Debt Recovery Case: Appeal and Cross-Appeal Dismissed

The Court of Appeal dismissed both the appeal and cross-appeal, affirming the primary judge's findings that the appellant authorised her estranged husband to jointly borrow from the respondents and that the interest rate of 48% per annum was not a normal incident of borrowing.

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: [NAME] v [NAME] [2020] NSWCA 253 Hearing dates: 28 August 2020 Date of orders: 15 October 2020 Decision date: 15 October 2020 Before: [NAME] at [1]; Gleeson JA at [2]; Payne JA at [14]. Decision: (1) Appeal dismissed with costs; (2) Cross-appeal dismissed with costs. Catchwords: CIVIL PROCEDURE – debt recovery – loans – dispute arising over two undocumented loans between friends – whether primary judge erred in finding that the appellant authorised the appellant's now-estranged husband to jointly borrow from respondents JUDGMENTS AND ORDERS – interest – pre-judgment interest – rate applicable – whether primary judge erred in finding that the appellant not liable to pay interest on loan at rate of 48% per annum Legislation Cited: Civil Procedure Act 2005 (NSW), s 100 Evidence Act 1995 (NSW), s 81 Supreme Court Act 1935 (SA), 30C Cases Cited: [COMPANY] v [COMPANY] of New South Wales [1983] 1 NSWLR 533 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 Bannatyne v MacIver [1906] 1 KB 103 Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 [COMPANY] Sydney v McLaughlin (1909) 9 CLR 615; [1909] HCA 78 Clarke v Abou-Samra [2010] SASC 205 Falcke v Scottish Imperial Insurance Co (1886) 34 ChD 234 [NAME] v [NAME] (NSW Sup Ct, 28 June 1974, Holland J, unreported) Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 [NAME] v [COMPANY] (in liq) (2008) 232 CLR 635; [2008] HCA 27 O3 Capital Pty Ltd v WY Properties Pty Ltd (2016) 49 WAR 517; [2016] WASCA 82 [COMPANY] [1939] Ch 286 Volonakis & Ors v Erceg & Anor [2019] NSWSC 1875 [NAME] v [NAME] (No 2) [2020] NSWSC 371 Category: Principal judgment Parties: [NAME] (Appellant) [NAME] (First Respondent) [NAME] (Second Respondent) Representation: Counsel: [redacted] [NAME] with A R Jordan (Respondents) Solicitors: [redacted] [NAME] (Respondents) File Number(s): 2020/147954 Publication restriction: Nil. Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2019] NSWSC 1875; [2020] NSWSC 371 Date of Decision: 20 December 2019 Before: Hallen J File Number(s): 2017/387961

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] In November 2015, [NAME] (the first respondent) and [NAME] (the second respondent) lent an amount of $375,000 to [NAME] (the now-estranged husband of the appellant). There was no written loan agreement. Hallen J, the primary judge, found that this loan was jointly advanced to [NAME] (the appellant). The primary judge found that [NAME] knew about, and accepted, the borrowing of the $375,000 and had authorised [NAME] to borrow that sum on her behalf jointly with him. The primary judge found that the whole of the amount was used to fund part of the deposit for the purchase of a house in Cronulla which was registered only in [NAME]'s name. The primary judge also found that the appellant was not required to pay interest at a rate of 4% per month on the loan to which [NAME] had agreed. The primary judge found that there was no evidence that [NAME] knew about the rate at which interest on the loan of $375,000 which [NAME] agreed was to be paid, or that she had authorised [NAME] to agree, on her behalf, to that rate of interest. There were two issues on appeal. First, [NAME] submitted that the primary judge should have found that the $375,000 loan had been advanced to [NAME] alone. The second issue, raised by a cross-appeal, was that [NAME] submitted that the primary judge erred in rejected their claim that [NAME] was obliged to pay interest on the loan at a rate of 4% per month. [ADDRESS] held, dismissing the appeal: Per Payne JA ([NAME] JA agreeing) 1. [NAME] was purporting to act on behalf of himself and [NAME], in circumstances where the knowledge and approval of [NAME] may fairly be inferred. [NAME] authorised [NAME] to act in the particular capacity as a joint borrower: [24]. Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142, applied.

2. Where there is evidence justifying an inference of authority, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity: [25]. Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142, applied. 3. [NAME] authorised [NAME] to borrow $375,000 in their joint names. [NAME] thereby authorised [NAME] to agree to terms which were a normal incident of that borrowing, including agreeing to pay interest. However, the Court was not satisfied that agreeing to pay interest at 48% per annum was a normal incident of borrowing in NSW in 2015: [26], [50].

4. The respondents were not entitled to payment of the interest agreed by [NAME] of 4% per month: [55]. The basis of the equity is one of recoupment: [56]. Bannatyne v MacIver [1906] 1 KB 103, considered. Clarke v Abou-Samra [2010] SASC 205, distinguished. Per Gleeson JA ([NAME] JA agreeing)

5. What is involved on the cross-appeal is the recognition of [NAME]'s just claim to recoupment. It does not follow that [NAME] could recover interest on their claim for recoupment of $375,000 at 4% per month: [11]. [COMPANY] [1939] Ch 286, applied. Clarke v Abou-Samra [2010] SASC 205, distinguished.

Judgment 1. [NAME]: I agree with the reasons and orders proposed by Payne JA. I also agree with the additional reasons of Gleeson JA.

2. GLEESON JA: I agree with Payne JA. Without detracting from his Honour's reasons, I wish to add the following comments in relation to ground 2 of the cross-appeal relating to the claim by [NAME] against [NAME] ([NAME]) for interest at the rate of 4 per cent per month, which equates to 48 per cent per annum.

3. The context of ground 2 of the cross-appeal is the assumption, contrary to the finding of the primary judge, that [NAME] ([NAME]) was not authorised by [NAME] to borrow in their joint names $375,000 from [NAME]. For the reasons given by Payne JA this assumption is incorrect. Hence, ground 2 of the cross-appeal does not strictly arise.

4. Nevertheless, on the assumption referred to in [3] above, [NAME] contended relying upon Bannatyne v MacIver [1906] 1 KB 103 (Bannantyne), that they are entitled to "stand in the same position as if the money had been originally borrowed by" [NAME], including as regards payment of the interest agreed by [NAME] at 4 per cent per month.

5. In [NAME], Romer LJ said at 109: … Where money is borrowed on behalf of a principal by an agent, the lender believing that the agent has authority though it turns out that his act has not been authorized, or ratified, or adopted by the principal, then, although the principal cannot be sued at law, yet in equity, to the extent to which the money borrowed has in fact been applied in paying legal debts and obligations of the principal, the lender is entitled to stand in the same position as if the money had been originally borrowed by the principal.

1. The rule in [NAME] is an equitable principle which is based in equitable estoppel: [COMPANY] Sydney v McLaughlin (1909) 9 CLR 615 at 624-625 (Griffith CJ and Barton J); [1909] HCA 78. What generates the equity is something more than knowledge by the debtor that the purported agent has requested the third party to advance money to pay the debt or that the third party has advanced the money for the purported agent to pay the debt. As explained by Clauson LJ (Scott LJ agreeing) in [COMPANY] [1939] Ch 286 at 322: Let it be assumed that A requests B to advance money to C, A being a person who has no authority from C to make the request (whether because C is a company whose powers are limited in such a way as to make it ultra vires on C's part to make such a request, or whether because A, though professing to act as C's authorised agent to make the request, has in fact no such authority): let it be further assumed that B, in response to the request, in fact places the money under the control of C or C's agents, and C, or an agent authorised by C to pay off C's debt's (sic) uses the money or procures the money to be used in or towards discharge of C's debts. On these assumed facts a court of equity will treat B as entitled to be recouped by C a sum equal to the amount so used in or towards discharging C's debts.

1. After referring to a number of authorities including [NAME], Clauson LJ continued at 322-324: It is to be observed that the equity cannot operate against C (the company or the principal) merely because C has in fact received a benefit from B's action in providing the money: that fact alone, as [NAME]'s case [53] has settled (so far as this Court is concerned), would not set up an equity against C. The equity must, it would seem, arise from the fact that C, by himself or by a person authorised to act, in the matter of payment of C's debts, for C, has used the money so as to obtain a benefit for C. The benefit has not been an unsought benefit conferred on C behind his back. It is a benefit which C has obtained for himself by using (either himself or by his agent) A's money as his own. It is his conduct in so using A's money which makes it unconscientious that he should retain the benefit while refusing recognition of A's just claim to recoupment.

1. In the present case, there was unchallenged evidence given by [NAME] that he provided the [COMPANY] cheque for $375,000 received from [NAME] to the solicitor for [NAME] on the purchase of the Cronulla property. And, it was conceded below that [NAME] knew that part of the money to pay the deposit had been obtained by [NAME] from [NAME]. [NAME] had authority to pay debts for which [NAME] was liable in respect of the purchase of the Cronulla property.

2. Applying the analysis in [COMPANY], [NAME] is to be equated with C, A with [NAME] and B with [NAME] who provided the money to [NAME]. [NAME] was invested with power to pay the debt owed by [NAME] to the vendors of the Cronulla property, that power stemming from authority given by [NAME] to do so. Like the party in the position of C in [NAME] v [NAME] (NSW Sup Ct, 28 June 1974, Holland J, unreported at 16), [NAME] did not spurn the benefit so obtained, she embraced it as partially satisfying her obligation to pay the deposit under the contract for sale of the Cronulla property. Adapting the language of Clauson LJ in [COMPANY] at 324, it is [NAME]'s conduct (through her agent, [NAME]) in so using [NAME]' money that makes it unconscientious that she should retain the benefit while refusing their just claim to recoupment.

3. It was submitted on behalf of [NAME] that the present case is distinguishable from [NAME] given that [NAME], as the person who arranged the transaction with [NAME], is himself liable as a borrower. That is not to the point because it ignores what generates the equity of recoupment. It can be accepted that is not the bare fact of conferral of a benefit on [NAME] by [NAME]: [NAME] v [COMPANY] (in liq) (2008) 232 CLR 635; [2008] HCA 27, where the joint judgment of Gummow, Hayne, Crennan and Kiefel JJ at [80] addressing a claim for unjust enrichment, cited the statement in [NAME] (1886) 34 ChD 234 at 248 that, "[l]iabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will". Rather, it is the fact that [NAME] had authority to pay debts for which [NAME] was liable, that he did so using the [COMPANY] cheque for $375,000 provided by [NAME] and it is unconscientious that [NAME] should retain the benefit by refusing their just claim to recoupment.

4. However, it does not follow that [NAME] could recover interest on their claim for recoupment of $375,000 at a rate of 4 per cent per month. What is involved, on the present hypothesis, is the recognition of [NAME]' "just claim to recoupment": [COMPANY] at 324. [NAME] is only estopped from denying authority to the extent that the benefit she has retained is inconsistent with her denial of agency. There is no such inconsistency to the extent that the purported agent ([NAME]) agreed with [NAME] to pay interest at the rate of 4 per cent per month.

5. That interest was awarded in Clarke v Abou-Samra [2010] SASC 205 on a recoupment claim at the rate of 10 per cent does not assist [NAME], as the reasons of Payne JA explain; the basis of the award of interest is not addressed in the reasons. The suggestion by [NAME] that the award of interest reflects the terms of the loan agreed to by the purported agent, being a period of one month at an interest rate of 10 per cent, suffers from the difficulty that the description of the loan terms at [37] of the reasons of Kourakis J is, with respect, ambiguous. It is not clear whether that was a monthly rate or a rate per annum. It is at least possible, that the award of interest on the recoupment claim in [NAME] v [NAME] at a rate of 10 per cent is based on the power to award of pre-judgment interest under s 30C of the Supreme Court Act 1935 (SA). Section 30C(2) provides that interest will be calculated at a rate fixed by the court in respect of a period fixed by the court and is payable in accordance with the court's determination, in respect of the whole or part of the amount for which judgment is given.

6. If it were necessary to decide the claim for pre-judgment interest, assuming the claim against [NAME] was for recoupment based on the rule in [NAME], the basis for any award of pre-judgment interest would be under s 100(2) of the Civil Procedure Act 2005 (NSW).

7. PAYNE JA: On 20 December 2019, the primary judge, Hallen J, delivered his reasons in Volonakis & Ors v Erceg & Anor [2019] NSWSC 1875. Although there were a multitude of issues litigated before the primary judge, the relevant issue for the purpose of this appeal was his Honour's finding that [NAME] (the first respondent) and [NAME] (the second respondent) had lent an amount of $375,000 to both the appellant, [NAME], and [NAME], the now-estranged husband of the appellant. The primary judge rejected a claim by the respondents that the appellant was required to pay interest at the rate of 4% per month on the loan. Without intending any disrespect, I will refer to the relevant participants by their given names.

8. The issue on the appeal was a narrow one. [NAME] accepted that there was a loan made in the amount of $375,000 by [NAME], but submitted that the primary judge should have found that the loan had been advanced to [NAME] alone. The second issue, raised by a cross-appeal, was that [NAME] submitted that the primary judge erred in rejecting their claim that [NAME] was obliged to pay interest on the loan at a rate of 4% per month.

The decision of the primary judge 1. The witnesses before the primary judge were [NAME] and a business associate of [NAME] and [NAME], Frank Masci. Although affidavits sworn by [NAME] were served, she did not give evidence before the primary judge.

2. In relation to the $375,000 loan, the primary judge found that there was no dispute that [NAME] borrowed this amount from [NAME]. There was no written loan agreement. The primary judge found the loan of $375,000 was made, in part, by [NAME], as to $200,000, and as to the balance by [NAME]. The primary judge found that the whole of the principal amount was used to fund part of the deposit for the purchase of a house in Cronulla which was registered only in [NAME]'s name. The primary judge found that [NAME] knew about, and accepted, the borrowing of $375,000 and had authorised [NAME] to borrow that sum on her behalf jointly with him.

3. In relation to interest, the primary judge found that there was no evidence that [NAME] knew about the rate at which interest on the loan of $375,000 which [NAME] agreed was to be paid, or that she had authorised [NAME] to agree, on her behalf, to that rate of interest.

4. The primary judge summarised his findings in his principal judgment about interest: 1. both [NAME] and [NAME] were liable to repay the amount of principal of the loan that remained unpaid; 2. [NAME] was liable to repay simple interest calculated at the rate of 4 per cent per month; 3. [NAME] may be liable for interest on the loan of $375,000 pursuant to s 100(2) of the Civil Procedure Act 2005 (NSW).

1. That question about the interest to be paid by [NAME] was resolved in the second judgment, [NAME] v [NAME] (No 2) [2020] NSWSC 371, wherein the primary judge concluded: "[58] Counsel for [NAME] submitted that, in the circumstances of the present case, the appropriate date from which interest to compensate them should be calculated on the amount of $375,000 was 1 March 2017. To the extent that pre-judgment interest was to be awarded, [NAME] did not dispute that this was the appropriate date from which interest should be calculated: [NAME], 13 March 2020, p 34(50). I see no reason not to award the Plaintiffs interest pursuant to s 100 of the Civil Procedure Act, against [NAME], at the rate contemplated by Practice Note SC Gen 16 from that date. There was no submission made to the contrary as to the applicable rate. [59] The pre-judgment interest should continue to run until the date that orders are made."

The notice of appeal 1. The appellant's notice of appeal contained 10 grounds. All raise asserted difficulties with the primary judge's reasoning and ultimate conclusion that the loan of $375,000 was made jointly to [NAME] and [NAME].

2. There is no doubt that [NAME] borrowed $375,000. [NAME]'s written evidence about the loan of $375,000 was as follows: "A conversation took place between [NAME] and me to the following effect: [NAME] said: 'You know this place at Cronulla that we have found. It is fantastic [i.e. the Cronulla [property]]. The one that I've been talking about, and [NAME] and I have been looking at. [NAME] has fallen in love with the place. She really wants it. We can get it for just over $8,000,000.The vendor will agree to a 5% deposit so we need about $400,000. Can you lend [NAME] $400,000? We really love the place. It's the dream home that [NAME] and I have been looking for a long time now.' I said: 'I can't lend you $400,000 but I am prepared to help you out. I can get you $375,000. I will ask [NAME] if she is okay for her company to lend you $375,000. Is that Ok?' [NAME] said: 'If you can lend $375,000, that will be great.' I said: 'How long will the loan be for? When will you pay [NAME] back?' [NAME] said: 'Maximum 12 months. I've negotiated a 9 month settlement. This will give [NAME] plenty of time to refinance everything, the investment properties, and get the money. Once I get that refinance, we'll pay you back everything.' [I understood at the time as I had been told by [NAME] many times previously that [NAME] and his wife had investment properties at [NAME] and [Caringbah].] [NAME] said: 'We will pay 4% per month interest if you can help [NAME] out.' I said: 'It should be OK. I'll check with [NAME] and get back to you.'" The use of the plural personal pronoun "[NAME]" and the phrase "we'll pay you back" in the fourth last paragraph and "We will pay" in the second last paragraph of this extract are significant.

1. Despite the large number of grounds of appeal, the central question raised by the notice of appeal was whether [NAME] had actual authority to borrow $375,000 on behalf of [NAME]. This was a question of fact. The primary judge was entitled to have regard to all the available inferences that arose, taking the evidence as a whole. So much was established by the oft cited passage in Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 149-150 where Jordan CJ said: "The authority of an agent may be particular - to do a specified act or acts, or general - to do acts of one or more classes. An authority expressly given, whether it be particular or general, gives implied authority to do anything which is incidental to what is expressly authorised. Whether any authority has been given, and if so what is the scope of the authority, are questions of fact to be determined by evidence. Evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him to act in the particular capacity. If there is evidence justifying such an inference, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity. If there is no evidence as to what authority was in fact expressly given, or what the business practice is, the jury may draw inferences based upon their own knowledge of business and affairs. This may be done, for example, where there is evidence that a person is manager or superintendent of a business: [NAME] v [COMPANY] of NSW; [NAME] v Brown or occupies a less responsible position: [NAME] v [NAME]; [NAME] v [NAME]. Evidence that an agent was prohibited from doing an act which, apart from such a prohibition, might have been inferred to be within the scope of his [or her] authority is evidence which, if accepted, prevents it from being inferred that the act was in fact within the scope of his authority: [NAME] v [NAME]. If, however, a person ignorant of the prohibition is induced to act on the assumption that the agent possess an authority which such an agent would ordinarily possess, the doctrine of holding out may prevent the principal from disputing the agent's authority." (Footnotes omitted.)

1. Two matters of importance in resolving this appeal emerge from this passage. First, evidence that a person is purporting to do acts on behalf of a principal in some capacity in such circumstances that the knowledge and approval of the principal may fairly be inferred is evidence that the principal has authorised him or her to act in the particular capacity. The primary judge drew the inference that [NAME] was purporting to act on behalf of himself and [NAME], in circumstances where the knowledge and approval of [NAME] may fairly be inferred. As I will explain, this is also the inference that I draw from all of the evidence. That is, [NAME] authorised [NAME] to act in the particular capacity as a joint borrower.

2. The second matter of importance arising from this passage is that where there is evidence justifying an inference of authority, it justifies the further inference that the person has authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity. The submission at the heart of the appellant's case was that there was an inconsistency between the finding that [NAME] had authorised [NAME] to enter into the loan agreement but not the agreement to pay interest at the rate of 48% per annum: "So you have at one moment arising a contract fully formed between [NAME] and the [NAME], if you like, to borrow money at a very high rate of interest, 48% per year or 4% per month, and that simultaneously apparently, by authority, he makes a contract on behalf of his wife, my client, but not for the interest. Intuitively one would have thought that was an odd result where the argument was based on or the legal liability is based [on] a contract for loan."

1. There is, in the present case, no such inconsistency. As Jordan CJ explained, the question of "ordinary business practice" is important to the question of determining the extent of the authority conferred by the principal on an agent, here [NAME]. [NAME] had authority to do such acts as would be done, as a matter of ordinary business practice, by a person acting in such a capacity. Interest is no doubt incidental to borrowing but I would not conclude in this case that the incidental conferral of authority upon [NAME] in borrowing on behalf of [NAME] included authorisation to agree to interest at a rate of 4% per month as being "incidental in the ordinary course". That is, the extent of [NAME]'s authority was conditioned by, in the language of [NAME] in Bonette, "ordinary business practice". [NAME] did not demonstrate that incurring annual interest of 48% on a private loan was, even arguably, an incident of "ordinary business practice". I agree with the primary judge that the extent of [NAME]'s implied authority did not extend to agreeing that [NAME] pay interest at this exorbitant rate.

2. The primary judge accepted that the loan of $375,000 was one made to [NAME] and [NAME]: "[238] On balance, I find that the loan of $375,000 was one made to [NAME] and [NAME] whilst the loan of $100,000 was made to [NAME] alone. I do not accept the submission that the loan of $375,000 was made to [NAME] alone. The whole of the conversation between [NAME] and [NAME] was in relation to both. In this regard, the conversation was: 'You know this place at Cronulla that we have found, it is fantastic, the one that I've been talking about and [NAME] and I have been looking at? [NAME] has fallen in love with the place. She really wants it. We can get it for just over $8 million. The vendor will agree to a 5% deposit, so we need 400,000. Can you lend [NAME] 400,000? We really love the place. It's the dream home that [NAME] and I have been looking for a long time now.' [239] Whilst the conversation between [NAME] and [NAME] to which reference has been made may have occurred after the conversation quoted above, it was before the handing over of the cheque for that amount, which she also knew came from [NAME]. So much was accepted by counsel for [NAME]: [NAME], 6 November 2019, p 247(46) – p 248(44)."

1. There was no error in his Honour so finding. The evidence was not challenged in cross-examination. The answers given by [NAME] in cross-examination were consistent with the agreement being one for a loan to [NAME] and [NAME]. The context in which the conversation occurred, about a new family home for [NAME] and [NAME], also supported his Honour's acceptance of [NAME]'s evidence on this point. The decision to accept [NAME]'s evidence was one that depended, in part, on his Honour's assessment of the credit of [NAME] and [NAME] as witnesses. No error was shown in the primary judge's findings on those issues. Ground 10 of the notice of appeal, which challenges the finding at [238], should be dismissed.

2. The purpose of the $375,000 loan was to fund the payment of the deposit on the Cronulla property: "[52] In October and November 2015, there were discussions between [NAME] and [NAME], in which [NAME] asked [NAME] to assist with the payment of the deposit of 10 per cent ($825,000) for the purchase of the Cronulla property by [NAME], by making a loan of $375,000. There is some dispute about the conversations, so it will be necessary to return to the precise evidence of each of the witnesses on this topic later in these reasons. However, as stated, there was no dispute that there had been a loan of that amount."

1. The contract for the sale of the Cronulla property named [NAME] as the sole purchaser. The $375,000 was advanced by way of [COMPANY] cheque addressed to the vendors of the Cronulla property and was delivered on 11 November 2015, being the date on which [NAME] exchanged contracts for the sale of the Cronulla property. The [COMPANY] cheque was used by [NAME] to pay (in part) the deposit on the Cronulla property: "[53] Following his discussions with [NAME] arranged for a [COMPANY] cheque, for $375,000, to be drawn, by [NAME], from the Business Cheque Account of [NAME] (which account was shown to be conducted in the name of [COMPANY]) (Ex. TB1/233), in favour of the vendors of the Cronulla property. [NAME] and [NAME] admitted that the [COMPANY] cheque had been given by [NAME] to [NAME] on 11 November 2015. That is the date on which the contracts for the purchase of the Cronulla property were exchanged: Ex. TB1/426. The [COMPANY] cheque was used in part payment of the deposit for the purchase of the Cronulla property, which was purchased in [NAME]'s sole name: Ex. TB1/361. [54] The [COMPANY] cheque was presented for payment by the vendors of the Cronulla property and was accounted, for [NAME]'s benefit, as part of the payment of the purchase price of the Cronulla property: Ex. TB1/272. [55] As will be clear, the amount of $375,000 was only part of the total deposit required to be paid on the exchange of contracts. How the balance of the deposit was paid by [NAME] was not the subject of evidence. [56] [NAME] played no role in the negotiations to borrow $375,000, but there can be little doubt that she would have been aware of what was occurring. [NAME] gave evidence that he had told her: [NAME], 5 November 2019, p 152(43-48). As her evidence was not read, it must be inferred that she did not dispute this evidence."

1. The findings of fact at [53]-[55] were not challenged. The inferences drawn by the primary judge at [56] were directly challenged in grounds 1 and 2 of the notice of appeal and, inferentially, in grounds 6 and 9. Those grounds should be rejected. The evidence established that [NAME] authorised [NAME] to pay the debt which she had incurred in relation to the deposit to acquire the Cronulla property. The [COMPANY] cheque was obtained. It went into [NAME]'s hands and it was used to pay the deposit. The inferences the primary judge drew from this conduct, that [NAME] authorised [NAME] to borrow the funds on her behalf necessary to complete the deposit, were correct. I draw the same inference from the unchallenged facts. As the primary judge concluded, [NAME] entrusted [NAME] with the conduct of the negotiations to borrow the amount required to assist in paying the deposit on the Cronulla home: "[227] There was no specific evidence that [NAME] was given express authority to act for, and on behalf of, [NAME]. However, it was submitted by counsel for the Plaintiffs that [NAME] gave [NAME] actual authority to act on her behalf, at least in relation to the loan of $375,000: [NAME], 6 November 2019, p 230(30-47). There seems to be little doubt that she entrusted him with the conduct of the particular negotiations to borrow the amount required to assist in paying the deposit on the Cronulla home."

1. The primary judge found that [NAME] was likely aware of what was occurring in the negotiations between [NAME] and [NAME]. While that finding is challenged, it was supported by the evidence concerning [NAME]'s purchase of the Cronulla property. I agree with the primary judge that it is unlikely that [NAME] would have signed a contract requiring the immediate payment, by her, of an $825,000 deposit without having concerned herself about whether she had the money to pay that deposit.

2. While all of the eventual repayments to the respondents were made by [NAME], the ultimate sources of those payments included a joint [COMPANY] account in the names of [NAME] and [NAME] and the proceeds of the sale of the Caringbah property. [NAME] was the sole owner of the Caringbah property.

3. I conclude on the balance of probabilities that by no later than 11 November 2015 when the cheque was handed over, [NAME] had authorised [NAME] to borrow $375,000 from [NAME].

4. The primary judge accepted at [238] the conversation between [NAME] and [NAME], which I have set out at [22] above, in which the question of lending to both [NAME] and [NAME] was raised and agreed in principle. [NAME] then told [NAME] that [NAME] had agreed to lend to them both some of the deposit: "Q. In late October or early November 2015, you and your wife [NAME] had found [a] house you wanted to buy in Cronulla? A. Yes. Q. You had a conversation around that time with [NAME]? A. Well, we were friends, so we were talking about things. Q. Well, you had a conversation in November in which [NAME] offered to lend you money towards the deposit? A. Yes, he did. Q. And there was a discussion about how long you would need to repay it. A. Correct. Q. And you said you thought it would be at least 12 months before you and [NAME] could pay back the loan. A. Correct. Q. You told [NAME] that [NAME] had agreed to lend you both some money for the deposit? A. Yes. Q. And she agreed to that arrangement? A. Yes."

1. After weighing up the competing evidence, the primary judge concluded that [NAME] knew of, and accepted, the borrowing of $375,000: "[206] However, in all the circumstances, I am satisfied that she knew of, and accepted, the borrowing of $375,000, and at least some of the terms on which that amount was borrowed. In other words, I accept that she was told about the loan and some of the terms, and she accepted the loan and the terms about which she was told. However, there is no evidence that she agreed to the rate at which interest on the loan of $375,000 was to be paid, or that she had agreed to that rate of interest. Nor is there evidence that she authorized [NAME] to agree, on her behalf, to that rate of interest."

1. The colourful description by the appellant of [NAME]'s evidence as a mere "scrap" does not accurately address the fact of his Honour's acceptance that [NAME] told [NAME] that she agreed to borrowing $375,000 from [NAME]. The complaint in ground 1 that the evidence referred to at [35] above was hearsay should be rejected. The fact that [NAME] told [NAME] that he had authority to borrow on her behalf from [NAME] was relevant and admissible for the fact it was said. I also agree with the primary judge that the evidence was admissible under s 81 of the Evidence Act 1995 (NSW) despite any hearsay representation. To the extent that ground 4 of the notice of appeal complains that [NAME]'s evidence should have been approached with caution, it is plain that the primary judge did so. Ground 4 should be dismissed. Ground 8, which alleges, without elaboration, that the primary judge erred in the conclusion expressed at [206] must also be rejected.

2. There is also an unchallenged finding that the conversation occurred before the cheque was delivered: "[239] Whilst the conversation between [NAME] and [NAME] to which reference has been made may have occurred after the conversation quoted above, it was before the handing over of the cheque for that amount, which she also knew came from [NAME]. So much was accepted by counsel for [NAME]: [NAME], 6 November 2019, p 247(46) – p 248(44)."

1. On 11 November 2015, [NAME] exchanged contracts on the Cronulla property.

2. Pausing there, given the possibility of forfeiture to which [NAME] exposed herself by exchanging contracts, I infer that [NAME] satisfied herself before exchanging contracts that she was in a position to pay the deposit that day. [NAME] would not rationally have exchanged contracts without knowing where the money was coming from to pay the deposit because that would have exposed her to the contract being terminated, leaving her liable to pay the deposit. That was an additional matter supporting the inference the primary judge drew.

3. On the same day, the cheque was delivered to [NAME] who then gave it to [NAME]'s solicitor and the solicitor then delivered it on behalf of [NAME]. I infer that the solicitor delivered it, with [NAME]'s personal instructions, to the vendors of the Cronulla property. Ground 10 of the notice of appeal which asserts that the primary judge should have concluded that [NAME] alone borrowed $375,000 from [NAME] should be rejected.

4. One document, dated 16 May 2017 ("the May 2017 document"), was relied upon in particular by [NAME]. That document was the subject of ground 7(b) of the notice of appeal, which states that the primary judge had "overlooked" it. That submission was not correct. The document, signed by [NAME], contained a statement that "[NAME] borrowed $375,000". [NAME] had lied to [NAME] about an affair that he had been conducting in 2016 and his attendances at the Four Seasons Hotel. According to his own evidence, [NAME] had signed the May 2017 document, knowing that, at least in part, its contents were false. Initially, he admitted that the first two lines of the document were true, but then gave evidence that both [NAME] and [NAME] had jointly borrowed that amount. That document was inconsistent with [NAME]'s written evidence reproduced at [22] above and [NAME]'s oral evidence reproduced at [35] above.

5. The primary judge concluded about this document: "[249] It follows that I do not give the May 2017 document the significance that was referred to by [NAME] and by [NAME]. I do not regard it as a document that truly reflects the events that occurred, and, as importantly, I do not regard it as a document upon which [NAME] and [NAME] can rely in defending the case upon the basis that the whole of both loans were wholly repaid and, thereby, each debt discharged. The conduct of [NAME] and [NAME], after this document was signed, also supports that conclusion."

1. This was in part a demeanour based credit based finding about competing evidence by the signatories to the document. No reason has been shown to set that finding aside. Ground 7(b) should be dismissed.

2. The remaining matters allegedly overlooked, the subject of grounds 7(a), 7(c) and 7(d) were also correctly taken into account by the primary judge. Ground 7(a) refers to the absence of documentary record of the loan. His Honour considered that matter carefully and correctly. Ground 7(c) refers to evidence [NAME] gave about what [NAME] had told her. That somewhat peripheral evidence does not lead to any different conclusion. Ground 7(d) contains an assertion about "the absence of evidence" of agreement by [NAME] to repayment terms. The primary judge did not err by overlooking that issue. Ground 7 of the notice of appeal should be dismissed.

3. The fact as noted in [35] above that [NAME] told [NAME] that "[NAME] had agreed to lend you both some money for the deposit" was direct evidence relevant to the question of authority. Ground 3 of the notice of appeal, which complains that the primary judge erred in accepting this evidence as some evidence establishing the grant of authority by [NAME] to [NAME] "without corroboration", should be dismissed. [NAME] gave her authority to the borrowing from the respondents on behalf of both herself and [NAME].

4. The inference I draw in this case is that [NAME] authorised [NAME] to borrow $375,000 jointly for her and [NAME]'s use. After discussing the relevant authorities, including [NAME] (2012) 247 CLR 345; [2012] HCA 17, [NAME]'s failure to give evidence to rebut the drawing of that inference was properly taken into account by the primary judge as a circumstance capable of leading rationally to the inference that the evidence that [NAME] could have given would not have helped her case. The inferences that arise can more comfortably be drawn in the absence of evidence from [NAME]. [NAME]'s complaint about a misapplication of [NAME] (1959) 101 CLR 298; [1959] HCA 8 should be rejected. In circumstances where the strong inference arose from uncontested facts that [NAME] was likely aware of what was occurring in the negotiations between [NAME] and [NAME], the primary judge was entitled to be more comfortably satisfied that the inference should be drawn in circumstances where the appellant did not give evidence to explain or contradict those available inferences. Ground 5 of the notice of appeal, which complains that the inference the primary judge drew was not available, should be rejected.

5. The appeal should be dismissed.

The cross-appeal 1. The cross-appeal contained two grounds, both related to interest. Although not dealt with in [NAME]'s written submissions, ground 1 of the cross-appeal complained that the trial judge erred in finding that [NAME] had not authorised [NAME] to agree to pay 4% per month interest. I have already addressed this issue in explaining the limits on the authority conferred by [NAME] on [NAME] by reference to the decision of Jordan CJ in Bonette.

2. The extent of the authority given by [NAME] to [NAME] is simply a question of fact to be determined having regard to all of the evidence and drawing the appropriate inferences arising from that evidence. As I have said, I am satisfied that the correct conclusion, having regard to the whole of the evidence, is that [NAME] authorised [NAME] to borrow $375,000 in their joint names. [NAME] thereby authorised [NAME] to agree to terms which were a normal incident of that borrowing, including agreeing to pay interest. I am not satisfied that agreeing to pay 48% interest per annum was a normal incident of borrowing in NSW in 2015. The inferential finding I make is that [NAME] authorised her husband to borrow money on terms meeting the description of an "ordinary business practice". I am not satisfied that the authority conferred upon [NAME] permitted him to borrow at a crippling rate of interest. I reject ground 1 of the cross-appeal.

3. The second ground of the cross-appeal was the subject of most consideration in submissions. That ground is also limited to the payment of interest. Ground 2 of the cross-appeal was advanced on the contingent hypothesis that [NAME] was the sole borrower of the $375,000 but he did so "purportedly" on behalf of [NAME], that [NAME] knew of the loan to [NAME], and that the $375,000 borrowed by [NAME] was used by [NAME] to pay a deposit on the Cronulla property.

4. In Bannatyne v MacIver [1906] 1 KB 103, Romer LJ said (at 109): "I think this case is governed by the general principle which I am about to state. That principle is one that is well recognized in the present day, and is binding upon [NAME]. Where money is borrowed on behalf of a principal by an agent, the lender believing that the agent has authority though it turns out that his act has not been authorized, or ratified, or adopted by the principal, then, although the principal cannot be sued at law, yet in equity, to the extent to which the money borrowed has in fact been applied in paying legal debts and obligations of the principal, the lender is entitled to stand in the same position as if the money had been originally borrowed by the principal." 1. [NAME] has been accepted in numerous decisions: [COMPANY] [NAME] (1909) 9 CLR 615 at 623, 631-632; [1909] HCA 78; [COMPANY] v [COMPANY] of New South Wales [1983] 1 NSWLR 533 at 537; [NAME] (2016) 49 WAR 517; [2016] WASCA 82 at [79]-[96].

2. The basis of the equity is one of recoupment, not subrogation. The rule is an instance of equitable estoppel. That was the view expressed by Griffith CJ and Barton J in [COMPANY] v [NAME] at 624-625.

3. In the present case, the respondents believed that the money was being borrowed jointly by [NAME] and [NAME]. The $375,000 borrowed was applied by [NAME] to discharge (in part) a legal debt owed by her, being the purchase price under the contract for the Cronulla property. [NAME] knew that the money had been obtained by [NAME] from [NAME]. It does not follow, however, that those matters entitle the respondents to "stand in the same position as if the money had been originally borrowed by" the appellant, including as regards payment of the interest agreed by [NAME] of 4% per month.

4. This is because the basis of the equity is one of recoupment. The extent of the equity here would provide [NAME], whose money was used by [NAME] in the purchase of the property, with a right to a refund of that amount of money. That is not what ground 2 of the cross-appeal seeks. Ground 2 seeks to recover the 48% annual interest [NAME] agreed to pay which, I have explained, was beyond the authority given to him by [NAME]. The claim to recover the 48% annual interest [NAME] agreed to pay may perhaps be described as a claim based on subrogation. It is not a recoupment claim.

5. The only case the cross-appellant could identify where a [NAME] claim for interest succeeded was Clarke v Abou-Samra [2010] SASC 205. The dispositive paragraph of that judgment about interest does not appear to have been the subject of argument or detailed consideration. Kourakis J, as his Honour then was, said there: "[111] I find that [NAME] are entitled in equity to stand in the same position as if they had borrowed the sum of $67,518.20 from [NAME] at a rate of 10 per cent, and to an equitable charge securing that principal and interest."

1. With respect, this formulation appears to express the equity the wrong way around. The equity provides that "the lender is entitled to stand in the same position as if the money had been originally borrowed by the principal". At least the way [111] is expressed, it appears that his Honour has addressed the equity as if the putative borrowers, [NAME] (rather than the lenders), were entitled to an equity. I am unable to agree that [NAME] v [NAME] provides any support for the cross-appellant's case here. 2. [NAME] were entitled against [NAME], and only entitled, to recoupment of $375,000, with pre-judgment interest awarded from 1 March 2017 pursuant to s 100 of the Civil Procedure Act. That was the order the primary judge made.

3. It follows that the cross-appeal should be dismissed with costs. Since writing this judgment I have read the additional reasons of Gleeson JA in draft. I agree with his Honour's additional reasons.

Conclusion and proposed orders 1. For the foregoing reasons I propose the following orders: 1. Appeal dismissed with costs; 2. Cross-appeal dismissed with costs.

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Amendments 03 November 2020 - Minor typographical amendments at [6] and [54]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2020