Carnemolla v Adelaide Bank

Court of Appeal (NSW)|2013-03-20|Before: McColl JA, Barrett JA, Hislop J, Basten JA

Judgment 1THE COURT: The appellants, Sebastian and Lucia Carnemolla, appeal from a judgment of Hislop J in which his Honour made an order for possession with respect to the appellants' family home due to their default in the repayment of a loan secured upon that house. However, the present case differs from many cases of a similar type where parents of senior years have mortgaged their home as guarantors of a loan made to their adult children so that they have not received any benefit therefrom. In the present case, the relevant loan in respect of which the appellants defaulted was one from which they benefited as borrowers rather than as guarantors: cf Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 at [216]-[217] per Basten JA.

The basic background facts 2The appellants are husband and wife and as at December 2004 were the owners of adjoining townhouses at Smithfield being Lots 1 and 2 in Strata Plan 63720 ("Lots 1 and 2"). Those lots were part of a larger property ("the Smithfield property") purchased by the appellants in 1991 upon which they ultimately constructed five two-storey townhouses, three of which they sold. The other two, being Lots 1 and 2, they retained. Lot 2 was held as an investment property. They lived in Lot 1 together with two of their children (who are now adults) who suffer from schizophrenia. As at December 2004, Lots 1 and 2 were subject to a mortgage registered in the name of Australian Wholesale Lending Mortgages Pty Ltd ("AWLM") but funded by ING Bank (Australia) Ltd ("ING"). 3The appellants and their eldest daughter and son-in-law also owned a parcel of land in Levuka Street, Cabramatta ("Levuka Street") which comprised two allotments, Nos 22 and 24 Levuka Street, being the land in Folio Identifiers A/399641 and B/399641. Levuka Street was a development site in respect of which the appellants obtained a development consent which they were apparently unable to implement. As at December 2004, Levuka Street was mortgaged to AWLM to secure the sum of $850,000. 4On 16 December 2004, the appellants made a loan application essentially to refinance the loan secured on Lots 1 and 2 funded by ING. The application was made to the third respondent, Premier Capital Pty Ltd (now known as PC Wholesale Funds Pty Ltd) ("Premier"), a mortgage sub-originator. The application was signed by the appellants and witnessed by the second respondent, Mr Angelopoulos, who, according to his evidence, was a contractor to Premier. 5Premier forwarded the loan application to the fourth respondent, Romavale Pty Ltd ("Romavale"), a mortgage manager appointed by the first respondent, the Adelaide Bank ("the Bank") to, amongst other things, assess loan applications and then make a recommendation as to whether or not the application should be approved. Romavale traded as Capitalcorp Home Loans until November 2004 when it commenced to trade as NationalCorp Home Loans. Romavale recommended to the Bank that a loan of $867,000 secured by first mortgage over Lots 1 and 2 be approved. The Bank accepted that recommendation and the loan monies were advanced on 18 January 2005 ("the Bank's loan"). They were dispersed by the payment to ING of $751,335.01 to discharge its mortgage over Lots 1 and 2 and, after deduction of various legal fees and expenses including lenders mortgage insurance of $16,173.49, the transfer of the balance of $94,636.69 to the appellants' account with the St George Bank in the business name of Renato's Building Services ("RBS"). 6The appellants duly made the required repayments with respect to the Bank's loan until default occurred on 22 February 2007. On 2 October 2007 the Bank filed a Statement of Claim seeking an order for possession of Lots 1 and 2 and judgment against the appellants for $892,318.79 being the amount of the loan monies then due and owing under the mortgage together with interest. 7It is unnecessary to relate the details of the various interlocutory applications which then occurred except to note that on 31 July 2008, the Bank obtained summary judgment for possession of Lots 1 and 2 and for monies owing plus interest. That judgment was set aside in respect of Lot 1 only on 28 October 2008. The appellants did not seek to set aside the summary judgment or the order for possession in relation to Lot 2 which was held by them as an investment property. Their concern was with Lot 1, which was their family home. Ultimately, Lot 2 was sold in December 2008 but the amount realised on sale was insufficient to discharge the Bank's loan. 8The Bank pursued its claim for possession of Lot 1 and outstanding monies by filing an Amended Statement of Claim on 12 December 2008. The appellants defended the proceedings alleging unconscionable conduct and misrepresentations on the part of Mr Angelopoulos. They also sought relief under various statutes including the Contracts Review Act 1980. 9Three cross-claims were filed. The first cross-claim was that of the appellants, the cross-defendants to which were the Bank, Mr Angelopoulos and Premier. The second cross-claim was instituted by the Bank and sought a contractual indemnity from Romavale pursuant to the management agreement entered into between those two parties. The third cross-claim was filed by Romavale and sought relief against Premier in the event that the Bank obtained judgment against it. Premier did not appear and did not participate in the proceedings or the appeal. 10The proceedings were heard over nine days in May 2011. On 14 October 2011 the primary Judge, Hislop J, delivered a judgment in which he rejected the appellants' defences to the Bank's claim and, as a consequence, refused the relief sought in each of the three cross-claims. His Honour therefore ordered that the Bank have possession of Lot 1 and granted leave to issue a writ of possession in respect of that Lot, staying execution of the writ until 30 January 2012. That stay has been extended and is in force until the determination of the appeal. His Honour also entered a verdict and judgment in favour of the relevant cross-defendants on each of the cross-claims: Bendigo & Adelaide Bank Ltd v Carnemolla [2011] NSWSC 1202. 11The appellants now appeal against the order of the primary judge granting the Bank possession of Lot 1. They do not appeal against the rejection by his Honour of the first cross-claim which they instituted against the Bank, Mr Angelopoulos and Premier. 12Although the appellants were represented by counsel at trial, they represented themselves on the hearing of the appeal. However, to assist the Court, on 11 February 2013 the President appointed counsel as amicus curiae. In this respect we received written and oral submissions from Mr Sheller, who appeared with Ms Lee, which were most helpful to the Court's resolution of the appeal.

The notices of motion 13The appellants filed two notices of motion in effect returnable before this Court which were dealt with at the commencement of the hearing of the appeal. The first sought to join as respondents to the appeal Mr Angelopoulos, PC Wholesale Funds Pty Ltd (formerly Premier) and Romavale. 14The second notice of motion sought the Court's leave to receive further evidence pursuant to s 75A(7) of the Supreme Court Act 1970. That evidence fell into two categories. The first was constituted by a series of medical reports relating to the health of the first appellant which were generated in 2008 and 2009. The second category was related to two reports by forensic document examiners being those of Mr C I Anderson of Chris Anderson & Co Pty Ltd dated 11 May 2012 and Mr Stephen Dubedat dated 19 March 2013. Each of those reports was obtained by the appellants for the purpose of establishing that their signatures on an application for a loan form dated 21 October 2005 and on a home loan contract dated 22 November 2005 with respect to Levuka Street were forgeries. 15After hearing argument the Court ruled against the admission of the evidence sought to be led by the appellants, indicating that it would provide its reasons when it delivered its judgment on the other issues argued on the appeal. The reasons for rejecting the application to admit further evidence now follow.

The notice of motion to adduce fresh evidence 16As the present appeal is one from a judgment after a trial or hearing on the merits, s 75A(8) of the Supreme Court Act prohibits the Court from receiving further evidence except on "special grounds". The principles to be applied to determine whether such grounds exist were articulated by Clarke JA, with whom Sheller and Powell JJA agreed, in Akins v National Australia Bank (1994) 34 NSWLR 155 at 160 as follows: "(1) It must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (2) The evidence must be such that there must be a high degree of probability that there would be a different verdict; (3) The evidence must be credible." 17In Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64, Spigelman CJ at [10]-[22] and Campbell JA at [134]- [136] (Handley AJA relevantly agreeing with both their Honours) recognised that Clarke JA's tests in Akins were not intended to be exhaustive of what might constitute "special grounds" and that other considerations might well overwhelm the failure of one or other of those "conditions" in the particular circumstances. 18Campbell JA noted (at [136]) that s 75A(8) should not be approached on the basis that it confers a completely untrammelled discretion on the Court to receive further evidence whenever it can identify "special grounds". His Honour then stated that the sub-section should be approached on the basis that the three Akins tests are usually applied, though there can be circumstances in which the balancing of the demands of justice and the public interest in bringing suits to a final conclusion comes down on the side of allowing a particular item of further evidence to be received notwithstanding that it does not comply with one or more of those tests. 19The requirement of "special grounds" in s 75A(8) was also the subject of discussion by Meagher JA (with whom Whealy and Barrett JJA agreed) in Tjiong v Tjiong [2012] NSWCA 201 (at [165]-[169]). His Honour observed (at [165]) that to justify the exercise of the power under s 75A(8), the circumstances: "must be sufficiently out of the ordinary or exceptional to answer the description 'special grounds'." Meagher JA returned to the topic in Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295 at [24] where, with the agreement of Basten JA and Bergin CJ in Eq, his Honour considered that "special grounds" were made out notwithstanding that the evidence sought to be tendered was available at the time of trial, but was not tendered because the appellant was neither present nor represented. In the present case, the appellants were legally represented at trial by counsel. 20At trial, the mental health of the first appellant was the subject of evidence given by him. It is referred to by the primary judge at [35] of his reasons. The second appellant also gave evidence on the issue (see at [36]). However, no attempt was made by the appellants' counsel at trial to tender any of the medical reports which it is now sought to tender and which, as we have indicated, are dated in 2008 and 2009 and therefore pre-dated the hearing at first instance by some two years. Nevertheless, after the evidence had closed an attempt was made by the appellants' then counsel to tender the medical reports. That application was opposed on a number of grounds, not the least of which was that it was too late and would require an adjournment of the trial to enable the Bank and the other parties to obtain their own evidence as to the first appellant's mental health. After hearing extensive argument, his Honour declined to grant leave for the medical reports to be tendered. He stated that he would provide written reasons for that ruling when giving his substantive judgment "if required to by the parties". It would appear that none of the parties required him to provide those reasons which, we infer, would have indicated his Honour's acceptance of the arguments opposing the admission of the medical reports. 21It follows from the foregoing that the evidence now sought to be tendered was available at the time of the hearing and was in fact tendered but rejected. However, as will appear, his Honour's rejection of that evidence formed a number of the grounds of appeal. 22There could be no issue as to the credibility of the expressions of opinion contained in the reports now sought to be tendered. But there is a real issue as whether it could be said that there was a high degree of probability that, had they been admitted, they would have changed the outcome of the proceedings. Our consideration of the relevant reports indicates that as at 2008 the first appellant was suffering either from schizophrenia or paranoid delusions or both. However, one thing the evidence did not establish was that the first appellant was suffering from some relevant mental condition as at December 2004 which would have prevented him from appreciating that he and his wife were refinancing their loan on Lots 1 and 2 with the Bank. In these circumstances, the tender of the evidence could not, in our view, have had any relevant impact upon the outcome of the proceedings so far as the events of December 2004 and January 2005 with respect to the entering into the mortgage over Lots 1 and 2 with the Bank were concerned. 23As to the two reports of the forensic document examiners, the primary judge adverted at [56] of his reasons, when dealing with the refinancing in October 2005 of the then existing loan on Levuka Street, to the fact that despite evidence being sought from a handwriting expert with respect to the application for that loan, no handwriting evidence was in fact adduced. In this respect, as we have indicated, the appellants' challenge to the genuineness of their signatures on the loan application form and the loan contract with respect to the Levuka Street refinancing could only be relevant to Mr Angelopoulos' credit as the present proceedings did not relate to the appellants' default under that loan. It would appear from his Honour's remarks to which we have referred that an effort was made to obtain a report of a handwriting expert with respect to the signatures on the documents in question but without success. However, no reason was advanced as to the cause of that lack of success. Accordingly, by the exercise of due diligence, the evidence which it is now sought to tender on this issue could have been made available at the time of trial. The first Akins condition is not satisfied. 24In any event, the issue concerning the genuineness of the appellants' signatures to the documents relating to the Levuka Street loan was collateral to the Bank's proceedings with respect to the appellants' default under the Bank's loan. Further, the reports in question are of little assistance to the appellants. Mr Anderson had only been provided with copies rather than the originals of the documents in question and, therefore, stated that it was not possible to make any determination about the authenticity of the challenged signatures. However, he did observe that: "The only pertinent observation that can be made is that the respective signatures have a level of pictorial similarity to the respective specimen signatures." an observation which is of no assistance to the appellants' case on this issue. 25Mr Dubedat was similarly handicapped by not having access to the original documents. He concluded that no determination could be made as to whether or not the challenged signatures on the loan application form had been transferred or reproduced from another document. So far as the signatures on the loan contract were concerned, he concluded that the first signature purporting to be that of the first appellant was probably genuine, although that purporting to be that of the second appellant was very probably not genuine. Nevertheless, each opinion was qualified due to the absence of the original documents. 26In the foregoing circumstances it was our opinion that in respect of both the medical reports as well as the forensic document examiner reports the appellants had not made out a case of "special grounds" which would have justified the receipt of those reports on the hearing of the appeal. Accordingly, the application of the appellants that we receive that evidence was refused.

The notice of motion to join parties 27The appellants filed a further notice of motion two days before the commencement of the hearing of the appeal seeking to join Mr Angelopoulos, PC Wholesale Funds Pty Ltd (formerly Premier) and Romavale as respondents. Service of the notice of motion upon PC Wholesale Funds Pty Ltd was proven, but as it did not appear the Court ordered that it be joined as a respondent. However, as was the case at trial, it took no part in the hearing of the appeal. In any event, whatever the outcome of the appeal, the failure to file an appeal against the dismissal of the first cross-claim had the consequence that the appellants would not be entitled to any relief against that party. 28Although he first objected to being joined at such a late stage of the appeal, Mr Angelopoulos ultimately consented to being joined and was represented by Mr Sneddon, who made oral submissions to support the primary judge's findings with respect to his client. Romavale objected to being joined and the Court upheld that objection, indicating that it would provide its reasons in this judgment. In this respect it was assisted by the submissions of Ms Rees of Senior Counsel, who appeared on behalf of Romavale. Her submissions may be summarised thus: (a) Romavale was not the subject of any cross-claim against it instituted by the appellants; (b) Rather, it was only a cross-defendant to the second cross-claim brought by the Bank; (c) The Bank had not cross-appealed against the dismissal of that cross-claim; (d) The issue raised by the appellants with respect to Romavale related to certain events in a coffee shop in Earlwood in late 2005 which did not concern the loan which was the subject of the Bank's mortgage over Lot 1 and which was the only transaction with which the Bank's proceedings and the cross-claims (including the first cross-claim instituted by the appellants) were concerned; (e) The Earlwood incident which related to the refinancing of Levuka Street was raised by the appellants in order to support an adverse credit finding with respect to Mr Angelopoulos. It did not purport to reflect upon, or be relevant to, any conduct of Romavale. 29In our opinion, there was much force in the foregoing submissions. In particular, Romavale had only been made a cross-defendant to the second cross-claim instituted by the Bank seeking a contractual indemnity. Although Romavale instituted the third cross-claim against Premier, the lack of success on the part of the appellants at trial rendered both cross-claims academic. In our opinion there was no justification for the joinder of Romavale and we declined to do so. 30We turn now to the merits of the appeal.

The background facts in greater detail 31The first appellant was born in Italy in 1944. After attending primary school for about two years he commenced work in the building industry. He migrated to Australia in 1966 aged 22 years and found work in that industry. It would appear that he ultimately conducted his own building operation under the name RBS. In 1989 he seriously injured his back and neck, as a result of which he has not been able to work in the building industry since. However, as will appear, he pursued a number of other enterprises. Nevertheless, as his Honour noted (at [19]), he gave evidence that after his injury he became depressed and understood that a diagnosis of schizophrenia had been made. He was under medical care for that condition and took antipsychotic medication. He was in receipt of a pension. That notwithstanding, since his injury he has dealt in real estate and share trading and conducted a business selling coins, banknotes and cars on eBay. 32The second appellant was born in Italy in 1954. She migrated to Australia with her parents when eight years of age. She completed an apprenticeship as a hairdresser, an occupation she followed for most of her working life up until 1989 when she ceased paid employment in order to care for her family. 33The appellants had three children born in 1972, 1975 and 1979 respectively. The eldest is married to Mr Steve Wolfe. The second and third children suffer from schizophrenia and at all material times have resided with their parents. Presumably they are in receipt of disability pensions. 34At [23] of his reasons, the primary judge set out a summary of the appellants' property dealings prior to December 2004. They purchased their first property at 4 Augusta Street, Punchbowl in 1971. It apparently became the family home. Over the years they purchased a number of investment properties. The first was in 1985 when they acquired a property at 13 Anthony Street, Yagoona. In 1989, they purchased a property at 3 Josephine Crescent, Georges Hall. In 1990, they sold the property at Anthony Street for more than double what they had paid for it five years earlier. In 1991, they purchased the Smithfield property as their second investment property. As noted at [2] above, they developed that property with five two-storey townhouses. The strata plan of subdivision was registered on 31 October 2000. As we have indicated, the appellants sold three of the townhouses, retained that erected upon Lot 2 as an investment and lived in that erected upon Lot 1. 35In October 2001 the appellants purchased their third investment property at 35A Stanbrook Street, Fairfield Heights for $200,000. It was sold in February 2003 for $573,400. 36Their fourth and final investment property was purchased on 20 February 2003 being Levuka Street. It was originally mortgaged to Permanent Trustee Company Limited, the mortgage being signed by the appellants and witnessed by their solicitor, Mr John Izzo. 37All the properties purchased by the appellants to which reference is made above were the subject of mortgages. A number of refinancing transactions occurred with respect to those properties. It would be fair to say, and the primary judge found, that the appellants were very familiar with the buying and selling of property including the mortgaging thereof and the necessity of refinancing the loans secured on those properties from time to time. 38As we have noted, Levuka Street was originally mortgaged to Permanent Trustee Company Limited. On 10 June 2003 that mortgage was discharged and Levuka Street was mortgaged to AWLM to secure a loan of $850,000 funded by ING. At about the same time the existing mortgage to Perpetual Trustees Australia Limited over the Smithfield property was discharged and a mortgage to AWLM to secure $750,000 funded by ING was entered into. Each of those mortgages to AWLM was signed by the appellants and witnessed by a finance broker, Shirley Morcilla. Mr Angelopoulos had nothing to do with the obtaining of the loans secured by those mortgages. 39As at December 2004 if not before, it was apparent that the appellants were in serious financial trouble. At [71] of his reasons the primary judge noted that the first appellant gave evidence that he told Mr Angelopoulos that he was in financial trouble, that he was a pensioner, had no income and was struggling to sell Levuka Street. Mr Angelopoulos denied that he was so informed by the first appellant. According to the primary judge (at [72]), Mr Angelopoulos' evidence was that the first appellant had told him that he was a successful builder. Furthermore, he was unaware that the first appellant had any health problems and had been informed by him that he had made a large profit for the taxation years 2003 and 2004 and that he wanted additional money to invest in the share market. He allegedly informed Mr Angelopoulos that the building industry was in good shape, there was plenty of work and he made good money from trading on eBay and the stock market. 40The primary judge's findings with respect to the first appellant's financial acumen are to be found at [49] and [50] of his reasons. His Honour regarded it as apparent from the number and type of property dealings by the appellants that they were experienced in respect of the purchase and financing of real estate. They understood the nature of a loan application and a loan contract. They had received the advice of a solicitor (Mr Izzo) in relation to transactions of this kind on many previous occasions. His Honour found that the appellants were well aware that in the event of default under a mortgage, judgment for possession of the secured property could be obtained by the lender and the property sold. 41His Honour also found that the first appellant had experience in the development of building sites as a result of the development of the Smithfield property and the proposed development of Levuka Street. It had been the appellants' intention to continue to buy and develop land. The first appellant also had experience in conducting a trading business on eBay with respect to coins and had also traded on the stock market where he allegedly had a turnover of $31 million in the 2004 taxation year. 42As we have already noted (at [4] above), on 16 December 2004 the appellants signed a loan application to refinance the mortgage to AWLM secured upon Lots 1 and 2. That application was accepted as a consequence of which they signed a home loan contract as well as the mortgage documents to secure a loan of $867,000 from the Bank. At [27] of his reasons the primary judge noted that the appellants conceded that they signed the loan application, loan agreement and mortgage over those properties. Their signatures were witnessed by Mr Angelopoulos. They also accepted that they were in default under that mortgage. As we have noted (at [5] above), after discharging the existing mortgage over Lots 1 and 2 and after the deduction of various expenses including lenders mortgage insurance, a balance of $94,636.69 was transferred to the appellants' St George Bank account which was in their business name of RBS. That amount was then available to the appellants to service the Bank's loan as well as the existing loan secured over Levuka Street. 43As the primary judge noted (at [29]), the appellants' case in their defence of the Bank's claim for possession of Lot 1 was centred upon an attack on the credit of Mr Angelopoulos. He observed (at [30]) that the appellants alleged that they were taken advantage of by Mr Angelopoulos as a result of which they entered into a mortgage with the Bank which was not in their best interests and too, that they did so without legal advice. It was further alleged that Mr Angelopoulos, without the knowledge of the appellants, obtained and lodged false taxation returns with the loan application and entered false information into that application but for which it would have been refused. It was submitted that Mr Angelopoulos was not a credible witness and that when there was a conflict in the evidence, that of the appellants should be preferred to that of Mr Angelopoulos.

The primary judge's findings 44As noted by his Honour (at [31]), the alleged disadvantage under which the appellants were suffering in their dealings with Mr Angelopoulos was due first, to their lack of education, reasoning ability and financial know-how; secondly, an inability on the part of the first appellant to read or write English; thirdly, the fact that the first appellant suffered a psychiatric condition; fourthly, the absence of advice from a solicitor as to the wisdom of entering into the subject mortgage; and, fifthly, the relationship of trust fostered by Mr Angelopoulos which he had breached. 45The primary judge dealt with each of these allegations in turn. His findings may be summarised thus: (a) There was no issue as to the second appellant's ability to read and write English. So far as the first appellant was concerned, he was clearly intelligent and advanced himself in Australia, initially in the building industry and after his injury, in property development and ultimately in share trading. He could read English at the time of trial and could also do so in 2004. Relevantly, no ground for relief was pleaded in the appellants' defence to the Bank's Amended Statement of Claim based on the first appellant's inability to read or write English. Finally, it was only after some time in cross-examination that he asserted that he could not read English. He could certainly speak it. (b) As to the first appellant's psychiatric condition, his Honour noted first, that the second appellant had given evidence that her husband seemed entirely capable of making decisions as to which properties to buy and sell and as to which were the best loans to take and that she had confidence in his capacity to identify properties to buy. Secondly, the proceedings were conducted without resort to any medical evidence. As already recorded, his Honour had noted that an application by their counsel after the evidence was otherwise complete to tender some medical reports dated 2008 was refused. Thirdly, the first appellant's involvement in business and financial matters did not suggest that his financial dealings were affected by any psychiatric condition. Fourthly, Mr Izzo, the solicitor who had acted for the appellants on a number of property transactions, was not called to give evidence to suggest that the first appellant had any difficulty in understanding the financial transactions into which he had been entering. Fifthly, it had therefore not been established that the first appellant's involvement in relation to the subject mortgage had been adversely affectedly by any psychiatric condition. (c) The first appellant gave evidence that at their first meeting in 2004 Mr Angelopoulos told him that he was like a father to him and that this was repeated on other occasions. It was alleged that this gave rise to a relationship of undue influence between Mr Angelopoulos and the first appellant which led to the appellants not retaining a solicitor, and entering into the mortgage with the Bank upon conditions which they were unable to meet. The primary judge rejected that evidence, noting that their counsel described the first appellant as "an extremely strong-willed person". Although not referred to by his Honour, counsel for the appellants also described the first appellant as having "very high self esteem". (d) Of some significance was the submission to his Honour by the appellants' counsel that the second appellant considered that her husband was a very clever businessman who was managing to buy and sell properties and to make profits. That indeed was the case as they had a couple of very good investments which caused their net worth to increase substantially. However, they then invested in Levuka Street. Before that property could be developed the economic conditions changed as a consequence of the GFC which reduced property values and resulted, according to counsel, in the appellants "having to continuously re-finance", they being victims of the property downturn. (e) Although both appellants gave evidence that they always signed mortgages in front of their solicitor, when shown mortgages which they had signed before persons other than solicitors, they were forced to concede that their evidence was incorrect. So far as the subject transaction was concerned, Mr Angelopoulos denied that the appellants said that they wanted a solicitor to look over and check the documents. He said that he offered them that opportunity on more than one occasion but they declined it, notwithstanding that the first appellant agreed that he could call on his solicitor, Mr Izzo, to get advice if needed. Furthermore, as will appear, they retained Mr Izzo in respect of the refinancing of Levuka Street at the end of 2005. Accordingly, there was no acceptable evidence that involvement of a solicitor for the appellants would have resulted in the Bank's loan and mortgage proceeding otherwise than as they did. In this respect, it was not suggested that there was any problem with the documents or that the terms of the loan contract and mortgage were other than what would normally be expected. 46The primary judge then turned to the issue of Mr Angelopoulos' credit, which was attacked on a number of fronts. His Honour set out (at [52]) six matters which, it was asserted, either taken individually or together, reflected adversely on Mr Angelopoulos' credit. It is sufficient to note that first, two of those matters involved typographical errors in Mr Angelopoulos' affidavit and that at least two of the other items were explicable for reasons which it is unnecessary to relate. Suffice it to say that the primary judge formed the opinion (at [53]) that those items did not affect Mr Angelopoulos' credit in any significant manner. Secondly, apart from the refinancing of the Levuka Street loan at the end of 2005, the only other matter directed to Mr Angelopoulos' credit related to his filling out of an application for the first appellant for a personal loan, in relation to which he indicated that he was unaware that it was to be a loan from St George Bank. However, in cross-examination he accepted that he accompanied the first appellant to the offices of that bank when making the application. His Honour stated (at [61]) that there was no explanation for that apparent change in his evidence on that subject.

The Levuka Street 2005 transaction 47The issue relating to this transaction seemed to assume greater significance from the appellants' perspective on the hearing of the appeal than it did at trial. On 10 June 2003 two mortgages were entered into in favour of AWLM. The first related to Folio Identifier No A/399641, being the property known as 24 Levuka Street, Cabramatta. The mortgagors were the appellants. The second mortgage of the same date in favour of the same mortgagee was secured over Folio Identifier No B/399641, being the property known as 22 Levuka Street, Cabramatta. The mortgagors were shown as Steven Grant Wolfe and Angelina Wolfe, the appellants' eldest daughter and son-in-law. As is apparent, the appellants were the registered proprietors of 24 Levuka Street whereas their daughter and son-in-law were the registered proprietors of 22 Levuka Street. Hence the necessity for two mortgages. Nevertheless, the mortgages were interrelated and the two loan agreements (one for each property) in the sum of $616,000 and $234,000 respectively, totalled $850,000. 48At some point in 2005 it became necessary for the appellants to refinance the existing loan over Levuka Street. The evidence of Mr Angelopoulos and a finance broker, Mr Saroukos, who had some relationship with Romavale, was that they met the appellants on 21 October 2005 at a coffee shop in Earlwood. The evidence regarding the conversation between Mr Saroukos and the first appellant is recorded by the primary judge (at [55]). As his Honour there noted, that evidence was generally confirmed by Mr Angelopoulos. The loan application purportedly signed by the appellants on 21 October 2005 was tendered. Their signatures were witnessed by Mr Saroukos. 49The appellants denied that they had ever been at the coffee shop or that they had ever met Mr Saroukos. They maintained that the signatures on the loan application form were not theirs. It was in that context that his Honour stated (at [56]) that it was: "notable that despite evidence being sought from a handwriting expert, no handwriting evidence was adduced." 50The primary judge also noted that, when cross-examined, the second appellant stated that her assertion that she had not signed the document was based upon the fact that she did not know Mr Saroukos and had not been to the coffee shop. However, the primary judge observed that it was not put to Mr Saroukos that the alleged signatures of the appellants were forged. Nor was he cross-examined as to the evidence of the conversation between him and the first appellant recorded by his Honour (at [55]) which, as we have indicated, was generally confirmed (according to the primary judge) by Mr Angelopoulos. 51The primary judge's finding with respect to this issue was in the following terms: "57 The [appellants'] 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 [appellants] may be simply mistaken. I am unable to determine the truth of this issue." 52Although it was no part of their case at trial, the appellants maintained on the appeal that the refinancing of the Levuka Street loan had taken place at the end of 2004 at the same time as they had refinanced the loan on Lots 1 and 2. They denied that the refinancing of Levuka Street took place at the end of 2005. They did accept that it was part of the refinancing arrangement in relation to Levuka Street that their daughter and son-in-law would transfer their estate and interest in 22 Levuka Street to them. Such a transfer in fact took place on 21 December 2005, it being noted that the consideration for the transfer was $280,000. The transfer was signed by both the transferors and the transferees. In each case their signatures were witnessed by Mr Izzo and on the same day a discharge of the mortgage to AWLM in respect of each of 22 and 24 Levuka Street was executed and dated 21 December 2005. On the same date, a mortgage over both properties was executed by the appellants in favour of the Bank. Their signatures were witnessed by Mr Izzo. 53There could be no doubt that the appellants were fully aware of the refinancing of Levuka Street in December 2005. By letter dated 22 December 2005 Mr Izzo wrote a letter to the appellants headed: "RE: DISCHARGE OF MORTGAGE TO ING WITH ADELAIDE BANK PPTY: 22 & 24 LEVUKA STREET, CABRAMATTA" The letter contained the following statements: "We refer to settlement of your refinancing and enclose Statement of Account, Trust Statement and Tax Invoices. As instructed we have banked the balance settlement monies of $40,611.38 in your St George account." 54Included amongst the documents signed by the appellants and forwarded to the solicitors for the Bank by Mr Izzo was a home loan contract dated 22 November 2005. In the foregoing circumstances there could be no doubt that the appellants were fully aware that the transfer to them of 22 Levuka Street took place at the same time as the existing mortgages over the two Levuka Street properties were discharged and a new mortgage over both properties in the name of the appellants entered into with the Bank. It is clear that the whole transaction was undertaken by their solicitor, Mr Izzo. As noted above, Mr Izzo was not called to give evidence.

The double mortgage issue 55It is convenient at this point to refer to a submission made by the appellants on the appeal relating to what they referred to as a "double mortgage". Apparently the appellants at some point attended the Office of Land and Property Information and were given two copies of the Bank's mortgage over Lots 1 and 2. In an email to the Court of Appeal Registrar received after the hearing concluded the appellants forwarded a copy of what they asserted were the "double mortgages" they had received from that office. Although not forming part of their grounds of appeal, as the appellants were unrepresented, it is appropriate to refer to these documents. They were relied on only to support the appellants' assertion that the refinancing of Levuka Street took place in 2004 at the same time as the refinancing of Lots 1 and 2 so that the existence of the mortgage over Levuka Street in favour of the Bank dated 21 December 2005 must be a fake, resulting in them making payments under two mortgages upon the same property when they should only have been making payments in respect of one mortgage. 56As we have already observed, the separate mortgages in favour of AWLM over each of 22 and 24 Levuka Street which were refinanced in 2005 were originally executed on 10 June 2003. Those mortgages were not discharged until 21 December 2005 when, as we have explained, the refinancing of Levuka Street took place (and 22 Levuka Street was transferred from the Wolfes to the appellants) which was handled on behalf of the appellants by their solicitor, Mr Izzo. Although there were separate mortgages over 22 and 24 Levuka Street when they had different registered proprietors, after the transfer of 22 Levuka Street to the appellants, only one mortgage was entered into by the appellants secured to the Bank over both Levuka Street properties. 57Lots 1 and 2 were also mortgaged to AWLM in June 2003. They were refinanced in December 2004. The mortgage in favour of the Bank signed by the appellants and witnessed by Mr Angelopoulos was dated 18 January 2005. 58The documents forwarded to the Registrar by the appellants and asserted to be "double mortgages" were, in fact, two copies of the same mortgage, being that in favour of the Bank over those properties. There was only ever one mortgage in favour of the Bank over Lots 1 and 2. Accordingly, the appellants have never paid monies under any "fake" mortgage. They may have been confused by receiving two copies of the same document from the Land and Property Information Office. Their misunderstanding seems to have arisen from the fact that each of the documents received by them from Land and Property Information was reproduced at a different time - one at 12.39 pm and the other at 12.57 pm. However, there is no doubt that each is a copy of the same mortgage. Their complaint of, in effect, having been hoodwinked when they entered into that mortgage arose from their apparent inability to appreciate that the documents were the same.

The findings of the primary judge with respect to the refinancing of Lots 1 and 2 59As we have already observed, the loan application which ultimately led to the mortgage in favour of the Bank was signed by the appellants, whose signatures were witnessed by Mr Angelopoulos. The primary judge noted (at [71]) that the first appellant 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 Levuka Street. It was asserted that notwithstanding this information, Mr Angelopoulos obtained a loan for the appellants from the Bank knowing that they had minimal income and in circumstances where he knew that they would be unable to service the proposed loan. In this context his Honour recorded (at [69]) that it was common ground that the value of the assets and earnings of the appellants stated in the loan application were inflated. The appellants asserted that this was done by Mr Angelopoulos without their knowledge. Mr Angelopoulos' evidence was that all the information was provided by the appellants. The Court was informed that the assets that were said to be overvalued were two motor vehicles the combined value of which was stated to be $141,000, furniture of $30,000 and a boat of $47,000. 60Of greater significance were the tax returns of each of the appellants which accompanied the loan application. That of the first appellant revealed a net pre-tax income for the financial year ending 30 June 2003 of $143,574 and a net pre-tax income for the financial year ending 30 June 2004 of $150,976. The same returns, his Honour noted (at [87]), were relied upon in respect of the 2005 loan in relation to Levuka Street. The returns were ostensibly prepared by an accountant, Mr Khan, trading as Practice One Pty Limited. However, as his Honour observed (at [92]-[93]), the appellants gave evidence that their accountant in 2002 was a Mr Faga of Pat A Faga & Associates and, in 2003, was a Mr Prasad. There was evidence that the appellants' taxation returns for 2002 were prepared and lodged with the Australian Taxation Office by Mr Faga, who then traded as CompTax Accounting and Taxation Services Pty Limited. His Honour noted that there was no independent objective evidence linking either the appellants or Mr Angelopoulos to the origin of the tax returns which accompanied the subject loan application. 61It is unnecessary to refer to all of the findings of the primary judge on this issue. Suffice it to say that his Honour determined that it had not been proved by the appellants that Mr Angelopoulos was responsible for the preparation of either the false loan application or the taxation returns. With respect to the latter, his Honour noted (at [88]) first, that the false tax returns had been signed by the appellants and, secondly (at [89]), that it was Mr Angelopoulos' evidence that the returns were given to him in an envelope by the first appellant outside the appellants' home. His Honour made no specific finding on this matter, but referred (at [90]) to the evidence of the second appellant that she had seen her husband hand an envelope to Mr Angelopoulos on that occasion, although she was unsure of its contents. The first appellant agreed that he had handed an envelope to Mr Angelopoulos, but said it contained $6000 in cash which Mr Angelopoulos had required from him in order to lodge the loan application. We refer to the latter contention below. 62Mr Angelopoulos' evidence, accepted by the primary judge, was that in 2004 he was employed by Premier as a contractor for a flat fee of $7500 per calendar month and that his income was not linked to the value of loans that he, or brokers under his guidance, had submitted for approval. No evidence was adduced to suggest that Mr Angelopoulos received commissions over and above that fee. 63The first appellant asserted on the other hand that Mr Angelopoulos had a financial interest in obtaining the Bank's loan as he had demanded a cash payment of $6000 to process the application and had made similar demands on three other occasions in respect of other loans. His evidence was that in all he had provided Mr Angelopoulos with $24,000 in cash in four lots of $6000 drawn from the appellants' bank account. However, when their bank records were produced, the first appellant was only able to point to one withdrawal of $6000 which occurred in April 2004, well before the subject loan application form was completed in December of that year. Accordingly, his Honour declined (at [78]) to accept that the appellants had established that they had given Mr Angelopoulos an amount of $6000 in order to process their loan application for Lots 1 and 2 or any other amounts of $6000 for other loans. 64The primary judge's ultimate finding with respect to Mr Angelopoulos was encapsulated in the following paragraph of his reasons: "108 In 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." 65His Honour nevertheless accepted (at [104]) that there were major conflicts in the evidence. He observed that the appellants' case was essentially that from 2003 they were in financial difficulties which increased and which they knew in all probability would continue to increase until Levuka Street was sold. Accordingly, in order to survive financially it was necessary for them to obtain additional funds. His Honour found (at [105]) that the appellants determined that this was to be achieved by refinancing the loan over Lots 1 and 2 so as to obtain additional funds after the repayment of the existing loan together with expenses. This was a legitimate business decision provided the excess was sufficient to enable the mortgage to be paid for a reasonable period in which continued efforts to sell Levuka Street could be made. The appellants received some $94,000 to enable this objective to be achieved, his Honour finding (at [111]) that they used that money to meet their repayments. As default under the Bank's loan did not occur until over two years later, the appellants thus gained the additional time intended notwithstanding that Levuka Street remained unsold. 66It was in the foregoing context that his Honour accepted the evidence of Mr Angelopoulos that the first appellant represented himself as a successful builder who also made money on the stock market and on eBay and, further, that the appellants were refinancing in order to raise additional funds for the latter activities. His Honour also accepted (at [107]) that the appellants provided the relevant information which Mr Angelopoulos inserted into the loan application form and supplied the taxation returns which accompanied that application. Accordingly, the primary judge accepted the evidence of Mr Angelopoulos and rejected that of the first appellant.

The grounds of appeal 67The final Amended Notice of Appeal was filed on 12 March 2013. Ultimately the following six grounds of appeal were pursued: "1. His Honour Judge HISLOP erred by failing to allow the defendants' MEDICAL RECORDS and thus in finding that the proceedings were conducted without any medical evidence, and in failing to find that the first defendant was relevantly affected by a psychiatric condition. (Paragraphs 38 & 39) 2. His Honour erred by failing to allow additional time to the parties to obtain and provide appropriate medical evidence and thus in failing to determine, after a proper hearing of the relevant evidence, whether the first defendant was relevantly affected by a psychiatric condition, and thus in failing to find that the first defendant was relevantly affected by a psychiatric condition. (Paragraphs 38 & 39) 3. His Honour erred by failing to conduct a hearing in relation to the defendants' medical conditions and thus in failing to determine, after a proper hearing of the relevant evidence, whether the first defendant was relevantly affected by a psychiatric condition, and thus: (a) in failing to find that the first defendant was relevantly affected by a psychiatric condition. (Paragraphs 38 & 39); and further (b) in failing to find that the first defendant was affected by a psychiatric condition; and thus (c) in failing to find that the first defendant's evidence was affected by his psychiatric condition and needed to be viewed in light of that condition; and thus (d) in accepting the evidence of Leon ANGELOPOULOS & Michael SAROUKOS, and rejecting the defendants' evidence (Refer to psychiatric condition of Sebastian Carnemolla - paragraph 35-39), (e) in failing to appoint appropriate representation for the defendants to ensure their interests were protected. 4. His Honour erred by failing to provide reasons for his decisions referred to above. 5. His Honour erred by failing, in deciding the above matters, to consider, or appropriately consider, or give due weight to, any medical records or any medical evidence already on the court file or otherwise available to the Court and the parties, including documents produced under subpoena, and thus (a) in failing to find that the first defendant was affected by a psychiatric condition; and thus (b) in failing to find that special circumstances existed to warrant an exception to be made to the rules of court; and further (c) in failing to find that the first defendant's evidence was affected by his psychiatric condition and needed to be viewed in light of that condition; and thus (d) in accepting the evidence of Leon ANGELOPOULOS & Michael SAROUKOS, and rejecting the defendants' evidence (Refer to perjured evidence by ANGELOPOULOS & SAROUKOS Paragraphs 77,78,79,108.) 6. His Honour erred by failing to make a determination with respect to alleged meeting at a coffee shop in Earlwood in 2005 and thus accepted the evidence of ANGELOPOULOS & SAROUKOS and rejected the evidence of the defendants.(paragraph 56). His Honour erred by not requesting and investigating the evidence on hand which was available and was not aware of the truth in this matter.(paragraph 57.)" 68Grounds 1, 2, 3 and 5 all relate to the issue of the first appellant's mental state at the time of the subject transaction. We have already dealt with the appellants' attempt to tender the medical statements as fresh evidence on the appeal. His Honour made findings with respect to the appellants' mental condition in the absence of those medical records the tender of which he had rejected. We have referred to his Honour's findings (at [20] and [45] above). On the basis of the evidence before him there can be no doubt that it was open to him to make the findings he did. In any event, for the reasons we have set out (at [22] above), the medical reports the appellants attempted to tender as fresh evidence and which, they assert, his Honour should have accepted at trial, do not provide any evidence upon which it could be found that at the time of the subject transaction in December 2004 the first appellant was suffering from a mental condition which affected his ability to understand and appreciate what he was then doing. 69As to ground of appeal 4 we have already referred to the fact that his Honour rejected the tender of the evidence on the basis that he would give reasons in his substantive judgment if they were required. Although it would not appear that he was required to give such reasons, nevertheless his Honour stated (at [38]) that the proceedings were conducted by the appellants without resort to any medical evidence until an application was made by their counsel, after the evidence was otherwise complete, to tender the 2008 reports. It is clear that the primary judge accepted the submissions of the Bank that it was too late for those reports to be tendered after the evidence had closed, especially as it was conceded by the appellants' counsel that their tender would necessitate an adjournment of the proceedings to enable the other parties to obtain their own medical evidence and for arrangements to be made for the authors of the reports to be available for cross-examination. His Honour rejected the tender on the second last day of the trial after six days of evidence in circumstances where bringing the trial to a conclusion was a matter of significance given the terms of s 56 of the Civil Procedure Act 2005. In our opinion, no error has been demonstrated either with respect to the reasons his Honour gave for rejecting the tender of the evidence or in the rejection of the tender itself. 70Ground of appeal 6 relates to the alleged meeting at the coffee shop in Earlwood in October 2005 concerning the refinancing of Levuka Street. It was in effect submitted that his Honour should have accepted the evidence of the appellants that they had not met Mr Saroukos or signed a loan application with respect to the refinancing of that property at that coffee shop. His Honour considered (at [57]) that in the circumstances he was unable to determine whether or not such a meeting took place. It is noteworthy that his Honour did not make a finding that the loan application to refinance Levuka Street was not signed by the appellants on 21 October 2005. Whatever may be the position as to the signatures on that loan application form, it cannot be disputed that an application for a loan from the Bank to refinance Levuka Street was made at that time and that the loan transaction was successfully handled on behalf of the appellants by their solicitor, Mr Izzo. 71As Mr Sheller, as amicus curiae, submitted, whether or not a meeting took place at the coffee shop at Earlwood could only be relied upon by the appellants to impugn Mr Angelopoulos' credit with a view to underpinning a broader attack on his role in the obtaining of the 2004 loan from the Bank. Nevertheless, his Honour was not prepared to make a positive finding that the meeting did not take place and the other attempts to impugn the credit of Mr Angelopoulos were unsuccessful. In these circumstances, in our opinion ground of appeal 6 does not advance the appellants' case. 72Insofar as it might be inferred from the grounds of appeal that the appellants seek to challenge his Honour's acceptance of the evidence of Mr Angelopoulos over that of the appellants and of the first appellant in particular, the onus lay upon the appellants to establish that the primary judge "failed to use or ... palpably misused his advantage" or acted on evidence which was "inconsistent with facts incontrovertibly established" or "glaringly improbable": Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 (at 479, 480-481); Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 (at [26]-[29]); see also the discussion of the relevant principles in Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 (at [494]-[507]). The advantage enjoyed by the primary judge over this Court in seeing and hearing the witnesses must be given significant weight especially in the absence of any uncontested objective evidence which would justify reversing his Honour's credit findings with respect to Mr Angelopoulos: Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35 (at [13]-[14]) per Allsop P. 73In our opinion there was considerable objective evidence sufficient to justify the primary judge in rejecting the evidence of the first appellant and accepting the evidence of Mr Angelopoulos. In particular, his Honour's resolution of the issues of the false taxation returns and the cash payments of $6000 allegedly made to Mr Angelopoulos from the appellants' bank account were of themselves significant findings which militated against acceptance of the first appellant's evidence. Furthermore, it was acknowledged by their counsel in final address that the first appellant was "obviously in dire financial difficulty" at the time he sought to refinance the loan secured upon Lots 1 and 2 and, for that matter, that secured on Levuka Street. 74It was thus necessary for the first appellant to present a case to Mr Angelopoulos relating to his financial position that would justify the making of a loan application which was likely to be approved. He had no chance of obtaining a loan if he informed Mr Angelopoulos of his true financial position unless Mr Angelopoulos, in conjunction with the first appellant, was prepared to commit a fraud upon the Bank. The primary judge accepted that the picture which the first appellant painted to Mr Angelopoulos as to his financial position was far more rosy than was the case and also accepted Mr Angelopoulos' evidence that he was unaware of the dire financial difficulties which in fact the appellants were in at the time. Once Mr Angelopoulos' evidence that he did not receive a commission on any loans that he wrote was accepted, it followed that Mr Angelopoulos had no motive for advancing a fraudulent loan application to the Bank. 75Finally, as observed at the commencement of these reasons, the present case is not one where elderly parents have been persuaded to mortgage their home, and often their only asset, for the sole benefit of their adult children. The loan applications with respect to Lots 1 and 2 in December 2004 and to Levuka Street in October 2005 were entered into by the appellants purely for their own benefit. Given the financial position that they were in, each of those loans generated sufficient surplus funds after the repayment of the existing mortgages to enable the appellants to meet their commitments and thus provided further time within which to sell Levuka Street which, had it occurred, would have solved or gone a long way to solving their financial difficulties. 76In our opinion the appellants have not discharged the onus of establishing that his Honour's findings as to the credit of Mr Angelopoulos were either inconsistent with facts incontrovertibly established or glaringly improbable. In our view, if anything, his evidence was, in the circumstances, glaringly probable.

Conclusion 77Notwithstanding the limited grounds of appeal, we have dealt with all the arguments advanced by the appellants on the hearing of the appeal even though many of those arguments were not the subject of submissions to the primary judge. We have so proceeded in order that the appellants may be satisfied that all matters that they have complained about to this Court have been the subject of careful consideration and determination. 78However, the challenges made by the appellants to the findings of the primary judge have been unsuccessful. Accordingly, the order of the Court is that the appeal be dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 May 2013

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