Berghan v Berghan [2017] QDC 47

DISTRICT COURT OF QUEENSLAND CITATION: Berghan v Berghan [2017] QDC 47 PARTIES: BARRY CLAUDE BERGHAN and LORRAINE ALLISON BERGHAN (plaintiffs) v BARRY MURRAY BERGHAN (defendant) FILE NO/S: 1592/2015 DIVISION: Civil PROCEEDING: Claim ORIGINATING COURT: District Court of Queensland, Brisbane DELIVERED ON: 7 March 2017 DELIVERED AT: Brisbane HEARING DATE: 7 February 2017 – 8 February 2017 JUDGE: Everson DCJ ORDER: The Claim is dismissed CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – INTENTION TO CREATE LEGAL RELATIONS – where the plaintiffs allege they made loans to the defendant – whether the plaintiffs have discharged the onus of proving an intention to enter into legally enforceable loan agreements Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 COUNSEL: C J Crawford for the plaintiffs SOLICITORS: Smith Leonard Fahey for the plaintiffs McKays for the defendant Introduction [1] In this proceeding the plaintiffs claim $286,471.09 together with interest and costs in respect of unpaid loans they allege they made to the defendant. [2] There are alleged to have been 13 discrete loans together with a further loan constituted by the use of credit cards belonging to the male plaintiff by the defendant. It is alleged that each of these loans was repayable on demand. The plaintiffs’ cause -- 1 of 9 -- 2 of action is pleaded as damages for breach of the loan agreements.1 The claim is pleaded solely on this basis. [3] The plaintiffs are the parents of the defendant. The male plaintiff is aged 72 and the female plaintiff is 71 years old. The defendant is 45 years old. The plaintiffs have three other children including the defendant’s sister, Natalie Porter.2 [4] Significantly, at the time the alleged loans were made the defendant operated the business of Make Communications. This business was conducted through a registered business name held by a company called Centregroup Pty Ltd of which he was the sole director from 19 March 2009. Prior to this date his former wife was also a director. They were the only shareholders of this company.3 For at least some of the period relevant to this proceeding, Natalie Porter worked for Make Communications.4 This occurred in circumstances where it was the view of the male plaintiff that the defendant ran Make Communications.5 [5] To complicate matters a little, there was another company with which the Berghan family was heavily involved, Official Pty Ltd. All of the shares except one are held by family members. The major shareholders are the defendant who holds 50 shares and his brother, Nigel Claude Berghan, who holds 51 shares.6 Until recently, both of the plaintiffs worked for Official Pty Ltd, the male plaintiff as an account manager,7 and the female plaintiff as a bookkeeper.8 A dispute has arisen between the defendant and his brother over control of Official Pty Ltd.9 It was after this dispute arose that the plaintiffs demanded payment of the alleged loans on 10 April 2015.10 [6] The plaintiffs raised their children in an evangelical Christian context. They did not appear to be sophisticated people when they gave evidence in court. The male plaintiff has been a minister with Gospel Churches of Australia and other organisations since 1987.11 Correspondence between him and the defendant in evidence before the court is replete with biblical references.12 Indeed the male plaintiff stated “The Bible is our school master, as a family.”13 1 It could have been pleaded as monies due and owing pursuant to the loan agreements but nothing appears to turn on this. 2 Exhibit 2. 3 Exhibit 1, part E. 4 T1-63, ll 15-20. 5 Ibid, ll 1-5. 6 Exhibit 3. 7 T1-27, ll 30-31. 8 T1-121, l 5. 9 T2-35, ll 5-10; Exhibit 1, part C, tab 3. 10 Exhibit 1, part C, tab 5. 11 T1-110, ll 35-40. 12 Exhibit 1, part C, tab 4: “Deut, Ch: 28, verse 1 to 14”. 13 T1-110, l 29. -- 2 of 9 -- 3 The alleged loans [7] Loan 1 allegedly occurred when the defendant contacted the male plaintiff and said, “I need money and I will pay it back…I’ll pay you back and more and I’ll look after you in old age.”14 The sum of $98,000.00 was then transferred from the plaintiffs’ bank account into the bank account of Make Communications on 27 February 2009 by the female plaintiff after the defendant gave her these bank details.15 The defendant alleges that this payment was to Make Communications, not him and it was, in any event, a gift in circumstances where there was no intention to form any legal relationship between the plaintiffs and him and Make Communications. [8] The second loan occurred when the defendant requested money from the male plaintiff and said, “I will pay you back…and more, and I will look after you in old age.”16 The female plaintiff then transferred $22,000.00 from the plaintiffs’ bank account into the bank account of Make Communications on the instructions of the male plaintiff on 15 October 2009.17 The particulars of the deposit in the bank account of Make Communications are recorded as “Repay Loan To Make”.18 The female plaintiff stated this notation was there because “it is a loan to Make”.19 The defendant alleges that this was a payment to Make Communications and, in any event, a gift in circumstances where there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [9] The third loan allegedly occurred when the defendant requested $60,000.00 from the male plaintiff saying “I will repay you the money in full and look after you in old age.”20 The female plaintiff then attended to transferring the sum of $60,000.00 from the plaintiffs’ bank account to the bank account of Make Communications on 4 November 2009. The notation in the bank records of Make Communications records it as being a “Loan To Make”.21 The defendant alleges that the payment was made to Make Communications, that it was a gift and that there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [10] Loans 4, 5 and 6 allegedly consist of three payments of $5,000.00 in cash which arose when the defendant contacted the male plaintiff on an unknown date and said that he needed cash and did not want to leave a paper trail. In each instance he allegedly said that he would pay the amount back in full and look after the plaintiffs in their old age. In respect of the fourth loan, it is alleged that he said “I’ll pay you back in full and more and look after you in old age”.22 In respect of the other two loans, it is alleged 14 T1-29, ll 15-20. 15 T1-29, ll 15-20; T1-121, ll 30-45; Exhibit 1, part D. Strangely there is a discrepancy between when it was withdrawn from the plaintiffs’ account and when it was received. 16 T1-30, ll 30-40. 17 T1-122, ll 20-45; Exhibit 1, part D. 18 Exhibit 1, part D. 19 T1-123, ll 10-15. 20 T1-32, ll 1-15. 21 T1-124, ll 15-30; Exhibit 1, part D. 22 T1-34, ll 5-10. -- 3 of 9 -- 4 he said, “He’d pay it back in full and look after us in old age”.23 It is alleged that $5,000.00 in cash was withdrawn from the plaintiffs’ bank account on 9 November 2009 and given to the defendant and a further two amounts of $5,000.00 each were withdrawn in cash from the plaintiffs’ bank account and given to the defendant on 13 November 2009.24 The defendant gave evidence that neither he nor Make Communications received these amounts as alleged by the plaintiffs.25 [11] Loans 7 and 8 allegedly occurred when the defendant asked the male plaintiff for $60,000.00 and the male plaintiff responded, “this is a loan to repay back”.26 The male plaintiff then instructed the female plaintiff to transfer the money.27 An amount of $40,000.00 and an amount of $20,000.00 were then taken from the plaintiffs’ bank account on 17 February 2010 and these amounts were deposited into the bank account of Make Communications on the same date. The notation in respect of the deposit of $40,000.00 records the particulars being “Action Retailing” which is the name of a partnership conducted by the plaintiffs.28 The defendant alleges that these payments were made to Make Communications as a gift and that there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [12] Loan 9 allegedly occurred when the defendant telephoned his mother on 21 September 2012 and asked for a loan of $4,000.00. He assured her he would pay the plaintiffs back, it was “never a worry” and he said he would “pay you back in full, even more, and look after you in old age.”29 She then transferred the sum of $4,000.00 into the defendant’s bank account with the particulars “loan Bm,” a reference to the defendant’s first two initials.30 She did this after the defendant gave her the account details.31 The defendant alleges that the $4,000.00 was a payment made to Make Communications and intended as a gift in circumstances where there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [13] The tenth loan allegedly occurred when the female plaintiff was contacted by the defendant who requested a loan of $4,500.00. He said, “I will look after you. I will pay you back and even more, and look after you in old age.”32 On 25 October 2012 she transferred the sum of $4,500.00 into the defendant’s bank account with the notation “repaybb”.33 The defendant asserts that the amount of $4,500.00 was paid to Make Communications as a gift and there was no intention to form a legal relationship between the plaintiffs and the defendant and Make Communications. 23 T1-33, ll 40-41. 24 T1-32, ll 40-45; Exhibit 1, part D. 25 T2-107, ll 1-10. 26 T1-46, ll 1-10. 27 T1-125, ll 25-30. 28 Exhibit 1, part D. 29 T2-7, ll 40-45. 30 T2-8, ll 10-15; Exhibit 1, part D. 31 T2-8, ll 15-20. 32 T2-8, ll 35-40. 33 T2-14 – T2-15, ll 45-20; Exhibit 1, part D. -- 4 of 9 -- 5 [14] Loan 11 allegedly occurred when the defendant contacted the female plaintiff and requested a loan of $1,000.00. She then arranged for the male plaintiff to give the defendant this sum in cash. The female plaintiff assumed that this was a loan. The defendant alleges that this amount was paid to Make Communications as a gift and there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. An email from the female plaintiff, recording alleged loans 9, 10 and 11, dated 21 December 2012 is headed “Money for Make”.34 [15] Loan 12 allegedly occurred when the defendant contacted the male plaintiff and requested $3,500.00. He said, “I’ll pay you back in full, Dad, and more, and I’ll look after you in old age”.35 The female plaintiff then transferred $3,500.00 into the defendant’s bank account on 16 August 2013 with the notation “personal Loan Muz,” an apparent reference to the defendant.36 The defendant alleges that this amount was paid to Make Communications as a gift and there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [16] The thirteenth loan allegedly occurred when the defendant contacted the male plaintiff and requested $5,000.00. He allegedly said, “It’s a loan. I’ll pay you back in full, and I’ll look after you in old age”.37 The female plaintiff then transferred the sum of $5,000.00 from the plaintiffs’ account to the account of Make Communications on 11 September 2013 and entered the particulars “loan to Make”.38 The defendant alleges that the sum of $5,000.00 was paid to Make Communications as a gift and there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications. [17] The plaintiffs also claim that loans were entered into by the use of credit cards provided by the male plaintiff to the defendant when he was living with them free of charge in 2013 after the breakup of his marriage. At the time he had an achilles heel injury and was not working, Make Communications was experiencing financial problems and he could not afford rent.39 The male plaintiff gave him a credit card and the defendant allegedly said “I will pay you back and more and I will look after you in your old age” and then the male plaintiff got him an extra credit card.40 It is alleged that as a consequence of using the first credit card, the defendant incurred expenses in the sum of $7,000.00 and that as a consequence of using the second credit card, the defendant incurred expenses in the sum of a further $2,772.00. The defendant alleges that all credit card expenses were incurred on behalf of Make Communications and that they were a gift and there was no intention to form any legal relationship between the plaintiffs and the defendant and Make Communications in respect of them. 34 Exhibit 1, part C. 35 T1-47, ll 10-20. 36 Exhibit 1, part D. 37 T1-48, ll 1-5. 38 Exhibit 1, part D. 39 T1-74, ll 30-35. 40 T1-49, ll 15-25. -- 5 of 9 -- 6 [18] No demand for any of the money allegedly loaned in the transactions referred to above was made until 10 April 2015. The amounts were calculated by going through bank statements. No ledger was kept recording any of the amounts that had been paid over the years by the plaintiffs to the defendant.41 The subsequent correspondence [19] On 9 January 2015, the male plaintiff sent the defendant an email which contained a number of religious overtones. He stated, inter alia: “Murray, I want to bring to your attention Mum and I are getting older and I have been unwise with giving so much of our money to you About $300 thousand dollars with out [sic] interest over the years up to the 9th Jan 2015 I need you to consider and agree to sell Melissa share [sic] of Official to myself and Mum We have nothing to back us now in life for our later years for all the years that we have worked. So giving all that we have had has been very unwise. … We believe in you and know you are a good Man Forgive Mum and Dad for our unwise giving – so I ask for forgiveness that is the best I can do.”42 [20] The defendant responded by email on the same date stating, inter alia: “I’m amazed that this has all come out just because I asked Nigel to give me regular updates on Official. Updates that would help me work out how to get you the money back. … If it is now urgent, I will need to find a way to get you the money. I don’t want to release equity in the business as I will use the dividends to pay you back or borrow against it in future to do so. … I sincerely hope this doesn’t blow out of proportion. It is already getting very strange. I hope it is amicable at the end of it. Regardless, I will get you the money. … If you need the money now then I’ll have to see if I can borrow the money.”43 41 T2-31, ll 5-45. 42 Exhibit 1, part C. 43 Ibid. -- 6 of 9 -- 7 [21] In a subsequent email dated 11 January 2015, the defendant stated to the male plaintiff, inter alia: “The current stress, you describe, is being brought on by your own action over the past week. I’ve owed you the money for a while and had an agreement with mum for its return. … If you want to relieve the stress let Nigel and I sort out the business of Official first. Then I will discuss how I’m going to get you the money separately.”44 [22] In an email to his brother, Nigel, dated 8 January 2015, the defendant again acknowledged owing the first and second plaintiffs money. He stated: “Mum and dad are going to get their money back plus some. … The downfall of Make and the fact I dutifully owe mum and dad money is a separate conversation I have had with mum. It sounds as though you are hearing something different. I hope you’re not forcing them to take sides for your gain.”45 [23] In a further email dated 12 January 2015 to his brother, Nigel, the defendant stated, inter alia: “I have been living with them for a year. In fact, I went out with them two nights a week for almost 5 months. We had discussed, amongst many things, the money I owed them and all of the money Karen had lent them over their life to keep them afloat. Mum always said just to look after them in retirement. Karen had done enough. Never did they raise wanting equity in Official. In fact, they said at least I had Official. … I’ll deal with mum and dad’s loan with them. … As to Make’s demise, I’m not going to quit with business and the way you make it sound it is all doom and gloom and no way I’ll be able to pay them back.”46 The status of the alleged loans [24] The defendant gave evidence and asserted that each transaction the subject of this proceeding represented a gift to Make Communications.47 He dismissed the admissions to owing money to his parents as being made in the context of a moral obligation.48 He alleged that when he said “I” in the emails referred to above he was always referring to Make Communications. It was pointed out to him that this was 44 Ibid. 45 Ibid. 46 Ibid. 47 T2-94, ll 20-30. 48 T2-91, ll 35-45. -- 7 of 9 -- 8 nonsensical.49 The defendant claimed all of the negotiations were with his mother and all of the money was put into Make Communications and that she was the only one that knew that.50 [25] In Cheshire and Fifoot Law of Contract,51 it is stated: “It is therefore said that, in addition to the phenomenon of agreement and the presence of consideration, a third contractual element is required – the intention of the parties to create legal relations.” [26] In Ermogenous v Greek Orthodox Community of SA Inc,52 Gaudron, McHugh, Kirby, Hayne and Callinan JJ stated: “‘It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty.’ To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet ‘[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts.” [27] The plaintiffs were deeply religious people who had a simplistic view of a person’s moral obligations. They were generous in their charity and not merely motivated by financial gain.53 On the other hand, the defendant cynically abused their generosity and shamelessly sponged on them when he found himself in dire financial circumstances. I found the defendant’s evidence to be self-serving and I did not find him to be a credible witness. I prefer the testimony of the plaintiffs to that of the defendant although it was notably lacking in detail concerning the transactions in question and both plaintiffs were evasive at times. As noted above they were only able to calculate what they alleged they were owed by trawling through bank statements years later.54 I accept the evidence of the plaintiffs that it was the intention of the parties that the monies advanced by them to the defendant were to be repaid by him. This is supported by what he says in the email correspondence quoted above. I am also satisfied that alleged loans 4, 5 and 6 were made. However, I do not accept that the plaintiffs have discharged the onus of proving that there was an intention to create legally binding loan contracts with the defendant. Even if, extraordinarily, the defendant used the same mantra of “I’ll pay you back in full and more and look after you in old age” practically every time the plaintiffs provided him with money, this is a general statement consistent with him being morally obliged to repay his parents rather than one which bears the indicia of entering into a binding loan agreement. In circumstances where no ledgers were kept and no demand was made until 2015, the transfers of money did not indicate an intention to create legal relations. Rather, in 49 T2-79, ll 1-15. 50 T2-100, ll 1-5. 51 N Seddon, R Bigwood and M Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths Australia, 10th ed, 2012) 219 [5.1]. 52 (2002) 209 CLR 95, 105 [24]. 53 For example, T1-58 – T1-59. 54 T1-77 ll 35-45; T2-31 ll 20-35. -- 8 of 9 -- 9 circumstances where the defendant’s business, Make Communications, was struggling and this business employed his sister, the plaintiffs’ daughter, it is understandable that they extended their charity to this organisation. The giving of the credit cards to the defendant for his use whilst he was injured and impecunious also does not indicate an intention to create a binding loan agreement enforceable at law. My conclusion is supported by the tenor of the email from the male plaintiff to the defendant dated 9 January 2015. [28] The female plaintiff repeatedly equated forwarding money to Make Communications to forwarding it to the defendant personally. She said of him “Murray is Make”.55 This is not legally correct. To the extent that monies were paid into the account of Make Communications which is a business owned by a corporate entity with half the shareholding held by the defendant’s estranged wife, it cannot be said that this is equivalent to loaning the defendant the money. The plaintiffs have been so vague about the circumstances surrounding the relevant transactions that they have not discharged the onus of proving that the request was made by the defendant personally rather than on behalf of Make Communications when there is evidence suggesting it was the intended recipient of the funds. Accordingly, I find that loans 1, 2, 3, 7, 8, 9, 10, 11, and 13 were either expressly, or by implication, loans to Make Communications and not the defendant personally. I find that loans 4, 5, 6 and 12 were indeed loans to the defendant but there was no intention to create legally enforceable loan agreements between the parties. Conclusion [29] The plaintiffs have not discharged the onus of proving an intention to enter into legally enforceable loan agreements with the defendant. The claim is dismissed. 55 T2-56 ll 29-30; T2-61 ll 2-3. -- 9 of 9 --