KS v Prime Capital Securities Pty Ltd

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: KS v Prime Capital Securities Pty Ltd (No 5) Citation: [2026] ACTSC 10 Hearing Date: 20-24 October 2025 Decision Date: 29 January 2026 Before: Mossop J Decision: (1) The proceedings are listed for the making of final orders on 12 February 2026 at 9:15am. (2) The plaintiffs are to provide to the Associate to Mossop J and to the defendant a proposed form of orders and a document setting out the calculations required for the purposes of determining the dollar amount to be included in those orders by 9 February 2026. Catchwords: FINANCIAL SERVICES – STATUTORY UNCONSCIONABILITY – Loan agreements – where defendant created system to insulate it from knowledge of borrowers’ personal circumstances – where defendant did not require information to establish that borrower and guarantor could service loan – where, despite borrower being trustee corporation and loan being labelled a business loan, property being purchased was to be owner occupied – where broker received substantial fees upon borrower’s entry into loan agreement – where defendant could increase interest rate under loan if it suffered increased costs or a decrease in effective return, despite loan not being identified as a variable rate loan – where defendant would receive substantial fees on default – where defendant had no system in place to ensure the borrower was an appropriate one – defendant’s conduct unconscionable EQUITY – UNCONSCIONABLE CONDUCT – Knowledge – where plaintiff under special disadvantage – where defendant only dealt with plaintiff through broker – where apparent that plaintiff under significant financial pressure – financial pressure not, of itself, a special disadvantage – defendant had no knowledge of plaintiff’s conditions and therefore her special disadvantage – defendant’s conduct not unconscionable in equity CONSUMER PROTECTION – BORROWERS AND GUARANTORS – Whether guarantor under loan agreement a “debtor” for National Credit Code (Cth) – where guarantor termed a “principal debtor” and has significant obligations under loan agreement – where, nevertheless, distinction maintained between borrower and guarantor under loan agreement – guarantor not a “debtor” Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth), ss 12BAA, 12BAB, 12CB, 12CC, 12GJ(2), 12GM Australian Securities and Investments Commission Regulations 2001 (Cth), regs 2B(1)(a), 2B(1)(f), 2B(1)(g), 2B(1)(h) Court Procedures Rules 2006 (ACT), rr 1617, 1619 Crimes Act 1900 (ACT), ss 311, 334 Land Titles Act 1925 (ACT), ss 93, 94, 96 National Consumer Credit Protection Act 2009 (Cth), ss 178, 179, 180, Sch 1 – National Credit Code (Cth), ss 3, 5, 77, 204(1) Personal Property Securities Act 2009 (Cth) Cases Cited: Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 267 CLR 1 Blomley v Ryan (1954) 99 CLR 362 Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309; 9 BFRA 524 CIMC Raffles Offshore (Singapore) Ltd v Schahin Holding SA [2013] EWCA Civ 644; 2 All ER (Comm) 760 Clipper Maritime Ltd v Shirlstar Container Transport Ltd [1987] 1 Lloyd’s Rep 546 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 275 CLR 165 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 Heald v O’Connor [1971] 1 WLR 497 Integrated Securities No 3 Pty Ltd v Creatrix Web Development and Online Marketing Solutions Pty Ltd [2021] NSWSC 596 Jams 2 Pty Ltd v Stubbings (No 3) [2019] VSC 150 Lee v ATL (Australia) Pty Ltd [2023] NSWCA 327 Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265; 75 SASR 1 Perpetual Trustees Victoria Ltd v Burns [2015] WASC 234 Prime Capital Securities Pty Ltd v Nusage Pty Ltd [2024] ACTSC 36 Prime Capital Securities Pty Ltd v Nusage Pty Ltd (No 2) [2024] ACTSC 119 Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27; 281 CLR 338 Shannon v Permanent Custodians Ltd (No 3) [2022] WASCA 112 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 276 CLR 1 The “Juliana” (1822) 2 Dods 504; 165 ER 1560 Parties: KS (by her litigation guardian A Torline) (First Plaintiff) Nusage Pty Ltd in its own capacity and as trustee for the Nusage Trust (Second Plaintiff) Prime Capital Securities Pty Ltd (Defendant) Representation: Counsel Z Mason with R Markham (Plaintiffs) B Katekar SC with D Robens (Defendant) Solicitors Adero Law (Plaintiffs) Lexmerca Lawyers (Defendant) File Number: SC 140 of 2024 MOSSOP J: Introduction

1. These proceedings relate to a loan agreement (Loan Agreement) entered into on 19 July 2021 by the plaintiffs, KS and Nusage Pty Ltd (Nusage), and the defendant, Prime Capital Securities Pty Ltd (Prime).

2. KS, the first plaintiff, has a history of mental illness. She sues by a litigation guardian.

3. The Loan Agreement was for a short-term loan of an amount of $850,000 to Nusage, a company that had been recently incorporated and of which KS was the sole director and shareholder. The purpose of the Loan Agreement was described in the agreement as “Working capital” but in fact it was to provide the plaintiffs with the funds to purchase a property in Ainslie (Ainslie Property).

4. Eventually, the plaintiffs fell into default under the Loan Agreement. As a consequence, a higher rate of interest applied and Prime obtained an order for possession of the Ainslie Property, which was the security for the loan. The Ainslie Property was ultimately sold by Prime as mortgagee in possession.

5. The plaintiffs seek both statutory and equitable relief as follows: (a) Orders pursuant to s 180 of the National Consumer Credit Protection Act 2009 (Cth), s 77 of the National Credit Code (Cth) (Code) and s 12GM of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) that the Loan Agreement is invalid, unenforceable and set aside and that only the principal and limited interest are payable to the defendant (less any amounts already paid by the plaintiffs). Damages were also sought pursuant to ss 178, 179 and/or 180 of the National Consumer Credit Protection Act. (b) A declaration that the Loan Agreement is unconscionable in equity. (c) A declaration that the defendant engaged in unconscionable conduct in connection with the supply of financial services contrary to s 12CB of the ASIC Act.

6. By the time of the hearing, the focus was on three issues: (a) whether, under the Loan Agreement, KS was a “debtor” so that the Code applied to her entry into the Loan Agreement; (b) whether the defendant had engaged in unconscionable conduct in equity; and (c) whether the defendant had engaged in unconscionable conduct in connection with the supply of financial services contrary to s 12CB of the ASIC Act. Evidence

7. The hearing took place over four days. Much of the evidence in the case was documentary because most of the dealings between KS and other people relating to the real property and financial transactions were documented or recorded in electronic form. Similarly, KS’s medical records and other documents relating to her mental state at various times were also available.

8. However, four witnesses gave oral evidence, each called by the plaintiffs.

9. The plaintiffs called KS to give evidence. The manner in which she gave evidence was consistent with the psychological and psychiatric evidence that was put before the court. She was very anxious, overinclusive in her answers, and keen not to be misunderstood or have her evidence misconstrued. I consider that her evidence was reliable in parts and unreliable in other parts. I have taken care to consider her evidence in the context of contemporaneous documentary materials.

Facts

16. The findings of fact which follow are largely derived from the extensive documentary material that was put before the court. The findings of fact are organised chronologically, indicating by the description in the headings those facts known to Prime at the time of the transaction and those facts which are now established by the evidence but which were not necessarily known to Prime at the time.

17. Overall, the process adopted by Prime involved no direct contact with the plaintiffs, and the progress towards the making of the loan is evidenced by the various stages of Prime’s internal processes.

18. Included in the findings of fact that follow are findings based upon records of KS’s consultations with Dr Marianne Bookallil (KS’s general practitioner (GP)) and a counsellor, and other documents relevant to her mental state at particular times. These are included because they provide contemporaneous information relevant to KS’s mental health throughout the relevant period and provide what is likely to be more accurate evidence as to KS’s mental state than her recollections in the context of litigation several years after the events.

KS and her properties

19. KS was born in China in 1962. As at the date of the Loan Agreement, she was 59 years old. She completed school and university in China. She moved to Australia as an adult. She received a scholarship to come to Canberra in her twenties. She started but did not complete a PhD. Her first marriage was marred by domestic violence. She remarried but her second husband died in the early 2000s as a result of a degenerative neurological condition. She had some form of employment in the public service but her employment was terminated for underperformance. Her mental health appears to have declined after the death of her second husband.

20. There are three residential properties relevant to the current case. First, there was a house in Lyons where KS had lived with her second husband until he died in about 2001 (Lyons Property). Second, there was an apartment in a newly constructed residential complex on West Row in Canberra City, the purchase of which was completed in 2016 (West Row Property). Third, there was the Ainslie Property, a house which was purchased using the funds provided by Prime under the Loan Agreement. The Ainslie Property had six bedrooms, four bathrooms, a study, a home office, a kitchen and a kitchenette.

21. From 2010, KS was in receipt of a disability support pension as a result of her mental health, which is described in more detail below.

22. The circumstances in which she came to move out of the Lyons Property were not the subject of detailed evidence. KS’s evidence was that, following her husband’s death in about 2001, she commenced hoarding a lot of items at the Lyons Property. She said that she wanted to move out of the Lyons Property because of the hoarding, memories of her husband, two occasions when burglars came to the property, and the fact that she felt unsafe taking the bus from Lyons.

23. On 22 December 2014, KS entered into a contract to purchase the West Row Property off the plan for $959,900. The settlement date was 9 November 2016, and the transfer was registered on 8 December 2016.

24. From October 2014, KS had been subject to a psychiatric treatment order. A further order was made on 26 March 2015 but, upon review in August 2015, it was not continued.

25. KS gave evidence that, in late 2020, she had discussions with four other women whom she had met in refuges about purchasing a large group home together for shared independent living. She only knew those women by pseudonyms: Mary, Susanne, Kylie and Deborah. The group had shared experiences of trauma.

26. On 8 December 2020, KS entered into a contract to sell the Lyons Property for $830,000. Settlement was anticipated to occur on 22 January 2021. However, it appears that there was a delay and that it was only on 5 March 2021 that settlement in fact occurred. In addition to the $83,000 paid as a deposit, KS received $761,178.85 after payment of her expenses.

KS meets Peter Carew, finance broker

28. On 28 February 2021, KS met Mr Peter Carew at a farewell party for a friend. He told her that he helped people to obtain finance to buy homes. KS thought that this was fortuitous as she was looking to buy a home to live in with other women with disabilities. It turned out that Mr Carew was the managing director of Realm Property and Finance Pty Ltd (Realm).

29. On 1 March 2021, KS exchanged emails with Mr Carew. Mr Carew indicated that KS could send him details of the properties she was looking at and that he was looking forward to “progressing funding requirements”.

30. On 2 March 2021, KS attended a doctor’s appointment, complaining of falls. As part of the notes of her examination of KS, Dr Bookallil recorded: “Nervous breakdown re selling house”. The doctor thought the falls were probably secondary to hypotension and poor diet.

31. It was in those circumstances that, at some stage on 2 March 2021, KS signed a document entitled “Mandate to Act”, appointing Realm as a broker to make loan applications on her behalf. The indicative loan product was described as “Commercial Loan Facility” and the maximum loan amount was $1,105,000. It was proposed that it be a 12-month facility with interest capitalised. Various fees were payable, including a brokerage fee of 1.1% of the loan amount.

32. Late that evening, Mr Carew emailed KS with a copy of the executed Mandate to Act for her records. He indicated that the maximum loan amount figure was based upon a 65% loan to valuation ratio of the proposed sale price in relation to the Ainslie Property. The maximum loan approach was adopted because: it provides you with flexibility in respect to the management and utilisation of your future ‘cash’ resources…ie retaining sufficient funds to meet your living expenses and existing mortgage loan commitments and potential future expenditures in respect to proposed residential property acquisition … together with funding of expenses related to the sale of your “West Row” property.

33. He requested a copy of the contract of sale for the Ainslie Property. He also requested various other supporting documents that he would need. KS provided a copy of the contract for the Ainslie Property at 10:39pm. Mr Carew then set about preparing a loan application to a business trading as IBN Direct (IBN).

34. On 3 March 2021 at 11am, he emailed KS, saying: “I’m in the process of putting together an initial submission to a lender and need your input”. Then, at 11:23am, he sent a further email with a draft of the application form, including a description of KS, her financial circumstances and the rental potential of the property. He asked her to “check the wording in this loan scenario form and call me to discuss before I email through to the lender”. It is likely that there was some discussion of the terms of the application and then, at 12:22pm, Mr Carew sent KS an amended loan application form. That was targeted at the acquisition of the Ainslie Property and sought a 12-month loan equivalent to 65% of the purchase price. The application form included the following:

Loan Purpose: Acquisition of Residential property for future redevelopment – block subdivision

Repayment / Exit Loan to be approved with 12 months interest capitalized – On Strategy: review at expiry client will review refi options or may seek to finalise loan from own financial resources or refi with a development loan, should she opt for a DA on the subject security.

Loan outline: • Client has 2 residential assets that will be sold over the next 12 months – net value after payout of existing RM1 - $1.7M • Client was a university academic having been employed with the ANU for several years. In addition, client has a private business providing student tutoring services (over past 7 years ). In 2020, client advises that student clientele was significantly reduced / impacted by COVID. Client has decided to redirect her energies into property investment and development and is in the process of establishing a Discretionary Family Trust to facilitate current and future property acquisitions. In the future client advises that the tutoring business will likely resume. In addition, client receives Centrelink disability pension, which is a secondary income source. • Target property has a substantial dwelling on the site and is estimated to generate $92,800 gross rent, producing a yield of 5.12%pa. There is also the option of renovating the site to accommodate a granny flat further improving the rental yield prospects for the asset (NB this option will likely form part of the client’s future review in 12 months time).

35. This was largely a work of fiction. It was true that KS did have two residential assets, although the contract of sale for one of them was to be completed in a few days. Everything else was, at the least, a very significant elaboration upon the truth. The Centrelink pension was her only significant source of income being, at the time that table was prepared, $841.20 per fortnight.

36. The same day, 3 March 2021, at 7:36am, Mr Carew emailed KS indicating that she should call Ms Brown (who practised under the name Emma Brown Legal) and engage her to assist with the contract of sale in relation to the Ainslie Property.

37. At 8:32am the same morning, Mr Carew emailed an accountant, Mr Atif Iqbal (carbon copied to KS). This email said: “We need to go down a commercial path for this acquisition. I have a private lender prepared to do the deal with the borrower being a family trust and corporate trustee”. Mr Iqbal was asked to set up the trust and trustee company.

The prospect of purchasing the Ainslie Property

38. On 3 March 2021 at 10:49pm, Mr Carew emailed Ms Brown (carbon copied to KS) asking her to assist with the proposed purchase of the Ainslie Property. He indicated that the contract would not be conditional upon finance. He foreshadowed that there would be a settlement date of 3 July 2021 at KS’s request and that an $85,000 deposit would be paid.

39. On 4 March 2021 at 9:02am, Ms Brown emailed Mr Carew saying she had provided advice to KS about the contract of sale for the Ainslie Property and the possibility of using KS’s other property as security. Mr Carew indicated that he would talk to Ms Brown later that day.

40. On 4 March 2021, Mr Carew coordinated with Ms Brown, Mr Iqbal and KS the establishment of a purchasing entity and a trust, and the finalisation of the sale price and contract. Mr Iqbal and KS exchanged emails about possible names for the company to be established and whether or not any of those names were available. Ultimately, one of the names identified by KS, Nusage, was found to be available and they proceeded with that name.

41. Ms Brown was contacted by KS on the morning of Friday, 5 March 2021. Ms Brown was asked to enquire of the sellers of the Ainslie Property whether there could be a flexible settlement date. It appears from the circumstances of the request that KS was seeking to have the contract allow for an earlier (rather than later) settlement date. Ms Brown made that enquiry of the sellers’ agent and replied by email to KS early that afternoon that the sellers had indicated that there could not, at that stage, be flexibility as the sellers did not yet know when they would be able to move out of the property. The request for an earlier settlement date when, as will be seen, finance had not been arranged, is indicative of KS’s anxiety about moving into the Ainslie Property.

The contract to purchase the Ainslie Property

42. On 5 March 2021 at 11:07am, KS emailed Ms Brown, indicating that the company that would be the purchasing entity for the Ainslie Property was called Nusage Pty Ltd and that the trust was the Nusage Trust. KS signed the documents necessary to establish Nusage (the company) on 5 March 2021. She was the sole director and secretary of the company and held the two $1 shares in the company. The company was registered that day. The trust deed, however, was only executed by KS as the director of Nusage on 28 June 2021.

43. At 2:44pm on 5 March 2021, Mr Carew emailed KS to make it clear that, if she did not sign the contract of sale for the Ainslie Property that afternoon, she ran the risk of the sellers’ real estate agents finding another prospective buyer who was prepared to pay more than the $1.735 million that KS had offered.

44. At 4:27pm, Mr Iqbal emailed KS, letting her know that Nusage had been successfully registered.

45. At 5:41pm, KS emailed Mr Carew, letting him know that the sellers had accepted the offer of $1.735 million and that she had signed the contract of sale. She said: “I now need to focus my energy on obtaining an agreement from RAMS (with your help) to sell the city property”. This was a reference to the West Row Property which was subject to a mortgage to the business trading as RAMS Home Loans (RAMS).

46. The contract to purchase the Ainslie Property was entered into that day (5 March 2021). It is notable that this occurred on the same day that the sale of the Lyons Property ultimately settled: see [26] above.

47. Following the entry into the contract of sale for the Ainslie Property, KS sent thank you emails both to Ms Brown and to the real estate agents involved in the transaction.

48. The deposit of $83,000 on the Ainslie Property was paid in two instalments of $19,416 on 5 March 2021 and $63,584 on 9 March 2021. Receipts were issued by the real estate agent on 9 March 2021.

49. On 9 March 2021 at 5:18pm, Ms Brown’s assistant emailed KS. The email noted that settlement was due on 5 July 2021, requested that KS call Ms Brown’s office as soon as possible to book an appointment in preparation for settlement, and attached a copy of the exchanged contract and “our initial letter”. The covering email contained a reference to finance in the following terms: If you are obtaining finance for this purchase please send a copy of the exchanged contract to your bank/broker so they can process your unconditional loan approval as soon as possible. Please note any delay in sending this to your banker could result in a delay in completion of the purchase.

50. The initial letter, signed by Ms Brown on 9 March 2021, advised of the contracts having been exchanged at auction (even though this was not the case) and indicated that the contract was legally binding and that if the contract could not be completed then KS may lose her deposit. The letter also contained instructions about signing and returning the loan documents when sent by “your bank”, the need for a final inspection and the process involved in settlement. The letter indicated the matters that were not covered by the fixed professional fees, impliedly indicating the limited scope of the retainer. After this, the next interaction between KS and Ms Brown was on 23 June 2021.

Nothing happens about finance

52. Also on 9 March 2021, at 5:25am, Mr Carew emailed KS indicating that he was “back on deck”, asking for payment of his fees, suggesting that they meet to go through the RAMS material and stressing that it was “important that we get the loan application under way as soon as possible”.

53. Later that day, at 3:57pm, Mr Carew emailed KS an invoice for the work completed to date including negotiations and advice on the purchase of the Ainslie Property, establishing a family trust and trustee company, inspection of alternative property options, assistance with respect to negotiating the “RAMS arrears situation … in relation to WEST ROW unit” and “Assistance with the future sale of West Row unit”. Although it was attached to the email, the invoice itself was not in evidence. Subsequent communications indicate that it claimed a total of $550, being the $330 payable upon KS signing the Mandate to Act and $220 for work done outside the scope of that Mandate.

54. It is not clear whether KS met with Mr Carew as suggested in his 5:25am email, but it is clear that they had some form of communication either that day or the following day (10 March 2021). KS must have objected to the payment of the invoice that had been sent by Mr Carew because, at 9:23am on 10 March 2021, Mr Carew sent an email to KS expressing his disappointment in relation to her attitude towards paying his invoice and explaining the basis upon which it had been calculated.

55. On 15 March 2021 at 10:57am, Mr Carew emailed KS, asking her to attend the office of Mr Iqbal to amend the “settler” (i.e., settlor) details for the trust. He also asked her to advise what her position was in relation to the invoice that he had sent. He identified that he would prefer to continue working with her but that, if it was her intention to “walk away”, he asked that his invoice be paid.

56. On 19 March 2021, there was correspondence from the solicitors acting for the sellers of the Ainslie Property, anticipating the date for completion being 5 July 2021.

57. After that 19 March correspondence, neither Mr Carew nor Ms Brown heard from KS for several months. In the intervening period, KS attended a number of doctor’s appointments.

58. On 25 March 2021 (a Thursday), KS had a telephone consultation with Dr Bookallil. KS said that she was required in court on Wednesday but could not get on a bus because she had severe diarrhoea. Dr Bookallil considered that the diarrhoea was probably secondary to anxiety and would provide her with a medical certificate but one that made it clear that she had not examined KS or seen her on the Wednesday.

59. On 1 April 2021, KS had a telephone consultation with Dr Bookallil recording a level of dysfunction in her life. She was not sleeping, had lost her keys and had lost the earlier medical certificate. She remained anxious about the Covid vaccine because of her needle phobia.

The finance panic begins

72. KS only got back in touch with Ms Brown in response to her email of 18 June on 23 June 2021. On that date, there was a telephone call between Ms Brown and KS. KS indicated that she had not organised finance for the purchase of the Ainslie Property and may need to extend the settlement date. KS said she was friends with the sellers and would speak to them directly. Ms Brown provided her advice which was recorded in a contemporaneous file note: Told her to go [with] whatever bank can get approval through first as if seller doesn’t agree to extension she will be charged interest & may have contract terminated.

73. On 28 June 2021, the Nusage Trust deed was executed. The settlor was the person with whom KS was temporarily living.

74. On 30 June 2021, KS requested that Ms Brown’s assistant send her the first page of the contract of sale in relation to the Ainslie Property. Ms Brown must have learned of this and sent an email to KS expressing her concern: I am concerned about the message you just left with my assistant. As discussed last week, it is urgent that you get finance in place as soon as possible. Approval is likely to take 2-3 weeks to obtain and then the bank will need another 3 weeks minimum to be ready for settlement. There is simply not the time to be negotiating on loan terms before you [choose] a lender. I strongly advise that you [choose] whichever lender will be able to settle first and then consider refinancing at a later stage. If you do not settle by the due date the following will apply: 1. The Sellers can charge you interest on the purchase price from 12 July onwards; 2. The Sellers can issue you with a default notice. This notice will give you 14 days to complete the purchase. If you cannot complete the purchase within this time frame the sellers can cancel the contract and keep your deposit. You must apply for finance immediately to try to avoid a situation where you will incur interest or potentially lose the property and your deposit.

75. KS was completing an application for finance with IBN. This is the one that Mr Carew had intended to use. As soon as KS received the front page of the contract from Ms Brown’s assistant, she forwarded it on to Mr Scott Roberts at IBN. Mr Roberts then sent her an email attaching an application form. Eleven minutes later, KS responded saying that she would advise as soon as she had completed it.

76. At 3:16pm, KS provided Mr Roberts with information in support of her application for a loan.

77. The significant features of this information were that: (a) it identified the applicant as being the Nusage Trust with Nusage as the trustee; (b) it identified the reason for seeking the credit as “Acquisition of residential property for future redevelopment – block subdivision”; (c) it identified that credit was $1.075 million or $900,000 or “lower amount (to be discussed)”; (d) it identified that the loan was to be for 12 months with an option to extend for a further 12 months; (e) it identified the “Exit strategy” in the following terms: Loan to be approved with 12 months interest capitalized On review at expiry applicant will review refinance options or may seek to finalise loan from own financial resources or refinance with a development loan, if opt for a DA on the subject security. - Applicant has 2 residential assets, one has been sold and one will be sold [ASAP] –net value after payout of existing RM1 - $1.7M. - Applicant was a university academic. In addition, applicant has a private business providing student tutoring services (over past 25 years). In 2020, student clientele was significantly reduced / impacted by COVID. Applicant has decided to redirect her energies into property investment and development and has established a Discretionary Family Trust to facilitate current and future property acquisitions. The tutoring business is likely to resume soon. In addition, applicant receives Centrelink disability pension, which is a secondary income source. - Target property has a substantial dwelling on the site and is estimated to generate $92,800 gross rent, producing a yield of 5.12%pa. There is also the option of renovating the site to accommodate a granny flat further improving the rental yield prospects for the asset - this option will likely form part of the applicant’s future review in 12 months time.

The notice to complete

101. Also on 6 July 2021, at 4:33pm, the conveyancer acting for the sellers of the Ainslie Property sent a notice to complete to Ms Brown by email. It was also faxed to her after close of business on 6 July 2021. The notice required completion of the sale contract before 3pm on 21 July 2021.

102. On 7 July 2021 at 9:41am, Ms Brown emailed KS, telling her that the sellers had issued a notice to complete which required completion of the purchase by 21 July 2021. The email pointed out that, if KS could not complete the purchase by that date, the sellers would have the right to terminate the contract and retain the deposit.

103. At 9:46am, Ms Brown emailed Mr Fernando. Her email referred to a discussion that she had with him the day before (6 July 2021). She then told him of the notice to complete. Her email continued: “If we cannot meet this settlement date the seller may terminate the contract.”

104. At 11:10am, KS provided documents to an employee at Mortgage House. Those documents included bank statements, documents in relation to the Nusage Trust and the income statement that had been obtained from the Braddon Centrelink Service Centre on 28 June 2021. It is notable that KS disclosed the fact that she was a disability pensioner.

105. At 11:31am, Mr Fernando replied to Ms Brown, saying: I strongly believe this will end in termination. Post assessment of documents, I’m no longer confident of the loan approval. There are some serious issues that makes this impossible for me to do. I have referred to a private lender and waiting on him to confirm if he wants to do this loan. Will keep you in the loop. Shame I didn’t get to work with you on something more solid. If you know anyone who is finding it hard to get finance, you can always send them my way, this one unfortunately is one of the most difficult [ones] I’ve seen.

106. Counsel for the plaintiffs relied upon this message as reflecting Mr Fernando’s opinion that the loan agreement would end in “termination” (due to default by the plaintiffs on any such loan agreement). However, in the context of the communications with Ms Brown in relation to the notice to complete and the provision of documents, including those from Centrelink, by KS, it is reasonably clear that the termination referred to by Mr Fernando was termination of the sale contract as a result of an inability to obtain finance prior to the time required by the notice to complete.

107. At 4:05pm, an employee of a business trading as Mango Credit emailed KS, indicating that the entity could not offer a loan as “it is unlikely the loan can be cleared from 70% of the estimated sale price less the existing bank debt”. That appears to have been based on a proposal to attempt to clear the loan taken out on the Ainslie Property with the proceeds of the sale of the West Row Property.

108. At some point that day (7 July), a business development manager at LJ Hooker in Dickson provided the rental appraisal for the “Granny Flats located out the back” of the Ainslie Property (referred to above at [66]), saying that they could “each” expect to achieve between $500 and $600 rental income per week. The floor plans of the Ainslie Property which were in evidence did not indicate that the Ainslie Property had any granny flats. The appraisal was given on the assumption that the two areas identified as granny flats (which, I infer, were the split-level storeys on the northwest wing of the property) were “self-contained”. That assumption is not borne out by the evidence. In particular, one of those areas had no kitchen or kitchenette.

KS commences dealing with Mr Taneski

110. On 8 July 2021 at 10:46am, Mr Taneski, the managing director of Universal Financial Group, sent KS an unsolicited email indicating, “I’m able to secure and settle private funding with the following term[s]”. The emailed provided details of a loan of $900,000 with an interest rate of 4.95% per annum.

111. KS was referred to Mr Taneski by a Mr Ken Sayer from Mortgage House (it will be recalled that Mr Fernando also worked for Mortgage House). Mr Taneski rented a desk in the same office as Mortgage House. He had access to the Mortgage House computer system and obtained basic information about the loan application from that computer system. At some stage, he printed out information from that system on the letterhead of his business, Universal Financial Group.

112. KS then dealt in parallel with both Mr Roberts (of IBN) and Mr Taneski.

113. KS’s affidavit evidence was that, following Mr Taneski’s email on 8 July 2021, she had a conversation with Mr Taneski (recounted in detail in her affidavit) in which she said that she disclosed “a combination of physical and psychiatric disabilities which are considered very severe and permanent”, that her case for a loan was not a strong one, that she had no proof of regular income and that she “had a formally diagnosed disability and that Centrelink’s assessment of [her] disability was that it was of the highest category of severity and considered permanent”.

114. I do not accept KS’s affidavit evidence about the substance of any such conversation. There is no contemporaneous documentary record which is consistent with those matters being disclosed at that point in time. Indeed, there is no record of KS responding to Mr Tanesky until 14 July.

115. Having regard to the carefully-formulated manner in which KS ultimately presented her claim for a loan to the various potential lenders (derived from what Mr Carew had drafted earlier), it is unlikely that, at this late stage, such complete disclosure would have been made.

The search for finance continues

116. Notwithstanding her mental health conditions, KS remained focused upon urgently obtaining a loan so as to not lose her deposit.

117. Also on 8 July 2021, at 1:14pm, KS sent a text message to Mr Roberts, saying that she had been “unwell for a few days” and asking him to return her call. A subsequent text at 6:24pm referred to an email that she said she had sent to him and recorded that she had decided to go with Option 1 but with a loan amount of $600,000 not $650,000. There was then a text message exchange reflecting some difficulty that KS had receiving an amended loan offer document sent to her by email.

118. At 2:08pm, Mr Taneski sent a text message to KS, saying, “new email sent … we really need to lodge your application by this afternoon to make sure we can settle by the 19th [of] July ok”.

119. At 2:45pm, Mr Roberts emailed to KS a spreadsheet comparing the three options for loans including the fees payable for those loans.

120. At some point that day, there was a telephone call between Ms Brown and KS. In that conversation, as recorded in a file note of Ms Brown, KS said she had been going to proceed with Mortgage House, but as that would not be possible, she would need to go with IBN. Ms Brown told KS that the interest amount would be $475 per day from 12 July. KS asked whether it would be possible to get the sellers to waive it and Ms Brown said they probably would not agree. KS said she was trying to open a bank account in the trust’s name but did not yet have an ABN. Ms Brown told her to get her accountant to do that for her. The file note records: “She mentioned she didn’t want to put the cheque in her bank [account] as she was on a disability pension & didn’t want to lose the pension. Told her she needed to get the cheque banked as it needed 3 days to clear. She is aware of the time frame for the notice to complete”.

121. At 7:51pm, KS sent an email to Mr Roberts confirming her intention to proceed with Option 1 for an amount of $600,000 and indicating that she would pay the $2,200 consultancy fee to IBN (see [90] above) the next day.

122. On 9 July 2021 at 7:46am, Mr Roberts emailed to KS indicative terms for a $600,000 loan.

123. At 9:23am, KS indicated by reply email to Mr Roberts that she was on her way to the bank to pay his consultancy fee. There were then text messages exchanged between KS and Mr Roberts.

124. At 9:53am, another employee of IBN sent KS an email (copied to Mr Roberts), stating: “Please find attached the updated terms with amended expiry date as per request.” It is not clear whether a document was in fact attached to that email. At 12:26pm that day, KS sent a text message to Mr Roberts saying that she had not received that email. Mr Roberts forwarded her the email at 12:29pm, and that email records that it contained an attachment entitled “Indicative Terms V4- NuSage Pty Ltd atf NuSage Trust [KS].pdf”.

A $600,000 loan is approved

130. Early on Sunday, 11 July 2021, at 7:52am, Mr Roberts emailed KS saying that the formal approval had been sent in a separate email. KS gratefully responded at 9:52am, saying that she still wished to proceed and asking him to “process my application as a matter of extreme urgency”. She said that, as a result of a “sudden illness”, she had been out of action for a few days the previous week. She said that she had been advised that the sellers would be charging “exorbitant (daily) penalty fees” if the settlement was delayed beyond 12 July, the following day.

131. At 10:43am, Mr Roberts emailed KS, saying that he needed her to accept the formal offer and return it and then she needed to pay the fee to the lender directly so that they could start preparing mortgage documents.

132. At 12:01pm, KS received the offer of a loan from Winscourt. The letter of offer was dated 9 July 2021. This was an offer of an amount of $600,000 at a rate of 15% per annum for a period of 12 months. At 3:08pm that afternoon, KS emailed Mr Roberts questions about the loan offer received from Winscourt.

133. On 12 July 2021 at 7:59am, Mr Roberts emailed KS providing some answers to the questions that she had asked in her email the day before. He also indicated that he needed the offer accepted and payments made to the lender that morning so as to be able to complete the mortgage documents.

134. At 2:48pm, a director of Winscourt emailed KS saying that no funds had been received into its account and hence no instructions had been given to prepare mortgage documents.

135. Early in the afternoon of 12 July 2021, KS had a telephone conversation with a Ms Shanta Lobo, an employee of the business trading as Private Mortgages Australia (PMA). As a result of that, KS forwarded the contract of sale for the Ainslie Property to PMA and completed an online application form on PMA’s website. That application was completed by 2:59pm. The information provided in support of the application contained the same description of KS’s employment and business background as had been provided with earlier applications. Further, it described the principal activities of Nusage as “E-learning, life coaching, meditation & yoga workshop/retreat”. It estimated that the property would generate $100,000 gross rental income per annum. As to why bank finance was unavailable, it contained the following: The bank lending specialist who was looking after my application left the bank unexpectedly. His colleague who took over my case advised that, due to her heavy workload, there would be considerable delay in processing my application with no guaranteed outcome, and I do not wish to risk losing the large deposit I have already paid plus losing the property.

136. This explanation was a false one.

137. In relation to an “exit strategy”, the application provided: “I plan to sell my residential property in the highly sought after location of Canberra CBD for $1,400,000 – 1,500,000 and pay off the mortgage completely.” The statement as to the value of the West Row Property was substantially in excess of the appraised value which KS had obtained from real estate agents: see [109] above. Further, this statement did not disclose the extent of any loan that would be required to be paid in order to discharge the mortgage over the West Row Property.

The offer from Prime

147. Also on 14 July 2021, at 10:35am, Mr Taneski emailed KS, saying “I received your message and I’m able to secure and settle private funding with the following term[s]”, being a $550,000 loan at a 4.95% interest rate. The message from KS referred to by Mr Taneski was not in evidence, but it may have been a voicemail message left for him by KS. Mr Taneski indicated that he needed “Borrowing entity information”, a copy of the executed trust deed, a copy of the contract of purchase and a copy of her driver licence or passport.

148. At 10:50am, KS forwarded to Mr Taneski the email from Valuations ACT, including the CV of the valuer, which she had obtained the previous day (see [143] above).

149. At 10:59am, Mr Taneski sent KS an updated email, saying “I’m able to secure and settle private funding with the following term[s]” and then setting out the details, including an interest-only loan of $850,000 for up to 3 years at a 4.95% interest rate, with a “facilitation fee” of 2.2%. The email requested the same documents noted above at [147].

150. At 11:12am, KS emailed Mr Taneski documents relevant to her application. These documents included: (a) the contract for the purchase of the Ainslie Property; (b) the Nusage Trust deed; (c) the Nusage certificate of incorporation; (d) certain other documents about Nusage; (e) identification documents for KS; (f) the rental appraisals for the Ainslie Property (including the appraisal for the “granny flats”); and (g) the Comparative Property Analyses for the Ainslie Property and the West Row Property.

151. At 11:45am, KS emailed Ms Brown’s contact details to Mr Taneski. KS also emailed him, at about the same time, proof of the two payments comprising the deposit on the Ainslie Property as well as an account summary from her NAB accounts showing a net position of $1,001,250.61.

152. At 3:34pm, KS emailed Mr Taneski and asked him to pass on to the lender the details of the valuer that she had forwarded earlier that day. She emphasised that Mr Taneski’s urgent help would be greatly appreciated because her solicitor had indicated that settlement had to happen by 20 July or she would lose the deposit on the Ainslie Property. She asked him and the lender to “view my case as a matter of extreme urgency” and fast track the application. She also asked whether Mr Sayer from Mortgage House had provided Mr Taneski with her Mortgage House loan application, including her exit strategy. She said, “If not, I am happy to provide so you can pass it on to the lender for assessment”. At 3:49pm, Mr Taneski replied simply: “I will have the approval letter this afternoon.”

153. Notwithstanding Mr Taneski’s response, at 4:42pm KS forwarded to Mr Taneski the “exit strategy” that she had provided to Mr Sayer of Mortgage House. This repeated what was said in earlier applications. It was in the following terms: Exit strategy At loan expiry applicant will review refinance options or may seek to finalise loan from own financial resources or refinance with a development loan, if opt for a DA on the subject security. - Applicant has 2 residential assets, one has been sold and the other one (located in the highly sought after location of Canberra CBD) will be sold asap. - Applicant was a university academic. In addition, the applicant has a private business providing student tutoring services (for over 25 years). In 2020, student clientele was significantly reduced/impacted by COVID. Applicant has decided to focus her energies on property investment and development and has established a Discretionary Family Trust to facilitate current and future property acquisitions. The tutoring business will resume very soon with 90% of the teachings conducted online. In addition, applicant receives Centrelink disability pension, which is a secondary income source. - Target property has a substantial dwelling on the site and is estimated to generate $100,000 gross rent, producing a solid income. There is also the option of renovating the site to accommodate another granny flat, further improving the rental yield prospects for the asset - this option will likely form part of the applicant’s future review in 12 months time.

Dealings with Ms Brown that day

158. Meanwhile, at 11:56am that day (14 July), KS forwarded Mr Taneski’s 10:59am email (see [149] above) to Ms Brown.

159. At 12:03pm, Ms Brown responded by email, saying: “We are really running out of time for you to be swapping lenders at this stage”. She said that it was unlikely that they would be in a position to settle by the following Tuesday (20 July).

160. At 12:29pm, KS replied to Ms Brown by email, saying that the lender said “he would do his best to help me settle this coming Wednesday 21 July”. KS asked various other questions in that email, including whether she should transfer the available funds into Ms Brown’s trust account.

161. At 12:40pm, Ms Brown sent another email to KS, pointing out that 20 July was the deadline for settlement and that, although a request could be made for an extension to 21 July, it was unlikely to be granted. Ms Brown noted that the broker had not guaranteed settlement, only saying that he would “do his best” to settle by 21 July. Ms Brown indicated that settlement would require a bank cheque. She said: As mentioned, you really don’t have time to be shopping around for loans. At this stage if you have not accepted a loan offer it is unlikely that any of the banks will be in a position to settle by Tuesday. I understand your difficulty and that you want to get the best possible deal however these delays are putting you at a very high risk of losing the deposit. It has been three weeks since we first discussed the urgency of getting the finance ready for settlement and we seem to be no closer than we were at that stage. I cannot stress the urgency of this enough, if you don’t put the finance in place with whichever bank can guarantee settlement on Tuesday you will lose your deposit and the property. The additional costs that you will incur with unfavourable loan terms will be less than the loss of the deposit.

162. A few minutes later, Ms Brown sent an email clarifying that the settlement date specified in the notice to complete was in fact Wednesday 21 July 2021 (it will be recalled that settlement was due at 3pm on that day: see [101] above) but that this did not affect her earlier advice that “it is very unlikely that any new bank you approach now will be able to settle given that is less than a week away”.

163. In response to a question from KS at 3:50pm, at 3:57pm Ms Brown again confirmed that a bank cheque was required for settlement and electronic funds transfer was not acceptable.

164. At 5:53pm, KS emailed Ms Brown indicating that she had signed and returned the loan approval form and that “They advised me that they would be able to get everything done by 21 July”. In fact, assuming the timestamps on all emails are consistent, it appears that KS only subsequently forwarded a scanned copy of the signed loan approval to Mr Taneski at 6:09pm that evening, thanking him for his time and kind assistance.

The Taneski “Discussion Paper”

165. At some stage, Mr Taneski prepared a document entitled “Discussion Paper”. This was th a typed document with the date “14 July 2021” in the top left corner. Mr Taneski’s evidence was that he had handwritten the document on 14 July in the form of illegible notes. His oral evidence left open the possibility that the typed document was only prepared at some point after 14 July, but that possibility was not explored. He no longer had the original handwritten notes.

166. This Discussion Paper was prepared for his own internal purposes and the evidence does not establish that it was provided either to KS or to Prime. I infer that it was prepared in order to be able to prove that there was some justification for him suggesting to Nusage and KS that the loan provided by Prime might have been suitable for their circumstances.

167. The Discussion Paper provided an outline of the circumstances as follows: KS had exchanged on purchase of a property in 139 Duffy Street, DICKSON, ACT 2602 on th rd the 5 March 2021 with an extended settlement to occur on the 3 July 2021. She th approached my company on the 14 July 2021 claiming that she was issued a notice to st complete & had to settle on the 21 July 2021 or she would lose her deposit of $173,500.00. As she purchased the property in her company Nusage Pty Ltd ATF Nusage Trust, the borrower via any lending body must be in the company name which was registered in March 2021. She had inherited funds overseas of over $1M to complete the purchase & required the balance plus interest & fees. She only required the loan for a short term as she was preparing to place her existing property at 172/45 West Row, CANBERRA CITY, ACT on the market to be sold with the sale proceeds to reduce the new loan & lease the new properties 2 granny flats for $600pw each to continue to service the new loan. In the meantime, her existing unit in West Row was to be leased to cover the existing loan payments until sold. … Repayments (This Loan) $4,356.25pm Existing Loan $2,304.17pm Total Payments $6,660.42pm Proposed Rentals $8,666.67pm Surplus $2,006.24pm Additional income being derived from her business also.

168. There is no evidence that indicates that KS inherited funds from overseas. It is not clear where this understanding on Mr Taneski’s part came from. I do not find that KS told him that. It is likely that there was some misunderstanding of what KS told him. So far as the figure of $1 million is concerned, KS had provided Mr Taneski with a copy of a bank statement showing that she had in excess of $1 million in the bank: see [151] above.

169. The statements about an intention to put the West Row Property on the market and rent the “granny flats” are likely to reflect statements made by KS to Mr Taneski. She did not disclose the fact that the West Row Property was filled with hoarded material and that the loan in relation to that property was in arrears. Nor did she disclose that one of the “granny flats” had no kitchen or kitchenette.

Final dealing with IBN Direct

175. At 9:52pm on 14 July 2021, Mr Roberts texted KS asking her to advise, one way or the other, whether she was proceeding with the loan offer. There is no evidence of further communication by KS with Mr Roberts.

Final dealings with PMA

176. Notwithstanding her dealings in relation to the offer received from Mr Taneski, KS had continued dealing with Ms Lobo from PMA.

177. At 1:43pm on 14 July 2021, KS had emailed Ms Lobo at PMA, asking for clarification of a couple of matters, including how the $27,720 approval fee was calculated. Ms Lobo replied with answers at 3:29pm.

178. At 4:51pm, Ms Lobo emailed KS saying that, because KS had not accepted the indicative offer, Ms Lobo assumed there was no further urgency with the loan.

179. On 15 July 2021 at 9:21am (after she had accepted the loan offer from Prime: see [164] above), KS replied to Ms Lobo, saying that the urgency had not changed but she was waiting for some advice and would advise Ms Lobo as soon as possible.

180. On 16 July 2021, Ms Lobo emailed KS, again noting that she had not received the accepted indicative offer. Ms Lobo asked KS to confirm urgently whether or not she was proceeding with PMA. There is no evidence of further communication by KS with Ms Lobo.

Prime’s internal processes: Loan Power approval

181. Prime processed loan applications using its internal software system called Loan Power, which defined and controlled its internal processes leading to the making of a loan offer and, ultimately, its entry into a loan agreement.

182. Because of his closeness to Prime, Mr Taneski had been given access to Loan Power so as to allow him to enter information into that system for the purposes of commencing the loan application process. Mr Henderson gave evidence that, “Most [brokers] weren’t given access to the - the [Loan Power] portal. That was a bit of a trial for a time.” Mr Henderson confirmed that Mr Taneski had direct access to the Loan Power system, and said Mr Taneski “writes a lot of business”. Sometime after KS sent documentation to Mr Taneski at 11:12am on 14 July 2021 (see [150] above), Mr Taneski entered sufficient information into the Loan Power system to trigger activity by employees of Prime. Although the process by which some of the documents were uploaded to the Loan Power system or otherwise came into the possession of Prime was not clear, Prime came to have documents about the incorporation of Nusage, the basic details of the contract for the Ainslie Property, identification details for KS, details of payment of the deposit for the Ainslie Property, the Nusage Trust deed and a completed Universal Financial Group document providing details relevant to the loan application.

183. At 3:20pm on 14 July 2021, a credit report was obtained by Prime in relation to Nusage, disclosing that it had been incorporated on 5 March 2021, had a share capital of $2, and had a “neutral” risk level. It also identified that KS was the sole director and shareholder of the company.

184. At 4:09pm, Mr John Zhang, who worked in the credit team at Prime, emailed another employee of Prime trying to rectify a technical issue relating to the generation of loan documents. This issue was rectified and the loan approval documentation sent to Mr Taneski. As pointed out above (at [156]), Mr Taneski sent the approval to KS at 4:53pm.

185. The Loan Power system identified that the Ainslie Property provided a security for the loan as a residential house or townhouse that would be owner occupied.

Basic features of the loan approval

186. The loan approval commenced as follows: Loan Approval for $850,000 Thank you for your application. We are pleased to confirm that your application has been approved on the terms and conditions outlined herein. Your interest rate is 4.95% pa. As an alternative to slow bureaucratic bank funding, it’s our business to provide fast, flexible solutions so you can get back to business and own tomorrow. We have helped thousands of Australian SME’s just like you, and we look forward to showing you why we are one of Australia’s fastest growing non-bank lenders. (Emphasis in original.)

187. The loan approval was for a “Business Basics” loan. The facility limit was $850,000. The approval was subject to satisfactory valuation. The purpose of the loan was described as “Working Capital”. The interest rate applicable if there was no default was 4.95% per annum (referred to as the “Lower Rate”). In the event that there was a default, then the “Higher Rate” was 1.5% per month. Nusage, as trustee for the Nusage Trust, was the borrower and KS was the guarantor. The security was the Ainslie Property. The offer would expire on 18 July 2021. The approval document indicates that amongst the information required prior to the first drawdown would be financial statements for the borrower, a bank statement for the borrower, and the complete assets and liabilities for all guarantors.

The acceptance of the offer

188. In order to accept the offer contained in the loan approval, KS was required to sign on behalf of Nusage and on her own behalf. Both signatures were witnessed. In addition, an application fee of $2,950 needed to be paid. A credit card authorisation for the amount of $3,009 (the application fee plus credit card fees) was signed by KS.

189. As noted above, at 6:09pm on 14 July 2021, KS emailed the signed loan approval form back to Mr Taneski. At 6:18pm, she texted Mr Taneski, thanking him, letting him know that the signed loan approval had been sent to his email and recording that her solicitor was very concerned about the lender being in a position to transfer funds by 21 July 2021.

Events following approval

190. On the morning of 15 July 2021, Mr Taneski suggested, in an email to KS, that he could have the loan documents prepared and sent to her solicitor in parallel with, and subject to, the completion of the valuation so as to speed up the process.

191. KS responded at 9:19am, asking Mr Taneski to instruct the lender to prepare mortgage documents and indicating that she had spoken to the assistant of the real estate agent who would do his best to help with the valuation. KS expressed gratitude for Mr Taneski’s assistance and asked him to update her on any progress.

192. On the same day, the credit card payment to Prime which had been authorised on the signed loan approval was declined. Mr Taneski got in contact with KS and she successfully transferred $2,950 to Prime by electronic funds transfer.

Prime’s internal processes: 15-16 July 2021

193. On 15 July 2021 at 9:01am, Mr Taneski emailed Mr Henderson (a business development manager at Prime) saying that the client had authorised him “over the phone” to request that urgent loan documents be prepared and emailed to her solicitor.

194. On 16 July 2021 at 7:43am (a Friday), Mr Taneski sent Mr Henderson a follow up to his earlier email (commencing, “Hey Mate!”), asking Mr Henderson to confirm once the loan documents had been emailed to the client’s solicitor as settlement was due on Wednesday, 21 July 2021.

195. At 9:29am, Mr Henderson emailed others within Prime to ask that they approve ordering documentation before receiving the valuation of the property.

196. At 10:02am, Mr Henderson asked Mr Taneski to respond to a query from someone in Prime seeking that a mandatory field, namely the income of the guarantor, be completed in Loan Power. This appears to have resulted from Mr Henderson being prevented by an error message from advancing the Loan Power process to allow the preparation of loan documents. The query asked how the loan had been approved in the first place if the mandatory field was not completed and raised the possibility that the guarantor income had been entered by Mr Taneski and then removed by him after approval. At 10:23am, Mr Taneski emailed Mr Henderson, advising that KS’s income was $150,000 by saying simply: “Net income $150K”.

197. At 10:49am, Mr Henderson emailed Ms May Cai, Chief Risk Officer at Prime, indicating that a net income figure of $150,000 had been entered into Loan Power. That led Ms Cai to allow the loan process to proceed to the preparation of loan documents. She asked Mr Zhang to order the preparation of documents on an urgent basis (“express docs”). By 11:42am, Mr Zhang had ordered the preparation of documents on an urgent basis.

198. At 11:23am, a search of the National Personal Insolvency Index was made showing no entry for KS. At the same time, an ASIC company search and a CreditorWatch search were done in relation to Nusage. The ASIC extract showed that Nusage was a two-dollar company of which KS was the sole director, secretary and shareholder and that it had been incorporated on 5 March 2021, with no documents lodged apart from its application for registration. The CreditorWatch report showed that the company had what was described as a “Neutral” risk level and that three credit enquiries had been made since May 2021. A “Risk and Compliance Report” prepared by InfoTrack was also ordered at 11:23am in relation to KS. This report described KS as a “Former Magistrate of Heping District, Shenyang Liaoning Province” in China and also as a “Director of Economy and Information Technology Department, Shenyang City Government, Liaoning Province” in China. Having regard to the dates of at least one of these reports, it is unlikely that they relate to KS and there was no evidence to suggest that these entries were correct.

Where did the $150,000 figure come from?

199. The $150,000 figure Mr Taneski recorded as KS’s income was not contained in the information recorded by Mr Taneski in his Discussion Paper.

200. In examination-in-chief by counsel for the plaintiffs, Mr Taneski gave evidence that he was provided with this information by KS. He said, “that’s the total income that was advised to me”. As to the components of the income, Mr Taneski said “That would have been the client’s income, plus the rental income that was coming from the properties”. He said that, by “client”, he meant Nusage.

201. However, when asked about the $150,000 figure later in his evidence-in-chief, he made reference not to Nusage’s income but instead to that of KS. He described the $150,000 figure as including “rental incomes and so forth, as well as her declared - self-declared income”. He was asked whether he made telephone inquiries with KS about this and said: “Yes, telephone, and also documentary as well. She emailed me information regards - in regards to her income and also rental income and so forth”. He was asked what information she had emailed him, and said: “Just confirm[ation of] what her income was”. He referred to the documents provided at 11:12am on 14 July, but he said that KS had told him over the phone that her income was $100,000. He then said that he added “rental incomes” to reach the figure of $150,000.

202. At no point did Mr Taneski ask KS how that $100,000 was earned: [Q:] And tell us what … you say KS said about her business incomes?--- [A:] Her business income was, I believe, $100,000 gross, at the time. [Q:] And this was the business, of Nusage? … [A:] Correct, yes. [Q:] And can you remember what she said about the business of Nusage? … [A:] I’m not sure exactly how much was said. But I believe $100,00[0] was the figure that was given to me over the phone.

203. He was not asked questions by either party which would clarify how he reconciled a gross business income of $100,000 with KS being a disability pensioner.

204. On this issue, I considered that Mr Taneski’s evidence was unreliable. Notwithstanding the caution with which I have treated the evidence given by KS and the fact that she was prepared, in other respects, to make false or misleading statements in order to obtain a loan, I do not consider that she would, as suggested by Mr Taneski’s evidence, have advanced such a blatant falsehood so as to represent to Mr Taneski that her business income was $100,000. Further, there is no record in the Discussion Paper of any income of KS not derived from possible property rental. There is nothing in the documentary material provided by KS to Mr Taneski that makes a representation that her income was $100,000, other than from renting the “granny flats” at $600 per week each, which he recorded in his Discussion Paper. There is no reference in any email communication between 8 July 2021 and 16 July 2021 to any quantified amount of her non-rental income. Mr Taneski had no other record of the alleged conversation in which that information was said to have been obtained.

Preparation for settlement

206. On 16 July 2021, there was a series of text messages sent between KS and Mr Taneski, particularly in relation to the availability of documents for KS to sign. Mr Taneski reassured her in relation to the documents. There is the following exchange: [Mr Taneski:] Hi [KS] we’ve just learned that Pexa is acceptable in the ACT which is great news! [KS:] hi tony, thank u so much for the good news. r loan docs ready to sign? ]Mr Taneski:] Not yet hopefully soon … [Mr Taneski:] They will be ready Monday morning I’ll make sure of it [KS:] thank u tony. everyone is stressed out inc my large extended family overseas so your help would be greatly appreciated! wishing you a good w’end. [Mr Taneski:] thank you we’ll make it happen together ok [KS:] thank u tony. if this works out, i’d be very happy to provide testimonials and recommend u to all my friends, and of course i’ll keep my credit record pristine.

207. The same day, the valuers who were engaged by Prime, JPM Valuers & Property Consultants (JPM Valuers), generated an invoice which was sent to Prime for the valuation fee.

208. Between 16 and 19 July 2021, KS made enquiries of Ms Brown as to whether or not a “Buyer Verification Declaration” was necessary and whether the PEXA settlement process was available in this case.

209. On 19 July 2021 (a Monday), Nusage took out insurance over the Ainslie Property and KS forwarded the certificate of currency to Ms Brown.

210. At 10:23am, KS emailed Ms Brown to enquire as to the time on Wednesday 21 July 2021 that the settlement would occur. Ms Brown replied at 10:42am, saying that settlement would start at 2:30pm on the Wednesday and asking whether KS had received the loan documents. KS replied that she was still waiting for the mortgage documents but she had been advised they would be available that morning. There were subsequently some emails about the buyer verification form, the address for rates notices and the availability of PEXA settlements. Ms Brown had informed KS that PEXA was unavailable for ACT land titles on Sunday 18 July 2021 at 2:34pm. In response to KS’s email on 19 July, Ms Brown again advised that PEXA was unavailable.

211. At 10:33am, KS informed Mr Taneski by email that Ms Brown had advised her that PEXA was unavailable for ACT land titles. Mr Taneski responded at 10:36am saying he was “urgently following up the loan documents & will update you shortly ok”.

212. At 11:43am, KS again emailed Mr Taneski, asking when the documents would be available and whether or not the valuation had been conducted. Mr Taneski responded at 11:51am, saying that the valuer would contact the real estate agent shortly and that he would update her on the loan documents. KS responded at 12:20pm with a tone of anxiety, asking who the lender was and saying that she was very concerned that the property valuation was yet to be conducted. Mr Taneski responded at 12:23pm that the lender was Prime and that the valuer would have the report by “tomorrow afternoon” (that is, the afternoon of 20 July 2021). He also said: “Please wait for my update ok”.

Prime’s internal processes: 19 July 2021

215. Meanwhile, on 19 July 2021 at 11:28am, in response to a request from Mr Taneski, Mr Henderson was following up the preparation of loan documentation from those within or engaged by Prime who were responsible for that process in light of the absence of PEXA settlements being available.

216. At 12:05pm, Prime performed a title search in relation to the Ainslie Property. It also searched for securities given by Nusage and the Nusage Trust. No encumbrances or securities were disclosed.

217. Also on 19 July, JPM Valuers performed a valuation of the Ainslie Property for Prime. The property was valued at $1.735 million with a forced sale value of $1.475 million. JPM Valuers assessed the unfurnished rental potential of the property as being in the range of $1,100 to $1,200 per week. The JPM Valuers valuation made no reference to any granny flat. It described the Ainslie Property as a “part two level dwelling” with a kitchen, a kitchenette, six bedrooms, two bathrooms (one with a separate water closet) and two ensuites. Information from the valuation report was uploaded to the Loan Power system.

218. The same day, Dentons, the solicitors acting for Prime, forwarded the documentation that needed to be executed by KS and Nusage to Ms Brown. This included the Loan Agreement and the mortgage over the Ainslie Property as well as identification documents.

219. Dentons also carried out a process of reviewing the terms of the Nusage Trust deed in order to ensure the trust was a suitable recipient for a loan. It provided a “Trust Review Report” which contained a checklist confirming the existence of certain relevant provisions in the trust deed.

Loan documentation executed

220. Although the precise time at which the documents were sent by Dentons to Ms Brown is not clear, they were sent on the afternoon of 19 July 2021. The documents were: (a) Loan, Security and Guarantee Deed (that is, the Loan Agreement); (b) the mortgage over the Ainslie Property; (c) a direct debit authority; (d) “AML / CTF and VOI Verification Forms”; and (e) a “Tip Sheet” on how to settle the loan quickly.

221. After the close of business on 19 July 2021, each of the documents (a)-(d) were signed or completed by KS. Where relevant, Ms Brown witnessed KS’s signature or certified copies of documents.

222. The evidence of KS and Ms Brown makes it clear that Ms Brown did not give legal advice to KS about the terms of the documents provided by Dentons which KS was signing. Ms Brown received them from Denton’s shortly before they were signed by KS and had not read them in full. Rather, her role was limited to identifying the documents that were required to be signed, witnessing KS’s signature at the various points at which it was required, and certifying those documents which needed to be certified. Significantly for the purposes of the present case, Ms Brown simply witnessed KS’s signature on the guarantor signature page (page 6), the security provider signature page (page 7) and the statutory declaration pages (pages 10 and 11) of the Loan Agreement. She was not required to certify that she had given any legal advice about the terms of the documents and did not, in fact, give any such advice. Ms Brown said that the process of execution took less than one hour. It probably took somewhat longer than KS’s estimate of 10 to 15 minutes.

223. I accept KS’s evidence that she did not read or properly understand the terms of the Loan Agreement when she signed it and that she may have skimmed the first few pages looking for where to sign without fully comprehending the ramifications or her obligations. I accept that she was desperate to get finance and not lose her deposit and as a consequence did not take the care that one might have taken in reading the documents or obtaining legal advice in relation to their contents and the obligations that they gave rise to.

224. At 6:36pm on 19 July 2021, Ms Brown emailed the signed loan documents, certified copies of KS’s identification, a certificate of currency for the home and contents insurance for the Ainslie Property (which named Prime as an interested party) and the Nusage Trust deed back to Dentons. Ms Brown indicated that she would have some of the documents couriered to Dentons the next day. She emailed the executed transfer to Dentons on the morning of 21 July 2021. Prime’s internal processes: telephone call to KS

225. At an unknown time on or about 19 July 2021, an employee or agent of Prime rang KS and confirmed that she understood her obligations as guarantor. The call made reference to KS having already signed the loan documents as a guarantor. The caller confirmed that KS knew about the loan application, that the repayments were $4,356.25 per month, that if the repayments were not made on time by the borrower then she would be personally liable for them, and that if the borrower defaulted on the loan then it was possible that the Ainslie Property may be sold to repay the loan. The caller also had KS confirm that she freely and willingly provided the guarantee and did not feel under pressure from anyone else.

Prime’s internal processes: 20 July 2021

229. On 20 July 2021 at 10:39am, Mr Taneski emailed Mr Henderson, copied to a solicitor at Dentons, indicating that the loan documents had been signed and emailed to Dentons and the originals were being couriered to Dentons. He asked Mr Henderson to make sure that Prime would be in a position to settle the next day by 2:30pm.

230. This prompted a response from the solicitor at Dentons, who indicated that a 40% “urgency fee” would need to be charged in order to turn around the “Certification” in time. Mr Taneski responded that Dentons should proceed as a matter of urgency and charge the urgency fee.

231. As a result, on 20 July 2021, Dentons was able to provide to Prime a “Settlement Certification”, which involved certification of certain matters relating to the transaction documents including that, subject to stamping and registration, they were “valid, binding and enforceable in accordance with their terms”. Under the heading “Transaction Documents”, those documents are described and then the following sentence appears: “All Guarantors have received legal and financial advice by an independent solicitor.” Precisely what this statement is intended to be is not clear from the form of the document. It does not appear to be a certification by the solicitor. It seems to be a statement as to the content of the statutory declaration that forms part of the Loan Agreement. The letter also contained a statement by Dentons that it had contacted the lawyer representing the borrower and guarantor and confirmed that the lawyer witnessed each transaction document and that “the independent legal advice certificate was sworn before them”. It also included the following statement in relation to the application of the National Consumer Credit Protection Act: “Given that the Borrower is a company, the National Consumer Credit Protection Act 2009 (Cth) does not apply to this transaction (irrespective of how the proceeds of the loan are applied by it).” These statements by the lawyer are likely to be required by Prime’s agreements with the entity that provided funds to it for the purposes of its lending business.

232. Also on 20 July 2021, there was further consideration by Prime of the valuation that had been provided the previous day. This was done by way of a “valuation review” by an employee of Prime which was something required by the Loan Power system. That review generated some questions for the valuer, but these were quickly resolved so that, by 6:14pm on that day, the review had been completed and Loan Power had been updated to record that fact. A settlement statement was also prepared by Prime and provided to Dentons.

KS thanks Ms Brown

233. At 3:44pm on 20 July 2021, KS emailed Ms Brown, thanking her for staying late the previous day to sign the mortgage documents. She also forwarded (“With help of a nurse”) the email from Mr Taneski outlining the fees that were payable at the point of settlement. They amounted to approximately $46,000.

Prime’s internal processes: settlement statement

234. On 20 July 2021, there was email correspondence between the solicitor at Dentons and Ms Brown in order to confirm that Prime would be in a position to settle as required by the notice to complete and in relation to cheque directions for the settlement.

235. At 4:10pm that day, the solicitor at Dentons emailed Mr Taneski and Mr Henderson indicating that all the documents had been uploaded to Loan Power and asking for a settlement statement. The solicitor indicated she would need approval to settle first thing the next morning to be able to get the cheques drawn. Following an email from Mr Henderson, Ms Cai asked the accounts team at Prime to prepare a settlement statement. She noted that it was a “broker portal deal”.

236. Prior to settlement, a final decision had to be made by Prime as to whether to advance the funds. Mr Henderson’s evidence was that this was a decision made by the CEO of the company, Mr Scanlon. It required the approval by Mr Scanlon of a “Credit Proposal”.

237. The proposal recorded that the Ainslie Property would be owner occupied (consistently with what appeared earlier in Loan Power). It identified that the borrower was incorporated on 5 March 2021 and that the guarantor was the 100% shareholder. In relation to the guarantor, next to the heading “independent advice”, the entry was “N/a”. This appears to reflect a requirement in the Loan Power system that, in some cases, the guarantor receive legal advice separate to that given to the borrower. Credit scores for KS and Nusage were recorded in the Credit Proposal document.

238. It is not clear where the credit score for KS came from in that no other document in evidence showed where this was derived from. A credit report was obtained by Prime in relation to Nusage: see [183] above. It is likely that a credit report for KS would have disclosed that she was in arrears on her West Row Property loan, but no such credit report was disclosed by Prime in these proceedings and there was no other evidence to indicate that Prime had obtained a credit report in relation to KS.

239. A “Combined Servicing Calculator” was recorded as “2.0x”. The sign off on the Credit Proposal by Mr Scanlon appears to have occurred at 10:03am on 21 July 2021.

240. The evidence as to how the serviceability figure was derived was limited. If it was reliant upon Mr Taneski’s statement as to KS’s income, then the figures used in the servicing calculator involved double counting. That is because, even if Mr Taneski’s evidence as to the derivation of KS’s income was accepted, it involved a substantial income derived from rental of the security property. It was that income which also formed the basis of Nusage’s income and no other source of Nusage’s income had been disclosed to Mr Taneski or to Prime. That double counting was in addition to the problem that the income figures for Nusage and KS assumed the property was fully rented when the information available to Prime was that the property would be owner occupied.

Establishment fee $18,700.00

Interest (1st Month) $1,268.01

Loan Management Fee $850.00

Mortgage Insurance $1,980.00

Legal Fees $3,891.48

Valuation Fees $1,100.00

Broker fees $18,700.00

242. These fees (excluding the original application fee) total $46,489.49.

The settlement

243. On 21 July 2021 at 9am, KS conducted a pre-settlement inspection.

244. At 9:32am, Ms Brown emailed to KS a settlement statement and her invoice for acting on the conveyance. She indicated that she would call KS once settlement had occurred. At 1:39pm, Ms Brown responded to a query from KS about differences between the Prime settlement statement and the statement that Ms Brown had emailed.

245. At 12:48pm, KS asked Mr Taneski to provide an itemised breakdown of the total fees and charges deducted from the $850,000. She also asked, “how much is your commission?” She asked him to confirm that the first month’s mortgage repayment would be deducted at settlement and asked how much the monthly repayment was and when the due date was. Mr Taneski responded at 1:02pm, providing a copy of the settlement statement and saying that the second monthly payment of $4,357 would be due on 31 August 2021.

246. At 3:38pm, KS texted Mr Taneski that she was “back in hospital” but did not provide any details of why that was the case. He said that he would confirm when settlement had occurred.

247. Settlement was effected sometime around 4pm on 21 July 2021. At 4:43pm on 21 July 2021, an assistant to Ms Brown emailed KS saying that the purchase of the property had settled. Mr Taneski texted with the same news at 5:07pm. KS responded: “thank u so much tony - your kind assistance is greatly appreciated! as mentioned, i’ll not hesitate to recommend u to all my friends.”

248. The settlement statement shows that the loan amount plus the payment of the application fee by KS was $852,950. After fees of $49,439.49 were deducted, this gave net funds available of $803,510.51.

249. Following the settlement, there was $142,655.78 remaining in Ms Brown’s trust account. Shortly after 5pm that day, there were text and email exchanges between Ms Brown and KS about returning excess funds to KS and the payment of Ms Brown’s fees out of those excess funds. KS also asked whether stamp duty could be paid from the surplus funds held by her solicitor or whether it should be paid by herself. Ms Brown indicated that it was best KS pay it directly.

250. As a result of the email and text message exchange, Ms Brown transferred the surplus funds back to KS’s account by two payments, being a transfer of $80,000 on the afternoon of 21 July 2021, and a second transfer of the balance (less Ms Brown’s fees) the following day.

The Loan Agreement

251. The Loan Agreement is entitled “Loan, Security and Guarantee Deed”. Nusage in its own capacity and as trustee of the Nusage Trust is identified as the “Borrower”. KS is identified as the “Guarantor”. Prime is identified as the “Lender”.

252. Part 1 contains the “Key Details”, including the parties and other key aspects of the loan. Amongst the matters disclosed are: Limit $850,000.00

Higher Rate 1.5% per month

Lower Rate 4.95% per annum

Establishment Fee 2.2% of the Limit

Default Fee $500

253. There is no reference in the key details to any capacity to vary the Lower Rate. Nor is there any reference to the “Capital Reserve Fee” or the monthly loan management fee of 0.1% ($850 per month) chargeable under the agreement (see [262] and [267] below).

254. Part 2 deals with “Execution”. KS executed the document as a deed on behalf of Nusage. She then executed it as Guarantor, witnessed by Ms Brown. Immediately prior to the place where she executed as Guarantor, there is an “Important Notice to Guarantor” which includes: This is a serious and important obligation and you should make sure you understand your obligation before you sign this loan and security deed. You should consider obtaining independent legal or financial advice (or both) on the effect of the Guarantee and Indemnity before signing it. … Before you sign, remember that there are financial risks involved in signing the Guarantee and Indemnity.

255. There is then a place where the agreement was executed by KS on behalf of Nusage and on her own behalf as a “General Security Provider” under the agreement. Finally, she signed the agreement on behalf of Nusage as the “Land Mortgagor”.

256. So far as the Lender is concerned, the agreement was signed by Ms Cai as an attorney of Prime under a power of attorney and witnessed.

257. Part 3 contains a statutory declaration by KS as Guarantor. That required her to attest that the Loan Agreement had been “freely and voluntarily executed by me and without undue influence or pressure from any third party”. Significantly for the present case, it also involved her attesting to clause 4, which provides: I have had the opportunity to obtain, and have obtained, legal advice from an independent Australian Legal Practitioner before whom this declaration was sworn, prior to executing this Loan, Security and Guarantee Deed and Security as to the nature and effect of the documents and my obligations under them.

258. The statutory declaration was signed by KS and witnessed by Ms Brown.

259. Next, there is an interpreter certificate which is blank as it was not necessary in the circumstances.

260. Part 4 of the Loan Agreement is headed “Term and Conditions”. Clause 2 describes the facility. Clause 3 provides conditions precedent to the drawdown on the facility. Clause 4 makes the “Advance” amount repayable by the Borrower on the “Termination Date”, which was identified in the Key Details as 36 months from the date of the initial advance. Early repayment is permitted, although if that were to occur within one month of the first interest payment date, then the amount of monthly interest and fees that would have been payable for the period up to the end of that month would be payable.

261. Clause 5 relates to the payment of interest. The interest rate is defined to be the Higher Rate, but if there is no default then the Lower Rate is payable. There is no reference in clause 5 to any capacity to vary the Lower Rate as defined by reference to the Key Details.

Events following settlement

276. On 3 August 2021, KS had a phone consultation with Dr Bookallil arising out of a fall that she had at a supermarket in early July. She complained of pain in her knees, elbow, back and shoulder, and was told to come in for a face-to-face consultation. KS reported that she had managed to get the Pfizer Covid vaccine on 16 July. She reported suffering from unusual headaches. KS was worried that she had a brain tumour or a clot. The doctor advised that she should be seen for the headache within 24 hours.

277. On 9 August 2021 at 5:48pm, Ms Brown emailed KS what Ms Brown described as a stamp duty notice of assessment which provided information on how it should be paid. The attached notice headed “Conveyance Duty Notice of Assessment” showed a total amount payable of $78,769. The payment was due by 23 August 2021.

278. On 17 August 2021, KS had a telephone consultation with Dr Bookallil. By this stage, KS had been given both doses of the Pfizer Covid vaccine and her headache was intermittent. The doctor recorded that she was still couch surfing. The doctor said that the Next Step counselling program would take her on if she followed through with the National Disability Insurance Scheme (NDIS). KS recorded that she had heard voices “once or twice” but was not taking the olanzapine because she was not sure where it was. The plan was that she take paliperidone. The doctor’s notes record that KS had abdominal pain, that she was only eating bread and was not eating carrots or apples due to dental pain.

279. On 14 September 2021, KS had a telephone consultation with Dr Bookallil. KS told Dr Bookallil that she was taking olanzapine but not paliperidone. The plan was to send a prescription for paliperidone to a pharmacy, but the doctor recorded that it was “very difficult to get her to agree a pharmacy as has shoplifted from pharmacies in past”. As a result, the prescription was to be left at the front desk of the medical practice.

280. On 22 September 2021, another telephone conversation with Dr Bookallil occurred. KS indicated that she needed another form to be completed. The doctor recorded that KS was scared to go out and, as a result, had not collected her prescription. The doctor recorded that she was “very anxious”, “scared to [go] out” and “I think schizophrenia is deteriorating due to non compliance with medication”. The doctor also recorded that her incontinence was getting worse and that she needed a face-to-face appointment. At a face-to-face consultation on 6 October 2021, KS collected the prescriptions.

281. On 1 October 2021, KS emailed Mr Henderson at Prime, asking Prime to stop direct debits as the money in the account in question had been moved to a different account. She said that she would make a manual payment each month. This request was passed over to the Prime customer service team. Somebody from the customer service team responded that day to indicate that the direct debit had been cancelled and that KS was expected to make manual repayments.

Default on the loan

293. By notice dated 22 April 2022, the ACT Revenue Office notified Prime of Nusage being in arrears of conveyancing duty, land tax and rates totalling $92,863.23 and of the existence of a charge for that amount on Nusage’s interest in the Ainslie Property, with priority over a mortgage. The ACT Revenue Office also sent a copy of the notice to KS’s email address.

294. On 26 April 2022, Prime notified KS that the “ATO” had placed a charge on the security property and that this was an Event of Default under the Loan Agreement. The email asked her to urgently advise Prime of her intentions in relation to the payment of “the ATO debt”. It appears there was no response to this email and there was a follow-up email on 25 May 2022 seeking advice about her intentions.

295. On 23 June 2022, KS had a phone consultation with Dr Bookallil about a variety of issues.

296. On 24 June 2022, the ACT Revenue Office sent an email to KS’s email address indicating that, as at the date of the email, the total amount owing was $98,154.54. It indicated that further debt recovery actions would start shortly.

297. On 24 June 2022, Mr Taneski sent an (apparently unsolicited) email to KS saying: Hi [KS]! Your loan is well conducted with no arrears, however the ATO have notified the lender Prime Capital of an outstanding ATO debt of approx. $90,000.00. May I suggest that we refinance the existing loan add the ATO debt plus fees as follows … There then followed a proposed new loan totalling $1,020,000. This included $55,000 worth of loan fees and an interest rate of 5.65% per annum.

298. On 25 June 2022, KS responded saying: Will discuss options with family and friends before making a decision. The ATO debt will be paid before the due date.

299. On 27 June 2022, a formal loan approval was prepared by Prime for a loan of $1,030,000, which showed Mr Taneski as the broker. It appears to have been sent to KS at 9:52am that day.

300. On 28 June 2022, the ACT Revenue Office rejected KS’s request for remission of interest on the conveyancing duty that was owed and indicated that an amount of $84,126.72 was due and payable immediately. Along with outstanding rates and land tax, the total amount owing was $98,317.04.

301. On 6 July 2022, KS paid the ACT Revenue Office $78,769.

302. On 11 July 2022, KS had a face-to-face consultation with Dr Bookallil. The doctor recorded: not doing very well denies [thoughts of self-harm] nervous breakdown - suicidal thoughts, everything too difficult couldn’t do anything, couldn’t boil the kettle no plan no hope

borrowed lots of money - from friends - want money back now borrowed from 3rd tier lenders - stopped paying back [threatened] foreclosure multiple crisis recent court case - young lawyer dropped unconditionally - almost doesn’t feel like it is real so nervous she didn’t hear magistrate magistrate recommended NDIS

303. The doctor administered the DASS21 Assessment (KS scored “Extremely Severe” for depression, anxiety and stress), changed KS’s medication and provided a GP mental health care plan.

304. On 13 July 2022, Dr Bookallil made a referral to the Next Step program, which appears to be a “high intensity counselling service” run by CatholicCare. The referral from Dr Bookallil provided: Thank you for seeing [KS] in your high intensity counselling service. [KS] has a complex mental health history with diagnoses of schizophrenia, PTSD, OCD, depression. Her schizophrenia is characterised by negative symptoms though she has some auditory halluciations at present and I have changed her medications to try to treat those symptoms. Her psychosis symptoms are usually fairly responsive to medication so hopefully will settle down soon. Her OCD is severe and if she has a shower, she stays in for a couple of hours and she reports that she rubs her skin off. She manages this by not showering and washing in basins. She has multiple stressors including homelessness, legal matters and illnesses. Please work with her to help her manage her OCD and depression and allow her to debrief about her stressors. I have referred her to ACT Mental Health and have asked that they assign her a case worker and psychiatrist to help with the schizophrenia.

305. The referral also included a summary of KS’s medical history taken from the doctor’s computer records system.

306. On 14 July 2022, solicitors acting for Prime sent Nusage a notice of default and demand based upon the failure to pay the ACT Revenue Office. On the same day, a notice of demand was sent to KS as guarantor requiring her to remedy Nusage’s default.

307. On 18 July 2022, KS’s referral to the Next Step program was rejected. KS was assessed as not suitable for the service as she needed longer-term supportive counselling rather than a structured cognitive behaviour therapy approach.

308. On 20 July 2022, solicitors acting for Prime sent by email to KS notices pursuant to ss 93, 94 and 96 of the Land Titles Act 1925 (ACT) directed to Nusage.

309. On 21 July 2022, KS saw Dr Bookallil again. She had a flu injection and discussed a variety of issues with the doctor, including a recommendation from a psychiatrist that she have a blood test. KS also said that she had been told that she needed to have all of her bottom teeth removed.

310. On 29 July 2022, KS wrote to the solicitors acting for Prime, stating that payment of $78,769 was made to the ACT Revenue Office and received on 6 July 2022. On 2 August 2022, the solicitors for Prime noted that the amount outstanding was greater than that and sought confirmation that all of the money set out in the demand had been paid.

311. On 1 August 2022, KS emailed the accounts team at Prime asking them to telephone her. The response indicated that “Your loan is in the process of recovery” and she should direct all communications to the solicitor who was acting for Prime.

The increases in the Lower Rate

318. Although the Lower Rate identified in the Loan Agreement was 4.95% per annum, and the loan was not identified as being a variable rate loan, from June 2022 notices were given to Nusage of increases to the Lower Rate payable pursuant to the Loan Agreement, with the reason given being changes in the Reserve Bank of Australia’s official cash rate.

319. Those notices did not state pursuant to which provision of the Loan Agreement the rates were changed, but the increase in rates and hence repayments was reflected in the monthly amounts required to be paid to Prime. In fact, the increases were made pursuant to clause 12 of the Loan Agreement, which is headed “Administrative provisions”. Clause 12.21 of the Loan Agreement, entitled “Reserve requirements” (set out at [269] above) provides, for the careful reader, a power to the Lender to unilaterally increase the interest rate payable under the Loan Agreement if there is an increase in the “BBSW” (the initials refer to the Bank Bill Swap Rate, but the term is specifically defined in clause 17) or any other cost or expense, or a decrease in the effective return from the loan to Prime.

320. Changes to the interest rate occurred in June, July and September which had the effect that, by the end of September 2022, the Lower Rate payable was 7.45% per annum and the minimum monthly repayments required under the loan were $6,127.08. It appears that one notice is absent from the evidence, namely the Lower Rate increase from 6.2% to 6.95% per annum. I infer that this was the increase effective from 1 September 2022, given that the notices (dated 21 and 30 September 2022) increasing the Lower Rate effective from 1 October 2022 refer to the “Existing Lower Rate” as being 6.95% per annum. The 21 September notice increased the Lower Rate to 8.45%, but this was subsequently corrected on 30 September so that the Lower Rate from 1 October 2022 was 7.45% per annum. From 1 November 2022, the Lower Rate rose again to 7.7% per annum and the minimum repayment rose to $6,369.74. The changes are summarised in the following table.

Date Interest Rate (per Monthly repayment annum)

Initial rate 4.95% $4,356.24

1 July 2022 5.7% $4,887.49

1 August 2022 6.2% $5,241.66

1 September 2022 (likely) 6.95% Unknown

1 October 2022 7.45% $6,127.08

1 November 2022 7.7% $6,369.74

321. It will be observed that these changes had the practical effect of increasing KS’s monthly repayment (in the absence of any default) by over $2,000. KS’s situation further deteriorates

322. On 14 October 2022, KS had a face-to-face consultation with Dr Bookallil. She reported additional dental problems which she could not afford to have fixed, a variety of physical conditions and worsening OCD.

323. On 27 October 2022, she had a telephone consultation with Dr Bookallil which dealt with a variety of issues including her anxiety about the data leaks from Optus and Medibank even though she was not a client of either.

324. On 7 November 2022, the solicitors for Prime emailed two letters to KS. The first related to payment of legal costs owed pursuant to the Loan Agreement, requiring those costs to be paid down by instalments. The second required Nusage to remedy the default relating to rates, land tax and conveyancing duty arrears of $24,680.30 (of which Prime had been given notice by the ACT Revenue Office) by 7 December 2022.

325. On 14 November 2022, KS had a telephone consultation with Dr Bookallil. The doctor recorded that KS demonstrated “paranoia about people finding out about her past”. She also addressed a number of physical conditions. On 18 and 25 November 2022, KS spoke to a social worker at Dr Bookallil’s practice to get assistance with her NDIS application.

326. On 23 November 2022, KS emailed Prime to enquire as to why she had been sent a default notice, saying that she had telephoned the customer service team well over 60 times but had received no response. KS was told that, because of the unpaid legal fees of $2,747.68, the Higher Rate would apply from the end of October 2022. It appears that KS had requested a “Discharge/Release Authority” form and that was also provided.

327. On 30 November 2022, KS made her final payment on her loan account, an amount of $6,369.74. She was again advised that, because her loan was in default, she should deal with the solicitor who was acting for Prime.

328. On 13 February 2023, KS had a telephone consultation with Dr Bookallil. The doctor’s notes record: “not doing well”, “gone backwards”. KS was severely depressed. She said that her bank account had been hacked, she was no longer paying her debt, she was receiving strange phone calls, she was losing more teeth but had no money to pay a dentist, and her incontinence had worsened.

329. On 21 February 2023, the solicitors for Prime sent by email to KS a notice of default and demand addressed to Nusage and a notice of demand for payment addressed to her (as guarantor) arising from a failure to pay monthly interest, Loan Management Fees and Default Administration Fees totalling $55,639.16.

330. On 31 March 2023, the solicitors for Prime sent letters terminating the Loan Agreement and making demands upon Nusage and KS. At that stage, the amount owing was the initial advance of $850,000 plus “Interest, Loan Management Fee, Default Administration Fee, Capital Reserve Fee, and Termination Fee” of $108,593.20, giving a total of $958,593.20.

Possession of the Ainslie Property granted to Prime

343. On 14 July 2023, Prime commenced proceedings against Nusage seeking possession of the Ainslie Property. On 30 January 2024, Prime obtained a Supreme Court order giving it possession of the Ainslie Property and requiring Nusage to give vacant possession of the property by 16 March 2024: Prime Capital Securities Pty Ltd v Nusage Pty Ltd [2024] ACTSC 36.

344. Following a hearing in April 2024 (see Prime Capital Securities Pty Ltd v Nusage Pty Ltd (No 2) [2024] ACTSC 119), on 3 May 2024, I made orders staying the order for possession up until 14 July 2024.

The West Row Property gets sold

345. The mortgagee of the West Row Property entered into possession of the property on 21 July 2023 and sold it. The sale settled on either 21 or 22 December 2023. The settlement statement indicates that significant legal fees ($81,010.52) had been incurred in relation to the possession and sale process. Further, it indicates that some approximately $38,000 was owing to the ACT Revenue Office and paid out of the proceeds of sale. There were some surplus funds which, as at 23 February 2024, were approximately $185,691.74, but by the time surplus funds were paid to Prime on 22 October 2024, that amount had reduced to $81,791.49.

The Ainslie Property gets sold

346. Eventually, the Ainslie Property was sold. The net proceeds of sale were $1,671,373.82. This amount was paid to Prime on 6 February 2025. The receipt of that money initially resulted in there being a surplus of approximately $85,000 in Nusage’s loan account, but legal and other fees charged against that account pursuant to the Loan Agreement soon resulted in the account falling into deficit again. As at 2 October 2025, the loan account was $207,652.33 in deficit.

Accrual of additional liabilities up until the date of the hearing

347. From the point of termination of the Loan Agreement on 31 March 2023 up until 2 October 2025 (the last statement available prior to the hearing of this matter commencing on 20 October 2025), the amounts incurred in the various categories provided for under the deed are as follows: Termination Fee: $9,350. Interest accrual (Higher Rate): $428,133.05. Loan Management Fee: $19,550. Default Administration Fee: $11,500. Legal Fees: $508,486.17. Capital Reserve Fee: $25,500. Recoveries Fee: $18,700. Total $1,021,219.22.

Although this calculation does not include all the fees charged, it totals $1,021,219.22. These fees comprise most of the amounts attributable to the loan account, in addition to the amount of $923,743.20 which was payable as at the date of termination.

Money transfers between the plaintiffs’ accounts

348. Between March and July 2021, KS had her disability support pension of $841.20 per fortnight deposited into an account ending **56. Amounts paid into this account were then transferred across to another account ending **38, leaving only a nominal balance in the account ending **56. On 31 March 2021, account ending **38 had a balance of $54,266.66. By 30 June 2021, that had increased to $58,631.05.

349. On 6 July 2021, Nusage opened a bank account with an account number ending **21. On 8 July 2021, Nusage received $72,875 from Hayman Partners, a real estate business. The payment represented the balance of the deposit monies for her sale of the Lyons Property.

350. On 9 July 2021, KS deposited the cheque that she had discussed with Ms Brown on 5 July 2021 (see [96] above) into her account ending **38. That was an amount of $868,282.05, producing a balance of $927,766.10.

351. On 14 July 2021, KS withdrew $927,700 from her account ending **38, producing a balance of $66.10. That withdrawal was then deposited into Nusage’s account ending **21, resulting in a balance of $1,001,175 in the latter account. KS then printed an account summary showing a balance of in excess of $1 million in the account ending **21, and this was one of the documents provided by her to Mr Taneski on that day: see [150] above.

352. In anticipation of settlement of the purchase of the Ainslie Property, on 20 July 2021 $998,035 was withdrawn, all but $35 of which was paid into Ms Brown’s trust account, effectively emptying Nusage’s account. The amount transferred was well in excess of that which was required, in combination with the funds to be received from Prime, in order to settle on the Ainslie Property.

353. As pointed out earlier (see [250] above), following the settlement of the sale, Ms Brown transferred a total of $140,874.23 into KS’s account ending **38 in two transactions on 21 and 22 July 2021. Those amounts were then used to make payments, including two payments of interest on the Prime loan totalling $8,712.50 and unit title fees relating to the West Row Property. The balance of the account, being $132,709, was then withdrawn on 2 September 2021.

354. On 1 September 2021, Nusage opened an account ending in **70. On 2 September 2021, Nusage received payment of $132,896.47 into that account. That amount was gradually run down, principally by monthly payments to Prime and then, on 6 July 2022, the payment of $78,769 to the ACT Revenue Office. An interest payment was made to Prime from this account on 1 September 2022.

355. It is not clear how the four subsequent interest payments up to the final payment on 30 November 2022 were made, but it is clear that, by this stage, KS and Nusage had effectively run out of money.

Prime’s policies at the time

356. The plaintiffs sought disclosure by Prime of all manuals, guidelines, procedures or other such documents relating to applications for, or the processing or approval of, loans or credit with Prime. The evidence of Mr Henderson was that, as at 2021, any such policies were built into the Loan Power system and did not exist separately.

357. The evidence indicated that there was only very limited training or guidance given to brokers prior to them being “accredited” by Prime. Mr Henderson gave evidence that they received a product guide that was available on the website and were required to do a quiz. The evidence indicated that there was not any system forming part of the broker accreditation process designed to ensure that Prime: (a) assessed the suitability of borrowers for loan products offered by Prime; (b) obtained reliable information from borrowers about their circumstances; (c) did not promote loans to persons with special disadvantages; and (d) did not allow the substantial incentives offered to brokers when loans were placed to lead brokers to act in the interests of the lender rather than the borrower.

358. Having regard to the evidence of Mr Henderson as to the limited nature of the accreditation process, and the fact that information about any accreditation process would have been peculiarly within the knowledge of the senior management of Prime, the failure to produce documents relating to that process on discovery or pursuant to the notice to produce at the hearing, and the failure of Mr Scanlon to give evidence, satisfies me that no process or system to address these issues formed part of the accreditation process.

359. The same is true in relation to internal guidelines and policies. The system adopted was structured around the Loan Power system which, so far as the evidence disclosed its contents, did not address issues related to the suitability of the loan, reliability of the information provided or the personal circumstances of the borrower or guarantor.

360. For example, there were not policies or guidelines for use internally or by brokers: (a) to reduce the risk of loans purporting to be business loans being made in circumstances where a corporate entity had been artificially interposed in order to avoid the operation of the Code; (b) to reduce the risk of income assessments of borrowers and guarantors being made on an unduly favourable basis, for example, through double counting corporate income as income of the guarantor; (c) to reduce the risk of serviceability being assessed only by reference to the interest rate identified in the approval rather than being assessed by reference to the potential for variation of that rate pursuant to the power to do so under clause 12 of the Loan Agreement; or (d) to reduce the risk of a broker’s approach to gathering evidence in support of the loan application being unduly influenced by the very substantial “facilitation fee” payable to a broker incorporated into Prime’s loan approval.

Other aspects of Prime’s system or conduct

362. There was only limited evidence about Prime. Its business is substantial. As at the date of the hearing, Prime promoted itself as having approved 17,000 loans, totalling in excess of $3 billion, to small-to-medium enterprises over 25 years.

363. As made clear by the terms of the loan approval in the present case, Prime advertises its speed of loan approvals.

364. Mr Scanlon, the director and CEO of Prime who was responsible for approving entry into the Loan Agreement, is director of a large number of other companies described in Exhibit 9.

365. The plaintiffs tendered search results from the County Court of Victoria and the District and Supreme Courts of Queensland for the period 2020 to 2025. For Victoria, the search yielded 68 cases, mostly brought by Prime or a related company (Capital Securities Mortgages Pty Ltd). For Queensland, the search yielded 20 cases, most of which were proceedings brought by Prime. It is not possible to place any significance on the evidence of the existence of these cases. There was no evidence to indicate whether the proportion of cases requiring court enforcement of agreements and the obtaining of possession of property the subject of mortgages was different to other comparable lenders or indeed to the rates amongst bank lenders.

KS’s mental health

366. The mental health conditions suffered by KS and the state of her mental health from time to time are described in a number of medical reports which were in evidence.

Dr Edward Wims, psychiatrist (8 December 2011)

367. KS was assessed by Dr Wims, a psychiatrist with the Forensic Community Outreach Service run by ACT Health, in the context of KS facing charges of burglary which had been dismissed under s 334 of the Crimes Act 1900 (ACT). Dr Wims had been looking after KS since she had been detained on remand at the Alexander Maconochie Centre. He wrote a letter on 8 December 2011 describing KS’s condition.

368. Dr Wims described KS as having “a long history of mental health difficulties and intermittent involvement with ACT Mental Health”. He identified that she had been involved with ACT Mental Health since 2002 when she was assessed in similar circumstances. She had a history of childhood and ongoing trauma. She had several periods of psychosis in the past, bouts of depression, and ongoing OCD. Her compliance with medication had “proven challenging” and at several points there had been “difficulty with engagement”.

369. While detained on remand, she presented in “an extremely anxious state that could have been described as hysterical”. She was found to have been suffering an acute psychotic episode marked by paranoid delusions about people monitoring her, watching her and being out to harm her. She was also having visual and auditory hallucinations. She was treated with antipsychotic medication. She was described as having multiple underlying anxiety disorders including generalised anxiety disorder, post-traumatic stress disorder (PTSD) and OCD. These were complicated by dissociation when under extreme stress and anxiety. Dr Wims also thought she “quite possibly” had kleptomania as described in the DSM-5.

370. He described that she had made excellent progress, was a model patient and her psychosis had almost completely resolved. She had been treated with cognitive behaviour therapy and medication. She revealed to Dr Wims “a very significant hoarding problem”, which he thought was related to obsessive-compulsive personality features.

371. The charges that she had faced were for the theft of many thousands of dollars’ worth of goods. Dr Wims concluded that, although it was possible that the theft was a result of delusional beliefs, he also felt that kleptomania combined with dissociation was likely.

372. He considered that she was likely to steal again and that she would require long-term management with antipsychotic medication. So far as her anxiety conditions were concerned, these were to be treated with cognitive behaviour therapy.

373. He summarised her diagnoses as including: Recurrent Psychotic Disorder (most likely Schizophrenia), Obsessive Compulsive Disorder, Generalised Anxiety Disorder, Post Traumatic Stress Disorder, Hoarding (most likely related to Obsessive Compulsive Personality Disorder), Dissociative Disorder, and Recurrent Depressive Disorder, currently in remission. Dr Olav Nielssen, psychiatrist (15 September 2013)

374. On 15 September 2013, Dr Nielssen prepared a report at the request of Legal Aid ACT. KS had been charged with possession of stolen property. Dr Nielssen described KS as having a high level of anxiety that affected her ability to communicate in a clear and orderly way. She demonstrated “what seemed to be either a disabling degree of memory impairment, or an inability to settle on the correct version of the events to convey in response to questions put to her”. That was reflected in her inability to describe the facts relating to the offences which she had committed.

Next Step counselling (2021-2022)

393. Notwithstanding her discharge from the service in September 2020, KS received counselling with the Next Step counselling program from August 2021 until June 2022 after a referral from her GP. The notes of the counsellor provide a useful insight into the pervasive way in which KS’s underlying mental health conditions manifested themselves. The picture presented is of a person with no family support or contact, and no contact with friends anymore, who is constantly overwhelmed and struggling to undertake day-to-day activities.

394. She was not, at that stage, suffering from positive symptoms such as hallucinations or delusions and was taking her antipsychotic medication. However, during this period of counselling, her functioning was described as poor. Although she had some intellectual insight into some of her behaviours and thoughts, she could not stop them. She remained overwhelmed and depressed. The nature of the goals of counselling indicate her level of dysfunction. The goals were to eat at least twice a day, to go for a walk every second day, to have a consistent bedtime routine and to recognise that her thoughts were just thoughts.

395. She was caught shoplifting in this period and had an altercation with police. She found pleasure in watching a children’s television channel, in particular, the program Shaun the Sheep. She had difficulties getting dental work done, seeing a podiatrist and going to court for the shoplifting. Her anxiety led her to have adverse interactions at Legal Aid, where she was trying to get assistance. She was often verbose and difficult to interrupt. She reported feeling panicked, chaotic and overwhelmed. Her memory appeared impaired, making it difficult to attend appointments.

396. Ultimately, she was discharged from the service because she required long-term mental health support, regular psychiatric reviews and case management rather than a counselling service. A summary of her position at the end of the period is provided by two passages from the clinical notes.

397. On 3 June 2022, the counsellor recorded: [KS] is currently struggling to manage daily life events e.g. self care, eating regularly, sleeping routinely, engaging socially and attending regular GP and psychological appointments due to chronic health issues that can be unpredictable. Despite this, there are pressing demands on [KS]’s situation including an upcoming court date and organising necessary documentation for this. She reflects that she can ‘bury my head in the sand’ re: problem solving tasks and initiating engagement with services (no credit, fear of answering unknown callers) which can further exacerbate her difficult situation.

398. The final entry on 6 June 2022 included: [KS] presents with complex mental health issues with complex PTSD, schizophrenia and personality disorders queried by past forensic psychiatrists. She presents as highly anxious and distrustful of others however also feels helpless and unable to manage her mental health symptoms without ongoing support from services. As such, she can oscillate between being dependent on services i.e. GP, Next Step and also struggling to trust health professionals and feeling that she is not receiving enough support from others ‘I am in a very fragile position and there is no one to help me’. As such, this can cause conflict between [KS] and support services, with many services reporting she has attended maximum sessions offered or not accepting referral at all.

Dr Bookallil, GP (2018-2024)

400. Dr Bookallil had been KS’s GP since June 2018.

401. In a letter written for the purposes of Magistrates Court proceedings on 1 May 2024, Dr Bookallil recorded that she had not seen KS since September 2023 and her last consultation was a telephone consultation in February 2024. She said: In the past, when [KS] has disengaged from services it is often due to a deterioration in her mental health and has resulted in an arrest or hospitalisation. As I have not assessed [KS] in months, I am unable to comment on her current mental health status. [KS] has a long mental health history including schizophrenia, complex PTSD, anxiety and depression which at times is severe and she has required hospitalis[ation] in the past. The severity of each condition varies over time. Schizophrenia is a significant condition and [KS] has more negative than positive symptoms (ie hallucinations/delusions) of schizophrenia so that she struggles with organisation and planning. Due to poor organisation [KS] at times forgets medication, struggles to organise her activities of daily living such as food, housing and finances. … [KS] also has hoarding disorder …

402. Records indicate that, after this letter was written, from June 2024 KS was seeing Dr Bookallil regularly on an approximately fortnightly basis.

403. KS’s appointments with Dr Bookallil are described extensively above.

Dr Lim, psychiatrist (4 November 2024)

404. Dr Lim assessed KS on 24 October 2024 by audiovisual means. She prepared a report dated 4 November 2024.

405. The history portion of the report described KS’s mental health issues which commenced from a young age, with KS only accessing professional help as an adult after leaving a violent marriage. Her history included physical abuse from her father, trauma observed during the Cultural Revolution, emotional abuse from her parents and a violent ex-partner.

406. Dr Lim reviewed the reports and clinical notes that were available to her. KS’s symptoms at the time of the examination included feeling depressed, sad and extremely anxious. She was obsessively cleaning and checking whether the doors were locked over 20 times per day. She described having several panic attacks a week, characterised by breathlessness, dizziness and an imminent sense of doom. She described her energy and appetite as very low. She said that she was extremely forgetful and struggled to fall asleep. She only showered every few weeks and ate one very simple meal per day. She continued to take medication for depression and hallucinations. The employment history given to Dr Lim indicated a decline after the death of her husband in the early 2000s. She was terminated from her employment in the public service due to underperformance and began hoarding.

407. Dr Lim recorded the results of her examination of KS’s mental state, describing that rapport was difficult to achieve and that KS presented as depressed, anxious and very emotionally charged. Consistent with the manner in which KS gave evidence in court, Dr Lim described KS as highly proficient in English but extremely overinclusive of details and difficult to curtail, interrupt or redirect toward the question being asked.

408. Dr Lim described KS’s diagnoses as: (a) recurrent major depressive disorder; (b) OCD; (c) hoarding disorder; and (d) PTSD.

409. Dr Lim said that KS’s mental health conditions were “chronic, severe and profoundly disabling” and that they “have compromised all aspects of her functioning including her personal care, social relationships and vocational capacity”.

410. So far as the disabilities suffered between January and July 2021 were concerned, Doctor Lim said: • She was experiencing increased stress, lowered mood, fatigue, distractibility, reduced appetite and poor sleep. • Her traumatisation symptoms were exacerbated including hypervigilance, hyperarousal, nightmares, intrusive memories. • Her obsession and compulsions were more pronounced and difficult to control. • She was hoarding more. • She was struggling to reliably attend appointments with her general practitioner.

411. So far as the impacts of those conditions were concerned, Dr Lim said: I believe [KS’s] decision making would have been significantly compromised during the relevant period, including making large financial decisions. Her stress was further exacerbated by feeling pressured to return to China to see her unwell, elderly father. She described significant guilt about her inability to do this as she was unable to afford the travel costs. This stress would have likely worsened her impairments further. Ms Morris, forensic psychologist (11 August 2025)

The distorted thinking of KS

A larger picture of disordered thinking

423. In light of the expert evidence referred to above, it is possible to state some conclusions about the effect of KS’s mental health on the events the subject of her claim.

424. At every stage of the purchase and ownership of the Ainslie Property, KS suffered the effects of distorted thinking, contributed to by her mental health conditions. Although the evidence did not provide great detail about the circumstances of KS in relation to the other properties in the period prior to entry into the contract to purchase the Ainslie Property, it is clear that she had very distorted thinking in relation to property, her financial circumstances and her accommodation. It must be remembered that, prior to the acquisition of the West Row and Ainslie Properties, KS owned the Lyons Property which was, at the time of its ultimate sale, unencumbered.

425. Her course of conduct in relation to the Lyons, West Row and Ainslie Properties was contributed to by her lack of trust in people, a difficulty getting on with them, her major depressive disorder, her anxiety and the consequences of her schizophrenia. Although she was a person with significant underlying intelligence, she remained an isolated woman suffering the effects of relative poverty, poor health and mental illness. The acquisition of the West Row Property

426. As a result of various factors (see above at [22]), KS decided she could no longer live in the Lyons Property. The evidence did not disclose when she reached that conclusion, but her subsequent conduct indicated a less-than-prudent approach to the acquisition of further property.

427. Notwithstanding that her principal, or only, source of income was a disability pension, she somehow managed to acquire the West Row Property in which she then lived from 2016. Yet it was only in 2020 that she took sufficient steps to be able to sell the Lyons Property. The financial consequences of her failure to promptly sell the Lyons Property were not described in the evidence.

428. While she was living in the West Row Property, she continued her hoarding behaviours. It is clear that, between late 2020 and early 2021, the loan on the West Row Property was in default. While the evidence was limited, there was evidence that, in addition to her hoarding, there were other maintenance issues with the property.

429. KS also gave some evidence of having had adverse interactions with real estate agents in relation to her attempts to sell the West Row Property. Having regard to her interactions with Mr Carew, her high level of anxiety and her distrust of people, it would not be surprising if she had great difficulty in pragmatically managing a relationship with a real estate agent sufficient to allow her to sell a property that she had filled with hoarded materials.

The decision to purchase the Ainslie Property

430. With the Lyons Property about to be sold, a reasonable course of conduct would have been to use the proceeds of that sale to remedy any default on the West Row Property and take whatever steps were required in order to have the West Row Property sold too, so as to be able to put in place accommodation arrangements that were consistent with her financial circumstances. KS described that she was already “experiencing enormous financial difficulty … enormous mental … psychological, emotional distress” and that, until the West Row Property could be sold, she would not have any ability to generate “any real cash to then put down as a deposit”. However, she did not adopt a reasonable course that was consistent with her means. Instead, she became incredibly anxious about her housing circumstances and obsessed with the need to acquire further property so that she had a roof over her head and avoid, in the future, “constant harassment from the bank” in relation to foreclosure.

431. I accept her evidence that, at about the time she contracted to sell the Lyons Property, she had discussions with four other women whom she met through a women’s refuge. The discussions related to the possibility of living in some form of a shared house and sharing ownership and expenses. These discussions could only have occurred in a tentative and preliminary way. KS only knew these women by their pseudonyms. KS and the women had developed no realistic structure for such a plan. So far as the limited evidence goes, it can only be inferred that what occurred were general discussions without any commitment. It is unlikely that, having regard to her mental health problems, including her hoarding behaviour, her anxiety and her distrust of people, KS would have been able to successfully manage the relationships involved in any such cooperative living arrangement. However, the dream of such an arrangement, combined with her underlying anxiety about having a roof over her head, created a strong impulse to purchase the Ainslie Property.

432. Although the evidence was limited, it appears that, at the time that she was dealing with Mr Carew, she had fixed upon the Ainslie Property as being suitable for her dream project. It was, in many respects, suitable for shared living, having multiple bedrooms, multiple bathrooms, a kitchen and a kitchenette. However, anybody acting reasonably and prudently in KS’s precarious financial circumstances would not have rushed in and purchased the house without having worked through issues relating to the funding of the balance of the payment due. That would also have involved resolving the financial situation in relation to the West Row Property. Rather, encouraged by the assistance given by Mr Carew, she purchased the Ainslie Property (for $1,735,000) on the very day that she settled the sale of the Lyons Property (which sold for $830,000).

The falling out with Mr Carew

433. KS’s immediate falling out with Mr Carew over his modest claim for payment was very counterproductive and indicative of her poor judgment at that point. She had signed the “Mandate to Act” which made reference to the charging of fees: see [31] above. She knew that obtaining finance was not straightforward, having previously unsuccessfully approached banks for finance. There is no evidence that she knew any other broker or had any other way of obtaining finance at that point. Whatever else might be said about Mr Carew’s assistance to her, he did at least have some appreciation that it was necessary to do something to rectify KS’s default in relation to the West Row Property and have that property sold. The period after the contract to purchase the Ainslie Property

434. From the point at which she fell out with Mr Carew (9 or 10 March 2021) until being contacted by Ms Brown on 18 June 2021, KS appears to have done nothing about the urgent issue of obtaining finance for the purchase of the Ainslie Property and made no useful progress in relation to the West Row Property. Precisely what was going on in her life during that period is not made clear by the evidence.

435. However, she had multiple problems which affected her mental state. Compounding her baseline mental health problems were: (a) the “disappearance” (as she described it) of the women that she had contemplated would be involved with the Ainslie Property; (b) her ongoing default on the home loan for the West Row Property; (c) the other difficulties relating to the West Row Property arising from actions of the body corporate, her own hoarding behaviour and her difficulty in finding an agent to sell the property; (d) her lack of secure accommodation, the need for couch surfing and her anxiety about her future accommodation; (e) her falling out with a couple with whom she had been couch surfing, resulting in the police being called, her being evicted from the property and her leaving her prescriptions behind: see [61] above; (f) that she was sleeping poorly and was losing things: see [59]-[60], [62] above; (g) that she was not eating properly and suffered abdominal symptoms as a consequence: see [63] above; (h) her anxiety about upcoming court appearances in March and June arising from her stealing and the physical consequences secondary to that anxiety such as disabling diarrhoea: see [58], [67], [69] above; (i) notwithstanding the Covid pandemic, she remained very anxious about having Covid and flu vaccines because of her needle phobia: see [59], [65] above; (j) she was “staring at [a] blank wall, crying non-stop”: see [61] above; (k) she was recorded in May as engaging in “magical thinking” and had poor insight into the consequences of her behaviour for others: [62] above; and (l) she was regularly forgetting to take her medication, with the result that her doctor contemplated the need for depot injections: see [64] above. The focus on finance after 23 June 2021

436. Following 23 June 2021, when KS responded to Ms Brown’s email of 18 June in relation to finance, KS was able, notwithstanding her difficulties, to focus upon the issue and act relatively logically in relation to obtaining finance.

Mental health after the purchase

443. The evidence indicates that KS was inconsistent in her taking of antipsychotic medication in the period from settlement until 22 September 2021 at which point Dr Bookallil recorded that her schizophrenia was deteriorating. She was scared to go out and her incontinence had worsened. She was recorded by Dr Bookallil as staying at someone else’s house in November. It is not clear why that would have been the case given that she had just acquired the Ainslie Property. She had been caught shoplifting again. Dr Bookallil’s records indicate that she remained very anxious and was not sleeping in January 2022 as she awaited her court case’s progress and remained anxious about Covid.

444. Even though KS could respond to immediate crises such as the demands for payment of the conveyancing duty by the ACT Revenue Office from April 2022 (even if that was only paid in part), and she could correspond with Prime, she remained incapable of addressing the fundamental issues with her financial situation and her health.

The absence of action after the purchase

445. After KS had successfully entered into the Loan Agreement and settled the purchase of the Ainslie Property, anybody thinking clearly about her circumstances would have recognised the need to immediately work on an exit strategy. That would have involved both the Ainslie Property and the West Row Property. However, after the purchase of the Ainslie Property had settled, nothing was done to rent it or any part of it out and KS began hoarding as she had in her previous properties. The process of acquiring hoarded material must itself have absorbed a significant amount of her time. Further, she did nothing to sell the West Row Property. She also failed to pay the conveyancing duty even though she was aware of the obligation to do so and was contemplating its payment at the time of the settlement. Her surplus funds that were left over from the settlement of the Ainslie Property and returned to her by Ms Brown were run down over time in making the interest payments owing under the Loan Agreement.

The failure to sell the Ainslie Property

446. Even upon running into difficulties with the conveyance duty, and then with repayments, she took no steps to sell the Ainslie Property. The precise reasons that she might have articulated to herself for why she did not take this step are not of significance. I am satisfied, however, that the inability to address in any reasonably prudent manner the circumstances which she faced was a result of her disordered thinking arising from her mental health conditions.

What did Prime know?

447. Even in circumstances where Prime was only dealing with the borrower via a broker and the broker’s knowledge could not be attributed to Prime, Prime was aware of the following features of the borrower, guarantor and the loan. (a) The loan was being sought at the last minute in circumstances where a notice to complete had been issued. (b) The property being purchased was a residential home. (c) The date of the contract was the same date as the date of incorporation of the company that was to be the borrower. (d) Notwithstanding that the contract had been entered into by the trustee corporation, the deed of trust was only executed subsequently on 28 June 2021. (e) There was no evidence (such as any financial statements, business plan or anything else) that the borrower in fact undertook any business. (f) Because there was no information about any business, there was necessarily no information as to whether the “Working Capital” description in the agreement (see [187] above) was realistic. (g) The guarantor was a 59-year-old woman who was the sole director and shareholder of the borrower. (h) Nobody other than the guarantor was involved with the borrower. (i) The guarantor had no other directorships which might have suggested business activity. (j) No financial statements had been required for the borrower even though that was stated to be a requirement in the loan approval documents. (k) The residential property was to be “owner occupied” (despite the owner being a trustee corporation). (l) If rented out, the potential gross income from the property was assessed by a valuer at between $1,100 and $1,200 per week: see [217] above. (m) The Loan Agreement did not require a lawyer to certify that the lawyer had given the advice which KS was required to say had been received. (n) Mr Taneski, the broker, was to receive a very substantial payment if the loan was approved (unconnected to how much time he spent actually scrutinising the loan proposal) and hence had an interest in achieving its approval even in circumstances where there was an inability to service the loan, and there was no policy, process or guideline put in place by Prime to guard against that risk. (o) There was no policy or guideline which Prime required the broker to adhere to in relation to methods for or approaches to assessment of the capacity of the corporate borrower or the guarantor to service the relevant loan. (p) The only source of information about the guarantor’s capacity was an unsupported statement provided by the broker about her income. (q) The capacity of Prime to vary the Lower Rate of interest was, by reason of the structure and drafting of the Loan Agreement and the terms of the approval of the loan, unlikely to have been appreciated by the borrower or the guarantor. (r) The terms of the Loan Agreement, in particular, the operation of the Higher Rate, the Termination Fee, the Capital Reserve Fee (and ultimately the addition of legal costs) would make it very difficult for many borrowers in default to remedy the default.

448. The terms of the Loan Agreement itself indicate that very large amounts became payable to Prime as fees or interest in circumstances where the borrower defaulted. The impression given by the interest and fee structure is that, so long as the security was sufficient to repay the loan, Prime would benefit from loans where the borrower defaulted, as distinct from loans where the borrower complied with the terms of the loan and repaid it successfully.

The Code

451. The plaintiffs sought relief under various provisions of the Code and the National Consumer Credit Protection Act.

452. In order for the Code and National Consumer Credit Protection Act to apply, each of four elements must be met: Code, s 5. In summary, these are (relevantly to this case): (a) the debtor in relation to the loan is a natural person; (b) the credit was provided, or was intended to be provided, wholly or predominately: (i) for personal, domestic or household purposes; or (ii) to purchase, renovate or improve residential property for investment purposes; (c) a charge is or may be made for providing the credit; and (d) the credit was provided in the course of a business of providing credit carried on in this jurisdiction.

453. The principal reason why the Code does not apply in the circumstances of the present case is that the borrower, Nusage, was a company and not a natural person. The plaintiffs sought to overcome this difficulty by characterising KS as a “debtor” for the purposes of the Code. This was by reference to the terms of the Loan Agreement, in particular the terms of clause 14.5, which provided that the liability of both the borrower and guarantor was “the liability of a principal debtor and not merely as a surety”.

Plaintiffs’ submissions

454. The plaintiffs submitted that whether or not KS, as a natural person, was a “debtor” within the meaning of the Code — despite being named a “guarantor” — was a question of the terms and construction of the Loan Agreement.

455. Pursuant to s 3 of the Code: 3 Meaning of credit and amount of credit (1) For the purposes of this Code, credit is provided if under a contract: (a) payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or (b) one person (the debtor) incurs a deferred debt to another (the credit provider).

456. Pursuant to s 204(1) of the Code: debtor means a person (other than a guarantor) who is liable to pay for (or to repay) credit, and includes a prospective debtor. … guarantor includes a prospective guarantor.

457. The plaintiffs submitted that a debtor within the meaning of the Code must mean any person who is liable to pay for (or to repay) credit, other than as guarantor.

458. The plaintiffs pointed to clause 14.5 of Part 4 the Loan Agreement, which states: 14.5 Principal liability The liability of each Obligor under this deed is the liability of a principal debtor and not merely as a surety. Each obligation of each Obligor under this clause 14 is unconditional and irrevocable.

459. “Obligors” is defined in clause 17.1 of Part 4 to mean “the Borrower and each Guarantor”, such that KS would have then had a principal and not just secondary liability.

460. In addition, the plaintiffs pointed to the following parts of the Loan Agreement: (a) Clause 5 of Part 2, which states: By signing this deed each Obligor … agrees that the Lender may accept and disburse the Advance or any part thereof or any further amounts drawn down in accordance with any direction provided by the Obligor, its solicitor and/or broker. Where there are two or more Obligors, a direction from any one Obligor is binding on all Obligors. (b) Clause 10(a) of Part 4, which states: If an Obligor is named as a General Security Provider in Item 9 of the Key Details, by signing this deed, the Obligor hereby charges and grants a security interest (as defined in the PPS Law) in the General Security Property to the Lender: (i) for payment of the Secured Money; and (ii) to secure performance of the obligations imposed on the Obligor under the Finance Documents, on the terms set out in Part 5 of this deed.

461. The plaintiffs submitted that the terms of clause 14.5 of Part 4 of the Loan Agreement impose a primary liability upon each of the Obligors (being both plaintiffs) as a principal debtor. This obligation is also supported by the terms of clause 10(a). The plaintiffs submitted that it is not open to Prime to insert obligations into the Loan Agreement which give Prime the benefit of all Obligors being a principal debtor but then for Prime to avoid the statutory consequences of doing so.

462. The plaintiffs submitted that the Loan Agreement has the effect whereby each Obligor is a principal debtor who otherwise guarantees the primary liabilities of each other Obligor. To the extent that there is true ambiguity, the contra proferentem rule applies in the plaintiffs’ favour.

Prime’s submissions

465. The defendant submitted that the Loan Agreement should not be interpreted so as to make KS a “debtor” for the purposes of the Code.

466. The defendant pointed to the following parts of Part 4 of the Loan Agreement: (a) Clause 2.1 provides that the cash advance facility is to be made available to the Borrower by the Lender. (b) Clause 2.3 indicates the purposes for which the Borrower must apply the funds. (c) Clause 4.1 imposes on the Borrower (but not the Guarantor) the obligation to repay the aggregate of the loan outstanding at the termination date. (d) Clauses 5.1, 6.1 and 6.2 provide that the obligations to pay interest, the establishment fee and the variation fee are on the Borrower. (e) “Obligors” means the Borrower and each Guarantor. That feeds into clause 14. Clause 14 provides that each Obligor guarantees and indemnifies to the lender the payment of money and the performance of obligations. Pursuant to clause 14.2, if there is a failure to pay by “any Obligor”, then “each other Obligor” is obliged to pay whether or not there has been a demand. The defendant characterised clause 14.2 as guarantee and clause 14.3 as an indemnity, both being contingent on there being a default.

467. The defendant contended that KS was a guarantor for the purposes of the Code and that clause 14.5 of Part 4 of the Loan Agreement did not change that.

Decision

468. The Loan Agreement is a commercial document. It must be interpreted in accordance with the usual principles of contractual interpretation outlined in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35], namely: (a) the meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean; (b) a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result; and (c) a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.

469. Clause 14 of Part 4 of the Loan Agreement provides: 14. Guarantee and Indemnity 14.1 Guarantee and Indemnity Each Obligor jointly and severally and irrevocably Guarantees and Indemnifies to the Lender: (a) the due and punctual payment and delivery by each other Obligor of the Secured Money; and (b) the due observance and punctual performance by each other Obligor of the Secured Obligations. 14.2 Guarantee and Indemnity payment If any Obligor fails to pay all or any part of its Secured Money when due, each other Obligor will pay that Secured Money to the Lender, whether or not demand for payment has been made on the relevant Obligor or any other person. 14.3 Guarantee and Indemnity obligations If an Obligor defaults in the due and punctual observance or performance of all or any part of the Secured Obligations, each other Obligor indemnifies the Lender in respect of any loss suffered by the Lender, directly or indirectly, as a result and will pay to the Lender on demand the amount of such loss. 14.4 Indemnity Each Obligor indemnifies the Lender against, and must pay on demand amounts equal to, any loss of the Lender arising out of: (a) any of the Secured Money (or any sum which, if recoverable, would have formed part of the Secured Money) not being recoverable from any Obligor by the Lender; or (b) any transaction relating to any Secured Money, or any Secured Obligations, being or becoming at any time void, voidable, defective or otherwise unenforceable and any other circumstances whatsoever which may allow any Obligor to avoid paying any Secured Money, in whole or in part, in each case, for any reason (whether or not within the Lender knowledge) including any legal or equitable limitation, disability or incapacity of or affecting an Obligor or any other person except where such liability arises from fraud or wilful misconduct of the Lender. 14.5 Principal liability The liability of each Obligor under this deed is the liability of a principal debtor and not merely as a surety. Each obligation of each Obligor under this clause 14 is unconditional and irrevocable. 14.6 Liability not prejudiced The liability of each Obligor under this document will not be affected or diminished, nor will any other Guarantee and Indemnity or security provided by an Obligor be released or discharged, by any act, indulgence, omission or matter which, but for this clause 14.6, would have operated to release an Obligor wholly or partly from its liability to the Lender, including: (a) the granting of any time, credit, indulgence, waiver or other concession to an Obligor or any other person, whether by the Lender or any other person (whether or not at the request of any Obligor or other person); [(b)-(i) omitted] 14.7 Continuing Guarantee and Indemnity … 14.8 No competition … 14.9 Hold on trust … 14.10 Suspense account … 14.11 Waiver … 14.12 Lender may enforce …

Equitable unconscionability

480. There are three essential elements for finding unconscionable conduct in equity: (a) there exists a special disadvantage affecting the weaker party’s ability to make a judgment in their own best interests; (b) the stronger party knows of this disadvantage, and (c) the stronger party unconscientiously or unfairly takes advantage of that disadvantage. See Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 459-460, 461, 474; Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 276 CLR 1 at [39].

481. As a majority of the High Court in Stubbings made clear (at [39]), these components should not be simply examined as discrete elements. Whether or not unconscionable conduct is established involves scrutiny of the exact relations between the parties and the three components should be examined in a comprehensive way in order to determine the real justice of the case.

Special disadvantage

482. Special disadvantage means something that “seriously affects the ability of the innocent party to make a judgment” as to the party’s own best interests: Stubbings at [40]. The factors relevant to an assessment of special disadvantage have not been exhaustively listed (Stubbings at [40]), but include illness, ignorance, inexperience, impaired faculties and financial need: Blomley v Ryan (1954) 99 CLR 362 at 415.

483. KS combined both significant intelligence with chronic mental health problems which distorted her thinking. That makes the assessment of whether there was, relevantly, special disadvantage more difficult than in a case like Stubbings or Amadio. In Stubbings, the borrower was manifestly incapable of understanding the risks involved in the transaction, being unable to perform simple calculations such as 10% of $130,000 (Stubbings at [41]). In Amadio, the guarantors were elderly, had not received much formal education and had only a limited grasp of written English (Amadio at 450-451, 470).

484. KS had the capacity to compare, at a superficial level, the loans which she was being offered. However, I have found earlier that she had a long history of distorted thinking in relation to her dealings with real property arising, most acutely, out of her hoarding behaviour. By the time she first came into contact with Prime, she was in a position of urgency, being locked into Nusage’s purchase of the Ainslie Property and subject to the notice to complete. Her distorted thinking about real property which led her to that position and her overwhelming anxiety about having a place in which to live both meant that she was in a position of special disadvantage in relation to the obtaining of finance to complete the purchase of the Ainslie Property. Given that she was the sole director and shareholder of Nusage, her position of special disadvantage also affected the position of Nusage. Knowledge

485. In Amadio, Mason J found (at 467) that the following may be sufficient to permit a finding of unconscionable conduct: (a) actual knowledge that the other party occupies a situation of special disadvantage in relation to the intended transaction; (b) awareness of the possibility that the situation of special disadvantage may exist; or (c) awareness of facts that would raise the possibility of a special disadvantage in the mind of a reasonable person.

486. Earlier, his Honour had described the requirement as being that “the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party”: Amadio at 462. Similarly, in Stubbings, the majority judgment referred to Mason J’s reasons in Amadio and, applying that approach to the circumstances of the case before it, said (at [46]): A case for relief against an unconscionable attempt to enforce legal rights is established in this case because Mr Jeruzalski had sufficient appreciation of the appellant’s vulnerability, and the disaster awaiting him under the mortgages, that his conduct in procuring the execution of the mortgages is justly described as unconscientious.

Statutory unconscionability

Statutory framework

493. The provision of credit by Prime to Nusage and KS was a “credit facility” within the meaning of the Australian Securities and Investments Commission Regulations 2001 (Cth): see reg 2B(1)(a). So too were the associated mortgage and guarantee: see regs 2B(1)(f)-(h). As a result, the provision of credit was a “financial product” within the meaning of s 12BAA of the ASIC Act: s 12BAA(7)(k); Jams 2 Pty Ltd v Stubbings (No 3) [2019] VSC 150 at [321], [325]. This meant that Prime provided a “financial service” within the meaning of s 12BAB of the ASIC Act: ss 12BAB(1)(b), (7)(b).

494. Section 12CB of the ASIC Act provides: 12CB Unconscionable conduct in connection with financial services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services to a person; or (b) the acquisition or possible acquisition of financial services from a person; engage in conduct that is, in all the circumstances, unconscionable. … (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract.

495. In determining whether Prime has engaged in unconscionable conduct within the meaning of the ASIC Act (statutory unconscionability), the court may take into account the non-exhaustive list of factors in s 12CC(1) of the ASIC Act. Most relevant to this matter are the following factors: (a) the relative strengths of the bargaining positions of the supplier and the service recipient; and (b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and … (j) if there is a contract between the supplier and the service recipient for the supply of the financial services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and (ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and … (l) the extent to which the supplier and the service recipient acted in good faith.

Submissions

502. The plaintiffs’ submissions were based upon systemic unconscionability. The submissions identified: (a) the reliance upon an intermediary broker network; (b) the avoidance of the Code by lending to corporate entities; (c) the lending for “working capital” or “business purposes”, notwithstanding that the actual purpose of the loan was for purposes that would be covered by the Code; (d) deliberate avoidance of receiving information from borrowers as to their financial and personal circumstances, focusing only upon the sufficiency of security to repay capital and interest upon default; and (e) the application of high interest rates and fees upon default resulting in borrowers being unable to remedy that default.

503. Overall, Prime’s system was characterised by the plaintiffs as providing high risk loans in such a way that there was real likelihood that the borrowers and guarantors would not have an ability to meet payments under the loan, with Prime deliberately avoiding that information so as to immunise itself from any knowledge of those vulnerabilities.

504. Prime relied upon the evidence of Ms Morris (the forensic psychologist) that, even though KS had a long history of mental illness, there was no indication in her correspondence of any thought disorder and nothing in the telephone interview (see [225]-[228] above) that would indicate that KS suffered from those psychiatric disabilities.

505. Prime submitted that KS was aware of the need to repay the loan and the potential to sell the West Row Property in order to pay down the loan relating to the Ainslie Property. Prime submitted that it obtained sufficient information about KS and her capacity to repay the loan, pointing to the information that was obtained by Mr Taneski about her income, assets and potential exit strategy. It relied upon the declaration in the Loan Agreement that KS had obtained legal advice. It submitted that it was not at all inevitable that KS would lose the equity in the Ainslie Property as a result of taking the loan.

506. Prime denied that it deliberately avoided receiving information from borrowers as to their financial and personal circumstances. It pointed to the information provided by Mr Taneski as well as the specific enquiries made about the income of KS when that had not been included in the Loan Power system. It pointed to the valuation conducted in relation to the Ainslie Property and the internal credit-related processes that were undertaken prior to making the loan. Prime emphasised that it was presented with a business loan application and a request to settle urgently, and it took steps to meet that request. It emphasised KS’s evidence that she was focused on making statements that were needed in order to obtain the loan and that any further enquiries would have only received information from KS supportive of the making of the loan.

Decision

507. The system adopted by Prime was to offer a fast turnaround on loan applications based on minimal requirements for documentation. Prime insulated itself from knowledge of borrowers as a result of dealing with those borrowers through brokers. Those brokers obtained significant rewards for placing loans with Prime by reason of commissions which were built into the offer of a loan by Prime (in this case, in the form of the 2.2% brokerage fee which was paid out of the funds provided by Prime: see [252], [262] above). The interests of Prime were secured by a mortgage over the Ainslie Property and the high fees under the Loan Agreement (which would increase, as would the interest rate, in circumstances where there was a default).

508. I have found earlier that Prime was not aware of KS’s special disadvantage, nor was it aware of circumstances which meant that it ought to have been so aware.

Features suggesting the system was not unconscionable

509. The following features would suggest that the conduct of Prime was not unconscionable within the meaning of s 12CB. (a) The system offered a product that had high fees and onerous terms, but had the benefit of minimal documentation requirements and fast turnaround, things that might be suitable for businesses in certain circumstances. (b) Although the system avoided direct contact between the borrower and Prime, the system relied upon brokers acting in the interests of their clients (even though there was no policy or requirement of Prime to ensure that was the case, and brokers had significant financial incentives set by Prime itself under the Loan Agreement to ensure that loans were taken out). (c) KS did sign the statutory declaration saying that she had received legal advice. For a lender to seek this kind of declaration in the context of a fast turnaround loan, there must have been suspicion on Prime’s part that these declarations were not true. It is notable that no declaration or certification was required from the lawyer who supposedly gave the advice as might have been the case if the intention was to ensure that such advice was actually given, as distinct from merely protecting the interests of the lender. However, apart from these structural factors, there was nothing in the particular circumstances of the case that indicated that no such advice had been obtained, other than the fact that the loan document was sent to KS at some point in the afternoon on 19 July 2021 (see [220] above), and was returned to Prime signed at 6:36pm that day by KS’s lawyer (see [224] above). (d) Prime did obtain information about the gross rental capacity of the property which indicated a potential to service the loan (so long as only the Lower Rate and monthly Loan Management Fee applied and there was no increase of that Lower Rate during the term of the loan). The valuation obtained by Prime indicated a potential rental yield of up to $1,200 per week. Gross income from the rent would be reduced by rates, land tax, repairs and agent’s fees but, if it was assumed that the property was to be rented (rather than “owner occupied”), a relatively short-term loan was not inevitably going to fail. (e) There was a risk that prospective borrowers would, in order to obtain a loan, make false statements in support of their applications notwithstanding the warranties given in the Loan Agreement, but that was their responsibility and a risk to Prime. That such borrowers may default was not an indicator of unconscionability.

Features suggesting the system was unconscionable

510. In Stubbings, when assessing a similar system of lending, Gordon J described the exercise as follows (at [77], [80]): What can be significant is that the conduct targeted a group to take advantage of their likely, although not certain, vulnerability or, as in this case, that the lenders recognised a likely, although not certain, vulnerability and yet designed a system of lending against a guarantor’s property, suspecting that they had no income or capacity to service the loan, and deliberately avoiding information as to the guarantor’s financial or personal circumstances in order to “immunise” themselves from knowledge of the vulnerability. … Here, the lenders’ system – their “internal method of working” – did not, and was not designed to, prevent the lenders acting unconscionably contrary to s 12CB of the ASIC Act. The lenders’ system was designed to do the opposite – to hide from the lenders any information which might later be said to make the loan, the guarantee or the taking of security unconscionable. The system sought to “immunise” the lenders from claims by borrowers or guarantors to set aside loans as unconscionable by studiously avoiding any inquiry about why or in what circumstances the individual guarantor provided their property as security despite the lenders recognising that a loan of the kind they were offering “could be a dangerous product in the wrong hands and wreak significant damage on the guarantor” (emphasis added). And the lenders’ system was not reasonably necessary to protect the lenders’ legitimate interests. (Citations omitted.)

511. The features of the system operated by Prime which tend to indicate that it was a system of lending which amounted to unconscionable conduct are as follows. (a) Prime only dealt with potential borrowers via broker intermediaries. Those brokers earned significant fees when a loan was placed with Prime. Those fees were built into Prime’s agreements with the borrowers and were reflected in the terms of the loan approval that the borrower was required to sign. The existence of those fees provided significant incentives for brokers to act in a manner that resulted in loans being made in circumstances where: (i) there was an unnecessary interposition of a company in order to avoid the operation of the Code; (ii) the loan was not suitable for the borrower; and/or (iii) the borrower was likely to default and lose their security. (b) It must have been obvious that there was, at the very least, a significant risk that the interposition of the company was in order to avoid the application of the Code. The company was a two-dollar company that had only been incorporated on the same date as the contract for the purchase of the property. (c) Consistent with a recognition that the interposition of a company was for the purpose of avoiding the operation of the Code, it was not part of the system to require that there be any evidence available to Prime that the company had any actual business. (d) The information that Prime had was that the property was to be owner occupied. That would be inconsistent with a capacity to rent out the property so as to generate income to contribute towards loan repayments. That made the absence of information about the business of Nusage or the basis for the assertion that KS had a substantial income more significant. (e) The product was a dangerous one which posed very significant risks to the borrower. In addition to the high initial fees, it had the following additional features: (i) the potential that the Lower Rate would be increased in a manner similar to a variable interest loan in the event that there was a change in Reserve Bank interest rates (but could also be increased if there was “any increase in costs to the Lender” or “decrease in the effective return of the Lender”); (ii) the application of the Higher Rate once there was a default; and (iii) the imposition of a range of other fees (including substantial legal fees) to the loan once it was in default. (f) The certification required as to the obtaining of legal advice, which only required a statement by the guarantor and not the lawyer giving the legal advice, making it more likely that a vulnerable guarantor would sign it notwithstanding that it was not true. (g) There was no system to verify any statement made as to the income of the borrower (or a guarantor), or to identify whether the income of a corporate borrower was independent of the income of the natural person standing behind the corporation. The figure provided by the broker, whether or not it was accurately or responsibly sourced, would be accepted. (h) In circumstances where Prime insulated itself from dealing directly with the borrower, it had no system in place to ensure that the borrower was an appropriate one to whom to make a loan from any perspective other than its own potential to make a profit. That was illustrated by its subsequent approval of a further loan (which Mr Taneski organised, apparently unsolicited) to the plaintiffs following their default without prompting or further information from KS: see [297] above.

Conclusion

513. The circumstances of the present case are very similar to those addressed by Gordon J in Stubbings. Her Honour said of the system in that case (at [81]-[84]): Vulnerability With knowledge of the significant risks associated with the financial product he was providing, Mr Jeruzalski’s system facilitated the making of interest-only loans to companies (avoiding the operation of the National Credit Code), where the loans were guaranteed by persons who he assumed had no income and were otherwise unbankable, whilst deliberately avoiding any knowledge that might enliven the court’s equitable or statutory jurisdiction to set aside unconscionable transactions. It may be inferred that the system assumed that some borrowers and guarantors would be vulnerable in a sense capable of enlivening that jurisdiction. But the lenders’ system sought to “immunise” the lenders against that assumption being known to be true because knowledge of its truth would inevitably attract the court’s equitable or statutory jurisdiction to set aside the transactions. That was unconscionable. Unconscientious taking advantage Mr Jeruzalski’s system used “unfair tactics” and lacked good faith. Developing and applying a system that seeks to avoid the application of statutory and general law protections is contrary to s 12CB of the ASIC Act. Taking advantage of vulnerable borrowers and guarantors reveals a clear power imbalance built into the system, reflected in Mr Jeruzalski’s refusal even to meet or communicate (let alone negotiate) with prospective borrowers and guarantors. As explained, he acted only through intermediaries. The system was also characterised by a lack of transparency, which was exacerbated, not ameliorated, by the certificates of independent advice. The certificates were crafted by Mr Jeruzalski to avoid any meaningful disclosure not only to the lenders but also to the borrowers and guarantors. The certificates of advice were “part of the system of conduct adopted by AJ Lawyers to immunise the [lenders] from knowledge that might threaten the enforceability of the loan”. The lenders’ system of conduct is outside the societal norms of acceptable behaviour so as to warrant condemnation as offensive to conscience. It does not reflect values that can be recognised by a court to prevail within contemporary Australian society. It is a system of conduct that is unconscionable contrary to s 12CB(1) of the ASIC Act. (Footnotes omitted, emphasis in original.)

514. In the present case, the designer of Prime’s system, the owner of the Loan Power software, the person required to ultimately approve the making of the loan and the CEO of Prime, Mr Scanlon, swore an affidavit, but that affidavit was not ultimately read and he did not give evidence at the hearing.

515. This case does not have the personal involvement by an individual such as Mr Jeruzalski in Stubbings. That is only because the system put in place in a larger operation like Prime was designed to avoid placing any one person in an equivalent position, and the one person with an overview of the whole of the system, Mr Scanlon, did not give evidence. The clinical process by which the loan was assessed and processed by the different persons responsible at Prime means that there is no one person upon whom the moral opprobrium of engaging in exploitative conduct will fall. That is a product of the design of Prime’s system for making such loans.

Orders

532. The orders of the Court are: (1) The proceedings are listed for the making of final orders on 12 February 2026 at 9:15am. (2) The plaintiffs are to provide to the Associate to Mossop J and to the defendant a proposed form of orders and a document setting out the calculations required for the purposes of determining the dollar amount to be included in those orders by 9 February 2026.

I certify that the preceding five hundred and thirty-two [532] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date:

************** Amendments 12 February 2026 Replace all instances of the name of the first plaintiff with “KS” on the cover sheet and within the judgment.