MDN Mortgages Pty Ltd v Caradonna

Background. 22 Mrs Caradonna was born in Italy in 1939. She left school at the age of eleven years, having completed fifth class (Ex 1 [4]). She then worked on her family's farm. Arrangements were made for her to marry Gerardo Caradonna in 1957 (Ex 1 [6]). They had four children including, relevantly: Anna Maria, born in August 1958, now married to Stephen Palumbo. Angelo Antonio ("Tony"), born in November 1961. 23 Their youngest child, Vito, is disabled. He now lives in a nursing home (Ex 1 [9]). Before he entered the nursing home (in approximately 2007), Mrs Caradonna was his carer (Ex 1 [9]). 24 Mrs Caradonna's father emigrated to Australia in the 1950s, arriving ahead of her mother who followed in about 1960. Mrs Caradonna and her husband arrived in 1963. In 1981, or thereabouts, they purchased land at 13 Kincumber Road, Bonnyrigg and built a house. Mrs Caradonna's husband died on 9 February 1995 (Ex 1 [8]). Mrs Caradonna remained in the house, which is still her residence.

Early assistance to Tony. 25 Some time before 1993, Mrs Caradonna and her husband were approached by their son, Tony. He wanted to borrow money to buy a stall at the Flemington Markets. He asked to use their home as security (Ex 1 [11]). Mrs Caradonna and her husband agreed. She described what then happened in these words: (Ex 1 [13]) "13. In 1993 my husband and I received a telephone call from a male person from whom Tony had arranged to borrow money. The man said to me words of or to the effect 'I want to see you in town'. My husband and I went to Sydney. I don't remember the name of the man or the building in the city where we saw him. We were accompanied by Tony. I recall that the man said 'Are you happy for this to happen?' The man gave my husband and I a lot of papers to sign but told us to do so 'in front of a solicitor'. Thereafter my husband and I went to see Mr Trimarchi, a solicitor in Liverpool We signed the document and Mr Trimarchi witnessed our signatures." 26 The mortgage was executed by Mrs Caradonna and her husband on 15 November 1993, securing a loan of $146,000 (Ex H, tab 7). Mrs Caradonna, when asked about the loan in cross examination at the resumed hearing, agreed that she had signed the documents with her husband, saying, accurately, that it had been repaid (T 6 (2.3.10)). However, when shown a copy of the document (Ex P, tab 3), she said this in respect of the first page: (T 6) "A. INTERPRETER : This one, yes, but it looks like but. GLEESON: Q: Please go to the next page in that document and look at the bottom of the page. Is that your signature at the bottom of the page? A. INTERPRETER : Doesn't look like mine. Q. What about it doesn't look like yours? A. INTERPRETER : Doesn't look like mine. Q. Do you deny it's your signature? A. INTERPRETER: I can't remember. Q. Please go to the top of the page on the left hand side there are some initials 'MC'. Is that your writing? The second page, are the initials 'MC' your writing, Mrs Caradonna? A. INTERPRETER : They don't look. I cannot remember." 27 Mrs Caradonna was then shown the last page of the document. She said this: (T 6/7) "Q. Please go to the next page. In the middle of the page there are words 'signed sealed and delivered by Maria Antonietta Caradonna'. Is that your signature? A. INTERPRETER : It is correct, Maria Caradonna. Q. That is your signature -- A. INTERPRETER: Because it says Maria Antonietta Caradonna. Q. And is that your signature? A. INTERPRETER: No, because there is no Antonietta there. Q. Is the signature, 'M Caradonna' your handwriting? A. INTERPRETER: I don't know. Q. Do you deny it's your writing? A. INTERPRETER: The 'M' doesn't look mine." 28 The document was uncontroversial. There was no question that it was Mrs Caradonna's signature and that of her husband. As mentioned, this evidence was given at the resumed hearing (2.3.10). It was the first in a series of denials. 29 Mrs Caradonna's original affidavit (31.3.08) included the following detail concerning a default under the loan: (Ex 1 [14]) "14. A recent search by me of the papers I held in my home in regard to the various dealings I have had with my son Tony, resulted in my discovering a letter dated 30 May 1995 from Anthony Sunman & Co Solicitors. I do not recall receiving such letter. Any time that I have received similar correspondence I have spoken to my children about such document and in particular Tony. He has said to me each time words of or to the effect 'don't you worry about that Mum'." 30 The letter from Anthony Sunman & Co, solicitors, of 30 May 1995, acting for the mortgagee, was produced. The letter drew attention to the fact that the mortgage was in arrears and threatened proceedings (Ex P, tab 5). At the resumed hearing, in cross examination, Mrs Caradonna was shown the letter (T 7). She was reminded, with the aid of an interpreter, of her previous affidavit. She said this: (T 7) "Q. You said in your first affidavit, Ex 1, paragraph 14, that when you were searching your papers at home you found this letter. But you don't recall receiving it? A. INTERPRETER : No, I don't. Q. But you did find this letter in your papers at home? A. INTERPRETER: I cannot remember." 31 Shortly after the letter from the solicitors (28.6.95), the mortgage was discharged (Ex H, tab 9). Meanwhile, Mr Caradonna had died. On 12 July 1995, the mortgage was replaced with another from Westpac, this time for $310,000 (Ex H, tab 10). The mortgage was signed "Maria A Caradonna". Alongside that signature, under the word "Debtor", Tony Caradonna signed his name, as he acknowledged (T 80). Separately, and also under the word "Debtor", was the signature of Stephen Palumbo, which, in cross examination, he also acknowledged (T 60). When Mrs Caradonna was shown that document in cross examination, however, she said this: (T 12) "Q. Please, Mr Interpreter, then show Mrs Caradonna the document appearing under tab 10. It's a mortgage dated 15 August 1997. The date is in the middle of the page on the right hand side. Does your signature appear above the words 'Maria Antonietta Caradonna'? A. INTERPRETER : I didn't see any solicitor, no. Q. That's not my question, Mrs Caradonna. Is that your signature? A. INTERPRETER: No." 32 That, I repeat, was evidence at the resumed hearing. However, Mrs Caradonna, in her original affidavit, provided the following recollection of the background to the replacement mortgage. She said this: (Ex 1 [16]) "16. In about July of 1995 Tony said to me words of or to the effect 'I am going to pay out the monies I borrowed in 1993 with a new loan from Westpac. Prior to that time I had regularly said to Tony 'Tony you pay bank?' to which Tony replied 'I pay every month, don't you worry'. I am now informed that, at the time he borrowed money from Westpac Banking Corporation in about July 1995, the money advanced was approximately $310,000. I was not aware at the time of signing the mortgage, again in front of Anthony Trimarchi, that additional monies had been borrowed by my son Tony." 33 Mrs Caradonna also provided the following detail concerning the August 1997 mortgage: (Ex 1 [19]) "19. I recall seeing a Mr Albert Macri Solicitor. I recall further that he prepared a will for me. To the best of my recollection this was after my husband and I had completed building the house at Bonnyrigg and it was no later than 1988. As to my signing a mortgage on or about 15 August 1997 whereby I, at the request of my son Tony, borrowed an amount of $185,000, the signature on the copy of the document I have seen appears to be mine . I recall Mr Macri saying words of or to the effect 'you've not done it again for your kids' . I can't recall whether the document which also appears to bear the signature of my son Tony was signed by my son Tony at the same time as I signed it in front of Mr Macri." (emphasis added) 34 At the resumed hearing (2.3.10), that paragraph was read to Mrs Caradonna through an interpreter. She was then asked the following: (T 9/10) "Q. Was that statement true? A. INTERPRETER : The fact is that I didn't know what they were doing. I didn't know anything about it. Q. You swore an affidavit after it was translated to you on 31 March 2008. Was that statement true? A. INTERPRETER: I cannot remember this." 35 The affidavit, Exhibit 1, was sworn in the presence of Mrs Caradonna's then solicitor, Gerard O'Donnell, as witness. Alongside Mr O'Donnell's signature appears "M Caradonna". The affidavit was accompanied by a certificate of an interpreter, in these terms: "I, Angela Angelone, of Community Relations Commission Language Services, interpreter, certify that before the above named deponent swore the affidavit, I read it over to her in the Italian language and she appeared to hear and understand the same and I interpreted the oath to her. I am competent to interpret from the English to the Italian language." 36 At the resumed hearing (2.3.10), Mrs Caradonna's attention was drawn to the final page of her affidavit and the various signatures, including the certificate of the interpreter. She said this: (T 10/11) "Q. Mrs Caradonna, do you recognise the word 'M Caradonna' at the bottom of that page as your signature? A. INTERPRETER : What I would like to know, I would like to know what this document is about. Q. But do you recognise it as your signature? A. INTERPRETER: Looks as if it is not mine because this paper, with all this money, I don't know." 37 Again there was no controversy about Mrs Caradonna's signature on her earlier affidavit. Indeed, it was used by the handwriting experts as a sample of the way in which she signed. 38 On 26 February 1999, Caradonna Investments was registered as a company. Tony Caradonna and Mrs Caradonna were appointed directors. On 10 January 2000, Mrs Caradonna was replaced by Stephen Palumbo (Ex 8, annex A). Mr Tony Caradonna, in cross examination, provided the following description of the way in which the company operated: (T 86) "Q. ... when it was yourself and your mother as directors from March '99 to early 2000 was the arrangement with your mother that she left everything to you to attend to in relation to the company's business? A. I can't remember.

Q. You are not suggesting your mother had an active part in the business affairs? A. No, she had no active part at all.

Q. She was content to allow to you look after the affairs of the company? A. Yes.

Q. I want to ask you about bank accounts. What bank account did Caradonna Investments have from the time it was incorporated? A. Western City Credit Union.

Q. And the signatories to that account were? A. Just myself.

Q. And that was the company's bank account? A. Yes.

Q. When Mr Steven Palumbo became a director on 10 January 2000, was the arrangement in relation to the day to day affairs of the company that he left things to you to attend to? A. Yes.

Q. And you would keep him informed of events from time to time? A. Yes, from time to time, yes.

Q. And if you were to refinance any loans of the company you would inform him about those matters? A. I would have to because he was a director.

Q. There was never an occasion where he disagreed with a decision by you to refinance a loan, was there? A. Not that I recall, no." 39 The August 1997 mortgages were discharged on 9 August 1999 and replaced by two mortgages arranged by R L Kremnizer & Co, Double Bay (Ex H, tabs 14 and 15). There was a first mortgage (where the mortgagees were Hely Services Pty Limited and Douglas Walter Lack and Margaret Lack) for $195,000 and a second mortgage (to Pacific Coast Nominees Pty Limited) for $30,000 (a total of $225,000). Mrs Caradonna, in her original affidavit, said that she had no recollection of signing those mortgages (Ex 1 [20]). At the resumed hearing (2.3.10), when shown her signature (Ex P, tab 14), Mrs Caradonna said that the signature ("Maria A Caradonna") was not her signature (T 17). The transcript included the following: (T 18) "HIS HONOUR: Q. Mrs Caradonna, what is being put to you is that in your affidavit you say, 'I didn't know about these mortgages and borrowing those amounts? A. INTERPRETER : No, I didn't. Q. But you don't say that. 'That is not my signature'? A. INTERPRETER: Yes, but it is not my signature, I can say that for sure. GLEESON: Q. But when you swore your affidavit of 31 March 2008, you were careful to differentiate between documents you say you signed and documents you saw you didn't sign, weren't you? A. INTERPRETER: Yes, because I said that because I didn't sign. I told Gerry all the time I never signed that and I knew nothing about that money." 40 Again, there was no real controversy concerning that document. Mr Tony Caradonna remembered refinancing through Kremnizer & Co (T 82). When shown his mother's signature, he was not sure that it was hers (T 84). He nonetheless believed that he could recall his mother giving a mortgage in connection with Caradonna Investments, through Kreminizer (T 84).

The September 2001 transaction. 41 The plaintiff, MDN Mortgages, was described by Mr John Dickinson (a director and sales manager) as a small company with three employees (Ex C [6], [9]). The company provided short term loans for business purposes to borrowers referred by brokers (Ex C [6]). Mr Dickinson had previously worked for Magney Mortgages Limited (Ex C [3]). Whilst at Magney Mortgages he met Mr Tony Caradonna. He said this: (Ex C [13]) "13. By 2004, I had been dealing with Tony Caradonna for about 4 years. He referred borrowers to me for finance, on occasions. On other occasions, he applied for finance for himself (or for a company with which he was involved, Caradonna Investments Pty Ltd)." 42 Mr Tony Caradonna said much the same thing. He described their relationship in these terms: (Ex 7) "3. In about 2000 I became acquainted with John Dickinson through a mutual associate Mr Vince Milti who was also involved in the boxing promotion business and I met Mr Dickinson regularly at boxing matches. 4. In late 2000 I recall a conversation I had with Mr Dickinson where Mr Dickinson said ... words to the effect: John said: 'Tony, I am a lender, if you have anyone who wants to borrow money please send them across to me and I will see what I can do for them.' I said: 'That's great John. If I know anyone I'll send them to you.' 5. Over the next year I referred a number of people to Mr Dickinson to obtain loans. I did not receive any commissions for these referrals and merely wished to introduce them to Mr Dickinson and foster the relationship between myself and Mr Dickinson. 6. In about November or December 200, Irena Bradirick shared an office with Caradonna Investments and acted as a mortgage broker in her own right. I recall she actively sought and referred clients to Magney Mortgages for loans." 43 Mr Caradonna said that he spoke to Mr Dickinson, in September 2001, about getting a loan on behalf of Caradonna Investments. Mr Dickinson said he would send "the document" (Ex 7 [7]). In fact, as Mr Caradonna acknowledged (T 89), their conversation was somewhat earlier. On 11 April 2001, an application was completed and sent by fax addressed to Mr Dickinson. On the cover sheet of the application, in printing, were the words, "From Tony Caradonna" (Ex R, tab 6). It was a six page questionnaire where the answers had been printed by hand. It was dated 12 April 2001 and signed. On the last page there was a further note, which was also printed and in these terms: (Ex R, tab 6) "Attention John. This is a urgent matter. Will discuss it with you over phone as I am in Qld on business. Basically re finance 12 mths int only 235k App 380k To re finance from Kremnizer & Co for 12 mths int only. Regards Tony Contact me at 9.30 am 0402-766511 17/4/2001"

44 When taken to the signature in cross examination, Mr Caradonna said, "It don't appear like my signature" (T 91). The cross examination continued as follows: (T 91) "Q. You don't deny it's your signature, do you? A. I am not certain. Q. Then look at the last page please of the document, the one I took you to previously headed "Attention John. This is an urgent matter etcetera, regards Tony". You are not suggesting seriously are you that someone else wrote those words? A. I am not certain. As I said, I am not certain. Q. Who would you suggest would write those words ending 'regards Tony", anyone other than yourself? A. I don't recall." 45 Mr Caradonna was asked about the handwriting in the rest of the document. Was it his? Again, he was "uncertain" (T 92). It was a very large sample of handwriting. The following question was then asked: (T 92) "HIS HONOUR: Q. The question is, is it your handwriting? A. Well, I don't believe so, because I've never written 'Antonia' which is on the third page. Simply Antonio Caradonna and corporate borrower, Caradonna Investments, and it's got an address of PO 127 principal activity, travel and finance." 46 To assist Mr Caradonna in his recollection, his attention was drawn to the mobile phone number appearing in the note. It was the same number as on the letterhead of Caradonna Investments (Ex R, tab 39B). Still Mr Caradonna remained uncertain. The application was sent by fax from the Conrad Jupiters Hotel in Queensland. Mr Caradonna acknowledged the hotel was one of his sponsors and that he was staying at the hotel in April 2001 (T 92). The message itself referred to his being in Queensland on business. The following question was then put: (T 93) "Q. Doesn't that assist your recollection where you were when you filled this document in and arranged for it to be faxed back to Magney Mortgages Limited? A. That is possible, yes." 47 There can be no doubt that Mr Caradonna completed the application and the postscript and knew it. He was a most unsatisfactory witness. Since he had acknowledged the September 2001 transaction in his affidavit, why did he deny an uncontroversial preliminary document in the history of that transaction? The document examiner retained by the defendant, Mr Storey, as I will shortly explain, sought samples of Mr Caradonna's signature in an original form from the defendant's solicitor (T 147). However, they were never provided (T 147). I infer that Mr Caradonna refused to acknowledge the obvious because he was not anxious to verify his signature, or a large sample of his handwriting. 48 On 17 April 2001, Magney Mortgages made the offer of a loan in a letter signed by Mr Dickinson. The letter was addressed, "Dear Tony" (Ex T, tab 1). The letter provided a form to be completed. It was returned by fax to Magney Mortgages on 9 May 2001 and again on 21 May 2001. The fax used was that of Overseas Travel, the business operated by Maria Palumbo, Mr Caradonna's sister. Mr Caradonna had no recollection of sending the fax. He acknowledged he had no fax machine at that time (T 94). He rented the back of his sister's office (T 132). When the letter was returned, the words "Attention John, as discussed" were printed on the letter. The printing was similar to the application form (Ex R, tab 6; cf Ex C, tab 1). As mentioned, the document made provision for acceptance. When it was returned on 21 May 2001, it included the following printed names with signatures alongside: (Ex T, tab 1A) Antonio Caradonna Stephen Palumbo Antonietta Caradonna Mrs Maria Palumbo

49 Mr Caradonna said he did not recognise the signature alongside his name (T 94). When asked about Mr Stephen Palumbo's signature, he said he did not ever recall having seen his signature (T 94). That evidence, however, was at odds with evidence he had given earlier of their practice as directors of Caradonna Investments, which he described in these terms: (T 86) "Q. And you provided documents to him for signature in connection with refinancing loans from time to time? A. If there needed to be, yes. Q. And he signed those documents and returned them to you? A. No. If we were we would do it together. There was no point of taking them to him, sending to him and sending them back, no, it was always done wherever we were, if that was the case." 50 Mr Caradonna said that he did not know his sister's signature (T 94). His mother's signature did not appear to be hers (T 94). 51 A handwriting report of Ms Novotny was tendered on behalf of the plaintiff. She examined, amongst other things, signatures on various documents attributed to Mr Tony Caradonna. She acknowledged a limitation upon her investigation. The signatures available to her for comparison were reproductions, not originals. I will examine her conclusions below. There were examples of Mr Caradonna's signature on documents which were not associated with this litigation. They included documents provided to Western City Credit Union when opening an account (Ex S). The application annexed a photocopy of his passport and driver's licence. He also signed the annual return for Caradonna Investments on 24 December 2002 (Ex 10, item 70: report Mr Storey). To my eye, the signatures on these documents certainly appear to be similar to the signature attributed to Mr Tony Caradonna on the document accepting the offer by the mortgagee (17.4.01) and the declaration that the loan was for a business purpose (Ex 10, items 69.4 and 69.5: report Mr Storey). 52 On 24 July 2001, a Notice to Vacate was served upon Mrs Caradonna by the Sheriff's Office (Ex U). The Kremnizer mortgages were, or at least one of them was apparently in arrears. The document was faxed to Overseas Travel (Ex R, tab 8). Mr Caradonna said he did not recall receiving the document. Nor did he recall the mortgage being in default (T 95). However, Mrs Caradonna, in her original affidavit, in the context of the mortgage of 6 September 2001, did provide a recollection of the events which led to the refinancing: (Ex 1 [21]) "21. ... I recall seeing Mr Flammia at a boxing match at Penrith. This was shortly after I had received a letter about monies and interest outstanding. I told Mr Flammia about the letter and in fact gave him the letter. He said to me 'Tony fix it up'. Tony was with me at the time." 53 On 26 July 2001, Manna & Flammia, solicitors, wrote to R L Kremnizer & Co stating that the loan was being refinanced (Ex R, tab 9). R L Kremnizer responded on 30 July 2001, agreeing to stay the eviction provided that outstanding interest and legal fees were paid. It appears that the arrears were paid, since the eviction did not proceed. 54 On 16 August 2001, Manna & Flammia, solicitors for Caradonna Investments, returned the Deed of Guarantee and Indemnity to the solicitors for Magney Mortgages. The deed made provision, on the last page, for the document to be "signed, sealed and delivered" by each of the guarantors in the presence of a witness. It appears that the witness to each signature was Mr Lorenzo Flammia, the principal of Manna & Flammia, whose distinctive signature can be seen alongside the signatures of Mrs Caradonna, Mr Tony Caradonna, Mr Stephen Palumbo and Maria Natalie Palumbo. However, Mr Palumbo, when shown the document, denied that it was his signature (T 65). Mrs Caradonna, on the first day of the trial (30.6.09), was shown the document and denied that it was her signature (T 36). The denial was the more plausible because she acknowledged that the mortgage of 6 September 2001 had been signed by her (T 35) (supra [15]). Mr Tony Caradonna, when asked about the signature alongside his name, said that he was "uncertain" (T 99). Again, to my eye, pictorially, Mr Caradonna's signature appears similar to signatures on other documents, including those not associated with this litigation, to which reference has been made. I will, however, return to the issue of Mr Tony Caradonna's signature below. 55 A Facility Agreement between Magney Mortgages Limited and Caradonna Investments Pty Limited, identifying the terms of the loan, including the security at Bonnyrigg (Ex R, tab 11), was also prepared. The document made provision for the Common Seal of Caradonna Investments to be affixed in the presence of two directors. The seal was affixed with signatures in respect of each director. The document was shown to Mr Tony Caradonna. He affirmed that it was his signature. He said this: (T 98/9) "Q. Then if we go to the last page of this document please, you will see there a reference to the common seal of Caradonna Investments, your signature appears on the left-hand side above the words "signature of director"? A. Yes.

Q. And then under the common seal appears the signature of Mr Palumbo, doesn't it? A. It appears, yes.

Q. And you say your ordinary practice was this is a document where you would both, that's yourself and Mr Palumbo, would sign at the same time? A. Say again. Sorry?

Q. You said earlier that your usual practice was not to send documents to Mr Palumbo for signature, but that you would see him personally and you would both sign the document at the same time? A. That's correct." 56 Mr Palumbo, when shown the same document, was asked whether he recognised Tony Caradonna's signature. He answered, "Yeah", and then after a pause added, "Well, I don't know. I don't know what his signature looks like" (T 64). It is likely that his first answer was the truth, and that he did recognise Mr Tony Caradonna's signature. However, Mr Palumbo denied that the "S Palumbo" appearing on the Facility Agreement was his signature (T 64). He added that Tony Caradonna had possession of the Common Seal of Caradonna Investments, which I accept (infra [229]). 57 Settlement took place on 6 September 2001. A mortgage in favour of Magney Mortgages Limited was handed over (Ex R, tab 13). Above the words "Signature of Mortgagor" appeared "Maria A Caradonna" in handwriting. Alongside her name was the signature of Mr Flammia, solicitor, as witness. In the context of that document, Mrs Caradonna said this, in her original affidavit (31.3.08): (Ex 1 [21]) "21. I have looked at a copy of a mortgage bearing date 6 September 2001 purportedly signed by me in front of Lorenzo Flammia Solicitor. The signature on this document appears to be mine. Mr Flammia had been to my place at Kincumber Road Bonnyrigg on two occasions, to the best of my recollection. I recall signing a will prepared for me by Mr Flammia. ... The signature on the mortgage of 6 September 2001 appears to be mine. I did not attend at 45 Castlereagh Street Penrith given by Mr Flammia as his address on any occasion." 58 In a later affidavit (19.3.09), sworn before the trial began, Mrs Caradonna elaborated upon her account: (Ex 3 [4]) "4. ... I did not sign such a mortgage document on before or after 6 September 2001 in front of Lorenzo Flammia Solicitor. Further, to the best of my recollection, I did sign a mortgage document in or about September 2001 at the request of my son Angelo Antonio Caradonna." 59 Mrs Caradonna added: (Ex 3 [5]) "5. At the time my son said to me words of or to the effect 'this is for cheaper interest'. At that time my son did not mention to me that he was borrowing any more money. At the time that I recall signing a mortgage in 2001, at the request of my son, I did not sign any other documents. I did not receive or declare that I had received independent legal advice regarding the document my son asked me to sign in or about September 2001. I did not sign any document purporting to be an acknowledgement by me of legal advice by me as a proposed guarantor. I did not sign any document purporting to be a consent by guarantor to legal advice or a consent by borrower to legal advice." 60 Mrs Caradonna's affidavit also included the following paragraph, reflecting the way in which the case was put on the first day, in contrast to the way in which it was put at the resumed hearing (2.3.10) (supra [18]): (Ex 3 [7]) "7. I did not authorize my son Tony or any other person to sign any documents on my behalf." 61 The two mortgages of the R L Kremnizer & Co clients were discharged on 20 September 2001 and the mortgage of Magney Mortgages registered the same day (Ex H, tab 1).

The October 2002 loan. 62 The September 2001 mortgage was for a term of one year. The date for repayment was 1 September 2002 (Ex D, tab 1, schedule: item 3). It will be remembered that Mr Tony Caradonna denied having made application to refinance the loan (supra [18]), whether in 2002 or in 2004 (Ex 7 [11]). The account he provided in his affidavit of what happened after the September 2001 mortgage was simply this: (Ex 7 [9]) "9. Thereafter, Caradonna Investments discharged the mortgage to Kreminizers and the loan was refinanced with Magney Mortgages for an amount of approximately $215,000.00 and Caradonna Investments paid interest on the loan from time to time, until approximately 2005 when the company went into liquidation." 63 In cross examination, Mr Caradonna was asked the following: (T 100) "Q. The lender wasn't giving you the money with no obligation to repay, was he? A. No, no one would do that.

Q. So it's a serious matter, the company had borrowed $213,000 for 12 months interest only, and so by September 2002 Caradonna Investments had to either repay that amount completely or refinance that mortgage, you agree? A. Normal practice, yes.

Q. And there was no reason why normal practice didn't apply to the borrowings of Caradonna Investments, was there? A. I wouldn't assume so, no.

Q. And what I suggest to you in September 2002 you arranged again to refinance your loan through Magney Mortgage Limited, and this time you borrowed some additional money? A. No, only ever, if that was the case, it was only ever once that I dealt with Magney." 64 The position taken by Mr Caradonna was absurd. He acknowledged he was party to a loan repayable in one year (September 2002). He provided no account of what happened and what he did once the loan fell due. 65 The cross examination continued: (T 100) "Q. Do you deny refinancing through Magney Mortgages in September 2002 and receiving for the company an additional $92,000? A. I do deny that, yes." 66 I will shortly describe the documentation associated with the 2002 and 2004 loans. It is clear beyond argument that, notwithstanding his denials, Mr Tony Caradonna organised both loans. Indeed his evidence, including his affidavit evidence, was, I believe, so brazenly false, that I propose to refer the papers to the Director of Public Prosecutions, so that consideration may be given as to whether charges should be preferred against him. 67 Handwriting evidence was called by both the defendant and the plaintiff. I will shortly refer to it. That evidence strongly suggested that the signatures of the defendant and others on documents associated with both with the 2002 and 2004 loans were forged (apart from the signatures of Mr Tony Caradonna himself and perhaps Mr Flammia). The evidence of forgery is stronger in some cases than in others. However, I believe a pattern does emerge when each document is examined in the context of the others concerned with the same transaction. For instance, on some documents (the guarantees) there were four signatures, Mr Tony Caradonna, his mother (the defendant), his sister (Mrs Maria Palumbo) and her husband (Stephen Palumbo). There is strong, even very strong in some cases, evidence that two of those signatures have been forged. There is some evidence that a third signature has been forged. The only signature that appears to be authentic is that of Tony Caradonna. The inference of forgery, and responsibility for the forgery, gains strength from the context, especially where, as here, the same pattern is repeated in respect of the refinancing in 2004. 68 In reaching the conclusions that I am about to express, I am conscious that Mr Flammia's name (and his unusual and distinctive signature) appears on certain documents as a "witness". Mr Flammia was not called. I will return to that aspect below. 69 Let me first describe the documentation in respect of the 2002 loan. On 10 September 2002, Magney Mortgages faxed two Letters of Offer, which both began with these words: (Ex D, tab 15) "We are pleased to advise that based upon your Mortgage Loan Application, we are prepared to arrange the loan described below subject to the following terms and conditions and your written confirmation that you wish to proceed. Borrower Mr Stephen Palumbo Mrs Maria Palumbo Mr Antonio Caradonna Mrs Marim (sic) Carradonna)" 70 The Mortgage Loan Applications were not tendered. There were two offers because the amount being loaned exceeded two-thirds of the property valuation (Ex D, tab 15). The sum of $279,000 was to be loaned on a first mortgage and $36,000 on a second mortgage (Ex D, tab 16), at a higher rate of interest. The offer required signatures from each of the persons described as "borrowers" in respect of three matters (although the "borrower", in the documentation of the loan ultimately prepared, was Caradonna Investments): First, an acceptance of the terms of the offer.

Second, a declaration that the loan was for business purposes.

Third, consent under the privacy legislation. 71 The forms were completed, with the names of the "borrowers" printed on three occasions, since three declarations were required. Signatures appeared alongside each name. The date, 12.9.02, was then written alongside each signature. The printed names and dates, in each case, appear to have been written by the same person. Mr Tony Caradonna, in his affidavit, denied that the signature alongside his name was his (Ex 7 [11]). Mr Stephen Palumbo (Ex 8 [3]), his wife Maria Palumbo (Ex 9 [3]) and Mrs Caradonna (Ex 6 [3]) likewise swore that the signatures alongside their respective names were not their signatures. When taken to the signatures on one of the Letters of Offer, Mr Palumbo said this: (T 66) "A. None of these signatures are right. My wife and my mother-in-law. It's all wrong." 72 The defendant retained Mr Gary Storey, a forensic document examiner, to provide a handwriting opinion in respect of a number of documents. Specimen documents were identified and a comparison was then made with documents which were termed "questioned documents", that is where there was an issue as to forgery. Mr Storey was, for 28 years, a police officer in the Victorian Police. He retired with the rank of Inspector. He has been in private practice as a document examiner since 1993 (Ex 10, annex B). In accordance with what was said to be world practice, he expressed conclusions on a qualitative scale, either positive or negative. Relevantly, the gradations on the positive scale (that is, suggesting the document is a forgery) are as follows: (Ex 10, annex B) "1. Conclusive 2. Very strong support 3. Strong support 4. Limited support 5. No conclusion or inconclusive" 73 There was an elaboration upon the fourth category, limited support, which was as follows: (Ex 10, annex B) "A conclusion of 'limited support' can also be expressed in terms that there is more or greater support for the proposition that the specimen writer wrote or did not write the questioned signature/s compared to the support that this writer did or did not write the questioned signature/s. In any event it is a qualified conclusion that is expressed when a significant limitation has been encountered in an examination, such as only having reproductions of the questioned signatures for examination. However, there are also a sufficient number of pictorial features in the signature/writing that point the examiner in a particular direction regarding authorship of the questioned writing/signatures but it is far from a conclusive conclusion." 74 One of the documents Mr Storey examined was the acceptance of the Magney Mortgage offer in respect of the $36,000 second mortgage (Ex D, tab 16), where there were three signatures "M A Caradonna". Mr Storey formed the view, based upon a pictorial assessment, that the specimens appeared to have been written by the same person. He identified a number of characteristics (12 in all). He then examined the questioned documents (including the letter of acceptance). He noted the following difference: (Ex 10, p 4 [16]) "16. Examination of the questioned signatures shows that all are signed 'M A Caradonna' with the exception of the signature appearing on the document item 28 which is signed 'M. B. Caradonna'. This would seem to be inconsistent to specimen signatures which are habitually signed 'Maria Caradonna'. there is only one example where the signature is signed 'M A Caradonna' and four examples where it is signed 'M Caradonna'." 75 However, he did not rely upon that feature because the more extensive range of specimen signatures may have revealed a different pattern of signing. There were, nonetheless, a number of inconsistencies in the questioned documents which he identified (11 in all). He concluded that there was strong support that the person who wrote the specimens (Mrs Caradonna) did not write the signatures on the Magney Mortgages acceptance document. I accept that opinion. I accept that Mrs Caradonna's signatures on both letters of acceptance (Ex D, tabs 15 and 16) were probably forged. 76 The same exercise was then undertaken in respect of the name "M Palumbo" on the same document. That signature was compared to specimen signatures of Mrs Palumbo. Mr Storey noted that there were only four specimen signatures, although he regarded that as sufficient to conduct a meaningful examination. They were all reproductions but were pictorially similar. When compared to the questioned signatures, there were a number of inconsistencies. He could not exclude the possibility that the questioned signatures were the product of some level of disguise. Nonetheless, he believed there was strong support for the conclusion that Mrs Palumbo did not write the signatures on the acceptance forms. Again I accept as probable that Mrs Palumbo did not sign either form (Ex D, tabs 15 and 16). 77 Mr Storey undertook the same exercise with respect to the signature of Stephen Palumbo on the same document. The specimen signatures provided in respect of Stephen Palumbo were examined. A pictorial assessment was consistent with their having been written by the same person. There were eight individual characteristics which he identified. The questioned signatures, on the other hand, contained a number of inconsistencies. Mr Storey said this: (Ex 10, p 7 [26]) "26. Therefore, it is not possible to entirely eliminate the possibility that the specimen writer has disguised their normal writing. However, while this possibility cannot be dismissed, it is noted that there is a similarity between the letter 'a' formation written on some of the questioned signatures compared to some of the formations ... on the questioned M Caradonna signatures. This raises the possibility but does not prove that the same person could be involved in writing both the M Caradonna and S Palumbo questioned signatures." 78 Mr Storey's ultimate conclusion was tentative. He formed the view that, in respect of two of the three signatures (items 2.1 and 3.1 on the acceptance form), there was more support for the proposition that Mr Palumbo did not write those signatures than the alternative that he did write them. It will be remembered that Mr Palumbo denied having written them. I accept as probable that he did not sign either acceptance letter (Ex D, tabs 15 and 16). 79 Returning to the history of the transaction, on 18 September 2002, Magney Mortgages wrote to their solicitors. They said they had approved the loans and asked that the solicitors prepare appropriate documentation (Ex D, tab 16). The documentation, once prepared, was provided to Mr Lorenzo Flammia of Manna & Flammia, solilcitors, acting for Caradonna Investments. Mr Flammia's office, in preparation for the settlement, forwarded three documents. They were: First, a declaration by Maria Antonietta Caradonna of 14 October 2002 that she was a third party mortgagor and guarantor in respect of a loan between Caradonna Investments and Magney Mortgages, where the security was her home at 13 Kincumber Road, Bonnyrigg. She acknowledged receiving independent legal advice relating to the loan and security documents. She further acknowledged that, having received such advice, she had freely and voluntarily signed the following documents: (a) mortgage (b) loan contract The declaration was then signed "M A Caradonna" and apparently "witnessed" by Mr Flammia. Secondly, an acknowledgement by Maria Antonietta Caradonna of legal advice by proposed guarantor. The document recorded that Mrs Caradonna had produced her passport and Medicare card. It provided a brief summary of the advice which had been given, including that the lender could take possession of her property if there were default under the loan. Again the document was signed "M A Caradonna" (Ex D, tab 24). Thirdly, a consent by guarantor to legal advice, acknowledging that the solicitor, Mr Flammia, may be disabled from acting, were a conflict to arise between the parties to the transaction. Once more the document was signed "M A Caradonna" (Ex D, tab 25). 80 To my eye, the signatures on these documents, purporting to be those of Mrs Caradonna, look different from the specimen signatures. The three documents were examined by Mr Storey. He concluded, in each case, that there was strong support for the proposition that the signatures were not the signatures of Mrs Caradonna. That evidence coincides with Mrs Caradonna's denial. I accept as probable that Mrs Caradonna did not sign the declarations.

81 Settlement took place on 24 October 2002. The structure of the transaction was the same as the September 2001 loan, apart from the fact that there were two mortgages. Facility Agreements between the borrower (Caradonna Investments) and the lender (Magney Mortgages) were executed in respect of both the first (Ex D, tab 17) and second (Ex D, tab 18) mortgages. The seal of Caradonna Investments was affixed to each agreement. A signature which resembles that of Mr Tony Caradonna appears on each document, as well as a signature of "S Palumbo". On one of the agreements (Ex D, tab 17), the signature which appeared to be that of Mr Tony Caradonna was written twice and one signature was crossed out and "S Palumbo" written above it. 82 There was, in addition, a Deed of Guarantee and Indemnity (Ex D, tab 19). The name of the guarantors appeared on the last page, "Maria Antonietta Caradonna, Antonio Caradonna, Stephen Palumbo and Maria Palumbo". Alongside their names were signatures which had been witnessed by a person whose signature resembles that of Mr Flammia. 83 Two mortgages were executed (Ex D, tab 20), one in respect of the first mortgage and the other in respect of the second. In each case, under the words "signature of mortgagor", there appears a signature "M A Caradonna". The mortgage form included a second page, also signed "M A Caradonna", with the witness signature alongside. The front page of the mortgage form made provision for the signature of the mortgagor to be witnessed, the certification being in these terms: (Ex D, tab 20) "I certify that the person(s) signing opposite, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this instrument in my presence." 84 Each mortgage was stamped with the name "Lorenzo Flammia, Solicitor", with a handwritten address at Penrith underneath. Above the stamp, on each document, there was a signature that appeared to be that of Mr Flammia. The two mortgages were to replace and pay out the September 2001 mortgage. A discharge of the earlier mortgage was therefore prepared, to be handed over on settlement (Ex D, tab 22). 85 The sum of $315,000 was advanced under the loan, which included $213,000 to discharge the September 2001 mortgage. Magney Mortgages prepared a letter, addressed to the ANZ Bank, with instructions concerning the cheques to be drawn in accordance with the agreement. Their letter included the following schedule: (Ex D, tab 21) Borrower Payee Amount Total CARADONNA INVESTMENTS PTY LIMITED Magney & Rhodes $1,575.29 202674 Magney Mortgages Limited $1,778.00 Magney Mortgages Limited $2,804.12 Office of State Revenue $349.00 Magney Mortgages Limited $213,000.00 Magney Mortgages Limited $2,567.67 Magney & Rhodes $330.00 Caradonna Investments P/L $92,595.92 $315,000.00

86 There was handwriting evidence in respect of a number of these documents. However, before dealing with that evidence, it is instructive to examine what happened to the surplus funds (after the discharge of the previous mortgage and expenses). It can be seen from the schedule that the bank was instructed to prepare a cheque in favour of Caradonna Investments for $92,595.92. 87 It will be remembered that Mr Tony Caradonna denied receiving the money as a result of refinancing the September 2001 mortgage (supra [19]). Mr Caradonna, when cross examined, acknowledged that he had an account with Western City Credit Union. He was shown a bank cheque drawn by the ANZ Bank on 24 October 2002, in favour of Caradonna Investments for $92,595.92. It was stamped "Western City Credit Union" (Ex R, tab 19). He was also provided with bank statements relating to that account. They were addressed to "Mr A A Caradonna trading as Caradonna Investments P/L, 10 Comboyne Place, St Clair". He acknowledged that was his name and address (T 101). Counsel then drew his attention to an entry on 24 October 2002 in respect of a cheque for $92,595.92 (T 101). Mr Caradonna said he could not recall it (T 101). The cross examination continued as follows: (T 101) "Q. This is a copy of the transactions on the company's bank account with Western City Credit Union? A. Did you say that this was deposited into Caradonna Investments?

Q. Into an account headed Mr A Caradonna trading as Caradonna Investments Pty Ltd, that's how the account is addressed, and you have told the Court that Caradonna Investments had its bank account with Western City Credit Union? A. That's correct, member number 49001, this is a completely different member number.

Q. This is a second account, isn't it? A. I don't recall this account." 88 The plaintiff then demonstrated that Mr Caradonna had two accounts with Western City Credit Union, one in respect of membership number 48731 and the other in respect of 49001 (Ex S). Still Mr Caradonna persisted with his denial. He said this: (T 102/3) "Q. It's an account in your name trading as Caradonna Investments? A. I've never seen that, and I don't recall depositing it or anything. Like I said, 48731, I don't know, and it's definitely not Caradonna Investments. Caradonna Investments is definitely 49001.

Q. Go back to the refinance arrangements. Did you transfer money from your Western City Credit Union, 49001, into this bank account, member number 48731? A. No.

Q. So it would be false to suggest that ever occurred? A. What, that I transferred from one account to another?

Q. Yes? A. No, not that I am aware of." 89 Mr Caradonna was then taken to other entries in the credit union bank statement, where money had been transferred from account 49001 to account 48731 (T 103). His attention was drawn to a number of items where money had been withdrawn and described as "Tony's petrol". The following was put: (T 104) "Q. They relate to transactions that you operated on this account, don't they? A. Who's Tony?

Q. I am suggesting Tony is you, Mr Caradonna? A. No." 90 Mr Caradonna was then taken to the Facility Agreements. He said he did not recall refinancing the September 2001 loan (T 104). When shown the signatures on the last page of one of the agreements (Ex R, tab 16), he said: "It doesn't look like mine" (T 106). He acknowledged that he primarily had custody of the seal, which was kept in the office (T 105). Counsel concluded his cross examination on this aspect as follows: (T 107) "Q. I want to suggest to you when the mortgage was refinanced over your mother's house in October 2002, part of the refinance proceeds, $92,595.92 was deposited into your account with Western City Credit Union, wasn't it? A. That's the first time I've seen that, I wasn't aware of it, no.

Q. So you weren't aware of it, you say, but you now accept you did receive the benefit of that money in October 2002, didn't you? A. Disagree with it.

Q. There's no other Mr A A Caradonna who resides at 10 Comboyne Place St Clair, is there? A. Not that I am aware of, no." 91 I reject Mr Caradonna's evidence. I believe that he is plainly lying. He received the surplus funds of $92,595.92, as he well knew. Indeed, that conclusion was accepted by counsel for the defendant in his final submissions (DS [35]). I also infer that he organised the refinancing. 92 Let me return to the signatures on the various documents associated with the transaction. Beginning with the two mortgages (Ex D, tab 20), the signature of "M A Caradonna" appears on the front page of each mortgage form and on each annexure (Mortgage 9089357D and 9089358B). To my eye, pictorially, they appear different from the specimen signatures of Mrs Caradonna and, indeed, somewhat different from each other. Both documents were examined by Mr Storey (Ex 10, items 6.1, 6.2; 7.1 and 7.2). Mr Storey concluded that there was very strong support for the proposition that they did not match the specimen documents (Ex 10, p 9 [42(A)]). In plain language, there was "very strong support" for the conclusion that each was a forgery. Again, that coincides with Mrs Caradonna's evidence. I accept as probable that Mrs Caradonna did not sign the mortgages. 93 Moving, then, to the Facility Agreements, Mr Palumbo denied that he signed either agreement. When taken to the signatures on the last page of each agreement, he said that they were not his (T 69, 71). Mr Storey examined one of the Facility Agreements (that with the signature crossed out) (Ex D, tab 17). He identified the document as "item 8.22" (Ex 10). Mr Storey had access to a ten page document (which was a photocopy) submitted by Mr Palumbo to the Australian Taxation Office in October 2001 and signed by him on each page (items 36 to 45). He made the following comment upon the specimen signatures: (Ex 10, p 5 [21]) "21. Based on a pictorial assessment of the specimen signatures I have found no evidence to indicate that the same person has not written all the specimen signatures and I have assumed that this is the case. If in the future this assumption proves to be incorrect then all the conclusions based on this assumption will need to be reviewed." 94 Mr Storey identified eight individual characteristics of Mr Stephen Palumbo's writing with variation in the execution of his signature. He then examined the questioned documents. His conclusion was more tentative. He believed that there was more support for the proposition that it was not Mr Palumbo's signature on the Facility Agreement (item 8.22) than the reverse (Ex 10, p 9 [42(C)]). Aspects of Mr Palumbo's evidence were not satisfactory. On occasions he appeared anxious not to implicate Mr Tony Caradonna. However, when asked to identify his own signature, he discriminated between documents, identifying plausibly those signatures which were his and those which were not. I accept that it is probable that Mr Palumbo did not sign the October 2002 Facility Agreement. 95 Was the second signature on the Facility Agreement (over the words "signature of director") that of Mr Tony Caradonna? Mr Caradonna specifically denied that it was his signature (Ex 7 [11(l)]). Mr Storey identified a number of documents where he believed it would be useful to compare the signatures attributed to Mr Tony Caradonna with specimen signatures. 96 However, he could not form a view. He said this: (Ex 10, p 9 [39]-[41]) "39. It was not possible to conduct a comparative examination of the A Caradonna signatures with any specimen signature, either of Mr Caradonna or any other writer of the specimen signatures examined as part of this examination. 40. I observed nothing to indicate that the same person has not written these questioned signatures. Further, the writer of these questioned signatures has the writing ability to have written any of the questioned signatures in the names of M Caradonna, S Palumbo and M Palumbo. 41. To take this aspect further I recommend normal course of business signatures of Mr Caradonna be obtained." 97 When giving evidence, Mr Storey elaborated: (T 147) "A. Basically the result of instructions I was given, sir, that was an implicit question as to whether the A Caradonna was written by anyone or did A Caradonna write any of the other material.

Q. And you weren't able to express an answer to this question, were you? A. No sir, because I was only supplied material which was all questioned.

Q. And you were never given any specimen signatures for A Caradonna? A. No.

Q. You did ask for that? A. I did ask for original material, but I have not (been) given any."

98 The plaintiff, in submissions, urged that the Court should infer from the failure to provide specimens that any evidence that Mr Storey could have provided, had specimens been given, would not have assisted the defendant's "new case", that the 2002 and 2004 mortgages were forged (Plaintiff's submissions [103]) (Jones v Dunkel (1951) 101 CLR 298). 99 Confining myself for the moment to Mr Tony Caradonna, I accept that submission. The position in respect of other witnesses is more complex, since specimens were provided, although Mr Storey would have liked more. I will return to that aspect below. 100 The plaintiff retained Ms Novotny, a document examiner, and asked her to address specific questions. She did so at relatively short notice. At that stage, it was anticipated the case would conclude in the early part of the year. She said more than once in her evidence that her examination was somewhat rushed (T 153). Ms Novotny is a graduate in science with honours in applied chemistry and forensic science (1997). She has worked full time as a document examiner since 1997 (Ex M, annex H). She prepared a report of 26 February 2010, addressing the specific issues identified by the plaintiff. One issue concerned signatures of Mr Tony Caradonna. She was asked to make a comparison between a number of specimen documents and documents which were questioned. Ms Novotny identified, at the outset, a number of limitations arising from the material which she had available to make that comparison. She said this: (Ex M, p 3/4 [5]-[7])) "5. The examination of the A Caradonna signatures is limited by: (a) the reproduction nature of many of the questioned signatures and the varying quality of the reproductions; (b) the reproduction nature of many of the specimen signatures and the varying quality of the reproductions; and (c) the paucity of contemporaneous specimen signatures attributed to Mr Caradonna. 6. The reproduction nature of a signature precludes any useful microscopic examinations to determine the finer details of structure and dynamic qualities. As such, the examinations are limited to the pictorial features that are evident on the copy submitted. 7. The paucity of contemporaneous specimen signatures precludes a proper assessment of the range of natural variation in signatures written by a person at a given time." 101 Ms Novotny, in Appendix A to her report, identified the specimen documents and those that were questioned. The specimen documents were those associated with the September 2001 loan (where Mr Caradonna had acknowledged his participation) (Ex 7 [7]) (items 65 to 69). She also had available as a specimen a copy of an ASIC Annual Return for Caradonna Investments for 2002, as well as the affidavit sworn by Mr Caradonna in these proceedings (Ex 7). 102 The signature on the last of these documents (Ex 7) may be put to one side. Mr Caradonna's signature on the affidavit was utterly different from his "usual" signature, such as the signature on his licence in 2003 (Ex S), his passport in 2007 (Ex S) and the signatures on the many documents involved in these proceedings which, from time to time, he acknowledged were authentic. I will come back to his change of signature below (infra [179]). 103 Ms Novotny believed, nonetheless, that conclusions could be drawn concerning Mr Caradonna's signature, notwithstanding the limitations of the material. In the context of the October 2002 loan, her conclusions may be summarised as follows; First, in respect of the Facility Agreement (loan $279,000) dated 24 October 2002 (Ex D, tab 17) (item 8), the signature on the left hand side of the page above the Common Seal was probably written by Mr Tony Caradonna. The signature opposite, on the right, which was then crossed out, was inconclusive as to whether it was Mr Tony Caradonna's signature. Second, in respect of the Facility Agreement (loan $36,000) dated 24 October 2002 (Ex D, tab 18) (item 63), the examination was inconclusive. 104 I have already made a finding (supra [91]) that Mr Tony Caradonna arranged the refinancing of the October 2002 loan. I have also expressed the view (supra [98]) that the failure to provide original specimens of Mr Caradonna's signature gives rise to a Jones v Dunkel inference. In the context of these findings, Ms Novotny's evidence and my own impression, I believe it probable that Mr Tony Caradonna did sign both the 2002 Facility Agreements. 105 Moving finally to the Deed of Guarantee and Indemnity, which form part of the documentation of the 24 October loan, there are four signatures on that document, each witnessed by a person whose flamboyant signature resembles that of Mr Flammia. Opposite each signature are the words "SIGNED, SEALED AND DELIVERED" with the person's name printed. In the case of Maria Antonietta Caradonna, the signature is in the form: "M A Caradonna". Mrs Caradonna denied any involvement in the 2002 loan. When cross examined, she was not asked specifically about this document. Mr Storey's examination was directed primarily at the 2004 loan documents. He did not examine all documents associated with the earlier loans. He did not offer an opinion about the Deed of Guarantee. Ms Novotny did look at the Deed of Guarantee, but only in the context of Mr Tony Caradonna's signature (Ex 10). 106 I am therefore left with Mrs Caradonna's denial and my own impressions. To my eye, the signature on the Deed of Guarantee is rather different from the specimen signatures of Mrs Caradonna and other samples of her signature in earlier documents. Mrs Caradonna, without any disrespect to her, was a woman of limited education. Her signature often had a tentative, child-like quality. Mr Storey made the general comment that Mrs Caradonna's writing appeared to be slower and more laboured than the questioned documents (T 148). The signature on the Deed of Guarantee, to my eye, appears rather more fluent and pictorially different to specimen signatures from Mrs Caradonna. 107 The Deed of Guarantee is one of a series of transactions. For the reasons stated, the fact that other documents in the series may have been forged is, I believe, relevant to whether the 2002 Deed of Guarantee was, as a matter of probability, also forged. I accept that probably Mrs Caradonna's signature was forged. 108 Let me pass to the November 2004 loan.

The November 2004 loan. 109 The October 2002 mortgage was to be repaid one year later (1.11.03). When it was not repaid, the solicitors for the mortgagee wrote to Mrs Caradonna on 18 June 2004, enclosing notices under the Conveyancing Act 1919 (Ex D, tab 26). One assumes that similar letters were sent to the other guarantors. On 20 September 2004, a Default Statement of Claim was issued in the Supreme Court, naming Caradonna Investments and the four guarantors (including Mrs Caradonna) as defendants. The claim was for the $315,000 principal and outstanding mortgage payments ([21]) (Ex D, tab 27). It was served upon Mrs Caradonna on 28 September 2004 (Ex D, tab 28). I infer that it was served upon the other defendants at about the same time. Judgment was entered on behalf of Magney Mortgages on 20 October 2004 (Ex D, tab 30). 110 It is plain from these events that there was some urgency in refinancing the loan. Indeed, within days of the despatch of the notices (18.6.04), an application was made to MDN Mortgages on 29 June 2004. The application form made provision on the front page for the "Introducer's Name". In printing, which is remarkably similar to the printing on the earlier application to Magney Mortgages (12.4.01) (Ex R, tab 6), the form was completed (according to its terms) by "Tony Caradonna" (Ex R, tab 21). The application sought $320,000. It included an assets and liabilities statement, with the printed names of Antonio Caradonna and Maria Caradonna at the foot of the page. Alongside each name there was a signature (Ex R, tab 21). The printing of each name appeared to be that of the same individual. The form was accompanied by two declarations: first, a declaration in respect of privacy, where the names of the borrowers were again printed (in what appeared to be the same hand) with signatures alongside; secondly, a declaration that the loan was for a business purpose, where the names of each guarantor (Antonio Caradonna, M A Caradonna and S Palumbo) were again printed in what appeared to be the same hand. Again, there were signatures alongside each name. 111 Mr Tony Caradonna was asked about this document in cross examination. He denied that the signature at the foot of the assets and liabilities statement was his (T 113). He also said that his mother's signature did not appear to be hers (T 113). His personal details were recorded in the form, including his driver's licence, mobile phone number, email address. Mr Caradonna acknowledged that each was accurate, adding: "Who wrote it is a different story" (T 113). 112 Mr Caradonna, in his affidavit (Ex 7), denied that the signature on the application was his signature (Ex 7 ). Mrs Caradonna, in her affidavit (Ex 6), said that the signatures on the application were not hers (Ex 6 and (h)). Mr Palumbo likewise denied that the signature on the Declaration of Purpose (as guarantor) was his signature (Ex 8 ). 113 Mr Storey examined the application (Ex 10, items 9, 10.4, 10.5 and 10.6). He expressed no view about Mr Tony Caradonna's signature. His focus was upon Mrs Caradonna's signature and that of Mr Palumbo. His conclusions may be summarised as follows (paraphrasing his terminology) (Ex 10): Item 9 (Declaration of Privacy): There was very strong support for the proposition that Maria Caradonna's signature was forged. Item 10.4 (Assets and Liabilities Statement): There was very strong support that Maria Caradonna's signature was forged. Item 10.5 (Declaration of Privacy (duplicate)): There was strong support that Maria Caradonna's signature was forged. Item 10.6 (Declaration of Purpose for Credit): There was strong support that Maria Caradonna's signature was forged. There was also more support for the proposition that S Palumbo's signature was forged, than for the proposition that it was his signature. 114 Ms Novotny examined the item 10 documents, looking at Antonio Caradonna's signature. She determined, in each case, that it was probable that his signature had not been forged (Ex M). Counsel for the defendant, in submissions, accepted that conclusion (DS [34]). 115 Counsel for MDN Mortgages made extensive submissions on the issue of forgery, in the context of the 2004 documents (PS [79-[108]). I will therefore refrain from expressing a concluded view until all the evidence in respect of the 2004 loan documents has been assembled. 116 On 1 July 2004, MDN Mortgages responded with a Letter of Offer to loan $320,000 to Caradonna Investments. The letter was sent to Tony Caradonna's email address (Ex C [24]). The letter required the payment of legal and valuation fees and a number of declarations. The reply to the offer was apparently despatched twice, because the first response was thought to have gone astray, although eventually it arrived. The acceptance required the signatures of each of the guarantors (Mr Antonio Caradonna, Mrs Maria Caradonna and Mr Stephen Palumbo) (Ex B, tab 21) and also Declarations of Financial Position and Business Purpose. 117 Mrs Caradonna stated that the signatures on the letter and its duplicate (10.9.04) were not her signatures. Similarly, the Declaration of Financial Position (7.7.04) was not her signature (Ex 6 ). Mr Palumbo said the same thing (Ex 8 [3]), as did Mr Tony Caradonna (Ex 7 [11]). 118 When Mr Storey examined these documents, his conclusions were as follows: In respect of Items 11 and 12 (the two copies of the signed Letter of Acceptance and accompanying Declarations), there was strong support for the proposition that the signature "M A Caradonna" was forged. There was also more support for the proposition that the signature "S Palumbo" was forged, than for the proposition that it was genuine. In respect of Item 13 (the Declaration of Financial Position), there was very strong support for the proposition that the Maria Caradonna signature was forged. 119 Ms Novotny looked at Mrs Caradonna's signatures on these documents. She said she could not conclude that her signatures were genuine (T 164/5). 120 Ms Novotny also examined the signatures of Mr Tony Caradonna on the various documents associated with the application in Item 11 to determine whether there was evidence that they had been forged. She reached the following conclusions which, again, counsel for the defendant accepted (DS [34]): (Ex M) In respect of Items 11.6, 11.7, 11.8 and 11.9, the signatures of Antonio Caradonna had probably not been forged. As to Item 11.13, there was evidence supporting the proposition that the signature had not been forged. Item 11.14 she found "inconclusive". 121 Within a short time of having accepted the offer from MDN Mortgages on 7 July 2004, two things occurred that provided further evidence of Mr Tony Caradonna's involvement in the 2004 refinancing of the previous loan. A fax was sent to Mr Dickinson on 14 July 2004, providing details evidently required by the mortgagee in respect of Mr Palumbo, including his address, occupation and income. The fax began with these words: (Ex R, tab 22A) "Attention John Dickinson As discussed Details required Stephen Palumbo" 122 There followed the details concerning Mr Palumbo. The fax, which was handwritten, ended as follows: (Ex R, tab 22A) "Thanks Regards Tony" 123 When asked about the handwriting, Mr Tony Caradonna chose his words carefully. He said: "I'm not certain", which was the same response he gave when confronted by the handwritten application to Magney Mortgages in 2001 (supra [45]). He said the document "could have come from Joe Blow" (T 111). Counsel then asked: (T 112) "Q. Your reference to Joe Blow, it's signed off as 'regards Tony'. That's yourself, isn't it? A. Possibly, possibly me, yes." 124 There can be no doubt that the fax was sent by Mr Caradonna, as he well knew. 125 On or about 14 July 2004, Mr Dickinson of MDN Mortgages, received credit reports for each of the prospective borrowers. He noticed that Caradonna Investments had defaulted in respect of an account from Optus for $6,158. Mr Dickinson telephoned Mr Caradonna, who confirmed that the account had been paid (Ex C [27]). I accept Mr Dickinson's evidence (which was not challenged). It is yet more material linking Mr Caradonna to the 2004 loan. 126 On 16 July 2004, MDN Morgages wrote to Caradonna Investments confirming that the valuation was in order. Approval for the mortgage had been given. Again the letter was sent to Mr Tony Caradonna's email address (at 9.18 am that day). Mr Caradonna, whilst acknowledging his email address, questioned whether the email was active at that time. The events which followed demonstrated that it was. The letter identified the mortgagee's requirements, which included a Certificate of Insurance and Direct Debit Authority. 127 On 17 September 2004, the Certificate of Insurance was faxed to MDN Mortgages. The fax was sent from Overseas Travel, where Mr Caradonna shared office space (T 132). The same day, a direct debit form was completed, signed and dated and sent two days later to MDN Mortgages. Mr Caradonna was asked about the signature on the direct debit. He said this: (T 115) "Q. You got the document headed 'MDN Mortgages direct debit request'. Got that? A. Yes. Q. Your signature appears at the bottom of that page? A. Yes, does appear to be but.

Q. And that's your signature-- A. There does appear a signature, I'm not certain that it's mine.

Q. You just agreed it was your signature? A. No, I didn't. You said there is a signature at the bottom of that page. I said "yes, there is".

Q. You now see it's inconvenient to admit it's your signature? A. Not at all. The question you asked is was, is there a signature at the bottom of the page.

Q. My recollection is, it may be wrong, I would like to put this to you, is that "it appears to be" when you were asked "is that your signature". That what you said? A. No. I might have misunderstood the question. I thought he said "there is a signature at the bottom of the page" and I said "yes, there is a signature" or I said "yes there is". I didn't say it was mine because I can't say that that's mine." 128 Mr Caradonna had acknowledged his signature and then thought better of it. The account, which was debited, was his account with Western City Credit Union, 48731 (supra [88]). 129 Returning to the chronology, MDN Mortgages, when giving approval on 16 July 2004, asked its solicitors (Magney & Magney) to prepare the necessary mortgage documents (Ex R, tab 23). On 20 July 2004, the solicitors wrote to Manna & Flammia providing the documentation for the transaction (17 documents in all) (Ex B, tab 1). 130 On 14 September 2004, Manna & Flammia (over the signature of Lorenzo Flammia) returned a number of the documents, including (item 3) "Deed of Guarantee and Indemnity duly signed". The document was ultimately dated by Mr Magney in the course of settlement, in accordance with his usual practice (1.11.04) (T 27). On 5 October 2004, Manna & Flammia provided the remaining documents necessary for the settlement (Ex B, tab 18). The documents included the mortgage by Maria Antonietta Caradonna in favour of MDN Mortgages. Under the words, "Signature of Mortgagor", were two signatures, one of which was crossed out (with initials alongside). The signature resembles that of Mr Tony Caradonna. Under that signature was written: "M A Caradonna". A signature which appears to be that of Mr Lorenzo Flammia, was alongside, above a stamp which said: "Lorenzo Flammia, Solicitor". There was an annexure to the mortgage (Annexure A) with a signature, "M A Caradonna". It was the practice of MDN Mortgages to insist that all borrowers (and guarantors) have their signatures on formal documents witnessed by a solicitor. Mr Dickinson, upon the basis of the documents forwarded by Manna & Flammia, believed that requirement had been met (Ex C [34]). 131 On 7 October 2004, the solicitors for MDN Mortgages faxed a letter to Manna & Flammia requesting a Certificate of Currency of the NRMA insurance policy. The policy required alteration to show the insured value of 13 Kincumber Road, Bonnyrigg was not less than $350,000. Manna & Flammia responded the same day, enclosing a certificate from the NRMA dated 7 October 2004. The Certificate included the imprint of the fax header which read: "Blaster Promotions, 7 October 2004". Mr Caradonna's attention was drawn to that document. He said this: (T 117) "Q. Blaster Promotions 7 October 2004 at 14.13. That was your business, wasn't it? A. Blaster Promotions, yes.

Q. This was a document that was faxed through to your office on 27 October 2004, wasn't it? A. I don't know whether it was.

Q. And you know that the purpose of this document was to satisfy the new mortgagee's requirements in relation to insurance over your mother's property when they refinanced the exhibiting mortgages? A. I don't know because I had never heard of MDN.

Q. This is a document which is sent by fax? A. I have never seen this document. I had never seen this document. This is the first time.

Q. You are unable to explain the fax header at the bottom of the page? A. Am I able to explain it?

Q. No, you are unable to explain-- A. Yes, I am unable to explain it." 132 I reject Mr Caradonna's evidence. There can be no doubt that the document was sent by Mr Caradonna or on his instructions. 133 An issue arose concerning whether Mr Tony Caradonna was an undischarged bankrupt as a result of a petition in Queensland in October 2003 (Ex B, tab 26). On 12 October 2004, Manna & Flammia sent a fax to the solicitors for MDN Mortgages, enclosing a certificate from the Trustee that, "as a consequence of all debts having been paid in full, the bankruptcy had been annulled" (Ex B, tab 27). 134 Meanwhile, as a result of the default judgment obtained by Magney Mortgages Limited on 20 October 2004, the sheriff issued a Notice to Vacate 13 Kincumber Road, Bonnyrigg. The notice was sent to Mrs Caradonna's home (Ex P, tab 33). 135 On 29 October 2004, settlement instructions were prepared by Manna & Flammia for a settlement which was to take place on 1 November 2004. Instructions were conveyed to Mr Magney (Ex B [22], tab 32). The instructions were headed: "Caradonna Investments - Refinance" (Ex P, tab 34). The instructions dealt with the exchange of documents in these terms: (Ex P, tab 34) " WE RECEIVE FROM HORTON RHODES 1. Certificate of Title Folio Identifier: 23/263093 2. Mortgage No: 9089357 & 9089358 duly discharged WE HAND TO MAGNEY & MAGNEY 1. Certificate of Title 2. Discharge of Mortgage x 2 3. Final Search 4. Direction to Pay" 136 The instructions then set out the cheques to be paid: (Ex P, tab 34) (cf Ex B [22]) " WE RECEIVE FROM MAGNEY & MAGNEY $7,282.21 IN FAVOUR OF Horton Rhodes (hand to Horton Rhodes) $14,350.88 in favour of Magney Mortgages Limited (hand to Horton Rhodes) $291,685.04 in favour of Magney Mortgages Limited (hand to Horton Rhodes) WE HAND TO HORTON RHODES $23,314.96 IN FAVOUR OF Magney Mortgages Limited" 137 Settlement duly took place on 1 November 2004 at 2.00 pm at the offices of Horton Rhodes, Solicitors. One infers the CT was produced by Horton Rhodes to Manna & Flammia upon payment of a bank cheque in respect of the mortgages outstanding. It was then handed to Magney & Magney, the solicitors for MDN Mortgages (cf Ex B [24]). The documents exchanged on settlement included the "signed" mortgage over 13 Kincumber Road, Bonnyrigg (Ex C, tab 14), as well as the Facility Agreement between MDN Mortgages and Caradonna Investments. The Facility Agreement made provision, on the last page, for the signatures of the parties (Ex R, tab 34). 138 The Common Seal was not affixed, but provision was made for the signature of two directors. There are two signatures on the document. The signature on the left resembles that of Mr Tony Caradonna. The signature on the right is legible and reads "S Palumbo". 139 Also exchanged on settlement was the Deed of Guarantee and Indemnity (Ex B, tab 11). On the final page of the deed, provision was made for the signatures of each of the guarantors, Angelo Antonio Caradonna, Stephen Palumbo and Maria Antonietta Caradonna. Signatures appear alongside each name (Ex B, tab 11). 140 When Mrs Caradonna gave evidence, she was taken to each document. She denied that the signature on the mortgage of 1 November 2004 was her signature (T 33). She was asked about the signature above her signature (the one crossed out), was it her son Tony's signature? She answered, in English: "No way". She added, through the interpreter, the following: (T 33) "A. INTERPRETER : It is not his signature. I haven't seen his signature for long time. That is not his signature. That is not my mine . When she said 'this is not mine' the witness was touching with her finger the name Caradonna." (words in bold added by Interpreter) 141 By her affidavit (Ex 6), Mrs Caradonna also denied that the signature on the Deed of Guarantee and Indemnity was her signature (Ex 6 ). Mr Tony Caradonna denied that the signatures on the Facility Agreement and the Deed of Guarantee and Indemnity were his signatures (Ex 7 & (m)), as did Mr Palumbo (Ex 8 [3] (j) & (k)). 142 These documents were examined by the handwriting experts. Mr Storey's conclusions were as follows: (Ex 10) "Item 30 (the Mortgage): There was strong support for the conclusion that the signature 'M A Caradonna' was forged (on pages 1 and 2). Item 31 (the Facility Agreement): There was more support for the proposition that the signature 'S Palumbo' was forged, than for the proposition that it was genuine. Item 32 (the Deed of Guarantee and Indemnity): There was very strong support for the conclusion that the signature 'M A Caradonna' was forged. There was also more support for the proposition that the signature 'S Palumbo' was forged, than the proposition that it was genuine." 143 Ms Novotny examined the same documents, although with a different focus. Her conclusions were as follows: (Ex M) "Item 31.1 (the Mortgage - 1st page): In respect of the signature that is crossed out, it is highly probable that Antonio Caradonna's signature was not forged (ExM, report p 2(a)). Items 30.1 and 30.2 (Mortgages - pages 1 & 2): Ms Novotny could not conclude that the signatures 'M A Caradonna' were genuine (T 164/5). Item 31 (the Facility Agreement): It was highly probable that Antonio Caradonna's signatures were not forged. Item 32 (the Deed of Guarantee and Indemnity): It was highly probable that the signatures of Antonio Caradonna were not forged." 144 Counsel for both parties urged acceptance of Ms Novotny's conclusion in respect of Mr Tony Caradonna (PS [104]; DS [35]). Her conclusions appear reasonable. I therefore accept that Mr Tony Caradonna signed the Facility Agreement, the Mortgage and Deed of Guarantee and Indemnity. 145 After the settlement, Magney & Magney solicitors, acting for MDN Mortgages, lodged the Certificate of Title (identifier 23/263093) and Mortgage for registration. On 2 November 2004, the Certificate of Title was issued (edition 9). The second schedule noted the following: (Ex C, tab 16) " 3. AB63657 MORTGAGE TO MDN MORTGAGES PTY LIMITED" 146 On 10 November 2004, MDN Mortgages wrote letters of "confirmation of current mortgage" to "Antonio and Maria Caradonna" and "Caradonna Investments Pty Limited" at 13 Kincumber Road, Bonnyrigg (Ex P, tab 36) and "Stephen Palumbo" at his home address (Ex Q, tab 15). The letters included the term of the mortgage (1.11.04 to 1.11.05), the security property (13 Kincumber Road, Bonnyrigg), the amount of the loan ($320,000) as well as the rate of interest and monthly payments (including the default rate). Mrs Caradonna, when asked about this letter, could not remember whether she received it (T 35). She said that she may have given it to Tony without opening it (T 35). She added that she knew nothing about the mortgage (T 35). Mr Palumbo acknowledged that he may have received the letter, but had no recollection of it (T 74). Mr Tony Caradonna said that, had his mother received it, it was likely that she would have handed it to him (T 119). However, he had not received it (T 118). He had never seen the letter (T 118). 147 On 23 November 2008, Manna & Flammia wrote to Caradonna Investments at P.O. Box 127, Liverpool NSW, enclosing its account. That was the postal address of Overseas Travel, the business of Maria Palumbo (T 92). Tony Caradonna rented the back of her office (T 132). The mailbox was cleared every day. If there was mail for her brother, it would be put in the back office (T 132). The post office box was an address that Mr Tony Caradonna used in various documents, including the application to Magney Mortgages Limited in April 2001 (Ex R, tab 6). The letter from the solicitors was in these terms: (Ex R, tab 38) "We are pleased to confirm that settlement of the re-finance of the above property took place on 1st November, 2004 . ... On settlement you were assisted in the re-finance of your property by a loan from MDN Mortgages Pty. Limited and they will now retain the deeds to the property until your loan has been repaid. The bank will write to you direct in relation to the repayment of your loan. We confirm that your mortgage to Magney Mortgages Limited has now been fully repaid. ..." 148 The account, which was enclosed, was as follows: (Ex R, tab 38) SETTLEMENT STATEMENT Amount of Advance: $313,318.13 Amount received from you (balance funds for discharge): $23,314.96 $336,633.09 LESS Discharge of Mortgage to Magney Mortgages And Costs (as per letter from Horton Rhodes): $337.733.09 Costs and Disbursements: $347.40 $336,980.49

BALANCE DUE BY YOU: $347.40

149 Mr Tony Caradonna said that he did not recall receiving that letter, nor paying the $23,314.96 to enable the refinancing to proceed (T 118). There was no evidence as to the source of that payment, nor whether Manna & Flammia was paid the sum of $347.40. Nonetheless, mortgage payments were duly made well into the following year, as I will shortly describe. It is likely that the letters of 10 November 2004 (from MDN Mortgages) and 23 November 2004 (from Manna & Flammia) were received and came to the notice of Mr Tony Caradonna. Counsel for the defendant accepted that Mr Tony Caradonna paid "a shortfall of $23,314.96" on settlement (DS [35]).

Default under the Mortgage. 150 On 3 June 2005, MDN Mortgages wrote to "Antonio Caradonna" at P.O. Box 127, Liverpool, drawing attention to an outstanding interest payment for May 2005 (Ex R, tab 39). The payment was then made. However, no payment was made in July 2005, so that a further letter was written to Mr Caradonna on 3 August 2005 (Ex R, tab 39A). On the same day, on the letterhead of Caradonna Investments Pty Limited, a fax was sent to MDN Mortgages with a typewritten annotation "from Tony Caradonna" (Ex R, tab 39). The fax was marked "Attention Jodie". Mr Caradonna acknowledged that "Jodie" was his secretary (T 119). The fax enclosed two receipts from the Commonwealth Bank, one for $2,293.00 (being the amount outstanding in respect of the Caradonna Investments loan) and $3,290.00 referable to a matter of "Zalavras". Mr Caradonna denied knowing the latter name (T 120). The fax carried the imprint of Mr Caradonna's business, Blaster Promotions (Ex R, tab 39B). 151 When these documents were drawn to Mr Caradonna's attention, he simply said that he knew nothing of the 2004 mortgage (T 120). He added that he did not cause the payment to be made and was not aware of it (T 120). I reject that evidence. The evidence of Mr Caradonna's involvement in the 2004 refinancing is overwhelming. 152 In August 2005, the loan was again in default. On 5 September 2005, MDN Mortgages wrote to "Antonio Caradonna" at the post office box address (Ex R, tab 40). Once more, Mr Caradonna denied having seen the letter (T 121). However, on the same day (5.9.05), an email was sent to Tonycaradonna@bigpond.com.au by the Portfolio Manager of MDN Mortgages, Ms Jane Sinclair, which was in these terms: (Ex R, tab 41A) "Hi Tony As requested your interest amounts and our bank details are listed below. ... " 153 The bank details and interest amounts were then set out. The interest payment outstanding in respect of Caradonna Investments was $2,293.33. The interest outstanding in the matter of Zalavras (referred to in the August 2005 fax, which Mr Caradonna said he had not heard of) was also included. When shown this document, Mr Caradonna denied having seen it. It was, he said, the wrong email address because it began with a capital letter (in "Tony") (T 121). 154 However, again the document trail demonstrated that Mr Caradonna received this correspondence and was well aware of the default. Arrangements were made to pay the amount outstanding on the same day as the demand (5.9.05). A fax was sent, imprinted with the name of Mr Caradonna's business, "Blaster Promotions", enclosing receipt in respect of Caradonna Investments ($2,293.33) and Zalavras ($3,290.00). On this occasion, the fax was accompanied by a handwritten note. The handwriting was remarkably similar to the handwriting on applications sent in the refinancing of previous loans (cf Ex R, tab 6, tab 21 and tab 22A). The handwritten note was addressed: "Attn Jane", which was no doubt a reference to Ms Jane Sinclair, the author of the email. The note was in these terms: (Ex R, tab 41B) "c/o M.D.N. Mortgages

Tony Caradonna" 155 Mr Caradonna, when shown this document, could not recall seeing it (T 121). He then said this: (T 121) "Q. Its your handwriting, is it not? A. I don't believe so, no." 156 Mr Caradonna's attention, having been drawn to the imprint of Blaster Promotions on the fax, then moderated his denial. His evidence was as follows: (T 122) "Q. I want to suggest you caused this to be faxed to Jane at MDN Mortgages on 5 September 2005 confirming that payment had been made, amongst other things, on the Caradonna Investments loan for the month September 2005? A. I'm not suggesting that it wasn't but they would - I'm suggesting that those payments were back from that loan in '01." 157 The cross examination continued. Mr Caradonna's uncertainty about the handwriting on the note became a denial: (T 122) "Q. What I am putting to you, Mr Caradonna, you well understand, is that the payments are now being directed to MDN Mortgages, aren't they? A. Well, that's what it seems like on here. Q. And that's your handwriting? A. No, that's not my handwriting, no." 158 Again, I reject Mr Caradonna's evidence. It is plain that he well knew of the 2004 mortgage, having arranged it. It is highly likely that the handwriting on the note was his and he knew it. 159 On 19 September 2005, MDN Mortgages wrote to "Antonio Caradonna" reminding him that the mortgage was about to expire on 1 November 2005, and offering to assist in refinancing if that was required (Ex R, tab 42). However, there was default once more in respect of the September 2005 interest. A letter was despatched to "Antonio Caradonna" at the post office box on 6 October 2005 (Ex R, tab 43). A further reminder of the expiry date was sent on 21 October 2005, again addressed to "Antonio Caradonna" at the post office box (Ex R, tab 44). 160 On 3 November 2005, MDN Mortgages wrote indicating that the mortgage had expired and that the company's solicitors would make a formal demand shortly. That demand was made, addressed to Mrs Caradonna, on 9 November 2005 (Ex R, tab 46). It included the words: "Total payable: $320,000.00". 161 On 11 November 2005, Ms Sinclair of MDN Mortgages sent a Letter of Offer to refinance the loan, both by post and by email, to Tony Caradonna (Ex R, tab 46A). A further letter was sent on 14 November 2005, with an amended offer requiring $1,732.00 in fees, if the offer were taken up (Ex R, tab 46B). At the same time, an email was sent by Ms Sinclair to "Tony Caradonna" providing the breakdown of the renewal fee (Ex R, tab 46C), attaching a Letter of Offer addressed to Caradonna Investments and the three guarantors (including Mrs Caradonna). The offer was on the letterhead of MDN Mortgages (Ex R, tab 46C). On 22 November 2005, the Sales Manager of MDN Mortgages, Mr Dickinson, spoke to Mr Tony Caradonna by telephone. He made a diary note of his call (Ex R, tab 47). His conversation was in these terms: (Ex C [50]) "Me: We are moving forward with recovery action. Tony: But I'm going to refinance the loan. Me: You've been making this promise for 8 months now, and we are not prepared to wait any longer." 162 I accept Mr Dickinson's evidence, which was not challenged. It is yet more evidence of Mr Caradonna's involvement in the refinancing. On the same day (22.11.05) a cheque, apparently signed by Mr Caradonna, on the account of his business, Blaster Promotions, was drawn. It was an ANZ Bank cheque for $1,732.00, being the refinancing fee (Ex R, tab 47A). When shown that cheque, Mr Caradonna denied that it was his signature. He denied that his business, Blaster Promotions, had a bank account with the ANZ (T 123/4). I reject his evidence. I accept that he was attempting to refinance the loan. Indeed, interest payments were brought up to date (presumably with the assistance of other members of the family). 163 On 28 November 2005, Caradonna Investments went into external administration. 164 On 19 December 2005, MDN Mortgages wrote to Mr Tony Caradonna at 13 Kincumber Road, Bonnyrigg. The letter began with these words: (Ex C, tab 27) "We write regarding your required new loan term with our company ..." 165 MDN Mortgages drew attention to information it had received from Westpac that Caradonna Investments was under administration. It sought clarification. Meanwhile, the arrears were paid. Mrs Caradonna's daughter, Maria Palumbo, recognised that her mother's house was in jeopardy and offered to pay (T 138). 166 However, there was default again in December 2005, prompting a further letter from MDN Mortgages on 3 January 2006 (Ex R, tab 49). The loan then remained in default. 167 In June 2006, as I will shortly describe, there was a further attempt to refinance the loan. Mr Tony Caradonna, however, denied any involvement (T 124, 126). He gave the following evidence, in answer to a question from me: (T 127) "Q. Had the 01 debt been repaid? A. Not to my recollection, no. Q. What happened? A. There were payments - I believe my sister made payments and that's as far as I know. I run into a bit of a problem which started towards the end of 04, beginning of 05 and it just sort of escalated from there and then I was held ransom by outlaw motorcycle people from the end of March 06 till early, I think it was early - I don't remember exactly - early February when I escaped from them and during that time ... " 168 However, on Saturday 3 June 2006, an email was sent to Ms Sarah Dougan, who was associated with a finance company (presumably "CapitalOne Australia"). The email address of the sender was "'Tony C' ". It appears that an attempt was made to raise $1 million net (Ex R, tab 51). The email from "Tony C" listed five applicants, including Maria Antonietta Caradonna (# 3), identifying the security in each case, including 13 Kincumber Road, Bonnyrigg. The letter provided the value of each property and the current mortgage. In respect of # 3, the particulars were "MDN - $320k". The email included a mobile phone number (0402 766 511) which was the number of Mr Caradonna's mobile phone, although he asserted in cross examination, that he did not have a phone at that time (T 127). The email ended with the words, "Best Regards, Tony". Mr Caradonna, once shown the email, denied that he had sent it. He asserted that, by June, he had been kidnapped (T 126). However, I accept that he sent the email and that, at this point at least, he was involved in a further attempt to refinance. 169 Nonetheless, I also accept that at about this time, Mr Caradonna's sister, Maria Palumbo, became more heavily involved. On 9 June 2006, Mr David Magney, the principal solicitor of Magney & Magney (and a Director of MDN Mortgages) telephoned Mrs Caradonna. He made a contemporaneous note of their conversation, which he said was to the following effect: (Ex B [29]) "Me: My name's David Magney. Is this Mrs Caradonna? Mrs Caradonna: Yes. Me: I'm just ringing to let you know that your son hasn't paid the interest on the loan that you've guaranteed. Mrs Caradonna: That's the mortgage for $320,000. Me: I'll double check that." 170 Mr Magney put the phone down and checked the loan by walking around to the office of MDN Mortgages, which was on the same floor. He returned and continued the conversation as follows: (Ex B [29]) "Me: Yes, $320,000 is correct. If the interest is not fixed up by the 15th of June, we will commence Court proceedings. Mrs Caradonna: I'll get my daughter to ring you next week. Me: The total interest owing is $9000." 171 Mr Magney said that he remembered the conversation well. Mrs Caradonna did not enquire where he was from. There were no language difficulties (Ex B [30]). The conversation, amongst the many he has had with guarantors, stands out in his memory because Mrs Caradonna specifically mentioned the amount secured ($320,000.00) (Ex B [31]). Later the same day, Mrs Caradonna's daughter (Mrs Palumbo) telephoned Mr Magney. The conversation was again the subject of a contemporaneous note and was to the following effect: (Ex B [32]) "Mrs Palumbo: I am Mrs Caradonna's daughter. You rang her today saying the mortgage interest has not been paid. The letter you sent says interest is to be paid by the 15th. Me: I know, but out of courtesy I rang your mother to tell her that her son has done nothing. Mrs Palumbo: The arrears will be paid by the 15th of June." 172 Mrs Caradonna denied these conversations (T 37). When Mr Magney was cross examined it was put to him that he had not spoken to Mrs Caradonna. He insisted that he had (T 33: 30.6.09). 173 I accept Mr Magney's evidence. Quite apart from his contemporaneous note and the confirmation supplied by Mrs Palumbo's call later the same day, Mrs Caradonna's telephone number was recorded on the front of the file (Ex K). An entry from the telephone directory was tendered to demonstrate that it was the correct number (Ex L). 174 Shortly after this conversation, the plaintiff asserted that Mrs Caradonna executed a Statutory Declaration dated 20 June 2006. The declaration, according to the plaintiff, was executed in the context of a planned second mortgage over the property at Bonnyrigg, which was then being arranged with Oakland Investments (Aus) Limited. The terms of the Statutory Declaration were as follows: (Ex P, tab 45) "I, Maria Caradonna of 13 Kincumber Rd Bonnyrigg NSW 2177 solemnly and sincerely declare as follows: I Maria Caradonna have only borrowed a sum of $320,000 from MDN Mortgages as mortgage or loans. I offer a second mortgage on 13 Kincumber St Bonnyrigg in favour of DJ Capital Solutions Ltd or Oakland Investments (Aus) Ltd ('the lender'). I confirm that their (is) no other debt secured against 13 Kincumber St Bonnyrigg apart from $320,000 from MDN Mortgages as mortgage or loans. ... This information and particulars set forth are true in substance and in fact. I make this solemn declaration conscientiously believing it to be true. Signed and declared by the abovenamed. Declared at Liverpool NSW (Signed) Maria Caradonna" 175 Mrs Caradonna denied that it was her signature on the declaration (T 41/2). The document, and others associated with the Oakland transaction, were examined by Dr Steven Strach, a forensic document examiner retained by Mr O'Donnell (the solicitor originally instructed by Mrs Caradonna) (Ex 5, annex GO'd1) (T 19: 30.6.09). Dr Strach formed the view that the signatures on a number of the Oakland documents did not appear to be genuine. However, he concluded that the signature on the Statutory Declaration appeared to be authentic (report 15.4.08, [16]). A microscopic and pictorial comparative examination with the specimen signatures revealed "similarities in each of the question signatures" and "no obvious or significant differences". Ms Novotny reached the same conclusion (Ex M). I accept that Mrs Caradonna signed the declaration. It is plain that she knew of a $320,000.00 "mortgage" to MDN Mortgages, as one would infer in any event from her conversation with Mr Magney. 176 However, one gathers the attempt to refinance the various properties (including the Kincumber Road, Bonnyrigg, property) with Oakland did not proceed. Mrs Palumbo then turned again to MDN Mortgages. From notes made at the time, Mr Dickinson believed that he spoke to Mrs Palumbo in June 2006 and agreed upon a schedule to bring the mortgage up to date (Ex C [55]; tab 28). One instalment was paid on 10 July 2006 by Mrs Palumbo (Ex C, tab 30). On 14 July 2006, Mrs Caradonna rang Mr Dickinson, who made a note of their conversation, which was in these terms: (Ex C [57]) "Mrs Caradonna: My daughter will call you about the mortgage. Me: I think she has already made contact but I'm not sure. Is it OK for us to give details of the mortgage to her? Mrs Caradonna: Yes, that is OK. Me: I would like to talk with you about your mortgage and the outstanding arrears. Mrs Caradonna: My daughter will call you." 177 Numerous emails passed back and forth between Mrs Palumbo and Mr Dickinson at about this time (Ex C, tab 32). In November 2006, Mrs Palumbo promised to pay $6,000.00 by 1 December 2006 (Ex C [61]). When it was not paid, Mr Dickinson telephoned Mrs Palumbo. Their conversation was as follows: (Ex C [63]) "Mrs Palumbo: I am very concerned about MDN commencing legal action against Caradonna Investments, as I do not want my mother evicted from the property. Me: This is not what we want to do, however we have no option but to commence legal action. Mrs Palumbo: Can you help us in any way? Me: Have you thought about the possibility of you and your husband purchasing the property as an investment, which would mean that you could leave your mother in it, if you wish? (At the time a possible refinance under a change of structure seemed like a viable suggestion to me.) Mrs Palumbo: I like that idea. I will call you next week after I've spoken to my husband." 178 However, nothing was paid. Letters of Demand were sent and ultimately a notice under the Real Property Act 1900 on 5 April 2007 (Ex C [69]). Thereafter, the present action began on 21 June 2007. 179 Before reviewing this material and making findings, I should comment upon the signature on the affidavit of Mr Tony Caradonna, which was sworn for the purposes of these proceedings (Ex 7). Pictorially, the signature was completely different from the signatures on any of the documents which Mr Caradonna acknowledged he had signed (including his licence, passport and various other documents). I infer that it was different because he did not want to provide his usual signature, which could then be compared to the signatures in question on the documents involved in this litigation.

Was the defendant's signature on the Mortgage forged? 180 The defendant, by her Defence, alleges forgery. She has the onus, on the balance of probabilities (Sanpine Pty Limited v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365, per Campbell J at [170]-[178]; cf Sanchet v Director of Public Prosecutions (Cth) [2006] NSWCCA 291 and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 at 26). 181 Mrs Caradonna denied that she had signed either the 2002 Mortgage (Ex 1 [22]) or the 2004 Mortgage (Ex 1 [23]). Counsel for MDN Mortgages urged, nonetheless, that she should not be accepted, for three reasons: First, Mrs Caradonna was, according to the plaintiff, "a most unreliable witness". She clearly could speak much more English than she was prepared to let on. She denied having signed a number of documents when it was plain, beyond argument, that she had done so. Secondly, the first suggestion that the Mortgage and Deed of Guarantee were forged was in the Defence and Cross Claim filed on 7 August 2007. Long before that, she had been sent letters of demand and notices drawing her attention to the fact that the Mortgage was in arrears. On 9 June 2006, she spoke to Mr Magney and made reference to the amount borrowed ($320,000). Shortly after that conversation, and in the context of the Oakland refinancing, she swore an affidavit of 20 June 2006 which was "broadly consistent" with Mr Magney's evidence, that she knew the principal sum secured by the 2004 Mortgage. Thirdly, there was no theory advanced on behalf of the defendant as to who may have forged these documents. When the case began, counsel then appearing for Mrs Caradonna suggested that the forger was Mr Tony Caradonna (supra [14]). The defendant's new representatives abandoned that theory. Indeed, they relied upon an affidavit from Mr Tony Caradonna in which he denied any involvement in mortgages transacted after 2001 (the 2002 and 2004 Mortgages). Even though the account provided by Mr Tony Caradonna was, according to the plaintiff, plainly untrue, the Court could not be satisfied that the defendant's signature on the 2004 Mortgage was forged, or attached without her authority (PS [81]-[107]). 182 There are two issues. The first concerns the signature on the 2004 (and 2002) Mortgage. Is it that of Mrs Caradonna? The second issue arises if, as a matter of probability, it is determined that Mrs Caradonna did not sign these documents. There then remains an issue whether she authorised someone else to sign on her behalf. 183 As to forgery, counsel for the plaintiff suggested that the opinion of the handwriting expert, Mr Storey, should be given limited weight (PS [80]). Attention was drawn to the specimen signatures available to Mr Storey. It was extraordinary, according to the plaintiff, that more specimens had not been provided, especially "normal course of business" signatures contemporaneous with the documents in question (October 2002 and November 2004) (PS [80]). 184 Counsel for the defendant urged an acceptance of Mr Storey's opinions (DS [30]). He added the following, which I assume was a reference to Mr Lorenzo Flammia, whose signature (or apparent signature) appears as a witness on a number of the documents said to have been signed by Mrs Caradonna: (DS [33]) "33. ... Whilst on one view, the Defendant not calling witnesses who allegedly witnessed signatures may be considered in the light of Jones v Dunkel (supra), it is submitted that such witnesses were not required to prove, on the balance of probabilities, that the purported signatures of the Defendant and other witnesses were not those of the Defendant and the other witnesses." 185 I should perhaps deal with the Jones v Dunkel issue first. Mr Flammia acted for Caradonna Investments in respect of Mortgages (and associated documents, including the Guarantees) in 2002 and 2004. Does that suggest that Mr Flammia was in the defendant's camp, such that you would expect the defendant to call him? In my view a solicitor, acting on a conveyance, supposedly witnessing documents associated with that conveyance, is in no one's camp (cf Allen, Allen & Hemsley v DCT (NSW) (1989) 20 FCA 576; (1989) 86 ALR 597). Either party could have called him. Neither chose to do so. No Jones v Dunkel inference arises, one way or the other. 186 Returning to the specimen signatures made available by the defendant (through her solicitors) to Mr Storey, they were, in my view, reasonably extensive (Ex 10, items 52 to 54.10). They included multiple signatures (and initials) which the original document examiner (Dr Strach) had obtained from Mrs Caradonna for the purpose of expressing an opinion concerning the Oakland documents (supra [175]). No doubt Mr Storey, in common with all document examiners, would have liked more. However, he expressed a view in his report, and did so in strong terms in respect of some documents. In evaluating that opinion, the context cannot be ignored. The mortgages and guarantees of 2002 and 2004 were simply a few of the many documents which Mrs Caradonna denied signing and which appear to have been forged. I accept that, as a matter of probability, the 2004 Mortgage and Guarantee were forged. I also accept that the 2002 Mortgages and Guarantee were forged. 187 The more difficult issue is whether the signatures were attached without Mrs Caradonna's authority. In her first affidavit (31.3.08), Mrs Caradonna said that she "did not authorise Tony or any other person to sign" the 2002 Mortgages on her behalf (Ex 1 [22]). She added that she did not consent to the 2004 Mortgage (Ex 1 [23]). Certainly, Mrs Caradonna was, as the plaintiff claims, an unreliable witness, at least after the resumed hearing on 2 March 2010. I accept that she understood (and read) much more English than she claimed. After the resumed hearing, she denied having signed almost every document that was shown to her in cross examination, including many that were uncontroversial, such as her own affidavit filed on the first day of hearing (T 10 (2.3.10)). I accept that Mrs Caradonna received most, if not all, of the many letters and notices sent by or on behalf of the plaintiff when the mortgage was in arrears. I further accept that, with her own limited English and with the assistance of the family, she understood that mortgage payments had not been made. I repeat that I accept that Mrs Caradonna spoke to Mr Magney on 9 June 2006, and in that conversation knew there was a Mortgage for $320,000 (supra [169]). I also accept that she probably signed the statutory declaration of 20 June 2006 (in the context of the Oakland refinancing). That declaration included the following words which, for convenience, I repeat: (Ex P, tab 45) (supra [174]) "I Maria Caradonna have only borrowed a sum of $320,000 from MDN Mortgages as mortgage or loans.' 188 Can it be said, in these circumstances, that Mrs Caradonna has established, as a matter of probability, that she did not authorise Mr Tony Caradonna, or anyone, to sign the impugned documents (that is the Mortgage and/or the Deed of Guarantee and Indemnity)? I believe it can, for the following reasons: First, there was a vast difference between the evidence given by Mrs Caradonna on the first day, in terms of its reliability (30.6.09) and evidence given at the resumed hearing (on 2.3.10). Far more weight should be given to the evidence before the resumed hearing. The affidavit, denying her signatures and denying that they were attached with her authority, was prepared before the first hearing (Ex 1). Secondly, it is apparent from the Mortgages and the Deed of Guarantee and Indemnity, that there was, in each case, an attempt to imitate the way in which Mrs Caradonna wrote her name, overlooking that she habitually signed her name "Maria Caradonna" or "M Caradonna" and only rarely (one example), "M A Caradonna" (as appears on these documents) (supra [74]. Thirdly, it was not only Mrs Caradonna's signature that was not authentic and imitated, but the signatures of her daughter (Maria Palumbo) and son in law (Stephen Palumbo). Where someone goes to the trouble of imitating the writing of different people, it strongly suggests there has been unauthorised forgery. Fourthly, it was not just one or two documents where the signatures were not authentic. The forgery involved many documents and many signatures. Forgery on that scale suggests concealment of the transactions by the forger, rather than authorisation from those concerned. Finally, there is some evidence that Mrs Caradonna did not speak to her son, Tony, for two years (T 39). In the context of the cross examination, it would appear that it was around the time of the 2002/2004 loans (T 39). 189 What is the evidence that suggests that the signatures were attached with Mrs Caradonna's authority? There are, perhaps, three matters, the first being the conversation with Mr Magney, the second the statutory declaration of 20 June 2006 and, finally, the fact that Mrs Caradonna (and the family) attempted to meet the obligations under the Mortgage. Following many letters sent by the plaintiff and its solicitors, drawing attention to the arrears, arrears were paid. 190 Dealing with the first two matters, certainly the conversation with Mr Magney and especially the terms of the statutory declaration, demonstrate that by June 2006 Mrs Caradonna was well aware of the Mortgage and the amount borrowed. Indeed the statutory declaration goes further and suggests that she may have authorised the loan. However, each is a fragment of evidence capable of a reasonable alternative explanation. The conversation with Mr Magney suggests, as one suspects in any event, that the correspondence and notices concerning the default under the Mortgage came to the notice of Mrs Caradonna. As to the statutory declaration, it is evident that Mr Tony Caradonna was implicated in the ambitious and ultimately unsuccessful attempt to arrange further finance with Oakland (supra [168]). There can be little doubt that the declaration was prepared by someone else (and probably Mr Tony Caradonna) for Mrs Caradonna's signature. I do not believe that very much weight can be attached to its precise terms. 191 The third matter concerned the actions of Mrs Caradonna (and family members) in not disowning the Mortgage once they became aware of it (in contrast to one's expectation if it were a forgery). Far from disowning the Mortgage, payments were made in accordance with its terms. Such payments however, in my view, were consistent with an unsophisticated appreciation of responsibility. Mrs Caradonna (and her family) knew that the Mortgages had been arranged by Mr Tony Caradonna. The family, including Mrs Caradonna, also knew that it was the latest in a series of mortgages, where authorisation had been given some years earlier to mortgages which had since been discharged. For the same reasons that underpin the equitable doctrine of subrogation and the reaction of courts in attaching conditions in the context of personal equities, Mrs Caradonna and family members would have assumed that money was owing and that the only way to avert eviction was to make payments. 192 I therefore make the following findings in respect of Mrs Caradonna and the October 2002 loan: First, that she did not sign any of the documents submitted to Magney Mortgages (or their solicitors) seeking a loan, and did not authorise her signature to be attached to such documents (supra [75]). Secondly, that she did not sign the First and Second Mortgages to Magney Mortgages, nor authorise her signature to be attached to those documents (supra [92])

Thirdly, that she did not sign the Deed of Guarantee and Indemnity, nor authorise her signature to be attached to that Deed (supra [107]). 193 In respect of the 2004 loan documents, I make similar findings, namely: (cf supra [109]-[149]) First, that Mrs Caradonna did not sign any of the documents submitted to MDN Mortgages seeking a loan, nor authorise her signature to be attached to such documents.

Secondly, that Mrs Caradonna did not sign the Mortgage of 1 November 2004, nor authorise her signature to be attached.

Thirdly, Mrs Caradonna did not sign the Deed of Guarantee and Indemnity, nor authorise her signature to be attached to that Deed.

Was the September 2001 loan Tainted? 194 I should briefly comment upon the September 2001 loan documents. According to the plaintiff, the September 2001 loan was the bedrock that, on their alternative case, was ultimately available by way of subrogation (PS [73]ff). Under the Second Cross Claim by MDN Mortgages against Mrs Caradonna, it sought declarations that, having discharged existing mortgages, it became an equitable assignee of the interests held by the preceding mortgagee. Relevantly, in the context of the October 2002 loan, it discharged mortgages arising from the loan on 6 September 2001. The Cross Claim asserted the following (paraphrasing the pleading): 2. That, on 6 September 2001, Magney Mortgages lent $213,000 to Caradonna Investments pursuant to a Facility Agreement of 6 September 2001. 3. That, in August or September 2001, Mrs Caradonna and Magney Mortgages entered into a Deed of Guarantee. 4. That, on 6 September 2001, Mrs Caradonna granted a Mortgage over the land at Bonnyrigg, as security for the obligations of Caradonna Investments as borrower under the Facility Agreement. 195 Mrs Caradonna, by her sworn Defence (translated by an interpreter who provided a certificate), admitted each of these paragraphs. No application was made during the course of the hearing to withdraw such admissions. 196 However, in evidence that was filed and given in the course of the hearing, the position was rather more confused. Mrs Caradonna, in her affidavit (Ex 1 [21]), acknowledged her signature on the Mortgage. However, she insisted that she did not attend the office of Mr Flammia, solicitor, at Penrith (supra [57]). Further, she denied her signature on the Guarantee, adding that she had not authorised her son Tony to sign documents on her behalf (supra [60]). 197 When the affidavits were originally framed there was, on the pleading, a Contracts Review Act 1980 claim made on behalf of Mrs Caradonna. The circumstances in which she signed the Mortgage and the position in respect of the Guarantee, may have had some relevance to that claim. However, as explained, that claim was abandoned (supra [7]). It has never been revived. Indeed, on the last day of the hearing, Mr Gleeson SC, on behalf of the plaintiff, again drew attention to the abandonment of that claim, stating the following: (T 202) "Could I raise one other matter for the Court's attention and my friend's attention? So far as my friend says his submissions would cover a claim under the Contracts Review Act in relation to the 2004 guarantee, I draw to everyone's attention that counsel previously acting for the defendant informed the Court, by a letter dated 25 June 2009 to your Honour's Associate, that Mrs Caradonna would not be pressing paragraphs 8, 9 and 10 of her first cross-claim, which related to this Contracts Review Act claim.

I am told by my junior that that matter was raised again at the first directions hearing after the adjourned hearing, so the new representatives of Mrs Caradonna were on notice of that.

If my friend seeks to depart from that position, then obviously we would object. We will deal with it, to the extent we can. I want to put that formally on the record. I do not ask for a ruling on that right now. There is no point, particularly when Mr Eardley (of counsel for Mrs Caradonna) was not in the matter at the time." (parenthesis added) 198 No application was made to reinstate that claim. I will therefore proceed upon the basis that there is no claim under the Contracts Review Act 1980. 199 Nonetheless, the defendant, in written submissions, as revised on 20 April 2010, attacked the 2001 loan agreements, stating that they were "tainted by unconscionability" (DS [1]). There was an elaboration in [63] to [67], referring to Commercial Bank v Amadio (1983) 151 CLR 447 and Blomley v Ryan (1956) 99 CLR 362. Such submissions seemed rather more appropriate to a claim under the Contracts Review Act 1980 than the claims that were pressed in the balance of the submissions. I will, however, deal with the issue of unconscionability when considering whether Mrs Caradonna has a personal equity to set aside such mortgages as may be binding upon her. 200 Returning to the 2001 loan agreements, it is appropriate, I believe, for the purposes of subrogation (if that becomes relevant), to treat the September 2001 Mortgage and Guarantee as having been signed by Mrs Caradonna. The Defence to the Second Cross Claim made such admissions and leave to withdraw them has not been given. 201 These being the findings, let me turn to the legal principles to determine their implications.

The legal framework. 202 The plaintiff, in helpful written submissions, set out the relevant principles. Upon registration of an interest in land, s 42(1) of the Real Property Act ("the Act") confers indefeasibility. It does so even where, as here, a person's signature has been forged or attached without authority. Section 42(1) is in these terms: "s 42 Estate registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud , hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except ..." (The exceptions are not relied upon by the defendant.) (emphasis added) 203 The exception in the case of fraud has been interpreted as requiring actual fraud, that is, personal dishonesty or moral turpitude on the part of the registered proprietor who claims the benefit of indefeasibility (Assets Co Ltd v Mere Roihi [1905] AC 176 at 210; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 614, 631-632; Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 221-222; Perpetual Trustees Victoria Ltd v English & Anor [2009] NSWSC 478 at [30]). 204 Here the defendant does not suggest that MDN Mortgages acted fraudulently (PS [37]). Fraud by a third party, therefore, does not defeat the indefeasible interest of the plaintiff arising on registration. 205 However, the issue arises: "Indefeasibility for what?" (Small v Tomassetti [2001] NSWSC 1112 (per Campbell J)). Section 41(1) of the Act provides: "s41(1) No dealing, until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature." 206 Registration of the mortgage gives indefeasibility to the mortgagee's interest in the land. Giles J in PT Limited v Maradona Pty Limited (1992) 25 NSWLR 643 said this: (at 679) "The general position thus indicated is, I think, as follows. That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor." 207 The charge of the debt on the land is part of the mortgagee's interest rendered indefeasible by the registration of the mortgage (Chandra & Anor v Perpetual Trustees Victoria Limited [2007] NSWSC 694 at [29]; Provident Capital Ltd v Printy [2008] NSWCA 131 at [22]-[36]). 208 A question of construction therefore arises. What, on the proper construction of the mortgage, is the debt secured by the mortgage? A distinction is made between a covenant contained or incorporated in the mortgage and a separate agreement. Where the debt arises under a separate agreement and that agreement is unenforceable, the registered mortgage secures nothing (Perpetual Trustee Victoria Ltd v English (supra)).

What is secured by the 2004 Mortgage? 209 The 2004 Mortgage names Maria Antonietta Caradonna as Mortgagor and MDN Mortgages Pty Limited as Mortgagee. It is dated 1 November 2004. It provided that the mortgagor: (PS p 11) " ... mortgages to the mortgagee all the mortgagor's estate and interest in the land specified above, and covenants with the mortgagee that the provisions set out Annexure A/memorandum no. Q860000 filed at Land and Property Information New South Wales are incorporated in this mortgage." 210 Annexure A made the following provisions: "1 That this Mortgage is granted as security for : (a) the obligations of the Borrower pursuant to Facility agreement between it and the Mortgagee of even date; (b) the obligations of the Guarantor pursuant to a Deed of Guarantee between it and the Mortgagee of even date; and the mortgage debt shall include all moneys actually or contingently payable to the Mortgagee by the Mortgagor or the Borrower as the case may require pursuant to the documents referred to in paragraph (a) and (b) of this clause ... to the intent that default in the punctual observance and performance of the terms covenants and conditions contained in or implied by the documents referred to in paragraph (a) and (b) of this clause will constitute a default under this mortgage, whereupon the mortgage debt may be recovered by the Mortgagee ..." (emphasis added) 211 There is no definition in the Mortgage of the terms "borrower" and "guarantor", beyond the description in clause 1(a) and (b). However, the Mortgage was one of a series of documents executed or exchanged on settlement on 1 November 2004. Those documents included the Facility Agreement (Ex C, tab 12) between MDN Mortgages Pty Limited (lender) and Caradonna Investments Pty Limited (borrower) and a Deed of Guarantee and Indemnity (Ex C, tab 13). The plaintiff submitted and I accept that, in understanding the terms "borrower" and "guarantor", reference may be made to the terms of the Facility Agreement and the Deed of Guarantee and Indemnity which form part of the same transaction (Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Limited [2008] HCA 3; (2008) 234 CLR 151 at [8]; Kimberley Securities Ltd v Esber [2008] NSWCA 301). 212 Clause 6 of the Memorandum Q860000 provided: "6 Upon default being made in payment at the respective times and in the manner shown in the mortgage of the principal sum or any part thereof, or of the interest thereon or any part thereof, or upon default being made in the observance or performance of any of the covenants contained herein or in the mortgage or implied therein by the Real Property Act 1900 or the Conveyancing Act 1919 the mortgagee shall ... be at liberty to exercise all or any of the powers of a mortgagee under the said Acts ... subject however to compliance with any requirements of the said Acts in respect of the exercise of such powers ..." 213 Annexure A and the provisions of the Memorandum Q860000 were incorporated into the 2004 Mortgage as if they were set out at length (s 80A of the Act). 214 That being the context, the plaintiff made the following submission: (PS [55]) "55 It is clear from clause 1 of Annexure A that the debt secured is money owing by Caradonna Investments under the 2004 Facility Agreement and money owing by the Defendant under the 2004 Guarantee: ... In other words, the debt secured by the 2004 Mortgage arises under a separate agreement specifically identified in but not incorporated in the mortgage." 215 Here, as the plaintiff acknowledged (T 202), the Guarantee was a collateral agreement. I have made a finding that the defendant's signature was forged (supra [193]). It was therefore outside the principle of indefeasibility and may be put to one side. 216 The Facility Agreement was also a collateral agreement (cf T 203). The plaintiff submitted that, first, as a matter of construction the Mortgage secured the obligations arising under the Facility Agreement, and secondly, that the Facility Agreement was binding upon Caradonna Investments. By its terms, it created an enforceable debt which was then secured by the Mortgage. 217 I accept, as a matter of construction, that the Mortgage secured obligations arising under the Facility Agreement of 1 November 2004. Did that agreement create an enforceable debt in respect of Caradonna Investments? The validity of the Facility Agreement 2004. 218 As mentioned, the Facility Agreement of 1 November 2004 identified the parties as MDN Mortgages Pty Limited (the lender) and Caradonna Investments Pty Limited (the borrower). It opened with these words: " IT IS AGREED by and between the parties in consideration of the Lender agreeing to provide financial accommodation at the request of the Borrower and the Guarantor:" 219 There followed nine clauses (many with subclauses) and a schedule. The schedule referred to item numbers and was as follows: SCHEDULE ITEM 1 Angelo Antonio Caradonna and Stephen Palumbo and Maria Antonietta Caradonna Guarantor: ITEM 2 THREE HUNDRED AND TWENTY THOUSAND DOLLARS Principal Sum: $320,000 ITEM 3 Date for 1 November 2005 Repayment: ITEM 4 TEN DOLLARS AND SIXTY CENTS ($10.60) PER CENTUM PER ANNUM Higher Rate: ITEM 5 EIGHT DOLLARS AND SIXTY CENTS ($8.60) PER CENTUM PER ANNUM Lower Rate: ITEM 6 (a) First registered mortgage by Maria Antonietta Caradonna in favour of the Lender in respect of the property known as 13 Kincumber Road Bonnyrigg NSW 2177. Title Ref: Folio Identifier 23/263093. Security: (b) Guarantee by the Guarantors. ITEM 7 None known to the Lender at the date of this Agreement. Trust: ITEM 8 NEW SOUTH WALES Governing Law:

220 Returning to the body of the document, clause 3 was headed "REPAYMENTS" and included the following: "3.1 The Borrower will pay to the Lender the Principal Sum, or so much thereof as remains unpaid on the date specified in Item 3. 3.2 The Borrower will pay interest on the principal sum or on so much thereof as for the time being shall remain unpaid, and upon any judgment or order in which this or the preceding covenant may become merged, at the rate specified in Item 4 as follows, namely - By monthly payments on the first days of each calendar month in each and every year until the principal sum shall be fully paid and satisfied, the first of such payments computed from the 1 day of November 2004, to be made on the first day of December next: Provided always and it is hereby agreed and declared, that if the Borrower shall on every day on which interest is hereinbefore made payable under this security, or within 7 days after each of such days respectively, pay to the Lender interest on the principal sum or on so much thereof as shall for the time being remain unpaid at the rate specified in Item 5 , and shall also duly observe and perform all and every the covenants on the Borrower's part herein contained or implied then the Lender shall accept interest on the said principal sum or on so much thereof as shall for the time being remain unpaid at the rate specified in Item 5 in lieu of the rate specified in Item 4 for every month for which such interest shall be paid to the Lender within such 7 days as aforesaid." (emphasis added) 221 Clause 4 dealt with "SECURITY" and was in these terms: "4 The Borrower is not entitled to any advance pursuant to this Agreement unless and until the Lender holds the Security and the Guarantee in form and substance satisfactory to the Lender. The Borrower acknowledges that the Security is charged with payment of the Debt. " 222 Clause 5 identified "EVENTS OF DEFAULT", which included the failure to perform the terms of the agreement, at which time the money outstanding became due and payable. 223 Provision was made on the final page of the agreement for the parties to sign. It provided as follows: THE COMMON SEAL of MDN ) MORTGAGES PTY LIMITED (ACN ) 105 205 301) was hereto affixed by the ) authority of its Directors in the presence ) of:

_____________________ ­­­­­­_________________ Signature of Director Signature of Director THE COMMON SEAL of CARADONNA ) INVESTMENTS PTY LIMITED (ACN ) 086 458 504) was hereto affixed by the ) authority of its Directors in the presence ) of:

_____________________ ­­­­­­_________________ Signature of Director Signature of Director

224 Mr David Magney and another person signed on behalf of MDN Mortgages. The company's Common Seal was not affixed. Similarly, there were signatures for the directors of Caradonna Investments and, again, the company's Common Seal was not affixed. 225 In the case of Caradonna Investments Pty Limited, the signatures appear to be (on the left) that of Mr Tony Caradonna and (on the right) that of S Palumbo. It will be remembered that there was handwriting evidence received in respect of these signatures. I have determined, upon the basis of that evidence, that the signature of Mr Tony Caradonna was in fact his signature (supra [144]). 226 Was the signature of S Palumbo a forgery or attached without his authority? Again, the onus is upon Mrs Caradonna to establish, on the balance of probabilities, that it was either a forgery or unauthorised (supra [180]). Mr Palumbo denied that it was his signature (Ex 8 [3(j)]) (supra [138]). Mr Storey was provided with specimens of Mr Palumbo's signatures, being a ten page document. It was a copy of a form signed on each page by Mr Palumbo and submitted to the Australian Taxation Office. The original was presumably with the Australian Taxation Office. On the basis of that material, Mr Storey formed an opinion that there was more support for the proposition that the signature of Mr Palumbo was forged, than that it was genuine (supra [142]). In the body of his report, Mr Storey set out particular characteristics of Mr Palumbo's signature and characteristics of the questioned signatures that were different. He added this: (Ex 10 [26]) "26. Therefore, it is not possible to entirely eliminate the possibility that the specimen writer has disguised their normal writing. However, while this possibility cannot be dismissed, it is noted that there is a similarity between the letter 'a' formation written on some of the questioned signatures compared to some of the formations on the questioned M Caradonna signatures. This raises the possibility but does not prove that the same person could be involved in writing both the M Caradonna and S Palumbo questioned signatures." 227 The plaintiff submitted that the defendant had not discharged the onus upon her (PS [115]). Mr Palumbo's "bare denial" should not be accepted. He clearly would have done whatever was necessary to prevent his mother-in-law being evicted from her home (PS [117]). It was submitted that Mr Storey's evidence should be given no weight. He had no original specimens. He acknowledged that this was a significant limitation upon his ability to express an opinion. The specimens provided showed a variation in the way in which Mr Palumbo signed. Mr Storey, in these circumstances, could not eliminate the possibility that the differences between the specimen signatures and the questioned signature was the product of a variation over time. 228 Giving full weight to these submissions, I nonetheless accept that the evidence establishes, as a matter of probability, that Mr Palumbo's signature was forged. Probably Mr Tony Caradonna was responsible, or someone on his behalf. I have earlier commented upon Mr Palumbo's evidence (supra [94]). I accept his evidence that he did not sign the 2004 Facility Agreement. Again, the context cannot be ignored. There is evidence of widespread forgery involving many documents associated with the 2004 and earlier loans. 229 So the real issue is whether Mr Tony Caradonna was authorised to sign on Mr Palumbo's behalf. There were only two directors of Caradonna Investments, Mr Tony Caradonna and Mr Palumbo. It was, nonetheless, very much Mr Tony Caradonna's company. He managed its day to day affairs. He was the only signatory on its bank account. He kept the Common Seal. Mr Palumbo never disagreed with decisions he made (supra [38]). I also accept that Mr Palumbo was anxious to avoid his mother-in-law being evicted. 230 Accepting all that, nonetheless, I believe that it is probable that Mr Stephen Palumbo knew nothing of the November 2004 loan agreement, including the Facility Agreement, until well after the settlement. He did not authorise Mr Tony Caradonna to sign on his behalf. Again, the documents reveal a pattern of concealment on the part of Mr Tony Caradonna, whether because he believed his mother or family members may object, or because time was short, or for some other reason. It is also significant that Mr Palumbo's signature was imitated (as in a forgery), rather than Mr Tony Caradonna signing on his behalf without imitation and signifying that fact, or at least disclosing it shortly after to Mr Palumbo. So, of the two signatures on the Facility Agreement, one was authentic and one was forged. The issue arises whether the Facility Agreement gave rise to enforceable debt, which was then secured by the Mortgage.

Statutory assumptions under the Corporations Act 2001. 231 The plaintiff asserted that, notwithstanding the forgery of Mr Palumbo's signature, the Facility Agreement was valid and enforceable, and created a debt which was secured by the Mortgage. It relied upon what is sometimes called the "indoor management rule of company law" (Story v Advance Bank Australia Limited (1993) 31 NSWLR 722, per Gleeson CJ at 724). The rule is now embodied in s 128 and s 129 of the Corporations Act. 232 A company may execute an agreement with, or without, its Common Seal. Where the Seal is not used, the Corporations Act makes the following provision in s 127(1): "s 127 (1) A company may execute a document without using a common seal if the document is signed by: (a) 2 directors of the company; ..." 233 The Corporations Act then makes the following provisions in respect of people who deal with companies, identifying assumptions which they may make: "s 128 (1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (2) ... (3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings. (4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect." 234 The relevant assumption, in the context of this case, was the following: "s 129 (5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices." 235 MDN Mortgages argued that they were entitled to make the assumption in s 129(5) in relation to its "dealings" with Caradonna Investments (PS [58]-[61]; [121]-[126]). Its dealings involved the negotiation and, through the Facility Agreement, the consummation of a loan to Caradonna Investments for $320,000 (Story v Advance Bank Australia Limited) (supra at 732-733). The Facility Agreement was in the form set out above (supra [223]). It made provision for two signatures with the words "signature of director" beneath each. The document was executed. Two signatures appeared. The document therefore appeared to have been executed in accordance with s 127(1)(a) (Soyfer & Anor v Earlmaze & Ors [2000] NSWSC 1068, per Hodgson J at [73]-[78]). It did not matter than one of the signatures (that of Mr Tony Caradonna) was illegible. Objectively, the document appeared to comply with the section. 236 Counsel for the defendant responded to these arguments by drawing attention to s 128(4) of the Corporations Act. The assumption of regularity could not be made in circumstances where a person, at the time of dealing with the company, "knew or suspected that the assumption was incorrect". In Queensland Bacon Pty Limited v Rees (1966) 115 CLR 266, Kitto J described what constituted a suspicion, in these words: (at 303) "A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to a 'a slight opinion, but without sufficient evidence', as Chambers' Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence." 237 Here, according to the defendant, there was a "special relationship" between MDN Mortgages and Mr Tony Caradonna which amounted to "actual notice, not constructive notice, that the plaintiff needed to take additional and prudent steps to ensure that any documents executed were duly signed by two directors of the company ..." (DS [58]). Counsel for the defendant added: (DS [58]) "58 ... That being so, any documents provided by Mr Tony Caradonna, would ordinarily be viewed by a reasonable person with a degree of suspicion when procuring a mortgage from the Defendant. This being especially the case when there was no benefit flowing to the Defendant, but all of the benefits flowed to a company owned by a business associate of the Plaintiff." 238 The assertion on behalf of the defendant of a special relationship between MDN Mortgages and Mr Tony Caradonna was made a number of times throughout written submissions, including in the present context. It is convenient to deal with that suggestion at this stage, gathering in the material set out more fully in the defendant's submissions on unconscionability and other aspects which are relied upon.

Was there a special relationship? 239 The argument that there was a special relationship involved three propositions: First, that the relationship between Mr Dickinson, the Sales Director of MDN Mortgages, and Mr Tony Caradonna can be characterised as a "special relationship". Secondly, that such a relationship "necessitated the plaintiff taking additional and prudent steps when lending money to Mr Tony Caradonna and procuring a mortgage from the defendant, so as to protect the rights of the defendant" (DS [19]). Thirdly, that the plaintiff, in breach of that duty, failed to take reasonable and prudent steps to protect Mrs Caradonna. 240 As to the first aspect, the special relationship, the submissions of the defendant identified the following matters which were said to give rise to such a relationship: (DS [16]-[18]) "16. John Dickinson is a Director of the Plaintiff and is employed by the Plaintiff as the Sales Manager. Mr Tony Caradonna was known to John Dickinson since 2000. 17. Mr Tony Caradonna was known to the Plaintiff as a mortgage broker and a loyal referral source. Further, the loans that were referred to (Magney Mortgages Limited) and the Plaintiff by Mr Tony Caradonna had performed well and were all serviced on time and without incident. 18. It is submitted that (Magney Mortgages Limited), the Plaintiff and the Defendant shared a mutually beneficial business relationship. It is submitted that the relationship is best described as a special relationship." (references omitted) 241 Counsel for MDN Mortgages responded by drawing attention to a number of matters. First, the defendant did not plead any "special relationship" between the plaintiff and Mr Tony Caradonna (PS reply, [27]). Secondly, no such suggestion was made to either Mr Dickinson or Mr Magney when each was cross examined (PS reply, [18]). Thirdly, as a matter of causation, even were there such a relationship, it would have no bearing upon the likelihood of Tony Caradonna forging signatures on documents (PS reply, [18]). Nor would it follow from prior dealings with the lender, that the lender had actual or constructive notice of the risk of forgery on the part of Mr Caradonna (PS reply, [26]). Indeed, Mr Dickinson said this, which was not challenged: (Ex C [20]) "20. In fact at the time (that is, in 2004), I considered Mr Caradonna to be a good mortgage broker and a loyal referral source to Magney Mortgages. If someone had asked me to do so, I would have given Mr Caradonna a reference to that effect. I had no reason to believe that Tony Caradonna was or may have been dishonest in any dealings he had with Magney Mortgages, MDN Mortgages, myself, or anyone else." 242 Fourthly, the matters set by the defendant, as the basis for the special relationship, namely prior business dealings, would not justify describing the relationship as "special" in any legally relevant sense (PS reply, [25]). 243 I accept the plaintiff's submissions. It is commonplace in business for people to refer prospective clients to each other. The matters identified by the defendant do not, in my view, establish a "special" relationship in any legally relevant sense. 244 I should perhaps address the remaining issues, since they are relevant to the suggestion of wilful blindness, which is made in the context of the defendant's case in respect of the in personam exception to indefeasibility. 245 Mr Dickinson of MDN Mortgages knew that the property being offered as security was Mrs Caradonna's home (T 21 (30.6.09)). He also knew that she was a pensioner (T 22). It may be assumed, as well, that Mr Dickinson had knowledge of the fact that Mrs Caradonna, in common with many parents, some to their cost, had pledged her home in the past as security for loans provided to her son or his company. However that does not, in my view, provide a basis for the suggestion that MDN Mortgages owed a duty to Mrs Caradonna to protect her from her son. The application by Caradonna Investments was submitted to MDN Mortgages for the loan. It included an assets and liabilities statement. From the perspective of MDN Mortgages, Mrs Caradonna was willing to provide security for the loan that was sought. 246 Moving to the third aspect, the suggested breach of duty by MDN Mortgages, counsel for the defendant identified the following (paraphrasing his submissions) (DS [19]-[25]): First, the lender failed to make reasonable enquiry to determine that Mrs Caradonna's signature had not been forged on the loan documents. Secondly, the lender failed to provide Mrs Caradonna with all loan and guarantee documentation. Thirdly, that the only time the lender communicated with Mrs Caradonna was after the loan was in default. Fourthly, the lender failed to verify the assertions of income on the part of the borrower. Fifthly, there was no evidence as to the lender's procedures in respect of acceptance of persons who provided a guarantee. 247 It was said by the defendant that these matters, in the context of the lender's knowledge that Mrs Caradonna was a pensioner who may lose her home, amounted to a breach of duty. The lender had "actual, not constructive knowledge of the vulnerability of the defendant" (DS [25]). Collectively, these matters amounted to "wilful blindness" and "unconscionable conduct" (DS [26]). 248 Counsel for MDN Mortgages responded to these submissions in a number of ways. First, these matters were not relevant to any pleaded defence. The defendant had not sought to set aside the 2004 Mortgage on the basis of unconscionability or the Contracts Review Act 1980 (NSW) (PS reply, [28]). Secondly, the plaintiff's practice, in dealing with borrowers, was described by Mr Dickinson in these words: (Ex C [34]) "34. It was the invariable practice of MDN Mortgages to insist that all borrowers and guarantors must have their signatures on formal documents witnessed by a solicitor, and they must receive appropriate legal advice about the transaction. To my knowledge, this was conducted by Manna & Flammia, Solicitors. Based on the information MDN Mortgages (or its solicitors) received from Manna & Flammia, Solicitors, I believe that all parties to the transaction had met this requirement (including Mrs Caradonna)." 249 Mr Magney duly received from Messrs Manna & Flammia, solicitors, documents which had been executed. It was not "put to Mr Magney or Mr Dickinson in cross examination that their reliance on the solicitor was unreasonable, or that they should have taken further steps to check the signatures were genuine" (PS reply, [29(a)]). The principles in Browne v Dunn should preclude the defendant from now taking this point in submissions. 250 Thirdly, once the settlement had taken place on 1 November 2004, MDN Mortgages sent Caradonna Investments, and each of the guarantors including Mrs Caradonna, a letter confirming the details of the Mortgage. The letter recited the amount borrowed ($320,000) and identified the security (13 Kincumber Road, Bonnyrigg) (Dickinson: Ex C [40]) (PS reply, [29(c)]). 251 Again, I accept the submissions of the plaintiff. The conduct of the plaintiff and its solicitors, towards the borrowers and guarantors, including Mrs Caradonnas, was reasonable. They did not refrain from enquiry, when enquiry was plainly required. There was no wilful blindness. There is no basis for the suggestion that something more was required of them. 252 Returning to the issue under the Corporation law, and the apparent compliance of the Facility Agreement with the requirements of that statute, is there any basis upon which it can be said that Magney Mortgages Limited knew, or suspected, that the loan documents had been forged or were irregular? Actual knowledge or suspicion that the assumption of regularity is unwarranted is required. Here there is no such evidence. I accept the evidence of Mr Dickinson that he had no reason to believe, in 2004, that Mr Tony Caradonna was otherwise than honest in his dealings with others, including his mother. 253 I therefore accept that the Facility Agreement of 1 November 2004 was enforceable against Caradonna Investments and effective to create a debt owing to MDN Mortgages. Annexure A, clause 1, secured that debt against the property of the defendant. There being default under the Mortgage, the plaintiff is, subject to the rights of Mrs Caradonna in personam, entitled to exercise its power of sale and possession under ss 58 and 60 (respectively) of the Real Property Act (s 57(2)(a) of the Real Property Act and Provident Capital Limited v Printy (supra)). 254 Let me turn to the issue of whether Mrs Caradonna has a personal equity to set aside the 2004 Mortgage.

Is there a personal equity? 255 The First Cross Claim asserted that Mrs Caradonna had a personal equity arising from the unauthorised production of the Certificate of Title to the Registrar General in order to register the 2004 Mortgage (supra [7]). A personal equity provides an exception to indefeasibility. It may be asserted against the registered proprietor of land under the Real Property Act in circumstances where the proprietor's enforcement of its interest or rights would be unconscionable or unconscientious, such that equity would intervene (Vassos v State Bank of South Australia [1993] 2 VR 316 at 333; Story (supra); Vella v Permanent Mortgagees Pty Ltd [2008] NSWSC 505 at [372]-[377]). 256 Here, as the plaintiff acknowledged, it follows from the finding that Mrs Caradonna's signature was forged, that she did not authorise the production of the Certificate of Title to the Registrar General (cf PS [109]). However, as submitted by the plaintiff, lack of authorisation or consent by the mortgagor for the production of the Certificate of Title to register a mortgage, does not by itself give the mortgagor a personal equity or right in personam sufficient to defeat the mortgagee's indefeasible title. Something more is required, such as knowledge by the mortgagee of the lack of consent or knowledge that the mortgagor's signature on the mortgage has been forged. The test was stated by Hayne J in Vassos (supra), in these terms: (at 333) "... whatever the limits may be on such 'personal' equities the very language used to describe the right and the reference to the remedies being ' in personam remedies' is a clear reference to the remedies being available in circumstances where equity would act, i.e., in cases which equity would classify as unconscionable or unconscientious. In the present case ... it may well be that the bank did not act without neglect but there is (in) my view no material which would show that the bank acted unconscionably. There was no misrepresentation by it, no misuse of power, no improper attempt to rely upon its legal rights, no knowledge of wrongdoing by any other party. It obtained a mortgage apparently regular on its face but which was in fact forged. Even if by making reasonable enquiries the bank could have discovered the fact of the forgery, I do not consider that that fact alone renders its conduct unconscionable. I do not consider that the plaintiffs have any in personam right against the bank; all that they have shown is the mere fact of forgery of the instrument." 257 These remarks were cited with approval and applied by Gleeson CJ in Story (supra) at 736/7; and Young CJ in Eq in Vella (supra) at 372 and 377. 258 The plaintiffs, in the same submissions, pointed out that both Story and Vella were cases in which it was held that the mortgagor did not have a personal equity to set aside a registered mortgage which was forged, in the absence of knowledge or wilful blindness to the forgery on the part of the mortgagee (see also Grigic (supra); Pyramid Building Society (in Liq) v Scorpion Hotels Pty Ltd [1998) 1 VR 188; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 and Perpetual Trustees Victoria Ltd v Cipri [2008] NSWSC 1128). 259 Counsel for the defendant suggested that the special relationship between MDN Mortgages and Mr Tony Caradonna provided the "something more" required beyond knowledge. It amounted to wilful blindness (DS [26], [71]-[73]). However, for the reasons stated (supra [251]), in my view the plaintiff neither had knowledge of the forgery, nor acted in a way which may be characterised as wilful blindness to the possibility that there may be forgery. Nor is there evidence of any other matter that would make the plaintiff's enforcement of its registered mortgage unconscionable. I do not believe, therefore, that Mrs Caradonna had a personal equity to set aside the registered mortgage.

The plaintiff's alternative case: Subrogation. 260 It will be remembered that there was a Second Cross Claim of the plaintiff, putting an alternative case (supra [9]). It relied upon the doctrine of subrogation, having paid out mortgages that would otherwise have encumbered the defendant's property. 261 Counsel, in submissions, referred to the principle established in Ghana Commercial Bank v Chandiram [1960] AC 732 at 745, that the mortgage shall be kept alive for "the benefit of the third party who pays it off" (PS [73]). Reference was also made to Cochrane v Cochrane (1985) 3 NSWLR 403, where Kearney J accepted that principle unless it were shown that the circumstances were such as to displace such a presumption. In that case, his Honour made these observations: (at 405C) "This principle is based on equity's concern to prevent one party obtaining an advantage at the expense of another which in the circumstances of the case is unconscionable. Hence, there is a common thread running through the relevant cases to the effect that the conscience of the mortgagor should be affected so as to cause the mortgage to be kept alive. This is illustrated in the text book examples first, of a third party not being entitled to a right by way of subrogation where he simply lends the money on an unsecured basis to the mortgagor who then uses such funds to pay off the mortgage; and secondly, of a third party being so entitled where he advances the money to pay out the mortgage on the understanding that security would be provided for such advance upon the mortgage being paid out." 262 That passage was approved by Santow JA (Giles and Hodgson JJA agreeing) in Highland v Exception Holdings Pty Ltd (in Liq) [2006] NSWCA 318; (2006) 60 ACSR 223 at [102]. Santow JA referred, with approval, to Registrar General v Gill [1994] NSWCA 261, in which Gleeson CJ and Priestley JA said: "The equitable principles relating to subrogation aim to adjust the interest of three parties, such as a creditor, a debtor and an insurer or surety, in such a way as to avoid the unconscionable result of double recovery by the creditor or inequitable discharge of the liability of the debtor." 263 The principle of subrogation, as an equitable remedy available in a variety of circumstances, was confirmed by the High Court in Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 at [6] and [88]-[98]. 264 In view of my conclusion that the plaintiff can claim possession under the registered Mortgage, I need not deal with this aspect, apart from saying that in view of my findings the appropriate alternative (were this doctrine applied) would be the amount paid out in discharge of the 2001 Mortgages ($215,567.67 plus interest since 24 October 2002).

1. The parties should prepare short minutes reflecting the findings in this judgment and agree, if possible, upon costs.

2. The matter to be listed on a date to be agreed to deal with any issues arising from the short minutes and such other issues as remain.

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