Knezevic v Perpetual Trustees Victoria Ltd & Anor

Judgment 1BASTEN JA: Mrs Donka Knezevic, the appellant, obtained a loan from the respondent, Perpetual Trustees Victoria Limited, secured by a first mortgage over her home. Advances under the loan agreement were made in May 2005; by June 2007 the appellant was in default. The respondent sought possession of the property under the mortgage. In her defence, the appellant sought to set aside the contract under the Contracts Review Act 1980 (NSW) and other statutory provisions. Her defence was dismissed by the trial judge, Adamson J: Perpetual Trustees Victoria Limited v Knezevic [2012] NSWSC 956. 2The appeal must be dismissed with costs for the reasons given by Meagher JA. I also agree with Ward JA with respect to the curious practice, referred to as "white labelling". 3MEAGHER JA: Between December 2002 and April 2005 the appellant, Mrs Knezevic, took three loans, each of which was secured by a first registered mortgage over her home in Croydon, New South Wales. The first, for $285,000, was used to invest in a property development in Clifton Hill, Victoria. That development was being undertaken by a company in the Foresyte group. That group failed shortly after that investment was made. The second loan, of $350,000 from the first respondent (Perpetual), was used to refinance the first in circumstances where the appellant had lost the whole of her investment of $280,000. The third loan, of $462,000 and again from Perpetual, was used to refinance the second and to enable the appellant to provide $70,000 to her daughter to assist her to buy a property. 4The primary judge made the following findings of fact concerning the appellant: "[3] The defendant, who was born on 25 August 1942 in Serbia, migrated to Australia in 1970. In 1973 she bought the Property in respect of which she granted a mortgage to the Commonwealth Bank. In 1975 she granted a mortgage over the Property which secured the sum of $12,000. [4] She has two children, Stevan, who was born in 1979, and Angelka, who was born in 1983. Between 1973 and 1998, she set laboratories for students in her capacity as scientific technical officer at the University of Technology Sydney. In about 1995 the defendant mortgaged the Property to Westpac Banking Corporation to raise the sum of $60,000, which was later increased to $81,000, to renovate the house. She performed much of the renovation herself over a period of about 8 years. [5] In 1997, the defendant refinanced the mortgage with another mortgagee. As at that time the mortgage still secured the amount of $81,000. [6] She elected to be made redundant in 1998 as a result of which she received a payment of approximately $150,000. She also had about $60,000 in superannuation. After 1998, the defendant worked in various jobs until at least 2005." 5Each loan was made in circumstances which involved a number of intermediaries standing between the appellant, as borrower, and the lender; or in the case of the first loan, the funder of that loan, ING Bank (Australia) Limited (ING). The purpose of each loan, as stated to the lender, was that it would be used for investment purposes and, at least in relation to the second and third loans, the appellant was not required to provide proof of her income or as to her overall financial position before the loan was advanced. 6The appellant defaulted in making repayments under the third loan. Perpetual commenced proceedings for possession. Those proceedings were defended on the basis that the third loan was an "unjust" contract within the meaning of s 9 of the Contracts Review Act 1980 (the CR Act) and unenforceable. 7The appellant alleged that at the time the third loan was entered into she did not have the financial capacity to make the repayments of principal and interest required. It was said that Perpetual was indifferent to whether she could repay and that had it made appropriate enquiries, it would have become aware of her inability to do so. The appellant also maintained that she had received little or no benefit from the repayment of the first loan by the taking of the second, and the repayment of the second by the taking of the third. This was because the first and second loans also were unjust and unenforceable. 8The appellant brought a cross-claim against Makhoul Legal Corp Pty Limited (Makhoul), a corporation providing legal services. Makhoul acted for ING in respect of the first loan. In the course of doing so it was required to certify various matters. The appellant alleged that in giving that certification, Makhoul engaged in misleading or deceptive conduct and that had it not done so, ING would not have proceeded with the first loan. On that basis the appellant alleged that Makhoul's conduct materially contributed to her being exposed to a liability which she could not service and which she was thereafter required to refinance by the second and third loans. She claimed, as damage suffered by the conduct of Makhoul and recoverable under s 82 of the Trade Practices Act 1974 (Cth) (now s 82 of the Competition and Consumer Act 2010 (Cth)) the amount outstanding to Perpetual, as well as additional amounts paid to discharge liabilities under the first and second loans. 9Each of the appellant's claims was rejected by the primary judge (Adamson J): Perpetual Trustees Victoria Ltd v Knezevic [2012] NSWSC 956. The appellant appeals from that decision.

The order of these reasons 10The claim made against Makhoul arises from the circumstances of the first loan. The appellant also relies upon the circumstances of the first and second loans in support of her claim that the third loan was an unjust contract. It is convenient, therefore, to address the three loans in the order in which they were made and, in doing so, to address the issues in the appeal as they arise in relation to those loans. Accordingly, I will, in the course of dealing with the first loan, address the issues raised in the appeal from the decision dismissing the claim against Makhoul.

The absence of evidence from the appellant 11Before considering the circumstances of the first loan, one matter should be mentioned at the outset because it was crucial to a number of the conclusions reached by the primary judge; and remains so in the disposition of the appeal. The appellant did not give evidence at the trial. As the primary judge observed at [61], the appellant signed a number of documents at various times including loan applications, declarations and agreements. In circumstances where the appellant did not give evidence "to shed any different light" the primary judge inferred "that she [had] either read and approved of the matter to which she [had] appended her signature or that she [was] willing to take the chance of being bound by its content": at [61]. The primary judge also proceeded upon the basis that there was nothing to displace the inference, which arose from the narrative of facts, that the appellant's "decision to undertake whatever risk was involved in obtaining refinance and increasing her indebtedness as a result of the Third Transaction was an informed, voluntary and deliberate one": at [62]. 12As will become apparent when considering the circumstances of each of the loans, the absence of evidence from the appellant had fatal consequences for her case. It meant that there was no direct evidence which established any inability on her part reasonably to protect her own interests. Nor was there direct evidence as to her inability to meet her obligations under any of the loans or evidence explaining why, if she could not service the loans, she had nevertheless proceeded with them. There was no evidence that she had been misled by any finance broker or other intermediary as to her ability to service the loans or that any applications had been altered or completed after they had been signed by her. To the extent that any information provided to the lenders or their managers was said to be untrue or incomplete, there was no explanation suggesting that the appellant was not aware that that had occurred or which supported a conclusion that she had been a victim, albeit careless, of dishonesty on the part of a finance broker or other intermediary.

The circumstances of the first loan 13In December 2002 the appellant made a loan application through an entity trading as "Ifinance", which was described in various documents as the "originator" of the loan. That application was for a loan of $285,000 and made to Australian Wholesale Lending Pty Limited (AWL). 14AWL was party to a Mortgage Origination and Management Agreement with ING. Under that agreement, AWL undertook to introduce loans to be funded by ING and to manage those loans once approved and settled. That management included the collection of payments, maintenance of lender's mortgage insurance and arranging for discharge or variation of the mortgage. The procedures to be followed with respect to the approval and documentation of loans under that agreement were set out in an ING Mortgage Management Funding Program, Documents & Procedures Manual. That manual provided for the instruction by AWL, as manager, of a "panel lawyer" to prepare the documentation for the loan and to arrange for its execution. Makhoul was a panel lawyer. The ING Manual also provided that the panel lawyers should act as "ING's lawyers" to "protect ING's interests and to refer to ING any matters of concern", whether arising from the manager's instructions or otherwise. It also recorded that ING expected "a high standard of care from its panel lawyers" and that it looked to them to ensure that "transactions are properly structured", and that "any problems with transactions or the conduct of managers are promptly reported to ING". Panel lawyers were also expected "to play a "policeman" role to ensure the integrity of the assets being written into the program". 15Once a loan was approved, the manager was required to prepare a document titled "Schedule 4 - Application for Approval". That document nominated the panel lawyer to act on the transaction, contained instructions with respect to it and formed the basis upon which a loan contract was to be prepared. The Schedule 4 document in respect of the appellant's loan was prepared on about 17 December 2002. The stated purpose of the loan was to "Invest with Foresyte Pty Ltd". The loan product type was "Lo-Doc" and was for a term of 25 years, with repayments of interest only for the first three years and thereafter repayments of principal and interest. The nominated variable rate was 7.35 per cent with a default rate of a further 3 per cent. A copy of the Schedule 4 document was provided to Makhoul. 16The evidence did not indicate what information, if any, was provided by the appellant to Ifinance or to AWL concerning the appellant's financial position. It was not part of the appellant's case that any of the information which had been provided to AWL or ING was misleading or false as a result of dishonesty on the part of any intermediary or that any such conduct should have been discovered had the procedures laid down by ING been followed: cf Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639; and Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699. 17On 17 December 2002 Makhoul wrote to the appellant enclosing a number of documents for execution. Those documents included a loan agreement, a direct debit form and a form of mortgage over the Croydon property. It is necessary to say something about the form of that letter. In addition to containing the address, name and logo of Makhoul at the top right side of the page, it contained at the top left side, and in large type, the name "Foresyte". The letter commenced with the words "We act for the Lender" and concluded: "Yours faithfully, IFINANCE SETTLEMENTS DIVISION" 18There was no evidence which explained why Makhoul permitted Foresyte's name to appear prominently on its letterhead in relation to this transaction. Nor was there any evidence addressed to the relationship, if any, which existed between Makhoul and Foresyte. That was because no solicitor from Makhoul gave evidence at the trial. There was some evidence as to a practice described as "white labelling", which in this context was said to involve a mortgage manager being permitted to use a lender or funder's logo on its correspondence in relation to loans managed on behalf of that lender or funder. The evidence also indicated that this practice extended to the use of the mortgage originator's name or logo on the letterhead of other persons involved in the loans introduced by that originator. None of that provides a satisfactory explanation for why the name "Foresyte" appeared on the letterhead of the solicitors acting for the lender and funder in a transaction in which the borrower was proposing to invest the loan moneys with a company in the group having that name. 19Although the closing words of this letter could suggest that it was sent by the settlements division of Ifinance, reference to other correspondence from Makhoul bearing the same logos makes it reasonably clear that there must have been a division within that practice known as the "Ifinance Settlements Division" and that the same letterhead and form of signing off was used whenever Makhoul was acting with respect to loans to borrowers who had been introduced by Ifinance. It will be necessary later to return briefly to this subject when addressing what inferences properly could be drawn as to there being any relationship between Ifinance and Foresyte. 20The loan agreement was signed by the appellant on 18 December 2002. It required that the loan be used to invest with Foresyte Pty Ltd. The appellant also signed a certificate stating that she had read the loan agreement; that she had been given the opportunity to obtain legal advice on its nature and effect, but chosen not to do so; that she understood the obligations and risks involved in signing it; and that she had signed it freely, voluntarily and without pressure. 21Under the terms of the ING Manual, the panel lawyer was required, at least two days prior to the proposed settlement of the advance, to deliver a certificate to ING and the manager. That certificate was to be in a particular form and, in addition, was taken to incorporate a further 16 statements. Several of those statements are set out by the primary judge at [108]. They relevantly included: "5 In acting in respect of the Documents we have complied with the usual legal practices commonly adopted in this State when acting for mortgagees of freehold real estate and the Funder's current instructions to us. ... 11 The cheques have been drawn in accordance with the purpose stated in the loan offer or special conditions." 22On 20 December 2002 Makhoul gave such a certification to ING, AWL and Australian Wholesale Lending Mortgages Pty Limited, the proposed lender and mortgagee. The letter addressed various matters with respect to the mortgage loan and its terms. They included the following: "We warrant that all special conditions have been complied with or will be complied with at settlement. We warrant all funds being telegraphically transferred are being used for the purpose of the loan." 23The first loan was settled and monies advanced on 24 December 2002. $283,129.50 was paid into an account of Foresyte with the Commonwealth Bank. In Makhoul's letter to Westpac of 23 December 2002 and its letters to the appellant and Ifinance of 27 December 2002, the party to whom that payment was to be made was described as "Foresyte Investments Pty Ltd". The evidence, however, indicated that this was an incorrect description of the holder of the account to which the funds were to be transferred. That account holder was Foresyte Pty Ltd. That appears from the letter from Foresyte to the appellant dated 24 December 2002 which was subsequently signed by her. 24The appellant authorised Foresyte to pay $200,000 of that amount to High Noon Properties Pty Ltd as an unsecured loan for a term of two years at an interest rate of 9.8 per cent per annum. The appellant also acknowledged that $64,000 was paid on account of fees due to Foresyte Pty Ltd and that the balance was to be paid into the bank account of the development project. Receipts issued by Foresyte and dated 24 December 2002 indicate that $16,000, being part of that balance, was paid for "Deposit Bonds". The evidence did not explain what those bonds were. 25As is noted by the primary judge at [23], shortly after the first loan was made the companies in the Foresyte group failed and went into liquidation. Unsecured creditors, including the appellant, received no dividends from those liquidations. That failure also meant that the appellant did not continue to receive interest income from her loan to High Noon Properties. From 1 May 2003 she defaulted in making the monthly repayments due under the first loan.

The appeal from the dismissal of the claim against Makhoul 26The appellant alleged that in providing its certifying letter dated 20 December 2002, Makhoul made the following representations to ING and AWL: "(a) the First Loan and Mortgage were suitable for settlement; and/or (b) the First Loan and Mortgage were suitable for settlement because it had complied with the "usual legal practices commonly adopted in this State when acting for mortgagees of freehold real estate"; and/or (c) the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to act with a high standard of care; and/or (d) the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to ensure the transaction was properly structured; and/or (e) the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to "play a 'policeman' role to ensure the integrity of the assets being written into the program"; and/or (f) the First Loan and Mortgage were suitable for settlement because it had complied with ING's current instructions to ensure the First Loan and Mortgage were dealt with and documented as if regulated by the Code; and/or (g) the cheques had been drawn in accordance with the purpose stated in the First Loan offer; and/or (h) there were no matters of concern relating to the First Loan and Mortgage; and/or (i) the second cross defendant had exercised a high standard of care and ensured that if there were any problems with the proposed transaction such problems would have been reported to ING prior to providing the Solicitor's Certificate." 27Representations (a) to (f) are that the loan and mortgage "were suitable for settlement". Representations (b) to (f) include specific reasons for that being so. With one exception, those reasons are that Makhoul had complied with general obligations that it was said to have in its role as a panel lawyer. Those obligations were claimed to arise from the statements in the ING Manual referred to above. The one exception is representation (b), which gives as the relevant reason that there had been compliance with the practices and instructions described in paragraph 5 of the incorporated statements. Representation (g) follows the language of paragraph 11 of those incorporated statements. It is also in similar terms to one of the express warranties which appeared at the conclusion of Makhoul's letter. Representations (h) and (i) mirror statements in the ING Manual as to ING's expectations of its panel lawyers. With the exception of representation (g), none of the representations was made expressly. The particulars relied upon in support of the making of the implied representations contend that they arose by reason of the panel lawyer's obligation "only" to provide its certificate if the lawyer had acted in accordance with ING's general expectations as recorded in the Manual. 28The primary judge accepted that there was a limited implied representation in the terms of (a) and that there was an express representation in the terms of (g). Her Honour concluded that none of the other alleged representations was made: at [121]-[125]. The appellant challenges those conclusions other than in respect of representation (g). 29I agree with her Honour's conclusions in relation to each of the pleaded representations, other than (a). In my view there was no representation made in the terms of that paragraph or in terms which were limited to the specific matters which Makhoul was retained to do. None of the representations in issue was made in express terms. Nor is it possible to imply the making of any of those representations from any of the express statements made or warranties given. The basis on which the appellant maintains that those representations should be implied also was not made out. The panel lawyer was not required "only" to provide the certificate if it had acted in accordance with ING's expectations. 30There is no other basis on which to imply the making of the representations in issue. ING required that specific matters be certified and no others. It had laid down procedures for the documentation and settlement of loans and retained a solicitor to act in its interests and in accordance with those procedures. The statements and warranties required to be made or given were in relation to specific matters which were able to be verified or checked by the lawyer for accuracy before they were made or given. In contrast, a statement that the transaction was "suitable for settlement" is of uncertain and potentially broad content, and is unqualified in the sense that it is in absolute terms. The making of a statement in those terms would involve the lawyer warranting a state of affairs which could not always or absolutely be assured, even with the exercise of a high degree of skill and care. Had the appellant alleged that by providing the certificate and by its other conduct, including silence, Makhoul had made representations as to its performance of the specific tasks that it was required to undertake, those representations would have been that it had done so with the requisite degree of care and skill of a competent lawyer: cf Boland v Yates Property Corp Pty Ltd [1999] HCA 64; 74 ALJR 209 at [104]; Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1 at [329]-[331], [431]-[432], [692]; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205 at [353]-[354]. Such an implied representation would be consistent with the performance of the lawyer's retainer. That is not the case with the representations alleged. Those in paragraphs (a) to (f), (h) and (i) are in absolute terms and, to that extent, inconsistent with the terms of Makhoul's retainer, which required the exercise of reasonable skill and care, albeit to a high standard. 31If, contrary to my view, a more limited representation was made in terms of (a), it was no more than that to the extent that specific matters had to be certified before settlement could take place, that had occurred and settlement could go ahead in accordance with the procedures laid down. I agree with the primary judge's conclusion at [122] that such a representation was not misleading or deceptive or likely to mislead or deceive 32The primary judge also held that the representation in paragraph (g) was not misleading or deceptive: at [123], [124]. The appellant challenges that conclusion on the basis that the correspondence from Makhoul in late December 2002 referred to payment being made into an account in the name of Foresyte Investments Pty Ltd. That challenge must be rejected. The circumstances described above show that on settlement of the first loan, $283,129.50 was to be paid into an account of Foresyte Pty Ltd and then paid away or applied in accordance with the appellant's authority. Although those funds were to be "telegraphically transferred" to the relevant account rather than paid by cheques drawn in favour of Foresyte Pty Ltd, that difference was not material and the statement that monies would be paid "in accordance with the purpose stated in the loan offer", which was to invest "with Foresyte Pty Ltd", was substantially correct. 33Mrs Knezevic also argued that representations (a) to (f) were as to a "future matter", thereby attracting the application of the presumption in s 51A of the Trade Practices Act. The primary judge rejected that argument: at [127]-[129]. That conclusion is challenged. It is said that the representations were that the loan and mortgage were suitable for settlement, which was something yet to occur, and were therefore with respect to a future matter. The primary judge was correct to reject that argument. Each of the relevant representations spoke as to the position with respect to its subject matter at the time the certificate was given. The fact that the characteristic which the subject matter of each representation (the "loan and mortgage") was said to have (being "suitable for settlement") was to be assessed by reference to an event to occur in the future did not alter the fact that the characteristic described a state of affairs which was said to exist at the time the certificate was given. 34For these reasons the primary judge was correct to conclude that there was no misleading or deceptive conduct on the part of Makhoul. Her Honour went on to consider the causation issues which arose in the appellant's claim against Makhoul. Her conclusions in respect of those issues are also challenged on appeal. I will deal with them briefly. 35The primary judge rejected the appellant's claim that she had suffered loss or damage "by conduct" of Makhoul within the meaning of s 82(1) of the Trade Practices Act. Her Honour held that the relevant loss or damage was due to the failure of the Foresyte group and its inability to repay or return her investment, and not the alleged conduct of Makhoul which may have resulted in ING making an advance when it may not otherwise have done so: at [134]-[141]. In particular the primary judge observed: "[139] Makhoul's conduct in issuing the certificate provided the defendant with no more than an opportunity to enter into the investment with Foresyte, which was the effective cause of her loss. Makhoul's conduct in issuing the 2002 Certificate had the effect that the monies were advanced to the defendant and applied in accordance with her direction. The alleged contravening conduct did not have any relevant causal effect on the defendant's decision-making; she did not rely on it." 36The relevant causal inquiry is whether there is a sufficient and direct link between the conduct proscribed by the Act and the consequences which are the subject of the appellant's claim: Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259; 15 BPR 29,421 at [67], [71]. The appellant accepts that the chain of causation which she relies upon to establish that link includes, as a necessary element, her making and adhering to a decision to proceed with the loan for the purpose of investing in Foresyte. However, she argues that the loan funded by ING and the investment in Foresyte were part of a single transaction, and that the effective cause of her loss was ING's decision to advance the funds. 37That submission was made in recognition of the difficulty which she otherwise faced in establishing a sufficient causal link between the alleged misleading conduct and her loss from investing in Foresyte. That difficulty was, as the primary judge observed, that there was not a sufficient causal link between that conduct, which provided her with the opportunity to invest funds with Foresyte but did not mislead her in her decision to do so, and the loss or damage suffered: see Henville v Walker [2001] HCA 52; 206 CLR 459 at [100]-[103]; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets [2008] NSWCA 206; 73 NSWLR 653 at [4]-[21], [79]-[82], [615]-[618]. 38The appellant sought to distinguish her position on the basis that it was within the circumstances described in the tentative dicta of Hodgson JA in Ingot at [80]-[83]: "[80] I am inclined to think that investors may be able to claim damages on the basis of misleading conduct where: (1) Because of misleading conduct that misleads people involved in putting together an investment opportunity, an investment opportunity is made available to investors which would not have been made available at all but for the misleading conduct; (2) Investors invest in it; and (3) The investors lose money because the investments are, by reason of matters concealed by the misleading conduct, worth less than the investors paid for them. [81] I accept that, if the investors actually know the truth concealed by the misleading conduct, it would be difficult if not impossible to characterise their loss as being loss or damage suffered "by" the misleading conduct, within the meaning of provisions such as s 1005 of the Corporations Law or s 82 of the Trade Practices Act. However, I do not think the investors would need to prove that they themselves relied on and were misled by the misleading conduct, except possibly to the extent of showing that they did not know the truth concealed by the misleading conduct. As to where the onus of proof would lie in relation to that matter, I note that, in relation to claims based on s 996 of the Corporations Law, s 1007 appears to place the onus on a defendant to prove that the plaintiff did know. [82] To require investors to prove also that they actually relied on the misleading conduct, or even that if they had known the truth they would not have invested, seems to me possibly superfluous. But for the misleading conduct, there would have been nothing to invest in; and in my opinion it is plainly foreseeable by the persons responsible for the misleading conduct that, if the misleading conduct results in the offering of investments that are worth less than their price by reason of the matters concealed by the misleading conduct, people not knowing the truth may invest in them and suffer loss by reason of the matters concealed by the misleading conduct. On that basis, it does seem to me arguable that loss of that kind would be loss suffered "by" the misleading conduct, at least so long as the investors did not know the truth. [83] It is not necessary for me to express a final view on this question, or on whether my suggested approach is consistent with Digi-Tech; and I will refrain from doing so." 39The appellant also relies upon the observation of Giles JA in Ingot at [21]: "Perhaps in some circumstances a plaintiff enters into a transaction simply because the opportunity to do so is available, when it would not have been available had there not been misleading conduct, and that plaintiff can be regarded as in like position to the passive sufferer from another's act." The reference to the passive sufferer is to someone who suffers loss as a direct and natural consequence of an innocent party's act which has been induced by another's misleading conduct. 40It is not necessary in this case to explore the correctness or otherwise of Hodgson JA's tentative view because an argument based upon that view is not available to the appellant. That argument requires that ING and AWL were misled by the relevant conduct. The evidence before the primary judge did not permit a finding that either was misled by the alleged conduct such that the loan would not have proceeded if they had been aware of the "true" position as alleged by the appellant. That position was that Makhoul was "on notice of the potential impropriety" of the first loan because the proposed recipient of the funds, Foresyte, was a related entity of the originator of the loan, Ifinance. Assuming that to have been the fact, it was by no means obvious that knowledge of that relationship would have made any difference to whether the loan was approved and proceeded. 41This makes it unnecessary to consider whether the "true" position was that as alleged by the appellant. Had it been necessary to address that question I would have concluded that the evidence did justify a finding that there was such a relationship. The evidence established that Ifinance and Foresyte had a common director, that the loan application was introduced by Ifinance and that the purpose of the loan was to enable an investment in a property development being undertaken by Foresyte. Mr Makhoul was a principal in the corporate legal practice. That practice allowed the Foresyte name to be used on its letterhead in relation to the documentation and settlement of loans originating from Ifinance. The most likely reason for that was that Foresyte was involved in the introduction or making of the loan via Ifinance. That would have been consistent with the loosely described practice of "white labelling". As described by Mr Wort, that included making reference to the originator of the loan on the lender's solicitor's correspondence. Makhoul did that in relation to the third loan by the inclusion of the reference to RESI on its letterhead. It is not likely that Foresyte's name was included on Makhoul's letterhead merely because it was the entity in which the borrowed funds were to be invested. These circumstances justify a conclusion that Ifinance was a part of, or closely associated with, the Foresyte group. 42Secondly, the circumstances of the present case are different from those in which Hodgson JA suggested that the causal link required might be satisfied. If Makhoul's alleged conduct misled anybody, it misled ING or AWL in relation to the decision to advance money to the appellant. In the circumstances postulated by Hodgson JA, the misleading conduct conceals matters affecting the true value of an investment opportunity with the result that prospective investors (as well as those putting the investment opportunity together) are misled as to that value. That is not the present case. The decision to advance the funds was not concerned with and did not involve any consideration of the value or suitability of the investment opportunity which the appellant proposed to pursue. The misleading conduct was not directed to either of those matters. Nor was the consequence of any misleading conduct that the suitability of the ING loan was misstated or that the value of the Foresyte investment opportunity was concealed. 43The primary judge did not err in dismissing the appellant's cross-claim against Makhoul. The appeal against her Honour's order doing so should be dismissed with costs.

Appellant's arguments in the Perpetual appeal with respect to the relevance of the first loan 44Relying on the provisions of the CR Act, the appellant argues that the first loan was also "unjust" and unenforceable and, for that reason, that she received no real benefit from the second loan, which was used to discharge that liability, or the third, which was used to refinance the second. It is said that the first loan "bore all the characteristics of the sort of predatory lending" considered by this Court in Tonto Home Loans. Although that argument was not raised in the pleadings it was dealt with by the primary judge and rejected: at [90]. 45The circumstances of the first loan are quite unlike those in Tonto Home Loans. There the introducing broker engaged in dishonest conduct by submitting false information with the loan applications without the borrowers' knowledge. That broker had an incentive to do so because it was associated with the property development in which the borrowers proposed to invest. The fact of that conduct was not discovered, as it should have been if the lender's guidelines had been followed. Here, so far as the evidence addressed the circumstances of the first loan, it did not justify findings that there had been any dishonesty on the part of Ifinance or Foresyte in relation to the making of the application for the loan. Nor did it justify a finding that there had been any misstatement concerning the appellant's capacity to service the loan, or that if there was, it was initiated by the finance broker, and that the appellant had not been aware of, or complicit in, the making of it. As the primary judge observed, in the absence of evidence from the appellant the inference to be drawn, consistently with her signed certificate to that effect, was that "she knew what she was doing and she voluntarily took a commercial risk, the extent of which she was in a good position to assess": at [90]. 46The primary judge was correct to reject the appellant's submission that she obtained no benefit from the first loan or its refinance by the second. However, it does not follow that because it was applied to discharge the mortgage securing the second, the third loan could not have been unjust for the purposes of s 7 of the CR Act. In St George Bank Ltd v Trimarchi [2004] NSWCA 120, monies advanced by the bank had been used to repay an earlier loan of National Mutual. This Court rejected an argument that the fact that the advance had been used to discharge that debt was "conclusive" of whether the subsequent loan was "unjust". The Court also accepted that the fact that the impugned loan had been used to discharge an earlier mortgage "did not mean that relief had to be withheld" in the exercise of the discretion given by s 7. That was especially so in that case because an aspect of the injustice of the later transaction was the absence of legal advice to the borrowers as to their rights to challenge the earlier one: Trimarchi at [22]-[25]. There was no such argument made in this case.

The circumstances of the second loan 47Interstar Securities (Australia) Pty Ltd (now Challenger Mortgage Management Pty Ltd) (Interstar or Challenger) had an agreement with Perpetual to assist it in the establishment and management of "mortgage backed securities programs", which are investment programs under which the lender, or a related entity, issues securities (usually debentures) containing repayment obligations which are secured by mortgages held by the lender as security for its underlying lending activities. That agreement between Interstar and Perpetual was not in evidence. Interstar in turn entered into agreements with third parties to introduce, and manage, the underlying mortgage loans. Those parties included Fox Home Loans Pty Ltd (Fox Home Loans). Under a Loan Origination and Management Agreement dated 12 August 2002, Fox Home Loans agreed to market and promote loan products provided by Interstar, to submit applications for such loans and to manage and service those loans once approved and drawn down. In the performance of those functions, Fox Home Loans agreed to adhere to the provisions of Interstar's Guidelines Manual. 48The loan products provided by Interstar included what were described as "Retro" type loans. The Guidelines Manual, current in August 2003, described those loans as "designed for borrowers who are unable to provide financial statements or taxation returns at the time of their application for a loan". Applicants for such loans had to be "self-employed, or a full time investor". The procedures for applying for those loans required that the application include a declaration "that the loan amount applied for is within the applicants' ability and capacity to meet their payments" and be accompanied by a completed loan application "excluding asset and liabilities statements, excluding stated income", those being things which would otherwise have accompanied such applications. 49From early May 2003 the appellant was in default in making monthly repayments of the first loan. In late July 2003 she approached Fox Home Loans to arrange a loan of $350,000. On 1 August 2003 the appellant completed and signed, apparently with the assistance of Fox Home Loans, a mortgage loan application which described her occupation as "self employed investor" and stated that she had commenced her current employment in March 1996. The appellant also signed a "Documentation Declaration" which included the following: "I/We... Confirm that in relation to my/our Loan Application for $350.000 I/We supplied all Pay Slips, Group Certificates, Tax Returns or Tax Assessments notices, Confirmation of Employment, Bank Statements or any other evidence of savings history in original form to Fox Home Loans Pty Limited." 50The appellant also signed a "Loan Purpose Check List" which is dated 1 August 2003. It described the purpose of the proposed loan as being to "refinance a property for investment purposes". In addition, she signed a "Retro Declaration" which included the following statement under the heading "Declaration of Purpose": "I/We declare that the credit to be provided to me/us by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." and the following statements under the heading "Declaration of Financial Position": "I/We certify warrant and represent to you that: (a)I am/we are aware of our financial obligations under our proposed loan with you and I am/we are fully able to meet our obligations under this loan; (b)I am/we are satisfied that our obligations to you will not adversely impact on our ability to meet all my/our other financial obligations (including living expenses) as and when they fall due. I/We acknowledge that you are relying on this statement in considering whether or not to approve this loan application." 51In principle approval was given to the loan application on 7 August 2003. The evidence of Ms Tran, the Interstar credit assessment officer who assessed the application, was that the information on which that approval was based was submitted electronically by Fox Home Loans and processed online. That information included the following statements (reproduced in a printout of the screen page recording that decision): "Applicant's accountant has declared that the loan amount applied for is within app ability and capacity to meet their repayments." "There are no PAYG Applicants." "Purpose is not predominantly for personal use." "Satisfactory individual Credit Report has been obtained for Ms Donka Knezevic." "Ms Donka Knezevic - Repayment of refinance debts is satisfactory." 52By facsimile dated 8 August 2003 Fox Home Loans submitted the signed loan application to Interstar for approval. The documents accompanying the application included the print out of that screen page and copies of statements of account issued by AWL in respect of the first loan for the period to 30 April 2003. On 14 August 2003 a loan of $350,000, with interest only repayments for the first three years at an interest rate of 6.82 per cent and a default rate of a further 4 per cent, was approved. 53On about 19 August 2003 the appellant signed a loan agreement which referred to initial monthly repayments of $1,989.17. The appellant also signed an acknowledgment that she had read the loan agreement, been given the opportunity to obtain legal advice, but had chosen not to do so, and that she understood the obligations and risks involved in signing it. She also acknowledged that she had signed the agreement freely, voluntarily and without pressure. 54The second loan was settled on 2 September 2003. Perpetual paid $296,933.78 to ING in discharge of the first loan and mortgage. The balance of $50,019.97 was paid into the appellant's account with the ANZ bank. The appellant gave a direct debit authority in favour of Interstar to draw the monthly loan repayments from that account. The evidence before the primary judge showed that all of the monthly loan repayments for the second loan were made from that account and by drawing on that amount.

Appellant's arguments in the Perpetual appeal with respect to the relevance of the second loan 55Before the primary judge the appellant relied upon the circumstances of the second loan as supporting three arguments relevant to the unjustness of the third loan contract. The first was that, as a result of its involvement in the second loan, Perpetual knew or ought to have known of the appellant's inability to service the third. That was said to be so because Perpetual or Interstar knew or ought to have known of the defaults in respect of the first loan and because Fox Home Loans had received documentation concerning the appellant's financial position as described in the Documentation Declaration dated 1 August 2003. The primary judge rejected both strands of that argument: at [70], [71], [75], [76]. The second argument was that the conduct of Perpetual and Interstar in relation to the second loan revealed an indifference to the appellant's capacity to service it which made it more likely that they were also indifferent to that capacity at the time the third loan was made. The primary judge rejected both aspects of that argument: at [73], [77]. The third argument was that the second loan would not have proceeded if Perpetual and Interstar had made adequate inquiries as to whether there had been defaults under the first loan and as to the existence of documents relating to the appellant's income and employment status. That was said to be relevant to whether the appellant received any benefit from the discharge of the second loan. The primary judge rejected that argument: at [72]. The appellant repeats these arguments on appeal and challenges those conclusions of the primary judge. 56It is convenient to start with the two strands of the appellant's first argument. The primary judge found that Fox Home Loans had sent the statements of account in respect of the first loan to Interstar: at [71]. The evidence did not show that Fox Home Loans was aware that there had been defaults after April 2003. If it was aware of those defaults, the online entry recording "(r)epayment of refinanced debts is satisfactory" would have been knowingly false. Ms Tran's evidence was that the information she relied upon "as identifying the history of payment in respect of the loan that was being discharged" included that entry, as well as the AWL statements of account. It was not suggested to her in cross-examination that notwithstanding that she had that information from Fox Home Loans, she was required by any procedure or otherwise to go further and request statements covering the period after April 2003. The position therefore was that Interstar had information that the repayment history of the first loan was satisfactory and there was no evidence that any further inquiry was required by any guideline or considered necessary. That being the position, the primary judge did not err in concluding that neither Perpetual nor Interstar was aware of those defaults, or ought in the ordinary course to have become so aware. 57The primary judge also rejected the argument that the Documentation Declaration indicated that the appellant had provided, or at least was able to provide, documentation in the categories described. In my view her Honour was correct in doing so. In its terms the declaration was that documents of the kind described, which had been provided to Fox Home Loans, had been provided in "original form". It was not a statement that those documents existed or that they existed and had been supplied to Fox Home Loans. The evidence did not show that any documents of the kind described had been supplied by the appellant in support of her application. As the primary judge observed, if the appellant's statement in her loan application that she had been a self-employed investor since March 1996 was correct, it was most unlikely that she also provided pay slips or group certificates showing that she was not self-employed: at [76]. 58Although the appellant appeared to submit otherwise, Ms Tran did not concede in cross-examination that the Declaration indicated to her that there were, or might be, documents of the kind referred to, so as to require Interstar to make inquiries about them. She did concede that if Fox Home Loans had said that it had received group certificates or tax returns from the appellant, she would have responded that the application did not "fall under the Retro loan". However, she did not accept that in the context of the appellant's application the Declaration should be read in that way, and the cross-examiner did not press questions directed to obtaining that concession. 59The appellant also argued that the reference in the screen printout to her accountant having declared that she had the capacity to meet repayments was inconsistent with her being unable to provide financial statements or taxation returns. That does not follow. The fact that the appellant had an accountant was not inconsistent with an inability to provide financial statements or taxation returns at the time of the application for the loan. For the appellant to have made such a case, it would have been necessary for her to give evidence. At the same time she would have had to explain, if her statement that she was able to meet her obligations under the loan was not true, how and why that declaration came to be made and submitted to the lender. 60These conclusions rejecting the two strands of the appellant's first argument make it unnecessary to consider the challenge to the rejection of her third argument. The relevance of that argument to the question whether the third loan was "unjust" is not readily apparent because that question turns on a consideration of the circumstances in which the third transaction occurred. There is one further matter to which reference should be made before addressing the appellant's second argument. Had it been necessary to consider the issue, I would have concluded that the primary judge's holding that the second loan would have gone ahead, even if Interstar had known of the earlier defaults, could not be sustained. Ms Tran's evidence, given by affidavit and in cross-examination, was that she would not have approved the loan with such knowledge. That affidavit evidence could not be discounted on the basis that she was "brow-beaten" by senior counsel into making that concession: cf [72]. 61The primary judge was also right to reject the appellant's second argument. To the extent that it was relevant for Interstar to consider the borrower's capacity to repay when addressing the retro loan application, it did so. It received the "Declaration of Financial Position" and Ms Tran had regard to the information submitted online by Fox Home Loans. None of this established indifference. Had it done so, as the primary judge observed at [73], that fact would not have established indifference in relation to the third loan.

The circumstances of the third loan 62Interstar also had a Loan Origination and Management Agreement with RESI Mortgage Corporation Pty Ltd (RESI) dated 4 December 2003. That agreement was in substantially the same terms as the earlier agreement with Fox Home Loans. Carr Financial Services Pty Limited, trading as RESI Ashfield, was a franchisee of RESI. Mr Carr was the principal of that franchise. On 19 February 2005, at a meeting with Mr Carr, the appellant signed a loan application for an Asset Value loan of $475,000. 63The primary judge made the following unchallenged findings in relation to that meeting: "33 On Saturday 19 February 2005, the defendant attended the offices of Carr Financial Services Pty Ltd, (Carr Financial Services) where she met with Mr Carr, a mortgage originator. Carr Financial Services traded as RESI Ashfield pursuant to a franchise agreement with RESI Mortgage Corporation Pty Ltd (RESI). Carr Financial Services offered RESI products to prospective borrowers. It was part of their role to select the appropriate RESI product for the borrower by reference to the criteria set out for each loan. 34 I accept Mr Carr's evidence that the defendant's spoken English was very good, that she was able to respond appropriately to questions that he asked and that she appeared to be able to read and understand the documents which he gave to her. 35 At the meeting the defendant told Mr Carr that she wanted to refinance a loan from Fox, which had been for an investment rather than to purchase the Property and that she also wanted an extra $70,000 to help her daughter buy a property, and an additional $50,000 by way of a line of credit. She told him that she did not have copies of her latest tax returns. She also told him that she was self-employed, that she did not have an Australian Business Number (ABN), that one of her jobs was as a hostess at Canterbury Racecourse and that she had investments. She handed him copies of loan statements for the Second Transaction, none of which indicated any default. The statements corroborated her assertion that the mortgage manager for the Second Transaction had changed from Fox to MP Mortgages Pty Limited trading as Mortgageport. 36 Mr Carr considered that there was only one RESI product for which the defendant would qualify, since she had neither an ABN, nor tax returns: namely what he described as an Asset Value loan, but which was also referred to as an "Easy Doc" loan. The applicable interest rate for such a loan was lower than that applicable in respect of the Second Transaction. It was a requirement of such a loan that the borrower make a declaration that he or she could afford to repay the loan. However, as the name "Easy Doc" suggests, the prospective borrower was neither required to declare the quantum of his or her income, nor to substantiate it by reference to primary documents or business records. Easy Doc loans were available for loans for predominantly business purposes. 37 During the meeting on 19 February 2005 the defendant signed an application for a loan of $475,000. ...The defendant declared that the information contained in the application was true and complete and that the loan was for investment purposes. She also signed the second page of a document headed "Privacy Notice"." 64In the loan application, under the heading "Personal Particulars", the appellant's occupation was described as "hostess-hospitality" and her employer as "self employed". 65By a letter dated 21 February 2005, RESI Ashfield advised the appellant that her loan application had been approved in principle. The loan amount of $475,000 was divided into three parts: an Asset Value loan of $355,000, a further Asset Value Loan of $70,000 and a line of credit of $50,000. The monthly repayments during the interest only period of ten years exceeded $2,800. Mrs Knezevic signed an acceptance of that approval which is dated 23 February 2005. 66At some stage the amount of the loan was reduced to $462,000, which included a line of credit of $37,000 rather than $50,000. On 25 February 2005 the appellant signed an "EasyDoc Declaration of Financial Position" in which she stated: "I/We certify warrant and represent to you that: (a) I am/we are aware of our financial obligations under our proposed loan with you and I am/we are fully able to meet our obligations under this loan; and (b) I am/we are satisfied that our obligations to you will not adversely impact on our ability to meet all my/our other financial obligations (including living expenses) as and when they fall due; (c) I/we request Perpetual Trustees Victoria Ltd to assess this facility without the documentary evidence of my/our income and financial positions such documentary evidence is not readily available or would not be a true representation of my/our income and financial position; (d) I am/we are aware that the interest rate payable to you is higher than the rate which would be payable if I/we qualified for an alternative loan product by the provision of satisfactory documentary evidence of my/our income and financial position; and (e) ... I/we acknowledge that you are relying on this statement in considering whether or not to approve this loan application." 67The appellant also signed a "Declaration of Purpose" which declared: "I declare that the credit to be provided to me by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." 68On 25 February 2005 a summary of the loan and supporting documentation was sent by RESI Ashfield to Interstar. That summary included a certificate from the "originator/broker" that it had made "full and complete enquiries" to satisfy itself that "the entire proceeds of the loan will be used only for the purpose of the borrowers"; and that there was no evidence or indication "to suggest that the loan (or any part of it) is being provided for the benefit of a third party" or that "any of the borrowers give the appearance of not fully appreciating the nature of the loan transaction". 69Settlement of the advance was initially scheduled for mid March 2005. Eventually it occurred on 19 April 2005. Perpetual was paid $353,539.73 in discharge of the second loan. An amount of $67,333.77 was deposited into an account of the appellant's daughter. That amount was applied towards the purchase of a property. Her daughter also borrowed $160,000 through RESI to assist in that purchase.

The appeal from the dismissal of the claim against Perpetual 70The appellant relied upon three principal matters as justifying the conclusion that the third loan contract was "unjust" for the purpose of the CR Act. The first was that Perpetual had engaged in "asset lending", in that it had entered into the third loan on the basis that the appellant's home provided adequate security and without having any basis for believing, and accordingly being indifferent to, whether the appellant was able to perform her repayment obligations. It was said that at the time that the loan was made the appellant in fact was unable to meet her obligations under it and that had Perpetual and Interstar not been indifferent as to her ability to do so, and made appropriate enquiries, they would have discovered that fact and the loan would not have proceeded. Finally, it was said that the appellant was in a desperate financial position as a result of the first loan and that her decision to enter into the third should not be treated as having been an "informed, voluntary and deliberate one". 71Before addressing the arguments on appeal, some general matters should be noted concerning the relevant principles. 72As Allsop P emphasizes in Provident Capital Ltd v Papa [2013] NSWCA 36 at [7], the first step in applying the CR Act is to consider whether the contract was unjust. That step calls for a broad evaluation of unjustness having regard to the public interest and the totality of the relevant circumstances. In doing so, regard must be had to the matters referred to in s 9, to the extent that they are relevant. His Honour continued: "[7] ... Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances." See also Kowalczuk at [87] and the earlier decisions of this Court discussed in Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51]. 73Judges of this Court have avoided making generalised remarks about the unjustness or otherwise of what is referred to as "asset lending" or the making of "lo doc" loans. As Allsop P observed in Tonto Home Loans at [3], the use of such labels "should be eschewed as determinative of legal reasoning". His Honour made similar remarks (which were agreed in by Bathurst CJ and Campbell JA) in Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260; 15 BPR 29,445 at [43]. In Khoshaba, Basten JA observed at [128]: "To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests ... . That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required." 74In Kowalczuk, referring to that observation, Campbell JA added that "whether lending on the basis that the loan can adequately be repaid from the security, is in the circumstances of any particular case unconscionable or unjust, depends on other matters as well". His Honour then referred, by way of example, to the decisions in Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; 11 BPR 20,841 and Khoshaba. 75In Elkofairi, a husband and wife gave a mortgage over their jointly owned property to secure a loan which was to be used principally by the husband in his own business activities. The lender knew that the wife had no income or ability to make repayments and that the husband had limited business experience. The lender had no information as to the nature of the business or investment to be undertaken or as to the income it was likely to generate. In circumstances where there was to be a large borrowing secured over the wife's asset and the lender knew that her only source of repayment would be the sale of her asset, the transaction was held, so far as the wife was concerned, to be unjust within the meaning of s 7: 11 BPR 20, 841 at [53]-[59], [79]. 76In Khoshaba, a husband and wife, who were pensioners, borrowed moneys which were to be invested by their daughter in Karl Suleman Enterprizes, which was subsequently found to be operating a Ponzi scheme. The loan application was prepared by a broker associated with Karl Suleman Enterprizes. The application falsely stated that the husband was employed and earning $43,000 a year. It also contained the forged signature of the wife. The husband and wife had no knowledge of, or involvement in, the making of the false statements or the forgery. The mortgage originator to whom the application was submitted did not take steps to check the correctness of the statements made. Had enquires been made in accordance with the lender's guidelines, the husband's true employment position would have been revealed and the loan not gone ahead. That breach of the guidelines allowed the broker dishonestly to procure the loan without the knowing involvement of the borrowers, in circumstances where it should not have gone ahead. 77The circumstances in Tonto Home Loans have been referred to earlier. A finance broker in the Streetwise group engaged in dishonest conduct by including false information in loan applications, without the borrowers' knowledge, so as to procure investments in a property development business undertaken by another company in that group. That was able to occur because of failures on the part of the intermediaries introducing mortgages to the lender to comply with the guidelines it had laid down. 78Returning to the present case, the primary judge rejected each of the elements of the appellant's case. She was not satisfied that at the time the third loan was made Mrs Knezevic was unable to service it: at [68]. Her Honour held that Perpetual and Interstar were not indifferent to whether the appellant had the capacity to meet her obligations under the loan: at [85]. Most relevantly, her Honour found that the appellant had "not established any matter relating either to her circumstances or to the terms of the loan" which indicated that she was unable to act at all times in her commercial interests: at [89]; and that in respect of each of the loans "she knew what she was doing and she voluntarily undertook a commercial risk, the extent of which she was in a good position to assess": at [90]. 79It is convenient to start with the last of these findings. The only reasons suggested as providing any basis for rejecting them are that the appellant's involvement in the first loan indicated that she was unable properly to assess what was in her own best interests, and that the outcome of her involvement in the first loan was the result of her being no longer able to make judgments in her own best interests because of the precarious position she found herself in. Neither of these matters provides a sound basis for concluding that the primary judge's findings involved any error. They have to be considered in the light of her Honour's unchallenged finding, at [34], that the appellant's spoken English was good, that she was able to respond appropriately to questions that Mr Carr asked and that she appeared to him to be able to read and understand the documents which he gave her. 80The appellant decided to invest $280,000 with Foresyte on terms which generated a return of 9.8 per cent per annum, albeit on only $200,000 of that amount. Those terms also included the opportunity to purchase units in the proposed development at a modest discount. There is a range of possible explanations for why she did so. They are not merely that the appellant was unable to assess or act in her own best interests. Her conduct is explicable on the basis that she was careless, gullible, imprudent, a risk taker or that there were other factors which justified her decision. In the absence of any evidence from her explaining the circumstances in which her decision was made, the primary judge was justified in making the finding that she did. That finding was also consistent with the certificate dated 18 December 2002 which the appellant signed in relation to the first loan. 81Her Honour's unchallenged findings at [35] and [36] are also significant in this context. When she first saw Mr Carr the appellant informed him of the purpose for which she required the loan and told him she did not have copies of her latest tax returns, that she was self-employed and that she had investments. Mr Carr then explained that she qualified for an "Easy Doc" loan and that she would not be required to either declare her income or substantiate it by reference to primary documents or business records. She would, however, have to make a declaration that she could afford to repay the loan. The appellant subsequently made a declaration that she "was fully able to meet" her obligations under the loan and that those obligations would "not adversely impact on" her ability to meet her other financial obligations. The primary judge correctly rejected the submission that the declaration was "no more than an expression of her subjective belief" made in objectively desperate circumstances: at [69]. The primary judge also is not shown to have erred in not being satisfied that at the time the loan was made she was unable to service it. The appellant tendered group certificates and taxation assessments. She submitted that those documents recorded the whole of the income that she had received during the relevant periods. The difficulty with that submission, as the primary judge observed, was that if that was the position, it was inconsistent with the statements in her signed declaration, and in some respects with her statement to Mr Carr that she also had investments. 82More significantly, if the position was that the appellant did not have the capacity to repay the loan from her own income or resources, that was something of which, in the absence of any evidence from her, she must be taken to have been aware. That made her declaration to Interstar and Perpetual incorrect and probably false to her knowledge. In the absence of any explanation from the appellant as to why that had occurred, the mere fact that she was unable to service or repay the loan was not sufficient to make it "unjust". 83Her Honour's finding that Perpetual and Interstar were not indifferent as to whether the appellant had the capacity to meet her obligations must also be upheld. Whilst they required no evidence to substantiate that ability, the basis on which they advanced the loan did not require that they do so. They sought and obtained the declaration and did not know that it was or might be false. 84The primary's judge's conclusion that the loan contract was not unjust involved no error. Having regard to the evidence, that conclusion was plainly correct. The appellant was not shown to be unable reasonably to assess and protect her interests. Nor was she shown to have been the subject of any dishonest or misleading conduct which could have consisted of, or which was assisted by, action or inaction of those for whose conduct Perpetual or Interstar might be taken to be responsible. Interstar dealt with the appellant though Mr Carr on the basis that Perpetual would refinance the appellant's existing debt and advance further funds to her against the security of her home, without requiring her to substantiate by documentary evidence her income or her ability to repay the loan. What Interstar did require and obtain was a declaration from the appellant that she was able to do so without adversely impacting upon her ability to meet her other financial obligations. That declaration was apparently given freely by someone who was able to understand what she was doing. That statement was either true or false, and in the latter event to the appellant's knowledge. In either case, in the absence of evidence from the appellant, she was to be taken to have appreciated the position she was in and the risks which she was undertaking. The latter included the risk, which was significant if she was unable or likely to be unable to make the monthly loan repayments, that she would default and lose her property. These circumstances do not justify a conclusion that the contract was unjust. The appeal must be dismissed.

Proposed orders 85The orders which should be made are: (1)Appeal dismissed. (2)Appellant pay the first and second respondents' costs of the appeal. 86WARD JA: I agree with Meagher JA's reasons and with the orders his Honour proposes. I wish briefly to note my concern as to the so-called practice of "white-labelling" when engaged in by legal practitioners (who, it must be remembered, are officers of the Court). 87My concern arises from the potential for such a practice to mislead the public, or those dealing with legal practitioners who engage in white-labelling, as to the relationship between the legal practitioner and the entity whose logo is situated prominently at the top of the letterhead and, indeed, as to the entity from whom the relevant correspondence has emanated. 88By way of example, it is by no means obvious on the face of letters issued on "Foresyte" letterhead (see, for example, Blue 467, Blue 535, 536 and 537) that the letters are from solicitors at all, as opposed to letters prepared by solicitors but issued by another entity (either the loan originator or the entity with whom the funds were to be invested). Although those letters include Makhoul's logo and the words: Documented and Settled by Makhoul Symond Solicitors and Attorneys most are signed with the signature block "Yours faithfully, IFINANCE SETTLEMENTS DIVISION". 89In substance, the documents at Blue 535 and 536 are the same letter (with some variation in the order of the concluding paragraphs), changed only to identify the source of the instructions for disbursement of the funds, one sent to Mrs Knezevic and the other to Ifinance. 90The letter at Blue 467, sent to Mrs Knezevic on 17 December 2002 (to which Meagher JA has referred), commences by stating "We act for the Lender" and referring to "the Settlement team" but is couched in language not immediately suggestive of correspondence from the lender's solicitors to a borrower, since the statement "We look forward to working with you to a successful settlement" suggests some form of working relationship with a borrower who is not the practitioner's client. 91In a different context, the Law Society has promulgated rules as to use of solicitors' letterheads (Rule 35 of the Solicitors' Rules) that recognise the need to avoid conduct in the use of solicitors' letterheads that would be likely to mislead the public. 92While adoption of the practice of "white-labelling" in the present case has not been suggested to have had a misleading effect on any of the parties to the transaction and while, in the absence of any explanation from Makhoul (who chose to give no evidence in the proceedings), it is not clear how widespread the practice may be in that firm (or more generally), it seems to me that caution should be exercised in the use of such a practice. I have real concerns as to the appropriateness of such a practice. If it is widespread in the profession, then it may warrant attention by the Law Society.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 July 2013