Fitzgerald v Watson

Judgment 1The Plaintiff, Ronald Reginald Fitzgerald, seeks judgment against Kathleen Susan Watson, the Defendant, in the sum of $69,356.47 together with interest and costs. He also seeks to enforce the judgment against a property owned by Mrs Watson at Tumbi Umbi. 2Mrs Watson purchased a property at Wyee Point in about April 2001 with a $50,000.00 loan from Australia and New Zealand Banking Group Limited on the security of that property which she mortgaged to the bank. 3In November 2003 she raised a further $40,000 from Response Finance Pty Ltd, again on the security of the Wyee property, which she mortgaged to Response Finance. Mrs Watson said that the de facto husband of her adopted daughter was the borrower and she was the guarantor giving security over the Wyee property. But she readily accepted that she was the mortgagor when the document was put to her with its reference to her as mortgagor and her acknowledgment of receipt of the principal sum and that she would pay it to the mortgagee and all other moneys thereby secured on the final maturity date. 4Mrs Watson borrowed the moneys to enable her adopted daughter and her de facto husband to purchase a pizza shop. He was to refinance within two months to enable the second mortgage to be paid out. 5The term of the loan was 60 days. It was at a high rate of interest. The adopted daughter's de facto husband defaulted in providing the instalment payments and from early January 2004 Mrs Watson was in default and being charged interest at 7% per month. She was in desperate need of refinance. Response Finance was demanding approximately $100,000.00 and threatening to commence legal proceedings. 6Mrs Watson was in receipt of Centrelink payments and was studying at TAFE to become a nurse. Because of her limited income she could not raise from ANZ sufficient moneys to pay out Response Finance. She described the interest rate she was being charged by Response Finance as overwhelming. 7Mrs Watson and her husband saw an advertisement on television of Xenium Financial Group being able to raise finance. She made an appointment and she and her husband met the principals who said they could obtain finance for her. She was told that Short Term Mortgages Pty Ltd was associated with Xenium. 8Mrs Watson understood them to be finance broking companies and that she would have to pay them a fee. First mortgage finance was arranged for most of the amount that Mrs Watson needed to pay out ANZ and Response Finance. But more was needed. 9Mr Fitzgerald had let Xenium know that he was interested in lending funds. He was approached by it and agreed to lend to Mrs Watson on a second mortgage. He preferred not to lend on such security as it was risky, but the amount was small at $50,000.00 and the Wyee property was valued at $240,000.00 with a prospective first mortgage loan of about $140,000.00. 10Mr Fitzgerald said he usually inspected properties offered as security but this was such an urgent matter that there was no time for an inspection. He retained James Barton Carter, solicitor, to act for him. 11Mrs Watson and her husband went to the Xenium office a second time where she signed some documents at the urging of her husband. Those documents related to the retainer of Short Term Mortgages as her broker. They included her consent to Short Term Mortgages lodging a caveat over the Wyee property to secure its fee. The mortgage documents were executed later. 12Short Term Mortgages referred Mrs Watson to Stanley Price, a solicitor, and she and her husband called on him to sign the mortgage documents, which had been forwarded to Mr Price by Mr Carter. 13Mrs Watson claimed that Mr Price had tagged the places where she was to sign and asked her to sign. She said she received no advice from Mr Price. She said that in the half hour with Mr Price he answered questions put by her by saying he would return the documents to Short Term Mortgages and they would explain the matters to her. 14Mrs Watson said she did not read the mortgage documents before she signed them. She understood that mortgages were serious legal transactions that could have potentially serious legal consequences for her if they were breached. 15By signing the documents without reading them Mrs Watson represented to Mr Fitzgerald that she had approved the contents of the documents or was willing to take the chance of being bound by those contents. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [45]; 180-181 the Court said: "It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it." 16The reference to Latham CJ was to his statement in Wilton v Farmworth [1948] HCA 20; (1948) 76 CLR 646 at [2]; 649: "In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions." 17Mrs Watson did not say that she was urged to sign the mortgage documents by her husband. 18A letter was addressed to Mr Fitzgerald from D & A Biggs Accounting Services. It was sent by email to Mr Carter by Mr Price. It was in the following terms: "I certify that: