Perpetual Trustees Victoria Limited v Menzies

Judgment Introduction 1Ann Marie Menzies is sued by Perpetual Trustees Victoria Limited (Perpetual) pursuant to a mortgage and loan agreement allegedly entered into by her. (Challenger, earlier named Interstar, procured Perpetual's funds for the purpose of the advance; for present purposes it can be ignored.) Ms Menzies denies that she was party to either document. This judgment concerns Perpetual's action against Ms Menzies and her counterclaim against Perpetual. There is other connected litigation between Perpetual and Challenger Financial Services Group Limited on the one hand, and BMC Mortgage Corporation Pty Limited on the other, which will be the subject of a further hearing. BMC, called a mortgage originator, organises for Challenger (and, thence, Perpetual) to provide the funds. The party to the loan agreement and mortgage is Perpetual. In this case, the approach to BMC was made by a Mr Dive, called a broker. A Mr Reddy, whose role is extensively discussed, is also a defendant, but filed no defence or appearance. Ms Menzies brought cross-claims against Perpetual, Challenger, BMC, Mr Dive's company and Terence Reddy. 2For the reasons that will appear I have concluded that Ms Menzies should succeed and that she and indeed the other parties were the victims of a complicated fraud certainly perpetrated by self-declared accountant Terrence Reddy, likely in concert to a greater or lesser extent with one Felix Lyle with whom he was closely associated. The relevant transactions included the aborted purchase of a residential property in Cardigan Street, Stanmore and the completed purchase of a residential property in Hancock Street. Two loans were negotiated, one with Perpetual and the other with Permanent Trustee Company Limited, the former in Ms Menzies' name, secured by a mortgage over Ms Menzies' home, and the latter in the name of Valcorp Developments Pty Limited secured over the Hancock Street property with a personal guarantee in the name of Ms Menzies. 3The fraud involved the forging of Ms Menzies' signature on a number of crucial security documents and the creation of a convincing but forged Certificate of Title over her residence in Stanmore. In the result, I am satisfied that Ms Menzies did not execute either loan agreement or mortgage or authorise their execution on her behalf, that she did not authorise the use of her Certificate of Title, moreover that she never intended to personally borrow or be personally responsible either directly or by guarantee for the repayment of the moneys advanced and did not in any real sense obtain the benefit of any of the funds provided. 4I should state at the outset that, although some aspects of her evidence were unreliable, Ms Menzies, who was extensively cross-examined, struck me as genuinely attempting to tell the truth, though sometimes reconstructing events according to her beliefs (and, perhaps, hopes) rather than the facts. However, this did not to my mind adversely affect her evidence in respect of any of the crucial facts in the case. She trained as a psychogeriatric nurse in 1979 and was employed in that role since then. Her wage was about $50,000 net a year with no additional income. Her only assets were her home and savings of about $40,000. There was no suggestion in the evidence that she had ever been involved in any commercial activity of significance, let alone property development. 5Although early in Ms Menzies' evidence I expressed a view that suggested otherwise to some extent, I formed the conclusion by the time her evidence ended that, though not unintelligent, she was at once extremely ignorant about financial matters and had naively placed her trust in two plausible rogues, whose inventions she all too readily believed. As the transactions unravelled, she was reluctant, I think, to accept that she had been taken advantage of and, to some extent, was blinded by the hope that things were not so bad as they would have appeared to be to a more alert and knowledgeable person, and as they all too gradually appeared to her. 6Mr Reddy also gave evidence and was extensively cross-examined. I found him to be a versatile and brazen liar whose testimony could not be accepted unless it were independently corroborated and then only to the extent of that corroboration. I have no doubt that he was involved, one way or another, in the forgeries which litter this case. Even when he eventually admitted straight-out frauds, he tried to justify them in terms that demonstrated extraordinary coolness and presence of mind. That Ms Menzies was no match for him is all too obvious. As to Mr Reddy's relationship with Mr Lyle he said he was "a business associate we met occasionally until we had this transaction so we didn't meet on a very regular basis." He said that he didn't recall doing anything of substance with Mr Lyle but rather it was "more introduction to lawyers, brokers, helping him, steering him into the right direction as to which type of property purchase and stuff like that." He later said that he knew that him "well enough to say hello to him all the time and if he called me and asked me for information I'd give it to him voluntarily" however he said that he had never done any business with him. 7Although there is reason to suppose that Mr Reddy's conduct and that of Mr Lyle is already the subject of investigation by the authorities, I intend to refer the papers to the Director of Public Prosecutions to take such steps as are appropriate. 8As to the other witnesses, I thought their evidence was by and large truthful although not always reliable. As will be seen, important matters were sometimes affected by assumptions, reconstructions and the problems associated with the passing of time. The plaintiff's case against Ms Menzies 9Perpetual sues Ms Menzies for possession of her home upon a default under s 58 of the Real Property Act 1900, being the failure to pay arrears specified in the s 57(2)(b) notice of July 2007. In the alternative, it seeks a monetary judgment against Ms Menzies personally for her liability under the loan. In the event that Ms Menzies did not execute the loan agreement, Perpetual alleges that her failure to notify it constituted a representation by silence that estops her from denying the effect of the transaction or otherwise she ratified or authorised Mr Reddy's actions. The forged Certificate of Title 10In the shifting sands of narrative, lies, uncertain and mistaken recollections and unexplained facts, there are several facts which provide anchor points for understanding, if not the certain, at least the likely course of events and enable conclusions to be drawn which might otherwise be problematical to be derived with a reasonable degree of probability. Perhaps the most important of these is the creation of the forged Certificate of Title over Ms Menzies' home. It was on this Certificate of Title, which was provided to Perpetual's solicitors at the time of settlement of the mortgage, upon which Perpetual's mortgage was registered. Also of crucial importance as anchor points are the forgeries of Ms Menzies' signature on the Perpetual loan agreement and mortgage. Although Ms Menzies' signed the Valcorp mortgage to Permanent as Director (this is, of course, entirely consistent with her case), neither an executed loan agreement (which referred to her personal guarantee) nor a guarantee has been produced. 11In 1984 Ms Menzies became the registered proprietor of the Stanmore property. In due course, following the discharge in May 1994 of a mortgage on the property in favour of a building society, a Certificate of Title was issued to her. It was then free of all encumbrances. This Certificate remained in her possession until November 2001 when it was deposited in the registry of this Court as part of surety for a bail undertaking given by Felix Lyle. 12That the Certificate of Title ultimately produced to Perpetual on settlement is a forgery is not susceptible of doubt, not because of detailed forensic examination (although this was carried out and revealed other variations from a genuine document) but because the forger made an elementary error which, however, is not obvious unless the forgery is placed side by side with a genuine Certificate. It can then be seen that the words "Certificate of Title" printed in large italics on the back are reversed on the forgery. Unless one were alerted to this positional inaccuracy, the forgery would easily pass all conventional examination. Indeed, it did so when it was lodged with the mortgage at the Land Titles Office and taken for genuine by the clerks or examiners whose duty it is to ensure that only genuine Certificates of Title are accepted. It is, perhaps, worth noting here that a forger who had available the original Certificate of Title would not be likely to make this gross error, since comparison would immediately expose it. It is reasonable to infer that the forger did not have access to the original although this conclusion is based upon other grounds, including the evidence of Ms Menzies and the logic of events. For completeness, I should mention that, when the paper on which the original and the forged Certificates are compared, the latter is of a substantially lighter grade and the red ink on the back is darker. I do not propose, (for obvious reasons) to set out the evidence of Mr Coleman, an expert called from the Department of Lands as to this issue, as to how the forgery might have been created. It is sufficient to note that the forger did not need to have access to the original to create the false Certificate although, without it, the task was rendered rather more complicated and required some specialized knowledge, which, however, could be acquired without all that much difficulty. 13There is only one sensible reason for undertaking the burdensome and risky task of creating a forged copy of Ms Menzies' Certificate of Title. That is, that the fraudster(s) knew that she would not permit the registration of any mortgage over her property and that the existence of the proposed mortgage would, when registered, become known to her. The creation of the forgery can thus only be explained by inferring that it was at all times known that that Ms Menzies would never consent to any transaction that would require registration of a mortgage. It is but several short - but, in my view, inevitable - steps to infer that it must have been known that she would not consent to a mortgage at all or to a substantial loan that involved any personal liability or guarantee a substantial loan that might entail a debt which would place at risk her only asset. It must also be remembered that the fraudster(s) were taking a very substantial risk in the event that the forgery was discovered and one supposes that it was calculated that, in that event, the whole intended fraud was criminal at all events and there was no way of avoiding this particular risk. The point is that the forgery, with the accompanying risks, was unnecessary if the fact was that Ms Menzies was a knowing participant in transactions that would give rise to her being personally directly or indirectly liable for the debts that were ultimately created. Other hypotheses have been proposed, but they all seem to me to be unreal. 14In addition to the forgery of the Certificate of Title, Ms Menzies' signature was forged on all the security documents upon which Perpetual relied to advance its funds and a significant number of other documents which, had they come to Ms Menzies' attention, would have exposed the fraud. The sheer scope of these forgeries is unprecedented in my experience. Again, they provide eloquent evidence supporting Ms Menzies' case that she was the victim of a thoroughgoing and well organized fraud. 15Ms Menzies' evidence about not signing these documents is supported by uncontested expert evidence that, on close examination of the matters relied on, I find convincing. The evidence of the handwriting expert 16Ms Menzies relied on the expert evidence of Mr Chris Anderson as to the genuineness of a number of signatures said to be hers contained on relevant documents. The expertise of Mr Anderson was not in dispute and I am satisfied that he is well qualified to provide the opinions that were adduced in evidence. He gave evidence and was cross-examined, to which I do not intend to refer except to state that it did not cause me to doubt the reliability or accuracy of his evidence; to the contrary, I thought he was an objective, careful and reliable witness. Given the nature of the case, the fact that neither Perpetual nor BMC sought to adduce any handwriting evidence can be regarded as reinforcing the correctness of Mr Anderson's opinions (of which, I might say, I am at all events independently persuaded). 17The suitability of Mr Anderson's approach was not controversial. It may therefore be briefly described. He conducted a microscopic (where appropriate) and macroscopic examination of the questioned and the specimen signatures to assess the structure, features and writing quality of the signatures and then made a comparative examination of the questioned and the specimen signatures. Mr Anderson noted that the majority of the questioned and four of the specimen documents were reproductions, which limited any examination to a pictorial assessment of their respective features, since the reproduction "process does not reproduce the finer details of letter construction, nor does it allow a proper assessment to be made of the line quality, speed or fluency of the writing" that can be assessed with the aid of a stereomicroscope. 18There is no issue as to Ms Menzies' specimen signatures and I therefore move on to the questioned signatures. These were divided into four groups (A, B, C, D) based on pictorial similarities or lack thereof. The Group A signatures "have a level of pictorial similarity to the specimen signatures". "Pictorially similar" means that "the questioned and specimen signatures have some level of pictorial resemblance that is observable and cannot be attributed to coincidence or chance", thus allowing the formulation of "hypotheses on how the questioned signature may have come into existence" but assessment of genuineness or otherwise is not made at this stage. Mr Anderson thus postulated the following two hypotheses - H1. The writer of the specimen signatures wrote the questioned signatures. H2. Another writer wrote the questioned signatures attempting to copy the form of specimen signatures either freehand or by a tracing process. 19Mr Anderson's report then sets out a detailed comparative descriptive analysis of the specimen and questioned signatures which I pass over but which informed my own examination of the disputed signatures. No issue about this analysis arises. The respect of 33 questioned signatures in Group A he concluded - These observations provide evidence in support of the 2nd hypothesis, H2. Other than the specimen writer has the writing skill to have written the questioned signatures, there is no other evidence providing support for the 1st hypothesis, H1. Given the nature of the inconsistencies on the questioned signatures I am of the view that the likelihood of the 1st hypothesis occurring is reasonably remote. 20In respect of four of the questioned signatures in Group A, Mr Anderson said - ... these signatures appear to fall within the range of variation exhibited by the specimen signatures .... In other words these observations provide evidence in support of the 1st hypothesis, H1. Other than the limitation placed on this aspect of the examination in examining reproductions I have observed no evidence to support the occurrence of the 2nd hypothesis. 21Group B comprises the only legible questioned signature that is legible: the words, "Ann Marie Menzies" can be read. (It is on an ASIC change of company details form for Valcorp.) Mr Anderson said this bore no pictorial similarity with the specimen signatures. However, without a specimen of Ms Menzies' ordinary handwriting (as distinct from a signature) he was unable to assess the likelihood of it's being genuine or not, since it was possible that she simply signed it in a way that was not usual for her. As mentioned above, however, Mr Reddy admitted that he had written this signature. 22Group C comprised two illegible signatures on two ASIC Change of Company Details forms but as writing rather than signing. There is no pictorial similarity between them and the specimen signatures but, for the same reason as applied to the Group B signature, Mr Anderson was unable to assess whether they were genuine or not. However, he noted that the signatures on the forms had a level of pictorial similarity to each other, whilst one appeared to be written with more speed and fluency than the other. He concluded that these appearances suggested the possibility some one had tried to copy on the former document the form of the signature on the latter with the other possibilities being that they are variants written by the same writer or the handiwork of two different writers. He added that only examining the originals of these two documents would assist in resolving this issue. We also know from Mr Reddy that he wrote these signatures. 23Group D comprised signatures on reproductions of the application by Valcorp for finance to BMW Group Financial Services dated 27 October 2005, a Quik Doc Declaration to Perpetual of Valcorp's financial position dated 28 October 2005, a Quick Equity Declaration to Perpetual dated 28 October 2005, a statement of Ms Menzies' assets and liabilities to BMW Group Financial Services dated 28 October 2005 and a Autosure Protection Application by Valcorp dated 28 October 2005. These signatures bear a strong pictorial resemblance to the signature on the reproduction of Ms Menzies' passport. The overall variation exhibited by the specimen signatures together with the "striking similarity" between these questioned signatures and the "highly unusual" passport signature indicates that the questioned signatures could be the product of a free-hand simulation using the passport signature as the model. Mr Anderson also pointed out that passport signature appears to have been cut off at the edges, presumably due to the writer signing on a narrow label, thus giving the signature "the appearance of having three little feet". He considered that, If this observation were correct (and I am quite sure it is), then this further supported his observations that these questioned signatures could be the product of a free-hand simulation process as the documents they have been signed on appear to have no evidence of the signatory being required to sign on a label but demonstrate the three feet. These factors provide evidence supporting the hypothesis that another writer wrote the questioned signatures in an attempt to copy the specimen signature as it appeared on the passport either freehand or by a tracing process whilst the only evidence supporting the hypothesis that the one writer wrote all signatures is "this writer has the writing ability to have produced these questioned signatures and cannot be entirely eliminated from having done so. (I interpolate that, having carefully examined the signatures in question and the original passport, I have no doubt that the only rational explanation for the questioned signatures is that they are attempts to copy the original, genuine signature.) 24Mr Anderson's conclusions may be summarised as follows - (1)There is very strong support for the proposition that the writer of the illegible specimen signatures did not write the illegible signatures on 16 of the questioned documents [listed but I shall identify them as they arise] compared to the support for the alternate proposition that the writer of the specimen signatures wrote these signatures. (2)There is strong support for the proposition that the writer of the illegible specimen signatures wrote the illegible signatures on the originals of the Express Loan Income and Purpose Warranty [for the Permanent Loan] dated 30 September 2004 [almost certainly an error for 2005], the EasyDoc Declaration of Financial Position addressed to Perpetual dated 30 August 2005, Consent to use personal information addressed to BMC dated 30 August 2005 and Declaration as to Purpose of Credit [for BMC] dated 30 August 2005 compared to the support for the alternate proposition that another writer wrote these signatures. (3)There is strong support for the proposition that the writer of the illegible specimen signatures did not write the 22 illegible signatures on the originals of the questioned documents [additional to those in para (1), which I shall also identify as they arise] compared to the support for the alternate proposition that the writer of the specimen signatures wrote these signatures. (3)The findings as to the three ASIC documents mentioned above are inconclusive as to authorship. The levels of conclusion used in Mr Anderson's laboratory reflect the general practice around the world of forensic document laboratories which comprise, in respect of positive conclusions: conclusive, very strong support, strong support, limited support, no conclusion or inconclusive. 25It will be seen that Mr Anderson has identified 38 documents for which there is strong support or very strong support that the signatures on them that purport to be that of Ms Menzies are not hers. I have examined these signatures for myself in light of Mr Anderson's report and accept these conclusions. Further, having regard to this evidence, my own examination and the circumstances otherwise established, I am persuaded that, in respect of these documents, there is a high degree of probability that the signatures on them are not genuine. The genuine Certificate of Title is lodged with the Court 26Ms Menzies deposed that, in about November 2001, her daughter introduced her to the father of her then boyfriend, Felix Lyle. Her daughter told her, and she believed, that Mr Lyle was a property developer and that he had brought up his two sons alone because their mother was not around. Shortly after this first meeting her daughter's boyfriend came to Ms Menzies' home and told her that his father had been charged with a crime that he did not commit but that he had been implicated because some drugs were found in one of the properties that he had in his name. He said that his father needed surety for his bail. Ms Menzies said that she did not want his father to go to gaol for something he did not do, and agreed to put up a surety for his bail. A few days later Mr Lyle came to the house and thanked her for agreeing to act as surety for his bail undertaking and said that his solicitor, Mr Martin Ricci would be in touch with her. Shortly after, Mr Ricci then arranged to meet Ms Menzies at the Supreme Court on 29 November 2001 to sign the bail papers. He said that the original Certificate of Title would need to be brought to the court and lodged there until the case was dropped. Accordingly, on that day Ms Menzies went to the bail section of the Supreme Court with Mr Ricci and signed a number of documents including a consent to a caveat and a mortgage. Ms Menzies handed her original Certificate of Title to the registry. Immediately before doing this she said that she made a small mark with a blue pen at the bottom of the first page. She did so, she says, because she wished to be certain that, when Mr Lyle's bail was eventually answered and the Certificate returned, it would be the actual document which she had lodged. The Certificate of Title (undoubtedly genuine) showing the blue mark is exhibited in the proceedings. 27Ms Menzies was cross examined about this matter by Mr Sirtes SC for Perpetual who asked whether she placed the mark on the document to make sure that the court was not going to make a copy and return the copy, keeping the original. She denied that she thought that someone in the court might make a copy and not return the original, explaining that she just wanted to be sure that she would get her original back. Mr Curtin SC for BMC also cross-examined her to suggest that she had placed the dot on the document at a much later time in order, in effect, to disprove the possibility that she had provided it to Mr Reddy for the purpose of obtaining the loan. Ms Menzies also denied this. One logical difficulty with the hypothesis proposed by Mr Curtin is that it seems to imply that at first she agreed to the use of her Certificate of Title but later refused because she did not wish to enter into a mortgage. Put together with the forgeries of her signature on the loan agreement (and the mortgage), however, this implies (as I think) that, at the very least, she was not a party to the loan agreement and thus cannot be liable (at least, in any straightforward way) for the debt or under the mortgage. For reasons that will become clear, I think this "change of direction" hypothesis is most improbable. For the present, however, it is enough to note that it was not put to Ms Menzies in cross-examination directly - although it was put to her, and denied, that she was always a willing party to the loan agreement and the mortgage. 28At all events, I think that Ms Menzies' evidence as to the time on which the dot was placed on the Certificate is truthful. It must be remembered that she was ignorant of the procedure and that Mr Lyle was, to some extent, an unknown quantity. That she just wanted to be sure about return to her of the title to her home seems to me to be quite believable. She struck me as someone who was in some ways not given to thinking things through in any well reasoned way. The dot, of course, does not mean that the forged Certificate was not produced with the assistance of a photocopy, merely that the forgery it was not a photocopy of the original. I am also satisfied by the expert evidence that the forgery was not a photocopy. 29As to what happened to the original Certificate of Title, regrettably the Court's records seem to be somewhat incomplete. On 4 April 2005 the District Court registry wrote to the bail section of this Court noting that Mr Lyle had appeared in answer to his bail undertaking, that the charge was finalised on 4 February 2005, that Ms Menzies was his surety and "the amount deposited by the surety may now be returned", of course a reference to the amount (of $50,000) secured by the grant of the unregistered mortgage, deposit of the Certificate of Title and registration of the caveat. Ms Menzies said she was telephoned about May 2005 by Mr Ricci who told her that she would soon receive all her papers back from the Supreme Court. Mr Lyle also telephoned her about this time to tell her the same thing. Although this was not the subject of cross-examination, I believe that she places this conversation in May by virtue of the letter of 5 May 2005 from Ms Joyce, a registry officer of the Court, set out below. I think it more likely that any such conversations would have occurred in February, when the charge was in fact dealt with and the surety ended. Nothing turns on this. It is simply an example of the defective reconstruction of memory to which we are all subject. 30Ms Joyce's letter to Ms Menzies informed her - "An audit of the Supreme Court safe has revealed that the Withdrawal of Caveat form was not collected from the Registry following the trial of Mr Lyle. The attached form will need to be lodged at the Land Title Office...to have the Caveat removed from your property. If you have any further queries please do not hesitate to contact me at the above extension." 31Ms Menzies still had in her possession and produced the original envelope, the letter and the withdrawal of caveat form. She says that the Certificate of Title was also in the envelope and that she recognised that it was the same document that she had lodged with the Court because it bore the blue mark. She did not lodge the withdrawal of caveat, she said, as it did not seem particularly urgent to her at that time. She said that, after receiving the envelope and its contents, she kept it in a hiding place at her home and (I take it) shortly after called Mr Lyle to inform him that the certificate had been returned. He said he would take her out to lunch as thanks. She also says that aside from her initial telephone conversation, she did not speak with Mr Lyle about the return of her Certificate of Title. For reasons which will become clear in due course, it was necessary for Mr Lyle (and Mr Reddy) to obtain the Certificate of Title for the purpose of providing security for the loan which had been arranged with Perpetual. Moreover, a search made on Perpetual's behalf had revealed that the caveat was still registered on the title and a withdrawal of that caveat was essential to enable the matter to proceed. 32Ms Joyce had only been sent to the bails section for two months to audit the safe to find out what was in there and give a list of what she found to someone else in registry, who determined what needed to be returned and to return documents that were no longer needed. She said the letter of 5 May 2005 addressed to Ms Menzies was written and signed by her. Of course, this could only have been done in light of the letter from the District Court and, until this was received, no occasion for returning the Certificate of Title and Withdrawal of Caveat had arisen. Since the letter makes no reference to the Certificate of Title, Ms Joyce (quite reasonably) thought it most improbable that it had been enclosed with the withdrawal. She identified all the handwriting on the withdrawal form as hers, except that the signature as caveator was that of the Registrar. She said that, when the Certificate of Title was lodged it would have been kept in the bail safe. Since the withdrawal form was completed in her hand, to my mind it must follow (and she agreed it was most likely) that it was not in the safe (unless a blank form was there, which was most improbable since it would have had no identifying information - unless it had been attached to the Certificate of Title against the occasion for its completion and return to the surety) and, therefore, it was not one of the documents discovered by her on her audit. Also, there would have been no occasion to list a blank form. Furthermore, it has title details on it which, it is very probable, she would have obtained from the Certificate of Title. Thus, if Ms Joyce found (perhaps instigated by receipt of the letter from the District Court) a document in the safe that could be related to Ms Menzies' surety, it would in all probability have been the Certificate of Title rather than just a blank withdrawal form, although she did not recall seeing one there. She said (unsurprisingly given her short period in this section) that she did not recall at any stage being involved in the return of a Certificate of Title where one had been lodged for a surety and did not recall seeing Certificates of Title stored in the safe. The envelope on the letter to Ms Menzies was written in Ms Joyce's handwriting and would have been placed in the outgoing mail tray. 33I am of the view that it is most likely that, in fact, the withdrawal of caveat form as completed by Ms Joyce, signed by the Registrar and dated 5 May 2005 had not been found in the safe. The document most likely to have been in the safe was the Certificate of Title, of which the registry undoubtedly had possession. (As to the unregistered mortgage, a copy is an exhibit to Ms Menzies' affidavit, with other documents relating to the bail but its provenance is unexplained.) There is no documentation at all as to what happened to the Certificate of Title or the unregistered mortgage, although they must have been held by the Court's registry, presumably in the bail safe, and returned some time after 4 February 2005. 34On 28 September 2005 Mr Ricci wrote to "Richard" at the court in the following terms - RE: FELIX LYLE SUPREME COURT REFERENCE NO, 72762/01 I refer to the above matter and our telephone conversation today. I confirm that I am requesting that a surety by the name of Ann Marie Menzies be removed in relation to the above matter. She put up her property in the sum of $50,000. I believe that the Certificate of Title is held at the Supreme Court. A letter has previously been forwarded by the District Court to you to release another surety by the name of Norma Smith who has collected her Title Deeds. Would you please arrange for Caveat No 1/K/3857 to be removed and advise when the Certificate of Title is ready to be collected. I look forward to hearing from you. 35Mr Ricci's inquiry about delivery of the certificate must have been made on Mr Lyle's instructions and thus that Mr Lyle did not know that it had already been returned (with the consequence that, as I think, Ms Menzies is mistaken as to when she told him that the Certificate of Title had been returned, if indeed if she ever did). Moreover, it follows that Mr Ricci had not collected it. I do not believe that Ms Menzies separately attended at the Court to do so. This leaves as the only mode of its return the letter of Ms Joyce and confirms the conclusion stated above as to this matter. (By the way, it also suggests that "Richard" was unaware of the Joyce letter, since Mr Ricci was not, it seems, told that, at least the withdrawal had been sent to Ms Menzies.) 36Some delay in responding to Mr Ricci's letter entailed and, on 11 October 2005 Mr Ricci wrote to the District Court registry requesting that a "letter of finalisation" be faxed from the District Court to the Supreme Court bails registry, as he understood that such a letter had already been sent on a number of prior occasions but misplaced in the Supreme Court. Mr Ricci's letter stated that the return of surety was now a matter of urgency for "my client" identified as Mr Lyle. (Why this was indeed urgent will become clear in due course.) Ms Menzies said (and I accept) that she did not authorise Mr Ricci to write these letters and had no contact with Mr Ricci or anyone else from his firm about the matter. 37No further record of any inquiry by Mr Ricci has been produced, and I think it very likely that he did not press the matter of returning the Certificate of Title because (without suggesting at all that he was aware of this) his client had not required it, since he knew that the problem of obtaining the Certificate of Title was solved, either because he knew that a forgery had been or could be created or because Mr Reddy, having such a forgery, told him that he now had the deed. To complete this aspect of the case for the present, a further Withdrawal of Caveat was executed by the Registrar of the Court and provided to Perpetual's solicitors on settlement. I have no doubt that it was obtained by Mr Reddy, or at his instigation, perhaps, via Mr Lyle or by Mr Ricci. As it happened, although Ms Joyce's document was not in registrable form (though obviously Ms Menzies would not have been aware of this) and that ultimately provided was, the obtaining of the latter document, to my mind, supports the inference that she did not provide her security documents to Mr Reddy or Mr Lyle. 38The return of a document such as a Certificate of Title should have been evidenced in the Court's records by a receipt of some kind, either by correspondence or, in the event of a personal collection, the signature of the person doing so. No such letter or receipt has been produced. 39Taking all these matters into account, I am of the view that the Certificate of Title had not been delivered prior to 5 May 2005. Returning to the letter of Ms Joyce in light of these considerations (particularly that an empty withdrawal form was not likely to have been not in the safe but was obtained and completed only when it was known that the surety had ended) I think the probability is that the Certificate of Title was indeed enclosed with Ms Joyce's letter of 5 May 2005 as Ms Menzies says, despite the absence of reference to it and the need of a receipt either overlooked or thought to be obviated by the way in which the letter was understood. 40Ms Menzies says that she thereafter did not give the Certificate of Title to any person, except her own solicitors for the purpose of these proceedings, and in particular never gave it to Mr Lyle or Mr Reddy and was never asked by either of them to provide either the original or copy. However, she in effect conceded in cross-examination that, although she was "pretty sure" that she never showed Mr Reddy the document she may have "pulled it out when we were doing the Cardigan Street dealing". (I will come to this transaction in due course.) I think that it is unlikely that Mr Reddy asked to see the Certificate and, hence, that it is unlikely in fact that Ms Menzies showed it to him. I do not believe that Mr Reddy ever wanted her to think that somehow her property might be at risk in respect of the proposed transactions. 41It remains to add reference to a peculiar and, I think significant, feature of the registration system, which is that, when a registered mortgage is discharged, a new Certificate of Title is issued to the registered proprietor which does not refer to the earlier encumbrance. Its existence can be ascertained by performing an electronic historical search but not by examining the Certificate of Title. Accordingly, if the property ultimately purchased were sold at a profit - which was, of course the expectation and, indeed the fact, as will be seen - the mortgage would be discharged, the forged Certificate would be replaced by a new (and genuine) Certificate having no reference to any mortgage to Perpetual. That Certificate could then disappear and Ms Menzies and, for that matter, Perpetual would never have known what had been done. This scheme depended upon the instalments payable under the mortgages (there was an additional mortgage to Permanent Trustees, which also comes into the tale and with which I deal in due course) being paid out of the bank account into which Perpetuals advance was paid. But, as will be seen, Mr Reddy's greed or, perhaps, desperation for funds led him both to drain this account and obtain other loans in Ms Menzies' name, which he failed to service, including the procuring of registration of a further mortgage over her home, resulting in default action eventually exposed the frauds and near financial catastrophe for Ms Menzies. Cardigan Street Stanmore 42Ms Menzies said that over the period from November 2001 to August 2005 she stayed in touch with Mr Lyle, telephoning him every few months or so to ensure that he was still around. Every three or four months or so she met him for a coffee in a café next to the community centre in Glebe. That time he was living in Glebe and she was working there. On those occasions Mr Lyle talked to her about his children, his elderly mother, his girlfriends and his property developments. He never mentioned any illegal activities, drugs or bikies (he had been associated with one of the so called outlaw motorcycle clubs). He talked about being busy with business and renovating several properties. 43From about May 2005 (as I gather) Ms Menzies thought of buying an investment property to renovate and sell at a profit. In August 2005 she noticed a property for sale on Cardigan Street in Stanmore (to distinguish this property from Ms Menzies' home, I shall refer to it simply as "the Cardigan Street property") just around the corner from her own home. As she believed that Mr Lyle was a property developer and his builders might be able to do the renovations for her, she spoke to him about the project. She said she told him that there was a house for sale in Cardigan Street that she was interested in buying and doing up and mentioned that there was a block of flats next door so that approval from the council for townhouses should be possible. Mr Lyle responded that he had an architect friend and, if Ms Menzies liked, he would get his friend to look at it. He also mentioned that he had some builders that could help. Ms Menzies said that a few days later she met with Mr Lyle and a man who he identified to her as his architect outside the property and they went to have a look at the front. Mr Lyle said that he thought the property would be good to do up and he would introduce Ms Menzies to a good accountant, Mr Terence Reddy, whom, he told her, he had known for a long time and trusted and would do a good job of arranging finance for her. Ms Menzies thanked him for this and Mr Lyle responded that he was glad he could help her to make some money as he was very grateful to her for "keeping me out of gaol for four years." 44In cross-examination Ms Menzies testified that she had no prior experience in property development. She said that she had at first no specific property or rather real estate in mind but simply the idea that attempting a development would be a good thing to do. Although she had some savings of about $40, 000 she intended to obtain a bank loan to buy the property including paying for stamp duty and conveyancing costs, together with enough funds to pay a deposit and, of course, further funds in addition to buying the property to renovate it. When she purchased her own property she had bought it with a mortgage and understood that, in order to borrow a substantial sum of money she would have to provide some security. She understood that one part of that security would be the property purchased for development, but depending on how much was needed, it might be necessary to secure a loan against her own property and she understood that this was one of the possible sources of security for the purpose of financing any proposed development. She agreed that the other issue was the repayment of capital and interest and the income from her job as a nurse did not provide any excess for these payments. She said that she thought she would use the rent for this purpose, which she had done when she had purchased her Stafford Street property. She proposed that the rent would cover the bulk, if not all, of her repayments. However, her proposal never became concrete enough for her to make any particular decisions let alone calculations. 45Ms Menzies thought that the Cardigan Street property would cost about $500,000 and that, as Mr Lyle was a property developer, she would buy the house, and he would help with the renovations. She had discussed this kind of transaction with him previously because that was the kind of thing he was already doing, renovating houses and selling them. She did not really think that she would be able to borrow all the money because she knew that, considering her income, she probably could not have obtained a loan. She agreed that buying and developing the Cardigan Street property would have required a capital investment of at least 1 million dollars, although of course, this rather depended on the nature of the renovations and Mr Lyle's role in respect of undertaking them. It was put to her by Mr Sirtes SC for Perpetual that it was inevitable that she would have needed to use her own house as security. She said at the time that she did not think about that possibility. Of course, even with her house as security, that she could service such a loan, was entirely out of the question. This supports, as I think, Ms Menzies' evidence (referred to below) that she believed Mr Lyle would, indeed, undertake the renovations and service the loan until ultimate sale of the property. 46Ms Menzies said that, shortly after the conversation with Mr Lyle in which he mentioned Mr Reddy, the two men came to her house and they talked about the proposal. Mr Reddy told her that the best way to undertake the development was to buy the house in the name of a company of which she needed to be the director and that the company could then obtain a loan to buy the house. Ms Menzies said, for the first time in cross-examination as it happened, that the arrangement was that she would buy the property and that he would make the repayments and they would split the profit when it was sold. She had always said that this was the arrangement which applied to a later joint transaction involving a property in Hancock Street, but her affidavits omitted to mention this arrangement as also having applied to the Cardigan Street transaction. Her explanation was that she was not asked this question by her solicitors. Although, on the face of it, this is surprising since the relationship between Mr Lyle and the financial arrangements in respect of the purchase of the property lies at the centre of the case. But I am minded to think Ms Menzies' evidence in this respect was true. Firstly, the security in question on which Perpetual is suing did not relate to the Cardigan Street property, which (as will be seen) scarcely proceeded any distance and was a mere precursor to the transactions in dispute in this case. Secondly, had the solicitors asked about this matter it is inevitable that Ms Menzies instructions (whatever they were) in relation to it would have been reflected in the affidavit. I think it is most unlikely that Ms Menzies gave instructions in this respect which were deliberately omitted for some tactical reason. In short, I accept Ms Menzies' explanation for the omission of this matter from her affidavits. 47Much is made by Mr Sirtes SC and Mr Curtin SC of the inferences that should be drawn from this transaction as to whether Ms Menzies was prepared to expose herself to the risk of personal liability and the loss of her home in the hope of making a profit. I will deal with these contentions in due course. I would point out that Mr Sirtes and Mr Curtin cannot have it both ways: if she were a knowledgeable purchaser and investor (which I do not accept), she would have known that merely purchasing the property in the name of the company created no personal liability and, even if a loan had been organised at that stage - which, as we shall see, had not even been applied for - she had certainly not entered into any personal guarantee of its obligations, let alone agreed to give security over her home. I do accept that it certainly crossed her mind that, if she bought a property in her name with borrowed funds, she would be personally liable to pay that debt. However, it of course does not follow that, in respect of any of the transactions in question here, she had actually decided to expose herself to such an obligation. Indeed, I am satisfied that the evidence demonstrates, certainly on the balance of probabilities, that opposite is the case. 48I need to go back a step, to a date that was before Mr Reddy had actually met Ms Menzies and which shows, I think, that he had been in contact with Mr Lyle, who had told him about her. It also shows that there were already in his mind plans that involved, at least Valcorp and probably Ms Menzies, although it is not really possible to hypothesise what they might have been, except that the following events bespeak some fraudulent intention; indeed, as will be shown, the forms themselves were false in one way or another and thus scarcely consistent with honest dealing. Mr Reddy agreed the ASIC forms came out of his office and said of the form lodged on 17 July 2005 (demonstrated by the ASIC date received stamp) that the Menzies signature "looks like my handwriting." After giving a Certificate under s 128 of the Evidence Act 1995 (in effect, requiring him to answer questions that might expose him to prosecution, the first of many such Certificates) in respect of the lodgement of documents with ASIC, he said that he signed the ASIC documents "because it was just easy to process, couldn't send it off because we had to send an original". The first form changed the registered office to Mr Reddy's office, with which Ms Menzies had no connection. It purported to be signed by her as Director, which she certainly was not, at that time. The form also gave the contact person for the company as Tamara Eason, Mr Reddy's employee. He said that he did not get permission from Ms Menzies "but I thought she knew that Valcorp would be operating" - Q:How did you think that? A:When we, initially, in our conversation, she knew setting up a company and it would be in an office in the city Q:When you told her that, who told her that? A:I can't recall telling her that or not telling her that but she knew that there was going to be a company. Q:That doesn't say where the registered office was going to be does it? A:No 49Mr Reddy's evidence, as pointed out below was that he met Ms Menzies for the first time in August 2005, just before the Cardigan Street auction. He said that maybe he had signed the forms because she may have been busy on that day. However, as at 17 July 2005 he had not met Ms Menzies. His response, "I must have met her" could not have been true. I mention this matter, chronology apart, since it provides an explanation for the somewhat odd fact that on the first form (as well as the subsequent two forms filed in early September) the signatures purporting to be that of Ms Menzies were plainly not attempts to copy her genuine signature. That on the first form is the only clearly legible signature in all the documents - as the handwriting expert Mr Anderson says, it is more like writing than signing. (His opinions are discussed below) I say "odd" because - with two exceptions I will deal with in a moment - all the other signatures purporting to be hers are clearly attempts to copy the genuine signature. The two exceptions are the signatures on the other two ASIC returns, which are also plainly not attempts to copy but are illegible. 50Mr Reddy said that he had a clear memory of his first meeting with Ms Menzies at her home. He said that the meeting comprised himself Mr Lyle, he thought Simon [Cooke] and another person whom his name he could not remember and maybe Victor "the construction guy but I am not quite sure". He said that he was not told at any stage either by Mr Lyle either at that meeting or subsequently of the nature of his relationship with Ms Menzies, although in a telephone call he described her as a friend. Mr Reddy says that between 2005 through to about 2007 he communicated with Ms Menzies either through text messages or face to face discussion probably three to five times. He could not remember receiving text messages from her. 51The timing of the creation of the document lodged on 17 August and the form of the Menzies signature on it, though at first glance trivial, are significant circumstantial facts. The explanation for these signatures and the form they take is, to my mind, that as at 17 August, Mr Reddy had not met Ms Menzies and so could not have obtained her signature on the first form but needed, for some reason to change the registered address of the company to that of his own office and the contact details to those of his employee. He did not have available to him any genuine signature to copy and hence wrote her name without using a signing style. Furthermore, although he did have Ms Menzies' genuine signature when the two other forms were lodged, it is so markedly different to that on the first form that to have attempted to copy it could have invited suspicion. The illegible signatures that he admittedly used, on the other hand, might well have been taken for different forms of the first signature, were any comparison made. The two forms later lodged, concerning changes of officers and shareholding, stated these had been effected on 17 August 2005, which brought them into line with the first form, purportedly signed by Ms Menzies as Director. Strangely, the form as to change of shareholding of the company's one issued share) states that it was not beneficially held by her for reasons never explained. (One can hypothesise that this was to give Mr Reddy some room to move if he ever needed to, but I do not take this any further.) 52Returning then to the early discussion involving Mr Reddy (and, I think, Mr Lyle), Ms Menzies said that he told her he had a shelf company that could be used and, when she agreed to use it, asked her (at some point) to sign a one page document with ASIC at the top which, she understood, said she had taken over as director. (Such a form was never lodged, I think because it showed that her signature was too different to that which had already been used, as discussed above. I do not believe that Ms Menzies authorised Mr Reddy to use her signature for this (or, indeed at any time), nor that he thought he was authorised to do so. It was nevertheless useful to obtain her signature on this form since it gave him an example of her genuine signature.) Ms Menzies understood that the company was to be hers and the only difference between undertaking the development in her own name and doing it through a company was that the company structure would be utilised. This did not amount to a concession, however, that she and not the company was to be liable for the cost of the project and I do not believe that, at this point, she had decided to undertake any personal obligations. Indeed, I infer that she agreed to participate in the proposal because it did not involve personal obligations. She denied that the development was, as Mr Sirtes SC for Perpetual described it, "your baby", because it was to be undertaken with Mr Lyle and using his builders. 53Ms Menzies arranged to attend the auction at Cardigan Street. She understood that it would be necessary to have the deposit funds available at that time if a winning bid were made. She did not intend to pay that deposit from her own savings and, in fact, did not do so. There had been no decision about the maximum price that they would be prepared to pay. Ms Menzies said that "we were still waiting for the finance...to come through", which Mr Reddy was arranging. Ms Menzies understood, as at the date of the auction, that the finance was "in place" and, so long as the property was sold at the price which she was prepared to pay, she would buy it through Valcorp Developments, the shelf company provided by Mr Reddy. 54For reasons which will become clear, I consider that Mr Lyle and Mr Reddy seized on the Cardigan Street proposal as a way to inveigle Ms Menzies into a scheme which would enable them to take advantage of her naivety for the purpose of defrauding Perpetual, using Ms Menzies as a "front" to give an apparently genuine flavour to the transaction with that company providing, of course, that they could obtain, one way or another, access to an unencumbered Certificate of Title to hand over on settlement. Given the sequence of events, I think it is most likely that the use of a forged Certificate of Title on respect of Ms Menzies' home was always contemplated. (This suggests that one or both of Mr Lyle and Mr Reddy had previous experience with forging such a document, but this is speculative and I do not rest any conclusions upon it.) 55It is now necessary to move to the evidence concerning the application for finance in respect of the Cardigan Street proposal. This was arranged through a Mr Wayne Dive, a director of Dive Investments Pty Limited, which operates as a mortgage broker under the trading name of Smartline. He says that in about August 2005 he received a telephone call from Mr Reddy whom he had previously known in connection with a loan brokered on his referral and understood was formerly a commercial broker and property investor and manager. Mr Reddy told Mr Dive - I am going into joint venture property development with a lady by the name of Ann-Marie Menzies. We are buying an investment property in Cardigan Street Stanmore. Ann Marie is putting up her unencumbered property in Stafford Street Stanmore as security to raise funds for her contribution towards the joint venture. We hope to buy the property in Cardigan Street, a deceased estate, for about $610, 000. We have incorporated a company Valcorp Developments Pty Ltd to buy the properties. She is a director of Valcorp. Ann-Marie needs to obtain finance over her Stafford Street property. We also need to obtain a loan for the property in Cardigan Street for the purchase price and to do renovations. These will be Low Doc loans can you arrange finance for us? 56This was the commencement of the fraud. Of course, it was not true that Mr Reddy was in a joint venture with Ms Menzies. (I deal with Mr Reddy's explanation for this representation below.) Nor was it true that Ms Menzies had agreed to secure any finance on her home. Mr Dive then spoke to a Mr Maloney, whom he knew, at BMC to tell him of the proposal and, shortly after called Mr Reddy and told him in effect that an application form completed by the company and by Ms Menzies was necessary. No question arose, at least at this point, about seeing Ms Menzies personally (the effect of which has led to cross-litigation between Perpetual and BMC, not immediately calling for decision). He sent the application forms by facsimile to Mr Reddy. 57On or about 30 August 2005 (the Tuesday following Saturday 27 August 2005, the day of the auction at which, as will be seen, Mr Reddy paid the deposit by a cheque that was dishonoured, almost certainly on that day). Mr Dive received the following forms, dated that day by Mr Reddy: applicant declaration, consent to use personal information, declaration as to purchase of credit and EasyDoc declaration of financial position. Of course, the point of an EasyDoc loan was that no proof of the asserted financial position was necessary, as undoubtedly Mr Reddy was well aware. Ms Menzies agrees that she had signed these forms except for the applicant declaration. She said the EasyDoc declaration of financial position may not have contained her name written at the top of the page when she signed it but she could not recall. (I think this candour, certainly capable of being against her interest, strengthens her credibility. During her evidence, Ms Menzies made a number of similar concessions which were, if she was minded to lie to support her case, not necessary to be made.) The consent to use personal information form of the same date, Ms Menzies says contained her signature just under the phrase "signature of borrower(s)" but she said that she thought she was signing it for Valcorp. The declaration as to purpose of credit was also signed by her alongside the word "(borrower)" but she said that she signed this also, as she thought on Valcorp's behalf. Her evidence in this respect was tested in cross-examination. I have concluded that she was being truthful, not only because of the way in which she gave her evidence, but also because of what I thought was the probability, having regard to the evidence as a whole. 58She says that these documents were handed to Mr Reddy in relation to the proposed purchase of Cardigan Street. In cross-examination she suggested at one point that they were signed after the auction but then reverted to the account given in her affidavit that she had signed them on the evening before, although the documents were dated three days later. She says that when she signed the documents they were not dated and those dates are not in her handwriting. She said that she trusted Mr Reddy because of Mr Lyle's recommendation. 59On 1 September 2005 Mr Dive received by facsimile a copy of a cheque for $1,800 dated the same day drawn on the Laiki bank account of Ocean Drive Developments (Aust) Pty Ltd (one of Mr Reddy's companies) made payable to BMC for its fees, and a copy of a statement of financial position for Valcorp Pty Limited, which Mr Dive forwarded onto Mr Maloney the same day. The statement of Valcorp's position forwarded on 1 September 2005 identifies the Cardigan Street property as the security, the purchase price as $610,000 and the amount of the proposed loan as $460,000. (Although, as will be seen, by this time the sale had fallen through.) Mr Dive said that the cheque was either delivered to him or he collected it from Mr Reddy's office in Pitt Street. Some time in early September Mr Dive was informed that further forms were required by BMC. He sent them to Mr Reddy, who returned them to him on 5 September 2005. Those documents comprised a LowDoc application form and ASIC search of Valcorp Developments Pty Limited. The Low Doc application form purported to be signed by Ms Menzies and stated that her income before tax was $140,000 per annum and that the loan amount sought was $480,000. Ms Menzies says, and I accept, that the writing, including the signature on the form, is not hers. The income was, of course, Mr Reddy's fabrication. Mr Dive said in effect that, had he been aware of Ms Menzies' true financial position, the loan would not have been approved. 60Ms Menzies' evidence, in substance, was that she simply signed such documents as were put in front of her by Mr Reddy because she trusted him. She said that she probably did not read each document and she certainly did not notice that she was identified as the borrower. She said, in effect, that she either did not read or did not take any particular notice of the identification of the lender as Perpetual Trustees Victoria Limited, since her recollection is that she only became aware of that name much later. Ms Menzies also made available to Mr Reddy her passport to enable him to copy it for the purpose of the loan together with her driver's licence and European Union passport and a rates notice over the property. Although these verified her personal identity, I accept that it did not occur to her that she was to be the borrower, as distinct, from applying for the loan on Valcorp's behalf. 61As mentioned above, the auction of Cardigan Street took place on Saturday, 27 August 2005. Ms Menzies said that on the previous day Mr Lyle, Mr Reddy and another person (introduced by Mr Lyle as a builder) came to Ms Menzies' home. Mr Reddy told Ms Menzies that finance had been arranged and he had arranged for the "real estate agent to bid at the auction". (Certainly, the first of these assertions was untrue.) Mr Lyle said that the builders he used could start on the renovations soon, as they did not have much other work on. Ms Menzies said that she was excited about these developments. It was regrettable that she did not seek more information about the actual details, I think reflects her commercial ignorance, simple naivety and misplaced trust. 62At the auction, Mr Reddy said to Ms Menzies that he would bid for her, which he did. Ms Menzies said that she had understood that Mr Lyle was to pay the deposit and that she saw Mr Reddy hand what she assumed was Mr Lyle's cheque to the real estate agent. A few days later, she said, Mr Reddy telephoned her to say, "The deal fell through, you didn't get the Cardigan Street property, the purchase didn't go ahead". He added that there was another property available in Hancock Street she should look at. Ms Menzies agreed. She was then called by Mr Lyle who said he would take her to see the property at Hancock Street, which he described as "the perfect property" and claimed it would be more profitable than the property in Cardigan Street. Ms Menzies agreed to view it. 63Mr Reddy said that he attended the auction intending to pay a cheque by way of deposit on an account controlled by him even though the account did not contain adequate funds to cover such a cheque. He was aware that finance had not been arranged and he denied telling Ms Menzies that finance had been arranged or, indeed, meeting her the previous night. He also denied telling Ms Menzies that the purchase had not gone ahead. He said that Mr Lyle had spoken with her because he had found the property in Hancock Street, about which he knew nothing until he sent Mr Reddy the front page of the contract. Mr Reddy, said he did not know whether Valcorp would pay the $610,000 ultimately bid but that there was a period of six weeks in which to obtain finance and "we were planning to exchange on the deposit bond, which didn't require a lot of money at that point in time". He said the deposit cheque was dishonoured. He said the bond did not proceed because he was called on Monday by Mr Lyle who said that the council would not give approval to convert the building into a block of units, "so he pretty much reneged on the deal". If finance had not been available, then the deposit would have been forfeited. No arrangement had been made by the time of the auction to acquire a bond. I should mention also that Mr Reddy at first denied that, but then said he may have been present with Ms Menzies when she signed some of the loan application forms. He agrees that he had obtained the application forms from Mr Dive. 64On 1 September 2005 Mr Dive, following a telephone call with Tamara Eason, Mr Reddy's employee, sent by facsimile to Mr Reddy (amongst other papers) a short bond application form asking him to "arrange with Ann Marie [Menzies]...and fax back" the three page form which is exhibited in these proceedings but (I think from oversight) was not the subject of any evidence from Mr Dive, Mr Reddy or Ms Menzies. The form purports to have been signed by Ms Menzies on 2 September 2005 but when it was returned is unclear. It states that it is made on behalf of Valcorp and Ms Menzies in respect of the purchase of Cardigan Street. The assets (without identifying whose they were) are said to be a cheque account for $25,000, shares worth $62,000 and a Toyota Corona worth $20,000. I am satisfied that Ms Menzies did not have any shares (except for her one share interest in Valcorp, which was for all practical purposes worthless). I am not satisfied that the details as to the cheque account and the car were true, nor do I believe that the information came from Ms Menzies. This document was examined by Mr Anderson and fell into the class described in para (3) of the summary of the effect of his report. In light of the evidence as a whole, I conclude that more probable than not the purported signature of Ms Menzies on this form is a forgery, almost certainly perpetrated by Mr Reddy against the possibility that he might need to redeem his worthless deposit cheque. There is no evidence that the form was actually submitted to QBE for its consideration. For whatever reason the proposed purchase did not go ahead and almost certainly had come to an end at or about this time. The need for the forged bond was, therefore overtaken by events. 65The documents signed by Ms Menzies, as she thought on 26 August 2005, the night before the auction, are all dated 30 August 2005. The loan documents were sent in dribs and drabs to Mr Maloney of BMC on 30 August 2005, 1 September 2005 and 2 September 2005. Shortly after 2 September 2005 Mr Maloney spoke to Mr Dive and told him of the caveat which was registered on Ms Menzies property and that it was necessary to obtain a withdrawal. This, of course, was the Supreme Court caveat. Mr Dive called Mr Reddy, informed him of the caveat and requested him to ask Ms Menzies about it, which Mr Reddy said he would. 66It will be recalled that a withdrawal of caveat form, apparently (though not actually) duly executed on behalf of the Court had been sent to Ms Menzies on 5 May 2005. Whatever might have been in the position about the Certificate of Title, there is no doubt that Ms Menzies had this document when Mr Reddy agreed with Mr Dive to enquire about it. I am quite sure he did not do so. Ms Menzies was not asked by Mr Reddy or, for that matter, by Mr Lyle about the withdrawal (let alone for her Certificate of Title) since the withdrawal form in her possession would have been that which was handed over on settlement - providing, of course, that Ms Menzies' was agreeable to her home being security for the loan. The same, of course, goes for her Certificate of Title. The evidence of Mr Dive is the first that connects Mr Reddy with the need to obtain a withdrawal of caveat, a problem raised at quite an early stage. Since he did not make any enquiry of Ms Menzies or, if he did so (which I do not accept), he must have been rebuffed. It follows from this, virtually taken alone, as cogent evidence that Ms Menzies did not agree to secure any loan on her home, a conclusion all the more convincing when the creation and use of the forged Certificate of Title is taken into account. (There is, however, a great deal of other evidence that tends strongly to the same conclusion, as will be seen.) It is unnecessary to repeat the communications between Mr Lyle's solicitor, Mr Ricci, with the Supreme Court. It will be recalled that on 28 September 2005 he had wrote to ask for removal of the caveat and advice as to whether the Certificate of Title was able to be collected. In the result, a second (genuine) withdrawal of caveat was ultimately obtained from the Court, probably by Mr Ricci, and passed on to Mr Reddy for the settlement of the loan to Perpetual. In this way, the withdrawal in Ms Menzies' possession was not necessary and she could be by-passed, as I am quite satisfied is what happened. 67I am somewhat sceptical that, at least by the date of the auction, the proposed purchase of the Cardigan Street property was regarded by Mr Lyle and Mr Reddy as a genuine transaction. They must have known, as at 27 August 2005, not only that no loan had been approved but none had been applied for and, of more immediate importance, that there were no funds to pay Mr Reddy's deposit cheque. It seems that Mr Reddy had provided against this problem by an application for a deposit bond organised through Mr Dive and fraudulently completed. The auction took place on 27 August 2005, so that the Monday would have fallen on 29 August. He was not, therefore, in a position to replace his cheque as he said he had promised to do on either the Monday or the Tuesday following the auction. The purchase of the property at Hancock Street Rozelle 68I accept Ms Menzies' evidence that, shortly after the purchase of Cardigan Street fell through, Mr Lyle suggested to her that, instead, the property at Hancock Street should be purchased and developed. He took her to see the property and they talked about the project. Mr Lyle told Ms Menzies, in effect, that the property was ripe for development and they should do it together. He had available builders, accountants and lawyers and, if Ms Menzies got the loan, he would pay the instalments until the house was sold and they could split the profits. He said that Ms Menzies was working full-time and he was able to "run the business". Ms Menzies said that she did not want to be involved in anything illegal, a reference to Mr Lyle's previous charge which concerned the manufacture of amphetamines. Mr Lyle assured her that he would do nothing wrong since he did not wish to end up in Court again. He repeated his role and said that Mr Reddy would arrange the finance. Ms Menzies agreed to participate in the project. 69A contract dated 15 October 2005 and signed by Mr Lyle as director of Valcorp and the vendor has been tendered. It was forwarded by the estate agent to Access Business Lawyers 20 October, who were informed also that the deposit of $35,750 was "invested by our office as directed by the contract". Settlement took place on 23 January 2006. On settlement, $125,729.03 was paid to the vendor by a bank cheque, making up the difference between the purchase price and the finance available through Permanent. At that time the Valcorp account had only $262.28. Mr Reddy said that, because the bank cheque was drawn on Laiki bank, the funds came from another one of his accounts with the bank. There are notes of telephone calls contained in Mr Venegas's file referring to deposits to be made for the purpose the settlement by Mr Cooke. Mr Reddy said that he could only think that Mr Cooke's involvement might have been a contribution either towards the balance of the purchase price or the stamp duty or some other disbursement "because I may not have had enough". Of course, it was essential that this purchase proceed, lest the entire scheme collapse. Hence the necessity for the make-up cheque. The applications for loans 70Mr Dive was told by Mr Reddy that the purchase of Cardigan Street and, by implication, the ensuing project involving was a joint venture between Mr Reddy and Ms Menzies. As I understand his evidence, Mr Lyle's involvement was never mentioned. Mr Dive was cross-examined about his failure to make contact with Ms Menzies until April 2006 (to which I shall come in due course). He said, first of all, that he did not understand that BMC required physical identification of an applicant for a loan. (Indeed, this is BMC's case as against Perpetual's contention that it was part of their contractual arrangements that BMC would ensure physical identification of the borrower.) Mr Dive said, at all events, his intention was always to meet with Ms Menzies at some stage during the process. He said that, on a number of occasions, he told Mr Reddy that he was always available during the day or after hours to meet with Ms Menzies and that he would love to talk to her because he had an interest in property development himself. He said that Mr Reddy told Mr Dive that Ms Menzies worked in a nightclub and it was very difficult to get in contact with as she worked long hours and slept most of the day. Although, Mr Reddy's evidence was that she was working in the hospital but he was not sure what her job was I accept Mr Dive's evidence as to what he was told. Mr Dive said that he was unaware that Ms Menzies actually worked at a hospital during the days and did not work at night. Mr Dive telephoned Ms Menzies home phone number on a number of occasions during the day (as I understand it) but she did not answer and he thought she must be asleep. He said, in effect, that Mr Reddy had put him off contacting Ms Menzies. He thought that he would meet with her before the final loan documents were ready and go through them with her to make sure that all was in order. He said that he told Mr Reddy that when the loan documents were ready he would like to go through them with Ms Menzies. However, the next he heard about the matter they had already been sent to Galilee's. He said that, from his point of view, he understood that a solicitor retained by Ms Menzies was involved in the transaction and he took some comfort from this. 71Mr Reddy was cross-examined about his communications with Mr Dive - SKINNER Q. The form goes further doesn't it Mr Reddy. It gives information to ASIC as to whom the contact person was to be for the company, doesn't it? A. Yes it does. Q. Who was that person? A. That was Tamara. Q. Tamara Eason, correct? A. Yes. Q. That step of notifying ASIC that from that date onwards, the 7th September 2005 that Tamara Eason was to be the contact number was part of your fraudulent endeavours concerning Ann Marie Menzies, wasn't it? A. No. HIS HONOUR Q. You see, what appears to be the case and I would like you to explain to me if it is wrong, that you took every step and acted at every point in a way that separated Ms Menzies from either knowledge, or participation in, any of these transactions. So far as you were concerned it was as though she didn't exist. That is what it looks like, do you agree? A. It looks like that, yes. Q. And do you say that was accidental or deliberate? A. It wasn't accidental. Q. So it was deliberate? A. No it wasn't deliberate either. Ms Menzies was aware a company was going to be formed. Q. I am not talking about the company. I am talking about the entire transactions from beginning to end, were designed to isolate Ms Menzies from what transpired. Is that not what you attempted to do? A. No. Q. Do you agree that what happened has the appearance of that intention? A. Largely looks like that, yes. SKINNER Q. All communications with Mr dive about two loan applications were all conducted by you? A. Yes. Q. Weren't they? A. Yes. Q. You never took Ms Menzies to meet Mr Dive? A. I don't remember taking her, no. Q. And the address that you provided Mr Dive for contact purposes with Ms Menzies was your office? A. Yes. Q. So far as details of Valcorp were concerned they were all details relating to your office? A. Yes they were. Q. And you provided Mr Dive with no information with which he could - withdrawn - and you never took Ms Menzies along to meet Mr Dive? A. No I don't recall. Q. Well you know you didn't? A. I don't know I didn't. I don't recall taking her to see Mr Dive or Mr Dive seeing her at my office. HIS HONOUR Q. Mr Reddy, are you saying as you sit there you may have taken her along to see Mr Dive? A. No I don't think I did. Q. Well isn't it the fact that you know you did not? A. Okay, I know I did not. Q. And is the reason that you know you did not because it was a deliberate decision by you that they would not communicate - you did not wish them to communicate? A. No that wasn't the case. I mean, Ms Menzies knew about the mortgage -- Q. No, no, I am not talking about that. I am talking about communicating with Mr Dive. Isn't it the fact that you know that Mr Dive never met Miss Menzies because you planned it that way? A. No it wasn't like that, no. (I should mention that Mr Reddy's demeanour was careful and deliberate. It never gave me the impression of simply, as it were, giving in. The admission that he knew he never took Ms Menzies to see Mr Dive was made, I am sure, because he realised that his attempt to temporise by appealing to a failure of recollection was unconvincing) 72Mr Dive said that the initial applications related to the purchase and development of the Cardigan Street property. He said that, some weeks after lodgement of the documents he was advised by Mr Reddy that the purchase was not proceeding and the application "was left in escrow at BMC until another property...was located". The EasyDoc Declaration of Financial Position dated 30 August 2005, signed by Ms Menzies, was filled in by him, he thought before he sent it to Mr Reddy for Ms Menzies' signature. The date may have been added when he received it from Mr Reddy by facsimile. The Consent to Use Personal Information and Credit Reports contains only one entry other than the signature of Ms Menzies, which is the date and was probably placed on the document when it was received from Mr Reddy. The same is the case with the Declaration as to Purpose of Credit and the Applicant Declaration Form although this latter form was not, Ms Menzies says (and I accept) signed by her. Also forwarded to BMC was a document giving details of Valcorp, completed for the purposes of the loan application in respect of Cardigan Street. That form was completed by Mr Dive. It contains no handwriting of Ms Menzies and no signature, forged or otherwise. It gives her address at her home and her home telephone number. A separate form adapted for a "personal borrower" relates, it appears, to an application by Ms Menzies. According to Mr Dive it, also related to the purchase of Cardigan Street. It can fairly be described as, in substance, a fraudulent document. The original postal address has been whited out and changed to 312/508 Riley Street which was said to have been her address for five years. Mr Dive said that he did not enter this address. (I must say, however, the handwriting bears an uncanny resemblance to other writing accepted by Mr Dive's as his but, because this was not put to him in cross-examination I am not prepared to draw this conclusion.) The address, which never had anything to do with Ms Menzies, was certainly supplied by Mr Reddy. He said that he does not know where the information came from but it was not Ms Menzies; he took no steps to verify the address but, "I did what I was told", by whom he did not remember. Of course, he had visited Ms Menzies in her home. The telephone number was that of Mr Reddy, as is the mobile number. The form states that Ms Menzies occupation is "Director - Events Mnr": and that she was an employee of Valcorp since 2003. Of course, she was not and never was an events manager, nor was she ever employed by Valcorp, let alone since 2003. I am satisfied these facts were provided by Mr Reddy. I am also satisfied that he knew they were false. Her solicitor is said to be Mr Venegas of Access Business Lawyers. The business telephone number is given as 9231 1555, a number not associated with Ms Menzies. The home telephone number has been scribbled over and is impossible to read. The contact name for the valuers access is Ms Eason whose the telephone number is stated as 9231 1555. The postal address at Suite 1301/115 Pitt Street Sydney was Mr Reddy's business address. The proposed security is Ms Menzies' home. The form contains a statement of Ms Menzies assets and liabilities. Her assets are shown as the home at $830,000, furniture/ household effects of $35,000, balance in a bank account of $50,000 and superannuation of $160,000. The liabilities are an existing mortgage to BMC of $539,000.00 and rent payable by the proposed borrower of $140,000.00. Although Mr Dive said, at first, this was part of the application sent to BMC in respect of Cardigan Street, so that the reference to the BMC mortgage was his mistake, it was (as he later conceded) actually sent when Mr Reddy tried to get a further advance from Perpetual secured by the forged mortgage. (I discuss this matter later but mention it now because it is significant, as it seems to me, that Mr Dive's file - if so it can be described - comprised a mess of different applications and amended forms that went backwards and forwards between him and Mr Reddy and BMC. I am not satisfied at all that Mr Dive has anything approaching a clear understanding of the transactions as they unfolded and have formed the conclusion - discussed later - that much of his evidence is a reconstruction based on what he later came to understand.) The form says the property is leased for six months for which the gross rent is $39,000 per annum. Leaving aside the valuation of the property, and the reference to the existing BMC mortgage (in fact, the Perpetual mortgage) the information on this form is false. The property was not let but it was occupied by Ms Menzies. She did not have furniture or household effects of $35,000, she did not have $50,000 in the bank and she did not have $160,000 in superannuation. I am satisfied these details were invented by Mr Reddy. 73Another form said to form part of Mr Dive's file, concerns the giving of security over the property at Cardigan Street Stanmore again refers by implication to Ms Menzies' assets and liabilities, valuing her home in this document as $1,100,000, giving her a vehicle worth $30,000, furniture and household effects $30,000 and savings of $20,000 with no liabilities. Mr Dive said that this latter document was filled in by him on Mr Reddy's information and that it was necessary, when the Hancock Street transaction was being financed to get a second form and that this was completed by him. Again, there is no evidence that connects Ms Menzies with any knowledge of these forms, let alone that she supplied any of the information contained in them and there is no proper basis for concluding that she was aware of their contents. I am quite satisfied that the information came from Mr Reddy, who admitted that he was not in contact with Ms Menzies at the relevant times. 74To summarise, these documents containing financial information, comprise a document headed "Security" said to be required for the purchase of Cardigan Street, two document headed "Corporate Borrower", one referring to Valcorp and purporting to give Ms Menzies' personal and financial details and the other having the words "Corporate borrower" struck out, and giving what purports to be Ms Menzies' personal particulars (all false), neither stating a purpose, a document headed "Security", specifying the Stanmore property containing false financial details, have no evidentiary connection with Ms Menzies and cannot be said to have been made with her authority. Also attached are an undated Consent to use Personal Information and an undated Applicant Declaration referable to BMC. Both purport to be signed by Ms Menzies. I am satisfied that they were not but that her signature was forged by or at the instance or with the connivance of Mr Reddy. Both from its appearance and the circumstances, I am satisfied that it was indeed forged by or at the instigation of Mr Reddy. 75Mr Dive also received from Mr Reddy the following forms: (i)Borrower details form; (ii)EasyDoc declaration of financial position dated 30/08/05; (iii)Consent to use personal information and credit reports dated 30/08/05; (iv)Declaration as to purpose of credit dated 30/08/05; (v)Application declaration dated 30/08/05; (vi) 100 point check dated 30/08/05; (vii)Photocopies of Ms Menzies licence and passport; (viii) Tax returns for 2004 and 2005 for Ms Menzies; (ix)2004 tax return for Valcorp.and financial details for 2005. 76Ms Menzies accepts that the signatures on the second, third and fourth documents but not the fifth are hers. In respect of the last of these, I am satisfied, taking into account also the evidence of Mr Anderson that this document falls into the third paragraph set out above in my summary, that Ms Menzies' signature was forged, in all probability by Mr Reddy. The tax returns were false, fabricated either by or at the direction of Mr Reddy. Mr Reddy agreed that, as a part of that exercise, he provided to Mr Dive false documents by way of details of Ms Menzies income and false details about the financial affairs of Valcorp - Q:Why? A. Well, for the type of loan he was doing. I guess we could have done a Low Doc loan and not produce any documents, but for the type of loan we needed to show that Valcorp was a trading entity and could repay its debts. Q. What benefit? Why would you? You must have known that doing this with false documents amounted to a criminal offence? You knew that Mr Reddy, yes? A. Yes, I did. Q. Why would you commit a criminal - what made you decide to commit a criminal offence? Ms Menzies didn't ask you to? Did Mr Lyle? A. No. Q. Neither of them asked you to commit a criminal offence you decided that you would do it yourself? A. Yes. Q. Why? A. Because I was in charge of organising the finances. This was the best way to do it. I had to show the bank that Valcorp was a trading entity at the time. Q. What was your motive? A. To get the transaction done. Q. What was in it for you? A. I would have shared in the profits of the renovation. Q. That was your motive? A. Yes. 77This explanation is probably correct to a certain extent. I believe that it was indeed necessary for Mr Reddy to obtain the finance but this was so he and, probably, Mr Lyle could use the proceeds, or much of them, for their own purposes. The most significant evidence for this conclusion is that, indeed, this is precisely what happened. The forgeries and frauds must have been part of the scheme from the very beginning, though perhaps their scale and precise character depended on the situation as it unfolded. It was never a legitimate arrangement. I do not believe that Ms Menzies ever regarded Mr Reddy as entitled to any of her half share. 78An application for an Express (LowDoc) loan dated 1 September 2005 and forwarded to BMC on that date referring to a loan of $480,000 (for what was to become the Permanent loan) contains another forged signature of Ms Menzies (again, an Anderson third paragraph document). This form relates to the Valcorp loan in respect of which it purports to be signed by Ms Menzies as sole director. It states that the company's gross income was $140,000. The document and the information contained in it was also supplied by Mr Reddy. Of course, Valcorp had no income at this time although it may be that it was hoped that it would obtain a profit from the development and on sale of Hancock Street. The document is simply a fraud. A security and purpose schedule was faxed to BMC on 1 September 2005 relating to Ms Menzies home. This states that the property is not let and that its estimated value is $1,100,000. It concerns a loan for $650,000 for "investment purposes". Nothing in that form is in Ms Menzies writing. It cannot be evidence against her in any sense. There is no evidence that it was authorised by her. If Mr Reddy's evidence could be said to suggest otherwise, I do not find him - as I have already said - a credible witness. 79On 1 or 2 September 2005 Ms Leanne Sherwood from BMC telephoned Mr Dive to request documents showing Ms Menzies relationship with Valcorp as an ASIC search did not mention her. On 2 September 2005 Mr Dive telephoned Ms Eason to inquire why this was so. Ms Eason told him that this had been recently done and ASIC not yet changed its records. She agreed to send a copy of the relevant forms to Mr Dive. On the same day Mr Dive received a facsimile from Ms Eason showing an ASIC record of a change to company details and a form headed "change to company details" purportedly, but not in fact, signed by Ms Menzies (this is one of Mr Anderson's inconclusive findings but Mr Reddy, as I have already mentioned, conceded that he had signed this document with Ms Menzies' name). Mr Dive sent a copy of these documents onto Mr Maloney at BMC. (I have already referred to the other ASIC forms relating to change of director/ secretary and shareholding, bearing Ms Menzies forged signature). 80Shortly after 2 September 2005 Mr Maloney telephoned Mr Dive advising that the Stanmore property was subject to a caveat and a withdrawal was required. As already mentioned, Mr Dive telephoned Mr Reddy who agreed to speak with Ms Menzies about it. I have already referred to the correspondence relating to this matter and my conclusions as to the obtaining of the withdrawal of caveat that was ultimately used in the transaction. (Mr Dive recalled that at about a week after Mr Maloney called him about the caveat, the withdrawal was provided directly to BMC. He does not state the source of this information.) Further LowDoc application forms are required about this time and provided by Reddy to Mr Dive, who on sent them to Mr Maloney. 81I think it is important to note that, in the result, there is no document collected by Mr Dive and sent on to BMC for the purposes of the "personal loan" which called for Ms Menzies' signature that identified the property which was to be secured. It is a most curious and highly unsatisfactory fact that the forms, which contain highly significant information, do not call for signature. They could, so far as appearances go, have been filled in by anybody. Nor are they dated, let alone numbered, so that it is not possible, by reference to their content, to reliably place them in chronological order or even connect them to a particular transaction. They give the appearance of being a collection of miscellaneous documents. In saying this, I am aware that they have been the subject of notices to produce and no doubt have been separated and copied and put back with little concern about their original order. However, it is surely obvious at the most elementary level that they should be able to be placed in order, dated and related to particular transactions or variations of those transactions by reference to their identifying content. 82On 8 September 2005 BMC arranged with a valuer to conduct an urgent valuation of the Stanmore property, which was arranged for later that day. Ms Menzies said she was telephoned by Mr Reddy to inform her that a valuer would attend her home to do the valuation and that "we need to show that you have assets because you are the director of Valcorp". Ms Menzies was present at the time of the valuation. The valuer introduced herself and asked for permission to take photographs and look through the house, to which Ms Menzies agreed. The only other conversation was, when she had finished, she told Ms Menzies that the inspection was completed and she then left. Mr Reddy denied that he had told Ms Menzies about the valuer, saying that it was Mr Lyle. Nothing turns on this but, as I have said, I consider Mr Reddy to be an utterly unreliable and dishonest witness and therefore I accept Ms Menzies evidence in preference to his. In cross-examination Ms Menzies said that she thought it was necessary to know how much her home was worth as opposed to the fact that she owned it because "it hadn't been valued for a long time and when they asked me how much it was worth I said I didn't know". She said that Mr Reddy had asked her how much it was worth and that she understood that he needed that information for ASIC. She said that, although it is true that she had signed the documents relating to a loan application for $650,000 some 8 days earlier, it did not occur to her that the reason for the valuation was that her house was being used as security for the loan. She said that she did not understand why ASIC needed the information and she did not ask Mr Reddy that question. 83Although it was submitted to me on behalf of Perpetual that Ms Menzies' explanation should be rejected as inherently unlikely, I believe that Ms Menzies was telling the truth about this matter. To my mind her evidence about Valcorp and her involvement in it showed that she was (like most members of the public I think) unaware of the legal requirements attaching to the holding of office in a company. I accept that she believed Mr Reddy's explanation which was, of course, designed to keep from her the true nature of the transaction that was underway. Her essentially passive role throughout arose from her simple, though misguided and unfortunate, trust in the representations of Mr Lyle in particular, and by derivation Mr Reddy to the effect that she was not undertaking any personal obligations.I do not doubt, from seeing Mr Reddy in the witness box over some days, that he could be extremely persuasive especially to persons with little knowledge of the commercial world in which he moved. The property was ultimately valued at $830,000. 84The registered office for Valcorp was level 13, 115 Pitt Street Sydney, namely the address of Mr Reddy's office. This was also the address used by BMC to communicate both with Ms Menzies and Valcorp. 85It is necessary to go forward some months. On 13 December 2005 an email from Mr Maloney of BMC to Mr Stewart of Interstar (ie Challenger) refers to the dishonouring of the first instalment on the Perpetual loan on two occasions. Firstly, it was said, "due to confusion over which account funds were to be withdrawn" and the second "due to unclear funds", the email attaching what were described as "letters from borrower" - plainly enough the letters signed by Mr Reddy which I mention in due course. The email noted that the repayment was processed on 8 December and was "OK". It noted that the "client wishes to increase loan by $124 500 up to 80% LVR and is providing financials to convert loan to fill Doc at a reduced rate of interest" and asked if the financier would be willing to consider such an increase. On the email itself are some handwritten notes, presumably made by Mr Stewart, stating that such a reconsideration would not be given until there were three clear repayments made. This request for an increased loan was admitted by Mr Reddy to be made by him without any instructions whatever and was in substance fraudulent as, at the very least, the financials which were proffered were fraudulent. Mr Reddy's evidence as to his involvement in the loan applications 86Mr Reddy said that he had met Mr Lyle around 1999 and that he had not done any other business with Mr Lyle other than introducing him to other brokers and individual clients. Mr Reddy said that the initial arrangement was that each of Ms Menzies Mr Lyle and Mr Reddy were to have a one third share in the joint venture of purchasing renovating or developing and ultimately selling a real estate property. Mr Reddy said that Mr Lyle's contribution was "construction expertise" and that his contribution was to organise the finance. That this "contribution" could possibly, in any real world, entitle him to a third interest in the proposed development is quite fanciful. He spelt it out. He said that Ms Menzies was going to provide all the money through borrowing and it was explained clearly to Ms Menzies at the initial meeting. He said that she did not actually say that this was a good idea "but she went ahead with the transactions, so I assumed she agreed with it", in short, there was no expression of actual agreement with this preposterous plan. As naïve and trusting as Ms Menzies was, I simply do not accept that she was, or would have been party to any such arrangement. 87Mr Reddy said that it was expected to spend between $75,000 and $100,000 on renovations on the Hancock Street property and that the money to be borrowed by Valcorp covered renovations as well as the short fall between the financing of Hancock Street and the purchase price. It being expected, as I understand it, that the initial financing would cover only 85% of the purchase price. It was also necessary to pay stamp duty and legal fees. He said that none of these figures were ever put in writing. He said he assumed that Mr Lyle had a quotation but that he never saw it. Mr Reddy said that he knew at the time how much was being paid to the builders for the renovations of Hancock Street, since he would get a request every week or every other week for payment. He said the builders were subcontractors engaged by Mr Lyle. He said that the request for payment was not in writing but was a telephone call and they would be paid either by cash or bank cheque depending on who needed to be paid. He said that he collected the cash and bank cheques from the bank. As best he could recall the amount paid to the builders was $120,000. This evidence was not true, given the date when the loan was settled and the virtual emptying of the Valcorp account into which the advance was paid, well before settlement of the purchase of the Hancock Street property occurred. (I set out Mr Reddy's evidence about this sequence of events below.) 88Contracts for the purchase of Hancock Street were exchanged on 15 October 2005. The settlement occurred on 23 January 2006. The purchase was in part financed by a loan of $643,000 advanced by Permanent Trustee Company Limited to Valcorp. The property was sold in December 2006 for $1.15 million. 89 Mr Reddy said that the plan was that Valcorp would obtain a loan to purchase the property and Ms Menzies would obtain a loan in her name to provide funding for renovations and to make up the short fall of the loan to Valcorp. He was asked - Q: What was said by you or what was said about that part of the plan concerning her borrowing money personally to fund the renovation and shortfall expenses? A: I don't recall exactly what she said but she agreed with it Q: Do the best you can Mr Reddy to tell his Honour what you said to her and what she said to you about that aspect. A: As I said before, its that she would provide the - HIS HONOUR: Q: No, what did you say to her, what did she say to you to the best of your recollection? A: I said to her that we plan on buying an investment property or renovation property and the equity to pay for the renovation and the shortfall financing cost will come from your property that you have now. CURTIN: Q: What was her response if any? A: I guess she agreed, I can't remember, but I guess she agreed. I find this failure of recollection impossible to accept. Of course, after the expiry of time, one would not have expected Mr Reddy to recall the exact conversation but in respect of a transaction in which he was going to make a substantial profit and was to attempt to find financing, that he did not know what in substance was put to Ms Menzies and what she agreed to is to my mind incredible. It cannot be true that her agreement was a "guess". 90Mr Reddy said that they discussed purchasing a property of around $500,000 and that they would probably make around $200,000 net if the property were very old and it was renovated with Mr Lyle's builders, because it would be cheaper that way. Mr Reddy said that either on the first or second meeting he obtained from Ms Menzies the passport and drivers licence and (I think) rates notice to make copies of them for the purpose of applying for a loan. He said that he did not see her sign any of the finance documents that he obtained from Mr Dive although he did talk to Ms Menzies about signing the documents. He said that everything "was sent to where it was required to be sent and came back signed". He said that he filled in the initial application form. He denied signing Ms Menzies name to any of these documents. He agreed that he did not have her authority to sign any documents on her behalf. 91In relation to the mortgage and loan contract from Galilee's that came to his office in Pitt Street, he said he informed Mr Lyle about them and made them available to be collected at the office. He did not see who did this or when or how. He said that the documents came back to his office about the next one or two days. He denied forging the signature of Ms Menzies on the mortgage and denied forging the Certificate of Title. Mr Reddy suggested that Ms Menzies was represented by lawyers for the purposes of settlement. As he well knew, the lawyers who were specified in the documents was Access Business Lawyers, in particular, Mr Claudio Venegas, who had previously acted for Mr Reddy in relation to a number of conveyancing matters. There is no evidence that Mr Venegas was ever retained by Ms Menzies, let alone that he attended on settlement. Mr Venegas said that on or about 18 October 2005 he was telephoned by Mr Reddy who said that he had a new matter for him, acting on behalf of Valcorp in its purchase of Hancock Street. I think it is inescapable that Mr Reddy knew that Access Lawyers had been specified in the documentation and that he was the source of this contact and, furthermore he was well aware that Mr Venegas was not at all involved in the mortgage of Ms Menzies home to Perpetual. 92In connexion with Valcorp, Mr Reddy said that he had bought it from a developer client of his shortly before his initial meeting with Ms Menzies. He said that Valcorp paid $15,000 which came from the money in the Laiki Valcorp account. This being a delayed settlement because there were no funds for the purchase. He did not tell Ms Menzies that the company would cost $15,000. Furthermore, it is identified in one of the application for loan documents provided to Mr Dive as a $2 shelf company. He said that it was purchased as a "going concern" but, of course, this was, as he must have known, a nonsense. None of its earlier business (assuming it had any, which I very much doubt, since the only evidence about this comes from Mr Reddy) was acquired in any sense. When acquired it had no assets and no income. Its only business, as he had to concede, was the proposed Cardigan Street and then Hancock Street developments. Yet he persisted in this patently untrue evidence, despite these matters being brought to his attention. This is one of a number of examples of false evidence. I do not believe for a moment that he really thought that Valcorp was a going concern. It follows also that his evidence that he paid $15,000 for it to his former clients is a fabrication. Mr Reddy was asked why he did not simply buy a shelf company which were then being sold for about $900. He said it was a going concern, and "had income, it had similar model to what we planned to do." 93When asked what income Valcorp had, he said he could not recall - it was "a little bit of income...[from] property developments". He said that the income was coming as part of consideration for purchasing the company, that he got a copy of the balance sheet (as to which, see below) which he sent to an accountant "to incorporate as a going concern." This is a nonsense. All that was done is to transfer the shares and change the officeholders and the registered office using forms that he filled in. There is no evidence that any accountant had anything to do with this acquisition and I do not believe any such thing occurred. He did not recall any transfer of the shares being executed although "most probably" it happened with no stamp duty being paid because the company had no assets. He said that the company's income from property development was to go to the previous director but that Ms Menzies got for her $15,000 - A: By getting a company that had an existing income stream would show when we were trying to finance the next project, we have a company that was in [the] business of renovation, that had an existing income stream but a different director. 94 There was no "existing income stream" as Mr Reddy well knew and in no sense did it continue its former business. Nor did he suggest to Ms Menzies that it was doing so. Indeed, I accept her evidence that he told her it was a shelf company. Nor did he suggest to Mr Dive that it did, (indeed, quite the contrary) until sometime later, in connexion with a different transaction in respect of which he produced fabricated financial records. He said, as to that transaction, he had obtained a profit and loss statement that he had provided to BMC. I asked - Q: ...Did you give the bank a balance sheet which stated that the company had assets? A:I can't answer that question now because that is probably going to incriminate me in another breaking in another law. 95He agreed that in due course Valcorp would be required to file tax returns and that it would have been his job to do so. He agreed that, in connexion with the Hancock Street development, in order to claim expenses for renovations, it would have been required, if directed by the ATO, to prove its expenses and that, in effect, these expenses were going to be proved by proving payments from the bank account rather than any accounts provided by the builders. However, he kept no records of these payments. I do not believe this is accidental. The Perpetual loan and security documents 96On 14 September 2005 BMC wrote to Ms Menzies at Mr Reddy's office thanking her for completing the application for a secured loan facility and advising, in effect, that "an Interstar premium facility loan facility" had been approved. The loan was for $539,500. The attached schedule outlined the proposed terms and conditions of the facility and, if she agreed to them, she was asked to sign the acknowledgment forwarded with the letter and initial the copy of the letter itself and the attached schedule. These documents were to be returned with a cheque payable to BMC for the applicable fees of $950. BMC subsequently received an acknowledgment, the loan purpose checklist and a Privacy Act 1988 (Cth) consent, all dated 21 September 2005 and apparently signed by Ms Menzies. On 14 September 2005 BMC notified "the director, Valcorp Developments" in a letter addressed to Ms Menzies at Mr Reddy's office that the application for finance by Valcorp of $480,000 was approved. 97Ms Menzies denies receiving either letter from BMC and did not sign any of the documents which had been forwarded. These three documents fall into Mr Anderson's first paragraph group. I am satisfied that Ms Menzies' signatures were forged. I reject the contention that Ms Menzies authorised them to sign her signature on any of these documents or that they could possibly have thought she had done so. I note that there was no pretence to BMC that the signatures were placed on the documents by virtue of some delegated authority to do so, of course, because proof of such an authority would have been required and, moreover, the form of the execution would have been quite different - this always requiring the signature of the attorney and a statement of the nature and source of the authority. However, such technicalities were immaterial: it was always the plan to forge Ms Menzies' signature on all the relevant documents, as sufficiently demonstrated by the fact that this was what was actually done. 98A significant, indeed key, piece of evidence is an email of 22 September 2005 Ms Cortes emailed Ms Amestica at BMC providing information concerning the approval of the loan and specifying certain conditions still to be fulfilled. The email stated that "documents are being sent to: Menzies A (borrowers)" giving Ms Menzies home address. Next to that part of the email is a handwritten note "advised Jeanie to post Pitt Street address," plainly Mr Reddy's office. This note is strong evidence as to the likelihood of the address in fact used by BMC to send correspondence to Ms Menzies as well as the addresses used on the correspondence to which I have already referred and mentioned below. 99On 21 September 2005 a bank cheque on Laiki bank in favour of BMC for $950 was received by BMC. On 23 September 2005 BMC wrote to Ms Menzies, again at Mr Reddy's office address, confirming a satisfactory valuation report and advising that a formal loan agreement would be issued by the mortgagee's solicitors, Messrs Galilee and Associates of Parramatta. The replacement value of the property was assessed at $250,000 and a current insurance certificate for an amount equal to or greater than the value which noted the interest of Perpetual together with a copy of the policy was required prior to settlement. 100On 30 September 2005 Mr Nada Saki, the solicitor with Galilee's handling the matter, wrote to Ms Menzies at Mr Reddy's office enclosing the housing loan contract, the mortgage, the mortgage memorandum of common provisions and authority and an undertaking permitting completion of the documents, a declaration by the borrower (if there was a choice to have legal advice before signing the document), a borrower's certificate to be completed (if there was a choice not to have legal advice prior to signing the documents), a direction to pay the funds drawn at settlement, a direct debit deduction form and a declaration as to purpose. Other presently irrelevant documents were also sent. Mr Reddy said that he received these documents at his office in Pitt Street and that, as far as he could recall, he called Mr Lyle, informed him that the documents had been received and were available at the office and that somebody picked them up but that he did not see who it was. He said, in effect, that the documents came back to his office within a day or so. 101An undated copy of the loan agreement between Perpetual and Ms Menzies has been produced. The signature that purports to be Ms Menzies' falls into the paragraph (1) group of the summary of Mr Anderson's conclusions, as does that on the mortgage. I have no doubt that both signatures are forgeries. The agreement states that Ms Menzies' signature was witnessed by one Yoon Lee of 93 Liverpool Street, Sydney. The mortgage gives the same name but with no address. There has been no attempt by either BMC or Perpetual to prove that such a person existed, let alone that he witnessed Ms Menzies' signature on the mortgage although it was manifestly in their interests to do so. This omission fortifies my conclusion, although it does not depend on this omission. I have already mentioned the inference that, to my mind, these forgeries provide objective evidence of the true nature of the transaction so far as Ms Menzies is concerned. 102Mr Reddy had returned to Galilee's on 10 October 2005 the direct debit request authorising withdrawals from the account of InvestOne Pty Ltd with Laiki Bank. He was the sole director and secretary of InvestOne. Mr Reddy also filled in the direction to pay as to the disbursement of the funds, which instructed Galilee that a separate cheque for $100,000 in favour of InvestOne was to be deducted from the advance. That direction has not been produced, for reasons which are unexplained. If it had been signed by Ms Menzies it would have been very significant and it is plainly one of Perpetual's documents. I have independently concluded that it was not signed by her. A post settlement loan disbursement schedule shows that, although the borrower was Ann-Marie Menzies, excepting various disbursements, the bulk of the funds were dispersed to InvestOne Pty Limited in the amount of $100,000 and Valcorp in the sum of $437,119.50. Perpetual has not, no doubt for forensic reasons thought to be advantageous, provided any documentary or other explanation for these payments. Mr Reddy's evidence was, in effect, he was the sole beneficiary of the $100,000. Furthermore, Mr Reddy said that he had filled in the form that authorised Galilee's to pay that $100,000 to InvestOne and the disbursement to Valcorp. These disbursements, of course, required an authority signed or apparently signed, by Ms Menzies who was supposed to be the borrower. This implies an authority from Ms Menzies to Galilee's authorising the disbursements of funds in accordance with the instructions of Mr Reddy. Neither of these necessary documents, rather surprisingly, have been produced by Perpetual. I rather suspect that, at least as to the latter, it never existed. Whether Galilee's were content with an authority signed by Mr Reddy in his name or had been provided with an authority apparently signed by Ms Menzies I do not know. However, it is perfectly clear that Galilees should not have disbursed funds on any authorisation except that given by or in accordance with a direction given by Ms Menzies. This raises the likelihood that Ms Menzies' signature was forged by Mr Reddy. However, it is sufficient to say for present purposes that I am quite sure that Ms Menzies was unaware of Mr Reddy's extraction and did not authorise it in any way. Moreover, I am satisfied, as discussed below, that Mr Reddy did not believe that he was authorised to deflect these funds to himself. 103The declaration as to purpose (stating that the loan was wholly or predominantly for business or investment purposes) dated 8 October 2005 purported to be signed by Ms Menzies. I am satisfied that she did not see this document and did not sign it. 104The Galilee's letter of 30 September 2005 also stipulated that the original Certificate of Title and Withdrawal of Caveat were required. Settlement was arranged for 12 October 2005. It will be recalled that Mr Ricci wrote to the District Court on 11 October 2005 seeking a "Letter of Finalization" to be sent to this Court. The forged Certificate of Title and the new Withdrawal of Caveat were duly handed over on settlement, together of course, with the mortgage containing Ms Menzies' forged signature. 105On 17 October 2005 Interstar sent a direct debit request confirmation to Ms Menzies. The address on the confirmation is that of Ms Menzies' home. However, Ms Menzies denies receiving this document. That all the security documents were addressed to Ms Menzies at Mr Reddy's office and that Interstar was aware of that address and had been, one way or another, specifically advised that communications should be posted there, provides persuasive support for the conclusion that, in fact, the envelope was addressed to Mr Reddy's office despite the address on the letter (especially in the absence of any evidence to the contrary from Perpetual) and lends support for Ms Menzies' denial of receipt. The opening of Valcorp's Laiki bank account 106Ms Menzies evidence is that she understood from Mr Lyle that the advance to purchase the Hancock Street property was going into the bank and would then be paid out to the vendor, emptying the account. I am satisfied that she was not aware of the deposit made by Mr Reddy into the account of the proceeds of the Perpetual advance. 107Mr Reddy completed the direct deduction form dated 7 October 2005 relating to Perpetual's loan by inserting the account of InvestOne with Laiki Bank. The post settlement document for Interstar and BMC notes this account as being that from which the ongoing loan repayments would be deducted. Mr Reddy said that the reason he provided that direct debit request was that Valcorp's bank account was not open at that time and the request was necessary for the impending settlement. The first instalment of $3,412.34 was to be made on 11 November 2005 but was dishonoured. Shortly after, Mr Dive was informed by BMC of this and, I think, he then contacted Mr Reddy to advise him of this occurrence. On 21 November 2005 Mr Dive sent to BMC a faxed copy of a further direct debit request in the name of Valcorp with details of its account with Laiki Bank and signed by Mr Reddy as Valcorp's secretary. Mr Reddy was never an office holder of Valcorp, let alone secretary. The bank should not have acted on it without evidence that he was the company's secretary. 108Ms Menzies deposed that Mr Reddy told her that it was necessary to set up a bank account for Valcorp so that a loan in the name of the company to buy the Hancock street property could be arranged. He asked her to come with him to the bank to open the account and arranged to do this on 14 October 2005. He told her that she needed to bring two forms of photo identification. Accordingly, on 14 October 2005 she attended the bank with Mr Reddy and signed an application for a business account in the name of Valcorp. She said that, when she did so, Mr Reddy's signature was not on it. She handed over her original passport and driver's licence as proof of identity to the bank clerk. The documents were photocopied as is usual and the originals returned to her. Mr Reddy did not need to do this, since he already had an account with the bank. 109The signature form shows that Mr Reddy signed as a co-signatory to the account. Ms Menzies said she did not know that this was so and would not have authorised it had she known this is what he wanted to do. It is contended for Perpetual and BMC that the fact that her signature is below that of Mr Reddy on the form shows that he signed it first. I would accept that this is suggestive of such a conclusion, but it is certainly no more than that and does not lead me to change my view of Ms Menzies' truthfulness on this point, which I prefer to that of Mr Reddy. Of course, if the proceeds (of what Ms Menzies thought was the loan secured on Hancock Street) was to be paid out, that would require her signature or that of some other authorised person. She was aware, in due course, that Hancock Street had been purchased. However, she was not cross-examined about her understanding as to quite how the purchase price was paid. Possibly she (or was told) thought that that the advance was paid to the vendor on settlement, which would have been the conventional arrangement. 110Of course, the Perpetual loan was not obtained for the purpose of purchasing the Hancock Street property. So far as the $539,000 borrowing was concerned Mr Reddy said, "I thought it was to be used for the development of another property that we were buying, as well as purchasing other properties". However, this money was obtained on 12 October 2005 and contracts were exchanged on Hancock Street on 18 October 2005. More significantly, the purchase was not settled until 23 January 2006 whilst, within three weeks of its deposit in the Valcorp account, the balance in the account had been reduced to $1,468. It followed of course, that none of this money was used for the purchase of or renovations to the Hancock Street property, as Mr Reddy agreed - Q:Were you the one responsible for paying the funds? A: Yes Q:What were you using the money for if it wasn't going towards the renovations? A: Again as I said before I had a request for money from different parties including Mr Lyle and I would either make a cheque or cash for their benefit Q:Well it couldn't have been wages could it? A:No Q:In three weeks? A:No. Q:What else was it for? A:I don't know. Q: Did Mr Lyle say I needed it for this or I needed it for that? A:No. Q:He just said I need X amount of money? A:Yes Q:And you just gave it to him? A:Yes. Q: And you thought this was proper account keeping did you? A:No I didn't think it was proper accounting Q:Well why did you do it then? A:Well I just - because I thought that's what I needed to do. Q:But why? A:Because if he asked for it I gave it to him. I thought that was the arrangement. I didn't question it at all. Q:Whose arrangement? A:The arrangement between him and Ms Menzies Q:What? That he could use the money for anything at all? A:Yes Q:Not even just for renovations just anything. Is that what you thought? A:Yes. Q:So you understood the arrangement was between you, and Ms Menzies and Mr Lyle that when the money came in Mr Lyle could use it for any of his personal reasons unrelated to the renovations and so could you? A:Yes. Q:You understood that was what she agreed to? A:Yes as long as we had it back in there to do the renovations, that's what I understood. Q: And you say that although there was never a conversation to that effect? A:With Ms Menzies no. Q:Was there was one with Mr Lyle to that effect? A:Yes. Q:He told you did he that Ms Menzies had agreed that both you and he could take these monies and use them as you wished as long as they were placed back in the account when it came to pay the bills. Is that what you are saying he told you? A:No he didn't tell me that Ms Menzies had agreed. He just said that you know if were going to use any monies of hers that it has to be back within a very short space of time, we needed it for the renovations. Q:So you did not understand that Ms Menzies had agreed to that? A:No I didn't understand no. Q:Well she plainly didn't. She probably didn't? No one would agree to such an arrangement would they? A:Yes. Q:Mr Reddy, you answered, "yes". You didn't honestly believe did you that Ms Menzies had agreed that whenever you or Mr Lyle wanted to take money out of the account you had her permission to do so as long as you paid it back? A:No. 111Perpetual called Mr Antonin Constantinou who, at the time of his affidavit in December 2010 was branch operations manager for Laiki Bank. To give evidence as to the circumstances in which the Valcorp account was opened. From 2002 until 2005 he worked as a customer service representative and, at the commencement of 2005, he was transferred to the City branch in the same position. He said that in the course of his employment he was trained on the proper method of opening accounts. He says that until October 2005 he had conducted many thousands of banking transactions as a customer service representative and opened many hundreds of accounts on behalf of customers with the bank, of which many were corporate entities. 112Mr Constanou's examination of the bank documents relating to the Valcorp account show that he was involved. He said that, although he recalled Mr Reddy, he had (not surprisingly) no independent recollection of the opening of the account and the events of 14 October 2005. He described what he called his "invariable practice" when opening an account. He said that the first step in this case was to sight an original document showing that the company was registered with ASIC. The next step was to verify the identity of the officeholders. The ASIC search showed Ms Menzies was the sole secretary and director and shareholder. However, the search (which was still with Laiki records and attached to Mr Constantinou's affidavit) is actually dated 17 October 2005, three days after the account was opened. He said that he does not recall how this occurred, and suggested that possibly an earlier search had been done on 14 October 2005, which is no longer on the file. This explanation is unconvincing. Mr Constantinou added that, "in any event, my invariable practice, [was that] withdrawals from the account could not be made until after that search was obtained". The next step was that Mr Constantinou would complete the application for a business account, which includes instructions for the mode of operation of the account and (critically) sets out who may sign cheques for withdrawals for the account. The application shows that the signatories to the account were Terrence Reddy and Ann Marie Menzies. Mr Constantinou says that the handwriting on the application is his and that, in accordance with his "invariable practice" he would only have completed the form in this way if Ms Menzies had given express authority to him to do so. Mr Constantinou noted the necessity for Ms Menzies to verify her identity but that, as Mr Reddy was an existing customer, it was not necessary for him to do so. 113Mr Constantinou noted that, on 14 October 2005 two deposits and a withdrawal were made on the account. The first deposit of $437,119.50 was in the form of a Westpac bank cheque. This was not regarded as "cleared funds" for three days. The withdrawal was for the sum of $45.00 which represented the fee for obtaining the ASIC search. The deposit of $100 was cash and enabled the fees to be paid. It is not possible by looking at the bank statement to determine which deposit was made first. Amongst the documents produced was one headed "account opening checklist" but this, contrary to what Mr Constantinou said should have been done, was not dated. Mr Constantinou said, in connexion with the identification verification that the account opening checklist had a tick next to the 100 point identity check. Mr Constantinou agreed that this meant that he had personally carried out that check. However, he was required to write on the photocopy words to the effect that he had certified the information to be correct and the photocopy attached to his affidavit does not contain any such certification. Although Mr Constantinou said that there might be other copies in the file containing that certification which had not been produced, the material was produced in answer to a subpoena and no additional document was amongst those papers. Attached to Mr Constantinou's affidavit is an uncertified copy of Ms Menzies' driver's licence expiring on 10 September 2005 and a cancelled passport valid until 3 March 1997. However, attached to Ms Menzies affidavit is a document, which was obtained by Ms Menzies solicitors, but is a photocopy of her licence which expired on 10 September 2010 and her passport expiring on 13 April 2014, apparently certified by a bank officer. It is agreed that this second certified document is that which was originally in the bank's subpoenaed papers although it is now not there and, apparently substituted for it, is the document attached to the affidavit of Mr Constantinou which is a photocopy of different documents and is uncertified. Mr Constantinou interpolated, following questions raising the certification of the identification material that the signature, or possibly initials, certifying the drivers licence to be a true copy of the original might be his. To my eye, this is unlikely. Mr Constantinou agreed that, at the time the form to open the account was completed, he was assisted by a female. He said that if he were busy with another customer, it is possible that his assistant opened the account. It also appears from the annexures to Mr Constantinou's affidavit that the company search dated 17 October 2005 had been faxed from the Marrickville branch. He could not explain how this happened. So far as the order in which the signatory form was filled in, Mr Constantinou said that this form is handed out to the customers to sign and is unable to say who signed first. 114As I have mentioned, Ms Menzies says that she did not authorise Mr Reddy as a signatory of the account. Had she done so, this would not be by any means fatal to her case, since she at all times accepted that Valcorp was undertaking the project of developing the Hancock Street property and there may have been reasons to allow Mr Reddy to make withdrawals for the purpose of assisting with the management of that project. In the end, however, the evidence of Mr Constantinou does not persuade me that Ms Menzies in fact gave any authority to Mr Reddy to operate the account. I have referred to what Mr Constantinou said was his invariable practice where one of the signatories to a corporate account is not an officer of the company (although, as mentioned above, the bank accepted an authority signed by Mr Reddy purportedly as Valcorp's secretary, when he was not). I think that Mr Constaninou is an honest witness, but I am unpersuaded that he actually followed this practice in this case. It might well be, I think, that he filled this form out after his assistant's completion of the opening process. I note that the form contains further signatures of Mr Reddy and Ms Menzies purporting to be made on behalf of the company. Mr Reddy held no office whatever. 115 Mr Reddy denied that he spoke to Ms Menzies on or about 8 August 2008 concerning the necessity to set up the bank account. He said that the bank signatory form was signed by both of them at the same time. As to the application form to open the account, his evidence was that nothing was said at the bank as to the authorisation of the signatories and that they simply signed the form with nothing being said. The evidence continued - Q. What did you tell her was the reason for having you as a signatory to that account? A. I think we originally discussed because I had the office in town was more for [a] base you know in order to pay for whatever payments because she was still working, it was just easier for me to call in than going back to her every day. This kind of answer is quite typical, namely commencing with a qualifying "I think" or similar phrase. I don't believe that this conversation occurred. It will be recalled that Ms Menzies' understanding was that the renovation work was being done at Mr Lyle's expense, thus justifying his interest in the profits. The thefts begin 116It will be recalled that settlement of the Perpetual loan occurred on 12 October 2005. Mr Reddy said that he did not remember whether he attended on settlement but that he may have attended. He eventually conceded that at settlement he received the two cheques. I have no doubt that he did attend on settlement, amongst other reasons because he received a cheque for $100,000 in favour of InvestOne, his own company and it was necessary that he attend to the banking of the Valcorp cheque. He says that he did not tell Ms Menzies that he had received those cheques because he had told Mr Lyle, although he met Ms Menzies at the bank to open the Valcorp account on the very day upon which he banked the cheques. It was suggested to him that a difficulty with telling Ms Menzies about the $437,000 deposit was that she might well have asked what had happened to the other $100,000. Mr Reddy said that this was asking him to speculate but he supposed so. It was put it to him that he did not want her to know about that $100,000. He answered, "I can't tell you now". This answer simply cannot be true: it is incredible that he did not recall whether he wanted Ms Menzies to know about it. He also said that he assumed that she knew about it via Mr Lyle and he thought she agreed with it - although it was to be a loan having nothing to do with her or Valcorp or the purchase and development of Hancock Street and, furthermore, he had not disclosed to her any of his financial position, not even whether he was bankrupt or solvent and his bare promise to repay it with unspecified interest was not documented in any way. I am quite satisfied that this evidence is false. Mr Reddy later agreed that Ms Menzies was not physically present when the cheque for $437,119.50 was deposited in the Valcorp account and that he probably did not tell her about the $437,000 to be deposited because it was $100,000 less than the loan. He was asked whether the only reason he would have had for not telling Ms Menzies what was happening to her money was to conceal it from her, to which he responded, "I was paying it back, so I wasn't concealing it from her." This, of course, is a non sequitur. He added, "I admit I didn't tell her, but I paid it back". Actually, as the bank records show, this was very far from the truth. I am quite satisfied that he deposited the cheque in the absence of Ms Menzies in order to keep its amount a secret. 117Furthermore, in order to obtain the cheque to InvestOne, this should have been done with Ms Menzies' express written permission as the borrower, authorising payment out of the proceeds of the loan. It follows from his evidence that Mr Reddy did not obtain Ms Menzies' specific authority for this disbursement. If Galilee's accepted his direction, then they were plainly not authorised to do so whilst if, as seems more likely, an authority was apparently signed by Ms Menzies, her signature must have been forged. If his evidence is true that he believed that her signature was genuine and had been obtained by Mr Lyle, he could, and I believe would, have pointed to the authority. That he relied, he said, on an assumption about Mr Lyle supports the conclusion (which, at all events, seems to me to be virtually inevitable) that, if Ms Menzies' signature appeared on the authority he was aware that it was forged. The more obvious explanation is that he had forged it himself. On either possibility, Mr Reddy's evidence that he believed this extraction had been authorised is unbelievable. In short, he stole the money from Ms Menzies. 118Three days after the deposit of the proceeds of the loan was made, Mr Reddy authorised a telegraphic transfer of $40,000 out of the account to a Ms Priscilla Ouvrier, his then girlfriend. He agreed that this had nothing to do with the renovations of any Valcorp property, saying that it was a loan repayment to her of a personal debt. He said that he had spoken to Mr Lyle about it and he gave permission to make the payment. I do not believe him but, at all events, if Mr Lyle had consented, this was nonetheless a fraud. Mr Reddy said he was not in contact with Ms Menzies, although he had attended the bank with her only a few days before. He added that he later paid the money back. As shown below, this was untrue by a considerable margin. 119On 20 October 2005 Mr Reddy transferred money into an account in the name of his son, then aged 2 or 3 years old, for whom he said it was held in trust. Whilst he said that Mr Lyle knew of these transactions, he did not say that he had called him on this occasion. I asked him about the trust for his son. He said it was "just a little account I set up for him, "though he could not recall the conditions of the trust and, then, that it wasn't a trust account but it was just an account "I set up for him." - Q: So it wasn't in trust for him? A: No. Q: Why did you say it was in trust for him? A: Well it inferred that. It wasn't a trust. It was just an inference that it was like a trust account. Q: I see. It was like a trust account but it wasn't a trust account? A: No it wasn't. Q: And what happened to the money in that account? A: Well I pretty much used that as a bank account as well. Q: For your own purposes A: Yes. Q: In breach of the trust to your son? A: There wasn't a trust in place or wasn't any breach I don't think. Q: So the money was really for you? A: Yes. Q: Why did you put it in your sons name? A: We had several accounts and I put it in several accounts -- Q: It follows that you had several accounts. I merely asking you why you had an account in your son's name. A: I can't remember why I did it at that point in time Q: What you just thought it might be useful to have accounts in various names? A: Probably Q: What was the use of having an account in your son's name? A: I don't know why I did it Q: You don't remember now? A: No Q: Are you seriously saying -- A: I don't remember. I am honestly speaking. I don't remember why I would have opened the account and used it as a bank account I don't know. The changing character of the account from being a trust account for his son to simply being an account of his that utilised his son's name is an example of his typical approach to potentially difficult questions. He started with a statement that he thinks somehow is justificatory which, on further questioning, is shown to be a fabrication as something rather less excusable emerges, though very rarely the truth. Indeed, almost every explanation of his conduct took this form. A number of other amounts went to his son's account: two withdrawals of $3,000 and $6,000 on 6 December: $3,000 on 8 December; and a further $10,000 on 21 December 2005. He agreed that it looked as though he were treating the Valcorp account as though it were his "but I did use it to pay for bills that were for renovation costs" by cheques, he claimed, that went to the sub-contractors. As shown below, this explanation was contradicted by his other (later) evidence, which emerged when he was confronted with the relevant dates. 120Although Mr Reddy asserted that these payments out of the Valcorp account were all made with the authority of Mr Lyle, he conceded that he had never obtained from Ms Menzies any statement or document that suggested that Mr Lyle was entitled to act on her behalf. As mentioned, the $100,000 deflected to InvestOne was used for the benefit of InvestOne, namely Mr Reddy. He said that Mr Lyle was aware of it - Q. So you spoke to a man, not an officer of Valcorp; correct? A. Yes. Q. And about loan funds which you knew on the face of the documents were Miss Menzies' money? A. Yes. HIS HONOUR Q. And in respect of whom you knew he had no power or authority to speak on Miss Menzies' behalf? A. Yes sir. Q. Did you actually believe you were authorised to take this money? A. Well, in a sense I did because I had authorisation from Mr Lyle. Q. From? A. From Mr Lyle. Q. But you knew that didn't come from Miss Menzies? A. Yes. Q. Therefore, you knew Miss Menzies did not agree to it? A. I didn't know if she did not agree with it. It cannot be accepted that Mr Reddy genuinely believed that he was authorised by Ms Menzies to take the money. Indeed, he said that Mr Lyle did not tell him that Ms Menzies had agreed that he could take the $100,000 out and use it for his own affairs but he said that it was "OK for me to use it as long as I paid it back." To my mind, this demonstrates, not that Ms Menzies ever authorised this or Mr Reddy's other deductions for that matter but, if anything, that Mr Lyle was Mr Reddy's accomplice in fraud. The use of funds in Valcorp's bank account 121Although I have dealt with some of these deductions elsewhere, it is useful I think to set out the series of withdrawals in a sequence as they occurred. The account commences, of course, with the deposits of $437,119.50 and $100.00. The first substantial debit, being for $40,000 was by way of telegraphic transfer on 17 October 2005, which went to Priscilla Ouvrier, Mr Reddy's girlfriend. Other withdrawals of $21,000 and $5,000 were made in cash. A cheque withdrawal of $6,000 and a cash withdrawal of $9,000 were made on 18 October 2005. On 20 October 2005 a further telegraphic transfer of $30,000 was made, again to Ms Ouvrier. On 25 October 2005 there was a withdrawal of $137,872 by way of bank cheque to Fowles Auction group, which deals in motor vehicles. Mr Reddy said that he did not know what this was for but that he did not think that it had anything to do with Valcorp. That he did not know what this money was for is unbelievable. He said that, if Mr Lyle had not asked for this cheque, it would have been a person called Simon or another named Alex. He said that before he drew this cheque (and the others that were requested) he did not verify what it was for but just gave "them" what they asked him for. He said that not verifying what the payments were for was "the arrangement we had when we set up the business", by "we" meaning him and Mr Lyle. These payments, whether taken by him or given to Mr Lyle or the other persons he named, must have been fraudulent and he must have known it. On 27 October 2005 $45,000 went by cheque signed by Mr Reddy to Wise Choice Investments, a company of whose name he claimed to be unaware until he gave evidence. He said that it had nothing to do with Ms Menzies but "may have had something to do with Valcorp...but I just can't, think of anything". This failure of recollection is not credible given a further payment to Wise Choice by a cheque signed by him, this time of $106,000 on 22 December 2005. He said that he did not recall "who Wise Choice Investments are, but it might be a company that we were buying some property off". Again "we" meant "me". He said that it "may have been" a personal purchase" but he was not sure what the transaction related to. On further questioning, he persisted in saying that he did not know what it was for but surmised that maybe it had been used for purchasing the Hancock Street property. However, he was unable to explain how a payment to Wise Choice Investments could relate to that acquisition. This is not surprising, since I think it is clear that it could not have done. On 27 October 2005 $45,000 was transferred to one Simon Cooke. Mr Reddy said that it was not one of his associates but he thought that he was instructed at that time by Mr Lyle to pay this sum. He did not know what it was for, whether it was a gift or a loan. On 28 October 2005 Mr Reddy drew $24,000 for a bank cheque in favour of BMW, this being the deposit on his purchase of a BMW vehicle in a transaction discussed below. On 31 October 2005 he paid $10,000 to one Warwick Anderson for what could well be "a personal debt". On 3 November 2005 there was a direct debit to BMW (Australia) Finance of $3,014.92. As at 9 November 2005, the balance in the account was $1,468.09. 122Mr Reddy was unable to identify any withdrawal between 14 October and 9 November 2005 that had anything to do with Valcorp. He said there may have been a couple of small payments but nothing substantial for the purposes of renovating. But, of course, the property was not purchased at that stage and accordingly no renovations could have taken place. 123On 4 November 2005 a cheque for $5,000 was drawn in favour of one Alex Marcello. He was asked whether there was any particular reason for paying Mr Marcello $5,000 out of the Valcorp account and replied, "No, I guess I must have owed him the money then". Further questions were asked about what kind of business he was in with Mr Marcello that gave rise to these debts. He said it would have been property related but was unable to give any details. On 5 December 2005 a deposit of $15,000 was made. Mr Reddy did not know what this was about but he said he was putting money back in and paying for the BMW as well. There was also a transfer of $3,000 from an account numbered 321547 but on the same day a countervailing transfer back to that account out of the Valcorp account of $6,000, so the improvement was only temporary. Mr Reddy was taken to a deposit of $2,200 on 3 January 2006 from the account in the name of his baby son. He said it would have been part of the repayment of the original withdrawal of $6,000 taken earlier in 2005. As it happens other deposits came from this account: $3,000.00 on 6 December 2005; and $3,000 on 8 December 2005. However, in December 2005 $10,000 was transferred to that account. The next deposit to which Mr Reddy was taken was on 10 January 2006 for $30,000. The deposit slip indicated that it was made by Tamara Eason and that the cheque came from Rick Damellian Motors. He said that he had no recollection as to why such a cheque came from Mr Damellian "but I would assume that it is the proceeds of a car payment of a car that we sold". Again, by "we" he meant "I". He said that in 2005 he owned only a BMW but could not remember the transaction that gave rise to the cheque. This date coincided with the purchase of the Mercedes car from Mr Damelian which was the subject of earlier cross-examination about which he said he knew nothing. Mr Reddy was asked about $2,254 deposited on 19 December 2005. He said that he did not know what the source of those funds was. On 20 December 2005 there was a deposit into Valcorp of $237,005.71. He said that it looked like it was the proceeds of the sale of a property. He said that he had paid that money to repay money that he had earlier taken out of the account. The money did not stay there long. Two days later, on 22 December 2005, Mr Reddy withdrew the sum of $106,000 to pay Wise Choice. Despite Mr Reddy's temporising, this plainly had nothing to do with Valcorp. On 23 December 2005 a bank cheque was purchased for $10,975 in favour of the real estate agent who, as it happened, acted on the purchase of Hancock Street but its actual purpose is unclear, given that the deposit had already been paid on the earlier exchange of contracts. Then $2,200.00 was transferred into the account from Mr Reddy's son's account on 3 January 2006 because the balance in the account was only $911.42 and, on the same day, the direct debit for BMW Australia Finance of $2,999.92 was paid. When the transfer fee of $90 was deducted, the balance in the account as at that date was $81.50. 124Mr Reddy was asked about buying a 2002 Mercedes Benz motor vehicle model CL55 in the name of Valcorp which involved a CBFC loan with a (forged) guarantee in the name of Ms Menzies. The documents relating to which bore the number of the facsimile machine in his office, access to which at the time was limited to him and Ms Eason. He said that he did not recall doing this. He said that he could not remember whether in 2006 he was in possession of a CL55. He said that at the time he had the BMW, "I had no other car to my recollection". I do not propose to analyse his evidence on this matter. It is enough to say that it is not credible. Direct debits were made in favour of CBFC limited from the Valcorp account on a number of occasions, firstly on 13 February 2006 in the sum of $4,987.44. The Menzies signature on the direct debit form dated 7 February 2006 that authorised these deductions was forged. Mr Reddy said he was not aware of this transaction. I do not believe him. 125Overall, from 13 February 2006 the account, despite occasional deposits, remained well below $10,000. From March 2006 (except for the deposit of $100,000 on 4 April 2006 and its withdrawal the next day to credit one of Mr Reddy's accounts in the name of Manufacturer's House, having nothing to do with Valcorp) the account contained a few hundred dollars and from 20 March 2006 less than $100 until it was ultimately closed on 6 April 2006. This was done by Ms Menzies on Mr Lyle's advice, as related below. 126 Mr Reddy said that he stopped speaking with Mr Lyle a few months after the purchase was settled on 23 January 2006. As at that date, the Valcorp account had a balance only of $262.28. He agreed that any work done on renovating Hancock Street must have occurred after 23 January 2006 and that no money from the Valcorp account was used on its development. He said that he was surprised to learn (in cross-examination) that none of Valcorp's money was used to renovate Hancock Street, saying that he had "thought we used money from the Valcorp account but it seems we used it from my other accounts". He said he kept no account of the amounts spent on the renovations and did not know how much he spent because Mr Lyle was in charge of renovations. This evidence cannot be believed. 127Ultimately, Mr Reddy conceded that he took a great deal more out of the Valcorp than he had put back in, which is obvious at all events from even a cursory examination of its bank statement. 128As to Mr Lyle's actual role, from Ms Menzies' evidence it seems clear that he was, to a greater or lesser degree, involved in the fraudulent creation of the loan secured over her home and so he at least knew about the forged Certificate of Title (Mr Ricci was, after all, his solicitor) and the forged signatures on the mortgage and loan agreement and, I rather think, the other forged signatures associated with the applications and the conveyancing requirements. However, it is not necessary to determine his actual role for the purposes of this case. What is plain enough is that Mr Reddy played a major part and was immediately connected with the questioned transactions and false documents, all of which went through his hands. Very substantial withdrawals from the Valcorp account were made by him and those which I have mentioned were all for his benefit. Although Mr Reddy's evidence cannot be relied on, as I have mentioned, I infer that some of the money that went through his hands was passed to Mr Lyle, else why would the latter have been a party to the fraud? Mr Reddy buys a BMW on Valcorp's account: more forgeries 129In October 2005, Mr Reddy purchased a demonstrator BMW for $240,000, financed by a loan from BMW Australia Finance Limited. The deposit of $24,000 was paid by a bank cheque he purchased by a cheque signed by him drawn on Valcorp's account on 28 October 2005. He said that he carried out all the negotiations for the purchase and finance. He signed the purchase order in the name of Valcorp. He said that, although he did not have Ms Menzies' authority to sign it, he got approval from Mr Lyle. He claimed that Ms Menzies must have known about the transaction because she signed the application form. The three Menzies signatures on the contract of sale are plainly forgeries (having the three legs demonstrating that they were copied from Ms Menzies' passport signature). The application for finance by Valcorp gives as Ms Menzies' address, the Riley Street address, the Authority to Obtain Credit Information contains another forged Menzies signature (again demonstrating the three legs), the Privacy Protection form contains two forged signatures. The Menzies signature on the Purchase Agreement as Director of Valcorp and as personal guarantor of the obligations created by it has the same features as the other signatures and is clearly also forged, as also is the Menzies signature on the Autosure Protection Application and that on the statement of assets and liabilities is also forged. Her assets are listed as cash on hand of $50,000, other investments of $160,000, a private residence worth $950,000, a motor vehicle worth $55,000, furniture and fittings in her home of $35,000, furniture and fittings in her business of $677,505 and no liabilities, thus having a "net worth" of $1,927,505. Mr Reddy said that these figures represented "information we would have provided to them". When asked who was "we"? he said, "Well, Valcorp would have - well me, I would have provided it to BMW." (The plural "we" was his most frequently used pronoun when asked about questionable transactions, which he corrected, most often when pressed, to the singular "I" or "me". This gave the impression, well based I think, that his instinctive reaction to these matters was to attempt to deny personal responsibility. The invocation of Mr Lyle was a more substantial attempt to the same end. It was equally ineffective.) Mr Reddy said that this information "we would have had on file," meaning Valcorp, meaning "me". Mr Reddy claims that this file, together with all records from this period, has been lost. He said that he did not check the accuracy of the information because he had in on file from information given by Ms Menzies at a previous meeting when he did the original application on the BMC mortgage. His evidence about this proceeded as follows - HIS HONOUR Q. So you did get it from her? You had it on file from when you previously spoke to her? A. Well, when I did the original application on the BMC mortgage I got it from her, yes. The original application. SKINNER Q. Did you take Ms Menzies seriously that what she had on hand she had $50,000? A. I can't recall that. Q. Do you agree she had other investments of $150,000? A. Again, she may or may not, I can't recall. Q. Did you say she didn't? HIS HONOUR Q. Well, if you didn't, why did you put it down? A. Well, this information that I put on this document was some information I had on file already. Q. Yes, but where did you get the information you had on file? A. Would have been from the original BMC mortgage. Q. It doesn't say $150,000. A. Well, I don't know where I got SKINNER: Q.At one point there's a document that says superannuation $160,000? Q. Where did you get the idea that Ms Menzies' property was worth $950,000? A. I just estimated that. Q. Where did you get the idea that Ms Menzies had a motor vehicle worth $55,000? A. I don't know. Q. Where did you get the information that her furniture and fittings were worth $35,000? A. Again, I just assumed that. I don't know. Q. And what business did Ms Menzies operate in October 2005 that had furniture and fittings worth $677,505? A. I'm not sure at this point of time. Q. You know very well there was no such business, don't you? A. Well, I did I was told that she had an interest in the Gas Night Club, but that may HIS HONOUR Q. Who told you that? A. Mr Lyle told me Q. And did he tell you how much it was worth? A. No. Q. So where did you get that amount? A. I visited the place fairly often so I assumed that was a proportion of the shares. Q. Did he tell you how much? A. No. Q. She may have only had 10 per cent. You're saying that you'd been there a few times and you thought 20 per cent of the business was worth $627,000? A. Yes. Q. It's a very precise sum? A. I think it's a combination of a few things, but again, I can't recall really how I came to this figure. Q. Mr Reddy, I remind you you're under affirmation. Are you saying you got that number from things you don't remember but one of them was an assumption that she had a 20 per cent income from a night club you had attended from time to time? A. I just now remember that when we first met he did suggest she had an interest in the club and -- Q. Sorry, when who first met? A. When I first met with Mr Lyle. At the club, that is. Q. At the club? A. Yes. Q. But you don't remember how much of an interest? A. No. Q. He didn't tell you how much the club was worth? A. He didn't tell me but we were doing some finance for the club so we may have had some financial information on file from that. Q. But you don't remember? A. I don't remember. But just given from what I did previously, if I had information on file I would have said I had information from him, I can't really speculate in here. I haven't assumed. Q. It was your document, Mr Reddy? A. Well, I can't remember how I got those numbers. Q. What I don't know is how could you possibly get a number out of someone telling you, in respect of a night club you attended from time to time, that Ms Menzies had some interest in it which you assumed was 20 per cent. A. I'm saying that now but I can't remember exactly what the conversation was. Looking at that information I assume that it would have been from information of the club between that figure. The odd number would probably equate to 20 per cent. That's why we've got the odd number. It would have been whatever 100 per cent of that would be and I would have taken it off their financials. That's the club's financials. SKINNER Q. You left BMW with the impression that Ms Menzies had a net worth of $1,927,505, didn't you? A. Yes, that's the information I had, yes. Q. And you knew that was an entire fabrication, didn't you? A. No. Q. And you'd received none of that information whatsoever from Ms Menzies. A. Again, I can't recall. HIS HONOUR Q. You visited, I think you've said, Ms Menzies on two occasions? A. Yes. Q. Tell me about the house. Was it a two or three bedroom home? A. I can't remember. We sat in the lounge room when we first met. Q. Did it have expensive furniture? A. It didn't look like it had expensive furniture, no. Q. Did you ever see her with a car? A. No, I didn't. This cross-examination speaks for itself. The document is fraudulent and his evidence about it involved deliberate, indeed brazen, lies. 130Mr Reddy said that he was going to pay the instalments but that Valcorp was to buy the vehicle because it would get the benefit of the tax deduction (although, of course, if Mr Reddy were to pay the instalments, Valcorp could not have deducted them). He also said, "It was to do with Valcorp in that they financed the car for me to use ... [because] I was working on the Valcorp transaction." He explained that it was "a bit more than signing cheques": "there a lot of calls made, a lot of coordination made with different parties related to the renovation", the Council, finance companies and the valuer. There was, no doubt a lot of work undertaken by him, but its real purpose was to steal from Ms Menzies. 131Mr Reddy also sent a document to BMC on the letterhead of Valcorp attaching its Certificate of incorporation and adding "we authorise BMW Sydney to register BMW M5 in our company's name." This was signed by Mr Reddy who said that he had authority from Mr Lyle although "he wouldn't have specifically". He was asked whether he was implicitly told and said, "I had probably an overall authority, but I was buying something or paying for something large I would talk to him about it before I would do it." He later said that he might have said that he did not know that the Menzies' signatures were forgeries. He said that all documents which required Ms Menzies signatures were sent to Mr Lyle because, Ms Menzies had said, "please don't contact me, you contact Mr Lyle" or words to that effect. This was the first mention of such an instruction. I do not believe it. 132The forgeries give the lie to Mr Reddy's evidence, quite apart from the sheer absurdity of the account he proffers. This was a fraud, both on BMW and Ms Menzies. The description of his "[probable] overall authority" from Mr Lyle is not possible to take seriously. How could such an authority be "probable", let alone an authority to use Ms Menzies' money to purchase "something". Moreover, by any standard, this purchase was "large", yet he does not claim to have spoken to Mr Lyle about it but just gave the documents to him to obtain Ms Menzies' signature. This is incredible and I do not accept it. I regard this claim as a transparently false attempt to place the blame for his thefts on Mr Lyle. Later on, when asked about Ms Menzies' signature on the guarantee, he said that he might have obtained it from a lawyer, though he did not remember. He said, Ms Menzies "had a lawyer that I was working with that I remember now, a Mr Davies, and he sent a lot of information to us as well". I do not intend to discuss his evidence about "Mr Davies", except to mention that he claimed to have been contacted by this person claiming to be Ms Menzies' solicitor, to whom he sent "whatever he required" although he was not talking to Mr Lyle at this time and he did not speak to Ms Menzies about it, for which he had no explanation. I believe this was a late invention. Fabricated tax returns 133To appreciate the thoroughness of Mr Reddy's fraud, it is necessary to deal with his admitted (but understated) participation in the creation and subsequent use of fabricated tax returns for Valcorp and Ms Menzies, which he forwarded to Mr Dive in connexion with the Valcorp and Menzies' advances as well as BMW. The returns in respect of Ms Menzies for the years ending 30 June 2004 and 2005 showed her occupation as a company director receiving from Valcorp very substantial funds by way of wages and dividends. The returns also disclosed a substantial income from "Legman Pty Limited t/as Gas Nightclub" - as I understand it, owned or at least operated by Mr Lyle. Of course, at the time covered by these returns, Ms Menzies was certainly not connected with Valcorp in any way nor with Legman Pty Limited. Mr Reddy said these income tax returns came from either Mr Lyle or from a Mr Cooke who worked for Mr Lyle as his assistant. He said that he assumed that they went to Ms Menzies and got copies of her assets and liabilities and "whatever I requested and got the statement as well". He said that none of this was on his file "prior to me meeting Ms Menzies, and then once we received it I kept a copy in a file". He said these documents were sent to him in connection with the finance of the property from Perpetual. It is, perhaps, belabouring the obvious, to point out that Mr Reddy must have known that what was stated about her income from Valcorp was false. I am also satisfied he knew that she was not employed by and had no interest in Legman. 134The Valcorp tax returns for 2004 and 2005, as it happens, shows its "main business activity" was not property development similar to that which was to be undertaken in connexion with Hancock Street but "management consultancy service of hotels, pubs and cafes" (so much for his other evidence that it was purchased as a "going concern" because its old business was to be continued). The trading statement shows a gross profit of almost $1,300,000 for the year ended 30 June 2004 and almost $1,400,000 for the year ending 30 June 2005. The expenses claimed were conventional office expenses including commissions and motor vehicle. There is no reason to accept that these returns were accurate. Indeed, since they were created with the Menzies' returns and for the same purpose, they were almost certainly false as well. 135It is important to note that all of these purported to be signed by Ms Menzies on 2 November 2005. I have no doubt these returns were not signed by Ms Menzies and that she knew nothing about them. Given the evidence of Mr Reddy (set out below) as to how they came about, I think it follows that, almost certainly, he forged these signatures; at the very least, he would have been aware that they had been forged. 136When Mr Reddy was confronted with the impossibility that Ms Menzies earned any money from Valcorp in 2005 he admitted that he knew that the return was false. The following then ensued - Q:Why did you send it if you knew it was false? A:We needed to get finance for Valcorp. [Again, the ubiquitous "we"] Q:So you were prepared to defraud BMW? A: These financials weren't prepared for BMW Q: They were sent to BMW to be relied on? A:Yes ... Q.You sent this to BMW to be relied on for the purpose of acquiring a loan knowing it to be false? A: Yes Q:Did you think that you, of yourself, that you were an honest man? A:I didn't think I was [an] honest man. Q:You knew you were a dishonest man? A: In this particular case yes Q:Is this the only situation in which you were dishonest? A:I can't comment on anything else Q:You can't remember? A:I'm not commenting on anything else. Q: You are not commenting but I have asked you so that you must answer my question were there other financial transactions into which you entered dishonestly? A:I can't recall. Q:You may have? A:I may or may not. Q:You just don't remember? A:I don't remember. 137A letter dated 21 November 2005 addressed "to whom it may concern" and purporting to be signed on behalf of Simon Cooke is said to be a "letter of employment" confirming that Ms Menzies had been employed by Legman Pty Limited for three years as an events manager since July 2002 and that her salary was $135,345 gross. Of course, this was completely untrue. It was however faxed from Mr Reddy's office. He said that he believed "probably" from Mr Lyle that Ms Menzies had an interest in the Gas Nightclub which was owned by Legman Pty Limited. The signature (I think that of Ms Eason) on a letter dated 9 December 2005 on the letterhead of Valcorp, is the same as that on the letter of Legman Pty Limited. Mr Reddy said that the signatures did not look like "her writing at all," although he agrees that it says Tamara Eason. He said that he had no idea how she came to sign the letters but that "she may have" signed them with his authority. He added that she may have signed it under someone else's authority and suggested Mr Cooke. When asked whether Mr Cooke had authority in relation to Valcorp he said "he may not have had any authority" but that he may have just called in and asked her to sign it. Mr Skinner, for Ms Menzies put to him - Q: Mr Reddy, you were involved in a simple exercise of the fraudulent production of documents designed to give the impression firstly that Ann Marie Menzies was employed by Legman Pty Limited and had a salary of $135,000 and secondly that she was employed by Valcorp Pty Limited. That is what you were doing, wasn't it? A: No I wasn't doing that. Q: Can you think of any other explanation as to how those two documents came into existence? A: I can't think of any other explanation. 138Of course, there was no other explanation, at least one that was truthful. I do not intend to analyse Mr Reddy's evidence about this matter. It is sufficient to say that it was not credible. I do not doubt that he well knew that Ms Menzies was a nurse and that she neither worked for nor had any interest in Legman or the Gas nightclub. 139As mentioned above, the returns were also sent by Mr Reddy to Mr Dive, Although he knew they were false, he nevertheless said that he did not have the intention of deceiving Mr Dive since "he was just sending information on". He agreed, on the other hand, that it was his intention to deceive BMC and whoever the financier was going to be. This is a fine (and incredible) distinction. He was asked who created the returns. He said that he couldn't remember his name, he thought a "guy by the name of Steve something or other but I can't remember his last name". He said that they were sent to him and that he knew that they were false but he did not know why he did not get back to Steve and tell him that they were false. Of course he knew, as he later admitted, saying he expected to get a dishonest return from "Steve" because he knew Ms Menzies had no income from Valcorp and the suggestion about the income entries came from him although he said the "the accountant did the financials". More emerged as the questioning proceeded. He said that, in substance, he told the accountant, "We need to fabricate an income for Valcorp; would you please attend to it?" although he did not use those exact words and only guessed that the accountant was involved in the frauds. He said the returns were created for the purpose of the mortgage loan and not for the Commissioner. He agreed that they were not only false as to their content but also because it was represented that they were in fact tax returns. 140Mr Reddy said it was his idea to create the returns, which were not discussed with Mr Lyle. He contacted the accountant, whose last name he could not remember, on the introduction of "someone I knew well ... who was likely [he agreed] to create a false document for you and wouldn't object". He said that there were a number of people who could have introduced him in this way. This evidence is possibly true, but I think the probability is far simpler, namely that Mr Reddy himself created these documents. The Finance Express loan 141This loan is significant for several reasons, but mainly because the lender attempted to recover the debt from Ms Menzies by exercising its mortgagee rights. It is necessary, however, to deal with Mr Reddy's evidence in respect of it. 142When Mr Reddy was cross-examined about his dealings with Finance Express in January 2006, his initial response was that he did not recall the company at all. The instigation for this loan was an unsuccessful application through Mr Dive for an increase in the loan to Valcorp of $125,000, but he also said that he had no recollection of this. It was put to him that the application was rejected by BMC and that he then went to Pinnacle Capital, a finance broker operated by Mr Peter Goldberg and applied for the same sum. He said that he might have done this but could not remember. He did not recall that Mr Goldberg required an application fee payment of $330. His recollection was not assisted by the fact that, in order to pay the application fee, he provided an authorisation to pay by Priscilla Ouvrier's credit card although he agreed that, if her credit card had been used in this way, it was his transaction. 143Mr Reddy then said, "I'm trying to recall but I think we were trying to get more money for the Hancock Street property," meaning by "we", "just me, representing Valcorp", although he could not recall why the extra funds were necessary. Mr Reddy said it was possible that a builder or a building inspector had told Mr Lyle that another building could probably be put at the back, but he could not recall the conversation with Mr Lyle discussing the additional funds and his reference to extension was speculation. (I believe it was invention rather than speculation.) He agreed that at no point did he discuss with Ms Menzies making a loan application on behalf of Valcorp to raise an additional $125,000. Although her home was to be the security for this additional advance, he did not know whether he discussed it with Mr Lyle and, therefore, he may have entered into this transaction without any authority either from Ms Menzies or Mr Lyle. He could not explain how that might have happened. 144Mr Reddy was shown a letter on the letterhead of Valcorp concerning a loan by Circuit Finance to Valcorp confirming the engagement of Mr Goldberg of Pinnacle Finance "to assist us with the finance for the purchase of equipment", purporting to be signed by Ms Menzies. The signature bears the three legged characteristic to which I have previously referred; it was examined by Mr Anderson and falls into paragraph (3) of the summary of his conclusions. I have no doubt the signature was forged. The letter bears the facsimile notation of the machine in Mr Reddy's office but Mr Reddy said that he was unable to explain the letter or how a signature purporting to be that of Ms Menzies came to be on it. Mr Reddy was then taken to a form relating to "HomeSec Finance Express" relating to the application fee payment of $330 which records Ms Ouvrier's credit card number and contains what purports to be Ms Ouvrier's signature. Mr Reddy then agreed that he sent the signed credit authority to Pinnacle Capital and also that, had this been a legitimate transaction on behalf of Valcorp, it would have paid that fee. He said that he thought Valcorp did not pay it because "they needed a credit card and Valcorp didn't have one". In fact the form itself provides for payment by internet transfer or direct deposit. This evidence was therefore not true. He said that this was not because he did not want Ms Menzies to be unaware of the transaction, but that "I thought everything we did she knew about via, you know [obviously a reference to Mr Lyle]." However, he did not discuss it with her and it may have been that Mr Lyle may not have known about it. Mr Reddy said that he thought the short-term loan was approved for Valcorp. He said that he thought it was for about $150,000 and he thought it was deposited in the Valcorp account. He said as far, as he could recall, a lawyer was involved in this transaction for Valcorp but he was unable to remember his name. 145The loan application dated 27 February 2006 was made in the name of Ms Menzies giving as her current address the Hancock Street property and, as her previous address, her home in Stanmore. The security offered was that home. The Menzies signatures on the application fall into paragraph (1) of the summary of Mr Anderson's conclusions. They are undoubtedly forgeries. They purport to be witnessed by a solicitor whose name is an illegible scribble. The form gives as the name and address of the nearest relative not living with the borrower as one Owen Murray of 26 Orlando Avenue Mosman. Mr Reddy said that he knew that address was a property owned by "another client of mine" he later identified as Owen Murray. He conceded that Mr Murray had no connexion whatever with the transaction and there was no explanation as to how he was identified as a relative saying, "I guess we [meaning "I"] just stuck that name in" because "that's the only name that we had at that time". He said that the address is in his handwriting, as indeed is all the writing on the form. The direction as to disbursement of the funds also contains a forged Menzies' signature. It directs payment to Finance Express (QLD) Pty Limited as to $14,200 and two months pre-paid interest of $22,814 to Ocean Drive Developments as to the sum of $120,000 (to be paid by telegraphic transfer to the latter's account as detailed with Laiki Bank. He agreed that the signature on the application was not that of Ms Menzies. He said he did not know how it came to be on the document but claimed, "I didn't sign it...somebody else signed it", he did not know who. After further questioning suggesting he had forged Ms Menzies' signature, he gave the following evidence - Q: So what you are saying is, as it happens, you did not sign this document but you just as easily could have? A:Yes Q:Because it was her application and really has no formal importance? A:Yes. Q:And you thought that would be honest, to sign her name? A:I didn't think whether it was honest or dishonest, it was just an application - Q:I am asking you now would you have thought it honest? A:No Q: That you would have signed her name? A:No Q:Did you think at that time had you signed her name that it would have been honest to do so? A:No Q:Did you sign that name? A:Again, I don't think I signed it because if I signed, and I have signed for clients previously, I will just stick in their name so that it's legible not a squiggle like that. Q:Had those other clients authorised you to sign their name? A:Yes Q:Did Ms Menzies authorise you to sign this name? A:No Q:Why is it then that you only think that you haven't signed this name? A:Because it's just not the way I would do it. I wouldn't squiggle a signature, I would do something - that's not even - it doesn't really matter what the signature looks like on an application? Q:Correct me if I am unfairly stating the effect of your evidence you're really saying that you think you didn't sign it - A:Yes. Q:- But you don't actually recall one way or the other but you rather think you did not because you would not have signed it in that way? A:Yes Q:Does that fairly express your evidence? A:Yes. 146The application shows that the date upon which it is purportedly signed was altered and this alteration initialled. Mr Reddy agreed that this suggested that the document was completed and the signature put on it at the same time as it was completed. He was asked - Q:And that makes it even more likely that it was you who put the signature and initials on the document? A:It is likely, but, as I said, I wouldn't waste my time trying to do a signature like that because it was just an application ... A: As I said before, just for an application it's pointless doing a proper signature, it's just an application.. Q. But the matter that Mr Skinner is bringing to your attention though is this: It seems likely, indeed almost inevitable, that the signature was placed on it at the same time that the document was completed; do you agree? A. Yes and that little squiggle looks like my initials anyway. Q. So there would have been no opportunity for Ms Menzies to have signed that document? A. Ms Menzies didn't sign this document. Q. She didn't? A. No. Q. Who did? A. Again I don't think I would have signed it in that form. Q. Who did, Mr Reddy? A. I don't know. Q. You see, you wrote it out? A. Yes. Q. And you've agreed that it is almost certain that that signature was placed on the document when it was written out, at the same time, haven't you? A. Yes. Q. Well, if it was written out at the same time, doesn't it follow as night to day that you placed the signature on it? A. Look, somebody else could have signed it. Q. What, leant over your shoulder at the desk? A. Well somebody who was in the office could have signed it but -- Q. Are you seriously suggesting that one of your employees might have signed it? A. Or anybody else who-- Q. Who happened to be in the office? A. Yes. Q. Someone who just happened to be in the office would sign an application with which they had nothing whatever to do and happened to use a signature that resembles in some respects Ms Menzies' signature with which they could not have been familiar; is that what you are seriously proposing? A. I think they would have got it from the idea, I suppose. Q. So you gave this person whom you do not know, who happened to be in the office, her ID and got her or him to sign the document; is that reasonably possible? A. It's possible. Q. Have you any idea who such a person might have been who would have agreed to sign a document with which they had nothing whatever to do by attempting to copy a signature that came from identification documents for another person? That's not true, is it? A. I have an idea. Q. Who then? What is your idea? A. It could have been one of many people. Q. Such as? Perhaps you might name one or two? A. Well, there's an Alex who worked there, there was a Chris who worked there. Q. An Alex who worked for? A. He worked for himself. There was several cubicles of everyone. Q. So he worked for himself in another cubicle? A. Yes. Q. This would have meant you would have had to have given him the identification documents and asked him to sign it, is that right? A. Yes. Q. Did you do that? It's possible? A. It's possible, yeah. Q. Why do you think it is possible that you would have done that? What possible reason would you have had? A. Really I don't recall because, as I said, it was only an application, I would have-- Q. What possible reason would you have had to give some entire stranger to this transaction the identification papers of Ms Menzies and asked him or her to sign it? Can you think of any reason at all? A. Just for ease of processing, just Q. Ease of processing by whom? A. By Finance Express because they probably wanted the application back the same day, so I asked somebody in the office to sign it, possibly. Q. And they would have known that they were imitating someone's signature which they were not authorised to do? A. Yes. Q. And therefore creating a forgery; that was inevitable? A. Yes. Q. And this person Alex is one such person whom you think might have been prepared to commit the crime of forgery? A. Yes. Q. Was he in your debt? Was he just a mate? A. Well, he was someone -- there was lots of stuff going on between people at that time. Q. Between people means involving you? A. Yes. Q. Well now, can you think of any reason that might have led Alex what was his surname? Don't remember, I take it? A. Yes, I can't remember that. Q. Can't remember, yes. What business was he in? A. He was in the property business. Q. Did you do any transactions with him? A. I may have. Q. But you don't remember as you sit there? A. No. Q. Was he in your debt? A. He could have been at that time. Q. I suppose it follows from what you have told me that if that had occurred you would have known the signature was a forgery? A. Yes. Q. Now let's get down to it. Do you now accept that the signature is a forgery? A. Yes, this one, yes. Q. And the document was put by you to the financier knowing that it was a forgery? A. Yes. 147I have set out the line of cross-examination as a demonstration of Mr Reddy's technique when dealing with possibly incriminating questioning. (Later, he said he recalled the surname was Marcello.) Of course, he must have known from the very beginning that the Menzies signature was a forgery. Furthermore, he must have known how it came to be a forgery since he asked it to be done. The signature is obviously an attempt to copy a Menzies' signature from another document, so it was a deliberate forgery committed (at the least) in his presence. Yet it took a great deal of questioning before he finally admitted this much, although of course, the invocation of Alex is incredible. It was then put to Mr Reddy that the signature on the application form had to look like Ms Menzies signature because when Finance Express had the identity documents, would be required, such as a driver's licence or a passport they would then have a genuine signature with which to compare the signature on this document - and, of course, on all the other documents. 148So far as the direction to pay the bulk of the proceeds to Ocean Drive Developments, that was written out by Mr Reddy. He denied that he knew the Menzies signature on the form was not hers. He said, "I had nothing to do with that, all I did was send the blank - this would have been faxed to me, I would have faxed it back or handed it back...to the lawyer handling this" before the signature was placed on it. He said that he did not recognise the witness' signature, he had never seen it before, and he did not know his name, although he knew "what he looks like". He said he met him when he gave him the mortgage documents in his office before they were signed (again with a forged signature). The next document shown to Mr Reddy was the identification Certificate for the application for finance. It purports to contain particulars of one William Jacobs of 123 Pitt Street Sydney, giving work, home and mobile telephone numbers saying that he had personally sighted and identified the applicantion and had sighted photocopied and endorsed clear legible copies of the driver licence with a photo, a Medicare card and some other document, for example, a passport (which should have been but was not specified). This document was dated 24 February 2006 and purported to be signed by Mr Jacobs. (Enquiries made by Mr Cohen, who was eventually retained by Ms Menzies in October 2006 showed that the Law Society had no record of such a person.) The signature is the same as that of the witness on the direction to pay form. Mr Reddy said that it was a surprise to him to learn that there was no such person as William Jacobs practising as a solicitor in New South Wales. Mr Reddy was shown a certification of Ms Menzies drivers licence and Medicare card, dated the same day and purportedly signed by Mr Jacobs. He said that "that came from a lenders lawyers". Of course that could not be true. 149A similar but different direction to pay form as that to which I have already referred dated 24 February 2006 contains the directions as to payments to Finance Express but no specific direction relating to Ocean Drive Developments. However, the bank details into which the funds are to be transferred was specified in Mr Reddy's handwriting as Ocean Drive Developments, again giving its Laiki Bank account details. That document also purports to be signed by Ms Menzies but her signature is not witnessed. Her signature is forged. Mr Reddy said he did not sign it and did not know how it came to be placed on the document. He said he would have sent the document back "I guess to the lawyer at that time" without Ms Menzies signature on it. He was asked whether Ocean Drive Developments Pty Limited was his business. He said, "I am not sure I was a director on it, but yes I was" and then that he sold it. It operated from his office, though he said that he thought it was Alex's company and he ran the bank account for it. He was asked why Ms Menzies' money was going to Alex - A:I can't tell you. I know we had to pay Alex some money. Q:Who's we? A:I had to pay Alex some money and I used Ms Menzies money. Q:You stole it from her? A:Yeah. Q:Sorry? A:You could say that Q:What else would you say? A:I used it Q:Well it wasn't yours to use? A:No. Q:This was a private debt? A:Yes. Q: To someone else? A:Yes Q: Who might have signed her document on this application for a loan? A:Yes. Q:You don't remember his surname? A:No but-- Q:Was he still working at that office? A:No Q:What about the company is that still in business? A:No. 150Mr Reddy said that although the company was not his, the account (which was opened some time in 2005) was owned by him, he was the only one who operated it and the money in the account was his and his alone. 151The Finance Express loan agreement is dated 2 March 2006 and provides for a two month loan of $157,014 with an optional extension for a further one month. The first two months interest of $22,814 was payable in advance out of the loan monies. The Menzies signatures on the loan agreement were forgeries as also, I am quite sure, was the signature of the person witnessing her signature as a solicitor - the same signature purporting to be that of William Jacobs, who also apparently witnessed the forged signatures on the statutory declaration as to obtaining independent legal advice, the declarations as to purpose (one for the loan agreement and the other for the mortgage), the authority to complete and amend documents, the mortgage. It seems certain that the witness' signatures were also forgeries indeed, that there is no such person as William Jacobs, since Mr Reddy could not take the risk that someone might actually contact Mr Jacobs. 152Mr Reddy was taken to a deposit into the Ocean Drive account - Q:You will see a deposit for 2 March 2006 for $120,000? A:Yes. Q:You would agree that the deposit of $120,000 on 2 March 2006 was the proceeds of monies advanced from Finance Express to Ocean Drive Developments pursuant to the direction to pay which you filled out? A:Yes. Q:So to put it as bluntly as I can Mr Reddy you stole $120,000 from Finance Express using as the borrower Ann Marie Menzies? A:It looks that way Q:It doesn't look any other way Mr Reddy. Please answer the question. You stole the sum of $120,000.00 using Ms Menzies identity? A:Yes 153 Mr Reddy agreed that it had always been his plan from the moment that he first spoke to the broker Mr Goldberg to take the $120,000 for himself. He agreed that the mortgage was never going to be legitimately signed by Ms Menzies - Q:How did you manage that part of the exercise? A:Someone else signed it and we had a lawyer, I assumed he was a lawyer, at that time to witness the document. Q:Whose the "we"? A:Myself and Alex. Q:You and Alex. So the two of you cooked this up? A: Yep, yes. Q:And the fact is, isn't it Mr Reddy you have always known that to be the fact before you were actually asked about the details for the transaction. It is not something that suddenly dawned on you was it? A:For this - yes. Q:You've always known it to be true? A:Yes. Q:And your statements of uncertainty in that you did not know were simply designed to avoid, if you could, admitting to this fraud, is that right? A:Pertaining to this yes. ... Q. But you know Finance Express took a mortgage from Ms Menzies? A. Yes, I think they attempted to do so, yes. Q. But you knew that wasn't going to succeed because Ms Menzies' signature was forged on the mortgage document. You knew that too, didn't you? A. No, I didn't know the mortgage documents were forged but, okay, let me just rephrase that, Ms Menzies didn't sign the mortgage documents. Q. And you knew that? A. Yes, for Finance Express she didn't sign. HIS HONOUR Q. When did you know that? A. When it was settled. Q. When it was settled? A. Yes. Q. You knew that the mortgage did not contain her genuine signature? A. Yes. Q. How did you know that? A. Because she didn't sign it. Q. But how did you know that? A. I didn't know but I know she didn't sign it. I didn't know that. I know it was taken away, the lawyers whoever this William Jacob was handled it and put it up to Finance Express. Q. But how did you know she hadn't signed it, Mr Reddy? A. I was told. Q. By whom? A. By Alex, Alex Marcello is his last name, actually I do remember it now, or Marcello. Q. And he told you she hadn't signed it? A. Yes. Q. Did you ask him who did? A. No. Q. Did you call Ms Menzies and say: "Look, a terrible thing has happened. I have unwittingly allowed this man to mortgage your property with a forged signature of yours. You must do something about it straightaway." Did you do something like that? A. No, I didn't. Q. Why not? A. Because again I knew Finance Express wouldn't get up. Q. Did you tell Alex that? A. Oh Alex knew, Alex knew. I only did it because-- Q. But he would never have to repay it because Fair Trading would ensure-- A. It was pretty much Alex's instigation, I just went with it because I had to pay him the money. Q. Do you remember Alex's address? A. Offhand Greenacre perhaps. I don't know it offhand, no. 154The notion that two or more forgers at work in connexion with this transaction is extremely unlikely, given that Mr Reddy alone had an interest in it. That Mr Reddy, who was on his own admission at least party to one of the forged signatures, believed that the other signatures were genuine, except for that on the loan agreement and he only discovered later that Ms Menzies' signature on the mortgage was a forgery is plainly impossible of acceptance. The interest payable on the advance of just over $157,000 under the loan agreement was a rapacious 16% per calendar month, reducible to 8.5% per month on prompt payment, thus a monthly payment of $13,345 and, in the event of default, $28,260. The notion that Mr Reddy for one moment thought that Ms Menzies would or even might have subjected herself to such an obligation on any basis at all (quite apart from anything else) the loan being entirely for his personal requirements and it being in effect conceded that he never made any undertakings of any kind about payment - indeed, almost certainly he was in no position to pay these instalments and never intended to do so - needs only to be stated to be decisively refuted. 155To have subjected Ms Menzies to this additional debt (leaving aside the fraudulent Perpetual mortgage) and the very real risk of losing her home and only asset or, at the very least, placing it at great risk and requiring the outlay of legal costs to vindicate her rights, demonstrates a breathtakingly ruthless and callous disregard for her interests. Mr Reddy said, by way of excuse (and with unconscious irony) that Finance Express were a "bunch of loan sharks" and thus that it was legitimate to steal from them. He said that, although he was going to pocket the money, he was not stealing from Ms Menzies because Finance Express could not have succeeded in obtaining repayment as their interest rate was excessive and "because the signature was forged on the loan application". That he might pay the debt was not mentioned. 156Further discussion of this evidence (which is far from all the incredible evidence Mr Reddy gave as to this transaction) is unnecessary. It remains simply to add that I have no doubt that Mr Reddy himself forged all the signatures purporting to be those of Ms Menzies on the documents relating to this transaction and his attempts to distance himself from the execution of the documents were transparent falsehoods. 157Ms Menzies received a notice on 7 March 2006 from the Department of Lands that identified a caveat over her Stanmore property in favour of Finance Express. Her evidence was - A. I rang Felix ... and he said that he was going to look into it and then I got a phone call from a chap that said that he was a solicitor acting for, that worked for Felix and that his secretary had lodged that by mistake because he had the Hancock Street papers there. SIRTES Q. When did you find out whether that caveat had been withdrawn? A. Umm, when I spoke to the chap that said he was Mr Davis [the solicitor whose name appeared on the caveat], he said, "Oh it was all a mistake" and I said, "Well", he said, "Oh I can put in a removal of caveat", so I said "When you have done that can you fax it to me at work" which he did. 158It appears that the broker (I think Mr Goldberg) contacted Finance Express some time before 27 April 2006 seeking an extension to 2 June 2006 since, on 27 April, Finance Express wrote to Ms Menzies at her home address in Stanmore referring to the debt payable under the agreement as $157,014 and the request for a one month extension. Ms Menzies did not receive this letter, as I understand the evidence. Although her Stanmore address was that stated in the loan agreement, it was probably posted to Hancock Street, which was given as her current address on the loan application and was the address to which the notice under s 57(2)(b) was addressed. There is no doubt that the broker's request was made at the instance of Mr Reddy or with his connivance. The extension required payment (in advance) of $11,407. Failure to pay the whole debt or obtain an extension would default the loan, which would then increase to $177,144 and accrue at a daily rate of $715.73. It seems that one more instalment was paid, although no further action was taken until September 2006 for recovery. This is dealt with in due course. Valcorp buys a Mercedes: more forgeries 159On 7 February 2006, Valcorp purported to enter into a Hire Purchase Agreement with CBFC, relating to a Mercedes Benz motor vehicle for a total rent of $372,689, payable by monthly instalments of $4,384.56. The agreement was never entered into or agreed to by Ms Menzies, whose forged signature is on the agreement, apparently witnessed by a broker for "Capital Corp" (perhaps "Steve O'Neill") but whether this signature is also forged I cannot say. The agreement purports to be guaranteed by Ms Menzies, also by virtue of a forged signature, also apparently witnessed. The agreement also states that the vehicle will be kept at Ms Menzies' home address. I have already mentioned some aspects of this transaction. A number of these instalments were paid out of Valcorp's account as also Mr Reddy's Manufacturer's House account. He denied any knowledge of the transaction. The CBFC file shows a number of apparently false and forged signatures and documents. However, it is not necessary to deal with these for present purposes. 160Mr Reddy was taken to the file of CBFC Limited, which contained a statement of the assets and liabilities of Ms Menzies as at 30 July 2005. The document noted Mr Reddy's fax number and he agreed that it appeared to have been faxed from his office to CBFC Limited as part of the Mercedes motor vehicle transaction. He said that he could not say that he was the creator of the statement of assets and liabilities "but it looks like I could have". It bears the forged signature of Ms Menzies. The statement shows Ms Menzies had net assets of $2,788,005. This must have been false to Mr Reddy's knowledge. It contained an entry that Ms Menzies had a net equity in Gas Nightclub worth $1,400,000. He said that he must have received that information from Mr Lyle and in respect of the net equity of Valcorp of $677,000 he said that was taken off the financial statement of 2005. Of course this was a fiction. The Valcorp 2005 tax return purports to be signed by Ms Menzies on 2 November 2005. That signature was forged and Mr Reddy must have known this because he was entirely aware, on his own account, of the circumstances that led to the creation of the document at his request. He said he did not know where he got Ms Menzies' superannuation figure of $160,000.00 and agreed that he may have invented it. The amount of $50,000 for cash at bank could again have been invented. The valuation of her furniture at $35,000.00 was a guess and the valuation of her car at $55,000 was an invention, as he did not know whether she had a car or not. He agreed that this is an example of a knowingly false document provided to Mr Dive for the purpose of obtaining money through BMC although the mere fact that it had his office fax imprint on it, Mr Reddy said, did not mean that he had sent it to CBFC. He said he did not know how it got to CBFC. He agreed in the result that he was in fact responsible for it but he didn't know how he got the Menzies signature on it. The following ensued - Q:Mr Reddy how did you get the signature on a false document of assets and liabilities that went to Mr Dive. A:I do not know. I assume it was either cut and pasted or it was signed, but I didn't sign it. Q:Cut and pasted from where? A:From the original signature Q:Found where? A:In the file of Valcorp, of Ms Menzies. Q:I see. Found without her authority? A:Yes Q:So in effect it is a forgery? A:In effect yes. 161Slightly later he resiled from agreeing that he had created the document saying "if it was done specifically for CBFC and not in the file for any other purpose then I did not do it because I did not have anything to do with the CBFC loan". Mr Reddy was then questioned about forging Ms Menzies signature. He said that he had not forged her signature or a copy of her signature at any point in time. He said that he would not have arranged for the forgery of her signature but, when the Finance Express application of a loan was bought to his attention he agreed that he had arranged for that to be done. He said that he would have had difficulties with signing Ms Menzies signature because "I couldn't have signed her signature in the first place, it looks pretty difficult". I do not believe him. 162Ultimately Mr Reddy, said that a person who, it appears, was a stand over man and whom, Mr Reddy claimed, had extorted money from him ostensibly to pay Ms Menzies but actually for his own purposes, was driving the Mercedes motor vehicle and that he was directly involved in procuring that vehicle through Valcorp. Mr Reddy said that he was not involved in the transaction but he was aware this person was and that his being able to drive that vehicle was part of a pay back for debts Mr Reddy owed him. He said that he was someone who had free access to his office and to the documents that were held there, including those of a financial nature or a personal nature relating to Ms Menzies and that he could have organised the CBFC documents without any involvement from Mr Reddy. Mr Reddy then said however that he did not know anything about the Mercedes transaction until after Mr Lyle told him when they started speaking again sometime in 2007. He said that he made payments to Mr Marcello from Valcorp and other of his accounts of probably $150,000 possibly more to repay his debts. In fairness, I should note that "the guarantor mailing address" for Ms Menzies was Hancock Street, not Mr Reddy's office which rather suggests Mr Lyle's involvement in some way in this matter. 163On 14 December 2006, CBFC terminated the hire-purchase agreement, presumably for non-payment of instalments, by notice addressed to Valcorp at a Spring Street address, which had been moved by Mr Reddy from Pitt Street. 164I have considerable scepticism about Mr Reddy's evidence about the interloper - too often introduced in the person of Mr Lyle and Alex and Steve in an attempt to avoid personal responsibility - but it might, at least to some extent, be true. However, it is not necessary to come to a final view about it. It is sufficient to note that (whatever Mr Reddy's motives for his evidence) the objective facts, the changes in the account, inherent unlikelihoods about such matters as sources of information, failures in recollection or uncertainty about matters that he must know, and his admitted use of fabricated information and documents. Mr Reddy's evidence about the transaction is highly questionable. The process of purchasing Hancock Street 165On 20 October 2005, BMC wrote to Valcorp at Mr Reddy's office, addressing Ms Menzies to advise that the loan application secured over Hancock Street and, Ms Menzies' guarantee had been approved subject to satisfactory valuation. Acceptances by both Valcorp and Ms Menzies were required and, in this respect, the letter contains two Menzies signatures dated respectively 22 November and 27 November 2005. Mr Anderson examined these signatures, (mistakenly dated 27 November 2005 in his list, but annexed to the report). The signatures fall within paragraph (1) of the summary of his conclusions. They are forgeries. Given that the letter was addressed to Mr Reddy's office, it is inescapable that he either forged the signatures or connived at doing so. It appears that the letter was returned to BMC on 24 November 2005. 166Mr Claudio Venegas was a solicitor admitted to practice in NSW in April 2003 and, between March 2005 and May 2006 was employed as a solicitor by Access Business Lawyers whose offices were in Elizabeth Street Sydney. He had previously acted for Mr Reddy in relation to a number of conveyancing matters. On or about 18 October 2005 he said that he received a telephone call from Mr Reddy and told him that he wished Mr Venegas to act for Valcorp in the purchase of a property at 4 Hancock Street Rozelle. He told him who the vendor's solicitors were and that contracts had been exchanged on 15 October 2005 for a purchase price of $715,000. The purchaser was identified as "Valcorp Pty Ltd" and signed by Mr Lyle as a director. He, of course, was never a director of Valcorp, indeed, he never had any interest in that company. The reason that he signed the contract is not altogether clear but it probably seemed desirable to keep the purchase price from Ms Menzies since, if she became aware of the actual shortfall in funds to be provided by the purchase price and the Permanent loan, this might have led to questions about the source of the balance, which was, of course, to be the advance from Perpetual - although, as I have pointed out, in the result that account had been milked dry before the settlement date. I think that it suited the fraudsters to keep Ms Menzies as ignorant as possible of what was transpiring and her all too passive trust in Mr Lyle and, by extension, Mr Reddy enabled them to get away with this ploy. 167It is evident that Mr Venegas has reconstructed the conversation set out in his affidavit (having, I think, no actual recollection) with the aid of his contemporaneous handwritten file note. But that note simply contains details of the vendor's solicitor's address, the price, a reference to a deposit bond clause and a note of a conversation with a real estate agent. Mr Venegas does not mention Ms Menzies either in his handwritten note or in the affidavit account of the conversation and I think it almost certain that her involvement was not mentioned. Indeed, it seems likely that Mr Venegas understood that the principal was Mr Reddy or Mr Lyle (using Valcorp for the transaction) as, on 20 October 2005 the real estate agent, obviously acting on the same understanding, wrote to Mr Venegas enclosing the signed contract and stating that she understood "you are acting for Felix Lyle (Valcorp Pty Limited) in relation to the...matter", which obviously reflected what she had been told. I infer that this resulted from Mr Lyle's and Mr Reddy's deliberate decision not to mention Ms Menzies' interest. Mr Venegas emailed the vendor's solicitor on 10 November 2005 stating, inter alia, that the contract is incorrect" since "the client is Valcorp Developments Pty Ltd (my italics) and "permission has been given to the vendor to amend contract accordingly". He said that he would make the necessary changes on his copy. His email also said that he suspected "the mortgage documents will go straight to client". As will be seen, this was correct and for obvious reasons I deal with in due course. In his affidavit, Mr Venegas said that he did not know who Mr Lyle was but he noticed that he was not a director of Valcorp and therefore the contract had not been validly executed. He said in his affidavit also that he does not now recall whether the contract was amended or a fresh contract was signed. I am quite sure his recollection about the mistake in the contract is wrong, as reference to his email makes perfectly clear. The only error mentioned related to the name of the purchaser. Furthermore, the vendor could scarcely make a change that cured the error identified by Mr Venegas in his affidavit, since that would have required Ms Menzies' signature. I add also that any company search (and none is mentioned in Mr Venegas' affidavit or is contained in the exhibits to it) would have revealed Ms Menzies was the only secretary and director, yet Mr Venegas made no reference at any point to the need to have her sign the contract. 168Mr Venegas says that all instructions on the purchase came from Mr Reddy on behalf of Valcorp, on the basis that he was authorised to act for the company. He said that during the time that he acted for Valcorp in relation to the purchase, he met and spoke to Ms Menzies only on one occasion, on 22 December 2005 at a meeting at the offices of Access Business Lawyers. It is, I think, significant, that this occurred, not at the instance of Mr Reddy but on the independent request of Mr Dive. Morevoer, it seems to me - from the email to the vendor's solicitor to which I have already referred - that Mr Venegas himself thought, in substance, that that the purchaser was organizing the mortgage, information that could only have come from Mr Reddy. On 15 December 2005 Mr Venegas received a fax from Mr Dive who said that he understood that Mr Venegas was "the lawyer acting for Anne Marie Menzies (director of Valcorp) in regards to the...purchase [of the Hancock Street property]" and that, as he had not met Ms Menzies, he asked Mr Venegas to give an identity certification when he met with her to execute and witness the documents relating to the purchase. Mr Venegas said that he always understood that the mortgage in question was from Valcorp to Permanent Trustee Company Limited to be secured over the Hancock Street property without any security being provided by Ms Menzies in respect of her Stanmore home. 169On 14 December 2005 BMC wrote to Valcorp at Mt Reddy's office (addressing Ms Menzies) advising that the mortgage loan had been approved and a formal loan agreement would be issued by Galilees. Of some significance, perhaps, is the identification the Hancock Street property alone as security, with no mention of any guarantee, by Ms Menzies or anyone else, despite the requirement being identified in the letter of offer of 20 October. No mention is made of Permanent. It seems likely that this letter was forwarded by Mr Dive to Mr Venegas by fax on the same day of Mr Reddy's request. By another letter of the same date from BMC to Valcorp sent also to Mr Reddy's office, notification is given of "Modification of terms and conditions". These do not refer to the guarantee. Provision is made for signatures accepting the modifications but the copy that has been tendered is unsigned. 170Also on 14 December 2005 Galilees' wrote to Valcorp care of Mr Venegas at the address of Access Business Lawyers in Elizabeth Street, Sydney enclosing a number of security documents. This letter was marked "For collection from [Galilees'] Sydney Office". It identifies the security as Hancock Street and Ms Menzies' guarantee. Also on 14 December 2005 Galilees' wrote to Ms Menzies, again care of Mr Venegas at Access Business Lawyers, but this time giving their address at 11/115 [a mistake for 13/115] Pitt Street, namely Mr Reddy's office. Again specifying that the letter was to be collected by Galilees' Sydney office, identifying the security as the property and Ms Menzies' guarantee and enclosing a number of documents, including a "Guarantee and Indemnity". 171Why Mr Reddy's address was given in respect of a letter to Access Lawyers is not explained in the evidence. It is particularly strange, given that the author of the two letters is the same solicitor. The use of Mr Reddy's address cannot be an accident. The only reasonable inference is that he arranged for the documents to be addressed to his office. It follows from this that the reason must have been the interception of correspondence addressed to Ms Menzies. Whether he had also requested Valcorp correspondence to be addressed to him and this was overlooked is not as clear, but the sequence and logic of events suggests that this was indeed what happened. (Mr Reddy said that he did not recall that this loan involved a guarantee. Having regard to the forgeries on the letter of offer of 20 October 2005, that his address was used by Galilees' and his interest in keeping from Ms Menzies the fact that she was personally liable for Valcorp's debt, this is not credible.) 172It is not disputed that Ms Menzies met with Mr Venegas in connexion with the Permanent loan. What actually transpired at that meeting is, however, controversial. 173Of course, Ms Menzies has always agreed that she was aware of the loan obtained for the purchase of Hancock Street and that it was secured by mortgage over that property. The potential significance of this transaction is that it involved her giving a guarantee of Valcorp's debt, which had the consequence of her undertaking a personal obligation. To place the evidence of Mr Venegas into context, I should mention that Ms Menzies' affidavit exhibits a copy of the loan agreement for the purpose of stating that she was unaware of such a document and never signed it. The agreement specifies that security for the loan comprises a mortgage over Hancock Street and a guarantee by Ms Menzies. The agreement provides for execution by Valcorp in the conventional way. Whether Ms Menzies saw (and executed) this agreement and the associated declaration as to legal advice was therefore a live issue, as to whether she executed a guarantee and guarantor's sworn declaration as to obtaining independent legal advice. I first deal with her evidence and then with that of Mr Venegas. For ease of understanding, I have stated certain conclusions in the course of dealing with Ms Menzies' evidence. Those conclusions take into account the evidence of Mr Venegas, which is separately analysed. Of course, the evidence must be considered as a whole. 174The loan agreement provides that it "must be read together with the 'Your Loan' general terms and conditions booklet (Version 7 dated December 2004". Ms Menzies' affidavit describes this document as "Loan Terms & Conditions Booklet" and exhibits it. The exhibited document is stated on the title page to be "Loan Terms & Conditions Booklet (Non-Consumer Credit Code Regulated)". Ms Menzies was not cross-examined to suggest that the exhibited document was not a copy of that which was actually attached to the loan agreement, although its title is not exactly that used in the agreement. In the circumstances, this must amount to a concession by Perpetual and Permanent that, indeed, this was a copy of the correct booklet. Ms Menzies said that she did not see this document in her meeting with Mr Venegas and was not aware of its existence. The affidavit, of course, was filed and served early in the piece and gave ample opportunity to BMC and Perpetual, if they were minded to contradict her, to obtain and produce the original executed documents and declarations. They did not do so. Although (as will be seen) Ms Menzies agreed that she signed the loan agreement (evidence to which I accord little or no weight), this does not explain why the executed guarantee was not produced and Ms Menzies' confronted with it. Indeed, if there is a genuinely executed loan agreement in existence, the bare agreement that she had signed it - which was accompanied by a denial that she was aware or made aware of any personal guarantee - would also not be an explanation to my mind for the failure to produce it. The only realistic inference is that production of the documents as I have mentioned as crucial on this issue, including the guarantee and declaration, assuming that they exist, would not assist the cases of Perpetual or BMC. This, to my mind, justifies the inference, in the absence of explanation, that they would not have assisted their cases. 175Of considerable significance, to my mind, is the fact that the only signature on the exhibited documents is one purporting to be Ms Menzies' but which she denies is hers. This signature was examined by Mr Anderson and falls within para (3) of the summary of his conclusions. I am satisfied that it is a forgery. Ms Menzies was not cross-examined to suggest otherwise. The only explanation for this forgery is that the document came into the hands of Mr Reddy. That there might be two documents in existence, one bearing the forged signature of Ms Menzies on the cover of the attached booklet (and, hence almost certainly her forged signature as director/secretary of Valcorp on the agreement itself) and the other being a duly executed agreement seems most unlikely. That such a document was seen by Mr Venegas, let alone executed in his presence, is therefore doubtful, to say the least. 176Ms Menzies' cross-examination on what transpired in her meeting with Mr Venegas is set out below - Q.You went to Mr Venegas' office and signed some documents in front of him for the purchase of Hancock Street? A. That's correct. Q. One of those documents you signed in front of him was a guarantee, correct? A. I wasn't aware of that at the time. Q. You signed the loan agreement on behalf of Valcorp, didn't you? A. Yes. Q. And that loan agreement expressly refers to a guarantee from you, correct? A. I wasn't aware at the time. Q. Mr Venegas told you in this loan agreement it referred to a guarantee from you personally? A. I don't remember that. Q. And in fact you did then sign the guarantee to support, that is you signed it as Anne-Marie Menzies personally to get the loan to purchase Hancock Street, correct? A. I signed many documents that day and I wasn't aware at the time I was being a personal guarantee. Q. Mr Venegas told you on that day that there was a guarantee from you personally, didn't he? A. I can't remember. HIS HONOUR Q. So, are you saying you are not in a position to deny it, your recollection doesn't permit you to deny that? A. That's right, if I saw the papers, I mean, there was a whole load of papers. Q. No, you are not being asked about what was in the papers, you are being asked about what Mr Venegas said to you. Did Mr Venegas tell you that you were signing as guarantor for the company's debts and that you would be personally liable if the company didn't pay? A. To the best of my knowledge I don't remember him saying that. Q. What are you saying, you don't believe he did say it or you are saying he may have said it and you have a failure of recollection one way or the other? A. He may well have said it and I may have not remembered. Q. If he had said it, then you would have known that you were personally liable to repay that money if the company did not do so? A. Mmm mmm, so you would think I would remember that. Q. Yes? A. That is why I am tending to say that he maybe didn't say that to me because I think if he had said that to me I would have remembered. Q. Would you have continued with the transaction if you realised you were personally liable? A. No. CURTIN Q. The truth is that when you left Mr Venegas' office, you knew you had signed a guarantee? SKINNER: I object to that question your Honour. There is evidence from Mr Venegas - this is creating undue confusion. Perhaps if the witness leaves the leave room for a second. HIS HONOUR: He is quite entitled to question what was in her mind. CURTIN Q. You knew you had signed a guarantee in front of Mr Venegas? A. No I didn't. Q. That was of no concern to you-- HIS HONOUR: I don't think you can have that, you can't build on a no a question that assumes a yes. HIS HONOUR: You can put it in another way. CURTIN Q. You were prepared to guarantee that loan for the purchase of Hancock Street because that was your part of this arrangement with Mr Reddy and Mr Lyle, correct? A. No. HIS HONOUR Q. Were you prepared to pay because you never thought that you would suffer a loss, would that be a reason why you might enter into such an obligation? A. I don't believe at the time I did know that I was going to be guarantor. 177Although Ms Menzies agreed she had signed the loan agreement, her later answers indicated that she had no clear idea of what documents she was shown and had signed. She was not actually shown the loan agreement, executed or unexecuted. She was not taken to the security clause. She was not taken to the booklet. She denied being taken to any guarantee document or signing one and none was shown to her. 178In the end, Ms Menzies was certain that had she signed any guarantee she was unaware that one was involved. She was unaware of any personal obligation and any personal guarantee and, as I understood her, reasoned from this that she was not taken to a document that suggested otherwise. I think that this evidence was truthful, indeed, that her reasoning was correct. Although her concessions were candid and thus support her honesty. Her agreement that she signed the loan agreement is of little or no weight, having regard to her evidence as a whole. In particular, to her not being aware of any personal obligation, the manner of questioning (in that she was not shown the document in question or her attention brought to the security clause) and the countervailing matters to which I have referred, as well her demeanour as a witness. I do not think she was actually aware which actual document it was that she agreed she had signed. In short, I am of the view that Ms Menzies' affidavit represented the facts, as she then believed them to be, moreover, that it is the truth. 179The letter from Galilees addressed to Ms Menzies via Mr Reddy's office enclosed also a certificate as to independent financial advice to be completed and returned. On a date which is uncertain, but very probably 21 December 2005, Ms Eason emailed, I think to Galilees,' a Certificate of Independent Financial Advice to Guarantors dated 20 November 2005. For the reasons mentioned below, this was a mistake for 20 December. It was addressed to Permanent, in which the self described, "financial advisor" (William John Taylor) stated that he had been asked to interview Ms Menzies at level 13, 115 Pitt Street Sydney (namely, Mr Reddy's address). He says he was provided with income tax returns and company tax returns for 2004 and 2005, and gave financial advice to Ms Menzies as guarantor. This document purports to be signed by Mr Taylor. Also sent with the email is a certificate of currency in respect of insurance on the Hancock Street residence. (At this time settlement had been arranged for 22 December but was then changed to 9 January and ultimately occurred on 20 January 2006.) There can be no doubt that the tax returns were the fraudulent documents, either made or obtained by Mr Reddy. Ms Menzies said in her affidavit that she does not know Mr Taylor and has never met him. She was not cross-examined to suggest otherwise. I do not doubt that Mr Taylor and his certificate is a fictional invention of Mr Reddy. Although, this concerns financial as distinct from legal advice. This document was almost certainly extracted by Mr Reddy from Galilees' letter addressed to Ms Menzies, care of Mr Venegas and sent to Mr Reddy's address, which makes specific reference to it. Furthermore, the guarantee had not been forwarded before 14 December 2005. I think it overwhelmingly likely that the date of the certificate mistakenly states "November" for "December". 180The most obvious and most likely reason for this false document is that Mr Reddy did not want Ms Menzies to be aware of any personal guarantee. It strains credulity beyond breaking point to suppose that Mr Reddy would have hesitated also to open the Galilees' letter addressed to Valcorp, it having fallen into his possession - I have already mentioned that Mr Venegas believes (correctly) that Mr Reddy also collected the letter addressed to Valcorp - to ensure that Mr Venegas was not given any document that might have alerted him (and hence Ms Menzies) to the existence of the guarantee, including the Galilees' letters, the copy of the loan agreement, the guarantee itself and the certification of independent financial advice. At the risk of repetition, it should be noted that the forged Menzies signature on the booklet attached to the loan agreement is additional cogent objective evidence supporting this conclusion. As will be seen there is nothing in Mr Venegas' affidavit that would lead to a doubt about the correctness of these conclusions. However, this changed somewhat on cross-examination. I now come to these parts of the evidence. 181It is important to have regard to what Mr Venegas first said about these matters in his affidavit of 27 November 2009 - 13. At pages 11 to 50 of exhibit CAV1 is a copy of a letter from Galilee Solicitors addressed to the director of Valcorp, care of me at Access Business Lawyers dated 14 December 2005 together with a copy of a document entitled "Loan Agreement" and a copy of a document entitled ""Your Loan" General Terms and Conditions" which were enclosed with that letter. I do not now recall but I suspect that that letter and enclosures were collected by Terence Reddy or his employed assistant Tamara Eason on or about 14 December 2005. The basis for my assumption is that the letter is marked "For collection from SYDNEY Office". 14. At pages 51 to 64 of exhibit CAV1 is a further letter from Galilee Solicitors addressed to "Ann-Marie Menzies, c/- Claudio Venegas, Access Business Lawyers, 11/115 Pitt Street, Sydney NSW 2000" dated 14 December 2005 together with a document entitled "Guarantee". The address shown on that letter is not the address of Access Business Lawyers but was the address of Mr Reddy. I do not now recall when I received this letter and the enclosed Guarantee but I think that it was given to me by Mr Reddy either at our meeting on 22 December 2005 or at a later date. 15. On 22 December 2005 Ms Menzies accompanied by Mr Reddy attended my office at Access Business Lawyers for the purpose of Ms Menzies signing the mortgage to Permanent Trustee Company over the property at 4 Hancock Street, Hancock Street. I asked Mr Reddy to wait outside the room and I then spoke to Ms Menzies by myself. I do not now recall what documents I showed to Ms Menzies at that meeting but it would have been my usual practice at that time to have taken a purchaser through the loan documentation provided to me by the vendor's solicitor. I therefore believe that I would have shown Ann-Marie Menzies the documents referred to in paragraph 13 above, namely the document entitled "Loan Agreement" a copy of which is at pages 13 to 28 of exhibit CAV1 and the document entitled "Your Loan" General Terms and Conditions" a copy of which is at pages 29 to 50 of exhibit CAV1. I also would have shown Ann-Marie Menzies a copy of the facsimile sent by Wayne Dive referred to in paragraph 11 [about the certification of the identification documents]. 16.I do not recall showing Ms Menzies the document referred to in paragraph 14 above entitled "Guarantee" a copy of which is at pages 53 to 64 of exhibit CAV1. I believe that it is more probable than not that I did not have this document at the time of my meeting with Ms Menzies on 22 December 2005 because the covering letter was not addressed to the address of Access Business Lawyers as deposed to in paragraph 14 above. If, however, my recollection is wrong and I did have that document at my meeting with Ms Menzies on 22 December 2005 then, my usual practice would have been to show it to Ms Menzies and I may or may not have advised her in relation to it 17. At the meeting with Ms Menzies on 22 December 2005 Ms Menzies signed the Mortgage over 4 Hancock Street, Hancock Street in my presence. A copy of the Mortgage signed by Ms Menzies is at page 65 of exhibit CAV1. Ms Menzies also provided me with a copy of her driving licence and credit card and I certified these as a true copy. A certified copy of these documents is at page 66 of exhibit CAV1. 182The Galilees' letters were not addressed to Mr Venegas but to Valcorp and Ms Menzies. Despite Mr Venegas' apparent belief that he did actually receive the letters, I think that this it most unlikely, for the reasons outlined as to Mr Reddy's need to keep the guarantee requirement from Ms Menzies, that Mr Venegas actually saw these letters. There is no documentary or other objective evidence that suggests he did. I am of the view that he has mistakenly assumed he saw them. 183None of the documents referred to by Mr Venegas are signed. The "'Your loan'" General Terms and Conditions" document exhibited to Mr Venegas' affidavit also states on the title page "Version 7 - December 2004" and thus a different document to that identified by Ms Menzies and bearing her forged signature. Although Mr Venegas was not questioned about this, I do not accept that this document is in fact a copy of the document enclosed with the letter. Its provenance is unexplained. It is clear that Mr Venegas has no actual recollection of the precise documentation and, as I have pointed out, no issue was taken with Ms Menzies' affidavit evidence on this point. The forged signature on her copy strikes me as decisive in this respect. 184It will be seen, so far as the guarantee is concerned, that in his affidavit Mr Venegas thought it probable that he did not have this document at the time of his meeting with Ms Menzies on 22 December, since the covering letter was not addressed to his firm. He does not say in paragraph 15 of his affidavit that he actually had the loan agreement and booklet but says, in substance, what his practice was, namely he would have "taken the purchaser through the loan documentation". This is somewhat ambiguous since, in dealing with the specific documents, he says merely he would have "shown" them to her and does not mention the giving of any legal advice. (This is important, since, the documents called for legal advice to be acknowledged, which one would expect to have been completed in his presence.) Furthermore, execution of the loan agreement was a clear requirement of the mortgagee. Since it was Mr Venegas' job to see to the execution of the relevant security documents, it seems extraordinary that, Ms Menzies having executed the mortgage, the need to also execute the loan agreement was overlooked if indeed it were amongst the documents he was dealing with. Yet, the topic of what documents he saw being executed being raised, he mentioned only seeing to the execution of the mortgage, this despite the fact that the loan agreement was an exhibit to his affidavit. If he had any recollection of witnessing that document being executed, it is inevitable that he would have mentioned it. However, as noted, he specifically says that he does not recollect having seen the document. As to the guarantee, he says merely that, more probably than not, he did not have it and, if he did, then his "usual practice would have been to show it to [her] and I may or may not have advised her in relation to it" (italics added). I should mention, for completeness, that he says that he never saw the loan booklet exhibited to Ms Menzies' affidavit. 185In addition, as to the guarantee, there was no good reason why, as it was to be signed by Ms Menzies who was also signing the mortgage as director of Valcorp, of which she was the only shareholder, that this would not have been supplied to Mr Venegas by Mr Reddy except, of course, that he did not wish this document to be brought to Ms Menzies' attention. Moreover, there is no good reason why Mr Venegas would not also have attended to its execution if he had it. That he did not must have been because Mr Reddy had extracted it. By parity of reasoning, Mr Reddy must have extracted the loan agreement (to which he undoubtedly had access), which had the same problem as the guarantee. This, then is positive evidence that strongly supports the conclusion that Mr Venegas did not have and gave no advice about the loan agreement, in particular the security clause. 186I now come to Mr Venegas' evidence. Mr Skinner for Ms Menzies elicited from Mr Venegas in chief that his affidavits of 27 November 2009 and 17 May 2010 constituted his evidence in the matter (the latter relating to another issue concerning a conversation with Mr Dive). He was then cross-examined by Mr Curtin SC for BMC who, first of all dealt with Mr Lyle's having been wrongly identified as a director of Valcorp. Mr Venegas said he obtained a search of Valcorp. Mr Venegas said that he had no recollection of seeing a contract signed by Ms Menzies. He said that all that needed to be done was "to change the names" but then that he did not have her sign when the amendment was made having, as I understand it, spoken to Mr Reddy. However, for the reasons I have given, the contemporaneous email identifies quite clearly what the problem was and it was not one that could be corrected unilaterally by the vendor's solicitors. The interpolation of the word "Developments" with the permission of the purchaser's solicitor was both simple and no problem. I have no doubt that Mr Venegas' evidence about this matter was a clear example, to my mind, of the trick sometimes our memories play on us, refuted (often to our surprise) by contemporaneous material. For itself, this is not important. However, it shows a definite incorrect and substantial reconstruction by a witness who also reconstructed other matters of greater relevance. 187Mr Curtin SC then dealt with the meeting on 22 December 2005 when Ms Menzies came to Mr Venegas' office with Mr Reddy, moving first paragraph 15 of his affidavit. He took Mr Venegas to the copy which was in the agreed tender bundle which he said was identical to that which was exhibited in his affidavit (at paragraph 13). (Although, the attached booklet was that which was exhibited to Ms Menzies' affidavit and contained her forged signature as previously described.) He asked Mr Venegas whether, as the solicitor acting for Valcorp, he "advised Ms Menzies of the important parts of the loan agreement". He said that "I would have gone through the most important bits...prior to the conference". However, this of course was based on the assumption that he had actually obtained that document. Which he said in his affidavit (sworn some 10 months previously) he did not recall. Unfortunately (I think by oversight, to be fair) the question - and the continuing questions - as it seems to me, proceeded upon the assumption that, contrary to Mr Venegas's statements in his affidavit - which he had adopted as his evidence in chief - he had indeed received the loan agreement and what is more, actually recalled mentioning the guarantee to Ms Menzies in the conference. Indeed, Mr Curtin's questions concerning paragraph 15 of his affidavit commenced with the question - Q.You, on 22 December 2005, if you look at paragraph 15 of your affidavit, your recollection is you showed Ms Menzies a document entitled " loan agreement"? A. Yes. The questioning went on from a fundamentally mistaken premise. It is clear that Mr Venegas' statement of what he received and what he had done was surmise based upon no actual recollection of having received these documents at all. Mr Venegas agreed that he had read the document before the conference for the purpose of advising Ms Menzies about it - CURTIN Q. You recall don't you, mentioning this guarantee [meaning the guarantee mentioned in the security clause of the loan agreement] to Ms Menzies in your conference? A. Yes. Q. You recall telling her that she was required to sign a personal guarantee in order to secure this finance. Correct? A. I'm not sure whether I had a personal guarantee that accompanied those documents that came with the loan agreement, but I would have said to her something along the lines of "you are personally guaranteeing this and that if, for whatever reason there is a shortfall once the bank forecloses, then you're going to be personally liable" and I made reference to her private address at 39 Stafford Street. Q. You actually recall saying words to that effect to Ms Menzies on 22 December 2005? A. Yes. Q. And sitting there in the witness box now, you don't recall whether or not you had a copy of the guarantee? A. That's correct, yes. Q. But your practice as a solicitor in 2005, was seeing that a personal guarantee was required by the lender, if you did not have that guarantee you would have taken steps to get it. Correct? A. Possibly yes, or if I didn't take steps to get it, the loan would not have proceeded any further. I would have got correspondence from the lender's lawyer saying this guarantee needs to be executed. Q. You recall don't you, from recollection or your file, this lender did require the guarantee and only settled the loan when the guarantee was provided. Correct? A. Yes, I would assume that's correct. HIS HONOUR Q. I've assumed that the loan agreement, when you say it was already signed or is that wrong? A. No, she signed it in my presence. Q. In your presence on that occasion? A. On that occasion, yes. 188As I have mentioned, no signed loan agreement, guarantee or acknowledgment as to legal advice has been tendered, although it appears highly likely that, the loan having proceeded to settlement, these documents were indeed executed by someone. However, the crucial questions are whether they were brought to Ms Menzies' attention and executed by Ms Menzies (which she denies). In light of the recollection described in his affidavit, which as I mentioned above, he adopted without any qualification in chief, I am unable to accept that Mr Venegas, as at the date (6 September 2010) when he gave his evidence, had an actual recollection of receiving the loan agreement, let alone taking her through it and seeing her sign it. I have already referred to the fact that the only signature on the security documents tendered and the agreed bundle (except of course for the mortgage) purported to be that of Ms Menzies on the booklet of terms but that this was in fact a forgery. This document Mr Venegas is certain he did not see but which, for the reasons I have given, is the document that was actually forwarded by Galilees' (as distinct from that exhibited to his affidavit.). 189Mr Venegas also gave evidence about a quite detailed (though, as I take it, brief) conversation with Ms Menzies concerning the way in which the purchase price was to be financed. In light of the absence of any mention of such conversations in his affidavit as set out above I do not give this evidence any weight. These were conversations that would have occurred almost four years previously in respect of which he made no note. I have already referred to his apparently clear recollection of the issue of Mr Lyle's having signed the contract as an example of confabulation. I believe he has also mistakenly reconstructed these conversations with Ms Menzies, although it is not impossible that some conversation occurred along similar lines. What I am quite sure about is that the question of a guarantee simply did not arise. He added some details about her telling him that she wanted to turn the property into a childcare facility through Valcorp and Terrence Reddy. The lack of mention of Mr Lyle is, I think, some evidence that this conversation did not occur. He also said that he noticed that the loan was interest only and required payments to be made to the order of something over $4,000 a month and he said that he explored with Ms Menzies Valcorp's ability to make the monthly repayments and she told him the property in Stanmore "would be leased out and it would be enough to cover the interest payments". I do not believe that Ms Menzies ever thought that she would lease her home or that the lease of that home would be enough to pay the envisaged interest rate or that she would say so. On the other hand Mr Reddy had fabricated documents which stated that the Stanmore property was to be leased. It is not at all impossible, indeed quite likely, that Mr Venegas has confabulated between what was said to him by Mr Reddy and what was said to him by Ms Menzies. Nor do I accept that Mr Venegas discussed with Ms Menzies the gap between the purchase price and the Permanent loan, although I would accept that he believed that he had. I regard this as a reconstruction based on what he thought he might or, perhaps, should have done. It was not mentioned in his affidavits. Nor was Ms Menzies cross examined on the topic. 190In re-examination, it seemed to me that Mr Venegas' evidence that Ms Menzies had told him about the relevant financial position and where the shortfall was coming from was rather weakened - Q.You're quite certain that Mr Reddy was going to act as an agent for Valcorp? A. Yes. Q. It was Mr Reddy who gave you all the information about the financial position? A. Yes. Q. And where the shortfall was going to come from? A. Correct. 191At the end of the day, I am not prepared to accept that Mr Venegas' actually has a recollection of the matters that go outside his affidavit. I also think that he, quite naturally, does not really have a recollection of what was told to him by Mr Reddy as distinct from Ms Menzies - bearing in mind, of course, it is possible that both told him the same things about one matter or other. The qualified character of his affidavit account of events and reference to his usual practice is decisive enough by itself. When all the other matters are taken into account about Mr Reddy and his intervention, the forged signature on the loan booklet and the fabricated certificate, it seems to me at least more probable than not that Mr Venegas did not have either the loan agreement, the guarantee, the certificate of financial advice, the guarantee or the Galilee letters themselves, and that he gave no advice about the guarantee. 192To complete Mr Venegas' evidence, he stated in his affidavit that at no time did Mr Dive or anyone else from his firm inform him that finance was being arranged or secured over Ms Menzies' property at Stanmore and that all he knew was that Mr Dive was arranging a mortgage for Valcorp with Permanent for the purchase of the Hancock Street property to be secured over that property alone. Indeed, Mr Venegas said that nobody at all, including Ms Menzies, Mr Reddy, Ms Tamara Eason, Mr Lyle told him that Ms Menzies home had been or was to be mortgaged and that what he knew was that the shortfall in the purchase price for the Hancock Street property (that is to say between what was being borrowed and the contract price) was to be paid for by Valcorp but that he did not know where that money was coming from. 193Mr Dive said in his affidavit that on 15 December 2005, documents needed to be executed by Ms Menzies in relation to the Valcorp purchase of the Hancock Street property. He said that he caused the letter to be sent to Mr Venegas on that day, "setting out the documents and asking that he meet with her and explain the documents". No such letter has been produced. Mr Venegas says in his affidavit of 17 May 2010 that he never received such a letter from Mr Dive, that the only correspondence from him was a facsimile relating to the obtaining of certified identification. In the absence of this letter being produced, and bearing in mind Mr Venegas' denial that he received such a letter, I do not accept that Mr Dive's recollection about this matter is correct. 194Mr Dive also says that just before Christmas 2005 he met with Mr Venegas to confirm that he had met with Ms Menzies and explained the mortgage and documents to her. Those were the documents which he said that he had forwarded to Mr Venegas but which Mr Venegas denies receiving. Mr Dive said that Mr Venegas told him - I have met with her. I have told her about the loans. She understands what she is getting into. I asked if she has sufficient funds to meet the purchase price of the Hancock Street property and she told me she had. She said she had a separate loan which Terrence Reddy had organised for her. 195Mr Venegas denied any such conversation. The reason he could be so certain about this is, as I have already mentioned, he was only ever aware of one loan which was that in the name of Valcorp with Permanent secured over the Hancock Street property and, so far as he was aware, the Hancock Street property was being purchased by Valcorp not by her. 196In cross-examination Mr Dive conceded that he may have met with Mr Venegas on 9 January 2006. He agreed that this was the occasion on which Mr Venegas handed to him the certified identification. In cross-examination also Mr Dive conceded that Mr Venegas spoke only about a loan in the singular number and that he was referring to the Hancock Street loan from Permanent. The cross-examination continued - SKINNER: Q. Mr Dive, when you spoke to Mr Venegas, Mr Venegas never said to you words to the effect referring to Ms Menzies, "I have told her about the loans", did he? HIS HONOUR Q. I suppose what you're being asked is how sure is your recollection Mr Dive, that he said that to you? A. My recollection is he was fully aware of the Valcorp loan. Q. No, we're really trying to get to what he actually said to you and the accuracy of your recollection. It's true that you're saying that these were words to the effect, and you may not remember the exact words used but, how sure are you that he did say to you, in effect, that he had told her about the loans? A. Should not be plural, should be one. "I have told her about the loan." Q. It was singular? A. Yes. SKINNER Q. If it was singular, then Mr Venegas was referring to the Hancock Street loan from Permanent? A. That's correct. Q. You're now certain that's what occurred? A. Yes. Q. I want to suggest to you that you, in your conversation with Claudio Venegas, never said to Mr Venegas, "she" meaning Ms Menzies "said she had a separate loan which Terrence Reddy had organised for her"? A. In my opinion I am clear that's what is said. Q. Did you make a contemporaneous note about that? A. No. 197Mr Venegas says that on 2 May 2007 Ms Menzies came to see him at the legal firm to which he had then moved as a result of a prior telephone conversation with her. In the presence of Mr Michael Lennard (the principal of the firm) Ms Menzies and Mr Venegas had a conversation to the following effect - Ms Menzies said: I now recall you giving me advice in relation to Hancock Street. There was no Mortgage over my residential property at Stanmore. The only property offered as security for Hancock Street, was Hancock Street itself. I said: Yes, that is my recollection too. Ms Menzies said: There are two Mortgages on my home at Stanmore Street [sic]. These mortgages have been forged by Terence Reddy. I said: I have no knowledge in relation to those transactions. I will get the Hancock Street file for you from Access Business Lawyers. Here, sign this authority form. Ms Menzies said: Okay. 198Having carefully considered the whole of Mr Dive's cross-examination (not only as to this subject matter) and his uncertainty about a number of relevant and important facts and, having regard also of course to the evidence of Mr Venegas, I am quite satisfied that Mr Venegas was unaware of the other loan and did not say anything to Mr Dive that suggested that there was another loan involving Ms Menzies. This evidence of Mr Dive about the letter that he said he sent to Mr Venegas and the conversation, has added significantly to the difficulty with accepting him as a reliable witness on matters of importance. Although I do not go so far as to doubt his honesty. Confusion between the Permanent and Perpetual loan 199Mr Wort pointed out that Challenger is a wholesale finance company which creates and manages, on behalf of trustees holding funds (such as perpetual and Permanent) of mortgage backed securities invested in registered first mortgages. Its primary role is to liaise between the trustees and a third party, such as BMC who usually offer funds to be lent to borrowers under their own branding. This is what occurred here and explains why, as I think, that many of the documents appear to identify BMC as the lender. 200Both BMC and Mr Dive were involved in the Perpetual and Permanent loans. In addition to the potential for confusion, having regard to the similarity of the name of the ultimate financier. The involvement of these parties made it very likely that some confusion, possibly significant, might arise. This is evident from the condition of Mr Dive's file to which I have already referred. The documents show that there were various forms faxed to and from BMC, their details changed as the transaction changed its course, often at Mr Reddy's instigation, sometimes because the forms were incomplete or mistaken and also because the file contained an application for the extension of the Permanent loan which, at first, Mr Dive thought related to the change of proposed development property from Cardigan Street to Hancock Street. 201The most prominent name on the documents associated with Ms Menzies' genuine signature and those which she agreed she had seen is that of "BMC Mortgage Corporation Limited". Many documents contain no reference at all to BMC, let alone to the actual lender. The references to Permanent and Perpetual are, in this set of documents few and far between. In my view it would require an eagle-eye to detect the difference and real focus to see its significance. This is especially so if one were labouring under the belief that there was but one loan, and that it was from BMC, with the distinction between it and the lender not clearly understood and the identity of the lender never focussed on. Notices and correspondence addressed to Ms Menzies 202In BMC's file on the Permanent loan is a document entitled "Primary Industry Bank" (PIB). Mr Conley, who is (and was at the material time) National Accounts Manager of BMC, says that this is a reference to the type of loan that was once written by BMC and that the sheet is now obsolete, used merely as a "summary sheet that we have on the front of our files for all our loan accounts, it just has basic loan information on it and we make reference to it". The importance of this document is that it shows that the contact address for Ms Menzies is that of Mr Reddy's office in Pitt Street. 203Thus, it is not surprising that BMC's letter of 14 September 2005 confirming the Perpetual loan approval (earlier discussed) was addressed to her at Suite 1301/115 Pitt Street. Also, in this context, the email from Ms Cortes from Interstar concerning the Perpetual Loan to Ms Amestica of BMC dated 22 September 2005, is of significance. Ms Cortes' email informed Ms Amestica that the loan documents were being sent to Ms Menzies at the Stanmore address. Next to this information and plainly intended to qualify it is a handwritten note that "Jeannie" (identified as Ms Scherer from Galilees') was to "post [the documents] to Pitt Street address", plainly enough a reference to Mr Reddy's office. This information necessarily came from BMC's file. For completeness, I should also mention (though this is also pointed out above) that the approval letter of the Permanent loan was also addressed to Ms Menzies at Suite 1301/115 Pitt Street. 204The mortgage facility schedule relating to the Perpetual loan, a Challenger document, has as Ms Menzies address at 312/508 Riley Street as distinct from her home, which is the security. Indeed, the letter from BMC to Ms Menzies of 28 November 2005 referring to an application for an increase in the loan of $124,500, and confirming an intention "to arrange an Interstar premium facility loan facility" is addressed to her at 312/508 Riley Street. It may be that notices relating to the mortgage were also ultimately addressed to her at Riley Street. (Of course, Ms Menzies had nothing to do with this application and the signature purporting to be hers on the relevant documents were forgeries.) 205Quite apart from Ms Menzies' own evidence (which, I am persuaded, is truthful) as to not receiving documents addressed to her on their face, I am not prepared to accept that, merely because her home address appears on a communication, it was in fact posted to her at that address. The fact that her address is given on the security documents at her home does not justify the inference, in the circumstances of this case, that it was in fact used as her postal address. Indeed, in respect of the numerous documents to which I have already referred and which are mentioned below, I am quite satisfied that it was not. Thus, although Mr Wort, head of Originator and Mortgage Services for Challenger and, at the relevant time the Loan Underwriter and National Lending Manager, deposes in his affidavit to the direct debit request confirmation form of 22 November 2005 as having been "sent to the property", without evidence that the document was actually posted to that address (a matter of which he clearly has no personal knowledge), I do not accept that it was actually sent as he states. Mr Wort also deposes to the practice of Challenger to send the borrower a statement of account every 6 months at the end of July and December and to the first of such statements showing transactions between 12 October and 8 December 2005, which shows the dishonoured payment of $3,412.34 made on 11 November 2005 and the replacement payment of 29 November 2005, also dishonoured. The statement notes a payment made on 8 December 2005. 206Following the dishonouring of the November direct debit, Mr Dive was contacted by BMC and, I would infer, spoke to Mr Reddy about it. Since on 21 November 2005, a further direct debit request was faxed by Mr Dive to BMC dated 18 November 2005. Signed by Mr Reddy, and varying the name of the account from InvestOne to Valcorp and the account number to that of the Valcorp account with Laiki Bank, opened as previously described. This document was sent to Mr Dive, as it appears to me, by Ms Eason on behalf of Valcorp. 207On 2 December 2005 a letter on a Valcorp letterhead (the address for which is stated as Level 13, 115 Pitt Street) and purporting to be signed by Ms Menzies (in fact forged by Mr Reddy) is stated - I refer to your recent letter on 16 November regarding the mortgage instalments of $3,412.34 which have recently been dishonoured. The reason for this delay is due to confusion with a new account I have only recently opened at the Laiki Bank. There was an error in the account number and if you can amend your records to the correct account details [then setting out Valcorp's account with Laiki Bank]. I apologise for this confusion and delay. By Monday 5 December 2005 the due amounts outstanding on the mortgage repayments will be ready to be directly debited from this nominated account. Of course this did not happen either. 208Mr Conley deposed that he became aware on 13 December 2005 that the instalment due on 12 December 2005 had not been paid. It is likely that Mr Dive was contacted by someone from BMC, leading him to send a facsimile to Mr Reddy on 15 December 2005 informing him that BMC were "a little distressed that the December payment was dishonoured" requesting him to speak with Ms Menzies and ask her to make a deposit immediately and noting that BMC "have been unable to speak with the client [presumably Ms Menzies] in regards to this matter", at least some evidence that the telephone number used was not hers at Stanmore. It appears that Mr Dive and Mr Reddy then spoke by telephone during which it appears Mr Reddy gave some assurances about the December instalment which could be drawn on that day. Mr Dive also raised a request by BMC possibly in connection with the Permanent loan, but more likely in respect of both Permanent and Perpetual loans that future payments be arranged through another bank and bank account. On the same day, as it happened, Mr Dive sent a facsimile to Mr Venegas informing him that he had not met Ms Menzies and asking him to obtain some identification from her and certify it as a true copy and return it to him. This Mr Venegas did on 22 December 2005. I note, though it does not seem to be a matter of any real significance that no further request appears to have been made by BMC to change the bank transfer arrangements. 209Mr Conley says that on 30 January 2006 he again reviewed the file and noted a further missed payment on 12 January 2006. He says that on that day he telephoned and left a message for Ms Menzies on her mobile telephone and with her business number. Mr Conley's file note, which was made on 2 February 2006, confirms these details but regrettably does not identify either the mobile service or what he describes as her "business number". (It will be recalled that, on the Perpetual application form, the specified mobile and business numbers were those of Mr Reddy at his office.) Ms Menzies denies having received any telephone calls or messages from Mr Conley at this time; furthermore, she deposed that her mobile does not, and has never had a mobile message service activated. Nor does she have, or indicated that she had a "business number". I accept Ms Menzies evidence in this regard. That Mr Conley identifies such a number as that upon which he left a message, which also indicates to me that he had not telephoned her on her home number. On the same day, Mr Conley telephoned and left a message with Ms Eason, for Ms Menzies to call her back. I am quite satisfied that Ms Eason did not contact Ms Menzies, very likely at Mr Reddy's direction as he did not wish Ms Menzies to speak to anyone at BMC. On the same day also Mr Conley wrote to Ms Menzies pointing out that the 12 January instalment was dishonoured and requiring immediate payment. However, this letter was addressed to her at the Riley Street address with which Ms Menzies had no connection. As mentioned above this address had been provided by Mr Reddy in connexion with the Perpetual and BMW Finance loans, although he claimed not to remember who gave it to him. It seems strange, nevertheless, that the letter to Ms Menzies was addressed to her at Riley Street, when the postal address on the form is given as Suite 1301/115 Pitt Street Sydney, namely that of Mr Reddy. However, it may well be that, although the letter is addressed to her at Riley Street, the envelope was addressed to the specified postal address. Indeed, this seems to me to be likely. 210Mr Conley says that between 10 and 14 February 2006 he made further enquiries about payment of the arrears including inquiries with Mr Dive. He noted a conversation with Mr Dive on 14 February 2006 in which, it appears, Mr Dive had been promised that a cheque would be sent to pay the outstanding instalment due on 10 February but as at that date it had not been received. (Mr Dive does not give any evidence about this matter and his file contains no note of these communications.) By 20 February 2006 Mr Conley, not surprisingly, still had not heard from Ms Menzies and he wrote to her again pointing out that the loan repayment of $3,412.34 due on 12 January 2006 was dishonoured and remained unpaid and requiring immediate payment. That letter also was addressed to her at Riley Street but, again, it is uncertain where the envelope was posted to. 211Mr Conley said that on 24 February 2006 "a female whom he believed to be Ms Menzies attended the office of BMC and hand delivered...a cheque for the sum of $3,412.34 from a Laiki Bank account payable to [Perpetual]), a receipt on the letter head of BMC was provided. The cheque has been exhibited. It was drawn on the Liaki Bank account of Valcorp. Comparing the signature on the cheque with those of Mr Reddy, acknowledged by him on the other documents tendered in the case. It seems to be virtually certain that he signed this cheque. Having regard to his role in the matter, Mr Conley's belief that it was delivered by Ms Menzies invites at least some scepticism. Jumping forward a little, it is necessary to mention that the female he believed to be Ms Menzies again attended at the office of BMC on 25 August 2006 and delivered a bank cheque, this time drawn on HSBC bank, payable to PTVL for an outstanding instalment of $3,950. At these meetings, the woman did not identify herself, more particularly, did not suggest that she was Ms Menzies. Ms Menzies denied these attendances (although she did go to BMC's office on another occasion, with which I deal in due course). 212Mr Conley's identification of the woman who gave him these cheques on two occasions occurred when he was approached for the purposes of providing an affidavit for the proceedings in November of 2009. Almost four years after first meeting her in February 2006, and three years after his second meeting on 25 August 2006. He was asked whether the photocopy of the photograph of the person said to be Ms Menzies on the form was the same person as the female whom he met on 24 February 2006. He said that she was. During cross-examination, he identified Ms Menzies sitting at the desk behind counsel in the courtroom. It is not necessary to dilate upon the difficulties attending identification of strangers. The circumstances of Mr Conley's doing so, present a textbook example of a very risky identification. The photocopy of the passport photograph is far from clear and indeed, having had ample opportunity to compare it with Ms Menzies while she was in the courtroom, identification of her was not straightforward. 213Mr Conley also said that he did not have a specific recollection of either meeting and, in the end, candidly agreed that it was not possible as at the date when he gave his evidence (8 September 2010) to say that the person he believed to be Ms Menzies on 26 February 2006, was the same person he identified in 2009. The same applied to the woman who he believed to be Ms Menzies who attended the office of BMC in August of 2006. Furthermore, he was not in a position as at the time he gave evidence, he agreed, to give an identification of that woman as the same person he identified in Court. 214Mr Conley's affidavit states that on 3 May 2006 "a woman [not identified] personally attended the office of BMC and handed to Martha Amestica a cheque in the sum of $3,412.50 in payment of the loan". That cheque was a HSBC bank cheque dated that day. Since Mr Conley did not, as I understand him, meet this woman on this occasion, the circumstances in which the cheque was delivered, and the gender of the person who delivered it must be hearsay. This significantly reduces the weight to be given to it. Although, no objection having been taken to that evidence, it is admissible. Mr Conley also deposed that on 12 July 2006 "a woman again attended BMC's office and delivered a cheque for $4 000 in payment of the loan", this payment being acknowledged by Ms Sara Holliday. The cheque was a Commonwealth Bank cheque drawn on 11 July 2006. The file notes of the same date, 12 July, states the cheque was returned to the borrower as it was made out to BMC rather than Perpetual. Again, the evidence of the mode of delivery is hearsay and therefore reduced in weight. Assuming, however, that indeed a woman delivered these two cheques and that it was the same woman, there is no direct suggestion (although it seems likely) that it was the same woman who delivered the cheques to Mr Conley. It is virtually certain that the first two cheques were organised by Mr Reddy and therefore that the woman who delivered them was Ms Eason. Since the bank account changed in respect of the last two cheques (and taking into account the evidence discussed below from Ms Menzies as to the opening of the HSBC account), it seems that Mr Lyle was responsible for these. Although I do not give this matter great weight, it seems to me fair to infer from the absence of any explanation for not calling Ms Amestica or Ms Holliday that their evidence would not have assisted those parties. 215Ms Menzies said, and I accept, that she did not attend the office of BMC on these occasions and did not deliver any cheques. 216The Finance Express mortgage was dated 4 May 2006, upon which date it was registered. It appears that in April, Finance Express had commenced the process of registering the mortgage on Ms Menzies' title and, for that reason, contacted either BMC or Perpetual. Which (unbeknownst to Ms Menzies, as I think) was the registered first mortgagee to obtain agreement for it to do so since, according to Mr Dive, Mr Maloney informed him that this request had been received and asked if he knew about it. Mr Dive said that he telephoned Ms Menzies. 217Ms Menzies said that sometime between March and May 2006 Mr Dive telephoned her and the following conversation took place - WD:Hi Ann-Marie, this is Wayne Dive. Me:Who are you? WD:I'm your broker. Me:Oh, I have a broker, do I? WD:I understand that you and a friend of yours got together to buy the Hancock Street property". Me:"Yes that's right. WD:I knew you must have existed. Someone is trying to register a dealing on your Stafford Street property. Me:Who's that? WD:I can't tell you who. So you are aware of the Hancock Street property? Me:Yes I am aware of the Hancock Street property but nothing else. WD:I've never met you so we must get together some time so I can meet you and have a chat. Me:Ok that would be really nice. Mr Dive was taken to this conversation with Ms Menzies. He agreed that he did recall having a conversation of that kind with Ms Menzies. Generally in the terms expressed by her, and that this would have been his first conversation with her. 218Mr Dive said that the conversation with Mr Maloney concerning the approach to register the second mortgage occurred in April 2007, not 2006. This, of course, could not be correct having regard to the fact that the mortgage was registered in May 2006. The source of this mistaken belief appears to be an email of 6 April 2007 to Mr Maloney, referring to a conversation of that day with Ms Menzies about the lodgement of the Finance Express second mortgage. That email is important for other reasons, which I shall come to in due course. The immediately relevant passage is - Further to our telephone conversation today, Ann-Maree [sic] Menzies has phoned to advised [sic]: A second mortgage had been lodged by Express Finance on her Stanmore property and that she was unaware of this transaction. As my memory serves, I called and spoke with Ann-Maree after you alerted me that a company was seeking consent to a second mortgage. She stated at that time that she was unsure and would speak with Terence Reddy with whom she had been associated with the Hancock St Hancock Street [sic] purchase and renovations. She informs now that she had no knowledge of the 2nd mortgage or transaction. 219The conversation to which Mr Dive referred in the third paragraph could only have taken place a year before. The accuracy of his recollection may be doubted, at least as to its precise terms. Mr Dive deposed that, on 1 May 2006, at the request of Mr Maloney of BMC, he called Ms Menzies on her home telephone number and said, in substance, "Your lender BMC has said that you defaulted on your repayments of your loans; are you aware of this?" Ms Menzies replied, "The renovations has just been completed and we are going to sell shortly. I will speak to Terence Reddy about it." Ms Menzies denies that this conversation occurred, that she knew that the renovations had been completed, or that Hancock Street was shortly to go on the market. In cross-examination Mr Dive, at first, said that he did not have a clear recollection of having told Ms Menzies that BMC claimed that there was a default as distinct from this being a reconstruction which "must have been based on a phone call from BMC bringing that to my attention". He said that he would not know from information to which he had access that "the client was behind in their repayments". He said that he was prompted to call Ms Menzies and that the purpose must have been in regards to repayments on the loan. Although he agreed that he had no independent memory of the reason for the call, he said, "I must have rung her for a reason - that was the reason". This evidence bears the hallmarks of a reconstruction. It is certainly wrong. As is demonstrated by the statement in his affidavit that he relied on an email from himself to Mr Maloney on the morning of 2 May 2006 which states as follows - Hi Rob Further to our telephone conversation yesterday, I phoned [sic] and spoke with Anne Maree [sic] Menzies at 8pm last night. She was well aware of the purchase and proposed sale of 4 Hancock Avenue [sic] Hancock Street and in turn confirmed that it was an investment for her and that renovations had been completed, hence time to sell. I also called and spoke with a solicitor preparing the contracts: Jo Strati Avendra, Singh and Strati [telephone number] For your records address is 39 Stafford Street Stanmore Ph: 9519 1791 (as noted in white pages online) You have mentioned that loans are in order. For information Wayne (Emphasis added.) 220It will be immediately seen that, far from there being any suggestion of default, or any problem with the loan, Mr Dive confirmed that Mr Maloney had told him that the loans were "in order". Mr Dive conceded in cross-examination, as of course he had to, that this was inconsistent with his recollection that he rang Ms Menzies because of Mr Maloney's claim that the loans were in default. He agreed that the email was much more likely to be accurate than a memory over 4 years after the event. He ultimately agreed that the conversation was not prompted by BMC's complaint about a default, and that whatever might have prompted it, he could not now recall. He also agreed that it might be that he reconstructed the conversation because he later came to know that there were defaults. I have concluded that no conversation took place at this time about any defaults, as Ms Menzies says. That Mr Dive could be so mistaken about this conversation, despite having the benefit of the email that he had sent, and which was exhibited to his affidavit - the terms of which he plainly either ignored or misunderstood despite their clarity, leads me - together with the other errors to which I have already referred - very much to doubt his reliability as a witness. I think that his memory has been significantly affected by what he later learned and reflects a great deal of reconstruction. What seems likely is that Mr Maloney became aware for some reason of the proposed sale, perhaps because of an inquiry about discharging the mortgage over the property and wished to confirm that this was actually occurring. However, I would accept that it is possible that a conversation occurred with Ms Menzies about the sale of the Hancock Street property. Although Ms Menzies believes that a conversation occurred in the terms set out above. In his affidavit, Mr Dive does not deny that he had a conversation in the terms set out by Ms Menzies although, having regard to the email of 2 May, it must have been a different telephone call. However, it is clear from the terms of that conversation that it was the first time, according to Ms Menzies, that she had spoken with Mr Dive and, accordingly, must have occurred prior to 1 May. Ms Menzies confirmed in cross-examination that the conversation to which she deposed was the first with Mr Dive. But she could not remember if she had a conversation with him on 1 May in which the proposed sale of the Hancock Street property was discussed. To my mind this conversation, along the lines mentioned by Mr Dive in his email is inconsequential at all events, and Ms Menzies' failure to recall at all or even deny that it occurred does not impinge upon her credibility. I should add, however, that Mr Dive himself does not suggest that he got the name of the solicitor from Ms Menzies and conceded that he might have got it from Mr Reddy. Ms Menzies said, in cross-examination about the conversation to which she deposed, that the information about someone trying to register a dealing on the property, did not sound good. She said that she must have got Mr Dive's telephone number because she rang him back (although does not identify the date, but I infer from the sense of her evidence that it was shortly after). She told him that she still had her Certificate of Title and nobody therefore could have registered anything. She said that, immediately after her conversation with Mr Dive she telephoned Mr Lyle to tell him of the call and that "someone is trying to register a dealing on my Stafford Street property". She says that Mr Lyle responded, "I don't know what that's about, I'm not sure, I'll find out". 221Ms Menzies says that the statement of account of 10 August 2006 which was addressed to her at 39 Stafford Street Stanmore may have been received by her at that address, since she recalled that, at some stage, she received a statement of account "from BMC" which she assumed related to the mortgage over the Hancock Street property. When she received the statement she recalled noticing that there were a number of fees for dishonoured payments and telephoned Mr Lyle about them, asking "what's going on, why are you paying so much money in dishonoured payments?" Mr Lyle responded, "don't worry we'll get it all sorted". Ms Menzies said that at this stage she still trusted that Mr Lyle was paying the instalments due under the mortgage over Hancock Street, and that he would continue to do so. Ms Menzies agrees that she received, on or about 31 August 2006, the notice under the Real Property Act 1900 s 57(2)(b) dated 28 August 2006 from Perpetual and addressed to her at her home. Although the claim is made by Perpetual, and refers to notice "given to you as mortgagor under the mortgage dated 12 October 2005 and registered number [etc]" and claims that "you have made default under the mortgage..." The notice does not say in terms what the mortgaged property is. On the assumption that Ms Menzies was unaware of any mortgage other than that over the Hancock Street property, I would not regard it as unreasonable or improbable that, although she saw that the notice was addressed to her (rather than Valcorp), she assumed that the mortgage to which it refers was that over the Hancock Street property. Nor do I think that the mere fact that it mentioned Perpetual, as distinct from Permanent, would necessarily have alerted someone in Ms Menzies position to the fact that indeed there was a separate loan. Ms Menzies says that immediately after she received the notice she telephoned Mr Lyle and had a conversation with him to the following effect - Me:I have received a default notice in the mail about repayments not being made. What's going on? FL:I've been giving Terence Reddy the money to pay the loan for the Hancock Street property but he has not been paying it and has been allowing the Mortgage to run into arrears. I need to get you to open a new account and I will give you the funds to keep paying the Mortgage. 222 The notice contained the following information - Please contact Guy of Interstar Wholesale Finance Pty Limited on telephone number...with any inquiries regarding this notice. 223Ms Menzies says that it was following this conversation that, on 5 September 2006, she opened a HSBC account in her own name. She gave Mr Lyle the details of the account and Mr Lyle deposited the sum of $11,500 into the account on or about 8 September 2006, informing Ms Menzies that he had done so and that this money could be used to make the repayments "while I get everything sorted out". Ms Menzies said, "ok that's fine for now. When will this be sorted out?" Mr Lyle responded, "Don't you worry about it". In cross-examination Ms Menzies was asked why it was necessary to open this account in her name if, as she said, Mr Lyle was taking care of the payments. She said that Mr Lyle had told her that Mr Reddy was using the original bank account for all sorts of things and that she should open another one that he did not have access to. When asked why the account was not simply opened in Mr Lyle's name rather than hers, she surmised that at this stage, she probably did not trust that the payments would be made if it was left to Mr Lyle and Mr Reddy and, thus, as I understood her to mean, she could check on whether payments were being made. 224After speaking with Mr Lyle, Ms Menzies telephoned Mr Stevens of Interstar Wholesale Finance. She said she told Mr Stevens that she had received the default notice and was "organising to get this fixed up". To which Mr Stevens responded, "OK, well just make sure you do". The records include a file note dated 30 August 2006 to the effect that the borrower's "husband" called but was advised that no information could be given to him on the loan. He, however, informed Mr Stevens that a payment was made on 28 August 2006 and wanted to know if this was reflected in the default notice. He was advised that any payments made after 10 August would not be reflected in that notice and that it would remain valid until such time as the amount required is paid. Mr Stevens' notes then record a conversation with the "borrower" (meaning, Ms Menzies) advising that the default notice had been received and that payment would be made before its expiry. Whilst dealing with Mr Stevens' note, I should mention that he recorded a telephone conversation, again with the "borrower" on 8 September 2006 who requested that a new direct deposit form be sent to a specified telephone number by facsimile and was told that this would be done. On 19 September 2006 Mr Stevens recorded that the arrears had been cleared in full on the 15 September and that the file was closed. The file note does not mention Ms Menzies' name, but Ms Menzies gave evidence that she made the calls attributed to her. The telephone number was that of a facsimile machine at her place of work. In respect of the "husband" however, she says that she has never married and does not know who made this call. It seems most likely the call was made by Mr Lyle describing himself as Ms Menzies' husband in order to attempt to obtain information. This suggests that Ms Menzies actually received the notice on 30 August 2006 (her affidavit says "on or about 31 August 2006") and that her call to Mr Stevens was on the day following her conversation with Mr Lyle. Nothing turns on this. 225Going back some steps, Mr Conley says that he again reviewed the file on 17 July 2006, when he noted that the account was in arrears of $7,107.74 with payments due on 12 June and 12 July 2006 outstanding. He said that he telephoned Ms Menzies "on her telephone number 0410 404 044 and left a message for her to call me". As I have already said, that mobile number was never Ms Menzies. Its source appears to be the personal particulars on the file copy of the application for loan completed, as Mr Dive said by Mr Reddy, or at least having come from Mr Reddy's office. I infer that the mobile number was Mr Reddy's or Ms Eason's, whose contact number in that form is given as the business telephone number adjacent to the mobile number 0410 404 044. 226Mr Conley says that on 15 December 2006, following the dishonouring of the instalment of $3,818.83 due on 12 December 2006 he telephoned Ms Menzies to enquire about the missed payment. Ms Menzies agreed that she did indeed have a conversation about this time with Mr Conley. Mr Conley asserts in his affidavit that Ms Menzies voice on this occasion was the same as that as the woman "who attended BMC's office on 24 February 3 May, 12 July, and 25 August 2006". First of all, as I have already mentioned, Mr Conley does not say - I think because it did not happen - that he had met the woman who delivered the cheques on 3 May and 12 July 2006. To this extent, the voice identification is necessarily mistaken. Secondly, and more important, in the absence in any peculiarity of voice or language, it is extremely difficult to identify voices, especially where the comparison is between that on a telephone and that heard directly. Moreover, it is clear that Mr Conley assumed that Ms Menzies had attended on the specified occasions. This renders his evidence of voice identification of little or no weight. In cross-examination, Mr Conley conceded, in substance, that he was not able to reliably identify the voice of Ms Menzies as he spoke to her on 15 December with the woman he had earlier met. In cross-examination Mr Conley, as I understood him, agreed in substance (although he used the word "possible") that he was unable to say whether the person he spoke to on 3 April 2007 was the same person who delivered the cheque on 25 August 2006 and, for that matter, on 26 February 2006. 227The effect of Mr Conley's evidence is that, if the woman who delivered the cheques was not Ms Menzies, he has never met her. Strangely, however, Ms Menzies asserts she did indeed meet Mr Conley and that this occurred on or about 10 October 2006 following her discovery of the Finance Express transaction. Ms Menzies said that in early October 2006 she received a telephone call from a man who told her that he was a private investigator working on tracking people down, who asked her to call Finance Express on a telephone number which he gave her because they "want to know when your bill will be paid". Ms Menzies said that she responded that she didn't know anything about this matter and that she would try to find out what was going on. (It will be recalled that she had earlier spoken to Mr Lyle about the Finance Express caveat, which was then withdrawn.) She says that she immediately called Mr Lyle and told him about the call and asked him what was going on. She says that Mr Lyle responded, "Terrence has turned gay. He's fucked up. Don't worry we'll sort it all out". She then received a text message from Mr Lyle which said words to the following effect: "Ali, Annie is driving me mad what can I do?" She said she realised this had been sent to her by mistake and telephoned Mr Lyle about having received a message that was supposed to have been sent to Ali. Mr Lyle told her, "We're going to have a meeting, why don't you come along? Meet us at Hyde Park". She said that she then met with Mr Lyle in the foyer of the Sheraton Hotel near the coffee shop. There were also three men there she described as of "middle eastern appearance" as well as Mr Lyle's son, Dallas Fitzgerald. She said she had never met the other three men before and was introduced to them by Mr Lyle. She does not remember their names except one of them was called "Ali Mussa" (perhaps the Ali Mussa referred to by Mr Reddy). Ms Menzies then deposed to the following conversation - Mussa:I'm so sorry. Terence is such a rat He took a Mortgage out on my mother's property. Mr Mussa then said to Mr Lyle: Mussa: Well who's paying for Ann-Marie's loan ? Lyle:Well I've had to. Mussa: Well we're going to have words with Terence and sort it all out. Mr Lyle then said to me: Terence has been doing a lot of stuff that we don't agree with and we're not talking to him anymore. Me:Well I'm going to go to the police. Lyle:Yeah good idea. (If Ms Menzies' recollection about this is correct, that Mr Lyle encouraged her to approach the police, suggests strongly that he had nothing to fear from any investigation and, hence, was not involved in the frauds. However, the circumstances, taken as a whole very much support the opposite conclusion. I therefore think that Ms Menzies' recollection about this part of the conversation is mistaken, although it would not be surprising if Mr Lyle temporised about her proposal. This mistake does not lead me to doubt her veracity.) Ms Menzies said that she didn't ask any questions as she felt intimidated in the company of these men and left, Mr Fitzgerald escorting her out and giving her $20 for a taxi. 228Two days later Ms Menzies telephoned Mr Lyle to say that she wanted "to get out of this company [Valcorp] because you guys are just causing too many problems". Mr Lyle responded that Ali was going to take over the company and pay all the debts and that he would arrange a meeting with a lawyer "and we'll talk about it". Ms Menzies says that a few days later she went with Mr Lyle to see his lawyer whose name she does not remember. They met in a coffee shop downstairs in the Strand Arcade in George Street for a short time. She does not know whether the man was in fact a lawyer. He said, "it will cost about $50 000 for Ann Marie to get out of the company". Shortly afterwards, Ms Menzies telephoned Mr Lyle and asked him why he had not paid the loan, adding, "these people keep ringing me up and hassling me." Mr Lyle responded, "one of the office girls paid the repayment into the wrong account". Mr Lyle's explanation is reflected by a Challenger file note (made by "KP") of 10 October 2006 which states - "Received message on voicemail to call Steve at BMC mortgages on [telephone number]. Rang Steve, he advised that the borrower's now up to date but she accidentally paid $3,900 onto this loan instead of another loan and wants the payment back." 229Steve advised her that it was not possible, as it would then put this account back into arrears. He advised that she may call their office to discuss. Incidentally, I do not think that this gives any support for an inference that the person to whom Steve spoke was Ms Menzies. 230Ms Menzies said that it was about 10 October 2006 that she contacted BMC because she wanted to go to their office and speak to somebody about the Hancock Street loan and the loan that Mr Lyle had told her had taken been taken out by Mr Reddy in her name, that is the Finance Express loan. 231Ms Menzies said that, on 10 October 2006 she wanted to go to BMC's office and speak to someone about the Hancock Street loan and "the loan that Mr Lyle had told me that Mr Reddy had taken out in my name," (a reference to the Finance Express loan which instigated the discussions with Mr Lyle at the Sheraton Hotel). Ms Menzies telephoned BMC and spoke with the receptionist. Her evidence is that the conversation was to the following effect - Me:I'd like to discuss my loan with someone. Who is the best person to see and are they in the office today? Receptionist: Come in and see Steve Conley. Me:How do I get to your offices? Which bus stop do I get off at? 232Ms Menzies said that she went to the office of BMC on the same day and this was the first time that she met Mr Conley. It was the only time that she attended at BMC's office. (I should mention at the outset that Mr Conley denies this meeting. I think that it likely that this evidence is correct although, at the same time, I have no doubt that a meeting did occur more or less as she describes. Ms Menzies could well be mistaken about the name of the person she spoke to. When she was challenged in cross-examination as to meeting Mr Conley, she pointed out a man sitting in the back of the Court as being him but he turned out to be Mr Dive and Mr Conley was not in Court at the time. For reasons that will become clear, I think it may be that she spoke to Mr Maloney. If indeed she is mistaken, it is of no real consequence. For convenience, I have retained Mr Conley's name in recounting Ms Menzies' evidence.) At the meeting she says she and Mr Conley had a conversation to the following effect - Me:Hi, I'm Ann-Marie Menzies. SC:Oh you! I've had trouble with your account since the day it started. I've been trying to contact you for years. I've sent you letters and left messages and the staff said you were always busy and you never replied. We haven't been able to contact you. Me:I have never received any messages or letters. What contact details do you have on your file? I'll give you my phone number and address. Can I also please see your files? 233She says that she then gave Mr Conley her mobile telephone number which Mr Conley wrote down on a piece of paper in the file, which she identified as the PIB sheet, (to which I have already referred and would not be available to borrowers) and which concerned the loan in the name of Valcorp Developments not Ms Menzies. Mr Conley agreed that the handwritten name "A Menzies" with the mobile number (which is that of Ms Menzies) is in his handwriting. This supports Ms Menzies' account. He was unable to recall either the time or the date or the circumstances in which he placed that writing on the document. As it happened, he also agreed that he had experienced trouble with the account, that he had been unsuccessfully trying to contact Ms Menzies and had sent letters, and left messages including with her staff. The "mailing address" is Suite 1301/115 Pitt Street Sydney, of course, Mr Reddy's address, immediately beneath the reference to Ms Menzies as guarantor. Mr Conley said it was his invariable practice to have made a note of a meeting and conversation of the kind to which Ms Menzies deposed but that no such note appears on the BMC file. There was further evidence about the "Asian woman of petite build" working at BMC at the time, which I do not intend to rehearse. There was, however, an Asian woman employed at BMC at the time whom he described as having a "husky build" and being "not slim". That lady worked in the credit area and he thought that her "main background" was Chinese. He said that the lady (Martha) whom he mentioned did assist him from time to time in the collections department, depending whether she was really busy or his section was busy and needed help. Ms Menzies' description of "petite" is scarcely precise and perhaps Martha was the woman with whom she spoke. Mr Conley said probably eight people were employed full-time in his office. There was a public reception area but no regular receptionist: a bell system on the front desk was used for members of the public to gain attention. 234Mr Conley said in cross-examination that he made enquiries of other employees of BMC as to whether they had any recollection of a meeting with Ms Menzies on 10 October 2006. He replied that he asked Mr Maloney, but no one else because he was the head of the credit section "and he would have been the only other person that would have had a meeting along those lines to my knowledge". No evidence was given about Mr Maloney's response, one way or the other. He also agreed that it was possible that a male employee at BMC, other than him or Mr Maloney may have spoken to Ms Menzies on this occasion. Mr Maloney was not called to give evidence although he supplied an affidavit for the purposes of the proceedings, which was not read. Given the potential importance of this evidence, and the clear possibility that Ms Menzies may have been mistaken in her recollection that it was Mr Conley with whom she had the conversation. I think that I should infer from the fact Mr Maloney was not called that the reason for not doing so, not given, is that his evidence would not have assisted either Perpetual or BMC. 235It is difficult to imagine why Ms Menzies would have fabricated this evidence. I do not believe she did but, on balance, I have concluded that she has mistaken Mr Conley's name and the handwritten note on the PIB form is possibly a reconstruction, possibly a coincidence. Though I am satisfied that the man to whom she spoke did make a note of her contact details. 236According to Ms Menzies' affidavit, the meeting proceeded as follows - 78. I then provided Mr Conley with my mobile telephone number and Stafford Street address. In my presence, Mr Conley scribbled my phone number on the file. A copy of that scribbled note of my phone number appears on page 3 of the Exhibit RM1 to Mr Maloney's affidavit. Mr Conley sent out a petite Asian woman to obtain the files and our conversation then continued to the following effect: Me:I have recently discovered that Mortgages have been taken out on my property that I didn't know about. I want to know what's going on. 79. During our conversation, Mr Conley continually kept walking out of the room we were in then into his office, only to return within a few minutes and say some words to me in an angry tone. When he next walked back in, I said: Me:I don't know about any Mortgages on my property at Stafford Street. I didn't take them out". SC:Wayne Dive is a good bloke and would never do anything wrong. 80. Mr Conley walked back out, then a few minutes later returned and said words to the following effect: SC: Lots of people have agents and I don't always deal with the person themselves. 237 At this stage, Ms Menzies says the "young woman" had returned and opened the file and a conversation to the following effect occurred - Woman:This is the Origin one for the Hancock Street property and this is the Perpetual Trustees one. Me: I would like to take a copy of these with me. SC:You will have to get them from Perpetual". At this point I was still confused so I asked the young woman: Me:Which house is the Mortgage over? Woman: 39 Stafford Street, Stanmore. 238Ms Menzies says that the woman then handed her two pieces of paper one of which is simply a torn off sheet of lined note paper and the other a BMC "With compliments" slip. The handwriting on the slip is in blue and black ink, Ms Menzies says that the handwriting in blue was that of the woman with whom she was speaking. Mr Conley identified the blue handwriting as probably that of a Ms Hampton, a BMC employee who left in about 2008. She was from the collections department at BMC. This confirms Ms Menzies' recollection to a significant degree. The note states "$3,729.25 monthly next due 12/10/06". This is plainly enough a reference to the instalments payable under the Perpetual mortgage. That the next due payment is stated as 12 October 2006, strongly supports Ms Menzies evidence that she attended at BMC before this date and, as I think, on or about 10 October 2006, as stated by her. On the torn off note paper there is a note of Ms Menzies address made by the person identified by Ms Menzies as "the petite Asian lady" but I think almost certainly made by Ms Hampton, together with the word "security" in the same hand and, as I think, the same hand identified by Mr Conley as that of Ms Hampton. Of course, Ms Hampton may well have written on that piece of paper and handed it to the woman with whom Ms Menzies spoke. Nothing depends on this. Ms Menzies recollection that it was written in her presence with the file in front of the BMC employee is possibly a mistaken reconstruction. Of course it may well be that the file was consulted at some point. Ms Menzies said in her affidavit that she "sat there completely shocked and on the verge of tears" and was so overwhelmed that she did not ask how much had been borrowed. She said that this did not seem particularly important to her at the time because "as far as I was concerned I had nothing to do with it". Although I think Ms Menzies is telling the truth so far as she recalls it, and I accept that she was very upset, I am inclined to think that, in fact, she was on this occasion told the amount of the loan, although she has now forgotten that fact, as it seems almost inevitable that in the circumstances, the amount of the loan would have been mentioned. On the other hand, supporting her evidence is the fact that only the monthly instalment is noted on the with compliments slip. Ms Menzies says that when the two pieces of paper had been handed to her, Mr Conley walked out of the room again and returned, and shouted words to the following effect, "You should sack all your staff". I rather think that it is unlikely that Mr Conley or some other person in his position working for BMC would have shouted at Ms Menzies. But it was an emotionally charged moment and it maybe that she interpreted an emphatic remark as shouting. I do not think that this is important. He then left the room. Ms Menzies then left the office and "burst into tears in the street outside". 239On 10 October 2006 Ms Holliday emailed Ms Tierney at Interstar - Could all future correspondence for the above borrower be forwarded to the security address: 39 Stafford Street Stanmore NSW 2048...as that is now where she lives. [Emphasis added.] and received the response that "the borrowers address has been amended" (emphasis added). It follows that the address previously held by Interstar and BMC for communications with Ms Menzies was an address other than her home at Stanmore. This confirms my previous conclusion that communications were posted either to Mr Reddy's, or the Riley Street address. This is reinforced by the lack of any evidence from Perpetual or BMC as to this change of address, or an explanation as to why neither Ms Tierney nor Ms Holliday gave evidence about this exchange of emails. 240Ms Menzies was cross-examined about the use of the plural "mortgages" in her questions of Mr Conley - or at least the man she thought was Mr Conley - which suggested that she was talking about at least two mortgages. She accepted that could be suggested, but that she only knew of one mortgage from the paperwork, the paperwork about Finance Express. She said that she did not know that the other loan (that is, that relating to Hancock Street) involved a mortgage of Stanmore. She said at the time she was trying to get to the bottom of what was going on because at this stage she "had phone calls and people knocking at the door," and was "overwhelmed by loans I didn't take out". She said that she was not aware of any document that disclosed to her the Perpetual mortgage before the meeting at BMC on 10 October 2006. She agreed that the female employee had informed her that in effect there were two mortgages taken out on her property (including the Finance Express mortgage). I do not think that it is fair to infer from the use of the plural "mortgages" that Ms Menzies in fact was aware before this of the Perpetual mortgage. There is also the very distinct possibility that her account of this conversation involves some reconstruction. Her recollection that she became aware of this mortgage towards the end of her conversation might itself be somewhat askew in the circumstances, I do not think much should be made of it. Rather, the use of the plural indicates both that Ms Menzies' account is candid, rather than calculated. Also (which is my overall impression of her from both her affidavits and her evidence) that her use of language is, like that of most people in a similar situation to hers, quite often imprecise. Furthermore, it would take a great deal to persuade me that conversations which occurred some three or four years previously could, realistically, be recalled word for word. 241Ms Menzies was also cross-examined as to why she did not call Perpetual immediately after and say that she had discovered a mortgage, ask for a copy of it and provide details as to what it was about. She said that she asked Mr Conley at the time and he said that he would contact Perpetual (although she did not mention this in her affidavit). She added that she rang him up a few days after 10 October and said, "You couldn't have a mortgage over my place because I have got the Certificate of Title", adding that she had just been to the Land Titles Office and had been told that the Certificate of Title which she had in her possession was the real one. This was again not a conversation set out in her affidavit. However, the mere fact that these conversations are not in her affidavit is not a safe basis for drawing any adverse inference. She was not cross-examined as to the reasons for the omission. The affidavits of course were drawn up by the solicitor and much depends on what the issues were then understood to be. Although Mr Conley was not asked about these particular communications, so that he had no opportunity to deal with them. I am of the view that it is very probable they did occur, though possibly not with Mr Conley. I do not think that Ms Menzies fabricated them. She had every reason for communicating what seems to her (quite rightly, as well) to have been the most important point, namely that her Certificate of Title was not subject in fact to any mortgage. However, she says that she went to the Lands Department in April 2007. So the conversation which she has placed as a few days after 10 October, might have referred to her Certificate of Title, but not to the visit to the Lands Department. Nothing depends on this. 242It was about this time, 10 October 2006, that Ms Menzies said she was telephoned by Mr Reddy and they had a conversation to the following effect - Me:What have you done to my CT? TR:I haven't done anything. Me:Well you must have because there are now Mortgages on my property. TR:Come to Spring Street and we'll have a chat. 243Ms Menzies said that a day or so later they met at a coffee shop on the corner of Spring Street and Pitt Street. Mr Reddy was outside the coffee shop and walked with her a little distance away and they had a conversation to the following effect - TR:I've already told you that I'm going to pay it out. Why are you hassling me all the time? Me: Well hurry up and do it. 244Mr Reddy said in cross-examination that he might have had this conversation with Ms Menzies at Spring Street concerning mortgages but denies any discussion about the Certificate of Title. I do not believe this denial. Ms Menzies was cross-examined about asking Mr Reddy what he had done with her Certificate of Title, pointing out to her that it suggested that she had given him her Certificate of Title or a copy of it. Ms Menzies explained that she did not mean the actual Certificate of Title "piece of paper". But that "somehow two banks had got copies of my Certificate of Title and because he had already told me that he had taken out this loan, I thought he must have done something to the Certificate of Title...so I thought somehow he had copied them". She said that, when she was trying to think of how this could have happened, she did think at one stage that he had broken into her house. She said that at the time she made the telephone call she checked to see that the Certificate of Title was still in the same place where she had concealed it and saw that it was still there. I accept this evidence as truthful. 245She said that it had been an "enormous shock" to find out about the mortgage but the amount involved "didn't seem particularly important to me at the time ... because as far as I was concerned I had nothing to do with it". Furthermore, although the questioning left her answer somewhat ambiguous, she believed that her title was and remained unencumbered because she had kept possession of it all times. Ms Menzies goes to the police and a solicitor 246The solicitors for Finance Express addressed a notice under s 57(2)(b) dated 8 September 2006 to Ms Menzies at the Hancock Street premises. Of course, she did not reside there. When it actually came to her notice is not clear but it was certainly well after this date. On a police report dated 25 October 2006 Ms Menzies is said to have attended at Newtown Police Station on that day to report a fraud. The report states - It is unknown what date the fraud occurred, however, recently (about 14 September 2006) she has received documentation relating to non-payment of a $233040.72 mortgage in her name ... [by Finance Express]. The victim requested a fraud assessment form which she was taking to her solicitor for assistance in completing. The form will be returned with accompanying documentation in the near future. I am sceptical about the correctness of the 14 September date, which would not seem to me to be "recent". Moreover, I think it is extremely unlikely that service of this notice would have been ignored by her for so long, as would, it seems, have to be the case if the date is correctly recorded. Although Ms Menzies was given this report to read and said that it was correct, this date was not brought to her attention and I would not be prepared to infer that she actually adverted to it, as distinct from the substance of the report. 247Ms Menzies said that, on or about 20 October 2006, thus five days before the report to the police, she instructed a solicitor, David Cohen, to act on her behalf in connection with the Perpetual loan and conferred with him on that date. She was not cross-examined to suggest otherwise. She said that she went to Mr Cohen "to do something about it", "but not specifically about the amount". It is clear that she also consulted him about the Finance Express mortgage. I think it likely that she did not mention this in her affidavit (or, for that matter, in her evidence) because it was not an issue in the case. It may have been that that the major consideration that drove her to seek legal advice was the Finance Express s 57(2)(b) notice because of its threat. I have no doubt that she also went to get advice about the Perpetual loan but she had already discussed this with Mr Reddy who had promised to pay it out. She said that she went to Mr Cohen because "these people won't give me any information without a lawyer because they are all saying we are not going to give you anything, you've got to get as lawyer" and she was given Mr Cohen's name by an acquaintance. 248Mr Cohen gave evidence. He said that Ms Menzies told him that she had never made a mortgage or loan application for Perpetual and never signed any mortgage documents, so she did not know how it came to be registered. It was not that she simply denied signing any documents, but she had no knowledge at all, of the loan. This evidence was repeated several times and I accept it is correct. However, he said also that the Finance Express proceedings were the major problem, in substance, because of the threat to foreclose. 249Mr Cohen's evidence concerning what Ms Menzies told him is essentially reconstructed from his letter to Newtown police station dated 27 October 2006, a week after his initial conference. So far is as material it states - We act for Ms. Menzies and enclose for your attention a NSW Police Fraud Report Form bearing Event Number E29165741 signed by our client. [This appears to have been lost.] Our client resides at ... [the Stanmore address and telephone number]. In or about October, 2005 she obtained two loans with the assistance of a Terrance Reddy, mortgage broker, from BMC Finance in respect of her home for renovations for the Stanmore property which was in the vicinity of $539,000.00, as well as finance for her purchase of an investment property situated at 4 Hancock Street, Roselle in the vicinity of $760,000. Our client was therefore shocked when she recently, belatedly received a letter (which had been placed in the wrong letter box) from Messrs Atken McLachlan Thorpe Solicitors, dated 8 September 2006, informing her that she had defaulted her mortgage to Finance Express (QLD) Pty Ltd. This letter enclosed a Sections 57 (2) (b) of the Real Property Act Default Notice and enclose a copy of that letter for your attention. Our client then made inquiries from the mortgage broker Terrance Reddy, of Level 13/115 Pitt St Sydney, Mobile 0400083002, who acknowledged that in fact the loan obtained by him without our client's knowledge was fraudulent further he understood it was our client who would attend to rectification of the problem and asked for some forbearance from our client in this regard. Our client informed him that she had to report the matter to the police after receiving legal advice. We therefore enclose Report Form signed by our client for your attention. We also enclose for your attention a copy of the Mortgage which reveals our clients signature appended there to. Our client assures us that the signature is a forgery, as she signs her signature sideways. It therefore appears that our client's signature has been scanned and appended to the mortgage document. The mortgage documents also refer to William Jacobs Solicitor providing our client with legal assistance. However, our client instructs us that she has never consulted her and nor dealt with a William Jacobs let alone her being a party to the mortgage. Furthermore, our client has never received any of the mortgage moneys alleged to be advanced to her pursuant to the mortgage from Finance Express (QLD) Pty Ltd. Our client did provide Terry Reddy with a copy of her Passport and her Drivers License which was required for identification purposes in relation to the other two mortgages with BMC Finance. We would therefore be pleased if you would be able to investigate this matter. Specifically, there appears to be fraudulent activity by Mr. Reddy whereby our client has been the victim. Further, our client is facing the threat from Finance Express (Qld) Pty Ltd which is now seeking to exercise its power of sale due to the default in the mortgage, causing her to have adverse credit record, let alone the accruing interest which is allegedly owed by her, being approximately $ 1,000.00, per day as the interest rate would appear to be 16 % per annum. [There were then listed documents concerning the Finance Express loan.] 250 Mr Cohen was cross-examined about how this letter came to be written. This evidence changed significantly as the cross-examination proceeded. Mr Cohen's bill mentions only two conferences with Ms Menzies the first on 20 October and the second on 12 December, when he with Menzies went to confer with Mr Stomo of counsel. His evidence was that the instructions for the letter came from his conference with her on 20 October and that the second conference was, as I have mentioned, on 12 December 2006. The first conference was also attended also by Mr Lyle, but Mr Cohen said that Mr Lyle remained silent. He said that it is possible that Mr Lyle attended the second conference but he could not recall. His account mentions a charge for "drafting and typing" the letter on 27 October, but no conference at that time. This was a matter pointed out to him by Mr Sirtes SC when he agreed that the instructions in respect of it were given on 20 October. (Mr Cohen also commented that his staff were not always accurate in their recording of his work for the purpose of his bills of account.) In cross-examination by Mr Curtin SC, Mr Cohen was asked - Q.... If you have the conference with Ms Menzies on 20 October 2006, then wrote the letter to Newtown Police ... on 27 October 2006, do you recall whether writing the letter ... was from memory, handwritten notes, dictated in conference? Are you able to recall? A.I think from notes from the conference rather than from memory. I don't take very good notes. My practice is to dictate the details in front of the client so I don't get it wrong. It would have been done with the client at the time ... I think that was the reason for the delay. Q.To the best of your recollection, you dictated the first draft ... in your conference on 20 October and awaited receipt of the fraud report and then completed it? A. Yes. Q.Ms Menzies gave you the fraud report later, after your conference? A.I think so yes. Q.So you did the first draft of the letter after the conference, then waited to get the fraud report, then attached the fraud report to the letter and sent it? A.Yes. I told her at out conference on 20 October to make a complaint to the police. Q. In relation to the Finance Express fraud? A.Yes. Q.At your conference on 20 October she did not tell you about any fraud for Perpetual? A.That's not correct. HIS HONOUR Q.It doesn't say that, does it? A.No, that's not what it says. In further answers to Mr Curtin SC, Mr Cohen said that he could not recall any allegation of fraud in respect of the loan for $539,000 for renovations for the Stanmore property but that, had she done so, it would have been in the letter to the police. His evidence was the same as to any allegation of fraud in relation to the loan of $736,000 [sic] for Hancock Street. 251It will be seen that the practice of dictating in the presence of the client was only mentioned after that possibility was put to him by Mr Curtin. Mr Cohen then moved from it being his practice, to what he would have done, to what was done. However, he then agreed that his first draft of the letter had been dictated after the conference. Mr Cohen's file was forwarded to Ms Menzies' succeeding solicitors and was produced. It contains no notes of instructions taken on 20 October. 252Given the circumstances in which the various transactions occurred, involving numerous changes to the applications, false documents and forged signatures. It is necessary to be cautious about drawing conclusions as to the underlying conversation or instructions which gave rise to the letter of 27 October. Thus, for example, in the third paragraph the language used is "... she obtained two loans ...". The difference between this and saying two loans were obtained is slight but, from Ms Menzies point of view, is significant. A significance which I am far from confident Mr Cohen would have appreciated. Again, the Hancock Street property was purchased by Valcorp, which also borrowed the funds for it to do so. A distinction which has always been important on whatever view one takes of the case and which, if Ms Menzies thought she was being held liable for this loan, she would certainly have mentioned. I think it not at all unlikely that a statement that the investment property was purchased with funds obtained from BMC might be translated, when the letter was ultimately written, to "her purchase". 253Moreover, the although the purchase price for Hancock Street was $715,000, not "in the vicinity of $760,000" and, of course the sum secured by the mortgage was $643,000, although the Perpetual loan was for $539,500. 254The letter then confines itself to the matter which required immediate attention, namely the threat to her home arising from the Finance Express mortgage. However, it is unknown what was contained in the Police Fraud Report, in particular how the transactions were described, since that document has since been lost. 255Weighing up the evidence as best I can, and bearing in mind the way in which Mr Cohen actually gave his testimony, I am not satisfied that he in fact dictated this letter in Ms Menzies' presence. It seems clear, nevertheless, that the information about the BMC loans, their purpose and amounts probably came, in one form or another, from her. Considering the circumstances to which I have referred as to how these loans came into existence, including especially that no renovations were ever contemplated by her in respect of her home, the elaborate efforts made by Mr Reddy to ensure, so far as he was able, including the use of numerous forgeries, that Ms Menzies was never made aware of the Perpetual loan and her guarantee of the Permanent loan, the fact that Ms Menzies was aware from her attendance at BMC that, from her perspective, BMC and Perpetual were the same, that Mr Cohen has no doubt that, from the beginning, Ms Menzies maintained that the Perpetual loan was a fraud and that she had signed neither loan agreement nor mortgage in respect of it, let alone that she agreed to seek a loan for the renovation of her home, I am quite satisfied that the letter does not, in fact, reflect Ms Menzies' instructions to him, for all that they were probably confused. At this point, no claim had been made in respect of either the Permanent or Perpetual loans, let alone a threat to foreclose, and payments were being made one way or another by Mr Lyle, without recourse to her, which was in accordance with the arrangement, as she believed it to be. I do think that she was quite aware of the significant distinction between a loan agreement or a loan, and a mortgage in the present context. Moreover, she undoubtedly felt secure (as she said) that no mortgages were capable of being used to take her property since her Certificate of Title was still in her possession, unencumbered. (Unfortunately, however, she did not reckon with the possible, and potentially devastating application of the Land Titles Act 1925.) 256It is inconceivable to Ms Menzies that she had three loans: two with BMC and one with Perpetual; or four loans, two with BMC, one with Perpetual, and one with Permanent. From Ms Menzies' insistence that the Perpetual loan was a fraud, it must follow that the BMC loan with which it is inextricably linked (indeed, I think almost certainly Ms Menzies' thought there was no real distinction between BMC and Perpetual) was also a fraud - as I believe she understood - this being the $539,000 advance said to be for renovations to her home. From observing Ms Menzies in the witness box, I think that she would have been most unlikely to have been able to give a clear account of the relevant transactions, in which she distinguished between what she knew, what she surmised or assumed, and when she had done so. Mr Cohen himself conceded that he was not a good note taker and it is doubtful, I think, whether he took careful notes of what he told her, let alone ensured that he understood what were facts and what conjecture; moreover, no such notes have been produced although, if they existed, they should have been in the file that he passed on and which was produced at trial. Furthermore, Mr Cohen did not do conveyancing work, his areas of practice involving mainly family and criminal law and I think that Ms Menzies' situation was, to a significant degree, outside his experience and expertise. 257In the result, I am quite satisfied that Mr Cohen was confused about these transactions and that in all likelihood, because his letter was in fact drafted and typed on 27 October, this confusion was unlikely to have been resolved, giving rise to the deceptively simple summary of the position stated in the third paragraph concerning these loans. In a sense, of course, the statement in that paragraph as to the loans correctly reflected the applications from BMC's perspective. Ms Menzies might have obtained that evidence from BMC or, perhaps more likely, from Mr Lyle. In this respect, her affidavits do not purport to be completely comprehensive, being largely responsive to those relied on by the opposing parties. The mere fact that she passed on this information to Mr Cohen does not justify the conclusion that she accepted (what she in the same breath virtually denied) that the BMC loan in respect of renovations to her home was agreed to by her. 258I bear in mind that Ms Menzies was not cross-examined about Mr Cohen's letter to the police of 27 October 2006, so that there is no evidence from her as to what she said to him in conference. The first defendant had access to, and cross-examined Ms Menzies upon, the account sent by Mr Cohen to Ms Menzies in respect of his work which referred, amongst other things, to the drafting and typing of a letter to Newtown police station on 27 October 2006. That letter was not the subject of cross-examination although, of course, it was potentially highly relevant, particularly having regard to the cross-examination (mentioned below) of her as to why she made no complaint to the police about the Perpetual loan. I am not prepared to conclude that the decision not to cross-examine her in this regard was not a deliberate forensic decision. She could have been recalled for cross-examination on the matter, but no such application was made. I should state that I gave counsel for Ms Menzies an opportunity to recall her and he also declined to do so. Because Mr Cohen was Ms Menzies' witness, Mr Skinner was unable to cross-examine him, although he could have sought leave to do so and did not. I do not think, however, that it is right to infer from this that it should be inferred that he accepted the reliability of Mr Cohen's account. I am not prepared to draw any adverse inferences from this course of events. As is evident, I consider that it is right, indeed necessary, that I consider for myself what weight I should give to Mr Cohen's evidence and that I should do so on the basis of the evidence as a whole. 259On 7 December 2006 Ms Menzies again attended at Newtown police station to report a further instance of fraud amounting to $285 000, of which she became aware when the person acting on behalf of the Commonwealth bank (concerning the Mercedes purchase) attended her address. No further report has been produced. Ms Menzies was cross-examined about her discussion with Constable Ryder on 25 October 2006. And agreed that she had not raised the Perpetual mortgage at that time. She was asked whether she had complained to the police about the Perpetual mortgage and said - No because when I went about the Finance Express one they explained to me that the difference between a criminal case and a civil case and they said that they handled criminal cases and that it was up to the lawyers to handle the civil cases so it wasn't really anything to do with them. 260She said that she did not mention anything about Perpetual because she did not have any documentation about it to show them, as she did with the Finance Express loan. This indicates a degree of confusion and misunderstanding about what she could take to the police. I doubt that she had quite grasped what had actually been involved. This is not surprising, since I think that neither Mr Lyle nor Mr Reddy had been candid with her and she had not yet obtained the relevant documents. Be that as it may, I consider that her evidence as to this matter was truthful. I add for completeness that, as I understand Ms Menzies' evidence, she spoke to another police officer, a Mr Langthorne at Darling Harbour, about the loan taken out in respect of the Mercedes motor vehicle, which she thinks was the first subject of complaint to police. 261Mr Cohen performed a title search in respect of the Stanmore property on 6 December 2006. It showed that the Perpetual mortgage was registered. The Perpetual mortgage was mentioned in the conference with Mr Stomo. 262On 27 November 2006, a Statement of Claim was filed by Finance Express seeking possession of the Stanmore property. In all likelihood it was served, together with a Notice to Occupier, on the following day. Mr Cohen, who had I think been undertaking some enquiries as to the matters raised by Ms Menzies, was provoked into consulting counsel. Mr Stomo's opinion was that a registered mortgage obtained by fraud can only be set aside - so far is presently relevant - if the mortgagee is aware of the fraud. But otherwise the only recourse is to bring a claim under s 129 of the Real Property Act 1900. Of course I am not concerned with the correctness of this opinion. In respect of the Perpetual mortgage Mr Stomo states - In relation to the mortgage with Perpetual Trustee I am somewhat at a loss to understand whether or not it is a valid mortgage or not. If fully for fraud the same principles [stated in respect of the Finance Express mortgage] would apply. I requested our client to provide a proof of evidence. I have also requested my instructing solicitor to make some inquiries to ascertain the true position of the parties before definitive answers can be made. 263I think by "valid", Mr Stomo meant "by virtue of registration". In the circumstances, I am not prepared to draw inferences as to Ms Menzies instructions as understood by Mr Stomo. However, I have no doubt that he had been told that none of the loan agreements or mortgages had been signed by her. Given that Mr Stomo thought that the crucial question was the knowledge of the mortgagor of the fraud, it is not surprising that he thought a full proof of evidence should be obtained from Ms Menzies. The advice of Mr Stomo is relevant in another respect because of the following passage in Mr Stomo's advice - In addition, contrary to the comments I made in conference, it would be to our clients benefit to make arrangements in regard to alternative sources of finance to mitigate the loss. At present the interest rate is over 100% per annum [plainly a reference to the Finance Express loan] and that should be able to be reduced to a more reasonable amount as soon as possible. It should be noted, however, that such refinancing arrangements should be carried out with full disclosure to the Registrar General as to the amount and the purpose of the re financing so that there is no misunderstanding as to the nature of the transaction or any suggestion that there is an acceptance of the advances made by the current mortgagee. 264 Ms Menzies understood this advice as applying equally to the Perpetual loan so that she understood the payments to Perpetual which, from her point of view should be continued. I deal with this matter further in due course. The sale of Hancock Street 265On 12 December 2006, the Hancock Street property was sold and the mortgage to Permanent discharged. Ms Menzies says she was unaware of this. She said the signature on the Transfer as sole director and secretary of Valcorp was not hers. I am satisfied that it is a forgery. The signature purports to have been witnessed by a Mr Michael Robertson, solicitor. Amongst the exhibits is a letter of 2 November 2006 from Mr Michael Robertson to BMC in connection with the discharge of the mortgage of Valcorp Developments over the Hancock Street property. That letter appears to be signed by Michael Robertson, but the signature is very different to that on the transfer. There is no evidence as to the circumstances in which Mr Robertson came to sign as a witness, if indeed he did. Ms Menzies said that she found out about the sale of Hancock Street around Christmas 2006. She said that nobody gave her any details of what the renovations cost or an accounting as to the cost of the renovations and the proceeds of the sale and that no part of the proceeds of the sale came to her. I believe this evidence. Further communications about payments 266On 11 November 2006 the interest payable on the Perpetual loan increased. By this time communications with Ms Menzies were sent to her at her home address and Ms Menzies believes that she received the letter and forwarded it to Mr Cohen. 267Between 22 December 2006 and 2 February 2007 Ms Menzies received text messages on her mobile phone in relation to repayment of the loans by Mr Reddy: 22 December 2006 from Mr Lyle: Goldberg rang said t[erence] on his way with last piece of paper needed.. Close eh... Believe it wen I see it. 10 January 2007 from Mr Lyle: That s cool... Goldberg says Friday at latest. Says all is approved as of yesterday. 11 January 2007 from Mr Lyle: By goldberg! Says its bookd in.. Was with the lender wen he rang. 19 January 2007 from Mr Lyle: Settlement is bookd in for 3pm... Russell kam is th solicitor acting for t. Still has not turned up.. Every body else is waiting... And ready.. Funders all ready... 22 January 2007 from Mr Reddy: Funds available tomorrow. My lawyer will call yours tomorrow. 2 February 2007 from Mr Lyle: Just got a call from him.. Says cheque directions bein done now.. Settlement today.. So we c. He ran all. We did not ring him. 268Ms Menzies said she received many more text messages than these from both Mr Lyle and Mr Reddy. But she had deleted all of these except the ones set out above. The only reason that she kept the ones listed was "because I thought I could get them", in the sense that "I had some evidence that they were saying we will pay off the loan". She also deleted the text messages sent by her to Mr Reddy and Mr Lyle, saying that she didn't think what she had said was important. The reference to Goldberg was, she thought, in connection with a Finance Express loan but the text could have been about both loans. At all events, the plan set out in the text messages, that Mr Reddy would somehow get funds to pay out the Finance Express and the Perpetual loans did not come about. Ms Menzies says that during this period of time she continued to make repayments to Perpetual through the HSBC account because of her understanding of Mr Stomo's advice about mitigating her damages. 269I should now go back a step. I have already referred to the communications between Mr Conley and the woman he believed to be Ms Menzies. Returning to this sequence, Mr Conley said that on 15 December 2006 he reviewed the file and became aware that a payment of $3,818.83 due on 12 December 2006 was dishonoured. He telephoned Ms Menzies to enquire about the missed payment. Ms Menzies agrees that she did speak with Mr Conley on this day and does not dispute the conversation as recounted by Mr Conley. He said, "Your payment due on 12 September 2006 has been dishonoured". She replied, "I will need to check my accounts. I will call you back in a couple of hours". 270Mr Conley says that he again telephoned Ms Menzies on 18 December 2006 and was told by her, "Sorry I didn't ring you back, I lost your number, it is OK to collect the past payment on Tuesday night". However, on 21 December 2006 he noted that the replacement payment had been dishonoured and telephoned Ms Menzies. She said to him, "The funds are now definitely in the account and it can go through". These conversations were noted by Mr Conley in his file at the time. On 20 March 2007, the loan was again in arrears and the instalment due on 12 March 2007 had been dishonoured. Ms Hampton of the collections department wrote to Ms Menzies informing her of the dishonouring of the payment. Ms Menzies says that she doesn't recall receiving that letter, but does not deny that she did so and said that she would have forwarded it to her solicitors for advice. 271In about January 2007, Ms Menzies says that Mr Reddy telephoned her and they had a conversation to following effect - TR:You can stop hassling me about the Finance Express loan. Now I'm just about to do it all but I'm waiting on the last piece of paper to organise it. I've got everything, I just need to contact the banks and am waiting on this other thing to come through. I'm going to sell this Mandalong Street property in Mosman that owes me about $3 million and you can be part owner of that. I'm going to use that property to pay off the loan. Me:No, I'm not going to be part of anything that you are involved in. 272Ms Menzies says that on 22 January 2007 she received a text message from Reddy which stated - Funds available tomorrow. My lawyer will call yours tomorrow. 273In March 2007 Ms Menzies sent a text message to Mr Lyle's son Erin asking whether he knew Mr Reddy's address and, on 23 March, received the following message in reply - T's address is, "Christie corporate office suites", suite 403, 13 spring st, CBD, I think its, level 4 when I, get back to HQ, N confirm with, U that's it Ievel 4 ... 274Mr Conley says that he reviewed the file again on 3 April 2007 and noted that the prior outstanding amount had not been paid. He telephoned Ms Menzies and a conversation in the following terms ensued - Me:The payment you were supposed to pay on 12 March 2007 has still not been paid despite our letter of 20 March 2007. What are you going to do about it? MOh I did not know the account was in default. The funds will be in the Menzies account by 5 April. Me:You are aware the next payment is due on 12 April 2007? Payments are due on the 12th of every month. MYes. Ms Menzies says that she believed that she had this conversation with Mr Conley, but could not be certain about it because she was speaking with a number of people about payments. 275On 4 April 2007 Ms Menzies went to the Department of Lands and spoke to a person whom she identified as "Gordon". She showed him her original Certificate of Title and said that she understood that there were mortgages on her property but that she had the original Certificate of Title. Gordon looked at information on his computer and handed her a note (which has been exhibited), which in effect said that there were no replacement Certificate of Titles issued. He conveyed this information to Ms Menzies and suggested that she should speak with Ms Anna Brann in the legal department. On the following day Ms Menzies went to the Department of Lands and met with Ms Brann, showing her the original Certificate of Title and told her that there had been a fraud, providing the details of her then solicitor Mr Cohen. 276It will be recalled that Mr Dive mistakenly dated in April 2007 a conversation with Ms Menzies about an enquiry by Finance Express about registering its second mortgage. Mr Dive relied on an email to Mr Maloney of 5 April 2007 for this evidence. He said, in effect, that there were indeed two conversations but, as I gathered from his evidence they were only a day or so apart. I have already pointed out that this is not possible. They must have been a year apart. Ms Menzies does agree that she had a conversation with Mr Dive on or about 5 April 2007, saying that it was to the following effect - Me:The second Mortgage has been lodged by Finance Express on my house at Stanmore which I didn't know anything about. The only Mortgage that I knew about was in respect of the loan on Hancock Street which was secured by that property and I understand that that property has been sold and that loan has been repaid. That loan was with BMC. I've also found out there was another loan with BMC that is secured on my house at Stanmore. I didn't know that any loan was secured on my house. I've now got copies of the Mortgages and they're not my signature on those documents. I've never seen those Mortgage documents before. The loan document that I saw with BMC for the Hancock Street property didn't have any page that BMC was taking a Mortgage on my house at Stanmore. How could this have happened when I have the original CT for Stanmore? There is no way that Perpetual could have the CT! I've engaged a solicitor and I'm being sued by Finance Express. I want a copy of all the BMC documentation and ask that you send it to my solicitor David Cohen. His phone number ...and his fax number is .... I had understood that Felix Lyle was going to make the payments on the loan for the Hancock Street property. Don't let Terence take out any other loans in my name. WD:I can't give you any of the BMC documentation. You will have to get your solicitor to contact BMC to get that. Me:I have been advised to find out whether it's possible to get the loan refinanced. WD:I'll see what I can do. 277Mr Dive said that he understood that one application was firstly to purchase Cardigan Street which developed into the purchase of Hancock Street by Valcorp, secondly, that Valcorp wanted to carry out renovations to Cardigan Street - this at the time of the original proposal - and subsequently to Hancock Street. He said that two loans were necessary because one would be in the corporate structure and the bank would only lend a certain amount against that particular property. So that there needed to be a separate loan created to cover the costs and renovations. It was pointed out to Mr Dive that this wasn't so. All that needed to be done was to add security so that the total security was sufficient to cover, from the bank's point of view, the loan being sought. Mr Dive pointed out that some people do not like to tie up two securities and that here two separate securities, which was the way it was proposed by Mr Reddy. As he understood it, separate transactions were important to him. The change of the purpose of the Perpetual loan to pay for renovations to Ms Menzies' Stanmore address thus was much later and marked a fundamental variation in the scheme, in which originally the loans both concerned the investment property, one way or another. This strongly supports Ms Menzies' evidence that she never understood or expected that renovations were to be effected on her home. Moreover, from her point of view, there was no need for a further loan, since the renovations, first to Cardigan Street and then to Hancock Street, were Mr Lyle's contribution to the investment. I regard it as significant that Mr Dive's account of the conversation, as contained in his affidavit was given with the benefit of consulting the 5 April email, since it differs in material respects. 278Mr Dive said in his affidavit that the conversation of 5 April 2007 was to the following effect - WD. Are you aware someone is trying to register a second mortgage over your home? AM.I don't know. I will speak to Terence Reddy about it. As far as I am aware there were only two loans taken out. The one in Valcorp's name for the Rozelle property and another unsecured one. I am one payment behind in that loan. I explained this to Steve at BMC. He said that "some time later" he was called by Ms Menzies who said - AM.I spoke to Terence Reddy about a month ago and he said he would pay the loans out. He hasn't done so. Can you help me refinance the BMC loan over my property? WD. I am not sure. Because of the defaults I doubt you will be able to get other financing. You probably should speak to your lawyer about it first and then tell me if you need further help. 279Leaving aside the confusion about the attempt to register the second mortgage, as distinct from its having been lodged for registration, the terms of the conversation are consistent with Ms Menzies awareness of the two loans, which was certainly the case as at 5 April 2007. The parts which he said in his evidence he disagreed with were, he said, "just the last two sentences commencing with 'I had understood..." He said that he did not recollect those things being said. When the distinction between a positive assertion that it was not said and it having possibly been said but he not having a recollection of it was pointed out, he said, "I'm more confident it was not said". When asked what fairly reflected his recollection about this he replied, "They were not said". Although this is not, to my mind, a significant difference, I should state that I prefer Ms Menzies' evidence, given the different ways in which the two witnesses struck me when they gave evidence and Mr Dive's quite significant errors in recollection to which I have already referred. It is significant, to my mind, that Mr Dive does not dispute that part of Ms Menzies' account which refers to her ignorance of the loan secured on her house. As suggested before, I believe that Ms Menzies was focussed on protecting her home and that she did not appreciate that she might be liable under a loan apart from its security. That she was unaware of the loan as well as the mortgage is stated by her: "I've also found out there was another loan with BMC that is secured on my house at Stanmore". I believe she thought that this was all bound up with her allegations about the mortgage. However, Mr Dive was of course aware of the distinction and I accept that, if he had not been paying careful attention to what Ms Menzies wqas saying, he might have thought that Ms Menzies shared that knowledge and hence was not disputing the validity of the "unsecured" loan. Mr Dive's answers to further cross-examination, set out below, strongly suggest that this was indeed what happened. 280The email of 5 April 2007 to Mr Maloney, of which part has been set out above, is as follows - Hi Rob, Further to our telephone conversation today, Ann-Maree Menzies has phoned to advised: A second mortgage had been lodged by Express Finance on her Stanmore property and that she was unaware of this transaction. As my memory serves, I called and spoke with Ann-Maree after you alerted me that a company was seeking consent to a second mortgage. She stated at that time that she was unsure and would speak with Terence Reddy with whom she had been associated with the Hancock St Hancock Street [sic] purchase and renovations. She informs now that she had no knowledge of the 2nd mortgage or transaction. In regards to the Hancock Hancock [sic] Street Loan, this has been subsequently repaid in full. She is clear that she only signed 2 loan contracts with BMC. She refers to the Hancock St Hancock Street [sic] loan and No Doc loan which was to be utilised for the deposit on Hancock Street and renovations. She states that is aware of the renovations loan yet thought that it was unsecured. She informs that she has a copy of the mortgages for this loan and that it is not her signature on the document. She claims that she never sighted the mortgage document and that the loan offer did not have a page stating that BMC were taking a mortgage. She states clearly that she is aware of her responsibilities and is happy to pay for the mortgage. She does state that she is in possession of the original Certificate of Title for Stanmore and that there is no way that she Perpetual have the C/T. Ann-Maree has advised that she has engaged a Solicitor given that the underwriter of Express Mortgages is commencing legal action for recovery. She has phoned me to seek a copy of the BMC documentation, hence I need to advise you. Her Solicitor is: David Cohen Ph:9212 7099 Fax:9212 7039 She has mentioned that she was of the understanding that Terence Reddy was going to make the payments on the loan BMC renovation loan and given that the Hancock Street property sold for much less that expected after renovations, has been left with the debt . I have advised Ann-Maree that she needs to have her Solicitor contact BMC to obtain any further information. She has also asked if the BMC loan can be refinanced. 281What then of Mr Dive's report of her attitude to the BMC loans? I think it is plain enough that Ms Menzies had been speaking of her knowledge as at 5 April 2007. By that time she had already spoken to Mr Cohen and had been advised to pay the instalments, as discussed above, including attempting to refinance the loan (though this advice related specifically to the Express Finance loan). I do not accept that Ms Menzies ever stated that she had signed "2 loan contracts with BMC". Firstly, none of the loan contracts were with BMC, secondly, the only signed loan contract that has been produced (Perpetual's) has her undoubtedly forged signature and other insignia of fraud and there could be no reason for agreeing that she had ever signed the two contracts. The balance of the asserted conversation is consistent with Ms Menzies stating what she then knew, not (which I think Mr Dive may have thought) what she thought at the time the transactions were entered into. Mr Dive's assumption has coloured to some degree the language of the email. 282The telephone records of Ms Menzies home number shows a phone call on 5 April to Mr Dive's landline office number, taking 15 minutes 25 seconds, so it was not instigated by Mr Dive. Given the length of the conversation it is evident that Ms Menzies account is a considerable contraction of what she said and so must the account Mr Dive in his email to Mr Maloney, assuming of course that it purports to be an account of the one telephone conversation on that date. Mr Dive was then further questioned - Q. You see, if you go down the page you will see that it says "she is clear that she only signed two loan contracts with BMC", and she refers to the Hancock Street Hancock Street [sic] loan and the no doc loan which was to be utilised for the deposit on Hancock Street and renovations", doing the best you can, was that statement then used to you or is that what you understood then to have been consistent with your understanding of what in fact happened? A. It was my understanding. I know that signing of two loan contracts was definitely something I had picked up on but, and I would agree that making reference to "she refers to the two loans", would have been my recollection of my piece, yes. Q. Now can I just take you to, about half way up the page, it says "in regards to the Hancock Hancock Street [sic] loan this has been subsequently repaid in full", so by the time this conversation took place Miss Menzies was telling you there was only one other loan left? A. Well, she was telling me that this loan has --- well it might have been me knowing that the loan had been repaid. HIS HONOUR Q. So it may not have been quoting her? A. Correct. 283Nor could Mr Dive recollect which mortgage Ms Menzies "is happy to pay for". As to the mortgage that he told Mr Maloney, Ms Menzies said that she was "happy to pay for". He said that he could not recollect the mortgage to which this referred. It was pointed out to him that the Hancock Street mortgage had been repaid in full, either being told this by Ms Menzies or otherwise in his knowledge, so that only one mortgage was left for repayment which he was aware was that over the Stanmore property. He was asked - Q:So where [the email] said "she states clearly she was aware of her responsibilities and is happy to pay for the mortgage" does it not follow that what you meant there was the [Stanmore] mortgage? A:I can't really recollect where it was at the time. 284One (amongst others) difficulty with this interpretation is that Mr Dive goes on to say that Ms Menzies immediately asserted that there was no way, in effect, that there was any mortgage to Perpetual "to be paid for". It must be remembered in this regard that she was already aware of the claim of Perpetual from her meeting at BMC on 10 September 2006. Mr Dive said that he sent this email to Mr Maloney because the fact that (as I understand him) the sale of Hancock Street was insufficient to cover the cost of the project (including renovation) was something of which Mr Maloney should have been informed. Mr Dive's attention was taken to Ms Menzies statement in her affidavit that she had discovered there was "another loan with BMC that was secured on my house at Stanmore. I didn't know that any loan was secured on my house". He was asked whether he was able to say "now with any certainty that that in fact was said to you". Mr Dive responded, "to the best of my recollection is that she was, she stated that she was not aware that there was a mortgage over her house" but as related in the email she was happy to pay for a mortgage. As to that part of the email where Mr Dive recorded the Hancock Street property as having been sold and the loan was subsequently repaid in full, he was asked whether this was something Ms Menzies told him and he answered, "Again, I may have known that from my records". In fairness, I should add the following - Q. At no stage did she say to you, did she, in that conversation that she hadn't signed two loan contracts, in fact you recalled her saying the very opposite, don't you? A. Could you repeat that? Q. Yes. I will frame it another way. You say in the third paragraph of page, about, sorry, the third last paragraph on page 988 that she says she is clear that she only signed two loan contracts with BMC. Now, when you wrote down loan contracts, did you, was that your recollection of loan agreement or application for loan or you can't remember? A. There was no reference to application or loans. It wasn't specific no. Q. When you say 'loan contract', do you recall whether that was something she said to you or would that have been your interpretation of something that she said, your words not hers in other words? A. I wouldn't normally use the words, 'loan contract', that strikes me as strange. Q. What would you have said? A. Two loan accounts, two loans. Q. So that may suggest to you from your own knowledge of your own forms of expression that that is something that was said to you? A. Yes. I point out that this is clearly reliance on reconstruction, and to my mind therefore, a rather weak basis for supporting the email reference to this matter. 285On 18 April 2007 Mr Conley became aware that the payment due on 12 April had been dishonoured. He called Ms Menzies to ask her what she was going to do about it. Ms Menzies responded that she would check the account and call him back. Sometime later, on the same day, Ms Menzies telephoned Mr Conley and said, in substance - There has been a fraud. It was carried out by Terence Reddy. He was a friend of mine who agreed to organise finance for me. The finance was to be over the property at 39 Stafford Street Stanmore which I own. I have the original Certificate of Title for the property. Without my knowledge, Reddy altered the amount of the loan from BMC and organised a second mortgage. The signatures on the documents are not mine. I have reported the matter to the police and the Lands Titles Office to say that the Certificate of Title used was not issued by them. I am preparing a detailed report for the police and I will provide a copy to you once I have it. I did intend to take out the loan. 286Ms Menzies agreed that she had a telephone conversation with Mr Conley at this time to the effect stated by him. But did not say that Mr Reddy was "a friend of mine". In fact Mr Conley's handwritten file note states that Ms Menzies said he was "a friend of a friend", which Mr Conley said was more likely to be a correct record of what he was told by Ms Menzies. 287 In her affidavit Ms Menzies stated with respect to this conversation - 97. ... I agree that I had a telephone conversation with Mr Conley on or about 18 April 2007 to the effect stated by Mr Conley in paragraph 28 of his affidavit and in the file note at tab 18 of exhibit SC1, except that I did not say that Mr Reddy was a "friend of mine". In fact, Mr Conley's handwritten file note states that I said he was a "friend of a friend" which is how I knew Mr Reddy. I may have said words to the effect: "I did intend to take out the loan" but what I meant by this was that I intended for a loan to be taken out in the name of Valcorp secured over the Hancock Street property. I never intended for any loan to be taken out or secured over my property at Stanmore. 288 She was cross-examined on the apparent concession that she told Mr Conley, "the finance was to be over the property at 39 Stafford Street Stanmore which I own". She said that she did dispute it because she said she never intended for any loan to be taken out or secured over her property as set out by her in the last two sentences of paragraph 97. She stated that she wouldn't have said, "the finance was to be over the property at Stafford Street which I own", she added, "I'm pretty sure I wouldn't have said that". She was then asked - Q. But why then didn't you say in your affidavit that you wouldn't have used those words or you didn't use those words, why did you simply -- A. Sorry, I said in my affidavit that I intended to take out the loan and what I meant was the loan in the name of Valcorp over ... [the Hancock Street] property and I didn't intend any loan to be secured over my property at Stanmore. ... Q. The point is that in paragraph 97 you made particular reference to words that Mr Conley says you used to him in his conversation, correct? A. Yes. Q. What you did not do in paragraph 97 is make any reference to the words "Reddy had agreed to organise finance for me, the finance was to be over the property at ... Stanmore", did you? A. I thought that's what the last bit meant. HIS HONOUR Q. Did you actually write out this paragraph? A. No. 289I accept Ms Menzies evidence that the actual language of paragraph 97 was not drawn by her, and I also think that it was reasonable for her to interpret it as she explained in her evidence, which I accept as truthful. That she ever intended to suggest in this affidavit that she agreed to any loan that involved her property in Stanmore I think is disproved by looking at her affidavit as a whole. In which she consistently insisted, one way or another that she was never a party to a loan that involved her in any personal liability or was secured on her house at Stanmore. Whether true or not, it is most unlikely that she would have made that concession at paragraph 97. More significant is the question whether Mr Conley's note of the conversation is correct. There is an internal inconsistency with the account, arising from Ms Menzies' assertion of a fraud carried out by a Mr Reddy which involved, she said, altering the amount of the loan from BMC and organising a second mortgage. This statement amounts to an assertion that there was only one loan from BMC but the additional amount was secured by a second mortgage, namely that over her home which is the one about which she was complaining. This is inconsistent with the previous sentence to the effect (depending on what is meant by the phrase "over the property") that the second mortgage was to be over the Stafford Street property. Ms Menzies had always conceded and agreed that there was to be a mortgage over the Hancock Street property by Valcorp which was part of the original arrangement. In my view, the allegation of the nature of Mr Reddy's fraud makes sense only if she had said (or intended to say) that the finance was to be over the Hancock Street property and not over her property. 290Mr Conley's contemporaneous file note upon which Mr Conley, for the account in his affidavit, in fact provides significant support for Ms Menzies' evidence of this conversion - Ann Marie Menzies called me. Gave me basic information about the alleged fraud carried out by Terrence Reddy (a friend of a friend who agreed to arrange finance for her) against the property at 39 Stafford Street Stanmore owned by Ms Menzies. Borrower claims she holds the ORIGINAL Title doc. Reddy altered the amount of the loan required from BMC - allegedly Reddy organised the second mortgage. The signatures on security docs ARE NOT hers (she has asked for a copy). Land Titles office state issue we have was NOT ISSUED BY THEM Matter has been reported to police Ann Marie is preparing a detailed report for the police a copy of which she will provide for our information. Apparently Reddy has been charged twice previously for similar actions but not convicted. CBA and St George. Await detailed letter from Ms Menzies. Ms Menzies verbally acknowledged that she fully intended to take out the loan and has maintained payments. There has been no mention of any action that may be considered against either the broker or BMC. 291The key point is that "who agreed to arrange finance for her" was in parenthesis relating to what Mr Reddy had done. When the parentheses are taken into account, the passage has a very different meaning. It is clear that Mr Conley has noted that Ms Menzies alleged a fraud was committed "against the property at ... Stanmore owned by Ms Menzies", which was effected by Mr Reddy "a friend of a friend who agreed to arrange finance for her". In omitting this important feature, the account in the affidavit (which expressly relied on the note) is seriously misleading. What quite is meant by the penultimate sentence is not clear, in the context. It may well be that the loan which she "fully intended to take out" is the loan that she understood applied to the Hancock Street property (which is the substance of her evidence) and the maintaining of payments (which was a fact) was due, as Ms Menzies claimed, to what she understood from Mr Stomo she should be doing. The suggestion that the amount of the loan was that which she intended to enter, not only cannot sit with the second sentence, accurately read, but also with the allegation that Reddy altered the amount of the loan. It seems to me, therefore, that fairly read, Mr Conley's file note supports Ms Menzies account of her conversation with him on this occasion. 292The same point applies essentially to Mr Conley's email of 26 April 2007 to Challenger setting out the details of the allegations made to him by Ms Menzies as made in the conversation of 18 April 2009. That contains the allegation that the "friend of a friend ...made the application for an amount exceeding what she wanted to borrow" and that "she understood the loan would be unsecured". Yet Mr Conley said that Ms Menzies "has not denied liability for the debt", which simply makes no sense, given her allegation of, at the least, fraudulent inflation of the amount. These emails represent, of course, the understanding of Mr Conley about what he was told rather than what Ms Menzies actually said. They are no better than a rolled up summation of his recollection and understanding. I simply do not, for the reasons I have given, accept them as accurate reports of her words, as distinct from Mr Conley's understanding of their purport. 293On 18 May 2007 Ms Menzies changed her solicitor's because she was unhappy with the pace at which Mr Cohen was dealing with her case. Thereafter there was correspondence between her solicitors and BMC which does not call for discussion. On 2 July 2007 Perpetual's solicitor's served on Ms Menzies at her home address a notice pursuant to s 57(2)(b) of the Real Property Act 1900 as the borrower and mortgagor, which Ms Menzies passed onto her solicitor. The application of Jones v Dunkel [1959] HCA 8; 101 CLR 298 294I have referred in the course of this judgment to the failure of Perpetual and BMC to produce documents and call certain witnesses. Those references were intended to apply the so-called rule in Jones v Dunkel as recently explained by Campbell JA in Manly Council v Byrne and Anor [2004] NSWCA 123 at [44] et seq and further explication is unnecessary. Mr Sirtes SC submits that the rule should apply to what he contends is the failure of Ms Menzies to call Mr Lyle, since she had been in contact with him. This is far from providing a basis for drawing any inference adverse to her and all the more so when his role in this whole affair is considered. Submissions by Perpetual and Challenger 295I have already dealt with many of the submissions made by Perpetual and BMC in the course of the judgment. Those findings took into account the factual contentions argued by counsel. However, it is appropriate to mention some of them at this point, at least in summary form. 296Mr Sirtes SC submits that it was part of Ms Menzies' plan from the beginning and through to the obtaining of the Perpetual advance that her home was to be the source of collateral for the additional funds required for the purchase and development of an investment property that turned out to be Hancock Street. As he notes, this depends (at least in large part) on Ms Menzies' conversations as recorded by Mr Dive and Mr Conley. I have explained at length why I prefer Ms Menzies' evidence about these conversations and do not need to repeat that discussion here. 297Mr Sirtes SC refers to Ms Menzies having given Mr Reddy her identification papers, her having signed documentation "seeking to borrow funds personally from Perpetual", allowed a valuer to attend her home, attended Laiki Bank authorising Mr Reddy to withdraw funds from the account, signing a direct debit form when needed and rectifying a loan default in mid-2006 after receiving a s 57(2)(b) notice. I have also explained why I have made findings in Ms Menzies' favour in respect of each of these matters. The three documents signed by Ms Menzies were: a consent to use credit information, headed BMC Mortgage Corporation Pty Limited and makes no reference to Perpetual or, for that matter, to any other financier, to the contrary, it bears the warning that, "if personal information is not provided, BMC Mortgage may be unable to provide credit"; the declaration as to purpose of credit for business or investment purposes (of course, inconsistent with any suggestion that it was to be used to renovate Ms Menzies' home) makes no reference to any lender; and the EasyDoc declaration of financial position is addressed to Perpetual. However, this last document was not a Perpetual or a BMC document and Perpetual had not then been identified as the lender. Ms Menzies said that she took no notice of the name. Indeed, why should she? Perpetual was nowhere in sight at this time except as a potential lender amongst others. Indeed, as I understand it, this was used for the purposes of the Permanent loan. The declaration that "I am ...fully aware of our financial obligations under our proposed loan", when its terms had not and could not have been determined or the lender identified is nonsense, as Mr Dive and, indeed BMC must have known. 298In short, I do not believe that Ms Menzies agreed to borrow money personally or offer her home as security in respect of the investment she entered into respecting either the Cardigan Street or Hancock Street properties, whether for purchase or renovations, or authorised Mr Reddy to act on her behalf to do so; nor did she intend or agree to borrow any money to renovate her home or authorise Mr Reddy to act on her behalf to do so. I am also persuaded, for the reasons already given that neither the Perpetual loan agreement nor the mortgage was signed by her, but that the signatures on both documents were forged, probably by Mr Reddy. Mr Sirtes seeks to reduce the effect of Mr Anderson's evidence by referring to his use of the phrase "more probable than not". However, this must be understood by his conclusion (as summarised by me above) to the effect that the conclusion as to forgery is either "strong" or "very strong". I have explained why, having carefully considered his explanations and examined the documents, I accept Mr Anderson's findings and, concluded that the purported signatures I identified were forged. Furthermore, the lack of any attempt to contradict these findings strengthens my conclusion as to their correctness. 299Mr Sirtes SC submits that the Cardigan Street transaction was not a "scam". I have dealt with the significance of this possibility at some length. The fact is that there were, of course, some genuine elements of the proposal but - from Mr Lyle's and Mr Reddy's perspective - also manipulative objectives aimed at taking advantage of her naivety and misplaced trust. 300In respect of the forged Certificate of Title, Mr Sirtes SC submitted that the forgery was made because Ms Menzies made her original available, submitting that otherwise the forgery could not be made. Again, this is the subject of considerable analysis in my judgment, in which I explain that possession of the original Certificate of Title is not in fact necessary to create the forgery and why I am satisfied that it was not provided to Mr Reddy to copy, although it might have been shown to him. Mr Sirtes also submitted, as I understand him, that Ms Menzies was party to or aware of the provision of the false tax returns to Mr Dive. She denied this. Moreover, Mr Sirtes never put such an allegation to Ms Menzies. 301Mr Sirtes SC also relies on the fact that Ms Menzies was not recalled to deal with the evidence of Mr Cohen, particularly as to the content of the letter of 27 October to the police. Mr Cohen's evidence in respect of the letter arose in cross-examination. It was not sent, as I understand it, to Ms Menzies' later solicitors but was retrieved from Mr Cohen's computer the day before he gave evidence. At all events, I have dealt with the fact that Ms Menzies was not recalled by Mr Skinner. She could have been recalled also for further cross-examination. The matters to which I referred for giving this letter and the reconstructed evidence of Mr Cohen's evidence little weight are sufficiently explained. 302The key to understanding Ms Menzies' communications with Mr Dive, Mr Stevens and Mr Conley is that she believed at all material times that there was only one loan in existence, that it was Valcorp's liability and that it was secured over Hancock Street. In this respect, Mr Sirtes SC points out that the funds required could not have been covered in this way and submits that Ms Menzies' demeanour and evidence about this matter "was risible'. I did not find her demeanour to be "risible" at any point. Whilst I would agree that she had plainly not really considered how the investment would work in any sensible way, I concluded that her commercial naivety and blind trust in Mr Lyle explained why she simply accepted what was proposed to her. The matters referred to in this part of Mr Sirtes' submissions have been extensively dealt with in the course of the judgment. 303Mr Sirtes SC points to the identification of the lender on some of the documents as Perpetual and on others as Permanent, an issue that arises in several contexts. I have dealt sufficiently with this matter also but would emphasise the ubiquity of the references to BMC Mortgage Corporation Pty Limited in both transactions. Also, for reasons already explained, I do not think that it was significant that Ms Menzies signed the few documents that she did personally, as distinct from doing so on Valcorp's behalf. I accept that she always believed that these related to Valcorp. 304Mr Sirtes SC also relies on the documents addressed to Ms Menzies at her home address. I have already explained why I do not accept that these were in fact posted to her at that address, relying to a significant degree on BMC's and Challenger's own documents, which neither Perpetual nor BMC attempted to explain. He calls into aid the provisions of s 76 of the Interpretation Act 1987, but it deals only with what will suffice to satisfy a requirement to serve documents by post and the presumed time of delivery, not at all with whether a document was posted to a particular address. 305Mr Sirtes SC also submits that it was essential for the forger of the Certificate of Title to have access to the original. This submission depends on the evidence of Mr Coleman, to which I have referred. However, I do not accept that the submission accurately reflects that evidence. For obvious reasons, I did not and do not now set out Mr Coleman's evidence in this judgment but, carefully read, it is clear that actual access to the original Certificate of Title or to the Department of Land's computer records is unnecessary. It will also be recalled that Ms Menzies said that she might have shown her Certificate to Mr Reddy who, in that event, would have been able to garner the limited knowledge he needed. I accept that she did not make the Certificate available for copying. 306Reliance is also placed on circumstances in which the Laiki bank account was opened and the apparent authorisation of Mr Reddy to operate on it. This subject has already been sufficiently dealt with in my judgment. I might also point out that a number of what Mr Sirtes SC describes as "important" questions were not asked of Ms Menzies, not only on this subject. 307Mr Conley's evidence as to the woman who attended at BMC's office to pay instalments is also relied on. This has already been dealt with. Reliance is also placed on Mr Dive. I have also dealt with his evidence which, in a number of important respects is objectively incorrect. Furthermore, I thought his account was confused as to a number of matters and heavily relied on reconstruction. 308Mr Sirtes SC has annexed to his submissions a list of various telephone calls between Ms Menzies and Mr Lyle, his son, Mr Reddy, Mr Cooke, Mr Cohen and Vic (the builder). Of course, this rather assumes that those persons used the specified telephones at those times. She said, about her calls to Vic, that "the main reason I was ringing him was to find out where Terence was and where Felix was" since, although she had Mr Reddy's number, "he wouldn't talk to me". The actual frequency of the calls was not put to her, not only in relation to Vic but also Mr Lyle's, Mr Reddy's and Mr Cooke's telephones. Nor does the list give the times of these calls, namely whether they were long enough for any conversation. I do not apprehend it is my task to analyse the voluminous telephone records to scour them for information, still less when that material is not put to Ms Menzies. In the circumstances, I do not think it appropriate to draw any adverse inference from the proffered list. 309It appears that Ms Menzies did not make, at least, a formal complaint to the police about the Perpetual loan, although it may have been (as set out above) that the subject was raised and she understood that this was a civil, not a criminal matter and she did not feel at that stage that she had sufficient information to take it further. It is possible that she had not actually mentioned in terms the Perpetual loan at that stage (her evidence is ambiguous on this point), because of what she was told about the civil/criminal difference. She pressed the Finance Express complaint because she had the documents but not, as I understand her, at that stage in respect of Perpetual because she did not have the documents. (What was placed in the missing report to the police enclosed with Mr Cohen's letter of 27 October 2006 is unknown.) The mere fact that she was unaware of any "police document that records a complaint by you to the police about that [Perpetual] mortgage" is, to my mind, inconsequential. 310As to notifying Perpetual of the frauds, she had spoken to Mr Dive and Mr Conley about them. BMC was the manager of the loan, appointed by Perpetual. Mr Sirtes SC's submission that she should personally have also contacted Perpetual is, to my mind, without any merit. Moreover, she had sought legal advice as to what she should do and was justified in awaiting it. 311I now deal with the arguments as to estoppel, agency (actual and ostensible authority) and ratification. Estoppel 312It is not controversial that the elements of estoppel by representation are (as set out by Lord Tomlin in Greenwood v. Martins Bank Ltd [1933] AC 51 at 57 cited with approval in Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 by Rich J at 520 (but also in the other judgments) - The essential factors giving rise to an estoppel are I think: -- (1) A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made. (2) An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made. (3) Detriment to such person as a consequence of the act or omission. Mere silence cannot amount to a representation, but when there is a duty to disclose deliberate silence may become significant and amount to a representation. Mr Sirtes SC relies on the following passage, in particular, from the judgment of Dixon J (ibid at 547, omitting references) - ... The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct ...; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted ....[Emphasis added] 313As to the duty to speak, Mr Sirtes SC relies on the following passage from the speech of Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 903 - ... What I think we are looking for here [as to the test of duty] is an answer to the question whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the "acquirer" [here Perpetual] would expect the owner [Ms Menzies] acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the "acquirer" and whether, in the face of an omission to do so, the "acquirer" could reasonably assume that no such title was claimed. As Clarke J (as he then was) pointed out in Associated Midland Corporation v Sanderson Motors Pty Limited [1983] 3 NSWLR 395 at 409, the House of Lords in Twitchings was divided and - Indeed Lord Wilberforce and Lord Salmon, who constituted the minority on this aspect, alone sought to define the factual circumstances the existence of which is necessary to give rise to the duty [to inform]". I do not believe however that it is open to me to apply the approach laid down by either of their Lordships in light of the actual result". 314After describing the dicta of Lord Wilberforce and Lord Salmon as "persuasive", Clarke J went on to say (ibid at 412) - Yet, it was not adopted or agreed with by any of the majority, and it led his Lordship to the conclusion, which did not prevail that the plaintiff was estopped by its failure to register [a hire purchase agreement]. I do not regard it as open to me, in the light of the result in the case, and no matter how attractive I find it, to adopt either Lord Salmon's or Lord Wilberforce's test... Clarke J explained (ibid at 411) that the majority did not define "the elements necessary to found the requisite duty [and] implicitly rejected the neighbourhood test which found its genesis in Donoghue v Stevenson", with the result that "the decision assists by demonstrating when a duty does not arise but not in defining those circumstances in which it does" (at 412-413). His Honour went on (omitting references) - In this state of authority I must, I feel, have regard to general principles. Estoppel, in general, operates when one party has so acted as to lead another party to believe a certain state of affairs exists. He is thereafter disentitled from denying the existence of that state of affairs. A party can, by maintaining silence in particular circumstances, equally lead another party to believe that a certain state of facts exist. The party maintaining silence is, in my opinion, subject to the same estoppel as the person who has actively brought about the belief in the existence of that state of affairs .... It seems to me to follow that if a party omits to record facts or take some positive action he will come under a duty of care to another only if he is aware that that other person has been induced to believe that a particular state of facts exists by reason of his omission and either deliberately or negligently remains silent and allows that party to continue to act, to his detriment, upon the basis of his mistaken belief. ... In addition the authorities establish that a party under a legal duty to act, whether that duty is imposed by Statute, contract or otherwise, may be estopped from denying facts which his omission to act would imply. For instance, if there was a duty, imposed by Statute, on an owner to register his interest in a motor vehicle at a Government register, and he fails to do so, an estoppel could arise. Such estoppel would be in favour of a person who believed, relying on his search of the register, that there was no such owner and who acted, to his detriment, on that basis. Whether these views are correct or not Twitchings clearly lays down, in my opinion, the proposition that an owner is not estopped by his failure to register his interest in a motor vehicle pursuant to a facility available to him, and which might inform potential purchasers of his interest, where there is no duty cast upon him by statute, contract or otherwise, to do so. 315Kirby P, (dissenting) in Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 considered that Clarke J's view as to the passage which is set out above from Lord Wilberforce's speech in Twitchings was "wrong, if he was suggesting that the decision of the majority ... bound him". Glass JA held (at 468-469), in disagreement with the President, that, in the context of s 26(1) of the Sale of Goods Act 1923, which imposes a statutory duty of registration, where a buyer relies on the omission of the owner to take steps to prevent the sale of goods, he can only succeed if the owner owed him a duty of care. In his judgment, Glass JA referred to the dictum of Lord Wilberforce in Twitchings but plainly without adopting or agreeing with it. McHugh JA, agreeing with Glass JA, thought that Lord Wilberforce's posited test was, subject to a qualification, correct, although it led his Lordship to a different conclusion to that of the majority (at 474). He pointed out that Lord Wilberforce held that there was a duty (at 905) because a "man who knows that others rely on a particular source of information, which derives that information from him, may surely be under a duty to supply that information if he has it, even though transmission of the information makes the seeker of it less than 100 per cent secure". His Honour added, however, that the words, in Lord Wilberforce's formulation of the "test of duty, 'as known to both parties' are of critical importance ... [and that] it is the situation in which the transaction occurred which must be known to both parties, not their actual interests or existence". 316Mr Sirtes SC submits that if on the accepted evidence the Court finds that a reasonable person in Perpetual's position would have expected Ms Menzies (acting honestly and responsibly) to have notified them upon receiving the correspondence that she was the borrower and mortgagor when she knew she was not, Perpetual could reasonably assume that she was the borrower and mortgagor, so that the effect of her not doing so is to estop her from denying the effect of that misapprehension. I am unable to see how these facts could give rise to the duty that Clarke J, Glass and McHugh JJA thought was essential to the creation of the estoppel. 317Furthermore, aside from reference to the authorities, Mr Sirtes SC's submission depends on the receipt of correspondence that was not received by her. Furthermore, it was ex post facto: the advance had already been made. Mr Sirtes also argued that her delay resulted in "a loss of a fair chance to obtain that which a person might obtain, whether by way of a legal remedy or may itself amount to a detriment, citing Thompson v Palmer (supra), submitting that her failure to do so as at 17 October 2006 prevented Perpetual from seeking freezing orders in respect of the Laiki Bank accounts of Valcorp and InvestOne, at that time, the former account having a balance of $370,000 and the latter $100,000. However, the page of the bank statement relied on relates to 2005 and not 2006 and the amount of $370,000 to the balance as at 17 October 2005. The account was closed on 6 April 2006. As at October 2006, the balance in the InvestOne account (assuming that it was still operating) is unknown. It is unlikely to have been substantial, if anything. (It is worth noting also, I think, that as at 17 October 2006, Perpetual had no rights under the loan agreement, there was no indebtedness by Ms Menzies and "it could not be misled into refraining from enforcing something it did not possess': vide Rowe v B & R Nominees Pty Ltd [1964] VR 477 per Gillard J at 485.) I have already pointed out that I accept Ms Menzies' evidence as to when she notified BMC that she had not signed the mortgage or loan agreement with Perpetual. This was a reasonable time at which to do so. Perpetual was, in my view, given notice by virtue of those communications. 318The mere likely existence of an assumption in the other party if a particular action is not taken by the other is not enough, quite apart from the question whether the assumption is justified. Silence raises a number of obvious possibilities. Furthermore, the knowledge of the facts - even accepting the timetable proposed by Perpetual - came after the advance was made. The estoppel could scarcely operate retroactively to prevent a denial of liability when, even on that case, no question of notification had then arisen. Actual authority 319This depends on the contention that Ms Menzies authorised Mr Reddy to sign the agreement and the mortgage. I have held otherwise, on the basis of evidence that I believe to be overwhelming. I accept that Ms Menzies authorised Mr Reddy to organise finance, but not to create a loan that exposed her to any personal liability, let alone secured against her home. I have dealt with the conversations with Mr Dive and Mr Conley, preferring Ms Menzies' evidence. It is not to the point to refer to Ms Menzies' agreement in relation to the Hancock Street transaction, in respect of which of which she executed the mortgage. As I have mentioned, I do not believe that she executed the loan agreement, let alone the guarantee. Mr Sirtes SC's posited question - not, as it happens, put to Ms Menzies - as to why, when presented with the Permanent mortgage (not the loan agreement, as I have held) she did not say to Mr Venegas, "Hang on, where did this documentation come from. Nobody had the authority to accept this loan on my behalf?" misses the point. No question of acceptance of the loan had - so far as she knew - arisen before then. She had at least authorised Mr Reddy to make the application. The purpose of the execution of the mortgage was, of course, to accept the loan. Had she declined to sign the loan agreement (had it been given to her) and the mortgage, that would have been the end of the matter from her point of view. There was no mystery about this event, although a knowledgeable party might have wondered about there being no loan agreement. As to the other contentions about the circumstances which, in Mr Sirtes' submission, should have led Ms Menzies to ask questions, in particular about the additional funds beyond Permanent's advance, I do not agree that these matters actually crossed her mind as, I believe, she trusted Mr Lyle's (and likely Mr Reddy's) assurances - in general terms - as to what was necessary and what was being done. As to the chandelier, the laying of a path, the stripping and polishing of floors, these would scarcely involve substantial sums and she understood that this was Mr Lyle's responsibility. As to the shortfall in the purchase price, I have already mentioned that the contract was not signed by Ms Menzies but by Mr Lyle and my conclusion that this was not varied. Ostensible authority 320It is submitted that, if Ms Menzies gave Mr Reddy ostensible authority to enter into the Perpetual loan, then she is estopped from denying his exercise of that authority in order to create binding legal relations. This requires a representation to Perpetual, by words or conduct, that Mr Reddy was authorised to act on her behalf to enter into the transaction. Mr Sirtes SC relies on the facts earlier mentioned but in respect of which I have made findings adverse to those for which he contends. It is sufficient, I think, to point out that the mere giving of her identification papers to Mr Reddy to enable him to make an application for what she thought was a Valcorp loan to be secured on Hancock Street, was not to give him ostensible authority to BMC or, later, Perpetual to enter into another loan, still less the signature on three pages of an application for that finance, none of which documents actually state that it is an application for finance. At all events, the most that this involved was authority to make an application and not any ostensible authority to enter into the loan agreement or mortgage as distinct from making an application. As to there being ostensible authority in respect of her signing a document that referred to her personally as the borrower, it may be that Mr Dive (and BMC) was entitled to infer that Ms Menzies was making an application as a borrower. Of course, the application required a great deal of other information, which was falsely created by Mr Reddy without any authority, ostensible or otherwise, but which Mr Dive assumed had come from Ms Menzies without any representation having been made to him in this respect either by her or Mr Reddy. Moreover, there is no evidence of any reliance by Perpetual or BMC on the representation that Ms Menzies was the borrower as contained in the documents she signed for the purpose of making the advance which, depended entirely on the implied representation - for which Ms Menzies was in no way responsible - that her signatures were genuine. 321Moreover, Mr Dive agreed that there was never any suggestion that Mr Reddy was Ms Menzies' agent and that it was correct that "at no time Mr Reddy indicate to you that he had any authority to bind Ms Menzies in the transaction which he was proposing to you". 322Mr Sirtes SC contends that the loan applications were executed by Ms Menzies. I have found that this was not so, although she did sign some documents (unidentified) at the beginning of the matter. Those which have been produced do relate to an application but do not constitute an application, let alone two applications. An application for finance does not, of course, amount to an agreement to take up any loan that might be proffered. Although no doubt it is a representation as to the facts contained, it does not create any legal relations of any kind, let alone amount to any representation as to agency. It is submitted that Ms Menzies "intended to be bound by them", but bound to what? The documents she signed referred to her as the borrower but this did not and could not be relied on as giving Mr Reddy ostensible authority to enter into the loan agreement, let alone the mortgage. 323It is clear that Perpetual relied on an actual identification of Ms Menzies by BMC (though whether it was entitled to, in light of its contractual relationship with BMC, is somewhat doubtful - but I do not need to determine this matter at present). Mr Sirtes does not articulate any argument that seeks to show how what happened in respect of the identification documents and the three application documents signed by Ms Menzies gave rise to any ostensible authority in Mr Reddy upon which BMC or Perpetual arise. Moreover, it is clear that BMC and Perpetual relied on the execution of the loan agreements and the mortgage by Ms Menzies in order to make the advance. They did not rely on the application documents to identify the borrower, except for the purpose of drawing the documents. They did not rely on any agency in Mr Reddy or any other person at all, but on an assumption that the security documents were executed by Ms Menzies. They relied, as mentioned above, on an implied representation that the signatures were genuine, but Ms Menzies was not in any sense responsible for that representation and there is no evidence as to who actually produced the documents at settlement, though I doubt that mere production of the documents would amount to any representation that the signatures on them were genuine. There can be no doubt that Ms Menzies gave no authority whatever to forge her signatures on any documents, let alone the security documents, and neither BMC or Perpetual relied on any authority. They both believed (in this respect) that they were dealing directly with Ms Menzies. 324I do not see, either, that Ms Menzies was imprudent in respect of the Perpetual loan, although that she trusted Mr Lyle and Mr Reddy for as long as she did when problems later came to light after the advance was made could be regarded as somewhat imprudent. Mr Sirtes SC argues that the shortfall between the purchase price for Hancock Street and the Permanent loan pointed to the Perpetual loan and "either Ms Menzies was comfortable with Mr Reddy and/or Mr Lyle raising money on her behalf, or she thought that that hundreds of thousands of dollars for the Hancock Street purchase price shortfall, the renovations, the deposit, and the associated conveyancing and legal costs were appearing out of thin air". Questions to this effect were, however, not put to Ms Menzies. I do not think that it would be fair to draw the adverse inference contended for. Much might depend on what she was told by Mr Lyle or Mr Reddy about these matters, in the context - largely ignored by Mr Sirtes - of the elaborate, indeed extraordinary, steps taken by them to keep her ignorant of the Perpetual transaction. 325Mr Sirtes SC also refers to entrusting Mr Reddy (or perhaps Mr Lyle) with her Certificate of Title. I have already dealt with my findings in this respect. Moreover, the Certificate of Title that was used was a forgery and thus not provided by Ms Menzies. Ratification 326If I may say so with respect, the principles governing the notion of ratification have been usefully summarised in the recent decision of Pembroke J in Learn & Play (Rhodes No 1) Pty Limited v Lombe [2011] NSWSC 1506 as follows - Ratification [21]Ratification may be expressed or implied. It will be implied whenever the conduct of the person in whose name a transaction has been entered into is such as to show that the person adopts the transaction. Silence, acquiescence or inactivity may be sufficient to demonstrate implied ratification: Taylor v Smith (1926) 38 CLR 48 at 54 (Knox CJ); Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA [1993] 2 Lloyd's Rep 225 at 234; Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd [2004] NSWSC 56 at [53] - [61] (Young CJ in Eq); Pollard v Wilson [2010] NSWCA 68 at [121]; Victorian Professional Group Management Pty Ltd v The Proprietors "Surfers Aquarius" Building Units Plan No. 3881 (1987) 1 Qd R 487 at 496 (Connolly J); Brockway v Pando [2010] WASCA 192 at [1116] - [117]. If the principal is aware of all the material facts, takes no steps to disown the transaction within a reasonable time, or adopts no means of asserting his rights at the earliest opportunity, that may, in certain circumstances, amount to sufficient evidence of ratification. [22]What is crucial however in any ratification is that it is necessary that the principal have full knowledge of all the material circumstances in which the transaction was purportedly entered into and its material features. There may be circumstances, probably rare, in which the principal should be taken as having intended to ratify and take the risk of the transaction, whatever the circumstances may have been: Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA (supra) at 234.... [23]I should also observe that ratification has objective as well as subjective features. It is not open to a principal who, by his conduct, appears to the outside world to have adopted a transaction, to be able to prove subjectively that he did not intend to approve it. A principal is not entitled to prove subjectively that he did not intend to adopt a transaction when he has done an unequivocal act to adopt it with full knowledge of its terms and features: Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA (supra) at 235. [24] On the other hand, the subjective knowledge and understanding of the principal is also relevant. It must be shown that the principal was aware of the material terms and features of the transaction which he is said to have adopted and ratified. Without such full knowledge, there will not be ratification according to law. I doubt very much whether a principal, who was aware of the material terms, could successfully contend that he lacked the relevant knowledge because of his own obtuseness, neglect or failure for some other reason to appreciate the significance of those terms. However I need not decide that question in this case. 327In Capital Access Australia Pty Limited v Hraiki and Anor [2011] NSWSC 109 Schmidt J held that the defendants had from the beginning known of and authorised both the mortgage and loan agreement even though their signatures on both documents were forged. The case advanced for the defendants was that this did not assist the plaintiff, because forgery or fraud could not be ratified, although accepting that a forged document could be adopted, if there was knowledge of the fraud. However, her Honour found that at the point of alleged ratification they were aware of the forgery, and nevertheless withdrew the allegation of forgery, with the consequence that they accepted the documents as genuine. 328Of course, (though this was not an issue in Hraiki) it does not follow from knowledge that one has not signed a relevant document, that the signature on it is therefore a forgery. That depends on what is known about the signature. It may well be that the document was executed as an agent by someone representing he or she is authorised by the principal. There is no suggestion here that Ms Menzies was aware until the documents were actually seen by her, at a much later stage, than the alleged ratification or adoption, that her signature was forged on the Perpetual documents. 329As was pointed out by James J in Chen v Song [2005] NSWSC 19 (a judgment not referred to by Schmidt J in Hraiki), whether there can be ratification of a forgery is a difficult question, citing Rowe (supra), Klement v Pencoal Limited [2000] QCA 152 and Soyfer v Earlmaze Pty Limited [2000] NSWSC 1068 Hodgson CJ in Eq (as he then was). G E Dal Pont, Law of Agency, 2nd ed (2008) LexisNexis Butterworths states the following at [5.15]: 'Nor can, at least in theory, an act that is void when effected by a purported agent be validly ratified by the principal. So it has been said that a purported agent's forgery of the principal's signature cannot be ratified, the reason being that a forged document is a nullity; it is void, not voidable. Justification for such a result has also been derived on the basis that an act that is a criminal offence is not capable of ratification. In most cases a forger who counterfeits a signature or seal does not profess to act as an agent, and it is for this reason that ratification cannot be effected. If, however, the agent in forging the signature purports to act for an identified principal, there appears no reason why the principal should not be able to ratify.' [emphasis in original, citing, inter alia, Rowe v B and R Nominees Pty Ltd [1964] VR 477]. 330Perpetual's submission in this respect depends again on the contention as to Ms Menzies' receipt of "voluminous" correspondence and her failure to inform BMC, Perpetual or Challenger that she had no knowledge of the transactions to which they referred. It is submitted that her silence requires the inference that she approved of the Perpetual loan. I have already dealt with this contention. Mr Sirtes SC also relies on the conversation between Ms Menzies and Mr Stevens of Challenger following receipt of the s 57(2)(b) notice in August 2006 and the fact that "she paid off the arrears" and payments continued to be made from her account with HSBC. I have already dealt with this evidence, in particular concluding that I accept Ms Menzies' evidence that these payments were made with funds supplied by Mr Lyle and she thought that the loan was that which related to the Hancock Street property. I do not accept at all Mr Sirtes' submission that Ms Menzies "sat on her hands to await any potential benefit from the [Hancock Street] Rozelle property transaction." Again, what she did and my findings on the matter are sufficiently set out above. 331It will already have been seen from my discussion of Ms Menzies' knowledge at all material times, that she did not have "full knowledge of [the] terms and features of the transactions", still less at the time when she arranged for payments to be made out of her HSBC account. Nor could these payments be seen as unequivocal acts of adoption. The payment of a few instalments could not amount, in the circumstances, to this. 332In short, I do not accept that Ms Menzies ratified or adopted the Perpetual loan. Submissions by BMC 333Mr Curtin SC's written submissions were confined to the case between BMC and Perpetual and Challenger on the assumption that a verdict for Ms Menzies were given on their Statement of Claim. However, it is necessary briefly to deal with Mr Curtin's oral submissions. Essentially, he adopted Mr Sirtes SC's submissions but wished to focus on the loan. He submitted that there were two "games" in play: the first was to buy and renovate a property to make a profit; and the second was Mr Reddy's plan to use the funds obtained for the purchase and renovation for his own purposes. He submitted that Ms Menzies had agreed to a personal liability on the basis that she always thought the project would make a profit and thus that she would not lose any money. 334I would agree that it is quite possible that, when the idea of purchasing a property and renovating it for resale was being considered by Ms Menzies, she may well have thought that she would need to borrow money and possibly would have done so were it not for the interposition of Valcorp. I would also accept that she believed there would ultimately be a profit and that she did not consider, or give any real consideration, to the possibility of loss. As to this issue, timing is crucial. In my view, for the reasons given in the judgment, by the time the loan application was being made, Ms Menzies thought there was but one loan, that it was to be obtained and was in fact obtained by Valcorp and was secured alone over the Hancock Street property and that she would not need and did not agree to make herself personally liable for the loan. Moreover, I think that she remained of this understanding until, on 10 October 2006, she went to BMC's offices and discovered the mortgage over her home and the other loan in her name with Perpetual, and concluded this was the loan taken out by Mr Reddy about which she had been told by Mr Lyle a few days before. 335Mr Curtin SC submitted that Ms Menzies had authorised Mr Reddy to organise the finance necessary for the Hancock Street project and argued that this included, if necessary, applying for a loan in her name for any amount which was necessary in the event that Valcorp did not get a sufficient advance. I agree with the first part of this submission but, for the reasons already given, not with the second part. I do not believe that Ms Ms Menzies ever contemplated, let alone authorised, either applying for or entering into a second loan in her name. The authorisation was confined at all times to Valcorp. Mr Curtin SC drew (I think correctly) a distinction between authorizing an application on the one hand and authorising the entry into a loan agreement on the other, although he submitted that, if the former occurred, it was easier to infer the latter also. Had Ms Menzies discovered - say, when the loan agreement came to be signed by her - that she would be personally liable and (necessarily) that liability was to be secured on her home, I have no doubt whatever that she would not have executed it. That was, of course, the reason for the forgery of the Certificate of Title and her signature on the security documents and any other document that might have betrayed the true position. Moreover, that this occurred is (as I explained above in the course of my judgment, very cogent evidence to my mind supporting the conclusion that this transaction was never part of the agreement or understanding or, most significantly, any authority. 336In dealing with the question of agency, Mr Curtin SC pointed out that, in arming Mr Reddy with at least some of the loan application documents that did not specify a lender, she gave him perhaps actual and at least ostensible authority to select any lender, even perhaps, more than one. So much can be agreed. However, that would not change the fundamental matter, which concerns the identity of the borrower rather than the lender and the security. For the reasons given, I do not accept that Ms Menzies gave actual authority for Mr Reddy to apply for a loan for her personally (including any guarantee) secured on her home. I have dealt with the possibility of ostensible authority above. In respect of the loan agreement (and, I think, the mortgage) Mr Curtin SC put the matter candidly and succinctly, "unless she clothed [Mr Reddy] in some way which communicates to Perpetual that he is authorised to sign there is no ostensible authority". 337Mr Curtin SC also relies on the authorisation of Mr Reddy to operate the Valcorp account. I have already explained why I do not believe this occurred. But, if it did, it could not establish, or even suggest, that Ms Menzies had authorised him to apply for a loan in her name, let alone enter into a loan agreement on her behalf, signing her signature. Mr Curtin submitted that she was prepared to enter into a personal guarantee in respect of the Permanent loan. I have explained why I do not believe this was so. 338Mr Curtin SC also referred to other matters, such as Mr Cohen's letter of 27 October 2006 to the police and Ms Menzies apparent inaction after hearing that the Hancock Street property had been sold. I have dealt sufficiently with the former. As to the latter issue, I would point out that at this time Ms Menzies had retained lawyers, with whose inaction she was unhappy but I do not think that the lack of further significant wrestling with these issues indicates anything of importance adverse to her. Other matters were also taken up briefly by Mr Curtin but these have all been sufficiently covered in my judgement and discussion of Mr Sirtes' submissions. Conclusion as to the case of Perpetual and Challenger against Ms Menzies 339Accordingly, I make the following orders: 1.I give judgment for Ms Menzies on the action brought by Perpetual and Challenger against Ms Menzies. 2.She is not liable under either the mortgage or the loan agreement. 3.It may be that some ancillary orders need to be made, and I will give directions about this matter and as to costs after hearing from the parties. Cross-claims 340In the circumstances, it is not necessary for me to consider Ms Menzies' cross-claims.