Supreme Court New South Wales Medium Neutral Citation: Permanent Custodians Limited v John Nobilo [2012] NSWSC 109 Hearing dates: 13 February 2012 - 16 February 2012 Decision date: 24 February 2012 Jurisdiction: Common Law Before: Adamson J Decision: (1) Judgment for possession of the land described in Folio Identifier [ID] of the Register known as [address]. (2) Grant leave to the plaintiff to issue a writ of possession forthwith. (3) Judgment for the plaintiff against the first, second and third defendants in the sum of $808,046.89. (4) Order the first, second and third defendants to pay the plaintiff's costs of the proceedings. Catchwords: CONTRACT - unjust and unfair - relevant enquiry for the purposes of the Contracts Review Act - whether the contract is unjust in all the circumstances - whether lender made sufficient enquiries concerning ability of mortgagees to service debt - enforceability of mortgage bearing forged signatures PRACTICE AND PROCEDURE - evidence credibility - inferences drawn from failure to call witnesses - whether a witness is in another party's camp Legislation Cited: - Civil Procedure Act 2005 - Consumer Credit Code - Contracts Review Act 1980 - Real Property Act 1900 Cases Cited: - Bank of Western Australia Limited v Tannous [2010] NSWSC 1319 - Breskvar v Wall (1971) 126 CLR 376 - Commercial Banking Co of Sydney Limited v Pollard [1983] 1 NSWLR 74 - Davey v Challenger Managed Investments [2003] NSWCA 172 - Fabre v Arenales (1992) 27 NSWLR 437 - Idoport Pty Limited v National Australia Bank Limited and Ors - Jones v Dunkel inference (from the eponymous case, at (1959) 101 CLR 298 - Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 - Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 - Perpetual Trustees Victoria Limited v English [2010] NSWCA 32 - Perpetual Trustees Victoria Ltd v English & Anor [2009] NSWSC 47 - Provident Capital v Printy [2008] NSWCA 131 - West v AGC (Advances) Limited (1986) 5 NSWLR 610 Category: Principal judgment Parties: Permanent Custodians Limited - Plaintiff John Nobilo - First Defendant, First cross-claimant on the second cross-claim Jakica Nobilo - Second Defendant, Second cross-claimant on the second cross-claim Judy Saad - Third Defendant Vincent Parisi - First cross-defendant on the second cross-claim Anthony Pascale - Second cross-defendant on the second cross-claim Representation: P Newton - Plaintiff M Avenell - Defendants, Cross-claimants C Colquhoun - Cross-defendants Kemp Strang - Plaintiffs SBA Lawyers - Defendants, Cross-claimants Sparke Helmore - Cross-defendants File Number(s): 2009/00297346 Judgment Introduction 1The plaintiff seeks an order for possession of the property at [address] ( the Property ), and judgment for the sum secured by a registered mortgage ( the Mortgage ) over the Property. 2The first and second defendants, Mr and Mrs Nobilo, ( the defendants ) resist the plaintiff's claim on two bases: first, that they did not execute the Mortgage which is thereby ineffective to encumber the Property and secondly, that the Loan Agreement and Mortgage are unjust, ought not be enforced and that relief ought be granted pursuant to the Consumer Credit Code ( the Code ) or the Contracts Review Act 1980 (the Contracts Review Act ). 3The third defendant, Mrs Saad, did not appear. The plaintiff has tendered evidence that establishes that she has been served. She has resided at the Property with her parents, the defendants, since August 2006. 4Mr and Mrs Nobilo's first cross-claim was brought against the plaintiff and the Registrar-General. Against the plaintiff, they reiterated the allegations in respect of the Code and the Contracts Review Act that were contained in their defence (which was strictly unnecessary as the Contracts Review Act can be relied upon by way of defence: Commercial Banking Co of Sydney Limited v Pollard [1983] 1 NSWLR 74 at 78, per Rogers J). The cross-claim against the Registrar-General was resolved and dismissed by consent. 5Mr and Mrs Nobilo filed a second cross-claim in which they made an alternative claim for damages for negligence and equitable compensation for breach of fiduciary duty against solicitors ( Hunter Lawyers ) in respect of advice said to have been given by them to Mr and Mrs Nobilo regarding the nature of the transactions they were entering into and certificates of independent advice and statutory declarations on which the plaintiff, through its mortgage manager, Bluestone, is said to have relied before advancing the monies secured by the Mortgage. However, on the last day of the proceedings this cross-claim was dismissed by consent and therefore does not need to be determined. 6As part of the settlement of the second cross-claim, the defendants agreed not to challenge the evidence of Hunter Lawyers' three witnesses: Mr Pascale and Mr Chand, solicitors, and Ms Schinella, a paralegal. Ms Avenell, counsel for the defendants, made the following announcement following the settlement and prior to the commencement of submissions: "Mr and Mrs Nobilo do not make any submissions or suggest to the court that the crossdefendants, that's Hunter Lawyers, acted negligently, breached their fiduciary duties or otherwise acted improperly in any way and we do not invite the court to make any adverse findings against the crossdefendants being the Hunter Lawyers crossdefendants or their employees." 7Mr Newton, counsel for the plaintiffs, read the affidavits filed by Hunter Lawyers in support of his case in reply to the defence under the Contracts Review Act and the Code . 8Accordingly, the only matters for me to determine are the plaintiff's claim and Mr and Mrs Nobilo's defence to it. The relevant facts 9Many of the facts are established by documents and are relevantly uncontroverted. However, Mr and Mrs Nobilo's understanding of the various transactions into which they have entered throughout their adult lives, and not merely the transactions the subject of these proceedings, is in issue. I propose to summarise salient events in chronological order, identify the evidence where this is disputed and set out my findings. I propose to address separately my assessment of Mr and Mrs Nobilo's credit, which is a significant issue in the proceedings. 10Mr Nobilo, who was born on 4 July 1942, and his wife, Mrs Nobilo, who was born on 25 June 1947, arrived in Australia in 1963. On 14 December 1969, they married. At about this time they purchased a property in Merrylands, which was mortgaged to the Commonwealth Bank. At least from that time, Mr and Mrs Nobilo understood that a mortgage was a loan secured over property which could be sold by the lender in the event of default. 11In 1971, their first child, Judy, was born. After her marriage she became known as Judy Saad but at some times after her separation from Mr Saad she used her maiden name of Nobilo. Mr and Mrs Nobilo also had a second child, Jason. 12In 1971, the couple purchased a block of land at Kincumber on which Mr Nobilo built a house. There was a mortgage over the Kincumber property in favour of the Finance Corporation of Australia, which Mr Nobilo said was associated with the Commonwealth Bank. They did not live there. Once the house was completed, in about 1975, they sold it for a profit. 13In 1976, Mr and Mrs Nobilo purchased a property in Baulkham Hills. They lived there until 1998. At the time of its purchase, they granted a mortgage to the Commonwealth Bank. In 1977, when Mr Nobilo had completed the house on the Baulkham Hills property, they sold the Merrylands property and moved to Baulkham Hills, where they remained until 1998. 14In 1993 Mr Nobilo, who was a builder, had a work related injury as a result of which he received a net workers' compensation payout of about $50,000 in about 1995. From 1995 until 2007, he was on a disability pension. In 2007 he qualified for the aged pension. 15Mrs Nobilo, who had previously worked as a seamstress, was at home full time from 1993, looking after her children and her mother-in-law, who had dementia. From the late 1990's to about 2004 she worked as a cleaner two days a week. 16In about 1995, Mr Nobilo lent his $50,000 pay-out to his daughter, Judy, so that she could pay out her business partner in the travel agency business that she had operated since 1994. There was no written agreement for this loan, which has not been repaid. 17In October 1997, while Mr and Mrs Nobilo still lived at Baulkham Hills, they granted a further mortgage to the Commonwealth Bank to secure loans to Nobi Pty Limited. According to an ASIC Company Extract, at that time the directors of Nobi Pty Limited were Judy Nobilo (later Saad) and Natali Covic. Although Mr Nobilo eschewed the proposition, Mrs Nobilo admitted that they had obtained this loan because "she (Mrs Saad) had just opened her business and she needed money and that's why we went." I infer, in the absence of any reliable evidence to the contrary, that the purpose of this loan was to confer a benefit on Judy and that this was what both Mr and Mrs Nobilo intended. 18In 2000, Mr and Mrs Nobilo bought two blocks of land at Glenwood and onsold one of the blocks of land for a profit which enabled them to own the second block unencumbered by a mortgage. They built a house on the lot which they retained doing much of the physical work themselves, with the assistance of some subcontractors. 19Mrs Saad's first child, Briana, was born in December 2003. At some time prior to 2004, Mrs Saad told her parents that her travel business had been the victim of credit card fraud. In early 2004, she asked them whether they would be prepared to guarantee a loan to her which would help her overcome the shortfall created by credit card fraud. They agreed to encumber the Property for that purpose. 20In February 2004, Mrs Saad, applied to La Trobe Home Loans of Australia (on behalf of Permanent Mortgages) for a loan of $450,000 for business investment purposes ( the La Trobe loan ). Mr and Mrs Nobilo were the guarantors of this loan which was secured by mortgage over the Property. It was the first time that the Glenwood property had been encumbered since they had purchased it. The La Trobe loan was serviced by Judy. 21Upon settlement of the La Trobe loan, Mr and Mrs Nobilo received and retained in their possession a document from Purcell Solicitors dated 8 July 2004 which set out how the proceeds of the loan would be disbursed which read as follows: By Advance from La Trobe $450,000.00 To La Trobe application fee $4,500.00 To La Trobe settlement disbursement fee $ 55.00 To Valuer inspection fee $ 330.00 To Our professional costs & out of pocket expenses $1,722.80 To Stamp duty $1,741.00 To Titles Office fees $ 75.00 To Commonwealth Bank of Australia $272,451.09 To Judy Nobilo $169,125.11 $450,000.00 $450,000.00 22Although Mr Nobilo said that he did not recall executing the Deeds of Guarantee with La Trobe, counsel for Mr and Mrs Nobilo accepted that they had signed the loan documents, the mortgage documents, and a declaration that they had received independent legal advice before signing the documents (albeit one witnessed by a Justice of the Peace). Ms Avenell also accepted that they had signed an acknowledgement that they had received copies of the documents; they had been given an opportunity to read them; the documents had been fully explained to them; and they understood that if the debtor defaulted, La Trobe would be entitled to sell the Property and recover the monies due to it. 23From 2004 until 2006, Mrs Nobilo received a carer's pension from Centrelink. The evidence does not reveal whether this was for care provided by her to Mr Nobilo, or to his mother, who lived with them. 24Mr and Mrs Nobilo gave affidavit evidence in these proceedings, which I accept, that they knew as of about July 2005 that their daughter was making enquiries with other lenders to refinance the La Trobe Loan, with a view to getting a better interest rate. 25In December 2005, Mrs Saad submitted an application in her name and the names of her parents for a loan of $600,000 to Wizard Home Loans. The loan application, which was subsequently referred to Bluestone, the plaintiff's agent, comprised several documents including rates notices for the Property, bank statements for Mrs Saad and also for Mr and Mrs Nobilo, and Centrelink payment summaries for Mr and Mrs Nobilo. The documents relating to Mr and Mrs Nobilo were provided by them to Mrs Saad at her request. Mrs Nobilo admitted that she knew that Mrs Saad needed these documents to support the loan application. The purpose of the loan was threefold: to refinance the La Trobe loan, to provide a fund for share investment and for "renovations". It is not suggested that the renovations were to be to the Property. Although signatures purporting to be those of Mr and Mrs Nobilo appear on the Loan Application it is common ground that they did not sign the documents. 26A journal entry made by Bluestone, dated 28 December 2005 reads: 3 applicants. Daughter, mother & father. We are taking the parents owner occ property as security & refinancing the existing La Trobe mortgage with additional funds for home improvements ($40K) & the further $100K for a share portfolio. The daughter will come onto the title & we can see that she is currently paying the existing mortgage. I have discussed with Kean Burke & it is agreed all parties will benefit with this loan. 27The loan was conditionally approved on 28 December 2005. Thereafter a valuation was performed and additional documents obtained. Mrs Saad had declared her net income to be $150,000. A computer programme was used by Bluestone to calculate her capacity to service the mortgage repayments, having regard to the proposed mortgage payments and her other financial obligations. 28Special conditions were imposed by Bluestone on the loan, including that Mrs Saad would have to be on the title with an equal share to each of her parents, and that Mr and Mrs Nobilo would be required to obtain independent legal and financial advice. 29On or about 27 January 2006, Mr and Mrs Nobilo signed the Loan Agreement. The document indicates, falsely, that Mr Borovina witnessed their signatures. The Loan Agreement indicates that Mr Borovina witnessed Mrs Saad's signature and he accepts that he did so. 30In late January 2006 Bluestone received originals of executed documents, including the loan agreement, the mortgage, an authority and direction, an authority to discharge the La Trobe mortgage and certificates of independent financial advice said to have been given by Mr Borovina to Mr and Mrs Nobilo. It is common ground that all of these documents were signed by Mr and Mrs Nobilo, save for the mortgage itself. The certificates of independence advice were not, however, otherwise filled in except as to Mr Borovina's name, address and occupation. Although Mr Borovina's signature appears on them he did not sign them. 31A Real Property Transfer dated 23 February 2006 was executed by Mr and Mrs Nobilo in which they purported to transfer a 1/3 share in the Property to Mrs Saad. This document was never registered or otherwise given effect to. Mr and Mrs Nobilo both denied that they executed it on the day it bears or that they were ever prepared to transfer a one third share in their property to Mrs Saad. They say that the only proposed transfer was for 1%. 32Mr Pascale, a solicitor, gave evidence that he took this document to Mrs Saad's house at Meadowbank. He gave evidence that he explained the document to them and also mentioned its potential effect on their Centrelink payments, which he said should be investigated, and that they might want to consider reviewing their wills in order to be fair to both Judy (the transferee of the third share) and Jason, their son. He also warned them that if Mrs Saad became divorced, her husband might claim an entitlement to her share of the property. He also advised them of the need for an independent valuation for stamp duty purposes. They told him that they would be happy to go ahead as long as it did not affect their Centrelink payments. Mr Pascale witnessed the three of them signed the document in his presence. Mr Pascale was not cross-examined. I accept his evidence. 33Mrs Saad's second child, Nicholas, was born on 3 March 2006. 34It is common ground between Mr and Mrs Nobilo and Hunter Lawyers that on 22 March 2006 Mrs Saad instructed Hunter Lawyers to prepare documents for the transfer of a 1% interest in the Property from Mr and Mrs Nobilo to Mrs Saad. 35On 24 April 2006, Mr and Mrs Nobilo went to the offices of Hunter Lawyers at Liverpool where they saw Mr Chand, a solicitor. Mr and Mrs Nobilo both deposed that Mr Chand told them that if Mrs Saad could not pay, they would only be at risk of losing $7,500 because she owned only 1% of the Property. Mr Chand, deposed that he gave legal advice to Mr and Mrs Nobilo in the presence of Mrs Saad (to whose presence no objection was taken by Mr and Mrs Nobilo, who were specifically asked by Mr Chand) about the effect of the loan agreement and the mortgage and told them that if Mrs Saad could not pay there was a risk that they could lose their house. Mr Chand also gave the following evidence: "During the course of the meeting, I never became concerned that either Mr or Mrs Nobilo was not able to understand the matters which were being discussed. While it was apparent that English was not their first language, they both spoke sufficient English during the meeting that I was satisfied that they understood the transaction, and at no time did either of them appear to fail to understand or appreciate what I was saying to them. It is my recollection that at no time during the meeting did any of the attendees converse with each other in another language." 36Mr Chand was not cross-examined or otherwise challenged. I accept his evidence. 37In the course of this conference Mr and Mrs Nobilo each signed Declarations declaring that they had received independent legal advice from Mr Chand. They also executed the Real Property transfer of 1% of the Property to Mrs Saad. 38The loan was settled on 11 May 2006. The total amount advanced, $562,028, was paid and disbursed as follows: Retained by funder 1. Completion fee $1,250.00 2. Lender documentation fee $495.00 3. Change of name fee $75.00 4. Title Insurance fee $282.42 5. Interest $68,190.97 Payee 6. La Trobe Home Loans $465,104.47 7. La Trobe Home Loans $27,116.48 8. Office of State Revenue $2,139.00 9. Land and Property Information $309.00 10. Horton Rhodes $704.00 11. J. Saad $63,991.37 TOTAL ADVANCED $562,028.00 39It was accepted that item 6 was a payout of the La Trobe loan and item 7 was an exit fee in respect of the La Trobe loan. 40On 27 June 2006, the discharge of the La Trobe mortgage was registered, as was the Transfer to Mrs Saad of 1% of the Property and the Mortgage to the plaintiff. 41In about August 2006, Mrs Saad moved back home to the Property to live with her parents, and continued to operate her travel business in an office constructed by her father, Mr Nobilo, in the garage for that purpose. 42In 2007, when Mrs Nobilo turned 60 she received the aged pension, which is her only source of income. 43On or about 9 October 2007, Mr and Mrs Nobilo consented to a caveat being lodged in respect of the Property. The relevant caveatable interest was said to be "equitable interest as mortgagee". The instrument said to have created the interest was a deed of loan and mortgage dated 5 October 2007 between Guardian Loans Pty Limited and Abeeda Khan and Mr and Mrs Nobilo and Mrs Saad. The evidence did not reveal the amount of the loan. 44Payments under the Loan Agreement were made substantially in accordance with its terms from the date of settlement, 11 May 2006, until 11 August 2009, when the default relied upon occurred and the requisite notices were served. These proceedings were commenced by statement of claim filed on 17 December 2009. 45The evidence established that Mr and Mrs Nobilo spoke with each other about the transactions that they entered into. They co-operated with each other in many material respects. They were both physically and financially engaged in building the houses and developing the properties that they purchased for business and private purposes. Mr Nobilo's credibility 46Mr Nobilo's mother tongue is Croatian. He gave evidence through an interpreter. At times he answered questions in English notwithstanding that they had been interpreted and at other times he was asked questions which the cross-examiner had requested not be translated. I formed the initial impression, through observing him, that Mr Nobilo's capacity to speak English was relatively basic and that his capacity to read in English was very limited. When he was asked to read a paragraph of his affidavit aloud, he was able to do so, but in a halting way, thereby demonstrating that, although he is literate, his literacy is at a basic level. However, Mrs Nobilo gave evidence that her husband liked to read English newspapers, a task which would have been outside the competence of the man I observed giving evidence, had he been genuine in his presentation. I am disposed to accept Mrs Nobilo's evidence and infer that Mr Nobilo's capacity to read and speak English is greater than he was prepared to demonstrate to me. 47Mr Nobilo was frequently unable to recall events about which he was cross-examined. He referred to the shock of the events the subject of the proceedings and the family history of dementia. However, when evidence of a matter about which he said he had no recollection was presented to him, his recollection seemed to revive and he purported to have a good recollection of what had occurred. He gave the impression of understanding these proceedings sufficiently to appreciate where the questions he was being asked were leading. His answers were almost invariably self-serving. 48The transcript is replete with instances where Mr Nobilo has exhibited a desire to advance his case rather than to tell the truth. 49For example, when it was put to him that Nobi Pty Limited, the debtor in respect of the loan secured by a mortgage over the Baulkham Hills property granted in 1997, was a company associated with his daughter Judy he said: "No, no, no definitely not." When documents were shown to him which established that Nobi Pty Limited was his daughter's company, he was adamant that it had nothing to do with him and he was never aware of the company. 50When shown the La Trobe mortgage he and his wife granted in 2004, he said, unprompted, "I wouldn't sign that", although Ms Avenell had opened that it was not in issue that Mr and Mrs Nobilo had executed the La Trobe mortgage. The following exchange occurred: "Q. Do you recall in 2004 Judy approaching you for financial assistance? A. INTERPRETER: Well, she never actually told us the truth. If she wanted us to sign something, she would just say, "Could you sign this and that?" but she never explained what it was for." 51The cross-examination continued and he agreed that at that time, in 2004, Mrs Saad had been the victim of credit card fraud. At first he denied that she had asked him for financial assistance but then he said that he could not remember. In his affidavit, he deposed to her doing precisely that. 52Time and again he was asked questions about matters which had been addressed in his affidavit. He professed lack of recollection, or said that he did not know what he was signing. He said that he could not remember his son Jason interpreting the affidavit, and then said, when it was pointed out to him that Jason had sworn that he had interpreted the affidavit into the Croatian language, that Jason's Croation was not good. His evidence was inconsistent with that of his wife, who said that Jason "speaks Croation well". 53Although Mr Blanks, the defendants' solicitor in these proceedings, was called on another topic, his evidence was not supportive of Mr Nobilo's criticisms of him. Mr Nobilo would have me believe that Mr Blanks simply put the affidavit in front of him for him to sign and there was no process of explanation or interpretation undertaken. There was nothing in the evidence of Mr Blanks which suggested that he was other than a competent solicitor, making sure that if his clients did not appear to understand, that they had the assistance of an interpreter. Although Mr Blanks accepted that there might have been occasions on which he saw Mr and Mrs Nobilo without Jason, he could not recall any. He observed Jason interpreting for his parents on a number of occasions, which he appeared to be able to do competently. 54An example of Mr Nobilo's preparedness to resile from the contents of his affidavit is provided by his evidence about the letter from Purcell Partners referred to above which sets out the breakdown of the funds advanced by La Trobe. Mr Nobilo gave oral evidence before me that he had seen the document for the first time at his solicitor's office for the purposes of these proceedings, but he swore in his affidavit that the only document he had in his possession relating to the La Trobe loan was the letter. 55In his cross-examination, Mr Nobilo said of the conference with Mr Chand: "A. INTERPRETER: So once I came there we didn't discuss anything. We got there and the gentleman was quiet. He had these documents laid out there and he said "sign this" and "sign that" and the whole thing would have lasted may be 10, at the most 15 minutes. There were no solicitors present, no interpreter." His evidence is completely at odds with Mr Chand's unchallenged evidence of the careful and competent explanation he gave as to the nature and effect of the mortgages and the consequences that would ensue if Mrs Saad could not meet the repayments. 56Mr Nobilo also sought to excuse his lack of recollection by reference to depression tablets he has been taking. The commencement of his taking such tablets is unclear. Subsequently he said that he has "problems with brain functioning and dementia". There is no medical evidence to support his lack of recollection. His affidavit does not on its face indicate any particular difficulty with memory. 57I formed the view that Mr Nobilo is an unreliable witness. I accept his evidence only where it is corroborated or where it is against his interest. Mrs Nobilo's credibility 58I found Mrs Nobilo to be more credible in some ways than her husband. She was more prepared to make admissions, including that she knew what a mortgage was, and that she recalled that they had granted a mortgage in 1997 to assist their daughter with her new travel business. 59She demonstrated that she was reasonably knowledgeable about the property market and recalled that they sold the Kincumber property in about 1974 which was "a bad year". 60She was also prepared to admit, in respect of the La Trobe Loan and Mortgage, that she appreciated that her daughter had obtained the loan and that she and her husband had guaranteed its repayment. 61She admitted that she could speak English but said that she could not read or write it. When asked whether her husband's command of English was better than her own, she agreed that it was and volunteered that he was always reading newspapers in the English language. 62She admitted that she knew that Mrs Saad was looking to refinance the La Trobe mortgage to get a better interest rate and admitted that the Loan Agreement was related to that. 63However, when it came to the critical meetings at which Mr and Mrs Nobilo had obtained advice from solicitors, Mrs Nobilo was adamant that she had not taken any active part in such conferences and that she had been, at both conferences, distracted by either one of her grandchildren. She denied that there was any discussion about the transfer of a third interest in the Property at the conference on 23 February 2006 at Mrs Saad's house at Meadowbank. Her general response is exemplified by the following passage from her cross-examination: "They been talking, I don't know. I didn't understand nothing what they been talking because I was with the baby and we didn't do nothing there. Nothing at all. We just left and that's it. We didn't sign nothing, we didn't do nothing." 64Her evidence about what occurred at the meeting with Mr Pascale (whose evidence was not challenged) was wholly inconsistent with her having signed a transfer document to transfer a one third interest in the Property to Mrs Saad following a discussion about the potential effects of such a transfer on her entitlement to Centrelink benefits, her will and what could occur if Mrs Saad became divorced. 65Rather than adopt, as her husband was wont to do, a stance of loss of memory, her initial approach was to deny vehemently what was put to her and to insist: "I remember it like it was yesterday." 66Her responses to questions regarding the conference with Mr Chand on 24 April 2006 were similarly self-serving. In her first affidavit she said that she did not remember anyone saying anything to her at the meeting. Once she had read Mr Chand's affidavit, she swore another affidavit in which she deposed that he had said to her: "The worst case for you is a loss of 1% of your home of about $7-8,000." 67She then said, in cross-examination, that she did not know how that evidence came to be in her affidavit. Ultimately, she sought refuge in loss of memory and said that she had no recollection of making her affidavit although it was only made 10 months ago. 68She used the same tactic when asked about the equitable mortgage in respect of which a caveat was lodged in October 2007. She seemed to resile from previous admissions in the following passage which followed the questions about the equitable mortgage: "Q. Did you not think signing a deed of loan and mortgage was a serious thing to do? A. INTERPRETER: I don't know. I don't remember." 69After seeing Mrs Nobilo in the witness box under cross-examination for some hours, I formed the view that her appreciation of the gravamen of the questions she was being asked was not as finely tuned as her husband's. She made more admissions than he did but I am unpersuaded that this was because she was endeavouring to answer truthfully, rather than because she did not appreciate the extent to which her answers could potentially harm her case. However, as I have said above, she was not truthful about the matters she perceived to be crucial to her defence against the plaintiff's claim. There is a further forensic difficulty: even if I otherwise believed her (which I do not) I do not accept any of her evidence where it is inconsistent with that of Mr Chand's and Mr Pascale's because of the basis on which the cross-claim was resolved. 70For these reasons I do not accept any of Mrs Nobilo's evidence except where it is corroborated or amounts to a statement against interest. What inferences, if any, can be drawn from the absence of other witnesses 71Mr Newton submitted that I could draw a Jones v Dunkel inference (from the eponymous case, at (1959) 101 CLR 298) that Mrs Saad's evidence would not have assisted the defendants' case since she was not called, and was "in the defendants' camp" as their daughter, who was not only not estranged from them but who had lived with them since August 2006. 72Ms Avenell submitted that the inference is not available, in any event, where the witness is also a party to the proceedings. She said, further, that having regard to Mrs Saad's conduct she could not be said to be reliable. 73I am not persuaded that such inference is available or, if available, would be of any significance. As was said in Fabre v Arenales (1992) 27 NSWLR 437, at 450 per Mahoney JA, such an inference might not arise if a witness has a reason for telling the truth or refusing to assist and the party who may call the witness is aware of this. If called, Mrs Saad would have been asked in effect to admit a crime of some seriousness. Although there is some protection afforded by the Evidence Act 1995 s 128 to a witness in such circumstances, I do not consider this to be enough to overcome the effect of what I have said above. 74Indeed, in Bank of Western Australia Limited v Tannous [2010] NSWSC 1319 ( Tannous ), Davies J said, at [3]: " Rather surprisingly , Affidavits have been sworn by their son Michael Tannous where he admits to having forged his parents' signatures, and otherwise to have persuaded them to enter into various transactions by misrepresenting those transactions to them." [Emphasis added.] The use of the word "surprisingly" by Davies J implies that his Honour would not have expected the defendant's son to be called and would not have drawn an adverse inference had he not been. 75Accordingly, I have not drawn any such inference by reason of Mrs Saad's failure to give evidence either in support of her parents' defence, or in her own defence. Whether the mortgage is enforceable as a matter of law 76Before I consider whether the defendants have a defence under the Contracts Review Act or the Code , I propose to consider whether the mortgage is enforceable in any event, notwithstanding that the defendants did not execute it. The Loan Agreement: is it enforceable against the defendants? 77The plaintiff submitted that the Loan Agreement imposed an obligation on the defendants, which became binding on 11 May 2006 when the monies were advanced, to repay the loan with interest and to enter into a mortgage over the Property to secure the loan. Mr Newton submitted that the plaintiffs are entitled to specific performance of the Loan Agreement and could have required the defendants to execute a mortgage in registrable form. 78The defendants accepted that they executed the Loan Agreement. However, in their Amended First Cross-claim, the defendants allege that they were not bound by the Loan Agreement for the following reasons: (1)Clause 2.1 provides that there is no legally binding agreement between the parties until an advance of monies is released by the plaintiff which occurred on 11 May 2006; (2)Clause 2.7(d), which provides that the borrower must give security for the debt specified in the Loan Agreement, is premised on the defendants and Mrs Saad granting a mortgage in respect of the Property prior to the advance of such monies; (3)The defendants did not grant a mortgage because the signatures on the mortgage were not theirs; (4)By not granting a mortgage to the plaintiff, the defendants demonstrated that they did not wish to go ahead with the Loan Agreement. 79In my view, clause 2.1 has the effect that, upon the first, and indeed only, advance being made on 11 May 2006, the Loan Agreement, which was executed on 27 January 2006, became binding. Clause 2.7 contains a list of separate obligations, including obligations to repay principal, and interest and to give a mortgage as security for the debt. I do not consider there to be any warrant in clause 2.7 for reading the obligation to grant a mortgage as a necessary precondition for the advance of monies, such that if monies are advanced before a valid mortgage is granted, there is no obligation to grant a mortgage. There is also a provision entitled "Security" which provides: You acknowledge that the following security extends to and secures any money due under this Loan Agreement. - First registered mortgage by Judy Saad and Jakica Nobilo and John Nobilo over [the Property] 80Further each of the obligations under the Loan Agreement was joint and several and accordingly was imposed on the defendants as well as Mrs Saad. 81Although, as they submitted, the defendants did not grant a mortgage because they did not sign the mortgage document, it cannot thereby be inferred that they demonstrated that they did not wish to go ahead with the Loan Agreement (a course which was open to them until the monies were advanced since the agreement was not binding until then). Signatures purporting to be theirs were placed on the mortgage document at some time prior to their attendance on Mr Chand on 24 April 2006. Whether, at the time someone forged their signatures on the mortgage, they were willing to grant a mortgage is beside the point. By the time it came to 24 April 2006, when Mr Chand explained to the defendants the nature of the agreement, its effect, and the consequences for them if Mrs Saad could not make the repayments, I am satisfied that they were willing to grant the Mortgage to assist their daughter. 82Indeed, the defendants did not ultimately contend to the contrary, since they accepted all of Mr Chand's evidence and did not criticise anything he had done when he explained the documents, including the mortgage documents, to them, and witnessed the defendants making a declaration that they had received independent advice regarding the loan and security documents, and that they had freely and voluntarily signed the documents. 83Accordingly, I consider that the plaintiff's rights against the defendants under the Loan Agreement are sufficient to support the plaintiff's right to possession and judgment. First, although their signatures were not witnessed by Mr Borovnia and accordingly, they did not execute the Loan Agreement, the agreement did not need to be in the form of a Deed to be binding. In any event it was an agreement that was enforceable in equity, as well as at law, since it was, from 11 May 2006, supported by consideration and there were sufficient acts of part performance (discharge of the La Trobe mortgage and advancements of further monies) to warrant a grant of specific performance. 84Although the Loan Agreement is not a deed because it has not been properly executed, it is nonetheless an enforceable agreement, having been signed by the parties, supported by consideration and partly performed. It is not affected by fraud. 85Having regard to these findings, it may not be necessary to determine whether the Mortgage is enforceable against the defendants by virtue of registration. However, since there may be a question of priorities with third parties, I propose to determine it. In any event, such determination will affect the form of orders made. The Mortgage: is it enforceable against the defendants 86Further, the plaintiff submitted that the Mortgage, on its proper construction, has the effect that, although not executed by the defendants, it conferred an estate or interest in the Property on registration. It relies on sections 41(1) and 57(1) of the Real Property Act 1900 and the principle that registration of a forged mortgage confers an indefeasible title on a mortgagee, who has not been party, or privy, to the fraud and no other exception to indefeasibility applies: Breskvar v Wall (1971) 126 CLR 376. 87The defendants submitted that, on its proper construction, the Mortgage does not take effect as security over the Property in relation to the debt and that therefore registration of the mortgage does not entitle the plaintiff to possession of the Property. 88The mortgage names Mrs Saad and the defendants as "Mortgagor". Clause 1 of the Memorandum of Mortgage includes the following definitions: " Debt (by reference to clause 2.1(a) of the Mortgage) as "all monies owing by you to us now or in the future on any account" Mortgage the Mortgage signed by you which incorporates this document, and includes this document You, your each mortgagor named in the Mortgage In the Mortgage ... Singular words include plural words and vice versa. If there are two or more of you, each of you is individually liable, and all of you are jointly liable." 89Clause 2.1 includes the following charging clause: "2.1(c) You: (i) mortgage to us the whole of the Property to secure the payment of the Debt." 90Clause 3 of the Memorandum sets out when a default occurs. The list of events of default includes: "[if] There is a default under any loan agreement or other agreement relating to the Debt." 91Clause 3.2 confers the right to possession on the plaintiff in the event of default. 92I consider that there is a "Debt" owing by the defendants and Mrs Saad by reason of the definition, since the Loan Agreement is, for reasons I have given above, enforceable against them and therefore the defendants owe the monies advanced by the plaintiff. This is not a case where nothing is secured by the mortgage because of the invalidity of an antecedence agreement ( cf Perpetual Trustees Victoria Limited v English [2010] NSWCA 32 and Provident Capital v Printy [2008] NSWCA 131). 93The question of construction turns on the meaning of "you and your". Clause 1 defines these words as including "each" mortgagor "named" in the mortgage. I note that it does not specify that each mortgagor must have signed the mortgage, but only that he or she must be named in the Mortgage. When one comes to the definition of "Mortgage" there is a requirement that it must be "signed by you". The meaning of "each" according to the Oxford English dictionary is: "Every (one or two or more) regarded separately". 94It is common ground that the Mortgage was signed by Judy Saad. Because the word "you" has the meaning referred to above and therefore means "any one of you", I consider that the definition applies. 95Clause 2.1(c) is potentially more problematic, since it provides that "you" mortgage the whole of the property to secure the payment of the Debt. The question is whether the word "you" as defined has the effect that if the document, as in the present case, is signed by only one of three mortgagors, it ought be construed as granting a security over the whole of the Property or merely the interest of the mortgagor who has in fact signed it. 96The question of the meaning of "I" and "You" arose in Perpetual Trustees Victoria Limited v English [2010] NSWCA 32. In that case Mr and Mrs English remained as joint registered proprietors of what had been their home prior to their separation. Mr English remained in sole occupation of the property and, by forging Mrs English's signature, had purported to apply for a loan from the appellant ( Perpetual ). When the loan offer was made, Mr English signed his own name and forged Mrs English's signature on the loan acceptance. Mr English executed the Mortgage. Mrs English did not. Monies were advanced and there was default. Perpetual sought to enforce the mortgage by an action for possession. Mr English, who was by then a bankrupt, did not appear. 97Ultimately the Court of Appeal determined that the obligations under the Mortgage were to pay "the Secured Money". As there was no "Secured Money", since there had been no acknowledgement by Mrs English of a loan agreement, there was found to be no enforceable agreement between Perpetual on the one hand and Mr and Mrs English on the other. Sackville J (with whom Allsop P and Campbell JA agreed) said, at [79] - [80]: "It follows from what I have said that the first limb of the definition of " Secured Agreement " in the Mortgage was not satisfied. There was no " present agreement " between Perpetual and Mr and Ms English, or between Perpetual and Mr English, at the time Mr English executed the Mortgage. There was no money payable under a Secured Agreement and therefore there were no amounts satisfying the definition of " Secured Moneys " in cl 1.1 of the Memorandum. The Mortgage was not security for the payment of any Secured Money since there was nothing that satisfied that definition. In short, the undertaking in cl 2.2 of the Memorandum to pay the Secured Money as and when it became due had nothing to operate on. It is therefore irrelevant that the word " I " is to be read as a reference to either the husband or wife, or to both of them. In whatever way " I " or the related pronouns are interpreted for the purposes of the Mortgage, it does not alter the fact that there is no Secured Money in respect of which the Mortgage is to be security." 98Accordingly the Court of Appeal did not need to decide between Mrs English's argument that "I" in the mortgage meant "both Mr and Mrs English", and Perpetual's argument that each of Mr and Mrs English was to be regarded individually as mortgagor. 99Simpson J, at first instance, rejected Perpetual's argument in the following terms, at Perpetual Trustees Victoria Ltd v English & Anor [2009] NSWSC 478, at [149]: "Perpetual's approach cannot survive the most cursory examination of the language of the contractual documents. The mortgage document itself refers to "the Mortgagor" in the singular, even though two individuals are named. The use of the pronoun "I" to stand for both individuals indicates that, for the purpose of the contractual arrangements, they are to be regarded as a single entity, or a composite." 100Although, as I have said, the point did not need to be determined, Sackville J (with whom Allsop P and Campbell JA agreed) did not appear to endorse what Simpson J said above, and indeed observed, at [72]-[73], that there was no reason why the rule of interpretation found in clause 1.2 that a reference to a group of persons is a reference to any one of them could not have the effect that a reference to Mr and Mrs English could be a reference to "Mr and Mrs English and either of them". 101I consider that the effect of the definition of "you" and the rule of interpretation contained in clause 1 is that the Mortgage is to be construed as a security over the whole of the Property for the debt outstanding from time to time under the Loan Agreement. Although it did not have this legal effect until registration (as the agreement was void at law because of forgery), it did so thereafter. 102It follows that the whole of the Property, and not merely Mrs Saad's interest, is encumbered by the Mortgage. Are the defendants entitled to relief under the Contracts Review Act or the Code 103Neither party submitted that there was a different test under either piece of legislation, or that both did not apply. Both parties made their submissions by reference to the Contracts Review Act and I propose to set out my reasons in this context. It was accepted that there is a three-stage process: first, I must determine the matters of primary fact relevant to the issue; secondly I must determine whether the contract is unjust and thirdly, whether, if so, the defendants ought be granted relief. Facts relevant to whether the Loan Agreement or Mortgage are unjust 104I have determined the facts in the reasons given earlier. However, for the purposes of determining the defendants' defence to the claim, I propose to set out my findings relevant to the defence. (1)The defendants understood, through a lifetime of buying, selling and developing properties, that a mortgage was security over property for money that had been borrowed. (2)By 2006, Mrs Saad had been conducting a travel business since 1994, and since 1995 on her own account, having been in partnership with another person for the first year. (3)The defendants were prepared to lend money to their daughter, Judy, to assist her with her travel business and had done so in 1995, 1997 and in 2004. (4)In 2006 the defendants were prepared to grant a mortgage over their property to secure a loan for the purposes of assisting their daughter with her travel business, as they had done in 2004. (5)The defendants can speak and understand English, although it is not their first language. Mr Nobilo's literacy in English is better than that of Mrs Nobilo as evidenced by the fact that he reads newspapers in English. (6)Mr and Mrs Nobilo understood, when they signed the Loan Agreement in January 2006, that the substantial purpose of the loan was to refinance the La Trobe Loan to Mrs Saad which they had guaranteed and which was secured by a third party mortgage over the Property. (7)As at 23 February 2006, Mr and Mrs Nobilo were prepared to transfer a one third interest in their Property to Mrs Saad, subject to such transfer not affecting their pension entitlements, having received independent legal advice from Mr Pascale as to the nature and effect of such transfer. (8)Somebody, presumably Mrs Saad, caused Mr Borovina's signature to appear on the Loan Agreement at a place where he had not signed and thereby falsely showed him to have witnessed Mr and Mrs Nobilo's signatures. (9)Somebody, presumably Mrs Saad, caused signatures resembling her parents' signatures to be engrossed on the Mortgage document at some time prior to their meeting with Mr Chand on 24 April 2006. (10)Somebody, presumably Mrs Saad, submitted to the plaintiff certificates of financial advice, on which Mr Borovina had written his name, occupation and business address but which had not been signed by him, although a signature purporting to be his appears at the foot of the document. No other details, apart from the signature of the borrower, appear on the certificate. (11)Mr and Mrs Nobilo did not receive financial advice about the transaction other than that which was included in the legal advice given by Mr Chand on 24 April 2006. (12)By 24 April 2006, Mr and Mrs Nobilo understood the nature and effect of the Mortgage and the Loan Agreement and in particular that if Mrs Saad were unable to make the payments under the Mortgage, the plaintiff could sell the Property to recover the debt. (13)On 24 April 2006, Mr and Mrs Nobilo signed the Declarations of Borrower to show that they had received independent legal advice and that they had voluntarily executed the relevant documents. (14)On 11 May 2006, when the loan was settled, Mr and Mrs Nobilo obtained a benefit from the discharge of the La Trobe mortgage of which the principal pay-out figure was in excess of 80% of the loan. (15)The plaintiff made enquiries about the parents' income and Mrs Saad's income. Although it did not verify Mrs Saad's income, for example, by requiring her to produce a tax return or her complete bank statements, it required and obtained documentation which showed that she was complying with the La Trobe mortgage that she wished to refinance. There was some evidence that she was occasionally, and ephemerally, in default. There was an explanation given: namely, that she was depositing money in the mortgage account and that sometimes cheques were not cleared in time. (16)The plaintiff was not aware of any matter of substance which gave it reason to believe that Mrs Saad would not be able to repay the loan in the foreseeable future. 105At some time prior to 24 April 2006, someone, and presumably Mrs Saad since she is the only person who had the motive to do so, caused signatures to be placed on the mortgage document which resembled, but which were not, her parents'. She also submitted Certificates of Financial Advice signed but not completed by Mr Borovina to the plaintiff, although she must have known that no such advice had been given to her parents. Why Mrs Saad did this, or indeed felt the need to do this, is unexplained. There are two obvious hypotheses: either Mrs Saad would not have committed such serious and possibly criminal acts had she been confident that her parents would have signed the Mortgage document in any event. On the other hand, her conduct is also consistent with expediency, and a misguided apprehension that, if her parents were prepared to sign the documents anyway, there was no need for their signatures on such documents to be genuine as distinct from appearing to be so. 106There is substantial evidence to indicate that Mr and Mrs Nobilo would have signed the Mortgage had they been given an opportunity to do so. They were, after all, prepared to sign the Loan Agreement, which provided that upon monies being advanced they were obliged to grant a mortgage over the Property. They did not resist the proposal that they transfer a one third share of the Property to Mrs Saad on any basis other than that they did not wish to jeopardise their pension. Once, as I refer to below, the Loan Agreement and Mortgage had been explained to them, in terms which I find that they understood, by Mr Chand, they were prepared make the Declarations of Borrower that they signed in his presence on 24 April 2006. Furthermore, Mrs Saad came with them to Hunter Lawyers on that day, and did not seek to derail or otherwise disturb the process whereby they obtained legal advice, which is accepted to have been given properly and consistently with the solicitors' duty of care and fiduciary duties. 107I am also fortified in my conclusion that Mr and Mrs Nobilo would have themselves executed the Mortgage, had they been asked to do so, by the fact that in October 2007, they permitted a caveat to be lodged to note an equitable mortgage to support a further loan. This is the only basis on which their consent to the Caveat bears on the justice of the Loan Agreement and Mortgage, since they pre-date it by over a year. Mr and Mrs Nobilo who were parties to the agreement, did not adduce any evidence of the underlying agreement, its terms or the amount advanced. I do not believe that Mr and Mrs Nobilo had no recollection of this transaction. The Caveat which was tendered by the plaintiff raises the inference, which I draw since no evidence has been led to the contrary, that they were prepared, once again, to encumber their house for their daughter, who was by that time in financial difficulties, having moved back home in August 2006 to work from there because she could not afford the rent for her office. Whether the Loan Agreement or Mortgage are unjust in whole or in part Substantive and procedural injustice 108There are two types of unjustness. First, a contract may be substantively unjust because its terms, consequences or effects are unjust, or because it imposes a burden on one party which is not reasonably necessary to protect the interests of the other party. Secondly, a contract may be procedurally unjust because of the unfair methods used to make it, including where the claimant for relief did not have the capacity or opportunity to make an informed decision whether to enter into the contract: West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620, per McHugh JA, with whom Hope JA agreed. 109The defendants do not allege that any term or provision of the Loan Agreements or Mortgage was unusual, unreasonable or unnecessary for the legitimate protection of the plaintiff. Nonetheless, they rely on the factors set out below. The time by reference to which injustice is to be determined 110The relevant time at which question is to be determined is provided for in the Contracts Review Act s 7(1) in the following terms: "Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made , the Court may..." [Emphasis added.] 111Mr Newton submitted (and Ms Avenell has not submitted to the contrary) that this meant that the circumstances must be adjudged by reference to 11 May 2006, since it was on this day that the advance of monies was made and accordingly, on this day that the Loan Agreement became binding. The Mortgage also had effect as a contract that became binding (at least in so far as its covenants affected the land) upon registration, since up until that time it was invalid at law since it had not been executed by all parties. Although the Mortgage was registered at a later date, 27 June 2006, it has not been submitted that anything of significance happened in the intervening period. Accordingly the relevant circumstances are those that applied up until 11 May 2006. The factors relied upon by the defendants 112Below, I have set out my reasons in respect of each of the grounds of injustice raised by the defendants. There is a certain artificiality in this given that the final determination of whether a contract or part of a contract is unjust depends on an overall assessment rather than on any particular factor. The terms of the Contracts Review Act make this clear. 113Nonetheless it will be seen from the reasons I give below that I am not persuaded that any of the matters individually has the effect that either the Loan Agreement or the Mortgage is unjust. Nor am I persuaded that they have that effect collectively. The lender's conduct: Mrs Saad's capacity to service payments 114Ms Avenell did not put the defendants' defence as high as requiring that lenders are obliged to verify the income of one borrower, when another borrower, who has no capacity to pay the loan, would be jeopardised by default by losing his or her property. However, she made submissions that at times appeared to embrace that proposition, and referred to the lack of verification and the fact that Bluestone had not sought tax returns, payslips or company financials from either Mrs Saad or Nobi Pty Limited or contacted the accountants identified in the application documents. 115In oral submissions, Ms Avenell said that the plaintiff knew that Mrs Saad could not service the loan and relied on the Commonwealth Bank statements that had been provided to the plaintiff which, if they constituted statements from all accounts held by Mrs Saad would be inconsistent with the declaration she had made as to her income (that she earned $12,500 net per month, or $150,000 per annum). However, there was a reference in correspondence to Mrs Saad having business accounts with Westpac, the statements for which were not provided. 116The defendants emphasised the Bluestone note (on behalf of the plaintiff) that: "Net asset position [does not] support the self-certified income." "Business and personal bank statements are [not] consistent with declared income." 117Ms Avenell pointed to the circumstance that Mrs Saad was self-employed by a company called Nobi Pty Limited, which it could be accepted was a family company and intimated that this could affect the reliability of such income. She also submitted that the plaintiff was in a much better position than the defendants were to assess Mrs Saad's capacity to repay the loan but failed to make use of that opportunity by making a comprehensive consideration of the possibility of default. 118The defendants submitted that the plaintiff had as its primary consideration the value of its security when it should have paid more attention to the serviceability of the loan. Ms Avenell referred to Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41, and in particular the following passage from the judgment of Spigelman CJ, at [85]: "Where the security is the family home of a low income earner and a pensioner, this posture [acting on the basis of adequate security alone] on the part of a lender is entitled to significant weight against the lender in the determination of unjustness." 119Handley JA's judgment is to a similar effect, at [128]: "To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f). That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required: see Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 at 491 (Handley JA) cited with approval in Elkofairi (supra) at [77] by Beazley JA." 120Mr Newton submitted that the Mortgage was not an "asset-lend". He said that the plaintiff had satisfied itself of Mrs Saad's capacity to make payments, in part by requiring that she demonstrate (as she was able to) that she was up-to-date with the payments under the La Trobe mortgage. He also pointed to a document referred to as a "Subordination Calculation" which takes into account the mortgage payments and other financial obligations already undertaken by Mrs Saad to assess her capacity to pay the mortgage. He submitted that this evidence showed that the plaintiff had turned its mind to Mrs Saad's ability to service the mortgage and had satisfied itself that she had that capacity. 121Furthermore he submitted that the defendants had a close relationship with Mrs Saad and that there was no evidence to suggest that she had ever misled them about her financial position or about why she wanted their financial assistance. 122Mr Newton also observed that the trust that Mr and Mrs Nobilo had placed in their daughter turned out to be well-placed since she had made mortgage payments for over three years after the advance was made until the default relied upon occurred. 123The following exchange in Mr Mackay's cross-examination shows that Bluestone did not purport to verify Mrs Saad's self-declared income by reference to her financial records: "Q. If you are looking through this statement would you be looking at it to support the income that's been declared in the application? A. No, because it's not a complete picture. The money that's deposited into this account for wages and from Nobi Pty Limited, there are two other business bank accounts or one at least. So it's possible there are retained funds in the other account or the other account is used for other purposes. Q. Is there anything in the file that you have reviewed to suggest that any information such as that was sought? A. No, and the policy dictated that it wasn't required." 124I consider that there is no injustice in a contract made in circumstances where the lender, although it does not have verification of the borrower's whole financial position, satisfies itself that the borrower with capacity to pay is able to pay the previous loan which is to be paid out from the proceeds advanced by the lender. After all, as was said in a different context in Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559, at 575 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ: "In many, if not most, cases, determining what is likely to occur in the future will require findings as to what has occurred in the past because what has occurred in the past is likely to be the most reliable guide as to what will happen in the future." 125In this case, I am satisfied that the plaintiff did not engage in "pure asset lending". In particular it required production of statements that demonstrated that Mrs Saad was up to date with the payments on the La Trobe Mortgage, which was granted in 2004. I accept Mr Mackay's evidence that the borrowers' collective ability to service the loan was important to Bluestone and that " At the time of assessment the loan, the previous loan was in perfect order." The lenders conduct: the change from the requirement that one third of the Property be transferred to Mrs Saad, to a requirement that 1% be transferred 126The defendants made several allegations in pleadings and elsewhere that the transfer of 1% interest in the Property to Mrs Saad was a sham transaction which was entered into to avoid the Bluestone policy against third party mortgages. Although the allegation remains in the defence, Ms Avenell did not press that submission which I take to be withdrawn. Had it not been withdrawn I would have rejected the proposition that the transaction had any of the characteristics of a sham. 127Nor, in light of the concession made about Hunter Lawyers' conduct, do the defendants suggest that there was anything untoward about Mr Chand witnessing the signatures of all three parties to the transfer of 1%, or indeed Mr Pascale doing the same in respect of the earlier iteration which provided for the transfer of a one third share. 128Ms Avenell accepted that there was a concern, which was raised by Mr Pascale on 23 February 2006 when the defendants executed the transfer for a one third interest in the Property, that such a transfer would jeopardise their entitlement to Centrelink benefits since the transfer documents would indicate that they would receive an amount of about $235,000, being a third of the value of the Property. She also accepted that this consideration led to a reduction in that requirement to 1%. 129Nonetheless Ms Avenell submitted that the change in requirement was a "contrivance" by Bluestone to get the loan approved and settled and that Bluestone knew that the defendants were not being paid from the proceeds of sale, since the direction they had to pay did not make provision for such payment to be made. 130Mr Newton said that the period of over three months that elapsed between the Loan Agreement and the advance of the monies indicated that there was no pressure applied to the defendants by the plaintiff to enter into the transaction. They had ample time to consider the transaction and decide whether they would agree to it. 131I consider that the change in the requirement shows that the plaintiff was prepared to accommodate the interests of borrowers as long as its own commercial interest was protected. It appears that the plaintiff's policy was not to advance monies in return for third party mortgages supported by guarantees, but instead to require that the borrowers and the mortgagors be the same. This policy was complied with as long as Mrs Saad was on title. I do not regard the change in requirement as indicating anything that is germane to the justice or otherwise of the Loan Agreement or the Mortgage. 132Furthermore, the documentary evidence establishes that there were several reasons for the time that elapsed between the signing of the Loan Agreement and the conference on 24 April 2006, including the following: (1)inconsistent responses from Centrelink about the effect of the transfer on Mr and Mrs Nobilo's pension entitlements; (2)Mr Pascale's unavailability to give legal advice at the particular times and dates nominated by Mrs Saad; (3)the birth of Mrs Saad's son Nicholas on 3 March 2006; (4)the death of Mr Nobilo's mother in late March 2006 and associated funeral arrangements; (5)Mr and Mrs Nobilo's own personal commitments; and (6)the need for Mr Pascale, or, in the events that happened, Mr Chand to be provided with all relevant documents in advance of the conference in order to prepare adequately for the giving of independent legal advice. 133That these matters caused delay is inconsistent with Mr and Mrs Nobilo being under pressure to agree to the transaction. There was a further period of almost three weeks between the conference on 24 April 2006 and settlement on 11 May 2006. In this period, a valuer came to the Property to conduct a valuation arranged by Hunter Lawyers for stamp duty purposes. A valuation was done on 9 May 2006. As referred above, the Loan Agreement became binding only on the date of the advance, 11 May 2006, over three months after it had been signed. The lender's conduct: failure to detect and act on discrepancies in loan documents and otherwise to comply with the Bluestone manual 134Ms Avenell submitted that I could more comfortably draw inferences against the plaintiff because the persons whose names appear on the loan file were not called. Mr Mackay, who was called on behalf of the plaintiff, had no involvement in this matter until this litigation. I am not persuaded that there is any particular fact about which a Jones v Dunkel inference could be drawn against the plaintiff. Mr Mackay appeared to be knowledgeable about Bluestone's procedures and was prepared to make concession on cross-examination. 135Ms Avenell suggested that the plaintiff was not the first lender who had been approached and the inference could be drawn that the loan application had been rejected by others. She said that I could draw the inference from the various fax headers to constituent parts of the documents sent by facsimile to the plaintiff. 136Even if it be the case that there had been applications that had been rejected, I do not think that anything turns on this in light of the defendants' concession that there was nothing extraordinary or uncommercial from the borrowers' point of view about the interest rate of the loan made by the plaintiff. It can reasonably be expected that different lenders have different requirements. It does not follow from one lender's rejection of a loan that there is anything suspicious or untoward about the application. 137Ms Avenell cross-examined Mr Mackay about various "discrepancies" between the signatures of Mr and Mrs Nobilo on various documents, and the fact that the Certificates of Independent Financial Advice had not been properly completed. She also criticised the plaintiff for not insisting on legible copies of the drivers licences of Mr and Mrs Nobilo. 138The defendants submitted that the signatures looked different across various pages. They also submitted that the litany of discrepancies in the documents provided "suggested to Bluestone [that] the people completing them were not directing proper attention to what they were doing." 139I consider that, even if such discrepancies ought to have indicated to Bluestone that this was the case, the following exchange is a sufficient answer to it "Mackay: Q. Well would that suggest to you that they are signing documents thoughtlessly? A. That's why they were going to get independent legal advice." 140I do not consider any of these matters to be of sufficient seriousness to outweigh the effectiveness of what occurred on 24 April 2006 at the premises of Hunter Lawyers at Liverpool when, as the defendants accept, they were given adequate legal advice as to the nature of the documents that they had signed and the effect of the transaction. The following exchange in the cross-examination of Mr Mackay serves to highlight the importance of independent advice in circumstances such as the present: "Q. Wouldn't it be a concern that the child was putting the loan together? A. That's why we asked for independent legal and financial advice." 141Had the discrepancies been material in that they manifested a disquiet by Mr and Mrs Nobilo about what was occurring or an unwillingness to put their house at risk for their daughter's business, then I consider that either or both of Mr and Mrs Nobilo would have raised such matters with Mr Chand. Their daughter, Judy, was present and could have translated, if required although I do not consider that any such translation would have been required. Since the resolution of their cross-claim against Hunters Lawyers the defendants no longer make any complaint about the presence of Judy on that occasion. 142Even if Bluestone ought to have entertained doubts about the authenticity of the various signatures and required the defendants to attend their offices to sign the documents again, I am unable to conclude that the defendants would not have signed a mortgage in these circumstances. Although they did not sign the Mortgage, the uncontroverted evidence establishes that they adopted the Mortgage, as if they had signed the document, by their conduct at the conference on 24 April 2006 and their signing the Declarations of Borrowers in Mr Chand's presence. Failure to comply with the condition that the defendants obtain independent financial advice 143Ms Avenell submitted that because the Certificates of Independent Financial Advice were not properly completed, the plaintiff was on notice that the defendants had not received independent financial advice, which was one of the conditions of the loan and that this had the consequence that the contracts were unjust. 144I am prepared to accept that had the plaintiff, through Bluestone, been acting diligently it would have raised questions about the Certificates of Independent Financial Advice and at least required them to be properly completed. 145However, the defendants bear the onus of establishing a defence under the Contracts Review Act and the Code . They have not adduced any evidence to show what the giving of independent financial advice would have involved and whether it would have made any difference to Mr and Mrs Nobilo's preparedness to assist their daughter. Although they submitted, in effect, that it was incumbent on the plaintiff to verify Mrs Saad's financial position to ascertain the probabilities of her being able to service the loan, they made no attempt either to do so in the proceedings or to prove that she would not have been able to service the loan. Nor did they seek to establish that independent financial advice would have required the giver of such financial advice to have done so. 146The only evidence which touches on what is involved in giving independent financial advice is the following paragraph from Mr Borovina's affidavit, in which he deposes that he told Mrs Saad: "Your parents will have to get financial advice before signing these documents. I wouldn't be able to sign the declarations of financial advice unless I see your parents and go through a personal interview and the loan with them. This is a lengthy process. It involves the completion of a full fact and an analysis of their needs, goals and objectives. It will take about an hour, and I will need to charge for this. The cost will be $150 plus GST." 147This evidence does not go far enough to establish what I consider the defendants would have needed to establish to make out a case that the absence of independent financial advice made any part of the Loan Agreement or the Mortgage unjust. The relevance of the La Trobe Loan and Mortgage 148The defendants submitted that they were entitled to rely on the circumstances of the La Trobe Mortgage and Loan in support of the proposition that they had not received a benefit from its refinance by the loan advanced by the plaintiff. The defendants referred to Tannous , and the following passages at [33] - [34]: "One of the considerations in the exercise of that discretion involves a consideration of any benefit that the borrowers obtained as a result of the unjust contract. That is why, in the ordinary case, the discharge of a pre-existing mortgage by the payment of part or all of the proceeds of the loan agreement held to be unjust would result in an order that ultimately required repayment of that sum to the new lender. However, that will not necessarily be so. If it can be shown that the pre-existing liability was itself unenforceable or unjust in whole or in part, the discretionary order made in respect of the unjust contract sued upon would take account of that unenforceability or that unjustness." 149Ms Avenell submitted that I ought take into account the following circumstances: (1)The defendants did not receive any of the benefit of the La Trobe loan because the each element of the amount advanced by La Trobe was advanced to Mrs Saad, or to the Commonwealth Bank, to repay a loan to her. (2)The purpose of the La Trobe loan was a business purpose for Mrs Saad, and not for Mr and Mrs Nobilo. (3)The certificates of legal advice were signed by a Justice of the Peace, rather than a solicitor and therefore I should infer that the defendants did not receive any legal advice. 150Although I accept that the effect of the propositions extracted from Tannous is that I can make findings about the La Trobe Loan and Mortgage, I am not persuaded that I should find those transactions to be unenforceable or unjust. First, it is accepted that the defendants signed them and therefore there is no apparent basis for arguing that they are unenforceable. Secondly, in light of my findings about the defendants, I consider that they were prepared to help their daughter and encumber their house, if necessary, and that they understood, even without the benefit of independent legal advice, the effect of encumbering their house with a mortgage and giving a guarantee. I do not consider there to be any substantial basis on which I could find that the La Trobe Loan was unjust. 151Accordingly, I consider that the amounts that discharged the La Trobe Mortgage would ultimately have to be taken into account to the credit of the plaintiff as a benefit to the defendants, were I otherwise persuaded that there was any lack of justice in the Mortgage granted to the plaintiff or the Loan Agreement to which it was a party. 152Ms Avenell also referred to the size of the exit fees from the La Trobe Loan (in the order of $27,000) as not amounting to a benefit to the defendants and, potentially, affecting the serviceability of the loan. I accept Mr Mackay's evidence that the amount of the fees was, in broad terms, within the usual range. I do not consider that this amount, over the period of the loan was sufficient to call into question the assessment by the plaintiff that Mrs Saad's ability to repay the La Trobe Mortgage was sufficient to establish her capacity to service the marginally greater loan from it. Conclusion 153I consider the following passage from the judgment of Handley JA (with whom Hodgson JA and Grove J agreed) in Davey v Challenger Managed Investments [2003] NSWCA 172 to be apposite to the instant case. His Honour said, at [23] - [24]: "The children should probably never have asked the appellants to hazard their homes in this business venture, but misrepresentation or undue influence on their part have never been alleged. The age and status of the appellants as pensioners did not deprive them of the legal capacity to do what they did. If the business had been successful the children would have been launched on a business career and the mortgages would have been discharged. The Court has no way of knowing how many business ventures financed by parents in this way are successful for the benefit of the community and all concerned. Courts only ever see the cases where the business has failed and the mortgages are enforced. The Court might be doing a disservice to the community if it treated age and pensioner status as disabling parents from helping their children in this way. The law has not taken that step, and under ordinary principles the appellants have no proper claim for relief." 154It follows from these findings that the defendants are not entitled to relief under the Contracts Review Act or the Code . 155I have been provided with an affidavit of Mr MacKay, sworn 16 February 2012, which is not challenged, that establishes the amount of the debt presently outstanding. Relief 156I make the following orders: (1)Judgment for possession of the land described in Folio [ID] of the Register known as [address]. (2)Grant leave to the plaintiff to issue a writ of possession forthwith. (3)Judgment for the plaintiff against the first, second and third defendants in the sum of $808,046.89. (4)Order the first, second and third defendants to pay the plaintiff's costs of the proceedings. ********** 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: 28 February 2012