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Judgment 1CAMPBELL JA : I agree with Young JA. 2YOUNG JA : This is an appeal from a decision of RA Hulme J in the Common Law Division of this Court dismissing a cross claim by the appellant to set aside a mortgage granted to the respondent (see Commonwealth Bank of Australia v Munro [2011] NSWSC 128). The cross claim was filed in response to a claim by the respondent for possession of a property co-owned by the appellant at Miranda and judgment against her for $472,545.39, being the amount owing under the mortgage. 3As a result of the dismissal of the cross claim, the Bank was held to be entitled to possession of the Miranda property. The Court has been told that it took possession and the appellant no longer resides there. 4The basal background facts are that the appellant became registered as a half owner of the Miranda property with her sister on the death of her father. 5The Miranda property was the appellant's residence. She wished to purchase her sister's interest and to do so borrowed $250,000 under what was referred to below as the RAMS mortgage. 6The appellant is a mentally disabled person living on a pension. She was never in a position to meet her liabilities under the RAMS mortgage and, in due course, RAMS commenced pre litigation threats to deal with the appellant's default. 7The appellant with the aid of a Mr Munro, who was a co defendant with her before the primary judge, then borrowed from the respondent to pay out RAMS and also to obtain a sum of $54,000 for Mr Munro. 8The primary judge summarised what occurred at [ 6] and following of his reasons. He noted that, at the date of the hearing, the appellant and Mr Munro were the registered proprietors of the Miranda property. On 14 November 2007 they entered into a loan agreement with the Bank. The agreement comprised a "Consumer Credit Contract Schedule" and "Usual Terms and Conditions for Consumer Mortgage Lending". The principal sum to be advanced was $440,000. It was to be secured by way of a mortgage on the Miranda property. The mortgage document incorporated terms of a memorandum which had been registered pursuant to s 80A of the Real Property Act 1900. 9Settlement took place on 7 December 2007. Aside from the payment of incidental legal expenses, $383,773.47 was paid to RAMS to discharge the appellant's existing mortgage on the Miranda property and $54,317.87 was paid to Mr Munro. 10The discharge of the mortgage to RAMS, the mortgage to the Bank and a transfer by the appellant of a half interest in the property to Mr Munro were registered on 18 December 2007. 11The first monthly repayment was made on 7 January 2008 but it was dishonoured. Most of the subsequent repayments were also dishonoured. No repayments were made after 8 August 2008. 12Written demands pursuant to s 80 of the Consumer Credit (New South Wales) Code were sent to both the appellant and Mr Munro on 31 October 2008 requiring them to rectify the default. There was no compliance. Notices pursuant to s 57(2)(b) of the Real Property Act were sent on 3 November 2008. The default was not remedied. Further demands for the accumulated amount owing under the loan were sent on 12 January 2009 but there was still no compliance. The statement of claim was filed on 10 April 2009. The amount claimed to be outstanding at that time was in the vicinity of $470,000. By October 2010 it had risen to some $527,000. 13The appellant's pleadings stated her basic case. So far as is still relevant, she said that she is and was at all material times, being between 1 December 2006 and present, on a disability pension, suffering from a mental illness, inexperienced in financial matters, of a lower than average intellect and unable to understand in any real way financial documents. 14She pleaded that on or about 9 November 2007, the respondent Bank engaged Mr Munro and/or Tony Ottavio to act as its agents for the purposes of obtaining the appellant's signature on the loan documentation and the mortgage the subject of the proceedings. At that time, the appellant, at the request of Mr Munro and Tony Ottavio and in circumstances where the appellant did not bring informed consent, did not understand the purpose or effect of the documents and acted as a result of Mr Munro's influence over her, signed the said mortgage document. 15The pleading continued by alleging that the appellant was a volunteer and did not benefit from the advancement of any funds by the respondent Bank or, alternatively, in the event that the transfer of the property from the appellant to Mr Munro is set aside, the appellant did not benefit from the advancement of any funds by the respondent in excess of $200,000.00. 16The appellant then alleged that the respondent Bank did not explain the documents to the appellant or ensure that she obtained independent legal and/or financial advice in respect of the transaction. 17It was on the basis of those alleged facts that the appellant sought that the mortgage should be set aside pursuant to s 7 of the Contracts Review Act 1980. Further, and/or in the alternative, it was pleaded that these facts create an unconscionable transaction for the purposes of s 51AA and/or s 51AB of the Trade Practices Act 1974 (Cth) and/or s 12CA and/or 12CB of the Australian Securities and Investments Commission Act 2001 (Cth). It was also pleaded that the mortgage should be set aside pursuant to s 87 of the Trade Practices Act and/or s 12GM of the Australian Securities and Investments Commission Act . Also, further, or in the alternative (which it really must be), it was pleaded that the mortgage should be set aside on the basis of non est factum . 18Mr Ottavio is an officer of the respondent Bank and the manager of its "Mortgage Innovation Centre" at Bexley. 19In her cross claim, the appellant also sued Mr Munro to set aside the transfer to him of part of the Miranda property. The primary judge dismissed this claim. 20Mr Munro took no part in the proceedings below. Orders for possession and for money payable were made against him. 21The case took three days before the primary judge. He heard evidence from the appellant, Mr Ottavio, Mr Kelava (an employee of the Mortgage Innovation Centre) as well as expert evidence from Drs Seidler, McMahon and Allnutt. 22The primary judge accepted at [196] that in late 2007, the appellant was suffering from schizophrenia, though there was no evidence that she was exhibiting symptoms of any great severity. 23Three medical witnesses signed a joint statement after a Joint Expert Conference and also gave concurrent evidence at the trial. They were Dr Katie Seidler, a clinical and forensic psychologist called by the appellant, Dr John McMahon, clinical psychologist and Dr Stephen Allnutt, forensic psychiatrist both called by the respondent. 24The primary judge summarised his findings on the medical evidence at [200] and following of his judgment: 200 The doctors were in agreement that Ms Buccoliero's intelligence was "lower than average". Dr McMahon's testing indicated that her intellect was at the 12 th percentile, placing her "at worst" in the below average range of general intelligence. He assessed her capacity to understand the information provided by Mr Ottavio on 14 November 2007 (on his version), and to understand the documents she executed on that occasion, as being between the 14 th and 37 th percentile, or " in all likelihood ... in the upper end of the below average range or lower end of the average range ". 201 Having regard to her intellectual capacity, there was agreement among the doctors that, without any information as to the purpose of the meeting with Mr Ottavio and without any explanation of the nature and purpose of the documents, Ms Buccoliero likely would not have adequately understood them. However, on the premise that there had been an adequate explanation, the doctors expressed the following opinions: Dr Seidler: "On the proviso that Ms Buccoliero was provided adequate information pertaining to the purpose, nature and information contained in the loan documents, her capacity to understand would be in the "below average range" commensurate with her below average intelligence, and this would likely have been to an adequate degree." Dr Allnutt: "With adequate orientation to the information, nature and purpose of the documents it is likely that she would have understood to an adequate degree; that is, had there been a process whereby the basic nature, purpose and information contained in the report been explained she would have likely understood." Dr McMahon: "In my opinion if oriented appropriately to the documents Ms Buccoliero would have understood the documents to an adequate degree commensurate with her below average range intellectual functioning." 25At the trial, the doctors were asked to comment similarly in relation to Ms Buccoliero's mental illness. They were agreed that it was " reasonable to conclude that, on balance, Ms Buccoliero was experiencing symptoms of a psychosis ... at the time she executed the loan on 14 th November 2007 " (see [202]). 26As with the question of intellectual capacity, the doctors agreed that, because of the presence of this mental illness, it was unlikely that she would have understood the nature and purpose of the documents if there had been no adequate explanation of them. 27Dr Seidler was of the view that, even if there had been an explanation " page by page, line by line, section by section ", there was " concern " that Ms Buccoliero still might not have understood the documents. In her oral evidence (T100.46) she explained that she had in mind matters such as the effect of the mental illness and of other mental health concerns including trauma, personality disorders, the influence of her relationship with Mr Munro, and the psychosocial stresses upon her. On the other hand, Drs McMahon and Allnutt were of the view that Ms Buccoliero would likely have understood if there had been an adequate explanation (see [202]). 28The primary judge also said: 203 The doctors were also asked whether Ms Buccoliero's below average intellectual capacity and mental illness would have been apparent to a lay person. They agreed that she could present as being eccentric, odd or naive but thought it unlikely a lay person would detect that her intelligence was below average. They noted that distinguishing between average and below average intellectual capacity is not something that a lay person can reliably determine. 204 The doctors agreed that a lay person " might reasonably not have detected a mental illness ". This was a general opinion in that they noted there were a number of variables, such as the person's experience with people with mental illness. 29The primary judge then considered the evidence as to whether the appellant was vulnerable to the influence of Mr Munro. He noted that Dr Allnutt had carried out a thorough review of the history of her mental illness, such as was disclosed in the documents which were provided to him. Dr Allnutt noted that other clinicians prior to 2006 had regarded her as vulnerable to be taken advantage of materially and unable to make realistic and rational decisions. Further, at some stage in the past she had been provided with a guardian in relation to financial matters. This suggested to Dr Allnutt that she was vulnerable to the influence of others, at least when experiencing active symptoms of her mental illness. 30The primary judge noted at [207]: Dr Allnutt explained in oral evidence that Ms Buccoliero's mental illness and, to a lesser degree, her intellectual capacity rendered her a person who placed greater reliance upon the opinions of others than was necessary (T94.35). Drs McMahon and Seidler agreed. Dr McMahon added that Ms Buccoliero impressed him as a person capable of responding with self-preservation if she detected that she was being manipulated (T94.41). 31The judge was not impressed with the appellant as a witness. In particular she gave evidence that she could not see properly when she signed the morgages because she did not have her glasses. The primary judge considered that the internal inconsistency with some of this evidence showed that the appellant's evidence should not be accepted uncritically. 32Mr Ottavio gave evidence which was not disputed that the appellant presented as being " a neatly dressed, attractive, middle aged woman ". It was his belief that, at all times during the meeting on 14 November 2007, she was attentive and coherent in her responses to him. 33The primary judge did not consider that there was sufficient evidence for him to find that Mr Munro exhibited undue influence over the apellant. He said at [208] that he accepted that Ms Buccoliero trusted Mr Munro and was vulnerable to his influence, but, just how, and to what extent, she might have been influenced was difficult to determine. It was difficult to draw conclusions from her own evidence in her favour. He found that the evidence that she had a mental condition that rendered her prone to being manipulative was not insignificant. 34However, he found at [209] that he was not satisifed that the respondent Bank was aware of the exercise of any such undue influience. 35The primary judge virtually concluded his reasons by setting out why he dismissed the appellant's case as follows: 213 Ms Buccoliero was never in a position to make repayments under either of the loans. That started, however, with the RAMS loan. If there was any injustice to Ms Buccoliero, it had its genesis there. The loan and mortgage with the bank was not the cause. 214 I am satisfied Ms Buccoliero had a sufficient understanding of the loan and mortgage documents at the time she signed them. I accept that they were explained to her and that she had the intellectual capacity to understand that explanation. There is no evidence that her capacity in this respect was impaired by her mental illness. 215 I am also satisfied that apart from refinancing in relation to the RAMS loan, Ms Buccoliero understood that additional funds were going to Mr Munro. I am satisfied that she was both aware of, and authorised, this. 36The primary judge, after referring at [216] to the judgment of Mc Hugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 held that he was not satisfied that there was either substantive or procedural injustice. He concluded by noting that it was: not suggested that the terms of the contract were unjust. The case for Ms Buccoliero was based upon the methods used to make it. Regrettably, the case was confused by arguments based upon alleged unfairness to Ms Buccoliero in relation to the antecedent contract with RAMS, yet there was no overt, let alone pleaded, attempt to claim that it was unenforceable. 37The amended notice of appeal contains the following grounds (in summary):

1. The primary judge should have found that the appellant entered into the relevant mortgage as a result of the undue influence of Mr Munro;
2. The respondent Bank did not check to see that the appellant could service the loan (ie this was an "Asset Lending" case);
3. The primary judge should have found that, because of her low intelligence and vulnerability, the appellant was not able to protect her own interests;
4. The primary judge should have found the loan agreement and mortgage were unjust;
5. Because he did not find the contract unjust, he did not direct his mind to the exercise of discretion. 38The appeal was heard on 5 October 2011, Mr D H Murr SC and Mr S J Chapple appearing for the appellant and Mr S Aspinall of counsel for the respondent Bank. 39Apart from the second ground, the challenges to the primary judge's findings are with respect of questions of fact. However, in their submissions on ground 1, the appellant's counsel put that the primary judge not only failed to make definite findings on the relevant facts, he also appeared to have misunderstood what was needed to deal with a case of undue influence. 40Section 9(2) of the Contracts Review Act sets out matters to which the court shall have regard. These include: (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under the Act, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under the Act: (i) by any other party to the contract, ... (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract .... 41Mr Murr puts that a major reason for the primary judge finding that Munro did not exert undue influence was that he found that the appellant knew of and understood the relevant transactions. However, undue influence is not based on the ignorance or understanding of the victim. Rather "influence" refers to the psychological ascendancy of the perpetrator over the victim. 42Mr Murr puts that the whole of the evidence indicates that Munro did exercise undue influence over the appellant and the result of that influence was to cause her to enter into the improvident transaction with the respondent. 43Mr Murr shows that the undisputable facts are that Munro took control of the borrowing process and that on each occasion substantial sums were syphoned off for Munro's benefit. 44Counsel for the appellant points out that the primary judge did not find that there was no undue influence, rather that he was not satisfied that the appellant had established that influence. That non-satisfaction was to a major part influenced by the primary judge's focus on the appellant's understanding of the transaction. 45Even if that were so, and it might well be, part of the reasons for the judge's decision was that he did not accept the appellant as a witness of accuracy and reliability so that he could not confidently draw conclusions as to the effect that Munro's influence had on her. 46Further, the primary judge was sure that the respondent Bank had no knowledge of that influence. 47Mr Murr put that s 9(2)(j)(i) needed to be compared and contrasted with s 9(2)(j)(iii); (j)(iii) refers to knowledge, but (j)(i) does not. Thus, he puts, as Munro was a party to the contract and he exercised the influence, the knowledge of the respondent was irrelevant. 48This raises the issue as to whether the words "other party" in s 9(2)(j) of the Act mean any other person who is named as making a contractual promise whether jointly or severally or whether it means a party not in the same interest as the person seeking relief under the statute. 49Thus, if Anne and John Doe make a contract with Ruth and Richard Roe, can Anne Doe say John Doe put unfair pressure on her to contract or is it only relevant to look at the conduct of the Roes? 50My initial thought was that it would be traditional to refer to the Does as the "party of the first part" and the Roes as of the second part and that there was a correlation between "part" and "party". Thus "other party" in criterion (j)(i) meant opposing party not a person of the same part as the person seeking relief. 51This view is reinforced by criterion (a) which envisages opposing parties and also the reference to negotiation in criterion (b). 52However, other criteria have some flavour of the wider view. Furthermore, where there is doubt about the construction of the Act, courts take the view that it is beneficial legislation to be interpreted liberally: West v AGC (Advances) Ltd . 53Although the present point has not, as far as I am aware, been the subject of judicial decision, I note that in Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; 11 BPR 20,841, relief was given to a wife who had been a joint contractor with her husband, the husband being one of the oppressors. 54The drafter of (j)(i) did not refer to knowledge, presumably based on the assumption that the party seeking to enforce the contract was the "other party". The situation where the oppressor was a joint contracting party with the person seeking relief seems not to be covered by the drafter; this does not absolve the Court from construing the section. 55A court hearing an application under the Act is obliged to consider the matters listed in s 9(2). A finding that one or more of the criteria have been established does not necessarily mean that the Court must find that the contract is unjust. The Court looks at all the circumstances at the time the contract was made. 56Even though the primary judge may have misdirected himself on the concept of undue influence, he took into account all the relevant primary facts. His decision that the contract was not unjust should not be disturbed. 57In any event, although the Court is required to consider criterion (j)(i), under s 7 of the Act the Court only gives relief if it considers it just to do so. 58In Collier v Morlend Finance Corporation (Victoria) Pty Ltd (1989) 6 BPR 13,337, 13,338, Hope JA, with whom Clarke and R Meagher JJA agreed, said: If a plaintiff establishes facts which bring the case within any one of the paragraphs in s 9(2) the court may, depending on all the circumstances of the case, exercise its discretion to grant relief under the Act. Although from their very nature the defendant would of necessity know of the matters giving rise to the claim in some cases and in other cases may know of them, in some cases this would not necessarily or might not be so. In the latter cases any lack of knowledge is relevant in the exercise of discretion, but does not preclude the court exercising its discretion in the plaintiff's favour. 59Even if it was right to say that the contract was unjust, there would in this case be strong reasons for exercising the discretion against the appellant. The primary judge, of course, did not reach this point. 60Assuming that undue influence by Munro were established, as the primary judge found it did not come to the knowledge of the Bank and for the reasons stated above, it would not have affected the result. 61Even if the Court found that it should give relief over an unjust contract, the appellant would have been left in the position where she would only have had relief upon repayment of the money that was used for her advantage in discharging her liability to RAMS: see Collier v Morlend Finance Corporation . 62The appellant's own evidence was that she had initially entered into the RAMS mortgage so that she could buy out her sister's half interest in the family home. She left the details to Munro. The resultant mortgage was one which the appellant could never have serviced. As was inevitable, in due course, RAMS made it quite clear that either it had to be paid out or it would take possession of the property. 63The appellant at that stage asked Munro to fix the problem, which he did by entering into the Commonwealth Bank mortgage. That bought a little time, but, again, unless Munro was to make substantial payments himself (something he never appears to have done), it was clear that the appellant, whose only income was her pension, could not service it. 64Despite Mr Murr's valiant attempts to show otherwise, I consider it is clear that there was no attack on the validity of the RAMS mortgage before the primary judge. 65Thus I reject Mr Murr's attempt to distinguish the Collier case on grounds that both the RAMS mortgage and that to the respondent should be set aside. This was never part of the case below. 66As to ground 2, the appellant's counsel agreed that the present was not the typical case of a bank taking part in what is commonly called "Asset Lending", but it closely approached it. The appellant says that the transaction was unfair because the Bank omitted to carry out the enquiries that any reasonable lender would have undertaken. 67It was clear from the facts as we now know them that the appellant could not service the loan from her income of the pension. Thus, the only way that the loan could be repaid was by realising the capital asset mortgaged. However, the Bank was unaware of this because it received fabricated documents from Munro which purported to show that the appellant was in receipt of substantial income and the Bank actually made some (though inadequate) reference checks. 68Although there are a number of authorities for the proposition that a lender who makes inadequate enquiries as to the borrower's ability to service the loan and relies on realising the security may find that the court may set aside the mortgage, there is no rule of law that that will occur in every case. 69In Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260, Allsop P said at [43]: The complaint about "asset lending" tended to raise a debate over semantics. "Asset lending" is not a label or a legal frame of reference. It is a convenient expression, used in cases... to describe a form of lending where the lender has little, if any, regard for the capacity of the borrower to repay and rests satisfied with the security to protect itself. As Campbell JA made clear in Kowalczuk at [96]-[99], the conclusion of "unjust" for the Act, ss 7 and 9 depends on all the circumstances and not on labels. There is no reason why considerations such as those here cannot lead to the conclusion that a contract of guarantee is unjust if entered into by a lender who is uncaring of a guarantor's capacity to repay where there is a real and significant possibility of default by the borrower and the guarantor takes no benefit under the borrowing. This is particularly so in all the other circumstances of this case - most particularly the recognition by the appellant of the only two likely sources of repayment, one (successful refinancing) having a real risk to it. 70Whilst the Court does scrutinize what are tagged as asset lending transactions, it must be remembered as Campbell JA (with whom Hodgson and McColl JJA agreed) said in Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205 at [99]: "I do not accept that a lender is always bound to carry out a detailed investigation of the practicality of an intending borrower actually being able to carry through the plan that the borrower says he or she has for repayment of the loan." 71It is true that in the instant case the borrower had no repayment plans, however, the proposition remains true that there is no duty owed by a lender to make reasonable enquiries to be satisfied that the borrower can service the loan. If it does not do so, that fact with other circumstances may add up to make a court consider the loan transaction was unjust, but that is a separate question. 72In the instant case, the lender did make some enquiries. Those enquiries were not as adequate as many prudent lenders would have made, but they were stymied by fabricated payslips and some interference with the reference checking process by Mr Munro's manoeuvres. 73The primary judge did discuss aspects of this part of the case and took the view that the present was a relatively straightforward transaction ([157]). The appellant lived in a home which was mortgaged and she wanted to refinance it and obtain a small additional sum. In the circumstances, there was nothing in the bank's conduct which would tell against the recoverability of the money lent. 74I see no error in the primary judge's approach to this issue. 75I have so far focussed on the first two grounds of appeal, grounds 3 and 4 really raise the same matters in a slightly different way, but the result is the same, they do not point to an error by the primary judge. 76Ground 5 puts that the primary judge did not consider the exercise of his discretion. This is true, but it is because he did not find the contract unjust. I have reached the same conclusion. 77Thus, I propose that the appeal be dismissed with costs. 78HANDLEY AJA : I agree with Young JA.