Supreme Court New South Wales Medium Neutral Citation: Mango Media Pty Ltd v Comitogianni [2011] NSWSC 152 Hearing dates: 18-22 October 2010 Decision date: 22 March 2011 Jurisdiction: Common Law Before: Davies J Decision: (1) The Plaintiff is entitled to possession of the Burwood Heights property and to a judgment for the appropriate sum outstanding. (2) The Parties should bring in Short Minutes of Order to reflect these reasons. Catchwords: CONTRACTS - unjust contracts - loan obtained by borrower to on-lend to a friend who acted as his finance broker - borrower promised $20,000 for on-lending money -borrower independently but inadequately advised - borrower signs Business Purposes Declaration - whether funds borrowed predominantly for personal, domestic or household purposes - whether on-lending was for a business or investment purpose - loan subject to Credit Code - interest rate reduced - whether finance broker exerted undue influence over borrower - whether unconscionable dealing - effect of undue influence and unconscionable dealing on lender - failure to serve s 80 notice - whether mortgage identified property charged - whether mortgage void for contravening s 40 Credit Code. Legislation Cited: Consumer Credit (New South Wales) Special Provisions Regulation 2007 Contracts Review Act 1980 Public Trustee Act 1941 (WA) Real Property Act 1900 Trade Practices Act 1974 (Cth) Uniform Consumer Credit Code Cases Cited: Bank of Baroda v Shah [1988] 3 All ER 24 Bank of Queensland Ltd v Dutta [2010] NSWSC 574 Beckley v Consumer, Trader and Tenancy Tribunal [2009] NSWSC 703 Benjamin v Ashakian [2007] NSWSC 735 Bromley v Ryan (1956) 99 CLR 362 Brott v Shtranbrandt [2009] VSC 467 Coldunell Ltd v Gallon [1986] QB 1184 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Commissioner of Taxes v The Australian Mutual Provident Society (1902) 22 NZLR 445 Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 In the will of Sherriff [1971] 2 NSWLR 438 Johnson v Buttress (1936) 56 CLR 113 Jonsson v Arkway Pty Ltd [2003] NSWSC 815 Linkenbolt Pty Ltd v Quirk [2000] VSC 166 Louth v Diprose (1992) 175 CLR 621 Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57 Re Fraser; Ex parte The Public Trustee as Manager of the Estate of Anne Veronica Fraser [2000] WASC 36 Shakespeare Haney Securities Ltd v Crawford [2009] QCA 85 Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Texts Cited: Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4th ed (2002) Butterworths, Sydney Category: Principal judgment Parties: Mango Media Pty Ltd (Plaintiff) Giuseppe Comitogianni (Defendant) Representation: M W Young (Plaintiff) D A Smallbone (Defendant) Heidtman & Co Lawyers (Plaintiff) Allied Lawyers (Defendant) File Number(s): SC 2008/289595 & 2008/283681 Judgment 1On 21 December 2007 Mango Media lent $250,000 to the Defendant. The money had been borrowed by the Defendant to on-lend to a friend of his, Sam Hraiki. The loan was for a two month period but at the end of the period Mr Hraiki did not repay the loan and has not done so since. 2The Defendant gave a mortgage over a property he owned at 22 George Street, Burwood Heights. Mango Media now seeks possession of the land in the first proceedings and claims the amount said to be due to it including interest in the second proceedings. 3The Defendant resists the claims on a number of bases including that he was said to be under the undue influence of Mr Hraiki with Mango Media on notice of that; that despite signing a B usiness Purpose Declaration the loan was in fact subject to the Credit Code with implications for the loan agreement; and that the contract should be set aside under the Contracts Review Act 1980 because it was unjust. Background to the making of the loan 4The Defendant and Sam Hraiki were school friends in high school about 20 years ago. It appears that the Defendant and Mr Hraiki lost contact after they finished school. However, about 12 to 15 months before September 2008 they met up through an old school friend. At that time Mr Hraiki told the Defendant that he was a finance broker. The Defendant mentioned to Mr Hraiki that he had bought a house at Burwood Heights . 5In the first affidavit he swore in September 2008, the Defendant said that he met up with Mr Hraiki " about 3 years ago". When he was asked about this in cross-examination he said that that was wrong and that it was about 12 to 15 months before that time. Accordingly, it appears that the Defendant and Mr Hraiki re-met some time between June and September 2007. 6In any event, j ust before Christmas in 2007 Mr Hraiki approached the Defendant and said he needed a loan of $250,000. He asked if the Defendant could help him out. The conversation went on in this way: I asked: "What do you need it for?" He said: "I need it for a development. I need it quickly." Apart from that he did not say why he could not get the money himself and I did not ask why he couldn't. I said: "When will I get it back and what will I get out of it?" He replied: "The loan will be only for two months and I'll give about $20,000.00 for your trouble." I asked, "How will it work". He said, "I will use your house at Burwood Heights as security for the loan of $250,000. I will pay it back by the end of February." 7The Defendant said that he assumed that the money would be coming from a lender because Mr Hraiki needed the house as security. Mr Hraiki said nothing about the name of the lender or anything about interest or interest rates and the Defendant did not think about those matters. 8The Defendant also said that he was short of money and "was quite desperate to get some money" because the truck driving industry had been so bad in the 6 months leading up to that time. 9In September 2008 the Defendant had been a truck driver for about 18 months. Before that he had been a caf proprietor for about 14 months, having purchased a caf business. Prior to that time he worked with his father in the sand and cement business. That was his first job on leaving school after he completed his School Certificate at the end of Year 10. 10The Defendant bought the property at 22 George Street, Burwood Heights in about 2000 or 2001 with mortgage finance from the Commonwealth Bank of $315,000. He has never lived in the premises. Rather, the house has been rented and operated as an investment property for the Defendant. 11When he purchased the caf business in 2005 he borrowed a further amount of about $200,000 by refinancing with Sydney Home Loans. By September 2008 he owed about $514,000 to the first mortgagee, Perpetual Trustees through Sydney Home Loans. 12The Defendant agreed to the loan proposed by Mr Hraiki. Mr Hraiki told the Defendant that the loan would be in the Defendant's name and that he (Mr Hraiki) would organise it all. 13Mango Media was first approached about the loan on 18 December 2007 when Mr Hraiki rang Mr Derums, the Director of Mango Media. Mr Hraiki told Mr Derums that he represented the Defendant who was looking for a loan of $380,000 for 2 months. He said the security for the loan would be the property of 22 George Street, Burwood Heights. Mr Derums asked Mr Hraiki to send an application form, a note on the background and what was required. 14An application form was sent to Mango Media on that day. It disclosed that the Defendant had an annual gross income of $200,000. It placed a value of $875,000 on the security property and disclosed the first mortgage with $240,000 owing. The application form did not contain any signature. 15It appears that Mango Media made an initial offer of $380,000 by a fax sent to Mr Hraiki at 11:19am on 18 December 2007. It was returned, apparently signed by the Defendant, on that day but he denied that the signature was his. 16In the meantime, enquiries were made by Mango Media, probably by Ann Charleston, about the proposed security property and its value. Those enquiries showed that the property was not worth nearly as much as $875,000. Rather, its value was probably in the range of $550,000 - $650,000. There was an early indication of that range on the morning of 18 December 2007 from what appears to be an online search. The valuer engaged by Mango Media did not report until 20 December 2007, and put a range of $620,000 - $640,000 on the property. 17That appears to have led to a revised letter of offer on 20 December 2007 for $250,000. The fax markings on the copy of the letter of offer indicate that it was returned to Mango Media, purportedly signed by the Defendant, at 1:12am on 20 December. How that was possible when the letter of offer was dated 20 December was not fully explored in the evidence. It is to be noted, however, that the Defendant similarly denied that the signature on the letter of offer was his signature. 18Mr Derums also instructed Mango Media's solicitors, WKA Legal Pty Ltd, to prepare the necessary mortgage documents, and relevant documents were sent by WKA Legal to Macquarie Lawyers at Burwood, being the firm that Mr Hraiki had advised Mr Derums was to be acting for the Defendant. Signing documents 19The Defendant said in his affidavit that in the week leading to Christmas (this was clarified in the witness box as meaning the week commencing 17 December 2007) Mr Hraiki met the Defendant at the Dolce coffee shop in Cabarita Road, Cabarita. Mr Hraiki showed him some paperwork which he said were the loan documents. Mr Hraiki said the Defendant needed to sign them. The Defendant quickly flicked through the documents, saw there was some handwriting on the them, did not look at the detail and did not read them. He asked Mr Hraiki if everything was OK and Mr Hraiki said "You don't need to read it. Trust me, it's all OK." 20The Defendant said he trusted Mr Hraiki so he signed the documents in the places that Mr Hraiki pointed to with his finger. He said there were 3 documents. The evidence did not make clear what these documents were (certainly, the Defendant did not know) although it was accepted that they were not any of the documents subsequently signed at the offices of Macquarie Lawyers. One of them may have been one of the loan offers from Mango Media but I have already noted that the Defendant denied that it was his signature on those documents. 21At the conclusion of that meeting Mr Hraiki told the Defendant that he needed to sign some further documents before a Justice of the Peace. He gave him the address of what in fact was the firm of Macquarie Lawyers in Bu rwood Road, Burwood. 22The Defendant said that he met Mr Hraiki outside the address of the property and they then went into the reception area. He denied seeing anything which indicated that the office was the office of a firm of solicitors including any sign saying Macquarie Lawyers. 23The Defendant said that there was a man of Asian appearance present but he was not introduced to him. He said that at no time did anybody speak to him and he spoke to nobody. What happened was that Mr Hraiki had a whole series of documents which he put in front of the Defendant, covering the top half of each document and pointing to the place where the Defendant was required to sign each document. In his affidavit the Defendant said that at the conclusion of signing all the documents the man of Asian appearance then signed the documents. However, during the course of cross-examination the Defendant said that after he signed each document the man of Asian appearance placed his signature on the document the Defendant had just signed. 24The Defendant said that he read none of the documents and did not notice any words of any sort on any of the documents although it is apparent from looking at the documents that some of those words were in such close proximity to the signature he placed there that his signature almost went through the words. 25The signing of these documents took place on 20 December 2007, the day before the money was advanced. The Defendant said that he believed that meeting, and also the earlier meeting and signing of documents at the Dolce coffee shop, took place 2 days before the money was advanced. Since there is no real doubt that the money was advanced on 21 December and the documents witnessed by Mr Vo were signed on 20 December, it would seem that the Defendant is mistaken in that regard. 26After the signed documents were sent by Macquarie Lawyers to WKA Legal, Mr Warwick Keay of WKA Legal advised Mr Derums that the Defendant's driver's licence had expired, that only 90 points of identification had been provided by the Defendant, and that the signature of the solicitor on the Declaration by Borrower was questionable. 27Mr Derums subsequently rang Mr Keay and asked him to check with the Defendant's solicitor if he witnessed the mortgage documents. Mr Keay subsequently rang Mr Derums, informed him that he had rung Mr John Vo from Macquarie Lawyers, and said that Mr Vo confirmed that he saw the Defendant and that the signature on the documents was Mr Vo's signature. 28Before the loan was settled Mango Media was provided with a number of other documents including letters that purported to be from entities (including Resimac) associated with the Defendant's first mortgagee, and also from a firm purporting to be the Defendant's accountants. It is now accepted by Mango Media that a number of these documents were forgeries, and it appears that Mr Hraiki was responsible for the forged documents. Settlement of the loan 29The settlement of the loan took place in somewhat unusual circumstances. Although the Defendant agreed that the money he was borrowing was always to be paid by him to Mr Hraiki, it appears to have been the intention of both the Defendant and Mango Media that in the first instance the money would be paid into the bank account of the Defendant. This is apparent from the provision of the Defendant's bank account details to Mango Media. It is also derived from the fact that Mango Media's standard methodology was to do an electronic transfer of money by a special online system with National Australia Bank Ltd, its banker, ("NAB") into the accounts of borrowers. 30On the day due for settlement it appears that Mr Hraiki contacted Mr Derums and asked him to pay the money, not to the Defendant directly, but to a third party named George Youssef. 31It should be noted that, although as between the Defendant and Mr Hraiki, the money borrowed was always intended to be paid by the Defendant to Mr Hraiki, Mango Media was not privy to that arrangement. It is not asserted by the Defendant that Mango Media had any knowledge that the money was to be on-lent at least, until the instruction to pay the money to George Youssef was received by them. Rather, what the Defendant says is that, if proper enquiries by Mango Media had been made by reason of certain anomalies in documents, and by reason of Mr Hraiki's dealings with them, Mango Media would have ascertained what Mr Hraiki was doing including borrowing the money. I shall return to this later. 32Coincidentally, with the instructions for a change of payee, the NAB's special online payment system was not working on 21 December. That meant an alternative method of settling the loan transaction had to be effected. Mr Derums' evidence was that he was sufficiently concerned about the requirement that the money be paid other than to the Defendant that he rang Mr Keay to ask him if it was all right to do that. Mr Keay's recollection was only that Mr Derums asked him if it was all right to pay the money by cheque rather than the usual online system. 33Mr Keay remembered advising Mr Derums that he should get the consent of the Defendant to the course that Mr Keay understood was being suggested to him was going to take place. Mr Derums said that he, therefore, prepared a document for signature by the Defendant for payment by 3 cheques to Mr Youssef. This was, in effect, a revised cheque direction. It was never disclosed in the evidence why 3 cheques rather than one was necessary when all of the money was to be paid to Mr Youssef. 34Because it was necessary for Mango Media to obtain bank cheques and for them to be handed over, Mr Derums decided that the most convenient place for the handing over of the cheques was a hotel called the Unity Hotel which was next door to the branch of the NAB used by Mango Media in Balmain. Accordingly, Mr Derums went to the Bank to obtain the bank cheques. Before he obtained the cheques he noted that the spelling of Youssef (that he himself had typed) on the revised cheque direction was incorrect because he remembered the spelling he had been told. For that reason he made a hand-written alteration and initialled it before obtaining the cheques which were made out to Mr Youssef with the correct spelling. Although Mr Derums gave no evidence of this, it seems that he also obtained a photocopy of the three cheques from the Bank. 35He then proceeded to the Unity Hotel where he managed to locate Mr Hraiki and the Defendant who were waiting for him. 36He said that he asked for and obtained the Defendant's driver's licence to check that he was the person borrowing the money. The Defendant denied this. Mr Derums said that he obtained the Defendant's signature on the new cheque direction to Mr Youssef. It appears that he also obtained a copy of the Defendant's signature on the photocopy of the 3 cheques, although he gave no evidence to that effect. I note, at this point, that the Defendant denied signing any documents at the Hotel and doubted if the signatures on those 2 documents were his signatures. I shall return to that later. 37The Defendant said that there was only one cheque handed over. He said it was handed by Mr Derums to Mr Hraiki. He, the Defendant, only saw the cheque later in Mr Hraiki's car. He remembered that it had Mr Youssef's name written in handwriting on the cheque. He became concerned at that stage because he understood the money was to be paid to him. 38Mr Derums' evidence was that, having got the Defendant to sign the new cheque direction in favour of Mr Youssef, he handed the cheques to the Defendant. Assessment of witnesses 39There were two areas where there was a significant factual dispute between the parties. The first concerned the signing of the documents at the offices of Macquarie Lawyers. The second concerned what transpired at the settlement in the Unity Hotel, Balmain. 40It is necessary, therefore, to make an assessment of the witnesses who gave evidence before me, and to make findings of fact in areas of contention. (a) The Defendant 41The Defendant presented as a curious combination of naivet and arrogance. His manner in the witness box gave me the impression of a person entirely sure of himself who, whilst accepting his limitations from his education and life experience, considered that he had acted in an entirely appropriate manner throughout the course of the loan arrangements and transaction. Some of his evidence was sufficiently implausible and unlikely as to lead me to the view that he knew more than he was disclosing in his evidence. His manner and the way he answered questions gave the impression that he could not see why he should not have trusted Mr Hraiki in the way he did, nor why he should not have done the various things he did in response to requests by Mr Hraiki, and he appeared to resent any suggestion that he should not have trusted Mr Hraiki and behaved in the way he did. 42I also gained the impression that the Defendant had come to have a fairly rigid view of how events had unfolded. So, for example, after he (rather unusually in his evidence) admitted that he had made a mistake in his affidavit in saying that he first re-met Mr Hraiki 3 years previously, he was cross-examined to suggest that he tried very hard to make his affidavit as accurate as possible. His answer was: No, I didn't, because I know it off by heart, I don't have to try hard. 43At times he gave inconsistent evidence about matters of some significance. One of these concerned his knowledge that interest would be required to be paid on the loan. He first gave this evidence (at T203): Q. You knew, didn't you, that the loan that you borrowed to pay to Mr Hraiki, that the lender of that loan would require interest to be repaid, is that right? A. No. Q. No? A. No. Q. One doesn't obtain $250,000 from a lender without paying interest; you knew that, didn't you? A. No. 44Thereafter he gave this evidence (at T204): Q. So you knew that you were borrowing the sum of 250,000 from a lender, isn't that right? A. Yes. Q. And you knew that lender wouldn't lend you 250,000 without getting some interest in return, isn't that right? A. Yes. Q. Is this the case, that you understood that Mr Hraiki would be paying that interest? A. Yes. 45His evidence that he was borrowing the money was inconsistent. He said this (at T203-204): Q. You were borrowing 250,000 to onlend that money to Mr Hraiki; isn't that right? A. Yes. Q. You knew that you had (sic) would be borrowing 250,000 from a commercial lender; isn't that right? A. No. Q. Who did you think you were borrowing it from? A. I thought he was borrowing the money and he was using my house as security. Q. But didn't you agree before that you understood that you were taking out a loan and then you were lending the money to Mr Hraiki? A. No. Q. You deny that you said that earlier, do you? A. He asked me to take the loan out for him and I said, "Yes, I agree to it" but because he was doing everything I had no say, I wasn't talking to anyone or anything, he wasn't explaining, I automatically thought he was taking the loan out in his name and using my house as security. Q. That's not what you said in the witness box earlier, is it? A. No, I didn't explain it. Q. You agreed with me earlier, didn't you, that you were borrowing the sum of 250,000 yourself and that you then lent that sum to Mr Hraiki; that's what you said earlier, isn't it? A. Yes, I did. Q. Was that wrong when you said that? A. No, that's right. Q. So you knew that you were borrowing the sum of 250,000 from a lender, isn't that right? A. Yes. 46A little later on, when asked about the mechanics of paying the money to Mr Hraiki, he gave this evidence (at T205): Q. So did you think what would happen was that the 250,000 would be paid to you and you would write a cheque immediately for 250,000 to Mr Hraiki? A. Yes. Q. Did you care where (sic) it was done like that or whether the money was paid straight to Mr Hraiki or to some other person that Mr Hraiki nominated? A. I did care. Q. Why did you care? A. Because I was taking the loan out, it was in my name. 47Another example concerned one of the reasons the Defendant put forward for having entered into the loan. In his affidavit of 4 September 2008, having set out the discussion where Mr Hraiki asked him to borrow the money, the Defendant went on to say: [18] At that time I was short of money and was quite desperate to get some money because the truck driving industry had been so bad in the last six months leading up to that time. Yet, when he was asked if he had any money remaining at the time this loan was taken out from a compensation payout for a bike accident, he said that he had $50,000 left. 48The naivet, to which I earlier referred, was demonstrated by the trust that the Defendant had, or said that he had, in Mr Hraiki. He first said that he was surprised when Mr Hraiki said he needed a loan of $250,000 for a development because prior to that conversation Mr Hraiki had never told the Defendant that he was a property developer or invested in property development. He then gave the following evidence (at T200): Q. Then wasn't it surprising for you to hear that he needed $250,000 for a development when he had never mentioned property developments before? A. Yes, it was. Q. Did you ask him, "Where is this development?" A. No. Q. Did you ask him, "Are you the developer or are you just investing in the development?" A. No. Q. Why not? A. Because I had trust in him. Q. Why did you have trust in him? A. Because he was a friend from school, he's never done anything wrong to me so why wouldn't I trust him? Q. Was he your only friend at school? A. No. Q. Is there any other school friend that you hadn't seen for many years that you had just been reacquainted with a year earlier, if they came up to you and asked you for a [sic] $250,000 by way of a loan, you would have given the money to them as well? A. Yes. Q. Just because they had never done anything wrong to you before? A. That's right. 49That evidence was so extraordinary that it caused me to wonder, rather than it demonstrating naivet, if it was not a justification put forward by the Defendant for having lent the money to Mr Hraiki in circumstances where the full picture was not being disclosed to the Court. 50It was highlighted by the evidence the Defendant gave immediately thereafter (at T200-202): Q. Have you had any experience with property development yourself? A. No. Q. Did you do any development to the Burwood Heights property after you purchased it? A. No. Q. Did you know whether property developments were risky or safe ways of investing money? A. No. Q. Did you ask Mr Hraiki if property development was a safe way of investing money? A. No. Q. You knew, didn't you, if you lent Mr Hraiki $250,000 you were relying on him to pay it back; isn't that right? A. Yes. Q. And you knew that if he didn't pay it back to you, then you would be stuck with a loan of $250,000, or thereabouts, owing to the lender that wouldn't have been repaid by Mr Hraiki, is that right? A. Yes. Q. Didn't that concern you that that might happen? A. No. Q. But you knew that there was a risk of that, didn't you? A. Of course I did. Q. Didn't you think you needed to evaluate how much that risk was? A. No. Q. Why not? A. Because I had trust in him. Q. Even the most honest person might have something go wrong in their business, isn't that right? A. Yes. Q. You might invest in a property development and it turns out not to be worth as much as you expect; that's one possibility, isn't it? A. Yes. Q. There could be delays in the development because the builder doesn't do a good job or for some other reason that causes problems with the development? A. Yes. Q. There could be other loans that the developer has taken out that he needs to pay back before he pays you back; that's a possibility, isn't it? A. Yes. Q. It could have been that Sam Hraiki was already in debt up to his eyeballs at that stage, isn't that right? A. Yes. Q. Did you ask him what other loans he had taken out? A. No. Q. Why not? A. Because I had trust in him. Q. Did you have any reason to believe he was particularly good at property development? A. No. Q. You had no idea whether the development was a sound one or not, is that right? A. No idea. Q. Did you ask him to give you some security for the loan? A. No. ... Q. And you say, do you, that the only reason you didn't ask him questions about the development or other aspects of what he was using the money for was because you trusted him? A. Yes. (emphasis added) 51The Defendant's explanation for this was, again, that he was very keen to get the $20,000 that Mr Hraiki was supposed to have promised him. But as I have said earlier, the stated need for the $20,000 sat very uneasily with the fact that the Defendant still had $50,000 from his bike accident compensation. 52There was then the rather strange evidence about the application for the loan (at T206-207): Q. Did you fill out an application yourself in relation to this December 2007 loan? A. No. Q. Is that because you entrusted that to Mr Hraiki? A. I didn't even know there was one filled out. Q. But you expected, didn't you A. Yes. Q. that there would be an application form filled out? A. Yes. Q. And you knew you hadn't filled it out? A. Yes. Q. Were you expecting Mr Hraiki to fill out the application form? A. Yes. Q. You expected that in the application form he would have to tell the lender something about your assets, is that right? A. Yes. Q. And that he would have to tell the lender something about your income? A. Yes. Q. Did you discuss your assets and income with Mr Hraiki in that conversation you had with him when he asked for the loan? A. No. Q. Did you have some conversation after that where you discussed your assets and income? A. No. Q. Did you write down what your assets and income was and give it to him in writing? A. No. Q. Did you inform Mr Hraiki in any way at that time what your assets and income was? A. No. Q. How were you expecting him to fill out the application form? A. I just left everything up to him. Q. How was he going to tell the lender what your assets and income was? A. That was his problem, not mine. Q. Had you talked to him in the past about your assets and income? A. No. Q. So as far as you knew he had no idea what your assets and income were, is that right? A. No, all he knew was that I owned a house, that was it. Q. Did you think that he would just be guessing at your assets and income? A. More than likely, yes. Q. Were you happy for him to fill out an application just on the basis of guesswork? A. I trusted him. Q. You trusted him so much that you thought he would accurately be able to guess the amount of assets and income you had to be able to tell the lender? A. No. Q. You expected, didn't you, that he would be filling in an application form that was based just on guesswork, isn't that right? A. Yes. Q. Didn't it worry you that that wouldn't be good enough for the lender? A. No, it didn't. Q. You didn't really worry about the lender's side, you just A. No, not really because I knew the loan wouldn't come through. Q. You knew the loan wouldn't come through? A. Yes. Q. Why did you know that? A. Because I owed $514,000 on the house. Q. So you were quite positive it would never go through? A. Yes. Q. Was it a big shock to you when it did go through? A. Yes, it was. 53Yet when the loan came through he gave this evidence concerning his reaction to it (at T209): Q. You say that at that stage Sam had already organised the loan; right? A. Yes. Q. Did that surprise you? A. Yes, it did. Q. Did you say to Sam, "How did you manage to organise that?" A. No, I didn't. Q. Why not? A. It didn't occur to me to ask him because he was a broker and I trusted him so I didn't even bother asking him. 54He was then asked again if the only reason he agreed to lend $250,000 was because he thought the loan would never go through to which he replied "Yes". He then gave the following evidence (at T210): Q. When he told you the next day or the day after that he had organised the loan, wasn't that the time to start asking him some probing questions about how good his development really was? A. It was. Q. That was the time to ask him about what security he could put up for the loan? A. Yes. Q. And what did you ask him about that? A. I didn't ask him. Q. Why not? A. I trusted him. Q. Even though he had been able to organise a loan that you thought that you couldn't possibly organise? A. Yes. Q. But in your own financial interests, you needed to ask him those questions, isn't that right? A. Yes, I know, but because I trusted him I didn't ask him many questions at all. Q. But you didn't know whether he was a good businessman or not, did you? A. I went to school with him, he didn't do anything bad to me. I trust a lot of people. I've got not [sic] reason to think he was a bad person, he was a good businessman or a bad businessman. 55He gave evidence that he made no enquiries about who was advancing the money despite knowing that there were loan sharks and other people from whom a person would not want to borrow money. His reason for not enquiring was, similarly, that he trusted Mr Hraiki. 56He was asked about interest and repayment of the loan and gave this evidence (at T213-214): Q. Did you ask what the interest rate was? A. No, I didn't. Q. Did you have a look on the loan documents to see what the interest rate was? A. No. Q. You knew, didn't you, if Mr Hraiki didn't pay back the loan as he promised, that you yourself would then have to meet the interest payments if the lender came to you and demanded the payment of interest, isn't that right? A. Yes. Q. So it was very much in your interests to have a low interest rate on the loan rather than a high interest rate, isn't that right? A. It was in my interest, yes. Q. And weren't you curious as to what the interest rate was on the loan? A. No. HIS HONOUR Q. Why not when you might have to pay it? A. I didn't think of it like that your Honour. I thought it was going to be paid by February so it didn't worry me one little bit what the interest was or wasn't. YOUNG Q. But haven't you said before that you knew there was a risk in lending the money to Mr Hraiki that might not be paid back by him? A. No. Q. You say you haven't said that in your evidence, is that right? A. Well, there's always a risk but with Sam Hraiki I didn't think there was a risk because I trusted him. So it didn't bother me one way or the other. Q. Even if you lend money to your brother or your father or your lifetime friend, there is always a risk that they are not going to pay the money back, isn't that right? A. Yes there is, but when you have a lot of trust in somebody you don't think of it like that. Q. Even if the person is the most honest person under the sun, circumstances beyond their control can cause them not to pay the money back, isn't that right? A. Yes. Q. Didn't I ask you a number of questions before about all of the number of things that could go wrong with a property development that would stop the money being paid back? A. Yes. Q. Didn't you agree that for all of those reasons Mr Hraiki might have had trouble paying the money back? A. Yes. HIS HONOUR Q. Do I take it therefore you were prepared to take the risk of that? A. Yes. (emphasis added) 57Contrary to his denial that he had not earlier said that he knew there was a risk that the money might not be paid back by Mr Hraiki, he had said that in the passage I have set out at para [50] above. 58One aspect of his evidence that suggested I was not being given the full story concerns the amount that was initially sought to be borrowed and the Defendant's evidence about Mr Hraiki's initial request to him. The evidence discloses that the first letter of offer from Mango Media of 18 December 2007 was in respect of a loan amount of $380,000. That was the amount Mr Derums said had initially been sought. After Mango Media made its enquiries about the value of the proposed security property it issued an amended letter of offer in respect of an amount of $250,000. 59As noted earlier, the Defendant denied that the signatures on both of those letters of offer are his signatures. Even if that is accepted as being correct 2 things suggest that Mr Hraiki must have asked the Defendant to agree to borrow the larger sum. The first matter concerns the application form to Mango Media that was filled out, presumably by Mr Hraiki, and provided to Mango Media before its first offer of $380,000 was made. That application form contains various details about the Defendant which Mr Hraiki would need to have found out from the Defendant, even allowing for the fact that the document appears to contain information which bears little or no relation to fact. In particular, the application form contains the Defendant's driver's licence number. That could only be information that Mr Hraiki obtained from the Defendant. Yet the only evidence given by the Defendant about providing his licence to Mr Hraiki was the evidence that he photocopied it at the meeting at the Dolce coffee shop on 20 December 2007 and gave the photocopy to Mr Hraiki. 60I note in passing also that the annual gross income of $200,000 shown on the application bore a close relationship to what the Defendant said his gross income was, namely about $180,000. 61The second matter is that it seems very unlikely Mr Hraiki would have requested the loan for $380,000 from Mango Media before he had even spoken to the Defendant to obtain his agreement to borrow the money. Further, the suggestion in submissions by the Defendant that Mr Hraiki could have approached Mango Media for a loan of $380,000 without letting the Defendant know, because Mr Hraiki knew that when the true value of the premises were ascertained the loan offer would be reduced to $250,000, is simply fanciful. 62The Defendant gave evidence about signing the various loan documents at what he said was the Justice of the Peace's property. He said he thought that there was a type of firm which trades as Justices of the Peace. He said that when he arrived at the office of Macquarie Lawyers he did not see any sign with Macquarie Lawyers on it. He then gave this evidence (at T221-222): Q. You went into the premises that you seen were the Justice of the Peace premises with Sam? A. Yes. Q. When you say "I didn't go into the office" what did you mean by that? A. Well I didn't go into anyone's office. We only went up to the front counter and that was it. Q. So did you understand that you were at the offices of someone that Sam had arranged to witness your signature on documents? A. Yes. Q. So do you say then that you started signing documents without there being any conversation at all? A. I didn't have a conversation with anyone. Q. But you just stood there and Mr Hraiki had a conversation with someone, is that right? A. Yes, yes. Q. But noone spoke a single word to you? A. No. Q. You had not spoken a single word to anyone? A. No. Q. Do you remember showing your driver's licence to the man you refer to as being the man of Asian appearance? A. I didn't show anything to anyone. Q. So the man of Asian appearance never spoke a single word to you at any stage during that meeting, is that right? A. Yes. 63The Defendant described the signing of the documents in his affidavit in this way: 8(a) The man of Asian appearance did not greet me or say anything to me. Sam turned to me and said, "Come here and sign the paperwork". The Asian man stood next to me. I cannot recall him saying anything to me. I was standing at the counter. Sam held the documents in his hand. He flicked each page to the area which needed a signature and said the words, "Sign here". He pointed to the area where I was to sign and I signed where he indicated. I could not see the entire page. (b) The man of Asian appearance man stood to the side of us at the time of signing. He did not say anything to me. After I had finished signing all the documents the man of Asian appearance took the documents, placed them on the counter and commenced signing various pages. At no time did anyone ever ask me whether if I wanted to make a solemn declaration. As mentioned earlier, this evidence was modified during cross-examination when the Defendant said that the man of Asian appearance (who it can be accepted was Mr John Vo) did not sign all of the documents in a bundle at the end but signed each document after the Defendant signed it. 64The Defendant also gave evidence of how Mr Vo saw copies of his licence and his credit cards. Mr Vo certified that they were true copies of the originals which he had been shown. The Defendant said that he photocopied his licence at the Dolce coffee shop in the morning of that day. He said that as Mr Hraiki was leaving the Dolce coffee shop he asked for the Defendant's credit cards. Rather than photocopying the credit cards as he had done with the licence, the Defendant said that he gave his 2 credit cards to Mr Hraiki so that he could take them away to copy them. Although Mr Hraiki told the Defendant that he would be back in a couple of hours with them (presumably when they were to meet at Macquarie Lawyers) Mr Hraiki did not give them back to the Defendant at Macquarie Lawyers, and the Defendant said he forgot to ask Mr Hraiki for them until 2 days later (which would be the day after the cheques were handed over) when he needed some money. That evidence leads me to the view that there was a much closer relationship between the Defendant and Mr Hraiki then the Defendant's evidence otherwise suggested and, again, that the whole story was not being told. 65In relation to the settlement transaction, the Defendant in his affidavit said that when they walked into the Unity Hotel Mr Hraiki greeted Mr Derums by his first name. The Defendant said they appeared quite friendly and Mr Hraiki introduced Mr Derums to the Defendant. 66The Defendant described Mr Hraiki and Mr Derums walking away from him to the bar of the hotel for about 5 minutes whilst they talked. He said that as they walked back to him he heard Mr Hraiki say to Mr Derums, "put it in this name" and he handed him a piece of paper. He saw Mr Derums hand a cheque to Mr Hraiki, but the Defendant did not know the name of the payee of the cheque and did not receive a copy of the cheque. He said he did not sign any receipt for it. 67In cross-examination it was put to him that there were three cheques and not one. He said that he thought Mr Derums had pulled a single cheque out of his pocket, written on it and handed it to Mr Hraiki. When it was put to him that the 3 cheques were bank cheques he said: I assumed it was a handwritten cheque. 68He said that after he left the hotel he asked Mr Hraiki to show him "the cheque". He noticed that the name on "the cheque" was not his name and it looked as if it had been handwritten in and that was why he thought it was a personal cheque and not a bank cheque. 69He was shown a copy of the 3 bank cheques that were typewritten except for the signatures of the officers of the NAB on them. The photocopied page also contained a signature (apparently, the Defendant's) at the bottom. He was also shown a cheque direction which on its face was an authorisation by him to pay the advance in 3 cheques (equivalent to the amounts in the bank cheques) to George Youssef. That document also contained a signature at the bottom, above the Defendant's name. The following evidence was then given by the Defendant where each of those documents was put to him in turn (at T257-258): Q. Now Sir, can you please turn to page 55 of Exhibit A and that is under tab divider 35. [the photocopy of the 3 cheques] A. Yes. Q. Can you have a look at the bottom of that page on the left? A. Yes. Q. Your signature appears, doesn't it? A. It looks like my signature. Q. In fact the first letter is certainly a "G"? A. Definitely. Q. The signature goes on for about the length of your signature? A. Pretty much. Q. It has that little dot at the end of signature which appears a lot when you are signing your name? A. Not really, I don't always put a dot. Q. A third or half way down? A. Yes. Q. A loop or rise, rising in the middle that is like a rise in your signature? A. There's a rise. Q. It looks very much like that is your signature? A. Close, but it is not my signature. Q. Now, page 56, if you could turn to that behind tab division 36 [the cheque direction]? A. Yes. Q. That is your signature? A. It looks like my signature. Q. It is your signature? A. No, because I can't remember signing that piece of paper. 70The Defendant had become aware of both of these documents prior to the hearing because they were annexed to an affidavit of Mr Derums. In relation to the photocopy of the 3 bank cheques the Defendant said in his affidavit: I do not recall signing that document or any document on that day. 71In relation to the cheque direction he said: Whilst the signature at the foot of the page looks like my signature I do not recall signing that document. 72Those statements are to be contrasted with earlier paragraphs of the same affidavit where he referred to other documents annexed to Mr Derums' affidavit which contain signatures purporting to be signatures of the Defendant. In relation to those documents the Defendant said this: [6] ... A signature appears at the base of each of pages 1, 2 and 3 of that letter. The signature which appears on those documents is not my signature and I did not sign that document. [7] I refer to Paragraph 5 of his affidavit. A signature appears at the base of each of pages 1, 2 and 3 of annexure "A" to the affidavit of Mr Derums. The signature which appears on those documents is not my signature and I did not sign that document. 73The Defendant was asked about this in cross-examination as follows (at T259-262): Q. Why didn't you refer in paragraph 15 to the fact that there was something on that page that looked like your signature? A. Because it is not my signature so I didn't think to bring it up and say it is not my signature but it looks my signature. Q. You thought it was so obvious that anybody looking at that page would think you didn't sign it? A. It is not my signature. Q. You have no explanation? A. I didn't think I needed to because it is not my signature. HIS HONOUR Q. Mr Comitogianni, do you have your affidavit of 16 September there? A. Yes. Q. Would you have a look in paragraph 6. Do you see the last two sentences in paragraph 6? A. Is this on page 3? Q. Yes? A. Yes. Q. You say you have looked at documents there that were in Mr Derums' affidavit and you have said the signature that appears on it is not my signature and does not appear in the document? A. Yes. Q. Why did you not say that in relation to the document Mr Young is now directing to you? A. I don't know, I can't explain it. ... HIS HONOUR Q. Why didn't you say in paragraph 16 of your affidavit when you were dealing with this document that was not your signature? A. I don't think I was shown this document. Q. Have a look at paragraph 16 of your affidavit Mr Comitogianni? A. On page 5? Q. Yes. A. Yes. Q. It is a reference to annexure I to Mr Derums' affidavit? A. Yes. Q. And this document is annexure I to Mr Derums' affidavit? A. Yes. Q. So why is it that you didn't deny that it is your signature? A. I thought I did, it definitely is not my signature. YOUNG Q. You say while the signature at the foot of the page looks like my signature I don't recall signing that document? A. Yes. Q. You are trying to convey in paragraph 16 that although it looks like you signed it you couldn't recall signing it, isn't that right? A. I know I didn't sign it. Q. I repeat, I did not sign any document or other document whilst at the hotel? A. Yes. Q. You don't discuss the possibility that you signed it at another occasion apart from the hotel, do you? A. No. Q. Well, do you say you might have signed it on another occasion? A. I could have possibly signed it at the 22 Burwood Road, Burwood. I didn't read any of the documents there. It is a possibility but nothing was signed at the hotel, no. Q. It is only the fact you don't recall signing any document at the hotel that leads you to believe that might not be your signature on the document? A. I definitely did not sign anything at the hotel, yes. HIS HONOUR Q. But do you now accept it is your signature? A. It could be, it is possible, yes. 74Although I will discuss this in greater detail when dealing with Mr Derums' evidence, I find that the signatures on the 2 documents concerned, being the photocopy of the 3 bank cheques and the cheque direction of 21 December 2007 (pages 55 and 56 of Annexure A), contain the Defendant's signature. 75The last piece of evidence of the Defendant for mention is some inconsistent evidence he gave concerning an incidental matter at the hotel. He denied having purchased a drink or cigarettes or food at the hotel. He was then confronted with a copy of his bank statements (which were, ironically, an exhibit to his own affidavit) showing a purchase at the Unity Hotel dated 24 December 2007. The Defendant accepted that he bought cigarettes on that occasion. When he was asked if he remembered the cross-examiner asking him if he had bought cigarettes from the hotel he denied that he had been asked that question. In fact he had been asked the question and expressly denied it. 76This was a small matter but it serves to highlight a certain unreliability about the Defendant's evidence, particularly when he claimed that he knew that evidence off by heart. The cross-examiner had scarcely tricked him when the bank statements were exhibited to his own affidavit. 77All of these unsatisfactory aspects to the Defendant's evidence cause me to treat his evidence with considerable caution. As I will discuss, generally where his evidence conflicts with the evidence of Mr Derums and Mr Vo I prefer their evidence. (b) Mr Derums 78The impression I formed was that, subject to one matter discussed below, Mr Derums was a generally honest witness who gave his evidence to the best of his ability. I acknowledge, however, the danger of a judge relying on demeanour alone to determine the reliability and honesty of a witness. 79Mr Smallbone of counsel for the Defendant cross-examined Mr Derums in a careful and thorough way, and raised a number of matters with Mr Derums that require consideration. Those matters include Mr Derums' relationship with Mr Hraiki, what he knew about Macquarie Lawyers, the circumstances surrounding the new cheque direction whereby the loan advance was directed to be paid to Mr Youssef, issues surrounding the Resimac letters, and matters concerning the settlement of the transaction at the Unity Hotel. 80The first contentious issue concerning Mr Derums was his prior relationship with Mr Hraiki. Much was sought to be made of this by the Defendant. The evidence certainly disclosed that there had been prior dealings between Mango Media and Mr Hraiki in one form or another. Those dealings chiefly seemed to involve Mr Hraiki as a finance broker but they also involved loans being made to members of his family and the provision to Mango Media of a guarantee by a company of which Mr Hraiki was a director. This evidence was adduced, and questions asked of Mr Derums in cross-examination, in an endeavour to show knowledge on the part of Mango Media that the loan the Defendant had apparently applied for was for Mr Hraiki's benefit, and was being made as part of a series of loans to benefit Mr Hraiki personally despite the identity of the borrowers. 81The matter was taken further by suggesting that a loan sought by Mr Hraiki's sister Mrs Aoun, after the Defendant's loan, was for the purpose of topping up Mr Hraiki with the funds that he was not able to obtain from the loan to the Defendant when the loan sum was reduced from $380,000 to $250,000. It was not made clear how the subsequent application for a loan could have fixed Mango Media with any knowledge about any benefit Mr Hraiki might be obtaining from the loan sought by the Defendant at the time that loan was made. 82In his affidavit of 15 March 2010 Mr Derums said this: I am not a friend or a business associate of Sam Hraiki. The meeting on 21 December 2007 was the first time, and the only time, I met Sam Hraiki in person. I know Sam Hraiki in his capacity as a finance broker and I have no other relationship with him, be it personal or business. Sam Hraiki has at all times, in his dealings with me and Mango Media, acted as an agent of the prospective borrower. 83Mr Derums conceded, in effect, that the statement that he had no other relationship with Mr Hraiki of a personal or business nature might not have been quite accurate because Mr Hraiki's company Lendwide Property Group Pty Ltd had provided a guarantee for a loan Mango Media had made to George Hraiki and Colleen Gibb. Furthermore, Mr Derums agreed that in relation to the loan to Mr Hraiki's parents, the amount of the loan was paid partly to Sam Hraiki and the other part to his company Lendwide. 84These 2 matters mean that Mr Derums' affidavit was not entirely accurate in relation to the portion I have set out above. This paragraph was, however, an answer to what appeared in paragraphs 30-33 of the Defendant's affidavit of 4 September 2008 where he detailed his account of the settlement at the hotel. That account asserted that Mr Hraiki and Mr Derums knew one another in the sense that they recognised each other in the hotel, asserted that they appeared to be quite friendly, and asserted that they had a private discussion for 5 minutes away from the Defendant. 85Despite the inaccuracy in Mr Derums's affidavit in that regard, I do not think that that error shows that Mr Derums' relationship with Mr Hraiki was a personal one. Certainly, Mr Hraiki had approached Mango Media on a number of occasions as a finance broker and some of those matters had involved members of his own family. The evidence discloses that one of those loans went to benefit Mr Hraiki and his company directly. 86In the absence, however, of any evidence that Mango Media and Mr Derums were aware that Mr Hraiki was benefiting personally from the loan to the Defendant (apart from his broker's commission) the prior dealings between Mango Media and Mr Hraiki do not have any impact or effect on the loan to the Defendant. They do not demonstrate that Mango Media was put on any form of notice or suspicion surrounding the loan to the Defendant. The fact that Mr Hraiki and his company may have directly benefited from a loan taken out by Mr Hraiki's parents is of little significance. There might be perfectly plausible explanations why that was happening. Had the borrowers not been family members there might have been room to suggest some suspicion on Mango Media's part, but where something similar was not known to Mango Media about the Defendant's loan it is difficult to see where that might have led. 87The other reason for this evidence was to support a submission that the referral of the Defendant to Macquarie Lawyers for so-called independent advice did not achieve the purpose of independent advice because, to the knowledge of Mango Media, Macquarie Lawyers were the lawyers who acted for Mr Hraiki. It was submitted that the Defendant needed to be advised independently of solicitors who acted for his broker. 88Mr Derums' evidence about his knowledge of Macquarie Lawyers and Mr Hraiki's use of them seems best able to be described as agnostic. He said it was possible Macquarie Lawyers had acted for other borrowers that had been referred by Mr Hraiki and it was possible that Mr Hraiki had used Macquarie Lawyers for his own matters but he did not really know. 89However, he did not accept the proposition that was put to him that Macquarie Lawyers were not truly independent of Mr Hraiki. Whether they were or not does not seem to me to be the important matter. What was not shown in the evidence was that Mr Derums or Mango Media had any idea that the loan for which the Defendant had applied was going to benefit Mr Hraiki in any way other than by giving him a broker's commission. If Mango Media was ignorant that Mr Hraiki was getting any other benefit from the loan it does not seem to me significant that they knew that Mr Hraiki was recommending his client borrowers to his own lawyers for advice. Certainly, Macquarie Lawyers were lawyers independent of Mango Media. 90Further, although for reasons I will discuss when dealing with Mr Vo's evidence, I consider that the advice provided to the Defendant was inadequate advice, I do not accept (for the reasons I have earlier discussed) that Mr Vo failed to give any advice to the Defendant. I also reject any suggestion that Mr Vo or Macquarie Lawyers was acting in Mr Hraiki's interest when it provided the advice to the Defendant. This is because the Defendant has not shown that Macquarie Lawyers themselves were aware that the loan was being borrowed for Mr Hraiki's purposes. Had it been shown that they were aware of that, it would certainly be open to point to Macquarie Lawyers having a conflict of interest when the Defendant was advised on 20 December. The only conclusion which can be drawn from the evidence, and which I draw, is that the Defendant was merely another client of Mr Hraiki being brought to Macquarie Lawyers for independent advice in respect of a loan for which Mr Hraiki was acting as a broker. Certainly, the quality of that advice has to be determined, but it is not infected with a conflict of interest on the part of Macquarie Lawyers. 91The issue relating to the Resimac letters involved a consideration of when those letters were sent and received, and also the policies that Mango Media had in place surrounding such letters. 92The course of events with these letters seems to have been this. A letter from Resimac Ltd to the Defendant, purportedly signed by Fred Alam, its director, was faxed to Mango Media from Cronulla Fruit Fair (a fax location seemingly accepted by the Defendant as associated with Mr Hraiki) at 23:32 on 20 December 2007. Despite the fax time the letter was in fact dated 21 December. Also, it was addressed to the Defendant at 22 George Street, Burwood rather than Burwood Heights. 93Mr Derums also received from WKA Legal a fax which had originally been sent (apparently) by Sydney Home Loans addressed "To whom it may concern". That letter confirmed that the Defendant had a current loan balance of $239,022.71 on security of the Burwood property. The letter went on to confirm that the facility would not be extended beyond that amount. 94When Mr Derums read the Resimac letter on the morning of 21 December he telephoned Mr Hraiki and told him that he needed a letter from Resimac which included the words "no further funds beyond $240,000 will be advanced on mortgage". Mr Derums said that the letter from Sydney Home Loans was not adequate because he was of the view that it was a mortgage broker rather than the actual lender. 95Mr Derums then received another letter by fax apparently from Resimac and signed by Mr Alam sent at 11:53am on 21 December. That letter contained what had been in the previous letter but added the words "no further funds beyond $240,000 will be advanced pursuant to the mortgage over 22 George Street, Burwood, NSW". The letter, like the previous one, was addressed to the Defendant at 22 George Street, Burwood. 96After the advance had been made on 21 December Mr Derums, who was then dealing with the loan to Mrs Aoun, sent a fax to Mr Alam at Resimac using the fax number on the Resimac letters asking Mr Alam if he would verify that the second Resimac letter regarding the Defendant and a similar one relating to Mrs Aoun were from Mr Alam and that the information contained within them was correct. 97Mr Derums received no written reply from Mr Alam so he telephoned Mr Alam at the phone numbers shown on the letter. He left a message on an answering machine asking Mr Alam to call him. Sometime later somebody who identified himself as Fred Alam rang Mr Derums and said words to the effect " Giuseppe Comitogianni owes Resimac about $240,000". 98Mr Derums was cross-examined about why he sent the fax on 27 December 2007, and it was suggested that he had a doubt about whether the Resimac letters were indeed from Mr Alam. He denied that and said that Mango Media were seeking to institute a policy around that time of verifying with the prior mortgagee what the debt was. He agreed that he did not follow the policy in relation to the advance to the Defendant because he settled the loan before he sent the fax to Mr Alam. 99It is to be noted at this point that Mr Derums' evidence conflicted with the evidence of Ms Charleston about this matter. Her evidence was that Mango Media would simply ask for a letter from the first mortgagee to verify or authenticate what the borrower's had said about the first mortgage. 100Mr Derums' evidence about this policy did not, at the time he gave the evidence, and does not now, make very much sense to me. My view about the evidence resulted in this exchange (at T70): HIS HONOUR Q. Mr Derums, can I just ask you this? If you had no doubt about the validity of those letters at 158 and 159 what did you hope to achieve by asking Mr Alam to confirm them? A. Well, simply that, confirmation. Q. So that if he says it twice to you it has more validity than if he says it once? A. No. I Q. If you believed it the first time why did you need to ask it a second? A. Well, it's I take your Honour's point, but all of the letters we required from about that time on confirmation that it is in fact correct. Q. Well, that must mean you have a doubt, doesn't it? A. Well, we do well, I mean's [sic] a tricky question, but we seek to confirm the indebtedness beyond doubt with the first mortgagee. SMALLBONE Q. Look, the concern's not merely with the amount of the indebtedness, but it is also with the authenticity of the correspondence that you are receiving from RESIMAC, isn't it? A. Well yes, but principally, not excluding the authenticity, you know, we're concerned with what is the debt with the prior mortgagee. Q. Well, the policy that you say that you had put in place, was that one that was provoked by some bad experience where a document turned out not to be genuine? A. No. Q. Well, why were you implementing a policy to seek confirmation of the authenticity of documents? A. Because we wanted to seek confirmation of the actual indebtedness. Q. You could do that without questioning the authenticity of the documents, couldn't you? A. No, I don't believe so. Our principal concern from around this point on was that we had to be satisfied with what the debt was to any prior mortgagee and if you want to say, well okay, that casts suspicion over the letters, well, what would be more accurate to say is that we're seeking confirmation of it. Q. You had a concern that brokers might make things up about what was owed to prior mortgagees, is that right? A. Well, not necessarily brokers but borrowers as well is a possibility is possible. Q. Borrowers or brokers might do it? A. Or that it's been misrepresented somehow even from the prior mortgagee. Q. That borrowers or prior mortgagees might make things up? A. Well, might get it wrong. Q. And that you were going to make enquiries of the mortgagee direct to confirm the truth, is that the policy? A. Well, not just the truth but what the entire indebtedness is. One thing we started to discover around this time is that people had other debts. Like you could say okay, the home loan was 250,000, but they may have had a car loan as well or some other loan, you know, that resulted in a total indebtedness being more than, you know, just against the home loan. Q. That would be a hazard that you would have been aware of from the beginning of your participation in this industry, wouldn't it? A. Well, you would think so but we have been certainly caught out in that regard. Q. If you were enquiring of first mortgagees as to the authenticity of correspondence, the obvious thing to do, isn't it, is to look them up yourself on particulars you have are correct? A. Yes. Q. But you didn't try that with RESIMAC in relation to Comitogianni and Aoun? A. No. Q. You simply used the numbers supplied on the very letters which you were calling into question? A. Well, embarrassingly, yes, we did use those numbers. 101The conclusion I draw from that evidence of the correspondence passing between Mango Media and what was thought to be Resimac, is that Mr Derums did have a doubt about the authenticity of the Resimac letters. The terms of the fax of 27 December highlight that. 102However, it does not seem to me to be shown that Mr Derums had a doubt about the letters until he received a similar letter, apparently from Resimac, dated 24 December 2007 in respect of the proposed loan to Mrs Aoun. 103The Defendant made much of the timing of the receipt of the Resimac letters including the fact that the first one was dated on the day following the night it was sent, and the fact that the letters, although addressed to the Defendant, could not have been received by him on those days. In the cold hard light of day it can be seen that those letters raise questions, particularly the speed with which Mr Hraiki was apparently able to obtain a revised letter from Resimac when he was requested to do so. However, it seems reasonable to accept Mr Derums' explanation, and I do accept it, that he did not pay particular attention to fax markings on the letters, nor think about whether the Defendant had actually received these letters, addressed as they were to 22 George Street, Burwood (rather than Burwood Heights), an address at which he did not live. Mr Derums' only interest was receiving those letters himself and not whether the Defendant received them. 104Further, the evidence was that the Resimac letters were forwarded onto WKA Legal by Mr Derums. It was reasonable for him to think that if there was any problem WKA Legal would pick it up. He agreed that the loan was proceeding in a great rush but he said that all of their loans were like that. The evidence suggests, as Mr Derums himself alleged, that he did not pay close attention to these letters except to ensure that the first mortgagee would promise to cap the funds that it advanced so that Mango Media knew there was comfortable equity in the property to support its loan. All of that suggests to me that Mr Derums had never considered the Resimac letters closely enough prior to the advance to the Defendant to have a doubt about their authenticity. 105However, by the time a further letter from Resimac arrived in respect of Ms Aoun's loan, a doubt had started to emerge. I do not accept Mr Derums' evidence about the policy that he claimed was being implemented in 2007 in the way he described it. Ms Charleston's evidence seems to me to be the more likely. That is to say, the policy was to verify with the first mortgagee amounts of indebtedness that had been told to Mango Media by the borrower and/or the broker. There could be no point in asking the first mortgagee to reiterate for a second or third time what it had already said in correspondence with Mango Media. 106Mr Derums appears to have given this evidence to justify his earlier denial of having a doubt at the time of the Resimac letter in respect of the Aoun loan. If it was true that he really had a policy to authenticate the veracity of letters from the first mortgagee he would not have been checking it with the writer of the letter already received and at phone numbers on that letter. 107This untrue evidence has caused me to scrutinise with great care the remainder of Mr Derums' evidence. I shall return to this after dealing with the issues of the further cheque direction and the settlement of the loan. 108The issue involving the cheque direction concerned when and in what circumstances Mr Derums corrected the spelling of Mr Youssef's name on the cheque direction. Mr Derums originally typed the cheque direction to provide for payment to "George Youseff". The word "Youseff", on the 3 occasions it appears on the document, was crossed out with initials that Mr Derums said were his initials, and in handwriting immediately adjacent was written "Youssef". Mr Derums said that that was his handwriting. Mr Derums said that he thought he made the correction to the document at the Bank before obtaining the bank cheques. 109On the face of it, Mr Derums gave some inconsistent evidence about how he came to alter the cheque directions document. 110The evidence he first gave about this was that he could not be precisely sure how the error came about and went on to say: But I recall correcting it, I think at the Bank I noticed I'd spelt it wrong, when you're getting the bank cheques. 111Under further cross-examination he gave evidence that he had a telephone call after leaving his office where he was told the correct spelling by Mr Hraiki. However, he then reverted to what he had initially said in a way that suggested he had become confused by the questions. For example, when he was being pressed that Mr Hraiki had given him the correct spelling after he left the office to go to the Bank he said: I'm missing something here. 112It was then put to him that he had a conversation with Mr Hraiki about the spelling of the name "Youssef" after he had prepared the cheque direction, but he said: No. If I had given that, said that, its not correct, then I've made a mistake. 113He then went on to say that he learnt of the error himself because he noticed that he had made a spelling mistake on the cheque directions form. 114I was left with the very clear impression that the initial explanation given by Mr Derums was correct, namely, that having typed up the cheque directions form with the wrong spelling, he realised on his way to the Bank or at the Bank that he had misspelt the name and corrected it at the Bank before he obtained the cheques. Although I accept that his inconsistent evidence could reflect on his credit generally and the reliability of his evidence, neither version of events supports the Defendant's case in relation to this issue. The Defendant's case is effectively set out in para [66] above. It is that Mr Hraiki told Mr Derums at the hotel to "put it in this name" and he handed him a piece of paper. Coupled with that is the evidence of the Defendant that Mr Derums pulled a single cheque out of his pocket at the hotel, wrote something on it and handed it to Mr Hraiki. 115The objective evidence does not support this train of events at all. The cheque was not a handwritten cheque. In fact there were three cheques, not one. They were all bank cheques and they had no handwriting on them apart from the signatures of the authorised bank officers. The cheques were made out to Mr Youssef using the correct spelling of his name. Accordingly, Mr Derums could not have found out for the first time at the hotel in whose name to put the cheques. Nor did he write anything on the cheques at the hotel. Moreover, although the cheque directions document had been altered in hand it was a typewritten document in its original form. 116The only explanation of how it came to be brought into existence was Mr Derums' evidence that he typed it at the office after receiving a telephone call from Mr Hraiki telling him that the cheques were to be made payable to Mr Youssef. In all the circumstances, that evidence is compelling. Whether there was a telephone conversation between Mr Hraiki and Mr Derums after Mr Derums left his office and before he reached the Bank is of little importance. It would not have been a call from Mr Hraiki in which he purported to correct the spelling because he had not, at that stage, seen the document. 117I accept that the telephone records of the Defendant's telephone suggest that there were some relatively brief calls between that telephone (which the Defendant said Mr Hraiki was using) and Mr Derums before the settlement was finally effected. Whether in any of those calls the spelling of Mr Youssef's name was discussed is of no importance at all. They were more likely to relate to the meeting to settle the loan itself including where people actually were in the hotel. 118Because the objective evidence supports Mr Derums' evidence about the bank cheques and the events at the hotel, and which are notably inconsistent with the Defendant's account, I accept Mr Derums' evidence about those matters. The Defendant's evidence relating to the purchase of cigarettes at the Hotel (para [75] above) confirms me in the view I have that the Defendant's evidence about those events is unreliable. 119I have indicated that I do not accept Mr Derums' evidence about the nature of the policy of checking with the first mortgagee that he described. In addition, I have found that Mr Derums' evidence that he had no personal or business relationship with Mr Hraiki at the relevant time not to be entirely accurate. I do not think the latter inaccuracy was the result of any lack of candour or honesty - rather I do not think that Mr Derums carefully considered that the guarantee signed by Mr Hraiki as a director of a guarantor company amounted to a business or personal relationship. The untrue evidence about the nature of Mango Media's policy regarding first mortgagees was certainly more troubling. 120I have nevertheless concluded that Mr Derums' evidence is generally to be accepted because in other areas of challenge his evidence was supported by objective indicia. This is particularly so in relation to the conflict in evidence between Mr Derums and the Defendant about what took place at the settlement of the transaction. The evidence does not enable the Defendant's evidence to be accepted and points fairly compellingly to the account that Mr Derums gave. (c) Ann Charleston 121Ms Charleston was only able to give limited evidence on relevant matters because she was only involved in some aspect of the transaction with the Plaintiff, and was not involved with other transactions involving Mr Hraiki's family members. Some information she knew only because Mr Derums had told her at the time. When that evidence was given it was invited by counsel for the Plaintiff in cross-examination. That evidence, and her evidence generally, was largely corroborative of the evidence given by Mr Derums. 122Ms Charleston certainly supported Mr Derums' account of having asked the Defendant for his licence at the Hotel and having asked the Defendant to sign a piece of paper (in fact, the new cheque directions document) to authorise the payment of the cheques to Mr Youssef. She said that she was told this later on the day of settlement when Mr Derums rang to tell her the settlement had gone through. 123It was not put to Ms Charleston that she was wrong in saying that that conversation took place later on the day of settlement. If it did take place on that day, and I find that it did, there is force in the submission made by Mr Young of counsel for Mango Media that if Mr Derums concocted a story in Mango Media's favour about the events at the hotel, he would have to have concocted it within a matter of hours of the settlement taking place in circumstances where there was no suggestion that there was any problem about the loan or that it would finish up in contested court proceedings. 124It was not put to her that Ms Charleston and Mr Derums had discussed the evidence that they might give. I certainly did not gain any impression from the way she answered questions that there had been any collaboration about their evidence. She answered questions promptly and in a spontaneous way. 125The one area in her evidence where there was some divergence from the evidence of Mr Derums concerned procedures in place in 2007 for the verification of amounts owed to prior mortgagees. Her evidence was only that they would ask for a letter from the first Mortgagee to verify or authenticate what the borrowers had said. She did not go as far as Mr Derums where he asserted that there was a policy, after obtaining a letter from the first Mortgagee, to verify the first letter. I have already said that I accept this evidence in preference to that of Mr Derums. 126In my opinion, Ms Charleston was an honest and reliable witness. (d) Warwick Keay 127Mr Keay was the principal of the firm of solicitors WKA Legal. They were the solicitors who acted on this and other matters for the Defendant. Mr Keay's credit was said not to be under challenge by counsel for the Plaintiff. In any event, I found him to be an honest and helpful witness. 128His evidence diverged from that of Mr Derums on one point only. He said that his recollection was that Mr Derums rang him to say that the Plaintiff had requested that he be provided with cheques rather than the loan advance being paid into his account. Mr Keay said that he probably told Mr Derums that it was okay as long as he met with the Plaintiff personally. He said that Mr Derums did not say there was any problem in effecting the electronic transfer, nor did he mention the name of George Youssef. 129On balance I think Mr Derums' evidence is to be preferred on this point. Given that the evidence was that the NAB online system had failed on a few times in the past - resulting in the payment, apparently, of cash on those occasions - it does not seem to me that Mr Derums would have needed to ask Mr Keay's advice if all that was changed was the substitution of cheques for an electronic transfer. On the other hand, a late request from a broker to change the cheque directions that had already passed through the hands of the borrower, his solicitors and Mango Media's solicitors would be something more likely to prompt Mr Derums to enquire of Mr Keay how the matter should be handled. 130In preferring Mr Derums' evidence I am not being at all critical of Mr Keay. As the solicitor for Mango Media his own involvement in any particular loan will not be as concentrated as that of Mr Derums. This loan took place some 2 years ago and Mr Keay cannot be expected to remember the precise terms of every conversation he had with Mr Derums and every enquiry that Mr Derums made. (e) John Vo 131Mr Vo was a solicitor employed by Macquarie Lawyers who witnessed the Defendant's signatures and the various loan documents signed by the Defendant at Macquarie Lawyers. 132Mr Vo was a somewhat unsatisfactory witness in the sense that after almost every question he was asked both by his own counsel and in cross-examination he paused for some time, and on occasions for a very long time, before he answered. I formed the impression that English was not his first language, and the long pauses caused me to wonder if he needed time to understand and process the questions that were asked of him. 133During those long pauses he would often look through or flip through documents that he had with him in the witness box. The impression I gained was that he did this to give himself more time to think about the answer that he gave. I do not, by this, suggest that there was anything sinister in this. I think that Mr Vo had great difficulty remembering the occasion he met with the Defendant and was doing his best either to remember or to reconstruct what he believed happened. 134I think Mr Vo had very limited recollection of the meeting with the Defendant. Much of his evidence appeared to have been given (and some was admitted to have been given) on the basis of his usual practice. In addition, I think it is clear that he reconstructed what he believed occurred both from an examination of the documents and from his usual practice. 135One particular aspect of his evidence that highlights this was his evidence that the Defendant came back to see him the day after the majority of the documents were signed. He thought that the mortgage was signed on the second occasion. In my opinion, Mr Vo has reached this conclusion by noting that the mortgage is dated 21 December, the day after the signing of the other documents on 20 December. 136I think Mr Vo's recollection about a second meeting with the Defendant is mistaken although he seemed very certain about it. It is inconsistent with the Defendant's evidence although, as I have said, I have considerable hesitation about much of the Defendant's evidence. Mr Vo's recollection does not sit easily with the way Mr Keay described the sending to, and receipt of documents from, Macquarie Lawyers. In my opinion, there was only one meeting the Defendant had with Macquarie Lawyers, and that was on 20 December. 137On the other hand, I accept Mr Vo's evidence that he did provide an explanation to the Defendant about the documents before the Defendant signed the documents and Mr Vo witnessed them. 138I cannot, however, be satisfied that the advice given by Mr Vo to the Defendant was adequate or sufficient advice. There is no evidence that he made enquiries of him about the purpose of the loan before the Defendant signed the Business Purposes Declaration. Further, Mr Vo claimed to remember that he specifically advised the Defendant in relation to paragraph 4 of the mortgage that the Defendant had to pay the principal and interest of 10% in 2 months time. In fact, the 2 month's interest was deducted and paid in advance to the Plaintiff as the draft cheque directions document made clear. 139Despite the inadequacy of the explanations and advice that Mr Vo claimed to have given, I accept that he did provide some explanation and advice to the Defendant, and I reject the Defendant's evidence that Mr Vo did not speak to him at all, provided him with no advice, and simply signed the documents after the Defendant had signed them. 140One aspect of Mr Vo's evidence highlights further unreliability about the Defendant's evidence. The Defendant thought that the entire premises at Macquarie Lawyers were on one level. Mr Vo's evidence was that the conference where the documents were explained and signed were in the conference room which was upstairs on the second level of the building. Mr Vo's evidence in this regard is to be preferred. 141One matter about Mr Vo's evidence which was never adequately explained was why the certification of the Defendant's licence was all in Mr Vo's handwriting whereas the certification of the 2 credit cards was done by means of a stamp and Mr Vo's signature. It may be that it was one of those documents which was signed by Mr Vo on a second occasion although without the presence of the Defendant. It would be consistent with Mr Hraiki retaining possession of the Defendant's credit cards beyond the time he and the Defendant attended at Macquarie Lawyers on 20 December 2007. It may be that Mr Hraiki went back the following day with the credit cards for certification by Mr Vo. There would be no necessity for the Defendant to be present as there would in relation to his licence where the picture on the licence would need to be compared with the Defendant himself. Issues and legal questions 142The parties prepared a Joint Statement of Issues, identifying some 24 matters said to be in dispute. In the circumstances I consider it to be appropriate to resolve the issues the parties have identified although there is some overlap between some of them. (1) Did the Plaintiff make the advance to the Defendant? 143Because I have found that the new cheque direction directing the money to be paid to Mr Youssef was signed by the Defendant at the hotel I am satisfied that the advance was made to the Defendant, albeit it was directed by him to be paid to a third party. Whilst it was true that it was Mr Hraiki who first told Mr Derums to pay the money to Mr Youssef, and he probably did so without the prior knowledge of the Defendant, the Defendant's evidence indicated that he was content for that to happen in any event. 144The Defendant gave evidence that he expected that the money would be paid to him and that he would immediately write out a cheque for the $250,000 to Mr Hraiki. The following evidence was then given by the Defendant (at T205-206): Q. Did you care where [sic] it was done like that or whether the money was paid straight to Mr Hraiki or to some other person that Mr Hraiki nominated? A. I did care. Q. Why did you care? A. Because I was taking the loan out, it was in my name. Q. The money was to go to Mr Hraiki's development, isn't that right? A. Yes. Q. So why would it matter whether it is paid straight to Mr Hraiki or to someone Mr Hraiki was doing business with or paid to you and then the next second transferred to Mr Hraiki? A. I just wanted to make sure that it was going to get to the person, where it was going. Q. In other words, you wanted to make sure it would get to where Mr Hraiki wanted it to get to? A. Yes. Q. But Mr Hraiki himself knew best the person he wanted the money to get to, isn't that right? A. Yes. This and other evidence clearly supported the proposition that the Defendant would have agreed to the monies being paid to whomever Mr Hraiki requested. 145The Defendant points to cl 28 of the mortgage which provides: The Mortgagor/s irrevocably authorises the Mortgagee/s on drawdown to pay the Principal Sum to the solicitors for the Mortgagor/s, Macquarie Lawyers in such manner as that firm may direct in writing. It is argued that because Mango Media did not pay it as Macquarie Lawyers had directed on the original cheque direction the Defendant did not receive the advance. 146Since I have held that the Defendant authorised the new cheque direction by signing it at the hotel, the Defendant cannot rely on cl 28, either because the further cheque direction must be regarded as a variation of the mortgage in that regard or because the Defendant is estopped from pointing to cl 28 in the face of Mango Media's having acted on the basis of the further cheque direction authorised by the Defendant. 147In any event, cl 28 is in the mortgage for the protection of the mortgagee. Had Mango Media, notwithstanding the further cheque direction, paid the loan as Macquarie Lawyers had originally directed, namely, to the Defendant, it would have been protected although it did not comply with the further cheque direction. 148I find that the money was advanced to the Defendant. Consumer Credit Code issues (2) and (3) The Business Purposes Declaration and the purpose of this loan 149The Defendant signed the Business Purposes Declaration. However, under s 11(3) of the Code that Declaration would be ineffective for the purposes of s 11 if Mango Media or any other relevant person knew or had reason to believe that the credit was to be applied wholly or predominantly for personal, domestic or household purposes. It is not suggested that Mango Media knew or had reason to believe that the credit was in fact to be applied predominantly for personal, domestic or household purposes. Rather, it is said that because a relevant person for the purposes of this subsection includes a finance broker, Mr Hraiki's knowledge that the loan was being borrowed for Mango Media to be on-loaned to him meant that the Declaration was ineffective. 150Since it is certainly true that Mr Hraiki did know the ultimate purpose of the loan, the first question is whether the making of the loan to him by the Defendant in return for a promise of $20,000 was for personal purposes or was for business or investment purposes. 151The Queensland Court of Appeal had occasion to consider what amounted to a business (and also what was an investment) for the purposes of the Credit Code in Shakespeare Haney Securities Ltd v Crawford [2009] QCA 85. The principal judgment was given by Muir JA with whom Mullins and Douglas JJA agreed. Muir JA said this in relation to word "business": [42] In Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation , Mason CJ, Gaudron and McHugh JJ observed "Of all words, the word 'business' is notorious for taking its colour and its content from its surroundings." [43] In the context of statutory or contractual provisions referring to the carrying on of a business, system, continuity and/or regularity are frequently identified as necessary features of a business. In that regard it was said in Hyde v Sullivan : Speaking generally, the phrase 'to carry on business' means to conduct some form of commercial enterprise, systematically and regularly, with a view to profit and implicit in this idea are the features of continuity and system. [44] But a "one off" transaction or venture may have a business character. [45] In Federal Commissioner of Taxation v Whitfords Beach Pty Ltd Mason J, in considering the concept of "business" in relation to s 26(a) of the Income Tax Assessment Act 1936 (Cth) said: Unfortunately there is an element of ambiguity in the expressions 'business deal' and 'operation of business' as there is in the adjectives 'business', 'commercial' and 'trading' which have about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be. In some contexts 'business deal' and 'operation of business' may signify a transaction entered into by a person in the course of carrying on a business; in other contexts they denote a transaction which is business or commercial in character. [46] In s 11 of the Code the word "business" is used in contradistinction to "personal, domestic or household." In order to cause a borrowing for the purpose of constructing, holding and maintaining one's own house to be for a business rather than a personal or domestic purpose, there must be more than the mere enterprising realisation of an asset. To my mind, there needs to be a commercial aspect to the transaction. That commercial aspect may exist where property is acquired with the intention of resale at a profit. In Federal Commissioner of Taxation v Whitfords Beach Pty Ltd , Mason J, said of Barwick CJ's reasons in Steinberg v Federal Commissioner of Taxation : In Steinberg his Honour made an important comment with which I agree. It was that 'the acquisition of property by the taxpayer with the purpose of its resale at a profit ... is in truth a commercial dealing.' 152Whilst it is true that there was a commercial aspect to the present transaction (the consideration of $20,000) it is difficult to see where the element of business is in the transaction. Mr Hraiki said he needed the money for property development reasons. The Defendant was a truck driver. He was not in the business of property development, nor in the business of money lending. 153It has been said elsewhere that this is beneficial legislation which ought to be liberally interpreted: Jonsson v Arkway Pty Ltd [2003] NSWSC 815; Benjamin v Ashakian [2007] NSWSC 735; Beckley v Consumer, Trader and Tenancy Tribunal [2009] NSWSC 703 at [63]-[69]. Bearing that in mind, and having regard to both s 11(1) and cl 7 of Schedule 2 to the Code, I do not consider that the Plaintiff has discharged its onus to show that the loan to Mr Hraiki was made for business purposes. 154What then needs to be determined is whether the loan, in return for a sizeable consideration, can be considered an investment. 155In In the will of Sherriff [1971] 2 NSWLR 438 Helsham J had to determine the meaning of the word "invest" for the purpose of a provision in a Will enabling the trustee to invest. He said (at 442): Investment of trust funds will ordinarily mean the laying out of trust moneys in acquisition of property with the object or purpose of obtaining some return by way of income or pecuniary return for the benefit of those ultimately entitled. In its dictionary meaning the word "invest" in relation to its monetary context is, in the revised third edition of the Shorter Oxford Dictionary, given a primary meaning as follows: "To employ (money) in the purchase of anything from which interest or profit is expected." There is added a colloquial meaning: "to lay out money." 156Similarly, in Re Fraser; Ex parte The Public Trustee as Manager of the Estate of Anne Veronica Fraser [2000] WASC 36 McKechnie J was considering whether the Public Trustee was entitled to invest monies bearing in mind the powers provided in the Public Trustee Act 1941 (WA). McKechnie J said at [16]: Investment is usually understood as it is defined in Butterworth's "Australian Legal Dictionary": Investment: conversion of money or circulating capital and some species of property from which an income or profit is expected. It is spending which adds to the stock of capital, traditionally regarded as spending on capital goods such as machinery, factory buildings, information, technology and infrastructure. It also includes the purchase of securities and other financial instruments. 157In The Commissioner of Taxes v The Australian Mutual Provident Society (1902) 22 NZLR 445 the issue was the meaning of the word "investments" in a taxing Act which taxed the company's "total income from investments of any kind". No definition was given of the word "investment" in the Act. The principal judgment of the New Zealand Court of Appeal was given by Edwards J who said (at 456-457): There is no statutory definition of the word "investment". The word must therefore be read in its popular meaning. That popular meaning embraces, I think, every mode of application of money which is intended to return interest, income, or profit. Money employed as capital in a business is, in popular language, money invested in a business; money used for the purchase of negotiable instruments is an investment; so also money lent upon a bond or other personal security; so money deposited with a bank or other financial institution at interest. 158In Shakespeare Haney Muir JA said this about what constituted an investment for the purposes of the Code. [47] Section 6(4), by excluding "investment" and not "business" activities from "personal, domestic or household purposes", suggests that investment purposes, in some circumstances, may come within the scope of "personal, domestic or household." As the subsequent discussion shows, it is not necessary for a transaction to exhibit much in the way of financial sophistication for it to be regarded as investing or as establishing an investment. [48] In Culverden Retirement Village Ltd v Registrar of Companies , it was observed in the judgment of the Court: As the courts below recognised, one of the everyday meanings of investment is the laying out of money in the acquisition of property in the hope of return. The return may come in the form of capital or income or both. It may be in cash, or it may be in kind such as the provision of services. There may be no prospect of capital growth, as with the purchase at par of short dated government stock. There may be no prospect of any lump sum return at all, as happens with an annuity. The purchaser of an annuity would readily say that he has invested his money in buying an annuity. Likewise in the present case, their Lordships consider that, without any strain of language, buyers of units would say they have invested their money in buying a townhouse in Culverden Retirement Village on terms that they will occupy this, with necessary services provided, for so long as they wish and that they will then get back all or a large part of their outlay. The return from their outlay is to be found in the totality of these benefits, not just the financial repayment at the end. [49] In Inland Revenue Commissioners v Rolls-Royce Ltd , Macnaghten J said: The word 'investment', though it primarily means the act of investing, is in common use as meaning that which is thereby acquired; and the primary meaning of the transitive verb 'to invest' is to lay out money in the acquisition of some species of property. [50] In The Commissioner of Taxes v The Australian Mutual Provident Society , Edwards J regarded the popular meaning of "investment" as embracing " ... every mode of application of money which is intended to return interest, income, or profit." 159Muir JA held that in the circumstances the purchase of property for the development of the land and the construction of a luxury house to be sold at a profit to increase the purchaser's capital amounted to an investment, even though it was to be lived in as the family home until an appropriate time arrived to sell it and realise the profit. 160What emerges clearly from all of these cases is that an investment ordinarily involves the acquiring of property of some sort to receive income or profit as a result of that acquisition. Mr Young argued that because the definition of property in Schedule 3 to the Credit Code includes "chose in action" what the Defendant acquired by making the loan to Mr Hraiki was a chose in action. However, the fact that he acquired a chose in action, being the right to sue Mr Hraiki for repayment of the loan, was only a necessary incident and legal result of making the loan. The purpose of making the loan to Mr Hraiki was not in order to acquire a chose in action, nor would he receive any income or profit from the right to sue Mr Hraiki. Rather, the benefit he was obtaining was a consideration for the making of the loan. 161It seems to me that the difference between an investment and what has taken place in the present case is that here the Defendant has not acquired any property from which some return might be expected. The fact that Mr Hraiki may be using the money for property development or for the acquisition of property with a view to a return does not mean that the Defendant, in the circumstances, is doing the same thing. Nor can the fact that he is receiving, or has been promised, consideration for the loan, convert a loan into an investment. Nor can the fact that he incidentally acquires a chose in action by reason of making the loan be deemed an investment in itself. 162Ordinarily, the difference between a loan and an investment of monies is that the right to a return of money loaned is dependent only upon the loan conditions including the date for repayment. The right to receive back money invested will ordinarily turn on the success or otherwise of the scheme into which the money is put or will depend on movements in value of the property so acquired by the investment. 163In my opinion, the purpose of the loan from Mango Media to the Defendant was a personal purpose, namely, to enable the Defendant to make a personal loan to his friend Mr Hraiki. Nor can it make any difference that the Defendant accepted in cross-examination that he considered the advancing of the money to Mr Hraiki with the intent that he would make a profit (i.e. the $20,000) was an investment. Whether it was an investment must be objectively determined. It cannot depend on what the Defendant believes. 164Mr Hraiki knew that the loan was to be used not for investment purposes by the Defendant but to be on-lent to him. Mr Hraiki was also the finance broker acting for the Defendant. Is he a relevant person within the meaning of s 11(3)? S 11(3) provides: (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. 165Mr Young argued that the reference to a finance broker cannot be intended to refer to someone who is acting as the exclusive agent of the borrower. He also took me to the amendments that were made to s 11(3) in 1998 where the words "relevant person" were introduced as well as the last sentence in sub-s (3). The amendments were said to be made, according to the Explanatory Notes, because the unamended section could operate unfairly towards credit providers where a false declaration was obtained from a person who was not a finance broker and was entirely unconnected with the credit provider. 166I do not consider, however, that it must be shown that the finance broker referred to in sub-s (3) was acting on behalf of the credit provider, whether exclusively or otherwise, for the conclusive presumption to be removed. Ordinarily a broker will be the agent of the borrower as was the case here. Mr Hraiki was the "finance broker ... through whom the credit was obtained". Nothing in the sub-section suggests that the finance broker must be one who is acting on behalf of the credit provider. If that had been the intention of the Legislature it is likely that the word "or" would have been replaced by "including". 167The Plaintiff argued that it was Mr Vo who obtained the declaration and it was not shown that Mr Vo knew that the money was to be on-lent to Mr Hraiki. That seems to me to be too narrow a reading of sub-s (3) for 2 reasons. First, although Mr Vo witnessed the Defendant's signature on the Business Purposes Declaration he was enabled to do that because Mr Hraiki brought the Defendant along to Mr Vo for that purpose. Secondly, and associated with the first matter, is the fact that Mr Vo was a solicitor in the firm which can be accepted was the firm of solicitors used by Mr Hraiki himself. 168I accept that there is an ambiguity in the last sentence of sub-s (3). It is not clear if "a person associated with" attaches not only to "the credit provider" but also to "a finance broker" by reason of the placement of the word "or" between those 2 entities. The better view is probably that the disjunction is between a person associated with the credit provider on the one hand and a finance broker on the other because of the words in parentheses immediately following the words "finance broker". However, because of the prior and apparently continuing retainer of Macquarie Lawyers by Mr Hraiki, Mr Vo should be regarded as "a person acting for" Mr Hraiki in the obtaining of the declaration. Some further support for this state of affairs can be inferred from the evidence of Mr Vo that the Defendant himself was never charged fees for the advice provided by Mr Vo, that the principal of the firm was an old friend of Mr Hraiki, and that he told Mr Vo he would look after the matter of the legal fees for the advice to the Defendant. In my opinion, the declaration was obtained by either or both of Mr Hraiki or Mr Vo who acted for Mr Hraiki. 169The result is, therefore, that Mr Hraiki's knowledge that the loan was to be used for personal purposes removes the effect of the Business Purposes Declaration and the conclusive presumption in s 11(2) of the Code. Accordingly, the presumption in s 11(1) applies so that the Code applies if the credit "is provided or intended to be provided wholly or predominantly" for personal use (s 6(1)(b)). 170Despite its lack of knowledge, actual or constructive, that the loan was for personal purposes, Mango Media is fixed with the knowledge by reason only of the inclusion of a finance broker as a relevant person in s 11(3) of the Code. 171I discussed in Bank of Queensland Ltd v Dutta [2010] NSWSC 574 at [115]-[124] the divergent views on what is meant in s 6(1) of the Code, and particularly in the case where the lender had been misled by what it was told, in that case, by the borrower. In the present case, Mango Media has undoubtedly been misled by Mr Hraiki (the application he submitted said the loan was for investment) and by the Defendant (the Business Purposes Declaration he signed said it was for investment), but for reasons which I discussed, that cannot alter the proper construction of the legislation which needs to be broadly and liberally interpreted as beneficial legislation. 172The proper construction of the section is the view of Gillard J in Linkenbolt Pty Ltd v Quirk [2000] VSC 166 at [98], that it is what the money is used for in fact. The result is that the credit was provided wholly for personal purposes within the meaning of s 6(1)(b) so that the Code applies to the loan. (4) Is the mortgage void under s 40 of the Code? 173Section 40 of the Code provides: 40 Mortgages over all property void (1) A mortgage that does not describe or identify the property which is subject to the mortgage is void. (2) Without limiting subsection (1), a provision in a mortgage that charges all the property of the mortgagor is void. 174The Defendant initially submitted that clauses 22 and 23 of the mortgage offend against the requirements of s 40(1). Those clauses relevantly provided: [22] The Mortgagor/s do hereby mortgage to the Lender/s all their estate title and interest in any real property/ies they currently own or partly own as surety for all of the Mortgagor's obligations to the Mortgagee/s arising herein ("Other Security"). The terms of the Mortgage over the Other Security will be the same as those contained herein. ... In the event of a default under this Mortgage the Lender/s will have the right to take possession of the Other Security and exercise power of sale and/or foreclosure to recover the debt and the Mortgagor/s will yield and surrender possession of the other security to the Lender/s. [23] The Mortgagor/s does/do hereby mortgage to the Mortgagee/s all their estate title and interest in any real property they will in the future own or partly own as surety for all of the Mortgagor's obligations to the Mortgagee/s arising herein ("Future Security"). The terms of the mortgage over the Future Security will be the same as those laid out in this Mortgage. ... In the event of a default under any of the Agreements the Lender/s will have the right to take possession of the Future Security and exercise power of sale and/or foreclosure to recover the debt and the Debtors will yield and surrender possession of the future security to the Lender/s. 175Schedule 2 of the Code contains a definition of property as follows: property means any legal or equitable estate or interest (whether present or future, vested or contingent, or tangible or intangible) in real or personal property of any description (including money), and includes things in action. 176The Defendant, however, accepted that because s 41 of the Code (making void except in certain enumerated situations a provision in a mortgage to the effect that the mortgagor creates a mortgage over property that is or maybe acquired), applied to avoid cl 23 it was unlikely that cl 23 was within the purview of s 40(1). The Defendant argued, however, that cl 22 continued to offend s 40(1) with the result that the mortgage is void. 177The mortgage document identifies on the first page the land being secured by its folio number. 178I do not consider that the presence of cl 22 in the mortgage results in the whole mortgage being avoided by virtue of s 40(1). There are 3 reasons for this. 179First, unlike the mortgage in Brott v Shtranbrandt [2009] VSC 467, this mortgage does identify specifically property of the Defendant being charged, namely, the land referred to in the folio on the front page of the mortgage. True it is that cl 22 purports to go further, and it will be necessary to consider s 40 generally in relation to that clause. However, in the first instance, this is not a mortgage that "does not describe or identify the property which is subject to the mortgage". 180Secondly, the terms of cl 22 point strongly to that clause being seen as a separate mortgage from the mortgage of the identified real property. A distinction is made in Schedule 1 of the Code between a "mortgage" and the "mortgage document". The definition of "mortgage" includes an interest in or power over property securing obligations of a debtor. The front page of the mortgage document (contained in exhibit A) says that the Defendant mortgages to the Plaintiff all of his estate and interest "in the above folio of the register". That is a mortgage as defined. 181Clause 22 then deals with what is described as "Other Security", and says that the terms of the mortgage over the Other Security will be the same as those contained in the mortgage document. Under the mortgage document the Defendant has entered into 2 mortgages consistent with the definition in Schedule 1. In those circumstances what is avoided by s 40(1) is not the whole of the mortgage document but the mortgage constituted by cl 22 because that clause does not describe or identify the property the subject of that mortgage. 182Thirdly, cl 27 of the mortgage provides: If any legislation relating to consumer credit would make a provision of this Mortgage illegal, void or unenforceable or would otherwise contravene a requirement of that legislation or impose an obligation or liability which is prohibited by that legislation then this Mortgage is to be read as if that provision were varied to the extent necessary to comply with that legislation or if necessary deleted. 183If, contrary to my earlier reasons, the "mortgage" is to be identified with the "mortgage document", cl 27 results in the mortgage being read as if cl 22 were omitted. In that way the mortgage will then not contravene s 40(1). (5) Interest rate on the loan 184The interest rate under the loan contract, if repayment was made in accordance with the loan contract, was 5% per month or 60% per annum. The default interest was 10% per month or 120% per annum. 185The maximum annual percentage rate for a credit contract to which the Code applies is 48% ( Consumer Credit (New South Wales) Special Provisions Regulation 2007 cl 6(1)). Section 21 of the Code relevantly provides: 21 Prohibited monetary obligations (1) A credit contract must not impose a monetary liability on the debtor: (a) in respect of a credit fee or charge prohibited by this Code; or (b) in respect of an amount of a fee or charge exceeding the amount that may be charged consistently with this Code; or (c) in respect of an interest charge under the contract exceeding the amount that may be charged consistently with this Code. (2) Civil effect . Any provision of a credit contract that imposes a monetary liability prohibited by subsection (1) is void to the extent that it does so. If an amount that is prohibited by subsection (1) is paid, it may be recovered. (3) A credit fee or charge can not be charged in respect of a credit contract unless the contract authorises it to be charged. (4) Civil effect . If an amount that is prohibited by subsection (3) is paid, it may be recovered. 186Section 22 makes it an offence for a credit provider to enter into a credit contract on terms imposing a monetary liability prohibited by s 21(1). Section 23 prohibits the credit provider from deducting an amount for interest charges under the contract from the advance to the borrower. 187The Defendant submits that by virtue of s 21(2) the provision in the mortgage stipulating the interest rate beyond that which the Regulation allows is void with the result that no interest is payable on the loan. Moreover, the Defendant submits that the prepayment of interest under the loan of $25,000 is a sum recoverable by the Defendant from the Plaintiff inasmuch as it was money had and received by the Plaintiff to the use of the Defendant. 188The Plaintiff submits that what s 21(2) does effectively reduces the interest rate to the maximum which is allowable. The Plaintiff also points to cl 27 of the mortgage to read down the interest provisions. 189In response, the Defendant submits that the prohibition contained in s 21(1) results in the provision being void. The mortgage, the Defendant submits, does not provide a less onerous obligation within the interest rate allowed by the Code. The words "to the extent that it does so" can only apply, the Defendant submits, if 2 rates are provided and one is beyond the allowable rate and the other is not. 190In my opinion, on a proper construction of s 21(2), the Defendant is not relieved from paying any interest under the credit contract. Rather, the interest rate charged is reduced to the maximum allowable of 48%. Section 21(2) avoids the excessive interest charge "to the extent that it does so", i.e. to the extent that an interest charge is imposed which is prohibited by s 21(1)(c). That construction gains support from the last sentence of sub-s (2) which enables the borrower to recover an amount "that is prohibited by sub-s (1)" if it is paid. What is prohibited by sub-s (1) is an interest charge "exceeding the amount that may be charged consistently with this Code". 191Since both the ordinary rate and the default rate of interest exceed the maximum allowable I consider that the wording of s 21(2) requires that each be declared void to the extent that it exceeds the maximum allowable. The result is that both will be reduced to 48% with the practical effect being that there will be no distinction between the two in the loan contract. I see no justification in according primacy to one or other of the rates so as to maintain the ratio between them when the rate is reduced. 192If I am wrong in that view, I consider that cl 27 of the mortgage has the same effect. That is, the interest provisions are to be read as if the provisions were varied to the extent necessary to comply with the Code. 193I do not consider that the Defendant is entitled to recover the whole of the prepaid interest of $25,000. Section 23 merely creates an offence associated with that practice. Unlike ss 21(2) and 21(4), s 23 does not make any provision for recovery of an amount that is paid in contravention of the provision in s 23. However, some portion of the $25,000 will be recoverable under s 21(2) because the figure will have been calculated upon the basis of the ordinary rate of interest of 60% per annum. The parties can make an adjustment in the Short Minutes I shall direct they bring in to give effect to this judgment. (6) Fees and charges 194The Defendant complains about the following fees and charges which were deducted from the advance at the outset: $7,600 Brokerage Skyder Financial $7,995 Establishment fee Mango Media $2,995 Mango Media's legal fees (estimate) $550 Mango Media's valuation (estimate) $951 Stamp duty $500 Miscellaneous registration and lodgement fees 195The amount complained about in respect of stamp duty appears to be incorrect. The figure shown in the letter of offer is $941. 196The Defendant submits that the mortgage did not authorise any of those fees to be charged with the result that s 21(3) meant that they were illegally charged. 197Section 21(3) refers to the "credit contract" and not the mortgage. The credit contract in the present case consisted of the offer from the Plaintiff of 20 December 2007 which set out the details of the loan and what would be paid from the advance. The Defendant denies that he signed the letter of offer but, in the light of the serious reservations I have about the evidence of the Defendant, I cannot accept that the Defendant has shown the signature is not his. He has an evidentiary onus in that regard and I do not consider it is discharged. 198What is certainly clear is that he signed 3 documents at the Dolce coffee shop on 20 December 2007 although, because he did not bother to look at what they were, he cannot now say what they were or what they contained. I note that the letter of offer consists of 3 pages and that it is for the amount the Defendant said he agreed to borrow to lend to Mr Hraiki. Even if it was not the loan offer signed on that day (because it appears Mango Media had a signed loan offer in its possession by 20 December) the Defendant did not call any handwriting expert to show that the signatures on the loan offers were not his signatures. 199The Defendant also submitted that the amount of $7,600 from Mr Hraiki's brokerage appeared in Mango Media's bank account as a debit in favour of itself. Whilst the bank statement was puzzling in that regard, and Mr Derums was not able to explain it, he said that he did not believe Mango Media had another account into which that money could have gone. In the absence of it being shown by the Defendant that Mr Hraiki had foregone his commission, so that it reverted to Mango Media, the likelihood is that $7,600 was paid to Mr Hraiki. Given his apparent desperation for money, it seems most unlikely that he would have foregone his commission. (7) Failure to serve a section 80 notice 200Because Mango Media had a Business Purposes Declaration signed by the Defendant it took the view, not unreasonably, that the credit contract was not subject to the Credit Code, and it did not, therefore, serve a s 80 notice before commencing these proceedings. I have held that the credit contract is subject to the Credit Code. That leads to a consideration of the failure to serve a s 80 notice in those circumstances. 201Mango Media served a notice that complied with s 57(2) Real Property Act 1900. That notice contained some of the requirements of s 80(3) but did not (because s 57 Real Property Act does not require it) give notice that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within that period. 202A similar situation arose in Dutta. In that case the Bank did not comply with the Regulation in that one Declaration was neither witnessed nor dated, and the other Declaration was signed after the loan agreement was entered into. There was also the factor in that case, as in the present, that the Bank was positively misled by the borrower about the purpose for which the loan was required. In the present case, Mango Media was misled by the stated purpose for the loan in documents presented to it by Mr Hraiki who was the Defendant's agent. In Dutta a s 57(2) notice was served. 203For the reasons I gave in Dutta at [142]-[157] and for the further reasons of Hoeben J in Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57 at [34]-[82], the present proceedings should not be dismissed because a s 80 notice was not served. At worst there was a procedural irregularity. The proceedings should be allowed to continue because Mango Media's failure to serve the notice was neither contumelious nor a highhanded disregard for its obligations: Dutta at [157], and see Bianka Monas at [84]. 204The Defendant is not disadvantaged by a refusal to dismiss the proceedings, particularly where he is able to have protective measures in the Code considered in these proceedings. He did not comply with the s 57(2) notice. The Defendant does not lead evidence that if he had been served with a s 80 notice he would have complied with its terms so as to have avoided the present proceedings. This is for the obvious reason that he wishes to challenge any liability he is alleged to have under the loan agreement in the various ways put forward in the proceedings. To dismiss these proceedings and require Mango Media to commence afresh after serving a s 80 notice would be a wasteful and futile exercise that would only cause unnecessary costs for all concerned, and would not, ultimately, produce an outcome different from the result in this judgment. (8) Section 102 Consumer Credit Code 205Section 102 Consumer Credit Code relevantly provides: 102 Civil penalty may be imposed for contravention of key requirement (1) Declaration as to key requirement . The Court must, on an application being made, by order declare whether or not the credit provider has contravened a key requirement in connection with the credit contract or contracts concerned. (2) Penalty orders . The Court may make an order, in accordance with this Division, requiring the credit provider to pay an amount as a civil penalty, if it is of the opinion that the credit provider has contravened a key requirement. (3) Prudential standing . The Court, in considering the imposition of a civil penalty, must have regard primarily to the prudential standing of any credit provider concerned, or of any subsidiary of the credit provider (within the meaning of the Corporations Law), if the credit provider or subsidiary takes deposits or is a borrowing corporation (within the meaning of that Law). However, the Court is to have regard to that prudential standing only if the credit provider requests the Court to do so. (4) Other matters to be considered . The Court, in considering the imposition of a civil penalty, must have regard to the following: (a) the conduct of the credit provider and debtor before and after the credit contract was entered into; (b) whether the contravention was deliberate or otherwise; (c) the loss or other detriment (if any) suffered by the debtor as a result of the contravention; (d) when the credit provider first became aware, or ought reasonably to have become aware, of the contravention; (e) any systems or procedures of the credit provider to prevent or identify contraventions; (f) whether the contravention could have been prevented by the credit provider; (g) any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions; (h) the time taken to make the application and the nature of the application; (i) any other matter the Court considers relevant. ... 206The term " key requirement " is defined in s 100(2) as a requirement of the Code contained in specified sections. The only relevant one for present purposes is s 21(1). 207There are 2 aspects to s 102. The first concerns a declaration which the Court must make if an application is made to it that there has been a contravention of a key requirement in connection with the credit contract. In the present case a declaration must be made because, as I have found, the loan was subject to the Code and the interest exceeded the permissible amount. 208The second aspect concerns the imposition of a civil penalty. Such a civil penalty will only be imposed at the Court's discretion. Matters which must be considered are set out in sub-ss (3) and (4) but paragraph (4)(i) makes it clear that any other matters that are considered relevant are also to be considered. 209The Plaintiff contravened a key requirement without fault on its part. The credit contract was found to be subject to the provisions of the Code only because of the knowledge of Mr Hraiki who, but for s 11(3), could not be regarded as the agent of the credit provider. The credit contract was only ultimately subject to the provisions of the Code because Mr Hraiki deliberately misled the credit provider about the purpose for which the loan was required. To a lesser extent the Defendant misled the credit provider about the purposes for which the loan was required because the Defendant was content to sign all sorts of documents addressed to the credit provider without regard to what those documents contained including the purpose of the loan contained in the Business Purposes Declaration. 210Had the position been what the Defendant and Mr Hraiki told the credit provider, the credit provider would have been entirely free to charge the interest rates set out in the loan contract because the credit contract would not have been subject to the Code. 211It is difficult to see what the credit provider could have done to ensure that it was not misled in the way it was. It engaged its own solicitors who prepared documents which were forwarded to solicitors who acted for the Defendant in respect of the execution of those documents. It was not open to the credit provider to proscribe particular solicitors who might act for the Defendant nor to prescribe those whom it considered should act for him. I have already held that the Plaintiff had no knowledge of the proposed loan to Mr Hraiki with the result that, even if they had known that Macquarie Lawyers were Mr Hraiki's own solicitors, they would not have been put on any notice of a possible conflict of interest in those lawyers acting for the Defendant. 212For these reasons it is not appropriate to impose any civil penalty on the Plaintiff. For similar reasons, no compensation should be ordered, nor any restitution made pursuant to ss 107 and 114 of the Code except as I have referred to in para [193] above. (11), (12) & (13) Was the contract unjust? 213The Defendant in his written submissions asserted that the contract was unjust for a number of reasons including: (a) The suspicious and improvident circumstances in which it was entered into; (b) the disparity of training and experience between the parties; (c) the lack of direct dealing by the Plaintiff with the Defendant; (d) the lack of any or any adequate legal advice; (e) the interposition of Mr Hraiki, especially in determining the destination of the funds to Mr. Youssef without direction from Macquarie Lawyers or any other solicitor; (f) the usurious interest provisions; (g) the attempt to attach all present and future real property; (h) the other matters listed in paragraph 78 of the Cross Claim which complained of clauses 13, 19, 32 and 35 of the mortgage. 214These matters were not amplified during the course of submissions made orally in Court. In the course of those submissions a further factor was added, namely, what was said to be the unfair tactics of Mr Hraiki being his forgeries and the way he imposed on the Defendant. However, that matter was not further developed. 215There is no doubt that a contract can be held to be unjust even if the factors that make it unjust are not known to the party attempting to enforce the contract. In this regard, Basten JA said in Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [119]: Reading St Clair [ St Clair v Petricevic (1988) ASC 55-688] and Karavas [ Beneficial Finance Corp Limited v Karavas (1991) 23 NSWLR 256] together, the true position may be that a claimant can establish the unjustness of a contract by reliance on factors of which the other party was ignorant when the contract was entered into, but that such ignorance may be relevant in determining whether to grant relief. The fact that the power may be engaged by circumstances which were not known to the other party at the time the contract was made is well-established: see, eg, St George Bank Ltd v Trimarchi [2004] NSWCA 120 at [36], Mason P, Sheller JA and Cripps AJA agreeing. (see also Spigelman CJ at [93]-[96]) 216I have found that the Plaintiff was unaware of the arrangement between the Defendant and Mr Hraiki, and was unaware until it was provided with the instructions from Mr Hraiki concerning Mr Youssef that the advance was going other than to the Defendant. It was unaware of the lies that Mr Hraiki had told (for example, the information contained in the loan application) and it was ignorant of the forgeries of the various documents provided to it in support of the loan application. Khoshaba and the authorities referred to in it, however, show that that ignorance will not prevent a finding that the contract was unjust if the Defendant otherwise establishes that unjustness. The ignorance of the Plaintiff would become relevant only when the Court comes to exercise its discretion whether or not to grant relief against that unjustness. 217The issue is, therefore, whether the contract between the Plaintiff and the Defendant was unjust. In that regard the purpose of the loan is a relevant circumstance relating to the contract: Khoshaba at [70]. 218In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 McHugh JA (as his Honour then was) said this about the Contracts Review Act (at 620-621): Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice. The definition of "unjust" in s 4 is not exclusive. It is in my opinion a mistake to think that a contract or one of its terms is only unjust when it is unconscionable, harsh or oppressive. Contracts which fall within any of those categories will be "unjust". But the latter expression is not limited to the so-called "tautological trinity". The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with "unjust" contracts. Very likely its provisions signal the end of much of classical contract theory in New South Wales. Any contract or contractual provision, not excluded from the operation of the Act and which the court considers is unjust in the circumstances existing at the time when it was made, may be the subject of relief under the Act. Moreover, the provisions of s 9(2) do not exhaustively indicate the criteria as to what can be taken into account in determining whether a contract or any of its provisions is unjust. The provisions of s 9(2) of the Act are concerned for the most part with matters of procedural injustice. But the court is entitled to have regard to all the circumstances of the case, subject to s 9(4), and the public interest. In an appropriate case gross disparity between the price of goods or services and their value may render the contract unjust in the circumstances even though none of the provisions of s 9(2) can be invoked by the applicant. Indeed, notions of unfairness and unreasonableness will, I think, generally be present when a contract or any of its provisions is declared unjust. This will particularly be the case where procedural injustice is relied on. If a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned, it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or a provision of the contract unjust. ... If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. 219These remarks of McHugh JA were again adopted by the Court of Appeal in Khoshaba at [71]-[73] and [114]-[116]. Further, as Basten JA made clear in Khoshaba at [128] an object of concern under the Act is a borrower who has demonstrated an inability reasonably to protect his or her own interests. 220I will now deal with the reasons put forward by the Defendant for suggesting that the contract was unjust. 221Although the suspicious and improvident circumstances are linked they appear to me to be separate matters. As I have found, there was nothing to put the Plaintiff on notice or alert of suspicious circumstances. Mr Hraiki was a finance broker who had dealt with the Plaintiff before, albeit that had involved on some occasions loans to various members of his family. Because the Plaintiff was not aware of the true purpose of the loan it was not put on any notice of any conflict of interest in relation to Macquarie Lawyers acting for the Defendant. 222It does not seem to me that there were improvident circumstances for entry into the loan. The Defendant was a willing participant in the arrangement with Mr Hraiki not only because he trusted Mr Hraiki to do the right thing by him but because Mr Hraiki had promised the Defendant $20,000. Although in a number of respects the Defendant could be considered to be in the position of a guarantor for Mr Hraiki, he was promised a substantial payment for doing so. The mere fact of his being a guarantor was not itself an indication of improvidence. 223The assertion of a disparity of training and experience between the parties does not even hint at unjustness particularly where the Defendant understood what he was doing and willingly entered into the contract, being prepared to take the risk that Mr Hraiki would not do the right thing by him whether deliberately or by misfortune, as he made clear in his evidence more than once. 224The lack of direct dealing by the Plaintiff with the Defendant, where the Defendant's agent was a finance broker that the Plaintiff had previously dealt with cannot amount to unjustness. Indeed, the interposition of a broker might be thought to provide more protection for a borrower than if the borrower dealt directly with the lender. 225Whilst it is true that the legal advice by Macquarie Lawyers to the Defendant was inadequate, its inadequacy did not result in the Defendant entering into the contract when he would not have done so if the advice had been adequate. The Defendant was a willing participant in the arrangement that he was happy to make at Mr Hraiki's request. It can be accepted, however, that if the Business Purposes Declaration had been properly explained to the Defendant (and I assume for this purpose that it was not) it is possible that the Defendant may not have signed it. Nevertheless, I have already determined that the purpose of the loan was a personal purpose and, therefore, that the Credit Code applies to it. In those circumstances, any failure of Mr Vo to have given a proper explanation about the Business Purposes Declaration has not resulted in the contract being unjust. 226In circumstances where the Defendant agreed that he wanted to make sure the advance was to go to where Mr Hraiki wanted it to go, and where the Defendant signed the amended cheque direction in favour of Mr Youssef, the fact that the initial direction to pay Mr Youssef came from Mr Hraiki cannot make the contract unjust. 227Although the interest provisions in the contract of loan might be regarded as usurious even though the Plaintiff was a lender of last resort making a short term loan, I have already determined that the Credit Code applies to the contract with the result that the interest rate is reduced to 48%. The rate of 48%, as a result of being the maximum rate allowable under the Regulation, cannot, therefore, be regarded as usurious nor, in all the circumstances, does it mean that the loan contract was unjust. 228The fact that the mortgage attempted to catch all present and future real property of the Defendant is of no significance in the circumstances because the only real property owned by the Defendant was the property specifically secured by the mortgage. In any event, the Code has acted on the terms of the mortgage to avoid those provisions. 229The Defendant complains about clauses 13, 19, 32 and 35 of the mortgage. Those submissions were directed to the assertion that those clauses made the contract unjust. Clauses 32 and 35 seem entirely innocuous concerning the service of notices and process. It can be accepted that clauses 13 and 19 of the mortgage contain onerous provisions although clause 19, which does not permit any set off by the mortgagor, is a common clause found in many mortgages from financial institutions. I do not consider that the mere presence of clause 13 in the mortgage renders the contract unjust, particularly in light of the fact that the rights, obligations and liabilities of the parties are being dealt with in these present proceedings. 230I do not consider that the contract was unjust for any of the reasons advanced by the Defendant. Further, when viewed from an overall perspective, there was nothing unjust about the contract. The Defendant willingly entered into the arrangement because Mr Hraiki requested it and the Defendant was content to assist Mr Hraiki, taking the risk if necessary that he (the Defendant) would be obliged to repay the money in the event that Mr Hraiki did not. He also entered into the contract because Mr Hraiki promised him $20,000, and he believed Mr Hraiki's promise. His evidence was that he was content for the money to be directed to whomever Mr Hraiki directed it. The Defendant's signature on the fresh cheque direction was confirmation of that. 231He was such a willing participant in what Mr Hraiki wanted to do that he was content for Mr Hraiki to present to the Plaintiff whatever information Mr Hraiki put forward about the Defendant's financial position. His statement that he allowed Mr Hraiki to do that because he never believed that the loan would be approved cannot be accepted. When it became clear that the loan had been approved, his agreement to sign a large number of documents to effect that, and to attend on the settlement of the loan with his agreement that the cheques be paid to Mr Youssef, is all a clear indication that, whatever his earlier belief that the loan would not be approved, when it was approved he was agreeable to it proceeding in the way it did. 232I have accepted that the one matter he may not fully have understood, because of the poor legal advice he received, was that he need not have signed the Business Purposes Declaration because the loan that he was borrowing was not for a business purpose. For the reasons I have discussed the outcome of that aspect of the transaction is that the Defendant obtains the benefits of the Credit Code because the loan is subject to the Credit Code. He has obtained that advantage although I have no doubt that if Mr Hraiki had told him he needed to sign the Business Purposes Declaration for the loan to be obtained he would willingly have done so. 233The loan from the Plaintiff to the Defendant cannot be unjust simply because Mr Hraiki persuaded the Defendant to enter into it when Mr Hraiki had no intention (it can be assumed) of repaying the money to the Defendant. No doubt the Defendant can now see that he was foolish to trust Mr Hraiki in the way he did. Viewed objectively, his blind faith in Mr Hraiki, whose acquaintance he had only renewed 12-15 months before, and whom he trusted simply because Mr Hraiki had never done the wrong thing to him at school, was something for which the Defendant has to take responsibility and which cannot be brought home to the Plaintiff (cf. Khoshaba at [90]). (14) & (15) Trade Practices Act issues 234The Defendant accepts that if it is found the loan is subject to the Credit Code because it was made for personal purposes then the provisions of the Trade Practices Act 1974 will not operate upon it. (16), (17) & (18) Unconscionability issues 235The Defendant argues that he was under a special disability at the time he agreed to borrow the money and on-lend it to Mr Hraiki. The Defendant says he was imposed upon by Mr Hraiki, and he (the Defendant) was vulnerable. 236There is a distinction between the doctrines of unconscionable dealing and undue influence, articulated by Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461. A helpful summary of what amounts to unconscionable dealing and an unconscientious bargain is to be found in the judgment of Brereton J in Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 at 49-54. In particular Brereton J said: [54] At the heart of the doctrine is the prevention of unfair exploitation of a disadvantage or vulnerability. A relationship of emotional dependence that renders a party susceptible to improvidence in favour of the stronger party may attract the doctrine [ Louth v Diprose (1992) 175 CLR 621; Bridgewater v Leahy (1998) 194 CLR 457]. But not every case of illness, impairment or emotional dependence is a case of special disadvantage. The cases to which reference has so far been made show that it is insufficient to attract the doctrine merely that there be an inequality of bargaining power, or that the plaintiff be affected by one or more of the relevant conditions; it is critical that the condition be such as to impact on the plaintiff's ability to conserve his or her own interests and render him or her vulnerable to exploitation. One can be ill, or poor, or even affected by delusions, and still perfectly capable of robustly conserving one's own interests [cf, albeit in a different field, Banks v Goodfellow (1870) LR 5 QB 549, in which it was established that the circumstance that a testator, who managed his general affairs perfectly capably, entertained certain insane delusions which did not impact on the will-making process, was not inconsistent with his having testamentary capacity]. 237The Defendant argued that many matters came to the attention of Mango Media that should have put it on enquiry that the Defendant was being used in this way by Mr Hraiki. The Defendant identifies these matters as including: (a) the failure of the 100 points identification test, (b) the late night faxes, (c) the attempt to get $380,000 on an egregiously inflated statement of value of the mortgage property, (d) the intervention of the direction to pay Mr. Youssef, contrary to those received after the visit to Macquarie Lawyers, (e) the lack of any correspondence from that firm, nor direction from the borrower to pay a fee to it, (f) the absence of any mandate to pay brokerage to Mr. Hraiki, (g) the lack of any authority for Mr. Hraiki to usurp the proper role of the borrower's solicitor on settlement, (h) the fact that Mr. Hraiki's company was in default of obligations to Mango Media and needed money, (i) the provision by Hraiki by a late night fax on 20 December of an obviously forged letter from the first mortgagee supposedly dated the next day, (j) then, on 21 December, the instant production by Mr. Hraiki of further purported letters from the first mortgagee after enquiry from Mango Media, and its refusal to act on earlier purported Resimac letters, (k) the failure of the transaction to conform in various respects with Mango Media's own procedures, and (l) The lack of any or any reasonable explanation for the transaction to proceed with the urgency contrived for it. 238I have dealt with a number of these matters when discussing the credit of various witnesses, particularly Mr Derums. Many of the matters are of minimal or no significance such as the fact that no provision was made to pay a fee to Macquarie Lawyers or the lack of a reasonable explanation for the urgency of the transaction. The failure of the 100 points identification test is scarcely of any significance when the lawyers acting for the Defendant had seen and certified his licence (as had Mr Derums) and credit cards, and had met him to provide some explanation of the documents. In any event, the Defendant does not dispute that he was the person who entered into the arrangement. The Plaintiff could not be aware, and was not aware, that the explanation was inadequate. 239There was no lack of mandate to pay brokerage to Mr Hraiki from the point of view of the Plaintiff when it had what was thought to be a signed letter of offer from the Defendant. The Defendant has not established that the signatures on those documents were not his signatures. 240The fact that the security property was considerably over-represented in value was not, as Mr Derums said, an unusual matter from the point of view of prospective borrowers from the Plaintiff. But the Plaintiff had no reason to assume that that over-value was Mr Hraiki's doing as opposed to the Defendant's. 241Many of the matters pointed to by Defendant only become of any significance if it can be shown that the Plaintiff knew that the money being borrowed by the Defendant was being on-lent to Mr Hraiki. The Defendant did not prove that that was so, and there was no evidence that the Plaintiff was aware that Mr Hraiki was other than the Defendant's finance broker. Although the Plaintiff had in its collective knowledge, and Mr Derums may have had it within his own personal knowledge to some extent, the fact that there had been default in repayment of Hraiki family loans with which Mr Hraiki was involved through his company's guarantee or otherwise, there is simply no evidence that the Plaintiff, Mr Derums or Ms Charleston, knew anything about the private arrangements between Mr Hraiki and the Defendant. 242There is no evidence of any inability on the Defendant's part to conserve his own interests or anything which rendered him vulnerable to exploitation. The Defendant suffered from no illness, impairment or emotional dependence on Mr Hraiki which left him unable to protect his own interests. Although it is undoubted that Mr Hraiki perpetrated a fraud on the Defendant he did so not because he took any particular advantage of him - he merely asked the Defendant to borrow the money for him and the Defendant agreed. The only evidence of any disadvantage was the assertion by the Defendant that he was desperate for money (cf the $50,000 he said he still had), but there was no evidence that he told Mr Hraiki of that or that Mr Hraiki knew it. (19), (20), & (21) Undue influence issues 243The Defendant said that the case was not one where the Plaintiff exercised undue influence over the Defendant. Rather, the issues were directed to Mr Hraiki's influence over the Defendant and, if that was found, what remedy the Defendant might have against the Plaintiff by reason of that undue influence. Mr Smallbone accepted that the Plaintiff is not affected by this undue influence unless it was on notice of circumstances that put it on enquiry. Mr Smallbone accepted that the Plaintiff did not have actual knowledge of the undue influence, but submitted that it had constructive knowledge because of the notice it had of sufficient circumstances to put it on enquiry that Mr Hraiki was exercising some dominion over the Defendant. 244The relationship between the Defendant and Mr Hraiki was not a relationship where undue influence is presumed. However, if it can be shown that in the circumstances Mr Hraiki exercised dominion over the Defendant, then subject to the matter of adequate consideration and the matter of independent advice, it may be found that there was undue influence. The difficulty for the Defendant in the present case is showing that dominion over him by Mr Hraiki. 245Mr Smallbone drew attention to what was said by Dixon J in Johnson v Buttress (1936) 56 CLR 113 at 137, and by Brennan J in Louth v Diprose (1992) 175 CLR 621 at 629, quoting from Bromley v Ryan (1956) 99 CLR 362 at 405, to suggest features that might be applicable to the Defendant. In particular, Mr Smallbone drew attention to what he described as the "pathetically trusting and simplistic nature" of the Defendant's outlook, his leaving his affairs wholly in Mr Hraiki's hand s, even to the extent of being taken by him to places they had to go and seeing people they had to see, having Mr Hraiki tell him what documents were all right to sign, together with the Defendant's rather strange view that (as he put it) one should trust an old school friend. Mr Smallbone submitted that the Defendant had had a somewhat sheltered life in that he had worked for 12 years in his father's business, not rising beyond the position of a truck driver. However, this seems to ignore the fact that the Defendant had set up a company to run a caf business, taken out a further loan for that purpose and run the caf business for some 14 months employing 2 staff, and subsequently ran a trucking business. 246The evidence about Mr Hraiki was sparse in the extreme. All that was known was that the Defendant and Mr Hraiki had known one another at school, that Mr Hraiki (by the time the Defendant re-met him) was a finance broker, although how successful was not identified, and that Mr Hraiki was a director of some companies including the one through which he operated his finance broking business. 247The Defendant gave no evidence of being influenced by Mr Hraiki, by being overborne by him or of any feeling that he was obliged to agree to what Mr Hraiki requested. There was no evidence that he had handed over his financial affairs for Mr Hraiki to manage. There is certainly no evidence of any pestering or nagging on Mr Hraiki's part to persuade the Defendant to agree to his request. On the contrary, what emerges clearly from the evidence was the Defendant's readiness to agree to the request on the first occasion Mr Hraiki made it. 248All of that seems to me to be a considerable distance from undue influence on the part of Mr Hraiki. When that is coupled with the absence of any prior relationship suggesting dominance or influence (e.g., there was no evidence that the Defendant had ever relied upon Mr Hraiki previously in his capacity as a finance broker or advisor) any claim of undue influence is not made out. 249In any event, a consideration of $20,000 for providing his property as security for a loan for a 2 month period cannot be seen to be inadequate consideration. As Dixon J said in Johnson v Buttress at 136: Where the arrangement is not a gift but a contract adequacy of consideration becomes a material question, and the Court examines the propriety of what wears the appearance of a business dealing. 250Even if, contrary to what I have found, Mr Hraiki exerted undue influence over the Defendant and the consideration was not adequate for the arrangement, there remains to be determined why the arrangement with the Plaintiff should be set aside at the behest of the Defendant. It can be accepted in the first instance that the equitable jurisdiction to set aside transactions involving third parties exists where Y under the influence of X enters into an obligation to Z which will be to the benefit of X as in the situation where Y is a guarantor for X: Meagher, Gummow and Lehane, Equity: Doctrines and Remedies , 4 th ed (2002) Butterworths at paras [15]-[150]. The Defendant must show that the person in the Plaintiff's position in the present case was put upon enquiry that impropriety might occur. In such a case the creditor is subject to the equitable rights of the surety: Amadio at 467-8. 251Something the Plaintiff was not obliged to do was to ensure that the Defendant had independent legal advice before entering into the transaction: Coldunell Ltd v Gallon [1986] QB 1184 at 1201; Bank of Baroda v Shah [1988] 3 All ER 24, and see Khoshaba at [90]. But here the Plaintiff did require it, and believed, reasonably enough, that the Defendant had received it. That is a strong factor against the Plaintiff being on enquiry about impropriety in the relationship between the Defendant and Mr Hraiki. 252For reasons I have dealt with earlier in a number of places I do not consider that the matters identified (and set out in para [237] above) put the Plaintiff on notice of any undue influence on the part of Mr Hraiki over the Defendant. Even if the Plaintiff had closely examined the fax markings and seen the odd hours faxes were sent and had thought about the shortness of time in which material was supplied in that regard, none of that would have been an indication of undue influence of Mr Hraiki. 253What the Plaintiff did know was that the Defendant had been to see Macquarie Lawyers who had provided him with various documents witnessed by a solicitor, including certificates that involved seeing the licence and credit cards of the Defendant. On the face of those documents they indicated that the Defendant had been advised by those solicitors of the matters about which he needed advice. As in Baroda v Shah I consider the Plaintiff was entitled to assume that Macquarie Lawyers had adequately advised the Defendant about the documents and the transaction. (22), (23) & (24) Mortgage enforcement issues 254The loan was advanced for a 2-month period and was due for repayment on 21 February 2008. The Defendant failed to repay the loan on that date or at any time thereafter. The Defendant has been unsuccessful in the defences it has raised to the claims for possession and for repayment of the principal sum with interest except to the extent that the interest rate under the mortgage is reduced because the credit contract has been found to be subject to the Credit Code. The Plaintiff is, therefore, entitled to possession of the land and is entitled to be repaid the principal sum together with interest at the adjusted rate. 255To that end, the parties should bring in Short Minutes to reflect these reasons. Such Short Minutes should include a declaration to the effect that the Code applies to the loan and the declaration referred to in para [207] above. 256I mentioned at the outset that the Plaintiff commenced 2 proceedings, one seeking possession and one claiming what was said to be damages although what ought to have been claimed was a liquidated sum owing. That error does not disentitle the Plaintiff from recovering the appropriate liquidated amount: Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 at [47]-[53]. It was never explained why 2 sets of proceedings were commenced. Subject to hearing from the parties on costs generally, the commencement of 2 sets of proceedings may have costs implications. I will hear the parties on costs generally. ********** 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. Decision last updated: 08 September 2011