Bendigo & Adelaide Bank Ltd v Carnemolla

The plaintiff 17The plaintiff initially carried on business as the Adelaide Bank Limited. In November 2007 it merged with the Bendigo Bank Limited to form the Bendigo and Adelaide Bank Limited. Through the operation of s 22 of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) the plaintiff on 1 December 2008, by operation of law, became the mortgagee of all mortgages registered previously in the name of Adelaide Bank Limited and was substituted for the Adelaide Bank Limited in these proceedings. An initial challenge to the plaintiff's standing to bring these proceedings was not pursued.

The first defendant 18The first defendant was born in 1944 in Italy. He attended primary school for about two years and then commenced working in the building industry. At the age of 20 he was conscripted into the Italian navy where he served for two years. In 1966, aged 22, he migrated to Australia. Here he found work in the building industry. In his affidavit [8] he said: "At first, I had a language problem and this meant that I was given only labouring duties. However, after a number of years and as my language and building skills improved, I was involved in more advanced building work, such as major plants, large government jobs, and building work associated with steel mills." 19In 1971 he married the second defendant. In 1989 he fell off a roof at his workplace seriously injuring his back and neck as a result of which he has not worked in paid employment since. Two weeks after his fall he injured his left arm in a domestic accident as a result of which he has a permanent impairment of the left arm. The first defendant gave evidence that he became depressed following the injury and that he understood a diagnosis of schizophrenia was made. He was under medical care for his condition and took antipsychotic medication. He was in receipt of a pension. 20Since the injury he has dealt in real estate, in share trading and conducted a business selling coins, bank notes and cars on eBay.

The second defendant 21The second defendant was born in 1954 in Italy. She migrated to Australia with her parents when eight years of age. She attended school in Australia until age 16, though she did not obtain a school certificate. She then completed an apprenticeship as a hairdresser, an occupation she followed for most of her working life. In 1989 the second defendant ceased paid employment in order to care for her family. She did not return to the paid workforce.

The defendants' children 22The defendants have three children, born in 1972 , 1975 and 1979 respectively. The eldest is married to Steve Wolfe. The second and third children suffer from schizophrenia, reside with the defendants and are in receipt of pensions.

The property dealings of the defendants prior to December 2004 2316.7.71 The first defendant purchased 4 Augusta Street Punchbowl. He signed mortgages to the Commonwealth Savings Bank of Australia and Finance Corporation of Australia on 9 July 1971, his signatures were witnessed by a JP. 20.11.82 The second defendant became a joint tenant of 4 Augusta Street Punchbowl. 9.12.82 The defendants signed a mortgage to Australia and New Zealand Banking Group Limited ("ANZ") over 4 Augusta St Punchbowl, the signatures were witnessed by a bank officer. 22.2.85 The defendants purchased their first investment property 13 Anthony Street, Yagoona and mortgaged it to ANZ on 15.2.85, the defendants signed the mortgage and their signatures were witnessed by a bank officer and cleaner respectively. 17.8.88 Discharge of mortgage to ANZ over Augusta Street. 10.1.89 The defendants purchased 3 Josephine Crescent, Georges Hall and mortgaged it to ANZ, the defendants signed the mortgage and their signatures were witnessed by a bank officer. 27.1.89 Discharge of Anthony Street mortgage to ANZ. 24.1.90 The defendants took a second mortgage over the Josephine Crescent property to ANZ, the defendants signed the mortgage and their signatures were witnessed by a bank officer. 7.9.90 The defendants sold Anthony St for more than double what they paid for it five years earlier. 6.2.91 The defendants purchased the property as a second investment property. 15.4.91 Discharge of the Josephine Crescent mortgage to ANZ. 29.11.91 Josephine Crescent sold. 20.12.91 The defendants mortgaged the property to ANZ. The defendants signed the mortgage and their signatures were witnessed by a bank officer. 4.6.98 Discharge of the mortgage over the property to ANZ. 31.3.99 The defendants took a mortgage over the property to Perpetual Trustees Victoria Ltd to secure $500,000, the defendants signed the mortgage and their signatures were witnessed by John Izzo, solicitor. 3.3.00 The defendants consented to a caveat over the property being lodged by Royal Guardian Mortgage Corporation Pty Limited to secure $20,000 loan. The defendants signed the caveat and their signatures were witnessed by a JP. 6.3.00 The caveat over the property withdrawn. 29.3.00 Caveat lodged over the property with Royal Guardian to secure $20,000 loan. 31.10.00 Registration of strata plan for subdivision of the property into 5 x 2 storey townhouses. The defendants sold three of the townhouses. 14.11.00 Withdrawal of caveat to Royal Guardian. Discharge of mortgage to Perpetual Trustees Victoria. Mortgage over the properties to Perpetual Trustees Victoria Ltd to secure $450,000 signed by the defendants before Zoran Pusic. 13.10.01 The defendants purchased third investment property (35A Stanbrook St Fairfield Heights) for $200,000. 13.11.01 The defendants mortgaged 35A Stanbrook Street Fairfield Heights to Permanent Custodians Ltd to secure $225,000. The mortgage was signed by the defendants and witnessed by John Izzo (solicitor). 12.8.02 Discharge of mortgage on the properties to Perpetual Trustees Victoria. The properties mortgaged to Perpetual Trustees Australia Ltd, signed by the defendants and witnessed by Dominic Izzo. 4.2.03 Sale of 35A Stanbrook Street Fairfield Heights for $573,400. 20.2.03 The defendants bought fourth investment property at 24 Levuka St Cabramatta and mortgaged it to Permanent Trustee Co. The mortgage was signed by the defendants and witnessed by John Izzo. 4.6.03 Discharge of mortgage on the properties to Perpetual Trustees Australia Limited. Mortgage over the properties to Australian Wholesale Lending Mortgages Pty Ltd to secure $750,000 signed by the defendants, witnessed by Shirley Morcilla (broker). 10.6.03 Letter from real estate agent to D La Rosa Isso & Co advising are instructed by Mr and Mrs Wolfe and defendants to sell 22 & 24 Levuka St Cabramatta. "Would you kindly contact Sebastian Carnemolla ... to discuss the special conditions which will be required, as the properties are being sold subject to DA approval of the plans currently lodged with Fairfield City Council." 10.6.03 Discharge of mortgage on Levuka Street to Permanent Trustee. Mortgage to Australian Wholesale Lending Mortgages Pty Ltd over Levuka St, Cabramatta to secure $850,000. Signed by defendants, Steve and Angelina Wolfe, witnessed by Shirley Morcilla (broker).

Defendants' property dealings from December 2004 2418.1.05 Discharge of mortgage over the properties. 18.1.05 Mortgage over the properties to Adelaide Bank Ltd signed by the defendants and witnessed by Leon Angelopoulos. 21.10.05 Credit Application through broker Michael Saroukas of MS Capital Sydney Pty Limited for $920,000 loan over Levuka Street, Cabramatta.

• 25.11.05 Letter from solicitors D La Rosa Izzo & Co to MacGillivrays attaching loan documents executed by the defendants.
• 21.12.05 Discharge of mortgage to Australian Wholesale Lending Mortgages Pty Ltd over Levuka St Cabramatta.
• 21.12.05 Transfer of Steve & Angelina Wolfe's interest in Levuka St Cabramatta to defendants.
• 21.12.05 Mortgage to Adelaide Bank Limited over Levuka St Cabramatta to secure $920,000 - signed by the defendants, witnessed by John Izzo.
• 21.11.06 Letters from NationalCorp Home Loans to defendants advising $920,000 loan is reaching end of first year, and asking whether want to continue with fixed or variable interest.
• 30.11.06 Form signed by defendants requesting $920,000 loan be fixed for 3 years at 7.55% interest.
• 18.12.06 Letter from NationalCorp Home Loans to defendants advising interest only period on loan over the properties is coming to an end, and will revert to interest and principal.
• 22.12.06 Fax from NationalCorp Home Loans (Paul Greig, Loans Administration Manager) to first defendant referring to recent discussions and attaching forms to fix the rate and extend the interest only period on the loan.
• Letter from defendants requesting that the loan be maintained at interest only for a further year.
• 2.10.07 Levuka Street sold.
• 16.12.08 Lot 2 sold.

Mr Angelopoulos 25Mr Angelopoulos was born in Australia in 1973. He attained the Higher School Certificate in 1991 and, for a time, worked in the family sign writing business whilst studying accountancy part-time. In his affidavit he described himself as a finance broker and swore [6]: "In 1994 I commenced employment with Werton Consulting as a financial consultant. In 1999 I was employed by Westpac as a financial planner during which time I held a Securities Dealer's Licence. After this in 2001 I commenced employment with Nu-Loan Australia (Mortgage Manger for ING Bank) in the role of BDM [Business Development Manager]. In 2003 I commenced employment as a BDM with Premier Capital Pty Limited. In this role I would liaise with finance brokers. I was employed by Premier Capital as a contractor for a flat fee of $7,500.00 per calendar month. My income was not linked to the value of loans that I, or that brokers under my guidance, would submit."

The issues 26Senior counsel for the plaintiff in his final address sought "Judgment in the sum set forth in the statement of claim; an order for possession of the property..." Subsequent to judgment being reserved, the attention of counsel was drawn to the terms of Associate Justice Harrison's judgment dated 28 October 2008. Senior counsel for the plaintiff then informed the Court that "Orders 1 and 2 in the amended statement of claim are otiose - judgment for a different money sum has already been entered on 19 November 2008 on which statutory interest is accruing and order 5 in the amended statement of claim is otiose." No submissions were received from counsel for the other parties despite the defendants' counsel seeking and obtaining an extension of time to consider the matter. 27The defendants concede the loan application, loan agreement and mortgage over the properties were signed by them. They accept that they are in default under the mortgage. They have withdrawn allegations that the notices pursuant to s 80 of the Consumer Credit Code and s 57(2) of the Real Property Act 1900 were not effective. They have not, it would seem, set aside the monetary judgment pronounced by Associate Justice Harrison on 31 July 2008. 28Prima facie the plaintiff is entitled to an order for possession unless the defendants succeed on one or other of their defences, in respect of which the onus lies upon them. 29Counsel for the defendants did not expressly relate his oral submissions to specific allegations in the pleadings but adopted a more general approach. The principal attack was upon Mr Angelopoulos. As counsel for the defendants put it: "... they [the defendants] were proceeding along quite well until some time after they ran into Mr. Angelopoulos. Now, I'm not saying that Mr. Angelopoulos is the cause of the rest of their problems, but that is basically the history of this couple." 30The defendants allege they were disadvantaged, that Mr Angelopoulos took advantage of this as a result of which the defendants entered into a mortgage which was not in their best interest and did so in the absence of advice from a solicitor. It was further alleged that Mr Angelopoulos, without the knowledge of the defendants, had obtained and lodged false taxation returns with the loan application and had entered false information into the loan application but for which the loan application would have been refused. The defendants submitted Mr Angelopoulos was not a credible witness and that when there was conflict in the evidence, the defendants' evidence should be preferred to that of Mr Angelopoulos. The defendants' specific submissions are identified and discussed in detail below.

Disadvantage 31The defendants submitted they were disadvantaged by reason of their lack of education, reasoning ability and financial know-how, an inability on the part of the first defendant to read English or to write English save by copying the writing of others, a psychiatric condition suffered by the first defendant, the absence of a solicitor and the relationship of trust fostered by Mr Angelopoulos.

Reading and writing 32It may be accepted the first defendant lacked a formal education. However, he was clearly intelligent and advanced himself in Australia as set out in para [18] hereof. The second defendant was educated in Australia to age 16 and then completed an apprenticeship as a hairdresser. There was no issue as to her ability to read and write English. 33The first defendant alleged during the course of cross examination that he could not read English. He had said earlier in his evidence that he was not a good reader. I do not accept the first defendant could not read English now or in 2004. Whilst his capacity in this regard is less than perfect, in my opinion his capacity to read English is and was generally adequate. The considerations leading to that conclusion are principally the first defendant's work history prior to injury which suggests he acquired some capacity in this regard, no ground for relief due to an inability to read or write English was pleaded in the defence or in the cross claim, the substantial affidavit of the first defendant, sworn on 3 September 2010, was witnessed by a solicitor but does not contain any endorsement that it was read to the first defendant before it was sworn, the second defendant said the first defendant read his affidavit before signing it, the first defendant, when giving evidence, appeared to be able to read various documents put before him, it was only after some time in cross examination that he asserted he could not read English. 34The first defendant asserted he could only write when copying what was written by another. This assertion appeared improbable as he related it to situations when the other person could have simply written directly on the document for the first defendant rather than adopting the cumbersome course suggested. This evidence was not confirmed by the second defendant who said the first defendant could write small words such as "rebate". A friend of the first defendant who was alleged to have assisted him in writing did not give evidence. In my opinion, it is more likely than not that the first defendant had, at least, basic skills in writing in English.

Psychiatric condition 35The first defendant gave evidence in his affidavit as follows: "...after I had my accident in 1989 I became very depressed...I was prescribed medication for my depression and also sent to counselling. I have been on antidepressants and antipsychotic drugs since then. When I am stressed I find that my schizophrenia becomes worse. In the period of around December 2004 I was going through a stressful period when I was financially unable to meet my debts. In 2004 my medication was increased." 36The second defendant, in her affidavit, said: "Since the injury [in 1989] my husband has been difficult to communicate with. I have noticed that he does not understand what I am saying all the time. He repeats himself often and often he has a 'far away' look in his eyes." The second defendant was appointed the first defendant's tutor. 37However, the second defendant gave evidence the first defendant seemed entirely capable of making decisions as to which properties to buy and sell and as to which were the best loans to take. She was confident of the first defendant's capacity to identify properties to buy and she was happy for him to give evidence in this case as to their finances. 38The proceedings were conducted without resort to any medical evidence. An application by defendants' counsel after the evidence was otherwise complete to tender some medical reports dated 2008 was refused. The first defendant's involvement in business and financial matters does not suggest his financial dealings were affected by any psychiatric condition. Mr Izzo, the solicitor who had acted for the defendants on a number of property transactions, was not called to give evidence that the first defendant had any difficulty in this regard. 39In my opinion, it has not been established that the first defendant's involvement in relation to the subject mortgage was adversely affected by any psychiatric condition. 40Mr Angelopoulos gave evidence he was unaware the first defendant suffered from any health problems; this was never disclosed to him. The contrary has not been established.

Father figure 41The first defendant, in his affidavit, said that at the first meeting in 2004 Mr Angelopoulos told the first defendant he was like a father to him. This was repeated on other occasions. It was submitted that this was indicative of a relationship of undue influence between the first defendant and Mr Angelopoulos which led the defendants not to retain a solicitor and to enter into a mortgage, the conditions of which they were unable to meet. I am unable to accept that the first defendant was influenced in this way. The defendants' counsel described the first defendant as an extremely strong-willed man. I find it improbable he would have been unduly influenced by Mr Angelopoulos' comments.

Advice of solicitor 42The second defendant gave evidence that mortgages were always signed by her in the presence of a solicitor. She denied signing any mortgage at all in the absence of her solicitor except the "one with Leon, because he said we didn't need a solicitor." Later, under cross examination, she changed that evidence to assert that sometimes it could have been somebody else, like a financial adviser. She said that by financial adviser she meant someone like a bank manager, not a broker. 43The first defendant gave evidence he always signed mortgages in front of his solicitor. He agreed, after being taken to various mortgages signed by him, that on occasions he had signed in front of bank officers. The documentary evidence established the defendants had had mortgage documents witnessed other than by a solicitor or bank officer. At other times employees of finance companies and even a cleaner had witnessed their signatures to mortgage documents. 44The first defendant said he told Mr Angelopoulos that the defendants wanted a solicitor to look over and check the documents but Mr Angelopoulos responded "there was no need, do not waste your money. I will witness it." He said in his affidavit "I never had any chance to obtain legal advice in relation to either loan." However, the defendants did obtain legal advice in respect of the loan over Levuka Street in 2005. 45Mr Angelopoulos denied the defendants said they wanted a solicitor to look over and check the documents. He said he offered the defendants the opportunity to consult a solicitor on more than one occasion. 46The bank's solicitor, when forwarding mortgage documents for signature, stated in the covering letter "We strongly recommend you obtain legal advice about the enclosed documents." 47The first defendant agreed he could call on his solicitor, Mr Izzo, to get advice, if needed, and, as previously noted, the defendants did retain Mr Izzo in respect of the Levuka Street mortgage. 48There is no acceptable evidence that involvement of a solicitor for the defendants would have resulted in the loan and mortgage proceeding other than as they did. This conclusion is supported by evidence of the defendants retaining the services of the solicitor in relation to the loan over Levuka Street in 2005 and that transaction proceeding in the manner sought by the defendants. In the ordinary course, a solicitor would have only come into the matter after the loan application had been approved. It was not suggested there was any problem with the documents provided by the plaintiff after the loan had been approved.

Financial dealings 49It is apparent from the number and type of property dealings by the defendants that they were experienced in respect of the purchase and financing of real estate. They understood the nature of the application and loan agreement. They had received the advice of a solicitor in relation to transactions of this kind on many previous occasions. The defendants were well aware that in the event of default under a mortgage judgment for possession could be obtained and the property sold. 50The first defendant had experience in the development of building sites as a result of the development of the property and the proposed development of the Levuka Street site. It had been the intention of the defendants to continue to buy and develop land. The first defendant also had the experience of conducting a trading business on eBay and trading on the stock market where he allegedly had a turnover of $31 million in the 2004 taxation year.

The second defendant's role 51The first defendant agreed that he discussed with the second defendant decisions that were being made about purchasing and selling property and he and the second defendant made these major decisions together. The second defendant gave evidence she and the first defendant spoke about the properties being developed from time to time. However, the first defendant did most of it. The second defendant was content to let the first defendant take the lead in relation to these transactions.

General 52The defendants asserted Mr Angelopoulos' evidence as to a number of matters was dubious, and that this supported the submission that he should not be accepted as a credible witness. These matters included: (a) he described himself in his affidavit as a finance broker. In evidence he agreed he was not a finance broker and said he had raised this with his solicitor but the affidavit had not been amended. However, the substance of the affidavit referred to Mr Angelopoulos' status and work history without asserting he was at any time a finance broker; (b) his given name was Leonidas. He said he had never used that given name since school. He conceded that was inaccurate when Land Titles Office documents were produced showing that he had used the given name Leonidas on those documents; (c) he said that he became a Justice of the Peace in about 1997. He produced a certificate of appointment which showed he was appointed a Justice of the Peace on 1 November 2006. When challenged that this did not establish he was a JP in 2001 he produced a business card from New Loan which referred to him as a JP and BDM. In his evidence he said that he was employed by New Loan as a BDM from 2001-2003; (d) he delayed giving his current work address when asked in cross examination to provide it; (e) his affidavit referred to a previous employer as "Werton". The correct name was Weraton. The probabilities are that this was a typographical error as two lines later a similar error occurred in relation to the word Manager; (f) the affidavit referred to Mr Angelopoulos' employer in 2001 as "Nu-Loan Australia" whereas the correct spelling was "New Loan Australia". 53In my opinion, these matters do not affect Mr Angelopoulos' credit in any significant manner.

Mr Angelopoulos' finances 54The defendants submitted that documentary evidence established that Mr Angelopoulos had obtained a large loan on his properties, that such a loan could not be serviced on his income of $7500 per month or the income disclosed in his taxation returns and that an inference should be drawn that the loan was secured by the use of documents falsely valuing his assets and income thereby making it more likely the defendants' version of events was true. There was no evidence as to the income of Mr Angelopoulos' wife or other funds available to him. I am not prepared to draw the inference sought from the evidence before me, particularly as it was never put to Mr Angelopoulos.

Levuka Street, Cabramatta - 2005 loan 55In 2005 the defendants refinanced the loan over the land owned by them at Levuka Street, Cabramatta. The defendants asserted that they had not signed the 2005 loan application in respect of the Levuka Street land. Mr Angelopoulos and a broker, Mr Saroukos, stated that that loan application was signed by the defendants in October 2005 in their presence at a coffee shop in Earlwood. Mr Saroukos said he witnessed the signatures after the application form was filled in by Mr Angelopoulos on the defendants' instructions. In his affidavit he said: "Leon asked Sam words to the effect 'Are you still self employed?' Sam replied words to the effect 'Yes I am, still building.' Leon said words to the effect 'Do you have a company?', Sam said words to the effect 'Yes, Renato's Building Services...' Leon asked words to the effect 'What is your income?' Sam said words to the effect 'You have the tax returns from last time. Whatever is on those.' Leon said words to the effect 'Yes, but that was nearly a year ago.' Leon said words to the effect 'I have a copy of your tax returns in my office, should I use those figures again?' Sam Carnemolla said words to the effect 'Yes, nothing has changed, the same amounts as before, because I don't have the latest tax returns like I told you before.' Leon said words to the effect 'I will leave these figures blank on the application form and when I go back to my office I will put them in.'" This evidence was generally confirmed by Mr Angelopoulos. 56The defendants stated that they not been to that coffee shop, had never met Mr Saroukos and had not signed the application. It is notable that despite evidence being sought from a handwriting expert, no handwriting evidence was adduced. When cross examined, the second defendant stated that her assertion that the document had not been signed by her was based upon the fact that she did not know Mr Saroukos and had not been to the coffee shop. It was not put to Mr Saroukos that the alleged signatures of the defendants were forged. Nor was he cross examined as to the evidence quoted above. 57The defendants' denial of a meeting at a coffee shop in Earlwood appeared convincing and I accept they genuinely believe that to be the case. However, it would be unnecessary for Mr Angelopoulos to invent such a meeting and it is not apparent why he and Mr Saroukos would lie on this issue. The defendants may be simply mistaken. I am unable to determine the truth of this issue.

St George Bank 58The first defendant gave evidence that Mr Angelopoulos in 2005 telephoned him and said he would get the first defendant two personal loans for $40,000 each. The first defendant agreed to take out one loan with St George Bank and another with Suncorp. Mr Angelopoulos attended at the defendants' home and completed the loan application forms. Some weeks later Mr Angelopoulos told the first defendant that the loans had been approved. 59Mr Angelopoulos initially gave evidence he filled out the application form for the first defendant for a personal loan from information given to him by the first defendant. He was unaware if it was for St George Bank. That was the extent of his involvement he said. 60However, later in his cross examination he gave the following evidence: "Q. If I could get back to the personal loan we spoke about earlier today. Do you know a person by the name of Costa Panagopoulos? A. Sorry. Q. Costa Panagopoulos? A. Yes. I do know Costa... Q. I suggest to you that you referred Mr Carnemolla to that person to obtain a loan with St George? A. That person was one of the three names that I gave to Mr Carnemolla when he asked me for a personal loan, because I don't directly get involved with personal loans. Q. But you also attended the offices of St George Bank when Mr Carnemolla was making application? A. Mr Carnemolla asked me to come with him to St George Bank, because I was in the area at Fairfield, in the event that I needed to sight any witnessing of signatures as a JP. Q. You accept that you went with him to St George? A. I have never denied the fact." 61There was no explanation for the apparent change in his evidence on this subject.

The transaction 62The first defendant and Mr Angelopoulos first met in 2001. The first defendant said he was referred to Mr Angelopoulos as a business development manager; Mr Angelopoulos had witnessed his signature and in doing so would have noted from the documents before him that the first defendant was a suitable client for follow-up. 63Mr Angelopoulos said he simply witnessed one document being a change of name for the first defendant and gave the first defendant his business card. 64The first defendant said the next contact with Mr Angelopoulos was when he was telephoned in April 2004 by Mr Angelopoulos inquiring as to his financial situation. Mr Angelopoulos' evidence was that he was contacted by the first defendant in November 2004 by telephone seeking a loan. He made an appointment to visit the defendants and after the visit arranged for valuations to be made of the properties. Mr Angelopoulos' version would appear the more probable having regard to the date of the valuations of the properties (29 November 2004) and evidence given by the first defendant in his affidavit that "In early December 2004, Leon Angelopoulos made contact with us." He later said Mr Angelopoulos contacted him in February 2004, "something like that". The second defendant gave evidence that the first time she saw Mr Angelopoulos was about the end of 2004. 65Mr Angelopoulos gave evidence that at his first meeting in 2004 with the defendants: "We didn't fill out an application form, because I like to sit down and discuss objectives and my clients' plans, as to what they want to do with their loan. We spoke about the values of their properties. We spoke about lender's mortgage insurance, and the concern was that the valuations may have been a little bit short, so we decided to organise the valuations first. When we received the valuations, I went back and filled out an application form." 66Mr Angelopoulos said the loan application form was completed at the second meeting. He said he went through the form with the defendants requesting the particulars required. He completed the form for them. All of the information contained therein was obtained from the defendants. The form was signed by the defendants at his request. He then submitted it to the company he was representing. That company then submitted it to NationalCorp and it then went to the plaintiff as lender. 67The second defendant said in her affidavit: "I was never given the chance to read the mortgage documents, but when Leon opened some different pages and said 'Sign here' in a number of places, I just signed because I trusted Leon." The loan application to Premier was annexed to her affidavit and she said "I did not read this document before I signed it." 68The first defendant said Mr Angelopoulos told him to sign the document but did not read it to him and gave no explanation. 69It was common ground the value of assets and earnings stated in the loan application was inflated. The defendants said that this was done by Mr Angelopoulos without their knowledge. Mr Angelopoulos said the information was all provided by the defendants. 70The first defendant gave evidence that in 2003 the real estate market was dropping. This occasioned some financial problems for the defendants. In June 2003 they engaged a real estate agent to sell the land at Levuka Street, Cabramatta. The land was subsequently passed in at auction. In May 2004 the defendants agreed to buy out their daughter and her husband's interest in Levuka Street (although it was not until later that the transfer was registered). This increased the financial pressure on the defendants. They sought, without success, to borrow from a number of lenders. By November 2004 the defendants were in need of additional funds to avoid defaulting on their mortgages. 71The first defendant gave evidence that he told Mr Angelopoulos in 2004 that he was in serious financial trouble, that he was a pensioner, had no income and was struggling to sell a property. However, Mr Angelopoulos obtained a loan for the defendants knowing they had minimal income but relying on the equity in the properties to ensure the plaintiff would be paid out if default occurred. 72Mr Angelopoulos denied he had been informed, or was otherwise aware of, such being the case. His evidence was that the first defendant had told him he was a successful builder. He believed him. Mr Saroukos said that in the meeting at the Earlwood coffee shop the first defendant had confirmed he was at the time a self employed builder. Mr Angelopoulos was unaware the first defendant had any health problems. The first defendant told him he had made a big profit for the taxation years 2003 and 2004 and he wanted the additional money to invest in the share market. The building industry was good, there was plenty of work and he made good money from trading on e-Bay and the share market. The first defendant denied this in his oral evidence but in his affidavit he said "I told Mr Angelopoulos I was a self employed builder." 73The second defendant said that at the meetings with Mr Angelopoulos the first defendant spent a considerable amount of time talking about mortgages and loans. There were documents on the table. Mr Angelopoulos spent considerable time with the first defendant with those documents. 74The defendants submitted Mr Angelopoulous, in any event, should have become aware of the true situation by a consideration of the bank records which showed the first defendant was share trading at a loss, the Baycorp credit reference which showed that a number of inquiries as to the credit-worthiness of the defendants had been made, and a rate notice for the properties for the period 1 July 2004 to 30 June 2005 which showed that the defendants were entitled to a pensioner rebate. 75However, neither Mr Angelopoulos nor any of the other parties, other than the defendants, had copies of the defendants' bank statements. The credit reference was not obtained by Mr Angelopoulos but when obtained by the credit officer showed a number of inquiries and a clear credit record save for a misunderstanding as to the payment of a telephone bill on one occasion. There was tendered in evidence a rate notice for the properties for the period 1 July 2004 to 30 June 2005 which contained reference to a pensioner rebate but which apparently had only been found by the defendants during the hearing. However, a rate notice for the properties and rate notices for the Levuka Street land which were received by Mr Angelopoulos and tendered by him did not have any note of a pensioner rebate. 76Mr Angelopoulos said he also relied on the taxation returns and statements of earnings by the defendants in the loan application. He said that had he been aware that the first defendant was in serious financial trouble, he would not have processed the loan application. He said there was no purpose in him doing so as in 2004 he received no commission or benefit from having helped the defendants obtain the loan. He said he obtained no financial benefit from so doing. 77The first defendant gave evidence that Mr Angelopoulos had a financial interest in obtaining the loan for the defendants as he had demanded a cash payment of $6000 to process the loan application and had made similar demands on three other occasions in respect of other loans. He said "I give cash money four times, also with the two loan, St George and National Corp, which he took it, $24,000 cash in his pocket." This was denied by Mr Angelopoulos. 78The first defendant stated that the moneys were paid by him with cash drawn from the defendants' bank account in four lots of $6000. He was only able to point to one withdrawal of $6000 in his bank records. That withdrawal occurred in April 2004 well before the loan application form was completed in December 2004. I do not accept that the defendants have established that they gave Mr Angelopoulos an amount of $6000 in order to process their loan application or other amounts of $6000 for other loans or that Mr Angelopoulos was aware of the defendants' true financial situation in 2004. 79It was alleged in the first cross claim that Mr Angelopoulos represented that even if the defendants could not keep up with the repayments on the investment properties they could remain in their home provided they could make the repayments on their home. 80In her affidavit, the second defendant swore: "I do remember very clearly though that Mr Angelopoulos said the following at various times to both my husband and I in that conversation words to the effect: '...if worse comes to worse you can sell one and keep the other. Don't worry even if something goes wrong and you can't keep up the repayments on all three properties, you can just reduce the payments so that you can just keep paying off your house and the bank will just take back your investment properties.'...I believed him when he said that provided we could make the payments on the house, we could still stay in our house, even if we got behind on the other repayments. I would not have signed the mortgage documents if I had known that the bank would try to take our family home that we had all lived in since 1991, even when we could still pay it off." 81The second defendant gave evidence that Mr Angelopoulos said "If you can't keep up with all your loans, you know, you can sell number two and you can keep your repayments on house number one." She understood she would have to make repayments on Lot 1 in the circumstances. She said: "He just said 'If you can't keep up your payments on your investment, then you can just pay your house you are living in', something along that line." 82However, the second defendant cannot recall the whole conversation because she was "just coming in and out and making coffee" and was "in and out of the room all of the time". She agreed that in coming in and out at all the meetings she only heard "bits and pieces" of the conversation. She said she was not listening to what the first defendant and Mr Angelopoulos were saying. She agreed she had a "very dim" recollection of what was said and done. 83The first defendant in his affidavit said Mr Angelopoulos said: "I will look after you as I consider you like a father to me. The mortgage will be in your best interest. If you have difficulty in keeping up payments on the investment properties, you can still remain in your home provided that you make payments on the home, but the other property can be sold." The first defendant further said that when he entered into the loans he believed that even if he could not keep up the repayments on the loans the bank would not take the family home and it would only have rights to repossess the investment properties. "I thus believed I could use the loan as some temporary money for living expenses until I could sell the investment properties, at no risk to my family home." 84Mr Angelopoulos denied that he had made these statements to the defendants. 85As was observed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319: "All too often what is actually remembered is little more than the impression from which the plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience... Considerations of the above kinds can pose serious difficulties of proof...in the absence of some reliable contemporaneous record or other satisfactory corroboration." There is no reliable contemporaneous record or satisfactory corroboration of this alleged representation. The second defendant's alleged recollection of conversations between the defendants and Mr Angelopoulos is somewhat selective. 86The second defendant's evidence ultimately was little more than the representation was "something along that line". In my opinion it is improbable Mr Angelopoulos made the representation alleged. Even if he did, the defendants did not comply with the condition that payments attributable to the home continue.

Taxation returns 87Taxation returns for the first and second defendants for the years 2003 and 2004, ostensibly prepared by an accountant, Mr Khan, trading as Practice One Pty Limited, and signed by the defendants were lodged with the loan application to Premier. They showed a net pre-taxation income for the first defendant of $143,574 (2003) and $159,976 (2004) in respect of "residential building construction". It was these returns and the information in the application which was the basis for the loan approval. The same returns were relied upon in respect of the 2005 loan in respect of the Levuka Street land. 88The defendants allege these returns were false and had been obtained by Mr Angelopoulos for the purpose of supporting the loan application. Despite their signatures on the returns, the defendants said they knew nothing of the returns until their solicitor found them, after the proceedings had commenced, among a bundle of papers given to the first defendant by Mr Angelopoulos and which the first defendant had not read. 89Mr Angelopoulos denied he was responsible for obtaining the taxation returns. He said he did not know and had had no dealings with Mr Khan or his company. He said the returns were given to him in an envelope by the first defendant outside the defendants' home. 90The second defendant gave evidence she had seen an envelope handed over on that occasion by her husband to Mr Angelopoulos but she was unsure of the contents of the envelope. The first defendant agreed he had handed over an envelope but said it contained $6000.00 in cash which Mr Angelopoulos had required to lodge the loan application. The defendants did not know Mr Khan and had never used his services. 91There was no independent objective evidence linking either the defendants or Mr Angelopoulos to the origin of the returns. Mr Khan was not called nor was his file or working papers tendered in evidence. 92The defendants gave evidence that their accountant in 2002 was Mr Faga of Pat A Faga & Associates. There was evidence that the defendants' taxation returns for 2002 were prepared and lodged with the Australian Taxation Office by Mr Faga. The first defendant's return showed an income of $3305.00. 93The defendants gave evidence that their accountant in 2003 was Mr Prasad who traded as CompTax Accounting and Taxation Services Pty Limited. There was evidence that Mr Prasad's office had prepared and lodged the defendants' taxation returns for 2003 and 2004 with the Australian Taxation Office. The first defendant's returns showed a loss of $6425.00 (2003) and a loss of $3305.00 (2004). 94However, other returns prepared by Mr Prasad for the defendants for the 2001 and 2002 taxation years were produced. These had not been lodged at the taxation office. They showed pre-tax income of $222,613.00 (2001) and $236,935.00 (2002) for the first defendant and $5840 and $7965 respectively for the second defendant. The defendants accepted the returns were signed by them but said that the figures were false and must have been manufactured by Mr Angelopoulos. 95Mr Prasad was called as a witness by Romavale. He gave evidence that in February 2003 he had met the first defendant who had said to him words to the following effect "Can you prepare tax returns for me and my wife for the periods 1 July 2000 to 30 June 2001 and 1 July 2001 to 30 June 2002. The taxation returns are for internal management recording purposes only and are not to be lodged with the Australian Taxation Office". Mr Prasad said he prepared the returns based upon figures provided by the first defendant. The first defendant signed his returns in the presence of Mr Prasad. Subsequently they had a dispute over fees and the taxation returns for 2003 and 2004 were prepared and lodged by another accountant in Mr Prasad's office. 96Mr Prasad said he had never met Mr Angelopoulos before these proceedings. The contrary was not established. 97Defendants' counsel submitted that Mr Prasad's evidence should not be accepted. He contended Mr Prasad was a very evasive and unsatisfactory witness and the signature of the first defendant on the original taxation return was so heavily imprinted that it had embossed the back of the document and this was to be compared with other signatures of the first defendant as his signature is light and shaky. Later written submissions of defendants' counsel went so far as to suggest that Mr Prasad's evidence should be referred to the authorities. 98However, there was, prima facie, no reason to believe Mr Prasad had come to Court to perjure himself in order to harm the defendants or to assist Mr Angelopoulos. Nor did his demeanour, in my opinion, reflect adversely upon him. He was seemingly independent of Mr Angelopoulos, the defendants had employed him as their accountant and had signed the returns produced by him. Seemingly he had no interest in the outcome of the proceedings. I accept his evidence. 99On the evidence, having rejected the first defendant's evidence of four payments of $6000, there does not appear to be any reason why Mr Angelopoulos should have engaged in the production of loan applications he knew to be false and taxation returns similarly so. In my opinion, it has not been proved Mr Angelopoulos was responsible for the preparation of the false loan application and taxation returns. 100That conclusion is strengthened by evidence that the defendants sought loans in 2003, 2004 and 2005 relying upon loan applications falsely exaggerated as to the particulars of assets and earnings. An application to New Loan was made on 27 February 2003. The defendants admitted they signed the application form which was apparently completed by Ms Morcilla. The detail of what then occurred is unclear but apparently the loan was approved and resulted in the registration of a mortgage to Australian Wholesale Mortgages Pty Limited, the funds for which were provided by ING. This mortgage was discharged when the subject loan was made and the amount outstanding on the mortgage paid to ING. Subpoenaed documents indicate the false Prasad taxation returns were in the possession of New Loan at the time. Mr Angelopoulos was an employee of New Loan at the relevant time. 101An application to Mortgage House of Australia for a loan was made by the defendants in November 2004. The particulars of assets were exaggerated and the taxable income for the 2002 year was stated to be a figure similar to the Prasad figure of $236,935. There was no evidence that Mr Angelopoulos was linked to this company. 102In June 2005 an application to Tonto Home Loans was made by the defendants for a loan. Once again the application form was signed by them but the first defendant said he did not remember the name Tonto whilst the second defendant identified the signatures on the loan application as hers and the first defendant's. She accepted that they had met in June 2005 with a mortgage broker from Tonto and signed the forms, though she said she had no recollection of Tonto. She did not know if Mr Angelopoulos worked for Tonto. The second defendant said she knew Antonio Massif, whose name appeared on the application form as broker, but did not know what job he did, though he was probably involved in obtaining money. The taxation returns prepared by Mr Khan were produced by Tonto on subpoena. There was no evidence linking Mr Angelopoulos to Tonto.

Jones v Dunkel 103The defendants asserted that Jones v Dunkel inferences should be drawn by reason of the failure of the plaintiff and other parties to call certain witnesses. I do not accept this submission. It has at base an assertion that the onus of disproof was upon the plaintiff and parties other than the defendants. The evidence adduced did not necessitate that such witnesses be called.

Determination 104There are major conflicts in the evidence in this case. The defendants' case is essentially that from 2003 they were in financial difficulty, which difficulty increased and which they knew in all probability would continue to increase until the Levuka Street land was sold. 105In order to survive financially it was necessary for the defendants to obtain additional funds. The defendants determined that this was to be done by refinancing the loan over the properties so as to obtain additional funds after the repayment of the previous loan, legal expenses and the like. This was a legitimate business decision provided the excess was sufficient to enable the mortgage to be paid for a reasonable period in which to enable further efforts to be made to sell the Levuka Street land. 106The defendants' case was that their income was essentially derived from pensions. They each knew that they could not finance the proposed loan from their income but they gave evidence that they told Mr Angelopoulos of their predicament. He responded "Don't worry, leave it up to me. I know what I'm doing and I have done it before". The defendants left it to Mr Angelopoulos who inflated asset and earning figures and engaged an accountant to produce false and misleading taxation returns. 107Mr Angelopoulos for his part gave evidence that the first defendant represented himself as a successful builder who also made money on the stock market and on e-Bay. The defendants were refinancing in order to raise additional funds for the latter activities. The defendants provided the information which he wrote on the application form and supplied taxation returns which accompanied the loan application. 108In my opinion, on the evidence before me, Mr Angelopoulos' version of events appears the more likely. Mr Angelopoulos gave evidence he received no financial benefit in processing the loan application by the defendants. The contrary was not established. The defendants' attempt to establish that the first defendant had paid Mr Angelopoulos four amounts of $6000.00 cash to process this and other loans could not be established from the bank records. It is improbable that with no financial incentive Mr Angelopoulos would have engaged in falsifying the application form and obtaining and submitting false taxation returns. Mr Saroukos may have wanted to assist his friend and business colleague Mr Angelopoulos but to come to Court and perjure himself for that purpose is not to be lightly inferred. Mr Prasad has been discussed earlier. There is no apparent reason for him to lie. 109This is to be compared with the situation of the defendants who were in desperate straits at the time. 110The evidence establishes that the defendants had made inflated loan applications and relied upon false earning figures on other occasions both before and after December 2004. This involved companies with which a link to Mr Angelopoulos was not established. 111The defendants determined that they would refinance the properties. They received the balance of moneys and used that money to meet their repayments. Default did not occur until over two years later. They thus gained the additional time intended but unfortunately the Levuka Street land remained unsold. 112Prima facie the defendants were bound by the terms of the loan and mortgage. The loan and mortgage were on reasonable terms. In my opinion, the loan and mortgage were not unjust to the defendants, nor are the circumstances in which they were made. In my opinion it has not been shown that the cross defendants engaged in conduct which was misleading or deceptive or likely to mislead or deceive nor was their conduct unconscionable such as would justify the exercise of the Court's discretion in favour of the defendants. 113The material which I have found the defendants caused to be put before the plaintiff in support of the application showed a good level of income, sound security and an unblemished payment record. The plaintiff was entitled to rely upon the information obtained by Premier and Romavale. It was not incumbent on it to have contact with the defendants. 114The defendants' situation was brought about, as defendants' counsel submitted, because they were victims of a world-wide financial downturn. The steps which they took to meet this problem were determined by them and were unsuccessful. Unfortunately the market conditions prevented sale of the Levuka Street land and they were unable to retrieve the financial situation. 115It is not without relevance that initially no complaint was made by the defendants against Mr Angelopoulos and the other parties. The defendants did not dispute the plaintiff was entitled to sell Lot 2 and the Levuka Street land by reason of mortgage defaults. 116Nor is it without relevance that despite admissions on the pleadings that the signatures on the mortgage and loan agreement were signed by them, an adjournment was sought to seek expert evidence on this question. Similarly, the defendants continued to seek documents and endeavoured to find a defence to the claim, even after the evidence was closed. This led to submissions being made which were speculative or went beyond the case pleaded. It is probable that the result would have been no different had the mortgage funded by ING remained in place. In my opinion, the plaintiff is entitled to an order for possession. 117At the conclusion of the hearing counsel for the defendants was given leave to serve written submissions in reply limited to the legal issues raised as well as a "couple of questions your Honour had asked me for clarification". Counsel for the defendants provided written submissions which were not in accordance with the leave granted and involved inter alia general comments suggesting a need for a wide-ranging inquiry well beyond the pleadings or leave granted. In my opinion it would be inappropriate to embark upon a consideration of those matters at this stage of the proceedings. 118In my opinion the plaintiff is entitled to an order for possession of Lot 1. The cross defendants to the first cross claim are each entitled to a verdict and judgment. It follows that the cross defendants to the second and third cross claims are also entitled to a verdict and judgment. 119The circumstances of the defendants are such that I consider it appropriate to allow until 30 January 2012 before the order for possession may be enforced. 120A dispute as to the appropriate costs orders has been foreshadowed. Accordingly, I make no orders as to costs at this stage. I grant liberty for the parties to serve appropriate submissions as to costs within 28 days of the date of this judgment and to respond to the other parties' submissions within a further 28 days.

Orders 121I make the following orders:

1. The plaintiff have possession of the whole of the land contained in Certificate of Title Folio Identifier 1/SP63720 being Lot 1 in Strata Plan 63720 known as 1/120 Oxford Street, Smithfield, New South Wales.
2. Grant leave to the plaintiff to issue a Writ of Possession in respect of Lot 1 in Strata Plan 63720.
3. Stay execution of the Writ of Possession until 30 January 2012.
4. Verdict and judgment for the first, second and third cross-defendants on the first cross-claim.
5. Verdict and judgment for the cross-defendant on the second cross-claim.
6. Verdict and judgment for the cross-defendant on the third cross-claim.
7. Costs reserved.

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: 19 October 2011