Perpetual Trustees Victoria Ltd v Cox

The Directions given by the Borrowers 29Mr and Mrs Cox signed a document dated 25 May 2006 headed "Direction to Pay" which instructed Galilee Solicitors to "leave the balance of funds in my redraw facility with Mortgage Merchants Australia Pty Limited T/as MMA Loan Management Account No. _________" (the account number was left blank). 30On 6 June 2006, Challenger certified that the mortgage would constitute an "Authorised Investment", will be a "Mortgage" and/or "Approved Mortgage" [sic] and will comply with all other provisions of the various agreements between Challenger and Perpetual. 31The loan settled on 7 June 2006. On 7 June 2006, a document purportedly signed by the Borrowers was faxed to Perpetual's solicitors (Galilee & Associates) in these terms: "7th June 2006 TO WHOM IT MAY CONCERN Galilee & Assoc Att: Joanne At settlement could you please telegraphically transfer the amount of $253,500 from Loan 3 to the following account: CBA BSB: [XXX XXX] A/C: [XXXX XXXX] Regards (signature) (signature) Raymond Cox Susan Cox" 32This document (Direction) was and is of critical importance to the trial and the appeal. It was common ground that the CBA account nominated was in the name of MMC, and was controlled by Ms Maloney. It was common ground by the conclusion of the trial, and on appeal, that the signature of Mrs Cox had been forged. Perpetual said that Mr Cox had signed for himself and had forged his wife's signature. The Borrowers said that Ms Maloney had forged both their signatures. 33The primary judge was not satisfied that Mr Cox had signed the Direction. It will be necessary to return to the detail of the evidence bearing upon this issue. For present purposes, it is sufficient to note that Mr Cox denied signing it (and denied attending Ms Maloney's office on 7 June 2006). On the other hand, the receptionist and trainee mortgage broker employed in Ms Cameron's business, Ms Ashleigh Brandon, claimed to have a clear recollection of Mr Cox signing the document, and she made what she said was a contemporaneous note of that fact (although she kept it separate from the "Originator's Notes" which accompanied the file). Neither party called Ms Maloney.

The registered mortgage 34It was common ground that the Borrowers signed the schedule to a registered mortgage in favour of Perpetual. (The copy in the appeal books appears to have been dated 25 May 2006 - when a suite of documents were executed by the Borrowers and witnessed by Ms Maloney - which date has been crossed out and replaced by 7 June 2006: compare Blue 1/283M with eg 1/232H. No party sought to make anything of this.) 35The mortgage as registered was a two page document. It was poorly drafted. 36The first page incorporated a Memorandum of Common Provisions (as to which see below), but made no reference to a Schedule. The second page was a Schedule. Although the first page referred, correctly, to the Wagga Wagga and Tathra properties, the Schedule referred only to the Tathra property. It contained two paragraphs numbered "1". It was replete with grammatical errors (for example "The memorandum is varies as follows" [sic]). Perpetual relied on the second paragraph numbered "1": "You acknowledge giving this mortgage and incurring obligations and giving rights under it for valuable consideration of $598,500 received from Us which You agree to repay together with interest and Expenses in accordance with the Memorandum of Common Provisions." 37The Memorandum of Common Provisions was registered. It contained, under the heading "Mortgage Obligations", an acknowledgement that the Mortgage gave security over the Property, and stated in cl 2.2: "The Mortgage is security for payment to Us of the Secured Money and for the performance of all of your obligations under the Mortgage. You agree to pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of each Secured Agreement or the Mortgage." 38The "Mortgage" was defined to mean "the Mortgage Form including all schedules and annexures and this document", and the "Mortgage Form" was defined to mean "the form of mortgage that You have executed that refers to and incorporates this document". The Mortgage was thereby defined by reference to documents, rather than its juridical status as a creature of statute amounting to a charge on the land: Real Property Act 1900 (NSW), s 3 and English Scottish & Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 323. 39"Secured Money" was defined to mean, relevantly: "all amounts that are payable at any time or are contingently owing or payable to Us under a Secured Agreement" 40"Secured Agreement" was defined to mean: "● any present or future agreement between Us, and You or any of You that You acknowledge in writing to be an agreement secured by the Mortgage, and ● an agreement that varies such an agreement." 41The first page of the mortgage provided that the mortgagor "covenants with the mortgagee that the provisions [of the Memorandum of Common Provisions] are incorporated in this mortgage". 42There were two further references in the Schedule to the Memorandum of Common Provisions. The first paragraph 1 provided (redundantly) that the provisions in the Memorandum of Common Provisions "are incorporated in this mortgage" and that "A reference to 'this mortgage' in the cover sheet, this Schedule, the memorandum or in any annexure to this mortgage is a reference to the mortgage constituted by the cover sheet, this schedule, the memorandum and each of those annexures". Finally, clause 3 of the Schedule provided that: "If the wording of the memorandum is inconsistent with this schedule, this schedule prevails."

The drawing down of the loans 43The amounts in Facilities A and B were drawn down and used to refinance the Borrowers' existing indebtedness. The Borrowers shortly thereafter asked MMA to arrange for repayments of the first facility on the 15th of each month, and of the second on the 30th of each month; that occurred in an orderly fashion. It will not be necessary to say much more about these two facilities, except insofar as their repayment history was completely different from that of Facility C. 44It was common ground that on 7 June 2006, in accordance with the forged Direction, Galilee transmitted $253,500 to the nominated bank account, in the name of MMC (which was in fact deregistered) and controlled by Ms Maloney. What happened to the funds thereafter was unexplored in the evidence.

After the drawing down of the loans 45Much of what happened thereafter was the subject of disputed testimonial evidence. I deal with that evidence later; this section of this judgment is primarily directed to what is established incontrovertibly from financial and other records. 46The mortgage was registered on around 20 June 2006. Automatic repayments, apparently from Mr Cox's credit union account, of Facility C were dishonoured (the credit union account had, save on one occasion, insufficient funds), and letters advising the Borrowers of that fact were sent to them. Some payments were made, apparently by Ms Maloney (the parties agreed that they were made by Ms Maloney or MMC, but the latter did not exist). In particular, on 20 and 28 September, payments of $5,000 and $48 were credited to the Facility C account by Ms Maloney. The missed payments on 7 July, 7 August and 7 September were $1,658.31, $1,658.31 and $1,731.58; the payments by Ms Maloney were approximately in that amount. Those payments came about because of discussions between Mr Cox and Ms Maloney (see further below). 47It would appear that there was an automatic debit facility from Mr Cox's credit union account throughout the period. In the case of the automatic debit on 6 October 2006 (and apparently for the first time) there were sufficient funds in that account for the $1,731.58 transfer to be successful. On the same day, there was a separate transfer of $1,731.58 into Facility C. It was an agreed fact that on 11 October 2006, Mr and Mrs Cox "redrew" $1,731.58 from Facility C (this is relevant to Perpetual's ratification submission). 48In evidence in chief and in cross-examination, Mrs Cox was taken to a letter referring to that transaction. It was in theses terms: "9th October, 2006 TO WHOM IT MAY CONCERN Could you please transfer back to our linked account at the Fire Brigade Credit Union $1731.58. regards Raymond Cox Susan Cox (signature) (signature)" 49It was common ground that Mr Cox signed his wife's name on that letter. Mrs Cox said that she recognised that both signatures were in her husband's writing, and she said that "he came home and told me he'd done it" on the same day. Moreover, the Borrowers cross-examined Ms Brandon on the basis that her recollection and her file note recording Mr Cox signing his wife's signature was a reference to what had occurred on 9 October 2006, rather than four months earlier in June. 50In the second half of 2006, there were communications between the Borrowers (later through a solicitor) and Ms Maloney, directed to the repayment by her of the facility. During the course of those communications, Ms Maloney agreed to repay the whole amount, with interest. It was common ground that that was how the payments of $5,000 and $48 came to be made. (There is a note in the Originator's Notes, seemingly in Ms Maloney's handwriting at this time which reads "T/F 5000 - full daily limit on system" which suggests why there were separate transfers of $5,000 and $48.) 51Later, after the Borrowers retained a solicitor, the communications became more formal. On 8 November 2006, Ms Maloney advised that "Upon settlement of their loan the sum of $253,500 was drawn and placed into an account, interest was being paid on this account of 12% per annum", and that it was agreed that the funds would be returned on or before 24 November, including any outstanding interest. That did not occur. Nor did Ms Maloney fulfil various other promises to repay the full amount plus interest, although some payments were made by her. 52In particular, on 24 November 2006, there was a credit of $4,466.13 on the Borrowers' first facility, Facility A, and a credit of $2785 on the third facility, Facility C. Ms Mahoney wrote on the same day to the Borrowers' solicitor: "Monthly interest to Loan ID No 279416 $2785.00, surplus transferred to Loan ID No 279414 $4466.13, transferred to appropriate accounts on Friday, 24th November, 2006, will show in accounts on 28th November, 2006." 53Perpetual said that this was consistent with Ms Maloney's offer made on 8 November (I note that $2,785 is approximately - although slightly more than - one month's interest at 12% on a principal of $253,500). 54Thereafter there were a series of "defaults" - in the sense that the automatic payment of the monthly interest on the 7th of each month was requested, and dishonoured (triggering a fee and default interest). Exceptionally, on 14 and 23 May 2007, amounts of $4,200 and $1,500 were credited to the facility, followed by a payment of $1,774.57 on 7 June 2007. 55To summarise: interest accruing on the first and second facilities was paid, automatically over the whole of this time without any default. The third and largest facility from the outset attracted a dishonour fee and default interest in every month, including the first, save for one, because the automatic payments were not being honoured. The exception was October 2006, but in that month there were two payments of interest of $1731.58 on the same day, one of which was refunded five days later. 56A letter from the Borrowers' solicitor dated 17 May 2007 stated that Ms Maloney had been "arrested on this and some five other counts of fraud only last week". An internal Challenger email dated 28 March 2007 stated that "[t]he police have advised Denise to pay back the money owing to all borrowers (3 with Challenger another 10 or so with other financial institutions) she has deceived by altering the disbursement certificates." Another letter dated 10 March 2009 from the Borrowers' solicitor advised that Ms Maloney had pleaded guilty to two of six counts of fraudulently misappropriating funds.

Perpetual commences proceedings 57Ultimately, a default notice under s 57(2)(b) of the Real Property Act was issued. The Wagga Wagga property has been sold, and the Borrowers' indebtedness pursuant to the first and second facilities has been discharged, with the surplus being held in a controlled monies account. 58Perpetual sought by its proceedings to obtain a writ of possession in respect of the Tathra property. The trial before the primary judge lasted for six days in July and August 2012, followed by an exchange of written submissions with a further day for oral addresses on 15 November 2012. The primary judge dismissed Perpetual's statement of claim, for lengthy reasons of 235 paragraphs, delivered some 11 months after judgment was reserved: [2013] NSWSC 1583. It will be convenient to summarise his Honour's reasons when addressing the issues which arise on appeal. 59The Borrowers had brought a cross-claim, whose effect was that Ms Maloney had misled them into believing that the loan documents were an approval to borrow money, rather than a borrowing of money, contrary to s 52 of the Trade Practices Act 1974 (Cth). They sought orders under s 87 of that Act and also (by their amended cross-claim) under the Contracts Review Act 1980 (NSW). The primary judge dismissed that cross-claim without adjudicating it, save to say that had he found that Mr Cox had signed the Direction, he would have ordered that Mrs Cox not be liable: at [231]. 60Perpetual had at one stage cross-claimed against its solicitors and its originator MMA, but those cross-claims were resolved and formed no part of the appeal. 61His Honour's orders required the removal of the mortgage from the Tathra property, and the payment to the Borrowers of the surplus from the sale of the Wagga Wagga property which had been retained, after discharging the indebtedness on the first and second facilities, in a controlled monies account. Those orders have been stayed pending the determination of this appeal.

Three issues raised on appeal 62Perpetual appealed as of right. Its notice of appeal is elaborate, but (helpfully) identifies three topics, under the headings "Ratification" (grounds 1-5), "Construction" (grounds 6-11) and "The first respondent signed the Direction" (grounds 12-18). It will be convenient to follow the course adopted in oral argument, and deal with them in a slightly different order. 63The premise of grounds 1-11 is that neither Borrower signed the Direction. Upon that assumption, Perpetual's first submission was that the second clause 1 of the Mortgage Schedule applied to burden the Tathra land with the obligation to repay the $253,500. Secondly, upon the same assumption, Perpetual submitted that Mr and Mrs Cox had ratified the conduct of Ms Maloney. If Perpetual succeeds either on construction or ratification, then it will not be necessary to resolve the challenge to the primary judge's factual finding as to the signing of the Direction, which is Perpetual's third submission on appeal. 64By a notice of contention, the Borrowers contended (speaking generally) that there could be no ratification of a forgery. Perpetual responded by saying that they ought not be permitted to advance this point, which was new and affected the evidence adduced at trial, on appeal. It will not be necessary to determine any aspect of the notice of contention in order to resolve the appeal. 65By their notice of cross-appeal, the Borrowers say that in the event that the appeal is allowed, the cross-appeal should be allowed and determined after trial. Perpetual did not oppose that course. On the view that I take of the appeal, this does not arise. 66It follows that there are three main issues: construction, ratification and the challenge to the finding about the signing of the Direction. Each is addressed in turn below.

First issue: construction of the second clause 1 in the Mortgage Schedule 67The primary judge addressed Perpetual's submissions on construction at [193]-[230]. He recorded Perpetual's submission as being that the whole amount of $598,500 was repayable by the Borrowers, irrespective of whether or not they authorised its drawing down, and the Borrowers' submission as being that they could not be liable for what they did not receive: at [199]-[200]. 68His Honour construed the mortgage together with the Memorandum of Common Provisions and concluded that the issue turned on construction. He distinguished the cases on which Perpetual relied, which were directed to the operation of indefeasibility, where the loan agreement was void, or indeed where the mortgage itself was forged; his Honour said that the proceedings did not concern indefeasibility, and neither the loan nor the mortgage documents had been forged: at [224]. As a matter of construction, his Honour considered that Perpetual was not entitled to enforce the mortgage in respect of funds disbursed unlawfully, pursuant to the forged Direction. 69On appeal, Perpetual again focussed upon the reference in the second clause 1 to the receipt of $598,500 and relied upon decisions whereby forged mortgages which contained an acknowledgement of the receipt of funds, and a covenant to repay them, were held to attract indefeasibility and were enforceable against the land in accordance with the provisions of the Real Property Act. Counsel for Perpetual stated that the clearest authority was the "second mortgage" referred to in Printy v Provident Capital Limited [2007] NSWSC 287 at [42]-[45] and mentioned on appeal Provident Capital Ltd v Printy [2008] NSWCA 131 at [18]. 70The forgery cases strikingly illustrate the force of indefeasibility (the defrauded registered proprietor may have a claim against the Torrens Assurance Fund if there is no solvent defendant who may otherwise be sued). Naturally, if as here the mortgage is not forged, but for some reason the loan agreement is unenforceable, the position is a fortiori. The position was explained by Giles JA with the agreement of the other members of the Court in Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390 at [15]-[16]: "[A]lthough forged, the mortgage had gained indefeasibility under the provisions of the Real Property Act 1900; but because it was so worded as to secure money payable by Mr Vella to Mitchell Morgan, and no money was payable, it secured nothing and should be discharged ... A registered proprietor gains indefeasibility as to 'the estate or interest in land recorded in a folio of the Register': Real Property Act, s 42(1). A series of cases has established that the extent of a registered mortgagee's interest depends on the money obligation secured. As Campbell J (as his Honour then was) said in Small v Tomasetti [2001] NSWSC 1112 at [9] 'Notwithstanding that registration confers indefeasibility on a mortgagee, there is still a question "indefeasibility for what?".' The answer to the question lies in the terms of the mortgage. On the wording of the Mitchell Morgan mortgage, it secured money owing by Mr Vella to Mitchell Morgan: there had to be money owing. In the principal judgment the primary judge so held and, applying the cases abovementioned, held that because nothing was owing by Mr Vella to Mitchell Morgan the mortgage was indefeasible as to nothing: at [264]-[328]." 71However, as is plain from the reasoning of Giles JA in that passage, everything turns upon the particular covenant, a point likewise made by Sackville AJA in respect of (coincidentally) another Challenger mortgage in Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32 at [12]. His Honour's summary of relevant principles at [68] included (authorities omitted): "[I]f as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt or obligation, registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation." 72Thus, contrary to the tenor of some of Perpetual's oral submissions, this appeal does not turn on the fact that the full amount drawn down (including the $253,500 never received by the Borrowers) is referred to in the Schedule to the Mortgage. His Honour correctly rejected what appears to have been a substantially similar submission advanced at first instance. The question whether, upon the assumption that Ms Maloney forged the signatures of Mr and Mrs Cox on the Direction, the covenant in the registered mortgage applied to the $253,500, disbursed fraudulently and without the Borrowers' authority, turns on construction of the Mortgage as a whole. It also follows that it is not necessary to enter into the debate as to the status of a mortgagor's personal covenant to repay: cf J Stoljar, "Mortgages, indefeasibility and personal covenants to pay" (2008) 82 ALJ 28. 73Perpetual advanced three alternative constructions of the covenant. Its first and primary submission was that the $598,500 was repayable directly by reason of the operation of the second clause 1 in the Schedule. That submission involved an acceptance of two propositions. The first was that the $253,500 was not repayable in accordance with the Memorandum of Common Provisions because it had not been advanced in accordance with the Loan Agreement. The second was that the $253,500 was payable on demand, there being no provision in the Memorandum of Common Provisions which provided for its repayment. Perpetual relied on clause 3 to the extent that the Memorandum of Common Provisions told against that result. 74Perpetual's strongest argument was that its decision to include the amount of $598,500 in the mortgage itself, with an acknowledgement of receipt by the Borrowers, pointed to the mortgage standing as security for the whole amount, even if it were never paid to the Borrowers, and was advanced without complying with the agreement between the parties. 75I would reject Perpetual's primary submission on construction, for four reasons. First, it seems plain by reason of the defined term "this mortgage" and the repeated references to incorporation that this particular covenant is directed to monies advanced and to be repaid in accordance with some existing or future agreement between borrower and lender. 76If anything emerges clearly from the mortgage documents it is that the coversheet, the Schedule and the Memorandum of Common Provisions were to be read together. The Memorandum was incorporated into the Mortgage (a) by the coversheet, and (b) by both clauses numbered 1 in the Schedule. In circumstances where the first clause 1 defines "this mortgage", where the second clause 1 refers to "this mortgage" and where the words "this mortgage" are not used anywhere else in the Schedule, the words "this mortgage" in the second clause 1 must bear the meaning defined in the first clause 1. Any other approach would leave the definition entirely otiose. I am conscious that, as Lord Hoffmann put it, "the argument from redundancy is seldom an entirely secure one", because "people often use superfluous words": Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266 at 274. However, the definition of "this mortgage" is elaborate, it is the only definition in a very short document, and the second clause 1 is the only clause in which that defined term is used. 77The covenant on which Perpetual relies is quite different from the second mortgage in Printy. There, the mortgage itself created a free-standing obligation to repay $50,000 within 12 months, independently of the loan documentation: see at [44] of the reasons at first instance. In contrast, here there are strong and repeated indications pointing to the covenant in the second clause 1 being read together with the Memorandum of Common Provisions. 78Secondly, as much is confirmed by the operative verb on which Perpetual relies: "repay". There is no good reason to give that ordinary word a strained meaning referable to "repaying" amounts never paid by Perpetual in the first place to or at the direction of the Borrowers. 79Thirdly, the construction for which Perpetual contends has an aura of unreality about it. It involves, in its application to this mortgage, the proposition that the Borrowers have almost 30 years to repay amounts they actually received, but have to "repay" on demand amounts they never received. That really does amount to the sort of "commercial nonsense" which a court should strain to avoid: cf Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447 at [35]. 80Fourthly, suppose Perpetual (or its solicitors) mistakenly transferred the funds to the wrong recipient. I cannot see why in those circumstances the mortgage should receive a strained construction so as to burden the Borrowers' land (and in addition create an obligation upon the Borrowers to "repay") in respect of an amount they had never received by reason of the lender's own mistake. And I cannot see how the construction for which Perpetual contends could treat fraud by Ms Maloney any differently. 81For those reasons, the construction for which Perpetual contends is unattractive when regard is had to the text and commercial sense of the clause. There is a much more natural construction, which does no such violence to the language, and which gives the word "repay" its ordinary meaning, such that the obligation to repay extends only to what has been received in accordance with the contract. That construction gives efficacy to the incorporation of the Memorandum of Common Provisions into the cover sheet and Schedule. Doing so does not give rise to any inconsistency such as to attract clause 3 of the Schedule. 82Perpetual's second submission was that the Mortgage was itself a "Secured Agreement" within the meaning of the Memorandum of Common Provisions. This submission was not advanced orally on appeal. It should be rejected. 83The relationship between the Mortgage and the Secured Agreements is tolerably clear. The former is security for the performance of the latter. As the primary judge observed at [208], the Mortgage is silent as to the time for repayment (contrast the "second mortgage" in Printy). That, together with the repeated references to the Memorandum of Common Provisions, indicates that the statutory charge created by the registration of the mortgage secures the performance of the Secured Agreements, but is not itself a Secured Agreement. 84That conclusion is strengthened by two further considerations. One is the commercial unreality of the unauthorised disbursement being repayable on demand, to which I have referred above. The other is that Perpetual's construction collides with the structure of the documents. Consistently with the defined term "Secured Agreements", it is plain that the Memorandum of Common Provisions identifies a class of promises whose performance is secured by a mortgage. There is no basis for a construction by which some promises are both secured agreements and security for the performance of those promises. Perpetual's argument requires the mortgage (or some of the covenants contained in it) to be both a primary obligation and security for the performance of those primary obligations. 85Perpetual's third submission was that the acknowledgement in the Schedule was an "acknowledgement" for the purpose of the Loan Agreement, such that the $598,500 was repayable under the Loan Agreement and was therefore secured by the Mortgage. This submission was also not advanced orally. In writing, it was articulated as follows: "The effect of the argument is that if the respondents' acknowledging receipt of $598,500 in [the second clause 1] is an acknowledgement of receipt under the Loan Agreement, so it is repayable under the Loan Agreement. Even on the primary judge's construction of [the clause], the amount specified in [the clause] is "Secured Money" and is repayable pursuant to clause 2.2 of the Memorandum. The Mortgage is a deed. Accordingly, the respondents are estopped from denying the matters they assert in the Mortgage, including in [the clause]. If the Loan Agreement and the Mortgage are to be read together, it is logical that the acknowledgement of the sum of $598,500 is an acknowledgement of receipt in accordance with the Loan Agreement." (I am conscious that the argument is put slightly differently in the two formulations above, but that is how it was formulated in the written submissions at paragraphs 62(c) and 84.) 86Perpetual said that this argument had been advanced below and had not been addressed by the primary judge. It is not clear to me that that is so. In the form advanced at trial, the submission appears to have been confined to one whose premise was that Mr Cox (although not Mrs Cox) had signed the Direction. Perhaps more importantly, the estoppel on which Perpetual relied for the purposes of this argument had not been pleaded (although Perpetual had filed an elaborate reply, including a different allegation of estoppel). But there are more direct answers to the submission. One is that it seems very similar to the second submission, and may be rejected for substantially similar reasons: why should the language be construed so that the same promise is both a primary obligation, and security for the performance of a primary obligation? Finally, one element of the maxim that "fraud unravels everything" is that the common law estoppel deriving from the fact that the mortgage covenant is to be treated as if it were a deed does not apply to prevent the Borrowers from contending, contrary to their acknowledgement, that in fact they received nothing by reason of the fraud of Ms Maloney. 87It follows that Perpetual's appeal, insofar as it challenged the primary judge's construction of the mortgage, should be dismissed.

Second issue: ratification 88It was common ground that, in order for conduct to amount to ratification, there must be "full knowledge of all the material facts": Leyborne v Permanent Custodians Ltd [2010] NSWCA 78 at [134]. The Court said that: "The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act." 89Perpetual's claim was confined to ratification. There is accordingly no occasion to consider whether there is any different mental state required for the Borrowers to have elected to affirm, or to be estopped from rescinding, the contract ("full knowledge of the material facts" has also been used in these related contexts: see for example Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 642). 90There can be no doubt that the Borrowers knew that the $253,500 in Facility C had been drawn down. They received, fairly rapidly, statements on Challenger letterhead indicating their indebtedness, and the interest and dishonour fees which had been charged. 91However, on the findings of the primary judge, it was not established that the Borrowers knew that Ms Maloney had transferred the $253,500 to an account she controlled by reason of a forged Direction. There were ample documents consistent with their evidence, and the findings of the primary judge, that the Borrowers for some time believed that they had signed the document, on the same day as they had signed many other documents as urged by Ms Maloney. (Indeed, the Borrowers' delay in asserting their signatures had been forged was an important element of Perpetual's challenge at trial and on appeal to Mr Cox's evidence that he did not sign the Direction; this is addressed below.) 92Put differently, Perpetual (through its agent Galiliee Solicitors) transferred funds to an account in the name of MMC with the Commonwealth Bank of Australia on 7 June 2006. It did so pursuant to what appeared to be a direction from the Borrowers, but which for the purpose of resolving this aspect of the appeal must be taken to have been a forgery. The question is whether the Borrowers ratified what Ms Maloney had caused to occur, so that what had been unauthorised became authorised. In my opinion, full knowledge of all the material facts in this particular case required the Borrowers to know that the document was a forgery. However they did not know that at any material time. 93That is sufficient to dispose of the ratification argument, but it is best to reproduce and refute Perpetual's submissions in the detail in which they were advanced. 94Perpetual relied on three particular aspects of the dealings between the Borrowers (and their solicitor) and Ms Maloney, although two of the three were related, and, in light of the fact that counsel for Perpetual candidly acknowledged that the third way in which he put ratification did not take the matter any further, I say nothing more of it. 95One way in which Perpetual contended there had been ratification was by means of the agreements reached between the Borrowers and Ms Maloney to the effect that she would make payments on Facility C. It is not necessary to provide the details of the correspondence in order to reject the submission (although some, such as the letter of 8 November 2006, is referred to above). The matter may be tested this way. Mr and Mrs Cox said that they believed for many months that the signatures on the Direction were in fact theirs (indeed, by their cross-claim they claimed that they had signed having been misled by Ms Maloney). Until such time as they knew that Ms Maloney had forged their signatures, they could not be regarded as ratifying what she had done. As the primary judge said at [183], the Borrowers' attempts to negotiate with Ms Maloney, and the seeming "agreements" reached with her that the funds would be repaid do not, of themselves, amount to ratification of her initial fraudulent transfer of funds. 96Perpetual's other submission turned on what was pleaded and referred to in submissions as the "redraw" of $1,731.58 on 11 October 2006. The language of "redraw" is, it may be inferred, intended to convey an acceptance by the Borrowers of the consequences of the forged Direction. However, that description is unhelpful for present purposes. 97The "redraw" came about from Mr Cox's letter "TO WHOM IT MAY CONCERN" letter of 9 October. It was styled in that letter by Mr Cox, not inaccurately, as a "refund". His letter was prompted by the fact that there were two repayments of Facility C, in the same amount on the same day, one by Ms Maloney, the other pursuant to the automatic debit upon the Borrowers' credit union account (which, this time, contained sufficient funds for it not to be dishonoured). 98It is not material whether, strictly speaking, it amounted to a "redraw". Nor is it material whether it was treated by Perpetual or Challenger as a redraw. The absence of knowledge by the Borrowers of Ms Maloney's having forged the Direction is a complete answer to the submission. What is more, in addition to the absence of knowledge, the request does not suffice to ratify Ms Maloney's fraud of 7 June 2006; it is not a "clear adoptive act" as required by the principles stated in Leyborne v Permanent Custodians Ltd [2010] NSWCA 78 at [132]. It is plain from his letter that Mr Cox wanted the transfer reversed. Even if Perpetual regarded that as a "redraw", it is the quality of Mr Cox's act that matters for the purposes of ratification. 99It follows that the primary judge correctly rejected this aspect of Perpetual's case. It is not necessary to say anything about the notice of contention.

Third issue: who executed the Direction? 100Perpetual submits that the primary judge committed appellable error in failing to find that Mr Cox signed the Direction. This is addressed in grounds 12-17 of its notice of appeal, elaborately, over four single spaced pages, with 39 subparagraphs. Perpetual initially contended that this Court should itself find that Mr Cox, contrary to his sworn evidence, signed the Direction. It is quite plain that this Court is unable to make such a finding, and counsel for Perpetual acknowledged as much during the hearing. 101Alternatively, Perpetual submitted that there had been a substantial wrong or miscarriage of justice in failing to make this finding such that a new trial should be ordered. 102The primary judge styled this as the "Primary Issue" and the majority of his Honour's reasons are directed to its resolution. He followed the conventional approach of assessing the competing testimonial evidence against the contemporaneous documents and the inherent probabilities. 103His Honour identified the four main strands of Perpetual's case at [31] as (a) the eyewitness evidence of Ms Brandon, (b) the failure by Mr Cox to deny that he signed the Direction until 2007, (c) the negotiations between the Borrowers and Ms Maloney after the funds had been disbursed, and (d) other conduct of Mr Cox which was said to be consistent with his having signed the Direction. His Honour summarised the evidence under those headings, and the criticisms of it, over 14 pages at [33]-[87]. His Honour then identified the key elements of the Borrowers' case on this issue at [88]-[113], at the same time noting Perpetual's criticisms of aspects of it. Finally, under the heading "Resolution of the Primary Issue", his Honour over 11 pages expressed his findings and reasons: at [114]-[160]. Within that dispositive portion of the judgment, there were three main sections, headed "Onus and Standard of Proof" ([114]-[117]), "The Effect of Ms Maloney's Absence" ([119]-[130]) and "Decision" ([131]-[160]); his Honour also acknowledged at [118] that nothing was to be drawn from the failure of either party to tender the original of the Direction.

(a) Onus 104His Honour recorded that it was common ground that Perpetual carried the onus of establishing that Mr Cox signed the Direction. That reflects Perpetual's written and oral submissions. That approach was correct. In order to succeed in this aspect of its case, Perpetual needed to establish that the Direction on which it (by its agent Galilee Solicitors) acted to disburse the $253,500 was authorised by Mr Cox. 105His Honour also referred, with respect correctly, to Briginshaw v Briginshaw (1938) 60 CLR 336 and s 140 of the Evidence Act 1995 (NSW), having regard to the fact that Perpetual placed heavy reliance on Ms Brandon's evidence that Mr Cox had forged his wife's signature. It is plain that his Honour had regard to the gravity of the matters alleged, in accordance with s 140(2)(c). As the High Court said in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 171: "the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." 106Neat pre-dated the Evidence Act. However, the mandatory considerations in s 140(2) reflect a legislative restatement of essentially the same approach: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; 162 FCR 466 at [30]. (If there be a difference between the principle at general law and under s 140, it was not argued and it is not necessary to consider it in this appeal.) 107The question of onus mattered. Perpetual would fail unless it proved facts such that the conclusion that Mr Cox had signed the Direction could be affirmatively drawn. This accords with the influential and authoritative statement by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 requiring the plaintiff to prove each element of the cause of action to the reasonable satisfaction of the court, "which means that the court 'must feel an actual persuasion of its occurrence or existence'. Such satisfaction is 'not ... attained or established independently of the nature and consequence of the fact or facts to be proved' including the 'seriousness of an allegation made, the inherent likelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding.'" A recent example of the application of those principles in this Court is Minogue v Rudd [2013] NSWCA 345 at [66]. 108The trial judge decided this issue on onus. His Honour dealt with the dispute at length, relying expressly upon the demeanour of Ms Brandon: see at [134]-[137]. He also relied upon the contemporaneous documents, subsequent statements by Mr and Mrs Cox, and the oral testimony of Mr Cox (who was described as "a defensive witness" at [139]). His conclusion was at [159]: "Accordingly, I am not satisfied, on the balance of probabilities, that Mr Cox signed the direction of 7 June 2006. In reaching this conclusion, I have had regard to all the evidence, including that of Ms Brandon (with its difficulties as discussed earlier), the oral evidence of Mr and Mrs Cox and the substantial body of documentation dating from 2006 and 2007 which strongly supports the Defendants in this case." 109Perpetual appeared, at times, to submit that it was not open to his Honour to determine the case on that basis. It said that this was a case where neither Mr Cox nor Ms Brandon could have been mistaken. One swore that he did not sign, and did not attend Ms Maloney's office on the relevant day. The other swore that she saw Mr Cox sign, heard him tell her that he was signing his wife's signature, and made a note of those facts on the day. 110I was initially attracted by that submission, but it is not sustained upon a review of the whole of the record. This is an unusual case. There were very serious difficulties standing in the way of the acceptance of the evidence of both Ms Brandon and Mr Cox; what makes it unusual is that the difficulties in Mr Cox's evidence were obvious, while those of Ms Brandon are far less self-evident. Undoubtedly, at least one of the pair was mistaken as to what occurred six years earlier, on 7 June 2006. Determining which it was is much more difficult than one might at first blush expect, given that one was plainly self-interested, confessed to forging his wife's signature four months later, and had given inconsistent accounts including having sworn that he had in fact signed the Direction, while the other had no apparent motive to lie, and said that she made a note on the same day, and had given a police statement relatively shortly after the event. In order to explain why, I need to descend to the detail of the evidence.

(b) The handwritten file notes made by Ms Brandon 111The following contemporaneous documents bore upon the primary issue. The first was the Direction. The original of the Direction itself was not in evidence. (It is possible that this is the reason there was no handwriting evidence adduced by either party.) What was in evidence was the fax received by Galilee Solicitors. As received, the Direction was preceded by a typed coversheet, on MMA letterhead, but expressed (in small print at the footer of the coversheet) to have been sent by MMC(WW). It was addressed to "Joanne - Galilee & Assoc", had the subject line "COX", and stated: "Good morning Joanne, Please find following request. Regards Denise Maloney" 112Consistently with its salutation, the fax header bore a time stamp of 11:14am. The coversheet was not signed. 113There were two handwritten documents made by Ms Brandon relevant to the Direction. First, in her personal diary, which was one day to a page, against 2.30pm she had written: "Ray Cox - Investment letter - signed wife signature - Told AB & DM to forget what we saw" 114There were no other entries on the page, which was for 7 June 2006. In her affidavit, Ms Brandon said that she made the notes in her personal diary on the same day. 115Secondly, there were the "Originator's Notes" for the file. These were five pages of handwritten notes, entered chronologically, kept inside the front cover with the next entry written in the immediately following line - in a way which would make it difficult to enter notes out of order. It is plain that (at least) two people, Ms Maloney and Ms Brandon, made entries in the notes (Ms Maloney's handwriting slopes to the left, and is quite distinctive; Ms Brandon could readily identify who had written each entry: see Black 115G and 116N). There are entries on 5, 7, 8, 14 and 16 June. The entry on 8 June is in Ms Maloney's handwriting. On the immediately preceding line is the critical entry in Ms Brandon's handwriting, initialled by her and dated 7 June: "DM went and got request signed for $253,500 from Loan 3 to be transferred at settlement today. AB faxed to Joanne @ Galilee & Ass." Here is how it appears in the Originator's notes: 116Obviously, there are important discrepancies between the two handwritten entries. The Originator's Notes do not refer to Mr Cox executing his wife's signature. The Originator's Notes refer to a request for a transfer, while Ms Brandon's personal diary refers to an investment letter. Most importantly, the Originator's Notes unequivocally refer to Ms Maloney (DM) leaving the office and returning with the signed request ("went and got"); the personal diary makes it plain that the signing happened in Ms Brandon's presence (Mr Cox told "AB & DM to forget what we saw"). 117The fact that Ms Maloney made an entry dated 8 June 2006, coupled with the self-evident fact that the Originator's Notes were on their face a useful record of dealings with a client, starkly contrasts with the note in Ms Brandon's personal diary. Ms Brandon's note in the Originator's Notes was highly probably made on 7 June 2006.

(c) Ms Brandon's statement to the police 118Some 18 months later, on 11 January 2008, Ms Brandon made a statement at Wagga Wagga police station concerning the Direction. She said: "I am employed by National Loan & Mortgage Centre Pty Ltd. I have been employed with that company for the past two years. Firstly as a receptionist and now I am also a qualified mortgage broker, and am also doing work as a broker. The Principle [sic] for that company is Denise MALONEY. On the 11th January 2008, Detective Sergeant Michael HANDLEY showed me a document dated 7th June 2006 ... I am able to say that I was present in the reception area of the National Loan & Mortgage Centre Pty Ltd Office, on the 7th June 2006 when that document was signed. I saw Raymond COX sign the document above his name, and he also signed the signature for Susan COX above her signature. Our office at the time was situated at .... Fitzmaurice Street, Wagga Wagga. It was in the afternoon, definitely after 2pm. He had finished work and came into the office. It was in the reception area, not in the back office. He was standing to the left of the reception area. Denise read the document to him aloud. The phone rang in the back office, and she went out to answer the telephone. When she returned, he was just finishing signing the document. There was just three of us in the office. Denise had asked him 'Where's Sue. She needs to sign the document too?' He said, 'I am Sue. Just forget what you saw today.' When someone tells you that, you never forget. Then there was general conversation, and then he left the office. Denise then faxed the document to Galilee and Associates. Galilee and Associates is a solicitors firm in Sydney that the company uses. Denise told me to document what I saw and what Ray did, which I did do in my diary. I am able to provide copies of that entry. I have that diary at home." 119Again, parts of that statement are problematic, some of them unexpectedly so. For one thing, Ms Brandon accepted in cross-examination that she was not working as a broker, and had never done so. For another, and again for reasons which are unexplained, Ms Brandon emphasised that the incident occurred in the afternoon: "definitely after 2pm. He had finished work and came into the office". The copy annexed to the police statement bears a fax time stamp of 14:50, although it is plain that it is dated 23 January 2007. The time mentioned by Ms Brandon is consistent with the placement of the entry in her one day to a page personal diary, but is very difficult to reconcile with at least three other pieces of evidence: (a) the time stamp on the fax header as received by Galilee Solicitors (which, it would appear, Ms Brandon did not have when she made the statement), (b) the words "Good morning" on the coversheet (once again, it does not appear that Ms Brandon had that document), and (c) the attendance book for ancillary staff at the school at which Mr Cox worked which showed that he worked for six hours on Monday 6 June and seven hours on Thursday 9 June, but not on Tuesday 7 June 2006. 120There are other difficulties with Ms Brandon's statement to the police. There is the fact that the Originator's Notes record Ms Maloney as having "went and got request signed". Many other entries in those notes refer to Mr Cox visiting the office (for example, 9 May, 19 May, 17 July, 9 August, 19 October, 8 December, 23 January, 25 January, 30 January, 13 February). It would make sense for those notes (which recall all manner of minor activities in relation to the loan - for example, sending emails, phoning Galilee for an update on a stamp duty refund) to record something as important as Mr Cox's attending the office if that is what occurred. Finally, the statement that "Denise then faxed the document" is inconsistent with the handwritten note in the Originator's Notes that "AB faxed to Joanne @ Galilee".

(d) Testimonial evidence 121Both Mr Cox and Ms Brandon gave evidence at the trial and were cross-examined at length. Mr Cox's cross-examination occupied one and a half days, Ms Brandon's occupied the afternoons of the first and second days of the trial. 122His Honour regarded Ms Brandon's evidence as unreliable. Perpetual contended that his Honour erred in so doing. In order to address and resolve Perpetual's submissions, it is convenient first to reproduce the impugned part of his Honour's reasons (at [135]-[137], emphasis added): "Ms Brandon was a somewhat nervous witness who gave her evidence with a degree of hesitancy. I keep in mind that, even in July 2012 when she gave evidence, she was a young person giving evidence about events that occurred when she was 17 years of age. I keep in mind also that, at the time when Ms Brandon made her statement to police in 2008 concerning these events, she was still working for Ms Maloney. As I have mentioned, there are significant inconsistencies in what are said to be the contemporaneous notes made by Ms Brandon. I find most persuasive among these the fact that one note refers to the most serious matter of a husband forging the signature of his wife, whilst the other entry, allegedly made at the same time, contains no reference to a forgery. Moreover, contrary to the Plaintiff's submission, I am of the view, that it is more likely that the direction was faxed in the morning, meaning Mr Cox had to have attended Ms Maloney's office at some time prior to this. Ms Brandon's evidence was plainly inconsistent with such a state of affairs. Further, Ms Brandon's actual recollection of events was extremely limited, with the diary being the primary basis for her evidence. Having regard to the totality of the evidence, I am not satisfied that Ms Brandon has given reliable evidence concerning the alleged events of 7 June 2006 involving Mr Cox." 123Perpetual submitted that the difference between the Originator's Note and Ms Brandon's note in her personal diary was readily explicable: Ms Maloney did not wish to leave a record in the file that she was aware of Mr Cox's forgery. There is some force in that submission, but it does not come close to reconciling the other differences between the Originator's Note which seems reliably to have been made on the day, and the handwritten file note whose timing is much less definitively established. 124Perpetual also submitted that there was no basis for his Honour's conclusion that Ms Brandon had extremely limited actual recollection of the events. It was said in oral address that this would emerge from a reading of the transcript as a whole. 125Having done so, I do not agree. 126First, accepting as I do that it would be a remarkable thing for a man to say to a receptionist that he had forged his wife's signature, it would still be astonishing if, as Ms Brandon professed, she had a clear recollection of other aspects of the events of 7 June 2006 more than six years later without the assistance of her diary note. By July 2012, not only had much time passed, but Ms Brandon had also given a police statement and made an affidavit for this litigation (it is likely that she had been asked to recall the events on other occasions too). The familiar caution of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 as to the fallibility of human memory particularly when litigation intervenes is applicable. 127Secondly, Ms Brandon repeatedly made it plain that her recollection was based on her diary note. Early in her cross-examination, she said: "Q. When did [he] come in? A. After 2pm. Q. And how can you be certain that he came in after 2pm? A. That's when I'd written the entry in my diary. It was definitely after lunch time, mid afternoon before we closed." 128To similar effect, Ms Brandon was asked: "Q. You are absolutely sure that [it] was 7 June? A. Yes. Q. Couldn't possibly be another day? A. No. Q. Are you sure of that because it's written in your diary? A. That's correct." 129The following exchange is to similar effect: "Q. You said to us that the reason you can remember now what happened six years ago is you rely on your diary notes, which is reasonable? A. Yes. Q. So whenever you wrote things down in the office were you being entirely accurate? A. As best I could." 130When confronted with the inconsistencies in the Originator's Notes, Ms Brandon said there was a "mistake" when she had recorded that Ms Maloney had "went and got it signed". 131Perpetual relied in particular upon the following transcript (which was reproduced in the judgment): "Q. Do you have any recollection of these events? A. I recall Mr Cox coming to the office and signing this document. Q. Can you really remember now, without look[ing] at this document that it was 7 June? A. Yes. Q. So without your diary note you can remember now that he came on 7 June? A. No. Q. So your diary note is what you're relying on? A. Yes." 132It is perhaps a little difficult to determine whether (as the second question and answer suggests) Ms Brandon retained an independent recollection of the event, or (as the following questions and answers suggest) she was relying on her note merely for the date, or more generally. 133However, it is certainly the case that, relying on the inconsistencies referred to above between the two handwritten notes and her police statement made 18 months later, the cross-examiner appears to have made some headway in attacking Ms Brandon's reliability. Towards the end of her cross-examination there was the following exchange: "Q. And why [are you] so sure when it was? A. Because it was written in my diary. Q. And then you also say it was in the afternoon? A. Yes. Q. It was definitely after 2.00pm? A. Yes. Q. He had finished work and came into the office? A. Yes. Q. How do you know he had been at work? A. At the time I assumed that. Q. And what would have been the basis for you assuming that? A. I can't recall the exact details at this time. Q. When you say you can't recall the exact details at this time, have you got any idea at all? A. No. Q. Would it assist you to have some time to think about it? A. No." 134It will be noted that it was open to the primary judge to find that Ms Brandon's evidence as to timing was unreliable, and Perpetual did not contend to the contrary. 135Finally, after squarely putting to Ms Brandon that she was lying, Ms Brandon was asked the following: "Q. You made no mistake it was after 2pm? A. That's correct. Q. And you made no mistake that Denise read the document to him aloud? A. That's correct. Q. And you have made absolutely no mistake that Denise faxed the document to him? A. Faxed the document to who Q. It asserts in your police statement, the last line, 'Denise then faxed the document to Galilee and associates'? A. Yes. Q. Are you sure about that? A. At this time as sure as I can be. Q. That's a lie isn't it? A. No. Q. Well, for instance, if you look at your originator's notes form, and you look where we are going through the handwritten bits where you had AB on the left hand side, where you go to the date 7/6? A. Yes. Q. You told me before the rest of it was accurate, apart from the bad English at the beginning? A. "And AB faxed to Joanne at Galilee and Associates." Q. So who faxed the document? A. I don't know. Q. So in fact you don't know if the police statement is right or wrong? A. The police statement is correct with a couple of mistakes, possibly. Q. So first it was just one mistake. Now it is two mistakes. Are there any other mistakes in there? A. I don't know. Q. So there could be other mistakes in there? A. (No verbal reply). HIS HONOUR: I think you made your point, Mr Shepherd." 136I am conscious that the transcript is not invariably a reliable indicator of the extent of a witness' recollection - for example, it may not show pauses and hesitations. I would infer that Ms Brandon appeared to be upset while giving evidence (the clearest instance is that after agreeing that she was aware that she was accusing Mr Cox of forging the document, his Honour intervened and asked her if she would like a glass of water). 137Doing the best I can based on the written record, I would regard it as open, indeed amply open, for the primary judge to conclude that he could not reach the state of "actual persuasion" of a conclusion so serious as Mr Cox having forging his wife's signature based upon Ms Brandon's evidence. In particular, in order to be so satisfied, there needed to be an explanation of why her note in the Originator's Notes made on that day was wrong. Of all of the evidence - documentary and testimonial - I regard that note as the most reliable, given the circumstances in which it was made. 138Further, it was not necessary for the primary judge to find that Ms Brandon was telling untruths. An intermediate possibility was that she was confused with her having learned that Mr Cox had signed his wife's name (in the "TO WHOM IT MAY CONCERN" letter of 9 October). This was put to Ms Brandon and denied by her, but in terms which strain credulity. The 9 October 2006 document is reproduced above. It is typed in the same font. The text of both documents occupies slightly more than one line. The layout is different only in that the Direction includes the bank account details, and the signatures in the Direction are above the Borrowers' names. 139Ms Brandon gave this evidence: "Q. In fact, that's the document you saw Ray Cox sign, isn't it? A. No. Q. It couldn't have been that document. A. No. Q. It has the same heading as the other document? A. Yes. Q. Then why are you so certain it's not the same document? A. Because there is a few more spaces with other writing on the other document than there is on this document. Q. Are you recalling the difference between this document and the other document from what you have seen attached to your affidavit? A. Yes. Q. It's not from what you say six years ago, is it? A. This writing is smaller than the other writing on the other document dated 7 June 2006." 140Another possibility is that Ms Brandon (perhaps out of loyalty to her employer, perhaps because in some way she stood to benefit, perhaps because she feared to lose her job) gave false evidence. There is reason to believe that Ms Brandon, aged 17 at the time, did what she was told by Ms Maloney. To return to the Originator's Notes, every entry is initialled by her - even those entries which were written by Ms Maloney. Ms Brandon's evidence gave evidence about this: "Q. [W]hose hand writing is that? A. Denise Maloney's hand writing. Q. And you initialled it again? A. Yes. Q. Would you have initialled after somebody put them in, would you have initialled a whole bunch of things after somebody put them in, a few days in a row or would you do it straight away after Denise did it? A. Depends how busy we were. Q. Would you sometimes see Denise do it and then go write the initials straight after her or would you just? A. When I opened the file notes. Q. And you say there were no initials down the left hand side you just filled [in] all the initials? A. Yes. Q. And why did you fill in all the initials? A. Because there had to be initials next to the entries. Q. Do you know why there had to be initials next to the entries? A. No, that was Denise's rule. Q. I will ask you again. Can you think why there would be initials next to the entries? A. No." 141Perpetual contended that there was some ambiguity as to the meaning of the finding of the primary judge at [137] (reproduced above) that Ms Brandon's evidence was unreliable. Perpetual submitted that none of the matters relied on by the primary judge (demeanour, inconsistencies between her handwritten notes and her police statement) supported a finding that Ms Brandon's evidence was dishonest. It followed, according to Perpetual, that either his Honour had failed to address the question of whether she was lying as a witness, or alternatively (if his Honour's finding of unreliability amounted to a finding that she was lying) then his Honour had failed to give reasons for it. 142I do not regard his Honour's finding as ambiguous. It means simply that it was not sufficient, applying Briginshaw and s 140 of the Evidence Act, to permit his Honour to feel an "actual persuasion" of its truth. It is not uncommon for a court not to make a finding that a party or witness is telling lies. I acknowledge that cases like this where the testimonial evidence was so starkly opposed are relatively rare, but that did not make it erroneous for his Honour to resolve the dispute by reference to the onus which Perpetual accepted that it bore. It was open for him to conclude that he could not be satisfied one way or the other, to a state of actual conviction, by the evidence from either side.

(e) Perpetual's other submissions challenging the factual findings 143Perpetual submitted that Mr Cox was personally and immediately interested in this issue, in a way in which Ms Brandon was not, and that this difference appears to have played no part in his Honour's reasoning process. I do not consider that there is any error in this respect, let alone appellable error. This, surely, is something which is so obvious that it goes without saying separately, in circumstances where a great deal of his Honour's reasoning as to the force to be given to Mr Cox's evidence deals with the weaknesses in it (which his Honour accepted). If I may respectfully say so, his Honour's reasons readily convey that he performed his judicial function with considerable care and sophistication, grappling with the whole of the conflicting testimonial and documentary evidence (and in detail), assessing each according to questions of interest and likelihood. 144Perpetual complained that his Honour in large measure treated the evidence of Mr and Mrs Cox collectively. In large measure, he did so. However, it is also plain that his Honour assessed Mr and Mrs Cox separately. Mrs Cox was plainly a witness who impressed the primary judge: see at [141]. There was separate consideration of Mr Cox's testimony at [142] and [143]; his Honour regarded him as not nearly so impressive. Perpetual's complaint does constitute a basis to set aside his Honour's reasoning process. 145Perpetual also complained of the way in which his Honour discounted Mr Cox's self-confessed forging of his wife's signature. However, his Honour saw both Mr and Mrs Cox give evidence, and was well-placed to conclude that the situation was entirely different, when Mr Cox was seeking an immediate refund of an amount he regarded as wrongly deducted from his credit union account, compared with the transfer of $253,500 on 7 June 2006. As his Honour said at [155]: "The October 2006 document authorised a payment back to Mr and Mrs Cox, rather than a drawdown or expenditure of further money. It ought be viewed in light of the circumstances prevailing at the time, being circumstances in which Mr and Mrs Cox were eager to have the Loan C funds returned to the lender. That Mr Cox would sign both for himself and on his wife's behalf so that they could retrieve the funds is, although not desirable, understandable in the circumstances. I do not consider that this aspect assists the Plaintiff in its case." 146That finding was open to his Honour, who saw Mr and Mrs Cox give evidence about it. 147Perpetual also complained of the way in which his Honour failed to have regard to the fact that Mr Cox did not, for more than a year, assert that his signature had been forged, and indeed had accepted that it had not been forged. But it must be said - no differently from much of Perpetual's submissions - that this really amounted to a complaint as to the manner in which his Honour had resolved the evidence before him adversely to Perpetual. His Honour found that Mr and Mrs Cox did not immediately realise that Ms Maloney - their friend - was a fraudster. It could not fairly be said that his Honour had failed to grapple with the case presented by Perpetual: see the authorities mentioned in Bunnings Group Ltd v Borg [2014] NSWCA 240 at [36]. 148Perpetual complained as to the weight given by his Honour to the terms of the correspondence between the Borrowers and Ms Maloney, and in particular the fact that Ms Maloney never asserted that Mr Cox had signed the document. This appears to have been an important element in his Honour's reasons. He said at [150]-[151]: "In my view, Ms Maloney's response of 8 November 2006 can be taken as affirming this state of affairs. Ms Maloney said that, at settlement, the funds from Loan C were placed in an account and were accruing interest. There was a complete omission of any statement that the investment was made pursuant to a direction from Mr Cox. If the investment was, in fact, undertaken at the direction of Mr Cox, why, when it was put to her by Mr Goldsmith that the investment was contrary to his clients' instructions, did Ms Maloney not refer Mr Goldsmith to the direction of 7 June 2006, or otherwise state that she had acted at the direction of Mr Cox? In the absence of actual evidence from Ms Maloney as to the events of 7 June 2006, this letter contains highly persuasive evidence in support of the evidence of Mr and Mrs Cox." 149Different people would give different weight to this evidence (that makes it no different from any other piece of evidence). Nevertheless, there is force in the proposition that one factor which tells against Mr Cox having signed the Direction is that Ms Maloney did not say as much to his solicitor. (It may also be that she was concerned that an examination of the original documents would disclose, quite rapidly, that at least in the case of the "EasyDoc Declaration of Financial Position", the Borrowers had not signed - the signatures on that document, even as they appear on the faxed copy, are quite different from the other signatures of Mr and Mrs Cox.) 150The primary judge heard lengthy submissions based on the failure to call Ms Maloney and the operation of the rule in Jones v Dunkel, and accepted the Borrowers' submission that Ms Maloney's evidence would not have assisted Perpetual's case (at [123]-[130]). That might arguably involve error of the kind identified by the High Court in RPS v The Queen [2000] HCA 3; 199 CLR 620 at [23] (although Perpetual did not rely on this). There, by reference to the mode of reasoning in Jones v Dunkel (1959) 101 CLR 298, it was said: "But it is essential to note its limits. It relates to the drawing of inferences or conclusions from other facts. It is not a mode of reasoning that is concerned, for example, with whether the direct evidence of an eyewitness should be accepted." 151However, it is not necessary to express a concluded view on this issue or as to whether Ms Maloney was a person who Perpetual could have been expected to call. His Honour found against Perpetual because he was not persuaded that Perpetual had discharged its onus. His Honour also made it clear that he was not prepared to draw an inference adverse to Perpetual with any greater confidence by reason of Ms Maloney's absence, observing merely that the evidence of Ms Maloney would not have assisted Perpetual: at [130]. His Honour repeated the point at [132]. It follows that the absence of Ms Maloney played no part in his finding that Perpetual had failed to discharge the onus it bore to establish that Mr Cox had signed the Direction. 152Finally, counsel for Perpetual placed reliance on the fact that judgment was reserved for nearly a year, and was delivered some 15 months after his Honour had seen the witnesses. Although delay by itself does not amount to error, it does permit an appellate court more readily to draw an inference that judicial function has miscarried: Monie v Commonwealth of Australia [2005] NSWCA 25; 63 NSWLR 729 at [49]. 153It would have been preferable for the primary judge to have referred to the delay, and the steps he had taken to record his preliminary findings at the time. However, the reasons which I have given to respond to the balance of Perpetual's submissions demonstrate that there is nothing in the present case like the series of errors present in Monie which were found to support the inference that the delay was destructive of the quality of the judgment.

Summary 154Perhaps it may be helpful to summarise the foregoing. The main issue at the trial was who had signed the Direction. By the time of the trial, it was common ground that one signature had been forged. There were only two candidates for signing Mr Cox's signature: Ms Maloney and Mr Cox. 155Perpetual acknowledged that it bore the onus of showing that Mr Cox had signed the Direction. Acceptance of Perpetual's case, in a practical sense, entailed a finding that Mr Cox had forged his wife's signature. It was supported by an eyewitness who claimed she had a contemporaneous note. The eyewitness did make at least one contemporaneous note, but one which did not support Perpetual's claim. The other note she made, and the statement she made 18 months later, contained serious inconsistencies which were never satisfactorily explained. Assisted by his observation of the witness being cross-examined, it was amply open to the primary judge to conclude that he could not find that Mr Cox had forged his wife's signature based on that evidence. 156Then one is left with this situation. On the one hand, it was plain that Mr and Mrs Cox had no immediate need for a quarter of a million dollars borrowed from a non-bank lender, at a premium interest rate attributable to the fact that theirs was a "low-doc" loan. As the primary judge said at [157]: "The Plaintiff's case essentially involves Mr Cox changing his mind some time between 25 May 2006 and 7 June 2006 and, subsequently, engaging in a type of frolic of his own, with his wife being ignorant of the course he was undertaking. The evidence simply does not reveal any development during this period that would have led Mr Cox to take such a radically different step in the agreed loan arrangements that he and his wife had entered into." 157On the other hand, Perpetual and Challenger had established a regime whereby the originator stood to make an extra $4,000 immediately, but only if the Borrowers drew down the whole of the facilities. Challenger and Perpetual created incentives for people to be lent more than they needed, and more than they could repay. Challenger and Perpetual were prepared to deal with borrowers they had never met, and indeed with borrowers whom their originator had never met, and with no regard to their income or ability to repay. 158The evidence does not disclose what systems there were to minimise the risk of fraud. The evidence does not disclose what (if anything) occurred when borrowers who had taken the trouble to negotiate a special condition entitling them not to draw down the whole of a loan immediately purported to do so. The evidence does not disclose why it took so long for Challenger and Perpetual to respond to the conspicuously different repayment histories of the first and second facilities (where interest was invariably paid off on time) with the third (where interest was never paid in accordance with the loan, save in one instance, which quickly generated a manual refund)? Nothing in the evidence suggests that there were active systems in place to deal with fraud that was apt to accompany a regime so focussed on generating volume and commission and so unconcerned by an inability to repay. 159Ms Maloney was well placed to be aware of, and to exploit, the weaknesses in the regime. In those circumstances, I see no reason to conclude that the primary judge's findings of fact were "glaringly improbable" or "contrary to compelling inferences"; cf Fox v Percy [2003] HCA 22; 214 CLR 118 at [29]. 160In substance, Perpetual (or perhaps more accurately, Challenger or the mortgage lender insurer) has sought to re-run the trial which it lost. However, upon close scrutiny, it has failed to demonstrate that this is a case where an appellate court can interfere with the findings of the primary judge.

Orders 161For those reasons, the appeal must be dismissed. The cross-appeal (which was defensive) should likewise be dismissed. Perpetual should pay the costs of Mr and Mrs Cox of the proceedings in this Court.

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