Supreme Court New South Wales Medium Neutral Citation: Bendigo and Adelaide Bank v Stamatis [2014] NSWSC 1233 Hearing dates: 24/03/14, 25/03/2014, 26/03/2014, 27/03/2014 and 28/03/2014 Decision date: 16 September 2014 Jurisdiction: Common Law Before: RS Hulme AJ Decision: Loan contract and mortgage to be set aside. Catchwords: EQUITY - mortgage - "Lo Doc" loan - forgery - unconscionability - Contracts Review Act. Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth) Civil Liability Act 2002 (NSW) Consumer Credit (NSW) Code 1995 Contracts Review Act 1980 (NSW) Criminal Assets Recovery Act 1990 (NSW) Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) National Credit Code Real Property Act 1900 (NSW) Trade Practices Act 1974 (Cth) Cases Cited: Burke v State Bank of NSW (1994) 37 NSWLR 53 Learn & Play (Rhodes No 1) Pty Ltd v Lombe [2011] NSWSC 1506 Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 National Australia Bank Ltd v Hall (unreported, Dunford J, 17 September 2003) Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 148 Perpetual Trustees Vic Ltd v Bodiroza [2009] NSWSC 861 Petersen v Moloney (1951) 84 CLR 91 Texts Cited: Bowstead and Reynolds on Agency, (18th ed) Ge dal Pont, Law of Agency (2nd Ed) Category: Principal judgment Parties: Bendigo and Adelaide Bank Limited (Plaintiff/Cross Defendant) Aristides Stamatis (First Defendant/First Cross Claimant) Maria Stamatis (Second Defendant/Second Cross Claimant) Representation: Counsel: N Kidd SC; RI Bellamy (Plaintiff/Cross Defendant) JK Taylor; Z Hillman (Defendants/Cross Claimants) Solicitors: Solicitors: Gadens Lawyers (Plaintiff/Cross Defendant) Hughes & Taylor (Defendants/Cross Claimants) File Number(s): 2011/156419 Judgment 1Since about 1982 the Defendants in these proceedings have been the registered proprietors of the land contained in folio identifier 7/14848 and known as 88 Bruce St, Brighton-le-Sands. 2Registered against the title is a mortgage AA277559 in favour of Adelaide Bank Limited dated 11 December 2003. It is common ground that the Plaintiff in these proceedings is a successor in title to the Adelaide Bank Ltd pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth). The Plaintiff asserts that there has been default under that mortgage and an associated loan agreement or agreements and seeks to enforce the mortgage (and a registered Memorandum referred to in it) and/or obtain damages and/or compensation. 3The Plaintiff's claims are opposed. The principal bases of opposition set out in a Defence and a Cross Claim are: * The Defendants never entered into any relevant loan agreement, * The Defendants did not receive the moneys advanced by the Plaintiff, * The documents on which the Plaintiff relies are the product of its conduct which is unconscionable under the general law or the Australian Securities and Investment Commission Act (Cth) 2001, * The documents on which the Plaintiff relies are the product of undue influence of which the Plaintiff should not be entitled to receive the benefit, * The Contracts Review Act 1980 (NSW), * The Consumer Credit (NSW) Code 1995, and * The Trade Practices Act 1974 (Cth) 4The Defendants further contend that any liability they may have is an apportionable claim under the Civil Liability Act 2002 (NSW) and that a number of other persons who were involved in the transactions are concurrent wrongdoers. Persons said to answer this description are Combined Home Loans Pty Ltd, Asset Conveyancing Enterprises, Paul Kemp, Krystal Grant, Michael Abboud, Adelaide Bank Limited, Bendigo and Adelaide Bank Limited, Cuir Pty Ltd and Constantinos Stamatis. With the exception of Constantinos Stamatis, the individuals named were employees of Combined Home Loans Pty Ltd. 5In addition to challenging these grounds, the Plaintiff contends: That the Defendants' son Constantinos had the actual or ostensible authority from the Defendants to enter into the transactions, (a claim of ostensible authority was abandoned) Alternatively the Defendants ratified the actions of Con (as it will hereafter be convenient to refer to this person) or acquiesced in them The Defendants are estopped from denying their liability The Defendants engaged in misleading or deceptive conduct and The Plaintiff is subrogated to rights the National Australia Bank had over the property under a mortgage that was discharged with funds provided by the Plaintiff. 6Oversimplified, the circumstances and the transactions that have led to this litigation are as follows. 7The Defendants' son Con needed money to assist in the purchase of an industrial unit that a company he and a business partner owned, Cuir Pty Ltd, had agreed to buy. His own attempts to obtain those funds had failed. 8His parents owned a home which was subject to a mortgage to the National Australia Bank but on which only some $60,000 was owing. 9Through Combined Home Loans Pty Ltd (hereinafter referred to as "CHL") Con arranged to borrow $380,000 on the security of his parents' home. When it was realised that this sum was not sufficient to both discharge the NAB mortgage and provide for Con's needs, a new arrangement was made whereby $440,000 would be borrowed. This arrangement was implemented, the $440,000 obtained, the NAB mortgage discharged, and one in favour of the Plaintiff given. 10Some eight or so months later, the loan was split into two parts, $44,000 and the balance. 11As incidents of these arrangements numerous documents were executed, some by Con forging his parents' signatures and some by the Defendants themselves albeit in circumstances where, according to their case, they did not realise what they were doing. In that connection reliance is placed on evidence that the Defendants were born in Greece, had limited education and have some difficulty in understanding English, particularly in legal or complex documents, and evidence that Con, who lived with them, effectively was able to exercise control over what documents they saw during the making and implementation of the arrangements and subsequently, and over the Defendants' knowledge and understanding of them. 12The primary case made on behalf of the Plaintiff is that the Defendants were not, and could not have been, as ignorant as they claim and authorised or ratified Con's actions. Resolution of the issues requires close attention to many documents and the circumstances surrounding them. 13A Court Book, filed pursuant to a consent order of 23 July 2013, consists of five large lever arch files. These contain copies of most of the documents but there are many hundreds of pages in addition, albeit many are complete or incomplete copies. To a significant degree the documents were not in chronological order and there were numerous copies of some. Fax dates on the top of some documents provide some assistance in dating the documents but they are not infrequently incomplete or inadequately photocopied or do not contain sufficient information to demonstrate when the document first came into existence. 14It should also be mentioned that virtually all of the documents are photocopies or faxed reproductions. Not all copies seem to be identical, e.g. the document commencing at Court Book pages 85 and 298, and the form of the documents meant that there was less certainty in the opinions of two handwriting experts than might otherwise have been the case. There were less significant reasons for other lack of conviction on the part of one or both but that said, there was such a measure of agreement between those experts that I feel entitled to accept the opinions expressed in their joint report without, and in at least most cases without even referring to, the qualifications they expressed. At times their evidence was contradicted by evidence from those alleged to have signed the documents and while I have taken that into account, on almost all occasions where there has been a conflict I have preferred the evidence of one or both experts. 15For the Plaintiff, a number of persons who were, or had been bank employees gave evidence. Their evidence was not contentious. There was the expert handwriting evidence which, as I have indicated, was not the subject of controversy. The Defendants and their sons Con and George gave evidence. No one from CHL was called and nor was there any explanation for their absence. Not called either was anyone from Asset Conveyancing Enterprises or a solicitor who was said to have given advice in 2009 to Mr Stamatis. 16CHL's role was an originator and manager of mortgages for Adelaide Bank Limited. In that regard an agreement had been entered into on 29 September 2001. At some stage its mortgage management books were purchased by another entity, Australian Mortgage Options. 17In more detail the history of events is as follows. In June 2003 Cuir Pty Ltd, a company through which Con and a John Saffioti conducted a leather finishing and furniture business, contracted to purchase an industrial property in Miranda. It would seem that the property was bought, either off-the-plan or at least in an incomplete state. 18At or about this time Con owned an apartment at Dulwich Hill in respect of which he owed some $150,000 secured by mortgage. In about October 2003 he had also bought a townhouse in West Wollongong in respect of which he borrowed a further $276,000. In late 2003 he transferred ownership of the Dulwich Hill property to his brother George. 19Whether because of the commitments to which I have referred or otherwise, Con and Mr Saffioti found themselves unable to raise the money, some $380,000, needed to complete the purchase of the Miranda property. Con applied to CHL for accommodation. Not long before settlement was due, Michael Abboud of CHL told Con his loan application had been refused and recommended that Con find equity from anywhere. On 22 October 2003 the solicitors for the vendor of the Miranda unit, Tress Cocks and Maddox, wrote advising that settlement was due within 21 days. In due course that time was extended but there is no doubt that in late 2003 Con was under considerable pressure to obtain funds. 20The first document of major significance and bearing date 5 November 2003 is a "Property Loan Application" on the letterhead of CHL. Copies, some incomplete and some with an additional page - e.g. CB 87 - are to be found at CB 85, CB 298 and a number of copies in Exhibit 4 (where the totality of pages, not in order, can be found). The document seems to have been sent (to CHL) from "Fabric Services JHD fax number 61 2 6277 XXXX" on 6 November 2003 and consisted of four pages including a Fax Cover Sheet bearing a CHL letterhead - see Exhibit 3. Fax notations on the top suggest that the document, possibly in blank form, was first sent on 30 October 2003 by CHL, then being a five-page fax, bearing number 384. 21The number 61 2 6277 XXXX is a Canberra number. Although the questioning was not as clear as it might have been it seems likely that at some time Con was working in Canberra and it would seem that this was so on 6 November. The document seems to have been followed by another fax to CHL less than a minute later constituted by a copy of a letter of 7 July 2003 from Tress Cocks & Maddox relating to the purchase by Cuir Pty Limited. 22In the Application document the Defendants, each described as "Individual Borrower/Guarantor" purported to seek a loan in an amount of $380,000 payable as to principal and interest over a term of 30 years. Mr Aristides is described as a taxi driver with a gross income of $60,000 per annum. Mrs Aristides is described as a "Partner" with an income in the same amount. The document indicates that the Defendants had no significant assets except their home which was proposed as security and which was said to have a value of $800,000. There was said to be an existing mortgage to NAB in an amount of $60,000. Mrs Aristides is nominated as the "contact for access". In the section entitled "Loan Purpose", the words "Future Investment Purposes" have been written. Interlined at some stage in the section "Loan Summary" someone has written "Lo Doc @ 7.5%". 23The expert handwriting evidence is that the signatures purporting to be those of the Defendants on this document are forged and I am satisfied this was done by Con. The joint handwriting report is to that effect and Con gave similar evidence. 24Con agreed that he had written a deal of the information contained on the form but denied having written significant parts of it. Words he denied writing included those I have underlined in the following extracts from the form: In the section relating to his father, "Time there 30 years", "Gross Income $60,000 pa", "Previous employer N/A"; In the section relating to his mother, "Occupation Partner", "Employer Self employed", "Phone XXXX XXXX" where secondly appearing, "Time there 30 years", Gross Income $60,000 pa"; On the second page, "future investment purposes" and "Lo Doc @ 7.5%" is not in his handwriting as are at least 2, but not all, of the 4 times the loan amount of $380,000 appears. 25I accept this evidence. Relevant in this connection is the extent to which Con was willing to admit forgery and the absence of any apparent reason for him to admit to writing some, and deny writing the particular other, parts of the document and my overall view of Con's credibility. 26Con also said that, having obtained the relevant documents without asking his parents for them, he provided copies of his father's driver's licence and mother's passport to CHL. It is not apparent when this occurred but copies were provided by CHL to Galilee and Associates on 19 November 2003. Galilee and Associates was a firm of solicitors who acted for the Plaintiff in settling the loan transaction and obtaining the mortgage. 27Con gave evidence that he believes he also provided his parents' tax returns. That he was asked to do so derives some support from a handwritten note "Two years tax returns" and "6 month statements NAB" written by Con on a fax cover sheet on the letterhead of CHL from Krystal Grant and dated 30 October 2003. That he sent the returns derives support from what appears to be a handwritten fax note in the CHL file, Exhibit 3, the body of which reads, "Re 2003 + 2002 income Tax Returns for Aris & Maria Stamatis". The document bears a fax date of 5 November 2003 but given that the document is not an original, there are a number of possible explanations as to how it came to be there and I am not certain that that is the date when it was sent. Be that as it may, and despite some inconsistencies to which I refer below, in the result the probability is that such returns were sent. 28During the course of challenge to evidence he gave to the effect that he had not come to some arrangement with his father for the family home to be used as security for a loan for his benefit, Con's attention was drawn to the fact that he had inserted the family phone number and his father's mobile number in the Property Loan Application, nominated in it an accountant who he knew had a close relationship with his father, and had nominated his mother as the "contact for Access" to enable a valuer to view the property. I accept his response to these questions and the matters relied on do not lead me to the conclusion that there was any such arrangement with his parents, as distinct from what I may refer to as preliminary discussions and about which I say more below. Relevant to this conclusion is my finding, recorded below, that the Defendants did agree to a mortgage to the Adelaide Bank being substituted for one they had previously granted in favour of the National Australia Bank. 29The evidence suggesting that the Property Loan Application was sent from Canberra is inconsistent with evidence Con gave to the effect that on the same day as he was informed that his own loan application was refused, he had a spare CHL application form in his possession at the factory in Penshurst, filled it out and faxed it to Michael Abboud that day. His being in Canberra would also have created logistical difficulties or delay in obtaining his parents' tax returns. However, he was not cross-examined on these inconsistencies. It is unsurprising that over 10 years on, some of the non-essential details might not have been accurately remembered and I do not regard the inconsistencies as casting doubt on the substance of Con's evidence. 30Another document that came into existence at about this time was one entitled "Privacy Consent Annexure". Copies seem to have the fax notation, or partial notation "services JHD", suggesting they may have accompanied the Property Loan Application. The handwriting experts said that there was "evidence supportive" of the conclusion that Mr Stamatis had signed his name but that Mrs Stamatis' signature had been written by Con. Con could not say whether his parents had signed that document but said that they did not do so on the day the Property Loan Application was signed. Given the surrounding circumstances, that there seems no reason why only one of the Defendants should have signed this document, and the far stronger evidence in respect of other documents signed at the time, I am not prepared to conclude that either of the Defendants signed this document. 31Dated 6 November 2003 and purporting to have been signed by the Defendants was a document entitled "LO DOC LOAN", "LO DOC DECLARATION OF FINANCIAL POSITION". The document contains a statement that the loan amount is $380,000. As printed, the document contains a number of representations and warranties and beside the reference to income there has been handwritten for each of the Defendants, "60,000". The third line of the document reads, "This declaration must be completed and signed by ALL borrowers". It is not clear what otherwise its province was. The handwriting evidence indicates the Defendants did not sign it and Con said that he forged his parents' signatures. He said however, and I accept, that the body of the document is not in his handwriting. 32The document bears attention for other reasons. Dated 6 November, one would infer it was not signed at the time the Property Loan Application was. Furthermore none of the copies in evidence show any indication they were faxed from Canberra and it thus provides an indication that Con may have been in Sydney for at least some part of 6 November and/or the next few days. The presence of the document in Exhibit 4 and fax notes on that copy indicate it was faxed from CHL to the Plaintiff on 10 November 2003. It is possible it came into existence as a reflection of the note "Lo Doc @ 7.5%" on the Property Loan Application but there is no direct evidence to that effect. 33Exhibit 4 was identified by Candece Nicholls as the documents that would contain the information used in assessing a loan application. It formed part of the Bank's credit assessment file. 34A fax cover sheet and fax pagination and copies of them in Exhibit 4 indicate that a copy of the Loan Application, the "Privacy Consent Annexure", the "Lo Doc Loan" document, and some other documents were faxed by Paul Kemp of CHL to Adelaide Bank on 10 November 2003 in order for the application to be assessed. 35The following document in Exhibit 4 dated 11 November 2003 says that the loan facility for $380,000 has been "Conditionally Approved subject to the following requirements: (1) Valuation Acceptable to ABL (2) 100 Point I/D for each" 36On a copy apparently sent to CHL someone has added to the first of these notes, "Attached" and to the second, "At Settlement". 37On 11 November 2003, the property at 88 Bruce St was valued by DTS Property Services Pty Ltd and the valuation faxed to CHL. Exhibit 4 indicates that a copy of the valuation was faxed to the Bank. 38Contained in Exhibit 4 is another "Formal Approval" made by another of the Plaintiff's assessors, Tammie, on 13 November 2003 which, without the inclusion of the word "conditionally" says that, "The above loan facility has been formally approved. 100 pt verification at settlement". 39On 17 November CHL wrote to Galilee and Associates in terms: Please act on the lenders behalf in prepare the appropriate Mortgage Documentation to secure the loan facilities, effecting final settlement, stamping and registration of the relevant security(ies). 40There followed particulars of the proposed borrowers, loan details, security and a copy of the Property Loan Application and the 13 November 2003 Formal Approval. 41On 20 November 2003 Galilee & Associates, solicitors, wrote to the Defendants at their home address advising that the firm acted for Adelaide Bank Limited and CHL and enclosed a dozen or so documents. The letter said that the documents were required to be returned, presumably after they were signed. The letter set out a calculation of the amount likely available on settlement, the calculation commencing with the figure of $380,000. The documents enclosed were listed as: 1. Housing Loan Contract dated 14 November 2003 (together with a copy for you to keep) 2. Memorandum of Mortgage (together with a copy for you to keep) 3. Authority to Date and pay Advance 4. Memorandum of Costs and Disbursements 5. Memorandum of Common Provisions Reg. No. 2469542 6. Direct Debit form; Please retain booklet 7. List of approved Insurers 8. Borrowers Certificate. Please note that should you not obtain legal advice, you will be required to sign the enclosed certificate, where indicated; 9. Declaration by Borrower. Please note that if the borrower obtains legal advice, you will be required to sign the enclosed certificate, where indicated; 10. Warranty relating to the property; 11. Office of State Revenue Declaration for use if you wish to apply for full or partial exemption of stamp duty. ... 12. ... letter together with a Discharge Authority addressed to National Australia Bank Limited ... 13. Direction to pay 42The expert handwriting evidence is to the effect that the Defendants signed documents answering the description of those numbered 3, 6, 8 and 10. Document 11 contains two signatures purporting to be by each of the Defendants. The lower ones, which have been crossed out, would seem to have been made in the wrong place. The expert handwriting evidence is to the effect that the lower ones are probably genuine but the upper ones were forged by Con. 43It may be inferred that the mortgage referred to in the letter is that which acquired the number AA277559S and is dated 11 December 2003. The expert handwriting evidence is that the signatures to this document purporting to be those of the Defendants are genuine. 44Con was taken to the signatures on these and other documents apparently signed about the same time. Looking at them, he was uncertain whether he had written some of the signatures but was definite that his writing appears on at least the "Direct Debit Request" (the terms of which authorise the Plaintiff to arrange for funds to be debited against an account in the name of Cuir P/L for the benefit of a loan or account number 0037052677 YX 01). I accept this last mentioned evidence. To the extent to which his evidence in respect of the signature to these (and other) documents differs from that of the handwriting experts I reject it but I do not regard the difference as reflecting on his general credibility. 45I infer the "Housing Loan Contract dated 14 November 2003" referred to in Galilee and Associates' letter is a document entitled "Home Loan Contract" and which on the first page records that the information in it is current as at 14 November 2003. It takes the form of an offer by the Bank and acceptance by the customer and also records that the amount of credit is $380,000. A short distance above that, perhaps in verification of a change in the first name of Mr Stamatis, signatures purporting to be those of the Defendants appear. Further signatures appear on the fifth and eighth pages, in the case of the last mentioned immediately adjacent to dates of 23 November 2003. On the fifth page, a quarter or a third of the page below the signatures the words "REFIN BANK OR OTHER" and "INVESTMENT PURCHASE" have been typed in beside the printed words, "Purpose of Loan". 46The expert handwriting evidence is that all of those signatures are genuine. 47However the area of the Form entitled "Offer from Adelaide Bank Limited" and which contemplates signature on behalf of the Plaintiff by "Karl Damien Combined Home Loans Pty Ltd" is blank and on the first page of the document someone has drawn a line running diagonally through it. In a copy of a summary or settlement sheet relating to the proposed loan of $380,000 contained in Exhibit 4 there is a very obvious red line inserted diagonally across the page. 48On 25 November Galilee and Associates wrote to the Defendants acknowledging receipt of (most of) the "mortgage documents". On 4 December 2003, Asset Conveyancing Enterprises wrote to Galilee & Associates advising that the firm acted for the Defendants who were described as mortgagors and inquiring if anything was outstanding. 49This seems to have been the first involvement of Asset Conveyancing Enterprises in events. The evidence did not reveal how that organisation came to be instructed. It had the same address as CHL, viz. Suite 12, 170 George St, Liverpool and in 2003 the same fax number. Con said that he had never attended with his parents to meet anyone from that organisation but said that he could not recall whether he himself had met anyone from there. 50Also on 4 December 2003 Michael Abboud sent a fax, apparently to the Plaintiff, for a copy of the fax is in Exhibit 4. The first two pages indicate what purports to have been a request on behalf of the Defendants for an increase in the loan from $380,000 to $440,000. The third page is another copy of the document dated 6 November 2003 and headed "Lo Doc Loan" save and except for the fact that in the description of the loan amount, the figure of 380 has been crossed out and "440" written in and apparently initialled. As has been said, the handwriting evidence indicates that the Defendants did not sign this document in its original form. Con said that he did but that the body of the document is not in his handwriting. 51The initials adjacent to the "440" are very small. The handwriting experts did not comment on them and when asked if he had written them Con said they weren't really legible - a proposition with which it is hard to disagree. The fourth page of the fax has no present relevance. It details a number of fees that have to be paid and mentions also the NAB. 52Con gave evidence that the request to increase the loan amount was inspired by conversation between himself and CHL wherein the latter informed Con that another $60,000 was needed. CHL may have come to this realisation in consequence of conversation with Mr Xuereb of Tress Cocks and Maddox. Michael Abboud of CHL said that they could take care of it and in due course another bundle of paperwork arrived that Con said needed signing. 53Included in Exhibit 4 is a document dated 5 December 2003 and entitled "Formal Approval". It is addressed to Michael at CHL and advises that the loan facility for $440,000 has been formally approved. The document bears the name of Candece Nicholls, described as "Assessor" for the Adelaide Bank and also bears the notation, "100 points of ID required prior to settlement". 54A letter from Galilee and Associates of 8 December 2003 addressed to Asset Conveyancing Enterprises is relied on. The letter reads, inter alia, We refer to our letter to you dated 25 November, 2003 and now enclose herewith amended Housing Loan Contract dated 5 December, 2003. Would you please disregard the previous Housing Loan Contract dated 14 November, 2003 replace it with the attached Loan Contracts. (sic) Please note that before we are able to proceed with settlement of this matter, we shall require from you the following: 1. Amended Loan Contracts (sic) dated 5 December, 2003 for the new loan amount of $440,000 2. ... 3. Authority to Date and pay Advance ... 55The terms of the letter tend to confirm that all or most of the documents forwarded with the earlier Home Loan Contract must have been returned. 56(Strictly, the Loan Contracts do not seem to have been "dated" as stated in the letter. Neither do the dates accord with those inserted on the first page beside the statement, "The information in this contract is current as at ...".) 57The "Amended Housing Loan Contract" is in broadly the same format as the earlier one. On the first page it is stated that the information in it is current as at 5 December 2003 and in the case of this document the Offer section purports to be signed by a solicitor on behalf of the Plaintiff on 5 December 2003. The amount of credit is stated to be $440,000. The document also states as the "Purpose of Loan", "Refin bank or other" and "Investment Purchase". 58This document purports to be signed by the Defendants on 8 December 2003 but the handwriting evidence indicates this document was not signed by the Defendants but by Con. He gave evidence to the same effect. 59On 11 December 2003 settlement of the loan arrangement occurred. The Adelaide Bank provided $439,940 and the principal disbursement of this money was by payment of $57,217.10 to the NAB and $377,821.88 to St George Bank. A statement of the loan account shows there was in addition a $60 fee. 60By letters dated 11 December 2003, CHL wrote to each of the Defendants at their home advising that settlement of their loan had occurred on that day. At the bottom of each letter was a Loan Summary showing that the loan balance was $440,000 and monthly repayments were $3,153. Regular repayments followed. 61On 25 August 2004, CHL sent a fax to Adelaide Bank Limited forwarding a "Product Conversion" application. The effect of this document was to seek that $440,000 of the existing loan would be the subject of separate arrangements. According to the handwriting evidence the request form was signed by the Defendants. 62The request was approved on the basis that the existing loan would be reduced accordingly. 63There followed a further Home Loan Contract relating to the sum of $44,000 which in its terms was formed by an offer made by CHL on behalf of Adelaide Bank Limited on 26 August 2004 and signed by the Defendants apparently on 14 September 2004. There are some particular terms of this document that are relied on by the Bank in support of its claim of ratification but these can conveniently be left for the moment. 64Also dated 14 September 2004 are a "Mortgage Acknowledgement" and an "Authority" (contained in a document entitled "Regular Payments Application to Transfer Funds") directed to the Adelaide Bank to make monthly payments in an unstated amount to a specified NAB account. (It would appear that the wrong part of this form was filled in.) Both of these documents were, according to the handwriting evidence, also signed by the Defendants. When asked about the signatures Con said that he could not recall whether he had written them or caused his parents to sign. He said that he did what he had to do to get the paperwork done. 65On 14 October CHL wrote to each of the Defendants at 88 Bruce St, Brighton-Le-Sands informing them of settlement of this $44,000 transaction, numbered 0037052677YX02, and that monthly repayments would be $336.00. On 20 October CHL wrote again to the Defendants, this time "C:/KonStamatis" advising that settlement of "your Home Loan 0037052677YX01" had occurred. That number was for the $440,000 loan. 66Con gave evidence to the effect that he had orchestrated this Product Conversion request because after the $440,000 loan the statements coming from the bank reflected that loan. The repayments of it were being made by Cuir Pty Ltd and no money was coming out of his father's account. To avoid arousing suspicion at home it was necessary to separate the loans as should have occurred originally - one for $40-50,000 or, as Con mentioned in another answer, "60", and one for (the benefit of) Cuir Pty Ltd. Mr Stamatis gave evidence that he had noticed the absence of mortgage payments and asked Con who was making them. 67During the currency of the $440,000 and $44,000 loans there were statements sent six monthly setting out transactions on the accounts and addressed either to Maria Stamatis or to Aristides and Maria Stamatis at 88 Bruce St, Brighton-le-Sands. There may have been a limited number of other letters referring to changes in interest rates. 68From at least January 2004 to January 2006 regular weekly payments, and one or two others, were credited to the $440,000 loan account. There were payments of $7,200 and $10,000 in February and June 2006 respectively, the latter apparently by Mr A Saffioti, but otherwise until September 2007 there were no amounts paid to the credit of the account. During this period regular payments were also being made in respect of the $44,000 loan. 69By 19 September 2007 the $440,000 account, but not the $44,000 account, was in arrears. On that day there was a conversation between Ms Tilling of the Bank and Mr Stamatis. He was in his taxi and reception was poor. A file note in Exhibit 5 dated 20 September 2007 made by Ms Tilling, refers to a phone call, inspired by the customer being in arrears, from her to "customer". The note continues: Customer claims he never received funds for this loan; We gave funds to "someone else". Asked for copy of application form and contract. ... Has another loan for $41K which is being maintained, ... 70The note goes on to record that a copy of the Application Form and Contract were then posted to the customer. Ms Tilling did this using the letterhead of Australian Mortgage Options, referring to the fact that the Loan 0037052677 YX01 was in arrears, observing that payments of $7,200 and $10,000 had been made on 6 February 2006 and 7 June 2006 respectively but nothing since and enclosing a copy of the application form and contract. She used AMO letterhead because, in her words, they "were the originator, they were the first contact for the customers". Con said that he received this letter and did not show it to his parents. 71Ms Tilling was cross-examined, in the course of which she was asked if it was possible that what had been said by Mr Stamatis was that the bank "must have given the money to someone else". Ms Tilling accepted that she had been paraphrasing but adhered to the terms of the note. 72She also said that in the note she had done her best to accurately record the terms of her conversation with Mr Stamatis. The note contains no reference to her having told him the amount of the loan but her evidence was that she would have done so. On a proper understanding of his evidence, Mr Stamatis denies that she did. 73Resolution of this issue is not easy. Ms Tilling was giving evidence of one of what almost certainly were hundreds or thousands of conversations chasing up defaulting customers and in this case of a conversation that occurred over six years ago. Her oral account differs from the document she said accurately recorded the terms of the conversation. For reasons referred to below, I have serious reservations about Mr Stamatis' credibility although supporting his account is the fact that he seems to have done nothing at that time when, if he had been told that he owed something of the order of $400,000, it is in the highest degree likely that there would have been some significant reaction. In the result, I do not know. I am simply not persuaded that he was told of the amount of the loan. 74Mr Stamatis' remarks were obviously a cause of concern to the Bank. A file note of the following day prepared by a Ms Croucher in a "Financial Crimes" section of the Bank shows that the Bank immediately set about some investigations. The file note makes apparent that there was great attention given to the topic of signatures and it was noted, inter alia, that in the case of the file ending in YX01, "MS's signatures don't match ID provided 21/09/2007" and that "Signatures for both applicants differ throughout both files". 75The note recorded the disposition of the $440,000 loan. Steps were put in train to trace further the payment to St George Bank. A memo of 19 October 2007 to Ms Croucher says that that cheque was banked to an account in the name of Bonar Pty Ltd. Documents reveal that on 11 December 2003 a mortgage by Bonar Pty Ltd in favour of St George Bank Ltd over the Miranda property was discharged and Bonar Pty Ltd transferred that property to Con and Mr Saffioti, the price being $358,750. 76The evidence does not reveal that the Bank took any further steps at that time. Indeed the lack of evidence suggests the Bank did nothing. A file note of 29 November 2010 records: Prev notes from 2007 mention fraud issue however don't adv outcome of this 77Regular weekly payments in respect of the $44,000 loan continued. As at 14 April 2009 the balance owing was $40,885.53. By 2 July 2009 the balance had been reduced to nil principally by the following payments: 16 April 2009 $5,000 17 April 2009 $5,000 18 April 2009 $1,701.88 2 July 2009 $28,988.89 78On 24 September 2007 a payment of $3,000 was made to the $440,000 loan account. There were then three payments of or about $1,500 and then from 11 November 2007 until May 2009 fairly regular payments varying between $3,100 and $5,000. These payments were made about monthly. Monthly interest during this period was of the order of $2,500 to $3,400. These payments were made by Con. 79On 30 May 2009 Con was arrested on drug charges and has been in custody ever since. His evidence was that he then told his parents about the transactions with the Plaintiff and that they owed the large balance of the money borrowed. 80From June 2009 until 15 June 2010 there were further payments made about monthly. One in June 2009 was $5,000 and those following varied between $2,960 and $3,292. Comparison with evidence of a reconstruction of the Defendants' NAB passbook indicates that the money for payments made in June to December 2009 and one made in June 2010 came out of their account. The method of payment to the Plaintiff was sometimes by cheque, sometimes by direct credit and sometimes by BPAY. There have been no payments since June 2010. 81Part of the Plaintiff's case is that it has suffered detriment in consequence of the Defendants not revealing to the Plaintiff the fact of Con's forgery when they became aware of it. Reference to the evidence bearing on this topic can be deferred. The Plaintiff's witnesses 82As I have indicated, there was little contention about the evidence from the witnesses called on behalf of the Plaintiff. It is not necessary to refer to much of it. 83Ms Nicholls who had approved the $440,000 loan said that she did so on the basis of only the information supplied by CHL. As the loan proposed fell into the category of a "Lo Doc Loan", the Bank's guidelines did not require that there be evidence of income other than as submitted by the mortgage originator. Such evidence was required in the case of different types of loans. 84Exhibit 4 indicates the information relating to the borrowers at the time of the 11 November Approval did not go beyond that contained in the Property Loan Application, the Privacy Consent Annexure, two Individual Consumer Reports (that contain nothing of present significance), a NAB bank statement for the period November 2002 to May 2003, and the "Lo Doc Loan" document. The 13 November 2003 Approval had in addition only the property valuation. Exhibit 4 contains no further information concerning the borrowers, apart from their apparent desire for $440,000, prior to 5 December 2003. 85It was the usual practice to leave the identification check to the mortgage originator and common for that check to be left until settlement. The Bank had guidelines as to the number of points particular items such as drivers' licences or Medicare cards attracted. 86The bank also left it to the mortgage originator to ensure that signatures or the like were those of the proposed borrower. It took the same attitude in relation to a requirement in the Bank's guidelines that "Borrowers are required to complete and sign (in their own writing) a declaration of income ...". In this case Ms Nicholls took no steps to verify whether the documents were signed by the Defendants. 87Furthermore, when assessing whether to approve the loan, Ms Nicholls did not consider the Defendants' age or whether they could repay the loan within its 30 year term. 88Included in the Bank's assessment of any loan applications was consideration whether, by reference to a "serviceability calculator" used by the Bank, a potential borrower could service a loan. Ms Nicholls agreed that the income revealed by the Defendants' income tax returns in evidence rather than the figures of $60,000 each disclosed in the documents would drastically reduce the serviceability ratio. It seemed that she did not have the "serviceability calculator" with her in the witness box and she said that she was unable to say whether the loan would have been approved on the basis of the income revealed in the tax returns. 89Annexed to Ms Nicholls' affidavit was an unsigned document she identified as an undated application checklist which "CHL would have submitted ... to the Bank via facsimile". Ms Nicholls identified in that document a tick indicating a "100 Point Form completed or 100 pt Declaration". 90Other evidence adduced by the Plaintiff shows that the Defendants are substantially in arrears in respect of the $440,000 loan and were so at the time of commencement of the proceedings and that they were the only persons in occupation of 88 Bruce St, Brighton-Le-Sands on the date of commencement of these proceedings. 91On 16 February 2011 Galilee and Associates sent notices to the Defendants at their home address enclosing notices under s 57(2)(b) of the Real Property Act 1900 (NSW) and s 88 of the National Credit Code alleging defaults under Mortgage AA 277559. The Defendants 92Mr Stamatis gave evidence that he was born in 1947 in Greece. He came to Australia in 1964. He went to primary school in Greece but received no further formal education. In an affidavit he said that he speaks some English but is not comfortable understanding legal documents or complex documents in English. 93In cross-examination, Mr Stamatis agreed that as at 2003 he had been a taxi owner for more than 25 years and on the board of Legions Cabs for several years. At board meetings discussions occurred in English and in his role as director he had been provided with financial statements and directors' reports. He believed that he had understood such documents and signed some. He operated his taxi business as a member of the Legion's trading cooperative and he had made decisions concerning written arrangements recorded in the English language with the cooperative. 94Over the years he had entered into two mortgages with the NAB. He was familiar with the nature of a loan agreement. He was familiar with and understood the nature and effect of a mortgage document. 95In the past he had provided the deposit for an apartment Con bought in Dulwich Hill. In mid-2003 he understood Con was working in a furniture business. In late October or early November 2003 Con told him that he needed financial help and had been unable to obtain a loan to pay for a factory unit. The witness immediately qualified this answer by saying that Con's request was for help "if" he could not borrow money himself. The qualified response more accords with what the witness said in his affidavit and, given the circumstances of the evidence, I do not regard his unqualified earlier answer as something that I am willing to hold against him. 96The tenor of the witness' evidence was that he had agreed to help Con by putting his house as security if Con could not borrow money himself. He denied that "at that stage", by which I understand after he had so agreed, Con told him that he could not borrow money. Mr Stamatis also denied that he had ever agreed to himself borrow money for Con. In his affidavit he had deposed to saying words to the effect: I cannot help you now because I'm with NAB. If you apply with NAB I can help. Or if you want to get the money through someone else I can transfer my loan. Otherwise I can't help you. 97He said that Con had asked him to transfer the NAB loan and in the affidavit he also referred to an occasion when Con gave him some papers to sign, saying that they were to transfer the (NAB) loan to CHL. He accepted that he left it to Con to make application for a new loan for the amount owing to the NAB, a figure of the order of $60,000. He denied ever being told $380,000 or any other figure that Con needed to borrow. 98In giving that summary of the witness' evidence I acknowledge that there are answers which, considered in isolation, go further. However, I have no doubt that my summary fairly reflects the tenor of what the witness said, and meant to say. 99Mr Stamatis also said that he did not provide copies of his or his wife's tax returns or identification documents to the Plaintiff, CHL or Con in connection with the transfer of his loan or helping to complete the Lo Doc Declaration. He denied seeing the Galilee and Associates' letter of 20 November. He denied ever meeting with CHL or the Plaintiff or having the documents explained by a lawyer. 100Mr Stamatis deposed to Con having said, immediately before the passage I have quoted: We want to buy a unit for the business. If we apply for the loan but can't get it, could you be a guarantor? The unit will be the first security. If there's ever a problem, the bank will sell the unit first, or you can pay out the loan and take the unit. 101The tenor of this evidence was repeated during the hearing: Q. Please explain what you understood the point to be of you granting a loan to Adelaide Bank, if you say Adelaide Bank had not agreed to lend Con the monies he needed? A. I agree for the loan when Con borrowed the loan - if Con applied for the loan. The unit will be secured first and then my house. It seems to me if they've bought a unit and they have to do anything about it, they hold the unit as a security. 102Taken to the Home Loan Contract for $380,000, (a copy of which commences at CB 353 and extends to CB 370) he agreed that when he signed it, it was clear that the document was a loan contract. He knew he was putting the house as security for 60,000. (His answers often omitted reference to "dollars".) 103Mr Stamatis said that when he signed the document the only figure on it was what looked like 60,000: The 60.00 looked like 60,000. There was no $380,000 there. Mr Stamatis maintained this evidence despite challenges to it. 104He acknowledged it was his signature on the top right hand corner of CB 353. He could not recall signing at CB 357. He was not sure whether it was his signature at CB 360. He agrees he signed other documents being the "Authority to Date and pay Advance" at CB 380 and probably the "Direct Debit Request" at CB 381. He signed the "Borrowers Certificate" at CB 382. 105He said that he recalled signing a mortgage "for 60,000" but shown a copy of Mortgage AA277559S at CB 476 he said that he was not sure the signature on it was his. 106Taken to the signatures on the Product Conversion Application at CB 529, he said he probably signed it but said there were no figures there when he did so. He reaffirmed this even when it was pointed out that he had not said so when referring to the document in his affidavit. Taken to a copy of the Home Loan Contract for $44,000 at CB 568 he said that he had never applied for 44,000. He acknowledged the signatures at CB 568 looked like his but said when he signed there were no figures on the first page of the document. 107Mr Stamatis denied ever seeing the letter of 11 December 2003 from CHL referring to settlement of the $440,000 loan and any of the six monthly statements commencing at CB 485 until after May 2009. In that connection he denied that his wife was the person who would generally collect the mail from the letterbox, saying that the letterbox was open and anybody could have picked up the mail. Later he denied seeing the Bank's letter of 19 September 2007. 108In his affidavit he said also that he had now seen the documents that the Bank relies on and is not, and would not have been, able to understand them without assistance. 109Mr Stamatis made no mention of Asset Conveyancing Enterprises. There is no evidence directed specifically to the question of whether he met anyone from that organisation but given the circumstances in which other events, including Mr Stamatis' hospitalisation referred to below, occurred, it seems unlikely. He did deny receiving advice from a lawyer. I do not infer from use of that term a decision to distinguish between lawyers and conveyancers. 110Questioned about his conversation with a representative of the Bank in September 2007, he denied saying that the Bank had given the funds to someone else and asserted he had said that "they make a mistake". This may well be correct but given the passage of time, I am not prepared to accept he remembered the conversation with such precision that this evidence should be positively accepted. 111Mr Stamatis was also questioned about his actions after the conversation with Ms Tilling. He said that he had not received the letter of 19 September 2007. He said that if he had, he would have done something about it as he could not afford $2,500 a month. 112To put Mr Stamatis' evidence in context reference should be made to some of Con's evidence. He said that he believed he saw the letter of 19 September and did not show it to his parents. He and Mr Saffioti arranged for the arrears on the $440,000 loan to be repaid and he continued to make payments on that loan until he was arrested on 30 May 2009. His parents visited him in gaol and, for the first time, he told them then about the mortgage and that they owed the bank. He told them also that the factory at Miranda had been sold and the money used. 113On 25 June 2009 the Defendants wrote to the Plaintiff asking for a copy of the "signed home loan agreement" for loan number 0037052677 YX01. The terms of the letter indicate that there had been some contact with the Bank at least in the days before that. Shortly after May 2009 Mr Stamatis arranged for the smaller loan to be repaid in full. This letter provides some support for the evidence that the Defendants did not see the letter from the Bank of 19 September 2007. 114Mr Stamatis acknowledged that when the Bank replied to his letter of 25 June 2009 he saw that the signature on the $440,000 loan contract was not his. It was put to Mr Stamatis that he did not tell the Bank at that stage that the larger loan had been advanced under a forged loan agreement. He responded by saying that he did not have to tell the Bank anything but when he went to pay off the smaller loan and asked for the papers for the house he was told by someone probably named David at AMO that he would not receive the papers because of the $440,000 loan. He said that he told David that it was not his loan and not his signature but was told he still had to pay the loan. This evidence was not in his affidavit but he denied making it up. It was submitted that this evidence derived some support from a file note dated 1 March 2011 of the Bank referring to having been contacted by the Defendants' son George and then the Bank officer involved contacting AMO who "advised they were aware of BWR 1's confusion surrounding the loan but that the loan was taken with the house as security to purchase a factory". The length of time between mid-2009 and March 2011 means any support is very tenuous. As will appear, I have no great confidence in Mr Stamatis' evidence. However there is some inherent probability in his account of conversation with "David" and for that reason I am disposed to accept it. 115He agreed that between June 2009 and June 2010 he arranged for repayments to be made in respect of the $440,000 loan. He agreed that this was being effected in part by bank cheques and in part with the assistance of a friend Mr Rogers. 116In paragraphs 53 and 54 of his affidavit, Mr Stamatis had said that in about June or July 2009 he had spoken to Con's solicitor. The latter advised that Con's bank accounts had been frozen because of the Crime Commission. Asked what he should do about the ($440,000) loan, the solicitor had advised Mr Stamatis to keep making the payment as "It might affect Con's case". The solicitor also advised Mr Stamatis to get a bank cheque each month and make the payments to AMO. Mr Stamatis said he followed this procedure until AMO refused to accept cheques and wanted payments made electronically. At that stage he involved Mr Rogers. In cross-examination Mr Stamatis said that the solicitor had not said how Con's case might be affected. 117The solicitor was not called. I can well understand that a lawyer representing Con in respect of the drug charges may not have wanted a charge of fraud being added to those Con was already facing. However, there seems no reason why payments could not have been made automatically from the Defendants' bank account as occurred with the $44,000 loan and because of the combination of this and my concerns about Mr Stamatis' credibility I do not accept his evidence concerning advice as to the method of payment. 118On the other hand, Con's evidence of being advised to continue the payments does derive corroboration from what George Stamatis said. The latter was not challenged on that topic and accordingly I accept that the payments were continued under the influence of that advice. 119Mr Stamatis was cross examined to show that in fact regular repayments of the $44,000 loan had been made out of his cheque account. Finally the cross-examiner gave up on that topic. 120There are three further aspects of Mr Stamatis' evidence to which I should refer. He annexed to his principal affidavit copies of tax returns for 2002 and 2003 for his wife, himself and their partnership. The returns show for the year ending 30 June 2003 an income for Mr Stamatis of $16,619 and for Mrs Stamatis of $10,193 and for the year ending 30 June 2002 corresponding figures of $13,874 and $8,430. 121Secondly, according to his principal affidavit, Mr Stamatis had been unwell in the months immediately preceding November 2003. He said that he had various tests including a stress test, ultrasound and angiogram. An invoice from a cardiac surgeon indicates he had coronary artery surgery on 27 November 2003. Con gave evidence that it was a quadruple bypass and his father was in hospital on 2 December 2003. A file note of Tress Cocks & Maddox of 2 December 2003 records a call from Con on that day in which he advised that he was with his father in hospital and the latter was having an operation that day. Con's evidence was that in December 2003 he had been told that his father's prognosis was 50/50. 122Thirdly, when being questioned about his conversation with the Bank's representative in September 2007 he said: A. Yeah, because that particular time, that is before, I used to pay, like, loan through the National Bank and then I thought the National Bank made some big mistake like Adelaide Bank and not pay my loan. That is why I say to her "they make a mistake", "send me the copies of where I am behind". She agree with me she will send it and I never receive it. She doesn't specify what the loan was, for a start. And later, A. The only loan I knew at the time, because she doesn't specify what kind of loan it was, I knew I got the loan only for 60,000. I never was behind and she told me it was a loan for $400,000. If you told me back then probably I save my son to go to gaol. 123The last sentence of this answer - and I have no doubt it reflected Mr Stamatis' thoughts - displays a significant degree of lack of understanding or intelligence. I had the impression of other examples of this in his responses to questioning - see e.g. T128 - and in any assessment of the credibility of Mr Stamatis' evidence, allowance has to be made for such factors. (To avoid inconsistency with the first sentence of the last answer quoted and with evidence given in the immediately preceding half page or so and in re-examination, the second sentence should have had "if" before "she told" and that is how I understood it.) 124Mrs Stamatis also gave evidence. I accept her evidence as to her background and that it is likely that she had little knowledge or experience or understanding of complex documents. I accept her evidence that she was content for her husband to make decisions on her behalf relating to matters concerning loans and mortgages throughout the relevant period. From my impression of her, I think it likely that her signature to documents was the result of her husband or Con telling her to sign them as distinct from the exercise of any thought or consideration on her part. I accept that she did not provide her tax returns or passport and that the writing on the Lo Doc Declaration is not hers and that she never met anyone from CHL or a solicitor. I accept her evidence to the effect that she did not receive legal advice and, as in the case of Mr Stamatis, I do not think she was drawing a distinction between legal advice and advice from a conveyancer. Given the family situation and my impression of her, I think it inherently unlikely that she would have knowingly participated in borrowing $380,000 or $440,000, a view that goes a long way towards supporting her evidence she never had any intention to borrow those amounts or (at least knowingly) signed any document that had that effect. I accept also her evidence, relied on by the Plaintiff in the event it becomes necessary to consider discretionary terms of any relief, that she has made a will leaving her estate to her sons Con and George if her husband predeceases her. 125In her affidavit of 17 April 2012, Mrs Stamatis said that she is unable to read or understand what the ($440,000) Home Loan Contract dated 8 December 2003 means. In her affidavit of 27 August 2013 she referred to some eight documents that purport to bear her signature saying that she is unable to understand those documents unless they are explained to her. One of the documents is the Home Loan Contract dated 14 November 2003. However in cross-examination she agreed that she understood the nature of a loan with a bank and, shown the copy of the $380,000 Home Loan Contract at CB 353, she agreed that she could read enough English to understand the words "Home Loan Contract" , her and her husband's names and the figure of $380,000. She denied knowing that the document was a loan agreement. Taken to the document at CB 476 she agreed that she could read the word "MORTGAGE". Mrs Stamatis denied participating in discussions with Con in late 2003 relating to Con raising money at that time. 126Leaving aside the matters in respect of which I have said that I accept her evidence, I am not disposed to rely on almost anything she said unless it was adverse to her interests, corroborated or inherently probable. She was obviously concerned to give answers that, as she saw it, would not hurt her case. For example: At T231 Q. As at 2003, you were familiar with and understood the nature of a loan agreement? A. There was a loan for $60,000. Q. As at 2003, you knew what a loan agreement was, do you agree? A. It was for my home. At T232 Q. As at 2003, you were also familiar with and understood the nature of a mortgage given to a bank? A. INTERPRETER: Yes, I think. Q. You and your husband had given a mortgage over your home to National Australia Bank some time prior to 2003? A. INTERPRETER: Yes. Q. As at 2003 you understood that a mortgage of a home enables the bank to sell the home if the borrower does not repay the loan? A. INTERPRETER: I don't believe and I don't know on this matter. 127It follows that, except insofar as I have indicated to the contrary, I do not rely on her evidence of not seeing, or knowing of, or understanding documents, or of not signing them. That of course does not mean, and I do not infer from my rejection of her, that she did see, know or understand the various documents. If I am to so conclude it will be on the basis of other evidence. Con's Evidence 128I have referred above to much of Con's evidence. He and his father gave evidence that he lived with his parents until 2009 and assisted them generally with financial matters. He said that he read documents to them and they could not write English so if a payment needed to be made by cheque, he would write out the cheque and then his father would sign it. 129Con agreed that at some time he had said to his parents that it would be easier for him to borrow money if all the family business was (where he sought to obtain finance from). He denied that at the time he signed the paperwork he had asked his parents if he could use their equity. He denied he had told his father that he had been unable to borrow money in his own name or discussed with his father that he needed $380,000 or $440,000. He denied that his father had agreed to borrow money for the Miranda purchase. He denied that his parents knew he was applying for a loan in their names. He denied that they had agreed to an increase in the amount of a loan to cover a perceived $60,000 shortfall. 130Arguing against these denials is Con's evidence that, although he would have been concerned at his parents receiving legal advice about the application for $380,000, he probably asked Mr Xuereb to give advice to them. 131Con also said that he intercepted most of the mail. He said it was not uncommon for mail to remain in the mailbox for days and he commonly knew approximately when mail relevant to the loans might arrive. For example, during the currency of the loans the statements were only six monthly (unless there was an interest rate increase). He said that when both loans were in existence he would pay attention to the loan numbers on the documents - whether they ended in "1" or "2". 132Certainly he said that there were multiple occasions when documents arrived in the mail. "Multiple" may have been an exaggeration but I infer he was referring to the times when the loans were being arranged. He remembered receiving a bundle of documents in relation to the loan which came that way and which had "post it" notes in terms "please sign here" all over the place. It is not unlikely that the documents that arrived with the letter from Galilee and Associates of 20 November answered this description. 133Con also described a practice whereby if he put something before his parents, provided some brief description, and asked them to sign it, they would sign where he told them to. Conclusions 134Any decision as to the conclusions that should be drawn from the totality of evidence requires attention to the evidence of the Defendants and Con as to the events and a decision as to the individuals' respective credibility. That last issue in turn involves consideration of the inherent probabilities of events occurring as described by the Defendants and Con. And in that regard, there are a number of inherent improbabilities. 135I include in these that a son, not at odds with his parents, would indulge in the imposition on them that, sacrificing some accuracy for brevity, his mortgaging of their home entailed, and this in preference to pursuing legitimate means of help. On the other hand - and I do not suggest this is a complete answer - it seems not unlikely that, at least when the transactions were entered into, Con was not expecting his parents would suffer ultimate loss. 136Another improbability is that the Defendants could have been induced to sign so many documents without knowing or at least becoming suspicious as to what was going on. A third is that they would not have seen in the documents they did sign figures or information inconsistent with any simple replacement of the NAB loan and mortgage with a loan and mortgage involving the Plaintiff. 137A fourth improbability is that Con could have kept from his parents all of the mail that would have alerted them to the true situation. 138Arguing in the other direction is the $44,000 transaction. There is no obvious, or indeed apparent, explanation for this other than the one Con gave to the effect that he needed his parents to see on their bank statements payments reflecting what they understood to be their borrowing in replacement for that from the NAB. 139Also of relevance is the extent to which Con forged his parents' signatures. If there was agreement on their part to help him obtain finance using the equity in their home, there would not seem to have been a reason why he should have forged their signature to so many documents. Of course it may be that he was in Canberra at some stage where his parents were not available to sign. However, this is not an explanation for a significant number of the forgeries. 140Another possibility is that in fact, or in Con's view, his parents were willing to help him to some extent, but not to the extent of the borrowing Con needed. However, this possibility was not explored and any consideration of it requires attention to the topic of onus. 141Relevant also is the fact that Con has admittedly been dishonest, grossly so. Furthermore, it is clearly in his parents' interest, and possibly ultimately in his, that they succeed in their contention that he, and not them, was entirely responsible for the mortgage and borrowing that are the foundation of the Plaintiff's claim. To be taken into account also is the fact that Con has been convicted of four counts of supplying, in about 2009, a large commercial quantity of drugs. It is at least very difficult to reconcile the offending reflected in such convictions with any reasonable standard of general morality. 142Nevertheless, while Con was giving evidence I made a note to the effect that both in chief and under cross-examination he seemed to be honest and intelligent. A review of the transcript during the course of writing these reasons has confirmed that impression. While there were isolated answers I do not accept or about which I have doubts, his evidence was far more consistent than I would have expected if he were lying. Furthermore, there were a number of occasions when he failed to give obvious answers that would have obviously suited the Defendants' case. 143And though I do not find it necessary to rely on the fact, it is significant that some of Con's evidence could have been contradicted and was not. I refer particularly to his evidence that a deal of the writing appearing on the original application and the "Lo Doc Loan" document is not his. If not, it must almost certainly have been placed there by someone from CHL. I have also found it probable that CHL was provided with a copy of the Defendant's tax returns, returns giving the lie to the income figures appearing in some of the documents used in furtherance of the loan applications. 144As I have said, no-one from that organisation was called and there was no explanation for their absence. In the circumstances of the case, I do not regard the fact that Con gave his evidence orally and not by some prepared affidavit, provides an adequate explanation. 145In the result, I accept the substance of Con's evidence. I accept that throughout he acted without the authority or permission of his parents, save and except that they had agreed to changing the loan they had from the NAB to another bank, including the Plaintiff, and authorised Con to make arrangements for that to occur. That authority did not extend to Con signing any loan agreement or mortgage on their behalf or forging their signatures. 146Secondly, I accept that the Defendants never agreed to borrow more money than was needed to pay out the NAB loan. Relevant in that connection, although I do not need to rely on it was Mr Stamatis' age, state of health and probable level of income. I do not accept the accuracy of his tax returns but at age 56, his likely future income as a taxi driver was unlikely to be sufficient to pay off any significant portion of $380,000 or more. Furthermore, I accept that Con had made him conscious of the desirability, if Mr Stamatis was to fund the purchase of the Miranda unit, of having that as a source of recourse for payment and there were no steps taken in that regard. It is inherently unlikely that Mr Stamatis would have knowingly undertaken the liability on the face of the $380,000 or $440,000 loan agreements at all, or at the very least, without some form of security over the Miranda property. 147Thirdly, although Mr Stamatis had indicated a willingness to act as guarantor in connection with the purchase of the Miranda property, he was never asked and never agreed to actually do so, i.e. implement that willingness. 148Fourthly, all of the Defendants' signatures to documents in the November - December 2003 period were affixed in the belief that they were an incident of rolling over the loan from the NAB. 149Fifthly, it was shortly after Con was arrested in May 2009, and not until then, that either of the Defendants became aware they were, or may have been, indebted to the Plaintiff for more than the amount of the NAB loan (possibly, if they turned their mind to this detail, plus costs incidental to the rollover, less repayments of capital made since 2003). I accept that Con effectively intercepted the mail. 150Sixthly, it follows from my conclusions as to the writing on the 5 November 2003 "Property Loan Application" and the "Lo Doc Loan" documents that the parts not written by Con were written by someone within CHL. 151Seventhly, especially when one adds to that conclusion that the Defendants' income tax returns were provided to CHL, significant parts of the documents referred to in the immediately preceding paragraph were written with knowledge of their falsity, or at least recklessly, not caring whether they were true or false. 152Eighthly, the submission to the Plaintiff of those documents, and any later documents with similar information in them, occurred with similar knowledge or recklessness on the part of CHL as to their falsity. 153(I should perhaps add that during the course of argument objection was taken to my making findings against CHL employees upon the basis that misconduct on their part had not been pleaded. That is so. However in aid of the defences of unconscionability and under the Contracts Review Act 1980 (NSW), knowledge on the part of the Plaintiff (for whom CHL was alleged to act as introducer, mortgage originator and manager) as to the Defendants' means was. The findings just made are but the corollary of my findings as to the extent of the information as to the Defendants' means that was provided and my acceptance of Con's evidence in that regard.) 154Ninthly, I accept the evidence as to Con's interception of the mail and that, save and except for the documents they signed and prior to Con being arrested, the Defendants did not see the documents that would have alerted them to the true situation. 155Tenthly, I accept the evidence given as to the reason for the $44,000 loan transaction. 156Subject to the following qualifications I accept Con's evidence that he kept from the Defendants the true nature of the documents they signed. The qualifications are that at or about the relevant time they knew they were signing a mortgage, and entering into an agreement with the Plaintiff whereby they would receive a loan and signing a number of documents ancillary to these 2 transactions. I accept that at no time did they know or believe that the loan was for an amount of more than, in round figures, $60,000. 157I must acknowledge that arguing very strongly against the conclusion just expressed is the $380,000 loan agreement where the Defendants' signatures appear very close to the heading "Home Loan Contract" and to the figure of $380,000, and I have no satisfactory way of reconciling my conclusion with these circumstances. 158Con said he believed he would have "snuck" it through - T179 - but when invited - at T209 - to agree that he had covered up the references to $380,000 in some way, he said he did not believe he had done that. In an answer which, as applied to the whole document, I do not accept he agreed that he had no reason to hide the document from his parents but it is not possible to explain this by some belief he had forged their signatures on it. As his evidence on the pages referred to makes clear, on that topic he was uncertain. But for his parents to be aware of a borrowing of $380,000 is completely contrary to both the whole tenor of Con's evidence and the pattern of documents. 159I do not accept Mr Stamatis' evidence that the only figure on the document was one he mistook for 60,000. In the circumstances prevailing, such a situation would fly in the teeth of almost universal business practice. If that evidence was not consciously false, Mr Stamatis must have deluded himself. 160Yet I do not believe that Mr or Mrs Stamatis did become aware they were participating in an agreement for a loan of $380,000. If they did, much of the reason for Con forging the signatures on the $440,000 loan documents disappears as does Con's expressed reason for the $44,000 loan. If Mr Stamatis was agreeable to such a loan at the time he signed the $380,000 Home Loan Contract, he presumably would have been agreeable to it earlier and at least one reason for Con forging signatures earlier disappears. Of course if he was in Canberra his parent's signatures were not readily obtainable by him but there remains the Lo Doc Loan document that bears no indication of having been faxed from Canberra and on which Con also forged signatures. 161As I have said I have no satisfactory way of reconciling my conclusion of the Defendants' ignorance with the $380,000 loan document. Furthermore, the volume and nature of the other documents signed also argues against the Defendants being ignorant of what was occurring. Nevertheless, particularly in light of the pattern of the documents and my opinion of Con's honesty in giving evidence, I am satisfied that the Defendants were ignorant apart from their belief and agreement to a mortgage and a loan of $60,000 or thereabouts. Conceivably, $44,000 might have fallen within the "thereabouts" but the Defendants did not say so and accordingly I put that possibility aside. 162I think that the Defendants signed documents because Con asked or advised them to do so. Certainly the volume, even for one Home Loan Agreement and its associated documents, would have operated as a disincentive to try to read and understand all. Legal Issues 163Although it may be necessary to make some further factual findings in the course of considering some of the legal issues that arise it is convenient now to turn to those legal issues. 164Firstly, the Defendants are under no liability arising under the $380,000 Home Loan Contract they signed. Any relationship arising from the document was abandoned. Evidence of that is contained in the letter from Galilee and Associates of 8 December 2003 telling Asset Conveyancing to "disregard" that earlier document. There is the line across the first page of the document and the obvious red line across the summary or settlement sheet in Exhibit 4. Furthermore, the Plaintiff did not advance any money pursuant to that document. The fact that the Defendants have never sought to pursue any rights that may have arisen under that "Contract" indicates that they too have abandoned it. One may accept the argument advanced on behalf of the Bank that one party to a contract cannot unilaterally abandon it but here both parties have done so. 165Furthermore, although the abandonment by the Bank occurred in circumstances where it contemplated that there would be a binding loan agreement in a different amount, it is impossible to say that the abandonment was conditional on that occurring. For example, there is nothing in the letter of 8 December or any other document to so suggest. 166These conclusions make it unnecessary for me to consider whether in fact any contract in terms of the $380,000 Home Loan Contract ever came into existence and in that regard the significance of the fact that the document was never signed on behalf of the Bank as the document contemplated it would be if it was to amount to an offer for the Defendants to accept. 167Turning to the $440,000 Home Loan Contract, I have expressed above my conclusion that Con had no authority from the Defendants to sign their names to that document. As I have said, the claim based on ostensible authority was (correctly) abandoned. Accordingly Con's forgery of his parents' signatures to that document did not turn that document into a binding contract between the Plaintiff and Defendants. Nothing the Plaintiff did thereafter, including advancing the $440,000 changed that situation. 168The engagement of Asset Conveyancing Services, if it was by Con (and not by CHL), to act on the Defendants' behalf in the settlement of the $440,000 did not amount to the conferring of authority to enter into the $440,000 Home Loan Contract. Ratification 169On behalf of the Plaintiff it was submitted that the Defendants ratified the $440,000 loan. However, the signature to that loan agreement was a forgery and as such cannot be ratified - Northside Developments Pty Ltd v Registrar-General (1989-1990) 170 CLR 146 at 184-5, 200, 207-8; Bowstead and Reynolds on Agency, 18th ed, Para 2-058. 170Furthermore, Con never purported to act as agent for the Defendants - one of the essential requirements for ratification - Bowstead and Reynolds on Agency, Para 2-061. In forging their signatures he was purporting to be them. 171There are other answers to the Plaintiff's argument that ratification is to be inferred from what are said to be "clear adoptive acts", viz: (i) The Defendants' conveyancer caused directions to pay to be issued which unequivocally adopted the $440,000 loan arranged by Con. (ii) The Defendants signed the following documents to enter into the $44K Loan, which contained express and adoptive references to the $440K Loan. Adelaide Bank Product Conversion Credit Application Wholesale $44K Loan Agreement Mortgage Acknowledgement to Adelaide Bank Limited Regular Payments Application to Transfer Funds (iii) The loan repayments made to the $440K loan between August 2004 and May 2009 debited pursuant to written signed instructions by the Defendants. (iv) The loan repayments made to the $440K loan after July 2009. (v) The Defendants' failure to reply to the Bank's letter dated 19 September 2007, which enclosed a copy of the application and the $440K loan agreement, together with the subsequent payment of $3,000 to the $440K loan account on 24 September to clear the arrears, and the subsequent making of regular repayments to the $440K loan account for almost three years until June 2010. (vi) The decision on the part of the Defendants to refrain from disputing that they had any obligation to repay the $440K loan agreement. (vii) Mr and Mrs Stamatis' receipt of the benefit of the refinance. 172In support of the contention that the Defendants did ratify, counsel for the Plaintiff drew attention to remarks in Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 at [131] - [134] and Learn & Play (Rhodes No 1) Pty Ltd v Lombe [2011] NSWSC 1506 at [21]. It is unnecessary for me to canvass the second of these cases but convenient to refer to the first wherein it was said: [132] Whether the conduct of the principal amounts to ratification is a question of fact, but there should be "clear adoptive acts" (Eastern Construction Co Ltd v National Trust Co Ltd (1914) AC 197 at 213 per Lord Atkinson); the conduct must be unequivocal (for example, Petersen v Moloney (1951) 84 CLR 91 at 101). It is well expressed in Dal Pont, Law of Agency, 2nd ed at 5.28 - "The positive acts of the alleged principal may, aside from any express words, constitute sufficient evidence of ratification. This may be so where the fair inference to be drawn from a person's conduct, on an objective basis, is that the person consents to a transaction to which he or she might properly have objected. Put another way, ratification 'is implied from or involved in acts when you cannot logically analyse the act without imputing such approval to the party whether his mind in fact approved or disapproved or wholly disregarded the question'." (citations omitted) [133] ... [134] There must be full knowledge of all the material circumstances in which the act was done, unless the principal intends to ratify and take the risk whatever the circumstances (for example, Bremner v Sinclair NSWCA, 3 November 1998; (2001) ANZ Conv R 29 at [32] per Campbell J. The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act (Bremner v Sinclair at [32]). 173Reference may also be made to Petersen v Moloney (1951) 84 CLR 91 at 101 where, in addition to emphasising that only unequivocal words or acts will suffice to establish ratification, the Court embraced the test whether "the circumstances of the alleged ratification are such as to warrant the clear inference that Smith was adopting the act at all events and under all circumstances". 174The matters referred to in sub-paragraphs (i), (iii), (v) and (vii) are easily dealt with. At the time of these events, the Defendants had insufficient knowledge for their actions to amount to ratification. 175In the case of the first, there is also a question I find it unnecessary to answer, viz. whether the actions of Asset Conveyancing can be attributed to the Defendants. I should record however that there is not persuasive evidence that the Defendants or Con engaged Asset Conveyancing Services. My impression is that CHL probably did. In the case of the fifth, my conclusion that the Defendants did not see this letter is a partial answer and I have dealt with the significance of the payments when considering the third and fourth matters relied on as amounting to ratification. The Plaintiff's reliance on this fifth matter also fails. 176The second matter relied on was the Defendants' signatures to: (i) The Product Conversion Application, (ii) The $44,000 Loan Agreement, (iii) The Mortgage Acknowledgment of 14 September 2004, and (iv) A "Regular Payments Application to Transfer Funds" (which I take to be that dated 14 September 2004). 177Neither of the third and fourth documents, being respectively the Mortgage Acknowledgment of 14 September 2004 (a copy of which appears at CB 560) and the Regular Payments Application also dated 14 September 2004 (a copy of which appears at CB 582-3), contains any express or other reference to the $440,000 loan. 178The only reference in the first of these four documents commencing at CB 529 to the $440,000 loan is an entry "37052677 YX01" under the heading "Account(s) to be converted". 179The only references in the second of these documents commencing at CB 561 to the $440,000 loan are as follows: There is a reference to "mortgages, other securities and guarantees" taken or to be taken by the Bank. Under that there is reference to the mortgage given by the Defendants and dated 22/12/2003, its registered number and under that an entry, "Loan Number 0037052677 YX01" On the following page there is a heading "Existing Credit Contracts" and under that the remarks:- Pursuant to 1.3(m) of Section D you must before, or on, the settlement date terminate the credit contracts listed below and repay any outstanding amounts: ● ADELAIDE BANK LOAN ACCOUNT 0037052677 YX01 REDUCED BY $44,000 180Certainly these references reveal the existence of a loan account, and the last an Adelaide Bank loan account, with the number mentioned and the last reference makes clear that the $44,000 being borrowed in 2004 was to be paid into that account. To anyone in the Defendants' situation who read the entries, they should have inspired some questions but the obscurity of the references is such that they and the documents that contain them by no means constitute "clear adoptive acts" or "warrant the inference" that the Defendants were adopting the $440,000 loan about which they were at that time ignorant. 181In support of the argument presently under consideration, counsel for the Plaintiff drew attention to decisions wherein persons have been held to the effect of documents signed by them even if they did not appreciate that the documents had that effect. Those decisions have no present relevance for while in the documents presently being dealt with there are the references, more or less obscure, to the $440,000 loan transaction, the terms of the documents were not such as to amount to an affirmation or ratification of that transaction. 182I turn to the fourth matter relied on, viz. "the loan repayments made to the $440,000 loan after July 2009 (at which time, even on the Defendants' case, they were aware that Con had arranged a loan of $440,000 in their name)". 183At the time these payments were made, the loan had been effected, the Bank had advanced the money agreed to be lent and on paper at least the Defendants were under a liability to repay by making the payments specified in the documents, including payments more or less in accord with those now relied on. Any ratification of what had occurred involved the Defendants accepting a liability to pay something of the order of $3,000 a month and something under $400,000 overall for no material benefit to themselves. 184Adapting the tests expressed in Dal Pont, Law of Agency (2nd ed), in the passage quoted above: (Is) a fair inference to be drawn from the Defendant's conduct, on an objective basis, that they consented to the transaction, and Can you logically analyse their acts without imputing to them approval of the transaction? 185When one has regard to the circumstances in which the Defendants were placed during the time of the payments relied on, the only fair answers to these questions are, respectively, "No" and "Yes". The Plaintiff's reliance on these payments as demonstrating or amounting to ratification fails. 186The sixth matter relied on was "the decision on the part of the Defendants to refrain from disputing that they had any obligation to repay the $440,000 loan or to make known to the Bank the fact that Con had signed the $440,000 loan agreement". 187The most obvious answer to this argument is the conversation Mr Stamatis had with Ms Tilling in September 2007 when he denied receiving the funds the subject of the $440,000 loan and the Bank's own internal inquiries revealed an inconsistency in signatures including that Mrs Stamatis' signature did not match her ID (which was her passport). The Bank's tracing of the proceeds in the following month revealed that indeed the Defendants had not received most of the proceeds. It is an inevitable inference that from that time onwards the Plaintiff knew that Mrs Stamatis' signature had been forged and, if not probable, that it was not unlikely that Mr Stamatis' signature had been also. 188In considering whether ratification has occurred, one looks at all of the relevant conduct of the person supposed to have ratified. By parity with the reasons expressed above when dealing with the payments made after July 2009 I am of the view that the Defendants' actions presently under consideration did not amount to ratification but when one adds to them Mr Stamatis' statements in September 2007, and a fortiori if the findings consequent on those statements are taken into account, the matters presently under consideration do not amount to ratification. Again "yes" and "No" respectively are the only appropriate answers to the questions - (Is) a fair inference to be drawn from the Defendant's conduct, on an objective basis, that they consented to the transaction, and Can you logically analyse their acts without imputing to them approval of the transaction? 189There was no ratification by the Defendants. Estoppel 190Summarised, the Plaintiff's estoppel case as pleaded is that the Defendants represented they had signed and agreed to be bound by the $440,000 and $44,000 loan agreements, represented they would repay monies the subject of the $440,000 agreement, did not and would not deny signing those agreements, and failed to disclose to the Plaintiff that they denied signing the agreements and their assertion that the signatures were forged. The representations were said to be effected by: * Signing and causing to be provided to the Bank, certain documents, and * Certain identified conduct. 191The documents the signing and provision to the Plaintiff of which are relied on were: (a) Undated privacy consent annexure, (b) Lo Doc Declaration dated 6 November 2003, (c) Warranty document dated 23 November 2003, (d) Direct debit request dated 23 November 2003, (e) Borrowers certificate dated 23 November 2006, (f) Authority to date and pay Advance dated 23 November 2006, (g) Statutory declaration dated 28 November 2003, (h) Mortgage registered number AA277559, (i) Application to transfer funds (of about September 2004), (j) Product conversion credit application - wholesale (of about September 2004), (k) Home Loan Contract dated 26 August 2004 (i.e. that for $44,000), and (l) Mortgage acknowledgement to Adelaide Bank (presumably that dated 14 September 2004). 192(I infer that the references to 2006 are a mistake for 2003. It seems also that the statutory declaration referred to is that dated 23 November 2003 forming part of the Application for Exemption from Mortgage Duty. I am not conscious of any other document answering the description.) 193The Defendants' conduct relied on was: (n) the engagement of Con to arrange a discharge of the mortgage, held by the NAB and providing various documents to him with the expectation he would deliver them to the Plaintiff, (o) permitting a valuer to inspect the mortgage property, (p) causing or permitting the Direction to Pay letter, (q) taking the benefit of $57,217.10 part of the $440,000 loan so as to extinguish liability to the NAB, (r) repayments of the $440,000 loan account on and between 24 September 2007 and 15 June 2010, and (s) failure to complain or deny liability in response to the CHL letter of 11 December 2003 and bank statements in respect of the $440,000 and $44,000 loans during the period about December 2003 to September 2007. 194(I infer that the "Direction to Pay letter" is the letter of 9 December 2003 from Asset Conveyancing Enterprises to Galilee and Associates.) 195The Plaintiff goes on to contend that in reliance on that conduct it acted to its detriment in: (i) Advancing the sum of $440,000, (ii) Advancing that sum on an inadequately secured basis, (iii) Failing to take any steps to enforce the $440,000 agreement and the mortgage before 16 February 2011, and (iv) Losing the opportunity to sue and enforce a judgment against third parties. 196There are obviously a number of problems with the case as proposed. In the first place, many of the documents came into existence under the aegis of the $380,000 loan proposal, prior to any apparent thought being given to the borrowing of $440,000. Documents listed as (a) to (h) come into this category. Secondly, some documents came into existence later than the $440,000 advance and cannot have induced it. Documents (i) to (l) fall into that category. Thirdly, I have found that the documents referred to in sub-paragraphs (b) and (s) were either not signed or not received by the Defendants. In these situations it is impossible without more to find that the matters referred to in those paragraphs were a representation. I also see no basis for concluding that any dealing with an unsigned document was a representation as pleaded. 197For a number of reasons, including timing and their inherent nature, the events referred to in sub-paragraphs (n) and (o) do not amount to any representation relating to the advance of $440,000. 198Given the Defendants' state of ignorance at the time and that I am not persuaded that they (or Con on their behalf) ever instructed Asset Conveyancing to act on their behalf, the Direction of Pay letter referred to in sub-paragraph (p) was also not a representation by the Defendants. 199The Defendants' state of ignorance at the times of the events means that taking the benefit of the sum used to discharge the NAB liability, repayments prior to about May 2009, and the matters referred to in sub-paragraphs (q) and (r) do not amount to the pleaded representations. This state of ignorance, extending to the documents referred to, means that the failure to complain or deny liability alleged in sub-paragraph (s) also was not a representation by the Defendants. 200Relevant also to many of the matters relied on by the Plaintiff is the fact that the Plaintiff called no witness to give evidence of what if any reliance was placed on any of these documents or events or indeed what attention if any was given by the Plaintiff or those acting for it to them. In some cases of course reliance may readily be inferred but when the Plaintiff has chosen not to call evidence of the nature to which I have referred, I am, subject to the qualifications expressed below, not disposed to draw any such inference. 201Particularly is this so in the case of documents that came into existence prior to the lending of the $440,000 once regard is had to the signatures appearing on the $440,000 loan agreement. Together with the mortgage, this was by far the most important document but a consideration of the signatures indicates that no significant attention was given to it. There is no reason to think that any other document other than the mortgage operated as an inducement as alleged. 202However, in their nature the matters referred to in sub-paragraphs (r) and (s) are inherently likely to have had some impact on the Plaintiff's conduct. Common experience, and to some extent the history of events in this case, show that so long as the Plaintiff was receiving payments more or less as stipulated in the loan agreement, it would be likely not to take other steps to enforce its rights but that whenever there was significant default it would be likely to consider and probably adopt alternative courses of action. Complaint or a denial of liability in response to the documents referred to in sub-paragraph (s) would also be likely to induce a bank like the Plaintiff to take steps to protect its position. 203In light of those remarks, I should say more in relation to the repayments made in (about) the May 2009 to June 2010 period and the contention that they caused detriment of the nature of that referred to in sub-paragraphs (iii) and (iv). (The timing of events means they could not have caused detriment of the nature of that referred to in sub-paragraphs (i) and (ii).) 204Again the Plaintiff's case suffers from the disadvantage that it called no evidence on the topic but it having taken steps by sending notices under s 57(2)(b) of the Real Property Act on 16 February 2011 when repayments stopped on 15 June 2010, and then commencing these proceedings on 12 May 2011, it is a reasonable inference that if repayments had stopped when Con was arrested in May 2009 the Plaintiff would have taken earlier similar steps to those which it has pursued. It was formally advised of the allegation of forgery by Con no later than 11 July 2011 when the Cross Claim was filed. Given the absence of evidence, how much earlier the Plaintiff might have proceeded in the absence of repayments in the mid-2009 to June 2010 period can only be a matter of estimation and one cannot assume that it would have accorded precisely with the length of the period between 1 June 2009 and 15 June 2010 but it is reasonable to think it would have been something of that length. 205Has the Plaintiff established any detriment flowing from the delay? Any judgment I may direct against the Defendants will have been delayed but in that eventuality the Plaintiff will be compensated by interest and I am not satisfied that there has been any detriment in that respect. Indeed, in that the interest rate payable during default is greater than normally applying and may continue for longer, the Plaintiff may have gained something from the delay. There is no evidence that persuades me that the Plaintiff has suffered from the delay except insofar as that delay may have resulted in loss as contemplated in sub-paragraph (iv) above. 206To appreciate the Plaintiff's case in that last mentioned respect it is necessary to have regard to some further evidence. 207The Miranda property was purchased pursuant to a contract between Bonar Pty Limited and Cuir Pty Ltd. By transfer dated 11 December 2003 the land was transferred into the names of Con and John Saffioti for a price of $358,750. Tress Cocks and Maddox acted for Con and Mr Saffioti in the purchase and in a letter dated 23 December 2003 said settlement had occurred and they would hold the Certificate of Title on behalf of Con and Mr Saffioti. The inference to be drawn from that letter is that the land was not then mortgaged. 208By a transfer undated but according to an affidavit of Lynne Hughes, registered on 20 October 2005, Con and Mr Saffioti transferred the Miranda land to other parties for a price of $370,000. On 18 October 2005 a caveat over that land lodged by a Garry and Tania Moon and registered on 10 October 2005 was discharged. The evidence did not reveal the foundation for the caveat. 209Con gave evidence that he had deposited the proceeds of the sale of the Miranda land into his account and then into the account of Cuir Pty Ltd from where it was used to keep the business, which had "a lot of tax debt, PAYG and bills to pay" going. He also said that he had been paying off the $440,000 loan. 210Con was not cross-examined on the first part of this evidence. However included as an annexure to the affidavit of Jayne Gurney of 8 July 2013 was a "Deed of Indebtedness" dated 19 October 2005 which, with its annexures, indicated payments on 20 October 2005 by Con on Mr Saffioti's behalf of $190,000 to the Australian Taxation Office and of $111,000 to Cuir Pty Ltd and a loan on the same day of a further $66,000 in cash to Mr Saffiotti. The Deed provided that Mr Saffioti was to repay $146,800 on or before 7 December 2005 and $220,000 on or before 28 January 2006. (It probably does not matter but these sums do not total the full amount of $367,000 said by the document to be lent.) 211On or before 20 November 2006, relying on the Deed of Indebtedness of 19 October 2005 Con lodged a caveat over land in Folio 13/SP71428 owned by Mr Saffioti. 212There was no evidence whether such repayments occurred or if so, what happened to the proceeds or what happened to the above land of Mr Saffioti except insofar as is to be inferred from the fact that on 11 November 2009 Mr Saffioti became a bankrupt on the petition of BMW Australia Finance Ltd. 213By transfer dated 22 August 2003 Con acquired land being 4/8 Buckle St West Wollongong, the title reference to which is 8/SP70699 for a price of $345,000. On that date he gave a mortgage over the land to Perpetual Trustees Victoria Ltd. The Stamp Duties stamp on the mortgage indicates it contemplates a loan or other indebtedness amount of $276,000. By transfer dated 19 February 2007, Con transferred the land in 8/SP70699 for a consideration of $277,000. There is no evidence as to whether any of the money secured by the mortgage was repaid during its currency but in light of all of the other evidence as to Con's situation, this seems unlikely. I would infer that on the sale of the land there was no surplus. 214On 25 August 2006 creditors voted to wind up Cuir Pty Ltd and on 8 September 2006, a Court order for the winding up of that company was made. A search of the ASIC database shows that Con was a director from May 1998 until 7 July 2004 and Mr Saffioti a director from 27 May 2008 until 13 July 2008. The company has been deregistered. 215As has been said, Con was arrested on 30 May 2009. On 11 June 2009 this Court made a restraining order pursuant to s 10 of the Criminal Assets Recovery Act 1990 (NSW) in respect of all of the interests in property of Con. On 15 June 2010 this Court ordered that, apart from the interest of Con in a Volkswagen motor vehicle, his interest in property be forfeited to the Crown. The property forfeited, which he warranted to be his only interests in property, was: (i) (Unspecified) funds in two ANZ bank accounts, (ii) A Ford Focus sedan, (iii) An amount of $26,755 cash found in a car at the time of his arrest, and (iv) $152,450 in cash seized by police during the execution of a search warrant at certain storage units. 216It is clear that a large part of the $440,000 advanced by the Plaintiff went to assist Con and Mr Saffioti in the purchase of the Miranda property, that when that was sold the proceeds of sale or a large part thereof were paid to Con and lent by him to Mr Saffioti, and Mr Saffioti's indebtedness arising in consequence was the inspiration for a caveat over land he owned being the land in Folio 13/SP71428. This latter event occurred some three years before Mr Saffioti became bankrupt. There can be no doubt that the proceeds of sale of the Miranda land, so long as they remained in Con's hands would have been held on a constructive trust for the Plaintiff and at least for some time after they were lent to Mr Saffioti the Plaintiff could still have exercised, directly or indirectly, rights against one or more of the money, Con, Mr Saffioti and possibly Mr Saffioti's trustee in bankruptcy. 217There being no evidence as to what happened to Mr Saffioti's ownership of the land in Folio 13/SP71428 and whether Mr Saffioti repaid the Plaintiff, it is impossible to say how long all of the possibilities referred to in the immediately preceding paragraph lasted, so the possibility exists that they were lost to the Plaintiff in consequence of the Defendants' continuing to make payments in respect of the $440,000 loan during the mid 2009 to mid 2010 period and failing during this time to apprise the Plaintiff of Con's forgery. 218Furthermore it is clear that Con had some assets in mid-2009. Their source and whether they were the proceeds of crime or what other claims there may have been against them is something that the evidence does not disclose. 219Given the incomplete nature of the evidence, there can be no certainty that the Plaintiff has lost any rights or opportunities that would in fact have proved of benefit to it. On the other hand the evidence does not prove that there would have been no such benefit. In the circumstances the consequences to the Plaintiff of Mr Stamatis not disowning the $440,000 loan agreement when he became aware of what Con had done are or include those fairly described in the Plaintiff's claim as "Lost the opportunity to sue and enforce a judgment against third parties". 220I do not ignore the fact that in September 2007 Mr Stamatis had effectively disowned the $440,000 loan and this whether or not the amount was mentioned, and that from the next day the Plaintiff was fairly on notice that signatures may have been forged. However, events had moved on and payments under the loan had been made for almost two years. Mr Stamatis' communication in September 2007 did not relieve him of the obligation to pass on to the Plaintiff the further information that Con gave him in mid 2009. 221It follows that the Plaintiff has established the estoppel pleaded. By virtue of that estoppel the Defendants are precluded from denying that they signed the $440,000 home loan agreement and, considered as a matter of pure contract, that they are not bound by its terms. 222I turn then to consider other matters raised in the Defence and Cross Claim; unconscionability, undue influence, the Contracts Review Act and other statutory provisions. Many factors are relevant to a number of these defences and it is convenient to refer at this stage to at least some of these. 223The transaction which led to the documents upon which the Plaintiff sues involved: (i) A need in Con to obtain a substantial amount of money, of the order of $380,000, (ii) The Defendants borrowing $440,000, an amount which was both for them and in event, a large sum of money, (iii) The Defendants providing their home as security for that borrowing, and this in circumstances where they had no other significant assets, (iv) The Defendants undertaking the liabilities consequent on those actions, (iv) Their son Con, possibly together with his business partner, receiving all of the benefit of these actions, except insofar as the sum borrowed included something of the order of $57,000 to replace an existing borrowing the Defendants had, in order that the title to their home would be available as security for the $440,000, (v) Con, acting for the Defendants, being the instrument by which arrangements to effect the above transactions were, at least largely, organised, (vi) The absence of any security in favour of the Defendants for the moneys received by Con and being part of the $440,000, (vii) Knowledge on the part of CHL of all of the above matters, (viii) Either knowledge on the part of CHL that the combined income of the Defendants was about $22,000 (2002) or $27,000 (2003) or alternatively, if CHL did not believe the figures in the Defendants' tax returns, no knowledge on the part of CHL as to the Defendants' income, (ix) Monthly payments under the $440,000 Home Loan Contract totalling about $37,000 per year. (The annual total under the $380,000 Home Loan Contract was less but still about $31,800.), (x) Documents sent to the Defendants' home for signature and which required to be witnessed were witnessed by a "Con Stamatis" of the same address - the mortgage, - or a "C Stamatis" - the Authority to Date and Pay Advance of 23 November 2003. This must have been apparent on the face of the documents when returned to the Bank's solicitor, (Although the mortgage is dated 11 December 2003 it was almost certainly signed at the time many other documents were signed, viz on 23 November 2003.), (xi) As may be inferred, prior to the making of the loan no-one acting on behalf of the Plaintiff had met either of the Defendants, and (xii) The Plaintiff knew that the Defendants had not been independently advised and took no steps to see that they were, or even gave any consideration to, or took any steps in connection with the matter, in the absence of Con. 224On the basis of the conclusions at which I have earlier arrived, there were some further matters, such as fabrication by CHL or known to CHL of information provided to Adelaide Bank in November 2003, but as these matters were not the subject of pleading in this area, it is not appropriate that I rely on them. 225However, the relationship between CHL and the Bank is also of relevance. It was governed in part by the terms of a "Mortgage Origination and Management Deed" which, so far as is relevant, provided: WHEREAS A. The lender wishes to appoint the manager to originate and manage Mortgages. ... 4. INTRODUCTION OF LOANS 4.1 Introduction The Manager will introduce to the Lender Loans which will comply with the Terms in accordance with the provisions of this Deed, the Lender's Credit Criteria, the Procedures and ... the Manager must act in accordance with sound business practices and take such steps as would be taken by a prudent lender and mortgagee. ... 4.2 No obligation to lend The Lender is under no obligation to give any Approval or to give any Approval to any particular Loan or to make any Loan ... 6.1 Management The Manager must manage all Participating Loans in an efficient manner ... 6.8 Not Create Obligations on the Lender The Manager must not without the prior written consent of the Lender create any legally binding obligation on the Lender ... 7.1 The Lender shall pay to the Manager in respect of each Participating Loan an origination subsidy ... 7.2 Subject to clause 6.16 and subject to there being no subsisting Event of Default the Lender will pay to the Manager a monthly management fee ... 13.8 Relationship Except as expressly stated in this Deed, the relationship between the Lender and the Manager created by this Deed is that of independent contractors and the Manager is not and shall not except as expressly stated in this Deed in any way infer that it is, or hold itself out as, an agent, employee, partner or joint venturer of or associated in any way, with the Lender or the Trustee. 13.9 Non-exclusivity The Manager and the Lender may engage in any kind of business, including the type of business contemplated by this Deed, with any other person. 226I have set out above many of the actions of CHL in connection with the transaction. Although when first approached in relation to the matter, CHL may not have been the agent to the Bank - a matter I do not have to decide - once CHL wrote the letter of 17 November to Galilee and Associates there can be no doubt that CHL was the Bank's agent and CHL's knowledge gained as an incident of the transaction should be imputed to the Bank. And against the possibility that that conclusion be wrong, it is appropriate to adapt something I said in Perpetual Trustees Vic Ltd v Bodiroza [2009] NSWSC 861 at [117]. In that case also there had been a "Mortgage Originator" whose conduct was less than desirable: Clearly, the Plaintiff has sought to establish a method of operation whereby it is brought into contact with, and ultimately contracts with, borrowers who, individually, will be in widely different circumstances. To further its interests in that regard it entered into an arrangement with CHL, and no doubt others, to make or receive contact with such borrowers and to remunerate CHL for its efforts. ... in effect the Plaintiff was employing CHL to do the sorts of things that the Plaintiff would have otherwise to do itself if it wanted to make a business of lending money. 227The improvidence of the transaction from the point of view of the Defendants is obvious. The fact that Con was arranging it showed that the Defendants were placing trust and confidence in him. That he was the witness to the mortgage and one other document signed on 23 November showed he was in a position to influence them at that time. The transaction was of substantial benefit to Con. 228There was in these circumstances a substantial risk that in effecting the transaction Con would wrong the Defendants and the Plaintiff, by its agents, knew sufficient of the factors for it to have recognised or been aware of the risk. The Defendants were accordingly at a special disadvantage and for the Plaintiff to seek to now take advantage of their liability is unconscionable - see as to the topic generally Burke v State Bank of NSW (1994) 37 NSWLR 53 at 73 et seq. and the cases there cited. In principle therefore, the $440,000 loan agreement and the mortgage given in aid, or operating by way of additional security for that loan, should be set aside. 229In what I have said, I have concentrated on the $440,000 loan. Although the detail varies, similar considerations would apply to it if I had taken the view that the $380,000 loan transaction had not been abandoned. 230I should add that I have not found it necessary to rely on the fact that the granting of the loan in respect of which the Plaintiff sues was in wholesale disregard to guidelines that the Plaintiff had laid down for the granting of loans. A summary of those guidelines occupies in excess of three pages of the Third Further Amended Statement of Cross-Claim and, in light of the decision at which I have arrived, it is unnecessary for me to detail these. It is sufficient to say that the breaches of the guidelines included loan serviceability (both annually and over its term), income verification, some of the guarantor, and a number of the documentation, requirements. 231It may be conceded that the object of these guidelines will primarily have been to protect the Bank but they do provide a standard of reasonableness against which the documentation and conduct in this case may be judged. 232Nor have I found it necessary to rely on the apparent failure to comply with the requirement that "100 points of ID required prior to settlement". It is mind boggling that such ID investigation as was done, if any, appears not to have extended to checking the signatures against the signatures on the driver's licence and passport provided for that purpose. 233My conclusion also makes it unnecessary for me to deal with the other matters relied upon by the Defendants. However, I might observe that although in s 9(2) of the Contracts Review Act, attention is directed to matters largely different from those I have relied on in finding unconscionability, the ones on which I have relied provide fertile ground for a finding under s 9(1) that the $440,000 contract was unjust. 234I have held that, prima facie, the $440,000 loan and the mortgage relied on by the Plaintiff should be set aside. However, the Defendants did derive some benefit from the transaction in that their liability to the NAB was discharged from the proceeds of the $440,000 loan and their mortgage to the NAB also discharged. Equity by them requires that some account be taken of these factors. 235But that equity also requires that account be taken of the splitting up of the $440,000 loan, the subsequent repayment of the $44,000 that originally formed part of it and possibly of other partial repayment of the $440,000 loan. 236Although it is not possible to trace all of the payments placed to the credit of the $440,000 loan account during the period 1 June 2009 to 15 June 2010 - a total of $38,579 - back to the reconstruction of the Defendants' NAB account it seems reasonably clear that all of the payments made during that period were made by them. During this period some $32,470 of interest was added to the account but the principal recorded as owing was reduced from $389,688.27 to $383,380.13, i.e. by $6,308.14. 237From the $440,000, $57,217.10 was paid to the NAB. The Defendants have repaid to the Plaintiff on account of principal $44,000 plus $6,308.14 and it seems to me that justice will be done if, so that the Defendants aren't unjustly enriched, they repay to the Plaintiff this further amount of $6,909. 238A question arises whether anything else should be taken into account. The loan from the Plaintiff also attracted a higher interest rate than the Defendants seem to have been paying to the NAB. The NAB bank statement provided to CHL and covering the period 23 November 2002 to 22 May 2003 showed NAB was charging 6.06%. The interest rate payable to the Plaintiff under the $440,000 Home Loan Contract was 6.75%. The interest rate payable to the Plaintiff under the $44,000 Home Loan Contract was 7%. The interest rates recorded on the Plaintiff's six-monthly statements in respect of the $44,000 loan during the period 13 January 2005 to 15 December 2008, during all of which period the principal exceeded $41,000 varied between 8 and 9.8%. The statement for the period 2 January to 30 June 2009 showed the current rate (presumably at the end of the period) to be 7.25%. There is no evidence as to the extent, if at all, the NAB interest rate would have varied during any part of this period but the evidence to which I have referred leads to the view that the Defendants probably paid a higher rate of interest than if they had remained with the NAB. 239On the other hand, the further amount of $6,909 to which I have referred, and which in one sense has remained "owing", contains no component of interest. In these circumstances I am not disposed to bring any element of interest into account. 240Payment by the Defendants of the sum of $6,909 should be made a condition of granting the Defendants the relief they seek. The amount is such that I would not anticipate its payment creating a problem but against that possibility I propose to publish these reasons and defer making any orders but to the intent that if such payment is made I may then make unconditional orders setting aside the $244,000 loan agreement and the mortgage from the defendants to the Plaintiff. This course will obviate the necessity of the Registrar General having to concern himself with whether the sum of $6,909.00 has been paid. Unless the Plaintiff accepts that there is no $380,000 loan agreement, it would seem appropriate to also make a declaration to that effect. 241Counsel for the Plaintiff also asked that, if I were disposed to grant relief to the Defendants, I should adopt an approach similar to that adopted by Dunford J in National Australia Bank Ltd v Hall (Unreported 17 September 1993) where his Honour left an agreement - in that case a guarantee - and a mortgage in place but varied the terms so as to preclude compound interest and preclude the bank exercising its power of sale during the guarantor's lifetime. His Honour's obvious aim was to prevent the fraudster in that case (a child of the guarantor) obtain the benefit of the relevant property, shorn of the liability, after the mortgagor's death. Here, weight was placed on the fact that Con is a beneficiary under the Defendants' wills, made in 1988. 242There is undoubtedly something for the Bank's argument in this connection although I have decided not to adopt it. 243In the first place, the issue of unconscionability is one between the Plaintiff and the Defendants and I am not persuaded that the Defendants or their property should be burdened in the interests of the party guilty of unconscionable conduct, even if that conduct was inspired in the first instance by Con's actions. 244In the second place, it seems clear that the Plaintiff both through the method of business it adopted - presumably it saw the commercial advantages as outweighing the "Lo Doc" risks - and through its agent CHL is at least in part responsible for its own problems. 245And although I do not rely on them there are two further factors that militate against what the Plaintiff seeks. Part of the justification for that is that Con is a beneficiary under the Defendants' wills. There is no certainty that that will remain the situation. Also arguing against the imposition of the terms which the Plaintiff now seeks is the potential complexity of giving effect to the Plaintiff's aims in circumstances where the Defendants may wish to deal with their property prior to their death, perhaps selling it and then using the proceeds to acquire other property or to acquire rights to reside in a nursing home or similar, rights the nature of which, and the mortgage ability of which, are not presently known. 246I should say something on the question of costs. In the ordinary course the Plaintiff having been unsuccessful would be ordered to pay the Defendants' costs. However I have concern about the costs in this case. 247The Court Book contained 1998 numbered pages. The Plaintiff's Tender Bundle, which became Exhibit C, contained something over another 220 pages. Counsel for the Defendant tendered many more, apparently because they constituted identifiable files. 248But even considering only the Court Book, there was an enormous degree of duplication and, at least at first blush, unnecessary duplication. Each Home Loan Contract took the same, or virtually the same, printed form often of about 22 pages. In the Court Book there were: * 2 copies of the $380,000 contract, unexecuted - commencing at pages 331 and 1453, * 3 copies of the $380,000 contact, executed - commencing at pages 353, 1182 and 1477, * 1 copy of the $440,000 contract, unexecuted - commencing at page 402, * 3 copies of the $440,000 contact, executed - commencing at pages 97, 420 and 1489, * 5 copies of the $44,000 contract, unexecuted - commencing at pages 97, 420, 1197, 1489 and 1858, * 5 copies of the $44,000 contact, executed - commencing at pages 137, 561, 1207, 1530 and 1865, * CB 449 and 453 seem identical, * CB 461 and 463 seem identical, * CB 521 and 527 seem identical, and * CB 1393 or at least most of the annexures - CB 1401 - 1689 seem to be unnecessary copies of documents in volumes 1 and 2 of the Court Book. 249Apart from the issue of duplication, a question arises as to the conceivable relevance of unexecuted copies of the contracts. 250CB 720 - 1134 seems to be a copy of the Conveyancing File of Tress Cocks & Maddox. It is not obvious that about 99% is not irrelevant. One may possibly add CB 709 - 712 to this comment. 251I query also the relevance of most of the pages at CB 633 - 712. 252I have not attempted a comprehensive review and mention the documents referred to by way of example only. 253Another issue arises in relation to the affidavit of Jane Gurney of 9 July 2013. In it in the course of some 70 paragraphs she summarises or recites the very obvious nature of documents annexed. Her remarks add nothing or virtually nothing to what would be immediately apparent to any Judge on the first sighting of the documents. Many of the documents annexed seem utterly irrelevant to the issues in the case and while I accept that she often states the source of the documents, there is a far more efficient way of doing that. Paragraph 53 strikes me as a supreme example of waste. 254Having had to plough through the thousands of pages tendered in the case, in the mistaken view that they were tendered presumably because they were relevant, my impression - I put it no higher at this stage - is that at least 75% were unnecessary. 255Litigation is notoriously expensive. It becomes vastly more so when paper is multiplied unnecessarily. Not only are there the photocopying costs and the duplication of the unnecessary copies so that all lawyers involved have the same documents such as the Court Book, but the time spent in consideration of the documents also expands greatly. 256The matters to which I have referred - and I repeat these are only examples - makes me wonder whether orders for costs should go against some of the lawyers involved in this case. I raise the issue reluctantly because I realise, inter alia, that I am creating a potential conflict between the parties and their lawyers. However the issue is so serious, both in this case and generally for the way much litigation is conducted these days, that I have felt obliged to do so. 257I have already indicated I propose to defer the making of final orders in the substantive dispute. That period will also allow everyone involved an opportunity of considering what I have just said on the topic of costs. On the day the matter will be listed for, hopefully, the making of final orders by way of principal relief the course to be then followed with a view to decisions on the question of costs, including any method of quantification, can then be determined. 258I publish these reasons I stand the proceedings over until 30 September 2014 at 9:30am. ********** 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: 17 September 2014