New South Wales Supreme Court CITATION : Angelina Spina v Permanent Custodians Limited [2008] NSWSC 561 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 26,27,28 & 29 May 2008 JUDGMENT DATE : 30 June 2008 JUDGMENT OF : Hammerschlag J DECISION : Plaintiff's claim dismissed. Judgment for defendant in money sum and order for possession CATCHWORDS : CONTRACT – AGENCY – Power of Attorney in form of Schedule 7 to Conveyancing Act 1919 (NSW) – s 163B – ambit of authority such a power of attorney confers – meaning of "on behalf of" and "attorney" in s 163B(1) – authority where no limitation in s 163B(2) specified not limited to transactions for the benefit of donor and does not exclude transactions for the sole benefit or partial benefit of donee – UNCONSCIONABILITY – Allegation that loan agreement and mortgage executed under power of attorney procured by unconscionable conduct of defendant – requirements for exercise of jurisdiction to set aside transactions – CONTRACTS REVIEW ACT1980 (NSW) – Allegation that transactions unjust when entered into – whether allegation made out – discretion under s 7(1) to make orders Contracts Review Act 1980 (NSW) Real Property Act 1900 (NSW) Interpretation Act 1987 (NSW) LEGISLATION CITED : Conveyancing Act 1919 (NSW) Powers of Attorney Act 2003 (NSW) Conveyancing (Powers of Attorney) Amendment Act (NSW) 1983 Powers of Attorney Act 1971 (UK) CATEGORY : Principal judgment Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Tobin v Broadbent (1947) 75 CLR 378 Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 Shorten v David Hurst Constructions Pty Ltd [2008] NSWCA 134 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Kelly v CA & L Bell Commodities Corporation Pty Limited (1989) 18 NSWLR 248 Barlow Clowes International Ltd (In liq) v Eurotrust International Ltd [2006] 1 WLR 1476 Spina v Conran Associates Pty Limited; Spina v M & V Endurance Pty Limited [2008] NSWSC 326 R v Toohey; Ex parte A-G for Northern Territory (1979) 145 CLR 374 Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Louth v Diprose (1992) 175 CLR 621 CASES CITED : Bridgewater v Leahy (1998) 194 CLR 457 Morrison v Coast Finance Limited (1965) 55 DLR (2d) 710 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Ribchenkov v Suncorp-Metway Ltd [2000] FCA 0835 Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 Kleinwort Benson Australia Ltd v Armitage & Ors (unreported, NSWSC, 26 April 1989) Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Pasternacki and Solka-Pasternacki (as Executors of the Estate of the Late Mary Nagy) v Correy [2000] NSWCA 333 St George Bank Ltd v Trimarchi [2004] NSWCA 120 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Teachers Health Investments Pty Ltd v Wynne (1996) NSW Conv R 55-785 NAB v Hall (1993) NSW ConV R 55-684 Melverton v Commonwealth Development Bank of Australia (1989) NSW Conv R 55-484 Reisch v Commonwealth Bank of Australia & Ors [1998] ANZ Conv R 628 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Halsbury's Laws of England, 5th ed, vol 1 Fridman, The Law of Agency, 7th ed Reynolds, Bowstead and Reynolds on Agency, 18th ed TEXTS CITED : Oxford English Dictionary, 2nd ed Halsbury's Laws of England, 4th ed, vol 44 Report on Powers of Attorney (LRC18) Report on Powers of Attorney and Unsoundness of Body or Mind (LRC 20) Meagher, Heydon and Leeming, Meagher Gummow & Lehane's Equity Doctrines and Remedies, 4th ed PARTIES : Angelina Spina by her tutor Sarina Spina Permanent Custodians Limited (ACN 001 426 384) FILE NUMBER(S) : SC 2393/2006 COUNSEL : A.S. Bell SC with J.R. Clifton (Plaintiff) S.A. Gregory (Defendant) SOLICITORS : Grogan & Webb (Plaintiff) Hickson Lawyers (Defendant) - 67 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMMERSCHLAG J 30 JUNE 2008 2393/2006 ANGELINA SPINA BY HER TUTOR SARINA SPINA -v- PERMANENT CUSTODIANS LTD JUDGMENT INTRODUCTION 1 HIS HONOUR: In these proceedings the plaintiff (by her tutor, Sarina Spina) seeks to impeach a loan agreement ("the loan") with the defendant, and a supporting mortgage ("the mortgage") she gave to the defendant over her property at 153 Shepherds Drive, Cherrybrook, New South Wales ("the Cherrybrook property"). 2 I shall refer to the loan and the mortgage collectively as "the contracts". 3 The loan was entered into on 24 October 2003 and the mortgage executed on 7 November 2003. 4 The borrowers under the loan were the plaintiff and her late son, Michael Spina (who I shall refer to as Michael, with no disrespect intended). Under it, the defendant advanced $396,701.46. 5 The plaintiff was committed to the contracts by Michael, purporting to act under a general Power of Attorney ("the power of attorney") which she gave him on 5 February 2003, and which was subsequently registered. 6 Michael died on 6 December 2005 from a heart attack. 7 The plaintiff claims that in the circumstances which occurred and on the proper construction of the power of attorney, Michael was not authorised to commit her to the contracts. She also seeks to have them set aside on the ground that they were unconscionably obtained by the defendant. In the alternative, she seeks orders pursuant to s 7 of the Contracts Review Act 1980 (NSW) setting them aside or varying them. 8 The defendant cross-claims for a money judgment and for an order for possession of the Cherrybrook property. 9 I shall refer to the plaintiff's tutor as Sarina, also with no disrespect intended. Sarina was married to Michael. FACTUAL BACKGROUND The plaintiff's personal background 10 The plaintiff was born in 1917 in Sicily. 11 She married in 1938. 12 In 1950 after the failure of his potato crop the plaintiff's husband, Carmello, emigrated from Sicily to Australia, and the plaintiff followed in 1952. 13 The plaintiff and her husband moved to a small farm in West Pennant Hills, New South Wales in 1959. She worked on the farm maintaining the house and assisting her husband as required, but had no other employment. They remained there until 1974 when the farm was sold (her husband then retired) and they moved to Cronulla in Sydney. 14 The plaintiff's husband died in 1983. 15 She stayed on at Cronulla until about 1987 when that property was sold and the Cherrybrook property was purchased. 16 She lived alone at the Cherrybrook property until 2002, when she had a fall. 17 As a consequence of the fall she went to live with Michael and Sarina for three or four months. 18 In early 2003 Michael became involved in managing the plaintiff's financial affairs. 19 On 5 February 2003 the plaintiff executed the power of attorney in favour of Michael. 20 In March 2003 at Michael's suggestion the plaintiff moved in to the Scalabrini Nursing Home ("Scalabrini") at Austral, which is to the southwest of Sydney. Since at least 2003 she has not lived at the Cherrybrook property. 21 She was admitted to Scalabrini under a resident agreement made on 20 March 2003 at what is described as hostel low-care level. 22 Originally she had her own room and was apparently mobile with the use of a walking frame. 23 In about early July 2003 she fell again. She was hospitalised after the fall. 24 This incident necessitated a change to high-level care and an agreement was entered into by Michael on her behalf on 20 July 2003 to provide that care. 25 After Michael's death the plaintiff's mental state deteriorated. 26 She is now 91 years old and still resides at Scalabrini. She has advanced dementia and is given 24-hour care. 27 On 18 January 2006 Sarina herself obtained a general power of attorney from the plaintiff ("the 2006 power of attorney"). Spywing Pty Ltd 28 Michael operated a company known as Spywing Pty Ltd ("Spywing"), which traded as Action Fruit Supply from a stand or module at the Flemington Markets near Sydney. 29 He and Sarina were Spywing's directors. Sarina described herself as a silent director. 30 To 30 June 2002 Spywing made a net profit of $207,737.00. 31 The plaintiff led no evidence as to the financial position of Spywing at the time of the contracts or as at any later time. 32 On 30 March 2006 administrators were appointed to Spywing (by Sarina as sole director) and on 3 May 2006 it was placed into liquidation. 33 Sarina's evidence was that during Michael's lifetime, apart from attending to wages and writing up of the wages book, she had no involvement of any kind in the affairs of Spywing and had no knowledge of its financial affairs. After Michael died Sarina had the assistance of an accountant in winding up Spywing's affairs. The NAB transaction 34 On 26 March 2003 the National Australia Bank ("NAB") offered to Michael and the plaintiff a facility of $150,000.00 which they accepted on 27 March 2003. The acceptance document was signed by Michael and the plaintiff. I proceed on the assumption that Michael arranged for this facility. The plaintiff's signature is a series of unsteady "spidery" lines consistent with her even then advanced years and lack of literacy, although to my observation her signature on the 2006 power of attorney (in favour of Sarina) was of a far superior quality. 35 On 26 March 2003 in the presence of a witness (who was not called) the plaintiff herself executed a mortgage over the Cherrybrook property in favour of the NAB securing the NAB facility. The Cherrybrook property had never previously been mortgaged. Between 2 April 2003 and 17 April 2003 the NAB advanced, under that facility, $148,026.05. 36 In these proceedings the plaintiff directed a subpoena to the NAB for all documents relating to the NAB loan, the NAB mortgage, and the plaintiff's and Michael's statements of account. Produced in response were only the offer letter, including the acceptance, a facility agreement, the NAB mortgage and bank statements. 37 The NAB loan was advanced by way of a withdrawal of $113,423 made on 2 April 2003 and by the bank meeting a number of cheques over the period 7 to 17 April 2003. There was no evidence where the money actually went or for what it was used. 38 The NAB was repaid and the NAB mortgage discharged from the proceeds of the loan from the defendant. The Across Australia Finance Pty Ltd transactions 39 On or about 20 August 2003 Michael and Sarina executed a mortgage over their residence at 43 Bain Street, Dundas ("the Dundas property") in favour of an organisation called Across Australia Finance Pty Limited ("Across Australia Finance"). The mortgage recorded that it was given in consideration of the receipt of $110,000 repayable by 20 September 2003. Interest at the rate of 60% per annum was payable if interest was paid on time, otherwise at 72%. Michael and Sarina signed a memorandum included in the mortgage which described the purpose of the advance as "Short Term Working Capital For Business = Action Fruit". 40 Although she signed the documents and was a director of Spywing Sarina's evidence was that she did not know why the advance was obtained. She says she never asked Michael about it and was never told. 41 In addition Michael, purporting to act on the plaintiff's behalf under the power of attorney, executed a mortgage in favour of Across Australia Finance over the Cherrybrook property to secure the same advance. He also executed a consent on the plaintiff's behalf to the lodgement by Across Australia Finance of a caveat to reflect the interest conferred on the company by that mortgage. However, no caveat was lodged. 42 Neither mortgage in favour of Across Australia Finance was registered, but Across Australia Finance caveated the Dundas property. 43 Like the NAB loan, the Across Australia Finance advance was repaid and the mortgages securing it discharged out of the proceeds of the loan from the defendant. Sarina benefited from the discharge of the mortgage over the Dundas property. The contracts 44 The defendant is the trustee of a trading trust. It lends funds and takes mortgages to secure repayment. The principal assets of the trust are a pool of mortgages. 45 The trust is managed by Australian Mortgage Securities Limited ("AMS"), which delegates some of its functions to AFIG Wholesale Pty Limited ("AFIG"). AFIG trades as GE Money. 46 Mortgages held by the defendant are originated by so-called "correspondents" of which Australian Lending Services Pty Limited ("ALS") is one. It operates out of Surfers Paradise, on the Gold Coast of Queensland. ALS was appointed as a correspondent under a "Correspondent Deed" which records that the correspondent is an independent contractor and not the agent, partner or employee of AMS or the mortgagee. ALS takes steps to attract borrowers. It obtains relevant information (including valuations) and submits loan applications and proposals to the defendant. AMS also issues to its correspondents (and it did to ALS) an operations manual for internal use in the course of the correspondent acting in that capacity ("the operations manual"). Amongst other things the operations manual required ALS to assess loan applications according to criteria specified by AMS. 47 The execution by borrowers of the necessary documents is attended to by ALS on behalf of the defendant. To that end ALS instructs solicitors from a panel. 48 Michael was apparently introduced to the Gold Coast office of ALS by a finance broker, Mr Prestia of Prestige Financial Corporation. 49 On or about 22 September 2003 a "credit application" to ALS for a loan of $400,000 was made. The application was signed by Michael. It also bore a signature "A. Spina" without disclosing (as was no doubt the fact) that this was not the hand of the plaintiff – but presumably of Michael purporting to act under the power of attorney. 50 The application gave the name of an accountant, Mr Ferruzzano, and a solicitor, Mr Nesci, and the respective telephone numbers of these practitioners. 51 The plaintiff's date of birth was given as "20/9/17". Her home phone number was also given and her occupation was stated as "retired". 52 The application gave Michael's details, including his address as 43 Bain St, Dundas, his occupation as fresh produce wholesaler, and his employer as Spywing trading as Action Fruit. 53 The application included an asset and liability statement for the plaintiff and Michael. It showed the Cherrybrook property as an asset at $750,000 and Dundas at $900,000. It showed debtors (presumably the loan – yet to be given) as $400,000 and other liabilities (presumably the NAB loan) as $150,000. It also reflected an asset of $1,200,000 described as "Action", presumably Spywing's wholesale fruit business. 54 In support of it, Michael provided his own income tax returns for 2001 and 2002, Spywing's income tax returns for 2001 and 2002, and Spywing's accounts as at 30 June 2001 and 30 June 2002. He also provided a valuation of the Cherrybrook property, which attested to a market value of $720,000 and an unfurnished rental value of $475 pw. 55 Spywing made an operating profit for the year ended 30 June 2001 of $56,206. For the same period, Michael's personal tax return showed total personal income of $57,940 (totalling $114,146). His personal tax return for 2002 reflected income less deductions of $60,140. To 30 June 2002, Spywing made a profit of $207,737. 56 AMS' records relating to the assessment of the loan application indicate that a Mr Cornford of AMS calculated the average annual income of Michael and Spywing over the financial years 2001 and 2002 to be $160,942. 57 ALS' records indicate that steps were taken to verify Michael's employment. A summary of the application prepared contains the following notation: "Borrowers are Son & Mother, who have operated a wholesale produce business from Flemington Markets for 16 years". 58 By letter dated 13 October 2003 ALS informed Michael and the plaintiff that it had approved the loan in principle on the basis that a first mortgage would be given by the plaintiff over the Cherrybrook property. The approval letter reflects the purpose of the loan as "Acquisition of investment and refinance existing loan". 59 On 15 October 2003 Michael signed acceptance for both himself and the plaintiff. His acceptance does not on its face reflect that he was acting for the plaintiff under the power of attorney. 60 On 22 October 2003 ALS instructed solicitors MacGillivrays of Brisbane, Queensland to prepare the loan and mortgage and to proceed to settlement in accordance with "the Solicitor's Pack". The Solicitor's Pack is of the nature of a procedural handbook. 61 The instructions to MacGillivrays were accompanied by a schedule containing details of the proposed transactions. The schedule included the following: "Loan Purpose Description: Acquisition of future investment for $230,000, refinance house loan $115,000 of associated costs $20,000." (The reference to $115,000 was an error. There was no issue that it was a reference to the NAB loan of $150,000.) 62 ALS' instructions also informed MacGillivrays that the borrowers' solicitors were "Blessington Judd, level 4, 16-18 Connell (sic) St, Sydney", and that documents were to be sent to that firm. 63 On the same day MacGillivrays sent a letter addressed to the plaintiff (not Michael), presumably as mortgagor, care of Blessington Judd, containing the transaction documents and a checklist of their requirements. The checklist contained a section entitled "How to Sign the Documents", which included the following statement: " DOCUMENTS EXECUTED PURSUANT TO A REGISTERED POWER OF ATTORNEY If any document provided to us by you or at settlement is executed pursuant to a Registered Power of Attorney, we require a certified copy of that document together with a declaration of non-revocation." 64 A separate letter was sent to Blessington Judd commencing with the words "We act for the Lender and we note that you act for the Borrower". The letter stated further: "Pursuant to our client's usual requirements, we now enclose a letter addressed to your client together with our loan documentation and a list of our requirements." The letter referred to was presumably the letter to the plaintiff. 65 A title search of the Cherrybrook property as at 22 October 2003 showed the only relevant encumbrance to be the mortgage to the NAB. 66 On 27 October 2003 Blessington Judd (under the reference of Mr McNamee of that firm) wrote to MacGillivrays in the following terms: "We act for Angelina Spina and Michael Spina in relation to independent legal advice on mortgage documents with your client . We refer to your letter of 24 October 2003 and enclose the following documents…" (emphasis added) 67 Blessington Judd's letter enclosed, amongst others, the loan, the mortgage, an Acknowledgement of Legal Advice by Proposed Borrower, a Declaration by Borrower, a copy of the power of attorney (certified by Mr McNamee as solicitor to be a true copy), a statutory declaration by Michael that he was the son of the plaintiff and the donee under the power of attorney, and an authority and direction to pay the loan to MacGillivrays or as they directed and thereafter as the plaintiff and Michael, their solicitors or agents directed MacGillivrays. 68 The "Acknowledgement of Legal Advice by Proposed Borrower" was signed by Michael and included the following: "I Michael Spina (signatory) acknowledge that, 1. I have instructed Mr Stephen McNamee (my solicitor) to give me legal advice concerning the following loan and security documents:- (i) Loan agreement/offer of loan between Permanent Custodians Ltd (the lender) and Michael Spina Angelina Spina (the borrowers) (ii) Mortgage over property situated at 153 Shepherds Drive (iii) Memorandum registered number 2584554 (iv) …" 69 The Declaration by Borrower was signed by Michael and witnessed by a solicitor. Michael solemnly and sincerely declared that he had received independent legal advice regarding the loan and mortgage and had freely and voluntarily signed the documents. 70 The direction to pay in handwriting (presumably Michael's) gave authority to pay "as directed by my solicitors Blessington Judd". 71 Although a copy of the power of attorney and a statutory declaration that Michael was the donee under it had been provided to MacGillivrays, the executed documents did not on their face reflect that Michael's execution on behalf of the plaintiff was under the power of attorney. 72 Ms Alison Hannay (nee Suffolk) is now, and was at the time, a paralegal employed by MacGillivrays. Within MacGillivrays she had responsibility for the communications between that firm and Blessington Judd. 73 She gave evidence which I accept entirely. She agreed that she must have contacted someone at Blessington Judd about the manner in which the documents had been executed. 74 On 28 October 2003 Ms Hannay wrote to Blessington Judd with a request that the "Power of Attorney sign on behalf of Angelina Spina at the Declaration by Borrower and the Acknowledgement of Legal Advice as only Michael Spina has executed the documents". 75 On or about 31 October 2003 Ms Hannay received from Blessington Judd (again under Mr McNamee's reference) a letter dated 30 October 2003 which referred to previous correspondence and enclosed a "fresh Declaration by Borrower executed by the Attorney and amended Acknowledgement of Legal Advice also executed by the Attorney". 76 The amended Declaration signed by Michael was in the following terms: "1. I am the Attorney for the borrower ANGELINA SPINA (under registered Power of Attorney Book 4377 No. 245) as named in certain loan and security documents in favour of Permanent Custodians Limited (lender) relating to property located at 153 Shepherds Drive Cherrybrook. 2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1, as Attorney for the borrower Angelina Spina; 3. After receiving that advice I have freely and voluntarily signed the following documents as Attorney for the borrower Angelina Spina." 77 The re-executed "Acknowledgement of Legal Advice by Proposed Borrower" was in the same terms as the earlier version but contained the additional following notation dated 30 October 2003 next to a further signature of Michael: "Signed by Michael Spina as Attorney for Angelina Spina pursuant to registered Power of Attorney Book 4377 No. 245" 78 On the executed loan agreement Ms Hannay added words reflecting that Michael's signature was as attorney for the plaintiff under the power of attorney. 79 On the instructions of Michael, upon settlement, the NAB was to be paid out, with the balance to go into Blessington Judd's trust account with Mr Prestia (the finance broker) to instruct what was to be done with the rest. 80 On 5 November 2003 Blessington Judd wrote to MacGillivrays to inform them that settlement had been arranged for Friday 7 November 2003 at the NAB. They provided MacGillivrays with their trust account details. 81 On 7 November 2003 MacGillivrays wrote to Blessington Judd with a request for Blessington Judd "to act as our unpaid agents on settlement…" The letter stated that MacGillivrays would arrange for $396,701 to be telegraphically transferred to Blessington Judd's trust account on the day of settlement and that MacGillivrays would attend to a final search of title on the morning and thereafter would confirm that settlement could proceed. 82 By letter of the same date MacGillivrays informed Blessington Judd that settlement could proceed. 83 A file note of Blessington Judd indicates that Mr Prestia advised that firm on the morning of 7 November 2003 that of the loan proceeds, $114,640 was to be paid to Across Australia Finance, $152,000 was to be paid to the NAB and the balance was to be paid to "Michael Spina – Action Supply". 84 Also on the same day, that is 7 November 2003, Blessington Judd requested Macquarie Bank to draw cheques on their trust account in those amounts in favour of Across Australia Finance, NAB and Spywing respectively. 85 Under cover of a letter dated 7 November 2003 Blessington Judd sent to MacGillivrays the Certificate of Title for the property, a discharge of a NAB mortgage and an original mortgage executed by Michael. The original mortgage bears the date 7 November 2003. It has the notation that Michael signed on behalf of the plaintiff under the power of attorney. Michael's signature was witnessed by Mr McNamee. 86 The loan amount was $400,000. The period was thirty years with interest only payable for the first ten years. 87 The monthly interest payments were at an initial interest rate of 6.55 per cent or $2,184.00 per month. 88 From the inception of the loan, interest was paid to the defendant by direct debit from the bank account of Spywing at the NAB, Caringbah branch. Interest was paid without interruption on a monthly basis until 8 May 2006 (that is, for some 2½ years until shortly after the winding up of Spywing). The total amount of interest paid was $71,444.00. 89 Under the terms of the loan the borrowers are liable to pay a default rate of interest. The defendant has not sought to charge the default rate. 90 A term of the loan requires the borrowers to pay the defendant all reasonable enforcement expenses which the defendant reasonably incurs or expends in exercising its rights under the contract or under any security resulting from any default. It further provides that such amounts may be debited to the borrowers' account and are payable when they are debited. 91 The loan also contains a provision that a certificate signed on behalf of the defendant is sufficient evidence of any fact or matter stated including the amount due and payable. 92 By affidavit of Hamish Raymond Blank dated 23 May 2008 the amount owing under the loan is established as at 19 May 2008 to be $717,565.51, which amount includes legal costs said to have been incurred by the defendant in these proceedings. 93 In submissions the plaintiff made no challenge to quantum. It was put, however (and accepted by the defendant), that the assessment of any costs ordered in the proceedings would have to take into account costs already charged so that there can be no doubling up. THE PLAINTIFF'S CASE 94 Mr A S Bell of senior counsel together with Mr J Clifton of counsel appeared for the plaintiff. Mr S Gregory of counsel appeared for the defendant. 95 Counsel for the plaintiff put her case on three bases: a firstly Michael did not have authority under the power of attorney to bind her to the contracts; b secondly the contracts were procured by the defendant acting unconscionably and they should be set aside; and c thirdly the contracts were unjust in the circumstances relating to them at the time they were made within the provisions of s 7(1) of the Contracts Review Act, and to avoid an unjust consequence or result, the Court should set them wholly or partially aside. 96 I will deal with each basis in turn. THE POWER OF ATTORNEY 97 The contention that the plaintiff is not bound by the contracts because in entering into them Michael acted beyond the authority conferred on him under the power of attorney was pleaded (by amendment introduced on the first day of hearing) and put in submissions as follows: a on the proper construction of the power of attorney the plaintiff did not confer on Michael authority to bind her to a transaction which was solely or predominantly for Michael's benefit; b the contracts were for Michael's sole or predominant benefit; c consequently his actions in purporting to enter into the contracts on her behalf were beyond the authority conferred on him so that the plaintiff is not bound by them. 98 The mortgage is registered under the Real Property Act 1900 (NSW). If the loan falls the consequence will be that there is no debt which the mortgage (albeit registered) secures. 99 As put the first step in the submission is a matter of the construction of the power of attorney and the second is a matter of fact. 100 Before considering these submissions it is necessary to make some brief general observations about the relevant legal concepts and principles pertinent to them. Agency and power of attorney 101 As a general rule whatever a person has power lawfully to do can be done by him, her or it through an agent. There are exceptions including where a statute prevents it and where the power concerned is purely personal and therefore not capable of delegation: Halsbury's Laws of England, 5th ed, vol 1 at [3]. 102 In law the word "agency" is used to connote a relationship arising from consent which relationship exists when one person (the agent) has the authority to act on behalf of another (the principal). The relationship usually, but not necessarily, arises by contract: Halsbury's Laws of England, 5th ed, vol 1, at [1]; Fridman, The Law of Agency, 7th ed (1996) Butterworths at 55. 103 If agency arises by contract the contract may be express (in writing or oral) or implied from the conduct or situation of the parties or by operation of law: Halsbury's Laws of England, 5th ed, vol 1 at [14]. 104 Agency can also arise where the principal holds out to a third party that the agent has authority to bind the principal and the third party acts accordingly. This type of agency is sometimes called ostensible agency or agency by estoppel and is not relevant for present purposes. 105 The traditional name for a contractual document creating express authority when the principal gives an agent wide general powers to act on his behalf is a "power of attorney": Fridman, op cit at 49. Sometimes the person holding such authority is called the power of attorney. 106 The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority: Reynolds, Bowstead and Reynolds on Agency, 18th ed (2006) Sweet & Maxwell at [8-207]. Where the agent is authorised to commit the principal to a transaction, and the agent's state of mind is relevant to that transaction, the principal will be bound by the agent's knowledge: Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 697 (reversed on other grounds: see Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514 at 548). There may be circumstances where facts received by an agent otherwise than as agent may nevertheless be imputed to the principal, such as where the principal had a duty to make further investigation, but where the principal had no such duty this will not be the case: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [127]; Bowstead and Reynolds at [8-207]. Principles of construction of written instruments and statutes 107 In construing a written contract the Court is required to discover the intention of the parties from the words of the instrument. The whole of the instrument has to be considered. If the words are unambiguous the Court must give effect to them. If the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. 108 Powers of attorney are instruments which have traditionally been strictly construed. Recitals in a power of attorney which show its object will control general terms in the operative part of the instrument. General words in it will be construed by reference to special powers conferred: see, eg, Tobin v Broadbent (1947) 75 CLR 378. This approach, however, has been described as "somewhat unfashionable especially in the commercial sphere": Bowstead and Reynolds at [3-011]. 109 In construing a statute, the meaning of a provision must be determined by reference to the language of the instrument viewed as a whole: Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 at 381. The primary object is to construe the relevant provision so that it is consistent with the language and all the provisions of the statute. 110 Section 33 of the Interpretation Act 1987 (NSW) requires the Court in the interpretation of a provision of an Act to prefer a construction that would promote the purpose or object underlying the Act to one that would not promote that purpose or object. 111 Section 34 of that Act enables the Court in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, to consider it to confirm that the meaning of the provision is the ordinary meaning conveyed by the text (taking into account its context in the Act and the purpose or object underlying the Act). 112 Such material may include reports of law reform bodies and, in appropriate cases, ministerial statements to discern the context of the Bill in question and the mischief which it is intended to address; see Shorten v David Hurst Constructions Pty Ltd [2008] NSWCA 134 at [19] and following. Fiduciary obligations 113 An agent may be in a special position to exercise a power or discretion given to him by his principal to the detriment of the principal, who is accordingly vulnerable to abuse by his agent. For this reason equity imposes on such an agent obligations or duties called fiduciary obligations or duties which regulate the manner in which the agent may exercise powers or discretions given by the principal. Principal and agent is one of the accepted fiduciary relationships. They are also sometimes called relationships of trust and confidence: see Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-7. 114 The scope and extent of fiduciary obligations imposed will depend on the nature of the relationship: Kelly v CA & L Bell Commodities Corporation Pty Limited (1989) 18 NSWLR 248 at 256-8. 115 Two of the accepted fiduciary obligations which are imposed upon an agent are the duty to act in good faith towards and for the benefit of his principal, and the duty to refrain from putting himself in a position where his own personal interests conflict with the interests of his principal. 116 In Hospital Products Ltd v United States Surgical Corp at 97, Mason J explained the relationship between a contract and a fiduciary relationship which existed with it as follows: "The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." 117 Accordingly where fiduciary obligations arise because of a contractual relationship the terms of the contract will affect the scope and extent of the fiduciary obligations between the parties, not the other way round. 118 The ambit of the authority conferred by a principal on an agent pursuant to a power of attorney is derived by properly construing the terms of the instrument in accordance with accepted canons of construction. 119 It follows that the nature and ambit of a posited fiduciary obligation arising out of a contractual relationship cannot permissibly be used to construe the terms of the contract (in particular a written contract) between the parties. 120 The terms of a power of attorney will circumscribe the extent of the power. Fiduciary duties will regulate how the power may properly be exercised. There is accordingly an important difference between lacking power and abusing it. 121 Where a transaction is entered into in breach of a fiduciary obligation, the Court may grant relief including by setting aside the transaction or awarding equitable damages or compensation. 122 Relief may be granted against third parties who participate in a breach of fiduciary duty by another. However, where the third party is not in possession of trust property (in respect of which a different rule applies), for relief to be available against that party it is necessary for that party to have participated in the breach with consciousness of those elements of the transaction which make participation in it "transgress ordinary standards of honest behaviour": Barlow Clowes International Ltd (In liq) v Eurotrust International Ltd [2006] 1 WLR 1476 at 1481; Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [165]. Construction and the power of attorney 123 The power of attorney is in the following terms: " GENERAL POWER OF ATTORNEY PART 1 THIS POWER OF ATTORNEY is made on the 5th day of February 2003 by Angelina Spina of 153 Shephards Drive, Cherry Brook (sic) 1 I appoint Michele (sic) Spina of 43 Bain Place, Dundas to be my attorney to exercise, subject to any conditions and limitations specified in Part 2 of this instrument, the authority conferred on an attorney by section 163B of the Conveyancing Act 1919 , to do on my behalf anything I may lawfully authorise an attorney to do. *2 In the exercise of the authority conferred on my attorney by section 163B of the Conveyancing Act 1919 , my attorney is authorised to execute an assurance or other document, or do any other act, whereby a benefit is conferred on my attorney. *3 This general power of attorney is given with the intention that it will continue to be effective notwithstanding that after its execution I suffer loss of capacity through unsoundness of mind. PART 2 CONDITIONS AND LIMITATIONS IN WITNESS whereof I the said [A. Spina] have hereunto set my hand and seal on the abovementioned date. SIGNED SEALED and DELIVERED by the said in the presence of [Signature]…………………….. Witness" 124 There was no dispute that Michael was the donee under the power of attorney. 125 As put the first step in the plaintiff's submission is a matter of construing the terms of the power of attorney. 126 However s 163B of the Conveyancing Act 1919 (NSW) ("the Conveyancing Act"), which applies to the power of attorney, provides as follows: " 163B Power conferred by prescribed form of instrument (1) Subject to this section, an instrument (whether or not under seal) in or to the effect of the form in Schedule 7 confers on the attorney thereby appointed authority to do on behalf of the person executing the instrument anything the person executing the instrument may lawfully authorise an attorney to do. (2) The authority conferred by an instrument referred to in subsection (1) does not include: (a) authority to exercise or perform any power, authority, duty or function as a trustee conferred or imposed on the person executing the instrument, or (b) unless it is expressly conferred by the instrument—authority to execute an assurance or other document, or do any other act, as a result of which a benefit would be conferred on the attorney appointed by the instrument. (3) Where an instrument referred to in subsection (1) specifies any conditions or limitations to which the authority conferred by the instrument is to be subject, the authority is so conferred subject to compliance with those conditions or limitations." 127 Section 6(3) of the Powers of Attorney Act 2003 (NSW) ("the Powers of Attorney Act") which came into force on 2 February 2004 preserved the operation of s 163B of the Conveyancing Act (which was otherwise repealed) with respect to existing powers of attorney executed before the commencement of the Powers of Attorney Act. 128 The power of attorney in this case is in the form of Schedule 7 to the Conveyancing Act. It contains no conditions and limitations and clause 2 is included. 129 The extent of the power which the plaintiff conferred on Michael is therefore strictly speaking not a matter of construction of the terms of the power of attorney but rather of s 163B of the Conveyancing Act because a power of attorney in the statutory form gives the authority described by the statute. 130 For her contention on construction the plaintiff, as she was properly entitled to do, relied on the recent decision of Austin J in Spina v Conran Associates Pty Limited; Spina v M & V Endurance Pty Limited [2008] NSWSC 326, in which his Honour construed this very power of attorney. 131 The proceedings concerned the efficacy of two other mortgages to which Michael committed the plaintiff, purportedly acting under the power of attorney. 132 His Honour concluded that the power of attorney did not confer express actual authority on Michael to execute the mortgage and other supporting documents which he executed in that case, on the grounds that upon its proper construction it did not confer authority on Michael to enter into transactions solely for his own benefit, and the mortgages given to the defendants in those proceedings had that quality. 133 The plaintiff's submission would further limit the authority as a matter of construction to transactions not for the predominant benefit of Michael. 134 Because I have come to the conclusion, for the reasons set out below, that his Honour was wrong on the question of construction and that I should not follow him, it is appropriate to set out more extensively than would otherwise be warranted what his Honour said. His Honour said the following: "72 Counsel have been unable to refer me to any authorities on the proper construction of the Schedule 7 general power of attorney in circumstances such as arise in the present case. Most of the authorities deal with powers of attorney that do not include clause 2. My task is, therefore, to construe the provisions of the power of attorney and s 163B in light of the general principles of construction of instruments and statutory provisions. 73 If my task were confined to construing clause 2 of the power of attorney in isolation from clause 1 and s 163B, I would hold that clause 2 did not authorise Michael to execute mortgages in favour of Conran Associates and M & V Endurance to secure loans used for the purposes of the Action Fruit Supply business. Clause 2 authorises the attorney to execute an assurance or other document, or do any other act, 'whereby a benefit is conferred on my attorney'. Those words seem to envisage conduct on the part of the attorney undertaken in the interests of the grantor, which also confers a benefit on the attorney. Senior counsel for the plaintiff gave as an example, in the family context, the acquisition of real property for the grantor coupled with a right of occupation by the attorney. Another example would be where the attorney is the grantor's solicitor, and enters into a transaction on the grantor's behalf which makes provision for the attorney to charge professional fees. In the absence of a provision such as clause 2, general principles of the law of agency would have the result that the agent would not be authorised by a general conferral authority to insert into a contract negotiated on the principal's behalf a clause which benefits only the agent ( Hodges v Montgomery [1916] VLR 90; G E Dal Pont, Law of Agency (Butterworths, Australia, 2001), para [7.35]). 74 It is quite a different matter for the attorney to purport to use a general power of attorney to enter into a transaction that is solely for the benefit of the attorney and confers no benefit whatever on the grantor, or even (as in the present case) causes the grantor detriment. One would have thought that if such a transaction were to be authorised, clearer language than employed in clause 2 would be needed. Instead of authorising the execution of an assurance or other document or the doing of an act whereby 'a benefit' is conferred on the attorney, the clause might have authorised the execution of an assurance or other document or the doing of an act solely for the benefit of the attorney, whether or not also to the detriment of the grantor . The use of the words 'a benefit' suggests a more limited scope for clause 2. 75 However, my task is not to construe clause 2 in isolation, but to give effect to it in its context, which includes clause 1, and also the statutory provisions that govern the effect of such a power of attorney. 76 Clause 1 purports to confer on the attorney the authority to do on the grantor's behalf anything he or she may lawfully authorise an attorney to do. There is no legal impediment to a grantor conferring authority on another person to mortgage the grantor's property solely for that other person's benefit. Obviously there may well be issues, on the facts, as to whether the grantor properly understands what he or she is doing and whether the grantor is subject to undue influence or pressure, or the circumstances are unconscionable. A person authorised to act in the affairs of another may be a fiduciary, but the terms of such an appointment would exclude the fiduciary duty and permit the person to act solely in his or her own interests, provided that the appointment was made freely and was properly understood by the grantor. There is no bright-line proposition of law saying that a grantor who wishes to engage in such an act of benevolence to another person is prevented from doing so. Therefore using a grant of general authority to obtain a loan secured on the grantor's property, solely for the benefit of the person to whom the authority is given, is something the grantor may lawfully authorise that person to do. 77 However clause 1 does not confer on the attorney the authority to do anything the grantor may lawfully authorise another person to do. It only gives the attorney authority to act 'on [the grantor's] behalf', and it only authorises things that the grantor may lawfully authorise an attorney to do. These words are very important. They make it plain that the person to whom the authority is given is limited to acting in an agency capacity, subject to the constraints of a fiduciary position. In particular, the person receiving the authority, being a fiduciary, is subject to the obligation to act on the grantor's behalf in the grantor's interests. By no conceivable stretch of the English language could the use of a general power of attorney for the execution of a mortgage over the grantor's land to secure a borrowing solely for the benefit of the attorney be regarded as a use 'on behalf of' the grantor, or as something that 'an attorney' might do. Therefore clause 1 is not an impediment to my adopting the construction that I would be inclined to take of clause 2 if I considered it in isolation; on the contrary, clause 1 reinforces that construction. 78 Section 163B provides further reinforcement of that conclusion. It was introduced by the Conveyancing (Powers of Attorney) Amendment Act 1983 (NSW). I have not been referred to any explanatory material for that legislative amendment. I infer, however, that the purpose of s 163B is to make it plain that a power conferred in the general language of Schedule 7 is to be construed as having the general effect that the words convey. 79 Prior to the enactment of that provision, courts construed powers of attorney much in the way that they construed the memorandum of association of an incorporated company. General language was read down ejusdem generis, leaving drafters with little option but to equip the company with a great many specific powers in order to avoid any such construction (see B Collier and S Lindsay, Powers of Attorney in Australia and New Zealand (1992), p 7-8). Similarly powers of attorney included substantial lists of specific powers. The purpose of the 1983 amendments (like approximately contemporaneous amendments to the Companies Code) appears to have been to eliminate the necessity for long lists of powers by giving statutory reinforcement to a general form of words. 80 Prior to the legislative amendments, courts adopted a particularly strict approach to the construction of a power that was alleged to permit the attorney to obtain a personal benefit. In Reckitt v Barnett Pembroke and Slater Ltd [1928] 2 KB 244, at 248, Russell J said: 'The primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property.' That judgment was approved in the House of Lords: [1929] AC 176, at 183 and 195. 81 In Tobin v Broadbent (1947) 75 CLR 378, the principal question was whether some widely drafted powers of attorney conferred authority on the attorney, Hodgetts, to pledge the grantor's share certificates as security for a personal loan to the attorney. It was held that no such authority was conferred. After noting the breadth of the language of the powers of attorney, Dixon J said (at 401): 'But the cardinal fact of the transaction which it is sought to bring within the power is that the loan was made to Hodgetts, the donee of the power, and not to either of the Tobins, the principals. Hodgetts was the borrower, the loan was for himself, he did not contract it is an agent but he gave the lender his principals' property as security. The question is, therefore, whether the power of attorney extended to authorising Hodgetts to give a security over his constituents' shares for his own debt, not simply whether it authorised him to give a security. He cannot sever the giving of the security from the indebtedness secured. A transaction of security is unintelligible without identification of the obligation secured. This is not the case of an agent mis-applying moneys borrowed in his principal's name on the security of his assets pursuant to an authority covering the borrowing of money on the principal's behalf. If the transaction is ostensibly on the principal's behalf and is of a description that falls within the authority, it is nothing to the point that the agent's purpose was to act for his own benefit and to defraud the principal, that is, unless the opposite party to the transaction had notice. 'But here the transaction was the attorney's own, both in form and substance, and the only incident of it concerning the constituents was when the latter's property was drawn in as a support for the loan. Prima facie, a power, however widely its general words may be expressed, should not be construed as authorising the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation. [His Honour cited Russell J's observations in Reckitt v Barnett Pembroke and Slater Ltd , quoted above]. In my opinion, the words of the powers of attorney do not in themselves suffice to confer authority upon Hodgetts to secure a borrowing of his own by a deposit of the plaintiffs' script. Such a transaction is in itself beyond the limits of the power.' (See also at 391 per Latham CJ, 398 per Starke J). 82 It seems to me unlikely that the legislature would have intended to overturn this strongly expressed and persuasive approach to the interpretation of powers of attorney that are alleged to permit benefits to be conferred on the attorney. On its proper construction, s 163B does not purport to do so. Subsection (1) says that the attorney has the authority to do 'on behalf of the person executing the instrument' anything that the person may lawfully authorise an attorney to do. That language echoes the observation of Russell J that the primary object of a power of attorney is to enable the attorney to act in the management of his principal's affairs . It also reflects the observation of Dixon J, distinguishing the case before him from a case where security is granted pursuant to an authority covering the borrowing of money on the principal's behalf . In my view the language of subsection (1) preserves the reasoning of the cases, rather than overriding it. Therefore subsection (1) authorises the use of the power within the scope of the attorney's fiduciary agency, but it does not authorise the power to be used inconsistently with the fiduciary duty. 83 Then subsection (2) makes it expressly clear that the general authority conferred by subsection (1) does not extend to action that results in a benefit for the attorney, unless the authority to do so as expressly conferred by the instrument. That is, again, consistent with Dixon J's reasoning. Subsection (2) permits the power of attorney, by express language, to authorise acts that result in a benefit to the attorney, but it does not permit the power of attorney to abrogate the fiduciary limitation implied by subsection (1). 84 My conclusion is that the plaintiff's power of attorney did not confer express actual authority on Michael to execute the mortgage and other supporting documents for the Conran Associates loan and the M & V Endurance loan." 135 Because s 163B itself describes the authority which a power of attorney in the prescribed form confers, the necessary exercise is to construe the terms of the statute. 136 Austin J concluded that the words "on behalf of" and "attorney" in s 163B(1) could not describe the entry into of a contract by an agent with a third party solely to the benefit of the agent. Such conduct could not, in his Honour's view, be "on behalf of" or "as attorney" for the principal. 137 By reference to the fiduciary obligations which arose from the grant of the power of attorney (to act for the principal's benefit) his Honour reasoned that the terms "on the grantor's behalf" and "attorney" cover only actions done in the grantor's interests. 138 His Honour concluded that as a matter of English language an action by an agent for his sole benefit could not be "on behalf of", or as "attorney" for, his principal. Hence, his Honour determined, s 163B(1) did not mean that an agent clothed with the authority therein described could do anything which the principal himself could lawfully authorise his agent to do. 139 His Honour also reasoned that the use in s 163B(2) of the term 'a benefit' indicated a narrower scope than would have been indicated by words which expressly contemplated the sole benefit being conferred on the agent. 140 His Honour considered that it was unlikely that there was any legislative intention to depart from the principle reflected in the authorities that powers of attorney are to be strictly construed and restricting an agent from acting to his own benefit. 141 With utmost respect to his Honour I find myself unable to agree either with his process of reasoning or with the conclusion which it yields. 142 Firstly to construe words in a written instrument or statutory provision by reference to fiduciary duties which the relationship created by that instrument or provision gives rise, involves circularity and is contrary to accepted canons of construction and binding authority. 143 The fiduciary relationship must accommodate itself to the terms of the arrangement (in this case a written contract which is given content by s 163B), not the other way round. 144 Secondly in my respectful opinion the words "on behalf of" and "attorney" used in s 163B(1) do not as a matter of language have the meaning attributed to them by his Honour. 145 The Oxford English Dictionary, 2nd ed, defines "on behalf of" (cf "in behalf of") in the following terms, as relevant: "I.1. on behalf of … c. On the part of (another), in the name of, as the agent or representative of, on account of, for, instead of. (With the notion of official agency.) …" 146 It defines "attorney" as follows: "2. ( attorney in fact, private attorney .) One duly appointed or constituted (by letter or power of attorney ) to act for another in business and legal matters, either generally , as in payment, receipt, and investment of money, in suing and being sued, etc., or in some specific act, which the principal, by reason of absence, is unable to perform in person. Hence the contrast between 'in person' and 'by attorney,' frequent also in fig. senses. …" 147 The term "attorney" signifies anyone who acts in the turn or place of another; Halsbury's Laws of England, 4th ed, vol 44(1) (reissue) at [1]. It has no necessary connotation that the actor acts for the benefit of another. 148 "Attorney" and "on behalf of" in the present context connote no more than a relationship which results in the actions of one person binding another. They are "concerned with the standing of one person as auxiliary to or representative of another person or thing"; R v Toohey; Ex parte A-G for Northern Territory (1979) 145 CLR 374 at 386, per Stephen, Mason, Murphy and Aickin JJ. 149 As a matter of language a person may lawfully authorise another to do something on his or her behalf which is entirely inimical to the first person's interests or entirely in the second's. 150 Likewise an attorney may, if authorised, act entirely inimically to his or her appointer's interest. 151 In my view as a matter of language neither the term "attorney" nor the term "on behalf of" necessarily imports any notion of benefit. The words merely connote the relationship where one person's actions bind another. 152 Even in the situation where there is a fiduciary duty, the expressions "for", "on behalf of" and "in the interests of", signify that the fiduciary acts in a "representative" character in the exercise of his responsibility: Hospital Products Ltd v United States Surgical Corp at 97, Mason J. 153 Whether a particular action by the agent under a general power of attorney on the principal's behalf involves a breach of fiduciary duty is a different matter. The principal may have redress against his agent and a third party who participates in the breach with requisite knowledge. Such a case would have to be pleaded. No such assertion is made in these proceedings against the defendant. 154 The only limitation which s 163B(1) imposes on the agent's authority is that the principal cannot authorise the agent to do what the principal could not lawfully do or what the law would restrict the principal from authorising the agent to do on the principal's behalf. 155 The limitation which his Honour placed on the words blurs the distinction between the extent (or lack) of authority and the abuse of it. 156 Thirdly a consideration of the underlying policy of the provision and the mischief it seeks to avoid as disclosed by relevant material not forming part of the Act (to which his Honour was not taken) assists in confirming that the words do not have the restricted meaning which his Honour ascribed to them but have their ordinary meaning. 157 Section 163B(1) followed the enactment in England of s 10 of the Powers of Attorney Act 1971 (UK), which is in the following terms: "10. Effect of general power of attorney in specified form (1) Subject to subsection (2) of this section, a general power of attorney in the form set out in Schedule 1 to this Act, or in a form to the like effect but expressed to be made under this Act, shall operate to confer – (a) on the donee of the power; or (b) if there is more than one donee, on the donees acting jointly or acting jointly or severally, as the case may be, authority to do on behalf of the donor anything which he can lawfully do by an attorney. (2) [Subject] to section 1 of the Trustee Delegation Act 1999, this section] does not apply to functions which the donor has as a trustee or personal representative or as a tenant for life or statutory owner within the meaning of the Settled Land Act 1925." 158 The words in square brackets were inserted by amendment in 1999. 159 Before its promulgation s 10 was the subject of a Law Commission Report, under the chairmanship of Mr Justice Scarman, presented to Parliament by the Lord High Chancellor on 7 August 1970. 160 Paragraph 39 of that report was in the following terms: "39. We have concluded that the best way to achieve the objective of having a statutory form of general power which would avoid argument as to the extent of the authority conferred would be to provide in the Act itself that a power in the statutory form should confer on the attorney authority to do on behalf of the donor anything which the donor can lawfully do by an attorney. The power itself can then be a very simple one-paragraph document referring to the relevant section of the Act. This in our view will quieten argument more effectively than any general words in the power itself (which, as experience shows, people are reluctant to take at their face value) or a long string of specific clauses which can never be all-embracing. It will enable the attorney to say firmly: 'I can do anything that the donor could do; the Act says so'. This one exception must be in respect of the donor's powers and discretions as a trustee. It is already recognised as the better practice in such a case to refer specifically to the trusts concerned and it is thought that this practice should be encouraged and that the statutory form should not embrace a delegation of this sort. Under our foregoing recommendations attention will have to be directed to the particular trusts involved since the delegation will be effective only if the requisite notices are given." (emphasis added) 161 The explanatory note to s 10 (which was numbered 9 in the Bill) was in the following terms: "9. Accordingly subsection (1) provides that a power in the form set out in the Schedule operates to confer authority to do anything that the donor could lawfully do by an attorney. In general this means everything that the donor could do in his own person. But there are some acts which, under English law, can only be done personally and not by an agent, for example marrying in England where marriage by proxy is not permitted." (emphasis added) 162 In this State s 163B of the Conveyancing Act was introduced by the Conveyancing (Powers of Attorney) Amendment Act 1983 No. 26, assented to on 22 April 1983. 163 Its enactment followed the New South Wales Law Reform Commission's Report on Powers of Attorney (LRC18) and the later Report on Powers of Attorney and Unsoundness of Body or Mind (LRC 20). Both reports made reference to the English report – indeed, it was said in LRC18 (at [2]) that the New South Wales Law Reform Commission's proposals for changing the law had been "influenced in several cases by changes effected in the United Kingdom under the Powers of Attorney Act 1971." 164 In the end result LRC20 made no specific proposals for a statutory power of attorney but invited views of interested persons (see [165] – [176]). 165 However during the second reading of the Bill in the Lower House the Minister, moving that the Bill be read for a second time, said (consistently with the English position) this of it: "[It] will provide for the operation of a statutory short form power of attorney conferring on the attorney authority to do on behalf of the principal anything the principal may lawfully authorise an attorney to do. The principal would, of course, be able to impose whatever conditions or limitations on the authority he desires. However, the bill specifically provides that the power does not authorise an attorney to execute any dealing in favour of himself unless this is expressly allowed by the principal." (emphasis added) 166 During the second reading of the Bill in the Upper House reference was made to s 10 of the English Act and to the fact that the proposal before the House was "extended slightly". This was apparently a reference to the inclusion of s 163B(2)(b), that is, the carve out for self-benefit. 167 Subject to the operation of the carve out in any given instance the plain meaning of s 163B(1) is that the agent is vested with power to do anything which the principal himself could do. The policy behind the provision is to avoid argument about, or the necessity for inquiry into, the agent's authority. 168 To require (as does his Honour's approach) a third party to divine the difference between a transaction which is solely to the agent's benefit and one where he gets some (however slight) benefit (or indeed to have to enquire at all) would defeat the underlying policy of the provision and result in the mischief the provision is calculated to avoid. 169 Moreover s 163B(3) provides that if limitations are specified in the instrument, the authority is so limited. The clear implication is that without such limitations the authority is not limited other than by what cannot lawfully be done through an agent. 170 Fourthly there is support in the text books for the conclusion I have reached. 171 In Bowstead and Reynolds the learned authors in their commentary to Article 24 on the construction of powers of attorney, at [3-011], say: "Where an absolutely general power is required, doubts can be avoided by using the form provided by s 10 of the Powers of Attorney Act 1971 (as amended), which confers authority to do on behalf of the donor anything which he can lawfully do by attorney." 172 In Fridman, op cit, the learned author at page 65, with reference to s 10 of the Powers of Attorney Act 1971 (UK), puts the effect of the statutory general power of attorney as follows: "…it confers on the donee or donees of the power authority to do on behalf of the donor, ie the principal, 'anything which he can lawfully do by an attorney'. Thus, if the words are unqualified, viz, 'I appoint A to be my attorney in accordance with s 10 of the Act', the only restriction of the agent's authority will stem from the principal's incapacity to act through an agent, eg where he is entering into a contract of marriage." 173 Fifthly I respectfully disagree with his Honour's view that the use in s 163B(2) of the words "a benefit" (rather than "the benefit" or "the only benefit") indicates that a transaction for the sole benefit of the agent is not covered; in other words that only transactions partially to the benefit of each can ever be authorised. My reasons are that: a there is "a benefit" to the agent even if it is the sole benefit; b his Honour's conclusion runs counter to the plenary authority which s 163B(1) confers; c the only limitations on the agent's authority are those specified in the section. The self-benefit limitation is removed by the inclusion of par 2 of the power of attorney, leaving the power conferred by s 163B(1) unaffected; and d the underlying policy behind the provision (where there is no limitation specified) is that it is not incumbent on the third party to go behind the authority, and for a third party to have to assess whether the principal will obtain some benefit (direct or indirect) undermines that policy. The position is different where there is an express limitation and the third party is on notice of the risk. 174 Finally his Honour placed significant reliance on the approach taken in Tobin v Broadbent that a power of attorney is to be strictly construed and concluded that it was unlikely that the legislature intended to overturn this approach. I respectfully differ from this view. The plain meaning of the words, the policy behind the provision and the extra-legislative material indicate the opposite. 175 It remains then to consider the effect if any of s 163B(2)(b), for which there is no counterpart in the English enactment. 176 Unless the instrument expressly confers it, the agent does not acquire authority to do anything as a result of which a benefit would be conferred on him. 177 On the construction of s 163B(1) which I have found, the general power conferred by that section would, absent the limitation in subs (2), authorise an agent to act in that fashion. 178 But that limitation is removed where the instrument expressly confers authority, as it does when the terms of clause 2 of Schedule 7 are included in a power of attorney. 179 Leaving aside the trustee limitation in s 163B(2)(a), the only limitation that remains is that the agent is not authorised to do what the principal could not lawfully authorise him to do. 180 The plain meaning of the words of s 163B as confirmed by the relevant material not forming part of the Act as well as the policy behind the provision dictate the conclusion that his Honour's construction that there was no power in Michael to bind the plaintiff to contracts solely for his benefit is wrong. 181 My conclusion says nothing of the fiduciary obligations which would have bound Michael to act in a particular way with respect to his mother when exercising the power she conferred upon him, nor derogates from what might have been a breach by Michael of those obligations. 182 But the plaintiff's case is not that Michael breached his fiduciary duty to her in doing what he did. Her case is that he had no power vis-à-vis the defendant to bind her to the contracts. Extended construction 183 His Honour's conclusion on construction concerned only transactions solely for the benefit of the agent, and his factual finding was that the transactions under consideration by him had that quality. 184 The plaintiff puts, again as a matter of construction, that a transaction for the predominant (as opposed to the sole) benefit of the agent would also be beyond power. 185 Having concluded that his Honour's construction with respect to sole benefit was incorrect it follows that a transaction for the agent's predominant, rather than sole, benefit would not be beyond the authority conferred by the power of attorney. The plaintiff did not suggest any juridical basis for a construction of s 163B that permitted a benefit, but not a predominant benefit to the agent. Self-evidently a third party dealing with the agent would be put in a very difficult position if predominancy of benefit determined the ambit of authority. In any case, in addition to Michael, Spywing and Sarina benefited from the contracts. 186 The plaintiff in any event failed to make out that the contracts were to Michael's sole benefit. 187 The evidence did not establish it and given the manner in which the plaintiff's case on the issue was conducted, a finding to that effect is not, in my view, fairly open. 188 On the first day of the hearing before me the plaintiff sought to amend her statement of claim to assert lack of authority in Michael. She proposed to plead in support of the contention of sole or predominant benefit to Michael a new contention that the proceeds of the NAB loan had been enjoyed by Michael and had not benefited the plaintiff. On a fair reading of the pleadings as they had stood, benefit to the plaintiff had not been or not squarely (at least) been placed in issue. 189 Objection was taken by the defendant to an amendment in those terms. Factual enquiry would have been necessary for the defendant to have had a fair opportunity to meet it with an inevitable adjournment and accompanying costs consequences. 190 Following debate between the Court and both sets of counsel, in order to avoid those consequences, the plaintiff proceeded with a modified amendment in the following terms: "40. The Mortgage and Loan Agreement were not entered into on behalf of the Plaintiff but were entered into for the sole or predominant benefit of Michael Spina Particulars The funds lent under the Loan Agreement were advanced by the defendant, as follows: $152,000 to discharge National Australia Bank mortgage registered number 9574371 ('the NAB payment"); $128,928.19 to Spywing Pty Ltd ("the Spywing payment"); $114,640.00 to Across Australia Pty Ltd ("the Across Australia payment"). The Across Australia payment solely benefited Michael Spina, as that payment discharged a mortgage over Michael Spina's home at 43 Bain Place, Dundas; The Spywing payment solely benefited Michael Spina, as that payment went to a company in which Michael Spina was the principal director and shareholder, and with which the Plaintiff had no connection. The loan was not entered into on the Plaintiff's behalf, and did not benefit the Plaintiff, because: i) It exposed the Plaintiff to a liability greater than the $150,000 cap on that loan and mortgage; ii) the NAB was not threatening any enforcement action, or any action otherwise detrimental to the Plaintiff, such that a benefit flowed from having that loan and mortgage discharged, and replaced by a loan from the defendant in circumstances where: (a) the terms of the defendant's loan were more onerous to the Plaintiff than the terms of the NAB loan in that the terms of the defendant's loan included a default provision imposing interest at an additional 2% in the event of default; and (b) the mortgage in favour of the NAB was itself liable to be challenged by the Plaintiff as unconscionable or pursuant to the Contracts Review Act as pleaded in 18(l) above. 41. In the premises, the Power of Attorney did not authorise Michael Spina to bind the Plaintiff to the Mortgage and the Loan Agreement, and the Plaintiff is not bound by the Loan Agreement or the Mortgage. 42. Further or in the alternative, the Power of Attorney did not authorize Michael Spina to enter into the Loan Agreement in respect of an amount greater than the amount owing on the NAB loan at the time of entry into the Loan Agreement. 43. In the premises, the Plaintiff's obligation to the Defendant under the Loan Agreement if any is limited to the amount that was owing to the NAB as at the date of entry into the Loan Agreement." 191 Paragraph 18(l) pleaded that the NAB mortgage was liable to be set aside under the principles of unconscionability and/or under the Contracts Review Act. 192 The plaintiff specifically refrained from pleading that the proceeds from the NAB loan went solely to Michael or for his benefit. In fact, the evidence did not establish where the proceeds went. A factual enquiry into that matter did not take place before me. 193 The circumstances surrounding the entry into of the NAB mortgage were not the subject of any significant factual enquiry before me. The circumstances under which the plaintiff signed the NAB documents and any dealings she may have had with the NAB were not revealed. The witness to the NAB mortgage was not called. 194 Significantly it was accepted on behalf of the plaintiff that prima facie she received from the contracts the benefit of the discharge of the NAB mortgage over her property. 195 In those circumstances a finding that the contracts, notwithstanding the discharge of the NAB mortgage, were solely for the benefit of Michael is not fairly open. 196 No doubt for this reason the plaintiff pleaded that the NAB mortgage itself was liable to be set aside for unconscionability or under the Contracts Review Act. 197 It is to be borne in mind that the issue of sole benefit in the present context arises in the context of the extent of the authority under the power of attorney. 198 The fact that a transaction may be set aside either in equity or under statute does not equate to a finding that the transaction was to the sole benefit of the guilty party. 199 In the absence of proper ventilation of that issue, with the defendant having a proper opportunity to meet the assertion including an opportunity to call the NAB or pursue further production of documents, a finding that the NAB mortgage was unconscionably obtained by that institution or liable to be set aside wholly or in part is also not fairly open. 200 It also seems to me that paragraph 43 of the further amended statement of claim implicitly recognises that the assertion of sole benefit to Michael is not maintainable. 201 As a separate matter the loan from the defendant was not for Michael's sole benefit because, at the lowest Sarina got the benefit of the discharge of the mortgage over the Dundas property. 202 In my view the terms of the power of attorney extended to authorising Michael to conclude the contracts on behalf of the plaintiff. 203 I turn now to the claim based on unconscionable conduct. UNCONSCIONABLE CONDUCT The legal principles 204 Where a bargain is obtained by a stronger party unconscientiously using its power against a weaker party, a Court of Equity has jurisdiction to relieve the weaker party of the bargain. 205 The following principles are established by the authorities: a the jurisdiction with respect to unconscionable conduct is separate from the equitable jurisdiction to set aside transactions brought about by undue influence; b the focus is not upon the quality of the weaker party's assent, as is the case with undue influence, but upon the conduct of the stronger party; c the weaker party must have a disabling condition, or the circumstances must be such, so as seriously to affect the ability of that party to make a judgment as to his, her or its own best interests. The weaker party's need or distress must be such as to leave that party in the power of the stronger; d the disadvantage of the weaker party may arise because of illness, ignorance, inexperience, impaired facilities, financial need, lack of assistance or explanation where necessary, lack of relevant language competence, emotional dependence or other circumstances; e it is not necessary for the stronger party to have actual knowledge of the weaker party's special disadvantage. It is sufficient if the stronger party is aware of the possibility or of facts that would raise that possibility in the mind of any reasonable person that the weaker party is suffering some special disadvantage; f the stronger party must take advantage of the opportunity presented by the weaker party's disadvantage; g the stronger party's conduct in taking such advantage must be unconscientious; and h where a stronger party has taken advantage of a weaker one to obtain a beneficial bargain, the onus is on the stronger party to show that his conduct was fair, just and reasonable. The presence of independent advice can be an important factor in showing that the transaction was fair, just and reasonable. See: Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447; Louth v Diprose (1992) 175 CLR 621; Bridgewater v Leahy (1998) 194 CLR 457; Morrison v Coast Finance Limited (1965) 55 DLR (2d) 710 at 713; Meagher, Heydon and Leeming, Meagher Gummow & Lehane's Equity Doctrines and Remedies , 4th ed (2002) Butterworths LexisNexis at [16-005] – [16-035]. 206 It is accordingly necessary for the plaintiff to establish three things: a firstly that vis-à-vis the defendant she had a special disadvantage which impaired her ability to make a judgment as to her own best interests with respect to her entry into the contracts; b secondly that the defendant either knew of her special disadvantage or of the possibility of it or knew facts which would have raised that possibility in the mind of a reasonable person in the defendant's position; and c thirdly that the defendant unconscientiously used its superior power against her in entering into the transaction. 207 The plaintiff's submissions did not approach the matter by seeking to identify each of these three elements of her cause of action. 208 Rather it was put on behalf of the plaintiff that: a the defendant (itself and by its agents) was aware of a series of facts (or the possibility thereof) which at the very least would have raised the possibility in the mind of any reasonable person that the plaintiff was in a position of special disadvantage vis-à-vis the defendant; b enquiry would have revealed to the defendant that the plaintiff would not have been in a position to service the loan and would not benefit "from at least a considerable proportion of the loan". 209 The following were the facts said to have been either within the defendant's knowledge through its agents (ALS and MacGillivrays) or which enquiry would have revealed: a the plaintiff was 86 years old and infirm; b the loan was for a period well beyond her life expectancy and there was no benefit to her in borrowing for that period or in acquiring a future investment; c the loan application did not identify the details of the investment referred to in it; d she was retired or her income was not sufficient to service the loan on her own; e she would be unable to obtain employment on the open labour market; f if she was playing some role in the Action Fruit business she would not be able to continue to do so (or to earn income) for most of the loan period; g the market rent from the Cherrybrook property was not enough on its own to pay the interest on the loan and if Michael defaulted it would be necessary to eat into the security; h the income stated in the loan application was that of Michael or Spywing; i the address of the Cherrybrook property was different from that of Michael and the plaintiff was not living at the property; j although her address was in Sydney she did not personally execute the contracts and was therefore not managing her own affairs; k only Michael's correspondence, details and telephone numbers were given; l there were facts from which it could be inferred that the loan was related to the fruit business; m the loan application listed one of its purposes as refinance with a figure of $400,000 appearing beside that reference whereas the only indebtedness was shown to be $150,000 owed to the NAB. (This contention is on its face incorrect. The reference relied on by the plaintiff shows the figure of $400,000 as an "asset-debtors". A different part of the document shows the $400,000 under loan required: refinance $400,000); n the NAB loan did not need refinancing; o parts of the asset and liability statement in the loan application were not filled in; p Michael had listed the NAB loan as a liability of his; q Michael was jointly indebted to the NAB and would be relieved of that liability upon receipt of the loan monies; r no security was being provided by Michael; s the defendant had no reason to believe that the loan or interest could be paid other than by recourse to the property; t Michael was in a position to receive the entire benefit of the contract with the plaintiff bearing the entire burden so far as security given was concerned; u the loan was entirely or overwhelmingly for the benefit of Michael; v there was a potential conflict of interest between Michael and the plaintiff; w the plaintiff had never in fact or personally received independent advice in respect of the transaction; x the only person to have been physically seen by Blessington Judd and provided with any advice was Michael who was also a borrower. 210 As put the facts contended for appear to involve a combination of factors which might amount to special disability; which might instead indicate that the transactions were improvident for the plaintiff; which might instead indicate that Michael breached his fiduciary duties; or which might instead concern more the quality of the plaintiff's assent rather than the nature of the defendant's conduct. 211 Nevertheless it is necessary to approach the matter as the authorities require by examining whether what the plaintiff puts makes out unconscionable conduct on the part of the defendant by establishing the three necessary elements; namely disadvantage, knowledge and unconscientious advantage. 212 I will deal with each of the necessary elements in turn. Disadvantage 213 Despite her age, circumstances and lack of literacy, the plaintiff's capacity in giving Michael the power of attorney, and in giving Sarina the 2006 power of attorney was not put in issue. It was not put that she did not understand the nature and effect of those instruments 214 No medical evidence was called on her mental capacity to have understood the contracts at the time they were entered into, assuming she had been told about them. 215 The evidence was capable of giving rise to the inference that the plaintiff was closely emotionally attached to Michael but there was no evidence that the plaintiff ever knew of the contracts or that Michael brought any undue influence to bear upon her with respect to them because no oral evidence was available and the contracts were concluded through the power of attorney. 216 So far as any disadvantage vis-à-vis the defendant was concerned, the plaintiff herself had no dealings directly with it. All her dealings with the defendant were either through her attorney, Michael, or through her solicitors. 217 For this reason, on one view of things, the notion of any disadvantage vis-à-vis the defendant arising out of her age, infirmity, lack of literacy (or otherwise) never arose. 218 But even if it did, whether a weaker party has assistance in the form of independent legal or other advice is important: see Commercial Bank of Australia Limited v Amadio at 466, 467-468, 469, 476-477, 479, 481; Ribchenkov v Suncorp-Metway Ltd [2000] FCA 835 at [64] – [70] and the cases there referred to; Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674. 219 The presence of such assistance may redress any personal disadvantage. 220 The plaintiff had Michael as her attorney and Blessington Judd as her solicitors, both of whom were interposed between her and the defendant. 221 Although it was not suggested that Michael was under any special disability, it seems to me that in the particular circumstances of this case his presence should have redressed the imbalance – although, in fact, it did not. 222 But the same cannot be said of Blessington Judd. From no later than 22 October 2003, the defendant's dealings with the plaintiff were exclusively through Blessington Judd. 223 In their letter to MacGillivrays of 27 October 2003 Blessington Judd said that they were acting for the plaintiff and Michael in relation to independent legal advice on mortgage documents with the defendant. 224 Blessington Judd transmitted to the defendant a declaration by Michael on the plaintiff's behalf that independent legal advice had been obtained for the plaintiff. 225 No evidence was adduced by the plaintiff that independent advice had not been obtained. Blessington Judd were not called and no documentary evidence with respect to that issue, apart from the declarations that indicated that it had been obtained, was adduced. 226 Nor was it suggested that Blessington Judd were incompetent or incapable of adequately protecting the plaintiff's interests. 227 It was put that it should have been plain to the defendant that Blessington Judd were acting in the face of a conflict of interest. 228 But from the defendant's point of view there were joint borrowers, the NAB mortgage was being discharged and it had no knowledge of the destination of the remaining funds. Any conflict and its management was for the plaintiff's solicitors not the defendant. 229 The plaintiff was vulnerable to an unfavourable transaction irrespective of whether she had any disadvantage, because she had given her son plenary power to commit her. Her vulnerability was to Michael's shortcomings, rather than to the defendant's power. 230 In turn, she had lawyers. She would have been vulnerable (as is anyone else) to the failure of her advisers to protect her, if that was necessary. 231 Because she had solicitors acting for her I do not consider that the plaintiff has established that she was, vis-à-vis the defendant, in a position of special disadvantage in respect of their mutual dealings. For this reason alone the plaintiff's claim based on the assertion of unconscionable conduct by the defendant fails. The defendant's knowledge 232 In considering the extent of the defendant's knowledge, an initial question which arises is the extent to which the knowledge of its agents is to be attributed to it in this case. 233 The defendant faintly submitted that ALS was an "independent contractor" and not the agent partner of AMS or the mortgagee, presumably on the basis that ALS' knowledge should not be attributed to the defendant. The defendant did not place in issue that knowledge on the part of MacGillivrays should be attributed to the defendant. 234 Although the contractual arrangements between ALS and AMS provide that ALS is an independent contractor and not an agent, in my view ALS was conducting dealings on behalf of AMS and the defendant, and whilst it may not have been an agent for the purposes of committing the defendant to the loan and mortgage, it was its agent for the purpose of furthering the credit application. 235 I proceed on the basis that relevant knowledge held by ALS and MacGillivrays was knowledge held by the defendant. 236 It was put as a separate matter that because MacGillivrays appointed Blessington Judd as its unpaid agents on settlement, the knowledge of Blessington Judd that the bulk of the loan monies were going to Spywing and Across Australia Finance was to be attributed to the defendant. 237 For a number of reasons the submission that Blessington Judd's knowledge of the disposition of the funds at settlement should be attributed to the defendant via MacGillivrays is untenable. 238 The extent of the authority conferred by MacGillivrays on Blessington Judd was no more than to attend and carry out the mechanics of settlement. The loan funds were advanced to the plaintiff by being deposited into Blessington Judd's trust account with Macquarie Bank. At settlement Blessington Judd took delivery of the relevant documents on behalf of MacGillivrays and subsequently sent them on. The disposition of the funds in Blessington Judd's trust account by cheques in favour of Spywing and Across Australia Finance were matters internal to the plaintiff and did not constitute part of the dealing by Blessington Judd on behalf of MacGillivrays pursuant to the unpaid agency to effect settlement. The knowledge was not acquired by Blessington Judd acting within the scope of its authority. Further there was no duty on the part of the defendant to make further investigation as to what the plaintiff or Michael was doing with the money either arising out of the unpaid agency or at all. 239 The defendant undoubtedly knew of the plaintiff's age but had no reason to consider that she lacked any necessary intellectual capacity. The defendant can be taken to have understood that she was unlikely to live for 30 years more. 240 However advanced years should in no way, in my view, of itself be equated with nor presumed to entail lack of intellectual capacity. Similar considerations apply in my view to the making of investments by persons of advanced years. A different view is redolent of patronising the aged. 241 The defendant cannot fairly be expected to have formed conclusions that the plaintiff was incapacitated, incapable of making investments at her age, or in straitened circumstances. Nothing that emanated from her solicitors gave any inkling to that effect. Those were matters for her own solicitors to watch over. 242 From the defendant's point of view, so far as the commercial and financial ramifications of the transactions and any emotional, financial or other vulnerability to her son were concerned, the plaintiff had advice and protection. 243 It was put on behalf of the plaintiff that the defendant knew that the plaintiff had not personally received any independent advice. 244 Ms Hannay did not know whether the plaintiff personally and directly had received any independent advice. But when documents were received under cover of Blessington Judd's letter of 27 October 2003, Ms Hannay noticed that the plaintiff herself had not signed the Declaration by Borrower or Acknowledgement of Legal Advice. 245 She drew this to the attention of Blessington Judd who thereafter provided her with a fresh Declaration by Borrower, which recorded that Michael was the plaintiff's attorney and that he had "received independent legal advice regarding the loan and security documents" as attorney for the plaintiff. As well she received a Declaration of Legal Advice referred to by Blessington Judd as "also executed by the Attorney". 246 Ms Hannay did not know whether the plaintiff had personally dealt with Blessington Judd but she did know that those solicitors were acting for the plaintiff who had provided advice for her benefit at least through her lawfully appointed attorney. 247 The defendant and its solicitors were entitled to assume that the plaintiff had, albeit via her attorney, been properly advised in respect of the transactions. This would be so even if the plaintiff did not in fact get such advice, although there was no evidence in this case that she did not and documentary material to the effect that she did. 248 In any event the financial material available indicated that Michael was not without resources. The rental from the Cherrybrook property was not enough to pay all of the interest on its own, but it was more than half the interest. The plaintiff would not have to repay capital (subject to any right of contribution from Michael in respect of any payment more than her share) until after she was 96 years old. The material also indicated that she had a connection with Spywing's business, albeit that she was retired. 249 The ordinary interest rate under the loan from the defendant was lower than the NAB rate and substantially lower than the rate from Across Australia Finance, which loans were replaced with the loan from the defendant. 250 Even if there was a potential conflict of interest between the plaintiff and Michael, and Blessington Judd were acting in the face of it, this does not mean that the plaintiff did not receive the benefit of proper advice. There is nothing to suggest that Blessington Judd avoided its duty to her. I do not consider that the inference is open that they failed in their duty to either of their clients. Either way it was not for the defendant (through its solicitors, or at all) to go behind her lawyers: see Kleinwort Benson Australia Ltd v Armitage & Ors (unreported, NSWSC, 26 April 1989) per Cole J. 251 Even leaving aside the interposition of legal advice, I do not consider that a finding on the facts is reasonably open that the defendant had knowledge of any special disability or knowledge of facts that would have raised that possibility in the mind of a reasonable person in its position. Unconscionable behaviour 252 It is incumbent on the plaintiff to establish that the defendant took advantage, against good conscience, of the plaintiff's disability, and thereby obtained the bargain. 253 I have already found that the plaintiff has not established that vis-à-vis the defendant she was under a special disadvantage, or that the plaintiff had the requisite knowledge. 254 However, if I am wrong, in my view the plaintiff fails at the third hurdle as well. 255 Far from the defendant placing any impediment in the way of the plaintiff obtaining the assistance of a disinterested legal advisor or applying unfair tactics, Ms Hannay insisted, correctly, on appropriate declarations being furnished on the plaintiff's behalf and they came via her solicitors. 256 The plaintiff's solicitors attended settlement and to the disbursement of the loan funds and reported back to MacGillivrays. 257 In no way can the defendant's conduct be described, in my view, as an unconscientious taking advantage of the plaintiff's disability to obtain the bargain: see Ribchenkov v Suncorp-Metway Ltd at [64]. 258 The plaintiff makes no case that the contracts should be set aside on the basis that the defendant knowingly participated in a breach by Michael of his fiduciary duty to his mother. 259 A submission was put on behalf of the plaintiff that ALS had failed to comply with the operations manual provided to it by AMS in relation to the loan to the plaintiff and Michael. The operations manual set out the procedures ALS was to follow and the criteria it was to apply when assessing loan applications. 260 It was submitted that ALS deviated from the operations manual when, among other things, it failed to ensure that the borrowers had clear credit histories and held stable employment, and it failed to retain evidence as to the purpose of the loan and certain other records. It was put that, had ALS complied with the operations manual, it would have recognised that the transaction was improvident for the plaintiff and would not have recommended it to AMS. 261 I have already found that it was not incumbent on the defendant to go behind the plaintiff's solicitors and that nothing it did can fairly be described as unconscionable. Its guidelines are predominantly its own internal prudential standards. Its deviation from them in no way points to unconscionable conduct on its part. 262 The plaintiff's claim based on the defendant's unconscionable conduct therefore fails. CONTRACTS REVIEW ACT 1980 The provisions of the Act 263 By s 7(1) of the Contracts Review Act where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, if it considers it just to do so, and for the purposes of avoiding as far as practicable an unjust consequence or result, it may make certain orders including refusing to enforce any or all of the provisions of the contract, declaring it void in whole or in part or varying it. 264 "Unjust" is defined in s 4(1) to include "unconscionable, harsh or oppressive, and 'injustice' shall be construed in a corresponding manner". 265 Section 9 of that Act sets out the matters to be considered by the Court. It is in the following terms: "9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made." The legal principles 266 The Contracts Review Act has been the subject of extensive judicial consideration from which the following presently relevant principles emerge: a consideration of whether relief should be granted to a party under the Act involves a two-step process: firstly, a determination on the particular facts of the case whether the contract was unjust in the circumstances relating to it when it was made and, secondly, if the contract was unjust, the exercise of a discretion whether or not to grant relief and if so, the form of any such relief, in order to avoid an unjust consequence or result: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256. b the circumstances described in s 9 are not exhaustive and each case under the Act must be determined on its own facts: Pasternacki and Solka-Pasternacki (as Executors of the Estate of the Late Mary Nagy) v Correy [2000] NSWCA 333 at [56]. c while equity provides relief against the unconscientious conduct of the defendant, the Act may permit relief in circumstances where the conscience of the defendant is not affected. Relief may be given even where relevant circumstances were not known to the other side when the contract was entered into. A contract, or a provision thereof, may be unjust in circumstances where there was no pre-existing duty owed by a lender to a borrower to act in a particular way: St George Bank Ltd v Trimarchi [2004] NSWCA 120 at [36]; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41. d under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to a party or because of the way in which it was made or both. A contractual provision may be unjust simply because it imposes an unreasonable burden on a party when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620. e the public interest requires the Court to consider the position and rights of the party against whom relief is sought. Orders may be made in favour of a party to a contract who proves that at the date of the contract he suffers from a relevant disability even though the other party to the contract is unaware of it. However, in general the Court should be reluctant to exercise the jurisdiction in those circumstances because the effect may be to deprive an innocent person of valuable contractual rights: West v AGC (Advances) Ltd at 626; Beneficial Finance Corporation Ltd v Karavas at 277. Were the contracts unjust? 267 It was put that the "kernel" of the plaintiff's case was that the defendant knew of the plaintiff's age, the length of the loan, and the representation that she was a participant in the business which "sat uncomfortably" with the use of a power of attorney when the plaintiff was known to be in Sydney. This, it was put, should have put the defendant on enquiry as to how the funds were being advanced, which enquiry would have enlightened the defendant of the true nature of the transaction, presumably that it was one mainly for the benefit of Michael with the plaintiff putting up the only security. 268 As to the matters specified in s 9(2) of the Contracts Review Act, the plaintiff's submissions were limited to reliance on subparagraphs (a), (b), (c), (e) and (h) of that subsection. 269 Paragraphs (a) and (b) of s 9(2) were submitted to be "peripherally relevant". 270 With respect to par (c) of s 9(2), it was submitted that, whatever her capacity was, the plaintiff was "simply not there" when the contracts were entered into and had no means to protect herself in that regard. 271 With respect to par (e) of s 9(2) it was submitted that so far as Michael was concerned he was in a position to represent her interests but also to disadvantage them. As to Blessington Judd it was put that they were instructed only by Michael and they were not protecting her interests and this was a reality of which the defendant was aware. 272 As to par (h) of s 9(2) it was put that at a practical level advice was not obtained and that what advice was obtained was not independent given the "apparent conflict" between the plaintiff and Michael. 273 The substance of the plaintiff's contentions is that: a Michael committed her at her age to an improvident transaction; b she was not there to protect herself and the protection she had was inadequate; and c the defendant knew these things or failed to make enquiries having been put on notice. 274 Under s 9(1) of the Contracts Review Act the Court is to have regard to the public interest and to all the circumstances of the case including the matters set forth in s 9(2). The public interest requires account to be taken of the position and rights of the defendant and not only of the plaintiff. 275 In Pasternacki and Solka-Pasternacki (as Executors of the Estate of the Late Mary Nagy) v Correy the Court reviewed some of the authorities which have found contracts to have been unjust where the transaction was improvident to the plaintiff and a defendant lender either knew of it, or failed to make enquiries having been put on notice. 276 Each of the cases reviewed can be distinguished from the present one in significant respects. 277 In Teachers Health Investments Pty Ltd v Wynne (1996) NSW Conv R 55-785 the respondent was cajoled and bullied into entering into the mortgage by the principal debtor, her husband. She was given false information of his ability to service the loan and the lender had information which indicated that the mortgage was sheer folly when looked at from the ability of the principal debtor to make the interest payments. Although there were lawyers acting for the principal debtor in relation to the transaction, there was no evidence that they acted for the respondent, and the appellant was not entitled to assume that they did. Nor was there any indication that she had received independent advice from any other source. 278 In NAB v Hall (1993) NSW Conv R 55-684 Mrs Hall stood to receive no benefit whatsoever from the transaction but ran the risk of losing the house in which she was born and had lived all her life. The bank did not deal with her in any real sense. She merely turned up to sign documents presented to her, the arrangements having been made by her son. There too, she did not have a lawyer acting. 279 In Melverton v Commonwealth Development Bank of Australia (1989) NSW Conv R 55-484 the plaintiff had no assets or income from which she could possibly pay the bank and had no interest in the company which borrowed the money. There was also no lawyer acting. 280 In Reisch v Commonwealth Bank of Australia & Ors [1998] ANZ Conv R 628 a mother was pressured by her son to provide her house as security. Simos J placed importance on the fact that the bank officer did not tell the plaintiff that it had no real information on the capacity of the son's company to pay, that neither the company nor its directors had any assets of any worth and that the prior dealings with the bank had been of an unsatisfactory nature. Once again, there were no lawyers acting. The Court inferred that the bank proceeded largely on the basis that it would be protected by the security rather than by any likely capacity of the principal debtor to pay. 281 The plaintiff relied on Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 in which the appellant and her husband were joint borrowers and mortgagors, had borrowed moneys forty per cent of which was to be used for business or investment purposes about which the application for the loan gave very little information. On the face of the application neither the appellant or her husband was in receipt of any income and the solicitor who witnessed the mortgage had failed to explain the full impact of it to her, in particular her personal obligation. 282 In the present case although the plaintiff was providing the only security both she and Michael were, jointly and severally, the borrowers. The information which the defendant had did not indicate (nor was it put that it did) that Michael was not in a position to meet his obligations under the loan. Michael had the resources to meet (and did meet) the interest payments until after he died and there is no evidence of the resources of his deceased estate. Unlike Elkofairi v Permanent Trustee Co Ltd this is not a case where the defendant was on notice that a co-borrower and principal debtor had limited prospects of meeting his obligations under the loan or where resort to the security should have been considered to have been probable let alone certain. In addition whilst the rental income from the Cherrybrook property was not sufficient on its own to meet all of the interest it was more than enough to meet half of it. Interest only was payable for ten years and if it was paid there was no imminent likelihood of the defendant foreclosing on the property. 283 So far as the defendant's knowledge of the plaintiff's circumstances were concerned it is not open to conclude that the defendant was or should have been on notice that (apart from the discharge of the NAB mortgage) the funds would not be used for the plaintiff's benefit despite the contents of the loan application. The defendant was not on notice of any lack of physical or mental capacity on the part of the plaintiff. It had knowledge of her age and the quality of her signature on the power of attorney. 284 The presence of the plaintiff in Sydney is not a reason why the defendant should have questioned the use of the power of attorney. Again Blessington Judd were giving advice to her or on her behalf. 285 Whilst the plaintiff was "not there" to protect herself, her solicitors were. The evidence did not establish whether they had any direct communication with her. Even if they received direct communication only from Michael, manifestly, they were giving advice for the plaintiff's benefit too. As I have earlier said it cannot be assumed that they did not do their duty and it was not incumbent on the defendant to have to go behind them. 286 There are additional circumstances and factors which need to be taken into account in considering whether the contracts were unjust. They include the following: a at the time the fact was that the Cherrybrook property was not the plaintiff's home; b the defendant did not seek to induce nor did it induce the plaintiff or her attorney to enter into the contracts and nor did it apply any pressure to that end (and nothing to the contrary was put); c it is not open to conclude, on the evidence, that Michael exerted any undue influence on the plaintiff and it is even less open to conclude, having regard to the fact that she had solicitors acting, that the defendant should have been on notice of that possibility; d the terms of the loan and mortgage were themselves not harsh, oppressive, unconscionable or unjust (and nothing to the contrary was put); e on the face of the loan application she was to obtain and she did in fact obtain the benefit of the discharge of the mortgage to the NAB; f she obtained the benefit of the discharge of the mortgage to Across Australia Finance. 287 When account is taken of all the circumstances of this case, in my view, it has not been established that the contracts were unjust in the circumstances relating to them at the time they were made. 288 Accordingly the plaintiff's claim for relief under the Contracts Review Act fails. Discretion 289 Even if, contrary to my conclusion, the contracts were unjust in the circumstances they were entered into I have formed the view, taking into account all of the circumstances, that this is not a case which would warrant the exercise of my discretion to make any order pursuant to s 7(1) of the Contracts Review Act. I do not consider that justice would require the making of any such orders. In my view to make the orders which the plaintiff seeks would not avoid but would bring about an unjust consequence or result given that: a the Cherrybrook property was not the plaintiff's home at the time of the contracts, she does not now reside there and there is no prospect of her ever returning; b it was not suggested that the plaintiff might require any income from the Cherrybrook property to remain at Scalabrini; c the defendant in no way inhibited the plaintiff from obtaining independent advice; d the defendant sought and obtained certificates as to legal advice from her solicitors; e the defendant applied no undue influence, unfair pressure or unfair tactics on the plaintiff or any of her representatives. 290 I would accordingly not have exercised my discretion in favour of the plaintiff by making orders under s 7(1) of the Contracts Review Act in any event. CROSS-CLAIM 291 As I have said above no challenge to quantum was made and nothing was put why an order for possession should not be made if the plaintiff otherwise failed. 292 There will accordingly be judgment for the defendant in the money sum claimed adjusted to date of judgment and an order in favour of the defendant for possession of the Cherrybrook property. 293 The parties are to bring in Short Minutes reflecting this outcome and an order for costs which takes account of any costs which are included in the principal amount. 294 The exhibits are to be returned. ********** 01/07/2008 - Judgment date omitted from cover sheet amend "nor" to read "or" add the word "assert" before lack - Paragraph(s) Cover sheet par 141 par 188 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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