New South Wales Supreme Court CITATION : Commonwealth Bank of Australia v Shahen Serobian [2009] NSWSC 302 HEARING DATE(S) : 2,3,4,5,9,10,11,12,16,17 & 18 March 2009 JUDGMENT DATE : 24 April 2009 JUDGMENT OF : Hammerschlag J DECISION : Judgment for the plaintiff against the first defendant and the second defendant, jointly and severally, for $8,007,806.85 and cross-claims dismissed. A warrant for possession of the Manly property may be issued forthwith. The first defendant and second defendant are to pay the plaintiff's costs including the costs of the cross claims. CATCHWORDS : BANKER AND CUSTOMER – contract – plaintiff bank sues for repayment of two loans made to the defendant customers – held bank entitled to the repayment of the two loans - MORTGAGES - mortgages and charges generally – form and execution – whether a mortgage is void or voidable due to witnessing by an officer of a bank where the bank was a party to the mortgage – held that the officer of the bank was not a party to the mortgage, and that witnessing by the bank officer was not an action taken on behalf of the bank – held that the mortgage is valid - TRADE AND COMMERCE - Trade Practices Act 1974 (Cth) and related legislation - consumer protection – defendants claimed bank loans should be set aside or varied as the bank had engaged in misleading or deceptive conduct or conduct likely to mislead or deceive under s 52 – defendants disputed personal liability in relation to a loan of $2 million, claiming that the bank represented to them that in respect of this loan it would have no recourse to their personal assets, but only those of their company – defendants claimed that the bank represented to them that properties owned by them personally were not being provided as security for any of their debts or any of the debts of their company – defendants claimed that the bank represented that a fixed interest rate of 5.6%pa would apply to a $4.8 million loan, when the actual rate was higher – held that the bank did not make any such representations and that no breach of s 52 occurred - GUARANTEE AND INDEMNITY - the contract of guarantee - parties and capacity – whether guarantee executed by the defendants for the debts of their company should be set aside under s 7(1) of the Contracts Review Act 1980 (NSW) for being unjust – the first defendant claimed that the guarantee was unjust as he could not read, write or understand English, that he did not have legal advice, and that there was an inequality of bargaining power – the second defendant claimed that the guarantee was unjust as at the time the contract was entered into she was suffering from ill health, that she did not have legal advise and that there was an inequality of bargaining power – held that in respect of both the first and second defendant the guarantees were not in any was unjust in the circumstances in which they were entered into nor was there any basis upon which it could be held to be just to deprive the bank of its contractual rights under the guarantees. Contracts Review Act 1980 (NSW) LEGISLATION CITED : Trade Practices Act 1974 (Cth) Conveyancing Act 1919 (NSW) Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 2 TPR 48 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 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 CASES CITED : West v AGC (Advances) Ltd (1986) 5 NSWLR 610 SH Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482 The Bank of Victoria v M'Michael (1882) 8 VLR(L) 11 Hickey v Powershift Tractors Pty Ltd (1998) NSW ConvR 55-889 Arnold v State Bank of South Australia & Ors (1992) 38 FCR 484 Briginshaw v Briginshaw (1938) 60 CLR 336 Helton v Allen (1940) 63 CLR 691 Rejfek v McElroy (1965) 112 CLR 517 Watson v Foxman (2000) 49 NSWLR 315 Commonwealth Bank of Australia (Plaintiff/Cross-Defendant) PARTIES : Shahen Serobian (First Defendant/First Cross-Claimant) Christine Serobian (Second Defendant/Second Cross-Claimant) FILE NUMBER(S) : SC 50219/2007 COUNSEL : P.A. Dowdy (Plaintiff/Cross-Defendant) A. Dlakic - Solicitor (Defendants/Cross-Claimaints) SOLICITORS : Henry Davis York (Plaintiff/Cross-Defendant) Johnston Vaughan (Defendants/Cross-Claimants) - 12 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST HAMMERSCHLAG J 24 APRIL 2009 50219/2007 COMMONWEALTH BANK OF AUSTRALIA -v- SHAHEN SEROBIAN & 1 OR JUDGMENT INTRODUCTION 1 HIS HONOUR: The plaintiff bank ("the Bank") sues the first defendant Mr Shahen Serobian ("Mr Serobian") and the second defendant Mrs Christine Serobian ("Mrs Serobian") for $8,007,806.85 being the balance of monies lent and advanced to them and secured by a mortgage dated 13 December 2004 over their property situated at 1/30A Addison Road, Manly in the State of New South Wales ("the Manly property"). 2 The Bank seeks a warrant for possession of the Manly property. 3 Mr Serobian and Mrs Serobian (together "the Serobians") cross claim for orders that guarantees which they executed in favour of the Bank for the debts of two companies, Schypsl Pty Ltd ("Schypsl") and Refnok Pty Ltd ("Refnok"), be set aside under s 7(1) of the Contracts Review Act 1980 (NSW) on the grounds that the contracts were unjust at the time they were entered into or under s 87 of the Trade Practices Act 1974 (Cth) on the grounds that they were procured by conduct on the part of the Bank that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of that Act. FACTUAL BACKGROUND Introduction 4 Mr Serobian was born in Iran. He left Iran for Armenia at the age of 12. He underwent military training in that country from 1974 to 1976 and was stationed in Siberia. Apart from Armenian, he speaks Iranian Farsi and he understands Russian. In 1978, when 24, he came to live in this country. For approximately two years he worked near Ryde for an American company as a factory worker doing pump assembly work. 5 Mrs Serobian was born in Iran of Armenian background. She arrived in Australia in about 1979. She too speaks Farsi. 6 The Serobians married in 1982. They lived in Penrith. 7 They have two children, Patrick and Yvette. Patrick was born in 1987 in Australia. He completed his HSC at North Sydney College. After that he attended Crows Nest TAFE College and studied real estate for two years. 8 In about 1992, Mrs Serobian began working as a child minder on behalf of Home Based Care, an organisation supervised by the Government of New South Wales. 9 In about 1994, in partnership, the Serobians opened a childcare centre in Penrith. They opened another centre in 1996. 10 In about 2001 they sold the care centres and moved to the Manly property. 11 According to Mrs Serobian, her children set up and ran a child care centre at Magarra Place, Seaforth. 12 In about 2001, Mrs Serobian attended a real estate course at TAFE College. In 2002 she established a real estate agency specialising in the sale of child care centres. That business was conducted through Refnok under the name Yerevan Real Estate. The Serobians are the shareholders and directors of Refnok. Mr Serobian is the secretary. 13 Schypsl was incorporated on 21 June 2002. The Serobians have at all material times been its shareholders and directors. Mr Serobian is its secretary. 14 Mrs Serobian says that in about 2005 there were three child care centres which had been set up by the children and which were being run by them. These centres were at Narrabeen, Hornsby and Seaforth. 15 At about this time, Patrick decided to expand their business by developing child care centres. 16 By then, Mrs Serobian had had more than 15 years experience in operating child care centres. 17 Schypsl held licences to operate child care centres. It ran centres at Narrabeen, Balgowlah and Seaforth. 18 Schypsl acquired properties at 1B Magarra Place Seaforth, 3-5 Grandview Street Parramatta and 3/22-26 Addison Road Manly. 19 In addition to its child care centre business, Schypsl also carried on a renovation business under the stewardship of Mr Serobian. 20 The Serobians themselves acquired investment properties including one at 102 Taylor Road, Cranebrook ("Cranebrook") and another at 62 Oakland Avenue, The Entrance ("The Entrance"). 21 The Serobians borrowed monies from St George Bank ("St George") which, amongst others, had enabled them to purchase the Manly property. Schypsl also borrowed money from St George. 22 By the end of 2004, the debt to St George was of the order of $9,300,000 of which the Serobians personally and Schypsl each had borrowed roughly half. Their personal debt related, it seems, predominately to the acquisition of the Manly property. 23 The Serobians had given personal guarantees and mortgages (including over Cranebrook and the Manly property) to St George. 24 The Serobians had also borrowed about $460,000 from an organisation called Yes Home Loans, secured by a mortgage over The Entrance. Introduction of the Bank 25 In early May 2004 the Serobians approached St George with a request for overdraft accommodation for Schypsl. St George declined the request. This led to the Serobians and Schypsl seeking to refinance. 26 To facilitate the refinancing, the Serobians employed finance brokers. One of these was a Mr Jim Bosch who spoke Farsi. Mr Bosch's organisation was known as United Mortgage Pty Ltd. 27 Two other brokers, AAA Capital Management and Amadaeus Mortgage Management ("Amadaeus") also became involved, although the evidence did not reveal precisely how this happened. It seems that a Mr Kiem Dinh, who worked for Amadaeus, had some contacts at the Bank's Hurstville branch. He may have been introduced to the Serobians by Mr Bosch. 28 On 27 August 2004 Mr Dinh made telephone contact with Susan Bell, a relationship manager at the Bank's corporate banking centre at Hurstville. On behalf of the Serobians he sent her a fax seeking to refinance "$4.7M and additional investment $2.0M" and offering the Manly property, Cranebrook and The Entrance as security. The fax gave estimated values for the Manly property of $8,500,000, for Cranebrook of $1,150,000 and for The Entrance of $750,000. Amongst others, the fax stated: "The borrowers are husband and wife currently staying in their own home, wishing to borrow $6,700,000 (LVR:70%): (1) to refinance existing mortgage of $4,700,000 with St. George and (2) to obtain an additional loan of $2,000,000 for future investment – buying investment properties." 29 On 30 August 2004 Mr Dinh faxed to Susan Bell financial information, including tax returns of the Serobians, Schypsl and Refnok for 2002 and 2003. 30 On 10 September 2004 Susan Bell had a telephone conversation with Mr Dinh in which she requested 2002 tax returns. These were apparently provided on 17 September 2004 under cover of a fax from Mr Dinh. Included in the material was a Detailed Statement of Finance Performance for the year ended 30 June 2004 for "Schypsl Pty Ltd Trading As Shahen's Renovations". It showed a trading profit for 2004 of $1,186,363. 31 On 11 October 2004 the Serobians signed a formal finance broking agreement with Amadaeus authorising it, on their behalf, to use its best endeavours to find finance. Mrs Serobian, in her hand, made various amendments to the terms of this agreement. She wrote in the following: "Note: This Agreement is only valid until 30 Oct 04 for Amadaeus obtaining Finance." Various other provisions were struck out by her. 32 The Serobians also signed a letter (handwritten by Mrs Serobian) addressed to Amadaeus agreeing to pay a fee of $124,300 which was to include the fees of AAA Capital Management, Jim Bosch and Amadaeus. Amongst others the letter stated: "We require unconditional finance by 20/10/04". 33 On 13 October 2004 Mr Dinh made further contact with Susan Bell and Carol White (a risk executive with the Bank). He sent a copy of the mandate, which the Serobians had given Amadaeus, to the Bank under cover of a fax of that date. 34 Mr Serobian recalls his wife telling him that the Commonwealth Bank would help them refinance and loan them funds to develop "our child care centres". He says he left all decisions about the development of child care centres in the Manly area to Mrs Serobian and Patrick. He would offer his opinion about gardening design and renovation but left all business decisions to them. 35 He recalls Mrs Serobian telling him that the Bank was prepared to loan them more money than St George with lesser interest payable. 36 Refnok and Schypsl had offices at 6 Belgrave Street, Manly ("the Manly office"). 37 On 14 October 2004 a meeting took place at the Manly office at which were present the Serobians, Susan Bell, Carol White, and Mr Dinh. Susan Bell says she had with her an "indicative letter" of 30 September 2004 which was discussed at the meeting. On 19 October 2004 she created a diary note which she says records the substance of what was discussed. The note recorded that: "Clients are seeking approval of finance as previously submitted to assist with the refinance of St George facilities and to provide a line of credit of $2M to assist with the purchase of potential child care centre sites and fit out." 38 Her note went on to recommend approval for loans of $4.8 M and $2 M to the Serobians, and a loan of $4.5 M to Schypsl. 39 The 30 September 2004 letter referred to the security to be provided for the proposed facilities, which included the Manly property, Cranebrook and The Entrance. 40 Susan Bell says that at this meeting she did most of the talking for the Bank and Mrs Serobian generally spoke for the Serobians. 41 She says that Mr Serobian spoke English and that on a couple of occasions she directed questions to him about Refnok which he answered intelligibly in the English language. 42 By letter dated 18 October 2004 Mrs Serobian sent to the bank "…copies of the valuations for the properties which will be used as security". The document in evidence had no valuations attached. Susan Bell's belief is that they included valuations from Clisdells (a firm of valuers) obtained by St George for Cranebrook and The Entrance dated 25 June 2003 and 12 September respectively. The October 2004 Meeting 43 On or about 22 October 2004 (probably 25 October), a meeting took place at the Manly office. Present were the Serobians, Patrick, Kerry Small, Susan Bell, Richard (Rick) Withers and probably Mr Dinh. Kerry Small was then a risk executive with the Bank, and Rick Withers was a manager, corporate interest rates. I shall refer to this meeting as "the October meeting". 44 Mrs Serobian did most of the talking on behalf of the Serobians and Schypsl except with respect to discussion on interest rates, in respect of which Patrick may have taken the lead role. The Bank officers and Mrs Serobian sat at a table and Mr Serobian sat at a separate table. Patrick may not have sat at the table but was within earshot. According to Mrs Serobian, her husband was at the meeting for a short time only. 45 According to Mrs Serobian, a broker was present. She makes no mention of Rick Withers being present. In her affidavit sworn 20 March 2008 she says a conversation to the following effect took place: SUSAN: How are you today? CHRISTINE: I am not well at all. I'm finding it really hard to cope at the moment. SUSAN: In addition to your refinance amount we will provide the Company with an additional $2,000,000.00 in order to maintain costs throughout the growth phase. This will give you peace of mind due to your health. CHRISTINE: That's fine, we are happy to work with you but the major thing for us is that we keep all of the company dealings separate to the personal assets. KERRY: That's fine, there is sufficient equity in the house at Manly so we will put your personal loans under that one property as a housing loan that would mean you would get The Entrance and Cranebrook titles back, if you are happy with that, Sue will organise the paperwork and bring it out. SUSAN: Everything has been organised for the refinance amount and the Company would also have the additional $2,000,000.00 that we discussed last time, all that is left to do is sign these documents so that the bank can organise settlement. CHRISTINE: Have you made sure that the personal security is kept separate from the Company? (I recall Patrick telling me to ask this question). SUSAN: All of the Company's borrowings will be kept separate to the personal assets as last discussed. CHRISTINE: Thank you. Just making sure as I am very sick and I can't handle anything to go wrong. 46 In her affidavit of 31 July 2008 she says that she recalls a conversation with Susan Bell at the October meeting to the following effect: SUSAN: As well as offering you $2,000,000.00 line of credit we will also offer you a fixed interest rate for 5 years at 5.6% for your $4,800,000.00 home loan instead of 6.8% which you are paying to St. George Bank at the moment. PATRICK: We will benefit from this interest rate and we will be better off. SUSAN: On settlement we will collect the titles for The Entrance and Cranebrook properties so you don't need to attend settlement. We will then drop off the titles to you straight after settlement. 47 This version of events is disputed by each of the Bank officers who were there. 48 Patrick also gave evidence about the October meeting. 49 His version (in his affidavit sworn 10 April 2008) was that a discussion to the following effect took place: SUSAN: Thank you for giving us the opportunity to meet how are you? CHRISTINE: I am not well and finding it hard to cope at the moment that is why I was willing to meet with you and see what it is you have to offer. PATRICK: As you have been informed, Christine's condition is not well at all therefore I have been taking control of the businesses. Nevertheless the business has continued to grow and we intend to continue improving the company, if the Commonwealth Bank can assist in any way whatsoever, we are willing to consider it. SUSAN: We understand your position and can see that the company has continued its success on that basis we are willing to offer the total refinance of all the facilities and an additional line of credit of an amount of $2,000,000.00 in order to maintain costs throughout the growth phase. Christine this will give you peace of mind due to your health. CHRISTINE: That is fine, we are happy to work with the Commonwealth Bank but as I am not well and actively involved, the major thing for us is that you keep all of the company borrowings and dealings separate from the personal assets. PATRICK: We would also like to see the release of the titles for the Taylor Road and Oakland Avenue properties, as we don't believe it is necessary to have that additional equity. KERRY: That is fine, there is sufficient equity in the family home at Manly. We will structure the personal loans as a housing loan secured against that property. You will get back the titles for the properties at The Entrance and Cranebrook. If you are happy with that we will finalise our paperwork and Sue can bring out the paperwork for signing." 50 Patrick says he recalls being satisfied that Cranebrook and The Entrance would be returned. He says that after the Bank officers left, his father asked him in Armenian whether the Bank would be returning the titles for the two properties and that he replied yes, and the $2 M would be secured against "the company". 51 In his affidavit sworn 31 July 2008 Patrick says he recalls either Kerry Small or Susan Bell informing his mother and the broker that the Bank would provide a fixed rate of 5.6% for a home loan of $4.8 M over his parents' home at 1/30A Addison Road, Manly. 52 Mr Serobian says he understood (apparently from what Mrs Serobian had told him) that the Bank would loan them money and return the titles for Cranebrook and The Entrance. He says he only vaguely recalls the October meeting. He only recalls the Bank officers and broker greeting him and he says he heard his wife explain to them that he could not speak English and that was why he was sitting at a separate table. He also says he recalls his wife explaining to Susan Bell and Kerry Small that she was very sick and he recalls his wife being visibly not well. He says he did not have any further discussion with his wife because she was so unwell and that he only understood that the Bank "would loan us the money my wife Christine had requested". 53 Susan Bell says that she took with her to the October meeting two Letters of Approval, one addressed to the Serobians personally and the other addressed to the directors of Schypsl. 54 She says she handed the Letters of Approval to Mrs Serobian, explained the contents and read and pointed out to her the amounts of the facilities offered and directed her attention to a Terms and Conditions booklet which was attached to the originals and given to them. 55 She denies that any conversation along the lines deposed to by Mrs Serobian and Patrick took place. She denies that Mrs Serobian said any words to the effect that she was sick or unwell. She denies that she said any words to the effect that Schypsl would be provided with an additional $2 M to maintain costs throughout the growth phase. 56 She denies that she was informed that Mr Serobian did not understand English. She says that none of her interactions with Mr Serobian caused her to consider that he may need the assistance of an interpreter or that he did not understand the effect of any documents he subsequently signed. She formed the opinion that he understood what was being said in the meetings she attended. 57 She denies that Kerry Small said words to the effect that Mrs Serobian would get the Entrance and Cranebrook titles back. 58 The Letter of Approval which she says was addressed to the Serobians personally offered facilities as follows: "We are pleased to inform you that the Bank has approved the following facilities totalling $6,800,000.00 . Our approval is provided for the reason and on the terms outlined in the enclosed Acceptance Document and Terms Schedule. Total facility summary Amount BetterBusiness Bill Facility – Variable Rate $4,800,000.00 BetterBusiness Bill Facility – Variable Rate $2,000,000.00 Total facility limit $6,800,000.00 Note: The BetterBusiness Bill Facility (Fixed Rate or Variable Rate) referred to in this Approval Letter and in the enclosed Terms Schedule and Fees and Charges Schedule means the Fixed Rate Bill Facility or Bill Facility (as the case may be) as defined in the enclosed Usual Terms and Conditions. Particulars of the approved new facilities are set out in the attached Acceptance Document." 59 The Schedules which she says were handed over were in evidence. 60 I shall call the facilities offered in this Letter of Approval "the $4.8 M facility" and "the $2 M facility" respectively. 61 The Letter of Approval included a document entitled "Acceptance Document" which made provision for the two addressees to sign acceptance. 62 Item 9 of the Terms Schedule for the $4.8 M facility was entitled "Bill Rate" and was as follows: " Item 9 Bill Rate Will be determined on the day of, or the working day preceding each drawdown Indicative yield rate for 90 day bills with a face value of $4,800,000.00 is presently 5.66%pa." 63 Item 14 included the following: "The drawdown of Line of Credit facility of $2,000,000 to be strictly controlled by the Bank and subject to provision of a synopsis of property being purchased by the Borrower, detailing intentions with the use of property & estimated income to be derived." 64 A Security Schedule described the security to be given. It included: " • A First Registered Mortgage by Shahen Serobian and Christine Serobian over a residential property situated at 30A Addison Road Manly NSW. • A First Registered Mortgage by Shahen Serobian and Christine Serobian over a residential property situated at 102 Taylor Road Cranebrook NSW. • A First Registered Mortgage by Shahen Serobian and Christine Serobian over a residential property situated at 62 Oakland Avenue The Entrance." 65 The Terms Schedule for the $2 M facility contained the following Item 9: "Item 9 Bill Rate Will be determined on the day of, or the working day preceding each drawdown Indicative yield rate for 90 day bills with a face value of $2,000,000.00 is presently 5.66%pa." 66 According to Susan Bell, when Mrs Serobian was referred to Item 14, she said words to the following effect: "I am not happy with that condition as the $2 million might be used for child care centres or other investment opportunities. I want this changed." 67 Susan Bell says that Kerry Small then said: "Well I'll take it back to the Bank and see whether anything can be changed there. You are still going to need to tell us what you need the funds for though." 68 Susan Bell says that she then read out and went through the Security Schedules relating to both the $4.8 M facility and the $2 M facility, pointing out and naming each security individually. She says that she then proceeded to explain the Fees and Charges Schedule and referred the Serobians to the information sheet for them to read themselves. 69 The Letter of Approval addressed to Schypsl which she says was handed over offered a facility as follows: "We are pleased to inform you that the Bank has approved the following facility totalling $4,500,000.00 . Our approval is provided for the reason and on the terms outlined in the enclosed Acceptance Document and Terms Schedule. Total facility summary Amount BetterBusiness Bill Facility – Variable Rate $4,500,000.00 Total facility limit $4,500,000.00 Note: The BetterBusiness Bill Facility (Fixed Rate or Variable Rate) referred to in this Approval Letter and in the enclosed Terms Schedule and Fees and Charges Schedule means the Fixed Rate Bill Facility or Bill Facility (as the case may be) as defined in the enclosed Usual Terms and Conditions. Particulars of the approved new facility are set out in the attached Acceptance Document." 70 I shall refer to this facility as "the $4.5 M facility". 71 The letter also included an Acceptance Document with provision for directors of Schypsl to sign. 72 Item 14 of the Terms Schedule relating to the $4.5 M facility contained the following: "The valuation of the Security Properties at 1B Maggarra Place Seaforth; 3-5 Grandview Street Parramatta and 3/22-26 Addison Road Manly must be equal to or more than $2,500,000.00; 1,450,000.00 and $3,900,000.00 respectively. The valuations must be undertaken on the basis of instructions given by the Bank to a valuer approved by the Bank and the valuations must be acceptable to the Bank." 73 Susan Bell says that she went through the same exercise with the letter offering the $4.5 M facility. She says that she directed Mrs Serobian to the Acceptance Document and read out the contents of Items 1 to 14 of the Terms Schedule, and then went through each of the bullet points in the Security Schedule and the fees and charges. 74 She says that at the conclusion of the meeting she said words to the following effect: "As you are not happy with the condition concerning the line of credit facility of $2 million I will not ask you to sign these letters today. We will get back to you." 75 Susan Bell says that the discussion then turned to interest rates and this was conducted by Rick Withers on behalf of the Bank. She says that Rick Withers gave to Mrs Serobian and Patrick an interest strategy paper, and a lengthy discussion about interest rates took place. 76 Susan Bell denies that either her or Kerry Small said the Bank would give a fixed rate of 5.6% for a home loan of $4.8 M over the Manly property. 77 Kerry Small also gave evidence about the October meeting. She could not recall whether Rick Withers attended the meeting or whether a broker was present. She provided a description of the Manly office. She says that the meeting was conducted primarily by Mrs Serobian and that Patrick was present but was not involved in the discussions. She says that the Serobians would occasionally discuss points between themselves in English. 78 According to Kerry Small, Susan Bell handed over two Approval Letters to Mrs Serobian and retained in her own hand the Bank's office copies. She says that Susan Bell proceeded to go through each of the pages, appearing to her, to summarise their contents. She says that Susan Bell went through the Security Schedule naming certain properties, which she cannot now specifically recall. 79 She recalled that the Serobians expressed some concerns about the conditions which gave the Bank control over the drawdown procedure in respect of the $2 M facility. 80 She says that Mrs Serobian said to her words to the effect that she was not happy with the wording and asked her to amend it so they could draw funds as and when necessary to assist with investment opportunities. 81 She says that she responded as follows, "I am prepared to vary the terms slightly. I will not draft the change to this clause here, but will amend it when I return to my office and send the amendment to you". 82 Kerry Small denies that there was any discussion about keeping Schypsl separate from personal assets and she denies that a release of the titles over Cranebrook and The Entrance was discussed. 83 She denies that Mrs Serobian or Patrick said words to the effect that "she would like to see the release of those titles". 84 Kerry Small denies that Mrs Serobian made any statement about suffering from any ill health. She says that Mrs Serobian did not appear to be visibly unwell. 85 She says that the Serobians occasionally discussed points in English. She denies that she was told that Mr Serobian did not sit at the table with them because he did not speak English. 86 She denies that Susan Bell said words to the effect that the Bank would provide "the Company" with an additional $2 M in order to maintain costs throughout the growth phase or that Susan Bell said that this would give Mrs Serobian peace of mind due to her health. 87 She denies that either her or Susan Bell confirmed an interest rate for the facilities. 88 Rick Withers also gave evidence of the October meeting. 89 He says he had prepared a Terms Sheet to present to the Serobians dealing with various issues with respect to the management of interest rates that applied to their facilities. 90 He says that after introductions, Susan Bell and Kerry Small proceeded to discuss various proposed facilities and the security that was to be provided. He was not directly involved in that part of the meeting and does not recall the substance of what was said. 91 He says that after that discussion he discussed interest rates and presented copies of the Terms Sheet. He says that he spoke to the Terms Sheet. 92 He says that Patrick was the main speaker on the part of the Serobians and that Mrs Serobian was also involved. He says Mrs Serobian said that Patrick would be helping them with this aspect of the refinance, as he was studying finance at university and understood these matters. 93 He says that Mr Serobian did not have much input but appeared to be paying attention and would nod in agreement with things that were said by either him or Patrick. 94 He says that after his explanation Mrs Serobian indicated that she favoured having a fixed rate bill facility. He says that he later spoke to Mrs Serobian on at least one other occasion discussing interest rates, risk management and the options for the Serobians. Mrs Serobian indicated to him that she would like to fix the interest rate in respect of the two bill facilities for five years. Events leading up to 13 December 2004 95 On 2 November 2004, Kerry Small prepared a letter to the Serobians, bearing that date, in the following terms: "As per our discussion, the Bank has agreed to vary the wording of the clause in relation to the drawdown of the Line of Credit facility. I have enclosed revised pages 6 & 8 (in duplicate), to replace existing pages 6 & 8 in the original letters of offer. Please replace these pages in your letters of offer and return accepted documents to this office in due course." 96 The revised page 8 of the Approval Letters, said to be enclosed, altered Item 14 of the Schedule with respect to the drawdown of the $2 M facility, to read as follows: "The drawdown of Line of Credit facility of $2,000,000 to be strictly controlled by the Bank and funds to be utilised for purchase of an income producing business asset. The Borrower is to provide an estimate of income to be generated, by the asset under purchase at each drawdown." 97 Kerry Small says she faxed this letter to the Serobians together with the enclosures. 98 On 19 November 2004, Susan Bell received documents by way of a 26 page fax from Mr Bosch's company. Mrs Serobian accepted that the documents transmitted were given to the broker for transmission to the Bank. The fax included signed Acceptance Documents for each of the facilities, and a letter from Clisdells addressed to Mr Bosch to the effect that valuations carried out by Clisdells in respect of Cranebrook and The Entrance could be used by the Bank for mortgage purposes. 99 The version of the fax in evidence was incomplete. 100 Susan Bell says that, either as part of the fax or shortly thereafter, she received valuations from Mrs Serobian for the various security properties including Cranebrook and The Entrance. Copies of Clisdells' valuations for Cranebrook and The Entrance, reflecting an inspection and valuation date of 22 November 2004 were in evidence. 101 Susan Bell says that she wrote on the cover page of the received fax the various properties to be given to the Bank as security, as identified in the schedules to the Approval Letters, and the amount of the valuation received for each property. 102 At the time, The Entrance was mortgaged to Yes Home Loans. 103 At Susan Bell's request, a discharge authority signed by the Serobians on 25 November 2004 in respect of The Entrance was received from Yes Home Loans. It stated that the mortgage was to be discharged, "To refinance to another bank/mortgage manager due to better products and/or rates". The document stated: "Please discharge the mortgage you have over my/our property at: 62 Oakland Av The Entrance. Please hand all deeds and documents connected with this property to Commonwealth Bank of Australia." 104 On 1 December 2004 Susan Bell wrote a memorandum to Kerry Small referring to bank valuations having been received, including a valuation of $1,300,000 in respect of Cranebrook and one of $800,000 in respect of The Entrance. The Bank's valuation for all the security properties totalled $16,730,000. It attributed Support On Normal Lending Margins ("SONLM") to these properties of $ 13,086,000. 105 On 10 December 2004 Susan Bell sent a memorandum to Kerry Small informing her that because The Entrance had been valued on the basis of development potential, total support would be reduced to $12,846,000. This was because a 'development potential' valuation entailed higher risk which had the effect of reducing the Bank's valuation. 106 In early December 2004 Susan Bell prepared a number of documents. They included letters dated 9 December 2004 to the Serobians personally and to the Serobians as directors of Schypsl respectively, referring to the Approval Letters of 22 October 2004 and requesting, amongst others, certificates of currency relating to insurance over the various properties including the Manly property, Cranebrook and The Entrance. 107 Susan Bell also prepared two letters dated 13 December 2004, one to the Serobians personally and the other to them as directors of Schypsl. The letter to the Serobians was in the following terms. " Please sign below to acknowledge the following: Interest Rate of 5.97%pa fixed for 5 years plus a Line Fee of 0.90%pa (giving an all up rate of 6.87%pa) for a face value amount of $4,800,000 has today been forward locked to commence on 10 January 2005. Should this contract fail to commence on the agreed date or is terminated the customer agrees to re-imburse the Bank any penalties or fees associated with the amendment or termination of this contract. The client also agrees to execute the necessary documents to the Banks satisfaction and meet all approval conditions specified in Schedule dated 13th December 2004." 108 The letter to the Serobians as directors of Schypsl was in the following terms: " Please sign below to acknowledge the following: Interest Rate of 5.97%pa fixed for 5 years plus a Line Fee of 0.90%pa (giving an all up rate of 6.87%pa) for a face value amount of $4,500,000 has today been forward locked to commence on 10 January 2005. Should this contract fail to commence on the agreed date or is terminated the customer agrees to re-imburse the Bank any penalties or fees associated with the amendment or termination of this contract. The client also agrees to execute the necessary documents to the Banks satisfaction and meet all approval conditions specified in Schedule dated 13th December 2004." 109 Patrick says he would regularly notice that his mother was not well and he would regularly ask her questions. He says he said to her: "When they call, make sure that the $2,000,000 they're going to lend to the company is not secured by the personal assets in any way, the existing company borrowings also need to be kept separate". 110 He says early in December 2004 he asked his mother about the $2 M facility and she said that she had double-checked with Susan Bell who had said that the personal assets "will be kept separate". The 13 December 2004 meeting 111 On 13 December 2004 Susan Bell met the Serobians and Patrick at the Manly office. 112 Susan Bell says that she placed each of the letters she had prepared on a table with the documents relevant to each letter under it, and said to the Serobians that the documents could either be signed then or if they preferred they could take them away and get legal advice. 113 She says that Mrs Serobian replied that they were happy to sign then because they wanted to settle as soon as possible. 114 She says that she then took each of the documents attached to the letters dated 2 December 2004 and 9 December 2004, described it, and asked the Serobians to sign at a particular place. She then signed each document as witness. 115 There is no issue that documents executed at the 13 December 2004 meeting included: a mortgages by the Serobians in favour of the bank over The Entrance, Cranebrook and the Manly property; b mortgages by Schypsl in favour of the bank over 3-5 Grandview Street, Parramatta and 3/22 – 26 Addison Road, Manly; c guarantees by Mr Serobian and Mrs Serobian for the debts of Schypsl and Refnok; d guarantees by Schypsl and Refnok for the debts of the Serobians; e declarations by Schypsl (signed by the Serobians as directors) and Refnok (signed by Mrs Serobian as director) that the companies were not controlled by public companies; f shareholders' resolutions by Schypsl and Refnok (each certified by Mr Serobian as secretary) resolving to enter into the transactions; g declarations of solvency by Schypsl and Refnok (signed by the Serobians as directors); and h acceptance of the letters dated 13 December 2004 to the Serobians and Schypsl respectively fixing the interest rates. 116 It is not in issue that Mr Serobian signed the declarations for Schypsl as a director, and the certified resolutions for Refnok and Schypsl as secretary of each company. 117 The mortgage over the Manly property was in statutory form and was witnessed. The signatures of the Serobians were witnessed by Susan Bell beneath the following certification: "I certify that the Mortgagor, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this mortgage in my presence: ………………………… Signature of Witness (Witness should be an adult who is not a party to the mortgage)." 118 Susan Bell says that after the Serobians had signed the interest rate letters she told them she would update the Terms Schedules to reflect the fixed interest rates that they had agreed to and that she would fax them a copy for them to sign to confirm their acceptance. 119 She says the meeting ended with Mrs Serobian asking when settlement would occur and that she replied that it could occur as soon as all the conditions of the letters were met, being provision of the loan contracts from Yes Home Loans and St George and certificates of currency of insurance for the security properties. 120 Patrick's affidavit evidence was that his mother informed him on 13 December 2004 that the paperwork had been signed. He did not otherwise deal with the meeting. 121 Mrs Serobian says that the mortgage documents did not have the addresses of the companies inserted and that Susan Bell did not explain what properties were being secured. She says that she had told Susan Bell the $2 M facility was to be loaned to Schypsl as a line of credit. 122 She said that she told Susan Bell that she was so exhausted that she was having difficulty standing up, and that Susan Bell said: "It's a (sic) very late for settlement this week and you must sign now to have the settlement on time." 123 She says that Mr Serobian was not sitting at the table with her and Susan Bell but located to the rear of the premises and that she told Susan Bell that he did not read or write English, which was why he was not joining them around the table. She says that when it came time for signing, she gestured to her husband for him to come and sign with her. 124 Mr Serobian's affidavit evidence was that he recalled a short meeting when a lady from the Bank came to the Manly office, pointed to a document and in English said "please sign here". He says that he only understood he was being requested to sign documents so that they could change financiers from St George to the Bank. He says he recalls being happy that they were now customers of the Bank because they had expanded their business and could buy some other properties. He says he did not understand what security was being given to the Bank for the loan. He says he is certain that no one explained the mortgage documentation to him. He says that he was never told that the $2 M facility had any personal consequences for him or Mrs Serobian and understood that this would be a loan to their company only. He says at no time was he advised to obtain independent legal or financial advice in relation to the documents nor was their effect explained to him. 125 Patrick says he never sighted any conditions for the $2 M facility and was never shown any of the documents regarding it. Events leading up to settlement 126 On 16 December 2004 Mrs Serobian sent a fax consisting of 16 pages to Susan Bell. 127 The fax cover sheet, which is a letterhead of Yerevan Realty, contained in Mrs Serobian's handwriting, the following: "Dear Sue, Hi! This is the documents you requested. Solicitors informed me that they have given payout figures. Regards, Christine Serobian" 128 The fax imprints (both headers and footers) show that the fax was sent and received on 17 December 2004. The document which was page 3/16 is on a Schypsl letterhead, is dated 16 December 2004, and states as follows: "Dear Susan Bell, The following break up of the funds used on the childcare centers are below, out of the 4 centres Seaforth is complete and some of the works on the remaining centers have commenced although there are still further costs involved. $264,000 was spent on Seaforth Pre-school $120,000 on Parramatta Pre-school $220,000 on Balgowlah Pre-school $123,000 on Leichardt (sic) Pre-school Schypsl Pty Ltd's total expenditure up to date has been $727,000. The remaining costs in order to finish the remaining centers will be supplied once they are ready." 129 The faxed documents included certificates of insurance for Cranebrook and The Entrance issued by NRMA Insurance, stated to be valid from 16 December 2004. They also included an Acceptance Document for the $4.5 M facility signed by the Serobians as directors of Schypsl and dated 16 December 2004, and an Acceptance Document signed by the Serobians in respect of the $4.8 M facility and the $2 M facility also dated 16 December 2004. 130 Page 4/16 of the fax was missing from the document in evidence. Susan Bell says it could not be located. 131 Mrs Serobian's oral evidence was that the document on Schypsl letterhead was not hers, but she proffered no explanation as to who other than herself may have brought it into existence. It was put to Susan Bell (presumably on instructions – for which there did not appear to be any discernible basis) that this document had been prepared "by someone at the Bank and not Christine Serobian". Susan Bell's response was, "I'm sorry, but it is part of her fax, so I can't put her fax header on my documents". 132 Mrs Serobian's oral evidence was that the Acceptance Documents signed by her and Mr Serobian for the $4.5 M facility were not part of the fax and "had been altered by the Bank by somebody I am not sure…". Her evidence was that the Acceptance Documents signed had been in a different form. 133 Susan Bell says that she subsequently received signed versions of the Acceptance Documents which she had earlier faxed to Mrs Serobian and which had been attached to Mrs Serobian's fax of 16 December 2004. She did not know whether the complete versions of the Acceptance Documents were returned, and has only been able to find the executed pages on the Bank file. 134 Mr Serobian says about the Acceptance Document he signed, that he vaguely recalls being asked by Mrs Serobian to sign a document that had arrived from the Bank on or about 16 December 2004. He says Mrs Serobian did not read it to him and that after he had signed it and it had been sent, he asked her whether she had read it and she said she had not. 135 Susan Bell says that once there had been agreement to fix the interest rates, it was necessary to update the Terms Schedules for the various facilities to reflect the fixing of the interest rates. She says that she had a conversation with Mrs Serobian in which she said she would be sending through the Acceptance Documents with a fixed rate and that she asked Mrs Serobian to execute them and return the originals through the mail. 136 Mrs Serobian's version of this conversation is that Susan Bell said: "We have forgotten to bring to you the letter of offer at our meeting earlier this week, I am faxing it to you". 137 On 16 December 2004 St George informed the Bank of the amount required on settlement, including the amount to be paid to Yes Home Loans. 138 According to Susan Bell she calculated the amount needed at settlement. Her calculation showed that there would be a shortfall at settlement on the drawing of the two fixed rate bill facilities of approximately $713,441. 139 She says she called Mrs Serobian and told her they had received payout figures from St George and Yes Home Loans and that there would be a shortfall of approximately $713,000. She says that after some discussion Mrs Serobian said the shortfall should be drawn from the $2 M facility. 140 Mrs Serobian's evidence was that a conversation to the following effect took place: SUSAN: There is a short fall of $727,000.00 and we are going to take out this sum from the $2,000,000.00. CHRISTINE: But that $2,000,000.00 is for business purposes and we need it for establishing new businesses, I really need that $2,000,000.00 because of my health right now and that was one of the major reasons we changed to the Commonwealth Bank and paid for all extra expenses for the changeover. SUSAN: There is no time and settlement cannot take place unless we use that $727,000.00 from the Schypsl line of credit. CHRISTINE: If we don't settle St George are not going to be very happy with us. You have to fix up your problem you can't take the $727,000.00 from the $2,000.000.00. 141 Mrs Serobian says that she did not have an option other than to agree and says: "I recall telling Susan when she told me that 62 Oakland Avenue, The Entrance, and 102 Taylor Road, Cranebrook was part of the security, that this was a mistake and it should be taken out. I recall that she agreed." 142 Susan Bell denies Mrs Serobian's version. She says she was not aware before preparation of her affidavit in these proceedings of any suggestion by the Serobians that the titles for Cranebrook or The Entrance were to be returned on settlement, or at any other time. 143 Mrs Serobian says she was extremely surprised and angry and that the following further words were said: CHRISTINE: This was not a condition of the loan and we had come to Commonwealth Bank because of the line of credit and interest rate. SUSAN: It is already past that stage and I cannot do anything about it. 144 Susan Bell denies Mrs Serobian's version. Settlement 145 Settlement of the refinancing took place on 20 December 2004. A total of $9,952,099.27 was paid over by the Bank, including $9,362,492.01 to St George, $460,819.75 to discharge the mortgage of Yes Home Loans over The Entrance, and $124,300 to Amadaeus for the brokers' fees. 146 The personal account of the Serobians was debited with $4,780,171.15 and $690,523.92 and Schypsl's account was debited with $4,481,404.20 (making up the total of $9,952,099.27). 147 On 22 December 2004 Mrs Serobian sent a fax to Susan Bell. The fax cover sheet was a Yerevan Realty letterhead and Mrs Serobian wrote the following on it: "Dear Sue, Hi! Please organise this today as we are going away tomorrow. Regards, Christine." 148 Attached to the fax was a handwritten letter, signed by the Serobians, in the following terms: "Dear Sue, I spoke to you this morning could you please forward $120000 from the Line of credit for the part of work for Balgowlah and Parramatter (sic), Please forward $60000 to Mes. Moussa 762233 – 5002224 who is a builder today. We require a bank cheque for Aiman Yousif $12000. The remainder $48000 to Schypsl so we can draw cheques as required for works at the centre. Thank you for your efforts. have a Merry Christmas and a Happy New Year. Best Regards Christine Serobian & Shahen Serobin (sic) * I will organise to pick up the 2 cheques this afternoon & drop off the originals." 149 The evidence did not reveal what the "originals" were. 150 Mrs Serobian says that on 22 December 2004, in addition, she sent to the Bank a typed letter reading: "Dear Susan As discussed please forward the titles for 102 Taylor Road, Cranebrook and 62 Oakland Ave, The Entrance to our office as we did not receive them at settlement." 151 The Bank disputes that any such letter was either sent or received. The 16 February 2005 facility 152 In January 2005 Schypsl applied for an additional facility of $150,000 which the Bank's internal records show was "to meet working capital expenses associated with the building renovation business and for initial set up costs associated with new child care centres". 153 This facility was approved in a letter dated 24 January 2005 from the Bank to Mr Serobian as a director of Schypsl. 154 On 16 February 2005 the Serobians signed an Acceptance Document on behalf of Schypsl accepting the increased overdraft facility. 155 Also on 16 February 2005 the Serobians each signed a Consent and Acknowledgement to Extension of Guarantee reflecting the overdraft increase, which stated: "I (the person referred to as "you" in Schedule 2) acknowledge that, by signing below:- • my maximum liability under my Guarantee will be as described in Schedule 3; and • the securities set out in Schedule 1 and 2 will secure all my liabilities to the Bank under my Guarantee." 156 These were provided under cover of letters to the Serobians each dated 14 February 2005. 157 Schedule 2 referred to the mortgages over the Manly property, Cranebrook and The Entrance. 158 According to Mrs Serobian these documents were signed at a meeting with Susan Bell at the Manly office. Susan Bell says that she must have phoned Mrs Serobian to arrange a meeting to have the documents signed. 159 Mrs Serobian says that when these documents were signed a conversation between her and Susan Bell to the following effect took place: SUSAN: These documents are for the $150,000.00 overdraft. I just need you and Shahen to sign them so that I can get back in time to have the overdraft in place tomorrow. CHRISTINE: So there isn't any changes in there and it's all going to be in the company's name? SUSAN: Yes, I have put it under the Company so Shahen and you won't be personally liable. 160 Susan Bell denies that any conversation to this effect took place. Release of 3-5 Grandview Street, Parramatta 161 In February 2005 the Serobians on behalf of Schypsl sought release from the Bank's security of 3-5 Grandview Street, Parramatta. 162 In a letter dated 22 February 2005 the Bank agreed to this. The Serobians signed acceptance of this at the foot of the letter both on behalf of Schypsl and as guarantors and mortgagors consenting to the variation. In respect of this transaction Schypsl and the Serobians had the assistance of a solicitor, Mr Parker, of LG Parker & Co. Drawdowns of the $2 M facility 163 On about 10 March 2005 Mrs Serobian requested a drawdown of $150,000 to settle on a child care centre in Narrabeen. 164 On 13 May 2005 in a handwritten letter the Serobians requested a $150,000 advance "for completing the Leichhardt centre and finishing the Narrabeen backyard and equipment". 165 The Leichhardt centre had in fact burnt down on 28 February 2005. The Ermington property facilities 166 In about 2003, Chad Molenaar became an employee of the Bank as a personal financial advisor. In about April 2006 he moved to corporate banking at the Bank's Hurstville business banking centre as a relationship executive. 167 He had had social contact with the Serobians because his then fiancé, a fashion designer, had met Yvette Serobian and carried out some design consultancy work for her in connection with a proposed fashion business venture. 168 He called Mrs Serobian to advise her that he was the new relationship manager, and visited the Manly office on 12 May 2006. He had lunch with Patrick sometime later. 169 At about this time the Serobians were contemplating the acquisition of a property at 4 Massie Street Ermington ("the Ermington property") which they planned to open and operate as a childcare centre. They were (on behalf of Schypsl) seeking finance to buy this property. 170 Mr Serobian says his wife suggested that the Ermington property would be a good investment for their company and although he had concerns about how much they were borrowing, Mrs Serobian told him it was a good investment and he was satisfied with his decision. 171 In addition, they had established a further child care centre at Hornsby which was expected to operate later in the year and they were (on behalf of Schypsl) seeking a rental guarantee. 172 On 9 June 2006, Chad Molenaar sent an email to Schypsl requesting information about Refnok and Schypsl. 173 In a Letter of Approval dated 16 June 2006, addressed to the Serobians as directors of Schypsl, the Bank informed them that it had approved a variation to the facilities by way of a Contingent Liability Bank Guarantee for $46,750 and a BetterBusiness Bill Facility of $800,000, thus increasing the facilities of Schypsl by $846,750 (in addition to the $4.5 M facility and the $150,000 overdraft facility), bringing its facilities to a total of $5,496,750. 174 The letter included a Terms Schedule and a Securities Schedule reciting the required securities which included a reference to guarantees by the Serobians limited to $5,496,750 supported by mortgages over the Manly property, Cranebrook and The Entrance. 175 The Serobians signed an Acceptance Document in respect of these additional facilities on 11 July 2006, according to Chad Molenaar, at the Manly office and in his presence. He says he presented Mrs Serobian with the entire Letter of Approval including the Terms Schedule and Security Schedule. He says he summarised the contents of the letter and read to them in summary form the substance of the Acceptance Document. 176 Chad Molenaar says that he made an urgent request at the Bank for preparation of the necessary documents to implement these facilities. He says that he attended the Manly office again on 13 July 2006 where he met the Serobians, in order to have them sign. 177 He says that the documents to be signed were a letter dated 13 July 2006 to Mr Serobian attaching a Consent and Acknowledgement to Extension of Guarantee, a similar letter and consent for Mrs Serobian and a mortgage by Schypsl over the Ermington property. 178 He says that he handed to the Serobians a Bank booklet entitled "What it means to be a guarantor" and that then he said words to the following effect: "As you know, each of you have already given a guarantee of the debts of Schypsl to the Bank, but because of the purchase of Ermington and the Hornsby rental guarantee, there is an increase in Schypsl's facilities. You need to agree that your guarantee will cover these increases. These here are forms of consent and acknowledgment which acknowledge that your maximum liability under your guarantees will be $5,496,750 plus enforcement expenses. I assume you understand what I am saying and what you are doing and you do it of your own free will but do you understand what I am saying and what you are doing? I am very happy, if you want to go through this booklet which sets out the full nature and effect of your liabilities under your guarantees." 179 In evidence was a Consent and Acknowledgement to Extension of Guarantee prepared for and signed by Mrs Serobian bearing the date 13 July 2006. It is apparent on the face of the document that Mr Serobian had (incorrectly) first signed it. His signature has been scratched out. Chad Molenaar has signed as a witness. The document has a handwritten date of 13 July 2006. 180 Also in evidence were a Consent and Acknowledgement to Extension of Guarantee signed by Mr Serobian and a mortgage signed by the Serobians as directors of Schypsl both with the date 13 July 2006. 181 Also in evidence was a typed diary note of Chad Molenaar in the following terms: " Diary Note Subject Schypsl, Refnok and Serobian (C&S) Mortgage and covering letter together with booklet "What it means to be a Guarantor" were handed to Christine and Shahen Serobian (also as Directors for REFNOK) as third party mortgagor. The following questions were asked: 1. Are you signing the Guarantee of your own free will? Answer: Yes 2. Do you understand what giving a Guarantee involves? Answer: Yes Both Christine abd (sic) Shahen were clearly advised not to sign the document until they understood the full nature and effect of their liabilities. They advised they wished to sign the documents immediately not withstanding such explanation. I made the request again for them to keep the documents and read through overnight but were told it was not necessary. …Signed…………………………… Chad Molenaar Relationship Executive Dated: 13th July, 06" 182 The Serobians have an entirely different version of these events. 183 They say that on 13 July 2006 Chad Molenaar arrived at the Manly office when only Mr Serobian was present. Mr Serobian's affidavit evidence was that Chad Molenaar got him to sign a document. He signed the wrong acknowledgement document being the one prepared for Mrs Serobian. Mrs Serobian says that when Mr Serobian told her that Chad Molenaar had called and had asked Mr Serobian to sign some documentation, she immediately telephoned Chad Molenaar and asked what documents her husband had been asked to sign. She says that a conversation to the following effect took place: CHAD: They are for the loans, I will bring out your copy for you to sign later. I have made a mistake, I had Shahen sign your document as well. CHRISTINE: You know Shahen does not read English. You are playing games and I am not very happy with Commonwealth Bank. CHAD: I will bring your's (sic) out to be signed in a few days. 184 She says further that: "Chad said to me "Shahen has already agreed and signed the documents so they are already binding. Just for the record I need you to sign here" and pointed to a space for me to sign on the last page. I signed but replied " that was not very fair, you know Shahen doesn't speak or read English. You have even got him to sign where my name is on the document. This proves to you that Shahen cannot read." I do not recall Chad discussing the terms of the guarantee or mentioning anything about me taking time to consider the documentation and consult my advisors." 185 Mr Serobian says he recognised the man because he had seen him once or twice before at the Manly office. He said the man pointed to a spot on a document for him to sign and he identified that document in his affidavit as the Consent and Acknowledgement to Extension of Guarantee bearing his signature. He also says that the man asked him to sign a further document which he identified as the Consent and Acknowledgement to Extension of Guarantee which had been prepared for Mrs Serobian's signature. He says that he only saw the entire document (presumably the letter dated 13 July 2006 and the Consent and Acknowledgement to Extension of Guarantee) when he was shown it by his solicitor when preparing his affidavit. He identified his own signature. He says that he told Mrs Serobian that he had signed two papers for the Bank. 186 He says the documents were never explained to him and he did not know that their effect was a personal guarantee for any increase in the loan to Schypsl by the Bank. He was not advised to obtain any independent legal or financial advice and the document was never explained to him by a translator or an interpreter. 187 The Serobians did not deal in their affidavit evidence with how the mortgage bearing the date 13 July 2006 came to be signed by both of them. 188 Chad Molenaar's oral evidence was that he never met Mr Serobian other than in the company of Mrs Serobian. 189 He also denies that he was aware that Mr Serobian could not speak English as he had previously spoken to him in English in an earlier meeting, and believed that he could speak English. 190 On 14 July 2006 Mrs Serobian sent a fax to Chad Molenaar enclosing "insurance papers as you requested" and requesting "a bill of $100,000 to be transferred today". 191 The documents accompanying that fax included confirmation of policy details by NRMA Insurance held by the Serobians in respect of Cranebrook and The Entrance. The policy dates are from 23 November 2005 to 22 November 2006. The insurance certificates state that the mortgagee is the Commonwealth Bank of Australia. 192 On 8 August 2006 Schypsl exchanged contracts to purchase the Ermington property for $713,000. 193 Settlement on the Ermington property took place on 15 September 2006. The September 2006 facilities 194 Chad Molenaar says that in August 2006 he became aware that the Serobians and Schypsl were considering moving their account to the National Australia Bank ("the NAB"). He contacted Mrs Serobian to arrange lunch. He, Mark Hill (executive manager corporate banking), Mrs Serobian, and Patrick went to lunch. 195 Mrs Serobian says that the lunch was arranged after she had a conversation with Chad Molenaar in which she told him that the Bank was not fulfilling its promises and was taking all the money for its interest payments and would not let them set up or buy any new businesses for them to be able to pay them the interest from those businesses. 196 The lunch took place in Manly on about 23 August 2006 at a restaurant on the Ferry Wharf. 197 Mrs Serobian expressed dissatisfaction with the Bank. 198 Her evidence was that a conversation to the following effect took place: MARK: We wouldn't want for anything to go wrong, nor do we want to lose you as our valued customer. We will fulfil all of your funding requirements from hereon in and we will fix your previous problems, don't worry. CHRISTINE: That's what Kerry and Sue said in the beginning, the bank is just full of false promises. MARK: I apologise, obviously there has been some miscommunication. We will fulfil all your immediate requirements, put a facility in place for the company to cover the set up of a couple of new centres and enough funds to cover payments until such time that the businesses generate enough income, what opportunities do you have available to you at the moment? CHRISTINE: We would like to buy the property I mentioned to you at Ermington, the Hornsby one, the new one at Wyong that has a 30 year lease in place from the Council and we also require about $750,000.00 for another centre we have in mind. MARK: I believe Chad was setting up a facility for about $850,000.00. We will increase that to $1,600,000.00 and from here on in any businesses you want to purchase we will provide the full funds for you to do so. 199 Patrick's evidence was that a conversation between Mark Hill and Mrs Serobian to the following effect took place: MARK: We do not want to lose your business we will fulfil all of your funding requirements and resolve any lack of service that you feel you are experiencing…we will fulfil all of your immediate funding requirements based on our discussions today, what opportunities do you have available to you at the moment? CHRISTINE: We have the property at Ermington as I had mentioned to Chad, Hornsby centre and the other new one at Wyong on a 30 year lease from the council, we will also require a further $750,000.00 for another centre we have in mind. MARK: Chad was setting up the facility for $850,000.00, we will increase that amount to $1,600,000.00 and from here on we will fund any business you want to purchase or establish. 200 Mark Hill's evidence was that there was general discussion about the Serobians' businesses and their current facilities with the Bank and that Mrs Serobian asked a lot of questions and demanded detailed answers during the lunch. He says that the usual way he would describe a customer in good standing was as a valued customer. He denies that he said the words which Mrs Serobian and Patrick attribute to him. He denies that at any stage he or anyone on behalf of the Bank committed to providing any, let alone limitless, finance without further review or consideration. 201 Chad Molenaar says Mrs Serobian told them that the NAB was offering to refinance and to increase their facilities to $14 M. She told them that the NAB had calculated a value for "their business" simply on the basis of the number of places at any childcare centre. She wanted the Bank to do the same. 202 He says that general matters relating to the Serobians' business and their funding requirements were discussed and that Mrs Serobian spoke of her intention to expand the child care business. According to him she said they were looking to buy additional centres in Wyong and Muswellbrook and were continuing to develop and progress the properties at Hornsby and Ermington. He accepts that she was critical of the Bank. 203 He denies that any conversation to the effect of the one which Mrs Serobian says she had with Mark Hill occurred. 204 On 28 August 2006 Chad Molenaar sent a fax to Mrs Serobian and Patrick asking for information about child care places at various child care centres. 205 On 29 August 2006 the Bank received under cover of a fax from Schypsl certain information about various childcare centres, including a projected cash flow for the Ermington childcare centre. 206 On 5 September 2006 in a Letter of Approval of that date the Bank approved an additional Multi-Option Facility for Schypsl of $1,050,000 and a further BetterBusiness Variable Rate Facility totalling $1,500,000 (including the earlier $800,000 facility – thus representing an increase in that facility of $700,000). 207 On 5 September 2006 a meeting took place at the Manly office at which were present Chad Molenaar, Mark Hill, Kerry Small, and the Serobians. Chad Molenaar could not recall whether Patrick was present. 208 Chad Molenaar says that he read to the Serobians, by way of summary, the description of the facilities appearing on the first page of the letter, pointing out the approved increases. The Approval Letter incorporated a Terms Schedule, Security Schedule and an Acceptance Document. He says he read to them the facilities described in the Acceptance Document. He says that he read to them the items and terms of the Terms Schedule for each facility and that he read or summarised each item of security stated in the Security Schedule for Schypsl. He says he read or summarised the Bank's fees and charges. 209 Chad Molenaar says that Mrs Serobian interrupted him stating that she wanted to rearrange these facilities so that the BetterBusiness Variable Rate Facility was for $1,600,000 rather than $1,500,000 and the Multi-Option Facility was reduced from $1,050,000 to $950,000. 210 According to Chad Molenaar, Kerry Small called her manager Roger Hastie by mobile phone, for permission to alter the document, which he gave, and alterations were made by hand to the Acceptance Document and initialled by Mark Hill and Kerry Small. The documents so amended were in evidence. 211 The Terms Schedule accompanying the 5 September 2006 Letter of Approval contained a provision that the release of funds would be strictly controlled by the Bank and would be subject to certain conditions. According to Chad Molenaar, Mrs Serobian objected to the wording of this condition, there was some discussion and new wording was proposed and approved by Roger Hastie during Kerry Small's conversation with him. 212 He says that there was considerable discussion about whether the Serobians would be able to obtain the consent of landlords of the leased child care centres to mortgages over leases in favour of the Bank and the Terms Schedule was varied after the discussion with Roger Hastie and handwritten by Mark Hill. The handwritten amendment was in the following terms: "The Borrower undertakes to arrange execution of mortgage over leases of centres at Hornsby, Leichhardt, Wyong & Narrabeen, within 90 days. The Bank agrees to fund the BetterBusiness Bill Facility Variable Rate $1.6m prior to the mortgages over the leases being executed." 213 The Terms Schedules for both these additional facilities contained a provision to the following effect: "The Borrower undertakes not the borrow or raise money, exceeding the sum of $300,000.00 (other than to repay the Facilities in full) without the bank's prior written consent." 214 Chad Molenaar says he has a specific recollection of reading out this condition and telling the Serobians that the Bank may wish them to sign a formal document agreeing not to borrow or raise money exceeding the set sum without the Bank's approval. Chad Molenaar says that once agreement had been reached on the final terms of the facilities, the Serobians signed the Acceptance Document which covered both facilities. An Acceptance Document bearing the date 5 September 2006 with the Serobians' signatures as directors of Schypsl was in evidence. 215 By this time the $2 M facility was fully drawn. Chad Molenaar says that he took to the meeting an Approval Letter, dated 5 September 2006, including a Terms Schedule, amending the terms of the $2 M facility to a fixed term loan facility extending its term for four years and three months so as to be repayable on 11 January 2010. Item 9 of the Terms Schedule stated that the bill rate would be determined on the day of, or the working day preceding each drawdown and stated that the indicative yield rate for a 90 day bill with a face value of $2 M was 6.57%. He says that there was otherwise to be no change to the facility as the previous one had been a variable rate facility as was this one and this rate would have applied to a bill under the facility whether amended or not as it was a variable facility. He says he explained the changes to the Serobians. 216 Chad Molenaar says the 5 September 2006 meeting started around 4.30pm and ended at about 6.30pm. 217 Mark Hill also gave evidence of this meeting. According to him they arrived at about 4.30pm and the meeting lasted approximately 2 hours. He says this was the first time he met Mr Serobian. He asked him whether to call him Shane or Shahen and he replied "either". 218 He says that Chad Molenaar, Kerry Small, Mrs Serobian and he sat at a small table. Mr Serobian was present but did not take much part in the meeting. 219 According to Mark Hill, Chad Molenaar put the 5 September 2006 Letters of Approval, Acceptance Documents, Terms Schedules and Security Schedules on the table and proceeded to take Mrs Serobian through them. 220 He says that he was content for Chad Molenaar, the relationship executive, to explain the documents but that he concentrated on and followed the explanation of the documents. He says that Mrs Serobian interrupted on many occasions to ask questions. Mr Serobian was in the room although he was not part of the "huddle around the documents" as they were being explained. 221 He says that Mrs Serobian requested that the proposed Multi-Option Facility limit be reduced by $100,000 and the Variable Rate Bill Facility be increased by that amount. He says that Kerry Small exited the office and made a mobile telephone call to a person he understood to be Roger Hastie who had authority to make the change and that she came back and said, "that's fine". He says he amended the documents to accord with this change. He could not recall how the condition relating to the Bank's strict control over the release of funds was removed, although he initialled the striking out. 222 He says that a conversation about the Security Schedule occurred in which he said that consents to the mortgages over the leases were required before the facilities were drawn down, and that after discussion it was agreed that the documents would be amended so as to require an undertaking for the consents to be provided within 90 days. He says that Kerry Small called Roger Hastie to get approval for this change, which she got. Mark Hill wrote the provision relating to obtaining the mortgages in his own hand. 223 Kerry Small also gave evidence of this meeting and of the discussion which led to changes to the documents, and of her phone call to Roger Hastie. She says that they arrived between 4pm and 4.30pm. 224 Mrs Serobian's version of this meeting is that it started at approximately 6.30pm and took place in a hurry. According to her: "I recall Mark apologising for being late and we had a conversation to the following effect: MARK: We have all of the documents here for signing so that we can get the funds through in time. CHRISTINE: So the $1,600,000.00 will be all under the Company? So we have full control, we can actually spend the money on building businesses as well? KERRY: You and Shahen won't be held liable for anything this would be under the Company. MARK: We just have to change these clauses (referring to documents in his hand) we will give you full control of the funds from here although we will ask you to obtain mortgages over the leases from the landlords at the leased of premises and Refnok will be taken out of any guarantee. CHRISTINE: The landlords won't sign them as the leases are already in place. KERRY: We can put the clause in there for now and Chad will bring out the documents, send it to the landlords and try one last time. CHRISTINE: Well I can try but I am 100% sure that they won't sign them." 225 Mrs Serobian says that no terms were read out to her or Mr Serobian and that the signing page was the only document presented to them. 226 She says that it was always her understanding that the loans were being kept separate and that her and her husband as directors of Schypsl "had to guarantee for the Company's debts, but never personally". 227 Each of Chad Molenaar, Mark Hill, and Kerry Small say that Mrs Serobian expressed the view that there might be difficulty with the landlords in obtaining mortgages. Otherwise each denies that the conversation which Mrs Serobian says took place, occurred. 228 Mr Serobian recalled that on or about 5 September 2006 two men and a lady from the Bank came to the Manly office. He was aware that Mrs Serobian had arranged an investment loan with the Bank but he was not aware exactly how much they were borrowing. He says the Bank officials talked to Mrs Serobian but did not communicate at all with him. He says that the Bank officials asked Mrs Serobian to bring him over to the table to sign the documents, but when he got to the table "the man pointed to a place for me to sign the document". He says the meeting lasted approximately 10 minutes, none of the documents were translated to him, or explained by Mrs Serobian. He understood that they had enough assets to cover this loan. 229 He says that: "At no time was it explained to me that if we agreed to a fixed term instead of an original facility, being subject to annual review at a variable rate of 5.93% would mean an increase to 6.57%". He says he was not told that they were agreeing to provide security in respect of their personal properties for the loans of Schypsl. 230 On 13 September 2006 Chad Molenaar returned on his own to the Manly office. 231 He says that he took with him two letters, one addressed to each of the Serobians dated 12 September 2006, and each enclosing a Consent and Acknowledgement of Extension of Guarantee in the following terms: "I acknowledge that, by signing below:- • my maximum liability under my Guarantee will be $7,200,000.00 plus enforcement expenses as set out in the Guarantee; and • the securities given by me as set out in the Facility Agreement will secure all my liabilities to the Bank under my Guarantee." 232 He says that he gave them these letters as well as a booklet entitled "What it means to be a guarantor" and that he told them that as the Schypsl facilities had been increased they would need to extend the guarantees again as they did back in July. He says that they said they were happy to sign and did not need an explanation by going through the booklet. He offered them the opportunity of keeping the documents and looking at them overnight, but they declined. 233 On 13 December 2006 in a fax to Chad Molenaar, Mrs Serobian sought to drawdown $500,000 from the $950,000 Multi-Option facility for use with respect to a proposed child care centre at Wagga Wagga. 234 On 14 December 2006 the Serobians under cover of a Schypsl letterhead provided further information to Chad Molenaar in support of the drawdown request. In the letter they said that they would forward "the execution (sic) mortgage over leases as soon as they are sent back". 235 In a letter dated 14 December 2006 Chad Molenaar sought further information with respect to the estimated costs of the new childcare centre. 236 He says that by the end of December 2006 he did not consider that he had received satisfactory documentation nor had the Bank received any deeds of consent from the landlords. Nevertheless he recommended drawdown of the sum of $500,000 and this was approved by the Bank on 21 December 2006. Dealings up to and including the temporary excess facility of $500,000 237 On 11 January 2007 Chad Molenaar, Mark Hill and Andrew Watson (general manager asset finance) had lunch with the Serobians and Patrick at the old Surf Lifesaving Club on the promenade at South Steyne, near Manly. 238 Chad Molenaar says that there was general discussion about business including a business called Tradebay which Patrick was operating. 239 He says that Mrs Serobian said that "they" wanted to develop Cranebrook into another child care centre, that they expected it would cost in the region of $1 M and that they would look to the Bank to fund this. He says he responded by saying that the Bank was unable to consider providing any new facilities until their requests for information had been complied with including 2006 financial statements and consent for mortgages over the leases of the leased child care centres. 240 Mark Hill says they met the Serobians at the Manly office and walked to the restaurant. He says during the walk there was general discussion amongst the party but that he spoke particularly to Mr Serobian while walking next to him. He says that they discussed general non-business matters in English, that Mr Serobian spoke with an accent but that he had no difficulty understanding him in English although he could not remember specifically the subject of the conversation. He says he does not recall ever seeing the Serobians speak to each other other than in English. He says that at the lunch he spoke to Patrick about Tradebay. 241 The lunch was the first time Andrew Watson had met the Serobians or Patrick. Mr Serobian sat in his immediate vicinity. Although he cannot now recall the exact details of the conversation, he remembers having a conversation with Mr Serobian in English and being told by Mr Serobian of a recent trip back to Armenia where Mr Serobian noted a contrast between the financial position and success of the Serobians compared to their relatives and friends back in Armenia, of Mr Serobian's service in the army and how tough it was, of how when Mr Serobian had moved to Australia he had started with nothing and that the business he and his wife built together had come from hard work, and of the pride they had in Patrick and the role he would increasingly play in their business. 242 On 13 February 2007 in a handwritten fax to which was attached a letter signed by the Serobians on a Schypsl letterhead, Mrs Serobian requested a drawdown of $400,000 from the facility which had been approved in September 2006. At this time Schypsl had already drawn down $46,750 for the Hornsby rental guarantee and $500,000 for the proposed child care centre at Wagga Wagga. 243 On 27 March 2007 there was a meeting at the Manly office at which Mrs Serobian and Patrick were present. According to Chad Molenaar, Patrick said Schypsl would like to purchase a new business and they discussed new facilities. His recollection was that there was a request for $15 M to purchase a laundry business. 244 According to Mrs Serobian, at this meeting a conversation to the following effect took place: CHRISTINE: Have you had time to do work on the $750,000.00 facility that we discussed? CHAD: Yes, I have discussed it with Credit and they have said that it is approved subject to updated valuations. CHRISTINE: Is that on the Schypsl properties? CHAD: Yes, they have to come in at either the same amount or higher. 245 She says that in the coming days she had a conversation with Chad Molenaar in which it was said: CHAD: The valuations are fine and came in higher than we required. As you know the loan was approved, subject to valuations, so now I will bring the paperwork to you for signing. CHRISTINE: Thank you. 246 Patrick's version of what occurred at this meeting is that a conversation to the following effect took place: CHRISTINE: Have you had time to do work on the $750,000.00 facility that we have discussed? CHAD: Yes, I have discussed it with credit and they have said that it is approved subject to updated valuations. CHRISTINE: Is that on the Schypsl properties? CHAD: Yes, they have to come in at either the same amount or higher. 247 Chad Molenaar denies that there was ever any conversation about a facility for $750,000. He says that he would never have approved such a facility even if it had been requested because he had no authority to do so. 248 In about late March or early April 2007 Mrs Serobian sought an increase in Schypsl's overdraft facility from $150,000 to $650,000. According to Mrs Serobian it was their intention to fit out the Hornsby child care centre and to borrow $500,000 for establishment costs and the like to enable Schypsl to do so. She says that in a series of conversations around April 2007 with Chad Molenaar she told him of her intentions. It was after this she says they went to lunch with Mark Hill. 249 She says that at the lunch Mark Hill told her to consider her requests to be approved and that he would get Chad Molenaar to finalise the documentation the following day. Mark Hill denies ever having said the words she attributes to him or any words to like effect. 250 She says that some days later she had a discussion with Chad Molenaar in which he told her that the Bank required a condition whereby the advance of $500,000 would be repayable within three months. She says she told him she was unhappy about this and that he said: "Do not worry about it. This is just to keep the credit guys happy and when it comes to repayment time, we will extend it and fix it up." 251 Chad Molenaar accepts that he spoke to Mrs Serobian to inform her that the request of temporary extension had been approved. However, he denies that she expressed any dissatisfaction and denies that he said the words she attributes to him. 252 On 5 April 2007 Chad Molenaar wrote a letter to Schypsl (and the Serobians) in the following terms: "Dear Shahen & Christine, As per our earlier teleconference, we have approved your request for a further $500,000 on the following basis: 1. It will be on a temporary excess basis for 90 days 2. Clearance will be through the sale of the Hornsby Child care business 3. As per previous requests we require a copy of the Cash Flow Forecast, DA approval ( and license if applicable) and lease agreement 4. Full Financials for Schypsl Pty Ltd & Refnok Pty Ltd Once these are in place, a formal letter of offer will be produced and sent to you for signing, upon receipt of the original the funds will be released (limit increased on the current overdraft facility)." 253 Chad Molenaar left the Bank on 10 April 2007. Management of the Serobians' and Schypsl's accounts and relationships then passed to Paul Tannock. Paul Tannock read Bank internal documents showing that the temporary excess facility had been approved on condition, amongst others, that the proceeds of sale from the Hornsby centre would be applied to its repayment. 254 Paul Tannock visited the Manly office on 11 April 2007. He took with him a copy of a Letter of Offer to Schypsl dated 10 April 2007 in which the Bank approved a variation of Schypsl's facilities to reflect the increased overdraft from $150,000 to $650,000. Attached Terms and Conditions reflected that the overdraft of $650,000 included a temporary excess limit of $500,000 for three months. 255 The Letter included a Security Schedule referring to all the securities held by the Bank including the mortgages over Cranebrook and The Entrance. Under a heading entitled "Conditions prior to Funding" the following was included "Term: 3 months from set up of Temporary Accommodation or earlier from sale proceeds of the Hornsby Childcare Centre". 256 He says that he introduced himself to the Serobians and they had a meeting which lasted about an hour. Patrick and Mr Serobian also sat at the table. He says that Mr Serobian spoke in English and interjected in the conversation. Paul Tannock says he had no difficulty understanding him. 257 According to Paul Tannock, Mrs Serobian informed him that they needed a large line of credit to facilitate the urgent purchase of childcare centres as and when they become available without needing approval. His response was that he would look at a more flexible funding requirement depending on the overall strength of their business once he had a chance to read through their file in detail. 258 Paul Tannock says he talked the Serobians through the Letter of Offer. He says Mrs Serobian asked what would happen in three months time if they had not sold Hornsby. Paul Tannock says he replied to the following effect: "Within three months I will have had time to complete the assessment of your group and understand the financials and cash flows. Assuming everything is satisfactory we can either extend the time to sell Hornsby or look to put further formal arrangements in place if need be. We will need to discuss this further." 259 He says that on 11 April 2007 the Serobians signed acceptance of the varied facility as directors of Schypsl. 260 Mrs Serobian's version of this meeting is as follows: "I recall the meeting commenced after 4:00pm and lasted no more than 5-10 minutes. I recall Patrick saying to Paul words to the following effect: 'Why is there a restriction on the borrowing of $300,000.00? This wasn't part of the agreement and it was an agreement to be a loan and not a 3 month facility.' I was very surprised at this as it was never part of the agreement. I told this to Paul and said words to the following effect: CHRISTINE: You are putting us in a very bad position we can't pay it back within 3 months as even if we sold the day care centre tomorrow it would take at least 16 weeks for all the licenses to come through and there is no way we could repay the sum in that time period, particularly if we cannot borrow from another source. PAUL: Do not worry about this, we can extend it later, this is just a formality. I recall myself and my husband signed the document. I am certain that Paul did not highlight any clauses in the documentation or explain the nature of any of the clauses to me or my family members in my presence." 261 Mrs Serobian says that Paul Tannock told her he had forgotten to bring the mortgage documents necessary for them to obtain the $750,000 advance. 262 Patrick's version is that a conversation to the following effect took place: CHRISTINE: Have you brought the documents for the $750,000.00? PAUL: I only have the documents for the $500,000.00 facility, as I mentioned over the phone Chad left the file on my desk in dribs and drabs, I am following it up and will either email you the documents or bring them out. PATRICK: He was also setting up a facility for the car loans, do you have the documents? PAUL: I will have to email them to you as well. 263 Paul Tannock denies that he ever suggested in telephone calls that he would be bringing out mortgage documents for funding of $750,000. He says he is not aware of any funding request for $750,000. His evidence was that he has never seen any document in relation to a loan of $750,000 between April and July 2007. 264 Mr Serobian only had a vague recollection of this meeting except that his recollection is that it lasted five minutes. He says he felt something was wrong because the meeting was rushed. He recalls only being asked to sign the documents for the $500,000 advance and says no terms were explained to him by any of the Bank officials, Mrs Serobian or Patrick. 265 During the period 12 April to 19 April 2007 the Serobians provided certain information to the Bank. On 19 April 2007 the temporary overdraft facility was put in place and drawn down. 266 Mrs Serobian says that the $500,000 was drawn down and was spent on business development expenses for the Hornsby centre and other business expenses. 267 The temporary excess facility was to expire on 11 July 2007. Events leading up to the breakdown of the relationship 268 Paul Tannock says that he did not hear anything further about the additional flexible line of credit which was mentioned at the 11 April 2007 meeting until he received a telephone call from Patrick on 14 May 2007 in which Patrick said they required access to their line of credit facility "by next Monday". 269 Paul Tannock says he responded by saying the Bank would need more information. 270 On 15 May 2007 Paul Tannock received a fax from Schypsl describing the current status of various child care centres including Leichhardt which he had previously been informed had burnt down. 271 The fax requested funding of $550,000 for a pre-school at Wamberal and a further $150,000 to be available on the overdraft facility. 272 On 21 May 2007 Paul Tannock and Karen Carter, the Bank's regional executive manager Sydney South, met the Serobians and Patrick at the Manly office. Karen Carter had not previously met the Serobians. According to Paul Tannock there was a discussion about the fact that the Bank wanted more detailed information about their business. According to Paul Tannock, Mrs Serobian said words to the following effect: "We have given you all that we can. We do not keep any more detailed records about our business as we know what we are doing. Our business was not set up to operate in that sort of way. However, we are now looking at new business opportunities. We would like to discuss with you today an investment that we wish to make into a golf-course development. We are entering into a joint venture to develop a golf-course worth $100million. We require funding from the Bank to make our investment in this project." Paul Tannock responded: "Before we can respond to this request we will need more details about ongoing cashflow for your child care business and information about current occupancy. All you have provided us with to date has been a snapshot of the relevant information. In respect of the golf course development, we will also need a lot more detail and information. The Bank has a contract at PKF, a firm of accountants. Our contact has been involved in both property developments and the childcare business. He would understand your business and be able to assist. Would you be interested in meeting him?" 273 Paul Tannock says Mrs Serobian agreed to this request and he gave her his contact at PKF. His belief was that Mrs Serobian later met the contact. 274 Karen Carter's evidence of this meeting is that she asked Mrs Serobian a series of questions and she made handwritten notes of the answers. She says that during the meeting she telephoned Patrick Phibbs from her mobile phone, she says that before the meeting ended she said words to the following effect: "We will review the $100 million facility request for the golf course when we receive the necessary information from you. I will come back to you with a decision one way or the other on your request for $550,000 for the Wamberal application by close of business on Friday." 275 According to Mrs Serobian, at a meeting in about April 2007 (which appears to be the meeting of 21 May 2007) the $750,000 facility which she says was previously discussed with Chad Molenaar, was discussed. She says she asked the Bank officers where the mortgage documentation was to sign, and that Karen Carter answered that the Bank's credit department had some questions, at which stage Karen Carter telephoned Patrick Phibbs on a loud speaker and Patrick Phibbs said, "Ok, I am happy with this", and Karen Carter said, "Paul will bring the documentation next week to sign". 276 Patrick in his affidavit evidence refers to a meeting, on or about April 2007 with Paul Tannock and Karen Small (sic). This also appears to be the meeting of 21 May 2007 with Karen Carter. He also says that there was discussion about a $750,000 facility and that "Karen Small" said the paperwork was being finalised and she would be phoning Patrick Phibbs and if he was happy Paul Tannock would bring out the documents. 277 According to Paul Tannock there was some discussion regarding the line of credit which had been requested for Wamberal. He could not recall the exact conversation but does recall that Patrick Phibbs dialled into the meeting at one point and that Karen Carter made notes of the meeting. According to Paul Tannock, Patrick Phibbs did not say "Ok, I am happy with this" in respect of any request for funding, nor did Karen Carter say words to the effect that Paul would bring documentation next week for Mrs Serobian to sign. 278 According to Karen Carter, towards the commencement of the meeting Mrs Serobian asked for mortgage documentation to sign and Karen Carter replied to the following effect: "There is no mortgage documentation to sign – no application for this has been completed or submitted for approval. Before we can do so, we are here today to better understand your business." 279 Karen Carter also denies having said that if Patrick Phibbs was happy Paul Tannock would bring out the paperwork or that Patrick Phibbs said the words which Mrs Serobian attributes to him. She says that she would not have said paperwork was being finalised because no application had been submitted. 280 In a letter dated 21 May 2007, on behalf of Schypsl, Mrs Serobian wrote to Paul Tannock in relation to the facilities required including for the golf course development. Amongst others she said: "We require an approval from CBA by Friday 25/5/2007 for all the facilities. This date cannot be delayed, as there is pre-sales waiting to be exchanged on that basis. If the approval is delayed the Commonwealth Bank will lose the opportunity to fund this project, the joint venture has already obtained an approval from another bank, but I would prefer to use the Commonwealth Bank and keep our business with you." 281 On 25 May 2007 Mr Michael Ahmet, Corporate Solutions Executive of the Bank, responded as follows: "In relation to the proposed development, please be advised that we are very interested in pursuing your financial requirements. We propose to introduce our colleagues from the Bank's Property Consultancy Services division early next week to facilitate credit assessment on this transaction. Should you wish to discuss the matter please don't hesitate to contact the writer." 282 On 2 June 2007 Mrs Serobian wrote to Paul Tannock providing further information on the proposed golf course development. Paul Tannock had apparently advised her that Mr Phillip Bryans, the Bank's current head of property risk, had a lack of experience in the risk analysis of golf courses. The letter enclosed a feasibility assessment/cash flow and provided Mrs Serobian's views on the risks involved. In addition, and amongst others, she stated the following: "Phillip Bryans needs to be educated in regards to the security of a golf course resort… On the 13th and 14th of June I have a group of 20 corporate individuals visiting the site which have expressed serious interest in purchasing at least one property each, they will be going on a private tour of the property followed by an exclusive property selection process where they will select their desired home. They expect a construction commencement date and evidence of funding in order for them to pre purchase. Prior to that date we require all documentation to be finalised and shortly after followed with the settlement of the current outstanding debt with the line of credit. We have noticed a change in turn around times in the corporate department since the change of management, as previously mentioned. Evidently nothing seems to have improved, as far as we are concerned the department is not doing their job. It is not our role to educate and give guidance to representatives. I suggest you contact Philip Bryans and ensure he attends the meeting at the property, 2pm on Monday, as I will not be canceling (sic) for the second time. This will give him the opportunity to have any questions answered by the key personnel involved. I will also be in contact with Andrew from head office on Monday and suggest for him to attend the meeting if possible." 283 Karen Carter says that over the next couple of days after 21 May 2007 she reviewed the file and information given to her by Mrs Serobian at the meeting. She says she rang Mrs Serobian and told her that they would need more information about the Wamberal transaction and the request for funding. She says Mrs Serobian was unhappy and Karen Carter reiterated to her that she would have to come out and speak to her further. 284 At around this time Karen Carter asked Derrick Lewis, her business improvement manager, to carry out a full review of the Bank's relationship with the Serobians and Schypsl. She also asked Paul Tannock to conduct title searches for the freehold and leasehold properties which she understood to be operated by the Serobians and Schypsl. The searches revealed that some of the centres were leased not to Schypsl but to Kidsdirect Pty Ltd. 285 Mr Lewis prepared a report dated 6 June 2007 which he sent to Karen Carter and Paul Tannock. One of the things which Mr Lewis noted was that the Bank needed to ascertain what third party interests might exist at the Wyong and Wagga Wagga child care centres because parties other than Schypsl were to be operating the child care centres at those sites. 286 Karen Carter got in touch with a friend of hers and asked her to drive by a number of the child care centres and photograph them to ascertain which of them were operating and were being operated by Schypsl. 287 On or about 8 June 2007 Paul Tannock says he sent a faxed letter (wrongly dated 8 June 2006) to the directors of Schypsl asking for information concerning Schypsl and Refnok. He says he spoke to Mrs Serobian the day before to explain that the Bank had some questions and would be writing to her. This was his last direct involvement with the Serobians. He went on annual leave for two weeks and by the time he had returned, the file had been passed to the credit management unit of the Bank. 288 On 11 June 2007 Derrick Lewis and Joanne Smith, a business improvement manager at Hurstville, met the Serobians at the Manly office. Karen Carter was supposed to attend but was prevented by another urgent commitment from doing so. She asked Derrick Lewis to take Joanne Smith to the meeting. However, during the meeting there was a telephone conference call with her and Patrick Phibbs. 289 Mrs Serobian's account of this meeting is as follows: CHRISTINE: We have been banking with Commonwealth Bank for the last three and a half years and all the information on the file was provided to your managers. Why should we go to the stress and inconvenience of repeating ourselves again and again to you? DERRICK: This will be the last time and Paul will bring out the paperwork to you next week. I have been with the bank for many years. They should never had made it a condition for the advance of $500,000.00 to be repaid in 3 months if they hadn't seen the exchanged contracts (referring to the Hornsby Child Care Centre). PATRICK: This is the promise all you people have given us the last two and a half months and Patrick and I are sick of the false promises this is damaging our business. 290 Patrick's account of this meeting is as follows: CHRISTINE: We have been with the bank for years, all the information should have been filed, so I am not going to go through the inconvenience of repeating myself over and over again it is causing us too much stress. DERRICK: I only have a few questions and this will be the last time, after today's meeting Paul will bring out the documents. I have been with the credit department of the Commonwealth Bank for 16 years and they should have never included the 3 month clause if there was no exchanged contract in place for Hornsby. CHRISTINE: We realise this and I specifically mentioned it to Paul when he came to our office, he said that it would be extended if the business had not sold, the purpose of the funds have always been long term. DERRICK This has been my question, I don't understand why they put the 3 month clause in if the business had not sold. CHRISTINE: They left a holding deposit and that was all. DERRICK: I will organise for Paul to bring out the paperwork. CHRISTINE: This is the promise all of you keep giving us, Patrick and I are sick of hearing the same false promises it is damaging our ability to concentrate on the business. DERRICK: I will get onto it this afternoon. 291 Patrick says that in the coming weeks the paperwork never arrived from the Bank and he was extremely frustrated and says the Bank would not return his calls in respect of the queries he had regarding the advance of $750,000. 292 Derrick Lewis' account of this meeting differs from Mrs Serobian's and Patrick's. One exchange which he says took place was as follows: DERRICK: I should remind you that the temporary overdraft facility of $500,000 expires on 11 July and that is to be cleared from the sale of Hornsby. CHRISTINE: That sale is no longer proceeding and it was never my intention to pay out that temporary excess from the sale of Hornsby. DERRICK: Well didn't you have an exchanged contract for the sale of Hornsby? CHRISTINE: No I don't have any exchanged contract. The sale of Hornsby is not proceeding. DERRICK: Well the letter of loan offer made quite clear that that excess was to be cleared from the sale of Hornsby. CHRISTINE: It was never my intent. I just signed the letter of loan offer because I wanted the money. DERRICK: Well why you would have committed to repayment of the $500,000 temporary overdraft if you didn't have a binding commitment to sell Hornsby? 293 Derrick Lewis says there was no reply to his last question. 294 He says that Mr Serobian spoke only about a dozen words and was not directly involved in the conversation. He says that he had no difficulty understanding the pleasantries which were exchanged with Mr Serobian in English at the beginning and the end of the meeting. 295 Joanne Smith has no particular recollection of the events or substance of the meeting but does recall a telephone conference call with Patrick Phibbs and Karen Carter. She does recall Mr Serobian asking her if she would like a cup of coffee and she had no difficulty understanding him. Karen Carter recalls the telephone conference and Mrs Serobian yelling aggressively over the phone about her unhappiness with the service they were receiving from the Bank. 296 Her evidence was that during the telephone conference she made handwritten notes on her copy of the letter wrongly dated 8 June 2006. 297 According to Patrick Serobian, Karen Carter was at the meeting. Karen Carter says she dialled into the meeting. 298 Derrick Lewis says that on 14 June 2007 he prepared a document which recommended that additional funding should be declined and that the matter be referred to the credit management unit of the Bank to determine further action. As a result of this recommendation, the files were transferred to that unit. 299 By 20 June 2007 the Bank had declined to fund the golf course development. 300 On 20 June 2007 Karen Carter attended a further meeting at the Manly office together with Sarah Hall and Mark Wlossak, both from the credit management unit of the Bank. 301 Sarah Hall provided an affidavit in the proceedings but was unable to give evidence because of prenatal confinement. She took notes of the meeting which were in evidence. According to Karen Carter her notes state the substance of what was discussed. 302 During this meeting Patrick claimed that the Bank had issued a Letter of Approval to provide $15 M. Karen Carter stated that there was no record of this approval and Mark Wlossak asked Patrick to provide a copy. Patrick refused to do so, stating that there was insufficient trust with the Bank to release the copy. 303 Mrs Serobian asked why the Bank had declined to provide finance for the golf course development, and Karen Carter replied that the acquisition did not fit the Bank's risk profile for a property transaction. 304 The versions of Karen Carter on the one hand and Mrs Serobian and Patrick on the other as to what occurred at this meeting are at odds. 305 One of the events about which the parties are at issue is that both Mrs Serobian and Patrick say that Mark Wlossak said he wanted the Serobians' business out of the Bank within the next week, an assertion which Karen Carter denies. Although Mark Wlossak was not called, Sarah Hall's contemporaneous note records, amongst others, that Mark Wlossak indicated that in his view it would be most appropriate if the customers looked to refinance and that he would be flexible and provide assistance to ensure a smooth transition. 306 The letter concerning the $15 M facility is one which Chad Molenaar sent the Serobians on 28 March 2007. It was in the following terms: "Thank you for your time today with respect to your future needs regarding the potential purchase of Valitel Commercial. As mentioned, there are many items that we would require prior to providing you with a full commitment to borrow. These (among others) include the full financials for the group, a contract of sale, a full going concern valuation and a due-diligence report/proposal audited by an accountant and a solicitor in the relevant area. As such, I would like to thank you for the opportunity to continue our business association with you and look forward to seeing your proposal. I am of the understanding that we are looking to provide an approval to the sum of approximately $15 Million (Australian Dollars) to purchase the above named business in the managed laundry services sector. I look forward to discussing the matter with you more in the near future." 307 On 21 June 2007 Sarah Hall wrote to the Serobians confirming that the Bank declined the request for an additional $500,000 to establish a new childcare centre at Wamberal. The letter (amongst others) also stated as follows: "2. Additional facilities of $15 million During our meeting of 20 June 2007, you indicated that the Bank has previously provided you with a formal letter of approval for additional facilities of $15 million for a separate entity controlled by you and / or your children. You further indicated that you were not prepared to provide a copy of this letter to the Bank. I have since conducted a full review of all correspondence on the file and have not located a copy of any letter approving additional facilities of $15 million to any entity associated with you or your family. I have reviewed a filenote by the former Relationship Executive, who stated that in a meeting held at your office on 27 March 2007, you indicated that you were looking to purchase a business called Vitel Commercial for $15 million. However, there is no evidence that any written correspondence relating to this matter was subsequently entered into. Further, one of my colleagues, Yvette Swan, has spoken with the former Relationship Executive, who has verbally confirmed that no such letter was issued by the Bank. As a consequence, the Bank has no option but to progress on the basis that no such approval has been granted. Should this not be the case and you are in possession of documentation to the contrary, I request that you provide evidence without further delay." 308 On 2 July 2007 Sarah Hall wrote to the Serobians and Schypsl. Amongst others, she said: "As discussed at our meetings of 20 June 2007 and 28 June 2007, the relationship between the Bank and yourselves as borrowers has broken down, resulting in a number of issues having arisen over the course of the previous six to nine months. In light of the breakdown in the relationship, the Bank requests that you undertake to secure a full refinance of all the facilities detailed above by 30 September 2007. I should be grateful if you would provide me with a proposal by 10 July 2007 confirming how you intend to achieve a refinance within this timeframe." 309 On 5 July 2007 Mrs Serobian sent a lengthy letter to the Bank setting out her complaints. 310 On 22 October 2007 the Bank as mortgagee appointed agents for sale of Cranebrook, The Entrance and the Manly property. 311 On 10 December 2007 the Bank appointed receivers to Schypsl. 312 On 21 December 2007 Mr Serobian was examined by Ms J Soars of Counsel under oath before a Deputy Registrar of the Court concerning the affairs of Schypsl. He gave his evidence with the assistance of an Armenian interpreter, Ms Lucy Varbedian. The following exchange took place: MS SOARS: Mr Serobian, do you speak English? INTERPRETER: Yes. He said, I've been here 30 years. I speak 30%, 40% with my family and in the business. MS SOARS: Is it correct that you understand the questions but feel more comfortable in giving your answer in the Armenian language? INTERPRETER: That's the truth. 313 On 8 August 2008 the Bank obtained judgment against Schypsl for $6,422,281.21. THE BANK'S CLAIM 314 The Bank sues for the outstanding balance (including interest and costs) of the moneys lent directly to the Serobians under the $4.8 M facility and the $2 M facility. 315 As at 2 March 2009, according to a certificate given by an officer of the Bank under the mortgage over the Manly property, that amount was $8,007,806.85. 316 The Bank does not sue the Serobians in these proceedings on any guarantee for any monies lent to Schypsl or Refnok. THE SEROBIANS' CASE The $4.8 M facility 317 In defence of the claim for repayment of the $4.8 M facility the Serobians raised only two matters. 318 Firstly, they put that the mortgage over the Manly property was either void or liable to be set aside because it had been witnessed by the Bank which is a party to the mortgage. 319 Secondly, they challenged the interest rate claimed by the Bank as excessive. 320 The Serobians' primary position is that at the October meeting the Bank represented that the interest rate would be fixed at 5.6% and the Bank should be held to that rate as the consequence of the representation. Their secondary position is that when on 13 December 2004 the parties agreed to the fixing of the interest rate at 5.97% plus a line fee, giving an all up rate of 6.87%, the Bank did not disclose to the Serobians that the rate agreed was higher than 5.6% (or the rate shown in Item 9 of the 22 October 2004 approval letter which was 5.66%), the non disclosure was misleading or deceptive and that the Serobians by agreeing as they did on 13 December 2004 suffered detriment. Although not expressly so articulated, I took it that their contention is that the relief that should flow is a variation of the facility documentation to reduce the rate of interest payable, or alternatively an award of damages having an equivalent effect. 321 The interest rate challenge was articulated on their behalf as involving two questions: a whether the Bank agreed to provide a fixed interest rate on 22 October 2004 (that is at the October meeting); and b whether the Serobians were informed by the Bank that by agreeing to "a fixed rate term" instead of the original facility, being subject to annual review, the variable rate would increase from 5.93% to 6.57%. 322 It was not suggested that the interest claimed by the Bank is not in accordance with the facility documents. No claim for rectification is made. The $2 M facility 323 In relation to the $2 M facility the Serobians disputed personal liability (by way of cross claim for relief under the Trade Practices Act 1974 (Cth) – there being no claim for rectification) on the basis that the Bank had represented at the October meeting (and, although not expressly put in submission, reaffirmed at the 5 September 2006 meeting) that this facility was being made available to Schypsl and was separate from them personally and from their assets. The necessary implication was that the Bank was representing that it would not have recourse to the Serobians personally for repayment. 324 Although not expressly so articulated, I have taken the Serobians' position to include an averment that but for the alleged representation, they would not have executed the facility documentation in the form they did and that the facility documentation should be set aside. 325 A submission was initially put that the Bank had agreed to make the entirety of the $2 M facility available for immediate drawdown on settlement and had breached this agreement by not doing so. This submission was abandoned when it was accepted that ultimately the whole of the facility was drawn down over a period of time and there was no evidence of any detriment to the Serobians arising from the alleged breach. In any event the Serobians' primary position was that the facility was to be given to Schypsl and not to them. Cranebrook and The Entrance 326 By their cross claim the Serobians contend that the Bank agreed and represented to them at the October meeting that on settlement of the refinancing with St George, the Bank would not be taking security over Cranebrook and The Entrance and that the titles to those properties would be returned. 327 It was not put that the contractual instruments which the parties signed did not in fact confer upon the Bank security over Cranebrook and The Entrance for the debts of Schypsl and the Serobians. There was no claim for rectification. 328 There is also no issue that Cranebrook and The Entrance have since been sold to third parties. 329 What is put is that as a consequence of the Bank's failure to return those properties in accordance with the representation, the Serobians have suffered damage in the amount of the value of Cranebrook and The Entrance on settlement on 20 December 2004. The Guarantees 330 The guarantee and cognate instruments which the Serobians executed are the following: a the guarantees for the debts of Schypsl originally given by the Serobians on 13 December 2004 when the facility documents for the $4.5 M facility to Schypsl were executed; b the Consent and Acknowledgement to Extension of Guarantee signed by each of them on 16 February 2005 increasing the limit of their personal liability to $4,650,000 as a result of the increase of Schypsl's facilities by the overdraft of $150,000; c the Consent and Acknowledgement to Extension of Guarantee, signed by each of them on 13 July 2006 (in the disputed circumstances referred to above), increasing their maximum liability to $5,496,750 to account for the additional two facilities of $800,000 and $46,750 which had been approved on 16 June 2006 and accepted by the Serobians on behalf of Schypsl on 11 July 2006; and d the Consent and Acknowledgement to Extension of Guarantee signed by each of them on 18 September 2006 increasing their maximum liability to $7,200,000 to account for the additional facilities of 5 September 2006 being the Multi-Option facility of $950,000 and the BetterBusiness Variable Rate facility of $1,600,000. 331 It was put on behalf of the Serobians that their personal guarantees were unjust at the time they were entered into, within the provisions of s 7(1) of the Contracts Review Act 1980 (NSW) and should be set aside because: a at the October meeting Mrs Serobian brought to the attention of the Bank that Mr Serobian could not read or write English; b Mr Serobian cannot read, write or understand English; c Mrs Serobian was suffering ill health and was not able to make decision as a result of her medical impairment; d at the October meeting Mrs Serobian told Susan Bell that she was very sick; e the Serobians did not have legal advice or other assistance; and f there was an inequality of bargaining position. 332 In addition, although not expressly so articulated in submissions, I have taken the Serobians' submissions to include that the guarantees should be set aside because they were procured by conduct of the Bank which is asserted to be misleading or deceptive on the bases that: a the Bank represented that Schypsl's facilities were being kept separate and that the Serobians were not giving guarantees for Schypsl's obligations; and b the Bank did not disclose that the Serobians were in fact giving guarantees for Schypsl's obligations; but for which the Serobians would not have executed the guarantees or subsequent acknowledgements or extensions of them. 333 The relief sought by the Serobians with respect to their guarantees is not of any immediate utility because they are not being sued on those instruments. Its utility relates to the possibility that the Bank might seek to enforce the guarantees in the future. THE PROCEEDINGS 334 Mr P Dowdy of counsel appeared for the Bank. Mr A Dlakic, solicitor, appeared for the Serobians. 335 The Bank's case in chief was by way only of the tender of documents, including the mortgage over the Manly property and the terms of a memorandum incorporated into the mortgage. 336 In the Serobians' case there were affidavits by Mrs Serobian, Mr Serobian and Patrick, each of whom were called and cross-examined. 337 Two affidavits of Mr Serobian were read, one of 27 March 2008 and a supplementary affidavit of 21 July 2008. According to each of his affidavits it was read to him by Ms Lucy Varbedian, an Australian Government contract interpreter, and each was accompanied by a certificate from Mrs Varbedian that it was a true translation from an Armenian original document into the English language. 338 When Mr Serobian was called an application was made for his evidence to be led through an interpreter, a course which the Bank opposed on the basis that there was a body of evidence available that indicated that Mr Serobian was capable of giving evidence in the English language. I ruled that he should, at least to commence with, be required to give his evidence in English. After a period I permitted the evidence to continue through an interpreter. There are a number of observations in that context pertinent to the credibility of Mr Serobian as a witness, which are made later in this judgment. 339 In the Bank's case there were affidavits by Susan Bell, Kerry Small, Rick Withers, Chad Molenaar, Mark Hill, Paul Tannock, Andrew Watson, Derrick Lewis, Joanne Smith and Sarah Hall. Save for Sarah Hall (who was unavailable) all were cross examined. I have not attributed any weight to the affidavit evidence of Sarah Hall. 340 The proceedings occupied more than 9 days of hearing over a period of some 13 days. APPROACH TO CONSIDERATION 341 The submission that the mortgage over the Manly property is impeachable because it was witnessed by the Bank, involves a purely legal question. 342 All of the other issues involve factual questions and nearly all of them concern what was said or not said at the October meeting or what was said or not said (or done or not done) on other occasions. 343 Resolution of these issues involves findings of fact (in many instances involving credit) which affect multiple issues. 344 The October meeting was described during submissions by counsel for the Bank as the fulcrum of the Serobians' case. That description was accepted by the solicitor for the Serobians. 345 I will deal firstly with the submission concerning the Manly mortgage. 346 I will then, with respect to the various meetings, make the findings of fact necessary to consider whether the Serobians' defences (or rather cross claims – other than with respect to the guarantees) have been made out and then I shall determine whether they have or have not been. 347 Finally, I will deal with the challenge to the guarantees. 348 Before proceeding as foreshadowed it is necessary to set out the relevant statutory enactments and to provide a brief synopsis of what has relevantly been said with regard to them in the authorities. THE RELEVANT STATUTORY ENACTMENTS The Trade Practices Act 349 Section 52(1) of the Trade Practices Act, which is in Part V, provides as follows: A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 350 Section 82(1) of the Trade Practices Act provides relevantly as follows: … a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part…V …may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 351 Section 87 (1) of the Trade Practices Act provides relevantly as follows: … where, in a proceeding instituted under this Part, … the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part … V…, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 82, … make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. 352 Section 87(2) of the Trade Practices Act provides relevantly as follows: The orders referred to in subsection (1) and (1A) are: (a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order; (b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified; (ba) an order refusing to enforce any or all of the provisions of such a contract; … 353 It is well established that: a conduct is misleading or deceptive within section 52(1) of the Trade Practices Act if it induces or is capable of inducing error; b whether conduct is misleading or deceptive is a question of fact; c where the conduct consists of a misrepresentation (which is often but not always the case), it is not misleading unless the person to whom the representation is directed labours under some error; d in order to recover damage the plaintiff must prove that loss or damage suffered was "by" conduct in breach of the Act. This means that the loss must be caused by the conduct complained of. Whether that is the case, is to be determined by approaching the matter in a common sense and practical way. See Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 2 TPR 48; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109. The Contracts Review Act 354 Section 7(1) of the Contracts Review Act provides relevantly as follows: 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, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. 355 Section 9(1) of the Contracts Review Act provides relevantly as follows: 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. 356 The Contracts Review Act has been the subject of extensive judicial consideration. The following presently relevant principles have been established by the authorities: 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: 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; and f 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 the court is empowered to make, if it considers it just to do so, appropriate orders "for the purpose of avoiding as far as practicable an unjust consequence or result": SH Lock (Australia) Ltd v Kennedy (1988) 12 NSWLR 482 at 489. CONSIDERATION The Manly property mortgage 357 The submission that the mortgage is void or voidable because of the manner of its witness attestation is unsustainable. 358 The notation in the mortgage "(Witness should be an adult who is not a party to the mortgage)" may well have its genesis in s 38(1) of the Conveyancing Act 1919 (NSW) which provides as follows: Every deed, whether or not affecting property, shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed; but no particular form of words shall be requisite for the attestation. 359 Susan Bell, the attesting witness, is not a party to the mortgage. Her attestation as a witness was not an act on behalf of the Bank: see The Bank of Victoria v M'Michael (1882) 8 VLR(L) 11; Hickey v Powershift Tractors Pty Ltd (1998) NSW ConvR 55-889 at 56,939. Concomitantly even if a corporation could be a witness (which I doubt), the Bank was not one here. 360 Moreover, even if the witness attestation was not in accordance with s 38(1) of the Conveyancing Act or the exhortation in the mortgage, the mortgage, which is registered on title, would not be unenforceable or void for that reason: see Arnold v State Bank of South Australia & Ors (1992) 38 FCR 484 at 487 and following. The October Meeting 361 The critical areas of dispute about what was said at the October meeting are whether: a Susan Bell offered the $2 M facility to Schypsl to enable it to maintain costs throughout a growth phase; b Kerry Small said that there was sufficient equity in the Manly property so that the Serobians' personal loans would be put under that property as a housing loan which would mean that the Serobians would get the titles to Cranebrook and The Entrance back; c Mrs Serobian asked for, and Susan Bell agreed to, Schypsl's dealings being kept separate from the Serobians' personal assets; d Mrs Serobian communicated, and Susan Bell and Kerry Small understood, that Mrs Serobian was sick; e Mrs Serobian brought to the attention of the Bank officers that Mr Serobian could not read or write English; f Susan Bell offered a fixed rate of interest for 5 years at 5.6% on the $4.8 M facility. 362 Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the Court which means that the Court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the Court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (2000) 49 NSWLR 315 at 319. 363 Not only am I not satisfied that the essential elements of the conversation which Mrs Serobian and Patrick assert took place at the October meeting occurred, in my view there are a significant series of objective factors which indicate that none of them did, and which supports the versions of the Bank officers who were there. 364 In addition, I consider that Mrs Serobian was not a truthful witness. She is intelligent, articulate, experienced in business, and quick witted and to my observation was prepared to say things under oath if she thought they suited her case, even though they were insupportable. Other aspects of her evidence (referred to below) were unbelievable. I do not accept her evidence unless objectively corroborated or against interest, and where her evidence conflicts with that of the Bank's witnesses, I prefer their evidence. 365 I also do not accept Patrick as a truthful witness. As with Mrs Serobian, his evidence was contradicted by significant objective material, especially with respect to the October meeting and the return of the titles for Cranebrook and The Entrance, and with respect to his asserted recollection of being satisfied that those titles would be returned and Schypsl's facilities kept separate. He tried to maintain consistency with his parents in the face of a significant body of material which made his position unmaintainable. Also, his evidence concerning his father's lack of English was in my view, untruthful. Where his evidence conflicts with that of the Bank's witnesses, I prefer their evidence. 366 For reasons which appear below, I also do not accept Mr Serobian as a truthful witness. I do not accept his evidence unless objectively corroborated or against interest. Likewise, where his evidence conflicts with that of the Bank's witnesses, I prefer their evidence. 367 I will deal in turn with each of the significant elements of the conversation asserted by Mrs Serobian and Patrick to have taken place at the October meeting. 368 I do not accept the assertion that Susan Bell offered the $2 M facility to maintain costs throughout the growth phase, and to give Mrs Serobian peace of mind due to her health because it is inconsistent with: a the fax from Amadaeus dated 27 August 2004 where the purpose of the $2 M facility was specified as being "for future investment – buying investment properties"; b Item 14 of the Terms Schedule attached to the Letter of Approval dated 22 October 2004 which stated: "The drawdown of Line of Credit facility of $2,000,000 to be strictly controlled by the Bank and subject to provision of a synopsis of property being purchased by the Borrower, detailing intentions with the use of property & estimated income to be derived." c Item 14 as changed at the instance of Mrs Serobian (according to Susan Bell whose evidence in this respect is not disputed by Mrs Serobian) which stated: "The drawdown of Line of Credit facility of $2,000,000 to be strictly controlled by the Bank and funds to be utilised for purchase of an income producing business asset. The Borrower is to provide an estimate of income to be generated, by the asset under purchase at each drawdown." 369 As appears below I am not satisfied that anything was said at the October meeting about Mrs Serobian's state of health or that the Bank was aware of any state of ill health. 370 Further, Mrs Serobian's position was that the Bank was supposed to have made the entirety of the $2 M facility available, and that she was surprised and angry that the Bank did not do so. Yet on 22 December 2004 she wrote a handwritten letter to Susan Bell (signed by both Serobians) drawing down on the line of credit and ending off with the words, "Thank you for your efforts, have a Merry Christmas and a Happy New Year." This is conduct irreconcilable with her asserted state of mind and behaviour. In addition, she had renegotiated Item 14 of the Terms Schedule to the $2 M facility which even in its amended form made the drawdown subject to the strict control of the Bank. 371 It is also inherently improbable, that, as Mrs Serobian's and Patrick's affidavit evidence appears to convey, the offer of the $2 M facility was made without being solicited and apparently to assist the Serobians because of Mrs Serobian's ill health. 372 As to the assertion that Kerry Small said that there was sufficient equity in the Manly property so that the Serobians' personal loans would be put under that property as a housing loan which would mean that the Serobians would get the titles to Cranebrook and The Entrance back, this assertion is at odds with a significant volume of consistent objective material and the parties' behaviour spanning a number of years: a the approval letters of 22 October 2004 leave no room for doubt that Cranebrook and The Entrance were part of the security being taken. Apart from the fact that the Security Schedule reflects those properties as part of the security, Item 14 of the Terms Schedule of the $4.8 M facility and the $2 M facility make express reference to the valuations of those properties; b the Bank's internal assessment of the application for finance took the value of the security of those properties into account; c the Serobians signed the discharge authority dated 25 November 2004 which facilitated the handing over of the title deeds to The Entrance to the Bank; d on 16 December 2004 Mrs Serobian sent to the Bank (on her own evidence, at the Bank's request) Certificates of Currency of Insurance over Cranebrook and The Entrance reflecting the Bank as mortgagee; e on 13 December 2004 mortgages over Cranebrook and The Entrance were executed by the Serobians; f on 16 February 2005 the Serobians signed an acceptance document for Schypsl's $150,000 overdraft facility, the Security Schedule for which showed mortgages over Cranebrook and The Entrance as security. On 11 July 2006 the Serobians each signed acceptance documents for Schypsl's facilities, the Security Schedule for which, showed mortgages over Cranebrook and The Entrance as security. On 5 September 2006 the Serobians signed an acceptance document for the increased Schypsl facilities, the Security Schedule for which, showed mortgages over Cranebrook and The Entrance as security. Also on 5 September the Serobians signed an acceptance document for the varied $2 M facility Security Schedule for which, showed mortgages over Cranebrook and The Entrance as security; g on 16 February, 13 July and 18 September 2005 the Serobians each executed a Consent and Acknowledgement to Extension of Guarantee which recorded that the securities which secured their liabilities to the Bank under their guarantees included mortgages over Cranebrook and The Entrance; h on 14 July 2006 Mrs Serobian faxed to the Bank certificates of insurance dated that day in respect of Cranebrook and The Entrance, showing the Bank as mortgagee. 373 This series of occurrences also makes the assertions that Mrs Serobian told Susan Bell and that Susan Bell agreed that Cranebrook and The Entrance were mistakenly taken as security, equally and highly improbable. It is also entirely inconsistent with the Serobians' and Patrick's evidence of discussions amongst themselves to the effect that Schypsl was being kept separate and the titles would be returned. 374 In addition, there was no credible evidence that the Serobians ever asked for return of the titles to Cranebrook and The Entrance. 375 Mrs Serobian asserted that she sent the document dated 22 December 2004 requesting the Bank to forward the titles to Cranebrook and The Entrance. There are a number of compelling considerations which have caused me to conclude that she never sent any such document. 376 On Mrs Serobian's evidence the Bank's failure to return the titles was serious. She nevertheless did not follow up the alleged letter. 377 There is no evidence that the Bank ever received it and Susan Bell's evidence, which I accept, is that she had not seen it before preparing for these proceedings. 378 On 16 December 2008 the Bank's solicitors called for any copies or originals of the letter and sought inspection of the computer upon which it was prepared or stored, or access to the hard-drive or other electronic storage device upon which it had been subsequently stored. 379 On 16 December 2008 a solicitor then acting for the Serobians (Mr Peter Fagan of Dennis & Co) responded, in relation to the request for the document, that they were taking instructions and in relation to the request for access to the computer, that "We are taking our clients' instructions but do not think it is appropriate to allow your client unreserved access to our clients' computer in the absence of certain measures being put in place between the parties". 380 On 19 December 2008 Mr Fagan wrote to the Bank's solicitors the following: "We have been instructed by our clients that the computer has been sold and is therefore no longer in their possession. We have no further information about to whom the computer was sold, or when the sale took place". 381 When Mrs Serobian was cross examined about this her evidence was not that the computer had been sold but that it had gone to a computer shop and couldn't be fixed and, "It was just destroyed by the shop" and "They could not save the documents, anything that was on there, and we had other stuff as well". She was unable to explain how Mr Fagan came to write that the computer had been sold except to say that she had not instructed him to that effect, but that she had told him, "The computer is not in our possession". 382 Her evidence was unconvincing and Mr Fagan was not called. 383 In addition, Mrs Serobian's evidence was that she does not type or use a computer and that Patrick prepared the document. Patrick, however, gave no evidence that he prepared it. 384 Finally, the evidence established that usually when Mrs Serobian wished to communicate with the Bank in writing she did so by fax. On 22 December 2004 she did communicate with the Bank by fax and the document in evidence showed the fax headers and footers reflecting transmission and receipt. There was no such evidence of transmission or receipt with respect to the document in question and there was no reliable evidence that it was communicated to the Bank in any other way. 385 I do not accept that the document was created at the time of the date it bears. I also do not accept Mrs Serobian's evidence that she sent the document. 386 Mrs Serobian's evidence was that the Bank was motivated to offer the return of Cranebrook and The Entrance because the value of the Manly property had gone up. But Susan Bell's memorandum of 1 December 2004 showed that the Bank's valuation was less than the owner's estimate and the SONLM even less. 387 The next assertion is that Mrs Serobian asked for and Susan Bell agreed to Schypsl's dealings being kept separate from the Serobians' personal assets, with the implication that there was to be no guarantee liability and that the facility was Schypsl's alone. 388 This assertion is inconsistent with the following objective contemporaneous material and subsequent conduct of the Serobians and the Bank over a lengthy period of time, and I do not accept Mrs Serobian's evidence with regard to it: a the original finance application via the brokers was for a $2 M facility for the Serobians personally; b the broker's facsimile of 27 August 2004 offered properties belonging to them personally as security; c in response to the application, the Letter of Approval dated 22 October 2004 offered the $2 M to the Serobians personally; d Mrs Serobian renegotiated the restriction in Item 4 of the Terms Schedule for the $2 M facility, which schedule showed the Serobians personally as the borrowers; e the Bank's letter enclosing the amended Item 14 was addressed to the Serobians personally; f the Serobians accepted the Bank's offer of the $2 M facility in writing; g the Serobians provided or facilitated the provision of valuation information concerning properties owned by them; h the Serobians provided insurance information over personally owned properties; i the Serobians executed guarantees as well as mortgages over their personally owned properties and signed various consents and acknowledgements reaffirming their obligations over an extended period of time; and j the approval letter dated 5 September 2006 varying the $2 M facility was addressed to the Serobians personally and they signed acceptance of it. 389 Also inconsistent with the Serobians' position is that Schypsl's detailed balance sheet as at 30 June 2006, which was in evidence, did not reveal the $2 M facility as its obligation whereas it did so reveal the $4.5 M facility. 390 The next assertion is that Mrs Serobian communicated and Susan Bell and Kerry Small understood that Mrs Serobian was sick. 391 Mrs Serobian's evidence was that she felt so sick she wanted to die. 392 It was put that her condition was such as to have impaired her ability to make decisions. 393 I do not accept: a Mrs Serobian's evidence that she was ill to the extent that it impaired her mental processes; b Mrs Serobian's evidence or that of Patrick that her illness was the subject of conversation at the October meeting; and c Mr Serobian's evidence that Mrs Serobian was visibly not well. 394 The Serobians led no medical evidence from which a conclusion could be drawn that Mrs Serobian was in fact sick at the time of the October meeting or indeed at any other time. There was in evidence a document indicating that Mrs Serobian was at the emergency department of Manly Hospital in March 2007. This was relied on by the Bank, because on its face information was apparently provided to the hospital that the language spoken by Mrs Serobian at home was English. There was no cogent evidence as to how that document came into existence and I have attached no weight to it. 395 Mrs Serobian's behaviour at all times reflects an unimpaired capability of dealing with the facilities and the Bank. So far as the period August through December 2004 is concerned: a she made significant and cogent amendments to the terms of the agreement with the brokers; b she provided relevant information to the Bank; c she did almost all of the talking at most of the meetings for the Serobians and Schypsl; d she negotiated amendments to the facilities and determined that there should be a fixed rate of interest; and e on 22 December 2004 she sought to drawdown on the $2 M facility and asked Susan Bell to organise it that day because they were going away. 396 I accept the evidence of Susan Bell and Kerry Small that Mrs Serobian did not appear to them to be ill. 397 The final assertion (in the present context) is that Mrs Serobian brought to the attention of the Bank officers that Mr Serobian could not read or write English. 398 Although this assertion, in its terms, related to Mr Serobian's inability to read and write English (rather than his ability to speak English) the Serobians' position (supported by Patrick) during the hearing was that Mr Serobian is in effect incapable of conducting any conversation (apart from pleasantries) in English. 399 According to Mr Serobian's affidavit evidence he heard and understood his wife explaining to the Bank officers at the October meeting that he could not speak English and that is why he would sit away at a different table. He must have at least understood English to this extent. 400 There was a significant body of evidence (which I accept) which suggested that Mr Serobian's professed inability to speak English was seriously exaggerated, including: a Kerry Small's evidence that at the October meeting the Serobians would occasionally discuss points between themselves in English; b Susan Bell's evidence that at the 14 October 2004 meeting Mr Serobian was introduced to her and Carol White and addressed them in English and that he answered questions about Refnok; c Rick Withers' observation that whilst Mr Serobian did not have much input at the October meeting he appeared to be paying attention and following the conversation, and that he would nod in agreement with things that were said by him or Patrick; d Mark Hill's evidence that at the 5 September 2006 meeting Mr Serobian said he could call him either Shane or Shahen; that on 11 January 2007 he spoke particularly to Mr Serobian while walking to the restaurant where they had lunch about general business matters and had no recollection of ever seeing the Serobians speak to each other in any language except English; and that he had no difficulty in understanding Mr Serobian in the English language; e Chad Molenaar's evidence that he had on occasions before the meeting on 13 July 2006 spoken to Mr Serobian in the English language; f Paul Tannock's evidence that at the meeting on 11 April 2007 Mr Serobian interjected in the conversation and that he spoke English; g Andrew Watson's evidence that he sat in the immediate vicinity of Mr Serobian at the lunch which took place on 11 January 2007 and that he remembers conducting a conversation with Mr Serobian in English and being told by Mr Serobian of a recent trip back to Armenia where Mr Serobian noted a contrast between the financial position and success of the Serobians compared to their relatives and friends back in Armenia, being told of Mr Serobian's service in the army and how tough it was, being told of how when Mr Serobian had moved to Australia he had started with nothing and that the business he and his wife built together had come from hard work, and being told of the pride they had in Patrick and the role he would increasingly play in their business; and h Derrick Lewis' evidence that Mr Serobian exchanged pleasantries before and after the meeting on 11 June 2007. 401 Kerry Small denied that Mrs Serobian gave as a reason that Mr Serobian sat separately at the October meeting his inability to speak English and Susan Bell denied that anything to that effect was said by Mrs Serobian. 402 Mr Serobian's evidence under oath before the Deputy Registrar on 21 December 2008 also shows his professed inability to speak English to be an exaggeration. There he referred to the fact that he had been in Australia for 30 years and spoke 30%, 40% with his family and in the business. 403 He initially denied having given this evidence before the Deputy Registrar. When the transcript was put to him he accepted that he had given that evidence "sort of". Also during submissions it was sought to be put (no doubt on instructions) that the translation before the Deputy Registrar was impure because the interpreter spoke a different dialect of Armenian. Leaving aside that there was no evidentiary basis for this submission, the same interpreter was employed by the Serobians to translate Mr Serobian's affidavits in these proceedings. These matters did not reflect well on his credit. 404 My own observations of Mr Serobian in the courtroom were that his professed near total inability to understand and speak English was not honest. In my view he was feigning a near complete inability to understand the English language. He understood and reacted immediately when I invited him to step forward and enter the witness box. The manner in which he commenced his evidence gave the impression that he was not even able to state his full name and address which would be inconsistent with even the level of English conceded. After Mr Serobian was asked his name and address by Mr Dlakic, I ruled that his evidence should be given in English. To my observation his ability to understand then appeared to improve. He understood and intelligibly responded to a series of questions. When giving evidence through the interpreter he responded or commenced to respond to questions put in English before the interpreter had translated or completely translated the question. 405 Mr Serobian has lived in this country for 31 years. He is a director and secretary of companies. He had a significant interest in a commercial enterprise of what might be thought to be reasonably significant proportions and executed company documentation for the purposes of that enterprise. 406 He applied to become a Justice of the Peace, although he did not follow through with the application. 407 I do not accept that Mr Serobian has anything approaching a near complete inability to understand English and I reject the evidence of the Serobians and Patrick to the contrary as being untruthful. 408 I also reject the evidence of the Serobians and Patrick that Mrs Serobian explained to the Bank officers at the October meeting that he could not speak English and that was why he "would sit away at a different table", and I accept the evidence of Susan Bell and Kerry Small that this did not occur. There was some controversy as to how far away Mr Serobian sat. There was little doubt that he was in earshot. There was also evidence that on occasion Patrick did not sit at the same table as his mother and the Bank officers. This is not surprising either in the case of Mr Serobian or Patrick because Mrs Serobian was in control. 409 The final critical area of dispute is whether Susan Bell offered a fixed interest rate of 5.6% for 5 years on the $4.8 M facility. 410 The Letter of Approval in respect of the $4.8 M facility dated 22 October 2004 described it as a Variable Rate and Item 9 provided that the bill rate would be determined on the day of, or the working day preceding each drawdown and disclosed that the indicative yield rate for 90 day bills with a face value of $4.8 M was at that time 5.66% (not 5.6%). The Fees and Charges Schedule disclosed that a line fee of 0.90% per annum was to be charged on the bill facility limit current at the time of charging. 411 The question of interest rates was discussed with the Serobians with Patrick taking the lead in the discussion on their behalf with Rick Withers. 412 After the meeting Mrs Serobian had contact with Rick Withers when the interest position was finalised. 413 The Serobians signed acceptance and acknowledgement of the letter dated 13 December 2004 from Susan Bell which, in accordance with the instructions given at the October meeting, stated: "Interest Rate of 5.97%pa fixed for 5 years plus a Line Fee of 0.90%pa (giving an all up rate of 6.87%pa) for a face value amount of $4,800,000 has today been forward locked to commence on 10 January 2005." 414 Leaving aside the evidence of the Bank officers as to the dealings between the parties concerning the interest rate agreed (which I accept) the objective contemporaneous material leaves no room for any suggestion of a representation or agreement in different terms. It also leaves no room for any suggestion that the Bank make any non-disclosure let alone one that was misleading in the circumstances. 415 Even if the alleged representation had been made at the October meeting, between then and 13 December 2004 arrangements were made which determined the interest rate payable in accordance with the consensus of the parties. 416 It was readily apparent that the indicative rate for a 90 day bill plus the line fee exceeded 5.66%. 417 On 5 September 2006 the Serobians signed an amended facility letter in a form consistent with the terms they had agreed on 13 December 2004. 418 Nothing that the Bank did was capable of misleading the Serobians with respect to the interest rates, the Serobians were not misled and the terms of the contract are clear. 419 Susan Bell, Kerry Small and Rick Withers were entirely unshaken in cross examination, their evidence accords with the contemporaneous material as well as the inherent probabilities and I accept it as to what occurred at the October meeting. 420 Correspondingly, I reject the evidence of the Serobians and Patrick to the extent that it is inconsistent with the evidence of the Bank officers. 421 Finally, there was nothing to suggest that even if the Serobians held the understandings which they say they did (which I have found they have not established) the terms of the transactions which they (and Schypsl) would have conducted with the Bank would have been any different to the terms which were ultimately agreed. 422 It follows that the Serobians have failed to make out any agreement or representation at the October meeting to the effect that a fixed interest rate was agreed, that the $2 M facility would be for Schypsl's account only, or that the titles to Cranebrook and The Entrance would be returned. The Serobians have failed to establish that they were misled or suffered any detriment by any conduct on the part of the Bank. The 13 December 2004 meeting and events until the 16 February 2005 facility 423 The significant areas of dispute about this meeting are: a whether Mrs Serobian told Susan Bell that she was ill; b whether Mrs Serobian told the Bank officers that Mr Serobian would sit at a separate table because he did not read or write English; c whether Susan Bell offered the Serobians the opportunity to sign documents then or take them away and get legal advice, which the Serobians declined; d whether Susan Bell was pressing execution of the documents because settlement was imminent or whether Mrs Serobian wished to sign then because they wanted to settle as soon as possible; and e whether Susan Bell described each of the documents which were attached to the letters dated 2 December 2004 and 9 December 2004. 424 As to Mrs Serobian's state of health, once again there was no medical evidence. She was attending to the Serobians and Schypsl's affairs in a manner which did not indicate any impairment. 425 I have dealt with the assertions of Mr Serobian's language shortcomings. 426 For the reasons which I have set out above and for the additional reasons which appear below, I do not accept Mrs Serobian as a truthful witness. 427 On the other hand Susan Bell was unshaken in cross-examination and her evidence accords with objective contemporaneous material. I accept her evidence including that she offered the Serobians the opportunity to take the documents away or obtain legal advice. 428 I accept that Susan Bell described the documents which were to be signed and that it must have been clear to Mrs Serobian that personal guarantees and mortgages over Cranebrook and The Entrance were being given. 429 For this additional reason I do not accept the evidence of Mrs Serobian that she did not appreciate that she and her husband were granting security over Cranebrook or The Entrance, that it was not her intention that either her or her husband grant securities over those properties or that she or Mr Serobian (to the extent that he relied on her) did not understand that they were giving personal guarantees for Schypsl's obligations. 430 I do not accept her evidence that the Bank was pressing for early settlement. There was no logical reason why the Bank would press the Serobians because of St George. On the other hand there was every good reason why Mrs Serobian would have wanted early settlement. St George had requested the Serobians to refinance and the Bank was offering what Mrs Serobian considered were advantageous terms. The amendments made by her to the brokers' agreements also indicate urgency on her part. 431 Mrs Serobian's evidence that the document on Schypsl letterhead dated 16 December 2004 (which was clearly sent by her to the Bank as part of her 17 December 2004 fax) was not hers but was created by the Bank, was fantastic. 432 So too was her evidence that the acceptance documents signed by her and Mr Serobian for the $4.5 M facility were not part of the fax but had been altered by the Bank. 433 I also do not accept Mrs Serobian's evidence concerning the conversation which she says took place on 17 December 2004, nor do I accept her evidence that she was surprised and angry that the shortfall on settlement was to come out of the $2 M line of credit. Mrs Serobian's handwritten fax of 22 December 2004 is inconsistent with her asserted state of mind. 434 I have already dealt with the assertion that she sent a further document on 22 December 2004. The 16 February 2005 facility 435 I do not accept Mrs Serobian's evidence that Susan Bell said words to the effect that this facility would be put under the company so Mr Serobian and her would not be personally liable. 436 At the time this facility was entered into the Serobians each signed a Consent and Acknowledgement to Extension of Guarantee, behaviour which is entirely inimical to the assertion of what Susan Bell said. The Ermington property facilities 437 The significant contest between the parties with regard to the Ermington property facilities concern the events on 13 July 2006, in particular the dispute about whether Chad Molenaar saw Mr Serobian alone (as Mr Serobian says) and procured his signature on a Consent and Acknowledgement to Extension of Guarantee or whether (as Chad Molenaar says) he met them both, gave them a booklet and offered an explanation (which they declined). 438 I had reservations about Chad Molenaar as a witness. He disclosed an arrogant unwillingness to respond to questions properly put in cross-examination. It was clear that he had a relationship with the Serobians and was driven by an over eagerness to do business, factors which appeared to have induced him, in order to please them, to cut corners. By way of example, he recommended drawdown of $500,000 in December 2006 notwithstanding having considered that the Bank had not received satisfactory documentation or the consents from landlords. 439 Nevertheless, I prefer his evidence to that of the Serobians. It better accords with objective contemporaneous material including the fact that the Ermington mortgage bearing the date 13 July 2006 was signed by both Serobians and they do not give an explanation as to how they came to sign that document with that date. 440 Also, although they ultimately did not press it, the Serobians having sworn to the fact that Mr Serobian signed the Consent and Acknowledgement to Extension of Guarantee bearing the date 13 July 2006 in Chad Molenaar's presence, foreshadowed a contention and sought to read affidavits to the effect that that document was not signed by Mr Serobian at all and that the signature on it was a forgery. On the first day of hearing a "proper report" (presumably that of a handwriting expert) was foreshadowed within a week but did not materialise. 441 In coming to the conclusion that I should accept the evidence of Chad Molenaar, I have not attributed any weight to his diary note dated 13 July 2006. Although there was nothing to found a finding that the document was brought into existence at some other time (a proposition which was put) Chad Molenaar did not create any such diary note in respect of the facilities which were signed on 5 September 2006. 442 In my view it was plain to Mrs Serobian and to Mr Serobian (in so far as he either understood himself or relied on Mrs Serobian) that they were executing instruments on that day (13 July 2006) which extended their personal liability as guarantors. 443 Mrs Serobian gave some evidence under cross examination that her understanding of being a guarantor was that she was liable as a director to ensure that Schypsl met its obligations, but not personally. The cross examination did not extend to eliciting from her what her understanding was as to her obligations if Schypsl could not meet its obligations. But the terms of the guarantees which were signed are clear, there is no basis for a finding that the Bank was responsible for her imperfect understanding (even if she had it – a matter about which I am far from convinced in any event) and the consent and acknowledgement documents which she signed made clear reference to her personal liability. The September 2006 facilities 444 I prefer the evidence of Chad Molenaar, Mark Hill and Kerry Small as to what occurred at the 5 September 2006 meeting. 445 Mark Hill was mistaken in his evidence that Mrs Serobian initialled the changes to the Letter of Approval and accepted his error. 446 At this meeting Mrs Serobian negotiated a change to the proposed facilities which is reflected in the contemporaneous written material. 447 Mrs Serobian's assertion that Kerry Small said that her and her husband would not be held liable for anything as the $1.6 M facility would be "under the Company" is contradicted by the documents that were executed. 448 It is inherently improbable having regard to what occurred at this meeting that it took the 5-10 minutes that Mrs Serobians says, or the 10 or so minutes Mr Serobian says it took. Dealings up to the 21 May 2007 meeting including the temporary excess of $500,000 449 I prefer the evidence of Chad Molenaar, Mark Hill and Paul Tannock to that of Mrs Serobian and Patrick with regard to the parties' dealings after the September 2006 facilities. Mark Hill and Paul Tannock were unshaken in cross examination. 450 There is no objective contemporaneous material which supports the assertion by Mrs Serobian and Patrick that there was ever under consideration a facility of $750,000. 451 It is also intrinsically improbable that Mark Hill told Mrs Serobian that she should consider her request to be approved. 452 Although I consider that it might be thought to have been true to form for Chad Molenaar to have told Mrs Serobian not to worry about the three months repayment condition of the temporary excess facility, his letter of 5 April 2007 clearly stipulated that it was a 90 day facility to be cleared through the sale of the Hornsby centre. This condition was further specified in his letter to Schypsl dated 10 April 2007. 453 Insofar as the evidence of Mrs Serobian and Patrick dealing with the 21 May 2007 meeting suggests that the alleged $750,000 facility was discussed, that Karen Carter telephoned Patrick Phibbs who approved the facility on the phone and said that Paul Tannock would bring out documents to sign, or that Karen Carter had said that paperwork was being finalised, I prefer the evidence of Paul Tannock and Karen Carter that this did not occur. 454 There is no evidence or internal record of any application for such a facility or consideration of it by the Bank, which occurred with respect to all the other facilities. 455 I accept as intrinsically probable Karen Carter's evidence that she would not have said that paperwork was being finalised given that no application for a facility had been made. The June 2007 meetings 456 I prefer the evidence of Derrick Lewis to that of Mrs Serobian and Patrick as to the meeting on 11 June 2007. Chad Molenaar's letter of 5 April 2007 had made it clear that the temporary excess was for 90 days and was to be cleared through the sale of Hornsby, and the Letter of Approval dated 10 April 2007 was equally clear. Clearly the Bank was anticipating the sale of Hornsby. 457 In the past Mrs Serobian had not hesitated from taking issue with conditions she did not accept and it is far more likely, in my view, that the condition that the Bank imposed was in the context of it having been informed that Hornsby was to be sold. 458 According to both Mrs Serobian and Patrick at the meeting on 20 June 2007 the Bank demanded repayment within one week. I prefer the evidence of Karen Carter that this did not occur. It is inconsistent with Sarah Hall's contemporaneous note and her subsequent letter dated 2 July 2007. 459 It is fair to say that whilst the letter concerning the $15 M facility was on a fair reading not a letter of approval, it did convey a positive disposition on the part of the Bank, and Mrs Serobian and Patrick had some justification for frustration at the Bank not having its own letter on file. Also it is perhaps somewhat remarkable that the "former Relationship Executive" referred to in Sarah Hall's letter of 21 June 2007 (Chad Molenaar) had apparently verbally confirmed that "no such letter was issued by the Bank" (an additional reason for having had reservations about Chad Molenaar's testimony). 460 In my view the Serobians were also justifiably irritated by the lack of continuity within the Bank with respect to the officers who were dealing with their account and what might have appeared to them as a change in the Bank's earlier flexible attitude to the making available of significant sums of money. However, these matters have no role to play in the resolution of the ultimate issues between the parties in these proceedings. 461 Karen Carter's evidence was that during her telephone connection with the meeting she made notes on her copy of the letter from Paul Tannock incorrectly dated 8 June 2006. 462 Before Karen Carter had given evidence and no doubt on instructions (but without any foundation) it was sought to be put to Paul Tannock that the letter was created for the purposes of these proceedings after December 2007 (when the proceedings commenced) but dated 2006. After some discussion Mr Dlakic properly did not proceed with this line. 463 From what I have said above it will be apparent that where the Bank's witnesses have given evidence that documents were gone through and explanations given, I accept that evidence, and I reject the evidence of the Serobians' to the contrary. Conclusion 464 It follows from what has been said above that the Bank is entitled to recover from the Serobians personally both the $4.8 M facility at the interest rate agreed as well as the $2 M facility and that the Serobians have failed to make out their claims with respect to Cranebrook and The Entrance. THE SEROBIANS' GUARANTEES 465 As appears above the Serobians have not established any representation by the Bank that Schypsl's facilities were being kept separate and the Serobians were not guaranteeing it. There is also no room for a finding that the Bank did not disclose that the Serobians were giving guarantees. Over a long period of time, documents inconsistent with the asserted representations were proffered by the Bank and executed by the Serobians. 466 So far as the Contracts Review Act is concerned the only matter relied on by Mrs Serobian was that the Bank was advised that she was very ill and she was not able to make decisions as a result of her medical impairment. A submission was made with respect to inequality of bargaining position which appeared to be restricted to Mr Serobian. 467 As appears above, Mrs Serobian has failed to establish either that there was any impairment as a consequence of illness or that the Bank was informed of her ill health. Over an extended period of time she signed various consents and acknowledgements confirming and extending her guarantee liabilities and there was no suggestion that she was sick when the last one of these was signed on 18 September 2006. 468 There was no suggestion that, even had she been impaired, the contractual arrangements between the parties would have been any different. 469 Mrs Serobian was at the helm of a significant commercial enterprise and dealt with the Bank in a competent and unimpaired fashion. Far from there being any inequality in bargaining position she negotiated amendments to the conditions of the facilities. 470 She successfully used the bargaining tool that the Serobians might move their accounts to the NAB to obtain an advantageous commercial outcome with respect to the September 2005 facilities. 471 The contents and tone of her letter to the Bank, dated 2 June 2007, regarding the golf course development reflect an aggressively demanding posture, leaving no room for the conclusion that she was a disadvantaged negotiator. 472 I accept the evidence of the Bank officers that the opportunity of legal assistance was offered but declined by Mrs Serobian. There was no suggestion that legal assistance was not available to her. There was evidence that solicitors were utilised on occasion. My assessment of Mrs Serobian is that she was sufficiently confident and competent with respect to her dealings with the Bank so as to consider that legal assistance was not required. There was no evidence of her having utilised legal assistance with respect to the proposed $100 M golf course development. 473 The commercial purpose and effect of her guarantee was to enable her personally (together with her husband) and Schypsl of which they were the only shareholders to refinance significant amounts of borrowings from St George and Yes Home Loans and to obtain the $2 M facility which was to be used in their commercial enterprise. 474 I do not consider that her guarantee was in any way unjust in the circumstances in which it was entered into. 475 Moreover there is no basis upon which it would be just to deprive the Bank of the benefit of its valuable rights where the borrowers have utilised the greater part of the monies borrowed for their own purposes in discharging (and refinancing) prior mortgages and the balance in aid of their own commercial enterprise. The Manly property was acquired with funds borrowed from St George and refinanced from the funds borrowed from the Bank. 476 Mrs Serobian's claim for relief under the Contracts Review Act fails. 477 The following were the matters relied on by Mr Serobian in support of his claim for relief under the Contracts Review Act: a at the October meeting Mrs Serobian brought to the attention of the Bank that he could not read or write English; b at no stage did Mr Serobian receive independent legal advice; c at no stage did Mr Serobian receive "translation advice" regarding the mortgage and guarantees; d at no stage did Mr Serobian receive any financial advice concerning the documents executed by him; e at no stage did Mr Serobian sign a Guarantor's Declaration that he read and understood the relevant documents and understood the implications of what he was doing or in writing confirm that he did not require legal advice; and f there was an inequality of bargaining position. 478 I have already found that the Serobians have failed to establish that at the October meeting it was brought to the attention of the Bank that Mr Serobian could not read or write English. On 13 December 2004 he signed various documents in English in his capacity as director or secretary of companies, conduct inimical to the suggestion that he could not read or write English and certainly inimical to the suggestion that the Bank knew it. 479 However, even assuming that his English was limited to the extent that he would not, without assistance, have understood the meaning and effect of the words in documents which he signed, he did have such assistance from Mrs Serobian, and where appropriate from Patrick as well. 480 His guarantee and the subsequent acknowledgments were all executed for the benefit of a commercial enterprise in which he either directly or through the vehicle of Schypsl had a significant interest. 481 I have accepted the evidence of Susan Bell that the Serobians were offered the opportunity at the 13 December 2004 meeting of obtaining legal advice which they declined. 482 I have accepted the evidence of Chad Molenaar that on 15 July 2006 he offered an explanation of the full nature and effect of the Serobians' liabilities under the guarantees which offer was declined. 483 There is in my view nothing which could be fairly described as putting the Bank on notice that Mr Serobian was under any disadvantage, particularly with the presence of Mrs Serobian, a financially astute and experienced person, who was acting in both their interests. Because of this there was no relevant or operative inequality of bargaining position. 484 As with Mrs Serobian, there is no basis upon which it would be just to deprive the Bank of the benefit of its valuable rights against Mr Serobian where the greater part of the monies borrowed were used to discharge and refinance prior mortgages and the balance in aid of a commercial enterprise in which he had a significant interest. 485 Mr Serobian's claim for relief under the Contracts Review Act likewise fails. FINAL RESULT 486 There will be judgment for the plaintiff against the first defendant and the second defendant, jointly and severally, in the amount of $8,007,806.85. Short minutes are to be brought in which may reflect any adjustment to be made to this figure up to date. 487 A warrant for possession of the Manly property may be issued forthwith. 488 The cross claims are dismissed. 489 The first defendant and second defendant are to pay the plaintiff's costs of the proceedings including the costs of the cross claims. 490 The exhibits are to be returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.