PERPETUAL TRUSTEES VICTORIA LTD -v- BURNS [2015] WASC 234 (30 June 2015)

(b) the mortgage by the defendants to the plaintiff dated 18 October 2007 and registered at Landgate Land Titles Division on 7 November 2007 (registration number K403751) to secure the sum of $228,368.54 declared invalid and unenforceable and set aside;

(c) the plaintiff forthwith lodge a discharge of that mortgage at the Land Titles Office and deliver the duplicate Certificate of Title and any other security documents held in respect of that loan to the defendants;

(d) the loan agreement between the plaintiff and the defendants dated on or about 17 October 2007 by which the plaintiff agreed to provide a credit facility to and at the request of the defendants with a limit of $228,368.54 be declared invalid and unenforceable and set aside;

(e) the defendants do account to the plaintiff for the principal sum of $228,368.54 advanced to them under the mortgage now set aside plus interest thereon, calculated as simple interest on that principal from 7 November 2007 until the date of repayment at rates of interest coinciding with the cash rates set by the Reserve Bank of Australia from time to time which, if not agreed, be determined by a Registrar on inquiry to be held to determine the appropriate rate in accordance with this order and the aggregate interest payable after credit has been given for all interest payments made by the defendants for that mortgage;

(f) the defendants' counterclaim for rescission of each of the five earlier loans and mortgages over Ilma Street, Barellan Court and Holland Street properties between the plaintiffs and the defendants, or one of them, be allowed and each of those loans and mortgages be set aside and declared unenforceable because of unconscionable conduct by the plaintiff. Restitutio in integrum for those transactions will be made by the plaintiff retaining the repayments of principal and interest made under them by the defendants, subject, however, to paying to the defendants the amounts found due on a further enquiry before a Registrar to determine the difference between the interest and other expenses charged to the defendants under those loans and mortgages and simple interest on the principal outstanding from time to time calculated at the cash rate of interest fixed by the Reserve Bank of Australia for periods when that principal was owing. The balance found due by the plaintiff to the defendants after this enquiry be set off by the defendants against the balance found due by them to the plaintiff on the completion of the enquiry and account ordered under subpar (e) above, and the final balance be paid by the defendants to the plaintiff;

(g) the balance of the amount of principal and interest so ordered to be paid by the defendants to the plaintiff after the enquiries and accounts shall be a debt due and payable by the defendants to the plaintiff without security;

(h) the defendants' counterclaim for damages against the plaintiff under s 82 of the Trade Practices Act 1974 (the Competition and Consumer Act 2010 (Cth)) be adjourned for a directions hearing before a judge at a date to be fixed with a view to being set down for hearing after any further necessary interlocutory procedures but only in respect of any damages claimed to have been caused by alleged misleading or deceptive conduct arising from what has been referred to in reasons for decision in this case as the Railway Avenue loan and mortgage of October 2007;

(i) otherwise the counterclaims of the first and second defendants be dismissed;

(j) there be liberty to apply in relation to the conduct of the enquiries and the taking of accounts.

1 EM HEENAN J: Who would lend more than $840,000 to a couple, each of whom was on a disability pension with no prospects of any form of employment, with the husband partially blind and the wife with a long-term disability, when each had nothing to offer but the desire to speculate in real estate? The answer is that the plaintiff did lend that money in a series of six loans to the defendants through intermediaries in what are termed 'low doc (documentary) loans' when any semblance of precaution or independent advice for the vulnerable borrowers was absent and where the intermediaries were entities for which the plaintiff disavows any responsibility or relationship of agency. Now that the defendants' investments have proved disastrous, four of the loans have resulted in distressed sales and a balance, insuperable for the defendants, remains outstanding, this action is brought by the plaintiff for recovery of possession of the last property acquired by the defendants which was offered as security. It is their residence and only significant asset.

2 This case concerns the question of how enforceable or inexorable are the obligations contained in the security documents granted to the plaintiff by this elaborate process of advances through intermediaries and whether the intermediaries are agents of the plaintiff. That intermediary process is complicated and requires extensive explanation, but that will come later.

3 The pleadings, in their final form after many amendments, including amendments made at trial, present for decision claims by the plaintiff for:

(a) an order for the defendants to give vacant possession of the property known as Unit 15, Sherwood Gardens, 405 Railway Avenue, Armadale, (the Railway Avenue property) the subject of a registered mortgage in favour of the plaintiff following default by the defendants under that mortgage;

(b) alternatively, an order for the defendants to pay to the plaintiff an amount of $266,849.83 plus interest for money had and received and/or as restitution for unjust enrichment.

4 There are also counterclaims by both defendants. The first defendant counterclaims for:

(a) a declaration that the mortgage sued upon by the plaintiff and its associated loan are void and unenforceable;

(b) a declaration that each or some of the five other loans by the plaintiff to the defendants is unconscionable;

(c) an order for the plaintiff to discharge the mortgage over the Railway Avenue property;

(d) an order for the plaintiff to pay damages in equity, alternatively to pay restitution to the first defendant in the amount of the current market value of certain other properties, namely the property formerly owned by the first plaintiff at Iluna Street, Armadale, and a property at Barellan Court, less certain deductions but plus $97,000; and

(e) further or other relief, including damages pursuant to s 82 of the Trade Practices Act (now the Competition and Consumer Act 2010 (Cth)) and other relief pursuant to s 87 of that Act.

(a) a declaration that he is not liable to pay any further amounts to the plaintiff, including the amount claimed by the plaintiff in this action;

(b) an order requiring the plaintiff and Landgate to discharge the mortgage over Railway Avenue insofar as it affects the interest of the second defendant;

(c) compensation of $200,000 for pain and suffering alleged to have been caused by the plaintiff to the second defendant;

(d) such further or alternative relief as the court deems appropriate.

6 Under this last pleaded claim for relief the second defendant, at the end of the trial, effectively contended that he should be granted relief in similar terms to all the relief claimed by the first defendant.

7 The second defendant appeared and conducted his defence and the prosecution of his counterclaim alone, without any legal representation. It was plainly obvious that he was disadvantaged by the lack of legal knowledge and experience, as well as by other disabilities which will be described later. Some flexibility and allowance therefore needs to be made when considering the pleading and the claims for relief made by the second defendant in order to identify the true substance of the case which his oral and written submissions endeavoured to present: Tobin v Dodd [2004] WASCA 288 [14] - [18].

8 From the manner in which the plaintiff's case and the counterclaims were conducted, the real contest emerging between the parties is whether the loans and mortgages relied upon by the plaintiff were enforceable or whether they should be declared void or unenforceable on the grounds that that mortgages and the associated loans were unconscionable having regard to the defendants' several disabilities.

9 In the first defendant's case that was also because one of the mortgages had been made by the plaintiff to the second defendant alone and guaranteed (constructively) by the first defendant, which she did not fully understand or comprehend, relying instead upon the wishes of her husband and where the plaintiff failed to ensure that she was provided with independent advice - so invoking the doctrine in Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649 and Garcia v National Australia Bank [1998] HCA 48; (1998) 194 CLR 395. As to this ground of the first defendant's counterclaim, the plaintiff responds by submitting that the principle in Garcia does not apply to instruments other than contracts of suretyship which operate to the advantage of the husband or confer a voluntary benefit upon him: Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 [96] and Narain v Euroasia (Pacific) Pty Ltd [2009] VSCA 290; (2009) 26 VR 387 [43] - [45].

10 In addition, the first defendant and the second defendant contend that the Railway Avenue loan, in the context of the then existing high debt level created by the earlier loans, was unconscionable lending and consequently unenforceable: Elkofairi v Permanent Trustee Co Ltd and Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353. This plea of unconscionability is advanced by them in respect of the earlier loans as well.

11 Consideration of the defendants' defences based on alleged unconscionability and associated doctrines requires an examination of the series of loan transactions (five in all) between the plaintiff and the defendants covering the period from 1997 to 2006. It also requires a consideration of the role of several intermediaries with whom the defendants dealt when negotiating and completing the loans and associated mortgages in order to determine whether or not knowledge of the defendants' circumstances and disabilities, alleged to have been known or apparent to those intermediaries, can be attributed to the plaintiff and whether or not any, and if so which, of these intermediaries was an agent of the plaintiff. The position of the plaintiff is that there was no such agency as alleged and that the plaintiff is not to be fixed with any knowledge or information known or apparent to any of those intermediaries except for certain limited written representations by the defendants conveyed in writing by those intermediaries to the plaintiff.

12 The structure of the arrangements between the plaintiff, these intermediaries and the defendants is complicated and for the moment can be left for later explanation.

13 Among the late amendments allowed in the course of the trial (ts 485 on 19 December 2014) were statutory claims for damages and other relief pursuant to s 82 and s 87 of the Competition and Consumer Act (Trade Practices Act 1974). This resulted in the plaintiff seeking leave to reamend its defences to the counterclaims by introducing pleas that the statutory causes of action under the Competition and Consumer Act were each time barred - a limitation of action defence. Attention will be given to that plea later in these reasons.

14 At an early stage of the trial counsel for the first defendant submitted that all questions of damages and/or compensation in equity or otherwise arising on the first defendant's counterclaim should be stood over and adjourned, to be heard later in a separate trial relating to damages or relief if, in the event, it became possible for the first defendant to pursue such claims. The second defendant effectively joined in that same application. I accepted this application and directed that any claim for damages or compensation in equity or otherwise by the defendants, should they arise, be heard at a subsequent hearing on a date to be fixed. This was because the entitlement to any such claim would, to a significant extent, be dependent on the central question of whether or not the mortgage and loan sued upon by the plaintiff were valid and enforceable and whether the other loans and mortgages referred to in the counterclaims were rendered invalid or unenforceable by reason of the pleas of unconscionability and associated claims advanced by the defendants.

15 Furthermore, the statutory claims under the Trade Practices Act (Competition and Consumer Act) had only been raised very recently before trial and the plaintiff had very little and inadequate opportunity to prepare for and address them. Counsel for the plaintiff submitted, and I accepted, that there may well be a need for further discovery or other interlocutory procedures to be taken in relation to these newly introduced claims. Consequently, all issues relating to the quantification of any counterclaims for damages, equitable compensation by the defendants arising from their counterclaims were adjourned over for future consideration if and when necessary.

16 The nature of the defences raised by the first and second defendants and their counterclaims puts into context the second principal, but alternative, claim by the plaintiff, namely its money claim for $266,849.83 plus interest as money had and received and/or money paid at the request of the defendants and/or a claim for restitution for unjust enrichment. The basis for this claim as advanced by the plaintiff is that, even if the loan and mortgage sued upon the plaintiff should be declared unenforceable or invalid, the fact was that the plaintiff had advanced to the use of the defendants the sum of $266,849.83, which had conferred upon them the benefit of purchasing the property the subject of the loan which they sought to retain. The basis of the claim was that even if the loan and/or the mortgage were unenforceable the principles of restitution required that the defendants should repay that money with interest: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449. Because this claim arises only if the loan and mortgage relied upon by the plaintiff is invalid or unenforceable, I shall defer dealing with it until after a determination of that crucial issue.

The plaintiff's claim for possession under its mortgage

17 This claim for possession of the mortgaged property is what I shall call the plaintiff's primary claim. Subject to the defences and counterclaims challenging the validity or enforceability of the mortgage and associated loan, there is very little contest about the basic facts or the default relied upon by the plaintiff. In effect, all the allegations of the plaintiff are effectively admitted by the defendants in their pleadings, save for denials by the second defendant, alone, that a requisite notice of default under the mortgage was ever served upon him, and whether or not the plaintiff was and is a company duly incorporated in Australia. The incorporation was proved at trial by the tender of a certificate of the registration of a company - exhibit E.

18 Mr and Mrs Burns are the registered proprietors of the property known as Unit 15, Sherwood Gardens, 405 Railway Avenue, Armadale, more particularly described as Lot 14 on Strata Plan 49766 and being the whole of the land comprised in Certificate of Title vol 2672 folio 369.

19 They agreed to purchase it 'off the plan' for $259,000 by a contract contained in an offer and acceptance document dated 31 January 2006. Under that agreement a deposit of $13,000 was payable by 13 February 2006 and the balance of the purchase price payable within 21 days of the title being available for issue. The contract was conditional upon Mr and Mrs Burns obtaining finance in the amount of the entire purchase price by 13 February 2006.

20 The defendants waived the benefit of that condition but obtained a preliminary loan approval from Interstar Wholesale Finance Pty Ltd (which had changed its name to Challenger Mortgage Management Pty Ltd on 20 November 2006) ('Challenger') on 17 February 2006 but only for $181,300 and conditional upon construction of the unit and the valuation of the unit as constructed.

21 Next, two applications to borrow the funds required by Mr and Mrs Burns to complete their purchase of the Railway Avenue property were submitted in September 2007. The first, unsuccessful, application was submitted to Challenger by Equity Plus Home Loans (Aust) Pty Ltd, trading as Perpetual Funding Group (PFG). That application was rejected on or before 16 September 2007. The second was submitted to Challenger on 25 September 2007 by Beverley Wilson, a director of Finance & Equity Loans Pty Ltd trading as Mortgages For Money (Mortgages For Money). Ms Beverley Wilson had formerly been on the staff of PFG and had had experience of Mr and Mrs Burns.

22 The acceptance by Challenger of that second application for a loan by the defendants via Mortgages For Money resulted in an agreement in writing between the plaintiff and both the defendants dated on or about 17 October 2007 (the loan agreement referred to in par 4 of the statement of claim). By that agreement:

(a) the plaintiff agreed to provide a credit facility to and at the request of the defendant with a limit of $228,368.54 (facility limit);

(b) the defendants agreed that if they exceeded the facility limit, they must immediately repay the excess (cl 16.10 of the loan terms and conditions booklet dated 20 November 2006);

(c) the defendants agreed that they would be in default if they did not make a payment in time (cl 22.1) and that if they failed to remedy the default the plaintiff could require the payment of all the moneys owing (cl 22.2); and

(d) the defendants acknowledged that a mortgage in respect of the property would secure the loan.

23 Mr and Mrs Burns then executed a mortgage of the Railway Avenue property to the plaintiff dated 18 October 2007.

24 The settlement of the purchase of Railway Avenue occurred on 6 November 2007. The plaintiff paid $225,453.92 to the vendor in satisfaction of the balance of the purchase price for the property and a further $2,904.62 in fees and costs associated with the purchase. Upon settlement Mr and Mrs Burns became registered as the proprietors of that land on 7 November 2007 and their mortgage of the property to the plaintiff was then registered over that land, becoming registered mortgage K190046.

25 The mortgage expressly incorporated the provisions of a Memorandum registered with Landgate (Land Titles Division) as number I965277 ('memorandum').

(a) 'Secured Money' means all amounts payable at any time or contingently owing or payable under a Secured Agreement and Enforcement Expenses;

(b) 'Secured Agreement' means any present or future agreement made between the parties and an agreement to vary such an agreement; and

(c) 'Enforcement Expenses' means all reasonable amounts that the plaintiff reasonably incurs in relation to, among other things, seeking possession of the Property or taking any other action to enforce the Mortgage after an Event of Default (cl 1.1).

(a) the defendants would pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of the Secured Agreement or the Mortgage (cl 2.2);

(b) the defendants must pay all Enforcement Expenses on demand (cl 2.4);

(c) an Event of Default occurs if the defendants do not pay any of the Secured Money on time (cl 7.1);

(d) if an Event of Default occurs and continues for one day or more and the Plaintiff chooses to exercise its rights under the Mortgage, then the Plaintiff will give the defendants a default notice requiring the defendants to remedy the Event of Default within a period of at least 30 days (calculated as provided by Credit Law (cl 7.2); and

(e) if the defendants fail to rectify the Event of Default in compliance with the Default Notice, the plaintiff may exercise all powers vested in mortgagees by law and may enter on and take possession of the mortgaged property (cl 8.1).

28 An event of default under the loan agreement occurred and continued for more than one day. The defendants defaulted in making the repayments under the mortgage in April 2011, and failed to remedy that default within 30 days specified in notices of demand dated 18 April 2011, sent to the defendants by post on 21 April 2011.

29 Clause 10.1 of the memorandum authorises the plaintiff to give notice by sending it by post to the defendants' last recorded residential address or to the mortgaged property. A notice of demand for payment can be signed by any principal of a firm of solicitors retained by the plaintiff (cl 10.4 of the memorandum read with the definition of 'authorised officer' in cl 1.1). The effect of cl 10.5 of the memorandum is that where a notice is sent by post it is deemed to have been given on the date it would have been delivered in the ordinary course of the post. Furthermore, under cl 10.1 of the memorandum a written statement by an employee of the plaintiff or a principal of a firm of solicitors engaged by the plaintiff is sufficient evidence of the amount due under the Railway Avenue mortgage.

30 Mrs Burns admitted in her defence that the default notice was duly served upon her on or about that date but Mr Burns denied this and maintained his denial when giving evidence. Nevertheless, I am satisfied that the default notice was duly posted by a staff member of the plaintiff's solicitors, Mr J R E Sutton, to the second defendant on 21 April 2011 by registered post. Two copies of the default notice were posted, one to the second defendant at 27 Ilma Street, Gosnells, and the second to the second defendant at Unit 15, Sherwood Gardens, 405 Railway Avenue, Armadale. On the same date similar notices were sent to Mrs Burns at both those addresses (see exhibit D and the cross-examination of Mr Sutton). It is clear that those default notices addressed to Mrs Burns reached her and I am satisfied on the balance of probabilities that one of the copies of the notice of default also reached Mr Burns on or about the same date. In reaching this conclusion, I do not doubt the sincerity of Mr Burns' denial of receipt but the evidence satisfies me that his records and memory of events about that time are confused and unreliable. Accordingly, I accept that the notice of default was served as required.

31 That default has continued unremedied. That default notice (TB 1598 and TB 0713) specified that the arrears then due under the mortgage totalled $20,641.66 with the consequence that the total amount outstanding was then $266,849.83, increasing at a rate of 13.46% per annum. That was the position as at 18 April 2011 recorded in this notice dated 21 April 2011. The notice required that the arrears were to be paid by no later than 3 June 2011 but that did not occur. No further payments were made by either of the defendants. I am satisfied, therefore, that continuing default under the mortgage has been established by the plaintiff and that it has not been remedied by the defendants.

32 Accordingly, subject to the yet to be determined assumption that the mortgage and the loan agreement are valid and enforceable, I am satisfied that the defendants are in default and that the plaintiff is entitled under the provisions of the mortgage to the relief which it seeks, namely, an order for the defendants to give vacant possession of the Railway Avenue property. Consequently, it is to the question raised by the defence of unconscionability and consequent ineffectiveness of the mortgage and loan agreements that attention must now turn.

33 Some of the intermediaries who were involved in the applications for, and negotiations over, and the grant and documentation of the several loans and mortgages from the plaintiff to the defendants have been identified in this introduction. It will be necessary to explain in more detail their exact roles and circumstances but for now that may be deferred. The questions of significance which arise in connection with these and other persons or entities are whether they are, as the defendants allege and the plaintiff denies, agents or sub-agents of the plaintiff or otherwise persons or entities whose knowledge of the defendants and their circumstances is to be attributed to the plaintiffs. These intermediaries, using at this point that neutral term, are:

• Interstar Securities (Australia) Pty Ltd (Interstar) which later changed its name to Challenger Mortgage Management Pty Ltd (Challenger), also known as Interstar Wholesale Finance Pty Ltd
• Challenger Non-Conforming Finance Pty Ltd (formerly known as The Mortgage Alternative Pty Ltd)
• Equity Plus Home Loans (Aust) trading as Perpetual Funding Group (PFG)
• The Mortgage Alternative Pty Ltd
• Justin Brown of PFG
• Terry Charles Frankland of PFG
• David Nore of PFG
• Graeme Harlow of PFG
• Ms Beverley Wilson of Mortgages For Money

Mr and Mrs Burns - Their disabilities and levels of comprehension

34 Both Mr and Mrs Burns have significant handicaps which raise questions about their abilities fully or adequately to comprehend the financial transactions into which they entered with the plaintiff and the role of the intermediaries who negotiated the various loans and mortgages. Their respective limitations in this regard become fully obvious after short acquaintance and were clearly discernible when each was giving evidence. I have no doubt that any persons dealing with them, including the representatives of the intermediaries through whose roles the various mortgages and loan agreements with the plaintiff were negotiated, would have been clearly aware of the limitations of the understanding and comprehension of each of the defendants of the transactions into which they entered.

35 The limitations and restrictions of comprehension of the first defendant, Mrs Faith Burns, are even more obvious and apparent than those of her husband, the second defendant. They are even more manifest when knowledge of their respective backgrounds, limited working history and physical disabilities is learned. With every respect to Mr and Mrs Burns, I have no doubt that any person meeting or dealing with them, particularly in any form of business or commercial transaction, would immediately realise that each had significant handicaps and that there must be serious doubt whether or not he or she fully appreciated the nature of the transaction into which he or she was entering or its actual or potential consequences for them.

36 It is not meant to be disparaging to say that in Mrs Burns' case her apparent appreciation of transactions, encounters with others, and the consequences of her transactions is almost childlike in its simplicity and trust. She demonstrates an over-eager readiness to oblige and agree with any interlocutor out of a deep seated, and no doubt longstanding, human desire to represent herself as understanding and agreeing with propositions being put to her in the hope of dispelling a fear that she may be regarded as unable fully to comprehend a matter in hand.

37 Mr Burns is less accommodating in his dialogue with others and is prone to aggressive assertions of knowledge, experience and comprehension in order to demonstrate his supposed competence and ability, again founded by deep seated resentment at often being treated as unable fully to cope. He exaggerates his ability to comprehend matters or fully to appreciate consequences. This was very obvious in the course of his oral evidence but also in the manner in which he 'conducted' his defence and counterclaim and even more remarkably so in the earlier interlocutory proceedings associated with questions which had been raised about his competence to conduct the proceedings on his own behalf without the appointment of a guardian, which would have been necessary had he been classified as a person under a disability: RSC O 70. The details of this earlier procedural controversy are set out later.

38 Mrs Faith Burns was born on 27 February 1949 in Bromley, Kent, in the United Kingdom. At all material times she has been on a disability support pension and was not working.

39 About eight months before she was born, Mrs Burns' father died and her mother never remarried. She was one of three children, having two sisters. At the age of about nine or ten years she had some form of mental breakdown and was committed to the mental care wing of the local hospital. It was a frightening experience in an adult ward. Part of her problem was that she had little speaking ability and those treating her did not know whether she had mental retardation or was deaf. She was released to her mother's care, but her mother struggled in looking after her and her two sisters. For a period of four or five years from the ages of 10 to 14 she was sent to live in a small convent boarding school. She claims that she was bullied almost every day at school and used to retreat to the school library to get away from others. She made one female friend who tried to protect her and she has stayed in touch with this lady over the years.

40 Mrs Burns had difficulties at school. She managed to complete the first year of her upper high school but left without completing her final year in the United Kingdom. On leaving school she obtained a job as a probationary level junior typist and worked there for a while, but she had problems doing her job and it did not last.

41 In 1972 Mrs Burns and her mother migrated to Western Australia. One of her older sisters had migrated to Australia about two years before but the other older sister remained in England.

42 On arrival in Australia Mrs Burns found employment at the Commonwealth Social Security Department in Perth. Her job was terminated after about 18 months. She explains that this was because she could not stop talking and thinking out loud and because she had to shuffle about to try to concentrate. According to her, her employer's representative said that she was interfering with other workers.

43 Mrs Burns admits that she can read and write. She effectively does all the writing for her husband because in her view he cannot really write at all. He tells her what he would like to have written and she then puts that into sentences.

44 Annexure A to her written statement, exhibit F, is a letter from the Public Service inspector of 16 July 1974 noting problems which she had demonstrated in having difficulty in adjusting to personal relationships in the work situation. It included a recommendation that she be counselled about the effect of her behaviour on fellow officers and that she may need professional assistance, particularly in relation to her speech. After a short extension of her probationary period she was terminated within the Commonwealth Public Service and given a medical report for a sickness allowance. After that Mrs Burns worked for a few years in a sheltered workshop. All of her work was under the strict control of supervisors, but she left of her own volition in order to study further.

45 In about 1978 Mrs Burns went to TAFE to complete her secondary schooling and then finished a librarianship diploma. She obtained some shortterm relief work cataloguing but could not find steady employment. Again she reports that people complained that she was 'thinking out aloud', disrupting others and that her co-workers said that it was difficult to work with her.

46 Over the years from 1981 to 1994 Mrs Burns acted as full-time carer for her mother and received a small pension. This lasted until November 1994 when her mother went into a nursing home. She says that although she helped her mother physically and with meals and cleaning and similar activities, her mother directed most decisions in her life and was very possessive and controlling of her.

47 In describing her health, Mrs Burns says that although she can read and write she finds it difficult to relate to people. She talks aloud all the time and cannot stop doing so despite the effect which it has on others. She finds herself getting very tense and nervous when dealing with people. This affects her speech and affects her ability to listen properly and to absorb what she may be told or asked. She says that this problem continues at present and that she finds it difficult to talk with others without her husband's support. She gives a history from a young age of having fits from nervousness every now and again and that this still occurs if she gets unduly nervous.

48 Mrs Burns suffers from a long history of poor eyesight dating back to her early youth. She says that when she was young she wore heavy thick spectacles because of short-sightedness. She no longer wears these but she does tend to squint. During the period 1990 to 1995 she had problems in both eyes, including retinal detachment in her left eye, and received multiple medical treatments. She now has only limited vision in her left eye and very blurred vision in her right eye. As a result, she moves her head around a lot when talking, walking or engaged in activity. She claims that she is effectively blind in the right eye and has only poor eyesight in the left. She attends regularly at the glaucoma clinic at Royal Perth Hospital for periodic check-ups.

49 In addition to these problems, Mrs Burns suffers from a frequent facial twitch, feet problems and dental problems.

50 Mr and Mrs Burns met at a church function in 1993. The church and its society was Mrs Burns' only contact with other people at that time. They were married in November 1994. It was after their marriage that Mrs Burns' mother went into a nursing home and she and her husband then lived in a HomesWest unit at 28/14 Coralie Court, Armadale.

51 Mrs Burns says that her husband has always been and is still quite controlling of her, giving her constant instructions like her mother did. This is consistent with the behaviour of the two during the course of the trial.

52 Mrs Burns' mother died in 1996 and she was left her mother's home at 27 Ilma Street, Gosnells (free of encumbrances) and $76,000. She has produced statements from the Public Trustee relating to the administration of her mother's estate which included a valuation report that the estimated value of her mother's home as at September 1996 was $69,500 and that her share of the distributions from her mother's estate was $28,989.72 plus $16,618.96 ($45,608.60).

53 Mrs Burns' understanding and appreciation of the various real estate transactions into which she and her husband entered from the year 2000 was extremely limited. It is enough at this point to say that she claims, and I accept, that she was very heavily reliant on explanation from her husband to appreciate these various transactions and had only a limited understanding of them even then. She effectively said, and I accept, that she thought her husband knew what he was doing in buying and renting units and that she did not know or think about the extent of the borrowings in October 2007 leaving it all to her husband.

54 From my observations of Mrs Burns when she was giving evidence and from her demeanour, I concluded that she was trying very hard to be cooperative, helpful and to give a truthful account of events as she understood them. It was apparent that she was quite garrulous and had slow mentation. She had an obvious tendency to affect knowledge, pretending to understand and accept what was being put to her when, in reality, her comprehension was poor and limited.

55 She had an obvious tendency to agree with her interlocutor on almost any subject, especially if she did not understand. This appeared to be a tendency to ingratiate herself with whoever was speaking to her in order to avoid any appearance of lack of comprehension. She usually agreed with a proposition when she did not understand it and seized on irrelevancies or details to maintain the semblance of following the conversation.

56 I came to the conclusion that this behaviour was indicative of a long-standing practice of trying desperately to appear to be normal, competent and intelligent, a measure of demonstrating that she could cope, and was an intelligent, competent person. In reality she presented a sad case of inability truly to follow trains of thought or lines of reasoning. She displayed very limited knowledge of the transactions which were the subject of this litigation but, nevertheless, tried very hard to please by asserting agreement with what was put to her. I conclude that it is most improbable that she had a full or adequate comprehension of events and that she relied trustingly on others, especially her husband, and would accept what they put to her out of a desire to please or because she was not able fully to analyse matters for herself.

57 I have no doubt at all that in relation to any business or commercial transaction she is a person who needs independent, competent and impartial advice from a person able to give it upon the subject matter in hand and from a person for whom there are, objectively, sufficient good reasons to trust. Similarly, I conclude that any person dealing with Mrs Burns on any business or commercial matter would appreciate within a very short time that her comprehension and understanding of any commercial or other complicated matters was most limited and inadequate, and that she was in need of competent and impartial advice.

58 Sadly, despite the best of intentions and a protective sympathy which he has had towards her, Mr Burns, is not a person able to provide that impartial, independent or competent advice. However, out of his own misplaced sense of competence and some grandiosity, he was constantly prepared to do so. His role and influence in this regard is also very obvious to an onlooker and would almost certainly have been obvious to any person dealing with him or them both in any business or commercial transaction.

59 Dale Francis Burns, was born on 5 December 1952 in Launceston in Tasmania. Only four days after his birth he was diagnosed as having suffered a brain haemorrhage at birth and then required lengthy hospitalisation as a baby, including at the Royal Children's Hospital in Melbourne. He lost 90% of the vision in his right eye, a shortening of his right leg, and some spasm in the right hand. He suffered behavioural disturbance as a child but says that he has grown out of this.

60 Dale Burns attended kindergarten until the age of six and was then sent to a school for children with emotional and mental disturbance. He is functionally illiterate with writing. He continued at school until the age of 14 years.

61 From about the age of 151/2 until 20 he worked at a textile mill in Launceston cleaning excess yarn off machines. He left this employment in 1973 and was unemployed for some years, later working as a cleaner until about 1982. He then did a number of jobs for short periods until 1991.

62 In 1993 Dale Burns moved to Perth. He did not obtain permanent employment, but did a number of unpaid work trials. He met his wife, the first defendant, then Ms Faith Dixon, at the Uniting Church in Gosnells in August 1993 and they were married in 1994. From 1995 to 1997 Dale Burns worked part-time doing odd jobs at the Gypsy Baron Function Centre. Over those two or three years he earned a total of about $7,000 and at intervals also received unemployment benefits.

63 At all times material to this litigation, he has been in receipt of a disability support pension and has had no employment. All the appearances are that, apart from simple part-time or voluntary jobs, he is unemployable.

64 After their marriage, Mr and Mrs Burns were living in a Department of Housing unit at 28/14 Coralie Court in Armadale, paying $59 a week rent.

65 From about September 1996 Mrs Faith Burns, was receiving Centrelink payments. Before that she had received a special pension and later she received disability benefits. Dale Burns continued to receive unemployment benefits until 1998 when he became entitled to a partner's allowance. The practical difference was that he did not have to present himself for further employment trials in order to maintain eligibility for unemployment benefits.

66 Following Mrs Burns' mother's death in September 1996, the first defendant was left her mother's house at 27 Ilma Street, Gosnells. She says that was worth about $90,000 at that time ($69,500 according to the Public Trustee statement). Mrs Burns also inherited a one-third share of her mother's estate which, according to Mr Burns, amounted to approximately $80,000, although the detailed records of distribution to her from that estate accompanying Mrs Burns' evidence, already mentioned, suggest a somewhat lower figure of $45,608.

67 In August 1997 Mr and Mrs Burns jointly purchased 25 Barellen Court, Armadale for $65,000, including all associated costs. This purchase was financed by a loan of $39,000 from BankWest and the balance (some $26,000) from Mrs Burns' inheritance. Her late mother's house at 27 Ilma Street was then let to tenants and so was the newly purchased Barellen Court. According to Mr Burns, the nett rental income from both Ilma Street and Barellen Court, after all ongoing costs, covered their mortgage payments on the Barellen Court loan.

68 This arrangement continued until January 2000 when both Mr and Mrs Burns moved out of Coralie Court and took up residence in the property at Barellen Court. This meant that they no longer had the rental income from Barellen Court until then paid by their tenants. According to Mr Burns, they were forced to move from Coralie Court because of the attitude of other tenants in units there. According to him, the other tenants abused them, complained about sharing accommodation 'with people with mental problems' and called him a spastic and a cripple.

69 In about January 2005 the defendants discharged the BankWest loan which had been obtained for the purchase of Barellen Court. Another mortgage remained over that property in favour of GE Money for $15,000. At about that time they mortgaged Ilma Street for $60,000 to NAB Homeside. The result was that at this time, January 2005, the two had mortgage liabilities in the aggregate amount of $75,000 (to NAB Homeside and GE Money) secured by mortgages respectively over Barellen Court and Ilma Street. Ilma Street continued to be let to tenants and they were still residing at Barellen Court. Their combined incomes came from the rents from Barellen Court and from Ilma Street and the disability partner support and unemployment pensions from the Department of Social Security.

70 Long before the commencement of this trial doubts arose over the ability of the first defendant to conduct his defence of this claim personally or for him to instruct solicitors to do so. It is unnecessary to relate the history of how these concerns arose but they led to an order which I made on 21 July 2014, on the application of the plaintiff, that Mr Dale Francis Burns should submit himself for medical examination by a nominated psychiatrist who was to be retained to provide an opinion about the ability of Mr Burns to conduct these proceedings on his own behalf or to instruct solicitors.

71 After some vicissitudes Mr Burns submitted to an examination by Dr Peter McCarthy FRACP FRANZ, a consultant forensic psychiatrist who, in turn, reported to the plaintiff's solicitors with his opinion on 25 July 2014. In short, Dr McCarthy was of the opinion that Mr Burns did have the capacity to conduct these proceedings on his own behalf or to retain solicitors to do so and set out his reasons for that conclusion.

72 As a consequence, the trial has proceeded with Mr Burns appearing in person as already mentioned. However, during the course of the trial, and in response to the raising of this question with him, Mr Burns put into evidence an affidavit of Mr J R Shepherd, with annexures, sworn 5 August 2014 dealing with events associated with Dr McCarthy's engagement and his report. There were no objections to this tender by counsel for the plaintiff or for the first defendant and there was no request made for the cross-examination of the deponent or for Dr McCarthy to be called or cross-examined. The evidence was received as relevant to Mr Burns' background disability and comprehension.

73 In his report Dr McCarthy sets out a full extensive history of Mr Burns' background and upbringing as narrated to him. This includes reports that

• Mr Burns attended a special school in Tasmania between the ages of eight and 14 years and he was aged 12 or 13 before he could read.
• He continued to have difficulty with writing but not for intellectual impairment reasons.
• He married for the first time in Tasmania in 1988 when aged 36 years. The couple were together for 18 months and the marriage lasted five years without children but they separated because of his wife's family problems.
• After moving to Western Australia in 1993 he worked as a casual kitchen hand for two years but otherwise has not worked in the State, his last employment being 1997. He attributed that to his poor education.
• He suffered a subdural haematoma in the course of a difficult birth and during infancy suffered from fits, but has not had a fit since 1960 and has not been on anti-convulsant medication since 1972.
• Mr Burns denied being intellectually impaired, claiming that he was excellent at mathematics and reading but that he cannot write.

74 After recounting this history and the details of the examinations which he conducted, Dr McCarthy concluded by expressing the following opinion:

This man is not suffering from any diagnosable psychiatric disorder. He has a history of a subdural haematoma at birth with the result of visual, and to a lesser extent, physical problems, but there is no convincing history of mental retardation or cognitive abnormalities such as frontal lobe impairment. He gives a history of epilepsy but he has not had a fit for 53 years.

I believe this man is psychiatrically and medically able to personally conduct his defence of the claim against him and is capable of instructing solicitors to do so. Irrespective of the wisdom or otherwise of this man representing himself, I believe he is as cognitively capable of doing that as any other defendant may be under the circumstances.

In coming to these conclusions I have psychiatrically determined that Mr Burns:

1. understands the facts relating to the claim against him and those relating to the claim he makes against PTVL;
2. is capable of understanding what facts are relevant to those claims, that that was explained to him;
3. is able to assess the impact of particular evidence;
4. is capable of articulating the basis on which he defends PTVL's claim and makes a claim against PTVL;
5. is capable of understanding the court's processes, and the rulings of the court, if they were to be explained to him;
6. has an[y] insight as to whether his conduct in court has any consequences for the court, the other parties, and himself, including the potential for a delay and resolution of the claims made in the proceedings, the court's resources being devoted to his case to the exclusion of other cases before the court, and PTVL potentially incurring unnecessary legal costs, if those matters were explained to him;
7. understands the role of counsel for PTVL, counsel for Mrs Burns, the witnesses and the judge in any trial of the proceedings, and whether he is capable of respecting those roles;
8. understands what he will be required to do in presenting his case to the court at trial, including calling witnesses (if he wishes to do so), and presenting arguments to the court;
9. understands that he could possibly lose all or part of the case if that is properly explained to him;
10. is capable of assessing any settlement proposal on its merits;
11. is capable of forming a view that a claim is likely to fail, that a person of reasonable intelligence and common sense would form that view upon the available evidence;
12. is capable of enduring the stresses of a trial lasting 4 days or more without detrimental impact to his health.

This man, on his history and presentation, is emotionally stable and cognitively able to understand his situation. He may have traits such as a lack of wisdom or prudence and there may be personality issues such as stubbornness or unreasonableness but I don't think he is psychiatrically or intellectually impaired in attending to his case. There is no evidence of a Personality Disorder or any psychotic process nor is there any evidence of a dementing process. I do not believe there is any reason to believe that he has an organic impairment of his judgment. I have no reason to believe his frontal lobe or any other neurological brain function is significantly impaired.

75 At all times Mr Burns has been absolutely insistent upon his capacity to conduct these proceedings by himself and of the sufficiency of his knowledge and understanding to do so. There is no reason to doubt any of Dr McCarthy's conclusions but, nevertheless, in the course of giving evidence it became apparent that Mr Burns had very great difficulty in reading any written material and attempted to overcome this by devising what he imagined were clever responses to questions which challenged his versions of events. While obviously making every effort to give a comprehensive account of the history of events and being careful and accurate, within his capacity, to answer questions it was obvious that Mr Burns had a degree of confidence in his own knowledge and abilities, particularly commercial matters, which had little in the way of justification from experience or otherwise.

76 Mr Burns tended to take an optimistic view of his abilities as an investor and accepted at face value an article or articles which he had read in the financial press during his time in investing in real estate that property had increased at the rate of 30% per annum, which he expected would continue unabated. His optimism and confidence in relation to investment and commercial transactions was not tempered by any degree of prudence or reserve which one would expect in a reasonable person contemplating major investments or financial outlays. The successes which he and his wife achieved in their initial property investments obviously emboldened him to enter into further investments and on an increasing scale.

77 It was obviously Mr Burns who made the decisions in the family about these matters and that Mrs Burns had little, if any, contribution to the decisions to purchase property, borrow or otherwise invest. Mr Burns exhibited all the signs that he knew best about these matters and seemed to have paid very little regard to the separate interests of his wife or any opinion which she might have. In fact, it is unlikely that Mrs Burns did have any opinion on any of these matters, for I am satisfied that she was, because of her particular circumstances, and her own disabilities, unable to make any real assessment of her own financial interests and accepted blindly and without question what her husband did.

78 There is no doubt, in retrospect, that in relation to the transactions she would have been better served had she received independent, competent, professional or financial advice. Had this been forthcoming, it is likely that there would have developed a difference of opinion between her advisor and her husband's wishes and decisions about investment prospects and that these would have probably led to dissention. That does not mean that she would, in the end, have yielded to her husband's opinions, or that her husband's opinion would have continued unaltered in the face of competent, independent advice coming from the respected source. Having regard to the degree of imprudence involved in the extent of the later borrowings embarked upon by Mr Burns, I consider that it is probable that independent advice would have been so adverse to the wisdom of entering into those transactions that both would have desisted even if after some recriminations.

79 Perhaps of even greater importance, Mr Burns was not a 'private investor' or an 'experienced investor' nor a person conducting a business on his own behalf in the real sense of any of those expressions. He was a person in receipt of a disability pension, of little education, negligible employment experience, unable to read, and with very little capital, independent income or capacity to earn. On any objective assessment his ability, and the combined ability of himself and his wife, to service loans or the borrowings which he undertook depended to a great degree on continuing significant appreciation in capital value of the properties which he was purchasing and on the continuation of rents at commercial rates from each of those properties. Reverses on any of these fronts rendered him and his wife extremely vulnerable to severe economic reverses. Only too obviously, that is what happened with the reduction in property values and reduced rent following the general financial difficulties occurring from 2008 onwards.

80 This narrative so far has identified the property at Railway Avenue which was purchased in 2007 and which is the subject of the plaintiff's claim for possession. It has also identified the acquisition by Mrs Burns of her late mother's property at Ilma Street by inheritance following the mother's death in 1996 and the acquisition by both defendants of the unit at Barellen Court in 1997.

81 There was a further acquisition in June of 2006 when Mr Dale Burns purchased Unit 5, 12 Holland Street, Gosnells for $330,000.

82 At the same time as the purchase by Mr Burns of Unit 5, Holland Street, there was a similar contract to purchase Unit 3, Holland Street in the name of Mrs Faith Burns. These two contracts to purchase properties at Holland Street explain why one was purchased in the name of Mr Burns and the other in the name of his wife. As events proceeded, however, finance could not be obtained for the purchase of Unit 3 by Mrs Burns and that did not proceed.

83 Therefore, rearranging the above purchases in chronological order they are:

1. acquisition of 27 Ilma Street, Gosnells by Mrs Faith Burns by inheritance from her mother in 1996
2. joint purchase of 25 Barellen Court, Armadale, in 1997
3. purchase by both defendants of Unit 15, Sherwood Gardens, 405 Railway Avenue, Armadale, on 24 January 2006
4. on 20 June 2006 Mr Dale Burns alone agreed to purchase Unit 5, 12 Holland Street, Gosnells, for $330,000
5. on 6 June 2006 Faith Burns agrees to purchase Unit 3, 12 Holland Street, Gosnells, for $330,000 (however this transaction never proceeded as it was subject to finance which could not be raised because of her inability to service the projected loan).

84 When Mr and Mrs Burns first decided to buy property, Barellan Court, they did so with the use of borrowed funds for which both Barellan Court and Mrs Burns' inherited property at Ilma Street were put up as security. Those funds were secured by mortgage in favour of Bankwest registered over Ilma Street in August 1997. There were three subsequent loan contracts between Mrs Burns and Bankwest for $6,000, $6,500 and $6,000 respectively. Then in June 2004 Mr and Mrs Burns were granted a mortgage to Bankwest for $60,000. That mortgage was discharged in February 2005 and replaced by a mortgage over Ilma Street in favour of the National Australia Bank for $60,000 in respect of a loan of that amount to both Mr and Mrs Burns.

85 The next major property transaction was the purchase of 15/405 Railway Avenue, Armadale. This was to be supported by:

(a) two loans totalling $150,500 to be secured over Ilma Street; and

(b) two loans totalling $129,500 to be secured over Barellan Court.

86 All those applications were made by the Burns through Perpetual Finance Group (PFG) and supported by, among other things, an 'Easydoc declaration of financial position' arranged by Mr Frankland of PFG.

87 In February of 2006 Interstar/Challenger gave preliminary approval for a loan of $129,500 in respect of Barellan Court and additional preliminary approval for a loan of $181,300 in respect of Railway Avenue. As the next step in this transaction Mr and Mrs Burns signed a loan agreement with the plaintiff on 23 February 2006 for:

(a) a loan of $60,000 (first Ilma Street facility); and

(b) a loan of $90,500 (second Ilma Street facility)

(in aggregate $150,500 which they sought in January 2006 to be secured over Ilma Street.

88 That then resulted in a mortgage in favour of the plaintiff being registered over Ilma Street on 23 February 2006.

89 The second half of this transaction involved Mr and Mrs Burns entering into a loan agreement with the plaintiff on 24 April 2006 for:

(a) a loan of $109,500 (first Barellan Court facility); and

(b) a loan of $20,000 (second Barellan Court facility)

both of which were to be secured over Barellan Court. Both the loan applications of 23 February 2006 and 24 April 2006 for the loans to be secured over Ilma Street and Barellan Court were arranged and witnessed by Mr Frankland.

90 This resulted in the mortgage from the defendants in favour of the plaintiff being registered over Barellan Court on 26 April 2006. Those two loans and that mortgage for the aggregate amount of $129,500 were the product of the second of the loan applications made by Mr and Mrs Burns in January 2006 to be secured over Barellan Court.

91 The next series of purchases and transactions occurred in June of 2006. Mrs Burns entered into a contract of sale for the purchase of Unit 3/12 Holland Street, Gosnells, for $330,000 dated 19 June 2006. On the same date Mr Burns entered into a contract of sale for the purchase of Unit 5/12 Holland Street, Gosnells, for $330,000. Each was subject to finance.

92 In late June or early July 2006 Mr and Mrs Burns each applied through PFG for loans to provide the finance needed for their separate purchases of the two units at Holland Street. In mid-July Interstar/Challenger gave preliminary approval for a loan of $231,000 each in respect of the Holland Street units conditional upon completion of construction and a valuation on completion of construction. However, PFG advised them that it was not prepared to act for them to apply for further or additional finance for those transactions.

93 On completion of the units at Holland Street both Mr and Mrs Burns signed applications for finance for $227,500 to be secured over the Holland Street units through PFG and gave an Easydoc declaration of their financial positions. That application of 26 March 2007 was only in respect of Unit 5, Holland Street.

94 Then on 27 April 2007 both Mr and Mrs Burns entered into a loan agreement with the plaintiff for a loan of $228,368.54 to be secured over Unit 5, Holland Street. The next day they signed a letter to PFG advising that they could not raise funds to purchase the other unit, Unit 3, 12 Holland Street, Gosnells.

95 Then in late April 2007 they each signed loan applications, via PFG, for three loans totalling $203,000 to be secured over Ilma Street and a further two loans totalling $182,000 to be secured over Barellan Court. Over the next few days they were advised by PFG that:

(a) a loan of $227,500 was approved for Holland Street;

(b) Challenger gave preliminary approval for loans of $203,200.44 in respect of Ilma Street.

96 That was quickly followed by a loan agreement between the plaintiff and the defendants dated 7 May 2007 for the plaintiff to:

(a) lend the defendants $60,000 in substitution for the first Ilma Street facility;

(b) lend the defendants $90,500 in substitution for the second Ilma Street facility; and

(c) lend the defendants a further $52,700.44 (the third Ilma Street loan facility)

97 Next, on 8 May 2007, Challenger gave preliminary approval for loans of $182,200.44 in respect of Barellan Court and this led to a loan agreement between the plaintiff and both defendants dated 9 May 2007 for:

(d) a loan of $109,500 in substitution for the first Barellan Court facility;

(e) a loan of $20,000 in substitution for the second Barellan Court facility;

(f) a further loan of $52,700.44 (the third Barellan Court loan facility)

98 Drawdowns under those loans then occurred in May of 2007.

99 The next transaction was the Railway Avenue purchase. On behalf of the plaintiffs, PFG submitted loan applications in respect of Railway Avenue on or about 10 September 2007. The mortgage insurer asked PFG for details of the Burns' employment and were informed by PFG that Mr and Mrs Burns are 'property investors'. This application was made through PFG to Challenger but the loan application was declined in mid-September 2007.

100 Undeterred, Mr and Mrs Burns then applied to another lending representative, 'Mortgages For Money', to whom they had been referred by PFG. It was operated and staffed by former personnel from PFG. Then, via Mortgages For Money, Mr and Mrs Burns applied to Challenger for three loans totalling $227,500 to be secured over 15/405 Railway Avenue, Armadale.

101 This was done again by an Easydoc declaration of financial position via Mortgages For Money to Challenger. On 26 September 2007 Challenger gave preliminary approval for loans totalling $228,368.54 in respect of Railway Avenue, and on 17 October 2007 the defendants signed a loan agreement with the plaintiff for a loan of $228,368.54 to be secured over Railway Avenue. This is the Railway Avenue loan agreement which, together with the subsequent mortgage, is relied upon by the plaintiff in support of its present claim.

102 In October of 2007 Mr and Mrs Burns drew on the first Ilma Street facility, completed the purchase of Railway Avenue with loan funds supplied by the plaintiff, became registered as co-proprietors of Railway Avenue, and registered a mortgage over that property in favour of the plaintiff.

103 In December 2007 both defendants defaulted in payment under the Holland Street loan - their first default. Various proposals and transfers of funds were pursued in an attempt to deal with the difficulties which had by then emerged and in January 2008 they agree to sell Barellan Court. That sale settled on 28 February 2008, resulting in the discharge of the mortgage over Barellan Court. The Barellan Court loan facilities were repaid and nett proceeds of some $58,446.44 paid to the defendants.

104 In January 2009 the defendants make their first default in the payment of moneys due under the Railway Avenue loan and mortgage and were contacted by the plaintiff. Mr Burns explained that he had no funds to make any further payments but was taking steps to sell Ilma Street.

105 On 17 March 2009 Mr and Mrs Burns entered into a contract of sale to sell Ilma Street for $270,000. That transaction settled on 12 June 2009, with the result that:

(b) the mortgage in favour of the plaintiff over Ilma Street was discharged; and

(c) Mr and Mrs Burns received nett proceeds of $45,083.09.

106 Then in early 2010 Mr Burns sold Holland Street and received, at settlement on 1 February 2010, funds to discharge the mortgage over Holland Street, following the repayment of the Holland Street loans, and nett proceeds of $72,151.74.

107 Then in April 2011 both defendants defaulted again in making payments under the Railway Avenue loan. This resulted in the default notices issued by the plaintiff relied upon in this action. The default has continued unremedied and no further payments have been made to the plaintiff.

108 While the amounts of the mortgages and the sources of the security varied from transaction to transaction, a common element was that the payments of interest and other moneys due under the mortgages were to be met by rents obtained by the Burns from the letting of the properties and/or by further loans or refinanced loans resulting from anticipated, and in some cases actual, increases in the capital values of the properties already mortgaged.

109 All that came to a halt in or about December 2007 due to a combination of the impact of the so-called global financial crisis (GFC) which in turn led to a fall in value of the properties and real estate in general; an increase in the interest rate charged by the plaintiff on the various loans; difficulties in letting the properties purchased, some of which became vacant and deprived the defendants of the income relied upon to meet the payments due under the mortgages. They had no other significant source of income to rely upon to meet those obligations save for the modest amounts of the pensions which they received and which, from all the appearances, were only sufficient for their own small needs and sustenance.

110 All but one of the loan applications, the consequent loan agreements and mortgages were entered into by the plaintiffs as a result of their dealings with Mr Frankland and PFG (Perpetual Finance Group) and were approved by Interstar/Challenger in its role as trustee/originator for the plaintiff under the arrangements which are yet to be explained. The single exception is the last financial facility, namely, the loan agreement and mortgage in respect of Railway Avenue which initially had been sought via PFG, which then advised that Challenger had declined that loan. However, a substitute application made to Challenger via Mortgages For Money was approved and a loan and mortgage from the plaintiff for that facility as desired was subsequently arranged and implemented.

111 In relation to each of these transactions, Mr Frankland at Perpetual Finance Group (PFG) had dealt with the Burns personally and was aware of their circumstances. He knew that neither was employed, that each was a pensioner, and that each had disabilities. He realised that Mr Burns was determined to show his prowess by successful investment in the property market but he knew that apart from Ilma Street and the properties which had been purchased on the loans arranged the Burns had no or no significant other assets. Expressly, he knew that neither Mr nor Mrs Burns conducted any business and did not have an Australian Business Number (ABN) and that they were not persons for whom the Easydoc system of a loan application was designed.

112 Mrs Wilson at Mortgages For Money had previously been at Perpetual Finance Group (PFG) and had some knowledge or familiarity with the Burns from that office but less experience of them than Mr Frankland. Nevertheless, she was aware that neither had any business of his or her own, did not have an ABN, and that both were in receipt of pensions and were seeking to repay the moneys due under the various mortgages from rent coming from the properties which had been acquired and/or by further loans based on an assumed progressive capital appreciation in the values of the underlying properties.

113 Mr Frankland of PFG first dealt with the Burns in early 2006. His evidence is that at this meeting it was Mr Burns who did all the talking with him. He said that Mr and Mrs Burns spoke loudly to each other because Mr Burns had to explain things to his wife. To the observation of Frankland, Mrs Burns seemed to be nervous and unsettled and occasionally would say something to her husband like, 'I don't understand what you're saying'. At this first meeting their income was not discussed in any detail but one of the Burns did disclose to Mr Frankland that they were in receipt of a pension and that Mrs Burns had an inheritance. Mr Frankland did not press these matters because he believed that in the case of Easydoc loans there was no income requirement to qualify and he never sought any income details from the defendants.

114 Mr Frankland reported to his superior at PFG, Mr Justin Brown, and said that he had doubts as to whether any loan funds should be provided to the Burns and he recalls that Brown seemed to agree with him.

115 The Burns frequently contacted Mr Frankland thereafter, usually on a weekly basis. Mr Frankland regarded it as his role not to give any financial advice and not to seek any information or details of the incomes of the Burns because the facility under discussion was an 'Easydoc' or an 'asset lend' loan which meant that if the borrowers had sufficient equity in the properties being offered their income was not required to be disclosed.

116 Specifically, Frankland was aware that the Burns did not have any business of their own and were not and had not in prior years been fulltime investors.

117 In his oral evidence Mr Frankland explained that he never arranged any loans for a property except from the plaintiff. He was aware that his employer, PFG, received financial incentives in the way of advertising funds and administration costs from the lender or its representative. He regarded Mr Burns as a person with a disability who was anxious to prove himself. When crossexamined by counsel for Mrs Burns, Mr Frankland observed that in the course of the meeting which he had with Mr and Mrs Burns in relation to the first transaction in which a loan was to be raised on the security, among others, of Ilma Street, that it was Mr Burns who was calling the shots and that he was a very dominant character. Despite Mr Frankland's own suspicions about the wisdom of the transaction, the application was pursued because he was trying to help the Burns as it was obvious that they had social difficulties. Mr Frankland also said that the interest rates payable under an 'Easydoc loan' were several percentage points higher than for a 'FullDoc loan'.

118 In their final written submissions the parties have put forward what each refers to as an 'aide-memoire' which amounts to a tabulation of the aggregate amounts borrowed by the defendants from time to time over the period when the various mortgages were current, showing the interest rates and the monthly interest rates and the amount owing on the various loans. The information contained in these tabulations comes substantially, but not entirely, from the mortgage documents, the loan applications and statements which are in evidence except for the gross rentals available from the various properties at different dates. Consequently, the plaintiff objects to reliance on these tabulations, at least insofar as they seek to include details of rental income or potential rental income. This objection is on the basis that in some instances there was no direct evidence of the rental to be expected from the properties and, in other instances, that where evidence to this effect was sourced from Mr Dale Burns, his evidence was unreliable in the absence of documentary confirmation or bank accounts which have not been produced or discovered. To the latter extent, I consider that the objection is well founded but they are, nevertheless, estimates of the rent likely to be derived from the several properties in valuations which were prepared in relation to loans on properties where there is a condition that the market value of the property on completion of construction should be provided before unconditional approval for the loan was given.

119 For that reason, therefore, I consider that I can accept the tabulation put forward by Mr Burns (reproduced below) which shows the total amount borrowed at various stages of this course of conduct, the interest rates payable on the loans and the total monthly interest payments and how this was broken down by the several composite loans over, respectively, Ilma Street, Barellan Court and Railway Avenue. The tabulation also includes the gross maximum rent income capacity at various times and it is in relation to these figures that I have reservations and do not accept them as anything more than a guide or approximation.

120 As the purpose of the tabulation, in this latter respect, is to show a significant disproportion between the aggregate monthly interest and the likely income for the Burns from rents to be derived by the properties, I am satisfied that in that respect there was significant disproportion (but not in quantitative amounts) which emerged from the evidence as a whole, not least from the evidence that the continued borrowings and their servicing required subsequent loans in higher amounts on the same properties as those appreciated in value during the salad days for investors before the GFC.

121 Furthermore, the exact or quantitative comparison of the revenue likely to be available from rentals with the aggregate of interest instalments payable under the mortgages was never a factor addressed or examined by Mr Frankland, Ms Wilson from Mortgages For Money or by any of the other intermediaries when considering or approving the loans and mortgages ultimately entered into by the plaintiff. Their rationale, and sole consideration, was whether or not sufficient value existed in the asset being put up for security to justify a loan regardless of repayment abilities of the borrowers. That approach was, in their view, justified by the overall criteria for 'Easydoc loans' in that they were intended for borrowers who were in business, who were not pensioners, and did not, therefore, need to state or otherwise disclose their income or repayment capacities. That tacit assumption, combined with the known false approach that the Burns were within the category or class of persons for whom Easydoc loans were designed was never questioned despite the strong implications to the contrary emerging from the Burns' circumstances and appearances as known to Frankland and Wilson.

122 This tabulation is set out in full in the appendix to these reasons, but for the present I only reproduce those parts dealing with the total amount borrowed, the interest rate, the monthly interest, and the estimated gross maximum rent capacity.

123 Essentially, the complaints of the defendants are that, in the case of the first defendant, she did not understand the purpose or effect of the six loans and related mortgages and, being the wife of the defendant, reposed trust and confidence in him and acted at his direction in entering into all the loans and related mortgages. Her case is that it was or should have been obvious to the plaintiff's intermediaries who dealt with her that she lacked this understanding and did not have sufficient capacity to understand the risks and consequences involved by entering into the loans and the jeopardy in which they placed her for the potential loss of her inherited property at Ilma Street. She claimed that it was her belief that the loans would be repaid out of rental income earned from the properties purchased and that only those properties could be sold if the loan repayments were not met. She asserts, and it is the fact, that she did not receive any independent advice prior to entering into any of the loans and related mortgages and, further, that the plaintiff did not take any steps to ensure that she had independent advice and dealt, effectively, only with Mr Burns.

124 Mrs Burns also pleads that had the purpose and effect of the loans and mortgages, including in particular the loans over the Railway Avenue property, been explained to her and had she been advised or informed that:

(a) the combined income of herself and her husband was insufficient to meet the loan and mortgage repayments, in particular the repayments in respect of the Railway Avenue property;

(b) the pension income which both defendants were receiving, together with anticipated rental income from the purchased properties would not be sufficient to meet the mortgage repayments;

(c) if the monthly repayments of the loans were not met and the properties were then sold at prices insufficient to discharge the amounts outstanding on the loans then her late mother's home and the premises in which they were living at Barellan Court would have to be sold, leaving her with no home;

(d) her property at Ilma Street and her share in Barellan Court were at risk and if they were sold she would become entirely dependent on the State for accommodation;

(e) the risk involved and the improvidence of the loans, in particular the loans in respect of Railway Avenue, was great and unacceptable for a person in her position

she would have not entered into any of the loans. This was the substance of her evidence and I accept that.

125 Mr Burns effectively supports these claims and contentions by his wife both in her own defence and counterclaim and for his own. In addition, he pleads that the various loans, and in particular the loan in respect of Railway Avenue, were unconscionable and that the loan agreements and the associated mortgages should be set aside. He pleads that assurances were given to him on behalf of the plaintiff that the interest rates to be charged on the loans would follow any variations in the prescribed rates of interest recommended by the Reserve Bank of Australia and that should further funds be required to service the loans further loans would be advanced against the defendants' increased equity in the properties arising from appreciation in their values.

126 Mr Burns further pleads that the plaintiff, through the intermediaries, misrepresented to him that the value of the loans obtained from time to time could be increased as the value of the properties increased and that the value of the properties would increase faster than the interest would accumulate. Accordingly, he pleads that such representations without clearly disclosing the inherent risks were, in the case of disabled welfare recipients such as himself and his wife, a course of unconscionable conduct.

127 He further pleads, and it is accepted by the plaintiff, that his application for the final loan in respect of Railway Avenue was submitted to him with most of the details blank and that he and his wife were asked to sign it in that state, as they did, and that the content of the application, including their status as 'investors', was completed by a person on behalf of the plaintiff, either Beverley Wilson or some person at Challenger. This leads him to advance the plea of non est factum both for himself and for his wife in relation to that loan and mortgage.

128 In his counterclaim Mr Burns pleads that the plaintiff was or ought to have been aware that:

• he (Dale Burns) had behavioural disturbances that impacted on his ability to understand the provisions of financial documentation;
• he had visual problems;
• at all particular times he and his wife were in receipt of a disability support pension from Centrelink. This leads him to plead that in entering into the loan agreement and mortgage in respect of Railway Avenue the plaintiff acted unconscionably because neither he nor the first defendant had any realistic prospect of making the required payments under the loans;
• in entering into that loan agreement and mortgage the plaintiff was negligent in not informing him of the risks should there be a market reversal and/or entering into the loan agreement despite his own credit position;
• in entering into the loan agreement the plaintiff was responsible for fraud because the application form had been altered by the inclusion of certain information and the failure to include other relevant information after Dale Burns had signed the partially completed form. (This was advanced as a claim of non est factum on his behalf and the allegation of fraud, whilst never abandoned, was not pressed or pursued. Actual fraud finds no support in the evidence).

129 Dale Burns also pleads that the plaintiff had a duty of care to him which it breached by acting in a harsh and unreasonable manner after default. Again, this allegation was never formally abandoned but was not pursued and has no support in the evidence.

130 Dale Burns also pleads that the plaintiff by its agent, Mr Frankland, engaged in misleading and deceptive conduct in relation to him by misrepresenting that:

(a) Dale Burns' asset position in relation to the properties purchased and the first defendant, funded by way of loans from the plaintiff, would be sufficient to meet any requirement to repay loans without recourse to the property; and

(b) together with his wife, he was able to afford to purchase the properties for investment purposes despite being in receipt of no other income apart from rental income from the previous property purchased and the disability support pension.

131 There are other pleas by Mr Burns in his defence and counterclaim, including an allegation that the contract was unenforceable because pages of the facsimile loan application were not supplied to him, but this is already included in the plea of non est factum and was not otherwise pursued.

132 In addition, and as part of each of these pleas, Mr Burns contends that it would be unconscionable for the plaintiff to be permitted to enforce the security for all of the loan outstanding in respect of Railway Avenue.

133 He then alludes to his counterclaim for damages for misleading or deceptive conduct or other unspecified causes of action (which appear to include a claim for damages for negligence and unconscionable conduct) by pleading that if he is to be found liable to the plaintiff under the mortgage or the loan to any extent, or if he is liable to pay restitution as a condition of equitable relief to discharge or set aside the mortgages and loan, then so much of his counterclaim for damages as he may recover should be set off against any such liability to the plaintiff.

134 As already mentioned, the problems which Mr Burns repeatedly experienced in his role as a litigant in person meant that he was never able to particularise or quantify his counterclaim for damages or compensation and that discovery and disclosure in relation to that aspect of his case was never made.

135 Nevertheless, counsel for the plaintiff submitted that claims for damages and/or relief pursuant to s 82 and s 87 of the Trade Practices Act (Consumer and Competition Act 2010 (Cth)) did not arise on these pleadings, and should not be permitted but, if they did, that he should be granted leave to plead limitation defences to those statutory causes of action as propounded in a minute to that effect which was then filed. Again, as mentioned, I ruled that I would determine the question of whether or not these pleas by the first defendant were open on the pleadings as they stood and, if so, whether the limitation defences should be permitted and, if so, to what effect. I shall address those issues later.

Applications by the Burns for loans and mortgages

136 Mr Graeme Wort, now of Advantage Financial Services, formerly of Challenger, was the officer in charge of managing the loans, accreditation process and other business of Advantage/Challenger as manager of trust assets for the plaintiff and servicing for loans and mortgages for the plaintiff, including those between the plaintiff and the defendants. Mr Wort confirmed and identified the following loan applications made by the plaintiff:

(a) a loan application and associated documents dated 24 January 2006 for a loan to Mr and Mrs Burns to be secured by a mortgage over 27 Ilma Street, Gosnells;

(b) a loan application and associated documents dated 24 January 2006 in relation to a loan to Mr and Mrs Burns to be secured by a registered mortgage over 25 Barellan Court, Armadale

(c) a loan application and associated documents dated 29 April 2007 in relation to a loan to Mr and Mrs Burns to be secured by a mortgage over 27 Ilma Street, Gosnells;

(d) a loan application and associated documents dated 26 March 2007 in relation to a loan to Mr and Mrs Burns to be secured by a registered mortgage over Unit 5/12 Holland Street, Gosnells;

(e) a loan application and associated documents dated 29 April 2007 in relation to a loan to Mr and Mrs Burns to be secured by a mortgage over 25 Barellan Court, Armadale.

(f) loan application between the plaintiff and Mr and Mrs Burns with the supporting documents dated 16 September 2007 for the Railway Avenue property.

Amounts alleged by the plaintiff to be outstanding under the Railway Avenue loan/mortgage

137 As already observed, the amount specified as then outstanding by the defendants to the plaintiff in the default notices issued in April 2011 is the sum of $266,849.83 increasing at a rate of 13.46% per annum. In the loan statement in evidence at the trial (TB 55) the sum claimed to be outstanding as at 31 July 2013 had grown to $470,674.

138 The main components in the increase were instalments of interest charged at varying rates, namely 13.46% from 28 September 2011; 13.26% from 14 November 2011; 13.01% from 23 December 2011; 13.11% from 24 February 2012; 12.79% from 18 May 2012; 12.58% from 22 June 2012; 12.38% effective from 19 October 2012; 12.38% effective from 1 December 2012; 12.18% effective from 14 December 2012; and 11.93% effective from 17 May 2013 until 31 July 2013. Clearly, interest at unknown rates has continued to accrue since then. In addition to charges of interest, that loan statement shows that legal fees have repeatedly been charged to the account as from 11 May 2011 to 23 July 2013, together with valuation fees (in modest amounts) on 7 May 2012.

139 Mr Burns contends that if the mortgage and/or loan agreement is set aside because of the alleged unconscionable conduct or on other equitable grounds, or under his statutory causes of action, but he and/or Mrs Burns are required as a condition of relief to make restitution or to repay the principal or any other part of the mortgage debt otherwise outstanding, the amount claimed by the plaintiff should be recalculated and reduced to exclude the interest charged or to recalculate interest at a lower and more equitable rate and that the legal fees claimed should be excluded or subject to review and moderation. I shall return to both those claims later when dealing with the plaintiff's claims both for principal and for alternative relief in the way of restitution.

The role of intermediaries - agents or representatives of the plaintiff

140 The question of whether any of the intermediaries with whom Mr and Mrs Burns dealt, or by whom their applications for financial accommodation were considered and processed, was an agent of the plaintiff or otherwise a person or entity whose knowledge of their circumstances should be attributed to the plaintiff is obviously a major controversy in this litigation. Its resolution requires an examination of a series of complicated agreements and appointments by the plaintiff and others of one or more of the intermediaries to specify the roles and the extent of the actual or apparent authority which those persons or entities possessed to act, bind or represent the plaintiff.

141 This reference to the extent of apparent authority (or ostensible authority) of the various intermediaries is used in the sense described in W Bowstead, Bowstead & Reynolds on Agency (20th ed, 2014) at pars 2100 and 8-010, and includes what previously was sometimes referred to as agency by estoppel. This aspect of the doctrine is also discussed by Professor G E Dal Pont, Law of Agency (3rd ed, 2014) 20-1 - 20-34.

142 It is necessary to bear in mind that the concept of apparent authority, as so defined, extends to the question of whether a person purporting to act on behalf of the principal, without any authority to do so, can because of a variety of considerations, including holding out, be treated nevertheless as an agent of that principal whose actions or representations bind that principal. Another, perhaps more common, example of the application of the doctrine of apparent authority is where an agent of the principal does have authority to enter into certain transactions or to make certain representations but not others and that agent nevertheless acts in excess of actual authority in his or her dealings with the plaintiff, in which case the question is whether or not the agent's agreements, representations or actions performed in excess of his or her actual authority nevertheless bind or can be attributed to the principal. This present controversy about the role and action of the intermediaries as representing or binding the plaintiff raises both aspects of the doctrine.

143 For an account of the nature and requirements for a relationship of agency to exist, and for the variety of ways in which knowledge or representation of an alleged agent may be attributed to the principal I have relied on the extensive analysis of these topics contained in The Bell Group Ltd (In Liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1 [6102] - [6173] and [6186] - [6203] (Owen J).

144 The question of the existence or otherwise of a relationship of agency in like circumstances was also considered extensively by Murphy JA in Permanent Mortgages Pty Ltd v Vandenbergh especially at [284] - [331]. From his Honour's reasons it is apparent that the question of agency and/or attribution of knowledge by an alleged agent or an alleged principal will depend upon many factors and a consideration of the entire transaction and history of dealings as a whole rather than any one determinative fact or test: see Vandenbergh [280] and Permanent Trustee Co Ltd v O'Donnell [2009] NSWSC 902 [342] (a case where the finance broker was held to be the financier's agent). His Honour also observed that provisions in contractual arrangements between the alleged principals and the alleged agent purporting to deny the existence of any relationship of agency will be given due consideration but are not necessarily determinative. At [315] Murphy JA also considered the general principle that prima facie a finance broker is the agent of the borrower rather than the lender: Custom Credit Corporation Ltd v Lynch [1993] VicRp 86; [1993] 2 VR 469, 486 and other authorities there cited, and that this general position is not altered by the fact that the broker may receive commission from the lender. However, Murphy JA considered in Vandenbergh that it would be unsafe to have resort to that prima facie presumption in the particular circumstances of that case and that the precise arrangements adopted by the parties need to be evaluated: Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [26] - [28] and Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226, 234 - 235.

145 The following account of the documents and other instruments bearing on the relationship between the plaintiff and various intermediaries and the defendants is taken largely from submissions from the plaintiff which are not in controversy. The observations and conclusions which I make about those various agreements or instruments and their significance are, however, my findings in the action.

146 Although there can be no doubt that the relationship between the plaintiff and the defendants under the mortgages and the loan agreement are contractual, and also the relationship of mortgagors and mortgagee under registered mortgages by which direct privity exists between the plaintiff and the defendants, the scheme of relationships set up by the plaintiff involves the operation of a master trust in which most of the assessment and discretionary decisions about the acceptance of a loan application and the grant of a mortgage is conducted, not by the plaintiff, but by its trust manager or servicer which in turn receives loan applications from originators, whose roles are carefully and restrictively defined in the instruments between those parties.

147 The use of these terms, 'trust manager', 'servicer' and 'originators', leads the plaintiff and those intermediaries into the use of a special vocabulary to describe their relationships and it is a vocabulary which does not match or coincide with the traditional roles of principal, agent or independent contractor, although those terms are referred to in the documents. Whatever may be the vocabulary utilised by the plaintiff and its intermediaries, the question of law remains whether the relationship of agency has arisen between the plaintiff and the defendants either because of, or in spite of, the terms used in the contracts between the plaintiff and its intermediaries or the trust manager and servicer and the originators.

148 It is the case that none of those documents between the plaintiff and the trust manager and servicer or the trust manager and servicer and the originators or the plaintiff was ever disclosed, or available to, the defendants. So far as Mr and Mrs Burns were concerned, they were dealing with a business trading under the name Perpetual Finance Group (PFG) through whom they made several applications for finance to the plaintiff and, on the last occasion, through Mortgages For Money, through whom they also made application for financial accommodation from the plaintiff. The latter firm was one which was staffed by personnel from, and which appeared to be a spin-off from, Perpetual Finance Group (PFG).

149 In every case in which they had these dealings, the loan agreements and the mortgages which resulted were between the defendants and the plaintiff. The Burns' evidence was, and I accept it to be the case, that when dealing with Perpetual Finance Group and then with Mortgages For Money they believed that they were dealing with the plaintiff or its agents and they were never expressly disabused of that although, as will be seen, some of the documents contained terms or provisions to the effect that Perpetual Finance Group and Mortgages For Money were not the plaintiff or agents or representatives of the plaintiff. The effect of these provisions purporting to exclude agency relationships or to deny them will be considered later.

150 The following documents set out the business arrangements between the various entities, including the plaintiff and the alleged intermediaries, at the times of the various loans:

(a) a deed made 2 December 1999 between the plaintiff as trustee and Interstar Securities (Australia) Pty Ltd (Interstar) (which subsequently changed its name to Challenger Mortgage Management Pty Ltd) (Challenger) as the Trust Manager (Master Trust Deed) (TB-001));

(b) an Investment Management Agreement made between the plaintiff and Challenger (then known as Interstar) in its capacity as Trust Manager and Servicer dated 18 May 2001 (the Investment Management Agreement (TB-002));

(c) a Series Notice issued by Challenger (then known as Interstar) to the plaintiff on 11 December 2002 in relation to the Interstar Millennium Warehouse B Trust (the Warehouse B Trust Series Notice (TB-297));

(d) a Series Notice issued by Challenger (then known as Interstar) to the plaintiff on 11 December 2002 in relation to the Interstar Millennium Warehouse N trust (the Warehouse N Trust Series Notice (TB298));

(e) a loan origination and management agreement (LOMA) made between Challenger (then known as Interstar), Challenger Non-Conforming Finance Pty Ltd (then known as the Mortgage Alternative Pty Ltd) and Equity Plus Home Loans (Aust) trading as Perpetual Funding Group (PFG) dated 17 August 2004 (the first PFG LOMA (TB-299));

(f) a LOMA made between Challenger (then known as Interstar Wholesale Finance Pty Ltd), Challenger Non-Conforming Finance Pty Ltd (then known as Interstar Non-Conforming Finance Pty Ltd and Finance & Equity Loans Pty Ltd trading as Mortgages For Money dated 21 September 2006 (the Mortgages For Money LOMA (TB-006));

(g) a LOMA made between Challenger, Challenger Non-Conforming Finance Pty Ltd and PFG dated 27 April 2007 (the Second PFG LOMA (TB-010)); and

(h) 3 Lending Manuals issued by Challenger over the period February 2006 to September 2007.

151 Interstar Securities (Australia) Pty Ltd changed its name to Interstar Wholesale Finance Pty Ltd on 10 November 2004, and then later to Challenger Mortgage Management Pty Ltd on 20 November 2006.

152 The Mortgage Alternative Pty Ltd changed its name to Interstar NonConforming Finance Pty Ltd on 10 November 2004 and then, later, to Challenger Non-Conforming Finance Pty Ltd on 20 November 2006.

153 This deed made 2 December 1999 between the plaintiff as trustee and Challenger (then known as Interstar) as the Trust Manager provided for the establishment of a series of separate trusts in accordance with cl 3 of that deed.

154 Each asset of each of the trusts so created was held upon trust for the beneficiaries of that particular trust.

155 By that deed Challenger was appointed to act as the manager of those trusts (cl 17.1). As Trust Manager Challenger had 'full and complete powers of the management of' each trust so established (cl 17.2).

156 Clause 17.1B of the Master Trust Deed provides that, except as provided in cl 17.17 and cl 19.3, Challenger 'will be an independent contractor and not an agent' of the plaintiff. This subclause also includes the following provisions:

(ii) the trust manager will not represent or hold itself out to any person to be an agent to the trustee; or

(iii) the trustee will not be responsible for the acts, omissions or defaults of the trust manager.

157 By cl 17.17 Challenger acknowledges that it cannot bind the plaintiff in exercising the powers and performing its duties under the Master Trust Deed except as expressly provided in the Master Trust Deed and in any Series Notice.

158 Clause 17.20 of the Master Trust Deed required Challenger to 'use reasonable endeavours to carry on and conduct its business insofar as it relates to the Master Trust Deed in a proper and efficient manner.

159 By cl 5.1 of the Master Trust Deed the plaintiff was authorised to borrow, at Challenger's direction, for the purpose of making investment, including 'making of, investment in, and funding of assets underlying, Loans and Loan Securities'.

160 The term 'loan' was by that deed defined to mean 'a right or interest under or in relation to residential loan originated or acquired, or to be originated or acquired' by the plaintiff in accordance with the Master Trust Deed. The definition of 'loan securities' included 'a registered or registrable mortgage over real property within Australia securing repayment of the principal amount of a Loan and all other payments payable under that Loan'.

161 Again by the trust deed Challenger as trust manager had sole 'absolute and uncontrolled discretion' to determine the manner in which any trust moneys should be invested, including what collections and realisations of trust assets should be effected, and the duty to give to the plaintiff all directions which the plaintiff may desire in relation to those matters. In such circumstances the plaintiff was obliged to give effect to all such recommendations (cl 4.2). In particular, where Challenger, as trust manager, gives a written proposal for the acquisition or origination of property which is to constitute assets of a trust, the plaintiff is to implement that proposal, and is not required to make any assessment of the proposal (cl 4.3). Under the Master Trust Deed the plaintiff was only to exercise its powers in relation to the disposal of Authorised Investments upon the Trust Manager's written direction. Challenger was to be paid the fee specified in each series notice from each trust in consideration of its performance of its obligations under the Master Trust Deed.

162 The effect of this, in my view, was that in relation to all decisions relating to the acceptance of loan applications for the grant of loans by mortgage from the plaintiff, the plaintiff delegated or permitted the decisions to be made to Challenger, subject to the terms of the Master Trust Deed and other documents yet to be explained. Effectively, the decisions of whether to grant or refuse loan applications were not made by the plaintiff but were made by Challenger on its behalf and the plaintiff was obliged to accept them and to lend funds in accordance with approvals given for loans or mortgages.

163 In relation to loans made by the plaintiff pursuant to the Master Trust Deed in the manner already described, the plaintiff expressly retained Challenger to manage those loans, including loans made under the trusts created by the Master Trust Deed. This was done by the investment management agreement, exhibit TB-002, of 18 May 2001.

164 Under this agreement Challenger agreed to act as the servicer, administrator and manager of the loans made by the plaintiff (cl 2.2(a)). In doing so, Challenger was entitled to appoint third parties to service and manage (but not act as administrator for) those loans (cl 2.2).

165 Under this agreement Challenger was empowered, as servicer, to waive any right in respect of a Loan or Loan Security in the ordinary course of servicing the loans. It was also entitled to 'appoint any person to be its attorney or agent or to delegate or subcontract with any person and with such powers, authorities and discretions ... as it (Challenger) thought fit' in performing its obligations under the investment management agreement.

166 By cl 4.1(f) Challenger undertook not to agree to any variation of any terms or conditions of the Loan or Loan Security without the plaintiff's prior written consent, and, by cl 4.1(p) to enforce the plaintiff's rights in connection with Loans in accordance with the plaintiff's directions.

167 For acting as servicer under the investment management agreement Challenger was to be paid a fee by the plaintiff and the plaintiff was liable to reimburse Challenger for all legal and selling expenses relating to the enforcement and recovery of a loan (cl 6.2). Otherwise, Challenger was itself responsible for the costs and expenses of servicing the Loans.

168 Challenger agreed to indemnify the plaintiff in respect of any loss or liability which the plaintiff might incur as a consequence of a failure by Challenger to perform its duties as servicer.

169 There is no provision in the investment management agreement identifying or describing the relationship between the plaintiff and Challenger as servicer or its character.

170 In my view, this investment management agreement also confirms the role of Challenger in making all the decisions, consistent with the agreements, in relation to the administration and servicing of loans on behalf of the plaintiff and it empowers Challenger to appoint any person to be its agent or delegate or to subcontract to any such person the performance of its obligations under the investment management agreement. This establishes the power for Challenger to engage or appoint originators to perform many of those obligations on its behalf and so on behalf of the plaintiff.

The Series Notices (exhibits TB-297 and TB-298)

171 The Interstar Millennium B Trust was constituted by the Warehouse B Trust Series Notice, The parties to this are the plaintiff, Challenger (then known as Interstar), Perpetual Trustee Company Ltd and Macquarie Bank Ltd, the latter being the financial institution which funded the operator of the trust.

172 The parties to the Warehouse B Trust Series Notice agreed that Challenger was to act as a servicer for that trust. Clause 3.1 of the Warehouse B Trust Series Notice provides that the plaintiff, at the direction of Challenger, shall raise or borrow money to enable the plaintiff, amongst other things, to lend by funding Eligible Loans. Pursuant to cl 3.3 of that notice, where insufficient funds are standing to the credit of the account maintained by the plaintiff for the purpose of funding loans which Challenger proposes be made, Challenger may issue a notice requiring the plaintiff to borrow from Macquarie Bank Ltd under the warehouse facility agreement and apply the funds so obtained to fund those loans.

173 Pursuant to cl 4.3(a) of the Warehouse B Trust Series Notice Challenger in its role as servicer may request the plaintiff to arrange for funds to be provided to borrowers under loans which accord with the provisions of the Series Notice. A loan is an Eligible Loan if it satisfies the criteria set out in Schedule 1 to the Warehouse B Trust Series notice.

174 Those criteria include that Challenger has reviewed the loan and considers that the borrower has sufficient funds to meet its obligations under the loan, except where the proposed loan forms part of a programme which Macquarie Bank Ltd confirms in writing does not require assessment for credit worthiness or borrower serviceability and the loan is covered by a valid, binding and enforceable Mortgage Insurance Policy.

175 By cl 7.2 of the Series Notice the Master Trust Deed was amended as set out in sch 2 to the Warehouse B Trust Series Notice.

176 The Warehouse N Trust Series Notice was agreed between the plaintiff, Challenger (then known as Interstar), Perpetual Trustee Co Ltd and National Australia Bank Ltd and it constituted the Warehouse N Trust in broadly similar fashion.

177 Challenger (then known as Interstar) was appointed as a servicer of the Warehouse N trust by the Warehouse N Trust Series Notice. That notice amended the Master Trust Deed for the purposes of that trust in a similar fashion to the manner in which the Warehouse B Trust Series Notice amended the Master Trust Deed.

The loan origination and management agreements (exhibits TB-006, TB010 and TB299)

178 The Perpetual Finance Group (PFG) and Mortgages For Money LOMAs are in near identical terms but with two differences, namely:

(a) first, cl 3.3 of the first PFG LOMA does not contain the final sentence:

Each Manager acknowledges that the Originator may refer loan applications to other lenders

which appears in cl 3.1 of each of the Mortgages For Money LOMA and the second PFG LOMA;

(b) secondly, the scope of the indemnity provided by PFG to Challenger under cl 18(3) of the first PFG LOMA is clarified in cl 18(3)(i) to (iii) of each of the other two LOMAs.

179 Accordingly, while the following description of the LOMAs applies expressly to the position of PFG, it also applies, mutatis mutandis, to Mortgages For Money.

180 Each of Challenger (then known as Interstar) and another company, The Mortgage Alternative Pty Ltd, separately appointed PFG as 'an originator and servicer of' loans by cl 3.1 of the PFG LOMA. That appointment was nonexclusive. Challenger was entitled to receive loan applications from other parties and (subject to what has already been said in [178] above) PFG was entitled to refer loan applications to other lenders.

181 PFG was responsible for employing those persons necessary for it to carry out its obligations under the PFG LOMA, and was not entitled to subcontract or arrange for any person to perform those obligations without the consent of the managers. PFG was responsible for paying the costs and expenses of operating its business.

182 By cl 3.6 and cl 18, PFG indemnified the managers and the plaintiff in respect of any loss, damage or injury arising from any act or omission by PFG or its representatives.

183 Challenger retained an absolute discretion to refuse any loan application submitted by PFG.

184 PFG was obliged by cl 6.2(g) to ensure that PFG complied with all requirements of the procedure manuals provided by Challenger to PFG as if the contents of those manuals had been set out in full in the LOMA.

185 In addition, by cl 9.1(c), PFG warranted, 'to the extent that it was capable of doing so', that any loan where a drawdown had been made by the borrower complied with all of the terms, conditions and requirements of the manuals; and by cl 9.1(d), that, in respect of every loan which had been drawn down by a borrower, that it had 'no knowledge of any facts, circumstances or conditions with respect to that loan' that might reasonably be expected to cause a prudent lender to regard a mortgage as an unacceptable investment or materially adversely affect the value or marketability of that loan' (italics added).

186 Those warranties had to be repeated at the time each loan was settled by operation of cl 9.2(a) and were stated to be for the benefit of the plaintiff notwithstanding that it was not a party to the agreement.

187 Pursuant to cl 10.1, Challenger was to pay both an initial lump sum payment to PFG in respect of each settled loan, and a percentage of the outstanding balance of all loans approved by Challenger submitted by PFG on the last business day of each month.

188 Provision was made for PFG to have access to electronic and on-line mortgage origination, management, servicing and processing services and solutions provided by Challenger, and access to certain computer facilities maintained by Challenger, including access to a website located at a specified web address. PFG was obliged to pay a fee to Challenger for the use of those services.

189 Under cl 19.1 PFG was stated to be 'an independent contractor with respect to each Manager and the plaintiff, and that nothing in the LOMA shall be construed as giving rise to any relationship of partnership, agency, employment or joint venture' between PFG and any of the managers or the plaintiff. Clause 19.2 prohibited PFG from holding itself out or otherwise permitting or acquiescing in 'the doing or making of any act or statement which would lead another person to believe that [PFG] was a partner, agent, employee or joint venturer of a Manager of the plaintiff' and it states that PFG 'had no authority to act on behalf of a Manager or the plaintiff in any capacity to bind a Manager or the plaintiff to any arrangement with any party'.

190 Pursuant to cl 24 the plaintiff was entitled to, among other things, exercise the same rights to issue any direction or requirement to PFG as, and to enjoy any right, benefit or power held by Challenger under the PFG LOMA.

191 I conclude from these provisions that, despite the terms of cl 19.1 and cl 19.2 denying the relationship of agency or the existence of any authority to bind the manager or the plaintiff, what was effectively done was to appoint and authorise PFG and Mortgages For Money under the LOMAs to act as originators and servicers of the loans, to receive remuneration for doing so, to comply with requirements and procedures specified by Challenger, and to ensure that any loan granted complied with the terms and conditions of the manuals and that there was no knowledge of any facts or circumstances which might reasonably be expected to cause a prudent lender to regard the mortgage as an unacceptable investment or materially adversely affect the value or marketability of that loan. By these provisions, PFG and Mortgages For Money were effectively obliged to consider the suitability and prudence of particular loans that they were seeking or 'originating' and were obliged to do so for the benefit of Challenger and the plaintiff. This was a responsibility cast upon them by Challenger for the benefit of itself and the plaintiff and required the performance by PFG and Mortgages For Money of prudential obligations which otherwise would be expected to repose with Challenger and/or the plaintiff.

192 As such, the originators were being appointed to perform significant obligations on behalf of both Challenger and the plaintiff. While those obligations and the associated indemnity and warranties given by the originators to Challenger and the plaintiff were undoubtedly protective of the plaintiff's liabilities, the functions that were being performed by the originators when dealing with borrowers remained significant and important and were obligations which, otherwise, could be expected to be performed by the plaintiff. For an example, far from this case, such obligations should ensure that the originators did not propose a loan application from an infant, or a person under a disability, or an undischarged bankrupt, but there is nothing in these documents to suggest that the plaintiff would be relieved from the consequences of entering into such a loan or mortgage with such obviously unsuitably borrowers or relieved from the consequences of doing so notwithstanding that it may have an action against the originators for damages or an indemnity under the terms of the LOMAs.

193 In other words, the LOMAs provided for the originators to perform significant functions on behalf of the plaintiff and Challenger accompanied with obligations for indemnity or liability in damages by the originators if they failed in doing so. However, I do not consider that there is anything in these LOMAs to deny recourse by a borrower to Challenger or the plaintiff for representations, commitments or, particularly, unconscionability which may have occurred in the making of those loans or ensuing mortgages.

The lending manuals - exhibits TB 014, TB 300 and Tb 3002

194 These three exhibits are lending manuals which variously applied during the period of the applications for the grant of loans between the defendants and the plaintiff. They are the Australian Prime Guidelines Manual version 0206 (exhibit TB 300), the Interstar Prime Australian Guidelines Manual version 0406 (exhibit TB 302); and the Challenger Mortgage Management Prime Australian Guidelines Manual of September 2007 (exhibit TB 014).

195 The guidelines applicable to the 'Easydoc' loan product are in s 3.3 of each manual. That product is stated to be 'designated for borrowers who are unable to provide financial statements or taxation returns at the time of their application for a loan'.

196 The Australian Prime Guidelines Manual version 0206 and the Interstar Prime Australian Guidelines Manual version 046 are identical for purposes material to this case. In effect, they provide:

(a) the 'Easydoc' loan product is available to applicants who were selfemployed or fulltime investors;

(b) an application for an 'Easydoc loan' is required to include, at a minimum:

(i) a declaration in the form approved by Challenger declaring that 'the loan amount applied for is within the applicant's ability and capacity to meet their repayments';

(ii) an application form, which did not require an assets and liabilities statement, nor any statement of income;

the effect of which was that persons wishing to obtain an 'Easydoc' loan did not have to produce evidence of their income in order to qualify for the loan provided that they certified that they could meet the repayments on the loan.

197 The Challenger Mortgage Management Prime Australian Guidelines Manual September 2007 imposed the following additional requirements:

(a) applicants were now required to have a current Australian Business Number (ABN);

(b) a full-time investor was defined to be a person who derived 100% of their income from their own investor portfolio; and

(c) a person who derived any form of income from a government pension of any kind was deemed not to be an investor.

198 Clearly, the Burns did not at any time satisfy the eligibility for an Easydoc loan as set out in these guidelines. They were never self-employed nor were they full-time investors. They did not derive 100% of their income from their own investment portfolio and they did derive a significant portion of their income from a government pension. Any declaration by them that the loan amount applied for was within their ability and capacity to meet their repayments was clearly, on any objective criteria, unsupportable. This was known to Mr Frankland from January 2006 onwards. The very basis of the loans as discussed between him and Mr and Mrs Burns was that repayments could be met, in part, by further loans or refinancing obtainable upon the progressive appreciations in value of the properties already subject to loans. This was a species of 'asset lending' which was predicated upon continuing unrelenting appreciation in the capital value of the properties purchased.

199 The rental income available or likely to be available from the properties purchased was never going to be sufficient to meet the interest payments and the fact that the Burns were disability pensioners with no employment prospects made it obvious to Mr Frankland, as it must have done to any reasonable person acting for a loan originator in those circumstances, that their financial circumstances were limited and fragile and that these were facts, circumstances or conditions which might reasonably be expected to cause a prudent lender to regard such a mortgage as an unacceptable investment or materially to affect adversely the value or marketability of the loan. Those obligations were conspicuously ignored by Mr Frankland and it is to be doubted that he ever realised that they rested upon him or PFG.

200 The same and more can be said of Mortgages For Money because Mrs Wilson was aware that the application which the Burns had made for finance for the purchase of Railway Avenue through PFG had been declined by Challenger. She knew that the same or similar application was being renewed through Mortgages For Money, on which occasion the application form (which was not completed by the Burns) listed their occupations as investors. By no stretch of the imagination could this be justified. It did not comply with the definition of 'investors' in the lending manuals then applicable and, further, they were in receipt of pensions which, by itself, rendered them ineligible as Easydoc loan applicants

201 So far as concerns the Railway Avenue loan, the ineligibility of the Burns for an Easydoc loan was known and appreciated by Challenger at the time. Exhibit TB 275 is an email dated 14 September 2007 from Mr Wayne Koch, then of Challenger, to Caris Brown and another of PFG, that, in relation to the 2007 loan applications from the Burns, Mr Koch had confirmed with Graeme Wort of Advantage that the loan applications would not be proceeded with. The email contains the explanation that various information which had been requested, including an updated assets and liability statement and so on had not been provided but that Mrs Burns was listed as an invalid pensioner. Koch advised 'that declined decision stands and in this instance any future applications to CMM for these clients, including increases, would need to be on a FullDoc basis'. This is confirmation that at this time PFG and Challenger were aware that the Burns were not eligible Easydoc applicants and that no loan to them on that basis should be approved.

202 Nevertheless, it is the fact that the Railway Avenue loan was later granted through Mortgages For Money. How the effect of this earlier refusal of the loan and statement that there should be no Easydoc loans for the Burns in the future was overlooked or ignored was never explained. This demonstrates that PFG and Challenger were aware of the unsuitability of the Burns for such a loan before the 2007 loan in respect of Railway Avenue was approved.

Conclusions in relation to agency or attribution or knowledge of intermediaries to plaintiff

203 From the foregoing it will be apparent that the question of whether or not Mr Frankland and/or of PFG and/or Ms Beverley Wilson of Mortgages For Money was an agent of the plaintiff or whose knowledge of the defendants should be attributed to the plaintiff, or for that matter whether PFG, Mortgages For Money and Challenger were also agents for the plaintiff or persons whose knowledge of the defendants should be attributed to the plaintiff are vital questions for decision.

204 The contention advanced for the defendants involves the proposition that Challenger is an agent of the plaintiff that PFG and Mortgages for Money are each agents of Challenger and also agents for the plaintiff, that the employees at PFC and Ms Beverley Wilson at Mortgages for Money are agents of the originators who in turn are agents for Challenger and so are agents for the plaintiff or persons whose knowledge should be attributed to the plaintiff.

205 This raises issues addressed by Edelman J in Perpetual Trustees Company Ltd v Burniston [No 2] [2012] WASC 383 where his Honour discussed the obstacle of 'double attribution of acts' or whether a subagent, in this case even a subsubagent, should be regarded as agent of the principal. As his Honour said in that case at [233]:

In such circumstances, there is an additional requirement before agency can arise, namely, that the agent and sub-agent both manifest an intention that the sub-agent's acts will bind the principal, not merely the agent. In other words, the Burnistons need to prove that both Collins Securities and Mortgage Miracles intended that the acts of Mortgage Miracles would bind Perpetual.

206 Edelman J referred to O'Keefe v London and Edinburgh Insurance Co Ltd [1927] NI 85 and NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270; 411 412 [637] - [648] for the propositions that to render a principal liable for the acts of a subagent two matters must be established:

(a) That the agent had either express or implied authority from his principal to delegate his authority and to appoint a sub-agent; and

(b) That the agent had express or implied authority from his principal in making such appointment to constitute the relation of principal and agent between the principal and such sub-agent, or, in other words, to establish privity of contract between them, and that it was the intention of the agent and sub-agent that such relation should be constituted.

207 His Honour went on to consider other authorities militating against any relationship of agency between a principal and a finance broker including a consideration of Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd and Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 [65] (Newnes M). In that particular case Edelman J concluded that no relationship of agency between the alleged subagent and the principal had been demonstrated but acknowledged that the substance of the relationship as a whole must be looked at.

208 The plaintiff submits that in the present case the brokers, that is the originators, were appointed as known originators and managers by Challenger not the plaintiff. From this, the submission proceeds that the defendants must establish that both Challenger and each of the brokers intended that the acts of that particular broker would bind the plaintiff in order for that broker to be an agent of the plaintiff. The plaintiff also submits that the existence of fiduciary duties owed by a finance broker to a borrower is inconsistent with the broker also being for the agent of a lender: Burniston [251]. However, there is an inconsistency with this approach because the plaintiff's case, at least as I understand it, is that there were no fiduciary obligations owed by the broker to Mr and Mrs Burns but rather the liability for unconscionable conduct, if it exists, may justify a court in equity setting aside, or rescinding or declaring unenforceable a transaction or portions of it without giving rise to any corresponding rights to damages, compensation or other relief for breach of fiduciary duty.

209 In other words, an entitlement to equitable relief in the form of rescission, or declarations as to the invalidity or ineffectiveness of a transaction, does not correspond with nor constitute a finding of the existence of a fiduciary relationship. This must be so because the time honoured remedies of rescission for fraud, or innocent misrepresentation while a contract is still executory and other species of equitable relief did not depend upon the establishment of fiduciary duty between contracting the parties such as vendor and purchaser whose interests were usually diametrically opposed.

210 As for apparent or ostensible authority the plaintiff submits that this will only be created by representation by the principal to the third party and intended to be acted upon by the third party that the agent has authority to enter into a contract of the kind within the scope of the apparent authority on behalf of the principal and that a representation by the alleged agent that he has authority to act for the principal is not sufficient. That submission was based on Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [36]. However, an examination of that passage in context demonstrates that that is not a universal or inflexible proposition. At [36] Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ all said:

... Where an officer is held out by a company as having authority, and the third party relies on that apparent authority, and there is nothing in the company's constitution to the contrary, the company is bound by its representation of authority. 'The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract.' It is not enough that the representation should come from the officer alone. Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company's conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole.

211 And at [38] - [42] their Honours went on to explain that a kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with certain title, status and facilities so as to impart an appearance of authenticity. Their Honours said that the holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation. Pacific Carriers v BMP Paribas is itself an example of how a transaction entered into by an agent with only limited authority, but having the appearances of wider authority, was sufficient to create an agency which bound a principal to actions of its agent beyond the actual scope of his authority.

212 As the lengthy recitation of the effects of the various documents and instruments between the plaintiff and intermediaries has shown, the effect of the master trust deed and the investment management agreement was to remove all evaluative tasks in the selection and approval of loan applications from the plaintiff and confer them upon Challenger, subject to the obligations contained in those instruments, and in circumstances where Challenger was authorised to engage originators to perform most of those functions on its behalf and to assess applications and the suitability of applicants and their credit worthiness. Consequently, I consider this is a situation in which Challenger and, for that matter, PFG and Mortgages For Money, had express authority from the plaintiff to engage in an evaluation and consideration of mortgage applications and to administer the criteria for the selection of eligible Easydoc loan applicants. Furthermore, the personnel of PFG and Mortgages For Money were obviously carrying out their tasks in soliciting applications but appear to have been oblivious to the need to verify or ascertain circumstances which might render a particular proposed loan improvident and to ensure that the originator had no knowledge of any facts, circumstances or conditions with respect to that loan that might reasonably be expected to cause a prudent lender to regard a mortgage as an unacceptable investment or materially adversely affect the marketability of that loan. These obligations cast upon Challenger and the originators were obviously to be performed for the advantage and protection of the plaintiff in circumstances where it disclaimed and disowned any obligation to do so itself. They suggest that important functions on behalf of the plaintiff were being performed by Challenger and the originators but sought to distance (outsource) the plaintiff and Challenger from any responsibility or liability for these and, at the same time, to negative any relationship of agency.

213 It is necessary, however, to concentrate on the substance of what was arranged and the fact that any loan so negotiated and established would result in direct privity between the plaintiff and borrower or borrowers. This renunciation by the plaintiff by Challenger of any relationship of agency must be considered in the light of the actual responsibilities which reposed on Challenger and the originators to ensure that borrowers of loans and mortgages complied with the requirements of the master trust deed, the investment management agreement, the series of notices and the LOMAs as well as the lending manuals. It is one thing to impose these obligations and another to renounce agency both expressly and by the use of the special vocabulary which has been constructed.

214 Nor did the application or the loan and the ensuing loan agreements and mortgage in relation to the Railway Avenue property occur as a single transaction. It was the last of a series of dealings between the defendants and PFG and/or Mortgages For Money, Challenger and the plaintiff. The preceding five loan transactions by the Burns involved similar applications for money and loans from the plaintiff. This pattern of conduct engendered an expectation in Mr and Mrs Burns that by dealing with PFG and/or Mortgages For Money they were dealing through representatives with the plaintiff. Indeed, the name of PFG is strongly suggestive of this and the nature of the discussions between Mr Burns and Mr Frankland encouraged this reliance and expectation and did nothing to dispel it.

215 The negative aspect of ostensible or apparent authority, unless the obligation is ratified by the principal, was discussed by Del Pont at [20.3]. It is not insignificant in the present instance that all previous dealings between the Burns and PFG (except for Mrs Burns' conditional purchase of Unit 3 Holland Street) did result in completed contracts of loan, mortgages and advances from the plaintiff to them. Despite the limitations in the documents purporting to deny the existence of a relationship of agency between the plaintiff and Challenger, and between Challenger and the originators, it is clear that there was a form of limited agency or authority conferred by the documents upon the originators and that it included an obligation on the originators to obtain evidence, in the form of declarations, as events transpired by the applicants, as to their financial circumstances.

216 In these particular instances, the obtaining of the signatures of the Burns to those application forms with such declarations was more ritualistic than real, for it is apparent that no enquiries as to their circumstances were made by the originators or their staff. The plaintiff and Challenger obviously knew of and directed procedures to be followed by the originators having prescribed them in the various documents already examined. By doing so, they were aware of and approved the role of the originators in making limited enquiry as to the financial circumstances of a borrower or at least his or her eligibility for an Easydoc loan.

217 I conclude that both the plaintiff and Challenger were aware of and did authorise the originators and their staff to perform these tasks and accepted their role in determining responses from the borrowers.

218 I turn then to the question of whether or not the authority of the originators and Mr Frankland and Ms Wilson to determine the eligibility of the Burns for an Easydoc loan was limited or excluded by the provisions of the contracts denying the existence of any relationship of agency and containing prohibitions on Challenger or the originators against holding themselves out in any way as agents for the plaintiff.

219 At [20.28] in Dal Pont there is a discussion of whether or not private instructions are sufficient to limit ostensible authority and the learned author concludes that they are not. In reliance on Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511 the author writes that an agent's ostensible authority is diminished only to the extent of the publicised limits placed upon it so that private instructions denying or limiting actual authority have no such effect where the principal has held out the agent as having authority unless the other contracting party has notice of those instructions. Reference is made to the observations of Griffiths CJ in Lysaght Bros & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421, 428 that:

Having held out the agent as his agent to make contracts of that kind, he cannot set up, against a person dealing innocently with the agent on the faith of the holding out, that the agent has in fact gone beyond the limits of his authority.

See also Egan v Ross [1928] NSWStRp 101; (1928) 29 SR (NSW) 382.

220 Accordingly, I conclude that, having regard to the entire context and the course of dealings between the plaintiff and the defendants leading up to and including the Railway Avenue loan agreement and mortgage of 2007, when it came to an evaluation of the suitability or eligibility of the Burns to become borrowers from the plaintiff under the Easydoc loan system, and as to their status of pensioners with disabilities and the inappropriateness of referring to them as investors, the knowledge held by Frankland and Ms Wilson was knowledge which they held as agents or subagents of the plaintiff and which must be attributed to the plaintiff. This leads to the conclusion that in making the Railway Avenue loan and, indeed, the earlier loans, the plaintiff must be regarded as being aware of the Burns' particular disabilities, the fragility of their financial position, and the fact that they were on pensions with no prospect of remunerative employment. Also the plaintiff must be treated as knowing that the Burns were embarking on a series of property investments financed by asset loans which they were unlikely to be able to service without continued refinancing based on progressive appreciation of the value of the properties already encumbered. In other words, I consider that the plaintiff should be taken to be apprised of these facts and circumstances which made these borrowings, and in particular the Railway Avenue borrowing, particularly disadvantageous to the defendants, who were persons with special susceptibilities and disabilities and that the loans were improvident and possibly perilous for the plaintiff.

221 The next issue of importance is what are the consequences of that.

222 At the forefront of the plaintiffs' submissions that there has been no unconscionable conduct on its behalf and that no relief in law or equity on that or any associated ground is available to the defendants, are the propositions that:

(a) a lender does not owe any duty to provide commercial advice to a borrower although it may assume a duty of care should it provide such advice: Permanent Mortgages Pty Ltd v Vandenbergh [255] and Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 276

(b) a lender has no duty under the general law to assess the capacity of the borrower to repay a loan, or to ascertain the viability of a loan, or to verify the details provided in a loan application; and

(c) a lender does not owe any duty under the general law to be alert for fraud by or on behalf of a borrower: Burniston [322] and Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 [176].

223 These propositions can be accepted but they apply to the general course of cases and not in circumstances where the financier, broker or other contractor is dealing with a person with particular vulnerabilities. In that case, the law takes pains to ensure that unconscionable advantage has not been taken of an especially vulnerable person. As the plaintiff rightly submits, to succeed in a claim for relief for unconscionable conduct, the claimant must establish that:

(a) the claimant suffered from a special disability or disadvantage with respect to the other party to the transaction at the time of entering into the transaction;

(b) that special disability or disadvantage seriously affected the claimant's ability to make a judgment in his or her best interests;

(c) the party knew of that special disadvantage or disability, or was wilfully ignorant of it; and

(d) the other party has unconscientiously taken advantage of the claimant's position.

224 See Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447, 462 and Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 [155] but the scope of the situations in which relief will be granted for unconscionable bargains is both very extensive and ancient: see R Goff, The Law of Unjust Enrichment (8th ed, 2011). Kakavas demonstrates that constructive knowledge of the disability of the claimant by the person against whom equitable relief is being sought will not be sufficient and that either actual knowledge or wilful blindness will be necessary. In Kakavas the court held that equitable relief of this kind required proof of a predatory state of mind and that the principle granting relief for unconscionable conduct is not engaged by mere inadvertence, or even indifference, to all the circumstances of the other party to an arm's length commercial transaction and that all circumstances in the whole course of dealing between the parties are relevant.

225 In the present case, as already concluded, there was a course of dealings between the plaintiff and the Burns via Challenger and PFC by which the representatives of PFC, whom I am satisfied should be treated as agents for the plaintiff and whose knowledge should be attributed to the plaintiff, were fully aware of Mr and Mrs Burns' physical and social disabilities, their lack of employment prospects, their dependence upon social security pensions as their only secure source of income apart from whatever rent may be derived from their investment properties, and that neither could properly be termed an investor and so eligible for an Easydoc loan. The Burns' disabilities and disadvantages seriously diminished their abilities to make judgments in their best interests. In a real sense, therefore, each was exploited by being encouraged into and accepted for these Easydoc loans when not eligible and in particularly vulnerable circumstances, both by reasons of physical and mental disadvantage and because of considerable economic fragility. On any view, the loans were very risky and improvident both from the perspective of the plaintiff and the perspective of the borrowers.

226 The plaintiff further relies upon observations in Kakavas to the effect that a person who voluntarily engages in a risky business is not to be redeemed from the coming home of risks inherent in that business. Kakavas, of course, was the case of the compulsive gambler consistently losing at the casino who brought an action against the casino and its staff. However, I do not consider that either Mr or Mrs Burns can be equated with or placed in a similar character to that of Mr Kakavas because each had longstanding physical disabilities resulting in educational deprivation and unsuitability or incapacity for employment so as to affect their ability to assess commercial or business risks. They were, to a not insignificant degree, like children or susceptible innocents playing in a field of financial investment of which Mrs Burns had no understanding and of which Mr Burns had a limited and inadequate understanding but an unduly optimistic and self-confident expectation - which in itself was part of his disadvantaged make-up.

227 Counsel for the plaintiff also referred to a series of cases in New South Wales which have examined transactions which have been termed 'asset lending': Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260; (2011) 15 BPR 29,445 [43]; Elkofairi v Permanent Trustee Co Ltd [2000] NSWCA 413, [57] - [59]; and Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205, [96] - [97]. This term was referred to and examined by Murphy JA in Permanent Mortgages v Vandenbergh at [206] - [214] where, after an extensive examination of authorities his Honour noted that the notion of asset lending has been regarded as relevant to the equitable doctrine of unconscionable dealing: Elkofairi and Kowalczuk. His Honour observed at [213] that:

Where the lender ignores its own lending guidelines in the making of the loan that fact may, depending on all the circumstances, provide some basis for the inference that the lender is lending only on the value of the security

without regard to the capacity of the borrower to repay.

228 His Honour was careful to emphasise that, even in cases of pure asset lending, that may not constitute unconscionable conduct.

229 Counsel for the first defendant submitted that equitable relief should be granted to Mrs Burns because of the unconscionable conduct of the plaintiff constituted by:

(a) the plaintiff's failure to ensure independent advice was provided to Mrs Burns when the circumstances demanded it, that is, at the times of the Holland Street and Railway Avenue loans;

(b) the fact that the purchase of Unit 5, Holland Street, solely in the name of her husband but with Mrs Burns becoming a joint borrower in the loan agreement for Holland Street meant that she became a constructive guarantor for her husband's purchase of the Holland Street property without deriving any consideration or advantage herself from that borrowing, thus giving rise to an entitlement to relief upon the principles in Yerkey v Jones and Garcia v National Australia Bank, whereas if she had been properly advised she would not have entered into that transaction and, not having entered into that transaction, and again if properly advised, she would not have entered into the subsequent transaction for the borrowing associated with the purchase of Railway Avenue;

(c) the fact that asset lending by the plaintiff to the Burns, including the Railway Avenue loan, took their total principal debt to over $844,000, an amount entirely unmanageable for them.

230 In relation to the position of Mrs Burns arising from the Holland Street purchase and loan and the Railway Avenue loans, it is submitted on her behalf that these transactions were unconscionable because:

(a) she did not understand the effect of the transactions;

(b) the lender knew that she obtained no gain from the Holland Street transaction;

(c) the lender should be taken to have understood that she reposed trust and confidence in her husband and also understood that he may not have fully explained the effect and potential consequences of the loan and mortgage to her;

(d) the plaintiff did not ensure that she was provided with independent advice; and

(e) the loan and loan application for Railway Avenue were made contrary to the Challenger manual stipulation that an applicant had to be selfemployed with an ABN and could not receive any pension income.

231 The first defendant by her counsel would seek to have her role in the Holland Street purchase categorised as that of a constructive guarantor so as to invoke the doctrine in Garcia and in Yerkey v Jones. However, she was never described as a guarantor or a surety but as a coborrower, although not a coregistered proprietor of the Holland Street unit. The reason why she was not a coowner of that unit has already been touched upon, because the original proposal was for Mr and Mrs Burns each to buy one unit at Holland Street so that the couple would have two units. Her contract to purchase one in her own name did not proceed, leaving the acquisition of the other in Mr Burns' name alone. In his evidence Mr Burns has effectively conceded that the benefit of that property was to be held equally both for himself and his wife and there is really no doubt that this was the case. With respect, I do not consider that this situation can be brought under the rubric of Yerkey v Jones and, as already stated, the current state of authority is that the rule in Yerkey should not be extended: Garcia v National Australia Bank Ltd.

232 The real contention of the first defendant is that the Holland Street loan was unconscionable and should be set aside on principles discussed in Garcia and that had that been done or the plaintiff ensured that she had been properly advised and therefore not entered into the Holland Street loan, she would not subsequently have entered into the Railway Avenue loan or if the possibility had been raised that she should have received independent advice that advice would have led her to decline to participate in borrowing for the Railway Avenue property which, in turn, would have meant that Mr Burns would not have done so either. That is by far the most probable consequence which would have then eventuated.

233 The position of Mr Burns in relation to the Railway Avenue loan is that the plaintiff was engaged in unconscientious lending by taking advantage of his disabilities, lack of experience and undue enthusiasm, and lending to him in circumstances in which he had no reasonable prospects of meeting his commitments under the loan. He also submits that loan was made in circumstances where the plaintiff actually knew that he was not an eligible applicant for such an Easydoc loan and, by implication, would not have satisfied the requirements for a full documentary loan for want of sufficient financial means.

234 I am satisfied that neither Mr nor Mrs Burns was an eligible applicant for an Easydoc loan in respect of the purchase of Railway Avenue or any of the other loans and that this was known to the plaintiff and its agents. The description of the Burns as investors was, in the context, false and no disclosures were made that they were pensioners.

235 That status alone disentitled them to an Easydoc loan at the time of the 2007 Railway Avenue loan. Challenger was then already aware of the unsuitability of Mr and Mrs Burns for such a loan and had declined the first application for their loan in respect of Railway Avenue when lodged through PFC. In the circumstances, this resulted in actual exploitation of the Burns and this must have been known to the plaintiff and its agents because of the knowledge of Challenger and Advantage (Koch) that they were not eligible for Easydoc loans and had not produced financial information which would render them eligible for a FullDoc loan. Furthermore, the knowledge of Mr Frankland and Ms Wilson meant that the extent of the Burns' disabilities, both physical and financial, were known to the plaintiff which, also, had at its disposal details of all the earlier loans then outstanding and aggregating $844,200, bearing interest at 9.97%, with an aggregate monthly interest bill on all loans of $6,380, well in excess of any rent which the Burns could expect to derive from the properties and when they had no other source of income save for their pensions.

236 This being the case, I am satisfied that unconscionability has been proved and that the Burns are entitled to relief which is sufficient to the merits and circumstances of their case. They seek a declaration that the Railway Avenue mortgage and the loan are invalid and unenforceable and should be set aside and for an order that the plaintiff discharge the mortgage. The plaintiff responds, in these circumstances, however, that any relief of that or a similar kind could only be made on terms and that the terms will require repayment of the principal advanced under the Railway Avenue loan with an appropriate rate of interest, if not the rates of interest prescribed by the mortgage and loan instruments themselves and charged for in the notice of default and which had been included in the statement of the balance of the loan outstanding put in evidence (exhibit TB 55) aggregating $470,674.12 as at 31 July 2013 and more now.

237 This also means that the defendants have established that the earlier five loans and consequent mortgages between the plaintiff and both defendants, but in one case, the Holland Street, Gosnells, mortgage, with Mrs Burns alone, were the results of unconscionable conduct by the plaintiff in the circumstances known because of the knowledge of Mr Frankland which is attributable to PFG, Challenger and the plaintiff. Those various loans and mortgages were secured over Ilma Street, Barellan Court, and Holland Street, which were progressively sold, and the respective loan repaid and mortgages discharged after the Burns defaulted the first time in December 2007 under the Holland Street loan. As already noted, the Barellan Court sale settled in February 2008, the Ilma Street sale settled in June 2009, and the Holland Street sale settled in February 2010. I accept the evidence of Mr Burns that these were each distressed sales in the sense that the properties were realised under the pressure of demands by the plaintiff to repay the loan then in default and in a market climate where the defendants were faced with delays in selling and falling real estate prices.

238 The defendants, by their counterclaims, contend that they are entitled to a variety of relief for the losses they suffered when these pressures forced them to sell those properties and for the plaintiff's unconscionable conduct which they contend caused those consequences. Just what relief, if any, is available in these circumstances is a matter which calls for close consideration.

239 The first defendant advances a claim based on undue influence, namely, the influence on her by her husband, especially in relation to the Holland Street loan, which caused her to consent to that transaction and to the other loans and of which the plaintiff had notice. I am satisfied that Mr Burns was the decisionmaker and the dominant person in the marriage who, effectively, insisted that his wife should accept his decisions and follow his choices in relation to the purchase of investment properties and the obtaining of loans on security to finance them. So much is an ingredient in my conclusion that there was unconscionable conduct by the plaintiff in lending to Mrs Burns in respect of the Railway Avenue and other transactions. But that is not to say that I am satisfied that undue influence by the bank has been proved or that undue influence by Mr Burns has been proved. Rather, I am satisfied that, due to his disabilities, lack of education, very limited literacy and his inexperience in commercial matters, Mr Burns was a person with special vulnerabilities which led him to be impressionable and easily led by his enthusiasms in making rash and inappropriate decisions to purchase real property and borrow to finance them.

240 Undue influence is available even when the person who benefited from the transaction, the plaintiff, is different from the one who exerted undue influence to bring it about, in this case, Mr Burns: Wright v Carter [1903] 1 Ch 27 and Halsbury's Laws of England vol 31 [840]. There is clearly an overlap between the doctrine of undue influence and the principles for granting relief in the case of unconscionability. There are elements of the requirements for undue influence present in the transaction relating to Railway Avenue, as with the other transactions, but success for Mrs Burns on this cause of action will not add to or in any way confer any greater advantage in the conclusions which I have already reached in relation to her claim based on unconscionable conduct.

241 The rights of the plaintiff as a registered mortgagee in respect of the loan granted for the Railway Avenue property are indefeasible in the sense that if the mortgage were transferred to and registered in the name of another, that other would take an indefeasible interest under the mortgage unaffected by equitable rights or interests of which the new proprietor of the mortgage did not have notice: Transfer of Land Act 1893 s 68. However, this indefeasibility does not affect the position as between the contracting parties themselves, that is, as between Mr and Mrs Burns and the plaintiff, there having been no change in the registered proprietorship of that mortgage by its transfer or assignment and registration to another: Bahr v Nicholay (No 2) [1988] HCA 16; (1988) 164 CLR 604, 613. In personam remedies remain available.

242 Petelin v Cullen [1975] HCA 24; (1975) 132 CLR 355 sets out the tests for the availability of the defence of non est factum. At 359 - 360 Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ said:

The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on the defendant who seeks to establish the defence.

243 In the present case there is no doubt that both Mr and Mrs Burns knew that the documents which they were signing in relation to the application for a loan, the loan agreement and the mortgage for the Railway Avenue property, were loan applications, loan agreements and a mortgage respectively. There is no doubt as to the identity or purport of the particular documents. It was their intention to apply for a loan, enter into a loan agreement and to grant a mortgage to the lender over the property which they had purchased. They proceeded knowingly to do so. Mrs Burns did not realise the full implications or possible consequences of the transaction so far as she was concerned and the effect that it may have on her assets, namely, Ilma Street, but that is not to the point. Nor is it relevant, for this defence, that Mr and Mrs Burns signed the loan application for Railway Avenue by leaving significant parts of the contents blank, leaving it to Mortgages For Money and/or Challenger to complete the details or that, when doing so, Mortgages For Money and/or Challenger wrongly described them as investors and failed to disclose that as pensioners they were not eligible for Easydoc loans under the system administered by Challenger for the plaintiff. Those were failures by Mortgages For Money and Challenger which have other consequences but which do not support a defence of non est factum.

244 In his defence and counterclaim Mr Burns alleges that the plaintiff is liable to him in negligence for failing to advise about the inherent risks associated with the mortgages and loans that he was negotiating, particularly in relation to the Railway Avenue loan and especially in the light of his limited financial circumstances and the conspicuous inadequacy of rental income from the properties to satisfy the interest payments due under the increasing number of mortgages. He also asserts that the plaintiff was negligent in failing in a duty of care to negotiate with him and propose solutions to reduce the hardship which faced him and his wife when the GFC produced a situation in which he could no longer service the mortgages, let all the properties or sell them to advantage.

245 Apart from advancing those contentions, Mr Burns has been unable to refer to any basis for the existence of such an alleged duty of care, nor has that submission been advanced by counsel for his wife. There is no basis upon which it can be contended that, in the absence of special circumstances such as vulnerability arising from conspicuous disabilities or similar causes, there is any duty on the plaintiff to advise the defendant as alleged arising from the principles of negligence. The relief available in equity against unconscionable conduct is not based on the existence of a duty of care but on long-established protective doctrines of the Courts of Chancery to grant relief against the exploitation of persons especially vulnerable. That does not correspond to a duty of care in negligence and no right to damages for negligence at law exists in the present situation.

Damages or compensation in equity for unconscionable conduct or breach of fiduciary duty

246 A breach of fiduciary duty may give rise to a liability by a defendant to account for profits improperly derived from a breach of fiduciary duty, especially in the case of a breach of trust, either on a common account or, alternatively, a wilful default basis: see In re Ellis; Ellis v Ellis [2015] WASC 77. Damages in equity under Lord Cairns' Act are of an entirely different kind, being damages which can be ordered in lieu of a decree of specific performance. Breaches of trust involving losses to the trust fund, whether actual losses or losses of opportunity, can give rise to an entitlement to an account, the usual remedy for breach of trust, although when monetary relief is granted it is often termed 'compensation' for breach of trust.

247 There are, however, many instances in which equitable relief will be available because of the breach of a duty which equity recognises without there being any corresponding entitlement to damages or compensation or, for that matter, to an account. The common examples of rescission because of some vitiating element in a contract will not usually involve the payment of any damages, although the payment of certain amounts may be necessary in order to achieve the accompanying restitutio in integrum. The orthodox view remains that damages are a remedy available at common law and, in the absence of special statutory powers, not in equity.

248 Cases dealing with the consequences of breach of duty by delinquent fiduciaries can often involve a hybrid case because, in many instances, for example, the role of a solicitor, there will be concurrent duties arising from contract at law and in equity, so that a breach by such a fiduciary of an obligation can give rise to a liability to damages, but that is because the breach simultaneously involves a breach of contract or a tort such as negligence. The plaintiff refers to the observations of Young J in Eurofinance Corporation Pty Ltd v Carrymoor Investments Pty Ltd [2000] NSWSC 415 [48] for the proposition that it is startling to consider that damages are available because of unconscionable conduct. For similar expostulations about the importation of the thought that damages may be available for breach of fiduciary duty simpliciter see Meagher, Gummow & Lehane's Equity Doctrine and Remedies (5th ed, 2015) [2.140], [2.310], [2.205, [2.210] and [23-010].

249 Furthermore, the availability of damages in respect of a claim for unconscionable conduct was doubted by McLure J, as her Honour then was, in Australia and New Zealand Banking Group Ltdv Dzienciol [2001] WASC 305 [413]. The possibility was recognised in Paroz v Paroz [2010] QSC 41; (2010) 5 ASTLR 452 [133] - [138] and such an award was made in Karam v Australia and New Zealand Banking Group Ltd [2001] NSWSC 709, which was overturned on appeal on the basis that the claimed unconscionable conduct had not occurred: Australia and New Zealand Banking Group Ltd v Karam [2005] NSWCA 344; (2005) 64 NSWLR 149. Despite these indications, I am not prepared to accept that damages for unconscionable conduct of the kind established in this present case are available. However, even if they were available, the plaintiff submits that if the transaction were to be set aside on that ground, compensation or damages could not be awarded without requiring restitution of the amounts advanced to Mrs Burns in respect of Ilma Street, Barellen Court and (although not included in the written submissions, by necessary implication from the oral submissions) the advances made in relation to Railway Avenue.

250 In circumstances such as the present, I consider that the remedy available to the defendants on establishing claims for unconscionable conduct are to set aside the impugned transaction or transactions as far as practicable and to order such other relief as may be necessary to return the parties to the position in which they would have been had the impugned transaction not occurred by requiring payments or restitution so far as may be necessary to do equity: Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428, 452 and Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102, 113 - 115.

251 When granting such relief, a court of equity will impose such terms upon the party obtaining relief as it deems the real justice of the case requires, consistent with the maxim that 'he who seeks equity must do equity'. This may involve relieving against some or all of the transaction challenged or limiting the effectiveness of the transaction to part only of the subject matter as occurred in Vadasz itself. In the present case, I see no basis upon which the defendants could be awarded damages for the unconscionable conduct found as distinct from obtaining relief setting aside or modifying the terms of the various transactions affected by that unconscionable conduct with or without terms.

Trade Practices Act

252 As already mentioned, counsel for the first defendant maintains that her existing defence and counterclaim gave rise to and asserted an entitlement to damages under s 82 of the Trade Practices Act and/or to other relief under s 87 of that Act. This has given rise to the objections by the defendant as to the sufficiency of pleading to recover relief for those asserted causes of action and an application, should they be available, to amend the defence to the counterclaim to plead limitation defences to each of them.

253 The exact basis for the alleged misleading and deceptive conduct by the plaintiff was not clearly advanced by the defendants, nor were the particular occasions and details of the misleading or deceptive conduct precisely identified. At its highest, it seems that the defendants contend that by accepting the loan applications by the defendants in circumstances where neither was entitled to an Easydoc loan according to the provisions of the documents regulating lending between the plaintiff and its intermediaries; and in describing the defendants as investors; and in failing to ensure that each had independent advice which would have exposed the improvidence of the proposed borrowing and the high risk of default and its consequences, the plaintiff and its intermediaries were guilty of misleading or deceptive conduct.

254 In fact, however, what the plaintiff did was receive, process and grant applications for loans followed by loan agreements and mortgages before advancing the moneys sought. By doing this, they acceded to the applications and wishes of the defendants. Having regard to the special vulnerability of the defendants and the improvidence of their proposed borrowings, I have concluded that this amounted to unconscionable conduct in taking advantage of vulnerable applicants, but that is not in itself misleading or deceptive conduct.

255 Mr Burns has claimed that the plaintiff's agents, in particular Ms Wilson, had misled him by representing that the liabilities under the Railway Avenue mortgage could be met by the rent on the properties acquired and from further borrowings and refinancing based on progressive appreciation of capital value of those properties over time. It is possible that this could amount to misleading or deceptive conduct if the defendants prove that those were material, that is not insignificant, factors in inducing them to enter into the transactions and that quantifiable losses or consequences were thereby caused to them. Several times now I have explained that any question of the quantification of damages has at the defendants' request been stood over for future hearing if necessary. Questions of inducement and causation for a s 82 claim have similarly not been addressed at this trial.

256 An action for damages pursuant to s 82 of the Competition and Consumer Act 2010 (formerly the Trade Practices Act 1974) can be commenced within six years after the day on which the cause of action that relates to the conduct accrued. That is the day upon which the damage was first suffered by a claimant. In a case where the alleged misleading and deceptive conduct led to a claimant entering into a mortgage with the defendant involving consequences or terms more onerous than would have occurred, if at all, had the misleading or deceptive conduct not eventuated, then the date on which the cause of action accrued will be the date of entering into the mortgage: Wardley v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 and Forster v Outred [1982] 2 All ER 753 discussed by the High Court without disapproval in Wardley despite submissions to the effect that Forster v Outred should not be followed - 175 CLR 518 (submission). In the event it was unnecessary for the High Court to determine whether or not Forster v Outred should be followed and it therefore remains persuasive authority which had stood for a substantial time and which has been followed on several occasions.

257 The transactions leading to the Railway Avenue loan occurred in October 2007 so any claim for damages under s 82 of the Trade Practices Act commenced before October 2013 would be in time. It is acknowledged by the plaintiff that if the defendants' pleadings raise a claim for damages under s 82 in respect of the Railway Avenue loan, that claim would be within time. I accept that to be the case.

258 Again, insofar as the defendants seek to raise statutory claims under s 87 of the Trade Practices Act, that claim must be made within six years after the day on which the cause of an action that relates to that conduct accrued (s 87(1CA)). Accordingly, a claim under s 87 would be open in respect of the Railway Avenue transaction but there is no reference to any of the other properties or any claim in respect of them in the defendants' pleadings before 25 September 2013, being the date of the first defendant's amended defence and counterclaim. Claims for relief under s 87 in respect of the earlier transactions, the latest of which were the third Ilma Street and Barellan Court facilities of May 2007, were more than six years before the introduction of any pleas in respect of any of those properties and hence time barred. Accordingly, any claims for relief under s 87 in respect of properties other than Railway Avenue must fail.

259 A claim for relief under s 87 in relation to the Railway Avenue transaction is, in these particular circumstances, virtually indistinguishable from the claim for relief for the unconscionable conduct which has been upheld. The powers of the court and the scope of relief under s 87 are extensive but the principles applicable to the nature and type of relief to be granted are similar to the principles relating to relief in equity in so far that restitutio in integrum should, to the extent possible, be ordered.

Should terms be imposed on the relief to be granted to the defendants?

260 In view of the conclusions reached that the loan agreement and mortgage between the plaintiff and the defendants in relation to Railway Avenue were the product of unconscionable conduct for which the plaintiff is responsible, I consider that the defendants are entitled to remedies which include an order that the mortgage should be set aside and that the plaintiff be required to discharge it and that the loan agreement be declared to be invalid and unenforceable. This leaves the question of what terms, if any, should be imposed on the grant of such relief and what should become of the plaintiff's alternative claim for restitution or for money had and received and/or money paid at the request of the defendants for the principal of $266,849.83 paid by the plaintiff in respect of the Railway Avenue loan.

261 This is the alternative claim pleaded by the plaintiff for restitution, recovery of money had and received, recovery of money paid at the defendants' request for the principal of $266,849.33 of the Railway Avenue loan and with or without interest. I will resist any examination of the question of whether those claims are separate and distinct causes of action of just part of an overall principle of unjust enrichment. Nothing turns on that here.

262 These claims, however, are all predicated upon the contract of loan and mortgage for Railway Avenue being set aside for unconscionable conduct or some other mitigating factor. Yet the plaintiff never conceded that either of those loans was invalid, unenforceable or should be set aside. By pursuing the principal contractual claim the plaintiff has denied, and so excluded, any right to sue on the restitutionary claim. They are inconsistent claims and the plaintiff's case did not allege or prove facts essential for the restitutionary claim. Those facts have, of course, emerged from the defendants' counterclaims but were never accepted or acknowledged by the plaintiff in its pleading, in evidence or, otherwise, at trial.

263 This means that the plaintiff's alternative claims in restitution must fail and be dismissed. However, the question of what if any return of the principal advanced by the plaintiff still arises in the action because the extent of relief recovered by the defendants raises it. Significantly, however, that issue is the product of the defendants' counterclaims and not, having regard to the plaintiff's chosen stance, from the plaintiff's case.

264 The rescission of the loans and mortgages sought by the defendants is that species of rescission which is a remedy granted by a court with equitable jurisdiction, and not rescission at common law which occurs by an act of the parties or because of an inherent aspect of the contract depriving it of any effect. Even then the scope of the remedy in equity is broader in cases involving unconscionable dealings, and even broader in cases of fraud, than in less reprehensible cases such as innocent misrepresentation. One difference from legal rescission is that a transaction rescinded in equity because of unconscionable conduct will be undone by the order of the court and not by any act of the parties. As well, the transaction will, until then, be treated as effective but voidable. Once rescinded by order of the court it will, except as may otherwise be dissected - Vadasz v Pioneer Concrete (SA) Pty Ltd - become void ab initio.

265 The availability of rescission for unconscionable conduct and catching bargains is very old and versatile.

266 Generally, equity will not award rescission of a transaction resulting from unconscionable conduct where it is not possible to restore the parties substantially to their original positions - Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 HL - but relief will not be denied in a proper case where it is merely difficult to do so - Earl Beauchamp v Winn (1873) LR 6 HL 223 (Lord Chelmsford). (See generally Halsbury's Laws of England vol 77 [43], [52] where the authors observe:

The court may order rescission on the basis of restoring the parties so far as practically possible to do so. For this purpose ancillary relief may be granted, such as an account of profits, or an allowance for work done, or a sum paid for benefits enjoyed ...

267 The extent to which rescission may be ordered but with appropriate ancillary relief where restitutio in integrum is not fully possible does not appear to be fully settled. It has resulted in a series of cases in England which the authors of Meagher, Gummow & Lehane, Equity, Doctrine and Remedies (5th ed, 2015) [25-065] - [25-075], and Goff & Jones, The Law of Unjust Enrichment (8th ed, 2011) [40-12] - [40-14] regard as confusing, conflicting and in need of resolution. See also Snells Equity (33rd ed, 2015) [15.014].

268 Emerging from those cases where rescission was ordered (but with adjusting relief) where restitio in integrum was not fully possible are observations to the effect that such a defendant should not be permitted to retain an advantageous position obtained through illegitimate means - Borelli v Ting [2010] UKPC 21 [38] - [39]; that a defendant cannot rely on his own misconduct to prevent rescission - Rees v De Bernardy [1896] 2 Ch 437, 446 (Romer J) - and that practical justice will require a defendant to return the 'benefit derived' from the unconscionable transaction - O'Sullivan v Management Agency and Music Ltd [1985] QB 428; [1985] 3 All ER 351. This flexibility in search of practical justice is demonstrated in Vadasz; Newbigging v Adam (1886) 34 Ch D 528; Adam v Newbigging (1888) 13 AC 308; and Alati v Kruger [1955] HCA 64; (1995) 94 CLR 216.

269 What does seem to be clear and generally acknowledged is that the remedy in this respect is more flexible and adaptable in Australia and perhaps more so in New Zealand: Alati v Kruger; Verdasz; and Scales Trading Co Ltd v Far Eastern Shipping Co Public Ltd [1999] 3 NZLR 26 - see on appeal [2001] 1 All ER (Com) 319.

Restitution to the plaintiff as part of the defendants' relief

270 This involves a consideration of the obligation of the defendants to do equity as a proper consequence of being granted the equitable relief which they sought in having the Railway Avenue loan and mortgage set aside. Counsel for the plaintiff relies on the result in Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, a case involving rescission of a mortgage granted by clients of a firm of solicitors to that firm without being advised to obtain independent legal advice. The mortgage was set aside but upon condition that the clients repaid the principal and interest due under the mortgage. Brennan CJ, Gaudron, McHugh and Gummow JJ said at 475:

To set aside the Mortgage purely in its operation as a security, without conditioning that upon repayment, would be to reform the transaction in an impermissible fashion. It would be to strike down the security interest without ensuring repayment of that which was paid in return for it. The respondents would be left with the fruits of the transaction of which they complain, whereas their equity was to have the whole transaction rescinded and, so far as possible, the parties remitted to their original position.

271 Their Honours referred to that as the manner in which the court addressed the principles applying in fixing terms upon rescission ordered of a commercial transaction. At [111] there is the further passage:

Where, as in this case, the court has granted equitable relief in the shape of rescission of a contract, the result is to set aside the contract ab initio. While equity followed the law in requiring restitution as a condition of rescission when a contract had been wholly or partly executed, it allowed greater flexibility in the basis upon which restitution and accounting between the parties may be ordered. Thus equity did not require complete restitution of the position which existed before the contract but allowed its remedies, particularly an order for monetary accounts, to be utilised to achieve practical restitution and justice.

272 Their Honours then referred to a judgment in Alati v Kruger at 223 224 which included the passage:

But it is necessary here to apply the doctrines of equity, and equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct enquiries as to the allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo.

273 In considering what terms, if any, should be imposed on the defendants to satisfy this longstanding principle, it is essential to appreciate that had the unconscionable conduct not produced this loan, neither of the defendants would have granted security over Railway Avenue or have been exposed to claims for possession, foreclosure or sale of the security by a registered mortgagee. Of course, without that mortgage, they may not have obtained the funds to purchase Railway Avenue. The possibility that they may have raised funds on a full documentary mortgage from another source, or by selling one of their other properties, was not investigated or explored but it cannot be assumed that they would not have, by some different and satisfactory means, acquired Railway Avenue without being exposed to mortgagee's remedies in favour of the plaintiff.

274 The first thing, therefore, is that I consider that the mortgage should be set aside and the plaintiff ordered to discharge it and, for similar reasons, that the loan agreement should be set aside. Doing only this would leave the defendants with the benefit of the principal of $266,849.83 advanced by the plaintiff.

275 This leads to the question of whether or not any restitution of the principal should be accompanied by an order to pay interest as it has accrued under the terms of the mortgage and the loan agreement both before and since the default which, as already recounted, led to interest being calculated and claimed at higher rates to which have been added substantial legal fees. By setting aside the mortgage which takes effect ab initio there is no contractual right for the plaintiff to receive interest at the rates prescribed in that security either before or after the default. Similarly, there is no contractual basis for the plaintiff to recover legal fees or other expenses under the terms of the mortgage once it is set aside. The unconscionable conduct proved disentitles the plaintiff to derive any benefits from the defendants by that transaction.

276 I consider that the restitution payable by the defendants in return for the relief granted in respect of the Railway Avenue 2007 loan and mortgage should be the original principal plus simple interest thereon from the date of the advance of the principal, namely 7 November 2007 (date of registration) at a modest rate, such rate being the cash rate as fixed by the Reserve Bank of Australia prevailing from time to time from 21 October 2007 until the date of payment. This rate should reflect the effects of inflation over the period the defendants had the benefit of the money advanced and a small commercial return acceptable to the market rather than an elevated rate charged by the plaintiff for Easydoc loans. In default of agreement between the parties on the amount of interest so payable I will direct that there should be an enquiry and an account before a Registrar to determine the rates of interest applicable during that period and the aggregate balance of interest due to the date of completion of that enquiry and the rate of any interest still accruing. When doing so the defendants should be given credit for all amounts of interest paid by them at higher or other rates under the mortgage.

277 Rather than make the repayment of the principal with such interest a condition of the dismissal of the plaintiff's claim for possession and the defendants' relief on their counterclaim, I consider that there should be an order that the defendants do pay to the plaintiff the sum of $266,849.83 plus interest to be calculated in accordance with the terms of this judgment, such obligation to make payment of principal and interest by the defendants to be, once ascertained, a debt due and payable by them to the plaintiff but unsecured. The obtaining of security by the plaintiff under the mortgage was part of the imposition and exploitation of the defendants by the unconscionable conduct proved.

278 The other five earlier loans and mortgages by the plaintiff to the defendants, or in the Holland Street case, the loan to both defendants and mortgage by Mr Burns alone, have been repaid and the mortgages discharged. Nevertheless, they were each the result of unconscionable conduct by the plaintiff. They too should be declared to be unenforceable and void and to have been set aside. Restitutio in integrum can, in a real sense, be recognised by the current position if the plaintiff is now required to pay to the defendants the benefits it derived from these unconscionable transactions to complete that restitution.

279 Those benefits are the extra interest received by the plaintiff under each of those loans and other charges debited to the defendants' account pursuant to the terms of the loan contracts or mortgages. There should, accordingly, be an enquiry and an account before a Registrar to ascertain the applicable Reserve Bank of Australia cash interest rates applicable from time to time over the period when those earlier loans were outstanding and an account of the simple interest on the outstanding balances by the defendants of those mortgages at the Reserve Bank cash rates from time to time over their duration. The account should also determine the total interest paid by the defendants to the plaintiff under those mortgages at the rates of interest prescribed by the loans or mortgages, both before and after any default, plus other charges to the defendants' account under them.

280 The balance, found due, on those accounts between the moneys actually received by the plaintiff as interest and other expenses under the loans and mortgages, less the aggregate of simple interest at the Reserve Bank of Australia cash rates, should be paid by the plaintiff to the defendants in order to complete practical restitution. That amount, once ascertained, may be set off by the defendants against the amounts found due on the other accounts for principal and interest at Reserve Bank of Australia cash rates in respect of the Railway Avenue loan and mortgage.

281 Accordingly, I consider that the orders which ought be made to give effect to these reasons should be as follows:

(b) the mortgage by the defendants to the plaintiff dated 18 October 2007 and registered at Landgate Land Titles Division on 7 November 2007 (registration number K403751) to secure the sum of $228,368.54 declared invalid and unenforceable and set aside;

(c) the plaintiff forthwith lodge a discharge of that mortgage at the Land Titles Office and deliver the duplicate Certificate of Title and any other security documents held in respect of that loan to the defendants;

(d) the loan agreement between the plaintiff and the defendants dated on or about 17 October 2007 by which the plaintiff agreed to provide a credit facility to and at the request of the defendants with a limit of $228,368.54 be declared invalid and unenforceable and set aside;

(e) the defendants do account to the plaintiff for the principal sum of $228,368.54 advanced to them under the mortgage now set aside plus interest thereon, calculated as simple interest on that principal from 7 November 2007 until the date of repayment at rates of interest coinciding with the cash rates set by the Reserve Bank of Australia from time to time which, if not agreed, be determined by a Registrar on enquiry to be held to determine the appropriate rate in accordance with this order and the aggregate interest payable after credit has been given for all interest payments made by the defendants for that mortgage;

(f) the defendants' counterclaim for rescission of each of the five earlier loans and mortgages over Ilma Street, Barellan Court and Holland Street properties between the plaintiffs and the defendants, or one of them, be allowed and each of those loans and mortgages be set aside and declared unenforceable because of unconscionable conduct by the plaintiff. Restitutio in integrum for those transactions will be made by the plaintiff retaining the repayments of principal and interest made under them by the defendants, subject, however, to paying to the defendants the amounts found due on a further enquiry before a Registrar to determine the difference between the interest and other expenses charged to the defendants under those loans and mortgages and simple interest on the principal outstanding from time to time calculated at the cash rate of interest fixed by the Reserve Bank of Australia for periods when that principal was owing. The balance found due by the plaintiff to the defendants after this enquiry be set off by the defendants against the balance found due by them to the plaintiff on the completion of the enquiry and account ordered under subpar (e) above, and the final balance be paid by the defendants to the plaintiff;

(g) the balance of the amount of principal and interest so ordered to be paid by the defendants to the plaintiff after the enquiries and accounts shall be a debt due and payable by the defendants to the plaintiff without security;

(h) the defendants' counterclaim for damages against the plaintiff under s 82 of the Trade Practices Act 1974 (the Competition and Consumer Act 2010 (Cth)) be adjourned for a directions hearing before a judge at a date to be fixed with a view to being set down for hearing after any further necessary interlocutory procedures but only in respect of any damages claimed to have been caused by alleged misleading or deceptive conduct arising from what has been referred to in reasons for decision in this case as the Railway Avenue loan and mortgage of October 2007;

(i) otherwise the counterclaims of the first and second defendants be dismissed;

(j) there be liberty to apply in relation to the conduct of the enquiries and the taking of accounts.

282 So far as the costs of the litigation are concerned it is the case that the issues arising on the plaintiff's claim and the defendants' counterclaims were essentially inextricable and amounted, in substance, to the one contest in respect of which the defendants have been substantially successful. Costs are always in the discretion of the court but subject to a discretion which must be exercised judicially having regard to the principles set out in RSC O 66 r 1. Assessing as best I can the balance of the degrees of success or failure of the parties I propose that subject to submissions on all issues of costs it may be an appropriate order for costs if the plaintiff were to pay 80% of the defendants' costs of the action and counterclaim to be taxed as one combined set of costs but that such costs should not include any allowance for work done when either defendant was not legally represented. On this basis, the second defendant, might recover 80% of his disbursements incurred in connection with this claim and his counterclaim and that the plaintiff would recover no costs of its claim.