BNY Trust Company of Australia Limited (formerly known as JP Morgan Trust Australia Limited) v Glambedakis and Anor

CATCHWORDS : MORTGAGES - loan to husband and wife secured by mortgage over home - claim for possession of land - alleged mortgage default - whether loan and mortgage required interest payments during first three years of loan - whether breach of condition established - whether wife a volunteer who did not receive proper information about purport and effect of transaction - Plaintiff entitled to relief against husband and wife

Trade Practices Act 1974 (Cth) LEGISLATION CITED : Real Property Act 1900 Contracts Review Act 1980 Consumer Credit Code

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 CASES CITED : Smith v Smith [2004] NSWSC 663; 12 BPR 23,051 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; 11 BPR 20,841 Australian Regional Credit Pty Ltd v Mula [2009] NSWSC 325

BNY Trust Company of Australia Limited (formerly known as JP Morgan Trust Australia Limited) (Plaintiff) PARTIES : Anthony Glambedakis (First Defendant) Marjorie Dawn Glambedakis (Second Defendant)

Mr BJ Burke (Plaintiff) COUNSEL : Mr A Glambedakis (First Defendant in person) Mr C Stomo (Second Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

12574/08 BNY Trust Company of Australia Limited (formerly known as JP Morgan Trust Australia Limited) v Anthony Glambedakis and Anor

JUDGMENT 1 JOHNSON J: By Statement of Claim filed 29 May 2008, the Plaintiff, BNY Trust Company of Australia Limited (formerly known as JP Morgan Trust Australia Limited), seeks an order that the Defendants, Anthony Glambedakis and Marjorie Dawn Glambedakis, give the Plaintiff possession of land at 189 Homer Street, Earlwood ("the subject property") arising from alleged mortgage default. 2 Mr BJ Burke, of counsel, appeared for the Plaintiff at the hearing and Mr Stomo, of counsel, appeared for the Second Defendant, Mrs Glambedakis. The First Defendant, Mr Glambedakis, appeared for himself at the hearing.

The Plaintiff's Claim and the Defences 3 The Defendants, who are husband and wife, are the registered proprietors of the subject property. The Plaintiff alleges that, by loan agreement dated 2 October 2007, the Plaintiff agreed to lend to the Defendants the sum of $720,000.00 and the Defendants agreed to repay to the Plaintiff on the due dates the amounts set out in the loan summary to the loan agreement. 4 It is the Plaintiff's case that, by mortgage dated 17 October 2007, the Defendants mortgaged the subject property to the Plaintiff as security for the amount owing to the Plaintiff under the loan agreement. The mortgage was registered. The sum of $720,000.00 was advanced by the Plaintiff to the Defendants on 17 October 2007. 5 It is the Plaintiff's case that the Defendants have breached the loan agreement by failing to make payments under the loan and mortgage. 6 By Defence filed 1 July 2008, the First Defendant, Mr Glambedakis, admits the substance of the Plaintiff's claim with the exception that he contends that the loan agreement did not require the Defendants to pay interest to the Plaintiff during the first three years of the loan, that is before 17 October 2010. He contends that the loan was to be capitalised for a period of three years and thereafter repaid on a capital plus interest basis by way of monthly repayments. 7 Mr Glambedakis resisted the Plaintiff's claim for relief upon the basis of this factual issue. In his Defence, Mr Glambedakis raised an alternative claim that the Plaintiff had engaged in misleading and deceptive conduct under s.52 Trade Practices Act 1974 (Cth), but he did not address this claim at the hearing. In any event, the factual foundation for this alternative Defence relied again upon the contention that the loan agreement did not require the Defendants to make interest payments to the Plaintiff before 17 October 2010. 8 By Defence filed 4 July 2008 (which had been drawn by a solicitor), the Second Defendant, Mrs Glambedakis, did not admit any part of the 20 paragraphs contained in the Statement of Claim. Her Defence stated that she had executed documents at the request of her husband, that the documents were not explained to her by Mr Glambedakis or any other person other than "to be advised that it was for the refinance of the business" of her husband, that she did not receive any benefit from the loan and that her husband stated that the documents were to allow a facility to be available to him for three years, at which time the loan was to be repaid on a monthly basis. 9 At the commencement of the hearing and in response to a question from the bench (T3-6), Mr Stomo indicated that Mrs Glambedakis sought to defend the claim by reliance upon Garcia v National Australia Bank Ltd (1998) 194 CLR 395. It was submitted that Mrs Glambedakis was a volunteer, who did not receive proper information about the purport and effect of the transaction, so as to fall within the second class of case in Garcia at 405 [23], 408-409 [31]. Mr Stomo submitted that the appropriate conclusion ought be that the interests of Mrs Glambedakis in the subject property should be left untouched, with the property to be sold by the Plaintiff, who would be required to account to her for her interest in the property (T5.16-5.37). 10 A short affidavit of Mrs Glambedakis sworn 11 March 2009 was read in her case and she was not required for cross-examination. I will return to aspects of her case later in this judgment. 11 The Defences of each Defendant, in effect, asserted that the Plaintiff was not entitled to relief. No Cross-Claim has been filed by either Defendant nor did the filed Defences contend that some other order, other than dismissal of the Plaintiff's claim, ought be made in their favour.

Issues of Fact 12 A number of affidavits were read at the hearing before me. Fernando Lemos, Jim Kiaris and Mr Glambedakis were required for cross-examination and gave oral evidence. There were limited areas of factual dispute. Unless otherwise indicated, what follows may be taken as my findings of fact, on the balance of probabilities, with reasons given for particular findings made in areas of controversy. 13 Mr and Mrs Glambedakis have resided at 189 Homer Street, Earlwood for a number of years. From time to time, over several years, Mr and Mrs Glambedakis had utilised the services of Jim Kiaris of Wizard Home Loans Earlwood to obtain mortgage finance. 14 The affidavits of Mr Kiaris recounted his involvement in arranging or providing finance to Mr and Mrs Glambedakis over the years. He stated that the Defendants had an "impaired credit history" (paragraph 4, affidavit of Mr Kiaris sworn 23 January 2009). 15 In August 2007, Mr and Mrs Glambedakis were both directors of Expert Decorative Services, a consultancy business carried on from their home address at 189 Homer Street, Earlwood. The business was effectively carried on by Mr Glambedakis with Mrs Glambedakis performing secretarial and clerical functions. She was an employee of the business and group certificates issued to her (T89-90). 16 Mr Glambedakis was born in 1947 and Mrs Glambedakis in 1948, with each of them being 59 years of age at the time of relevant events between August and October 2007. 17 It appears that a number of loans had been secured by mortgage on the subject property over the years. Reference was made to a loan from GIO Finance which was followed in 2002 by a mortgage to Magney Mortgages Limited to secure a loan of about $560,000.00 (T71-72). 18 In February 2004, the Defendants borrowed from MDN Mortgages Pty Limited by way of mortgage and discharged the mortgages to Magney Mortgages Limited (T72-79; Exhibits A and B). 19 Mr Angelo D'Agata, solicitor, of Alidenes Solicitors acted for the Defendants in the February 2004 loan and mortgage transactions. Two mortgages were given by the Defendants to MDN Mortgages Pty Limited in February 2004, securing total borrowings of about $681,000.00. The term of the mortgage was one year with interest payments for the term of the mortgage to be prepaid directly from the loan proceeds (Exhibit A). A letter from Mr D'Agata dated 26 February 2004 (Exhibit B) revealed distribution of settlement proceeds including the sum of $578,511.74 to Magney Mortgages Limited, the sum of $63,026.01 to MDN Mortgages Pty Limited and the sum of $21,667.95 to Mrs Glambedakis (Exhibit B). 20 It is clear that the sum paid to MDN Mortgages Pty Limited was by way of prepaid interest for the one-year loan. Although Mr Glambedakis prevaricated under cross-examination concerning his understanding of the prepaid interest component of this loan (T76-79), I am well satisfied that Mr Glambedakis had a clear understanding of the interest component of that loan and the fact that it was prepaid. Mr Glambedakis had a clear understanding of this financial arrangement, a view reinforced by my observations of him at the hearing, both as a witness and as an advocate. He struck me as a "hands on" businessman with a clear understanding of the detail and ramifications of financial dealings in which he was involved. 21 It is noteworthy that a substantial sum ($21,667.95) was paid at settlement in February 2004 in favour of Mrs Glambedakis. This issue is relevant to aspects of the proceedings relating to her. 22 On 21 January 2005, the Defendants requested that the MDN Mortgages Pty Limited mortgages be renewed for a further 12 months (Exhibit C; T79-80). 23 The loan arrangement between the Defendants and MDN Mortgages Pty Limited was still on foot in mid-2007. However, the Defendants were in default under that loan and it appears that proceedings were commenced in this Court as a result (T43; T80; paragraph 11, affidavit of Mr Kiaris sworn 5 August 2009). 24 In about June 2007, Mr Glambedakis approached Mr Kiaris seeking assistance to obtain a loan for about $750,000.00 for the purpose of refinancing the MDN Mortgages Pty Limited loan and to undertake renovations on his home and to repay other family debts (paragraph 3, affidavit of Mr Kiaris sworn 23 January 2009). 25 By August 2007, Mr Kiaris, from time to time, was arranging loans for clients through Carrington National Mortgage Company, of which Fernando Lemos was National Sales and Marketing Manager. 26 On 8 August 2007, Mr Lemos attended the Wizard Homes Loans office at Earlwood. Although there was some controversy in the oral evidence of Mr Kiaris, Mr Lemos and Mr Glambedakis concerning events on 8 August 2007 at that office, I am satisfied on the balance of probabilities that the following occurred on that day. 27 I am satisfied that Mr Glambedakis was pressing Mr Kiaris to arrange finance so that the Defendants could discharge their indebtedness to MDN Mortgages Pty Limited which had given rise to default and subsequent court proceedings. Mrs Glambedakis was aware that the MDN Mortgages Pty Limited loan had "gone wrong" (paragraph 7, affidavit of Mrs Glambedakis, 11 March 2009). 28 The Wizard Home Loans office at Earlwood was located at 210 Homer Street, Earlwood, just over the road from the Defendants' home at the subject property. I am satisfied that Mr Lemos and Mr Kiaris met at the Wizard Home Loans office at Earlwood on 8 August 2007 to discuss a range of matters of mutual interest to them. In that context, I am satisfied that Mr Kiaris introduced Mr Lemos to Mr Glambedakis and some discussion took place concerning application being made to Carrington National Mortgage Company for a loan. Although Mr Lemos has no recollection of meeting Mr Glambedakis, I am satisfied that he did so and that, during that meeting, his business card was handed to Mr Glambedakis. I am satisfied that Mrs Glambedakis was not present at the time of this meeting. 29 Following that meeting and later on 8 August 2007, Mr Kiaris and Mr Glambedakis met, and documents were provided by Mr Kiaris to Mr Glambedakis for the purpose of a loan application being made by the Defendants. Mr Kiaris states that the loan application was completed by Mr and Mrs Glambedakis in his presence on that day. There is a dispute on the evidence as to whether Mrs Glambedakis was present on this occasion. Annexed to the affidavit of Mrs Glambedakis of 11 March 2009 (Annexure A) are a number of documents apparently signed by Mr and Mrs Glambedakis, but not otherwise completed, being part of the loan application documents. The existence of these documents in this form supports a conclusion that Mr Kiaris provided the blank documents to Mr Glambedakis, who then returned home on the short journey across Homer Street, with each of the Defendants then signing the documents before they had been otherwise filled in. I accept that Mr Glambedakis then returned to the office of Mr Kiaris, where the documents were completed and then submitted by facsimile to Mr Lemos that day (Annexure A, affidavit of Mr Kiaris sworn 23 January 2009). 30 At the hearing, it was not contended for Mrs Glambedakis that any matter contained in the completed loan application was false or misleading. This is not a case where a person signed a blank form, with false information being inserted thereafter without the knowledge of the signatory. Accordingly, I do not consider that much turns upon the irregular manner adopted for obtaining the signature of Mrs Glambedakis on 8 August 2007. As will be seen, I am satisfied that Mrs Glambedakis acquired a full and complete understanding of the terms and conditions of the loan and mortgage with the Plaintiff. 31 The loan application identified Mr D'Agata of Alidenes Solicitors as the Defendants' solicitor and Theo Premetis, of Lazarides Premetis & Associates, as the Defendants' accountant. A loan of $750,000.00 was sought in the application with the "interest only" box being ticked. 32 A significant factual dispute exists concerning what was said on 8 August 2007 concerning interest rates. Mr Glambedakis gives a version which asserts effective oral acceptance by Mr Lemos and Mr Kiaris of a form of three-year payment-free arrangement (paragraphs 31-37, affidavit of Mr Glambedakis sworn 13 March 2009). Mr Lemos denies this claim (paragraph 7, affidavit of Mr Lemos sworn 28 January 2009; paragraphs 7-13, affidavit of Mr Lemos sworn 16 June 2009). Mr Kiaris also refutes the version of Mr Glambedakis (paragraph 9, affidavit of Mr Kiaris sworn 23 January 2009; paragraph 15, affidavit of Mr Kiaris sworn 5 August 2009; T46-47, 49). For reasons expressed in greater detail later in this judgment, I reject the account of Mr Glambedakis on this aspect and accept that of Mr Lemos and Mr Kiaris. 33 On 15 August 2007, an approval in principle for a loan of $750,000.00 issued from Carrington National Mortgage Company with certain conditions to be met, including provision of a completed accountant's declaration (Annexure B, affidavit of Mr Kiaris sworn 23 January 2009). 34 Mr and Mrs Glambedakis met with their accountant, Mr Premetis, on 21 August 2007. Mr Premetis completed an accountant's declaration on that day (Annexure C, affidavit of Mr Kiaris sworn 23 January 2009). The declaration stated that Mr and Mrs Glambedakis had acknowledged to Mr Premetis, amongst other things, that they had applied to borrow $750,000.00 with an applicable interest rate of 10.2% per annum and with the monthly repayment under the loan, as at the date of the loan application, calculated to be $6,375.00 over 36 months. Mrs Glambedakis confirmed in her affidavit that she went to the accountant with her husband to sign papers. Mr Glambedakis confirmed that Mr Premetis had been his accountant since the mid-1990s, and that he regarded him as a careful and honest man whom he trusted and a person whom he would not expect to sign anything false (T70). 35 It is apparent that the accountant's declaration is fundamentally inconsistent with the assertion that Mr Glambedakis had been informed, or otherwise believed, that the loan application was for a loan including a three-year period during which no payments by way of interest or principal would be required. I accept that Mr and Mrs Glambedakis were familiar with the concept of prepaid interest from the 2004 loan and mortgage with MDN Mortgages Pty Limited (see [19]-[20] above) and that the August 2007 application could be contrasted clearly with such an arrangement. 36 On 6 September 2007, each of the Defendants made a statutory declaration explaining variations between their full names and the names appearing on their Medicare cards (part Annexure A, affidavit of Mrs Glambedakis sworn 11 March 2009; Annexure H, affidavit of Mr Glambedakis sworn 13 March 2009). In her statutory declaration, Mrs Glambedakis described her occupation as "office assistant" and in his statutory declaration, Mr Glambedakis described his occupation as "business manager". The approval in principle of 15 August 2007 had sought statutory declarations dealing with these aspects and I infer that these statutory declarations were provided in response to that requirement by the lender. 37 On 17 September 2007, a letter of approval from Carrington National Mortgage Company issued which Mr Glambedakis picked up from the office of Mr Kiaris in Earlwood (paragraph 60, affidavit of Mr Glambedakis sworn 13 March 2009). The approval was for a loan of $720,000.00 with an interest rate of 10.45%, with the loan type described as "Three Years Interest Only then 25 Years Principal & Interest" and a loan term of 30 years with monthly payments of "$6417.77 (Interest Only)" and "$6671.91 (P&I)" (principal and interest). Accordingly, the face of the loan approval specified a loan involving interest-only payments for the first three years, and thereafter payments of principal and interest. The document stated that "repayments will be due on the same day in each month as the proposed date of settlement" and provided that payments were to be made by direct debit and foreshadowed that a direct-debit authority form would be furnished with the mortgage documents. The document also stated that "JP Morgan Trust Australia Limited" was to be noted as the first mortgagee on insurance documents. Mr Glambedakis well understood the terms and conditions of the loan offer, including the provisions for interest-only payments for the first three years of the loan (paragraph 60, affidavit of Mr Glambedakis sworn 13 March 2009). 38 On 27 September 2007, more documents concerning the loan were received by Mr Glambedakis, and he went through them to find the main points, in the course of which he checked on the early discharge fee (paragraph 62, affidavit of Mr Glambedakis sworn 13 March 2009). He noted that the early discharge fee was 2.75% of the loan value and raised the matter with Mr Kiaris who, in turn, contacted Mr Lemos. On 28 September 2007, Mr Lemos informed Mr Kiaris by email that the early discharge fee would be reduced to 2.15% (Annexure K, affidavit of Mr Glambedakis sworn 13 March 2009). 39 On 2 October 2007, Mr and Mrs Glambedakis visited their solicitor, Mr D'Agata at the office of Alidenes Solicitors at Dulwich Hill (paragraphs 68-69, affidavit of Mr Glambedakis sworn 13 March 2009). Mrs Glambedakis admitted that she attended the solicitor (paragraph 12, affidavit of Mrs Glambedakis sworn 11 March 2009). On that day, each Defendant certified that he and she had obtained legal advice on the nature and effect of the loan documents from Mr D'Agata and understood its nature and effect and the obligations and risks involved (page 11, Annexure C, affidavit of Rory Ratz sworn 28 January 2009). 40 Having regard to the totality of the evidence, I am satisfied that Mr D'Agata explained to the Defendants the terms and conditions of the loan agreement between the Plaintiff and the Defendants at their meeting on 2 October 2007. Mr Glambedakis said that Mr D'Agata had acted as solicitor for his wife and himself for the purpose of various loans and mortgages in recent years, and that he regarded Mr D'Agata as a careful and honest person whom he trusted and whom he would not expect to sign a false document (T70-71). 41 The loan agreement itself is a significant document. It specifies the lender as being JP Morgan Trust Australia Limited and the Defendants as the borrowers. The mortgage manager is stated to be Carrington National Mortgage Company. The loan amount is $720,000.00 with a variable interest rate of 10.45% per annum. The agreement specified that the first repayment was due one month after the settlement date and that monthly repayments were due thereafter. The agreement referred to "360 repayments" with "interest only for 36 months from the settlement date". The loan was to be secured by a first registered mortgage by the Defendants over the subject property. 42 Each of the Defendants signed the loan agreement on 2 October 2007. On the same day, each of the Defendants signed a direct-debit request seeking the opening of an account with the Bank of Queensland at Marrickville in the name of Mr Glambedakis (Annexure D, affidavit of Mr Ratz sworn 28 January 2009). 43 Each Defendant executed the mortgage to JP Morgan Trust Australia Limited, with Mr D'Agata witnessing the signature on the mortgage of each Defendant (Annexure A, affidavit of Mr Ratz sworn 8 May 2009). Annexure B to the mortgage, which was executed by each Defendant, provided that the mortgage secured payment of all money owing in respect of the agreement specified in the schedule to the mortgage. The schedule specified the loan agreement between the Defendants and the mortgagee in the sum of $720,000.00. I am satisfied that the loan agreement referred to in Annexure B to the mortgage is the loan agreement executed by the Defendants on 2 October 2007. The loan agreement incorporated the general terms and conditions, a copy of which is Annexure C to the affidavit of Mr Ratz sworn 8 May 2009. In addition, the mortgage between the Plaintiff and the Defendants incorporated the provisions contained in Memorandum No. 9690126 filed at Land & Property Information New South Wales, a copy of which is Annexure B to the affidavit of Mr Ratz sworn 8 May 2009. 44 On 2 October 2007, JP Morgan Trust Australia Limited changed its name to BNY Trust Company of Australia Limited (paragraph 3, affidavit of Owen Taylor sworn 26 March 2009). It was not submitted that anything in these proceedings turned on this change of name. 45 On 8 October 2007, Mr D'Agata provided certificates that he had known each of the Defendants for five years (Annexure B, affidavit of Fernando Lemos sworn 16 June 2009). 46 On 17 October 2007, settlement of the loan as between the Plaintiff and the Defendants took place (paragraph 71, affidavit of Mr Glambedakis sworn 13 March 2009). By letter dated 17 October 2007, Mr D'Agata gave directions for drawing of cheques at settlement, including cheques in the total sum of $690,645.71 payable to MDN Mortgages Pty Limited and $17,403.11 payable to Mr Glambedakis (Annexure F, affidavit of Mr Ratz sworn 8 May 2009). These settlement figures may be contrasted with those set out in Mr D'Agata's letter of 26 February 2004 (see [19] above) which included a sum by way of prepaid interest to MDN Mortgages Pty Limited (Exhibit B). 47 I am satisfied on the balance of probabilities that Mr D'Agata, a careful solicitor who had acted for Mr and Mrs Glambedakis for some years, explained to Mr and Mrs Glambedakis the terms and effect of the loan and mortgage arrangements entered into by the Plaintiff, through Carrington National Mortgage Company as the Plaintiff's mortgage manager. Mr and Mrs Glambedakis certified that Mr D'Agata had explained these matters to them. The signatures of Mr D'Agata on a number of documents, including the mortgage itself, support this conclusion. As he had done in the past, Mr D'Agata acted for the Defendants on the settlement of the loan and gave directions for disbursement of the loan monies upon settlement. 48 The consistent content of the loan documents was that the loan required interest-only monthly payments for the first three years, thereafter translating into a loan requiring monthly payments of principal and interest. There is no support in any of the loan documents for the suggestion made by Mr Glambedakis that no payments at all were to be made in the first three years. This was not a prepaid interest loan, where part of the borrowed monies were to be paid to the Plaintiff. So much was clear in the contrast between the settlement letters of Mr D'Agata concerning the February 2004 and October 2007 loans. The appropriate inference, which is entirely consistent with the documents, was that Mr D'Agata made this fact clear to both Mr and Mrs Glambedakis on 2 October 2007. 49 As required by the loan agreement, Mr and Mrs Glambedakis opened a direct-debit account with the Bank of Queensland in the name of Mr Glambedakis (Exhibit D). After an initial deposit of $50.00 to open the account on 3 October 2007, the sum of $8,847.00 was deposited on 19 October 2007, with further deposits being made on 10 December 2007 ($2,750.00), 13 December 2007 ($2,500.00), 9 January 2008 ($4,499.00), 16 January 2008 ($1,800.00) and 19 February 2008 ($6,800.66). Mr Glambedakis conceded that he paid these monies into the Bank of Queensland account in this period (T86-88). 50 I am satisfied that these payments were made into the account so that the Defendants could meet the monthly interest-only payments due under the loan and mortgage arrangement. I reject Mr Glambedakis' account in which he attempted to provide a contrary explanation (T86-88). The irresistible inference is that Mr Glambedakis was well aware that interest-only monthly payments were to be made under the mortgage after 2 October 2007, thus the need to have funds in the Bank of Queensland account to meet these direct debits. 51 Mr Glambedakis points to the loan statements of Carrington National Mortgage Company with respect to this loan in support of his argument that no interest was to be paid in the first three years. He relies upon a loan statement issued on 8 January 2008 (Annexure M, affidavit of Mr Glambedakis sworn 13 March 2009) with entries for 17 November 2007 and 17 December 2007 describing the transaction as "Interest (Capitalised)". Mr Glambedakis submitted that this demonstrated that interest was to be capitalised and thus added to the capital debt, with the consequence that it was not due and payable during the first three years of the loan. On this basis, he submitted that there was no default under the loan and mortgage because no sum at all by way of interest or principal was to be paid before 17 October 2010. Mr Glambedakis relied as well on a further Carrington National Mortgage Company loan statement dated 21 January 2009 which described transactions as "Interest (Capitalised)" and "Higher Rate Interest (Capitalised)" in the period between 17 November 2009 (Annexure F, affidavit of Mr Ratz sworn 28 January 2009). 52 I do not accept the submissions of Mr Glambedakis on this issue. There are a number of reasons for this conclusion. 53 Firstly, all the loan and mortgage documentation is entirely inconsistent with his submission, and supports the Plaintiff's argument that monthly payments were required on an interest-only basis during the first three years of the loan. 54 Secondly, Mr Glambedakis set up the direct-debit account and paid significant sums into it in the early months of the loan which serviced the loan for a period. His own conduct in this respect was entirely inconsistent with a belief that no monies were payable under the loan in its first three years. 55 Thirdly, to the extent that Mr Glambedakis seeks to rely upon the loan statements of Carrington National Mortgage Company and the use of the term "capitalised", it is necessary to read the statements as a whole. The particulars of the loan set out on the statement are not consistent with an arrangement where no payments at all were required for the first three years of the loan. The statement revealed an accumulating balance each month, with the borrowers being credited for monthly payments actually made. Accordingly, the face of the statement disclosed a lender expecting, and accepting, monthly payments as interest fell due on the loan. 56 Fourthly, the evidence of Mr Lemos and Mr Kiaris, which I accept on this aspect, rejected the account of Mr Glambedakis concerning the 8 August 2007 conversation about interest (see [32] above). Mr Kiaris said that it was not possible to arrange a home loan in August-October 2007 on the basis that there would be no payments for the first three years and he would have so advised a client if asked (paragraph 17, affidavit of Mr Kiaris sworn 23 January 2009). Thus, the evidence is to the effect that no commercial lender would enter into an arrangement involving no payments whatsoever being required during the first three years of the loan, and that no such arrangement was entered into with the Defendants. Mr Glambedakis could not advance any rational explanation for a commercial lender entering into such an arrangement with him and his wife in October 2007 (T104). It was not as though their credit record was satisfactory. The Defendants were borrowing in an attempt to extricate themselves from existing difficulties in which they found themselves. In assessing the evidence for the purpose of fact finding, the Court may have regard to the absence of any commercial reality in an arrangement as contended by Mr Glambedakis. Mr Burke submitted that the loan ultimately approved for the Defendants in October 2007 was one of $720,000.00, less than the in-principle approved sum of $750,000.00. On the First Defendant's submission, the Plaintiff had agreed to lend to the Defendants the sum of $720,000.00, together with interest over three years on the basis that that sum would be added to the capital debt, thereby producing a principal sum in the order of $900,000.00 or more. Mr Burke submitted that this was not only devoid of commercial reality, but entirely inconsistent with the approval process revealed in the evidence, whereby the Plaintiff confined the principal sum to be advanced to the Defendants to a sum of $720,000.00. I accept these submissions of the Plaintiff. 57 Fifthly, Mr Kiaris said that Mr Glambedakis never complained to him about having to make repayments under the October 2007 loan and mortgage. The first time that Mr Kiaris became aware of any issues in relation to the Defendants having to make repayments was when he was contacted by the Plaintiff's solicitor in December 2008 (paragraph 25, affidavit of Mr Kiaris sworn 5 August 2009). The Defendants lived over the road from Mr Kiaris' office. The evidence reveals that Mr Glambedakis would frequently visit or contact Mr Kiaris concerning loan and mortgage issues. Having observed Mr Glambedakis, and having considered his evidence and other evidence which relates to him, he does not strike me as a person who would be backward at coming forward if he felt there was something to complain about in his own financial interests. If Mr Glambedakis honestly believed that no repayments were required to be made until 17 October 2010, I have no doubt that he would have been on Mr Kiaris' doorstep to register his protest during 2008. The failure of Mr Glambedakis to so act speaks strongly against him having such a belief. 58 If further evidence was required to reinforce these factual findings, it can be found in other documents which are in evidence. On 29 October 2007, a "Welcome" letter was sent to the Defendants by the Carrington National Mortgage Company, confirming that settlement had taken place on 17 October 2007 and that the loan details included a loan amount of $720,000.00 with minimum monthly instalments on an interest-only basis for three years, with the payment frequency being monthly in arrears by a direct debit from a nominated bank account (Annexure E, affidavit of Mr Ratz sworn 28 January 2009). A further letter dated 29 October 2007 to the Defendants from the Carrington National Mortgage Company advised an increase in interest rate from 10.45% to 10.75% effective from 10 October 2007 and that, as a result, the Defendants "interest only instalments due on 17 November 2007 will include the increased rate effective from 10 October 2007" and that "direct debit repayments will be adjusted to reflect the new monthly instalment" (Annexure L, affidavit of Mr Glambedakis sworn 13 March 2009). 59 I am more than comfortably satisfied that the loan and mortgage arrangement entered into between the Plaintiff and the Defendants involved a condition that interest-only payments were to be made monthly in the first three years of the loan, and that Mr Glambedakis always knew this to be so. I reject the account of Mr Glambedakis on this issue which, in my view, is based upon an opportunistic reliance upon the word "capitalised" appearing in the loan statements. 60 I am satisfied that no payment has been made under the loan and mortgage arrangement by the Defendants since February 2008 and that default under the mortgage has been demonstrated by the Plaintiff. As at 21 January 2009, the loan was $130,995.10 in arrears and the loan balance was $850,995.71. 61 The affidavit of Mr Glambedakis sworn 20 May 2009 was treated as written submissions in support of his case. I reject the submission of Mr Glambedakis which suggests that the lender here is, in reality, Carrington National Mortgage Company and not the Plaintiff. A proper and sensible construction of the documentary evidence demonstrates clearly that the Plaintiff was the lender and mortgagee, with Carrington National Mortgage Company, acting as the loan or mortgage manager. I reject the submission of Mr Glambedakis that any step taken by Mr Lemos, Mr Kiaris, the Plaintiff, Carrington National Mortgage Company or any other person gave rise to a change in the loan and mortgage arrangement whereby no payment whatsoever was required to be made in the first three years of the loan. The obligations of the Defendants were, and remain, as set out in the loan and mortgage documents which I am satisfied were explained to each of them by their accountant, Mr Premetis, and their solicitor, Mr D'Agata. 62 Notices pursuant to s.57(2)(b) Real Property Act 1900 and s.80 Consumer Credit Code were served on each of the Defendants on 24 April 2008 (affidavit of Mark Gerard Slater sworn 29 April 2008). Neither Defendant has taken action in accordance with these default notices.

Plaintiff's Claim Against Mr Glambedakis 63 With respect to the Plaintiff's claim against Mr Glambedakis, I am satisfied on the balance of probabilities that the Plaintiff has established its claim for relief as contained in the Statement of Claim. In relation to the issue in dispute, for reasons set out above, I am satisfied that it was a condition of the loan and mortgage that interest-only monthly payments be made by the Defendants during the first three years of the loan commencing on 17 October 2007 and that no payments whatsoever have been made since February 2008. I am satisfied on the balance of probabilities that Mr Glambedakis well knew, at all relevant times, that this was a term of the loan and mortgage. I reject his account that he was led to believe, by any means, that no payments were required at all during the first three years of the loan. 64 Although he has not pleaded it, to the extent that Mr Glambedakis seeks to assert, as an alternative, unilateral mistake on his part with respect to the question of whether any payments were required during the first three years of the loan, Mr Burke relies upon the decision of Barrett J in Smith v Smith [2004] NSWSC 663; 12 BPR 23,051. I record immediately my conclusion that I do not accept as truthful evidence the claim by Mr Glambedakis that he believed that the loan was payment free during the first three years of its life. He had no honest belief to this effect and his claim at the hearing is, in my view, a recent construction in an attempt to fend off the otherwise irresistible claim by the Plaintiff against him arising from mortgage default. 65 If the point had been reached, however, whereby unilateral mistake fell for consideration, Mr Glambedakis would have confronted another problem. In the case of unilateral mistake, where the actuating misapprehension is said to have operated upon one party but not the other, rectification is generally not permissible. However, an exception exists where the party not under the misapprehension is guilty of fraud, whether actual, constructive or equitable: Smith v Smith at 23,066-23,067 [48]-[50]. 66 Even if Mr Glambedakis had demonstrated that he had entered into this contract under a serious mistake about its content in relation to a fundamental matter, and that the Plaintiff was aware that circumstances existed indicating that he was entering into the contract under such a serious mistake, there is no evidentiary basis for a conclusion that the Plaintiff, or anyone on its behalf, deliberately set out to ensure that Mr Glambedakis did not become aware of the existence of the mistake, either by positive acts or by omitting to bring it to his attention: Smith v Smith at 23,067 [50]. 67 Accordingly, if this issue had been pleaded, with a claim for rectification, a claim of unilateral mistake would not have availed Mr Glambedakis in this case. However, as I have said, Mr Glambedakis has fallen at the first hurdle and this issue does not arise. 68 The Plaintiff is entitled to the relief as claimed as against Mr Glambedakis.

The Plaintiff's Claim Against Mrs Glambedakis 69 I have made a number of findings of fact in regard to the Plaintiff's claim against Mrs Glambedakis. In this respect, I have had regard to the fact that Mrs Glambedakis was not required for cross-examination on her affidavit. 70 Mr and Mrs Glambedakis had lived in the subject property for a number of years. I am satisfied on the evidence that Mr Glambedakis conducted a business from their home, and that Mrs Glambedakis was employed in an administrative or secretarial capacity in that business and continued to be so employed as at October 2007. 71 The evidence demonstrates that, over several years, there was a series of loans secured by mortgage over the subject property, before the present loan and mortgage were entered into with the Plaintiff in October 2007. There is some generalised evidence that earlier loans were entered into for business purposes. Given that Mr and Mrs Glambedakis (and apparently no one else) were both involved in the business, I am satisfied that each of them benefited from these earlier loans and mortgages. I note that a bank cheque in the sum of $21,667.95 was drawn in favour of Mrs Glambedakis as part of the 26 February 2004 settlement (see [19] above). I infer that Mrs Glambedakis benefited in this respect as well under the 2004 mortgage, which was overtaken by the October 2007 mortgage to the Plaintiff. 72 In his affidavit of 23 January 2008, Mr Kiaris stated that, in about June 2007, Mr Glambedakis approached him seeking assistance to obtain a loan for $750,000.00 for the purpose of refinancing the MDN Mortgages Pty Limited and to undertake renovations on the home and to repay other family debts (paragraph 3). I accept that this evidence accurately describes the purpose of the loan obtained in October 2007 from the Plaintiff. Mr Glambedakis acknowledged that the sum of $17,403.11 which was paid to him as part of the October 2007 settlement, went into a family account and some improvements were undertaken (T84-85). 73 I accept that Mr Glambedakis was the essential point of contact with Mr Kiaris in 2007 for the purpose of entering into the loan and mortgage arrangement with the Plaintiff. Mrs Glambedakis played a secondary role. Nevertheless, I am satisfied that Mrs Glambedakis attended separately with her husband upon their accountant, Mr Premetis, and their solicitor, Mr D'Agata, and that each of these persons explained the terms and effect of the proposed loan and mortgage arrangements so that they were well understood by Mrs Glambedakis. The fact that the 2007 loan and mortgage may have been entered into under some pressure because of default under the MDN Mortgages Pty Limited mortgages does not affect this position in any material way. Mrs Glambedakis was aware that there were problems with the existing mortgages and that refinancing was being undertaken as a result. 74 Insofar as the affidavit of Mrs Glambedakis refers to comments made by her husband to her about the terms of the loan with respect to interest, I have regard to the totality of the evidence which I am satisfied demonstrates that Mrs Glambedakis was made aware from the documents themselves, and the explanations provided by Mr Premetis on 21 August 2007 and Mr D'Agata again on 2 October 2007, that interest-only monthly payments were due under the mortgage in the first three years of its life. 75 To the extent that Mrs Glambedakis states that she did not get any monies out of the loan as it was to help her husband keep running the business, I have regard to the fact that this was a family business conducted by both Defendants from their home, with benefits flowing to Mrs Glambedakis as a result. Apart from this, the 2007 loan and mortgage were entered into to discharge an existing mortgage over the subject property of which she was a joint owner and Mrs Glambedakis obtained the benefit of this. 76 Mr Stomo submitted that application of the principles in Garcia assisted his client's case. He referred, in particular, to the joint judgment of Gaudron, McHugh, Gummow and Hayne JJ at 408-409 [31]: "The principles applied in Yerkey v Jones [(1939) 63 CLR 649] do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that:

(a) in fact the surety did not understand the purport and effect of the transaction;

(b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed);

(c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet

(d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." 77 Mr Stomo did not contend that this was a case of actual undue influence, the first type of case referred to in Garcia, at 404-405 [23]. Rather, he submitted that this was an example of the second kind of case, and that each of the four elements referred to by their Honours existed here. 78 Firstly, he submitted that Mrs Glambedakis in fact did not understand the purport and effect of the transaction. In light of the factual findings made earlier, I do not accept this submission. I am satisfied that Mrs Glambedakis was aware of the terms, conditions and effect of the loan and mortgage by her own perusal of the documents, and the explanations provided to her and her husband on separate occasions by their accountant and solicitor. The second category of case referred to in Garcia (at 404-405 [23]), is concerned with lack of proper information about the purport and effect of the transaction. I am satisfied that Mrs Glambedakis had been provided with this information. 79 Secondly, Mr Stomo submitted that the transaction was voluntary in the sense that Mrs Glambedakis obtained no gain from the loan contract and mortgage. As part of the borrowing was to refinance the mortgage on the home of which she was a joint owner, Mrs Glambedakis does not fall classically into the second class of case: Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; 11 BPR 20,841 at 20,848 [43]. Further, the evidence establishes that Mr and Mrs Glambedakis conducted a family business from their home. Mr Glambedakis was the business manager and Mrs Glambedakis performed administrative and secretarial duties for the business. This is not a case where a loan and mortgage were entered into to obtain monies to be utilised for a business conducted by a husband away from the family home, and in circumstances where the wife played no part in the business. To the extent that it may be said that the October 2007 loan was partly to refinance the house, with some part of past and existing loans also being for business purposes, an issue may arise as to whether being a partial volunteer only would suffice: Elkofairi v Permanent Trustee Co Ltd at 20,848-20,849 [43]-[49], 20-857-20,859 [91]-[97]. In the circumstances of this case, which does not involve a guarantee, and having regard to the benefits which Mrs Glambedakis obtained under the loan, I do not accept that she was a volunteer for the purpose of the second element. 80 Thirdly, the lender is to be taken to have understood that, as a wife, Mrs Glambedakis may repose trust and confidence in her husband in matters of business, and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife. For the second class of case in Garcia (at 411 [40]), the only question of notice that arises is whether the lender knew at the time of the transaction that the two persons are married to each other. It may be that Mr Glambedakis did not provide a fulsome explanation of the terms, conditions and effect of the loan and mortgage arrangement in 2007 to Mrs Glambedakis. However, I am satisfied that Mrs Glambedakis derived such an understanding from the documents themselves and, in particular, from the explanations provided to her and her husband by the accountant and solicitor on separate occasions. This is not a case where Mrs Glambedakis was dependent solely upon her husband as the source of information about the loan and mortgage arrangements. Nor is this a case where there is said to be any language difficulty. I note that Mrs Glambedakis has administrative and secretarial skills, so that some understanding of documents of this type is to be expected. Further, I note that she states in her affidavit that, when she signed forms at home, she insisted that her husband give her copies of the papers (paragraph 10, affidavit of Mrs Glambedakis sworn 11 March 2009). Action of this type suggests that, in conjunction with her administrative and secretarial skills, she had a capacity to direct her husband in certain respects. She was not under the control and direction of her husband. This does not assist Mrs Glambedakis with respect to this element. 81 Fourthly, the lender must not itself have taken steps to explain the transaction to the wife or find out that a stranger had explained it to her. Once again, the evidence does not assist Mrs Glambedakis on this aspect. The evidence demonstrates that competent, independent and disinterested strangers to the transaction, in the form of the accountant and the solicitor, explained the transaction to her on separate occasions. This is not a case where a solicitor and/or accountant were imported, on a one-off basis, to fulfil a formal function. Rather, Mr D'Agata had known Mrs Glambedakis for five years, and had acted for her and her husband in earlier loan and mortgage transactions. Further, although Mr Premetis appears to have known Mr Glambedakis for some years as a client and did not certify that he knew Mrs Glambedakis for the same period, he was the accountant for both Defendants and certified that he had explained the terms of the loan to them. The Plaintiff was informed that the terms and conditions of the loan and mortgage had been explained to Mr and Mrs Glambedakis by an accountant and a solicitor. The Plaintiff was entitled to rely upon this information.

82 On the facts of this case, I am not satisfied that Mrs Glambedakis brings herself within the principles in Garcia so as to be able, in some way, to resist the Plaintiff's claim for relief against her. 83 In any event, the mortgage in this case secured a specified sum and charged the land with that sum: Australian Regional Credit Pty Ltd v Mula [2009] NSWSC 325 at [11]. 84 I am not persuaded that any basis has been demonstrated to withhold from the Plaintiff relief against Mrs Glambedakis. No claim has been pleaded under the Contracts Review Act 1980. The sole argument seeks to invoke the principles in Garcia. I reject the submissions made on behalf of Mrs Glambedakis in that respect. 85 I am satisfied that the Plaintiff has made out its claim for relief against Mrs Glambedakis. The loan and mortgage arrangements have been established and clear breaches have been proved. A proper foundation exists for the Plaintiff to obtain an order for possession of the subject property as against both registered proprietors.

Conclusion 86 The only relief sought in the Statement of Claim against the Defendants is an order for possession of the subject property, and leave to issue a writ of possession in that respect. No judgment expressed in monetary terms is sought against either Defendant. 87 I am satisfied that the Plaintiff has established its case against each of the Defendants, and that it is entitled to an order that the Defendants give the Plaintiff possession of the subject property and that the Plaintiff should have leave to issue a writ of possession for that purpose. 88 I will hear the parties on the form of orders and, if necessary, as to costs.

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