(h) it was clearly not drafted with the benefit of legal advice or the input of a legal practitioner, in circumstances where the Mortgagee understood that Mr Hancock was acting and advising.
74 Heidtman & Co sent the facsimile from Hancocks Solicitors to Response, including the Heads of Agreement. This was done on or about 5 December 2002. On 6 December 2002 Response wrote to Mr and Mrs Hadid advising of the settlement of the $130,000 loan. On receipt of the letter, Mr Hadid, once more, telephoned Mr Littleford and requested to meet him.
75 In early December (but necessarily after 6 December 2002), Ms Bradaric met with Ms Palumbo and Mr Hadid. There was a conversation in which Mr Hadid, referring to the letter explaining the allocation of monies from the loan, asked:
"Who is Split Cycle International Pty Ltd and what is the amount of $4,400 for? Why is their rate so high? Wasn't it two months' interest up front? Anna you get ripped off with all the fees and charges you are paying. I know a very good solicitor who can get you out of paying it back. Also my wife's name on the letter is not right."
To this statement, that Ms Bradaric alleges Mr Hadid made, Ms Bradaric allegedly replied that he should contact John Hancock.
76 On 20 December 2002, the First Mortgagee consented to the registration of the Second Mortgage. On the same day, Mr Littleford received a telephone call from Mrs Hadid alleging that she did not know anything about the loan. On the same day, Mr Littleford received a complaint, by telephone, from Ms Palumbo. The complaint was about the amount said to be owing under the loan.
77 Finally, after receiving advice relating to the preliminaries for title registration, Mr Theos, on 31 December 2002, lodged the Second Mortgage for registration. In that regard the lodgement was done, as would be usual, by a clerk in the employ of Heidtman & Co, on the instructions of Mr Theos.
78 Mr Littleford alleges that, on 10 January 2003, there was a further conversation between Mr Hadid and Mr Littleford in which Mr Hadid queried the amount now owing on the loan and, according to Mr Littleford, acknowledging that he knew Ms Palumbo, Mr Hancock and Mr Flammia and was aware of the transaction from which the debt arose. I do not accept that this conversation, to this effect, occurred.
79 On 20 January 2003, there was a conversation between Mr Hadid and Ms Palumbo in which Mr Hadid tore up the letter written to him in November (the Heads of Agreement) and insisted upon a letter from Ms Palumbo guaranteeing the refinancing of her home and acknowledging her responsibility for the caveat.
80 Mr Littleford alleges that there was a further conversation with Mr Hadid in which Mr Hadid explained that Ms Palumbo will be in a position to repay the amount shortly and that Mr Hadid and Mr Littleford should work together on this to resolve the issues. Mr Hadid, however, reiterated that he had not signed any documents; that the matter was solely done by Ms Palumbo and sought to obtain Mr Littleford's assistance in arranging a large ($500 M) investment from overseas. Further, following that conversation, Mr Littleford alleges, Ms Palumbo rang him confirming the fact that she had reached a commercial arrangement with Mr Hadid in which she would pay the $130,000 and that she would pay this month's interest. I accept two conversations occurred in or to this effect.
81 As would be expected, thereafter, there were appropriate notices of default, given to Mr and Mrs Hadid, and there were letters relating to the non-payment of Response and/or Mrs Khan.
Credit of Witnesses and Subsidiary Facts
82 The evidence in some areas has been set out more fully because of the conflict in the evidence. While there are other conflicts in evidence that are not set out, the resolution of those conflicts is more obvious. Part of the resolution of those conflicts depends on the reliability and credit of various witnesses.
83 The evidence of Mrs Hadid is accepted without qualification. She is a devout, moral person who acted in a manner that displayed a truthfulness, candour and reliability that is rare. She recalled that which one would expect and answered directly and fully, whether or not the answer was thought to be helpful to her case, or assisted or protected her husband or their relationship.
84 Largely, I also accept the evidence of Mr Hadid. While there is not the same level of confidence in his reliability as is the case with his wife, his demeanour and his relative openness made his evidence believable. There are some areas where, either because of the stress under which he was operating at the time, or because they were then unimportant, his memory is faulty, but his testimony does not disclose any attempt to dissemble.
85 Ms Bradaric was not as reliable as either Mr or Mrs Hadid. I am not of the view that she lied, only that she was a little flippant and it affected the care taken with her evidence in a way which made the detail unreliable.
86 Mr Shami gave evidence on a secondary issue with which I will deal shortly. His evidence was largely reliable. He was a truthful witness but did not seem to understand the import of much that was occurring. He seemed extremely distressed and unwell, but truthful.
87 Mr Farouk Hadid was extremely frank, truthful and well spoken. Ultimately, however, his evidence related to peripheral issues.
88 Mr Flammia was not called. No attempt was made to call him or to explain his absence. While an application was made on his behalf that there was no case to answer, which application would ordinarily involve an election not to call evidence, no reliance was placed on this as a reason for not calling him. Nor could it be without at least seeking leave of the Court to call the evidence despite the "no case" application: see Uniform Civil Procedure Rule 29.10(4).
89 Ms Palumbo was the sixth defendant but, in these hearings, she did not appear and she was not called.
90 Mr Theos and Mr Littleford were both called by Mrs Khan. To a large degree, Response and Heidtman & Co acted throughout this transaction, and the events surrounding it, as one entity. The necessary inference (and in some respects the direct evidence) was that the companies/firms and the individuals worked in that way on all or many such transactions over many years.
91 Mr Theos, for the most part, gave the impression of being honest and helpful. There are some significant respects in which that is not so. First, the timing of events given by him is unreliable. Secondly, and to some degree related to the first, his notes are, in significant respects, not contemporaneous. It is likely that one or two of them (particularly relating to contact with Mr Flammia, both its timing and the practice of independently checking with the solicitor giving independent legal advice) are inaccurate. Dates have been altered, as have other details. I do not accept, in the absence of any note confirming it in any other similar matter, that contact with Mr Flammia, or the solicitor giving independent advice, was part of the ordinary practice. Thirdly, I do not accept that by 28 November 2002, Mr Theos did not have significant concerns and doubts about the genuineness of the mortgage and security documents. I will return to this later.
92 My initial reaction to the evidence of Mr Littleford was that it was glib. I was prepared initially to assess the evidence on the basis that he was in unfamiliar circumstances, was less prepared than others (particularly the legal practitioners called) and sounded glib because he was seeking to cover his embarrassment at his inability to answer questions. His evidence, however, continued over three days. While at times he was tired and exasperated, particularly during the cross-examination on behalf of Mr Hancock, his evidence at other times gave little doubt that he was prevaricating. At times there was a significant time gap in answers after which there was a qualification of a response that he seemed to think was unhelpful to Mrs Khan's case. Mr Littleford had (like Mr and Mrs Hadid) a financial interest (albeit, in Mr Littleford's case, indirect) in the outcome of the proceedings.
93 Having made that comment, I do not think Mr Littleford set out to tell untruths. I find, however, that his evidence, on any controversial issue, was unreliable. This is because his notes (if any) were poor, his recollection poorer and he reconstructed events on the basis of what should have happened if he were acting properly and not in doubt about the genuineness of the mortgage and security documents. This course led him into the necessity to attempt to avoid questions that required detail or exposed inconsistency. His evidence is not accepted on any controversial matter.
94 Lastly, I turn to the demeanour of Mr Hancock. Mr Hancock was a most unimpressive witness. It is rare to see a witness, particularly a legal practitioner, whose evidence is so unbelievable. He dissembled. He prevaricated. He gave the impression, to which I will return, that, during the events in late 2002/early 2003, he was more concerned with Ms Palumbo's welfare than for Mr or Mrs Hadid. He acted in other matters for Ms Palumbo.
He gave the impression that, with what was originally an honest belief in the genuineness of the arrangement, he took part in a process, which he later realised was not genuine. He thereafter rationalised his conduct and deludes himself about it.
95 I do not accept the genuineness of his notes. I do not accept he had any conversation or conference with Mrs Hadid. Further, I do not accept he had any relevant conversation or conference with Mr Hadid except on two occasions. The first was a meeting in or about May 2002 with a number of people one of which was Mr Hadid. The others present were independent business people and it was not a conference at which it was appropriate to take instructions or in which instructions to act were given. Nevertheless, at that meeting, Mr Hadid expressed the view that he would like to assist Ms Palumbo and would "go guarantee" for a $30,000 loan to her. The second occasion was a conversation after the settlement of the mortgage monies. Otherwise, Mr Hancock took his instructions from Ms Palumbo or Ms Bradaric and did not speak to either Mr or Mrs Hadid. Nor did he send them a letter or any information that would alert them to the events occurring or the conduct he was purporting to perform on their behalf. All correspondence was sent to Ms Bradaric or Ms Palumbo.
96 Mr Hancock seemed to have no recollection of events that were significant at the time, which events would normally be memorable. Often, when asked, he had to refer to (or read from) his affidavit on such matters. On matters not recited in the affidavit, Mr Hancock would reconstruct events seemingly from what ought to have occurred, if he were avoiding liability, and which best fits the other evidence, all of which he had heard and/or read.
97 The view taken of the witnesses allows resolution on one of the important but subsidiary aspects of the factual matrix: Mr Hadid's knowledge of the transactions and his reactions to it. It is not in issue that Mrs Hadid had no knowledge, prior to 27 or 28 November 2002, of any transaction, and no knowledge of the persons involved, other than her husband. Mrs Hadid's reaction, as described, was at once shock, anger and dismay. She accused her husband of cheating on her, not only in relation to funds. These are not unusual reactions and the reactions are obvious from the evidence adduced.
98 Mr Hadid had greater knowledge. He originally (May 2002) expressed a willingness to guarantee the loan to Ms Palumbo. The nature of their relationship has already been described. I infer that Mr Hadid, somewhat naively, did not appreciate the burden or potential liability that such a guarantee involves and took the view that the risk was low.
99 After the initial indication, in or about May 2002, that he was prepared to guarantee a loan to Ms Palumbo, Mr Hadid may have had one other conversation in relation thereto, but it is difficult to ascertain and the evidence is not conclusive, even on the balance of probabilities. Mr Hadid did not have a conversation concerning a loan of $130,000 before the receipt by him and Mrs Hadid of the letter from the Land Titles Office.
100 Moreover, properly understood, the evidence of Mr Hadid's conduct after receipt of the Land Titles Office letter is consistent with his lack of knowledge beforehand, and I so conclude.
101 On receipt of the letter, initially by Mrs Hadid, Mr Hadid was required to deal with the alleged debt and, once its source was ascertained, his wife's suspicions and accusations relating to Ms Palumbo.
102 For a period, the stress of the situation prevented Mr Hadid from acknowledging or accepting the reality of the situation. When he did try to deal with it, he dealt with it by confronting Ms Palumbo. She dealt with it by giving him a "guarantee" that the $130,000 would be paid and he would be able to recover the money. I find that she intended the Heads of Agreement to be a letter of comfort, which, fraudulently, would allow Mr Hadid to claim from AIATA Insurance the amount purportedly spent on unissued tickets. I accept that Mr Hadid, when he was later advised that the whole arrangement was illegal, destroyed the letter and demanded a binding document, legally enforceable, that Ms Palumbo would pay the debt. This confrontation led to Ms Palumbo ringing Mr Littleford.
103 The conversation, overhead by Ms Bradaric, and referred to in [75] above, occurred after the Heads of Agreement document had been signed and at a time when Mr Hadid had become comforted that: