Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustees Victoria Limited v Belcastro (No 2) [2013] NSWSC 1189 Hearing dates: 2, 29 & 30 November 2010, 1 & 2 December 2010, 25 March 2011,19, 20, 21 & 22 November 2012 & 18 February 2013 Decision date: 30 August 2013 Jurisdiction: Common Law Before: Adams J Decision: 1. Judgment for the plaintiff against the second defendant. 2. The first and second defendants are to deliver up possession of the land in Certificate of Title Identifier 89/9969 within 28 days of the date hereof. 3. Judgment for the third cross-defendant against the cross-claimant. 4. The question of costs to be determined on written submissions as directed. 5. Liberty to apply on three days' notice. Catchwords: MORTGAGES - possession - husband and wife borrow funds secured against their family home on lent to their business - business failed to pay the borrowers who eventually defaulted - application for possession or application for appointment of trustees for sale - Direction to pay - whether completed by borrowers - allegation of fraudulent conduct - application for a loan - whether a mortgage broker was an agent for lender CONTRACTS - Contracts Review Act - unfair contracts - bargaining position between lending institution and borrower - no imbalance between the parties apart from the usual difference affecting terms of loan - no reason to suspect borrowers were credit risk - whether asset lending LIMITATIONS - contract and tort - extension of limitation period where fraud or deceit Legislation Cited: Conveyancing Act 1919 Contracts Review Act 1980 Trade Practices Act 1974 (Cth) Competition and Consumer Act 2010 (Cth) Limitation Act 1969 Cases Cited: Argyropoulos v Layton & Anor [2002] NSWCA 183 Wilson v Rigg [2002] NSWCA 246 Perpetual Trustees Victoria Ltd v Belcastro [2011] NSWSC 1418 Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 Learn & Play (Rhodes No 1) Pty Limited as Trustee for Rhodes 1 Childcare Centre Unit Trust v David John Frank Lombe [2011] NSWSC 1506 Taylor v Smith (1926) 38 CLR 48 at 54 (Knox CJ) Suncorp Finance and Insurance Corp v Milano Assicurazioni SpA [1993] 2 Lloyd's Rep 225 Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd [2004] NSWSC 56 Pollard v Wilson [2010] NSWCA 68 Victorian Professional Group Management Pty Ltd v The Proprietors "Surfers Aquarius" Building Units Plan No. 3881 (1991) 1 Qd R 487 Brockway v Pando [2010] WASCA 192 Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389 Fast Fix Loans Pty Limited v Mladenko Samardzic and Anor [2011] NSWSC 19 Kowalczuk v Accom Finance [2008] NSWCA 343 Spina v Permanent Custodians Limited [2009] NSWCA 206 Perpetual Trustee Company v Khoshaba [2006] NSWCA 41 Category: Principal judgment Parties: Perpetual Trustees Victoria Limited ACN 004 027 258 (Plaintiff/ First Cross-Defendant) Domenci Belcastro (First Defendant) Maria Teresa Belcastro (Second Defendant/ Cross-Claimant) Mawson Securities Pty Ltd (Second Cross-Defendant) Ted O'Shannessy (Third Cross-Defendant) Representation: Counsel: S B Docker (Plaintiff/ First Cross Defendant) C Evatt (Second Defendant/ Second Cross-Claimant) P A Horvath (Second and Third Cross-Defendants) Solicitors: Kemp Strang (Plaintiff/ First Cross-Defendant) Dennis & Company (First Defendant) M J Woods & Co Solicitors (Second Defendant/ Cross-Claimant) Moray & Agnew (Third Cross-Defendant) File Number(s): 2008/288187 Judgment Introduction 1The plaintiff, Perpetual Trustees Victoria Limited, sues the first and second defendants, respectively Mr and Mrs Belcastro, for possession of land at St Marys, pursuant to its rights as a mortgagee under a registered mortgage. On 29 May 2003 Perpetual advanced $200,000 under a loan agreement with Mr and Mrs Belcastro, the obligations for payment of interest and repayment of principal being secured by the mortgage. Perpetual claims that Mr and Mrs Belcastro defaulted under the loan agreement and the mortgage by failing to make repayments when they were due. It is therefore entitled to possession of the land. (On 25 August 2009, the Court gave judgment in favour of Perpetual against Mr Belcastro for possession of the land. Accordingly, he is not, as it were, a continuing litigant.) If Perpetual loses its case against Mrs Belcastro, it seeks the appointment of trustees for sale under s 66G of the Conveyancing Act 1919 so that it can enforce its judgment against Mr Belcastro. 2So far as Perpetual's action is concerned, Mrs Belcastro's defence depends upon whether the loan proceeds were paid in accordance with her authority or whether, as she maintains, it was paid without her authority to Great Western Fencing and Gates Pty Limited (GWF), a third party. Mrs Belcastro has cross-claimed against Perpetual, claiming that the loan agreement and the mortgage are unjust contracts within the meaning of the Contracts Review Act 1980 and in equity. Generally speaking, this case depends upon the manner in which the loan was arranged, which involves the conduct of a Mr O'Shannessy who acted as the broker and the character of the loan from Perpetual's point of view, that is whether it had engaged in asset lending and did it breach its own lending guidelines (although this latter case was not ultimately pressed). If the loan agreement and the mortgage are unjust contracts or Perpetual acted unconscionably, the remaining issue concerns appropriate relief. 3Mrs Belcastro, in a further cross action, has claimed against Mr O'Shannessy in contract, tort and for breaches of s 52 of the Trade Practices Act 1974. She alleges that Mr O'Shannessy fraudulently concealed a number of matters from the lenders, which, had they been known, would have resulted in the loan not having been approved. It is alleged that he undertook this conduct in order to procure commission payments on the loan. Absent fraud, assuming nevertheless that Mr O'Shannessy was negligent or in breach of contract or s 52, the additional question arises whether the claim against him is statute barred. Great Western Fencing and Gates Pty Limited 4The involvement of the Belcastros in this company (called hereafter GWF) lies at the centre of the case. The essential facts are not in dispute. Between 1976 and 2001 the Belcastros conducted a business of home delivery of soft drinks. For about ten years Mr Belcastro delivered soft drinks to the home of Mr Alan and Mrs Lorraine Astley who, as a result, became well known to him. In about 2001, he learnt that Mr Astley worked in a business supervising the manufacture and installation of residential fencing and that Mrs Astley worked in the same business as an accountant. In 2002 Mr Belcastro, following an approach by Mr Astley, became a shareholder in the company, Mr Astley and Mr Belcastro each holding six shares. Mr Belcastro was appointed director of the company on 9 May 2002, ceasing to hold that office on 13 October 2005, the date upon which the company was deregistered. Mr Astley was a director from 9 May 2002 until 5 September 2003 leaving, so far as the ASIC records are concerned, Mr Belcastro as sole director. Mrs Belcastro was secretary of the company from 9 May 2002 until 13 October 2005. Although she was not a shareholder, her evidence was that all the assets of the Belcastros were regarded by them as jointly owned. 5The company manufactured and installed fences and balustrades. Mr Belcastro's initial investment was $30,000 for the purpose of purchasing plant and equipment and, as he put it, "to get the business up and running". Mr Belcastro worked in the business, as I understand it, in the manufacturing and installation side, leaving the office management and (I think) sales to Mr and Mrs Astley. By early 2003 Mr Belcastro had "invested" from his own savings a total of $130,000. He says that the Astleys had not provided any "capital" and the only "capital" came from him. Although described in the manner quoted, it is clear that these funds were loans made by the Belcastros to the company. 6So far as Mrs Belcastro's involvement was concerned, she said she did not understand what being company secretary involved but agreed to her appointment after she was told that it did not actually involve any work. At the time she was involved in selling phone cards. In early 2003 she attended the Commonwealth Bank and signed a document that made her a signatory on GWF's cheque account. Mrs Astley was the co-signatory. Mrs Belcastro could not recall who asked her to do this. She said that, in the early days, she was not involved in the day to day affairs of the business although Mr Belcastro from time to time told her in a general way about his day's work. As time went on, Mrs Belcastro undertook secretarial and administrative work in the office and, about six months after they became involved, she started to go to job sites and help with quoting, work for which she had no experience but, as time went on, she was able to undertake. The proposed loan to GWF 7Mr Belcastro said that, in early 2003, Mrs Astley and he discussed the need for further funds to enable the company to complete substantial contracts, involving fencing for home building developments near Campbelltown. He was aware that such contracts were coming up, for which the company needed to buy a considerable quantity of materials. Mr Belcastro said that he asked Mrs Astley how much was needed for these two jobs. Mrs Astley told Mr Belcastro that, she had done the figures and $200,000 was required. He said that he accepted this information. He was aware of the amount of material that needed to be purchased and understood that the money he had already lent to GWF had already been used in buying the materials and paying labourers and other business costs. He said that he knew that the company was doing well from his involvement in the manufacture of the fences and the fact that they were always busy. Although he did not know the amounts involved in the upcoming contracts, he said that one was with the Department of Housing involving about 63 houses and involved doing all the tubular and colorbond fencing, joining the balustrades and associated work. There was a lot of work on hand and the profits from the proposed contracts were going to be substantial and sufficient to make the payments due on the loan. 8Mrs Astley told Mr Belcastro that the company could not get a loan because it had not been in business long enough and that neither she nor Mr Astley could borrow any more money since they had no more equity left in their property. He says that he told Mrs Astley that he and his wife were already servicing a loan and could not afford to borrow any more money and that Mrs Astley suggested a loan could be obtained secured on the Belcastros' home, which was unencumbered, with GWF servicing the loan so that the Belcastros would not have to make the repayments. She said she would make appropriate arrangements. A few days later, Mr Belcastro says, he spoke again with Mrs Astley who told him that she had found someone who could help find a loan and that the amount needed was $200,000. Mr Belcastro, it seems, balked at this amount and asked whether it could not be reduced but Mrs Astley told him that the company needed it all to enable them to complete the two impending contracts. He thought that GWF would be able to repay him the $130,000 he had already lent the company and, if he needed to borrow more money for the business, he thought it would also be able to pay this back. Mrs Belcastro also was aware, at least through Mr Belcastro, of the reasons for which the funds were needed. A few days later, Mr Belcastro says, Mrs Astley told him that she had contacted a broker friend, Mr O'Shannessy, who was coming to the factory to discuss the proposed $200,000 loan and get some papers signed. She asked him and Mrs Belcastro to be there. 9It appeared that Mrs Astley had made enquiries about obtaining finance and had contacted Mr O'Shannessy (the third cross-defendant), a mortgage broker. It is not controversial that the Belcastros decided that the money should be borrowed and made available to GWF. Both Mr and Mrs Belcastro agreed that they would borrow the funds on the security of their home and that the loan would be repaid by them with money provided to them by GWF, or which would borrow the amount from them. (Although at first Mrs Belcastro alleged that she was overborne by Mr Belcastro in making this decision, this case was not pressed. At all events, I saw both her and Mr Belcastro in the witness box. I do not accept in any way that this allegation was correct.) There is, however, controversy about how this transaction was to be effected, to which matter I will come in due course. The Belcastros knew that GWF would not have had two years of financial statements covering the period in which they had been involved in the company and they also believed that GWF could not itself get a loan. They were aware that the loan could not be obtained unless they were prepared to mortgage their home, which was unencumbered, as security. Each of them believed that they were dependant on GWF to service the loan. Mr Belcastro said that, because of his involvement in GWF, he was fairly confident that the company would be able to make the necessary payments. It should be inferred that Mrs Belcastro was of the same opinion, perhaps relying on her husband's view. Making the loan application 10In May 2003 the Belcastros met with Mr O'Shannessy to complete the formal application form. There is, however, some dispute about the sequence of events and what was said at the time. In April 2003 Mr O'Shannessy, as well as being a mortgage broker, was a co-agent for a telecommunications company and attended various training conferences in Sydney with other representatives from mobile phone companies. It was at one such conference in April 2003 where he first met Mrs Belcastro and Mrs Astley. Some weeks after, he was telephoned by Mrs Astley to seek his help to borrow funds to purchase the supplies to undertake new contracts. Mrs Astley told him that her business partners would be taking out the loan on the security of their own home which was valued at about $800,000. She said that Mr O'Shannessy's help was needed because "they have not been able to get finance through the banks". (This latter statement was, if said, untrue since it is clear that the Belcastros had not sought bank finance but nothing turns on this.) Mr O'Shannessy says that he told Mrs Astley that he would happy to meet to discuss the specific requirements for a loan but that, in effect, if the borrowers could not provide any financial documentation to support an income stream it would be difficult to source a loan. He mentioned also that he would charge a two per cent brokerage fee. Shortly after this conversation, about a week before 13 May 2003 Mr O'Shannessy says that he attended the GWF premises at Mount Druitt where he met with Mrs Astley and Mrs Belcastro, whom he recognised from the training conference. He recalled that the premises were part of an industrial estate and it appeared that the business was in the process of moving to a new location as there were fencing materials scattered around. 11Mrs Belcastro said that this meeting did not take place and that only one meeting took place with Mr O'Shannessy, that this was at the new premises at St Marys and Mrs Astley and Mr Belcastro were also present. I am quite satisfied that Mr O'Shannessy's evidence is the more reliable on this point. As will become evident, Mrs Belcastro's reliability as an accurate historian is very doubtful. Mr O'Shannessy's account fits far more closely with the logic of events. His recollection of the Mt Druitt premises is also persuasive. 12Mr O'Shannessy says that Mrs Belcastro told him that she and her husband did not have financial documentation for GWF because they had not been in the fencing business for long and realised that getting a loan in these circumstances might be hard. She mentioned that she and her husband had taken out loans before to purchase investment properties and had experience running mobile phone and a soft drinks business. She also mentioned that they owned their home, which was worth about $800,000. She said that a loan of $200,000 was needed for the business and that it was needed quickly so the contracts were not lost. Mr O'Shannessy claims that he told Mrs Belcastro, in effect, that based on their circumstances, the only type of loan which they could obtain would be a no-doc or low-doc loan secured by a mortgage against their home. He explained, he said, that this loan is one in which the lender would be relying on the security of the mortgage rather than proof that it could be paid off with a steady income; instead, the lender wanted a signed declaration of affordability. Mr O'Shannessy said that, at this meeting, both Mrs Belcastro and Mrs Astley participated in discussing the business and its financial situation but that Mrs Belcastro took the lead in discussions about the loan requirements for the business, the security for the loan and the financial situation of her and her husband. 13Mr O'Shannessy said that following the meeting he made calls to various lending bodies in an attempt to obtain agreement to provide funds, essentially on the basis that the loan would be based upon the proposed security. He then made in enquiries with Homeloans Ltd, which was an approved loan originator for Challenger Mortgage Management Pty Limited, the trust manager for the plaintiff, the funds of which were ultimately used for the loan. (For present purposes, Challenger - at the time of the transaction called Interstar - can be regarded as Perpetual's agent and there is no point to the distinction. For simplicity I refer only to Perpetual.) Mr O'Shannessy informed the manager that he was acting for a couple who required an urgent loan for their business but they had no financial records because they were new to the business. He said that they owned their own home, and implicitly, this would secure the loan. He said that the manager informed him that the company had a product called a Retro loan which allowed people to borrow against their home and only limited financial details were required. She faxed to him the application form which contained details of the loan package. 14On 13 May 2003 Mr O'Shannessy said that he went to GWF's new business premises in St Marys, the state of which showed that it had only recently located there. He met Mrs Astley and the Belcastros. (Mrs Belcastro mistakenly says that this is the only time she met Mr O'Shannessy). What happened at this meeting is not agreed. Mr O'Shannessy said that Mrs Belcastro introduced him to her husband. Mrs Astley was briefly present at the meeting but, at all events, was in the premises, given that it was the company's business address. Mr O'Shannessy said that Mrs Belcastro said that the funds were necessary for the business which needed to be able to supply materials at short notice to meet contractual requirements and they were expecting to obtain some big contracts at some housing estates and needed the funds quite quickly. Mr O'Shannessy asked whether they had been in the business for long and was told, "Not this business, but we have run other businesses". (It will be observed that the substance of this information was given, according to Mr O'Shannessy at the previous meeting and it seems somewhat odd that it would be repeated on the second occasion. However, except that it was put to Mr O'Shannessy that the first meeting did not occur, this was not the subject of cross-examination and aside from noting the repetition, I make nothing more of it. At all events, it is difficult to see why this is significant.) Mr O'Shannessy told the Belcastros that he had looked into various loans and had found one through Homeloans. He said that because they were new to GWF they could not borrow against it but could borrow against their home. He told them that because a sufficiently steady income stream could not be established, it was necessary to obtain a low-doc or no-doc loan, "which is basically where they don't look at your earnings, just the security. It [is] sometimes called an equity loan. In this case it means there will be a mortgage against your home for this loan". He says that Mrs Belcastro responded, "Yes, that's sort of loan we think we need." 15Mr O'Shannessy said that it was during the course of this meeting that he assisted the Belcastros to fill in the loan application form for Homeloans. He said that he did not keep a copy of the application. The completed form, which is in Mr O'Shannessy's handwriting except, of course, for the Belcastros' signatures, gives the personal details of each of the Belcastros, including, as their "present employer" GWF, in Mr Belcastro's case as "Owner and Director" and in Mrs Belcastro's case as "Admin/Manager". In Mr Belcastro's case his former occupation was given as "Franchisee - Crystal soft drinks" and, in Mrs Belcastro's case, "Franchisee". The purpose of the loan was stated to be "Investment into Business". The form asked, "Do you require legal or financial advice?" next to which the yes box was ticked. As to whether a language interpreter was required, the no box was ticked. The application form contained what was called a "Retro declaration of purpose and financial position", so far as is presently relevant in the following terms - "We certify, warrant and represent to you that: (a) we are aware of our financial obligations under our proposed loan with you and we are fully able to meet our obligations under this loan; and (b) we are satisfied that our obligations to you will not adversely impact upon our ability to meet all our other financial obligations (including living expenses) as and when they fall due. We acknowledge that you are relying on this statement in considering whether or not to approve this loan application." 16Both Mr and Mrs Belcastro signed the form immediately below this declaration. Mr O'Shannessy recalled that the information about Mr Belcastro being one of the directors and owners of GWF was stated by him, although he did not recall a similar conversation with Mrs Belcastro. The information about her, he says, would have come from one or other of the Belcastros at some point. He recalled asking Mrs Belcastro about seeking legal advice and was told that she intended to do so. 17Mr O'Shannessy said in his first affidavit (of 30 November 2009) that the part of the application form which disclosed the Belcastros financial situation was left blank because the Retro loan product did not require those details for the purpose of approving the loan. Mr O'Shannessy said that Mrs Belcastro showed him what she described as the original title deeds to her home but he told her that it was not necessary for him to take it as the original title deed would be handed over at the settlement of the loan. However he agreed to take a copy of the title deed since the property details were necessary for the loan application. A copy of that title deed was exhibited to his affidavit and he said that it came from his file. Mr O'Shannessy recalled that one or other of the Belcastros asked him whether he needed copies of their financial records and that he responded, "Yes please. It always helps to know as much as possible about your situation. Please contact your accountant and give them permission to speak to me about it" and one or other of the Belcastros agreed to do this. Mr O'Shannessy said that he intended to use these records to assist him in his research and in preparing his letter to Homeloans regarding whether or not he believed the Belcastros would be a good loan risk. Indeed, when the application was faxed to Homeloans on the morning of 14 May 2003, Mr O'Shannessy said - "[The Belcastros]... come across as typical hardworking Italian people who have accumulated good asset and business base with their assets being largely unencumbered. They have an opportunity to expand their business exponentially and to take some of the equity they possess to create a very stable and viable long-term business. There is a short term window of opportunity to complete contracts, hence the need to have a speedy settlement under lo-doc conditions". Mr O'Shannessy wrote on the communication an additional note, "Settlement required as close to 21/5/03 as possible please". 18On 16 May 2003 Homeloans informed Mr O'Shannessy that one of the forms had been incorrectly completed. On 19 May 2003 he sent the new page by facsimile to the Belcastros asking them to initial the corrections and post the form to Homeloans, which they did. Shortly afterwards Homeloans arranged for a valuation of the security property. Mr O'Shannessy was not involved in this process. He was, however, called by a Homeloans' employee who told him that the valuation came in lower than expected but, as there was nothing owing, "it should be fine". Mr O'Shannessy said that he spoke then to either Mr or Mrs Belcastro giving them this information. On 21 May 2003 Mr O'Shannessy received a copy of a facsimile from Homeloans to the Belcastros advising them that the loan had been approved. 19It is relevant to note that, on 14 May 2003 Mr Ali, the Belcastros' accountant faxed a copy of financial papers for the years 2001 and 2002 to Mr O'Shannessy whose recollection was that he did not forward them onto Homeloans because they were not required for the loan application but kept the records on his file as supporting documentation. The documents comprised notices of assessment of taxation for both 2001 and 2002, showing the Belcastros' taxable income totalled $27591 for 2001 and $13561 for 2002. Also provided for these years were the profit and loss figures for their businesses and rental income, the details of which are immaterial. It is obvious that this income stream could not have serviced the loan. 20Mr O'Shannessy agreed in cross-examination that the financial information about the Belcastros' income for 2001 and 2002 that he was sent by the Belcastros' accountant showed that they could not service the loan from the disclosed income (but, in effect, this was irrelevant). Mr O'Shannessy said that when he met Mrs Astley and Mrs Belcastro (the first occasion) they informed him of the progress that GWF was making and the fact that there were contracts ready to go, for which they needed funds. He thought this information came from both of them but was not sure. Mrs Belcastro said that Mr O'Shannessy was asked "to look at the financials to see if it was viable for us to pass that money onto [GWF]". She agreed that she had never stated in any of her affidavits that she or her husband had requested Mr O'Shannessy to look into the accounts of GWF and advise them whether or not it was a good idea to lend the company the money. At the end, Mrs Belcastro said that this idea was conveyed by Mr Belcastro asking Mr O'Shannessy to get the GWF accounts and Mr O'Shannessy's reply that he was already organising that with Mrs Astley. She said that she simply assumed that this was why the request was made. She agreed that no advice ever came back from Mr O'Shannessy in relation to the financial position of GWF, adding, "He didn't come and say no either". She agreed that Mr O'Shannessy never said, "If I don't get back to you, you can assume that it's okay". She said, "Well, we thought if the loan and everything was approved that it was okay". (Despite the allegation in the cross-claim that Mr O'Shannessy suggested that the loan should be used for the purpose of investing in GWF, she agreed on a number of occasions that Mr O'Shannessy never said this. When confronted with the cross-claim allegation, Mrs Belcastro said that she had not read that part of the cross-claim. She added that the allegation was what he "virtually said" because he has been asked to investigate GWF to see whether or not it was a good investment, although the word "investment" she later agreed was never used. I mention this as an example of Mrs Belcastro's tendency to reconstruct events and draw unreasonable conclusions that happen to support her case.) Mrs Belcastro said that, when the loan was entered into she believed that they could afford it "as far as the way it was going to be set up". 21Mr Belcastro gave evidence that he knew at all times, even before he met Mr O'Shannessy, that he and Mrs Belcastro were planning to mortgage the house for the purposes of the loan and that the loan agreement provided that he and Mrs Belcastro were responsible for the loan repayments. He said, however, that the money had to come from GWF with which, as he understood, Homeloans had not entered into any agreement. He said, in effect that he was trusting GWF to pay them, so that in turn they could pay the instalments. He believed that the payments were going to come from GWF's continuing business, in particular, the two large contracts which were coming up and for which the funds were required to purchase materials. He said that there was plenty of work on hand from other clients and the business was going well at the time. Mr Belcastro said that he was fairly confident that GWF would repay the loan (from him and Mrs Belcastro) since he was 50 per cent owner of the company. He also agreed that he did not ask Mr O'Shannessy for any advice on whether GWF could afford to service the loan. 22Mr Belcastro said that he was aware that the loan application required a declaration by him as to the ability to repay the loan but he said that he told Mr O'Shannessy that, even if this was said in the loan application, the lender was to understand that he and his wife could not afford the loan and that Mr O'Shannessy should tell the lender that. This was denied by Mr O'Shannessy although he, in substance, accepted that he was told by one or other of the Belcastros that they could not make the repayments out of their own income and depended on GWF repaying them. Mrs Belcastro also said that her husband told Mr O'Shannessy, "Do you realise that Teresa and I personally cannot make the repayments on this money as we have another mortgage [over their investment property]?" He said that Mr O'Shannessy said, "I realise this. I am sorting financials for GWF with Lorraine Astley". Mr O'Shannessy, on the other hand, says that he responded to Mr Belcastro's statement to the effect - "I realise this. But you've told me the money you're borrowing will go to help Great Western Fencing carryout these you have. So you're expecting Great Western Fencing to fund the repayments. But you know you're borrowing the money against your house." He denied ever suggesting that he would obtain or examine the financial records of GWF. I accept his evidence on this point. There was no need for him to have undertaken this task and he was not at all events qualified to do so. Nor do I accept that he gave a false assurance about this matter to inveigle the Belcastros into the loan or for any other reason. As Mr O'Shannessy said, the loan was unusual in the sense that it was to finance a new business venture which had not traded for a sufficient period to produce financial records or to distribute income and for which the funds were required to create cash flow. Nor did the Belcastros suggest that they actually asked him at any time for his opinion on GWF's financial viability which, as it seems to me, would have been very likely, if not inevitable, had they actually believed he was going to undertake the assessment to which they referred. 23On page 3 of the application giving details of the security property, namely the Belcastros' home, their solicitor was identified as Mr David Wilson of Wilson & Associates, Penrith and his telephone number supplied. On the same page there is a statement of assets and liabilities. A number of items were listed on information that was provided by the Belcastros. The details do not presently matter. It is sufficient to note that their home was valued at $800,000 and their overall net position was well over $1 million. Although the page provided for wage or self-employed income, dividend payments or rental income, none of this information was supplied. 24In his third affidavit of 5 November 2012 Mr O'Shannessy said that, following the meeting at which the application form was completed and signed he spoke to Ms Montgomery, an employee of Homeloans and asked whether the statement of assets and liabilities should be completed and that Ms Montgomery responded, "No". Mr O'Shannessy said that, for this reason, he did not include the page containing the statement of assets and liability (page 3 of 7) of the application form when he sent it to Homeloans. However, in a fourth affidavit, sworn some two weeks later, Mr O'Shannessy responded to being shown by his solicitors the ten pages which had been exhibited in his first affidavit but which he did not consider when he swore the affidavit of 5 November 2012. From an examination of those documents, in particular the fax header on each page of the facsimile which identifies the pages actually transmitted, he said that "there is a real possibility that I did in fact transmit to Homeloans, as part of this facsimile, the page that would been page 3 of 7 of the loan application", notwithstanding the recollection about this matter to which he had earlier deposed. 25The photocopy of the application exhibited to Mr O'Shannessy's affidavit bears two lines of fax imprints at the top of each page. The first four pages from his fax machine are the coversheet (numbered 01), the first page of the loan application (numbered page 1 of 7 in print at the bottom of the page and 02 by the fax machine), page 2 of 7 of the application (numbered 03) and page 4 of 7 of the application (numbered 05). On the (by far most likely) assumption that the application was sent in page order, it should be inferred that 3 of 7 - which would have borne the facsimile imprint "04" - was sent but is missing from the collection. On 19 May 2003 Homeloans sent the loan application together with internal documents on to Interstar by fax comprising 28 pages numbered, as is customary, by the sending fax machine. That part of the application which had been completed by the Belcastros contained the pages to which I have referred marked by Mr O'Shannessy's fax machine when they were transmitted to Homeloans. The Homeloan fax numbers of its transmission to Interstar numbers page 2 of 7 as 9/28 and 4 of 7 as 10/28. All the pages have been exhibited. It therefore seems very probable that page 3 of 7 (containing the Belcastros' financial information and the solicitor's details) was indeed forwarded to Homeloans by Mr O'Shannessy but not forwarded on by Homeloans to Interstar. It may be that the account he originally gave was a reconstruction based on something he was likely told by Ms Montgomery at some point. 26At all events, the provision of the list of assets and liabilities was immaterial. Mr Paravizzini, the lending services advisor who considered this application on behalf of Interstar said that a loan of this kind did not require consideration of "financial statements, tax returns or anything related to income". Indeed he said that if he had seen page 3 of the application, the assets and liabilities would have been disregarded as immaterial. In substance, Mr Wort, who was in charge of the lending operations of Interstar (presumably, for loans of this kind) agreed in substance with Mr Paravizzini that he would not expect to see any disclosure of income or financials. 27So far as the details of the Belcastros' solicitor is concerned, no doubt had page 3 been forwarded to Interstar the documentation would have been sent to Mr Wilson in the expectation that he would take the matter up with the Belcastros. However, the documents were sent directly to the Belcastros, as I have mentioned. 28I am satisfied that Mr O'Shannessy did send page 3 to Homeloans and did not play any further material part in the application. Even if I were not satisfied on this point and concluded that Mr O'Shannessy did not send page 3 with the application, this was not done for any dishonest or fraudulent reason. There was nothing on that page which might have given rise to any doubt as to the likelihood of the loan being approved. Nor was there any reason for Mr O'Shannessy to suppose that there was anything in the transaction or in the Belcastros' personal situation that would have led him to think that the solicitor might advise them not to enter into the transaction. Indeed, I am positively satisfied that Mr O'Shannessy was not in the slightest concerned about the whether Belcastros consulted a solicitor and that, whatever he did with the form, it was not done with any dishonest, unfair or improper intention. 29So far as that part of the form which related to income and which was not filled in, Mr O'Shannessy denied that the reason that the income details were not included in the application was that the income figures were disclosed by the Belcastros but they were so low that the loan application would not have been approved, reiterating that the loan was not based on the Belcastros' incomes but on the business venture creating cash flow and income. I accept Mr O'Shannessy's evidence on this point. It may be that the Belcastros thought that the information about their personal incomes, later forwarded to Mr O'Shannessy by their accountant might have been considered by the lender but this goes nowhere. I am satisfied that Mr O'Shannessy did not withhold the information for any ulterior motive. It was irrelevant, since approval of the loan was not based on past income but, in this respect, on the Belcastros' assurance that they would be able to service the loan, in effect, from future income the prospects of which they were in the best position to assess, which assessment one would reasonably expect was carefully done having regard to the risk to their home. 30Mrs Belcastro confirmed that the loan was to be used to buy material for two major contracts which were coming up for GWF. Mrs Belcastro denied that Mr O'Shannessy told her that the only loan he thought could be obtained was a low-doc or a no-doc loan which would rely on the security of a mortgage against their home. Mr O'Shannessy said in his affidavit of 30 November 2009 that he explained to the Belcastros what a no-doc/low-doc loan was, in particular that the lender relied on the security of the mortgage, namely the Belcastros' home, and a "declaration of affordability" rather than proof of an income stream. This information was repeated, Mr O'Shannessy said in his affidavit at a later point. In cross-examination Mrs Belcastro agreed that the possibility of using the home as security for the loan was raised during their discussions and she understood from the loan application that their home was being offered as security by way of mortgage because she and her husband, and not GWF, were the applicants for the loan. Mrs Belcastro further conceded in cross-examination that Mr O'Shannessy had said, in effect, that the only loan they would be able to get would be one that used their property for security. Mrs Belcastro denied, however, Mr O'Shannessy's evidence about the no-doc/low-doc loan conversation, although in her affidavit of 25 June 2010, made by way of reply to Mr O'Shannessy's affidavit, she did not deny his assertions about the matter. She said that her then solicitor (who was reading the affidavit to her in order to draft her response) had not put those particular paragraphs to her. I reject Mrs Belcastro's evidence on this point. It simply would not make sense for Mr O'Shannessy not to have explained what loans were or might be available and it is incredible that Mrs Belcastro's solicitor would simply have ignored that part of Mr O'Shannessy's affidavit when it plainly went to a critical issue in the case. 31There was also a controversy about whether the Belcastros' Certificate of Title was handed over to Mr O'Shannessy. Despite Mrs Belcastro's evidence that neither the original nor a copy was handed over, I am satisfied that, at least, a copy of it was; it was on Mr O'Shannessy's file and there was no reason for Homeloans or Interstar to have provided it to him. This issue does not seem to me to be of any importance at all events. 32Mr O'Shannessy charged a broker's fee for arranging the loan of $4,000, namely two per cent of the loan sum. He also obtained a further commission (directly or indirectly) by the funder. The $4,000 was paid by cheque drawn on GWF's bank account, after some communications between Mr O'Shannessy and Mrs Astley. 33I did not find Mr Belcastro (or, for that matter, Mrs Belcastro) an impressive witness. An example of Mr Belcastro's unreliability is that he said in his affidavit that he told Mr O'Shannessy at the outset, in effect, that the loan "is to be in the company name" and at first maintained this assertion in his evidence, although he later agreed that what he actually said to Mr O'Shannessy was that GWF was going to be making the repayments through them and that they could only afford to pay it if GWF did so. Another example is that he said that he believed at all times that GWF was the sole borrower but then agreed in cross-examination (as was inevitable) that he understood when he signed the loan agreement that he and Mrs Belcastro and not GWF were the borrowers. 34Further analysis of the multiplicity of affidavits and the lengthy cross-examination is unnecessary. The following conclusions seem to me to follow from the matters which I have set out above. The loan was to be made to the Belcastros, secured by a mortgage over their home. They were aware that, from the lender's point of view, they were the debtors and legally liable to repay the loan. In turn, they intended to lend the funds to GWF, which would pay them the amounts necessary to service the loan. Mr O'Shannessy was aware that the Belcastros could not service the loan out of their own incomes but they in effect assured him (as they believed) that GWF would be able to do so as its business was going well. They provided their personal financial information to Mr O'Shannessy but were aware that this would not to be used by the lender to consider whether the loan should be made, rather that the lender would rely on their declaration that they could afford to pay the instalments and the mortgage. At no stage did they ask Mr O'Shannessy to examine the financial position of GWF, nor was there any suggestion that he would obtain or be given its accounts or other financial details, nor did they expect Mr O'Shannessy to undertake such an exercise or rely on him in relation to this issue. They were led to expect that the security documents would be sent to their nominated solicitor and this did not happen because the relevant page of the application form, though sent to Homeloans by Mr O'Shannessy, was not forwarded on to Interstar. (In the result, for reasons I explain later, this was immaterial.) In the entire transaction, despite earlier statements made by Mrs Belcastro to the contrary, she was not overborne by her husband or Mrs Astley, although I would accept that she was somewhat reluctant to enter into the transaction and mortgage her home and may have been persuaded by one or other - most likely both - to agree. Allegations of fraudulent conduct 35Mrs Belcastro alleged in her cross-claim that Mr O'Shannessy's conduct was fraudulent in the following respects (slightly amended) - (i)the Belcastros assets and liabilities as listed on page 3 of the application form was concealed by Mr O'Shannessy from Homeloans and Perpetual; (ii)that the Belcastros had nominated a solicitor in their application form was concealed by Mr O'Shannessy from Homeloans and Perpetual; (iii)that the Belcastros could not afford to repay the loan was concealed from Homeloans and Perpetual; (iv)Mr O'Shannessy failed to examine GWF's financial position; (v)Mr O'Shannessy failed to advise the Belcastros that GWF was not in a position to repay the loan; (vi)Mr O'Shannessy did not assess whether the Belcastros were a reasonable loan risk; (vii)Mr O'Shannessy did not contact the Belcastros' solicitor; (viii)Mr O'Shannessy caused the funds to be paid directly to GWF; (ix)Mr O'Shannessy knew that Homeloans did not have a loan or facility suitable for the Belcastros; (x)Mr O'Shannessy failed to warn the Belcastros that their home was at risk; (xi)the loan application was incomplete and materially altered without authority; (xii)Mr O'Shannessy did not attempt to ascertain or verify whether the Belcastros were self-employed or and not subject to PAYG payments in order for them to eligible for the loan; (xiii)Mr O'Shannessy failed to inform the Belcastros that his involvement ceased when he forwarded the application to Homeloans; (xiv)Mr O'Shannessy wrongly advised the Belcastros that they should borrow against the security of their home although he knew the Belcastros could not afford to repay the loan; and (xv)inserting the name of GWF as the recipient of the funds in the Direction and Authority to pay. 36For the reasons I have already given, allegations (i) and (ii) must be rejected. As to (iii), the Belcastros were able to repay the loan if GWF paid them as they envisaged and informed Mr O'Shannessy. As to (iv) to (vii), it was no part of Mr O'Shannessy's contractual or other duty to do so, nor did he undertake to, nor did the Belcastros think that he did have any such duty or give any such undertaking. As to (viii), for the reasons given below, Mr O'Shannessy had nothing whatever to do with the document. As to (ix) he knew no such thing and, as to (x), the Belcastros were fully aware at all material times that their home was at risk if the loan was not repaid. As to (xi) the application was relevantly complete and not altered; the information mentioned in (xii) was irrelevant and, at all events, there is no evidence that the requisite requirements were not in substance satisfied. As to (xiii), there was no duty of any kind for Mr O'Shannessy to have informed the Belcastros as to when his involvement ended and, at all events, they gave no evidence that they understood from anything he told them that his involvement was any greater than in fact it was; at all events, this is irrelevant. As to (xiv), Mr O'Shannessy gave no such advice and, as to (xv), he had nothing to do with the form. 37It follows from what I have said that Mr O'Shannessy is entitled to judgment against Mrs Belcastro in respect of the action in tort and contract. Mrs Belcastro also sued under s 52 of the Trade Practices Act. Mr O'Shannessy must have judgment also in respect of this claim. The application of the Limitation Act 1969 38Against the possibility that I am mistaken in my findings on the substantive issues, I should consider the potential application of the Limitation Act 1969, upon which Mr O'Shannessy also relies. Section 14(1) of the Act (relevantly) provides that a cause of action founded on contract (other than one founded on a deed) or tort is not maintainable after six years has expired from the date upon which it accrues. Section 55 extends this period where fraud or deceit is proved. As appears from the above, this provision does not apply, though no doubt it gave rise to the amendment of the pleading to make the allegations I have dismissed. Section 82 of the Trade Practices Act (now s 236 of the Australian Consumer Law (Schedule 2) of the Competition and Consumer Act 2010) also imposes a limitation period of six years from the date upon which the loss was suffered. Mr O'Shannessy was joined to the proceedings pursuant to an order of this Court on 5 June 2009. Accordingly, if the actions accrued on or before 5 June 2003, they are statute barred. 39The Belcastros executed the loan agreement and associated documents on 26 May 2003, shortly after they came to their home in the mail. One of those documents, entitled "Direction and Authority" dealt with the payment of the loan moneys after deduction of fees, registration and stamp duty. The form, when it came to Homeloans from the Belcastros, directed the funds to be deposited in the bank account of GWF, particulars of which were given. If this part of the form had not been completed, the surplus funds would be automatically credited to the Belcastros' loan account. In the result, in accordance with the direction, the funds were indeed paid to GWF on 29 May 2003 following execution of the mortgage by Perpetual. Mrs Belcastro alleged that she did not give the direction as to GWF. All the alleged breaches could occur only in relation to acts or omissions committed by Mr O'Shannessy, whose involvement ended on 19 May 2003, when the application was completed by forwarding to Homeloans a corrected page. In relation to the allegation that Mr O'Shannessy had filled in the Direction and Authority with GWF's details, this must have occurred prior to payment of the surplus funds into its bank account. By 30 May 2003 GWF had disbursed $150,000 of the loan funds. 40So far as tort and the statutory claim are concerned, the cause of action first accrues "when measurable damage is first suffered, even though further damage continues to accrue": Argyropoulos v Layton [2002] NSWCA 183 per Handley JA at [5]; see also Wilson v Rigg [2002] NSWCA 246 per Giles JA at [21], [23]. The effect of the execution of the mortgage and the advance of the funds on 29 May 2003 was that the Belcastros were subject to the obligations of repayment together with interest as provided in the loan agreement and the mortgage, on the security of their home. Whatever might have been the position had the funds been paid into the Belcastros' loan account, since it was paid to GWF in which they only have a one half interest, it appears to be clear that they suffered loss on this event. If I am wrong about this, the fact that GWF had disbursed $150,000 of the loan funds by 30 May 2003 must be regarded as a significant loss in the relevant sense. It seems to me inevitable that the claims in tort, under the Trade Practices Act and for breach of contract accrued, if at all, prior to 5 June 2003, namely either on 26 May 2003 when the Belcastros entered into the loan agreement or by 29 May 2003 when the loan was advanced or, at the latest by 30 May 2003 when much of it was spent. 41Accordingly, even if I am wrong about the findings as to there being no breach of contract or tortious or statutory wrongdoing, the action of Mrs Belcastro against Mr O'Shannessy must fail. Perpetual's case against the Belcastros 42It is necessary, of course, for Perpetual to establish that Mrs Belcastro was liable under the mortgage and loan agreement in respect of the obligations created by them. She submits that she is not liable and is otherwise entitled to relief under the Contracts Review Act and in equity. The only substantive defence to the claim under the loan agreement and mortgage concerns the payment of the loan proceeds to GWF. Mrs Belcastro alleges that the funds should have been paid into the loan account of her and Mr Belcastro and that the payment to GWF was unauthorised. This depends upon the terms of the "Direction and Authority" which formed part of the documents required by Homeloans for the processing of the approved loan. The form was drawn in the alternative so that, if no direction otherwise were given, the funds would be automatically credited to the loan account. It provided for the insertion of the name and banking details of another recipient which, if it were left blank or struck through, would result in the default position applying, namely payment into the Belcastros' loan account. The account name in the ultimate provided was "Great Western Fencing & Gates Pty Ltd", the financial institution was the St Marys branch of the Commonwealth Bank, and the BSB and account numbers specified. 43Both the Belcastros denied completing that part of the form. How did GWF's name and details come to be on the form? The security documents, including the direction were sent by mail to the Belcastros' home on, or perhaps some days before, 26 May 2003 (a Monday). Although Mrs Belcastro said that she opened the package that evening sometime after 6pm when Mr Belcastro came home, this must be mistaken because on that day Perpetual was noted as a mortgagee on the property's insurance policy which, she said, that she arranged the day after she got the documents. Nothing, to my mind, however depends upon this. 44The first page of the form did not require any input (unless an alternative payee was proposed) but the second page of the document required the borrowers' signatures. Mrs Belcastro said that she photocopied the Direction and Authority (absent reference to GWF) for her records. This strikes me as unlikely, given that a copy of this form was provided with the security documents and was in Mrs Belcastro's possession and produced to Mrs Astley in June 2003, when Mrs Astley wrote on it the amount deposited in the GWF account - a matter I discuss below. There were no details, on Mrs Belcastro's account written on this page of the form, although the second page provided for their signatures - which page Mrs Belcastro said she had lost. At all events, Mrs Belcastro said that she retained her photocopy and that, when the documents were sent off with her husband, was no handwriting on the front page which she had retained. In her affidavit of 25 September 2009 Mrs Belcastro said that she first found out that the loan funds had been paid to GWF in June [2003] when an instalment was deducted from her account (this was 27 June), that she asked her husband, "have these loan monies already been paid to the company" and he replied, "yes". She said that she called Mrs Astley and demanded repayment, which was refused. In her affidavit of 26 October 2010 Mrs Belcastro said that on or about 31 May 2003 she saw the Direction and noted that in contained in handwriting the words, "Deposited into our a/c 198,618.75" but does not explain how she came to see the document, though implying clearly enough that it was the form she sent to First Title Secure (Perpetual's settlement agents). In her affidavit of 26 September 2012, the only reference to the matter is a conversation with Mrs Astley sometime in June, when she produced her copy of the Direction to her and Mrs Astley wrote the words "Deposited into our a/c $198,618.75". This account is, of course, markedly inconsistent with that in her affidavit of 26 October 2010. They cannot both be true. At the least they indicate a distinctly unreliable recollection. 45Mrs Belcastro said that when she signed the documents, Lorraine Astley was present and, after giving varying accounts of what happened to the documents, ultimately said that, because she did not have an envelope at home big enough to mail the documents, she gave them to Mrs Astley to give to a friend who worked in the same street as First Title Secure and would deliver the documents on her way to work. The varying accounts given by Mrs Belcastro about this matter are, to say the least, confused. In her first affidavit of 24 September 2009 Mrs Belcastro said that she could not recall what happened after she signed the documents and did not know how they came to be in the possession of Perpetual. In her affidavit of 26 October 2010 she said that she signed the original and copy of the direction "and placed the duly signed original in an envelope with the other documents in the package and posted or sent the envelope to First Title [Secure]". In her affidavit of 26 September 2012 Mrs Belcastro said that Mrs Astley made the offer to which I have referred. Mrs Belcastro said she did not have an envelope at home large enough to contain the documents and Mr Belcastro took them with him to work the following day. In cross-examination Mrs Belcastro said that her reference to posting in the affidavit of 26 October 2010 was a mistake. She says that the statement about placing the documents in envelope was also a mistake because, although "the originals were put into an envelope... it wasn't the right size envelope, so it wasn't closed up or anything like that". She said that she told her solicitor at the time her affidavit of 26 October 2010 was sworn that the documents were going to be delivered and he inserted the word "posted" in the relevant paragraphs. However, she then said that she might have told the solicitor that the documents were going to be posted, "I'm pretty sure that it was either going to be posted or hand delivered. But, at the end, I did say that it was taken by [Mr Belcastro] the next day [to the factory]. But when he was typing that he may not [have put it in]..." She said that she (ie. not the solicitor) had adopted the term "post" used in the letter of First Title Secure that accompanied the documents. In fact, however, the document referred to the "delivery of all documents" although, to be fair, it did refer to a post office box or a DX address for the purpose of delivery. At the bottom of the page in very small print the street address is noted. Mrs Belcastro said that she assumed, despite the specific instruction as to the mode of delivery, the documents could be delivered to that address. In the result, Mrs Belcastro's evidence was that the documents were taken to work early on 27 May 2003 by Mr Belcastro to be delivered by Mrs Astley's friend to First Title Secure. 46I think it highly probable that Mrs Belcastro has no genuine recollection of what she did, as she first stated and has reconstructed her later accounts. 47In his affidavit of 26 September 2012, Mr Belcastro said that Mrs Astley said, on the evening the documents were signed, that she had a friend who worked in the same street as the place where the documents needed to be delivered, that she would arrange for delivery and the documents should be brought to the factory on the next day. He said that he took the documents as requested and left them on Mrs Astley's desk. He gave essentially the same account in his evidence. I am inclined to think that he may have been telling the truth about this matter. However, it is not necessary to finally decide this question since I am satisfied that Mrs Belcastro did, in fact, place GWF's details in the Direction. 48Before moving on, it is useful to note at this point that it is clear that Mr O'Shannessy did not have access to the form after it left the Belcastros' possession, however that occurred. Nor, it is clear, did any employee of Homeloans. Both were out of the loop. It is not, and cannot be suggested that any employee of Interstar or Perpetual had access to the form at any relevant time, let alone that any such employee may have altered it. The allegation against him is unsustainable. In light of the circumstances as any competent legal adviser should have known them at the relevant times, it could not have been made, still less as an allegation of fraudulent conduct. 49As to whether Mrs Belcastro in fact filled in GWF's details on the Direction, the matter of greatest significance to my mind is the handwriting in they are cast. In cross-examination Mrs Belcastro conceded that the handwriting was very similar to hers - as was inevitable - although it was not her hand. Mr Belcastro said that parts of that writing did look similar to his wife's but other parts did not. Perpetual called Ms Novotony, a handwriting expert, who's detailed analysis and report was tendered in evidence. Ms Novotony concluded - "(a) there is evidence supportive of a proposition that the handwriting produced on D1 (excluding the entry "Dominic Belcastro") D2, D3, D4 and D5 were written in original form by one person; and (b) there is evidence supportive of a proposition that the entry "Dominic Belcastro" reproduced on D1 was not written in original form by the writer/s of the remaining handwritings." D1 is the Direction in question. The other documents contain handwriting of Mrs Belcastro, on her own admission and are not disputed. 50If it were the fact that Mrs Belcastro did not place GWF's details on the direction, the only candidates for having done so are Mr and Mrs Astley. If either of them wrote those details, they must have been making a conscious effort to imitate Mrs Belcastro's handwriting, which would have required considerable skill. They clearly could not conceal from Mrs Belcastro that the money had gone to GWF's bank account rather than the Belcastros' loan account. It was therefore inevitable that Mrs Belcastro would discover this forgery, if forgery had occurred. It was clear that the Belcastros intended to lend GWF funds that would enable it to fulfil the substantial contracts on GWF's books or for which it is bidding, a matter in which they had their own substantial interest. It is difficult to understand why the Astleys would take the risk of committing forgery. I accept that the copy of the Direction retained by Mrs Belcastro did not contain the entry in question but I do not think this is significant. I am of course entitled to form my own view as to the handwriting comparison. That opinion takes into account, not only the appearance of the writing but also the evidence as a whole, including my view of Mrs Belcastro as a witness. I have concluded that Mrs Belcastro indeed did place those details on the Direction form and her denials of so doing are untrue. 51If the direction to pay GWF was not filled in by Mrs Belcastro, Perpetual submits that the Belcastros ratified the transaction, as it was ultimately cast. The Belcastros claim that it was a condition of the contract that, in effect, the advance should have been paid to them and not to GWF (or, for that matter, to anybody else). It is submitted on behalf of Perpetual that, on the assumption that the advance was wrongly paid to GWF, that is to say, that the direction in that respect was not given or authorised by the Belcastros, they nevertheless ratified the payment to GWF. In Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 the Court said - "[131] A principal can ratify the making of a contract entered into by a purported agent when the agent did not in truth have authority to make the contract on behalf of the principal. The ratification has retrospective effect, and the agent is treated as having had the requisite authority: Union Bank of Australia Ltd v McClintock (1922) 1 AC 240 at 248; [2006] NSWSC 1028 at [81]; Jones v Peters (1948) VLR 331 at 335. [132] Whether the conduct of the principal amounts to ratification is a question of fact, but there should be "clear adoptive acts" (Eastern Construction Co Ltd v National Trust Co Ltd (1914) AC 197 at 213 per Lord Atkinson); the conduct must be unequivocal (for example, Petersen v Moloney (1951) 84 CLR 91 at 101). It is well expressed in Dal Pont, Law of Agency, 2nd ed at 5.28 - "The positive acts of the alleged principal may, aside from any express words, constitute sufficient evidence of ratification. This may be so where the fair inference to be drawn from a person's conduct, on an objective basis, is that the person consents to a transaction to which he or she might properly have objected. Put another way, ratification 'is implied from or involved in acts when you cannot logically analyse the act without imputing such approval to the party whether his mind in fact approved or disapproved or wholly disregarded the question'." (citations omitted) [133] Acceptance of the benefit of the unauthorised act of the agent with knowledge that the benefit flows from that act will ordinarily suffice (Australian Blue Metal Ltd v Hughes (1961) 79 WN (NSW) 498 at 515; Brockway v Pando [2000] WASCA 192 at [120]). Suing on a transaction brought about by an agent acting beyond authority will also ordinarily mean ratification of the unauthorised transaction: the reason is obvious, see Dal Pont, op cit, at para 5.29 and cases cited. [134] There must be full knowledge of all the material circumstances in which the act was done, unless the principal intends to ratify and take the risk whatever the circumstances (for example, Bremner v Sinclair NSWCA, 3 November 1998; (2001) ANZ Conv R 29 at [32] per Campbell J. The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act (Bremner v Sinclair at [32])." 52In Learn & Play (Rhodes No 1) Pty Limited as Trustee for Rhodes 1 Childcare Centre Unit Trust v David John Frank Lombe [2011] NSWSC 1506 at [21] Pembroke J pointed out that even "[s]ilence, acquiesence or inactivity may be suficient to demonstrate implied ratification", citing Taylor v Smith (1926) 38 CLR 48 at 54 (Knox CJ); Suncorp Finance and Insurance Corp v Milano Assicurazioni SpA [1993] 2 Lloyd's Rep 225 at 234; Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd [2004] NSWSC 56 at [53] - [61] (Young CJ in Eq); Pollard v Wilson [2010] NSWCA 68 at [121]; Victorian Professional Group Management Pty Ltd v The Proprietors "Surfers Aquarius" Building Units Plan No. 3881 (1991) 1 Qd R 487 at 487 (Connolly J); Brockway v Pando [2010] WASCA 192 at [1116] - [117]. His Honour added - "If the principal is aware of all the material facts, takes no steps to disown the transaction within a reasonable time, or adopts no means of asserting his rights at the earliest opportunity, that may, in certain circumstances, amount to sufficient evidence of ratification... [Furthermore,] It is not open to a principal who, by his conduct, appears to the outside world to have adopted a transaction, to be able to prove subjectively that he did not intend to approve it. A principal is not entitled to prove subjectively that he did not intend to adopt a transaction when he has done an unequivocal act to adopt it with full knowledge of its terms and features: Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA (supra) at 235. [24] ...I doubt very much whether a principal, who was aware of the material terms, could successfully contend that he lacked the relevant knowledge because of his own obtuseness, neglect or failure for some other reason to appreciate the significance of those terms." 53On 29 May 2003 Mrs Belcastro and Mrs Astley both signed cheques to Metroll Pty Limited for $17,033.56, cash for $25,000, AMEX for $12,416.56 and Metalcorp for $25,402.74, in total $79,852.86. The cheques to Metalcorp and Metroll respectively for raw tubing and colorbond fencing were, Mrs Belcastro agreed, necessary so that GWF could carry out its contracts which were those envisaged as the purpose of obtaining the loan. Mrs Belcastro said that, when she signed the cheques, she assumed that GWF already had the funds to pay them because she understood at that point that the advance had gone into GWF's account. She said that Mrs Astley had told her about the advance having been credited in GWF's account and that they had an argument about it. (I note that, as mentioned above, in her first affidavit she said that her husband had told her.) Prior to the deposit, GWF had available only a little over $500. Payments of $2,000 were made on each of 27 June, 29 August and 25 November 2003 by GWF into the Belcastros' joint account. Mrs Belcastro explained that the initial instalments payable to Perpetual were $1,372.17 a month and that the difference was a reimbursement in part for money previously lent to GWF by them. 54Mrs Belcastro said that payments continued to be made out of the joint account to Perpetual (from 27 June 2003) until some time in early 2008 with borrowings obtained from friends and family. Mrs Belcastro claimed tax deductions for these payments. At no point did Mrs Belcastro contact Mr O'Shannessy, Homeloans or Perpetual to point out that the funds had been paid to GWF contrary to the direction that they should be paid into the joint loan account of her and her husband, the funds were dispersed by GWF with her express agreement demonstrated by her signature on the cheques and payments continued for as long as she and Mr Belcastro could afford to make them. This is persuasive evidence that, indeed, the moneys were paid in accordance with the direction given by Mrs Belcastro, (though I have not needed to rely on it for my finding that the direction to pay GWF was given). If, however the direction was not given, the conduct of her and her husband is reconcilable only with a decision to accept the position and attempt to fulfil their obligations under the loan agreement and the mortgage. In short, they ratified the contract despite the variation in its terms relating to the deposit of the loan funds. 55Mrs Belcastro pleads various other defences to Perpetual's action which depend on proving that Mr O'Shannessy was an agent of Perpetual. Homeloans, in the terminology adopted by Perpetual is a "loan originator" which introduces proposed borrowers to Perpetual. Pursuant to those arrangements, the application form executed by the Belcastros - forwarded by Mr O'Shannessy - were on forwarded with certain other documents and information although, as I have mentioned, without page 3. Perpetual then considered the application and decided to approve it and advance the loan. It notified Homeloans of its approval on 21 May 2003 and on the same day instructed First Title Secure to act as its settlement agent. That firm prepared the loan documents, arranged for them to be completed, and when they were signed on behalf of Perpetual, disbursed the secured funds, paying the stamp duty and arranging for registration, ultimately returning the security documents to Perpetual. There is no doubt that Mr O'Shannessy was a mortgage broker who satisfied the accreditation criteria imposed by Homeloans (and, perhaps, by Perpetual), including attendance at training sessions and who had available to him application forms with the Homeloans letterhead. However, there is no evidence capable of establishing that he was an agent in any sense of either Homeloans or Perpetual. There was no contractual or consensual relationship between him and Perpetual except in the sense that he was entitled to be paid a commission in certain events when a loan was successfully negotiated; nor was he under the direction of either or able to commit them to any course of action; nor is there any basis for imputing to Perpetual anything conveyed to or known by him: see Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389 per Allsop P, especially at [175]-[178], [207]. He did not represent that he was their agent; on the contrary, he made it clear that he had approached them on the Belcastros' behalf to apply for the accommodation. Nor was he held out as the agent of either. It is not necessary to consider the position of Homeloans but, again, the evidence does not establish that it was the agent of Perpetual. Accordingly, nothing that Mr O'Shannessy did or omitted to do can affect Peretual's rights under the loan agreement or the mortgage. It is therefore unnecessary to consider the allegations arising from Mr O'Shannessy's acts or omissions. Contracts Review Act 1980 56The Contracts Review Act, provides, so far as is relevant - "7(1) 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, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following ... 9(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made." 57It is important to note that this case does not concern any of the terms of the loan agreement or the mortgage but focus entirely on whether the transaction (otherwise not contended to be unreasonable or unjust) should have been entered into at all. It should be noted, at the outset, that the public interest is to be taken into account: s 9(1). As Allsop P observed in Tonto Home Loans at [269], this comprehends "keeping people to their freely entered bargains", as a "fundamental ... aspect of society that is of vital importance". There is also a public interest in the "advancement of ... protection ... to those not able fully to protect themselves and to those preyed upon by dishonesty, trickery and other forms of predation": ibid at [270], in other words the prevention of "unjust dealings which offend against community standards of business morality" - although business loans are excluded from the operation of the Act (an argument not raised here, however, by Perpetual). There is also a public interest in procedures "that promote suitable borrowings and operate as checks against fraud...[which are not merely for the benefit of lenders but] indirect guards against conduct that can produce injustice to members of the public and thus undermine confidence in the free and fair operation of financial markets": ibid at [271]. 58The first issue I propose to deal with concerns the knowledge by Perpetual of the information contained in page 3 of the application. I have already concluded that this page was not sent to Perpetual by Homeloans. As the statement of assets and liabilities was not suggested to be incorrect and there was no statement of income, the absence of this part of the application, though no doubt, in breach of Perpetual's requirements - to be gauged from the fact that it was part of the form - was immaterial except for the absence of the identification of the Belcastros' solicitor. Had Perpetual received the page, it would not have adversely affected the decision to advance the loan. However, its absence was, no doubt, the reason that the documents were sent by First Title Secure directly to the Belcastros. 59I am satisfied that this was immaterial since the Belcastros themselves adverted to the desirability of consulting their solicitor and decided not to do so. Mrs Belcastro said in her affidavit of 24 September 2009 that, when the loan and mortgage documents arrived she said to Mr Belcastro, in effect, "Shouldn't we get the solicitor to look over this" and that he replied "[something like], we don't have any time, sign it now". There was nothing stopping them from making an appointment, urgent if necessary, with Mr Wilson or for that matter another solicitor for this purpose and no evidence that suggested he was or might have been unavailable to help them, even at short notice. The evidence of Mrs Belcastro that, when the documents arrived she did not realise that they had not gone to Mr Wilson (although they came under cover of a letter from First Title Secure which, as she knew, was the lender's agent) is somewhat at odds with this statement. She conceded that she did not attempt to ring Mr Wilson to check if he got the documents, saying that she simply assumed from the fact that the address was given in the application form that the documents had gone to him. She said that she thought that, if there was a problem which the solicitor discovered, he would take the initiative and called her. This shows, of course, that she was not relying on Mr Wilson to explain the documents to her but, at the highest, only to advise her "if there was a problem". 60The documents were conventional and it has not been suggested that, in any respect, they contained any matter of significance of which the Belcastros were unaware or were, in the circumstances unfair or unreasonable. Although she was not, in my view, candid about this, Mrs Belcastro ultimately agreed that she was aware that the mortgage secured repayment of the loan against their house and that, if for any reason GWF had not made the repayments, the house would be sold. She agreed that she did not need a lawyer to tell her these matters. Mrs Belcastro said that she believed that Mr O'Shannessy would be sending the loan application to Mr Wilson. It is clear, however, that even if she thought this (which I do not accept) it was no more than an assumption since I do not doubt that Mr O'Shannessy never suggested to her or her husband that he would do so. Mrs Belcastro, when asked what kind of advice she hoped to get from the solicitor said that it was as to the meaning of the loan agreement and the mortgage. However, since no such advice was sought by Mr or Mrs Belcastro before they signed the documents, it is clear that they did not think it either necessary or desirable to seek his advice on their meaning. Nor was there any basis upon which they could have thought (and I do not believe they did) that the solicitor had examined and approved the documents and, by his silence, they could reasonably infer that he thought all was in order. Mrs Belcastro when pressed on this matter, said that she also assumed that, because he had all the paperwork, the solicitor "would also have seen whether or not Great Western was viable". But then said that she did not want commercial advice, she "just wanted... legal advice". She said that she did not expect Mr O'Shannessy to make an appointment to see the solicitor but that she intended to go to see him about the documents. But she said that she never got there, because the transaction had been completed only a day or two after she had sent them (or had them delivered) to First Title Secure. She said that she thought the loan would not go through quite so quickly, which would have given her time to obtain advice. However, obtaining advice after having executed all the documents without indicating that she was seeking advice before the matter was completed could scarcely have been useful. Indeed, the patent unreasonableness of this proposed course of action persuades me that it was not, in fact, contemplated by Mrs Belcastro. She was asked - "Q. When you had the documents, why did you sign them then, why didn't you say, "I want to go through these with my solicitor", because you didn't think of it? A. I didn't think of it and my husband - I didn't think of it. HORVATH Q. The answer that you didn't think of it is false, isn't it. You just made that up on the spot, didn't you? A. No I didn't. [She was taken to the passage in her first affidavit, which I have set out above.] Q. .... So, is that the truth.... That you thought about it and you raised it with your husband who said, "we don't have time, sign it now" or is the truth what you said to his Honour a minute ago? A. I didn't think about it, but we didn't have time. This an eventuality of what happened. ... Q. Which is true, what you put in your affidavit in September 2009 or what you said to his Honour a minute ago? A. I believe what I said to his Honour, this [I took this to mean, the affidavit] may be a mistake." 61I do not accept Mrs Belcastro's evidence on this point. Perhaps she would have liked to have obtained legal advice but it is clear that she made a decision not to bother to do so. I am satisfied that she knew well enough what the essential nature of the transaction was and, aside from on various occasions asserting (falsely) that she did not understand that she and her husband were directly and primarily responsible for repaying the loan (of course, depending on GWF's paying them first so that the repayments could be passed on) or that her home secured the loan and could be sold by Perpetual if payments were not duly made, there were no aspects either of the loan agreement or the mortgage which Mrs Belcastro said she did not, in the result, understand. There was no resulting unfairness to Mrs Belcastro (or, for that matter, Mr Belcastro) for her not obtaining legal advice and thus the failure to send Perpetual page 3 of the loan application is inconsequential. 62It should also be borne in mind that the Belcastros were not naïve borrowers. This was a conventional transaction. They had been in business, albeit in a small way, for many years, and had borrowed funds to purchase an investment property. Mrs Belcastro claimed, in effect, that she was hampered by her education (leaving school after year 10) and by feeling "under pressure" from her husband and Mrs Astley. In her pleadings, she alleged these and other matters: that the transaction was "manifestly disadvantageous" because it exposed her to the risk of the loss of her home where she had no independent means of satisfying the loan agreement and the loan monies were used in a manner not to her benefit and use. There was no evidence that demonstrated that the matters she identified as disabilities actually operated to influence her decision to enter the transaction. The monies went to GWF, in which she and her husband had, for practical purposes, a joint interest and from which they expected significant income. Mrs Belcastro gave no evidence that she was herself unable to ascertain the financial viability of the company had she been minded to do so. Nor was there any evidence that suggested that it was unwise for her to trust (as I think she did) her husband's judgment on this point. 63Although imbalance of bargaining power is alleged in the pleadings, there is no suggestion that Perpetual or, for that matter, Mr O'Shannessy or Homeloans, in any way pressured or attempted to influence the Belcastros to borrow the funds or, more to the point, in respect of the terms of the loan. No term was identified in the pleadings or the evidence in either the loan agreement or the mortgage which is said to be unfair or inappropriate and agreed to wholly or partly because of Perpetual's bargaining power as the lender. There was no imbalance of power except that which ordinarily arises between a borrower looking for funds and a lender willing, on certain conditions, to advance them. 64As to whether the Belcastros could repay the loan, there was nothing to suggest either to Homeloans (on the assumption that it is Perpetual's agent, which it was not) or to Perpetual that the Belcastros were unable to do so. I do not accept that the Belcastros believed that Mr O'Shannessy or Homeloans or Perpetual or anyone acting on its behalf, would consider GWF's financial position let alone that they believed that one or other of Mr O'Shannessy, Homeloans or Perpetual believed that GWF's finances were sound by virtue of their own independent investigation and, by their silence, entitled the Belcastros to assume such an implied assurance. I have no doubt that the Belcastros believed and probably did so on a sound basis, that GWF was indeed in a position to service the loan (between it and the Belcastros, which would enable the Belcastros to make the repayments). Mrs Belcastro said that, when she entered into the loan she believed that she could afford it. She said, however, that she did not "really" read the Declaration of financial position which she and Mr Belcastro signed as part of the security documents. 65As mentioned before, this was signed by both Mr and Mrs Belcastro. In relation to this issue, Mr Wort said that he would not expect to see any information about the borrowers' income or financial position. He said that Retro loans were for self-employed people who could not produce financials. There was an issue, or at least appeared to be at the early part of the case, whether indeed the Belcastros were self-employed at the time of the application since, certainly so far as Mr Belcastro was concerned, he was employed by GWF. However, as Mr Paravizzini explained, since he was employed in his own business, that was regarded as self-employment. Mr Wort said that the loans were designed for people who were self-employed for less than two years and, therefore, financial information would not be expected. He said that Perpetual relied upon the information from Homeloans as to self-employment and carried out no independent enquiries. Be that as it may, I do not think this particular matter is significant. Essentially, the borrowers assessed their own ability to service the loan. There was a risk, of course, that they might be mistaken or, in the result, the future was not as prosperous as they predicted and, accordingly, substantial security was taken. Perpetual relied on the originator to bring to its attention any matters that suggested that these expectations were unreliable or the information in the documentation was not legitimate but there was no expectation that originators would make independent enquiries. The only matters capable of indicating a problem was the financial position of GWF, which I discuss below, and the income details of the Belcastros shown in the material forwarded by Mr O'Shannessy. As to this last matter, there is no reason for Perpetual to have made any assumption about their previous income and they were not affected by Mr O'Shannessy's knowledge of it; it was at all events irrelevant. (I have already explained why I think it was reasonable for Mr O'Shannessy not to have forwarded the statements on.) Mr Wort said that Perpetual had declined to make a Retro loan where it was unsatisfied about the position, despite there being a declaration of affordability. This is not a case where the lender was indifferent to the ability of the borrowers to service the loan. In my view it was reasonable for Perpetual to have relied on the declaration of affordability. Amongst other things, it was manifestly in the Belcastros' interests to ensure that they could be confident of their ability to repay. 66It was submitted by Mr Evatt of counsel on Mrs Belcastro's behalf that the financial position of GWF was parlous and that Perpetual should have been aware that this was so. However, there was no evidence that GWF's position was problematic at the relevant time, although it is clear that it had a substantial debt, at least to the Belcastros, and it did not have sufficient capital to finance its operations, needing the loans to purchase the wherewithal to fulfil the substantial contracts to which I have already referred. It is uncertain whether those contracts were ultimately entered into but it is clear that certainly Mr Belcastro believed they would be and they would be very profitable. There is no basis at all for inferring that this judgment was wrong. More generally, Mr Belcastro's evidence was that the company was doing well at this time, a matter which, in my view, he was well placed to know. Mrs Belcastro also, by virtue of her being in the office, would also have had or been able to obtain an understanding of the company's financial position. 67The mere facts that in September 2003 a creditor was apparently unpaid for the supply of materials and, in December 2003 an administrator was appointed and in January 2004 the company went into liquidation does not establish that its financial position as at the date of the loan was precarious although it may be, of course, that the continuation of its business depended on its continuing to obtain further contracts. The company was, in substance, an incorporated partnership between the Astleys and the Belcastros. It may be that they fell out and the company was therefore no longer viable. However, it is unnecessary to speculate. What is clear is that no attempt has been made to establish the financial position or prospects of the company as at the relevant time and, insofar as Mrs Belcastro's case depends upon this consideration, it must fail. There is no basis for inferring that, had Perpetual undertaken a financial assessment of GWF, it would likely have concluded that there was a real risk that the Belcastros would default. 68In sum, therefore, the Belcastros were seeking funds to enable a company in which they had a one half interest to fulfil substantial contracts which, it can be inferred, were likely to be profitable and from which, perhaps together with other contracts, the expenses of the company, including the indirect payment of the Perpetual loan, could be paid. They were in a position to know the financial position of the company and did not suggest at any point that its financial position was problematical. Furthermore, the funds, when they went into GWF's account, were in substance under their control in the sense that cheques could not be paid unless one or other of them signed them and, in so far as the funds were used to pay other debts of the company, half of the liability was theirs. Note as to credibility 69It will have been seen that, in respect of Mrs Belcastro, I have made a number of adverse findings as to her reliability as a witness. In making those findings I have borne in mind and made allowance for her evidence that, for a considerable period during which her case was being prepared for trial, she was ill. It may be that this factor was a significant one in respect of some important parts of her evidence, added to the inevitable reconstruction of events over time - which will often favour the (perhaps unconsciously) the interests of a witness. Was this asset lending? 70This is very far from the case of a naïve outsider guaranteeing the debts or borrowing funds to be made available for transactions in which they had no interest to persons whose financial situation they were in no real sense able to assess: cf inter alia Fast Fix Loans Pty Limited v Mladenko Samardzic and Anor [2011] NSWSC 19. In Kowalczuk v Accom Finance [2008] NSWCA 343; (2010) 77 NSWLR 205, Campbell JA (with whom Hodgson and McColl JJA agreed) said - "[96] It can be accepted that pure asset lending - described by Basten JA in Khoshaba at [128] as being "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 in at least some circumstances unjust within the meaning of the Contracts Review Act, or unconscionable: Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 at [57]-[59], [79] per Beazley JA (with whom Santow JA and MW Campbell AJA agreed); Khoshaba at [92] per Spigelman CJ (with whom Handley JA agreed on this point), [128] per Basten JA. However whether lending on the basis that the loan can adequately be repaid from the security, is in the circumstances of any particular case unconscionable or unjust, depends on other matters as well. Thus, in Elkofairi the facts that neither the applicant nor her husband had any income, the loan in question was for five years, and the security was over the applicant's only asset (involving the proposition that the applicant had no other resources from which to service the loan) and that the secured property was the applicant's home, were all relevant matters in reaching the conclusion that the transaction was both unconscionable and unjust. In Khoshaba, other factors relevant to the conclusion of injustice were that the applicants were a husband and wife, one of whom earned $43,000 pa and the other of whom was a pensioner, the lender had no information at all about the purpose for which the loan was being sought, and the security was over their home. [97] Mr Conti submitted that the trial judge had adopted too high a standard for the degree of certainty that a lender must have that a loan will fall into default before the making of the loan counts as being pure asset lending. He pointed to a passage in the judgment (at [52]) where the judge stated that Elkofairi and Khoshaba: "... are not authority for some general proposition that a lender of money on security of real estate to a borrower who has no ability through his own income or assets to repay the loan, is guilty of taking part in some unconscionable and predatory conduct. That may be the position if there is no means disclosed for payment of interest, but a good proportion of borrowers for fixed terms in any mortgage situation would be proceeding on the basis that the principal debt would be repaid by new borrowings or by sale of the mortgaged land. The position is of course different if the lender knows that there will be default in payment of the interest or principal so that mortgagee sale will be the inevitable result. This latter conduct is the type of pure asset lending that has been found unconscionable; the former is not. In the instant case so far as payment of interest was concerned, it was paid in advance and deducted from the loan funds" [98] Mr Conti submitted that there could be unconscionable lending in circumstances where it could not be said that the lender actually knew that there would be a default in payment of interest or principal so that a mortgagee sale will be the inevitable result, but the lender knew there was a high risk that the intended means for payment of the loan might fail. As well, he submitted that a lender who was not acting unjustly should look into the prospect of refinancing, and if that prospect is too risky, the lender should refuse to make the loan. [99] I would accept that in some circumstances knowledge of a high degree of risk that there might be a default in payment of interest or principal so that a mortgagee sale would result, could be unjust lending, even though it could not be said that the lender knows that there will be default. However I do not accept that a lender is always bound to carry out a detailed investigation of the practicality of an intending borrower actually being able to carry through the plan the borrower says he or she has for repayment of the loan. In the present case, Kowalczuk stated to Accom that he proposed to pay the Berowra loan out through bank refinance, and the Haberfield loan through refinancing with FirstLoan (the same brokers through whom Kowalczuk was able successfully to refinance the Berowra loan) and there was no occasion for Accom to doubt that he would be able to do so. Thus, even if Mr Conti is right in saying that there can be pure asset lending if the lender knew that there was a high risk that the intended means of repayment might fail, in the present case Accom did not have knowledge of that type." In this case, to adopt the language of Young JA in Spina v Permanent Custodians Limited [2009] NSWCA 206 at [131], when considering the circumstances, even those known to Mr O'Shannessy and Homeloans, and assuming that what they knew or ought to have known there was nothing which constituted a "red light", or indeed, even a yellow light, to the reasonableness of the proposed transaction. 71As Allsop P said, in Tonto Home Loans (supra) at [252] - "The first stage of analysis is whether the contracts were unjust as between the parties in the circumstances in which they were made... The agreements for loan and mortgage were unexceptional. They contained no harsh or unjust terms of themselves." That is the position here. The question is whether it was unjust for Perpetual to have left it to its borrowers to satisfy themselves as to their ability to service the loan. In my view, the evidence does not justify the conclusion that default, with consequent necessity to resort to the Belcastros' home as security, was inevitable or even probable. Moreover, as I have already indicated, I do not think that, objectively, it should be inferred that such was the case. 72It was also claimed that this was a case where Perpetual's Guidelines were not followed. Although the guidelines are principally directed to safeguarding the interests of the lender, they may - by parity of reasoning - benefit a prospective borrower by demonstrating that the proposed loan is risky: Perpetual Trustee Company v Khoshaba [2006] NSWCA 41 per Spigelman CJ at [80]-[82] and Campbell JA in Kowalczuk at [102]. However, I was not directed to any particular guideline that was material in the circumstances here although during interlocutory argument it was submitted by counsel who then appeared for Mrs Belcastro that the failure to follow the formal requirements of eligibility would have likely resulted in no advance being made. However, in the result there was no reason to conclude - even in the light of what has happened - that the Belcastros were unsuitable borrowers and serviceability was doubtful. Conclusion 73I make the following orders - (1)Judgment for the plaintiff against the second defendant. (2)The first and second defendants are to deliver up possession of the land in Certificate of Title Identifier 89/9969 within 28 days of the date hereof. (3)Judgment for the third cross-defendant against the cross-claimant. (4)The question of costs to be determined on written submissions as directed. (5)Liberty to apply on three days' notice. 74In the circumstances, it is unnecessary to consider the application for orders pursuant to the Conveyancing Act 1919. ********** Amendments 13 September 2013 - amended representatives Amended paragraphs: coversheet 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: 13 September 2013