Tony Steele's capacity.
124 Dr Seth Manners said that he had treated Tony Steele since the mid 1980s. He had been diagnosed as schizophrenic at the age of 17 years (T 297). On seven or eight occasions he had been admitted to psychiatric hospitals. His psychotic symptoms had, with treatment, disappeared in about 1990 (T 297). He had been involved in a number of motor vehicle accidents, suffering severe fractures of both femurs. The fractures had healed, but had left him with significant deformity in both legs and a degree of pain (T 300). He now walked with a limp. He had been continuously on medication for schizophrenia for more than two decades. He attended the surgery every three weeks for tablets and an anti-psychotic injection (T 296). He had been generally stable for the last ten years (T 298). At one point methadone had been prescribed because he had developed problems with narcotic medication, prescribed for pain (T 298). He had a short period of agitation lasting days, associated with withdrawal (T 298). Dr Manners described him as suffering from a "very mild chronic mental illness" (Exhibit L). His intellectual capacity had been reduced to a slight degree (T 298). Dr Manners described the way in which he presented in these words: (T 297)
"A. ... his speech is often slow and stilted, he doesn't necessarily follow a logical course in a conversation, he'll interrupt a conversation and go off in another direction. I'll just refer to - he does not have much conversation other than pleasantries because he doesn't volunteer information, you have to seek information from him."
125 Dr Manners believed that Tony Steele had never been employed. He could not work (T 298). He was in receipt of a Disability Support Pension. Indeed, in the context of that pension, Dr Manners said this: (T 298)
"Q. Did you as a result of having met with him, had you observed anything about the tasks that he could or could not do?
A. From time to time we had to fill out forms to support his ongoing disability support pension. He was unable to fill those forms out without complete assistance of myself or someone in the family."
126 Dr Manners stated that Tony Steele was very much under the influence of his brother Trevor (T 302). If he were asked to sign a document, he probably would do so (T 303). The following was put in cross examination: (T 303) (cf Exhibit M)
"Q. That is a simple document authorising payment of any monies due to him (through) his solicitors, he would be quite able to, if that document was read and explained to him he would be quite able to sign that?
A. If it was explained to him.
Q. On the condition it was explained to him?
A. Umm, well, he expressed a desire in the past that he would like more money so if it was explained that you may receive more money, he would agree to sign it.
Q. And he could have no problems with that?
A. No."
127 However, there were limits to his comprehension. On 12 April 2005, in the context of the Equity proceedings, Tony Steele gave a Power of Attorney to a solicitor, Ms Pamela Young (Exhibit N). The following was put to Dr Manners: (T 304)
"Q. And if you look at page 2, it appoints Pamela Young, his solicitor as power of attorney, in other words to act and attend to matters on his behalf. If that document - I want you to assume that is his signature. If that document was explained to him you would have no problems with that?
A. I think it is extremely unlikely that he would understand that."
128 At the same time, Tony Steele signed a document appointing Ms Pamela Young, solicitor, as his "Enduring Guardian" (Exhibit O). Again, Dr Manners thought he would have a great deal of difficulty understanding that concept (T 304). He said that Tony Steele had a limited degree of literacy (T 298).
129 The following question was put in cross examination as to the way he presented: (T 301)
"Q. If you were to look at him, without knowing anything about him, leaving aside a limp, if he walked into this court and you didn't know anything about him, he would appear normal?
A. Initially yes, although he has some side effect from this long term anti psychotic medication that leaves his face somewhat frozen, but that may or may not be apparent.
Q. Apart from a sometimes frozen face, he would appear normal?
A. Yes.
Q. If you didn't know?
A. If you didn't know. He often has a rash on his face, again, a side effect of medication, but no."
130 Tony Steele's sister, Mrs Denise Robinson, was asked to describe her brother. She said this: (T 435)
"A. He has always been Tony, I guess. He is not very talkative. You find it very difficult to have a conversation with Tony. On those occasions when I did visit the home he would stay in his room. He would probably say five or six words to me the whole time I was there."
131 She added: (T 435)
"A. Tony cannot work. Tony cannot hold a proper conversation for any length of time. He could answer telephone, but not hold a conversation. He would always answer a telephone and just get my mother or father. He can use his VCR to change videos, make himself a cup of coffee. That's pretty much Tony. He doesn't do much else."
132 Mrs Robinson also said this: (T 435)
"Q. What about understanding things, how would you describe talking to him over the years, what's his level of understanding, to your observation?
A. I don't think Tony has a very good understanding. I don't know that I can engage Tony for long enough to make him understand, he won't listen.
Q. What about business matters, does he have an understanding, to your observation, of business matters?
A. No, none whatsoever."
133 Mr Tony Steele was called to give evidence. He walked with a marked limp. He was dressed normally. His head had not been shaved. Indeed, he presented well. As Dr Manners remarked, at first he appeared to be reasonably normal. His answers were limited, but generally responsive. Within a relatively short time, however, the limits of his comprehension and the quirkiness of his reactions were apparent. I accept that he may have been able to correct the address on the loan document from 1/51 to 1/151, because he was no doubt familiar with that address, and had seen it many times. Nonetheless, I believe that the limits of his literacy would soon have been obvious, had time been spent with him, and especially if documents had been placed in front of him. I cannot accept that Mr Mahommed spent one and a half hours interviewing him, without recognising that he suffered from a mild mental illness. I reject as false Mr Mahommed's evidence that he spent ten to twelve hours with him and regarded him as normal. That evidence, I believe, was false to the knowledge of Mr Mahommed when he gave it.
134 Mr Mahommed acknowledged that, on 29 August 2002, that is before the first loan application on behalf of Tony Steele, he became aware of the Trust that had been established for Tony. He also became aware of the Trustee Company, Maxwell Developments Pty Limited (T 270/1). The defendant attached some importance to these concessions (DS: para [156]). It was submitted that it would have been obvious to Mr Mahommed, within minutes of meeting Tony Steele, that he was unable to protect his own interests and needed independent advice. I will return to this aspect below.
135 Tony Steele identified Mr Mahommed in Court. He said that he saw him only to sign papers, although he could not remember when he had seen him, nor whether he signed papers on more than one occasion (T 372). He denied that he had a conversation with Mr Mahommed (T 372). He also denied telling him that he had a job (T 374). He denied having been asked questions about how much money he earned (T 374). He said that, since leaving school, he had done nothing. He had never had a job (T 370). Tony Steele said that Mr Mahommed did not ask him a thing (T 374).
136 However, Mr Tony Steele also said in cross examination that his memory had gone (T 374). It was really bad (T 374). Indeed, he could not remember having given evidence in court before (T 374).
137 What happened, in the context of these applications, as a matter of probability? There are obvious difficulties in making any finding of fact. The four participants in these events are either absent or unreliable. Tony Steele's account of his interaction with Mr Mahommed is unreliable because his memory is so poor. Trevor Steele and Doreen Smith did not give evidence. I cannot accept Mr Mahommed's version that he interrogated Tony Steele and obtained answers from him.
138 There are, I believe, two possibilities. One is that, when completing each loan application, Doreen Smith and Trevor Steele sat with Mr Mahommed supplying answers to questions, with Tony being called in for a short time to sign his name. The other possibility is that they all sat around the same table with Doreen Smith and Trevor Steele providing the information whilst Tony Steele remained mute, or almost mute. The evidence of Tony Steele would suggest the first of these alternatives. There is some support for that version in the evidence of Ms Edith Maher, Doreen Smith's cleaner. Ms Maher said this: (T 394)
"Q. Did you ever see Mr Mahommed with Tony Steele?
A. Yes, only once. And that was out on the back verandah where Doreen came in and asked me to go out and get Tony from his bedroom and take him - and I just said they needed him out the back verandah and took him out there.
Q. Who was on the back verandah once you took Tony Steele out there?
A. Doreen and Mr Mahommed.
Q. How long, to your observation, was Tony Steele out on the back verandah with Mr Mahommed and Doreen Smith?
A. Less than five minutes."
139 If Tony Steele were only called upon to sign his name, that may explain why Mr Mahommed thought him "normal", although it should be noted that his initials and signature were written in a childlike hand (cf Exhibits 21 and 24).
140 There is a further matter which, arguably, supports this conclusion. It will be remembered that the Office of Fair Trading wrote to Mr Mahommed on 21 June 2004, that is, a week before the television programme. Reference has been made already to that letter (supra para [80]). The Office's letter stated that, according to the family doctor, Tony Steele was a chronic schizophrenic, opiate dependant and a long term recipient of the Invalid Pension (Exhibit J). Mr Mahommed responded by letter dated 28 June 2004. His response made no reference to Tony Steele's medical condition (Exhibit 4). When cross examined concerning that omission, he said this: (T 127)
"Q. The reason why did didn't respond to those allegations or issues about the condition of Tony Steele is you had nothing to say about them?
A. I honestly don't know why I didn't respond to them."
141 However, Mr Mahommed wrote a covering letter to the Office, which included the following paragraph: (Exhibit 4)
"3. Allegations made by Trevor Steele and Doreen Steele/Smith that are not covered in the attached report are simply not covered as I have no knowledge or have no information on file regarding those allegations. Therefore should you have any documented information that may assist me in assessing such allegation I would be pleased if you could forward a copy to me."
142 The failure of Mr Mahommed to notice the obvious limitations under which Tony Steele laboured is consistent with his only having interacted with him for a short time, obtaining his signature upon documents.
143 I will shortly describe two further applications which concerned the property of Tony Steele (the third and fourth Steele applications). They were made in July and October the following year (2003). They provide insight into the power of Doreen Smith and her attitude to the property of her son, Tony Steele.
144 There was, in the context of the first and second Steele applications, dishonesty on the part of Mr Mahommed in two respects. First, as with the Smith applications, he adjusted upwards the assets of the applicant, even though ample security was being offered and the adjustment was unlikely to make any difference.
145 Secondly, and importantly, Mr Mahommed gave on oath a false explanation of his dealings with Tony Steele in his affidavit and evidence before Palmer J. He then repeated the same false explanation to this Court. I am not persuaded, however, that his dishonesty extended to an absence of belief concerning the business that Ms Doreen Smith intended to pursue, in which she would usefully employ her sons. I have the strong impression, at least during 2002, that Mr Mahommed was, to some extent, under the spell of Doreen Smith, a practiced fraudster who, I infer, was very plausible.
146 Indeed, I should note in passing, that there was more than a whiff of fraud (at least with hindsight) in the recovery action that Ms Smith persuaded Mr Mahommed to pursue on her behalf. The whiff was to grow stronger in time, as I will describe. I should also note in passing that, on 18 May 2007, well after these events, unrelated fraud charges were laid against her. She was charged with four counts of obtaining money by deception. In June 2008, she was given a six month suspended sentence after entering into a bond. She was ordered to pay compensation of $53,500.
The third Smith application.
147 After the second Steele application (21.11.02) and before settlement (6.12.02), the solicitors for NorthPower sent a further letter on 2 December 2002. The letter, on this occasion, was unambiguously hostile. It included these words, referring to the request for further documentation made in their previous letter: (Exhibit 29)
"In view of the lack of a response from you we have today advised our client that it ought not to entertain any further dealings with your client.
We also confirm that our client on our advice, has informed the Independent Commission Against Corruption in accordance with section 11 Independent Commission Against Corruption Act 1986 (NSW)."
148 Mr Mahommed maintained that, notwithstanding that letter, he still had confidence in Doreen Smith. He said this: (T 258/9)
"A. Thank you your Honour. In response to those questions why, well there was no question why I believed, Doreen Steele advised me from day one in relation to this Country Energy matter that she assisted in getting the Country Energy/NorthPower general manager his job. Now, prior to that, we had some, several conversations and she would tell stories to me about her association with predominant business persons in Australia, Kerry Packer, Alan Jones, and that involvement came out of the NorthPower John Singleton in relation to the NorthPower stadium down there and she would tell stories about functions and the like and so when she indicated to me about the Country Energy matter in, and the raising of questions and invoices, I was comfortable from the point of view in relation to the obtaining of the contract, her words were 'we will get the contract, I assisted in getting the general manager at Country Energy his job' so I had no reason to disbelieve that, given the conversations and the stories that she would tell me about the associations with prominent business people. Now I had no way of checking that out but by the same token I had no way of knowing whether it was true. I believed her."
149 There was a discussion between Mr Mahommed and Doreen Smith concerning the reference to ICAC. She said she regarded it as "bluff and pressure" (T 261). Mr Mahommed said that they needed to go to another level and involve actuaries (T 261).
150 On 30 December 2002, Doreen Smith again contacted Mr Mahommed, seeking a further loan secured on Caves Beach. Their conversation, according to Mr Mahommed in his affidavit, was in these terms: (Exhibit 35: para [30])
"(Doreen): 'I would now like to increase my existing loan for the business.'
I said: 'How much do you need?'
Doreen: 'Another $80,000, making a total of $170,000.'
I said: 'We will need to go through the application process again.'
Doreen: 'OK, nothing's changed concerning my details.'"
151 A further application was submitted to Liberty Financial, again on the basis that it was a business loan. Doreen Smith's "employer" was again identified as Country Power Newspapers, where she was "Sales Manager" (Exhibit 28: p 191). This was a reference, once more, to the prospect of a contract with NorthPower. Her assets, as described in the previous application, were reproduced, although the previous application was made for the purpose of purchasing a motor vehicle for the business, which was not then reflected in the application. The loan was duly approved (Exhibit 30).
152 It was put to Mr Mahommed in cross examination that he did not believe, by this time, that Doreen Smith would secure a contract with NorthPower, or alternatively, that he was wilfully blind. Mr Mahommed rejected these suggestions (T 260).
153 By January 2003, Doreen Smith had instructed Ms Pamela Young, a solicitor of Warners Bay, to pursue her action against NorthPower (Exhibit 31). She was boldly pressing ahead with her claim. It is reasonable to infer that Mr Mahommed was taken in by her confidence, encouraged by the belief that he might also profit, as her agent. However, it is one thing to accept Doreen Smith's assertion that she had been short changed in respect of her previous contract. It is another for Mr Mahommed to believe that she would still obtain a new contract in circumstances where she was contemplating suing NorthPower, and NorthPower had reported her to ICAC. Ordinarily, the threat of court action may be regarded as an act of hostility, more likely to rupture relations with a company than lead to a new contract.
154 However, it was still relatively early in their relationship. By December 2002, Mr Mahommed had been dealing with Doreen Smith for six months. She repeatedly expressed confidence that she would secure a new contract. On balance, I accept that, at least at this point, Mr Mahommed believed that she may yet pull it off. I am not persuaded that there was dishonesty or wilful blindness in respect of the third Smith application. Nor do I believe there was dishonesty in relation to the statement of Doreen Smith's assets.
155 Before dealing with two further loan applications made later that year (2003) involving the assets of Tony Steele, I should refer to certain matters of history. On 7 March 2003, the property of Tony Steele at 1/151 Bowman Street, Swansea, was sold. The loan to Liberty Financial was discharged ($133,868.18) (DS: para [200]). In his letter to the Office of Fair Trading on 28 June 2004, Mr Mahommed asserted that the loan had never been in default (Exhibit 4: p 5). He was not cross examined to suggest otherwise and no evidence was tendered from Liberty Financial. It was also said that the property had been sold at a significant profit. Tony Steele, on the other hand, said that he did not receive the proceeds of the sale (T 373; 378), although very little weight can be given to that (infra para [175]).
156 On 20 March 2003, the solicitors for NorthPower (Deacons) wrote to Pamela Young, solicitor (Exhibit 31). They indicated that, upon receipt of the claim, the matter had been referred to KPMG Forensic for investigation. They added: (Exhibit 31: p 1)
"This investigation found that the documentation accompanying your client's claim did not reconcile with NorthPower's records. KPMG Forensic found several instances where the documentation provided by your client indicated duplicate payments, quotations claimed to be invoices and other anomalies.
KPMG Forensic's investigation supports our client's view that no monies are owed to your client by NorthPower (now Country Energy). However, if your client is able to provide any further documentation in support of her claim, then your client may be assured that any new information will be thoroughly investigated ... "
157 The letter repeated that the matter had been referred to ICAC, although it added: (Exhibit 31: p 2)
" ... This should not be taken as an indication that our client alleges any corrupt conduct on the part of your client or NorthPower. Our client has simply complied with the ICAC Act."
158 Doreen Smith was not deterred, although it should be remembered that she had boldly pressed ahead with a defamation action in 1975, in circumstances where she was later convicted of the crime which was the subject of the report about which she complained (supra para [53]). Mr Mahommed, at this point, knew nothing of her criminal past. He said that, as her agent, he attended a number of conferences in Sydney with a QC and instructed actuaries (T 265). It is reasonable to accept that Mr Mahommed, without the insight provided by Doreen Smith's past, was carried along by her confidence and believed that there was some prospect of recovery.
159 Against that background, let me then deal with the further applications made in respect of the property of Tony Steele.