FEDERAL COURT OF AUSTRALIA Sapuppo v Ribchenkov [2001] FCA 1428 TORTS – negligence – application to set aside mortgage – condition of mortgage that elderly non-English speaking mortgagor receive independent advice from solicitor explaining nature and extent of obligations under mortgage – where primary judge found mortgagor not properly advised by solicitor – whether that conclusion open on facts – whether damage flowed from any failure to advise SEBASTIAN ANTHONY SAPUPPO & ANOR v ALEVTINA RIBCHENKOV & ORS Q60 OF 2001 TAMBERLIN, MANSFIELD & EMMETT JJ 11 OCTOBER 2001 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q60 OF 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: SEBASTIAN ANTHONY SAPUPPO FIRST APPELLANT AUSTRALIAN PACIFIC PROFESSIONAL INDEMNITY INSURANCE COMPANY LTD ACN 072 266 909 SECOND APPELLANT AND: ALEVTINA RIBCHENKOV FIRST RESPONDENT SUNCORP-METWAY LIMITED ACN 010 831 722 SECOND RESPONDENT JUDGES: TAMBERLIN, MANSFIELD & EMMETT JJ DATE OF ORDER: 11 OCTOBER 2001 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The appeal be allowed. 2. Orders 2, 6 and 7 made by the Court on 7 March 2001 be set aside. In lieu thereof, the first respondent pay the first appellant's costs of defending the first respondent's claims against the first appellant in proceeding Q 33 of 1997. 3. The first and second respondents pay the first appellant's costs of the appeal. 4. There be no order as to the costs of the second appellant in relation to the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q60 OF 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: SEBASTIAN ANTHONY SAPUPPO FIRST APPELLANT AUSTRALIAN PACIFIC PROFESSIONAL INDEMNITY INSURANCE COMPANY LTD ACN 072 266 909 SECOND APPELLANT AND: ALEVTINA RIBCHENKOV FIRST RESPONDENT SUNCORP-METWAY LIMITED ACN 010 831 722 SECOND RESPONDENT JUDGES: TAMBERLIN, MANSFIELD & EMMETT JJ DATE: 11 OCTOBER 2001 PLACE: BRISBANE REASONS FOR JUDGMENT THE COURT: 1 In January 1993, the appellant, Sebastian Anthony Sapuppo ("Mr Sapuppo"), was a solicitor of the Supreme Court of Queensland. At that time, Mr Sapuppo was retained on behalf of the first respondent, Alevtina Ribchenkov ("Mrs Ribchenkov"), to advise her in connection with documentation relating to the making of advances by the second respondent, Suncorp-Metway Bank Limited ("the Bank"). The advances were for the purpose of refinancing borrowings by Mrs Ribchenkov's daughter and son-in-law, Ludmila Rouyanian and Andrew Ardashir Rouyanian ("Mr and Mrs Rouyanian") and for renovating a house then owned jointly by Mr and Mrs Rouyanian at 43 Nicholson Street, Greenslopes ("the Greenslopes Property"). On 2 March 2001, a judge of the Court ordered that judgment be entered in favour of the Bank against Mrs Ribchenkov in the amount of $190,079.47. His Honour also ordered that judgment be entered in favour of Mrs Ribchenkov against Mr Sapuppo in the same sum. Mr Sapuppo now appeals to the Full Court from the order for judgment against him and from ancillary orders relating to costs made by the primary judge. THE PROCEEDINGS BEFORE THE PRIMARY JUDGE 2 In the proceeding at first instance, Mrs Ribchenkov sought an order against the Bank that a registered bill of mortgage ("the Bill of Mortgage") over property situated at 21 Maynard Street, Buranda ("the Mortgaged Property") owned by Mrs Ribchenkov be set aside. She also sought an order pursuant to s 87 of the Trade Practices Act 1974 that the mortgage is void and unenforceable. Mrs Ribchenkov also sought damages from Mr Sapuppo for fraud and negligence. 3 The Bank brought cross-claims against Mr Sapuppo and Mrs Ribchenkov. The Bank claimed damages from Mr Sapuppo for allegedly providing a false statutory declaration concerning advice given by Mr Sapuppo to Mrs Ribchenkov in connection with the proposed advances by the Bank. The Bank claimed the amount of those advances from Mrs Ribchenkov. 4 Mr Sapuppo also filed a cross-claim against the second appellant, Australian Pacific Indemnity Insurance Company Ltd ("the Insurer"), claiming indemnity under a professional indemnity insurance policy in respect of any liability that he might be found to have to Mrs Ribchenkov or to the Bank. The Insurer had declined indemnity under the policy on the ground that any such liability arose from fraudulent conduct by Mr Sapuppo. 5 The primary judge concluded that, in respect of an advance in the sum of $355,000 made jointly to Mr and Mrs Rouyanian and Mrs Ribchenkov in January 1993, the Bank, while aware of special disability of Mrs Ribchenkov, did not engage in unconscionable conduct or undue influence or take advantage of undue influence. However, in respect of each of two subsequent advances in the sum of $34,000 and $25,000 made in April 1994 and July 1995 respectively, his Honour concluded that the Bank was on notice that Mrs Ribchenkov required independent advice and that it would be unconscionable to permit the Bank to seek to enforce remedies in respect of the two further advances against Mrs Ribchenkov. 6 Accordingly, his Honour declared that it would be unconscionable for the Bank to enforce the Bill of Mortgage against Mrs Ribchenkov in respect of the two subsequent advances. In light of his conclusion concerning the first advance, his Honour ordered that there be judgment against Mrs Ribchenkov in the amount referred to above – see par [1]. The judgment ordered against Mrs Ribchenkov in favour of the Bank was for the amount that would be owing by her in respect of the transaction if the Bank had not made the further advances. 7 The professional indemnity insurance policy of Mr Sapuppo with the Insurer contained the following exclusion clause: "This insurance shall not indemnify the Assured in respect of any liability… brought about by the dishonest or fraudulent act or omission of the Assured." His Honour concluded that Mrs Ribchenkov was obliged to pay the amount to the Bank pursuant to its cross-claim against her as a consequence of the negligence of Mr Sapuppo. That negligence was constituted by Mr Sapuppo's inadequate advice to Mrs Ribchenkov and, in particular, his failure to advise her of the extent of her exposure pursuant to certain documents that Mr Sapuppo witnessed Mrs Rivchenkov execute. However, his Honour also concluded that that liability of Mr Sapuppo was not brought about by the dishonest or fraudulent act or omission of Mr Sapuppo. Accordingly, the exclusion clause relied on by the Insurer did not apply. His Honour therefore ordered that the Insurer indemnify Mr Sapuppo in respect of the judgment ordered against him in favour of Mrs Ribchenkov and made other consequential costs orders. 8 In the notice of appeal, the Insurer is joined as an appellant, apparently because it has a commercial interest in setting aside the judgment in favour of Mr Sapuppo in respect of which it has a liability to indemnify him. Under condition 4(a)(i) of the certificate of insurance issued to Mr Sapuppo, the insurer would be entitled to conduct the appeal in the name of its assured. The Insurer is therefore not a proper party to the appeal and should not have been joined. 9 Following an application made on behalf of the Bank, the Bank was joined as a respondent to the appeal. No relief is sought in the appeal by Mr Sapuppo against the Bank. The only interest that the Bank had was as a potential unsecured creditor of Mrs Ribchenkov. It has no legal interest in the outcome of the appeal. A judge of the Court considered that it was appropriate that the Bank be joined as a respondent because of its commercial interest as a potential unsecured creditor of Mrs Ribchenkov. 10 There has been no appeal from the order for joinder of the Bank. The occasion therefore does not arise for this Court to make any ruling on the propriety of the joinder of the Bank. However, it is difficult to see any justification for seeking joinder. The only relevance of the joinder would be in relation to the question of costs in the event that the appeal fails. The Bank accepted that it is at risk as to costs in the event that the appeal succeeds. THE BACKGROUND FACTS 11 Mrs Ribchenkov was born in 1918 in Manchuria when it was a Russian colony. She was brought up speaking the Russian language. In 1938 she married Constantine Ribchenkov, who was also of Russian speaking background. In 1957, Mrs Ribchenkov and her husband emigrated to Australia. She worked at Peters ice cream factory in Brisbane as a packer for two years then for approximately 20 years at Nabisco as a biscuit packer. That employment lasted until 1979. 12 Mrs Ribchenkov's matrimonial home was at 40 Maynard Street, Buranda. That property was owned by Mr Ribchenkov. In approximately 1960 Mrs Ribchenkov acquired the Mortgaged Property. On 4 October 1968 she executed a mortgage over the Mortgaged Property to the Commonwealth Trading Bank of Australia. That mortgage was discharged on 15 October 1980. 13 On 12 November 1992, Mr Rouyanian attended the Stones Corner Branch of the Bank, seeking an advance for the purpose of renovating the Greenslopes Property and refinancing a debt that he had with another financier. Because of the total amount required, he informed the Bank that Mrs Ribchenkov, his mother-in-law, was prepared to put up the Mortgaged Property as third party security. On 13 November 1992, Mr and Mrs Rouyanian signed an application to the Bank for a loan of $355,312. On 24 November 1992, the Bank received valuations of the Greenslopes Property in the sum of $200,000 "as is" and $300,000 on completion of the proposed renovations. On 25 November 1992, Mr Michael Agnew, an officer of the Bank, informed Mr Rouyanian that the loan application was rejected. Later on the same day, Mr Rouyanian asked Mr Agnew if the Bank would reconsider the loan application if Mrs Ribchenkov were a co-borrower. 14 On 30 November 1992, Mrs Ribchenkov attended at the Bank with her husband and with Mr and Mrs Rouyanian. Mr Agnew had a conversation with Mrs Ribchenkov in which he indicated that she would be a co-borrower and that the amount of the loan would be approximately $355,000. 15 On 2 December 1992, the Mortgaged Property was valued at $120,000. However, on 10 December 1992, the Bank again refused approval of the loan. Mr Agnew made a diary note recording that head office advised that they were not happy with the security being offered by Mrs Ribchenkov because she was not deriving any benefit. On the following day, Mr Rouyanian informed the Bank that he would offer Mrs Ribchenkov a two-tenths share in the Greenslopes Property, thus "allowing her to derive benefit as required". 16 On 6 January 1993, a letter of loan offer was sent by the Bank to Mr and Mrs Rouyanian and to Mrs Ribchenkov, addressed to them at the Greenslopes Property. The offer was for a total advance of $352,291 for a term of approximately 25 years. Special conditions included, amongst other things, the following: "A stamped transfer from Andrew Ardashir Rouyanian and Ludmila Rouyanian to Andrew Ardashir Rouyanian and Ludmila Rouyanian and Alevtina Ribchenkov giving the latter a two-tenths share in the property located at 43 Nicholson Street, Greenslopes is to be provided prior to settlement… An interpreter will be provided by the Bank at cost to the borrowers to explain the legal position involved with undertaking of loan." 17 On 12 June 1993, a meeting took place in Mr Sapuppo's office which was attended by Mr Sapuppo, Mrs Ribchenkov and Mr George Pridannikoff. Mr Sapuppo made a note of the meeting in the following terms: "Re: New Matter Pers/in – Mrs Alevitinia Ribchenkov Rouyanian's mother-in-law) - my perusing mortgage doc.s for her to sign (as co-mtgr) - she is giving mtge over her own home as collateral security for loan to Rouyanian - also Rouyanians are thg a 1/12(?) share in their own home (Nicholson St, G'slopes) to her - GEORGE PRIDANNIKOFF, O.A.M. Ph … (W) Ph … (H) – … was interpreter for Mrs Ribchenkov S.A. Sapuppo" 18 At the meeting, Mrs Ribchenkov signed the following documents: · a bill of mortgage in respect of the Greenslopes Property; · the Bill of Mortgage in respect of the Mortgaged Property; · an acknowledgment that the transfer of an interest by Mr Rouyanian of his two-tenths interest in the Greenslopes Property to Mrs Ribchenkov was made in consideration of Mrs Ribchenkov agreeing to provide the Mortgaged Property as security for an advance of $352,291, · an authority containing a statement that in the absence of any prior written direction "loan funds of $352,291 are to be disbursed in the manner indicated verbally or in writing by [Mr and Mrs Rouyanian and Mrs Ribchenkov] or by [their] solicitors". Mr Sapuppo witnessed the signature of Mrs Ribchenkov on all of the documents. 19 By letter dated 13 January 1993, Mr Rouyanian sent to Mr Agnew the documents described above, together with other transfers and stamp duty declaration forms and a statutory declaration made by Mr Sapuppo. In the bills of mortgage and other documents, Mrs Ribchenkov is described as a co-borrower of the relevant sum with Mr and Mrs Rouyanian. The advance was made by the Bank shortly after receipt of the documents and the monies were disbursed as directed by Mr and Mrs Rouyanian. mrs ribchenkov's claim against mr sapuppo 20 Mrs Ribchenkov's claim against Mr Sapuppo was pleaded along the following lines: 1. As a condition of the advance of the sum of $352,291 to Mr Rouyanian, the Bank required a certificate from a solicitor that Mrs Ribchenkov had received independent legal advice; 2. In order to satisfy that condition, Mr Rouyanian procured or requested Mr Sapuppo to execute a statutory declaration dated 11 January 1993; 3. By the statutory declaration Mr Sapuppo declared that: (a) he attended upon Mrs Ribchenkov on 12 January 1993; (b) he explained the contents and nature of, inter alia, a bill of mortgage over the property through an interpreter; (c) he was satisfied that Mrs Ribchenkov understood the nature and effect of the documents she was executing; 4. The statutory declaration was false and Mr Sapuppo's conduct in completing it was fraudulent in that: (a) Mr Sapuppo did not on 12 January 1993 or at any other time attend upon Mrs Ribchenkov for the purposes of explaining mortgage documentation to facilitate a loan to Mr Rouyanian; (b) Mr Sapuppo has never explained to Mrs Ribchenkov the nature and effect of any security documentation to secure a loan by the Bank to Mr Rouyanian; (c) Mr Sapuppo completed the statutory declaration for the purposes of assisting Mr Rouyanian in obtaining the advance; 5. Alternatively, if Mrs Ribchenkov did attend upon Mr Sapuppo on 12 January 1993 (which was denied), any advice given by Mr Sapuppo was negligent. Particulars (a) failing to advise Mrs Ribchenkov that the documents she was executing constituted a mortgage over the Mortgaged Property; (b) failing to advise Mrs Ribchenkov that the documents that she was executing secured an advance of $352,291; (c) failing to advise Mrs Ribchenkov that if Mr Rouyanian defaulted with respect to the advance, the Mortgaged Property could be sold by the Bank; 6. As a consequence of Mr Sapuppo's fraud and/or negligence Mrs Ribchenkov has suffered loss and damage, being the balance owing pursuant to the advance. THE decision OF THE PRIMARY JUDGE 21 As indicated above, the primary judge rejected the claim of fraud against Mr Sapuppo. However, his Honour found that Mr Sapuppo did not, either at the time of the meeting of 12 January 1993 or at the trial, "appreciate the gravity of his task". His Honour was satisfied that whatever discussions Mr Sapuppo had had with Mrs Ribchenkov did not include any explanation beyond three items that he mentioned in an affidavit. Those three items were as follows: "(i) that both bills of mortgage were security documents provided to secure loan moneys in favour of the Bank over the properties situated at: · 21 Maynard Street, Buranda · 43 Nicholson Street, Greenslopes (ii) that the Applicant by herself, together with her daughter, Ludmila Rouyanian, and her son-in-law, Andrew Rouyanian, were each co-borrowers and mortgagors under the bills of mortgage; and (iii) that if the moneys which will become due to Metway are not paid when due and payable under the terms of the loan, whatever the terms, that the Bank will be entitled to enforce the security and recover pursuant to the mortgage whatever monies are due to the Bank." 22 His Honour found that the amount of the loan and the extent of the risk to which Mrs Ribchenkov was exposed were never the subject of instruction or advice by Mr Sapuppo. His Honour recorded that his "clear impression is that the explanations given to [Mrs Ribchenkov] were of the most perfunctory kind." His Honour considered that it was apparent that Mr Sapuppo himself did not understand the "all monies" clause in the mortgages and it followed that there was no mention to Mrs Ribchenkov of the possibility of an expansion of her liability by the making of further advances. 23 His Honour was satisfied that the advice that Mr Sapuppo gave fell considerably short of discharging his duty to Mrs Ribchenkov. His Honour was satisfied that the exposure of Mrs Ribchenkov pursuant to the documentation that was to be the subject of advice by Mr Sapuppo was never mentioned to her and that, had she been advised concerning the amount secured by her documents, then she would not have agreed. His Honour was of the opinion that Mrs Ribchenkov believed at that time that she was affording assistance and that her level of exposure was in the order of $20,000. That sum had been the subject of conversation between Mr and Mrs Rouyanian and Mrs Ribchenkov in relation to what might happen if there was default on the loan. 24 While his Honour rejected the allegation of deliberate fraud on the part of Mr Sapuppo, his Honour was satisfied that Mr Sapuppo was in breach of the duty that he owed to Mrs Ribchenkov. His Honour considered that "the deficiencies in the diary note" supported a conclusion that there was a meeting such as Mr Sapuppo had deposed to but that the advice and explanations offered to Mrs Ribchenkov fell "woefully short of an adequate discharge of the duty" that Mr Sapuppo owed to Mrs Ribchenkov. ISSUES ON APPEAL 25 Mr Sapuppo advanced alternative grounds upon which the orders against him should be set aside. First he contended that the primary judge erred in finding that Mr Sapuppo had failed to explain to Mrs Ribchenkov that the amount of the advance was $352,291. Alternatively, Mr Sapuppo contended that the primary judge erred in finding that, if there were any breach by Mr Sapuppo of his duty to Mrs Ribchenkov, there was a causal connection between the loss or damage claimed by Mrs Ribchenkov and that breach. Mr Sapuppo contended that: · the finding that at the time of the execution of the bill of mortgage Mrs Ribchenkov did not understand that the mortgage secured an advance of $352,291 was unsupported by the evidence or, alternatively, was against the weight of the evidence; · the finding that Mrs Ribchenkov would not have executed the bill of mortgage, had she been aware that it secured an advance of $352,291, was unsupported by the evidence or, alternatively, was against the weight of the evidence. 26 It is convenient to deal with the second ground first. If Mr Sapuppo were to succeed on the second ground, it would be unnecessary to deal with the first ground. 27 Mrs Ribchenkov gave her evidence in chief by affidavit. She was then cross-examined with the assistance of an interpreter. His Honour concluded that Mrs Ribchenkov was, by reason of her age, inherently unreliable. He found that she had little clear recollection of important matters and no recollection at all on some critical points. He considered that notwithstanding her vagueness she was, on occasions, quite evasive. He made the following observations: "Her account really was a repetition, almost like a mantra of the fact that she trusted her son-in-law and that she understood that she was helping him in the provision of $20,000 towards the cost of the renovations of her daughter's and his home. This is clearly a case where documentary evidence is much to be preferred. I could not place any meaningful reliance on her oral evidence." 28 On the other hand, his Honour accepted the evidence of Mr Agnew, despite there being some inconsistencies in that evidence. His Honour also accepted that Mr Rouyanian, who was centrally involved in the transaction, was a reliable and honest witness. His Honour accepted that there were inconsistencies in his recollection of critical events but generally was prepared to accept Mr Rouyanian's account. Finally, his Honour did not consider that Mr Sapuppo's honesty as a witness was suspect, although his Honour did make adverse findings in relation to Mr Sapuppo. 29 It is against the background of those findings on credibility, and the evidence relating to Mrs Ribchenkov's state of mind, that one must consider his Honour's findings that the exposure of Mrs Ribchenkov pursuant to the documentation was never mentioned to her and that, had she been advised concerning the amount secured by the documentation, she would not have agreed to the transaction. 30 Mrs Ribchenkov swore several affidavits, which represented her evidence in chief. In one affidavit she said the following: "5. In January, 1993, Andrew Rouyanian came to my residence at 40 Maynard Street, Buranda and told me that he needed $20,000.00. I agreed to help him because he was my son-in-law. I loved and trusted him as if he was my own son. Andrew Rouyanian had the documents with him which I did not understand, could not read, nor which were explained to me. Andrew Rouyanian gave me the documents to sign saying they were to help him get a loan of $20,000.00. 6. At the time of executing the documents provided to me by Andrew Rouyanian I was not aware that he was borrowing approximately $350,000 from the Metway Bank and that my property at 21 Maynard Street was being used as security. 7. I knew Andrew Rouyanian was a Solicitor and I have relied upon him to give me advice and act appropriately regarding any documents that he gave me to sign. 8. I have been made aware of a statutory declaration completed by Sebastian Sapuppo, Solicitor, to the effect that he gave me advice on 12 January, 1993, regarding a bill of mortgage over my property at 21 Maynard Street. Mr Sapuppo never gave me any such advice. The only occasion I have ever met Mr Sapuppo was in 1992 when I attended at his office for the execution of my Will. On that occasion the contents of the Will were translated to me by George Pridannikoff. That is the only occasion upon which Mr Pridannikoff or any other person have translated documents for me in the presence of Mr Sapuppo." 31 In a second affidavit, Mrs Ribchenkov said: "2. I have no recollection of attending a meeting at the Stones Corner branch of the First Respondent with Mr Michael Agnew on 30 November 1992 or at any other time. I deny that it was explained to me by any person at any time that I would be providing my property at 21 Maynard Street, Buranda as security for money being borrowed by my daughter and then son-in-law. ……………………… 4. I have been shown exhibits 'MA5' and 'MA6' to the affidavit of Michael Agnew sworn 30 September 1998. I acknowledge my signature on those documents. I have no recollection of executing the documents. Unless the documents had been read to me at the time I would not have been able to understand them." Mrs Ribchenkov could not read English. Each affidavit contains a certificate that, before she swore each affidavit, it was read over to her in the Russian language and that she appeared to hear and understand it. 32 It is clear from the findings made by the primary judge that his Honour rejected the allegations made by Mrs Ribchenkov in the paragraphs quoted above. While his Honour did not expressly say that he rejected the affidavit evidence as well as the oral evidence of Mrs Ribchenkov, that is the only sensible way of reading his Honour's conclusions. Thus, Mrs Ribchenkov's claim against Mr Sapuppo must be assessed on the basis that there was no reliable evidence before the primary judge of the relevant state of mind of Mrs Ribchenkov from the person who would best give it, namely, Mrs Ribchenkov. In one sense, that should be an end of the matter. Mrs Ribchenkov had the onus of establishing, on the balance of probabilities, that she did not know the amount of the loan and that, had she known, she would not have signed the documentation. In circumstances where there is no acceptable evidence from her as to those matters, it is inappropriate that inferences should be drawn in her favour. However, the evidence before the primary judge pointed firmly to contrary conclusions on both of the matters in issue. 33 On 12 January 1993, Mrs Ribchenkov signed two documents that referred to the amount of the advance. While his Honour found that Mr Pridannikoff did not translate the documents to Mrs Ribchenkov, Mr Sapuppo said in cross-examination that, having regard to the contents of the documents that were signed on that day, he felt certain that, from his normal way of explaining the sort of situation, he would have told Mrs Ribchenkov that she could be liable to the full extent of the $355,000. He said that when he explained the acknowledgment to Mrs Ribchenkov the amount of the loan would have been mentioned. He said that he explained to her about the acknowledgment that she was a co-borrower for the amount of money referred to in the acknowledgment. As indicated above, his Honour accepted that Mr Sapuppo was an honest witness. There is no reason to doubt Mr Sapuppo's evidence that he would have told Mrs Ribchenkov the amount of the loan. His Honour made no express finding that he did not accept that evidence of Mr Sapuppo. 34 Mr Rouyanian said in cross-examination that all matters concerning the loan, the reasons for it and the purpose of it were discussed with Mr and Mrs Ribchenkov. He said that any approaches to the Bank were a culmination of extensive discussions with his in-laws. He said that he first alerted them to the amount of the loan that he proposed to borrow when he and his wife instructed architects to prepare plans. He said that he and his wife showed the plans to Mr and Mrs Ribchenkov and discussed the costs with them. He said that he discussed with Mr and Mrs Ribchenkov the moneys that were needed to pay out existing loans and general refinancing that would be needed before they could afford the renovations. He said that when the Bank rejected the first loan application he discussed with Mrs Ribchenkov what the position would be if Mrs Ribchenkov were a co-borrower. Mr Rouyanian said that when the loan was refused his in-laws said "Well, we'll help you out; we'll sell Maynard Street or Dalgety Street and you can then use those funds". In the discussions between Mr and Mrs Rouyanian and Mr and Mrs Ribchenkov, Russian was always spoken. Mr Rouyanian and his wife both speak fluent Russian. His Honour accepted Mr Rouyanian as a reliable witness. There is no reason to doubt that he told Mrs Ribchenkov the amount of the proposed borrowing from the Bank. 35 Mr Agnew also gave evidence concerning the meeting that took place with Mr and Mrs Ribchenkov and Mr and Mrs Rouyanian on 30 November 1992. At that meeting, Mr Agnew had copies of the application for loan forms for Mr and Mrs Rouyanian and Mrs Ribchenkov to look at. He said that during the interview Mrs Ribchenkov spoke in English for most of the time and that she talked to him in English which was very basic. He said that in some stages throughout the interview Mrs Rouyanian spoke to Mrs Ribchenkov in a foreign language, which he assumed to be Russian. Mr Rouyanian also spoke sometimes to Mrs Ribchenkov in Russian. He said that Mr Ribchenkov did not speak very much at all throughout the interview and he also spoke English. Mr Agnew said that he went through the details of the loan and expressly stated that the amount of the loan was $355,312. At the same time he pointed out the amount on the form. 36 Mr Agnew said in cross-examination that he was satisfied that Mrs Ribchenkov appeared to understand what was being put to her when he referred to the amount of the loan. On the other hand, he also acknowledged that one thing that dawned on him very strongly at the meeting was the possibility of Mrs Ribchenkov not being able to comprehend and understand what was going on. For that reason, he imposed the special condition of the loan concerning translation. However, there is no doubt that Mr Agnew believed that Mrs Ribchenkov understood what he was saying to her in the course of the meeting. 37 In the light of the evidence briefly summarised above, there are strong grounds for concluding that Mrs Ribchenkov was well aware, when she signed the documents on 12 January 1993, of the amount of the loan, even if Mr Sapuppo did not tell her the amount. It follows that any failure by Mr Sapuppo to inform her of the amount of the loan at that meeting had no consequence so far as she was concerned. She signed the documents knowing the amount of the loan. Any breach of duty by Mr Sapuppo gave rise to no loss or damage, since she proceeded with the transaction with the full knowledge of what she now complains she was not told by Mr Sapuppo. 38 His Honour did not accept a claim by Mrs Ribchenkov that she was told by her son-in-law that he needed $20,000. His Honour did not accept Mrs Ribchenkov's claim that the security documents were presented to her on or about 12 January 1993 as being something that would assist Mr Rouyanian in getting a loan for $20,000 and that she executed them relying on that representation. Rather, his Honour accepted the evidence of Mr Rouyanian that it was explained to Mrs Ribchenkov that, in the event of default, there could be a $20,000 shortfall for which she may be liable. 39 The primary judge's conclusion that Mrs Ribchenkov believed that she was affording assistance and that her level of exposure was in the order of $20,000, which had been the subject of conversation with her daughter and son-in-law, is not inconsistent with her knowing that the amount of the loan was $352,000. At the time, there was a valuation of the Rouyanian's house of $200,000 as is and $300,000 after completion of the renovation and improvements. Even if the amount of proposed borrowing was $350,000, the expected shortfall, even if there had been no repayments by Mr and Mrs Rouyanian, was no more than $50,000. 40 Mrs Ribchenkov's primary claim in the proceeding was rejected on the basis that the primary judge did not accept her evidence. A fair reading of his Honour's reasons indicates that his Honour accepted neither the oral nor the affidavit evidence given by Mrs Ribchenkov. His Honour's conclusion that Mrs Ribchenkov, at the time when she signed the documents, believed that she was affording assistance and that her level of exposure was in the order of $20,000 was not based on any evidence given by Mrs Ribchenkov. Her evidence was that Mr Rouyanian told her that he needed her help to get a loan of $20,000. That was expressly rejected by his Honour. 41 It is not appropriate, therefore, to draw inferences in favour of Mrs Ribchenkov in respect of matters about which she gave inconsistent evidence. The issues relating to causation involve Mrs Ribchenkov's state of mind. The person best able to give that evidence, namely Mrs Ribchenkov, did not give evidence which was considered credible. It is inappropriate, therefore, to draw inferences in her favour. In any event, on the balance of probabilities, Mrs Ribchenkov was well aware, when she signed the documents on 12 January 1993, of the amount of the loan and she signed the documents with the intention of helping her daughter and son-in-law to improve the property of which she was to acquire a one-fifth interest. CONCLUSION 42 It follows that the primary judge's conclusions in relation to Mr Sapuppo's liability should be overturned. The appeal should be upheld and that orders for judgment and associated ancillary orders made on 7 March 2001 should be set aside. Mrs Ribchenkov and the Bank should be ordered to pay Mr Sapuppo's costs of the appeal. There should be no order for the costs of the Insurer in relation to the appeal. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin, the Honourable Justice Mansfield & the Honourable Justice Emmett. Associate: Dated: 10 October 2001 Counsel for the Appellant: D G Clothier Solicitor for the Appellant: Brian Bartley & Associates Counsel for the First Respondent: M D Martin Solicitor for the First Respondent: Tucker & Cowen Counsel for the Second Respondent: D C Andrews Solicitor for the Second Respondent: Allens Arthur Robinson Date of Hearing: 14 August 2001 Date of Judgment: 11 October 2001