New South Wales Supreme Court CITATION : RELIANCE FINANCIAL SERVICES NSW PTY LIMITED v SOBBI & ANOR [2010] NSWSC 236 HEARING DATE(S) : 28, 29, 30 September 2009, 1, 2 October 2009, 18, 19 November 2009, 11 December 2009, 11 February 2010 JUDGMENT DATE : 1 April 2010 JURISDICTION : Common Law JUDGMENT OF : Hall J at 1 (1) An order that the defendants give the plaintiff possession of the land comprised in the relevant Certificate of Title Folio Identifier. DECISION : (2) An order that the plaintiff have leave to issue a Writ of Possession in respect of the property referred to in order (1). (3) Judgment be given in favour of the plaintiff against the defendants in the amount of the judgment debt together with interest calculated on that sum to the date of judgment. (4) That the defendants' Second Further Amended Cross-Claim be dismissed. CATCHWORDS : CONTRACTS – Contracts Review Act 1980 – unjust contracts – loan contract – guarantee and mortgage security provided by defendants (parents of borrower) – purpose of the loan – adult son in financial difficulty – whether defendants/parents aware of that fact – alleged threats made to son to pay monies – whether there was a single or dual purpose of loan from plaintiff lender – whether loan to son for benefit of family business operated by company of which defendants sole directors and shareholders – whether defendants in position of "special disadvantage" – whether in particular the claimed indebtedness of adult son and alleged threats made to him constitute a position of "special disadvantage" – issues of credit over true purpose of loan central to issues of whether the contracts were "unjust" or unconscionable under general law principles - cross-claim by guarantor/mortgagors to avoid guarantee and mortgage under Contracts Review Act and for unconscionability dismissed - judgment that defendants pay plaintiff (lender) outstanding loan and for possession Australian Securities and Investments Commission Act 2001 (Cth) LEGISLATION CITED : Contracts Review Act 1980 Real Property Act 1900 Antonovic v Volker (1986) 17 NSWLR 151 Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 at 277 Commercial Bank of Australia Limited v Amadio (1988) 151 CLR 447 Elkofairi v Permanent Trustee Co Limited [2002] NSWCA 413 Garcia v National Australia Bank Ltd (1993) NSW Conv R 55-662 National Australia Bank v Satchithanantham [2009] NSWSC 21 CASES CITED : Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41 Perpetual Trustees Victoria Limited v Longobardi [2009] NSWSC 654 Reliance Financial Services Pty Limited v Sobbi [2009] NSWSC 1375 Riz & Anor v Perpetual Trustees Australia Limited & Ors [2007] NSWSC 1153 Spina v Permanent Custodians Limited [2009] NSWCA 206 Teachers' Health Investments Pty Limited v Wynne (1996) NSW Conv R 55-785 West v AGC (Advances) Limited (1986) 5 NSWLR 610 Yerkey v Jones (1939) 63 CLR 649 PARTIES : RELIANCE FINANCIAL SERVICES NSW PTY LIMITED v Ghandi Faizi SOBBI & ANOR FILE NUMBER(S) : SC 04/179279 COUNSEL : P: M Ashhurst SC/D Allen D: P Menzies QC/C Bova SOLICITORS : P: Proctor & Associates D: Bowles Lawyers IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HALL J THURSDAY 1 APRIL 2010 2004/179279 RELIANCE FINANCIAL SERVICES (NSW) PTY LIMITED v GHANDI FAIZI SOBBI & ANOR JUDGMENT HIS HONOUR: PART A 1. Introduction 1 These proceedings arise out of a loan agreement dated 11 June 2002 between the plaintiff, Reliance Financial Services (NSW) Pty Limited ("Reliance"), and one Alan Sobbi who is the son of the defendants, Ghandi Faizi Sobbi and his wife, Zakiyeh Faizi Sobbi ("the Loan Agreement"). They concern a guarantee and mortgage given by Alan Sobbi's parents (the defendants) in respect of the loan, in particular, a deed of guarantee and mortgage both dated 11 June 2002. 2 Mr and Mrs Sobbi seek to meet the claim by Reliance by the Second Further Amended Cross-Claim in which they seek orders setting aside or rescinding the guarantee and mortgage pursuant to the Contracts Review Act 1980, the Australian Securities and Investments Commission Act 2001 (Cth) or, alternatively, under the general law principles of unconscionable dealing. They also seek ancillary orders as set out in the pleading. 3 Reliance was, at all material times, the trustee of a service trust for a firm of accountants, Cassaniti & Associates. It was also appointed the trustee of the Reliance Discretionary Trust which was a provider of loans to clients of Cassaniti & Associates. On 11 November 2008, Brereton J made declarations acknowledging the appointment of Reliance and declaring that the loan, the mortgage and these proceedings were assets of the Trust. 4 Cassaniti & Associates were formerly accountants to the defendants. 5 In the period 1999 to 2003, Mr Sam Cassaniti was a principal of Cassaniti & Associates. He was also in that period a director of Reliance. He and his wife were shareholders of Reliance. 2. The proceedings 6 Reliance claims that it made loan advances to Alan Sobbi in the amount of $613,000 (although the loan agreement of 11 June 2002 specified an amount of $600,000). A term of the loan agreement was that Alan Sobbi would pay interest on the monies advanced at the rate of 12%. There is no dispute as to the loan, the amount of the loan or the interest rate. 7 The defendants are and were as at 11 June 2002, the registered proprietors of a residential property being their home, at Wakeley, New South Wales (the "Wakeley property") over which they gave a mortgage in favour of Reliance in respect of advances made by Reliance. The mortgage was subsequently registered. It secured the above loan of $613,000 made by Reliance. 8 On 9 June 2004, Reliance made a formal demand on the defendants pursuant to the terms of the guarantee to repay the monies owing to it. However, the defendants have not paid the monies so demanded. It, accordingly, claims that the loan being in default (it was due to be repaid on 11 June 2003) the defendants are in breach of the terms of the Mortgage. 9 On 16 October 2003, Reliance served on the defendants a Notice pursuant to s.57(2)(b) of the Real Property Act 1900. The Notice called upon the defendants to pay the monies specified therein. It expired on or about 16 November 2003. 10 Reliance claimed that, as at 30 June 2004, the defendants were indebted to it in respect of principal and interest in the amount of $770,837. 11 The orders sought in the Statement of Claim include an order for possession of the Wakeley property, that leave be granted to issue a Writ of Possession and judgment in favour of Reliance in the abovementioned amount together with interest at the rate of 12%. 12 It is not disputed that Alan Sobbi failed to repay the loan in accordance with the terms of the Loan Agreement. It is in those circumstances that Reliance looks to enforce the guarantee and indemnity dated 11 June 2002. 13 The original Statement of Claim has been amended on a number of occasions. Reliance ultimately proceeded on the Further Amended Statement of Claim filed on 24 March 2009. 14 The defendants filed an Amended Defence on 14 November 2007. By that Defence, the defendants admitted the mortgage but did not admit breach of the loan (however, there is no assertion that it was repaid). The defendants also conceded that they have not satisfied the notice served on them by the plaintiff pursuant to s.57(2)(b). They assert, however, that the mortgage should be set aside pursuant to s.7 of the Contracts Review Act or, alternatively, for unconscionable dealing by or on behalf of the plaintiff. 15 The defendants filed a cross-claim which was later amended. In the Second Further Amended Cross-Claim filed towards the end of the hearing (on 11 December 2009), they claim the following unjust circumstances existed at the time the mortgage was executed:- (1) That the defendants were elderly with a poor command of spoken or written English. (2) That a copy of the Loan Agreement was not provided to the defendants or explained to them. (3) That the defendants did not obtain independent legal advice. (4) That Reliance knew but did not disclose to the defendants that their son, Alan, was, at the time of the loan, a bankrupt. (5) That the defendants did not know that the purpose of the loan was for their son, Alan, to repay monies owed to one Fadi Ibrahim (who it was said was threatening Alan Sobbi) rather than purchasing jewellery (which is what the defendants claimed Alan Sobbi had told them was the purpose of the loan). (6) That Alan Sobbi did not have the financial resources to pay the loan. 3. The cross-claim (a) The issues and contentions in support of the cross-claim 16 The matters in dispute between the parties in these proceedings do not relate to the matters alleged in the Further Amended Statement of Claim, but arise out of the Second Further Amended Cross-Claim. In support of the claim for relief in respect of the Guarantee and Mortgage, Mr and Mrs Ghandi Sobbi rely upon the matters pleaded in paragraph 6 of the amended cross-claim as extracted in paragraph [15] above. 17 The claims for relief by the defendants in the abovementioned bases is to be considered on three bases:- (1) First, by reference to and application of equitable principles and the statutory provisions for relief as well as the principles that apply to guarantees and security granted by third parties. (2) Second, whether, notwithstanding that the Loan Agreement was an agreement made between Reliance and Alan Sobbi, the defendants nonetheless received a material benefit from it (the issue of "benefit" ). (3) Third, whether, with or without the benefit referred to in (2), the defendants gave the guarantee and mortgage in full knowledge that the loan monies paid by Reliance would be used to assist their son resolve his financial problems, including those with Fadi Ibrahim. 18 A considerable amount of evidence focussed upon the second and third matters. 19 The defendants, in support of their claim that the contracts in question (the guarantee and mortgage) were "unjust" or unconscionable, claimed that Reliance had knowledge of the fact that their son, at the time of the loan, was an undischarged bankrupt but that they did not. Such knowledge, it was alleged, could be inferred from the circumstances set out in paragraphs A, B, C and D in paragraph 6 of the Second Further Amended Cross-Claim. 20 Alternatively, they claim that Reliance ought to have known that, as at that date, Alan Sobbi was an undischarged bankrupt. Particulars in that respect are also set out in the pleading. 21 The defendants assert that, by Reliance's failure to inform them of the fact that Alan Sobbi was an undischarged bankrupt, it falsely represented to them that he was not, at the time, an undischarged bankrupt. 22 Particulars set out in that respect state that the "representation" is to be implied from the failure of Reliance to inform the cross-claimants on or before 11 June 2002 that their son was an undischarged bankrupt. 23 In the written submissions for the defendants/cross-claimants, their case is summarised in the following terms:- "5. The basis for the relief sought by Mr and Mrs Sobbi can be summarised as follows: (a) The Guarantee and Mortgage are unjust in all the circumstances given the position of special disadvantage that Mr and Mrs Sobbi were in at the time they entered into those documents of which Reliance took advantage; the position of special disadvantage arises from: (i) the following matters of which Mr and Mrs Sobbi were not aware that: A. Alan Sobbi was an undischarged bankrupt; B. the purpose of the loan from Reliance to Alan Sobbi was to repay monies allegedly owing to a person by the name of Fadi Ibrahim (Ibrahim) and was not to purchase jewellery or the business of the House of Diamonds Pty Limited (House of Diamonds); C. that Alan Sobbi was heavily indebted to Reliance; D. that Alan Sobbi did not have the financial means to make payment to Ibrahim or to repay the loan to Reliance; and E. that Alan Sobbi had been physically harmed by persons on behalf of Ibrahim and was threatened with further physical harm if he did not make payment to Ibrahim. (ii) The fact that Reliance was aware or ought to have been aware of the matters set out in A to E above and knew, concealed from or otherwise failed to disclose the same to Mr and Mrs Sobbi. (iii) Alternatively, if it is found (which is denied) that Mr Sobbi was aware of any of the matters set out in (i) above, then: A. the knowledge of Mr Sobbi that Alan Sobbi had been physically harmed by persons on behalf of Ibrahim; B. the knowledge of Mr Sobbi that Alan Sobbi had been threatened with further physical harm if he did not make payment of $600,000 to Ibrahim; and C. the agreement to enter into the Guarantee and Mortgage so that Alan Sobbi could make payment to Ibrahim and Ibrahim would not be further harmed. (iv) The fact that Reliance had no regard to Mr and Mrs Sobbi's ability to repay the principal under the Loan Agreement or service the payment of interest. (v) The age of Mr and Mrs Sobbi; the total lack of experience and expertise of Mr and Mrs Sobbi; the inability of Mr and Mrs Sobbi to read or write English; the inability of Mrs Sobbi to speak English; the poor command of the English language of Mr Sobbi; failure to obtain financial advice; and (vi) The behaviour of Mr Cassaniti and generally leading up the entry into the Loan Agreement, Guarantee and Mortgage (see paragraph 6(i) of the Cross Claim). (b) Further or alternatively, by reason of the matters set out in (a)(i) to (a)(vi) above, enforcement of the Guarantee and Mortgage would be unconscionable in all the circumstances given the position of special disadvantage that Mr and Mrs Sobbi were in at the time they entered into those documents of which Reliance took advantage; and (c) Further, the failure of Reliance to disclose to Mr and Mrs Sobbi that Alan Sobbi was an undischarged bankrupt was a failure to disclose an unusual feature of the transaction; alternatively, such a failure to disclose amounts to a misrepresentation actionable under the ASIC act; Reliance's failure to disclose and or the making of the misrepresentations, will result in rescission of the Guarantee and Mortgage." 24 The same matters are relied upon in support of a claim that Reliance was engaged in unconscionable conduct. 25 The case pursued by the defendants, accordingly, rests on two bases. The first was the Contracts Review Act. The second was the doctrine of unconscionability. (b) The response of Reliance to the cross-claim 26 Reliance was granted leave on 11 February 2010 to file its Defence to the Second Further Amended Cross-Claim. However, from the outset of the hearing, Reliance proceeded upon the following bases:- (1) That the loan was negotiated by Ghandi Sobbi and not by his son. (2) That the loan was taken out in the name of Alan Sobbi at the request of his father. (3) That the purpose of the loan was for the defendants' own personal benefit. Reliance maintained that, whilst the defendants (in particular Ghandi Sobbi) advised it through Sam Cassaniti that the purpose of the loan was to allow their son to pay certain monies to Fadi Ibrahim, in fact, the defendants intended to use the monies in order to purchase jewellery stock for a company owned by them (Lemery Holdings Pty Limited ( "Lemery Holdings" ).) (4) That the defendants' inability to speak English was irrelevant as they negotiated the loan for their own benefit and, in circumstances in which they received a copy of the Loan Agreement and independent legal advice. (5) The fact that their son was a bankrupt as at the date of the loan was not known to Reliance. However, it was known to David Cassaniti, who was practice manager of Cassaniti & Associates. It is Reliance's contention that David Cassaniti had, before the date of the loan, informed both Alan Sobbi and the Ghandi Sobbi of the sequestration order made against Alan Sobbi in October 2001. (6) That the bankruptcy of Alan Sobbi was an irrelevant fact given that the purpose of the loan was for the defendants to fund the purchase of jewellery belonging to House of Diamonds Pty Limited ( "House of Diamonds" ) by Lemery Holdings. PART B 4. Relevant persons and entities (a) Mr and Mrs Sobbi 27 Mr Ghandi Sobbi was born in Iran. He emigrated from Kuwait to Australia in 1984. It is said at that time he was unable to speak or understand English. However, he learned to speak the English language in subsequent years in Australia. It is said that he had difficulty in understanding the English language in its written form and required documents to be explained to him in order that he would fully understand the nature of them. 28 As at 11 June 2002, Ghandi Sobbi was 70 years of age and Mrs Sobbi was aged 62 years. 29 Mrs Zakiyeh Sobbi was also born in Iran. In 1957, she married Ghandi Sobbi and had seven children with him. She emigrated to Australia with her husband in 1984. Mrs Sobbi does not write, read or speak English. She speaks Persian and Arabic. She is unable to read or write in Persian or Arabic or any other language. She has never been to school. She says she has no knowledge or understanding of financial matters, a matter which Reliance, however, disputed. 30 In her affidavit sworn 13 September 2007 (paragraph 6), she stated that she leaves matters concerning her affairs or the affairs of her husband and family to her husband. She stated "I trust him and do as he advises". 31 Ghandi Sobbi is a jeweller by trade and has been involved in the jewellery business since emigrating to Australia in 1984. 32 In 1984, Ghandi Sobbi and his wife became the founding directors of Lemery Holdings, which carried on business in the retail jewellery trade. 33 In his affidavit sworn 12 September 2007 in the present proceedings, Ghandi Sobbi stated he retired in 2004. At the time of swearing his affidavit he was 75 years of age. 34 In approximately 1985, he purchased the shop front at 227 Macquarie Street, Liverpool. On those premises he, for many years, has operated his jewellery business. He bought the property without borrowed funds. 35 At about the same time, he purchased his then house in Wakeley. Again, he did not utilise any loan funds for the purchase. 36 In 1988, he purchased his present home, the Wakeley property. Again, he did not borrow money to finance the purchase. In the period from 1988 to 1990, a house was built on the land and, in that year, his family moved into the house where he and his wife still reside. 37 As at 11 June 2002, the combined assets of Mr and Mrs Sobbi were:- (1) The shareholding held by them in Lemery Holdings. (2) The Wakeley property (said to be valued at between $800,000 and $850,000 as at 4 October 2007 – Tender bundle, Exhibit 22, p.170). 38 As at that date, the assets of Lemery Holdings were:- (1) The Liverpool property which was unencumbered and had an estimated value of $1 million (affidavit of Mr Ghandi Sobbi sworn 13 July 2004, paragraph 21(b)). (2) Jewellery stock in respect of the business of Lemery Holdings valued at approximately $2 million (affidavit of Mr Ghandi Sobbi sworn 13 July 2004, paragraph 21(a)). 39 On behalf of the defendants, it was said that the relationship between Cassaniti & Associates and themselves extended throughout the period 1999 to 2003 and that that firm acted on their behalf as accountants and consultants and tax agents as well as acting as accountants and tax agents for Lemery Holdings, Alan Sobbi and the House of Diamonds. (b) Alan Sobbi 40 Alan Sobbi emigrated to Australia from Kuwait with his parents. In 1993, he said he moved to certain premises in Wakeley. He said that property was a wedding gift from his parents. The property was sold by him and his wife in 1998 when they purchased a unit in Mortlake. 41 In April 2000, he and his wife sold the Mortlake unit and rented a house until they moved in with his parents in or about August 2002. 42 He said that he first met Sam Cassaniti in 1996/1997 and appointed him as his accountant and financial adviser. He said that in or about mid-1999, he began borrowing money from Mr Cassaniti. He recalled in mid-1999 applying for a $50,000 overdraft from the State Bank. However, instead, he borrowed the money through Sam Cassaniti. 43 In his affidavit sworn 12 November 2009, Alan Sobbi stated that he knew a person by the name of Fadi Ibrahim. He said that he knew Mr Ibrahim "… to be a prominent figure in the Sydney underworld" (paragraph 12). 44 On 30 October 2000, Registrar Quinn of the Federal Court of Australia ordered that service of a bankruptcy notice addressed to Alan Sobbi be effected by leaving it at the offices of "Castariti [sic] & Associate, Level 1, Unit 1, 106 Moore Street, Liverpool, NSW". 45 On 4 October 2000, Registrar Segal of the Federal Court of Australia ordered service of the Creditor's Petition be effected by service at the offices of "Cassaniti & Associates, Level 1, Unit 1, 106 Moore Street, Liverpool and at 'Diamond Centre Jewellers and Manufactures', 227 Macquarie Street, Liverpool …". 46 On 27 June 2001, following compliance with the service requirements for substituted service orders, Registrar Hedge of the Federal Court ordered that a sequestration order be made against the estate of Alan Sobbi (tender bundle, p.35). (c) Lemery Holdings Pty Limited 47 From 1986, Lemery Holdings owned and operated a jewellery business as well as the premises on which that business was conducted, namely, 227 Macquarie Street, Liverpool. The directors and shareholders have, at all material times, been Mr and Mrs Sobbi. 48 According to the evidence, Lemery Holdings also became involved in a property development in the late 1990s and carried on business as a property investor in 2002. 49 In August 2001, Lemery Holdings leased the business and premises that it owned in Macquarie Street, Liverpool to House of Diamonds, a company owned by the defendants' daughter, Sheriene Sobbi and their son in law, Masoud Malek. 50 As discussed below, in March 2002, Lemery Holdings terminated the lease with House of Diamonds of the premises at Macquarie Street, Liverpool and regained possession of the premises. (d) Masoud Malek 51 At the time of the loan, Masoud Malek was Ghandi Sobbi's son in law, he being married to his daughter, Sheriene Sobbi. For a period of time up to June 2002, Masoud Malek and his wife worked in the business of the House of Diamonds. In particular, according to the evidence of Ghandi Sobbi, Lemery Holdings lent House of Diamonds sums of money to assist it in the early stages of its business: Exhibit B, paragraph [8]. 52 Masoud Malek came to Australia in 1995. In his affidavit sworn in the present proceedings on 10 November 2009, he stated that he did not have involvement in the management of House of Diamonds. He stated that Alan Sobbi was involved in the conduct of the business. 53 In the affidavit of Ghandi Sobbi sworn 4 October 2002 (Exhibit B, paragraph [21]), "Kevin Group Pty Limited" was stated to be a company owned and controlled by Masoud Malek. An historical company extract attached to that affidavit marked "GFS-4" indicates that a company named Kevin Group Pty Limited commenced on 19 March 2001 and that a company, Kevin Group Services Pty Limited, was established and operated from 13 January 2000. The registered office of the latter company from that day was Cassaniti & Associates. The current director of that company as at 11 September 2002 was shown as Masoud Malek, who is recorded as then having been the beneficial holder of two shares in the company. 54 The only significance of Kevin Group Services Pty Limited to the present proceedings, as discussed below, is that, by direction given to Reliance, a large portion of the loan monies advanced under the loan agreement were to be paid to that company. The evidence establishes that, on 8 July 2002, a cheque was made payable to Kevin Group Services Pty Limited in the amount of $200,000. On 11 July 2002, a second cheque payable to that company was issued in the amount of $413,000. (e) House of Diamonds (NSW) Pty Limited 55 The ASIC Historical Company Extract (a copy of which constitutes Annexure A to the affidavit of Masoud Malek sworn 10 November 2009) establishes that the company commenced to trade under the above name on 13 April 2000. The company was dissolved on 10 December 2006. 56 The organisation details in the ASIC Extract reveals that the previous registered office of the company was Cassaniti & Associates at that firm's address in Moore Street, Liverpool and that the previous principle place of business at the time was 227 Macquarie Street, Liverpool. 57 The directors of the company are shown as Zina Sobbi (appointment date: 24 January 2002, cease date: 27 June 2002) and Masoud Malek (appointment date: 13 April 2000, cease date: 24 January 2002). 58 There was only one issued share which was beneficially held by Masoud Malek. The firm Vouris & Bell were appointed as liquidators on 22 July 2002 and the cease date of their appointment was 6 May 2004. 59 In October 2001, House of Diamonds opened an additional jewellery business as Westfield, Burwood. According to the evidence, to assist in the commencement of that business, the defendants, through Lemery Holdings, loaned approximately $200,000 to House of Diamonds so that the company could acquire stock and business equipment for the new shop. 60 In affidavit evidence given in earlier proceedings (discussed below), Ghandi Sobbi became aware in early 2002 that both businesses conducted by the House of Diamonds were experiencing financial difficulties and had been the subject of demands for payment of unpaid invoices by suppliers previously used by House of Diamonds. PART C 5. The Loan Agreement 61 The Loan Agreement between Reliance and Alan Sobbi recorded the agreed principal loan amount to be the sum of $600,000 and that "the principal sum" included all or any other monies in addition to the amount of $600,000 owing by the borrower to the lender. 62 The Agreement, as earlier noted, provided for repayment of the principal sum on 11 June 2003. 63 Under clause 3.1, Interest, provision was made for the payment of interest on the principal sum at a lower rate of eight percent and at the higher rate at 12% per annum from 11 June 2002. 64 Clause 7 of the Loan Agreement, Security, recorded the personal guarantee of the defendants (clause 7.1) and that a first mortgage was given over the defendants' premises (clause 7.2). 65 Attached to the Loan Agreement was a document entitled "Schedule 2", being a declaration by third party mortgagor, guarantor in the name of the defendants. The declaration, inter alia, recorded that the defendants had received independent legal advice regarding the loan and security documents referred to in paragraph 1 of the declaration and in clause 3 that after receiving that advice, the defendants had freely and voluntarily signed the Mortgage, the Deed of Guarantee and the Direction to Pay. The declaration was made and signed at Liverpool on 11 June 2002 and was witnessed by a solicitor. 66 The Loan Agreement was also accompanied by a declaration under s.10 of the Consumer Credit Regulation 1995. It stated that the defendants declared that the credit to be provided by Reliance "… was applied wholly for investment purposes and the security being granted by us over the property at … Wakeley … is to be applied wholly for investment purposes". The declaration, which was made by both Mr and Mrs Sobbi, was also dated 11 June 2002. 67 Although, as noted above, the loan agreement secured by the mortgage included an "all other monies" clause, Reliance has not pursued a claim for any other monies than the loan of 11 June 2002 together with interest. 6. The Mortgage 68 The mortgage granted by Mr and Mrs Sobbi was dated 11 June 2002. Annexure A to the mortgage sets out particular covenants. The latter recorded that, in consideration of Reliance:- "At the request of the Mortgagor entering into a Loan Agreement (the 'Agreement') of even date made between the Mortgagee, as Lender, and Alan Sobbi , as Borrower and a Deed of Guarantee (the 'Guarantee') between the Mortgagee, as Lender, and Mortgagor, as Guarantor, the Mortgagor (a) … (b) covenants with the Mortgagee as follows:- 1. the Mortgagor will pay to the Mortgagee all monies payable under the Agreement. …" 69 The defendants made and subscribed a "Declaration by Third Party Mortgagor, Guarantor …" (Schedule 2) in which they declared that they, as third party mortgagors and indemnifiers for the borrower (specified as Alan Sobbi), declared that they had received independent legal advice regarding the loan and security documents identified in paragraph 1 of the Declaration. 70 In paragraph 3 of the Declaration, the defendants stated that, after receiving the independent legal advice referred to, they freely and voluntarily signed the Mortgage, Deed of Guarantee and the Direction to Pay. 71 The defendants additionally swore a declaration under s.10 of the Consumer Credit Regulation 1995. In it they declared:- "We, Ghandi Faizi Sobbi and Zakiyeh Faizi Sobbi … declare that the credit to be provided to us by Reliance Financial Services Pty Limited … was applied wholly for investment purposes and the security being granted by us over the property … Wakeley is to be applied wholly for investment purposes." 72 The Declaration was signed on 11 June 2002. 73 The defendants signed a Direction to Pay addressed to Reliance. Reliance was:- "… directed to draw the advance of $600,000 in favour of (…) … or as they may direct in writing." 74 The Direction was dated 11 June 2002. 7. The Deed of Guarantee 75 In clauses 1 to 5 of the Deed of Guarantee, the defendants agreed to unconditionally and irrevocably guarantee to Reliance the performance of the Loan Agreement by Alan Sobbi. The Guarantee and Indemnity was expressed to be a continuing security and extended to all obligations and monies payable under the Loan Agreement: clause 4. PART D 8. Discussions and advice preceding the execution of the Mortgage and Guarantee 76 Ghandi Sobbi stated in his affidavit that he was not involved in any discussions or negotiations with "Cassaniti" in respect of the loan which his son, Alan, had arranged to obtain as recorded in paragraph 16 of his affidavit. As discussed below, there is evidence to the contrary, namely, a file note of Cassaniti & Associates dated 17 May 2002, Exhibit 9. 77 According to Mr Sam Cassaniti, on or about 11 June 2002, Mr and Mrs Ghandi Sobbi attended on his office where he stated the following conversation took place:- Ghandi Sobbi: "Can we sign the documents now?" Cassaniti: "No, you both have to get independent legal advice from separate lawyers. Alan has already sent me documents which he says were signed by you and I'm not so sure. I want a solicitor to witness you signing the documents." Ghandi Sobbi: "We will go now and find a lawyer as we need the money urgently. Who can we see?" Cassaniti: "There are many lawyers. Try T J Johnson, Stoikovich Macri, who are across the road, Mark Rumore, your son knows him, it's up to you. If I don't have you see a lawyer, you might come back and say that you did not understand the documents and try to get out of paying the money back." Ghandi Sobbi: "Sam, I'm a man of Honour, I will never forget the help you have given us. I don't need any documents explained to me or my wife." Cassaniti: "No, this is the proper way to do things and it protects you and me just in case of any future dispute." 78 On Mr Ghandi Sobbi's account, Sam Cassaniti told him he would need to see a solicitor. He said that Mr Cassaniti arranged for a solicitor to see him before whom the documents were to be signed. He and his wife went to the solicitor's office (whose name he could not recall). The solicitor said to him "you are both guaranteeing your son's loan with a mortgage on your property. Is that right?". Ghandi Sobbi confirmed that they were. According to Ghandi Sobbi, the solicitor seemed to be in a hurry and stated that, although he could witness his signature, he could not witness his wife's, as she would need to see a solicitor who spoke Arabic. Ghandi Sobbi stated that the solicitor then made a telephone call and said that he had arranged an Arabic-speaking solicitor to see his wife straight away. 79 Mr Ghandi Sobbi claimed that the solicitor did not read the contents of the documents to him and he himself, he said, was unable to read their contents. He said that the solicitor did not explain the provisions or the effect of the documents to him. According to his account, he simply put the documents in front of him and showed him where to sign, which Ghandi Sobbi said he did. 80 Ghandi Sobbi said that he understood that he was signing the documents in order to guarantee his son's loan and to give a mortgage over his house. He also understood that if his son did not repay the money and interest to "Cassaniti", then he would have to pay for his son. He also understood that if he did not pay, his house could be sold. 81 In paragraph 33 of his affidavit sworn 12 September 2007, Ghandi Sobbi identified a number of matters that he said the solicitor did not point out to him, including the seriousness of the risk, the terms of the loan or the amount of any liability under the loan, failure to advise his son's financial position including the fact that he had been made bankrupt in 2001 and did not inform him or advise him to obtain financial advice from a financial advisor or legal advice from his own solicitor. 82 Mr Ghandi Sobbi's evidence was that he first became aware of his son's bankruptcy after the date of the Mortgage and Guarantee when Mr Leon Nikolaidis, solicitor, who, at one stage, acted for Lemery Holdings, advised him that his son had, in June 2001, become bankrupt. Mr Nikolaidis is said to have told him this "in around mid-2003". On the same day, he said he spoke to his son about the advice Mr Nikolaidis had given. His son told him that the information could not have been right as he had not received any documents. 83 Mr Sobbi stated that, had he known that his son was bankrupt when he was asked to guarantee the loan, he would not have done so. He stated that he would not have risked the family home and would have refused to guarantee the loan. He said that, in that event, he would not have signed the documents for the loan. 9. Evidence concerning the purpose of the loan application 84 The purpose of the loan is a primary factual issue in the present proceedings. The evidence relating to it is analysed below. (a) Ghandi Sobbi's evidence on the purpose of the loan 85 According to Ghandi Sobbi, in late May or early June 2002, he spoke to his son, Alan Sobbi, to the following effect:- Alan Sobbi: " I need to borrow $600,000 to buy Masoud's shop ." Ghandi Sobbi: "Why don't you go to the bank and apply for a loan?" Alan Sobbi: "Because with the bank it will take too long. I have already talked to Sam Cassaniti and he can organise the loan. But he has asked that you and Mum guarantee the loan." Ghandi Sobbi: "What kind of loan would it be?" Alan Sobbi: "It will be an interest only loan for a period of 2 or 3 years, at an interest of 8% per annum." Ghandi Sobbi: " How would you be paying the loan and the interest? " Alan Sobbi: " From the income I'll be deriving from Masoud's shop. " Ghandi Sobbi: " You go ahead with Sam and your mother and I will guarantee the loan. " (Affidavit of Ghandi Sobbi sworn 12 September 2007, paragraph 16) (emphasis added) (b) Mr Sam Cassaniti's account on the purpose of the loan 86 In his affidavit sworn on 26 September 2007 (paragraph 23), Mr Cassaniti stated that he was first approached in May 2002 by Mr Ghandi Sobbi and that the following conversation took place:- Ghandi Sobbi: "Alan has been hiding money for some very very bad people in Kings Cross, I will need to borrow $600,000 so Lemery can buy the House of Diamonds and then the money can be cashed through House of Diamonds to pay Alan's debts." Cassaniti: "What do you mean, how is he hiding the money?" Ghandi Sobbi: "Alan is a very bad man, he leased cars for them and he would cash money through fraudulent credit cards through the businesses and now they are backing him, I need the money desperately." Cassaniti: "I will see what I can do, I don't know if Reliance has the funds available, but in any case, you and your wife will need to get independent legal advice and you will need to guarantee all of the other money lent." Ghandi Sobbi: "Thank you, I am a man of Honour and I will never let you down." Cassaniti: "Reliance has already lent over $400,000 and you only probably around about $150,000 in [sic] accountancy fee. You must guarantee all of this money plus interest before I advance another dollar. Do you understand this?" Ghandi Sobbi: "That's fine, I am happy to pay back all of the money, I am a man of honour." Cassaniti: "I will draft a sale agreement between House of Diamonds and Lemery for the purchase of the stock. How much are you paying?" Ghandi Sobbi: "$800,000 because that is the value of the stock, I need $600,000 from you, I am a man of honour, you will be paid all the money owing." (Affidavit of Sam Peter Cassaniti sworn 26 September 2007, paragraph 23) 87 Sam Cassaniti said that he and Ghandi Sobbi also had a conversation about Lemery Holdings. PART E 10. Chronological summary of relevant events 88 The chronological series of events set out below provide context in which the Sale Agreement between House of Diamonds and Lemery Holdings, the Loan and the Mortgage and Guarantee may be considered. (a) Events in 2001 89 As earlier noted, in August 2001, Lemery Holdings leased the business and premises owned by it in Macquarie Street, Liverpool to House of Diamonds, being a company then owned by the defendant's son in law, Masoud Malek. 90 House of Diamonds originally opened its jewellery business at Westfield, Burwood in October 2001. As explained by Ghandi Sobbi in paragraph 8 of his affidavit sworn on 4 October 2002 filed in proceedings by Lemery Holdings in the Equity Division (Exhibit B in the present proceedings), to assist in the commencement of the Burwood business, the defendants arranged for Lemery Holdings to loan monies to House of Diamonds of at least $150,000 so that it could acquire stock and business equipment for the new shop. (b) Events in 2002 91 The evidence given by Ghandi Sobbi in paragraph 10 of his affidavit sworn on 4 October 2002 (Exhibit B) was that he became aware in early 2002 that House of Diamonds conducting both the business which it leased from Lemery Holdings at Liverpool and the business at Burwood were not operating profitably and that it had many creditors whom he knew as trade creditors and this caused him ongoing embarrassment. 92 In Exhibit B, Ghandi Sobbi also stated in paragraph 10 that, in March 2002, he caused Lemery Holdings to terminate its lease with House of Diamonds in respect of the premises at Macquarie Street, Liverpool and that Lemery Holdings assumed the conduct of "its business" and took control of the premises. 93 In paragraph 11 of Exhibit B, Ghandi Sobbi also stated that at the same time he appointed his son, Alan Sobbi, to manage the Burwood shop. He said he did this on the basis that he had lent Lemery Holdings approximately $200,000 and had paid off many of its debts. 94 In paragraph 13 of Exhibit B, Mr Ghandi Sobbi said that, on 12 May 2002, he proposed to his daughter that he would purchase all the stock of House of Diamonds and buy the business from her and the purchase money could be used to pay out the creditors of House of Diamonds. In paragraph 15 of Exhibit B he said he told his son, Alan Sobbi, that Lemery Holdings was going to take over saying to him "we will pay for the stock …". 95 According to his affidavit sworn on 12 November 2009 (paragraph 39), in May 2002, Alan Sobbi was under significant pressure to repay money to one Fadi Ibrahim. 96 In May 2002, two file notes of Cassaniti & Associates were made (Exhibit G). The first is dated 17 May 2002. It purports to relate to a personal attendance by Ghandi Sobbi and his grandson, Alan Sobbi (identified as "Alan Jnr"), on Sam Cassaniti. According to the note, Ghandi Sobbi told Sam Cassaniti that he needed $550,000 "on his house". 97 The 17 May 2002 file note refers to three hour meeting commencing at 10.00 am in the following terms:- "Ghandi upset and crying. Very upset with Alan Jnr - phone calls from F Ibrahim and other (threats) - pension. He has no $, will transfer shares to SPL - needs 550K on his house to pay out Ibrahim, needs a home loan - and will sell property and buy smaller home - Ghandi's worried Alan (jnr) not ??? Fadi $ ? C'wealth Bank, process server at shop ?? Alan is a liar - SPL will finance $550K pay out Ibrahim and own shares in Lemery in reduction of his O/S debt to SPL ? - Ghandi will pay Ibrahim $300K within a week." 98 As discussed below, this file note is a contemporary note and, if determined to be an accurate record, is evidence of the following matters:- (1) That Ghandi Sobbi, not his son, Alan Sobbi, took the initiative in approaching Mr Sam Cassaniti with a view to obtaining finance from him or through him. (2) That, at that time, Ghandi Sobbi was very upset with his son, Alan, over financial matters. In particular, he was concerned as to money apparently owing by Alan Sobbi to Fadi Ibrahim and to the Commonwealth Bank. (3) The financial problem said to have existed between Alan Sobbi and Fadi Ibrahim was, according to Ghandi Sobbi, linked to alleged threats attributed to Fadi Ibrahim and/or others on the latter's behalf. (4) That Mr Ghandi Sobbi told Mr Sam Cassaniti that he needed funds to assist in paying Fadi Ibrahim. (5) That a proposal was made by Ghandi Sobbi at the meeting of 17 May 2002 to Sam Cassaniti that the latter arrange finance. At that time, Ghandi Sobbi raised the prospect of shares in Lemery Holdings being transferred and offset against outstanding debts owed to Sam Cassaniti and/or Reliance. 99 Notwithstanding the above file note of 17 May 2002, Ghandi Sobbi denied, in the present proceedings, that he had met with Sam Cassaniti on 17 May 2002. In particular, he denied ever saying to him that he required a $550,000 loan (as recorded in Exhibit 9) or telling Sam Cassaniti that Mr Ibrahim was making threats to his son, Alan Sobbi. When cross-examined in detail upon the basis of the file note of 17 May 2002, Ghandi Sobbi denied that he ever attended a meeting at which any of the matters recorded in the file note were discussed. 100 In cross-examination, Mr Ghandi Sobbi denied speaking to Mr Sam Cassaniti and saying to him "I need your help … I need some money urgently". He also denied saying to Sam Cassaniti, "I need the money. They've beaten Alan with a baseball bat. I've got to help my son and I need to pay the rent for the shop at Burwood, Westfield", as stated by Ms Deigan, solicitor, in her affidavit sworn 2 October 2009. 101 Mr Sobbi also denied that Mr Sam Cassaniti said (as recorded in Ms Deigan's affidavit, paragraph 3) "I would rather lend it to Lemery than you" and he also denied him saying to Sam Cassaniti "I want Alan to be responsible". 102 On 20 May 2002, Mr Ghandi Sobbi executed a share transfer in favour of Mr Sam Cassaniti in Lemery Holdings for $1. Mr Cassaniti claimed that he held the shares on trust for Ghandi Sobbi: transcript, p.60 at line 20. 103 On 22 May 2002, Deigan Moore Associates, solicitors acting for Reliance, wrote to Alan Sobbi and to the defendants in relation to a mortgage on the Wakeley property. The letter recorded that Reliance had approved a loan to be secured as an unregistered second mortgage on the property and enclosed a number of documents including the Loan Agreement, the Guarantee and the Mortgage (Plaintiffs' bundle of tender documents, at p.46). 104 On 23 May 2002, Mr Sam Cassaniti wrote to Westfield, Lease Management in respect of House of Diamonds. The letter recorded two cheques had been received by him "… from our clients to pay the outstanding arrears …". The letter referred to outstanding rent of approximately $32,000 to $33,000. The letter also recorded:- "… Mr Sobbi is very keen to retain the shop as he believes it is a profitable partnership there between Westfields and himself. He will make every endeavour to ensure this problem does not occur in the future." (Plaintiffs' tender bundle, p.47) 105 On 23 May 2002, a stock take was carried out by Mr Ghandi Sobbi, his son, Alan Sobbi and his then son-in-law, Masoud Malek of the House of Diamonds stock. 106 On 23 May 2002, according to a file of Cassaniti & Associates, a meeting took place between himself, Gino Cassaniti, Alan Sobbi, Ghandi Sobbi, Alan Sobbi Junior, "Fadi Abraham" and "bodyguard". The file note of 23 May 2002, being part of Exhibit G, was entitled "Sobbi debt – to Abrahams". 107 On 23 May 2002, the reference to "Abrahams" in the file note is obviously a reference to the person "Ibrahim". 108 The note records the following matters:- "• Alan Big Shot with Fadi's & SPC's money • If your honest people will get $700 ? and pay back to Bank. • Always new cars BMW/Merc/Porsche • Will take Alan away for 1 day & sort him out for further • Feels sorry for father • Alan owes a lot of other people money. • Doesn't want the stock. • All jewellery is there – not even one pendant is missing. • Will return stock if they agree to pay back money • Bodyguard slapped Alan on the head & said 'you're the lowest cunt I've ever met'. • Alan has fucked everybody & been the Big Shot • Can't trust Alan – his word means nothing • Father said that if SPC will release caveat will give them the shop & extra $ to cover • fadi said – likes SPC – give him good advice steer him in the wrong direction." 109 Mr Ghandi Sobbi said, as he did in relation to the meeting of 17 May 2002, that he did not attend the meeting of 23 May 2002. He said that he had never attended a meeting with his son, Alan, Fadi Ibrahim and Mr Ibrahim's bodyguard. He said that he had never met Mr Ibrahim. He said he was never at a meeting at Sam Cassaniti's office on an occasion when his son, Alan, was slapped on the head. He denied saying at such a meeting "I can't trust Alan" and denied saying, as purportedly recorded in the file note, "Alan is a liar". 110 On 24 May 2002, Ghandi Sobbi instructed Mr Cassaniti to prepare a Contract for Sale recording the purchase of the House of Diamonds stock and business by Lemery Holdings. 111 Mr Sam Cassaniti stated that, after the above meeting with Ghandi Sobbi, he prepared a document identified as "SPC-25" in his affidavit. The document was an agreement dated 24 May 2002 between House of Diamonds as vendor and Lemery Holdings as purchaser. 112 The agreement recorded that the vendor as the owner and operator of a retail jewellery business conducted at Westfield, Burwood and the purchaser as the owner and operator of a retail jewellery business conducted in Macquarie Street, Liverpool. 113 The relevant recitals refer to the fact that the parties had agreed to sell/purchase all of the vendor's stock in trade, fixtures and fittings for the sum of $800,000. Recital D made specific provision for House of Diamonds to assign the lease to Lemery Holdings. 114 Sam Cassaniti said that he saw Masoud Malek sign the agreement of 24 May 2002 and that he signed it himself on behalf of Lemery Holdings because at that time he was its director. 115 On 24 May 2002, a "Direction to Pay" addressed to Lemery Holdings "re House of Diamonds. The direction was that Lemery Holdings was to draw the following cheques:- "(1) Sydney Home Loans $200,000 (2) Kevin Group Services Pty Limited $400,000 or as they may direct" 116 Mr Malek signed on behalf of House of Diamonds. 117 On 24 May 2002, a meeting took place at Suite 1, Level 1, 106 Moore Street, Liverpool. A file note of the meeting records Sam Cassaniti present at a meeting on that date at 10.00 am. The file note (Exhibit 11) in respect of the meeting is entitled "SOBBI Matter". It contains reference to the lodging of a caveat to protect Fadi Ibrahim and notes concerning amounts to be paid to Fadi Ibrahim over specified time periods. 118 On 11 June 2002, as earlier noted, the Loan Agreement between Reliance and Alan Sobbi in the amount of $600,000 was executed and the mortgage and guarantee. 119 On 15 July 2002, Mr Sam Cassaniti sent a facsimile to Alan Sobbi enclosing a copy of a letter dated 15 July 2002 in relation to the mortgage with Reliance. Also on that date, a letter, also signed by Sam Cassaniti as director of Reliance, was addressed to Mr and Mrs Sobbi in the following terms:- "Re Mortgage I refer to the mortgage that you executed on 11 June 2002. As per your instructions, all the monies have been distributed as follows:- 1. Sydney Home Loans on 26 June 2002 $100,000 2. Sydney Home Loans on 3 July 2002 $100,000 3. Kevin Group Services Pty Limited on $200,000 8 July 2002 4. Kevin Group Services Pty Limited on $213,000 11 July 2002 We ask that you please observe the repayment dates and ensure that you comply with the contract. In the meantime, I have approached Peter Di Prinzio from Statewide Services Pty Limited to refinance the loan. Should you have any queries whatsoever, please do not hesitate to contact the writer." 120 A copy of each of the cheques listed in the above letter of 15 July 2002 appears in the tender bundle, Exhibit 22, at pp.67-70. Mr Ashhurst relied upon these cheques as contemporaneous evidence that demonstrated that the $600,000 loan borrowed from the plaintiff went to Kevin Group Services Pty Limited (and/or Kevin Group Pty Limited). Mr Malek, in his affidavit sworn on 10 November 2009, stated that he was given the abovementioned cheques for $200,000 and $213,000 and that he banked them through the accounts of Kevin Group Services Pty Limited. He said he withdrew "large amounts in cash" and delivered cash to Fadi Ibrahim. 121 In submissions on behalf of Reliance, it was contended that the substance of the transaction was that Ghandi Sobbi (on behalf of himself and his wife) sought and obtained the loan either:- "(1) For Lemery Holdings Pty Limited ('Lemery') to buy a business and its stock (which is, in fact, what happened); or (2) So that Alan Sobbi could pay out a liability to Fadi Ibrahim (which was the purpose represented by Ghandi Sobbi). In either event, Mr Ghandi Sobbi received what he bargained for. Mrs Sobbi also obtained the benefit of the loan (for the same reasons) as she was and remains a shareholder of Lemery. …" (Plaintiff and Cross-Defendant's Outline of Submissions , paragraph [48]) 122 The case for the plaintiff was that given that the monies were received and (at least a portion) utilised for the purposes of paying Ibrahim, the loan and mortgage transaction did not constitute "asset lending", the money having provided the means for Lemery Holdings to obtain inventory for the business being conducted by Lemery Holdings. PART F 11. Acceptance by the defendant of responsibility of the loan 123 There were a number of statements made on behalf of the defendants in which, it was stated that they accepted they were liable under the mortgage. Other documents (referred to below) also appear to reflect an acknowledgement by the defendants of their liability with respect to the loan. 124 On 4 December 2002, Sid Hawach & Associates, solicitors, wrote to Sam Cassaniti & Associates in respect of "GF and ZF Sobbl [sic]" in respect of their Wakeley property. The letter recorded:- "We act for Mr and Mrs Sobbi. Please advise our office of the pay-out figure as at today's date and we will be asking you for a further pay-out figure closer to the settlement date. We look forward to receiving the above information at your earliest convenience." 125 On 22 January 2003, Cassaniti & Associates wrote to Ghandi Sobbi, providing an "estimate pay-out figure". The letter recorded that, as at the date of the letter, the amount due to Cassaniti & Associates by the defendants was based on monies to be paid by Alan Sobbi. The letter recorded a principal amount of $613,000 and interest of $27,288 totalling $640,288. 126 On 13 April 2003, David Landa Stewart (Mr Michael Zwar, Partner), solicitors, wrote to Sam Cassaniti. The letter was entitled "Ghandi & Alan Sobbi & Reliance Financial Services Pty Limited". The letter, in part, stated:- "We have been consulted by Mr Alan Sobbi and his father, Mr Ghandi Sobbi. We understand that Reliance Financial Services Pty Limited is a company associated with you and that it has made various advances during the late 1990s and late last year to our clients … It is noted that you claim that a total of $2,340,906.52 is alleged to be outstanding. It is said that this comprises a recent loan of $745,344.62 as well as previous loans and interest in the sum of $1,595,561.90. For the record, our instructions are that our clients have no idea how this alleged sum has been calculated and it is completely inconsistent with the records maintained by our clients. Our clients admit that they borrowed the sum of $613,000 late last year for the commercial purposes . They stand ready to repay the Loan Agreement with an agreed amount of interest as outlined in your letter of 3 February 2003. However, in the context of reconciling receipts and payments of funds, our clients deny that there is any liability in respect of the quantum outlined in your letter of 3 February 2003. Whilst it is correct that there have been other advances over and above the amount of $613,000 there has also been a continual series of repayments by our clients …" (emphasis added) 127 The letter, inter alia, went on to record a dispute as to Reliance's entitlement to issue a s.57(2)(b) notice. 128 From 12 May 2003, the plaintiffs commenced proceedings in the Equity Division of this Court and which by summons they sought a declaration against Reliance, as first defendant, in the following terms:- "(1) Declarations that in the events that have occurred, the First and [sic] Plaintiffs' are liable to pay the First Defendant a sum not exceeding $645,505. … (3) A declaration that on payment into Court by the First and Second Plaintiffs' [sic] of a sum not less than $645,505, the First and Second Defendants be restrained until further order from making any further demands for payment upon the First and Second Plaintiffs for any monies in excess of the sum of $645,505. 129 The second defendant to the proceedings was Sam Peter Cassaniti. 130 The apparent acceptance in the statements made by others on behalf of Mr and Mrs Sobbi to the effect that they were liable to pay the principal amount of $613,000 together with interest, I do not consider should be taken as unequivocal admissions that they themselves borrowed the loan monies. However, it is noted that the statement included in the letter written by Mr Zwar on 13 April 2003, set out above, does contain an additional dimension insofar as the letter states "our clients admit that they borrowed the sum of $613,000 late last year for the commercial purposes" (emphasis added). Whilst I do not take those statements as definitive, they, at least, are to be taken into account when assessing the defendants' credibility. PART G 12. The evidence of Mr Sam Peter Cassaniti (a) Mr Cassaniti's affidavit evidence 131 The primary evidence in the plaintiff's case on the Statement of Claim was given by Mr Sam Peter Cassaniti in his affidavit sworn 26 September 2007. Particular paragraphs of the affidavit admitted in evidence were directed to establishing:- (1) That there was an initial approach to him by Mr Ghandi Sobbi in May 2002 with a view to obtaining finance. (2) The matters discussed by them on that occasion. (3) The circumstances leading up to the Guarantee and Mortgage (paragraph 28). (4) The fact that advances were made under the Loan Agreement (paragraph 34). 132 In opening submissions, Mr Ashhurst contended on behalf of Reliance that Mr Ghandi Sobbi had sought the loan so that Lemery Holdings could purchase the business stock of the business that was then being operated by the defendants' daughter and son in law (transcript, p.1). 133 Mr Ashhurst also contended that the monies paid by Reliance were advances made for the purposes of the loan and that the defendants' company, Lemery Holdings, acquired the stock of House of Diamonds. (b) An evidentiary issue sought to be raised against Mr Cassaniti 134 I will come to the specific issues raised in cross-examination with Mr Cassaniti. Before doing so, I note that at a late stage in the hearing of the proceedings, application was made on behalf of the defendants for leave to file and rely upon a further affidavit of their son, Alan Sobbi sworn 12 November 2009 in support of their cross-claim proceedings. The affidavit was designed to deal with inconsistent evidence given by Ghandi Sobbi, in particular, evidence on the issue of "benefit". 135 In that affidavit, evidence was sought to be led to the effect that Mr Sam Cassaniti had, in relation to earlier proceedings concerning House of Diamonds (discussed below), set out to induce Alan Sobbi to have his father, Ghandi Sobbi, give a false or concocted account. This was said to relate to the purchase of the House of Diamonds business in May 2002 and the arrangements put in place to obtain a loan in Alan Sobbi's name and the mortgage by his parents. 136 The affidavit of Alan Sobbi sworn 12 November 2009 was also sought to be relied upon to establish that Mr Cassaniti had set out to induce Alan Sobbi to give a similar false account (paragraph 107 of the affidavit sworn 12 November 2009). 137 On 10 December 2009, I delivered judgment on the application for leave to adduce the evidence sought to be relied upon by the defendants in the affidavit of their son sworn on 12 November 2009: Reliance Financial Services Pty Limited v Sobbi [2009] NSWSC 1375. By that judgment, Mr and Mrs Sobbi were refused leave to rely upon paragraphs [54] to [122] of the affidavit. 138 The affidavit evidence of Ghandi Sobbi, in earlier proceedings in this Court which it was sought to establish as having been a "concocted account" as discussed in paragraph [134] was the affidavit Ghandi Sobbi sworn on 4 October 2002 in proceedings brought by Lemery Holdings in the Equity Division of this Court against John Vouris, liquidator (first defendant), and House of Diamonds (NSW) Pty Limited (in liquidation) (second defendant). A copy of that affidavit became Exhibit B in the present proceedings. 139 I will return to these unusual events. At this point, I turn to the matters about which Mr Sam Cassaniti was examined on 29 September 2009 and 1 October 2009. (c) The issues on which Mr Sam Cassaniti was cross-examined 140 The following specific issues raised in the cross-examination of Mr Cassaniti:- (1) His appointment as director of Lemery Holdings in on or about 20 May 2002 and the transfer of shares to him at that time in Lemery Holdings, which Mr Cassaniti said were held by him in trust. Mr Cassaniti was questioned about the circumstances in which the share transfer was signed and the reasons for it. (2) Mr Ghandi Sobbi's command of the English language. Mr Cassaniti rejected the proposition that Mr Sobbi had a poor command of English and contended that he had a good command of the language. (3) The fact, as mentioned above, that Mr Cassaniti had been convicted of fraud. (4) In relation to the file note of Cassaniti & Associates dated 17 May 2002, the reasons as disclosed to him for the loan and, in that context, the issue as to threats having been allegedly made by Fadi Ibrahim. (5) The fact that Lemery Holdings and/or Alan Sobbi were indebted to him (or to Reliance) at the time of the loan in the amount of $250,000, it later being put to him that Alan Sobbi was indebted to him or Reliance in a total amount of $400,000. (6) The facts and circumstances concerning Sam Cassaniti's knowledge of Alan Sobbi's bankruptcy. In that respect:- • A letter that Mr Sam Cassaniti had written to Baycorp dated 3 June 2004 about Alan Sobbi's bankruptcy. • The reason for him writing to Baycorp on 3 June 2004. • His knowledge that, as at 25 March 2003, Alan Sobbi was bankrupt as indicated in a letter from him to Mr Nikolaidis, solicitor. • That in February 2001, he had been contacted by Mr McAlpine of Wise McGrath & Associates concerning Alan Sobbi in which he was told that he had taken delivery of "bankruptcy notices for Alan Sobbi and passed them on to him" . • That on 24 May 2001, Mr Nicholas Ireland had rung him concerning Alan Sobbi and that Sam Cassaniti indicated that he would accept service of a creditor's petition. • A proof of debt by him in Alan Sobbi's bankruptcy made in 2003 that he had been a creditor of Alan Sobbi as at June 2001 in the amount of $680,000 concerning loans taken out between 10 August 2000 and 7 September 2000. • Statements made by Sam Cassaniti in his affidavit (paragraph 29) were challenged, being statements that he did not know that Alan Sobbi had been made bankrupt and he did not suspect that he was bankrupt. 141 Mr Cassaniti agreed in cross-examination that he was wrong in saying that he had undertaken the Baycorp search soon after he became aware of Alan Sobbi's bankruptcy (as there was evidence that that had come to his knowledge in 2003). Mr Ghandi Sobbi denied that the letter to Baycorp had been written to "bolster" his case. He denied that he knew on 11 June 2002 that Alan Sobbi was bankrupt. 142 The affidavit evidence of Ghandi Sobbi in the proceedings in the Equity Division of this Court, to which I have earlier referred, was, in part, directed to the nature and the purpose of the loan and the associated transactions. 143 By reference to the issues raised in the course of Mr Cassaniti's cross-examination as identified above, it can be seen that no suggestion was raised or put to Mr Sam Cassaniti during cross-examination that he had, as discussed in paragraph [138], proposed or sought to induce either Alan Sobbi or Ghandi Sobbi to give a false or concocted account in affidavit evidence filed in proceedings brought in the Equity Division concerning the liquidation of House of Diamonds. Such a proposition involving, as it does, a grave accusation against Mr Sam Cassaniti first emerged in the affidavit of Alan Sobbi sworn on 12 November 2009, long after Mr Sam Cassaniti had given and completed his evidence in the present proceedings. Ghandi Sobbi's evidence in those earlier proceedings will be discussed below. 144 In written and oral submissions for Mr and Mrs Sobbi, it was contended that Mr Cassaniti was an evasive and unreliable witness. Particular emphasis was placed upon his convictions in relation to past offences against the Commonwealth in support of that contention. 145 There was considerable conflict in the evidence on a number of factual matters that fall for determination. These include whether meetings occurred, the personnel in attendance at specific meetings held at the offices of Cassaniti & Associates, the content of discussions at such meetings including, in particular, those said to have occurred between Mr Ghandi Sobbi and Mr Sam Cassaniti. The conflict and inconsistencies in evidence on such matters and the credibility of Sam Cassaniti and of Ghandi Sobbi and his son, I consider, are best resolved on the basis of contemporaneous records and by an examination of objective matters established in evidence. In this respect, on some issues the relevant file notes of Cassaniti & Associates are (as I have determined them to be and as discussed below) reliable. Reference has also been made in the determination of primary issues of fact to specific objective circumstances that preceded and post-dated the making of the loan, guarantee and mortgage. PART H 13. The purpose of the loan 146 As noted above, Ghandi Sobbi gave evidence in earlier proceedings concerning the circumstances and purpose of the loan advanced by Reliance in 2002. (a) Affidavit of Ghandi Sobbi on 4 October 2002 (Exhibit B) 147 Ghandi Sobbi swore the affidavit, as noted earlier, in proceedings brought by Lemery Holdings against the liquidator and House of Diamonds in the Equity Division of this Court (Exhibit B in the present proceedings). In it stated:- "10. During early 2002, I became aware that the second defendant conducting both the business which he had leased from the plaintiff at Liverpool and the business at Burwood was not operating profitably and that it had many creditors and some of whom were trade creditors that I knew in the industry. This caused me significant ongoing embarrassment within the industry and as a result both I and my son, Alan, fell into dispute with my son-in-law, Masoud. In about March 2002, I terminated the plaintiff's lease to the second defendant in relation to the Liverpool shop and the plaintiff assumed conduct of its business and took control of the premises. 11. At the same time, I appointed my son, Alan, as manager to oversee the operations of the second defendant at Burwood. I did this on the basis that I had lent the plaintiff approximately $200,000 and paid off many of the plaintiff's debts that it incurred." 148 In the affidavit, Ghandi Sobbi recounted a conversation he said he had with his daughter on or about 12 May 2002 in the course of which he suggested to her that the approach to be taken was that he purchase all of the stock of House of Diamonds and buy the business from his daughter and that the money that he paid for the stock would hopefully pay out all the creditors and his son, Alan, could run the shop on behalf of Lemery Holdings (paragraph 13). 149 In the last-mentioned affidavit, he said that he instructed his accountants, Cassaniti & Associates, to arrange to prepare a simple draft contract for the sale to the plaintiff of the business (paragraph 16). 150 Mr Ghandi Sobbi agreed that he signed the affidavit in the offices of M D Nikolaidis & Co, but added in cross-examination that his son, Alan, and Sam Cassaniti had prepared the affidavit with Mr Nikolaidis (transcript, p.178). (b) Affidavit of Ghandi Sobbi sworn 26 May 2003 (Exhibit A) 151 Ghandi Sobbi swore the affidavit in proceedings in the Equity Division, No 2747 of 2003. In those proceedings, Reliance was the first defendant and Mr Sam Peter Cassaniti was the second defendant. In the affidavit, Mr Ghandi Sobbi stated:- "1. … 2. The Second Defendant has been the company accountant of Lemery Holdings Pty Limited and I have had a professional association with the Second Defendant for several years. 3. During the course of 2002, it became apparent that Lemery Holdings Pty Limited would need to purchase the business trading as House of Diamonds and was in need of loan monies in order to fund the purchase. 4. In the circumstances, myself and the Second Plaintiff arranged an advance of $600,000 from the First Defendant herein. 5. To the best of my information and belief, the Second Defendant is a shareholder and previous director of the First Defendant … 6. To the best of my recollection, the advance of $600,000 was fully drawn down on or about 1 July 2002, although the purpose of loan was to arrange the purchase by Lemery Holdings of the business known as House of Diamonds from the company known as House of Diamonds (NSW) Pty Limited. 7. … 8. Pursuant to the Loan Agreement, the Second Plaintiff and myself granted security by way of Real Property Mortgage over a property known as 96 Bulls Road, Wakeley, … 9. At no time did the Second Plaintiff and myself ever agree to draw down any funds in excess of the sum of $600,000 from the First Defendant herein. 10. Since November 2002, the Second Plaintiff and myself have been in a position to discharge the obligations owing to the First Defendant as a consequence of the $600,000 loan facility negotiated in July 2002. 11. The First and Second Defendant, however, have refused to provide a discharge figure or to provide a discharge of mortgage in respect of the secured borrowing." 152 Mr Michael Zwar, solicitor, stated in his affidavit sworn 18 November 2009 (paragraph 3), that he had a number of conferences with Ghandi Sobbi. He said that on some occasions Ghandi Sobbi's son, Alan, was present at the conferences. On other occasions, he would see him by himself. They would, he said, speak to each other in English. Mr Zwar observed that Ghandi Sobbi had a strong accent but that he, nonetheless, understood what he said and he was able to give advice to him in English. He said he appeared to understand the advice given and would respond to what he said in English. He appeared to him, he said, to have no problem with English. 153 Ghandi Sobbi, on the other hand, denied that he spoke to Mr Zwar in English. 154 The letter dated 13 April 2003, which was written by Mr Zwar to Sam Cassaniti, is, in part, reproduced at paragraph [126] has been discussed above. Mr Zwar in his affidavit said that he had an initial conference with Ghandi Sobbi in March/April 2003 in which he said Ghandi Sobbi stated:- "… We owe Sam Cassaniti's company $645,000 but he wants more and won't release the mortgage over our home until we pay what he says we owe. Sam owes us money. What can we do to make him release the mortgage?" 155 Mr Zwar said that he drafted the letter dated 3 April 2003 (Tender Bundle, Exhibit 22, at pp.81 to 82) on Ghandi Sobbi's instructions. On the basis of those instructions he said he filed the Summons (Exhibit D) in proceedings numbered 2747 of 2003 seeking "a declaration that on payment into Court by Mr and Mrs Sobbi, a sum of not less than $645,505 … Reliance and Mr Sam Cassaniti be restrained until further order from making any further demand for payment …". 156 In this affidavit sworn 18 November 2009, Mr Zwar said:- "7. I have been shown an affidavit of Ghandi Sobbi sworn 26 May 2003 in proceedings No. 2747 of 2003. I drafted the affidavit. I did so from what Ghandi Sobbi had said to me. Ghandi Sobbi had said to me words to the effect, 'During 2002 Lemery Holdings needed to purchase the business trading as House of Diamonds and was in need of a loan in order to fund the purchase. Myself and my wife arranged an advance of $600,000 from Reliance Financial Services Pty Ltd. To the best of my recollection the advance of $600,000 was fully drawn down on or about 1 July 2002, although the purpose of the loan was to arrange the purchase by Lemery of the business of House of Diamonds. My wife and I granted security for the loan by giving a mortgage over our property at Bulls Road, Wakeley. Since November 2002 my wife and I have been in a position to pay the money back on the $600,000 loan but Reliance claims over $2 million is owing' 8. Before Ghandi executed the affidavit I read it to him in the presence of Alan Sobbi. Ghandi then took the affidavit and appeared to read it himself. From my experience of being able to speak to Ghandi Sobbi in English, Ghandi Sobbi's reaction when I read the draft affidavit to him and that he took the draft affidavit and appeared to read it himself I did not think of obtaining an interpreter." 157 In cross-examination in the present proceedings, Ghandi Sobbi accepted that paragraphs 3 and 4 of his affidavit had been read to him before he swore it and that he understood its contents. He added that, in answering the questions in relation to those paragraphs that he did so because his son, Alan, told him to give that evidence (t.161 to t.163). 158 I generally found Mr Zwar to be an impressive witness who gave his evidence in a straight-forward manner. That said, I accept that his evidence as to having himself read the affidavit directly to Ghandi Sobbi, rather than it having been read back to him in Arabic by another, was probably incorrect. I reach that conclusion having regard to the terms of Mr Zwar's letter to the defendants dated 24 June 2004 (Exhibit 14). However, I accept Mr Zwar's evidence as to the following matters:- (1) That he experienced no difficulty in conversing in English with Mr Ghandi Sobbi or making him understand what he, Mr Zwar, told him. His experience in that regard is consistent with the evidence given by Sam Cassaniti to similar effect. In particular, Ghandi Sobbi spoke to him in English. (2) That Ghandi Sobbi gave him instructions as to the fact that $645,000 was owing to Sam Cassaniti's company. (3) That he drafted the above letter dated 13 April 2003 on the basis of Ghandi Sobbi's instructions. (4) That he drafted Mr Ghandi Sobbi's affidavit sworn 26 May 2003 as he stated in paragraph 7 of his (Mr Zwar's) affidavit and that he did so based upon what Ghandi Sobbi had said to him as set out in that paragraph. (c) Affidavit of Ghandi Sobbi sworn 13 July 2004 (Exhibit F) 159 The affidavit was filed in proceedings in the Equity Division of this Court, No 3923 of 2004 (Exhibit F in the present proceedings). Those proceedings were brought by Lemery Holdings against Reliance, as first defendant, Sam Peter Cassaniti, as second defendant, Anthony Warner, as third defendant, and Iva Worrell, as fourth defendant. In it, Ghandi Sobbi stated:- " Financial Dealings with Cassaniti 10. On or about 24 May 2002, I attended Sam Cassaniti's office for the purpose of settling the purchase by Lemery Holdings of a business from the House of Diamonds (NSW) Pty Limited ('House of Diamonds'). To enable Lemery Holdings to purchase the business of House of Diamonds, my son, Alan Sobbi, arranged to obtained a loan personally from Reliance Finance Services Pty Limited, the Second Defendant ('Alan's loan from RFS')." 160 Mr Ashhurst tendered paragraphs [10] and [11] of that affidavit. Those paragraphs were admitted in the proceedings as relevant to the issues of "benefit" (transcript, p.183), and the reason or purpose of the loan. Ghandi Sobbi conceded that the affidavit was read to him before he swore it: transcript, p.180. PART I 14. The issue of Alan Sobbi's bankruptcy: the allegation that the fact of the bankruptcy was withheld by Mr Cassaniti (a) Factual matters 161 I have referred in paragraph [140], when dealing with the evidence of Mr Sam Cassaniti, to the cross-examination as to his knowledge of Alan Sobbi's bankruptcy. It is necessary to refer in greater detail to the evidence on that matter. 162 Mr Sam Cassaniti's affidavit evidence was that, when dealing with the defendants concerning the loan and associated transactions, he did not tell them that Alan Sobbi was bankrupt. As earlier noted, he stated in his affidavit that he did not know that Alan Sobbi was bankrupt at that time and that he did not suspect that he was. He said that when he found out that Alan Sobbi was bankrupt, he undertook a search on him with the organisation, Baycorp, by way of a letter dated 3 June 2004. 163 Mr Cassaniti was cross-examined at length as to his knowledge of bankruptcy proceedings having been instituted against Alan Sobbi. He acknowledged that in a letter to Mr Nikolaidis, solicitor, dated 25 March 2003 he had stated that Alan Sobbi was already bankrupt as at that date, that is, over a year before he had written to Baycorp about the matter. 164 Mr Cassaniti also accepted that, in February 2001, in the course of a discussion with Mr McAlpine of Wise McGrath & Associates, he told Mr McAlpine that he would take delivery of a bankruptcy notice on behalf of Alan Sobbi and pass it on to him. He also accepted that, in March 2001, Mr McAlpine spoke to him again in which he told him that he needed to speak to Alan Sobbi. He accepted that he probably responded by saying that he, Mr Cassaniti, himself was having problems getting in touch with Alan Sobbi. He also agreed that on 9 March 2001, Mr McAlpine rang him again and he told Mr McAlpine that he had spoken to Alan Sobbi and that Alan Sobbi would be in his office that afternoon and he would arrange for him to speak directly to Alan Sobbi. 165 Accordingly, Mr Cassaniti accepted that he had, at that time, received a bankruptcy notice, had passed it on to Mr Alan Sobbi and was aware that a bankruptcy notice was "a precursor for … bankruptcy" (transcript, p.103). 166 Mr Cassaniti said that his usual practice was that when his firm received a bankruptcy notice, a member of the firm would make sure that the client received it and the seriousness of it was explained to the client and that they had 21 days in which to set it aside or extend time for compliance. 167 Mr Cassaniti accepted that in May 2001 a Mr Nicholas Ireland had rung him about Alan Sobbi's bankruptcy and informed him that he wished to serve a creditor's petition and asked whether he would accept substituted service on behalf of Alan Sobbi. Mr Cassaniti said he could not recall whether he did agree to accept it, although he agreed that, if it was served on his office then, in accordance with normal practice, he would have contacted the debtor client and advise him/her. He also agreed that if a sequestration order was served on his firm that, in ordinary practice, he would communicate that fact with the debtor. 168 Mr Cassaniti also accepted that, at a later stage, he lodged a proof of debt as a creditor of Alan Sobbi for a total amount of $621,493.56 which related to loans made between 10 August 2000 and 7 September 2000. 169 Mr Cassaniti said in evidence that the date of Alan Sobbi's bankruptcy was 27 June 2001. Any debts that he borrowed after that date would form part of what he described as "the second bankruptcy" if he went bankrupt, stating that there was nothing illegal about a bankrupt borrowing money after his date of bankruptcy. 170 Mr Cassaniti stated that, from time to time, he had raised with Alan Sobbi financial matters that required his attention. Alan Sobbi would usually respond in the fashion of saying not to worry about it and that he would sort it out, but, Mr Cassaniti observed, he rarely did sort things out. He said that he "let little matters fester". He said that he would have explained the creditor's petition to him and told him how to sort it out as, for example, by putting forward a payment plan to pay the debt by instalments and have the creditor's petition set aside. 171 He said in giving evidence in relation to Alan Sobbi, he was largely relying upon his usual practice and that he had no specific recall of particular conversations about the matter with Alan Sobbi. He rejected the proposition that, as at June 2002, he had a suspicion that Alan Sobbi had gone bankrupt. 172 Mr Cassaniti emphasised that, according to his recollection, Alan Sobbi's debt which was the subject of the bankruptcy proceedings did not involve a large amount. It was his recollection that it was of the order of $30,000 and that that was an amount which could easily have been negotiated by way of an agreement so as to avoid bankruptcy. Whilst he said that, over time, he came to know Alan Sobbi as a person who tended to "put his head in the sand" over financial matters, Mr Cassaniti said that he could not be certain as to whether he had appreciated that that was Alan Sobbi's approach to financial problems as at June 2002 or whether he came in due course of time to that realisation after matters got worse following June 2002. 173 Finally, Mr Cassaniti accepted that, in stating in his affidavit that when he found out that Alan Sobbi had gone bankrupt he wrote the letter of 3 June 2004 to Baycorp, he was wrong in that he clearly had known of the bankruptcy earlier as indicated by the letter shown to him in cross-examination which he wrote in 2003 to Mr Nikolaidis. (b) Consideration 174 The evidence establishes that a bankruptcy notice and a creditor's petition had issued against Alan Sobbi in 2001 and that that had been brought to Mr Cassaniti's attention. There is, however, no evidence that affirmatively establishes that he knew or was conscious or suspicious of the fact that, as at 11 June 2002, that Alan Sobbi was, in fact, bankrupt. 175 There is some evidence to support the proposition that Sam Cassaniti had reason to believe that bankruptcy proceedings may, at some point in time, have culminated in an order for Alan Sobbi's bankruptcy. It has been necessary on this aspect to assess Sam Cassaniti's evidence, having regard to his past convictions and other matters relied upon as affecting his credibility. 176 Evidence was given by David Salvatore Cassaniti in his affidavit sworn 30 September 2009 (paragraphs [12], [13] and [14]) that his practice in 2001 was that if he received from a trustee or liquidator a Statement of Affairs to be completed by a client, he would send the document on to the client with a covering letter. 177 David Cassaniti said that he recalled taking a Statement of Affairs form to the jewellery shop run by Ghandi and Alan Sobbi at 227 Macquarie Street, Liverpool for Alan Sobbi. He said he did not recall when this occurred. 178 His evidence was that he went into the shop with the Statement of Affairs and that both Ghandi and Alan Sobbi were there. He said that he said in front of them:- "Alan this is a statement of affair [sic] . Your trustee in Bankruptcy needs you to complete it. This is serious, you need to fill the form out and send it in. If you need a hand, one of the guys will help you out with it, it can become a criminal matter if you don't complete and your bankruptcy doesn't commence until it is completed." 179 Mr David Cassaniti said that, as he said this, Ghandi Sobbi shook his head. According to David Cassaniti, Alan Sobbi said, "leave, leave it here, it's nothing, it's already been sorted out. It's been paid". 180 It was put to David Cassaniti that he had, in effect, been less than accurate in his affidavit. In cross-examination, he accepted that his second affidavit contained an error, in that it stated that he was the Office Manager for Reliance. He said he was a director of Reliance but that he was Office Manager. He could not explain how the error had been made in the affidavit. 181 The evidence discloses (in particular, Exhibit 5) that David Cassaniti was aware that Alan Sobbi had been made bankrupt and that arrangements had been made for a s.81 examination. David Cassaniti said in evidence that, in October 2001, Alan Sobbi had told him that he had sorted the matter out. He said he appreciated that, in May 2002, Alan Sobbi was in a great deal of financial trouble. 182 He was cross-examined at some length on his evidence including, in particular, his evidence of having provided Alan Sobbi with the Statement of Affairs in the presence of his father. 183 In re-examination he said that he recalled the amount of the debt owed by Alan Sobbi at the time was $20,000 and he believed it was a debt owed to the Commonwealth Bank. 184 Given that the events to which he deposed occurred almost eight years before the date of his affidavit and the fact that there are only limited records of events occurring at that time, it has been necessary to consider David Cassaniti's evidence with appropriate caution. 185 Whilst I accept David Cassaniti when he said he provided Alan Sobbi with the Statement of Affairs, I do not consider that his evidence can be taken as sufficiently reliable to conclude that Ghandi Sobbi was present at the time he handed the document to Alan Sobbi. He did not, in evidence, provide any contextual or other matters by which he was able to recall so many years later that Ghandi Sobbi was, in fact, present at the time he said he delivered the Statement of Affairs. 186 On the question as to Sam Cassaniti's knowledge on the matter and, notwithstanding the attack on his credibility, I do not consider that the evidence establishes that he knew or, alternatively, was conscious or held a reasonable suspicion of the fact of a sequestration order having been made against Alan Sobbi as at late May up to and including 11 June 2002 when he was dealing with the loan and associated transactions. In arriving at that conclusion, I have taken into account Sam Cassaniti's evidence on this aspect, which I accept, having closely observed him giving evidence. Whilst other evidence establishes that, as at late 2001, bankruptcy proceedings had been initiated against Alan Sobbi, Sam Cassaniti's firm had a practice in handling such matters giving advice to clients as to how to deal with bankruptcy proceedings. There is no reason not to accept that such practice was followed in the present case especially given the relatively small amount of the debt said to have been owed by Alan Sobbi. 187 Although Ghandi Sobbi's gave evidence that, had he known that his son was bankrupt when he was asked to guarantee the loan, he would not have done so, that evidence is to be evaluated in the light of other evidence and the context of the case. 188 In the written submissions for the plaintiff, it was contended:- "56. The Plaintiff contends that the Defendants' knowledge of the bankruptcy of their son would have had no effect on their decision to execute the Mortgage. To say otherwise is to say that they would have foregone the opportunity to have Lemery Holdings purchase the House of Diamonds, in the circumstances of the House of Diamonds causing considerable embarrassment … a reasonable inference to be drawn is that the purchase would be to the advantage and profit of Lemery and that profit would be used to pay Alan Sobbi's debts." 189 In cross-examination of Ghandi Sobbi, gave the following evidence:- "Q. If you thought your son was being threatened with physical harm and you could stop that by borrowing $600,000 that is what you would have done, isn't it? A. INTERPRETER: If I can borrow, yes, but if I can't borrow, no." 190 It was contended for the plaintiff that a more fundamental problem with accepting Ghandi Sobbi's evidence on the significance of his son's bankruptcy, was the fact that Alan Sobbi's bankruptcy did not change the nature of the transaction and it did not add a risk to the transaction: Written Submissions, paragraph [58]. 191 I have concluded that, assuming Ghandi Sobbi was unaware of the fact of his son's bankruptcy, it is more probable than not that if he, at the time of the loan, had been so aware, he would, nonetheless, have proceeded with the loan and associated transactions. This conclusion rests, not only upon the fact, as I determine below, that the defendants did stand to receive a "benefit" from the loan but also upon the fact that, to Ghandi Sobbi's knowledge, Alan Sobbi's financial position as at May/June 2002 was far from sound. 192 The file note of Cassaniti & Associates dated 17 May 2002 (which I accept as a reasonable accurate record) supports the fact that Ghandi Sobbi was aware that his son, Alan Sobbi, had, as at the date of the loan, significant financial problems, in particular, the Ibrahim matter, his indebtedness to the Commonwealth Bank and that he was, at that time, being pursued by a process server. PART J 15. The provisions of s.7 and s.9 of the Contracts Review Act 193 Before proceeding with an analysis of the evidence, I set out at this point some of the judicial guidelines that have been established in relation to the provisions of the Act. 194 A contract may be an "unjust" contract in terms of s.7(1) of the Contracts Review Act by reason of what has been referred to as "substantive injustice" or "procedural injustice" or a combination of both: West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620 per McHugh JA, who observed that most unjust contracts will be the product of both procedural and substantive injustice. (a) Substantive injustice 195 A contract may operate unjustly as, for example, by imposing an unreasonable burden on the claimant when it is not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision. In other cases the claimant may not have had the capacity or opportunity to have made an informed or real choice as to whether to enter into the contract. A contract may be unjust because its terms, consequences or effects are unjust. 196 In the present case, the substantive terms of the loan have not been attacked as unfair or unjust. The defendants, however, having been called upon to repay the loan with interest, have failed to make payment. They claim relief on the basis that the subject contracts in all the circumstances are "unjust" or constitute unconscientious transactions. The consequence of enforcement of the mortgage, it was emphasised, will be that their home will be at risk. (b) Procedural unfairness 197 Procedural unfairness may arise from the methods used to make a contract. The defendants do not allege sharp or dishonest practices against Reliance. 198 As earlier stated, they assert, inter alia, non-disclosure of particular facts concerning their son's bankruptcy and the fact that he had been threatened and that the loan monies would be used to pay Fadi Ibrahim. 199 They also, in a general way, allege disadvantage because of their age, their limited English and limited business experience and what was said to be inadequate legal advice. 200 Although Ghandi Sobbi seeks to establish himself and his wife as having been, in effect, volunteers in a vulnerable position, the question in these proceedings is whether either proposition is substantiated. 201 The defendants seek to characterise themselves as mere sureties in respect of the loan by Reliance to their son. The evidence, however, requires analysis in order to determine whether that is a true and proper characterisation, in particular, whether the loan was part of a transaction under which they had no personal financial advantage or whether they were, in fact, advantaged by it. 202 A further issue arising in the proceedings is concerned with the relationship between the defendants and their son. Did the defendants, as sureties, act upon the basis of trust and confidence in their son in relation to his financial affairs or was it Ghandi Sobbi, and not their son, who was the driving force in seeking and securing the loan from Reliance pursuant to an informed decision to do so. 203 In Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41 at [106], Spigelman CJ, in relation to the provisions of s.7(1) of the Contracts Review Act stated that the structure of the Act involves a two-stage inquiry. First, was the contract unjust? Second, what, if any, orders should be made? (at [34]). 204 The second stage, the Chief Justice observed, was clearly discretionary. The first stage, it was observed, may more accurately be described as involving a judgment. 205 In Khoshaba (supra), Basten JA at [106] to [109] stated that the consideration of an application for relief under s.7 of the Contracts Review Act involves three steps:- (1) Making findings of primary fact relevant to the issue (at [106]). (2) Making a finding, or determination, that the contract is unjust: "an evaluative judgment as to whether the facts as found satisfy [the] statutory description which, in turn, engages [the] discretionary power" (at [107]). (3) The exercise of the power to grant relief "which may, but need not, follow from the conclusion that a contract or provision thereof is unjust" (at [109]). 206 In Khoshaba (supra), Spigelman CJ observed:- (1) "… When the Parliament adopts so general, and inherently variable, a standard as that of 'justness', Parliament intends for courts to apply contemporary community standards about what is just. Such standards may vary over time, particularly over a period of two decades" (at [64]). (2) That the application of so general a standard as that denoted by "unjust" cannot be confined by reasons given in earlier cases "as if they were rules" (at [73]). (3) "… The purpose for which a loan is advanced is a relevant circumstance . This was confirmed by s.9(2)(1), which includes, amongst the matters to which a court shall have regard in determining whether a contract is unjust: 'The commercial and other setting, purpose and effect of the contract'." (at [68]). (5) "Plainly, the conduct, whether by act or omission, of the party resisting a finding of unjustness under the Act is highly relevant, and will often be determinative. However, the scope of relevant circumstances is not confined to what the person resisting an order under s.7(1) did or did not do and knew or ought to have known. The critical phrase in s.7(1) -- 'the circumstances relating to the contract at the time it was made' -- cannot be so limited. Section 9(1) provides that when determining unjustness, 'the court shall have regard to the public interest and to all the circumstances of the case'. Furthermore, s.9(2)(1) includes, as I have noted, amongst the relevant circumstances 'the commercial or other setting, purpose and effect of the contract'." (at [76]). 207 In Perpetual Trustees Victoria Limited v Longobardi [2009] NSWSC 654, McDougall J referred to the proposition that there was jurisdiction under the Contracts Review Act to make orders in favour of a party to a contract who acted under circumstances amounting to a disability and who:- "… proves that at the date of the contract he suffers from a relevant disability, even though the other party to the contract is unaware of that disability … In general, it would be unsound to exercise the jurisdiction in those circumstances … The reason … is that it is hardly just to deprive an innocent person of valuable property, of which contractual rights are a species…" ( Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 at 277 208 His Honour observed that the "innocence" of the party against whom relief is sought may be a relevant factor in, at least, two ways: in considering the jurisdictional question of whether the contract is unjust, and (if it is) in deciding whether and, if so, how to exercise the discretion to grant relief that is thereby enlivened. His Honour noted, however, that his own statement to that effect cannot be taken as a rule restricting or circumscribing the operation of s.7. 209 The application of the provisions of s.7 of the Contracts Review Act is to be determined by reference to the facts and circumstances established in evidence rather than by application of the approach taken in a particular case. As McDougall J observed in Longobardi (supra) at [75]:- "… At most, decided cases are helpful because they direct attention to factors that may be significant in undertaking the process of analysis and determination that constitutes the second of the three stages identified by Basten JA." 210 In evaluating the "justice" or otherwise of a loan agreement and mortgage transaction, it is appropriate to commence by looking at the circumstances of the transaction (in this case, the loan, as well as, the mortgage and guarantee that are the subject of the proceedings) from the perspective of each participant (Longobardi (supra) at [81]) and bearing in mind that a borrower's purpose in obtaining a loan is usually the motive or incentive for a loan transaction: Riz & Anor v Perpetual Trustees Australia Limited & Ors [2007] NSWSC 1153 per Brereton J at [73]. 211 The primary fact-finding task once completed, enables the Court to consider and apply the relevant provisions of the Contracts Review Act (in particular, s.7 and s.9) and, where invoked, the equitable principles relating to unconscionability in accordance with the general law. The submissions on behalf of Mr and Mrs Sobbi addressed both. 212 The relevant authorities establish that the jurisdiction created by the Contracts Review Act is wider than the equitable principles of unconscionability: Spina v Permanent Custodians Limited [2009] NSWCA 206 per Young JA at [74]. That is not to say, as his Honour pointed out in that case at [75], that there may be some situations where unconscionability will apply where the Contracts Review Act does not, eg, where there is not a contract within the meaning of that Act or where ` exemption from the application of the Act or where there is an exemption from the application of the Act such as where the plaintiff has been carrying on a business or where there are problems involving the Real Property Act where the statute cannot cover the field. 213 Basten JA in Khoshaba (supra) observed (at [76]) that the legislature no doubt recognised the general policy of the law as stated by Gleeson CJ in Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9, namely, "… that people should honour their contracts. That policy forms part of our idea of what is just". 214 The s.9 considerations under the Contracts Review Act are matters to which a court shall, to the extent that they are relevant, have regard. In relation to them, Basten JA in Khoshaba (supra) at [112] observed that they would be described as mandatory considerations "… they involve factors which may tend in different directions in a particular case or may simply be inapplicable …". 215 The exercise, his Honour observed at [113] requires:- "… An assessment of the relevant circumstances in relation to a broad concept of unjustness." 216 The considerations a court is required to give consideration to indicate the comparatively broad nature of the evaluation to be made. In Elkofairi v Permanent Trustee Co Limited [2002] NSWCA 413, Beazley JA at [78] stated that it would appear that the trend of authority since West (supra) permits a court not only to look at the terms of the contract per se, to see if its terms are unjust, but to look at the circumstances in which the contract was made and its effect, having regard to those circumstances. That said, however, it is not sufficient for a claimant for relief under the Act merely to point to a loss or to an inopportune transaction. 217 In the application of the Act, as the abovementioned authorities indicate, the Court is not only to consider the position of "justness" of the contract from the point of view of the party seeking relief, but should examine the contract having regard to the position of both or all parties to it. 218 In determining whether a contract is unjust, in the circumstances in which it was made, having regard to the factors referred to in s.9, the conclusion though one of fact, ultimately involves a broadly based value judgment: Riz (supra) per Brereton J at [51], citing Antonovic v Volker (1986) 17 NSWLR 151, 154 to 155, Samuels JA (Kirby P agreeing); Karavas (supra) and Khoshaba (supra), Spigelman CJ at [34] to [40] and Basten JA at [106] to [111]. PART K 16. Analysis of evidence (a) Contemporaneous evidence 219 There are significant inconsistencies between the evidence given by Mr Ghandi Sobbi and that of Mr Sam Cassaniti as to the circumstances in which the loan agreement was negotiated and made. 220 Mr Ghandi Sobbi's own account of those events in the present proceedings conflicts with his own evidence in earlier proceedings in this Court. He sought to explain the latter evidence on the basis that it was erroneous, saying that he gave the evidence only because he was told to give it. In that respect, he said he was acting at the behest of his son, Alan Sobbi and Sam Cassaniti who wished him to give a false version of events. I note that that was said to have occurred in relation to the House of Diamonds liquidation proceedings. However, as noted earlier, Ghandi Sobbi also gave evidence about the loan in other proceedings. 221 In the unusual circumstances concerning the conflicting accounts given in evidence in these proceedings, it is appropriate, as noted earlier, wherever possible to identify specific matters that are clearly established in evidence and, by reference to them, to then proceed with a consideration of the conflicting accounts given by Ghandi Sobbi in these and other proceedings and between him and Sam Cassaniti as to the circumstances in which the loan agreement was sought and made. 222 The file notes of Cassaniti & Associates relating to the meetings on 17 May 2002 and 23 May 2002 were clearly contemporaneous records of discussions at each of those meetings and I make a finding to that effect. Although at one point in submissions Mr Menzies suggested that it was open to me to conclude that I simply could not rely upon the file notes as reliable evidence of events, there is no evidence suggesting, that they were falsified or fictitious or had been tampered with in any way. Accordingly, there is no basis for not accepting the notes as bona fide records. As such, they provide a touchstone for determining where the truth lies in the competing versions to which I have referred. 223 Accepting as I do the file notes as contemporaneous notes, they directly contradict Mr Ghandi Sobbi's evidence that he was not present at the meetings to which they relate. In particular, they establish his presence and his participation in discussions at the meeting of 17 May 2002. 224 Apart from the file notes, the Sale Agreement prepared by Mr Cassaniti dated 24 May 2002 is consistent with a desire and an intention in Mr Ghandi Sobbi to acquire the stock in trade of House of Diamonds and the fixtures and fittings associated with the business. The agreement, as noted earlier, recorded Lemery Holdings as purchaser. 225 Following the loan agreement, guarantee and mortgage, cheques were drawn by Reliance in accordance with instructions given for the distribution of the loan monies. On 8 and 11 July 2002, two cheques totalling $413,000 were drawn in favour of Kevin Group Pty Limited and Kevin Group Services Pty Limited (a company or companies owned and controlled by Mr Malek) with two cheques dated, respectively, 26 June 2002 and 3 July 2002 being drawn in accordance with directions in favour of Sydney Home Loans. 226 Although the loan agreement was drafted as one between Reliance and Alan Sobbi, the funds were advanced by Reliance (amongst other monies) by the abovementioned cheques drawn in accordance with Mr and Mrs Sobbi's instructions as subsequently recorded in the letter from Reliance to them dated 15 July 2002. 227 The file note of 17 May 2002 is of assistance in resolving the conflict in evidence to which I have earlier referred including the fact that it was Ghandi Sobbi who sought the loan and also the fact that he knew at that time that his son had received threats in relation to the Ibrahim matter. (b) Mr Askari's evidence that he was not in attendance at the meeting held on 17 May 2002 228 On 12 November 2009, leave was granted to the defendants to file the affidavit of Alan Askari sworn 30 October 2009. The affidavit was in the briefest of terms as follows:- "1. I am the grandson of the Defendants in these proceedings. 2. I have never attended a meeting [sic] the office of Sam Cassaniti on or about 17 May or at any other time." 229 In oral evidence, Mr Askari, a sales person aged 31 years, said that he had come to Australia in 1991 at about 12 years of age. 230 He said that he had been to the office of Mr Sam Cassaniti but that he did not attend there on or about 17 May 2002. He said that he had never actually attended a meeting held at the office. 231 In cross-examination, he indicated that he had some appreciation as to the nature of the orders being sought by his grandparents in the proceedings. 232 During the course of cross-examination, he stated that Ghandi Sobbi had asked him directly as to whether he recalled being at a meeting, to which he said he said "no". Mr Askari said (transcript, p.289):- "He did ask me a question and I answered the same question that he asked." 233 He said that this occurred a day or two before he swore his affidavit on 30 October 2009. 234 Mr Askari demonstrated a degree of evasiveness, on a number of occasions stating he did not understand the question. There was no evidence that he had any particular problem with the English language. Due allowance, of course, is to be made for the fact that there may have been some questions that he did not genuinely understand. 235 It is apparent that very late in the case Mr Askari was approached by Ghandi Sobbi specifically in relation to the important question of the meeting of 17 May 2002. Mr Askari did not make any reference to circumstances that would support his recollection of not having attended the meeting. Upon consideration, I do not accept him as having been a reliable witness and do not accept his simple denial made for the first time eight years later that he never attended a meeting at the office of Mr Cassaniti on or about 17 May 2002 or at any other time. 236 As stated earlier, I accept the reliability of the file note of 17 May 2002. The noter establishes that Mr Askari was present at the meeting with Mr Ghandi Sobbi (he is identified on the note as "Alan (Jnr)") and I find that he was in attendance. (c) The evidence of Ms Deigan 237 Ms Caroline Deigan, solicitor, swore two affidavits both on 2 October 2009. 238 Her evidence was that on 17 May 2002, she attended at the Liverpool office of Cassaniti & Associates in order to work on a number of matters including matters for Reliance and what she described as the "Hawkins matters". 239 She said that when she arrived, there were four persons present at a meeting in Mr Sam Cassaniti's office. They were Sam Cassaniti, Gino Cassaniti, Ghandi Sobbi and a man who introduced himself as Masoud. 240 Ms Deigan said that they were in the office for a couple of hours and from time to time she would enter the room in order to get Sam Cassaniti's attention about work matters. On one of these occasions she heard Ghandi Sobbi say words to the effect:- "I need the money. They have beaten Alan with a baseball bat. I've got to help my son and I need to pay the rent for the shop at Burwood Westfield." 241 She said that Mr Sam Cassaniti responded to the effect, "I would rather lend it to Lemery and you". She said Ghandi Sobbi replied, "I want Alan to be responsible". She said that Sam Cassaniti said, "If Alan does not pay, I want the money from Lemery or you". 242 Thereafter, she said there was a long and heated discussion but recalled that, at some point, Mr Sam Cassaniti saying words to the effect, "okay, then Alan will be the borrower and the loan will be guaranteed by Lemery and you". She said that she heard during the conversation Sam Cassaniti say "Do you want the money or what?". 243 Ms Deigan said that later that day, Mr Sam Cassaniti gave her instructions to draw up the loan agreement between Reliance and Alan Sobbi with his father and mother being guarantors of the loan with security over their property at Wakeley. 244 She said that she said to Sam Cassaniti words to the effect, "What about Lemery?". He is said to have responded "No we have changed … – I have tidied up in other documents". 245 Ms Deigan said that she recalled the incident and the conversation as it was the first time that she had been around anyone who had been beaten up for not paying their debts. 246 Within a few days, she said she prepared documents. She identified a letter (p.46 in the tender bundle) addressed to Alan Sobbi and to the defendants dated 22 May 2002. She said that she typed this letter and a further letter together with documents at pp.52 to 66 of the bundle. 247 She explained the checking procedure that she followed when documents were attached to correspondence. 248 Ms Deigan was cross-examined about her recollection, in particular, her evidence that the day in question was a Saturday. Ms Deigan stated that she would wear casual clothes if working on a Saturday and when attending during the week would wear working clothes. She said that she recalled the occasion in question being a Saturday as she was wearing casual clothes. 249 She said that Sam Cassaniti was a client of hers at the time. She also said she had guaranteed some loans and that Reliance had been a creditor to her since 11 September 2000. She said she was made bankrupt on 15 July 2003. Her suspension as a practising solicitor continued until November 2006. 250 Ms Deigan accepted in cross-examination when shown her diary that 17 May 2002 was a Friday, not a Saturday. She, however, remained firm that the meeting that she gave evidence about occurred on a Saturday and, accordingly, it must have been Saturday 18 May 2002 because she said it was the Saturday before she did the mortgage documents. She insisted that the meeting had taken place as related by her. 251 She stated that she came to swear her first affidavit on 2 October 2009 when a solicitor, Mr Kekatos, contacted her. She agreed that the first occasion she was required to recall the events of May 2002 was the day before she swore her affidavit. 252 Ms Deigan refuted, when it was put to her, that the conversations to which she referred in her affidavit did not occur. She also rejected the suggestion that she had given evidence by reason of the fact that, at the relevant time, she was indebted to Mr Sam Cassaniti. 253 In the written submissions for the defendants, it was contended that Ms Deigan's evidence should be rejected. It was contended that her recollection of events was poor and that she had conceded that she had incorrectly stated that the meeting had taken place on 17 May 2002 as that was not a Saturday. It was observed that her response that the meeting must have occurred on Saturday 18 May 2002 was clearly inconsistent with Exhibit 9. 254 Reliance was also placed on the fact that it was not until October 2009 that she was asked to recall events relating to May 2002. 255 It was further submitted that her evidence was "tainted" by the fact that she was formerly a creditor of Reliance. 256 Finally it was submitted that her evidence identifying Mr Askari as having been the person referred to as "Masoud" should not be accepted. It was only when Mr Askari's name was presented to her that she was able to recall that his name was "Askari" rather than "Masoud". 257 In the submissions for Reliance, it was contended that Ghandi Sobbi's earlier version of events was corroborated, inter alia, by the evidence of Ms Deigan. 258 Her evidence was also relied upon to establish, contrary to Ghandi Sobbi's evidence, that the loan was, in fact, directly negotiated by Ghandi Sobbi. 259 Whilst it is clear that Ms Deigan was in error in stating that the meeting occurred, according to her recollection, on a Saturday in May 2002, I do not consider that that alone or the fact that she had been a creditor of Reliance, are matters that are sufficient to discredit her as a witness or the reliability of her recollection as to the fact that a meeting took place on 17 May 2002 at which Ghandi Sobbi was present and directly negotiated the loan. 260 Ms Deigan presented as a straightforward witness, but in assessing her reliability, due account must be taken of the fact that she was speaking from an unassisted recollection many years after the relevant events. 261 Whilst I do not consider it would be safe to rely upon her evidence to affirmatively establish that Mr Askari was one of the persons who attended the meeting on the last-mentioned date, I do accept her evidence concerning the fact that she overheard discussions concerning the loan essentially as she described it in her affidavit evidence. 262 Her account is broadly consistent with the file note in Exhibit 9. I consider that her evidence is sufficiently reliable to corroborate the matters to which I have referred. (d) Credibility issues in relation to the evidence of Alan Sobbi 263 There are a number of credibility issues concerning the evidence of Alan Sobbi, in particular, in relation to the issue as to the purpose of the loan. His evidence in relation to the events, including discussions, leading up to the making of the loan is far from consistent. In his affidavit sworn 12 November 2009 (paragraph [52]) he set out a conversation that he said he had with his father before the loan was taken out. It was, he said, to the effect that he had received jewellery from suppliers and did not have the money to pay for it and asked his father to help him to get a loan. 264 A very different account is to be found in Alan Sobbi's affidavit sworn 28 September 2009 in which he stated that he wanted to borrow approximately $600,000 to purchase his brother-in-law's jewellery business (paragraph [3]). There is no account in the affidavit of a conversation with his father to the effect that he had purchased jewellery and required a loan to pay for it. 265 It was put to him in cross-examination that he had not, prior to the commencement of the hearing, referred in either his affidavit of 19 October 2004 or his affidavit of 28 September 2009 to an occasion on which he told his father that he required a loan to pay jewellery suppliers. He did not have any explanation for the omission, even though he said that he appreciated by 28 September 2009 the purpose for which his affidavit was required in the proceedings and that he had full knowledge of his parents' defence. 266 He, in due course, agreed in cross-examination that he had not previously raised with the solicitor acting for his parents before 28 September 2009 an account of telling his father that the loan was required to enable him to pay off jewellery suppliers. He said that he had, in fact, not given that version of events to anyone. Following considerable probing in cross-examination, he suggested that the reason he had not done so was because Sam Cassaniti had "set up a story for us … and we just continued with it" (transcript, p.326). 267 Alan Sobbi was cross-examined in relation to the file note of 23 May 2002 (Exhibit E). He denied that his father was present at that meeting at which he and Fadi Ibrahim are noted as present and as recorded in it. It became apparent from answers given by Alan Sobbi in cross-examination that he had had an association with Fadi Ibrahim for some time, having leased, in 2002, a Mercedes Benz vehicle which was used by Fadi Ibrahim as well as a Porsche vehicle which he said he leased for a person, Mick Ibrahim. He denied that Fadi Ibrahim made any of the statements that were attributed to Ibrahim as appears in the file note of 23 May 2002. 268 There is a further difficulty with Alan Sobbi's evidence concerning Ibrahim which I will deal with at this point. 269 He initially swore an affidavit in the present proceedings on 19 October 2004. There is no reference in that affidavit to the loan from Reliance being for the purpose of paying Ibrahim. Nor is there any reference to harm having been inflicted upon him or threats having been made to him by persons acting on behalf of Ibrahim. 270 Alan Sobbi swore his second affidavit on 28 September 2009. Again there is no account of harm or threats or of the loan being taken out in order to pay money to Ibrahim. In paragraph [3], Alan Sobbi stated:- "3. I wanted to borrow approximately $600,000 to purchase my brother in law's jewellery business, which was owned and operated by the House of Diamonds (NSW) Pty Limited." 271 His affidavit continued (at paragraphs [5] and [6]) to refer to a proposal which he said had came from Mr Cassaniti for Lemery Holdings to purchase the business but that that was a proposal that was subsequently changed. 272 As noted above, Mr Alan Sobbi swore a third affidavit on 12 November 2009. Leave was sought to file and rely upon it. The hearing by then had been underway since 28 September 2009. In the affidavit (paragraph [49]), he gave an account of a conversation he said he had with Sam Cassaniti on 24 May 2002. He said Ibrahim was present on this occasion. Alan Sobbi claims that Sam Cassaniti proposed an approach that would disguise from his father, Mr Ghandi Sobbi the true purpose of the loan and to do this by telling Ghandi Sobbi that he, Alan, needed the money for a business. This, I note, was not a matter raised with Sam Cassaniti when he was cross-examined on 29 September and on 1 October 2009. 273 I consider Alan Sobbi to be a most unsatisfactory witness. That conclusion is one that inevitably arises from the inconsistencies in his evidence to which I refer in this judgment and to a lesser extent on his demeanour and unsatisfactory responses to questions in cross-examination. I have ultimately concluded that he is not a witness of credibility. (e) Inconsistent evidence of Ghandi Sobbi 274 It was contended for the defendants that, once it is accepted that the purpose of the loan was to repay monies owing to Ibrahim, the Court should then have no regard to the earlier (and contrary accounts) given by Ghandi Sobbi in his affidavits that were relied upon in earlier proceedings and that are now Exhibits A, B and C in the present proceedings. 275 Acceptance of such a contention, however, depends upon there being an adequate and proper basis to simply disregard the sworn evidence which Ghandi Sobbi gave concerning the purpose of the loan in Exhibits A, B, C and F. 276 Whilst the evidence given by him is of particular relevance to the issues as to the reason and purpose of the loan, it is not limited to those matters. The earlier evidence is also relevant to matters such as whether Ghandi Sobbi was the person who took the initiative or a lead role in negotiating the loan, whether he attended on Sam Cassaniti for that purpose and, if so, the matters discussed. Even if it is assumed that the loan was wholly sought to pay out Ibrahim, Ghandi Sobbi's role and participation in securing the loan are relevant in determining whether the loan and associated transactions were "unjust" and, if so, whether the discretion should be exercised in the defendants' favour. 277 The fact that certain of the loan monies were to be applied to pay out Ibrahim does not, of course, mean that other loan monies were not also available and used in a way that commercially benefited the defendants. 278 The earlier evidence of Ghandi Sobbi in Exhibits A, B and C is clearly relevant to his credibility in the proceedings generally. Accordingly, for the above reasons, I do not accept Mr Menzie's submission to which I have referred in paragraph [274]. 279 It is clear that the file notes of Cassaniti & Associates dated 17 May 2002 and 23 May 2002 (Exhibit G) contradict Mr Ghandi Sobbi's evidence to the effect that he was unaware that the loan monies were being sought, at least in part, for the purpose of paying monies to Fadi Ibrahim. The submission was that the file notes, having been created by Sam Cassaniti, "should only be accepted to the extent that they are against Reliance's interest …" (paragraph [53]). Whilst such an approach would obviously favour the defendants, no evidential or other basis was identified by Mr Menzies for adopting the suggested approach of simply disregarding unfavourable file notes that, establish Ghandi Sobbi's presence at both meetings and other matters that are unfavourable to him. (f) The loan to Alan Sobbi 280 The evidence does not clearly establish why Ghandi Sobbi arranged for the loan to be made to his son, Alan, as distinct from the loan being made to Lemery Holdings and/or to himself, as borrower. 281 There is some evidence that Ghandi Sobbi wanted his son to be made responsible for the loan, envisaging that his son would, at least indirectly, benefit from it. It was Ghandi Sobbi who specifically requested that his son should be, what has been described in submissions as the "front person", and the first person liable in the event that the loan was not repaid. 282 In any event, Reliance placed emphasis upon the fact that the loan was structured in the way it was at the express request of Ghandi Sobbi. 283 The plaintiff relied on the evidence of Ghandi Sobbi (paragraphs 3 and 4 of Ms Deigan's affidavit sworn 2 October 2009) that when Mr Cassaniti put that he would prefer to lend the money to Lemery Holdings, Ghandi Sobbi responded "I want Alan Sobbi to be responsible". (g) The claim for relief under the Contracts Review Act 284 In determining the primary issue under the Contracts Review Act, namely, whether the "contract" is "unjust" in the circumstances relating to the contract at the time it was made, it is necessary to have regard "… to the public interest and to all the circumstances of the case …" and, to the extent that they are relevant, the circumstances referred to in s.9(2) of the Act. 285 The power under s.7 of the Act is not necessarily engaged if one or more criteria specified in s.9 are established. Such a mechanistic approach would not, of course, be at all appropriate to the task of determining the broad concept of "injustice". 286 The loan, the mortgage and the guarantee were, of course, related and taken together may be seen as forming parts of an overall "transaction". Whilst McHugh JA in West (supra) at 621E stated that the Act "regulates contracts not investments" nevertheless, as Basten JA in Khoshaba (supra) observed (at [122]), "… the transaction or investment which constitutes the purpose for which the loan is obtained may be relevant in a number of respects …". 287 Section 9(2)(l) provides that one of the matters to which the Court shall have regard, to the extent they are relevant to the circumstances, include:- "(l) The commercial or other setting, purpose and effect of the contract." 288 In the present case, it is of importance to determine the commercial or other setting of the transaction (the loan, guarantee and mortgage) and, in particular, the purpose of the loan contract. 289 Was the transaction in part one entered into by Ghandi Sobbi to assist or to facilitate Lemery Holdings (and, therefore, indirectly to benefit the defendants) to acquire the stock, fixtures and fittings of House of Diamonds and to then enable Lemery Holdings and/or the defendants to take over control of the conduct of the House of Diamonds business? Was the purpose, on the other hand, to assist Alan Sobbi to obtain finance to acquire or take over an existing business, in particular, the House of Diamonds business? Was the purpose to help Alan Sobbi pay for jewellery purchased by him? Was the purpose to raise funds to assist Alan Sobbi to pay out Ibrahim? Was the purpose of the transaction a combination of two or more of the above matters? 290 As the earlier discussion of Contracts Review Act decisions indicate, identifying the purpose of the transaction will more often than not bear directly upon the fundamental question of the justness or otherwise of the contract. Determining whether the person or persons seeking relief received a "benefit" from the transaction is also relevant. 291 A combination of factors, taken together, may make a loan agreement and mortgage subjectively harsher than fair. It may be that such factors indicate that the transaction was ill-advised. However, as McDougall J observed in Longobardi (supra), unfairness and poor decision making do not necessarily amount to injustice. (h) The issue of special disadvantage 292 In support of the contention that the defendants were in a position of "special disadvantage" at the time of the loan, reliance was placed upon the asserted need for Ghandi Sobbi to obtain the loan to meet the alleged demands of Fadi Ibrahim: Written Submissions at [133]. His lack of available funds and the fact that Lemery Holdings had a debt of $250,000 were also matters referred to. 293 The financial position of Lemery Holdings as at the date of the loan was impliedly raised in written submissions as relevant to the defendants' financial position as at that date. Its real estate was said to have been unencumbered but it was said to have had borrowings with Reliance of approximately $250,000. 294 The exact financial position of the defendants and of Lemery Holdings as at the date of the loan, 11 June 2002, was not the subject of specific affidavit or other evidence. The defendants referred in their written submissions to a number of answers given by Sam Cassaniti in response to questions in cross-examination: Written Submissions at [133] to [134]. Those questions were put without reference being made to documentation that established the full details of prior borrowings as at the date of the loan with Reliance by Lemery Holdings or other persons or related entities. 295 It was put to Sam Cassaniti that Ghandi Sobbi had previously guaranteed substantial debts of Alan Sobbi, Lemery Holdings and House of Diamonds (t.79). Whilst Sam Cassaniti indicated that such debts could have been substantial, he was unable to provide details. 296 Ghandi Sobbi's own evidence, however, as to prior guarantees by him was to the contrary. In his affidavit sworn on 12 September 2007 (paragraph [12]), he said that before entering the guarantee and the mortgage, the subject of these proceedings, "… I had not entered into a mortgage or guarantee. I do not like to borrow money from anyone as I do not like to owe anything …". 297 On the question of the defendants' financial position at the date of the loan, Ghandi Sobbi's affidavits in the present proceedings were not directed to establishing a case that he or his wife were, as at 11 June 2002, in a position of significant indebtedness or financial disadvantage apart from their claim of having made payment in respect of their adult son's alleged indebtedness to Fadi Ibrahim. 298 The question of "special disadvantage" in the present case was said to have arisen from a combination of facts, including that the fact that the defendants were migrants, that Ghandi Sobbi had a limited command of English and Mrs Sobbi had none, that although Ghandi Sobbi understood the nature of a loan, mortgage and guarantee, the defendants were not given proper legal advice. 299 It was also contended that they were not sophisticated commercial people and that they were operating at the relevant time under circumstances in which, alternatively (depending upon which version of their case was accepted) they did not know that their son, Alan, had allegedly been assaulted and threatened over the question of money said to have been owing to Ibrahim. In the alternative, it was argued that if they did know about those matters, then they were placed in oppressive circumstances by reason of the situation their son found himself in. They, additionally claimed, as has been noted, that, at the date of the loan, they were unaware of their son's bankruptcy. I will return below to consider those matters in relation to s.7 and s.9 issues. 300 It is clear on the evidence, and I find accordingly, that leading up to the loan, two separate sets of circumstances were taking place more or less simultaneously. The first was the claimed indebtedness of Alan Sobbi to Fadi Ibrahim and threats allegedly made by or on behalf of Mr Ibrahim to recover the monies from Alan Sobbi. The second concerned the less than satisfactory performance of the House of Diamonds business whilst under the control of Masoud Malek and Mr Ghandi Sobbi's desire to take control of the business from Mr Malek. 301 The alternative case for the defendants, as noted earlier, was that, if Ghandi Sobbi was in fact aware that the loan was to be used by his son, Alan Sobbi, to pay monies he allegedly owed Fadi Ibrahim, then they were at a special disadvantage and Reliance took advantage of that position. 302 Such a contention, however, requires analysis. If the defendants' alternative case is that Alan Sobbi was in a position whereby he was forced to submit to the alleged threats of personal harm, and Sam Cassaniti was aware of that fact, it would then be necessary to consider whether those circumstances amounted to "special disadvantage" as that expression is understood. 303 The evidence does not establish that Alan Sobbi was, in any practical sense, precluded from seeking protection for himself from the alleged criminal conduct involving threats of violence by reporting the matter to police. 304 Indeed, according to Alan Sobbi's affidavit sworn on 12 November 2009 (paragraph [32]), he allegedly had resisted Fadi Ibrahim's agents on 7 May 2002 and police attended to assist him on that occasion. 305 Again, on the defendants' alternative case, on the assumption that such threats were, in fact, made by or on behalf of Fadi Ibrahim to the knowledge of Ghandi Sobbi, for reasons unexplained in evidence, Alan Sobbi elected to respond to them not by reporting them but seeking loan funds to pay out Fadi Ibrahim. 306 A decision of a borrower in such circumstances to effectively buy-off a person making threats does not, in my opinion on the facts of the present case, constitute evidence of "special disadvantage" that would require a lender to refrain from granting the loan or to require it to do so only after it has sought more information to ensure that the potential borrower was making a rational decision about the matter. 307 The evidence does not, in my opinion, establish that Reliance acted in relation to the loan in a way that could be said to have constituted an unconscientious taking of advantage of the position of either Alan Sobbi or his father. On the findings I have made elsewhere, Ghandi Sobbi acted for a two-fold purpose in seeking the loan and he saw a commercial advantage in doing so. (i) Conflicting evidence of Ghandi Sobbi and Alan Sobbi on the issue of "benefit" 308 The purpose of the loan and any "benefit" from it to the defendants are related matters. They are central in determining the defendants' claim for relief. In relation to them, the credibility of both Ghandi Sobbi and his son, Alan Sobbi, is critical. 309 As I have earlier stated, the evidence in the present proceedings given by Mr Ghandi Sobbi on a number of matters conflicts with evidence given by him in relation to them in earlier proceedings. In the latter proceedings, he gave a clear account of the loan being used to enable Lemery Holdings to purchase the stock etc of House of Diamonds. 310 A fundament conflict also arose between the evidence of both Ghandi and Alan Sobbi in their primary affidavits filed in the present proceedings (namely, Ghandi Sobbi's affidavit sworn 12 September 2007 and Alan Sobbi's affidavit sworn 28 September 2009) and the basis upon which the defendants' case was ultimately presented in final submissions on their behalf. 311 The purpose of the loan of $600,000 as stated by Ghandi Sobbi in his "first" affidavit filed in the present proceedings (namely, in effect, to facilitate Alan Sobbi acquiring the business operated by House of Diamonds), was disavowed as part of the defendants' case in final submissions. 312 In final submissions, it was contended for the defendants that the Court would find:- "The purpose of the loan from Reliance to Alan Sobbi was to repay monies owed to a person known as Fadi Ibrahim." (Defendants'/Cross-Claimants' Written Outline of Submissions, paragraph 31(a)) 313 The evidence given by Mr Ghandi Sobbi in his affidavit, in particular, his statement that it was represented to him by his son, Alan, that he, Alan, needed to borrow $600,000 to buy "… Masoud's shop" is, in my opinion, clearly an incorrect account. It has no support from any of the affidavits relied upon by Alan Sobbi in the present proceedings. The proposition that Alan Sobbi stated that he intended to purchase any retail jewellery business at that time is quite unsupported. 314 Ghandi Sobbi's account referred to in the preceding paragraph does not accord with the known facts in that:- • Prior to Alan Sobbi's affidavit sworn on 28 September 2009, Alan Sobbi had not referred in his initial affidavit in these proceeding sworn 19 October 2004 to any intention or proposal by or for him to use the loan to buy a business, let alone "Masoud's shop" . • Alan Sobbi did not buy the jewellery shop or its stock-in-trade of House of Diamonds stock. That was ultimately sold on 24 May 2002 by House of Diamonds to Lemery Holdings pursuant to the agreement made on that date. He was never a purchaser of any shop in the period 2002. • Mr and Mrs Sobbi were the only directors/shareholders of Lemery Holdings at that time. Alan Sobbi held no interest in the company. 315 Mr Ghandi Sobbi's account as to the purpose of the loan set out in his affidavit of 12 September 2007 (to finance Alan Sobbi in the purchase of House of Diamonds) also conflicts with his own account in his affidavit sworn on 26 May 2003 in Equity proceedings number 2747 of 2003 (being Exhibit A in the present proceedings). In the earlier affidavit (Exhibit A), as earlier noted, he stated:- "3. During the course of 2002, it became apparent that Lemery Holdings Pty Limited would need to purchase the business trading as House of Diamonds and was in need of loan monies in order to fund the purchase. 4. In the circumstances, myself and the Second Plaintiff arranged an advance of $600,000 from the First Defendant herein. … 6. To the best of recollection, the advance of $600,000 was fully drawn down on or about 1 July 2002, although the purpose of loan was to arrange the purchase by Lemery Holdings of the business known as House of Diamonds from the company known as House of Diamonds (NSW) Pty Limited." 316 Mr Ashhurst, in his oral submissions, correctly, in my opinion, contended that Mr and Mrs Sobbi, as plaintiffs in the last-mentioned proceedings taken against Reliance, could have no possible reason for having given a false account as to the purpose of the loan. There was no possible advantage to either of them in lying about that topic. The conflicting accounts on such a critical matter, in my opinion, further supports the conclusion I have earlier indicated, namely, that Mr Ghandi Sobbi is a witness of no or very low credibility. 317 The submission of senior counsel made on behalf of the defendants that it should be accepted that the purpose of the loan was limited to the Ibrahim matter, conflicts with the sworn evidence of Ghandi Sobbi in Exhibits A and F which identified the purpose as related to the acquisition of the House of Diamonds stock, fittings etc. 318 I have referred earlier to the fact that Alan Sobbi, for the first time, referred to Fadi Ibrahim in his affidavit sworn 12 November 2009. Alan Sobbi's initial account of a threat having been made by Fadi Ibrahim appeared in paragraph 34 of that affidavit. In paragraph [43], he said he met with Mr Sam Cassaniti shortly after 19 May 2002 and said "I need to get a loan fast". He then included in paragraphs [44] to [52] conversations he said he had with Mr Sam Cassaniti and Fadi Ibrahim concerning the loan. In paragraph [53] he claimed that he did not inform his parents as to the "real reason" as to why he needed the money for the loan that they were guaranteeing. 319 The position ultimately taken by both Ghandi Sobbi and Alan Sobbi in the present proceedings is as follows. They, effectively, seek that in determining the facts concerning the loan (including its purpose and application), the inconsistent evidence each of them gave in earlier proceedings should be put to one side and a finding made that the alleged demands of Fadi Ibrahim for payment of money by Alan Sobbi was the sole reason or purpose for the loan. For reasons earlier set out, I reject the submissions made to that effect. (j) Evidence relevant to a commercial purpose 320 The evidence, as earlier noted, establishes that from the outset Ghandi Sobbi was actively involved in the proposal for finance put to Sam Cassaniti on 17 May 2002. 321 There is evidence that, in fact, suggests that the sale of the House of Diamonds business in May 2002 was very much a live issue in the lead up to the loan. As discussed earlier, on 24 May 2002, House of Diamonds made an agreement with Lemery Holdings to sell all its stock in trade, fixtures and fittings for the amount of $800,000. Ghandi Sobbi said in his affidavit of 4 October 2002 (Exhibit B):- "16. I instructed my accountants, Cassaniti & Associates to arrange to prepare a simple draft for the sale to the plaintiff of the business …." (A copy of the agreement dated 24 May 2002 was annexed and marked GFS-2) 322 In the same affidavit, Ghandi Sobbi said that the sale was completed on the evening of 23 May 2002 and that a handwritten stock sheet was generated by himself, his son Alan and "Masoud" during the course of the day and on the evening of 23 August 2003. He stated that the total value of the stock at cost amounted to approximately $800,200 (paragraph [17]). 323 Ghandi Sobbi's affidavit sworn 4 October 2002 (Exhibit B) as well as contemporaneous documents (including, in particular, the cheques in the tender bundle Exhibit 22 at pp.67 to 70 inclusive) establish that the loan monies that were paid out pursuant to directions given to Reliance to third parties associated with Mr Malek, constituted the consideration for the transaction whereby Lemery Holdings acquired title to the jewellery stock of House of Diamonds. 324 Mr Malek's stated in his affidavit (paragraphs 12 and 13) that certain monies received by his company, Kevin Group Services Pty Limited, by means of the two cheques drawn on the account of Mr Cassaniti, provided the means for paying Fadi Ibrahim money, the amount of which was unspecified. His evidence on these matters does not establish that Lemery Holdings did not itself benefit from the transaction (in particular, by acquiring jewellery (stock in trade), and the fixtures and fittings formerly owned by House of Diamonds). 325 As earlier noted, in paragraph [13] of his affidavit, Mr Malek acknowledged that two cheques totalling $413,000 were received via Cassaniti & Associates and these were banked to the accounts of his company, Kevin Group Services Pty Limited, whereby he said he withdrew "large amounts in cash" and delivered cash to Mr Ibrahim. His evidence in this respect did not disclose either the quantity of cash said to have been withdrawn or the amount of cash said to have been delivered to Ibrahim. 326 It is clear from the evidence given by Mr Ghandi Sobbi in Exhibits A and B that his motivation for obtaining the loan from Reliance was, at least in part, to rescue or revive what were seen by him to be the flagging fortunes of the House of Diamonds business. 327 It was contended in the written submissions for the defendants (paragraph [69]) that Sam Cassaniti's evidence that the loan money was used to purchase diamonds, jewellery or stock was inconsistent with Exhibit 9 (the file note of 17 May 2002) and Exhibit 11 (note of meeting at Cassaniti & Associates on 24 May 2005). However, the file notes are to be considered in the context of all the evidence including the Sale Agreement of 24 May 2002, the affidavit of Ghandi Sobbi (Exhibits A and B) and the evidence as to the payment/distribution of the loan funds. (k) The issue of asset lending 328 In submissions it was contended for the defendants that the loan amounted to "asset lending" as that term is understood in the relevant authorities (eg, Elkofairi (supra) and Khoshaba (supra) at [128]. 329 In Elkofairi (supra), the contract was held to be "unjust", firstly, because the borrower was in a position of "special disadvantage" (although not known to be so by the lender) and, secondly, because the lender was "content to lend on the value of the security only", knowing that the borrower had no income or other assets with the result that it was likely that the borrower would lose her home. 330 As to the loan itself, this is not a case, in my opinion, in which the principles relating to pure asset lending apply. That expression comprehends a transaction under which money is lent 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 and thus "a potentially fruitless enterprise, simply because there is no risk of loss": Khoshaba (supra) at [138] per Basten JA. 331 The circumstances in Khoshaba (supra) indicate that it was very different from the present case. In Khoshaba (supra) the loan of $120,000 was raised for an investment which was said to have had the structure of a pyramid selling scheme. That scheme eventually collapsed leaving the respondents without the expected flow of revenue from it and a debt to the lender (the appellant). 332 The lender did not, before granting the loan, verify that the respondents were employed and did not verify their income. That led to the conclusion that the appellant was prepared to act on the basis of adequate security alone. One of the respondents was represented to the lender as having had an income of $43,000 per annum and the other as a pensioner. Enforcing the security against the personal residence of such borrowers, it was held, should not be treated as if it were the first resort. However, on paper, that was what it appeared the appellant could be described as having done: Khoshaba (supra) at [83] per Spigelman CJ. 333 In the present case, Sam Cassaniti had acted for Mr and Mrs Sobbi and Lemery Holdings as their accountant for several years. He would be taken to have some reasonably detailed knowledge of their business, their financial status and their asset position. The defendants did not lead evidence of their capacity (or lack of capacity) to repay the loan. As at the date of the transaction the subject of the proceedings, they owned assets other than their home. In particular, they owned the shares in Lemery Holdings which, as noted above, had assets (premises plus stock) valued at approximately $2 million. The net asset position of Lemery Holdings, of course, must bring to account any unsecured loans owed by it. 334 The subject loan was not, as in Khoshaba (supra), raised for the purposes of a speculative venture involving a highly risky investment promoted by third parties to the public (including the gullible public). There is no evidence in this case (as in Khoshaba (supra)) that the defendants incurred damage or loss as a result of a loss-making investment scheme. The evidence instead establishes that they have had the benefit of the plaintiff's money, as discussed above. (l) The position of Mrs Sobbi 335 In cases where a husband (or equivalent) has taken the lead role in relation to a joint transaction entered into by the husband and wife (or partner), in any proceedings for relief from the transaction under the Contracts Review Act or under the general law, the position of the wife or partner who has not actively participated is one to be separately considered. 336 In the present case it is clear that Ghandi Sobbi was the driving force and Mrs Sobbi was not directly involved in discussions or negotiations concerning the subject transaction. Additionally, she, unlike her husband, has no command of the English language and there is no suggestion that she had anything approaching the level of business experience or capacity that her husband clearly possessed. 337 In those circumstances, the question arises as to whether or not Mrs Sobbi, being a joint owner of the Wakeley property, has established a basis for the relief claimed. 338 The issue of "benefit" is also relevant in evaluating Mrs Sobbi's claims for relief. It was argued by Mr Ashhurst on behalf of Reliance that his client, in paying out $600,000 pursuant to the loan, meant that Lemery Holdings derived a material benefit by obtaining title to the jewellery stock, fixtures and fittings of the House of Diamonds business. As Mrs Sobbi, like her husband, was a director and shareholder of Lemery Holdings, it was contended that she clearly benefited from the transaction as much as he did. 339 In that way, the argument proceeded, Mrs Sobbi obtained what was bargained for. That was said to be fundamental in determining whether or not unconscionability had been established or whether the contract in question was "unjust". It was also said to be a matter that was relevant to the exercise of the discretion. 340 I have, in the findings made, determined that Lemery Holdings did obtain a benefit from the transaction and that it follows that Mrs Sobbi indirectly also benefited. I do not consider that it is open to Mrs Sobbi to claim that she has suffered a loss or detriment entitling her to relief. 341 In National Australia Bank v Satchithanantham [2009] NSWSC 21, the appellant signed a mortgage over her home to secure a loan. She understood that she was signing a mortgage and that it related to the loan but said that she only signed it because her husband forced her to do so. 342 One of the issues in that case was whether the appellant was entitled to relief from the consequences of the mortgage and the loan agreement under the second limb in Yerkey v Jones (1939) 63 CLR 649. The Court (McCallum J) rejected the defence on the basis that the appellant herself had received considerable benefit under the transaction and that it was not the type of situation to which Yerkey (supra) was directed. 343 On appeal, Young JA (with whom Giles and Hodgson JJA) agreed at [45]:- "The main reason why her Honour took that view is that Yerkey v Jones primarily deals with the situation where a wife or equivalent mortgages her property and receives no benefit at all from the funds produced by the mortgage. There is a very limited area where a wife can take advantage of the Yerkey v Jones principle where she receives some benefit, usually in the case where she is a director and shareholder of a corporate borrower: see eg the cases referred to by Clarke JA in Warburton v Whiteley (1989) NSW Conv R 55-453 at 52,287 – 58,291 and my decision at first instance in Garcia v National Australia Bank Ltd (1993) NSW Conv R 55-662 at 69,787." 344 In Garcia v National Australia Bank Ltd (1993) NSW Conv R 55-662, Young J (as his Honour then was) observed at [5]:- "… It would seem from the authorities that the mere fact that there is a guarantee in a large amount involved does not necessarily make the transaction disadvantageous within the meaning of the rule. All the circumstances must be taken into account so that if a large guarantee is given so that a company in which a wife has a 50% interest has a chance of trading out its difficulties, there will be no material disadvantage …" 345 In the present proceedings, Mrs Sobbi did not specifically plead or rely upon a defence based on the principles in Yerkey (supra). However, the approach taken in cases where such principles are relied upon illustrate the importance of determining whether a party seeking equitable relief from a transaction has, in fact, been a beneficiary of it. 346 Accordingly, I do not consider that, taking all matters into account, this is a case where Mrs Sobbi's position warrants a different approach or outcome to that of her husband. PART L 17. Findings and conclusions (a) Factual matters established in evidence 347 The evidence, in my assessment, in the present case establishes the following matters and I make findings accordingly:- (1) The guarantee and mortgage between Reliance and Mr and Mrs Sobbi constituted security for the Loan Agreement between Reliance and Alan Sobbi and the three instruments constituted related parts of a single transaction. (2) There was a two-fold purpose for the loan. The first was to acquire stock, fixtures and fittings of the House of Diamonds which would assist Ghandi Sobbi in taking control of the conduct of that business from Masoud Malek. The second was to assist Ghandi Sobbi and Alan Sobbi to pay monies allegedly demanded by or an behalf of Fadi Ibrahim. (3) The evidence does not establish or suggest any relationship or association between Sam Cassaniti and Fadi Ibrahim. (4) At all material times, Ghandi Sobbi was aware of the allegation that his son had been threatened. He applied for the loan in order to assist his son to pay out Fadi Ibrahim and to achieve the commercial objective of purchasing the House of Diamonds' stock, fixtures and fittings. (5) Ghandi Sobbi understood the nature and effect of the loan, the guarantee and the mortgage including the fact that, by virtue of the mortgage, he was putting his house at risk. (6) Pursuant to the loan made on 24 May 2002, Reliance made payments of loan monies to third parties associated with Mr Malek as directed by Mr and Mrs Sobbi and by Alan Sobbi. (7) Ghandi Sobbi, through his then lawyers, David Landa Stewart & Co, acknowledged responsibility for the loan and offered to repay the loan monies upon receipt of advice as to the amount actually owing. (8) Mr Ghandi Sobbi was a successful manager of his retail jewellery business as at the date of the loan. (9) Both Ghandi Sobbi and Alan Sobbi were well-known to Sam Cassaniti. Mr Sam Cassaniti was aware of the business interests and experience and financial affairs of the defendants. (10) Mr Ghandi Sobbi obtained advice from a solicitor to whom he was referred by Mr Cassaniti in respect of the mortgage and guarantee. Mrs Sobbi was also seen by a solicitor about the transaction. On the evidence, Mr Cassaniti was entitled to act upon the basis that the defendants had received legal advice on the proposed transaction. (11) The file note of 17 May 2002 (Exhibit 9) is a contemporaneous record of the meeting between Mr Ghandi Sobbi and Mr Sam Cassaniti. There is no evidence that undermines or destroys the integrity of the file note as being a bona fide record of the meeting. (12) The file note of 17 May 2002 constitutes evidence of the fact that Mr Ghandi Sobbi was present at the meeting held on 17 May 2002. It is evidence of him taking a lead role in the discussions for a loan from Reliance, that he was aware of the fact that his son was then claiming that he had received threats from Ibrahim and others about monies allegedly owing and that his son was in financial difficulty. (12) The file note of 23 May 2002 (Exhibit G) is also a contemporaneous record of the meeting held that day at the offices of Cassaniti & Associates. Again, as in the case of the file note of 17 May 2002, there is no evidence that calls into question the integrity of the file note as a bona fide record of the meeting. (13) The evidence given by Mr Ghandi Sobbi that he was not present at the meetings of 17 may or 23 May 2002 is incorrect. Contrary to his evidence that he did not know or had not met Fadi Ibrahim, the file note of 23 May 2002 establishes that he was present throughout the meeting attended by Mr Ibrahim and others. It also establishes that Ghandi Sobbi, contrary to his evidence, knew who Fadi Ibrahim was and that he heard threats being made at the meeting against his son (the fourth dot point in the file note records "will take alan away for 1 day & sort him out for further" . (14) The defendants, through Lemery Holdings, obtained a material benefit from the loan as the sole shareholders of the company. (15) Sam Cassaniti was not aware or conscious of the fact of Alan Sobbi's bankruptcy as at the date of the loan. (b) Conclusions 348 On an assessment of the evidence, I have concluded as follows:- (1) The terms of the loan/guarantee and mortgage were not unjust. (2) The commercial opportunity of taking over the House of Diamonds business as assessed by Ghandi Sobbi at the date of the loan was a material motivation in him seeking finance from Reliance. (3) At the date of the loan, Ghandi Sobbi was an experienced commercial participant in the jewellery trade. He clearly saw a calculated commercial opportunity in taking over the stock, fixtures and fittings of House of Diamonds with the assistance of funds advance by Reliance. (4) The decision of Ghandi Sobbi to apply the loan funds towards a commercial purpose (investment in the House of Diamonds business) was not shown, at that time, to have been an impudent one. (5) Insofar as loan monies paid by Reliance to Kevin Group Services Pty Limited were, in some amount, subsequently utilised to fund Alan Sobbi in respect of a debt he allegedly owed to Ibrahim, that was an event that post-dated the making of the loan, guarantee and mortgage and was not a direct consequence of them. (6) Even if it were accepted that Ghandi Sobbi was, at the date of the loan, unaware that his son, Alan Sobbi, was bankrupt, it is not likely to have influenced him against proceeding with the loan. Alan Sobbi was, at the time, in a financially strengthened position. (7) At least as at 17 May 2002 (the date of the file note, Exhibit 9), Ghandi Sobbi was aware of the fact that Alan Sobbi was in a position of serious financial difficulty. (8) The evidence does not establish that Mr and Mrs Sobbi's financial position was such that the loan from Reliance was unserviceable or could not be repaid by them. (9) Mr and Mrs Sobbi were not subjected to any unfair tactics by or on behalf of Reliance. There were no misrepresentations by Sam Cassaniti and/or Reliance in the discussions that preceded the making of the loan and no unconscientious advantage was taken by Reliance of the defendants. (10) The loan from Reliance having been made at the request of Ghandi Sobbi for the dual purpose of enabling Lemery Holdings to acquire the stock of House of Diamonds and to provide a source of funds to assist Alan Sobbi in relation to his dealings with Fadi Ibrahim was not a substantively "unjust" contract in its terms or its effect. Nor were the guarantee and mortgage substantively unfair or unjust in their terms or effect. (11) They were both provided with the opportunity of receiving and did receive legal advice in relation to the guarantee and mortgage. This is not a case in which the claimed circumstances of special disadvantage existed or operated in a way which would warrant the exercise of the discretion to grant relief as sought by the defendants. 349 In the determination of the broad concept of unjustness under s.9 of the Contracts Review Act, it is necessary that regard be given, inter alia, to all the circumstances of the case, including the consequences or results arising in the event of compliance with any or all of the provisions of the contract. 350 In making that determination, the evidence is accordingly to be examined to determine the matters set out in s.9(2)(a) to (l) so far as relevant to the circumstances of the present case. 351 Many of the matters referred to in s.9(2) have necessarily been dealt with in the analysis and findings of fact made and set out above. In particular in that respect, the defendants have not established:- • Any material inequality in bargaining power between them and Reliance. • That the contracts constituting the transaction were imposed upon them. The loan, guarantee and mortgage were the subject of discussions and negotiation. It has not been argued that it was not reasonably practical for the defendants to negotiate an alteration of or to reject any provisions of the contracts. • That any particular contractual conditions set out in the loan, guarantee or mortgage imposed or gave rise to any requirements that were excessively or unreasonably difficult or were unnecessary for the protection of Reliance's legitimate interests. • That they were disadvantaged in discussing and negotiating the loan, guarantee and mortgage with Sam Cassaniti. 352 This is not a case in which the evidence establishes undue influence, unfair pressure or unfair tactics were exerted or used by Reliance against the defendants. 353 I have, accordingly, concluded that neither the loan contract nor the guarantee or mortgage were unjust in the circumstances in which they were made. Reliance did not act as a prospective mortgagee that demonstrated indifference of a kind referred to in Khoshaba (supra). 354 I do not consider that the circumstances established in evidence would warrant, as an exercise of the discretion, the grant of relief against Reliance. Reliance had been provided with information by Ghandi Sobbi as to the circumstances and purpose for which the loan was required. Ghandi Sobbi was in a position to make a rational assessment as to whether he wished to raise a loan for those purposes. The fact that Reliance, in fact, was aware of Ghandi Sobbi's intention and the purpose of the loan distinguishes it from the circumstances considered in Khoshaba (supra). 355 Finally, the basis upon which the case for the defendants has been conducted does not require in this case a determination in respect of the "benefit" received by the defendants of the principles of "unwarranted benefit": Elkofairi (supra) per Santow JA at [98] to [111]. No submissions were made by either party in that regard. (c) Unconscionability 356 The principles upon which the defendants contend that the transaction was unconscionable are well-established. They were enunciated by the High Court in Commercial Bank of Australia Limited v Amadio (1988) 151 CLR 447. See dicta of Mason J at 461. 357 Many of the considerations and factual findings set out earlier in this judgment are relevant and material in determining the unconscionability alleged by the defendants. 358 In Teachers' Health Investments Pty Limited v Wynne (1996) NSW Conv R 55-785 (referred to by Beazley JA in Elkofairi (supra)), Beazley JA observed at 56,029:- "… Two matters need to be established to invoke the Court's jurisdiction to set aside an unconscientious transaction. The first is that a party seeking to impugn the transaction was under a relevant disability. In describing this disability, Deane J at 476 referred to the statement of McTeirnan J in Blomley v Ryan (1956) 99 CLR at 392 that:- '… As taking surreptitious advantage of the weakness, ignorance or necessity of another. The essence of such weakness is that the party is unable to judge for himself.' … The second element [required to establish an entitlement to relief under Amadio is that this disability], as Deane J said at 477:- 'Sufficiently evident to the [other party to the transaction] to make it prima facie unfair or 'unconscientious' of the [other party to the transaction] to procure [the] execution of the [contract] in the circumstances in which the execution was procured'." 359 On the basis of the findings made, and having regard to established principles as to unconscionability, I do not consider that the defendants have established that the guarantee and/or mortgage were unconscientious transactions. 360 I have, accordingly, concluded that the defence and cross-claims made by the defendants must fail. There being no other ground of defence relied upon, Reliance is entitled to judgment for the amount of its debt and to judgment for possession of the property. 361 I direct that the parties bring in short minutes of orders to give effect to this judgment. The appropriate orders will include the following:- (1) An order that the defendants give the plaintiff possession of the land comprised in the relevant Certificate of Title Folio Identifier. (2) An order that the plaintiff have leave to issue a Writ of Possession in respect of the property referred to in order (1). (3) Judgment be given in favour of the plaintiff against the defendants in the amount of the judgment debt together with interest calculated on that sum to the date of judgment. (4) That the defendants' Second Further Amended Cross-Claim be dismissed. 362 In the ordinary event, costs should follow the event. I will, however, receive submissions from the parties as to costs should they wish to do so. The costs follow the event rule, however, prima facie, indicates that the defendants should pay the plaintiff's costs of and incidental to the proceedings. 363 I, accordingly, order and direct that the parties bring in short minutes to give effect to this judgment. I will, as necessary, re-list proceedings for the making of final orders and hearing any submissions on costs. ********** 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.