Supreme Court New South Wales Medium Neutral Citation: RHG Mortgage Corporation Ltd v Baira; RHG Mortgage Corporation Ltd v Ianni [2014] NSWSC 849 Hearing dates: 3 - 7 March 2014; 10 - 11 March 2014; 8 - 9 May 2014 Decision date: 01 July 2014 Jurisdiction: Common Law Before: Davies J Decision: The parties should bring in Short Minutes to reflect these reasons. Catchwords: REAL PROPERTY - possession of land - mortgages - default - Contracts Review Act - parents of borrowers gave guarantees and mortgages - transfer of banks by borrowers - parents become borrowers and mortgagors - knowledge of parents - whether kept in the dark by children who benefited from loans - whether change of status explained by lawyers or other persons - improvidence of loan agreements - notice of lender of true position - failure of lender to follow guidelines - effect on lending - mortgage broker - whether agent of lender for purposes of Financial Transaction Act EVIDENCE - proof - inferences - failure of both sides to call some witnesses - whether Jones v Dunkel inference available - effect of such inference Legislation Cited: Contracts Review Act 1980 (NSW) Financial Transactions Report Act 1988 (Cth) Financial Transactions Reports Regulations 1990 (Cth) Cases Cited: Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 Beneficial Finance Corp Limited v Karavas (1991) 23 NSWLR 256 Blomley v Ryan (1956) 99 CLR 362 Briginshaw v Briginshaw (1938) 60 CLR 336 Collier v Moreland Finance Corp (1989) 6 BPR 13, 337; [1989] ANZ ConvR 515 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Davey v Challenger Managed Investments [2003] NSWCA 172 Fabre v Arenales (1992) 27 NSWLR 437 Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 Jones v Dunkel (1959) 101 CLR 298 Nguyen v Taylor (1992) 27 NSWLR 48 O'Donnell v Reichard [1975] VR 916 Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 RHG Mortgage Corporation Ltd v Ianni [2011] NSWSC 520 Toll (FGCT) Pty Ltd v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 Westpac Banking Corporation v Velingos [2011] NSWSC 607 Category: Principal judgment Parties: BAIRA PROCEEDINGS RHG Mortgage Corporation Ltd (Plaintiff/First Cross-Defendant) Rosa Baira aka Rosa Fioravanti (Defendant/Cross-Claimant) Australian Mortgage & Business Finance Solutions Pty Ltd (Second Cross-Defendant) IANNI PROCEEDINGS: RHG Mortgage Corporation Ltd (Plaintiff/First Cross-Defendant) Rosario Ianni (First Defendant/Cross-Claimant) Domenica Ianni (Second Defendant/Cross-Claimant) Australian Mortgage & Business Finance Solutions Pty Ltd (Second Cross-Defendant) Representation: Counsel: M Ashhurst SC & M Newton (Plaintiff) J Kelly SC (Defendants Rosario and Domenica Ianni) P Bolster (Defendant Rosa Baira) Unrepresented (Australian Mortgage & Business Finance Solutions Pty Ltd) Solicitors: Kemp Strang (Plaintiff) Uther Webster & Evans (Rosario and Domenica Ianni) Frank Legal (Rosa Baira) Unrepresented (Australian Mortgage & Business Finance Solutions Pty Ltd) File Number(s): 2008/285539 & 2008/284857 Table of Contents Para No. 1. Introduction [1] 2. The Defendants [8] (a) Rosario and Domenica Ianni [8] (b) Rosa Baira [14] 3. Background to the loans [18] 4. The RHG loans [44] (a) Rosario and Domenica Ianni [44] (b) Mrs Baira [80] 5. The knowledge of the mortgagors prior to the RAMS loans [97] (a) Rosario Ianni [98] (1) The meeting with Mr Wennerbom [137] (b) Mrs Baira [144] (1) The meeting with Mr Egisto [160] 6. The involvement of Mr Famularo and Joe [181] (a) Joe Ianni [183] (b) Mr Famularo [199] (1) The application to NAB [202] (2) The alleged meeting of 14 September 2005 [208] (3) The sham contract [221] (4) The Snapshot of account [239] (5) The identification documents [241] (6) The alleged meeting of 2 December 2005 [244] (7) Conversations with Mr LoSurdo [254] (8) The "With compliments" slip [259] (9) The shortfall [265] (10) Did the conferences occur? [269] 7. The knowledge of the Defendants about the RAMS loans [277] (a) Rosario and Domenica [277] (b) Mrs Baira [284] 8. What RAMS knew about the borrowers [295] (a) Rosario and Domenica [295] (b) Mrs Baira [335] 9. Was Mr Famularo the Plaintiff's agent? [344] (a) Was RAMS required to carry out an identification check? [349] (b) Was Mr Famularo RAMS agent for the Act? [356] 10. Were the contracts unjust? [358] 11. Unconscionable conduct [374] 12. What relief should be granted? [382] 13. The cross-claim against AMBFS [386] 14. Conclusion [389] Judgment 1. Introduction 1In these proceedings the Plaintiff claims possession of properties belonging to Rosa Baira and Rosario Ianni. The Plaintiff also seeks judgment against them pursuant to loan agreements entered into by them. The loans were entered into for the benefit of Joe Ianni (the son of Rosario and Domenica Ianni (now deceased)) and his ex-wife Sandra (the daughter of Rosa Baira) and their companies Jencon Australia Pty Limited and Jencon Management Pty Limited. 2The loan agreement entered into by Mr and Mrs Ianni is dated 11 October 2005 and was for an amount of $910,000. The loan agreement with Mrs Baira is dated 28 February 2006 and the amount lent by RHG to Mrs Baira was $650,000. 3This case is a little unusual. The trial that I heard was the second trial of the proceedings. The matter was first heard by Grove AJ. That case involved not only the two claims by RHG against Rosario and Domenica Ianni and against Mrs Baira, but also involved cross-claims against the broker, Peter Famularo, and his company Australian Mortgage & Business Finance Solutions Pty Ltd (AMBFS), Fast Track Finance Group Pty Ltd, and Joe and Sandra Ianni. Grove AJ gave judgment on 3 June 2011: RHG Mortgage Corporation Ltd v Ianni [2011] NSWSC 520. 4The mortgagors appealed. The Court of Appeal upheld the appeal and remitted the matters to the Common Law Division for re-trial: Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 (referred to as "Baira"). 5None of the cross-claims except those against Mr Famularo and AMBFS was pursued. However, shortly prior to the hearing before me commenced, Mr Famularo became bankrupt. AMBFS had no legal representation but Mr Famularo gave evidence on its behalf. 6I was informed by consent that the evidence on which I was to decide the matter was to be the evidence in the statements and affidavits that were before Grove AJ and subject to his evidentiary rulings, the transcript before Grove AJ together with the further oral evidence given before me. I had expected that the evidence would largely be that given before Grove AJ. However, extensive cross-examination took place before me. Nevertheless, it was reiterated that I could and should have regard also to the oral evidence given before Grove AJ. The evidence in each of the proceedings was evidence in the other. 7In this judgment I will refer to the Plaintiff variously as RHG, RAMS and the Plaintiff. At the time of the relevant events it was known as RAMS. It is now known as RHG. I shall refer to the Iannis by their first names for reasons of clarity and without intending any disrespect. 2. The Defendants (a) Rosario and Domenica Ianni 8Rosario Ianni was born on 16 January 1935 in Italy. He left school at the age of 14. He did not learn any English at school. He commenced work as a fisherman with his father. He immigrated to Australia in 1954 at the age of 19 years. 9After arriving in Australia he worked for about 5 years as a factory hand at Cyclops at Leichhardt apart from a period of about 18 months when he worked as a fisherman. In about 1960 he commenced to work as a painter and docker employed by the Department of Defence (Navy) at Garden Island. He remained in that position until he retired in 1993. Since that time he and his wife have received a pension. 10He married Domenica in 1960. They purchased the property at 159 Thompson St, Drummoyne in 1972. He said in an affidavit that he had very poor reading and writing skills in English although he can read a short letter and various bills for utilities. 11Domenica was born on 20 December 1937 in Italy. She left school in Italy at the age of 8 years. Whilst at school she learnt no English. From the age of about 10 she was trained in hand craft in a convent. She emigrated to Australia in 1960 at the age of 23. She worked for about a year in a convent and then looked after her children. She said that she cannot read or write English although she can write her name in English and understand a little English. 12She suffered from depression from about 1976. She was treated by Dr Quentin Cameron, a general practitioner since 1993. Since that time he had prescribed tablets for depression. Dr Cameron said that there had been a rapid deterioration of her health between 2002 and 2010. By the time of Dr Cameron's affidavit in September 2010 he considered that she was incapable of managing her affairs. 13Domenica died after the Court of Appeal's judgment was handed down. I appointed Rosario to represent her estate in the proceedings. The evidence suggested that at all relevant times Domenica did whatever Rosario advised in relation to the signing of documents and in connection with financial matters. (b) Rosa Baira 14Mrs Baira was born on 23 April 1944. At the time of the entry into the agreement with RAMS she was aged almost 62. She was born in Italy. She left school at the age of 10 and began working to learn to be a dressmaker. Her father had already immigrated to Australia and her mother could not afford for her to be at school. She immigrated to Australia with her mother and two sisters in July 1959 at the age of 15 years. She immediately obtained work as a machinist in a dressmaking factory. In 1961 at the age of 17 years she married her first husband, Dante Fioravanti, and they lived with her parents until they had saved a deposit for a house. They purchased the house at 319 Livingstone Rd, Marrickville with a mortgage. 15She continued to work as a dressmaker throughout her marriage. She worked from home when the children were born until 1973 and thereafter she worked for herself part time. In 1983 her husband died. She remarried in 1991. Her second husband was Dimitri Baira to whom she is still married. Since 1991 Mr Baira has owned in partnership a café in Bankstown called "Pancake Plus". From time to time Mrs Baira works at Pancake Plus. 16At the time of the RAMS loan she was in receipt a part pension. 17In order to understand how the Defendants came to be borrowing these amounts some background is necessary. What follows is a brief summary of various transactions involving Mrs Baira, Rosario and Domenica. At a later stage in the judgment I will consider in greater detail some circumstances concerning those transactions. 3. Background to the loans 18In 1992 Joe and Sandra Ianni borrowed $155,000 from Advance Bank (later St George Bank) to purchase and fit out a coffee shop which they called "Café Galleria". Sandra's mother, Mrs Baira, provided a guarantee to the Bank in respect of the loan. In addition, on 1 May 1992, a deed was executed between Mrs Baira on the one hand and Joe and Sandra on the other giving Mrs Baira fairly extensive rights in relation to the café by reason of her having provided a guarantee. That deed was prepared by a solicitor, Graeme Ross. 19As security for the guarantee Mrs Baira gave a mortgage over her property at Marrickville to the Advance Bank. Her signature on the mortgage was witnessed by Mr Ross. Mrs Baira agreed that Mr Ross explained that if Joe and Sandra did not pay their debt to Advance Bank the bank might use the mortgage she signed to sell her house and pay the debt out of the proceeds. She said, however, that she thought no-one would take her house for $155,000. 20On 24 June 1994 Advance Bank issued a letter of approval to Joe and Sandra for a further loan of $112,000 to fit out Café Galleria. Mrs Baira again provided a guarantee for the further advance although she claims that she did not know that she was doing so. Rather, she asserted (as she did in respect of most of the documents she subsequently signed) that she understood she simply needed to sign the document because she had guaranteed the 1992 loan, and her daughter Sandra told her that the purpose of her signing was "knowledge of the guarantor". 21On 3 August 1998 St George Bank sent a further letter of offer to Jencon Pty Ltd, a company that Joe and Sandra had formed to run the restaurant business, with an offer of an overdraft of $30,000 and a fixed rate loan of $400,000. The purpose appears to have been to fit out a new café at Darling Harbour. At some time that is unclear from the documents in evidence this café or restaurant was called Fiorannis. 22On 12 August 1998 Mrs Baira signed a Guarantor's Acknowledgement in respect of the overdraft and the loan. She signed the Guarantee in front of Mr Ross who provided the solicitor's certificate. The Guarantee was limited to the proceeds of sale of the Marrickville property. 23On 29 September 1999 St George made a further offer to Jencon but the details of the amount of the loan are not in evidence. On 5 October 1999 Mrs Baira signed a Guarantor's Acknowledgement for this further loan. 24On 24 May 2000 St George forwarded a further letter of offer to Jencon to provide an overdraft facility of $100,000. This appears to have been because the $30,000 overdraft had "blown out" as the bank documents said. On 31 May 2000 the letter of offer was signed by Mrs Baira. On that day also she swore a statutory declaration, witnessed by Albert Naticchia JP, that she had voluntarily signed the letter of offer after receiving legal advice. 25In early June 2000 St George Bank offered to lend Joe and Sandra $550,000 to buy an investment property in Pyrmont. This loan was to be partly guaranteed by Joe's parents, Rosario and Domenica. Rosario and Domenica signed the Guarantor Signing Page and an Authority to the bank on 2 June 2000 in front of Chris Gialamis who was the manager, Corporate and Business Banking at St George. 26On 13 July 2000 Rosario had a meeting with Pompeo Egisto, a solicitor, to obtain advice in relation to the guarantee. Rosario signed an Acknowledgement by Guarantor, the Guarantee, a Mortgage over his and Domenica's property at 159 Thompson Street, Drummoyne, and a Declaration by Guarantor that he had received legal advice. Mr Egisto witnessed his signatures on the Guarantee, the Mortgage and the Declaration. On the same day Domenica met with another solicitor, Mr Previte, where she obtained advice in relation to her guarantee. She signed the same documents. Mr Previte witnessed her signature on the same documents. 27The Guarantee was limited to the market value of the Drummoyne property. 28On 4 June 2002 St George Bank made a loan offer for an Executive Housing Loan to Joe and Sandra for $1.3 million to enable them to purchase an apartment at Milsons Point. This loan was also to be guaranteed by Mrs Baira although her Marrickville property was not listed as security for this loan. 29A statutory declaration purportedly by Mrs Baira that she was a third party mortgagor and guarantor contains the signature of Angelo Lo Surdo, an accountant and Justice of the Peace, as the witness to the statutory declaration. Mrs Baira denies that the signature is her signature and denies that she ever met Mr Lo Surdo. Her daughter Sandra asserts that she obtained her mother's signature on the statutory declaration and then gave it to her husband Joe who had Mr Lo Surdo affix his signature as a witness. Mr Lo Surdo denies that he did this. He said that he met Mrs Baira and she signed the statutory declaration in front of him. 30On 16 December 2002, by a letter of offer, St George offered to increase Jencon's facility to $963,000. Mrs Baira signed a copy of the letter of offer and her signature was witnessed by her son Dante. On 2 July 2003 Joe, Sandra and Mrs Baira signed an Acknowledgment by Mortgagor/Guarantor that they had obtained legal advice in relation to their exposure as a result of the offer of further finance in December 2002. They also signed a further Acknowledgment by Guarantors. Mrs Baira's signature was witnessed by Sandra, Sandra's signature was witnessed by Cathy Macri and Joe's signature was witnessed by Angelo LoSurdo. Cathy Macri worked for Mr LoSurdo. 31The schedule of security in this Acknowledgment listed the properties at Harris St, Pyrmont and Tuckwell St, Castle Hill, all owned by Joe and Sandra, in addition to Mrs Baira's property. The earlier Acknowledgment also listed a property at Dind St, Milsons Point belonging to either Jencon or to Joe and Sandra. 32On 18 November 2003, St George offered to increase Jencon's overdraft facility to $270,000 until 31 December 2003. Although the increase was specified to expire on 31 December 2003, the acceptance of the facility by Jencon and the two separate Acknowledgements by Joe, Sandra and Mrs Baira were only signed on 16 March 2004. Mrs Baira's signature was witnessed by Sandra, Sandra's signature was witnessed by Cathy Macri and Joe's signature was witnessed by Ross Ianni. 33By a letter of offer dated 2 September 2004 St George offered to increase Jencon's facilities to $1,059,000. On 3 September 2004 a letter of offer by St George offered four lease facilities to "The Directors Café Fiorannis" (the name of Jencon's café by this time) totalling $116,000. 34On 30 October 2004 there was a meeting at Mr Lo Surdo's office. Those present were said to be Mr Lo Surdo, Joe and Sandra and Mrs Baira. Joe and Sandra signed the letter of offer from St George and their signatures were witnessed by Mr Lo Surdo. Mr Lo Surdo said that Mrs Baira needed to get legal advice, and she did not sign the document. Mrs Baira denies that she was at that meeting and says she has never met Mr Lo Surdo. 35On 11 November 2004 there was a meeting at Mr Egisto's office between Mr Calvitto, Joe and Sandra, and Mrs Baira. Mrs Baira signed a Facility Agreement, an Acknowledgment that she had been given advice by Mr Calvitto, a Declaration by her as third party mortgagor/guarantor and a Consent by Borrower/Guarantor to legal advice. All of these documents were witnessed by Mr Calvitto. 36By a letter of offer dated 17 May 2005 St George offered a bank guarantee to Jencon for $24,000 in addition to the existing facilities totalling $1,059,000. On 18 May 2005 Mrs Baira signed the letter of offer. The witness to her signature was Cathy Macri. Joe and Sandra also signed the letter of offer but their signatures were not witnessed by Cathy Macri. Mrs Baira denied ever meeting Cathy Macri. I prefer Cathy Macri's evidence that she had both met Mrs Baira on three or four occasions and that she witnessed her signature. 37On 15 August 2005 by a letter of offer St George offered to increase Jencon's overdraft from $230,000 to $350,000. Mrs Baira signed an Acknowledgement of Guarantor on 15 September 2005. Her signature was witnessed by Anthony Ianni. 38On 19 August 2005 Joe and Sandra entered into a contract to purchase 7 Wildthorn Avenue, Dural for $2,223,500. Finance was sought from the NAB through Mr Famularo and AMBFS for an amount of $3.5 million. $2.4 million of this was to be used to complete the purchase, $490,000 was to be used to repay St George and there was to be a line of credit for $610,000. The loan application to the NAB was dated 30 August 2005. 39By a letter of offer dated 30 September 2005 St George offered to reduce the facilities to Jencon by a figure of $624,000 to $536,000. Joe and Sandra's property at Pyrmont was to be released on payment of $624,000. This was part of the refinancing from the purchase of Dural and the loan being made to Rosario and Domenica from RAMS. Mrs Baira signed an Acknowledgment of Guarantor on 13 October 2005. Her signature was again witnessed by Anthony Ianni. 40There is a letter from Egisto Solicitors to St George Bank dated 12 October 2005 saying this: We confirm that Ms Rosa Baira attended our office on 12 October 2005, when we explained to her the nature of her proposed guarantee and the increased liability which she will assume by her in relation to the release of the proposed securities mentioned in the facility offer. Having had the nature of a guarantee explained to her and the possible consequences of a default by the bank's customers, she confirmed to the writer that she understood the nature of her guarantee. She also confirmed that she was familiar with the business of the borrower, she had confidence in its success and that she was content to execute the guarantee. The conference was conducted in the absence of the borrower or any other person. 41The letter was written by a Mr Frederick Forster who gave evidence that he was the solicitor who saw Mrs Baira. Mrs Baira disputes that she ever saw Mr Forster and says that she did not go to the offices of Egisto Solicitors on or about 12 October 2005. It will be necessary in due course to consider where the truth lies in relation to that incident. 42At the time that the application was made to RAMS the legal position with regard to the Defendants was as follows, putting aside for the moment what they say they understood the position to be: (a)Mrs Baira had given a mortgage over her Marrickville home as security for a Guarantee she had given for Jencon's facilities. The Guarantee, and accordingly the mortgage, was limited to the sale proceeds for the Marrickville property; (b) Rosario and Domenica had given a mortgage over their Drummoyne property as security for a Guarantee they had given for the loan to Joe and Sandra to purchase Pyrmont for $550,000. This Guarantee, and accordingly the mortgage, was limited to the market value of the Drummoyne property. 43What was then to take place is made clear in the judgment of Basten JA in Baira: [209] In about July 2005 Mr and Mrs Ianni junior decided to purchase a house at Dural for a little over $2.2 million. In order to obtain the funds, they engaged in a major restructuring of the outstanding debts of Jencon and themselves, apparently to extract larger borrowings against the equity in their own properties and, particularly, the properties owned by their respective parents. The restructuring involved two stages, the first having three elements. The first element was to remove from the securities in favour of St George Bank both their property at Pyrmont and the property owned by Mr and Mrs Ianni senior at Drummoyne. The result was that the remaining securities held by St George Bank were the Castle Hill and Milsons Point properties owned by Mr and Mrs Ianni junior and the third party guarantee and mortgage secured over Mrs Baira's property at Marrickville. The Bank was willing to accept that arrangement on the basis of a reduction in the amount owing to it from a little over $3 million to a little over $2 million. [210] The second element was a loan to Mr and Mrs Ianni junior to purchase the Dural property, with additional financial accommodation provided by the National Australia Bank Ltd ("NAB") involving a total of $3.5 million, secured by mortgages over both the Dural and the Pyrmont properties, the latter having been released by St George. [211] The third element of the restructuring involved Mr and Mrs Ianni senior "borrowing" $910,000 from RHG Mortgage Corporation Ltd ("RHG"), formerly known as RAMS Home Loans Pty Ltd, in exchange for a mortgage over their Drummoyne property. The total indebtedness then amounted to $6.5 million, in round figures. However, Jencon and Mr and Mrs Ianni junior nominally had primary responsibility for only $5.6 million. [212] Stage two occurred on 14 March 2006. It involved a further reduction of approximately $550,000 in the liability to the St George Bank, in exchange for which St George released the third party mortgage over the property of Mrs Baira. That arrangement was financed by a "loan" to Mrs Baira from RHG in an amount of $650,000. On the basis that the beneficiaries of all loans were Mr and Mrs Ianni junior, either directly or through Jencon, their total liabilities were then $6.56 million. 4. The RHG loans (a) Rosario and Domenica Ianni 44On 14 September 2005 at 7:18pm a loan application on behalf of Rosario and Domenica was submitted in a 20 page fax to RAMS by Mr Famularo as principal of AMBFS. The purpose of the loan was stated in the application to be the purchase of property for $500,000 and the refinancing of a loan or loans for $490,000. Costs for the financing of $10,000 were also sought making a total of $1,000,000. The loan was sought for 30 years. 45The application said that Rosario was a self-employed investor at Fiorannis and that his taxable income was $85,000 per year. His date of birth was given as 16 January 1935 making him 70 years of age. The contact details given for him referred to Joe or Rosario at Shop 297 Harbourside in Darling Harbour. That was where the café/restaurant was conducted. The telephone numbers provided were telephone numbers of either Joe or the restaurant. 46Domenica Ianni was similarly described as a self-employed investor in the food industry and she was said to have a taxable income of $90,000. Her date of birth was given as 20 December 1937 so that she was 68 years of age. The contact details for Domenica were the same as for Rosario. Their solicitor was said to be Deborah Brown of Phillips Fox and their accountant was said to be Angelo Lo Surdo. 47In the Statement of Assets the property at Drummoyne was said to be worth $1,000,000, their house contents $50,000, a deposit paid on a purchase of $50,000 and they were said to have a share of business goodwill in Fiorannis of $1,000,000. 48On a document headed "Borrower Self Certification - Income and Affordability" each of them was said to have been self-employed for 15 years and 3 months. Their earnings of $85,000 and $90,000 respectively were described as "net business income". Their names appeared in each case above the word "Applicant", and alongside the words "Company, Firm or Trading Name" the words "Jencon Australia Pty Ltd" appeared with an ABN. 49Other documents sent in the fax included documents relating to identification of the borrowers. I shall discuss these documents in greater detail a little later in the judgment. 50A tracking document from RAMS showed that the application was created by RAMS on 15 September 2005. On 16 September 2005 at 12:21pm an email was sent by Matthew Anderson of RAMS to Mr Famularo saying: Hi Peter, my direct line is 8218 7183. As discussed, CRAA are not showing directorship. We will require either a consent from the company to perform a CRAA inquiry, or a driver's licence reference. 51This was clearly a reference to Jencon's name appearing on the Borrower Self Certification form. It may be observed, however, that nowhere in the material sent by Mr Famularo was it asserted that Rosario and Domenica were directors of Jencon. 52On 16 September 2005 at 4:01pm Mr Anderson made a file note saying: Peter will be amending the A and L and self cert to reflect the true nature of the applicant's employment. 53At 4:47pm on 16 September Mr Famularo sent an 11 page fax containing some fresh documents and also copies of documents that had already been sent in the first fax. One of the fresh documents was a Borrower's Self-Certification which omitted any reference to Jencon but was otherwise identical with what had earlier been sent. 54Two other new documents that were sent were the 100 point check forms for each of Rosario and Domenica. What was sent in each case was the document originally sent in the 20 page fax with handwritten alterations. The original form of this document for Rosario contained details of what was said to be his Australian passport. It was said to have been issued on 6 July 2001 with expiry on 6 July 2011. The passport number was said to be L9724757. On the original of Domenica's 100 point check document her passport was said to be an Australian passport issued on 19 March 1998 to expire on 19 March 2008. Its number was said to be L6428797. 55That information was entirely false. Rosario's passport was issued on 20 June 2005 and bore the number M2829871. His previous passport, which was issued on 10 March 1992 and expired on 10 March 2002, bore number K1205995. 56In relation to Domenica she had never held an Australian passport. She had an Italian passport that was issued on 30 January 2004 with the number B853490. 57On the amended 100 point check document for Rosario the tick for the passport (worth 70 points) was crossed out. A tick was placed alongside an Australian driver's licence which provided 40 points. The tick remained for 35 points alongside a reference to verification from a current employer, but it appears that what was intended was that the tick should be alongside the reference to a rating authority (e.g. land rates). There was then a new tick in the box alongside "the records of a public utility" (worth 25 points). 58In the section dealing with document details the information about Rosario's passport was crossed out. The document was then described as "water rates" dated 1 September 2005 with the document number being 4028834. The water rates document disclosed that Mr and Mrs Ianni had a pensioner rebate on their rates. 59In relation to Domenica the passport tick was removed, the tick for the rating authority remained as before and there was a tick for 25 points in relation to the verification of Domenica's telephone number. It was said that there had been telephone contact with her at phone number 9181 1607. That appeared to be her home telephone number although it did not appear as a contact number in the loan application. 60It may be observed that without the passport the number of points for Domenica was only 60 although the total shown on the document remained as 105. 61In the original fax sent on 14 September there were two significant documents. One of these was the front page of a Contract for Sale of Land. The land being purchased was 7 Wildthorn Avenue, Dural. The purchasers were said to be Rosario and Domenica and the purchase price was $500,000 with a deposit of $50,000 having been paid. The contract date was 19 August 2005. In handwriting on the bottom were the words "NOT SECURITY". 62In fact, as mentioned earlier, on 19 August 2005 Joe and Sandra entered into a contract to purchase 7 Wildthorn Avenue for $2,223,500. Mr Famularo had a copy of that contract because it was the basis for the application he was making to the National Australia Bank on behalf of Joe and Sandra for a loan for $3,500,000. 63What was altered on the front page of the contract forwarded by Mr Famularo on 14 September to RAMS was the box headed "Purchaser" and the box headed "Price". It is clear that the original contract of sale was fraudulently altered. 64The other significant document, the "Snapshot of Account" forwarded to RAMS by Mr Famularo, was in the name of Rosario and Domenica in respect of an account for an Executive Housing Loan from St George numbered 55167631. It showed movement on the account between 21 October 2004 and 22 August 2005 with the balance outstanding on that last date at $486,035.16. At no time did Rosario and Domenica Ianni have an executive housing loan or any other loan with St George Bank. They were simply guarantors for Joe and Sandra's borrowing in that regard. 65Mr Famularo had amongst his documents at that time other documents entitled "Snapshot of Account" for the same loan with Joe and Sandra being shown as the account holders. The evidence tended to suggest that St George issued documents entitled "Snapshot of Account" to guarantors as well as to borrowers. It does not seem likely that the "Snapshot of Account" in the name of Joe and Sandra was fraudulently altered to contain Rosario's and Domenica's names and address. Rather it was probably a genuine document. The issue is why Mr Famularo forwarded the "Snapshot of Account" in the name of Rosario and Domenica to RAMS. I shall return to this later. 66The RAMS Application Status Tracking Document discloses an internal file note addressed to Mr Anderson asking him to hurry the application along with the statement concluding: Please see what you can do to have a conditional if possible on this deal today. Broker says that if he doesn't get one today he may have to take it to another lender. 67A file note of Mr Anderson of 11:58am on 20 September says that the file had been submitted to GE that morning for confirmation of conditional approval. There is then a note of Mr Anderson's at 4:49pm that day saying that the application had been given conditional approval. 68The reference to GE was a reference to the mortgage insurer. Mr Anderson sent a fax on 20 September to the insurer, which on the cover page, relevantly said: Low doc loan Purchase an investment property (front page COS attached) Refinance St George ... Both applicants are investors - and own an income producing restaurant in Sydney which generates their income. ... SRAA clean - no defaults or irregularities. 69On the following page a standard form was completed by Mr Anderson. Relevantly, three questions were answered in the affirmative by him as follows: Has (sic) genuine savings, income, employment details and security being verified as acceptable in accordance with the Genworth Financial LMI Underwriting Guidelines? (If "yes", provide details). [It does not appear that details were provided despite the affirmative answer.] Has the repayment history on all facilities being refinanced been confirmed as satisfactory in accordance with the Genworth Financial LMI Underwriting Guidelines? Is the credit bureau report clearer than the adverse credit history? (If "no", please provide a copy of the report). 70On 27 September 2005 there is a file note of an email sent by Mr Anderson to Mr Famularo at 6.03pm saying: Hi Peter. Please advise if max loan of $910,000 is acceptable, as val has come in at $1.3 million. Alternatively incoem (sic) and A&L can be provided to apply for $1 million. Comparable sales evidence must be provided to go back to the valuer about the val amount. 71That email was sent at 6:03pm. At 10:02am the following day there is a note from another employee of RAMS saying that the broker advised that it was okay to proceed with $910,000. 72On 29 September 2005 there is a file note from a Mr Conway at RAMS which says: Name checked against title search. Address cross ref against rates notice. 100 points held on file. 73The loan summary prepared by RAMS on 29 September 2005 has under the heading "Purpose Summary": Loan purpose: $490,000 for refinance $420,000 for equity release A borrower is likely to receive an income tax deduction in respect of at least 50% of the total interest payable on the amount proposed to be borrowed. 74Rosario's evidence was that in about September 2005 Joe said to him that he had found another bank, RAMS, that would offer cheaper interest for the loan. Joe said that he wanted to take out a loan with RAMS and pay out St George. He asked his father to sign the documents for the loan as the guarantor. Rosario then says that Joe took them to a solicitor in Sydney whom he had never met before. That solicitor was in fact Mr Wennerbom of Lands Legal. 75The Plaintiff says that a significant matter occurred between Joe speaking to his father and taking him to see Mr Wennerbom. The Plaintiff relies on a diary note made by Mr Famularo of a meeting with Rosario, Domenica and Joe. The meeting is said to have taken place on 14 September 2005 although the date on Mr Famularo's diary note is "14/9/09". There is a serious issue in the case about whether that diary note was later fabricated. 76The diary note has been typed for the purposes of the proceedings and it is as follows: 14/9/09 9AM - IANNI ROSARIO 159 THOMPSON ST -IANNI DOMENICA DRUMMOYNE -Joe IANNI-Son SBG Refinance 1300+/1500 = 87% But needs only S486K ?? live with Son Purchase S500K - Sell current ??/Surplus - FAMILY BUSINESS-Investor only - 4 Sons - Deborah Brown P/Fox - Y 85K each to 95K. Jencon Aust P/L -Refinance -cross coll at SGB with Son Joe Jencon Management/AustP/L ?? Source of Y. 77Rosario said in evidence that he did not have any such meeting with Mr Famularo and that he had never met Mr Famularo until a mediation was held after the proceedings commenced. 78On 11 October 2005 there was a meeting at Lands Legal between Mr Wennerbom (the principal of that firm) and Joe, Rosario and Domenica Ianni. At the meeting a number of documents were signed by Rosario and Domenica being a Loan Agreement for $910,000, two Statutory Declarations by Rosario, a Statutory Declaration by Domenica, a Borrower's Acknowledgment about Legal and Financial Advice, a Direction to Pay and a Discharge of Mortgage Authority. 79The loan settled on 14 October 2005. Rosario and Domenica became the borrowers under the loan from RAMS which was secured by a mortgage to RAMS over the Drummoyne property. (b) Mrs Baira 80On 16 January 2006 Mr Famularo sent two loan applications to RAMS. The first of these was on behalf of Joe and Sandra Ianni seeking $650,000 for the purpose of a 50% refinance of a St George bank loan. A note made by Mr Famularo on the front page of the application said this: Please see application for Rosa Baira - this loan is presently secured over two properties R Baira and Joe Ianni. 81The second loan application was for Mrs Baira. She sought $650,000 for refinance. Mr Famularo's note on the front of the application said this: This property is held as security by St George Bank for the attached loan - the loan is now being split. Please see application in the name of Joe and Sandra Ianni which will also be used to repay St George Bank at the same time. 82Mrs Baira's loan application described her as self-employed in food/catering and made reference to Fiorannis. It said that her income for the last financial year was $145,000 and for the prior year $140,000. 83The contact telephone numbers were Joe's mobile number and the café's telephone number. 84Mrs Baira signed the Borrower's Self-Certification - Income Affordability Form which disclosed her net business income before tax at $145,000. She signed in the section of the form that contained the following immediately above her signature: I confirm that I can meet the repayments in accordance with the terms of the loan and will not suffer any hardship in doing so. I understand that you have advised me to seek independent legal and financial advice prior to entering into the agreement with you and that I may chose (sic) whether or not to accept that advice. 85Mr Famularo sent copies of Jencon's tax returns for the 2004 and 2005 tax years with the applications. He did not send any documents relating to Mrs Baira's earnings. 86In the RAMS Application Status Tracking document there is a file note from Mr Anderson at 3:49.38pm on 17 January 2006 which says: This file is a little unusual, in the fact that we are paying out a loan that the applicant is not an account holder of. We have been advised that the loan being paid out is however secured by this property, and was written as a third party security by the broker himself while he was a business banking manager at St George. Therefore it is appropriate to treat this deal as a refinance. 87The Application Status Tracking Document then contains a note some eight seconds later saying: Application has been given conditional approval. 88On 2 December 2005 Mr Famularo claims to have met with Mrs Baira regarding the application being made to RAMS to refinance the St George Bank facilities. There is a detailed file note in Mr Famularo's handwriting which he claims to have made during the course of the meeting. It is necessary to set out the full text of the diary note in its typed version: Baira/lanni 2/12/05 Meeting Baira Re SGB Refinance. LVR 1,250,000 900,000 & 850,000 =71% MAR CH But has other SGB Liabs to - Jencon Aust P/L -IANNI- -Does not know exact Amounts as GIA over Several years - Approx - From 1995. For Purchase of Business activities @ D. Harbour. - Galleria Cafe & Fiorianni's water Front restaurant. Fioravanti " - IANNI " Partnership - SGB Loans $3m+ - wants to separate Business Affairs -Joe & Sandra expanding Into childcare & overseas property investments & she is not comfortable. - Husband passed away many years ago & Remmaried (sic) "Baira. Previously 'FIORAVANTI". - Does not wish her new husband to be aware of this refinance as he has own children & not business minded. Joe lanni to Provide Statements Re SGB Loan $1.350 - Max loan on Marrickville to be $650K. in N. OF 'ROSA BAIRA' -Furn $50-$100 k - MV $10-15k A&L's - WBC $5 -D/L 53 685F EXP. 30/11/10. - 2009232398. - DOB. 23/4/44. (P). 9211 - 1777. - 319 LIVINGSTONE ROAD MARRICKVILLE NSW. 2204. 20 yrs. - Medicare 2187 857 8855. - Passport (AUST) L843 6248. EXP. 6/5/10. - EMP. BAIRA - FIORAVANTI Catering Jointly with D. Harbour Business. Worked for many years with Daughter & Son in LAW. Joe. 1990. Private Parties & Functions - consulting On menu for Fiorianis Business Enjoys work. But wants to cutback. - income $140 - 150K per A. without much effort. Joe & Sandra pay cash -TAX Returns requested But not available due to cash business - I indicated concern that SGB might not release Marrickville due to high LVR & Cross coll with other SGB loans Group had taken. - She Said to leave loans if RAMS could not refinance. LOANS are GIA Joint & Severally & crossed at SGB. - Baira said that she had been advised both Financially & legally with respect to her SGB liabilities. Indeed the GROUP Accountant LOSURDO (Angelo) was aware of the nature of her liabilities. (over the Mar peroperty (sic)). LoSurdo had on many occasions provided the Financial Statements For the Group to Support SGB Borrowings secured over various investment properties & the Family houses Including lanni senior - I recommended to Baira to obtain Further legal & Financial advice with regards to her proposed refinance in view of internal transaction. - She Said she would speak with either Deborah Brown of Phillips Fox or Mr Lou Serio of Five Dock. She Said this would add cost to the transaction. - Baira said in her nature to assist children Financially & this was going to be left to them in her will anyway. - Has another Son But has not achieved much in his life and is also employed By the Fioriani Businesses at D. Harbour. -In her interest that business continues smoothly as many families have an interest in the Business including 3 other lanni families. -I indicated concern over possible delays For the Refinance as Xmas was iminent and I did not have all the relevant Docs to lodge with RAMS She indicated there was no urgency. - Application to be Sent to Baira in due course with all lender requirements - Baira Agreed 89Mr Famularo produced a letter that he claims was written by him on behalf of his company to Mrs Baira on 9 December 2005. The letter is addressed to her at her Marrickville property. The letter is addressed to "Dear Rosa" and relevantly says: I refer to the above matter and our meeting of Friday, 2 December in which we discussed the refinance of your St George Bank loan (which you advise is in the names of Joe and Sandra Ianni) and is presently secured over your property in Marrickville to St George Bank. We have now prepared the attached loan application in accordance with information provided by you. You should peruse the RAMS application and if correct, then sign where indicated and return same to us at the earliest possible in order that we may lodge the Rams (sic) application. Please advise us immediately if there are any changes to be made. The following documentation remains outstanding in respect of the Application and must be received by our Office prior to lodgement as delays may be expected if the Application is lodged incomplete: - St George Bank loan statement covering the past six month period; - Rates notice for the Marrickville property; - Identification for Rosa Baira (I note sighting your driver's licence, passport and Medicare card but omitted to take copies in the Office). We will require clear colour copies of these documents. ... 90Alongside the reference to the need for the St George Bank loan statement there is a handwritten note in Mr Famularo's handwriting which says: Outstanding 16/1/06. Ianni said he would provide the latest statement. 91There are handwritten ticks next to the words "rates notice", "driver's licence", "passport" and "Medicare card". At the bottom of the letter there appears in handwriting "mailed 9/12/05" and initials which are said to be those of Adriana Famularo, Mr Famularo's wife. She did not, however, give evidence. 92Mrs Baira denies ever having received this letter or ever having met with Mr Famularo. 93There was a "With Compliments" slip from AMBFS attached to the letter. On that slip was written in Mr Famularo's handwriting "Mother in law to sign plus copies of passport, licence/Medicare Thanks PF". 94The loan agreement with RAMS was signed by Mrs Baira on 28 February 2006. Other documents signed by her on that day included a Direction to an insurance company to note RAMS on the policy, an Authority to Pay out and Discharge the St George mortgage, a Disbursement Authority, a document headed "Authority, Direction, Undertaking and Acknowledgement", an Acknowledgement that no legal or financial advice was obtained, a Warranty as to the correctness of her name (namely, that she was the same person as Rosa Fiorivanti) and a Warranty regarding the property. Mrs Baira also signed the mortgage to RAMS and her signature was witnessed by Sandra. 95On 10 March 2006 a company called Mortgage Settlements Australia wrote to Mrs Baira at her Marrickville property confirming that the loan was scheduled to settle on 13 March 2006. The letter set out how the loan amount was to be disbursed and asked her to sign to confirm those instructions. The letter contains a signature purporting to be that of Mrs Baira. She says that it is not her signature. 96The loan appears to have settled on 14 March 2006 with an amount of $640,870.50 being paid to St George Bank. RAMS took a mortgage over Mrs Baira's property. 5. The knowledge of the mortgagors prior to the RAMS loans 97It is important to consider what Rosario and Mrs Baira knew about their legal responsibilities immediately before they entered into the loan agreements with RAMS. This involves an assessment of their evidence. (a) Rosario Ianni 98Rosario's evidence was very unsatisfactory in a number of respects. The first respect was his ability to speak and understand English. This was a very significant issue because of his claim that he could not understand either Mr Egisto nor Mr Wennerbom when they explained important matters about transactions into which he was entering. 99After entering the witness box and being sworn, he was asked his name. Instead of answering he looked to the interpreter to interpret the question. I asked him a short time later: Q. Mr Ianni do you not understand any English? A. WITNESS: Little bit, not much. A. INTERPRETER: Very little. A. WITNESS: Very little. INTERPRETER: If I may say, speaks a Calabrese dialect, and very little Italian, extremely little English. ASHHURST: I object to that. HIS HONOUR: I am not going to take any notice of that. KELLY: I am happy to proceed in English and see how far we go, your Honour. ASHHURST: I am in your Honour's hands. HIS HONOUR Q. Mr Kelly asked you what your name was and you looked at the interpreter to interpreter that question. Did you not understand that? A. INTERPRETER: He said he couldn't understand at the moment. (The evidence then proceeded through the interpreter.) 100This is to be contrasted with the commencement of his evidence before Grove AJ. Not only was he able to understand when he was asked his name, address and that he was a pensioner, he was also able to have a conversation with Grove AJ about understanding the oath. There were also occasions both in the evidence given before me and before Grove AJ where Rosario answered questions before they were translated. 101He claimed not to understand what the word "loan" meant in 2005. Yet he moved to Australia in 1954 and he worked for 39 years before retirement. During that time he worked for 30 years as a painter and docker at Garden Island. He borrowed money from the Commonwealth Bank to buy the property at Drummoyne. He gave a mortgage to the bank. Indeed, in his affidavit of February 2010, an affidavit sworn without any reference to its having been interpreted to him, paragraph 14 says: In about 1977, I paid out the loan that was taken by me to purchase the house at Drummoyne. 102He obtained his driving licence. He agreed that he had to undertake a written test to get his licence but said that he had someone to help him do it. That seems very unlikely. 103He denied in cross-examination that he could read a short letter in English. Yet in his affidavit of 23 February 2010 he said: 30. I have very poor reading or writing skills in English although I am able to read for example a short letter and the various bills for utilities. 104When confronted with the fact that one of the solicitors who advised him, Mr Egisto, spoke Italian he made false claims about the dialect that Mr Egisto spoke. He first said that he couldn't remember if Mr Egisto spoke Italian or Sicilian. Then he said that Mr Egisto spoke in Italian, but that the Italian spoken was a different dialect from Calabrese and that he could not understand Mr Egisto. He said that he told Mr Egisto he could not understand him. The next day he said that he did not know what dialect Mr Egisto was speaking but he could not understand him. 105It was put to him that Mr Egisto had been his solicitor since the early 1990s. Rosario said that he had only seen him once about his hearing and a workers compensation claim, but they didn't really talk to one another very much. He claimed not to have understood what Mr Egisto said to him about his claim. 106In his evidence before Grove AJ he said that he had never been to Mr Egisto before he saw him in July 2000. He did not assert before Grove AJ that Mr Egisto was speaking a different dialect. He said that Mr Egisto wasn't speaking clearly, that all Mr Egisto said was that Rosario must sign the documents and he, Rosario, did not understand anything Mr Egisto was saying. 107It was put to him in evidence he gave before me that Mr Egisto said to him in the Calabrian dialect that if Joe and Sandra didn't pay St George Bank he, Rosario, may have to. His answer was: He never said, he never said anything to that effect, not in Calabrian, not in English, never said anything to that effect. He was then asked three times by Mr Ashurst SC for RHG how he knew Mr Egisto had not said that in English. On each occasion he gave a non-responsive answer in a manner that indicated to me that he did not want to answer that question. 108Mr Egisto said that he had acted on five workers compensation matters for Rosario in the early 1990s. He said he spoke to him in a mixture of Italian, Calabrian and English. He said that Rosario had never said to him that he did not understand what Mr Egisto was saying to him. I accept Mr Egisto's evidence in that regard. 109Mr Wennerbom met Rosario and Domenica when they came to sign the RHG documents. He says that he spoke to them in English. He exchanged pleasantries with them when they arrived. He then explained the documents to them, maintaining eye contact to make sure they were understanding him. He told them to ask him to slow down if he was going too fast. He said that they both said to him that they understood. He said at no time was any language other than English spoken even between Joe Ianni and his parents. He said that the meeting took about 40 minutes. This is borne out by his records of his fees. 110Rosario agreed that he had attended such a meeting. He said that he did not understand what was being said during the meeting and he informed Mr Wennerbom of that but Mr Wennerbom just kept talking and required him and his wife to sign the documents. In his affidavit Rosario said that he was introduced to the solicitor, they exchanged pleasantries about Rosario's health and then the solicitor simply asked him and Domenica to sign the documents "as a guarantor" in places where the solicitor pointed. He said that at no time were the documents explained to him or his wife. He said that he did not read the documents. He said the meeting took about 10 minutes. 111His description of what took place at the meeting bore a striking resemblance to his description of his meeting with Mr Egisto some five years earlier including where Joe sat at the meeting, the way solicitor behaved and spoke and how the documents were signed. The only significant difference was that Rosario said (although not consistently) that Mr Egisto spoke in Sicilian whereas Mr Wennerbom spoke in English. The result was the same, however, according to Rosario - Rosario didn't understand what was said, he told the solicitor he didn't understand but the solicitor effectively ignored him. 112He gave evidence before Grove AJ also that he went to see the solicitor in 2000 (Mr Egisto). He gave this evidence (T 123): A. INTERPRETER: I was there for a total of 10 minutes. I was given papers to sign. They were put in front of me, "sign here, sign here, sign here". I have had to go move my car because it was in a "no standing" place and I had to leave my wife there to sign her paperwork while I went downstairs and moved the car. I was there no longer than 8 to 10 minutes. No-one explained anything to me. 113A little further on it was suggested to him that he knew he was executing a mortgage. He said (T 131): No, no, I didn't know this. They only said, "Sign here, sign here." I didn't know what I was signing. They said, "Put your signature here." I was in a hurry and no-one explained anything and I didn't know I was signing for these things here. 114I asked him about that evidence (T 84): Q. Mr Ianni, when you went to see Mr Egisto in the year 2000 were you in a hurry to get away from him? A. When I went to see Mr Egisto the first time he asked me for some documents. I brought him some documents and no, I was not in a hurry. Q. You see, when you gave evidence in the last case before the other judge, you said in your evidence at transcript 131, "I was in a hurry and no one explained anything." Was that correct? A. I wasn't really in a hurry. I just gave him the documents, he picked up the documents and then I went. There was no reason to stay. 115I do not think Rosario has any clear recollection of either meeting. To the extent that he remembers the meetings he appears to have conflated two events. Both in evidence before me and before Grove AJ he said that the meeting with Mr Wennerbom was short because he was parked in a No Standing zone and he was in a hurry to move the car. It was put to him before Grove AJ that he spent almost an hour with Mr Wennerbom and he said (T 156): INTERPRETER: No way that - no way he could have said that because I had to go down and move the car. And by the time I went around to find any parking spot in the city and went around and around, at least half an hour had passed. And then when I went upstairs, I stayed there no more than, in total, 10 minutes. 116It was never put to Mr Wennerbom, either in the proceedings before me or before Grove AJ, that Rosario left the conference to move his car. 117Mr Arul Niles was the former solicitor for Rosario and Domenica. Mr Niles swore three affidavits. In one of those affidavits he swears to having read two of Rosario's affidavits to him before they were sworn. He said that Rosario appeared to understand them. Mr Niles also deposed to discussions with Rosario about the matters the subject of these proceedings and particularly what Rosario did when served with the Statement of Claim. Mr Niles gave evidence before Grove AJ that he did not speak to Rosario in any language other than English. Mr Niles was not required for cross-examination at the hearing before me. 118Rosario said that he could only have understood Mr Niles if an interpreter had been present. Yet in his affidavit of 5 September 2008 Rosario said: 15. On 4 September 2008, Arul Niles, solicitor attended our home as my wife is unable to travel. I explained to him the matters referred to in this affidavit. Mr Niles has advised me that RHG Mortgage Corporation Ltd the Plaintiff in these proceedings is claiming approximately $962,825.00 in relation to the guarantee. ... 17. This document was read to me by Mr Niles, my solicitor, and the contents accurately reflects (sic) the matters that I told Mr Niles. 119Mr Niles said nothing about an interpreter being present. He said that he read the affidavits to Rosario and spoke to him. He was not cross-examined. His evidence is plausible because it accords with much other evidence. 120That evidence suggests, and I find, that Rosario does have an understanding of at least basic English and that he can understand when things are said to him using fairly straightforward language. I accept that Rosario is an elderly man and that English is not his native language. I accept also that when people are under pressure (in the witness box, for example) their facility with a second language may diminish. However, Rosario was not honest in his evidence about how much English he could speak and understand from 2000 to the present time. His evidence about the dialect in which Mr Egisto spoke to him was not honest. 121Other aspects of Rosario's evidence lead me to conclude, at the very least, that his evidence is unreliable. 122Rosario said in his affidavits of 5 September 2008, 16 October 2008, and February 2010 that in about September 2005 Joe said that he had found another bank, RAMS, which would charge a lower interest rate. Joe wanted to borrow from RAMS to pay out St George. He asked Rosario if he would sign the documents as guarantor. 123However, in the witness box Rosario said that he did not know what the RAMS documents were and that Joe did not tell him that he needed him to sign a guarantee. He gave this evidence: Q. Do you claim that your son never said to you, Could you please sign the documents for the new loan with RAMS as guarantor? Your son never said that to you; is that what you say? A. INTERPRETER: Well, no, he never said that because I don't know anything about what he has or what agreement he has with this bank or what he was doing. Q. But you are quite clear about this, your son never asked you to sign any guarantee for the RAMS loan? A. INTERPRETER: I went to the solicitor in town, but I don't know who sent these documents or-- Q. Please listen to my question, Mr Ianni. Is it your evidence that your son never asked you to sign a guarantee for the RAMS loan? A. INTERPRETER: No. Q. So your son never said to you, Dad, I want you to sign a guarantee for the RAMS loan; he never said that to you? A. WITNESS: No INTERPRETER: No, because if he would have said something like that I would have cancelled, you know, just said no. Q. And, again, you don't know any reason why your son can't come to this court and give that evidence himself, do you? A. INTERPRETER: If they call, if you call him he will certainly come, but I don't know. Q. But you are not going to-- HIS HONOUR Q. Mr Ianni, why would you have said no if your son had asked you to sign a guarantee with RAMS? A. INTERPRETER: Okay. I don't like to sign guarantee and I wouldn't do it for my son, I wouldn't do it for anybody and yet because the first time I did it because at that time it was to buy a house. 124Yet at another point in his cross-examination it was suggested that the RAMS Home Loan Document had been shown to him by Mr Wennerbom and he said (T 69): I don't remember that he was showing me this document because I went to the city just with the idea that it was always for the guarantee for a hundred thousand dollars. I didn't know about other things. There were numerous other similar references. In fact, many of his answers, often non-responsive to the questions that he had been asked, were that he went to the solicitor only with the guarantee for $100,000 in mind. This repetitious, non-responsive answer led me to the view that Rosario was deliberately trying to avoid answering questions, particularly questions the answer to which would expose more knowledge on his part than he was prepared to admit. 125It is difficult to know at other times if Rosario was being deliberately untruthful, whether his own honest beliefs about the events have been altered by time, or whether he was just confused. For whatever reason, his evidence is generally unreliable and it must be scrutinised with care. 126Mr Egisto gave evidence about the conference on 13 July 2000 when Rosario first signed documents concerned with the loan from St George to Joe and Sandra. He said that it was hard to remember an event that took place 14 years ago but he had a usual practice that he would have followed. Mr Egisto was taken to various documents signed on that day including the Guarantee, Mortgage and a Declaration by Rosario that he had received independent legal advice. 127Mr Egisto's evidence about the advice he would have given regarding the Guarantee was this: I would have said "Do you understand what a guarantee and indemnity is? Do you understand that if your son and daughter-in-law don't pay or can't pay that you will be then be responsible to pay the full amount to the extent of the value of your house in Drummoyne". Q. You referred to a circle that appears on that page 724? A. Yes. Q. Do you know who put that circle on that page? A. That's my way of making sure that the client has clearly understood, in other words I would have emphasised to him, do you realise the extent of your liability. The reference to the circle was a circle he had drawn over the special condition of the Guarantee that limited the liability of Rosario and Domenica to the value of their house. 128He was then asked about the mortgage and the advice he would have given. He said: A. I would have said "do you realise that you're signing a mortgage and that the bank is taking your property as security for what you have guaranteed". Q. And would you tell him what the effect of that document would be if the loan was not repaid? A. Yes. Q. What would you, again using the best you can, the words you would have said? A. Well, I would have said if your son and daughter-in-law don't pay the debt then you will have to pay it and if you can't pay it the bank will take your house and sell it. Not only does it cover the debt but also any penalties such as legal fees, interest rates and so forth. Mr Egisto said that all of this would have been said in a mixture of Italian, Calabrian and English. 129Mr Egisto said that he did not recall Mr Ianni saying that his son told him that there was a limit on his guarantee of $100,000. 130In the proceedings before Grove AJ Rosario gave the following evidence: Q. You know what a mortgage is, don't you, sir? A. INTERPRETER: Mortgage? Mortgage? What's a mortgage? Mortgage. Q. When you went to the Commonwealth Bank to borrow money to purchase xxxxxxxx xxxxxx, you needed a loan from the Commonwealth Bank and you signed a mortgage to give security to the Commonwealth Bank for that loan? A. INTERPRETER: Oh yes, mortgage. "Mortgage" means the paperwork for the property? Q. Yes? A. INTERPRETER: I had it there at the Commonwealth Bank. ... Q. And if the Commonwealth gave you money, they wanted something in return? A. INTERPRETER: What do you mean? I paid the interest, yep. Q. But to give you the loan, they wanted to take security and the form of security they took was a mortgage over your property? A. INTERPRETER: Yes, of course, for the house. And until I paid the house, they kept the paperwork of the house. And then when I finished paying it, they gave me the paperwork. HIS HONOUR Q. What did you think, Mr lanni, would happen if you didn't pay the bank the money you owed? What do you think would have happened to the house? A. INTERPRETER: It would be sold and they would take the money that was left. I don't know. 131I am satisfied from the foregoing that, by the time Rosario was asked by Joe to agree to change from St George Bank to RAMS, Rosario knew that he had given a guarantee for Joe and Sandra's borrowing, that he and Domenica had given a mortgage over their property as security for what he had guaranteed and that if Joe and Sandra did not pay what St George asked them to pay Rosario and Domenica would be responsible to pay it up to the full value of the Drummoyne property. 132Joe gave evidence before Grove AJ but not before me. He said that, at the time Rosario and Domenica provided their first guarantee in 2000, he told his father that the guarantee "was up to $100,000". He also said that when he spoke to his father in 2005 regarding changing banks he said, I will be changing banks from St George to RAMS and that his guarantee for $100,000 was required for the change of banks. 133This appears to provide some basis for Rosario's fixation on a guarantee for $100,000. Joe also said that he did not inform his father in 2005 that he (Rosario) was actually borrowing money nor that what Rosario was doing involved reducing the indebtedness of Joe, Sandra or Jencon. 134It is hard to know what to make of this evidence of Joe's. It has a certain plausibility because he clearly did not want his father to know too much or he may have refused to help by undertaking the borrowing. Further, in one sense the evidence was against Joe's interest because at that time he was being sued by his father and mother in a cross-claim. It did not advance the defence of the claim for him to admit keeping his father in the dark. On the other hand, Joe was a bankrupt by that time with no real interest to protect. The evidence may have been designed to assist his parents in their defence of the Plaintiff's claim. 135On balance, I consider that I should accept that evidence of Joe's. It is largely consistent with other matters (to be discussed presently) that cause me to think that Joe used his parents to obtain the loans he wanted, although at the time he may have had the belief that no problem was likely to arise to imperil their position. There was some basis for that belief from the success of the restaurant for some years. 136In other circumstances I would have been prepared to infer that Rosario had simply misunderstood what was being asked of him in 2000 to provide a guarantee and a mortgage to secure it. However, in the circumstances of this case there is a reasonably strong likelihood that he and Dominica were actually misled by Joe into believing that the limit on the guarantee they were providing was $100,000. Nevertheless, I am satisfied from Mr Egisto's evidence that he informed Rosario and Dominica that they could be liable up to the value of their house in the event that Joe and Sandra did not pay. The meeting with Mr Wennerbom 137It is now necessary to consider further what transpired at the meeting with Mr Wennerbom on 11 October 2005. I have no doubt that Rosario and Domenica went along to that meeting believing, as Joe had told them, that he needed them to guarantee the new loan he was obtaining for RAMS which was at a lower interest rate than the loan from St George. There is no evidence to suggest that Rosario and Domenica had any idea that they were to become principal borrowers from RAMS rather than the existing position being maintained with the new borrower. 138On the other hand, Mr Wennerbom had no information suggesting that he knew that that was Rosario's and Dominica's belief, nor any information that Joe had led Rosario and Dominica to believe that they were simply giving a guarantee. Indeed, it is not apparent from the documents provided to Mr Wennerbom that he would have been able to discern that there was to be a change in the status of Rosario and Dominica from being guarantors/mortgagors to borrowers/mortgagors. What the covering email to Mr Wennerbom certainly made clear was that there were more parties involved in the transaction than Rosario and Dominica. He knew that Joe was involved in the transaction and, that the mortgage being given by Rosario and Dominica was not the only mortgage in the transaction. 139The significant matters that Mr Wennerbom said to Rosario and Domenica are these (T272 - T273): Q. And are you able to tell his Honour what you said after you sat down, and Mr and Mrs Ianni sat down? A. Yes, I said to them that: "You are entering into a loan agreement which is going to be secured by a mortgagor over your property at Drummoyne, that I have reviewed the documents, and that I believe the documents are in order to be executed by you once we've explained them." I have explained them. I said to them that, "As with any loan, if you do not make your repayments, then the bank will have the right to sell up your property, and pursue you for any money left over." I asked them to slow me down if I was talking too quickly. Mrs Ianni said, "No", and Mr Ianni said, "I understood". I made a point of eye contact with both of them to make sure they were understanding what I said. I said if they don't understand the documents or what I'm saying, to stop me, which they acknowledged. Q. Can I stop you there. How did they acknowledge that? A. I believe Mr Ianni said, "Yes, I will", and Mrs Ianni said, "I understand". I can't be exactly sure, that's it, but I think that's what they said, and I made a point of saying, when I - sorry. 140In relation to the loan agreement he said: A. I said, "You are borrowing $910,000", pointing at it, and I then said, "It is subject to the terms of this agreement and the others that follow. You have a term of 30 years. You will also be liable to pay some fees like stamp duty". And I pointed out the amount for stamp duty that would be deducted from the loan, and also the insurance fee. I said to them, "Approximately $11,000 will be deducted from the $910,000 you are borrowing, so you will not get $910,000 when the matter settles. There will be 11,000 less". Q. I'll stop you there. What if anything did Mr and Mrs Ianni say to that, do you recall? A. No, nothing. Q. They didn't respond? A. No. I then highlighted other fees such as a break fee that could be charged by the bank which was set out in this letter, and they should be sure they understood those costs. Q. What if anything did they say to that? A. Nothing. 141Mr Wennerbom said that he did not ask any questions in relation to the discharge of the St George mortgage nor about where the $890,000 that was being borrowed was going. He said he did not do so because he was not giving commercial or financial advice to them. Although he was required to ask about their ability to repay he was not enquiring about the money that was being borrowed nor the value of their home at Drummoyne nor the discharge. He said he did not see it as his role in the transaction to do that. He knew that Phillips Fox were involved but he did not know what their involvement was, nor did he even assume that they were acting for Joe in the transaction. It was suggested to him that it was odd that Phillips Fox had the right to direct payment of the $890,000 but Mr Wennerbom said that he thought that that was because what he was advising on was part of a larger transaction or a larger series of transactions. 142Mr Wennerbom denied that Mr Ianni said anything about a guarantee, nor was the sum of $100,000 mentioned at any stage. 143I thought Mr Wennerbom was an honest witness who was doing his best to recall events that took place almost nine years earlier. I did, however, have the very distinct impression that, to a marked extent, his evidence was based a reconstruction of what he thought had taken place when he looked at the documents that were placed before him. In saying that, I do not suggest that he did not provide an explanation along the lines of what he said he did, nor that he was not endeavouring to be truthful. (b) Mrs Baira 144Consideration of Mrs Baira's position starts from a different foundation than Rosario & Domenica. First, I do not think her facility with English was nearly as limited as Rosario. Secondly, there had been multiple occasions of signing Guarantees and associated documents, and having them witnessed prior to the RAMS documents. Thirdly, the clear impression I had from her evidence was that she simply did not care what she was signing, not from any lack of understanding, but because she was prepared to do whatever Joe and Sandra asked of her, usually by means of Sandra's agency. Although she said that she did not know what she was signing and Sandra could not enlighten her, she was still prepared to do so without attempting to read the document or to seek advice from a solicitor even when she attended on him. 145In that regard it is important to remember what the High Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [47]: The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief. 146I found Mrs Baira to be an unsatisfactory witness whose evidence, unless corroborated, was unreliable. On some occasions I do not think she told the truth. Generally, I think she has come to believe that events occurred in accordance with the evidence she gave, whereas the true position was otherwise. Sometimes she appeared to say the first thing that came into her head and then subsequently reconsider. 147Some examples are these. Her evidence in relation to her knowledge of the new restaurant Joe and Sandra were buying in 1998 was this (T 111): Q. You did know that Sandra and Joe's company was going to buy a new restaurant in Darling Harbour in 1998, didn't you? A. No. Q. You are saying that your daughter didn't tell you in 1998 that her and her husband's company was going to buy a new restaurant? They didn't tell you that? A. Well, she may have, but again she didn't ask me for permission. Q. I will get to that Mrs Baira. If you could please stop jumping forward? A. I am trying to give you the answer the best of my knowledge. Q. I am just asking you whether it is the case that in 1998 your daughter told you that her and Joe were planning to buy a new restaurant? A. Okay. I will say yes. 148She was asked questions about her knowledge of why she was signing various documents. She gave this evidence (T 119): So you're recording there that Sandra told you that she didn't really know what the documents were for. That is what you are saying there, isn't it? A. That's what always she kept telling me. She didn't know. I suppose that's knowledge of guarantor. She always claimed she did not know. Q. If she did not know why didn't you ask Mr Ross when you were in front of him what these documents were for? A. Because I suppose I was naive, trusting my kids. Q. But your daughter told you she didn't know what the documents were for. You weren't trusting her about anything, were you? A. I don't understand what you're trying to tell me. HIS HONOUR Q. She hadn't given you a reason for signing the documents so you weren't trusting her at all, were you? A. I did trust her because otherwise I would not sign. Q. You asked her why you had to sign. She said, "I don't know." How are you trusting her? A. Well, I thought I did. That was my way. Like I said, I'm not someone that expert on these things. I just, I didn't make nothing of it. Q. But you wanted to know why she wanted you to sign the documents. You asked her that, didn't you? A. Yeah, I don't know why I didn't. Q. But you didn't ask Mr Ross to tell you? A. No. Q. You didn't say to him, "Look Sandra doesn't know why I have to sign these. Can you help me?" A. Well Sandra and Joe was always present with me. I mean, I thought they knew. Q. But Sandra told you she didn't know? A. I didn't know. Q. Did you ask Joe why you had to sign them? A. No. Q. Why not? A. I hardly used to see Joe. I always saw Sandra. If any document to sign was always Sandra. Q. I thought you said Joe was always with you when you-- A. When we went to Mr Ross, yes. Q. Why didn't you ask Joe then? A. I don't know. I can't answer you, I just didn't. ASHHURST Q. Do you say that Joe was with you when you went to see Mr Ross? A. When I went to Ross. I don't remember every time but the very first time was there, yes. Q. What about September 1998 was he there? A. I don't recall. It's a long time ago, I can't remember everything. 149Her evidence disclosed that she had seen Mr Ross and had received advice from him. She agreed on other occasions that she could have sought, but did not seek, advice from him about documents she was signing or had signed. Her only explanation for not doing so was because she said she trusted Sandra. However, that answer made little sense because she said that Sandra could not explain to her why she was signing documents on each occasion she was asked. The only sense that can be made of the answer about trusting Sandra is that Mrs Baira assumed that if Sandra and Joe wanted her to sign something it must be appropriate to do so. 150The passage set out at [148] provides another basis for concluding that what she said cannot be relied upon. She first said that Joe was always present when she went to see Mr Ross. Then she said that she hardly saw him - it was only Sandra who was present when she had to sign documents. Then she said that Joe was present the first time when she saw Mr Ross. 151She gave inconsistent evidence regarding her understanding of her potential liability if Joe and Sandra did not pay what they owed. In her affidavit of 23 October 2008 she said that she remembered signing documents to be a guarantor for a loan of around $50,000 from St George Bank in about 1991 and she understood that if Joe and Sandra did not repay the loan then St George would take their property first and then she, Mrs Baira, would have to pay the rest. 152By contrast, in her affidavit of 20 October 2010 she said that she understood she was a guarantor for $155,000 and if Joe and Sandra could not pay she would have to pay. She said that she understood that the Bank could ask her to sell her house to pay the money but she did not understand that the Bank could cause her home to be sold. 153On the other hand, when she gave evidence before Grove AJ and she was asked of her understanding of the guarantee and the mortgage, she said this: A guarantee is I help my children, which I did, for whatever amount, and you have to pay it off. If they fail to pay, I will have to pay. ... If I haven't got the money, of course they take the house and they going to sell the house for me to pay. 154A little later on she was asked about signing the documents in 1992 and she gave this evidence: Q. You knew this was an important document because, by executing this document, Joe and Sandra were going to be able to find a business? A. WITNESS: Yes. Q. You hoped that that business would provide for them in the future, didn't you? A. WITNESS: Yes. Q. And you were prepared to accept a risk and that risk was your home? A. WITNESS: Yes. Q. And you realised that if the loan wasn't repaid, the bank could come and take your home? A. WITNESS: Yes. Q. So you were signing this and you signed this document as a guarantor? A. WITNESS: (Witness nods). Q. And you then were prepared to execute a mortgage, weren't you? A. WITNESS: Yes. Q. As security for that guarantee? A. WITNESS: Yes. 155She gave evidence to similar effect before me, having agreed that Mr Ross explained to her in 1992 that if Joe and Sandra did not pay their debt to the Bank the Bank could rely on the documents to sell her house and pay the debt out of the proceeds. 156In the light of her oral evidence both before Grove AJ and before me the only conclusion I can reach is that her explanation in her affidavit about what she understood the effect of the guarantee and the mortgage to be was deliberately untruthful. Dishonesty may not be the explanation for the discrepancy between her belief that the guarantee was for $50,000 on one occasion and $155,000 in a later affidavit, but it highlights the unreliability of her memory. 157On another occasion she was directed to a loan offer made to Jencon in December 2002 that Sandra asked her to sign. She said that Sandra did not know why it was necessary for her to sign this document. She was asked in those circumstances why she did not look at the document to see what it was for. Her answer was: A. Because I was naive. If that will happen again, of course I will, but those days, I was left by myself. My husband just passed away, I had two young children, I was working, too vulnerable, I'd been always sick, the last few years I had a breast cancer, I had mastectomy, I had chemo, I had everything, you name it. I was vulnerable, and that's why I did what I did. Q. Mrs Baira, this is 2002. A. I understand. 158As the cross-examiner pointed out to her, the document being asked about was 2002, her husband had passed away in 1983, she had been remarried since 1991, and she did not have any small children in 2002. He might also have pointed out, as the evidence before Grove AJ made clear, that she was being treated with chemotherapy for breast cancer in 2008 or 2009 and not 2002. 159This answer she gave is a good example of why her explanations for acting or not acting to gain a greater understanding of what she was signing cannot be accepted at face value. The meeting with Mr Egisto 160As mentioned earlier, there is a conflict in the evidence in relation to advice provided by Mr Forster, a solicitor at Egisto Solicitors, on 12 October 2005. Mrs Baira said that she did not attend on that occasion or any other occasion to obtain advice from Mr Forster about an increase in the facilities that St George was providing to Jencon and which she was guaranteeing. Mrs Baira says that the only time she saw Mr Forster was in relation to the giving by her of a power of attorney. 161Mrs Baira relies on two matters in particular to suggest that Mr Forster's memory is faulty in relation to the meeting. The first is that the description he gave of the woman whom he saw on 12 October 2005 in the proceedings before Grove AJ was not a description of Mrs Baira. He suggested that the woman he saw was "a young woman" about 40 and of slim build. Mrs Baira was born on 23 April 1944. At the time she is supposed to have seen Mr Forster she was aged 61. It is accepted that Mrs Baira could not be described as being of slim build. 162The second matter relied upon by Mrs Baira is that when Mr Forster left the witness box after giving evidence before Grove AJ he claims to have seen Mrs Baira sitting in the back of the Court. However, he did not inform anyone that he recognised her as the person he had seen and advised on 12 October 2005. His explanation for not doing so was that the proceedings were almost concluded by that stage and he decided that it would serve no purpose. 163It has been suggested that Sandra might have impersonated her mother on 12 October 2005. She denies that she did so. I accept her denial in that regard, although I generally found her to be an unsatisfactory witness and her evidence unreliable. 164It is also suggested that Joe may have arranged for some other woman to impersonate his mother on 12 October 2005. In my opinion, that did not happen. I accept Mr Forster's evidence that the person he saw on 12 October 2005 was Mrs Baira. My reasons for doing so are as follows. 165First, Sandra was asked in interrogatories administered on behalf of Mrs Baira if she knew who had attended at the office of Egisto solicitors on 12 October 2005. She said that she, Joe and Mrs Baira attended but that she (Sandra) was not present at the meeting between Mrs Baira and the solicitor. She gave similar evidence before Grove AJ. At the time she answered these interrogatories and when Grove AJ heard the case Sandra was being sued by Mrs Baira in a cross-claim. Her answer was in her own interest. 166By contrast, in the hearing before me she gave this evidence (at T 251): Q. Can you please go to page 1066. This is not a letter that you may have seen before. Have you seen this document before? A. No. Q. It records from Mr Forster your mother attending at his offices on 12 October 2005 in relation to the St George Bank offer that you've just been asking you about. You deny taking your mother there, don't you? A. Yes. Q. You've also denied ever impersonating your mother in any way as a result? A.Yes. 167The question, "You deny taking your mother there, don't you?" was an odd one, particularly as it was asked by Senior Counsel for the Plaintiff. As Senior Counsel subsequently acknowledged, nowhere had Sandra denied taking her mother to the solicitors on that day. Her evidence was to the contrary. Her agreement with the question in the face of her previous evidence reflected badly on her reliability, even if it could be accepted that she was led to that denial. 168There was a considerable change between Sandra's demeanour and her attitude to those questioning her on the second day of her evidence - the day on which these questions were asked. On the second day she was far more aggressive, and her evidence appeared tailored to support her mother's case. On the first day the impression I had was that she was doing her best to answer honestly although she had little recollection or understanding of the detail of what had occurred. I consider that her evidence generally on the second day should be scrutinised with great care. 169I consider that the evidence in her answers to interrogatories and the evidence she gave before Grove AJ should be accepted on this matter of whether she accompanied her mother to the solicitors' offices on 12 October 2005. 170Secondly, whilst accepting that there were differences between Mr Forster's recollection when he gave evidence before Grove AJ and when he gave evidence before me, I nevertheless accept the evidence, that he gave before me, that he observed Mr Egisto in conversation with the woman he advised before he, Mr Forster, saw her on 12 October 2005. Mr Egisto was holding the documents that were then handed to Mr Forster. Mr Calvitto, another solicitor in that practice, gave evidence that in November 2004 he was introduced to Mrs Baira, as well as Joe and Sandra, by Mr Egisto who then asked Mr Calvitto to look after them. Accordingly, it is clear that Mr Egisto knew who Mrs Baira was by October 2005. 171Thirdly, that confirms the conclusion I have reached that Sandra did not impersonate her mother on 12 October 2005 because she would have well known that Mr Egisto and Mr Calvitto knew her. Turning up to Mr Egisto's office to see Mr Forster pretending that she was someone else would have been too risky because Mr Egisto might have seen her. 172Furthermore, I accept Mr Calvitto's evidence that Joe was present when he, Sandra and Mrs Baira were introduced by Mr Egisto to Mr Calvitto in November 2004. That means that it is very unlikely that Joe would have risked getting somebody else to impersonate Mrs Baira in October 2005 because he knew that two of the three solicitors in that practice would have known who Mrs Baira was. 173Fourthly, Mrs Baira saw Mr Forster again on 8 November 2005 when he witnessed her signature on a power of attorney. If a different woman had arrived on that occasion, I would have expected Mr Forster to have remembered that fact. That is the more so when the identity of Mrs Baira was an issue both before Grove AJ and before me. Moreover, Mr Forster's evidence was that the recipients of the power of attorney, Sandra and Dante Fioravanti, were present at the time Mrs Baira signed the power of attorney. Support for that derives from the fact that Mr Forster identified his handwriting of the dates which appear immediately under their signatures and from his certification underneath that he witnessed their signatures. That is another fact which confirms my opinion that Sandra did not impersonate her mother on 12 October 2005. Had she done so she certainly would not have attended on 8 November 2005 in her own guise. 174Fifthly, although I do not place great weight on this matter, the letter written by Mr Forster to Mrs Baira on 19 October 2005 asking her to arrange an appointment with him to sign the power of attorney appears to be a letter written by a person who had already had some contact with the recipient. 175The fact, as I have found, that Sandra accompanied her mother to see Mr Forster may go some way to explaining why the description Mr Forster gave of Mrs Baira, that accorded more closely with Sandra's description, was given. He had remembered seeing a woman fitting her description on the day but wrongly remembered that it was Mrs Baira 176I accept, therefore, that the advice said to have been provided to Mrs Baira on 12 October in the letter of that date to St George Bank was in fact provided to her by Mr Forster who I found to be a careful solicitor. 177However, an examination of the advice in that letter demonstrates that it was limited advice because neither Mr Forster nor Mrs Baira were provided with the bigger picture. The bigger picture was summarised by Basten JA as I have set out in [43] above. That is, the St George facilities were to be reduced, with new loans being obtained from RAMS by both Rosario and Domenica, and Mrs Baira, with Joe and Sandra having the Pyrmont property released so that it could form part of the security for the purchase of Dural. There is no indication that Mrs Baira knew, at this stage, about the intention to change banks from St George to RAMS, let alone that she was to become a borrower. Certainly, the advice recorded in the letter of 12 October gives no hint of that. 178I am quite satisfied that immediately before she came to sign the documents concerned with the RAMS loan Mrs Baira knew that she had provided a guarantee for Jencon, that she had given a mortgage over the property as security for that guarantee, and that she knew that if Joe and Sandra or Jencon did not pay what they owed to the Bank the Bank could take her property to pay the debt. I do not accept Mrs Baira's evidence that she thought that the guarantee was limited to $155,000. I accept Mr Ross's evidence that he would have explained to her that the limitation to her liability was the entire value of her property. I also accept his evidence that he would have explained to her that the amount she was guaranteeing in 1998 was the $30,000 overdraft and the loan of $400,000. I accept that Mr Ross had no actual memory of the advice that he gave but I accept that he followed his usual practice in explaining documents to clients. I thought that Mr Ross was an honest and careful witness. 179Whilst I can accept that Mrs Baira might not have known the extent of Jencon's borrowings by the time that she was told that Joe wanted to change banks for a lower interest rate in 2005, I do not accept that she did not know that Joe and Sandra and Jencon had been borrowing increasing amounts of money from the time she first gave a guarantee in 1992. She did know, because Mr Ross told her, that by 1998 the borrowings amounted to $430,000. I do not believe that there was no discussion between Mrs Baira and Sandra about further borrowings even if the precise amount was not conveyed to Mrs Baira on each occasion. 180However, by the time Mrs Baira came to sign the RAMS documents no-one had told her what Joe was doing by seeking to remove St George from the picture in the way that he and Mr Famularo had clearly arranged matters. She had received advice from Mr Forster about the release of the Pyrmont property belonging to Joe and Sandra. This increased her potential liability because it left only the properties at Castle Hill, Milson's Point and Mrs Baira's property. Mr Forster's letter of 12 October 2005 says that he advised her about this and that she was content to sign the further guarantee on that basis. I accept that all of that is true. Mrs Baira continued to think, correctly, that she was a guarantor who had provided a mortgage as security, but she was confident in the continuing success of the restaurant. There is no evidence, however, of what she actually knew about the business. 6. The involvement of Mr Famularo and Joe 181It is now necessary to consider in more detail the events directly leading to the loans being made by RAMS. An important consideration is the evidence of Mr Famularo. As noted earlier, both Rosario and Mrs Baira deny that they ever met with Mr Famularo or had any dealings with him before the loans were made. On the other hand, Mr Famularo claims to have met with Rosario and Domenica in September 2005 and with Mrs Baira in December 2005. 182The importance of Mr Famularo's evidence is this. A very significant issue in the proceedings is the extent of the understanding that Rosario, Domenica and Mrs Baira had about the RAMS loan agreements. If Mr Famularo held conferences with Rosario, Domenica and Mrs Baira, and the information that was given to him was as recorded in his diary notes or even his affidavits, then it would have to be concluded that those persons knew perfectly well what was about to happen and, indeed, that to a greater or lesser extent, they were the moving parties in respect of the loan agreements they entered. (a) Joe Ianni 183Although I have found that both Rosario and Mrs Baira were unreliable witnesses who did not always tell the truth I cannot and do not conclude that none of their evidence was able to be relied upon. In the difficult position of having conflicting witnesses who are both unreliable and to some extent dishonest, it is necessary to look to other more objective material to endeavour to see where the truth lies. 184Whilst, as I have indicated, I am entirely satisfied that both Rosario and Mrs Baira knew that they had provided their properties as security for guarantees they had given for Joe, Sandra and Jencon at the time of the applications to RAMS, I am comfortably satisfied that they did not understand the detail of the financial arrangements that existed between Joe, Sandra and Jencon on the one hand and St George Bank on the other. I do not think that either of them knew the extent of the borrowings nor what was being planned and organised by Joe and Mr Famularo from August 2005 and onwards. 185Neither Rosario nor Mrs Baira was a sophisticated person. Rosario had no understanding of commercial or financial matters beyond basic things such as what a guarantee, a mortgage and a loan was. Mrs Baira's knowledge and understanding was not significantly greater although she had had some little exposure to business matters because of her husband's pancake business with which she assisted. 186The evidence satisfies me entirely that Rosario had not worked since he retired from his job at Garden Island in 1994. Further, the evidence, particularly the medical evidence, satisfies me that Domenica did not work at any time relevant for these proceedings. In relation to Mrs Baira, I am satisfied that the only work that she performed at any time relevant to the proceedings was by assisting her husband in his pancake business on a part time basis. 187I am also satisfied that Joe was the moving party in relation to the loans and that Sandra, although she was prepared to go along with whatever Joe wanted in that regard, had little understanding herself of what was happening, except that more money was being borrowed from time to time whether for the business or for the purchase of real estate. I consider that both Sandra and Mrs Baira were telling the truth when each said that Sandra was not able to give Mrs Baira any explanation for why it was necessary for her to sign more documents from time to time, apart from the fact that it was necessary because she had been a guarantor and continued to be a guarantor. Of course, the fact that Sandra and Mrs Baira were prepared to sign any document put in front of them because that was, ultimately, what Joe wanted does not of itself provide any defence to them for the liability that each incurred by doing so. 188Whilst Rosario was also agreeable to signing documents that Joe asked him to sign, he did so because of the limited understanding that Joe had provided to him for the purpose of obtaining his agreement. I do not consider that Rosario displayed the same cavalier attitude to signing documents that Mrs Baira displayed. 189Both in respect of Rosario and Mrs Baira I accept that there was a language problem although this was much less the case with regard to Mrs Baira. Whilst I do not accept that Rosario has the very limited understanding and ability with English that he would maintain, I am satisfied that he had a limited grasp of English particularly when legal and financial documents were being explained to him. I think the likelihood is that Domenica had even less understanding than Rosario but she was prepared to do whatever he suggested in that regard. 190I also accept that it is likely that there was a great gulf fixed between Rosario on the one hand and any solicitor explaining documents on the other, particularly when it came to Mr Wennerbom. This is because a solicitor may have honestly believed that Rosario and Domenica understood what was being said to them, when in fact they did not sufficiently understand what was being conveyed but believed that they did. It is no surprise from a person of Rosario's background that he might have indicated that he understood matters that were being explained by the solicitor when he did not have at least a full grasp of what was being said. Nor does it assist if someone like Rosario has a preconceived fixed notion of what he is doing and what is happening although that may not accord with reality. People sometimes hear what they want to hear and perceive what they expect to see. 191It had been recommended long before 2005 to solicitors who were giving the sort of advice Mr Wennerbom was giving that, rather than making statements to their clients and then asking if they understand, the solicitor should ask the client to tell the solicitor what the client's own understanding is about the transaction. This proposition was not put to Mr Wennerbom, and he is not being sued for negligence. But where this approach has not been adopted by the solicitor, and where Mr Wennerbom received no response to significant parts of his advice (see [140] above), I can have no confidence that Mr Wennerbom's explanation was in fact understood by Rosario and Domenica. That conclusion is strengthened by my finding that Joe led them to believe that they were simply going to sign documents to transfer their guarantee from St George to RAMS because of the lower interest rate. 192It is significant that up to that point (as recorded at [140]) they were being told things that they already understood, such as, if money was not paid to the bank, the bank could take the house and sell it. However, when something new was being said that did not accord with their pre-existing understanding, such as "you are borrowing $910,000", they fell silent and did not indicate any understanding. 193The Plaintiff submitted that the fact that Joe arranged for a solicitor to provide independent advice to his parents demonstrates that Joe was not trying to trick them into borrowing money on his behalf. It is significant, however, that the solicitor Joe arranged to advise them was not one of the Italian/Calabrian speakers whom Rosario and Domenica or even Mrs Baira had seen in the past in relation to signing documents from Joe and Sandra, but Mr Wennerbom, whom they did not know, who spoke only English, and who had no background in what had gone on previously in relation to arrangements between Joe and Sandra on the one hand and Rosario and Domenica on the other. 194Whilst I have found that Rosario could understand more English than he cared to admit, I am still entirely satisfied that he had difficulty with English involving legal or technical terms. His ability read English was very limited so that he would be completely dependent upon what the solicitor was telling him in his non-native language. Joe knew that. 195The Plaintiff submitted that Joe was in the camp of Rosario and Domenica and, to a lesser extent, in the camp of Mrs Baira, and the failure of those parties to call him to corroborate their evidence should result in an inference that his evidence would not have assisted them. Given the case that was being run by the Defendants, that it was Joe and to a lesser extent Sandra that were responsible for wrongfully bringing about their present liability, it is not immediately apparent that Joe was a witness who it would naturally be expected would be called by the Defendants: O'Donnell v Reichard [1975] VR 916 at 929. I do not overlook what Schmidt J said in Westpac Banking Corporation v Velingos [2011] NSWSC 607 at [78], but it does not appear that her Honour's attention was drawn to Fabre v Arenales (1992) 27 NSWLR 437 at 450 where it was said that a Jones v Dunkel (1959) 101 CLR 298 inference may not arise if a witness has a reason for not telling the truth. 196In any event, Joe gave evidence at the hearing before Grove AJ. If that evidence is to be believed, it provides some support for Rosario's evidence that he never met Mr Famularo, that Mr Wennerbom (whom Joe called a liar) did not explain the documents to Rosario and Domenica, and that Mrs Baira could not read English. However, a reading of the whole of his evidence causes me to doubt that he was telling the truth in all respects. 197He professed a lack of knowledge about some things that he could have been expected to know including, for example, how his parents came to sign the loan application. He appeared to want to shift the blame for things onto Mr Famularo, portraying himself as an innocent in the matter. For example, he said that he did not ask the NAB for a line of credit of $610,000, nor did he know what business on the NAB application was said to have a value of $10 million. He did, however, support Rosario's evidence that he, Joe, told Rosario that he was simply changing banks to get a lower interest rate for a guarantee from Rosario and Domenica of $100,000. 198Any failure to call Joe appears to me entirely explicable as a result of these matters. It does not seem likely that his evidence would have assisted anyone because of the desire to whitewash his own involvement in the matter. By the time he gave evidence at the earlier hearing he had been made bankrupt. He had no interest in doing other than to support his parents and Mrs Baira, and to blame others for what had happened. I do not think I can draw a Jones v Dunkel inference that his evidence would not have assisted Rosario or Mrs Baira. The contrary position is more likely, but the question would certainly be whether he should be believed for anything he said. (b) Mr Famularo 199I found Mr Famularo to be a most unsatisfactory witness and I found it difficult to accept much of the evidence he gave. Mr Kelly SC, who appeared for Rosario and Domenica, suggested at one stage to Mr Famularo that he was making his evidence up as he went along. Mr Famularo denied the assertion. However, I accept it. Some of the evidence he gave was, quite frankly, unbelievable. There were significant inconsistencies in his evidence, particularly between what he swore to in his affidavits and what was contained in diary notes said by him to have been made contemporaneously with the events recorded. For a number of reasons which I will provide presently, I consider that it is more likely than not that he fabricated diary notes of the meetings alleged to have been held with Rosario and Domenica and with Mrs Baira. The information in them may have, and most likely did, come from Joe, but it certainly did not come from the Defendants. 200Of course, I bear in mind that, in the ordinary course, matters which I find were within Mr Famularo's knowledge are not matters the knowledge of which can be attributed to the Plaintiff. Ordinarily, a broker in Mr Famularo's position is the agent of the borrower. That is subject to the consideration, discussed later, of whether Mr Famularo was the agent of the Plaintiff for the purpose of identifying the borrowers. Mr Kelly SC submitted that he was but the Plaintiff resists the attribution of his agency to it. 201The following matters cause me to conclude that Mr Famularo's evidence is entirely unreliable and has simply been reconstructed or made up to try to make it consistent with documentary material that Mr Famularo has seen. (1) The application to NAB 202In August 2005 Mr Famularo completed a loan application to the NAB for $3,500,000 on behalf of Joe and Sandra. The application was dated 30 August 2005. One of the purposes of the loan was for the purchase of the property at 7 Wildthorn Avenue, Dural. Mr Famularo had a copy of the front page of the contract (Exhibit 10). 203In his affidavit sworn 23 November 2009 in the proceedings against Rosario, Mr Famularo said this: 16. Mr Joe lanni was referred to our office by his brother Anthony lanni. AMBFS had assisted Anthony lanni in the past and we understood him to be happy with our services. 17. Joe lanni contacted me by telephone and we had a conversation with words to the following effect: Joe: Hi Peter, it's Joe lanni, Anthony lanni's brother. Peter: Hi Joe, how are you? Joe: I'm well. I'm calling to make an appointment to see you to discuss the refinance of loans I have with St George Bank, which are secured by my parent's property at Drummoyne. Peter: No problem. Is 9.30am on 14 September 2005 convenient for you at my office in Five Dock? Joe: Yes, the 14 September 2005 is fine. Peter: Great. I would also need to meet your parents personally to discuss the loan arrangements with them and will require them to complete a loan application. Joe: No problem. I will bring them with me on the 14th. 204The only reasonable inference to draw from those paragraphs is that this conversation was put forward as the first time that Joe had dealt with Mr Famularo. In fact, as Mr Famularo agreed in the proceedings before Grove AJ, he had had two and maybe three meetings with Joe prior to 14 September and many telephone conversations. Joe's evidence was that he had met Mr Famularo from July 2005. Further, one of the other purposes of the application to NAB was refinancing of part of the St George Bank loan which would alter matters in relation to Rosario and Domenica's property in Drummoyne. Mr Famularo had already made application to the NAB by the time this conversation is supposed to have occurred. The conversation in paragraph 17 of Mr Famularo's affidavit could simply not have occurred in those terms or anything like them. 205The application to the NAB dated 30 August 2005 was for a loan of $3.5m. There were three stated purposes: (1) $2,400,000 to assist purchase of Dural; (2) $490,000 Refinance St George Bank; (3) $610,000 line of credit. 206The application that Mr Famularo completed and sent to RAMS on 14 September 2005 on behalf of Rosario and Domenica sought $490,000 for the purpose of refinancing a St George loan. The loan was the same loan for which the same money had been sought from NAB. When asked about this he gave the following evidence (T 481): Q. On their behalf, you were seeking from the National Australia Bank a total of 3.5 million? A. Yes. Q. And the three purposes that you have written for the loan purposes are, firstly, to assist with the purchase of Dural, amount requested? A. Yes. Q. The reference to Dural is to this property at Wildthorn Street? A. Yes. Q. The same property that is the subject of the $500,000 supposed contract for Mr and Mrs Ianni senior? A. I don't know that. Q. But the second item in the list of purposes, St George Bank refinance, amount required, 490? A. Yes. Q. You do know that that is the same subject matter for refinance as the subject matter in your loan application as drawn for Mr and Mrs Rosario Ianni, don't you? A. Yes, I was instructed that that loan was secured over both Drummoyne and Pyrmont, yes. Q. What is your explanation for making an application to two banks for funds to repay the one debt? A. I - I had to disclose that liability in both loan applications because both parties were jointly and severally liable for that debt. Q. But you know I am not talking about disclosure of a liability? A. Um, what are you talking about? Q. Naming, as a purpose of a loan, repayment of the one debt twice? A. Yes, that's how the - well, one application was submitted earlier in time and then there was a change to this application, the loan amount was reduced, so the - there were not two loan applications for the same amount at the - at the same time. Q. Weren't there? A. No. Q. This one is dated 30 August, correct? A. Yes. Q. And Mr and Mrs Ianni's, you put that in on 14 September. You say that in that 14 day window, something changed, did it? A. This - this loan - this loan application was reduced to 2.4 million. Q. Is this right: That was a matter that you made known to your client, Mr Rosario Ianni and his wife? A. They approached me. Q. I beg your pardon? A. They approached me. I didn't make it known to them. They came to my office and applied for a loan. Q. You are not suggesting for a minute that you had any discussion at all ever with them about the fact that the National Australia Bank had been asked to provide the self same moneys for repayment of this debt? A. I - I don't recall that I disclosed that to them, no. 207There is no evidence that the NAB loan application was reduced as Mr Famularo asserted. He acknowledged that he did not tell Rosario and Domenica that this amount had been applied for from NAB and, if the request it for it was withdrawn, why that occurred and why Rosario and Domenica were now seeking to accept the liability for it when only two weeks earlier Joe and Sandra were seeking it. (2) The alleged meeting of 14 September 2005 208In the same affidavit Mr Famularo said that he met with Rosario and Domenica on 14 September 2005. The affidavit does not record Joe as being present although the diary note, said to have been made by Mr Famularo at the time, records Joe as being present. Mr Famularo records a conversation he said that he had with Rosario and Domenica in Italian with some "broken" English spoken by Rosario. 209Mr Famularo records the conversation this way: ROSARIO: I have a number of loans which both my wife and I have secured for Joe and Sandra Ianni including a loan for $486,000. We may have also given guarantees for a company by the name of Jencon Australia Pty Ltd but I know that these loans are all secured over my Drummoyne property. These loans had been in existence for many years. PETER: What are the amounts of these other loans that you have guaranteed? ROSARIO: I cannot recall the exact amounts guaranteed. Joe and Sandra manage the finances. I simply want to reduce the liability on my home that's why we need to refinance my share of the liability. I also wanted to borrow funds to assist with the purchase of another property if possible. This will allow me and my wife to live closer to our son Joe. [Emphasis added] 210If Joe had been present at the meeting, as the diary note asserts, I would have expected there to be some reference to Joe during that part of the conversation. If Mr Rosario did not know the amounts guaranteed (which Mr Famularo needed to know) and Joe and Sandra managed the finances (as he was supposed to have said) I would have expected there to be a note in the affidavit of Mr Famularo that he asked Joe what were the amounts guaranteed by Rosario and Domenica. 211This conversation cannot have taken place in that form for the following reasons also. First, it was not true that Rosario had a number of loans which he had secured for Joe and Sandra. Secondly, I do not accept that Rosario had any idea of the precise amounts of any of the loans to be quoting a figure of $486,000. Thirdly, I do not accept that Rosario would have been capable of saying in Italian let alone in English that he wanted to reduce the liability on his home and that was why he wanted to refinance his share of the liability. That presupposed a far greater understanding of the whole of the St George financial arrangements than Rosario had. Fourthly, there was no proposal whatsoever for Rosario and Domenica to purchase another property. 212Mr Famularo then said this in paragraph 24: 24. I then went on to ask the defendants a series of questions relating to their employment status, what assets they held and their income. I had a conversation with the Defendants to the following effect: Peter: Are you both working at the moment or have you retired? Rosario: I am working. I work for Joe and Sandra in the Darling Harbour business. It's an Italian Restaurant called Fioriani. Both Domenica and I are silent investors in the business. I have worked there for a long time and helped my children purchase the business in the early 1990's. I have another three sons who also works (sic) there. Domenica: That is right. We have worked there for a long time and helped Joe and Sandra purchase the business in the early 1990's as well as helped them purchase a property in Pyrmont in 2000. Peter: So the Restaurant is a family business. Rosario: It is. Our three other sons are also employed at the Restaurant. This business supports our children and their families. If I can help my children and their families I will and have previously offered my home to St George Bank as security to help them get ahead in life. Peter: Are you confident that you can repay the loan should RAMS approve your application and lend you the money? Rosario: Yes, it would be fine. Our income ranges from $85,000-$95,000 per year. I have never had a problem repaying the loans I have had with St George since the 1990's and have always made the payments in a timely manner. You can see for yourself that we have always had the ability to repay our loans. Peter: We will need to obtain bank statements from you for the purpose of confirming this. Rosario: No problem, I have them with me. Peter: Do you own any other real estate besides your Drummoyne home? Rosario: No. The Drummoyne property is the only property we have. Peter: Do you have other assets? Rosario: Well, I have substantial cash reserves. Peter: What is the approximate value of the cash reserves? Rosario: I cannot recall the current value but over $100,000.00. 213This conversation could not have taken place for these reasons. First, Rosario was not working at the restaurant and he had not worked anywhere for 11 or 12 years. Secondly, they had not helped Joe and Sandra purchase the business in the early 1990s. Thirdly, Rosario and Domenica did not have income ranges from $85,000 to $95,000 a year. Fourthly, Rosario had never had loans from St George Bank to make payments in a timely manner. I do not accept that either Rosario or Domenica would have told those untruths to Mr Famularo. They had no incentive to do so and I do not accept that they had the understanding nor the commercial savvy to have engaged in misleading or untruthful conduct on behalf of Joe. 214Mr Famularo then sets out a further conversation with Rosario as follows: Peter: You should obtain legal and financial advice in relation to the proposed RAMS loan. Rosario: We have previously obtained legal or financial advice on a number of occasions with regards to our existing St George Bank loan obligations and would prefer not to have to obtain it again. Peter: You should obtain the advice again regardless. Rosario: I can have Mr Angelo LoSurdo confirm that we have previously received advice with respect to our St George Bank loans. 215This conversation could not have taken place because Rosario and Domenica did not have St George Bank loan obligations. They had provided a guarantee and a mortgage in respect of Joe and Sandra's borrowings. Further, they had received legal advice on one prior occasion in July 2000 when they first provided the guarantee and mortgage. There is no evidence that they ever received financial advice. 216The last statement attributed to Rosario makes little sense because there was no requirement from anyone, at least at that time, that they needed to prove that they had previously received advice. Mr Famularo's concern (in the words he attributes to himself) was that they should receive further advice. Moreover, I accept Mr LoSurdo's evidence and Rosario's evidence that Mr LoSurdo had ceased to do any work for Rosario since he ceased working at Garden Island in 1994. Mr LoSurdo would not have been in any position to know what advice had been received by Rosario in 2000 or subsequently. 217In the proceedings brought against Mrs Baira, Mr Famularo swore an affidavit on 11 November 2009. In relation to the alleged meeting he had with Mrs Baira he said this conversation took place: Peter: You should obtain legal and financial advice regarding your RAMS loan obligation to ensure you understand the ramifications of entering into a loan. Defendant: I would prefer not to obtain legal or financial advice again due to the cost and because the loans already existed for many years. Peter: You should obtain the advice again regardless. Defendant: I can have Mr. Angelo LoSurdo confirm that I have previously received advice as Mr. LoSurdo himself has signed statutory declarations for me. 218The similarity between the two conversations is such that I consider that Mr Famularo has invented them. 219In paragraph 38 of his affidavit of 23 November 2009 Mr Famularo said that Rosario and Domenica attended his office again on 16 September because: During RAMS' review of the loans it became apparent that the Defendants were not directors of the family business but were only investors and had incorrectly completed the Income Declaration Form. 220That statement is not true because it was Mr Famularo who completed the document, although the document bears the signature of Rosario and Domenica, but nowhere in the document does it assert that they were directors of "the family business". The fact, however, that Mr Famularo had written Jencon and its ABN on the loan application is a good indication of what this loan application was all about, namely a borrowing by these applicants on Jencon's behalf. (3) The sham contract 221As mentioned earlier ([61] above) one of the documents sent to RAMS with the loan application was the front page of a contract for sale of land by Rosario and Domenica. Mr Famularo said that this was produced to him by Rosario at the conference of 14 September 2005. He said that Rosario said to him "this is a property that we are looking to purchase". Mr Famularo said that he did not look at the contract, he did not notice that it had been signed by the vendor, nor that it was an exchanged contract. 222This evidence should be compared with evidence he gave both before and after that evidence. He was earlier being asked about words in his diary note: ?? Live with Son Purchase $500K He gave this evidence: Q. ... Firstly, are you able to tell his Honour, to the extent you can, to the best of your ability to recall them, what words Mr Ianni said to you about this topic, that is Mr Ianni senior? A. Yes, "I would like to live closer to my son". Q. The words that actually appear there are "live with son"? A. Yes. Q. Do you recall if there was any discussion about where it was that Mr Ianni senior wanted to live? A. Well, they were looking at Dural. Q. And who told you that, Mr Ianni senior or Joe? A. Well, Joe mentioned this because he also had told me previously that he had already purchased a property at 7 Wildthorn Avenue, Dural. Q. And at this meeting, that is on 14 September 2009, was there any specific reference to the Dural property? A. No. Q. Then there is a reference, "Purchase 500K". Are you able to tell his Honour who at this meeting said something to you that caused you to write those words? A. Yes, Mr Ianni senior was looking to purchase a property to the value of he said to me that he was looking to purchase a property at around the $500,000 mark. Q. Did he tell you which property? A. We didn't talk about a property address, no. 223Two things emerge from this evidence. The first is that Mr Famularo clearly had in mind the property that Joe and Sandra had purchased at 7 Wildthorn Avenue, Dural. Secondly, his evidence that he was not told which property it was that Rosario was looking to purchase was quite inconsistent with being handed a copy of the front page of a contract which identified that property. 224A little later Mr Famularo gave evidence that he was not aware that the contract Rosario handed him at the meeting was for the same property that Joe and Sandra had bought. 225Inconsistently with his earlier evidence that he did not look at the contract Mr Famularo gave this evidence (T445): Q. You would have his Honour believe that you didn't notice that this was a contract that was signed? A. No. Q. This contract on its face says "completion date 56th day". You saw that, didn't you? A. No. Q. You say to his Honour that you didn't appreciate that 56 days from 19 August 2005 was in fact 14 October? A. No. Q. You did notice that it was a purchase for $500,000 did you? A. I would have looked at that, yes. Q. You looked at some parts of this but not other parts, is that what you say to his Honour? A. Yes, I do say that. Q. You say to his Honour that you just didn't notice that this was for sale at 7 Wildthorn Avenue Dural? A. I didn't look at all the detail of this document, that's correct. 226Again, inconsistent with his previous evidence was this: Q. Mr Famularo, if you have a look please on page 380 A. Yes. Q. It's the front page of the contract? A. Yes. Q. If you saw the price of $500,000 there can you tell me how you could not have noticed the date contract date and the signature of the vendor? A. I didn't notice your Honour. KELLY Q. You did notice that a $50,000 deposit had been paid? A. That's what Mr Ianni told me, yes. HIS HONOUR Q. In fact you listed that as one of Mr Ianni's assets, didn't you, on page 388, the deposit of $50,000 had been paid A. That's correct. Q. Doesn't that mean that you did understand the contract had been exchanged? A. Yes. 227The conversation Mr Famularo sets out at [209] above has Rosario saying that they want to borrow to assist with the purchase of another property "if possible". The clear inference is that no property has yet been found. However, as Mr Famularo acknowledges, he understood they had exchanged contracts of 7 Wildthorn Avenue, and he included the front page of the contract to support the request for part of the loan purpose. The conversation could not have been as Mr Famularo asserts. 228Having heard this inconsistent evidence of Mr Famularo and having looked at the front page of this sham contract, I do not believe that Mr Famularo did not both notice that the contract had been exchanged by virtue of the vendor's signature and the contract date immediately below the figure of $500,000. Nor do I believe that he did not see that it was for the same property that he knew Joe and Sandra were purchasing. It was for the purchase of that property that Mr Famularo had made the application to NAB on Joe and Sandra's behalf. 229There are only two persons who, reasonably, could have forged the alterations on this contract. One such person was Joe Ianni, the other was Mr Famularo. The more likely person was Joe but I do not believe that Mr Famularo did not know that it was a fake. His failure to produce it in December 2008 in answer to a subpoena is some indication of this. He had no explanation for the failure to produce it. 230The likelihood is that the fake first page of the contract came into Mr Famularo's possession because he was provided with it by Joe. It was certainly not provided by Rosario because he and Domenica were not purchasing a property at Dural and had no intention of doing so. Any information that Mr Famularo might have had about Rosario and Domenica wanting to live with Joe (as the diary note says) or live closer to them (as Mr Famularo asserted in his evidence) was given to him by Joe. 231The Plaintiff' submission in relation to this contract was this: 17. There is also one final point worth noting about the file note of Mr Famularo that is impugned by the Iannis as "fraud". The point is that this file note is far too elaborate and cryptic to be a fraud. The note, somewhat unnecessarily for Mr Famularo's "fraudulent purposes", make a cryptic reference to the Iannis "living with son" and "purchase $500k". It is possible that the real intention of the loan by the Iannis was, as the loan application stated, to refinance the liability to the St George Bank ($490,000) and for the Iannis to acquire an equitable interest in the Dural property for $500,000. That would make the so called "fraudulent" first page of the contract submitted to the Plaintiff not only not "fraudulent" but accurate. 232It is difficult to know where to start to deal with this submission. First, anything is possible, but what the Court is concerned with is probabilities and not speculation based on no evidence whatever. Secondly, it is clear beyond reasonable doubt that the contract page showing a purchase for $500,000 by Rosario and Domenica was the same page as in the contract showing a true purchase by Joe and Sandra with alterations only to the purchasers and the price. Thirdly, and associated with the second point, if Rosario and Domenica were to be obtaining some sort of equitable interest in the Wildthorn Ave property it would not be evidenced by the altered front page of a contract signed by the vendor of the property. 233Fourthly, it was never put to Sandra or Rosario by Senior Counsel for the Plaintiff that the intention was for Rosario and Domenica to acquire an equitable interest in Dural and/or that that was the relevance of the contract showing its purchase by them for $500,000. Indeed, Mr Kelly SC for Rosario and Domenica put to Sandra (at T199): Q. Now, over the page - and just to be absolutely certain, it was yourself and your husband who were buying this property in Dural, not your then father-in-law and mother-in-law? A. That is correct. Mr Ashurst SC for the Plaintiff never challenged Sandra about that statement. 234Finally, not only was there no evidence in any document before or after the settlement suggesting that Rosario and Domenica intended to obtain, or had obtained by the making of the loan, an equitable interest in the property, the Plaintiff did not attempt to lead any evidence from Mr Wennerbom (whom the Plaintiff called) to suggest that the acquiring of such an interest formed part of the transaction. 235The only additional evidence the Plaintiff could point to in order to sustain this submission were two paragraphs of a recent affidavit by Mr Famularo which dealt with a conversation he allegedly had with Dante Fioravanti at the Dural property. Mr Fioravanti pointed to two "in-law" accommodations on the property. One was supposed to be where Mrs Baira lived. The other "was to be renovated and prepared for Rosario and Domenica". 236Dante Fioravanti denies the conversation about the "in-law accommodation" and denied that Mrs Baira lived there. He had no recollection of the conversation in relation to Rosario and Domenica. I accept Dante's denials. Mrs Baira has never lived at the Dural property. I find that the conversation about preparing the "other" accommodation for Rosario and Domenica never took place. 237However, this evidence of Mr Famularo, even if accepted, does not support the Plaintiff's submission. No-one suggested that Mrs Baira obtained an equitable interest in Dural by becoming a borrower from RAMS on Joe and Sandra's behalf. Yet, according to Mr Famularo and the Plaintiff by its submission, Mrs Baira was already living there. On the other hand, Rosario and Domenica, who were not living there, had acquired such an interest by reason of having taken on the loan. 238The Plaintiff's submission has no basis whatever. The contract page submitted to the Plaintiff with the application by Rosario and Domenica was a fake, and was known to be a fake by Mr Famularo. (4) The Snapshot of account 239As noted earlier, Mr Famularo sent to RAMS a St George Snapshot of Account in the name of Rosario and Domenica although he had in his possession a Snapshot of the same account in the name of Joe and Sandra. 240In his affidavit of 23 November 2009 in the Ianni proceedings Mr Famularo records Joe as saying to him: I'm calling to make an appointment to see you to discuss the refinance of loans I have with St George Bank, which are secured by my parent's property at Drummoyne. Mr Famularo knew, therefore, that what was being refinanced were Joe's loans. It was very misleading of him to send to RAMS the Snapshot of Account in the name of Rosario and Domenica as if they were the account holders. It is difficult to believe that Mr Famularo did not do so deliberately. Mr Famularo was asked about this and he gave this evidence: Q. Why didn't you attach a copy of the snapshot of account of Joe and Sandra Ianni to the application that you sent in to RAMS on 14 September? A. I forwarded on to RAMS the document that showed Mr and Mrs Rosario and Domenica Ianni as the guarantors of that facility. That was not a truthful answer because there was nothing on the documents that indicated Rosario and Domenica were guarantors. (5) The identification documents 241I referred above to the provision of 100 point identification documents in the first application submitted and to the varied documents in the subsequent application ([54] -[60] above). 242It should be noted that Mr Famularo sent off the false passport information having ticked a box answering the question "Has verification been achieved?" in the affirmative. That was a false statement in each case because Mr Famularo had never verified the passport information. 243What highlights the seriousness of this behaviour is that Mr Famularo, in his affidavit of 23 November 2009 in the Ianni proceedings, claims to have spoken on the telephone with Rosario later on the day he met with Rosario and Domenica. So far from making any further enquiry about the passports which he needed to verify, he claimed that the conversation would provide 25 points on Domenica's identification document when he later sent the second fax on 16 September. Yet, having had this phone call and not sought, for example, that they bring their passports into his office, he sent the first fax containing the unverified and false identification evidence. (6) The alleged meeting of 2 December 2005 244In his affidavit of 11 November 2009 sworn in the proceedings against Mrs Baira, Mr Famularo claims to have met with Mrs Baira alone on 2 December 2005. He said that she told him that she had been the guarantor for Joe and Sandra for various loans from St George since from about 1995. Those loans totalled about $3 million at that point. He claims that Mrs Baira said that St George had a mortgage over her house for the full value up to about $1.3 million. She wanted to reduce the liability on her house and that was why she needed to refinance her share of the liability. When Mr Famularo expressed doubt that St George would release the Marrickville property for only $650,000 (apparently his assumption about her share of the liability) he claims that Mrs Baira said that she and Joe would negotiate with St George to that end. 245He claimed that she told him that she worked for Joe and Sandra in the restaurant and that she earned between $140,000 and $150,000 a year. She said she had never had a problem repaying the loans and he could see that from the statements. 246Mr Famularo then claimed to have had a conversation with Mrs Baira that I have set out at [217] above. What Mr Famularo claims that Mrs Baira said about preferring not to obtain legal or financial advice again due to the cost is inconsistent with what he recorded in the diary note which he claimed was contemporaneous with the meeting. The diary note says this: I recommended to Baira to obtain Further legal and Financial advice with regards to her proposed refinance in view of internal transaction. - She Said she would speak with either Debra Brown of Phillips Fox or Mr Lou Serio of Five Dock. 247Mr Famularo gave this evidence about the conversation he recorded in his affidavit (T512): HIS HONOUR Q. Mr Famularo, what I don't understand is that in the affidavit in paragraph 26 when you say she should get legal and financial advice, she said she would prefer not to because of the costs and because the loans had existed for years. In your diary note, when you say you recommended she obtain legal and financial advice, you have her saying that she would speak to Deborah Brown or Mr Serio. How are those two matters consistent? A. Well, in in the meeting, your Honour, she mentioned that she would see some solicitors and I jotted down those names. Q. But that is quite contrary to what you have sworn in paragraph 26 of your affidavit. Do you have it there? A. Which particular part, your Honour? Q. Paragraph 26? A. Yes. Q. You say, "You should obtain legal and financial advice" and you have her saying, "I would prefer not to obtain legal or financial advice", et cetera? A. Well, that is to the best of my recollection what was said. Q. What, what is in your affidavit? A. Yes. Q. Well, how does it accord with what is in the diary note, which you say you wrote down at the time? A. Well, I she was trying to avoid spending more money on legal advice and in in the diary note, she is talking well, I I got the impression also that she was going to, if there were going to be solicitors, talk to those people. Q. And do you understand why she volunteered, as you say in paragraph 26 of your affidavit, that she can have Mr Lo Surdo confirm that she has received advice? Were you telling her there was some requirement about this? A. No. Q. Well, why would she say that she can have Mr Lo Surdo confirm something? A. I I can't recall at the moment, your Honour, the exact context in which that was said. Other than to say that Mr Lo Surdo is in the same building, virtually next door, and maybe something was raised as to their relationship with one another. 248These answers demonstrate that Mr Famularo could not explain the matters asked of him. The inconsistencies, coupled without any explanation, cast grave doubts on the accuracy of the evidence and on the likelihood that the conversations and meeting ever took place. For that and other reasons, which follow, I do not accept that this meeting took place. 249There can be no serious likelihood that Mrs Baira would have mentioned Deborah Brown or Mr Serio as lawyers she might consult. There was no evidence that she had ever seen or spoken to either of them. Documents produced on subpoena from Phillips Fox confirmed that she had never consulted that firm. On the other hand, Joe had used Deborah Brown previously. Further, if there had been any conversation about Mrs Baira seeing lawyers, she would most likely have referred to Mr Ross, or to Mr Calvitto, or to the firm of Egisto Solicitors. This all tends to suggest that the information in the diary note and the affidavit came from Joe. 250I do not consider that Mrs Baira had the sophistication to have been able to inform Mr Famularo of much of the material contained in the diary note. As with Rosario and Dominica, I do not believe that she was sophisticated enough to have concocted this information to benefit Joe, and for the purpose of incurring a direct liability to RAMS, a liability that she did not have to St George. I consider that the information contained in the diary note in fact was provided by Joe. 251Mrs Baira did not work at Joe's restaurant. She did not earn $140,000-$150,000 per year. She had not previously had any loans with St George, let alone loans that she could prove that she had always paid on time. 252Mr Famularo commenced his account of the conference in his affidavit with Mrs Baira saying that she had been the guarantor for Joe and Sandra's loans. On that basis the statement that he attributes to her that she had never had any difficulty meeting her repayments to St George made no sense at all. Significantly, Mr Famularo knew that she had been only a guarantor up to the time of applying to RAMS but thereafter she would be a principal debtor. Yet nowhere in either the diary note nor the account in his affidavit is there any reference to what the repayments would be under the loan that she would be obtaining for the first time. As her counsel submitted, knowing what the repayments were likely to be would be in the forefront of any potential borrower's mind. This is a further matter that leads me to the view that this conference never took place. 253Mrs Baira may be able to be criticised for her cavalier attitude to signing any documents put in front of her, but the clear impression I had was that she did not know very much about Joe, Sandra's and Jencon's affairs and she was not interested in knowing. She understood that she was a guarantor and, as I have found, she understood that from time to time the amounts that she was guaranteeing were increasing. She understood that she had a mortgage over her house to support the guarantee and she knew what would happen if the guarantee was called upon and she was not able to pay. Beyond that she had little or no knowledge of the financial arrangements of Joe, Sandra and Jencon. The information contained in the diary note and in Mr Famularo's account in his affidavit of meeting Mrs Baira is completely inconsistent with that conclusion. (7) Conversations with Mr LoSurdo 254In his affidavit of 23 November 2009 in the proceedings against Rosario Mr Famularo records a conversation he says that he had with Mr LoSurdo as follows: 34. On or around 14 September 2005 I telephoned Mr Angelo LoSurdo, an Accountant who I understood had formally acted for the Defendants. We had a conversation to the following effect: Peter: Hi Angelo, do you know Rosario and Domenica Ianni? Angelo: Yes, They are Joe Ianni's parents I have previously assisted the Ianni's with St George bank loans. I have also provided financial information to St George previously to facilitate the establishment and ongoing review of the various Ianni and "Jencon" loans. St George have a mortgage over their property for the entirety of the value of the Drumrnoyne property, they know this. They have also received independent financial advice. Peter: Do you know whether Rosario and Domenica received independent legal advice at any time? Angelo: Yes, I recall them saying that they received independent legal advice with regards to loans they had secured to St George Bank for Joe and Sandra Ianni and Jencon Australia. Egisto Solicitors advised them. 255In his affidavit of 11 November 2009 in the proceedings against Mrs Baira Mr Famularo records an almost identical conversation with Mr LoSurdo at the time Mr Famularo was making application in January 2006 to RAMS. That conversation was as follows: 37. On or around 19 January 2006 I telephoned Mr Angelo LoSurdo who was the Accountant for Joe and Sandra Ianni and formally the defendant. We had a conversation to the following effect: Peter: Hi Angelo, I understand you have previously given advice to Rosa Baira on the ramifications of entering into a loan. Angelo: Yes. I have given advice to Rosa and have also provided financial information to St George previously to facilitate the establishment and ongoing review of the various Baira, Ianni, Jencon loans. I understand Baira wants to reduce the liability on her home and that St George have a mortgage over her property for the entirety of the value of the Marrickville property. Peter: Did you witness Baira sign a statutory declaration that confirmed she had received independent legal advice. Angelo: Yes, I did. I recall she signed it prior to her drawing down on a further $1,300,000 facility from St George. I recall her saying that she received independent legal advice with regards to loans she had secured to St George Bank for Joe and Sandra Ianni and Jencon Australia. 256I do not accept that either of these conversations took place. First, there was no requirement from RAMS for Mr Famularo to ensure that Rosario or Mrs Baira had received independent legal or financial advice. Indeed, the RAMS documents expressly contemplated that they may not have received that advice. There was, therefore, no reason for Mr Famularo to be having these conversations. In any event, if Mr Famularo was so concerned about whether they had received independent legal advice (as the conversation suggests) it would have been more appropriate for him to ascertain from each of Rosario and Mrs Baira which lawyers they had seen so Mr Famularo could contact them with their authority. 257Secondly, Mr LoSurdo denies that these conversations took place. I thought that Mr LoSurdo was an honest and straightforward witness and I accept his evidence. 258Thirdly, and associated with the second matter, Mr LoSurdo would not have said what he is supposed to have said because he did not assist Rosario and Domenica with St George Bank loans nor is there any evidence at all that Mr LoSurdo provided financial advice to Mrs Baira. (8) The "With compliments" slip 259I referred earlier to the letter on Mr Famularo's file dated 9 December 2005 addressed to Mrs Baira. The letter purports to confirm the conference that Mr Famularo had with Mrs Baira on 2 December 2005. I also referred to the "With compliments" slip with handwriting of Mr Famularo on it that says: Mother in law to sign Plus copies of ID - passport - licence - Medicare Thanks PF 260Mr Famularo was asked about this document and he gave this evidence which made little sense (T425): Q. Firstly, when do you say you prepared that with compliments slip? A. That was more than likely attached to the draft of this letter. We had two applications that were identical. That was the one for Joe Ianni and Sandra Ianni and a similar letter to this went out with it and there was this document. This was used I used this in fact as an internal document. Q. Sorry, when you say "this", are you talking about document 1353? A. Yes, I had used this as an internal document and attached it to Mrs Baira's application because the letters were virtually identical. The applications were virtually identical and that, I would say, was was attached to Mrs Baira's application as a note internally and it was subsequently the original was subsequently sent out with the original loan application, which it shouldn't have gone out. Q. Do I understand what you have just said then is you say the original of the with compliments slip was sent out with A. Mrs Baira's application. Q. And the covering letter of 1352? A. Yes. HIS HONOUR Q. I don't understand what you mean by an internal document? A. Your Honour, there were two loan applications virtually identical. Q. Yes? A. I had put this this note attached to Mrs Baira's loan application. Q. Yes? A. As a means of determining internally that these these key documents were still outstanding to the application. Q. If it was just internal, why would you sign it and write "thanks"? A. More than likely it was directed to the person drafting this this letter. Q. Why would you put "mother in law" rather than "Rosa Baira"? A. That's how I have always referred to her internally, your Honour. Q. Is there some other document with "mother in law" written on it? A. There wouldn't be a requirement for that, your Honour, no. Q. You have just said you would always refer to her internally, so I just wondered if you had written "mother in law" on some other internal document? A. Only to the extent that I have made referred to her in conversations with people internally. 261He was cross-examined by Mr Bolster about this as follows (T515): Q. If you go over the page, this is the document which was attached to the loan application which you gave to Joe for his mother in law to sign, correct? A. No. Q. And you asked for copies of the passport, driver's licence and Medicare card to be obtained by Joe, didn't you? A. No. Q. And he did, didn't he? A. He returned the documents, yes. Q. Because if you had seen her, you would have taken those photocopies of those items on 2 December, correct? A. No. Q. And your evidence yesterday was, correct me if I am wrong, that this document was an internal document? A. Yes, I I said that there were two loan applications to the same lender identical. That with compliments slip should not have gone out. Q. Why did you write, "Thanks PF" on it? A. Maybe it was addressed to somebody else within my office. HIS HONOUR Q. But that A. I wouldn't have referred to myself as "PF" to somebody external to my office. Q. But what was it asking the person in your office to do? A. Well, these were important documents, your Honour, which I had failed to take copies of and it was just put on the front page of the file just to highlight that these documents were still outstanding and required for my for my identification process to satisfy the the RAMS lending requirements, which I hadn't as at that date. BOLSTER Q. So on the front of your file is that a cardboard-- A. It's a manila folder. Q. A manila folder. On the front of that, you have got your AMBFS with compliments slip with "mother in law to sign"? A. The documents that the lending application still had to be signed, yes. So we had we had an unsigned loan application with without, without significant material in support of the loan application. HIS HONOUR Q. But if this with compliments slip was in effect addressed to someone in your office, what was that person to do? A. Your Honour, it was simply to highlight there was nothing really to do until until the loan application came back signed and, two, that all the supporting material, including copies of the identification, came in with, with the loan application. Q. But I thought you said before the reason you had put "thanks" and then your initials was because it was for someone in your office? A. It was it was as an internal reminder, yes. Q. To whom? A. To my assistant, your Honour, and and perhaps even to myself that these documents were still outstanding. BOLSTER Q. All you needed to do was to open the folder and see your letter there with the ticks or the lack of ticks to know what needed to be done, didn't you? You didn't need this with compliments slip on the cover, did you, Mr Famularo? A. As I said to you, there were two loan applications identical. It was simply put there to highlight that nothing pretty much nothing was to be done or no documents to be sent out until that information was to hand. Q. How do you explain how Sandra Ianni comes to be in possession of a copy of that slip? A. Well, as I said earlier, I think it went out in error. Q. In error? A. Mmm. Certainly was-- Q. Sorry? A. I don't think it was addressed to her. Q. It was addressed to her husband, wasn't it? A. No. Q. He was the only person whose mother in law was going to sign the documents, correct? Correct? A. I don't know who was going to arrange to sign the documents. The documents were mailed to 319 Livingstone Road, Marrickville. Q. The documents were given to Joe, he had returned them around 16 January and you put the loan forward, didn't you? A. He returned the documents, yes. Q. Mrs Baira didn't send them to you? A. No. 262This was another example of Mr Famularo making up his evidence as he went along. I do not accept that the "With compliments" slip was an internal document. It is clear from the words "mother in law to sign" and the word "thanks" that this was addressed to somebody by Mr Famularo asking them to do something. The only reasonable inference is that it was addressed to Joe to get Mrs Baira to sign the attached application. There would be no basis for writing "thanks" on the "With compliments" slip if the document was simply an internal one. Moreover, the fact that Mr Famularo acknowledged that it was Joe who provided the ID that was requested, and not Mrs Baira, is further strong evidence for the fact that this "With compliments" slip, the letter of 9 December 2005 and the loan application were in fact all sent to Joe. What thereafter happened was that Sandra, in the way she usually did, took the application to Mrs Baira and asked her to sign it without giving any explanation of why it was needed. 263Further support for that view comes from the handwriting that is contained in the letter of 9 December 2005. It is Mr Famularo's handwriting and it notes that the St George Bank loan statements for the past six months were outstanding as at 16 January but that "Ianni said he would provide the latest statements". 264The fact that the letter also, when listing what was outstanding, said "Identification for Rosa Baira" is an indication that the letter was not intended for her but for someone else who was to organise the identification documents. As noted, Mr Famularo agreed that they were provided by Joe and not by Mrs Baira. (9) The shortfall 265The loan application lodged by Mr Famularo on behalf of Rosario and Domenica was for a loan of $1,000,000. When the valuation of the Drummoyne property came in it resulted in the maximum that RAMS was prepared to lend being $910,000. The application status tracking document showed that the following morning after being advised of the maximum amount of the loan Mr Famularo advised that it was okay to proceed for $910,000. 266Mr Famularo gave inconsistent evidence about whether he spoke to Rosario before agreeing to this with RAMS. The first evidence he gave was this (T479): Q. So on the face of this application, when it came out at 90,000 short, it was not possible on those figures for Mr and Mrs Ianni to go ahead and purchase this property and pay out the St George loan? A. I don't know that. Q. Why not? A. I put it to him that that's the maximum value of the loan that we could get and and he he determined to proceed. 267Only eleven questions later he gave this evidence: Q. Is this right: You didn't speak with Rosario Ianni or Domenica Ianni about whether 910,000 would be enough to enable them to go ahead and both pay out the St George Bank and buy this property in Dural? A. I didn't speak to them, no. Q. You didn't actually speak with them ever? A. That's false. Q. Why didn't you speak with them when you learned that what was being offered was $90,000 less than what they needed? A. Because Joe was calling me every day, every once every half an hour, to see how his matter at the NAB was going and I communicated some information in relation to this application directly to him. The loan facility at the - at - at St George Bank was partly secured over Drummoyne and at least this is what was communicated to me. Partly secured over the Drummoyne and partly secured over Pyrmont. And within within their own arrangements, they had to nut out how it was that this liability was to be repaid. Now, I was not in a position to be able to understand whether there was sufficient funds to complete any purchase, whatever the arrangement was here, because I don't know what internal arrangement they had made to extinguish that St George Bank debt and whatever other loans that there were on top, which I still don't have a full understanding of. So I can't answer your questions in relation to completion of - of any purchase. I can't answer your questions in relation to what was outstanding prior to me - me becoming involved here. 268This evidence shows two things. First, it is another example of Mr Famularo making up his evidence. Secondly, I do not believe the evidence he gave in that first extract is correct because, at least at that stage, Rosario had no idea that he was borrowing money as opposed to providing another guarantee for Joe and Sandra. The second extract is likely to be the correct evidence and it demonstrates clearly that Mr Famularo knew at all times that the loans being obtained were really loans for Joe and Sandra and that Rosario was not the person making any decisions about them. Mr Famularo's explanation for why he did not speak to Rosario was that he was given instructions at the meeting on 14 September 2005 that instructions in all financial matters were to be referred to Sandra and Joe. There is nothing in Mr Famularo's affidavit of 23 November 2009 nor in his diary note of the meeting of 14 September 2005 that suggests that any such instructions were given at that meeting. (10) Did the conferences occur? 269The evidence that points strongly against Mr Famularo's claim that he had conferences with Rosario and Mrs Baira is as follows. 270First, in relation to the conference with Rosario and Domenica, much of the information that was said to have been provided to Mr Famularo by them was simply not true. I do not accept that Rosario and Domenica were sophisticated enough to have concocted the information to give to Mr Famularo for the purpose of obtaining a loan which did not benefit them in any way but only assisted Joe and Sandra. Much of the information could only have come from Joe. There is no doubt that it was he who was endeavouring to restructure the loans. He had already met with and spoken to Mr Famularo a number of times before 14 September 2005. In particular, he had instructed Mr Famularo to start the restructure by the loan application to the NAB some weeks previously. 271Secondly, on 9 December 2008 Mr Famularo produced documents in answer to a subpoena which required production of all his files in the matter. The diary notes of the two meetings were not produced by Mr Famularo nor was his diary for that year. Mr Famularo said that he had no explanation for not producing his diary. His explanation for not producing his diary notes was that he spoke to Rosario's then solicitor Mr Arul Niles and thought that he only had to produce his files as opposed to producing file notes and diaries. However, a letter from Mr Niles specifically referred to the need for him to produce "diary notes and file notes". When that was pointed out to him, Mr Famularo was not able to offer any explanation for not producing them. One likely explanation for the failure to produce the file notes was because they were not in existence at the time of that subpoena. 272Thirdly, and related to that matter is the fact that the diary note in respect of the meeting with Rosario is dated "14/9/09". If the conference took place on 14 September 2005 it is most unusual that Mr Famularo would have dated it in that way. It is not unusual for people to date documents in January of any given year as January of the preceding year. People do not normally date documents in a year four years in the future. Mr Famularo's only explanation that the conference was to take place at 9am and that was why he may have written "09" was nothing more than an attempt to explain what could not otherwise be explained. 273The Plaintiff submitted that Mr Famularo should not be disbelieved generally, and I should not find that the diary notes were fabricated. The chief reason for this submission was that Mr Famularo had no motive to lie and to fabricate. 274I do not consider that it is necessary to point to some motive on Mr Famularo's part before I can find that he has not been a truthful and reliable witness. In any event, he was not without any motive because the successful obtaining of the loans would undoubtedly result in his earning commission. Further, he had already acted for Anthony Ianni, and the family's finances, particularly Joe and Sandra's, were such that more work was at least a reasonable possibility if these applications were fruitful. 275However, whether or not he had a motive, the matters which I have already dealt with in his evidence leave me in no doubt that he cannot have been telling the truth about a number of matters, and that other parts of his evidence were so unreliable that other evidence of what occurred is to be preferred. I accept that some matters call for a greater degree of satisfaction being established in accordance with Briginshaw v Briginshaw (1938) 60 CLR 336. I am entirely satisfied about those matters. There were a number of other aspects of his evidence, which I have not detailed, that provide support for the view to which I have come. These matters are to be found in paragraphs 93 and 98 to 103 of the written submissions made on behalf or Rosario and Domenica. I accept those submissions. 276If I am mistaken in my conclusion that the diary notes were fabricated later, I have no doubt that the information in them came from Joe, and they have been worded to give the appearance that it came from the Defendants. 7. The knowledge of the Defendants about the RAMS loans (a) Rosario and Domenica 277Despite the unsatisfactory nature of Rosario's evidence, I accept his evidence that he thought he was to go to see Mr Wennerbom to sign documents granting a new guarantee for Joe and Sandra's borrowings that were being changed from St George Bank to RAMS. That evidence receives support from the evidence that Joe gave before Grove AJ. Although trial judges have been warned of the dangers of placing too much emphasis on demeanour, there can be no doubt that seeing a witness give his or her evidence can assist in an assessment of its veracity. I have not had the opportunity to see Joe give evidence. I have only read his evidence in the transcript of the proceedings before Grove AJ. I have indicated earlier the impression that I obtained from that evidence which was that Joe was attempting to blame others for what had occurred and to paint himself in a good light. 278What I do not doubt, however, is that it was Joe who was pulling the strings to obtain the loans that he needed both for keeping his business going and for purchasing the properties he wanted to purchase. The only way he could do that was to secure the continued assistance of his own parents and of Mrs Baira. Both of them, but particularly Mrs Baira, had proved easy prey for what Joe had wanted to achieve in the past. 279It was not explored with Mr Famularo why it was that the arrangements were to be changed to bring about the position that Rosario and Domenica and Mrs Baira would become principal borrowers. The case proceeded on the assumption that the only way Joe could achieve his purposes was for that to occur rather than for those persons to continue in their role as guarantors/mortgagors. Because nobody was called from RAMS no enquiry was possible of them about this matter. 280What seems also to be clear is that, although the parents in both cases were to become principal borrowers, it is likely that Joe (and to a lesser extent Sandra) always intended to meet the liabilities for those loans. That was Sandra's justification for signing the letter that she claimed Mr Famularo required her to sign so that all notices and letters in relation to the loans were sent to them at 7 Wildthorn Avenue rather than to Mrs Baira, Rosario and Domenica. Sandra said that she always saw the loans as being their (that is, Joe and Sandra's) loans. 281Nevertheless, Joe must have had an apprehension that if his parents and Mrs Baira understood that they were doing other than remaining as guarantors, there could have been problems and they would likely refuse to agree to sign the loan agreements. That is likely to be the reason that neither Joe nor Sandra suggested to Mrs Baira that she should obtain legal advice in relation to the loan agreement that she was signing with RAMS. It is also likely to be the reason, as I have indicated, that Joe arranged for his parents to see a solicitor whom they did not know, who could not speak their native language, and who had no background knowledge or understanding of Joe, Sandra's and Jencon's financial arrangements. 282Because Mr Wennerbom had no knowledge or understanding of the prior arrangements he was not able to provide Rosario and Domenica with the necessary information to cause them to understand that things were changing fundamentally for them by the signing of the RAMS documents. That was not necessarily Mr Wennerbom's fault because he was provided with limited documents and limited instructions. He was only asked to advise on the documents and not the transaction as such. 283I am satisfied that, despite Mr Wennerbom's best efforts with the material that he had, he did not succeed in getting Rosario and Domenica to understand that they were becoming principal borrowers and not merely giving their house as a guarantee in the limited way that had existed prior to the RAMS agreement. (b) Mrs Baira 284Mrs Baira certainly signed a number of documents relating to the loans starting with the Loan Application. None of the documents associated with the Loan Application was witnessed by anyone. Although Mrs Baira has no distinct recollection of signing any particular document at this time I conclude that Sandra presented these documents to her and asked her to sign them probably without giving, or being able to give, any explanation about why they needed to be signed. I accept that it is possible that she said they were documents concerned with Joe and Sandra changing banks to get a lower interest rate. I do not believe that any greater information was provided. 285There is some support for this conclusion by the fact that each of these documents has a cross ("x") indicating where she was to sign and where she in fact signed. Mrs Baira said in her oral evidence that she was not convinced that all of the signatures were hers but I am satisfied in relation to these documents that they were all her signatures. 286Similarly, the Loan Agreement and associated documents all dated 28 February 2006 are not witnessed by anyone. They also have crosses where she was to sign. The Home Loan General Terms has in handwriting, "Please sign: x". Although Mrs Baira had expressed some doubt in her affidavits about whether some of these signatures were hers, she accepted in cross-examination that they were. 287She said, and I accept, that she was not given any explanation for the signing of these documents apart from the fact that they concerned a change of banks with a lower interest rate, and that she needed to sign them as guarantor. No-one suggested to her that she should see a solicitor or any other person to give her financial or legal advice about what she was signing. Although I do not believe that she did not see references to a Home Loan (for example, on the Home Loan General Terms document), I am satisfied that she thought it was a loan to Joe and Sandra for which she was providing a guarantee. 288The Plaintiff pointed to the evidence of Sandra after the funds were advanced, where she said that she found out that the loan statements were addressed to her mother but did not tell her, as justifying an inference that Mrs Baira already knew that she herself was the borrower. The Plaintiff submitted that I would reject Sandra's evidence that she did not tell her mother because she was horrified at the discovery. I reject the Plaintiff's submission that the failure to tell her was because Mrs Baira already knew. The reason she did not tell her mother was because, as Sandra said, she always thought that the loan was hers and Joe's. Sandra may also have known that Joe did not want Mrs Baira to know the true situation. Sandra's forging her mother's signature on the letter directing notices to Wildthorn Avenue is some support for that. 289That evidence accords with the true intention of the arrangement, namely, that although Mrs Baira was the borrower from RAMS, the loan was to be repaid by Joe and Sandra from their account, as they had directed (see CB 1451). The Plaintiff accepts that this was so. I doubt that Sandra had sufficient understanding of everything that Joe had organised, and I doubt that he explained it to her in any detail or at all. I consider that her evidence was true that she did not know why her mother had to sign all of these documents except in the most general terms. 290Another matter which undoubtedly kept Mrs Baira in the dark was the fact that Sandra, by her own admission, forged her mother's signature on a letter addressed to RAMS dated 28 February 2006. That letter made reference to Mrs Baira's loan account number (CZ:2177100) and asked for all future correspondence pertaining to that account to be forwarded to 7 Wildthorn Avenue, Dural. Mrs Baira denies the signature is hers, and I am satisfied partly from an examination of that signature and its comparison with genuine signatures of hers, and also by Sandra's admission, that Mrs Baira is telling the truth. 291Sandra claims that Mr Famularo asked her to sign this letter on her mother's behalf because there had been a clerical error. He said that RAMS had got the mailing address wrong. She said she was prepared to sign it because Mr Famularo asked her to do so and because the loan was not her mother's but, rather, hers and Joe's. 292Mr Famularo denied that he had anything to do with Sandra signing the letter. He said that the document was received at his office on about 13 March 2006 and he was asked by Sandra to send it on to RAMS. It is difficult to know whether Mr Famularo was telling the truth but one matter that suggests he is not is that the letter bears the reference of Mortgage Settlements Australia (CZ:2177100). It is not clear where Sandra of Joe would have obtained that number to write that on the letter of 28 February 2006. 293In any event, the significance of the letter and the forged signature is that it resulted in other documents, which would have come to Mrs Baira's attention, being sent to Joe and Sandra. One significant document was the letter prepared by Mortgage Settlements Australia addressed to Mrs Baira that required her to sign as the authority to pay the loan to various entities. The signature of Rosa Baira on that letter is said by Mrs Baira not to be her signature. The letter was faxed on 13 March 2006 from Jencon Australia Pty Ltd to Mortgage Settlements Australia. I accept Mrs Baira's evidence that she did not sign that letter nor authorise those payments. 294It may also be accepted that in relation to this letter RAMS could not be expected to have any knowledge of what had transpired. However, it is a factor in determining what knowledge Mrs Baira had, in order to make an appraisal of the unjustness of the contract. 8. What RAMS knew about the borrowers (a) Rosario and Domenica 295RAMS had a number of items of information that ought to have put them on notice at least to make further enquiries before going ahead with the loan. 296First, they knew that Rosario was aged 70 years and that Domenica was aged almost 68 years. Yet they were approving a 30 year loan. They were told that each was a self-employed investor in what was apparently a restaurant. Although the first form of the loan applications sent through to them included the name of Jencon Pty Ltd and that company's ABN, when RAMS asked for any reference to Jencon to be removed they were not provided with, and did not ask for, an ABN for Rosario and Domenica. The email on the application's status tracking document of 16 September 2005 at 12:21pm to Mr Famularo said that the CRAA was not showing a directorship for Rosario and Domenica. The email then said: We will require either a consent from the company to perform the CRAA enquiry, or a driver's licence reference. It is not clear why a consent from the company to perform a CRAA enquiry was needed nor what the relevance of a driver's licence reference could be. Nobody gave evidence from the Plaintiff to explain that. 297The file note that followed that entry on the application status tracking said: Peter will be amending the A&L and self cert to reflect the true nature of the applicant's employment. In fact the only amendment made was that any reference to Jencon was removed. Jencon was never shown to be the employer of Rosario and Domenica. The A&L and self cert was not in fact amended with anything to do with their employment. On the assumption that "A&L" stands for assets and liabilities, it is not clear why amending that would have anything to do with the applicant's employment. Nobody from RHG was called to explain that. 298However, although no amendment was made by Mr Famularo to reflect the true nature of the applicants' employment no further enquiry about the matter was made by Mr Anderson. If the matter was a concern, as Mr Anderson's email reproduced in the Application Status Tracking document indicated that it was, an explanation was called for when no alteration was made about their employment. I can infer that Mr Anderson's evidence would not have assisted the Plaintiff. Without an explanation the position is left that a significant matter was left unclarified by RHG. 299The Plaintiff submitted that Mr Anderson had never required clarification of the true nature of the applicants' employment. Rather, his concern was having the difficulty with a CRAA search resolved. However, the fact that Mr Anderson made the note about what Mr Famularo was going to do points to its significance for Mr Anderson. The matter at least required an explanation from Mr Anderson: Jones v Dunkel at 321. 300The matter has further significance because in the summary document reproduced at [64] Mr Anderson said: Both applicants are investors - and own an income producing restaurant in Sydney which generates their income. When Mr Famularo had never clarified the applicants' employment position it is difficult to see how Mr Anderson could assert that an income producing restaurant generated their income. Mr Anderson may have inferred that from the reference to Fiorannis restaurant on the loan application but in the absence of evidence from him it is not clear how he could make the statement to Genworth set out. 301That matter is connected with a further incorrect statement that Mr Anderson made in the document at [68]. The statement was that there were no irregularities with the CRAA enquiry. In his email to Mr Famularo Mr Anderson said: CRAA are not showing directorship. We will require either a consent from the company to perform a CRAA enquiry, or a drivers licence reference. The matter was never cleared up as noted above because Mr Famularo never amended "the A&L and self cert to reflect the true nature" of their employment. Mr Anderson did not give evidence to explain the incorrect statement. 302Secondly, although this was a Low Doc loan, RAMS did not follow its own guidelines in a number of respects. Page 24 of the guidelines defined a "self-employed borrower" as: A borrower who has a registered Australian Business Number OR A borrower whose base PAYG income is exceeded by income from other sources (i.e. rental income, distributions, investments, dividends etc). 303In the case of Rosario and Domenica they must have fallen into the former category because the only income they were said to have was the wage or salary they were obtaining from the restaurant. Despite this, and despite the removal of Jencon with its ABN, RAMS never asked for Rosario and Domenica's ABNs. If RAMS had asked they would have found that both Rosario and Domenica were not self-employed investors at all. In those circumstances, the absence of tax returns or proof of earnings from the restaurant, the loan would not have gone ahead. 304Page 28 of the guidelines defines "self-employed evidence" as: Tax returns for the most recent two financial years, together with applicable tax assessment notices to be obtained. 305Page 41 of the guidelines stipulated that in the case of loans involving Genworth (which these loans did) if they were greater than $750,000, full traditional income evidence was required. As noted, no tax returns or other documents demonstrating the stated employment or earnings were required. Again, if such documents had been required it would have been readily ascertained that the stated employment was false and that Rosario, Domenica and Mrs Baira had no capacity to service the loans. Because that was in fact the case the effect of the loan agreements was pure asset lending. 306Putting aside the supposed arrangements between Joe on the one hand and the borrowers on the other whereby Joe and/or Jencon would be paying the loans, on the assumption that RAMS knew nothing about such arrangements, the only way RAMS would be repaid the money it was lending was by the sale of the Drummoyne and Marrickville properties. If on the other hand, RAMS did know that these loans were really only for the benefit of Joe, Sandra and Jencon and that they would be making the loan repayments, there were third party issues for RAMS to consider, contrary to what Mr Anderson said in his Loan Summary of 16 February 2006. 307In the RAMS Home Loans Settlements Policy and Procedure (Exhibit 9) the following appears: 6. Sub Process #2 - Pre-Settlement Call 6.1 Description A Pre-Settlement call is made to the borrowers to outline the ongoing Settlement process and to provide the customer with a contact point, should they require to contact RAMS re their Settlement. During this call, it has become an opportunity to validate the information held on file in relation to their personal details along with their chosen product, loan requirements and payment options.... The Pre-Settlement call is made by the Settlement officers, after all file information has been checked and verified. This allows the operator an opportunity to capture or clarify missing information, or requirements, that can be requested at the time of the call. 308No such call was made. If it had been the true position would have been disclosed and the loan would never have gone ahead. 309Thirdly, when the valuation came in below what had been put forward to RAMS the maximum loan RAMS was prepared to make was $910,000. Although Mr Famularo sent a fax to RAMS on 28 September saying that amount was acceptable, RAMS was thereby put on notice by the information that they already had that the loan would not be able to be used for the purposes that had been identified. Those purposes were to purchase property for $500,000 (and RAMS had seen the sham contract cover for that amount) and refinancing of $490,000. The Statement of Liabilities on the Loan Application disclosed a figure owing to St George of $486,035. The bank statements forwarded with the application showed the same final figure. 310Even if the $1,000,000 had been available it is difficult to understand how those two purposes could have been achieved. The $1,000,000 included only $10,000 for costs. Stamp duty and costs would have exceeded that amount. With the maximum loan amount being reduced by $90,000 RAMS ought to have considered how the loan could go forward when the statement of assets and liabilities showed only house contents worth $50,000, the deposit already paid of $50,000 and an intangible of $1,000,000 for business good will. 311Fourthly, RAMS knew from the sham contract cover that the property being purchased was said not be part of the security for the loan being sought. That was unusual because it strongly suggested that the property was not being purchased as an investment property. The tax benefits that would have flowed from using that property as security for a loan made that clear. In turn, that suggested that the new property would not be producing income to assist in meeting the loan commitments. RAMS also knew from the loan application that Rosario and Domenica had lived at the Drummoyne property for 35 years. 312Yet on the summary of 20 September 2005 sent by Mr Anderson to Genworth Mr Anderson wrote "Purchase an investment property (front page COS attached)". Nothing on the loan application or in the documents submitted to RAMS suggested that what was being purchased was an investment property. Mr Anderson was not called to explain that discrepancy, and an explanation was required. Saying that the property being purchased was an investment property created an impression that there would be an additional source of income to service the loan. 313The reason put forward for Mr Anderson's not being called was said in the Plaintiff's written submissions in reply to be, based on the pleadings and evidence filed and more specifically on the fact that no allegations against the employees of RHG Home Loans required any positive evidence (beyond that shown in the contemporaneous documents.) However, paragraph 18 of the Iannis' Cross-Claim clearly identified the assertion of Rosario and Domenica purchasing an investment property, and that RAMS sated to Genworth that certain matters had been verified by RAMS when that was not the case. Other matters were also specified that called for an explanation from Mr Anderson or other relevant persons at RAMS. 314This matter highlights a further consideration from the problem arising from the lower than expected valuation and the shortfall in the loan. An obvious way that the original loan could have been obtained was to offer the property being purchased as security also. It does not appear that such a suggestion was made by Mr Anderson or by anyone else at RAMS. Of course, they were under no obligation to do so. However, the failure to mention it left the position, as I have said, that the original purposes of the loan could not go forward because the funds available were insufficient. 315Further, Mr Anderson's email of 27 September 2005 to Mr Famularo reporting on the lower loan amount says this: Hi Peter, Please advise if max loan of $910,000 is acceptable, as val has come in at $1.3M. Alternatively incoem (sic) and A&L can be provided to apply for $1M. Comparable sales evidence must be provided to go back to the valuer about the val amount. On its face, that suggests that Mr Anderson was implying that the assets and liability figures could be altered to justify a loan of $1 million. That would be a deliberate attempt to circumvent the guidelines. That statement cries out for an explanation. None was forthcoming in the evidence. 316Fifthly, on the revised identification documents sent through Domenica's points did not add up to 105 as the document asserted. This appears to have been overlooked entirely by anyone from RAMS. 317Sixthly, the evidence satisfies me that the water rates notice was forwarded to RAMS. There were two missing pages from the 11 page fax sent by Mr Famularo on 16 September. Although the original of that fax and its annexures were required to be produced by RAMS, RAMS was not able to do so. 318In his affidavit of 23 November 2009 Mr Famularo said that he sent to RAMS the loan application and the supporting documentation, amongst which he listed the Sydney Water bill. In his oral evidence before me, he first said that he did not think he sent the water rates document but then he said he thought that he did because it was his practice to send in the supporting identification material. When he first faxed the material to RAMS he included the council rates notice which he had relied upon for 35 points. When he was not able to get proof of the passport details he had been given he relied instead on the water rates notice. He amended the identification form accordingly. It was true, as he said, that he sent the supporting identification material in the first fax. That tends to support his statement that he would have sent the water rates with the second fax. 319In the proceedings before Grove AJ Mr Famularo was asked if the fax that he sent to RAMS consisted first of pages 362-371 in the court book (that is the loan application document itself) as well as the other material on pages 357-361 of the court book. Page 360 is the water rates document. He agreed that he did. 320In the Application Status Tracking document Mr Conway records on 29 September: Address cross ref against rates notice. 100 points held on file. It may be accepted that this note is ambiguous as to the identity of which rates notice. However, that note means that one of the rates notices was on the file. When the statement goes on to say "100 points held on file", that suggests that all the supporting material was with RAMS. In any event, the note is sufficiently cryptic to require an explanation, given that the reference to "pensioner rebate" on the water rates was an issue, and Mr Famularo had given evidence before Grove AJ (as noted above) and in his affidavit that the pages sent to RAMS included CB 360 which was the water rates. 321Nobody was called by RAMS to give evidence in order to establish that they did not receive the water rates notice. Where prima facie evidence exists that it was sent, I can draw a Jones v Dunkel inference that any evidence from RAMS would not have assisted them in that regard. The result of that is, when taken with the prima facie evidence, that I can comfortably infer that the water rates notice was sent to RAMS. 322That water rates notice showed clearly that Rosario and Domenica were entitled to a pensioner rebate. That was entirely inconsistent with their being self-employed investors earning the large amounts of money that the loan application identified. RAMS made no enquiry about that inconsistency. If they had, they would have ascertained that Rosario and Domenica were indeed pensioners with no ability to service the loan. In those circumstances, the loan would not have proceeded. 323Seventhly, on the Application Summary, apparently dated 29 September 2005 and prepared by Steve Conway, the following appears: Purpose of Loan: $490,000.00 to Refinance $420,000.00 to Equity Release The same changed purpose appears on a separate document called "Loan Summary" of the same date. That latter document added this: A Borrower is likely to receive an income tax deduction in respect of at least 50% of the total interest payable on the amount proposed to be borrowed. That statement is difficult to understand since by this time, it seems, the purpose of the loan to purchase a property had changed. The only basis for a tax deduction on the interest (and it would have been the whole interest) would have been if an investment property was being purchased. 324There is no explanation why the purpose of the loan was changed but it is clear that this happened after the loan was reduced. Nothing in the documents forwarded to RAMS indicates a change in the purpose. A possible explanation is that there needed to be some justification for the loan that could not be explained by the prior stated purposes. This change of purpose, coupled with how the reduction in the loan amount could be reconciled with the continuing purchase of Wildthorn Avenue, required an explanation from Mr Anderson and/or Mr Conway. I infer that their evidence would not have assisted the Plaintiff's case that it was not on notice of any matter that need to be explained to it. 325Eighthly, in the same document the following appears: Loan Size LVR LVR is outside of RAMS guidelines. Maximum LVR for Self-Certified - Low Doc loans up to $1000000 for METRO NSW (Non Vacant Land) is 65%. (Requested LVR is 70%) Overriding Comments: Loan manually assessed by GE Again, no-one from the Plaintiff gave evidence to explain what circumstances justified the overriding of the guidelines in this case. I can infer such evidence would not have assisted the Plaintiff. 326The same document also said: Loan Size LVR Maximum loan amount for Sel Certification Equity Release where LVR> 65% is $250,000 with no stated use for funds Overriding Comments: Held It is not apparent what "Held" means. However, by this stage there was no stated use for $420,000 of the funds. The LVR exceeded 65%. Since the loan went ahead it may be inferred that the guidelines were either not followed or were manually overridden with no explanation being offered. 327Ninthly, on 11 October 2005 Lands Legal sent to National Lending Solutions, said to be in the Loan Agreement to be the solicitors for RAMS, the various documents executed by Rosario and Domenica. Amongst the documents was a Direction to Pay. It identified an amount of $10,933.25 for fees and charges payable under the loan agreement, a fee of $77.25 for a Discharge of Mortgage and then stipulated "Balance as directed by Phillips Fox Lawyers". Somewhat inconsistently, the letter from Lands Legal concluded by saying: The balance of the settlement monies are to be paid to St George Bank Limited 328Ultimately, on 12 October 2005, a letter from Phillips Fox directed that $898,989.50 be paid to St George. 329Since the Loan Application had identified Phillips Fox as the applicants' solicitors, someone at RAMS ought to have wondered (1) why Lands Legal had arranged for the execution of the documents, (2) why Phillips Fox was to direct the balance of the funds in those circumstances, but in any event why there were, seemingly, conflicting directions about the balance of the funds, and (3) most particularly, why the whole balance was to be paid to St George when the loan application and bank statements had shown only a figure of $486,035 in circumstances where initially $500,000 was needed to purchase the property that had to be settled by 14 October 2005 and subsequently $420,000 was being borrowed for equity release. 330Nobody was called from the Plaintiff to explain the anomalies associated with the disbursement of funds. An inference is open on the material that RAMS knew that the purpose of the borrowing was not the purchase identified and that some other person's loan accounts with St George were being paid out since the only liability disclosed to RAMS in the loan application was the one account of $486,035. 331Tenthly, amongst the documents sent by Lands Legal to National Lending Solutions was a document headed "Warranty". This was a document chiefly about the property being mortgaged dealing with defects, disputes, notices and rates. At the end of each question either "Yes" or "No" was to be circled. Initially Mr Wennerbom circled "Yes " for every question except the one asking whether the mortgagor had ever been made bankrupt. He realised that he had made an error and then proceeded to circle "No" for every answer. That resulted in a "No" to the question, "Is the property your principal place of residence?" 332There was no evidence that this was noticed by anyone from RAMS. It was inconsistent with what had appeared in the loan application. On the basis that the loan purpose had changed because the applicants were no longer purchasing 7 Wildthorn Avenue, the answer called for an explanation. I can infer that evidence about this matter, in terms of what RAMS knew or understood, would not have assisted the Plaintiff. 333Finally, two of the other documents returned by Lands Legal were statutory declarations by each of Rosario and Domenica swearing they could repay the loan without substantial hardship. Although each declaration contained a handwritten "x" where it might be expected that the deponent's occupation would be stated, nothing was inserted. When it is remembered that Mr Famularo never clarified the true nature of the applicants' employment, the failure to notice these omissions (if failure it was) was significant. Had an enquiry been made the whole problem would have been exposed and the loan would not have proceeded. If in fact the omission was noticed but ignored, that was a singular failure that might have averted the making of the loan on the false basis it was made. I can only infer that evidence from employees of the Plaintiff about this would not have assisted the Plaintiff. 334 Despite RAMS having no tax returns or other financial material from Rosario and Domenica, no enquiry was ever made of Mr Lo Surdo who was identified as their accountant. If he had been rung, the little he could have told RAMS would have required a great deal more enquiry and would likely have meant that the loan would not proceed. (b) Mrs Baira 335In relation to Mrs Baira there is an entry by Matthew Anderson from RAMS on the application status tracking document at 3:49:38pm on 17 January 2006 that reads: This file is a little unusual, in the fact that we are paying out a loan that the applicant is not an account holder of. We have been advised that the loan being paid out is however secured by the property, and was written as a third party security by the broker himself while he was a business banking manager at St George. Therefore it is appropriate to treat this deal as a refinance. Eight seconds later, according to the application status tracking document, conditional approval was given for the loan. 336It is not explained why, pursuant to the guidelines or otherwise, it was appropriate to treat Mrs Baira's loan application as a refinance. There is nothing in the guidelines that apparently entitles the loan application to be treated in that way simply because Mr Famularo was said to have written the third party security with St George. 337More significantly, and contrary to the guidelines that I have already drawn attention to in relation to Rosario and Domenica, RAMS did not obtain any of the information concerning Mrs Baira that the guidelines required. No ABN was obtained for her. No tax returns or other evidence supporting the earnings she was asserted to have from her work at the restaurant was obtained. Yet, despite the absence of that material, Mr Anderson confirmed to Genworth on 2 February 2006 that Mrs Baira's repayment history on all facilities being refinanced had been confirmed as satisfactory in accordance with the Genworth underwriting guidelines. That was untruthful. 338Had RAMS made minimal enquiries, the true position is likely to have been identified and the loan would not have proceeded. Nobody was called to give evidence by RHG to explain why it was appropriate to treat the deal as a refinance, nor to explain how it was appropriate or in accordance with guidelines for the finance to have proceeded without any of the checks and balances being carried out. A Jones v Dunkel inference is available that evidence from Mr Anderson or any other person at RHG would not have assisted RHG. 339In an Application Summary generated by Mr Anderson, under the heading "Payment Histroy for Existing Mortgages" the following appeared: Ms Rosa Baira - No missing payments on debt(s) being repaid. ($1,246,482.00, ST GEORGE BANK loan) As Basten JA observed in Baira at [342]: Not only was that statement false, but RHG knew that Mrs Baira had no liability for the loan in the name of Joe and Sandra and had no evidence to suggest she was in any way responsible for making repayments. 340RAMS knew a number of matters from which I infer that a reasonable lender in its position would have understood that the loan being made to Mrs Baira was only for the benefit of Joe and Sandra, and that Mrs Baira was guaranteeing the loan by being put in the position of a borrower. Those matters were these: (1)RAMS knew that the indebtedness to St George of $1,246,482 was Joe & Sandra's and that it was being split between Mrs Baira and Joe and Sandra - $650,000 each. Bank Statements from St George in the name of Joe and Sandra were provided to RAMS showing such indebtedness; (2)RAMS knew from the material provided with the loan application by Rosario and Domenica in September 2005 that to reduce the money to St George, Joe & Sandra had brought in Rosario & Domenica as borrowers; (3)RAMS was provided with financial records of Joe & Sandra and Jencon but not Mrs Baira; (4)RAMS knew that the contact details in all applications were Joe's including for inspection of Marrickville house; (5)RAMS knew repayments were coming out of Joe & Sandra's account. A request and authority to debit an account of Joe and Sandra at the ANZ Bank in respect of Mrs Baira's loan account was provided to RAMS; (6)RAMS knew that all correspondence concerning the loan was to go to 7 Wildthorn Ave, Dural, the property RAMS which RAMS believed Rosario & Domenica had bought. On the loan application from Joe and Sandra, the property at 7 Wildthorn Avenue was to be the postal address for Joe and Sandra after settlement of the loan. 341Those matters meant that the statement of Mr Anderson on his Application Summary that there were "No third party mortgage issues" was untrue and must have been untrue to his knowledge. 342A further matter which ought to have caused concern and prompted enquiry by RAMS was that, by the time it received the Authority to Pay on 28 February 2006, RAMS knew that the payout figure had suddenly reduced to $797,000. A letter from St George to Joe and Sandra dated 2 March 2006 agreed to the change "at your request". Part of the reason for the reduction was that loan account number 551910713 was only to be partially repaid. That resulted in Joe and Sandra borrowing less from RAMS than previously requested with the result that the indebtedness of approximately $1.3m was no longer being split between Joe and Sandra on the one hand and Mrs Baira on the other. There is no evidence that Mrs Baira knew of this change or that RAMS took any steps to ensure that she did. 343On the approval for the loan contained in the Application Summary generated by Matthew Anderson the following condition was imposed: RAMS to control funding to ensure repayment of St George home loan account number 551910713 on settlement. By reason of the changed arrangement made between Joe and Sandra and St George, and acquiesced in by RAMS, loan account number 551910713 was not repaid on settlement. Moreover, so far from that account being repaid, the settlement letter of 15 March 2006 in respect of Joe and Sandra's loan shows that a mere $156,729.50 was paid to St George Bank with the bulk of the funds ($320,675.00) being paid to Joe and Sandra themselves. The condition of approval was not, therefore, followed. There is no evidence that anyone from RAMS contacted Mrs Baira to tell her that, so far from loan account number 551910713 not being paid out, the great majority of the reduced loan to Joe and Sandra was being paid directly to them. This was so, despite what was said on the covers of the two loan applications ([80] and [81] above). 9. Was Mr Famularo the Plaintiff's agent? 344Mr Kelly SC submitted that Mr Famularo was RAMS' agent, at least for the purpose of carrying out the process of identification required by the Financial Transactions Report Act 1988 (Cth). The significance of demonstrating that Mr Famularo was the agent of the Plaintiff for this purpose was that Mr Famularo's failures with regard to identification would be the failures of the Plaintiff. Those failures would include the fact, as I have found, that Mr Famularo never met the Defendants so that the identification process was fundamentally flawed. There may be difficulties determining what, of the information provided to the Plaintiff, arose from the failure ever to meet the Defendants. It is one thing to say that, if Mr Famularo was provided with false passport details which he did not check, then the Plaintiff is fixed with that failure. It is another thing to say, for example, that all of the personal information provided by Mr Famularo to the Plaintiff is tainted in the Plaintiff's hands because Mr Famularo did not meet them to ascertain its truth. All of that information will not go to who the Defendants are for identification purposes. 345In support of his submissions, Mr Kelly SC pointed to Mr Famularo's evidence (at T 476): Q. But this task of identification is a task that you were carrying out pursuant to the statutory regime contained in the Financial Transaction Reports Act and regulations, were you not? A. I was identifying a client, yes. Q. And you were identifying the client for RAMS? A. Yes. Q. And as you went through the document, you saw the references to various sections of that Act and those regulations as well as a reference to the AUSTRAC help desk? A. I - I don't know that it got that detailed but-- Q. But you understood that you were carrying out this task for RAMS? A. I had to identify clients, yes. Q. And you understood that it was part of the task confided to you that you would forward to RAMS so that they might have a record each of the documents on which you relied? A. Yes, and it was my practice to send in the documents, the identification. 346The Plaintiff submitted, quite correctly, that Mr Famularo's agreement that he was identifying the applicants for RAMS cannot be determinative of the agency question. It is necessary to examine the circumstances and any documentation that might tend to throw light on the matter. 347Mr Kelly SC pointed to paragraph 7.6 of the RAMS Broker Agreement with AMBFS. That clause relevantly provides: 7.6 Identification checks 7.6.1 The broker acknowledges that RAMS may appoint the broker to carry out verification of identity checks required under the Financial Transactions Reports Act 1988 and its regulations. 7.6.2 The broker undertakes to strictly comply, and to ensure that its Personnel strictly comply, with: (a) the Financial Transactions Reports Act 1988; (b) the Financial Transactions Reports Regulations; ... "Personnel" is defined as including employees. Accordingly, Mr Famularo would be included in the definition of personnel for clause 7.6. 348The Plaintiff submitted that there were two matters to be determined in this regard. First, was a lender in the position of RAMS under an obligation pursuant to the FTR Act to carry out an identification check? Secondly, was Mr Famularo the agent of the Plaintiff for the purposes of carrying out that check? (a) Was RAMS required to carry out an identification check? 349The Plaintiff submitted, on the first issue, that the obligations under the Act do not apply because the essential requirements specified by subparagraphs 18(1)(a)(iii) and (iv) have not been met, in that at no time were the accounts of the Defendants with the Plaintiff in credit. 350Section 18 relevantly provides: 18 Opening etc. of account with a cash dealer (1) Subject to subsections (1A) and (1B), this section applies where: (a) on a day (in this subsection called the transaction day) after the commencement of this section, a person: (i) opens an account (other than a facility or arrangement for a safety deposit box or for any other form of safe deposit) with a cash dealer; or (ii) becomes a signatory of such an account with a cash dealer; and either of the following subparagraphs applies: (iii) on a day (in this section called the infringement day), being the transaction day or a later day, the credit balance of the account exceeds $1,000; (iv) on a day (in this section also called the infringement day), being at least 30 days after the transaction day, the aggregate of the amounts credited to the account within the last 30 days exceeds $2,000; ... (2) If, at the end of the infringement day, the cash dealer does not have the account information about the account, the account is blocked with respect to each signatory until the cash dealer has the information or the AUSTRAC CEO gives a notice under subsection 19(2). ... (2A) If, at the end of the infringement day, the cash dealer does not have the signatory information about the person (unverified signatory), the account is blocked with respect to that signatory until the cash dealer has that information or the AUSTRAC CEO gives a notice under subsection 19(2). ... (3) At the end of the infringement day, the cash dealer commits an offence against this subsection unless it has made reasonable efforts, on or before that day, to obtain the account information and the signatory information. 351In my opinion the Plaintiff's submission should be rejected. Subparagraph (a)(iv) applies. That subparagraph is not concerned with whether the account is in credit but whether amounts have been credited to the account which exceed $2,000 within 30 days of the transaction day. The accounts show that the monthly repayment was made in each case within 30 days of the transaction day. Such repayment in each case exceeded $2,000. 352Signatory information is defined in s 3, and includes (d) an identification record for the signatory in accordance with section 20A. 353Section 20A defines identification record relevantly as follows: Identification record (1) For the purposes of this Act, a cash dealer has an identification record for a signatory to an account if, and only if: (a) the cash dealer has an identification reference for the signatory (whether or not the reference was obtained in connection with that account); or (b) the cash dealer is an identifying cash dealer and: (i) the cash dealer has carried out, and has a record of, the prescribed verification procedure to identify the signatory; or (ii) the cash dealer has carried out, and has a record of, a verification procedure to identify the signatory, being a procedure approved by the AUSTRAC CEO for the cash dealer; (whether or not the verification procedure was carried out in connection with that account). 354The prescribed verification procedure is contained in regulations 3 and 4 of the Financial Transactions Reports Regulations 1990 (Cth). In short, it requires the 100 point check that Mr Famularo purported to carry out. 355Accordingly, RAMS was required to have the information obtained through the 100 point check. (b) Was Mr Famularo RAMS agent for the Act? 356 Mr Famularo's view about whether he was the Plaintiff's agent is of minimal weight because the question is ultimately one of law to be determined on the factual material. Certainly, clause 7.6 of the Agreement between RAMS and AMBFS enables RAMS to appoint AMBFS and/or Mr Famularo for that purpose. However, in the light of what was said in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [191]-[194], I cannot lightly assume that the fact that Mr Famularo carried out the check meant that he did so as the agent of RAMS. There is considerable force in the Plaintiff's submission that Mr Famularo was carrying out the check for the purposes of his own business, and that that is exemplified by the fact that AMBFS did not have an exclusive agreement with the Plaintiff. Indeed, the matter is highlighted in the present case by the fact that the first loan application made by Mr Famularo and AMBFS in connection with the present matters was the application to NAB. Further, although Mr Famularo might have been endeavouring to put pressure on RAMS by saying that if the application on behalf of Rosario and Domenica was not approved quickly he might go elsewhere, that course was clearly open to him because he was not bound to submit applications only to RAMS. 357There is no evidence that RAMS asked him to obtain the identification even though RAMS did not undertake the task for itself. In this case, no inference can be drawn as a result of the Plaintiff not calling evidence, because this is an allegation of agency made on behalf of the Defendants against RAMS. It is for them to prove that Mr Famularo and his company were the agents of the Plaintiff. I do not consider that they have done so. 10. Were the contracts unjust? 358The starting point must be that, objectively speaking, the contracts were improvident to a substantial degree because the Defendants who had been guarantors were transformed into principal borrowers without any right of recourse against Joe and Sandra who were obtaining all of the benefits of the borrowings. 359In Nguyen v Taylor (1992) 27 NSWLR 48 Sheller JA said at 71: The question of the unjustness of the contract is to be determined in the circumstances relating to the contract at the time it was made and, in this case, without regard to the ignorance or innocence of the appellants. However when coming to determine how the discretion should be exercised, the court, in my opinion, is entitled to have regard to additional circumstances and importantly for the purposes of the present case the ignorance and innocence of the appellants ... in the context that it was the respondent's agent who misled him. 360The "appellants" there referred to are relevantly identical with the Plaintiff in the present case. That passage was approved by Spigelman CJ in Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [95]. 361In Khoshaba Basten JA, having quoted a portion of Meagher JA's judgment in Beneficial Finance Corp Limited v Karavas (1991) 23 NSWLR 256 at 277C, went on to say: [118] In St Clair v Petricevic (1988) ASC 55-688 a vendor sought to set aside a contract of sale of land at a price which had been significantly lower than the asking price. The vendor's home encroached on a right-of-way which benefited the prospective purchasers. They made an offer for the land, combined with a threat to assert their rights over the right-of-way and demolish the encroaching property if it were not accepted. At the time the vendor agreed to the sale she was distressed and agitated, having learned that she suffered from a serious illness. Hope JA (with whom Clarke JA agreed) stated at p 58,207: Her ability to be resolute in the face of the threat which [the purchasers' agent] made, and to continue with the negotiations, must, in my opinion, have been significantly affected. ... Furthermore, it is not relevant to the question whether the contract should be found to be unjust by reason of the defendant's health that the plaintiffs did not know of it and did not try to take advantage of it. In this regard it is the position of the defendant that is to be considered. This Court set aside an order for specific performance made in favour of the purchaser and set aside the contract of sale. [119] Reading St Clair and Karavas together, the true position may be that a claimant can establish the unjustness of a contract by reliance on factors of which the other party was ignorant when the contract was entered into, but that such ignorance may be relevant in determining whether to grant relief. The fact that the power may be engaged by circumstances which were not known to the other party at the time the contract was made is well-established: see, eg, St George Bank Ltd v Trimarchi [2004] NSWCA 120 at [36], Mason P, Sheller JA and Cripps AJA agreeing. 362As far as Rosario and Domenica were concerned, immediately before they entered into the loan agreement with RAMS they were guarantors for an amount of approximately $486,000. There had been no default by the principal borrowers, Joe and Sandra, nor was there any suggestion that the new loan was being obtained because of an impending or anticipated default. Once the RAMS agreement was in place Rosario and Domenica had an immediate liability for $910,000 and an obligation to repay a monthly amount of $6,294.45. As mentioned, they had no longer had recourse to Joe and Sandra by virtue of a guarantee, nor recourse to the properties that Joe and Sandra had mortgaged for the St George loans. None of this money was paid to them which enabled Joe and Sandra to reduce their liability to St George and to have their property at 802/261 Harris Street, Pyrmont released from liability for the St George loans. 363In the case of Mrs Baira, immediately before entry into the RAMS agreement she was a guarantor for loans from St George to the value of her Marrickville property. Again, there is no evidence that the principal debtors were in default to St George nor that there was any pending or anticipated default. Immediately after entry into the RAMS agreement she was the principal borrower for $650,000 and required to pay monthly repayments of $3,640. She also lost the rights of recourse she previously had. Mrs Baira received none of the funds borrowed with some of the money being repaid to St George but $320,000 being paid directly to Joe and Sandra contrary to the direction to pay which the Plaintiff believed had been signed by Mrs Baira. 364The Plaintiff pointed to what was said in Davey v Challenger Managed Investments [2003] NSWCA 172 by Handley JA (with whom Hodgson JA and Grove J agreed) said: [24] The Court has no way of knowing how many business ventures financed by parents in this way are successful for the benefit of the community and all concerned. Courts only ever see the cases where the business has failed and the mortgages are enforced. The Court might be doing a disservice to the community if it treated age and pensioner status as disabling parents from helping their children in this way. The law has not taken that step, and under ordinary principles the appellants have no proper claim for relief. 365The Plaintiff laid emphasis on that passage to suggest that if Rosario and Domenica, and Mrs Baira, had voluntarily entered into the present loan arrangements it could not be said by reason of their age and status as pensioners that the contracts were unjust. So much can be accepted. In Davey the parents were found not to be illiterate. They had English as their first language, they were in full possession of their faculties and were in general good health. They knew perfectly well what a mortgage and a guarantee were as they had entered into a similar transaction for the benefit of a son only a few months earlier. 366However, the Defendants do not simply rely on their age and pensioner status. In the present proceedings there were many other factors. 367In Baira Basten JA noted what had been said by Handley JA in Davey v Challenger Managed Investments and went on to say: [216] ...The implication of these statements is, presumably, that the courts should not be unduly ready to relieve parents of what turn out to be improvident agreements. It does not follow, however, that elderly parents are therefore without the protection of the law in respect of transactions believed, at least by the offspring, to be beneficial to their interests, regardless of the fact that they may thereby be putting at risk the sole family asset. [217] The law provides protection with respect to family transactions where, for example, an offspring misrepresents his or her business circumstances or otherwise uses undue influence to obtain a benefit of a guarantee secured by way of mortgage from his or her parents, in circumstances where the credit provider is on notice: see, eg, Commercial Bank of Australia v Amadio [1983] HCA 14; 151 CLR 447 at 464 (Mason J). Credit providers anxious to avoid such risks will generally require that a party obtaining no apparent benefit from the financial accommodation (a "third party guarantor") should obtain independent financial and legal advice before entering into the transaction. In particular, both Mrs Baira and Mr and Mrs Ianni senior relied by way of defence and cross-claim on alleged unconscionability under the Australian Securities and Investments Commission Act 2001 (Cth), ss 12CA and 12CB, the Trade Practices Act 1974 (Cth), s 51AC and the Contracts Review Act 1980 (NSW). In each case, what was in fact merely a contingent liability under a guarantee was treated by RHG as an extant liability of the proposed borrowers which each sought to refinance, thereby acquiring, for the first time, a primary liability which they had no capacity to service. 368Accepting that it is unhelpful to refer to the matters listed in s 9 of the Contracts Review Act 1980 (NSW) as "the unjustness calculus" (Khoshaba at 101 and 112), the particular matters in s 9(2) that appear to me to be relevant in the present case, and which I have referred to in what has been discussed above, are the following: (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, ... (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, (l) the commercial or other setting, purpose and effect of the contract. 369Whilst it is true that the Defendants were all of somewhat advanced years and were pensioners, their background in language, education and business experience alone takes them out of the description of those who would fit within Handley JA's discussion in Davey. When there is added the fact that the Defendants were kept in the dark by Joe about what precisely they were entering into, and were not, through deliberate intent or misfortune, disabused of their preconceived notions by third parties, the unjustness is plain. 370On one view, if none of that had been known to the Plaintiff, there may have been difficult questions in granting any, or moulding, the relief that should be accorded to them as a result of these unjust contracts. However, working on the assumption that Mr Famularo was at no time the agent of the Plaintiff, the Plaintiff had sufficient notice that the contracts were unjust or, if they had followed their guidelines and done other things that might in the circumstances have been expected of them, they would have ascertained quite how improvident the contracts were for the borrowers. 371In Khoshaba Spigelman CJ said: [79] The Appellant submitted that the failure to observe its own Guidelines was not entitled to substantial, let alone determinative, weight. The Appellant accepted that the failure was a relevant consideration. However, it submitted that the Guidelines were designed for the purpose of protecting the lender, not the borrower. Their purpose was to enable the Appellant to assess and minimise its own risk. [80] This proposition can be accepted, but it does not lead to the conclusion, urged on the Court by the Appellant, that the failure is entitled to minimum weight when determining what is just in all the circumstances. The benefit to the borrower from a proper risk assessment may be indirect, because unintended, but that does not mean that it cannot, in appropriate circumstances, be entitled to significant weight in the determination of unjustness. It is clear from the list of factors contained in s 9(2) and (3) of the Act, that a substantial purpose of the legislative scheme is to protect persons who are not able to look after themselves. [81] Rolfe DCJ's finding of fact, which is not challenged, that if the Guidelines had been observed the Appellant would never have advanced the loan to the Respondents was justified. The finding does not go only to causation. It is a factor entitled to be taken into account and given weight in the determination of unjustness. 372Further, the Plaintiff, as I have mentioned, called no one to explain matters which, on the face of the Plaintiff's own documents, and on the face of other evidence the Plaintiff had in its possession, and in the light of evidence that was given in the proceedings, called for an explanation to avoid inferences that could be drawn against the Plaintiff by the prima facie nature of that evidence. Whilst in the ordinary case, a Jones v Dunkel inference cannot plug the gap of evidence that has not been adduced, it is open to a court to infer from the evidence that is otherwise led that that evidence can be accepted, and more confidently so (Jones v Dunkel at p 308) when it was within a party's power to meet the evidence and does not do so: Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 at [14]-[16], and see [17]-[19] for how that position can operate. 373The significant matter is that, in respect of both loan applications, if the Plaintiff had followed even some of its guidelines or had made the most cursory enquiries as a result of matter about which it was clearly on notice (see Section 8 above), the rue position would have been exposed and the loan agreements would never have been made. 11. Unconscionable conduct 374It is not strictly necessary to make any determination about whether the Plaintiff engaged in unconscionable conduct towards the Defendants. However, since submissions were made on the point I will say something briefly about it. 375It will not be the result, in every case where a contract has been found to be unjust, that the party against whom relief has been granted will be found to have engaged in unconscionable conduct. As has been noted earlier, a contract may be found to be unjust where matters that justified that finding have not been known to the other party. In a rare case, relief may be granted in those circumstances. 376Further, for unconscionable conduct to be demonstrated, the claimant must show that they were under a special disability or special disadvantage. A contract may be unjust although one party is not under a special disability or special disadvantage. 377In the present case, I consider that the Defendants were under a special disability by reason of their age, language, education and economic background. Further, by reason of their ignorance of the financial position of the persons for whom the loan agreements were designed to benefit, and the transactional arrangements being put in place to bring about the benefit to those persons, they were at a special disadvantage. Not to be ignored is the fact that no consideration effectively moved to the Defendants from the transaction: Commercial Bank of Australia v Amadio (1983) 151 CLR 447 per Deane J at p 475. 378RAMS did not have actual knowledge of all of those matters, but it was on notice of some of them, particularly for whose benefit the loan agreements were entered into. More importantly, RAMS was aware of facts that ought to have put them on enquiry and notice of the possibility that it was or might be taking advantage of the Defendants' special disability and disadvantage. 379In Amadio, Mason J, having made reference to the judgments in Blomley v Ryan (1956) 99 CLR 362, said (at p 462): It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J., that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-a-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party. [Emphasis added.] 380He said further (at p 471): As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same. 381By reason of the matters that I have identified in Part 8 of this judgment (from [295] onwards), I consider that RAMS engaged in unconscionable conduct towards the Defendants. 12. What relief should be granted? 382In relation to relief, this is also a slightly unusual case. At the time the Defendants entered into the loan agreements with the Plaintiff they were already subject to a guarantee, limited either to the value of, or the sale proceeds of, the property in respect of which a mortgage had been granted as security for the guarantee. In that way, the loan agreement and mortgage entered into with the Plaintiff in each case provided a benefit, in that the Defendants were released from the earlier guarantee and mortgage. The general rule articulated in Collier v Moreland Finance Corp (1989) 6 BPR 13, 337; [1989] ANZ ConvR 515 (and see Baira at [303]) would operate so that credit would need to be given to the incoming lender for the benefit received. 383However, at the time the loan agreements and mortgages were entered into with the Plaintiff in the present case the principal borrowers (Joe, Sandra and Jencon) were not in default under the arrangements they had with St George Bank, nor was there any threat to the Defendants that the guarantees would be called upon and the mortgages enforced. The Defendants had only contingent liabilities that had not crystallised. 384There is no basis, therefore, for the operation of the general principle. If it is otherwise appropriate to grant relief that sets aside the loan agreements and directs a discharge of the mortgages, it is true that the Defendants will receive a benefit in that they will be placed into a better position than they were at the time of entry into the agreements with the Plaintiff, albeit their liabilities were only contingent. It does not seem to me that that benefit ought to be a bar to such relief being granted if it is otherwise appropriate. 385I made reference earlier to the fact that, in cases where the lender is unaware of matters that cause the contract to be an unjust one, is relevant to the issue of whether relief should be granted. In the present case, however, the Plaintiff was not without notice that there were matters that needed further enquiry on the face of the material with which the Plaintiff was supplied in each case. Moreover, if guidelines had been adhered to, or there had been a reasonable explanation for not doing so, there may have been some basis for refusing relief in the circumstances. When the position was, however, that if the guidelines had been followed and appropriate enquiries made, matters would have been ascertained at various times that would have prevented the loan agreements from going ahead, it seems to me that the only fair relief is that the Defendants should have the contracts set aside and the mortgages removed from their properties. 13. The cross-claim against AMBFS 386Because I have determined that relief should be granted to the Defendants pursuant to the Contracts Review Act, it is not necessary to consider the cross-claim brought against AMBFS. 387However, if I am wrong in determining the contracts with the Plaintiff were unjust and/or the relief that I have determined should be made, then I consider that AMBFS should be found liable to the Defendants to the extent of their current liability to the Plaintiff. The basis, in short, for that determination is that AMBFS purported to act as the broker for the Defendants in circumstances where it had no instructions to do so, and it made no effort to have contact with the Defendants to ascertain their knowledge of the true position. Moreover, AMBFS knowingly forwarded misleading and deceptive, and in some cases false, material to the Plaintiff in support of the applications that brought about the existing liability of the Defendants to the Plaintiff. 388The measure of damages for which AMBFS would be liable would be the amount that would discharge, in each case, the indebtedness of the Defendants to the Plaintiff and would result in the discharge of the mortgages on their properties. 14. Conclusion 389In proceedings 2008/284857 RHG Mortgage Corporation Limited v Rosario Ianni and Domenica Ianni, the loan agreement date 11 October 2005 should be set aside and the Plaintiff should discharge the mortgage over the Defendants' property. The cross-claim against Australian Mortgage & Business Finance Solutions Pty Ltd should be dismissed. 390In proceedings 2008/285539 RHG Mortgage Corporation Limited v Rosa Baira the loan agreement date 28 February 2006 should be set aside and the Plaintiff should discharge the mortgage over the Defendant's property. The cross-claim against Australian Mortgage & Business Finance Solutions Pty Ltd should be dismissed. 391The Plaintiff should pay the costs of the Defendants in both proceedings. Australian Mortgage & Business Finance Solutions Pty Ltd should pay the costs of the Cross-Claims brought by the Defendants. 392The parties should bring in Short Minutes to reflect these reasons. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 July 2014