New South Wales Supreme Court CITATION : Fast Funds Pty Limited v Coppola; Coppola v Hall [2010] NSWSC 470 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 9-12 February & 4 March 2010 JUDGMENT DATE : 14 May 2010 JURISDICTION : Equity JUDGMENT OF : Slattery J at 1 ORDERS: 1 The Possession proceedings are stayed until further order. DECISION : 2. Direct the parties to consult one another with a view to agreeing within seven days upon the quantum of the sum due by Elio and Maria Coppola to Fast Funds and the other lenders within seven days but in the absence of agreement for each party to file its own calculation of the amount due. 3. Direct the parties to consult and agree if possible within seven days upon short minutes of order to give effect to this judgment. If agreement is not forthcoming within seven days, each party should file short minutes of order for which that party contends and serve the same on the other party. 4. Grant liberty to apply. See paragraph [304] of judgment for final short minutes of order. CATCHWORDS : EQUITY - equitable remedies - whether a series of loan and mortgage transactions should be set aside - whether the loans were regulated by the Consumer Credit Code - whether unjust transactions within Code s 70 and Contracts Review Act s 7 - business purpose declaration executed under power of attorney - one borrower ignorant of transactions but benefits from them - HELD - loans not for business or investment purposes - Code applies - lender breached the Code - mortgage unjust within Code s 70 and Contracts Review Act s 7 - loan obligations varied - lender's rights to enforce stayed pending compliance with the Code s 80 Australian Securities and Investments Commission Act 2001 (Cth) Consumer Credit (New South Wales) Act 1995 ss 5, 6 Consumer Credit (New South Wales) Code ss 6, 11, 14, 15, 21, 40, 43, 70, 71, 80, cl 7 Consumer Credit (Queensland) Act 1995 LEGISLATION CITED : Contracts Review Act 1980 (NSW) s 4, 7, 9 Fair Trading Act 1987 (NSW) Powers of Attorney Act 2003 (NSW) ss 43, 51, 52 Real Property Act 1900 (NSW) s 57 Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW) s 100 CATEGORY : Principal judgment Australian Financial Direct Ltd v Director of Consumer Affairs Victoria (2004) VSC 526 Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44 Baltic Shipping Co v Dillon ("the Mikhail Lermontov") (1991) 22 NSWLR 1 Beneficial Finance Corporation v Caravas (1991) 23 NSWLR 256 Benjamin v Ashkian [2007] NSWSC 735 Bridgewater v Leahy (1998) 194 CLR 457 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Fabre v Arenales (1992) 27 NSWLR 437 Hraiki v Beljon [2008] NSWSC 775 CASES CITED : Jones v Dunkel (1959) 101 CLR 298 Kowalczuk v Accom Finance [2008] NSWCA 343 No Fuss Finance Pty Ltd v Miller [2006] NSWSC 630 Permanent Mortgages Pty Ltd v Cook (2006) NSWSC 1104 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 Rafiqi v Wacal Investments Pty Limited (1998) ASC Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 S H Lock (Australia) Ltd v Kennedy (1998) 12 NSWLR 482 Smith v Samuels (1975) 12 SASR 573 Spina v Permanent Custodians [2009] NSWCA 206 Fast Funds v Coppola: Plaintiff: Fast Funds Pty Limited First Defendant: Maria Coppola Second Defendant: Elio Coppola Third Defendant: Pepper Finance Corporation Limited Fourth Defendant: Permanent Trustee Australia Limited Fifth Defendant: Bank of Western Australia Limited PARTIES : Sixth Defendant: Commonwealth Bank of Australia Coppola v Hall: Plaintiff: Maria Coppola First Defendant: Simon Clear Hall Second Defendant: George Romiz Third Defendant: John Storm Fourth Defendant: Fast Funds Pty Limited Fifth Defendant: Finance Consultancy Group Pty Ltd FILE NUMBER(S) : SC 2009/289358 Fast Funds v Coppola; 2009/290634 Coppola v Hall Fast Funds v Coppola: Plaintiff: Mr V Bedrossian Defendants: Mr M Condon COUNSEL : Coppola v Hall: Plaintiff: Mr M Condon Defendants: Mr V Bedrossian Fast Funds v Coppola: Plaintiff: Bransgroves Lawyers First and Second Defendants: Moloney Lawyers Third Defendant: Kemp Strang Fourth Defendant: Bray Jackson & Co, Solicitors SOLICITORS : Fifth Defendant: Gadens Lawyers Sixth Defendant: D A Cohen Coppola v Hall: Plaintiff: Moloney Lawyers First, Second, Third & Fourth Defendants: Bransgroves Lawyers Fifth Defendant: No appearance IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SLATTERY J FRIDAY 14 MAY 2010 2009/289358 FAST FUNDS PTY LIMITED v MARIA COPPOLA; ELIO COPPOLA; PEPPER FINANCE CORPORATION LIMITED; PERMANENT TRUSTEE AUSTRALIA LIMITED; BANK OF WESTERN AUSTRALIA LIMITED AND COMMONWEALTH BANK OF AUSTRALIA 2009/290634 MARIA COPPOLA v SIMON CLEAR HALL; GEORGE ROMIZ; JOHN STORM; FAST FUNDS PTY LTD AND FINANCE CONSULTANCY GROUP PTY LTD JUDGMENT 1 HIS HONOUR: Events in late 2007 placed members of the Coppola family in acute financial distress. They turned to high interest rate lenders for assistance. The internal dynamics of the family moulded their dealings with these lenders. Now family members seek to set aside the loan dealings in which they were involved. The question in this case is whether the law will allow that to occur. 2 These proceedings principally concern three loan transactions made between members of the Coppola family and Fast Funds Pty Limited and related lenders in 2008 and 2009. Elio and Maria Coppola claim relief setting aside the second and third of these transactions. These two later transactions and the securities supporting them are still in place. 3 In the first loan transaction entered on 12 March 2008, Elio and Maria Coppola borrowed $51,244 from Fast Funds. This advance was structured to meet mortgage obligations to their existing lenders. 4 In the second loan transaction entered on 11 June 2008, Fast Funds advanced $141,390 to Elio and Maria Coppola. The second loan transaction was principally to discharge Elio's existing indebtedness under the first loan transaction. Elio and Maria claim that the justice of the second loan transaction is to be assessed partly by reference to the circumstances of the first loan transaction, which it discharged. 5 The third loan transaction entered into on 12 March 2009 with lenders related to Fast Funds discharged monies due under the second loan transaction and funded other payments. Elio and Maria contend that injustices allegedly associated with the first and second loans, together with the circumstances in which the third loan was made, are all bases to infer injustice in the third loan and that it too should be set aside. 6 Fast Funds contests Elio and Maria's claims that the Consumer Credit (New South Wales) Code ("the Consumer Credit Code" or "the Code") applies to these three loan transactions and contests that any of them were unjust in the circumstances in which they were made. The two proceedings were heard together. In June 2009 Fast Funds commenced proceedings (No. 2009/289358) against Maria and Elio and the first mortgagees of several of their properties, seeking the recovery of monies owed and the enforcement of its securities ("the Possession proceedings"). In September 2009 Elio and Maria launched a counter action (No. 2009/290634) against Fast Funds and associated parties, seeking declarations as to the enforceability of the Fast Funds securities and seeking remedies under the Consumer Credit Code, the Contracts Review Act 1980 (NSW), the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) setting aside the second and third loan transactions ("the Coppolas' proceedings"). 7 This judgment examines the events surrounding the first, second and third loan transactions and determines whether relief should be granted in relation to the second and third loan transactions. 8 To assess the contentions put for the Coppola family and in response by Fast Funds it is necessary to examine in some detail the family history and the circumstances existing at the time of entry into each of these three loan transactions. Background Elio and Maria Coppola 9 Elio and Maria Coppola married in Australia on 11 July 1970. They each migrated to Australia from Italy at different times in the late 1950s. 10 Elio was born in August 1942 and at the date of trial in February 2010 he was aged 67 years. After working in Germany in the restaurant industry he migrated to Australia in 1958 at the age of 24. He had only limited education and never gained any qualifications beyond school. He worked in restaurants and as an unskilled labourer from the early 1970s. After their marriage Elio and Maria worked together for a period on an assembly line at the AWA television factory in Sydney. Elio did not qualify for or undertake white-collar work at any stage during his working life. He worked as a stevedore until he retired in December 2000. 11 Elio describes his own English as "not good" but that he can understand basic conversations in English. Having seen him in Court struggling with an interpreter and hearing and misinterpreting snippets of English, my own findings are that his English is very poor. It would only be adequate for the most undemanding conversations of daily life. His own account of his English language skills does not understate his facility with the English language. He could not understand written English or spoken formal English especially where technical words are involved. He particularly relied upon his daughter Vanessa, together with family friends, to explain to him formal documentation in English. Although he picked up German when working in restaurants in Germany in the 1950s he never gained the same facility with formal English. He was generally a credible witness to the extent he was able to give an account of relevant facts. Much of what he said was limited by reason of the low level of his involvement in important transactions. But I do not accept all that he said as is evident in my findings below. 12 Elio Coppola has not conducted any formal business activities during his life. His only real exposure to investment is through the properties the subject of these proceedings. His daughter Vanessa's description of him as "unsophisticated when it comes to matters of finance and business" I accept is correct. 13 Maria's migration and educational history parallels that of her husband. She was born in Sicily in 1947 and migrated to Australia in 1957. She was educated at Paddington Primary School and afterwards at Darlinghurst High School. Because her first language was Italian she experienced difficulties at school. She said, and I accept, that she struggled with her eyesight, as her family could not afford to purchase prescription glasses for her. She left school at the age of 15 without gaining the Higher School Certificate. Like Elio, Maria had no education beyond secondary school. She too did not undertake white-collar employment at any stage during her working life. Apart from the demanding and continuous role of raising her four children, Maria Coppola's paid employment outside the home was as a seamstress and assembly line worker. 14 Maria's language skills are better than her husband's. Her affidavit was sworn in English without the assistance of an interpreter. Her evidence started in English but soon ran into difficulties when she was being cross-examined from the text of her affidavit. This was odd given that she had sworn her affidavit in English, unlike her husband who had his affidavit read over to him in Italian before it was sworn. I had a clear impression that she was understating her English-language abilities for defensive purposes in these proceedings. 15 Vanessa Coppola's description of her mother as someone who "has never been involved with business or commercial matters" was correct. But I do not agree with her statement "from my observation my mother relied entirely on my father with respect to financial and business decisions associated with our family". To the contrary, I find that between 2007 and 2009 both Elio and Maria relied heavily upon Vanessa in financial and business decisions associated with the family. 16 Maria Coppola took her time to answer questions. She was thoughtful. She considered each question very closely as it was interpreted to her, scrutinising it for possible harm to her interests before answering it. She had a reasonable appreciation of the questions being asked of her in English. Occasionally when she was using the interpreter she quickly answered questions in English directly to the cross-examiner. This created difficulties in managing her evidence through an interpreter. But more importantly it demonstrated a facility with formal spoken English. She often understood quite formally posed English questions. I find that she has some facility with English but that she is still more comfortable speaking Italian. 17 An issue arising later in the case is whether she had sufficient capacity with the English language to have a conversation in English with a mortgage broker, Mr Brockmuller in relation to the second loan. In my view she was sufficiently fluent in daily conversational English to have had the conversation that Mr Brockmuller alleges. I find that she did have that conversation but her capability with English would be tested by material written in English dealing with concepts that were unfamiliar to her such as legal expressions. Understanding such things without a clear explanation from an empathetic speaker would probably be beyond her. 18 There have been health problems in the Coppola household, which assist understanding of relationships within the family. Elio Coppola suffers from diabetes and high blood pressure. Maria has been diagnosed with type 2 diabetes and suffers transient ischaemic attacks ("TIA"), a condition characterized by a fleeting blockages to the arteries supplying blood, oxygen and other nutrients to the brain. Stress associated with problems in the family was said to exacerbate these episodes. Maria Coppola has also suffered from depression from time to time. I accept that all the health issues described here exist for Elio and Maria. 19 At the time of the three loan transactions in question in these proceedings Maria Coppola had little communication with Elio about family financial matters. Various reasons were advanced for this including a poor relationship between husband and wife. Elio was not asked to acknowledge or agree with this explanation. The precise reason for the lack of communication does not matter. The more important fact is, and I find, that there was little communication about financial matters between them from 2007 to 2009. Elio says that after his retirement he delegated the complexities of family financial affairs and the management of family investment properties to his capable daughter Vanessa. He was content to withdraw from such things and leave detailed management to Vanessa. He says he trusted her to keep him informed about transactions. He was not told much at all. Maria did not contradict this general account and I accept it as correct, although he was told the specifics of some transactions as I find later. 20 The underlying explanation for Elio's limited knowledge of family finances between late 2007 and early 2009 is that Maria and Vanessa decided between themselves that keeping him in the dark was the best way to manage the series of crises that engulfed the family in those three years. A conscious decision was made between mother and daughter to treat Elio on a "need to know" basis in relation to the family's personal and financial affairs. Instead of speaking to Elio in matters concerning the family in 2007 and 2009 Maria preferred to confide in her daughter Vanessa. The explanation for such lopsided family communications is found in the evidence of Vanessa. The Wider Family 21 Elio and Maria Coppola have four children, a son and three daughters. The eldest is a son, Angelo. In descending order of age their three daughters are Gabriella, Vanessa and Laura. Only Vanessa played an important role in the events that led to these proceedings. Just before the first loan was taken out Vanessa suffered her own problems that impacted directly upon the family's financial stability. These problems became particularly acute in late 2007. They are explained below in the chronological account of the loan transactions. 22 Vanessa was born and educated in Australia and left school at the age of 15. At the time of the hearing she was 32 years of age. She had lived with the family all her life. She has no post school educational qualifications. She has a good command of English. For many years she successfully acted as an interpreter for her parents and conducted a wide variety of day-to-day transactions in English on their behalf. They became used to her explaining in Italian what she had done for them in English. 23 Until 2003 Vanessa worked principally in restaurants and hotels. Following the path of her father's career, in 2003 she commenced employment as a stevedore and she worked in that capacity until the birth of her first child in December 2008. She was keen for family members to attain financial security. She encouraged her parents to acquire a number of pieces of real estate. While she was working full time she purchased an investment property for herself at Greenacre. 24 The Coppolas' contention in this case is that at the time of each of the loan transactions in question, the family was under considerable background stress due to Vanessa's personal situation. The Coppolas' say that those stressors impaired their capacity to safeguard their own interests and substantially disadvantaged them in their dealings with the lenders. That is an issue that the Court must determine. 25 Vanessa's affidavit generally represents a candid and compelling history of the Coppolas' family life and financial circumstances in the last few years. She was often a credible witness but was prepared to be artful in some of her responses, especially when she perceived, rightly or wrongly, that her answers might adversely affect the family's interests. Her principal credit problem was that she admitted she was prepared to forge her father Elio's signature on documents given to Fast Funds and to create false documents to mislead it in relation to the three loan transactions the subject of these proceedings. Her credibility was widely impaired by this and I viewed all her evidence with caution. That being said she was a surprisingly reliable witness about many aspects of her dealings with Fast Funds and the family. 26 Before examining the circumstances of each of the loan transactions it is necessary to review the family's general financial position and circumstances just before the first loan. Coppola Family Assets 27 By the second half of 2007 the Coppola family's property interests were extensive. They held seven valuable pieces of real estate described below. But the family's assets had become highly geared and were sensitive to unexpected financial setbacks. Neither the full addresses of these properties nor any information from which those addresses may be derived are disclosed in this judgment due to the Court's policy of avoiding identity theft through the Court's published judgments. If further information is required about the precise address of any of the properties it can be obtained from the Court's file. (a) The first property is a domestic residence situated in Concord, a suburb of Sydney. This property is called "Number 11" in this judgment, because its street number is 11. This property is registered in the name of Elio and Maria Coppola jointly. (b) The second property is situated in the same street in suburban Concord, as is the property, Number 11. The street number of this property is number 9. Number 11 is adjacent to number 9 in the street. This property is called "Number 9" in this judgment. It is registered in the sole name of Elio Coppola. (c) The third property is in Stanmore Road, Stanmore ("the Stanmore property"). This property is registered in the name of Elio Coppola. (d) The fourth property is at Lawrence Hargrave Drive, Coledale ("the Coledale property"). This property is registered in the name of Elio and Maria Coppola. (e) The fifth property is in Wilson Drive, Colo Vale ("the Colo Vale property"). This property is registered in the name of Maria Coppola. (f) The sixth property is in Greenacre Road, Greenacre ("the Greenacre property"). This property is registered in the name of Vanessa Coppola. (g) The seventh property is in Angus Avenue, Kandos ("the Kandos property"). This property is registered in the name of Elio Coppola. 28 Each of these seven properties had a place in the Coppola family history. Family members have held some of these properties for a long time. The characteristics of the properties and family members use of them are material to assessing the justice of the transactions the subject of these proceedings. For example there are issues in the proceedings as to whether Number 11 and Number 9 were let out or were used solely for domestic purposes. Findings about their use are relevant to the question of whether the Fast Funds loans secured over these properties were made for business purposes or not. Despite this dispute, some less controversial facts can be stated about all these properties. The more contentious matters about the use of Number 9 and Number 11 are determined later. Number 11 and Number 9 29 The Coppola family contend that the properties at Number 11 and Number 9 were the domestic residences of family members. Elio and Maria Coppola purchased Number 11 in their joint names in about 1970 and raised their family there. Elio, Maria and Vanessa Coppola's evidence is that they lived in Number 11 until December 1997, when Elio Coppola purchased Number 9 next door in his own name. After that purchase both Elio and Maria Coppola say that they moved into Number 9 and have lived in Number 9 ever since. Once the two properties, Number 9 and Number 11 both came into Coppola family ownership the two houses were joined to form a family compound. The dividing fences both front and back between the two properties were removed and both houses enjoyed a single large backyard. 30 Elio Coppola purchased Number 9 in his own name for $438,000. After Elio and Maria moved into Number 9, they say that Vanessa continued to live at Number 11 as did other members of the Coppola family at various times. Vanessa agrees with this and says that she also stayed from time to time at Number 9 overnight. At various times after 1998 not only Vanessa but Angelo and his girlfriend lived at Number 11, as did Gabriella and her husband and children and also the youngest daughter of the family, Laura and her then partner (now husband) Mohamad Harmouche. I accept Elio, Maria and Vanessa Coppola's account of their use of Number 9 and Number 11, to the extent that it is summarised here. Other controversies about the use of the two properties are separately considered. The Colo Vale Property 31 The Colo Vale property came into the family through Maria Coppola's late father. He purchased the property in the 1960s. After his death the property passed to Maria's mother, and after her death in August 2004, ultimately to Maria herself. The property is cleared and has been used for limited grazing purposes for a long time. It also has capacity to provide some basic short-term accommodation. Maria spent much family time at the Colo Vale property, first with her parents and later with her own children. She says and I accept that she has a strong sentimental attachment to this property. Since August 2004 Maria Coppola and her brother have principally used the Colo Vale property for cattle grazing. It was finally transmitted to her from her mother's estate early in 2009. 32 Members of the family had at various times either lived in or made personal use of the three properties already mentioned, Number 9 and Number 11 and the Colo Vale property. The family used the other four properties, the Stanmore property, the Greenacre property, the Coledale property and the Kandos property rather less in the past. By the time of trial these four remaining properties were leased out permanently for investment purposes. The Coledale, Stanmore, Greenacre and Kandos properties 33 The Coledale Property. The Coledale property in Lawrence Hargrave Drive Coledale consists of a small weatherboard coal miner's cottage now rented out for approximately $300 per week. Coledale, near Wollongong, south of Sydney was originally settled as a coal mining community. Elio Coppola purchased the Coledale property in about 1980 or 1981, from which time the property was used for Coppola family holidays. The property is mortgaged to Pepper Home Loans to secure a loan of approximately $380,000. This property is held in the names of both Maria and Elio. No default occurred in the mortgage over the Coledale property prior to the hearing of these proceedings. 34 The Stanmore Property. Elio Coppola purchased this property in Stanmore Road, Stanmore in 1996 for $340,000. He did so in response to Vanessa's encouragement for him to acquire a property for his retirement. He borrowed from St George Bank to fund the purchase. At the time of trial the Stanmore Property was mortgaged to BankWest securing a loan of approximately $540,000. The mortgage over the Stanmore property was in arrears at the time the Possession proceedings were commenced. 35 The Greenacre Property. Vanessa Coppola owns the Greenacre property, situated in Greenacre Road Greenacre. This property was Vanessa's own investment. Vanessa substantially funded the acquisition of the Greenacre property with advances from St George Bank Ltd. On 24 March 2009, in part as a result of the financial pressures identified later in this judgment, Vanessa exchanged contracts to sell the Greenacre property for $720,000. 36 The Kandos Property. Elio Coppola purchased the Kandos property in Angus Avenue, Kandos near Mudgee in about June 1995 for $45,000. The Kandos property consists of two small semi-detached and dilapidated dwellings. The Kandos property was run down at the time of its purchase. In the early years after purchase Elio Coppola used it as an informal country retreat to enjoy with his friends. It was occasionally let out. He repaired it and made it habitable. After he ceased regular visits to the Kandos property both dwellings on it were rented out more often. Vanessa Coppola assisted in managing the rental of this property. Contracts for its sale were exchanged in early May 2009. 37 Number 11, the Coledale property and the Kandos property were owned unencumbered by the time Elio Coppola purchased Number 9 in 1997. The family took on substantial debt with the purchase of the Stanmore property and Number 9. Borrowings in the order of $770,000 to $800,000 were funded by St George Bank. This debt to St George Bank is largely accounted for by the initial requirement to fund the purchase prices of the Stanmore property ($340,000) in 1996 and Number 9 ($438,000) in 1997. The St George Bank debt was secured not only over the Stanmore property and Number 9 but also over Number 11. Family Income 38 Prior to his retirement from active employment Elio Coppola funded mortgage payments out of his wages and the rent from the family investment properties. After he retired from stevedoring work in December 2000 Elio's sources of income were his savings, his accumulated superannuation, and the rent received from the investment properties. Maria Coppola's sources of income were the rent derived from the same investment properties together with her disability pension. 39 The family worked together to improve the value of their investment properties. Vanessa also contributed a significant part of her income from personal exertion towards interest payments on the family's properties until December 2005 when she acquired the Greenacre property. She borrowed 100% of the purchase price of the Greenacre property from St George Bank Limited. As a result she was required to direct her wage income into meeting the mortgage payments on the Greenacre property, for which she was personally responsible. She had little spare income to make the payments due under the loans secured over other family properties. 40 Joint family investment in properties such as those held by the Coppolas were a good idea in theory. The practical problem for the Coppolas was the debt they acquired in 1996. Family gearing stepped up when Elio borrowed to acquire the Stanmore property and Number 9. A further step up in gearing occurred when Vanessa acquired the Greenacre property in 2005. Instability in the income from the family's various investment properties and in the income and assets of family members ultimately led to default on the debt structure of these investments. Elio Coppola's Role in Family Finances 41 It is necessary to distinguish Elio's role in family financial decision-making from that of Maria and Vanessa. 42 From the time of his retirement in 2001 Elio Coppola relied heavily upon his daughter to manage his and his wife's financial interests. He says and I accept that from the time of his retirement he no longer participated in managing the family's finances. He was content for rental income derived from the Stanmore property and the Coledale property to be deposited into a St George Bank account that he and Maria maintained. Vanessa Coppola was responsible for paying household bills and expenses as well as for expenses associated with ownership of their various investment properties. Apart from the specific exceptions mentioned in this judgment, I largely accept this description by Elio as a correct account of his role in relation to family finances. He left that function to his daughter Vanessa and to his wife Maria. 43 Vanessa was not an authorised signatory on her parents' St George Bank account, so she arranged with Maria to sign cheques when necessary. Household bills were normally paid with cash. Elio Coppola says that he was not consulted about what cheques had to be signed, be they investment related or domestic or what household expenses and bills were to be paid between 2001 and 2006. Equally, during this period Vanessa was the one who communicated with the real estate agents who managed the Stanmore property, the Coledale property and the Kandos property. Given Elio's poor command of English this was a necessary delegation. To facilitate Vanessa's execution of family financial matters I accept that because she was living at Number 11 she arranged for Number 11 to be the mailing address for notices and correspondence with which she would normally deal to assist her parents. In any event Elio was not capable of reading or understanding financial correspondence sent him at Number 9. 44 About mid 2007 Vanessa sought to change the status of her representative work on behalf of her father. Elio Coppola gives an account of conversations with Vanessa in mid 2007, which I accept as correct, in which she explained that because of difficulty in managing the family's investment properties on his behalf and in getting information in relation to those properties, that the family's own lawyer had suggested that Elio give her a power of attorney to allow her, as she said to Elio, "to manage your properties". This is her account of her conversations with him about the execution of the power of attorney which I accept that it is correct. 45 Shortly afterwards Vanessa presented a form of power of attorney to Elio, identifying it to him as the document "that we were talking about" that is, as a document allowing her to manage his properties. Elio Coppola trusted Vanessa's description and signed the document as she requested. He signed the power of attorney on 26 June 2007. The power of attorney was a general power of attorney made under Part 2 Powers of Attorney Act 2003 (NSW) appointing both Maria and Vanessa as attorneys to do anything on Elio's behalf that he may lawfully authorise an attorney to do. The power of attorney operated immediately. It contained no additional powers and restrictions. Mr Mohamad Harmouche then the boyfriend (and later the husband) of Elio's youngest daughter, Laura witnessed the execution of the power of attorney. In June 2007 Vanessa probably did intend only to use the power of attorney within the limits she had described to her father. There was no pressure on her to do otherwise. But once it became available to her it was easy to use it more widely. 46 Elio Coppola did not obtain legal advice concerning his entry into this power of attorney. I accept that he relied upon what Vanessa said to him about the way it would be used. THE 2007 REFINANCING 47 The Coppolas' case is that the Court should set aside the second loan in part because the first loan was itself liable to be set aside. Some analysis of the 2007 refinancing is required in order fully to assess the circumstances in which the Coppola family took out the first loan. The St George Bank Loans Begin to Default 48 Commencing in late 2006 and progressively throughout 2007, Elio and Maria Coppola began to default on the St George Bank loans and the various mortgages that then existed over the family properties identified above. There were several conventional financial explanations for this. (a) Periods of vacancy reduced the rental income from the Stanmore property, the Coledale property and the Kandos property. This reduced the capacity of Elio and Maria Coppola to pay interest to St George Bank on the mortgages over those properties. (b) From late 2000 Elio Coppola had retired and was unable to supplement any shortfall in mortgage payments falling due from his income from personal exertion. (c) Prior to 2005 Vanessa subsidised out of her own income any shortfall in interest payable on family investment properties. But by 2007 she had understandably diverted most of her income towards paying the interest on the Greenacre property. 49 In the second half of 2007 their defaults led the Coppola family to refinance their St George Bank loans. This increased their indebtedness but it rationalised their financial position to an extent. The refinancing was structured through the following facilities. (a) In June 2007 the family took out a $250,000 short-term high interest rate loan from DG Capital Solutions Pty Limited secured by second mortgage over Number 9, Number 11, the Coledale property and the Stanmore property. (b) In approximately October 2007 the family took out a loan from BankWest of approximately $650,000 secured against Number 11. (c) In October 2007 the family borrowed approximately $540,000 from BankWest secured by the Stanmore property. (d) In November 2007 the family took out a loan from MDN Mortgages Pty Limited ("MDN") for $650,000 secured against Number 9. 50 The family's refinancing plan was that the funds advanced by BankWest would be used to discharge the initial short term higher interest rate loan from DG Capital Solutions and would also be applied to repay the balance of monies due to St George Bank. The DJ Capital Solutions Advance 51 The first step in the 2007 refinancing was an advance from DJ Capital Solutions. When Maria saw the St George Bank loan defaulting she arranged the advance from DJ Capital Solutions in June 2007. She had been borrowing small amounts of money from Laura's partner, Mr Mohamad Harmouche for some time to meet the growing shortfall in the family budget. Maria and Vanessa organised the DJ Capital Solutions facility through a mortgage broker, Roy Skaf, an acquaintance of Vanessa's then boyfriend Mayez Elriche. It was a temporary loan of $250,000 to pay off the St George Bank arrears and provide some money to live on whilst the larger refinancing was being negotiated. 52 From the DJ Capital Solutions advance of $250,000, the sum of $220,000 was made available to the borrowers after the deduction of $30,000 in loan fees, interest and facility expenses. The remaining $220,000 was applied to both domestic and investment purposes. Of the $220,000 the sum of $100,000 was given to Gabriella to assist her in the purchase of a family home. The balance was utilised to repay the arrears to St George Bank and to renovate the kitchen and bathroom of the Coledale and Stanmore properties. This would have made them more attractive as rental properties. 53 The DJ Capital Solutions advance was clearly for Elio's benefit. It remedied defaults on the St George Bank loan. It prevented St George Bank from taking legal action against him and seeking possession of its security properties held in Elio's name, Number 9 and the Stanmore property. I do not accept Elio's evidence that he does not know how the DJ Capital Solutions advances were applied. 54 Elio was aware of the DJ Capital Solutions advance. DJ Capital Solutions lodged caveats against the title to Number 9 and Number 11 to secure its advance to Elio and Maria. Elio signed these mortgages and consented in writing to caveats being placed on these titles. Elio says that he has no recollection of this transaction and does not know how the money from the advance was paid or dispersed. He says that he did not participate in applying for a loan from DJ Capital Solutions and that he was not involved in applying the funds advanced. Whilst he may not have actually applied for the loan from DJ Capital Solutions, it is likely that Maria and Vanessa gave him sufficient information about the elements of the transaction to procure his signature. Elio signed the DJ Capital Solutions mortgage documents with his wife Maria in early June 2007 in the presence of a solicitor known to him, Mr Angelo Andresakis. Neither Maria nor Vanessa specifically says that he was actively misled about this early loan. 55 It is likely that at the time that the DJ Capital Solutions loan was arranged that Elio understood that the loan was a necessary temporary measure while a larger refinancing was arranged. I find that is what he understood. He had some general awareness of default having occurred in the St George Bank loans. Given that the DJ Capital Solutions loan was applied to remedy the St George Bank defaults and it was for his benefit, there is little reason why at this early stage Maria and Vanessa would not tell him about this transaction. Similarly there was little reason for him not to be told that the same transaction would help facilitate the generous gift that was being made to their daughter Gabriella on her marriage. 56 By October 2007 the mortgage broker Roy Skaf had also arranged loans from BankWest and MDN. I find that Elio was given basically correct information about these loans too. The BankWest and MDN Loans 57 Roy Skaf arranged the mortgage advance for $656,000 by MDN Mortgages Pty Limited secured over Number 9. This was a 12 month interest only loan. He also arranged a BankWest advance for $650,000 secured over Number 11 and a further BankWest loan for $540,000 secured over the Stanmore property. 58 The funds BankWest advanced secured over Number 11 and the Stanmore property were used to pay out the DJ Capital Solutions advance and to pay out the balance of Elio and Maria's existing borrowings with St George Bank. The BankWest money was also applied to assist Vanessa to partially pay out (as to $145,000) her loan with St George Bank secured over the Greenacre property so as to give her some equity in that property. She had originally borrowed 100% of the purchase price. 59 Unfortunately the family refinancing plans went awry from this point. This was not due to predictable forms of financial mismanagement. 60 From the balance of the BankWest and MDN advances, $180,000 was paid to Laura's fiancée Mohamad Harmouche, to cover the principal ($40,000) and accrued interest on his original advances to Maria that had commenced in late 2006. She paid a punishing amount of interest to him and not long afterwards the family received close attention from some of his friends. 61 Vanessa and Maria had earmarked an amount of approximately $400,000 sourced from the BankWest advance to make future mortgage payments and to pay out the existing mortgage on the Coledale property. This fund would have kept the family financially afloat for quite some time. It was paid into a savings account held at the St George Bank as part of a sensible financial plan. Instead of using this fund for this planned purpose, Maria and Vanessa succumbed to extreme personal pressure and used this money to make advances to friends of Vanessa and Laura and their associates. The Pressure on Vanessa 62 Before the first loan transaction in March 2008 Vanessa became involved in a ruinous personal relationship with one Mayez Elriche, who was a friend of Laura's fiancée Mr Mohamad Harmouche. This personal relationship developed to the great disadvantage of Vanessa and her family. In late 2007 Mr Elriche and his associates pressed Vanessa and through her the Coppola family, to advance them sums of money. 63 The $400,000 was disposed of the following way. Vanessa was persuaded to pay debts of her then boyfriend Mayez Elriche in the sum of $85,000. Vanessa was also persuaded to lend $200,000 to one Omar Chamma, a friend of Mayaz Elriche and Mohamad Harmouche. She was further persuaded to lend $40,000 to Omar Eltrach, another friend of Mr Harmouche and Mr Elriche. Finally, as all these funds were going to associates of Laura and Vanessa it seems to have been decided to give Gabriella $60,000. Gabriella who had lived until 2007 with her husband and children at Number 11 was by then living away from the family. Altogether, including the $180,000 paid to Mr Harmouche, for Maria's part borrowings in excess of $500,000 had been paid away by the family in late 2007 to Mr Harmouche, Mr Elriche and their associates. 64 Mr Elriche and his associates as borrowers did not provide any security for the repayment of these loans. The loans were obtained due to overwhelming physical and emotional pressure placed directly upon Vanessa and Maria. The family's evidence is and I accept that persons acting in Mr. Elriche's perceived interests made threats of violence against Vanessa and members of her family when attempts to have the advances repaid were made. 65 These advances cannot readily be characterised as loans. They were not documented as loans in any conventional commercial sense. There is no evidence that the recipients actually took responsibility to repay the advances. To this day they remain unpaid. I infer that there was never any intention to repay them. 66 Vanessa did not go to the police about any of the threats and physical intimidation that she suffered. She took the view that the police would not be able to protect her. Her intimidation involved incidents of intensely ugly forms of humiliation at the hands of people professing to act in Mr Mayez Elriche's interests. Most forms of objective language are ill equipped to convey the distress that these incidents undoubtedly caused to her. Its effects were still quite evident when she gave evidence. I accept all Vanessa's evidence on this subject and find that overwhelming threats and intimidation caused her and Maria to pay away all the liquid funds that the family raised in the second half of 2007. 67 Elio Coppola claims to be unaware of the dissipation of the proceeds of the 2007 refinancing to the male friends of two of his daughters and their associates. I accept that this is correct. Vanessa kept this information from him. Maria did not inform him either. They both felt they could manage the situation. Vanessa is to be accepted when she says that she was too frightened to tell her father that she was involved in losing these large sums of money and equally frightened to inform him that there would be difficulty in servicing the loan to MDN. Vanessa confided in her mother. I find that she talked to her mother throughout this period about all the family's financial problems and how to solve them. Once the first concealment occurred it became more and more difficult for Maria and Vanessa later to tell Elio Coppola about how desperate the family's financial position had become and how they were trying to fix it, without confronting the concealment from him of earlier events. 68 There has been no suggestion in these proceedings that Fast Funds or any persons associated with it have any connection whatsoever with these threats and this intimidation. Nevertheless they still had personal and financial effects on family members at the time of the first, second and third loans. 69 The removal of these funds caused the Coppola family's finances rapidly to spiral out of control. The payments removed from the family all their planned financial reserves. This had immediate consequences. 70 The loan from MDN was drawn down on 8 November 2007. The interest due for the month of November 2007 was paid on time. But by the end of the following month Elio Coppola defaulted. No payments were made to MDN for the months of December 2007 and January and February 2008. MDN issued a statement of claim on 19 February 2008. By 14 March 2008 MDN claimed that Elio Coppola owed accumulated default interest, penalties and charges totalling $22,281.80. Fast Funds advanced the first loan to meet this liability. The Family Turns to Fast Funds 71 In these circumstances the Coppola family turned to Fast Funds. The case started with a disclosure relating to Fast Funds and the Court. 72 At the opening of these proceedings counsel for Fast Funds and Mr Hall indicated to the Court that one of the principals of the company, Mr Simon Hall, had been to school with me at St Ignatius College, Riverview, leaving that school the same year that I did in 1971. His counsel indicated to the Court that Mr Hall realised at the time that the proceedings were called on that I had been to school with him. I was told that this fact had been communicated to counsel for the Coppola family just before the hearing commenced. In response to this disclosure I indicated that I had probably not seen Mr Hall for at least 15 years, if not at any time since I had left school some 39 years ago. Until I was told about this early connection with Mr Hall I did not recognise him in the courtroom. 73 I indicated to the parties that I did not have difficulty in proceeding to hear the case and that there had been no association between Mr Hall and myself at any time during the last 39 years, although obviously our time together as schoolboys during the 1960s and early 1970s involved near daily contact. I invited both parties to indicate whether there was any objection to my hearing the case. Both parties made clear that there was no objection. 74 Mr Hall was across the detail of all the loan transactions between Fast Funds and Maria and Elio Coppola. He made appropriate concessions during much of his cross-examination. He has a relaxed manner in the courtroom, perhaps because of his long familiarity with courtrooms and court procedure. He has been a private investigator. He has often given evidence. He was generally a credible witness. He was though very uncomfortable with aspects of his cross-examination. In several places though I do not accept his evidence. THE FIRST LOAN 75 In late February 2008 MDN commenced proceedings for possession of Number 9 and for recovery of monies outstanding on its loan. Maria and Vanessa Coppola kept in contact with MDN. Elio was not involved in this contact. Elio says he was unaware of MDN commencing proceedings in early 2008. I accept this is correct. 76 After the MDN proceedings were commenced, one of its principals, Mr John Dickenson referred Maria and Vanessa Coppola to a firm of mortgage brokers, Artex Consultancy Pty Ltd. The principals of Artex were Mr Stephen Moujalli and Mr Nicolas Navarro. Artex conducts business from offices at Unit 3A, 24 Canarvon St. Silverwater, New South Wales. 77 Mr Dickenson's reference to Artex connected the Coppola family with Fast Funds. Mr Dickenson gave Artex the background. Vanessa then spoke to Mr Moujalli and Mr Navarro about the possibility of getting a short-term loan to meet the arrears that had already accumulated to MDN. 78 Artex arranged with Fast Funds to put in place a second mortgage to pay all the outstanding arrears to MDN. The purpose of fixing the problem of arrears first was, as Mr Navarro explained to Vanessa, that it would be difficult for the family to get a loan approval at more favourable rates than existed at MDN, while they remained in default and proceedings for possession were on foot. Mr Navarro's advice sounded logical and would objectively appear to have been in the Coppola's best interests at this time. 79 As Elio and Maria were the borrowers under the existing mortgage to MDN, Artex not unnaturally raised with Vanessa the need for Elio to sign the Fast Funds documentation for the first loan. I find that Vanessa said to Mr Navarro, "Nick do we have to get my father involved? The reason he is in this mess is all my fault ...Why can't I execute the documents on his behalf?" I find that Vanessa said this because she did not want her father to get too close to this transaction. She feared he would discover just how much money had been lost through the loans to Mr Mayez Elriche and his associates. She did not explain all her motivation to Mr Navarro however. She had no need to. 80 Mr Navarro spoke to Mr Hall at Fast Funds about this subject and Fast Funds agreed that Elio could execute the first loan through his attorney Vanessa. What Mr Navarro conveyed to Mr Hall was no more than what Vanessa had conveyed to him, that it would be more convenient and less painful for her father if Vanessa used the power of attorney that her father had given her in the transaction rather than have him personally present, confronting all the mistakes the family had made in the recent past. I do not accept that Mr Hall was aware that the whole first loan transaction was being concealed from Elio Coppola. He denies such knowledge and I accept that as correct. More detailed findings about Mr Hall's knowledge at the time of the first loan are made below. 81 Vanessa Coppola attended at Mr Simon Hall's address in Glebe to sign the documents for the first loan on 14 March 2008. Mr Hall indicated to her where he wanted her to sign the loan documents including the letter of offer. She signed the letter of offer that provided for a total mortgage sum of $51,244. The advance included sufficient funds to cover an establishment fee of $7,990 and the first month's interest of $4,645. After providing for fees for document preparation, registration and stamp duty, the amount paid at Elio Coppola's direction was $37,680. Vanessa initially said that she could account for the $10,000 difference between the amount to be paid at Elio's direction of $37,680 and the payment to MDN of only $27,680. She deposed to being unaware of how it was allocated or paid. She admitted later this was false evidence. The evidence concerning what happened to this sum is discussed below when relief in relation to the first loan transaction is considered. 82 Mr Hall acknowledged to Vanessa that the matter was urgent and it was necessary to pay the funds over quickly. An amount to cover the arrears to MDN of $27,680 was transferred immediately. It is recorded on MDN's statement of account as having been paid on 14 March 2008. No lawyers were involved on the Coppolas' side in any part of the first loan advance. 83 The terms of the first loan transaction, are reflected in the mortgage over Number 9 that Vanessa Coppola signed and were: a three-month term expiring on 12 June 2008; simple interest payable monthly in advance at 15% per month, reducible to 10% if payments were made on time; and the borrower's agreement that the loan was for "business/investment purposes only and specifically for the operating costs of the borrowers' investment/rental property". Fast Funds lodged a caveat against the title of Number 9 claiming the interest created by this second mortgage. 84 Fastcorp Financial's letter of 12 March 2008 offering to enter into the first loan transaction contained the full terms agreed. Vanessa signed this letter under the power of attorney from her father. The letter of offer required the borrower to sign a "Declaration of Purpose" form that the loan was predominantly for business or investment purposes. Vanessa also signed this declaration under the power of attorney. 85 The letter also contained a provision, Clause 10, (the all properties security clause) that appeared in the letters of offer in each of the loan transactions. "10. To secure our above fees and charges and interest thereon until such amounts are paid to us in full you consent to us/the lender lodging a caveat on the title of the proposed security property/s or any other real property in which you have an interest or may at any time in the future acquire an interest. Our fees and expenses, if any, together with interest will create a caveatable and equitable interest and charge in the proposed security property/s." A not dissimilar term appeared in clause 101 of the mortgage. 86 As a result of the statements that Vanessa made to her mother, Maria understood that Artex was undertaking to get a refinancing within one or two months. Her hope was that the high rates of interest payable to Fast Funds would only be incurred for a short period. 87 Vanessa and Maria did not think it necessary to do more than put the MDN mortgage back in order. They did not attempt to negotiate for the discontinuance of MDN's Supreme Court Possession proceedings. Nor did they get legal advice about their dealings with MDN at this time. This is odd because they had a solicitor acting for them when they took out the MDN advance. They placed their hopes in Artex succeeding in securing a refinancing in the short-term. 88 Artex did not arrange a refinancing of the existing mortgage obligations to MDN. The MDN mortgage soon fell back into arrears. The accumulated interest on the Fast Funds loan, which was only intended to be temporary, began to mount up rapidly. The worsening situation prompted the family's efforts to seek the second loan in June 2008. THE SECOND LOAN 89 Between March and June 2008 MDN's first mortgage over Number 9 began to fall into default. Vanessa stayed in touch with Mr Navarro to discuss the refinancing contemplated at the time of the first loan transaction. She stipulated that the refinancing must be effected through a loan, which could be executed under power of attorney. It was very difficult to achieve this. Vanessa says Mr Navarro himself explained to her, "Vanessa I'm still working on it and I'm sure I'll get something approved. The difficulty that am having is finding a loan which can be executed pursuant to power of attorney." Mr Navarro was not successful in effecting a refinancing before June 2008. Mr Dickinson of MDN warned her that MDN would move for possession if default continued and urged her to bring the arrears up to date. Mr Navarro appeared unable to offer her any refinancing prospects in the short term. 90 Vanessa Coppola kept her mother Maria informed about the discussions with Mr Dickinson and Mr Navarro. She discussed her parents' financial options with her mother. By this time Maria Coppola was wholly content to make financial decisions for herself and her husband without consulting him. She was also content for Vanessa to continue her discussions with MDN and Artex. Elio was undoubtedly given some information about the family's financial position at the time of the first loan but by mid-2008 what Vanessa herself says applied, "I gave less information to my father concerning financial matters as time went by." Elio was told nothing of the negotiations for or the financial imperatives for the second and third loans. 91 By June 2008 the MDN first mortgage was in serious default. So was the second mortgage securing the first loan to Fast Funds. Mr Navarro warned Vanessa "If judgment is entered in this matter it's going to be almost impossible to refinance." The existence of MDN's enforcement proceedings was proving an impediment to refinancing. 92 MDN had not discontinued its Possession proceedings in the Supreme Court, despite the bringing of arrears up to date in March. Maria and Vanessa Coppola say that they were unaware that MDN's Possession proceedings had not been discontinued. This is difficult to accept because of the very clear warnings to which Vanessa deposes from Mr Dickinson that if the arrears were not brought up to date then the sheriff would evict them from the family home. I do not accept the evidence of either of them about this. 93 Frustrated with lack of progress by Artex, Vanessa Coppola went back to Simon Hall early in June. Just how she returned to him is a matter of dispute in the proceedings. She says she contacted him and he explained that he did not "do loans directly". She says that he claimed that he only "managed" mortgages and he referred her to Mr Jason Brockmuller, a Melbourne-based mortgage broker. Mr Hall denies he said this to Vanessa and Mr Brockmuller says Vanessa said she had seen one of his advertisements in the paper. I accept their evidence about this, not Vanessa's. In any event she gave Mr Brockmuller information about the Coledale property, its value and the amount of the first mortgage. Between them she and her mother had decided that the Coledale property could now be offered as security to save the family from eviction from Number 9. Mr Brockmuller undertook to speak to Mr Hall. His discussions were effective. 94 11 June 2008 Rebfin Pty Ltd, a company also associated with Simon Hall, declaring itself to the agent for Fast Funds issued a further letter of offer to Elio and Maria Coppola. The letter offered a net advance of $122,118 secured by second mortgage over the Coledale property. The amount of the mortgage offered was $141,390, which would cover an establishment fee of $5000, the first month's interest of $12,807, payment out of the accumulated liability to Fast Funds of $72,118, and after providing for other minor expenses, authorising payment to the Coppolas of $50,000. The advance offered was for a nominal period of three months and otherwise on terms identical to those in the Fast Funds letter of offer of 12 March 2008, including an identical form of clause 5 (the business purposes clause) and clause 10 (the "all properties" security clause). The interest rate offered was 10% per month reducible if payments were made on time but otherwise 15%. I accept that Elio and Maria Coppola signed the letter of offer the same day, 11 June but when Vanessa spoke to Simon Hall he required the security documents to be signed before a solicitor. 95 The same day, 11 June 2008, coincidentally MDN obtained judgment for possession of Number 9. On 17 June 2008 MDN applied for a writ of possession. The speed of MDN's action caught Vanessa somewhat by surprise. She was able to arrange for both her parents to see the solicitor, Mr Angelo Andresakis by 24 June 2008. Mr Andresakis had already assisted family members with the DJ Capital Solutions advance some twelve months before. 96 What happened at this meeting with Mr Andresakis on 24 June 2008 became a controversial issue in the proceedings. My findings in relation to it are recorded later in relation to the issue of giving legal advice for the second transaction. Vanessa Coppola says that the meeting was short and that Mr Andresakis tendered little advice to her parents. Surprisingly, neither party called Mr Andresakis to give evidence. 97 Vanessa returned the executed loan and security documents to Mr Hall. There were difficulties in making the $50,000 available immediately to MDN because Elio and Maria Coppola by then did not have a savings account into which it could be paid. Mr Hall refused to pay the funds to Vanessa. Such payment would not have been in accordance with the terms of the second loan agreement, which required an advance to be made to Elio and Maria. Vanessa arranged for the funds to be paid urgently into Elio Coppola's Mastercard account. To transfer the $50,000 quickly Mr Hall used his personal cheque. 98 Vanessa calculated that the amount outstanding to MDN at that time was $20,000. She arranged for that sum to be deposited into the MDN mortgage account on 1 July 2010. But Vanessa had miscalculated. Unknown to her MDN had paid $7,310.91 in land tax in respect of Number 9 the same day, 1 July 2008. The account actually remained in arrears. On 10 July 2008 Elio and Maria Coppola received an eviction notice. Vanessa's consequent conversations with MDN soon revealed the land tax payment. Vanessa then used more of the second loan advance and paid a further $18,713.17 into the MDN mortgage account before the eviction notice expired. 99 Vanessa says that she kept her mother informed of these developments but not her father. Vanessa's activity was so intense at this time that it is difficult to believe that Elio was not peripherally conscious of at least some of it. He had only recently been to see Mr Andresakis to sign mortgage documents. He was aware in a very general sense of the family's continuing financial defaults. But he had no idea what Maria and Vanessa were actually doing about them. They did not tell him. 100 The second loan bought more time for the family but not unlimited time. The MDN borrowings remained within terms until September. From then a series of events precipitated the Coppola family's third approach to Mr Simon Hall. THE THIRD LOAN 101 On 29 September 2008 MDN caused a second notice to vacate Number 9 to be served on Elio and Maria Coppola. Vanessa believed at the time that the loan was not in arrears. But the loan was technically in default because of the non-payment of a Supreme Court filing fee incurred by MDN. Out of caution Vanessa engaged solicitors at this time on behalf of her father. Those solicitors obtained on 7 October 2008 a stay of MDN's possession action over Number 9. The MDN account was put in order on 14 October. The stay was extended by consent until 1 December. 102 On 3 November 2008 Rebfin served a default notice claiming $220,535 as then due under the second loan transaction. Vanessa complained to Simon Hall at this time that the family had only received "$50,000 from your loan in June" and now he was demanding more than four times that sum. Whilst it is true that $50,000 was paid from the second loan advance to Elio's credit card, Vanessa overlooked the fact that $72,118 of the second loan advance was also used to pay out the first loan. Nevertheless the amount due had by November risen by approximately $80,000 ($220,535 less $141,390) in this period. 103 In November and December 2008, Maria and Vanessa Coppola began actively searching for finance again. They went back to Mr Jason Brockmuller. He was not able to offer a satisfactory short-term facility. Mr Simon Hall referred them to another mortgage broker called Dion Lines but she was unable to secure approval for a refinancing to pay out MDN and Fast Funds. They went back to Roy Skaf but he could only secure finance that included a high interest rate second mortgage. 104 In January 2009 Vanessa found and engaged Mr Kevin McCrohan of Darkbluefire Mortgage Brokers, to look for finance for the family. Mr McCrohan was not a broker for whom Mr Simon Hall and Fast Funds commonly wrote loans. Darkbluefire found suitable finance for the Coppolas from Sydney Wyde Mortgages. 105 In late February or early March 2009, Maria and Vanessa received notification that, as a result of Mr McCrohan's work, Sydney Wyde Mortgages had approved a mortgage advance in the amount of $770,000 to be secured by first mortgage over Number 9 and the Colo Vale property. The Colo Vale property had only just been transferred to Maria from her mother's estate in March of 2009. A solicitor, Mr Angelo D'Angelo acted for Elio and Maria Coppola on the conveyancing associated with the proposed Sydney Wyde refinancing. 106 A number of impediments arose to settlement of the Sydney Wyde Mortgage advance. A property search before settlement revealed that there would be insufficient funds payable on settlement to meet all the secured claims over Number 9. There were several such claims. 107 First, Mr Roy Skaf's company CB Direct Pty Ltd had lodged a caveat against the title of Number 9 to secure mortgage broking fees of $12,000 alleged to be due to CB Direct. Mr Skaf had placed a caveat on the property even though he had not secured an acceptable refinancing loan approval. 108 Second, Fast Funds still had a caveat (AD829135) and a mortgage (AE305419) on the title to Number 9. This mortgage dated back to the first loan transaction in March 2008. Vanessa said she was surprised that this caveat had not been removed. Fast Funds' desire to continue this caveat and the mortgage was perhaps not surprising. But the precise claimed legal basis for its continuation at this time is unclear. Rebfin's letter of offer of the second loan of 11 June 2008 only refers to a second mortgage over the Coledale property. Rebfin's 11 June 2008 letter does not make at all clear that security for repayment of the second Fast Funds loan advance was to be retained over Number 9. Mr Hall's own affidavit evidence was that the second loan was secured by unregistered mortgage over the Coledale property. He did not refer to any other expressly named security for the second loan. This is correct on the face of the loan document. The only part of the 11 June 2008 letter justifying a continuing security interest in and the retention of the caveat over Number 9 is the all properties clause (clause 10). But even to treat this clause as creating a security interest in Number 9 would require the existing caveat to be withdrawn and another to be lodged to claim a particular security arising either from a letter of offer of 11 June 2008, or from the all properties clause 101 in the Coledale Mortgage, rather than from an unregistered mortgage of 12 March 2008. I accept Vanessa's evidence that neither she nor her father Elio were aware that the caveat had remained in place until it was asserted against them. The March 2008 caveat and mortgage were on the title of Number 9 in June 2008 and March 2009. The mortgage was not discharged until 4 May 2009 after the third loan transaction. On the evidence the caveat had not been discharged by that date. The March 2008 caveat and mortgage become a relevant factor when considering the application of the Contracts Review Act and the Code to the circumstances of the third loan. 109 It was clear to Maria that something needed to be done to save them from eviction from Number 9. I find that Maria authorised Vanessa to offer the Colo Vale property as security to try and overcome these two impediments to Sydney Wyde's refinancing. In about early February 2009 Vanessa Coppola telephoned Mr Navarro. The subject of the meeting was the possible provision of caveat withdrawals to permit the Sydney Wyde refinance of Number 9 to go ahead. With Maria's permission Vanessa offered the Colo Vale property as security to have Simon Hall remove the caveats. She pointed out that it was worth about $700,000. Mr Navarro pointed out that the Colo Vale property may already be captured within the Fast Funds all properties security clause. He suggested that the best course was to enter another formal loan agreement with Simon Hall to pay out MDN and save Number 9 from repossession. 110 Vanessa went to Artex's offices. There I find that Mr Navarro and Mr Moujalli told her that because the Colo Vale property was now available, that a refinancing through the Commonwealth Bank at a lower interest rate was in prospect. This was to be a substantial refinancing in which security would be taken over all the family's properties. In the course of this meeting at Artex, Vanessa says that Mr Moujalli suggested that they telephone Mr Hall. She says that a conversation then took place between the four of them with Mr Hall involved by telephone to the following effect: "[126] Shortly after the conversation referred to in paragraph 124 above I observed Stephen Moujalli dial a number on the telephone. A conversation then took place whilst the telephone was on loud speaker to the following effect:- Stephen Moujalli: "Simon it's Steve. I'm just here with Nick and Vanessa. We've been talking about the refinance of the MDN loan. Apparently that settlement is due to take place but there's certain problems including a caveat which you have placed on the property." Simon Hall: "That caveat is securing the position of Fast Funds Pty Limited." Stephen Moujalli: "Nick's had a look at the Coppolas' overall position and with the addition of the Colo Vale farm he can get an approval through the CBA. It seems to me that it is in everyone's best interests for all of these properties to be refinanced. Vanessa and her father are in default with the MDN facility. They are in default with you and without selling them up there is no real prospect of you getting paid. On the other hand Vanessa can't afford these high interest-bridging facilities and it will be much better for her and her father to be refinanced at a very low rate with the Commonwealth Bank. As far as Nick and I are concerned we obviously want our brokerage." Simon Hall: "Are you suggesting that I simply lift my caveats to allow the current refinancing because I'm not going to do that." Stephen Moujalli: "What about if we arrange another short term facility so that you get some funds for lifting your caveat on the Concord property. We could arrange some short term funds on the farm. In the meantime Nick can get an approval with the CBA." Myself: "Simon we need to get the refinance of the MDN mortgage through. If it doesn't settle immediately my parents will lose their home." Simon Hall: "How much brokerage do you boys need?" Stephen Moujalli: "Simon we've done a lot of work in the past. We've been working on a refinance for eight or nine months. If we are going to get an approval from the CBA we want to be paid upfront. We want a fee of at least $30,000." Simon Hall: "I need to get a minimum of $80,000 for Fast Funds. Vanessa you need to get your parents to enter into a brokerage agreement with Steve and Nick and get them an upfront commission. I want you to use my brokers because I want them to protect my interest. In any event I think it's going to assist you anyway. If they get you an approval from the CBA you can see the end of these high interest loans. Steve you should arrange some short term funding to get that across the line." Not long after that the telephone call was terminated." 111 I accept most of Vanessa Coppola's evidence about this conversation. But it was not entirely in this form. Mr Hall denies this conversation with Vanessa entirely. He says that he had a conversation by telephone with Mr Moujalli at this time but that he did not understand that Vanessa was present while the conversation was taking place. I find that he was mistaken about that and that Vanessa was present. Mr Hall's version of the conversation is that Mr Moujalli telephoned him and explained that another broker had arranged a loan for the Coppolas from Sydney Wyde mortgages to pay out MDN and to save the house at Number 9 but that a bridging loan of $150,000 was required. Mr Hall says that after the refinancing proposal was explained to him that he would do the third loan provided Fast Funds was paid $80,000 out of the Sydney Wyde advance. I accept that Mr Hall's evidence is a correct account of what happened to this extent in the conversation. However, although he now denies it, I find that Mr Hall did say something to the effect that he wanted the Coppolas to use Artex and not any other broker. He got this message across although I doubt that he described Artex as "my brokers". I find that he did not say what Vanessa suggests he did: that Artex must be used, in Mr Hall's view "because I want them to protect my interest". It is highly unlikely Mr Hall would have said that. 112 Importantly also in this conversation I accept Vanessa's evidence that she said to Mr Hall "I can't let this refinance of MDN fall over. My parents will lose their house". She clearly only played a small part in this conversation but she was involved in it to this extent. 113 I find that by this time Maria and Vanessa Coppola did have confidence in Darkbluefire Mortgage Brokers. It is difficult to understand why they would have gone back to Artex unless some pressure was applied to them. They had lost confidence in Artex by then. It is highly probable that Mr Hall did require them to work through Artex. From his perspective it also seemed to be a more realistic way of him being fully paid out. 114 But there are other aspects of Mr Hall's evidence at this time that I do accept. He says that shortly before the telephone conversation with Mr Moujalli, set out above, that Maria Coppola telephoned him and said "I know you told Vanessa that we could not have another loan but we are desperate. MDN are going to take [Number 9] in a few days and all our mortgages are behind and we are going to start losing all our properties." Simon Hall said in reply to this that there was nothing he could do. He says that Vanessa and Maria telephoned him several more times that very same day to make the same request. He says on various occasions they were crying on the telephone. I accept that this evidence is a correct account of what happened. 115 Mr Hall further says that the following day Vanessa and Maria Coppola arrived unannounced at his home in Glebe. Mr Hall is likely to have remembered such a visit and I accept his evidence about it. He said that when he opened the door Maria Coppola dropped to her knees on the hallway floor crying and pleaded with him "we have to have this loan. You have to help us. We will lose all our property." As they were saying to Mr Hall, they were indeed desperate to get the third loan. Mr Hall's preference was to use Artex. Maria and Vanessa did not appear to be in any position to oppose his preference for Artex to act as their broker. 116 Vanessa then conveyed the substance of the telephone conversation with Mr Hall to her mother Maria. She explained to Maria that Simon Hall had said, the following to her: "There will be two conditions for me to allow the refinance of your parents home to go through. The first is that I require monies to be repaid to me in respect of existing borrowings. The second is that you engage Steve and Nick (referring to Stephen Moujalli and Nicolas Navarro) to obtain approval for a refinance over all of your parents' property so as to repay my debt. They're going to charge you an upfront fee. You'll need to pay them at least $30,000 upfront. They will arrange a refinance so that all of these monies can be repaid back. Unless those conditions are met I'm not going to lift my caveat and allow the refinance to take place. You are to use my brokers to arrange the refinance." Vanessa's report to Maria of the telephone conversation is consistent with my findings as to what was said in the course of it. 117 I accept that this was what Maria was told. Maria says and I also accept that as a result of her being told that Simon Hall had said this, she felt that she had no option but to borrow additional money so as to satisfy his requirement. Maria and Elio Coppola engaged a solicitor, Mr Angelo D'Angelo to act for them on the Sydney Wyde refinancing transaction. 118 Rebfin as mortgage manager for the lenders sent to Mr D'Angelo the letter of offer dated 12 March 2009 for the third loan transaction. This time the proposed three lenders were Simon Hall, George Romiz and John Storm. This third letter of offer had business purposes and all properties clauses in identical terms to the first and second letters of offer. The three lenders were offering an advance of $184,124 from which, after the deduction of establishment fees, the first month's interest and other fees, $150,000 would be paid to the Coppolas. The term of the proposed loan was three months with the usual interest charge, 10% per month simple interest but 15% on late payments. 119 Maria and Vanessa Coppola met Mr D'Angelo on 12 March 2009 to execute the Sydney Wyde mortgage documents and the documents necessary for the third loan transaction. The Sydney Wyde refinancing settlement was scheduled for 16 March 2009. Maria had arranged to sign the Sydney Wyde refinance transaction documents for her husband Elio under his power of attorney. He was not present on 12 March 2009 at the offices of Mr D'Angelo. Whatever might have been his limited knowledge of the first and second loan transactions that I have already identified, he knew almost nothing of this third loan transaction. The use of the power of attorney meant that he could be left in almost total ignorance of this last transaction and he was. 120 Mr Elio Coppola had one wisp of information about the third loan. He knew that his wife Maria and his daughter Vanessa were doing something about the properties sufficient for him to refuse to become involved. But that is all he knew. This is to be inferred from something that happened after completion of the third loan. Vanessa Coppola telephoned Simon Hall a short while after the third loan. On the telephone he repeated to her something, which Mr Moujalli had said to him, "Steven tells me that he cannot get your refinance done because your father won't sign the application form or anything else for the loan. You have to get him to commit to the refinance". I accept Mr Hall's evidence that this conversation took place and that Vanessa blamed Artex for not being able to find a lender for a full refinance. But importantly Vanessa confirmed that the problem with the refinancing was that Elio would not sign the application form. I doubt that this was a recent position on Elio's part. I infer that his attitude throughout March 2009 was that he simply did not wish to be involved in any transactions involving his interests in property. Only Maria and Vanessa attended Mr D'Angelo's office to sign the security documents in respect of the third loan. Mr D'Angelo did give them some warnings however before they signed. 121 Vanessa says and I accept that Mr D'Angelo emphasised to Maria and Vanessa Coppola how high and harsh the interest rate was on the third loan but he explained to them that they had little choice but to sign it they wanted the caveat lifted on Number 9. Vanessa voiced concern that the loan was for too large a figure. She did not want to borrow $180,000. She remembered that Simon Hall had said in the conversation on the telephone with Mr Moujalli and Mr Navarro that he would lift the caveat on Number 9 if he received $80,000. To give effect to Vanessa's concern Mr D'Angelo proposed amending the letter of offer to reduce the loan advance to $130,000. The alterations were cleared by telephone with Mr Hall and Mr D'Angelo made the amendment to the letter of offer. Mr Hall himself changed the security documents, which were signed at Mr D'Angelo's office later that same evening 12 March 2009. Vanessa Coppola delivered them to Mr Hall's home at Glebe later that night. 122 Maria Coppola signed a declaration in relation to the third loan on 12 March 2009 to the following effect: "I/We declare that the credit to be provided by me/us by Rebfin Pty Limited or one of their assigned lenders is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." 123 Maria Coppola also made a "Declaration by Borrower" in the form of a statutory declaration to the following effect: 1. I am the borrower named in certain loan and security documents in favour of George Romiz, Simon Hall and John Storm (lenders) relating to property located at Wilson Dr. Colo Vale 2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1. 3. After receiving that advice I have freely and voluntarily signed the following documents: (Specify the documents produced for signature) (a) Application form/Declaration of Purpose/Letter of Offer (b) Mortgage (c) Mortgage Memorandum 124 The amended letter of offer dated 12 March 2009 provided for a total loan figure of $130,000 secured by a second mortgage over the Colo Vale property. After allowing for an establishment fee of $15,990, the first month's interest of $13,000 and other fees and duties, the sum of $100,740 was payable to or at the direction of Maria Coppola under the third loan. 125 The third loan was entered into to discharge in part the amount due under the second loan. Mr Simon Hall released $70,000 to Maria Coppola from the third loan advance. What happened to the balance of $30,000 is discussed later. 126 To give effect to the arrangements to engage Artex Maria and Vanessa also went to Artex's office on 12 March 2009. I accept Maria's evidence that she waited outside while Vanessa went inside to discuss the refinance with Mr Moujalli and Mr Navarro. Maria cited approval that day authorising Artex to use all their properties to secure a 30 year loan with the Commonwealth Bank for $2.75 million at 5% per annum and signed a letter to this effect. Maria and Vanessa also signed that afternoon a direction to Rebfin Pty Ltd to remit funds from the settlement of the third loan to the following recipients: 1. Newcorp Financial Group Pty Ltd: $30,000 2. Fast Funds Pty Ltd: $60,000 3. Vanessa Coppola: balance of loan funds Vanessa and Maria thought that the execution of this direction would fully pay Mr Moujalli and Mr Navarro in advance for their work on the proposed refinancing with the Commonwealth Bank. AFTER THE THIRD LOAN TRANSACTION 127 Within six weeks of the completion of the third loan transaction a series of events occurred that assist in understanding the full effect of that transaction. The Court may have regard to the performance of the second and third loan agreements after they were made, when the Court considers a possible grant of relief, for example, under the Contracts Review Act: see s 9 (2) Contracts Review Act. On 13 March 2009 the borrowed funds of were disbursed. On 16 March 2009 the funds from Sydney Wyde Mortgages were drawn down and MDN was paid out. On 24 March 2009 Vanessa exchanged contracts to sell the Greenacre property. On 25 and 26 March 2009 Artex demanded yet more fees to progress Elio and Maria Coppola's incomplete refinancing application. On 30 March 2009 Elio and Maria borrowed more funds to meet these new Artex fees from, Rebfin Pty Limited, a company associated with Simon Hall. On 28 April 2009 the sale of the Greenacre property settled and Rebfin was repaid. There is more detail behind this short description of events. 128 Disbursement of the Rebfin advance. The final amended borrowings under the third loan transaction were a net amount of very close to $100,000. Of that sum Mr Simon Hall's company Rebfin paid $70,000 to Maria Coppola on 13 March 2009. 129 The Sydney Wyde settlement. Sydney Wyde paid existing obligations of $664,771.91 out to MDN at a settlement held on 16 March 2009. Apart from various sums paid to solicitors, $12,000 was paid to Bransgroves the solicitors for Fast Funds and two amounts of $46,105.29 and $33,894.71 (making a total of $80,000) to Rebfin. The second of these amounts of $33,894.71 was sourced from the $70,000 that Rebfin had advanced to Maria Coppola on 13 March 2009. 130 Exchange on the Greenacre property. Vanessa Coppola's solicitor, Mr Angelo D'Angelo, exchanged contracts of sale of the Greenacre property on 26 March 2009. Vanessa still had control over the sale process of the Greenacre property. A result of the exchange was that a 10% deposit of $72,000 was deposited into Mr D'Angelo's trust account. I find that Vanessa informed Mr Navarro that the exchange of contracts had taken place. Rapidly following Mr Navarro receiving this information, he made a further request for money from Vanessa. 131 Further Artex demands. Nicolas Navarro telephoned Vanessa Coppola soon after the exchange on the Greenacre property and said to her, "Vanessa we need more money to get your parents' loan through. We've been working on the Commonwealth Bank approval but the money we have been paid is not enough. We need further funds if the loan is to be approved." Vanessa expressed astonishment at this demand for increased fees. She told Mr Navarro that she understood that Simon Hall had paid the fees agreed with Artex. Navarro did not deny this was so but simply said "Vanessa, I don't think Steve and I will be able to get the approval your parents need. I don't think we can go any further with this application." This is Vanessa's version of the conversation with Mr Navarro, which I accept as accurate. Vanessa says that she was angry and disgusted at this demand being made especially when a large sum had only been paid to Artex a short while before. Vanessa's disquiet was understandable. An agreement for a lesser fee had been made and the fee had already been paid. This further demand appeared to her to be opportunistic. 132 Borrowing the new Artex fees. Mr Navarro called Vanessa again a few days later. He reiterated, "as we discuss the other day we can't go any further with that loan application without more funds. I would hate to see your parents lose their property because we didn't get the Commonwealth Bank consolidation through." Mr Navarro then suggested to Vanessa that Simon Hall might be prepared to lend additional funds to pay the extra fees declaring, "He is prepared to do so because you have exchanged contracts on the Greenacre property. He is confident that he will be repaid." Mr Navarro conveyed a request from Mr Hall to see a copy of the exchanged contract for the Greenacre property, so Mr Hall could prepare security documents. This again is Vanessa's version of the conversation, which I accept is correct. 133 Vanessa says that although she was angry and upset, she nevertheless agreed to borrow the additional funds from Simon Hall to cover the extra fees being demanded by Mr Navarro. She says that she did so because she had lost large amounts of her parents' money and had almost caused them to lose their home. I accept the whole of Vanessa's account of her dealings with Mr Hall and the mortgage brokers and her own solicitor in March and April 2009 and her explanation of her motivation for acting in the way that she did at this time. 134 Settlement of the Greenacre property. On 26 March 2009 Mr D'Angelo's office confirmed to Mr Hall that he was holding the deposit in respect of the sale of the Greenacre property in his trust account. Mr Hall prepared security documents including a mortgage over the Greenacre property to a company controlled by Mr Hall, GKQ Mortgages Pty Limited. The mortgage provided for the lending of a principal sum of $27,350 for three months at an interest rate of 15% reducible to 10%. Vanessa signed the mortgage at Number 9 on 30 March 2009. The unregistered mortgage was protected by caveat lodged over the Greenacre property. Vanessa also executed a declaration that the loan was 100% for business investment purposes. Mr Hall is the sole director and shareholder of GKQ Mortgages. 135 Vanessa received $8,700 herself out of the $27,300 that GKQ Mortgages advanced. She assumes that Simon Hall paid the balance to Mr Navarro and Mr Moujalli although she says and I accept as correct that she has not received an accounting in relation to the application of these funds. 136 Although the principal sum GKQ Mortgages advanced was only $27,350, when the Greenacre property was to be settled a month later on 28 April 2009 Vanessa says that Simon Hall demanded repayment of the higher sum of $37,350. The increased sum cannot be explained by unpaid interest. At the end of the month of April 2009 a maximum of only $31,425.50 was repayable under the contract (being the principal of $27,350 plus one month's interest at 15%, namely $4,102.50). 137 Vanessa expressed disbelief that this larger sum was being sought upon settlement of Greenacre property. She rang Mr Navarro. She says he explained that Simon Hall had paid Mr Moujalli an extra $10,000 on account of increased fees for their services. Neither Vanessa nor her parents had assented to these increased fees. They were not provided for in the mortgage to GKQ mortgages. Vanessa had not authorised Mr Hall to advance this extra sum to Artex. Vanessa says she feared she had no choice but to pay the amount being demanded to achieve settlement of the Greenacre property to release the funds tied up in their property. Paying under protest, she authorised Simon Hall to be paid $37,350 on settlement of the Greenacre property in exchange for the withdrawal of the GKQ Mortgages caveat. 138 Mr Hall denies demanding without proper authority an extra $10,000 (making a total sum of $37,350) on settlement of the Greenacre property on 20 April 2009. He says that Vanessa asked him on 6 April 2009 for a further $10,000 to meet Artex's further demands for brokerage fees. I do not need to decide which of these two versions is correct. Vanessa was being forced to pay an amount of further fees to Mr Moujalli and Mr Navarro in excess of the fee she had agreed with them. The Coppolas had been unwilling to continue to use these brokers at the time of the third loan and Mr Hall's insistence that they did had put the Coppolas in this position after the third transaction. This transaction is not the subject of a claim for relief in these proceedings. Vanessa is not a claimant for relief. Nevertheless it demonstrates Mr Hall's continuing knowledge of the Coppolas' incapacity to protect their interests in March and April 2009. The brokers made their demand and Mr Hall advanced the extra money to satisfy that demand, not just to refinancing of the Greenacre property for Vanessa, but on the basis that her parents' promised refinancing would not proceed without it. 139 This episode demonstrates just how much the brokers Artex had been paid in advance by late April 2009. Their fees were not expressed to be conditional upon their achieving success in securing the refinancing. By the end of April 2009 the brokers had been paid $51,300 in fees. This sum was made up of $30,000 (taken out of the advance under the third loan transaction) $11,300 (taken out of the $20,000 advanced to Vanessa on 30 March 2009) and the final $10,000 (demanded and paid before settlement of the Greenacre property). The fact that these sums could be demanded and paid irrespective of whether Artex had achieved a successful refinancing shows the Coppolas then incapacity to guard their own financial self-interest at the time each of these payments were made. These demands were made and satisfied not long after the third loan transaction but they are indicators of circumstances existing on 12 March 2009, at the time of the third loan. FINAL DEFAULT AND THE COMMENCEMENT OF PROCEEDINGS 140 From late April 2009 the Coppolas' financial crisis descended from final demands into this litigation. The final period had several phases: initiation of the sale of the Kandos property; commencement of the Possession proceedings; and, the execution of consent to judgment for possession. Throughout this period, the Coppolas' then solicitor, Mr D'Angelo, did not initiate the defensive action that has now been taken by the Coppolas' present solicitors. Maria Coppola gives an account of events and actions during this final period, which I accept as accurate. 141 The sale of the Kandos property. The Kandos property had originally been purchased with a loan advance of $50,000 from the IMB Building Society. This mortgage was soon paid off from Elio Coppola's earnings as a stevedore. In 2006 a line of credit facility for $70,000 was taken out over the Kandos property. This facility fell into default in 2008. The mortgagee, the Commonwealth Bank of Australia obtained possession. The Commonwealth Bank spent money preparing the Kandos property for sale such that the total outstanding mortgage became $90,000. Elio and Maria Coppola arranged a friend to purchase the property at a price satisfactory to the Coppolas. Contracts were exchanged on 6 May 2009 with completion due on 17 June 2009. 142 In early June 2009 Mr Simon Hall caused a caveat to be lodged against the title of the Kandos property based on the "all properties" charging clause in his existing loan agreements with Elio and Maria Coppola. Completion of the sale of the Kandos property was due to take place on 17 June 2009. Elio Coppola was unable to complete. Fast Funds refused to remove the caveat it had lodged against the title to the Kandos property. Fast Funds and Mr Simon Hall refused to withdraw the caveat. 143 When called upon by Fast Funds to do so, on 3 July 2009 Mr D'Angelo proved to the solicitor for Fast Funds, that the Commonwealth Bank was owed $89,417.60 on the Kandos property. There was a shortfall as the purchaser was only required on settlement of the sale to pay $70,000. Elio Coppola was making up the shortfall to the mortgagee on the sale of the property. There was no equity in the Kandos property for Fast Funds and no diversion of funds from the purchaser back to Elio Coppola. The purchasers of the Kandos property served a notice to complete which was due to expire on 17 July 2009. Mr Simon Hall continued to refuse to release the caveat. Maria says that he would not entertain any negotiation to finalise the matter unless Elio and Maria Coppola agreed on an overall settlement of the Possession proceedings and that they would only attempt to refinance through companies associated with Mr Navarro and Mr Moujalli, namely Newcorp Finance Group and Artex. Mr Simon Hall denies that he used the caveat over the Kandos property for this purpose. With the exception of the Artex demand, I prefer Maria's version. It far better explains the timing of the Agreement as to Judgment, which contained an overall settlement and was made the same day that the Kandos settlement was due. 144 The Possession proceedings. Fast Funds commenced the Possession proceedings on 19 June 2009 seeking orders for possession and judicial sale of Number 9, Number 11, the Coledale property and the Stanmore property. 145 By mid-July after discussions with their then solicitors, the Coppolas thought they might have a chance of refinancing. They thought they could do so at a reasonable interest rate and to keep most of their properties if they were able to use the services of the broker Kevin McCrohan. In January 2009 Mr McCrohan had found them reasonable finance through Sydney Wyde. Elio Coppola needed to maintain the current sale of the Kandos property. The notice to complete expired on 17 July. Alternative sales risked winning only a lower price. The caveat over the Kandos property was used to achieve a settlement. Although ultimately the Kandos caveat was not used expressly as a lever to prevent the Coppolas going to Mr McCrohan it had that effect. Mr D'Angelo did not see any solution other than negotiating with Mr Hall. In the short term he may well have been right. A series of emergency meetings were held on 16 and 17 July 2009 to try and resolve the impasse. 146 The Agreement as to Judgment. On 17 July Mr D'Angelo advised Maria and Vanessa Coppola that they had little practical choice but to accept the Fast Funds terms and to sign a written form of "Agreement as to Judgment" that Simon Hall was offering to resolve the matter. Mr Simon Hall's final terms ultimately did not include a stipulation that the Coppolas must use Mr Navarro and Mr Moujalli for a refinancing. The full terms are in evidence but their substance was that the Possession proceedings would be settled on the basis of judgment for possession of the Coledale and Stanmore properties and Number 9 and Number 11, with leave to issue a writ for possession of each property forthwith. Fast funds could not enforce the judgment if the Coppolas paid $240,000 to Fast Funds before 6 August 2009. 147 I accept Maria's evidence that Elio Coppola was not present on the occasion at Mr D'Angelo's office when the Agreement as to Judgment was signed. I find that Elio has never seen the Agreement as to Judgment. There is a signature next to the name "Elio Coppola" on the document. He denies that it is his signature. It does not look like his authentic form of signature. I find that it is not Elio Coppola's signature. Maria signed the document. I accept Mr Simon Hall's evidence though that he did not make or authorise the making on his behalf of a representation to the Coppolas that he would allow the $240,000 to be paid after "refinance could be obtained". Such a representation would have been wholly contrary to Mr Simon Hall's approach at this time, which was to finalise his involvement in this matter as soon as possible. The sale of the Kandos property was completed later on 17 July 2009. 148 But Mr Navarro and Mr Moujalli were still seeking fees from the Coppolas. On 1 September 2009 Maria Coppola was notified that the Finance Consultancy Group had lodged a caveat against the title of the Colo Vale property. Mr Navarro is the sole director and shareholder of the Finance Consultancy Group. The caveat claimed an equitable interest in the Colo Vale property based on an agreement dated August 2009. It turned out that the fee agreement relied upon was actually dated 12 March 2009. The fee agreement provided for a fee of $12,500 to be paid "out of the principal sum of the proposed mortgage of $900,000". The Coppolas' dispute that this fee agreement was signed and dispute that Mr Navarro actually procured a mortgage of $900,000 for them. 149 After the making of the Agreement as to Judgment the Coppolas engaged Mr McCrohan to attempt to refinance their properties. He could not do so. One reason for this was because Elio Coppola was continuing to refuse to sign anything and prospective financiers would not accept his execution through Vanessa's signature under the power of attorney. 150 Sale of the Colo Vale property. A friend of Maria Coppola informed her on 14 September 2009 that the Colo Vale property was being advertised for sale. Indeed as it turned out, a sale had actually occurred. Contracts for sale of the Colo Vale property for $500,000 had been exchanged on 10 September 2009. The purchasers of the Colo Vale property, are seeking to complete its purchase. The existence of this unsettled sale was one reason for the expedition of these proceedings. 151 The Coppola family's new solicitors acted quickly. They commenced the Coppolas' proceedings on 21 September 2009 only 10 days after they were retained. It is now necessary to consider whether any and if so what relief should be granted in the Possession proceedings and the Coppolas' proceedings. RELIEF AND THE FIRST LOAN 152 Elio Coppola does not seek relief directly in respect of the first loan. The case was argued on the basis that whether or not the first loan would have been amenable to a grant of relief under the Code or the Contracts Review Act is relevant to an assessment of the application of the Code, and the Contracts Review Act to the second and third loans and whether any relief should be granted in respect of those loans. The position of each of Elio and Maria Coppola is different in respect of the first loan as it is with respect to the two subsequent loans. Fast Funds claims Elio Coppola is a party to the first loan. Although relief is not sought directly in relation to the first loan, its analysis represents the foundation of analysis of the two subsequent loan transactions. 153 By agreement the parties structured their submissions into a series of questions about the issues relevant to the grant of relief for each of the three loans. This same essential structure is adopted in this judgment. The answers to the questions are then gathered together at the end of the judgment. First it is necessary to consider what statutory regimes governed the first loan and what relief might have been granted in relation to it. Is the first loan regulated by the Code? 154 The submission put on behalf of Elio Coppola is that the first loan, and the mortgage signed by Vanessa Coppola under the power of attorney, securing the first loan, were regulated by the Consumer Credit (New South Wales) Code ("the Code") and were each unjust in the circumstances at the time they were entered into within the Code s 70. 155 The Consumer Credit Code is, in form, an appendix to the Consumer Credit (Queensland) Act 1995. It has effect in New South Wales by s 5 of the Consumer Credit (New South Wales) Act 1995. Regulations made under the Code, the Consumer Credit Regulation 1995 (NSW) ("the Regulation"), have effect in New South Wales by s 6 of Consumer Credit (New South Wales) Act: see George Hraiki v Jean Dorothy Beljon [2008] NSWSC 775 at [9] per McDougall J. 156 Whether the first loan transaction is regulated by the Code first requires analysis whether the business purpose declaration Vanessa Coppola made on 14 March 2008 created a conclusive presumption against the application of the code. This in turn requires consideration of the form of the declaration, the credit providers' knowledge of any domestic purpose of the loan and the effect of her making the declaration by power of attorney. Finally, even if the declaration is itself ineffective to take the first loan outside the Code, it is necessary to analyse whether the loan was actually taken out for business or investment purposes. The Form of the Declaration 157 The first issue is whether the business purpose declaration for the first loan is in the correct form or substantially in the correct form required by the Regulation. Code s 11 provides that in proceedings where a party claims that the Code applies the legal presumption is that it applies unless the contrary is established. This is subject to the debtor making a declaration under Code s 11(2). The full text of Code section 11 is set out: "(1) In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established. (2) Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes). (3) However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained. (4) A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not." 158 The form prescribed by regulation 10 of the Regulation is the following: "10 Declaration of purposes for which credit provided (1) For the purposes of section 11 of the Code, the form of the declaration is as follows— 'I/We declare that the credit to be provided to me/us by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both purposes).'. (2) The declaration is to contain (immediately below the above words or, if the declaration is to be made by electronic communication, prominently displayed when (but not after) the person signs) a warning in the following form— IMPORTANT You should not sign this declaration unless this loan is wholly or predominantly for business or investment purposes. By signing this declaration you may lose your protection under the Consumer Credit Code. (3) The declaration is to contain— (a) the signature of each person making the declaration; and (b) either the date on which the declaration is signed or the date on which it is received by the credit provider. Note — The Code applies only to credit provided or intended to be provided for personal, domestic or household purposes. Section 11(2) of the Code provides that credit is conclusively presumed not to be provided for those purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes). The declaration is not effective unless it is substantially in the form required by the regulations ." 159 The declaration signed by Vanessa Coppola under the power of attorney on behalf of her father stated as follows: "I/We declare that the credit to be provided to me/us by Fastcorp Financial or one of their assigned lenders is to be wholly or predominantly for business or investment purposes (or for both purposes)." 160 Fastcorp Financial Pty Limited was not the credit provider to the borrowers. The entity contracting to advance the monies under the first loan transaction was Fast Funds. Leaving aside for a moment the issue of what "assigned lenders" means in this declaration, the first question is whether or not s 11(2) Consumer Credit Code is satisfied when the wrong credit provider is named in the declaration required by the Regulation. 161 Code s 11 is a key provision for determining whether a transaction is one to which the Code applies. Authority in relation to Code s 11(2) and regulation 10 provides that there ought be no room for doubt whether a declaration in the form of a certificate applies to the transaction; and such a certificate must not be given in blank, must not be given after the transaction to which it relates and must on its face apply to the specific transaction that was intended to be exempted from the operation of the Code: George Hraiki v Jean Dorothy Beljon [2008] NSWSC 775 per McDougall J at [18] and [19]. A declaration which simply describes the lenders as "credit providers" does not comply with code section 11 (2) because it fails to nominate a lender: Benjamin v Ashkian [2007] NSWSC 735 at [28], [40], [58], and [62]. 162 In the present case the naming of the wrong credit provider fails to meet the standards required by the Code, as explained by McDougall J George Hraiki v Jean Dorothy Beljon [2008] NSWSC 775. The naming of "Fastcorp Financial" or one of their assigned lenders instead of Fast Funds as the lender in the declaration creates room for doubt as to the application of the regulation 10 declaration. It is a circumstance that immediately calls for further enquiry outside the document itself to ascertain whether or not the declaration actually relates to the first loan transaction. Looked at objectively it creates doubt in the mind of the debtor whether the debtor is in truth dealing with Fast Funds or another entity that stands behind Fast Funds. A form of declaration naming the wrong lender is likely to be more misleading than one in blank. At least with a blank declaration the debtor might be inclined to mentally fill in the correct name. Here the certificate creates confusion and prompts the obvious question, "who is Fastcorp Financial?" to which there is no immediate answer from the certificate itself. 163 Consideration of the wider purpose of the Code prompts the same conclusion. In interpreting the Code the construction that will best achieve the Code's purpose or object is to be preferred: Code Cl 7 Schedule 2 Part 2. The purpose of the code is to protect the debtor: Rafiqi v Wacal Investments Pty Limited (1998) ASC 155-024 at [148575]. The Code's purpose is also to ensure there is truth in lending and full disclosure to borrowers: Australian Financial Direct Ltd v Director of Consumer Affairs Victoria (2004) VSC 526 at [76] per Kaye J. In determining whether the declaration Vanessa Coppola made in this case is "substantially in the form ... required by the regulations", as s 11(4) requires, a result should be avoided that leaves uncertainty for the debtor. Holding such a declaration compliant with the Code would not be consistent with full disclosure to borrowers and protection of the debtor. 164 The position is not improved by the addition of the words "or one of their assigned lenders" to the group of words describing the credit provider in this declaration. The extra words do not identify a particular lender with any greater precision than such a lender would be identified if the words were not there. Fast Funds does not claim that it took an assignment from Fastcorp Financial in relation to this first loan transaction. There is no evidence as to how the class of "assigned lenders" should be defined, what its limits are and whether or not, for example, the class is limited to entities related in some way to Fastcorp Financial. It is unclear whether Fast Funds falls inside or outside the class of possible "assigned lenders". 165 Fast Funds says that the declaration of 14 March 2008 does not convey less information than the regulation 10 form requires and would not operate to confuse or mislead the debtor and thus meets the standard set by Patten AJ in Permanent Mortgages Pty Ltd v Cook (2006) NSWSC 1104. Fast Funds points out that the declaration was precisely in the form of the letter of offer from Fastcorp Financial and the application form relating to this transaction. It is true that both of those documents passing between credit provider and borrower are on the letterhead of Fastcorp Financial and that the letter of offer introduces itself to the borrower with the statement "Fastcorp Financial Pty Ltd is the agent for the lender Fast Funds Pty Ltd". These documents do not reduce confusion for the debtor, who would still reasonably be puzzled from the form of declaration whether some other lender had perhaps crept into the picture by the process of assignment. 166 The business purpose declaration is not substantially in the form required by regulation 10. The declaration is ineffective to create the conclusive presumption provided for by Code section 11 (2). Credit Provider's knowledge of the domestic purpose of loan 167 It is not strictly necessary now to decide the question whether the declaration is ineffective to displace the Code s 11(1) presumption on the grounds that the credit provider actually knows or has reason to believe that the credit will be applied predominantly for personal domestic or household purposes: Code s 11 (3). The Court has found the declaration ineffective for other reasons. The Court must still decide whether the first loan is regulated by the Code because it was predominantly made for business or investment purposes. That task also involves consideration of the credit provider's knowledge. Both these matters are considered together below after analysis of the legal effect of Vanessa Coppola using the power of attorney for the first loan. Certificate under Power of Attorney 168 Elio Coppola also submits that the declaration is ineffective for the purposes of s 11(2) because Vanessa Coppola signed it under Elio Coppola's power of attorney. The submission is that this form of execution neither complied with s 11(2) of the Consumer Credit Code nor the form described by s 11. Section 11(2) operates to create a conclusive presumption for the purposes of the Code that the credit is not provided "wholly or predominantly for personal, domestic or household purposes" if before entering into a contract "the debtor declares" that it is for business or investment purposes or both. It is not strictly necessary to decide this question because of the conclusion already reached. Nevertheless it may be useful to the parties to know how this question would be determined. 169 Nothing in Code s 11(2) gives any indication that the legislation will permit a declaration to be made by an attorney under power of attorney. The words "debtor declares that " in s 11(2) requires in ordinary language that the declaration be made by the debtor personally. There is no licence within Code s 11 for the act of declaration making to be delegated. A wider construction, allowing delegation to an attorney is also inconsistent with the form of declaration mandated by regulation 10. This regulation requires the inclusion of specific text giving personal warnings to the maker of the declaration. The warning would be wholly misdirected if an attorney could execute the declaration. The form of words in the prescribed declaration assumes that the person making the declaration is the debtor and not somebody acting for the debtor. Any other construction would weaken the protections for consumers in the legislation. 170 In submissions Fast Funds emphasises s 43 of the Powers of Attorney Act 2003 (NSW) which expressly validates acts done by an attorney in the authorised manner, emphasises the fact of registration of the power of attorney granted to Vanessa and Maria, so that no issue arises as to the capacity of the attorney to transact on behalf of Elio Coppola in dealings affecting interests in real property arises (Powers of Attorney Act ss 51 and 52) and emphasises that there is no evidentiary basis for the Court to look behind the power of attorney. The validity of the power of attorney to Maria and Vanessa can be accepted. The problem for the Fast Funds argument is that the Code does not permit making a declaration under s 11 by power of attorney. 171 The declaration is ineffective for the purposes of Code s 11(2) because Vanessa Coppola signed it under Elio's power of attorney. The Code s 11(1) presumption of the operation of the Code is enlivened but the substance of the transaction may yet have that result anyway. Was the First Loan Predominantly for Business or Investment Purposes 172 Fast Funds submits that the Code does not apply to the first loan transaction because it was for "business or investment purposes" and was not "wholly or predominantly for personal, domestic or household purposes". This section considers that issue and then the issue of Fast Funds' knowledge of the purpose of the loan. The issue is of consequential importance for the assessment of the second and third loans because the second loan paid out the first loan and the third loan partially paid out the second loan. 173 The Code applies to a transaction if when the credit contract is entered into, "the credit is provided or intended to be provided wholly or predominantly for personal domestic or household purposes": Code s6(1)(b). For the purposes of Code section 6 the "predominant purpose for which credit is provided" is "the purpose for which more than half of the credit is intended to be used": Code s6 (5)(a). There was a close contest between the parties about the purpose of the first loan transaction. 174 Fast Funds' submission that the first loan falls outside the operation of the Code has initial attraction but ultimately does not carry the day. Fast Funds points to evidence that the first loan was both intended to be utilised and was in fact utilised for business or investment purposes. The first loan from Fast Funds advanced $51,244. After deduction of expenses, the establishment fee and the first month's interest, other fees and excluding an amount of $10,000 used by Vanessa, $27,680 of the first loan advance was applied to rectifying arrears on the MDN loan. The MDN loan had been taken out on or about 9 November 2007, was declared to be a loan for business purposes, and was one to which Elio Coppola assented. Fast Funds says that the application of the proceeds of the first loan to satisfy the MDN arrears was not credit "provided or intended to be provided wholly or predominantly for personal, domestic or household purposes", because it satisfied the arrears on a business or investment loan. 175 Fast Funds says the commercial purpose of the MDN mortgage is to be inferred from several sources. Fast Funds says that the MDN loan application itself describes the purpose of the funds applied as being "To refinance investment property and funds for future investment use". But Vanessa forged Elio Coppola's signature on this document on or about 24 October 2007, as she admits. The document was signed only by Maria in her own name and by Vanessa forging Elio's signature. Vanessa's forgery does not necessarily invalidate its character as a representation of Vanessa's and Maria's intentions in relation to the MDN loan. Nothing can be inferred as to Elio's intentions from this MDN loan application document. Elio Coppola's own intentions in relation to the MDN loan are important because it was secured over the property in his name, Number 9 and in the course of seeking relief against the second loan he seeks adjustment of the obligations created by the first loan transaction. 176 Elio Coppola himself executed a business purpose declaration in relation to the MDN loan on or about 6 November 2007. In it he declared that the credit to be provided under that advance was to be provided "wholly or predominantly for business or investment purposes". He agreed that he signed this declaration himself. It was not a forgery. The existence of Elio's own business purpose declaration would perhaps enliven the presumption under Code s 11 that the credit was not provided "wholly or predominantly for personal domestic or household purposes". But given my findings in relation to Elio Coppola's poor level of understanding of formal written English, far more would be required than his mere recognition of his signature, to infer that he was a "debtor" who "declares" the purpose of the loan within Code s 11(2). Fast Funds did establish that he really understood what he was doing at the time he made the MDN loan declaration. 177 MDN had also taken steps in October 2007 to verify that Elio Coppola appreciated that the first loan was being advanced and that he understood it was for business purposes. But this evidence is weak. Mr Coppola's accountant of five years, Mr Mahdy Dennaoui had advised Mr Coppola about his obligations under the MDN mortgage and certified to MDN as to his capacity to pay. Acting on behalf of MDN, one Roslyn Pierce interviewed Elio Coppola by telephone about his obligations under the proposed mortgage with MDN. She had been informed by email that "the client has advised that the loan is for investment purposes." But the source of this information to Ms Pierce is obscure. Given her driving influence in the course of the refinancing of late 2007 and early 2008, the information about business purpose is far more likely to have come from Vanessa than Elio. 178 The MDN mortgage itself was raised to pay out the St George Bank loan. It is not clear that the St George Bank loan over Number 9 itself had been raised for business or investment purposes. Whether or not the St George Bank loan secured over Number 9 was for business or investment purposes depends on how Elio and Maria Coppola were intending to and did use the property, a matter considered below. 179 Against the Fast Funds inference that the first loan was provided for and intended to be provided for business or investment purposes, Mr Condon deploys a number of arguments on behalf of Mr Elio Coppola. Some of these arguments are more persuasive than others. 180 First, Elio Coppola argues that the reality was that MDN had a mortgage over Elio's home; he was in default; MDN were about to take possession; and, the default was caused not by any commercial investment activity but by the frauds practised on Vanessa and Vanessa had not disclosed the full position to her parents. It is said that these were all domestic matters. It is true the mortgage was secured over Elio's home, as I have found. 181 Despite the circumstances in which Vanessa was persuaded to give away the advances from MDN and BankWest in late 2007, the first loan was taken out for a precise purpose and was applied for that purpose, to meet existing MDN defaults. Vanessa has not given evidence that she channelled the advances from the first loan to the same persons who had defrauded her. Regrettable though the circumstances were in which these monies were lost, the first loan was a small advance to meet a liability for which the family had no other money. It is not useful to determine the character of that loan by looking at how Vanessa lost the money that the loan was designed in part to replace. 182 Further to the extent that this argument relies on a finding that Vanessa deceived her parents the argument is wrong. I find that Vanessa confided all that she was doing in her mother. Use of Number 9 183 Number 9 was Elio and Maria's residence as I have found. Because it was a domestic residence the original borrowings from St George to acquire Number 9, and any MDN refinance of those borrowings, would be the provision of credit for domestic purposes. Mr Hall was convinced that Number 9 was used to derive income as a boarding house and that Elio and Maria lived at Number 11. I have found that they lived at Number 9. But Mr Hall is partly right. He says that they take in boarders. There is evidence of the family taking in boarders into Number 11. It is likely that from time to time some boarders were taken into Number 9 too. There was certainly room for that activity in Number 9, which was a two-storey residence with separate ensuite bathrooms attached to some of the rooms. But to the extent that Number 9 was used for boarders as a source of business income it was a merely a minor and incidental use. Taking in boarders at Number 9 from time to time did not change its fundamental character as the domestic residence of Elio and Maria Coppola. 184 Although Elio, Maria and Vanessa had filled out and issued declarations about the loan for Number 9 that it was used for business or investment purposes, to that extent they were misleading lenders. Their relative culpability for that misleading conduct varies with their knowledge of the transactions. When the lender misled was Fast Funds this conduct on their part is relevant to an assessment whether the loan transactions were unjust in the circumstances relating to the loan transactions at the time they were made. Fast Funds' Knowledge 185 The actual impression given to Mr Hall in March 2008 about the use of Number 9 and the consequent purpose of the first loan, which was secured over Number 9, was quite different from the reality on the ground. Mr Condon submitted that the documentary and oral sources of information available to Mr Hall pointed to Mr Hall being aware that both Elio and Maria Coppola were using Number 9 as their residence. To the contrary I conclude that Mr Hall believed that Elio and Maria did not live in Number 9 and that the first loan was taken out for business and investment purposes, except with respect to the $10,000 paid to Vanessa from the first loan advance. This is also relevant to the assessment of the justice of the first loan transaction. 186 My findings in relation to Mr Hall's oral information sources at the time of the first loan throw light upon how the documentary information sources available to him should be assessed. Mr Hall says that on or about 12 March 2008, Steven Moujalli told him about the referral of the Coppolas from Mr Dickenson of MDN. Mr Hall says that after carrying out a title search of Number 9 he telephoned Vanessa Coppola and had a conversation with her to the following effect: "Hall: 'We can only do a loan for you at Number 9 as an investment property" Vanessa: 'Dad lives with me and my mother at Number 11. Dad used to live at No 9 but now he rents that out.' 187 Vanessa says this conversation did not occur. I find that it did. Vanessa's multiple admissions of forgery widely impair her credibility. Her misfortunes do not make her a reliable witness. Mr Hall himself was not a reliable witness in other ways that I identify below. But on this issue I accept his evidence. Mr Hall was an experienced second mortgage lender. He wanted always to lend in an environment free of the Code. He explained to the Court several times that it was not worth his while to lend to borrowers where it was not clear that the borrowing was for business or investment purposes. At one point in his cross-examination Mr Condon asked him the question "What was the detriment from your perspective on lending monies which are regulated by the Credit Code?" Mr Hall paused, looked around the courtroom and said "All of this, Mr Condon". I accept that Mr Hall wanted nothing to do with lending that might attract the operation of the Code. He was strongly motivated to ask the question that he did ask Vanessa about the use of Number 9. He got the answer that he wanted. I accept that this conversation occurred in the terms that Mr Hall states. 188 Vanessa also knew what Mr Hall wanted to hear. That is what she told him. She already had experience in crafting loan applications that declared the purpose of the proposed borrowings as being for business and investment purposes. She had been involved in arranging the DJ Capital Solutions advance, the BankWest advance and the MDN advance. Although Elio and Maria did live at Number 9, as I have found, Vanessa deliberately told him that they did not live there. 189 The documentary evidence is to be assessed in the light of this conversation. Mr Condon submits that Mr Hall should have concluded from the documentary material supplied to him that Elio and Maria lived at Number 9 or that he at least should have suspected that they lived there. Once the conversation is taken into account, the documentation supplied to Mr Hall is seen to be reasonably consistent with Vanessa's statement that Elio and Maria lived at Number 11 and consistent with Mr Hall's stated belief that the loan was for business and investment purposes. Before considering the documentary evidence Mr Condon threw out a challenge to Mr Hall's credibility and submitted that his evidence as to his state of mind at the time of the first loan transaction could not be believed. 190 Mr Condon submitted that Mr Simon Hall should not be accepted as a witness of truth when he said that he believed the first loan was for business and investment purposes. I do not wholly accept Mr Hall as a witness of truth. I assess parts of his evidence with caution. In particular I do not accept his evidence about Exhibit F, an email of 14 March 2008 relating to the payment of $10,000 to Vanessa out of the first loan advance. Mr Hall's initial evidence in cross-examination was that he had no involvement in the payment of $10,000 from the first loan advance to Vanessa. Then he was shown Exhibit F an email, addressed from himself to Mr Moujalli at Fastcorp entitled with the subject "Coppola" and sent at 11.38am on 14 March 2008. The text of this email reads "$10,000 to V Coppola" followed by BSB and account numbers. As a result of seeing it, Mr Hall quickly admitted that he must have known, probably through Mr Moujalli, that there was a $10,000 advance made to Vanessa out of the first loan advance. The email could hardly be consistent with any other conclusion. 191 Mr Hall was conscious that this document showed that part of the first loan advance was being diverted with his knowledge to Vanessa. He could not explain how this email, sent at 11.38am on 14 March 2008, was not produced to the Court in response to a notice to produce. In response to the same notice to produce he had produced to Court another email but without the same negative import for the Fast Funds case, sent from the same email address at 11.46am on the same day. I do not accept Mr Hall's explanation that the failure to produce Exhibit "F" was "because I simply missed it. I did not do it intentionally. I have no real reason for hiding this from you or the Court." There is no satisfactory explanation for the non production of the 11.38am email other than that it was withheld from production. It came to the attention of those acting for the Coppolas through the production of Mr Moujalli's file on subpoena. Mr Hall had reason to suspect that this particular amount of $10,000 was perhaps not going to Elio Coppola and perhaps may not be applied for business purposes. The 11.38am email only establishes that some of the funds were going to Vanessa. The email says nothing about whether the $10,000 was for her personal use but it raises a reasonable suspicion that this amount was not being applied for Elio's benefit. But it does not throw any real light on Mr Hall's belief about the overall use of Number 9. 192 Then the first document that the Coppolas rely upon to show the use to which Number 9 was put in March 2008 was the loan application for the first loan. A 16 page facsimile application (including annexures) contained information about the proposed borrower, Elio Coppola. There are indications in the fax cover sheet that Elio Coppola's address is recorded as being at Number 9, the application includes a rates notice issued by the City of Canada Bay Council on 25 July 2007 in respect of Number 9 addressed to Elio Coppola at Number 9, the power of attorney shows Elio's address at Number 9 and Elio's licence identifies his address at Number 9. When Mr Hall prepared security and associated documents the 12 March letter of offer was addressed to Mr Coppola at Number 9, the address for service for the borrower in the draft mortgage for March 2008 was Number 9 and the related caveat addresses identify the same address. From this material, Elio Coppola submits that Mr Hall and a reasonable person in his position would have concluded that Number 9 was Elio Coppola's home. 193 The documentary evidence was not all one way. Included within the bundle of loan application documents was a Residential Tenancy Agreement that Vanessa had fraudulently created, which nominated Mr Coppola's address as Number 11 and identified the tenant as at Number 9, a Mr Mohamad Harmouche who was described as "having the right to occupy the premises at [Number 9]". Mr Condon properly concedes on the evidence that there is no basis on which Mr Hall would have appreciated that this document was a sham. He submits however that it expired in February 2008 and should have been discounted by Mr Hall in March 2008 after the 12 month term of the lease had expired. However the Residential Tenancy Agreement provides for the tenant to stay on in the premises from the end of the term. I accept Mr Hall's evidence that he had been told notwithstanding the expiry of this "tenancy" that the property had still been rented. Vanessa had organised an elaborately crafted fake Residential Tenancy Agreement, on which Maria had witnessed Elio's forged signature. Mr Hall's evidence as to what he was told is consistent with the probabilities. Vanessa was prepared to go to the trouble to create this agreement to include it with the loan application. It is likely that she would have also said to Mr Hall that the tenancy continued past February 2008. The Residential Tenancy Agreement does not indicate that any part of the premises at Number 9 was reserved for Elio and Maria Coppola. Any reader of the document was entitled to infer that the whole of the premises had been let out to Mr Harmouche as tenant. 194 Mr Hall also reasonably relied upon an application form from Fastcorp Financial which added the address of Elio Coppola at Number 11 and a copy of Vanessa Coppola's photo identification card which stated her address as being at Number 11. It was reasonable for him to rely upon these documents in March 2008 to assist in confirming what he was told about the family living at Number 11 and the tenancy at Number 9. 195 When challenged about the significance of the documents sent to him on 12 March 2008 appearing to connect Elio Coppola with Number 9, Mr Hall reasonably explained that: all that the driver's licence indicated was that Elio at one stage lived at Number 9; that the Canada Bay rates notice alone would not indicate that he lived at Number 9 because of the other inconsistent documents; and, the absence of a reference to any tenancy of the property in the valuation he judged would be more significant in respect of commercial property but was not the subject of consistent valuation practice with respect to residential property. 196 Mr Moujalli introduced Mr Hall to the first transaction. Elio Coppola also argued that a Jones v Dunkel (1959) 101 CLR 298 inference should be drawn against Mr Hall in relation to his knowledge of the proposed first loan. The argument was that Mr Moujalli is a person whom it could be expected that the defendants would call to give evidence in relation to the first loan transaction. Mr Hall and Mr Moujalli still spoke regularly and did business together. Mr Moujalli and Mr Navarro had a significant role in putting together the first loan application. Even accepting that Mr Moujalli had done business with Mr Hall and referred other loan applications to him, Mr Moujalli was still acting on behalf of Mr Coppola in this transaction. It might be expected that Elio Coppola should call him to give evidence. However even if the inference could be drawn that Mr Moujalli's evidence would not have assisted the lender's case, a Jones v Dunkel inference is not decisive in these proceedings, where there are other factors that bear directly upon Mr Hall's knowledge of the use of Number 9 and the purpose of the transaction. 197 Finally, Elio Coppola submits that Mr Hall's evidence that he believed the loan was for investment purposes was inconsistent with three matters. The first is Mr Hall's exchange with Vanessa in June 2008 at the time the second loan was being settled. Vanessa said to Mr Hall "my parents are going to be kicked out of their house. They need the money desperately so that we can pay the arrears." Mr Hall accepted the correctness of this conversation with Vanessa. I agree with the submission put on behalf of Elio Coppola by June 2008 this was an indication to Mr Hall that Elio occupied Number 9. It was obvious that MDN was moving on Number 9, that is why the conversation had significance for Vanessa. 198 In the same conversation Vanessa said to Mr Hall "Simon can the money be placed in that account in cleared funds. We are desperate to pay the arrears to MDN. If we don't we're going to be evicted from our house." This was another indicator to Mr Hall in June 2008 that when MDN were moving to take possession of Number 9, that they were taking possession of what Vanessa regarded as Elio and Maria's home. 199 Although this is evidence of what happened in June, Mr Condon submits that it is also a basis to infer what Mr Hall's state of mind was in March: Benjamin v Ashikian [2007] NSWSC 735 at [74]. Elio Coppola's argument is that Mr Hall did not express surprise at having in June just found out that this was their home. From this it is said that I can infer he already knew that it was their home. Whilst I accept this evidence is one of several indicators to Mr Hall by June 2009 of the real occupation status of the house, the context of the conversation in which Mr Hall was dealing with an anxious Vanessa Coppola in June, did not really call for him to make comments about consistency with what she had told him previously. I do not accept that this conversation is a basis to infer what his state of mind was back in March 2008. 200 The second matter was that Mr Hall was criticised for alleged lack of candour in giving evidence about the existence of the City of Canada Bay rates notices and Elio Coppola's driving licence in his affidavit. I did not find his evidence on this unconvincing. It was acceptable in light of what Vanessa had told him about the occupation of the house and the presentation to him of the forged Residential Tenancy Agreement. Mr Hall was criticised for not producing the introductory fax from Mr Moujalli to Mr Hall of 12 March 2008 because it contained a reference to Elio Coppola at Number 9. Mr Hall said that he did not regard it as significant but judged it to be "a brief summary of a loan scenario". I accept this explanation. There is in fact a contemporaneous record of Mr Hall's memory on the issue in an email he sent on the morning of 12 March 2008 about Mr Coppola's loan, in which he said: "the property is rented so no problem with business purpose." That is what he genuinely thought. 201 The third matter adverted to on behalf of Elio Coppola was that Mr Hall prepared mortgage documents nominating Number 9 as Elio's address for service. But these documents do not record Mr Hall's understanding about the site of Mr Coppola's residence in March 2008. Mr Hall said and I accept that it was open to him to use either the security address or the home address of the mortgagor in such documents. The selection of Number 9 as the address in these documents does not indicate Mr Hall believed that to be Mr Coppola's home address. 202 Little turns either way on Mr Hall's evidence that Vanessa Coppola asked him to ensure that documents were posted to Number 9 so that they would not be scrutinised by Maria. Vanessa Coppola denied that she said this to Mr Hall and I am doubtful that it was said. As Mr Condon submits it is hardly the kind of thing that Vanessa would have said in order to keep knowledge of this transaction away from Elio and Maria because they did live at Number 9 as I have found. On this matter Mr Hall's recollection is probably incorrect. 203 In summary, my findings are that Number 9 was the domestic residence of Elio and Maria Coppola but in March 2008, Mr Hall was induced by misrepresentation into believing they lived in Number 11. As I find below however, by June 2008 he should have suspected that he had been lied to by the Coppola family. Was There a Breach of the Consumer Credit Code in relation to the First Loan? 204 The Coppolas have not made any claim for relief with respect to the first loan under the Code and none can be granted. It is convenient to deal with the application of the Code when the second loan is considered. A Contracts Review Act Claim in respect of the First Loan ? 205 Neither in the Possession proceedings nor in the Coppolas' proceedings have the Coppolas made any Contracts Review Act claim for relief in respect of the first loan. The defendants submit that the Court cannot now entertain any grant of relief with respect to the first loan under the Contracts Review Act. 206 Although the Court is not granting relief in respect of the first loan several features of this transaction are of significance when the Code and the Contracts Review Act are applied to the second loan. These features of the first loan, whether or not they are enough to warrant the first loan transaction being set aside, are relevant to the way Fast Funds' conduct is to be judged in relation to the second loan. I deal with these matters below. Use of the Power of Attorney 207 The fact that a power of attorney was used for the first loan transaction did alert Mr Hall to the possibility that Elio had not in fact approved the first loan. Mr Hall agreed in cross examination that he appreciated there was always a significant risk of the loan proceeds being misused in respect of a power of attorney loan. So Mr Hall took the course of seeking some other independent assurance that Mr Elio Coppola was aware of the loan transaction. He did this by requesting Elio Coppola to execute a letter to show he had approved the loan. At the time of the first loan transaction, a letter in the following form came into Mr Hall's possession: 14 March 2008 Fastcorp Financial PO Box 7090 Silverwater NSW 2126 To Whom it May Concern: I Elio Coppola acknowledges my daughter Vanessa Coppola of [Number 11] is taking a loan over the property of [Number 9] in the amount of $56, 000. I agree this is acceptable to me. Yours truly, [signed] Mr Elio Coppola 208 Mr Hall was quite emphatic that he wanted this letter before the loan was settled. He initially thought that this letter came to him by facsimile and that the originals came a few days later. Mr Condon put to Mr Hall that this letter was "an afterthought", somewhat suggesting that it had been created after the loan transaction in order to create evidence that Mr Elio Coppola did approve the loan. To this Mr Hall responded, "no it was certainly done before the loan was advanced" and "there is no way in the world I would settle a loan without that letter". In the course of evidence immediately afterwards, Mr Condon successfully demonstrated that Mr Hall could not have received the letter on 14 March by facsimile and I find that Mr Hall was mistaken in the belief that it was faxed to him. Nevertheless I accept Mr Hall's alternative explanation that he had been assured by Mr Moujalli that Mr Moujalli had this document in his possession. Mr Hall regarded it as a precondition of settling the first loan transaction that Mr Coppola had to sign such an acknowledgement. I accept Mr Hall's evidence that he would never have finalised the loan without such acknowledgement. This is consistent with Mr Hall's outlook that he did not wish to be involved in loan transactions, which were likely to attract Court intervention. The request for the letter was not to provide cover for what he knew was likely to be a problem loan. Rather it was a genuine attempt to seek assurance that any risks associated with accepting execution by power of attorney had been neutralised. 209 This approach by Mr Hall was acceptable when his conduct is analysed in respect of the first loan. It becomes problematic though when other factors started to crowd in at the time of the second loan. Clause 101 of the Mortgage and Loan Agreement Clause 10 210 Another feature of the first loan transaction is of particular importance. Clause 101 of the mortgage over Number 9 and clause 10 of the letter of offer for the first loan authorised Fast Funds to place caveats on any other titles owned by Elio Coppola. Fast Funds' stipulation for such a clause in the transaction diminishes the strength of the argument that the monies advanced in the first transaction were advanced wholly for Elio's benefit. These clauses set a high price upon the discharge of Mr Elio Coppola's pre-existing liability through Fast Funds to MDN. Although discharge of his existing liabilities was clearly to Mr Elio Coppola's advantage, discharging these liabilities through Fast Funds markedly impaired his freedom of action in future refinancing. Clause 101 and Clause 10 effectively meant that unless he met all of Fast Funds' demands in the future, he could not deploy any other property he owned to another financier to assist a refinancing without first settling up with Fast Funds, however reasonable his objections to Fast Funds' demands might be. These clauses have two implications for the way the second loan should be assessed. 211 The first implication is that objectively speaking the price at which the discharge of Mr Elio Coppola's existing liabilities was being obtained was unreasonably high. 212 The second implication was that Mr Hall had stipulated for that price and knew it had been accepted. When it came to looking at Mr Hall's understanding of Elio Coppola's position at the time of the second loan transaction, Mr Hall was well aware of the reduction in Mr Coppola's freedom of manoeuvre that Clause 101 had imposed. The Code and relief in respect of the First Loan 213 There are relevant considerations as to how the first loan should be taken into account when considering giving relief under the Code in relation to the second and third loans. These considerations and the legal principles in relation to the operation of the Code on the second loan are identified later. As no relief under the Code is sought in respect of the first loan none is granted. It is helpful though to look now at how the Contracts Review Act might have applied to the first loan. Principles in Relation to the Contracts Review Act 214 The principles relevant to the grant of relief under the Contracts Review Act are well established. Consideration of an applicant's claim for relief pursuant to the Contracts Review Act involves a two stage process, namely: firstly the determination of whether the contract was "unjust" which is a conclusion of fact involving a "broad based value judgment" and, second, if the contract is found to be relevantly "unjust", whether any relief should be granted, and if so, what relief should be granted, this being an exercise of judicial discretion: Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [34]-[36] per Spigelman CJ, at [109]; Kowalczuk v Accom Finance [2008] NSWCA 343 per Campbell JA (with whom Hodgson and McColl JJA agree) at [87] and Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 at [51] per Brereton J. 215 In the exercise of that discretion, if the contract is found to be unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy the injustice: Kowalczuk v Accom Finance Pty Ltd (2008) 252 ALR 55 at 74-75; [2008] NSWCA 343 at [88]. Ordinarily in applications under the Contracts Review Act relief will not be granted against an innocent party: Beneficial Finance Corporation v Caravas (1991) 23 NSWLR 256 per Meagher JA at 277 and Hraiki v Beljon [2008] NSWSC 775 per McDougall J at [35]. The "circumstances relating to the contract at the time it was made" are not limited to circumstances concerning what the person resisting an order under s 7 of the Act did or did not do or knew or ought to have known; when determining unjustness under s 9 the Court should have regard "to the public interest and to all the circumstances of the case": Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [76]-[77]. 216 An entitlement to relief is not made out merely because the circumstances relating to the transaction did not work out in favour of one party, which is consistent with the public policy in keeping parties to their bargains: Baltic Shipping Co v Dillon ("the Mikhail Lermontov") (1991) 22 NSWLR 1 at 9 per Gleeson CJ. Even if the court does find a contract to be unjust and warranting the provision of relief, the relief to be granted would be limited to the minimum required to do justice between the parties: S H Lock (Australia) Ltd v Kennedy (1998) 12 NSWLR 482. There should be a causative connection between the relevant injustice and the unjust consequence which requires relief to be granted: S H Lock (Australia) Ltd v Kennedy (1998) 12 NSWLR 482 at 492 per Priestley JA. 217 A contract can be unjust because of the way it operates in relation to the claimant or because of the way in which it was made or both; a contract may be unjust because its terms, its consequences or its effects are unjust ("substantive injustice") or because of the unfairness of the methods used to make it ("procedural injustice") or both; a contract may be unjust even if it is not unconscionable, harsh or oppressive; a contract may be unjust even though the circumstances that give rise to the injustice are not known to the other party: Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 at 277; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [94]-[96]. 218 One factor entitled to significant weight in favour of a party seeking an order under s 7 of the Contracts Review Act, is the fact that that person had no involvement of any kind in the making of the investment the subject of the transaction: Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [77]. The Justness of the First Loan 219 It is first useful to consider the justness of the first loan in relation to Elio Coppola. I find that Elio Coppola was unaware of the first loan transaction of March 2008. Many things that did not happen in March 2008 support this conclusion. First, Elio Coppola gives no account of any discussion with other family members about the three loan transactions. Secondly, neither Maria nor Vanessa Coppola gives any account of discussions with him about the first loan transaction. Thirdly, Elio Coppola is not the author of any correspondence about the first loan. Fourth, none of the defendants' evidence about the first loan transaction refers to Mr Hall or anyone representing Artex actively dealing with Elio Coppola about the loan. Fifth, there is no evidence from the other mortgagees with whom the Coppola family were dealing in the period March 2008 to March 2009, such as MDN and Sydney Wyde that Elio Coppola dealt with them himself, either orally or in written correspondence. The objective evidence supports Elio's account as to his lack of involvement in the first loan. Although, as I have found he was informed in general terms about the refinancing in late 2007. 220 Elio Coppola claims that he should not be bound by the transaction documents constituting the first loan. He did not execute any of those documents personally. Vanessa Coppola executed the letter of offer, the declaration of loan purpose and the associated mortgage for the first loan as his attorney pursuant to the power of attorney dated 26 June 2007. Elio's only act of assent to the first loan is through his execution of the power of attorney on 26 June 2007. I find that he understood that the power of attorney would only be used for a more limited purpose than executing mortgages over the title to November 9. 221 I find that Elio Coppola was unable to read or understand the power of attorney without assistance. He was willing to sign the document that his daughter Vanessa requested him to sign. I also find that he did not obtain any legal advice in relation to the power of attorney. His understanding of the power of attorney was entirely a product of what he was told by other family members. Vanessa was the family member who explained it to him. She misled him about the use to which the power of attorney would be put, when she said it would be used to manage his properties.. 222 I find that Elio Coppola had some limited capacity to understand what a power of attorney involved. The simple elements of a power of attorney of allowing his daughter and his wife to act in his name he could understand. He understood, based on what his daughter told him about the power of attorney that he was signing that it merely gave Vanessa and Maria management authority over the real property in his name, not authority to dispose of or charge that property. I find that he did not authorise her to keep information about the use of the power of attorney from him. Vanessa Coppola indeed expected when it was signed that she would inform him about its use. Later pressures prevented her doing that. 223 Elio Coppola submits that based on these findings that were the first loan still on foot, he would not be liable, under the first loan or its security. Justice of the First Loan and hypothetical relief 224 The first loan objectively had a substantial benefit to Elio Coppola. Despite the fact he was ignorant of it being taken out, for this reason it is difficult to conclude that it was "unjust" either within the Contracts Review Act or the Code. 225 When the Court considers the justice of the first loan transaction for the purposes either in Code s 70 or Contracts Review Act ss 7 and 9 it is not necessary to treat each of the statutory relevant considerations exhaustively. In this case a number of relevant considerations identified in the legislation are brought into more immediate focus and are of greater weight in the determination of justness of the first loan transaction in this case. They are dealt with below. 226 Inequality in bargaining power, lack of negotiation and excessive terms. As the chronological account above shows, a powerful burden upon the Coppolas created by the first loan was the all properties clause in the letter of offer, clause 10 and in clause 101 of the memorandum of mortgage. This clause went well beyond the legitimate security interests of Fast Funds at the time of the first loan which after all was an advance of just a little over $50,000. No legitimate interest of Fast Funds was served by an all properties clauses securing Elio's interests in Number 9, Number 11, the Kandos property, the Coledale property and the Stanmore property. Fast Funds did not make a case that it was genuinely commercially concerned about the security value of Number 9 in relation to the amount advanced. There was no identified threat to the integrity of its second mortgage security. 227 Where relief is being sought under the Code in respect of the first loan the all properties clause would be void in any event: Code s 40. This provision of the Code assists in defining what is the public interest in relation to such provisions. Under both the Code and the Contracts Review Act, the Court is entitled to take into account the public interest as well as the circumstances of the case. 228 The all properties clause in this case caused particular mischief for the Coppolas at the time of the third loan. As the history recounted above shows, the Coppolas felt pressured into acceding to demands to work with the broker Artex, to their great disadvantage, in part because a mortgage and caveat from the time of the first loan existed over Number 9. The actual use of the March 2008 mortgage and caveat over Number 9 at the time of the third loan is, although not decisive on its own, a factor inclining the Court to the view that when it comes to considering relief in relation to the second loan that the obligations of clauses 10 and 101 in the first loan should be treated as void. 229 Another factor pointing in the same direction was the lack of negotiation about this the all properties clause. Whilst I am not inclined to the view that there was a strong material inequality in bargaining power in this case with respect to the first loan, for reasons I will shortly explain. Such inequality did exist with respect to the all properties clause. The lack of any competent legal advice being available to Elio Coppola at the time of the first loan goes a long way to explaining why the existence of this clause was not picked up and rejected or made an item for negotiation. 230 Background, Literacy, Form of the Contract and Inability to Protect Self-Interest. Without any countervailing factors, my findings as to Vanessa's conduct in using the power of attorney without her father's consent would normally make out a strong case for setting aside the first loan transaction entirely. However, in this case it must be remembered that Elio Coppola substantially benefited from this transaction. He was the one who was in default under the MDN mortgage and the other mortgages in default at the time of the first loan. He was content to allow Vanessa to act generally in his interests, although he was not aware that she was going as far as she was. In the sense that she saved Number 9 from sale by MDN she did act in his interests. His trust in her abilities was not entirely misplaced. She of course wanted to keep him away from the transaction because of her fear of explaining to him what had happened to the family's money. Despite that aspect of the relationship, curiously, she did act in his interests and this is an important consideration making it impossible in my view to set aside the first loan transaction entirely despite Elio Coppla's lack of knowledge. 231 Although I find that because of Elio's lack of knowledge that the whole contract was unjust in the circumstances in which it was made, it is important for the Court to focus on what is the minimum relief required to do justice between the parties and that to focus on a causative connection between the relevant injustice found and the unjust consequence which requires relief to be granted. 232 Applying these principles to the first loan I fail to see how Elio being informed of this loan by his daughter Vanessa would really have made any difference. His trust in and fondness for her was immense. He is likely to have followed her advice even about refinancing after full disclosure of the facts. She is likely to have made much the same kind of arrangement and without legal advice even if Elio had known all the facts. Subject to one matter, a grant of relief in respect of the first loan would not require an alteration of any of its other terms, except its terms as to interest. 233 I am conscious if relief was sought under the Code that the cap would be applied to interest on the first loan but relief is not sought in respect of the first loan so that the interest caps do not apply. Nevertheless they can be taken into account when granting relief in relation to the second loan. And the way that the second loan should be approached is that the interest that accrues on the first loan should accrue at the maximum rate permitted by the Code and Regulations on the first loan. I see no reason to reduce the rate below the maximum rate in this case. Particularly for the reasons that follow. 234 Commercial setting. When considering the justice of the first loan it is of considerable significance in the commercial setting of the loan that Vanessa Coppola was propounding false documents and engaging in misleading conduct against Fast Funds for what she perceived was her father's best interests. She was successful in this. Mr Hall was misled. This had the result of making Fast Funds, through its agent, Mr Simon Hall an innocent party at the time of the first loan transaction. The fraud practised upon Fast Funds, of which it was unaware at that time was most unjust to Fast Funds. I am not inclined therefore to do any more than reduce the interest charged on the first loan to the statutory maximum permitted under the Code. 235 The exception though relates to the $10,000 paid to Vanessa. Through Mr Hall, Fast Funds was on notice of the benefit of $10,000 from the first advance going to Vanessa rather than Elio. Mr Hall knew the importance of paying the loan advance into the correct account. He was reluctant in later loans to pay loan advances other than to the named borrower. He had reason to suspect that this $10,000 was going to Vanessa, not to Elio. On the other hand he was reasonably satisfied through Vanessa's forged letter of 14 March that Elio was aware of the whole loan. As Fast Funds was aware that these funds were not being paid to Elio Coppola, Mr Coppola should not have to repay interest on them and relief should be fashioned to effect this result. RELIEF AND THE SECOND LOAN Is the Second Loan Regulated by the Code? 236 Elio and Maria Coppola did not sign a declaration under Code s 11(2) for the second loan. The second loan and its securities are presumed to be Code regulated: Code s 11(1). The statutory presumption is capable of being rebutted by evidence that the second loan was not provided or intended to be provided wholly or predominantly for personal, domestic or household purposes: Code s 6(1)(b). Elio and Maria Coppola contend that the statutory presumption is rebutted and Fast Funds contends that it is not. 237 Fast Funds' contention on this issue reflects its contention in relation to the first loan. Fast Funds says that the $72,118 applied from the second loan in repayment of the first loan and the $38, 713.17 applied in repayment of the MDN loan. 238 Fast Funds says that the same arguments to infer business or investment purpose apply to the second loan as were deployed in relation to the first loan. 239 In response Maria and Elio Coppola rely upon the lack of declaration in relation to the Code for the second loan and that there is no basis for the statutory presumption to be rebutted. They say that because more than half of the second loan was used to discharge the first loan that the purpose of the second loan will be determined by my findings about the purpose of the first loan. 240 The Coppolas' contentions are persuasive. I have determined that the first loan was provided or intended to be provided wholly or predominantly for personal, domestic or household purposes. As a substantial proportion of the second loan was used to pay out the first loan and the mortgagee of Number 9, MDN, I find that the second loan has the same purpose as the first loan. Therefore Code s 11(1) is enlivened and the second loan transaction is one to which the Code applies. Has Fast Funds Breached the Code? 241 As with the first loan, Fast Funds breached the Code with the second loan. Fast Funds took no steps to comply with the Code. 242 Fast Funds properly conceded that if the Credit Code applied that the second loan was not Code compliant in a number of respects. As the credit provider Fast Funds did not give the debtor a pre-contractual statement setting out the matters required to be included in the contract under s 15 Consumer Credit Code. The credit provider did not provide an information statement in the form required by the regulations of the debtor's rights and obligations. The first loan charges interest beyond that provided for in the Code. 243 Fast Funds acknowledges that if the Code applies that it breached parts of ss 14, 15, 21, 40 and/or 43 of the Code and that it charged interest in excess of that permitted by the Code. Fast Funds also admits that it has failed to comply with the notice requirements of s 80 of the Code. I have dealt with these notice requirements separately below both in relation to the second and third loans and they can be put to one side for the moment. 244 The real contest in relation to loan 2 took place upon the territory of whether the second loan agreement and the mortgage were "unjust" within the meaning of s 70 of the Code and within the meaning of s 7 of the Contracts Review Act. 245 In light of my findings, Fast Funds concedes that orders should be made effectively restricting the ability of Fast Funds to claim interest under the second loan through an amount of not more than 48% per annum being the maximum rate prescribed by the Code and Regulations. 246 Fast Funds also accepts in light of my findings that the payment of such interest under the second loan as remains claimable by Fast Funds and which has not otherwise already been paid by Elio and Maria Coppola should be secured only by the Coledale property. This is because Fast Funds properly concedes that the application of the Code means that any all properties clauses in the second loan transaction are avoided by Code s 40. 247 Fast Funds contends that it should not be liable for the payment of any civil penalties for breaches of the Code because Fast Funds entertained a mistaken but honest belief that it had complied with the procedures required to exempt the second loan from the Code. Fast Funds says the appropriate outcomes is to restrict the calculation of interest on the second loan to the maximum rate prescribed by the Code and Regulations. Fast Funds says this already provides significant compensation for relief for the Coppolas. 248 In response Elio and Maria Coppola have put detailed submissions as to the injustice of the second loan transaction and the need for the imposition of civil penalties. I will now deal with the question of the justness of the second loan and what relief is appropriate. Whether the credit transaction was unjust within Code s 70 and Contracts Review Act s 4 249 Authority establishes uncontroversial principles as to how the contract may be found to be "unjust" under the Act or as a credit transaction under s 70 Code. These have been well summarised in respect of the first loan. 250 The principal features of unjustness relied upon by Elio and Maria Coppola in relation to the second loan are: MDN were claiming judgment for possession; no refinancing of the MDN facility had been arranged despite promises to the contrary; Elio Coppola was misled by his wife and daughter about the purpose of the loan; the solicitor Mr Andresakis did not advise Elio Coppola properly about the transaction; Elio and Maria Coppola did not have the benefit of Code s 14 disclosures; the lender was asset lending on the second loan; most of the second loan advance was taken in repayment of the first loan; and the second loan was otherwise on the same challengeable terms and conditions as the first loan. These features are dealt with in more detail below. But first it is necessary to consider the effect of a feature peculiar to the second loan that Elio and Maria Coppola apparently had legal advice for the loan. Mr Angelo Andresakis 251 Mr Angelo Andresakis, a solicitor, conferred with Elio, Maria and Vanessa Coppola about the loan and mortgage documentation relevant to the second loan. Three family members saw Mr Andresakis. He was free of any association with the defendants. They were able to ask him whatever they needed to about the wisdom of his entering into the second loan. However, Vanessa's evidence was that Mr Andresakis gave them "very little advice". Just what that meant was not made very clear in the evidence. A contest developed between the parties as to who bore any applicable burden of proof regarding the inadequacy or extent of Mr Andresakis' advice to them. 252 If a lender is to rely upon the fact of independent legal advice being given to the borrower it is necessary for the independent advice to actually be received by the borrower; but the position would be different if the borrower were incapable or if the transaction were clearly for her benefit or if the transaction was a purely commercial one with no flavour of possible influence from or benefit to some relative or friend: Spina v Permanent Custodians [2009] NSWCA 206 at [60]-[64]. The crucial matter is whether the person seeking to set aside the transaction was denied the opportunity to have the assistance of a disinterested legal adviser: Bridgewater v Leahy (1998) 194 CLR 457, at 486 [100]. 253 The contention of Fast Funds was that as the Coppolas were alleging that the second transaction was unjust in all the circumstances and that they had acknowledged that some advice was given to them by Mr Andresakis, their failure to call him as a witness required the Court to draw an inference that if he remained uncalled that his evidence would not have assisted them: Jones v Dunkel (1959) 101 CLR 298. 254 In response to this the Coppolas' case was that no adverse inference should be drawn from their failure to call Mr Andresakis. They said that it was clear from their evidence that they were critical of the advice of Mr Andresakis and that their interests were at odds with his. They submitted they were not obliged to call a witness who could be expected to be unfavourable given the criticism of him that they had offered in their evidence. Their case was that without serving a subpoena to testify on Mr Andresakis they would not expect him to assist their case, particularly it is said because of the provision commonly found in professional indemnity policies prohibiting the making of admissions by insured persons. They further submitted that they had clearly waived privilege over the communications occurring at this meeting. Therefore there was no impediment to Fast Funds calling Mr Andresakis in its case and it was appropriate that it do so. The Coppolas submitted that the Court should assume that Mr Andresakis had interests to protect which were adverse to those of Elio and Maria Coppola and that the relationship between him and his former clients had become, as the Coppolas put it "a potential source of conflict rather than a reason for calling him". 255 In response Fast Funds developed its submission that a Jones v Dunkel inference should not be drawn against it. Fast Funds pointed out that the mere fact that the Coppolas wished to make an adverse assertion about Mr Andresakis' conduct does not automatically create a proper excuse for not calling him as a witness. This submission was advanced both on the evidence in this case and as an issue of law. Fast Funds argued that there was in fact no evidence to support the conclusion that misconduct was being alleged against Mr Andresakis, or that his conduct was being impugned. It was also put that even if there was a sufficient evidentiary basis for it to be found that there was criticism of the conduct of Mr Andresakis that that did not as a matter of law justify the drawing of a Jones v Dunkel inference in this case. In support of this argument Fast Funds relied upon the following statement of Bray CJ in Smith v Samuels (1975) 12 SASR 573 at 581: "For the unfavourable inference to be justified the witness not called must be available: it must be "in the power" of the party to call him. He may be unavailable through absence of illness. He may be unbailable because he would not be a competent witness. In my view he may also be unavailable in the relevant sense, or at least no unfavourable inference should be drawn from his absence, when there are strong reasons for not calling him other than the falsehood of the story he might be expected to confirm, such as hostility to the party or, I would say, jeopardy or grave prejudice to the witness himself." 256 Based on this passage the Fast Funds' submission was that an unfavourable Jones v Dunkel inference should not be drawn where there are strong reasons for not calling the parties such as the witness' hostility to the party, or the likelihood of jeopardy or grave prejudice to the witness himself. 257 Fast Funds characterised the Coppola's submission here as well short of such strong reasons for resisting a Jones v Dunkel inference. Fast Funds said that the Coppola's submission amounted merely to a statement that "one would not expect [Mr Andresakis] to admit that he gave inadequate advice" and then to seek to resist the drawing of an unfavourable inference from his absence. The Fast Funds' submission is that there are no strong reasons for not calling him "other than the falsehood of the story he might be expected to confirm". 258 In response to this the plaintiff says that the position here is similar to that considered by Mahoney JA in Fabre v Arenales (1992) 27 NSWLR 437 in which his Honour stated at 449-450: "I have to this point dealt with what the judge did upon the assumption that an inference was properly to be drawn from the fact that Mr Arenales was not called. But, in my opinion, that assumption is not correct: at least, it did not appear to the judge necessarily to be so. The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness "blind". These matters are of relevance in the present case. A Jones v Dunkel inference may not arise if, for example, a witness has a reason for not telling the truth or refusing to assist and the party who may call him is aware of this." 259 Relying upon this passage the plaintiff then submitted that the Court could assume that Mr Andresakis had his own interests to protect and that they were adverse to those of Elio and Maria Coppola, who should not be put in the position of having to call him blind. 260 The Coppola family then turned the Jones v Dunkel argument back on Fast Funds. The Coppola's submitted that a Jones v Dunkel inference could be drawn against Fast Funds arising from its own failure to call Mr Andresakis. The Coppola's cited in support the reasoning of Barrett J in No Fuss Finance Pty Ltd v Miller [2006] NSWSC 630 at [41]-[42], [73]. No Fuss Finance Pty Ltd v Miller was a case where, as here, the borrower's solicitor who gave some advice was available and that, again as here, there was no issue about privilege. Barrett J said the following in paragraphs [41]-[42] of No Fuss Finance Pty Ltd v Miller [2006] NSWSC 630: "[41] Neither party called Mr Attapallil. There is no suggestion that he was not available. Indeed, there was evidence at trial that he continued in practice as a solicitor at Rockdale. Faced with the matters raised in the defendant's defence, the plaintiff ought logically have called in aid in reply the fact that Mr Attapallil had given legal advice to the defendant. There may have been an apprehension that any such attempt would be met by a claim that the communications between Mr Attapallil and the defendant were privileged, so that there was no point in persisting with the attempt. But, on the evidence, Mr Rampling was also present (so that privilege could not attach) and the defendant, in her affidavit, had already disclosed her recollection of what passed between her and Mr Attapallil. The plaintiff should therefore not have seen the possibility of a claim for privilege as an obstacle (or, at least, an insurmountable obstacle) to the calling of Mr Attapallil. [42] It is therefore open to me to have regard to the plaintiff's failure to call Mr Attapallil when I come to the question whether the plaintiff has made out its case: Jones v Dunkel (1959) 101 CLR 298. This, coupled with the defendant's evidence that Mr Attapallil really did no more than read out long passages from documents that she did not understand, leave me in a position where I cannot find that Mr Attapallil gave the defendant an explanation of the meaning and effect of the documents she was about to sign and of the implications of the transaction as it affected her.' 261 In No Fuss Finance Pty Ltd v Miller Barrett J then reasoned that the defendant had failed to obtain evidence from the solicitor advising the borrower despite the absence of any apparent reason not to do so. 262 The issue then is what inference should be drawn in the present case. My conclusion is that a Jones v Dunkel inference can be drawn against Fast Funds for the failure to call Mr Andresakis. There was a waiver of privilege by the Coppola's over their communications with Mr Andresakis in their advancing affidavit evidence of their exchanges with him. Fast Funds could have sought the issue of a subpoena to him and awaited the Court's determination of any issues of privilege that the Coppolas raised. The pleadings made clear that the quality of Mr Andresakis' advice was in issue. There could be no serious objection maintained to Fast Funds calling Mr Andresakis in those circumstances. 263 Despite the lengthy debate between the parties in relation to Jones v Dunkel inferences the quality of Mr Andresakis' advice can be determined by more objective factors. The parties should not have to be thrown back on Jones v Dunkel inferences. There is no need in this case. The important result of the conference with Mr Andresakis was still that Mr Elio Coppola was unaware of the full import of the second loan transaction. This is puzzling but it is nevertheless the fact. Mr Andresakis had acted for the family before and was obviously familiar with family members. However, the estrangement between Elio and Maria on financial issues, the influence of Vanessa and Elio's general incomprehension of legal English all conspired to leave him in the dark as a result of the conference with Mr Andresakis. No doubt Mr Andresakis tried to convey legal advice to the family but without the fullest disclosure of the complications of the Coppolas' family life it could be well understood that he could not readily comprehend the different interests of Maria, Elio and Vanessa as they existed at the time. 264 It can also be inferred that the advice was not comprehensive. This can be inferred from the fact that at the time of the second loan transaction no one seemed to pick up the fact that the caveat and mortgage remained on title to Number 9 even though the first loan has been entirely paid out by the second loan. This appears to be an objective demonstration of the limits of the legal advice. That may of course have been a product of limits on what Mr Andresakis was asked to do. 265 There is no basis to find that Vanessa and Maria did not have a general comprehension of what the second loan transaction involved as a result of Mr Andresakis' advice and I find that they did. Asset lending 266 The second loan was said to be an exercise in "asset lending", or lending against an individual's assets irrespective of the individual's capacity to earn income to meet repayments on the loan advanced under the particular loan contract. Fast Funds had little or no information about Elio and Maria Coppola's capacity to repay the second loan. Because the second loan refinanced the first loan and the MDN defaults, Fast Funds was aware that further default was likely so the issue of serviceability was brought more into focus. 267 The following statements of principle apply to the practice of "asset lending". It is unconscientious for a lender to lend a large sum of money to a person with no income with full knowledge that if the repayments under the loan were not met it could sell that person's only asset: Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 at [59] per Beasley JA (with whom Santow JA and Campbell AJA agreed). 268 Where the security is the family home of a low income earner and a pensioner, the fact of a credit provider not verifying financial data is entitled to significant weight against the credit provider in the determination of unjustness: Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [85] per Spigelman CJ. At least where the security is the sole residence of the borrower there is a public interest in treating "pure asset lending" contracts as unjust where the borrowers have demonstrated an inability reasonably to protect their own interests: Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [128] per Basten JA. 269 However the issue of asset lending is not as prominent in this case as the Coppolas have submitted. This is not a case where Number 9 is the only residence owned by the family. They have a number of investment properties that could be sold before their residence at Number 9 would be lost. They are not as vulnerable to asset lending as many individuals who simply own one piece of real estate which is being mortgaged. The difficulty here was that in part that the family could not ultimately agree upon a plan for the orderly sale of those other properties in the face of the ever escalating interest payments under the Fast Funds loan agreements. I do not regard this therefore as a particularly significant factor in this case. What relief, if any, should be granted in respect of the second loan and the mortgage under the Code and the Contracts Review Act? 270 Relief should be granted under the Code. The following observations are appropriate about the statutory relevant considerations in respect to unjustness and relief in relation to the second loan. Again, it is not necessary to exhaustively review these statutory relevant considerations but there is a need to focus on the ones that are of greatest significance in this case. 271 Lack of Legal Advice. The position with respect to Elio's comprehension of the legal advice from Mr Andresakis has already been stated. He did not understand the transaction but Maria and Vanessa did as a result of Mr Andresakis ' advice. 272 Bargaining Power in Negotiations. Maria and Elio's bargaining power was significantly impaired by the time of the second loan. They were in default to MDN. They were in default to Fast Funds. They were offering the Coledale property as security, a property to which the family was very attached. There was no real prospect of refinancing at the time of the second loan. 273 Capacity and Educational Background of the Parties. Although Maria undoubtedly had some difficulties in comprehending the second loan transaction. I find that she had a reasonable understanding of it. But by this time Elio's lack of comprehension was a totally disabling force. 274 Fast Funds' Tactics. As my findings in the chronological section show, by the time of the second loan Fast Funds had strong reason to suspect that Number 9 was the residence of Elio and Maria Coppola, that the loan probably was governed by the Code and that Vanessa's conduct indicated that she may not have been acting in both her father and her mother's best interests. All that being said it is difficult to argue with the steps that Fast Funds took, undoubtedly based upon that suspicion, of getting the family legally advised by Mr Andresakis. From Fast Funds' perspective the certificate from the solicitor was certainly enough to allow Fast Funds objectively to conclude that the family had been legally advised but not enough for Fast Funds to overcome strong suspicions that the advance was governed by the Code. 275 The appropriate relief to reflect these imbalances is that an interest rate lower than the maximum allowed under the Code should be all that is permitted to Fast Funds in respect of the second loan transaction. There is no clear evidence before me of market rates but justice would be served and to relieve against the injustices of the circumstances of the second loan by reducing the interest rate to half of the maximum allowed under the Code which would be 24% per annum. What is owed to Fast Funds on the Second Loan Agreement and how may it be enforced? 276 The amount that is owed on the second loan agreement will need to be calculated as a result of this judgment and calculations should be submitted to the Court for consideration and approval. RELIEF AND THE THIRD LOAN Is the third loan regulated by the Code? 277 As the third loan was a refinancing of the second loan it will be held to have the same purpose as the second loan. By the time of the third loan the domestic purpose of the loan secured over Number 9 was evident to Mr Hall. This was clear to him from what Vanessa had told him. Code s 11(3) applies and the s 11 declaration was ineffective. When was the Business Purposes Declaration Signed on the Third Loan? 278 But one issue about the form of the declaration for the third loan was argued extensively and is dealt with briefly here. The Coppolas raise a timing issue in relation to the 12 March 2009 declaration for the third loan. Section 11 of the Code requires the declaration to be entered into "before entering into the credit contract". Vanessa Coppola's evidence is that Maria Coppola executed the letter of offer, amended by her solicitor, before other documents (especially the declaration) were signed. Those documents, "including the declaration" she says were executed later that day. 279 Strict compliance with s 11 is necessary. s 11(2) of the Code provides: "Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract , that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." [ emphasis added ] 280 If the declaration is not executed before the transaction documents were executed then the lender does not have the benefit of the s 11 presumption: Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150. 281 The sub-section raises for consideration that the relative timing of the event of the borrowers' declaration that the credit is to be applied for business or investment purposes and of the event of entry into the credit contract itself. 282 The evidence from the Coppola family about the sequence of events in relation to the declaration and making of the third loan are not in contention. The unsigned documents were supplied to Mr D'Angelo, acting on behalf of the Coppola's on 11 March 2009. During the course of the next day, 12 March 2009 documents were signed by Maria Coppola including the declaration. The Coppolas made some amendments to the letter of offer before it was signed. After signature, all the signed documents were delivered to Mr Simon Hall late on the evening of 12 March 2009. 283 Fast Funds contends that upon this account by Vanessa Coppola of the events of 11 and 12 March 2009 that the business purposes declaration must have been signed prior to the credit contract documents being delivered to Mr Hall and that the timing requirements of sub 11(2) of the Code were satisfied. 284 s 11(2) must be interpreted strictly in accordance with its terms. The declaration of purpose of the loan must be entered into "before entering into the credit contract". All that is required here is for the Court to assess the moment of "entering into the credit contract". Fast Funds submission is that as the declaration signature took place before delivery of the document to Simon Hall that the declaration must have been made before entering into the credit contract. 285 I agree with the Fast Funds submission on this issue. The contract here was not formed until the executed documents were received back by Fast Funds. A contract is not formed until acceptance is communicated back to the offeror. The earliest possible time in which there could have been a contract in this case is upon receipt of the documents back by Mr Simon Hall. The declaration was signed before that. Form of the Business Purpose Declaration 286 It is not necessary to decide the question of whether the form of declaration for the third loan was Code compliant. Was the third loan for business or investment purposes and did Mr Hall know? 287 The third loan was not for business and investment purposes and Mr Hall knew that because of what Vanessa had told him about the use of Number 9. Has Fast Funds breached the Code in the third loan and what relief should be granted in relation to the loan and mortgage? 288 Fast Funds has breached the Code in relation to the third loan in substantially the same way that it did for the first and second loans. Contracts Review Act – Justice and Relief 289 The third loan and mortgage were unjust and relief should be granted. 290 The specific features of the third loan which was the subject of complaint of unjustness under the Act s 9 and Code s 70 are the following: MDN had judgment for possession of Number 9; the Coppola's could not refinance the MDN loan through Sydney Wyde Mortgages in early 2009; Sydney Wyde Mortgages required security over Number 9; Fast Funds had a caveat over Number 9 and the Colo Vale property; Fast Funds were maintaining caveats over other properties contrary to Code s 40; the third loan was really the provision of funding to satisfy the Fast Funds demand of a price for lifting its caveat on Number 9 which is said to be an otherwise illegitimate demand; Maria Coppola and Vanessa Coppola were very distressed; Fast Funds had further engaged in the practice of asset lending in circumstances of ongoing facility delinquency; the terms of the third loan were as objectionable as the first and second loans, and Maria Coppola could not make an informed decision because she did not have the benefit of the information required to be provided under Code s 14. 291 No more elaboration is required of the unjustness of the third loan than the chronological account earlier in this judgment of its immediate aftermath because it is quite evident that the Coppola family were without any means to negotiate in their own self interest at the time of the third loan transaction. That was the single overwhelming factor leading to unjustness in the third loan transaction for Elio and Maria at that time. Other factors have much less significance. The appropriate way for that to be dealt with is for the third loan contract to be varied so that the interest chargeable on the contract is no more than that prescribed under s 100 of the Uniform Civil Procedure Rules 2005 (NSW). That represents in my opinion a sufficient adjustment of the rights of the parties and no additional civil penalty orders need to be made for any of the loans. Recovery on the Third Loan 292 Several issues of the issues stated between the parties remain to be determined in relation to recovery under the third loan. Fast Funds submits that these issues should be determined after the Court's determination of earlier issues is known. 293 There are three remaining issues, as follows. The more efficient course with the first of the remaining questions is to defer it until the parties have had sufficient time to undertake calculations based on this judgment. a) How much is owing if anything to Fast Funds pursuant to the third loan and against which properties is it secured? b) If any monies are owed to Fast Funds pursuant to the third loan, to what relief is Fast Funds entitled for the purpose of enforcing payment of such outstanding amounts? c) Is the s 57(2)(b) Real Property Act 1900 (NSW) notice which was served by Hall/Romiz/Storm in respect of the Colo Vale property invalid and if so what is the consequence of such invalidity? 294 As to the first of the issues, I will direct the parties to bring within 7 days an agreed calculation of the amount owing under the second and third loans. I will further direct that if agreement is not able to be reached within that period that the parties serve on one another and file in Court their respective calculations of the amounts said to be due. 295 One aspect of the first question can be answered now in light of my reasoning above. The properties against which the amount owing to Fast Funds (and the co-lenders) in relation to the third loan is Maria Coppola's interest in the Coledale property and the Colo Vale property. There is no security against any of Elio's interests in any property of which he is a registered proprietor. 296 The second of these questions can be answered now even though the precise amount owing has not yet been calculated. The issue of the relief to which Fast Funds is entitled is independent of the precise amount owed on the second and third loans. 297 I have found that the Code applies to both the second and third loans. I have also found that Fast Funds did not serve notice complying with Code s 80 (1) and (2) on Elio or Maria Coppola before commencing the Possession proceedings. None of the recognised exceptions to the requirement to serve on defendant notice before commencing proceedings in s 80 (3) apply. If proceedings are commenced without the prior service of a default notice on the debtor then the proceedings cannot continued: Benjamin v Ashkian [2007] NSWSC 735 at [88] and [89]. That is arguably the consequence that should follow here. The Possession proceedings will at least be stayed immediately. The Coppolas may wish to argue that the proceedings should be struck out entirely. This order is made without prejudice to Fast Funds' right to seek to lift the stay or bring fresh proceedings after it has served a default notice in conformity with the Code and 30 days have elapsed. I will not hear any application for orders striking out the proceedings for a period of seven days. Fast Funds and the Coppolas must have an opportunity to consider their positions. 298 Questions may arise as to whether interim preservation orders will be needed and may be made pending any recovery Fast Funds' recommencement of the Possession proceedings after the service of default notice and the expiry of the 30 day period. 299 The third question can be answered. On 16 June 2009 Mr Simon Hall on behalf of the mortgagees, himself, George Romiz and John Storm served a notice under s 57(2)(b) Real Property Act on Maria Coppola in respect of the Colo Vale property. The notice recited the existence of the mortgage of 12 March 2009 over the property and recited a default under the mortgage in failure to pay the mortgagees the sum of $182,000 said to be due as at 13 June 2009. The notice then required Maria Coppola to pay the sum of $182,000 within one month and notified the mortgagor that unless that occurred the mortgagees proposed to exercise their power of sale over the property. 300 It is not necessary to consider issues such as the validity of the s 57(2)(b) Real Property Act notice on grounds that it has failed to give sufficient particulars of the amount due or any other technical grounds. To sufficiently consider whether the mortgagees can proceed on the notice in the face of Code s 80. In terms s 80(2) prohibits a credit provider from beginning enforcement proceedings against a mortgagor to recover payment of money due or to take possession unless a default notice has been served in the requisite 30 days have expired. The immediate effect of s 80(2) is that a stay should be granted on enforcement. Code s 80 does not provide for a specific civil remedy for contravention of s 80. It imposes criminal sanctions on contravention. It is arguable that proceedings commenced in contravention of s 80 are not invalidated by reason of a contravention of the section. Nevertheless, the Court, for example, has broad powers to order grants of ancillary relief under Contracts Review Act Schedule 1 including "such orders in connection with the proceedings as may be just in the circumstances". Under Code s 71 (g) upon re-opening a credit contract under s 70, the Court is empowered to "make ancillary or consequential orders". Both these powers are sufficient for the Court to grant a stay in circumstances where s 80 has been contravened. If the Coppolas wish to argue the proceedings should be struck out and Fast Funds in relation to the second loan transaction, or the three lenders in respect of the third loan transaction, wish to maintain the present proceedings, the issue can be re-listed for argument and determined. 301 It is not immediately necessary to determine the validity of the s 57(2)(b) notice. Its validity may have to be determined, in any application by Fast Funds and the three lenders to lift the stay ordered by this judgment. ANSWERS TO THE JOINT STATEMENT OF ISSUES 302 At the Court's request the parties organised their submissions in relation to a series of questions about each of the three loans. Those questions and the answers required by my reasoning follow. The First Loan (12 March 2008) 1. Is the First Loan regulated by the Consumer Credit Code (hereinafter "the Code")? The first loan was regulated by the Code for the reasons set out below in answer to 1(a) and (b). (a) Was the business purpose declaration dated 14 March 2008 (TB 242) effective for the purpose of s 11 of the Code in creating a conclusive presumption against the application of the Code ? (i) Was the business purpose declaration in the correct form or in such form so as to satisfy the requirement, identified in s 11(4) of the Code , for substantial compliance with the form required by the Consumer Credit Regulation and thereby effective to create the conclusive presumption identified in s 11(2) of the Code ? The business purpose declaration signed by Vanessa Coppola on behalf of Elio Coppola in relation to the first loan did not satisfy regulation 10 of the Regulation and was not effective to create the conclusive presumption identified in Code s 11(2). (ii) If the answer is "Yes" to (i) above, was there nevertheless relevant knowledge on the part of Fast Funds sufficient to enliven the operation of sub-section 11(3) of the Code and consequently overcome the aforementioned conclusive presumption? It is not strictly necessary to answer this question in light of the answer to 1(a)(i). (iii) Further, if the answer is "Yes" to (i) above, was the business purpose declaration ineffective for the purpose of the Code , because it was executed by Vanessa Coppola in her capacity as attorney, pursuant to the Powers of Attorney Act 2003 (NSW), on behalf of Elio Coppola? The business purpose declaration was ineffective for the purposes of the Code because it was executed by Vanessa under power of attorney on behalf of Elio Coppola. The business purpose declaration was not effective in creating a conclusive presumption against the application of the Code. (b) If the answer is "No" to (a) above, was the loan provided pursuant to the First Loan nevertheless a loan predominantly for business or investment purposes (including by reference to the definition of "predominant purpose" in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code and in favour of the borrower, that the Code applies? The first loan was not predominantly for business or investment purposes within Code s 6(5). As these are proceedings in which Elio and Maria Coppola claim that the Code applies to the first loan transaction and the mortgage securing it, that is presumed in these proceedings because the contrary has not been established: Code s 11(1). 2. If the answer is "Yes" to (1) above, has Fast Funds breached the Code? Fast Funds has breached the Code. (a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ? Fast Funds has charged interest at a rate greater than that permitted by the Code. (b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ? Fast Funds has breached each of ss 14, 15, 21, 40 and 43 of the Code. (c) Was the mortgage unjust within the meaning of section 70 of the Code ? The mortgage was unjust within the meaning of s 70 of the Code as was the contract itself. 3. If the answer is "Yes" to any of (2)(a), (b), or (c) above, what, if any, relief ought to be granted pursuant to the Code? As no application for relief pursuant to the Code was made in relation to the first loan, no relief is granted. The affirmative response to this question is nevertheless relevant to the determination of issues in relation to the second and third loans. 4. Was the mortgage unjust within the meaning of section 7 of the Contracts Review Act? The mortgage was unjust within the meaning of s 7 of the Contracts Review Act. The precise injustice in relation to the mortgage was Clause 101 in which Elio Coppola created a mortgage of all his interest in any real property he currently owned as security for repayment of the first loan. The other injustice in relation to the first loan was the interest rate charged which was excessive. 5. If the answer is "Yes" to (4) above, what, if any, relief ought to be granted pursuant to the Contracts Review Act? No relief granted pursuant to the Contracts Review Act in relation to the first loan. Elio Coppola did not seek relief in respect of the first loan under the Contracts Review Act. However, the relief that could have been sought in respect of the first loan is nevertheless relevant to the consideration of the grant of relief in respect of the second and third loans. The Second Loan (11 June 2008) 6. Is the Second Loan regulated by the Code? The second loan is regulated by the Code. (a) Was the loan provided pursuant to the Second Loan a loan predominantly for business or investment purposes (including by reference to the definition of "predominant purpose" in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code and in favour of the borrowers, that the Code applies? The second loan was not predominantly provided for business or investment purposes. The presumption in the Code s 11(1) is not displaced and the Code applies to the second loan transaction. 7. If the answer is "Yes" to (6) above, has Fast Funds breached the Code? Fast Funds has breached the Code in relation to the making of the second loan. (a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ? Yes (b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ? Yes (c) Was the mortgage unjust within the meaning of section 70 of the Code ? Yes (d) Has Fast Funds failed to comply with the notice requirements of section 80 of the Code ? Yes 8. If the answer is "Yes" to any of (7)(a), (b), or (c) above, what, if any, relief ought to be granted pursuant to the Code? See the judgment. 9. If the answer is "Yes" to (7)(d) above, is Fast Funds entitled to enforce the loan and mortgage in this proceeding? No. Fast Funds is not entitled to enforce the second loan and mortgage in this proceeding. Its rights to enforce have been stayed pending its compliance with the Code s 80. 10. Was the mortgage unjust within the meaning of section 7 of the Contracts Review Act? Yes. The injustice was that identified in more detail in the judgment above. 11. If the answer is "Yes" to (10) above, what, if any, relief ought to be granted pursuant to the Contracts Review Act? The relief to be granted pursuant to the Contracts Review Act is the same as the relief granted under the Code identified in answer to Question 8. 12. How much, if anything, is owed to Fast Funds pursuant to the Second Loan and against which properties is payment thereof secured? The precise amount owed to Fast Funds pursuant to the second loan is still to be calculated. Number 9 is released from any liability in respect of the second loan. This is a product of the relief granted in respect of Elio Coppola releasing him from all loan obligations. 13. If any monies are owed to Fast Funds pursuant to the Second Loan, to what relief is Fast Funds entitled for the purpose of enforcing repayment of any such outstanding amounts? A temporary stay is granted in respect of Fast Funds rights to enforce repayment of any outstanding amounts owing on the second loan. Once those amounts have been ascertained and a notice has been served, Fast Funds can apply to lift the stay hereby granted on enforcing repayment of such outstanding amounts. The Third Loan (12 March 2009) 14. Is the Third Loan regulated by the Code? The third loan is regulated by the Code. (a) Was the business purpose declaration dated 12 March 2009 effective for the purpose of section 11 of the Code in creating a conclusive presumption against the application of the Code ? The business purpose declaration dated 12 March 2009 was not effective for the purpose of s 11 of the Code to displace the presumption that the Code applies to the third loan. (i) Was the business purpose declaration signed prior to the credit contracts and so as to comply with the timing requirements identified in sub-section 11(2) of the Code ? Yes (ii) If the answer to (i) above is "Yes", was the business purpose declaration in the correct form or in such form so as to satisfy the requirement, identified in sub-section 11(4) of the Code , for substantial compliance with the form required by the Consumer Credit Regulation and thereby effective to create the conclusive presumption identified in sub-section 11(2) of the Code ? Not necessary to decide. (iii) If the answer is "Yes" to (ii) above, was there nevertheless relevant knowledge on the part of Hall/Romiz/Storm sufficient to enliven the operation of sub-section 11(3) of the Code and consequently overcome the aforementioned conclusive presumption? Yes (b) If the answer is "No" to (a) above, was the loan provided pursuant to the Third Loan nevertheless a loan predominantly for business or investment purposes (including by reference to the definition of "predominant purpose" in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code , that the Code applies? The third loan was not provided predominantly for business or investment purposes and the presumption in Code s 11 (1) that the Code applies is not displaced in respect of the third loan. 15. If the answer is "Yes" to (14) above, has Fast Funds breached the Code? Fast Funds has breached the Code in respect of the third loan. (a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ? Yes (b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ? Yes (c) Was the mortgage unjust within the meaning of section 70 of the Code ? Yes (d) Has Fast Funds failed to comply with the notice requirements of section 80 of the Code ? Yes 16. If the answer is "Yes" to any of (15)(a), (b), or (c) above, what, if any, relief ought to be granted pursuant to the Code? See the judgment. 17. If the answer is "Yes" to (15)(d) above, are Hall/Romiz/Storm entitled to enforce the loan and mortgage in this proceeding? No. Enforcement proceedings on the third loan and the mortgage in relation to the third loan is stayed pending the three lenders, Hall, Romiz and Storm ascertaining the precise amount due on the third loan pursuant to the third loan agreement as varied under this judgment and then serving a notice under s 80 of the Code. The three lenders may then apply for the lifting of the stay on enforcement. 18. Were the loan and mortgage unjust within the meaning of section 7 of the Contracts Review Act? Yes. 19. If the answer is "Yes" to (18) above, what, if any, relief ought to be granted pursuant to the Contracts Review Act? The relief granted pursuant to the Contracts Review Act is the same as that granted pursuant to the Code. 20. Are the loan and mortgage unconscionable within the meaning of the Trade Practices Act, the Australian Securities and Investments Commission Act, and/or the Fair Trading Act 1987 (NSW)? Unconscionability within the meaning of the Trade Practices Act and the Fair Trading Act was not determined. 21. If the answer is "Yes" to (20) above, what, if any, relief ought to be granted? Not applicable. 22. How much, if anything, is owed to Fast Funds pursuant to the Third Loan and against which properties is payment thereof secured? See the judgment. 23. If any monies are owed to Fast Funds pursuant to the Third Loan, to what relief is Fast Funds entitled for the purpose of enforcing repayment of any such outstanding amounts? See the judgment. 24. Further to (23) above, is the section 57(2)(b) notice, which was served by Hall/Romiz/Storm in respect of the Colo Vale property, invalid and, if so, what is the consequence of such invalidity? See the judgment. Conclusions and Orders 303 Work must be done by the parties to bring in short minutes of order to give effect to these reasons for decision. I will make the following interlocutory orders and directions pending finalisation of the short minutes. 1. The Possession proceedings are stayed until further order. 2. I direct the parties to consult one another with a view to agreeing within seven days upon the quantum of the sum due by Elio and Maria Coppola to Fast Funds and the other lenders within seven days but in the absence of agreement for each party to file its own calculation of the amount due. 3. I further direct the parties to consult and agree if possible within seven days upon short minutes of order to give effect to this judgment. If agreement is not forthcoming within seven days, each party should file short minutes of order for which that party contends and serve the same on the other party. 4. Grant liberty to apply. 27 May 2010 304 The parties brought in short minutes of order on 27 May 2010 in the following terms: The Court declares:- 1. That:- (a) the loan between Fast Funds Pty Limited and Elio and Maria Coppola dated 12 March 2008 (the "First Loan"); (b) the loan between Fast Funds Pty Limited and Elio and Maria Coppola dated 11 June 2008 (the "Second Loan"); (c) the loan between Simon Hall, George Romiz, John Storm and Maria Coppola dated 12 March 2009 (the "Third Loan"); and (d) the mortgages given pursuant to the First, Second and Third Loans; are all regulated by the Consumer Credit Code . 2. That the Second Loan and mortgage (identified at paragraph [4] of the Judgment of 14 May 2010) and the Third Loan and mortgage (Judgment [5]) are unjust within the meaning of Section 70 of the Consumer Credit Code and Section 7 of the Contracts Review Act 1980 (NSW). 3. That clauses 101 and 102 of Mortgage Memorandum AC218459F, insofar as such memorandum formed part of the terms of the Second Loan and the Third Loan (including Mortgage Registered No. AE742964), are void and unenforceable. 4. That the First Loan and Mortgage AE305419 (Judgment [3]) are unjust and liable to varied insofar as they:- (a) claim an entitlement to interest at a rate greater than 48% per annum simple interest; and (b) claim interest upon $10,000 of the principal advanced under the First Loan. 5. That Second Loan and Mortgage are unjust and are liable to be varied insofar as they:- (a) claim an entitlement to interest at a rate greater than 24% per annum simple interest; and (b) purport to create security for that loan against the interest of Elio Coppola in the property located at and known as the Coledale property. 6. That the Third Loan and Mortgage registration No. AE742964 are unjust and liable to be varied insofar as they:- (a) claim an entitlement to interest at a rate greater than the rate prescribed in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW). 7. That as at 27 May 2010 the amount owing by Maria Coppola and Elio Coppola to Fast Funds Pty Limited pursuant to the Second Loan is $32,284.22. That amount is secured against Maria Coppola's half interest in the Coledale property. 8. That as at 27 May 2010 the amount payable by Maria Coppola to Simon Clear Hall, George Romiz and John Storm in respect of the Third Loan and Mortgage registration No. AE742964 is $144,007.94. That amount is secured against the property known as the Colo Vale property. The Court Orders:- 9. That Fast Funds Pty Limited remove the following Caveats:- (a) Caveat Number AE653419 lodged against the title of the property known as the Stanmore property; (b) Caveat Number AE668652 lodged against the title of the property known as Number 11. (c) Caveat Number AE653432 lodged against the title of the property known as Number 9. 10. That the terms of the First Loan and the mortgage given pursuant to it be varied as follows:- (a) by excising any obligation to pay interest in respect of $10,000 of the principal sum advanced; and (b) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate of 48% per annum calculated on a simple basis from 14 March 2008; and (c) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum forms part of the terms of the First Loan. 11. That the terms of the Second Loan and the mortgage given pursuant to it be varied as follows:- (a) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate of 24% per annum calculated on a simple basis from 24 June 2008; (b) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum form part of the terms of the Second Loan. 12. That the terms of the Third Loan and the mortgage given pursuant to it be varied as follows:- (a) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate prescribed from time to time in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW) per annum calculated on a simple basis from 14 March 2009; (b) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum form part of the terms of the Third Loan. 13. Reserve for further argument and consideration the issue of whether the notice purportedly issued pursuant to Section 57 (2) (b) of the Real Property Act by Simon Clear Hall, George Romiz and John Storm to Maria Coppola dated 16 June 2009 is void and of no effect. 14. That the injunctions granted by the Court against Simon Clear Hall, George Romiz and John Storm on 9 October 2009 be discharged. 15. Reserve for further argument and consideration the issue of whether proceedings No. 289358 of 2009 be dismissed. 16. The Court reserves the costs of the proceedings for argument on 2 June 2010. 17. The parties are granted liberty to apply on three days notice in writing (or shorter notice in the event of an urgent application) to have the matter re-listed. ********** 31/05/2010 - Minor typographical error in cover sheet - Paragraph(s) Cover sheet 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.