New South Wales Supreme Court CITATION : Perpetual Trustee Company Ltd v Alexander Kotevski [2009] NSWSC 1228 HEARING DATE(S) : 14,15,16,17,18,21,22,23,24,25,28,29,30 September 09; 1,27,28,29 October 09 JUDGMENT DATE : 16 November 2009 JUDGMENT OF : Patten AJ at 1 DECISION : See paragraph 305 Consumer Credit (NSW) Code; Contracts Review Act 1980; Trade Practices Act 1974; LEGISLATION CITED : The Australian Securities and Investments Commission Act 2001; Civil Liability Act 2002; Consumer Credit Administration Act 1995; Fair Trading Act 1987; Yorke v Lucas (1985) 59 ALJR 776; Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Tambree v Travel Compensation Fund & Ors [2004] NSWCA 24; AGC Advances v West (1984) 5 NSWLR 590; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 4; CASES CITED : Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd & Ors 78 ALR 195; Lam v Ausintel Investments (1989) 97 FLR 458; Gould v Vaggelas (1985) 157 CLR 215 at 236; Ricochet Pty Ltd & Ors v Equity Trustees Executor and Agency Company Ltd (1993) 41 FCR 229 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR 42-079 Perpetual Trustee Company Limited - Plaintiff PARTIES : Alexander Kotevski - Defendant Milanex Pty Ltd and Milan Vlasic - Cross Defendants FILE NUMBER(S) : SC 15851 of 2007; 13889 of 2008 Mr S Docker - Plaintiff COUNSEL : Mr K Connor SC with Ms M Avenell - Defendant Mr D Weinberger - Cross Defendants Kemp Strang - Plaintiff SOLICITORS : SBA Lawyers - Defendant McCabe Terrill - Cross Defendants IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Patten AJ 16 November 2009 No:13889 of 2008 No: 15851 of 2007 Perpetual Trustee Company Limited v Alexander Kotevski JUDGMENT INTRODUCTION 1 The Plaintiff (Perpetual), for whom Mr S Docker appeared, purported to lend $224,000 to the Defendant (Mr Kotevski) on 18 January 2006 pursuant to a loan agreement (the loan agreement) made between Perpetual and Mr Kotevski constituted by the acceptance on 20 December 2005 of a loan offer made by Perpetual on 14 December 2005 secured by a first mortgage (the mortgage) registered AC67270Q over the home unit in which Mr Kotevski lived, known as 3/3 Baxter Street Kogarah (the premises). The mortgage obliged Mr Kotevski to repay the loan and interest (at the initial rate of 7.67%) by monthly instalments of $1,581.61 2 The transaction had unusual features not the least of which was that Mr Kotevski was 74 years old in January 2006 and his only apparent source of income was an aged persons pension of about $ 500 per fortnight. 3 A number of entities and individuals played roles in the matter, which in due course I will need to consider. Certain of them are, or were, parties to the proceedings. In some cases their roles and procedures were regulated by written documents, which often were honoured more in the breach than the observance. There was, I regret to say, in my view, a fundamental failure by a number of individuals to apply themselves, if not honestly, at least sensibly and competently to the task in hand. THE PLEADINGS. 4 The somewhat complicated pleadings were amended many times. In this section I will outline those upon which the trial was conducted. 5 There are two actions before the court. The first No.15851 of 2007 commenced on 20 November 2007 was met by a defence based on asserted non compliance with the provisions of the Consumer Credit Code (the Code). This led to the filing of a further Statement of Claim on 29 July 2008, No.138890/2008. Perpetual has not abandoned the earlier action and both actions were heard concurrently. For the purposes of the hearing, Perpetual relied on a Second Further Amended Statement of Claim in respect of the earlier action and a Second Amended Statement of Claim in respect of the later action. 6 For convenience, I will hereafter refer to the Second Amended Statement of Claim filed in court on 23 September 2009 as the Statement of Claim. It will not be necessary to refer further to the Second further Statement of Claim. 7 The Statement of Claim sought possession of the premises and declarations as to Perpetual's entitlements under the loan agreement and the mortgage and judgment for monetary sums, which appear to total about $400,000. 8 The facts pleaded alleged: The loan agreement provided inter alia for an advance to Mr Kotevski of $224,000 secured by the mortgage, for the payment of interest on the advance, for the payment of various fees, charges, and expenses and for the making of regular repayments over a term of 30 years. Registration of the mortgage. Defaults by Mr Kotevski under the mortgage. Service of Notice of Default. Failure to comply with notice of default causing all amounts advanced, interest, and all other amounts payable to fall due. An entitlement to possession of the premises and judgment for a monetary sum. 9 The defences current at the hearing filed on behalf of Mr Kotevski, for whom Mr K Connor SC and Ms M Avenell appeared, were comprised within the Defence to Further Amended Statement of Claim (in the earlier action) and Defence to Amended Statement of Claim (later action). These documents, inter alia: Put in issue the loan agreement. Denied that Mr Kotevski received the benefit of any money advanced by Perpetual. Denied that Mr Kotevski granted a mortgage to Perpetual over Folio Identifier 17/SP3893. Did not admit the mortgage. Raised a defence as to the earlier action based on alleged failure to serve a notice under s80 of the Code . Sought relief under the Contracts Review Act ( the Review Act) and the Code Claimed that it was unconscionable for Perpetual to seek to enforce the mortgage and sue on the loan agreement. Claimed that it was unconscionable for Perpetual to seek to enforce the mortgage without first requiring a company Calibre Financial Services Pty Ltd (Calibre) to purchase the mortgage under the terms of an agreement between Perpetual and Calibre. 10 It was not disputed that there had been default and that if the loan agreement and mortgage were valid Perpetual was entitled to the relief it claimed. CROSS CLAIMS 11 The Amended First Cross Claim by Mr Kotevski against Perpetual sought declarations under the Review Act and the Code that the mortgage and loan agreement be set aside and consequential relief. It also sought relief based upon alleged breaches of various agreements involving Perpetual and upon the conduct of persons asserted to be the agents of Perpetual. 12 The Defence to the Amended First Cross Claim for the most part simply denied or put in issue most of the matters alleged. 13 The Further Amended Second Cross Claim was brought by Perpetual against a company Milanex Pty Ltd (Milanex). It sought damages and or compensation under the Trade Practices Act (TPA) and/or the Fair Trading Act (FTA) and/or The Australian Securities and Investments Commission Act (ASAICA). In effect, it was alleged: 1. That Milanex represented to Perpetual: that it acted for and represented Mr Kotevski; that Mr Kotevski wanted to mortgage his home for an advance of up to 80% of its value; that he had signed a loan application; that he had signed a declaration that the loan was to be applied predominantly or wholly for business and/or investment purposes; that Mr Kotevski had an ABN number; that his occupation was builder; that his annual income was $75,000; that Mr Kotevski had been identified by the sighting of his citizenship certificate, his drivers licence and a rate notice for the premises; that Mr Kotevski could be reached on telephone number 95882986 and that he had been self-employed for 6 years. 2. That the conduct of Milanex was in trade or commerce. 3. That in reliance on the representation, a company Good Home Loans Pty Ltd (GHL)made a "loan purchase request" to Perpetual for a loan to Mr Kotevski. 4. That in reliance upon the "loan purchase request" Perpetual made a loan to Mr Kotevski. 5. That in the event the Court finds the above representations to be misleading or deceptive Perpetual is entitled to damages and indemnity from Milanex. 14 By its Amended Defence to the Second Cross Claim, Milanex put in issue or denied the representations alleged; denied any reliance by Good Home Loans or Perpetual on the representations and relied on s35 of the Civil Liability Act, claiming that a Mr Kevin Lo (Mr Lo), a solicitor, and Perpetual were concurrent wrongdoers. THE THIRD CROSS CLAIM. 15 The Third Cross Claim was by Mr Kotevski against Mr Lo. It is unnecessary to consider that cross claim further as, on the first day of the hearing, Mr Lo consented, without admissions, to a verdict against himself for $105,000 and an order for costs. Although he made some relevant admissions in his defence to the cross claim, he also gave evidence in Perpetual's case at trial and any admissions were subsumed in his testimony. THE FOURTH CROSS CLAIM 16 The Fourth Cross Claim was by Mr Kotevski against Milanex and its director, Mr Milan Vlasic (Mr Vlasic). In it, Mr Kotevski sought damages and equitable compensation against Milanex and Mr Vlasic, arising out of the parts they respectively played in the transaction. It was asserted that they falsely represented an authority to represent Mr Kotevski; that they breached their duties to him in a number of respects; and that they engaged in misleading and deceptive conduct contrary to the TPA and the ASAICA. 17 By their defence to the Fourth Cross Claim, Milanex and Mr Vlasic put in issue most of the matters alleged against them and also raised a defence based upon s35 of the Civil Liability Act and s12GR of the ASAICA, naming as concurrent wrongdoers Perpetual, Mr Lo, and a Mr Marko Micic (Mr Micic). PERPETUAL'S CASE. EVIDENCE OF Ms JANE POGSON 18 Ms Jane Pogson was the first witness called in Perpetual's case and Mr Docker read her affidavit, which stated that it was sworn in April 2009. Somewhat carelessly, the actual date of swearing was omitted, both in the affidavit itself and on the note identifying the documents exhibited to it. 19 Ms Pogson said that she has been employed by Good Home Loans (GHL) since 2005. She was employed to establish its business and make contact with brokers. She had previously been employed in the mortgage industry for over twenty years, including with National Australia Bank. 20 She described the business of GHL in these terms: "GHL accepts applications from brokers on behalf of borrowers and directly from borrowers and refers those borrowers to various lenders for funding. After a loan is advanced, GHL also carries out certain responsibilities in relation to the ongoing management of the loan in accordance with the requirements of the lenders." 21 Perpetual was one of the lenders to whom GHL referred borrowers via Calibre as an intermediary. A written agreement dated 22 November 2005 and comprising some 34 pages regulated the relationship between Calibre and GHL (the MOMA agreement). (GHL was called the Mortgage Manager). Relevant provisions included: "1.1 Definitions …………………….. Loan application means an application by a prospective borrower for a Loan. Loan Purchase Request means a proposal by the Mortgage Manager to Calibre for the making of a Loan secured by a Mortgage. ……………………… Non-complying Mortgage has the meaning given in clause 12.2. ……………………….. Operations Manual means the document entitled 'Calibre Operations Manual' (Version 1.0) setting out all procedures, policies, criteria and guidelines relating to the acquisition, origination, management and servicing of Mortgages under this Agreement, as varied from time to time in accordance with this Agreement. ……………………………. Repurchase Price means in relation to a Non-Complying Mortgage and a completion date, the sum of: (a) the unpaid principal amount of each Loan secured by that Non-Complying Mortgage at that time; and (b) the unpaid amount of all interest payments, fees and charges and other amounts accrued on or payable under or in connection with each such Loan or the Non-complying Mortgage at that time. ……………………………. Trailing Servicing Fees means all fees payable to the Mortgage Manager under clause 15.1 in respect of Mortgages which are payable on a periodic basis following settlement of that Mortgage. Up-front Servicing Fees means all fees payable to the Mortgage Manager under clause 15.1 in respect of a Mortgage which are payable on settlement of that Mortgage. ………………………….. 2.2 Operations Manual In exercising its powers and performing its obligations under this Agreement, the Mortgage Manager must comply and act in accordance with the Operations Manual in all respects. 4. Origination Procedures 4.1 Making of Loan Purchase Requests The Mortgage Manager may from time to time give to Calibre Loan Purchase Requests. Each Loan Purchase Request must be in the form, contain the information, be accompanied by the documents required by, and otherwise be made in accordance with: (a) the Operation Manual; and (b) any relevant Mortgage Insurance Policy. 4.2 Mortgage Manager to provide information The Mortgage Manger must give Calibre all information requested by Calibre in relation to a particular Loan Purchase Request which is reasonably required by Calibre to give consideration to and process the Loan Purchase Request in accordance with its usual practices and procedures. 4.3 Acceptance of Loan Purchase Request Calibre may accept a Loan Purchase Request but has no obligation to do so. Any such acceptance must be in the form, contain the information, be accompanied by the documents specified in, and otherwise be made in accordance with the Operations Manual. 4.4 Adverse Information (a) If after accepting a Loan Purchase Request in accordance with clause 4.3 but prior to settlement of the relevant Mortgage, Calibre becomes aware of information which, acting in good faith, it considers material to its decision to accept that Loan Purchase Request, or likely to be material to the decision of an insurer to accept the relevant mortgage for cover under the relevant Mortgage Insurance Policy, Calibre may reject that Loan Purchase Request notwithstanding its earlier acceptance of that Loan Purchase Request. (b) If the Mortgage Manager becomes aware of information prior to settlement of a Mortgage which might reasonably be considered as material to Calibre's decision to accept or reject the relevant Loan Purchase Request, or to the decision of an insurer to accept or reject the relevant Mortgage for cover under a Mortgage Insurance Policy, the Mortgage Manager must notify Calibre of that information promptly after becoming aware of it. 4.5 Implementation of Accepted Loan Purchase Request If Calibre accepts a Loan Purchase Request in accordance with clause 4.3, the Mortgage Manager must take all action which it is required to take under the Operations Manual in order to implement that Loan Purchase Request. In doing so, the Mortgage Manager must: (a) comply with all applicable laws, the Operations Manual and any reasonable requests and direction which Calibre may make or give regarding that implementation; and (b) use the same degree of skill and care as would be used by a responsible and prudent mortgagee. 4.6 Mortgage documents The Mortgage Manager must, subject to clause 6.4 (a) comply with all of the provisions of the Operations Manual as to the form of all Mortgage Documents and their preparation, completion and execution; and (b) instruct an Approved solicitor to prepare and complete the Mortgage Documents relating to each Loan in a manner consistent with the relevant Loan Application, Loan Purchase Request and the Operations Manual; and (c) take reasonable steps to monitor compliance by the Approved solicitor with its instructions. …………………….. 7.1 Undertakings The Mortgage Manager must ……………………………… (l) (exercise own skill) upon and subject to the terms of this Agreement and to any request made or directions given by Calibre, exercise its own judgment, skill and discretion in performing its obligations under this Agreement; ……………………………….. 9. Default procedures 9.1 Advising of Defaults The Mortgage Manager must promptly give notice to Calibre upon becoming aware of the occurrence of any event of Default under a Mortgage. 9.2 Procedures on Default The Mortgage Manager must (in accordance with and subject to the Operations Manual and subject also to clause 9.5) take such action following the occurrence of an event of Default, and enforce the powers (including by taking legal proceedings) in respect of any Defaulting Mortgage in such manner as: (a) the Mortgage Manager reasonably considers necessary to: (i) remedy the Event of Default; Regarding Mortgages (ii) recover the money secured by that Defaulting Mortgage; and (iii) protect and preserve the rights of the relevant Mortgagee; and (b) is required under a Mortgage Insurance Policy to ensure that any losses suffered in relation to that Mortgage which are or are required to be insured under that Mortgage Insurance Policy, are able to be claimed under that Mortgage Insurance Policy. 9.3 Mortgage Manager to comply with direction Calibre may (but shall not be obliged to) give direction and instructions to the Mortgage Manager as to the action to be taken pursuant to clause 9.2. The Mortgage Manger must comply with any such direction and instructions, provided they are not inconsistent with any proper instructions given by an insurer under the relevant mortgage Insurance Policy. 12. Representations and Warranties 12.1 Regarding Mortgages The Mortgage Manager represents and warrants to Calibre and the Mortgagee of each Mortgage that except as disclosed to Calibre in writing and approved or waived by Calibre on or prior to the settlement or acquisition of a Loan and the relevant mortgage, the following matters will be true and correct in all material respects in relation to that Loan and Mortgage. ……………………………….. (b) (Information) all information provided by the Mortgage Manager to Calibre in connection with the Loan Purchase Request and the origination of that Mortgage was, to the best of the knowledge of the Mortgage Manager, true and correct in all material respects when provided. …………………………………. (e) (Loan Application) the relevant Loan Purchase Request has been fully investigated by the Mortgage manager in accordance with the Operations manual, and the Mortgage Manger is satisfied that all statements and information contained init are correct in all respects; (f) (Origination) the Loan has been assessed and originated in accordance with the Operations Manual; (g) (Consumer Credit Code) in the case of any Loan which is regulated by the Consumer Credit Code, all of the requirements of the Consumer Credit Code with respect to the entering into of the relevant Mortgage Documents were complied with except to the extent that such non-compliance was caused by the act or omission of Calibre, any adviser or consultant to Calibre or any person referred to in clause 6.4; (h) (Adverse circumstances) the Mortgage Manager is not aware of any circumstances relating to the Mortgage, the property, the borrower or any guarantor which could reasonably be expected to cause Calibre or an insurer under a Mortgage insurance policy to: (i) regard the Mortgage as an unacceptable investment; (ii) expect the Borrower to default under the Mortgage; or (iii) diminish the value or marketability of the property from that stated in the valuation; (i) (Operations Manual) the Operations Manual has been fully complied with in relation to that Mortgage; and (j) (Representations and Warranties) to the best of the Mortgage Manager's knowledge, all representations and warranties made by each Obligor in the Mortgage Documents relating to that Loan are true. 12.2 Repurchase of Non-Complying Mortgages (a) The Mortgage Manager must purchase or cause to be purchased each Mortgage in respect of which any of the representations and warranties contained in clause 12.1 are untrue (each a Non-complying mortgage) on the date (the completion Date) specified in the written notice from Calibre, which must be not less than 30 days after the date of the notice. ……………………………………… 13. Acknowledgement and Indemnity 13.1 Acknowledgement The Mortgage Manger acknowledges that: (a) Calibre: (i) enters into this Agreement; (ii) has made or given and will make or give representations, warranties and undertakings to or in favour of Mortgagees; and (iii) has agreed and will agree to indemnify Mortgagees in respect of Costs and Expenses suffered or to be suffered by them, In each case, in reliance on the representation, warranties, undertakings and indemnities made or given by the Mortgage Manager in this Agreement; …………………………. 13.2 Indemnity The Mortgage Manager must indemnify Calibre and each Mortgagee on demand for all Costs and Expenses which Calibre or that Mortgagee may suffer or incur as a result of, or in connection with: (a) any negligence, fraud or breach of duty by the mortgage Manager or any Delegate (b) any breach by the Mortgage Manager of this Agreement; (c) any breach by the Mortgage Manager of any representation and warranty contained in this Agreement; ………………………………… (e) The Mortgage Manager or any of its Representatives being, or being held to be, the agent, partner or employee of Calibre or that Mortgagee. 22 The Operations Manual contained 94 printed pages. Some relevant provisions are: "1.1.1 Calibre Financial Services Pty Ltd (Calibre) Calibre is responsible for the management of the Calibre programme, including the development, maintenance and ongoing functionality of the loan product range and the systems that service that product range. 1.1.2 Mortgage Manager The Mortgage Manger is primarily responsible for the sourcing and ongoing servicing of high quality assets for the Calibre Programme. ………………………………… 1.1.4 The Trustee (Trustee) The Trustee, Perpetual Trustee Company Limited, is the legal owner of, and registered mortgagee, on all mortgages settled into the Calibre Programme. It is the custodian of the security documents and is responsible for ensuring that all of the documents required to complete the Security Packet are received post settlement, and monitors the release and return of any security document released to a Panel Solicitor post settlement of the loan. ………………………… The Trustee will act as Trustee of a number of Trusts which will be set up to facilitate the funding of pools of mortgage. 2. The Mortgage Manager 2.1 Obligations, Role and Responsibilities Outlined below are the Mortgage Managers key obligations, role and responsibilities. Please note however, nothing in this section limits the Mortgage Managers obligations and responsibilities found elsewhere in the Operations Manual. To act prudently in the sourcing and ongoing servicing of high quality assets for the Calibre Programme and in doing so act in accordance with the Operations Manual, Mortgage Origination and Management Agreement and any relevant legislation applicable at the time. …………………………….. To advise Calibre and the relevant lenders Mortgage Insurer as soon as possible if any information provided about the loan changes, is incorrect, or the Mortgage Manager becomes aware of: Any non-disclosure of information by or on behalf of the borrower, or any guarantor, or any circumstance which is relevant to Calibre's approval of the Loan; or That any statement or information provided by the borrower, or any guarantor, is false, incomplete or cannot be prudently relied upon; ………………………………….. Strongly recommend to borrowers and guarantors that they obtain independent legal and financial advice regarding the contents and effect of the credit contract and any security granted by them. Not to accept an application if it knows, or has reason to believe, or suspect, that the information contained in the application form is incorrect or incomplete. Not to accept an application if there is an obvious misstatement in the application form and to seek further information from the applicant if the application is incomplete. 2.4 Components of the Borrower Rate The calculation of the borrower/s interest rate can be broken down as follows: Mortgage Deliver Rate: Set by Calibre and may vary from time to time Plus Upfront Repayment Margin: Nominated by the Mortgage Manager Plus Trailer: Nominated by the Mortgage Manager Equals Borrower Interest Rate 3. Relevant Legislation All loans originated for and submitted under the Calibre Programme are required to comply with any relevant legislation in force from time to time including: …………………………….. Consumer Credit Code Under the Calibre programme, after conducting sufficient enquiry to ensure that the correct classification has been applied as to whether the loan is regulated by the Consumer Credit Code, if the Mortgage Manager has any doubt as to whether the loan funds are to be used wholly or predominantly for personal, domestic or household purposes, or where the loan funds are to be used wholly or predominantly for business or investment purposes, has not received a valid business purpose declaration executed by all borrowers, then the Mortgage Manager must use documents and procedures that comply with the Consumer Credit Code. …………………….. The Mortgage Manager must, in no circumstances alter or accept any declaration which has been altered from, the form in Appendix 9. The Mortgage Manager is not to encourage applicants to sign the declaration where the purpose is, or maybe, a personal, domestic or household purpose. The Mortgage manager is not to accept a declaration if it knows, or has reason to believe or suspect that the declaration is incorrect. 4.2 Product Features/Parameter Please find outlined below the parameter and features of Calibre's product range. Facility type Home Loan Line of credit ………………. LoDoc Available on all facility types with the exception of loans regulated by the Code LoDoc 80 – Max LVR 80% LoDoc 70 – Max LVR 70% LoDoc 65 – Max LVR 65% …………………………… Min. Loan Term 10 years Max. Loan Acc Term Up to 30 years Interest Rate Type Variable-at the lender's discretion Fixed Fixed Rate period 1-5 years, or as otherwise advised by Calibre Payment Typed Principal and Interest Interest Only Interest Only Period 1-10 years, or as otherwise advised by Calibre, reverting to principal and Interest thereafter. ……………………………. 5.2 Loan Purpose 5.2.1 Acceptable Loan Purpose Subject to the relevant Lenders Mortgage Insurers parameters and 5.2.2 below the loan funds can be used for any worthwhile legal purpose. ……………………………….. 5.5 Net Surplus Ration (NSR) The NSR is a calculation method used to assist in assessing the borrowers ability to repay the proposed loan taking into account current commitments and living expenses. The minimum NSR requirement is 1.00.1, or as otherwise agreed by the relevant lender Mortgage Insurer and Calibre. The NSR calculation must be based on income that is regular and reoccurring in nature. With the exception of LoDoc65 and LoDoc70 the Calibre NSR Calculator is to be used and submitted with the Loan Purchase Request in each and every instance. ……………………………. Please note however, irrespective of whether the borrower meets the NSR guidelines, where the Mortgage Manger has reason to believe the borrower would not be able to repay the loan without substantial hardship the loan is not to be submitted to the Calibre Programme. ………………………………… 5.7.1 Acceptable Forms of Income Acceptable forms of Income Acceptable Criteria PAYG Income Not subject to a probationary period Commission and Overtime Average of the last 2 years if paid consistently for the past 2 years. Half of the income earned if paid for less than 2 years but more than 12 months. Nil if paid for less than 12 months. Superannuation Payments are reoccurring and regular in nature Investment Income Payments are reoccurring and regular in nature, eg interest and dividends. Pension Lifelong 80% of Rental Income Rent to reflect market expectation Net profit Audited financials, or if unavailable, financials prepared by an independent accountant. ………………………………………………………………………… 5.7.2 Acceptable Evidence of Income Self-Employed Companies And Trusts LoDoc80 – Declaration of income and Affordability – Refer appendix 8 LoDoc70 – Declaration of Affordability – Refer Appendix 8 LoDoc65 – Declaration of Affordability – Refer Appendix 8 …………………………… 5.9 Credit Evaluation During the credit evaluation process, the Mortgage Manager is to make an assessment of the borrowers/guarantors' ability to meet their commitments and obligations taking into account the requirements of the relevant lenders Mortgage Insurers, the relevant sections of the operations manual, and all other factors which a prudent mortgage lender would take into account such as continuous employment history. 5.9.1 Minimum Credit Evaluation As a minimum the credit evaluation must include and consider the following: Fully completed and dated Loan Application Form executed by all relevant parties including a current Asset and Liability Statement. The Mortgage Manager must hold a copy of the Loan Application Form on their loan file. A credit check with no material adverse findings for all parties to the loan, including guarantors. ………………………………… 6. Documentation Description/Application Outlined below is a brief description of the documentation used as a loan progresses from initial application through to settlement. 6.1 Origination Stage 6.1.1 Borrower/Guarantor Identification From Separate from to be completed for each borrower/guarantor Identifies and confirms which original documents were sighted in identifying the borrower/guarantor. …………………………………. 6.1.2 Confirmation of Conversation Form Separate from to be completed for each borrower/guarantor. Confirms that an authorised officer of the Mortgage manager has discussed the loan details with the borrower/guarantor. …………………………………… 6.1.4 Income & Affordability Declarations Required for LoDoc loans only. Allows PAYG (LoDoc70 only) and self employed borrowers to make a declaration confirming their ability to service the loan in lieu of producing financials. ………………………………… 6.1.8 Loan Application Form Required in every instance. Outlines the borrower/guarantors personal details including contact and income details, net asset position and loan requirements. ……………………………. 6.1.10 Loan Purchase Request To be completed by the Mortgage manager in every instance. Used as the base document for loading information onto the Calibre system, it outlines the borrowing structure, contact, security and loan details and importantly warrants that the loan qualifies for the Calibre programme. 6.1.11 Loan Purpose Declaration Form Required for all loans not regulated by the consumer Credit Code, that is where more than 50% of the loan funds are to be used for business or investment purposes. The form of this declaration is mandatory under the Code and must not be amended as any alterations to the standard form will not be accepted. …………………………….. The Mortgage Manager is not to accept a declaration if they know, or have reason to believe or suspect that the declaration is incorrect. …………………………… 6.2.4 Direct Debit Request form and Service Agreement Required in every instance, regardless of the payment method selected by the borrower, and sent with the Loan Contract by the Panel solicitor. Completed by the borrower, it outlines the bank account details from which payments may be collected and redraws credited. Please refer to Appendix 39 for a copy of the direct Debit Request form and Service Agreement. ………………………………… 7.1.2 Origination Process and Procedures On receipt of the loan package from the Borrowers or Introducer, the Mortgage manager is to: Conduct an initial assessment of the loan proposal to ensure that it meets the programmed parameters. Identify all borrowers/guarantors who are a party to the loan In every instance this function is to be conducted in person and maybe performed by the introducer of the loan. The person confirming the identification must be authorised to do so and is to complete the relevant section of the Borrower/Guarantor identification Form, refer Appendix 3. The sighted forms of identification must be originals and certified copy/s are to be held on the Mortgage Mangers loan file. Acceptable forms of identification are: Both a drivers license and a passport, or either one, and a Birth Certificate, Citizenship Certificate, Medicare Card, Credit Card, Tertiary Student identification, Identification issued to a public sector employee. Interview all borrowers/guarantors who are a party to the loan. In each instance the person conducting the interview must be an authorised officer of the Mortgage Manager and complete a confirmation of conversation form, refer Appendix 4. Each interview must cover all sections noted on the form. …………………………… A credit check with no material adverse findings. Individual – Commercial and Individual Consumer Report. …………………………… Submit the Loan Purchase Request to Calibre for compliance review and issuance of solicitor Instructions. The Loan Purchase Request is comprised of the following document: * LPR Statement signed by an authorised signatory, refer Appendix 33 * LPR information schedules, refer Appendix 34 * Valuation. * Lender Mortgage Insurance Approval. * NSR calculation or the relevant LoDoc declaration refer appendix 8 * Service consent/Nomination form (if applicable), refer Appendix 12, or Loan Purpose Declaration (if loan is to be treated as unregulated) refer Appendix 9. 7.2.2 Settlement Process and Procedures 7.2.3 Settlement On receipt of the Solicitor Instructions, via the Mortgage manager, the Panel Solicitor conducts the relevant searches and enquiries, prepares the loan documentation in accordance with the Solicitors instructions, programme requirements and any relevant legislation, eg Consumer Credit Code. …………………………. An authorised signatory of the Panel Solicitor is to sign the Mortgage and Loan Contract on behalf of the Trustee and then forward the loan documents to the borrowers solicitor, at the same time forwarding a letter to the borrower, (in a predetermined format), advising them of same. In those instances where the borrower has not engaged a solicitor to act on their behalf the documents will be sent directly to each borrower. ………………………….. On receipt, the Panel Solicitor reviews the executed documents to ensure that they have been properly executed by all relevant parties and are not subject to any alterations, other than customer specific details which have been completed incorrectly. Any permissible alterations must be signed and initialled by all relevant parties. …………………………. Once satisfied that the loan is in order to proceed to settlement the Mortgage Manager completes the Request for Settlement Form and forwards it along with the settlement documentation to Calibre. ……………………………………… The settlement funds will be transferred to the Panel Solicitors trust account on the proposed settlement date. It is the Panel Solicitors responsibility to ensure that the loan is settled in accordance with the documented loan purpose. ……………………………… 10.2 Obligations and Responsibilities of the Panel Solicitor …………………………. To ensure that the loan is settled in accordance with the documented loan purpose and that the loan funds are disbursed accordingly. ……………………………………. Once the loan or security document has been executed any changes will not be accepted unless the borrower/s sign or initial the change in the margin. On becoming aware of any error or admission, or of any information contained in the solicitors instructions being incorrect, without delay notify the Mortgage Manager who in turn will notify Calibre. ………………………………. 10.3 Service of Documents ……………………………………. In those instances where the borrower has not engaged a solicitor to act on their behalf the Panel Solicitor will send the documents directly to each borrower. ……………………………. Each party to the loan must personally collect their copy of the loan documentation from Mortgage managers office. No one party to the loan can pick up the loan documentation on behalf of another party's to the loan. Each party to the loan must sign that they have personally collected their copy of the loan documents. 23 According to Ms Pogson's affidavit, one of her duties as an employee of GHL was to send information kits to brokers. The kits referred to what were termed "LoDoc Loans", a product not available in respect of loans regulated by the Code. One broker to whom she sent a kit was Milanex as she had previously dealt with Mr Vlasic in respect of 40 or 50 loans when she worked for NAB. 24 On or about 29 November 2005, Mr Vlasic telephoned her and said he had a proposition to refer to her and at 12.35pm that day, she received an email which comprised a short formal note from him and a number of attached documents, some of which require further attention. They included: A letter from Milanex to GHL regarding a new "Low Doc Loan" indicating that the client wanted to borrow up to 80% of the value of his mortgage free property. It mentioned an interest rate of 7.60%. A form on the letterhead of GHL ("Applicant's Personal Details") which contained Mr Kotevski's first name and surname; his home address, 3/3 Baxter Street, Kogarah for 10 years; his telephone number 958 82986; his date of birth 24.08.31; his driver's licence number 8736WZ; his marital status - single; and an indication that he had no dependants. The document bore no signature. A document headed "Loan Security Details". The form indicated that the security was owner occupied; that a loan of $240,000 was sought; and that the proposed term of loan was 30 years. Under the heading "Purpose" a box labelled "Refinance" was ticked. Alongside in a space against "please provide details', somewhat incongruously, the words "mortgage free property" had been written. Below this material appeared the address of the property 3/3 Baxter Street Kogarah; an indication that this was a metropolitan property; a second indication that it was owner occupied – title references 3/SP3893 and 17/SP3893; the estimated current value of the property viz $300,000; and against "contact for Valuer access", the words Marko Micic 0402963368. A document headed "Monthly Income/Statement of Assets and Liabilities" in which there were various boxes and headings. Nothing appeared in the section "Wages and Salaries per Month". Under the heading "Assets" appeared "Kogarah property, $300,000", car/s $25,000; furniture etc $70,000 and superannuation $30,000. Nothing was completed under the heading "Liabilities" and total living expenses were shown as $0. There was a tick in a box at the foot of the page against which was printed "Tick box if loans are to be repaid by this advance. The document purported to be signed A. Kotevski." A document headed "Applicant's Declaration". By this document, which purported to be signed by Mr Kotevski and dated 28 November 2005, he, inter alia, agreed to the lender engaging a valuer and indicated that he was not bankrupt or insolvent etc. and agreed that GHL could negotiate a loan on his behalf with a lender subject to its terms and conditions. A document purporting to be signed by Mr Kotevski, which seems to be irrelevant as it was headed "Joint Borrowers Nomination Form Address for Notices". In the document, Mr Kotevski nominated himself as the person to receive notices and other documents under the Consumer Credit Code. A document purporting to be signed by Mr Kotevski and dated 28 November 2005 whereby he stated that the loan was to "be applied wholly or predominantly for business or investment purposes". A two page document purporting to be signed by Mr Kotevski on the second page, "Acknowledgment and Authority to Give and Receive Credit Information". A four page document called "Privacy Consent" purporting to be signed by Mr Kotevski on the fourth page. A document headed "Verification of Borrower – 100 Point Check List" dated 28 November 2005 purporting to be signed by Mr Vlasic. It listed as the documents used to verify identification Citizenship Certificate and Drivers Licence. A document headed "LoDoc declaration " in these terms: "To: Mortgage Manager Perpetual Trustee Company (the Lender) Proposed Loan Details Loan amount $240,000 Loan Term Years - 30 Repayment $ per month – 1,684 Borrower Information: Name (Individual/company/Trust & Trustee) Alexander Kotevski ABN (companies only) Occupation Builder Declaration of Financial Position I /We certify, warrant and represent to you that: I am/we are aware of our financial obligations under the proposed loan with you. I/we have carefully considered our ability to afford the loan repayments as well as our ability to meet all our other financial obligation (including living expenses) as and when they fall due and can do so without incurring financial hardship. Where the borrower is a Trust or company, that I/we (the Trustee/Directors) have been properly appointed and are entitled to act on behalf of the Trust/company to submit this declaration. I/we acknowledge that you will be relying on this declaration in considering whether or not to approve my/our loan application. The following income will be available to meet my financial commitments: Complete only where declaration is required Income (per annum) Borrower (1)- Borrower (2) 75,000 25 Under this appears a signature purporting to be the signature of Mr Kotevski. Suspiciously, immediately below the purported signature the words "Alexander Kotvski" (sic) are hand written under which appears the date, 24 November 2005. 26 Ms Pogson's affidavit continued with these two paragraphs: Also on the GHL file are copies of Mr Kotevski's Certificate of Australian Citizenship, his drivers licence and a Rate Notice dated 21 July 2005 in relation to the Property referred to in the Verification of Borrower document copies of which are at [151-153]. Because these documents are on the GHL file, GHL only received documents from Milanex in relation to the Application and because these documents are documents of the kind which normally come with loan applications and I would not have proceeded with processing the application until I had received them, I say that these documents were sent by facsimile or email to GHL by Milanex on 29 November 2005. Milanex never sent GHL original documents. GHL only ever received copies of the original documents." 27 Ms Pogson said that she checked the documents and the signatures which appeared on them against the signature on the drivers licence and did not observe any discrepancies. She did, however, observe that the ABN number had been omitted from the LoDoc Declaration (even though the form only seems to require companies to provide an ABN number). She telephoned Mr Vlasic and asked for it. He telephoned her back and told her the number 59811955289 which she wrote on a copy of the LoDoc Declaration. 28 There was evidence that this ABN number related to a Mr Alexander Kotevski, the Proprietor of ACG Carpenters, which carried on business in Victoria and seemingly had no connection with the Mr Kotevski in this case. She telephoned 95882986, the telephone number on the applicant's personal details form, and the male person who answered told her he was not Alexander Kotevski. 29 She reported this to Mr Vlasic who told her to try 95889786. He also told her, according to her affidavit, that Mr Kotevski intended to use the loan proceeds "to purchase a business (or a building) for his grand daughter who is a hairdresser". I interpolate that according to the evidence, Mr Kotevski was billed by Telstra in November 2005 in respect of the number 95889786. 30 Ms Pogson telephoned 95889786 and conducted a conversation with a man who told her he was Alexander Kotevski. According to her affidavit, this man confirmed, by saying "yes", "no" or "ok", to everything on the documents which she had received, including that he had lived at 3/3 Baxter Street Kogarah for ten years; that he had a car worth $25,000; that the contents of his home were worth $70,000; that he had a superannuation policy worth approximately $30,000; that he was a self employed builder with an income of $75,000 per annum; and that the funds were to be used for investment purposes. 31 Ms Pogson made a note about the telephone conversation on a form headed "Confirmation of Conversation Form". She ticked 3 boxes on the form against "Borrower", "Loan Account" and "Property". She left blank the space beside the box "Purpose for which Loan Funds are to be Used" and had written N/A against the boxes "Employer", "Type of Employment", "Length of Service" and "Remuneration" 32 In relation to this conversation, Ms Pogson said: "Mr Kotevski spoke with a strong European accent. I did not think about what kind of accent he had but I now know he is Macedonian. My only concern at the time was whether he understood the questions I was asking him. At no stage did he say he didn't understand any questions I asked him nor did he ask me to repeat any questions I asked him. Mr Kotevski never hesitated to respond to any of my questions and although his answers were short they seemed to me to be responsive to the questions." 33 Earlier in her affidavit Ms Pogson had explained that it was the responsibility of Milanex to conduct a full interview with Mr Kotevski and it was not the purpose of her telephone call to interview him as she would have interviewed a customer who came to her direct. 34 She then ordered a credit search against Mr Kotevski with Baycorp Advantage Business Information Services Ltd. The search dated 29 November 2005 revealed two matters, which may have given her pause for reflection. Under "consumer employment" appeared "4/12/1998 DSS Rockdale". Under "Consumer Defaults" was a reference to a default in a payment due to AGC QLD Credit Line, although it appeared that the default involving $1,232 had been settled. 35 She proceeded to calculate what she termed the Net Surplus Ratio (NSR) from the documents and determined that it exceeded the minimum requirement for an approved loan. She described this as a method used to assist in assessing a borrower's ability to repay the proposed loan, taking into account current commitments and living expenses. She then applied to Gemworth Financial Mortgage Insurance Pty Ltd (Gemworth) for mortgage insurance which by facsimile of 30 November asked her to provide "term in current employment". She referred the question to Mr Vlasic who told her "six years" which she conveyed to Gemworth. – "self employed 6 years". 36 The application to Gemworth was conditionally approved subject to valuation. She commissioned one from a valuer, nominating Mr Micic as the person to contact. When received, the valuation was $280,000 against which she could negotiate a maximum loan of $224,000. She referred this problem to Mr Vlasic who telephoned her back and told her to reduce the loan application to $224,000. Mortgage insurance was approved by Gemworth on that basis. 37 Having received the mortgage insurance approval, Ms Pogson sent a Loan Purchase Request to Calibre. It was in this form: "Good Home Loans Pty Ltd requests that the Trustee, document, settle and purchase the loan as outlined in the following schedule. To assist Calibre in processing the Loan Purchase Request please find attached the following documents. Borrower: Documents Attached: Lender Mortgage Insurance Approval Valuation NSR Calculation LoDoc declaration Loan Purpose Declaration Form I hereby certify that: In originating the loan the obligations and requirements outlined in the Mortgage Origination and Management Agreement, the Operations manual and any applicable relevant legislation have been complied with. I am not aware of any event or circumstance which may detrimentally alter the status or financial condition of the borrower, or any guarantor, or which may reduce the value of the mortgaged property. I am not aware of any non-disclosure of information on behalf of the borrower, or any guarantor, or a change in any circumstance which may be relevant to Calibre's and the relevant Lenders Mortgage Insurer's approval and the Trustees purchase of the loan. I am not aware of any event or circumstance which would cause the borrower/s difficulty in meeting their obligations under the Loan Contract upon settlement of the loan. The Lender Mortgage Insurer's disclosure requirements have been satisfied in obtaining the Lenders Mortgage Insurance. I am not aware of any incident, event or circumstance which may negatively affect the ability of Good Home Loans Pty Ltd to carry out the ongoing management and administration of its portfolio, or a loan, or meet its obligations under the Mortgage Origination and Management Agreement, the Operations Manual or any applicable relevant legislation. Good Home Loans Pty Ltd is not in default under the Mortgage Origination and Management Agreement. Authorised Signatory Good Home Loans Date 13/12/05" 38 On the same date viz 13 December, she received a letter of instructions by Calibre addressed to Paul Fabian & Co Solicitors (Fabian) to act for Perpetual on the transaction. She forwarded the letter to Fabian. 39 On 13 January 2006, Ms Pogson received from Fabian by facsimile a letter which purported to enclose: "Solicitor's Certificate together with Loan Offer document, Mortgage, Direct Debit form and certificate of currency for strata insurance for settlement on Wednesday 18 January 2006." 40 The certificate which was signed by Sharmila Ratnasiva as "authorised signatory for, and on behalf of, Paul C Fabian & Co" certified among other things: "………………………… 7. None of the Relevant Documents have been altered by anyone except where customer specific details had been complete incorrectly. Each alteration has been signed or initialled by all parties to the Relevant document. ……………………….. 8. All Relevant documents have been duly executed. ………………………… 10. We have, on becoming aware of any error, admission or incorrect information in the Solicitor's Instructions, promptly notified the Mortgage Manager and where required, liaised with the Mortgage Manager to amend any affected document, and notified Calibre of the amendments. …………………………….. 12 (a) We have served each Secured Agreement, Mortgage and Guarantee separately on each Borrower, Mortgagor and Guarantor respectively or their solicitors (as applicable) in accordance with the requirements of the Consumer Credit Code (where they are regulated by the Consumer Credit Code) and the procedures in the Solicitor's Pack. (b) Where we have sent any of the above documents to the Mortgagor's, the borrower's or the Guarantor's solicitor, we have also at the same time, sent a letter to the Mortgagor, Borrower or the Guarantor (as applicable) advising them we have sent that document to their solicitor. 41 Among the copy documents sent by Fabian to Ms Pogson was a Statutory Declaration signed by Mr Kotevski before Mr Lo, in which he said he was the borrower named in the loan security documents in favour of Perpetual; that he had received legal advice; and that he freely and voluntarily signed the documents. 42 The copy mortgage sent by Fabian to Ms Pogson appeared to be signed by Mr Kotevski before Mr Lo. It mortgaged Torrens Title 3/SP3893 and incorporated by reference as a collateral document "Loan Offer number 8553480 dated 14 December 2005". 43 The copy "Loan Offer" indicated that it was signed by Mr Kotevski before Mr Lo on 20 December 2005. It provided for a loan of $224,000 by Perpetual to Mr Kotevski for a term of 30 years. Repayments were to be made by monthly instalments covering principal and interest of $1,581.61 each, apart from the last which was to be $2,727.38. That would have been payable in December 2035 (when Mr Kotevski would have been 104). The "Loan Offer" document comprised 12 printed pages. Rather significantly, as perhaps indicating where the minds of all those involved in the transaction were concentrated, 7½ pages were devoted to the interest, fees, and charges payable, or potentially payable, by Mr Kotevski. The "Loan Offer" provided that the security would be "a registered first mortgage" over "the property at 3/3 Baxter Street Kogarah, title Reference: 3/SP3893". 44 In a box labelled "Purpose" was printed: You must only use your Loan for the purpose or purposes specified in your Loan application. You have told us that you expect the proceeds of the Loan to be paid as follows: $1,926.75 to the Lender on account of the total ascertainable credit fees and charges itemized in the Initial Fees and Charges section above, which are to be paid out of your loan. $222,073.25 being the balance of Loan Account 1 to you or as you or your solicitor or conveyancer directs. If you need to change this information you will need to do so in your direction to pay. See clause 1.5 of the Booklet for details of which Loan Account any amounts listed above as payable to the Lender will be paid from. The Lender is treating this offer as not regulated by the Consumer Credit Code." 45 After checking the documents, Ms Pogson on 13 January sent a "Request for Settlement" to Calibre confirming everything was in order for settlement on 18 January. She certified, inter alia, that GHL had complied with the MOMA and the Operations Manual. 46 On 16 January GHL received an email from Calibre which read: "As discussed prior to booking funds for the above settlement, could you please let me have the Loan Purpose Declaration showing Perpetual Trustee Company Limited as the Lender. Also could you please ask Fabian and Co for an amended Loan Offer document showing the additional reference to title 17/3893 on page 9 of 12. (In the schedule to the Solicitors Certification they are showing two references to title for the property, yet in the Loan Offer there is only one.) Once these two issues are resolved I will book funds." 47 In Ms Pogson's absence the request was dealt with by Mr Jason Gomes. He sent to Mr Vlasic a blank form of the document "Declaration of Purposes for which Credit is Provided" and requested "please get the client to sign the attached form and fax it back to me". The same day GHL received by facsimile from Milanex a copy of the declaration addressed to Perpetual, purporting to be signed by Mr Kotevski that day. As appears, hereafter, in my opinion, the probability is that the signature purporting to be that of Mr Kotevski is forged. 48 Later, on 16 January GHL received an email from Fabian "attaching a copy of an amended page 9 of the Loan Offer, which included a title reference of 17/SP3893 and a copy of an amended page 4 of the Solicitors Certificate dated 16 January 2006, which also contained such reference. On the former document, the additional title reference was written in ink alongside the initials (according to the evidence of Mr Fabian referred to hereafter) of his employee Ms Rachel Ralston. GHL sent the new Declaration and the two amended pages to Calibre by facsimile. 49 On 18 January GHL was informed by Fabian that the loan had been settled. 50 On 22 February, Ms Pogson was notified that the direct debit arrangement put in place for payment of the instalments payable under the loan agreement, had been dishonoured. She spoke to Mr Vlasic about this and subsequently, according to her affidavit, had a number of conversations, extending into 2007, with Mr Kotevski about the default. Her affidavit does not indicate the telephone number she called or the means by which she identified Mr Kotevski. Following one of the conversations a payment of $1,650 was made to Mr Kotevski's account. In another conversation, according to her affidavit, Mr Kotevski said "Ring Marko Micic, my son. He will sort it out. His mobile number is 0402963368. 51 Ms Pogson's affidavit continued: "I then telephoned Mr Micic and we had a conversation in words to the following effect: I said: Hi is this Marko Micic? Mr Micic said : Yes. I said: This is Jane from Good Home Loans. Alex Kotevski has asked me to give you a call. His direct debit in the amount of $1,669.62 for his loan has dishonoured. Mr Micic said: Sorry. It will be ok, take the payment on the 29 th . I said: Thank you. I then made a note of the above conversation on the email I received from Mark Darby at Calibre dated 21 June 2006. I recall Mr Micic had a European accent but it was not as strong as Mr Kotevski's and his English was much clearer than Mr Kotevski's. I recall Mr Micic's voice was deeper than Mr Kotevski's and he sounded younger than Mr Kotevski. I also recall he dropped less words that Mr Kotevski. From this point onwards, my first point of contact was still Mr Kotevski but if he was unavailable, I would telephone Mr Micic. In the event that I spoke with Mr Micic, it was my practice to make a note of this as he was not the borrower. The Account statements show on 29 June 2006 a payment was made to the Account in the sum of $1,669.62 which was dishonoured the same day." 52 Thereafter Ms Pogson relates other telephone conversations with Mr Kotevski and Mr Micic regarding the default. Her evidence was that she telephoned Mr Kotevski on 95889786 and Mr Micic on 0402963368 and 0433519930. 53 Ultimately, following many unfulfilled promises and continued defaults, which stretched to nearly the end of 2007, steps to enforce the mortgage were instituted. In the meantime in November 2007, Ms Pogson had a telephone conversation with Mr Kotevski's daughter, Javorka Cirhovic, and a visit in December from three men, who introduced themselves as Mr Kotevski, Mr Micic, and Mr Kotevski's nephew. The meeting was unproductive in that no proposal to pay the arrears was made. 54 In her oral evidence, Mr Pogson said that the number she used to telephone Mr Kotevski was always 95889786 and she always seemed to speak to the same male person with a distinctive middle eastern accent on that number. 55 In cross-examination, Ms Pogson told Mr Connor that she was aware that at the time of the loan Mr Kotevski was 74 and that the loan was to be for 30 years. She said that she did not consider raising that circumstance with Calibre or Perpetual as she did not regard it as relevant. 56 She told Mr Connor that she also did not regard it as relevant to inform Calibre of the default indicated on the Baycorp search. She said that she could not recall noticing that the search indicated that Mr Kotevski's employer was stated as "DSS Rockdale". She seemed to me reluctant to admit what I regard as rather obvious, namely that the initials "DSS" might well refer to the Department of Social Security. Nor did she consider that, having regard to his age, Mr Kotevski might have been a pensioner. 57 Asked about, so called LoDoc loans, Ms Pogson said they were used for clients who did not have financial documentation such as income tax returns. She did not ask Mr Kotevski whether he had such returns but assumed that Milanex had gone through the established procedures. She identified Mr Vlasic's handwriting on the documents "LoDoc Declaration" (other that the figures 75,000); "Applicant's Personal Details"; "Loan/Security details"; and "Monthly Income/Statement of Assets and Liabilities" received from Milanex on 29 November 2005. 58 She agreed with Mr Connor that the statement in the last mentioned form to the effect that Mr Kotevski's monthly expenses were zero was obviously incorrect. However, she said that in the case of LoDoc loans a declaration by the borrower as to ability to service the loan was all that was required and that she would take it at face value. 59 She also agreed that if she had closely examined the signature on the LoDoc Declaration and compared it to Mr Kotevski's signature on the driving licence, she would have noticed a discrepancy. 60 As to how she thought the loan would be serviced there was this exchange: "Q. Did you look at serviceability of the loan at the start of the loan? A. Yes, we do. Q. Do you look at serviceability of the loan after six months? A. No. Q. Do you look at serviceability of the loan after 12 months? A. No. Q. Do you look at the serviceability of the loan at any time from one year to 30? A. No. Q. So, you are only concerned with from Good Home Loans' point of view with serviceability of the loan at the outset? A. No. We do not check the servicing. But, I mean, we assume the client is going to service the loan. Q. How do you make the assumption in Mr Kotevski's case that after 15 years the loan could be serviced? A. He was acquiring an investment, it could have been from that. It would have been from any project he was working on. I do not, sort of, delve too far into that, that is not something we would normally do. Q. What investment was Mr Kotevski making? A. For the loan? Q. Yes? A. It was a purchase of a business, a hair-dressing business, for his grand-daughter. Q. Now, where did you get that information from? A. An early conversation with Milan. Q. Where is the note of that in your notes? A. Sorry? Q. Is there any note of that in your notes? A. In the file, no. " . 61 She said that she did not tell Calibre that her information was to the effect that the investment by Mr Kotevski was to benefit a third party, namely his granddaughter. 62 I asked Ms Pogson about LoDoc loans: "Q. Ms Pogson, I am puzzled about this low doc concept. Whose call is it, the borrower or the mortgagee, as to whether it is a low doc transaction? A. It is, basically, the borrower. Either they have the documents or they do not, and they can choose to select a low doc loan. All financial institutions have them. Q. So, in this case, Mr Kotevski, you say, chose to have a low doc loan? A. Yes. Q. And he made the low doc declaration? A. Yes. Q. What in that document constituted his suitability for a low doc loan? A. It is something that would have been established through the interview with Milan, that it was a low doc loan. So, it would have probably been discussed prior, as to whether he had financials or did not. Q. When you say "financials", that means? A. Tax returns. Q. Tax returns? A. Yes. Q. Did you think that a person who disclosed an income of $75,000, presumably per annum, would not have a tax return? A. There are lots of people that have low doc loans that do not have their financials up to date. We require the two most recent years. Yes. Q. So, they might have a huge tax liability, for instance? A. They may. Q. Which you would not care about? A. Well, not that we would not care about, no. " 63 Later she agreed with Mr Connor that in several respects the documents received by her on 29 November 2005 were incomplete and that the agreement with Calibre required that such documents not be accepted. She maintained, however, that LoDoc loans required neither details of income, nor sources of income to be particularised. 64 Ms Pogson conceded to Mr Connor that she made no enquiries and, in truth, knew nothing about the hairdressing business or even the proposed ownership of it, which she mentioned in her affidavit "it was just in conversation that is what the funds were going to be used ". Although she said that an investment loan required no more than that the word "investment" appear, she agreed that nowhere in the manual was that stated. 65 Cross-examined about the telephone conversation, she claimed to have had with Mr Kotevski soon after receiving documents from Milanex on 29 November 2005, Ms Pogson agreed that she had no independent recollection of what was said but could independently recollect the conversation. She said that she reconstructed the conversation from her usual procedures. 66 As to the risk of her relying on false LoDoc declarations, there was this exchange: "Q. You knew that the risk of false Low Doc declarations was significant? A. No. Q. Is it the position, that you gave no consideration as to whether it was false, or not? A. No. Q. You mean that you did give it consideration? A. No, never considered it, never crossed my mind. " 67 Mr D Weinberger, counsel for Milanex and Mr Vlasic, in his cross-examination of Ms Pogson touched on the subject of the LoDoc Declaration: "Q. Well, applicants for Low Doc/subprime loans simply put forward security, don't they? In order to procure the loan? A. And the declaration. Q. And the declaration, but the only matter that is verified is the value of assets by which the loan is to be secured, correct? A. Yes. Q. And that verification has taken place by a valuation, correct? A. Of the property. Q. Of the property, yes? A. Yes. Q. Nothing else advanced, or I am sorry, nothing else asserted to be the applicants financial predicament, if you like, is verified, correct? A. Their debts would be if they had debts. Q. But if an applicant says his or her income is $100,000 or $200,000 or $300,000 there is no checking of that at all? A. That's correct, yes. " 68 Ms Pogson agreed with Mr Weinberger that unlike all of the other conversations referred to in her affidavit, she did not make a note of the conversation with Mr Vlasic referred to in her affidavit regarding the purpose of the loan. However, she denied Mr Weinberger's proposition that she did not have the conversation until after the loan was made. He asked her about the conversation: "Q. Alright, and you understood from that conversation that Mr Kotevski wanted to give his granddaughter some money to purchase a hairdressing salon? A. No, not worded like that. HIS HONOUR: Sorry, I couldn't? WITNESS: No, not how you worded it. WEINBERGER Q. Right, what do you say you understood? A. That, that he was - I am not certain if it was a building where his grand daughter's hairdressers was, or the business, yes, but it wasn't that he was just giving her money. Q. Well, if you are not sure whether it was the building or the business, does that mean you are unsure about the content of the conversation you had with Mr Vlasic? A. In general it was that sort of content, but as I say I don't recall it was that exact business or the building that the business was in. I am not sure. MR WEINBERGER GRANTED ACCESS TO GOOD HOME LOANS ORIGINAL FILE WEINBERGER Q. Ms Pogson, before the luncheon adjournment I think I was asking you questions about the purpose of the loan. Can we take it you were not aware of what was the arrangement between Mr Kotevski and his granddaughter and indeed if one existed? A. Yes. Q. So it would follow therefore would it not that if - and when you say you were not aware of the arrangement, that is, you were not aware as to whether Mr Kotevski was for example, receiving or going to receive an income from the hairdressing salon? A. Yes. Q. If that is the case then it follows does it not that you were not aware or could not have concluded that the loan was for an investment purpose. If you were not aware Mr Kotevski was going to receive an income or otherwise, would you accept that it follows that you were not able to conclude that the loan was for an investment purpose? A. No. Q. Let's assume it to be the fact Mr Kotevski intended to lend or give the money to his granddaughter, lend the money interest free or give the money to his granddaughter. In those circumstances would you still maintain that the loan was for an investment purpose? A. Meaning if he was just giving her money, no. Q. What if he was lending her the money without any interest at all? A. It is all hypothetical. Q. I understand it is hypothetical. If Mr Kotevski was lending his granddaughter $200,000 odd interest free, would you agree that is not for an investment purpose? A. Yes. Q. So it follows therefore given your earlier evidence that you were not aware of what arrangement existed between Mr Kotevski and his granddaughter, if any, that you were not able to conclude that the loan was for an investment purpose. It must follow? A. But I don't determine that. Q. I didn't ask you whether you determine it. It must follow that you were not able to conclude that the loan was for an investment purpose? OBJECTION (DOCKER) HIS HONOUR: It is very hypothetical. Ask the question again. WEINBERGER Q. You said you were not aware of what arrangement if any existed between Mr Kotevski and his granddaughter? A. Yes. Q. If it be the case that Mr Kotevski intended to give his granddaughter the monies or lend it to her interest free you have agreed that would not be for an investment purpose? A. Yes. Q. So, other than ringing Mr Kotevski and putting the words into his mouth, are the funds to be used for an investment purpose and he says yes? OBJECTION (DOCKER) Q. Other than putting the words in Mr Kotevski's mouth as you said at paragraph 24, are the loans to be used for an investment purpose and Mr Kotevski says yes, you were not able to conclude whether or not the funds were for an investment purpose, correct? A. No that is established in the interview process. Q. I am asking about yourself. You weren't able to-- A. No. Q. You were not able to conclude that the fund were for an investment purpose? A. No. " 69 Later in the cross-examination, by Mr Weinberger, Ms Pogson conceded that if she had known Mr Kotevski was, or might have been, a pensioner, she would not have proceeded with the loan. 70 I do not question the honesty of Ms Pogson, or the reliability of her evidence, with the qualification that I do not accept that she had a conversation with Mr Kotevski on or about 29 November 2005 during which he allegedly verified the matters set forth in paragraph 24 of her affidavit of April 2009 and referred to in paragraph 30 above. The testimony seems to me to be inconsistent with her own note of the conversation and also inconsistent with the capacity of Mr Kotevski to understand spoken English. Moreover, in my opinion, it is improbable that Mr Kotevski would have made patently false statements, the truth of which could easily be checked as to his occupation, his income, his period of residence in Baxter Street and his assets. In the outcome, in my view, Ms Pogson does not, however, emerge from this particular transaction with a great deal of credit. It is all very well for her to say that she relied on Milanex and Mr Vlasic but the fact is her own conduct was regulated by a very detailed agreement, of which multiple breaches were plainly committed, not the least of which being the obligation to "act prudently in the sourcing and ongoing servicing of high quality assets for the Calibre program" as required by clause 2.1 of the MOMA agreement. 71 Spigelman CJ made some observations pertinent to this case as to the significance attributable to a lenders failure to adhere to its own guidelines and procedure in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at paragraph 79 and following: "79 The Appellant submitted that the failure to observe its own Guidelines was not entitled to substantial, let alone determinative, weight. The Appellant accepted that the failure was a relevant consideration. However, it submitted that the Guidelines were designed for the purpose of protecting the lender, not the borrower. Their purpose was to enable the Appellant to assess and minimise its own risk. 80 This proposition can be accepted, but it does not lead to the conclusion, urged on the Court by the Appellant, that the failure is entitled to minimum weight when determining what is just in all the circumstances. The benefit to the borrower from a proper risk assessment may be indirect, because unintended, but that does not mean that it cannot, in appropriate circumstances, be entitled to significant weight in the determination of unjustness. It is clear from the list of factors contained in s9(2) and (3) of the Act, that a substantial purpose of the legislative scheme is to protect persons who are not able to look after themselves. 81 Rolfe DCJ's finding of fact, which is not challenged, that if the Guidelines had been observed the Appellant would never have advanced the loan to the Respondents was justified. The finding does not go only to causation. It is a factor entitled to be taken into account and given weight in the determination of unjustness. 82 I have set out above in the extract from his Honour's findings on the Guidelines issue each of the respects in which the Appellant failed to observe its own Guidelines. Of these failures the most significant, in my opinion, is the fact that the section of the standard form application about the purpose of the loan was left blank. This indicates that, as in Elkofairi supra at [79], the Appellant "was content to lend on the value of the security". In my opinion, that approach is entitled to significant weight in the determination of unjustness. (I note that nothing like this occurred in West where the purpose of the loan was known.) 83 On the information actually available to the Appellant, a husband and wife – one with a $43,000 per annum income and the other a pensioner – borrowed $120,000 for, as far as the Appellant cared to know, immediate expenditure. Enforcing a security against the personal residence of such borrowers should not be treated as if it were the first resort. That is what, on paper, the Appellant can be described as having done." 72 As it seems to me, no sensible person would make, or participate in making, a loan of $224,000 to a 74 years old aged pensioner for a term of 30 years without at least a close consideration of the purpose of the loan. Ms Pogson knew, from more than one source, that Mr Kotevski was born on 24 August 1931. 73 If she had thought about it for a moment, she should have realized that the reference in the Baycorp credit search to DSS Kogarah may mean that Mr Kotevski was in receipt of a pension paid by the Department of Social Security. If she did not realize this then, in my view, she had an obligation to make a further inquiry, particularly as the bald statements in the LoDoc declaration that Mr Kotevski was a builder in receipt of $75,000 per annum, plainly begged a number of questions. THE EVIDENCE OF Ms LENORE MCKINNIERY 74 Mr Docker read three affidavit of Lenore McKinniery, respectively sworn 23 December 2008, 8 September 2009 and 14 September 2009. Carelessly, as it seems, her surname is spelled McKinnery in the first of the affidavits and McKinniery in the other two. Her signature does not assist in resolving the discrepancy but I will employ the spelling McKinniery, which appears on documents emanating from her office. 75 In the first affidavit, Ms McKinniery said that she is a director of Calibre which has operated since its inception in 2005 in the "wholesale residential mortgage market". She has worked in the mortgage industry for over 17 years. In her first affidavit, she described the business of Calibre and its relationship with Perpetual and GHL in these terms: "The Calibre Programme is an arrangement under which a range of credit products are advanced on security of registered first mortgages over residential property. These products include conventional term loans, lines of credit (revolving), MasterCard and various fixed and interest only options. Perpetual Trustee Company Limited (Perpetual) the plaintiff is the trustee of various trusts. As trustee it advances the loans and is the legal owner of and registered mortgagee on all mortgages taken under the Calibre Programme. Perpetual is also the custodian of the security documents which include, inter alia, the certificate of title and the mortgage. Calibre is the trust manager of the trusts of which Perpetual is the trustee. Calibre is responsible for the management of the Calibre Programme. Calibre is responsible for deciding whether a loan and mortgage will be entered into by Perpetual. At[4] is a copy of the trust deed pursuant to which Perpetual becomes trustee of the trusts and Calibre is the trust manager. Calibre accredits various companies as mortgage managers in the Calibre Programme. Good Home Loans Pty Ltd (GHL) is an accredited mortgage manager. Calibre's relationship with GHL is governed by the Mortgage Origination and Management Agreement (MOMA). A copy of the MOMA is a [102]. 76 Ms McKinniery exhibited to her affidavit a copy of the trust deed between Perpetual and Calibre, a copy of the MOMA with GHL and a copy of the Operations Manual. I have earlier made extensive reference to the latter two documents. It is unnecessary, I think for me to make further reference to the trust deed, except to comment that its provisions may well entitle Perpetual to recover any loss through Calibre by requiring GHL to purchase the mortgage. 77 She deposed to receiving a Loan Purchase Request from GHL on behalf of Mr Kotevski on 13 December 2005 and said that it was the practice of Calibre to check the documents sent to it, namely the insurance approval, the valuation, the net servicing ratio calculation, the LoDoc declaration and the loan purpose declaration form. Subject to this and other administrative tasks, such as the establishment of a file, instructions would be given to a solicitor which, in Mr Kotevski's case, were given to Fabian. Those instructions, which according to the evidence in this case, were emailed at 7.30pm on 13 December 2005 were in a standard printed form and instructed Fabian to prepare and serve the Loan Contract and Mortgage. 'Security Details" given to the solicitors stated "3/3 Baxter St Kogarah" but did not provide a title reference. There was, however, a reference to the purpose of the loan viz "for future investment". 78 Subsequently, she said that Calibre received from GHL a request for settlement, accompanied by Fabian's certificate and a copy of the Loan Offer, which they had prepared. She noticed that the solicitors certificate included reference to two certificates of title 3/SP3893 and 17/SP3893, yet the Loan Offer referred only to the former. 79 On 18 January 2006, Fabian notified Calibre that settlement had been effected. Thereafter, she became aware that numerous payments from a client debit account were dishonoured. 80 In cross-examination by Mr Connor, Ms McKinniery agreed that Calibre is the entity that decides whether or not Perpetual accepts a loan application and that Perpetual has no role in that connection. She also agreed, in effect, that Calibre relied upon GHL to perform its role and she did not review the tasks which it had contracted to perform. Moreover, only some of the documents collated by GHL were sent to Calibre. 81 Ms McKinniery told Mr Connor that she was not aware of Mr Kotevski's age until well after settlement when he went into default. She conceded that she did not receive a copy of the LoDoc declaration until it was sent to her by Ms Pogson on 14 December 2005, the day after she had given instructions to Fabian. She said this was an oversight but an inconsequential one as it was only necessary for her to sight the LoDoc declaration before settlement. 82 In my assessment Ms McKinniery was an honest witness whose testimony should be accepted. Her position in general terms was that, under the procedure she had devised, Calibre was entitled to rely on entities such as GHL performing their contractual obligations. The system contemplated that Calibre would receive only some of the documents generated in the transactions and, in this particular case, the documents she saw neither put her on notice of Mr Kotevski's age, nor that he was, or might be, the recipient of a pension paid by the Department of Social Security. Of course, Calibre, and Perpetual, in turn, were vulnerable to a failure as in this case of GHL to perform its contractual obligations. THE EVIDENCE OF PAUL FABIAN 83 As I have previously indicated, Fabian acted for Perpetual in the transaction with Mr Kotevski. Mr Paul Fabian, principal of the firm, swore an affidavit on 21 January 2009 and gave oral evidence. His retainer was regulated by a "Solicitors Pack", a document of some 26 pages. It is unnecessary to refer in detail to this document, suffice to mention these paragraphs: "Given the increase in identity fraud, Panel Solicitors must take reasonable precautions to ensure that transaction are genuine. Without limiting other steps the solicitor may take, Calibre expects Panel Solicitors to confirm the validity of any other solicitor involved in the transaction by checking the contact details of the firm against the Law Society's internet "Find a lawyer" search as available from the applicable Law Society. Where the borrower is acting for themselves (i.e. a refinance) or has arranged a Conveyancer the Panel Solicitor should take all prudent steps to ensure that the transaction is genuine. Conveyancer contact details should be checked against the white pages or yellow pages listing/s. Borrower contact telephone details can also be verified by the White Pages. In all cases use of the electronic white pages ( www.whitepages.com.au ) is preferable. Special attention should be taken when transactions involve unencumbered properties or when a previous title document has been lost or destroyed and a replacement title document is presented. ………………………………….. The Panel Solicitor is to forward the loan documents to the Borrower's Solicitor and at the same time forward a letter, (Solicitors Confirmation Letter) to the borrower advising them that the loan package has been sent to their nominated solicitor. …………………………………. In those instances where the borrower has not engaged a solicitor to act on their behalf the Panel solicitor will send the documents directly to each borrower ………………………………… In those instances where the Panel Solicitor or the Mortgage Manager delivers the loan documents to the borrowers/guarantors the Panel Solicitor or the Mortgage Manager will be responsible for ensuring that the following occurs: Each party to the loan must personally receive their copy of the loan documentation from the Panel solicitors or the Mortgage managers authorised agent." 84 He confirmed that he received instructions to act by facsimile from GHL on 13 December 2005. Upon receipt of the instructions, documents were generated in his office by an employed solicitor, Ms Sharmila Ratnasiva under his direction. Those documents, in accordance with his instructions, were posted to Mr Vlasic, Milanex Pty Ltd PO Box 565, Dee Why NSW. Extraordinarily, the letter of instructions dated 14 December 2005, described Milanex as Mr Kotevski's solicitor. 85 Paragraph 11 of Mr Fabian's affidavit lists the documents sent to Milanex "(a) Letter from Paul Fabian (b) Loan Offer (c) Mortgage (d) Multi authority (e) Declaration by borrower, Schedule 1 (f) Acknowledgement of Legal Advice by Proposed borrower, Schedule 4 (g) Borrowers Acknowledgment (h) Warranty (i) Receipt of Loan Documents" 86 Paragraph 12 of the affidavit states that included with the letter were "The Booklet of Standard Terms and Conditions" and "Direct Debit Request Form". Neither of those documents was listed in the letter and there must be considerable doubt as to whether they were sent. 87 On or about 12 January, Fabian received back into its office those documents sent to Milanex on 14 December which required execution by Mr Kotevski, apparently duly executed. The documents were accompanied by the letter addressed to Mr Kotevski which had been enclosed with Fabian's letter to Milanex. 88 Some of the documents received back into Fabian's office were exhibited to Mr Fabian's affidavit including a Direct Debit Request Form addressed to St George Bank Kogarah, specifying an account, but left blank as to the amount to be debited; a Statutory Declaration subscribed by Mr Kotevski before Mr Lo acknowledging that he had received legal advice and that he had freely and voluntarily signed a loan agreement; a mortgage and ancillary documents; an "acknowledgment of Legal Advice by Proposed Borrower", apparently signed by Mr Kotevski; and a "warranty" signed by Mr Kotevski as to various formal matters. 89 Also exhibited to Mr Fabian's affidavit and signed by Mr Kotevski was an "Authority to Complete" in these terms: "To: Perpetual Trustee Company Limited and Paul C Fabian & Co Level 23, 25 Bligh Street Sydney Re: Loan from Good Home Loans Pty Ltd Alexander Kotevski 3/3 Baxter Street, Kogarah AUTHORITY TO COMPLETE You are hereby authorised to complete the relevant dates and other details in the Loan Offer, Mortgage and any Duty declarations given by us in respect of the abovementioned loan and amend the documents to either correct any errors or satisfy any requisition or such other thing required to give effect to the documents and the agreed Terms and Conditions of our loan and to cause the documents to be in registrable form. We undertake to comply with any requisition, objections and demands made in respect of the registration of the Mortgage and to pay any stamp duty or additional stamp duty and/or registration fees payable on the Mortgage within seven days." 90 On the same document and above Mr Kotevski's signature was a "Direction to Pay", whereby it was directed that funds at settlement be paid to Mr Kotevski at 3/3 Baxter Street Kogarah. All signed documents were dated 20 December 2005. Not exhibited to Mr Fabian's affidavit was either a copy of the Mortgage or a copy of the Loan Offer as executed. 91 On 12 January, Fabian emailed GHL: "We received the signed documents today from Mr Kotevski and all requirements have been received and we're ready to settle. Since the property is unencumbered, do you know if Mr Kotevski is holding the original Certificate of Title and if he is, could you please ask him to forward it to us." 92 According to Mr Fabian's affidavit, on 12 or 13 January, Fabian received the two certificates of title 3/SP3893 and 17/SP3893 apparently hand delivered in an envelope, which had a Milanex stamp printed on the back of it. 93 Thereafter Fabian, according to Mr Fabian's affidavit, prepared the matter for settlement in an unremarkable manner and settlement was effected on 18 January, following which the mortgage was stamped and registered. 94 At settlement, Fabian drew on its trust account a bank cheque in favour of Mr Kotevski for $221,963.25. It sent that cheque by letter dated 18 January 2006 to Mr Kotevski but the copy of the letter, in evidence, indicates that although the letter was originally addressed to him at 3/3 Baxter Street Kogarah, that address is struck through and alongside in ink is written "PO Box 565 Dee Why NSW 1099", being the postal address of Milanex. 95 Mr Connor, in cross-examination of Mr Fabian, suggested that copies of the Loan Offer and the mortgage were deliberately omitted from the exhibits to his affidavit, so as to conceal that they were altered after execution by the addition of references to Folio Identifier 17/SP 3893. He denied responsibility for the omission and attributed it to the solicitors acting for Perpetual in these proceedings. 96 He agreed, however, that the additional title reference was added to the mortgage by someone in his office, after it was signed by Mr Kotevski in the presence of Mr Lo. He agreed that while knowing or authorising this, he did not personally refer it to GHL or to Mr Lo with whom he had other dealings. He was unaware what other solicitors in his office had done. He agreed that when he signed the mortgage on behalf of Perpetual he was certifying it for the purposes of the Real Property Act. He claimed as authority for adding the title reference, the "Authority to Complete" signed by Mr Kotevski to which I have earlier referred. Upon that subject there were exchanges with Mr Connor: "Q. What did you do to explore whether there was an error or not? A. Well, the error was in the original valuation that didn't show both lots in the title description. That's where the original error was. Q. In the valuation? A. In the valuation. Q. So you know more than you put in your affidavit about that, do you? A. Well, having looked at the documents for the purposes of, you know, understanding the file, I could see that the valuation had an error in it. Q. Did Mr Kotevski authorise the valuation? A. The valuation comes with instructions, I don't know the process there but he pays for it. Q. It is Good Home Loans' valuation, isn't it? A. Well, it is a valuation that is given to a number of parties, the benefit of. Q. Did you speak to Mr Kotevski about what you thought was an error? A. No. Q. Did you check with him whether he agreed with you that it was an error? A. No, I didn't have carriage of the file. Q. You thought you had authority to act on behalf of Mr Kotevski, Mr Fabian? A. Well, the firm does, so the solicitor who was handling the file would obviously correct any error. The purpose was to facilitate the fact that documents didn't have to go back and forwards for correction, and I think that was the reason. ………………………………. Q. And what, you say that Mr Kotevski granted to Perpetual a mortgage over two titles? A. That's correct. Q. Where did it do that, Mr Fabian? A. By granting, by giving a mortgage over the address 3/3 Baxter Street. That property, the title description to that property is contained in two deeds, as is noted on the rates notice. Q. So, you thought you could simply add 17 to that? A. Well, because that corrected the proper title description. Q. Isn't the unit also 3/3 Baxter Street? A. It is part of it - unit and garage make up that address. Q. It is your position, is it, that what, you are making, where do you get the 3/3 Baxter Street from? A. Well, that's the address of the security. Q. But how did you know that? A. Well, in the instructions when they came. Q. Where is it in your file? A. It is in the instructions in the, the valuation. And all that correspondence lists the security as 3/3 Baxter Street, Kogarah. Q. That's the security is it? A. That's the security address. Q. Described by 3/3 Baxter Street? A. Yes. Q. That's how you dealt with matters? A. No, that's the address of the security. " 97 Mr Fabian agreed that the documents he sent out for execution on 14 December 2005 would not have been sent to Mr Vlasic of Milanex if Fabian had realized that he was not a solicitor and this was something that should have been realized. As to the alteration of the Loan Offer by adding the reference to 17/SP3893, Mr Fabian said that this alteration was initialled by Ms Rachel Ralston, a solicitor in his office. 98 Mr Connor asked Mr Fabian about the failure to send to Mr Kotevski, the loan proceeds: "Q. And you will see there that this is an authorisation and direction to pay? A. That's correct. Q. From Mr Kotevski? A. Yes. Q. So you are authorised to pay? A. Yes. Q. To send a cheque to 3/3 Baxter Street? A. That's what that says, yes. Q. Now you were not authorised to send it anywhere else, were you? A. Well, I can see by the letter that the letter was originally directed there but we were obviously - that is Sharmila's writing, she was advised to send it to Milanex. Q. Now have you got any note in your file of a new authority from Mr Kotevski? A. No. Q. Plainly the payment has been made not in terms of the authority that was granted by Mr Kotevski, if it was so granted, on 20 December 2005? A. No. Q. You accept that? A. Yes. " 99 Mr Weinberger cross-examined Mr Fabian about apparent breaches of the "Solicitors Pack" provided to him as a panel solicitor by Calibre. Q. Can I draw your attention, firstly, to clause 5.3 on page 9? A. Yes. Q. At about line 5 it says, "Where the borrower is acting for themselves i.e. a refinance or has arranged a conveyancer, the panel solicitor should take all prudent steps to ensure the transaction is genuine". Do you see that? A. Yes. Q. "Conveyancer contact details should be checked against the white pages or yellow pages". And then dropping down, "Special attention should be taken when transactions involve unencumbered properties". Do you see that? A. Yes. Q. Now do you know in your office whether any check was carried out, whether it be via the white pages or otherwise, to ascertain whether Milanex was a firm of solicitors? A. No, I don't. Q. Would it be reasonable for his Honour to conclude that no such search was carried out? A. One could assume that. Q. I am sorry? A. Yeah, one could presume that. Q. Now if you drop down to the service document at 5.4, and I draw your attention to the second paragraph, the second line, "The panel solicitors to forward the loan documents to the borrower's solicitor and at the same time forward a letter to the borrower advising that the loan package has been sent to the nominated solicitor". Now, pausing there, you did not send a letter to the borrower, did you? A. It would appear not. Q. If you can drop down even further, it has two paragraphs above the first bullet point, "In those instances where the borrower has not engaged a solicitor to act on their behalf, the panel solicitor i.e. you, will send the documents directly to each borrower". That did not occur here, did it? A. No, because-- Q. I am not asking you "because", that did not occur here, did it? A. No. Q. And if you see the first bullet point on that page, "Each party to the loan must personally collect their copy of the loan documentation from the panel solicitor i.e. you or mortgage manager's office, i.e. Good Home Loans", correct? A. Right. Q. That did not occur here to your knowledge, did it? A. No. Q. And then the next bullet point, "Each party to the loan must sign that they personally collected their copy of the loan documents"? A. Right. Q. Did that occur here? A. Well, there was an acknowledgement that Mr Lo served documents on the borrower. Q. Now if you go over the page to page 8, and I am drawing your attention to the paragraph beneath the first bullet point, sorry, it is page 10 but it is page 8 of the solicitor's pack? A. Right. Q. "In those instances where the panel solicitor or mortgage manager delivers the loan document to the borrower, the panel solicitor or mortgage manager will be responsible for ensuring the following occurs". Do you see that? A. Yes, I do. Q. So did you ensure that each party to the loan, i.e. Mr Kotevski, personally received his copy of the loan documentation? A. Well, that was evidenced by the-- Q. No, did you ensure-- OBJECTION. (DOCKER) Q. Did your firm, just your firm, I am not asking you about Good Home Loans, ensure that Mr Kotevski personally received his copy of the loan documentation? A. Yes. Q. How did you do that, by sending it to Milanex? A. No, by the acknowledgement that was received by Kevin Lo. Q. That does not mean you are ensuring that Mr Kotevski personally received it, it may be intercepted by someone else, correct? A. No, not if that certificate was signed. That is the purpose of the certificate. Q. The documents, according to that bullet point, the documents are supposed to first go to Mr Kotevski and he is then to take the documents to Mr Lo or someone else, correct? A. Well, that was the-- Q. That is the order? A. That was the order. Q. That did not occur, did it? A. No. Q. The next bullet point, "No one party to the loan can receive loan documentation on behalf of another party to the loan". Do you see that? So there was a failure to comply with that clause as well, correct? A. Yes. " 100 In my opinion the Authority to Complete referred to by Mr Fabian did not, on its proper construction, authorise the alteration of the signed Loan Offer and the Mortgage by adding a second title reference. This, in my view, was not a mere completion of the documents to enable registration. Fabian should have required the alterations to be attested by Mr Kotevski and Mr Lo. It is, I think, surprising that the Registrar General registered the mortgage with such a significant unattested alteration. However, in light of the view I have formed about the matter, it is unnecessary to consider the affect of unauthorised alterations upon the Loan Offer and the mortgage. 101 Plainly Fabian failed to comply in several respects with the "Solicitors Pack". Rather more significantly, in the context of this case, Fabian failed to comply with Mr Kotevski's direction to send the proceeds of the loan to him at his home. THE EVIDENCE OF MR LO 102 Mr Lo swore an affidavit on 3 March 2009, which was read by Mr Docker. As at 3 March 2009, Mr Lo was a cross defendant in the proceedings. 103 In his affidavit, Mr Lo said that he was admitted to practice as a solicitor in NSW in 1990 and commenced to practice on his own account as Kevin Lo & Co in 2002. He described his usual practice in respect of loan agreements: "It is my invariable practice to read through any loan agreement or loan document in full, and then to give oral advice to my client about the significant terms and conditions of the agreement, and of the risks and obligations the client would accept if the loan was made. In particular I always give express oral advice to my client concerning: (a) The term of the loan; (b) the principal amount to be repaid; (c) the rate of interest, including penalty interest if applicable; (d) the frequency and amount of each individual loan repayment; (e) any fees and charges payable in relation to the loan, including in relation to its ultimate discharge. Where the loan is to be secured by way of mortgage, it is also my invariable practice to ask my client whether the proposed loan is to discharge an existing loan facility; or whether the security property is unencumbered. That is relevant because of the different arrangements that might be necessary, depending on whether the security property is encumbered or unencumbered, to arrange settlement of the proposed loan. It is also relevant to me commercially, as my fee differs depending on whether there is an existing loan to be discharged or not. It is my usual practice to say to the client words to the effect of: "If there is an existing loan to be discharged you need to bring me in the loan statement for your current loan so that I can contact the lender and make arrangement to discharge it It is my usual practice, during the course of explaining loan agreements and related documents to my clients, to ask the client from time to time words to the effect of: "Do you understand that? or "Does that make sense to you?" or "Is that your understanding?" It has been my frequent experience, particularly when explaining loan agreements and related documents to persons whose first language is not English to be asked further questions by the client during the course of my explanation of the documents." 104 Prior to December 2005, Mr Lo said that he became acquainted with Mr Marko Micic whom he believed was in some way connected to a business operated from a nearly office ABMC Mortgage Centre. 105 Mr Micic called at his office and discussed the referral of clients to Mr Lo's practice. He also gave Mr Micic some advice as a client in relation to property transactions. Late in 2005 or early in 2006, he acted for Mr Micic and his partner Ms Zlatija Savic when she transferred her interest in a property at Bexley to Mr Micic. 106 As to his involvement with the transaction between Perpetual and Mr Kotevski, his affidavit deposed: "The only times I have met Mr Kotevski to the best of my memory were on 20 December 2005, and later in October 2008 Mr Kotevski and Mr Micic attended at my office on 20 December, without an appointment. To the best of my recollection they arrived at my office late in the day at around 4.30pm My secretary/receptionist, Ms Chelina Huo was present that day. She has been my only employee since I commenced in sole practice in 2002. I recall Ms Huo coming into my office and saying words to the effect that Mr Micic and a Mr Kotevski had called to the office unannounced and that Mr Kotevski was seeking legal advice about some loan documents he had received. I cannot now recall the precise words my secretary used. My office at 32A Hercules Street, Ashfield has four principal rooms. The first is a reception/waiting are. The second is a conference room, which adjoins the reception/waiting area. The third is my private office. The fourth is a storage room at the rear of the office. I agreed to see Mr Kotevski and met with him and Mr Micic in my private office. I recall Mr Micic saying words to the effect of: "Alexander here wants to borrow some money but the lender requires that he gets independent advice." Mr Kotevski had brought an envelope with him into the conference room. I was given the envelope and found that it contained a loan offer from Perpetual Trustee Company Limited and a number of other documents together with a form of Real Property Act Mortgage. To the best of my recollection the documents comprised a loan offer addressed to Mr Kotevski and dated 14 December 2005; an undated document entitled "Declaration by Borrower"; a Real Property Act Mortgage for Torrens Title 3/SP3893; an annexure to the said mortgage, referring to loan offer 8553480; an Acknowledgement of Legal Advice by proposed borrower; and a document entitled "Receipt of Loan Document". ……………………… On reading the loan offer I saw that it was addressed to Mr Kotevski at his private residence at 3/3 Baxter Kogarah. Because Mr Kotevski was the named borrower, I addressed the whole of my explanation of the documents to him. I then addressed Mr Kotevski, saying words to the effect of: "I need to take you through these documents as part of the process." In accordance with my usual practice, described earlier in this Affidavit, I gave advice to Mr Kotevski as to the proposed term of the loan, the principal amount he was borrowing, the repayment frequency, the repayment amount, the interest rate and the default interest provision, and the various fees and charges associated with the loan offer. During the course of my explanation, and also in accordance with my usual practice, I asked occasional questions to the effect of: "Do you understand that?" or "Does that make sense to you? or Is that your understanding?" I observed Mr Kotevski to nod in response to those questions. Although I do not have a detailed recollection of the precise words I used in the course of the whole explanation, I do specifically recall saying to Mr Kotevski words to the effect of: "This says the amount you are borrowing is $224,000. Is that your understanding of the amount of the loan?" I recall Mr Kotevski nodded in response to that question. …………………………….. Although I cannot recall the precise words I used, I have a specific recollection of telling Mr Kotevski that if he did not make the repayments required under the loan, the lender could sue him and could potentially take his house and sell it to satisfy the amount owing. I have a recollection of Mr Kotevski nodding after I gave that explanation to him." 107 Mr Lo said that at his request, Mr Kotevski produced by way of identification his original driving licence and that the consultation occupied in all about 30 minutes. He said that although Mr Micic remained in the room, he was not an active participant. 108 As to Mr Kotevski's understanding of what was involved Mr Lo deposed: "I do recall hearing Mr Micic speak to Mr Kotevski. He spoke to him partly in English and partly in another language which I now believe to be either Macedonian or Serbian. I cannot recall how much of the conversation was in English and how much was in the other language; but I certainly recall Mr Micic using a number of English words to Mr Kotevski. I also recollect hearing Mr Kotevski speak a number of words in English, although it is fair to say that the majority of his conversation was in another language which I now believe to be either Macedonian or Serbian. There was nothing about Mr Kotevski's speech, conduct or demeanour that suggested to me that he did not understand, or may not have understood, my explanation of the loan agreement or associated documents; or that he was unaware of the general nature of the loan offer, or that he was to be a borrower giving security for a loan. I did not observe anything in the way in which Mr Kotevski and Mr Micic spoke to each other, or in the way they related to each other to suggest other than that they were on friendly terms. I did not ask Mr Kotevski how he proposed making repayments of the loan, or about how he proposed to use the loan monies. It is not my ordinary practice to do so." 109 Mr Lo's affidavit does not deal expressly with the execution of documents in his presence but it seems plain that this occurred. He said that he expected to receive further instructions in the matter but this did not happen. The affidavit is silent as to what happened to the documents which he explained to Mr Kotevski, but he stated his belief that no documents were left in his office, because in April 2008 he caused a search to be made and none could be found. He has no record of establishing a file for the matter. 110 Cross-examined by Mr Connor, Mr Lo agreed that it was not his usual practice to read loan documents aloud, word by word, "I am reading the document at the same time going through the document with the client". 111 Asked whether he had a specific recollection of Mr Kotevski carrying the envelope containing the documents into his office, Mr Lo said that he did not and that his only recollection was that the documents were not sent to him directly by the lender or its solicitors. Nor could he remember the words used by Mr Micic in introducing Mr Kotevski to him. He agreed that he made no note of the consultation. 112 Mr Lo told Mr Connor that he looked at the drivers licence produced by Mr Kotevski and noted its number but did not make a copy, nor did it strike him that he was giving advice about a 30 year mortgage to a man aged 74. He said that his recollection was that he thought Mr Kotevski was about 60. 113 As to Mr Lo's capacity to understand Mr Kotevski there was this exchange: "Q. So it stands, doesn't it, that you have no particular recollection of any response that Mr Kotevski might have made on that day. Is that fair? A. He may or may not have made a response. I don't have a specific recollection. Q. Now, and is it fair to say you made no assessment of Mr Kotevski's capacity to understand what you were telling him? A. Well, I did have some form of assessment of his ability to understand what I'm saying. But my assessment would be not totally correct. Q. You didn't ask him what education he had? A. I didn't. Q. And you took no formal steps to understand whether he understood English that you were speaking to him? A. Formal, that is, such as? Q. What would you ordinarily do when presented with a person who you suspected may not speak English? A. Well, I would have to make a somewhat quick and generalized decision then as to whether the person can carry on a conversation in English. Q. How would you go about that? A. Well, assess the simple things, "How do you do? What do you do for a living? Do you have families, and this very general types of conversational things. Q. And ordinarily you would expect a response of a few sentences, would you, in relation to those questions? A. I would expect a response. But as to how much the other person would like to speak about I don't have any particular expectation as to whether they will say a lot or they will say a little. Q. But your objective is to keep asking them questions until you ascertain whether they can sufficiently speak English, is that so? A. I think I just try to carry on a conversation as far as the flow back and forth is continuing I assume that is all right. And then I did not make any particular assessment as to Mr Kotevski's ability in understanding English. Q. Now, you don't have any recollection of Mr Kotevski saying anything, do you? A. Not specific words, no." 114 There was also an exchange with Mr Weinberger, in which I participated, as to the means by which Mr Lo formed the belief that Mr Kotevski understood what was being said to him: "Q. Now you also in an answer to a question from Mr Connor said something as follows, "Mr Kotevski seemed to understand what I said". Do you recall saying that in an answer to a question? A. Yes. Q. Why did you form that view? A. Again it is only based on I tried to carry out a general conversation with Mr Kotevski but I am not in a position to assess his English or his competency in the English language but so far as we can keep the conversation flowing I will continue with the conversation but the degree of understanding that he had I did not make an assessment-- Q. I understand that but your answer was he seemed to understand what I said. What I am asking you is what made you form the opinion that Mr Kotevski understood what you were saying to him? A. From observing his demeanour, his response, a nod and some sort of a response in kind but I can not remember exactly what he said in reply. HIS HONOUR Q. Your affidavit said he kept nodding his head. That is the response you are referring to? A. Yes something like that but that tells where he has nodding it was him being polite or he understand or. WEINBERGER Q. Apart from nodding, did Mr Kotevski speak any words to you in the English language? I am not asking you to recall what he said. That doesn't matter for the moment. Did he actually speak English to you? A. Yes, he did, yes. " 115 The evidence of Mr Lo provides, in my opinion, a good example of my earlier remark concerning persons in this transaction who acted without dishonesty, but yet without the application of common sense or reasonable competence. To my mind it beggars belief that a competent solicitor would act as Mr Lo did in this case. He established no file and made no record, yet he purported to explain to a 74 years old man the significance of documents whereby he borrowed $224,000 over the security of his unencumbered home for a term of 30 years, a man whose first language was obviously not English. Significantly, to my mind, in neither his affidavit nor his oral evidence was Mr Lo able to identify a single word uttered by Mr Kotevski in the English language. Every aspect of this transaction, as it was presented to Mr Lo should, in my opinion, have caused a competent solicitor to regard it with very considerable suspicion and to act with the greatest of care. Mr Lo patently did neither. THE ST GEORGE BANK ACCOUNT 116 There was evidence in Perpetual's case (Exhibit T) that on 10 January 2006, Mr Kotevski opened an account with St George Bank 029254821 with a deposit of $50. 117 On 24 January 2006, the bank cheque in the sum of $221,935.75 drawn by Fabian on its trust account and sent to Mr Kotevski at the address of Milanex, was deposited to the credit of the St George Bank account. On the same day $220,000 was transferred to an account in the name of Marko Micic with St George Bank account number 127459003. Also on the same day there was a cash withdrawal of $900, leaving a balance of $1085.75. There were further cash withdrawals of $500 on 2 February and $670 on 13 February 2006, leaving a balance of less that $10. 118 It is, I think, instructive to have some regard to the movements on this bank account from its inception until on 4 December, the then debit balance of $205.79 was "transferred to recoveries". To the extent it was funded, it was obviously used to pay instalments due under the mortgage by the direct debit signed by Mr Kotevski. On some 30 occasions, the direct debit was dishonoured due to insufficient funds in the account. 119 In all, however, it seems that $34,371 was paid through the account to GHL. For the most part, after February 2006, the account was funded by cash deposits of which there were 17, totalling $26,090. Other funds totalling $16,000 were directly credited to the account and, as it seems reasonable to infer, the source of those amounts was Mr Micic's account with St George Bank, which I will refer to hereafter, as the credits and debits match precisely. 120 There were a few withdrawals from the account in addition to the three cash withdrawals referred to earlier. Altogether, cash was withdrawn to the extent of $8,360. There is no evidence as to the identity of the person benefiting from these withdrawals apart from Mr Kotevski's evidence that he did not. I accept that evidence. OTHER EVIDENCE IN PERPETUAL'S CASE 121 The balance of Perpetual's case, apart from documents, comprised the evidence of Ms Kylie Davies, a direct employee of Perpetual and Ms Sarina Roppolo, a solicitor with Kemp Strang, the solicitors for Perpetual in this action. Ms Davies identified documents relating to the transaction held by Perpetual, which established unremedied defaults by Mr Kotevski and his failure to comply with a notice served under s 57(2)(b) of the Real Property Act. 122 Ms Roppolo gave evidence about the work performed by Kemp Strang upon the instructions of Perpetual in seeking to enforce the mortgage and about the accounts for costs rendered in respect of that work, which seem to total about $100,000. All those costs are claimed against Mr Kotevski under the Mortgage. There was no evidence that the costs were reasonably incurred or reasonable in amount, although Ms Roppolo deposed in her affidavit sworn on 18 September 2009 that she checked accounts in draft and satisfied herself "in accordance with my usual practice that the time entries contained in the drafts and if not I amended the time entries so that they reflected reasonable amounts for each task to be charged for". 123 Cross-examination by Mr Connor revealed what appeared to be significant errors in the records underpinning the accounts, which Mr Roppolo was unable to explain. Whether those errors ultimately affected the amount claimed is unclear but, as I indicated during the hearing, I do not regard Ms Roppolo's evidence as an appropriate way of proving Perpetual's entitlement. Some of the costs, in any event, would form part of its costs in these proceedings should it be successful. 124 In my opinion, it is impossible to calculate from the evidence of Ms Roppolo and the records she identified, what amount, if any, may be properly claimed against Mr Kotevski under the mortgage. If it became necessary there would, in my view, need to be evidence from an expert duly qualified upon the subject or, as Mr Weinberger suggested, following what was done by Hodgson J in AGC Advances v West (1984) 5 NSWLR 590, refer the matter to a costs assessor. In the result, I have not found it necessary to resolve the question. THE CASE FOR MR KOTEVSKI. EVIDENCE OF MICHELLE NOVOTNY 125 It is convenient to commence a review of the evidence in Mr Kotevski's case with a reference to the evidence of Ms Michelle Novotny. She is a Handwriting and Questioned Document Examiner. According to her Curriculum Vittae, she: "…completed formal studies for my Bachelor of Science (Honours) in Applied Chemistry and Forensic Science in November 1997 at the University of Technology, Sydney and graduated with first class honours in May 1998." 126 She commenced: ".. full time employment and training in the field of forensic document examination with forensic Document Services Pty Ltd in Canberra in October 1997. Since that time I have studied and worked under the direction and guidance of both Mr Paul Westwood, director of Forensic Document Services, and the former director of the Australian Federal Police and the Department of Immigration and Ethnic Affairs document examination sections, and Dr Steven J Strach, senior document examiner, formerly employed by the Forensic Science laboratory of the London Metropolitan Police." 127 Ms Novotny's report dated 10 November 2008 formed part of her evidence. In the report she said that she was instructed to undertake examination of questioned signatures in the name A Kotevski, reproduced on a number of documents, "to determine whether or not any of the questioned signatures were written in original form by a Mr Alexander Kotevski, by reference to a number of original and reproduction signatures attributed to him. 128 The questioned documents (all reproductions) were: Q1 Declaration of Purposes for which Credit is Provided, in the borrower name Alexander Kotevski, dated 16/1/2005. Q2 LoDoc Declaration in the mortgage manager name Good Home Loans and borrower name Alexander Kotevski, dated 24/11/2005 Q3 Verification of Borrower – 100 Point Check List, in the borrower name Alexander Kotevski, dated 24.11.2005. – this document does not bear any questioned signatures. Q4 Applicant Declaration, dated 28.11.2005. Q5 Joint Borrowers Nomination form Address for Notices, in the name A Kotevski, dated 28/11/2005. Q6 Declaration under the Consumer Credit Code where Credit is to be Applied Wholly or Predominantly for Business of Investment Purposes, dated 28/11/2005. Q7 Acknowledgement and Authority to Give and Receive Credit Information in the agent name Good Home Loans Pty Ltd and borrower name Alexander Kotevski, dated 28/11/2005. Q8 Privacy Consent in the credit applicant name Alexander Kotevski dated 28/11/2005. Q9 Good Home Loans Applicants Personal Details in the applicant name Alexander Kotevski, not dated." 129 Ms Novotny's conclusions, which followed detailed methodology, analysis, and reasoning, were as follows regarding the questioned signatures: "On the basis of the nature of the differences observed, I found no evidence in support of a proposition that any of the questioned signatures were written in original form by the writer of the Kotevski specimens. That is to say, my observations provide support for a proposition that each of the questioned signatures was written by a person other than the writer of the Kotevski specimens. No conclusion is expressed as to the number of writers of the questioned signatures. Within the limitations of the available material, I am unable to express a conclusion in probability terms." 130 In examination in chief to Mr Connor, Ms Novotny said that one limitation in relation to the questioned documents was that none of them was an original document: "A. We prefer to have the original documents for the examination because we can then undertake much more detailed examination of the signatures and also the documents as a whole and other relevant information. Q. Looking at this signature on an original document versus a copy of the document, what is the limitations in looking at the signature? A. Yes. With the original signatures we can conduct microscopic examinations to look at the finer details of the structure and dynamic qualities of the signature such as the pen stroke direction, the factor number and order of the pen strokes whereas on a copy there is not as much detail reproduced particularly in the circumstances of this case where the copies of the questioned documents were quite poor in quality. " 131 During the course of cross-examination by Mr Weinberger, Ms Novotny was shown a bundle of documents comprising 5 pages and asked to express an opinion as to whether Mr Kotevski's signature appeared on them. After debate, I stood the witness down until 10am the following day in order that in the meantime she might prepare a further report in respect of the documents Mr Weinberger showed her, and also in respect of documents which Mr Docker intended to produce. 132 The documents produced by Mr Weinberger were labelled A1 – A5. Ms Novotny's evidence the following day was that there was support for the proposition that the signature on document A1 (a document dated 23 May 2001) was written by the writer of the specimens, but she was inconclusive as to the remaining four. Ms Novotny agreed with Mr Weinberger that the document A5 contained a copy of Mr Kotevski's signature at P10 of his affidavit sworn 20 October 2008. 133 I was impressed with Ms Novotny, both as to her qualifications and with the care taken and the precision of expression employed in her reports and evidence. Her opinions require careful evaluation in light of other evidence given in the case. It seems probable that all the specimen signatures provided to Ms Novotny were in fact written by Mr Kotevski and I make that assumption. MR KOTEVSKI'S EVIDENCE. 134 Mr Connor read four affidavits of Mr Kotevski respectively sworn 16 June 2008, 20 October 2008, 4 June 2009 and 21 September 2009. He also gave oral evidence and was cross-examined by other counsel. His evidence was given through an interpreter in the Macedonian language, although occasionally Mr Kotevski answered a question pre-empting the interpreter. His earliest affidavit said that he was born in Macedonia on 24 August 1931. He claimed that his only income since retirement in 1996 is the age persons pension paid through Centrelink. He said that he has never been in business or conducted a business and has no superannuation entitlement. 135 According to the affidavit, his native language is Macedonian, he speaks little English and has "limited literacy skills in both Macedonian and English". Paragraphs 9 to 13 read: "9. I do not recall signing the LoDoc Declaration, the Loan Application or the declaration found in the Loan Application entitled "Declaration under the Consumer Credit Code where Credit is to be applied Wholly or Predominantly for Business or Credit Purposes" (the Declaration). 10. I am not able to confirm that all of the signatures which appear on the LoDoc Declaration or the Loan Application are mine. At least some of them look as though they are not mine. In particular, I am unable to say by looking at the photocopy of the Declaration whether I have signed the Declaration. 11. I have doubts that it is my signature because it appears to be different from my normal signature which appears on this affidavit and because there are differences between the variety of signatures purporting to be my signature through the Loan Application. 12. In November 2006: a. I did not own a car or cars; b. I did not have an ABN c. I did not trade as ACG Carpenters; d. I did not live in Victoria; e. I did not have an income of $75,000 per annum; f. I did not have an entitlement to any benefits under a superannuation fund; g. My monthly living expenses were not nil; and h. I did not have the financial capacity to repay any loan. 13. The monies which were advanced under the loan to which these proceedings relate were given to Mr Marko Micic. I do not know what the monies were used for." 136 The affidavit contained a certificate by an interpreter that the affidavit was read aloud to Mr Kotevski in the Macedonian language and he appeared to understand it. 137 The second affidavit sworn 20 October 2008 provided more detail. It said that he had never conducted a business and had only received 2 years of primary school education in Macedonia and none in Australia. The affidavit continued: "From about 1976 to 1996 I worked as a carpenter in the Australia Post workshop in Martin Place. In about 1974 I purchased a house in Rockdale for about $28,000 with the proceeds of a loan to me of about $20,000. This was the first property I ever owned and the first and last mortgage I ever undertook. I subsequently paid off the mortgage to that house entirely. I cannot remember exactly what year that occurred. In 2001 I sold the house in Rockdale and with the proceeds of the sale I purchased outright an apartment at 3/3 Baxter Street Kogarah (the Property) in which I still reside. The purchase and sale of these properties is the only experience I have ever had in the real estate market. Marko Micic In about the year 2000 I met Marko Micic through friends in the Slavic community. Marko is of Serbian descent. He talks to me in Serbian and I respond in Macedonian. We generally understand each other in this way. Marko is now about 45 years old. He is of average height and has a big muscular build. From about 2003 to 2007 I understood that Marko owned a combined commercial and residence property on Stoney Creek Road in Bexley Park. He operated a retail shop for cured meat and resided in the apartment above. Marko was also formally (sic) a self-employed builder, operating a Gyprock business. Marko once made a compensation claim for injury suffered in the course of his trade. Whilst waiting for the compensation claim Marko said words to me to the effect: "I need to borrow some money. I have no current income. I will pay you back when I receive my compensation payment." I lent Marko $1,000 which he repaid me in full when he received his payment. I am generally not in the practice of lending people money however I did on this occasion. In about 2005, I had numerous conversations with Marko with him speaking in Serbian and me in Macedonian, to the effect: "MM: Alexander, I am in financial trouble. I need a loan to pay off my 2 properties. I need you to sign so I can get the loan. It's only for three months. AK: I can't I'm a pensioner. MM: Don't worry – you sign it and I'll fix things up with a solicitor even if you are a pensioner." We had conversations like this almost every day for about 2 or 3 weeks. I felt that Marko was putting on a lot of pressure on me to do as he said. On several occasions in these conversations, Marko said to m e words to the effect: "Don't worry – there is nothing for you to be afraid of. It's not going to have any effect on you. We'll go to see a solicitor just to discuss it. Nothing will affect you; it's just so you will know where you stand." I was intimidated by Marko and too scared to say no to him. I have witnessed Marko having a physical fight with another man in which Marko started the fight. I was and am afraid that he will try to hurt me or poison me if I don't do what he says. Ashfield In about late December 2005, I had a conversation with Marko to the effect; "MM: We need to go see the solicitor. He's just going to ask you some questions. You will need to take the title deed to your flat. He will have a look at it and give it back to you. Come in the car with me. AK: I can't. I won't be able to understand him. MM: I'll interpret for you. He's just going to ask you some questions." I kept the title certificate in an unlocked draw in my apartment. He took me by car to an office building in Ashfield. We went up a staircase to the office of a male Chinese solicitor whom I had never met before. We only went in one room in the office, I cannot say if there were other rooms. I did not see a secretary or any person other than the solicitor. Marko and the solicitor had a conversation in English. I did not understand most of what was said, although I understood that they were talking about money. I had my title certificate with me. Marko said to me words to the effect: "Give me the title deed". I then handed the title certificate to Marko who then handed it to the solicitor. The solicitor did not say anything to me. There was no Macedonian interpreter present. Marko showed me several documents and said to me in Serbian, words to the effect: "You need to sign here". I had not seen the documents before this occasion. I signed the documents where Marko showed me to in the presence of the solicitor. I do not know exactly what documents I signed or how many documents I signed. I did not understand the documents I signed. No-one explained or translated the documents to me. I did not know that I was signing documents to borrow money or to give a mortgage over my property. I was not given any advice as to the contents of the documents I signed at any time prior to these proceedings. Marko and I were in the office for a total of about 5 to 10 minutes. I did not pay the solicitor any money. I do not know if he was paid by someone else or not. When we were outside the office, Marko and I had a conversation to the effect: "AK: why didn't the solicitor give me back the title certificate? MM: Don't worry. He said that he would post it to you in a couple of days." Dee Why Between about one and one and a half months after being taken to Ashfield, Marko said to me words to the effect: "We need to go for a drive and see my friend now. Come." Marko drove me to an office in Dee Why on the first floor of a building. Marko introduced me to a man who I had never met before. Marko and the man spoke to each other in Serbian. They greeted each other and then Marko said words to the effect: "Alexander, I want to introduce you to my friend Milan." There were at least two rooms in the office. I was left in one room whilst Marko and the man went to the other room and spoke to each other very quietly. I could not hear what they were talking about. There was no Macedonian interpreter present. A conversation between myself, in Macedonian, and the other man (OM), in Serbian took place where words were said to the effect: "OM this is a cheque that you need to give to Marko. Don't worry about it, it's really Marko's money, you just need to sign this and give it to Marko. AK: I don't understand – why is my name on it? OM: No, no. it is Marko's money, you just need to sign this and give it to Marko." I did not know or understand why I was there, or what I was being told to do. I signed at least one document there but I did not know what it was. Several time the other man said to me words to the effect: "Just sign, just sign." Both men were standing very close to me and speaking to me very loudly. I felt pressured and intimidated by both men. I thought that if I disobeyed them, they would kill me. Marko took the cheque and some other documents from the other man and we left. We were at the office for about 15 minutes in total. I did not pay this man any money. I do not know if he was paid by someone else or not. Bank Several days after the trip to Dee Why, Marko took me to a St George Bank in Kogarah. Marko handed over some documents to the teller and then told me to sign a document. I signed a document there but I do not recall what I signed. I understood that this was related to the events at Dee why, but I did not understand how and I did not think that it involved any of my money. I did not intend to give Marko any of my money. I did not know that this money was mine. About one month later I started receiving by post statements from St George bank for an account in my name. I did not open the account. I did not previously know that the account existed." 138 Mr Kotevski claimed in the affidavit that the first time he heard of Perpetual was when he was served with the first Statement of Claim. 139 Mr Kotevski annexed to the affidavit a letter from Mr Vlasic to his daughter Javorka in which Mr Vlasic told her that he identified Mr Kotevski "as he provided original Citizenship Certificate and Drivers Licence". Mr Kotevski denied that he provided these documents to Milanex or to Mr Vlasic. 140 In the third affidavit sworn 4 June 2009, Mr Kotevski, in effect, denied that at the meeting in Mr Lo's office, Mr Lo gave him any explanation of the documents he signed, which was comprehensible to him. He said that all he carried to the meeting was his certificate of title, but Mr Micic carried an envelope containing documents and carried away a bundle of documents. Mr Kotevski said he did not carry away any documents from Mr Lo's office. He also said that there was conversation between Mr Lo and Mr Micic in English, which he did not understand. 141 In the same affidavit, sworn in reply to Mr Vlasic's affidavit of 10 March 2009, Mr Kotevski maintained his denial of meeting Mr Vlasic on any occasion before the cheque was handed over towards the end of January 2006. He denied that he was present when Mr Micic told Mr Vlasic that he was Mr Micic's uncle or that he needed a loan for his daughter and he denied signing any document in Mr Vlasic's presence prior to January 2006. He also denied providing Mr Vlasic with any information for the purposes of a loan application. He said that he did not authorise anyone on his behalf to provide Mr Vlasic with originals or copies of his driving licence or citizenship certificate. In apparent explanation of how copies of these documents came into Mr Vlasic's hands, he said: "In about 2003 I sent my original citizenship certificate to Belgrade, and it has not been returned to me yet. From between about late 2005 and early 2006 Marko had stayed at my house on several occasions, sometimes for days on end. Marko had said to me words to the effect: "Alexander I need to stay with you. I am having financial problems with my house and I need to be able to stay with you until I get everything sorted." Marko was alone in my apartment on occasions during the day when I went out. He is the only person, apart from my immediate family who had keys to my apartment." 142 In answer to Ms Pogson's affidavit, Mr Kotevski denied any conversation with her before the handing over of the cheque in late January 2006. He said: "My level of English is not good enough to either comprehend or respond to the questions and answers deposed there. Specifically, I did not understand the English word 'investment'." 143 As to the telephone conversations Ms Pogson claims she had with him following default under the loan agreement, Mr Kotevski deposed : " …….. I say that several months after I had received the cheque from Mr Vlasic, being about 22 January 2006, I received occasional telephone calls during the day on my home landline from people speaking English. I could not understand exactly what they were saying, but I understood that they were talking about money and Marko. I always said to whoever was ringing the same thing to the effect: "I'm sorry, I don't speak English. You need to speak to Marko." On several occasions the caller(s) requested asked to speak with Marko before I had given my response. On at least one occasion, the caller rang at a time when Marko was in my apartment. I gave the receiver to Marko and Marko spoke to them in English for a couple of minutes. Marko never gave me an explanation or an interpretation of these phone calls. I never asked Marko for an explanation, I did not want to pry into his personal affairs." 144 Mr Kotevski also deposed to a meeting in December 2007 In about December 2007, Marko Micic came to my house with his car and said to me words to the effect: "Alexander we need to go to Wollongong to see the Company who lent me money. I don't have any more money to pay them back so I need to ask for more time." When we got to Wollongong, Marko said to me words to the effect: "I need to pick up my friend George to come with us. He will show me where the office is and will help me ask for more time. His English is much better than mine." I had not met George before. The three of us went to an office building together and George spoke to a lady. I stood about one metre away from George and the lady as they were speaking. I could hear that they were speaking English. I did not speak to anyone there in either English, Macedonian or Serbian. I did not tell anyone that George was my nephew or that Marko was my son. I do not recall seeing or hearing Marko speak to anyone. The conversation was carried out entirely by George and the lady in English. I did not understand what they were talking about. No one told me what they were talking about. 145 The fourth affidavit of Mr Kotevski sworn on 21 September 2009, in part, modified or added to what he had said in his affidavit sworn 20 October 2008. He said the reference in paragraph 20 to 2 properties should have stated "my property". 146 He said he was mistaken in paragraph 43 when he referred to Mr Micic driving him to Dee Why. He said that he in fact drove while Mr Micic gave directions. 147 He amended the statement in paragraph 46 of the previous affidavit by indicating that the quiet conversation between Mr Vlasic and Mr Micic occurred in the same room as he was, even though he could not hear or understand it. 148 In relation to the statement in the previous affidavit that in November 2007 he wrote an authorisation for his daughter to make enquiries on his behalf, he said that he did not write the document himself but authorised his daughter to write and sign it on his behalf. I interpolate that this authority was one of the "questioned documents" shown to Ms Novotny, who found the signature purporting to be that of Mr Kotevski to be "inconclusive". 149 Similarly, he said that he did not sign the authority in favour of his daughter referred to in paragraph 75 of his affidavit. That again was a "questioned document", the signature upon which Ms Novotny found "inconclusive". 150 He provided a different and expanded version of how his citizenship certificate came to be in Belgrade. Rather than the explanation previously given that he had sent it to Belgrade, he said that his second wife, Svetlana Tomic, took it with her to Belgrade and had, in effect, refused to return it. As to this second marriage, he said that he met Ms Tomic about 2003 when she was visiting her daughter in Australia. They married about one month later but the marriage lasted only about 3 months. His wife was refused citizenship and deported. She took Mr Kotevski's citizenship certificate with her and despite his requests failed to return it. 151 In the affidavit of 21 September 2009, Mr Kotevski dealt with the subject of telephone calls. He said that at relevant times he had a landline number 95889786. He denied making calls to Milanex recorded against that number on 1 and 7 December 2005 and 23 and 27 January 2006. 152 The affidavit stated: "I have never called Milanex. I have never known its telephone number or had a note of it. The only time I spoke to Milan was when I met him with Marko at Dee Why. Between about mid to late 2005 through until about January 2008 Marko made telephone calls from my telephone on many occasions, often for long periods of time. Almost every time that he came over he used my telephone. Sometimes I could hear that he was talking to his sons, but many times I had no idea who he was talking to. Sometimes he took the phone into the other bedroom to talk. Marko never paid, or offered to pay, for all the phone calls he made." 153 The affidavit also deals with the circumstance of a personal loan obtained by Mr Kotevski in late 2007 or early 2008: "In about late 2007 or early 2008, shortly after going to Wollongong with George and Marko, I saw George again and we had a conversation in Macedonian to the following effect: Me: Times are tough for all of us. I am having problems paying my bills. They all come at once and the pension is not enough. G: I know a lady at Commonwealth bank. She helped my parents to borrow money, I can see if she can help you out. You can pay from your pension a little each fortnight. The next day or so I went with George to the bank. The lady from the bank filled in a form and asked questions in English and George acted as an interpreter for me. Ms Grygiel (Mr Kotevski's solicitor) has told me that the form says that I owned a property valued at $345,000. I did not tell George or the lady at the bank that I thought my property was worth this amount. Ms Grygiel has told me that the form says that I owned assets and investments valued at $35,000. This is not correct. I did not own assets or investments except for my unit. I did not tell George or the lady at the bank that I owned assets and investments valued at $35,000. Ms Grygiel has told me that the form says that I owned a car worth $3,000. This is not correct, I estimate that it was worth between $200 and $500. I did not tell George or the lady at the bank that the car was worth $3,000. The loan was approved for $5,000 and I paid some outstanding bills from it. That loan has not been paid off completely yet." 154 When Mr Kotevski was called to the witness box, Mr Connor asked him some questions as to his name, address, and the year he came to Australia, which he asked not be translated. They were answered in English. He appeared to have difficulty with the question in English "when did you go to school" but was able to answer in English a question as to the nature of the work he performed in Australia viz making doors.. 155 Thereafter questions and answers were translated although, as I have said, occasionally Mr Kotevski pre-empted the interpreter's answer. I formed the opinion that his fluency in spoken English is very limited and certainly would not extend to comprehension of explanations regarding legal documents. 156 He told Mr Connor that he met Mr Micic through his son with whom Mr Micic was friendly. As to the conversation at Dee Why concerning the cheque given to Mr Micic, there was this exchange with Mr Connor "Q. Sorry, translate this question. Did Mr Kotevski hear Milan say anything? A. INTERPRETER: Milan said when I went inside, Milan showed me a cheque. I said to him, "I am not asking for money. What did you take out a cheque here for." He said to me, "No worry. You sign here. This money is for Marco. They are not for you. No worries. It's nothing, it's not dangerous for you." " 157 Mr Kotevski told Mr Docker in cross-examination that he received an age pension when he turned 65 and that became his sole income. About a year previously he had retired and became in receipt of a carers pension for his wife who subsequently died. 158 As I understood his evidence given to Mr Docker, on retirement from Australia Post, he received $65,000 superannuation, which he used to buy a small holiday house near Tumut, which he then gave to his son. He also told Mr Docker that following his wife's death, the sale of the Rockdale house and the purchase of the Kogarah unit there was a surplus out of which he made gifts to his two children, put about $5,000 in the bank, paid $12,000 for a tombstone for his wife and himself, and spent the balance on "poker machines, beer and whisky". 159 Cross-examined by Mr Docker as to his ability to speak English, Mr Kotevski said that at work his foreman's instructions were interpreted to him by Macedonian work mates 160 According to the evidence given by Mr Kotevski to Mr Docker, initially Mr Micic came to his Kent Street, Rockdale, house and listened with others to music played by Mr Kotevski's son in a separate building at the rear of the property. However, Mr Micic was not particularly interested in music and made a habit of talking to Mr Kotevski as a result of which they became friendly. 161 Mr Kotevski said that he became aware from a conversation with him that Mr Micic bought a house in Stoney Creek Road Bexley about 2004. He went there once and saw that it was a shop with a residence at the rear. 162 After Mr Kotevski acquired the Baxter Street unit, Mr Micic used to visit him there quite frequently, sometimes twice a week and sometimes staying all day. On occasions Mr Kotevski would go out and Mr Micic would remain in the unit. 163 Mr Kotevski said that after the cheque was handed to Mr Micic in January 2006, he stopped visiting for a time, but then started visiting again. He said Mr Micic was about 44 years old, younger than his son. 164 He agreed with Mr Docker that he and Mr Micic conversed on the telephone during 2005 and that he telephoned Mr Micic in 2006 after he began to be pressed about the outstanding loan. He agreed that he may have telephoned Mr Micic 37 times between 20 June and 31 October 2005. He also agreed that Mr Micic may have telephoned him 41 times in the same period. His evidence was that he could not remember any of the conversations. 165 Asked by Mr Docker about the loan which Mr Micic claimed to have needed, there was this exchange: "Q. You say in your affidavit that you had numerous conversations with Mr Micic in which he said to you "I need you to sign so I can get a loan"? A. INTERPRETER: Yes. Q. And I suggest to you you understood by that, that you would be the person who would have to get the loan? A. INTERPRETER: Yes he was saying to me but I was not agreeing to that and that is it. Q. But you understood what he was suggesting was that you would get a loan? A. INTERPRETER: No. For me to sign for him for 3 months I was saying to him, "No I'm a pensioner". Q. Can you please answer my question which is that Mr Micic was suggesting to you that you would get a loan? A. INTERPRETER: No Q. He was suggesting that you would have to sign - withdrawn. He was suggesting to you that you sign documents that is right, isn't it? A. INTERPRETER: He was not suggesting any documents at the time, none at all. He never did Q. So, he never asked to you sign documents is that right? A. WITNESS: No, no. Q. You knew that you could not get a loan - withdrawn. You knew that you would not get a loan if the lender knew you were a pensioner. That is right isn't it? A. INTERPRETER: Of course, they wouldn't give me one. Q. If they knew you were a pensioner they would not give you a loan, is that right? A. INTERPRETER: Yes. Of course. Q. You knew, didn't you, that if you signed documents relating to a loan that you would be responsible for repaying it? A. INTERPRETER: Of course. " 166 As to the visit with Mr Micic to see Mr Lo, Mr Kotevski said: "A. INTERPRETER: We went to ask whether, whether I would sign for 3 months and nothing else but said "I am a pensioner, I can't sign at all. We can go and ask for us to go and see him to ask him". " 167 He maintained to Mr Docker that Mr Lo gave him no advice: "A. INTERPRETER: He didn't say anything to "me and if he did, I don't understand English. Nobody was interpreting for me so even if he had said something to me I would not have understood him. Q. You understand the English words, "Do you understand that" don't you? A. INTERPRETER: I don't understand. I understand a little bit not things like that. They were talking together with Marco. They didn't say anything to me. HIS HONOUR Q. Who is "they"? A. INTERPRETER: Marco and the solicitor that they were talking with. DOCKER Q. I suggest to you that Mr Lo was looking at you and talking to you? A. WITNESS: Yes. A. INTERPRETER: Yes and Marco was interpreting but how he was talking to me, I don't know. What he was saying to me, I don't know. I don't know what he was saying to Marco. I don't know. That was their business. They were arranging something." 168 As to whether he kept nodding to Mr Lo: "Q. I suggest to you that Mr Lo was looking at you and talking to you? A. WITNESS: Yes. A. INTERPRETER: Yes and Marco was interpreting but how he was talking to me, I don't know. What he was saying to me, I don't know. I don't know what he was saying to Marco. I don't know. That was their business. They were arranging something. Q. I suggest to you that Mr Lo said to you and looked at you when he said it, "This is a 30 year loan"? A. INTERPRETER: I didn't understand. He didn't say anything to me. Q. I suggest to you that Mr Lo looked at you and said "This says the amount you are borrowing is two hundred and twenty four thousand"? A. INTERPRETER: He didn't say anything to me, absolutely nothing to do with money. He did not say anything to me to do with money. Nothing Q. I suggest that Mr Lo said to you "Is that your understanding of the amount of the loan"? A. INTERPRETER: He didn't say anything to me. HIS HONOUR Q. Where did the documents that Mr Lo had come from? A. INTERPRETER: Maybe Marco has given them to him. Marco has given them to him. I didn't take any, I didn't carry any documents. DOCKER Q. I suggest that after each time Mr Lo spoke to you, you nodded? A. INTERPRETER: I was nodding, I was not understanding what he is saying to me. I was waiting on Marco to interpret for me. Q. So, you were nodding? A. INTERPRETER: Well I was not understanding. Q. Please answer the question. Were you nodding or not? A. INTERPRETER: I was watching, listening but I, I didn't understand. I was not nodding my head. How could I nod my head when I don't understand? " 169 Later there was this exchange: "Q. But he was talking to you, Mr Kotevski, wasn't he? A. INTERPRETER: He was talking with Marco, not with me. I was waiting on Marco to interpret to me but Marco was not saying anything. Q. I suggest to you that Mr Lo asked you if you had a mortgage on your unit? A. INTERPRETER: I don't know anything, asked anything, I don't know anything. I didn't understand anything of the English that was being spoken. Q. (Shown exhibit). That is a mortgage the mortgage over your unit? A. INTERPRETER: I don't know. Yes, this is my signature but nobody told me they are going to draw money for me for me to guarantee about money. " 170 Pressed by Mr Docker as to what he though he signed in Mr Lo's office, Mr Kotevski said, "Nothing, I didn't know anything". In answer to the following question "Were you happy to sign them whatever they were?, he replied, "Because I did not know what they were for, I thought that later they'll explain to me what for but nobody said anything to me". 171 Mr Docker also pressed Mr Kotevski about the telephone conversation which, according to her testimony, Ms Pogson had with him about 3 weeks before the visit to Mr Lo. Mr Kotevski vehemently denied any conversation with Ms Pogson before his visit to Milanex in January 2006 and until he spoke to Ms Pogson regarding default under the loan agreement. 172 Mr Kotevski agreed that on 10 January 2006 at Mr Micic's request he went to St George Bank and opened an account. He agreed that in that connection he may have produced his driving licence and Medicare card. He said that he did not use the account and threw out the passbook. 173 Mr Docker put to Mr Kotevski that the account was opened for the purpose of paying the loan proceeds into it. His somewhat unresponsive reply was "Marko said to me, I – No I didn't open an account. I didn't need to open an account." 174 There was cross examination about telephone calls after midday on 23 January 2005: "Q. Mr Kotevski, your phone records show that Mr Micic's number, at Stoney Creek Road, was rung from your number at 12.34 and then Mr Vlasic's number was rung from your number at 12.46. I suggest to you that you rang Mr Micic and then Mr Vlasic on the day you picked up the cheque? A. INTERPRETER: Not me. I haven't called. I didn't know - I didn't know anything about that. I didn't telephone. Q. Mr Kotevski, how do you explain the fact that there was a call from your number to Mr Vlasic's number on 23 January, 2006? A. INTERPRETER: I will explain now. Marco was coming to my place more often and he has telephoned. I don't know when he telephoned. I didn't hear him. So he has rang from my place to that other fellow, Milan, and they have talked. Then he said to me, Let's go out to go and see one of my friends." WEINBERGER: This is getting to the stage where it is beyond non-responsive. DOCKER Q. Mr Kotevski, that could not have been Marco Micic who rang Mr Vlasic, because someone rang his number just before the call to Mr Vlasic? A. [STRIKE OUT BEGINS]I don't know. I don't know. I don't recognise Vlasic. I have never seen Vlasic. I don't recognise him. I saw him then for the first time[STRIKE OUT ENDS]. WEINBERGER: Could that be struck out as being non-responsive? HIS HONOUR: Yes, that can be struck out. Q. What is being put to you, Mr Kotevski, is that you suggested that Micic came to your unit and made the call to Mr Vlasic. What Mr Docker is pointing out is that one minute before that call, is a call from your phone to Mr Micic's phone at Stoney Creek Road? A. INTERPRETER: I don't know when they said calls from my telephone. He comes to my place all the time. I don't know who was doing the telephoning. I don't know when he was ringing and where do I know where he is ringing from, Because my telephone was a portable one. " 175 As to what happened to the cheque handed over by Mr Vlasic: "Q. Mr Kotevski, I suggest to you that you went to the St George Bank with the cheque you got from Milanex and you deposited the cheque there? A. INTERPRETER: Yes, we deposited it there, but not in my name. Q. And that you signed that document that is in front of you to deposit the cheque? A. INTERPRETER: To Marco, in his name. I was not asking-- HIS HONOUR Q. You are being asked whether you signed that deposit slip? A. INTERPRETER: Yes, I signed it. I didn't know what for. DOCKER Q. Mr Kotevski, I suggest to you that you knew that it was your money, because you were the one who signed the deposit slip? A. INTERPRETER: I didn't know. I was not asking for money and I didn't know that money had been requested by me. " 176 Mr Kotevski agreed that after 24 January 2006 he received a number of letters from GHL including a letter dated 25 January 2006. Asked whether, from this letter, he knew there was a loan to himself, he replied, "It was in my name but not for me. It was for Marko, that is what they told me. I did not know about the cheque, nobody told me about that". 177 Mr Kotevski agreed with Mr Docker that on 30 January 2006, $900 was withdrawn by him from the St George Account. He added, "Yes and I gave them to Marko, then there was no account any more". I have earlier summarised the evidence concerning this account. 178 Also in evidence, part of exhibit 7, were records of an account with St George Bank in the name of Marko Micic, trading as Multiservice, account number 127459003. These records show that $220,000 was transferred into the account on 30 January 2006 as a result of which the account had a credit balance of $220,019.41. This credit balance was gradually dissipated with what appears to be day to day spending and cash withdrawals. By the end of April 2006, the credit balance had reduced to $34,965. A number of sums were then credited to the account including several deposits in May 2006, which totalled about $43,650. Debits correspond with credits to the bank account of Mr Kotevski with St George Bank. The account was in debit by the end of June. It went into credit with a deposit of $2,800 on 24 August 2006 but was in debit again on 18 September. It remained in debit thereafter so far as the records in evidence reveal. It is not apparent that Mr Kotevski was ever connected in any way to this account. 179 In relation to conversations and dealings with Ms Pogson after the loan went into default, there was this exchange with Mr Docker: "Q. The telephone call from Jane from Good Home Loans that you have given evidence about, you say occurred 2 or 3 months after the cheque so does that mean in March or April 2006? A. INTERPRETER: I don't remember exactly. I don't know when. Who can think that much at my age? Q. When you had this call with Jane from Good Home Loans were you still friends with Mr Micic? A. WITNESS: Yes. Q. And at that stage you used to call him up on the phone regularly, is that right? A. INTERPRETER: Sometimes over the telephone, other times I had go to tell him. Q. Go to tell him what? A. INTERPRETER: To tell him you've got to pay because people are calling over the telephone. The people are calling from this place, what's it called, asking for the money and papers coming. I was giving him the papers too . A. WITNESS: Yeah everything give to him Q. About how many of these calls did you get? A. WITNESS: Yeah, I give everything to him A. INTERPRETER: I don't know about calls. I know once when he rang me but as far as for the papers I was giving them to Marco. Q. I suggest to you that you got about 20 calls from Jane from Good Home Loans in 2006 and 2007? A. INTERPRETER: I don't know who they are in English. It may be but I don't know. Q. It was always a woman, wasn't it? A. INTERPRETER: I don't know in English. Yeah, a woman was ringing me. A woman was ringing me. Q. And she called you about 20 times in 2006 and 2007 is that about right? A. WITNESS: I don't know. A. Yes, I don't know how to tell you the truth. I know it was once. I can't remember more times. I don't remember. Maybe if I was not home because the papers have been coming for a long time it wasn't necessary for her to ring me. Q. (Shown document) you have in front of you a letter to you - this is at page 252 of exhibit A - can you see that is a letter to you? A. WITNESS: Yeah. A. INTERPRETER: Yeah, I see it. Q. What is the date on it? A. INTERPRETER: 25 October of 06 Q. And it is a letter from Good Home Loans? A. WITNESS: Yes. A. INTERPRETER: Yes, here it is here. Q. And you received letters like this from Good Home Loans didn't you? A. WITNESS: Yes. Yes I was. Q. And you knew they were letters asking for payments of money? A. INTERPRETER: Yes, that's why later I was giving them to Marco because I didn't take out any more for me to pay. They said to me it is for Marco. Q. When you got letters like this you understood, didn't you, that Good Home Loans was asking you for the money? A. INTERPRETER: Yeah, that is why I knew they were coming to me. That is why I was giving them to Marco. That's why. That's why he was making trouble. All the time we were arguing with Marco. What did you do this thing to me for. Q. You were arguing with Marco were you? A. WITNESS: Yes. A. INTERPRETER: We used to argue yes. Q. When you say "we" who do you mean? A. INTERPRETER: Us two. Q. What were you telling him? A. INTERPRETER: What did you do this thing for. Why do you take me over there to Milan but you didn't tell me what for." 180 Mr Docker suggested to Mr Kotevski that he planned to invest in a restaurant with Mr Micic: "Q. And in 2005 he was talking to you, wasn't he, about buying another restaurant in Forest Road, Bexley? A. INTERPRETER: He was talking about buying one. He hadn't bought one. He was doing repairs inside. Well, that means he'd probably bought it. Q. Mr Kotevski, did you ever go down and look at it? A. INTERPRETER: I used to see it sometimes, I'd go past with the car, I could see how he was working inside and doing repairs. Q. I show you this document. (Handed to witness.) Is that a picture of the property at Forest Road, Bexley-- A. WITNESS: Yes, Forest Road. Q. --that Mr Micic was-- A. INTERPRETER: This is the restaurant. Q. --talking about buying? A. WITNESS: Yes. A. INTERPRETER: He bought it, that's what he said, that's what he was telling me, that he bought it. But I don't know. Q. And did he tell you that if you put in money towards it you could make money out of it? A. INTERPRETER: No, he wasn't speaking that to me. Q. Did he tell you that he wanted - sorry - I withdraw that. Did he ask you for money to help him buy that property? A. INTERPRETER: He'd bought it, that's what he was telling me. Q. Did he ask you for money to help him with that property? A. INTERPRETER: He said to me for me to help him, but I didn't have any money. Who's going to help him? Q. Well, Mr Kotevski, I suggest to you that you got the loan so that you could put money into this property at Forest Road, Bexley? A. WITNESS: No. A. INTERPRETER: I wasn't taking out any money, I wasn't asking for money in order to help him. Q. Mr Kotevski, I suggest to you that you didn't want your name on this property because if it was that would have affected your pension? A. WITNESS: No. A. INTERPRETER: We weren't talking, nor did I want to. How could I give him money when I didn't have any? I couldn't sign anything. I couldn't give him any. Later-- Q. You knew you could get money by taking a mortgage against your unit, didn't you? A. WITNESS: No. A. INTERPRETER: No. In a week later he was asking me to sign for three months for him to get a little money from somewhere. A. WITNESS: Yeah. A. INTERPRETER: He said: "I've got my own solicitor. We'll go to my solicitor and we'll ask." A. WITNESS: Yeah. Q. Mr Kotevski, you were planning, weren't you, to have your or allow your grand-daughter to move into this property and open up a salon, weren't you? A. WITNESS: No. A. INTERPRETER: No. We didn't talk about that, nothing. INTERPRETER: Did you mean for the grand-daughter to actually move in, or just to open a salon? DOCKER: Open a salon. INTERPRETER: I'll interpret it to open a salon. A. WITNESS: Open already. A. INTERPRETER: It's open, it was already working. Q. What was already working? A. INTERPRETER: That place, what do they call it? Like for women to beautify them. Q. Beauty salon? A. WITNESS: Yes. A. INTERPRETER: Yeah, beauty salon, what do they call it. Q. Were you getting the money to help her? A. INTERPRETER: I wasn't getting any money for anyone, nor was I asking for any money for me. Her mother already made one over there for her. A. WITNESS: A little money. A. INTERPRETER: It only cost a little money there. Her mother had some money and they opened it. A. WITNESS: Couple of years working there already. A. INTERPRETER: She'd been already working a couple of years there, a year, something. Then the business wasn't doing well and she closed it. 181 There was a deal of inconclusive cross-examination by both Mr Docker and Mr Weinberger as to when and what Mr Kotevski told his daughter, Javorka, about the documents he signed. There was evidence that in the evening of the day he saw Mr Lo he telephoned his daughter and conversed for 13½ minutes. Mr Weinberger asked him directly: "Q. Mr Kotevski, on 20 December you telephoned Javorka and spoke to her for about 13 and a half minutes. Did you tell her about what happened that day at Mr Lo's office? " 182 And received the reply: "A. INTERPRETER: I didn't - I didn't tell her anything then, I told her later, a few months on when they started asking for money. Because I didn't believe that the solicitor would do that to me. " 183 In relation to his visit or visits to the office of Milanex, there was this exchange with Mr Weinberger: "Q. When you went to Milan's office there was a girl there as well, wasn't there? A. INTERPRETER: When did I go? Who with? On my own? Q. When you went to Milan's office there was another girl there, wasn't there? A. INTERPRETER: I went there once and I didn't see a young girl. Q. Did you see anyone else there? A. WITNESS: No. A. INTERPRETER: I didn't. Q. Was Milan's office one room or more than one room? A. INTERPRETER: I saw just one room. Q. And you sat down at a desk? A. INTERPRETER: Yeah, we sat on chairs. Q. And Milan asked you questions? A. WITNESS: No. Q. And another girl filled out forms? A. WITNESS: No. A. INTERPRETER: I didn't see a girl. Q. At Milan's office you were asked to provide your driver's licence? A. WITNESS: No, no. A. INTERPRETER: It is not true. Q. And later on you were asked to fax your driver's licence to Milan? A. INTERPRETER: That is not true. Q. In January 2006 you went to Milan's office and he gave you a cheque? A. INTERPRETER: He gave me a cheque." …………………………………. Q. When you went to Milan's office you told Milan that you were a builder? A. WITNESS: No. A. INTERPRETER: We weren't talking about that. We didn't talk anything about those sorts of things, nor did he ask me. Q. You told him that you were earning $75,000 a year? A. INTERPRETER: That's very funny. Q. You told him you had no tax returns? A. INTERPRETER: We didn't talk anything about those sorts of things. Q. And you told him you wanted the money for an investment? A. WITNESS: No, no. A. INTERPRETER: That is not true. Q. When Milan gave you the cheque he told you the money was yours. Correct? A. WITNESS: No. A. INTERPRETER: Not true. The money is for Marco. Q. You also told Milan that you work for yourself. "Yes" or "no"? A. INTERPRETER: How could I work for myself? I wasn't working. We weren't talking about that. " MR KOTEVSKI'S COMMONWEALTH BANK ACCOUNT 184 The evidence reveals that Mr Kotevski had an account with the Commonwealth Bank, account number 762235.154272. Bank statements, Exhibit 5, relate to the account for the period from September 2002 to November 2008. They reveal that it was regularly credited with payments shown as "DSS Pension". As at November 2005, the payments were $494.70 per fortnight. 185 The maximum credit balance prior to the end of 2005 was $1,487 on 25 March 2004. $5,000 was credited to the account on 3 January 2008. Immediately before that credit, the balance was $80.66. 186 The account does nothing but evidence that from 2002 onwards, Mr Kotevski was struggling to live on his pension and was a man of very limited means. THE CREDIBILITY OF Mr KOTEVSKI 187 I found it difficult to assess Mr Kotevski's credibility. He was, I think, an honest witness but many of his answers were unresponsive, he was vague, his memory seemed poor and there were contradictions, discrepancies and unresolved internal inconsistencies. This may, at least in part, be explained by language difficulties and the unfamiliarity of the court atmosphere. He was also, I am satisfied, an unsophisticated man with very little formal education and virtually no business experience. 188 He seemed to believe that it was in his interests (either for the purposes of this litigation or possibly to avoid embarrassment with his children) to distance himself as much as possible from involvement with Mr Micic, to the extent that he often sought to make this point, whether or not it was relevant to the question. It seems to be the case that in the second half of 2005 his relationship with Mr Micic was very close, possibly as a consequence of Mr Micic setting out for a nefarious purpose to ingratiate himself with a much older and potentially gullible man. Despite being given a number of opportunities to do so, Mr Kotevski never articulated clearly, to my mind, what he thought he was doing when he signed the documents, which, I am satisfied, Mr Micic took to Mr Lo's office. The closest he came to an explanation was that he was providing temporary financial assistance to Mr Micic for three months but that does not sit entirely easily with the rest of the transaction. I think the truth is that he did what Mr Micic asked of him without really comprehending at all what he was being asked to do. 189 On the very important question of whether Mr Kotevski received any benefit from the loan, I am satisfied that he received no benefit whatever and had no role in the funding of such payments as were made to GHL. It is clear to me that Mr Kotevski had no income apart from his pension and perhaps a few dollars here and there for odd jobs. Although the proceeds of the loan were paid into a bank account in Mr Kotevski's name, I am satisfied, on the probabilities, that this was done as part of Mr Micic's scheme to take advantage of a vulnerable man. I accept Mr Kotevski's evidence that he received no benefit from the loan proceeds paid into the account established by him on 10 January 2006. That account was, as I have indicated, in debit by the end of the following month. 190 It is, of course, curious that according to the evidence Mr Kotevski maintained a friendly relationship with Mr Micic well beyond the making of the loan and, apparently up to at least the time enforcement proceedings were commenced. Mr Micic was not called by any party and no counsel submitted that I should draw any inference from that circumstance. It may be, but this is speculation, that Mr Micic provided comforting assurances about the money which Mr Kotevski accepted. Mr Kotevski's own evidence on the subject was vague and inconclusive. However, the fact that Mr Kotevski behaved foolishly does not of itself disqualify him from obtaining the relief he seeks in this case. 191 There was evidence (Exhibit AF) that about 2 February 2006 a loan of $665,000 was approved to Mr Micic over the security of property 307-313 Forest Road, Bexley and that on 10 February 2006, Mr Micic entered into a contract to purchase that property for $930,000 (Exhibit 18). The contract as it appears was never completed for reasons unexplained, as there was in evidence (Exhibit AJ), a property search showing that the property the subject of the contract with Mr Micic, was transferred by the same vendor to someone else on 30 March 2007. It is not known whether the deposit of $46,500 was forfeited but the source of that deposit seems to be Mr Micic's account with St George Bank. These facts ground Mr Docker's submission that Mr Kotevski did indeed intend to invest money in the Forrest Road purchase. However, although that is a possible scenario, there was not, in my opinion, a shred of evidence to support it. It was not mentioned by the originator, presumably Mr Micic, of the explanation that Mr Kotevski was borrowing the money for his granddaughter's purposes; it was not mentioned in any conversation as to which Ms Pogson testified; and it was denied by Mr Kotevski. Ir was also inconsistent with what actually happened to the loan, apart from the payment of a $46,500 deposit. 192 In my opinion, the more probable explanation and the one I accept is that Mr Micic convinced Mr Kotevski that correctly or incorrectly, he was in financial difficulty and needed temporary assistance. The deposits to the credit of Mr Micic's St George Account in May and June 2006 suggest that he had other sources of funds. 193 As to Mr Kotevski's proficiency in the English language, I am satisfied that while Mr Kotevski had some knowledge of spoken English, he was certainly not fluent in it and had no capacity to understand more than very simple concepts. Nor could he read or write in English. I do not for that reason accept that he held the conversation with Ms Pogson to which she deposed prior to the preparation of mortgage documents. 194 Apart from the one conversation with Ms Pogson, which I have mentioned, Mr Kotevski's evidence is also, in a significant way, in conflict with the evidence of Mr Vlasic and to a lesser extent with Mr Lo. Despite what I regard as Mr Lo's gross departures from the standard of competence expected of a solicitor, I think he probably spent a little more time with Mr Kotevski and the documents than Mr Kotevski would have the court believe. However, such explanations as Mr Lo did provide were so ineffective that nothing turns on this finding. In my view, Mr Kotevski received no benefit whatever from Mr Lo's advice. 195 I will need to return to the conflict between Mr Kotevski's evidence and the evidence of Mr Vlasic when I consider his testimony. OTHER EVIDENCE - Mr KOTEVSKI' CASE 196 Mr Stephen Blanks, Mr Kotevski's solicitor, gave evidence on affidavit upon which he was cross-examined regarding the course of pleadings in the matter, such evidence being relevant to the contention by Counsel for Mr Kotevski that Milanex and Mr Vlasic are estopped from pleading that Mr Micic should be treated as a concurrent tortfeasor for the purposes of s35 of the Civil Liability Act. As will appear, it is unnecessary for me to decide that question. 197 The final witness in Mr Kotevski's case was his granddaughter, Olivera Cirhovic. She said in an affidavit sworn 29 September 2009 that she was born on 6 March 1983 and that after leaving school she studied beauty therapy. She was in employment as a beauty therapist until Christmas 2005 when she decided to open her own beauty salon. Ultimately, she leased premises at 28 Bay Street Rockdale from 1 February 2006 and established a business there, commencing some time in March. She told Mr Kotevski of her plans and he wished her good luck. She said the total cost of setting up the business was about $5,000, which her mother paid. She remained in the business until about May 2008. 198 During 2005 and 2006, she said that she saw Mr Kotevski about once a month and spoke to him on the telephone about once a fortnight. She said that she did not discuss with him any of the details of her proposed business and did not ask him for any money or assistance with the exception that while she was renovating the premises he replaced a door and door handle for her. She has never been a hairdresser. 199 I accept the evidence of Ms Cirhovic without qualification. THE CASE OF MILANEX AND Mr VLASIC. 200 Mr Vlasic swore two affidavits on 10 March 2009 and 16 September 2009. 201 He said that he is a director of Milanex, a mortgage broker, which usually obtains clients by referral from estate agents, solicitors and accountants. In 2005, Milanex submitted to lenders about 20 new loan applications per month. In respect of accepted loans, Milanex received a commission from the lender and during the currency of the loan a monthly "trailing" commission. 202 In 2005, he said the business was operated at Level 1, Suite 8/876 Pittwater Road, Dee Why. Those premises comprised a single un-partitioned room containing 4 desks, one of which was used by loan officer Ms Ranka Radanovic and another by a Mr Daniel Kotoran. 203 According to Mr Vlasic's affidavit sworn 10 March 2009, Mr Micic who was an existing client, brought Mr Kotevski into his office in the latter half of 2005. He said that Mr Kotevski was wearing steel protected shoes and overalls. He deposed to a conversation in Serbian: "Micic said: Milan this is Alexander, he needs a loan. I said: Why do you need money? How much do you need? Do you have a property and can you service the loan? Kotevski said: I want to borrow as much as I can for an investment. I have my own unit worth about $300,000. I said: Do you owe anybody money on the unit? Kotevski said: No, I have the deeds. I said: Do you realise when you borrow money you have to give the deeds to whoever gives you the loan? Kotevski said: Yes, I understand that . I said: I can prepare an application for you and then it will be up to the lender to approve." 204 Mr Vlasic said he prepared a loan application on behalf of Mr Kotevski either at the meeting or at a later meeting and would have requested identification. He said he decided to send the loan application to GHL: "Good Home Loans provided a loan application to Milanex for completion. In relation to Mr Kotevski, I believe that he attended on me on about 2 or 3 occasions. Mr Micic came with him, but all information for the loan application was obtained by me directly from Mr Kotevski. The loan application form was filled out by Ranka Radanovic, who sat at my desk, when I was interviewing Mr Kotevski. I recall that Mr Kotevski handed to me an original certificate of citizenship and a driver's licence which had a photograph of Mr Kotevski. I gave these documents to Ranka Radanovic who photocopied the documents in colour." 205 According to Mr Vlasic, the loan application was completed and signed as was a LoDoc Declaration. These documents were sent to GHL with his letter of 28 November 2005 referred to earlier. 206 Mr Vlasic said that he now has no recollection of receiving documents from Fabian and cannot recall if they were posted to Mr Kotevski or collected from his office. 207 On or about 18 January 2006, Mr Vlasic said that he received a letter from Fabian addressed to Mr Kotevski which contained a cheque in his favour for $221,935.75. Mr Micic at about the same time telephoned him and asked "Can I come and collect the cheque myself or does the old man have to come with me?" Mr Vlasic told him that he had to give the cheque personally to Mr Kotevski. 208 Thereafter Mr Kotevski and Mr Micic came to his office and there was this conversation: "I said: This is the money for the loan. You realise you have to pay it back. Your repayments will be coming out of your nominated account, once per month (and I quoted him the amount) you must make sure you always have enough money in that account. Kotevski said: Yes, ok." 209 He said he heard nothing further about the transaction until Mr Kotevski's daughter Javorka contacted him in November 2007. He said that whenever Javorka contacted him by telephone she sounded as if in tears or upset. 210 Mr Vlasic denied that he ever stood close to Mr Kotevski and spoke to him in a loud voice. He denied threatening or intimidating him. 211 Annexed to Mr Vlasic's affidavit were copies of a LoDoc Declaration; a statement of "Applicants Personal Details"; a statement of "Loan Details"; a "Monthly Income/Statement of Assets and Liabilities"; an "Applicants Declaration"; a "Joint Borrowers Nomination Form"; an "Address for Notices"; a "Declaration Under the Consumer Credit Code where credit is to be applied wholly or predominantly for Business or Investment Purposes"; an "Acknowledgment and Authority to give and Receive Credit Information"; a "Privacy Consent" and a "Declaration of Purposes for which Credit is to be Provided". 212 All the documents, which bore a date, bar one, were dated 28 November 2005. The exception was the "Declaration of Purposes for which Credit is to be Provided", which was dated 16 January 2006. The above listed documents were all dealt with by Ms Novotny as "questioned documents" and were the subject of her opinion: "I found no evidence in support of a proposition that they were written in original form by the writer of the Kotevski specimens. That is to say, my observations provide support for a proposition that each of the questioned signatures was written by a person other than the writer of the Kotevski specimens. No conclusion is expressed as to the number of writers of the questioned signatures." 213 Although asked to produce the originals of the documents, Mr Vlasic was unable to do so. 214 In his affidavit of 16 September 2005, Mr Vlasic said that he does not now have a recollection of Mr Kotevski wearing steel protected shoes. He explained this as a confusion between his recollection and Ms Radovic's recollection. He also stated that he does not now have a clear recollection of Mr Kotevski's handing him his original citizenship certificate but was adamant that he was handed an original drivers licence. 215 Mr Vlasic, in his second affidavit, deposed to having been informed that some documents, purportedly signed by Mr Kotevski, were allegedly not so signed. He responded: "If it be the case that Mr Kotevski did not sign any of those documents, I did not know that to be the case and I had no reason to suspect that he did not sign any document which appeared to contain his signature." 216 He dealt with Ms Pogson's testimony that he was the source of her belief that the borrowing was to purchase a hairdressing business for Mr Kotevski's granddaughter: " I refer to paragraph 23 of Ms Pogson's affidavit. It is likely that I told Ms Pogson words to the effect that Mr Kotevski intended to use the loan proceeds to purchase a business or building for his granddaughter who was a hairdresser. However, that conversation occurred after 22 January 2006 and after Mr Kotevski defaulted on his loan obligations. It had been suggested to me by Mr Micic after 22 January 2006 and for the first time, that Mr Kotevski may have used the loan funds for that purpose." 217 Mr Docker commenced his cross-examination of Mr Vlasic by asking about the circumstances in which he found documents to annex to his earlier affidavit: "Q. Mr Vlasic you have attached to your affidavit thirty-two pages of documents, your first affidavit, do you see that? A. Yes I do. Q. Have you just attached to the affidavit all the documents that you had in your file for this matter? A. Yes. Q. Mr Vlasic, in relation to your folder, do you keep a paper copy file? A. No. Q. How did you keep the documents? A. I don't keep files. Q. So where did you get the documents from that you put into your first affidavit? A. I don't keep files at all. Sometimes after, I do keep files till the loan serviced. Q. Paper files? A. Paper files. Some documents, some files mostly for marketing purpose would remain in the office for time being but usually I don't keep files. Q. And so where did you get the documents which are annexed to your first affidavit from? A. I found them in my office. Q. And they were hard copy documents? A. Yes they were. Q. Were they in a folder? A. I believe so yes. Q. So on this occasion you did keep your file, is that right? A. I believe I had more of Mr Kotevski's file than what I found. Q. But these are all the documents you could find when you went to make your affidavit, is that right? A. Yes. Q. And you looked through your office and you couldn't find anything else is that right? A. Correct. Q. All the documents you have got here with your first affidavit you found them all in the one folder is that right? A. I believe so. I'm not sure about that." 218 He agreed with Mr Docker that he was the sole director and shareholder of Milanex, which had been in operation since about 2003 and said that in 2005 he had known Ms Pogson for 5 or 6 years. 219 Mr Docker cross-examined Mr Vlasic about the document "Verification of Borrower – 100 Point Check List", a copy of which was annexed to his affidavit. He agreed that the signature was his but other handwriting on the document was not, although the document indicated that he conducted the verification and signed it on 24 November 2005. Mr Vlasic was unable to recall whether he conducted the verification on or before that date. 220 According to Mr Vlasic he had two meetings with Mr Kotevski before the email to GHL of 28 November 2005 enclosing various documents. He said that Mr Micic was present at the second meeting, as was Ms Radanovic who also speaks Serbian. He said at the second meeting there was discussion about "the title deeds, interest rates, repayments, penalties to pay out loan faster, and some general other topics." Pressed on the subject, he was largely unable to give further details of the conversations. He said Ms Radanovic was making notes but was unable to say what happened to them. He was then able to recall pointing out that there would need to be a valuation of the property to be secured and a conversation about LoDoc loans. Mr Vlasic claimed that after he told Mr Kotevski that he would need to produce financial information, Mr Kotevski told him that he did not have tax returns. In such a case, Mr Vlasic said the client would have to apply for a LoDoc loan. 221 In relation to the documents sent to GHL on 28 November 2005, Mr Vlasic said that he could not identify the handwriting on the LoDoc declaration nor could he recognise the handwriting on any other of the documents sent by Milanex to GHL. He could not recall seeing the signing of any of the documents respectively headed "Monthly Income/Statement of Assets and Liabilities"; "Applicant Declaration"; "Joint Borrowers Nomination Form"; "Declaration under the Consumer Credit Code where Credit is to be applied wholly or predominantly for Business or Investment Purposes"; "Acknowledgment and Authority to give and Receive Credit Information"; and "Privacy Consent". 222 Asked about a second, apparently signed but undated, LoDoc Declaration annexed to his affidavit, Mr Vlasic said he had no explanation as to why it was in his file. His handwriting did not appear upon it. 223 He affirmed to Mr Docker that he could not find the original of any of the documents annexed to his affidavit and said he did not know what happened to the originals. 224 In relation to the preparation of the LoDoc Declaration, Mr Vlasic told Mr Docker that it and all the other documents were prepared by Ms Radanovic. He had no recollection of seeing her do anything with them. 225 There was this further exchange: "Q. Mr Vlasic, is it the case that you've never seen Mr Kotevski sign anything, is that the case? A. I can't say that precisely. HIS HONOUR Q. I think what you do say is that you can't remember ever seeing Mr Kotevski sign anything? A. That's correct, I believe he did sign but I don't remember specifically him. " 226 Mr Vlasic denied to Mr Docker that around the time the loan application was made at the end of November 2005, he told Ms Pogson that the purpose was to purchase a building or a business for Mr Kotevski's granddaughter. He maintained that this conversation did not occur until after the loan was in default, the source of his information being Mr Micic. 227 Mr Docker questioned Mr Vlasic about the documents sent to him by Fabian under cover of a letter dated 14 December 2005. He said he had a recollection of seeing them. What he did with them was the subject of these questions and answers: "Q. And did you contact Mr Kotevski after you got the letters and the documents? A. Yes, we did. Q. What happened, what did you do to contact him? A. I called them. Q. Who did you call? A. Mr Marco Micic and Mr Alexander Kotevski, I don't have recollection of who I called. Q. You don't know who you called? A. No, I don't remember precisely. Q. Right? A. And told them that the documents were ready. Q. And what was the response? A. When you say response? Q. The person who you were talking to, what did that person say? A. I don't remember precisely, said "great, excellent". Q. And did someone, did you then send the documents anywhere? A. To the best of my recollection they came over to the office to collect the documents. Q. When you say they, who are you talking about? A. Mr Kotevski and Mr Marco Micic. Q. Right, both of them? A. I don't remember who came. " 228 His attention was then drawn to handwriting on the original of Fabian's letter, which he said was not his. He denied that after execution, the documents sent by Mr Fabian were returned through his office. However, it was pointed out to him that his affidavit had annexed to it copies of documents which post dated November 2005 and were specifically requested in Fabian's letter to him. It was suggested that this indicated he had sent these documents back to Fabian with the executed loan documents. He replied, "I still don't think its possible". 229 In relation to the relevant certificates of title, Mr Vlasic said he could remember receiving them from either Mr Kotevski or Mr Micic, or both of them. He could not remember clearly. He said he sent the certificates of title to Fabian, as it appeared, simply in an envelope with his firms name on the back without a covering letter. I raised this practice with him: "Q. Is it your usual practice to receive and send Certificates of Title without keeping any record of either the receipt or the sending? A. It was a bit unusual from, in this case the Certificate of Title and documents and everything was sent to me but it does happen your Honour. " 230 As to why the letter from Fabian enclosing the cheque payable to Mr Kotevski was sent to him, there was this cross-examination: "Q. Do you know why the letter was sent to you? A. It does happen sometimes. I don't specifically remember your Honour why would that be sent to me. Q. You didn't ask for it to be sent to you? A. I don't remember that, if I asked that, no. DOCKER Q. You understood when you got the cheque that it was important you gave it to Mr Kotevski, that's right isn't it? A. Not really. Q. It was his cheque wasn't it? A. Yes. So could be sent to him in the mail, could be given to anyone, it can't be banked into anyone's account but his own. Q. And you say that Mr Kotevski came to your office and collected the cheque? A. Yes. Q. And did you satisfy yourself that it was Mr Kotevski who was in your office? A. Yes. Q. And that it was Mr Kotevski who you gave the cheque to? A. Yes. Q. How did you do that? How did you satisfy yourself that it was Mr Kotevski? A. Because I knew him. Q. So you are saying it was the same person that had come to your office two or three times before is that right? A. Yes that's what I'm saying yes. Q. Can you describe him? A. I saw Mr Kotevski here two weeks ago. If I didn't see him here I wouldn't be able to describe him, I don't have good memory for people's faces, sorry. I saw him two weeks ago so I can describe him so." 231 Mr Connor drew Mr Vlasic's attention to a copy rate notice and a copy of Mr Kotevski's driving licence annexed to his affidavit. He agreed that each was faxed to Milanex on 17 November 2005 and, in turn, were the copies sent to GHL. He said his files contained no other copies of the documents. Mr Vlasic agreed that the fax headers indicated that the driving licence was page 3 and the rate notice page 5. He said he did not remember what happened to other pages. 232 He agreed that in November 2007, he provided Mr Kotevski's daughter with the copy driving licence, copy rate notice, and copy of the cheque, handed over in his office. There was this exchange regarding his filing system: "Q. You accept that you plainly had to go and find these three documents from somewhere in November 2007 to provide them to Mr Kotevski's daughter? A. Can you repeat that? Q. You plainly had to get these three documents, that is the document at page 31, document at page 32 and the document at page 17 from somewhere to provide them to Mr Kotevski's daughter in November 2007? A. Yes. Q. Now you didn't, you went to your file to get those? A. No I don't think I went to the file. I don't think I had Mr Kotevski's file complete. Still some pages are missing as you said. Q. So, where do you say you went to get these pages? A. I don't remember in 2007 and when was, when the files were destroyed, I don't remember those details now. It was somewhere in the office. Q. When you say somewhere in the office? A. It is a big office. Q. Aren't documents kept in some system? A. No, not really, no. Q. So one client's files can be mixed up with another client's files, is that what you are saying? A. It would be, yes, unfortunately, yes. " 233 He agreed with Mr Connor that in answer to a subpoena in October 2008 to produce all his documents he said that he could not find any. Some time after this, between October 2008 and March 2009, he said he found the copy documents, copies of which were annexed to his affidavit. 234 Mr Vlasic said he had no recollection of the circumstances in which Milanex came to be in possession of a faxed copy of Mr Kotevski's Citizenship Certificate, apparently sent from Belgrade. However, he agreed that he used that document on 24 November when signing a verification certificate of Mr Kotevski's identity. 235 Although Mr Vlasic conceded that he did not actually see Mr Kotevski's original citizenship certificate before signing the verification form, he remained adamant that he did sight the original driving licence. He agreed, however, that when he signed the verification of borrower certificate, he did not go to the documents referred to himself, but relied on his staff. I asked him what he thought he was doing by saying that the verification was conducted by himself and he replied: "A. My understanding, your Honour, is verification of the borrower. The lender wants to make sure the person who receives the money is the person who is on the title of the property being used as security. Q. Yes, but you've signed a document saying "verification conducted by" and then you've signed it. A. It means that I've seen the document, that I identified the client, I'm a hundred per cent - I'm certain that this is the client who borrows money. That's my understanding. " 236 To Mr Connor's suggestion that he had not done the verification in front of Mr Kotevski, he answered, "No, I'm not required to do that in front of the person who borrows the money". 237 Mr Connor put to Mr Vlasic that the two earlier meetings with Mr Kotevski did not occur and that he had reconstructed his evidence from documents. He denied this proposition and said that he had a clear recollection of talking to Mr Kotevski. He denied that he treated Mr Kotevski and Mr Micic as if they were one and the same but agreed that during his evidence he had on occasions referred to "clients". 238 Mr Vlasic answered in the affirmative Mr Connor's question, whether in effect Milanex is happy to receive LoDoc declarations signed away from the offices of Milanex and not in front of a Milanex employee, and he agreed that was Milanex' attitude towards all the documents annexed to his affidavit. 239 Mr Vlasic agreed that he treated Mr Micic as acting for Mr Kotevski, "because of the friends and family". He also agreed that he did not explain any of the documents which came into his hands to Mr Kotevski in Macedonian. 240 At the end of Mr Connor's cross-examination, I asked Mr Vlasic a question: "Q. Mr Vlasic, are you aware of the evidence that was given in this court by an expert that it is not Mr Kotevski's signature that appears on most if not all of the documents which purport to be signed by him? A. I am. Q. And which would seem to comprise your file? A. I am your Honour. Q. If that's the case have you got any explanation of how that could be? A. It's very hard to explain. I can just tell you what I think happened. Clients would take some forms with them to complete them, to sign them, to send them back, take them, fax them back, and this particular instance I don't have explanation your Honour. " 241 The final witness in the case was Ms Radanovic who had sworn 2 affidavits, respectively 24 August 2009 and 22 September 2009. She stated that she was employed as a loans officer by Milanex from late 2004 to about November 2008. She speaks Serbian, Croatian and Bosnian languages and understands Macedonian. 242 Her earlier affidavit proceeded: "I recall meeting Mr Kotevski at the offices of Milanex located at 876A Pittwater Road Dee Why on at least three occasions. I do not recall the exact dates of those meetings. I have been shown documents contained in the affidavit of Jane Pogson April 2009 to which I refer to below. Having refreshed my memory by reference to those documents, to the best of my recollection, Mr Kotevski attended the offices of Milanex in about late November 2005. He attended with a person I know to be Marko Micic (Micic). Micic had attended the offices of Milanex on occasions prior to this meeting. At the time, the office of Milanex comprised one room with a number of desks. Mr Kotevski sat down at Mr Vlasic's desk together with Micic. I was seated at my desk which was located beside Mr Vlasic's desk. I overheard the conversation between Mr Vlasic, Mr Kotevski and Micic. They spoke in Serbian. I recall a conversation to the following effect: Kotevski: I want a loan for my personal investment. Vlasic: Do you work? Kotevski: Yes I do. Vlasic: Do you have a property? Kotevski : Yes, its mortgage free. I recall Mr Vlasic asked Mr Kotevski questions as to his employment. Mr Kotevski said: "I work for myself." Mr Vlasic then said: "I need to see your driver's licence, citizen's certificate or passport in order to apply for finance as well as the statement of any other loans which you might have. Kotevski: "OK. If you can't reach me speak to Marko." Second Meeting About a week or so later, Mr Kotevski returned to the office together with Micic. They sat at Mr Vlasic's desk. I was seated at my desk." 243 At Mr Vlasic's request, she said that she prepared a LoDoc Declaration in her own handwriting and gave it to Mr Kotevski to sign. She also, in her own handwriting, completed the Loan Application. 244 She said that she recalled Mr Kotevski returning to the office with Mr Micic when Mr Vlasic handed over a cheque after first making a copy of it. The affidavit of 22 September corrected one statement in her previous affidavit. She said that the name "Alexander Kotevski " printed on the Declaration Under Consumer Credit Code at page 141 of Ms Pogson's affidavit is not in her handwriting, although the date on the page is. 245 In cross-examination by Mr Docker, Ms Radanovic confirmed that Mr Kotevski attended 3 meetings in her office, each time accompanied by Mr Micic. She described Mr Kotevski as "grey haired", "bald on top", "chubby" and "mid 60's". She was confident that the same person attended each meeting. 246 She said that the first two meetings occurred about a week apart. She said the first occupied about 30 minutes and while it took place she was seated next to Mr Vlasic's desk and listened to what was being said. She did not, so far as she could recall, speak herself. She did, however, take notes, which she threw away after the loan was settled. She said that the conversation set out in her affidavit occurred at the first meeting and it consisted of questions asked by Mr Vlasic and answered by Mr Kotevski. However, she said, in effect, that she could not recall anything about the conversation beyond what was stated in her affidavit. She could not, for instance, remember whether Mr Vlasic asked a question about the investment contemplated, or asked Mr Kotevski to clarify in any way the nature of his occupation as a builder. She could not recall whether any documents were handed over at the first meeting. 247 She said the second meeting occurred about a week later and at this meeting the form of the LoDoc Declaration was completed in her handwriting, apart from the signature. She said she gave this document to Mr Kotevski but could not remember whether he signed it in her presence. 248 Asked by Mr Docker about the 12 documents exhibited to Mr Vlasic's affidavit, which she agreed collectively comprised the loan application, she said that on the document headed "Applicant's Declaration", she, at the second meeting, heard Mr Vlasic ask Mr Kotevski each of the 6 questions and she placed a cross in the "No" box against each question to correspond with the answer. 249 As to the Declaration Under the Consumer Credit Code, Ms Radanovic said that the date 28.11. 05 was in her handwriting but the signature "A Kotevski" was not, nor was the printed name "Alexander Kotevski", underneath the signature. She could not recall giving Mr Kotevski the document or seeing him sign it. She said that she could not recall seeing Mr Kotevski sign anything. 250 Asked about the "Verification of Borrower – 100 point check list" document dated 24 November 2005, exhibited to Mr Vlasic's affidavit, she said that it was her handwriting on the document apart from the signature of Mr Vlasic. She could not explain why a second slightly different Verification of Borrower form dated 28 November 2005 was exhibited to Mr Vlasic's affidavit but said that this too, apart from his signature was in her handwriting. 251 Ms Radanovic told Mr Connor that although she worked for Mr Vlasic until November 2008 and remained working in the same industry, he had never, after settlement of the loan, asked her to look for documents connected to the case. 252 The effect of Ms Radanovic's evidence was that all the documents purportedly signed by Mr Kotevski, which passed through the office of Milanex, may have been completed in the office and taken away to be returned, apparently signed, some time later. I asked her about this: "Q. Why would any of these documents have left your office? A. Because sometimes clients just want to see another broker and are shopping around for a better deal and they would take the application and some of them never returned." 253 In relation to the retention of documents after loan settlements, she told Mr Connor, "they could be thrown away", but said she was not involved in that process, which was looked after by Mr Vlasic. 254 Pressed by Mr Connor as to whether she had actually inspected Mr Kotevski's original driving licence she maintained that she had, despite the fact that the copy annexed to Mr Vlasic's affidavit appeared to have been faxed on 17 November 2005 by a company Huhao Trade Australia Pty Ltd. Her explanation that this document was faxed afterwards to replace a copy of the original licence, which had been mislaid, appears to be plainly wrong. RELIABILITY OF MR VLASIC AND MS RADANOVIC 255 For a number of reasons, I do not regard either Mr Vlasic or Ms Radanovic as reliable witnesses. I formed the opinion that neither had an independent recollection of the events from November 2005 to January 2006 to which they deposed and instead were reconstructing what they thought occurred from documents. 256 When tested Mr Vlasic could not remember what in particular had occurred at either of the two meetings, which he said took place in his office in November 2005. He referred on more than one occasion to "clients" as encompassing both Mr Kotevski and Mr Micic and seemed to regard them as being in the same interest. He could offer no explanation for the fact that all the signatures on documents, purportedly signed by Mr Kotevski and exhibited to his affidavit, may have been forged. As to this, if, as seems probable, they were forged, I find it difficult to believe that if Mr Kotevski had, in truth, attended the office of Milanex twice in November 2005, some if not all of the documents would not have been signed by him while there. 257 Ms Radanovic purported to have quite a clear recollection of the conversation she recounted in her affidavit, yet when cross-examined could remember virtually nothing else about the meetings. In respect of the documents completed in her handwriting, it seems to me, inherently unlikely, that if Mr Kotevski were in her office she would not have had him sign them in her presence. Despite her firm denials, I am of the opinion that Ms Radanovic was mistaken in her evidence that she saw the original of Mr Kotevski's driving licence. It seems to me probable that Milanex only had the copy, faxed on 17 November. 258 What may seem a small matter has also influenced my opinion that Ms Radanovic did not obtain the information in the documents exhibited to Mr Vlasic's affidavit directly from Mr Kotevski. In the document headed "Applicants Personal Details", she has incorrectly recorded Mr Kotevski's telephone number and she has also incorrectly recorded as 10 years the period he lived at 3/3 Baxter Street, Kogarah. It is to me inconceivable that Mr Kotevski would have lied about these two matters, which would have been inconsequential to him, and almost as inconceivable that Ms Radanovic would have incorrectly recorded matters which she would have regarded as important. It is, I think more likely that she was relying on someone else for her information. 259 In assessing the reliability of Mr Vlasic in particular, it is also. I think, appropriate to take into account the manner in which he conducted the business of Milanex. 260 It would seem that in November 2005 it was obliged as a "finance broker" to comply with the Consumer Credit Administration Act by entering into a written contract with clients and preserving records for 7 years, neither of which it did. Moreover, Mr Vlasic seems to have made no record of his alleged meetings with Mr Kotevski and any notes taken by Ms Radanovic were, according to her evidence, destroyed. 261 Mr Vlasic's evidence as to his record keeping was very unimpressive. He suggested that contrary to the statute he destroyed records after each loan was made. He purported not to be able to find any records in answer to the subpoena served in 2008 yet was able to find the documents exhibited to his affidavit in 2009. He gave no convincing explanation for his inability to produce the original documents, which would have been of greater forensic assistance to Ms Novotny. 262 To my mind, his conduct in sending Mr Kotevski's two certificates of title to Fabian in an envelope unaccompanied by a covering letter and his failure to make any record of either receiving or sending those certificates of title reveals very lax business practice. Such laxity was of particular relevance in this case, where Milanex seems to have assumed a role which went somewhat beyond mortgage broker. Milanex seems to have collected the documents required by Fabian, for a reason unexplained, all the mortgage and loan documents for execution were sent to Milanex, and for a reason also unexplained, the cheque in favour of Mr Kotevski was sent to Milanex. 263 In assessing Mr Vlasic's reliability as a witness, I also regard, adversely to him, the apparently cavalier way in which he approached the task of identifying Mr Kotevski. Despite his signature on the form as the identifier, he did not perform the task himself, nor, in my view, did he or anyone in his office sight the original documents relied on. 264 Despite the imperfections, discrepancies and contradictions in his evidence, I prefer the testimony of Mr Kotevski in relation to his dealings with Milanex to the testimony of Mr Vlasic and Ms Radanovic. I think the probability is that Mr Kotevski attended the Milanex office only once, as he testified, in January 2006. On small factor which supports this conclusion is Mr Kotevski's initially faulty description of Milanex' office. He is, I think, more likely to have made a mistake that it comprised two rooms, having been there once for a short time only, than if he had been there three times, the first two for significant periods while important matters were discussed. 265 In my view, the probability is that the documents exhibited to Mr Vlasic's affidavit were prepared in Milanex' office, from information provided by Mr Micic; they were sent to or taken away by Mr Micic and subsequently returned apparently signed by Mr Kotevski. It is probable that each of those purported signatures was forged. 266 Although I have made adverse findings about the evidence of Mr Vlasic, I should add that, in my opinion, the evidence in the case stops short of establishing fraud on his part. There is no evidence that he sought to gain anything other than a commission from the transaction. It would not have been in his interests to promote a loan likely to go into immediate default. THE CONTRACTS REVIEW ACT AND THE CONSUMER CREDIT CODE 267 Relief was sought by Mr Kotevski under both statutes. 268 It may well be that both the Review Act and the Code apply to the transaction between Mr Kotevski and Perpetual, having regard to the presumption provided for by s11 of the Code. However, that matter is not entirely free from doubt and I think it preferable to consider this case in the light of the Review Act. There is little difference in the relevant principles, although I note the Code by s 70(2) (j) and (l) introduces concepts relevant to this case for a court to take into account which are absent from s 9 of the Review Act. However, these matters are, in my opinion, available to be considered as part of "the circumstances of the case" within s 7(1) of the Review Act. 269 The Review Act provides by s4 that "unjust" includes "unconscionable, harsh or oppressive" and that "injustice" shall be construed in a corresponding manner. S6 provides that a person may not be granted relief under the Act where, in effect, the contract is entered into for the purposes of a trade, business or profession other than an agricultural one. It was not suggested that such exception applies in this case. 270 Sections 7 and 9 provide: "7 Principal relief (1) 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 . (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19. ………………………………………… 9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust , the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust , the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. " 271 Although the decision of the Court upon an application under s7 of the Review Act must be informed by authority to some of which I will hereafter refer, I am able to dispose briefly with a number of the matters listed in s9(2) which I am bound to consider. 272 There is, in my opinion, no doubt that there was material inequality in bargaining power between Mr Kotevski and Perpetual, I am satisfied that the provisions of the loan agreement were not the subject of negotiation and I am satisfied that it was not reasonably practical for Mr Kotevski to negotiate for the alteration of, or to reject any of the provisions of, the Contract. However, in the particular circumstances of this case, I do not regard any of those matters as of significance. 273 The Contract imposed obligations upon Mr Kotevski which were not simply difficult but, in truth, impossible to comply with unless, perhaps, he was able to invest the loan at a high rate of interest. As to whether such an investment could be achieved or was going to be achieved Perpetual and those it relied on were supremely indifferent. As I indicated earlier, apart from anything derived from the loan, Mr Kotevski's income was about $500 per fortnight, against a liability under the loan contract to pay $1,581.61 per month. 274 Of course, even if Mr Kotevski had been able to comply with the contract when it was entered into it was hardly likely that this state would continue until he was 104, a circumstance which the lender also chose to ignore. 275 It seems to me that Mr Kotevski's age and unsophisticated mental state rendered him vulnerable to the importuning of Mr Micic and thus not reasonably able to protect his interests. He was also disadvantaged within s9 (2)(f) by his very limited formal education and literacy which, in my view, rendered him incapable of understanding the contract within s9 (2)(g). 276 Although it is true that legal advice was purportedly provided to Mr Kotevski, it was not done at his instigation and, in my opinion, the legal advice provided was, on the evidence, quite useless. 277 There was, in my opinion, undue influence or undue pressure on the balance of probabilities, exerted on Mr Kotevski by Mr Micic, but there was no evidence that this was by, or on behalf of, Perpetual or anyone for whose acts it was responsible. 278 However, I am not confined in my consideration of the matter to the circumstances specifically listed in s9 (2). I am bound to consider also the more general terms of s9 (1). Although there is a strong public interest in upholding contractual obligations, it seems to me that the blindness of Perpetual, Calibre and GHL to the reality of the transaction being entered into with Mr Kotevski reversed the public interest factor in this case to the extent that, far from being in the public interest for the contractual obligations to be upheld, it becomes in the public interest that they be set aside. It is difficult to understand how it could be in the public interest to uphold a contract providing for a loan of $224,000 repayable over 30 years to a 74 year old man whose only income was an aged persons pension and whose only significant asset was his home. 279 There are many cases where contracts foolishly entered into have been held to be unjust for the purposes of the Review Act. See for instance Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 and the cases referred to therein. At paragraph 79 of Elkofairi, Beazley JA with whom Santow JA in a separate judgment and Campbell AJA agreed, observed: "This case does not fit neatly into either of the factual scenarios presented in West and in Smith . However, it is characterised by two significant features. First, it was a substantial loan, security for which was the appellant's only asset — her interest in the property. The debt to asset ratio was almost 75%. Second, the respondent knew that the appellant had no income nor other assets. None was disclosed on the loan application. The only confirmation the respondent had that the payments under the loan would be met was the series of letters from the accountant, which only related to Mr Elkofairi, and which contained no particulars of Mr Elkofairi's income and included a disclaimer "as to the accuracy of the information" provided. The consequence was, as submitted by the respondent's counsel, that the respondent was content to lend on the value of the security only. In my opinion, these factors taken in consideration with the matters to which I have referred in [53], are sufficient to make the contract unjust in the circumstances in which it was made: s 9; and sufficient for the court to exercise its discretion under s 7." 280 See also Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 where Spigelman CJ observed at paragraph 128: "To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f). That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required: see Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 at 491 (Handley JA) cited with approval in Elkofairi (above) at [77] by Beazley JA." 281 In my opinion, the loan contract in this case, was unjust at the time it was made within s7 of the Review Act. This leads to consideration of what relief, if any, is appropriate. Central to that question, as it seems to me, is whether any benefit was derived by Mr Kotevski from the loan. As I have found, he, in truth, received no benefit due to the persuasive powers of Mr Micic. 282 However, it was submitted on behalf of Perpetual that he received the full benefit of the loan when the cheque handed to him by Mr Vlasic was paid into his St George Bank account. I reject that submission, in so far as it suggests that the payment of the cheque into Mr Kotevski's account forecloses the need for further investigation. 283 One of the dangers of Perpetual making a loan such as this one was that the borrower may be under the influence of a third party for his or her own purposes. This danger was plainly recognised by Perpetual as, for example, in the Solicitors Pack provided to Fabian, referred to above. Although Milanex may not have been Perpetual's agent, GHL certainly was, and its acts and state of mind governed and represented the state of mind of Perpetual as if they were its own (Khoshaba per Handley JA) GHL, being aware of the involvement of Milanex, made no inquiry of it as to the purpose of the loan, or as to the circumstances in which Mr Kotevski came to be introduced as a borrower. The telephone call, which Ms Pogson said she made to Mr Kotevski, did not purport to overcome this problem even though, in any event, my view of the probabilities is that she did not actually speak to Mr Kotevski at that time. 284 In my opinion, the failure to make reasonable inquiry, the carelessness of GHL, both attributable to Perpetual, and the multiple failures of GHL and Fabian to comply with their contractual obligations, all facilitated the wrongdoing of Mr Micic and all contributed towards the making of a loan which, in my view, should never have been made. I disagree with Mr Docker's submission that the only entity that could be described as assisting Mr Micic to exploit Mr Kotevski was Milanex. Both GHL and Fabian, in my view, made significant contributions. 285 So far as Perpetual is concerned, it received payment of some instalments during 2006 and Mr Connor has indicated that his client, if the loan contract is set aside, would hold the proceeds of his verdict against Mr Lo on trust for Perpetual. 286 In my opinion, in all the circumstances, the justice of this case requires an order declaring the loan contract void. It should never have been made. Perpetual should be held entitled to the benefit of all monies paid to it previously and there should be a declaration that Mr Kotevski holds on trust for Perpetual the net proceeds of his verdict against Mr Lo. Perpetual has not cross-claimed against either Calibre or GHL against whom, directly or indirectly, it has contractual rights. However, I need to consider its action against Milanex. THE CROSS CLAIM BY PERPETUAL AGAINST MILANEX 287 The Cross Claim seeks damages pursuant to s82 of the TPA and/or s68 of the FTA and/or s12 GM of the ASAICA. 288 The relevant provisions of the TPA are s52 within Part V and s 82(1) (1B) and (2): Misleading or deceptive conduct (1) A corporation shall not, in trade or commerce , engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1). ………………………………… Actions for damages (1) Subject to subsection (1AAA), a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention . …………………………………… (1B) Despite subsection (1), if: (a) a person (the claimant ) makes a claim under subsection (1) in relation to: (i) economic loss ; or (ii) damage to property; caused by conduct of another person (the defendant ) that was done in contravention of section 52 ; and (b) the claimant suffered the loss or damage : (i) as a result partly of the claimant's failure to take reasonable care; and (ii) as a result partly of the conduct referred to in paragraph (a); and (c) the defendant : (i) did not intend to cause the loss or damage ; and (ii) did not fraudulently cause the loss or damage ; the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage . Note: Part VIA also applies proportionate liability to a claim for damages under this section for a contravention of section 52. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. Note: Part VIB restricts awards of compensation for death or personal injury , and sets out time limits for commencing actions for damages for death or personal injury . " 289 So far as the FTA is concerned, the provisions are s42 (within Part 5 and 68(1) and (2): Misleading or deceptive conduct (1) A person shall not, in trade or commerce , engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1). …………………………………. Actions for damages (TPA s 82) (1) A person who suffers loss or damage by conduct of another person that is in contravention of a provision of Part 3, 4, 5 (section 43 excepted), 5A, 5B, 5C, 5D, 5E or 5F may recover the amount of the loss or damage from the other person or from any person involved in the contravention, in a court of competent jurisdiction. (1A) A reference to loss or damage in subsection (1) does not, if the loss or damage arises from a contravention of Part 5 (section 43 excepted), include a reference to: (a) the death of a person, or (b) personal injury to a person (including any pre-natal injury, any impairment of the person's physical or mental condition and any disease). (2) Proceedings under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. " 290 It is not apparent to me that the ASAICA confers rights upon Perpetual additional to those conferred by the TPA and the FTA and no submission to the contrary effect was addressed by Mr Docker. Accordingly, I intend to deal with Perpetual's claim as though it was confined to rights arising under the TPA and the FTA 291 The essence of the pleading is set forth in paragraph 13 above. The Cross Claim raises four issues to be decided by the Court; did Milanex make the representations alleged; were they false and misleading; did Perpetual rely on them and, if so, did Perpetual as a consequence suffer loss and damage. 292 Some of the representations, as it seems to me, create no difficulty in particular those contained in subparagraphs (a), (b), (d) and (g) of paragraph 5 and the representations contained in paragraph 6. However, in my view, nothing would turn on the fact that any of these representations were false and misleading The remaining representations involve the question whether Milanex was representing that Mr Kotevski had himself signed the documents referred to or was merely passing on documents without knowing whether Mr Kotevski had signed them or not and possibly whether Milanex was representing the truth of the matters set out in the documents. 293 In part, the problem lies with, if I may say so, the very poor design of the documents constituting the loan application including the LoDoc declaration. Not only do these important documents make no requirement for the basic safeguard that the borrower's signature be witnessed by an identified person, they do not even require an indication of the place of signature. 294 Mr Weinberger submitted that Milanex was doing no more than acting as a "conduit" or "post box". However, in my opinion, none of the cases referred to by Mr Weinberger on this aspect, viz, Yorke v Lucas (1985) 59 ALJR 776; Tambree v Travel Compensation Fund & Ors [2004] NSWCA 24; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 and Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR 42-079 support his contention in this case. They all, as it seems to me, concern cases where the defendant was purporting to do no more than pass on information emanating from someone else. The following passage from the joint judgment of Mason ACJ Wilson, Brennan, Deane and Dawson JJ in Yorke v Lucas at 777 is apposite: "It should be observed at the outset that the facts as found by the trial judge raise the question whether the Lucas company itself was guilty of any contravention of s.52. It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [1978] HCA 11 ; (1978) 140 CLR 216, at p 228; Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. [1982] HCA 44 ; (1982) 149 CLR 191, at p 197. That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive" 295 In the circumstances of this case, I think it would be unreal to conclude that Milanex was merely acting as a "conduit" or "post box". It purported to be much more involved than that. While I doubt that it represented the truth of the statements in the documents, of many of which it could have had no knowledge, in my opinion, it plainly represented that Mr Kotevski had signed those documents which purported to be signed by him and probably it also represented that the source of the information in the documents was Mr Kotevski himself. 296 As, in my opinion, none of the documents sent by Milanex to GHL on 29 November 2009 was actually signed by Mr Kotevski, in my view, Milanex should be held to have engaged in conduct that is misleading or deceptive or likely to mislead or deceive within s 52 of the Trade Practices Act and s42 of the Fair Trading Act. 297 For Perpetual to recover damages against Milanex, it must show that its misleading or deceptive conduct, in breach of the TPA and FTA, was causative of loss, a question of fact to be assessed in accordance with principles established by the High Court in March v Stramare Pty Ltd (1991) 171 CLR 506 298 In Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd & Ors 78 ALR 195 Gummow J distilled from a number of cases which he quoted principles applicable to an issue of reliance and causation under the TPA. They included (omitting references to authority): (i) Where statements have been made either before or in the course of complex negotiations for a significant transaction for sale and purchase of property those statements are not to be assessed in isolation but in the overall context of the negotiations. (ii) It is for the applicant to show reliance upon the conduct complained of as supplying a sufficient causal connection between the conduct and the loss or damage for which recovery is sought under s.82 ; conduct in contravention of Part V of the TP Act need not be the only cause of the "loss or damage" that may be recovered under s.82 . (iii) If a representation is of such a nature as to be likely to induce a representee to act upon it, the inference may be drawn, if the representee does act, that the representee has acted in reliance on the representations, but the inference is one of fact and may be rebutted by other, inconsistent, evidence." 299 In Lam v Ausintel Investments (1989) 97 FLR 458 Gleeson CJ (with whom Samuels AJA and Meagher JA agreed) quoted with approval the judgment of Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 236: "However, in my view the submission does not accurately reflect the law. It is accepted by the appellant that, whether his case is considered in terms of s52 of the Trade Practices Act, or equitable fraud, he can only succeed if there were reliance upon the relevant representations or conduct of the respondents. The principles are summarised in the judgment of Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 236 as follows: "1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case. 2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. 3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation. 4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract." It is to be noted, with reference to paragraph 3, that what it contains are only expressed to be examples of how the inference referred to may be rebutted. Another way in which the inference can be rebutted is if it appears that the representee had his own reasons for entering into the contract and that these were uninfluenced by the representations. " 300 In Ricochet Pty Ltd & Ors v Equity Trustees Executor and Agency Company Ltd (1993) 41 FCR 229, the Full Court of the Federal Court (Lockhart, Gummow and French JJ) at page 234 after referring to Gould v Vaggelas observed: "Where, for example, it is shown that a false representation has been made which the representor intended should induce the representee to enter into a contract, and where it is shown that the representation is of a kind likely to provide such an inducement and that the representee entered into the contract, then, as Wilson J said: "... common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract." The statement provides a practical guide to the way in which inferences can and should be drawn in such cases. It remains for the tribunal of fact, as his Honour pointed out, to determine, when all the evidence has concluded, whether the misrepresentation in question contributed to the decision to enter the contract. The unremarkable logic of these propositions is more likely to be obscured than illuminated by reference to notions of presumptions of fact or the incidence of the evidentiary onus. The proposition that in a s.82 case inducement can be established by identification of the relevant misrepresentation as one of a number of inducing factors is not controversial. However, the suggestion advanced for the appellants that it is enough for an applicant under s.82 to show that the impugned representation (being conduct which contravened s.52) might have induced entry into the contract is one we cannot accept." 301 In my opinion, the facts, which I have found in this case, do not establish reliance in any relevant sense upon the representations of Milanex. Ms Pogson conceded that if she had realized that the application was made on behalf of a 74 year old aged pensioner, she would not have approved it. Yet she knew he was seventy four years old and she knew, or should have known, from her own inquiries that he was an aged pensioner. Moreover, she telephoned a male whom she believed to be Mr Kotevski on a telephone number shown to her in his name. She relied on this conversation as confirming the matters contained in the documents sent by Milanex. She apparently chose not to ask any of the rather obvious questions the material exposed. 302 In light of my finding that Perpetual did not rely on any representation made by Milanex within the principles stated above, it follows that its cross-claim against Milanex, relying on the TPA and FTA and the ASAICA, must be dismissed. There is no other basis, in my view, which entitled it to relief against Milanex. Having regard to the conclusions earlier expressed, it is unnecessary for me to consider the cross claim by Mr Kotevski against Milanex. 303 Mr Docker submitted tha I should, in any event determine Mr Kotevski's cross claim against Milanex and Mr Vlasic in order that its rights may be subrogated to those of Mr Kotevski in respect of any judgment found in Mr Kotevski's favour. I do not consider it appropriate to pursue this hypothetical question in respect of a contract I propose to set aside. Mr Kotevski will in the result suffer no loss. However, in any event, in my opinion, the negligence of Milanex and Mr Vlasic did not cause Mr Kotevski's loss, for the same reason that Perpetual's cross claim against Milanex should fail. The intervening cause of loss was the conduct of GHL and to a lesser extent Fabian. 304 I propose to make final orders in this matter but being mindful that some aspects, including the costs orders, may require further argument and Mr Dockers specific request. I will give all parties liberty to apply. This should be done at least in the first instance by approaching the Associate to the Chief Judge at Common Law. 305 The orders I make are: 1. Pursuant to s7 of the Contracts Review Act I declare void in whole the loan contract and the mortgage. 2. Notwithstanding order 1, I declare that Perpetual shall be entitled to retain all monies purportedly paid to it under the loan agreement or mortgage prior to this date. 3. I declare that Mr Kotevski holds in trust for Perpetual the verdict payable to him by Mr Lo, less any costs as between solicitor and client properly payable by Mr Kotevski in respect of his cross claim against Mr Lo. 4. I order Perpetual to execute in registrable form a discharge of mortgage AC67270Q and deliver such discharge together with certificates of title 3/SP3893 and 17/SP3893 and the appropriate registration fee to Mr Kotevski within 30 days. 5. Verdict and judgment for the defendant in each of the actions by Perpetual against Mr Kotevski. 6. Amended First Cross Claim Dismissed with no order as to costs. 7. Further Amended Second Cross Claim by Perpetual against Milanex dismissed with costs. 8. Amended Fourth Cross Claim dismissed with no order as to costs. 9. Perpetual to pay Mr Kotevski's costs of both actions. 10. Liberty to all parties to apply on 7 days notice. 11. Exhibits may 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.