ANZ Banking Group v Londish

The purchase of Pibrac 11In about 1992, Mrs Londish contracted to purchase Pibrac for about $3.1m. She negotiated a delayed settlement so that she could sell the apartment block in Bondi and use the proceeds for the purchase. The total land area of Pibrac is 3,724 square metres. The house has seven bedrooms and six bathrooms. There is an in-ground swimming pool, a tennis court and various other attributes which are regarded as desirable in residential property. 12On 6 April 1993, the date on which title to Pibrac was transferred to Mrs Londish, she granted a mortgage to the State Bank (the 1993 mortgage) which secured monies advanced to Knoll Holdings. At that time the State Bank was the banker for the Knoll companies (which included Knoll Holdings and Knoll Investments). The funds generated from the mortgage were used, at least in part, to provide funds for investments to be made by Knoll Holdings and Knoll Investments, from which the family income was derived. Indeed, the following term of the mortgage was added by hand on the schedule to the 1993 mortgage and specifically initialled by Mrs Londish: "That this Mortgage is collateral to and secures the same moneys as the Securities set out in the Loan Facility Agreement between the Lender and M & S Knoll Holdings Pty Limited." 13Accordingly, despite Mrs Londish's preference that Pibrac remain unencumbered because it was her family's home, it was encumbered from the outset. 14Mrs Londish did not have any particular recollection of executing the 1993 mortgage or how the monies secured by it were used. However, she knew that her husband was involved in property development and that her family's income depended on income from that business, except to the extent that she retained other investments or money inherited from her parents. 15By deed dated 23 March 1993 a further trust, the PIAS Unit Trust, was created. Knoll Investments was the sole unit holder in this trust. The trust was varied by deed of variation executed by Mrs Londish as a director of Knoll Investments on 22 September 1995. 16Mrs Londish did not have a detailed knowledge of how the trusts operated but she understood, as a general matter, that the better the business performed, the better off the beneficiaries would be. She believed that she, her husband and the children were the beneficiaries of the trusts. Whether or not that was the case, they in fact benefited from the trusts.

The Knoll companies 17In addition to Knoll Holdings and Knoll Investments referred to above, both of which were incorporated during Mr Knoll's lifetime, further associated companies were incorporated. They include the following: (1)Knoll (GNG) Pty Limited; (2)Knoll Cardiff Pty Limited; (3)Knoll Properties Newcastle Pty Limited. 18Mr and Mrs Londish gave evidence of their understanding that these companies were trust companies that operated for their benefit and that of their three children. There were, however, only two trust deeds in evidence, both of which are referred to above. I am not satisfied that there were other trust deeds other than the ones in evidence or that Mr Londish or any of the three children were named as beneficiaries, whether of fixed or discretionary trusts. I am, however, satisfied that the rationale for the use of different companies was to advance the financial interests of Mr and Mrs Londish and their children, for whose exclusive benefit the companies were intended to operate. 19Company searches in evidence show the following (prior to external administration): Name of company Shareholders Directors Knoll Group Holdings Pty Limited Mrs Londish (2 "A" class, 1,000 "B" class, 4,000 "C" class, 50,000 "F" class) Max Knoll (30.6.67-3.4.92) Knoll Investments Pty Limited (1,000 "B" class) Syda Knoll (30.6.67-24.9.87) Mrs Londish (from 30.9.87) Mr Londish (from 14.4.92) Knoll Investments Pty Limited Mrs Londish: 1 ordinary share Mrs Londish (8.4.81-25.8.13) Mr Londish: 1 ordinary share Mr Londish (8.4.81-25.8.13) David Fitzgerald (8.11.02-25.8.13) Knoll Tomago Pty Limited Knoll Developments Pty Limited (ultimate holding company) Mr Londish (from 12.5.04), David Fitzgerald (from 12.5.04) and Elizabeth Sutherland (from 23.7.04) Knoll Cardiff Pty Limited Mr Londish (2 ordinary) Mr Londish (from 6.7.93) and David Fitzgerald (from 10.10.94) David Fitzgerald (1 ordinary) Knoll Investments (2 ordinary) Knoll Properties Newcastle Pty Limited Knoll Developments Pty Limited (10 ordinary shares) Mr Londish (from 8.7.04) and David Fitzgerald (from 8.7.04) Knoll (GNG) Pty Limited Knoll Group Holdings Pty Limited (ultimate holding company) Mr Londish (from 28.9.05) and David Fitzgerald (from 28.9.05)

20In her affidavit of 13 June 2012, Mrs Londish described herself as "one of the owners" of each of the companies listed in the table above, except Knoll Tomago Pty Limited, which is not referred to in her affidavit. 21In about 2000, when the Commonwealth Bank acquired State Bank, the Commonwealth Bank became the banker of the Knoll group of companies. Between 2000 and 2002 the Knoll companies acquired substantial commercial properties in the Newcastle/Cardiff area with monies that were advanced by the Commonwealth Bank. 22On 14 March 2000 Mr Londish entered into contracts for the purchase of three units on Hickson Road, Walsh Bay off the plan. Only the front pages of the three contracts are in evidence. They show that he agreed to purchase unit 315 for $1,315,000 for which he paid a deposit of $131,500; unit 415, for $1,335,000 for which he paid a deposit of $133,500 and unit 420 for $1,315,000 for which he paid a deposit of $131,500. His principal solicitor was Margaret Antunes and contact solicitor was Malcolm Forsythe. The completion date was determined by clauses 15 and 29 of the contract, which are not in evidence. The evidence referred to below established that completion of his purchase of the units took place in 2003. On 24 October 2002, Mr Londish contracted to purchase two moorings, numbered 15 and 16, for $185,000 and $190,000 respectively. He paid a 10% deposit for each of them. He believed that his ownership of the moorings would enhance the value of the Walsh Bay units. 23In 2001 Mrs Londish guaranteed certain debts owed by Knoll Holdings to the Commonwealth Bank. On 28 June 2001, she made a statutory declaration that she had received independent legal advice regarding the loan and security documents referred to in the declaration. I accept her evidence that she read the document and would probably have satisfied herself that it was true before signing it. I also accept her evidence that at the time she signed the statutory declaration she did not appreciate the true import of the word "independent" in the context of the phrase "independent legal advice". However, I am satisfied that she received legal advice about her obligations at the time and that she understood the nature of the commitments she was making. 24Mrs Londish also signed a security acknowledgement addressed to State Bank which makes reference to the Pias Unit Trust, of which Pias Settlements Pty Limited was trustee and Knoll Investments was the sole unit holder. Mrs Londish was listed as a security provider and there is specific reference to her having granted a mortgage to the State Bank over Pibrac. Although Mrs Londish did not specifically recall signing this document and did not recall specifically whether she was a director and shareholder of the companies referred to, I am satisfied that she would have understood the document had she read it and that she probably read it before she signed it. 25The 1993 mortgage was discharged in November 2002, at which time Pibrac became unencumbered for the first time during its ownership by Mrs Londish.

Completion of the purchase of the Walsh Bay units and the Challenger Mortgage 26In about 2002, Mr Londish came to believe that the Commonwealth Bank was not sufficiently familiar with the commercial real estate market in the Newcastle/Cardiff area where properties owned by the Knoll group were located and decided to transfer the business to the ANZ, principally because of the ANZ's then manager, David Nay. 27In about March 2003 Mr Londish met with Mr Nay to discuss funding for completion of his purchase of the three Walsh Bay units and associated marine berths. However, neither the ANZ nor the Commonwealth Bank, which was still the banker for the Knoll companies at that time, was prepared to advance funds for that purpose. 28When Mr Londish was unsuccessful in obtaining finance for the units by using them and the associated berths as security, he asked Mrs Londish if she would be prepared to grant a mortgage over Pibrac to secure the funds. He persuaded her that at some time in the future it would be good to have a unit for each of their three children to use or inherit and that, in the meantime, the properties would generate a rental return and appreciate in value over time. She knew that there was a risk associated with granting any mortgage, since it gave the mortgagee the right to possession and to sell the property in the event of default. Nonetheless, she agreed. On one occasion before construction of the balance of units commenced, Mrs Londish went to see a display unit. Once or twice she inspected the units while they were still vacant. 29In order to obtain finance, Mr Londish approached Stephen Fenton, of Liquidity Finance. By letter dated 13 March 2003, Mr Londish informed Mr Fenton that he and his wife controlled, and were beneficiaries of, the trusts conducted by Knoll Holdings and associated companies. 30Enclosed with the letter was a statement of assets and liabilities of various companies which was prepared by Mr Thompson, who had been their relevant tax agent and accountant since the early 1980's, and who had been appointed secretary of Knoll Holdings in 1995. The document showed total assets of $27.7m, total liabilities of $9.48m and net value of $18.22m. When these figures were put to Mrs Londish in cross-examination she said: "I just didn't deal with the numbers. I knew there were various properties and it was in the millions, but exactly how many, no idea." 31Mrs Londish did, however, agree that these documents showed the approximate position of the business and family assets at that time. When Mr Londish was asked by the ANZ what Mrs Londish's involvement was in the business he gave the following answer that I accept is an accurate description of their respective roles since the death of her father: "It ultimately all came from her side of the family. She's a director and we try to keep her up to speed for major stuff but Fitz [David Fitzgerald, who was a director of some of the Knoll companies] and I did the day-to-day management." 32In a further letter to Mr Fenton dated 19 March 2003, Mr Thompson enclosed the profit and loss statement and the balance sheet for Knoll Holdings for the year ended 30 June 2002. The letter contained the following explanation (which was presumably proffered to indicate why the personal taxable income of Mr and Mrs Londish was so low): "The income generated by the Londish Group has come primarily from the Knoll Family Trust and the Pias Unit Trust. The income generated by the Knoll Family Trust and the Pias Unit Trust is distributed to other entities in the Londish Group that have tax losses. Accordingly, none of the assessable income of these entities has been distributed to Mr and Mrs Londish in recent years." 33Mr Fenton recommended to Challenger by letter sent by facsimile on 31 March 2003 that the application for a loan be approved, because of the strong financial position of the Knoll companies and because the conduct of loans from the Commonwealth Bank "has been impeccable". 34Mr Thompson, by further letter to Mr Fenton dated 8 April 2003 summarised Mr and Mrs Londish's financial position as follows: "As you may be aware, Ian and Vicki Londish control entities that own the following industrial, commercial and residential properties: 48 Parker Street, Newcastle 52 Parker Street, Newcastle 7 Pennant Street, Cardiff 9 Pennant Street, Cardiff 24 Nelson Street, Cardiff Church Street, Burrawang 13 Penrhyn Avenue, Pymble 23 Pibrac Avenue, Warrawee The Newcastle and Cardiff properties are rent producing industrial properties. Church Street, Burrawang has been utilised for many years to operate an advanced tree nursery although this business has operated minimally since July, 2001. Penrhyun Avenue, Pymble is a rent producing investment residential property and Pibrac Avenue, Warrawee is the family residence of Mr. and Mrs. Londish. We understand that the unencumbered gross value of these properties is $22,500,000 against secured mortgages of $9,480,000. Additional to these net property assets, we also understand that Mr. and Mrs. Londish have cash and other assets to the value of approximately $5,200,000. Having regard to the foregoing, the asset position of Mr. and Mrs. Londish is quite strong and surplus income generated from these assets are [sic] estimated to be in excess of $400,000 after deducting depreciation and capital allowances. As previously stated, wherever possible, this income will be distributed to entities with accumulated income tax losses and, accordingly this income will not be distributed to Mr. and Mrs. Londish when this occurs. We attach copies of the personal income tax returns of Mr. and Mrs. Londish for the year ended 30 June 2002. The losses attributable to Mr. Londish relate to his share of the partnership losses in Established Landscape Trees. The business activity of the partnership has virtually ceased and it is highly probable that any future losses incurred by the partnership will be minimal. Please call the writer on xxx if you have any questions in relation to this letter." 35Eventually agreement was reached with Challenger, on behalf of Perpetual, that the security for the loan would be a registered mortgage over Pibrac and a mortgage over Unit 315.

The Challenger Mortgage 36I accept Mr Londish's evidence that when he brought the relevant loan documents home in April 2003 for Mrs Londish to execute, she was uncomfortable about granting a mortgage because she was reluctant to encumber the family home again. Her discomfort showed, in my view, that she understood the effect of a mortgage and knew that it created a risk that the lender might call for possession of the house. She had an additional objection to mortgaging Pibrac: it was, effectively, her dowry as it had been purchased from the proceeds of the Bennett Street units that she had received as a wedding present from her parents. Her evidence was: "Because he [Mr Londish] knew when we bought the house it was never meant to be mortgaged." 37Mrs Londish does not have any particular recollection of the documents she signed that were associated with the Challenger Mortgage. However, in cross-examination she accepted that she "presumably" read and understood a number of documents that she signed associated with that transaction. 38Such documents included: (1)a deed of loan (which identified both Mr and Mrs Londish as borrowers and whose signatures were witnessed by David Fitzgerald) which specified $4.3m as the amount of the facility and described the purpose the facility as being the purchase of three investment units at Walsh Bay, which Mrs Londish understood to be for investment purposes; (2)a mortgage executed by Mrs Londish and witnessed by David Fitzgerald; (3)a statutory declaration relating to a survey report, which Mrs Londish understood was required by Challenger as part of the means whereby it would ascertain the sufficiency of the value of its security; (4)an acknowledgement of financial advice from Mrs Londish; (5)a document entitled "Declaration by Borrower"; (6)a document entitled "Consent by Borrower to Legal Advice".

Whether Mrs Londish received legal advice in connection with the Challenger Mortgage 39There is a significant issue whether Mrs Londish received legal advice about the Challenger Mortgage, which makes it necessary to examine the chronology and evidence surrounding its execution in some detail. 40By facsimile letter sent at 12.16 pm on 5 May 2003, Ms Antunes, solicitor, wrote to Mr Sunman, solicitor for a party associated with Challenger. The opening paragraph read in part: "We act for IAN GREGORY LONDISH on the Walsh Bay purchase and VICKI CHRISTINE LONDISH on the mortgage of the property at Warrawee." 41This paragraph is important since it confirmed Ms Antunes' appreciation that she was acting not only for Mr Londish as purchaser, but also for Mrs Londish as mortgagor. The letter continued with a list of documents enclosed and a request for mortgage documents to be forwarded. It then said: "Settlement of the Walsh Bay purchase must take place on or before 6 May 2003 otherwise our client will become liable to pay penalty interest under the contract." 42The letter concluded with a request that a telephone call be made when the documents were ready so that they could be collected by courier. 43By letter dated 6 May 2003, Mr Sunman, on behalf of the lender, forwarded documents, including the following, to Ms Antunes: (1)the transaction documents (deed of loan and mortgage); (2)a declaration pursuant to s 11 of the Consumer Credit Code confirming the business purpose of the loan; (3)a declaration by the borrower (as to the receipt of legal advice); (4)a consent by the borrower to legal advice (consenting to Ms Antunes acting for other parties); (5)an acknowledgement of financial advice. 44I note that in the letter Mr Sunman referred to both Mr and Mrs Londish as "the Borrower" and that the documents referred to in (3) and (4) above were prepared for each of them. I infer that it was Mr Sunman who initiated the creation of document (4) and that he did so, having noted the potential for conflict that arose from Ms Antunes' disclosure in her letter dated 5 May 2003 that she acted for both Mr and Mrs Londish. 45In "Declaration by Borrower" Mrs Londish declared, by her signature dated 6 May 2003, that she had received independent legal advice. The declaration was "made and subscribed" at Warrawee on that day. The evidence established that it was Peter Londish, Mr Londish's brother, who signed the words above the line under which the words "signature of solicitor". Peter Londish, who was not cross-examined, deposed that he has never been a solicitor and has never purported to give Mrs Londish legal or financial advice. He did not recall the occasion although he recognised his signature. 46Mrs Londish's evidence in cross-examination on this document was relevantly as follows: Q. Then in paragraph 2 you say "I received independent legal advice regarding the loan and security documents referred to in paragraph 1"; see that? A. I do see that. Q. That was true and correct when you signed it? A. I can't recall. Q. You'd seen Ms Antunes or somebody in her office? A. No. I think I was meant to but I don't recall ever meeting her. Q. Did you meet any one else who worked for or with Ms Antunes? A. I can't recall. Q. You can't remember one way or the another? A. I don't think I did. Q. Possible but you can't remember? A. I don't think I did. Q. You don't think you did? A. I cannot remember. 47I consider that the effect of Mrs Londish's evidence was that she did not recall going to Ms Antunes' office and does not believe that she did; however, she did not deny receiving legal advice in relation to the loan and mortgage documents although she did not recall receiving any. 48In my view, Mrs Londish did not go to Ms Antunes' office in North Sydney. Had she done so, it is likely not only that she would have remembered it but also Mrs Antunes would have witnessed her signature there. Nor, in my view, did Ms Antunes or one of her employed solicitors go to see Mrs Londish at Pibrac to give legal advice about the transaction since, had that occurred, it is likely that the solicitor, rather than Peter Londish, would have witnessed her signature on the certificate. 49Although any number of other hypotheses can be envisaged, the principal available hypotheses appear to be the following: Either: A. Ms Antunes or one of her solicitors gave legal advice by telephone to Mrs Londish about the effect of the loan and mortgage transaction; or B. Mrs Londish did not receive any legal advice about these documents. 50By letter dated 7 May 2003, Ms Antunes returned the executed documents to Mr Sunman, including the declarations by borrowers, consents by borrowers to legal advice and the acknowledgement by them that they had received financial advice. In circumstances where Ms Antunes was in a position to know whether or not Mrs Londish had received legal advice, I would not infer that she would have forwarded to the lender's solicitor a declaration by Mrs Londish that she had received such advice, in the absence either of evidence from Ms Antunes to that effect, or a denial from Mrs Londish (rather than mere lack of recollection). 51Ms Antunes' files are not available to shed light on the question. She was subpoenaed to produce files relating to the Challenger Mortgage but it was accepted that they had been returned to Mr Londish who gave evidence that he could not locate them. 52Ms Antunes was subpoenaed by Mrs Londish to give evidence in the proceedings. She was not in court at 2 pm after the luncheon adjournment and I adjourned the court for a few minutes on the basis that she was on her way from George Street where she had been attending a mediation. When I resumed after the adjournment, Mr Drew, who appeared for Mrs Londish, informed me that he did not propose to call Ms Antunes after all. In these circumstances I draw the inference that her evidence would not have assisted Mrs Londish's case: Jones v Dunkel (1959) 101 CLR 298. 53I am satisfied that Mrs Londish received legal advice about the effect of the loan and the mortgage on 6 May 2003, which was probably given by telephone. I have made these detailed findings in order to address the evidence and the parties' submissions. However, the importance of Mrs Londish receiving such advice is, in my view, diminished by the circumstance that I am satisfied that she knew the legal effect of a mortgage and a loan and that whatever legal advice she was given on 6 May 2003 would not have added to what she already knew.

Whether Mrs Londish received financial advice before executing the Challenger Mortgage and associated loan documents 54The evidence does not enable me to be satisfied that financial advice was given to Mrs Londish before she executed the Challenger Mortgage and associated loan documents. Mrs Londish's signature on the Acknowledgement of Finance Advice was dated 6 May 2003. There is no reference on this document to Mrs Londish's location at the time she signed it, although I infer from other evidence that she was at Pibrac. It was witnessed by "David Fitzgerald, 1 Church Street, Burrawang". The typed endorsement at the foot of the form read: "This document should be witnessed by the solicitor acting for the mortgagor. The solicitor need not give the independent advice referred to in this document." 55Mr Fitzgerald deposed in an affidavit sworn on 16 February 2014 that he had never given any legal or commercial or financial advice to Mrs Londish in relation to any document she signed. He was not required for cross-examination. 56Mrs Londish confirmed in her oral evidence that the following statement included in the Acknowledgement of Financial Advice was true: "In offering a mortgage over my property I do so willingly and without any undue influence." 57Mrs Londish gave evidence that on 6 May 2003 she believed the following statement to be true when she made it because she believed the Knoll companies could fulfil the loan commitments from their combined resources: "I confirm that I have received independent advice on my ability to comply with the loan commitments and I am satisfied that I will have the capacity to meet those commitments." 58Whether Mrs Londish in fact received financial advice and from whom is not clear. She cannot recall receiving any. The person who witnessed her signature, David Fitzgerald, did not give it to her. It is possible that the only person who could be said to have given her financial advice on 6 May 2003 was her husband, who was obviously not independent. However, if he (or anyone else) had given her financial advice at that time, I infer that it would have been along the lines of the letters from Mr Thompson dated 12 and 19 March and 8 April 2003 respectively, which indicated that the Knoll companies had sufficient income to meet the payments under the Challenger Mortgage and associated loan and had ample net assets. 59There is no evidence to indicate that the description of the financial position of the Knoll companies given by Mr Thompson in this correspondence was in any way inaccurate. Indeed it was common ground that there was no material default in the performance of the Challenger Mortgage from the date of its grant until the date of its discharge. 60The Walsh Bay units were purchased in Mr Londish's name although they were an investment for the business. Mr Londish explained to an officer of the ANZ Bank his understanding of the effect of the trust on which he held the units in the following terms: "They are an investment in the business, same beneficiaries so no one is disadvantaged- maybe the kids will have a place to live in later on- they are just in my name as trustee because of a structure our lawyer suggested." 61A call was made for the trust instrument, and nothing was produced. The last of the Walsh Bay units was sold in January 2008. The proceeds of sale of the units were largely applied in reduction of the loan from Challenger. 62I accept the ANZ's submission that the transaction was intended to benefit Mr and Mrs Londish and their children and that it was neither improper, improvident nor unreasonable.

The financial position of the Knoll group of companies after 2003 63Later in 2004, Mr Londish refinanced the debt owed to the Commonwealth Bank and obtained a new advance from the ANZ that included a $12.5m finance facility. 64A document dated August 2004 (prepared to support an application to the ANZ for funds to purchase an industrial property in Tomago) shows total assets of the Londish family, including the Knoll companies, of about $40m, total liabilities of about $17m, net assets of $23m, rental income of $2.2m, interest expense of $1.3m and net income of $900.000. 65A comparable document dated May 2009 lists assets said to be worth $45m and liabilities of about $28m. By that time the Walsh Bay Units had been sold. Mrs Londish did not recall any transactions that would have affected the items in this document between May 2009 and November 2009 when the ANZ Mortgage was granted. 66The following table sets out the asset position of the Knoll companies and Mr and Mrs Londish in 2004 and 2009, extracted from these two documents: Owner Property (address) Value in 2004 $ Value in 2009 $ Knoll Holdings 44 Parker Street, Newcastle 2.6 m Sold 52 Parker Street, Newcastle 4.5 m 5.1 m Church Street Burrawang 1.5 m 1.6 m 13 Penrhyn Avenue, Pymble 1.8 m Sold Knoll Tomago Tomago Not yet acquired 4.2 m Knoll GNG Elizabeth Street, Tighes Hill N/A 6.3 m Knoll Cardiff 9 Pennant Street, Cardiff 6.6 m 8.2 m 7 Pennant Street, Cardiff 3.9 m 4.4 m 24 Nelson Road, Cardiff 3.4 m 5.2 m Knoll Properties Newcastle Pendlebury, Cardiff Not yet acquired 2.2 m Knoll Investments Cotswalds 500k 450k William Street, North Sydney 300k 300k Alfred Street, North Sydney 900k 1.1 m Vicki Londish 23 Pibrac Avenue, Warrawee 6 m 6 m Ian Londish Walsh Bay 315 1.5 m Sold Walsh Bay 415 420 3.5 m Sold TOTALS 37 m 42.85 m

The refinance of the Challenger Mortgage and the grant of the ANZ Mortgage 67The Knoll companies, through Mr Londish, had extensive business dealings with the Commercial and Property area of the ANZ, principally with Mr Nay, who, as the relationship manager, had been his point of contact. In about February 2008 Mr Nay moved to St George Bank. He was replaced briefly by Rob Mathews, who in turn was replaced in December 2008 by John Watkins. 68In March 2009, Mr Londish met with officers of the ANZ, including Mr Watkins and Adam Cotterell who was then the State Manager of the ANZ's Institutional Property Group. The purpose of the meeting was to review the financial position of the Knoll companies and their banking requirements. In the course of the meeting Mr Cotterell, whom Mr Londish had not met before, informed Mr Londish that the ANZ would be increasing the margins applicable to the Knoll companies from 1% to 2.5%. Mr Londish took great exception to the proposed increase and accused the ANZ of punishing its good customers by making them pay for the losses it had suffered in the Global Financial Crisis. 69Mr Londish was adamant that the investments of the Knoll companies comprised "excellent" real property that generated "AAA rental income" from solid tenants. The evidence supported that proposition. I accept Mr Londish's assessment of the financial strength of these companies (and their corresponding capacity to service the debt that was secured over Pibrac) at that time. Indeed Mrs Londish did not seek to impugn his assessment by alleging that the investments initiated by her husband were in any way improvident or that the Knoll companies were other than in a sound financial position at the time the ANZ Mortgage was granted. 70On 15 May 2009 there was a further meeting in the course of which Mr Londish intimated that he might consider moving the business to another bank if the margin increase could not be resolved to his satisfaction. Mr Watkins proposed that it might be possible to achieve a lower interest rate if at least part of the borrowings could be classified as residential. 71Mrs Londish tendered a folder of documents, many of which were also contained in the Bank's exhibit, which included email exchanges between Mr Londish and various officers of the ANZ Bank. The relevance of many of these emails (many of which were directed towards lunch arrangements and other extraneous matters) was not apparent. However, the emails show that on several occasions in 2009 before the ANZ Mortgage was granted, Mr Londish complained about the ANZ and, on a few occasions, he intimated that, if his requirements were not met, he would change banks. 72The proposal to structure at least part of the refinancing as a home loan was addressed further at a meeting between Mr Londish and Mr Watkins at some time after 5 June 2009. Mr Londish did not expect any resistance from Mrs Londish to this proposal as Pibrac was already used as security for the indebtedness of the business (by the Challenger Mortgage). This aspect of the transaction was referred by Mr Watkins to Mr Dennis of the Bondi branch of the ANZ, who was responsible for residential home loans. 73In 2009 Mr Londish told his wife of the plan to refinance. He told her that the ANZ were "good people" whom he dealt with in Newcastle and that he would be getting a "better deal" with the ANZ than they had with Challenger. By this time Mrs Londish had forgotten about the Challenger Mortgage although she accepted that she had been aware of its grant at the relevant time because of the documents she had executed. 74There were several documents that concerned the refinance which required Mrs Londish's signature, including a Home Loan Application in which she was described as an "investor". I accept Mrs Londish's evidence that she did not think of herself in those terms, even though she regarded the description as accurate. I accept Mr Londish's evidence that when he gave his wife the loan application he said words to the following effect: "Don't worry, it's an application. You are not committing with this. The full docs will come later. It's to get rid of Challenger off the house and reduce interest costs". 75I am satisfied that Mrs Londish signed the document on the date it bears, 10 September 2009, and that when she did so, she understood it to be a loan application to refinance the debt secured by the Challenger Mortgage. Mrs Londish could not recall whether she had read the declaration immediately above her signature when she signed it but accepted that she might have done. 76The ANZ wrote to Mrs Londish by letter dated 9 November 2009, with which was enclosed a Loan Offer. In the covering letter, the ANZ said: "We encourage you to obtain independent legal and financial advice concerning the offer." 77The Loan Offer document specified $3.86m as the amount of credit and identified the purpose of the loan as being: "Refinance Challenger Home Loan." 78Mrs Londish confirmed that when she executed the ANZ Mortgage she appreciated that it was to secure monies advanced by the ANZ, which would principally be used to discharge the Challenger Mortgage. She also confirmed that she had signed a document entitled "ANZ Mortgagor and Witness Acknowledgement" and that she had "hopefully probably" read the following passage: "ANZ recommends that all mortgagors seek independent legal advice before signing any legal document." 79Mrs Londish acknowledged in her evidence that: (1)she had been offered the opportunity to obtain independent legal and financial advice about the mortgage; (2)she had satisfied herself as to the nature and intent of the mortgage and had signed the document freely in front of an authorised witness; (3)she understood that it was for the benefit of the business conducted by the trusts of which she was a beneficiary, that the Challenger loan, of which she was a borrower, be refinanced with the ANZ, in part because of the more advantageous interest rate; and (4)she understood that the increased borrowings would be available for the business conducted by the trusts which were operated for her benefit and for the benefit of her family. 80Mrs Londish confirmed that she had signed a statement of financial position in connection with the grant of the ANZ Mortgage. She presumed that she would have read the following statement before signing it: "We declare that the information given on this form is true and correct." 81I am satisfied that the ANZ prepared the statement of financial position from material that Mr Londish had provided to it. When Mr Londish gave his wife the statement of financial position to sign, he said to her: "ANZ have put it together from our asset and liability schedule- we've given them all the information- so I presume this is how they want it for the resi [residential] loan." 82The part of the statement that related to income included the following summary: Total net monthly income (1) $77,417 Less Total monthly expenditure (2) $21,546 Uncommitted monthly income (1) - (2) $55,871 83Mrs Londish responded: "I'd love it if I really made that much every month." 84Although Mrs Londish agreed that she made such a statement, she was not prepared to concede that she knew the information to be false at the time she signed it. She said that she would try to make sure that she did not sign anything that was false and that when she signed such documents, she trusted her husband to ensure that they were correct. It was my impression that Mrs Londish had no reason to believe that the figures were not correct, but was simply bemoaning the fact that the surplus was not, in fact, available for her to spend as she wished. 85Mr Londish was less forthcoming when it came to those figures, as the following exchange demonstrated: Q. Well, you understood when this document was signed that ANZ wanted it and would be relying on it? A. That's what they wanted. Whether they were relying on it I don't know. I know that's what they wanted 'cause that's what they prepared. . . . Q. Why isn't what they want, your wife's declaration that the information is true and correct, they want the person who is concerned either to verify it or not verify it? A. The way we were looking - or I was looking at it is that this was an internal document between ANZ institutional bank and ANZ residential bank. This is what institutional wanted us to give residential so that they could achieve a purpose. Q. So do you say that you asked your wife to sign a document which you knew to be incorrect? A. Yes, in that sense, yes. 86In my view, Mr Londish was the person who was in a position to know whether the figures in the document were correct. He was responsible for providing them to the ANZ Bank. The ANZ Bank was entitled to rely on them because they had been provided by the relevant companies and were verified by Mrs Londish, who was not only the borrower, but also relevantly a director of at least some of the various companies in the Knoll group. Although Mrs Londish expressed scepticism about the figures when speaking with her husband, I am not satisfied that they were in any way incorrect, much less that she knew them to be so. 87Despite Mr Londish's evidence above that suggested that he considered the figures to be incorrect, I do not accept that they were. My impression was that he was loath to accept them as correct because he appreciated that it would not help Mrs Londish's defence for the collective income of the Knoll companies to be demonstrated to be ample to meet the repayments required by the ANZ Mortgage. 88Further, there is some evidence, albeit not detailed, that corroborated the figures in the statement of financial position. An ANZ Credit Memorandum dated 2 September 2009 recorded the following: Entity Net rental income Interest paid Knoll subgroup $2.036m $1.296m Knoll Tomago subgroup $371,000 $182,000 TOTAL PER ANNUM $2.407m $1.478m

89The net surplus income, on these figures, is $929,000 per annum or approximately $77,416 per month. This figure approximates the figure contained in the statement of financial position set out above. There is no evidence, apart from Mr Londish's somewhat ambivalent and ambiguous answer (which I do not accept), that these figures are not correct. In any event, the evidence does not provide any basis for a causal connection between the accuracy or otherwise of these figures and any eventual default. 90I accept Mrs Londish's evidence that, just before she signed the ANZ Mortgage, her husband assured her that they had sufficient assets and equity and good income. These statements were important to her because she did not want to put her home at risk, although she appreciated that that is what she was doing every time she executed a mortgage. 91Mr Londish's personal tax return for the year ended 30 June 2008 is in evidence and discloses a total taxable loss of $343,429. Mrs Londish's personal tax returns for the years ended 2002 and 2008 were also in evidence; they show, in respect of the former, a taxable income of $29,408 and in the latter $19,391. I am satisfied that their personal income tax returns bears no relationship to their true economic position or to the resources that were then available to them and their family. Indeed, it was not suggested that the position of Mr and Mrs Londish and the Knoll companies was in any way precarious at the time Mrs Londish granted the ANZ Mortgage or that the debt had been refinanced for other than sound, commercial reasons and in the reasonable expectation that there would not be a default. 92At no stage did anyone from the ANZ Bank speak to Mrs Londish about the refinancing. It follows that no one from the ANZ Bank made any enquiry of her whether she regarded the Challenger Mortgage as otherwise valid and enforceable. In the circumstances I do not consider that there was any particular reason for the ANZ to make such an enquiry. Mrs Londish was not only the borrower for this loan but also a director of some, if not all, of the relevant companies which were principally conducted for the benefit of her family. The investments made by these companies were, at least on their face, reasonably prudent since they were, in the main, industrial properties with reliable tenants. The LVR (loan to value ratio) was 65%. There was therefore no question of any improvident investment being made for the benefit of a third party, in respect of which Mrs Londish could properly be regarded as a volunteer. The ANZ Bank had no reason to view the refinance of the Challenger Mortgage as other than a prudent business decision by Mrs Londish, which had the purpose and effect of reducing overall interest costs and obtaining further capital to improve existing rental properties with a view to obtaining a better rental return. 93In about December 2009, the Challenger Mortgage was discharged when the loan was refinanced with the ANZ. Total funds of $3.86m were advanced, of which $3,270,827.76 was paid to discharge the Challenger Mortgage, $588,875.24 was paid to Knoll Investments and $297 was paid to Perpetual for attending settlement. I accept that the balance paid to Knoll Investments was to upgrade the commercial properties owned by the Knoll companies with a view to reducing vacancy rates and attracting solid, creditworthy tenants. 94There was no material default under the Challenger Mortgage. There was no material default under the ANZ Mortgage until 2011. Up until this time the Knoll Group was able to meet all of its financial commitments to Challenger and later to ANZ. 95Following service of a notice of default on 29 November 2011, the ANZ and Mr Londish engaged in negotiations that culminated in a document entitled "Deed of Forbearance", the parties to which were the Bank, members of the Knoll group of companies and Mr and Mrs Londish. The footer on the document bears the date 29 July 2011. It is not clear whether it was executed or what its current status is. The ANZ pressed only faintly, if at all, its submission that the following acknowledgement by Mrs Londish in clause 2.1(a) of the deed operated to her detriment in these proceedings: "The Borrower and the Guarantors acknowledge, warrant and agree that: (a) the Finance Documents are valid and enforceable in accordance with their respective terms; . . . " 96In any event, the ANZ did not rely on the deed as a matter that would render either equitable relief or relief under the Contracts Review Act unavailable to Mrs Londish. 97By statement of claim filed on 23 February 2012, the ANZ commenced these proceedings for possession of Pibrac and judgment for the amount outstanding.

The relationship between the two mortgages 98Mrs Londish contended that, because the Challenger Mortgage ought be set aside as against her, the ANZ Mortgage, which was a refinance of the Challenger Mortgage, ought also to be set aside. It is, accordingly, necessary to address the availability of relief in respect of both mortgages, since this affects not only Mrs Londish, but also the ANZ's claim for restitution against Perpetual.

Whether relief ought be granted to Mrs Londish 99The jurisdiction to grant relief under the Contracts Review Act is broader than that available under equitable principles: West v AGC (Advances) Limited (1986) 5 NSWLR 610. Accordingly, I propose to address it first before considering whether equitable relief ought be granted.

Legislative provisions 100Section 7 empowers this Court to alter the contractual rights of parties. The prefatory words of s 7 are: "Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result . . ." 101Section 4 defines "unjust" in the following terms: unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding manner. 102Section 9 provides for the matters relevant to the determination of whether a contract is unjust. It provides: (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. 103The Contracts Review Act provides for a two-stage process. First, the Court is required to determine whether the contract is just; and, secondly, it is to determine whether, if so, it is appropriate to grant relief. 104Because of the way the case has been conducted it is necessary to consider the relevant factors by reference first to the Challenger Mortgage and then the ANZ Mortgage. Where the considerations are, in my view, similar I shall address them only when considering the Challenger Mortgage.

The relevance of the public interest: s 9(1) of the Contracts Review Act 105The Act specifically makes the public interest and the circumstances of the case mandatory relevant considerations in the determination of whether a contract or provision of a contract is unjust: s 9(1). The Act followed the draft Bill contained in the Peden Report (John R Peden, Harsh and Unconscionable Contracts: Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, (1976)). The author identified the purpose of the reference to public interest in the draft Bill as being to: "direct the courts' attention to the underlying purpose of the Bill, namely to prevent unjust dealings which offend against community standards of business morality" John R Peden, The Law of Unjust Contracts, (1982, Butterworths) at 122 (Peden). 106In so far as a consideration of the public interest in the present case requires a consideration of community standards of business morality, I do not consider the conduct of either the ANZ Bank or Challenger to offend these standards. Challenger, by requiring proof that financial and legal advice had been given to Mrs Londish, took, in my view, reasonable steps to ensure that she was willing to provide Pibrac as security for what, on any view, was a prudent transaction designed to produce income for her family through non-speculative investment. When the ANZ refinanced the debt, it had no reason to believe that the refinance was other than commercially beneficial to Ms Londish and her family. The interest rate it offered on borrowed funds was better than had been applicable to the Challenger loan. Further, it enabled further borrowings for an apparently sound commercial purpose. 107It would, in my view, be antithetical to the concept of public interest in the Contracts Review Act for a party to a loan and mortgage transaction, which was made for sound commercial reasons, to be relieved of its provisions when it transpired that the ultimate enterprise funded by the contract was not viable, for reasons extraneous to the loan. 108The circumstances of the case, which are also required to be considered, will be addressed in more detail below in light of my findings of fact set out above.

Other relevant factors: s 9(2) of the Contracts Review Act 109The matters listed in s 9(2) of the Act must be taken into account to the extent to which they are relevant. 110As to s 9(2)(a), I do not consider there to be any material inequality between Challenger and Mrs Londish. The loan was advanced, in part, to fund the Walsh Bay units in respect of which Mr Londish had, some years previously, paid a 10% deposit. Although neither the Commonwealth Bank nor the ANZ was prepared to advance the requisite funds, there was no suggestion that Challenger had greater bargaining power than Mr Londish when negotiating the loan on behalf of himself and Mrs Londish. There were presumably other lenders which might have been willing to finance the advance. 111As to s 9(2)(b), (c) and (d), I do not consider that there was anything untoward or unusual about the Challenger loan and Mortgage that would make these factors significant. 112As to s 9(2)(e), Mrs Londish was neither aged, nor was she suffering from any physical or mental incapacity. 113As to s 9(2)(f), Mrs Londish was articulate, intelligent and well educated. She was acquainted, in broad terms, with the nature of property development and its attendant gains and risks. She was capable of reading and understanding the nature and import of any of the transactional documents that she signed and the effect of any certificate, statement or statutory declaration in evidence in the proceedings. 114As to s 9(2)(g) I do not apprehend there to be any suggestion that the transactional documents in the present case were insufficiently clear to Mrs Londish. 115Section 9(2)(h) and (i) are covered by my findings above. In summary, I consider that Mrs Londish was given legal advice about the Challenger Mortgage and associated loan although such advice did not augment her appreciation of the legal effect of the transaction which she understood in any event. I am not satisfied that Mrs Londish was given financial advice as such before executing the Challenger Mortgage and associated loan documentation but I consider that it is probable that Mr Londish appraised her of the financial circumstances of the Knoll companies at about that time to the effect of the material contained in the letter from Mr Thompson dated 8 April 2003. Accordingly, she was, in my view, in as good a position when she executed the Challenger Mortgage and associated loan documentation as had she received independent financial advice. The financial position of the Knoll companies at the time she executed the Challenger Mortgage was sound. 116Although s 9(2)(j) was not addressed in terms by Mrs Londish, I apprehend her case to be that Mr Londish exerted pressure on her to grant the Challenger mortgage over Pibrac, when she would have preferred it to remain unencumbered. Whether or not Mr Londish can properly be described as having exerted "pressure" on Mrs Londish to grant the Challenger Mortgage, I do not consider that any such pressure was "undue". Mrs Londish knew what risks a mortgage could entail; she knew that the family income was substantially, if not wholly, derived from rental returns from properties owned by the Knoll companies; she knew that Pibrac was a valuable asset which was, as the family home, not income-producing. She knew that the principal reason for the loan was to buy the Walsh Bay units and that they were intended to be income-producing and available, at some time in the future, for the three children. There is, in my view, no reason to infer that her decision to grant the Challenger Mortgage was not the result of a careful consideration both of what could be gained, in commercial terms, from the transaction and the limited risk to which she was exposed, having regard to the financial position of the Knoll companies. 117Section 9(2)(k) is not relevant and s 9(2)(l) has been addressed sufficiently above. 118For the foregoing reasons I am not satisfied that either the Challenger Mortgage or associated loan contract is unjust within the meaning of the Contracts Review Act. Accordingly Mrs Londish is not entitled to any relief under that Act by reason of the Challenger Mortgage.

The ANZ Mortgage 119As to s 9(2)(a), I accept the ANZ's submissions that the relative power between Mrs Londish and the ANZ is to be measured by reference to the power of Mr Londish and the Knoll companies on the one hand and the ANZ on the other. The reason for this is that the interests of Mrs Londish, for that purpose, coincided with those of her husband and the Knoll companies, of which she regarded herself as an owner, if not the owner. Mr Londish was in a position to accept the terms offered by the ANZ Bank, negotiate for better terms if he found the terms on offer unacceptable, or move the accounts of the Knoll companies to another bank. Because of the financial strength, in terms of income and asset backing, of the Knoll companies, and the value of Pibrac, there was, in my view, no material inequality between Mrs Londish and the ANZ. 120As to s 9(2)(b), there was some negotiation between Mr Londish and the ANZ as to the applicable interest rate and the extent to which it could be lowered by reason of its classification as a home loan. There was no negotiation about the actual terms of the mortgage, apart from this, since the terms were standard. There is no suggestion, however, that the terms of the ANZ Mortgage were in any way unorthodox. 121As to s 9(2)(c), I do not consider that it was reasonably practicable for Mrs Londish (or Mr Londish on her behalf) to negotiate for alteration of what was a standard home mortgage to secure a business loan. 122As to s 9(2)(d), it was contended on behalf of Mrs Londish that it was not necessary for her to be named as the sole borrower in the loan agreement for the advance that was secured by the ANZ Mortgage and that she and Mr Londish should have been named, or that the loan agreement ought to have been with Knoll Investments and she ought to have been a guarantor. 123The difficulty with this submission is that it ignores the fact that the advantageous interest rate that Mrs Londish obtained from the ANZ Bank was available because part of the advance could be characterised as a home loan. For this purpose, I apprehend that Mrs Londish was required to be the borrower because she was the registered proprietor of Pibrac. 124Furthermore there is no suggestion that the Bank sought to recover against her by proceeding pursuant to its rights under the ANZ Mortgage rather than pursuing its rights against the Knoll companies. The evidence does not establish the totality of the arrangements between the Knoll companies and the ANZ Bank or the agreement for the whole facility. However, the evidence does show that the total facility limits of the various Knoll companies to the ANZ Bank prior to the grant of the ANZ Mortgage were, as at 4 September 2009, $25.8m. The evidence also established that each of the relevant Knoll companies was under external administration, which I understand to have been at the instigation of the ANZ Bank. The present case bears no resemblance, in my view, to the situation of Mrs West (in West v AGC (Advances) Ltd) who was persuaded to encumber her house in circumstances where the other sureties did not provide relevant security, thereby leaving her exposed. There is no evidence that the ANZ did not have rights of enforcement against the Knoll companies for the full extent of the debt secured by the ANZ Mortgage. 125As to s 9(2) (e), (f) and (g), similar considerations apply as are set out above with respect to the Challenger Mortgage. 126As to s 9(2)(h), Mrs Londish did not receive independent legal or financial advice before executing the ANZ Mortgage. As I have found, she understood the nature and import of a mortgage and the mortgagee's right to possession and sale in the event of default. Had she been given financial advice, she would have been told of the position of the Knoll companies in terms of net assets and income set out above. There is no suggestion in the evidence that the Knoll companies were not in a sound financial position or that they would be unable to meet the commitments undertaken by Mrs Londish when she signed the loan documentation and executed the ANZ Mortgage. Further, she appreciated that the ANZ Mortgage was to her benefit in two respects. First, the applicable interest rate was more advantageous to her than that applicable to the Challenger loan which was being refinanced; and secondly, there would be additional funds available to improve the condition of the properties owned by the Knoll companies, which would tend to increase the rental return of the properties and therefore the funds available to her family. 127Mr Drew, on behalf of Mrs Londish, criticised the ANZ Bank for not meeting with Mrs Londish to make sure that she understood the transaction and was prepared to enter into it. The difficulty with this submission is that, as I have found, she did understand the transaction and was prepared to enter into it. Therefore any omission by the Bank in meeting her face to face has not, in my view, had any material consequence. 128As to s 9(2)(j), I do not discern any unfair tactics or pressure having been applied to Mr Londish to Mrs Londish when it came to the refinance. After all, Pibrac was already encumbered by the Challenger Mortgage, which was to be discharged upon the grant of the ANZ Mortgage. 129Section 9(2)(k) is not relevant and s 9(2)(l) has been addressed sufficiently above. 130For the foregoing reasons I am not satisfied that the ANZ Mortgage or associated loan contract is unjust within the meaning of the Contracts Review Act. Accordingly Mrs Londish is not entitled to any relief under that Act.

Equitable relief 131Because of the breadth of the Contracts Review Act, unless a finding is made that the relevant contract or contracts are unjust, it may be difficult to see why equitable relief ought be granted: West v AGC (Advances) Limited at 616 per Kirby P. However, in deference to the parties' detailed submissions on equitable relief, I shall set out the reasons for my view that there is no ground for equity to intervene to relieve Mrs Londish of the consequences of her legal obligations.

Yerkey v Jones 132In general terms, equity will intervene to set aside contracts on the grounds of unconscionable conduct. Mrs Londish relied on a particular aspect of equitable jurisdiction that was established by the High Court in Yerkey v Jones (1939) 63 CLR 649. Equity may intervene to set aside a transaction as unconscionable where a creditor fails to explain to the wife adequately or accurately either the suretyship transaction which the husband seeks to have her enter for his immediate economic benefit, or to explain to her the circumstances in which she may become liable. 133In Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395 at 404-405 Gaudron, McHugh, Gummow and Hayne JJ explained that the equity was based on the trust and confidence that a wife might repose in her husband which might cause her to leave all business judgments to him in circumstances where she is neither consulted, nor advised, about the legal effect of documents she signs which concern her financial interests as well as those of her husband. 134The plurality said at [33]: " . . . it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction's purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable." 135For equitable intervention in favour of Mrs Londish to be warranted, proof is required of four matters: (1)Mrs Londish did not understand the purport and effect of the transaction; (2)The transaction was voluntary, in that there was no direct or immediate gain for her from the transaction; (3)The creditor, the Bank, knew that she was Mr Londish's wife and could be expected to repose trust in him in financial matters; (4)The Bank did not itself take steps to explain the transaction to her, or find out that a stranger had explained it to her. 136The ANZ accepted that (3) and (4) had been established. The availability of relief depends, in substance, on whether Mrs Londish can be regarded as a "mistaken volunteer", which concerns (1) and (2) above.

Whether Mrs Londish understood the purport and effect of the transaction 137What is required is that Mrs Londish understood the fact of, and general extent of, her liability and the possible consequences of default. She did not, however, have to appreciate either the degree of risk associated with the transaction or the prudence of entering into it: Yerkey v Jones at 689 (Dixon J). 138In my view, for the reasons given above, Mrs Londish understood the purport and effect of the Challenger and ANZ Mortgages and associated loans. She knew the amounts of the loan and what would occur if the Knoll companies could not meet the repayments. 139As it happens, I consider that Mrs Londish also knew, in general terms, the degree of risk associated with the transactions and that it was not commercially imprudent of her to enter into them. In the case of the Challenger Mortgage, the transaction enabled the Walsh Bay units to be purchased. She had no reason to believe that they would not be a sound commercial investment or that the Knoll companies would not be able to meet the repayments. In the case of the ANZ Mortgage, she knew that the interest rate that could be achieved if the loan were refinanced by the ANZ was advantageous to the Knoll companies and that there would be surplus funds above those required to discharge the Challenger Mortgage that would be used to improve commercial properties owned by the Knoll companies. The benefit to Mrs Londish from the monies advanced by Challenger and the ANZ that were secured by the respective mortgages over Pibrac was therefore a real benefit and not merely an incidental benefit which accrued generally to the family of which Mrs Londish was a member: see the authorities considered by Einstein J in State Bank of New South Wales v Chia [2000] NSWSC 552; 50 NSWLR 587 at 169. 140Since Mrs Londish has failed to establish that she did not understand the purport and effect of either the Challenger Mortgage or the ANZ Mortgage, equitable relief is not available on Yerkey v Jones principles. However, for completeness, I propose to address whether the Challenger or the ANZ Mortgage was voluntary.

Whether the transaction was voluntary 141Whether someone is a volunteer is to be decided as a matter of substance and not according to legal rights and obligations: Bylander International Consortium (Australia) Pty Ltd v Multilink Investments Pty Ltd [2001] NSWCA 53 at [15] (Handley JA, Giles and Heydon JJ agreeing). In Garcia v National Australia Bank Ltd Mrs Garcia was regarded as a volunteer for the purposes of this element of the Yerkey v Jones equity although she was both a director and shareholder of the debtor company, since she had "no financial interest in the fortunes of the company" ([43]) which was her husband's creation and of which the trial judge found he was in complete control. 142I consider the instant case to be distinguishable from Garcia in a number of respects. In respect of the loan secured by the Challenger Mortgage Mrs Londish was a co-debtor with her husband and the loan was advanced to both of them jointly. In the case of the ANZ Mortgage she was the sole borrower and the bulk of the funds advanced were applied to discharge a mortgage over property she owned. She regarded herself, correctly, as the "owner" of the Knoll companies and was a principal shareholder or co-shareholder with her husband in each of them. She was also a director at least of some of them. There was therefore a direct benefit to her in having monies advanced to those companies for the purposes of improving their real property assets. 143It was contended on behalf of Mrs Londish that, although she was a director and shareholder of the Knoll companies, she nonetheless did not receive a "direct financial or economic benefit" from the monies advanced because she had no real control over the Knoll companies. The following matters were relied upon: (1)She was only one of three directors of Knoll Investments and had no involvement in the day-to-day management of the company; (2)She was only one of two shareholders in Knoll Investments and therefore could not control the company or remove and replace a director without the concurrence of her husband (the other director); (3)Her husband, as a matter of practical reality, controlled the finances of the Knoll companies. 144The question of control is relevant to a determination of whether "the wife", in this case Mrs Londish, has received a benefit from the transaction or whether she should be regarded as a volunteer. In Garcia, Mrs Garcia was held to be a volunteer even though she was a director and shareholder because the trial judge found she had no control over the company and received no benefit, other than the incidental benefit that might accrue to her in the future by reason of his superannuation policy. Mrs Londish's situation is far from this scenario. That she did not exercise control with respect to the companies, does not mean that she had none or that she derived no benefit from the transaction. 145Further, although some of the companies could be said to have been her husband's creation, many of the principal assets were held by Knoll Holdings which had been created by her father, for her benefit, through the trust and she had inherited his shares on his death as his sole heir. 146Mr Drew, on behalf of Mrs Londish, contended that the loan to Mrs Londish by ANZ that was secured by the ANZ Mortgage was, effectively, a loan to the Knoll companies that was guaranteed by her and that therefore she was a volunteer. This submission ignored three salient matters: first, she obtained an immediate benefit from the loan in that the Challenger Mortgage was discharged and she obtained funds at a lower cost from the ANZ; secondly, she was relevantly the debtor, not the guarantor as a matter of law; and thirdly, she owned the Knoll companies. 147Where an agreement is sought to be impugned on the basis of general unconscionability, there is no need to insist on the requirement in Yerkey v Jones that the wife be a volunteer and it is relevant, to consider whether there is "constructive suretyship". Santow J, with whom Campbell J agreed, said in Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 (Elkofairi), at [92]: Because relief is available under the wider doctrine of unconscionability, for the reasons stated by Beazley JA, it has not been necessary to consider whether the form of the transaction should matter. Here the lender lends under a transaction where the money is intended to go to the husband, though framed in terms rendering husband and wife jointly liable as co-principals. Such a situation may, in the eye of equity, involve a transaction of guarantee or, as sometimes described, constructive suretyship. 148This passage might appear to lend some support to the proposition that it is appropriate to characterise the monies advanced by reference to the use to which they will be put to determine whether, in respect of any part, or indeed the whole, the wife is a volunteer for the purposes of the Yerkey v Jones equity. However, Beazley JA, with whom Santow and Campbell JJ agreed, confirmed that that was not appropriate in the context of the Yerkey v Jones equity: [47] This case is not one of guarantee. If it is sought to make the principles in Yerkey v Jones applicable to a case which is outside the case of a guarantee given by a wife as a volunteer in respect of her husband's obligations (again without commenting upon the possible application of the principle to other relationships) it would be necessary for the creditor to be on notice that the person seeking to impugn the transaction was a volunteer. Otherwise, the underlying premise upon which the principle operates is missing. 149Santow JA articulated the limits of the Yerkey v Jones equity in [96] in the following terms: The relevance of this analysis in the present context is not to anticipate what the High Court might, or might not, do in extending the doctrine of Yerkey v Jones to cases outside the conventional guarantee by a wholly volunteer wife. It is not for an intermediate appellate court to do that. Rather it is to support the proposition that, when resorting instead to the wider doctrine of unconscionability, here in granting relief to the wife (Cf. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447) the fact that the transaction is in the strict sense not one of guarantee need not provide an insuperable obstacle to relief. 150For the foregoing reasons, Mrs Londish has not established that she was a volunteer either in respect of the monies advanced by Challenger or by the ANZ that were secured by the Challenger Mortgage or the ANZ Mortgage. 151Mrs Londish contended that the Challenger and ANZ Mortgages were unconscionable on the basis of the principles in Yerkey v Jones and Garcia. As she has not established either (1) or (2) of the matters required to be established by an applicant for relief under Yerkey v Jones, her application for relief on that basis is refused.

Whether Mrs Londish was at a special disadvantage 152Mrs Londish also contended that she was at a special disadvantage and that equitable relief ought be granted on that basis. She submitted that she: "was at a special disadvantage in dealing with ANZ including because her ignorance and inexperience, coupled with her complete reliance upon her husband in such matters, affected her ability to conserve her own interests, and ANZ unconscientiously took advantage of the opportunity thus placed into its hands." 153I am not satisfied that Mrs Londish was suffering from any relevant disadvantage. The extent to which she signed documents her husband asked her to sign has been sufficiently considered in the context of Yerkey v Jones. There was, in my view, no other circumstance which could conceivably be regarded as placing her in a position of special disadvantage. 154Even if, contrary to my finding that she was not at a special disadvantage, the ANZ, or indeed Challenger, bore any onus of establishing that their respective transactions were "fair, just and reasonable": Louth v Diprose (1992) 175 CLR 621 at 637 (Deane J), they have, in my view, amply discharged the onus. For the reasons given above, each of the Challenger and ANZ Mortgages and associated loans were transactions that were fair, just and reasonable. They were eminently provident transactions at the time they were made. Indeed the cause of the undoing of the Knoll companies has not been established by the evidence. There is no evidence that, but for these loans, they would be solvent. 155I reject Mrs Londish's submission that the transactions were, from her point of view, "obviously improvident" because she did not have the income to service the loans. The monies were advanced because the Knoll companies, of which she was a director and at least equal shareholder, did have the capacity to service the loan. This does not make the transactions improvident from her point of view. Indeed one might have expected that, given the coincidence of interest between her and the companies, it would make good sense, as it did at the time, for her to encumber her valuable non-income-producing asset, Pibrac, to facilitate the availability of finance to the companies which provided her with her livelihood and lifestyle. 156Mr Drew, on behalf of Mrs Londish, made the following submission: "In the circumstances it would be unjust, unfair and unconscientious for ANZ to enforce the ANZ agreement and ANZ Mortgage against Mrs Londish. Rather ANZ should look to her husband or the Knoll Group for repayment, whom it always knew to be the true borrower." 157As referred to above, it appears that all of the Knoll companies are under external administration. There is no evidence that Mr Londish has any assets. There is no suggestion that the proceedings have been taken except as a last resort to recover the debt. Indeed Mr Drew, on Mrs Londish's behalf described the situation in the following terms: "What has happened is ANZ has placed the group of companies into liquidation, got what they can out of that presumably and now is coming from [sic, for] the family home. 158I reject Mr Drew's submission that Mrs Londish's position as the named borrower in the ANZ Mortgage gives rise to any injustice or unconscionability.

The claim by ANZ against Perpetual 159The claim by ANZ against Perpetual would arise only if I found that the ANZ was not entitled to enforce its mortgage against Pibrac because Mrs Londish was entitled to relief in respect of the Challenger Mortgage by reason of any unjustness or unconscionability associated with it. Because I have not found any basis on which to impugn either the Challenger or the ANZ Mortgages, the claim does not arise. I have considered whether I ought make findings of fact lest the matter go further. However, such findings would appear to me not only to be so hypothetical as to be of no utility, but also unnecessary since the advantage I have enjoyed as trial judge would not, in my view, affect the availability of restitution to the ANZ in respect of monies paid to Perpetual to discharge the Challenger Mortgage, or the ANZ's right to be subrogated to the Challenger Mortgage.

Orders 160I make the following orders: (1)Judgment for possession of the whole of the land comprised in Certificate of Title, Folio Identifier B/102621 and known as 23 Pibrac Avenue, Warrawee in the State of New South Wales. (2)Judgment in the sum of $4,854,012.98 plus any further amounts that have become due since 1 March 2014. (3)Leave to issue a writ of possession to enforce the judgment referred to in paragraph (1) above. (4)Subject to any party making an application for a different costs order in writing to my Associate within seven days, order the first defendant to pay the plaintiff's and the second and third defendants' costs of the proceedings. (5) Direct the parties to send short minutes of order to my Associate stipulating the judgment sum calculated by reference to (2) above

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