, particularly at the outset, the deceased did become annoyed and dissatisfied with the rate of repayment, certainly after the defendant had obtained employment.

119. Indeed, it seems to me that the deceased's generosity was intended to get the defendant motivated to enter full-time employment and to continue in it. It was his failure to pay the $1,200.00 per month or to negotiate a variation if he truly could not afford it that caused the deceased to seek legal advice. She certainly believed the defendant to have been making no reasonable effort to comply with the loan agreement. That is the only reasonable inference, in my view, from her conduct in consulting solicitors and the terms of the instructions she manifestly gave to them.

120. That attitude on the part of the deceased is, in my view, consistent with the terms of the agreement being as I am persuaded that they were. I believe the defendant knew that he was to pay at a higher rate but believed his great-aunt would forgive him if he was "doing his best". This was a unilateral assumption on his part. His apparent confusion over whether it was $120.00 or $150.00 per week that had been agreed supports this even though he asserts that the $150.00 figure was volunteered by him. Put simply, he told inconsistent untruths.

121. He was, therefore, fundamentally in breach of the loan agreement. That breach was not, before demand was made, remedied. The defendant would have been in breach of it even if it had been agreed that repayments were to be $120.00 or $150.00 per week.

The law

122. Unless otherwise stipulated, a loan, if made in circumstances intended to create legal relations, will be repayable on demand if no contrary term is agreed, without the need for a formal request or demand - see Norton v Ellam (1837) 2 M & W 461 per Parke B at 464; Re George; Francis v Bruce (1890) 44 Ch D 627.

123. It is not contended in this case that the relationship between lender and borrower gave rise to any issue that the sum advanced should be presumed to have been a gift rather than a loan.

124. Nevertheless, Mr Hassall contended, the relationships between the parties may explain the somewhat generous and, indeed, uncommercial terms for which the defendant contended.

125. I agree up to a point. The loan, without security, repayable on the terms as I have found them to be, was generous. The indulgence shown to the defendant from the time he commenced payments up to the time a formal demand was made was also generous.

126. Nevertheless there was a clear expectation by the deceased that the defendant would comply with the terms of the loan as she had specified them to be. The 1% interest in the Crown Lease provided a measure of enforceability and security. Perhaps it was not the best conveyancing option but I am satisfied that, as the deceased perceived it, it was in accordance with Mr Ng's advice.

The conclusion

127. My conclusion is that the plaintiff has established that a loan was made to the defendant on 11 April 2000. It was on terms that interest would accrue on the outstanding balance at current bank rates otherwise payable to depositors from time to time. It was to be repayable at a rate of at least $1,200.00 per month. Had the sum loaned been repaid, by refinancing or by such instalments or a combination thereof within ten years, then I am satisfied that the interest accrued would have been forgiven.

128. However, that intention of the deceased was not an express term of the loan. It was not even implied. It was a generous gesture which the deceased intended to make to reward compliance with the terms of the loan. However, I cannot rule out the possibility that the deceased made mention of that intention in some form which may, perhaps, explain his mistaken belief that the loan was to be interest-free.

129. In any event, by his default, the defendant has forfeited that expectation, even had it been a term of the loan agreement.

130. It may be added that, had the amount to be repaid been repayable at $150.00 per week as the defendant conceded by his pleading, there was no time before the demand was made that he was not substantially in arrears. Even if $120.00 per week had been the agreed sum and credit allowed for the additional $30.00 per week paid, he was still substantially in arrears at the time the demand was made.

131. Up until 24 September 2002, he had paid $15,930.00.

132. It follows that there will be judgment for the plaintiff. It will be entered for $173,064.00 plus interest less further payments actually made from the date of the claim to the date of the entry of judgment.

133. I give leave to the plaintiff to bring in draft minutes of orders to give effect to these reasons including, if necessary, evidence to support any specification of the sum due for interest, if not agreed and bringing up to date the credit to be allowed for payments to date.

134. I will hear the parties as to costs.

I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Higgins.

Associate:

Date: 30 January 2003

Counsel for the plaintiff: Mr G Lunney

Solicitor for the plaintiff: Rod J Barnett & Associates

Counsel for the defendant: Mr D A Hassall

Solicitor for the defendant: Mr J Horniblow

Date of hearing: 24 September 2002

Date of judgment: 30 January 2003