Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustees Victoria Ltd v Knezevic [2012] NSWSC 956 Hearing dates: 13 - 16 August 2012 Decision date: 23 August 2012 Jurisdiction: Common Law Before: Adamson J Decision: (1) Judgment for possession of the Property. (2) Judgment for the plaintiff for the amount owing under the Third Mortgage, together with enforcement expenses and interest, the quantum of such judgment to be as agreed or determined. (3) Judgment for the cross-defendants on the cross-claim. (4) Costs reserved. (5) Direct the parties to bring in short minutes of any additional orders required to reflect these reasons. Catchwords: CONTRACT - unjust contract - claim under the Contracts Review Act - self-certifying loan - allegation of asset lending - whether the loan is unjust in the circumstances - borrower's age at the time of the loan made the loan contract unjust - lender's lack of substantiation of the borrower's income CONSUMER LAW - misleading and deceptive conduct - representations by a lender's agent at settlement - causation - whether a sufficient and direct link between the conduct and consequences Legislation Cited: - Australian Securities and Investment Commission Act 2001 (Cth) - Trade Practices Act 1974 (Cth) - Contracts Review Act 1980 - Consumer Credit (New South Wales) Code Cases Cited: - Alexander v Cambridge Credit (1987) 9 NSWLR 310 - Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 - Bullabidgee Pty Limited v McCleary [2011] NSWCA 259 - Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; 218 CLR 592 at 605 - Digi-tech (Australia) Ltd v Brand [2004] NSWCA 58; 62 IPR 184 - Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260 - Henville v Walker [2001] HCA 52; 206 CLR 459 - Ingot Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206; 73 NSWLR 653 - Janssen-Cilag Pty Limited v Pfizer Pty Limited [1992] FCA 437; 37 FCR 526 - Jones v Dunkel [1959] HCA 8; 101 CLR 298 - Jonsson v Arkway Pty Ltd [2003] NSWSC 815; 58 NSWLR 451 at 456-457 - Michalopoulos v Perpetual Trustees Victoria Ltd [2010] NSWSC 1450 - Pan Pharmaceuticals v Natural Care [2008] FCAFC 2; 165 FCR 230 - Perpetual Trustee Co Limited v Khoshaba [2006] NSWCA 41 - Perpetual Trustees Victoria Limited v Longobardi [2009] NSWSC 654 - Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153 - Smith v Noss [2006] NSWCA 37 - St George Bank Limited v Trimarchi [2004] NSWCA 120 - Taco Company of Australia Inc v Taco Bell Pty Limited [1982] FCA 136; 42 ALR 177 - Toll (FGCT) Pty Limited v Alphafarm Pty Limited [2004] HCA 52; 219 CLR 165 - Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 - Wilton v Farnworth [1948] HCA 20; 76 CLR 646 Category: Principal judgment Parties: Perpetual Trustees Victoria Ltd (Plaintiff/First Cross-defendant) Donka Knezevic (Defendant/Cross Claimant) Makhoul Legal Corporation Pty Limited trading as Makhoul Symond Solicitors and Attorneys (Second Cross-defendant) Representation: Counsel: S Docker (Plaintiff/First Cross-defendant) M J Lee SC / A D Crossland (Defendant/Cross-claimant) K Stern SC (Second Cross-defendant) Solicitors: Kemp Strang (Plaintiff/First Cross-defendant) Marsdens Law Group (Defendant/Cross-claimant) Colin Biggers & Paisley (Second Cross-defendant) File Number(s): 2007/263417 Judgment Introduction 1The plaintiff seeks possession of the defendant's home at Croydon (the Property). It also contains a claim for damages for deceit against the defendant in the event that she is granted relief. The defendant resists the plaintiff's claim on the basis of a defence under the Contracts Review Act 1980 (the Contracts Review Act) and the Consumer Credit (New South Wales) Code (the Code). She also maintains a cross-claim against the plaintiff which is in similar terms to her defence and against Makhoul Symonds Solicitors and Attorneys (Makhoul) who were, relevantly, retained by the lender in respect of the original transaction which gave rise to the debt which was ultimately refinanced by the plaintiff. The cross-claim arises by reason of alleged breaches of s 52 of the Trade Practices Act 1974 (Cth) or the corresponding provisions in the Australian Securities and Investments Commission Act 2001 (Cth). 2The plaintiff's evidence comprised the affidavit evidence of Graeme Wort, an officer of Challenger; Bruce Carr, the mortgage originator of the relevant transaction; and Aileen Tran, who assessed and approved one of the plaintiff's loan applications on behalf of Challenger. Each of these witnesses was cross-examined. The plaintiff also relied on the unchallenged affidavit evidence of Edward Yin, together with documentary evidence. The defendant chose not to adduce oral evidence and relied on documentary evidence. Makhoul also chose not to adduce oral evidence and relied on documentary evidence. The facts 3The defendant, who was born on 25 August 1942 in Serbia, migrated to Australia in 1970. In 1973 she bought the Property in respect of which she granted a mortgage to the Commonwealth Bank. In 1975 she granted a mortgage over the Property which secured the sum of $12,000. 4She has two children, Stevan, who was born in 1979, and Angelka, who was born in 1983. Between 1973 and 1998, she set laboratories for students in her capacity as scientific technical officer at the University of Technology Sydney. In about 1995 the defendant mortgaged the Property to Westpac Banking Corporation to raise the sum of $60,000, which was later increased to $81,000, to renovate the house. She performed much of the renovation herself over a period of about 8 years. 5In 1997, the defendant refinanced the mortgage with another mortgagee. As at that time the mortgage still secured the amount of $81,000. 6She elected to be made redundant in 1998 as a result of which she received a payment of approximately $150,000. She also had about $60,000 in superannuation. After 1998, the defendant worked in various jobs until at least 2005. 7There are relevantly three loans and associated mortgages which are germane to the issues in the proceedings. For brevity, I shall use the terms "First Transaction", "First Loan" and "First Mortgage" as the case may be to apply to the 2002 loan and mortgage; "Second" to apply to the 2003 loan and mortgage; and "Third" to apply to the 2005 loan and mortgage. 8Makhoul gave a certificate to the lender in respect of the First Transaction. This conduct is alleged to be misleading or deceptive and to give rise to relief by way of damages sufficient to reduce the indebtedness under the Third Mortgage. The plaintiff was a party to the Second and Third Transactions. The defendant seeks to set aside the Third Transaction on the ground that it was unjust. Accordingly it is necessary to set out my findings of fact in respect of each of the First, Second and Third Transactions. The First Transaction 9Towards the end of December 2002, but before 17 December 2002, Makhoul received a loan application in respect of the defendant from either Australian Wholesale Lending Pty Limited (AWL) or ING Bank (Australia) Limited (ING). It received instructions in the form of a document forwarded to it by AWL, which was entitled "SCHEDULE 4 - APPLICATION FOR APPROVAL". It contained the following instructions to Makhoul: (1)The product was a "Lo-Doc" loan; (2)AWL was the manager; (3)Ifinance was the originator; (4)The purpose of the loan was to "Invest with Forsyte Pty Limited"; (5)The loan was not regulated by the Credit Code; (6)The security for the loan was a first registered mortgage over the Property; (7)There was a special condition that the loan offer was subject to satisfactory valuation and final approval. 10Under cover of letter dated 17 December 2002 from Makhoul on behalf of Ifinance (the originator), the defendant received a "document checklist" which contained instructions in relation to settlement of the loan and listed deductions to be made from the loan funds. The letter also said: "We will also pay out the loans listed in the Loan Offer. The balance of the funds will be paid as directed by you and in accordance with the purpose of your loan." 11On or about 18 December 2002, the defendant executed a document entitled "Authority, Direction, Undertaking and Acknowledgement". She also signed a loan agreement which identified the purpose of the loan as "invest with Foresyte Pty Limited" and a certification that she understood the nature and effect of the loan agreement and that she had chosen not to obtain legal advice. She also declared that she had read the agreement and understood it. 12On 20 December 2002, Makhoul Symonds provided a document entitled "Certification" to ING, AWL and Australian Wholesale Lending Mortgage Pty Limited (AWLM) in which they certified as to certain matters relating to the First Transaction (the 2002 Certificate) which will be dealt with in more detail when considering the cross-claim. In the 2002 Certificate, AWLM was described as the trustee; ING was described as the funder; and AWL was described as the manager. 13Following the issuing of the 2002 Certificate, the First Transaction was completed and the monies advanced. 14The defendant did not at any time attend the offices of Makhoul Symonds. 15By letter dated 23 December 2002, Makhoul informed Westpac of a transfer of funds which would arrive in Makhoul's controlled monies account from ING on 24 December 2002. There followed an instruction to draw down the amount of $283,129.50 and pay it to a nominated account with the Commonwealth Bank in the name of Foresyte Investments Pty Limited. 16A terms letter to the defendant from High Noon Properties Pty Limited dated 24 December 2002 stipulated the bank account into which the defendant's investment was to be paid. The details corresponded to the nominated account identified in Makhoul's letter of 23 December 2002. Although the terms letter is dated 24 December 2002, the defendant is recorded as having signed it on 7 February 2003. I infer that the defendant, as at 24 December 2002, authorised and directed Makhoul to pay the monies borrowed in the First Transaction to that account, and that they were paid in accordance with that direction. Although Makhoul did not have access to the terms letter, its terms corroborate the evidence that supports the proposition that the money was transferred by Makhoul in accordance with the defendant's direction and that the transfer was authorised by her. 17As part of the First Transaction, the defendant granted the First Mortgage over the Property to AWLM, which she executed on 24 December 2002. The First Mortgage secured an advance of $285,000, $283,129.50 of which was paid into the account in the name of "Foresyte Investments Pty Ltd" referred to above. 18Documents said to be receipts/ tax invoices/ memoranda of fees issued by Foresyte Pty Limited and dated 24 December 2002 in respect of the following and for the following amounts were produced by Paul Marsh, one of the plaintiff's former solicitors, on subpoena: Description of purpose of payment Amount of payment Management fees $64,000 Loan amount $200,000 Deposit bonds $16,000 Total $280,000 19I infer that these documents were provided to Mr Marsh by the plaintiff. There is no evidence that any of these documents were provided to Makhoul or otherwise came to their attention prior to these proceedings. 20By letter to the defendant dated 27 December 2002, Makhoul confirmed what had occurred with the loan monies and the sum that was paid to Foresyte Investments Pty Limited. They also said: "We write to confirm the above loan for $285,000 was finalized on Tuesday 24 December 2002. We further confirm that the loan amount was disbursed in accordance with the letter of approval and your instructions including your direction to pay." 21By letter dated 8 January 2003 Foresyte wrote to the defendant about her investment. It contained an extract from the Foresyte Mission Statement which identified the purpose of the investment as follows: "...to assist our clients in securing their future through unique, high return, tailor-made property portfolios and accurate marketing strategies." 22There is no evidence that Makhoul saw this correspondence or that they were otherwise aware of the nature of the investment. 23It is common ground between the defendant and Makhoul that shortly after the payment of the sum of $285,000 to the Foresyte Group, the Foresyte Group went into liquidation and that unsecured creditors of the Foresyte Group, including the defendant, received no dividend in the liquidation. 24At some time prior to September 2003, the defendant had engaged solicitors to investigate whether she had a claim against either the Foresyte Group or AWL. Ultimately, the defendant was told by her then solicitors in September 2004 that they were not able to help her. She subsequently applied to Legal Aid and was referred to a solicitor, Mr Marsh. Because Mr Marsh became indisposed she did not receive advice from him, although she provided certain documents to him, at least some of which are referred to above. 25It is not necessary to determine whether the defendant had any claim against someone who was not party to the proceedings in relation to her failed investment since there is no allegation in the cross-claim that the defendant ought to have pursued the Foresyte Group or AWL to mitigate any loss she suffered as a result of entering into the First Transaction. Further, since the loss alleged to have been suffered by the defendant was sustained prior to 26 July 2004, the proportionate liability provisions which were introduced into the Trade Practices Act 1974 and which commenced on 26 July 2004, do not apply. Accordingly the availability or prospects of any such claim are irrelevant to the cross-claim against Makhoul. The Second Transaction 26On or about 1 August 2003, the defendant decided to raise further funds and to refinance the First Mortgage. On that date she signed the following documents: (1)an application form of Fox Home Loans Pty Ltd (Fox) for a loan in the sum of $350,000; (2)a document which included a section entitled "Declaration of Financial Position"; (3)a document headed "Loan Purpose Checklist"; and (4)the second page of a document headed "Privacy Act 1988 Consent". 27On 8 August 2003, Mr Browning of Fox sent the application form and the other documents to the "Orange Team" at Interstar Wholesale Finance Pty Limited, which was subsequently taken over by Challenger (Challenger). On 11 August 2003, Challenger informed Fox that the defendant's loan application was approved subject to conditions, including that a copy of a current rates notice needed to be provided. On 14 August 2003, Fox faxed to Challenger a copy of a rates notice for the Property dated 31 July 2003. 28On 14 August 2003, Challenger instructed First Title Secure (FTS) to act as the plaintiff's settlement agent to document and settle the proposed Second Transaction. On 18 August 2003, FTS despatched the loan, mortgage and associated documents to the defendant at the address of her Property. 29The defendant executed or signed the following documents: (1)the Loan Agreement for a loan of $350,000; (2)a mortgage over the Property; (3) a Borrower's Acknowledgement that the defendant had had the opportunity of obtaining legal advice but chose not to obtain it; (3)a Direction and Authority; and (4)various other documents including a Direct Debit Request, a Request to Provide Payout Statement, a Discharge Notice, an Undertaking to Make No Further Drawings, a request for a PIN for StarCall or StarNet and a Declaration of Purpose. 30On 2 September 2003, the Second Transaction settled. Makhoul were retained by AWL to obtain a discharge of the First Mortgage in respect of the Second Transaction. The plaintiff advanced $296,933.78 to AWL and received in return a discharge of the First Mortgage and the Certificate of Title for the Property. The Second Mortgage was subsequently registered. The Third Transaction 31At some time prior to 19 February 2005, the defendant saw a television advertisement for RESI loans and decided to refinance the Second Loan and Mortgage. Her reasons for doing so were fourfold: she was dissatisfied with the service provided by Fox, the manager of the Second Mortgage; Fox had changed hands; she wanted a better interest rate; and she wanted to borrow additional funds to be secured against the Property. 32The defendant was, at as 2005, familiar with the risks and requirements of loan and mortgage transactions. By this time the defendant had already mortgaged the Property six times previously. The times and loan amounts are set out in the table below. Year Amount of principal secured 1975 $12,000 1995 $60,000 1995 $81,000 1997 $81,000 2002 $285,000 (the First Transaction) 2003 $350,000 (the Second Transaction) 33On Saturday 19 February 2005, the defendant attended the offices of Carr Financial Services Pty Ltd, (Carr Financial Services) where she met with Mr Carr, a mortgage originator. Carr Financial Services traded as RESI Ashfield pursuant to a franchise agreement with RESI Mortgage Corporation Pty Ltd (RESI). Carr Financial Services offered RESI products to prospective borrowers. It was part of their role to select the appropriate RESI product for the borrower by reference to the criteria set out for each loan. 34I accept Mr Carr's evidence that the defendant's spoken English was very good, that she was able to respond appropriately to questions that he asked and that she appeared to be able to read and understand the documents which he gave to her. 35At the meeting the defendant told Mr Carr that she wanted to refinance a loan from Fox, which had been for an investment rather than to purchase the Property and that she also wanted an extra $70,000 to help her daughter buy a property, and an additional $50,000 by way of a line of credit. She told him that she did not have copies of her latest tax returns. She also told him that she was self-employed, that she did not have an Australian Business Number (ABN), that one of her jobs was as a hostess at Canterbury Racecourse and that she had investments. She handed him copies of loan statements for the Second Transaction, none of which indicated any default. The statements corroborated her assertion that the mortgage manager for the Second Transaction had changed from Fox to MP Mortgages Pty Limited trading as Mortgageport. 36Mr Carr considered that there was only one RESI product for which the defendant would qualify, since she had neither an ABN, nor tax returns: namely what he described as an Asset Value loan, but which was also referred to as an "Easy Doc" loan. The applicable interest rate for such a loan was lower than that applicable in respect of the Second Transaction. It was a requirement of such a loan that the borrower make a declaration that he or she could afford to repay the loan. However, as the name "Easy Doc" suggests, the prospective borrower was neither required to declare the quantum of his or her income, nor to substantiate it by reference to primary documents or business records. Easy Doc loans were available for loans for predominantly business purposes. 37During the meeting on 19 February 2005 the defendant signed an application for a loan of $475,000. In the loan application document she states that she was self-employed as a hostess in hospitality and estimated the value of the Property as $950,000. The defendant declared that the information contained in the application was true and complete and that the loan was for investment purposes. She also signed the second page of a document headed "Privacy Notice". 38I accept that Mr Carr followed his usual practice and informed the defendant of the monthly repayments which she would be obliged to make if the loan were approved. He gave her an information sheet relating to the loan, which included the interest rate and the fee payable for early repayment. The following comparison between the interest rates for amounts borrowed in the Second Transaction and the Third Transaction indicates that the interest rate for all components of the latter was lower. Second Transaction Third Transaction $355,000 7.47% $355,000 6.94% $70,000 6.94% $37,000 7.44% 39On Monday 21 February 2005, Mr Carr requested a credit check on the defendant which was clear but for one payment default of $103 to Alliance Factoring concerning a telecommunications service. 40On 21 February 2005, the defendant instructed Mr Carr to split the loan into three parts: a $50,000 line of credit; $70,000 for a personal purpose (being to help her daughter buy property); and $355,000 for the refinance of the Second Transaction. On the same day Mr Carr generated and sent to the plaintiff an indicative letter of approval, which included the requirement that she provide a letter explaining the default to Alliance Factoring on the defendant's credit record and confirming the default had been rectified. It reiterated what the defendant had told Mr Carr and what was written in the loan application that the loan was to "refinance an owner occupied property for investment purposes". 41On or about 23 February 2005, the defendant provided Carr Financial Services with a document in her handwriting addressed to whom it may concern explaining that the Alliance Factoring default related to Telstra and stating that it had been paid, along with a copy of a letter from Alliance Factoring and a copy of the receipt for her payment of the default. A document in the same terms was typed in the office of Carr Financial Services on or about that same day and was signed by the defendant. She also paid by credit card for the plaintiff's legal services on that day. 42Also, on or about 23 February 2005, the defendant signed a form entitled "Acceptance of Indicative Approval Letter". 43On 23 or 24 February 2005, Carr Financial Services received a valuation of the Property of $770,000. 44On 25 February 2005, the defendant signed a document headed "Loan Purpose Checklist" for a total loan of $462,000 made up of $37,000 (stated to be for providing a line of credit for the borrower's business), $70,000 (stated to be for finance expenditure of a personal, domestic or a household nature) and $355,000 (stated to be for the refinance of a property for investment purposes). On the same day she also signed associated documents including one entitled "EasyDoc Declaration of Financial Position" and another entitled "Declaration of Purpose". These declarations read as follows: "I/We certify warrant and represent to you that: (a) I am/we are aware of our financial obligations under our proposed loan with you and I am/we are fully able to meet our obligations under this loan; and (b) I am/we are satisfied that our obligations to you will not adversely impact on our ability to meet all my/our other financial obligations (including living expenses) as and when they fall due; (c) I/we request Perpetual Trustees Victoria Ltd to assess this facility without the documentary evidence of my/or income and financial positions such documentary evidence is not readily available or would not be a true representation of my/our income and financial position; (d) I am/we are aware that the interest rate payable to you is higher than the rate which would be payable if I/we qualified for an alternative loan product by the provision of satisfactory documentary evidence of my/our income and financial position; and (e) My/our ABN/CAN number is: __________ I/we acknowledge that you are relying on this statement in considering whether or not to approve this loan application." and: "I declare that the credit to be provided to me by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." 45I infer from the fact that the Loan to Value Ratio (LVR) did not require such a reduction and from the absence of any other explanation, that the reduction in the sum sought to be advanced for the line of credit from $50,000 to $37,000 was as a result of the defendant's instructions to Mr Carr. 46On 25 February 2005, Carr Financial Services sent various documents by facsimile to Challenger, including the following: (1)the loan application; (2)the Loan Purpose Checklist document; (3)the privacy notice document; (4)the EasyDoc Declaration of Financial Position document; (5) the Declaration of Purpose document; (5)a typed letter dated 23 February 2005 addressed "to whom it may concern"; and (6)copies of some loan statements for the defendant's existing loans and a rate notice for the Property. 47On or about 28 February 2005, Challenger produced a document entitled "Preliminary Loan Approval". 48Also on or about 28 February 2005, Makhoul received instructions from Challenger to effect settlement of the Third Transaction. 49By letter dated 1 March 2005, Makhoul advised the defendant that the loan had been approved. Towards the end of March 2005, the defendant called Mr Carr and asked him to go through the loan and other documents with her before she signed them. On or about 22 March 2005, Mr Carr went to the Property at the defendant's invitation. At that meeting the defendant signed some documents. Either at that meeting or at other times, the defendant signed a loan agreement, an Acknowledgement and a Direct Debit Request. Other documents signed by the defendant (whether at that meeting or at some other time) included a Disbursement Authority, an Authority, Direction, Undertaking and Acknowledgement, a Borrower's Acknowledgement (Legal Advice), a Declaration of Purpose, a mortgage over the Property (which was witnessed by the defendant's daughter) and a Direction to Insurance Company. 50On 1 April 2005, Makhoul received the executed documents from the defendant and the Third Loan Agreement was made. 51Under the Third Loan Agreement, the plaintiff agreed to lend a total amount of $462,000 to the defendant which comprised the following three facilities: (1)the line of credit of $37,000; (2)the personal loan of $70,000, which was to be given by the defendant to her daughter to assist her with the purchase of a property, and to which no challenge is made in these proceedings; and (3)the amount of $355,000, which was to refinance the Second Transaction and discharge the Second Mortgage. 52On 8 April 2005, the defendant signed a document entitled "Discharge Request and Authority or Direction" in respect of the Second Loan and Mortgage stating that the reason for discharge was refinance. 53On 19 April 2005, the Third Transaction settled. The $355,000 amount was fully drawn down, including $353,539.73 to discharge the Second Loan and Mortgage. 54Subsequently, on 3 May 2005, $67,252.69 was drawn down from the personal loan and deposited by the defendant into an account in her name with the ANZ Bank; on 5 May 2005, a further $92.08 was drawn down. Some, but not all, of this money was used to help the defendant's daughter purchase a unit in late May, which settled in early July 2005. The defendant's daughter took out a loan of $160,000 to buy a unit for $200,000 and also received a first homeowner's grant. 55On 15 December 2005, the drawing down of the line of credit began. 56By 15 June 2007, the defendant was in default under the Third Loan Agreement and the Third Mortgage because she had failed to make instalment payments which had become due. On that day, the plaintiff gave the defendant a default notice, which stated that she was $7,337.48 in arrears of instalment payments and required the arrears to be cleared by 22 July 2007. The defence under the Contracts Review Act or the Code 57There is an issue between the plaintiff and the defendant whether the Code applies. However it was not suggested that there is a material distinction between the test applicable under the Contracts Review Act and that under the Code. Accordingly I propose to refer only to the Contracts Review Act in these reasons and determine whether the Code applies only if it be necessary. 58The defendant contended that the Third Transaction was unjust because: (1)the plaintiff made no enquiry as to whether she was able to repay the loan in accordance with its terms and indeed that the plaintiff was indifferent to the serviceability of the loan; (2)if such inquiry had been made, the plaintiff would have ascertained that she was unable to repay the loan from her income; (3)the plaintiff is fixed with the knowledge, or at least the suspicion, that the defendant would not be able to pay the Third Loan without hardship; and (4)the effect of the Third Transaction was that there was a real prospect that the defendant would lose her house, as will occur unless relief is granted. 59It is of some significance that the defendant makes no criticism of the terms and conditions of the loan agreement or the mortgage that together comprise the Third Transaction. Her contention is that the loan ought not to have been made at all. 60The defendant's contention that the Third Transaction was unjust fails for a number of reasons, which will be addressed below. The defendant's failure to give evidence 61As the narrative of facts in these reasons shows, the defendant signed a number of documents at various times, including loan applications, various declarations and various agreements. In circumstances where she has chosen not to give evidence to shed any different light, I infer from her signature that she has either read and approved of the matter to which she has appended her signature or that she is willing to take the chance of being bound by its contents: Wilton v Farnworth [1948] HCA 20; 76 CLR 646 at 649, per Latham CJ; Toll (FGCT) Pty Limited v Alphafarm Pty Limited [2004] HCA 52; 219 CLR 165 at 180-181, per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. 62Furthermore, as the defendant has not given evidence, there is nothing to displace the inference that arises from the narrative of facts that the defendant's decision to undertake whatever risk was involved in obtaining refinance and increasing her indebtedness as a result of the Third Transaction was an informed, voluntary and deliberate one. For the reasons given below I am not satisfied that the defendant was, as viewed at the time at which the Third Transaction was entered into, unable to service the loan. But even if that were the case, there is no explanation as to why she made the declaration that she could service the loan and meet her other expenses. In circumstances where she voluntarily assumed the risk of not being able to service the loan in accordance with its terms, it is questionable whether the transaction ought be regarded as unjust: Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153 at [70], per Brereton J. 63As appears from these reasons, it is a fundamental premise in the defendant's submissions that the business records she has tendered represent the sum total of her income for the relevant periods. My reasons for not accepting this proposition include that the defendant herself did not give sworn evidence to that effect and thereby expose herself to cross-examination. The serviceability of the loan 64The defendant relied on a number of matters for the proposition that the plaintiff was indifferent to her capacity to service the loan, including the plaintiff's age and the lack of substantiation of her income. 65I reject the defendant's submission that the age of the defendant was a circumstance that made the contract unjust. At the time of the Third Loan, the defendant was 62 and was still earning. I reject the submission that, because it could not reasonably be expected that she would still be receiving remuneration from her own labour when the 25-year term of the loan expired, the Third Transaction was unjust. Such a submission, if accepted, would deprive all but the young and those in early middle age of the opportunity of raising finance by mortgages of 25 or 30 years' duration which are intended to be serviced by monies derived from their labour. 66The defendant submitted that the evidence established that her income was insufficient to service the mortgage and that it was unjust for the plaintiff to advance her funds without inquiring as to her income and requiring substantiation thereof. One of the difficulties with this submission is that it rests on the following propositions that have not been established: (1)that the group certificates in the defendant's possession that were produced in answer to a notice to produce represented the sum total of the defendant's earnings; (2)that the estimates of tax prepared by the defendant's accountant record accurately all of her income; (3)that the Notices of Assessment issued by the Australian Taxation Office (ATO) record all of the defendant's taxable income, as distinct from the income that she chose to declare; (4)that the defendant had no other resources from which to meet mortgage payments; and (5)that the defendant's declaration that she was able to meet the loan repayments represented no more than her subjective belief and was inherently unreliable. 67The defendant submitted that the Notices of Assessment and estimates of tax payable were business records and therefore reliable and that there was no need for her to give evidence to verify them. She submitted that these documents together with the pay slips and group certificates were the only evidence of income and that therefore I should accept them as proving the matters set out above. She submitted that it would be quite wrong to infer that she had not declared all of her income to the ATO since this would amount to a criminal offence and therefore the Briginshaw standard would apply: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-362, per Dixon J. 68I reject these submissions. I am not persuaded that the documents referred to above represent, at the dates they bear, the sum total of the defendant's income derived either from her labour, or from her labour and investments, at those times. It follows from this finding that I do not accept the defendant's submissions to the effect that she was relevantly unable to service either the First or the Second Loans. Although I can infer from the default, and the fact of these proceedings, that the defendant was unable to service the Third Loan, the reason for her inability to do so is not established by the evidence. 69One of the difficulties with the defendant's submission as to the quantum of her income and her capacity to repay the mortgage is that it depends on her having told the truth to the ATO and not having told the truth to the plaintiff in the declaration that she was able to meet the loan repayments. The argument advanced by the defendant that her declaration to the plaintiff that she was able to service the Third Loan was no more than an expression of her subjective belief, the non-fulfilment of which did not adversely reflect upon the credibility of other statements made by her and recorded in business records, needs only to be stated to be rejected. 70The defendant sought to establish the proposition that, by reason of its involvement in the Second Loan, the plaintiff knew or ought to have known of the defendant's inability to service the First, Second and Third Loans. 71The defendant relied on evidence that she was in default in repaying the First Loan at the time she applied for the Second Loan. Bank statements tendered showed that from May 2003 until August 2003 there were defaults in payment of interest with respect to the First Transaction. These documents were not provided to Challenger when it was assessing the defendant's application for the Second Loan. The defendant provided Challenger with documents entitled "Statement Summaries" from AWL which covered the period 17 December 2002 to 30 April 2003 which showed the loan account to be in order. It appears from this evidence that the defendant withheld evidence of her default from Challenger when she applied for the Second Loan and that Challenger did not insist on complete documentary evidence of itemised transactions which, if provided, would have established default. 72I do not accept the defendant's submission that the Second Loan should not, on the basis of the defaults, have gone ahead. Although there are passages in the transcript of the cross-examination of Mr Wort and Ms Tran which could be understood as implying that it was of crucial importance that there be no absolutely no default when refinancing, I gained the impression, when seeing and hearing them give evidence, that they were effectively brow-beaten by the defendant's senior counsel into making such concessions and that those concessions did not correspond either with their true beliefs or their usual practices. The same observation applies to their evidence about the defendant's declaration about the documents provided to Fox which is referred to below. 73In any event, the defaults in 2003 do not, in my view, bear on the justice or otherwise of the Third Transaction because of the time that had elapsed between the defaults in 2003 and the time at which the Third Transaction was entered into. In particular, I do not consider that it establishes that the plaintiff was indifferent to serviceability at the time of the Third Transaction. 74The application for the Second Loan, which was signed and dated by the defendant on 1 August 2003, contains a declaration by the defendant as follows: "I/We supplied all Pay Slips, Group Certificates, Tax Returns or Tax Returns [sic] or Tax Assessment notices, Confirmation of Employment, Bank Statements or any other evidence of savings history in original form to Fox Home Loans Pty Limited." 75The defendant sought to use this declaration to establish that the plaintiff had access to all of the defendant's documents in each of the categories referred to as at the date of the declaration. She then developed this proposition by submitting that, in that event, the plaintiff would have known that the defendant could not afford to service the Second Loan without hardship. 76I do not accept this argument. The wording of the declaration is so general that one could not infer that each and every document in each and every category had been supplied. Furthermore the words "or any other evidence of savings history" suggests that there were alternative ways of fulfilling the requirements administered by Fox. There is no evidence of what exactly the defendant supplied to Fox in support of her application for the Second Loan. She did not give evidence herself. She told Fox, as she later told Mr Carr, that she was self-employed. According to her application for the Second Loan she had been a self-employed investor since 1996. Accordingly, on the basis of this representation, it is unlikely that she would have provided pay slips or group certificates or confirmation of employment, since the existence of such documents would have been inconsistent with her stated occupation of self-employed investor. 77The defendant relied on the lack of documents on the file with respect to the Second Transaction that corresponded to the categories in the declaration referred to above as being an instance of the plaintiff's (through its originators) failure to comply with its guidelines. In this respect, and in others, the defendants relied on what Allsop P (with whom Bathurst CJ and Campbell JA agreed) said in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 (Tonto) at [265]: "In all the circumstances, these considerations are relevant to conclude that the unjustness of the contracts can be seen as unjustness affecting Tonto HL and the lenders. This conclusion is relevant to the assessment of unjustness and the extent to which the lenders should be viewed as bearing responsibility for what happened and in applying the broad considerations contained in the CRA , founded as they are in justice and fairness. Looking at these events as brought about primarily by the fraud of Streetwise, a fair assessment is that the business structure put in place by the lenders in how it operated was significantly responsible for the preying upon these people by Streetwise. That is not to ignore the basis upon which the trial and appeal proceeded, that 'Lo Doc Lending' per se was not unjust. Nor is it to introduce an enterprise concept of agency; rather it is to recognise that a sub-contracted lending structure of the kind here, in which persons such as Streetwise are 'chased' to become the introductory agents, should have guidelines enforced with real vigour to deal with the obvious objective risks of fraud and deception. No one criticised these guidelines. Their operation was loose, and affected by the attitude found by his Honour. It is only fair and just to recognise the significant responsibility of the lenders in these circumstances." 78In Tonto, the relevant guidelines were intended to deal with the risk of fraud, which ensued. In the instant case, there is no allegation of fraud. The guidelines alleged not to have been complied with rested, in my view, on an erroneous construction of the borrower's declaration as to documents made in respect of the Second Transaction set out above. 79The defendant made much of Mr Carr's certification in respect of the Third Loan that: "there is no evidence or indication to suggest that the loan or any part of it is being provided for the benefit of a third party." 80The defendant sought to impugn Mr Carr's competence and credibility by eliciting an admission from him that the $70,000 component of the loan was for the benefit of the defendant's daughter and that the certification was, accordingly, false. Mr Carr explained in re-examination why he had given the certification: "What I understood at the time was that, because Mrs Knezevic was driving the process with the potential purchase of a property with her daughter, that it was to her benefit, because she was so actively involved, if you like, and initiated the process." 81I accept this explanation. The evidence referred to in the narrative above shows that the defendant's daughter had not entered into a contract to purchase a property at the time the Third Loan settled. The advance of $70,000 was, in substance, to benefit the defendant at the time it was made because she wanted to give her daughter the money to help her. Parents are permitted to help their children and it is to their 'benefit' to do so. The facts of the instant case are very far from other cases in this area where parents are called upon by debt-ridden and cash-strapped children to bail them out of poor investment decisions. In any event, as referred to above, there is no challenge to the $70,000 part of the advance, which was given to the defendant's daughter. 82The defendant also submitted that the plaintiff's indifference to the defendant's capacity to repay the Third Loan was evidenced by the circumstance that it failed to ask whether she had used the $50,000 component of the Second Loan which was not required to refinance the First Loan, to repay the Second Loan. I do not consider that there was any reasonable basis to expect, much less require, the plaintiff to make that enquiry. Nor was there any evidence that that was what in fact occurred. 83There is nothing per se unjust about the absence of verification of the borrower's means of repayment of a loan. As White J said in Michalopoulos v Perpetual Trustees Victoria Ltd [2010] NSWSC 1450 (Michalopoulos) at [106]-[107] "The fact that no inquiry was made to verify the borrowers' income and Interstar's Guidelines Manual did not require any such attempted verification does not lead to the conclusion that the lender advanced the loan being indifferent to the borrowers' capacity to repay. The absence of verification and any requirement to seek verification shows that the lender was relying heavily on its security. But it is not unjust, let alone unconscionable, that a lender should rely on its security, as protection against the consequences of false information. The fact that declarations were required of the borrowers' income shows that the lender was not indifferent to the borrowers' ability to service the loan. The fact that a different conclusion was reached on the facts in Perpetual Trustee Co Limited v Khoshaba ([2006] NSWCA 41) is neither here nor there." 84Further, as White J said in Michalopoulos at [105], if a lender does not know that the borrower's declarations are false it would be wrong to conclude that the loan was advanced without regard to the borrower's capacity to service it. The defendant has neither persuaded me that her declarations as to capacity to pay were false (except in hindsight, as evidenced by the fact of these proceedings), nor that the plaintiff knew or ought to have known them to be so. 85In any event I am satisfied that the plaintiff did enquire as to whether the defendant was able to pay the Third Loan and was assured by her that she could. The plaintiff was not indifferent to the defendant's capacity to service the loan. It obtained a credit report and insisted that the single default be remedied before the loan was approved. It obtained loan statements from the previous loan, the Second Loan, which indicated that it was in order. The plaintiff had a credible, explicable and prudent reason for refinancing: she wanted a lower interest rate, and to raise further funds. Her past financial experience, as established by the number of times she had used the equity in the Property to raise funds, meant that there was no reason for the plaintiff to doubt that her declaration was honestly made, and in fact true. 86It follows that, whatever the relevance of the term 'asset lending', it does not apply to the plaintiff's conduct with respect to the Third Transaction since it is a term, as Allsop P explained in Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260 at [43], that is used: "...to describe a form of lending where the lender has little, if any, regard for the capacity of the borrower to repay and rests satisfied with the security to protect itself." 87I find that the defendant understood that, if indeed her declaration that she was able to service the loan was false because her income was not sufficient to permit her to do so, she was conveying the wrong impression to the plaintiff: Perpetual Trustees Victoria Limited v Longobardi [2009] NSWSC 654; cf. Tonto. 88Far from indicating any financial distress, the defendant's application for refinance was supported by cogent financial reasons: her desire to raise further funds and to reduce the interest cost. The monthly repayments were not substantial for someone who was still working and the interest rate was more beneficial than the rate that applied to the Second Transaction. The time frame within which the transaction was sought, approved and completed is consistent with its being a considered commercial transaction by a party cognizant both of the lender's procedures and her own rights. Her facility with English, her apparent ability to understand documents and respond appropriately to questions and explanations tells against any vulnerability which might have cast a burden on Mr Carr to make further enquiries. 89The defendant has not established any matter relating either to her circumstances or to the terms of the loan that indicates that she was unable to act at all times in her own commercial interests. It is not to the point that the loan to be refinanced was occasioned by a poor investment choice she made in 2002, which she chose to refinance in 2003, and again in 2005, on each occasion using the refinancing opportunity to obtain larger advances and, in the case of the Third Loan, a better interest rate. In each instance, she obtained a benefit: discharge from an earlier liability and a greater sum. 90Even had the pleadings entitled the defendant to put the proposition that she received no benefit from the earlier transactions and that therefore they could be taken into account in connection with the justice or otherwise of the Third Transactions, it would have not availed her. Her situation is at the opposite end of the spectrum from that of the borrowers in St George Bank Limited v Trimarchi [2004] NSWCA 120. On each occasion, she knew what she was doing and she voluntarily undertook a commercial risk, the extent of which she was in a good position to assess. I reject the submission that she obtained no benefit from the earlier transactions. That the "benefit" of being afforded the opportunity to invest in the High Noon/ Foresyte investment turned out to be of dubious value is not to the point. The First Loan was for an investment purpose. The subsequent loans derive their purpose from the first, since they were, relevantly refinancing the first loan: Jonsson v Arkway Pty Ltd [2003] NSWSC 815; 58 NSWLR 451 at 456-457, per Shaw J. 91In the course of the hearing the defendant sought to characterise the Third Loan as "high risk lending" on the grounds of her age and lack of verification of her income. I do not accept this epithet (cf. Kowalczuk v Accom Finance Pty Limited [2008] NSWCA 343; 77 NSWLR 205 at 228, per Campbell JA). The interest rate that the plaintiff charged the defendant for the loan does not indicate that the plaintiff adjudged the loan to be high risk. To the extent that the label was accepted by Mr Wort, it was my impression that he did so as a result of the tenor of the cross-examination, rather than because it represented his actual view. 92Because the defendant has not discharged her onus of persuading me that the Third Transaction was unjust, it is not necessary for me to consider the second step of whether any relief ought be granted: Kowalczuk, at [87]. 93I have approached the question of whether the Third Transaction was unjust as if Mr Carr and the plaintiff were one and the same, since it does not, in my view, produce a different result if one takes account of the consideration that Carr Financial Services was the mortgage originator and not the lender. However, even if one attributed all of Mr Carr's knowledge to the plaintiff, it would not, in my view, make the contract unjust. In deference to the submissions made by the defendant that Mr Carr was the plaintiff's "agent to know", I propose to set out my findings on the question of agency. Was Mr Carr the "agent to know" of the plaintiff? 94The starting point is the Loan Origination and Management Agreement between Challenger, the mortgage manager for the plaintiff, and RESI, a mortgage originator, who was the franchisor of Carr Financial Services. The agreement was non-exclusive in that it contemplated that RESI would introduce borrowers to lenders other than Challenger. It specifically provided, by clause 19, that: "19.1 The Originator is an independent contractor with respect to Interstar and the Trustee and nothing contained in this Agreement shall be construed as giving rise to any relationship of partnership, agency, employment or joint venture between the Originator on the one hand and Interstar and the Trustee (or either of them) on the other. 19.2 The Originator must not hold itself out or otherwise do or make or permit or acquiesce in the doing or making of any act or statement which would lead another person to believe that the Originator was a partner, agent, employee or joint venturer of Interstar or the Trustee (or either of them). The Originator has no authority to act on behalf of Interstar or the Trustee in any capacity or to bind Interstar or the Trustee to any arrangement with any party. 19.3 Without limiting any other provision in this Agreement, the Originator shall be responsible for all of the acts, omissions and defaults of the Originator's Representative and any act, matter, thing, default or omission by or on behalf of an Originator's Representative shall be deemed, for all purposes, to be an act, matter, thing, default or omission by the Originator." 95A similar arrangement was considered by the Court of Appeal in Tonto. Allsop P (with whom Bathurst CJ and Campbell JA agreed) said at [172]-[177] that it needed to be established that the introducer had the authority to bind the lender or that it represented the lender by some consensual arrangement and that any agreement between the alleged principal and agent must be construed in its commercial context. In Tonto, there were terms to the effect that the originator/ introducer would have duties to its customers to act carefully and in good faith, but the terms of the deed did not provide for the introducer to represent the lender. At [192]-[193], Allsop P said that the trial judge's reasoning process of commencing with the proposition that the originator/ introducer carried out tasks for the lender was flawed because it tended to place undue importance on organisational and enterprise structure when determining whether there was an agency. Whether agency had been established depended on the legal content of the consensual arrangement between the parties as viewed in the commercial context that each party operated its own business. 96I do not consider the arrangement between RESI and Challenger to be relevantly distinguishable from that between the parties in Tonto. Where, as here, the parties, each of which operate its own business, have made express provision excluding agency, the Court ought give effect to the parties' bargain and find that RESI was not Challenger's agent. It is therefore not necessary to consider the question whether Carr Financial Services was acting as the agent of RESI, since, even if they were, they would not thereby become the agent of Challenger and Challenger would not be fixed with their knowledge. The plaintiff's claim for damages for deceit 97Because the defendant has failed to make out her defence under the Contracts Review Act it is not necessary to determine the plaintiff's claim for damages for deceit. The cross-claim 98The defendant's cross-claim against the plaintiff effectively restates the Contracts Review Act defence. Accordingly, it is not necessary to determine it separately. References to the cross-claim ought be taken to be a reference to the defendant's cross-claim against Makhoul. 99The defendant contended that by issuing the 2002 Certificate, Makhoul engaged in misleading and deceptive conduct which caused her to suffer loss and damage because, had the certificate not been issued in the terms in which it was issued, the First Transaction would not have gone ahead. After the certificate was issued, the First Transaction was completed and funds were advanced to the defendant for the purpose of her investment in Forsyte Investments Pty Limited. The investment caused her to lose all the funds, which put her in a position where she refinanced the loans in 2003 and 2005. The defendant submitted that had the 2002 Certificate not issued, she would not have entered into the First Transaction because ING would not have been prepared to advance the funds. Had she not entered into the First Transaction, she would not have entered into either the Second or the Third Transactions. 100The defendant claims by way of damages the amount presently outstanding to the plaintiff required to discharge the Third Mortgage and amounts paid to date to discharge purported liabilities pursuant to the First Loan and Mortgage and the loans which refinanced those initial liabilities. From this total amount is to be deducted amounts referable to the loan for $70,000 which was advanced as part of the Third Transaction in order to permit the defendant to assist her daughter to purchase a property of her own. 101The extent of the loss and damage suffered depends on the extent to which, if at all, the Third Transaction is set aside as being unjust within the Contracts Review Act. 102The representations said to have been made by the provision of the 2002 Certificate do not correspond to the express representations in the certificate. Rather, it is said that certain representations were made by the provision of the certificate because of the context in which it was issued. 103It is well established that whether or not conduct is misleading or deceptive is a question of fact that is to be decided against the background of all relevant surrounding circumstances: Taco Company of Australia Inc v Taco Bell Pty Limited [1982] FCA 136; 42 ALR 177 at 202, per Deane and Fitzgerald JJ; Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; 218 CLR 592 at 605, per Gleeson CJ, Hayne and Heydon JJ. 104It is common ground that such context includes the retainer to Makhoul, although there is an issue about the extent of that retainer. The defendant submitted that there was a relationship between Foresyte Pty Limited and Ifinance by reason of there being a common director, which also formed part of the context in which the representations were made. These matters will be addressed in turn. The Makhoul retainer 105The role of Makhoul is informed by the ING Mortgage Management Funding Program Documents & Procedures Manual dated 14 February 2002 (the 2002 ING Manual), which was current at the relevant time. The 2002 ING Manual provided that the manager is entitled to instruct panel lawyers to prepare transaction documents and that the "transaction medium" for such instructions was Schedule 4 for new loans. 106The 2002 ING Manual provided for the role of panel lawyers in the following terms: "Although panel lawyers will usually be instructed by managers, panel lawyers are acting as ING's lawyers. At all times panel lawyers are expected to protect ING's interests and to refer to ING any matters of concern whether arising from manager's instructions or otherwise. ING expects a high standard of care from its panel lawyers. It looks to them to ensure: - transactions are properly structured; - compliance with the Consumer Credit Code; - transaction documents are not altered without ING's written consent; - payout figures are authorised by ING (an not by the manager); - that any problems with transactions or the conduct of managers are promptly reported to ING. Panel lawyers are expected to play a 'policeman' role to ensure the integrity of the assets being written into the program." 107On 20 December 2002, the 2002 Certificate was issued by Makhoul. It made several express representations, including that: "We warrant that all funding being telegraphically transferred are being used for the purposes of the loan." 108Several further standard representations are incorporated by reference into the certificate. These are set out in a separate document which applies to all similar transactions, and include representations to the following effect: "The transaction documents prepared by Makhoul comply with the funder's current requirements as to form. The documents have been duly stamped and registered. All of the conditions in the loan offer have been met. The insurance cover is effected by an approved insurer. The cheques have been drawn in accordance with the purpose stated in the loan offer or special conditions." The alleged relationship between entities associated with the First Transaction 109The defendant submitted that there was a relationship between entities associated with the First Transaction which formed part of the context against which Makhoul's conduct should be construed. She submitted that: "It is apparent that 'Ifinance', the entity that was the 'originator' of the First Loan and Mortgage was a company, or was related to a company named I-Finance Group Limited (I-Finance Group). It is noted that the I-Finance Group's sole director was Lionel Sonntag, a director of Foresyte. I-Finance Group and Foresyte shared a business address. It is also apparent that they were related, as MLC wrote correspondence on behalf of the company on the letterhead of 'Forsyte'." 110The precise arrangements of the entities associated with the First Transaction were not established by the evidence. Mr Carr accepted, as a general proposition, that in the relevant period property development companies sometimes had finance arms which employed brokers to obtain investors to invest in the property development. I infer that at least one possibility was that Ifinance was part of the Foresyte Group, or associated with it. That there was a common director of Ifinance Group and the Foresyte Group is some indication of this, although it is not clear to which entity the business name "Ifinance" belonged. 111Although various pieces of correspondence, the most significant of which is the letter to the defendant dated 17 December 2002, bear the names "Ifinance", "Foresyte" and "Makhoul", it does not follow that there was any conflict of interest between Makhoul and the other entities. The reason for this is that there was, as both Mr Carr and Mr Wort explained, a practice known as "white-labeling" whereby certain entities had the right to have their names appear on correspondence, notwithstanding that they were not the substantive entity engaged in the transaction or sending the correspondence. Although Makhoul was a panel lawyer and, I infer, was responsible for the letter of 17 December 2002, their name is not obtrusive on the correspondence, although it does appear. 112Furthermore, there is no evidence that Makhoul had either actual or constructive knowledge that the Ifinance Group and the Foresyte Group had a common director. There is, in my view, no proper basis for the suggestion that Makhoul was obliged to undertake such inquiries as would have elicited such information. 113The defendant also placed reliance on a settlement checklist for the First Transaction which contained the following line: "Makhoul Symond - in house - Parramatta" 114She submitted that I ought infer from that line that Makhoul were the in-house lawyers for AWL. I do not accept that submission and accordingly do not draw that inference. 115The defendant also relied on an undated, but executed, agreement entitled "MORTGAGE ORIGINATION AND MANAGEMENT AGREEMENT" between ING, AWL and "The Mortgage Processing Centre Pty Limited" (MPC) and Samuel Makhoul and Gustavo Mendez. Although the agreement was not dated, its provenance and connection with the time of the First Transaction has been sufficiently established by the evidence. The defendant submitted that the remuneration paid to Makhoul for the work it performed on the First Transaction was not limited to the relatively paltry sum of $115.50 by which it charged a fee relating to services performed on and in connection with settlement. The defendant submitted that Makhoul was in fact relevantly a guarantor and that it had an interest in the transaction proceeding which imposed a higher duty on it to make a full declaration to ING, AWL and AWLM and therefore made its conduct misleading and deceptive. 116I reject this construction of the agreement. Although the word "guarantor" is used with respect to Mr Makhoul, Mr Mendez and the company, MPC, the express provisions of the agreement establish that they were a guarantor in a very limited, defined sense. Effectively, the guarantor, as defined, provided a guarantee to ING, the lender, of the obligations of AWL, who was relevantly the manager. Clause 13.6 of this agreement expressly prohibits Mr Makhoul from owning any shares in MPC or AWL or any related corporation of either of them. 117Further, as Makhoul submitted, the First Loan had already been approved by the lender before it was referred to Makhoul for settlement and completion of the 2002 Certificate. 118The defendant submitted that I should more comfortably draw the inference that Makhoul was in a position of conflict because Mr Makhoul was not called although he had sworn an affidavit in the proceedings. The defendant contended that Mr Makhoul could have explained the relationship between the entities. I do not accept that any Jones v Dunkel [1959] HCA 8; 101 CLR 298 inference arises in this context from the fact that Mr Makhoul was not called. The relationship between commercial parties is presumably a matter of record. I am not satisfied that Mr Makhoul was aware of any relationship between the broker, the investor and the originator. He was a panel lawyer who acted for AWL, ING and AWLM. He had a limited role to effect settlement of the transaction. 119I am not satisfied that Makhoul placed itself in a position of conflict of interest or that any of the matters referred to above are such as to render its conduct in issuing the certificate misleading or deceptive. The representations that the defendant alleges were made by the provision of the 2002 Certificate 120The defendant alleges that in providing the 2002 Certificate, Makhoul made the following representations to AWLM, AWL and ING: (a)the First Loan and Mortgage were suitable for settlement; and/or (b)the First Loan and Mortgage were suitable for settlement because it had complied with the "usual legal practices commonly adopted in this State when acting for mortgagees of freehold real estate"; and/or (c)the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to act with a high standard of care; and/or (d)the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to ensure the transaction was properly structured; and/or (e)the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to "play a 'policeman' role to ensure the integrity of the assets being written into the program"; (f)the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to ensure the First Loan and Mortgage were dealt with and documented as if regulated by the Code; and/or (g)the cheques had been drawn in accordance with the purpose stated in the First Loan offer; and/or (h)there were no matters of concern relating to the First Loan and Mortgage; and/or (i)the second cross defendant had exercised a high standard of care and ensured that if there were any problems with the proposed transaction such problems would have been reported to ING prior to providing the Solicitor's Certificate. 121Subject to the matters that appear below in relation to (a) and (g), I am not persuaded that any of these representations were made. I accept Makhoul's submission that their retainer was limited and that there is no basis to infer that the representations as alleged in (b) to (f) and (h) and (i) were made. There is, in my view, nothing in the context against which the certificate was issued from which it can be inferred that Makhoul made representations beyond those expressly contained in the certificate, other than those which are referred to below. 122I accept that there was a representation that the loan and mortgage were suitable for settlement ((a) above), but I construe the representation as being limited to the matters in respect of which Makhoul were retained: namely to ensure that the loan had been properly documented and that all the steps required of Makhoul had been undertaken. Makhoul was, relevantly, what Mr Wort described as a "settlement agent". Its role with respect to the First Transaction was akin to that of FTS with respect to the Second Transaction, namely: to prepare the loan documents, to arrange for the mortgage loan documents to be completed and executed, disbursing the funds secured by the mortgage, paying any stamp duty due on the mortgage and loan documents, arranging for the registration of the mortgage and returning the mortgage documents to the mortgagee. This representation, so construed, was correct. 123The defendant submitted that because it had been established that there was in fact no company called Foresyte Investments Pty Limited, the representation in (g) was misleading and deceptive. She also relied on the disparity between the agreement she had with High Noon Properties Pty Limited dated 24 December 2002, which obliged her to lend $200,000 to High Noon, and a document dated 7 February 2003 entitled "Terms Letter", which indicated that she had agreed to pay a fee to Foresyte of $64,000 and asked her to sign a copy of the terms letter and return it. She also relied on the circumstance that both Foresyte Pty Limited and High Noon went into administration on 10 March 2003, presumably as evidence of loss. 124I find that the 2002 Certificate contained a representation that the cheques had been drawn in accordance with the purpose stated in the loan offer ((g) above). As appears from the narrative above, the cheques were drawn to a designated account which was consistent with the purpose of the loan identified in the instructions to Makhoul in the Schedule 4 document and consistent with the defendant's direction to pay the funds into an account nominated by the defendant. That the advance turned out to be imprudent cannot be laid at the feet of Makhoul. I do not accept the defendant's submission that the invoices apparently issued by Foresyte and dated 24 December 2002 show that only $16,000 of the amount advanced was used for the loan purpose, or that this has any bearing on whether the issuing of the 2002 Certificate was misleading or deceptive. 125As to (b), I accept Makhoul's submissions that there was no evidence of what the "usual legal practices" relevantly were. As to (c), (d), (e) and (f), (h) and (i), I reject the submission that the obligations of Makhoul in the manual can be converted into representations as the defendant has sought to do. I do not consider that there was any expectation on the part of ING, AWL or AWLM that Makhoul would carry out an investigative role with respect to the First Transaction or that they would check or analyse the facts comprising the background or context to the transaction. Whether the representations in the 2002 Certificate were misleading or deceptive 126For the reasons given above, I am not persuaded that the defendant has established that any of the pleaded representations were misleading or deceptive. 127The defendant made a further submission that amounted, in my view, to no more than sophistry. She submitted, in substance, as follows: (1)the representations were representations as to future matter; (2)s 51A of the Trade Practices Act deems representations as to future matters to be misleading or deceptive unless evidence to the contrary is adduced; (3)because no one on behalf of Makhoul was called, there is no evidence of the basis of the future representation; (4)therefore the representations are misleading or deceptive; (5)because the loan would not have been advanced but for the 2002 Certificate, causation has been established; and (6)the defendant has established her cross-claim against Makhoul. 128I propose to deal first with propositions (1) to (4) above before considering the question of causation. 129The principal basis on which the defendant contended that the representations were as to future matters was that the relevant manual provided that panel lawyers (which included Makhoul) must deliver the certificate "at least two business days before the proposed settlement date". The certificate is, in substance, a present representation that the matters referred to therein have been attended to, and that, accordingly, the matter can be settled. That the certificate, for administrative reasons, might be required to be provided in advance does not convert a representation as to a present matter into a prediction or a representation as to a future matter. I find that none of the representations alleged was a representation as to a future matter. 130For completeness, I propose to deal with the remaining four propositions, although it is strictly unnecessary to do so, having regard to my finding that the representations, properly construed, did not attract the operation of s 51A of the Trade Practices Act. 131The effect of the authorities is that if Makhoul adduces evidence that tends to establish that there were reasonable grounds for making the representations, then the deeming provision (s 51A) ceases to operate and the legal and evidentiary onus of establishing that the representations were misleading or deceptive rests on the defendant: Pan Pharmaceuticals v Natural Care [2008] FCAFC 2; 165 FCR 230 at [6] and [44], per Emmett J and [191]-[192], per Allsop J. 132I accept Makhoul's submissions that they have discharged the evidential onus. In particular they adduced evidence of the following: (1)their retainer as set out in the ING Manual; (2)the instructions provided to them in Schedule 4, which did not indicate any impropriety; (3)that the direction to pay was made in accordance with the defendant's direction; (4)that the direction to pay was made to an account which on its face appeared to be an entity within the Foresyte Group; (5)that the account to which payment was in fact made was within the Foresyte Group; (6)that security was in fact granted over the Property; (7)that the mortgage was in registrable form and was in fact registered; (8)that mortgage insurance was in place; and (9)that they had undertaken the tasks required of them by their retainer. 133Each of these matters is established by the documents relied upon. There was no relevant matter concerning Makhoul, which required oral evidence to render it probative or comprehensible. Accordingly, the deeming provision, s 51A, ceases to operate. As I have said above, I am not persuaded that any of the representations alleged were misleading or deceptive. Causation of loss 134The defendant lost money because she made a poor investment in the Foresyte Group. She borrowed the money for the First Transaction from ING. ING advanced the money to her in circumstances where it had been given a certificate by Makhoul. The defendant submitted that these matters are sufficient to establish causation and that her loss was occasioned "by" the alleged misleading and deceptive conduct. 135As Allsop P said in Bullabidgee Pty Limited v McCleary [2011] NSWCA 259, at [71], after reviewing and citing the relevant authorities at [64]-[70]: "The inquiry is for a sufficient and direct link between the conduct and the consequences..." 136Makhoul relied on the distinction drawn between the majority of the Court of Appeal (Giles and Ipp JJA) in Ingot Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206; 73 NSWLR 653 (Ingot), which in turn relied on a categorization of cases in McHugh J's judgment in Henville v Walker [2001] HCA 52; 206 CLR 459, at [100]-[103], which was considered in Digi-tech (Australia) Ltd v Brand [2004] NSWCA 58; 62 IPR 184. There are, as the Court of Appeal said in Ingot, two types of cases: (1)cases where some act of the alleged contravenor set in train events that resulted in damage to the claimant, but the conduct of the claimant does not form a link in the causal chain in the sense that the claimant was a passive sufferer of another's act; and (2)cases where the claimant relied on the conduct of the alleged contravenor to enter into a transaction to which the alleged misrepresentation was material. 137There may be recovery in the first category of cases if the act of the innocent party by its very nature causes the claimant's loss. The paradigm example of the first category of case which leads to recovery is where the alleged contravenor makes misrepresentations about a competitor's goods as a result of which consumers buy fewer of the competitor's goods (Janssen-Cilag Pty Limited v Pfizer Pty Limited [1992] FCA 437; 37 FCR 526, at 529-530). 138The instant case does not fall into the first class of case because the defendant cannot be regarded as a passive sufferer of another's act. If she falls into either category, it must be the second. As to the second category, the Court of Appeal (Sheller, Ipp and McColl JJA) said in Digi-tech, at [158]-[159]: "On the assumption that Digi-Tech's forecasts as to the revenue and gross margin of the products were misleading and deceptive, that misleading and deceptive conduct resulted in Deloitte producing, in essence, a misleading and deceptive valuation to support the price of $72.5m. That valuation enabled the investment scheme to be put together and proposed by Urwin to the appellants. But to complete the chain of causation, there must be something linking the appellants' loss to their entry into the investment scheme. That link is the inducement of the appellants and their consequential act of entering into the transaction to their prejudice. Without that link, there is no proof that the misleading conduct caused the loss. We accept Mr Sheahan's submission that, whatever might be the position in other contexts, in cases of this kind (misrepresentation inducing a transaction) the courts have required reliance by or on behalf of the plaintiff on the misrepresentation as being essential to the proof of causation as required by s 82(1) of the TP Act. Persons who claim damages under s 82(1) on the ground that they entered into transactions induced by the misrepresentations of other persons must prove that they relied on such misrepresentations and, therefore, "by" that conduct, they suffered loss or damage. As Mr Sheahan pointed out, were it otherwise, representees could succeed even though they knew the truth, or were indifferent to the subject matter of the representation." 139Makhoul's conduct in issuing the certificate provided the defendant with no more than an opportunity to enter into the investment with Foresyte, which was the effective cause of her loss. Makhoul's conduct in issuing the 2002 Certificate had the effect that the monies were advanced to the defendant and applied in accordance with her direction. The alleged contravening conduct did not have any relevant causal effect on the defendant's decision-making; she did not rely on it. 140In any event, the defendant was entitled to terminate the First Loan Agreement before the monies were advanced. The agreement was made on 17 December 2002; the 2002 Certificate is dated 20 December 2002; the defendant undertook the obligation to invest in Foresyte by lending money to High Noon Properties Pty Limited on 24 December 2001 and the monies were drawn down on that day. It was the defendant's act in committing herself to a liability to High Noon Properties Pty Limited which caused her loss. 141In that sense, Makhoul's conduct in issuing the 2002 Certificate was no more a legal cause of her loss than was the auditors' certificate in Alexander v Cambridge Credit (1987) 9 NSWLR 310 (a claim in tort). A similar paradox arises as did in that case (per McHugh JA, at 358F): AWL, AWLM and ING relied on the 2002 Certificate but there is no evidence that they made any complaint about Makhoul's conduct; while the defendant who did not rely on the 2002 Certificate is the party claiming damages. 142The findings I have made above are sufficient to dispose of the issue of causation. 143However, Makhoul also submitted that there was no evidence as to what would have occurred but for the allegedly misleading conduct. If, for example, ING had known that Makhoul had not made the inquiries that ING thought they had made by reason of the issue of the certificate, the question arises: what would have occurred: Smith v Noss [2006] NSWCA 37 at [26], per Beazley JA. I accept Makhoul's submission that the defendant has not established what would have occurred with the loan. However, I consider that the matter sufficiently determined by the construction I have given to the representations alleged and the findings on causation given above. Accordingly, I do not consider it to be necessary to go further to determine the counterfactual beyond what I have set out above. 144For the foregoing reasons, the cross-claim must be dismissed. Evidentiary matters 145The defendant tendered documents and asked questions in the course of the hearing, some of which were admitted or allowed over objection subject to relevance. I indicated that I would record my final rulings on those documents and those questions in these reasons. To the extent to which I have referred to such documents in these reasons, I regard them as relevant. Otherwise I consider them to be irrelevant. Orders 146I make the following orders: (1)Judgment for possession of the Property. (2)Judgment for the plaintiff for the amount owing under the Third Mortgage, together with enforcement expenses and interest, the quantum of such judgment to be as agreed or determined. (3)Judgment for the cross-defendants on the cross-claim. (4)Costs reserved. (5)Direct the parties to bring in short minutes of any additional orders required to reflect these reasons. ********** 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: 24 August 2012