Zorbas v Avco Financial Services Ltd [1999] NSWSC 54

New South Wales Supreme Court CITATION : Zorbas v Avco Financial Services Ltd [1999] NSWSC 54 revised - 13/08/99 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 19161/93 HEARING DATE(S) : 1-3 February 1999 JUDGMENT DATE : 3 February 1999

PARTIES : (Plaintiff) Vicki Zorbas (Defendant) Avco Financial Services Ltd JUDGMENT OF : Michael Grove J at 1

COUNSEL : (Plaintiff) P. Glissan/O. Harrison (Defendant) M. Ashurst SOLICITORS : (Plaintiff) Chegwidden Solicitors (Defendant) Noyce & Associates CATCHWORDS : contracts review - mortgage agreement - unfairness not established ACTS CITED : Contracts Review Act 1980 DECISION : Judgment for defendant

1 HIS HONOUR : In this action the plaintiff seeks relief pursuant to the Contracts Review Act. The relevant transaction took place on 21 September 1992 when the plaintiff in company with her estranged husband attended the office of the defendant at Burwood. It is apparent that whilst in the office she applied her signature to a number of documents being a loan application, a loan contract and a mortgage. In evidence the plaintiff said she only remembered signing one document but, as I have said, it is clear and she does not dispute that her signature appears upon the others. 2 The relief sought by the plaintiff is the declaration that the loan contract and mortgage were unjust and relief is sought in accordance with the statute which I have mentioned. 3 The evidence and addresses concluded yesterday and whilst I might be able to express myself more fully and felicitously if I were to reserve my judgment, as I have formed a firm view of the outcome of the litigation I proceed to this judgment. 4 There are a number of background circumstances, not necessarily interconnected, which it is appropriate to record. The plaintiff's husband had for a number of years been engaged in a business of concrete formwork building. Their son, Nicholas, left school and worked in the business with his father. The plaintiff said that she was unaware of the nature of the business relations between them. 5 The plaintiff herself was born in Corinth during the Second World War and arrived in Australia as a young woman aged 20. She obtained employment as a process worker and that employment lasted for about seven years. She met her husband shortly after her arrival in Australia. She claims that she has not learned to speak English. Her husband's affidavit filed in these proceedings supports her contention and asserts that she speaks but a few words of English. Her education in Greece ceased at about the age of eleven whereafter she assisted on her parents' farm. 6 That background gives rise to a number of particulars which are set out in the schedule to paragraph 3 of the further amended statement of claim filed on 13 November, 1998 which I will not pause to recite. 7 Many of the particulars incant the matters which are to be taken into account, if they exist, pursuant to the terms of the statute and others relate to the plaintiff's asserted handicaps in participating in the transaction upon which this action is centred. 8 The plaintiff and her husband had separated in about August 1991. The matrimonial home which is the subject of the mortgage encumbrance arising out of the transaction in September 1992 had been purchased in the early 1970's. The separation of the parties apparently took place when the husband had become the father of a child by another woman and this circumstance became known to the plaintiff. 9 The parties were ultimately divorced in about 1994. However, in October 1992, that is to say in the month following the transaction upon which this action is centred, a consent agreement was filed in the Local Court at Kogarah exercising jurisdiction pursuant to the Family Law Act. I shall return to remark about an aspect about that agreement in due course. 10 The plaintiff's case was opened on the basis that on the occasion in question her husband had simply asked her to attend with him in order to sign some documents in connection with the payment of wages for his business. 11 The course of evidence revealed that the plaintiff acknowledged that she was aware that the purpose of the excursion was to raise money for the stated object but her claim was effectively articulated in her statements to the effect that she did not know that the house was involved. It is fair to observe that the assertion that the plaintiff did not know the house was involved appeared to be something of a mantra which was repeated frequently during the course of her cross-examination in response to many questions, some of which could not have reasonably been understood to be seeking such an answer. The evidence of the plaintiff was taken through a Greek interpreter. 12 There is no allegation that the terms of the loan contract themselves were inherently unjust or unreasonable nor is there any assertion that the defendant or any party on its behalf misrepresented the nature of the transaction. The latter statement must be qualified to the extent that it is submitted that the husband was, in effect, an agent of the defendant, in that it was left to him to explain the nature of the transaction to his wife. That is not a proposition which I accept, but in any event my acceptance or non acceptance of that proposition is not something which is essential to my determination of the outcome of the case. The particulars to which I have referred include an assertion in a variety of language that the plaintiff was inexperienced in commercial matters and essentially it would be unjust to hold her to this agreement because it can be concluded that she did not really understand the nature of the transaction. 13 That is a proposition which I reject. The matrimonial home which as I have said was purchased in the early 1970's was the subject of many mortgages in the period prior to September 1992 and indeed, has been the subject of mortgage since. That is to say, a mortgage separate from that upon which this action is centred. 14 A background fact which it is convenient to recount and interpolate is that the defendant and his son both became bankrupt. 15 The date of the plaintiff's husband's bankruptcy is established in the evidence and it is reasonable to assume, having regard to the report to creditors in respect of both the husband and the son that his bankruptcy was at about the same time, that is to say, December, 1994. 16 It is of interest to observe that although the plaintiff describes herself as a pensioner and makes these claims of business inexperience, she has filed an affidavit which does not elaborate upon the bland statement that: "In 1996 I wished to purchase certain building scaffolding materials owned by Emmanuel Zorbas, the brother of George Zorbas, the cost of the scaffolding was $140,000. The only way in which I was able to obtain funds to purchase the scaffolding was by borrowing money secured against the title against my house at 31 Cometrowe Street, Drummoyne." 17 I would add to these observations that the notice to the creditors of the husband and the son, Nicholas, records that a business called Sydney Formwork Pty Limited was being conducted under the directorship of two ladies known as Niki and Patti Zorbas. It appears that those ladies are, respectively, the plaintiff's daughter-in-law and daughter. 18 Part of the money raised by the 1996 mortgage was in fact used to discharge the mortgage obligation owing to the defendant. 19 The payment was made without prejudice and I would accept the contention that in the circumstances, if the plaintiff could demonstrate that she was otherwise entitled to relief that that payment should not stand in the way of grant. 20 Counsel for the defendant vigorously submitted that the mortgage, having been discharged, could be regarded as entirely irrelevant. I do not agree that this is so. However, this is a matter that need not be pursued unless I am otherwise persuaded that the plaintiff is entitled to relief. 21 The evidence manifests that the plaintiff, herself, had considerable motive and interest in keeping the husband's business in operation. She has testified that had she known the house was involved she would not have entered the transaction. She distinguishes the transaction in 1996 by asserting that she was prepared to do this to help her son but she was not prepared to help her then estranged husband in 1992. That claim is somewhat contradicted by the circumstance that in the series of mortgages that had been applied to the matrimonial home, but one month before the visit to the Burwood office of the defendant the plaintiff had joined in the mortgaging of the property to the ANZ Bank in the sum of $360,000. That security and money was raised to discharge an existing obligation but it is plain that she was willing, on that occasion, to secure the house in the interest of the husband's business. 22 This leads me to return to the settlement of the property under the Family Law Act. The document which was filed in court after the parties had legal advice demonstrates that in reality the plaintiff was to receive the matrimonial home and the husband was to receive the business. Importantly, however, the husband took upon himself the obligation to free the matrimonial home of mortgages and to pay maintenance or alimony to the plaintiff of $500 per week. 23 It is self evident that there was no source from which such payments could be made other than the conduct of the business and it is for that reason that I have become convinced that the plaintiff had not only a motive for ensuring the continued operation of the business but was in fact actively interested in achieving that result. 24 In the course of counsel's address, I drew attention to the second paragraph in the consent orders made pursuant to the Family Law Act which referred to mortgages over the family home being discharged. The use of the plural was appropriate as there were, on the evidence, two mortgages: the presumably registered mortgage to the ANZ Bank and the unregistered mortgage to the defendant. 25 As I have already observed, those orders were made within a couple of weeks of the attendance at the defendant's office in Burwood. 26 For all these reasons, and having regard to my observations of the plaintiff, and giving full consideration to the circumstance that her evidence was being translated to me, I have nevertheless firmly come to the view that her assertion that she did not know the house was involved in the relevant transaction cannot be accepted. Indeed, I am affirmatively satisfied to the contrary. The plaintiff entered into the transaction, therefore, with adequate knowledge of what was involved. 27 It is true, as counsel for the plaintiff pointed out, that the documents contemplate that copies would be given her, but this did not occur. It is also true that the documents suggest that the benefit of the loan is to go directly to the plaintiff's husband. However, this leads to another curious piece of evidence to which I should make passing reference. Despite the terms of the documentation there appeared in the plaintiff's Verified List of documents reference to cheques and deposit slips. Copies have been tendered and become Ex. 2 in the proceedings. These reveal that two cheques, which I am satisfied are the cheques respectively for $40,000 and $10,000 drawn by Avco in favour of the plaintiff and her husband were deposited into an Australia and New Zealand Bank account on 21 September 1992. That is to say, on the date of the visit to the Burwood office. Bearing the same date, a cheque in favour of the plaintiff's husband was drawn by her on an account in the ANZ Bank at Drummoyne for $40,000. 28 The plaintiff claims no recollection of this transaction. She said that she has signed cheques from time to time. That activity, as represented by the drawing of cheques, is fortifying in my view of the conclusion that the plaintiff was well aware of what she was engaged upon at the time. It may be that the plaintiff herself did not have considerable business experience, and it may be that she was handicapped in a lack of understanding of the English language. The history which I have sketched shows, however, that she was well fitted to engage in a transaction of mortgage giving the home as security such as occurred on the relevant occasion and which had occurred on many prior occasions and as I have indicated on at least one occasion since. 29 The relief pursuant to the Contracts Review Act can follow upon a finding that the terms of a contract were inherently unjust or unreasonable. No such contention was here advanced. Nor, indeed, is there any material upon which such a finding could reasonably be made. 30 As I have said, there was no misrepresentation on the part of any agent of Avco and it remains to consider whether or not arising out of the surrounding circumstances there emerges an injustice of the type that attracts the relief contemplated by the statute. As I have sought to indicate, the plaintiff joined in this contract for the loan. The funds were passed. She was, in my finding, fully aware of the nature of the transaction and there would be no injustice in that contract or the contract of mortgage being enforced against her. 31 As I have indicated, somewhat unusually, in the litigation that is comparable to this which usually comes before the Court, the mortgage has in fact been discharged and payment made on it on a without prejudice basis. Therefore, it seems to me the only appropriate order needed to be made is that the action be dismissed and I direct entry of judgment for the defendant. 32 It would follow that there be an order for costs. I order the plaintiff to pay the defendant's costs of the action. 33 HIS HONOUR: After delivery of judgment in this matter there were tendered for the purpose of an application on costs, copies of two letters from the defendant's solicitors. The first letter is dated 18 August 1998 and is addressed to Messrs Simpson and Harrison, who were then the solicitors on the record for the plaintiff. The document itself shows that it is addressed to a document exchange and also has endorsed upon it a fax number. 34 It is submitted by counsel for the plaintiff that I should act upon a conclusion that there is inadequate evidence before me that the letter was dispatched or received. 35 In the circumstances I regard the dispatch and the receipt of the letter as not genuinely in dispute and I regard the tender of the letter as evidence of the facts manifest therein including dispatch to the addresses that I have mentioned. I am prepared to infer that the letter was received. The letter does specify attention to a former partner of the firm who by August 1998, I accept, had left the firm and, indeed, been admitted to the bar - or what I think is more accurate these days, had commenced to practice as a barrister. 36 The letter in its terms makes an offer of judgment for the defendant without costs and includes not uncommon declaration that the letter is a "Calderbeck" letter and the defendant's solicitors reserved the right to tender this letter if the issue of costs should arise. The offer was expressed to remain open until the close of business on 25 August 1998 at 5pm. 37 As is apparent from the continuation of litigation the offer was not accepted. Indeed, the second part of the tender consists of a letter in not dissimilar terms dispatched to the new solicitor on record dated 27 January 1999. The offer in this case was expressed to be open only until 4pm Friday 29 January. The case was listed for hearing on Monday 1 February instant. 38 Mr Glissan, for the plaintiff, has said practically everything that one could imagine could be said to resist this application. In addition to the submission that I have already mentioned he points out that the defendant's success was in a large way perceptibly attributable to concessions made by the plaintiff herself in cross-examination. He contends that therefore the defendant would not have been entirely confident of his position when offering a settlement, as it were, based upon judgment in its favour. The issues in the case it is claimed were complex. The position of the plaintiff as a non English speaking migrant to the country should not be ignored and it was submitted that it could not be said to have been vexatious to continue litigation. Given all that, it is my duty to exercise my discretion in accordance with the overall principles which have been conveniently stated by Young J in Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2) Equity Division, unreported 21 August 1995. 39 I would respectfully adopt what his Honour had to say there. Applying that adoption, and adapting matters to the present circumstances I come to the conclusion that the non-response of the plaintiff to the letter of the 18 August 1998 should result in a consequence that indemnity costs be paid after expiry of the offer of that date. Accordingly I amend the order for costs already made that the plaintiff pay the defendant's costs of the action to add that those costs be paid on an indemnity basis after 25 August 1998.