Pambris v Makis [2024] NSWSC 1289 | Case summary

Pambris v Makis [2024] NSWSC 1289 | Case summary | Zoe

[4]

JUDGMENT

From 2004 the plaintiff, Mr Sam Pambris and his wife, developed a close and honoured friendship with the first defendant, Ms Andrea Makis, and her then husband, Mr Ioannis Papatheodotou. Ms Makis became the godmother of Mr Pambris' youngest son, Alexandros, a role which in Greek Orthodox tradition carries the feminine honorific, koumbara.
Within that close interfamily relationship, Mr Pambris had financial dealings with Ms Makis and Mr Papatheodotou, which are now disputed. The principal disagreement relates to two instruments Ms Makis executed, a mortgage in 2010 and a guarantee in 2017. Mr Pambris now seeks to enforce both instruments by his Statement of Claim in these proceedings.
The terms of the mortgage dated 5 November 2010 ("the 2010 mortgage") describe an advance of $1,210,000.00 from Mr Pambris as mortgagee to Ms Makis and Mr Papatheodotou as being secured over their residence, a property in Fowler Crescent, Coogee ("the Maroubra property") of which they were the registered proprietors. The mortgagors Ms Makis and Mr Papatheodotou then jointly owned Maroubra property.
Mr Papatheodotou became bankrupt in 2013. Ms Makis later acquired Mr Papatheodotou's interest in the Maroubra property from his trustee in bankruptcy and she became the sole registered proprietor.
The terms of the deed of a guarantee dated 8 December 2017 ("the 2017 guarantee") between Mr Pambris and Ms Makis, guaranteed the performance by Mr Papatheodotou of certain financial obligations he owed Mr Pambris under a deed of loan dated 23 December 2005 ("the 2005 deed") and another deed of loan dated 5 December 2009 ("the 2009 deed"). The 2017 guarantee also recorded that each of the 2005 deed and the 2009 deed were secured by the 2010 mortgage.
Part of Mr Pambris' financial logic for the 2017 guarantee appears to have been overcoming the disadvantage of Mr Papatheodotou's bankruptcy. The 2017 guarantee bolstered Ms Makis' liability to Mr Pambris for all Mr Papatheodotou's pre-existing financial obligations to Mr Pambris. The 2017 guarantee was associated with a loan from Mr Pambris to assist Ms Makis to pay out the Commonwealth Bank of Australia ("the CBA") and take over its mortgage over the Maroubra property. Ms Makis subsequently reimbursed Mr Pambris for most of these payments by refinancing in 2021 with the second defendant, Perpetual Trustee Co Limited ("Perpetual").
Mr Pambris now seeks relief under the 2010 mortgage against Ms Makis and the other mortgagee, Perpetual, by way of judicial sale of the Maroubra property and to have the proceeds of sale applied in discharge of her obligations under the 2010 mortgage, including all amounts due under the 2005 and 2009 deeds. Mr Pambris seeks additional orders following any judicial sale. He seeks orders that Ms Makis personally pay the balance Mr Pambris claims to be due under the 2005 and 2009 deeds. At the date of filing the Statement of Claim, this was said to be $4,525,448.39 plus interest and the separately advanced sum of $37,500.00 plus interest.
Ms Makis disputes that she has the alleged obligations under the 2010 mortgage on several grounds. First, she contests Mr Pambris' contention that the 2010 mortgage secures advances Mr Pambris made to Mr Papatheodotou between 2001 and 2008 which are reflected in the 2005 and 2009 deeds. Ms Makis contends instead that the 2010 mortgage secured quite different liabilities. She says the mortgage secures liabilities arising from a loan from the Laiki Bank of Cyprus in the sum of $1,200,000 to Mr Pambris, herself and another person for a transaction involving a parcel of real estate on Canterbury Road, Canterbury ("Canterbury Road property"). Ms Makis says that all the liabilities in relation to the Canterbury Road property have since been discharged and there is nothing owing to Mr Pambris on the 2010 mortgage.
In the alternative, Ms Makis seeks to have the 2010 mortgage and the 2017 guarantee set aside both in equity at general law and under the Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law), s 20, alleging that Mr Pambris' unconscionable conduct and undue influence occasioned her execution of both documents.
She also alleges these instruments can be set aside due to contraventions of the National Consumer Credit Protection Act 2009 (Cth) ("NCCP Act"), grounded in allegations that Mr Pambris allegedly engaged in unfair, dishonest or unconscionable conduct without a licence under NCCP Act, s 29.
Her claims to set aside these instruments were initially pleaded in her Defence. The Court has treated the positive allegations in her Defence as a Putative Cross Claim which the plaintiff, has replied to by way of Points of Defence to the Putative Cross Claim. Mr Pambris says the NCCP Act does not apply because he did not provide the relevant credit in question in the course of carrying on the business of providing credit.
These proceedings were heard over four days on 26-28 September and 17 October 2023 and were followed by a regime of written closing submissions concluding on 3 November 2023. Mr D.C. Price of counsel instructed by Harry Danalis of H. Danalis & Co appeared for the plaintiff. Mr M.R. Hall SC and Ms M.A. McGrath of counsel appeared for the first defendant, following referral for pro bono assistance pursuant to r 7.36 of the Uniform Civil Procedure Rules 2005 ("UCPR"). The second defendant filed a submitting appearance.
The Court records the assistance which it received from the counsel and solicitors on both sides of these proceedings. It also notes that until very shortly before the hearing Ms Makis was proposing to conduct this case herself without legal representation. Using the mechanism under UCPR, r 7.36, the Court sought assistance through the Registrar in Equity from the Bar Association to see if Ms Makis could be legally represented even at the last minute. For some days that request was unsuccessful, and the Court initially decided to adjourn the proceedings with an order for costs against Ms Makis.
But in the highest traditions of the Bar and the legal profession Mr M.R. Hall SC and Ms M.A. McGrath stepped into the breach and volunteered to represent Ms Makis. This was only days before the trial had been due to commence. They then conducted her case to its best advantage in the circumstances. The Court reversed the order for an adjournment (and an accompanying costs order) and allowed a short delay for Mr M.R. Hall SC and Ms M.A. McGrath to familiarise themselves with the detailed factual environment of the proceedings. Mr D.C. Price of counsel for Mr Pambris and his solicitors dealt flexibly with these rapidly changing circumstances including by providing documents to their opponents which greatly aided the administration of justice.
The following is a narrative of the relevant history. This narrative represents the Court's findings on the matters covered, except to the extent that the context indicates that only the parties' allegations are being recorded. For reasons of economy this narrative does not always include reference to versions of the facts that have not been accepted.
The Court has assessed the credibility of the witnesses to reach the findings in the narrative of findings below. Observations of the credibility of the witnesses are made throughout the narrative. But some preliminary general observations should be made about each of the witnesses.

[5]

Observations on the Credibility of the Parties and Witnesses

Mr Pambris. The plaintiff was a financially sophisticated witness. He sought to give the impression to the Court of being a family friend whose patience had become exhausted by the lack of cooperation by Mr Papatheodotou and Ms Makis in paying the debts due to him. His evidence was mostly consistent with objective the facts but his financial recordkeeping of his cash dealings with and alleged advances to Mr Papatheodotou were opaque, unsatisfactory, and unreliable.
He painted an altruistic picture of himself trying to look after the interests of Mr Papatheodotou and Ms Makis. And he should be credited generally with mostly behaving in an honourable fashion towards Ms Makis and trying to help her. But as will be seen, some of his later conduct towards her in 2017 can also be explained as a mixture of self-interest and altruism. He had little insight into the immense actual influence that he had over Ms Makis after she and Mr Papatheodotou had divorced. His evidence was only accepted in part.
Ms Makis. The first defendant, Ms Makis was passionately persuaded of the correctness of her own position in the proceedings. She had strong opinions which she voiced firmly throughout the proceedings. Her evidence was framed around very clear assertions of her own version of events. But her conviction as to the correctness of her own point of view did not always correspond with objective indicators of the likely events. She was often able to explain consistently with her case, the documents that Mr Pambris sought to use against her. Nevertheless, her distaste for Mr Pambris, who she believed had betrayed her trust, was so strong that the Court treated her as a partisan witness whose evidence was treated with caution. Despite the caution the Court here expresses about her evidence, the Court has accepted much of it, in part because of the unusual relationship of trust and submission that she had with Mr Pambris.
Mr Papatheodotou. Ms Makis' former husband was a difficult witness to read. He exhibited a profound and voluble dislike of his former wife, Ms Makis, although called as a witness in her case. Nevertheless, much of his evidence assisted her case. His hostility to and resentment of his former wife added unexpected credibility to his account in her favour. But his financial dealings, with Mr Pambris were obscure. The Court was often cautious about accepting his evidence.

[6]

The Backgrounds of the Parties

Ms Makis and Mr Papatheodotou. Ms Makis was born in Cyprus in 1961. Although she was commonly addressed as "Andrea", her full Greek name used in some legal documents was "Androulla". When she moved to Australia in 1976 at the age of 15, she could not read, write, or speak English. But she attained her Higher School Certificate and later studied at the Teachers College. English is now Ms Makis' second language. At the time of the hearing, she taught Greek at a Sydney primary school.
Ms Makis met Mr Papatheodotou in the Greek zone of the Island of Cyprus in 1981 whilst she was on holidays there. He was born in Cyprus in 1959. When they met, he worked for the Greek Cypriot government for the zone. They were engaged in Cyprus in September 1983, moved to Australia in October 1983, and married here in November 1983.
Ms Makis and Mr Papatheodotou have two children together, a son born in November 1985 and a daughter born in June 1987. They divorced in June 2012.
Both Ms Makis and Mr Papatheodotou worked hard to establish themselves financially after their marriage. Ms Makis simultaneously worked three jobs, namely, as a dressmaker, a beautician, and a casual teacher. Mr Papatheodotou initially worked for Ms Makis' parents and undertook a Bachelor of Economics and Bachelor of Law degrees at Macquarie University, although he did not finish either. He was later awarded a Diploma of Business Banking and Finance from TAFE NSW. In 1987, Mr Papatheodotou commenced full-time employment at the CBA, whilst he was studying part-time. Until 1993, he was employed by the CBA as a customer service manager.
In May 1993, Mr Papatheodotou left the CBA and commenced employment in September 1993 as a banking representative of the Cyprus Popular Bank, which had just opened representative offices in Sydney. The Cyprus Popular Bank had expanded beyond Cyprus in the 1990s and in 2000 changed its name to the Laiki (meaning "popular" in Greek) Bank, by which name it will be referred to in these reasons. In about July 2008, Mr Papatheodotou left the Laiki Bank and took employment with the Bank of Cyprus Australia.
Within their marriage, Ms Makis was generally responsible for family arrangements and childcare for their two children. Mr Papatheodotou was generally responsible for managing the family's finances, including the investment properties that they owned from time to time. Ms Makis and Mr Papatheodotou bought and sold several properties during their marriage. From 1987, they conducted several joint bank accounts. Mr Papatheodotou also conducted property investment bank accounts for the couple in his name.
The parties actively contested the extent of Ms Makis' knowledge of her husband's property development activity. Ms Makis says, and the Court accepts, that in relation to the couple's investment properties her role was to identify and approve potential properties for purchase. Mr Papatheodotou was responsible for arranging, preparing, negotiating, and financing investment opportunities. He would explain the nature and terms of investments, and the associated documents to Ms Makis. She was not involved in either arranging finance or managing the couple's financial contributions to those purchases. She generally left those aspects of the transactions to Mr Papatheodotou. Ms Makis is not financially sophisticated but nevertheless has a practical understanding of basic business concepts.
Cross-examination of Ms Makis revealed several purchase and sale transactions of residential property to which she was a party between 1984 and 2013: a property in East Lakes in 1984, a property in Zetland in 1987, a property in Pyrmont in 2001 another property in East Lakes before 2005, a property in Cessnock in 2005, a property in Lakemba in 2006, another property in Lakemba in 2007. These properties were acquired and held between 3 to 8 years each.
This was a logical division of expertise. Mr Papatheodotou worked in a bank and was much closer to financial resources than Ms Makis. Mr Papatheodotou explained, he would make recommendations, and "Andrea would follow my mark". The Court does not accept it was as simple as this. The couple undoubtedly discussed these various investment property purchases and Ms Makis agreed that they should proceed with them.
By 2002, Ms Makis and Mr Papatheodotou were able to purchase the Maroubra property for $1.427 million. The purchase was almost entirely funded by a loan from the CBA, secured over the Maroubra property.
Mr Pambris. Mr Pambris describes himself as a property developer, investor, and entertainment promoter. In the last of these roles, he brought entertainment acts to Australia from overseas, mainly from Greece to perform at venues throughout Australia.
By the mid-1990s, Mr Pambris was using the Laiki Bank. He found Laiki Bank provided convenient banking facilities for transferring money to the entertainment acts he was bringing out to Australia from Greece.
Mr Pambris met Mr Papatheodotou in 1993 at a function for the Sydney Olympic Football Club. Mr Papatheodotou was then employed by Laiki Bank and attended the function as its representative. Mr Pambris had a senior management role at the Sydney Olympic Football Club, which occasioned their introduction. Mr Pambris says that he met Mr Papatheodotou in 1996, but it is likely that the meeting was earlier than that and Mr Papatheodotou has a convincing memory of the precise occasion when they first met.
Mr Pambris met Ms Makis not long afterwards. She denies this and says she did not meet Mr Pambris until November 2004. But it is more likely that they did meet earlier. Although it is accepted that Ms Makis probably did not see Mr Pambris very often during the 1990s after her husband met Mr Pambris. From about 2000, the two families began to spend more time together and regularly visited one another's houses and had dinner together. Occasionally, Ms Makis and her husband spent Christmas Day with Mr Pambris and his wife at their home.
Koumbaroi. Whatever the timing of the parties' meeting, by the mid-2000s the families' relationships became close. In 2008, Ms Makis and Mr Papatheodotou assisted as godparents at the baptism of Mr Pambris' second son in the Greek Orthodox Church. Mr Pambris says that Mr Papatheodotou asked for him and Ms Makis to have this role. That may well be right, but Mr Pambris accepted them in the role. This meant that Ms Makis and Mr Papatheodotou thereafter referred to and addressed Mr Pambris as "koumbaro", and Mr Pambris referred to and addressed Ms Makis as "koumbara" and Mr Papatheodotou as "koumbaro". Those honorific terms roughly translate in English to "godfather" and "godmother" and are used in their email correspondence. However, the relationship between koumbaroi (plural of koumbaro/a) is to be understood as meaning something more than one between godparent and parent. The Court accepts Ms Makis' description of the concept as, "a special term, which denotes a particularly close, trusting and familial relationship". And for these two couples that is what it meant. Ms Makis took the role very seriously.
Mr Papatheodotou and Ms Makis divorce. Unhappy differences arose between Mr Papatheodotou and Ms Makis by 2009. She complained that he was never home. His testimony vividly expressed his dissatisfaction with aspects of their relationship. They agreed in December 2009 to separate but to keep their separation and subsequent divorce secret for a time. Ms Makis explained that her immediate family knew of the separation. But they decided not to tell other members of the Greek Orthodox community. To maintain their public reputation, they remained living separately but under the one roof but presenting as though they were married until 1 August 2012. On that date, Ms Makis moved out of the Maroubra property and leased the property to personnel from the Canadian consulate in Sydney. She later moved back to her mother's place, to become her mother's carer. She was living permanently with her mother at the time of the hearing. These arrangements are discussed in more detail later in these reasons.

[7]

Early Financial Transactions between Mr Papatheodotou and Mr Pambris

In addition to his other commercial pursuits, from time-to-time Mr Pambris loaned money to investors and friends. The extent of the lending and whether it might amount to carrying on a business of lending was an issue in relation to Ms Makis' claims for relief under the NCCP Act. Mr Papatheodotou and Mr Pambris gave differing accounts of their financial relationship prior to 2005. It is not necessary to resolve all the differences between their accounts, but an accounting of the factual disputes during this period is required to understand later factual contests.
Mr Pambris contends, and the Court accepts, that the first time he loaned money to Mr Papatheodotou was in 2001, when Mr Papatheodotou asked for a loan to help fund renovations to the Maroubra property. Mr Pambris says that he and Mr Papatheodotou from then agreed to keep an informal ledger of the advances and repayments made between them. Their lending activities are said to give rise to the first deed of loan executed between the pair, the 2005 deed, which is discussed later in these reasons.
Mr Pambris claims he made other advances prior to the execution of the 2010 mortgage additional to those described later in these reasons between Mr Pambris and Mr Papatheodotou, these are as follows: 1. In 2002, Sam Pambris Super Fund Pty Ltd loaned $80,000 to I & K Pty Ltd, company in which Mr Papatheodotou was a shareholder and of which Mr Kyriacou was a director, 2. In 2004, Byrozan Pty Ltd, a company of which Mr Pambris was a director, loaned about $20,000 to a friend in the import-export business who was trading through the company, Miloway Pty Ltd; and 3. In about April 2007, Byrozan Pty Ltd loaned money to a private company by the name of Brendanna Pty Ltd.
After November 2011, Mr Pambris also loaned the following amounts to a friend of his, Ms Emilie Kalidis: $107,000 in May 2015, $60,000 in September 2015 through his super fund, Sam Pambris Super Fund Pty Ltd, and $171,487 in November 2016, also through Sam Pambris Super Fund Pty Ltd.
In cross-examination, Mr Pambris was also questioned about a caveat he had lodged over a property acquired by the Bankstown Community College. Mr Pambris explained that he was a director of the college and that the college required funds so it could own the whole of the property on which it was situated as it presently only owned half. To effect the purchase of the other half, he loaned the college approximately $600,000. Mr Pambris conceded that this transaction did not fall within one of the business activities he described himself as being involved in, as property developer, investor, or entertainment promotor.
Mr Pambris agreed that it was necessary from time to time, during the conduct his business as a property developer, to advance or receive credit from other participants in the development schemes in which he was involved. But this activity was ad hoc and contingent upon his financial needs and those of his development partners.
Mr Pambris also loaned money to a partnership between Ms Makis and Mr Kyriacos Kyriacou, an acquaintance of Ms Makis and Mr Papatheodotou. In 1995 or 1996, Ms Makis formed an investment partnership with a Mr Kyriacou (the "AM/KK partnership"). Mr Kyriacou managed the financial aspects of the Kyriacos partnership. Ms Makis could best be described as a "silent partner" in this partnership, with her name and her role as a partner being used by Mr Papatheodotou for his own business purposes. Ms Makis displayed little firsthand knowledge of the business affairs of the AM/KK partnership.
In July 2007, Mr Pambris loaned $60,000 to the Kyriacos Partnership through his corporate vehicle, Pambris Bros Pty Ltd and in turn to PK Tiger Investments Pty Ltd, which was associated with Mr Papatheodotou.

[8]

The 2001 Loan and Advances up to 2004

Mr Pambris says that in 2001, Mr Papatheodotou approached him for a loan, because he and Ms Makis wanted to renovate the Maroubra property before moving in. According to Mr Pambris, he agreed to "see what funds I have available and give you what I can afford". He says that Mr Papatheodotou said that the money would not all be needed at once "but we will need it gradually". But his evidence is exceptionally vague about how this money was advanced and what was advanced. He merely says "a few days after this conversation, I gave to [Mr Papatheodotou] an amount of money" and he says, Mr Papatheodotou provided him with a ledger to record future amounts advanced. If there is a complete and comprehensive ledger of all these advances it is not available in evidence.
Mr Papatheodotou gives a different account of their mutual financial dealings in this period. He says that from 2001, Mr Pambris occasionally requested Mr Papatheodotou to safekeep cash on his behalf in Mr Papatheodotou's office at the Laiki Bank and to transfer money to various parties, including overseas bank accounts. Mr Papatheodotou says that sometimes he returned the cash to Mr Pambris. But Mr Papatheodotou that says that more often he would make payments to third parties - people in Australia and overseas agents - for Mr Pambris' business and personal dealings. He surmised that Mr Pambris was asking him to keep cash and make cash payments in this way, so Mr Pambris could avoid tax. The Court did not have to determine whether that opinion was correct.
Mr Papatheodotou says that the cash amounts that he was asked to keep ranged from $15,000 - $30,000. Mr Papatheodotou says that by the end of 2005 the total amount he was keeping in his office was approximately $500,000. Mr Papatheodotou gave a convincing account of how he kept this cash in his office. Whether the sums were as high as this at this time is unclear, but Mr Papatheodotou was probably making very substantial cash payments for Mr Pambris from cash funds held on Mr Pambris' behalf.
Mr Papatheodotou says that the ledger that Mr Pambris says relates to the 2001 loan in fact referred to a record of the cash given to Mr Papatheodotou for safekeeping. Mr Papatheodotou described the recordkeeping as follows. Mr Pambris would give him $100,000 in cash. Mr Papatheodotou would keep a record of what he had paid from the cash until that account ran down to zero. Then Mr Papatheodotou would show Mr Pambris all the receipts that evidenced the cash payments that Mr Papatheodotou had made on behalf of Mr Pambris. Then they would agree what had been paid and would destroy the receipts.
Mr Pambris denies requesting that Mr Papatheodotou kept a ledger held on his behalf. But he conceded that he did, from time to time, give money to Mr Papatheodotou for safekeeping for periods of one to two weeks. But he asserts that the amounts he gave to Mr Papatheodotou ranged between $5,000 and $9,000. The Court does not accept that the cash amounts kept were this modest, but their size is nevertheless uncertain.
Mr Pambris counters Mr Papatheodotou's allegations that he was holding an amount of $500,000 for Mr Pambris, by saying that the amount of $500,000 in fact represented the sum owed to him by Mr Papatheodotou. He says this amount of $500,000 is made up of $200,000 he had paid on behalf of Mr Papatheodotou and another $300,000 that he had advanced to Mr Papatheodotou over time together with interest.
Mr Pambris gives an account of a conversation with Mr Papatheodotou in mid-2004 that led to Mr Pambris making a loan of $200,000 in response to a request by Mr Papatheodotou. Mr Pambris recalls the conversation as follows: Mr Papatheodotou: How much money can you spare? Mr Pambris: I can lend you $200,000.00. Mr Papatheodotou: The $200,000 has to be deposited into an account in your name with Laiki Bank in Cyprus and I will obtain the codes necessary for me to access the account.
In his final affidavit, Mr Pambris seeks to identify uses some written evidence to support his lending Mr Papatheodotou a sum of $200,000 in July 2004 consequent upon this conversation. He adduces evidence of certificates of fixed deposit at Laiki Bank in that sum and a facsimile from Mr Papatheodotou dated 15 July 2004 with instructions to open a bank account. But this material does not prove that Mr Pambris made an advance of this sum to Mr Papatheodotou.
The Court has little confidence in Mr Papatheodotou's evidence of large amounts of cash being held by him. But the Court also has little confidence in the evidence of Mr Pambris that he made the advances he alleges. His evidence is not supported by the kind of objective contemporaneous evidence of bank transfers, bank statements and other banking or business records that the Court would expect him to have available, had he made the advances he alleges.
Evidence showing cash flows from Mr Pambris to Mr Papatheodotou is what might be expected as a starting point. The unsatisfactory state of the evidence perhaps flows from the large number of informal cash transactions in which both parties engaged without a comprehensive set of objective accounts.
As these reasons explain later, if Mr Pambris wishes to establish what, if anything, is outstanding on the 2005 of the 2009 deeds in a later quantum hearing much better evidence than this will be required. The present analysis of these advances should be taken not as a final determination of what is due but merely as an identification of the wholly unsatisfactory nature of the present evidence and the fact that the Court accepts that there were significant cash transactions in both directions between Mr Pambris and Mr Papatheodotou.

[9]

The Maroubra Property and the CBA Loan - 2002

Ms Makis and Mr Papatheodotou purchased the Maroubra property in 2002 for $1,427,000, funded by a loan of $1,500,000 from the CBA. They undertook renovation works at the Maroubra property, including the installation of a new bathroom and kitchen, new kitchen appliances, landscaping, and painting of the house. There is confusion as to when these renovation works occurred. Ms Makis says that the works had not been completed by the time they moved into the property. But Mr Papatheodotou says the works were performed after they moved in. The timing is not decisive.
On this issue both Ms Makis and Mr Papatheodotou were confronted in cross-examination with an affidavit of Ms Makis dated 9 March 2018 filed in family law proceedings she commenced in the Federal Circuit Court (which became Exhibit D in these proceedings), in which Ms Makis affirmed that these renovations occurred prior to moving into the Maroubra property. Ms Makis stated in Exhibit D that she was aware of loans that Mr Pambris said he had made to her and Mr Papatheodotou over the years "which had not been repaid" and that interest had accrued. She also affirmed in that affidavit that "this included loans of about $200,000 to renovate the Maroubra property, loans to assist us finance the purchase of real estate and loans to buy two new cars for us".
In contrast, Ms Makis says in her evidence in these proceedings that the money used for the renovations came from the proceeds of four properties she had sold (two in Rosebery, one in Zetland and one in Narrabeen) for a sum of about $1,500,000 towards the end of 1999 or 2000. She says that in 2010 she had no idea that Mr Papatheodotou was also borrowing money from Mr Pambris in this earlier time period. She says that she did not find this out until during the family law proceedings.
Both Mr Papatheodotou and Ms Makis now deny that the money for the renovation works came from loans from Mr Pambris. Ms Makis says that she only told the solicitor who prepared Exhibit D, Ms Staka, what Mr Pambris had told her to say.
Her explanation while unusual is surprisingly plausible. Mr Papatheodotou did handle the finances within their marriage. It is reasonable to assume that she had little idea where the money came from to fund the renovations that Mr Papatheodotou was paying for. But the Court asked her questions about the inconsistency between the current evidence that the money for the renovations had come from the sale of investment properties and Exhibit D which produced the following exchange: The Court: "…I thought you said in general terms that the money for the renovations had come from that [the sale of investment properties], right? So even if Mr Pambris said to you, "No, the money from the renovations came from money that I" - Mr Pambris - "gave [Mr Papatheodotou]," you would have known that was wrong, wouldn't you? Because you did know that the money came from the property development, or the property sale proceeds." Ms Makis: "Yes, because that was my understanding till then. But then because of all the other issues I had with my ex, and Mr Pambris said to me, "koumbara, I gave that money when you were doing the renovations," I - I - I get - I had more trust on my koumbaro then my ex, and that's what I believed." The Court: "… even if Mr Pambris said to you that, "I gave the money to [Ioannis]," so that he and you could spend it on the renovations, if he had said that to you, you would have known that was wrong, wouldn't you? Because you knew the money for the renovations came directly from the proceeds of sale of these other properties." Ms Makis: "Until then, your Honour, that's what I believed. What - that's - that was my understanding. But during that time I was so stressed, I was so confused, everybody telling me different things, so I wouldn't listen to anybody else. I was following my koumbaro's instructions and guidance to help me save my house." The Court: But why would you follow-- Ms Makis: "I - I did think about that. I thought, "We sold three properties, and we had all that money. Did he go and borrow money from a - from my koumbaro?" And I believed it."
The upshot of this is that Ms Makis is saying that because of her lack of trust in Mr Papatheodotou during the divorce she listened to Mr Pambris' explanation that he had lent the money for the renovations, and she relayed in her affidavit what she had been told. In truth, she says she did not really know. The Court accepts that this is what happened. She now believes that the money for the renovations came from the sale of investment properties. But, she is in no better position now than she was at the time of swearing Exhibit D to assert that. However, Exhibit D is considerably weakened as an admission: it did not come from actual knowledge that the renovations were funded from loans from Mr Pambris.

[10]

The 2005 Deed

By November 2005, Mr Pambris says that the amount owed to him by Mr Papatheodotou had grown to about $500,000 (inclusive of interest) and he requested Mr Papatheodotou either pay him back or sign "an official document" to record the loan. Mr Pambris says that Mr Papatheodotou agreed to sign, "anything you want me to".
The 2005 Deed was prepared in late 2005 by a solicitor, Mr Jim Kartsounis of J Kartsounis & Co, while Mr Pambris and Mr Papatheodotou were at his office. Mr Kartsounis took instructions from Mr Pambris only. Mr Kartsounis swore an affidavit in these proceedings. He was not cross-examined. His evidence is accepted, as far as it goes. Mr Kartsounis recalls Mr Pambris stating in his office, in the presence of Mr Papatheodotou: "I have made certain loans to [Mr Papatheodotou] totalling $500,000.00 and we want to record the terms of those loans." Mr Kartsounis informed Mr Papatheodotou that he would need to obtain his own legal advice on the document. The document was prepared that day and reviewed with Mr Pambris to ensure that it reflected his instructions, in the presence of Mr Papatheodotou. Mr Pambris then executed the document, which Mr Kartsounis witnessed. Mr Kartsounis told Mr Papatheodotou that he was not prepared to witness Mr Papatheodotou's signature on the document, even if Mr Papatheodotou did not wish to seek independent legal advice. Mr Papatheodotou left Mr Kartsounis' office with the document.
According to Mr Pambris, Mr Papatheodotou signed the 2005 Deed the next day at the Laiki Bank in the presence of an employee of Laiki Bank. This is probable. Mr Papatheodotou says he did not read the document before signing it.
According to Mr Kartsounis the 2005 Deed, executed by Mr Papatheodotou, was returned to Mr Kartsounis' office by Mr Pambris sometime later. Mr Kartsounis dated the deed 23 December 2005.
The material parts of the 2005 Deed are the following: THIS DEED dated 23rd December 2005 PARTIES: SAM THOMAS PAMBRIS of [address] Dulwich Hill NSW 2203, Promoter (Lender) JOHN PAPATHEODOTOU of [address] Marrickville NSW 2204 Bank Manger (Borrower) INTRODUCTION The Borrower has requested the Lender to lend the Borrower the sum of $500,000.00 which the Lender has agreed to do upon having the repayment of the sum secured in the following manner. IT IS AGREED that in consideration of the premises and of the sum of $500,000.00 now lent to the Borrower by the Lender being various advances (the receipt whereof is acknowledged): 1. The Borrower covenants with the Lender that he will repay to the Lender so much of the sum of $500,000.00 as shall remain outstanding within three (3) months of the Borrower receiving a demand by notice in writing for repayment of the said sum from the Lender. 2. In case the Borrower defaults in the making of payment pursuant to clause 1 or upon the occurrence of any of the following events: (a) if the Borrower shall be adjudicated bankrupt; (b) if any distress or execution shall be levied against the property or any part of the property of the Borrower and shall remain unsatisfied for at least 14 days then and in such case the Lender shall be entitled at his option to make demand by notice in writing to the Borrower for the immediate payment of the principal sum or so much thereof as shall then remain outstanding and upon the service of any such notice the principal sum shall become immediately due and payable by the Borrower to the Lender along with interest in the sum of $13,750.00 for each month in which the principal sum, or any part thereof remains outstanding and continuing until the whole of the principal sum and interest accrued has been paid in full. …
The 2005 deed looks like an uncommercial document. As Mr Papatheodotou points out, it does not contain any interest provision other than clause 2 which seems only to require the payment of interest (at what looks like a rate of 30%) after notice is given for repayment. It is unclear on the evidence in this case whether Mr Pambris ever served any notices under this provision. And, the Court's attention has not been drawn to any. Clause 3 allows the borrower to repay the balance of the loan "before the date stipulated for repayment" although no such date seems to be clearly stipulated in the agreement. By Clause 4 the borrower "agrees to charge any real property or other asset he may now owns or may own in the future with the performance of this deed and consents to the lender lodging a caveat on any real property of which he is abridged right" to secure performance of the obligations under this deed. No caveat was then lodged on the Maroubra property, which was then jointly owned by Mr Papatheodotou and Ms Makis, nor were any further documents then requested of Mr Papatheodotou "to perfect the security offered to the Lender in Clause 4", as was permitted by Clause 5.
Ms Makis says she was not aware of the purpose or existence of the 2005 deed until her family law proceedings. This is accepted. Mr Papatheodotou did not share all his financial dealings with her. Ms Makis says she never discussed this document with Mr Papatheodotou before he signed it. Ms Makis denied in cross-examination that she had become aware of the 2005 deed shortly after it was signed and the Court accepts, she was unaware of it prior to November 2010.
Ms Makis' Exhibit D is generally consistent with her current evidence in this respect. It affirms that she was aware that Mr Papatheodotou and Mr Pambris had entered the 2005 deed "sometime after the event" and that she knew "Sam had loaned us some money,"" but qualified this, stating "I was not directly involved in their [Mr Pambris' and Mr Papatheodotou's] dealings". In cross-examination, Ms Makis consistently maintained that she was not aware of the 2005 deed until during the family law proceedings and that she was unaware when she signed the 2010 mortgage.
The Court accepts this evidence, partly because it reflects their marital habit of Mr Papatheodotou controlling their finances and informing his wife of financial matters on a "need to know" basis. It is unlikely that Mr Papatheodotou reached the view that she needed to know about this document, not least because he regarded the 2005 deed as a meaningless legal formality.

[11]

The 2008 Document - March 2008

Mr Pambris says that he and Mr Papatheodotou met on 1 March 2008 to discuss and agree on the amount that was then owing between them. He contends that on that date Mr Papatheodotou agreed that he owed Mr Pambris $1,210,000 as recorded in a photocopy document in evidence, apparently dated 1 March 2008 ("the March 2008 document"). The March 2008 document consist of two parts: (a) an upper part showing calculations in typescript, and (b) a lower part with other calculations in handwriting and apparently signed by Mr Pambris and Mr Papatheodotou at the foot of the document. The parties advanced strongly contrasting and disputed evidence about the creation of the March 2008 document. What results is a most confusing and unreliable picture, occasioned by the informality of their arrangements.
Mr Papatheodotou concedes that he prepared the typescript upper part of the March 2000 document recording the transactions between the pair in the period from August to December 2007, which related to money owed to Mr Pambris and which calculated interest. The amount that the typescript part of the document concludes on 31 December 2007 at $919,607.56. Mr Papatheodotou insisted there was a separate document, which also recorded money owed by Mr Pambris to Mr Papatheodotou. He did not produce that separate document.
Beneath the typed part of the 2008 document - the table recording transactions and interest payments - is a lower handwritten part of the document. Mr Pambris says he wrote this. He appears to have made handwritten additional calculations and recorded some form of agreement, which appears to bear the signatures of himself and Mr Papatheodotou at the foot of the March 2008 document.
The handwriting at the foot of the 2008 document is as follows. It should be noted that there are errors in this handwritten text, for example in relation to the date of the 2005 deed. And some information has been lost in the scanning of the document to produce the version which is now in evidence. "Int to 15.2.08 - 34,012 E 10,000 Dep Grk A - 16,668 E 1,500 - 2,500 Byrozan - 3,500 11,344 $930,952 BALANCE. 29.2.08 one million dollars $1,000,000 9.2.08. PLUS BALANCE DERIVED FROM OTHER ACCOUNTS $210,000 TOTAL OWING TO SAM. PAMBRIS $1,210,000 one million two hundred & ten thousand dol [scil - dollars] I IOANNIS PAPTHEODOTOU ACKNWOLEDGE THIS DEBT TO SAM. PAM [scil - Pambris] WHICH INCOPERATES THE DEBT OF $500,000 ON DEED LOAN 23rd October 200 [5] [I Papatheodotou] 1ST MARCH 2008 [S Pambris]
Ms Makis' case contested the March 2008 document as a complete and reliable record of the financial dealings between the parties. The Court has little confidence in this document. The Court does not accept that the parties who both agree they dealt in cash with one another at times, created a single document that accurately recorded what was propounded as some kind of account stated between them. And the Court accepts Mr Papatheodotou's evidence that there were other cash dealings between them that are not recorded in this document. It is an incomplete and unreliable picture of the state of accounts between them.
Moreover, the 2008 document makes little mathematical sense and is based on obscure sources. As indicated above, the typescript ends with an amount due in December 2007 of $919,607.56. It purports to calculate the interest of 15 February 2008 of $34,012 and then deduct $11,344 in unspecified outgoings to produce a total amount due of $930,952. Then it asserts a balance due as at 29 February 2008, two months later of exactly $1 million. How the figure of $1 million is reached is a mystery. If interest were accruing under the 2005 deed, it only allows interest to accrue at the rate of $13,750 per month which would not reach a figure of $1 million within two months. From where the "balance derived from other accounts" of $210,000 comes is equally a mystery.
Mr Price contended in submissions that Mr Papatheodotou had accepted in cross-examination that the figure of $1,210,000 represented the total sum that he owed Mr Pambris as at 1 March 2008 and that he later tried to change his admission. But properly analysed Mr Papatheodotou's answers in cross-examination do not make any such admission. When first confronted with the March 2008 document Mr Papatheodotou said (a) "I don't think… I ever signed that document", (b) "it looks like my signature but I never signed such a document", (c) with reference to the typewritten upper portion of the document that he "probably" created it, (d) he was insistent that "there is a separate document for the amounts that Mr Pambris owed to me as well" and that he did not "believe the figures [in the March 2008 document] are correct", and (e) he said the suggestion that he agreed on 1 March 2008 that he owed Mr Pambris $1,2100.000 was "false", and finally (f) in answer to the suggestion that he signed the March 2008 document "to indicate that he agreed with it", he agreed that "I signed the document but it was supposed to be changed" (emphasis added).
Mr Papatheodotou went on to explain in evidence what he meant when he said that "the document" was "supposed to be changed". It became clear in his explanations that he was not talking about signing the March 2008 document at all but about a mortgage which "was to guarantee the long document that I signed - the handwritten document that I signed in 2009 with Mr Pambris that was for the - that was guaranteeing the Laiki Bank loan for $1.2 million".
The document that was "supposed to be changed" that Mr Papatheodotou was talking about in his answers was the mortgage he signed in 2009 which, when it was presented to him, showed a debt due of $1.21 million. He said this figure was wrong because he said the Laiki Bank loan had been paid down by then to $1.108 million and therefore needed to be adjusted. But Mr Papatheodotou contends that he was presented with a loan agreement in 2009 which was signed after it was agreed. He stated, "we signed the - another page that is saying that that document is not a legal document".
When the evidence reverted to the 2008 document and Mr Papatheodotou was given a warning by the Court to listen to questions from counsel carefully, he said that he never signed the March 2008 document, but said "definitely I have not signed the document with the handwriting on it". The Court accepts that evidence.
A remarkable feature of the 2008 document is that in a handwritten scrawl it attempts to summarise complex financial calculations which one would ordinarily expect to find easily demonstrable from accounting software or other well-kept accounting records showing the transactions to calculate what was due. But that has not been included in the evidence to give the Court confidence in the provenance or accuracy of these documents and calculations. If an original of the 2008 document exists it was not made available to the Court.

[12]

The Canterbury Road Property and the Laiki Bank Loan - 2007 to 2009

A central contest about the 2010 mortgage is whether it secures obligations of Ms Makis in relation to a commercial property in Canterbury Road Sydney ("the Canterbury Road property"), or whether it secures obligations of Mr Papatheodotou in relation to the 2005 deed, the 2008 document and another deed between Mr Pambris and Mr Papatheodotou (discussed below) made in December 2009. Quite apart from his dealings with Mr Papatheodotou, Mr Pambris had complicated financial dealings with Ms Makis and Mr Kyriacou, in relation to the Canterbury Road property.
Mr Pambris and his brother, Mr Steven Pambris were both 50% shareholders in a private corporate investment vehicle, Pambris Bros Pty Ltd. Pambris Bros Pty Ltd was the registered proprietor of the Canterbury Road property. Pambris Bros Pty Ltd leased the Canterbury Road property out to commercial tenants, including family relations. Mr Pambris, Mr Pambris' son and Mr Papatheodotou occupied offices for a time in the building on the Canterbury Road property.
During 2007, Mr Pambris expressed an interest in selling his investment in the Canterbury Road property. By December 2007, Mr Pambris changed his mind and decided he wanted to buy out his brother's share in the property. Mr Pambris shared this idea with Mr Papatheodotou. Mr Pambris also said to Mr Papatheodotou that he would be interested in purchasing the property adjoining the Canterbury Road property if it came up for sale, because together the two properties appeared to be an attractive joint development site.
Mr Pambris had applied to Laiki Bank for a loan to buy out his brother's interest and Laiki Bank valued the property for lending purposes at $1,775,000. Mr Pambris says that he offered his brother's half interest in the Canterbury Road property for sale to Mr Papatheodotou at a slight discount for $850,000 (the valuation implied that a half interest should be valued at $887,500). Mr Papatheodotou agrees that the discussion took place, but he says that the agreed valuation for the Canterbury Road property was $1.5 million and the half share was to be purchased for $750,000. The Court prefers Mr Pambris' version that the agreed consideration for the sale of a half share was $850,000. This figure better accords with later calculations.
The discussions between Mr Papatheodotou and Mr Pambris evolved into a proposal that Ms Makis and Mr Kyriacou would purchase the 50% interest in the Canterbury Road property that was for sale through a partnership that they would form, "the AM/KK Partnership". Should the transaction proceed the arrangement discussed was (a) Mr Pambris would hold a 50% interest in the Canterbury Road property and the AM/KK Partnership would hold the other 50% (called for convenience in these reasons "Canterbury Road Partnership"), (b) Pambris Bros Pty Ltd would transfer the Canterbury Road property to Mr Pambris, (c) together Mr Pambris, Ms Makis and Mr Kyriacou would borrow from the Laiki Bank by mortgage secured over the Canterbury Road property and would apply for a loan of $1.2 million to raise additional funds of $350,000 beyond the $850,000 purchase price for the half share, (d) the proceeds of the loan would be and distributed as to $850,000 to Mr Pambris and the balance of $350,000 to the AM/KK partnership, with a view to the AM/KK partnership purchasing a property, or properties, adjacent to the Canterbury Road property for development with the Canterbury Road property and (e) Mr Pambris would be equally responsible with the AM/KK partnership to repay the $350,000 because it was to be applied to partnership purposes but the AM/KK partnership would be responsible to repay the $850,000, which would be used to pay out Mr Pambris and his brother. Ms Makis was not present at these initial discussions even though they related to a partnership in which she would hold a 25% interest and her husband would hold no interest. Mr Papatheodotou later explained the discussions to Ms Makis.
Ms Makis says that she was told by Mr Paptheodotou the reason for this structure was that there was tension between Mr Pambris and Mr Kyriacou and that Mr Pambris's preference was that he retain the sole title to the Canterbury property in his own name and that any adjacent properties that were purchase would be in the name of the members of the AM/KK partnership, Ms Makis and Mr Kyriacou. This was said by Mr Pambris to make it easier to split the Canterbury Road partnership in the event the acquisition and development of the adjacent property did not proceed. In the end, no adjacent property was ever purchased.
The discussions between Mr Papatheodotou and Mr Pambris about the terms of the Canterbury Road partnership contemplated that 50% of the rents received from the Canterbury Road property would belong to the AM/KK partnership, which would also be liable to contribute 50% to meeting the expenses of the Canterbury Road property. It was further contemplated that Mr Pambris would collect rent and pay the expenses in the first instance, and the AM/KK Partnership would receive a statement and 50% of the net profit. The evidence discloses that very few statements were ever received.
Facilitated by Mr Papatheodotou, a loan agreement was executed on 7 February 2008 between Laiki Bank as lender and Mr Pambris, Ms Makis and Mr Kyriacou as joint borrowers for the bank to advance $1,200,000 to be repaid over 15 years at a fixed interest rate of 8.20% for ten years, reverting to 9.97% but variable for the remainder of the loan. ("the Laiki Bank loan"). The securities for the loan were the Canterbury Road property, and guarantees from Pambris Bros Pty Ltd and Byrozan Pty Ltd. The purpose of the loan was not described as having anything to do with the Canterbury Road partnership but to repay existing loan accounts held by Mr Pambris with Laiki Bank. As will be seen that is what happened. This was Mr Pambris' first business dealing with Ms Makis' rather than with Mr Papatheodotou.
The Laiki Bank loan settled on 15 February 2008. A few days prior to settlement, Mr Papatheodotou told Ms Makis that Mr Pambris had agreed that after receiving a sum sufficient to cover payment for his brother's half share in the Canterbury Road property the balance would be given to the AM/KK partnership, which would result in the AM/KK partnership being as between the partners, liable for the total amount of the loan.
Mr Pambris initially received the whole of the amount drawn down, being $1,190,738.34, some of which was applied in discharge of Mr Pambris' various loan obligations to Laiki Bank and the residue credited to a savings account in his name. The difference of $9,261.66 between $1.2 million and the $1,190,738.34 advanced is accounted for by valuation fees, tax, legal fees, and other bank fees. By this time, the Canterbury Road property was registered solely in Mr Pambris' name.
Ultimately, some of the funds from the Laiki Bank loan were placed in Mr Pambris' savings account and were then applied at the direction of the AM/KK partnership to pay off debts of that partnership. On 20 February 2008, Mr Pambris transferred $330,000 to a Mr Andreou Kyros and $50,000 to Mr George Chrysostomou. These funds transfers are evidenced by bank receipts which contradict Ms Makis' different recollection that the sum transferred to Mr Kyros were $300,000 but the receipt give the appearance that it was for $330,000. Mr Hall accepted in closing submissions the strong inference that the total amount paid on account of the AM/KK partnership was $380,000. These payments support Mr Pambris' evidence that the amount to be paid to the AM/KK partnership was $350,000, plus an additional discretionary $30,000.
From the time of the draw down of the loan in February 2008, Mr Pambris considered himself a half-owner of the Canterbury property, because he had received an amount of $850,000 for the AM/KK partnership's half interest in the property. A half interest in the Canterbury Road property was never registered in the name of Ms Makis and Mr Kyriacou. Mr Pambris seemed to have remarkably little impetus to make this transfer. He says he had a transfer "signed and witnessed" and that he was merely waiting for instructions from "Mr Papatheodotou, Mr Kyriacou and Ms Makis". Notwithstanding that he was a partner in the Canterbury Road partnership with Mr Kyriacou and Ms Makis he was still using Mr Papatheodotou as a conduit for communications with Ms Makis.
This means of communication was still evident in December 2009. By then the global financial crisis was well underway and it was clear that the AM/KK partnership was unlikely to purchase any property adjacent to the Canterbury Road property. Mr Papatheodotou says, and the Court accepts, that Mr Pambris expressed concern to him that the Laiki Bank loan (at $1.2 million) was higher than the AM/KK partnership's equity in the Canterbury Property (of $850,000). Mr Pambris told Mr Papatheodotou that he had prepared a document he wanted Mr Papatheodotou to sign. Mr Pambris denies this conversation occurred. But later events show that it was likely.
Subsequently, Mr Papatheodotou informed Ms Makis that Mr Pambris would be drafting a document for Mr Papatheodotou to sign to ensure that the Laiki Bank loan would be repaid. The document would include terms under which Mr Pambris would transfer 50% of the property to the AM/KK partnership, because the partnership had never signed a contract for sale. Ms Makis said she was content for Mr Papatheodotou to do this on her behalf.
On 5 December 2009, Mr Pambris prepared the foreshadowed handwritten agreement which he and Mr Papatheodotou signed. Mr Pambris says that he signed the agreement to document the arrangement made with Mr Papatheodotou. The written agreement ("the loan responsibility and sale agreement") was as follows (the errors are in the original and some information is lost in the scanning of document): "DATED. 5th DECEMBER. 2009. This agreement is a further documented arrangement between SAM PAMBRIS of [address] and MR John PAPATHEODOTOU of [address of the Maroubra property] who has the representation of ANDREA MAKIS of [address of the Maroubra property] AND KYRIACOS KYRIACOU of [address]. In relation to the [a]rrangement regarding the loan to Laiki Bank's loan of one million two hundred dollars drawn down February 2008. It is agreed that the total amount this Loan $1,200,000 is the responsibility of ANDREA MAKIS, KYRIACOS KYRIACOU and JOHN PAPATHEODOTOU including the total [of] the repayment of this Loan. SAM PAMBRIS will transfer 50% fifty percent property known as [XX] Canterbury Road Canterbury upon the instructions and the [re]solution of the Loan of $1,200,000 (one million [tw]o hundred dollars). As of the end of June 2009 It is agreed [an]d accepted that an amount of $38,187 [th]irty eight thousand one hundred & eighty seven dollars) [ha]s been received by the said ANDREA MAKIS, KYRIACOS [KY]RIACOU and JOHN PAPATHEODOTOU. Dated 5th December 2009." Ms Makis agreed that she had been shown the loan responsibility and sale agreement in late 2009, after it was signed. But Mr Papatheodotou did not discuss its contents or show her the document before he signed it.
The amount of $38,187 referred to in the last paragraph of the loan responsibility and sale agreement was calculated in a second supplementary handwritten calculation document, which seems to have been created at the same time and was entitled "RENTALS FROM: 15.02.08 - 30.06.08". The purpose of this "rentals" document appears to have been to calculate the share of rent due to the AM/KK partnership from rent-paying commercial tenants (excluding members of Mr Pambris' family) net of land tax and other lease expenses for the period 15 February 2008 to 30 June 2008.
Mr Pambris agreed this amount had never been paid but was to be considered as a "set off", to be taken as notionally received. It was a calculation of what he would owe on a periodical basis for rents received from the commercial tenants of the Canterbury Road property. Mr Pambris never paid any rents to the AM/KK Partnership for his own family businesses. It is unclear whether this amount of $38,187, or any other rental received, was applied in reduction of the Laiki Bank loan.
By the first week of December 2009, the overall position was the following. Mr Pambris held a half share of the Canterbury Road property in his own name on trust for the members of the AM/KK partnership. And he was a co-obligor jointly and severally liable with Ms Makis and Mr Kyriacou to repay Laiki Bank $1.2 million in respect of that advance which by then had been applied entirely for the benefit of the AM/KK partnership.
Mr Pambris was concerned about his immediate financial exposure. If Ms Makis and Mr Kyriacou defaulted to Laiki Bank, Mr Pambris' half share of the property might be called upon to meet the joint liabilities to Laiki Bank to an extent of approximately $350,000 ($1.2 million less $850,000 and possibly more depending upon (a) the state of the property market given the global financial crisis and (b) default interest and recovery expenses collectable by Laiki Bank. The loan responsibility and sale agreement of 5 December 2009 helped to cure this problem in part by Mr Papatheodotou acknowledging that he was a person responsible to repay the loan to Laiki Bank. It is reasonably clear that Mr Pambris did not receive legal advice before handwriting this document. To be effective, it probably needed to be expressed as a guarantee and to be supported by consideration. But Mr Pambris showed a habit for using his own informally constructed documents.

[13]

The 2009 Deed

Mr Pambris says that by December 2009 the interest and principal owed to him by Mr Papatheodotou under the 2005 deed totalled $1,160,000.00 and that Mr Papatheodotou had made no repayments in reduction of that outstanding amount. Mr Pambris says that to address this he and Mr Papatheodotou had a conversation to the following effect in early December 2009: Mr Pambris: "Ioannis, I think it's only fair since no repayments have been made to date and with all the other transactions that have transpired between us which you have all the details for, that an amount should be added to the sum of $1,160,000.00 in lieu of compounding interest." Mr Papatheodotou: "Do you think $50,000.00 is a fair figure" Mr Pambris: "I agree."
This conversation is the most explicit origin of the calculation of the amount claimed to be due to Mr Pambris of $1,210,000. Mr Papatheodotou denies this conversation occurred. He says he did not agree to add any amount of default interest to an amount said to be owed to Mr Pambris. Apart from the Court's preference for Mr Papatheodotou's evidence on this subject, this conversation looks staged, convenient, and improbable. The Court does not accept that it occurred for several reasons.
First, Mr Papatheodotou, the banker, did not strike the Court as the kind of person who would just agree to figures for principal and default interest without verifying how much was due under the 2005 deed. Mr Papatheodotou can be expected to have been familiar with the principal amount reflected in the 2005 deed. But Mr Pambris has him agreeing in the conversation to an amount for default interest on top of a larger principal.
Secondly, the calculation of the $1,160,000.00 has not been explained and is obscure but may be the following. If one takes the whole 48 months that had elapsed since the execution of 2005 deed in December 2005 and December 2009 and accrues interest at the rate of $13,750 a month for the whole of that period one reaches a total of $660,000. If that is added to the $500,000 of principal identified in the 2005 deed, one reaches a total of exactly $1,160,000.
If that is indeed the basis of the calculation, the 2005 deed does not authorise it. Upon the proper construction of Clauses 1 and 2 of the 2005 deed, the $500,000 would only be "outstanding" after a written demand. And the meaning in Clause 2 of "defaults in the making of payment pursuant to Clause 1", should properly be construed as, defaulting on the payment of monies that are outstanding. But no monies are "outstanding" if no notice has been served. The Court cannot infer on the available evidence that written notice of demand was ever served on Mr Papatheodotou before December 2009. So, it is doubtful that any interest was accruing on the $500,000. This undermines confidence in a figure which is said to be the foundation of this conversation.
Thirdly, the figure of $1,160,000 as at December 2009 is anomalous and inconsistent with other documents that Mr Pambris propounds to advance his case. An example is the 2008 document. Apparently created on 1 March 2008, the March 2008 document reaches the same total figure owing to Mr Pambris of $1,210,000 at a date 18 months earlier than December 2009. If interest is accruing or other advances are being made, it is odd that the same amount would be due on such different dates. Not only that, but as will be seen, most surprisingly the same amount is said also to be the amount due in November 2010. Mr Papatheodotou recognised this inconsistency in cross-examination: when it was put to him that he had agreed in March 2008 that he owed Mr Pambris $1,210,000, he confronted Mr Price with the telling answer, "so the loan was the same amount as in 2010? That's what you're suggesting?"
All this could possibly make sense if no interest were included in the $1,210,000, which was just accumulated advances of principal. But that is not how Mr Pambris puts his case. The calculation of the $1,210,000 in his alleged conversation in December 2009 explicitly includes an amount of interest in that figure. And the figure on which interest is calculated appears nowhere in the 2008 document.
Fourthly, once again Mr Pambris' recordkeeping and accounting is so deficient that the Court has little confidence in its accuracy. In an age where proprietary accounting software had long been available to the community, an apparently sophisticated investor such as Mr Pambris, using handwritten and inconsistent back-of-the-envelope calculations of this kind undermines respect for the quality of his work and the reliability of his evidence. Should he have to prove amounts due under these documents this evidence is not sufficient.
Mr Pambris says that following on the conversation he alleges he had with Mr Papatheodotou, he prepared a form of deed which he and Mr Papatheodotou executed in December 2009. The terms of the 2009 deed are the following (showing the errors in the original): THIS DEED dated PARTIES: SAM THOMAS PAMBRIS (Lender) JOHN PAPATHEODOTOU (Borrower) INTRODUCTION The Borrower has requested the Lender to lend the Borrower the sum of $1,210,000.00 which The Lender has agreed to do upon having the repayment of the sum secured in the following manner. IT IS AGREED that in consideration of the premises and of the sum of $1,210,000.00 now lent to the Borrower by the Lender being various advances (the receipt whereof is acknowledged): 1. The Borrower covenants with the Lender that he will repay to the Lender so much of the sum of $1,210,000.00 as shall remain outstanding within three (3) months of the Borrower receiving a demand by notice of writing for repayment of the said sum from the Lender. 2. In case the Borrower defaults in the making of payment pursuant to clause 1 or upon the occurrence of any of the following events: (a) if the Borrower shall be adjudicated bankrupt: (b) if any distress or execution shall be levied against the property or any part of the property of the Borrower and shall remain unsatisfied for at least 14 days then and in such case the Lender shall be entitled to at his option to make demand by notice in writing to the Borrower for the immediate payment of the principal sum or so much thereof as shall then remain outstanding and upon the service and any such notice the principal sum shall become immediately due and payable by the Borrower to the Lender along with interest in the sum of $30,250.00 for each month in which the principal sum, or any part thereof remains outstanding and continuing until the whole of the principal sum and interest accrued has been paid in full. …
The 2009 deed bears the signatures of Mr Pambris and Mr Papatheodotou, apparently witnessed by Mr Steven Pambris, the brother of Mr Pambris. There are seven numbered clauses to the deed, but the version of the 2009 deed in evidence also bears a handwritten number "8." below the final clause 7 and above the execution clauses but without any text. The terms of the 2009 deed are otherwise identical to the 2005 deed except for the principal figure in clause 1 and the monthly interest figure in clause 2.
Mr Pambris does not say that he engaged lawyers to settle the 2009 deed. It is regrettable that he did not. Had he done so there would have been professional legal input that ordinarily would have identified with precision what was the principal sum of $1,210,000 that was said to be due from Mr Papatheodotou to Mr Pambris.
The evidence on Ms Makis' side about the execution of this document is also unsatisfactory and difficult to follow. Mr Hall SC for no doubt good forensic reasons decided not to read part of Mr Papatheodotou's affidavit that explained the execution of this document. Mr Papatheodotou nevertheless gave his own somewhat disjointed version of its execution during cross-examination.
Mr Papatheodotou insisted that he did not sign the 2009 deed until about 8 December 2010. He also says that there was a further version of this document, signed by both Mr Papatheodotou and Mr Pambris, with the completed "Clause 8", which stated that the document was not to be used for legal proceedings, because the figure in the 2009 deed was incorrect. That other document is not in evidence. But the version that is in evidence does suggest that somebody contemplated the addition of another term to the 2009 deed, a Clause 8. In the Court's view, it is more probable that Mr Papatheodotou did sign the 2009 deed around December 2000. But the Court also accepts there was another version with a Clause 8 in it which negated its force as binding legal document. Mr Pambris could avoided all of this uncertainty if he had engaged lawyers to draft this documents and have it executed.
Ms Makis says she was not aware of the 2009 deed until she was involved in her family law proceedings in 2016-17. As with the 2005 deed, she says that she never discussed documents with Mr Papatheodotou before he signed them. Ms Makis denied in cross-examination that she was aware of the 2009 deed prior to November 2010. The Court accepts this part of her evidence as correct.
But there is potentially countervailing evidence. Ms Makis' own affidavit (Exhibit D) was strongly deployed against her in cross-examination to suggest that she was aware of the 2009 deed when Mr Pambris says it was executed in December 2009. But Exhibit D does not say that she was aware of it at the time; it only acknowledges that she was aware of the 2009 deed "after the event", that is after its execution. She also acknowledges in Exhibit D that her ex-husband "had agreed that the total sum owing to Pambris was $1,210,000 and interest of $30,250 per month".
Exhibit D does not damage Ms Makis' case or her credibility, because of the way that Mr Pambris gave her the information contained within it. The Court accepts her evidence in these proceedings that during the family law proceedings in 2018, Mr Pambris was the primary source of her information about his dealings with her ex-husband..
In Exhibit D at [43], without referring to exactly when she found out about her husband's borrowings from Mr Pambris, Ms Makis explained her understanding of the principal sum of $1,210,000 in the following way: "While I did not fully understand how the amount owing to Sam was calculated by Sam and Ioannis I knew of loans Sam had made to us over the years which had not been repaid and that interest had accrued. This included loans of about $200,000 to renovate the Maroubra home, loans to assist us finance the purchase or [sic] real-estate and a loans [sic] to buy two new cars for us. I trusted Sam as he is family.
The qualifications Ms Makis makes in Exhibit D at [43] are important. She did not fully understand how amounts said to be due to Mr Pambris had been calculated between Mr Papatheodotou and Mr Pambris and she does not commit to when "[she] knew of loans Sam had made to us over the years". The only loan she expressly identifies is that of $200,000 for renovations, which the Court infers Mr Pambris had told her about. The funding of the renovations to the Maroubra property were of particular interest to her.
Ms Makis also denied that Mr Pambris loaned her and Mr Papatheodotou money in 2008 to assist in purchasing real estate and insisted that Mr Pambris "had made me say that during Family Court, because I had no idea". Whilst the Court does not accept that Mr Pambris compelled her to say those things, it accepts that he was her source of information for Exhibit D.
Ms Makis' reliance upon Mr Pambris as an information source for Exhibit D is an important indicator of the degree of influence that he still had over her in March 2018. Mr Pambris' ascendancy over her developed after she separated from Mr Papatheodotou in January 2010. From that point on, she relied upon Mr Pambris in her litigious and other struggles against Mr Papatheodotou.

[14]

Separation and Property Settlement - January 2010

As earlier indicated, Ms Makis and Mr Papatheodotou unofficially separated in January 2010 - an event of critical importance for assessing the personal dynamic among these parties. The timing of their separation is indisputable. On 18 January 2010, they executed a financial agreement under the Family Law Act 1975, s 90C ("the s 90C agreement") in final settlement of their respective property claims against one another upon their separation.
Under the s 90C agreement, Mr Papatheodotou agreed to transfer all his interest in the Maroubra property to Ms Makis and he gave her an indemnity against claims made against him over the property. He signed a transfer, but it was not registered in the short term. She wanted to keep their home for understandable reasons: she had lived there for eight years, she had been closely involved in its renovation and it had also been the home of their two children (who were then aged 23 and 25). They otherwise split their assets, mainly on the basis that each took away their movable property. Despite the terms of the s 90C agreement, the legal title to the Maroubra property remained in joint names for some years.
Several features about the separation should be observed. Ms Makis complained that Mr Papatheodotou had been absent from their home without explanation for lengthy periods during their marriage. It is probable that there was much tension between the pair in 2009 long before their formal separation. And the separation was very bitter, proved by the continuing mutual resentment between Mr Papatheodotou and Ms Makis which still crackled across the courtroom in 2023, 13 years later.
The probable conduct of Mr Papatheodotou and Ms Makis in 2009 and 2010 in relation to Mr Pambris needs to be realistically assessed against this contemporary background of mutual hostility and the terms of the s 90C agreement in which Ms Makis gained the Maroubra property as part of their property settlement. It is highly unlikely in this context that the Ms Makis that the Court saw in the witness box would readily assume any liabilities which Mr Papatheodotou had incurred without her knowledge, especially when she then felt that he had badly wronged her.

[16]

The 2010 Mortgage

The 2010 mortgage consists of three pages. The first page is the form of mortgage instrument authorised under the Real Property Act 1900 ("page 1"). The remaining two pages constitute Annexure "A", which is referred to on page 1. Both page 1 and Annexure A, are signed by Ms Makis and Mr Papatheodotou.
Page 1 is dated 5 November 2010. On page 1, the signatures of Ms Makis and Mr Papatheodotou are recorded as being witnessed by Mr Jeremy Calaveris, who was then the boyfriend (now the husband) of their daughter. The document is certified as correct on page 1 by the solicitor for Mr Pambris, the mortgagee, Mr Harry Danalis, who prepared the document. Page 1 also describes that the mortgagors, mortgage all their estate in the Maroubra property and "covenants with the mortgagee that the provisions set out in the annexure and/or memorandum as specified below are incorporated in this mortgage" and then continues by referring to Annexure A and Memorandum Q860000 (a standard form set of mortgage terms).
Annexure A provides (errors are in the original): THIS IS ANNEXURE 'A' REFERRED TO IN THE MEMORANDUM OF MORTGAGE DATED 5th of November, 2010 BETWEEN Ioannis Papatheodotou and Androulla Papatheodotou (Mortgagors ) AND Sam Pambris (Mortgagee) 1. The Mortgagor [scil - Mortgagee] has agreed to lend to the Mortgagors and the Mortgagors have agreed to Borrow from the Mortgagee the sum of One Million Two Hundred and Ten Thousand Dollars ($1,210,000.00 ) (hereinafter called 'the principal sum" ) subject to the terms and conditions referred to in this Annexure. … 3. The Mortgagors covenants to pay the Mortgagee the principal sum, or so much Thereof as shall remain unpaid on the 5th day of May 2012 4. The Mortgagors covenant to pay the Mortgagee interest on the principal sum at the rate of 8.5% per annum in equal monthly instalments of $8,570.83 such interest calculated from the 5th day of November 2010 the first of such payments to be made on the 5th day of December 2010 and thereafter on the same day of each month. PROVIDED ALWAYS, and without prejudice to the rights powers and remedies of the Mortgagee otherwise given under this Mortgage the Mortgagors with pay to the Mortgagee interest at the rate of $12.00 per centum per annum on any money due but unpaid for seven (7) days by the Mortgagors to the Mortgagee on any account whatsoever pursuant to this Mortgage. Such interest shall be computed from the due date for the payment of the said moneys until payment in full of the said unpaid monies and be recoverable in an action at law. …
The italicised dates shown in Annexure A above represent a handwritten part of Annexure A. The parties advanced conflicting accounts of the events surrounding the signing of the 2010 mortgage. Their respective accounts may be shortly analysed as follows.
Mr Pambris' account - the proposal. Mr Pambris contends that in 2009 to 2010, he had several conversations with Mr Papatheodotou in which he inquired about repayment of the loaned amounts. After several failed promises of payment from Mr Papatheodotou, Mr Pambris says he informed Mr Papatheodotou that he needed a mortgage for protection and that Mr Papatheodotou agreed, saying "Yes, koumbara [Ms Makis] and I will sign".
When there were still no repayments on the loaned amounts, Mr Pambris says in about October 2010 he instructed his solicitor, Mr Danalis, to prepare a mortgage over the Maroubra property. Mr Pambris says that "sometime later", Mr Papatheodotou gave Mr Pambris an executed mortgage signed by Mr Papatheodotou and Ms Makis, including page 1 and Annexure "A". Mr Pambris then caused his solicitor, Mr Danalis, to lodge a caveat to protect the interest created by the mortgage.
Mr Papatheodotou's account - the proposal. Mr Papatheodotou says that in late October 2010, Mr Pambris reminded him that the AM/KK partnership (Ms Makis and Mr Kyriacou) had "full responsibility" for the Laiki Bank loan but Mr Pambris said he wanted his name removed from the loan. Mr Papatheodotou says that Mr Pambris told him that he "didn't trust" Mr Kyriacou and therefore wanted security for the Laiki Bank loan. Mr Papatheodotou says he informed Mr Pambris that this could not happen because the security for the loan was the Canterbury Road property which was in Mr Pambris' sole name. So, if he was not a borrower, he would need to be a guarantor. Mr Papatheodotou says Mr Pambris then requested to be given a second mortgage over the Maroubra property.
Mr Papatheodotou says he expressed doubts that the CBA would agree to a second mortgage but told him that he would ask Ms Makis. Mr Papatheodotou says that he thought it made sense for he and Ms Makis to provide security for the Laiki Bank loan, because the intention was always that the loan would be repaid and the AM/KK partnership only had a 50% interest in the Canterbury Road property which was worth $750,000 and the total borrowings from the Laiki Bank were $1.2 million. Mr Papatheodotou acknowledged that Mr Pambris might want additional security, to protect himself in the event Mr Kyriacou defaulted to the Laiki Bank. Mr Pambris denies this conversation took place.
Mr Papatheodotou says that he then spoke to Ms Makis, who asked what he thought. Mr Papatheodotou told Ms Makis that he thought it would be "okay to give it to him" and that "the only risk is if the Laiki bank loan does not get repaid". He says Ms Makis agreed to a second mortgage over the Maroubra property in part because there was already a large mortgage to the CBA over the Maroubra property.
Ms Makis' account - the proposal. Ms Makis contends she signed the 2010 mortgage believing that it related to the Laiki Bank loan. She claims this understanding came from conversations she had had with Mr Papatheodotou about the proposed mortgage. She explains that first Mr Papatheodotou showed her a copy of the December 2009 loan responsibility and sale agreement. Mr Papatheodotou then told her of the intended effect of this agreement, which was for Mr Papatheodotou to assume personal liability for the obligations of the Canterbury Road partnership to Laiki Bank in addition to Ms Makis and Mr Kyriacou.
It was put to Ms Makis repeatedly in cross-examination that she was aware in 2010 of Mr Papatheodotou's debts to Mr Pambris, and that she signed the 2010 mortgage with full knowledge of the money owed to Mr Pambris. But she consistently denied this was the case. She says she signed the 2010 mortgage because she believed the Laiki Bank loan was her responsibility, and it had not yet been fully repaid. Ms Makis says she understood the amount of $1,210,000 to be a mistake that was supposed to be fixed but never was - the amount was supposed to be $1,200,000 and she says that because she had signed this mortgage, she made every effort to keep up payments to the Laiki Bank from her savings. Mr Pambris denied in cross-examination telling Ms Makis that the documents needed to be signed for the protection of the Laiki Bank loan.
Ms Makis' and Mr Papatheodotou's evidence is accepted on this issue. Several factors make it more probable than Mr Pambris' evidence. First, Ms Makis' and Mr Papatheodotou's evidence though strongly challenged remained consistent and was sufficiently detailed to show it was drawn from genuine recollection rather than invention. Secondly, Mr Pambris had created the loan responsibility and sale agreement in December 2009 which by adding Mr Papatheodotou, had set the scene for he and Ms Makis to both provide security. Thirdly, the $10,000 difference between $1,210,000 and $1,200,000 is less than 1% of the principal of the loan. It is not a difference which would greatly alert Mr Papatheodotou or Ms Makis to a serious inconsistency from what they had been told by Mr Pambris, whom they both deeply trusted.
Ms Makis account - the signing. The Court also accepts Ms Makis' following account of the signing of the 2010 mortgage. In late 2010, Mr Papatheodotou broached the subject of the 2010 mortgage with her in the following way. He explained to her that Mr Pambris had asked him "to register a mortgage over the Maroubra property as security for the Laiki Bank loan". Mr Papatheodotou also explained to her that because she and Mr Kyriacou were only 50% owners of the Canterbury Road property and the value of that 50% was only $750,000 and Mr Pambris was also liable as the borrower for the whole of the $1.2 million loan from Laiki Bank, which was really the responsibility of Mr Kyriacou and Ms Makis, Mr Pambris wanted additional security to cover any shortfall. Upon Ms Makis enquiring whether this would affect her, Mr Papatheodotou assured her "no, as long as the Laiki Bank loan is repaid". Mr Papatheodotou then foreshadowed to her that Mr Pambris' solicitor was going to prepare the proposed mortgage for this security.
Ms Makis says that in early November 2010, Mr Papatheodotou told her that he had signed "the mortgage over the house" that he had discussed with her earlier. Mr Papatheodotou said to her that he had signed it and returned it to Mr Danalis' office and that she should "pass by [Mr Danalis'] offices and sign it".
Up to this point all her understanding of this proposed mortgage had been conveyed to her through Mr Papatheodotou, who had connected the mortgage with Mr Pambris' desire for additional security in relation to the Laiki Bank loan. Ms Makis says Mr Pambris first called her about this subject on or about 4 November 2010 and asked her to attend Mr Danalis' office to sign some papers "so, I am protected for the loan with Laiki".
She says that based on what Mr Pambris had said to her, she believes that the documents she was being asked to sign related to the Laiki Bank loan and nothing else. But Ms Makis' trust in Mr Pambris was then so great that she was ready to sign documents based upon his assurances as to what the documents were about. She understood from what Mr Papatheodotou had said, why Mr Pambris wanted these documents signed.
In his affidavit evidence Mr Pambris says he telephoned Mr Papatheodotou to request that Mr Papatheodotou collect the documents to be signed from Mr Danalis. In cross-examination, Mr Pambris accepted that he may have called Ms Makis and told her that there were documents she needed to sign. But he denied that he mentioned to Ms Makis that the documents to be signed concerned the Laiki Bank loan.
Although Ms Makis was highly suggestible to ideas from Mr Pambris, she was sufficiently self-possessed and businesslike to require some very basic explanation as to why she was being asked to sign a mortgage over the Maroubra property. It is probable that Mr Pambris gave her some account of why this her execution of documents was required. That the documents were required to satisfy the Laiki Bank was rational and made sense to her. Mr Pambris did call Ms Makis. If he intended the mortgage to be for a different purpose, then he would have had to give her some plausible explanation as to what that purpose was. In his affidavit evidence, he merely calls them "the mortgage documents".
But the Court accepts that Ms Makis was unaware of allegedly high levels of borrowing of Mr Papatheodotou from Mr Pambris. If Mr Pambris had said that the mortgage to be signed to secure Mr Papatheodotou's financial obligations to Mr Pambris, it is inevitable that Ms Makis would have enquired about what these financial obligations were. She had only 10 months earlier signed a s 90C agreement securing the Maroubra property to herself. It was highly improbable she would sign a mortgage for a newly revealed liability of Mr Papatheodotou, and even less so without adequate explanation. Mr Pambris did not know of the separation.
Ms Makis says that when she arrived at Mr Danalis' office by prearrangement, Mr Pambris and Mr Papatheodotou were already waiting outside but Mr Danalis was running late. Mr Papatheodotou had already signed some mortgage documents and returned them to Mr Danalis' office, as he had explained to Ms Makis. But Mr Papatheodotou was required to sign additional documents: Ms Makis suggests Mr Papatheodotou had signed page 1 of the 2010 mortgage but had not yet signed Annexure A.
But after waiting for some time, eventually Mr Papatheodotou had to leave for another appointment. In oral evidence, Ms Makis gave a vivid and detailed account of waiting outside Mr Danalis' office and what happened after Mr Papatheodotou left. Mr Pambris began to slowly recall some of these events under cross-examination. After Mr Danalis had not arrived after a further period, Mr Pambris and Ms Makis went inside to ask Mr Danalis' wife, who was also his receptionist, how long she expected that he would be.
Mr Pambris initially denied Ms Makis account on affidavit, and he advanced his own different account that Mr Danalis simply told her "to take these documents to your solicitor to sign" without offering any explanation as to what they were for. But Mr Pambris later accepted that Mr Danalis was not there when they arrived and that they both waited for about 10 or 20 minutes, both on the street outside Mr Danalis' office and then waited upstairs in his office.
Ms Makis says that Mr Pambris was keen for the document to be signed and repeatedly said to her "It would be good if you can sign this now, today", especially after Mr Danalis' wife suggested that they come back another day because she could not give a clear time as to when Mr Danalis would return. Mr Pambris denies saying this. Once inside, Ms Makis says that she overheard a conversation between Mr Pambris and Mr Danalis' wife, where Mr Pambris said "Let koumbara sign the documents now and Harry [Mr Danalis] can witness it when he comes back". Mr Pambris also denies this but it is likely he did suggest that.
Ms Makis says, and the Court accepts that she then signed the 2010 Mortgage in front of Mr Pambris and Mr Danalis' wife. Ms Makis does not recall either of them subscribing their signatures as witnesses to her signature. No one then explained its legal effect to Ms Makis or what it related to. Ms Makis signed believing the documents related to the Laiki Bank loan for the Canterbury Road property.
The evidence does not reveal whether Ms Makis could see Mr Papatheodotou's signature on the 2010 mortgage when she signed it.
Mr Papatheodotou's account - the signing. Mr Papatheodotou's version is generally consistent with that of Ms Makis and the Court also accepts it. He says that he signed the 2010 mortgage prior to Ms Makis signing it and without prior legal advice. He says he signed because he believed the mortgage was being offered as security to support Ms Makis in fulfilling the obligations of the AM/KK partnership under the Laiki Bank loan.
He says he signed the mortgage at the home of Mr Jeremy Calaveris who witnessed his signature. After signing it and before it was signed by Ms Makis, Mr Papatheodotou scanned a copy of the signed document and returned it to Mr Danalis' office for Mr Pambris and Ms Makis to sign. Mr Papatheodotou's scanned copy of the 2010 mortgage signed by him is in evidence. The scanned document only bears his signature and the signature of Mr Calaveris and only consists of page 1 of the 2010 mortgage without Annexure A. This is objective evidence supporting Mr Papatheodotou's account that when he signed the 2010 mortgage, it did not include "Annexure A".
And there is nothing in page 1 of the 2010 mortgage which refers to any particular loan or advance made by Mr Pambris to Mr Papatheodotou or Ms Makis. Noticing he had signed a one-page document with "Page 1 of 3" at the bottom, Mr Papatheodotou says that he called Mr Pambris about the missing pages and that Mr Pambris told him Mr Danalis was preparing additional documents "to support the mortgage", and that when those documents were ready Mr Papatheodotou should attend Mr Danalis' office to sign them.
A few days after the telephone conversation Mr Mr Papatheodotou says that Mr Pambris told him that the further documents were ready. Mr Papatheodotou says he attended Mr Danalis' office and signed Annexure "A" and Mr Danalis' wife was the only other person present when he signed. According to Mr Papatheodotou this occasion when he visited Mr Danalis' office to sign Annexure "A" was not the same day that Ms Makis attended. Mr Papatheodotou says that he did not receive legal advice before he signed this Annexure "A" document.
As foreshadowed above, Mr Papatheodotou says that he understood that the 2010 mortgage document he was signing was only to give Mr Pambris some additional security in relation to money owed under the Laiki Bank loan and that it did not have any handwritten information in it at the time he signed it. A version of Annexure A signed by Mr Papatheodotou is in evidence without any handwriting for the dates in Clauses 3 and 4. Mr Papatheodotou says, and the Court accepts, that he believed that the figure of $1,210,000 was incorrect and thought that it should subsequently be amended. Mr Papatheodotou thought he was signing a security for any shortfall on the Laiki Bank loan. Even though $1.2 million was probably an incorrect figure fir the loan principal at that point. When Mr Papatheodotou returned to his office, he checked the then balance of the Laiki Bank loan, which he recalls was then approximately $1,080,000. The precise amount was less important to Mr Papatheodotou that the fact that the security was linked to the Laiki Bank loan for which he now also had responsibility.
Mr Papatheodotou says that he queried with Mr Pambris that Annexure "A" referring to $1.21 million was wrong. He says that Mr Pambris explained to him that Mr Pambris had registered a caveat based on the 2010 mortgage and the amount in Annexure A and the figure could not be changed because this would require removal of the caveat. Mr Danalis had prepared a caveat on 5 November 2010 although it appears to have been lodged only on 8 December 2010. It was put to Mr Papatheodotou in cross-examination that this was a lie, and he knew that the 2010 mortgage secured the amount of $1,210,000. But Mr Papatheodotou convincingly adhered to his version and continued to deny this contention.
Mr Pambris' account - the signing. Mr Pambris has quite a different story. He says that he was present when Mr Danalis gave blank copies of the whole of the 2010 mortgage to both Mr Papatheodotou and Ms Makis to take away and take legal advice and to be signed and witnessed. And Mr Pambris denied that Mr Papatheodotou had already signed the mortgage documents before Ms Makis collected them from Mr Danalis' office. He added that Mr Danalis told Mr Papatheodotou and Ms Makis to get legal advice. He insisted that the copy of the 2010 mortgage given to Ms Makis to sign was blank with no signatures and denied that Ms Makis ever signed the documents at Mr Danalis' office. Mr Pambris denies he received back any version of the 2010 mortgage only executed by Mr Papatheodotou. This may be right, because Mr Papatheodotou says he took the document back to Mr Danalis before it was later executed by Ms Makis. Mr Pambris may only have seen it after it was fully executed.
Although the evidence is confusing, it is doubtful that the 2010 mortgage documents were given to Ms Makis and Mr Papatheodotou in Mr Pambris' presence in this way. Mr Pambris' own solicitor, Mr Danalis, was not called to give evidence of giving the unexecuted 2010 mortgage to Mr Papatheodotou and Ms Makis. Mr Pambris was generally vague on this subject and did recall the different occasion where Ms Makis was present at Mr Danalis' office and Mr Danalis was not. There is no contemporaneous correspondence in evidence, addressed by Mr Danalis to Mr Papatheodotou and Ms Makis requesting them to take away unexecuted mortgage documents and bring them back executed after receiving independent legal advice. And Mr Pambris' version does not explain the existence of the scanned 2010 mortgage only executed by Mr Papatheodotou.
And despite the involvement of Mr Danalis, the documentation was created, and then executed by Mr Papatheodotou and Ms Makis without a professionally disciplined file note or documentary trail that would have filled in the uncertainties raised by the conflicting evidence. The Court has little confidence in Mr Pambris' version of events concerning how the 2010 mortgage documents were given to Mr Papatheodotou and Ms Makis and then executed by them. This is so despite some implausibilities in their competing version.
The Court could not readily infer that Mr Danalis or someone in his office signed as a witness to the signatures Mr Papatheodotou or Ms Makis without being present at the time of signature. Such conduct is unlikely, and Mr Danalis did not give evidence. The final available version of the 2010 mortgage is only witnessed on the first page by Mr Calaveris in a manner consistent with Mr Papatheodotou's version and Annexure A is not similarly witnessed. Mr Danalis seems to have certified the document as correct but not signed as a witness. The best available inference from the form of the final 2010 mortgage is that Mr Papatheodotou's and Ms Makis' signatures on Annexure A were left unwitnessed and only Mr Papatheodotou's signature was witnessed on page1.
There is no evidence of a solicitor acting for Mr Papatheodotou and Ms Makis witnessing the document. This leads to analysis of the next much debated and mysterious document - a statutory declaration dated 5 November 2010, and said to be witnessed by a solicitor, Mr George Vhalakis (the 2010 statutory declaration).

[17]

Mr Vlahakis and the 2010 Statutory Declaration - November 2010

After she had signed the 2010 Mortgage Ms Makis received a call from Mr Pambris, who told her that he had organised for her to sign some further documents with a solicitor, Mr Vlahakis at the firm Kydon Segal, and that he (Mr Pambris) was going to arrange for Mr Papatheodotou to pick up the documents for signing from Mr Pambris' office. When it came to financial matters by 2010 Ms Makis generally did what Mr Pambris requested. This occasion was no different. She responded when requested. Mr Papatheodotou brought a document or documents to Mr Vlahakis' office. Mr Papatheodotou says, and the Court accepts, that the document or documents he brought to Mr Vlahakis office had been prepared by Mr Pambris or Mr Danalis.
The evidence of what was put before Mr Vlahakis to advise Mr Papatheodotou and Ms Makis is most unsatisfactory. There is no paper trail from Mr Pambris or Mr Danalis showing exactly what was prepared either by Mr Pambris or Mr Danalis and given to Mr Papatheodotou to take to Mr Vlahakis, as might be expected in a transaction where legal rigour and integrity were an objective. Ms Makis and Mr Papatheodotou signed what they say was the single document Mr Papatheodotou had brought with him and then Mr Vlahakis witnessed their signatures. There is no evidence of other documents being in front of Mr Vlahakis. But Mr Vlahakis was not called by either side.
Ms Makis and Mr Papatheodotou attended upon Mr Vlahakis at the same time when the 2010 statutory declaration was signed by each of Ms Makis and Mr Papatheodotou and witnessed.
The 2010 statutory declaration was on a single page headed "Statutory Declaration", and was in typescript (except where the italics appear below) as follows: "I, We Ioannis Papatheodotou and Androulla Papatheodotou of in the State of New South Wales, hereby solemnly and sincerely declare as follows:
We are the Borrower pursuant to a Mortgage between ourselves as Mortgagors and Sam Pambris as Mortgagee for a principal sum of $1,210,000.
Prior to the execution by us of the Mortgage the terms of the said Mortgage were read and explained to us by our Solicitor Mr George Vlahakis of KYDON SEGAL LAWYERS AND WE MAKE this solemn Declaration conscientiously believing the same to be true and by virtue of the provisions of the oaths act 1900. Subscribed and Declared at Sydney ) This 5th day of November 2010 ) I Papatheodotou Before me: ) A Papatheodotou (Indecipherable signature [name and address of Mr Vlahakis]"
The 2010 statutory declaration appears to be a standard form in which blanks for the name of a solicitor could be filled in as required. And the name of Mr Vlahakis and his firm were handwritten into the blanks. The document is signed by Mr Papatheodotou and Ms Makis (with her married surname) and apparently witnessed by Mr Vlahakis. His address block appears to be stamped beneath.
Although the 2010 statutory declaration describes Mr Vlahakis as "our solicitor", there is no other evidence that either Mr Papatheodotou or Ms Makis had retained Mr Vlahakis or became liable to meet his professional fees for advice. His solicitor's file was not adduced in evidence, if one ever existed for this matter. Nothing suggests that Mr Vlahakis was a solicitor who Mr Papatheodotou and Ms Makis had previously retained or who was generally familiar with their financial affairs.
The provenance of the 2010 statutory declaration is obscure. Mr Papatheodotou denied creating it. Mr Pambris said he does not know Mr Vlahakis and has never instructed him and that he did not organise for any documents to be signed with Mr Vlahakis at this time. Mr Pambris says he did not call Mr Papatheodotou to come and collect any documents from him. He says any document, or documents, brought to the office of Mr Vlahakis were collected from Mr Danalis' office by Mr Papatheodotou and Ms Makis.
Mr Pambris denied that Mr Danalis prepared the form of 2010 statutory declaration and had given it to Ms Makis at Mr Danalis' office. He said he knew which documents Mr Danalis gave Ms Makis to take away, because Mr Danalis went over the documents with him in a meeting that day before giving the documents to Ms Makis, and he could not recall seeing a blank form of statutory declaration in the documents Mr Danalis prepared.
The Court must attempt to infer what happened from this puzzling matrix. There was undoubtedly a meeting with Mr Vlahakis. But it is improbable that Mr Vlahakis had the 2010 mortgage documents with him and explained them to Mr Papatheodotou and Ms Makis before they were executed. The words of the statutory declaration "prior to the execution by us of the mortgage" do not displace this inference. Those words are consistent with execution taking place elsewhere, as Ms Makis says happened. If Mr Vlahakis had the execution copies with him, one would expect an employee of Mr Vlahakis to have witnessed the whole of the 2010 mortgage, rather than having page 1 witnessed by Mr Calaveris and Annexure A being left unwitnessed. Nor is such a scenario comfortably consistent with the scanned copy of the 2010 mortgage signed only by Mr Papatheodotou and Mr Calaveris coming into existence. Mr Pambris could not throw any light upon this problem.
The blank form of the 2010 statutory declaration is unlikely to have originated in Mr Vlahakis' office. In his ordinary professional practice Mr Vlahakis is unlikely to have used a multipurpose standard and partially blank form that he needed to fill out by hand. It is more probable that the form came from Mr Pambris or Mr Danalis.
In the absence of proper document transmittal correspondence originating from Mr Danalis and showing the chain of movement of the 2010 mortgage documents for execution and witnessing, or of Mr Danalis being called to explain the transmission process, the Court is unwilling to infer Mr Vlahakis ever had the 2010 mortgage documents for execution by Mr Papatheodotou and Ms Makis.
The Court is cautious about accepting Mr Papatheodotou's and Ms Makis' version in the absence of their calling the solicitor who they described in the 2010 statutory declaration as "our solicitor". But despite these reservations, Mr Papatheodotou and Ms Makis convincingly and consistently adhered to their evidence that the only document they gave Mr Vlahakis was the blank form of statutory declaration, which is what the Court finds probably happened. But even if he had other copies of the 2010 mortgage documents, they were not copies for execution. It is likely that Mr Vlahakis gave Ms Makis some general advice about the effect of a mortgage if the principal sum were not paid, but she was generally aware of this anyway given she had some experience in property transactions.
Mr Vlahakis' advice to Ms Makis was likely to be inadequate even if he had all the 2010 mortgage documents for execution. Ms Makis believed, just as Mr Pambris had represented to her, that the 2010 mortgage was being executed to support the Laiki Bank loan and nothing else. There is no evidence that Mr Vlahakis was told otherwise and certainly no evidence that he made any enquiries of Mr Pambris or Mr Danalis as to whether there were any other substantial liabilities secured by the proposed 2010 mortgage. Nor is there any evidence that Mr Pambris told Mr Vlahakis of such liabilities.
Mr Papatheodotou had still not shared with Ms Makis the existence of these liabilities and she remained ignorant of them for some years following this meeting. Mr Pambris did not inform her of them and should have inferred that she was ignorant of them when she went to Mr Vlahakis.
Given what Mr Pambris had said to Ms Makis about his need for security for the Laiki Bank loan, it must have appeared to him that she was proceeding on the basis that this was the liability being secured. The lack of any demonstrated enquiry to Mr Pambris back from Mr Vlahakis about whether any other liabilities existed, strengthens this inference. Therefore, to the extent that Mr Pambris now wishes to enforce the 2010 mortgage against Ms Makis for liabilities, other than the Laiki Bank loan, she was at a disadvantage with respect to Mr Pambris because of her assumption about the limited purpose of the 2010 mortgage. And Mr Pambris was aware that Ms Makis was assuming the 2010 mortgage had that limited purpose, had not been informed otherwise, and was unlikely to be informed otherwise notwithstanding the intervention of Mr Vlahakis.
Then there is the effect of the relationship of influence. Nothing Mr Vlahakis said to Ms Makis in their brief encounter in fact changed that relationship or changed Ms Makis' continued willingness thereafter to sign documents at the behest of Mr Pambris because of her perception that he was her protector and was acting in her interests.
The Court is cautious about accepting the somewhat self-serving evidence of Ms Makis about her interactions with Mr Vlahakis on this occasion. She says she did not read the statutory declaration before signing it. That may be right, but the Court accepts Ms Makis evidence that the meeting was short. Ms Makis accepted that she could have asked Mr Vlahakis questions, but she says that she trusted everybody involved and saw no need not ask any.
Mr Pambris submits that Ms Makis should have called Mr Vlahakis as a witness. The failure to call witnesses on both sides in this case led to several debates about the application of the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 ("Jones v Dunkel"). The doctrine may be shortly stated. The unexplained failure by a party to give evidence, to call witnesses or to tender documents may, in appropriate circumstances, lead to an inference that the uncalled evidence would not have assisted that party's case: Jones v Dunkel at CLR 308, 312 and 320-21.
The rule also permits the trier of fact to take the failure to call the witness into account in deciding whether to accept any evidence relating to a matter on which the absent witness could have spoken. The rule also permits the trier of fact to more readily to draw any inference fairly to be drawn from other evidence by reason of the opposing party being unable to prove the contrary, had the party chosen to call evidence. But the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it and the rule cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference: Nuhic v Rail & Road Excavations [1972] 1 NSWLR 204 at 206-7.
But the inference is one which will vary depending upon the circumstances and may not always be available. First as Glass JA explained in Payne v Parker (1976) 1 NSWLR 191, at 201 - 202, "the missing witness would be expected to be called by one party rather than another". And the significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance: Fabre v Arenales (1992) 27 NSWLR 437 at 449-450 (Mahoney JA, Priestley, and Sheller JJA).
Here the facts are not so clear as to what the involvement of Mr Vlahakis was, that the court should infer that he would be expected to be called by her. Whether Ms Makis retained him as a solicitor in relation to the 2010 mortgage is so uncertain that the court will not draw a Jones v Dunkel inference against her in relation to him.

[18]

Divorce and Bankruptcy - 2012 to 2013

Ms Makis and Mr Papatheodotou lived in the Maroubra property until they were divorced on 21 June 2012. Following their divorce, the property was rented to the Canadian consulate to assist in meeting the monthly mortgage payments to the CBA. Ms Makis moved in with her mother in Rosebery. Although the Maroubra property was still in joint names Ms Makis considered herself to be the sole owner and lessor of the property under the January 2010 s 90C agreement.
In February 2013, Ms Makis gave instructions to list the Maroubra property for auction. The bidding reached $2,010,000 but the property did not reach its reserve and was passed in. After this, Mr Papatheodotou moved back into the Maroubra property and paid rent to Ms Makis for his occupation. Ms Makis' and Mr Papatheodotou's daughter also moved in with her husband and children, occasioning Ms Makis to visit the home from time to time to support her daughter.
Mr Papatheodotou was made bankrupt on 25 July 2013 and Mr Christopher Palmer was appointed as his trustee in bankruptcy. In Exhibit D, Ms Makis says, and the Court accepts, that in early 2013 she first heard about Mr Papatheodotou's looming bankruptcy from "gossip in the Greek community". Initially, she did not believe what she was hearing, as she had little sense from her knowledge of his financial affairs that he was in financial trouble. The first official news to her of his bankruptcy came when a representative of Mr Papatheodotou's trustee in bankruptcy telephoned her in October 2013.
The trustee in bankruptcy served notices under the Bankruptcy Act (Cth) 1966 on the Canadian embassy claiming half the rental income from the Maroubra property. Ms Makis was unable to persuade the trustee to take responsibility for half of the mortgage payments. This placed her under additional financial pressure in attempting to meet the CBA loan repayments. Until this event, she had been managing the CBA mortgage payments and had been able to implement a financial plan of using the rental income to put her ahead on her mortgage payments.
The pressure now increased on Ms Makis. To try and save the situation, she applied to the CBA to convert her mortgage to interest only payments on the grounds of financial hardship, but the CBA declined. In December 2013, Ms Makis engaged Mr Peter Zada of Navado solicitors to advise her in relation to the CBA loan.

[19]

The 2013 Statutory Declaration.

Amid Ms Makis' struggles with the CBA, Mr Papatheodotou signed another statutory declaration on 12 December 2013 ("the 2013 statutory declaration"), which Mr Pambris sought to deploy in his case against Ms Makis in the proceedings.
The 2013 statutory declaration was annexed to an affidavit of Pambris responding to part of an affidavit of Mr Papatheodotou which was ultimately not read in evidence but was raised by Mr Price in cross examination of Mr Papatheodotou. The 2013 statutory declaration sets out an account of events that is consistent with Mr Pambris' present case. It provides as follows: ● I have borrowed, together with my ex wife Andrea Makis previously known as Androulla Papatheodotou the total sum of money, one million two hundred and ten thousand dollars plus interest, from Mr Sam Pambris. ● The amount was borrowed between, July 2004 and December 2009. ● The original loan amount of five hundred thousand dollars was evidenced by the Deed of Loan document prepared by J. Kartsounis and Co. Solicitors for Five hundred thousand dollars plus interest and was signed by myself and Mr Sam Pambris. ● The loan was gradually increased since 2006. We still have dealings with Mr Sam Pambris. ● Subsequently the Deed of Loan document has been updated to represent the new loan amount totally one million two hundred and ten thousand dollars plus interest. The new Deed of Loan has been signed by myself and Mr Sam Pambris. ● A second mortgage was signed by myself and my ex wife Androulla Papatheodotou, over our house property at [address of the Maroubra property], for the amount of $1,210,000, on the 5th of November 2010 to acknowledge and guarantee Mr Sam Pambris's debt and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Oaths Act 1900.
Mr Papatheodotou says, and the Court accepts, that this document was created by Mr Pambris, who asked him to sign it. There was no reason for Mr Papatheodotou to create and swear a document such as this unless he was requested to do so. It is improbable that Mr Papatheodotou drafted it. Mr Pambris did not arrange this document through lawyers. He did so directly with Mr Papatheodotou.
The December 2013 timing of the 2013 statutory declaration appears to have been triggered by Mr Papatheodotou's bankruptcy in July 2013. Mr Papatheodotou says Mr Pambris had been telling Ms Makis and him that "his [Mr Pambris'] mortgage was not valid and in order to protect her… he has to create… additional documents in order to protect her against other people". The 2013 statutory declaration was Mr Pambris' solution to protect her from "other people". These "other people" seem to have been Mr Papatheodotou's bankruptcy creditors. But the "protection" looks like it involved bolstering the evidence for Mr Pambris' having security over the Maroubra property for Mr Papatheodotou's debts to Mr Pambris at the expense of the other unsecured general creditors of Mr Papatheodotou's bankrupt estate. This appears to have offered as much protection for Mr Pambris as it might for Ms Makis.
And the momentum to create a convenient document such as the 2013 statutory declaration raises its own questions. It is to be wondered why Mr Pambris thought that this 2013 statutory declaration was necessary if Mr Pambris was as confident as he now says he is that it was always clear among these parties that the 2010 mortgage secured Mr Papatheodotou's liabilities arising 2005 and 2009 deeds.
The extent of Mr Pambris' ascendancy in 2013 over Ms Makis was graphically illustrated by two answers Mr Papatheodotou gave to the Court about the 2013 statutory declaration, which the Court accepts as accurate descriptions of the relationship between Mr Pambris and Ms Makis at that time. These answers were given compelling force because they were accompanied by a slight but discernible undercurrent of the resentment of the displaced husband.
Mr Price asked Mr Papatheodotou what Mr Pambris said he needed to "protect" Ms Makis from in December 2013? And Mr Papatheodotou said the following: "Yes, and he was - he convinced Andrea that she is going to lose her house unless she does whatever he wants her to do. As I said, he was micromanaging Andrea [on what to do] from since 2010 onwards."
Mr Papatheodotou explained to the Court that the 2013 statutory declaration was not accurate, and he was reluctant to sign it but that he did so "under pressure". But he said that "the threat was that he wanted to protect Andrea from claims against her house". Then the Court asked him why someone else could not have protected Ms Makis and the following exchange occurred. "The Court: But couldn't you get someone else to protect Andrea? Why did you have to rely upon him? Mr Papatheodotou: "Mr Pambris convinced her that he was her saviour." The Court: He was what? Mr Papatheodotou: Her saviour. He would save her from anybody."
Mr Papatheodotou went on to say that although the Maroubra property was owned by Ms Makis after the divorce, he, Mr Papatheodotou, still cared about Mr Pambris protecting Ms Makis because "it was the family house that belonged to my kids". Mr Price put to Mr Papatheodotou that he "made that evidence up". But Mr Papatheodotou refuted that. His evidence on this subject was given directly and spontaneously and clearly drawing upon additional detail as required and without obvious internal inconsistency. The Court accepts it as an accurate account of then current events and of the then relationship between Mr Pambris and Ms Makis.
Mr Price robustly challenged Mr Papatheodotou as to why he signed this document, given that he was aware that the amount of $1.21 million was inaccurate as were other aspects of the document. But Mr Papatheodotou explained, and the Court accepts, that he had protested about this previously to Mr Pambris but in the end, he was resigned to his ex-wife's wishes, saying "I signed it because she was believing that that document had to be signed for Mr Pambris to protect her". He did not ask Mr Pambris to correct the amount in the document again because Mr Pambris had consistently been telling Mr Papatheodotou that Mr Danalis would correct the document.
The execution of this inaccurate document is a telling cameo of Mr Pambris' mental hold over Ms Makis then and is old indirectly over Mr Papatheodotou. He was witness to her genuine perception that her koumbaro was her "saviour" after her separation and divorce and she would sign whatever he told her was needed to protect her. In the Court's view, she did not escape this outlook until she received legal advice in 2017. Mr Papatheodotou gave in and signed the 2013 statutory declaration because he felt he could do nothing to convince Ms Makis not to do what Mr Pambris wanted of her.

[20]

Later Developments with the Canterbury Property - 2012 to 2013

In parallel with these events, the parties were discussing what was to be done with the Canterbury Road property. Between February 2008 and November 2013, the AM/KK partnership had continued to meet in full the payments on the Laiki Bank loan.
In early 2012, Mr Pambris says, and the Court accepts, that he spoke with Mr Papatheodotou about Ms Makis and Mr Kyriacou purchasing his interest in the Canterbury Road property. Mr Papatheodotou told Mr Pambris that they were not interested in pursuing that option. Mr Pambris was still communicating with the AM/KK partnership through Mr Papatheodotou about the Canterbury Road property. Mr Pambris was distrustful of Mr Kyriacou and preferred not to deal with him. And Mr Pambris correctly judged Mr Papatheodotou, the banker, to be more financially sophisticated than Ms Makis.
Mr Pambris informed Mr Papatheodotou that there was then about $1,000,000 owing to Laiki Bank on the Laiki Bank loan, and he had only received $810,000 from that borrowing. Mr Pambris says, and the Court accepts, that he asked Mr Papatheodotou, "who is going to pay the difference?" He calculated he still had exposure to the Laiki Bank because he was a co-borrower liable to the Laiki Bank. On instructions from Mr Kyriacou and Ms Makis, Mr Papatheodotou told Mr Pambris in response that the AM/KK partnership would continue to pay the loan instalments as they had been paying them in the past.
Based on Laiki Bank records, Mr Pambris estimates the level of his net financial exposure to Laiki Bank at various times as the following: (a) as at 5 November 2010 it was $267,800 (being the then loan balance of $1,077,801.11 less the $810,0000 which had benefited him) and (b) as at 14 November 2013 it was $125,831.89 (being the then loan balance of $935,831.89 less the $810,000). The full potential liability for Mr Pambris was more complex than this: in 2008 Mr Papatheodotou had negotiated a fixed interest loan for 10 years for the Laiki Bank loan. The fixed rate of interest he negotiated for the loan was by then well above post-GFC prevailing interest rates. Therefore, a substantial break fee of $150,000 would have to be paid to Laiki Bank to close out the loan before the expiry of the 10-year team in 2018.
Mr Pambris elected not to pay Laiki Bank the substantial break fee and instead he continued to pay off the loan together with Ms Makis and Mr Kyriacou. They say they made their last repayment on 14 July 2017. Mr Pambris made his last repayment on 27 August 2018 and that they only paid up to 2013.
The Canterbury Road partnership eventually sold the Canterbury Road property in 2012 for just over $1,900,000 with a deferred settlement period of 12 months. The Laiki Bank loan was not paid off at this time due to the break fee. Mr Pambris transferred the security to a property he owned with his wife and applied the whole of the sale proceeds to his own purposes and then continue to pay off the Laiki Bank loan. There has never been any final accounting as to what is owed between the parties to the Canterbury partnership, a matter that may yet be required to finalise these proceedings.
Mr Pambris says that in 2010, he was not concerned about the Laiki Bank loan, because he had received the majority of the drawn down funds, and the AM/KK partnership was paying off the loan as it fell due. But the Court does not accept this. At the end of 2010, he still had exposure of $267,000 that required him to rely (a) upon Mr Kyriacou, who he did not trust, and (b) upon Ms Makis, who was not financially sophisticated and whose husband owed him money.

[21]

The CBA and Family Law Proceedings - 2014 to 2017

On 3 October 2014, the financial pressure from Mr Papatheodotou's bankruptcy sharpened, when CBA commenced proceedings against Ms Makis and Mr Papatheodotou to recover the loan arrears ("the CBA proceedings") secured over the Maroubra property. In October 2015, the CBA told Ms Makis that it would no longer garnishee rent accruing from the Maroubra property. From January 2016, Ms Makis changed solicitors and engaged Mr Dominic Carbone of Sydney Law to act for her in the CBA proceedings.
Ms Makis commenced family law proceedings in the Federal Circuit Court of Australia in April 2016 against Mr Papatheodotou, his trustee in bankruptcy, Mr Pambris and three other persons. Mr Pambris appears to have been joined into these family law proceedings as a claimant to his claimed security interest in the Maroubra property under the 2010 mortgage. Ms Makis was represented in the family law proceedings by Ms Suzana Staka of Broun Abrahams Burreket solicitors.
Notwithstanding that Mr Pambris was in an opposed interest to Ms Makis in the family law proceedings, throughout these and the CBA proceedings Ms Makis requested Mr Pambris to guide, advise and assist her, and he did. From time to time, she went to his offices for advice about what course she should take in those proceedings, and he gave her handwritten notes to confirm the instructions that he proposed she should give to her lawyers. One example of Mr Pambris' handwritten notes was one guiding her as to how she should instruct her lawyers about the CBA loan, as follows: Seek Orders in addition to 2."That the Trustee do all things and sign all documents as may be required to:- (a) Convert loan to interest only (b) Agree to assignment of Mortgage to PAMBRIS (second unregistered mortgage). [c] OR Full discharge See correspondence from Commonwealth Bank 17.08.2017 3.36 p.m
Mr Price sought to cross-examine Ms Makis to establish that during the family law proceedings she could have asked the lawyers she had engaged whatever she needed to know about dealing with the title to the Maroubra property. But in answer Ms Makis said, and the Court accepts, that she felt that without her husband, she needed guidance from an experienced businessman in her decision-making and she turned to Mr Pambris, her koumbaro, for that purpose. She explained just how close at a practical level her reliance upon Mr Pambris was, when she said, "[b]efore making any decision I used to go and call - and - and speak to my koumbaro and guiding me what to say … used to go and get - and get advice from my koumbaro before asking anything [of her own lawyers]".
On about 10 February 2017, Ms Makis invited Mr Pambris and Mr Danalis to meet with Mr Carbone. In that meeting, Mr Carbone advised Ms Makis to sell the Maroubra property jointly with the trustee. Ms Makis says that Mr Pambris gave Ms Makis different advice: that she should go into default on the CBA loan, and he [Mr Pambris] would assist her and as a result she was likely to be better off than selling with the trustee.
Ms Makis said to Mr Pambris, "koumbare, I spat blood for that house! I want to keep my house I don't want to sell it." She had carefully managed over many years to try and keep up with the CBA mortgage payments to save the Maroubra property from sale and that is how she then felt about the property. Mr Pambris agreed that he understood that Ms Makis had a powerful emotional attachment to the house, that she was determined to retain the house if she possibly could but that regrettably, she was not able to obtain finance from anyone other than Mr Pambris. Despite her concerns, after reflecting on what Mr Pambris advised her and because he had repeatedly told her "[d]o not worry I will look after you", or "I will protect you", Ms Makis stopped making loan repayments to the CBA.
Mr Pambris does not remember saying this to Ms Makis, but he did not deny that he said to her that "[I] would help her with the loan". But he did regularly make such statements to Ms Makis' and her conduct is consistent with him doing so. It is objectively likely that he did say this in response to Ms Makis.
Her default accelerated action from CBA. And on 15 August 2017, after further negotiations, Ms Makis reached final agreement with the CBA to settle its claim against her. Consent orders were made in chambers in the Common Law Division of this Court in the CBA proceedings, ordering Ms Makis to pay to the CBA the sum of $1,305,509.83 with interest from 27 April 2016 and giving the CBA judgment for possession of the Maroubra property and leave to issue a writ for possession.
Mr Pambris was aware that Ms Makis was not living in the Maroubra property, that the trustee was claiming the rent from the Maroubra property, that the CBA had commenced proceedings against her and that she had defaulted in the CBA loan. He understood that unless he intervened, Ms Makis would probably lose her house.
Conscious of the financial pressure on her, Mr Pambris generously offered to lend her the money to pay out the existing CBA loan and to save the Maroubra property from sale on the basis that he would take a transfer of the CBA's first mortgage. Mr Pambris did have to do this. He told Ms Makis to speak with her solicitor, Ms Staka, who advised the CBA of her agreement with Mr Pambris. But the parties contested the terms upon which they agreed Mr Pambris would take a transfer of the CBA first mortgage and pay out the CBA. This contest included an argument about the effect of the guarantee that Ms Makis executed in December 2017.

[22]

The 2017 Guarantee

In August 2017, Mr Pambris and Ms Makis began conversing about the CBA pressing to sell the Maroubra property and that she did not have the money to pay the arrears. He suggested that she consider selling the Maroubra property, but she was reluctant to do so. She asked him to lend her money to pay off the CBA and take over the first mortgage. She did say to him, as he deposes, "that way you will have the first and second mortgage". She was aware of the 2010 mortgage, a second mortgage, but then believed it related to the Laiki Bank loan. Mr Pambris said to her he was working on the basis that if he took over the first mortgage Ms Makis would owe him about $1.3 million. He said to her that he could "carry you for about three years" and she agreed to pay interest at the rate of 6.5% per annum.
The parties contest the range of their initial discussion. Mr Pambris says he also said to Ms Makis: "I will also want you to guarantee the repayment of the other loans I have made under the loan agreements and the second mortgage". Ms Makis denies having any conversation with Mr Pambris referring to "the [2005 or 2009] loan agreements" before lawyers became involved on both sides. Mr Pambris continued to insist under cross-examination that Ms Makis was aware of these loan agreements. Both sides are partly right about these early conversations before lawyers became involved. In the Court's view, Mr Pambris did mention protecting the second mortgage in the transaction but at that stage Ms Makis was still associating the second mortgage with the Laiki Bank loan.
On 16 August 2017, Ms Makis informed the CBA that she had arranged a refinance of its first mortgage. On 7 September 2017, Mr Danalis, on behalf of Mr Pambris communicated with the CBA, proposing the assignment of the first mortgage to Mr Pambris. The same day Mr Danalis wrote to Ms Makis' family lawyer, Ms Staka, putting a proposal about an interest rate for repayment of the first mortgage after the proposed assignment. This letter did not mention the second mortgage, which tends to indicate it was not a high priority in Mr Pambris' thinking at that point. On 14 September, Ms Makis requested a first mortgage payout figure from the CBA. Correspondence concerning the proposed assignment also took place at this time with the lawyers for Mr Papatheodotou's trustee in bankruptcy.
In September 2017, after assuring her that he would lend the money, Mr Pambris and Ms Makis agreed to organise the transaction through their solicitors. Ms Staka was still acting for Ms Makis in late September and early October 2017 on the assignment of the CBA mortgage. Eventually, on Ms Staka's recommendation to engage a specialist transaction lawyer, on 24 October 2017 Ms Makis, retained Mr Norman Donato, then a partner of Bartier Perry Lawyers, to assist with negotiating the assignment.
On 15 November 2017, Mr Donato emailed Mr Danalis and Ms Staka a detailed memorandum outlining the proposal discussed between them a few days earlier. The memorandum efficiently and comprehensively summarised the detail of the proposed assignment transaction with a view to preparation of the transaction documents. It contained the basic framework set out above and explained that once Mr Pambris had paid out the CBA's first mortgage and taken this assignment, he would be able to rely upon the equitable doctrine of subrogation to maintain the first ranking priority of the mortgage. But in sub-Clauses 1.3 (e) and (f) of his memorandum several relevant features were highlighted: (e) the proposal was not designed to effect Mr Pambris rights "in relation to his caveat and the rights under the equitable mortgage that he claims is protected by it"; and (f) subrogation would place him in the same position as the CBA "and would not confer upon him any greater rights". Mr Donato was aware of the 2010 mortgage by this time.
Whatever Ms Makis' understanding of the nature of the liabilities secured by the 2010 mortgage up to the end of November 2017, there can be little doubt that any misunderstanding on her part was cleared up by no later than the first week of December 2017. On 6 December 2017, Mr Donato sent to Mr Danalis draft documents for signing to give effect to the proposed transaction before Mr Pambris' planned departure for overseas.
Two documents were attached: a document entitled "Repayment of loan to Commonwealth Bank of Australia - Forbearance" and a document entitled "Guarantee - Andrea Makis". When signed, the second document became the 2017 guarantee. In draft, the 2017 guarantee refers to both the 2005 deed and the 2009 deed.. The final executed version was in identical terms. The first document ("the first repayment/forbearance document") went through a number of iterations and will be dealt with later in these reasons.
Mr Donato's covering email implies he had drafted the documents himself from his knowledge of the transaction but did not yet have final instructions from his client for them. But he is unlikely to have included material in his draft that was not generally familiar to both him and his client. Mr Donato's covering email says of the draft documents, "I have not heard from my client yet in relation to them and so she may want changes. As stated, we have kept them simple for obvious reasons".
Mr Pambris found out from Mr Danalis that documents were available for signature. The next day, 7 December 2017, he telephoned Ms Makis and told her "koumbara, there are some documents you have to sign so we can finalise the loan." He suggested that she go to Mr Donato's offices to sign them. Although Mr Pambris denies it, she said to him, "Okay I will call them today. You know how much weight I carry on my shoulders?" He replied, "koumbara, everything will be over. You listen to me, and you will get rid of all of them."
The 2017 guarantee was drafted as a deed, although also it is addressed to Mr Pambris as a letter. There can be no doubt that it was executed at the offices of Bartier Perry on 8 December 2017, the date it bears. It provides as follows (showing certain errors in the original): "8 December 2017 Dear Mr Pambris Guarantee - Andrea Makis I refer to your loan to Ioannis Papatheodotou (Borrower), pursuant to the following documents: (a) Deed of Loan dated 23 December 2005 between the Lender and the Borrower for a principal amount of $500,000; and (b) Deed of Loan dated 5 December 2009 between the Lender and the Borrower for a principal amount of $1,210,000.00, (together the Agreements). 1. Guarantee i. By signing this letter: 1. I guarantee the due and punctual performance of the Borrower's duties and obligations under the Agreements to you including the money which the Borrower is liable to you under the Agreements and note that my obligations under this guarantee are secured under the mortgage over property contained in certificate of title [address of the Maroubra property], which mortgage is protected by the caveat that you have currently lodged on title. 2. I guarantee to indemnify you and keep you indemnified against any cost, loss, damage, claim, demand or action suffered by you arising from: a. any failure by the borrower to satisfy the duties and obligations pursuant to the Agreements:or b. Any obligation or liability that would otherwise form part of the duties and obligations being void, voidable or unenforceable against or irrevocable from the borrower for any reason ,whether or not you(Sam Pambris) knew or ought to have known of that reason 2. I consent to the lodgement by you of a caveat against my share of the property [the Maroubra property] 3. Acknowledgements I acknowledge that by signing this letter, I: (a) have read and understood this letter; and (b) understand the extent of the Borrower's current and proposed commitments to the Lender under the Agreements. … Executed as a deed. A Makis Signed sealed and delivered by Andrea Makis in the presence of:
Ms Makis' signature on the 2017 guarantee was witnessed by an employee of Bartier Perry Lawyers, who gives her professional address at that firm as part of her witness address block.
Ms Makis must have been aware of the 2005 and 2009 deeds before she signed this document which refers to them both. She must also have been aware by then that the 2010 mortgage and the caveat lodged over the Maroubra property in its support was now to be related to these two deeds rather than the Laiki Bank loan. Such understanding as she had about those matters prior to December 2017 could not survive the execution of this document, which expressly linked the 2010 mortgage with the 2005 and 2009 deeds and not the Laiki Bank loan for the first time. She had access to her own independent solicitor, Mr Donato, who was expert in transactions such as this and who had drafted the documents for her and who it should be inferred explained this to her. She did not give an account of finding out that Mr Pambris now wanted this linkage, but it must have happened.
It would be expected that Ms Makis would call Mr Donato to give evidence as a witness in her case. She retained him exclusively as her independent solicitor. Her failure to call evidence from him was unexplained. The Court draws the Jones v Dunkel inference that Mr Donato's evidence would not have assisted her case.
Ms Makis says she did not read the 2017 guarantee before signing it. She accepted that it was prepared by Mr Donato, but she says that it was not explained to her, and she did not see the document before signing it. Ms Makis says the extent of her understanding was that the document was for a refinance. But the Court does not accept this evidence. It is not credible that an experienced transaction lawyer, Mr Donato, would have allowed her to execute this or any other documents in his office without their essential features and legal effect including in relation to the 2005 and 2009 deeds, being explained to her.
Ms Makis' case is right in one respect. There is no evidence that Mr Donato had a copy of or called for either the 2005 or 2009 deeds before the 2017 guarantee was executed. Nor is there evidence of any statements of account passing between Mr Danalis or Mr Donato, showing the then state of accounts between Mr Papatheodotou and Mr Pambris under the 2005 or 2009 deeds or any set off for cash payments made on behalf of Mr Pambris. Ms Makis' understanding of the extent of the liability she was guaranteeing seems unfortunately to have been imperfect. But she had immediate access to competent and independent legal advice to ask whatever she needed, and the 2005 and 2009 deeds as summarised in the 2017 guarantee refer to a potential liability of at least $1,210,000, plus interest, if the interest clause were triggered.
No contemporaneous evidence of statements of account emanating from Mr Pambris to Ms Makis show precisely how much was outstanding on the 2005 and 2009 deeds at that time. This is unsurprising, given the unsatisfactory nature of such evidence in these proceedings.
Ms Makis says that she signed the 2017 guarantee believing Mr Pambris' assistance was necessary to prevent the CBA from selling the Maroubra property and to allow her to end the family law proceedings. This evidence can be accepted. But difficult though these pressures were, she had Mr Donato to help her navigate her way through them. Ms Makis was still much influenced in her decision-making by Mr Pambris'. But she was also moved by what she perceived to be his firm support in paying out the CBA.
The oral evidence explored Mr Pambris' state of mind about Ms Makis' potential disadvantage at this time. He accepted that by the end of 2017 he knew much about Ms Makis' finances: he knew that she was still working, that she was having difficulty recovering rent because of issues with the trustee in bankruptcy, that she was in default with the CBA and that a writ of possession had been issued. It was put to Mr Pambris in cross-examination that he knew Ms Makis would struggle taking on the CBA loan and the obligations of Mr Papatheodotou secured by the 2010 Mortgage, as if they were all hers. In response to such contentions, Mr Pambris described his thinking at the time as follows: "I didn't know her entire income and expenses. But in any event, there was equity in the house. So, if she fell short, she could have sold the house and moved somewhere else". He denied that he knew the extraordinary pressure she was under and turned that to his advantage to get her to sign the 2017 guarantee, allowing her to believe it was just in relation to the CBA mortgage.
Reality lies somewhere in between. Mr Pambris knew that he had dealt with Mr Papatheodotou in relation to the 2005 and 2009 deeds and that Ms Makis believed from what he had told her that the 2010 mortgage related to the Laiki Bank loan. But he saw this is an opportunity to bargain with her to try and extend the coverage of the 2010 mortgage to the 2005 and 2009 deeds. And this must have been done lawyer to lawyer, Mr Danalis to Mr Donato, neither of whom were called in evidence. Mr Pambris must have stipulated for that term, and Ms Makis must have given instructions for it to be accepted. Whilst offering to pay out the CBA so Ms Makis could keep the Maroubra property, Mr Pambris was at his maximum bargaining power with her, and being generous in one respect by facilitating the refinance he nevertheless took commercial advantage of his position by seeking of her guarantee for debts that were no longer recoverable against Mr Papatheodotou. Ms Makis realised that if she wanted to save the Maroubra property, these were the only terms on offer. After consulting her lawyer she accepted them.

[24]

Discussions between Mr Pambris and Ms Makis - November/December 2018

Preliminary discussions took place between Mr Pambris and Ms Makis before the execution of the 2017 guarantee. Given the Court's findings above about the contents and execution of the 2017 guarantee, the factual disputes about these preliminary discussions have become of lesser significance than they were at the hearing. But they are mentioned here for completeness out of their chronological order.
There was one meeting between Ms Makis and Mr Pambris at the home of Mr Pambris on 21 November 2017 to discuss the terms upon which Mr Pambris would take over CBA mortgage. It was suggested in the cross-examination of Mr Pambris that there was another meeting in early December 2017 at his home on the evening of 8 December 2017. But this is doubtful not least because Mr Pambris was scheduled to leave to spend Christmas in Greece the following day, 9 December 2017. And Mr Pambris does not remember this happening. The outcome of the discussions on 21 November 2017 led to the financial terms of the first repayment/forbearance document and to the terms of the 2017 guarantee.
When Ms Makis and Mr Papatheodotou attended Mr Pambris' home on 21 November 2017 they brought with them a draft document entitled "Deed of Loan", which sought to define how much and at what rate of interest Mr Pambris would lend money to Ms Makis. They told Mr Pambris that the draft deed of loan had been prepared by their solicitor. The three discussed possible changes to it together.
The Draft Deed provided that the amount to be borrowed would be $1,320,000, with an interest rate of 6.5% per annum, payable at the end of each month, secured by a first registered mortgage over the Maroubra property; monthly minimum repayments were to be $4,000. At the meeting, Mr Pambris made handwritten annotations, including calculations, adjusting the amount to be borrowed and increasing the monthly minimum repayment to $4,015 and handed back the document. The typed text of Clause 13 provided: "13. The borrower agrees to pay any money received by the Trustee for Bankruptcy of the Estate of Ioannis Papatheodotou direct to the loan for the reduction of the loan."
Handwritten words "of the second mortgage" have been annotated in Mr Pambris' handwriting at the end of Clause 13. The entire Clause 13 has also been crossed out in handwriting. Mr Pambris could not recall whether he had crossed out the clause. His writing of these words indicates that the 2010 mortgage was probably discussed at this meeting. But the terms of that discussion are unclear.
Mr Pambris says, and the Court accepts, that on the same night, in Ms Makis' presence, he handwrote another draft agreement, which provided (errors in original, some information lost in scanning of document) as follows: "Agreement. 21.11.17 For the first year an amount of a minimum repayment of $4,015 per month on the C'wlth payout figure of approx. $1,320,000. An additional 4% will be paid equally over the balance of the 2 remaining years together with 6½% on the remaining amount. The 6½% will be the applicable rate of Balance of mortgage amount remaining. The above is always as part of the understanding that MRS MAKIS will do any sign documents to protect MR PAMBRIS second mortgage as far as her 50% of the second mortgage liability is concerned. S. Pambris The understanding between the Borrower and th[e] Lender is that this is a continuation of the existing share of Ms M[akis'] [2]nd Mortgage to Mr S.P. 1. A formula regarding the repayment of Loan 2. A means of enforcing the second mortgage in relation to MRS Makis share over [the Maroubra property]." …
The third paragraph commencing "The above is always…" is circled in handwriting below which Mr Pambris' name appears. But the handwriting below Mr Pambris' name is Mr Papatheodotou's. The document is not signed by Ms Makis.
Once more, this document shows that there was discussion about the second mortgage, the 2010 mortgage, and specifically "her 50% of" that mortgage. But it does not throw much light on what that discussion was.
On the morning of 22 November 2017, Ms Makis sent an email to Mr Pambris with the subject line "Fw: Draft loan agreement". Ms Makis wrote "Please find attached the draft loan agreement as discussed." This typed document incorporates the amendments made to the documents the night before. It relevantly provided: 4. This loan agreement is separate and in addition, of any currently existing loan agreements between Mr Sam Pambris and Ms Andrea Makis. The understanding between the Borrower and the Lender is that this is a continuation and in addition of Ms Makis 50% share of the current second mortgage in favour of Mr Sam Pambris protected by the current caveat on the property in favour of Mr Sam Pambris. … 14. The borrower agrees to pay any money received by the Trustee for Bankruptcy of the Estate of Ioannis Papatheodotou direct to the loan for the reduction of the loan. 15. The Borrower shall upon request of the Lender execute all documents necessary to be executed by her to perfect the security offered to the Lender and secure her existing share of the second mortgage or any other documents the lender requests in the future.
This document shows Ms Makis writing up the results of a discussion between Mr Papatheodotou and Ms Makis on the one side, and Mr Pambris on the other side, about the inclusion of the 2010 mortgage in the overall agreement for Mr Pambris to take over the CBA's first mortgage. This document is silent as to whether the 2010 mortgage secures Mr Papatheodotou's obligations under the 2005 and 2009 deeds or Ms Makis' obligations under the Laiki Bank loan. But as both the 2017 guarantee which was executed shortly afterwards, and this document indicate, Ms Makis was discussing "perfect[ing] the security offered to the Lender and secur[ing] her existing share of the second mortgage".

[25]

The 2017 Private Loan Agreement

A contest also arose at the hearing as to the authenticity of, yet another document entitled "Private Loan Agreement" dated 18 December 2017. The Private Loan Agreement recorded the terms upon which Mr Pambris might advance funds to Ms Makis to pay out the CBA mortgage. It did not mention the 2010 mortgage or the 2005 or 2009 deeds. Neither side ultimately relied upon the document as bearing upon what was agreed between the parties in December 2017. But it became a subject of cross-examination and of submissions about the credibility of Mr Papatheodotou and Ms Makis.
The Private Loan Agreement provided (errors in original) as follows: Private Loan Agreement Agreement: THIS AGREEMENT is made on the 18th of December 2017. THE Starting date of the agreement is the 8th of January 2018. Between: Andrea Makis, [address] being the Borrower and Sam Pambris, of [address] being the Lender. THE PARTIES AGREE AS FOLLOW: 1) The borrower agrees to borrow the amount of $1,380,000 (one million three hundred and eighty thousand dollars) only for the purpose of repaying the CBA. 2) The borrower confirms receipt of the money. 3) The term of the loan is for three years and expires on the 8th of January 2021. 4) The loan is interest only for the period of three years; however, the borrower can make additional repayments, of any amount and at any time as she wishes and the interest adjustments will be calculated at the date of the full repayment of the loan. 5) Security is going to be a registered first mortgage over [the Maroubra property]. A caveat has already been placed on the above property to safeguard the rights of the lender. 6) The interest rate for the full term of the loan is 6.5%, calculated on the daily balance and charged monthly to the account. 7) The loan repayments are to be as follow: a) $4,042.48 per month for the first twelve months, and; b) $8,777.17 per month for the next twenty-four months. 8) The loan repayments will be made direct to the account of the lender …
As with most of the documents in this case, only a photocopy of this document was available in evidence. Each of Mr Price and Mr Hall SC called, as upon subpoena, for the other to produce the original of the Private Loan Agreement. Neither side complied and both failed to produce an original.
Ms Makis deposed that this document was signed by her on or about 18 December 2017. But Mr Pambris' adduced irrefutable evidence, including passport immigration stamps, that demonstrated that both he and his wife were overseas during the period 9 December 2017 to 16 January 2018. Ms Makis said under cross-examination that she thought that the date of signing was in fact early December 2017, and most likely 8 December 2017. She said she had a work Christmas party on Friday, 8 December 2017, which is why she recalled the date.
Ms Makis said that she obtained the Private Loan Agreement from Mr Pambris and it was signed at his home, with his wife and children present in December 2018 as a stopgap before going overseas, because she says Mr Pambris was unwilling to lend her $1,300,000 without any proof. But Mr Pambris denied that this document was created as a "stopgap" whilst he was overseas before the arrangement was finalised.
Mr Pambris denied either preparing or signing the document. He believed that the signatures on the Private Loan Agreement were copied and pasted from the second repayment/forbearance document that was executed between the parties in January 2018.
Mr Pambris' contention has merit for several reasons. First, the rationale Ms Makis advances for creating the Private Loan Agreement - to create a stopgap agreement whilst Mr Pambris was overseas, and settlement was pending - makes little sense. The first repayment/forbearance document already served that purpose.
Secondly, the Private Loan Agreement could not have been executed at Mr Pambris' home in Sydney on 18 December 2017. Mr Pambris was overseas.
Thirdly, the form, spacing and configuration of the parties' and witnesses' signatures on the second repayment/forbearance document and the 2017 Private Loan Agreement appear to be identical. Ms Makis and Mr Papatheodotou were cross-examined to suggest that one of them had created the document and either copied the signatures from the second repayment/forbearance document and applied them to the Private Loan Agreement or imposed the Private Loan Agreement text over blanked-out text of the second repayment/forbearance document. They each denied such conduct. Mr Papatheodotou suggested that he had seen the original document in Mr Pambris' office but this is not accepted.If such conduct occured, it would reflect very poorly upon the credit of either Mr Papatheodotou or Ms Makis. But the authorship of the Private Loan Agreement is indeterminate. It would therefore be a mistake based on presently available information to infer that the Private Loan Agreement damages the credibility of one of them, or even both of them.
Finally, Mr Pambris says that as at 18 December 2017, the date of settlement the final figures were not known, and could not have been known, such that the Private Loan Agreement was probably created with the benefit of hindsight not available in December 2018. Mr Danalis was only told of the final date of settlement on either 3 or 4 January 2018 and the final figures came through on the day of settlement on 8 January 2018.

[26]

The Second Repayment/Forbearance Document - February 2018

When the CBA loan settled on 8 January 2018, Mr Pambris paid $1,321,365.33 to the CBA and $7,669.97 to Dentons for CBA's costs and disbursements. Both Mr Pambris and Ms Makis offer slightly conflicting figures for the mortgage debt that Mr Pambris paid out, but this CBA figure should be accepted as it is likely to be the most accurate. Before going overseas, Mr Pambris had left with Mr Danalis the funds to be paid to the CBA on 8 January 2018 for the transfer of the CBA's mortgage Mr Danalis.
Mr Pambris returned from overseas on 16 January 2018. On his return, he attended Mr Danalis' office and was shown two documents. The first was the 2017 guarantee that Ms Makis had executed at the offices of Bartier Perry. The other was the first repayment/forbearance document, which was dated on the first page 8 December 2017, and dated for acceptance by Ms Makis on the same date as the settlement of the CBA mortgage transfer, 8 January 2018.
The first repayment/forbearance document needed to be amended. No change was needed to the 2017 guarantee. Mr Pambris noticed that the interest payments in the first repayment/forbearance document were wrong and did not correspond with what he thought had been agreed. They were shown in the first repayment/forbearance document executed by Ms Makis as $4,015 for the first 12 months and $7,164.84 for the remaining two years. This needed to be changed to $4,042.48 for the first 12 months and $8,777.17 for the remaining two years, or until the debt was paid.
A second version of the repayment/forbearance document with the amended figures was prepared, dated, and executed by Mr Pambris on 20 January 2018 at the offices of Mr Danalis and a copy was then sent to Mr Donato. Mr Pambris emailed Ms Makis on 31 January 2018 notifying her of the amended payment figures which he said to her were "as per our 'Repayment of Loan' signed document". This was a reference to the figures in the second repayment/forbearance document which Mr Pambris had executed on 20 January 2018.
Ms Makis says that the document referred to as "per our 'Repayment of Loan' signed document" was the 2017 Private Loan Agreement. Mr Pambris says the document he was referring to in this email was the second repayment/forbearance document discussed below. The Court prefers Mr Pambris' evidence on this matter.
In reply to this email, on 2 February 2018, Ms Makis requested Mr Pambris to provide her with a copy of the agreement "with the new figures" for her records. Mr Pambris responded a short time later informing Ms Makis that her solicitor had the amended agreement, which required her signature. Then on 5 February 2018, Mr Pambris emailed Ms Makis a copy of the second repayment/forbearance document and invited her to attend her solicitor's office to sign it.
On 19 February 2018, Ms Makis and Mr Papatheodotou visited Mr Pambris and his wife for their godson's birthday. Ms Makis executed the second repayment/forbearance document when she was there that evening. This is probable, as her signature is witnessed by Mr Pambris, not by Mr Donato or someone from Bartier Perry. She says she signed this document without reading it. This may be right, as it only contained slight numerical amendments from the first repayment/forbearance document. Mr Pambris says that he was not present on 19 February 2018, but he accepts that the document was signed around that date.
The second repayment/forbearance document provided as follows: Dear Ms Makis Repayment of loan to CBA Forbearance The purpose of this letter is to confirm that my proposal to pay to CBA (CBA) the amount of $1,329,035.30 (Repayment Amount) to repay the debt owed by you and Ioannis Papatheodotou, as co-borrower, which is secured by a registered first ranking real property mortgage dated 27 September 2002, registered number 9013302 (Mortgage) of the [Maroubra property] land comprised in certificate of title [Maroubra property] (Property) AND to pay at your request a sum of $7,669.97 on your behalf the costs of CBA Soli8citors Dentons Australia Pty Ltd on the following conditions: (a) the Mortgage is kept alive and not discharged; and (b) the Mortgage is transferred to us by CBA, so that we become the registered first mortgagees in relation to that mortgage; and/or (c) we are subrogated to the rights of CBA under the Mortgage. In the addition to the above, we are also prepared to make the following offer of forbearance. 1. Offer of forbearance … Despite our entitlement to immediately enforce the Mortgage to recover the money it secures, including the Repayment Amount, and to charge interest at a default rate, we offer to forbear from taking any action by way of enforcement under or in connection with the Mortgage for a period of 3 years from the Payment Date, on the following conditions: (a) (Payment of instalments) on and from the Payment Date you make monthly repayments on the last Business Day of each calendar month of $4,042.48 in repayment and reduction of the Amount Outstanding for the first year of the term following repayment of the debt due to the Commonwealth Bank by me and for the remaining two years or until the debt due is repaid at the rate of $8,777.17 … 2. Repayment of CBA You acknowledge and agree that, on payment of the Repayment Amount by us to CBA: (a) you are indebted to, and owe us the Amount Outstanding; (b) we are subrogated to the rights of CBA under the Mortgage; and (c) the Mortgage is not to be discharged and is instead to be kept alive for our benefit, to secure the repayment of the Amount Outstanding by you. …
The second repayment/forbearance document provided financial certainty for Ms Makis for three years. It does not refer to the 2010 Mortgage, only to the CBA mortgage then being assigned.

[27]

The Family Law Consent Orders and the May 2018 Acknowledgement

The family law proceedings came on for final hearing in the Federal Circuit Court on 15 May 2018. The hearing was adjourned for some hours to allow the parties to engage in settlement discussions. There were extensive negotiations among the parties, who were all legally represented. Ms Makis was represented by her solicitor, Ms Staka and counsel. The negotiations were protracted but concluded that day.
Agreed terms of settlement were reached and incorporated in consent Court orders made on that day under Family Law Act 1975, s 79 ("the 2018 consent orders"). In summary, the effect of the settlement was: the trustee in bankruptcy transferred the whole of Mr Papatheodotou's and the trustee's interest in the Maroubra property to Ms Makis (clause 1); the trustee and a major creditor in the bankrupt estate withdrew caveats over the Maroubra property (Clause 2); Ms Makis paid $75,000 to another creditor, Mr Kavallaris, in exchange for him withdrawing a caveat over the Maroubra property (Clause 3); the parties gave one another mutual releases and further assurance and discharged existing costs orders in the family law proceedings and certain related Equity proceedings (Clauses 4, 5, 7 - 12).
The parties agreed in the 2018 consent orders to a further clause 6 which acknowledged that Ms Makis could retain, as against all other parties, any interest held by her in real or personal property as follows: "6. That the Wife otherwise retain and is hereby declared, as against the Husband all other parties to these proceedings, to be solely entitled to (to the exclusion of all other parties to these proceedings) any interests held by her in any real property, monies held on deposit at bank or financial institution, savings and investments, personal property, motor vehicles, chattels and superannuation entitlements presently held in the name of the Wife or to which the Wife may be otherwise beneficially entitled, subject to the mortgage dealing [the CBA mortgage] on the [Maroubra property] and the unregistered mortgage dated 5 November 2011, each in favour of [Mr Pambris]."
The reference to the "unregistered mortgage dated 5 November 2011" is an erroneous description of the 2010 mortgage, as can be seen by the acknowledgement she signed the same day (see below). Here, Ms Makis was agreeing to be bound by the 2010 mortgage, as part of a wider transaction in which she received consideration in the form of releases and other benefits. Whatever had gone before, and despite Mr Pambris' actual past influence over Ms Makis, here with the benefit of advice from a barrister and solicitor, she accepted that she held the Maroubra property subject to the 2010 mortgage and the CBA mortgage.
Ms Makis says Mr Pambris influenced her decisions during the negotiations that day for the 2018 consent orders. Mr Pambris spoke to Ms Makis and offered her support and comfort. Occasionally, she was distressed and in tears in what was a very difficult day. And Ms Makis had occasion that day to thank him more than once for refinancing the CBA mortgage in January that year.
Ms Makis' evidence is accepted that she asked Mr Pambris that day for advice about settling with various other parties to the family law proceedings, including the third respondent Mr Kavallaris who was seeking $75,000 for removal of his caveat. Mr Pambris favoured her participating in a settlement and, although he denies it, he communicated this preference to her that day, but he tempered it with his offer of future assistance to her.
Mr Kavallaris had a judgment debt against Mr Papatheodotou's half share of the Maroubra property. Mr Pambris also had a caveat lodged against the property. There was a dispute about the priority between Mr Kavallaris' claimed interest in the Maroubra property and the claimed interest of Mr Pambris. Negotiations took place on behalf of Ms Makis with Mr Kavallaris, who appeared to be willing to settle with Ms Makis. But Ms Makis could not fund this payment. Ms Staka on behalf of Ms Makis and Mr Pambris negotiated a mutually satisfactory resolution to this three-way issue in the 2018 consent orders. Mr Pambris agreed to pay Mr Kavallaris $75,000 for Mr Kavallaris to remove his caveat and Ms Makis would later pay Mr Pambris back half this amount, or $37,500. Mr Pambris paid the $75,000 to Mr Kavallaris, whose caveat was removed.
Ms Makis says she agreed to the 2018 consent orders to secure any money that she may have owed under the Laiki Bank loan. She says that she did not believe clause 6 secured any other loans or amounts advanced to her or to Mr Papatheodotou. Mr Pambris' testimony remained consistent: that he did not refer to the Laiki Bank loan in any conversation with Ms Makis and/or Mr Papatheodotou at this time.
By this time, his evidence on this subject can be accepted, rather than that of Ms Makis. The Laiki Bank loan was almost paid off by May 2018. There was less reason in May 2018 for him to be concerned about his liability to Laiki Bank than there had been in November 2010. But more importantly, it is clear from the 2018 acknowledgement which she signed at the same time as giving instructions for the 2018 consent orders, that Mr Pambris now wanted to secure obligations owed to him under the 2005 and the 2009 deeds, even though he had not done so before.

[28]

The 2018 Acknowledgement

During these negotiations, Ms Staka and Ms Makis' barrister brought to her a document entitled "Acknowledgement" ("the 2018 acknowledgement") which had been prepared on behalf of Mr Pambris and presented to them. The 2018 acknowledgement provided as follows: ACKNOWLEDGEMENT We the undersigned hereby acknowledge the following: 1. Deed of Loan between SAM THOMAS PAMBRIS (lender) and JOHN PAPATHEODOTOU (borrower) dated 23 December 2005 and appearing at ANNEXURE A to this acknowledgment; and 2. Deed of Loan between SAM THOMAS PAMBRIS (lender) and JOHN PAPATHEODOTOU (borrower) dated 5 December 2009 and appearing at ANNEXURE B to this acknowledgment; and 3. Mortgage dated 5 November 2010 between SAM THOMAS PAMBRIS (Mortgagee) and JOHN PAPTHEODTOU (mortgagor) and ANDROULLA PAPTEHODOTOU (mortgagor) including Annexure A annexed thereto and appearing at ANNEXURE C to this acknowledgment, together with the memorandum of mortgage no. Q860000 filed with Land and Property Information referred to therein, are agreements to which the following mortgage extends: 4. Mortgage between the CBA (as mortgagee) and ANDROULLA PAPATHEODOTOU (otherwise known as Andrea Makis) and IOANNIS PAPATHEODOTOU (otherwise known as John Papatheodotou) (as mortgagors) being dealing no. 9013302, as transferred by the CBA to SAM THOMAS PAMBRIS and appearing at ANNEXURE D to this acknowledgment, together with the memorandum dealing no. O671753Y filed with Land and Property referred to therein. Signed: A Makis [signature] Andrea Makis
Ms Makis signed the 2018 acknowledgement that day, 15 May 2018. Her signature was witnessed by a Mr Eli Ball. Mr Pambris was not a party to the 2018 acknowledgement, and though witnessed it was not declared to be a deed. The 2018 acknowledgement refers to various annexures which are not annexed to the version of the 2018 acknowledgement in evidence. But the 2005 deed, the 2009 deed, the 2010 mortgage and the CBA mortgage are all clearly identified in the 2018 acknowledgement.
Ms Makis says that she signed the 2018 acknowledgement under pressure at the same time as the 2018 consent orders. She says that Ms Staka and her barrister advised her that she did not owe Mr Pambris any money, but that Mr Pambris wanted her to sign the document. She says, and the Court accepts, that she signed the 2018 acknowledgement after saying to her lawyers of this Mr Pambris: "He is my koumbaro and I trust him with my life. I am sick of all these problems for five years now, so I will sign whatever he wants in order to give an end to it. He promised me that he will help me to finish this ordeal and save my house."
But Ms Makis says, and the Court accepts that she signed the 2018 acknowledgement and the 2018 consent orders in part because of her trust in Mr Pambris. But she also signed because her own lawyers had advised her to do so, and she wanted to finalise the family law proceedings without any further expense and stress.
Ms Makis had independent legal advice at this moment from her own barrister and solicitor. Whatever influence Mr Pambris continued to have over her was neutralised on 15 May 2018 by her independent legal assistance.
The Court only partly accepts Ms Makis account of her state of mind when she signed the 2018 acknowledgement. She says she felt obliged to sign it and did so thinking that the Laiki Bank loan was the only money owing to Mr Pambris and that was minor. She also says she was not aware of any money owing under the 2005 or 2009 deeds. But Mr Pambris says (and the Laiki Bank loan record reflects) that the amount owing on the Laiki Bank loan at 15 May 2018 was $44.29. Ms Makis says that after signing the 2018 acknowledgement Mr Papatheodotou told her she should not have signed it because he had never really borrowed any money from Mr Pambris.
The Court does not accept that Ms Makis was told either by Mr Pambris or her own lawyers on 15 May 2018, or indeed that she believed, that there was no money owing on the 2005 and 2009 deeds. Mr Pambris' request to refer to these documents in the 2017 guarantee and now again in the 2018 acknowledgement must have conveyed to her, as they would to any reasonable person in her position, that they probably involved financial obligations of some significance to Mr Pambris.
But there is no contemporaneous documentary evidence or testimony to suggest that Mr Pambris told Ms Makis or her lawyers that there was a substantial sum of money still outstanding to him under the 2005 and 2009 deeds. The same omission to communicate what was outstanding on these deeds had occurred at the time of the 2017 guarantee. Little attention was given to this omission in the contested of evidence in the proceedings. For example, it might be thought that an up-to-date statement of account setting out what was alleged to be due under the 2005 and 2009 deeds at May 2018 would have been a good starting point for discussion about whether she should sign the 2018 consent orders and the 2018 acknowledgement. But the Court's attention was not drawn to any such document in evidence. Mr Pambris' motivation for not doing so was not explored the evidence. But as the Court's findings earlier in these reasons show, it would then have been embarrassingly difficult for him then to justify objectively what, if anything, was owing to him on the 2005 and 2009 deeds. It is difficult enough to do so now.
Ms Makis is to be accepted in one important aspect of her evidence: that Mr Pambris "promised me that he will help me to finish this ordeal and save my house". Both at the time of the 2017 guarantee, the 2018 acknowledgement and the 2018 consent orders, she believed, based on what Mr Pambris and Mr Papatheodotou had said to her, that whatever was still owing on the 2005 and 2009 deeds it was an amount not incompatible with her primary objective of being able to "save my house". The whole point of signing the 2018 consent orders and the 2018 acknowledgement from her perspective was to preserve her house, as Mr Pambris no doubt appreciated. It is most unlikely that Mr Pambris conveyed to her, or to her lawyers in May, that he was going to claim many millions of dollars had accrued owing to him on those two deeds. Had he revealed such a thing at that time, it is likely that the negotiations on 15 May 2018 between himself and Ms Makis would have taken a different course.

[29]

Events Up to the Commencement of Proceedings - 2018 to 2021

The Laiki Bank loan was finally discharged on 15 August 2018. Mr Pambris and the AM/KK partnership shared the burden of paying Laiki Bank between 2008 and 2013. But Mr Pambris paid Laiki Bank from 2013 until the loan was finally discharged.
Mr Pambris calculated the payments that he had made to the Laiki Bank that the AM/KK partnership owed him to be $187,278. His calculation of that figure was the simple difference between the money that benefited him from the Laiki Bank loan ($810,000) and the monies he paid to Laiki Bank on behalf of Ms Makis and Mr Kyriacou ($997,278) from 2013 to 2018. Mr Pambris calculates his benefit of $810,000, by subtracting from the Laiki Bank loan advance of $1,200,000, the two amounts totalling $380,000 ($350,000 plus $30,000) that he paid out on behalf of the AM/KK partnership.
This calculation is simplistic. Mr Pambris' gives no credit in his total payments of $997,278 for interest accruing the part of the Laiki Bank advance that was for his benefit. He answers this by saying that he would not have borrowed the Laiki Bank loan money but to accommodate the financial needs of AM/KK partnership and so this is an appropriate method of accounting.
The Court does not have to decide this question now but makes two observations about Mr Pambris' calculations. First, it repeats the observation made earlier in these reasons that there has not been full accounting between Mr Pambris and the AM/KK partnership, namely the Canterbury Road partnership, including in relation to rent received. Secondly, the Laiki Bank loan was taken out to facilitate the AM/KK partnership, purchasing a half interest in the Canterbury Road property rather than Mr Pambris expending his own money to purchase his brother's half interest. Mr Pambris wanted this transaction to go ahead.
In mid-2018, to secure the amount he said remained owing to him under the Laiki Bank loan, Mr Pambris had arranged with Ms Makis to lodge a caveat over Ms Makis' interest in another property jointly owned by Ms Makis and Mr Kyriacou in Lakemba ("the Lakemba property"). Ms Makis signed the caveat on the Lakemba property on 23 November 2018. Mr Pambris used Ms Makis' participation in this transaction to argue that she could not have believed that the 2010 mortgage secured the obligations of the AM/KK partnership with respect to the Laiki Bank loan. Mr Pambris argues that had she thought so, she would have refused to agree to a caveat over the Lakemba property because Mr Pambris already had security over the Maroubra property. But this argument has little weight given the Court's findings. By the time of 2017 guarantee, some 12 months before this, the new connection between the 2010 mortgage and the 2005 and 2009 deeds had been put to Ms Makis.
Mr Papatheodotou was discharged from bankruptcy on 24 January 2019.
Financial relationships between Ms Makis and Mr Pambris had broken down by late 2019. On 27 November 2019, Mr Danalis served a letter of demand on behalf of Mr Pambris on Ms Makis alleging that she had failed to pay the full monthly instalments due under the second repayment/forbearance document since 8 January 2018. Mr Pambris alleged that she was paying $4200 per month rather than the stepped-up $8777.17 per month required by the second repayment/forbearance document after the first 12 months. The letter claimed she was in default by a total of $50,348.87. But Mr Pambris did not act further on this demand.
By the end of 2020, as the three-year grace period of reduced mortgage payments on the assigned CBA mortgage was ending, Ms Makis began negotiating to refinance the assigned CBA mortgage. She sought a payout figure and removal of the caveat protecting the 2010 mortgage to allow the refinance to proceed.
The content of these conversations is disputed. But a combination of what the parties allege is more likely. Mr Pambris sought from her, "the other money you owe me", being a reference to money owed on the 2010 mortgage. Ms Makis raised the need for an accounting for the Canterbury Road partnership, which she said would determine whether she owed him any money. He brushed that aside and requested the "other money" he claimed to be owed on the 2010 mortgage. He initially refused to remove the caveat.
After disputation about the correct payout figure, the matter was ultimately resolved for settlement through Mr Danalis and Mr Donato on behalf of their respective clients.
On 17 February 2021, Ms Makis completed the refinance with Perpetual Trustee Co Ltd, the second defendant, through its representative agent, RedZed. On settlement, the distribution of funds included a loan payout amount of $1,403,995.57 to Mr Pambris. Ms Makis says Mr Pambris was reimbursed through this payout for the $75,000 he had paid to Mr Kavallaris in 2018. In fact, Ms Makis was only required to reimburse $37,500 for the payment to Mr Kavallaris.
The parties did not closely join issue on this calculation of the reimbursement of the $37,500, so the Court will only finally determine it after each party has an opportunity to put further submissions on the issue, if required. Mr Pambris has advanced calculations that show that the payout figure as at 17 February 2021 represented the principal and interest due to him up to 17 February 2021 on the assigned CBA mortgage in conformity with the second repayment/forbearance document. His accountant's calculations show that the amount then due totalled $1,401,257.32, a sum very close to the payout figure. The sum of $37,500 may not yet have been paid to Mr Pambris.
Following settlement on 17 of February 2021, the CBA mortgage was discharged, and a mortgage was registered in favour of the second defendant, Perpetual. Mr Pambris then re-lodged a fresh caveat over the Maroubra property based on the 2010 mortgage.
Ms Makis did not make payments strictly in accordance with the terms of the 2010 mortgage or the 2017 guarantee between February and June 2021. On 11 June 2021Mr Pambris issued to Ms Makis a demand by notice in writing in accordance with Conveyancing Act 1919 s 111, demanding repayment of the whole amount due and notifying Ms Makis of Mr Pambris' intention to exercise his rights under the 2005 and 2009 deeds, the 2010 mortgage and the 2017 guarantee. The amount claimed was $4,525,448.39, including alleged interest at 12% per annum on the principal sum of $1,210,000.
On 30 September 2021 Mr Pambris served his statement of claim claiming the relief sought in these proceedings.

[31]

The National Credit Code Remedies

Ms Makis contends that money secured by the 2010 mortgage and the 2017 guarantee is part of a "credit contract" within the meaning of the NCCP Act and that Mr Pambris was engaged in unlicensed credit activity contrary to s 29 of that Act. Should that contention be established, Ms Makis seeks to be relieved of liability under the 2010 mortgage and the 2017 guarantee pursuant to NCCP Act, s 180. Alternatively, Ms Makis seeks relief under the Code, ss 76 and 77 to reopen the 2010 mortgage and the 2017 guarantee on the grounds that they were "unjust".
This claim was embedded within the defence filed by Ms Makis but the Court treated as if it were a cross-claim as discussed earlier in these reasons.
The threshold question here is whether the 2010 mortgage and the 2017 guarantee involve the provision of credit to which the Code applies. The issue answering that question is whether Mr Pambris' provision of credit to Ms Makis or Mr Papatheodotou satisfies the provisions of Code, s 5(1)(d), which provide as follows: "The credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction."
As Gleeson JA explained in Lauvan Pty Limited & Anor v Bega & Anor [2018] NSWSC 154 ("Lauvan") at [261], Code, s 5(1)(d) has three limbs. The provision directs attention to whether the credit in question is provided: 1. "in the course of a business of providing credit carried on by the credit provider"; or 2. "as part of another business carried on by the credit provider"; or 3. "incidentally to another business carried on by the credit provider.
Whether a person carries on a business is a question of fact. The expression "in the course of a business carried on" should be given a similar meaning to the well-known expression "carrying on a business" which has been held to require "repetition and continuity of the activities which characterise the business": Lauvan at [262]; Williams v ATM & CPA Projects Pty Limited [2015] NSWSC 703 at [70]. The phrase "to carry on a business" means to conduct some form of commercial enterprise systematically and regularly with a view to profit and implicit in this idea "are the features of continuity and system": Hyde v Sullivan (1956) 56 SR (NSW) 113, at 119. Although a "one off" transactional venture may have business character: Federal Commissioner of Taxation v Whitford's Beach Pty Limited (1982) 150 CLR 355, at 376-7 and 383; [1982] HCA 8.
The words "incidentally to" in Code s 5(1)(d) may be taken to be an expression of wide import but there must be some connection between another business of the credit provider and the particular loan that provides the credit, which in turn involves a question of degree: Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463 at [93].
As to the first limb of the Code s 5(1)(d), the activities of Mr Pambris in providing credit were not systematic, continuous, or repetitious to the extent necessary to be characterised as being in the course of a business of providing credit. Rather, the Court's findings in the narrative above show that Mr Pambris' provision of credit to Mr Papatheodotou and the other persons identified in the narrative was ad hoc and far better explained by personal friendships than by the conduct of a business. Indeed, one of the real problems with the 2010 mortgage is that it was so ad hoc and unbusinesslike that it will be difficult to establish what principal and interest is due under it. Mr Pambris' discussions with Mr Papatheodotou before 2009 arise out of informal personal arrangements for one to hold and apply cash for the other through various informal and personal practices.
As to the second limb of the Code s 5(1)(d), the credit provided by Mr Pambris was not provided as part of another business of his, such as property development or share investment. Mr Papatheodotou did hold some cash from time to time generated from Mr Pambris' entertainment business and applied it at Mr Pambris' direction. But this did not involve the systematic provision of credit as part of that entertainment business.
Nor is the third limb of the Code, s 5(1)(d) satisfied. There is no incidental connection to any other identifiable business carried by Mr Pambris either in property development or in Mr Pambris' impresario business, such that the loans could be said to be incidental to those other businesses. The loans in question were not obviously related to any business that Mr Pambris conducted and were better explained again by the idiosyncrasies of Mr Pambris' personal relationships.
In summary, as the requirements of the Code, s 5(1)(d) have not been satisfied, the Code does not apply to these advances and relief under the Code is not available against Mr Pambris.

[32]

Legal principles - Undue Influence and Unconscionable Conduct

Unconscionable Conduct. The principles that govern the setting aside of transactions for unconscionable conduct have often been restated in first instance and appellate authority. All that is required here is to summarise the essential elements that must be established to make out a case for relief, so they can be applied. The starting point is two signal passages in the judgment of Mason J in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447, at 461 and 462 ("Amadio"). Mason J said (at 461):- "Historically courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, eg a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position."
Mason J drew attention in Amadio (at 462) to the content of the requirement that the disadvantage to be established must be "special" disadvantage in the following sense: "…the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
Mason J also explained in Amadio (at 467) that the degree of knowledge of special disadvantage that may be sufficient to qualify as unconscionable conduct may include not only knowledge of the situation of special disadvantage but knowledge of the possibility of a situation of special disadvantage: "[22] …if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same."
In Louth v Diprose (1992) 175 CLR 621 ("Louth"), Deane J stated the necessary elements of the general law of unconscionability (at 637) as follows: "It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disability was sufficiently evident to the other party to make it prima facie unfair or "unconscionable" that that other party procure, accept or retain the benefit of, the disadvantaged party's assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain" or retain the benefit of it".
In Blomley v Ryan (1956) 99 CLR 362 ("Blomley"), at 406, Fullagar J had listed some examples of such special disability, namely "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary." Some of the language in subsequent cases such as Amadio and Louth appears to be founded in Fullagar J's observation in Blomley that the common characteristics of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other party": Blomley at 405. But the adverse circumstances which may constitute special disadvantage for the purposes of the principle relating to relief against unconscionable dealings may take a wide variety of forms and the circumstances are not susceptible to being comprehensively catalogued: Amadio at 474, and Deane J in Louth at 637.
The elements to be established to show that a transaction is "unconscionable" in the relevant sense were more recently concisely summarised in Hewitt v Gardner [2009] NSWSC 1107 at [106] ("Hewitt") as follows: "(a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the strong party; (b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests; (c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person); (d) that party must take advantage of the opportunity presented by the disadvantage; and (e) the taking of advantage must have been unconscientious."
The analysis in Hewitt (at [106] - [107]) further notes that "once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage". These principles were later reaffirmed in Torok v Becker [2020] NSWSC 1570 at [308] - [311].
The High Court emphasised in Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25 ("Kakavas") that the conduct proscribed by the equitable doctrine of unconscionability involves the unfair exploitation of weakness. The Court in Kakavas observed at [161]: "Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned."
The principles have again more recently been discussed by the High Court in Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6. And similar observations have been made in the New South Wales Court of Appeal in Tonto Home Loans Australia Pty Ltd v Tavares (2011) ASC 155-107 [2011] NSWCA 389, by Allsop P (Bathurst CJ and Campbell JA agreeing), which also compares the position at general law with what is required to establish unconscionable conduct to qualify for relief under the Contracts Review Act 1980.
The Defence filed by Ms Makis, which is being treated in part as a Cross Claim, expands upon the plaintiff's unconscionable conduct claim at general law, and pleads a claim under the Australian Consumer Law ("ACL"), s 20 which prohibits persons from engaging in unconscionable conduct in trade, commerce as follows: "(1) A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time."
ACL, s 20 is found in Chapter 2 of the ACL. Ms Makis should be treated as seeking relief analogous to that available in equity at general law upon an action for a statutory injunction or for statutory damages under ACL, ss 232 and 236, relief which is available where conduct contravenes ACL, Chapter 2.
A question arises as to whether the conduct of Mr Pambris in this case was conduct engaged in "in trade or commerce". But it is not necessary to decide that question, because the range and legal availability of remedies to Ms Makis at general law is in substance the same as applies under ACL, s 20. Therefore, in the analysis below the Court only considers the position at general law.
Undue Influence. The principles to be applied in evaluating a claim for alleged undue influence may also be shortly summarised. A claimant may seek to set aside a transaction by showing that another party had, in fact, come to occupy or assume a position of practical ascendency, power or dominion over the claimant who had taken a co-relative position of dependence or subjugation: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) at paragraph 15-105. Making out a relationship of actual undue influence involves establishing a relationship involving ascendancy or influence on the part of one person over another and that other is in a position of dependence, reliance, trust, or confidence on the stronger party: PW Young, C Croft, ML Smith, On Equity (2009, Thomson Reuters) at [5.440]. Much of the Australian and English law on this subject finds its origins in the classic statements of relevant legal principle in Allcard v Skinner (1887) 36 Ch D 145.
The applicable law in relation to undue influence in Australia was comprehensively stated and applied by the High Court in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 at [34] ("Thorne") as follows (omitting citations): "There are different ways to prove the existence of undue influence. One method of proof is by direct evidence of the circumstances of the particular transaction. That was the approach relied upon by the primary judge in this case. Another way in which undue influence can be proved is by presumption. This presumption was relied upon by Ms Thorne in this Court as an alternative. A presumption, in the sense used here, arises where common experience is that the existence of one fact means that another fact also exists. Common experience gives rise to a presumption that a transaction was not the exercise of a person's free will if (i) the person is proved to be in a particular relationship, and (ii) the transaction is one, commonly involving a "substantial benefit" to another, which cannot be explained by "ordinary motives", or "is not readily explicable by the relationship of the parties". Although the classes are not closed, in Johnson v Buttress Latham CJ described the relationships that could give rise to the presumption as including parent and child, guardian and ward, trustee and beneficiary, solicitor and client, physician and patient, and cases of religious influence. Outside recognised categories, the presumption can also be raised by proof that the history of the particular relationship involved one party occupying a similar position of ascendency or influence, and the other a corresponding position of dependency or trust. In either case, the presumption is rebuttable by the other party proving that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party's free will.
Thorne discussed (at [36]) whether the relationship of fiancé and fiancée should be recognised as one to which the presumption of undue influence attaches. The relationship between koumbari such as Mr Pambris and Ms Makis is not one of the traditionally identified presumptive relationships of influence and is not treated as such a presumptive relationship in these reasons. Here, the method chosen to determine whether the relationship between Mr Pambris and Ms Makis was one of actual undue influence is to look to the direct evidence of the transaction and the relationship between the parties from the narrative of findings above.
In Amadio, Mason J also drew a distinction (at 461) between a transaction that is sought to be set aside on the grounds of unconscionable conduct, and one that is sought to be set aside on the grounds of undue influence: "Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest."
Deane J also explained in Amadio (at 474) that undue influence "looks to the quality of the consent or assent of the weaker party" whereas "unconscionability looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, dealing with the person under a special disability in circumstances where it is not consistent with equity and good conscience that he should do so".
Recent United Kingdom legal authority has tended to simplify the remedy for undue influence. That authority states that there are two principal requirements to make out a case to establish a rebuttable presumption of undue influence - first there must be a relationship of influence, and second, the transaction must not be readily explicable on ordinary motives, such that the nature and contents of the transaction must in the context of the relationship of influence, absent evidence to the contrary, make one conclude that undue influence has been exercised: Nature Resorts Ltd v First Citizen Bank Ltd [2022] 1 WLR 2788, [2022] UKPC 10[11] - [13] and Royal Bank of Scotland plc v Etridge (No. 2) [2002] 2 AC 773; [2001] UKHL 44. The relationship of influence may be established on the facts that the gift was a result of influence expressly used by the donee. But in respect of some relationships what is commonly referred to as a rebuttable legal presumption of a relationship of influence arises.
Ms Makis seeks to set aside both the 2010 mortgage and the 2017 guarantee transactions. They each took place in different circumstances although they share common features. These reasons will now deal with (a) some preliminary issues presented by the submissions that are common to both transactions, (b) analysis whether the narrative of findings supports the plaintiff's claim for relief for alleged undue influence or unconscionable conduct in respect of the 2010 mortgage and the 2017 guarantee, followed by (c) some issues requiring to be addressed that arise out of the Court's narrative of findings.

[33]

Preliminary Issues Common to the 2010 Mortgage and the 2017 Guarantee

Mr Pambris' first submission about Ms Makis' case draws upon distinction made in the authorities in relation to the remedy for unconscionable conduct, the distinction between "procedural unconscionability" and "substantive unconscionability". The distinction was explained by the Privy Council in Hart v O'Connor [1985] AC 1000 at 1017-1018. There the Privy Council said that a contract may be stigmatised as "unfair" in one of two ways: either by reason of the unfair way it was brought into existence (procedural unfairness or unconscionability) or unfair by reason of the fact that the terms of the contract are more favourable to one party than the other (substantive unfairness or unconscionability). The two concepts may overlap. Undue influence is an example of procedural unfairness.
The High Court of Australia ACCC v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 ("Berbatis") discussed additional classifications of special disadvantage that may be posited such as "situational" disadvantage (referring to particular features of the relationship between the actors in the transaction in the circumstances) and "constitutional" disadvantage (referring to disabling qualities of the disadvantaged person such as, age illness poverty inexperience or lack of education). In Berbatis the High Court rejected a claim of unconscionable conduct brought by lessee in a shopping centre on the basis that the lessee's disadvantage in assigning a lease was not "special" because it only arose out of the terms of an existing lease which did not contain a right of renewal. Gleeson CJ (at [10]) emphasised that although such categorisation is understandable and acceptable "there is a risk that categories adopted as a convenient method of exposition of an underlying principle, might be misunderstood and come to supplant the principle".
Mr Pambris submitted that Ms Makis' real complaint in these proceedings was about substantive unfairness in that that the terms of the two documents that she had signed, the 2010 mortgage and the 2017 guarantee were inherently unfair in their terms and her complaint was not about procedural unconscionability exhibited in the bargaining process.
Developing this submission first with respect to the 2010 mortgage, Mr Pambris contended that to the extent that Ms Makis was seeking to vary the terms of the 2010 mortgage so that it applies to the Laiki Bank loan rather than to monies due under the 2005 and 2009 deeds, that this a claim for substantive unfairness which, like for example in Berbatis, is not remediable either in equity or under ACL, s 20. Mr Pambris makes the point that there is an important difference between a person who suffers from a condition or circumstance that prevents the person from being able to make a judgment about their own best interests and a person who can make such a judgment but fails to make a sound one: Berbatis at [5] per Gleeson CJ; see also, Turner v Windever [2005] NSWCA 73 at [74].
In summary, Mr Pambris submits that to the extent that Ms Makis seeks to vary the effect of the 2010 mortgage, her claim for relief based upon alleged unconscionability, cannot succeed.
This argument is not persuasive. The short answer to it is that Ms Makis is not relying upon purely substantive unconscionability to seek to vary the 2010 mortgage. She makes a claim of procedural unconscionable conduct in relation to the 2010 mortgage. She says she was induced to believe by Mr Pambris' conduct in dealing both with her husband and with her that the 2010 mortgage related to the Laiki Bank loan, not to the 2009 deed. She is not making a simple claim that the terms of the 2010 mortgage were inherently unfair. Her claim is that they were unfair because of what she was led to believe before the 2010 mortgage was executed. Her claim in relation to the 2010 mortgage is analysed further below.
To the extent that Mr Pambris contends that the 2017 guarantee is also a claim for substantive unconscionability, it meets the same answer. Ms Makis' case is one of procedural unconscionability with respect to that instrument as well. Although with respect to the 2017 guarantee the procedural circumstances were different due to stronger evidence of independent legal advice to Ms Makis at the time of the transaction.
Mr Pambris attacks at a general level Ms Makis' pleaded aspects of special disadvantage in her procedural unconscionability case that are common to both the 2010 mortgage and the 2017 guarantee. He submits that these pleaded elements of special disadvantage do not make out a compelling case of procedural unconscionability.
First, Mr Pambris submits that Ms Makis' plea that English is her second language is of no consequence because her language ability did not cause her any disadvantage in either of these transactions. Mr Pambris submits that Ms Makis understands English well and displayed no difficulty with the language in her cross-examination.
This submission can be accepted. Ms Makis' language ability did not cause her any disadvantage in her dealings with Mr Pambris. She did not need an interpreter in court. She had a ready capacity to switch between English and Greek as required. And she is a primary school teacher, teaching in Greek and English.
Secondly, Mr Pambris submits that Ms Makis' plea of a procedural disadvantage because Mr Pambris and Ms Makis shared a close personal relationship referring to one another as koumbara and koumbaro respectively, cannot succeed. He submits that the mere fact of a close family relationship could not on any rational view inhibit Ms Makis from making judgments as to her own best interests.
Perhaps if the koumbaro/koumbara relationship is looked at as a factor on its own this submission might have had some force. But especially with respect to the 2010 mortgage, and to a lesser extent with respect to the 2017 guarantee, this factor was combined with other factors, such as Ms Makis' separation from her husband and her looking to Mr Pambris for guidance and support. Together these factors contributed to creating a relationship of actual undue influence of Mr Pambris over Ms Makis.
Thirdly, Mr Pambris submits that Ms Makis' plea that she was suffering financial difficulty and emotional distress because of the breakdown of her marriage cannot constitute special disadvantage. Mr Pambris submits that financial need without more, does not constitute special disadvantage: ASIC v Australian Lending Centre Pty Ltd (No 3) (2012) 213 FCR 380 at [199]. Mr Pambris further submits that Ms Makis did not lack commercial expertise given her history of purchasing several properties. Mr Pambris also submits there is no evidence that Ms Makis suffered emotional distress.
The Court's findings in relation to this pleaded factor create a more nuanced picture than Mr Pambris' submissions allow. Although Ms Makis had experience prior to 2010 in purchasing properties with her husband, as the narrative of findings shows, her experience was not in arranging the financing for the acquisition of those properties. Her role was more centred on evaluating and approving the properties that the couple acquired.
Contrary to Mr Pambris' submission, Ms Makis was suffering high levels of emotional distress particularly in 2010 at the time of her separation from Mr Papatheodotou, albeit under the one roof. This emotional distress was disabling particularly in 2010 shortly after the separation. This factor drove her to confide in Mr Pambris more often and more readily and led to her dependence upon him. And financial need was a greater factor at the time of the 2017 guarantee that will be discussed below.
Fourthly, Mr Pambris submits that Ms Makis' plea that she placed "the utmost trust and confidence in" Mr Pambris has no consequences in the absence of a fiduciary relationship or a relationship of undue influence.
It can be accepted that there was not a fiduciary relationship between Mr Pambris and Ms Makis at any relevant time. But Ms Makis reposed deep trust and confidence in Mr Pambris throughout the events the subject of these proceedings and that element of trust and confidence is one factor founding the relationship of actual undue influence which the Court has found Mr Pambris had over her.
Fifthly, Mr Pambris submits that Ms Makis' plea that Mr Pambris "facilitated an imbalance of bargaining power" in his favour should fail on two grounds: (a) there was no material imbalance in bargaining power between Ms Makis and Mr Pambris; and, (b) any imbalance in bargaining power is not of itself special disadvantage: Berbatis at [11].
The importance of this factor varies as between the 2010 mortgage and the 2017 guarantee. As the narrative of findings shows there was an immense imbalance in bargaining power at the time of the 2010 mortgage. This was due to Ms Makis being misled about the relationship between the 2010 mortgage and the Laiki Bank loan. She was disabled from bargaining in her own interest because of her misapprehension about the liability secured by the 2010 mortgage. But by the time of the 2017 guarantee any imbalance in bargaining power was substantially neutralised by Ms Makis' engaging Mr Donato as the lawyer acting in her interests.
Sixthly, Mr Pambris submits that Ms Makis' plea of alleged special disadvantage on the basis that she did not have the benefit of assistance from Mr Papathedotou following the breakdown of their marriage cannot be made out. Mr Pambris points out that there is evidence that Mr Papathedotou assisted Ms Makis from the time that the CBA began to take legal action against her.
Again, this submission needs to be evaluated at different times. As the Court's narrative of findings shows, by early 2010 and probably well before, Ms Makis had lost complete confidence in Mr Papatheodotou. In addition, open hostility had broken out between them and remained that way right through the Court hearing. This was particularly intense in 2010 but the hostility was still quite overt at the time of the hearing of these proceedings. Ms Makis was placing no reliance upon her husband at the time of the 2010 mortgage. To the extent that she was communicating with Mr Papatheodotou at the time of the 2017 guarantee, he was not a source of trusted advice to her. She still preferred then to look to Mr Pambris, until that relationship was severed leading up to these proceedings.
Seventhly, Mr Pambris submits that Ms Makis' plea that she not aware of the dealings between Mr Papathedotou and Mr Pambris is contradicted by the contents of the March 2018 Federal Circuit Court affidavit (Exhibit D).
But as the narrative of findings shows, by the time Exhibit D was sworn in March 2018 Ms Makis had already signed the 2017 guarantee with the benefit of independent legal advice. By the time of the 2017 guarantee she had agreed that the 2010 mortgage secured the borrowings under 2005 and 2009 deeds. But in November 2010 she knew little of Mr Papatheodotou's dealings with Mr Pambris.
Eighthly, Mr Pambris submits that there was no "constitutional" disadvantage suffered by Ms Makis relating to any personal characteristic of her, or any "situational" disadvantage due to circumstances surrounding the execution of the 2010 mortgage or the 2017 guarantee from which special disadvantage could be inferred: Blomley v Ryan (1956) 99 CLR 362 at 405. In support of this submission Mr Pambris argues that there is no evidence that Ms Makis was impaired due to her age or health, and that she had independent legal advice available to her.
It can be accepted that Ms Makis was not impaired by age or ill health at the time of either the 2010 mortgage or the 2017 guarantee. And the Court's narrative of findings about what independent legal advice she had available to her differ between the 2010 mortgage on the 2017 guarantee, as will be discussed further below.
Finally, Mr Pambris submits that Ms Makis has not pleaded that any of the challenged transactions were improvident. Nor he submits could they have been classified as improvident, because Ms Makis received the benefit of the monies Mr Pambris loaned, as is evidenced by the 2010 statutory declaration and Exhibit D. The narrative of findings shows the limited weight to be given to the 2010 statutory declaration and the information in Exhibit D largely came from Mr Pambris.
And on the Court's narrative of findings, the 2010 mortgage was clearly improvident from Ms Makis' point of view, as will be analysed below; and the 2017 guarantee is potentially less disadvantageous this will be dealt with below.

[34]

The 2010 Mortgage

The 2010 mortgage is analysed here in relation to the case that Ms Makis conducted that the 2010 mortgage (a) related to the Laiki Bank loan, (b) should be set aside for undue influence or (c) should be set aside for unconscionable conduct.
Issues (a) and (c) can conveniently be dealt with together. As to (a), Mr Pambris represented to Ms Makis that the liability that the 2010 mortgage secured was to protect him in relation to the Laiki Bank loan. He induced that belief in her, and he must have appreciated that is what she believed. He also believed in November 2010 that the 2010 mortgage would assist to protect him with Laiki Bank loan. The 2010 mortgage did not expressly refer on its face either to securing financial obligations owed to him in relation to the Laiki Bank loan, or to securing what was owed to him under the 2009 deed. It only refers to a liability of $1,210,000. Subject to the issue of a mistaken $10,000, the 2010 mortgage could apply to either financial obligation.
The Court does not find that he then knew that the 2010 mortgage related only to the obligations under the 2009 deed and that he was deliberately or otherwise misrepresented to Ms Makis the effect of the 2010 mortgage. He did not deliberately mislead Mr Papatheodotou and Ms Makish in that sense to make out a case of unilateral mistake of the Taylor v Johnson (1983) 151 CLR 422 type. But what he did know was that because of its lack of specificity the 2010 mortgage could be used later to secure either the Laiki Bank loan or what was owed to him under the 2009 deed. But it was convenient for him to focus in his discussions with Ms Makison what he knew that she understood, namely the financial obligations associated with the Laiki Bank loan and his need for some financial protection related to that. The Court does not need to consider whether either side could have sought to rectify the 2010 mortgage, a remedy which was not relied upon by either party.
Using the framework in Hewitt to assist the analysis, Ms Makis was the weaker party when entering the 2010 mortgage she suffered from a special disadvantage vis-a-vis the stronger party, Mr Pambris. The disadvantage she suffered was an understanding that the mortgage related only to the Laiki Bank loan. Mr Pambris understood she had that narrow view but he had a broader view as to its import due to his failure to refer to a particular financial obligation.
This special disadvantage seriously affected Ms Makis' capacity to judge or protect her own interests because she was unaware of the wider range of liabilities associated with the 2009 deed that the 2010 mortgage might secure. Being unaware of them she was in no position to ask about them. Had she been aware of them she would have asked about them.
Mr Pambris knew of the special disadvantage that Ms Makis was under. This must been obvious to him from four things: (a) what he had said to her and Mr Papatheodotou that the 2010 mortgage was related to the Laiki Bank loan, (b) that it was likely Mr Papatheodotou would be reinforcing that view to Ms Makis because of what Mr Pambris had also said to Mr Papatheodotou as to what the 2010 mortgage was for; (c) Ms Makis' failure to inquire of him about the level of liabilities to which she was being exposed for the first time on the 2009 deed through the 2010 mortgage and to ask him for an up-to-date account of those liabilities, so as to show that she appreciated she was now being exposed to these liabilities; (d) he had no reason to believe that she was aware of the 2009 deed as neither Mr Papatheodotou nor Ms Makis had told him that she was aware of it; and (e) her apparent lack of protest about the improvidence of the transaction from her point of view;
With the state of knowledge of Ms Makis special disadvantage referred to in the previous paragraph Mr Pambris took advantage of the situation by proceeding to request that Ms Makis execute the 2010 mortgage.
Hewitt ingredients (a), (b) and (c) are established. And the improvidence of the transaction is clear. It is not established that Ms Makis benefited from the loan dealings between Mr Papatheodotou and Mr Pambris. There is insufficient certainty about those dealing on the evidence relied upon by Mr Pambris to establish such benefit. In those circumstances Ms Makis was assuming a liability which up until that time was not hers but only her husband's. She had only 11 months before divided all his property and his liabilities from hers and she had no legal reason to take any of them on. And this liability she was taking on was of a magnitude unknown to her was being secured over her interests in the Maroubra property which she had just freed from her husband's other liabilities.
Equity presumes, and the Court infers, that the improvident transaction was a consequence of Ms Makis' position of special disadvantage, and that Mr Pambris unconscientiously took advantage of the opportunity presented by her disadvantage.
Issue (b) can now also be dealt with briefly. The narrative of findings shows that Mr Pambris was in a relationship of actual undue influence over Ms Makis at the time she signed the 2010 mortgage in November 2010. He was in such a position of ascendancy over her that she would do whatever he recommended. She turned to Mr Pambris and became dependent upon him after the breakup of her marriage. If she had any other sources of support, they are not obvious, and she did not use them. She turned to Mr Pambris first as she believed he would protect her and look after her financial and personal interests. Mr Pambris had a well-established relationship of actual undue influence and ascendancy over her at this time.
When in addition to what Mr Papatheodotou had said to her that the 2010 mortgage related to the Laiki Bank loan, Mr Pambris suggested she attend at the office of Mr Danalis to sign papers so he could be "protected for the loan with Laiki", she attended and signed without hesitation because of his actual undue influence over her. Moreover, what Mr Pambris was asking of her was consistent with what Mr Papatheodotou had been saying to her.
Within this relationship of actual undue influence Ms Makis conferred a substantial benefit on Mr Pambris through an improvident transaction (for the reasons explained above) which is not readily explicable except by the subjugation of her will to his wishes.
Mr Pambris seeks to answer this case by submitting that Ms Makis had legal advice available to her in relation to both the 2010 mortgage and the 2017 guarantee. He submits this fact has two principal consequences for the validity of both instruments.
The first consequence is that that legal advice addresses any concern that the borrower/mortgagor could not understand the nature and effect of the transaction. Mr Pambris submits that as Ms Makis had access to independent legal advice, she did not suffer from a disabling condition that seriously affected her ability to make a judgment as to what was in her best interests: Berbatis at [15] and Aboody v Ryan [2012] NSWCA 395 at [74] per Allsop P (Bathurst CJ and Campbell JA agreeing) ("Aboody"). The second implication of the availability of independent legal advice to Ms Makis is that the knowledge of that circumstance meant that Mr Pambris did not unconscientiously exploit any special disadvantage suffered by Ms Makis in the circumstances of these transactions, because he was entitled to expect that Ms Makis had been legally advised.
Mr Pambris further submits in relation to the 2010 mortgage that it is not important whether Ms Makis signed the mortgage before or after meeting with Mr Vlahakis. He submits that even if the Court accepts that the 2010 mortgage was signed by Ms Makis before the meeting with Mr Vlahakis, the mortgage document was at the meeting with Mr Vlahakis and it could therefore have been kept, destroyed, or not returned to Mr Pambris' solicitor. In short it is submitted that Ms Makis had control over whether it was sent back to Mr Pambris' solicitors and became binding.
There are several answers to these arguments. The Court has found that Ms Makis was affected by the undue influence exerted by Mr Pambris in 2010. This undue influence was not overcome by whatever legal assistance she obtained from Mr Vlahakis. Authority is clear that receipt of legal advice is only one factor to be considered in determining whether a transaction was affected by a person either by reason of a relationship of actual undue influence or whilst they are disabled by some special disadvantage. And depending on the circumstances the existence of legal advice may not be a complete answer to a claim to set aside an instrument executed in such disabling circumstances even though it will usually be "a most important factor": Johnson v Butress (1936) 56 CLR 113 at 120 per Latham CJ and Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 is not an automatic answer to such a claim.
The significance of independent legal advice to the stronger party in a relationship of undue influence or where there is a special disability on the part of a weaker party were discussed by Allsop P in Aboody a case in which the plaintiff, Mr Ryan, had made an improvident gift to Mr and Mrs Aboody after receiving some legal advice from a solicitor, Mr Dakin. Allsop P made observations in Aboody at [65] - [69] that are of relevant to this case, as follows: "[65] It can be seen from the expression of the general principle by Deane J in Amadio and by Lord Selborne in Earl of Aylesford that once the disability or weakness is sufficiently evident such that it is prima facie unfair to procure, accept or retain the benefit from the weaker party's assent to the transaction in the circumstances in which it was procured, accepted or retained, the onus is upon the stronger party to show the transaction to be fair, just and reasonable. The focus is upon the conduct of the stronger party in the assessment of unconscionability in the procurement, acceptance or retention of the benefit. Equity's fixing upon the conscience of the stronger party is not strictly limited by the need to find moral obloquy or reprehensible conduct, either generally, or at any particular point of time, although it is often present. At the heart of the doctrine is the taking or retaining of the benefit in a transaction in which advantage was taken of weakness or disability in a manner that in all the circumstances is unjust or unfair: Johnson v Smith [2010] NSWCA 306 at [5]. [66] The obtaining by the weaker party of the advice of a solicitor may be relevant to the application of the general principle from at least two perspectives. The appreciation of its occurrence, and perhaps (as here) the place in its arrangement, by the stronger party might be seen as part of the circumstances in which he or she procures or accepts the benefit. It is an element of the stronger party's conduct to be assessed. From that perspective, the precise quality of what was done by the legal adviser may be seen not to be as relevant as what an honest and reasonable person in the position of the stronger party would have understood its effect to be on the justice and fairness of the transaction. [67] The second perspective is that if the circumstances, including the known special disadvantage, the nature of the transaction and the existence of advice, remain sufficient to make it prima facie unfair or unconscionable to procure, accept or retain the benefit, the independence and adequacy of the advice will be relevant, but as part of the discharge by the stronger party of his or her onus of proving the transaction to be fair, just and reasonable. [68] Looking at the circumstances here, the Aboodys knew, on the findings, not only of Mr Ryan's age, ill health, financial position, and dependence on Mrs Aboody, but also of the irrational obsession which was operating upon him to make a gift which would leave him financially exposed to their charity or the support of the state. By taking the property in those circumstances, they were sufficiently aware of the operation of the special disability and to take the improvident gift was to take advantage of the known weakness. The obtaining of a solicitor to advise him, at least without that adviser knowing of the irrational fear, would not remove the appreciation of the likely continued operation of the irrational fear. Thus, it was for them to demonstrate that the transaction was fair, just and reasonable. Proof of independent and adequate legal advice was part of their onus. [69] From this perspective, the effect of Mr Dakin's advice can be assessed without too much complication. Mr Dakin obtained what he understood to be the reasons for the transaction. No mention was made by Mr Ryan of the fear of the Labor government. No enquiry was made about Mr Ryan's financial position and the risk that the disposal of his capital asset posed to him. Mr Dakin satisfied himself that Mr Ryan knew what he was doing and wanted to go ahead. There was no discussion or advice about mechanisms that might bind Mr and Mrs Aboody to deal with the capital asset for his benefit or to retransfer it. If such steps had been taken, the fairness and reasonableness of the transaction and its attendant transaction costs could have been evident and advised upon. The advice of Mr Dakin did not transform the transaction into one that was fair, just and reasonable."
As in Aboody, here, Mr Pambris had good reason to believe in November 2010 that Ms Makis was under his actual undue influence and that she was likely to believe that the 2010 mortgage he was asking her to execute related to the Laiki Bank loan and not to the 2005 or the 2009 deeds because, that is what he had represented to her. He knew that whatever legal advice she received that she remained under his actual undue influence and that she must have believed the 2010 mortgage related to the Laiki Bank loan. And he did not receive a certificate of independent legal advice from Mr Vlahakis himself: the 2010 statutory declaration is not such a certificate.
Leaving aside the adequacy of the legal advice she received in November 2010, and whether she received advice before or after executing the 2010 mortgage documents, the effect upon her of the relationship of actual undue influence was not displaced by the legal advice. Nor did the legal advice clear Mr Pambris' conscience because he continued to have reason to believe based on what he knew that she executed the 2010 mortgage based on a belief that she was securing the Laiki Bank loan. It would now be unconscientious for him to contend otherwise, or that she was somehow mistaken.

[35]

The 2017 Guarantee

The undue influence case and the unconscionable conduct case that Ms Makis advance have not been successful with respect to the 2017 guarantee. It can be accepted that in December 2017 Ms Makis was still under a relationship of undue influence with Mr Pambris.
But two matters distinguish the circumstances of execution of the 2017 guarantee from the 2010 mortgage. The first is the nature of the transaction Mr Pambris was entering; and the second is the intervention of Mr Donato as the legal advisor acting on behalf of Ms Makis. These factors are decisive in answering a case that the 2017 guarantee should be set aside.
As to the nature of the transaction: the 2017 guarantee was part of a larger transaction which was not improvident from the perspective of Ms Makis. This factor alone would defeat both the unconscionable conduct and undue influence cases. The 2017 guarantee was part of the terms upon which Mr Pambris was prepared to assist in refinancing the CBA mortgage to prevent the CBA from exercising its power of sale over the Maroubra property. It was a cost of obtaining a tangible benefit of retaining the Maroubra property, that Ms Makis wanted to achieve in the short term. And she obtained that benefit through Mr Pambris' honourable intervention on her behalf following her execution of the 2017 guarantee.
As to the intervention of Mr Donato, the narrative of findings shows that he was independently retained by Ms Makis and always acted at arm's length from Mr Danalis leading up to the 2017 guarantee and the CBA refinance. The form of the 2017 guarantee as drafted by Mr Donato shows express reference to the obligations of the 2005 and 2009 deeds and the 2010 mortgage. The Court infers that the legal connection that was being established by the 2017 guarantee - which did not clearly exist before December 2017 - connecting liability under the 2005 and 2009 deeds with the 2010 mortgage must have been explained by Mr Donato to Ms Makis. Such uncertainty and ambiguity as had previously existed about the scope of the 2010 mortgage was cleared up by Mr Donato, who must have explained to Ms Makis the wider scope now being stipulated for the 2010 mortgage by Mr Pambris. She did not seek an explanation about that change from anyone else. Moreover, Mr Danalis and Mr Pambris were entitled to assume that what the 2010 mortgage now secured had been explained to Ms Makis by Mr Donato, and as a result Mr Pambris' conscience was clear of taking advantage of any special disadvantage of Ms Makis.
One query remains about the 2017 guarantee. It is strange that Mr Donato did not seek an up-to-date account of what was then said to be owing on the 2005 and 2009 deeds. It is probable that Ms Makis did not realise how large the liability was said to be owing on those deeds. If she did it would be expected that she would have queried it through Mr Donato at the time. And she kept up payments on the CBA mortgage, the refinanced mortgage with Mr Pambris, and the further refinance with Perpetual on the basis that she would be able to manage the liability associated with the second mortgage at a later time.
But that is an insufficient basis to infer that Mr Pambris took unconscientious advantage of Ms Makis, or that she executed the 2017 guarantee under his undue influence. Yet the lack of such an up-to-date account does tend to explain that Ms Makis thought that after she had refinanced the CBA mortgage with Mr Pambris' assistance, she nevertheless had real prospects of being able to keep the Maroubra property, because her financial obligations under the 2005 and 2009 deeds would be manageable. The amount claimed in these proceedings came as something of a shock to her. What amount, if anything, is recoverable is yet to be resolved.

[36]

Consequential Issues

It follows from the narrative of findings that the Court has little confidence in the plaintiff's presently adduced evidence which seeks to establish what is now said to be due on the 2010 mortgage and now the 2017 guarantee. The Court has concluded that the 2010 mortgage is now binding upon Ms Makis by reason of her execution of the 2017 guarantee. But given the narrative of findings it is difficult to determine what is due to Mr Pambris on these instruments. This means that the Court will need to hold a supplementary hearing in relation to the quantum that is said to be outstanding on the loan secured by these securities. Several issues may arise at such a quantum hearing now that the Court has found the 2017 guarantee binding.
There is acceptable proof from the 2018 consent orders that Mr Pambris advanced $37,500 on behalf of Ms Makis to assist in resolution of the family law proceedings and that she owes this sum at least to Mr Pambris. But it is not clear that this sum is secured by the 2010 mortgage, which by reason of the 2017 guarantee is expressly linked to the liability under the 2005 and 2009 deeds and the 2010 mortgage does not contain an "all moneys" clause.
There may also be questions about the proper construction and operation of the 2017 guarantee, for example what the words "including the money which the borrower is liable to you under the agreements" mean in respect of a guarantee signed after Mr Papatheodotou's bankruptcy.
The narrative of findings raises sufficient uncertainty about what is due on these securities to enliven the Court's jurisdiction to order an account as between mortgagor mortgagee to ascertain how much is due. That jurisdiction is sufficiently ample to accommodate resolution of the present issues of quantum.
Ordinarily the payment of the advance secured under a mortgage need not be proved unless the fact is put in issue on the pleadings, because the security itself is usually sufficient evidence of such payment: Minot v Eaton (1826) 4 LJ OS Ch 134, and ELG Tyler, PW Young and CE Croft, Fisher and Lightwood's Law of Mortgage, 3rd Australian Edition, LexisNexis - Butterworths, Australia 2014.
Ms Makis' defence admits that Mr Pambris served a demand on 11 June 2021 but denies liability in respect of "all amounts demanded in the 11 June 2021 letter". This is sufficient to put in issue the quantum of Mr Pambris' claim on the mortgage. The only admission made is that no payment has been made since 11 June 2021. If no money has in fact been advanced, the mortgage is worthless: Fisher & Lightwood [16.39].
Mr Pambris therefore still bears the onus of establishing what is due under the mortgage. And this is more so in this case, where upon closer scrutiny of the 2010 mortgage, neither page 1 nor Annexure A does not contain an acknowledgement of receipt of the principal sum: see Sims v Lowe 1988 1 NZLR 656, at 663 and Fisher & Lightwood [16.39]. Moreover, the Court has found that active undue influence was in play against Ms Makis at the time the 2010 mortgage was executed, and Ms Makis believed it related to a different loan transaction. Even though the security was validated in 2017, albeit without any enquiry as to the quantum of the loan then due upon it, such circumstances call for very close scrutiny of the quantum now alleged to be due: Lewes v Morgan (1817) 5 Price 42, at 143; 146 ER 530 at 563 and Fisher & Lightwood [16.39].
Modern authority in relation to mortgagee/mortgagor accounts makes clear that a mortgagor is entitled challenge the mortgagee as to the amount secured under the mortgage provided the mortgagor can show that there is a serious question to be tried as to whether the sum stated in the acknowledgement of receipt to have been advanced was in fact advanced: Close Asset Finance Ltd v Derek Allan Taylor [2006] EWCA 788 and Fisher & Lightwood [39.11]. There is a serious question to be tried on the question of quantum here.
The Court's narrative of findings foreshadows that at least the following questions will probably arise in a quantum hearing: 1. What advances were made under the 2005 and the 2009 deeds? 2. What repayments were made against those advances in cash or otherwise? 3. Is there any objective evidence in the form of banking records to verify that any amount was advanced to Mr Papatheodotou? 4. What cash did Mr Papatheodotou hold and pay out on behalf Mr Pambris in cash and is that to be set off against any advances made to him? 5. When was any demand first made for the repayment of principal in accordance with Annexure A? 6. What interest is due upon the correct amount of principal?
The Court will appoint a directions hearing to prepare for the proposed quantum hearing in these proceedings at a date that is suitable to the parties. At that hearing the parties will be expected to propose a timetable for further evidence and submissions in relation to the quantum issues.
At that hearing the Court will also ask the parties to consider whether this remaining aspect of the proceedings could profit from being referred to a Court annexed mediation pursuant to Civil Procedure Act 2005 s 26, to see if it can be resolved by agreement to save the parties the expenditure of further legal costs.
The Court will not deal with the question of the costs of these proceedings until it decides how much, if anything, is due by Mr Pambris to Ms Makis on the 2010 mortgage and the 2017 guarantee at the conclusion of the quantum hearing.

Pambris v Makis

At a glance

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Judgment (38 paragraphs)

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Legislation Cited (3)

Cases Cited (29)