Permanent Trustee Australia Limited & 1 Or v Mary Gusevski & 1 Or [2005] NSWSC 1281

New South Wales Supreme Court

Permanent Trustee Australia Limited & 1 Or v Mary Gusevski & 1 Or [2005] NSWSC 1281 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 26, 27, 28 & 31 October 2005

JUDGMENT DATE : 12 December 2005

JUDGMENT OF : Newman AJ

DECISION : See Para 28

CATCHWORDS : Conveyancing - Mortgages - Unconscionable conduct - Effect of mortgagee's unconscionable conduct

Contracts Review Act 1980 LEGISLATION CITED : Managed Investments Act

Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Gray v Small [2004] NSWSC 97 CASES CITED : Teachers Health Investments Pty Ltd v Wynne (1996) NSW Con R 55-785 West v AGC (Advances Ltd) (1986) 5 NSWLR 610

Permanent Trustee Australia Limited & 1 Or PARTIES : Mary Gusevski & 1 Or

FILE NUMBER(S) : SC 10133/03

Mr P Walsh (Pl's) COUNSEL : Ms R Francois (1st Def) Mr G Curtin (2nd Def)

Sunman & Walker Solicitors (Pl's) SOLICITORS : Legal Aid Commission of NSW (1st Def) Middletons Lawyers (2nd Def)

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

NEWMAN AJ

12 December 2005

10133/03 Permanent Trustee Australia Limited & 1Or v Mary Gusevski & 1 Or

JUDGMENT 1 His Honour: This is primarily an action for possession of land brought on behalf of a mortgagee against the first defendant. The second defendant has been joined by the mortgagee on the basis of an allegation of professional negligence made against the second defendant, a solicitor, by the first defendant. In essence the plaintiff's claim is that, should they be denied relief against the first defendant by virtue of the second defendant's negligence, they are entitled to relief against the second defendant. However, the plaintiffs' readily conceded that if they succeed against the first defendant their claim against the second defendant is nugatory. 2 The reason why there are two plaintiff's in the matter is that the first plaintiff is the custodian of an entity known as the Howard Mortgage Trust and is the mortgagee of the mortgage which is involved in these proceedings. The second plaintiff is the single responsible entity of the said Howard Mortgage Trust under the provisions of the Managed Investments Act and is the lender under the deed of loan which arose in the proceedings. 3 There are a number of matters which are not in dispute. The first is that, pursuant to the terms of a deed of loan, the first plaintiff, in its capacity as trustee of the Howard Mortgage Trust, advanced the sum of $170,000. By written direction of the first defendant, that sum was in fact paid not to her, but to one Robert Charles Silkman. Equally there is no dispute that the plaintiff executed a deed of loan and also granted the first defendant a mortgage over land of which she was a registered proprietor, known as 7 Francis Avenue, Brighton-Le-Sands, in this State. There is equally no dispute that the first defendant is in default under the deed of loan and that, ex facie, the first plaintiff is entitled to an order for possession. I say ex facie because the first defendant has raised a number of matters by way of defence which, if any one of them were successful, would result in the plaintiffs' being denied relief against her, either under the deed of loan or under the mortgage. The first defendant, in her defence, relies upon the provisions of the Contracts Review Act 1980. As I have indicated above, she has brought a cross-claim against the second defendant, alleging professional negligence on his part. It is her cross-claim against the second defendant that, if the plaintiffs' are entitled to the relief they seek, she is entitled to damages against the second defendant, representing her liability to the first and second plaintiff's. 4 I turn then to the facts of the matter. The first defendant is a woman who has met much misfortune in her life. She is now aged 42, having been born on 24 June 1963. Her marriage, which she entered into in the 1980's, was disastrous. Her husband was, to quote Dr Klug, psychiatrist, "very irritable with a fiery temper which focused on her and their two children. He was physically violent at times but this did not extend to sexual violence." This miserable union ended in divorce. As I understand the evidence, the first defendant was acted for by a solicitor, Sue Vasil, in the Family Court proceedings. Subsequently Ms Vasil acted for the first defendant when she first attempted to obtain a loan in the year 2001. Following the dissolution of her marriage the first defendant has taken to using her parent's name, Tuntev, rather than her former married name Gusevski, under which she is named in these proceedings. In the year 2001 the first defendant entered into a romantic relationship with a man known as Robert Silkman. While her evidence in the matter did not establish exactly when it was that she first became romantically involved with Mr Silkman, nor when that relationship came to an end, it is apparent that at all relevant times during the transactions which led to the creation of the subject loan and mortgage her affair with Mr Silkman was ongoing. According to the history the first defendant gave to Dr Klug, psychiatrist, she has lost contact with Silkman and is aware that he had been convicted of criminal offences and was serving time in prison. Accordingly, it is the first defendant's misfortune to have had both a miserable marriage and then an unfortunate and equally miserable association with a rogue. 5 To add to the first defendant's misfortune her ageing mother was diagnosed with Alzheimer's disease in 1998 and this has resulted in the first defendant being her aged parents' principal support from then on. To add to her misfortunes she has herself been diagnosed with a malady known as sarcoidosis. Apparently this is a systemic granulomatous reaction to various stimuli and can involve any tissue of the body. It has affected the first defendant in an unusual manner (and I quote here from Dr Klug) "that it has caused her teeth to fall out as well as suffering from anaemia." 6 If all of these matters were not enough the first defendant has been diagnosed by Dr Klug, psychiatrist, as suffering from a dependant personality disorder. This is no recent diagnosis, as Dr Klug first began to see the first defendant on 21 April 1993. He then saw her regularly until mid-1998. While there was some dispute from the plaintiffs' as to the nomenclature used by Dr Klug in his diagnosis of the first defendant's psychiatric malady, there was in fact no challenge mounted to the veracity of his diagnosis. Dr Klug, in his report, put his diagnosis in this way :- "A dependant personality disorder is characterised by a pervasive and excessive need to be taken care of, that leads to submissive and clinging behaviour and fears of separation. In Ms Tuntev's case the specific features of her dependant personality disorder include the following: 1. Has difficulty making everyday decisions without an excessive amount of advice and reassurance from others. 2. Needs other to assume responsibility for most major areas of her life. 3. Has difficulty expressing disagreement with others because of fear of loss of support or approval. 4. Goes to excessive lengths to obtain nurturing and support from others, to the point of volunteering to do things that are unpleasant. 5. Feels uncomfortable or helpless when alone because of exaggerated fears of being unable to care for herself. 6. Is unrealistically preoccupied with fears of being left to care for herself. She is plagued by pessimism and self-doubt and is highly self-critical. She interprets criticism and disapproval as confirmation of her worthlessness." 7 The first defendant's psychiatric problems provide an explanation for what I would find to be some bizarre actions on her behalf involving not only the subject loan and mortgage of these proceedings but also some subsequent borrowings by her and indeed her earlier attempts to obtain a loan. However, as I understand Dr Klug's evidence, despite the presence of the psychiatric disorder which he diagnosed, the first defendant's cognitive ability is not impaired by this problem. 8 The first defendant had been brought up in Sydney. She completed her secondary education, gaining the Higher School Certificate. Prior to her marriage she had worked for an insurance company as a pay clerk. In 2001 she was residing at premises at 7 Francis Avenue, Brighton-Le-Sands with the two children of her marriage. That house, of which she was the registered proprietor, had been given to her by her father. At the beginning of 2001 the premises were unencumbered. She was then working part-time for a supermarket chain. As I understand her evidence, she would work on a number of days per week, which occasionally included weekend work. Again while her evidence on this topic is not clear, I gather her part-time employment with the supermarket chain involved some supervisory duties. In any event, whatever capacity in which she was working, it plainly enough was not a lucrative occupation. Prior to 2001 she had purchased a Mazda motor vehicle, utilising a loan from Esanda for that purpose. Documentary evidence before the court indicates that she had difficulties in making repayments under that loan. Indeed she seems to have successfully fended off a number of efforts by Esanda to repossess the vehicle. 9 As at 2001 she had a cheque account with St George Bank and was maintaining a Visa card with the same institution. In her affidavit of 27 January 2004 the first defendant deposes that in 2001 she met Silkman and a man called Roy Skaf, who apparently was a mortgage broker. She then deposes of a series of events involving only one application for a loan, which eventually resulted in attendance at the offices of the second defendant. There she alleges she went with Silkman, and once at those premises, she was taken to the office of a man who, without either explaining or allowing her to read documents, got her to sign them. All this occurring in the presence of Silkman. She claims that she thought she was signing an application for a loan for $60,000 and had no idea that she had completed mortgage and associated loan documents for a loan of $170,000. 10 Her affidavit makes no mention whatsoever of earlier applications she had made for loans. She claims that she had no idea what a mortgage was. 11 As it happens, the documents that she signed at the second defendant's office were the documents relating to the mortgage and loan which are the subject of these proceedings. In her affidavit she omits to refer to two earlier applications she had made in the year 2001 for mortgage loans, the first of which was to an organization known as Eclipse Prudent Mortgage Corporation Limited. This was an application for a loan of $50,000 to be secured by a mortgage. It was in relation to that application that she had the solicitor Sue Vasil acting for her. Apparently that loan did not proceed because Sue Vasil had advised her that it would be imprudent for her to proceed with the loan. She then made an application for a loan to the second plaintiff in this matter through an organisation known as Associated Finance Group Limited. She there sought a loan for $150,000. In the event she did not proceed with that application, finally she made an application for a loan secured by mortgage to the present second plaintiff through the aegis of an organisation known as The Australian Credit Corporation, who describe themselves as merchant bankers and mortgage originators. That application was for a loan in the sum of $170,000. 12 When challenged in cross-examination as to the omissions from her first affidavit of any reference to her earlier applications for loans in 2001 and to her knowledge about events which occurred, the first defendant continually responded that she could not remember. She was adamant however that when she went to the second defendant's offices nothing was explained to her and it was as if she was just asked to sign here without explanation, which she did. She states that she had been told to remain silent during her interview at the second defendant's offices by Mr Silkman – whom she said was present. 13 The first defendant's account of what happened at the offices of the second defendant is totally opposed to what one Mary-Lou Carter, a law clerk employed by the firm (and in fact the second defendant's wife), and one Marcel Joukadour, deposed to as to the events there. 14 Let me say at once that I found Mrs Carter and Marcel Joukadour to be credible witnesses. Mrs Carter's evidence that the first defendant was alone when she saw Joukadour and her explanation of why she would insist that this was so, was, I find, compelling evidence. 15 Joukadour's evidence that he explained in detail the documents which the first defendant subsequently executed, again, I found to be evidence which I have no hesitation in accepting. Marcel Joukadour made three concessions as to what happened during the course of his meeting with the first defendant which I believe are indicative that he is a witness of truth. Those concessions were :- 1) That he failed to keep a file note – he conceded that this was an oversight 2) That he failed to have the first defendant execute the document known as Declaration of Purpose 3) His then ignorance of the circumstances under which the Consumer Credit Code would apply to the transaction in question.