4 In these reasons, I provide a background to the matters in issue between the parties, before describing the trial, the issues between the parties and my resolution of those issues. The final section of these reasons is my conclusion and call for submissions as to orders.

Background: the second mortgage sought to be enforced

5 The matters I set out in this section are not in contest.

6 The defendants (respectively Mr and Mrs Janceski and together Mr and Mrs Janceski, the Janceskis or the defendants) are and have been at all material times the registered proprietors of a residential property on Collingwood Street in Dianella in this state: it is and has been at all material times their residence (the Collingwood Street property). They have two sons, the eldest of whom is Michael Mario Marjan Janceski Knight (Mr Knight).

7 By contract of sale by offer and acceptance bearing the date 24 August 2002 (the 24 August 2002 agreement to sell) the plaintiff (Choice, or the plaintiff), as trustee of a superannuation fund, agreed to sell, subject to finance, to Mr Knight, as trustee of the Knight Family Trust, Unit 3 in a development on Janet Street, West Perth (the Janet Street unit). The purchase price was $375,000. The finance condition was for a first mortgage to secure the amount of $220,000 in favour of Reliance Finance and Mortgage Services (Reliance), the trading name for Walthamstow Pty Ltd (Walthamstow). There was also provision for mortgages in favour of Choice. The mortgages so provided for were to secure the amount of $175,000 provided for under the 24 August 2002 agreement to sell in the events that happened. The mortgages were to be over three properties. One was a property on Ingleton Lane in Mount Lawley, the registered proprietor of which was Mr Knight (the Ingleton Lane property). The other two were the Collingwood Street property and the Janet Street property.

8 A first mortgage in favour of Walthamstow over the Janet Street property was registered on 4 September 2002. The mortgage appears to have been executed on 31 May 2002 and shows the mortgagee as Walthamstow and the amount secured as $220,000. I will call the first mortgage over Janet Street so registered Walthamstow's first mortgage over the Janet Street property.

9 On 20 August 2002, two other mortgages in favour of Walthamstow were executed, by Mr Knight and by the Janceskis, respectively, in each case showing the amount secured as $260,000. This was the amount shown as the advance under a loan agreement dated 20 August 2002 between Walthamstow as lender, Mr Knight as borrower and Mr and Mrs Janceski as guarantors. I will call this the Walthamstow loan agreement with Mr Knight and the Janceskis. The amount to be provided under the Walthamstow loan agreement with Mr Knight and the Janceskis was in addition to the amount of $220,000 provided by Walthamstow to permit the acquisition of the Janet Street property. I will return below to the purposes of this finance under the Walthamstow loan agreement with Mr Knight and the Janceskis. By deeds of guarantee and indemnity dated the same date, 20 August 2002, Mr and Mrs Janceski provided guarantees in respect of the lending facilities granted by Walthamstow to Mr Knight under the Walthamstow loan agreement with Mr Knight and the Janceskis (the Deeds of Guarantee and Indemnity by the Janceskis). It was common ground before me that Mr and Mrs Janceski had no liability to Walthamstow in respect of the $220,000 secured by Walthamstow's first mortgage over Janet Street.

10 One of the two other mortgages was executed by Mr Knight over the Ingleton Lane property (Walthamstow's mortgage over the Ingleton Lane property). I do not have any evidence as to the registration of that mortgage. The other of those mortgages was executed by Mr and Mrs Janceski over the Collingwood Street property, and this mortgage was registered as a first mortgage on 4 September 2002. I will call the first mortgage over Collingwood Street so executed Walthamstow's first mortgage over the Collingwood Street property.

11 An instrument granting second mortgages in favour of Choice, showing the amount secured as $175,000, over the Ingleton Lane property and the Janet Street property and bearing the date 3 September 2002, was executed by Mr Knight who as mortgagor was liable to pay the amount secured; this mortgage was registered on 4 September 2002. I call the registered second mortgage over the Janet Street property Choice's second mortgage over the Janet Street property.

12 An instrument granting a second mortgage in favour of Choice, showing the same amount secured and bearing the same date, 3 September 2002, over the Collingwood Street property was executed by Mr and Mrs Janceski who as mortgagors were liable to pay the amount secured. I call the registered second mortgage Choice's 2002 second mortgage over the Collingwood Street property.

13 All three second mortgages were registered on 4 September 2002.

14 Later in 2002 the Ingleton Lane property was sold, and the proceeds were used to pay down the amount due under the Walthamstow loan agreement with Mr Knight and the Janceskis, leaving a balance of about $86,000.

15 On 15 April 2003 Registrar's Caveat I 449276C was lodged in respect of the Janet Street property showing in the box '... in order to protect the interest' the words 'of the beneficiaries disclosed by Deed of Trust I424434'. It does not appear to be in contest that that Caveat was in respect of the interests of the beneficiaries under the Knight Family Trust: as has been seen, the Janceskis were among the beneficiaries under that trust.

16 In late November 2003 Walthamstow issued a default notice against Mr and Mrs Janceski and Mr Knight for default in paying the balance under the Walthamstow loan agreement with Mr Knight and the Janceskis.

17 In May 2004 Mr and Mrs Janceski executed an Equity Direct Loan Agreement with Pepper Finance Corporation Limited to borrow $214,200 to be applied principally to pay out the amount due (including interest) under the Walthamstow loan agreement with Mr Knight and the Janceskis (the Pepper Finance agreement). By the terms of the Pepper Finance agreement, the borrowing was to be secured by a first registered mortgage over the Collingwood Street property.

18 On 21 July 2004 the funds under the Pepper Finance agreement were made available, from which funds totalling $156,923.12 were collected by Reliance. That sum was applied to pay out the amount due under the Walthamstow loan agreement with Mr Knight and the Janceskis with the balance, $49,948.13, applied to reduce the arrears owed by Mr Knight under Walthamstow's first mortgage over the Janet Street property. On the evidence before me consisting of e-mails from Mr Knight to an officer of Choice of 28 May and 1 July 2004, and a letter dated 15 July 2004 from that officer to Mr Knight and the Janceskis, it would appear that at least part of the remainder of the funds under the Pepper Finance agreement, in the amount of $30,000 or thereabouts, was to be made available to Choice for their agreement to allow Pepper Finance to replace Walthamstow as first mortgagee, and it was common ground that there was such an allocation of such a sum from those proceeds.

19 On 23 July 2004 a first mortgage in favour of Pepper Finance as mortgagee and executed by Mr and Mrs Janceski as mortgagors, and a second mortgage in favour of Choice as mortgagee and executed by the Janceskis as mortgagors, were registered against the Collingwood Street property. I call this second mortgage, which replaced Choice's 2002 second mortgage over the Collingwood Street property, Choice's 2004 second mortgage over the Collingwood Street property, and the two second mortgages over the Collingwood Street property Choice's second mortgages over the Collingwood Street property. As under Choice's 2002 second mortgage over the Collingwood Street property, Mr and Mrs Jancescki as the mortgagors under Choice's 2004 second mortgage over the Collingwood Street property were liable to pay the amount secured by it.

20 The present action is to enforce Choice's 2004 second mortgage over the Collingwood Street property.

21 On 2 December 2004 Walthamstow issued a default notice against Mr Knight calling for payment of the principal and interest due under the Walthamstow's first mortgage over the Janet Street property and extension agreements with respect to it.

22 On 8 March 2005 Walthamstow gave written notice to Mr Knight of its intention to exercise its power of sale under Walthamstow's first mortgage over the Janet Street property.

23 On 21 March 2005 Choice issued a default notice against Mr Knight in respect of his indebtedness to Choice, and against Mr and Mrs Janceski in respect of their indebtedness to Choice secured by Choice's 2004 second mortgage over the Collingwood Street property. That default notice called for the payment of the same sum as arrears from Mr Knight and from Mr and Mrs Janceski, failing which the balance of Mr Knight's indebtedness to Choice would become payable and Choice could among other things exercise any or all of its rights under Choice's 2004 second mortgage over the Collingwood Street property.

24 On 27 April 2005 Choice commenced the present proceedings for enforcement of Choice's 2004 second mortgage over the Collingwood Street property.

25 In December 2005, following Walthamstow's sale of the Janet Street property as mortgagee the balance of the proceeds of the sale, after payment to Walthamstow and its solicitors, was paid to Choice. That balance was approximately $31,000. It is not in contest that after that payment there remained under the terms of Choice's 2004 second mortgage over the Collingwood Street property a substantial balance for principal plus interest owing, that balance being as at 31 July 2010 the amount of $266,345.69, with daily interest accruing at the rate of $66.99 from 1 September 2010.

26 I turn now to provide further background on Mr and Mrs Janceski, Choice, the purchase of the Janet Street property and subsequent events.

Background: real property transactions in which the Janceskis were involved before the purchase of the Janet Street property

27 The following is not in contest, except as indicated.

28 Mrs Janceski was born on 11 February in 1948 in a small village in Macedonia. She had schooling only to Year 4, in which she was taught Macedonian but not English.

29 I do not have any corresponding evidence for Mr Janceski, who did not testify at the trial. However, it was not in contest that Mrs Janceski met Mr Janceski in a neighbouring village and that the two married in 1966.

30 Mr and Mrs Janceski's son Michael (Mr Knight) was born 11 February 1968 and their other son, Kiro, was born on 4 December 1970.

31 In 1971 the Janceskis and their sons migrated to Australia. After a stay in Melbourne, they moved to Perth.

32 After an initial period of about 6 months Mrs Janceski began work in a bakery packing bread. Her evidence was that she worked there for about 6 years, although this is not readily to be squared with her evidence as to when she left that job that I will reach.

33 Mrs Janceski did not have any English initially, and acquired English through watching television and talking with those with whom she worked over the years. She was unable to do any course on English for migrants because she had to care for her family. She particularly had to care for her son Kiro, who was intellectually disabled.

34 I do not have corresponding evidence for Mr Janceski, save, as I will indicate, that at the times indicated below he was a labourer, that he was working full-time in 1984 and that it appears he received a redundancy payment no later than 1989.

35 In the early 1970s Mr and Mrs Janceski bought a house on Fitzgerald Street in North Perth, being Lot 4 on Diagram 3956 and being all that land comprised in Certificate of Title Volume 1352 Folio 926 (the Fitzgerald Street property). For that purpose they took out a home loan and mortgage with the ANZ bank. A transfer of the Fitzgerald Street property to the Janceskis and a mortgage over it to the ANZ bank were both registered on 21 June 1973. The transfer shows the consideration as $13,000 and the mortgage appears to show the principal amount secured as $10,000, while both the transfer and the mortgage show Mr Janceski as 'labourer' and Mrs Janceski as 'married woman'.

36 The Janceskis repaid the loan to the ANZ bank in about three years.

37 Mrs Janceski's evidence was that when they 'bought' the Fitzgerald Street property she left her job at the bakery and began to work as an office cleaner on St George's Terrace. She had to leave that job when Kiro who also had epilepsy became very ill. This evidence as to when she left her job at the bakery is not readily to be squared with her evidence as to how long she worked at that job, described earlier. The difference is not significant, except to show, as I will indicate as to a number of other contexts, that her evidence as to times and dates may not always be reliable.

38 Some time later she began to work at Royal Perth Hospital as a night cleaner, a job she had for six years, until in 1984 she had to stop work again to care for Kiro.

39 At about that time Mr and Mrs Janceski acquired the Collingwood Street property, being Lot 223 on Plan 9063 and all of the land comprised in Certificate of Title Volume 132 Folio 138A. For that purpose they borrowed the larger part of the purchase price from the ANZ bank on mortgage security over the Collingwood Street property. The transfer of the Collingwood Street property to the Janceskis is dated 8 March 1984 and shows the consideration as $59,000. There were two mortgages over the Collingwood Street property in favour of the ANZ bank by the Janceskis, both dated 12 April 1984. One appears to indicate the principal amount secured as $33,000; the other, expressed to be the subject to the first, appears to indicate the principal amount secured as $6,000. The transfer and two mortgages were all registered on 18 April 1984 and all show Mr Janceski as 'labourer' and Mrs Janceski as 'housekeeper'. The Janceskis put towards the purchase both a compensation payout Mrs Janceski had received when she finished work and Mr Janceski's redundancy payment. They kept the Fitzgerald Street property as a rental property.

40 Mrs Janceski's evidence was that in about 1989 the Janceskis repaid their indebtedness on the purchase to the ANZ bank. However, the evidence from the Certificate of Title (exhibit A p 22) shows a discharge only of the first of the two ANZ mortgages, registered on 4 October 1991. At the same time, it is common ground that the Collingwood Street property, as well as the Fitzgerald Street property, were both unencumbered over the period from about October 1991 to February 1999, when the Janceskis granted the mortgage over the Fitzgerald Street property I will reach.

41 Mrs Janceski testified that in 1989 the Janceskis gave the Fitzgerald Street property to Mr Knight 'to do with it what he wanted ... [w]e didn't have anything to do with it anymore'. This evidence is inconsistent with the evidence as to the mortgaging and sale of the Fitzgerald Street property I will shortly reach, and in view of the nature of the latter evidence and to the extent of the inconsistency I would reject the former evidence.

42 In 1997, Mr Knight as Trustee executed a Deed of Settlement constituting the Knight Family Trust. By the terms of the trust Mr and Mrs Janceski were among the General Beneficiaries and, jointly with Mr Knight, Guardian and Appointor.

43 In February 1999 Mr and Mrs Janceski executed a mortgage over the Fitzgerald Street property to secure a borrowing from Walthamstow (Walthamstow's mortgage over the Fitzgerald Street property). Mrs Janceski testified she had no recollection of such a borrowing, although she acknowledged having signed the mortgage document. However, she remembered borrowing the sum of $50,000 from Reliance. The mortgage document, showing the mortgage registered on 26 February 1999, also shows the principal sum secured by a mortgage given to Walthamstow by the Jancesckis over the Fitzgerald Street property to be $100,000. Mrs Janceski could not recall what the $50,000 borrowed was for or what was done with the $50,000, other than that the Janceskis 'needed money for something'. There is no evidence from Mr Knight that he was involved in any such borrowing from Reliance or from Walthamstow or in relation to the proceeds of either in any way. I find from this body of evidence that in February 1999 the Janceskis borrowed $100,000 from Walthamstow and granted it a mortgage over the Fitzgerald Street property to secure the loan.

44 By loan application dated 12 May 1999 Mr and Mrs Janceski applied to Resi Home Loans, a trading name of Residential Housing Corporation Pty Ltd, for a loan of $144,380 with security offered in the form of a mortgage over the Fitzgerald Street property. The purpose of the loan was stated as 'investment (property) - refinance'. Mrs Janceski testified she had no recollection of the loan application. A Statement of Account from Perpetual Trustees Victoria Ltd 'Account Manager RESI Home Loans' shows as an initial entry for 24 June 1999 a 'Settlement Amount' of '$144,380'. On 28 June 1999 a mortgage over the Fitzgerald Street property by the Janceskis in favour of Perpetual Trustees Victoria (the Perpetual Trustees mortgage over the Fitzgerald Street property) was registered, and on the same day a discharge of Walthamstow's mortgage over the Fitzgerald Street property was registered. There is no evidence from Mr Knight that he was involved in this transaction or its proceeds in any way. I would infer from these matters that the mortgage in favour of Perpetual Trustees Victoria related to the loan obtained from Resi Home Loans, which was used by the Janceskis at least in part to discharge the debt secured by Walthamstow's mortgage over the Fitzgerald Street property.

45 By transfer of land dated 18 December 2000 and registered 21 December 2000 the Janceskis transferred the Fitzgerald Street property to a third party for a consideration of $210,000. Mrs Janceski's testimony was that 'we sold the North Perth property [the Fitzgerald Street property]'. She further testified that '[w]e took some money for the house' but she could not remember where the money went. At the same time, she testified that '[m]aybe Michael took them [the money] or something. Maybe we used them for the house in Dianella. I do not remember. I don't know'. She also testified that they may have permitted him to take the proceeds to buy a property for himself on Fitzgerald Street, but she also testified 'I'm not sure what we did'. There is no evidence from Mr Knight that he was involved in this sale transaction or its proceeds in any way. There is evidence from the Certificate of Title to the Fitzgerald Street property in evidence before me that on 21 December 2000 a discharge of the Perpetual Trustees mortgage over the Fitzgerald Street property was registered. I would infer on all of the evidence before me that the Janceskis used at least part of the proceeds of the sale to discharge the Perpetual Trustees mortgage over the Fitzgerald Street property.

46 By a transfer of land executed on 31 January 2002 and registered on 8 February 2002 Mr and Mrs Janceski and Mr Knight, as tenants in common in equal shares, took a transfer of certain lands in the suburb of Westminster. The consideration was shown as $232,000. The lands were two lots with houses on them, on Arkana Road in that suburb, being Lot 342 on Plan 8907, the whole of the land comprised in Certificate of Title Volume 38 Folio 152A; and being Lot 343 on Plan 8907, the whole of the land comprised in Certificate of Title Volume 38 Folio 153A (the Arkana Road properties).

47 Mrs Janceski's testimony was that she found the Arkana Road properties as available for purchase in a local community newspaper and told her son that if they bought them they could make 'a lot of money'. It was her idea that the Janceskis and Mr Knight buy the Arkana Road properties; that they would be rented out to repay the loan for the purchase, with any additional contributions from the Janceskis' pension income and from Mr Knight's earnings; and that at a later stage they would sell the smaller of the Arkana Road properties and the Collingwood Street property and the Janceskis would move into the larger one with Kiro.

48 Mrs Janceski's testimony was initially that the Janceskis and Mr Knight obtained the loan for the purchase from Walthamstow. However, her later testimony was first that she could no longer remember from whom they had obtained the loan, and then that they obtained the loan from Liberty Funding Pty Ltd (Liberty). This last testimony is consistent with the evidence in the form of a document 'Investment loan agreement (variable rate) schedule' between Liberty and Mr Knight and the Janceskis bearing the signatures of the last three, dated 17 January 2002 and showing the amount of credit as $470,000, with security to be in form of first mortgages over four properties. Those mortgages were to be over the Arkana Road properties, over the Collingwood Street property and over a property at 107 Ingleton Street in Mt Lawley. This last appears to be the Ingleton Lane property, being Lot 6 on survey strata plan 39276 and the whole of the land comprised in Certificate of Title Volume 2500 Folio 85.

49 I note that the Certificate of Title for the Ingleton Lane property in evidence before me shows that on 3 December 2001 a mortgage H945898 to Liberty was registered over that property. There is also evidence in the form of a mortgage H945894 to Liberty over the Collingwood Street property, with an attestation sheet dated 30 November 2001 and registered 3 December 2001, indicating the sum secured was $200,000; and evidence in the form of a mortgage I9703M granted by Mr Knight and the Janceskis to Liberty over the Arkana Road properties, with an attestation sheet dated 17 January 2002 and registered 8 February 2002, indicating the sum secured was $470,000. I call the mortgages H945898, H945894 and I9703M respectively Liberty's mortgage over the Ingleton Lane property, Liberty's mortgage over the Collingwood Street property and Liberty's mortgage over the Arkana Road properties.

50 As will become apparent, the evidence indicates that following enforcement proceedings by Liberty the balance of the borrowing from that company, after the application of the proceeds of the re-sale of the Arkana Road properties, was re-financed by a borrowing from Walthamstow. I find then that Mrs Janceski was mistaken in her initial testimony as to the source of the borrowing for the purchase of the Arkana Road properties.

51 By writ of summons dated 21 May 2002 Liberty commenced proceedings (CIV 1675 of 2002) against Mr Knight and the Janceskis. Liberty's claim was principally for possession of the Ingleton Lane property pursuant to the terms of Liberty's mortgage over the Ingleton Lane property; possession of the Collingwood Street property pursuant to the terms of Liberty's mortgage over the Collingwood Street property; possession of the Arkana Road properties pursuant to Liberty's mortgage over the Arkana Road properties; and the sum of $482,061.25 calculated to 10 May 2002 plus interest, 'pursuant to the terms of the Mortgage' from and including 10 May 2002. Mrs Janceski's testimony was that she could remember nothing as to a demand by Liberty for the money owed it. However, on the evidence of affidavits of service of the writ of summons on Mr and Mrs Janceski I find that they were both personally so served.

52 Further, Mrs Janceski acknowledged in her testimony that Mr Knight explained to Mr and Mrs Janceski that because of late payment Liberty was seeking the payment of the money owed it. He told them Liberty had taken them to court. She also testified that (cross-examination, ts 610):

When we went there, we told the judge that the houses were already put for sale and he said it was fine, so after that we didn't have any problems. It was finished.

So you were sued in this court by Liberty for not paying back the loan, weren't you, Mrs Janceski?---We only went to court for one day. It was just for one day and the man from Liberty was there and when we told them that the houses were already put for sale, he said he didn't know, so everything was finished quickly and we never had problems with them again.

53 In evidence in these proceedings was the transcript of a status conference in CIV 1675 of 2002 on 27 June 2002 at which Mr Knight and the Janceskis were present and at which Mr Knight indicated that it was proposed to sell the Arkana Road properties and pay out about 50% of the amount owing to Liberty, with the balance to be refinanced. Also in evidence in these proceedings was a contract of sale of the Arkana Road properties dated 22 June 2002 showing a purchase price of $270,000 (the agreement to sell the Arkana Road properties of 22 June 2002).

54 Mrs Janceski's testimony was also that when she became aware that the rental income from the Arkana Road properties was not what had been expected, that Mr Knight was not able to contribute because he had become ill, he had not been working 'for a long time' and that the Janceskis' pensions were insufficient to make up the shortfall, it was decided to sell the Arkana Road properties to repay Liberty. The decision to not to sell the Collingwood Street property was because Mr Knight's name was not on the title to that property while his name as well as the Janceskis' was on the title to the Arkana Road properties; and because the debt owed to Liberty was his as well as the Janceskis'. Mrs Janceski acknowledged she had 'worked that out' and 'made that decision'.

55 On 20 August 2002 Mr Knight and the Janceskis executed a range of documents in favour of Walthamstow, including the Walthamstow loan agreement with Mr Knight and the Janceskis, for an advance of $260,000. Under these arrangements, Mr Knight was borrower, who would provide a mortgage over the Ingleton Lane property; and the Janceskis were guarantors, who would provide a mortgage over the Collingwood Street property. Among the documents enclosed with a letter dated 14 August 2002 from Steven Alick Masel to Mr Knight and the Janceskis apparently including that range of documents for execution, there is a 'Form 1 Notice'. That document states the purpose of the advance of $260,000 as 'to refinance existing loan and raise further funds for improvements to investment property and for the purchasing of an investment property'. Mr Masel was the Managing Director of Walthamstow, and his unchallenged evidence at the trial was that Walthamstow's first mortgage over Collingwood Street was 'a refinancing arrangement and Reliance Finance took over as first mortgagee from a previous financier'.

56 By facsimile dated 4 September 2002 from a settlement agency to Mr Masel, he was asked to draw cheques 'for settlement' to Liberty in the amount of $275,524.55, to Choice in the amount of $182,056.25 and a sum for the settlement agency. By a letter dated 5 September 2002 from Mr Masel to Mr Knight, Mr Masel confirmed the disbursement of funds totalling $480,000 from Walthamstow's first mortgage over the Janet Street property (shown as $220,000) and from Walthamstow's mortgage over the Ingleton Lane property and from Walthamstow's first mortgage over the Collingwood Street property (shown as $260,000), including to meet that request from the settlement agency.

57 On 5 September 2002 a transfer of the Arkana Road properties dated 4 September 2002 to the person shown as purchaser in the agreement to sell the Arkana Road properties of 22 June 2002 was registered. The transfer shows the consideration as $270,000.

58 On 24 September 2002 Liberty discontinued CIV 1675 of 2002.

59 I find on the body of evidence I have reviewed as to the satisfaction of the debt owed to Liberty that the advance of $260,000 under the Walthamstow loan agreement with Mr Knight and the Janceskis was made, together with the proceeds of the agreement to sell the Arkana Road properties of 22 June 2002, for the purposes of that satisfaction, among other things, and that Walthamstow's first mortgage over Collingwood Street was security for the obligations of the Janceskis as guarantors under the former agreement.

60 As I have previously indicated, the obligations under the Walthamstow loan agreement with Mr Knight and the Janceskis were ultimately satisfied as a result principally of the application of the proceeds of the sale of the Ingleton Lane property and of the provision of funds under the Pepper Finance agreement.

61 I turn now to the background to and events following the purchase of the Janet Street property, a purchase which ultimately resulted in Choice's 2004 second mortgage over the Collingwood Street property.

Background: the purchase of the Janet Street property and subsequent events

62 The events I describe here began at about the time of Liberty's proceedings against Mr Knight and the Janceskis.

63 On or about Saturday 18 May or Sunday 19 May 2002 Mr Knight went to a home open for a completed development at 2A Janet Street, West Perth. This development consisted of four three storey townhouse units. One of those units was the Janet Street property. The owner of that development was Choice, as the trustee of the Choice Construction Superannuation Fund (the Fund). Joseph Michael Anthony Nardizzi (Mr Nardizzi) and his wife Yolanda Rita Nardizzi (Mrs Nardizzi) were the principal beneficiaries of the Fund. Mr Nardizzi, who was a qualified registered builder, operated Choice. It was not in contest, and could not be contested, that the knowledge of Mr Nardizzi was the knowledge of Choice. See Austin, RP and Ramsay, IM, Ford's Principles of Corporations Law (14th ed, 2010) [16.190], [16.200].

64 Mr Nardizzi also operated Elders Real Estate West Coast Central (Elders), which has since become known as Choice Estates. At the home open Mr Knight expressed to Mr Nardizzi a strong interest in buying the Janet Street property.

65 By a contract for sale of land by offer and acceptance dated 20 May 2002 with an annexure dated 21 May 2002 Mr Knight as trustee of the Knight Family Trust agreed to buy the Janet Street property for $375,000. The annexure provided for vendor finance from Choice in the amount of $195,000 if Mr Knight used a furniture and chattel allowance of $20,000, and $175,000 if he did not. The annexure also provided for security for the vendor finance to be granted over the Janet Street property, the two Arkana Road properties, the Collingwood Street property and the Ingleton Lane property. Except for the provision for the mortgage over the Arkana Road properties there was no material difference between this contract of sale and the 24 August 2002 agreement to sell. By the latter date, of course, there was the agreement to sell the Arkana Road properties of 22 June 2002, as I have indicated. The 24 August 2002 agreement to sell did not provide for any security over them.

66 On 4 September 2002, Mr Knight became the registered proprietor of the Janet Street property.

67 There is evidence that, on 17 January 2004, following the issue of Walthamstow's default notice of later November 2003 in respect of the balance due under the Walthamstow loan agreement with Mr Knight and the Janceskis, there was a meeting at the Collingwood Street property. At this meeting the Janceskis signed a letter of the same date to Elders authorising it and Mr Nardizzi to accept the appointment from Reliance as first mortgagee to sell the Janet Street property. The letter went to say, among other things, that in the presence of Mr Knight Mr Nardizzi had explained 'the implications' of the mortgagee sale of the Janet Street property, and the 'real possibility' of Reliance also exercising its right to sell the Collingwood Street property. Mrs Janceski's testimony was that, while she recognised her signature on the letter, she could not remember the meeting; and she strongly denied that Mr Nardizzi had explained anything to her and Mr Janceski.

68 On his testimony Mr Knight, beginning about February 2004, began discussions with Mr Nardizzi to have Choice facilitate the refinancing of the debt owing under the Walthamstow loan agreement with Mr Knight and the Janceskis. Choice's initial position was that, in order to discharge its second mortgage over the Collingwood Street property, it should be paid out in full. These negotiations continued until July 2004. As a result of the negotiations Mr Nardizzi accepted there would be a payment which was ultimately $30,000 towards Choice's debt in return for its discharge of Choice's 2002 second mortgage over the Collingwood Street property and its replacement by Choice's 2004 second mortgage over the Collingwood Street property.

69 Mr Knight's testimony was that during the course of the negotiations Mr Knight told Mr Nardizzi that the Janceskis had not understood and wanted to challenge Choice's second mortgage over the Collingwood Street property, with Mr Knight telling him that the Janceskis' complaint was because Mr Knight had not explained the transaction to them. Mrs Janceski's testimony was that in early 2004 she had learnt from a real estate agent of Choice's second mortgage on the Collingwood Street property. As she had previously been unaware of that mortgage, and considered she had no agreement with Mr Nardizzi, she complained to him. Mr Knight's testimony was also that he understood that a 'problem' with Choice's second mortgage over the Collingwood Street property was a part of the negotiations with Mr Nardizzi, and was a part of why Mr Nardizzi was willing to negotiate.

70 Following advice Mr Nardizzi received from the solicitors for Choice, by letter dated 5 June 2004 he wrote to Mr Knight and the Janceskis (Mr Nardizzi's letter dated 5 June 2004) enclosing among other documents Choice's 2004 second mortgage over the Collingwood Street property, translator's certificates for the Jancekis and solicitor's certificates for the Jancekis and Mr Knight with instructions to have all of them completed and returned. Mr Nardizzi in his letter also asked them to provide a copy of the deed of the Knight Family Trust and Mr Knight to confirm he had the power under the trust deed to borrow and give security on behalf of the trust. I note that it was not in contest in these proceedings that Mr Knight had such power.

71 On 9 June 2004, before the negotiations had concluded, Mr Knight and the Janceskis went to the office of a solicitor, Vladimir Veselko Ozich, where they signed Choice's 2004 second mortgage over the Collingwood Street property, among other documents. Mr Ozich's practice included providing independent legal advice for borrowers and mortgagors who had 'had a connection with former Yugoslavia and the regions that the former Yugoslavia comprised', including persons 'of ... Macedonian origin'.

72 Mr Ozich had previously met with the Janceskis on 20 August 2002 when, as to the documents they had signed before him then that included the Walthamstow loan agreement with Mr Knight and the Janceskis, Walthamstow's first mortgage over the Collingwood Street property and the Deed of Guarantee and Indemnity by the Janceskis, he testified (ts 1565):

I can't recall the exact words I used at the time but in accordance with my normal practice I would have gone through each of the documents and summarised what the documents are about.

73 This evidence is not a clear affirmation that Mr Ozich did in fact provide the explanations in question. However, that he did follow the 'normal practice' he testified to derives support from the contemporaneous solicitor's certificates dated 20 August 2002 he executed, one for each of Mr and Mrs Janceski, stating that he had advised the 'guarantor' of the 'legal nature and effect of the documents before any were signed'. Mr Ozich identified these documents which were in evidence before me, and I consider I can accept them as evidence of the truth of their contents under Evidence Act 1906 (WA) s 79C(2a).

74 Mr Ozich's testimony was that his explanations had been in Serbo-Croatian. Mr Ozich's testimony was also that he believed the Janceskis understood his explanations.

75 Mrs Janceski in her testimony accepted that she and Mr Janceski had seen Mr Ozich and signed those documents before him then but she could not remember if he had explained them to her.

76 Mr Ozich's evidence including that he believed that the Janceskis understood his explanations was not challenged in cross-examination except in the respect I will shortly reach.

77 I consider Mr Ozich, on the basis of the clear and consistent way in which he gave his evidence, to be a truthful witness. However, I will return below to a challenge in cross-examination that the defendant made to the soundness of his belief that the Janceskis understood his explanations, on the basis of the language, Croatian or Serbo-Croatian, which he used to provide his explanations. I will indicate I do not consider that challenge made out.

78 I find on the evidence of Mr Ozich and the documents I have referred to that in August 2002 Mr Ozich provided the explanations he testified he would have provided to the Janceskis pursuant to his normal practice, and that he believed then that the Janceskis had understood them.

79 It may be noted there is no evidence the Janceskis met with Mr Ozich concerning, or signed before him, Choice's 2002 second mortgage over the Collingwood Street property. Nor is there any evidence that the Janceskis received any other independent advice concerning it before they executed it. There is evidence from Mr Nardizzi that he met with the Janceskis in late May 2002 in which he told them that Mr Knight's purchase of the Janet Street property would involve the placement of second mortgages over a number of properties, including the Collingwood Street property; on 30 August 2002 in which he left the Janceskis with a draft of the mortgage for them to read and tell him if changes were needed; and on 3 September 2002 when he gave the Janceskis Choice's 2002 second mortgage over the Collingwood Street property telling them to check it and if it was correct to sign it and have it witnessed. Mrs Janceski's testimony was that she did not know she had signed a mortgage to Choice. In any event, there is no evidence that Mr Nardizzi or any one else explained to the Janceskis or either of them the nature of the 'mortgage' that Choice sought over the Collingwood Street property.

80 As will be seen, the matter of what documentation from Choice Mrs Janceski understood or could reasonably be seen to have understood she was signing in September 2002 is a matter of considerable significance in this case.

81 Mr Ozich's testimony was that at the meeting with Mr Knight and the Janceskis on 9 June 2004 he explained the nature of a mortgage to the Janceskis and that they were being asked to execute a second mortgage. He provided his explanations in Serbo-Croatian. He executed both printed solicitor's certificates and printed translator's certificates for each of the Janceskis in respect of Choice's 2004 second mortgage over the Collingwood Street property. He also executed a further handwritten document, as I will indicate.

82 Mrs Janceski's testimony was that Mr Ozich had provided no explanation of what they were signing, which as indicated included Choice's 2004 second mortgage over the Collingwood Street property. She also testified that it was 'very hard' for her to understand Croatian, which was the language which, in her final testimony on the matter, she said Mr Ozich 'mainly' used at the meeting. The matter of what Mr Ozich said to the Janceskis and what Mrs Janceski understood or could reasonably be seen to have understood at the time of the signing in June 2004 is also a matter of considerable significance in this case and I consider further evidence in relation to this below.

83 Mrs Janceski also testified that when, in early 2004, she complained to Mr Nardizzi after she discovered Choice's 2002 second mortgage over Collingwood Street he threatened to put her and Mr Janceski on the street. Subsequently he rang her repeatedly. She further testified she went to the meeting with Mr Ozich of 9 June 2004 as it was 'the only way to stop' Mr Nardizzi.

84 Mr Knight's evidence was also that Mr Nardizzi 'constantly made phone calls to us and also personal visits demanding the mortgage be signed or paid out'. The 'personal visits' included personal visits to his parents, although Mrs Janceski testified there was no pressuring of her and her husband by personal visits.

85 Mr Nardizzi's evidence was that it was only after the Janceskis signed Choice's 2004 second mortgage over Collingwood Street that he made 'unsuccessful and repeated attempts to contact [Mr Knight] by telephone'. He believed his calls were more constant in the latter half of 2004 when he was frustrated at the failure of the Janceskis to pay and it seemed he was unable to contact Mr Knight by telephone.

88 As I have previously indicated Choice commenced the present proceedings on 27 April 2005. It did so by writ with statement of claim.

89 On 3 June 2005 the defendants filed a defence, which on 16 June 2005 was amended pursuant to Rules of the Supreme Court 1971 (WA) O 21 r 5(1) (the Amended Defence of June 2005).

90 On 7 June 2005 Choice applied for summary judgment.

91 On 17 August 2005 Master Newnes (as his Honour then was) dismissed Choice's claim for summary judgment, for the reasons published as Choice Constructions Pty Ltd v Janceski [2005] WASC 186 (Choice, Newnes M).

92 On 22 September 2009 the trial commenced. Choice was represented by counsel with instructing solicitors in attendance. The Janceskis represented themselves. On that day for the reasons given then I granted leave for the defendants to rely on a defence in place of the Amended Defence of June 2005. That defence was subsequently filed as Amended Defence dated 28 July 2009 (Amended Defence of July 2009).

93 Of the two defendants, only Mrs Janceski appeared to take an active part in the trial. Mr Janceski was present for many of the early days of what proved to be a lengthy trial, but did not appear to take an active part. Mr Knight also sat in on much of the trial, in circumstances I will return to. Mrs Janceski was assisted by the services of a number of sworn interpreters.

94 I also permitted Mrs Janceski to have seated beside her, and to speak for her from time to time, a friend. This friend appears to me to have been of considerable assistance to her, and was of considerable assistance to the court. I confirm the court's gratitude for the friend's assistance.

95 The trial ran to 21 days of hearing, with some significant breaks between days, although one day was very short without any taking of evidence. There was also one day of oral closing submissions following receipt of written closing submissions. At the hearing of oral closing submissions I also allowed the parties to submit marked-up copies of their written submissions to supply references and other matters which they signalled a wish to provide. In the event both parties took up that opportunity.

96 As will become apparent the sole issues for the trial were those raised by the defence of unconscionability and a related matter. Accordingly, I permitted the defendants to adduce evidence first. They indicated a wish to call only one witness, Mrs Janceski. She gave evidence over 15 days, although her giving of evidence did not occupy more than one-half of all but one of those days.

97 During the trial, and before the closing of the defendants' case, the defendants indicated a wish to call Mr Knight. With the consent of the plaintiff I gave leave to the defendants to call him, and he gave evidence over two days.

98 For the plaintiff, the witnesses called were Mr and Mrs Nardizzi, with the former giving evidence over three days; Mr Ozich; and Mr Masel.

99 On 11 August 2011, at the time of the presentation of oral closing submissions, the defendants applied for leave to put in the witness statement of Mr Janceski dated 21 May 2009 which had been filed in accordance with the trial orders I made on 21 July 2009. As Mr Janceski had not given evidence at the trial, the trial orders required the leave of the court to put in his witness statement.

100 The defendants' submission to me was that given the medical condition of Mr Janceski that had developed over the trial and been made known to the plaintiff, it had not been thought appropriate to call him as a witness.

101 For the reasons I gave extemporaneously at the hearing, having principally to do with the way in which the matter of calling of other witnesses had been discussed extensively with the defendants at the beginning of the trial, and the way in which the trial had as a consequence been conducted, I did not grant the leave required.

103 I have previously indicated that there is no contest that Choice's 2004 second mortgage over the Collingwood Street property was duly executed or that the amounts calculated in the statement of claim as due under that mortgage are correctly so calculated.

104 The issues before me concern whether or not Choice's 2004 second mortgage over the Collingwood Street property is unenforceable as an unconscionable dealing.

105 The defendants' pleading as to the bases on which they say Choice's 2004 second mortgage over the Collingwood Street property is an unconscionable dealing has undergone significant change over the course of the proceedings.

106 In the Amended Defence of June 2005 the defendants pleaded that Choice's 2004 second mortgage over the Collingwood Street property was 'unconscionable' as:

• the defendants understood 'little English', having been born in a non-English speaking country and having received very little formal education;
• the plaintiff had known this but 'had not encouraged' them to seek 'independent legal advice' when Choice's 2002 second mortgage over the Collingwood Street property was executed;
• the plaintiff had them seek independent legal advice only when Choice's 2004 second mortgage over the Collingwood Street property was 're-registered', at a time when the defendants were 'under pressure' from Walthamstow to pay out Walthamstow's first mortgage over the Collingwood Street property and when the plaintiff had 'taken unfair advantage of [its] own superior bargaining power, or of the position of disadvantage' in which the defendants were placed;
• the defendants had 'no choice' but to execute the replacement mortgage as, if they did not, Walthamstow as first mortgagee would have 'foreclosed' on the defendants;
• the plaintiff knew that Mr Knight's purchase of the Janet Street property was made 'without any monetary deposit' and that Mr Knight was not in a position to be able to complete the purchase of that property without the defendants providing a mortgage over their own property as security; and
• the plaintiff did not inform the defendants they were bound to pay 'all interest and penalties due' in addition to the 'full amount of the guarantee (Mortgage)' with a 'similar guarantee (Mortgage)' for the 'same debt and identical terms and conditions' also registered on the Janet Street property, an apparent reference to Choice's second mortgage over the Janet Street property.

107 The Amended Defence of June 2005 was the form of the defence in place at the time of Choice, Newnes M.

108 In the Amended Defence of July 2009 the defendants plead that 'the guarantee (Mortgage) was unconscionable and therefore unenforceable - see Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1983) 151 CLR 447' and was also unconscionable because:

(a) The Defendants were at a 'special disadvantage' in dealing with Choice Constructions.

(b) The Defendants 'special disadvantage' affected their ability to make a judgement as to their own best interests.

(c) Consequently, there was an absence of any reasonable degree of equality between the parties; and

(d) Choice had knowledge of their 'special disadvantage' or the disabling condition was sufficiently evident to make it prima facie unfair or unconscientious that Choice procure or accept their consent to the impugned transaction.

109 The defendants plead that the 'special disadvantage' was

due to the following relevant factors:

(a) age;

(b) illiteracy or lack of education;

(c) unfamiliarity with the language;

(d) lack of business knowledge;

(e) emotional dependence (on their son Michael)

(f) the circumstances of the negotiations and how the mortgage came to be signed;

(g) the length and complexity of the documentation;

(h) the relative bargaining positions of the parties; and

(i) misrepresentations made and pressure applied (especially the threats and harassing phone calls by Mr Nardizzi).

Additionally the Defendants were faced with the problem of their son (Michael) suffering from severe depression thus placing additional stress and emotional concern upon the Defendants and as such giving rise to a further special disadvantage.

110 The defendants further plead that Choice had knowledge of the 'special disadvantage', and the following matters are referred to:

(a) It is clear from an email sent by Mr Nardizzi to Choice's solicitors that he was aware of the Defendants lack of English proficiency and commercial knowledge. Mr Nardizzi specifically states that the Defendants are not financial and that they may not understand the document in English.

(b) The Defendants believe that Mr Nardizzi was also aware of the Defendants emotional dependence on their son (Michael), as he states in his email to Choice's solicitors that the Defendants trusted and relied on their son (Michael).

the transaction was not fair, just and reasonable due to the fact that;

(a) Mr Ozich did not provide advice adequately or at all and further that the Solicitor's and Translator's Certificates are defective; and

(b) Mr Nardizzi's conduct, including the harassing phone calls and threats, do not make the transaction fair, just and reasonable.

112 It will be seen that there are a number of differences between the two Defences.

113 The principal difference as this emerged at the trial was a reliance in the Amended Defence of July 2009 on the defendants' pleaded lack of understanding of the documentation from Choice they were asked to sign in 2004 which has no equivalent in the Amended Defence of June 2005. In particular, the former Defence unlike the latter pleads lack of adequate advice and defective certificates from Mr Ozich where there is no such pleading in the latter. There is no indication I could find in Choice, Newnes M that the defendants then relied on any lack of understanding of Choice's 2004 second mortgage over the Collingwood Street property.

114 Both Defences appear not to have been settled by a legal professional, although the second at least appears to have been prepared after consultation with a source of legal advice. In particular, in the Amended Defence of July 2009 there is the evidence pleaded of the 'email sent by Mr Nardizzi to Choice's solicitors', together with the reference to Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447. However, the plaintiff did not take objection to any feature of the Amended Defence of July 2009, including the matter of evidence referred to.

115 As will be seen, that e-mail assumed considerable significance in the case of the defendants.

117 I did not understand there to be any contest as to the following statement of the law of unconscionable dealing. It is from Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 [219] [236] (Murphy J), making reference to Commercial Bank of Australia v Amadio; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51; Australia & New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457; and Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621, among other authorities. I set out Permanent Mortgages [219] [236] in full:

Equity's jurisdiction to set aside a transaction for unconscionable dealing is invoked where one party to the transaction is under a special disadvantage or disability in dealing with the other party, and that special disadvantage or disability was sufficiently evident to the other party to make it prima facie unfair or unconscionable for that other party to accept or retain the benefit of the transaction: Commercial Bank of Australia v Amadio; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621, 637.

The underlying equitable principle may be invoked 'whenever one party by reason of some condition or circumstance' is placed at a special disadvantage of which unfair and unconscientious advantage is taken by the other party: Commercial Bank of Australia v Amadio (462).

The special disadvantage will be sufficiently evident to the other party if the other party knows facts which would raise the possibility of the special disadvantage in the mind of a reasonable person: Commercial Bank of Australia v Amadio (467 - 468, 479).

Where such circumstances are shown to exist, the onus is on the other party to establish that the transaction was fair, just and reasonable: Commercial Bank of Australia v Amadio (474).

The special disadvantage need not have been created by the party taking the benefit of the transaction: Louth v Diprose (629).

The special disadvantage alleged must be one 'which seriously affects the ability of the innocent party to make a judgment as to his own best interests'; mere difference in bargaining power is insufficient: Commercial Bank of Australia v Amadio (462). The 'essence of such weakness is that the party is unable to judge for himself': Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 392; or 'to conserve his own interests': Blomley v Ryan (415); ACCC v C G Berbatis Holdings [12], [46], [55].

In this regard care must be taken not to 'eviscerate unconscionability of its meaning': NZI Capital Corporation v Fulton [1998] FCA 667 Black CJ & Lehane J, quoting Mason CJ in Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489, 503.

In ACCC v C G Berbatis Holdings, Gleeson CJ [14] said:

Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position. There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence ...

In ACCC v C G Berbatis Holdings, Gummow & Hayne JJ [56] also said that even a person in a 'greatly inferior bargaining position' may nevertheless not lack capacity to make a judgment about that person's own best interests.

In all cases, the court's equitable jurisdiction is to be exercised according to recognised principles, and the courts are not armed with a general power to set aside transactions which in the eyes of the judges appear unfair, harsh or unconscionable: Louth v Diprose (654) (Toohey J, although in dissent in the result). See also the observations of Sir Anthony Mason in 'The Impact of Equitable Doctrine on the Law of Contract', (1998) 27 Anglo-American Law Review 1, 12 cited by Debelle & Wicks JJ in Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265; (1999) 75 SASR 1 [648]:

There is a strong objection to simply equating the concept to what is unreasonable and unfair. The object of the doctrine is not to protect people from the consequences of their own mistakes. Because our contract law, unlike that of the United States, does not impose a general obligation of good faith and fair dealing, it is preferable to think of unconscionable conduct in terms of that which shocks the conscience, something which is harsh or oppressive in that it involves taking advantage of another's special disability or disadvantage. So understood, the concept is not one which is open-ended, to be applied according to the subjective whim of the Judge, though like other standards, such as that of 'the reasonable person', borderline applications will require an element of value judgment.

In Bridgewater v Leahy [76], Gaudron, Gummow & Kirby JJ referred with approval to the Privy Council's observations in Hart v O'Connor [1985] UKPC 1; [1985] AC 1000, in which unconscionable conduct was described as:

[V]ictimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.

In The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1 [4924], Owen J said that it is not enough for there to be unequal bargaining power - the conduct of the stronger party has to be exploitative or oppressive.

Whilst the categories of disability are not closed, the requisite special disadvantage often involves poverty, need, sickness, age, infirmity of body or mind, sex, drunkenness, illiteracy, lack of education and lack of assistance or explanation when assistance or explanation is necessary: Blomley v Ryan (405, 415); lack of or limited comprehension of the English language: Commercial Bank of Australia v Amadio; impaired intelligence: Wilton v Farnworth [1948] HCA 20; (1948) 76 CLR 646; or infatuation with or emotional dependence upon another person: Louth v Diprose.

Absence of independent legal advice may in a given case be a circumstance of factual importance in determining whether a special disability exists: Bridgewater v Leahy [41].

Physical frailty and enfeeblement, with diminished knowledge by the party in question of that party's property and affairs generally, are not necessary elements of a special disadvantage: Bridgewater v Leahy [116].

Advanced age

Advanced age of itself does not constitute a special disadvantage but may, in combination with other factors, contribute to the condition of being under a special disadvantage: Australia & New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 [289] - [290].

An elderly disponor, with limited education and of reclusive habits, with a strong emotional attachment to and dependence on the disponee, has been held to be under a special disadvantage: Bridgewater v Leahy [114] - [118], [120], [127].

It is, however, by no means inevitable that elderly parents, who guarantee and mortgage their home to secure the debts of their childrens' business, will, simply by dint of that fact, be found to have suffered a special disadvantage. For example in Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 the elderly widowed pensioners guaranteed the debts of their childrens' company and mortgaged their homes to secure the borrowing. They had no capacity to repay the debt from their own incomes and, as the business was a new venture, the children, who needed to borrow capital, were in a similar position. The children also guaranteed the loan but had little chance of repaying the debt if their company failed. The widowed pensioners, who had received the benefit of independent legal advice, failed to set aside the guarantees and mortgages on the basis of unconscionable dealing or under the Contracts Review Act. Handley JA (Hodgson JA & Grove J agreeing), said [21], [23] - [24], [26]:

Independent legal advice was desirable, if not necessary, in this case to ensure that the appellants, who were volunteers, understood the transactions and their implications, and, with an appropriate understanding, executed the security documents freely and voluntarily. They received such advice before they executed the documents.

...

The children should probably never have asked the appellants to hazard their homes in this business venture, but misrepresentation or undue influence on their part have never been alleged. The age and status of the appellants as pensioners did not deprive them of the legal capacity to do what they did. If the business had been successful the children would have been launched on a business career and the mortgages would have been discharged.

The Court has no way of knowing how many business ventures financed by parents in this way are successful for the benefit of the community and all concerned. Courts only ever see the cases where the business has failed and the mortgages are enforced. The Court might be doing a disservice to the community if it treated age and pensioner status as disabling parents from helping their children in this way. The law has not taken that step, and under ordinary principles the appellants have no proper claim for relief.

...

If there was any unfairness the lender was not responsible for it, and had no notice, actual or constructive, of that unfairness [219] [236]. (emphasis added)

118 As stated in Permanent Mortgages [222] (see also [219] ('prima facie unfair'), [350] and [351]), the onus of proof in relation to unconscionable dealing shifts is as described in Amadio (474), which is as follows:

The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them, and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract' (see per Lord Hatherley, O'Rorke v Bolingbroke [(1877) 2 App Cas], 823; Fry v Lane (1888) 40 Ch D 312, 322; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 428 - [429]).

119 The defendants' case as I understood it was that they had discharged their onus of proof as described in Amadio.

120 The plaintiff's case was that the defendants had not discharged their onus of proof in the circumstances of this case, particularly what was not shown to have been the characteristics of the Janceskis in 2002 and 2004 and what was not known or sufficiently evident to Choice through Mr Nardizzi in 2002 and 2004. The plaintiff did not undertake to show that Choice's 2004 second mortgage over the Collingwood Street property was 'fair, just and reasonable'. However, the plaintiff's case included that the Janceskis had not been shown to have received inadequate consideration for their execution of it. In particular, the evidence in the form of the terms of the Knight Family Trust showed that they were not volunteers in relation to the purchase of the Janet Street property. Thus, the following aspect of the law of unconscionable dealing, from Permanent Mortgages [245], was unavailable to the Janceskis:

Inadequacy of consideration can be important either as supporting an inference that a special disadvantage existed, or as to tending to show that unfair use was made of the occasion: Blomley v Ryan (405 - 406); ANZ v Dzienciol [293]; Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [16-020] and the cases there cited.

121 The defendants in their closing submissions also made reference to the setting aside of Choice's 2004 second mortgage over the Collingwood Street property on 'Garcia' principles. I took this to be a reference to the principles in Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395. I consider the following, from Permanent Mortgages [189] [190] to be a sufficient statement of those principles for my purposes:

Beside cases involving actual undue influence, referred to in the section above, it is unconscionable for a financier to enforce against a married woman a guarantee given to secure her husband's debts in circumstances where:

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

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

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

(d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her. See Garcia v National Australia Bank [31], [40].

As to the second element, where the transaction is not on its face for the benefit of the wife (such as where she is a surety for another's debts), the onus will lie on the party seeking to enforce the security that the wife was not, relevantly, a volunteer: State Bank of New South Wales v Chia [2000] NSWSC 552; (2000) 50 NSWLR 587, 601; Warburton v Whiteley (1989) 5 BPR 11,628, 11,634 (McHugh JA); Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 [46] [189] [190].

122 That combination of circumstances makes it unconscionable for the creditor to enforce the transaction: Garcia v National Australia Bank (408) (Gaudron, McHugh, Gummow and Hayne JJ).

123 I accept for the purposes of this aspect of the defendants' case that Choice's 2004 second mortgage over the Collingwood Street property is to be approached as in substance a guarantee by the Janceskis of a debt incurred by Mr Knight as trustee of the Knight Family Trust.

124 As in Permanent Mortgages the application of those principles to this case would depend upon the 'extension' of those principles to aged parents guaranteeing a debt incurred by their son, if I concluded that the Janceskis were 'aged parents' within that description. I consider whether or not the Janceskis were 'aged' below. On the assumption they were 'aged parents', there is a difficult question of law represented by the question whether or not the principles of Garcia v National Australia Bank extend to such a relationship: see Permanent Mortgages [191] [197], [205] and [354]. As will become apparent it is not necessary for me to arrive at a final conclusion on that matter.

125 I turn then to apply the law, and I organise the analysis as follows.

126 I begin by considering whether or not the defendants have discharged their burden of proof to show that they were under a special disadvantage or disability in dealing with Choice in relation to Choice's 2004 second mortgage over the Collingwood Street property. It is convenient I organise this consideration by reference to the relevant factors which the defendants pleaded which were also, as I understood the way they conducted their case, the factors they relied upon.

127 Then I turn to consider whether or not the defendants have discharged their burden of proof to show that any special disadvantage or disability I consider might have been made out was sufficiently evident to Choice, to make it prima facie unfair or unconscionable for Choice to accept or retain the benefit of Choice's 2004 second mortgage over the Collingwood Street property.

128 I then consider the application to this case of the principles in Garcia v National Australia Bank.

129 I understood the defendants' case to rest on the combination of the 'relevant factors' listed in the Amended Defence of July 2009 as sources of their 'special disadvantage'. This left open the possibility that one or more of the factors might not be shown to have existed at the relevant time, but yet a 'special disadvantage' had been shown, by reference to the remaining factor or factors shown to have existed.

130 I note that I have no evidence from Mr Janceski, as I have explained. However, I do have evidence from Mrs Janceski as to him, at least as to some of the factors.

131 There is a particular question arising as to the relevance of the answer to the question whether or not Choice's 2002 second mortgage over the Collingwood Street property was an unconscionable transaction. The defendants' case appears to have included that it was relevant, as one of the 'circumstances of the negotiations [for Choice's 2004 second mortgage over the Collingwood Street property] and how [it] came to be signed' (the Amended Defence of July 2009 [3](f)).

132 The plaintiff addressed this issue on the basis that if the defendants had not shown Choice's 2002 second mortgage over the Collingwood Street property as unconscionable that was the end of the defendants' claim. I disagree that would necessarily be the case. It seems to me that even if the defendants failed to show Choice's 2002 second mortgage over the Collingwood Street property was an unconscionable transaction, they might yet succeed in showing Choice's 2004 second mortgage over the Collingwood Street property was an unconscionable transaction, as where there was evidence relevant in that regard for the latter of a kind missing for the former. I consider that matter below.

133 The plaintiff also addressed this issue on the basis that even if the defendants had shown Choice's 2002 second mortgage over the Collingwood Street property was an unconscionable transaction, the defendants' claim still failed. This would be on the basis that Choice's 2004 second mortgage over the Collingwood Street property represented a mortgage on 'more favourable terms' than the mortgage it replaced, as a part of a transaction for the refinancing of Walthamstow's first mortgage over the Collingwood Street property, both procured by the defendants through Mr Knight by relying on the threat to challenge Choice's 2002 second mortgage over the Collingwood Street property on Amadio grounds. The plaintiff's case does not indicate in what respect or respects the terms were 'more favourable'. It appears that at the least, the latest date for repayment of the vendor finance was extended. However, I consider that if the defendants are able to make out their case of unconscionability, this would extend to any agreement in respect of their 'Amadio' claim in relation to Choice's 2002 second mortgage over the Collingwood Street property. I have so concluded because the agreement would be one forming part of Choice's 2004 second mortgage over the Collingwood Street property.

134 At the same time, I consider the matter raised by the plaintiff to be of significance to whether or not the matter of Choice's 2002 second mortgage being an unconscionable dealing is capable of adding anything of significance to any special disadvantage which the Janceskis were subject to in respect of Choice's 2004 second mortgage over the Collingwood Street property. I return to that matter below.

135 I turn now to consider each of the relevant factors relied upon in the Amended Defence of July 2009.

136 As Permanent Mortgages [235] and [236], above, indicates, advanced age does not of itself represent 'special disadvantage'; but advanced age, in combination with other factors, such as limited or lack of education and strong emotional attachment to and dependence on the person who is to benefit under the transaction, may show special disadvantage. I reach those other factors below. For now, I focus on the factor of age.

137 Mrs Janceski was 54 years old at the time of execution of Choice's 2002 second mortgage over the Collingwood Street property, and 56 years old at the corresponding time for Choice's 2004 second mortgage over the Collingwood Street property. This compares with the ages of the Dzienciols at the time they signed the two mortgages challenged in Dzienciol of 74 and 75 and 67 and 68 respectively; and the age of Mr York at the time he entered into the transaction challenged in Bridgewater of about 84 years old.

138 There is no suggestion that Mrs Janceski was suffering from an age related disability that seriously affected her ability to make a judgment as to her own best interests, such as dementia or age related physical fragility. Indeed there is no substantial reliance on Mrs Janceski's age in the submissions for the defendants, save in relation to the following evidence of Mr Ozich, in connection with his experience of the ability of persons with a Macedonian linguistic background (as the Janceskis had) to understand Croatian or SerboCroatian (the language Mr Ozich used with them at the meeting of 9 October 2004, and indeed as I have indicated at the meeting of 20 August 2002).

139 That evidence was the following (cross-examination, ts 1576):

What do you say to the suggestion that people who speak Macedonian wouldn't have understood your Serbo-Croatian?---Well, I totally disagree with that because at that stage I'd been in practice well over 30 years, almost 35. In that time I've had many, many hundreds of Macedonian clients, probably 1000. Aside from a number which I could probably count on one hand, and they relate mainly to elderly women from isolated areas who haven't had any education, I was able to make myself understood with almost all the Macedonian clients I've had.

140 It may be noted that no objection was taken to the question on the basis that it concerned a matter of linguistic expertise for which it was not shown Mr Ozich was qualified to express an opinion. In any event, it seems to me this evidence went to what Mr Ozich's experience had been of making himself understood to his clients who had a Macedonian background. In addition, I have indicated that I accepted Mr Ozich's evidence that he believed the Janceskis had understood his explanations of the documents they had signed at the meeting of 20 August 2002. While I have noted Mrs Janceski's evidence that she found it 'very hard' to understand Croatian, this evidence in my view taken at its highest falls short of establishing she could not understand that language.

141 To the extent the cross-examination for the defendants was a challenge to the reasonableness of Mr Ozich's belief that the Janceskis had understood explanations he gave at the meeting of 20 August 2002, based on the language of the explanation, I consider that challenge was not made out.

142 However, for the defendants, it appears to have been put that Mrs Janceski fell into the category Mr Ozich described, of 'elderly women from isolated areas who haven't had any education'. At the same time, it was not in contest that Mr Ozich did not put Mrs Janceski in that category. Indeed, it is not apparent to me that Mrs Janceski could be classified as 'elderly' at the relevant times, or that I had evidence before me that the village in which she had been born and raised was an 'isolated' one.

143 Further, on the authorities referred to in Permanent Mortgages [235] and [236] other factors than her age are relevant, including in a case like this one her experience of life outside the area of her village. I reach that experience below.

144 In any event there is no direct evidence as to the age of Mr Janceski at the times referred to. At most I might infer from his marriage to Mrs Janceski, and the evidence that she and Mr Janceski had pension income in January 2002 when the Arkana Road properties were purchased, that he was about the same age as she. In any event there is no evidence on the basis of which I consider I can treat him in respect of his age any differently from her.

145 I do not consider that the ages of Mrs Janceski and Mr Janceski had on the evidence before me a significant contribution to make to any special disadvantage to which they were subject.

146 I turn to the next two relevant factors as pleaded and relied upon.

Application: illiteracy or lack of education; unfamiliarity with the language

147 In my view, these two pleaded factors are best dealt with together, as they shade into one another. For the defendants it was not suggested they should be dealt with separately.

148 As Permanent Trustees [231] indicates, special disadvantage often involves illiteracy, lack of education and lack of or limited comprehension of the English language, which I accept is written or spoken English. I accept that any of these factors without the others may be significant.

149 The evidence does not in my view show that Mrs Janceski was illiterate in the sense of having no capacity to understand spoken or written English. Further, it was not in contest that Mrs Janceski at all material times understood simple and plain conversations in English of an everyday nature.

150 In my view, at most the evidence shows that her capacity at all material times was limited.

151 Further, for the reasons I will explain, I find that Mrs Janceski had the capacity, notwithstanding her lack of formal education in English, to understand in English, spoken or written, if with some difficulty, the terms of significance to her in relation to Choice's 2002 second mortgage over the Collingwood Street property and its replacement in 2004.

152 There was no evidence of any kind led as to the literacy, education or understanding of the language of Mr Janceski.

153 There is the unchallenged evidence of Mrs Janceski that she had only primary school education, and that in Macedonian, while written Macedonian uses the Cyrillic alphabet. I consider that I can take judicial notice of the fact that that alphabet is very different from the alphabet used for written English.

154 There is also the testimony of Mrs Janceski that 'I do not understand English' (ts 429) and 'I cannot read to you in English' (ts 255).

155 However, the former testimony was in the context of questioning concerning a passage in a letter quoted in her witness statement (exhibit C). That letter was one to the court dated 17 August 2005 which she and Mr Janceski had signed and the contents of which concerned their response to the plaintiff's summary judgment claim (the Janceskis' letter to the court of August 2005). She was able to recognise that the passage quoted was the same as the one appearing in that letter (ts 428). I do not consider that Mrs Janceski was indicating she could not understand written or spoken English, but rather that she did not readily understand the language, at least in some contexts. Further, her evidence taken as a whole indicated she could understand both spoken and written English to a significant extent at least.

156 Thus, I note that her testimony 'I cannot read to you in English' was given in the context of the request she read out aloud her witness statement (exhibit C). This witness statement was prepared by Freehills when that law firm had been acting for her. The exchange with her immediately after her testimony concerning reading to the court in English was the following:

All right. Can I then ask how you were able to know what was in this document. Has this document ever been translated into Macedonian for you?---No, because Freehill ask me, I tell them and I know what I tell them.

Have you ever tried to read this document after Freehills prepared it?---I was looking at it. I know some bits, but like properly it's not really, but I can, you know, read something but it's - can't say the word it's properly or the things, but I know it's all there.

What I would like to suggest is this, that we have Mrs Janceski attempt to read out what is in the document. The fact that it may be a little difficult for her we'll allow for.

Mrs Janceski, we'll allow you to read it out slowly, and if there is anything that you do not understand you should indicate that so that there can be an interpretation into your language, into Macedonian, of what is in that paragraph?---So you want me to read out it English or

Read that in English, and I will assume that when you read something in English you understand what you have said as being what you had told Freehills?---Okay.

Otherwise she will stop and say something like, 'I need that interpreted into Macedonian for me'?---Yes.

157 Mrs Janceski read the witness statement out aloud, occasionally indicating a difficulty with understanding particular words, such as 'initially' (ts 260) and 'adjacent' (ts 306), and occasionally indicating, by stumbling, difficulty with reading words out loud (see ts 262 for an example with 'wanted'; and ts 425).

158 In her cross-examination it emerged that she did not 'understand all of it' (ts 468), and indeed that she appeared to testify that she equated 'understanding' with the ability to read the witness statement out aloud (see ts 466), notwithstanding repeated attempts to have her appreciate the difference between the two, a difference which she had apparently recognised (see ts 260, 262 263, 377).

159 However, it was evident she did understand much of her witness statement, including matters having to do with aspects of the Janceskis' loan arrangements with Reliance. This in my view is clearly indicated by the following cross-examination concerning whether she understood par 259 of her witness statement (exhibit C).

160 She had read that paragraph out aloud in her examinationinchief as follows, after which she responded to a question from me, as follows (ts 423):

I recall that prior to that time, Steve had told me words to the effect that we had to find money to pay back the loan with Reliance Finance because he did not like to have security over the family home and only wanted to have security over investment homes. He told me that because we had sold the Westminster property and no longer had an investment property we would have to obtain a loan from another company in order to repay the loan with Reliance Finance.

Mrs Janceski, if you could pause there please, you refer to 'the loan with Reliance Finance.' Which loan are you referring to or what loan are you referring to? What loan from Reliance Finance are you referring to?---Pepper.

161 I note that Mrs Janceski did not ask for, nor did it appear to me she received, a translation of this paragraph into Macedonian.

162 Her response to my question was, of course, correct as to the source of the refinancing loan the proceeds of which paid out Reliance.

163 In the cross-examination of Mrs Janceski as to her understanding of par 259, there were the following exchanges (ts 466 467) (emphases supplied):

Can you explain paragraph 259?---What does that mean? What do you want to know?

I am asking you what it means. You see, that paragraph has three words in it that you said you didn't understand - security, investment and obtain. You have said to his Honour that even though you don't understand, you understood all of your statement. I am accepting that and asking you to explain paragraph 259?---In the statement, I just read it. All this writing - I just read it.

So you don't understand it?---The words you asked me, no.

What about paragraph 259?---I know what you mean. You mean I said 'I recall.' That is that. I recall writing like that and I have to say that. I don't have a lawyer to help me, like you do.

I beg your pardon?---That is been writing recall but I can't understand like the meaning of recall, that word like - I know what it (indistinct) but the writing I didn't understand.

So you don't understand paragraph 259?---I understand what that means, you know.

You tell us what it means then?---That's what I said, it's - 'I recall that'

Don't read it. Tell us what it means. I want you to tell his Honour what paragraph 269 [sic 259] means.

SIMMONDS J: Just one moment. Mr Solomon, would it be an answer to your question if the witness were able to say - I'm sorry, let me put that another way. Would an answer to your question be the witness saying what she believes 259 to mean in Macedonian?

SOLOMON, MR: Well, my intention was to come to that.

SIMMONDS J: All right.

SOLOMON, MR: And first - I mean, the witness has said that she understands what the statement means. She has repeated that now.

SIMMONDS J: Yes.

SOLOMON, MR: On that basis I'm asking her to explain what 259 means.

SIMMONDS J: All right.

SOLOMON, MR: And if there are difficulties with that I propose to adopt your Honour's course?---No, I can tell them now. If Steve asked he needs to pay his loan we have with him because he doesn't like have loan on us family house. He said that on Westminster because Westminster

He what, sorry? I just didn't get that last bit. What did you say?---He doesn't like have loan on family house. If we have investments he okay with that but not with family home and he likes to pay his moneys.

I see; and which was the investment - so what - okay, I'm sorry, I withdraw that. Ignore that. And therefore what? What did he want?---Ask Joe. They dealing with that.

You tell me what Steve said to you he wanted in paragraph 259?---That I tell you. He want to repay them the money they - one moment. It's the money we have to repay him that was given to us to have (indistinct) loan on the family house, only on an investment.

And is your evidence that he had the loan on the investments but now it was on the family home so he wanted it changed?---I can't say that because I don't know. I know he (indistinct) on my house. I don't know any more.

164 It will be noted that Mrs Janceski expressly declined to take the opportunity to respond to the question in Macedonian, but rather responded to it in English.

165 Of course, her evidence indicates her understanding at the time she gave this evidence, in November 2009. The relevant times for my purposes were, of course, August and September 2002 (for Choice's 2002 second mortgage over the Collingwood Street property) and July 2004 (for Choice's 2004 second mortgage over the Collingwood Street property). It might be expected that Mrs Janceski's understanding of the principal English words associated with the present proceedings would have improved over the period, at least since the latter period, as a result of her involvement in the present proceedings. However, it was not put to me that her apparent understanding of English, spoken or written, or lack of it, as displayed at the trial, was misleading as to that understanding or lack of it at either of the earlier times, with the exceptions of the words 'mortgage' and 'loan'.

166 In the cross-examination of Mrs Janceski attention was directed to what she understood by the English word 'mortgage' and when she had attained that understanding. Her evidence was that at the time of the Janceskis' acquisition of the Collingwood Street property, in 1984, she did not know what a 'mortgage' was, and this was also the case in 2000, by which she meant she did not understand at those times what the English word meant (ts 480, 490 and 649 653). Further, her evidence appears to be to the same effect as at the time prior to the entry into Choice's 2002 second mortgage over the Collingwood Street property (ts 845). However, by the time of the trial she understood its meaning (ts 480).

167 In addition, Mrs Janceski's evidence was that she did not understand the meaning of the English word 'loan' in 2002 but had acquired an understanding of it subsequently (ts 774).

168 However, I find that she did understand the meanings of the English words 'loan' and 'mortgage' in 2002, in particular before her entry into Choice's 2002 second mortgage over the Collingwood Street property. I have arrived at this view after my consideration of the number and circumstances of the transactions of loan secured by mortgages over land into which she had entered by that time.

169 It will be recalled that she had executed mortgages over the Fitzgerald Street property (in 1973), the Collingwood Street Property (in 1984), both for loans from the ANZ Bank; a mortgage over the Collingwood Street property (in 1999), for a loan from Resi Home Loans; a mortgage over the Collingwood Street property (in 2001) and over the Arkana Road properties, for a loan from Liberty; and prior to her execution of Choice's 2002 second mortgage over the Collingwood Street property a mortgage over that property (2002), for a loan from Walthamstow.

170 Further, on Mrs Janceski's own evidence in 1973 an ANZ Bank employee had helped her understand the 1973 mortgage by explaining it to her in Macedonian, one of the languages he spoke (ts 475). Also, in 1984 again on her own evidence she understood that to acquire the Collingwood Street 'we have to get money from the bank and we have to give them back' (ts 480). And also on her own evidence she understood that by 1989 she and her husband had paid back the amounts owing on the Fitzgerald Street property and the Collingwood Street property (ts 481).

171 I note that none of the transactions just listed involved a second mortgage. Mrs Janceski did not give any evidence which indicated that she did not understand the nature of such a mortgage. However, I return below to this characteristic of Choice's mortgages over the Collingwood Street property.

172 I have previously indicated that the evidence establishes that in June 2002 she attended a status conference at the Supreme Court in the proceedings in which Liberty was seeking the repayment of its loan.

173 Further, I have indicated that the evidence also establishes that on 20 August 2002 at a meeting with them Mr Ozich had explained to the Janceskis and Mr Knight in Croatian, and considered that they understood his explanations of, the Walthamstow loan agreement with Mr Knight and the Janceskis, Walthamstow's first mortgage over the Collingwood Street property and the Deeds of Guarantee and Indemnity by the Janceskis. I have previously referred to Mrs Janceski's evidence that it was 'very hard' for her to understand Croatian. However, in view of Mrs Janceski's previous experience with mortgages in real estate transactions, and the evidence of Mr Ozich, which I accept, that he believed the Janceskis had understood his explanations at the meeting of 20 August 2002, I find that Mrs Janceski and Mr Janceski had understood those explanations.

174 Finally, I note the apparent significance Mrs Janceski attached to the nature of the transaction, as a mortgage over the Collingwood Street property, she had entered into with Choice Constructions in 2002. Her evidence was that had she known she was being asked to sign such a document she would not have signed it (ts 845). I have also referred to her evidence that she had complained to Mr Nardizzi when she learned in 2004 she was a party to a mortgage with Choice.

175 For the defendants, it was put to me that out of Mrs Janceski's simple educational background and upbringing in a small village in Macedonia with about 40 houses had grown a trusting nature. A sign of this was her evidence that if she were given a document to sign she would habitually sign it. I note the following evidence to which I was directed (ts 581 583):

Do you remember whether, when you signed this, you asked what it was for?---I can't tell you because I don't remember and I don't know anything.

Would you usually ask before signing something what it was for?---Every time someone gives me something to sign I think that I have to sign. I will just give you an example. When Joe came for the last time and brought the last document and asked me to sign, I signed because I thought that I had to sign, so I signed. Everyone that asks me to sign, I just assume the person is not lying and I sign.

So do you never ask what it's for?---I ask now but for this, I do not remember after so many years.

Did you ever ask Joe when he gave you a document to sign what it was for?---I have asked.

SIMMONDS J: What was that answer again?

THE INTERPRETER: 'I have asked.'

SIMMONDS J: I see, thank you.

SOLOMON, MR: When was that?---I don't remember the date, the day or the month, but when he gave me the papers to sign, we're in the unit where my son used to live.

Is that the only time you asked Joe what a document was for?---And when he came to my door and brought the papers and asked me to sign them, I asked what they were for and he said that the lawyer had asked for me to sign.

When or which documents was that?---I can't remember the date but it was the last document that he brought for the court, some papers that he brought, and he said that I should sign that I have received them.

This is court documents for this action, is it?---For the court, yes.

I'm asking before this court case started, did you ever ask Joe what you were signing for except for that one time you have explained?---I don't remember because we were signing papers regarding an offer that we put for a house and also - regarding an offer that we put for a house and also for the houses that he was selling for us. I do not remember whether I was asking my son Michael to explain what was happening to me. I do not remember, but he was there, Michael was there and he was telling me things.

Right. We will come to each document in turn, but let's just deal with the documents that we have dealt with so far?----Okay.

176 I agree that this evidence indicates a trusting nature, including such a nature in relation to documents produced by Mr Nardizzi, at least until the time of these proceedings.

177 However, her evidence was also that she was capable, even in 2002 in dealings with Mr Nardizzi, of asking questions concerning the nature of the documents she was asked to sign. Further, her evidence was that, had she known in 2002 that the document representing Choice's 2004 second mortgage over the Collingwood Street property was a mortgage as she now understood such a transaction, she would not have signed the document.

178 That evidence is as follows, concerning what Mrs Janceski testified to as to her understanding that she was signing Choice's 2002 second mortgage over the Collingwood Street property 'as a witness' based on Mr Nardizzi's response to a question she asked him at the time (ts 820, 845).

And when a document has a witness it means a person who is buying the property or giving the mortgage signs and a witness comes along and the witness signs. You know that, don't you?---Yes.

And you thought that that was what Joe was telling you to do, was it?---Yes, that's true.

How could you think you were signing as a witness if you were the first to sign and no-one else had signed?

THE INTERPRETER: She knows because she asked Joe whether she sign as a witness signing and he said, 'Yes, as a witness.' That's the only thing she can say?---No, no.

The only thing that she can say is Joe brought the document and said, 'You can sign here,' and then she asked him - he never said what the document is and she said, 'As a witness' - when she asked, 'What is this document for,' he said, 'Just sign, mum.' Then she asked 'As a witness' and he said, 'Yes, something like that'?---'Because you signed it, you buy nice house.' That's all that she talking, no more.'

...

Thank you. You received this document - sorry, I'm coming back now to your signing of the document. You received this document and it had no signature on it. Is that right?---Yes, that's correct.

And you have agreed with me that it is obvious where the witness signs?

THE INTERPRETER: She didn't actually read anything, she just signed where Joe pointed for her to sign.

SOLOMON, MR: Your evidence is, is it, that you didn't look at a single thing on the page. Is that right?---That's true.

And is it your evidence that if you had known it was a mortgage you wouldn't have signed it?---Yes, hundred per cent true.

179 I do not accept Mrs Janceski's evidence that she believed she was signing as a witness. This is because of her acknowledgement she knew what signing as a witness represented without qualification as to when she attained that understanding. However, I consider the evidence quoted does indicate that she was in 2002 capable of asking Mr Nardizzi about what she was doing by signing rather simply signing what she was asked to sign.

180 I conclude on the present factor that it has been shown that, while Mrs Janceski had a limited capacity to understand spoken and written English, she had a not insignificant capacity in those respects, including in relation to loan and mortgage transactions.

181 I have no evidence as to Mr Janceski having a limited capacity of either sort.

182 I turn now to the next factor pleaded, lack of business knowledge.

183 Permanent Mortgages makes no reference to this factor as a matter of special disadvantage, and no authority in point was cited to me. However, it seems to me that such a lack may indeed be such a matter. This is particularly likely to be the case where the transaction in question has particular features that make it other than a commonplace one. As I will explain below, Choice's second mortgages over the Collingwood Street property had such features. A lack of business knowledge, perhaps in combination with other factors, in relation to such a transaction, might be such as seriously to affect the ability of the Janceskis to make a judgment as to their own best interests in relation to that transaction.

184 Was there a lack of business knowledge in this case?

185 In my view on the evidence the Janceskis, and in particular Mrs Janceski, had a not insignificant level of knowledge of business transactions involving the purchase and sale of real estate for which there were substantial borrowings. I so find on the evidence as to the Janceskis' involvement in Walthamstow's mortgage over the Fitzgerald Street property; the refinancing involving the replacement of that mortgage by the Perpetual Trustees mortgage over the Fitzgerald Street property and the eventual discharge of the latter mortgage; Mrs Janceski's involvement in the acquisition of the Arkana Road properties; and her involvement in the plan to deal with Liberty's pursuit of Mr Knight and the Janceskis to repay the borrowings for that acquisition.

186 I have previously described Mrs Janceski's testimony as to Walthamstow's mortgage over the Fitzgerald Street property and my findings as to that matter.

187 I have also previously described Mrs Janceski's testimony that she found the Arkana Road properties and told Mr Knight that if they bought them they could make 'a lot of money'; that it was her idea that the Janceskis and Mr Knight buy the Arkana Road properties; that they would be rented out to repay the loan for the purchase, with any additional contributions from the Janceskis' pension income and from Mr Knight's earnings; and that at a later stage they would sell the smaller of the Arkana Road properties and the Collingwood Street property and the Janceskis would move into the larger one with Kiro.

188 I have also previously described Mrs Janceski's testimony that she had worked out that the rental income from the Arkana Road properties was not what had been expected, that Mr Knight was not able to contribute because he had become ill and that the Janceskis' pensions were insufficient to make up the shortfall; and she had made the decision it was appropriate to sell the Arkana Road properties rather than the Collingwood Street property to repay Liberty.

189 I find then that Mrs Janceski did not lack business knowledge, at least to the extent that she had a not insignificant level of knowledge of business transactions involving the purchase and sale of real estate for which there were substantial borrowings. However, as I have already indicated, this level of knowledge needs to be considered with all of the other circumstances, in particular the nature of the transaction represented by Choice's 2004 second mortgage over the Collingwood Street property.

190 I turn now to the next factor pleaded, emotional dependence on Mr Knight.

191 The defendants' case in relation to this factor was that the Janceskis trusted and relied upon Mr Knight at all material times, which as I understood their case made them vulnerable to any failure of his to look after their interests.

192 There is a separate matter forming part of the defendants' case in relation to Mr Knight. It is that of Mr Knight's condition, or at least his perceived condition, at the time of the negotiations for Choice's 2004 second mortgage over the Collingwood Street property. That condition, on the defendants' case as I understand it, produced a particular concern for his welfare. That concern seriously affected the ability of the Janceskis to make a judgment as to their own best interests in matters involving his welfare. I return to that separate matter below.

193 As Permanent Mortgages [231] recognises, referring to Louth v Diprose, special disadvantage has often been involved in cases of emotional dependence upon another person.

194 In this case, I consider the evidence establishes that the Janceskis trusted Mr Knight and had relied upon him in a number of situations involving loan transactions. I further consider that to the extent of that trust and reliance the Janceskis were vulnerable to any failure by him to look after their interests.

195 However, I also consider that the evidence does not establish that the Janceskis were always dependent upon Mr Knight in matters of loan transactions.

196 Mrs Janceski's evidence was that she regarded Mr Knight as a 'good son' and he had 'helped me where he can because of my limited English, especially with the Supreme Court case'. I took the latter to be a reference to the present proceedings. Mr Knight's evidence was that '[i]n the earlier stages' he 'assisted considerably' as 'there was no-one else'. Further, it was common ground that at the status conference in the Liberty proceedings arising out of its loan for the acquisition of the Arkana Road properties Mr Knight sought to appear for his parents. I do not consider any of this evidence was seriously challenged.

197 Mrs Janceski's evidence was also that in relation to their acquisition with Mr Knight of the Arkana Road properties she and Mr Janceski had relied upon him; and that at a meeting with Mr Masel to discuss a loan and mortgage from Reliance where Mr Masel spoke in English she asked Mr Knight 'a few times' to translate what she could not understand, although her evidence later became that Mr Knight translated Mr Masel's instructions to them as to where to sign.

198 Her evidence was also that it was Mr Knight who dealt with the lender, which I am satisfied was Liberty, in organising the Janceskis' execution of the loan documentation with it. He translated the letters received from Liberty in relation to its demands for repayment. He also dealt with it in relation to that repayment as the following evidence from Mrs Janceski indicates (ts 541 543):

Was anyone chasing you for that? Was the person you borrowed the money - I will start that again. Do you remember whether the company or person you borrowed the money from was asking for his money back?---It was all done by my son and he told us that they were asking for the money. That's why we sold the houses. That's why we had to sell the houses and we returned the money, all of it.

So you, Mrs Janceski, had nothing to do with the money being with the company or the person chasing its money back?---We were all together there; myself, my husband and Michael but Michael was the one

All together where?---Taking care of these things, together with the houses, with the loans for this (indistinct)

That wasn't really my question but it may not have been clear. I'm asking you, Mrs Janceski, this: you say that Michael dealt with the company that was chasing the money and paying them back. Is that right?---Yes. He told us that we have to - they are asking for the money. We have to give them the money. Since we couldn't make the payment we have to sell the houses. That's what he said.

199 I understood that the plaintiff challenged the extent to which Mrs Janceski depended upon Mr Knight to translate for her correspondence and other documents sent to her. On my findings as to her capacities in English I am not satisfied she always required his assistance, as her evidence might be taken to suggest. Further, on my findings as to her business knowledge, I am not satisfied she did always require his advice in matters to do with loan transactions, as her evidence might also be taken to suggest; indeed, on those findings she had arrived at her own positions in respect of the acquisition of the Arkana Road properties by the Janceskis and Mr Knight as well as their extrication from that acquisition.

200 Of course, the matter of the Janceskis' trust of and reliance upon Mr Knight falls to be judged in relation to Choice's 2002 second mortgage over the Collingwood Street property and its replacement, Choice's 2004 second mortgage over the Collingwood Street property.

201 As to the 2002 transaction, the evidence included that of Mrs Janceski that she had been worried about Mr Knight at the time she learnt from him of his purchase of the Janet Street property, as he had not been working for a long time and she believed he was dealing with depression. The first time she and Mr Janceski visited Mr Knight in the Janet Street property the visit was unarranged, and they had been joined by Mr Nardizzi, to whom Mrs Janceski complained that she would not have allowed Mr Knight to purchase it, as she preferred a house to a unit or apartment. At some stage while she and Mr Janceski were talking with Mr Nardizzi a family friend Mr Vincent Tunevski arrived. While Mr Knight was in another room Mr Nardizzi gave Mr and Mrs Janceski papers to sign, telling them they should sign them, and in response to their questions as to what the signing was for said that they should sign them 'like' or 'as' a 'witness'.

202 At the trial considerable attention was directed to the plausibility of this account, including the likelihood that the visit occurred, as Mrs Janceski testified, because she and Mr Janceski happened upon the sign for Janet Street while driving in the area for other reasons. I am unable to believe the account for the rather more compelling reason that it requires me to believe that Mr Nardizzi happened to have with him at the time of the Janceskis' unarranged visit the documents for Choice's 2002 second mortgage over the Collingwood Street, for a complex settlement that was to occur on the day after the date shown on the document. I also note for this purpose my conclusion previously referred to that I should not accept Mrs Janceski's evidence that Mr Nardizzi told her she should sign 'like' or 'as' a 'witness'.

203 I further note that Mr Tunevski appears to have signed Choice's 2002 second mortgage over the Collingwood Street property as a witness, but was not called by either side to give evidence in the trial. Counsel for the plaintiff put to me that an inference of the Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 kind, against the defendants, was appropriate in that circumstance, as Mr Tunevski was a family friend of the defendants. That inference would be, of course, that Mr Tunevski's evidence would not have assisted the defendants' case. I agree. However, even without that inference I consider I am able to arrive at the conclusion I cannot accept Mrs Janceski's account.

204 It may be noted that Mrs Janceski's account is one that does not in my view involve any indication of trust or reliance on Mr Knight in relation to Choice's 2002 second mortgage over the Collingwood Street property.

205 The only other evidence I have as to the circumstances in which the Janceskis executed Choice's 2002 second mortgage over the Collingwood Street property is that of Mr Nardizzi and of Mr Knight.

206 I have previously referred to Mr Nardizzi's evidence that he met with the Janceskis in late May 2002 when he told them that Mr Knight's purchase of the Janet Street property would involve the placement of second mortgages over a number of properties including the Collingwood Street property; that on 30 August 2002 he left the Janceskis with a draft of the mortgage for them to read and tell him if changes were needed; and that on 3 September 2002 he gave the Janceskis Choice's 2002 second mortgage over the Collingwood Street property telling them to check it and if it was correct to sign it and have it witnessed. In evidence before me is a letter dated 30 August 2002 from Mr Nardizzi to the Janceskis attaching the draft of the 2002 second mortgage which Mr Nardizzi testified he left with the Janceskis at the meeting of that date. Mrs Janceski's evidence was that she did not receive the letter of 30 August 2002, while acknowledging that she would pass on letters of that type addressed to and received by her to Mr Knight for him 'to keep'. Her evidence was also that she first learnt that Choice was shown on the title to the Collingwood Street property in a conversation with a man at her property in early 2004.

207 Mr Nardizzi's evidence was that after the meeting of 30 August 2002 Mr Knight indicated that his parents were prepared to sign that mortgage and Mr Nardizzi subsequently contacted him to arrange for his parents to sign the document at the Janet Street property on 3 September 2002. This I find to be credible evidence, in view of my conclusions as to Mrs Janceski's evidence concerning the meeting which I have described.

208 The only evidence of Mr Knight as to the circumstances of Choice's 2002 second mortgage over the Collingwood Street property was in his cross-examination in which he testified as follows, in relation to what he and his parents were alleging in the course of the negotiations in 2004 with Mr Nardizzi to have Choice replace Choice's 2002 second mortgage over the Collingwood Street property as follows (ts 1347):

In the course of your negotiations with Joe to get him to agree to lift the second mortgage, you and your parents were alleging that the original second mortgage of 2002 was something unfair because they hadn't understood it. Correct?---What I'm alleging or what I'm saying is that I did not explain anything to my parents. It was me that did all the negotiation with Joe. Joe hasn't explained anything to them, I haven't.

We will come to that. I'm saying that in the course of your negotiations with Joe Nardizzi, for him to agree to lift his mortgage, you said to him that your parents hadn't understood the 2002 mortgage and were upset about it and wanted to challenge it. You said that to him, didn't you?Because I didn't explain, yeah.

You said it to him, didn't you?---I didn't explain anything to them and that's what I said to him.

Did you say that to him?---I did.

209 I find evidence of the Janceskis' dependence on Mr Knight in relation to Choice's 2002 second mortgage over the Collingwood Street property in the testimony of Mr Knight just quoted. This evidence was not challenged. I also find evidence of the Janceskis' dependence on Mr Knight in Mr Nardizzi's evidence, which I have indicated I find credible, of his dealings with Mr Knight following the delivery of the 30 August 2002 letter which led to the 3 September 2002 meeting with the Janceskis at which they executed Choice's 2004 second mortgage over the Collingwood Street property.

210 I consider that body of evidence does tend to establish that the Janceskis were dependent upon him at least to a degree in relation to Choice's 2002 second mortgage over the Collingwood Street property.

211 As to the 2004 transaction, the evidence included that of Mrs Janceski that after she was told that Choice's name was on the title to the Collingwood Street property she contacted first Mr Masel and then Mr Nardizzi. Mr Nardizzi then told her Mr Knight had no assets but that she and Mr Janceski had the Collingwood Street property; and she complained to him he had never explained anything to her or Mr Janceski. After Mrs Janceski was later told by a real estate agent that there was a second mortgage over the Collingwood Street property and complained to Mr Nardizzi about this, he began to ring the house repeatedly to speak to Mr Knight. During this period she told Mr Nardizzi on a number of occasions that Mr Knight was sick in bed and could not speak with him. Her evidence was that for a period at that time, put first as 6 months then as 6 weeks, Mr Knight stayed in his room because of his depressive illness. Eventually, Mr Nardizzi arranged for the Janceskis and Mr Knight to go to Mr Ozich to sign the documents Mr Ozich would explain to them. She decided to go to the meeting after Mr Knight told her it would stop Mr Nardizzi calling, Mr Ozich would not make her sign as she was a pensioner and she was very worried about Mr Knight.

212 In significant part this evidence is difficult to reconcile with evidence of Mr Knight to which I have previously referred. That evidence was that beginning in February 2004 he conducted negotiations with Mr Nardizzi for himself and Mr and Mrs Janceski as to the terms on which Choice would agree to replace Choice's 2002 second mortgage over the Collingwood Street property so as to facilitate the refinancing of the indebtedness under the Walthamstow loan agreement with Mr Knight and the Janceskis. The difficulty lies in Mr Knight's active involvement in negotiations, on his own behalf and that of the Janceskis, that took him regularly to Mr Nardizzi's offices, on his evidence as frequently as every second day during a period during a part of which at least it would appear he was, on Mrs Janceski's evidence, sick in bed. Mr Knight's evidence that he was actively involved in negotiations with Mr Nardizzi over at least part of this period gains support from an e-mail from him to Mr Nardizzi of 28 May 2004 in evidence before me, in which Mr Knight requests that Mr Nardizzi permit the refinancing 'of the West Perth and Dianella properties with a cash payment to Choice Constructions of $40,000 at settlement as agreed', which Mr Knight accepted was put on behalf of himself and his parents. Mr Knight's evidence also derives some support from an e-mail from him to Mr Nardizzi of 1 July 2004, following the execution before Mr Ozich on 9 June 2004 Choice's 2004 second mortgage over the Collingwood Street property and also in evidence before me, and putting a new figure of $34,500 as being the most that that 'we' can offer him from the proceeds of the borrowing from Pepper. Ultimately, it would appear, from a letter dated 15 July 2004 from Mr Nardizzi to Mr Knight and the Janceskis, endorsed with the signature of Mr Knight as 'authorised by all parties to sign on their behalf', that it was agreed Choice would accept $30,000 'to allow settlement to proceed'.

213 I find on the evidence of Mr Knight that there was a measure of dependence of the Janceskis on him in relation to Choice's 2004 second mortgage over the Collingwood Street property.

214 I turn now to the next relevant factor, the circumstances of the negotiations and how the mortgages came to be signed.

Application: circumstances of the negotiations and how the mortgage came to be signed

215 I understood 'the negotiations' to relate to 'the mortgage', and 'the mortgage' to refer to Choice's 2004 second mortgage over the Collingwood Street property. Further, it appeared to me this was the basis on which the present factor was approached in the defendants' case.

216 However, 'the circumstances of the negotiations' were approached in the defendants' case as I understood it as including Choice's 2002 second mortgage over the Collingwood Street property, and as I have indicated the plaintiff's case also addressed that mortgage.

217 There were other matters which might be seen as 'circumstances of the negotiations' on which the defendants' case relied. However, these appear to me to be subsumed in other factors, most notably the emotional dependence on Mr Knight which I have previously considered, the defendants' concern for him in his perceived condition, and misrepresentations and pressures applied, both of which I reach below.

218 I further understood that 'how the mortgage came to be signed' on the defendants' case referred to the advice that Mr Ozich did and did not give them at the meeting of 9 June 2004. This matter overlaps with that of Choice's 2004 second mortgage not being fair, just and reasonable, which also focuses on Mr Ozich's advice. I consider that the latter matter focuses on advice which the defendants contend he ought to have given, of a financial kind, and I will consider that contention below. My consideration here will be of what advice Mr Ozich in fact gave at the meeting of 9 June 2004.

219 I turn first to Choice's 2002 second mortgage over the Collingwood Street property.

220 While a matter of that kind is not, it seems to me, addressed in Permanent Mortgages, it seems to me that a position of special disadvantage might derive from having entered into a previous transaction of which the other party to that transaction seeks to take fresh advantage, in circumstances where the previous transaction was an unconscionable dealing. I note that this was apparently also the view expressed in Choice, Newnes M [28].

221 Whether Choice's 2002 second mortgage over the Collingwood Street property was an unconscionable dealing would of course depend on all of the matters previously referred to when applied to the circumstances of the entry into that mortgage. Those circumstances were not it seems to me materially different from those of the entry into Choice's 2004 second mortgage over the Collingwood Street property, with two significant exceptions.

222 One was that there was no question of the Janceskis having obtained any independent legal advice in relation to the earlier mortgage. The absence of such advice may in the circumstances of a case be a matter of factual importance in determining whether or not a special disadvantage exists: Permanent Mortgages [232].

223 However, the other was that the matter of a possible challenge by the Janceskis to Choice's 2002 second mortgage over the Collingwood Street property was, on the evidence I accept, a feature of the negotiations of Mr Knight with Mr Nardizzi for Choice's 2004 second mortgage over the Collingwood Street property. I have previously set out some of Mr Knight's evidence in relation to this matter. I consider the following evidence makes clear his understanding of this feature of the negotiations (ts 1371 1373) :

SOLOMON, MR: Now, Mr Janceski, I want to go back to the matters we discussed this morning, briefly, because what we discussed this morning were the events leading up to the signing of the 2004 Choice mortgage, if I could call it that. You understand what I mean by that, don't you?---Yes.

And we discussed the events leading up to that this morning and indeed beyond it. Do you recall that?---Yes.

Tell me if you think this is a fair summary of the events leading up to that. Steve Masel was pressuring you for the payout of his mortgage over Collingwood and you, in response to that, sought to refinance. You arranged refinancing through Pepper. Is that fair so far?---Yes.

Yes?---Yes.

Thank you.

Then over the course of those months you were conducting negotiations with Joe Nardizzi for him to permit that refinancing to take place. Correct?---Yes.

In the course of those negotiations Joe Nardizzi softened his position, if I could call it that, from demanding a full payout right down eventually to about a $34,000 payout. That's correct, isn't it?---I wouldn't use the term 'softened'.

All right, but he changed. Let's say he changed?---He found some information from Steve that cast doubt on the validity of his mortgage, so he was more willing to negotiate.

So he changed his position and was more willing to negotiate?---Yes.

And that was as a result of taking the evidence you've just given and the evidence you gave this morning of him finding out that there were possible problems with his 2002 mortgage?---Yes, because I noticed a change in his tone from the end of 2003.

And you in fact told him, as we discussed this morning, that there were problems with the 2002 mortgage as part of that negotiation?---No. Steve told me

You gave evidence this morning, Mr Janceski, that you said to Mr Nardizzi in the course of those negotiations that there were problems with the 2002 mortgage because your parents didn't understand it. You gave that evidence this morning, didn't you?---At the time that I told him that he was already told prior to that by Steve

I'm not asking you whether he had already been told by someone else?---Okay.

I'm asking you whether you told him. You did, didn't you? That was the evidence you gave this morning?---He already knew what I told him prior to me telling him that. It was information that he knew.

Did you see Steve Masel tell him?---Steve told me.

Did you see Steve Masel tell him?---Steve told me.

Did you see Steve Masel tell him?---I wasn't in the room when he told him, no.

Thank you. Let me put it this way: you said to Joe that there was a problem with his 2002 mortgage and you understood he already knew that from Steve. Would that be correct?---True.

And that was part of the negotiation during which or as a result of which Joe changed his position and was more willing to negotiate. Correct?True.

And so you managed finally to do a deal with Joe that was acceptable to you, that relieved you of the pressure of Steve Masel's threat. Correct?---It wasn't the deal that I wanted but it was the best compromise between all parties that we could reach.

And that relieved you of the threat of Steve Masel enforcing his first mortgage. Correct?---Not quite.

Well, you've given evidence this morning that you were under pressure from Steve Masel and that's why you had to do a deal with Joe, so when you did a deal with Joe it relieved you of that pressure. That follows, doesn't it?---I also gave evidence that Steve is not comfortable with lending on residential property with the borrowers also living in that property.

It doesn't matter what the reason is?---I haven't finished.

I'm getting you to answer my questions, Mr Janceski. It doesn't matter what the reason Steve Masel was applying pressure. What I'm saying is that whatever his reason for applying pressure, having done the deal with Joe, that relieved you of the pressure because you were able to pay back Steve Masel. Correct, isn't it?---If it was to buy another investment property and combine that one with the investment, then Steve would have been okay.

But the pressure on the Collingwood Street home was relieved, wasn't it?In one manner, yes.

By doing the deal with Joe Nardizzi. Correct?---That was one solution, yes.

That was the solution that you adopted in fact, wasn't it?---That was the best compromise that we could reach.

And they overall were the circumstances that led to the 2004 Choice mortgage, weren't they, the matters we've been discussing over the last five minutes?---Not quite.

Why not?---I would have preferred to get rid of that mortgage altogether.

224 I should note that I consider it would be of no significance that Mr Masel may have been first to have raised the possibility of the Janceskis challenging Choice's 2002 second mortgage over the Collingwood Street property in circumstances where Mr Knight had drawn on that possibility in the negotiations with Mr Nardizzi. Mr Knight's evidence just quoted leads me to conclude Mr Knight did just that.

225 This evidence is also consistent with the e-mail from Mr Knight to Mr Nardizzi of 1 July 2004 in evidence before me to which I have previously referred and in which the following appears:

The option is now up to you. You should decide if you will accept $34,500 and remove your 2nd Mortgage from Collingwood. I have no say in the matter.

My parents are too frightened to agree to the mortgage remaining on their property and I have not been able to convince them as others have now joined the party and have got them very upset.

226 I also consider that Mr Nardizzi understood this to be a feature of the negotiations as indicated in his testimony as to an e-mail from him to his solicitors of 27 May 2004 in evidence before me (Mr Nardizzi's e-mail of 27 May 2004). I now set out his principal evidence in full. I will have occasion to return to it and certain related evidence of his in relation to whether any special disadvantage of the Janceskis was sufficiently evident to Mr Nardizzi as to make it prima facie unconscionable for Choice to take the benefit of Choice's 2004 second mortgage over the Collingwood Street property. In that context I will quote Mr Nardizzi's email of 27 May 2004 in full.

227 Mr Nardizzi's evidence was in cross-examination, as follows (ts 1517 1520, 1521 1523, 1524, 1525 1529):

You can see that that's an email at the top from Douglas Hall to West Coast Real Estate, Elders West Coast Real Estate?---Yes.

You can see down the bottom there's a reply or there's an email from you?Yes.

To Douglas Hall?---Yes.

Sent at 2 minutes past 9 on 27 May 2004?---Yes.

Are the contents of that email true?---Yes. I wrote it, yes.

Is it not the case that there was a need to lift and reregister the mortgage?No, no. Sorry, we could have relied on our first mortgage by way of clarification but Peppers wouldn't agree to that, and I think there's something there - I haven't got my hands on it but that was their requirement.

So when you say in that email - and I'm referring to the third line?---Yes.

Actually, we will start from the second paragraph:

Please advise if you are interested in providing two second mortgages or whatever you recommend is necessary to allow us to lift and reregister?

Please note that the two parties are both living in the premises and that the parents are at 1 Collingwood Street, Dianella and they are unsophisticated, with poor English and not much commercial experience?

---Yes.

Would you accept that that's contrary to the evidence you have previously given?---No, to the extent that I'm instructing a solicitor and bringing to his attention what I thought was necessary in the new mortgage to ensure that the problems that I had become aware of with the Amadio thing were covered, whether or not that was really the situation, which I did not believe in 02.

At this point, that is, at the time you wrote this email, would you agree that you were aware that there was no likelihood of Michael or Mr or Mrs Janceski being able to repay Choice?---No. I had great belief in Michael. I thought this was a fairly simple matter if Michael would apply himself and I even suggested to him to consider taking a job up north when the time was buoyant, there was plenty of activity and the pay was very high, and that's the best that I could do, is to suggest that to him, and it's up to him whether or not he would do that, and there's emails or some correspondence there, faxes, in which I say to Michael words to that effect that I believed in the guy and really it was up to him to make the effort. It wasn't a big deal to meet the repayments of that mortgage. He could easily have done it if he applied himself.

So you would say that it wasn't a big deal to meet the repayments of that mortgage?---Yes.

even though there were in existence first - a first mortgage?---Yes.

That needed to be repaid as well?---Well, if Michael as a single man, no ties to families or school fees et cetera, had elected to take a job up north, and he had plenty of qualifications, plenty of smarts about him and plenty of capability - young, strong and quite talented in many things that he did - he could have earned six figures easily and that would have been more than adequate to meet the repayments of the mortgage. It was foreign to my way of thinking that one would borrow money and not want to pay it back and then not wanting to extricate themselves from the situation by really applying themselves.

Yes, I understand what you are saying there, but my question was more directed to your belief in the ability of Mr Janceski to repay that amount?---I believed he could. However, in retrospect I was wrong and if I had that thought at the time, I would not have agreed to have gone into the 04 mortgage. I could have sat back and let Walthamstow do what they did in Janet Street, sell the property and collect my proceeds. In fact I was - I won't say that. It's a personal thing.

So when you wrote to your lawyer and said that the Janceski parents were unsophisticated, with poor English and not much commercial experience, you have said you were telling the truth. Is that correct?---I was more working on the lawyer to say to him, 'I've heard of Amadio. Make sure you cover the bases on this time around.' I didn't really have a problem communicating with Mr and Mrs Janceski in English. I didn't have any real reservations about their commercial savvy because of the other properties they owned, in particular Arkana. I noticed that Arkana was owned for probably six months and they made about $60,000 profit on that sale, and for that reason I thought they were quite savvy people doing business, but I wanted my lawyer, who didn't give me the Amadio thing in 02, to make sure that he understood and would give me everything that I need.

So is it your belief that Mr and Mrs Janceski made about $60,000 on the Arkana Road sale?---I'm going by memory. The paperwork is there, but it was about 60. I think it was 212 and they sold it for 270. I would need to check the figures, though, of that audit.

Were you aware of the amount of money they had borrowed to pay for the Arkana Road properties?---No, I wasn't clear on that.

Did you become aware of that when they were unable to pay the commission fees that were due to you?---Well, yes, at settlement, the settlement statement was prepared; yes.

So were you made aware then that the money they had borrowed over Arkana Road did not leave enough money for them to?---Yes.

Receive $60,000?---Yes, but the reality is they still made a profit on the transaction. It went towards other debts but there was a profit on the transaction.

So you understood that they didn't actually get that money themselves?Well, they did get the money, but it went to retire other debts.

Thanks. You have clarified what was a badly-put question, I'm sorry. So when did you - no, actually, I will go back to your statement when you said that you told the lawyer that the Janceski parents were unsophisticated with poor English and not much commercial experience. I think your words were that that was more what you were putting to your lawyer when you became aware of Amadio and wanted to cover the bases. Is that what you said?---Yes.

So would you say that that statement then expresses the truth as you believed it?---Not really. I think there's some - focusing the mind on the Amadio arguments there, one would give more weight to that. You know, if - I would have given more weight to that in 04 than 02. I gave no weight to it in 02 at all.

So you didn't really believe that statement at the time?---Certainly not in 02. In 04, when I became cognisant of what this argument was, I wanted to make sure that I had expressed everything that I possibly thought or knew, so that my lawyer would do everything that was necessary, or I didn't want to go ahead with the 04 mortgage, just leave it alone, sit back and wait for the sale and take the proceeds. I wouldn't be here today if that was the case.

I just need to clarify with you, Mr Nardizzi, as to what level of truth you believe there to be where you say there is in that statement you made. Were you expressing the truth as you believed it at the time, or are you saying you overstated it for the purposes of putting it across to the lawyer?---In 02 I had no problem communicating with Mr and Mrs Janceski, and Michael was very fluent in English et cetera. In 02 I had no misgivings or reservations about Mr and Mrs Janceski and Michael being commercially savvy and owning and dealing with properties, so in 02 I didn't give any real weight to those thoughts. In 04 it was I wanted to instruct my lawyer what I wanted him to do. I expressed it poorly, but I think the documents he prepared were basically the same mortgage as 02 with solicitors and translators. If I had any indication that solicitors and translators were necessary in 02, as is my normal practice, I declare everything. I give all declarations, authorities that are necessary, but it didn't seem to me in 02 it was necessary.

So can you tell me, in 04 when you wrote that statement do you believe it to be true?---Not really. I was more - as I repeat myself, it was more for the lawyer to be - for me to emphasise to him that was my belief at the time.

So would you accept then, if I put it to you, that you were lying to your lawyer?---I think 'lying' is not the right word. I would say it was more an instruction to say, 'Make sure you cover all of these bases' because of the Amadio knowledge that I didn't have earlier.

...

Mr Nardizzi, if I put it to you that your statement that, 'They are unsophisticated with poor English and not much commercial experience' is in fact true, what would you say to that?---I didn't believe it in 02, I really didn't believe it in 04, but there was an instruction given to my lawyer.

Further on, Mr Nardizzi, it says - and I'm following directly on from where we finished with 'not much commercial experience'. You also wrote, 'They trusted and relied on their son'?---Yes.

Further, 'Their son is highly experienced with all facets of property,' and you go on about the book and Mr Michael Knight - 'all facets of property and financing', sorry, 'and he persuaded them to use their home as security for these loans.' That statement, 'They trusted and relied on their son': was that a true statement?---In 02 when I first met Michael, he made a proposal with five properties as security. I have no knowledge how he got - what conversation went between him and Mr and Mrs Janceski to include the three properties they were involved in in that. Again, becoming more aware of Amadio and the circumstances of how that had some influence, I was using that particular thrust of instruction to make sure that he covered all the bases there. It was to give him the background. I don't know what happened in 02 between the parents and Michael. I accepted the proposal from Michael.

SIMMONDS J: Mr Nardizzi, although you have said some things relevant to the question, I'm not sure that you have answered it?---Okay.

What the cross examiner asked you was whether at the time you wrote that email you believed it to be a correct characterisation of the relationship between the Janceskis and their son that you said, as you did, 'They trusted and relied on their son,' who resides at a nominated place. 'The son is highly experienced with all facets of property.' Is that a statement you believed to be true at the time you wrote the email?---No, your Honour. It was more of the basis of an instruction. My getting to know the family - it wasn't the impression I had of the family from that sense.

VAN DER MEULEN, MS: The last section of that sentence, Mr Nardizzi, when it says, speaking of Michael, 'And he persuaded them to use their home as security for these loans,' would you also say that you didn't believe that statement?---In 02 it was a fait accompli. He just proposed that and Mr and Mrs Janceski were in full agreement.

Can you explain to me why you would use the words 'he persuaded them'?---An instruction to a lawyer. It's the same category. That email was to tell him everything I knew that came back from the Amadio situation.

When you say everything you knew that came from the Amadio situation, are you saying that you only made the statements in light of the Amadio situation or what you knew to be the truth in relation to the Janceski family?---The Amadio situation. I didn't really think that they were in that category at all.

You didn't believe that Mr Michael Janceski persuaded his parents to use their home as security for the loan?---The home was there in 02. I don't know what conversations went on between them. He may have, he may not have, but it was an

Would you believe that he persuaded them to use their home as security in 2004?---It was already there.

Would you say that that statement, 'He persuaded them to use their home as security' - because you have said that was already there in 2002. You have now said it was already there in 2004. Would you say that he persuaded them in either of those instances, or neither?---My understanding - in 02, Liberty was suing the family, all three members, in the Supreme Court, and this has only come about after delving into this particular proceedings. The family had attended the Supreme Court. They were aware of the ramifications of that. I was not aware of any of that at the time, otherwise my position would have been different to going ahead with the transaction. They didn't tell me. I went in good faith, and I don't think they needed Michael to persuade them to do anything. They really had no option. Either they found a gullible person with limited knowledge of the events or they were going to be sold up in 02.

You have explained to the court what you believe you meant in the phrase when you wrote the email, 'If you recommend to now cover the bases, please advise.' Is there anything more you would like to say about why you would use that phrase - why you used that phrase?---'If you recommend to now cover the bases, please advise.' It doesn't make a lot of sense, does it, really? I'm probably saying to him, 'Make sure you give me what is necessary.'

Are you again referring to Amadio in there?---The main thrust of this was the allegations being made. On reflection, I should have just sat back and done nothing and the family would have lost the house in - well, in 04 for sure; in 02. ...

...

SIMMONDS J: Yes, I understand that. What did you mean by that to say? Can you now remember?---Basically, your Honour, in light of what I was trying to convey to my solicitor, my lawyer at the time, 'These are the problems that I perceive with my current knowledge and if you' - I'm still seeking his advice, 'If you recommend to now cover the bases, please advise.' My understanding of that comment, your Honour, is, 'Give me everything that's necessary if we are to go ahead with this new mortgage,' which we didn't want to go ahead with, your Honour. Back on - if I may just amplify on that. Excuse me, your Honour, just a moment. On page 348 in which Deacons confirmed to me that they tried to use the existing mortgages but the new people were not agreeable - Peppers were not agreeable to doing that.

Yes, all right. I will let Mrs Van der Meulen have a look at 348. It seems to me that you have gone a little beyond the answer that Mrs Van der Meulen was seeking. In the normal course of things Mrs Van der Meulen would cut you off and say effectively, 'I only want an answer to my question, please,' and the matter would then be a matter for re examination, if necessary, but I believe you have answered Mrs Van der Meulen's question but I should now check with Mrs Van der Meulen and if she is of a different mind, she can ask you the question again.

VAN DER MEULEN, MS: No, I'm satisfied with that, your Honour.

...

Mr Nardizzi, still on page 344 and the term 'cover the bases', if I put to you that by that you were referring to the fact that there was no translator certificate for the 2002 mortgage, what would you say?---I really didn't know what I was saying to him. I asked him for his advice what we had to do, because of my later knowledge.

So if I asked you whether that was one of the bases that you wished to be covered would you agree with that?---In general everything that had to be covered. As I say, I knew nothing about Amadio, not that I had any real misgivings about them understanding me and me understanding them, in English.

SOLOMON, MR: Your Honour, can I just rise to clarify the witness's evidence? It seems to me to call for some clarity. The witness has just said he knew nothing about Amadio. I'm just a little confused as to when the witness says that

SIMMONDS J: To what period he is speaking.

SOLOMON, MR: Precisely.

SIMMONDS J: Yes, all right. Mrs Van der Meulen, perhaps if you would ask the question implicit in Mr Solomon's concern, which is also mine, when the witness says he knew nothing about Amadio, at what point of time is he speaking to, what point of time describes the knowledge, or lack of it, that he has just indicated.

VAN DER MEULEN, MS: Thank you, your Honour.

Mr Nardizzi, you have given evidence that when you wrote this email you had in mind Amadio. At what stage did you become aware of Amadio?---When Michael said to me they won't sign anything and discussions went on on that.

Was that point very much prior to the writing of this email?---I can't recall specifically. It was certainly before this email, yes.

But it was around about that time, it was during this period of negotiations on the 2004 mortgage?---My best recollection, it was a telephone conversation. I can't recall when we had that. I don't

So in 2002 you were not aware of Amadio?---Of course. No.

So now being aware of Amadio and your evidence that that's what you had in mind when you wrote this email, do you accept that one of the bases you wished to cover was the absence of a translator certificate on the 2002 mortgage?---I was taking advice from the lawyer. I'm asking him, 'What do I do?'

In actual fact, Mr Nardizzi, in this email you are actually not taking advice from the lawyer; you are asking - you are putting your thoughts into an email for the lawyer's comment, for his advice, and on that basis I would ask you if the lack of the translator certificate on the 2002 mortgage was one of the bases that you wished to be covered?---It was a generic request.

So can you answer 'Yes' or 'No', whether that was one of the issues, one of the bases, that you wished covered?---At the time I wasn't focusing on translators or interpreters or any other components of the mortgage document; I was asking for advice, 'Well, this allegation's been made.' There's sufficient evidence there that we didn't have to do anything. We could have just sat back and let the process take its course. I wasn't specifically thinking of translators or interpreters. It was more, 'Well, this allegation has been made, these are circumstances that I now understand may be relevant', and in my mind I wasn't believing that to be of relevance, and that was the basis of the email. I wasn't specifically thinking of translators or interpreters.

Was it one of the issues that you wanted covered? That's my only question

SOLOMON, MR: Your Honour, I think I have been more careful in my counting this time and I think it is four times that the witness has answered this question. I don't think it can go any further.

SIMMONDS J: Yes, although it's a difficult question to get the witness engaged upon.

SOLOMON, MR: Well, your Honour

SIMMONDS J: I accept that it has not been much reformulated in the asking. Perhaps, Mrs Van der Meulen, I will try this: it seems to me the question that you are trying to ask the witness, and I think you have almost asked it, is, 'When you were putting together this email was one of the things you were thinking about the question whether or not a translator's certificate was needed?' I think I know Mr Nardizzi's answer to that question but I think that was the question you were getting at.

VAN DER MEULEN, MS: Yes, it was, your Honour, and whilst I understand I was repeating it, I wasn't confident that it had actually been answered rather than him saying that there were generic issues. I wanted to establish the relationship between that particular issue.

SIMMONDS J: All right. Would you object to my asking the question?

VAN DER MEULEN, MS: No, I would very much appreciate that, your Honour.

SIMMONDS J: Mr Nardizzi, the question is this: when you were putting together this email, and I appreciate that may pose some difficulties in recollection for you, but when you were writing this email, composing it, was one of the matters that you were looking to the lawyer to advise you about - was one of those whether or not a translator's or interpreter's certificate should be procured for the new 04 - or what became the 04 mortgage?---Your Honour

Was that a matter you had specifically addressed your mind to as one of the possibilities upon which you would need advice?---No, your Honour. I was not aware of any requirement in that regard and I relied on his advice.

So the answer to the question is 'No'?---'No.'

Thank you.

VAN DER MEULEN, MS: Thank you, your Honour.

Mr Nardizzi, can you now go to page 346?

SIMMONDS J: In MFI A, volume 1?

VAN DER MEULEN, MS: Yes, yes - just a few pages on, and look at the email down the bottom from Douglas Hall to yourself?---Yes.

Under point number 1 it says:

$750 for the new mortgage based on the old one which will include a certificate to be signed by a translator and a lawyer acting for the mortgagors.

Please note that I was not aware previously of a language problem or lack of commercial understanding?

---Yes.

Did that response from Mr Hall alert you to some difficulties with [there] being no translator certificate?---No, I think - as I'm reading it, my - the first one on 344 is the same date, 11.36. The email on page 346 is the same date on 12.35. That came after, so in my saying to him, you know, 'What do you we need?' he has then - as I'm reading this he said that we should include a translator certificate. So he's prompting me there, as I recall, as I'm reading it, unless I'm misreading it. This one followed my earlier generic sort of email, 'What do we do?' and that's what he said.

When Mr Hall says:

Please note that I was not aware previously of a language problem or lack of commercial understanding -

did you understand that to mean that he should have been made aware previously?---In 02 I had no problem with language with Mr and Mrs Janceski, and certainly not Michael. I did not think there was any need to brief him on that. It was my practice, and it still is, any disclosures that I need to make, I am meticulous on giving disclosures and I had no reason at all not to give them everything if I had any clue that it was necessary. I did not believe language was a problem in 02.

So when Mr Hall wrote this email to you in 04, did you take his response then or did that response convey to you that there may be a problem with their lack of commercial understanding or language problem?---Well, the way he's qualified it, he's saying that in 02 there was no issue about language. Because of that email, for reasons that I have already explained, he's saying that there may be issues there, and for prudential reasons I was happy to take any piece of paper that he provided.

Can I ask then if you would tell the court why you didn't explain in your email to Mr Hall that the language problem or lack of commercial understanding was different in 2002 to 2004?---Because in 04 it was more of a brief to emphasise beyond - what's the word I'm looking for - to overemphasise that, 'If we do have a problem and if I do elect to go ahead and go along with a new second mortgage, that it's important that we cover all the bases', but I didn't believe that in 02. There was no perceived language problem to me in 02.

So there was a change in the situation to 04, or is that?---No, it's

Part of the statement you are saying you didn't really believe?---Yeah. It was more an instruction to a lawyer. That was my intention then.

228 I note that Mr Knight's evidence was that any understanding Mr Nardizzi had that the challenge from the Janceskis would be rested on Commercial Bank of Australia v Amadio did not come from him or the Janceskis. I have previously considered that matter.

229 However, it seems to me on this body of evidence from Mr Nardizzi that the matter of a challenge to Choice's 2002 second mortgage over the Collingwood Street property was indeed a significant feature of the negotiations for its replacement. It is not suggested by the defendants that Choice's 2004 second mortgage over the Collingwood Street property was unconscionable because the Janceskis were at a special disadvantage having to do with their not appreciating the basis on which such a challenge might be mounted. Nor was their lack of appreciation of such a matter put to Mr Knight or to Mrs Janceski. In view of the evidence I have described it is not evident to me that any such case could readily be made.

230 I further note Mr Nardizzi's letter of 5 June 2004 and the solicitor's and translator's certificates it enclosed following legal advice he received in that regard.

231 On that basis, it does not seem to me that the matter of Choice's 2002 second mortgage over the Collingwood Street property being an unconscionable dealing, if it was such, is capable of adding anything of significance to any special disadvantage to which the Janceskis were subject in respect of Choice's 2004 second mortgage over the Collingwood Street property.

232 I turn now to the matter of what advice Mr Ozich gave the Janceskis at the meeting of 9 June 2004.

233 Mrs Janceski's evidence was in a number of respects rather difficult to follow.

234 She testified in her examination-in-chief that she and Mr Janceski signed the documents at that meeting that included Choice's 2004 second mortgage over the Collingwood Street property without any explanation of them, before a further handwritten document was produced by Mr Ozich which he also had them sign.

235 He did this, she testified, after saying that they were pensioners, he knew he would be blamed, and they would be thrown out on street, they would end up in court and he needed protection.

236 As I have previously indicated, at the meeting of 9 June 2004 Mr Ozich executed printed solicitor's certificates and printed translator's certificates for each of the Janceskis in respect of Choice's 2004 second mortgage over the Collingwood Street property. He also prepared and had the Janceskis and Mr Knight sign a handwritten note.

237 The solicitor's certificates, one for each of Mrs Janceski and Mr Janceski, each read in material part as follows:

1. I am a solicitor retained by the Mortgagor independently of Choice Constructions.
2. The above mortgage was executed by the Mortgagor in my presence.
3. I explained the effect of the mortgage to the Mortgagor (via translator) before it was executed by the Mortgagor and advised the Mortgagor (via translator) that the Mortgagor should make independent enquiries in respect of the Debtor's financial position.
4. The Mortgagor (via translator) has stated to me that the mortgage has been read to the Mortgagor (via translator) and the Mortgagor understands the legal effect and financial consequences of entering into it.

238 The translator's certificates, one for each of Mrs Janceski and Mr Janceski, each read in material part as follows:

1. I am a translator and I speak and read the English Language and speak and read the Croatian Language [it may be noted that the printed word 'Macedonian' is struck out and replaced by the handwritten word 'Croatian', accompanied by 'V.O.'].
2. I have been requested by the Mortgagor independently of Choice Constructions and the Debtor to translate the mortgage and other security documentation.
3. The above mortgage was executed by the Mortgagor in my presence.
4. I read and explained the contents of the mortgage and other security documentation to the Mortgagor before it was executed by the Mortgagor.
5. The Mortgagor has stated to me that the Mortgagor understand the contents of the mortgage.

239 On the evidence of both Mr Nardizzi and Mrs Janceski the solicitor's and translator's certificates were provided to Mr Nardizzi not long after the meeting of 9 June 2004.

240 The handwritten note recited the amounts due to Pepper as $214,000 and to Choice as $152,822, the interest rate and repayment date for the Choice finance and went on:

if the money (principal sum and interest) for this loan is not paid on time we can and probably will loose [sic lose] [indecipherable crossing-out] our home by mortgagee sale.

Mr V Ozich has explained all this to us.

We agree to sign the mortgage.

We have no questions.

241 Mrs Janceski's evidence was that Mr Ozich did not explain what was in the note.

242 In her cross-examination Mrs Janceski appeared to elaborate slightly on what Mr Ozich said to her and Mr Janceski before writing out the note. She testified he said as follows (ts 1002):

You're on pension, right? How are you going to repay this? With this you will end up in court and you will be on the street then I will be to blame for that. I have to protect myself and that's why I'll write some notes.

243 In her cross-examination, Mrs Janceski also testified that she was 'shocked' when he said words to this effect (ts 1032).

244 However, Mrs Janceski also testified in her cross-examination that Mr Ozich did not tell her that by signing the documents she had signed her house was at risk (ts 1002). Further, she also testified she did not believe she would be out on the street, while also believing that Mr Ozich was working in the interest of the Janceskis and trying to help them, and that they would be protected (ts 1036).

245 Further, in her examination-in-chief she testified that a statement in the Janceskis' letter to the court of August 2005 was incorrect that indicated that they were advised by a solicitor in 2004 but signed the documents then because otherwise the Collingwood Street property would go to a mortgagee sale by Walthamstow. However, she appeared to contradict this testimony in her cross-examination in which she affirmed as true a statement to the same effect in the Amended Defence of June 2005 (ts 1134 1137) and another statement to the same effect in a letter dated 1 April 2005 written on their behalf by Law Access (ts 1148).

246 I note again Mrs Janceski's eventual evidence that Mr Ozich spoke with her mainly in Croatian, a language which as I have indicated she testified she found very difficult to understand. However, I note that she was able to testify as to features of what Mr Ozich said to her notwithstanding that difficulty.

247 I also note Mrs Janceski's evidence that if it had been explained to her that a mortgage on Collingwood Street would be used, through the funds it permitted the Janceskis and Mr Knight to borrow from Pepper, to reduce Mr Knight's debt she would not have allowed that (ts 1062, ts 1211 1212). In view of her testimony as to her concern for Mr Knight which I reach below, as well as the evidence of Mr Ozich which I am about to reach and which I accept, I do not accept this evidence, except as an indication of a measure of disapproval of the acquisition of the Janet Street property, a disapproval I have already referred to.

248 Mr Ozich's principal evidence as to what occurred at the meeting of 9 June 2004 prior to his production of the handwritten note was as follows (examination-in-chief, ts 1571 1573):

Can I just ask you to pause there, Mr Ozich? Do you have an actual recollection of doing it on this occasion or are you reconstructing this from the documents?---No, I have a recollection of doing it on this occasion. The reason for that is, as I said, at the when I was just discussing, just having some small talk with them, Mr Janceski did say he was on a pension and that sort of alerted me somewhat because I was aware that pensions are means tested both as to income and assets. I didn't say anything at the time but it sort of concentrated my mind, as it were, I suppose, and I do recall going through the documents with them and, as I say, explaining each of the documents. Having done that, again asking Michael Knight to leave the room - I distinctly recall that because I didn't mind him leaving the room; his phone kept going off, his mobile phone, which was irritating. Then I again satisfied myself that they were under no pressure of any kind.

What did you say to them, Mr Ozich, to Mr and Mrs Janceski?---Well, I

Perhaps I will rephrase that more specifically. What did you say to them that satisfied you that they knew what they were doing, firstly, and secondly, that they weren't being influenced unduly?---That they knew what they were doing?

Yes?---Well, what satisfied me in relation to that was their responses to the questions I asked them, so when I said to them, 'Do you realise that you're placing a mortgage, a second mortgage - a second mortgage is being placed on your residence in Dianella to the sum of' - from memory, '$150,000?' and I asked them, 'Do you realise that's happening?', having explained the nature of a mortgage, and they said, 'Yes, we understand that. We're here to help our son Michael '

Sorry, I will ask you to pause there?---'We're here to help our son Michael. We're trying to help our son Michael.'

You say having explained to them the nature of the mortgage - is that what you said?---Yes, correct.

What would you have told them about that?---Well, again, I would have used the analogy of a bank and basically saying that - it was that analogy but in this case, because they were signing a guarantee, the lender was requiring security, additional security, and that additional security was security over their house, which meant that if the obligations under the guarantee and under the mortgage, or the lender's - I'm sorry, if their, the guarantor's, obligations under those documents were not met, they risked the possibility and probability of, at the end of the day, losing their home.

Do you recall saying that to them?---Absolutely I did.

And do you?---And in fact I recall saying to them, 'Do you really, at your age in life, want to be doing this, being involved in this?' and they kept - the common refrain was, 'Look, we want to help our son Michael. We want to help him get on.'

Did you detect any difficulty in communicating with them?---No, not at all.

Did you detect any difficulty in them understanding what you were saying?---Not at all.

249 Mr Ozich's principal evidence as to the handwritten note signed after the other documents signed was as follows (ts 1574 1575):

What I wanted to ask you was this particular note, this note at page 360: does that reflect your usual practice?---Not my usual practice necessarily, no.

Why was it done on this occasion?---Well, I thought it appropriate to have a record on file of the meeting that I had with Mr and Mrs Janceski.

Why is that?---Well, I think unconsciously I might have been a little bit concerned about their situation, particularly as they were pensioners and I was aware, as I suppose most people are, that being pensioners - I made the assumption I suppose that they were limited in their resources, both in terms of income and assets, and had limited cash flow in case of problems arising out of these arrangements so - yes, I mean, that's probably the essence of it.

What were the - can you describe how this note came about? Can you tell his Honour that, please, Mr Ozich?---Well, first of all, as I said, I went through my usual process of explaining all the documents, getting Michael - well, the principal borrower out of the room, satisfying myself about all the essential elements of what I needed to satisfy myself in relation to providing a valid certificate, and having done that, I recall I called Michael Knight back into the room and I said to them I was satisfied that it was appropriate for me to give a certificate of independent legal advice and I was fully satisfied that they understood what they were letting themselves in for, and the repercussions, and I said that I needed - I wanted a note for my file of what in very brief summary form had taken place and were they okay with that, and they said they were.

Did you tell them what the note contained?---No, no. I said, 'Well, look, I'll prepare some notes here, and as I'm writing them down I'll read them to you' and I translated them in Serbian-Croatian. Then having completed the note, I once more read it to them in full and said, 'Are you happy with that? Are you happy to sign that? I'd like you to sign it' and they said, 'Yes.' They signed it and then I gave the note to Michael Knight, these notes, and I said, 'Are you happy to sign it?' He read it through. I remember him reading it and reading through the notes, and then he said, 'Fine' and he signed it.

Where in that sequence were the actual documents signed, the instrument signed and the solicitor's?---They signed before this note was signed.

So you gave - so there were three things, Mr Ozich: there's the explanation, there's the signing of the documents and there's the signing of this note?---Correct.

Is that the correct sequence?---Basically it is the correct sequence, yes.

250 The only evidence from Mr Knight as to what happened at the 9 June 2004 meeting was that in which he accepted as true what appeared in an affidavit of his parents sworn 14 July 2005 (the Janceskis' affidavit of July 2005) and in evidence before me in the summary judgment proceedings as follows (ts 1361):

This time we sought legal advice and provided a solicitor's certificate to Choice Constructions, however we had no choice but to sign a new mortgage guarantee as we were now facing a forced sale of our home by Reliance Finance, first mortgagee, due to the delays in negotiations with Choice Constructions, second mortgagee.

251 I consider that in view of the difficulties with Mrs Janceski's evidence to which I have referred, my view of Mr Ozich as a credible witness, the plausibility of his account and the evidence of Mr Knight I should prefer Mr Ozich's account of what occurred at the 9 June 2004 meeting.

252 I further consider that on the same body of evidence I should conclude the Janceskis understood what he said. Below, I consider the case of the defendants on the basis that Mr Ozich was in error as to the Janceskis' understanding of what he said.

253 I note that in assessing the relevance of independent legal advice it is 'important to bear in mind the essence of the supposed disability or weakness' (Bridgewater [41] (Gleeson CJ and Callinan J)). On my findings, it seems to me that the advice in this case substantially qualifies the case for special disadvantage that rests on age; limited English; the form of dependence of the Janceskis on Mr Knight I have previously considered that consisted in the Janceskis' trust of and reliance on him; lack of business knowledge; and the length and complexity of the documentation. However, as I will explain, it seems to me that these findings qualify only in certain respects the case for special disadvantage that is rested on the lack of financial advice.

254 I turn now to the next relevant factor, the length and complexity of the documentation.

Application: the length and complexity of the documentation

255 On the defendants' case I understood this to be a factor I should approach by reference to the other factors on which the defendants rely as establishing the Janceskis' special disadvantage.

256 I accept that the documentation produced for the Janceskis to sign at the meeting of 9 June 2004 which included but was not limited to Choice's 2004 second mortgage over the Collingwood Street property was both lengthy and complex.

257 However, it is not clear to me that that documentation was, for what was a complex transaction, especially so. It will be recalled that the transaction involved a refinancing of a loan transaction with the Mr Knight and the Janceskis (the Walthamstow loan agreement with Mr Knight and the Janceskis), the paying down of a loan transaction with Mr Knight alone (the loan secured by Walthamstow's first mortgage over the Janet Street property) and a replacement second mortgage for Choice over the Collingwood Street property (Choice's 2004 second mortgage over the Collingwood Street property) to permit these arrangements to be made.

258 More importantly, on my findings the Janceskis had through Mr Ozich been made aware of the fundamental features of transaction, including the financial obligations the Janceskis had undertaken and the consequences of default.

259 On that basis I do not consider the case for special disadvantage in the present respect has been made out.

260 I turn now to the next relevant factor, the relative bargaining positions of the parties.

Application: the relative bargaining positions of the parties

261 As Permanent Mortgages [224], [226], [227] indicates, a disparity, even a marked disparity, in bargaining positions is not of itself a factor going to show a special disadvantage. What is of importance is an incapacity or a seriously diminished capacity to conserve the weaker party's interests, which an inferior bargaining position may not produce or affect.

262 I understood the defendants' case here to rest on features of Choice's 2004 second mortgage over the Collingwood Street property of which the Janceskis were unaware, an unawareness which produced an incapacity or seriously diminished capacity to protect their interests in the transaction it represented. Those features were of two kinds, although on the defendants' case as I understood it was only the first received any emphasis. As I will explain, the second is sufficiently closely related to the first that I took it to have been part of the defendants' case also.

263 The first kind they emphasised was that the transaction was one with a high risk of default, deriving from the position of Mr Knight. Reference was made in the defendants' closing submissions to Mr Knight as an undischarged bankrupt for whose bankruptcy Mr Nardizzi had been responsible. Reference in those submissions was also made to Mr Nardizzi's knowledge or presumptive knowledge of Mr Knight's property dealings in respect of the Arkana Road properties, the Ingleton Lane property and the Janet Street property. It appears to have been contended in respect of those dealings that they showed an overall result of production of proceeds that had proved insufficient to meet the indebtedness associated with the properties. The contention was that the Janceskis were ignorant of this history.

264 I accept that ignorance of a history of the kind described might at the least contribute to an incapacity or a diminished capacity to conserve the interests of a person asked to grant security for the debt of a person with that history. However, I do not consider a sufficient evidentiary foundation was laid for a case of the kind the defendants put forward.

265 True it is that on the evidence of Mr Nardizzi Mr Knight had gone into voluntary bankruptcy as a result of Walthamstow 'foreclosing on the Janet Street property' (ts 1513). However, there is no evidence as to when that bankruptcy occurred other than after the Walthamstow enforcement referred to. That enforcement began as I have indicated with the issue of a default notice on 2 December 2004, after which on 8 March 2005 Walthamstow gave notice of its intention to exercise its power of sale under Walthamstow's first mortgage over the Janet Street property. While that enforcement did begin not long after the entry into Choice's 2004 second mortgage over the Collingwood Street property, it is not clear to me that I should infer from that proximity, without more evidence as to matters in existence at the time of that entry, that there was a high risk of default at the time of that entry. Nor was there any evidence as to what the Janceskis knew or did not know of any risk of bankruptcy.

266 True it also is that there was evidence before me which tended to show the overall result of the property dealings was as the defendants contended for. However, on my findings on the evidence before me Mrs Janceski was aware of the need to refinance the indebtedness associated with Arkana Road properties and the Janet Street property, while there is no evidence before me that Mr Janceski was unaware of that need. I consider that on that basis I am not in a position to find they were ignorant of the overall result described.

267 The second kind of feature of the transaction represented by Choice's 2004 second mortgage over the Collingwood Street property was that it was one in which it might be suggested that Choice's focus was on the Collingwood Street property as the means of repayment of the indebtedness, rather than taking security for an indebtedness it was seeking to have repaid if necessary by resort to other payment by the Janceskis. In my view this feature might be seen to be a matter closely related to the previous one, by virtue of a claim that Choice's focus was a result of its assessment of the high risk of default by Mr Knight.

268 I have concluded that this feature of a mortgage transaction is one that, if made out, is of potential relevance to a finding of an unconscionable dealing. I have so concluded on the basis of the discussion of 'asset lending' in Permanent Mortgages [206] [214]. From those paragraphs I extract the following propositions:

1. Asset lending, understood as the lending of money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is in some circumstances unjust: [210] quoting from Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343 [96] (Campbell JA, Hodgson and McColl JJA agreeing) (my emphases);
2. Whether the lender's concern was with the security and not the borrower's ability to repay is a matter of fact to be determined on the evidence: [212] referring to Perpetual Trustees Victoria Ltd v Kirkbride [2009] NSWSC 377 [63] [65] (R A Hulme J);
3. Evidence relevant to determining whether or not to draw the inference that the lender's concern was of the sort just described includes the evidence as to the information available to the lender as to the size of the borrowing, the borrower's asset position and the borrower's income: thus, the inference may drawn in a case where on the evidence the borrowing was large and secured on the borrower's only asset, and the application form for the loan failed to disclose any income for the borrower. See [209], quoting from Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 [56], [59] (Beazley JA);
4. Other evidence of a kind which may provide some basis for drawing the inference in question is that the lender ignored its own borrowing guidelines in the making of the loan, although this does not exhaust the kinds of evidence that may so provide: see [213], referring to Kowalczuk [102] and Spina v Permanent Custodians Ltd [2009] NSWCA 206 [68] (Young JA, Tobias and Campbell JJA agreeing);
5. However,

[e]ven where, prima facie, there is pure asset lending, the totality of all the circumstances must be examined in assessing the alleged unconscionability of the loan transaction ([214]).

269 I consider that the potential relevance to unconscionability of a showing of asset lending is that of supporting an inference that a special disadvantage existed, or as to tending to show that unfair use was made of the occasion, in the way inadequacy of consideration in a bargain might ground such an inference or so tend: see Permanent Mortgages [245] on inadequacy of consideration, which I quoted earlier.

270 However, I consider that here an insufficient evidentiary foundation has been laid for a case of that sort.

271 I consider that the matter falls to be judged as at the time of entry into Choice's 2002 second mortgage over the Collingwood Street property. I so consider because, as at the time of entry into Choice's 2004 second mortgage over the Collingwood Street property, there is no evidence I could find that Choice's concern through Mr Nardizzi as to that security was materially different from its concern as to the security it replaced.

272 At the time of entry into Choice's 2002 second mortgage over the Collingwood Street property, there is no evidence of what information was available to Mr Nardizzi as to the Janceskis' regular income. There was no evidence from Mr Nardizzi as to the application form if any the Janceskis had completed in connection with Choice's 2002 second mortgage over the Collingwood Street property and what other information was available to him at that time. Nor was there evidence as to the concerns that animated him in respect of obtaining security from the Janceskis, except for evidence in two forms.

273 One, from Mr Nardizzi, was that that security was one of those Mr Knight had indicated in 2002 could be given for Choice's vendor finance for the acquisition of the Janet Street property and that Mr Nardizzi had assessed the security for the vendor finance Choice was providing by reference to the entire package of securities being offered. He described the process by which he assessed the provision of that finance in his cross-examination as follows (ts 1427, ts 1440 1441):

VAN DER MEULEN, MS: Mr Nardizzi, when you were considering whether to grant mortgages, second mortgages, to Mr Michael Knight and Mr and Mrs Janceski over Janet Street and Collingwood Street, were you interested in assessing their financial abilities? Sorry, that's not well worded either. Did you take any interest in their financial position?---I analysed that there was plenty of security. I was not terribly experienced in this sort of financial arrangement. I accepted the number of properties in principle as being very good security, so I was quite happy to proceed on that basis and I did not have any suspicions that there was any financial stress on the families.

...

At any stage, and I'm going right back to the time when Mr Janceski first made inquiries about the Janet Street unit through to the time when you sold the Arkana Road and Ingleton Lane properties and were managing the Janet Street property - did you at any time inquire into the incomes of any of the members of the Janceski family?---No, other than Michael showed me two businesses that he was operating. This is around about the 02 time.

Was he operating these businesses concurrently?---With the 02?

No, with each other. Were they - when you say he showed you two businesses he was operating about that time, I'm just wondering whether you mean he was running two businesses at the same time?---I can only recall that I visited him in Angove Street, North Perth - I don't recall the street number - and I purchased two shirts from him on the clothing business and I visited him at the property in Northbridge which was a café-type restaurant, nightclub. It seemed to be a well set-up business, operating normal.

So would it be true to say that you had granted second mortgages on five properties without considering whether or not the Janceski family were capable of servicing the loans they had undertaken?---I did not check their income; I did not check their equity. If that answers a question, that's my position on that. I didn't think it was necessary.

So you don't think it's necessary, when there's five second mortgages, to check whether the person entering into those mortgages, or persons, are capable of servicing those loans?---With five mortgages there's a good deal of comfort, second mortgages, and much less thought in my mind that there would be a need to check this out, particularly when seeing that the younger party was operating these businesses. They seemed to be operating okay to me.

Your primary consideration was to secure the mortgages by way of equity. You weren't concerned about an ability to repay?---It never entered my head that they wouldn't repay or that they had problems. There was plenty of equity there that I saw in the periphery of it.

274 It seems to me this evidence does not show a lack of concern for the ability of the Janceskis to meet their obligations, but rather that Mr Nardizzi satisfied himself as to that ability in an undemanding way. He so satisfied himself in view of his satisfaction with the package of security being offered. It was not put to Mr Nardizzi, and he gave no evidence to the effect, that he in fact had no concern for the Janceskis' ability to meet those obligations.

275 The other form of evidence was from Mrs Janceski, and was that in 2004, when she was told Choice's name was on the title to the Collingwood Street property and she contacted Mr Nardizzi about this, he said the following during the course of their conversation (ts 372) (emphasis supplied):

I recall that he then said to me words to the effect that, 'Well, ma'am, I have a family to look after and I have my own children and I have to do that because your son didn't have any assets, but I knew that you and your husband have the house.' At the time I did not understand what the word 'asset' mean but this was like a letter explained to me by Michael.

276 I accept this evidence was of Mr Nardizzi's view as to 2002 and as to 2004. However, I do not consider that evidence indicates that Mr Nardizzi was concerned with the Collingwood Street property as the means of repayment of the indebtedness to Choice. Rather, it indicates his concern for it as collateral, or security.

277 I also note that there was the evidence that the purchase of the Janet Street property was by the Knight Family Trust under which as I have indicated the Janceskis were among the general beneficiaries. There was also the evidence of the sale of the Arkana Road properties, of which the Janceskis had been owners together with Mr Knight, the proceeds of which on the unchallenged evidence of Mr Nardizzi had on his understanding exceeded the purchase price of the property and had been applied towards meeting other indebtedness. I review this evidence below, in connection with what was on the evidence before me apparent to Choice at the times of entry into Choice's second mortgages over the Collingwood Street property. I consider that body of evidence might be taken to indicate that Mr Nardizzi viewed the Janceskis as persons who might be expected through their property dealings or otherwise to be in a position to meet their obligations to Choice. Whether this body of evidence should not be so taken was not the subject of other evidence before me, save for evidence in Mr Nardizzi's e-mail of 27 May 2004, that the Janceskis were 'not financial'. I return to that evidence below, where I indicate why it should not be so taken.

278 True it is that the transaction represented by Choice's 2002 second mortgage over the Collingwood Street property had particular features that made it other than a commonplace one, and heightened the risk that the transaction represented for the Janceskis in the giving of a mortgage over their home as security for a portion of the borrowing for the purchase of the Janet Street property. Those features were ones that on the evidence before me showed the purchaser under the 24 August 2002 agreement to sell had at best little or no equity in the Janet Street property. Those features were that the deposit payable under the 24 August 2002 agreement to sell was only $10,000 on a purchase price of $375,000; the provision in the 24 August 2002 agreement to sell for a first mortgage was in the amount of $220,000, which was the amount secured shown in Walthamstow's first mortgage over the Janet Street property; and it was common ground that the provision for vendor finance in Choice's 2002 second mortgage over the Collingwood Street property in the events that happened was for finance in the amount of $175,000. In Choice, Newnes M [25] attention is drawn to these features.

279 However, there is no evidence before me that the Janceskis were unaware of those features, other than Mrs Janceski's evidence that it was in 2004 she first became aware she and Mr Janceski had granted a mortgage over the Collingwood Street property in favour of Choice; and Mr Knight's evidence that he had provided no explanation of the transaction to his parents at the time of entry into Choice's 2002 second mortgage over the Collingwood Street property. I have previously referred to this evidence. I have previously indicated why I do not believe Mrs Janceski's evidence in that respect. While Mr Knight's evidence in the respect indicated was not challenged, I have no evidence that Mr Nardizzi was aware in 2002 of any failure of Mr Knight to provide any explanation of the transaction.

280 In those circumstances, it seems to me that there is no reasonable inference of the kind I have been considering available to assist the defendants from the particular features I have described.

281 Of course, the particular features I have described in the circumstances of this case would tend to indicate that it was imprudent for the Janceskis to enter into Choice's 2002 second mortgage over the Collingwood Street property. Further, the same could be said of Choice's 2004 second mortgage over the Collingwood Street property, with even greater force, as I will indicate. I consider that aspect of the defendants' case below.

282 I turn now to the matter of misrepresentations and pressure applied.

Application: misrepresentations and pressure applied

283 As I understood the defendants' case, this factor went to what was said to be the deliberate concealment from his parents by Mr Knight of his dealings in property, the nature and extent of his borrowings and the financial effects of his dealings when considered with the failure of Mr Nardizzi to disclose what he knew of those matters; and Mr Nardizzi's constant harassment of the Janceskis and Mr Knight, primarily by persistent telephone calls that led to the Janceskis changing their telephone number on several occasions, to the point that they took the action that resulted in Choice's 2004 second mortgage over the Collingwood Street property to bring that harassment to a stop.

284 It seems clear that a deliberate concealment of the kind referred to, of which the party in the position of Choice took no advantage because it was unaware of it, would of itself have no bearing on unconscionability. However, a failure to disclose knowledge of such a concealment potentially would have such a bearing. These matters are explained in Permanent Mortgages [255] as follows:

There is no duty on a financier to provide a borrower or guarantor with commercial advice: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 276. Also, the rights of a creditor are not impeached purely on the basis of misrepresentation made by the debtor to the surety unless the creditor knew of or assented to the making of the misrepresentation: Commercial Bank of Australia v Amadio (458). Nevertheless, the fact that a surety is misled by the debtor may contribute to a condition of special disadvantage in the surety, vis-à-vis the financier: Commercial Bank of Australia v Amadio (464).

285 No authority was cited to me, and I am not aware of one, as to the relevance to a showing of an unconscionable dealing of pressure by a creditor for execution of a security agreement which led to the debtor signing one. It seems to me that a creditor's repeated indications that, absent such an agreement, it would allow the borrower to be subject to enforcement proceedings, of its own or from another creditor, where those indications produced that effect, would not itself tend to be relevant to a case of unconscionable dealing. However, this would in my view be absent a form and frequency of such indications that would operate, perhaps in conjunction with other factors, with the effect, of depriving the borrower of the capacity to conserve their own interests whether the creditor intended this or not. Where there were such indications, they would have the relevance referred to.

286 As I understood the defendants' case, it rested in the present respect on such an effect, of what they said were repeated telephone calls Mr Nardizzi made to the Janceskis and Mr Knight which so affected Mrs Janceski, both directly, and through the calls' effects on Mr Knight for whom she was concerned. I deal with the latter below when I consider the matter of the stress of the defendants and their emotional concern for Mr Knight arising out of his perceived condition. I here focus on the defendants' case as to the direct effects on Mrs Janceski.

287 I consider that the defendants have not made out the misrepresentation aspect of their case, as they have not shown that Mr Knight had deliberately concealed the matters referred to, and as they have not shown what Mr Nardizzi knew of any such deliberate concealment. I have previously addressed the lack of evidence as to the effects of Mr Knight's dealings on which this aspect of the defendants' case in part rests. I consider that the evidence that Mr Knight had told Mr Nardizzi he had not explained Choice's 2002 second mortgage over the Collingwood Street property does not extend beyond that transaction, to the other matters which on the defendants' case Mr Knight deliberately concealed.

288 I also note that there is no evidence from Mrs Janceski that Mr Knight deliberately concealed his financial position from her. Indeed, her evidence in connection with the application of the proceeds of the sale of the Fitzgerald Street property, that he was 'a good son' and that she did not know he had lied to her in connection with that application, might be taken to indicate that she did not regard him as some one who would deliberately conceal financial matters from her.

289 In any event, there is no evidence that Mr Nardizzi was aware of Mr Knight's having deliberately concealed either kind of matter.

290 I should note that there was a representation on Mrs Janceski's evidence Mr Knight made to her when in 2002 she learnt he had bought the Janet Street property and asked him how he was able to buy it. Mr Knight told her that Mr Nardizzi had offered him a job adding 'I'll be OK'. Mr Nardizzi's evidence was that he had 'never' offered Mr Knight a job. Neither item of evidence was challenged. However, the defence case did not rely upon this body of evidence. In any event, it is not apparent to me on all of the evidence why it might be said Mr Nardizzi was aware that Mr Knight had made such a representation in 2002.

291 I also consider that the defendants have not made out the pressure aspect of their case as they have not shown that Mr Nardizzi engaged in the harassing behaviours relied upon.

292 Mrs Janceski's evidence was that, after learning from a real estate agent that there was a second mortgage over Collingwood Street, she rang Mr Nardizzi. He told her that he was going to throw the Janceskis on to the street. He kept calling Mr Knight and, when Mrs Janceski told him he could not speak with Mr Knight because he was sick in bed, Mr Nardizzi said he would keep calling her. The phone kept ringing, and Mrs Janceski had no peace. He would call from as early as 6 am, up to 11 times a day, to 11 pm, to the home phone and if that did not answer to 'the mobile', explaining in cross-examination that he first called Mr Knight's mobile, then the home phone at the Collingwood Street property and then her husband's mobile. Between January 2004 and the time the present proceedings were commenced the Janceskis had to change their phone line three times because of phone calls. She complained to a number of third parties about this over that period. In the phone calls he would say that the Janceskis had to pay him, asking when they would do so and often saying, either they should sell the Collingwood Street property or he would do so throwing them out on to the street. Mrs Janceski's evidence was also that one of the reasons she went to the meeting with Mr Ozich, which Mr Nardizzi arranged, was that Mr Knight told her this was a way to stop Mr Nardizzi.

293 However, I consider it more likely than not that a pattern of telephone calls with demands for payment and intimations of enforcement, whether or not with the timing and frequency Mrs Janceski testified to, came after, not before, the entry into Choice's 2004 second mortgage over the Collingwood Street property.

294 On the evidence before me, the pattern indicated by Mrs Janceski's evidence cannot be readily reconciled with what I have found were the negotiations between Mr Knight and Mr Nardizzi in the period leading up that entry. Mr Knight's witness statement for these proceedings (exhibit L), which as amended was taken as part of his evidence in chief, referred to threats, pressure and harassment by Mr Nardizzi of him and the Janceskis, by telephone calls and visits many of which Mr Knight witnessed as he was living at home with his parents. His witness statement also indicates that he chose Mr Ozich as a lawyer who should explain Choice's 2004 second mortgage over the Collingwood Street property to his parents.

295 However, in his cross-examination Mr Knight appeared to acknowledge that the main events leading up to the signing of Choice's 2004 second mortgage over the Collingwood Street property were the pressure from Mr Masel to address the indebtedness to Reliance and Mr Knight's negotiations with Mr Nardizzi which were not referred to in Ex L. I did not find Mr Knight's explanation of the apparent discrepancy, in terms of lack time to prepare a fuller account in his witness statement and lack of sufficient legal advice for the purpose, to be convincing.

296 I also note from Mr Knight's evidence that it was he who chose Mr Ozich without any indication that that choice was dictated by Mr Nardizzi. Mr Nardizzi, whose evidence was that he did not make regular contact with the Janceskis, by telephone or otherwise, also gave evidence he did not direct the Janceskis to Mr Ozich, with whom he had no contact.

297 Moreover, there was evidence from Telstra records of no change in the Janceskis' home number between 18 March 2004 and 10 May 2006, which Mrs Janceski accepted in cross-examination meant that the three changes in phone number she referred to in her examination-in-chief must have occurred before 18 March 2004, which seems unlikely in view of the evidence she later gave.

298 That evidence, given not long afterwards in her cross-examination, was in the following exchange between counsel for the plaintiff and Mrs Janceski about the number of calls before the 9 October 2004 meeting with Mr Ozich (ts 1257):

In the months leading up to the time you saw Mr Ozich, how many times do you think he would have called your home phone number?---I don't remember.

Well, guess. Twice?---I can't guess because

Closer to five or closer to a hundred?---Only he stop, then I tell them, 'Don't call me any more because I'm sick of that' and he says, 'Fine, fine. I not going to call you but I see the lawyer' and he stopped calling me. That's it.

That was after you saw Mr Ozich, wasn't it?---No, before, I think, because he call lawyer. I'm not sure. I can't say because I'm not sure. That's last talking, I say to him, 'Stop calling me. I get sick of that.' He says, 'Fine, fine, fine. I'm not going to call you but I take you to the court.' That's all been happening. Ask him. He going to tell you exactly.

299 It seems to me that this exchange tends to indicate that Mrs Janceski was less sure than her examination-in-chief appeared to indicate that the calls had preceded the meeting with Mr Ozich but that on her evidence they continued up to the meeting of 9 June 2004.

300 I note that the only evidence to support Mrs Janceski's evidence she had complained to third parties about Mr Nardizzi's conduct was a letter from an officer at the Multicultural Services Centre of WA dated 18 May 2009 referring to complaints Mrs Janceski made to the Centre beginning in early 2005 concerning continual phone calls 'she was getting ... from a Real Estate Agent' (emphasis supplied). This evidence is of calls made after the meeting of 9 June 2004.

301 I also note that Mr Knight in his cross-examination acknowledged it was possible that the calls he recalled Mr Nardizzi making occurred after that meeting, in the following terms:

And isn't it possible that these phone calls that Mr Nardizzi you say made to you constantly - isn't it possible that that came later on after you had signed the 2004 mortgage and hadn't paid him?---It's possible but I recall the process leading up to that mortgage. I can give you one example if you like.

What example do you want to give me, Mr Janceski?---Prior to signing the mortgage a phone call that I received from Joe - I was at Bunnings in Morley, Russell Street. I purchased one of those little view finders that goes on the front door. He called me in an anxious state asking why I was late and how long I would be to get to his office with the documents. I told him that I'd stop by

Which documents?---The mortgage documents. I told him that I'd stopped by Bunnings to pick something up and then he was very irate that I wasted time doing that rather than going

He wanted you to bring the signed mortgage documents to him, did he?---Well, he was anxious to get the deals sorted, yep.

This is - he was anxious to get the signed mortgage documents, was he? Is that what the conversation was about?---I'm not sure is they were the mortgage documents, but there was some - I think it was either that or we were still negotiating and I was to meet him at his office. It was part of the negotiations leading up to that.

So he was anxious to progress the matter?---That's right, yeah.

302 This evidence indicates to me less certainty by Mr Knight than his examination-in-chief appeared to indicate that there had been the harassment before the 9 June 2004 meeting with Mr Ozich his examination-in-chief referred to.

303 I further note that there was no reference to harassing telephone calls or other form of harassment in the Amended Defence of June 2005, the Janceskis' affidavit of July 2005 or the Janceskis' letter to the court of August 2005.

304 Mr Knight also as I have indicated testified to personal visits by Mr N of a harassing kind; however, Mrs Janceski testified that he made no pressuring personal visits.

305 In conclusion, I do not doubt that the Janceskis, and Mr Knight, felt under pressure to conclude an arrangement with Mr Nardizzi and Choice that would permit the refinancing of the indebtedness under the Walthamstow loan agreement with Mr Knight and the Janceskis. However, on the evidence this did not prevent Mr Knight engaging in protracted negotiations with Mr Nardizzi as to the terms on which Choice would replace Choice's 2002 second mortgage over the Collingwood Street property. Nor am I convinced that the pressure they were under was of the particular kind they asserted to have arisen from the conduct of Mr Nardizzi they claimed had occurred.

306 I turn now to the matter of the Janceskis' concern for Mr Knight's condition at the material times.

Application: the Janceskis' concern for Mr Knight's condition

307 I understood this aspect of the defendants' case to be that they believed Mr Knight was suffering from depression at the time leading up to the entry into Choice's 2004 second mortgage over the Collingwood Street property. The defendants said the Janceskis' stress over this perceived condition and concern for Mr Knight with it at the least contributed significantly to the set of conditions under which they were labouring at the time, which seriously affected their ability to make a judgment as to their own best interests.

308 I consider such a case to be one of the same kind as that relating to their claim of emotional dependence on Mr Knight, considered above, and to be one to which Permanent Mortgages [231], referring to Louth v Diprose, likewise applies.

309 I find that at least that part of this aspect of the defendants' case which asserts a significant contribution that the Janceskis' stress over Mr Knight's perceived condition, and their concern for him with it, made to their capacity to judge their own interests in relation to Choice's 2004 second mortgage over the Collingwood Street property, is not made out, for the following reasons.

310 Mrs Janceski in her examination-in-chief testified that at the time she learnt of Choice's 2002 second mortgage over the Collingwood Street property Mr Knight was depressed, to the point he was staying in his room at the Collingwood Street property and not eating with or talking to the Janceskis, sick in bed. At the time of the 9 October 2004 visit to Mr Ozich Mr Knight, she testified, was depressed such that it was 'very hard' to talk with him, and indeed he had told her he had tried to do 'something to himself' not long before. She also testified he had spent 'six months in his bed in his room and he never went out' (ts 386), further elaborating on her evidence in response to questions from me as follows (ts 387 388):

SIMMONDS J: Mrs Janceski, I will now back to back to paragraph 214. Why do you say he was depressed? What caused you at the time to have that belief?---Because I was watching him at home. He wasn't going - he wasn't going out to have a bath. He wasn't changing into his pyjamas. He would go to sleep as he was. He wasn't changing his clothes. He wouldn't come out of his room to eat with us. He would only get out of his room during the night when we were asleep. We couldn't see his face. The social worker was coming. (indistinct) to be with us, for him coming out, but the door has been locked. We can't open it. We don't know what's happening inside. We were worried. I cannot go back and tell you all the things again.

All right. I apologise in advance for having to ask you this question. These questions are important. She says, 'He had tried to commit suicide only a few weeks before.' What caused her to believe that? Why did she believe that?---When he came out, we asked him to seek help and see a professional and he said to us that we were lucky to see him again alive because he had tried to do something to himself. I don't know how - maybe with the electricity. I don't know how. I don't know. I can't - - -

All right, so the reason she says what she says in paragraph 214 about him and suicide is because of what he said to her at about that time?---Yes, what he said to us.

Yes, I understand that. The further question I would ask is this: with all of those beliefs or memories in her head about the way he was behaving at home and what he had said when he had come out of his room, were those beliefs, those things in her head, things she was thinking about on the way to Ozich's office?---Yes: if this continued he wouldn't know what to do and it might be the best way for him to end everything driving into the river and we didn't know what to say, with my husband. We were lost for words.

When did this conversation with their son Michael take place? When and where?---On our way to Ozich's office, when he was driving us there.

311 However, I must also note her evidence later that he spent only 'six weeks' in bed, although his depression lasted 'longer' (ts 416).

312 The evidence of Mr Knight in his examination-in-chief was that when in 2004 he received from Choice a draft mortgage for his parents' signature his own reaction was 'great stress and feeling of depression' (exhibit L [13]). In his cross-examination he testified that at the time of the meeting with Mr Ozich of June 2004, Mr Knight was 'suffering fairly severe depression' (ts 1367).

313 However, there was no reference in his evidence to a period of time in bed or in his room. Further, his account of active negotiations on his behalf and that of the Janceskis with Mr Nardizzi in the period leading up to entry into Choice's 2004 second mortgage over the Collingwood Street property is in my view impossible to reconcile with depression he was suffering from with such an effect.

314 In addition, it is hard to reconcile an account of perceptions of his depression, having stress and concern effects on Mrs Janceski and I take it Mr Janceski sufficient to have the effect on their capacities to conserve their interests claimed in the present aspect of the defendants' case, with her evidence she would not have allowed a mortgage over the Colllingwood Street property to generate funds to pay down Walthamstow's first mortgage over the Collingwood Street property that secured the debt Mr Knight owed, with no indication that Mr Janceski's position would have been any different.

315 It is for those reasons I have reached the conclusion as to the present aspect of the defendants' case that I described.

316 I conclude that the defendants at most have made out that Mrs Janceski had a limited capacity in spoken and written English and that the Janceskis had a measure of dependence on Mr Knight. I accept that those matters affected the ability of the Janceskis, and particularly Mrs Janceski, to conserve their interests in relation to Choice's 2004 second mortgage over the Collingwood Street property. However, those matters cannot in my view be judged in isolation from the advice I have found that the Janceskis received at the 9 June 2004 meeting with Mr Ozich. On my findings as to the content and effect of that advice, I consider that any case for special disadvantage resting on those matters has not been made out.

317 However, in case I am in error as to my conclusion as to the effect of the advice of Mr Ozich at the meeting of 9 October 2004, that is to say, he was mistaken in believing the Janceskis had understood his advice to them, I should consider the case for the defendants on the basis that those matters, of limited capacity in English and dependence on Mr Knight, were at least in combination sufficient to establish a case of special disadvantage.

318 As Permanent Mortgages [219] indicates, such a case is not sufficient to discharge the burden of proof on the defendants. They must also show that the special disadvantage established was sufficiently evident to the other party, Choice, to make it prima facie unconscionable for that other party to accept or retain the benefit of the transaction, Choice's 2004 second mortgage over the Collingwood Street property.

Application: whether any special disadvantage was sufficiently evident to Choice

320 I have already described evidence from Mr Nardizzi as to what he believed as to the Janceskis' understanding in 2002 of Choice's 2002 second mortgage over the Collingwood Street property based on his description of his dealings with them in English. I have also described evidence from him as to his assessment of the commercial 'savvy' of the Janceskis, deriving from the transactions in relation to the Arkana Road properties with which as I have indicated he had been associated. That assessment in my view indicates his belief that they were not dependent or entirely dependent upon Mr Knight in relation to such transactions. Finally, I have described his receipt of Mr Ozich's solicitor's and translator's certificates from the 9 June 2004 meeting.

321 In my view of that body of evidence, and of the way in which as I have indicated Mrs Janceski presented in giving her evidence before me, and what I have found as to her role in the Janceskis' and Mr Knight's entry into and their extrication from the transactions in relation to the Arkana Road properties and Mr Nardizzi's association with the sale of the Arkana Road properties, I am unable to conclude that there were facts which would raise the possibility of the special disadvantage in the mind of a reasonable person. See Permanent Mortgages [221].

322 For the defendants it was put to me that I should not accept Mr Nardizzi's evidence as to his beliefs in 2002, in view of what were said to be 'discrepancies' in his evidence in other respects; the implausibility of his evidence that Mrs Janceski understood him; and the manner in which he gave his evidence. For the defendants it was also put to me I should not accept that evidence because of Mr Nardizzi's e-mail of 27 May 2004. I deal separately below with that e-mail, which in my view relates primarily to Mr Nardizzi's beliefs in 2004. I focus here on the first set of contentions.

323 The discrepancies relied upon were as to the date upon which payments of interest under Choice's 2002 second mortgage over the Collingwood Street property first became due to Choice from Mr Knight, which Mr Nardizzi had to correct; and that Mr Knight proposed the payment of $50,000 to Choice to obtain its approval to replace Choice's 2002 second mortgage over the Collingwood Street property, when the documentary evidence showed that it was Mr Nardizzi who proposed that figure.

324 As to the first discrepancy, it seems to me that Mr Nardizzi did not 'correct' his statement in his examination-in-chief (exhibit R [55]), which was that payments of interest did not become due before the date there indicated. Rather, he explained (see ts 1488 1499) why he said (in [57]) that he contacted Mr Knight, after what appears to be that date and when no payment of interest had been received, to express his concern that no payment had been made. That explanation was not challenged.

325 As to the second discrepancy, there is documentary evidence, in the form of an e-mail from Mr Nardizzi to his solicitors of 29 June 2004 in evidence before me, which would support the contention that it was Mr Nardizzi who proposed the figure, rather than Mr Knight. However, Mr Nardizzi, who did not have this e-mail put to him in cross-examination, testified in relation to the matter of whether he rather than Mr Knight put the proposal as follows (ts 1492):

But it wasn't your request that he pay $50,000. He nominated that amount?---That's my recollection, unless there's some correspondence here where it came through on paperwork that - I don't recall, without checking on the papers. My best recollection is that Michael made the proposal.

And that having made that proposal and you having accepted that proposal, you were then not prepared to take any lesser sum?---Than the 50,000?

Yes, than the 50,000?---He managed to whittle me down.

326 I consider this evidence shows a measure of uncertainty by Mr Nardizzi which I do not consider should cause or contribute to my disbelieving evidence he gave on other matters.

327 As to the implausibility of his evidence that Mrs Janceski understood him, I do not consider that evidence to be implausible. I refer again to my inability to conclude that Mr Nardizzi did not have a reasonable basis for his beliefs.

328 As to the manner in which Mr Nardizzi gave his evidence, the defendants' case focussed on what was said to be his evasiveness in answering questions calling for 'direct and inconvenient answers'; rambling answers; and discomfort in answering certain questions, particularly evident when he asked for a break before answering questions concerning Mr Nardizzi's e-mail of 27 May 2004. However, in that last respect in particular I note that it was admitted he needed eye drops during the giving of his testimony. It appears to have been accepted he was suffering with a cold or influenza. While for the defendants it was put I should not accept that the signs of physical discomfort in answering questions or any of them were symptoms of a cold or of influenza, I would so accept them. Mr Nardizzi was visibly labouring with a cold, influenza or similar ailment.

329 I accept that there was at least one occasion on which Mr Nardizzi did not immediately answer questions put to him (see ts 1420), although I disagree that he acted similarly in other respects referred to by the defendants (see ts 1429, 1469 and 1490 1491). On balance, I consider that Mr Nardizzi was attempting to give careful answers to the question asked of him, but sometimes wished to answer a question he had not been asked.

330 I also accept that a number of his answers were of a rambling character (see ts 1462 1463, 1514 and 1526). However, I consider that their character derived from a measure of uncertainty as to what the question called for, where the questioner, Mrs Janceski's friend, was not a trained forensic questioner (see in particular my observations at ts 1524 on his responses there).

331 Finally, I consider that the discomfort I observed at a number of points in Mr Nardizzi's giving of his evidence (see in particular in relation to Mr Nardizzi's e-mail of 27 May 2004, ts 1524) is more readily to be explained by his physical condition as I observed it at the time. Nor did I observe any discomfort in relation to one matter with respect to which it was put to me he had to be pressed to make an admission, that the majority of his dealings were with Mr Knight (see ts 1513). Mr Nardizzi's evidence in chief in the respect which it appears to be suggested he had qualified his evidence (exhibit R [89(a)] does not it seems to me express a different position, and the contrary was not clearly put to him.

332 In sum, I do not find on my examination of the defendants' contentions I have just reviewed, taken individually or together, sufficient reason to disbelieve Mr Nardizzi's evidence as to his beliefs in 2002 as to the Janceskis in the respects I have indicated.

333 Having noted these matters, I turn now to what appears to be at the centre of the defendants' case that Mr Nardizzi did not have the beliefs I have described in 2002, or in 2004, which is Mr Nardizzi's e-mail of 27 May 2004.

334 The defendants place reliance on what they say were Mr Nardizzi's acknowledgements in Mr Nardizzi's e-mail of 27 May 2004 that he knew throughout, which I took to include 2002, that the Janceskis lacked English proficiency, including sufficient proficiency to understand Choice's 2002 second mortgage over the Collingwood Street property even accepting Mr Nardizzi's evidence as to what he had said to them about it; and were in a relationship of trust of and reliance upon Mr Knight.

335 Further, the defendants' case appeared to me to be that, even if the acknowledgements in Mr Nardizzi's e-mail of 27 May 2004 were taken to relate only to what he knew in 2004, Mr Nardizzi could not rely on Mr Ozich's certificates as to Choice's 2004 second mortgage over the Collingwood Street property, because of their failure to address matters of financial risk, being the risk that Mr Knight would default on his obligations to Choice, which were important to understanding that mortgage.

336 I accept that if such acknowledgements were made out there would be serious reason to doubt the reliability of Mr Nardizzi's evidence more generally. Further, if Mr Nardizzi could not rely on Mr Ozich's certificates because they failed to record advice having been given as to the risk that Mr Knight would default, the defendants' case would be very strong.

337 I have previously set out in full what appears to me to be the greater part of the material cross-examination of Mr Nardizzi on Mr Nardizzi's e-mail of 27 May 2004. I now set out the e-mail in full (exhibit A p 344):

Thankyou for your efforts to persuade them to use existing mortgage. It seems as if they will not agree.

Please advise if you are interested in providing 2 second mortgages or whatever you recommend is necessary to allow us to lift and re-register. Please note that the two parties are both living in the premises, and that the parents are at 1 Collingwood Street Dianella and they are unsophisticated with poor English and mot much commercial experience. They trusted and relied on their son (who resides at Unit 3 No. 2A Janet Street West Perth). Their son is highly experienced with all facets of property (even wrote a book on property purchasing) and financing and he persuaded them to use their home as security for these loans.

If you recommend to now cover the bases please advise.

Please quote all costs so that we can advise them what is involved. If you have a more cost effective solution that would be appreciated as the borrowers are not financial.

Thankyou.

338 I have previously set out Mr Nardizzi's cross-examination as to all of the paragraphs but the penultimate one. I now set out that cross-examination (ts 1530 1533):

Mr Nardizzi, can we just go back in MFI A, volume 1, to page 344, the page we have just come from?---Yes.

The last paragraph on that page says:

Please quote all costs so that we can advise them what is involved. If you have a more cost effective solution, that would be appreciated as the borrowers are not financial.

When you say 'the borrowers', who were you referring to?---The Janceski family. They were paying the legal costs and I'm trying to request some consideration into doing it for the minimum cost possible. Lawyers are amenable to approaches like that, I have found. I'm trying to help them out.

In the 2002 mortgage, and then the subsequent 2004 mortgage, the borrower was Mr Michael Janceski. Is that correct?---Well, Mr and Mrs Janceski were the - well, Michael was the borrower, yes.

But when you say 'the borrowers are not financial', I take it then that you were including Mr and Mrs Janceski?---Yes, plural.

- - - because they were the guarantors?---Yes. It was their cost as well. Again, the email was more casual than absolutely precise.

When you say it was more casual than precise, did you believe at that time that Mr Michael Janceski was not financial as well as his parents?---Well, he hadn't paid me. I was coming to that conclusion very rapidly and I wish I had a clearer resolve at that time.

If I put to you that the financial position of the three Janceskis was no worse than it was in September 2002 other than the fact that you had evidence that Michael hadn't paid you, would you agree with that?---The financial position in 04 I think - I'm speculating, if I may. I would need to check if you really want it precise - their indebtedness was greater in 04 than 02, but in 02 they were in a parlous position. They were going to be foreclosed by Liberty; they were at the Supreme Court. I bought the story from Michael to buy my unit et cetera.

When you say that, were you aware of that in 2002?---No.

You're saying in hindsight, knowing what you knew in 2004, their financial position would have appeared to be no worse than 2002?---I'm speculating, but I think their indebtedness would have been greater in 04 than 02.

SOLOMON, MR: Your Honour, really, I don't think the witness's speculation is all that helpful.

SIMMONDS J: Yes, and I'm also not entirely sure I know what the witness is responding to.

SOLOMON, MR: No, neither do I, your Honour, but he

VAN DER MEULEN, MS: No, your Honour, I actually lost that last question in the middle of it, I'm sorry.

SIMMONDS J: Yes. The question appears to ask the witness, 'With what you know in 2004, examining their financial position with what you knew in 2004 as to that position and comparing that with what you knew in 2004 as to their financial position in 2002, were they roughly the same?'

VAN DER MEULEN, MS: Yes.

SOLOMON, MR: Your Honour, can I rise in respect of that formulation? There has been no evidence that this witness turned his mind to the financial position in 2004. The question assumes a whole lot of things that are not established.

SIMMONDS J: Yes.

SOLOMON, MR: To the extent that the witness has understood the question, he has engaged in speculation, which is entirely unhelpful. Anyway, Mrs Van der Meulen is of course at liberty to put whatever question she likes that's proper, but I'm just not sure this is really taking us anywhere.

SIMMONDS J: Yes. It may well be, Mrs Van der Meulen, that you can get an answer to that question but there's a preliminary point perhaps that needs to be address. The preliminary point is, 'Did you reflect in 04 on the comparative financial position of Mr Knight and the Janceskis together in 02 compared with 04?'

VAN DER MEULEN, MS: Thank you, your Honour. I think I'm actually content with the witness's previous answers and I think I have got the answer from that, thank you.

SIMMONDS J: All right.

VAN DER MEULEN, MS: Mr Nardizzi, would it be true to say that in 2004, because property values had risen, Choice's financial position was better than in 2002?

SOLOMON, MR: Your Honour, is that question asked about Choice generally? Is it asked about

SIMMONDS J: Yes, I'm a little unsure about that too. Are you referring to Choice's overall financial position on all of its activities or Choice's financial position in respect of the Janceski-Knight transaction?

VAN DER MEULEN, MS: Thank you, your Honour.

Mr Nardizzi, in relation to the mortgage over the Collingwood Street property and the Janet Street property, would it be true to say that in 2004 the equity that would be available to Choice under the mortgage would be greater than it was in 2002?---That sounds reasonable and, in addition, the mortgages would probably support that, I guess. I would really have to look at the market factors at the time but - it would seem reasonable that properties appreciate in time but that's not always the case, accepting that the equity would have been somewhat diluted by the increased value of the mortgage to Peppers in 04. I don't have the figures in front of me. I don't recall.

Thank you. In late May 2004, at the time that you wrote the emails to Douglas Hall, was it your belief that the Janceskis were in a position to repay the mortgage?---As I've said earlier, Michael could have easily got on top of this mortgage if he decided to commit himself, and I still believe in the guy.

339 I consider that Mr Nardizzi's evidence, both in relation to the other paragraphs of the e-mail and in relation to the penultimate paragraph, clearly distinguishes between what he knew in 2002 and what he knew in 2004.

340 I further consider that as to all of the matters, except that referred to as 'the borrowers are not financial', his evidence is that he became aware as a possibility that the Janceskis had the attributes the Nardizzi e-mail of 27 May 2004 refers to. As to the exception, it seems to me his evidence is less clear, while the e-mail's language in that respect if not in the others is that of actuality and inconsistent with mere possibility.

341 However, the matter of what Mr Nardizzi meant by the language 'not financial' was not further explored in the questioning of him. I consider that language indicates that from what he knew at the time of the e-mail it was important to minimise immediate costs to them. However, I consider that language does not itself indicate that he was concerned as to their ability if called on to repay the secured obligation. His evidence as has been seen is that he was focussed on the ability of Mr Knight to repay the same indebtedness, and he assessed that ability as sufficient for his purpose.

342 I do not consider, on my assessment of Mr Nardizzi's credibility, and in the context of the negotiations with Mr Knight that I have described, that I should disbelieve Mr Nardizzi's evidence.

343 Further, seems to me that Mr Nardizzi's awareness of the possibilities referred to would not make Choice's acceptance of Choice's 2004 second mortgage unconscientious if Mr Nardizzi could reasonably rely on Mr Ozich's certificates. That is, the possibility would in my view be eliminated in that case.

344 It was not put to me that Mr Nardizzi had reason to disbelieve their truth; and I have already indicated why I believe what they stated as to the advice they describe as given to the Janceskis was truthful.

345 However, as the defendants point out and as I have previously indicated, the solicitor's certificate contains the legend as follows:

[T]he mortgagor should make independent enquiries in respect of the Debtor's financial position ...

346 Mr Ozich's evidence, including his handwritten note, did not indicate that he had advised the Janceskis concerning any need to inquire into Mr Knight's financial position. Rather, as I have indicated, he had advised them of their obligations and the possible practical consequences for them in the event there was a default in the satisfaction of the secured obligation.

347 The defendants' case, given that there is no evidence of any financial advice from any source which was evident to Mr Nardizzi, and given that he was aware of a high risk of default by Mr Knight, particularly but not only in view of his non-payment of any monies to Choice after the expiry of the period during which no payments had to be made, was that it was prima facie unconscientious of Choice to accept Choice's 2004 second mortgage over the Collingwood Street property.

348 In respect of Mr Nardizzi's awareness of the risk of default by Mr Knight, I have noted his evidence indicating, while he had confidence in Mr Knight's capacity to meet the obligations secured by Choice's second mortgages, that even in 2002 there were some contraindications as to that capacity of which he was aware, on the following evidence (cross-examination, ts 1475 1479):

VAN DER MEULEN, MS: Mr Nardizzi, you say that Michael was supposed to start paying a sum every month from 3 September 2003 to Choice and you go on with details of that. In paragraph 56 you say prior to that date, so prior to 3 September 2003, you had no indication that Michael would not honour his obligations and fail to pay his monthly instalments which were due under the Choice Construction Superannuation Fund mortgage?---Yes.

I put to you that the defendants state that Mr Michael Janceski had advised you prior to this date of his financial affairs?---I have no clear recollection of that.

Would you agree that it's possible that Michael Janceski had given you information prior to 3 September 2003 about his financial affairs?---It's probable. It's possible, I guess, but I just don't recall any conversation that's foremost in my mind or even prominent in my mind.

Did you ever, prior to this date, ask Mr Janceski what he was doing with his business ventures?---We've had a few conversations on that and he was - I think he did some work in Kalgoorlie as a hotel manager, my understanding. I'm not clear on the other things that he was doing. I think he may have - I'm not clear on that. That's my best recollection there.

Do you have any recollection in terms of an understanding you may have gained, a general understanding you may have gained of Mr Janceski's financial matters?---I had great - I had a lot of confidence in his ability to do things and I thought that he was quite well placed to make significant income. The wild card in my - I guess was really his commitment and motivation, so that's the best recollection that I have and my best impression of the man at the time.

I know you've previously given evidence that you don't recall when this information came to you but you gave evidence that you did become aware that Michael was no longer running the café, or I think you call it something different?---Yes, 'café' is fine.

Bar-cum-restaurant?---I may have driven down I think it was Francis Street, on memory, and noticed that it wasn't in the same name. That's possibly when I recall that it had closed down but I had many things to concern myself with and I wasn't concerned directly in every finite detail about what Michael was doing with that business. I only went there the once.

Mr Nardizzi, if you can have another look at exhibit AA - do you have the exhibit there?---Yes.

It's the letter dated 30 December 2002 from Mr Janceski Knight to Elders Real Estate?---Yes.

We've already looked at that in relation to the outstanding interest and commission payments in regard to the sale of the Arkana Road properties, and this is the end of December 2002. Did this incident where Mr Janceski was unable to meet his financial obligations - did that alert you to any financial issues that he may have?---I suppose it should have, but it didn't overly alert me. I suppose it should have, looking at it again, but I still felt that he was quite capable of getting ahead of himself financially if he wanted to.

That was the end of December 2002, as we've seen, and Mr Janceski didn't give you any deposit, didn't put down a deposit on the Janet Street unit either, did he?---The deposit was in the equity, which is common in financial transactions.

So he didn't give you a deposit; it was in the equity, which you've given evidence is common in financial transactions, and then he's not able to make payments due to you in regard to the sale of the Arkana Road properties but you didn't wonder after those two - and I won't say 'events' because the lack of a deposit is not really an event, but you hadn't started to wonder about his financial affairs at this point? You've given evidence that this failure to meet his obligations the subject of this letter didn't alert you to it but in combination with the fact that you may or may not have known at that time that the café was now run by Michael; he hadn't given you a deposit other than in the equity when he purchased Janet Street - none of these things prompted you to wonder about his financial affairs?---I was getting some feelings about it but I still believed it was a relatively simple matter of getting on top of the mortgage.

So when you say you were getting some feelings about it, can you elaborate on what they might have been?---Well, this letter here, on rereading it, looking at it there - that would probably have alerted me to a little more concern than what I possibly gave it, and I still believe they had plenty of equity and I was hoping he would take on his responsibilities.

Did you wonder whether Michael was going to have the ability to continue to meet his obligations?---In late 04, no. I had my grave misgivings. Prior to that he gave me plenty of undertakings. I was gullible to accept them and I still believed in the guy. I thought all he had to do was apply himself and he could do it. It was buoyant times. It wasn't a really big deal and it wasn't difficult to earn the income to make the repayments and square things away.

You were aware, were you not, that the first mortgages to Michael Janceski and Mr and Mrs Janceski, his parents, were with Reliance Finance?---After 02, yes.

Is Reliance Finance a lender that one would approach when they - I'm not putting that very well. Would you understand Reliance Finance to be a lender of, perhaps I could say, last resort?---No. I think they would be in a category of lenders who have more leniency on documentation, I guess, if you could put it that way. I did not know Reliance at the time. I became more aware of them, and their principal, Mr Masel, seemed to be a competent operator.

Did Reliance Finance - were you aware - in relation to those first mortgages being with Reliance Finance, were you aware of the type of finance that Reliance provided?---No.

For example, shorter-term loans?---No, I wasn't involved in that finance situation. It was the business of the Janceski family.

But you were aware that they had dealings with Reliance?---Well, we had to settle together, yes.

349 I note again the evidence of Mr Nardizzi's concern when Mr Knight did not commence payments as I have indicated. This evidence confirms my understanding of Mr Nardizzi's evidence just quoted that after the entry into Choice's 2002 second mortgage over the Collingwood Street property he was concerned about prospects for repayment by Mr Knight where he had no such concern prior to that.

350 However, the matters to which Mr Nardizzi referred - non-payment of commission on the Arkana Road properties sale, the loss of the café business and non-payment of interest - were, as to the first two, matters of which it seems to me it would been reasonable for him to have believed the Janceskis were aware, whether by information from Mr Knight or otherwise. This would be by virtue of Mrs Janceski's evidence previously referred to as to her involvement in the sale and her awareness at the time of the sale of the Arkana Road properties that Mr Knight had not been working for a 'long time'.

351 The matter of the non-payment of interest is in my view a closer question. On my findings as to the negotiations between Mr Knight and Mr Nardizzi the latter was told by Mr Knight that he had failed to explain Choice's 2002 second mortgage over the Collingwood Street property to the Janceskis at the time of their entry into it. However, on the same findings Mr Nardizzi was also told by Mr Knight that the latter was negotiating, for himself and his parents, a refinancing of the indebtedness to Walthamstow where Walthamstow was pressing for payment. On my findings as to Mr Knight and the Janceskis' concern for him, Mrs Janceski's evidence she had been told he had no assets and that he was seen by the Janceskis to be in a condition such that he was not in a position to respond to demands for calls for payment made on him, it seems to me that it has not been shown it would have been evident to Mr Nardizzi in such circumstances that there was a possibility that the Janceskis were unaware of difficulties Mr Knight was having meeting other indebtedness, including indebtedness to Choice. Indeed, I consider that the evidence I have referred to is sufficient to show there was no such possibility.

352 Accordingly, I consider that the failure of Mr Ozich's certificates to address financial risk of the kind the defendants' case refers to does not have the effect the defendants contend for.

353 As I earlier indicated, I have concluded that the defendants have failed to make good their case that they were at any material time suffering from a special disadvantage which seriously affected their ability to make a judgment as to their own best interests. Again, I note that for this purpose that mere difference in bargaining power is insufficient: Permanent Mortgages [224].

354 Further, I have concluded that the case for the defendants, considered on the basis that they had made good their case that their limited capacity in English and dependence on Mr Knight were at least in combination sufficient to establish a case of special disadvantage, that that special disadvantage was sufficiently evident to the other party, Choice, to make it prima facie unconscionable for that other party to accept or retain the benefit of the transaction, Choice's 2004 second mortgage over the Collingwood Street property, has also not been made good.

355 It follows the defendants have not made their case that Choice's 2004 second mortgage over the Collingwood Street property should be set aside as an unconscionable dealing.

356 I should add that undoubtedly it was not prudent for the Janceskis to execute Choice's 2004 second mortgage over the Collingwood Street property. However, in that respect I note the following, from Permanent Mortgages [255] (in material part) [256]:

There is no duty on a financier to provide a borrower or guarantor with commercial advice: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 276. ...

In relation to the execution of documents, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, it was observed:

The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth [(1948) [1948] HCA 20; 76 CLR 646] was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief [47]. (footnotes omitted)

357 I turn now to the other basis on which the defendants say Choice's 2004 second mortgage over the Collingwood Street property should be set aside, the principle in Garcia v National Australia Bank.

358 I have previously set out the principles from this authority as described in Permanent Mortgages [189] [190]. I consider that Choice's 2004 second mortgage over the Collingwood Street property should not be set aside under those principles, for the following reasons.

359 First, I consider that it has not been shown that the Janceskis did not understand the purport and effect of Choice's 2004 second mortgage over the Collingwood Street property. I so consider on my findings as to the evidence of Mr Ozich concerning his advice to the Janceskis at the meeting of 9 June 2004, together with what I have indicated I conclude that they knew as to the relevant financial risks at the relevant time. Thus element (a) referred to in Permanent Mortgages [189] has not been shown to be satisfied.

360 Second, I consider that in any event that, assuming without deciding that the plaintiff bears the onus of showing that the defendants were not relevantly volunteers (see Permanent Mortgages [190]), the plaintiff has shown that the defendants were not such volunteers in relation to Choice's 2004 second mortgage over the Collingwood Street property. I so consider on the evidence of the terms of the Knight Family Trust under which they were general beneficiaries. There is no evidence which in my view would indicate that that interest was in fact only nominal, or related only to a particular aspect of the transaction such that they might be seen to be 'partial volunteers' by being volunteers as to the other aspect or aspects. See Permanent Mortgages [247] [253] (discussing authority): I note in particular the reference in [253] to Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 [49] (Beazley JA), [96] (Santow JA) and [112] (Campbell AJA). Thus element (b) in [189] has been shown not to be satisfied.

361 Third, I consider that in any event it has been shown that Choice had taken steps to find out that a stranger had explained the purport and effect of the mortgage to the Janceskis who apparently knew their son was facing difficulties meeting his indebtedness. I so find on the evidence as to the steps taken by Mr Nardizzi to have the Janceskis obtain translated advice from a solicitor who would provide certificates to that effect and my findings as to the Janceskis' apparent knowledge of their son's difficulties meeting his indebtedness. Thus element (d) in Permanent Mortgages [189] has been shown not to be satisfied.

362 Thus, I consider I do not need to address the matters of whether or not Garcia v National Australia Bank extends to aged parent/child relationships. I note what appears to be the tentative view expressed on that matter in Permanent Mortgages [205] and [354].

363 I have found that the defendants have not made out their case that Choice's 2004 second mortgage over the Collingwood Street property should be set aside.

364 It follows on the other matters as to the enforceability of Choice's 2004 second mortgage over the Collingwood Street property that there should be judgment for the plaintiff, which is entitled to orders by way of enforcement of that mortgage.

365 I will hear from the parties as to the terms of those orders.

CITATION : CHOICE CONSTRUCTIONS PTY LTD -v- JANCESKI [No 3] [2011] WASC 358 (S)

Procedure - Recovery action by mortgagee - Orders on judgment - Principal and interest

Procedure - Recovery action by mortgagee - Costs - Whether costs order overrode contractual rights to costs in the mortgage - Construction of contractual rights - Indemnity costs both of and incidental to recovery action and other indemnity costs

Supreme Court Act 1935 (WA), s 37

1 This is my judgment on the plaintiff's application (the plaintiff's application) for further orders following judgment in the action (the plaintiff's action). The plaintiff's action is to enforce a second mortgage over property of the defendants. The second defendant died following the reservation of judgment in the action but before delivery of judgment in it; the first defendant is his widow. I note that it appears no legal representative of the second defendant appears to have been appointed, and thus there has been no separate participation for the second defendant's estate in the proceedings on the plaintiff's application.

2 I begin by providing background to the plaintiff's application, in which I also describe that application and the programming orders which led to this judgment. I then analyse the issues arising out of the parties' submissions to me. The final section of this judgment is my conclusion and orders or call for orders.

3 Much of this background is taken from my judgment in the plaintiff's action, Choice Constructions Pty Ltd v Janceski [No 3] [2011] WASC 358. None of this background is in issue.

4 On 27 April 2005 the plaintiff commenced the plaintiff's action by writ with statement of claim. The plaintiff was the mortgagee under a second mortgage granted by the defendants over their home. Their home was on Collingwood Street in Dianella (the Collingwood Street property). The Collingwood Street property was Lot 223 on Plan 9063 and all of the land comprised in Certificate of Title Volume 132 Folio 138A and the defendants were shown as its registered proprietors jointly. The plaintiff's second mortgage was dated 21 July 2004 (Choice's 2004 second mortgage) and replaced the plaintiff's previous second mortgage over the Collingwood Street property granted by the defendants (Choice's 2002 second mortgage) to secure vendor's credit granted by the plaintiff. This credit was granted by the plaintiff as the vendor to the defendants' son Michael (Michael) of a property in Janet Street, West Perth (the Janet Street property).

5 On various days between 22 September 2009 and 11 August 2010 there was a trial in the plaintiff's action. The sole issues in the trial were those raised by the defendants' claim that Choice's 2004 second mortgage should be set aside on unconscionability grounds or on the basis of the principles from Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395.

6 The defendants were selfrepresented throughout the trial, although they had the assistance throughout of a McKenzie friend.

7 The defendants were also self-represented for the purposes of the plaintiff's application.

8 On 21 December 2011 I delivered judgment in the plaintiff's action. For the reasons in Choice Constructions [No 3] I concluded that the defendants had not made out their case Choice's 2004 second mortgage should be set aside on either of the two bases they had advanced.

9 At the hearing on the delivery of the judgment in Choice Constructions [No 3] I made two orders. One was judgment for the plaintiff. The other (my costs order of 21 December 2011) was in the following terms:

The plaintiff's costs of this action, including any reserved costs, to be taxed if not agreed.

10 By application dated 10 January 2012 the plaintiff applied for orders that it be granted possession of the Collingwood Street property, that such further and other orders as appropriate be made, and that provision be made for the costs of the application. I call this application, as elaborated upon from time to time as I will indicate, the plaintiff's application.

11 On 16 January 2012 the plaintiff filed an affidavit of Joseph Michael Anthony Nardizzi bearing the title 'Affidavit of [Mr Nardizzi] and Annexures 'JN1' to 'JN4' in Support of [the plaintiff's application] Sworn 16 January 2012' (the Nardizzi affidavit of 16 January 2012). Mr Nardizzi at all material times has been a director of the plaintiff.

12 By chamber summons dated 18 January 2012 the defendants applied for a stay of enforcement of Choice's 2004 second mortgage pending the outcome of their appeal against Choice Constructions [No 3] in CACV 3 of 2012. The defendants by that chamber summons also applied for an adjournment of the plaintiff's application as well as certain other orders (the defendants' chamber summons).

13 At a hearing on 18 January 2012 I dismissed the defendants' chambers summons with no order as to costs (o 1) and made an order for the defendants to deliver to the plaintiff possession of the Collingwood Street property by 8 February 2012 (o 2). I also made programming orders (my programming orders of 18 January 2012) as follows:

1. The plaintiffs are to provide the defendants with a minute of orders, together with any affidavit or affidavits in support of that minute, with respect to the payment in accordance with the terms of [Choice's 2004 second mortgage] of the Principal Sum and interest thereon that would include, for the calculation of the total due to the last date indicated in [Mr Nardizzi's affidavit of 16 January 2012], a reference to that affidavit, within 7 days of today's date.
2. Within 14 days after the provision of this minute to the defendants, the defendants may provide such evidence by affidavit as they see fit with reference to that minute, and such written submissions as the defendants see fit with respect to that minute, and the plaintiff may likewise provide written submissions with respect to that minute. After the expiry of the 14 days specified in this order, his Honour may make orders as to the payment of the Principal Sum and interest thereon upon the papers, unless within 7 days of the provision of the last of any of the papers described in these orders, either party requests a hearing or his Honour on his own motion concludes that a hearing is appropriate.
3. With respect to the payment in accordance with the terms of [Choice's 2004 second mortgage] of costs and expenses and interest thereon, the same orders mutatis mutandis as in orders 2 and 3 (relating to the Principal Sum and interest thereon) above; ...

14 It will be apparent that the reference in my programming orders of 18 January 2002 O 5 to 'orders 2 and 3' is in error: the reference should have been, as at all material times the parties also understood it, to 'orders 3 and 4'.

15 On 25 January 2012 the plaintiff filed a document bearing that date entitled 'Minute of Orders Sought by the Plaintiff Filed Pursuant to [my programming orders of 18 January 2012]' (the plaintiff's Minute). The orders sought by the plaintiff's Minute were as follows:

1. The Defendant [sic] pay the Plaintiff the principal sum of [Choice's 2004 second mortgage] being $152,822.51.
2. The Defendant [sic] pay the Plaintiff interest on the principal sum in the amount of $189,491.27 up to 23 January 2012 and 16 % per annum thereafter until payment.
3. The Defendant [sic] pay the Plaintiff's costs of enforcing [Choice's 2004 second mortgage] fixed at $313,087.47 at 23 January 2012.
4. The Defendant [sic] pay interest on such enforcement costs calculated from 17 January 2012 at the rate of 16% per annum and thereafter until payment.
5. The Defendant [sic] pay the Plaintiff's costs of finalising particulars of judgment.

16 On the same date, 25 January 2012, the plaintiff's solicitor sent a copy of the plaintiff's Minute by email to the first defendant care of the email address of Michael.

17 Also on the same date, 25 January 2012, the plaintiff filed an affidavit of Mr Nardizzi entitled 'Affidavit of [Mr Nardizzi] in Support of Particular and Further Judgment Sworn 25 January 2012' (the Nardizzi affidavit of 25 January 2012), while on that date the plaintiff's solicitor sent a copy of the Nardizzi affidavit of 25 January 2012 to the first defendant by post addressed to her at the Collingwood Street property.

18 On 3 February 2012, Pullin JA of the Court of Appeal dismissed an application by the defendants to that court for a stay of the judgment in Choice Constructions [No 3].

19 On 7 February 2012 the plaintiff's solicitor sent by post addressed to the first defendant at the Collingwood Street property and an address in Ballajura a document entitled 'Plaintiff's Submissions in Support of Minute of Proposed Final Judgment Filed Pursuant to [my programming orders of 18 January 2012]' (the plaintiff's submissions). It is common ground that by 7 February 2012 the first defendant had moved out of the Collingwood Street property, and she had filed in CACV 3 of 2012, but not in CIV 1500 of 2005, notice of an address for service in Ballajura that corresponded with that in the posting by the plaintiff's solicitor, except as to unit number. The plaintiff's submissions were not filed in the court until 30 April 2012.

20 On 15 February 2012 orders for seizure and delivery and for seizure and sale of the Collingwood Street property were issued under Civil Judgments Enforcement Act 2004 (WA). Subsequently the Collingwood Street property was sold and sale proceeds, after deductions for the first mortgage over the Collingwood Street property and selling expenses, in the amount of $274,915.49 as at 17 May 2012, are held in the account of a settlement agent pursuant to one of the orders I made on 30 April 2012 which I reach next.

21 On 30 April 2012 a hearing was held before me at my instance. I wished to identify which documents called for by my programming orders of 18 January 2012 had been created and provided by the parties to one another. At that hearing, after hearing from the parties, I made the following orders (my orders of 30 April 2012):

1. The plaintiff has 14 days, namely by 4 pm, 14 May 2012, to provide such further affidavit or affidavits as it sees fit with respect to its claim for principal and interest, and costs and interest on those costs, in accordance with [the plaintiff's Minute of 25 January 2012], such affidavits to be filed with the court and to be provided to [the first defendant] at her address being Unit 11, 28 Luton Close, Ballajura WA.
2. The plaintiff also have liberty to file and serve in the same way as in order 1 any supplementary submissions with respect to the plaintiff's Minute of 25 January 2012 by 4 pm 14 May 2012.
3. The defendants have liberty to file any affidavit or affidavits with reference to the plaintiff's Minute of 25 January 2012 and serve such affidavit or affidavits on the address for service for the plaintiff, namely BW Duckham & Co, Level 1, 33 Barrack Street, Perth WA 6000 by 4 pm 14 May 2012.
4. The defendants have liberty to file and serve, as described in order 3, written submissions with respect to the plaintiff's Minute of 25 January 2012 by 4 pm 14 May 2012.
5. Costs of today be reserved and the parties have liberty to include submissions as to costs in the submissions these orders provide for.
6. After 14 May 2012 his Honour may make orders on the papers filed under [my programming orders of 18 January 2012] and under [my orders of 30 April 2012], unless within 7 days of the provision of the last of any of those papers either party requests a hearing, or his Honour on his own motion concludes that a hearing is appropriate.
7. The balance of the proceeds of the sale of [the Collingwood Street property] made by the plaintiff by reference to [Choice's 2004 second mortgage] less the expenses of the sale and payment to the first mortgagee be held by A1 Conveyancing on trust pending a further order of the court.

22 On 11 May 2012 the defendants' appeal CACV 3 of 2012 was discontinued.

23 On 14 May 2012 the defendants filed a document entitled 'Defendants' Submissions Filed Pursuant to [my orders of 30 April 2012]' (the defendants' submissions). At about the same time the plaintiff informed the court that it would need an extension of time to comply with my orders of 30 April 2012 as to further affidavits and supplementary submissions. Also at about the same time Michael indicated that the first defendant might be prepared to agree to an extension of time without a hearing.

24 On 17 May 2012 the plaintiff filed an affidavit of Mr Nardizzi entitled 'Affidavit of [Mr Nardizzi] in Support of Orders for Special Costs and Other Orders Sworn 17 May 2012' (the Nardizzi affidavit of 17 May 2012).

25 Also on 17 May 2012 the plaintiff filed a document entitled 'Plaintiff's Supplementary Submissions Filed Pursuant to [my orders of 30 April 2012]' (the plaintiff's supplementary submissions).

26 On 22 May 2012 my associate communicated with the parties by e-mail to the plaintiff's solicitor and to the defendants care of Michael indicating that, if the parties did not file a memorandum of consent orders extending the relevant times under my orders of 30 April 2012 or seek a hearing, I would treat those times as extended appropriately and make my determination on the papers filed. My associate's email allowed for a response by 4 pm 25 May 2012. No further filings were made by either party by that date and time.

27 Accordingly, this determination is made on the papers comprising the Nardizzi affidavit of 16 January 2012; the Nardizzi affidavit of 25 January 2012; the plaintiff's Minute; the plaintiff's submissions; the defendant's submissions; the plaintiff's supplementary submissions; and the Nardizzi affidavit of 17 May 2012.

28 I note there is no affidavit material for the defendants.

29 I turn to consider the issues as framed by the parties' submissions.

30 The defendants' submissions state that they 'do not admit to liability of any kind to the plaintiff'. The defendants' submissions refer in this respect to the defendants' inability to secure legal representation during the trial.

31 In my view these are matters that were for the defendants to raise in any appeal against Choice Constructions [No 3]. They do not go to the orders to be made on the plaintiff's application. This is except insofar as the defendants' submissions in this respect may be taken as a call on the plaintiff to make its case for the orders it seeks. I so take the defendants' submissions.

32 The defendants' submissions include the claim that they have no liability for interest or (as will be seen) costs, charges, damages and expenses in connection with or incidental to Choice's 2004 second mortgage. I return below to those costs, charges, damages and expenses.

33 My concern here is in relation to the plaintiff's Minute, orders 1 and 2.

34 Order 1 covers principal. As to principal, the defendants' submissions take no position other than that which I associated with their position as to liability.

35 Order 2 concerns interest, the defendants' submissions as to which I have referred to.

36 I turn to consider whether or not the plaintiff has made its case for those orders.

37 Choice's 2004 second mortgage is annexure 'JN-2' to the Nardizzi affidavit of 16 January 2012. There was no contest at trial that this mortgage was duly executed and the defendants were in default under its terms.

38 Those terms include (cl 5) that the defendants are to pay to the plaintiff on demand the 'Money Secured', provided that, if the defendants punctually pay interest (as provided for in cl 6) and the 'Principal Sum', in the manner on the dates stated in the Schedule, the plaintiff would make no demand.

39 The 'Money Secured' is defined (in cl 3.1(8)(a)) to include the 'Principal Sum', which in turn is defined (in cl 3.1(12) read with Schedule, Item 4) as $152,822.51 and is further described (in Schedule Item 5, 'Date of Advance of the Principal Sum') as '[a]lready advanced'. I took this as a reference to the advance of the vendor's credit under Choice's 2002 second mortgage which Choice's 2004 second mortgage replaced. The amount referred to is that specified in the plaintiff's Minute order 1. By the provisions of the Schedule, and subject to the payment on demand of an indemnity to which I will return below, the Principal Sum was repayable at any time prior to 3 September 2006 (Schedule, Item 6).

40 The 'Money Secured' is also defined (in cl 3.1(8)(c)) to include 'interest', while the defendants are required (by cl 6) to pay interest on demand at the 'Prescribed Rate specified in the Schedule' on the 'Money Secured' or on so much as from time to time is owed by the defendants from the Date of Advance of the Principal Sum. I describe the Prescribed Rate, which are in fact two rates, below. Interest (by Schedule, Item 7) is payable three monthly in advance. If (by cl 6.1) the defendants pay interest punctually and have not committed any breach of any representation, covenant, agreement, condition or stipulation on the part of the defendants in Choice's 2004 second mortgage or any collateral security then interest is payable at the 'Reduced Rate' specified in the Schedule (Schedule, Item 3).

41 On the uncontradicted evidence in the Nardizzi affidavit of 16 January 2012 and the Nardizzi affidavit of 25 January 2012 the only payments made under or for the purposes of Choice's 2004 second mortgage were of $30,974.35, from proceeds of the sale of the Janet Street property. Those payments (the payments) were of the amounts of $29,853.15 and $1,121.20 on 3 January 2006 and 28 February 2006, respectively. There is no contest that the payments were properly applied by the plaintiff towards the amounts due and payable for interest on the Principal Sum under Choice's 2004 second mortgage, as indicated in the Nardizzi affidavit of 16 January 2012 and the Nardizzi affidavit of 25 January 2012. There can be no contest that in the events described in this paragraph of my reasons the rate of interest applicable to the Principal Sum (and to the other moneys making up the Money Secured) was simple interest, at the Prescribed Rate. The Prescribed Rate was 13% for the period 4 September 2002 to 3 September 2004, both dates inclusive, and thereafter 16% (Schedule, Item 3).

42 It follows in my view that the plaintiff is entitled to an order in terms of the plaintiff's Minute, order 1; and, to the extent the amount of interest the plaintiff's Minute, order 2 is correctly calculated, including crediting of the payments, the plaintiff is also entitled to an order in terms of that other order.

43 I have examined the table of calculations and statement of credit in the annexure 'JN4' to the Nardizzi affidavit of 16 January 2012, and updated the calculations to 23 January 2012 on the basis, as stated in the Nardizzi affidavit of 25 January 2012, that no payments were made after the last date to which the earlier affidavit related. I find that the calculations and crediting have been done so as to produce a figure for interest on the Principal Sum no higher than the amount due and payable under Choice's 2004 second mortgage. I note in passing that Choice's 2004 second mortgage appears to have interest accrue for the day of 4 September 2002, which is not included in the calculation.

44 I further note that there is provision in Choice's 2004 second mortgage (cl 22.2) which in my view has the effect that security does not merge in the judgment following Choice Constructions [No 3].

45 It follows, in my view, that the plaintiff is entitled to orders in terms of both orders 1 and 2 in the plaintiff's Minute.

46 I turn now to orders 3 and 4 in the plaintiff's minute.

47 I begin by noting, as I have previously, that the defendants' submissions assert that the plaintiff is not entitled to claim 'any and all costs, charges, damages and expenses which the plaintiff incurs or becomes liable for in connection with or incidental to [Choice's 2004 second mortgage]'. The defendants' submissions put this submission on the basis that Choice's 2004 second mortgage cl 3.1(8)(f) 'clearly gives this right only to the defendants (Mortgagors)'.

48 Choice's 2004 second mortgage cl 3.1(8)(f) defines as part of the Money Secured the following (emphasis added):

all costs charges damages and expenses which the Mortgagor incurs or becomes liable for in connection with or incidental to this Mortgage.

49 In my view 'Mortgagor' in cl 3.1(8)(f) is clearly an error. It would make no sense to include as part of the Money Secured such items that the Mortgagor incurred or became liable for. This may be seen most clearly from the opening words of Choice's 2004 second mortgage cl 5.1, which are:

To pay to the Mortgagee on demand the Money Secured or such part thereof as shall be specified in the demand ...

50 It is clear to me that 'Mortgagor' in cl 3.1(8)(f) is a clerical error and should be read as corrected to 'Mortgagee'. No order for rectification of Choice's 2004 second mortgage is required or appropriate. See Carter on Contract LexisNexis Butterworths, as at 29 May 2012 [22-380] at n7; and Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, 426 427 (Dixon CJ and Fullagar J).

51 I next note that the plaintiff's supplementary submissions state that the plaintiff seeks orders for payment of 'enforcement costs ... incurred on a solicitor/own client basis'. The plaintiff's supplementary submissions identify those costs as appearing both in the Nardizzi affidavit of 16 January 2012 and the Nardizzi affidavit of 17 May 2012. The latter affidavit in [2] states that it details and annexes copies of tax invoices referred to in the Nardizzi affidavit of 16 January 2012 and that 'all of such expenses related to [Choice's 2004 second mortgage], the enforcement of the mortgage, proceedings and implementing the judgment'. Further, that affidavit states that 'all such tax invoices have been paid in full'.

52 It would appear from the dates of the earliest invoices annexed to the Nardizzi affidavit of 17 May 2012, in October 2003, February 2004 and July 2004, that the amounts they refer to cannot be costs of enforcing Choice's 2004 second mortgage, while it is not apparent from the invoices for October 2003 and February 2004 how they are within Choice's 2004 second mortgage cl 3.1(8)(f) as costs 'in connection with or incidental to [Choice's 2004 second mortgage]' (emphasis supplied). The plaintiff's Minute, orders 3 and 4, relate only to enforcement costs of Choice's 2004 second mortgage. As will appear, however, the plaintiff appears no longer to seek orders in those terms.

53 The plaintiff's supplementary submissions also note my costs order of 21 December 2011 and appear to accept that such order is for costs on a party and party basis. I do not consider that it could be successfully contended that my costs order of 21 December 2011 could be construed otherwise. See Bank of Western Australia Ltd v Ponga (Unreported, WASC, Library No 980697, 2 December 1998) 6 (Sanderson M), referred to with approval in Rumball v Mortimore [2000] WASC 126 [13] (Owen J).

54 My costs order of 21 December 2011 may be contrasted with the Special Condition (2), headed 'Indemnity', in Item 10 of the Schedule to Choice's 2004 second mortgage. The plaintiff's supplementary submissions refer me to that provision, which reads in part as follows:

Except in the case of fraud, wilful misconduct or gross negligence by the Mortgagee, each of the Mortgagor and the Borrower must on demand indemnify the Mortgagee against any loss cost or expenses (including legal fees, costs and disbursements (on a solicitor/own client basis)) which the Mortgagee may sustain or incur as a consequence of:

(a) any sum payable by the Mortgagor and the Borrower as the case may be under this Mortgage or any Collateral Security not being paid when due; or

(b) the occurrence of any default or potential default.

55 I also note Choice's 2004 second mortgage cl 17.1(1) and (3), to the latter of which the plaintiff's supplementary submissions call my attention: those subclauses read as follows:

17.1 That the Mortgagor shall upon demand (which may be made at any time notwithstanding anything herein contained or implied to the contrary) pay:

(1) All costs and valuation fees incurred by the Mortgagee in connection with this Mortgage including, and without limiting, the costs (as between solicitor and client) of instructions for and preparation stamping registration and discharge hereof; and

(2) ...

(3) Any costs incurred by the Mortgagee in the exercise or attempted exercise of the Mortgagee's remedies powers or rights hereunder; ...

56 I have previously set out the terms of Choice's 2004 second mortgage cl 3.1(8)(f).

57 On the authorities the language of costs liability in a mortgage in the form of 'solicitor/own client' and 'all costs' should be construed as meaning costs on an indemnity basis. See on the language of 'solicitor/own client' (emphasis supplied) Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171, 187 (Scott LJ for the court of Sir Stephen Brown P, Stocker and Scott LJJ); and on the language 'all costs' see Bank of Baroda v Panessar [1987] Ch 335, 355 (Walton J), quoted in Gomba 192. I consider the latter construction would extend to 'any costs' in cl 17.1(3). While there is authority that there is a difference between costs on an indemnity basis and costs on a 'solicitor/client' basis that authority also notes the difference in this jurisdiction is not great. See Rumball (2000) [33]. I consider that 'all costs' in cl 17.1(1) should be given the meaning I have described notwithstanding the use in the same subclause of 'solicitor and client' costs and to give the meaning of indemnity costs to those latter costs. This would align with the language in Special Condition (2) quoted and with the language of 'all costs' in cl 3.1(8)(f).

58 On these conclusions as to the construction of Choice's 2004 second mortgage Special Condition (2), cl 3.1(8)(f) and cl 17.1(1) and (3), does my costs order of 21 December 2011 displace the entitlement of the plaintiff to costs, charges and expenses under those provisions so construed?

59 I should immediately note that any such displacement could only be so far as costs of and incidental to the proceedings in the plaintiff's action are concerned, and not for other costs, such as those in Choice's 2004 second mortgage cl 17.1(1). See Rumball (2000) [31]. I note that only cl 17.1(3) and Special Condition (2) appear to be limited to the first kind of costs. Indeed the costs included in the three earliest invoices in the Nardizzi affidavit of 17 May 2012 previously referred to (those of October 2003, February 2004 and July 2004) as they appear on their face cannot be other than costs which are not costs of or incidental to the plaintiff's action for the purposes of Choice's 2004 second mortgage.

60 However, I note that in the hearing at which my order as to costs of 21 December 2011 was made no reference was made to the plaintiff's costs entitlements under Choice's 2004 second mortgage; my order as to costs of 21 December 2011 on its face makes no reference to such entitlements; and I did not adjudicate on whether or not the plaintiff should be deprived of those costs pursuant to such entitlements. In those circumstances, the plaintiff is not precluded from seeking orders to recover those entitlements. See Rumball (2000) [27] [30], citing other authorities.

61 Further, while an order for one party to pay another its costs of or incidental to proceedings in this court is always discretionary (see Supreme Court Act 1935 (WA) s 37 and Gomba 194 on the corresponding English provision), such an order does not affect contractual or equitable rights of a mortgagee to retain its costs out of the mortgaged property or the proceeds of its sale (Gomba 192).

62 The plaintiff's supplementary submissions in fact state that a 'further and suitable further costs order' in the following terms could be made:

The Defendants indemnify the Plaintiff in respect to all costs and disbursements incurred on a solicitor/own client basis together with interest at the rate of 16% per annum from the date each item is incurred.

63 I took this 'further and further suitable costs order' to be a statement by the plaintiff it no longer presses for an order in terms of the plaintiff's Minute orders 3 and 4. Rather, it seeks an order for all costs including costs other than those of or incidental to the plaintiff's action, and interest on the costs sought, all as made payable by Choice's 2004 second mortgage. Further the costs order the plaintiff seeks is of an indemnity kind. That is to say I take this order to be for 'all costs and disbursements incurred' in accordance with the plaintiff's contractual entitlements.

64 Orders of an indemnity kind, when they are made in the exercise of the discretion under Supreme Court Act s 37, are of course subject to an exception. That is, in that context at least that is what 'indemnity costs' means. The costs so ordered are except in so far as they are of an unreasonable amount or have been unreasonably incurred. See Civil Procedure Western Australia LexisNexis Butterworths [66.1.16.1] as at 30 May 2012. This of course means that the burden of showing the exception applies is on the party resisting the claim to costs.

65 On the authority of Gomba (see 186 read with cl 2 of the mortgage in that case, which is set out at 179) the exception referred to should be seen as applicable to the costs provisions in Choice's 2004 second mortgage I have referred to, Special Condition (2), cl 3.1(8)(f) and cl 17.1(1) and (3). This is a matter of the 'true construction' of the clauses (Gomba 186), and applies to the plaintiff's entitlement to costs whether they are of or incidental to the plaintiff's action or otherwise.

66 True it is that the final orders made in Rumball [36], also a mortgage enforcement action, were in the following terms, which did not include on their face any qualification:

The plaintiffs are entitled to a declaration that the defendant is liable to pay non-litigation costs arising from the defendant's default to the plaintiffs. Consequently, I order that:

1. The defendant pay to the plaintiffs, from the substitute security fund, the plaintiffs' non-litigation costs incurred as a result of the defendant's default.
2. The non-litigation costs incurred as a result of the defendant's default be taxed if not agreed, and that they include the costs to the plaintiffs of the preparation and taxation of the bill (if necessary).
3. The balance of moneys held in the substitute security fund be paid out to the defendant.

67 However, I do not consider Owen J in Rumball meant by that order that the mortgagor was to pay to the mortgagees there 'any non-litigation costs incurred as a result of the defendant's default', whether or not it could be shown that they were unreasonably incurred or unreasonable in amount. The matter appears not to have been addressed in submissions to his Honour. And it would be inconsistent with the ordinary meaning of an order for indemnity costs in this court which appears from his Honour's judgment to be the measure of the mortgagor's costs liability: see Rumball (2000) [33] [35].

68 I consider then that the order the plaintiff now seeks as to costs, understood as I have indicated and modified to reflect that understanding, is one which I should make. To the extent the order goes to costs of or incidental to the plaintiff's action, it is an exercise of the court's discretion as to costs which reflects the contractual right of the plaintiff, as ordinarily the exercise of the court's discretion in such a case should do. See Rayner v Australia and New Zealand Banking Group Ltd [2003] WASCA 264 [25] (Murray and Parker JJ), referring with approval (see [26]) to Gomba 193 194.

69 I also consider that the costs order I should make should be further modified to provide for the costs of and incidental to the plaintiff's action to be taxed if they are not agreed. This appears to be the standard costs order in mortgage enforcement actions, including for nonlitigious costs of and incidental to the action, and allows for the defendants to have the costs of and incidental to the plaintiff's action, which I understand to be the bulk if not all of the costs sought, to be reviewed by a taxing officer of the court. However, that taxation should be at the cost of the defendants, as provided for by order 2 from Rumball (2000) [36].

70 Finally, the order I should make should substitute for my costs order of 21 December 2011, which accordingly should be vacated.

72 The plaintiff's Minute, order 5, set out above, would have the defendants pay such costs.

73 As indicated in the previous reasons, the plaintiff has largely been successful in persuading me to make further orders of the kinds, if not always in the terms, it seeks. Although there were difficulties with the provision of some of the relevant papers to the first defendant as I have indicated earlier, I consider the plaintiff made efforts in good faith and for the most part reasonably to meet the requirements in my programming orders of 18 January 2012 to provide her with them. For that reason I do not consider that those difficulties were such as to deny the plaintiff all or a part of its costs of finalising judgment.

74 I note the order for costs of the plaintiff's application I made on 18 January 2012 (my order of 18 January 2012 as to the costs of plaintiff's application), which was as follows:

1. The plaintiff is to have its costs of the application, fixed in the amount of $2,800.

75 I consider that my order of 18 January 2012 as to the costs of the plaintiff's application is one fixing the costs of the application for particular judgment as at the hearing that day, as an exercise of the costs discretion in Supreme Court Act s 37 but without regard to the plaintiff's contractual rights in Choice's 2004 second mortgage. Although the matter of those rights was addressed in that application, no argument was addressed to me as to their implications for the order I should make as to the costs of the application, I made no reference to those rights and I did not adjudicate upon them. This, on the authority of Rumball (2000) [27] [30] and authorities there cited, means I am not prevented from making an order for the costs of finalising the particulars of judgment, including costs of the kind the subject of my order of 18 January 2012 as to the costs of the plaintiff's application, to reflect those rights. Those rights in my view would extend to such costs. Further, the order I should make in the exercise of my costs discretion should ordinarily reflect those rights.

76 However, the plaintiff's Minute order 5 does not on its face appear to seek to have the order for the plaintiff's costs of finalising particulars of judgment reflect its contractual rights. On Ponga 6 approved in Rumball (2000) [13] the plaintiff's Minute order 5 is limited to party and party costs. At the same time, I consider the 'further and further suitable costs orders' the plaintiff now seeks, and a modified version of which I would make, would extend to such costs.

77 I will hear from the parties as to what order, if any, I should make with respect to the costs of finalising particulars of judgment.

78 For the foregoing reasons I would make, from the plaintiff's Minute, orders 1 and 2; I would make a modified form of the 'further and further suitable costs orders' in the plaintiff's supplementary submissions; and I will hear from the parties as to the order to make, if any, with respect to the costs of finalising the particulars of judgment.