Supreme Court New South Wales Medium Neutral Citation: Prime Capital Securities Pty Ltd v Elizabeth Ann Calleja; Calleja PJC Furniture Freighters Pty Ltd v Prime Capital Securities Pty Ltd; Elizabeth Ann Calleja v Prime Capital Securities Pty Ltd [2017] NSWSC 1694 Hearing dates: 31 October 2017, 1 – 2 November 2017, 6 – 8 November 2017 Date of orders: 06 December 2017 Decision date: 06 December 2017 Jurisdiction: Common Law Before: Wilson J Decision: (1) The Statement of Claim filed by Prime Capital Securities Pty Ltd on 20 May 2016 is dismissed. (2) Judgment is entered for the defendant (and claimant and cross-claimant). (3) It is declared that the Facility Agreement dated 12 February 2015, and exhibited as Exhibit D in these proceedings, is void ab initio. (4) It is declared that the mortgage signed by Elizabeth Calleja in favour of Prime Capital Securities Pty Ltd and registered on 4 May 2015 bearing reference number AJ464656C is void. (5) It is declared that the Deed of Guarantee executed by Elizabeth Calleja is void. (6) It is declared that the Deed of Guarantee executed by Michael Calleja is void. (7) It is declared that the General Security Deed executed by Elizabeth Calleja is void. (8) It is declared that the General Security Deed executed by Michael Calleja is void. (9) It is declared that the General Security Deed executed by Michael Calleja on behalf of Calleja PJC Furniture Freighters Pty Ltd is void. (10) Prime Capital Securities Pty Ltd is directed to forthwith execute and lodge at Land and Property Information a discharge of the mortgage referred to in order (4) above, in the approved form. (11) Prime Capital Securities Pty Ltd is directed to forthwith take all necessary steps to discharge the registration of the General Security Deeds referred to in orders (7), (8), and (9) on the Personal Property Securities Register. (12) Prime Capital Securities Pty Ltd is to pay the defendant's costs of these proceedings, on an indemnity basis. (13) Any application for any further order as to costs by the Defendant is to be filed and served by 4pm on 11 December 2017. Any reply is to be filed and served by 4pm on 13 December 2017. Any such application will be dealt with on the papers in chambers. Catchwords: REAL PROPERTY – claim for possession – question of whether mortgagee can establish debt – question of misrepresentation as to loan contract – terms of purported contract - authority to disburse monies – question of validity of mortgage – claim of unconscionable conduct by lender Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) Real Property Act 1900 (NSW) Cases Cited: Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261 Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62 Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132; [2005] FCAFC 226 Qantas Airways Ltd v Cameron (1996) 66 FCR 246; [1996] FCA 1483 Category: Principal judgment Parties: Prime Capital Securities Pty Ltd (plaintiff; defendant, cross-defendant) Elizabeth Ann Calleja (defendant) Calleja PJC Furniture Freighters Pty Ltd (claimant / cross-claimant) Representation: Counsel: Mr M Young SC – plaintiff / defendant / cross-defendant Ms N Obrart – defendant / claimant / cross-claimant Solicitors: Summer Lawyers – plaintiff / defendant / cross-defendant Atticus Lawyers – defendant / claimant / cross-claimant File Number(s): 2016/00155378; 2016/00260959 Publication restriction: None Judgment 1. WILSON J: Over six days in October and November 2017 the Court heard evidence and submissions in this matter, a claim for possession of property at Heatherbrae by the plaintiff, Prime Capital Securities Propriety Limited ("Prime"), against Elizabeth Ann Calleja, the defendant; together with the associated claim and cross-claim filed against Prime by the company of which Mrs Calleja is the sole director, Calleja PJC Furniture Freighters Propriety Limited, and by Mrs Calleja ("Calleja PJC" and, collectively, "the Calleja interests"). 2. Prime is a finance company which makes short term loans at high rates of interest. Mrs Calleja is the sole shareholder and director of Calleja PJC, a small company which she manages with her husband, Michael Calleja. 3. Over late 2014 into early 2015 Calleja PJC was in discussion with Prime about a loan of monies for the purpose of buying a small number of second hand trucks, to replace trucks rented by the company. In late April to May 2015 Prime paid the sum of $290,000 to various entities, including itself, purportedly as the payment of loan monies to Calleja PJC. The loan was secured by mortgage against Mrs Calleja's home at Heatherbrae. 4. The claim for possession relates to Prime's claim to be entitled to the Heatherbrae property, in default of repayment of the purported loan. The Calleja interests dispute the claim, contending that the monies paid out as a loan to Calleja PJC were paid without authority and, in any event, Prime conducted itself in an unconscionable manner, such that any loan agreement, whatever its terms, should be set aside. THE PLEADINGS 1. By Summons filed on 20 May 2016 Prime claims judgment in its favour for possession of the whole of the land situated at 2213 Pacific Highway Heatherbrae ("the Heatherbrae property"), together with an order for vacant possession and related orders. Prime pleads its case as follows. The Defendant is the registered proprietor of the property and remains the sole director and shareholder of the company Calleja PJC Furniture Freighters Pty Ltd (CAN 151 396 002). Facility: That on or about 19 November 2014 the Company requested the plaintiff agreed to enter into an agreement with the following salient terms: a. The plaintiff would advance to the Company the sum of $360,000.00 (the 'principal'); b. The company agreed to repay the principal together with interests and costs within 12 months from the advance or upon termination of the agreement, whichever is the earlier (the 'Due Date'); c. The defendant; i. guaranteed the Company's obligations under the Agreement to the plaintiff; and ii. agreed to secure the performance of the Company's obligations to the plaintiff under the Agreement by way of a second registered mortgage over the property. (Collectively, the 'Agreement'). The agreement was wholly in writing and consisted of the following documents: i. Mortgage; ii. Memorandum; iii. Security Deed; iv. Deed of Guarantee; v. Authority and Direction; vi. Business purpose Declaration; vii. Declarations of Legal Advice; viii. Identification certificates; ix. Asset warranty; x. Real estate warranty. On 17 April 2015 – the principal was advanced to the company. A term of the agreement being that the Company would repay the principal by 17 April 2016. The Guarantee: The defendant provided the plaintiff with a guarantee to secure the obligations under the agreement - Clause 2 of the Deed of Guarantee. The defendant would pay any money to the plaintiff that the company failed to pay. Mortgage: To secure the obligations under the guarantee, the def. granted the plaintiff a second registered mortgage over the property (Memorandum no. AG588734). The following being express terms of the mortgage: a. "An event of default would occur under the Mortgage if the defendant failed to comply with any demand which plaintiff made on the defendant pursuant to the guarantee." (Clause 10.1 of the Memorandum) b. "Following an event of default, the plaintiff was entitled to enter into possession of the Property." (Clause 10.2 of the Mortgage). Default and Demands: The Company defaulted under the terms of the Facility by failing to make interest repayments when due (the 'Default') (interest due not being paid in June 2015, September 2015, November 2015, and April 2016). The plaintiff informed the company of the default by letters dated 2 June 2015, 2 September 2015, and 2 April 2016. The company/defendant have failed to repay the Principal by the Due Date. Because of the failure and pursuant to the terms of the Mortgage, the plaintiff is entitled to take possession of the property. 1. The defendant, Mrs Calleja, denies Prime's claim and pleads in her defence (in summary form) that the company agreed to enter an agreement in or around April 2015 which involved Prime making available to it a cash advance facility up to a limit of $360,000, from which Calleja PJC could (but was not obliged to) draw funds, interest being payable only on the drawn amount. The defendant denies that Calleja PJC drew any monies from the facility, or alternatively, if monies were drawn, that there was authorisation for such withdrawals. 2. Mrs Calleja asserts in her defence that, as the company did not draw any funds from the loan facility, no consideration was given by the plaintiff for the Mortgage or Deed of Guarantee. 3. The defendant seeks a declaration that she has no liability under the Deed of Guarantee and no liability under the Mortgage. She asks for an order that the plaintiff discharge the mortgage it holds over the Heatherbrae property. 4. The defendant has filed a cross-claim against Prime in which she seeks 1. a declaration that the Guarantee is void ab initio, voidable, or discharged by law pursuant to s 12GM of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"); 2. further or alternatively a declaration that the Mortgage signed by her is void or liable to be discharged pursuant to s 12GM of the ASIC Act; 3. an order that the Mortgage does not secure any amounts payable to Prime; 4. other related orders relevant to the discharge of the mortgage and registration of the Guarantee; 5. an order that no amount of money is payable by her to Prime; and 6. damages. 1. Calleja PJC separately filed a Further Amended Statement of Claim "the FA Claim"), in Court on 2 November 2017 by leave. The FA Claim seeks: 1. A declaration that the debits by the defendant to the plaintiff's Facility on or about 5 May 2015 were without authority; 2. A declaration that the Facility Agreement is void ab initio or varied or further or alternatively such other order pursuant to s 12 GM of the ASIC Act as this Honourable Court deems fit; 3. Damages pursuant to s 12 GF of the ASIC Act; 4. An order that the defendant take all necessary steps to discharge the registration of the General Security Deed on the Personal Property Securities Register forthwith; 5. Damages; 6. Restitution of the sum of $87,140, or such other amount as this Honourable Court deems fit; 7. Interest; 8. Costs; 9. Any further or other orders as the Court deems fit. 1. Calleja PJC pleads that it entered an agreement with Prime in or about April 2015 for Prime to provide a cash advance facility on a progressive basis, the purpose of the funds being to purchase semi-trailers for the company's business. It pleads that Prime engaged in unconscionable conduct within the meaning of s 12CB of the ASIC Act, and that the cash advance facility was misrepresented by Prime, with Prime's unconscionable and misleading and deceptive conduct causing loss and damage to it. A charge and security was granted to Prime to secure the cash advance facility. Subsequently, Prime made payments from the cash advance facility which were without authorisation, and do not constitute a debt by Calleja PJC to Prime. It further pleads: Loan Facility Agreement: That in or about April 2015, the plaintiff and the defendant entered into an agreement in writing in the following terms, among others: The defendant would make available to the plaintiff a cash advance facility on a progressive basis (facility) (clause 2.1, clause 2.3). That the purpose of the Facility was to provide capital to replace three semi-trailers for the plaintiff's freight business (facility purpose) (clause 2.3, item 10). The plaintiff must pay interest at a rate of 2% per month in respect of any sum drawn down (clause 5, schedule 1). The plaintiff must pay to the defendant a loan management fee of 0.2% of the Facility Limit per month, on and from the date of first draw down on the Facility (Loan Management Fee (clause 6.5, definitions). General Security Deed: By General Security Deed dated 4 May 2015 registered on the Personal Property Securities Register, the plaintiff granted to the defendant a charge and security interest over its undertaking assets and property to secure payment of any money which became due to the defendant by the plaintiff pursuant to the Loan Facility Agreement (General Security Deed). Payments made without Authority: On or about May 2015 the defendant caused the following payments to be made and represented to the plaintiff that it had made the following payments: a. $8,808.58 to Gadens; b. $3,093.33 to itself; c. $7,910.00 to Prime Capital Securities Administration Pty Ltd; d. $6,805.97 to Capital Finance Australia Limited; e. $2,571.57 to Kemp Strang; f. $62,877.61 to Baycorp Collections PDL (Australia) Pty Ltd; g. $6,380.00 to Fast Commercial Loans; h. $152,496.44 to Bankwest; i. $34,676.50 to the plaintiff's NAB account BSB: 082 ***; Account # 946****** (Collectively, the payments). The Company did not make any draw downs on the facility […] or, alternatively, such draw down was not made at the Company's request, and accordingly there was no consideration given for the Deed of Guarantee. 1. As at June 2017 Calleja PJC claims that it has suffered loss and damage quantified at $587,408.99. THE EVIDENCE The Case for Prime Documentary Evidence 1. The principle witnesses for Prime were its sole director and secretary, Paul Scanlon, and its former employed investment director, Peter Ainsworth. These two witnesses gave evidence by affidavit and in person. 2. Mr Scanlon swore 5 affidavits including that which verified the pleadings, and gave oral evidence over three days on 31 October 2017, 1 November 2017, and 2 November 2017. 3. In his first affidavit of 7 September 2016, Mr Scanlon deposed that, on 28 October 2014 Calleja PJC made an inquiry with a company known as Fast Commercial Loans regarding a loan to the company. An email chain in evidence indicates that the inquiry to Fast Commercial Loans was made by a telephone message left at 11.57am that day by "Frank". The "Fast Commercial Loans team" responded at 12.20pm asking for details of loan amount, purpose, identification and company details. The brief information was provided the same afternoon and, apparently in response to a telephone request, the Marketing Manager for Calleja PJC, Frank Bugeja, provided an estimate of the value of "the property" the following morning, 29 October 2014. 4. The loan inquiry was referred to Prime and, the very same day, 29 October 2014, Prime wrote to Calleja PJC at an address in Melbourne conditionally offering the company a commercial loan facility of $450,000. In the accompanying loan documentation the borrower was recorded as "Calleja PJC Furniture Freighters Pty Ltd", with guarantors noted as Elizabeth and Michael Calleja. The facility offered was described as a "Commercial Loan" with the "Authorised Purpose" given as "Capital to replace three semi-trailers for freight business". The "facility limit" was $450,000. Calleja PJC and Mr and Mrs Calleja individually were all required to execute General Security Agreements as a condition of the loan, and Mrs Calleja was required to allow the loan to be secured against property she owned at Heatherbrae, by execution of a mortgage. 5. A copy of the loan offer was signed by Mr Calleja on behalf of Calleja PJC, and separately by Mr and Mrs Calleja, on 19 November 2014. The signed document was returned to Prime. A $2,000 administrative fee was paid by Calleja PJC on 27 November 2014. 6. Prime then took steps to have the Heatherbrae property valued, before instructing its then lawyers, Gadens, to prepare loan documentation. The loan documentation was issued to the Calleja interests. Subsequently, Prime obtained a valuation of a second property owned by Mrs Calleja, a residential property at Minimbah. 7. In his affidavit Mr Scanlon exhibited various email inquiries of creditors of Mrs Calleja, inquiries made by Prime with a view to ascertaining the extent of debts secured against the Heatherbrae and Minimbah properties, so that Prime could ensure priority of its proposed mortgage over the Heatherbrae property. Mr Scanlon suggests that the Calleja interests were aware of these inquiries and understood their purpose. 8. At some point the intended loan amount was varied by Prime from $450,000 to $360,000, and later to $290,000, on the basis of the available security. 9. Mr Scanlon asserts that he had a telephone conversation with Frank Bugeja on 1 April 2015 in which he obtained Mr Bugeja's "instructions" to pay out loan arrears and valuation fees connected with a Bankwest loan, [a loan to Mrs Calleja personally and secured over her properties]. He deposes that, on 17 April 2015, he sent an email to Mr Bugeja requesting "account details as to where the surplus loan draw down could be paid" ([23] CB175). The email in fact asks for "account details where your loan draw down can be paid to" (CB 329). 10. Mr Scanlon says that, on the same day, he had a telephone conversation with Mr Calleja in which he told him that, "Just ringing to confirm that settlement has been partially completed today, and we have paid out the Bankwest mortgage including arrears, and the Baycorp debt. We are now just waiting on the signed financial advice, insurance and your account details and we can send the balance of the funds to you. Can you get that for me?" [24] CB 175. 1. Mr Scanlon conceded in cross-examination that his assertion in the call as to the Bankwest mortgage was false. [Mr Calleja denies having any such conversation in any event]. 2. Mr Scanlon relied upon heavily redacted telephone bills, exhibited by him to support his claims with respect to these telephone calls. The bills are at Court Book ("CB") 487 – 490 and show the following calls (being the only calls visible as a consequence of the redactions): Date Time Origin Destination Tel No Min:sec 17 Apr 04:29pm CLARENCE S Mobile 041*****03 0:01:00 [illeg] 10:39am Coolangai Mobile 041*****45 0:03:00 13 Apr 11:06am CLARENCE S Mobile 041*****45 0:02:00 17 Apr 12:41pm Sydney Cbd Mobile 041*****45 0:01:00 17 Apr 04:07pm CLARENCE S Mobile 041*****45 0:01:00 17 Apr 04:21pm CLARENCE S Mobile 041*****45 0:01:00. 1. The number ending in **03 is that of Mr Bugeja; the number ending **45 is that of Mr Calleja. 2. Mr Scanlon deposed that, also on 17 April 2015, Prime advanced $290,000 to Calleja PJC "as per the Settlement Sheet", and the company was advised by letter of the draw down of the funds. In his second affidavit of 14 October 2016 Mr Scanlon said he had a memory of personally posting the settlement letter and associated documents by dropping the envelope into a postbox on the corner of Market and York Streets in Sydney. 3. Prime's case is that the disbursal of the funds as said to be evidenced by the Settlement Sheet was in accordance with the instructions of Calleja PJC, despite the absence of any instruction document or other written record. 4. On 21 April 2015 the "surplus loan draw down" was paid to a bank account for Calleja PJC [the money being received, on bank records in evidence, on 5 May 2015]. 5. The Settlement Statement (CB 331) records the following payments and dispersals: "Disbursements: Legal fees $4,950.00 Lodgement fees, duty and outlays $3,858.58 Application fee $0 Discount establishment fee $7,250.00 Interest $2,513.33 Loan Management Fee $580.00 Valuation fees $660.00 Balance at borrower's direction $272,188.09 Total: $292,000.00 Disbursement of Funds Available: 1. Gadens Lawyers $8,808.58 2. Prime Capital Securities Pty Ltd $3,093.33 3. Prime Capital Securities Administration $7,910.00 4. Capital Finance Australia Ltd $6,805.97 5. Kemp Strang $2,571.57 6. Baycorp Collections PDL Australia $62,877.61 7. Fast Commercial Loans $6,380.00 8. Bankwest $152,496.44 9. Calleja PJC $41,056.50 Total: $292,000.00" 1. In evidence Mr Scanlon conceded that the figure of $41,056.50 said to have been paid to Calleja PJC was incorrect, and should have read $34,676.50. 2. After the asserted draw down of the funds, Mr Scanlon says that Prime received an executed second registered mortgage over land granted by Mrs Calleja, together with three General Security Deeds, executed by or for respectively, Elizabeth Calleja, Michael Calleja, and Calleja PJC. 3. A mortgage was registered by Prime on 4 May 2015 over the property at Heatherbrae. The document itself (CB 332) was signed by Mrs Calleja as mortgagor, and witnessed by R.J. Shacklady. The date of the document, entered in a hand different to that of either Mrs Calleja or Mr Shacklady, is 4 May 2015. 4. Deeds of Guarantee were also received. That signed by Mrs Calleja (CB 286) bears the signatures on each page of Mrs Calleja as guarantor and Mr Shacklady as witness. The execution page, at CB 300, is similarly signed and witnessed. A second such deed was executed by Mr Calleja and witnessed in the same way by Mr Shacklady (CB 301). In each case, the deed is both a guarantee and an indemnity. 5. Subsequently, it is contended that Calleja PJC failed to make interest payments by the time and date specified, and default notices were issued to the company within a day or so of the dates required for payment, being 1 June 2015, 1 September 2015, 1 November 2015, and 1 April 2016. 6. It was Mr Scanlon's evidence that, since the loan monies were drawn down on 17 April 2015, interest accrued from that date, and the loan amount was due to be repaid in full by 17 April 2016. The principal was not repaid by that date. On 28 April 2016 he instructed his solicitors (by this time Summer Lawyers Pty Ltd) to commence recovery action on the loan. 7. On 11 May 2016 Prime caused a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) to be issued to the Calleja interests. The notice [wrongly] demanded payment of $360,000 by way of the principal. 8. In his second affidavit of 14 October 2016 Mr Scanlon responded to matters set out by Mrs Calleja in her defence to Prime's claim. 9. Mr Scanlon's third affidavit was sworn on 31 March 2017 as a response to the affidavit evidence of Michael Calleja and Frank Bugeja. 10. Peter Ainsworth swore two affidavits and gave oral evidence before the Court. 11. In his affidavit of 14 October 2016 he said he was, in the relevant period, employed by Prime as investment director. 12. Mr Ainsworth said that he attended a meeting with Mr and Mrs Calleja and Frank Bugeja at Calleja PJC's depot at Chullora in November 2014 to discuss the loan proposal with them. He recalled seeing them sign the loan offer document, which he had amended by hand to note that the facility could be "rolled over" for a further 12 months, being additional to the contractual 12 month repayment period. He has no recollection of the Callejas asking for the loan to be repayable over a 3 year period rather than a 12 month period, and did not believe that any such request was made. 13. He exhibited an email which he sent to the Callejas (to Callejafreighterssydney@*****.com) which read, "Hi Michael / Liz / Frank, Confirming: 1) Interest is only payable on the funds drawn down 2) Provided the account is kept in good order the facility will be rolled over Best regards, Peter" (CB 464). 1. In a second affidavit of 10 April 2017 Mr Ainsworth denied that he ever had a conversation with Mr Calleja in which he had told Mr Calleja that he did not need to draw down more of the loan facility than he wished, and only had to repay the amount actually drawn out. He also denied telling Mr Calleja that a 3 year term for the loan "shouldn't be a problem", or amending the offer document by hand to that effect. He denied the proposition that Mrs Calleja had been very clear in stating that the company could not repay the loan in 12 months, or that he had assured her 3 years would be acceptable as the term of the loan. 2. Mr Ainsworth denied contacting Mr Calleja daily to ask him for the signed loan contracts. He said that he did not tell Mr Calleja that the Callejas' solicitor [who had advised the Callejas to have nothing to do with the Prime loan due to its very unfavourable terms] did not know what she was talking about. He denied telling Mr Calleja that he would get a solicitor for them, or making such arrangements, as that was not his usual practice. Similarly, he denied telling Mr Calleja that he would arrange for an accountant to see him [to provide financial advice as to the loan], although he conceded that he knew the name of the accountant who purportedly provided financial advice to the Callejas. 3. Although he could not say when the conversation occurred Mr Ainsworth gave the details of a discussion with Mrs Calleja in which he explained that Prime would have to have her properties valued so that it could pay out some or all of her debts to "obtain its security position". He deposed that Mrs Calleja responded "OK" and promised to send details of her debts. 4. Robert Shacklady is a solicitor who swore an affidavit for Prime on 18 May 2017, and was called to give evidence on 31 October 2017. 5. Mr Shacklady deposed that he was the principal solicitor of Coopers Law Practice, practicing from an address in Botany. Mr Shacklady's affidavit was drafted in response to Mrs Calleja's affidavits of 29 September 2016 and 13 February 2017. In it, he denied acting as Prime's solicitor relevant to the loan agreement, asserting instead that he had acted for the Callejas. He said that he attended a meeting with Mr and Mrs Calleja on or around 12 February 2015 at Chullora, for the purpose of advising them about the proposed loan agreement with Prime. He said that he took with him to the meeting a set of the proposed loan documents, and spent 2 or 3 hours with Mr and Mrs Calleja explaining the legal effect of the documents. He expressed no opinion to them as to its commercial viability. 6. Mr Shacklady said that, after he had explained the documents, Mr and Mrs Calleja appeared to understand his advice, and the documents were executed. He said that he left the executed documents with them in case they wished to ask further questions. Other Evidence 1. Prime tendered some documentary material in its case. 2. Exhibit 1 is an unredacted copy of Mr Scanlon's telephone bills issued on 10 March 2015, 10 April 2015, and 10 May 2015. 3. Exhibit 2 is a title search and caveat over Mrs Calleja's Heatherbrae property. 4. Exhibit 3 is a file note of 17 December 2014 from the legal file held by Lea Smith, formerly solicitor for the Callejas. 5. Exhibit 4 is a letter from Gadens to Ms Smith dated 5 December 2014, and received on 11 December 2014, which accompanied the loan and other documentation sent to Ms Smith. 6. Exhibit 5 is an email of 17 April 2015 from a Gadens solicitor to Mr Scanlon referring to the pay down figure to be paid to Bankwest at settlement of the Calleja loan, together with a copy of a receipt dated 5 May 2015 showing payment by cheque of the sum of $152,496.44 to Bankwest at "King Street Store", and the ANZ bank cheque itself, which is dated 5 May 2015. 7. Exhibit 6 is a document showing information held by ASIC concerning Calleja companies. Oral Evidence Paul Scanlon 1. Mr Scanlon has been in the business of finance for 20 years. 2. Mr Scanlon commenced his evidence in chief by correcting a number of errors in the affidavits he had sworn. In cross-examination, he was forced to acknowledge other errors, of a more material nature. Even his affidavit verifying the pleadings as correct was in error, since the pleading itself referred to the principal advanced to Calleja PJC as $360,000, when the correct amount was $290,000 (T34:35). 3. The same error was made on the s 57(2)(b) Real Property Act notice issued on 11 May 2016: it referred to the unpaid principal as $360,000, rather than the actual principal of $290,000. Mr Scanlon was, however, reluctant to concede the error: "Q. The parts of the notice that I have taken you to, they are not true are they? A. The answer is somewhat complicated in the sense that we instruct our lawyers to prepare the notices, as is the case here they have referred to the agreement and issued a notice. We will have seen it afterwards and I have not corrected it in the sense the balance owing is not correct. It is probably more than 360,000 at that point. The principal is not correct, no the principal was $290,000 but the nature of it is that more than that amount was owed, so the notice was issued and done its job" (T37:01 – 08). 1. He acknowledged having received the payment of a $2,000 administrative fee from Calleja PJC on 27 November 2014 and, by 18 December 2014, having "probably" lodged a caveat over Mrs Calleja's home (that is, at a time when the loan agreement had not been executed). He asserted that the notice to Mrs Calleja that such action would be taken on signing the conditional letter of offer was contained in a sentence of the offer terms which stated, "You and the Guarantor(s) charge all present and after acquired property in favour of the Lender in respect of monies payable to the Lender […]" (CB 201). 1. (The particular sentence takes up a paragraph of dense type in small font and contains 102 words, importing legal rather than everyday concepts.) Mr Scanlon thought this notice was "clear" (T27:19). 2. The loan agreement itself was not dated, a practice Mr Scanlon regarded as normal. He agreed that the loan was described in its terms as a "cash advance facility" made available on a progressive basis not exceeding the limit, and acknowledged that the agreement required the monies advanced to be expended only for the purpose of replacing three semi-trailers for a freight business. Prime had required the Callejas to sign statutory declarations confirming the business purpose to which the funds would be applied. 3. He accepted that a number of clauses in the agreement specifically required the funds to be applied to the stated commercial purpose, and no other. 4. Mr Scanlon was asked about the certificate of financial advice required to be completed as part of the loan progress, being ultimately forced to acknowledge that his assertion in his affidavit that the certificate was dated 12 February 2015 (that being the same date as that upon which the Callejas' executed the loan agreement) was false, the certificate apparently being executed on 24 April 2015, the date it bore. "Q. So the statement in paragraph 10(e) and (f) that the independent advice certificates are dated 12 February is false? A. I am not sure. Am I referring to the legal advice certificates there or the financial advice certificates? Oh no, I am referring to the financial advice certificates on page 40 to 41 and yes, I agree with you they are dated 24 April not 12 February" (T30:20 – 25). 1. He later conceded that the financial advice certificate was executed well after the date of the loan agreement and, indeed, after the funds (on his evidence) had been drawn down and dispersed: T39:08. 2. Mr Scanlon acknowledged that clause 3.1 of the loan agreement provided for progressive drawdowns, such that the borrower could draw finance on a progressive basis up to but not exceeding the limit. Clause 3.2(h) is a condition requiring the obligor (being Calleja PJC) to have received independent legal advice as a condition precedent to any drawdown of funds. He conceded that the date by which an initial drawdown had to be made for the agreement to have effect was 20 December 2014, "unless we waive that condition", something he asserted the company had done "by our actions". He acknowledged there was no written record of the waiver: T31. 3. There was similarly no written record of a variation in the amount of the facility. The letter of offer of 29 October 2014 referred to an amount of $450,000; the facility was subsequently to be provided with a limit of $360,000; the limit in fact provided was $290,000. The Callejas were not notified of that in writing: "Q. Where is the formal notification to the Callejas of the reduction of the amount of the facility? A. It is our practice to explain these things to clients and that occurred in conversation between Peter Ainsworth and the client. Q. There is no written notification to the client of the reduction of their proposed facility from $360,000 to $290,000? A. I don't believe so" (T34:45 – T36:02). 1. Mr Scanlon was cross-examined about a curious feature of the loan agreement in evidence as that alleged to have been signed by the Callejas (the original being Ex. D), a feature about which he was able to give no explanation. 2. The loan agreement which, at the time he gave his evidence, had not been produced by Prime in the original, is Ex. PS-1 pp. 72 -107 (CB 250 – 285) in copy. It is a document of 33 pages numbered consecutively 1 - 31, 31, 32; that is, there are two pages numbered 31, that being the execution page. The first page 31 bears the apparent signature of "E Calleja" on behalf of Calleja PJC, and her name in type, but it is otherwise incomplete. The signatures of Mr and Mrs Calleja as guarantors are absent, and there is no endorsement from any witness. At the base of the page, in common with all pages of the agreement other than the second page 31, is what appears to be a code, "20418014.1 ARA ARA". 3. The second page 31 contains the execution. Mr Calleja's signature has been added on behalf of Calleja PJC, and Mr and Mrs Callejas' signatures have been added to the Guarantor section of the page, with the signature, name and address of Mr Shacklady as witness. At the base of the page (and on this page alone) is the code "20418014.1 ARA EVW". (The original was only produced towards the end of the hearing of the matter. It was subsequently tendered by the Calleja interests as Ex. D. The paper of the second page 31 and upon which these endorsements appear is quite different in colour and weight from the paper comprising the balance of the agreement.) 4. Mr Scanlon was asked, "Q. It looks like, does it not, that the second page 31 has been inserted into this document from some other document? A. I could not comment on that. I see the different references on the bottom but-- Q. You don't know anything about that? A. No" (T32:34 – 40). 1. He said that he was not aware of any pages of the agreement being changed. 2. Agreeing that the loan agreement was executed on 12 February 2015 Mr Scanlon saw no difficulty with the fact that the General Security, Mortgage, and Guarantee and Indemnity, were all dated 4 May 2015, even in circumstances where Mrs Calleja had signed a Declaration by Guarantor for the Borrower (CB 214) on 12 February 2015 declaring that she had signed these particular documents. 3. Mr Scanlon confirmed that he had prepared and personally mailed the letter to the Callejas dated 17 April 2015 confirming settlement of the loan and dispersal of funds "in accordance with your instructions". He agreed in cross-examination that there was no written document containing the instructions of the borrower or even so much as a file note recording an oral instruction as to the disbursal of the loan amount of $290,000. Some of the amounts recorded on the Settlement Sheet were not even supported by an invoice or other proof of amount required to be paid out. 4. The sum of $8,008 was recorded as paid to Gadens Lawyers, an amount Mr Scanlon justified as authorised by the borrowers in the loan agreement, containing as it did a reference to the lenders costs being paid, together with "conversations I had with the client to complete settlement" (T39:33). (It should be noted that Mr Scanlon's practice was not to make file notes of conversations such as these, so there is no contemporaneous record of any conversation in which he discussed payment from loan funds of Prime's legal fees with Calleja PJC: T40:33 – 38). 5. Mr Scanlon was not able to point to an invoice from Gadens at or prior to the date of settlement evidencing legal costs, but suggested the firm "will have told us the number" if an invoice was not provided (T39:42). Even though the accrual of interest said to be payable by Calleja PJC commenced on 17 April 2015 against monies disbursed, Mr Scanlon would not concede that no payment was in fact made to Gadens on that date, as asserted by the Settlement Sheet. He was apparently unwilling to acknowledge the difference between a payment made, and a payment instructed to be made: "Q. There was in fact no amount paid to Gadens Lawyers on 17 April 2015, was there? A. Well on 17 April I had instructed our funding lines to be drawn down and paid to Gadens Lawyers and from that - if you are referring to the invoice, that was paid from their trust account later on but monies were directed to be paid to Gadens on the 17th. Q. There was no disbursements of funds to Gadens Lawyers on 17 April 2015 was there? A. Again, I repeat there was instructions to pay Gadens on the 17th. Q. Could you turn to Court book Volume 3 (handed to witness), p 843 and have a look at p 844? A. Yes. Q. The $8,808, to which you refer to in the settlement statement, was disbursed by Gadens to itself on 12 May 2015 wasn't it? A. Yes. Q. I am suggesting to you that in respect of item 1 of the letter and settlement statement on 17 April on pp 330 and 331 of the Court book, that statement is false, that disbursement had not been made? A. I don't agree with that" (T40:40 - T41:12). 1. According to the Settlement Sheet, Fast Commercial Loans received the sum of $6,380.00 paid to it on 17 April 2015 by Prime from the loan funds. Mr Scanlon said that the payment represented payment of a fee to a loan broker, who "would have" informed Prime of the amount due (T52). Mr Scanlon insisted there "would have been an invoice" from Fast Commercial Loans, although no invoice had ever been produced by the plaintiff in response to requests from the defendant. He conceded that there was nothing in the loan agreement as to payment of a brokerage fee or how any such fee was calculated. (There is a hand endorsement on the offer document noting a broker fee of 1%, considerably less than $6,380) 2. An amount of $3,093 Prime paid to itself from the loan monies was explained as payment of interest of $2,513.33 and a loan management fee of $580. The authority to pay interest and a management fee was, Mr Scanlon said, to be found in clauses 5 and 6 of the loan agreement, and in "conversations I had with the clients on 17 April" [2015] (T40:30). 3. Again, although the amount of $3,093 was not in fact paid out until 5 May 2015, Mr Scanlon maintained that there was no inaccuracy or falsity in the Settlement Sheet, which recorded payment as made on 17 April 2015 (thus giving rise to interest payable from that date). "Q. The amount of 3[0]93, representing interest that Prime disbursed to itself on 17 April, that amount was not in fact disbursed on 17 April was it? A. Not in the way you are describing it, no. Q. The amount was not drawn down in accordance with what is said on p 330 of the Court book, was it? A. Well, I say that it was" (T41:17 – 23). 1. The Settlement Sheet recorded a further payment made on 17 April 2015 to Prime Capital Security Administrations [not the plaintiff, but an associated company] of $7,910, in circumstances where the evidence (CB 844) established payment of the sum on 5 May 2015. Mr Scanlon again refused to concede the difference, even though interest on the amount was calculated on the basis of payment on 17 April 2015: T41. He disagreed that there was no instruction from the Callejas to pay this fee from the loan monies, but there is no written note of such an instruction, and Mr Scanlon was not able to point to any particular instruction given orally. 2. Mr Scanlon relied upon "many things" as the borrower's instructions to discharge a debt of $6,805 owed by Calleja PJC to Capital Finance Australia: "Q. Where is the instruction from the company to pay its debt to Capital Finance? A. I would read many things, starting with our initial approval which said that we needed a second mortgage, which meant the caveats needed clearing; correspondence around our loan documents which referred to caveats needed clearing; conversations I had with the borrower and the guarantors and their representatives throughout the process before settlement and my conversations on the day of 17 April" (T42:40 – 47). 1. It would seem that the motivation for Prime in making the payment to discharge the debt to Capital Finance Australia was to secure Prime's interests. Mr Scanlon deposed, "We knew that they had a caveat on title, which needed clearing, so there were enquiries made as to the amount and how to clear it so that our second mortgage could be registered" (T42:36 – 38). 1. Mr Scanlon accepted that it was in Prime's interests to remove the caveat Capital Finance held over Mrs Calleja's Heatherbrae property, to permit it to register a second mortgage over the same property. 2. As to a payment of $2,571 made to Kemp Strang, referred to in the Settlement Sheet as having been made on 17 April 2015, the following evidence was given: "Q. Where is the instruction from the company to pay Kemp Strang $2,751 prior to 17 April 2015? A. I would repeat the same answer. They were connected with the two caveats that needed to be removed so that we could have a second mortgage, which was the first premise of the transaction in the offer letter, which was then outlined in documents which went out which were for the client to sign and consistent with the conversations I had with the borrower, the guarantor and representatives at the times, various occasions, including 17 April. Q. There was no instruction as such from the company is what you were saying; you were relying on the facility documentation to pay that amount? A. No, I had conversations with representatives of the borrower along with the signed offer letter and signed agreement, which specifically they needed to be a secondary mortgage. Q. Where is the conversation with any representative of the borrower, which authorise Prime to pay Kemp Strang $2,571? A. Where are the conversations? Q. That authorise the payment, instructs or authorises the payment of that amount? A. They occurred on 17 April with Frank and Michael" (T45:01 – 22). 1. It is useful to set out the conversations Mr Scanlon referred to as constituting an instruction from Calleja PJC to pay Kemp Strang this amount of money from loan funds. He referred firstly to [20] of his affidavit of 7 September 2016, which says: "On 1 April 2015 I recall calling Frank Bugeja of the Company on the Company's telephone number. We had a conversation in words to the following effect: PS: 'Hi, it's Paul from Prime Capital. Is Frank there?' Operator: 'Yes, I'll get him.' FB: 'Hi, it's Frank.' PS: 'Hi, it's Paul from Prime Capital. I confirm Bankwest now have their valuations, but require loan arrears and the valuation costs to be paid.' FB: 'Can that be paid from the loan with Prime?' PS: 'Yes, it can. I'll let the[m] know.' FB: 'Thanks'." 1. A further conversation of 17 April 2015 with Mr Bugeja detailed in his affidavit of 14 October 2016 was also pointed to by Mr Scanlon. He asserts that conversation occurred as follows: "On 17 April 2015 I telephoned Frank Bugeja and I asked for account details of where to pay the surplus funds at settlement. We had a conversation in words to the following effect: Me: Hi Frank, its [sic] Paul from Prime Capital. We're ready to settle. After fees and payments to Bankwest and Baycorp there is a surplus to pay you. Could you please let me know the account details of where to send the surplus funds after settlement? Frank: I'll email them to you" ([13] CB 434). 1. Frank Bugeja, with whom Mr Scanlon asserts that he had these conversations is the Marketing Manager for Calleja PJC; he is not an officer of the company and has no authority to make financial decisions binding the company. That was conceded by Mr Scanlon: T46:12. 2. Mr Scanlon also pointed to [24] of the 7 September 2016 affidavit as evidence of further authority. That paragraph says: "On 17 April 2015 I recall calling Michael Calleja of the Company on his mobile telephone number 0412 [***] [***]. We had a conversation in words to the following effect: PS: "Hi, it's Paul from Prime Capital." MC: "Hi Paul" PS: "Just ringing to confirm that settlement has been partially completed today, and we have paid out the Bankwest mortgage including arrears, and the Baycorp debt. We are now just waiting on the signed financial advice, insurance and your account details and we can send the balance of the funds to you. Can you get those for me?" MC: "Ok thanks, I'll get Frank from the office to send them to you." PS: "Thanks." 1. Mr Calleja similarly is not an officer of Calleja PJC (also conceded by Mr Scanlon at T46:18 and T77:29) but, even if he had authority over financial matters, it should be noted that according to its terms, this conversation occurred after settlement was said to have been effected. It is, in any event, an untrue account of what Prime had done, as Mr Scanlon conceded, the Bankwest mortgage not having been "paid out": T77 - T78. 2. Mr Scanlon relied upon Ex. 1 as evidencing the 17 April 2015 calls to Mr Bugeja and Mr Calleja. The document is a copy of Mr Scanlon's telephone bill. 3. Regrettably, none of the telephone conversations Mr Scanlon says he had, evidencing as Mr Scanlon asserts they do authority to disburse substantial sums of money, was recorded by a contemporaneous file note: T45:50. 4. Precisely the same undocumented telephone conversations with persons who were not officers of the company, together with some emails, were relied upon by Mr Scanlon in his evidence as giving Prime authority to pay sums of $62,877.61 and $152,496.44 from the loan monies to Baycorp Collections PDL (Australia) Pty Ltd ("Baycorp") and BankWest. 5. Mr Scanlon agreed that the latter debt was a personal debt owed by Mrs Calleja, unconnected with Calleja PJC: T49:45. 6. The emails referred to, at CB 320 – 329, were emails between Prime operatives and Calleja PJC and / or Bankwest in which valuations of the security property were referred to. There is no clear reference in them to a proposal that Prime would pay out or pay down Mrs Calleja's debts with the loan funds. The following evidence was given: "Q. These emails go no further than referring to the release by Bankwest of the Heatherbrae property, do they, what I am suggesting is, there is no reference in any of these emails to paying any sum of money to Bankwest, that's what I'm putting to you? A. In this email here on page 325? Q. In any of the emails attached to your affidavit and I believe I have collected the series of them, it starts at 320 and there is some repetition. But for completeness they end at 329, that series of emails concerning Bankwest goes no further than referring to valuation of Mrs Calleja's properties and a release of the Heatherbrae property? A. Well, the emails will say what they say. Here I agree with what they say and the process here was that Bankwest needed their valuations to determine the amount, they could not know it then" (T74:13 – 26). 1. Mr Scanlon relied upon an email of 7:56am on 1 April 2015 (CB 328) as evidence of instructions given to reduce or discharge the Bankwest debt. The email was sent from Mr Scanlon to recipients at Bankwest and at Prime's then lawyers, copied to a general Calleja PJC email address, and to Frank Bugeja's email address. It reads: "Hi Shelley, Thanks for your email, re questions below: 1. Bankwest arrears: the client will use funds from our facility to fix up the arrears and val [sic] fee 2. Security separation: please confirm how much of the Bankwest facility will be allocated to the Minimbah property, we will take security of the Heatherbrae property and payout any residual balance owed to Bankwest. Any q's let me know. Thanks, Paul" (CB 328). 1. (The evidence is that the arrears on the Bankwest loan were between $6,674, and $12,000, whilst the "val" or valuation fee was under $1,000) Although Mr Scanlon was not prepared to concede it (at T130 - 131), and relied upon his own oral evidence that he was told (by a person not identified) that an amount of $152,496.44 was required to be paid to Bankwest, there is no independent evidence of such a requirement from Bankwest.) 2. Mr Scanlon could not point to anything that gave authority to pay $152,496.44 to Bankwest, other than his conversation with Mr Bugeja, set out at [84] above (also CB 434 [13]). He gave the following evidence: "Q. In addition to there not being any evidence apart from your oral testimony today of any request or requirement by Bankwest for $152,000, there is no evidence apart from anything you might say or you have said in the witness box of any communication from Prime to the company or Mrs Calleja that it intended to pay $152,000 to Bankwest, is there? There's no piece of paper to that effect, is there, anywhere in the proceedings? A. If I can remember. Well, I know that there is the settlement statement that went to the client" (T133:05 – 12). 1. It is noted that the Bankwest file relating to the Calleja loans was available to the parties under subpoena; had there been anything on the Bankwest file to support Mr Scanlon's claim, it might be expected that it would have been tendered by the plaintiff. 2. The balance of the funds on the loan facility was paid to Calleja PJC, although Mr Scanlon conceded that no amount of $41,056.50 was paid to the company on 17 April 2015, or at all. The company received $34,676.50 on 5 May 2015. 3. Mr Scanlon accepted that the semi-trailers that Calleja PJC had applied for loan funds to purchase cost in the vicinity of $40,000. The following evidence was given: "Q. Are you suggesting that Prime, in effect, dispensed with the loan agreement? A. No. I can elaborate, if you would like more on it. Q. The position, Mr Scanlon, is this, isn't it? That none of these payments referred to on the 17 April settlement letter were requested or instructed by the company, but Prime of its own volition attended to facilitating these payments, so that it could lodge its own security over Mrs Calleja's assets. I put that to you. A. I don't agree with that and I think we had a caveat on the title beforehand anyway. Q. I put to you that the facilitation of the payments referred to on the 17 April letter were for the purpose of manufacturing a significant debt, which Prime would then utilise to charge exorbitant interest and fees and when the inevitable event happened, that those amounts could not be repaid, Prime would then make a huge profit by using its securities that it had obtained from Mrs Calleja? A. (No answer) Q. What I am saying, Mr Scanlon, is the modus operandi of Prime here was to manufacture a debt owing to itself that was not one that was requested by the clients, and then use the security to realise that debt and make a windfall profit for itself? Q. Do you agree or disagree with that statement? A. Well no […]" (T50:23 – T51:04). 1. Although the monies were not all paid out as at 17 April 2015 Mr Scanlon accepted that Prime charged interest on the total sum from 17 April 2015: "Q. Apparently it is the case Prime took the position that the company was obliged to pay interest to Prime in respect of funds that, not only had not been dispersed to third parties but had not yet even been drawn into the trust account from which those third parties were to be paid. That's Prime position. That's your position? A. Yes. Yes" (T101:41 – 46). 1. Once drawn down it was Mr Scanlon's evidence that Calleja PJC did not maintain the facility as required, with interest and other charges paid after the due date. Interest was to be paid by Calleja PJC by interbank transfer on the first of each month. Although there was nothing in the loan agreement that is in evidence (as Ex. D) to justify it, Mr Scanlon further insisted that the payment was due "on or about midday on the first" (T122:44). Mr Scanlon accepted that bank transfers were not necessarily instantaneous, taking anything up to three days to be effected: T79:12. Other than where the due date fell on a weekend, it was Prime's practice notwithstanding to issue a default notice on the second of each month where payment was not received by midday on the first. 2. He agreed in evidence that Calleja PJC had made each monthly payment until March 2016, which was received (as distinct from when it was transferred by bank transfer) on the first of each month or soon after. The amounts paid were ordinarily $6,800, that being in excess of the amount of $6,380 required by the terms of the loan, although Mr Scanlon relied upon the late receipt of payment to claim interest at double the ordinary "discounted" rate. The supposed late payments, that is, anything received after midday on the first of the month, were the basis upon which the interest payable was doubled from 24% per annum to 48% per annum. They were also the basis upon which an administrative fee of $70,000 was charged to Calleja PJC. See also T121 – 122. 3. Mr Scanlon agreed in general terms that, had the interest been calculated from the date on which the loan funds were in fact paid out however, rather than from 17 April 2015, Calleja PJC would have been ahead of payments due by a figure "close" to $23,000: T112 – 115. 4. Notwithstanding the fact that the loan had generally been maintained, if not to the letter, enforcement action occurred, on Mr Scanlon's evidence, with considerable speed. A s 57(2)(b) Real Property Act notice was dated 11 May 2016 (with instructions to draft it presumably given to Prime's lawyers some little time before that). Instructions to commence legal proceedings for possession of Mrs Calleja's home were given by Prime to its lawyers at the same time as the notice issued, and prior to the expiry of notice period: "Q. In effect Prime instructed its solicitors to commence proceedings at around the time of the issue of the section 57(2)(b) notice, didn't it? A. I instructed them to start or to prepare the notices at that time, yes" (T54:49 - 55:01). 1. Despite the alacrity with which proceedings for possession were commenced, Mr Scanlon denied having no genuine intention of allowing the borrower to remedy the supposed default, or of having no expectation that the company could repay the debt, thus permitting Prime to seize Mrs Calleja's assets, as guarantor of the loan. In a complex answer to a relatively simple question, he maintained that Prime had carried out proper inquiries as to the capacity of Calleja PJC to repay the debt: "Q. Putting aside the issue of whether or not the disbursements referred to in the 17 April letter were authorised or not what due diligence analysis did Prime do to ascertain that the borrower could repay a sum of $290,000 charged at interest at 2% per annum in a period of 12 months? Where is the analysis of that at the time of entering into these facility documents? A. Yes, it is a long answer in the sense that it – our business necessitates, because small businesses in Australia find it difficult to get funding, it is difficult to both run a small business and typically have up-to-date financials and tax returns, let alone forecasts that are accurate and detailed. Most small business does not run that way so we have finance and we have capital lines which enable us to lend these businesses which mean that we can understand the processes and assess credit in different ways so that the gaps in people's information do not stop them getting credit. So in this case for example we will look at active businesses. We will discuss what is going on with those directors but having a business which has existed for a long time, built up a significant asset base, it is a proof of saving and capacity to generate income to us for them so those things are kind of put together, the sum total of which are pretty, not always complete as a picture which is why we also require all of our clients to get both independent legal and financial advice on the facilities and they get legal advice so they understand the terms and they get financial advice so someone else is working with them to understand their financials so we do some work, the financial advice does some work and we do what we can" (T55:42 to T56:14). 1. Mr Scanlon asserted that the "significant asset base" he referred to was a fleet of trucks which Prime's representative had seen. He was unaware, however, that the trucks were all leased: T56:45 – 50. Mr Scanlon also referred to reliance upon valuations of property as part of the process of due diligence, but conceded that the properties at Minimbah and Heatherbrae were not owned by Calleja PJC: T57:32 He also placed reliance on "representations that were made" to Prime's representative (being Peter Ainsworth) of which there was no contemporaneous record or other file note: T57:18; T57:45. The questioning continued: "Q. There is not a single document in existence referring to those conversations or representations that you're referring to? A. No. Q. There is not a single document referring to the due diligence you say Prime carried out in respect of the company's capacity to pay $290,000 in 12 months? A. There is signed financial advice" (T58:10 – 17). 1. (The signed financial advice was that supposedly executed after the funds had been instructed to be paid out.) 2. Mr Scanlon conceded, at least in part, that loans were granted where there was security which could be accessed in the event of default: "Q. In effect what Prime did was that Prime assessed that there was sufficient assets which could be sold to repay $290,000 plus interest to Prime. That is what Prime did, didn't it? A. I agree that part of our credit assessment is an assessment of what would have to happen if security needed to be realised to repay a debt in default, yes. It is not a primary basis upon which we loan" (T58:19 – 24). 1. He denied having paid out amounts of monies from the loan funds without authority to manufacture for Prime a debt of $290,000, in circumstances where Prime was aware the loan could not be discharged in 12 months, and with the intention of putting itself in a position to seize the assets of the guarantor upon default. Peter Ainsworth 1. Mr Ainsworth is a finance broker who has been working in the industry for about 5 years. He is no longer employed by Prime. 2. When he was so employed, Mr Ainsworth said that it was not his practice to recommend or arrange a solicitor to give a borrower legal advice. He said he did not believe that he had arranged for a solicitor to give the Callejas advice [after their own lawyer refused to act for them in what she regarded as a disadvantageous contract]. 3. Mr Ainsworth conceded knowing Mr Shacklady, but thought that he had first met him after leaving Prime's employ. His knowledge of him was: "I would have seen him on matters, you know, around the traps I guess you could say, the last couple of years since I have been a finance broker" (T143:30 – 31). 1. He thought he might have spoken to Mr Shacklady a few times, but could not recall any specific conversation with him. He told the Court he did not telephone Mr Shacklady and ask him to speak to the Callejas, saying initially he was "fairly certain" he had not done so, and subsequently, "my testimony before is that I am certain that that did not happen": T144. 2. Mr Ainsworth was also asked about his knowledge of Charbel Boutros, the accountant who signed a document certifying that he had given the Callejas financial advice about the loan agreement. Mr Ainsworth thought that Mr Boutros was a financial planner or advisor but was sure that he came to know Mr Boutros only after his period of employment with Prime ended. He could not say how or in what context he came to know him. Mr Ainsworth conceded that he was a witness for Prime in other unrelated Supreme Court proceedings but claimed to be unaware that Mr Boutros was also a witness in those proceedings. 3. He was asked about an email he sent on 27 January 2015 to Mr and Mrs Calleja in which he wrote: "Hi Michael / Frank / Liz, Confirming; 1) Interest is only payable on the funds drawn down 2) Provided the account is kept in good order the facility will be rolled over. Best regards, Peter" (CB 525). 1. He disagreed that the first point was a response to a concern expressed by the Callejas to the effect that they did not require the full amount of the loan, asserting that it instead related to their concern that interest would be charged on the amount initially approved for loan, being $450,000, rather than the revised reduced amount. 2. Mr Ainsworth said that he had had numerous conversations with the Callejas that were not referred to in his affidavit, as he could not remember them all. He was not able to relate the 27 January 2015 email to any particular conversation. 3. Like Mr Scanlon, Mr Ainsworth was not in the habit of making a file note about conversations with borrowers; indeed, he claimed not to know what a file note was: "Q. […] What was your usual practice with respect to telephone conversations with clients? Was it your usual practice to file note those? A. No. Like write down what time I had a conversation on a piece of paper or something? Q. Yes, and what was said? A. No. Q. Any instructions that were given? A. No. I mean, if there were some details like a loan amount or an interest rate discussed I would jot those down on a piece of paper but I am - yeah, I would do that. Q. Would they then become formal A. No. Q. - parts of a file? A. No, they'd probably be thrown in the bin in a couple of days. HER HONOUR Q. What was the point of writing it down in the first place if you were just going to throw it away? A. Well, just to remind me, you know, if I was going to write an email afterwards Q. You were asked a question about file notes? A. Do I take files notes? No. Q. Just listen to what I am asking you. A. Sorry. Q. When you were asked a question about file notes you said "like a piece of paper or something". Do you know what a file note is? A. No. Q. You don't know what a file note is? A. I am assuming it is a log of a phone call that you – is that - " (T150:01 – 39). 1. Although he had no contemporaneous notes of any of the many conversations he said he had with the Callejas, Mr Ainsworth was quite certain that he did not tell Mr Calleja that he could take what he needed of the loan monies and leave the rest. When asked about the nature of the loan, he was unable to answer: "Q. So I am asking you what did you understand was the nature of the facility? A. That they would borrow the money, whatever was in the loan documents and they would borrow that. Q. The loan documents indicate that the facility that was to be put in place was a cash advance facility which could be progressively drawn down by the Callejas, didn't they? That is what the loan documents said, didn't they? A. The loan documents that come from Gadens? Q. Yes? A. I have not seen a copy. I would have to see a copy. Q. You have never seen a copy? A. No, I don't think so, not a full copy. I don't usually read through" (T151:42 – T152:05). 1. He claimed almost complete ignorance of the nature of the loan agreement or of its terms, despite being the person the Callejas principally dealt with, and despite selling the product to them. He gave the following evidence: "Q. And I take it from what you are saying that it was not something that Prime expected of you as an employee of Prime in dealing with the clients in this way to have any knowledge of what was contained - any detailed knowledge of what was contained in the documents you were dealing with, it was not an expectation of you? A. No. Like I am a sales guy, you know. I am not huge on the details. I would never have read through a whole set of mortgage documents. They are like (indicated). HER HONOUR Q. Didn't you give your occupation as a finance broker? A. Yes. Q. That is a sales guy, is it? A. Yes. Q. And you don't have any knowledge of the product you are selling? Is that what you are telling the Court, on your oath? A. No, no. That is not what I am saying, but, I mean, it is very simple, the loans, you know. Q. If it is very simple tell Ms Obrart what you understood it to be? A. To be a business loan. They borrowed an amount and then you pay it back. That is what I mean" (T152:27 - 153:01). 1. Mr Ainsworth denied that the loan agreement he sold the Callejas was a cash advance facility, despite being referred to clauses 2.1 and 3.1 of the agreement. Those clauses are: "2.1 Cash Advance Facility Subject to the terms of this agreement, the Lender agrees to make available to the Borrower a cash advance facility on a progressive basis up to but not exceeding the Limit." "3.1 Progressive drawdowns The Borrower may draw down Advances on a progressive basis up to but not exceeding the Limit. The aggregate of all Advances made must not exceed the limit." 1. Having read the clauses in Court Mr Ainsworth, despite his occupation, asserted "Like, I don't read this stuff every day. I don't know what that means to a lawyer" (at T155:11). He was, however, able to give the meaning of clause 2.1 as borrowing money up to a limit, whilst maintaining that, because the words "line of credit" did not appear in the agreement, it was not a facility that could be regarded as involving progressive access to loan monies. 2. Mr Ainsworth maintained that his recollection of the conversation in which he sought and received specific approval from the Callejas to pay out or pay down other company debts or Mrs Calleja's personal debts, as set out in his affidavit, was clear. He was not hampered by the absence of any file note. He did not accept that there was anything unsatisfactory about giving the details of only one out of the more than twenty conversations he said he had had with Mr or Mrs Calleja or Mr Bugeja. Robert Shacklady 1. Mr Shacklady is a solicitor. At present, and at the time of his involvement in this matter, Mr Shacklady was working from an office belonging to a friend. He attended his place of business only when he needed to. 2. Prior to his attendance in Court for Prime, the defendant had endeavoured to serve a subpoena on him for production of relevant documents. He explained his apparent resistance to service of the subpoena as a desire not to increase the costs for the litigants by them having to provide conduct money, in circumstances where he had no file and nothing to produce in answer to any subpoena that was served. Mr Shacklady agreed that he was told by a process server that service was necessary so that he could tell the "solicitor of the Supreme Court" that he had no documents. He conceded that his response was "Not if I don't get served" (T15:04). 3. He said in evidence to the Court that he was contacted, he thought by Peter Ainsworth, who asked him to "sign some mortgage documents for a client" (T9:27). He collected the loan documents from either Mr Ainsworth or Gadens, and took them with him when he went to see Mr and Mrs Calleja at their place of business on 12 February 2015. He was casually dressed for attendance on the Callejas, believing that it was best to "look the same as the people you're dealing with" (T16:13). 4. He recalled signing (as witness) the loan document, a general security deed, guarantees, identity certification documents, and a statutory declaration in which it was stated that the purpose for seeking the loan monies was to purchase trucks. 5. Mr Shacklady said that, in doing this, he was acting for the Callejas and not for Prime. He did not, however, open any file in the name of Calleja PJC or the Callejas, or make any file note about his attendance on them. He did not think it was appropriate to do so: T15. He gave this evidence: "Q. You did not think, having attended on Mr and Mrs Calleja, that it was appropriate to make a file note of your meeting with them? A. No. I signed the documents. Part of my retainer was to execute the documents and also to certify. It is a big thing for the lending companies to get certification of the client's identity. That was a major part of it as well" (T15:39 – 43). 1. One of the documents witnessed by Mr Shacklady was an "Authority, acknowledgement, and undertaking" (CB 246), which was to be executed as a deed. The document was signed by Mr and Mrs Calleja on pages 1 – 4, but only pages 1 – 3 were signed by Mr Shacklady as witness. The fourth, execution, page, was not witnessed by him. Pages 1 – 3 bore a code on the bottom of each page "20416760.1 ARA EVW"; the unwitnessed page 4 bore a different code, "20416760.1 ARA ARA". Mr Shacklady could give no explanation for the differing code on the fourth page, or for failing to witness the signatures of Mr and Mrs Calleja. He was aware that a document executed as a deed had to be witnessed. 2. Similarly, Mr Shacklady could give no explanation for the differing code appearing on the second page 31 of the loan agreement, or for the fact that the first page 31 was signed by Mrs Calleja, but not he or Mr Calleja. He identified his signature as occurring on the second page 31 (CB 283). He did not date the loan agreement on the date on which it was signed. 3. When witnessing a lengthy document, it was Mr Shacklady's usual practice to date every page: "Normally to sign every page, correct, and to get the clients to sign every page so there is no dispute" (T20:40 – 41). 1. His signature, or those of the Callejas, does not appear on pages 1 – 31 and 32 of the loan agreement, but only on the second page 31. He was not able to offer any explanation for that deviation from his usual practice, such that only the second page 31 bore his signature. He speculated that the clients may have been "getting annoyed about signing and signing", or time was running short (T20:50), but that was no more than a "guess". Mr Shacklady had no recollection of signing the documents, observing "It's nearly three years ago" (T21:05). 2. Mr Shacklady recalled explaining that the loan was, "[..] an uncoded loan so basically you can set the rules" (T23:19). 1. He told Mr and Mrs Calleja that it was important that the loan was for business purposes, that being, he recalled, the purchase of trucks for the company. 2. At the time he completed witnessing the documents Mr Shacklady was paid $300. Whilst he "would have" issued a handwritten receipt, he did not issue any invoice, because "they didn't ask" (T22:34). Lea Smith 1. Ms Smith did not swear an affidavit. She was called to give evidence by the plaintiff and testified on 1 November 2017. 2. Ms Smith is a solicitor who was admitted to practice in 1982. She had been the solicitor for Calleja PJC for about 10 years, and for Elizabeth Calleja personally for about 20 years. She did work for Michael Calleja in the same period in which she worked for the company. 3. On 17 December 2014 Ms Smith received a telephone call from Michael Calleja who wanted her to review loan documents relating to a line of credit for an amount of up to $350,000. Ms Smith made a file not of her discussion (Ex. 3), recording in part, "Wants to buy truck, trailers and mini trucks. Thinks only needs 100,000. Interest paid on amount drawn. Loan for 12 months only." 1. Ms Smith opened a file. Correspondence from Gadens dated 5 December 2014 (Ex. 4) which Ms Smith later received was placed in the file. On a cursory glance in Court Ms Smith thought that the loan agreement at CB 250ff was the same as that she received from Gadens, and about which she advised Mr and Mrs Calleja. On the same basis, she thought the deeds of guarantee and general security deeds signed respectively by Mrs Calleja (CB 285; CB 333) and Mr Calleja (CB 300; CB 361) and Mrs Calleja for Calleja PJC (CB 389), and the mortgage (CB 332), were the same as those she had discussed with the Callejas. 2. A conference was held with the Callejas on 7 January 2015, with a second conference on 6 February 2015. At the first conference Mr Calleja told Ms Smith he wished to borrow money to buy trucks. Ms Smith went through the documents and told the Callejas to look for an alternative source of finance. She told Mr Calleja that proceeding with the Prime loan was not "a wise decision" and stressed that he was putting Mrs Calleja's "house on the line" (T93:16- 23). She told the couple, "Do not do this. This is a bad mistake. You cannot sign these documents" (T93:23). 1. Although Ms Smith did not refer to each and every provision of the loan agreement, she pointed to some of the more "over the top" clauses and queried how the Callejas would be able to repay $360,000 in 12 months, together with the high fees, such as the loan establishment fee, that were involved. Ms Smith queried whether the company needed to purchase trucks. She suggested that Mr Calleja speak again to the financier about the matters she had raised as concerns. 2. At some stage after the meeting a copy of the caveat that Prime had lodged against Mrs Calleja's Heatherbrae property was delivered to her. 3. Ms Smith next saw the Callejas on 6 February 2015. They indicated to her that they wished to proceed with the loan, and she again questioned the need to buy trucks, and suggested that an alternative source of finance be sought. She explained the effect of the caveat, telling her clients that she thought it was the usual practice of Gadens to operate in that way. Ultimately, she told the Callejas that she was not prepared to act for them if they pursued the loan. 4. Ms Smith was not further involved, other than to issue an invoice at a later stage. The Case for Elizabeth Calleja and Calleja PJC Documentary Evidence Elizabeth Calleja 1. Mrs Calleja swore three affidavits, and gave evidence before the Court on 2 November 2017 and 6 November 2017. 2. In her affidavit of 29 September 2016 Mrs Calleja deposed that she was the sole director of Calleja PJC. 3. Mrs Calleja said that in late 2014 it was decided that the company needed to buy trucks, and around October the Marketing Manager, Frank Bugeja, was asked to identify a lender. On 29 October 2014 an email was received from Fast Commercial Loans attaching correspondence from Prime which advised that conditional approval had been given for a loan of $450,000, repayable in 12 months. The company could not repay a loan in that period and decided not to proceed. 4. Before Christmas Peter Ainsworth came to the Company's Chullora premises to discuss the loan with her and her husband Michael [Mrs Calleja initially thought that Mr Scanlon had also attended but later said she was mistaken about that]. 5. At the meeting Mr and Mrs Calleja said they could not repay the proposed loan in 12 months and asked that the term of the loan be extended to 3 years, with an appropriate amendment made to the documentation. They said that they did not require $450,000, needing only $100,000 to $150,000, but were assured that they could draw down only what they needed, with interest payable on the drawn amount only. 6. She did not know who made the hand amendment to the offer document noting a further 12 months rollover of the loan, or when it was made. It did not reflect the request for a further 24 month period sought by her and her husband. 7. After that meeting Mrs Calleja saw Ms Smith, who expressed her concerns about the loan agreement. 8. On 12 January 2015 Mr Bugeja sent an email to Mr Ainsworth asking him to contact the company. He sent a response saying he would telephone the next day. He did not call. Similar emails were sent in ensuing days asking for contact from Mr Ainsworth, with an email eventually received from Mr Scanlon saying Mr Ainsworth was on holidays. Mr Scanlon suggested any concerns about the loan be put in writing so that they could be addressed. 9. Subsequently, on 27 January 2015 an email was received from Mr Ainsworth confirming that interest was payable only on funds drawn down, and the facility would be rolled over if in good order (see [42] and [115] above). 10. On 6 February 2015 a concern raised by the Callejas about the 2.5% termination fee payable on the termination date (cl. 6.4) was addressed by email by Mr Scanlon, who suggested that the loan agreement be hand amended by the Callejas such that the clause read, "Provided an event of default has occurred the Borrower must pay to the Lender a termination fee equal to 2.5% of the Limit on the Termination Date". 11. Mr Bugeja responded by email that any change would have to be made and signed by Prime. 12. On 12 February 2015 Mr Shacklady arrived at the Chullora premises to have the Callejas sign the loan agreement. They were not given a copy of the signed documents, and were asked to pay $300 immediately to Mr Shacklady. 13. Mrs Calleja understood that she was granting a second mortgage to Prime over property she owns at Heatherbrae. 14. In March 2015 a representative of Baycorp telephoned Mrs Calleja to offer a reduced loan payment amount if the loan was paid out in full immediately. Mrs Calleja responded that the Company could not pay the debt out in full. An arrangement was in place whereby Calleja PJC paid a regular instalment payment against the debt; Mrs Calleja understood this was to continue. 15. On 17 April 2015 Mr Scanlon sent an email to Mr Bugeja, copied to Mrs Calleja (using the Callejafreighterssydney@*****.com email address) asking, "Can you please provide account details where your loan drawdown can be paid to". Account details for Calleja PJC were sent by return email. 16. On 1 May 2015 Prime asked for details of insurance over the Heatherbrae property noting its interest. The information was provided by Mrs Calleja. 17. On 5 May 2015 a deposit of $34,676.50 was received into the company's bank account. On the same day Prime paid $152,496.44 to Bankwest with respect to Mrs Calleja's personal home loan debt to that bank. Mrs Calleja had not authorised any such payment, believing that her Heatherbrae home was simply to be used as security for the Prime loan. 18. Contact was made with Prime and, on 13 May 2015 at 10:08am, Mr Scanlon emailed copies of settlement documentation. The email read, "Hi Michael, copies of corro are attached as requested. Originals have been posted to you" (CB 531). 1. When Mrs Calleja saw the documentation she was shocked. She had not authorised the payments made to Prime itself or to third parties, and had not authorised her Bankwest mortgage to be paid down. The payments meant that debts payable over time and at a much lower interest rate had been replaced with the high interest short term Prime loan. The amount left to the company after dispersal of the funds was insufficient to buy even one truck. 2. The company made numerous attempts to contact Mr Scanlon and Mr Ainsworth, but neither responded to emails. 3. On 13 May 2015 at 11.10am (that is, 62 minutes after Mr Scanlon sent the settlement documentation by email) an email was sent from the Calleja Freighters email address to Mr Scanlon's email address as follows: "HI PAUL PLEASE RING MIKE CALLEJA URGENTLY ON 041[* ******] PLEASE ASAP." 1. At 12:46pm a further email was sent to Mr Scanlon with High importance, typed in very large font and capital letters: "HI PAUL BEEN TRYING TO CONTACT YOU ON YOUR LANDLINE AND MOBILE BUT YOU WONT ANSWER – PLEASE RING MIKE URGENTLY RETURN HIS CALLS PLEASE" (CB 534). 1. The response from Mr Scanlon was sent at 12:55pm telling Mr Calleja "I'm in meetings today" and asking him to email "your question". 2. At 2:19pm Calleja Freighters responded to Mr Scanlon, "Hi Paul he wants you to ring him URGENTLY PLEASE." 1. On 21 May 2015 an email was sent from the Calleja Freighters email address to Mr Scanlon's email address, with High importance, stating: "Hi Paul and Peter Mike again has been trying to get a hold of both of you but you will not answer his calls again. PLEASE RING HIM URGENTLY PLEASE – 0412 *** *** Liz" (CB 532). 1. On 26 May 2015 at 12:24am an email was sent from the Calleja Freighters email address to Mr Scanlon's email address, with High importance. It read: "HI STILL NO PHONE CALL FROM EITHER OF YOU AND MIKE HAS BEEN CONSTANTLY RINGING BOTH OF YOU BUT NEITHER OF YOU WILL ANSWER HIS CALLS OR RING HIM BACK MIKE NEEDS A PHONE CALL BY NO LATER THAN TUESDAY 2PM PLEASE 0412 *** ***" (CB 532). 1. Between 17 April 2015 and 26 April 2016 Calleja PJC paid Prime $74,380 with respect to the loan facility. Payments, evidenced by funds transfer receipts from the Callejas' bank, were made as follows (CB 536 - CB550): "3.6.15 $6,380.00 1.7.15 $6,800.00 3.8.15 $6,800.00 2.9.15 $6,800.00 1.10.15 $6,800.00 4.11.15 $6,800.00 1.12.15 $5,900.00 2.12.15 $900.00 30.12.15 $6,800.00 3.2.16 $6,800.00 2.3.16 $6,800.00 26.4.16 $6,800.00 23.5.16 $6,000.00 26.5.16 $380.00 31.5.16 $6,380.00" 1. Mrs Calleja made her second affidavit on 13 February 2017 in response to the affidavits of Mr Scanlon and Mr Ainsworth served upon her as defendant. 2. She set out the details of her education and work experience. Mrs Calleja was educated to Year 10 in a regional high school. She left school at 15 years and worked initially at Woolworths in the delicatessen section, and subsequently in other retail stores, for about 20 years. When she married Michael Calleja, she began working with him in the freight business. 3. At the pre-Christmas 2014 meeting with Mr Ainsworth at Chullora to discuss the loan Mr Calleja said that the company needed only $100,000 – $150,000 Mr Ainsworth told them that "you just take what you need" and paid interest only on the funds drawn down. When told the company needed 3 years to repay the loan, Mr Ainsworth said that he would have to check that with Mr Scanlon, but assured them that it shouldn't be a problem. She thought that Mr Ainsworth may have made the handwritten amendments to the loan offer document [as to "rollover for another 12 months" and a 1% broker fee] and she and Mr Calleja signed the offer document that day (19 November 2014). 4. Mrs Calleja understood the loan facility to be one in which she could control how much of the loan amount would be drawn upon, and she intended to draw between $100,000 and $150,000 to purchase second hand trailers. She believed the loan was for 12 months with a further 24 month period by "rollover" because that was what was agreed at the November meeting with Mr Ainsworth. She believed that Mr Ainsworth's email of 27 January 2015 confirmed that agreement. 5. When Mr Shacklady came to their office in February 2015 he said, "Hi, I hear you need to sign some documents". He gave her some documents and told her to sign on the bottom of each page. Having pointed out where she and Mr Calleja were to sign the papers, each did so. Mr Shacklady also signed them. He did not explain the documents at all. He left the signed papers with them but gave them no other documents. 6. Once the papers were signed, Mr Shacklady asked for $300 cash. Mrs Calleja paid him and he left. 7. Mr and Mrs Calleja delivered the documents to the office of Gadens in Sydney, and were asked for their driver's licences. They were not given a copy of the documents. 8. After litigation commenced, Mrs Calleja was shown a copy of a "Certificate of Independent Financial Advice to Guarantors" (CB 218) and identified her signature on it. She deposes that she did not sign any documents other than those she was asked to sign on 12 February 2015 by Mr Shacklady. She has never received financial advice from any person. 9. Around 16 February 2015 Peter Ainsworth telephoned her and told her he was looking at the Company's documents. He asked about the debt to Baycorp, and for details of the payment arrangement Calleja PJC had in place. The details of the debt, which the company was paying off at instalments of $500 per week, were sent to him. The email (CB 316) forwards without comment an email from a Baycorp employee setting out the details of the loan account and the payment agreement of $500 weekly. 10. Mrs Calleja confirmed that she assumes she read an email copied to her on 20 February 2015 at 11.17am, but has no recollection of reading it. No-one from Prime or Gadens spoke to her about approval to discharge the Baycorp debt, and it was not her intention to do so. 11. The email copied to her (CB 317) was sent from a Baycorp email to a Gadens email, copied to Calleja Freighters. It says: "Hi Greg, As per our discussion today, please be advised Baycorp are prepared to accept $60,000.00 as full and final settlement to close the above mentioned file on the conditions that the funds are cleared in Baycorp's account by close of business 26.02.2015. Please see banking details below:" 1. On 2 March 2015 an email was received from Peter Ainsworth stating that valuations were to be undertaken with respect to Mrs Calleja's properties at Heatherbrae and Minimbah. Both of these properties were bought by Mrs Calleja with a mortgage, the mortgages being held by Bankwest. She assumed that the valuations were connected with assessment of her assets as guarantor of the Calleja PJC loan. She acknowledged receiving emails from Prime on 2 March and 1 April 2015 (CB 320, CB 328) but assumed they were to do with Prime's mortgage over the Heatherbrae property. She did not know what it meant to have the Heatherbrae property "released", or understand the term "security separation". 2. She received no further correspondence from Prime until the email to Mr Bugeja asking for account details to pay loan funds on 17 April 2015. 3. After discovering the deposit of $34,676.50 into the Calleja PJC account, and obtaining a copy of the settlement figures from Mr Scanlon on 13 May 2015, Mrs Calleja realised for the first time that Prime had paid disbursements to others. She had had no intention of discharging the Baycorp debt, or reducing her Bankwest loan, as these loans were being repaid in manageable instalments. 4. After Prime paid the monies as it did Mrs Calleja thought she had no choice but to make the interest payments Prime required, because she didn't want to lose her home, and did not have the sort of money needed to fight Prime. 5. She first became aware that Prime regarded the company as in default in June 2016, when she received the s 57(2)(b) notice, and a letter from Prime's solicitor. 6. In her third affidavit of 8 September 2017 Mrs Calleja set out the costs to the Company of truck hire in the period between May 2015 and June 2016, costs that continue. Michael Calleja 1. Mr Calleja swore his affidavit on 13 February 2016, with a second affidavit sworn on 8 September 2017. 2. Mr Calleja left school in Year 9 at the age of 14 years. He has been employed as a truck driver since he was 18 years old, and is employed presently by Calleja PJC. 3. Mr Calleja recalled meeting Mr Ainsworth on two occasions at Chullora, subsequent to receiving the loan offer documents of 29 October 2014. He told Mr Ainsworth that the company needed only about $150,000 to buy a couple of second hand trailers. Three years would be needed to repay the amount. Mr Ainsworth told him and Mrs Calleja that he could take what he needed of the limit approved and, although he would have to check it with Paul, he was sure a 3 year term wouldn't be a problem. 4. At the second meeting, also in November, Mr Ainsworth showed him the loan offer document, which was still for a 12 month term. Mr Calleja again said the company needed a 3 year term, and Mr Ainsworth said he would handwrite it on the document. Mr Calleja saw Mr Ainsworth endorse the document and believed he made the 3 year amendment. He and his wife then signed the signature part. He was not given the rest of the document and did not see the amendment. 5. After meeting with Ms Smith Mr Calleja telephoned Peter Ainsworth about the loan papers sent to Ms Smith. He again raised the issue of term: "Me: Peter, there are some things in the loan agreement that we don't agree with, like that it says that we have to pay the money back in 12 months. We only agreed to this because you said it would be rolled over and we would get three years. And it says the facility limit is $360,000. We don't want that much." 1. Subsequently, the 27 January 2015 email was received, which Mr Calleja believed confirmed the extended rollover term. 2. Mr Ainsworth thereafter called daily asking for the signed loan documents, but they remained unsigned, as Ms Smith had refused to sign them. 3. In February or March 2015 Mr Calleja spoke to Mr Ainsworth about the loan, and told him that his lawyer had refused to sign the loan papers, telling him not to sign them as it was "a bad deal" ([16], CB 570). Mr Ainsworth responded, "She doesn't know what she is talking about. I can get you a solicitor". 1. About a week later a man turned up at Chullora, identifying himself as a solicitor who could sign the documents for them. He didn't explain the documents, just pointed out where to sign. The documents that were signed were the only documents given to them. 2. Soon after, Peter Ainsworth telephoned Mr Calleja, asking him to return the signed documents. Mr Calleja said that there was a document that their accountant had to sign but he had not been able to get hold of him. Mr Ainsworth told him he would organise an accountant to come out to him. 3. About a week later a man came to the Chullora premises and signed the financial advice document. He didn't look at the document other than to fill it in, and he did not give Mr and Mrs Calleja any advice. Later, the Callejas returned the documents to Gadens, perhaps by mail, although Mr Calleja did not recall. 4. On 5 May 2015 Calleja PJC received a payment for $34,676.50 into its account. Mr Calleja wondered if the payment had come from Prime and called Mr Scanlon over a week or so, without being able to speak to him. On about 13 May 2015 he did speak to Mr Scanlon, having the following conversation: "Me: Paul, it's Mike Calleja, I've been trying to call you for days. Paul: How can I help. Me: We've only been paid $34,000. That's not what I was after. I was after the $100,000 to get these trailers. Paul: Well we paid off some of your debts, so that's all that's left. Me: I never authorised you to pay our debts! Paul: It was in your best interests, I've done you a favour. Me: Well I don't want it, you might as well have the whole lot back, I'm no further ahead than I was before and I can't even afford one trailer with the money you've given us. Paul: You've got it now, live with it and get on with your life. Mr Scanlon then hung up on me" ([24] CB 571 – 572). 1. Later the settlement document was received by email, and Mr Calleja saw that a number of payments had been made, none of which had been authorised by him. He tried repeatedly to speak to someone from Prime but neither Paul Scanlon nor Peter Ainsworth returned his calls. 2. Fearful of losing his and his wife's home, Mr Calleja "just tried our best to get through every month paying the interest" ([29], CB 572) but received documents in June 2016 about Prime suing he and his wife for possession of their home. 3. Mr Calleja denies any conversations with Mr Scanlon other than the one he had on 13 May 2015. Frank Bugeja 1. Mr Bugeja is the Marketing Manager for Calleja PJC. 2. Mr Bugeja denies having any conversation with Paul Scanlon on 1 April 2015 about payment of loan arrears to Bankwest and valuation fees being paid from loan monies. He also denies speaking with Mr Scanlon on 17 April 2015 about an account for surplus funds to be paid to. 3. Mr Bugeja deposes that he only ever spoke to Mr Scanlon a couple of times prior to loan documents being signed, when Mr Scanlon called to chase up signing the loan documents. He did receive an email on 17 April 2015 asking about the Company's bank details, but understood that Mrs Calleja had responded to it. 4. On 5 May 2015 he received a telephone call from Mr Calleja, who was very upset. Having had a conversation with him Mr Bugeja tried on a number of occasions to telephone Mr Scanlon, but his calls were not taken or returned. Alexandra Doig 1. Ms Doig is the solicitor for the Calleja interests. She sought from the plaintiff any document which evidenced instructions to pay loan monies as paid by reference to the 17 April 2015 settlement sheet. Nothing was produced. A response to a request of 28 July 2016 was the statement, "the majority of the cheque directions required for settlement were not directions which came from Mrs Calleja but rather were directions from other creditors, for example, Bankwest". 1. Ms Doig also sought production of Prime's file, the loan agreement, particulars of payments made by Prime and proof of the date on which the payments were made. After numerous requests by email, letter, and Notice to produce, very little was provided. Other Evidence 1. Tendered as part of the defendant's case were a number of documents. 2. Exhibit A is a Notice of Caveat dated 18 December 2014 together with a copy of a caveat lodged by Gadens for Prime Capital Securities Pty Ltd on 11 December 2014. 3. Exhibit B comprises affidavits of attempted service by three individual process servers who sought to serve a subpoena to produce on Robert Shacklady. 4. The first attempt to serve Mr Shacklady was on 18 October 2017. A process server went to Mr Shacklady's listed place of business at Botany but he was not there. Mr Hertz, solicitor, who was present, told the process server that Mr Shacklady did not work at the address, and Mr Hertz neither acted for him nor could accept process on his behalf. 5. The second attempt to serve Mr Shacklady started with a telephone call on 20 October 2017 to a person who identified himself as Robert, at a telephone number associated with Mr Shacklady. When told by the process server, Ms Cook, that she wished to arrange to serve a subpoena to produce in the matter of Prime Capital Securities Pty Ltd and Elizabeth Ann Calleja, Robert said, "I don't really have much to produce. I didn't act for them, I only sighted some documents for them". 1. (In evidence, Mr Shacklady said that he would have said "signed" rather than "sighted".) 2. Ms Cook asked for a business address as a person at Mr Shacklady's claimed place of business said that he did not work there. She was told, "I don't have a fixed place of business at the moment, I basically freelance at several different places". 1. Mr Shacklady said that he was on a boat in the harbour but would pick up the subpoena the next day, and comply with it, even though the following day would place service out of time. 2. The final attempt to serve Mr Shacklady was on 23 October 2017 when a third process server, Mr Mullen, telephoned Mr Shacklady's mobile number and spoke to a man who identified himself as Robert Shacklady. Mr Shacklady said that he had not been able to get into the city, as he had promised Ms Cook, and asked Mr Mullen to telephone him the next day. When Mr Mullen telephoned the following day, Mr Shacklady said he was not going to collect the subpoena as promised as he was "all over the place today". He said, "As I told your colleague Kris the other day I don't have anything. The following conversation is deposed to by Mr Mullen as then occurring: Mullen: "We still need to get this Subpoena to you so you can advise the Solicitors and the Supreme Court that you don't have any documents to produce." Shacklady: "Not if I don't get served." Mullen: "The client may get sub service Orders to leave the Subpoena at John Hertz & Associate's office." Shacklady: "I don't work there. John is just a friend of mine who was helping me out." 1. Mr Shacklady hung up the phone. He was not served and did not produce anything to the Court. 2. Exhibit C was an affidavit of service from a process server who served a subpoena to produce at the business premises of Charbel Boutros, the person whose certificate of financial advice is relied upon by Prime. The subpoena was accepted by an office worker authorised to accept process for Charbel Boutros. It would appear that Mr Boutros did not answer the subpoena, or he had nothing to produce. 3. Exhibit D is the original loan agreement. It has two pages numbered 31. The second page 31 is printed on paper markedly different from that comprising the balance of the document, and the inked markings are in black, as opposed to the blue ink used on all other pages, including the first page 31. The second page 31 additionally has a code entry in the bottom left corner which is different to the code entry that appears on all other pages. 4. Exhibit E is the mortgage and security documents. The Deed of Authority and Acknowledgment has a similar oddity to the loan agreement, in that the fourth page differs from the first three pages. Pages 1 - 3 are printed on paper that is slightly more grey in tone to page 4, and with a different, rougher, texture. Pages 1, 2, and 3, all bear the inked signatures of Mr Shacklady and Mr and Mrs Calleja, with Mr Shacklady's signature having been added in a thick blue ink, whilst those of the Calleja's have been made with a finer blue pen. Page 4 has the signatures of Mr and Mrs Calleja only, entered in black pen, with a date (4 May 2015) entered in what appears to be a different hand, and in blue pen. 5. Exhibit F is a series of emails of 26 October 2017, 27 October 2017, and 7 November 2017. The emails were sent by Ms Doig, solicitor for the defendants, to Summer Lawyers, solicitors for the plaintiff, asking for production of the original documents that are now Exhibits D and E. The necessity to repeat the request, and the fact that production was evidently only made on 7 November 2017, being the second last day of a six day hearing of the matter, points to, at least, tardiness if not unwillingness by the plaintiff in producing this material. 6. Exhibit G is a Notice to Produce issued on behalf of the defendant on 14 February 2017 seeking the same material as Ex. F. Clearly there was no timely response to the Notice. 7. Exhibit H is the loan offer document and covering email. 8. Exhibit J is a copy of a subpoena to produce issued by the plaintiff upon the Commonwealth Bank, the relevant legal entity for Bankwest. The subpoena requires production of all documents (where document is internally defined so broadly as to include computer records) evidencing or constituting communications in the 2014-15 financial year relating to the Bankwest mortgages held in relation to Mrs Calleja's properties. The Bank answered the subpoena. Oral Evidence Elizabeth Calleja 1. Mrs Calleja gave evidence on 2 November 2017 and 6 November 2017. 2. She has been in the trucking industry since marrying, for about 20 years. Calleja PJC had a predecessor, Calleja Freighters. The current company has depots in Sydney, Melbourne, and Brisbane, with its head office managed from Mrs Calleja's Heatherbrae home. Mrs Calleja controlled the company; Mr Calleja worked as a truck driver, principally from Sydney. Ten or twelve drivers were employed, four clerical staff, and a few more people who loaded and unloaded trucks. Mrs Calleja regarded herself as "hands on", spending much of her time loading and unloading trucks rather than dealing with paperwork. 3. Mr Bugeja was asked to look on line for a possible lender. A rough figure of $500,000 was initially given to him in that regard, although Mrs Calleja did not necessarily think a lender would loan such an amount to them. The amount the company needed to purchase trucks was between $100,000 and $150,000, second hand trucks costing about $40,000. Ms Calleja could not say why the figure of $500,000 was sought, there being no reason for that sum in particular. 4. Mrs Calleja denied seeing Peter Ainsworth hand amend the loan offer document to reflect a further 12 month rollover, stating that he had told her 3 years wouldn't be a problem. 5. Mrs Calleja spoke to her solicitor for her opinion about the loan proposal, and was aware that loan documents had been sent to Ms Smith at some stage. She saw some but not all of the documents at her meeting with Ms Smith. Ms Smith was not happy with the agreement and thought it was "dodgy" (T200:21). She pointed out a number of specific terms that were undesirable, although Mrs Calleja could not remember them all. Ms Smith suggested they look for alternative finance. Mrs Calleja understood from Ms Smith that she was putting her house on the line, that the loan was costly, risky, and a bad idea. Mrs Calleja did not remember a second meeting with Ms Smith. 6. After the meeting with Ms Smith, the Callejas took no steps about the loan. Peter Ainsworth persistently rang, telling Frank Bugeja to get them to sign up for the loan. They signed the agreement after being "pestered to get another solicitor on behalf of Prime Capital" (T203:38), and being told the agreement could continue for 3 years. She conceded that in an email of 14 January 2015 (CB 796) she referred to a further term of "at least" another 12 months. The email says, "Hi Peter We went over to see the solicitor in our break to sign the papers but the solicitor was not happy with them as they are incorrect to what we agreed in our office here at Chullora. There is one clause that says that we have to PAY the interest at the end of the 12 MONTHS on the full amount of the $360,000.00 even though we were not actually using the full amount. We told you we could not pay the amount that we borrowed in the 12 months required and that the loa[n] would carry on for another 12 months at least which works out to be around $9,000.00 Nothing has been signed until you get back to my solicitor with some answers please. Please call her ASAP Regards Liz" (CB 79). 1. She maintained that Peter Ainsworth had said that the loan could be rolled over for 24 months. "Q. And what you understood, when you received the 27 January email is that the rollover was another 12 month rollover after the original 12 month period, isn't that right? A. No, I assumed it would be at least for two years because that is what we wanted in the first place, that is what he agreed to, in the first meeting" (T205:47 – 51). 1. Mrs Calleja denied receiving or reading a letter addressed to Frank Calleja at her address (CB 824). 2. She agreed that, as director of Calleja PJC and guarantor, she could have refused to go through with the loan. 3. When asked (on 6 November 2017) about her history of obtaining loans, Mrs Calleja said she did not have any "secured loan", other than the one with Capital Finance. She did not understand the Bankwest loans to be "secured" although she knew she had a mortgage on her house to Bankwest. Calleja PJC had never obtained a loan; its debt to Capital Finance (and ultimately Baycorp who purchased the debt) was as a consequence of a rented truck being written off in an accident not covered by insurance. 4. Mrs Calleja denied that the meeting with Mr Shacklady took 2 to 3 hours; she said "we would have been lucky to be there for half an hour" (T213:06). Even though he explained nothing to them, Mrs Calleja knew that in signing the loan documents she was putting her house on the line, and that some of the clauses in the agreement were disadvantageous. 5. Whilst Mrs Calleja understood that the loan agreement she signed before Mr Shacklady was the same loan agreement as that Ms Smith had told her not to sign, she understood Prime had agreed that the term would be for 3 years on a rolled over basis (T218:47). In other respects she assumed Ms Smith's advice was still relevant. 6. When questioned about the debt to Baycorp, Mrs Calleja maintained that she had a repayment agreement in place and, whilst she sometimes struggled with the payments, she had no intention of doing other than continuing with the regular payments. She denied wanting or intending to use Prime loan monies to discharge the Baycorp debt. 7. As to the Bankwest debt, Mrs Calleja did not understand how the process of first or priority mortgage and second mortgage operated in practice. She did not understand what it meant to separate security. "Q. Madam, you knew, certainly by early April 2015, didn't you, that Bankwest had security over both your Minimbah and Heatherbrae properties in relation to loan facilities it had advanced to you, isn't that right? A. Yes. Q. You knew, didn't you, that Prime was only taking security over your Heatherbrae property, is that right? A. Yes. Q. You knew that in order for Prime to make the loan, that Prime would need to be satisfied that it had sufficient security, taking into account the fact that Bankwest would also have security over your Heatherbrae property, isn't that right? A. No. Q. You weren't expecting Prime to lend you money without it having a good security for that loan? A. It had security over Heatherbrae, that was enough apparently. Q. But you knew that Bankwest was also claiming a mortgage over Heatherbrae, correct? A. No, they were no, Prime was taken over as the first mortgage. Q. You considered that Prime was going to take over as first mortgagee of Heatherbrae, is that right? A. I think so, yes. Q. So you had some experience with one lender taking over as first mortgagee from another because that had happened when Bankwest took over as first mortgagee from National Australia Bank earlier on, is that right? A. Yes. Q. In relation to Prime taking over from Bankwest, you were expecting then, were you, that Prime would pay out the money that was owing to Bankwest, secured over Heatherbrae, is that correct? A. No. Q. But that is what had happened when Bankwest took over from NAB as first mortgagee of Heatherbrae, wasn't it, that Bankwest had paid out the NAB mortgage in order that Bankwest become first mortgagee, isn't that right? A. Yes, I think I understand what you are trying to say, yes. Q. Is that what you understood would happen, that Prime would pay out the Bankwest, the part of the Bankwest debt that was secured over Heatherbrae? A. No. Q. And that Prime would become the new first mortgagee? A. No, I didn't know that, no, and I didn't authorise anything to be done like that" (T242:04 – 243:02). 1. (See also T270:41 - T271:18.) 2. When asked about being an experienced business woman, Mrs Calleja said she was experienced, without being "on top of it", and for that reason, she relied upon an accountant (T256:23). She conceded that she had not sought her accountant's advice about the Prime loan. 3. Mrs Calleja maintained that neither she nor Calleja PJC had authorised Prime to pay out her and the company's debts. She said, "[…] no-one asked us to pay these payments out, no-one asked us at all. No-one authorised it, we did not authorise these payments to be made out - what they did" (T246:33 – 36). 1. Mrs Calleja denied receiving a copy of the settlement documentation in the mail in April 2015, receiving it by email only after her husband spoke to Prime after the $34,000.00 or so was received into their account. When she looked at the document, she said that she felt "pissed off" (T259:33) and was outraged because Prime had no authority to make the various disbursements (T260:08). 2. Mrs Calleja agreed that she had not written to Prime about what they had done, or sought legal advice, believing that she simply had to pay the interest payments to ensure that she did not lose her home. The following evidence was given: "Q. But you are claiming, Madam, that this loan that Prime made was some complete travesty of your instructions? A. Well, they were. All we wanted in the first place was $100,000 grand to buy two second hand trailers. They went behind our back and did completely the opposite and we ended with a bigger debt than what we had in the first place with a higher interest. Q. So didn't you think if it was really the case that Prime had done almost nothing that you wanted that you had an excellent case against Prime? A. I could have, but I don't have the money to fight it" (T261:46 – T262:05). 1. She denied having "concocted a story" to answer Prime's legal action (T266:33). Michael Calleja 1. Mr Calleja gave evidence on 6 and 7 November 2017. 2. He drives trucks for Calleja PJC and runs the depot. His wife made most management decisions, although they both discussed the Prime loan. 3. Mr Calleja said that he asked Mr Bugeja to chase up the possibility of a loan to buy two trailers because he did not have the time. He did not believe he raised the figure of $500,000 and could not say where that had come from, if not from Prime. 4. At the meeting with Peter Ainsworth Mr Ainsworth said that he had the loan, and he had a document with him. He made a hand endorsement on it but Mr Calleja could not see what he wrote. He told the Callejas that he would speak to Paul, but a 3 year term would not be a problem. Mr Calleja told Mr Ainsworth it was no good writing it in and it had to be done properly. He told Mr Ainsworth that he only needed $150,000, not the $450,000 offered. 5. Mr Calleja said he did not ring Ms Smith about advice; his wife did. He was aware that Peter Ainsworth was trying to send loan paperwork to Ms Smith. At the meeting with Ms Smith he did not see the paperwork; Ms Smith was going through it and told them not to touch the loan. He recalled her saying that Liz's house was on the line, and agreed that she pointed out some unfriendly clauses. He could not remember what those clauses were. 6. Mr Calleja had very limited memory of documents connected with security deeds, mortgages and the like. 7. Although he understood that Ms Smith regarded the loan negatively, he had felt pressured by Peter Ainsworth constantly ringing about them taking out the loan. He did not accept that he was weak willed. Peter Ainsworth had arranged for a solicitor to see them. "[…] Peter Ainsworth kept insisting, he said he would send this bloke over for him to go through the documents with us and he did not go through the documents with us, he just come over there and flipped through a couple of pages, didn't say anything at all" (T303:28). 1. He signed documents at the meeting, but did not know what he was signing. The meeting with the solicitor took 15 minutes. He did not know if what he signed represented the same deal as that Ms Smith had warned him not to touch, but thought that Peter Ainsworth had made some alterations to it: "Three years, it was supposed to be" (T305:35). Although extensively cross-examined on the subject, Mr Calleja maintained that, had he known it was a loan over 12 months, he would not have signed it. He could not remember if Mr Shacklady took the signed documents with him, or left them, but he thought he may have left them. He agreed he could have sought advice from his accountant or other person, or even torn the documents up. 2. Mr Calleja said that his dealings with Prime after the documents were signed were limited because he was on the road most of the time. He had not seen the various emails, as he did not know how to use a computer and did not use email. 3. He firmly denied any wish to obtain the Prime loan to discharge the Baycorp debt, maintaining that a repayment plan was in place for it. He was completely unaware of emails from or relating to Baycorp. He did not know anything about a suggestion or plan to pay monies to Bankwest. "No, Bankwest was not going to be paid out, there was only to be the money to buy the trailers, not to pay anything else out, there was no mention of paying anything else out. Q. You knew, didn't you, that Bankwest had determined that an amount of $397,500 was all that could be properly secured over the Minimbah property, didn't you? A. No, I didn't. Q. You knew an amount of about $247,000 remained owing to Bankwest, that it would need to rely on the Heatherbrae security in relation to, isn't that right? A. No, I don't know, I don't know nothing it about it. Q. You knew either that money would have to be paid out to Bankwest or some other deal would have to be made with Bankwest to enable Prime to lend the money, didn't you? A. No, I didn't, this is all news to me. First I've heard of this" (T310:43 – T311:14). 1. Mr Calleja denied that he had a conversation with Paul Scanlon on 17 April 2015 about the discharge of the Bankwest mortgage: "definitely not" (T311:49). He said that the conversation he did have was after he and Mrs Calleja discovered what Prime had done. He said, "I was annoyed because he said he paid out Bankwest and all that, what he said he did, and I said 'that's not what I wanted, you can take it back' […] I was very surprised that was done because that wasn't supposed to be done. All I wanted was the hundred thousand to buy the trailers and that was it, simple, end of question" (T312). 1. He continued, "I tried ringing him when the 34,000 was in the bank, I tried for a whole week to get him. When I did get him, the conversation we have just gone through, he hung up on me. I tried to ring him again after that, no one would answer the phone and then I had no more conversations with Prime at all" (T313:42 – 45). 1. Mr Calleja was quizzed as to why he did not take some action after his discovery, such as "getting solicitors involved" (T314:16). "Q. You made no attempt at all during that period to communicate with Prime that there was something wrong in relation to the Prime loan, did you? A. No, what is the use anyway? Q. Well you didn't communicate that because you were in fact relatively content with the loan from Prime. By "relatively content" I mean you hoped there would be more money left over after the payment out of Bankwest and Baycorp, but still you wanted the loan to proceed, isn't that right? A. No, I didn't want - all I wanted was a hundred thousand to get them two trailers. I didn't want Bankcorp (as said) paid out or Bankwest paid out, that was all a surprise to us from when that money came into the bank. There was no conversation with anyone to pay anything out. All we wanted was a straight out one hundred thousand dollars so we could go and buy these two trailers to put into the business and then it was supposed to rollover for the three years and we would have been able to pay it off nice and easy and comfortable. Q. You knew if you wanted to make an issue with Prime about the loan, it was easy enough just to send a letter to Prime setting out what your problems were with the loan, isn't that right? A. I couldn't get a hold of - they wouldn't answer their phone and I'm not one to write letters, I'm not real literate to go writing letters and stuff like that" (T314:19 – 39). 1. It was put to Mr Calleja that he had concocted his story about Prime acting without authorisation, but he rejected that proposition. Frank Bugeja 1. Mr Bugeja gave evidence before the Court on 2 November 2017. 2. He said that he had worked for Calleja PJC for about eight years, since it began. His work was mostly in sales, and involved getting new clients for the company, or other duties as instructed, including employment of staff. 3. Calleja PJC had offices in Sydney, Melbourne, Brisbane, and in Newcastle. Mr Bugeja worked from the Sydney office, with Mr and Mrs Calleja and a warehouse manager. He visited the other offices from time to time as necessary. Mrs Calleja used to spend a lot of her time in Sydney, but is now frequently in Melbourne. The company has about 12 drivers and there were about 20 employees including drivers as at the end of 2014. 4. Mr Bugeja's background is in sales, although he has also worked as a plant manager. He has no qualifications in accountancy. He was asked by Mr Calleja to find a lender for a loan to the company. Mr Calleja had never asked him to do anything like that before; he assumes he was asked because he was trusted. Mr Bugeja has had personal loans himself, but has no experience of business finance. 5. He looked on the internet and found Fast Commercial Loans, which he assumed was a broker, and left a message for someone to call about a loan. He sent an email to Fast Commercial Loans (CB 189) asking for a $500,000 loan, a figure he thought Mr Calleja would have given him. He understood the purpose of the loan was to buy semi-trailers for the company. 6. Mr Bugeja's involvement after that was limited. He was at a meeting with Peter Ainsworth once or maybe twice, he got a couple of emails including one that asked him to illegally hand amend a document, and he took calls from Paul Scanlon pushing for the contract to be signed by Mr and Mrs Calleja. He did not have any conversation with Paul Scanlon on 1 April 2015 about Bankwest, and would have passed a call of that nature to Mr and Mrs Calleja. He did not have any telephone conversation with him on 17 April 2015. 7. He did not see any correspondence sent to Lea Smith. He did not see the letter at CB 824 that was addressed to "Frank Calleja" at the Heatherbrae address. Emails sent to him by Prime concerning the loan or related matters would have been left to the directors to deal with, as it was nothing to do with him. He denied any knowledge of loan payouts or security separation and the like. He did not know that Calleja PJC owed debts to Baycorp or Capital Finance. 8. Mr Bugeja summarised his involvement in the transaction as: "My involvement was to find them a loan, that I did. Yes, I sat down with Peter and that's when he came out there. We discussed it. We found that he had a - in the loan, they wanted the prepayments done within 12 months and the company didn't agree to it, and that's when I started getting calls from Peter and Paul to push Michael and Liz to sign the contract" (T178:31 – 35). 1. It was put to Mr Bugeja that he had lied and fabricated his evidence, but he rejected that suggestion firmly. CONSIDERATION 1. On the first day of the hearing of this matter, and in the face of the defendant's pleadings (which allege that there is no liability under the loan agreement, mortgage or other security documents; and which raise issues of misrepresentation and unconscionable conduct and considerations of contract review) Senior Counsel for the plaintiff said, "This is a case that is not heavy with law. It is essentially a factual dispute about whether authority exists and whether there was a misrepresentation or not". 1. It is those two questions of fact, whether Prime had Mrs Calleja's authority to make the payments and disbursements it did of loan monies; and whether Prime misrepresented the nature of the facility and its terms, that determine the case, and I have approached it on that basis. 2. The first proposition is essentially Prime's case: that it had a valid loan agreement with Calleja PJC and valid security agreements, and paid loan monies as authorised by Calleja PJC. The second is essentially the defendant's case, that the loan agreement was one which was seriously misrepresented and nothing done by Prime was done in accordance with agreement or authority from Mrs Calleja or Calleja PJC. 3. It is for Prime to prove on the balance of probabilities that the loan agreement it pleads was validly entered into, and its actions in paying out loan monies as it did were authorised. If it can prove this basic proposition, the indebtedness to it of Calleja PJC follows, as does Prime's claim against the security offered against payment of the loan. 4. Having considered all of the evidence, and particularly having regard to the oral evidence and my assessment of the witnesses called respectively for the plaintiff (and cross-defendant) and the defendant (claimant and cross-claimant) I am not satisfied that Prime has established those things it pleaded as its case. 5. To the contrary, the overwhelming weight of the evidence supports the conclusion that Prime conducted itself in a wholly unconscionable manner with regard to Calleja PJC, by purporting to provide a facility it did not provide, and subsequently acting with complete disregard to the loan agreement as it was represented by its agent. The circumstances of entry into the loan agreement 1. Mr and Mrs Calleja both deposed that, towards the end of 2014 they were interested in obtaining finance to permit them to purchase two or three second-hand trailers, which would permit them to run their own trucks in the freight business, rather than pay lease fees to others for hire trucks. Whilst I do not doubt on the evidence that second hand trucks could sometimes became available for as little as $33,000 in 2014 – 2015, I accept that an average price for such a vehicle was $40,000. Calleja PJC therefore required around $120,000 if it was to purchase three trucks. 2. The company's marketing manager, Mr Bugeja, was asked to try to find a source of finance, not because he had financial qualifications, or experience in dealing with financiers (neither of which he had), but for no better reason than that he could use a computer for internet searches and had time in the office. Had Mr Bugeja had the sort of financial acumen senior counsel questioned him about in cross-examination, he may have thought better of making an inquiry of something styling itself "Fast Commercial Loans", in circumstances where a legitimate commercial loan for a not insignificant sum simply could not be "fast". He might also have thought better of any involvement with a finance company that was prepared to offer a loan in the sum of $450,000 less than one day after a telephone message inquiring about a loan had been left, and patently before any proper inquiries as to the borrower's capacity to take on such a debt could have been made. 3. Mr Bugeja was no financial wizard; he was a man who had spent his working life in sales and marketing for small companies, and who had no knowledge beyond that which is acquired by an ordinary individual who has taken out a personal loan. I am satisfied that Mr Bugeja's only role in the loan agreement subsequently entered by his employers was to make the initial inquiry on their behalf, attend a meeting with the Callejas and Peter Ainsworth, and subsequently field frequent and persistent telephone calls from Mr Ainsworth and Mr Scanlon, in which they sought to urge the Callejas to sign up for a loan with Prime. 4. I reject completely the proposition that Mr Bugeja was simply a skilled liar playing a part in the witness box in support of a fraudulent defence and claim by his employers. Mr Bugeja impressed me as a man who was sufficiently concerned about proper dealing in business matters to refuse to endorse a loan document by hand at Prime's request, believing it would be "illegal" to do so (T178:41). 5. Mr Bugeja was an honest witness. 6. What he was not was an officer of Calleja PJC with any authority whatsoever to act for his employer in legal or financial matters. That Prime attempted to portray him as such to legitimise some of the company's actions says more about the illegitimacy of its dealings with the Callejas than it does about Mr Bugeja. 7. Having made his brief inquiry on 28 October 2014 Prime responded on 29 October 2014 by offering a loan facility for $450,000 that was accompanied by a twelve page densely worded offer document. (It was this document that Peter Ainsworth ultimately amended by hand.) 8. The speed with which the offer was made says much about the absence of any proper inquiry by Prime as to the financial position of the company with which it was dealing. It is open to infer that Prime was unconcerned as to the capacity of Calleja PJC to repay any loan, having been advised that the security against the loan was real property with an estimated value of $850,000 (CB 197). Certainly it had made no proper inquiries of the company's financial position by 29 October 2014; there simply was not time to have done so. Indeed, part of the extremely limited information it did have access to by 29 October 2014 was an entry (of unestablished origin) that accompanied a record of Mr Bugeja's telephone inquiry, which referred to a "business loan also poor credit history" (CB 188). 9. The offer document is a complex one, but some things about it are reasonably straightforward. The documented "Authorised Purpose" of the loan offered was "capital to replace three semi-trailers for freight business" (CB 196), something the borrower was required to swear to in a statutory declaration (CB 204). The loan was required to be "wholly or predominantly for business purposes or investment purposes other than investment in residential property" (CB 204). The facility had a specified limit, and the "outstanding amount" could not exceed that limit. 10. The loan dealings were referred to Peter Ainsworth. Mr Ainsworth gave his employment for Prime as "Investment Director". His job title at the time of his oral evidence was finance broker, or "just a sales guy". By whatever employment title Mr Ainsworth is described, as a witness I could not characterise him as anything other than extraordinarily unsatisfactory and entirely unreliable. 11. Prime relies upon the evidence of Mr Ainsworth to rebut the Callejas' assertions about misrepresentations relevant to the terms of the loan, but I would not accept anything Mr Ainsworth said unless it was against interest, or supported by independent evidence. He was a witness whose patent intention was to say whatever he believed was necessary in support of Prime's case, whether it approximated the truth or not. Indeed, there is reason to wonder whether Mr Ainsworth fully understood, or in any way took seriously, his obligation to be true to the affirmations he took before signing his affidavits, and giving his evidence in court. 12. When asked about another unrelated matter in which he was a witness for Prime, that being a matter in which, coincidentally, Charbel Boutros was also said to be a witness called by Prime, Mr Ainsworth gave answers that suggested he did not really know what a witness was, and did not fully appreciate what an affidavit was. 13. Although he had sworn at least one affidavit in the unrelated matter, he denied that he was a witness, conceding only, "I will be, I guess, when I go to court for it, yeah" (T146:04). When reminded that he had sworn an affidavit in the proceedings he responded, with startling disingenuousness, "Yes. Actually, when you say 'sworn', does that mean somebody comes and witnesses it and everything?" (T146:10). 1. Perhaps Mr Ainsworth thought that an affidavit was a document that was required to be signed and witnessed without comprehending the importance of it, or that it was the equivalent of sworn testimony. If so, that may be one reason why he felt able to give evidence before me which was so obviously false. 2. Even senior counsel for Prime could not fully defend Mr Ainsworth, although he did submit he was truthful: "I would say he's certainly truthful. Having seen Mr Ainsworth in the witness box reliable is perhaps, in the full layman's sense of the word, reliable is perhaps not what you would attribute to him" (T324:44 – 46). 1. Having had an opportunity to observe Mr Ainsworth's casual approach to both his role as seller of a complex financial product, and to the truth, I have no difficulty in accepting that he would have "pestered" the Callejas to enter the loan as Mr Bugeja and the Callejas testified, and that he would have told Mr and Mrs Calleja whatever he thought they wanted to hear in order to have them sign up for the loan he was trying to sell them. 2. Mr and Mrs Calleja have deposed that Mr Ainsworth assured them that, in signing the loan agreement, they were signing up for a facility in which they could draw only such funds as they wished to draw, and they would pay interest only on the amount drawn. They were both emphatic in their evidence that Mr Ainsworth further assured them that there would be no problem in the loan being for a total term of 3 years, and that it was in fact for that period. I accept that evidence, and reject Mr Ainsworth's assertions to the contrary. 3. The documentary evidence provides no support for Mr Ainsworth's assertions in that regard. I have concluded to the contrary, that they suggest shady dealing. Prime relies on the hand amendment to the offer document which referred to a 12 month rollover, and the email of 27 January 2015 as confirming that change, but I accept the evidence of Mr and Mrs Calleja that, whilst each saw Mr Ainsworth make some alteration to the offer document at the meeting of 19 November 2014, he did not show them what he wrote and they signed the offer document without having read the alteration. 4. The email of 27 January 2015 spoke most loudly in what it did not say: as an email supposedly confirming an important oral agreement, it was in terms that confirmed nothing beyond that there was an additional rollover period. Why did Mr Ainsworth not record the rollover period of 12 months, if that is what was in fact agreed? If, on the other hand, he had agreed a total term of 3 years, but did not want that in writing, his email confirmation was quite anodyne as far as Prime could be concerned. It had the effect of allowing the Callejas to believe there had been an extension of the term of the loan, without in fact confirming anything Prime did not want to honour (CB 525). 5. Even had there been a written confirmation of a 3 year term agreed by Mr Ainsworth, there is reason to believe it would not have been honoured. Another hand amendment made by Mr Ainsworth to the offer document was to the effect that the broker's fee (the fee payable to Fast Commercial Loans) would be no more than 1%; it was in fact charged to the Callejas at close to three times that amount. 6. Despite his denial, I am also satisfied that it was Peter Ainsworth who arranged to have Robert Shacklady attend upon the Callejas to get the loan documents signed, and that the documents were signed without any advice from Mr Shacklady. 7. Mr Calleja deposed that Peter Ainsworth, when told that the Callejas' solicitor would not sign the loan documentation, dismissed her as not knowing what she was talking about. Although Mr Ainsworth denied having said such a thing, it is a comment entirely consistent with his unprofessional presentation in the witness box, and what I have concluded was his intention to have the Callejas sign up to the loan notwithstanding their hesitancy to do so, and the concerns they raised. I accept that he made the comment, and that, as he promised Mr Calleja he would, he arranged for Robert Shacklady to attend upon the Callejas and sign the loan documents. 8. That Mr Ainsworth also denied any contemporaneous knowledge of Robert Shacklady, asserting that he had only encountered him "around the traps" after he had left Prime's employ, is but another example of his mendacious evidence. 9. Although I also found Mr Shacklady's evidence unreliable in many respects, I accept his evidence that he knew Mr Ainsworth in 2014 – 2015, and that it was probably Mr Ainsworth who asked him to go out to see the Callejas: T9:24. Mr Shacklady's recollection was that Mr Ainsworth asked him to "sign some mortgage documents for a client" (T9:27), and he collected the loan documents that had to be signed from either him or Gadens. 10. It is significant to me that Mr Ainsworth apparently had no interest in giving Mr Shacklady any background information, to the effect that the Callejas own solicitor had refused to act for them, or that they needed advice about the documents they were to sign. Mr Ainsworth's clear focus in sending Mr Shacklady to see the Callejas was to secure a solicitor who was prepared to sign the loan and security documents. 11. Mr and Mrs Calleja both gave evidence that neither had met Mr Shacklady before, or knew anything of him other than that Peter Ainsworth had said he would arrange for a solicitor for them. 12. It would appear that, for Mr Shacklady, this was a reasonably regular occurrence. Mr Shacklady told the Court that, although he had never done work for Prime, Peter Ainsworth, or sometimes the firm's solicitors, would ring him about once every six weeks to ask him to witness documents for clients of Prime. 13. That Mr Ainsworth denied all knowledge of Mr Shacklady clearly points to his awareness that his conduct in having Mr Shacklady attend the Callejas to have mortgage documents signed was dubious to say the least. 14. Although the circumstances in which Charbel Boutros came to sign a financial advice certificate is not fully established on the evidence, I do not accept Mr Ainsworth's claim not to have known Mr Boutros at the relevant time. It seems likely, in all the circumstances, that Mr Ainsworth arranged for Mr Boutros to sign the necessary certificate. However Mr Boutros came to sign this document, I accept Mrs Calleja's evidence and am satisfied that it was not after having given financial advice to Mrs Calleja. 15. If Mr Boutros was in a position to testify to having given Mrs Calleja proper financial advice prior to certifying that he did, it might be expected that Prime would have called him. He was not called. 16. There is a dispute in the evidence as to how the loan agreement came to be signed and whether the Callejas had received appropriate legal advice. Again, having observed the witnesses as they gave their evidence, and having regard to both the presentation of each and other relevant evidence, I accept the account given by Mr and Mrs Calleja. 17. There is no doubt on the evidence that the Callejas were given competent, sensible, and firm legal advice by Lea Smith that they should not enter the loan agreement with Prime. Ms Smith told Mr and Mrs Calleja that the loan was a bad deal, and that in signing it they risked losing their home. She pointed them to some of the more glaringly disadvantageous clauses in the agreement, and warned them about the possible outcome of accepting such terms. 18. I accept without hesitation Ms Smith's evidence to the Court. She clearly conducted her practice in an orthodox and capable fashion, keeping a file relating to her dealings with the Callejas, and maintaining the file with appropriate file notes. Her evidence was given with the benefit of contemporaneous notes of conferences and telephone conversations. There can be no question that the Callejas received clear and appropriate legal advice from Ms Smith, and were given strong warnings of the dangers in entering the Prime agreement. 19. The same cannot, regrettably, be said for Mr Shacklady's dealings with the Callejas. Although I accept that Mr Shacklady did not see himself as Prime's lawyer, and was not in any strict sense acting for Prime, I have concluded that Mr Shacklady saw his role as to get documents signed that Prime wanted to have signed. He did not regard it as his business to give the Callejas any advice about the loan agreement. His role was, as he deposed to the Court, "I signed the documents. Part of my retainer was to execute the documents and also to certify. It is a big thing for the lending companies to get certification of the client's identity. That was a major part of it as well." (T15:41 – 43). 1. It would appear that Mr Shacklady has no place of business, and operates in something of an on-call fashion. Prime and other lenders contact him to witness documents for clients, and he does so for a cash payment, without opening a file, without taking file notes or keeping copies of documents, and without issuing an invoice for work done or proper receipt for fees paid. It is a most unusual way for a solicitor to operate. 2. It is also unusual for a solicitor of this Court to seek to avoid service of a subpoena issued by it, as I am satisfied Mr Shacklady sought to do. His dealings with the process servers, none of whom were required for cross-examination, suggests that Mr Shacklady behaved less than professionally in avoiding service of a subpoena to produce. I do not accept that his motivation in so doing was, as he deposed before me, to save the defendant the conduct money. 3. Although Mr Shacklady deposed that he spent 2 to 3 hours with the Callejas on 12 February 2015, I accept the Callejas' evidence that the period was in fact much shorter than that, and more like 15 to 30 minutes. The signing of the loan documents was a matter of some significance for Mr and Mrs Calleja and it is more likely that they would remember broadly what transpired. Their evidence is also consistent to a degree with the request from Peter Ainsworth to Mr Shacklady to get some mortgage documents signed, as Mr Shacklady said occurred; and with Mr Shacklady's evidence that that his "retainer" was to execute the documents and certify that legal advice had been given. 4. Mr Shacklady's estimate of spending some hours with the Callejas is not an estimate based upon his contemporaneous file notes, or upon his invoice setting out work done, and it is not consistent with the fee charged, with a $300 fee for 3 hours work plus travel being unusually low. His assertion is based upon memory unaided by any record. In circumstances where Mr Shacklady frequently gets documents signed at the request of Prime or another lender, it is unlikely that this particular transaction could be prominent in his memory. 5. Further, even if Mr Shacklady did give some basic advice about mortgages and so forth, he was unaware of the oral variations to the loan agreement, matters of significance in properly advising Mr and Mrs Calleja. 6. Although Prime argues that the Callejas had legal advice from Ms Smith if not Mr Shacklady, Ms Smith's advice related to an agreement unmodified by oral variation, and for an amount greater than that ultimately paid out by Prime. The distinction is in what the Callejas had been promised by 12 February 2015 about the term of the agreement, being 3 years, its progressive character as a cash advance facility, and the amount of the facility, being the amount they drew upon for the purchase of trucks, intended by them to be a maximum of $150,000. 7. I have concluded on the evidence that the Callejas did not receive legal advice from Mr Shacklady, or at all about the agreement in the terms represented by Peter Ainsworth. Mr Shacklady's role was to have the Callejas sign the agreement, mortgage and security deeds, and to sign off on a certificate of legal advice. That is all he did. I am not able to accept his evidence to the contrary. 8. I have also concluded that neither Mrs Calleja nor Mr Calleja received financial advice from Charbel Boutros. To the contrary, he was simply someone Mr Ainsworth arranged to sign the necessary certificate. The Loan Agreement 1. The loan agreement itself is in evidence, and it presents a further basis upon which to firmly query the legitimacy of this transaction. 2. There is firstly the issue of the date upon which the documents were executed and the contract was made. Mr Shacklady said that he did not date the documents, and they have clearly been dated by a different hand, adding "4 May 2015" (that is, after the loan funds were said by Prime to be disbursed, on 17 April 2015). There is no evidence at all as to when Prime executed the documents. 3. Further, the appearance of the document is suspicious to say the least, and there is no adequate explanation from any witness as to why it appears the way it does and, particularly, why the execution page is both present in duplicate (one being executed and the other not) and completely different in appearance to all other pages of the agreement. 4. The appearance of the document – the two pages numbered 31, the different paper on which the executed page 31 is printed, the different ink used on that page alone, the different code on the executed page 31- is such as to lead me to doubt whether the document in evidence as Ex. D is the loan agreement Mr and Mrs Calleja signed, or whether, at some later stage by some unidentified hand, pages 1 to 30 of some other document were substituted for the pages that originally preceded the page bearing the execution. That doubt as to the authenticity of the loan agreement is heightened by Mr Shacklady's evidence. 5. Mr Shacklady did not notice that there were two pages numbered 31 in the document he added his signature to as witness; nor did he note the difference in the code references at the foot of the executed page 31, as opposed to that on all other pages. That might, however, be set aside as a simple failure to observe. The code in particular is in very small font. What is of significance in terms of Mr Shacklady's evidence is that the loan agreement, as distinct from the security deeds and other important documents, is not signed and witnessed on each page, even though such was Mr Shacklady's practice, a practice demonstrated on the other documents, and consistent with Mrs Calleja's evidence that she was directed to sign each page. 6. Putting these features of the evidence into the overall context of the circumstances in which I have concluded that this loan agreement was reached, I am left wondering whether Ex. D is a fraud. 7. Prime's submission about the document is to the effect that the documents must have been executed twice: "[…] we don't actually know the precise date that the contract was entered into. We know when the defendant signed the documents with Mr Shacklady. As my friend has pointed out, there seems to be an additional execution page in the loan agreement. That suggests, although no one on either side seems to remember it, including Mr Shacklady, it appears that there was some problem in the execution at one point of time, and then the documents were executed again, in order to cover that, so we don't know actually when the defendants and Mr Calleja finally executed the document" (T323:45 – 324:03). 1. There is, however, no evidence at all from any witness that the loan was executed twice because of some unidentified problem, and that was not raised with the Callejas, or with Mr Scanlon or Mr Ainsworth. There is simply no basis upon which I could conclude that the document was signed twice for a legitimate if unestablished reason. 2. The evidence of Ms Smith to the effect that the document she was shown in Court and the document she received from Gadens appeared to be the same does not alleviate the issue with Ex. D. Ms Smith was able to give the document shown her in the witness box only a cursory glance; she did not have the opportunity to carefully compare them. 3. I am satisfied that Mr and Mrs Calleja signed the distinctive page 31 of the loan agreement, but I cannot be satisfied that the balance of the pages were annexed to it at the time. That is, I cannot be satisfied, even on the balance of probabilities, that the loan agreement Prime relies upon to found its claim for possession of the Heatherbrae property is the loan agreement Mr and Mrs Calleja signed. 4. The loan agreement that Mr and Mrs Calleja had received advice in relation to was one consistent with their understanding of a loan facility with an approved loan amount, against which progressive drawings could be made, for the sole purpose of funding the purchase of second hand trucks. 5. I am satisfied that, whatever may have been in the written agreement the Callejas signed on 12 February 2015, Peter Ainsworth had falsely represented the agreement to the Callejas be one akin to a line of credit or cash advance facility, whereby Calleja PJC could draw only such monies as it wished to draw, up to a specified limit (perhaps $360,000), pay interest only on those monies, and repay such loan monies as had been drawn within a term of three years. 6. Mr and Mrs Calleja are relatively simple people. Mr Calleja drives trucks. He has some problems with literacy, and is entirely unsophisticated. He has a very basic understanding of financial matters. His limitations were evident to me when he gave evidence; by his overall demeanour, his obvious difficulty in negotiating the three volume court book at counsel's direction, and the manner and content of his speech. His limitations would have been equally obvious to Peter Ainsworth. 7. Mrs Calleja, whilst the director of Calleja PJC, saw her main occupation as loading and unloading trucks. Her duties associated with managing the company were undertaken by her with appropriate assistance: she had a bookkeeper for day to day accounting; an accountant for more significant financial matters; and a marketing manager to deal with sales and marketing and employment. Even so, the evidence is that the company was not especially profitable, and struggled to pay its bills. 8. Neither Mr or Mrs Calleja would have been any match for the much sharper Mr Ainsworth. 9. I found Mr and Mrs Calleja to be honest witnesses. On occasion there were inconsistencies in the evidence of each, but I accept that such inconsistencies as there were originate in the ordinary fallibility of human memory, and the relatively limited understanding of each of financial matters. I accept their account of how they came to enter a loan agreement with Prime, and that they did so only on the basis of the false representations of Peter Ainsworth. The Question of Authority to Pay Monies 1. Even if the loan agreement that was signed is that reflected by Ex. D, and liability as debtor arises prima facie, I am not able to accept Prime's case that it acted with the authority of Calleja PJC when it made the payments recorded in the settlement sheet of 17 April 2015. 2. Mr Scanlon asserts that the Callejas authorised the payments recorded in the settlement sheet, but he could point to no signed authority with respect to the payment or, indeed, to any other contemporaneous document to evidence authority. The emails he relies upon were sometimes sent or copied to a Calleja email address, and sometimes not. They do not in any event establish that Calleja PJC gave authority to make the various payments in fact made. At most, the emails could have led to Mrs Calleja making some inquiry about their meaning, but they do not in any sense demonstrate that she was aware that Prime intended to apply funds sought by Calleja PJC to buy trucks to securing for itself a position of good security over Mrs Calleja's assets. They do not evidence her authorisation of such a course. 3. Mr Scanlon also relies upon a telephone conversation he says he had with Frank Bugeja on 1 April 2015 as authority to pay down the Bankwest debt. There are a number of problems with that proposition as evidence of authority. 4. Firstly, Mr Bugeja was not a director or officer of the company, and he had no authority to make any financial or legal decisions for Calleja PJC. Had Prime made the most basic inquiry about the individuals with whom they were dealing that fact would have been discovered. 5. Secondly, to suggest that Mr Bugeja could have orally authorised Prime to pay monies borrowed by Calleja PJC for a specified business purpose, to pay down the debt of a private individual in a substantial amount, and that Prime would have accepted that telephone conversation as being such an authority, is entirely inconsistent with proper or prudent business practice. 6. Thirdly, this conversation is relied upon as constituting authority by a company to pay $152,496.44 of loan funds, to the benefit of a private individual, and contrary to the declared purpose for which the funds were sought, and yet there is no written confirmation of it. Indeed, there is not so much as a file note to record what was said. 7. According to Mr Scanlon, Prime's policy was not to make file notes, but such a policy is beyond belief. I do not believe, as was submitted by Prime, that it is really only lawyers who regard file notes as significant. Any legitimate business, and particularly one dealing in finance for large sums of money, would see the value of file notes. For the legitimate business person, and the truthful witness, recording and retaining a file note can only be in his or her interests, as it provides a contemporaneous record that can be relied upon as proof going to the contents. 8. Had Mr Scanlon had a thorough file note of the supposed conversation of 1 April 2015, he could have produced it as support for his evidence, as corroborative of the truth of what he said. Given that the conversation is relied upon as significant, in that it gave authority to pay over $150,000 to the benefit of someone other than the borrower, the absence of any written record of it takes on quite another meaning. 9. Fourthly, Ex. J is in evidence, and the significance of that would appear to be what was not produced in answer to the subpoena - that is, any document, letter, or file note that would demonstrate that Mrs Calleja was in discussion with Bankwest about the pay down of her loans, or that she acquiesced in such a course, much less authorised it. There is also nothing from Bankwest to corroborate Mr Scanlon's claim that someone with the bank "required" the sum of $152,496.44 to be paid to it prior to "releasing" the Heatherbrae property. 10. A significant factor calling into question the occurrence of the conversation of 1 April 2015 and what if any authority Mr Bugeja gave Prime to pay down Mrs Calleja's Bankwest debt is the reliability of Mr Scanlon himself. Mr Scanlon was in the witness box over three days; there was a very good opportunity to assess his credit as a witness, based upon both his presentation as a witness, and upon the credibility of what he said, particularly in light of other evidence. 11. I did not find Mr Scanlon to be a persuasive witness. He had the veneer of credibility without the substance. Whilst clearly intelligent and polished, I regarded him as insincere. He frequently gave long and involved answers where a short answer should have sufficed. His answers often provided information not asked for, whilst conversely not providing that which was sought by the question. His evidence was at times evasive, and on occasion quite incredible, such as his evidence of not taking file notes or otherwise confirming important discussions in writing. I would not accept Mr Scanlon's evidence unless it is against interest, or supported by independent evidence. 12. He relied upon Ex. 1 as evidence of his telephone conversations with the Calleja interests, but the document fell short of providing such proof. It also provides an interesting contrast with the individual pages of the telephone bills exhibited as part of Mr Scanlon's documentary evidence (CB 487 – 490). It is noted that the version of the document without redaction was produced only at the insistence of the Calleja interests. 13. Exhibit 1 contains the whole of the telephone bills of which CB 487 – 490 is but a very small part. Distinct from the redacted documents, Ex. 1 contains call records for 1 April 2015. No call to Mr Bugeja or to the Calleja PJC office is shown to have been made. It is possible, of course, that Mr Scanlon made the call he asserted in his evidence that he placed to Mr Bugeja on that day from some other telephone service. That would, however, appear to be inconsistent with his ordinary use of the service to which Ex. 1 relates. 14. The document does not seem to provide the proof of calls made on 17 April 2015 that Mr Scanlon has deposed he made. It contains reference to the following calls that were placed by Mr Scanlon's phone service: 17 Apr 12:41pm Sydney Cbd Mobile 041*****45 0:01:00 [Bugeja] 17 Apr 12:41pm Sydney Cbd Sydney 0296****39 0:01:00 [Office] 17 Apr 12:44pm Sydney Cbd Sydney 0296****39 0:02:00 17 Apr 04:07pm CLARENCE S Mobile 041*****45 0:01:00 17 Apr 04:08pm CLARENCE S Sydney 0296****39 0:01:00 17 Apr 04:15pm CLARENCE S Sydney 0296****39 0:01:00 17 Apr 04:21pm CLARENCE S Mobile 041*****45 0:01:00 17 Apr 04:29pm CLARENCE S Mobile 041*****03 0:01:00 [M. Calleja]. 1. Although no officer from the relevant telephone service provider was called to explain the meaning of the records, it is notable that all of the many calls logged on the telephone bill are recorded in intervals of one minute or multiples of one minute. It seems reasonable to infer that, because of the billing practices of the service provider, calls are "charged up" at one minute intervals. That would mean that a telephone call of 5 seconds duration would be recorded in the same terms as a 59 second call, that is, as a call of one minute in duration. 2. Whilst the records provide evidence that brief calls were made to Mr Bugeja's mobile telephone, the Calleja PJC office number, and Mr Calleja's mobile telephone number on 17 April 2015, the pattern of calls is more consistent with a caller endeavouring to speak to someone, perhaps without complete success. The longest call, of 2 minutes to the Calleja PJC office number, and the one minute call to Mr Calleja's mobile service, seem hardly long enough for the sort of conversations with Mr Bugeja and Mr Calleja that Mr Scanlon deposed to. 3. That is particularly so when it is recalled that, in oral evidence, Mr Scanlon asserted that he had obtained instructions to pay various disbursals during "conversations with the client" (T39:33; T40:30; T42:40-47; T45:15; T45:22). The only other April call recorded in the telephone bill other than those set out at [24] and [347] above is a call of 2 minutes duration placed from Mr Scanlon's service to Mr Bugeja's mobile telephone number at 11:06am on 13 April 2015. It is noted that Mr Bugeja was not someone who could have provided the instructions Mr Scanlon says he obtained. 4. At [20] of his affidavit of 7 September 2016 Mr Scanlon said that he telephoned Mr Bugeja "on the Company's telephone number" and obtained his verbal authority to pay Kemp Strang an amount of money from the loan funds. There is no record of any such call in Ex. 1. 5. Exhibit 1 taken as a whole tends to undermine the veracity of the evidence of Mr Scanlon rather than to provide support for it. 6. Finally, it defies common sense and credulity to suggest that Calleja PJC would knowingly borrow an amount of money almost three times greater than it required, in circumstances where the company was struggling financially, so that company debts and Mrs Calleja's personal debts could be replaced with a debt of shorter duration and substantially higher interest, fees, and charges. 7. The only entity that benefitted from the disbursal of the money as it was disbursed by Prime was Prime, it thereby gaining favourable security which could be profitably seized. 8. On all of the evidence I do not accept that Prime has established that it acted with authority before making the payments it did on or around 5 April 2015, and which are detailed in the Settlement Statement dated 17 April 2015. Neither Mrs Calleja nor any person on behalf of Calleja PJC had authorised the payments, orally or in writing, nor had any person associated with the company known what Prime intended to do with the purported loan monies. 9. I accept Mr and Mrs Callejas' evidence that they were shocked and upset when they discovered, on about 13 May 2015, what Prime had done in disbursing the $290,000. Their many e-mails sent at this time – generally with "high importance" and in large font or capital letters – tends to confirm this. 10. I accept also that, in thereafter making the interest payments demanded by Prime, and often paying (by mistake) in excess of the monthly sum demanded, they neither intended to or did accept a loan in the terms Prime's actions suggest Prime meant to be extant; Mr and Mrs Calleja simply lacked the personal and financial resources to, as Mrs Calleja put it, "fight Prime". They hoped that, by keeping up with the exorbitant interest payments demanded of them, they would save their home. That was their only intention. Enforcement 1. Although Prime regarded the loan facility as not kept in good order in the following 12 or so months after it disbursed $290,000, it would appear from Mr Scanlon's evidence that interest and loan management fees were paid by Calleja PJC generally on the day due, being the first of each month, even though, because of the speed with which direct deposits are processed by banks, the payments may not have been received until the next day or even later. There was delay in the payment due for April 2016 not explained by bank tardiness. Thereafter, enforcement action commenced. 2. On Mr Scanlon's evidence, enforcement action commenced and proceeded with what could only be characterised as extraordinary haste. 3. Although a Real Property Act notice was issued, Prime had already instructed its lawyers to start legal proceedings for possession of Mrs Calleja's home; there was no attempt to discuss the late payment with the Callejas, or to wait for the notice period to expire to permit the borrower a reasonable interval in which to make good payments. I do not accept Mr Scanlon's evidence that he believed speedy action of this kind was the best means of having a debtor attend to his or her affairs. On the contrary, Prime's haste was in my conclusion motivated by a desire to take possession of Mrs Calleja's secured asset as quickly as possible. Its actions were about maximising its own profit, not about fair dealing with a customer. 4. Indeed, nothing about this transaction was about fair dealing. 5. Peter Ainsworth's object in his dealings with the Callejas was about signing them up for a loan agreement that was highly profitable to Prime. He did not care about the sort of loan facility his clients required, nor about the capacity of the borrower to repay the loan. He was content to misrepresent the loan agreement as one which incorporated terms amended to meet the concerns of the Callejas, without ever intending to in fact vary the contract. 6. Paul Scanlon was similarly unconcerned by the capacity of Calleja PJC to afford the sort of extortionate loan Prime was selling; his concern as Director of Prime was that the loan was secured by assets that could make good any default. The loan agreement he asserts to be that signed by the Callejas has severe penalties for default; it was in fact in Prime's interests if a borrower could not keep up with contractual payments as any default led to a doubling of the interest rate, as well as to a range of other drastically high fees becoming operational, such as a termination fee and an "undiscounted" loan establishment fee. 7. Those are all features of the matter which inform a proper understanding of the speedy enforcement action. Conclusion 1. It follows from those matters referred to above that Prime has failed to make out its case. It has failed to establish the liability of Mrs Calleja or Calleja PJC for the payment of monies by the Calleja interests; it has similarly failed to establish any entitlement to possession of the Heatherbrae property. 2. On the basis of the facts as I have found them established by evidence, I have concluded that: 1. With the exception of the second page 31, Prime has not established on the balance of probabilities that the loan agreement in evidence as Ex. D is the document signed by Mr and Mrs Calleja on 12 February 2015. What constituted the balance of the document and what constituted its written terms is not established on the evidence. 2. Although the evidence does not establish by whom it was done, I am satisfied that a person acting on behalf of Prime removed the second page 31, which bears the execution of the loan agreement, from the document signed on 12 February 2015 by Mrs Calleja on each page and witnessed in the same way by Mr Shacklady, and placed that page with a different document. 3. In his dealings with the Calleja interests, and without intending to fulfil his assurances, Peter Ainsworth on behalf of Prime knowingly misrepresented the terms of the loan agreement he sold to the Callejas, by assuring them: 1. that the loan monies could be accessed by them on a progressive basis, with no obligation or requirement that the whole of the approved amount be drawn; 2. that interest would be payable only on the amount actually drawn, as opposed to on the whole of the facility; 3. that the loan agreement was for a term of three years, comprised of an initial 12 month period, with an additional 2 year period by way of "roll-over". 1. Regardless of the contents of the document in evidence as Ex. D, I have concluded that, because of the misrepresentations by Prime's agent, Mr and Mrs Calleja believed that they were entering a loan contract for a cash advance facility with progressive draw down to a maximum amount of $360,000, where they controlled the actual amount drawn upon, with a term of 3 years. 2. Mr Ainsworth proceeded with a loan agreement in terms other than those agreed knowing that Calleja PJC would have serious difficulty in repaying a loan in the amount and with the terms implemented, as opposed to the terms agreed (CB 525; CB 796; T148:45). 3. The loan agreement that the Callejas believed themselves to be entering when they signed a document on 12 February 2015 was not the loan agreement about which Ms Smith provided advice, it having by that time been significantly altered, orally, by Peter Ainsworth. 4. No independent financial advice was provided to the Callejas, Charbel Boutros having no greater role than to certify that he had given such advice even though he had not, at the request of Peter Ainsworth. 5. No independent legal advice was provided to the Callejas, Mr Shacklady having done no more than, at the instigation of Peter Ainsworth, attended upon the Callejas with the intention of seeing the loan and security documents executed, and ensuring that identification requirements were met. 6. In executing a mortgage over her Heatherbrae property as guarantor, in favour of Prime, Mrs Calleja believed on the basis of Prime's misrepresentations, that she was providing security for a loan that would not exceed the $150,000 that Calleja PJC intended to draw as a maximum, and that it would be repayable over 3 years. 7. The mortgage signed by Mrs Calleja in favour of Prime is void. It does not secure any amount payable to Prime. 8. In executing the General Security Deeds, Mr and Mrs Calleja, and Calleja PJC, believed the security deeds related to a loan agreement for a maximum amount of $150,000, repayable over 3 years, because of the misrepresentations of Prime to that effect. 9. The General Security Deeds executed by Mr and Mrs Calleja, and Mr Calleja for Calleja PJC, are void. 10. The Guarantee was executed to guarantee a loan that was not provided by Prime and is void. 11. No monies were disbursed by Prime on behalf of Calleja PJC on or by 17 April 2015. The "settlement sheet" was no more than a fiction, as to both date, and content. Whilst bank cheques were purchased by Prime in the amounts represented by items 4, 5, and 6 on the settlement sheet, those sums were not paid out to any entity purportedly on behalf of Calleja PJC until after that date. 12. Such monies as were subsequently disbursed purportedly pursuant to a loan agreement were paid by Prime without any authority from the borrower. Neither Mrs Calleja, or Mr Calleja or Mr Bugeja, gave authority, or were aware of the use to which Prime intended to put the "loan monies". 13. The monies were paid by Prime to secure its own interests in having access to assets sufficient to secure the debt it subsequently claimed that Calleja PJC owed it. Prime disregarded entirely the wishes and interests of the borrower, or the purpose for which the borrower had sought loan monies, or the terms agreed by Peter Ainsworth on behalf of Prime. 14. The monies disbursed by Prime in April – May 2015 were not monies drawn from the loan facility by the Calleja interests. 15. The monies disbursed by Prime were not the monies secured by the mortgage or General Security Deeds. 16. In paying interest in the period May 2015 to May 2016 Calleja PJC did not intend, and did not, accept a loan agreement in the terms suggested by Prime's conduct. Prime had, by its actions in paying loan monies without authority and contrary to the purpose of the loan as it was represented to be, repudiated any loan agreement. 17. Prime has failed to establish that Calleja PJC was in default of the loan agreement as it is alleged to have been by Prime, having paid in excess of the required charges on the loan funds drawn down on 5 May 2015 (and from which date any interest would have been payable). Despite that, Prime commenced recovery action because its interest was in taking possession of the assets that secured the purported loan agreement. 18. For the purposes of the ASIC Act, Prime has at all times in its dealings with Calleja PJC and Mr and Mrs Calleja acted in an unfair and unconscionable manner which is entirely contrary to ordinary community standards of honest and reasonable dealings: Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at [121]; Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at [44]; Qantas Airways Ltd v Cameron [1996] FCA 1483; (1996) 66 FCR 246 at 262. 1. It follows from my conclusions of fact that, I would answer the two questions senior counsel for Prime posed at the commencement of the hearing, whether there was a misrepresentation by Prime and whether authority existed to disburse loan funds as Prime did, yes to the former, and no to the latter. 2. The plaintiff's case fails and judgment must be entered for the defendant. The Defendant's Claim and Cross Claim 1. As will be clear from my analysis of the facts established by the evidence the the Calleja interests have established the case pleaded in the Claim and Cross-Claim. I am satisfied that Calleja PJC entered into a loan agreement with Prime as a consequence of Prime's misrepresentations. Thereafter, Prime conducted itself in such a manner as to repudiate any agreement. The monies it paid were paid without authority, and do not give rise to any debt owed by Calleja PJC or the Guarantors. No consideration was given by Prime for the Deed of Guarantee or the mortgage, and those instruments in any event secured a loan agreement which was repudiated by Prime. In effect, they secured nothing. 2. Prime's conduct with respect to this matter was unconscionable. It sought to lend money without any inquiry as to the capacity of the borrower to repay the debt, and in full knowledge of the statements of the Callejas that a loan over 12 months could not be repaid by them. It then paid out monies without authority in an attempt to generate a debt, having first taken steps to ensure that it could seize Mrs Calleja's assets to its profit. 3. Judgment must be given for the Calleja interests. A Just Resolution 1. In its final submissions to the Court Prime was insistent that, as monies had been paid to the benefit of the Calleja interests, the defendant and Calleja PJC should not be permitted to obtain a windfall. 2. Monies paid which may be concluded to have had some benefit to the Calleja interests are as follows: 1. $62,877.61 to Baycorp; 2. $152,496.44 to Bankwest; and 3. $34,676.50 to Calleja PJC. 1. The total of those sums is $250,050.55. 2. It is clear that Calleja PJC has sustained loss as a consequence of the plaintiff's actions. 3. The company paid $87,140 in interest payments it was not liable to pay. Because the "surplus" paid into its bank account was insufficient to buy even one truck, the company continued to pay truck rental and other associated fees, at a cost of $101,129.60 exclusive of GST for the period May 2015 to May 2017. Those costs continue. 4. There is evidence that, whilst a second hand truck could have been purchased in 2014 for as little as $33,000, trucks at such a price are no longer available. It is reasonable to infer that, because of the passage of time, the price of a comparable vehicle will be higher at the present time or in the future than it was in 2014, and Calleja PJC will have to spend a greater sum of money than would otherwise have been the case if it is to purchase trucks. 5. Other, uncalculated, costs have been incurred. For example, Mr and Mrs Calleja both took time away from their business to defend Prime's court action, losing the value of the work they would otherwise have performed to the benefit of Calleja PJC. The company's marketing manager was also diverted from his usual work to the company's benefit to prepare affidavits and attend Court as a witness. 6. Although the evidence does not allow the Court to precisely quantify the financial damages to the Calleja interests, I am satisfied that they are significant, and equivalent to or exceeding the monies paid by Prime from which some benefit was derived by the Calleja interests. 7. I have not included in these calculations the legal costs incurred in defending Prime's claim. 8. A fair resolution in my conclusion is to make orders such that the Calleja interests are not further financially disadvantaged, and to recognise the loss already sustained as being broadly equivalent to the monies paid to their benefit by Prime. 9. Orders to that effect would not deal with the question of legal costs, which are likely to be significant. The Calleja interests sought orders in the Cross-Claim for costs to be awarded on an indemnity basis. Prime made no submission concerning that aspect of the relief sought. 10. Costs would ordinarily be awarded to the defendant, claimant and cross-claimant, as a consequence of judgment in their favour. Having regard to the findings of the Court as to Prime's unconscionable conduct, I have concluded that indemnity costs should be awarded. Any other order would not appropriately meet the costs to the Callejas of defending Prime's litigation. orders 1. The Court orders that: 1. The Statement of Claim filed by Prime Capital Securities Pty Ltd on 20 May 2016 is dismissed. 2. Judgment is entered for the defendant (and claimant and cross-claimant). 3. It is declared that the Facility Agreement dated 12 February 2015, and exhibited as Exhibit D in these proceedings, is void ab initio. 4. It is declared that the mortgage signed by Elizabeth Calleja in favour of Prime Capital Securities Pty Ltd and registered on 4 May 2015 bearing reference number AJ464656C is void. 5. It is declared that the Deed of Guarantee executed by Elizabeth Calleja is void. 6. It is declared that the Deed of Guarantee executed by Michael Calleja is void. 7. It is declared that the General Security Deed executed by Elizabeth Calleja is void. 8. It is declared that the General Security Deed executed by Michael Calleja is void. 9. It is declared that the General Security Deed executed by Michael Calleja on behalf of Calleja PJC Furniture Freighters Pty Ltd is void. 10. Prime Capital Securities Pty Ltd is directed to forthwith execute and lodge at Land and Property Information a discharge of the mortgage referred to in order (4) above, in the approved form. 11. Prime Capital Securities Pty Ltd is directed to forthwith take all necessary steps to discharge the registration of the General Security Deeds referred to in orders (7), (8), and (9) on the Personal Property Securities Register. 12. Prime Capital Securities Pty Ltd is to pay the defendant's costs of these proceedings, on an indemnity basis. 13. Any application for any further order as to costs by the Defendant is to be filed and served by 4pm on 11 December 2017. Any reply is to be filed and served by 4pm on 13 December 2017. Any such application will be dealt with on the papers in chambers. ***************** 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: 06 December 2017