Kaji Australia Pty Ltd v Glover

Supreme Court of NSW|2019-04-18|Before: Davies J

Pty Ltd v Thomas [2012] NSWSC 683 Ewer v Ambrose (1825) 3 B & C 746 Guardian Mortgages v Miller [2004] NSWSC 1236 In Re B (Children) (Care proceedings: Standard of Proof)(CAFCASS intervening) [2009] 1 AC 11 Kaji Australia Pty Ltd v Glover (No 2) [2018] NSWSC 414 Khul v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 McPhilemy v Times Newspapers Ltd [2000] 1 WLR 1732 Mizzi v Reliance Financial Services Pty Ltd & Ors [2007] NSWSC 37 NOM v Director of Public Prosecutions (2012) 38 VR 618; [2012] VSCA 198 R v Welden (1977) 16 SASR 421 Takemura v National Australia Bank Ltd [2003] NSWSC 339 The Saints Gallery Pty Ltd v Plummer [1988] FCA 309; (1988) 80 ALR 525 Wells v South Australian Railways Commissioner & The New Zealand Insurance Co Ltd (1973) 5 SASR 74 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Texts Cited: Cross and Tapper on Evidence, 9th ed. (1999) Butterworth, London Category: Principal judgment Parties: Kaji Australia Pty Ltd (First Plaintiff) William Bradley Webster (Second Plaintiff) Johann Benson Glover (Defendant/Cross-Claimant) Mercia Financial Solutions Pty Ltd (Third Cross-Defendant) Richard Nicholson (Fourth Cross-Defendant) Rodney Shields (Fifth Cross-Defendant) Representation: Counsel: P Follino-Gallo (Plaintiffs) R Newell (Defendant/Cross-Claimant) D Lloyd (Third and Fourth Cross-Defendants) R Shields (Fifth Cross-Defendant)

Judgment

On 21 February 2011 the defendant, Johann Benson Glover, entered into a loan agreement with the plaintiffs, Kaji Australia Pty Ltd and William Bradley Webster to borrow $115,000. The loan was repayable on 21 April 2011. The defendant gave a mortgage over his property at 15 Vincent Street, Mount Druitt as security for the loan.
The defendant did not repay the loan on 21 April 2011 or at all. On 8 April 2014 the plaintiffs commenced proceedings against the defendant seeking possession of the defendant's property and judgment for the amount then owing under the loan.
The form of the claim ultimately pursued in the proceedings was an amended statement of claim filed 17 June 2016.
By a defence to the amended statement of claim filed 26 August 2016 the defendant denied that the plaintiffs were able to obtain possession or claim the amount said to be owing under the loan agreement and, in substance, relied upon a cross-claim that he filed against the plaintiffs as cross-defendants. The proceedings were subsequently expanded by the filing of an amended cross-claim on 20 February 2017. That cross-claim joined three other parties being Mercia Financial Solutions Pty Ltd as the third cross-defendant, Richard Nicholson as the fourth cross-defendant, and Rodney Shields as the fifth cross-defendant. Those parties were alleged to have been involved in obtaining finance for the defendant that led ultimately to his entry into the loan agreement on 21 February 2011. The final form of the cross-claim pursued by the defendant was a further amended first cross-claim filed 8 June 2018.
As against the plaintiffs, the cross-claim asserted that the loan agreement and the mortgage were unjust pursuant to s 7 of the Contracts Review Act 1980 (NSW), and that they were unconscionable contrary to ss 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth); as against Mr Nicholson and Mercia the cross-claim asserted that they had engaged in misleading and deceptive conduct in the form of representations contrary to s 12DA of the ASIC Act and/or s 18 of the Australian Consumer Law (Cth); as against all of the cross-defendants it alleged fraud and conspiracy. I shall refer to this document as "the cross-claim". I shall refer only to Mr Nicholson when mentioning the Third and Fourth Cross-Defendants because no distinction was made between Mr Nicholson and Mercia in respect of their actions and the claims made.

The defendant

The defendant was born on 21 February 1950. At the time of the loan agreement he was aged 61 years.
He left school in what was then called fifth form, and became employed with the Commonwealth Bank of Australia as a bank teller. He was subsequently promoted to the position of assistant relief manager with the Bank. He worked for the Commonwealth Bank for 26 years until 1994. He left the Bank, taking a redundancy package. He has not worked since that time. He has supported himself from investments that he had at the time he ceased his employment with the Bank.
He said that he was first diagnosed with depression in the late 1960s and has been receiving medical treatment for that condition since that time.
He received unemployment sickness benefits from November 2013 to 2015.
He inherited the security property at 15 Vincent Street, Mt Druitt when his mother died in 1988. He has lived in that property all his life.

Relationship with John Lippits

The defendant met a woman called Donna Lippits in about 1977. He became friends with her and subsequently met her father, John Lippits Snr. The defendant commenced to socialise with the Lippits family at that time and subsequently met John Lippits Jnr in about 1998 or 1999.
From about 2000 to 2004 the defendant lent money to John Lippits Snr. The first such loan was for $160,000. That amount was repaid. A subsequent loan of $90,000 was made and repaid. A third loan of $160,000 was made and repaid. In each case a loan agreement was drawn up and John Lippits Snr paid interest on the loans.
After the third loan had been repaid, John Lippits Jnr (to whom I shall refer subsequently as "Mr Lippits") asked the defendant for a loan of $16,000. That loan was made but never repaid.
After Mr Lippits divorced his wife and was required to pay her a sum of money, Mr Lippits borrowed that money from his father. He then approached the defendant to borrow money so that he could repay his father. The amount was $200,000. The defendant lent that amount to Mr Lippits. Although a loan agreement was entered into between the defendant and Mr Lippits, the amount of $200,000 has never been repaid.
Subsequently, Mr Lippits asked the defendant for a loan of $76,000 to set up a helicopter business. The defendant agreed. A loan agreement was drawn up and the money advanced. That loan has never been repaid.
Subsequently, Mr Lippits sought a further loan of $140,000 from the defendant to buy Mr Lippits' partner out of a business. That loan was made to Mr Lippits but never repaid.
Thereafter Mr Lippits told the defendant that he was thinking of moving his helicopter business from Canberra to Sydney. He said he had found a hangar at Bankstown but it was going to cost $265,000. He asked the defendant for a loan of that amount. The defendant loaned that amount to him but it was never repaid. Mr Lippits request and was given a further loan of $70,000 to $80,000. That loan was not repaid.
Finally, a loan of $30,000 was made by the defendant to Mr Lippits. That was the only loan that was repaid by Mr Lippits.
The defendant said that he loaned more than $1,000,000 to Mr Lippits throughout this time. He has never sought to recover any of the loans from Mr Lippits.

The immediate need for the loan

In order to lend Mr Lippits the sum of $265,000 to purchase the hangar at Bankstown, the defendant sold shares that he owned in Harvey Norman, Commonwealth Bank, Telstra and the St George Bank. As a result of the sale of those shares the defendant incurred a Capital Gains Tax liability of $56,000. The defendant said that he had anticipated that he would have to pay Capital Gains Tax on the sale of the shares, and he told Mr Lippits that he (Mr Lippits) would have to provide the money to pay the Capital Gains Tax when the assessment arrived. Mr Lippits promised to do so. However, he did not provide the money, making what the defendant said were all sorts of promises to do so and excuses for not having done so.
The Australian Tax Office (ATO) commenced proceedings in the District Court against the defendant on 28 November 2008. On 9 February 2009 a default judgment of $74,890.17 was obtained by the ATO.
On 1 December 2009 the ATO issued a Bankruptcy Notice against the defendant. It was served on him on 31 January 2010.
The defendant did not comply with the Bankruptcy Notice and the ATO filed a creditor's petition on 11 August 2010. The petition was originally listed for hearing on 22 September 2010 but there were ten adjournments before the matter was finally dismissed on 7 March 2011 after the events giving rise to these proceedings.
The defendant said that when the bankruptcy proceedings were commenced he told Mr Lippits that he would have to sort the problem out for him. The defendant and Mr Lippits went down to the ATO and an officer of the ATO set up a repayment schedule on the basis, the defendant said, of assurances given by Mr Lippits that he would be able to come up with the money. The defendant said that to the best of his knowledge and recollection Mr Lippits made a number of appearances in the Federal Magistrates Court to adjourn the proceedings. The defendant said that he did not have a clear idea of what was happening in the Federal Magistrates Court except that Mr Lippits was supposedly looking after the proceedings. It seems likely, however, that at some stage Mr Lippits engaged a Mr Prestia of Crest Capital Investments Pty Ltd, and Mr Prestia went to the Federal Magistrates Court to adjourn the proceedings.
The defendant said that after a number of excuses from Mr Lippits for not having found the money to enable the tax debt to be repaid, Mr Lippits suggested that he could apply for a loan and Mr Glover would need to put his house up as security so that the tax debt could be paid off. The defendant said he agreed to that proposal. The defendant said that a number of approaches were made to various banks including the Commonwealth Bank and National Australia Bank. The defendant said that the officers of those banks said that they could not provide a loan to Mr Lippits because if the defendant was putting his house up as security and Mr Lippits did not make the repayment, the defendant could lose his house. It is not clear when the plan apparently changed to provide for the defendant to borrow the money and provide his property as security. That matter was not identified in the affidavits nor explored in cross-examination.
The defendant said that: Having exhausted all the conventional lenders John then approached Mercia Financial Solutions [the third cross-defendant] a loan brokerage firm in an attempt to see whether it could find a lender to provide a low doc loan to me directly using my house as security.

Meetings with Richard Nicholson

The defendant said that to the best of his recollection he had two or three meetings with Mr Lippits and Mr Nicholson prior to discussing the loan the subject of these proceedings arising. He said that the meetings occurred in a café in Clarence Street in the city. He recalled that there was also a fourth or fifth meeting which took place in a conference room that he understood to be part of the offices of Mr Nicholson's company, Mercia Financial Solutions.
It is not clear when Mr Nicholson first met the defendant. It appears from both the evidence of the defendant and the evidence of Mr Nicholson that Mr Lippits first approached Mr Nicholson on behalf of the defendant and that Mr Nicholson subsequently met the defendant. According to Mr Nicholson's affidavit he first met Mr Lippits in January 2011, having been introduced to him by Mr Prestia who Mr Nicholson understood had already undertaken some work for the defendant to prevent a bankruptcy occurring. That was probably work involving the appearances in the Federal Magistrates Court.
The date of January 2011 cannot be correct for two reasons. First, there is a copy of a finance broking deed dated 21 December 2010 made between Mercia Financial Solutions Pty Ltd and the defendant which the defendant has signed. Secondly, on 23 December 2010 Mr Nicholson sent an email to Mr Lippits with the subject as "Johann Benson Glover". The email relevantly said: As discussed with Joseph Prestia, the $2,000 for services rendered remains outstanding and we are now out of pocket to this effect. The email went on to say that the funds should be deposited into an identified bank account of Mercia Financial Solutions Pty Ltd.
Whether the $2,000 was for what Mr Prestia had done or was in respect of work Mr Nicholson had done pursuant to the finance broking deed dated two days earlier or because of his earlier retainer by Mr Lippits on behalf of the defendant, is not clear. One possible explanation for the money being deposited into Mercia's account is that Mr Prestia was bankrupt from 14 April 2009 until discharged on 15 April 2012. That may have been a private arrangement between Mr Nicholson and Mr Prestia.
At the first meeting both Mr Nicholson and the defendant agreed that an application was to be made to St George Bank. The defendant's evidence was that Mr Nicholson said, "I think I can get you a loan with St George." The defendant said that most of the conversation at the meeting was between Mr Lippits and Mr Nicholson. Mr Lippits had, in his meeting with Mr Nicholson prior to Mr Nicholson meeting the defendant, asked that paperwork be emailed to him because he said that the defendant did not have an email address. At the defendant's first meeting with Mr Nicholson, the defendant agreed that communications from Mr Nicholson to him could be effected through Mr Lippits.
The defendant said that a few days after the meeting with Mr Nicholson he received a telephone call from Mr Lippits who told him that Mr Nicholson had obtained a loan approval from St George. Shortly afterwards, Mr Lippits contacted the defendant again and said: The brokers have got a better deal for you from Bankwest. The defendant said that he did not see any Bankwest documentation until after the present proceedings were commenced.
About a week later the defendant said that he received another call from Mr Lippits who said that Mr Nicholson had been offered a better deal with St George than that offered by Bankwest, so they were going back to St George. The defendant said that a short time after that conversation he received another call from Mr Lippits who said (apparently for the second time) that Mr Nicholson had obtained a loan approval from St George at a better rate of interest than from Bankwest and he was recommending that the defendant proceeded with the St George loan. The defendant said to Mr Lippits that he would take Mr Nicholson's advice. He said that he was never told by Mr Lippits or Mr Nicholson that the alleged loan approval from St George was purportedly a conditional loan approval.
A few days later the defendant said he received a further telephone call from Mr Lippits who said that unfortunately St George was not going to be able to process the loan fast enough to prevent the ATO from making the defendant bankrupt. Mr Lippits said that they were going to have to get the defendant a short term loan in the interim to get the ATO paid off to prevent him from becoming bankrupt. Mr Lippits said that the short-term loan could then be paid off with the monies from St George. The defendant agreed. Mr Lippits said they would have to go and see the solicitor who was going to organise the short term loan.
It should be noted at this stage how much of the information the defendant was receiving was coming to him from Mr Lippits. Much of that information was not verified by other persons involved.
Mr Nicholson said that a conditional approval was issued by St George Bank's Home Loan Manager. At some time in the following week the conditional approval stalled. Mr Nicholson understood from a telephone conversation with the St George Bank's Home Loan Manager that the stalling was due to internal bank audit reasons. Mr Nicholson became concerned that he could not settle the transaction within the necessary timeframe because over two weeks had passed since the previous adjournment of court proceedings had been granted.
Mr Nicholson said that he rang Mr Lippits on or about 11 February and told him that he did not think the St George home loan would be secured in time. He said one option was to approach a private short term lender who could act quickly and provide the funding within the timeframe required to satisfy the ATO. Mr Nicholson also said that it might be worth commencing the loan application process with another mainstream lender in case St George did not move forward with the loan.
Mr Lippits asked how much the private finance would cost and what the term of such finance would be. Mr Nicholson said it would be expensive, in the region of 1% to 3% per month plus transaction costs and that such loans could be for one month to 12 months. Mr Lippits asked Mr Nicholson to approach a lender to attempt to secure the funding. Mr Nicholson said he decided to approach Rodney Shields, the fifth cross-defendant, whom he had known for some years and who he was aware had access to private funders.
Mr Shields said that he received a telephone call from Mr Nicholson on about 15 February 2011. Mr Shields said that he knew Mr Nicholson as a mortgage broker with whom he had had dealings over a number of years. Mr Nicholson said words to the effect: I have an urgent application for short term finance for a Mr Glover. The loan would be secured by way of a first mortgage. The loan amount is approximately $100,000 net for a period of one month. The loan amount will be applied to pay out a debt to the Deputy Commissioner of Taxation who is in a position to enforce a Bankruptcy in the Federal Magistrates Court in the next few days. He is prepared to pay interest at the rate of 3% per month, and if there is a default, interest of 5% per month. I am told that St George has approved a loan but they cannot do it in time to avoid bankruptcy and will not directly pay a debt of the Taxation Department.
Mr Nicholson did not give evidence at the hearing. However, the defendant read a number of paragraphs of three affidavits Mr Nicholson had sworn in the proceedings. In one of those affidavits Mr Nicholson denied discussing interest rates with Mr Shields, but did not dispute the remainder of the conversation.
Mr Shields said that he doubted he could organise a loan with such short notice but he wanted to make a number of matters clear. First, no lender would issue a loan for one month only. Secondly, there had to be a formal valuation to ensure that the security stacked up. Thirdly, Mr Shields wanted to sight the approval letter from St George and the application made to St George, and finally he needed proof of the borrower's income so that if there was a delay with the St George loan he could be sure that the borrower could support the loan for a few months until it was paid out.
Mr Nicholson said he would advise the borrower about the two month minimum loan term. He said he had the approval letter and the application signed by the borrower which set out his income at $70,000. He said he had a letter of income from the borrower's employer who was helping him with the loan. He said the borrower would understand mortgages better than most people in the community because he had told Mr Nicholson that he worked for the Commonwealth Bank as an assistant manager for over 20 years.
On 15 February 2011 Mr Nicholson sent an email to Mr Shields which said: As discussed, Mr Johann Benson Glover is looking for $100,000 net for 4 weeks to pay-out the ATO. Current debt is approx. $97,500. Take out will be via St George refinance. I've attached the St George application which lists all personal details, along with Rates Notice and Creditors petition from ATO - also included pay details.

The St George Loan Agreement

The St George loan was, on the defendant's claims, the most significant matter in the proceedings. The application itself assumed considerable importance in the trial, and it is necessary to detail its contents. Nothing particularly turned on the way it was set out, so its questions and answers can be summarised.
The loan application took the form of a document addressed to the bank. Under the heading of "Information" on the first page it listed a number of things that "You may require". Three of the boxes were ticked: • Proof of income, e.g. PAYG slips, rental statements optional for low doc loans • Proof of assets, e.g. rates notices, recent bank account statements • Personal identification, e.g. birth certificate, driver's licence
In the next section under the heading "Bank/introducer use only" the total loan amount was said to be $160,000 and the lender/originator was said to be Richard Nicholson.
On the second page under the heading "Loan details" there were a number of boxes for the purpose of the loan. Two of these were ticked, being "Other" and "Investment". Where the applicant was to provide details the words "Personal investment" were typed. The loan amount was again stated to be $160,000 for a 15 year loan, with repayment type being interest only for five years at a variable rate.
On the third page under the heading "Employment", the box marked "Full-time" was ticked and the applicant's occupation was described as "Consultant Trader". The current employer was said to be Boston Traders, and the length of employment was said to be two years one month. The borrower's base income was said to be $70,000.
At the bottom of the that page the following three questions appeared: • Have you borrowed or do you intend on borrowing any part of the deposit? • Has anyone ever started legal action against you because you did not pay an amount when it was due? • Have you ever had a judgment entered or conviction recorded against you, been bankrupt, insolvent, assigned your estate to, or entered into a scheme of arrangement with, creditors? In each case the "No" box was ticked.
On the seventh page, the solicitor's contact name was said to be Grant Pritchard, and an address and phone number were provided. On page eight under the heading "Financial position" the applicant's total assets were shown at $433,500. The bulk of that came from the property in Vincent Street but there were also said to be shares/investments of $52,000.
On the same page, the only liability shown was a debt on a Commonwealth Bank credit card with a balance owing of $1,100.
The last two pages of the application contained a signature purporting to be that of the applicant. One of those signatures was in respect of making a Business Purpose Declaration. The defendant denied that the signatures on the application were his and denied that he was aware that an application to St George had been made. The handwritten date alongside the signatures was 25 January 2011. However, the date typed on the front page of the application in the section headed "Bank/Introducer Use Only" was 27 January 2011. That might suggest that the application was signed before it was completed. All of the information provided in the application is in typed form including the date of 27 January 2011.
Precisely what then occurred with this application is shrouded in mystery. The next thing that happened was the appearance of a letter from St George Bank dated 1 February 2011 which was headed "Approval in Principle". The letter was addressed to the defendant at his Mt Druitt property but he does not say if he received this letter or whether his solicitors came upon it at a later time as a result of files of various persons which were produced.
The letter was said to have been written by Hany Hanna who was subsequently dismissed by St George for wrongdoing, although whether that conduct related to the present matter is not known. The letter relevantly said this: Thank you for choosing St George Bank to help you with your loan application. We are pleased to let you know that based on the information provided, your application is approved in principle. … Loan amount: $100,000.00 … Formal approval of your loan application(s) is subject to: [Four matters were listed including a satisfactory valuation and lender's mortgage insurance approval if required.] Once all of our approval conditions are satisfied, we can formally approve the application and issue loan agreement(s) to you. Now, it is important for you to know that this approval in principle is not a guarantee of formal approval or the funds being made available.
A facsimile marking on the letter shows that it was faxed from Kogarah to Mr Nicholson at 9:42am on 1 February. It appears to have been sent, presumably at someone's request, in order to obtain a further adjournment of the creditor's petition in the Federal Magistrates Court that morning. The Court's record shows that the petition was adjourned that day until 22 February 2011.
At 9.47am on the same day, Hany Hanna sent an email to Mr Nicholson with the Subject as "CLAS 2790810" (presumably a file number). The email said: Dear Mr Benson, [sic] I am pleased to inform you your loan has been conditionally approved and valuation was returned today coming in at $316,000. Should you require any further information please don't hesitate to contact me. The email had printed on it St George Bank details.
Mr Nicholson forwarded this email to Mr Lippits at 3.37pm that day.
The lawyers acting for the defendant issued a number of subpoenas to St George Bank for production of documents related to the Approval in Principle and the email from Mr Hanna of 1 February 2011. The Bank responded by saying they were unable to locate any documents matched to the customer, nor to the reference number CLAS 2790810, nor connected with any valuation of the defendant's property.
Mr Nicholson sent to Mr Shields a copy of the St George application and a page containing photocopies of a rates notice for the defendant, his driver's licence and his Medicare card. He sent a copy of the creditor's petition by the ATO and a letter on the letterhead of Boston Traders Pty Ltd. That letter, in its heading, included the company ACN, two telephone numbers and Mr Lippits' email address.
The letter which was dated 14 January 2011 said this: I am writing this letter to confirm that Johann Benson Glover is employed by this company on a full time basis in the capacity as a consultant. Mr Glover is on a salary of $70,000 per year plus super. He has been employed by Boston Traders since December 2008. If you require any further information please contact me on the phone numbers above. The letter was signed by Mr Lippits who was described as the CEO.
The letter from Boston Traders assumed some significance in the proceedings for a number of reasons. The first was because of initial denials by the defendant about his knowledge of it or of Boston Traders at all, and his subsequent admissions that he and Mr Lippits used the letter to mislead Mr Shields and the plaintiffs. Secondly, evidence of the defendant suggested that there was a second letter from Boston Traders, probably in identical terms, with a different letterhead. The second letter was said by the defendant to have been given to Mr Shields in the conference. However, the only Boston Traders letter that Mr Shields said that he had in his files since the proceedings commenced was the version of it forwarded to him in Mr Nicholson's email. It will be necessary to return to this letter, particularly when discussing the credibility of the defendant.
Mr Shields said that he saw the "Approval in Principle" letter although he did not annex it to the affidavit he swore in the proceedings. However, an affidavit from the defendant's solicitor of 14 December 2018 annexes a file he obtained from Licardy & Co Solicitors. That file contains the letter from St George of 1 February 2011. That fact confirms, in my opinion, that Mr Shields is correct in saying that he saw this letter, because Licardy & Co were acting as the solicitors for the present plaintiffs on the loan agreement.

The entry into the loan agreement

Mr Shields ordered a valuation from Diamonds Valuation Services, and he received that valuation on 17 February 2011. On the basis of the valuation Mr Shields formed the view that the value of the property was sufficient to secure a first mortgage loan. Mr Shields said that the value of the security, coupled with other aspects of the application including the income he was earning, the approval from St George, and his assessment of the defendant assisted him in forming the view that the loan was viable.
Mr Shields said that on Saturday 19 February 2011 he arranged for a meeting and interview with the defendant to be held on 20 February 2011.
A meeting took place at the offices of Licardy & Co Solicitors in the Edgecliff Centre. The defendant was present with Mr Lippits. The defendant remembered that, after taking them into the conference room, Mr Shields said, "So you are after a loan?" The defendant said that somebody answered "Yes" but he cannot recall whether it was him or Mr Lippits. The defendant also said that he did not recall what was said after that. He said everything was a bit of a blur and he does not recall exactly what happened. He does not recall being given the opportunity to read documents and he said that the documents were not explained to him. He does remember Mr Shields saying that the rate of interest was 3% per month but he does not have any recollection of 5% per month being mentioned.
The defendant does recall that Mr Shields said words to the effect of: The people lending you the money will need it paid back quickly and on time because they will need the money for their business. The defendant said that Mr Lippits did most of the talking to Mr Shields.
Mr Shields' evidence was that during the meeting he asked Mr Lippits how he fitted into the picture. Mr Lippits replied: I am a family friend and employ Joe in my business. The defendant denied that Mr Lippits said that he was a family friend and employed Joe [the defendant] in his business.
Mr Shields then asked the defendant how he got into the mess, to which the defendant replied: I had made a loan of $300,000 to help a friend and was informed that I would get it back eventually. It is not yet available and I need to pay the tax department. Mr Shields asked what prompted the tax debt and Mr Lippits replied: The capital gain made on the sale of shares to assist with the loan of $300,000 to his [sic] friend. He [sic] will get the $300,000 back. It is not relevant to this matter and the loan will be paid back.
At some stage during the meeting Mr Shields said that the defendant said to him: I am employed by Boston Traders at an annual income of $70,000. The defendant then referred Mr Shields to the Boston Traders letter.
When Mr Shields was discussing the interest rates, the defendant said: I am experienced as I have worked in a bank for many years.
Mr Shields said the interview with Mr Lippits and the defendant lasted in excess of an hour. During that time he read aloud the terms of a document entitled "Letter of Approval" to the defendant. He stated the interest rates that applied to the loan. He then read through the terms of the document entitled "Borrowers Understanding of Consequences and Implication of Entering into this Loan" to the defendant. The defendant said that he fully understood the documents and would sign them. He then did so.
Mr Shields said that the following day the defendant and Mr Lippits attended the office of Michael Rogers, solicitor, to obtain independent legal advice and to sign the mortgage documents.
The defendant said that the day after the meeting with Mr Shields he went back to the offices of Licardy & Co. Mr Shields gave him the details of a solicitor who was to provide him with independent legal advice. The defendant says that he now does not recall the details of what the solicitor said in providing the legal advice and does not even recall the solicitor's name. He said the solicitor went through the contract on pages where he had yellow post-it notes, and the solicitor told him that he had legal rights over and above what was contained in the contract. The defendant says that he has a vague recollection that the solicitor made some comments about the interest rate and the general nature and effect of what a mortgage was and what would happen in the event that loan monies were not paid back.
After the conference with Mr Rogers, Mr Shields said that the defendant provided the documents to Mr Shields who asked him if he understood the effect of the documents. The defendant said: Yes I am very pleased. Will you fix up the tax department. Mr Shields said he would give the documents to Richard Licardy to enable him to pay the tax department. Mr Shields did so later that day, and the loan was settled on that day.
On 7 March 2011 the creditor's petition was dismissed in the Federal Magistrates Court.
The defendant said that a week or two after he obtained the loan from the plaintiffs, Mr Lippits telephoned him and told him that the loan from St George had fallen through. When the defendant asked why, Mr Lippits said he did not know. Mr Lippits said that Mr Nicholson told him that it would not be in the defendant's interests for Mr Lippits to contact St George. Mr Lippits told the defendant that Mr Nicholson was trying to get another loan.
Mr Lippits subsequently told the defendant that Mr Nicholson had made attempts to get loans from La Trobe Finance, from a private lender and from RAMS but was unsuccessful. Mr Lippits told the defendant that the RAMS loan did not proceed after Mr Shields was contacted by an officer from RAMS. Again, it should be noted that any information the defendant was receiving was coming from Mr Lippits.

Failure to repay the loan

The loan agreement was due to be repaid on 21 April 2011 but was not repaid.
Correspondence then ensued principally between Mr Shields and Mr Lippits concerning repayment of the loan.
On 27 April 2011 Mr Shields sent an email to Mr Lippits and Mr Nicholson saying that the loan was due for repayment on 20 April 2011. The email asked for advice on "Your intentions" (presumably the defendant's intentions through Mr Lippits), and the progress of the loan from St George (which may have been a request both to Mr Lippits and Mr Nicholson).
Mr Nicholson replied the next morning to the email saying that the loan from St George could not proceed. The email went on to say that Mr Nicholson had since discussed an alternative source of refinance through Adelaide Bank, and the mortgage manager there had expressed interest in the refinance. He said he had forwarded application forms and documentation to the defendant via John Lippits, and had received the signed application form back but not the balance of the necessary documents. He said that he had had no communication with the defendant or Mr Lippits since the week commencing 8 April 2011.
Shortly after receiving that email Mr Shields said that he rang Mr Nicholson and asked him what was happening. Mr Nicholson said: No one will tell me but I think St George did not believe he had the income as indicated so am trying someone else. The letter of employment was a lie and the details of employment that was set out in Glover's loan application was bullshit. In one of the paragraphs of Mr Nicholson's affidavits, Mr Nicholson said he did not believe that he said what Mr Shields asserts in that regard.
On 25 May 2011 a s 57(2)(b) Notice under the Real Property Act 1900 (NSW) was served on the defendant.
On 30 November 2012 a statement of claim was filed by the plaintiffs in the District Court seeking repayment of the principal sum together with interest at the rate of 3% per month. On 30 January 2013 a consent judgment was entered in the District Court with respect to the loan after the defendant signed an acknowledgment of the amount claimed. That consent judgment was ultimately set aside by Gibb DCJ on 25 January 2016 because it was irregularly entered by a person in the Court without the power to do so.
On 8 April 2014 the present proceedings were commenced seeking possession of the Mt Druitt property.
After the defendant's present solicitors commenced to act for him they sent a letter to the plaintiffs' solicitors on 17 February 2015 saying that they acted for the defendant. They said that a sale of the property in Mr Druitt was to go ahead with the purchaser being Mr Lippits. They asked for certain documents to permit the sale of the property to proceed. Those documents included the s 57(2)(b) notice alleged to have been served on the defendant, copies of the initiating process seeking possession of the property, a copy of the writ for possession and: 4. The precise amount required to discharge your client's mortgage in full including all legal costs, fees and charges properly claimable. The letter went on to say: Mr Lippits is a family friend of our client and will be purchasing the property at less than market value.
Not, apparently, having received a reply, the defendant's solicitors wrote again on 19 February 2015 noting that the documents had not been provided. The letter asked if the solicitors would immediately advise as to the precise amount owing to the plaintiffs pursuant to their registered mortgage over the defendant's property. The letter went on to say that their client had no recollection of having been served with any documents pertaining to the proceedings for possession. They said that the defendant was entitled to exercise his equity of redemption at any time before the property was sold, and they were doing everything necessary to assist their client in that regard.
On 20 February 2015 the plaintiffs' solicitors wrote to the defendant's solicitors. The letter relevantly said that the auction was scheduled to take place on 7 March 2015 and that the exact amount owing would be provided in the following few days. The letter said that the indicative payout at that time not including legal and other expenses was as follows: (a) Lower rate: 3% - $294,503.00 (b) Higher rate: 5% - $404,903.00 The letter went on to say that the plaintiffs were entitled to the higher rate.
The plaintiffs had scheduled a mortgagee auction for 7 March 2015. However, on 6 March 2015 the defendant made an ex parte application in the present proceedings and obtained an order restraining the mortgagee from exercising its power of sale.

Evidence at the trial

There was voluminous documentary evidence contained in seven court books, two volumes entitled "Addendum Court Book" and a further bundle of documents tendered by the plaintiffs which became exhibit A.
The plaintiffs called no witnesses.
The defendant had sworn a number of affidavits. Those affidavits were read and he was cross-examined at length. An affidavit was sworn by Mr Lippits on 6 March 2015 and was used, seemingly, as part of the evidence upon which the ex parte injunction was obtained to stop the auction going ahead. However, the affidavit was not read at the present hearing, and the defendant sought to portray Mr Lippits as other than a friend, and someone who could not be considered to be in his camp.
A great deal of what was said by Mr Lippits in that affidavit was reproduced in a medical report of a psychiatrist, Dr Paul Friend, which the defendant sought to tender. I refused the tender of the report on the basis that Mr Lippits' affidavit was not being read, Mr Lippits was not put forward for cross-examination and the conclusions reached by Dr Friend were, on the face of his report, based significantly on Mr Lippits' evidence. That evidence went to a great deal of the history of the matter including what Mr Lippits said took place at and around the time of obtaining the present loan agreement from the plaintiffs. It was not possible to excise from Dr Friend's report the material from Mr Lippits' affidavit because it was so extensively quoted and obviously relied upon by Dr Friend in reaching his conclusions. Where there are real issues about what took place not only at the meeting with Mr Shields but in relation to Mr Nicholson, I considered that it was unfair to the plaintiffs, Mr Nicholson and Mr Shields for Mr Lippits' hearsay evidence to come before the Court in the form of Dr Friend's report.
There can be no doubt that Mr Lippits is a central figure, if not the central figure, in the present matter. The defendant's case attributing legal liability for what occurred not only to the plaintiffs but also to Mr Shields and Mr Nicholson overlooks the significant involvement of Mr Lippits in the events. Strong inferences are available that concern Mr Lippits, and I will come to those later in this judgment.
The plaintiffs also read affidavits of Peter Valentino, a mortgage broker. Mr Valentino was cross-examined by Mr Lloyd of counsel for Mr Nicholson. The plaintiffs also relied on a valuation report annexed to an affidavit of Adrian Staltari. The valuation was of the defendant's property as at 2011. Mr Staltari was not required for cross-examination.
As mentioned earlier, although Mr Nicholson swore a number of affidavits, he did not read those affidavits. The defendant, in his case in reply, read a number of paragraphs of those affidavits.
Finally, Mr Shields, who appeared for himself, read an affidavit which he had sworn to assist the plaintiffs as part of their case and their defence of the cross-claim made by the defendant. This affidavit was not read by the plaintiffs in their case; rather, Mr Shields relied on it in his own defence of the cross-claim. Mr Shields was cross-examined at length by Mr Newell for the defendant.
The credit of both the defendant and Mr Shields is an important issue in assisting in the determination of the present matter.

The defendant's credit

The defendant was articulate and obviously intelligent. However, I found him to be a most unsatisfactory witness. I highlight the following aspects of his evidence.
First and most significant is the evidence which relates to the deception which the defendant and Mr Lippits practised on Mr Shields and, thereby, the plaintiffs, when they met with Mr Shields for the defendant to enter into the loan agreement. This was first mentioned by the defendant in his affidavit sworn 12 December 2018, an affidavit sworn to respond to one of Mr Nicholson's affidavits and also to the affidavit of Mr Shields which had been sworn as long ago as 28 June 2015. Later, I shall deal separately with the fact that this information first emerged in this affidavit.
The defendant was responding to paragraph 3 of Mr Shields' affidavit where Mr Shields detailed the first conversation he had with Mr Nicholson in which Mr Nicholson said he had an urgent application to obtain finance for the defendant. In that conversation, Mr Shields said he asked Mr Nicholson (inter alia) for proof of the borrower's income.
In reply the defendant said this in his affidavit of 12 December 2018: (b) At no stage did Nicholson ask me for a letter of employment. If Shields asked Nicholson for a letter of employment that information was not conveyed to me. The first that I became aware of a letter of employment was when Lippits and I were on our way in the car to Shields' office. When we were about 5 mins away from Shields' office, Lippits said words to the following effect: "Nicholson has told me to present this letter to the person we are meeting today". (c) Lippits then handed me a copy of a letter on a Boston Traders' letterhead. I looked at the letter and said words to the following effect: "Who are Boston Traders?" (d) Lippits said words to the following effect: "It's a company I had". (e) I said words to the following effect: "I'm not employed by you". (f) Lippits said words to the following effect: "Oh come on Joe, we have done business together". (g) I said words to the following effect: "Why do we need this?" (h) Lippits said words to the following effect: "Nicholson told me that we need it, that's how low docs loans work". (i) At that time, I had no experience with low doc loans and did not know what to make of what Lippits was saying to me. Although I have [sic] the opportunity to read the Boston Traders' letter when Lippits showed it to me, I did not have time to think about it or the full implications of the letter. I said words to the following effect to Lippits: "Why did you write this letter the way its written?" (j) Lippits said words to the following effect: "Nicholson told me how to construct it". (k) Despite the assurance that Lippits gave me I remained uncomfortable and upset and still remain uncomfortable and upset about the letter of employment from Boston Traders that Lippits prepared. I felt that I had been ambushed about this matter when Lippits told me about it and I still feel ambushed. 9. I refer to paragraph 16 of the Shields Affidavit and say that John Lippits did not say words to the affect [sic]; I am a family man and employ Joe in my business". At that time John Lippits was a divorced man and had no children. He continues to be single and without children. 10. My recollection is that John Lippits said words to the following effect: "I am a family friend and Joe is a consultant to my business".
In cross-examination, the defendant agreed that he knew that the information in the Boston Traders letter would be relied upon by Mr Shields in forming a view as to whether or not to extend a loan to him and that he was willing to mislead Mr Shields at that time to save his house. He gave this evidence in cross-examination to Mr Follino-Gallo for the plaintiffs (at T130-131): Q. And that document represented that you were earning $70,000 per annum, yes? A. Yes. Q. And that you were employed by Boston Traders, that's so, isn't it? A. Yes. Q. And you saw that document being handed to Mr Shields by Mr Lippits, that's correct, isn't it? A. Yes. Q. And at no stage did you say to Mr Shields, "The contents of that document is inaccurate"? A. No. Q. So, you were willing to misrepresent your income to Mr Shields at the time of that meeting, weren't you? A. Yes. Q. Because you knew that that document would be relied upon by Mr Shields in forming a view as to whether or not to extend the loan to you? A. Yes. Q. And you were willing to mislead Mr Shields because you wanted to save your house, that's so, isn't it? A. Yes, but can I answer that? Q. You were willing to mislead Mr Shields so that you could obtain the loan-- A. Yes, because as far as we knew we were getting a loan off Nicholson. It was going to be short term matter-- Q. So the fact that you were misleading Mr Shields was really in your mind of no moment, is that right? A. It was something that played upon my mind. I wasn't happy about it, but-- Q. But nevertheless you were willing to do it? A. Well, it was sprung upon me, yes.
The defendant gave this evidence in cross-examination by Lloyd for Mr Nicholson (at T159-161): Q. You see, you went to the meeting on your account with Mr Shields and you sat there while Mr Lippits made a statement to Mr Shields that you were a consultant to his business. A. Right. Q. Correct? A. (No verbal reply) Q. That's right, isn't it? A. Right. Q. Are you agreeing with me? A. Yes. Q. You knew that that statement made by Lippits to the lenders in your presence was false, didn't you? A. Yes. Q. And you knew or believed that that statement was being made to try and trick them into lending you money? A. Yes. Q. You knew that the purpose was to deceive them so that they believed something which was false to get the loan funds out of them, that's right, isn't it? A. Yes. Q. You sat there while that statement was made in your presence and you did nothing to correct it, that's right, isn't it? A. Right. … Q. You said nothing about the falsity of the information in the letter? A. No. Q. You knew that those things were highly material or believed that those things were highly material to the lenders? A. Yes. Q. And you knew that if that letter was handed over there was a high chance they'd be tricked or misled into parting with money? A. Yes. Q. You participated in them being misled in that way, true? A. Yes. Q. You did that for your own financial advantage so that you could trick them into giving you money, that's right, isn't it? A. Yes. Q. You did that because you were desperate to get the funds, knowing that if you didn't have the money by the following day to pay the ATO there'd be a sequestration order. A. Yes. Q. That was what was happening, wasn't it? A. (No verbal reply) Q. I think you said "yes"? A. I did. Q. So you engaged in this conduct to trick them out of the money so as to ensure that you could keep your house, that's right, isn't it? A. Yes. Q. And you did that because at this time you were desperate to retain that house? A. Yes. Q. You could not imagine any scenario that you could accept where you wouldn't be able to keep your house, true? A. Yes.
The defendant also gave this evidence (at T164): Q. You knew that in fact what had occurred was that you and Lippits had actively set out to and did mislead Mr Shields about your employment and your earnings, true? A. Yes.
Secondly, the defendant maintained a lie concerning his knowledge of Boston Traders and that letter up until he swore his affidavit of 12 December 2018.
The defendant's first affidavit of 6 March 2015 was filed in relation to his application for an injunction to prevent the auction going ahead. It omits any reference to the conversation the defendant had with Mr Lippits in the car going to Mr Shields' office and it omits any reference to the conversations about who Mr Lippits was or any matter of the defendant's employment. That is one of three significant matters not disclosed by the defendant on an ex parte application.
In his affidavit of 29 July 2015 the defendant first responded to the affidavit of Mr Shields sworn 28 June 2015. In that affidavit the defendant relevantly says this: 9. At not (sic) stage did I authorise Nicholson to make a representation to Shields or any other prospective lender that I was earning $70,000 a year. … 11. I note the letter purporting to be from Boston Traders Pty Ltd at page 22 of exhibit "RS1". I do not know who Boston Traders is and I have no recollection of ever hearing the name Boston Traders Pty Ltd. The first knowledge I have had of Boston Traders Pty Ltd is when I saw page 22 of exhibit "RS1".
In Mr Shields affidavit the following appears: 66. … Mr Glover expressly represented to me at his interview on 20 February 2011 that he was gainfully employed. Mr Glover said words to the following effect: Glover: I am employed by Boston Traders at an annual income of $70,000 a year. 67. Mr Glover then referred me to a letter drafted under the hand of Mr Lippits to verify that he was earning $70,000 per annum in that employment. If I had been truthfully advised by Mr Glover in February 2011 that he had been unemployed since 1994 I would not have submitted the loan to any borrower.
In response to those paragraphs in his affidavit of 29 July 2015 the defendant said this: 42. As to the allegation contained in paragraph 66 of Rodney Shields [sic] affidavit, I expressly deny that I said words to the following effect: "attributed to me". At no stage did I represent to Shields or anyone else that I was employed by Boston Traders Pty Ltd and that I gainfully employed [sic] earning an annual income of $70,000.00 a year. 43. The first I heard of a company called Boston Traders Pty Ltd is when I saw the documents referring to Boston Traders Pty Ltd in "RS1" [the exhibit top Mr Shields' affidavit] at which time I asked John Lippits about Boston Traders and Lippits said words to the following effect: 44. "Oh that was a company that I was going to use to buy and sell boats, it never got off the ground, it never traded and never did anything" 45. As to allegations of fact contained in paragraph 67 of Rodney Shields [sic] affidavit, I deny the allegations. At no stage did I refer Shields to the letter from Lippits, I know nothing about the letter. I have no recollection of ever being asked whether I was employed or not or ever advising Shields that I was employed.
In his affidavit of 30 April 2018 the defendant said at paragraph 165: At paragraph 15 of the Nicholson affidavit [sworn 29 October 2015] Nicholson asserts that I said words to the following effect: "I have worked with Mr Lippits for some time now". I say that I did not make any such assertion. Although my recollection of the specifics of the meeting are not good I say that I would recall whether or not I had made such an assertion because it is not true.
Later in that affidavit the defendant records what happened immediately and during the meeting with Mr Shields. He makes no mention of the conversation in the car with Mr Lippits on the way to Mr Shields' office about the Boston Traders letter. The defendant not only failed to set out the conversation concerning who Mr Lippits was and about the defendant's employment with him, he positively said at paragraph 180: I was not asked any questions about whether I was employed or what kind of work (if any) I did.
The defendant also said this at paragraph 190: (a) Shields did not ask either myself or John (who did most of the talking and to whom most of the questions were directed) for any documentation which demonstrated my earnings. In particular, Shields did not ask for a periodic payslip or group certificate evidencing some employment. (b) Shields did not ask either John or myself what Boston Traders did or what its business was. (c) Shields did not ask what a trader is in the context of the Boston Traders' letter which is annexed to the purported St George loan application. … (d) Shields did not ask either John or myself about my job (if any) or what I did in that job.
The defendant also said at paragraph 191: I have had my attention drawn to an affidavit sworn by Rodney Shields in these proceedings on 28 June 2015 ("the Shields affidavit"). Shields asserts at paragraph 16 of the Shields affidavit that John said words to the effect of: "I'm a family friend and employ Joe in my business". I say that no such words were said at the meeting at the office of Licardy & Co. John did not assert that I was his employee. I say that I would remember if such a thing had been said because I was conscious that such a statement was not true.
The defendant was cross-examined about paragraph 11 of his affidavit of 29 July 2015 (at [108] above) and gave this evidence (T 134ff): Q. Paragraph 11 you say you note the letter purporting to be from Boston Traders at-- A. Yeah. Q. --page 22 of Mr Shields' exhibit. "I do not know who Boston Traders is and have no recollection of ever hearing the name Boston Traders." Both parts of that sentence, to your knowledge, when you affirmed this affidavit, were false, weren't they? A. I think I'm just - I am - I knew that that letter was not the one that I'd seen handed over. Q. You say in paragraph 11 you do not know who Boston Traders is and have no recollection of ever hearing the name Boston Traders. Both parts of that statement in this paragraph of your affidavit were false to your knowledge when you affirmed it, that's right, isn't it? A. I suppose I better say "yes" there. I-- Q. Well, don't say "yes" if you don't agree. Answer the question, please. You knew that what you were saying in that sentence was false at the time you affirmed the affidavit? A. Yes, I knew it wasn't correct. Q. The next sentence, "The first knowledge I have had of Boston Traders is when I saw page 22 of exhibit RS-1." That statement in paragraph 11 was false to your knowledge when you affirmed the affidavit, wasn't it? A. Yes. Q. Have a look at paragraph 43, please. A. Yep. Q. You say, there, the first you heard of the company, Boston Traders, is when you saw the documents referring to it, at which time you asked Lippits. Do you see that? A. Yep. Q. That statement about the first time you had heard of the company was false to your knowledge when you affirmed the affidavit, true? A. Yes.
In cross-examination by Mr Folino-Gallo for the plaintiffs, after he put to the defendant the statements in the affidavits which I have set out above, the following exchanges occurred: Q. And you, at no stage did you, prior to 12 December 2018, did you seek to correct this inaccurate statement that was contained in two previous affidavits, did you? A. Yes. Q. And it wasn't the case, was it, that you'd simply forgotten about the existence of Boston Traders, that's so, isn't it? A. No, I'd never forgotten that. Q. Yes. Now-- HIS HONOUR Q. Why did you say you hadn't heard of Boston Traders if you had? A. I don't think I, I read the affidavits too closely. FOLINO GALLO Q. Well, Mr Shields, I asked you at the outset of my cross examination whether you had - I withdraw that. I apologise. Mr Glover, I asked you at the outset of this cross examination whether before swearing these affidavits you satisfied yourself as to their accuracy. Is the position now that that was not so? A. I, I, I read them as much as I could. Often I found them confusing. They were just referring to other, other, what other people had said and so forth. Q. So, are you telling the Court that you were confused by your own affidavit evidence, is that the position? A. No. At times there was stuff coming through and it would say that, you know, somebody had said, said something or rather in, in, what have you, in another affidavit or something. (emphasis added)
If the defendant is to be believed when he said that he had never forgotten about Boston Traders, the passages set out in his affidavits prior to 12 December 2018 were calculated and deliberate lies. Although in paragraph 27 of his affidavit of 12 December 2018 the defendant said that he was genuinely mistaken about not seeing a copy of the Boston Traders letter, I do not believe him in that regard.
The position was made worse by the defendant in cross-examination by Mr Lloyd for Mr Nicholson. The defendant gave the following evidence (T177ff): Q. You see, you know that in addition to your earlier evidence to the effect you hadn't seen a copy of the Boston Traders letter until Mr Shields' affidavit, that you also had earlier said that you'd never heard of Boston Traders? A. Yes, that's right. At, at the time - it didn't ring any bells with me at the time that I saw that. Q. This paragraph 27 doesn't seek to correct or withdraw anything that you'd said on any earlier occasion about the question of whether you had ever heard of Boston Traders before Shields' affidavit, does it? A. Sorry, could you repeat that? Q. You only deal in paragraph 27 with correcting what you say was a genuine and honest mistake about when you first saw the Boston Traders letter, true? A. Yes. Q. You don't deal with your earlier evidence about when you first heard of Boston Traders, do you? A. No. Q. And you know that you, on an earlier-- A. Because it - anyway, at the time it didn't, it didn't ring any bells with me. Q. On an earlier occasion in an affidavit you had said that you didn't know who Boston Traders were and never heard of them until you saw Shields affidavit? A. Yes, that's right and that was that it didn't ring - I didn't - it didn't ring any bells with me. … Q. You said yesterday to his Honour that when you gave the earlier evidence that you hadn't heard of Boston Traders until you saw Mr Shields' affidavit that you knew that what you were saying was false? A. That was mistaken. Q. False? A. I, I didn't - no, it was mistaken. It, it just didn't ring any bells with me. Q. You knew, I suggest to you, that it was untruthful to say that? A. It didn't ring any bells with me at the time. HIS HONOUR Q. In fairness to you. A. Yes. Q. I should just remind you of some evidence you gave yesterday. A. Right. Q. Mr Folino-Gallo said to you-- A. Yeah. Q. --at transcript 129, line 39: "Q. And it wasn't the case, was it, that you'd simply forgotten about the existence of Boston Traders, that's so, isn't it? A. No, I'd never forgotten that." But-- A. Well, I'd, I'd never forgotten-- Q. --you now seem to be saying that it didn't-- A. I'd, I'd-- Q. --ring any bells? A. --never forgotten the letter, right? I have never forgotten the letter but I'd - but obviously forgotten the name Boston Traders at the time when I first swore those affidavits. (emphasis added)
The lies were made worse because the justification given on two occasions for denying that there had been any suggestion he worked for Boston Traders was that it was not true. That was a calculated attempt to provide corroboration for the lie that nothing was ever said about it. Further, in the portion of his affidavit set out at [108] above, he attempted to blame Mr Nicholson for his own lie.
Thirdly, in the affidavit the defendant swore and read at the ex parte hearing on 6 March 2015 to obtain a stay on the writ of possession, the defendant omitted any information in that affidavit about having been provided with independent legal advice by a solicitor Michael Rogers. In addition, the defendant said that he did not recall being given the opportunity to read the documents he signed nor were they explained to him. This was the second significant non-disclosure on the ex parte application.
In his affidavit of 29 July 2015 he said that recalled seeing an independent solicitor for advice. I have summarised at [73] above the defendant's evidence in that affidavit of what transpired at that meeting.
The failure to make any mention of the independent advice he received is a matter which detrimentally affects the defendant's credit, because a full and frank account was not given by him on an ex parte application to the judge who heard the urgent injunction application.
Fourthly, in the affidavit that he swore on the ex parte application to obtain a stay of the writ of possession, the defendant said that he did not know precisely what had been going on during the previous four years with his loan and "I had not previously been served with any documents". In fact, as the defendant acknowledged in cross-examination, he had been served with a District Court statement of claim which claimed what was then the amount owing under the loan together with interest thereon. Indeed, the defendant attended at the District Court and signed an acknowledgement of the debt which led to the judgment of the District Court being entered. Although that judgment was ultimately set aside (as I have said) that was only because of an irregularity within the District Court and not because the acknowledgement by the defendant had not been executed by him.
This was the third serious failure to give a full and frank account of matters on an ex parte application. It is also significant that the application, although made in existing proceedings, was made without the plaintiffs or their solicitors being present. It is not difficult to infer that their absence was the reason for the non-disclosures which could otherwise have readily been answered.
Had the Court been aware that the defendant had been given independent legal advice, had signed a court document acknowledging the debt, and had misled Mr Shields about his employment, there is a very strong chance that the stay orders would not have been made. The significance for present purposes is that these three material failures amount to dishonesty by silence.
Fifthly, the defendant claimed that he was only aware of an interest rate of 3% per month. He was not aware of a higher rate of interest that would be charged if he defaulted on the loan. (I am not dealing here with the issue of who of the defendant and Mr Shields is to be believed about whether he was told of the higher rate.)
The defendant worked at the Commonwealth Bank for 26 years and reached the position of assistant relief manager. When he denied being aware that there was a default rate of interest the following exchange occurred (at T115): HIS HONOUR Q. Did you not know from your experience working within the bank that all mortgages have two rates in them, a higher rate for a default and a lower rate for payment on time? A. Not the ones I, I dealt with and I couldn't say I, I actually read the documents. Q. You didn't know that mortgages contained what's called a default rate? A. No.
The defendant said that he was an assistant relief manager for more than ten years but that he did most of his loans work before he became an assistant manager. If, as he said, he was involved with loans from the Bank, I do not believe his evidence that he was not aware that there would be a default rate of interest in a mortgage, nor his evidence that the mortgages he dealt with at the Bank did not have two rates. It is utterly implausible.
Finally, in paragraph 10 of his affidavit of his affidavit of 29 July 2015, the defendant said that until he read Mr Shields' affidavit he had not seen any of the documents exhibited to it pages 1 to 22 of that affidavit. He gave this evidence in cross-examination (T 134): Q. For the purposes of you affirming this affidavit of yours of 29 July you had read Mr Shields' affidavit and the exhibited documents carefully, hadn't you? A. I had read them. Q. You'd read them carefully, hadn't you? A. (No verbal reply) Q. You need to give a verbal response. A. Yes. Q. And in response to what Mr Shields had said about the Boston Traders letter you say in paragraph 10 that you hadn't seen any of the pages until you'd received Mr Shields' affidavit, that's right, isn't it? That's what you say? A. Yeah. Q. At the time that you affirmed this affidavit with that statement in paragraph 10, you knew that what was in that paragraph was false, didn't you? A. Yes, I, I would have known, yes. Q. When you say you would have known, you knew that what was in paragraph 10 of this affidavit was false, that's right, isn't it? A. Yeah, I - yes, yes, if I read it, yes.
That is a further instance of the defendant knowingly swearing to matters in an affidavit that he knew were false.
All of these matters lead me to the conclusion that I cannot accept the defendant as a truthful witness. Except for matters against his interest and one matter to which I will come, I cannot rely upon his evidence where it is disputed, unless it is otherwise corroborated.

Mr Shields' credit

The defendant submitted that Mr Shields should not be believed unless his evidence was corroborated by documents. He submitted that Mr Shields gave an enormous amount of improbable evidence which was not believable. He submitted that Mr Shields claimed to be able to remember some particular matters but not many other matters. In that regard it was also submitted that there was a pattern to Mr Shields' inability to remember things. It was said that, whenever uncomfortable questions were asked, Mr Shields claimed an inability to remember. He submitted that Mr Shields was an advocate to establish that the whole matter turned on the false Boston Traders letter.
There is no doubt that Mr Shields was a difficult and irritating witness. He demonstrated an inability on a large number of occasions to focus on the questions that were being put to him, preferring instead to answer by emphasising his view of the matters in question. That often involved answers being given which were repetitive of earlier answers with that aim in mind.
Nevertheless, I do not consider that Mr Shields was dishonest. I do not think that he feigned an inability to remember things. Nor do I think he was doing other than endeavouring to give an accurate account, to the best of his ability, of the events in question. He was prepared to admit when he had overlooked things or where he had made mistakes in matters that appeared in his affidavit. Those admitted shortcomings mean, however, that I must scrutinise his evidence carefully in order to see whether it is reliable even though it was honestly believed.
In my opinion, much of the way Mr Shields answered questions could be traced to his belief that he had been seriously misled by the defendant when the defendant applied for the loan; to the significant efforts he (Mr Shields) made and, as he saw it, the plaintiffs made to try to avoid putting the defendant out of his house, notwithstanding that the defendant had not repaid the loan or, indeed, any monies owing under that loan in the years that passed; and to the resentment he felt at being labelled a conspirator with the plaintiffs and Mr Nicholson. In that regard, I note and accept Mr Shields' evidence that he was not to receive, and did not receive, any fee for having organised the loan until such time as the loan was repaid.
I do not consider that Mr Shields was an advocate for the plaintiffs (terminology normally used in relation to expert witnesses), but I accept that Mr Shields was keen to put forward his view of the facts. He was not an expert but a party being sued, and he was conscious that his actions at the time and after the loan was made were being used by the defendant to support the defendant's claim against the plaintiffs. He cannot be criticised for trying to persuade the Court of his view of the facts, particularly where he was acting for himself.
Further, contrary to the submissions of the defendant's solicitor, I consider that the Boston Traders letter was a significant matter, because I accept Mr Shields' evidence that, if its falsity had been known, the loan from the plaintiffs would not have proceeded.

The defendant's claim

It is apparent from the case sought to be made by the defendant against the various cross-defendants that the St George Bank loan is a central matter. A consideration of that matter involves the person who is at the centre of the events, namely, John Lippits. It was clear that, by the time of the trial, the defendant was anxious to distance himself from Mr Lippits. As I have already mentioned, Mr Lippits swore an affidavit for the plaintiffs in these proceedings. It seems likely that Mr Lippits was to be a witness for the defendant because his affidavit was amongst the material sent to Dr Friend, and provides most of the basis for Dr Friend's opinion of the defendant.
It is also apparent that at some stage which is not identified, either there was a falling out between the defendant and Mr Lippits or, for some other reason, a decision was made not to rely on Mr Lippits. I note in that regard that the defendant has made no claim against Mr Lippits and, seemingly, does not intend to do so. This is a matter to which I will return in due course.
It seems very clear that for a lengthy period of time the defendant and Mr Lippits were close friends. It is difficult, otherwise, to explain how the defendant could have gone on lending money to Mr Lippits to the extent of more than $1,000,000 when, apart from one small amount, Mr Lippits had never repaid the loaned monies. The defendant and Mr Lippits clearly remained close even though Mr Lippits continued to let the defendant down, and did so specifically in relation to the amount of Capital Gains Tax he was required to pay, which ultimately led to the judgment against him and the bankruptcy notice. The evidence suggests also that Mr Lippits did not even adhere to the instalment payment schedule that was agreed with the ATO after the petition was filed.
It is apparent that the defendant continued to trust Mr Lippits to try to get the defendant out of the problems which had been brought about by Mr Lippits. The evidence discloses that Mr Lippits was taking steps in relation to the creditor's petition and in relation to obtaining a loan some time before the defendant met Mr Nicholson. The evidence discloses that the defendant knew that Mr Lippits had engaged Mr Nicholson (and probably Mr Prestia) before the defendant met Mr Nicholson. The evidence discloses that the defendant was content for Mr Nicholson and others to communicate with Mr Lippits as his agent. He expressly confirmed to Mr Nicholson what Mr Lippits had told Mr Nicholson, namely, that communication could be made with him through Mr Lippits.
The one matter about which I am prepared to accept the defendant's uncorroborated evidence is that the signature on the loan application to St George Bank is not his signature. Although Mr Lippits has not given evidence and has not been given the chance to explain his involvement in the matters with which the proceedings are concerned, I am comfortably satisfied that it was Mr Lippits who signed the defendant's name on the application form and provided the information to Mr Nicholson that is contained in it. There is some likelihood that Mr Lippits felt, when he did so, that he was doing it to assist the defendant when he, Mr Lippits, knew that the only way bankruptcy could be avoided for the defendant was for him to able to obtain the loan to pay out the ATO.
Although the present legal advisors for the defendant put forward a case to suggest that Mr Nicholson was behind the fake loan application and approval from St George, as will be seen later, I do not accept that there is any evidence to suggest that that is so. It is difficult to see what benefit Mr Nicholson could think that he would derive from engaging in such behaviour. The submission made by the defendant's solicitor, Mr Newell, during the hearing that Mr Nicholson was doing this to take "a slice of the equity of the [defendant's] house", or to take "a secret commission derived from the equity in the property" was improperly made because not only was it made without any evidence to support it, it is impossible to see how Mr Nicholson would ever be able to take any equity in the defendant's property. Since the plaintiffs through Mr Shields were conducting the auction they were, presumably, the only party who could pay Mr Nicholson a secret commission. It was never put to Mr Shields that any commission or fee was to be paid or was paid to Mr Nicholson for any reason by the plaintiffs.
Although under the finance broking deed the defendant was required to pay a non-refundable application fee of $2,500, Mr Nicholson would not otherwise be paid the remaining fees referred to in clause 3 of the deed until there was a final and unconditional letter of offer from the financial institution. It is apparent from what Mr Newell said in his opening submissions that he entirely overlooked the terms of the broking deed when he asserted that Mr Nicholson was doing what he did to get some benefit from the proceeds of the sale of the house. In that regard Mr Newell said (T20.47): But he's not getting paid, that's the point. He must be getting paid from somewhere else.
The strong likelihood is that the information contained in the St George application was largely or entirely provided to Mr Nicholson by Mr Lippits. The likelihood is that Mr Nicholson either provided the completed application to Mr Lippits for him to obtain the signature of the defendant, or provided it to him in advance of its completion to obtain the defendant's signature. Instead, Mr Lippits signed on behalf of the defendant, possibly because at that stage he did not want the defendant to see the falsehoods that were contained in it.
Mr Nicholson was undoubtedly careless in not seeing that some of the information given to him could not have been correct such as the answers to the questions about whether the defendant had ever had legal action taken against him or a judgment entered, but there is no evidence that those errors had anything to do with the failure of the loan to go ahead. Indeed, on the defendant's case that Mr Nicholson was trying to force the defendant into the loan from the plaintiffs, truthful answers to those questions would be more likely to achieve that result, because St George would have refused the application at that stage.

(a) The defendant's claim against the plaintiffs

Subject to one matter, the claim by the plaintiffs is a straightforward one for repayment of the loan in accordance with its terms and for possession of the property because there was a failure to comply with the terms. By reason of the matters raised in the cross-claim it must, however, be determined whether the loan agreement should be set aside for unconscionability, or under the Contracts Review Act 1980 (NSW), or because of the fraud and conspiracy allegedly engaged in by the plaintiffs and Mr Shields. In the course of determining that it will be necessary to discuss whether the plaintiffs are entitled to make a claim for the amount owing on the basis of the default rate of interest. This is because, when the plaintiffs entered judgment in the District Court, they did so for the lower rate of interest, and also because Mr Shields was keen to emphasise in his evidence that what the plaintiffs only ever intended to claim was the lower rate of interest.
The particulars relied upon to suggest unconscionability of the loan agreement focused particularly on the letter from Boston Traders and the fact that no payslips or group certificates were provided. The particulars also alleged that there was undue influence by Mr Lippits over the defendant to the knowledge of the plaintiffs and Mr Shields. The particulars also asserted that the loan agreement was improvident because there was no effective exit strategy from the loan which was a matter that ought to have been known to Mr Shields. Finally it was asserted that the defendant did not receive genuine or adequate independent advice in relation to the agreement.

(a) Proof of income

The defendant asserts that he should have been asked for proof of his income by a group certificate or payslips. He said that such evidence was never requested by Mr Shields. The implication of this complaint is that if those matters had been asked for, the loan would not have gone ahead when they were not able to be produced.
Mr Shields gave evidence that he specifically asked for group certificates at the meeting and was told that they were not available by Mr Lippits. I accept his evidence in that regard. It is entirely consistent with the proffering of the false Boston Traders letter. In any event, Mr Lippits' statement that there were no group certificates or payslips was actually true because the defendant was not employed by Boston Traders.
The position here was not an applicant for a loan turning up by himself with a letter purporting to be from an employer concerning his employment. In the present case the person purporting to be the applicant's employer accompanied him to the meeting and proffered a letter signed by him that stated the applicant was so employed. In addition, as I have said, he told Mr Shields that no group certificates or payslips were available.
The defendant submitted that Mr Lippits could not be considered to be an ordinary employer because he was, in effect, the applicant for the loan. It was Mr Lippits, it was submitted, who was responsible for the loan being sought. However, there is not a shred of evidence to suggest that Mr Shields had any idea of the true relationship between the defendant and Mr Lippits. The defendant gave no evidence that the true position was disclosed. Indeed, the deceit that was practised on Mr Shields was designed to cloak the true position, both that the defendant was in the mess he was because of Mr Lippits, and that the defendant was not employed at all, let alone by Mr Lippits' company. It will be recalled that Mr Shields asked Mr Lippits how he fitted in to the picture, and was not told the truth.
It is difficult in those circumstances to understand how there could be any criticism of Mr Shields for not accepting the letter as proof of employment. There was nothing improbable about it. Not only was the true relationship between Mr Lippits and the defendant not disclosed, but as the defendant said, the letter was designed to mislead Mr Shields and the plaintiffs so that a loan would be obtained in order for him not to lose his house. In those circumstances, the defendant can scarcely complain that Mr Shields was in fact deceived. No unconscionability arises from the absence of other proof about the defendant's employment.

(b) Undue influence of Mr Lippits

No evidence was led on behalf of the defendant of any undue influence by Mr Lippits. The evidence was only that the defendant was prepared to go on lending money to Mr Lippits notwithstanding that Mr Lippits constantly failed to repay it. Any inference of undue influence is not available from those matters. Nothing in the evidence suggests that Mr Lippits forced or persuaded the defendant to seek a loan through Mr Nicholson or Mr Shields. It was the defendant who was desperate to obtain a loan, and Mr Lippits was trying to achieve that, presumably to avoid having to repay to the defendant what he had borrowed and what he had promised to pay, namely, the amount of the Capital Gains Tax.
The defendant gave no evidence of being overborne or even pressured by Mr Lippits. For reasons known only to himself, and perhaps to Mr Lippits, the defendant was content for Mr Lippits to take the initiative in trying to obtain a loan. If it is the case that Mr Lippits acted inappropriately in that regard, that is no evidence of undue influence.
More significantly, there was no evidence at all that Mr Shields or the plaintiffs knew anything about the true relationship between the defendant and Mr Lippits nor that the predicament that the defendant was in at that time had been brought about by Mr Lippits. There is no basis for the assertion that the plaintiffs knew that the defendant's judgment and will were overborne by the circumstances in which he found himself. Mr Lippits, on what Mr Shields was told, was a family friend, and employed the defendant.
The only evidence of a psychiatric condition of the defendant came from the defendant himself. He said that he was first diagnosed as suffering from depression in the late 1960s. At the time he swore his affidavit of 6 March 2015 he said he was not taking any prescribed medication. At the time he swore his affidavit of 30 April 2018 he said he was taking Prozac.
Even if that evidence is accepted, there was certainly no evidence that Mr Shields or the plaintiffs had any idea about those matters. Whilst I accept that matters which are not known to the other party to a contract can nevertheless bring about a situation where the contract is unjust, there was no evidence in the present case that any depression suffered by the defendant, particularly if it was being treated, was in any way related to the situation in which he found himself before taking out the loan, or to the taking out of the loan in an improvident way itself.

In my opinion the evidence comfortably establishes that the defendant received appropriate advice as well as independent advice about the transaction he was entering into. I accept the evidence of Mr Shields that he read the terms of the document entitled "Letter of Approval" to the defendant and stated the interest rates that applied to the loan. I accept also that Mr Shields read through the terms of the document entitled "Borrower's Understanding of Consequences and Implications of Entering into this Loan".
The Letter of Approval was a three page document addressed to the defendant and signed by Mr Shields. In its heading it identified the amount of the loan as being $115,000 with security being a first mortgage over the Mt Druitt property. The term of the loan was for two months. Two rates of interest were identified being 3% and 5%, and each was quantified for the two month period. The interest was said to be payable in advance. The 5% interest reduced to 3% per month if payment was made within seven days of the due date.
The method of repayment was said to be a new first mortgage loan from St George Bank. Certain requirements were made relating to identification of the borrower, insurance and a land tax certificate. The last section of the letter gave a right to the plaintiffs to withdraw the offer if at any time prior to settlement the plaintiff or its solicitors became aware of any non-disclosure or any circumstance which in their opinion was relevant to the approval of the loan, or became aware that any information provided by the mortgagor was false. It also gave a right to withdraw if the plaintiffs or its solicitors were not satisfied with any documents or information provided in respect of the mortgagor. The letter went on to set out the fees in relation to the loan.
The second document, the "Borrower's Understanding" was a two page letter which was signed on each page by the defendant. It provided: I/we agree to be bound by all of the terms of this Loan Approval and the security documents. By signing this approval letter I/we acknowledge and accept the following: 1. The repayment of the Loan and the payment of interest is both a moral and legal obligation. 2. The Loan provided by the lender is/are an important portion of the lender's savings and a failure by me/us to repay the Loan and interest will have a serious effect on the lender's financial position. 3. I/We are appreciative and thankful that the lender has at my/our request provided me with the Loan in our present financial predicament. 4. I/We have provided security for the loan and understand that if I/we default in the repayment of Loan and interest the consequence are that the security property has to be sold to comply with my/our moral and legal obligations.
In addition to the matters explained by Mr Shields at the first meeting, the defendant met with a solicitor, Michael Rogers, on the following day. The defendant agrees that he had such a meeting, despite not disclosing it in his first affidavit. He claims that an adequate explanation was not given to him by Mr Rogers, but agrees that Mr Rogers had post-it notes on various pages which he explained. He agrees that Mr Rogers told him that he had more legal rights than the contract provided.
In any event, the defendant signed a number of documents in Mr Rogers' presence including an "Authority and Undertaking" addressed to the plaintiffs to pay the advance and to complete the security documents, an Epitome of Mortgage which clearly identified the two rates of interest amongst other things, a statutory declaration about the land and a Mortgagor's acknowledgment which relevantly said this: I, the undersigned, hereby acknowledge and warrant that: 1. I have received copies of the Security Documents listed in the Schedule below. 2. I have been given the opportunity to read the Security Documents. 3. The Security Documents have been fully explained to me by my solicitor. I understand the true purport, nature and effect of the Security Documents and my obligations thereunder. 4. I understand that the mortgagees are entitled to rely on this signed mortgagor's acknowledgment. 5. This acknowledgment was read and signed by me BEFORE SIGNING the Security Documents requiring signature by me.
Other documents signed by the defendant at the time included a cheque direction, a letter concerning the memorandum of fees and disbursements of the lenders' solicitors, a Declaration by Borrower and an Acknowledgment of Legal Advice by Proposed Borrower.
The Declaration by Borrower was in the form of a statutory declaration and it said (inter alia): 2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1. 3. After receiving that advice I have freely and voluntarily signed the following documents: memorandum of mortgage.
The Acknowledgment of Legal Advice by Proposed Borrower was a document signed by the defendant which relevantly said this: I have instructed Mr M Rogers (my solicitor) to give me legal advice concerning the following loan and security documents: (i) Loan agreement between Kaji Aust Pty Ltd and W Webster (the lender) and John B Glover (the borrower). (ii) Mortgage over property situated at 15 Vincent Street, Mt Druitt. (iii) Memorandum registered number AA392381. … (3) The advice given to me by my solicitor included that: … (b) If I fail to make any payment on time, the lender can charge a higher rate of interest, and the lender's costs of rectifying that failure; (c) If I fail to comply with any of the terms and conditions of the loan documents including the obligations to pay principal or interest: • The lender can sue me personally; and • The lender may take possession of my property; … … 5. After receiving the above advice I freely and voluntarily signed the loan documents.
A statutory declaration signed the previous year by the defendant and relied on in the Federal Magistrates Court said that he had retained a solicitor, Grant Pritchard, in relation to the Bankruptcy Notice. It will be recalled that the name "Grant Pritchard" appeared on the St George loan application. The defendant did not elect to obtain independent advice from Mr Pritchard but accepted receiving advice from Mr Rogers. There is no evidence that Mr Rogers was not a solicitor independent of the lenders.
I am comfortably satisfied that the defendant was appropriately advised about the transaction he was entering.

(d) Exit strategy

A great deal of criticism was directed at Mr Shields for not having carefully read and considered the St George loan application. The defendant submitted that it was apparent that there was material on that application that was inconsistent with what Mr Shields had been told by Mr Nicholson concerning the defendant's financial position and the need for the loan. These matters included the fact that the loan was being sought for a greater sum than was being sought through Mr Shields, that the loan was said to be for personal investment, and that the answers to the second and third questions which I have set out at [49] above were answered in the negative. Those answers were inconsistent with what Mr Nicholson said was the need for the loan through Mr Shields.
Although the defendant's oral submission in relation to the St George letter of approval was that Mr Shields had never seen that letter, in his earlier written submissions the defendant said that on the balance of probabilities the plaintiffs and Mr Shields must have seen the letter. As I have earlier indicated, I am comfortably satisfied that Mr Shields did receive that letter of approval as he said he did, particularly because it was found in the files of Licardy & Co who acted for the plaintiffs.
The defendant submitted that Mr Shields should have been "placed on notice", if he saw the letter of approval, by the fact that it was a conditional approval only and by the fact that the amount conditionally approved was less than the amount that had been applied for. Other matters identified by the defendant in the loan application were the employment details and the stated assets of the defendant that were said to be inconsistent with his need for a loan in order to stave off the bankruptcy proceedings.
Although much cross-examination was directed to Mr Shields about what was contained in the St George application and what Mr Shields failed to notice or take account of, the only particular touching on the unconscionability of the contract relating to exit strategy was paragraph 22(o) of the cross-claim. That particular provided: The Fourth Cross-Defendant chose not to include a copy of the St George Loan Approval in his email to the Fifth Cross-Defendant dated 15 February 2015 in circumstances that the demonstration of an exit strategy was essential to the propriety of the proposed loan.
Where I have found that Mr Shields saw the Letter of Approval, this particular is not made out. Nevertheless, I will consider the matter on the basis of the much broader submissions made, which directed attention to Mr Shields' omissions in properly reviewing the St George application.
It was no part of Mr Shields' responsibility to scrutinise the St George application in circumstances where he had been informed that the application had been lodged with St George and a conditional approval, which he saw, had been received. Mr Shields said more than once in his evidence, when asked if he could have envisaged that St George would advance the loan, that St George was very thorough in the way it operated. Mr Shields was entitled to rely on the fact that an application to St George had been made and that it had reached the stage where a conditional approval had been granted. It is significant that the defendant's expert witness, Mr Valentino, considered that on their face the documents appeared authentic.
One of the difficulties in dealing with this issue concerning whether there was an exit strategy is that it was submitted by the defendant that Mr Shields knew all along that the Boston Traders letter was false and that he knew the application to St George could not have been supported by that letter. There was no evidence to justify the submission that Mr Shields knew the Boston Traders letter was false. Indeed, the submission is entirely contrary to the evidence given by the defendant that the purpose of providing the letter to Mr Shields was to deceive him into obtaining the loan from the plaintiffs. If Mr Shields knew that the letter was false, the inference would have to be that he conspired at that time to deceive the plaintiffs into making the loan. Since Mr Shields gave evidence, which I accept, that he did not get paid until the loan was repaid, it is difficult to understand what motivation Mr Shields would have in deceiving the plaintiffs into making a risky loan. Nor was it ever put to Mr Shields that he conspired to deceive the plaintiffs.
The submission was also made in this context that Mr Shields arranged for the plaintiffs to lend this money to the defendant knowing there was going to be a default and expecting it. That was a matter that was never put to Mr Shields in cross-examination. The submission went on to assert that the plaintiffs would receive the benefit of the accumulation of interest at a high rate which would ultimately be to their benefit. In turn, the benefit Mr Shields obtained was that such a loan would engender goodwill from the plaintiffs and result in further work to Mr Shields from the plaintiffs.
The acceptance of these farfetched submissions, which were not based upon any evidence at all, would require that I disbelieve all of Mr Shields' evidence about the plaintiffs' need to recover their money quickly. Indeed, Mr Shields' evidence was that the defendant was told of that need of the plaintiffs before he entered into the agreement. That is borne out by the Borrower's Understanding document signed by the defendant (at [162] above), where the defendant acknowledged that a failure to repay the loan would have a serious effect on the lenders' position. I accept Mr Shields' evidence concerning the need of the plaintiffs to have their money returned quickly.
The particulars of unconscionability appear in paragraph 27 of the cross-claim. The paragraph also incorporates paragraphs 21-24 of the pleading although those matters do not appear to be particulars of unconscionability so much as background facts. In my opinion, the defendant fails to establish that the loan agreement was unconscionable whether under the general law or statute, and that the contract was unjust. It may be accepted that the interest rate was high. However, this was a lender of last resort, the loan was for a two month period with interest paid up front, and the plaintiffs had evidence of an exit strategy in the form of a loan application to St George together with a conditional letter of approval. There was no obligation on the part of Mr Shields or the plaintiffs to go behind the St George documents and arrangement. Neither the plaintiffs nor Mr Shields had any knowledge of any invalidity or falsity in relation to the St George loan.
In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 McHugh JA (as his Honour then was) said (at 620-621): Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice. … If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice.
In Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37 Brereton J (as his Honour then was) said: [42] In this case, the significant circumstances are as follows: • Mrs Mizzi was desirous of helping her grandson Stefan. She had been involved in one previous successful similar transaction, the Across Australia mortgage, and another in respect of which enforcement proceedings were underway against her, the Kremnizer mortgage. • The Reliance mortgage involved her home and only asset of significance. However, it did not place it in jeopardy, because the home was already in jeopardy as a result of the Kremnizer mortgage, which was in default, and unless she could somehow otherwise escape liability, a refinance was imperative to have any chance of saving her house. • When the mortgagees sought to enforce the Kremnizer mortgage, Mrs Mizzi raised a Contracts Review Act defence, but ultimately refinanced with Reliance rather than pursuing it. … • While Mrs Mizzi's financial position was such that she would not be able herself to service the interest let alone repay the principal in accordance with the terms of the Reliance mortgage, in circumstances where the Kremnizer loan was in default, a refinance at least gave her some time, and the prospect that Stefan would be able to arrange repayment, without materially worsening her position. Even though it was unlikely that Mrs Mizzi would herself be able to service and repay the Reliance loan, and there may have been doubt (objectively viewed) as to Stefan's ability to do so, the alternative was for her to suffer a judgement for possession under the Kremnizer mortgage, in respect of which consideration had already been given on her behalf to a Contracts Review Act defence. • Although the interest rate charged by Reliance was high relative to bank rates, it was not when compared to the rates which the court often sees charged by lenders of last resort; no contention that the interest rate was unreasonably high was pleaded or particularised; and no evidence which would have permitted such a conclusion was adduced. • While Mrs Mizzi has little education and limited English, and while the advice given by Mr Kekatos probably did not convey to her in any detail an understanding of the obligations she was assuming, from the accumulation of what Mr Kekatos told her, and her son Martin's explanation of the consequences of "going guarantor", and her experience with the Kremnizer mortgage and the default under it, by the time she entered into the Reliance mortgage she must have known the general nature of and risks associated with such a transaction, and in particular she had a basic but sufficient understanding of those aspects which are relevant in the context of this case: that in return for an additional three months time, she was leaving her house at risk, reliant on Stefan to perform his obligations and procure the return of her deeds at the end of that period. … [88] The Reliance loan and mortgage were not unjust contracts in the circumstances in which they were made, within s 7. The only respect in which they worsened Mrs Mizzi's position was the higher interest rate, on which no attack was made or sustained; her only practical alternative was loss of her home under the Kremnizer mortgage, on which a Contracts Review Act attack was abandoned; and Mrs Mizzi had a sufficient if basic understanding of their effect and consequences. Even if they were unjust contracts, relief under Contracts Review Act, s 7, should be declined as a matter of discretion, as Reliance's role was not such as to justify relief being granted against it.
The position in the present matter is similar. If the defendant had not obtained the loan from the plaintiffs there was a strong likelihood, and it was certainly his belief, that a sequestration order would have been made against him with the result that he would lose his house. The loan did not put the defendant's house in jeopardy. It was already in jeopardy because of the sequestration order hanging over the defendant's head. The loan bought him extra time, and in circumstances where it could reasonably be thought at that time that a loan from St George was likely to be forthcoming. The defendant, by reason of his long banking experience, knew the risks of entering into the loan and mortgage.
The particulars of unjustness related to the interest rate are found in the cross-claim at paragraphs 27(a) and (b), which provided: (a) The Agreement was improvident. The terms of the Agreement and in particular the interest rates stipulated generally and in respect of default were harsh and not reasonably necessary for the protection of the First and Second Cross-Defendants. (b) The effective rate was 36% per year at the lower rate and 60% per year at the higher rate which latter rate applied from and after default under the Agreement.
The defendant at all times was aware of the interest rates being charged. On the defendant's own evidence he was informed about the interest rate of 3% per month. In my opinion, it is not necessary to consider whether the default interest rate is unconscionable or unjust because the plaintiffs elected to claim only the lower rate when they obtained judgment against the defendant. Further, I accept Mr Shields' evidence that subsequently it was only intended to claim the lower rate.
As in Mizzi, there was no evidence that the rates were unreasonably high or that they were not reasonably necessary for the protection of the plaintiffs. I accept that the rates are high, and are much higher than would be charged by banks. I am here concerned only with the ordinary rate of 36% because I have determined that the plaintiffs are prevented now from claiming the higher rate.
In Takemura v National Australia Bank Ltd [2003] NSWSC 339 the issue was whether the court would order specific performance of agreements where the rates of interest were 60% and 72% per annum. Young CJ in Eq said: [21] In Barrett v Hartley (1866) LR 2 Eq 789, 795, Stuart VC said: "It is an observation of some importance now that the usury laws are repealed, that one effect of such repeal was to bring into operation, to a greater extent than formerly, another branch of the jurisdiction of this Court which existed long before them - I mean, that the principle of the Court which prevented any oppressive bargain, or any advantage exacted from a man under grievous necessity and want of money, from prevailing against him." [22] The situations where equity has exercised this power are said to fall into four categories; see Waldock on Mortgages 2nd ed (Stevens & Sons, London, 1950) pp 192 and following, which has found its way in a different form into Cousins Law of Mortgages 1st ed (Sweet & Maxwell, London, 1989) pp 311 and following. The four classes are: (1) Where the mortgagee stands in a fiduciary relation to the mortgagor; (2) Mortgages of reversionary interests and expectancies; (3) Where the mortgagee has unconscionably exploited the necessitous circumstances of the mortgagor to extort from his exorbitant terms for the loan; and (4) Where the court is given jurisdiction by statute to reopen extortionate credit arrangements. [23] It is the third of these categories that may be relevant in the present case. [24] It is usually not sufficient to show that a mortgage falls into the third class to show that the interest rate was much higher than one might expect. What must be shown is that there is unconscionable pressure on the mortgagor to enter into the arrangement. A mortgage given by a business person at a very high rate of interest, if that mortgage was freely and voluntarily given, will not be able to be attacked.
In Guardian Mortgages v Miller [2004] NSWSC 1236 the interest rates in the loan agreement were 14.5% per month or 174% per annum reducible to 12% per month or 144% per annum. The borrower asserted that the requirement to pay interest at those rates was unconscionable and constituted an unjust provision. Wood CJ at CL said: [104] The interest rate, although admittedly high, does not constitute of itself an unconscionable or unjust provision, in a case such as the present involving a commercial loan, where there was no unconscionable pressure, placed on the Defendant by the Plaintiff, to enter into the transaction. [105] In any event the Court is not in a position to determine whether the rate charged was, or was not, one which fell within the range for commercial bridging or short term loans, since no evidence was called by the Defendant in relation to this aspect of the case. That the rate was in excess of the commercial rate was in fact rejected by Mr Benn, in cross-examination. While it may be possible, in a general way to take judicial notice of prevailing interest rates, for example from credit and store card interest charges, as was suggested in Cityland & Property (Holdings) v Dabrah [1967] 2 All ER 629 and in Asia Pacific International Pty Ltd v Dalrymple (2000) 2 Qd R 229, I am not in a position to determine the prevailing rate for short term bridging loans secured by second mortgage.
In Driat Pty Ltd v Thomas [2012] NSWSC 683 the interest rates charged on a three month loan was 36% per annum reducible to 30.85%. It was claimed that those rates made the contract unjust. Windeyer J said at [26]: The interest rate on the Point Piper loan was, of course, very high, but it was only for a three month period. It was a second mortgage, and experience is that interest rates on such short term loans are often high. There was, of course, no difficulty about ability to make the interest payments payable under the loan as they were paid in advance. That means in this case that unless there were default in payment on the due date there could not be any default for failure to make payments during the term of the mortgage.
In the present case, there was no unconscionable pressure placed upon the defendant by the plaintiffs to enter into the loan agreement. The loan agreement was for a short period with interest paid up-front. The interest rate was relevant only if there was default in repaying the principal. The parties all believed there was a relevant exit strategy in place to repay the loan. Mr Valentino agreed that on the face of the St George documents they appeared to be authentic. The lenders were what might be called lenders of last resort. It is notorious that such lenders charge higher interest rates because the risk is generally higher than a standard mortgage from a mainline bank or financier. The rate of 36% per annum is not out of line with interest rates I regularly see from lenders of last resort whilst administering the Possession List in the Court.
Although it was suggested at one point in passing that the loan by the plaintiffs to the defendant involved asset lending, no particular was included in the further amended cross-claim alleging that the loan amounted to asset lending. Moreover, I accept the evidence of Mr Shields that there were four considerations which guided his assessment of the viability of the loan. They were his assessment of the borrower, that the plaintiffs were obtaining adequate security, that a loan from St George was being arranged as an exit strategy, and he had evidence of income to support the loan if it was not repaid at the end of the two month period.
The evidence pointed strongly to the fact that the defendant would have entered into this arrangement in any event because he was prepared to do anything to save losing his house by being bankrupted. However, I do not consider that his concern in that regard says anything about the unfairness of the contract. Nor is there any evidence of unconscionability either under the general law or statutory unconscionability that affected the loan agreement.
The defendant was not at a special disadvantage as that term is understood at law. Whilst he was certainly in great need of a loan and perceived himself to be in a desperate situation, there is nothing in the evidence to show that the plaintiffs or Mr Shields took any advantage of the situation in which the defendant found himself.
It was faintly suggested that the defendant lacked the ability to negotiate over the terms of the loan agreement, particularly the interest being charged. There is no evidence to suggest that negotiation on interest rates or other matters was not open. The defendant gives no evidence that either he or Mr Lippits tried to negotiate but were rebuffed. It is not without significance that the defendant was not required to sign the loan documents on the same day he first saw Mr Shields. He was, as I have found, given all necessary information about the proposed loan. He then went away until the next day when he returned for legal advice from Mr Rogers. He was, of course, under time pressures as a result of the adjourned bankruptcy proceedings. However, so far from the plaintiffs taking any advantage of him by forcing the arrangement on him, Mr Shields was doing all he could to finalise the matter quickly as the defendant wanted.
There is the additional matter in the present case that the loan was obtained by the defendant and Mr Lippits deceiving and defrauding the plaintiffs into making a loan which would not have been made had the truth been known to them. That deception highlights how it was the plaintiffs and not the defendant who were being taken advantage of. That deception to obtain the loan is a further matter telling against the unjustness of the loan, and against any unconscionability on the plaintiffs' part.
Mr Newell drew my attention to the decision of Hulme J in Brendan King Pty Ltd v Toseka [2006] NSWSC 487. He submitted that the principles in it were not exceptional, but that the facts were similar to the situation in the present matter. I was not directed to any aspects of the case at all. My own reading of it suggested some similarities but some considerable differences. The differences are striking. Justice Hulme found that the defendant was a woman of limited education with a lack of elementary business ability. His Honour found that the lender was aware of her situation and took unconscientious advantage of her. She was not advised by a solicitor, but only a conveyancer, and the advice was inadequate. Although his Honour found that the defendant was prepared to tell lies when it suited her, she did not do what the defendant in the present case did, namely, deliberately deceive the lenders so that the loan would be made. Further, the lender was found not to be an honest witness. I note in passing that an interest rate of 72% per annum defaulting to 114% was not, of itself, considered to be unconscionable, with Hulme J relying on what Young J had said in Takemura.
Cases, particularly, in a fact-dense area such as possession cases involving claims of unconscionability are not to be decided by comparing the facts of decided cases with the case under consideration. The matter must always be approached from the point of view of applying legal principles from decided cases to the case at hand. That is what I have endeavoured to do in the present matter. I do not find Toseka to be of assistance in that regard.
For the reasons I have given the claim against the plaintiffs based on unconscionability, the Contracts Review Act and breaches of the Australian Securities and Investment Commission Act, the Australian Consumer Law and the Fair Trading Act 1987 (NSW) fail.

(b) The claim against Mr Nicholson for misleading or deceptive conduct

Before turning to deal with the claim of conspiracy involving all of the cross-defendants, it is necessary to deal with the claim against Mr Nicholson based on what are described as "the Expected Loan Representations".
This claim is set out in paragraphs 15-17 of the cross-claim as follows: 15. On or about 1 February 2011, the Fourth Defendant stated to Lippits (with the intention and expectation that Lippits would so inform the Cross-Claimant); (a) that he had obtained on behalf of the Cross-Claimant an approval for a loan from the St George Bank (to enable the Cross-Claimant to discharge the ATO Judgment ("the St George Loan Approval"): and, (b) Gave to Lippits a copy of a letter of conditional approval from St George Bank dated 1 February 2011 which purported to approve a loan to the Cross-Claimant. (c) The matters pleaded in paragraph 12(a) and (b) [scil.15(a) and (b)] in fact were conveyed by Lippits to the Cross-Claimant on or about the date that those matters were conveyed to Lippits by the Fourth Cross-Defendant. 16. After 1 February 2011 and before 15 February 2011 the Fourth Cross-Defendant (acting as alter ego of the Third Cross-Defendant): (a) Advised Lippits and thereby represented to the Cross-Claimant that he had been informed by St George Bank that the St George Loan could not be settled in time to avert an imminent expected sequestration order against the Cross-Claimant; and, (b) Suggested to Lippits (and through Lippits to the Cross-Claimant) that an approach be made to private lenders with a view to obtaining a short-term loan pending the settlement of the St George Loan. 17. The effect of the matters pleaded in the previous two paragraphs was to constitute representations by the Fourth Cross-Defendant (on behalf of the Third Cross- Defendant) to the Cross-Claimant that: (a) The St George Loan Approval was a sound basis on which to contemplate the pay out of the ATO Judgment; and that, (b) The St George Loan Approval provided a sound exit strategy from a short-term loan insofar as a short-term loan had become necessary ("the Expected Loan Representations").
Paragraph 31 then alleges: Further, or in the alternative, the Third and Fourth Cross-Defendants made the Expected Loan Representations fraudulently in that they knew that the Expected Loan Representations were false and were made by the Third and Fourth Cross-Defendants with the intention of deceiving the cross-Claimant and thereby inducing the Cross-Claimant to enter into the Agreement and Mortgage.
As can be seen, the case based on the expected loan representations concerns the application to St George and the letter of approval. The representations were said to be both false as well as misleading and deceptive contrary to the provisions of the ASIC Act and the Australian Consumer Law because, it is alleged, there were no reasonable grounds to believe that the loan approval would result in the loan being granted by the Bank.
The particulars of falsity focused on the specific problems with the loan application and the letter of approval which were put to Mr Shields in his cross-examination. In other words, the material contained in the loan application which did not accord with what Mr Nicholson told Mr Shields when he first contacted him, as well as the Boston Traders letter were said to throw doubt on the genuineness of the loan application. Other matters which were identified related to the involvement of Mr Hanna, the employee of St George Bank; the fact that subpoenas to St George Bank showed that the Bank had no record of the application or the approval; the various reasons provided in the evidence for why the loan ultimately did not go ahead; the assertion that there could not have been a valuation because no valuer attended at the defendant's home; and the assertion that Mr Nicholson and his company destroyed or concealed their files, both hardcopy and electronic, concerning the application and approval.
These matters were said to lead to the conclusion that the letter of approval was not the result of a bona fide consideration of a loan application, but was informed by an arrangement between Mr Nicholson and an officer of the Bank to provide a documentary basis to obtain an adjournment of the bankruptcy petition before the Federal Magistrates Court.
As the defendant's submissions made clear, the essence of the fraud claim was that Mr Nicholson knew that the St George application and the Letter of Approval were not genuine, and that the representations were made for the purpose of forcing the defendant into the position of obtaining the loan from the plaintiffs. This claim also involves Mr Nicholson knowing at all times that the Boston Traders letter and the employment details were false.
As far as the statutory counts of misleading and deceptive conduct are concerned, the defendant submitted that Mr Nicholson had no reasonable grounds to think that the conditional approval from St George would become unconditional. However, nothing independent of the assertion that Mr Nicholson knew that the St George loan was a sham was identified to demonstrate that Mr Nicholson did not have reasonable grounds for thinking the approval would become unconditional. Indeed, the solicitor for the defendant agreed that the case against Mr Nicholson was on the assumption that he did something wrong, and then lied in his affidavits. In other words, the way the case against Mr Nicholson was put means that it was fraud or nothing.
As I have noted earlier, neither Mr Nicholson nor Mr Lippits gave evidence. However, some information about the St George arrangement is to be found in those parts of Mr Nicholson's affidavit of 29 October 2015 that were put into evidence by the defendant. Although I have set out some of this material earlier, it is useful to set it out again in the context of this particular claim against Mr Nicholson.
The affidavit records Mr Nicholson's introduction to Mr Lippits by Mr Prestia and Mr Lippits' explanation of the need for a loan. Mr Lippits asked Mr Nicholson that paperwork be emailed to him as the defendant did not have an email address. When Mr Nicholson met the defendant later, the defendant affirmed that arrangement.
Mr Nicholson said that after the initial meeting with Mr Lippits he arranged for forms to be sent to Mr Lippits and that those forms included the application forms for both St George Bank and RAMS.
When Mr Nicholson met Mr Lippits and the defendant together he told them that his company had a strong working relationship with a home loan manager at St George, that that manager was not part of the usual third party channel (whereby brokers submitted applications), but a designated home loan writer with authority to approve the transaction himself.
Mr Nicholson's affidavit recorded him saying that subsequently a conditional approval was issued by the St George Bank's home loan manager. Mr Nicholson went on to say that at some time in the following week or so the conditional approval stalled which, he understood from a telephone conversation with the St George Bank's Home Loan Manager, was due to internal bank audit reasons. He rang Mr Lippits on or about 11 February 2011 and said it seemed to him that the St George home loan would not be secured in time. He suggested that one option was to approach a private short term lender who could act quickly to provide the funding within the timeframe required to satisfy the ATO. He also suggested that it might be worth commencing the loan application process with another mainstream lender in case St George did not move forward with the loan. Mr Lippits asked him to approach a lender to attempt to secure the funding as Mr Lippits said he did not want the defendant to be in the position of not being able to satisfy the ATO debt.
Mr Nicholson also said that shortly after the settlement of the loan agreement, he was advised by telephone from the St George Home Loan Manager that St George was not prepared to move ahead with the defendant's application.
On 28 April 2011 Mr Nicholson sent an email to Mr Shields and Mr Lippits saying: The loan from St George could not proceed. I have since discussed an alternative source or refinance (a mortgage manager through Adelaide Bank) who have expressed their interest in the refinance. I have forwarded application forms and required documentation to Mr Glover (via John Lippits) and have received the signed application form back, but not the balance of the necessary documents. I have had no communication with Mr Glover or Mr Lippits since the week commencing 8 April 2011.
Mr Shields said that, shortly after receiving that email, he telephoned Mr Nicholson and words to the following effect were said: Shields: What is happening? Nicholson: No one will tell me but I think St George did not believe he had the income as indicated so am trying someone else. The letter of employment that was set out in Glover's Loan Application was bullshit.
Mr Nicholson said of that evidence by Mr Shields in the part of his affidavit of 24 October 2018 that was read by the defendant: I do not recall saying these words and I believe I did not say those words. The basis for my belief is that I have no recollection of being informed by St George Bank or anyone else as to the reason why St George bank determined not to advance a loan to Mr Glover.
Whilst it is not necessary to decide who of Mr Shields and Mr Nicholson is correct, I am inclined to think that Mr Nicholson did not say those words. I accept the evidence of Mr Valentino that banks like St George do not undertake employment checks. If that is correct, the falsity of the employment details including the Boston Traders letter would never have been ascertained by the Bank.
There was no evidence of either of the matters in paragraph 15 (a) and (c) of the cross-claim. Mr Nicholson forwarded to Mr Lippits Mr Hanna's email of 1 February later that day. It is not unreasonable to infer that the letter of approval was provided to Mr Lippits on the morning of 1 February 2011 given the fax markings on the document and the fact that the bankruptcy proceedings were before the Federal Magistrates Court that morning. However, the evidence at its highest only leads to a conclusion that the representation made by Mr Nicholson on 1 February was (as paragraph 15(b) of the cross-claim acknowledges) that a conditional approval had been obtained. Although Mr Glover claims that Mr Lippits told him that Mr Nicholson had obtained an approval from St George, there is no evidence that Mr Nicolson said other than that there was the conditional approval as appears in the Approval in Principle letter. This is a further example of how much of the defendant's case is dependent on what he was told my Mr Lippits.
The defendant submitted that because Mr Hanna's email said, in effect, that the valuation was satisfactory, the approval was really unconditional. However, not only were there other conditions, but there is no evidence that Mr Nicholson represented that there was an unconditional approval.
The issue is whether the effect of "the Expected Loan Representations" was as is set out in paragraph 17 of the cross-claim. Mr Nicholson's evidence, tendered by the plaintiff, tends to suggest that at least by 11 February 2011 he did not consider that the loan approval was a sound basis on which to contemplate the payout of the ATO judgment or to provide a sound exit strategy from a short term loan. He expressly told Mr Lippits that he ought to consider commencing a loan application process with another mainstream lender in case St George did not move forward with the loan.
If Mr Nicholson did not know that the St George approval was a sham, there is nothing in the evidence to suggest that he represented anything more than may be inferred from paragraph 15(b) of the cross-claim, namely, that there was a letter of conditional approval from St George Bank. Absent fraud, there is no basis for a conclusion that the giving of a copy of a letter of conditional approval to Mr Lippits constituted a representation that the St George loan approval was a sound basis on which to contemplate paying out the ATO judgment or that the approval provided a sound exit strategy from a short term loan.
The defendant does not give evidence that Mr Nicholson ever represented that the St George loan approval was a sound basis to pay out the ATO judgment or that it provided a sound exit strategy from a short-term loan. Indeed, the defendant said in his affidavit of 29 July 2015 that he had no direct knowledge of a loan from St George having been approved at all. Rather, he had been informed by Mr Lippits that St George had approved the loan "and that it would be available within a month so I could pay back any short term loan that was provided". A statement by Mr Lippits to that effect does not amount to a representation by Mr Nicholson of the matters alleged.
Further, in the defendant's affidavit of 30 April 2018 it is apparent that the reliance placed by the defendant on the St George loan was almost entirely based upon what he was told by Mr Lippits and not by Mr Nicholson. The defendant said that in the first meeting with Mr Nicholson, Mr Nicholson said to him words to the following effect: I think I can get you a loan with St George. That is the extent of the defendant's evidence concerning any representations made by Mr Nicholson at his first meeting with him.
Subsequently Mr Lippits told the defendant that "Nicholson has obtained a loan approval from St George for you", but shortly afterwards Mr Lippits told him "The brokers have got a better deal for you from Bankwest". About one week later Mr Lippits told the defendant: Nicholson has now done a better deal with St George than Bankwest had offered and it's a special offer from St George and so we are going back to St George, it's a better rate of interest.
Shortly after that conversation, the defendant received a further call from Mr Lippits who said: Nicholson has now obtained a loan approval from St George at a better rate of interest than from Bankwest. He has recommended that you now proceed with the St George loan.
The defendant said that he was never advised by Mr Lippits or Mr Nicholson that the loan from St George was a conditional loan approval and he, the defendant, assumed it was unconditional.
It is apparent from this evidence that what the defendant was told came entirely from Mr Lippits. By this time the defendant had no reason at all to rely on anything that Mr Lippits told him but he chose to do so. The important point is that, absent evidence from Mr Lippits of what he was told by Mr Nicholson, the defendant does not make out his case that the representation as pleaded was made.
The defendant submitted that Mr Nicholson's failure to give evidence should result in a Jones v Dunkel inference. The defendant submitted that the inference should go beyond an inference that Mr Nicholson's evidence would not have helped him, and should extend to a positive finding that Mr Nicholson made the representation as alleged.
The High Court discussed the position in Khul v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11: [63] The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. These principles have been extended from instances where a witness has not been called at all to instances where a witness has been called but not questioned on particular topics. Where counsel for a party has refrained from asking a witness whom that party has called particular questions on an issue, the court will be less likely to draw inferences favourable to that party from other evidence in relation to that issue. That problem did not arise here. The plaintiff's counsel did ask the plaintiff relevant questions. [64] The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party. But the conclusion by the trial judge that the plaintiff - a party-witness - deliberately withheld evidence reflected a stronger reaction. It operated as a finding that there had been an admission. It could be inferred that the evidence was withheld, in breach of the witness's duty to tell the whole truth in answer to the question, because the plaintiff was conscious that success in the litigation would be rendered impossible or less likely if the material withheld were revealed. Depending on the circumstances, when a party lies, or destroys or conceals evidence, or attempts to destroy or conceal evidence, or suborns witnesses, or calls testimony known to be false, or fails to comply with court orders for the production of evidence (like subpoenas or orders to answer interrogatories), or misleads persons in authority about who the party is, or flees, the conduct can be variously described as an implied admission or circumstantial evidence permitting an adverse inference. The position must be the same where there is a failure of a party-witness to comply with the duty of a witness to tell the whole truth. There is a reason why failure to call a witness or failure to ask a particular question of a witness supports the possible inference that the witness's evidence would not have assisted the party, while failure of a party-witness to tell the whole truth may support an inference that the party suppressed evidence which would have been damaging to the party-witness. A litigant has no duty to call particular witnesses or to procure that any witnesses called by that litigant are asked particular questions. A litigant who enters the witness box, on the other hand, is under a positive duty to tell the whole truth in answer to the questions asked.
The position described in Khul at [64] does not apply here. There is nothing to justify a conclusion that what was contained in Mr Nicholson's affidavits was other than truthful. For reasons I will come to, there is no evidence that Mr Nicholson destroyed or concealed evidence. The only inference that could be drawn is that Mr Nicholson's evidence would not assist him.
However, as noted earlier, in the present case there is evidence that Mr Nicholson forwarded Mr Hanna's email to Mr Lippits. That email referred only to a conditional approval. Further, I am satisfied that a copy of the Approval in Principle was provided to Mr Lippits on the morning of 1 February to enable him to obtain the adjournment at the Federal Magistrates Court. If Mr Lippits told the defendant that there was an approval (as opposed to a conditional approval) of the St George loan, that was a misrepresentation by him and not by Mr Nicholson.
Accordingly, the evidence discloses that the only representation made by Mr Nicholson was that there was a conditional approval from St George. It is then necessary to ask whether the forwarding of that letter of approval constituted misleading or deceptive conduct.
In considering whether the facts of the case disclose misleading or deceptive conduct, a two-step analysis is required. The first involves asking whether the facts establish the conduct pleaded. The second involves asking whether, as a question of fact, the conduct is false, misleading or deceptive or likely to mislead or deceive: Campbell and Another v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25; Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12; Australian Competition and Consumer Commission v Telstra Corp Ltd [2004] FCA 987; (2004) 208 ALR 459.
The solicitor for the defendant submitted that because the arrangement was that communications to the defendant would be effected through Mr Lippits, in that way representations made to Mr Lippits were, in practice, representations made to the defendant. The difficulty with that submission is that there was no evidence from Mr Lippits about what representations were made to him. There is only evidence from the defendant about what Mr Lippits told him. Whilst there is every reason to doubt that Mr Lippits was accurately conveying to the defendant what Mr Nicholson told him, the issue can be determined without having to resort to speculation of that sort. There simply was no evidence from Mr Lippits of what Mr Nicholson said to him so that that could be tested against what the defendant says that Mr Lippits told him. I do not accept the defendant's uncorroborated evidence about what Mr Lippits told him. An agreement that Mr Lippits was to be the intermediary between Mr Nicholson and the defendant does not result in a finding that what the defendant reports Mr Lippits as telling him actually came from Mr Nicholson.
I am also satisfied that, in forwarding the Approval in Principle and Mr Hanna's email, Mr Nicholson was acting as a mere conduit in accordance with what was said in Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 and Butcher v Lachlan Elder Realty (2004) 218 CLR 592; [2004] HCA 60. These cases and others were discussed in Borzi Smythe Pty Limited v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233, particularly with respect to the need for a disclaimer from the claimed conduit. Beazley JA (as her Honour then was) (Basten JA and Handley AJA agreeing) said: [37] In the plurality judgment, Gleeson CJ, Hayne and Heydon JJ referred to the passage from Yorke v Lucas set out above. Their Honours then stated at [39]: "In applying those principles, it is important that the agent's conduct be viewed as a whole . It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the … land must be taken into account. It is also important to remember that the relevant question must not be reduced to a crude inquiry: 'Did the agent realise the purchasers were relying on the diagram?' To do that would be impermissibly to dilute the strict liability which s 52 imposes." (Emphasis added) [38] Their Honours held that the agent had not engaged in contravening conduct. Rather, the agent had done "no more than communicate what the vendor was representing, without adopting it or endorsing it". Their Honours stated, at [40] ff, that this conclusion flowed from: (1) the nature of the parties; (2) the character of the transaction contemplated; and (3) the contents of the brochure itself. The evidence relevant to each of those matters was then examined. [39] The question in this case is whether, by indicating the source of the information, Mr Campbell had done enough to implicitly disclaim any belief in the truth or falsity of the information he was conveying. In Butcher, there was an express disclaimer. However, the plurality judgment endorsed the analysis of Handley JA, particularly at [47]-[48], in the Court of Appeal: Butcher v Lachlan Elder Realty; Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558. Handley JA noted that the survey diagram reproduced within the body of the brochure purported to be a copy of an original survey prepared by a professional surveyor. The brochure represented that this was an accurate copy of what the agent believed to be a genuine and correct survey diagram. Handley JA stated that in so doing, the agent made no representation as to the accuracy of the survey. His Honour said, at [47]: "The question can be tested by supposing that they handed copies of the survey report and diagram to prospective purchasers telling them, without more, that it was a copy of a survey they had obtained from the vendor. The recipients would know that the agents did not hold themselves out as professional surveyors, and had not carried out the survey themselves." [40] His Honour continued, at [48]: "The agents by proffering copies would be impliedly representing that they had an honest, or perhaps honest and reasonable, belief that the copies were genuine and recorded the surveyor's opinion on the matters disclosed. See Spencer Bower, Turner & Handley 'Actionable Misrepresentation' pp 13-14. They would also impliedly represent their belief that the report and diagram were accurate (op cit pp 11-13), but I see no good reason why they would intend to represent that it was in fact accurate, or why the recipients would think that the agents were making any such representation. In my judgment the situation is indistinguishable from that considered in Argy."
Her Honour made reference to the decision of the Full Court of the Federal Court in The Saints Gallery Pty Ltd v Plummer [1988] FCA 309; (1988) 80 ALR 525 and said: [46] It was argued that there was no evidence of any disclaimer, as was said was required on the principles stated in Yorke v Lucas. Their Honours rejected this argument and said, at 530: "The reference in Yorke v Lucas, to an express or implied disclaimer of belief in an instruction conveyed by an agent does not involve that an agent who does believe his client, and makes that fact apparent, may not at the same time impliedly disclaim personal responsibility for what he conveys." [47] Their Honours added that, in any event, the reference to an implied disclaimer in Yorke v Lucas was not to be read as strictly as if it was a provision of a statute. Rather, the question was whether, on the proper construction of s 52, it had been breached. Their Honours concluded, at 531, that a disclaimer of any personal knowledge of the paintings' authenticity was deducible from the parties' relationship and the whole of the circumstances of the transaction, notwithstanding that the gallery owner had not disclaimed belief in the truth of what the owner had told him.
Finally, her Honour concluded at [51]: It is apparent from the authorities to which I have referred, that a failure to make a specific finding that there was an implied disclaimer, does not necessarily signal some error or oversight in the trial judge's conclusion. The question in a case such as this is whether information has been merely passed on for what it is worth, without adoption or endorsement of its truth or falsity. If, having regard to all the circumstances of the case, the source of the information is made known and it is apparent that there has been no such adoption, then there will have been a relevant disclaimer. In other words, the disclaimer can be, and in the case of an implied disclaimer, will be, found in the conduct of the representor, including the words actually used in the communication and all other relevant circumstances, including the nature of the parties, the character of the transaction and the contents of the communication. There may be other relevant factors in a given case.
I am satisfied that Mr Nicholson was not doing other than passing on what he had received from Mr Hanna. He was not adopting the Approval in Principle. In that regard, and in relation to the reasonableness of Mr Nicholson's acceptance of the Approval as genuine, I accept the evidence of Mr Valentino who said this about the St George Approval in Principle letter (T 314ff): Q. And there would be no reason whatsoever if a broker received a letter like this to think anything other than it's a genuine conditional approval of a loan, that's right, isn't it? A. Correct. … Q. He or she would think, receiving this letter, that there was no reason to think anything other than this was a genuine conditional approval, true? A. True. Q. If you then go back to annexure A, I said I would take you to the email from Mr Hanna, have a look at 2760 in the second half of the page? A. Yes. Q. This on its face appears to be an email from Hani Hanna, senior personal banker to Richard Nicholson, 1 February? A. Correct. Q. No reason for you to doubt the authenticity of this document, is there? A. No. Q. It strongly supports the idea that what was occurring was a bona fide conditional approval of the loan, true? A. True. Q. This email, in terms of the genuineness of the conditional approval that you'd called into doubt in your first report was a highly relevant piece of evidence, wasn't it? A. Yes. Q. Because not only did you have the conditional approval letter, but when you got this email, when you went to do your second report, there's also an email from the person who is the author of the letter, addressed to Mr Benson, but sent to Mr Nicholson? A. Yes. Q. Strong evidence suggesting that in fact it was entirely above board in the sense that there was a legitimate conditional approval, true? A. True.
Even if it was found that Mr Nicholson engaged in misleading or deceptive conduct by representing that the loan approval was other than conditional, the issue of what the defendant would have done, had he known the true position, must be examined. The defendant submitted that if he had known the St George approval was conditional he would never have entered into the loan with the plaintiffs.
I do not accept that evidence. It is inconsistent with the defendant's evidence that he was, effectively, prepared to do anything to save losing his home, and that involved him engaging in a fraud on the plaintiffs in an attempt to gain the extra time that was provided by the plaintiffs' loan. On the morning the conditional approval came through from St George the ATO's petition was again before the Federal Magistrates Court. It had been adjourned in December because there had been a promise of a loan from Bankwest which appeared to have evaporated in the interim. That adjournment was the last of many and, and on what the various parties understood by 1 February, there was unlikely to be the chance of a further adjournment unless there was further evidence of a loan approval. The defendant believed that if he was made bankrupt the ATO would sell his house. That was why he was so desperate to avoid bankruptcy. In my opinion, if he had known that the loan was conditional he would have been prepared to enter into the loan agreement with the plaintiffs in the hope and expectation that the loan would become unconditional.
The Expected Loan Representations set out in paragraph 17 of the cross-claim were not made. The claim against Mr Nicholson based on s 18 of the Australian Consumer Law and s 12DA of the ASIC Act fails.

The solicitor for the defendant submitted that the case against Mr Nicholson, and the other cross-defendants, based on fraud and conspiracy was made out on the basis of what he called the "many non sequiturs" in the transaction. Some of these have been identified at [202] above. I took that to mean that there were a number of anomalies in relation to the loan application and the conditional approval, together with the fact that the loan did not ultimately eventuate which should result in an inference that Mr Nicholson knew the loan application and approval were shams and were created by him together with Mr Lippits, and possibly Mr Hanna, with a view to forcing the defendant to enter into the loan with the plaintiffs.
The defendant submitted that the evidence shows that there was a conspiracy to defraud him of his home or most of his equity in it. The defendant submitted that the conduct of Nicholson showed that he intended to induce the defendant to enter into the plaintiffs' loan in the belief that he had an exit strategy via the St George bank loan. The defendant submitted that Mr Nicholson could not have been acting on a frolic of his own. His fraud would only exist in the context of the conspiracy with Mr Shields and the plaintiffs.
The defendant submitted that one of the inherently improbable matters was the fact that Mr Nicholson was seemingly not being paid because he was dealing directly with the loans officer at the Bank and not in the usual way that brokers dealt. The defendant submitted that Mr Nicholson and Mr Shields had had an ongoing relationship for some time. The defendant relied on the fact that the St George loan was a sham. The defendant submitted that Mr Nicholson knew it was a sham because he had been involved in arranging for the conditional loan approval. The defendant submitted that all of Mr Nicholson's knowledge could be visited on the plaintiffs and Mr Shields, because it was wholly implausible that Mr Shields would have acted with such knowledge without the plaintiffs having the same knowledge. The defendant submitted that it was generally untenable that Mr Nicholson set out to perpetrate a fraud on the plaintiffs without any compensation for his work. Accordingly, the plaintiffs and their privies must have been the source of a necessarily secret commission to Mr Nicholson. The defendant also relied on the failure of the plaintiffs to sue Mr Nicholson for the position that they found themselves in with the loan not having been repaid.
On 19 June 2018 the solicitors for Mr Nicholson wrote to the defendant's solicitors and asked these questions: 4. In relation to paragraph 32 of the FACC, what are the facts, matters and circumstances supporting the allegation that certain parties "conspired" and "combined together". Further: 4.1 If the alleged conspiring and alleged combining together occurred verbally, please specify: 4.1.1 the time and place of each conversation; 4.1.2 between whom each conversation took place; 4.1.3. in the presence of whom each conversation took place; and 4.1.4 the substance of each conversation; 4.2 if the alleged conspiring and alleged combining together was recorded in writing or partly in writing, please specify the writing and provide a copy of the same. 5. Further, in relation to paragraph 32 of the FACC, in circumstances where our client was not a party to the Agreement (as that word is defined in the FACC) or a mortgagee in respect of the Mortgage (as that word is defined in the FACC), how is it said our clients (or one of them) obtained the opportunity to appropriate the value of your client's home? 6. In relation to paragraph 34(a) please clarify what is meant by the phrase "a substantial stake in the outcome".
They received the following answers: 4 This is not a proper request for particulars. The opportunity in question was the end and aim of the conspiratorial agreement and the conduct engaged in for that purpose. It is out of that value of the home that rewards were to be distributed to the conspirators including Nicholson, it is not material to specifically know or assert how access to the benefits of that opportunity were to devolve to the conspirators. 5 This is not a proper request for particulars. It is not necessary to allege what benefit, if any, was obtained by reason of a fraud or deceit. Nonetheless, we observe that your clients' conduct can only be explained on the basis that they received (or were to receive) a pecuniary benefit for their role in fraudulently facilitating the unconscionable loan. As you are aware, that loan was the subject of a course of conduct by Shields and the Plaintiffs calculated to obtain an unconscionable windfall of no less than $500,000 from the auction of the Cross-Claimant's home leaving the Cross-Claimant homeless. 6 It is not clear what you consider to be problematic so far as concerns the phrase in context: "a substantial stake in the outcome". We will assume that you seek to have the meaning of the outcome clarified. The outcome is the creation of access to a windfall fund by inducing the Cross-Claimant to enter into the securing of a grossly unconscionable loan agreement and a protracted course of conduct designed to allow for the unconscionable accumulation of contractual interest.
In final submissions I asked Mr Newell again what Mr Nicholson was to get out of engaging in this conspiracy with Mr Shields and the plaintiffs. The following exchange occurred (T 472ff): HIS HONOUR: But what was Mr Nicholson to get out of it? NEWELL: The starting point is that the loan, at the high rate of interest that was stipulated, was a highly profitable arrangement for a lender with whom Mr Nicholson regularly dealt and it was in Mr Nicholson's interests, at the very least but we're going to submit there must be more to it-- HIS HONOUR: Sorry, are you talking about the loan now from the plaintiffs? NEWELL: Yes, the loan from the plaintiffs. HIS HONOUR: But Mr Nicholson - I didn't think the evidence established he regularly dealt with the plaintiffs at all. He had regularly dealt with Mr Shields. NEWELL: I mean Mr Shields but as the emanation of the plaintiffs, yes. The question of whether Mr Nicholson maintains a profitable relationship for the purpose of lending with lenders really depended on his relationship with Mr Shields as opposed to the plaintiffs separately and it's that relationship which had existed for some time, that's undisputed, which was somehow mediated originally by Mr Prestia, which resulted in Mr Shields and Mr Nicholson both being aware that the St George application contained a great deal of false information and Mr Nicholson's relationship with Mr Shields was such that Mr Nicholson was not at all concerned as to what Mr Shields would think about his conduct in being instrumental in lodging such a loan. Now, there is no surreptitious conduct by Mr Lippits that can explain Mr Nicholson's indifference to Mr Shields' knowing about his dishonest role in the St George loan. HIS HONOUR: But wasn't it Mr Nicholson who sought out Mr Shields, rather than the other way around? NEWELL: Well, Mr Nicholson went to a person, Mr Shields, with whom he regularly dealt. HIS HONOUR: But I'm trying to understand the benefit out of all of this to Mr Nicholson. You suggest it seems to be getting continuing work from Mr Shields on behalf of these plaintiffs or others but Mr Shields didn't approach Mr Nicholson to give him this work. NEWELL: No, they have an established commercial relationship. The approach is an incidental matter. There's an established commercial relationship whereby Mr Nicholson, as a broker, deals with Mr Shields regularly for the purpose of loans and it's that commercial stream of work that was at least one incentive for offering up somebody to enter into the transaction with the plaintiffs via Mr Shields. There has to be-- HIS HONOUR: So Mr Nicholson makes this fraudulent arrangement with St George to further his relationship with Mr Shields and his lenders, is that the idea? NEWELL: To do whatever it took to send the work Mr Shields' way, the type of contract to Mr Shields' way. Now, there also has to be a suggestion-- HIS HONOUR: And what does Mr Nicholson get out of this? A fee and continuing work from Mr Shields, is that what you say? NEWELL: Yes…
As Mr Lloyd of counsel for Mr Nicholson pointed out, this was a wholly new basis for putting the case. In any event, the only evidence that remotely provided any basis for it was evidence obtained from Mr Shields in cross-examination that he had known Mr Nicholson for some time on a professional basis and had been involved in a number of other loan agreements previously. The defendant should not be allowed to change the basis of his case in this way. It would be unfair to all the cross-defendants who are likely to have led further or different evidence concerning the prior relationship between Mr Shields and Mr Nicholson. In any event, the evidence does not support the new basis put forward. The matter must be considered on the basis set out in the pleadings and particulars.
Given that criminality involving fraud and conspiracy is asserted against Mr Nicholson and others, I would have to be satisfied to a Briginshaw (Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34) standard by reason of the seriousness of the nature of the allegations made. The solicitor for the defendant submitted that the Briginshaw principle has no application because of what Lord Hoffman said in In Re B (Children) (Care proceedings: Standard of Proof) (CAFCAA intervening) [2009] 1 AC 11: [13] My Lords, I would invite your Lordships fully to approve these observations. I think that the time has come to say, once and for all, that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not.
In the light of the enactment of the Evidence Act 2005 (NSW), the question concerning whether Briginshaw is good law requires a consideration of s 140 of that Act. Section 140 provides: 140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence, and (b) the nature of the subject-matter of the proceeding, and (c) the gravity of the matters alleged.
Both the Full Court of the Federal Court in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission (ACCC) (2007) 162 FCR 466; [2007] FCAFC 132 and the Victorian Court of Appeal in NOM v Director of Public Prosecutions (2012) 38 VR 618; [2012] VSCA 198 held that s 140 embraces the Briginshaw principle. I consider that I ought to follow that approach.
As I have noted earlier, the findings of fraud and conspiracy are said to be inferences and, presumably, the only reasonable inferences that can be drawn from what happened. One of the difficulties, noted by counsel for Mr Nicholson, was the lack of clear identification by the solicitor for the defendant of what evidence was relied upon by the defendant to justify the inferences sought. I will endeavour to identify what appears to be relevant in this regard.
First, I accept that the St George Approval in Principle was a sham. That is likely because St George has no records, electronic or documentary, of the loan application or the approval. It is also likely because the loan approval ceased without any formal rejection in writing or adequate reason being offered. It is also likely because the employee apparently involved, Mr Hanna, was subsequently dismissed for "serious misconduct".
However, the evidence discloses that the only thing connected with those matters that Mr Nicholson knew before the defendant entered into the loan agreement with the plaintiffs was that the loan application had stalled "due to internal bank audit reasons". The delay was the reason Mr Nicholson, on Mr Lippits' instructions, approached Mr Shields.
Secondly, I accept as I noted earlier, that Mr Nicholson was careless in submitting the St George Loan Application by reason of negative answers to the two questions concerning judgments against the defendant. I accept also that Mr Shields did not notice that incorrect information. However, as I noted earlier, those wrong answers could only have assisted the defendant to obtain the St George loan.
Thirdly, the Approval in Principle was for a lesser sum than had been sought in the Loan Application. I find it difficult to see that that was significant. Even if Mr Nicholson and Mr Shields had noticed it, they could be comforted by the fact that there was at least a conditional approval that might result in the loan from the plaintiffs being able to repaid by St George. It was not a matter that rang warning bells about the authenticity of the St George loan. But even if it was, the defendant was still in urgent need of some finance until a more permanent solution was found.
Fourthly, there is the statement in Mr Hanna's email of 1 February about the valuation being returned on that day for $316,000. There is no evidence that Mr Nicholson or Mr Shields had any knowledge about that. It may now be apparent that no such valuation was carried out, although that is far from clear. Mr Valentino accepted that the issue was not suspicious because the valuation could have been what was called a desktop valuation. Further the defendant gave contradictory evidence about whether a valuer had ever been out to his house (Cf his affidavit of 29 July 2015 paragraph 15 and his affidavit of 4 June 2016 paragraphs 5 to 7). Again, the statement that the valuation was satisfactory would have given comfort to Mr Nicholson that the St George loan was more likely to go ahead.
Fifthly, Mr Nicholson had no files to produce. The defendant relies strongly on that fact to infer, as far as I understood the submission, that Mr Nicholson had something to hide and that the "something" was his involvement with Mr Hanna and possibly Mr Lippits in cooking up the St George Loan Approval. Reliance on this failure to produce was, in effect, an attempt by the defendant to re-agitate the adequacy of Mr Nicholson's discovery which I decided in Kaji Australia Pty Ltd v Glover (No 2) [2018] NSWSC 414. I refer in that regard to what I said at [39] to [47] of that judgment.
Sixthly, it appears that a Bankwest approval dated 20 December 2010, and apparently used to obtain an adjournment in the Federal Magistrates Court on 21 December 2010, was not a genuine approval. The evidence about this Bankwest approval was scant. The only evidence of Mr Nicholson's involvement with it is evidence given by Mr Glover in his affidavit of 30 April 2018 of what Mr Lippits said to him in January 2011 after the defendant's second meeting with Mr Nicholson.
In the letter from the defendant's solicitors of 2 August 2018 the following appears: The Cross-Claimant relies upon the propensity and practice revealed by the role of the Third and Fourth Cross-Defendants in collaborating with Joseph Prestia ("Prestia") in the preparation and use of a fraudulent unconditional approval letter from Bankwest dated 20 December 2010 which letter of approval was used to deceive the Federal Magistrates Court and the ATO. That role included procurement of payment of $2000 into the bank account of the Third Cross-Defendant in consideration of the joint role of Prestia and the Fourth and Fifth Cross-Defendants [sic] in facilitating the creation and use of the Bankwest approval letter. It seems likely that the reference in the penultimate line should be to the Third and Fourth Cross-Defendants because Mr Shields (the Fifth Cross-Defendant) had not even been contacted in December 2010.
The only evidence to support what appears in that letter is the fact that on 23 December 2010 Mr Nicholson sent an email to Mr Lippits saying (inter alia): As discussed with Joseph Prestia, the $2000 for services rendered remains outstanding and we are now out of pocket to this effect.
What inference should be drawn from that email is hard to determine. Even if the inference is that Mr Nicholson had assisted Mr Prestia in the work he had been doing with Mr Lippits to obtain repeated adjournments in the Federal Magistrates Court, that says nothing about Mr Nicholson's knowledge of, or involvement with, the Bankwest approval.
Seventhly, the suggestion that the failure of the plaintiffs to sue Mr Nicholson is indicative of a conspiracy assumes that Mr Nicholson must have committed wrongdoing separately from the plaintiffs. Otherwise, it is question begging. Any separate wrongdoing by Mr Nicholson could only be concerned with him being a party to the sham loan approval from St George. For reasons already given and matters to which I will come, the defendant fails to show that Mr Nicholson was a party to the sham loan approval, or even aware that the loan approval was a sham.
To establish fraud and conspiracy against Mr Nicholson, the defendant must prove, at a minimum, that Mr Nicholson was a party to the sham approval from St George. In addition to the matters I have identified above, the defendant put forward an opinion of a valuer, Peter Valentino who concluded at the end of his first report: There is cause for serious suspicion that the alleged loan from St George was not genuine and was a fabrication by the broker.
In final submissions, the defendant appeared to suggest that this was not relied on. However, this serious allegation was made, and it formed the basis for much of the cross-examination of Mr Valentino.
Mr Valentino's opinion was said by him to be based on "the failure by the broker to follow with the normal procedures and the anomalous nature of the matter including, but not limited to, what purports to be a request by the broker for monies for a valuation to be undertaken by St George."
Mr Valentino said that it was a cause for suspicion that St George did not appear to hold any documents in relation to the loan and that St George did not have a reference number on the conditional approval. Mr Valentino agreed that he did not have any knowledge of what St George's document retention policy was nor its electronic retention policy.
In coming to his conclusion, Mr Valentino also relied on his understanding that the loan from St George ultimately did not proceed because the Bank was having an audit. Mr Valentino assumed that that information was correct but came to understand by the time of his third affidavit that an internal audit was not the reason for the loan not being approved.
Mr Valentino also relied for his opinion on matters which he said a broker would ordinarily attend to in relation to complying with conditions in the conditional letter of approval. Mr Valentino said that Mr Nicholson failed to carry out those matters. He agreed in cross-examination, however, that a number of the matters he relied upon were not made conditions by St George in the letter of approval and he agreed that he had not been ultimately able to identify any condition in respect of which Mr Nicholson had not taken steps to comply with.
In his oral evidence Mr Valentino said this: Q. What you're saying in paragraph 49(viii) is there's a serious suspicion that the broker actually fabricated this document. That's the effect of your opinion, isn't it? A. Yes. … Q. You've just told his Honour that the effect of your opinion was that there was serious suspicion the broker fabricated this letter, that's right, isn't it? A. No, I did not say the broker fabricated this letter. Q. Serious suspicion-- A. I said the approval, not this letter. Q. What approval are you talking about if in this affidavit you-- A. This St George approval. Q. So you are talking about this letter? A. Yeah, I'm not saying the letter is fabricated. Q. How could the letter be genuine, but the approval be fabricated? A. Because it never came unconditional.
Whether Mr Valentino was saying that the letter was fabricated or that the loan approval was fabricated (it is difficult to see how the letter of approval could be genuine if the loan itself was a fabrication) he had no basis at all for suggesting that the author of the fabrication was Mr Nicholson. His conclusion in that regard was based only on assumption and speculation. His opinion in that regard should not have been put forward by the lawyers acting for the defendant. It was an allegation of fraud and criminality without any basis as Mr Valentino's cross-examination demonstrated and as he ultimately accepted.
In the same way, none of the matters identified by the defendant considered singly or together, leads to an inference that Mr Nicholson engaged in fraud or that he conspired with the plaintiffs and Mr Shields to enrich themselves from the sale of the defendant's land. I accept the submissions of Mr Lloyd for Mr Nicholson which demonstrate the improbability of the fraud and conspiracy alleged. Mr Lloyd put the matter in the following way.
By late January 2011 Mr Nicholson knew of the defendant's indebtedness to the ATO. The defendant's case must be that at that time Mr Nicholson set about to cause Mr Lippits to prepare the St George loan application and, in concert with Mr Hanna, they procured a false conditional approval letter. By this time Mr Nicholson must have had in mind that there could be a further adjournment of the bankruptcy proceedings which would enable Mr Nicholson to string the defendant along for long enough to be able to bring Mr Shields into the picture. Mr Nicholson must have known that Mr Shields would have at his disposal some lenders who would advance a short term loan at high interest rates and that the defendant would be willing to enter into that loan.
Mr Nicholson would then have to wait until 11 February 2011 when he had the conversation with Mr Lippits saying that it seemed that the St George loan would not be secured in time. He said one option would be to approach a private short term lender so that the ATO could be satisfied, and he said it would also be worth commencing a loan application process with another main stream lender in case St George do not move forward with the loan. The latter is hardly likely from someone endeavouring to push the defendant into a short term loan from which he would not be able pay out.
On receipt of instructions from Mr Lippits, Mr Nicholson then sends the email to Mr Shields on 15 February, taking the risk that Mr Shields will not be able to find lenders in the short time available. Significantly, Mr Nicholson then drops out of the picture except for being told subsequently that the St George loan is not going ahead, whereupon he then made contact with Adelaide Bank (see at [212] above).
In my opinion, none of that makes any sense when Mr Nicholson could have arranged for Mr Shields to find lenders without going through the charade of a fraudulent loan approval from St George Bank. If, as the defendant asserts, Mr Shields was part of the conspiracy with the plaintiffs, neither Mr Shields nor the plaintiffs would have been concerned in those circumstances for there to be any exit strategy from the short term loan, because the whole point of the conspiracy was that the defendant would not be able to repay the short term loan, with the result that there would be a windfall to the plaintiffs and the other participants in the conspiracy at a time further down the track.
The defendant also relies on matters which are set out at paragraph 34 of the cross-claim. They are said to inform the agreement to perform the unlawful acts for the combination and conspiracy. The first five are neither facts nor particulars but, rather, conclusions or inferences which it is said should be drawn. That is the difficulty. They assert that (a) Mr Nicholson had a substantial stake in the defendant entering the loan with the plaintiffs; (b) Mr Nicholson, knowing the St George Approval was a fabrication and that the Expected Loan Representations were fraudulent, made himself available to the plaintiffs by swearing an affidavit to resist the application by the defendant to set aside the judgment; (c) Mr Shields and the plaintiffs "sought out and embraced [Mr Nicholson] as part of their camp"; (d) all the cross-defendants cooperated forensically to frame an affidavit case to suggest the St George loan was genuine; (e) Mr Nicholson formed an intention "to avoid a forensic exploration" of the St George Loan Application and Approval.
It is very difficult to understand what most of those matters mean. There was no evidence to support any of them except that both Mr Nicholson and Mr Shields swore affidavits for the plaintiffs in relation to the making of the loan. That was hardly surprising when both men were involved in the loan coming about. Neither had been joined to the proceedings at that stage. The matter referred to in (d) above would have been difficult to achieve without the involvement of the lawyers acting for the various cross-defendants. It is not clear if there is a suggestion that they too were involved.
Further matters which did assert facts rather than conclusions were these: (f) the plaintiffs assisted by Mr Shields obtained judgment in the District Court against the defendant; (g) an order for possession was not sought until much later when interest had accrued; (h) the plaintiffs' solicitors undertook to have the caveat on the defendant's property removed to enable sale or refinance, and received a fee to do so, but failed to have the caveat removed; (i) the plaintiffs' solicitors did not provide a payout figure in and about February 2015 although requested to do so.
Although obtaining a monetary judgment in the District Court as a precursor to taking possession proceedings in this Court was somewhat bizarre, the plaintiffs were certainly entitled to obtain such a monetary judgment. It is true that possession proceedings were somewhat delayed but I accept Mr Shields' evidence that the plaintiffs were doing what they could to avoid putting the defendant out of his house. It was always open to the defendant to offer to pay the amount of the District Court judgment together with interest to exercise his equity of redemption. He did not do that. Neither of these matters remotely suggests a conspiracy.
Neither of the failures to remove the caveat or to provide a payout figure suggests anything more than negligence on the part of the plaintiffs' solicitors. The inclusion of those matters as a basis for the allegations of combination and conspiracy can only mean that the defendant is asserting that the plaintiffs' solicitors were part of the conspiracy. Those solicitors were not named as cross-defendants. There is no basis for alleging that those matters were evidence of a conspiracy. The allegations should not have been made.
That Mr Shields was involved in a conspiracy was never put to him in the lengthy cross-examination that Mr Newell conducted. The idea that the parties to the conspiracy intended for the loan not to be repaid so that high quantities of interest could be run up is entirely inconsistent with the documents signed by the defendant at the time the loan was entered into which noted the need of the plaintiffs to have the money repaid in due time. it was never put to Mr Shields that those documents were not to be taken at face value, but were some sort of charade to hide the real intentions of the parties to the conspiracy. The notion that the plaintiffs and others intended that the loan not be repaid, allowing the defendant to be gouged, is also inconsistent with the fact that when judgment was entered by the plaintiffs in the District Court they did not claim the much higher default rate of interest.
The defendant's case also involved a submission that the evidence contained in those portions of Mr Nicholson's affidavits that were read (those parts of the affidavits of 29 October 2015 and 24 October 2018 were later consolidated into exhibit D6), and the affidavit of 7 March 2018, should not be accepted as truthful evidence. It is necessary to say something about that submission.
It was the defendant who read portions of Mr Nicholson's affidavits. They were read rather than being tendered on the basis that the affidavits contained admissions against Mr Nicholson's interest. Having read this evidence, Mr Newell then sought to discredit Mr Nicholson and his evidence.
The general rule is that a party cannot seek to discredit his own witness. In Wells v South Australian Railways Commissioner & The New Zealand Insurance Co Ltd (1973) 5 SASR 74 Bray CJ said at (85): A party cannot, except within narrow and well known limits, seek to discredit a witness called by him on the ground that he is unworthy of credence on his oath, but if he calls two witnesses whose evidence differs he is at liberty to ask the court to accept one and reject the other.
In the later case of R v Welden (1973) 16 SASR 421 the Crown after the close of the case for the defence sought to call a further witness which would have had the effect of contradicting one of its own witnesses in chief. Chief Justice Bray said (at 427): Next, it is apparent that the Crown was calling evidence in rebuttal which had the effect of contradicting what one of its witnesses, namely Mr Pitt, had said in cross-examination when called as part of the original Crown case. In my opinion, however, this in itself did not render Lockyer's evidence inadmissible. A party who calls a witness cannot, with irrelevant exceptions, call other evidence to show that the witness is a person unworthy of credit, that he can call other evidence to show that he has made a mistake.
In McPhilemy v Times Newspapers Ltd [2000] 1 WLR 1732 Brooke LJ (with whom Thorpe LJ agreed) first quoted from Cross and Tapper on Evidence, 9th ed. (1999) Butterworth, London at p285 where the learned author said this: The prohibition against a party impeaching his own witness means that there is a general rule preventing a litigant from taking any of the above steps with regard to witnesses called by him. It is for the judge to determine whether and to what extent a witness is unfavourable to the party calling him, and no such determination should be made before the witness has been sworn and given a chance to come up to his proof. That is a position dealt with in New South Wales under s 38 of the Evidence Act 1995 (NSW).
Lord Justice Brooke then went on to quote and endorse part of a judgment of Holroyd J in Ewer v Ambrose (1825) 3 B & C 746 at 750: If a witness proves a case against the party calling him, the latter may show the truth by other witnesses. But it is undoubtedly true, that if a party calls a witness to prove a fact, he cannot, when he finds the witness proves the contrary, give general evidence to show that the witness was not to be believed on his oath, but he may show by other evidence that he is mistaken as to the fact which he is called to prove.
I have mentioned one part of Mr Nicholson's evidence where it conflicted with that of Mr Shields, and I reached a view about that conflict. The other areas of conflict do not need to be dealt with. However, in accordance with the authorities to which I have referred, I reject the defendant's submission that Mr Nicholson should be seen not to be a witness of truth. This particularly applies to Mr Nicholson's affidavit of 7 March 2018 concerning why he has no documents to produce. Quite apart from the fact that I dealt with this matter in Kaji (No 2), the defendant cannot read this affidavit and then impugn the deponent's credit to submit that I should reject the evidence contained in it.
The matters put forward by the defendant to suggest a conspiracy are entirely insufficient and inadequate to do so. Lawyers have ethical responsibilities not to plead or allege fraud and other criminality without a proper basis to do so. It is difficult to see in the present matter how those ethical responsibilities have been complied with. Any conclusion that there has been fraud or conspiracy here by the cross-defendants is only attainable by speculation and a predisposition to believe it. I certainly accept that the St George loan was a sham. The person who had the most to gain by all that occurred was Mr Lippits. The history of his dealings with the defendant confirms that.
The defendant's evidence about why he had not joined Mr Lippits to the proceedings or sued him separately was entirely unconvincing. He knew as little of Mr Nicholson's and Mr Shields' wherewithal as he did about Mr Lippits. Nevertheless, the defendant, having used Mr Lippits' assistance to set aside the judgment for possession, then chose not only not to call him to give evidence but chose not to join him to the proceedings to claim against him.
From the point of view of causation, any loss suffered by the defendant was entirely brought about by Mr Lippits, and the defendant himself who was prepared to do anything to borrow money to pay the ATO to avoid losing his house.
The claims in fraud and based on a conspiracy fail.

The open offer

It is necessary to say something about an open offer made by the defendant on 16 April 2019, being the second day of the hearing. The offer, contained in a letter of that date, offered to repay the principal sum and interest at the rate of 12% up to 1 March 2015. It required the plaintiffs to pay the defendant's costs on a party/party basis; alternatively, if costs were not agreed to be paid, the solicitors would obtain instructions that costs be determined by the Court on the basis of the settlement/outcome.
The basis for the 12% rate was said to be evidence of Mr Valentino that such a rate was reasonable. Although that matter appeared in Mr Valentino's first report, I subsequently rejected that evidence as being no more than an assertion and not based on expertise. The date of 1 March 2015 was said to be the date the defendant sought unsuccessfully to discharge the loan and redeem the mortgage.
The defendant submitted that, quite apart from the open offer, interest should not run beyond 1 March 2015 because of the failure of the plaintiffs' solicitors to provide a payout figure. The defendant submitted that it was the failure to provide that figure which prevented the sale of the property to Mr Lippits. The defendant pointed to the approval of a loan to Mr Lippits from ANZ Bank.
The evidence disclosed that a letter was sent on 17 February 2015 from the defendant's solicitors to the plaintiffs' solicitors advising that Mr Lippits was going to purchase the defendant's house. The letter asked for various documents as well as: The precise amount required to discharge your client's mortgage in full including all legal costs, fees and charges properly claimable.
On 20 February 2015 the plaintiffs' solicitor replied giving two indicative figures based on the higher and lower rates of interest. The indicative figures did not include legal and other expenses. The letter noted that an auction was scheduled to take place on 7 March 2015. That letter was answered by a further letter from the defendant's solicitors on the same day, although nothing further was said in relation to the payout figures.
On 24 February 2015 the defendant's solicitors again wrote to the plaintiffs' solicitors saying that they had obtained a copy of the mortgage and had formed the view that it was unconscionable and predatory. They said they would file a notice of appearance in the Supreme Court proceedings and would seek an urgent stay of orders that had been made. They also said they would seek to set aside the mortgage.
That led to the ex parte application on 6 March 2015.
There was in evidence a loan approval from ANZ Bank to Mr Lippits dated 11 February 2015 in respect of an amount of $304,000 with security to be the defendant's property that Mr Lippits was purchasing. However, the evidence does not support a submission that the purchase by Mr Lippits was unable to proceed by reason of the failure of the plaintiffs' solicitors to provide a payout figure. First, there was no evidence from Mr Lippits that he intended to go ahead and purchase the property, and in the light of the evidence about Mr Lippits generally, such an intention cannot be inferred. He had promised much but delivered little.
Secondly, and more significantly, although indicative figures were provided by the plaintiffs' solicitors, the defendant's solicitors never sought to line up a settlement date so that precise figures could be obtained. Rather, they took the view, having obtained a copy of the mortgage, that it was unconscionable and should be set aside. It is clear that that resulted in a complete change of direction with a view to avoiding the need to sell the property to Mr Lippits.
Thereafter the defendant pursued the cross-claim, although taking a considerable time to do so. I have held that the loan agreement should not be set aside or varied. In those circumstances, there is no justification for limiting the payment of interest to 1 March 2015 or any other date.
It is not clear, in any event, what is said to flow from the making of the open offer. I do not consider either of its terms touching the payment of interest to be reasonable. My present view is that the making of the offer has no effect on the way costs will be directed to be paid, but I agreed that the parties could make submissions on costs after the substantive judgment was delivered.

Conclusion

In my opinion the plaintiffs establish their right to possession of the land and to judgment for the amount owing under the loan agreement and mortgage. In relation to the rate of interest, the claim should be confined to the lower rate of interest. The plaintiffs sued in the District Court and elected to claim only the lower rate of interest.
Further, in an email from Mr Shields to Mr Lippits of 3 March 2015 Mr Shields said that the plaintiffs had calculated interest on both the higher and lower rate. The email went on to say that the plaintiffs would accept the lower rate if the matter was settled without the intervention of the sheriff. In his evidence Mr Shields said that he was mistaken in the email. The plaintiffs only ever wanted the lower rate.
I do not consider that the plaintiffs should be confined to interest at court rates after the date of entry of the District Court judgment. Because it was set aside for irregularity, there never was a proper judgment. The defendant sought and obtained an order setting aside the judgment. Contractual interest, therefore, continues to run. Despite the passage of time, I can see no basis for the plaintiffs now to revert to the higher rate.
The plaintiffs must bring in short minutes to give effect to this judgment. Such short minutes will identify the amount owing to the date of judgment on the basis of the lower rate of interest. The short minutes will also provide for judgment for possession of the land and the dismissal of the cross-claim. It may include a grant of leave to issue a writ of possession. I will hear the parties on costs.

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Evidence Act 2005(NSW)

Evidence Act 1995(NSW)ss 38, 140

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