Power Plane Ltd v Kotak

Three grounds of appeal are advanced in the notice of appeal. First, that the judge erred in failing to apply the correct law in respect of the construction or creation of the contract for a loan. Secondly, that the judge erred in that there was no evidence to support a finding of fact in respect of the creation or construction of the contract for a loan. Thirdly, that the judge erred in failing to give any or any adequate reasons as to how a loan was formed. Those grounds have been further refined in oral submissions made today.

In refusing permission to appeal on the papers, Sir Robin Jacob said as follows:

As to the first ground, in paragraph 34 of the judgment the judge set out the relevant passage in Chitty on Contracts to which she had been referred dealing with the definition of a loan. She then considered the application of those principles to the facts of the case, finding that this was a simple and straightforward loan, that the fact that there were no detailed terms and conditions did not detract from that, and further finding that the claimant (the respondent in this appeal):

The judge there considered the relevant principles and made findings that this was intended to be, and was, a loan and also as to the terms of the loan.

I therefore reject the suggestion that she has failed to apply the correct law in relation to the finding of a loan.

As to the second ground, there clearly was evidence before the judge to support the finding that she made. In particular Mr Don Kotak in his witness statement evidence said that in August 2010 the defendant was desperate for money for the purpose of completing the purchase of property and "he asked me if I was in a position to lend the money to him". He did not ask him to make a gift. He said he remained anxious to assist his nephew and that "I agreed with the defendant that I would see if I could obtain a short term loan for him to enable him to complete his purchase". He explained how he then approached the respondent company to see if this could be arranged and how then the monies were made available from the respondent. He then says at paragraph 21 of his witness statement:

So there clearly was evidence to support the findings made by the judge in paragraphs 33 and 34 of the judgment. There were issues at trial as to the reliability of the appellant and Mr Don Kotak and it is clear that the judge preferred the evidence of Mr Don Kotak. She said in paragraph 33:

In essence, the judge is saying there that she prefers the evidence of Mr Don Kotak to that of the appellant. One has seen in the witness statement what that evidence was and she has found corroboration for her acceptance of that evidence in the reliable evidence of Mr Clarke and Mr Chattington of the respondent. That in itself would be sufficient to justify the finding of loan.

As to the third ground, sufficient reason for her conclusion is given in her explanation of her preference for the evidence of Mr Don Kotak over that of the appellant. But there were also more detailed reasons given.

The judge found, in particular at paragraphs 14 to 16, that Mr Don Kotak had, as he said in his witness statement, approached the respondent and in particular Mr Clarke and Mr Chattington to see whether monies could be loaned to the appellant. It was the evidence of Mr Clarke and Mr Chattington, which the judge accepted, that they understood that the money was to be a loan and that was basis upon which they agreed money would be available.

The judge further found that the appellant knew the source of the funds was the respondent company rather than the partnership in which his father had an interest. In circumstances where he knew that the funds were coming from the company and not from the partnership one can readily understand why it would be reasonable to conclude that he well understood that it was to be a loan rather than a gift. In particular, it would be reasonably understood that the company cannot gift money. It is suggested that the background was an intention on behalf of the father to make a gift from the partnership and that it could therefore conceivably have been a loan on behalf of the company to the partnership which in the appellant’s hands would be a gift. The background fact of the intent of the father does not, however, prevent it from being a loan, as is borne out by the earlier transaction which took place in May of the same year. On that occasion, again for the purpose of the property purchase, the appellant needed to show that he had monies available, and Mr Don Kotak made monies available on the accepted basis that it was a loan. In August, it appears that a very similar factual scenario arose. As the judge observed in paragraph 24, what the appellant was asking was for money to be "shown in his account" for the purposes of his mortgage arrangements and that is entirely consistent, as it had been in relation to the earlier transaction, of it being handed over to him by way of a loan rather than by way of a gift.

It follows that both by reason of the direct findings made by the judge in paragraphs 33 and 34, and also by reference to her more detailed reasoning as to the factual background, the circumstances in which the transaction was put together and the context of the earlier loan transaction, I fully agree with the conclusion of Sir Robin Jacob, namely that the judge was entitled to conclude on the evidence and her findings that this was a loan and that none of the ingenious arguments advanced can throw into doubt that basic finding of fact.

For all the reasons outlined I accordingly refuse this application.