Q. Did that strike you as odd?
A. It was odd, yes."
71 In her affidavit sworn 1 March 2005, Ms Jajoo, a solicitor and wife of the First Defendant, said that in 1998 she commenced to work in the property section of the Fairfield office of DDS and by 2001 was responsible for all aspects of property matters handled by that office.
72 She deposed to her initial contact with Mr David and her first meeting with him in these terms:
"5. On about 9 February I received a telephone call from the first plaintiff (Mr David) during the course of which we said words to the following effect:
Mr David: "My name is Eddy David. My wife and I are refinancing with Quick Loan Services. Quick Loan Services have told you they will forward the unconditional loan approval to you because we have listed you as our solicitor."
Me: Thank you for your instructions. But there is nothing much I can do at this stage until I receive the unconditional loan approval. I will call you as soon as I receive it.
Mr David: "That would be good, my phone number is ….
3. Quick Loan Services (QLS) is a mortgage brokerage firm with whom the Fairfield office of the first to fourth defendants had regular dealings since about April/May 2000.
14 February meeting
3. On about 14 February 2001, I had a meeting with Mr David and Mr Jessie George (Mr George) at the offices of DDS. I understood Mr George worked for Quick Loan Services. An appointment had been arranged for me to meet with Mr David and Mr George.
3. About the start of the meeting, Mr David gave me a facsimile addressed to Mr David and the second plaintiff (Mrs David) from Direct Mortgage Solutions Pty Limited (DMS) dated 5 February 2001.
3. I read the facsimile.
3. We then had a conversation in words to the following effect:
Mr David: "My wife and I are refinancing our existing loan and Jessie has organised the unconditional loan approval. But, I wish to know what the costs and expenses involved in the refinance are as Jessie has agreed to cover all those costs at this stage. Jessie is my mate and he'll pay the costs now and I'll sort if out with him late. I'd rather Jessie make the money as a broker since he's a friend."
Me: "Well, I am not in a position to advise you on exactly what expenses will be incurred by you as you have not as yet provided to me the loan agreement, however from my experience, the usual costs involved with a Direct Mortgage Solution's loan include, $950.00 establishment fees, approximately $600.00 for Direct Mortgage Solutions' legal fees and $941.00 for stamp duty on the $250,000 loan. You're also looking at approximately $900.00 for our legal fees and disbursements. So a total of approximately $3,390.00."
Mr George: "As I have agreed with Mr and Mrs David these costs will be covered by my office initially."
Me: "That's something agreed between you and Mr George. On settlement all of Direct Mortgage Solutions' fees will be deducted from your loan amount and our fees must also be paid by you on the same day. You will be issued with a settlement statement and then it's between you and Mr George as to how you will be reimbursed by his office."
Mr David: "That's fine."
Me: "There's nothing much I can do at this stage until the mortgage documents have been issued by Direct Mortgage solutions, except organise the discharge of any existing loan you may have."
Mr David: "Yes we have a loan with Westpac which needs to be discharged."
Me: "I need you to bring to me copies of your latest council rate and water rate notices, building insurance policy, your driver's licences and/or passports, and Westpac's loan statement regarding the loan being discharged."
Mr David: I will organise for these documents to be forwarded to you. But I have the details of my loan account. It's a Classic Plus Account and the account number is ………."
73 Annexed to the affidavit was Ms Jajoo's file note of the meeting on 14 February 2001. It indicated that it occupied from 11 am to 11.35 am
74 On 5 March 2001, Ms Jajoo received a letter from Galilee & Associates Solicitors acting for Macquarie Bank Ltd and Macquarie Mortgages Pty Ltd addressed to the Plaintiffs. The letter enclosed documentation regarding a proposed loan of $250,000 secured over the Plaintiffs' home at 39 Orchard Road, Fairfield.
75 She arranged a meeting with the Plaintiffs, which took place on 6 March 2001. Her version of what transpired at the meeting as deposed to in her affidavit (omitting references to documents) was:
"13. During the course of the meeting I looked at documents brought in by Mr and Mrs David for this meeting, or prior to this meeting, being 2 Westpac bank account statements, a council rates notice, a water rates notice, their passports and Mr David's driver's licence.
3. I looked at the bank account statement. We then started a conversation during the course of which we said words in English to the following effect:
Me: "This Westpac Classic Plus statement is in your names, however, the Premium Option Land Loan account statement has four names on it. Why?"
Mr David: "We have a number of accounts with Westpac and they are all interconnected. The securities provided to Westpac at various times are also connected to the various loan accounts as well. We need Westpac to discharge the security over 39 Orchard Rd, Fairfield and any loans associated with that security."
Me: "I think we should call Westpac and see what their requirements are to discharge the security."
3. I then, using the loudspeaker function of the phone, telephoned the Westpac account enquiry number disclosed on the bank statement and spoke to a person who identified herself as Evelyn Colin (Ms Colin). We had a conversation in words to the following effect:
Me: "I'm calling on behalf of Mr and Mrs David and their account number is ………. I need to speak to someone regarding their loan."
Ms Colin: "I cannot speak to you about their loan until I have their authority to do so, due to the privacy law."
Me: "I have both of them here with me and Mr David will authorise you to speak to me as their legal representative."
3. Mr David then spoke with Ms Colin and then the conversation between Ms Colin and me continued in words to the following effect:
Me: "Mr and Mrs David wish to arrange a discharge of the security held by Westpac over a property situated at 39 Orchard Rd, Fairfield. However, as their various loans are all interconnected, I'm not sure as to who is required to sign the discharge authority."
Ms Colin: "There are four borrowers, Eddy David, Grace David, Rosa David and Matthew David and all four are required to sign the discharge authority for any partial discharge of the loan."
Me: Thank you. I will attend to that."
3. I then continued my conversation with Mr and Mrs David in words to the following effect.
Me: "Well, the discharge authority to Westpac must be signed by all four parties discharging the loan. You need to arrange for Matthew and Rosa to sign it as well."
Mrs David: "That won't be a problem. We'll organise for them to sign the authority and we'll fax it to you".
3. I then prepared the Discharge Authority and gave it to Mr and Mrs David. I then continued my conversation with Mr and Mrs David in words to the following effect:
Me: "Let's look at your credit contract and the general conditions"
3. I opened the document entitled "DMS Equity Plus Revolving Line of Credit" (Credit Contract). I then gave a copy of the Credit Contract to Mr and Mrs David. I then drew a line half way down and across the second page of my file note dividing the page into two parts and started to read the Credit Contract. The conversation continued in words to the following effect:
Me : "You are borrowing $250,000 from Macquarie Bank at an interest rate of 7.74% per annum. The default rate that will apply to your loan is 9.74%, which is 2% higher than the standard interest rate at the time of default. This means that if you fall behind with your repayments or you don't comply with any other term of the loan, then the bank may apply the higher interest rate to your repayments. For example if you fall behind with your repayments by one week, for that week, from the due date, the interest rate applicable will be 9.74% should the standard variable rate at the time be 7.74%. The bank may also charge you other fees such as dishonour fee of $35.00 as noted on page 7 of the credit contract.
The interest rate is an interest only range.
The term of the loan is 30 years, that is, 360 monthly repayments, so if you only pay the minimum repayments required under the credit contract, then it will take you 30 years to pay out the loan.
The credit contract shows that you have requested an interest only period of 10 years, and then 241 monthly repayments of interest and principal at a minimum repayment of $1,791.00 per month based on the current variable interest rate. So if the interest rate is different at that time, that interest rate would be applicable to your loan."
Mr David: "No, we have not asked for any interest only period. We've asked for the standard repayments of interest and principal. We will not proceed with the loan if this is not changed. We've told our broker that we want a principal and interest loan. This is not right. I'll call Zia now."
3. Mr David then had a telephone conversation with a person whom I believe was Zia George of QLS. After the conversation finished, I continued my conversation with Mr and Mrs David in words to the following effect:
Mr David: "I just spoke to Zia and he agreed that they've made a mistake. We need to talk to the bank."
Me: "I'll call Galilee and Associates now and talk to them."
3. I then telephoned Melanie Coppin of Galille and I left a message for her to call me back. The conversation then continued in words to the following effect:
Me: "Well, that's something we need to bring to the attention of the lender's solicitors once they call back. In the meantime let's continue and see if there are any other problems with the documents.
The expenses that will be deducted on settlement will be:
Direct Mortgage Solution's settlement fee of $50.00
Stamp duty of $941.00
Direct Mortgage Solution's solicitors fees of $188.00
Direct Mortgage Solution's application fee of $750.00
Direct Mortgage Solution's valuation fee of $200.00
That totals about $2,129.00. Our costs and disbursements will be approximately $800.00 made up of $450.00 for professional fees in explaining mortgage documents and $100.00 for professional fees in acting on the discharge of the Westpac loan, there'll be $55.00GST on those fees and approximately $200.00 in disbursements and attendances. I will write all these expenses down and give them to you now including our fees and disbursements so you have them for your record. And we'll issue the bill before settlement and advise you of the final total amount before settlement.
The amount available to you on settlement, once all the fees and charges have been deducted will be approximately $247,000.00."
Mrs David: "We'll need a statement of all the expenses before settlement because Jesse George has promised us that he will cover all the expenses at this stage."
Me: "As I have already explained to Eddy, all the expenses will be deducted on settlement and I will issue to you a settlement statement itemising all the expenses incurred and the it's between you and Mr George as to what arrangements are made and how he will reimburse you with expenses. This is an unusual arrangement and it really has nothing to do with the loan.
Continuing with your credit contract, there's a $120.00 account maintenance fee per year that will be charged to your account every six months at $60.
The bank requires you to take out building insurance and the policy must be renewed every year before it expires, otherwise it would constitute a default. You are required to insure your house for a minimum amount of $240,000 and Macquarie Bank Limited must be noted on it as the first mortgagee. We need to forward a copy of the insurance policy to Direct Mortgage Solution's solicitor."
Mrs David: "I'll change our existing policy and fax it to your office."
Me: Should you fall behind with your repayments to the bank you will be in default. You'll also be in default if you don't comply with your other obligations under the loan and the undertakings you have given to the lender. For example timely payments of your repayments, if you've given false information to the bank, if you become a bankrupt, if you don't renew you building insurance, if you lease the property without the consent of the lender, if you damage the property. You'll also be considered to be in default if, god forbid, one of you dies. If you do default on any of your obligations to the bank, especially if you don't make your repayments on time, then the bank has the right to call on the loan and if you can't pay it out within the required time, then the bank can repossess the property, auction it and charge you for all the fees and expenses such as agent's fees, auctioneer's fees, legal fees etc. Should there be a shortfall from the sale, then the bank can sue you personally for the difference. So if for any reason you can't make your repayments on time you should contact the bank straight away and ask for special consideration and see if there is any special arrangement the bank will allow you to enter into. You should also note that you are both 'jointly and severally' liable for this loan, which means the bank can pursue any one of you individually for the total amount owing to the bank or of course both of you jointly.
Pages 5 to 9 disclose all of the services provided by the lender and the costs of those various services, so if you use the services or if they apply to you then you will be charged with those fees, but otherwise they're listed for disclosure purposes. For example, there is a 'deferred establishment fee' which means that if you for any reason discharge your loan within the first three years from the date of settlement, for example, if you've sold your house or wish to refinance with another lender, then you will be charged a penalty of $1,000. Should you discharge the loan after the third year and during the fourth year, then you will be charged a penalty of $250.00. After the fourth year, there will be no deferred establishment fee applicable. However, whenever you do discharge a first mortgage, there will be a mortgage discharge fee of $650.00 applied. The purpose of your loan is to refinance the house that you're living in now."
I then opened up the document entitled "Information Statement" and the conversation continued in words to the following effect:
Me: "Going through the "Information Statement" referred to on page 12 of the loan contract, the statement goes through certain common questions asked by Borrowers and gives answers to those questions. For example, the first question is "How can I get details of my proposed credit contract?' and the answer is that the lender must give you a copy of the loan contract and this statement before you sign the contract, and they have given you copies which you are looking at now. Another question is 'can you terminate the contract' and the answer is 'yes', as long as you haven't obtained any monies under the contract and as long as you pay any fees or charges incurred by the lender before you terminate the contract'. Questions 4, 5 and 6 are regarding 'early repayment of your loan' and we have covered that already. Question 7 is 'can your contract be changed by your lender?' and the answer is 'yes, but only if your contract says so' and you should note that you will receive notice in writing of any changes to the contract in advance, unless it's a change to the interest rate which is usually published in a newspaper. Make sure you do read any letters sent to you by the lender in the future and you do keep them in your records.
Question 9 says 'is there anything you can do if you think that your contact is unjust?' and it tells you that if you do think so then you should approach the lender first and discuss it with them and if you still have problems then you can apply to the Court or contact the Government Consumer Agency or see a lawyer about it.
Questions 10 to 14 are in relation to mortgage insurance for which you have not been charged. However, you may obtain your own mortgage insurance if you wish so in order to have protection should you not be able to make your loan repayments in the future.
You also shouldn't make any structural changes or alterations to the property without obtaining the bank's consent first. Questions 15 to 21 of the 'Information Statement' are in relation to the mortgage and the security you have provided to the bank. Questions 18 to 25 are all about 'if you find yourself in a situation that you cannot afford to make repayments' and it says that you must immediately contact the lender and see if you can come to some arrangements with them such as extending the term of the loan or simply defer payments for some time. We've now gone through the Credit Contract, we still need to clarify the interest only issue."
Mr David: "Yes, because we will not be proceeding if we have to make interest only repayments of the first ten years especially if we can't make any additional repayments."
3. The conversation then continued in words to the following effect:
Me: "I've left a message for Melanie Coppin and I will ask her as soon as she calls me back."
Mrs David: "We will sign the mortgage documents now, but please hold on to them until you've spoken to the bank and let Eddy or I know."
3. Mr and Mrs David then signed the Credit Contract. The conversation then continued in words to the following effect:
Me: "Page 13 of the Contract asks you if you have obtained legal advice regarding the mortgage documents of not. If you chose not to obtain such advice you would have to sign Box B, so we'll cross it out. Box A needs to be completed with my details and by signing it you are declaring to the bank that you've obtained legal advice on the nature and effect of the loan documents from me, that you understand the nature and effect of the documents and you don't need them to be translated, that you understand the obligations and risks involved in signing these documents and that you signed the documents freely, voluntarily and without pressure from any person."
I then crossed out Box B on page 13 of the Contract and inserted my name and date. In accordance with my usual practice I would then have obtained Mr and Mrs David's signatures but I omitted to do so as, at this stage, Mr David's mobile phone rang. He commenced a conversation on the phone and I started perusing the balance of the documents.
3. When Mr David finished his telephone conversation, I then looked at the mortgage and summary of mortgage memorandum. The conversation then continued in words to the following effect:
Me: "Lets go through the mortgage and the mortgage memorandum. The mortgage is the document that the lender registers on your certificate of title to protect itself until you pay out the loan at which time the mortgage will be removed from the certificate of title. You can have this copy of the two documents to look at while we go through them. The mortgage memorandum repeats the same terms and obligations as the credit contract and the general terms that we've already gone through. You are basically undertaking to comply with all your obligations to the bank and understand that if you default for any reason as discussed earlier then the bank can take possession of your property. You must continue to keep the property insured. You must make all repairs necessary to keep the property in good repair. You are not allowed to make any alterations to the property. You must continue to pay all your rates, including water rates and council rates on time as well as any other outgoings. You are not to change the use of the property without prior consent of the bank this includes renting the property. You shouldn't leave it vacant either."
3. Mr and Mrs David then signed the mortgage. I provided a copy of the mortgage and memorandum of mortgage to Mr and Mrs David.
3. I then looked at the document entitled "Warranty". The conversation then continued in words to the following effect:
Me: "The next document that you need to sign is the warranty. By signing the warranty you are acknowledging that you have taken out a loan of $250,000 from the bank and have given a security to the bank over your property at 39 Orchard Road, Fairfield which is registered in your names. I'll read the warranty to you and if you don't agree with anything in it just stop me so you can explain it to me."
Mr David: "That's fine."
Me: "You warrant to the bank that there are no other mortgages against the property besides the one to Westpac, that there are no charges, restrictions, encumbrances or easements affecting the property. You are unaware of any buildings or other erections, including any swimming pool or extensions to the property that are illegal or without the approval of the Council.
That there are no extensions done to the property in the past seven years.
That there are no encroachments on your land by any building on the neighbouring lands or vice versa, for example any fencing issues.
That you are not aware and have not received any notices from any governmental authorities regarding any affectations to your land for example any road works, road widening, mine subsidence, land slip, contamination etc.
That you are not aware of any restrictions on your land because of any flooding.
That you are not aware of any affectations that would affect the value of the property in a negative way.
That you will occupy the property as your main place of residence and that you don't have to pay any land tax on it.
That none of you has ever been bankrupted before.
That all your rates are paid up to date.
Mr David: "That's all true and OK."
76 Thereafter, according to Ms Jajoo's affidavit, the Plaintiffs signed the form of warranty. She then gave advice regarding their obligations to notify the mortgagee of receipt of notices affecting the mortgaged property before explaining to them the meaning and significance of the document called "Authority to Date and Pay Advance", which the Plaintiffs proceeded to sign.
77 Ms Jajoo's affidavit proceeded:
"32. I then looked at the document entitled "Direction to Pay - DMS equity plus revolving line of credit". The conversation then continued in words to the following effect.
Me: "And this next document is the Direction to Pay. It indicates that your loan is broken down into two sub-facilities. Facility 1 is for $210,000 and facility 2 is for $40,000. The bank is asking you to complete the direction to pay at this stage which you can't do as we don't know what the pay out figure to Westpac will be at this date. So I will complete it by advising the bank that you authorise them to accept the direction to pay which our office will forward to the bank before settlement following your instructions."
I wrote on page 2 of the document. "To be advised by Dominic David Stamfords".
Mr David: "Yes that will be OK."
Me: "You can then let the bank know yourself as to which of the two sub-accounts you wish the fees debited to."
Mr David: "I'll speak to them later."
78 Ms Jajoo, according to her affidavit, then turned her attention to the document headed "Direct Debit Request" and obtained instructions from Mr David as to the bank account from which he wished payments to be debited, and that he wished payments to be made fortnightly rather than monthly. The document was then completed by Ms Jajoo and signed by the Plaintiffs.
79 Ms Jajoo 's affidavit continued:
"40. I then looked at 2 documents each entitled "Declaration by Borrower". The conversation continued in words to the following effect:
Me: "Now, you each have a separate certificate to sign called a Declaration by Borrower. By signing it you each declare to the bank that you are the borrowers of this loan from Macquarie Bank, and that you are giving to the bank as security your house at 39 Orchard Rd, Fairfield. You are acknowledging that you have seen me as your solicitor and I have explained to you the legal effect of the mortgage of your house and the credit contract relating to the mortgage and the other documents. You are also declaring that after receiving that advice from me you are freely and voluntarily signing those documents. Now, do you each affirm the contents of this declaration I have just read to you to be the truth and nothing but the truth. Eddy?
Mr David: "Yes".
Me: "Grace?"
Mrs David: "Yes, sure."
Me: "You understand that you are signing this Declaration under the Oaths Act and if there are any false statements made by you, then you are committing perjury which is a crime."
Mrs David: "Yes."
Mr David: "Yes."
Me: "You understand that I am not giving you any advice regarding the financial effects of the loan such as your affordability of the loan and that the bank and I strongly recommend you to go and see an accountant or a financial advisor for that. This recommendation by the bank is on page 11 of your credit contract.
80 Mr and Mrs David each then completed, before Ms Jajoo, a Statutory Declaration. Each was in identical terms, omitting formal parts as follows:
"1. I am the borrower named in certain loan and security documents in favour of Macquarie Bank Limited (lender) relating to property located at 39 Orchard Rd, Fairfield.
3. I have received independent legal advice regarding the loan and security documents referred to in paragraph
(Specify the documents produced for signature)
3. Loan Agreement
(b) Mortgage
I Ancillary documents"
81 Following this meeting Ms Jajoo acted in the matter, according to her instructions. Her diary note of the meeting indicates that it commenced at 12 noon and terminated at 1.30pm.
82 She deposed to a telephone conversation with Mr David on 16 March, as follows:
"Me: Your settlement has been booked for Monday. The balance of the loan amount available on settlement is $247,861.00. That is after the lender's costs and expenses of $2,129.00 as I had told you in the conference have been deducted from your loan amount. There's also a $10.00 bank cheque fee to be deducted for each cheque additional to first three.
The pay out figure to Westpac is in the sum of $64,238.22.
Our bill has come up to $822.00, which includes $605.00 for our professional costs for acting for you on the mortgage and the discharge including GST, and Disbursements which included $16.00 for final search fees, $85.00 for attendances and $116.00 for Sundries.
So you're left with $182,800.78 which I need to know how you want it paid."
Mr David: "That's all fine. Out of that we want a cheque in the sum of $150,000.00 to be drawn in the name of Karl Suleman Enterprizes and the balance to both Grace and I."
Me: "Have you obtained independent legal and financial advice on whatever contract it is that you're planning to enter with Karl Suleman. Because we don't advise on matters involving Karl Suleman. We don't know the status of Karl Suleman's current business structure and are not in a position to approve or disapprove (the words used in Assyrian were "le masyan makhshekhan" meaning 'I can not recommend/advise in favour of or not/approve or disapprove') of any of his business deals (the word used in Assyrian was 'Mumla' meaning 'commercial dealing'). Suzy David from our office has referred Karl Suleman to another firm of lawyers, who are trying to work out how to restructure the whole thing. Apparently the way that the structure is currently it doesn't look to be right and it could have problems with certain laws and regulation. So it may be that the present set up must be changed so it does comply with the law. At the moment we don't know the extent nor as a matter of fact any of the details of Karl Suleman, you should wait for a while to see what will happen."
Mr David: Look, I know many people who are in business with Karl. Some of my cousins have invested with him more than once and they're all making a lot of money. We're in business and we don't care about taking risks. Anyway, my first cousin is one of the best financial advisors in Australia, so we just want you to finalise the mortgage documents for us for the loan. Also, I need to collect the breakdown of the expenses before settlement."
Me: "That's fine. I'll have a letter ready for you collection at the reception together with a copy of the fax from Westpac stating that the E-G Plumbing's overdraft must be paid out on settlement, so you need to put some money in that account if you have direct debits attached to it, or you must cancel all the direct debitings with you suppliers."
Mr David: "No worries. I'll take care of that."
Me: "You can collect your cheques from our office on Tuesday."
83 The mortgage transaction was duly completed and on 20 March, Mr David collected, as he deposed, two cheques, one in favour of the Plaintiffs for $32,800.78 and the other in favour of Suleman Enterprizes for $150,000.
84 According to Ms Jajoo, the statement regarding legal advice, inadvertently, was not signed by the Plaintiffs in her office on 6 March, but was signed by them subsequently and delivered to her office by 18 March.
85 Ms Jajoo was cross-examined as to her knowledge of the involvement of the partners of DDS, professionally and commercially, with Mr Suleman and as to his business interests. She said that she was aware that the First and Second Defendants were involved with Mr Suleman towards the end of 2000 in a transaction involving the purchase and resale of some scooter wheels, which returned them a profit. She was also aware that Mr Suleman used the name Froggy in connection with his business interests and that early in 2001 a company was incorporated as Froggy Music Pty Ltd, the registered address of which was the office of DDS at Fairfield. She said that the First and Second Defendants were to take a financial interest in this company, which it was intended would operate music stores.
86 Ms Jajoo said that she first met Mr Suleman in September 2000. Some time later she became aware that he was conducting a trolley collection business. She was also aware that from about December 2000 he attended the offices of DDS from time to time as a client. She, however, did not do any professional work for him, herself. She did, however, act for a number of clients in the refinancing of their properties in order to invest part of the proceeds of the refinancing with Suleman Enterprizes and knew that questions as to the legality of the investment scheme had been referred by DDS to Messrs Mallesons, Stephen, Jacques (Mallesons) solicitors. The Second Defendant was primarily involved in this legal work and had told Ms Jajoo, about December 2000, that Mr Suleman's business "setup" was being restructured. She knew at the time, from conversations with members of the Assyrian community of which she was part, that people appeared to be making a lot of money by investing in Mr Suleman's business schemes but she said she did not know any details.
87 There was the following exchange with Mr Baran in cross-examination:
"Q. Did it concern you, in respect of these two particular clients, that your firm was representing Karl Suleman and Karl Suleman Enterprises at the same time as you were representing people who were refinancing their property where part of that refinance was to be invested with your client?
3. In respect of the refinance?