Bendigo & Adelaide Bank Ltd v Carnemolla - [2011] NSWSC 1202 - NSWSC 2011 case summary — Zoe

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Bendigo & Adelaide Bank Ltd v Carnemolla

[2011] NSWSC 1202

Supreme Court of NSW|2011-05-26|Before: Hislop J

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Source facts

Court

Supreme Court of NSW

Decision date

2011-05-26

Before

Hislop J

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

Introduction 1The defendants are husband and wife. As at December 2004 they were the owners of adjoining properties at Smithfield being Lots 1 and 2 Strata Plan 63720 ("the properties"). The properties were part of a larger property ("the property") purchased by the defendants in 1991 upon which they built five two storey town houses, three of which they sold . As at December 2004 the properties were subject to a mortgage apparently registered in the name of Australian Wholesale Lending Mortgages Pty Limited and funded by ING Bank (Australia) Limited ("ING"). The defendants and their eldest daughter and son-in-law also owned land at Levuka Street, Cabramatta. 2On 16 December 2004 the defendants made a loan application essentially to refinance the mortgage funded by ING. The application was made to Premier Capital Pty Limited (now known as PC Wholesale Funds Pty Limited ("Premier")), a mortgage sub-originator. The application was signed by the defendants and witnessed by Mr Angelopoulos, an employee of, or contractor to, Premier. 3Premier forwarded the loan application to Romavale Pty Limited ("Romavale"), a mortgage manager appointed by Adelaide Bank Limited. Romavale traded as Capitalcorp Home Loans until November 2004 when it commenced to trade as NationalCorp Home Loans. Romavale recommended to Adelaide Bank Limited that a loan of $867,000.00 over the properties be approved. Adelaide Bank Limited approved the loan. 4The loan moneys were advanced on 18 January 2005. $751,335.01 was paid to ING to discharge the mortgage over the properties. After deduction of various legal fees and expenses including lenders mortgage insurance of $16,173.49 a balance of $94,636.69 was transferred to the defendants' account in their business name of Renato's Building Services. 5Default in making the loan repayments occurred on 22 February 2007. 6On 2 October 2007 Adelaide Bank Limited filed a statement of claim seeking an order for possession of the properties and judgment against the defendants for $892,318.79, being money due and owing under the mortgage together with interest. 7On 31 July 2008 Adelaide Bank Limited obtained summary judgment for possession of the properties and for moneys owing plus interest. The judgment of Associate Justice Harrison was in the following terms: "1. Defence dated 22 October 2007 struck out. 2. It is adjudged that the Plaintiff have possession of land described in the schedule of the Statement of Claim. 3. The Defendants pay to the Plaintiff the sum of $987,057.71. 4. The Writ of Possession, so far as Lot No 2 is concerned is not to issue until after 14 August 2008. 5. The Plaintiff's solicitor is to forward a letter to the managing agent of L.J. Hooker, Fairfield, attention Graham Ball, informing them of orders made today and the solicitor is also to forward a copy of the letter to the tenants of Lot No 2. 6. The Writ of Possession, so far as Lot No 1 is concerned is not to be issued until after 30 August 2008." 8On 26 August 2008 Adelaide Bank Limited filed a notice of motion seeking "the issue of a writ for the possession" of Lot 2. On 24 September 2008 a similar notice of motion was filed in respect of Lot 1. 9On 24 September 2008 the second defendant consented to act as tutor for the first defendant and consent documents were filed. 10On 3 October 2008 a notice of motion was filed by the defendants seeking the following orders: "2. A stay of the Plaintiff's enforcement proceedings 15001/07 in relation to [Lot 1]. 3. That the judgment entered in favour of the Plaintiff on 31 July 2008 be set aside pursuant to rule 36.15 of the Uniform Civil Procedure Rules 2005 (NSW). 4. In the alternative to order 3 above, that the judgment entered in favour of the Plaintiff on 31 July 2008 be set aside pursuant to rule 36.16(1) of the Uniform Civil Procedure Rules 2005 (NSW). 5. In the alternative to order 3 or 4 above, that the judgment entered in favour of the Plaintiff on 31 July 2008 be set aside pursuant to rule 36.16(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW). 6. The Defendants are to file an Amended Defence within 14 days of the making of these orders." 11On 28 October 2008 Associate Justice Harrison determined the latter notice of motion. In her judgment she referred to the earlier decision on 31 July 2008 in which she "adjudged the plaintiff have possession of [Lots 1 and 2]" and "also made an order that the defendants pay to the plaintiff the sum of $987,057.71." She made the following orders: "1. The judgment entered on 31 July 2008 is set aside insofar as 1/SP63720 is concerned. 2. Expedition is granted. 3. Costs are reserved. 4. The matter is listed for a status conference on 5 November 2008 before the registrar at 9.00 am." 12On 16 December 2008 Lot 2 was sold on behalf of the plaintiff. The amount realized on sale was not sufficient to discharge the defendants' indebtedness. 13The plaintiff pursued its claim for possession of Lot 1 and outstanding moneys. It filed an amended statement of claim on 12 December 2008 claiming the following relief: "1. An order for judgment in the sum of $1,061,291.44. 2. Interest at the rate of 7.55 percent per annum calculated pursuant to the loan agreement and mortgage from 25 July 2007 until the date of judgment, which is currently accruing at the rate of $215.98 per day. 3. An order for possession of the property. 4. An order granting leave to the plaintiff to issue a writ of possession in respect of the property. 5. Alternatively, restitution in the amount of $1,061,291.44 plus interest calculated in accordance with section 100 of the Civil Procedure Act 2005 from 25 July 2007 to payment or judgment. 6. Costs. 7. Such further or other orders as this Honourable Court may deem fit." 14The defendants have defended the proceedings. In their defence to the plaintiff's amended statement of claim they have challenged the transaction on various statutory and other grounds. They have also cross claimed against the plaintiff, Mr Angelopoulos and Premier. 15In a second cross claim the plaintiff has sought a contractual indemnity from Romavale. Romavale, in its defence, has alleged contributory negligence on the part of the plaintiff and sought apportionment pursuant to s 34 of the Civil Liability Act 2002. 16In a third cross claim Romavale has sought relief against Premier in the event the plaintiff obtains judgment against Romavale. Premier has not appeared or participated in these proceedings. Romavale seeks default judgment against it.

[6]

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).

[9]

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.

[11]

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.

[12]

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.

[14]

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.

[19]

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.

[21]

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.

[22]

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.

[24]

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.