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[2009] VSC 31
defendant. The originating motion and summons were dismissed; the Magistrates’ Court consent judgment remained in place, with the parties permitted to make submissions on costs.
Paolacci said he had not signed the personal guarantee for his company's photocopier rental agreement. A former employee later gave evidence that another employee had signed Paolacci's name. The court accepted that this evidence could matter, but found that Paolacci had not shown reasonable diligence in trying to discover it before he agreed to judgment. The court also found no evidence that Capital Finance or its solicitor knew of the alleged signature problem or took steps to exploit or conceal Paolacci's mistake. The application to set aside the consent judgment was dismissed.
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1,953 words · generated 29/09/2026
In Paolacci v Capital Finance Australia Limited [2009] VSC 31, Forrest J considered an application to set aside a consent judgment entered in the Magistrates' Court. The underlying dispute concerned a photocopier rental agreement made in the name of Oxygen Print & Media Pty Ltd (OPM). The agreement appeared to include a personal guarantee by John Paolacci, an OPM director. OPM defaulted after entering administration, and Capital Finance sued Paolacci on the guarantee [1], [9]–[13].
No linked legislation citations have been extracted yet.
The central factual complication was that Paolacci said he had not signed the guarantee. A former OPM employee, David Farrugia, provided an affidavit saying he had seen another employee, David Ryan, sign Paolacci's name. Farrugia's account was that Paolacci was absent and had not been involved in arranging the transaction [18]–[19]. Paolacci said he learned this only by chance in June 2008.
Before that information emerged, Paolacci had defended the Magistrates' Court claim through solicitors. His defence did not assert that he had not signed the guarantee. It instead said Capital Finance had not requested him to sign a personal guarantee [15]. He later appeared in person and agreed to consent orders requiring payment of $28,837.42, interest of $2,723 and costs of $8,450.80, with a 60-day stay [16]. After a bankruptcy petition was served, he sought to set aside the orders [17], [25].
The Supreme Court treated the matter as a preliminary sufficiency inquiry. The parties agreed that Paolacci's evidence would be taken at its highest. They also agreed that cross-examination would follow only if the evidence disclosed a prima facie case to set aside the judgment [7]–[8]. Forrest J concluded that it did not.
The court considered two main grounds: fresh evidence and an alleged defect in the settlement agreement underlying the consent judgment.
For fresh evidence, Forrest J referred to the test in McDonald v McDonald. The evidence must be admissible and credible, not reasonably discoverable before judgment, and sufficiently probative that it would probably be decisive when assessed with the existing evidence [26]. The judge accepted that Farrugia's affidavit appeared admissible, credible and potentially decisive if accepted [27]. That did not finish the inquiry. Paolacci also had to show reasonable diligence in discovering it before the Magistrates' Court proceedings concluded.
The difficulty was the gap between Paolacci's doubts and the steps he took. The judge noted that Paolacci had not asserted during the earlier proceedings that he had not signed the agreement. He had not sought or inspected the original document, despite being the person best placed to recognise his own signature. He also had not asked employees about the circumstances in which the agreement was signed [29]–[30]. The document contained anomalies, including an incorrect middle name and an address that was not Paolacci's address [21], giving further context to the judge's view that inquiries could have been made.
Most importantly, the evidence did not explain meaningful efforts to find Farrugia before settlement. The judge found a “deafening silence” about any attempts to locate or contact him and inferred that Paolacci and his solicitors had not tried to do so [31]. On that record, the court was not persuaded that reasonable diligence had been exercised [32]. The fresh-evidence ground was rejected [33].
The second issue concerned the nature of a consent judgment. Forrest J adopted the distinction described in Siebe Gorman: sometimes “by consent” records a real agreement between the parties; in that situation, intervention is considered on grounds applicable to contracts. Here, the consent judgment rested on an agreement to settle, so the inquiry was whether there was a prima facie basis to set aside that agreement [34]–[35]. It was not a general reconsideration of every circumstance surrounding Capital Finance's original claim. The focus was on events relevant to the settlement [35].
The allegations of fraud and unconscionability failed because Paolacci's evidence identified no such conduct by Capital Finance or its solicitor, Mr Koroneos, that induced the settlement or tainted it [36]. The unilateral-mistake argument, raised in argument, was that Paolacci believed he had signed the guarantee when he had not [37].
The court explained that a fundamental unilateral mistake may justify relief where accompanied by sharp practice. The discussion of Taylor v Johnson focused on the other party's awareness, or reason to know, of a serious mistake and deliberate conduct that prevents the mistaken party from discovering it [38]. Forrest J also referred to active concealment, inducement and unconscionable conduct, and said that actual knowledge was not always necessary: knowledge or strong suspicion of a fundamental mistake could suffice. Silence could matter, but only where there was evidence of that knowledge or strong suspicion [39]–[40].
There was no evidence that Capital Finance or Mr Koroneos knew or suspected that Paolacci had not signed the guarantee, or that he was mistaken about having signed it. Nor was there evidence that they induced his consent or withheld knowledge of the signature issue [41]. The judge separately observed that the Telekom representative's role was unclear, and there was no evidence of assistance in the forgery or of knowledge by Capital Finance officers [42]. The required prima facie basis was therefore absent [43].
The judgment did not purport to create a comprehensive new test. It applied existing principles to an application to reopen a consent judgment.
On fresh evidence, the judgment states the established requirements it drew from McDonald v McDonald: admissibility, credibility, reasonable inability to discover the evidence earlier, and decisive probative significance [26]–[27]. The practical contribution of this decision is its application of reasonable diligence to the particular circumstances. The court considered whether the applicant had inspected the document, asked people who might know how it was signed, or attempted to locate the witness whose later evidence was relied upon [30]–[32].
On consent judgments, the court explained that the underlying settlement agreement matters where the judgment represents a real agreement between the parties. The applicant must show a contractual ground that could justify setting that agreement aside [34]–[35]. The judgment thus separates a challenge to the original guarantee from a challenge to the later settlement. Evidence that might bear on the guarantee does not automatically establish that the settlement itself was affected by fraud, unconscionability or actionable mistake.
For unilateral mistake, the judgment applied the formulation discussed in Taylor v Johnson and related authorities. It emphasised the significance of the other party's knowledge or strong suspicion of a fundamental mistake, together with conduct that conceals, induces or exploits it [38]–[40]. On the facts before it, the court found the necessary evidence absent.
This account describes the law as stated in this judgment. The supplied judgment does not provide a subsequent doctrinal survey or establish how the law may have developed after February 2009.
At [27], Forrest J said Paolacci “must also establish that he exercised reasonable diligence” in discovering Farrugia's evidence. In plain English, potentially important new evidence is not enough by itself. The applicant must explain why reasonable steps would not have uncovered it earlier.
At [30], the judge observed that Paolacci had not obtained or inspected the agreement, even though he was the person who could recognise his signature. The point was not that every case requires the same inquiry. It was that the available evidence and apparent anomalies made the absence of basic inquiries relevant to the diligence question.
At [35], the judge said the inquiry had to concern “the events relevant to the settlement agreement”. This means the challenge to the consent judgment was not simply a fresh trial of whether Paolacci had originally guaranteed OPM's debt. The alleged defect had to affect the agreement by which he consented to judgment.
At [40], the judge stated that silence can sometimes be enough, but only where there is evidence of knowledge or strong suspicion of a fundamental mistake. In plain English, mere failure to volunteer information is not, on this account, sufficient without the required awareness or suspicion of the other party's mistake.
At [43], the judge concluded that there was no prima facie case to set aside the agreement and that “the consent judgment stands”. This was the result of the preliminary inquiry, followed by dismissal of the originating motion and summons [44].
The decision is relevant to applications relying on evidence discovered after judgment, particularly where an applicant argues that a witness or document would have changed the result. It highlights the need to explain what reasonable steps were taken before judgment and why those steps would not have revealed the evidence [26]–[33]. The factual examples considered included obtaining or inspecting the contract, asking people involved in its execution, and attempting to locate a potentially material former employee [30]–[31].
It is also relevant where a party seeks to undo a consent judgment that was based on a settlement. The judgment directs attention to the agreement underlying the consent orders, rather than treating the original claim and later settlement as the same inquiry [34]–[35].
For a unilateral-mistake argument, the decision concerns an alleged fundamental mistake coupled with evidence, or lack of evidence, about the other party's knowledge, suspicion, concealment or inducement [38]–[41]. The case does not hold that a forged signature can never affect a later settlement. Its result turned on the absence of evidence connecting Capital Finance or its solicitor to knowledge of the alleged forgery or to Paolacci's asserted mistake.
The supplied judgment contains no later judicial treatment of Paolacci v Capital Finance Australia Limited. It therefore does not establish whether later courts have followed, distinguished, applied or criticised this decision.
The authorities identified within the judgment are earlier authorities, not subsequent treatment of Paolacci. Forrest J referred to McDonald v McDonald on fresh evidence, Siebe Gorman on consent orders, and Taylor v Johnson and other cases on unilateral mistake [26], [34], [38]–[40]. Those citations explain the sources the judge used; they cannot establish how later courts treated the 2009 decision.
The judgment resolved a preliminary question about whether the material disclosed a prima facie case. The parties had agreed that cross-examination of affidavit witnesses would occur only if the threshold was met [7]–[8]. Because the judge found the material insufficient, the decision did not determine the truth of disputed matters through cross-examination.
The judgment also does not decide the underlying merits of Capital Finance's claim against Paolacci after a full rehearing. The application was dismissed because neither asserted ground for setting aside the consent judgment was established at the preliminary stage [43]–[44].
Several factual matters were expressly left uncertain. The judge said it was unclear whether the Telekom representative understood Ryan's identity or the significance of his signing Paolacci's name. There was no evidence that the representative actively assisted in the forgery, or that a Capital Finance officer knew the signature was not Paolacci's [42]. The judgment therefore does not make a final finding about the representative's conduct or the circumstances in which the guarantee was signed.
The decision also leaves the application of its principles to other factual settings open. It states that knowledge or strong suspicion may be relevant to unilateral mistake and that silence can sometimes suffice, but the result depended on the particular absence of evidence of knowledge, suspicion, inducement or concealment [40]–[41]. The judgment should accordingly be read through its stated tests and facts, not as a general rule that any particular signature dispute will or will not invalidate a settlement.
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PRACTICE and procedure- Consent judgment - Setting aside - Fresh evidence - Unilateral mistake - Fraud, unconscionability or silence.
**1 On the face of the document, Mr John Paolacci guaranteed and indemnified the obligations of Oxygen Print & Media Pty Ltd ("OPM") under a rental agreement entered into with Capital Finance Australia Limited ("Capital Finance") for the provision of a photocopier. OPM defaulted upon payments to Capital Finance, resulting in it issuing proceedings in the Magistrates' Court against Mr Paolacci based on the guarantee.
2 Subsequently, those proceedings were settled and a consent judgment entered into in the Magistrates' Court in favour of Capital Finance.
3 The twist in the case and the reason for this application is that the uncontested evidence before this Court is that Mr Paolacci did not sign the guarantee; rather, it was signed by one of his employees, a Mr David Ryan.
4 Mr Paolacci now relies upon two grounds upon which to set aside the judgment:
(a) That fresh evidence has emerged and this Court should set aside the judgment.
(b) That the consent judgment was procured by fraud or unconscionable conduct.**
**5 Mr Paolacci issued an originating motion on 8 August 2008 seeking to set aside orders made in the Magistrates' Court and remit the matter to the Magistrates' Court for rehearing.
6 The parties were agreed that neither s 109 nor s 110 of the Magistrates' Court Act applied to the facts in this case. No issue was taken by Capital Finance as to the form of the application made by Mr Paolacci, which sought the quashing of orders made in the Magistrates' Court based upon the grounds I have set out above.
7 It was accepted by the parties that I should determine, as a preliminary issue, whether the material provided on behalf of the plaintiff was sufficient to disclose a case to set aside the consent judgment. It was accepted by Capital Finance that this required me to take the evidence at its highest for Mr Paolacci.
8 The parties were also agreed that in the event of a finding that there was a prima facie case upon which the consent judgment could be set aside, then I should adjourn the matter for a further hearing at which the deponents of the affidavits would be cross-examined.**
**9 OPM conducted the business known as "Oxyprint Solutions". Although Mr Paolacci was a director, the running of the business was delegated to Mr Ryan, the office manager.
10 In July 2004, OPM purchased a Canon photocopier from Telekom Pty Ltd. To finance the purchase, OPM, on the face of the document, entered into a rental agreement with Capital Finance. The agreement provided for 48 monthly payments at a rate of $1,189.50, paid in advance.
11 The rental agreement[1] is signed in two places by "Paolacci", including a signature under a provision which reads as follows:**
"By signing this schedule, the guarantor undertakes the guarantee and indemnity obligations set out in clause 24 of the terms of rental attached to this schedule."
**12 It is not necessary to repeat the terms of clause 24, save to note that, by its terms, the guarantor irrevocably and unconditionally guaranteed payment of all rental payments by OPM under the agreement.
13 The photocopier was delivered to OPM and payments of rent were made between July 2004 to April 2006. In May 2006, OPM was placed in administration and no further payments were made.
14 A copy of the rental agreement is said by Capital Finance to have been sent to Mr Paolacci, after he had requested provision of the agreement, in late August 2006. He denies receipt of it.
15 Capital Finance issued proceedings in the Magistrates' Court against Mr Paolacci.[2] A defence was delivered prepared by a solicitor on his behalf. It did not contend that Mr Paolacci had not signed the guarantee but did assert "the defendant further states that the plaintiff did not at any time request the defendant to sign a personal guarantee".[3]
16 Although Mr Paolacci had been represented by solicitors, by the time the matter came on in the Magistrates' Court on 14 August, he appeared in person. He sought and obtained an adjournment of the hearing to 18 October 2007. Shortly prior to that hearing, he rang Mr Koroneos, the solicitor for Capital Finance, and told him that he did not wish to incur any further costs and wanted to settle the matter.[4] According to Mr Koroneos, Mr Paolacci was told that the matter could only be resolved by him consenting to judgment for the full amount of the claim, interests and costs, and that that, in return for a stay of 60 days being consented to, in which time a settlement proposal could be put to Capital Finance. He eventually accepted this arrangement. Consent orders were agreed upon in the following terms on 16 October 2007 and were signed by Mr Koroneos on behalf of Capital Finance and by Mr Paolacci[5]:**
"The parties consent to the following orders:
(1) The defendant pay to the plaintiff the amount of $28,837.42 on the claim, $2,723 in interest and $8,450.80 in costs. Stay of 60 days."
**These orders were entered in the register on 18 October 2007.
17 Mr Paolacci made no payments to Capital Finance, and on 4 June 2008 a creditors petition pursuant to the Bankruptcy Act (Cth) 1966 was served upon him.
18 In June 2008 and by chance, Mr Paolacci met a Mr David Farrugia, a former employee of OPM. Mr Farrugia has subsequently sworn an affidavit which deposes to the following matters: He, in July 2004, was a senior sales manager with OPM and was present when a representative of Telekom visited OPM's premises to discuss the sale of a photocopier and the provision of finance for it. Mr Paolacci was not present at the time. He asserts that the signatures to the rental agreement are not those of Mr Paolacci, but that the agreement was, in fact, signed by Mr Ryan, who forged Mr Paolacci's signature:**
"Dave and I signed the documents in our boardroom. John had had no involvement in arranging the deal and was not present when the documents were signed. Dave signed John's name and when I queried this Dave said that as a shareholder he had John's consent to sign. I recall us celebrating the deal that afternoon. I also recall Dave telling everyone thereafter that he had 'done that deal'.
It was not until the end of June this year, when I was having a general catch-up conversation with John and he informed me of the bankruptcy proceeding and the whole saga that I became aware he had not been aware of the deal or given consent for Dave to sign his name."
**19 I infer that Mr Farrugia observed Mr Ryan signing both the rental agreement and the agreement for the sale of the photocopier by Telekom. Both Mr Ryan and Mr Farrugia gave the Telekom representative their cards. The Telekom representative[6] did not query Mr Ryan signing as "John Paolacci".
20 Mr Paolacci, in his affidavit, asserts that he opposed the purchase of the photocopier and goes on to say:**
"At the time Court proceedings commenced in 2007 I believed I had not signed the guarantee and had no recollection of doing so or of receiving any explanation of such a document but I had no means of proving I had not signed any guarantee. I did not at that time hold a copy of the document.
On the basis that I could not at that time prove I did not sign the guarantee my previous solicitors initially advised me to defend the matter on the basis of the Defence they filed on my behalf and later to consent to judgment in the Magistrates' Court proceeding. That was also the basis upon which they and later myself sought to negotiate a settlement of the claim but not to oppose it. I did what I was advised.
After I ceased to have a solicitor I needed time to consider my options, based on the advice I had received. I did not seek further legal advice prior to consenting to judgment and in part what occurred when the matter was adjourned on 14 August and when consent judgment was approved on 18 October 2007 was based on what Mark Koroneos told me was required. Subsequent negotiations in 2008 by myself and by solicitors I instructed earlier this year were conducted on the same premise."
**21 The guarantee also contains several factual errors. Mr Paolacci's middle name is incorrectly noted as Mark. The address of 1/53 Barkly Street on the guarantee is not his address, but it is close to where he used to live.
22 Mr Paolacci also asserts that he did not sight the rental agreement at any time prior to the 2007 Court proceeding and goes on to say:**
"My then solicitors advised me that based on their viewing of the copy document they I understood they held by way of discovery it looked like my signature on the document and as I depose in paragraph 12 of this affidavit they subsequently advised me that unless I had proof that it was not my signature I should settle the matter rather than proceed to trial. I accepted their advice and also say:
(a) As far as I am aware they took no steps to determine if it was my signature even though my instructions were that I did not recall signing the document;
(b) At that time and until I caught up with David Farrugia by chance in late June 2008 I had no knowledge of and no means of determining who signed the document and who else was present when it was signed."
"I have read the affidavit sworn by Mark Koroneos 8 September 2008. My response is that the premise of his entire affidavit is that he does not accept either the new evidence I depose to in this affidavit or how that has changed what had previously occurred, including how and why the proceedings and negotiations had been conducted in that manner. Had I been aware in 2007 of what David Farrugia told me this year and been in a position to act on that information, there would have been no consent judgment or adjournment on 14 August 2007. It is clear from the matters deposed by David Farrugia in his affidavit filed in support of my application in this proceeding that Capital Finance relied on the Telekom representative, who had the Capital Finance Rental Agreement with her to be signed at the meeting, to be their agent. Capital Finance have produced no affidavit that disputes what David Farrugia deposes occurred on 26 July 2004."
**24 He does not, however, dispute Mr Koroneos' version of the events surrounding the signing of the consent orders.
25 On 3 July 2008, Mr Paolacci issued an application in the Magistrates' Court proceeding seeking that the consent orders be set aside. That application was withdrawn on 8 August 2008, the day upon which these proceedings were commenced.**
Fresh admissible evidence obtained after judgment
26 At common law, subsequent to a verdict or judgment, a party may be entitled to have that judgment set aside by reason of the discovery of fresh evidence or the existence of fraud. In McDonald v McDonald,[7] Barwick J said of fresh evidence:
"The discovery subsequent to verdict of admissible credible evidence, which could not have been sooner discovered by the exercise of reasonable diligence in the circumstances, and which is of such probative value and significance that, taken with the evidence already given at the trial, it will in all probability be decisive of the issues between the parties in a sense opposite to that of the verdict, is a ground for the granting of a new trial. If the Court is satisfied that the fresh evidence fulfils these requirements, it will generally conclude that, therefore, the interests of justice demand that the issues be tried afresh."
**27 It can be accepted that the evidence of Mr Farrugia is admissible and, on its face, credible and probative; if accepted, it may well be decisive of the issues between the parties. However, Mr Paolacci must also establish that he exercised reasonable diligence in relation to the discovery of the evidence of Mr Farrugia; the question is whether, by the exercise of reasonable diligence, Mr Farrugia's evidence could have been placed before the Magistrates' Court in August or October 2007.
28 An analysis of the conduct of Mr Paolacci generally and specifically in relation to Mr Farrugia demonstrates an absence of such diligence.
29 Mr Paolacci did not at any time during the course of the Magistrates' Court proceedings assert that he had not signed the agreement. Indeed, to the contrary, his case was (or seemed to have been) that he was not requested to sign a guarantee, nor were the contents of the rental agreement, including particularly the presence of the guarantee, drawn to his attention.
30 He did not question his solicitors' advice as to settlement on the basis that he could not prove that he did not sign it. Despite his asserted doubts as to who signed the document, he took no steps to obtain a copy or sight the original to ensure that it was, in fact, his signature. This when he was the one person who could positively identify his signature. If he had any doubt about whether he had signed the document at that time, one would have thought that he would have made inquiries of employees (such as Mr Ryan or Mr Farrugia) as to the circumstances surrounding the execution of the rental agreement and guarantee, particularly where the document, on his account, had several other anomalies.
31 The above matters provide the background to the principal inquiry, namely, whether Mr Paolacci could have, with reasonable diligence, procured the evidence of Mr Farrugia at the trial. The only explanation for failing to speak to Mr Farrugia is an assertion in his affidavit that he had no knowledge of and no means of determining who signed the document and who else was present when it was signed. The high point of his affidavit is that, after Mr Farrugia ceased to be employed by OPM, Mr Paolacci had no contact with him, (who had not left forwarding details, "as far as he was aware"). There is a deafening silence as to any steps taken by him to locate Mr Farrugia or to contact him prior to the settlement of the claim. There is no suggestion in Mr Farrugia's affidavit that he was uncontactable or reticent to assist. I infer that neither he nor his solicitors did anything to track down Mr Farrugia.
32 In summary, and notwithstanding the turn of events, I am not persuaded that reasonable diligence was displayed by Mr Paolacci to adduce evidence from Mr Farrugia prior to the hearing.
Consent judgment obtained unconscionably or by fraud
34 In Siebe Gorman & Co Ltd v Pneupac Ltd,[8] Lord Denning said as follows:
"There are two meanings to the words 'by consent ...'. One meaning is this: the word 'consent' may evidence a real contract between the parties. In such a case the court will only interfere with such an order on the same grounds as it would with any other contract. The other meaning is this: the words 'by consent' may mean 'the parties hereto not objecting'. In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order and that is made by the court without the consent of the parties." (Emphasis added.)
**35 A consent judgment may only be set aside on grounds which would justify setting aside the contractual agreement upon which the settlement or compromise was based. [9] In the context of this case, the inquiry must necessarily be as to whether the evidence discloses a prima facie case that the agreement entered into between Capital Finance and Mr Paolacci was tainted by fraud, unconscionability or, as matters emerged in argument, mistake. [10] Because it is the settlement agreement which underpins the consent judgment, the relevant inquiry does not involve consideration of all the circumstances surrounding the claim. Rather, it must relate to the events relevant to the settlement agreement.
36 There is no evidence whatsoever of any fraud or unconscionability on the part of Capital Finance or Mr Koroneos, its solicitor, which may have induced Mr Paolacci to enter into the agreement or which may have tainted the agreement in some way. The affidavit of Mr Paolacci does not suggest any such conduct.
37 Although not mentioned in the summons or the originating motion, in the course of argument a further basis for setting aside the agreement, and therefore the order, emerged: namely, that of unilateral mistake. The identified mistake, one may assume, was that Mr Paolacci believed that he had signed the guarantee when in fact he had not.
38 In Australia, a court will, in certain circumstances, set aside a contract on the basis of unilateral mistake, provided it is fundamental and is attended by sharp practice. In Taylor v Johnson[11] the High Court said:**
"The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension. What we have said is sufficient to demonstrate the broad basis of support which the authorities provide for that proposition. Moreover, and perhaps more importantly, it is a principle which is best calculated to do justice between the parties to a contract in the situation which it contemplates. In such a situation it is unfair that the mistaken party should be held to the written contract by the other party whose lack of precise knowledge of the first party's actual mistake proceeds from wilful ignorance because, knowing or having reason to know that there is some mistake or misapprehension, he engages deliberately in a course of conduct which is designed to inhibit discovery of it. Our comment can, for present purposes, be limited in its application to the case where the second party has not materially altered his position and the rights of strangers have not intervened."
39 In Easyfind (NSW) Pty Ltd v Patterson,[12] Young J said:
"In Australia a contract may be avoided not only where the mistake was induced by the person in the part of the present plaintiff, but also where he has deliberately cloaked the mistake or has otherwise behaved unconscionably."
**40 Accordingly, active concealment of the true facts or inducement of the mistaken belief will be grounds for setting aside a contract. It is not necessary that a party to the contract be actually aware of the other party's mistake; it is enough that the party must have known or strongly suspected that the other party is labouring under a mistake of a fundamental nature.[13] So silence can, in some circumstances, be enough to have a contract set aside; but only where there is evidence of knowledge or strong suspicion of such a mistake.
41 There is nothing in the material to suggest that Capital Finance or Mr Koroneos knew or suspected that Mr Paolacci:
(b) was acting under the misapprehension that he had signed the guarantee
Nor is there any evidence that there was any act on the part of Capital Finance or Mr Koroneos that induced Mr Paolacci to sign the consent orders or that, in some odd way, it had knowledge of the fact that Mr Paolacci had not signed the agreement and withheld that from him.
42 I should add, for the sake of completeness, that whether the conduct of the Telekom representative could be described as culpable or dishonest is not at all clear. It was Mr Ryan, the OPM employee, who signed the document; whether the Telekom representative understood Mr Ryan's true identity and the fact that he was signing the name of another is not apparent. There is no suggestion that the representative actively assisted in the forgery or participated in it. Moreover, there is no evidence that any officer of Capital Finance (at any level) was aware that the signature on the rental agreement was not that of Mr Paolacci. Nor is there any evidence that any such officer was aware that the Telekom representative had been present when Mr Ryan effected Mr Paolacci's signature.
43 There is no prima facie case to set aside the agreement and therefore the consent judgment stands.**
**44 I am not persuaded that there is a prima facie case that the consent orders entered into on 18 October 2007 in the Magistrates' Court should be set aside. Neither ground has been made out and the originating motion and summons should now be dismissed.
45 The parties may, if they wish, make submissions as to costs.**
[1] Exhibit MSK2 to the affidavit of Mr Mark Koroneos.
[2] Exhibit MSK 1 to the affidavit of Mr Koroneos.
[3] The defence is consistent with a letter written by the solicitor for Mr Koroneos which, rather than taking up the point that he did not sign the guarantee, asserts that he was not advised that he was signing a guarantee.
[5] Exhibit MSK 5 to the affidavit of Mr Koroneos.
[6] Sadly, the Telekom representative is now deceased.
[7] [1965] HCA 45; 113 CLR 529, 532. See also Menzies J at 542. See also Clark v Stingel [2007] VSCA 292 [25], Bourke v Beneficial Finance Corp (1993) 47 FCR 264, 271 - 272, Munroe, Schneider Associates (Inc) v No.1 Raberem Pty Ltd (No.2) [1992] FCA 367; (1992) 37 FCR 234.
[8] [1982] 1 WLR 185, 189 - 190.
[9] Harris v Caladine [1991] HCA 9; (1991) 99 ALR 193, 205, DCT v Chamberlain (1990) 26 FCR 221, 230, Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273, 280.
[10] See Mintel International Group Ltd v Mintel (Australia) Pty Ltd [2000] FCA 1410; (2000) 181 ALR 78, [35].
[11] [1983] HCA 5; (1983) 151 CLR 422, 432.
[12] (1987) 11 NSWLR 98, 107 - 108.
[13] Misiaris v Saydels Pty Ltd (1989) NSW ConvR 55 - 474, International Advisor Systems Pty Ltd v XYYX Pty Ltd [2008] NSWSC 2, [22] - [25].
Paolacci
Capital Finance Australia Limited [2009] VSC 31
(1993) 47 FCR 264
(1992) 37 FCR 234
(1991) 99 ALR 193
(1990) 26 FCR 221
(2000) 181 ALR 78
(1983) 151 CLR 422
(1987) 11 NSWLR 98
The originating motion and summons were dismissed; the Magistrates’ Court consent judgment remained in place, with the parties permitted to make submissions on costs.