Plaintiff v First defendant

EQUITY - Unconscionable conduct - Enforcement of transaction against wife - Principle in Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649, Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, considered - Failure by plaintiff to explain transaction - Whether wife had sufficient understanding of purport and effect of the transaction - Onus of proof - Previous business experience - Consideration of circumstances of execution of transaction documents - Wife unable to discharge onus - Not unconscionable to enforce transaction.

1 This case concerns the fate of a short-term investment opportunity to charter a vessel (the MS Caledonian Sky) for the purpose of providing accommodation and entertainment at Canary Wharf on the River Thames in London for the duration of the London Olympic Games in late-July to early-August 2012.

2 The plaintiff, Twenty Ninth Macorp Nominees Pty Ltd, claims:

(a) that it lent the first and second defendants[1] $1,050,000 to enable the defendants to participate in the boat venture;

(b) that the loan was secured by a mortgage granted by the second defendant over the defendants' matrimonial home at 9A Young Street, Brighton (which was at all relevant times registered solely in the second defendant's name);

(c) that the defendants failed to repay the loan when it fell due for repayment or at any time since; and

(d) that the defendants are jointly and severally liable to repay to the plaintiff the loan (plus interest and costs under the loan agreement).

3 The first defendant, Mr Norman George, says in essence that he and his wife did not borrow any money from the plaintiff but that Mr George Saade (on behalf of the plaintiff and its sole director)[2] invested in the boat venture himself. Mr George says that his case is supported by the fact that the relevant funds were not transferred to Mr George but directly to Mr Jason Coorey, the organiser of the London venture. Mr George admits that he executed the signature pages of a loan agreement (and witnessed the signing of a mortgage of land), but says these documents came into existence approximately three weeks after the alleged loan amount had been transferred and were signed only to make Mr Saade feel more comfortable with his investment.

4 The second defendant, Ms Pauline George, also says that she did not borrow any money from the plaintiff. She also admits executing the signature pages of a loan agreement, a Declaration under the National Consumer Credit Protection Regulations 2010, and a mortgage of land, but says that she did not read the documents and did not know the key features of the transaction; in short, that she did not have a sufficient understanding of the transaction at the time she signed the documents to be bound by their terms.[3]

5 Both defendants otherwise seek to avoid liability under the loan agreement and mortgage on the basis that the loan funds were transferred prior to the their execution. The defendants argue that the consideration for entering into the loan agreement and mortgage was past consideration and therefore insufficient.

6 The following questions arise for determination in this case:

1. Is the transaction properly characterised as an investment made directly by the plaintiff or as a loan made by the plaintiff to either or both defendants?
2. If the transaction is properly characterised as a loan, is the second defendant also liable to the plaintiff as borrower and mortgagor? This question can be further divided into three sub-questions:

(a) Did the second defendant authorise the first defendant to act as agent on her behalf in entering into the agreement to borrow money from and give security to the plaintiff?

(b) Did the second defendant in any event have a sufficient understanding of the transaction when she signed the transaction documents so that the transaction documents can be enforced against her (under the principles in Yerkey v Jones and Garcia)?

(c) If the first defendant acted on the second defendant's behalf without authority, did the second defendant ratify the excess of authority by later signing the transaction documents?

3. Does it matter that the loan amounts were advanced before the transaction was documented?

7 Each of these questions will be addressed in turn.

Question one: Is the transaction properly characterised as an investment made directly by the plaintiff or as a loan made to either or both defendants?

8 It is common ground that Mr Saade and Mr George had a strong professional and personal relationship for over 25 years. During the trial the parties referred to each other by first names and for convenience, and to avoid confusion with first names and surnames, I propose to do likewise where appropriate.

9 Norman gave evidence that he first met George around 30 years ago when he was running a restaurant for George's brother, Henry, in Double Bay in Sydney. After the restaurant in Sydney was sold, Norman came to Melbourne and together with Henry opened a restaurant called Ricardo's in Albert Park. Later, Norman worked for George at a restaurant called The Deli in Toorak Road, which he managed for several years. Together with Pauline, he also managed a caravan park and farm owned by George and Henry in Nelson Bay. Norman's main role with the Saades, however, was at a restaurant called Giorgios, which George opened in 1980 and which Norman managed (with several other managers) for approximately 27 years.

10 George and Norman became close friends through their involvement in Giorgios. While Norman worked at Giorgios he would see George every morning, when George would come in for coffee. George gave evidence that he and Norman treated each other like brothers. Norman similarly described the relationship with George as 'family basically',[4] and indicated that he spent more time with the Saades than his own family in Sydney and treated the Saades' children like his own.

11 At the time the disputed transaction occurred, Norman had been married to Pauline for many years. George did not know Pauline as well and had not had business dealings with her before, but saw her on occasion at family functions or with Norman at the restaurant.

12 Norman gave evidence that for some time his third cousin on his father's side, Mr Jason Coorey, had been involved in a boat business venture which involved hiring a ship or boat at major sporting events to be used as a floating hotel. Norman said that in late 2011, Mr Coorey approached Norman at Giorgios with a business opportunity to invest in a boat at the London Olympic Games. Norman said that he liked the deal because it looked transparent and simple and 'everything sort of checked out in respect to the boat'.[5] In November 2011, Norman invested $400,000 in the venture, paying $270,000 to a shipping company for the deposit and about $130,000 directly to Mr Coorey's company, the Sportius Group, for working capital.[6]

13 Norman was again approached by Mr Coorey in 2012 seeking further investment capital. Norman says that he was told by My Coorey at this time that:

(a) the first boat that Mr Coorey had arranged had sold out and that Mr Coorey had made a profit of $4.5 million on it;

(b) it was possible to arrange for an investment in a second boat but that Mr Coorey required a minimum of $1,050,000;

(c) the money from the first boat had not come through and he needed the money in a very short period of time; and

(d) the investment would pay double to triple over a four week period and that there was a lot of money to be made.

14 Norman said that he understood from what he had been told that the boat venture would be highly profitable and lucrative because accommodation during the Olympic Games was in high demand and very costly. Norman expected, based on the numbers his cousin presented to him and the fact that another boat had sold out quite quickly, that at a minimum he would double or triple his investment.[7] Norman said he also did some 'due diligence on the internet' to establish that they in fact ran out of accommodation very quickly.[8]

15 It is common ground that Norman approached George about this opportunity and met with George and George's brother (Nicholas Saade) at George's office and a café on 1 May 2012 to discuss the opportunity. The evidence of the parties, summarised below, departs significantly in respect of their conversation and the events that follow.

16 George gave evidence that on 1 May 2012, he received a telephone call from Norman who said he wanted to come over and talk to George about a 'deal'.[9] They initially met that same morning at George's office in Glenferrie Road, Malvern, then went across the road to a café. George's brother Nicholas (who was in George's office at the time) joined George and Norman at the meeting.

17 George gave the following account of the conversation at the café:

He says 'I've got a deal. I'm sick of restaurants, I've been in it over 30 years. Could you help me? My cousin has got a - a deal in London and they hire out large boats where people stay on - on board and they breakfast, lunch and dinner there', and he wanted to go into the deal, and he asked me, 'Are you interested as well?'. I said, 'Look, I'm not interested, I don't deal - do deals overseas. I'm - I do only in Melbourne, I don't do any deals interstate and plus, I don't know your cousin or that sort of business.'

So he said, 'Can you lend me the money? I need 1,050,000'.[10]

18 George said that after this explanation, Norman elaborated on the details of the venture: to the effect that his cousin, Mr Coorey, had already chartered one boat which was fully booked, and thought he could fill a second boat, which would be coming from Germany. Norman showed George a brochure given to him by Mr Coorey and said something to the effect that the expected return was a large amount - double or triple the investment. Norman said that he only needed the money for a month.

19 George looked at the brochure and said that he was not interested in doing that sort of thing and he would not normally give anybody that sort of money especially as it was going overseas, but said because he had known Norman for 25 to 30 years and it was only for a month he thought he would lend him the money as a favour.

20 The discussion then moved to the question of security. George gave evidence as follows:

I said 'I'll lend you the money - it's a large amount - but we need some security. What security?' He said, 'I'll give you my house', so I said, 'How much is the house worth?' He said, 'About 2 million to 2.2 million', and I said, 'You got a mortgage on the house?' He says, 'We have a $300,000 mortgage'. So I said, 'Well that sounds okay'. Then he tells me that the house's in his wife's name...[11]

...

I said to him, 'If you want that sort of money we need security', and he said he's got a house and 'I'll give you my house as security then. It's worth about 2.2 million and we owe 300,000 to the National Bank.' I said, 'Well that sounds okay', and he said, 'Look, you know me a long time. Something happens I'll sell the house and pay you straightaway. You know me, I've always been honest with you.' I said, 'Yes, you have, and we're friends', and I was helping him to sell - he wanted to get out of the restaurant business. He saw this as an opportunity, so I said - well, when I found out the house was in his wife's name, he told me, I said, 'You need to go and see if she's happy with everything, that she's on board with the project and she's willing to put her house up as a mortgage and a loan' - so we had loan - she - he said 'Yes', and he went and told her.[12]

21 The matter was left that day on the understanding that George would lend the money, provided that Norman's wife was also willing to borrow the money and to put the house up as security.

22 The following day, 2 May 2012, George met Norman again at George's office. George gave evidence as follows:

Yes, he came in the office and he told me - that's when he told me he'd spoken to his wife that night and she was happy to go ahead, and - go ahead with the deal. So he gave me all the details.

What details did he give you?---Well, of the house, the address, and - and I said, 'I'll get our lawyer to get the documents done' - the mortgage and loan documents.[13]

23 George then rang his lawyer, Mr Michael Czarny of Meerkin & Apel Lawyers, advised him about the transaction and said that his secretary, Ms Sharon Mott, would ring back with all the details.

24 After speaking with his lawyer, George told Norman that he would arrange for the documents to be prepared, and as soon as they were ready he would give Norman the money. Norman then expressed concern about the proposed timing. According to George, the following conversation ensued:

(NORMAN) No, no, we need the money in a hurry'. I said, 'Why is that?', and he said, 'Well, the boat might go and somebody else might lease it and we need to pay the money quickly. If I could have it tomorrow, on the 3rd.' I said, 'Look, the documents won't be ready'. He said, 'You know me for 30 years. You know I won't do anything wrong and I've promised you. I give you my word.' He said, 'Look at my face. If something happens I'll sell the house and pay you straightaway.' I said, 'Okay'.[14]

25 On 3 May 2012 at about 9.00 am, Norman attended George's office yet again. George asked Norman to provide his account details to Ms Mott and said he would have the money put into Norman's account. However, Norman said:

No, no, we're in a hurry. I want it straight to my cousin's account because by time it clears my account and it goes to him we might have lost the boat. We promised him we'd pay him on this day, either the 3rd or the 4th, had to paid, at the latest.[15]

26 In light of this, George asked Ms Mott to arrange for the transfer of funds as requested by Norman directly to Mr Coorey's bank account, which Ms Mott did at 11.00 am that morning. It is common ground that Ms Mott mistakenly transferred $1,000,050 instead of $1,050,000, and this mistake had to be rectified by a further transfer of funds ($49,950) later that morning.

27 That same day at 11.16 am, the transaction documents were emailed to George from Meerkin & Apel. The documents sent through included a cover letter,[16] loan agreement,[17] mortgage[18] and Declaration under the National Consumer Credit Protection Regulation 2010.[19]

28 George gave evidence that he was informed by Ms Mott when the transaction documents arrived by email from Meerkin & Apel. George said that Ms Mott told him that she had given Norman a copy of the documents to take home so that he and his wife could sign them.

29 After the money had been advanced, Norman rang to thank him. During this conversation, George said he wanted the documents back as soon as possible. Norman said that he knew that and was busy with his daughter going to a concert or singing at Channel 7, but that he had the documents and would get them signed soon and drop them off in George's letterbox.

30 On 5 or 6 May 2012, George found the loan agreement and the mortgage documents in his letterbox. He said that the documents were stapled together in two packs: one was the loan document, and the other was the mortgage document, and that both had been crumpled to fit in the front of his letterbox. George noted that the signatures all appeared in the right places. He took the documents to work and put them with his files.

31 The following week, George received a telephone call from his solicitor, Mr Czarny, who asked him whether the documents were signed and whether George wanted to send the documents to him. George said that he had the signed documents and wanted to keep them for his records for the moment. He also said that he was not in a hurry, and because it was only a one month loan it was not that important.

32 After one month passed, the loan had fallen due for repayment but had not been repaid. At this time, George rang Norman for an explanation. Initially, Norman said that the United Kingdom government thought that he was laundering money and had put a freeze on the account, and that a lawyer and accountant were working on the problem and it would take about a month. Over the following months Norman gave George other excuses for the money not having arrived, including a statement to the effect that the travel agent in London that sold the accommodation for the boat had embezzled the money.

33 After some time, Norman asked George for an extension for the repayment of the loan for a year, and offered to pay George interest. George asked him to pay the interest and said that he would then consider whether to give an extension. No principal or interest was forthcoming.

34 Under cross-examination, George said he did not recall being told by Norman that Norman had invested $400,000 in the boat venture. Some discrepancies between the nature of the transaction described by George in-chief, and his account of the conversation in Giorgios on 1 May, were identified. George acknowledged these discrepancies but was substantially unshaken on the nature of the transaction (a loan) and why he was not interested in investing in the venture himself. George said that he thought the rate of return sounded unrealistic but did not form any view as to the viability of the investment because he was not interested in it.

I was doing him [a] favour, that was what it was. I was doing - helping him out. He'd been in the restaurant business for 30-odd years, he was tired and had had enough, and he saw this as an opportunity, him and his wife, to make some quick money, I presume, and start a new life. I don't really know. I did it for him as a favour.[20]

36 George denied that he knew on 1 May 2012 that he was going to make an advance either on 2 or 3 May 2012. George said:

No, he had to come back. He came back to me on the 2nd and he spoke to his wife and he said everything's okay with her, she'll be signing the documents, and we're all - all on board.[21]

37 George accepted that the first tranche of $1,000,050 was transferred to Mr Coorey's bank account at 11.00 am on 3 May 2012, prior to receipt of the transaction documents from Meerkin & Apel at 11.16am that same day. He explained that he advanced the money on Norman's request so that Norman would avoid losing the boat and the deal, and because he had known Norman for 30 years and saw it as a new start for him in life.

38 George rejected a suggestion to the effect that he told his solicitor on 9 May 2012 that he had the signed documents in his possession when in fact he did not; supposedly because he did not have the heart to tell his solicitor that the documents had not been signed before he sent the money, or was too embarrassed to say he did not have them back after the solicitor expedited the preparation of the documents.

39 George also rejected a suggestion (advanced by Counsel for Norman) that the transaction documents were signed about three weeks after the money was transferred, and a suggestion (advanced by Senior Counsel for Pauline) that the transaction documents were signed after the loan was already in default.

40 In particular, George denied having asked Norman to sign the transaction documents to give him (George) 'some comfort' or so that he would 'feel better about his investment'.[22]

41 George accepted that he could have lodged a caveat earlier but said that he was lenient because Norman was like a brother, and because Norman had said that he would repay the money at the end of the month he wanted to avoid spending any more money on legal fees.

42 Ms Mott gave evidence that she was an office administrator, had worked for the Saade Group for 27 years, and was George's personal assistant. Ms Mott had known Norman and Pauline through George for over 20 years. She was present in the office on 1 May 2012 when George and Nicholas left to have coffee with Norman.

43 On the following day, 2 May 2012, George told Ms Mott that he was having a meeting with Norman that morning. Ms Mott did not know what the meeting was about and asked Michelle Saade (Wade), George's daughter (who also worked at the office) if she knew what they were meeting about. Ms Mott said that Michelle told her that 'Norm wants to borrow a million dollars from George'.[23] At that point Ms Mott did not know what the money was for.

44 Ms Mott recalled Norman coming to the office later that morning and meeting with George. Ms Mott gave evidence that she was sitting at her computer, about six metres away from George's desk, while George and Norman sat together. Ms Mott said that she overheard much of the conversation between Norman and George, though some of the conversation was in Arabic which Ms Mott did not understand. Ms Mott's account of the conversation was as follows:

I heard them talking about a - a venture of Jason Coorey's, who was a cousin of Norm's, and he was going to - he already had one boat on the Thames for the London Olympics with spectators and just guests, and he was wanting to put another boat there and he needed money to do it, and so Norm asked George could he loan him the money. I - I didn't know the amount at that stage. He had a picture of the boat, a sort of a glossy picture of the boat that he was showing George, and he said, you know, it's - 'You'll get a lot of money back', and yeah.

...

I - at one stage I heard him say, 'You'll get three times the amount back', which seemed - yeah, like a lot of money.

...at one stage I know George said - he didn't call her by her name, but he said, 'Does your wife know about this?', and Norm said, 'Yes she does, course she does'.[24]

45 Ms Mott resisted the suggestion that it was not likely that Norman would have asked for the loan on 2 May 2012 because he had already had that discussion with George on 1 May 2012. Ms Mott responded, 'But that was - that was what they were all - they were talking about it, was about the loan and the boat'.[25]

46 Ms Mott gave conflicting evidence about whether she recalled Norman saying that he would get Pauline to sign the documents. However, she was firm in her recollection that she heard George ask Norman whether his wife knew about the loan and that Norman had said 'Yes she does'.[26] Ms Mott also reiterated that she heard reference to security being provided, saying 'Yes they were talking about the house, because he asked - George asked Norm did his wife know about the loan, because she had to sign the documents'.[27]

47 After the meeting, Norman showed Ms Mott the brochure for the boat and left the office. George then said to her:

'I'm going to loan Norm $1m for the boat', and I - I just said, 'Oh, gee', you know, 'I don't' - 'I don't know whether that's a great' - 'great idea', and George said, 'Look, it's' - 'it'll be fine'. He said, 'He's putting his house up as security, so if anything does go wrong, you know, we've got his house as a security'.[28]

48 After this discussion, on the afternoon of 2 May 2012, Ms Mott sent an email with the subject matter 'Loan to N & P George' to Mari Ross, a solicitor at Meerkin & Apel, so that Meerkin & Apel would be able to prepare the loan documentation.[29] The email set out details of the company providing the loan, the names of the borrowers, a reference to a second mortgage over a property at 9A Young Street Brighton, the term of the loan, a statement that the loan was to be a commercial loan to 'N&P George', and that they currently owed $300,000 on the property. Ms Mott said that she got the details for this email from George.[30]

49 The following morning, 3 May 2012, Ms Mott notified Meerkin & Apel of the amount of the loan, however in doing so mistakenly typed $1,000,050 rather than $1,050,000.[31] Later, when Norman came into the office with details of what had to be sent through to the bank (being Mr Coorey's address, name, account details and so on), she inserted the same, incorrect amount on the NAB 'RTGS Request Form', causing the lesser amount to be transferred.[32] She later rectified the error by preparing a second request form requesting a transfer of an additional $49,950.[33]

50 That same morning at 11.16 am, Ms Mott received an email from Ms Ross with the transaction documents attached.[34] Ms Mott gave evidence that she assumed that she printed and stapled the documents together and gave them to George. Ms Mott said that she did not specifically recall doing so, but that this was her usual practice ('otherwise they'd go missing'), and was what she would do as a 'reflex action' if documents came through for George by email.[35] Ms Mott said that she did not use bulldog clips and that she had a big stapler that had the capacity to staple all of the documents together into a single bundle.

51 Ms Mott could not recall whether George was present at his desk or otherwise in the office at the time she printed out the documents but said that if he had not been there, she would have left them on his desk. She did not recall making copies of any documents and later conceded that she did not know exactly what documents, if any, Norman was given by George.

52 Ms Mott also had no recollection of reading the covering email from Meerkin & Apel, but said that she did not normally read documents that come through for George and generally just gave them straight to George.

53 Ms Mott recalled that when Norman took the documents, he said that he was going to get Pauline to sign them and then left the office. Ms Mott recalled that Norman had something in his hand which she was 'pretty sure' were the documents,[36] but she could not really tell nor could she remember whether and when the documents were brought back to the office, if at all.

54 Ms Mott said, in effect, that if she had received the signed documents back she would have sent them to Meerkin & Apel, but did not recall doing so. It was common ground that Meerkin & Apel did not receive the documents until 2 or 3 July 2012. Ms Mott did not accept that it was likely that Meerkin & Apel received them from her, stating that George often drops things off himself.

55 Ms Mott recalled having a telephone conversation with Pauline in early 2013. Ms Mott rang Pauline at George's request to tell Pauline that she could have more time to sell the house. During the call, Ms Mott asked Pauline about her holiday, and Pauline said 'it wasn't a holiday, it was more of a business trip' and it was the worst time she had had in her life and that Norman brought the marriage to an end when she returned.[37] Pauline also mentioned that her father was very ill and she just needed a bit more time.

56 Ms Mott was questioned in cross-examination about whether she had more than one telephone conversation with Pauline, but Ms Mott could only remember having one. Ms Mott was asked whether she recalled a telephone conversation from Pauline in which Pauline asked to speak to George because she had received a letter of demand and asked that George put a stop to 'loan default and without prejudice letter sending'.[38] Ms Mott was firm in her responses. She rejected the proposition that after about four years two phone calls might have merged into one or that she did not remember very well. Ms Mott said she definitely remembered the (single) conversation she had with Pauline.

57 Nicholas Saade is George's brother and has also known Norman and Pauline for over 30 years. Nicholas worked with Norman for 25 years and said that he was 'inspired' by Norman's capabilities as the manager of various restaurants for the Saades. Nicholas also knew Pauline from seeing her at functions and when she worked with Norman.[39]

58 Nicholas' evidence is substantially consistent with his brother's. Nicholas recalled attending the initial meeting with Norman at the café on 'around 1 or 2 May 2012'. Nicholas recalled Norman saying that he had a deal with his cousin, Jason Coorey, who had a venture providing berths on boats in London and that he had already sold the berths on one boat and wanted to order a second. Nicholas said Norman produced some documents about the boat that had already sold. Norman said he needed the money for only a month and that it would be highly profitable. Nicholas said the whole concept 'sounded great because it was like a berth and you walked straight in to the Olympics'.[40]

59 Nicholas gave evidence that at the meeting George asked Norman why he did not borrow the $1,050,000 from a bank, to which Norman explained that he needed the money urgently. George then said that because he had known Norman for 25 years he would be prepared to lend Norman the money, but that 'he (Norman) had to check with Pauline' and provide security.[41] Norman said that he had a house worth $2.2 million which was in his wife's name, and that they only owed $300,000 on it. Norman said he could organise that as security and that he would 'go and talk to Pauline and organise it'.[42]

60 Nicholas recalled that at one point, Norman said he would give Nicholas 'a couple of hundred grand or something like that'.[43] Nicholas said he did not want anything out of it.

61 In cross-examination, Nicholas agreed that Norman may have asked George whether George wanted to invest in the business venture, saying:

He might have said that, I'm not sure, right, but all I can tell you is that George as I know my brother since I was a kid, I looked after him as - as my father, because my father died at 10 - that he did not invest, 100 per cent did not invest in something he didn't know anybody, but - and he invested in him by saying to him, 'I will give you the money for a month as long as you give me some sort of security',...[44]

62 Nicholas also acknowledged that in the conversation, Norman may have said he would double or triple his money:

There was comments made flowing around with Norm George, 100 per cent that we were going to make a million, we're going to do this, we're going to do this, but George wasn't interested in that. He just wanted black and white. He wanted a security, he's prepared to lend him the money on security, and that security was the house. As far as George knows that the house was in his name, Your Honour, and her name. That's all.[45]

63 Nicholas denied that Norman had told George that he had invested $400,000 of his own money into the boat venture.

64 Nicholas recalled being present with George in the office on the next day, 2 May 2012. He recalled that Norman came into the office and said that he wanted George to transfer the funds directly to Mr Coorey's account. Nicholas could hear the conversation with George from where he sat, which was opposite George's desk. Nicholas recalls George saying that he didn't know Mr Coorey and asking why he couldn't put the funds in Norman's account, and that Norman said the money had to be in London by a certain time. In cross-examination, Nicholas denied that Norman asked George for the money to go directly to the shipping company or that George said he wanted it to be paid directly to Mr Coorey.

65 Nicholas also noticed Norman in the office asking Ms Mott to transfer the money into Mr Coorey's account, and said that Norman put a lot of pressure on Ms Mott to get the money transferred. Nicholas said that Norman gave Ms Mott Mr Coorey's details and that Ms Mott rang the bank and organised the transfer of the money. Later, Nicholas heard Norman telling Ms Mott that she did not transfer the right amount.

66 Nicholas said he did not see Norman collect any documents or return any documents.

67 In the several months after the Olympic Games had taken place, Nicholas was present on several occasions when George rang Norman and heard a few of the conversations and observed his brother becoming upset. Nicholas recalled Norman coming up with excuses such as 'the tax man had hold of the money', 'the Germans had not paid yet' or 'they're paying next month'.[46] Nicholas also saw Norman come into the office several times and promise that the money would be returned.

68 Michelle Wade is the office manager for the Saade Group's construction business and George Saade's daughter. Michelle is employed to manage day-to-day operations, managing the process from planning to sales, leasing and other family affairs. Michelle had known Norman and Pauline for more than 20 years and said that Norman and Pauline were like family to her. Michelle said that she spent more time with Norman than Pauline due to him managing the family business, Giorgios, and that Norman was like a 'mentor' or 'second father' to her and that he and Pauline were present at all significant family occasions.[47]

69 Michelle recalled having a brief conversation with George in early May 2012 where George said that he was going to lend Norman some money. She asked him what for and he said there was a deal to do with a boat in London, something about providing accommodation during the Olympic Games. She recalled that George had a brochure in his hand. She asked him a few questions about the boat which George could not really answer. Michelle recalled later trying to search the vessel online and described it as 'a super yacht with accommodation'.[48] Michelle said that she could recall the timeframe of the discussion by reference to the email of 3 May 2012 and other documentation.

70 Michelle was concerned after George mentioned the proposed loan, as it was quite removed from what the family normally did. However, after raising it with George, George said not to worry and that he was getting security.

71 Michelle recalled seeing Norman in the office the following day having discussions about the deal with George. She could hear Norman reassuring George that it was a good idea and that Norman was going to make a good return. She heard Norman say that the first vessel had sold out in a short space of time, which was the reason why they needed to invest in a second vessel. Michelle said that her office had louvre windows facing towards George's desk area, so she was able to hear everything that was taking place.

72 Michelle also recalls hearing George say something along the lines that documents would be arriving and that he needed to get them signed. She remembered George saying to Norman 'Is Pauline going to be okay?', and Norman saying yes.[49]

73 Subsequently, Michelle had a direct conversation with Norman, who approached her in her office and confirmed what she had heard about the vessel and the accommodation.

74 The next day, Michelle received an email from Meerkin & Apel, which was copied to Ms Mott.[50] Michelle said that George did not use a computer and that Michelle received all his emails. Michelle asked Ms Mott whether she had received the email and Ms Mott said that she had and that she had printed the documents. Michelle said that at the time the email came through there was only herself and Ms Mott in the office, and that Ms Mott contacted George about receiving the documents. Michelle understood from a conversation with Ms Mott that George had asked her to give the documents to Norman.

75 Michelle recalled that Norman was in and out of the office numerous times that day. She assumed that he had collected the documents.

76 Michelle also recalled seeing Norman the next day speaking with Ms Mott about the transfer of funds, and said that Norman was 'extremely anxious and on edge and [was] on his mobile phone'.[51] Michelle could see Norman standing over Ms Mott and writing down some information and could hear Norman saying to the person on the phone that the transfer was happening now. Michelle recalled Norman coming in to the office again later that day, where he raised his voice and told Ms Mott that the incorrect amount had been transferred and that she needed to fix it and transfer additional funds.

77 Michelle gave evidence that in the months after May 2012 she overheard numerous conversations between George and Norman. She said that she overheard George telling Ms Mott to contact Norman and to find out what was going on with the money and when the money would be repaid. She also recalled seeing Norman come into the office to speak to George numerous times and George continually asking where the money was and when it would be repaid, and that Norman continued to say that it was coming and should arrive in the latter part of 2012. Michelle overheard George make a statement during one of the meetings to the effect that if the money was not repaid the house would have to be sold. Despite challenge under cross-examination, she remained firm that George had made a statement to this effect.

78 Michelle denied that in the meetings which took place between George and Norman George was in fact enquiring about his investment in the boat venture.

79 On one occasion in late 2012, Norman rang Mr Coorey in Michelle's presence and asked Mr Coorey whether he could give an update on where the money was. Mr Coorey said he believed it had been caught up with the travel agent and was doing everything he could. Michelle said that her father was losing patience and wanted the money recovered. After the call ended, Norman also said that he was doing everything he could to get the money back and repay the loan.

80 Mr Czarny has been a partner at Meerkin & Apel for approximately 40 years and is in charge of securities, banking and finance. He is also a director of a finance company conducting a business of managed mortgage schemes. Mr Czarny gave evidence that he had known George for 25 to 35 years and George was a long-standing client.

81 Mr Czarny recalls that in early May 2012, George instructed him to prepare documents concerning a loan transaction. Mr Czarny said that George told him that he was going to make a loan of just over $1 million to his 'good friend' (who in George's words was 'like a brother'), and that the loan was only for 30 days to enable his friend to do some venture to do with the Olympic Games in London.[52] The instructions were to keep it simple and to secure George but without the full expense and delay of a normal commercial mortgage transaction. George identified the borrowers and said that the security would be the equity in their home. Mr Czarny advised him that at the very least he needed to have a binding loan agreement and mortgage in support as collateral, that there should be a title search, and that the documents needed to be executed properly.

82 Mr Czarny also recalled explaining to George that it was necessary to have a mortgage even if it was not registered, that George needed to have the right to lodge a caveat, and to make sure that the registered proprietors were party to the mortgage and the loan agreement.

83 Mr Czarny recalled George making it clear that the money had to get to London urgently and that the documents therefore had to be prepared urgently. He recalled that there was a large boat or ship involved in the transaction and, because the Olympic Games were of short duration, every day was important. He thought that the instructions would have been given the day before the documents were issued.

84 Towards the end of the call, Mr Czarny told George that Mari Ross (who was an experienced security lawyer at Meerkin & Apel) would contact him to firm up the terms and conditions and do the drafting and the searching, and would have the documents out to him within a day or two with instructions on how they were to be completed.

85 After the call, Mr Czarny instructed Ms Ross to open a file. Ms Ross prepared the documents, which Mr Czarny reviewed before they were transmitted by email.[53] Ms Ross prepared a detailed instruction letter confirming the instructions that had been given and the limitation of the work the firm was to do.[54]

86 Mr Czarny recalled following up George by phone four or five working days later to see what was happening because the documents had been issued urgently but had not come back signed and Mr Czarny had not heard that the work was completed or that the transaction was consummated. In that call, George informed Mr Czarny that the transaction had proceeded ('everything is done') and that he had the signed documents and was going to hold onto them.[55] He instructed Mr Czarny not to do anything further and not to lodge a caveat at that stage. George said that he would come back to Mr Czarny if there was a problem or he was not repaid. Mr Czarny then said to George that they would close off that part of their work. Mr Czarny identified a contemporaneous note of the telephone conversation dated 9 May 2012 which is in all respects consistent with the above account.[56] Mr Czarny agreed that he did not sight any signed documents at the time of this call.

87 Mr Czarny recalled receiving a telephone call from George in mid-to-late June 2012, advising Mr Czarny that the money was late in coming back to him and that the problem might be sorted out but that he ought to lodge a caveat. Mr Czarny said he needed to see the signed documents before he could lodge the caveat, and a day or two later a signed original loan agreement, mortgage and (perhaps) a declaration regarding business purposes were delivered to Mr Czarny's office. A caveat dated 29 June 2012 was lodged on 2 July 2012.[57] Mr Czarny agreed that it is likely that he would have had the original documents in his office immediately prior to the caveat being prepared.

88 Mr Czarny also identified a Deed Entry Form dated 3 July 2012 indicating that the executed loan agreement and mortgage were recorded in the Meerkin & Apel Deed Register and filed that day.[58]

89 On 9 August 2012, Meerkin & Apel sent a notice of default under the loan agreement.[59] Second and third demand notices were also issued in February and July 2013.[60] After the third demand notice was issued a Notice to Pay under the mortgage was issued on 12 July 2012.[61] Mr Czarny recalled being involved in signing off on the notices of default and the Notice to Pay.

90 Mr Czarny said that the secured property was subsequently sold with an agreement reached for distribution of the proceeds of sale. The residue (after various costs) was placed in a controlled monies' account.[62]

91 Norman recalled meeting with George and Nicholas at the café on 1 May 2012 where Norman explained to George:

(a) that he had become involved in an investment with Mr Coorey in which Norman had already invested $400,000;

(b) that he had an opening for George to make a further investment of $1,050,000 in the venture to pay for a second boat;

(c) that the amount was only required to be invested for four weeks;

(d) that George would get double to triple his investment back; and

(e) that he had the utmost confidence in Mr Coorey and that the boat venture was a 'no brainer'.

92 Norman gave evidence that he decided to give George the opportunity to invest because 'it'd be good to do something together'.[63] Norman said that he sold the deal to George because he was very confident, and he would not have asked George to invest in something bad as they were very close.

93 Norman said that after explaining the deal, George said 'Look, I trust you and I'll do it' and then said 'Let me think about it. Come to my office tomorrow'.[64] Norman also recalled George saying to Nicholas 'If it comes off... I'll give you $300,000 to buy a house out of it', and Nicholas saying 'that would be great' and putting his arm around Norman and George.[65]

94 Norman recalled going to George's office the next day and discussing the transfer of money, and telling George that the money was needed the following day. Norman also recalled discussing whether the money would be transferred to the shipping company directly (which is what Norman thought would happen). Norman said that George was more comfortable (even though he did not know Mr Coorey) for the money go through Mr Coorey's account because Mr Coorey was the person running the business. Norman then rang Mr Coorey, and they agreed that when the money came into Mr Coorey's account Mr Coorey would send it straight to the shipping company, which to Norman's knowledge was what happened the next day. Norman said he gave the banking details to George, which were then given to Ms Mott. George then told Norman to return the next morning and that he would 'arrange it'.[66]

95 Norman recalled going into George's office again the following day (3 May 2012) when the money was transferred. The amount transferred was $49,950 short and Norman was under pressure to get the money through to the shipping company. He recalls calling George, who said 'No problem, that he would get Sharon to fix it'.[67]

96 Significantly, Norman said that the loan and mortgage documentation came into existence approximately three weeks after the money was transferred. Norman gave the following explanation:

What had happened was about three weeks after we did all the transfers of the moneys, George is feeling a bit uncomfortable with the investment and he said, 'I need you to sign some loan documents and a mortgage,' and I said, 'What for?' He said, 'It would make me feel a lot more comfortable'. I mean, you've got to understand, I mean, I've been with the guy for 35 years and I didn't think it would turn to this, how we are now, because we had just a - we had a very good relationship and when things had gone wrong in his areas, I was always there for him.

Perhaps just tell His Honour what Mr Saade said to you and what you said to him?---And he said that, 'I need you to sign - I need you - I'd feel a lot more comfortable if you sign a loan document and a mortgage document in respect of the moneys I've given you in all fairness,' and I felt morally obliged; stupid, actually, but at the same time, I wanted him to be happy because I respected him so much, so I said I would, and he said, 'You'll have to get your wife to sign it'. I said, 'I will'. Now, I don't know the exact date but it was about three weeks after we started this.[68]

97 Norman could not remember the date he picked up the documents from the Saade Group offices. He could also not say who gave him the documents, but thought he may have picked them up in an envelope. When asked to say which pages were given to him, Norman identified the execution page of the loan agreement, the (single page) schedule to the loan agreement and the mortgage of land.[69]

98 Norman gave evidence as to what he did after collecting the documents:

So what I did was, when I went home, I foolishly but that's what I did, I said to - I walked in and I - and I had to go to another meeting to see Jason, about another meeting, just about some different parties they want to have on the boat and all this sort of stuff. I said to Pauline, 'I need you to sign these documents'. She said, 'What do you mean?' I said, 'Look, I'm in a hurry,' I swore, I shouldn't have, not normally - - -

I said to her, 'I need you to sign these documents,' which I had, the execution document and the mortgage document. But I only had only signature pages because I honestly thought there was never anything going to be wrong with the deal. I wasn't trying to fraudulently sort of do the wrong thing by my wife. Until you go things wrong, you don't realise it, you know?

Perhaps just restrict yourself to what you said to your wife and what you gave to her?---I gave her the signing - the execution part of the loan document.[70]

99 Norman recalled that at the time Pauline signed the documents, he was standing at the bench separating the kitchen from the dining room. When he asked Pauline to sign the documents, he said that he flipped the document over to the signature page of the mortgage and said he was in a hurry. When shown his wife's signature on the following page he said he did not remember that page, although it looked like his wife's signature. He denied that Pauline stopped and looked at the page incorporating the schedule.[71] Asked whether he would have turned over the document to look at the schedule, Norman agreed that he would presumably have done so.

100 Norman said that when he gave the pages to Pauline to sign he told Pauline that the documents had to do with the trip to the Olympics. Norman agreed that whatever he picked up and took away he put before Pauline to sign.

101 When shown the 'Declaration of purposes for which credit provided', Norman acknowledged that the signatures of himself and his wife were on the document but said that he did not remember the document. When shown the memorandum of common provisions and asked whether he had also picked that document up from the Saade Group office, Norman said that he had never seen it.

102 Norman recalled that the following day he returned the documents to George's letterbox. He agreed that he returned all the documents he had received.

103 In July to August 2012, Norman and Pauline attended the Olympic Games in London and stayed at Canary Wharf on the boat. Norman said whilst he was in London he put pressure on Mr Coorey as the money had not been repaid within the four weeks. Norman said that Mr Coorey made various promises and offered many excuses.

104 Norman recalled that after the Olympic Games had finished, George rang Norman about every second day asking 'When is the money going to come back from the investment?'[72] Norman accepted that he gave George a lot of explanations but that he only told George what Mr Coorey had told him, and was trying to be as truthful as possible about what he was being told.

105 Norman said that on one occasion he spoke to Mr Coorey with Michelle. During the conversation, Michelle quizzed Mr Coorey about where the money was and what was going on. Norman recalled that Mr Coorey said that there had been problems with the travel agent who, it appeared, had embezzled some money, and that he was trying to get the money back as soon as possible.[73] Norman had some further discussions with George, who kept ringing and asking when the money was coming back. Norman said that George started being 'heavy handed' by saying he would have to take it further.[74]

106 Norman said that he ceased living at the Brighton home shortly after returning from London and divorced from Pauline in July 2014.

107 Under cross-examination regarding the events with Pauline in the kitchen, Norman denied saying:

(a) that Pauline had to sign the documents so that the tickets for her and Tanya George (Norman and Pauline's daughter) could be allocated for the Olympics as part of a group booking;

(b) that Pauline had to sign the documents to enable Tanya to sing on the MS Caledonian (sic) or any other Coorey-related vessel; or

(c) that Pauline had to sign the documents so that Tanya could have exposure to important dignitaries in the music and entertainment industry.

108 Norman agreed that he had spoken with Pauline about the trip to London a few days prior to the events in the kitchen. Norman recalled that he said to Pauline 'We've got a chance of going to the Olympics'.[75] Norman conceded that he already knew they were in fact going but said that he did not say that to her because he wanted it to be a surprise. Norman denied that he had spoken to Pauline about the trip much earlier.

109 Norman also denied that Pauline sat down and went through the documents at the time that she signed them. He said it was a 'rush job' and reiterated the circumstances of the occasion as follows:

I walked in and said, 'I have to go to a meeting. Hurry up and sign - I need you to sign these two documents.' And I actually swore, which I'm not proud of, but I'm telling the truth, is what it is, and that's what it is. And she said, 'What's it for?' I said, 'It's got to do with the trip. Hurry up and sign it, just quickly sign it. I've got to go.' And she signed it.

You put it on the bench between you?---Yeah, well we never had lights on all the time in the house like this.

Yes?---When she was cooking she'd cook and sort of dim the lights all the time, and I put the first execution document in front of her. I didn't go flip through it all, and then I turned it over after she signed it. I witnesse[d] she signed it. I flipped it over, she signed the other side, and then I took it and witnessed it.[76]

110 When it was pointed out that there were more signatures that had to be put on the mortgage than just the execution page, Norman said 'Wherever - well, whatever it was'.[77]

111 When asked whether Pauline asked any questions about the documents, Norman said 'When you've got a husband who's fiery like I was at the time, and had sworn at you, she felt - as I said, I'm not proud of it - she obviously felt intimated...she wouldn't question me'.[78] Norman denied that the documents did not cause any alarm or shock for Pauline because Norman had told her earlier about the need to sign the documents. Asked whether he threatened his wife, Norman said 'I swore at her. I swore, "Hurry up and effin' sign it," which she didn't deserve'.[79]

112 Finally, Norman was shown a copy of the loan agreement with the word 'Ours' written on the top left hand corner. This was a document that the first defendant produced on discovery apparently bearing George's signature on the execution page (but without the signatures of Norman or Pauline).[80] Norman said that he was not sure if the word 'ours' was in his handwriting. Norman denied that the document was a copy for him and Pauline to keep for his records or was part of the documents that he picked up from George's office. However, Norman conceded that the only place that he could have got the document was from 'George's side'.[81] Norman acknowledged that it was his copy, but re-affirmed that he was positive that he had not made a copy of the document before he and Pauline signed the execution page.

113 For the reasons which follow, I have determined that the transaction is properly characterised as a loan made by the plaintiff to (at least) the first defendant and not an investment made directly by the plaintiff to Mr Coorey. Whether the loan was also made to the second defendant is considered in question two below.

114 At the outset, I accept the evidence of George and Norman (corroborated by Nicholas and Michelle) to the effect that Norman had worked for many years in management roles in restaurant (and other) businesses run by George and his brother Henry, and that as a result the Saade family and Norman had formed a trusting relationship which developed into a strong friendship between George and Norman. There is little doubt that this was one of the reasons why Norman chose to approach George regarding the transaction in May 2012.

115 I am also satisfied that at that time the events took place in May 2012, Norman genuinely believed that investing funds in his cousin's boat venture was likely to be extremely lucrative and low-risk. In this regard, I accept that Norman was convinced (having earlier invested $400,000 in the venture in 2011) by representations made by Mr Coorey regarding the success of previous bookings for vessels at other events. It was evident that Norman was very confident and very enthusiastic about the venture, variously describing the investment as a 'no brainer' and 'an absolute monty'.[82]

116 However, it does not follow that an investment of this kind would have appealed to George, or that the Court should find that George must have invested in the venture simply because he transferred the funds directly to Mr Coorey. There are several reasons why this is the case.

117 First, George had never met Mr Coorey and gave evidence, which I accept, that he did not invest money offshore. In my view, these circumstances alone make it unlikely that he would take the risk himself of investing more than $1 million with Mr Coorey at very short notice for a business venture in the United Kingdom. It was not suggested that George had any need for money; on the contrary, I infer that he was in a strong financial position (in light of a successful history of owning restaurants and developing property), and was therefore seen by Norman as a potential source of funds.

118 Second, given the personal history between Norman and George, I believe that George was likely to do what he could to help his friend, who was seeking financial accommodation for a very short period and was prepared to provide security in support. In my view, that proposal represented a transaction with little risk, which would be far more likely to appeal to George. I accept that there was an initial overture to George to interest him in a personal investment but this was perfunctorily dismissed as George had no interest in an investment of this kind.

119 Third, the evidence of Nicholas, Michelle and Ms Mott all corroborate George's account that the transaction was a loan. Michelle and Ms Mott had contemporaneous discussions with George in which they each raised concerns with him about whether it would be wise to lend Norman such a large amount of money. Both gave evidence that they were reassured by George that the loan would be secured. I accept that these discussions took place. Had the transaction been a direct investment such discussions would not have occurred.

120 Fourth, George instructed his solicitor Mr Czarny to prepare transaction documents at the time the deal was taking place. The documents that were subsequently prepared on 3 May 2012 (and signed by Norman and Pauline) included a loan agreement and a mortgage of land. These documents squarely reflect the characterisation of the transaction as contended for by the plaintiff.

121 I reject Norman's evidence that the transaction documents were prepared approximately three weeks after the money was transferred or were signed because of a request by George to make him feel 'more comfortable' or 'better' about his investment. There is no doubt from objective evidence that the documents came into existence on 3 May 2012. They were clearly not prepared as an afterthought. This is clear from the evidence of Mr Czarny to the effect that the documents were prepared urgently based on instructions received the day before. The documents were also undoubtedly sent to George's office by email on 3 May 2012.[83] I consider that it is very unlikely that George would go to the extreme of giving false instructions to his solicitor as to the nature of the transaction so that his solicitor would unwittingly create documentation which falsely characterised the true commercial arrangement. It is noteworthy that on 3 May 2012, when the documents were prepared (or even three weeks later), there was no reason to suppose that the boat venture would not be financially successful and no reason for George to need 'comfort' or to be made to 'feel better' about the alleged investment.

122 The notion that the documentation of a loan with security came into existence weeks after the fact was otherwise comprehensively rebutted by the evidence given by Mr Czarny of a telephone conversation he had with George on 9 May 2012. In this conversation, Mr Czarny was told that the transaction had proceeded and that George had the signed documents in his possession. Mr Czarny made a contemporaneous file note to that effect.[84] I am satisfied that the conversation took place in the terms of the file note and that the file note was made at the time. The file note records notes of a conversation which took place well before any default occurred. It strongly corroborates George's evidence that the transaction documents were executed early in May and returned to him at least by 9 May 2012.

123 It was suggested by Senior Counsel for Pauline that George lied to Mr Czarny when he said that he had the signed documents back in his possession either because he did not have the heart to tell Mr Czarny that the documents had not been signed before he transferred the funds, or he was too embarrassed to say that he had not received the documents back from Norman after Mr Czarny had expedited preparation of the documents a week earlier. George rejected these suggestions in emphatic terms, as I do. There is no evidence to support such an assertion.

124 Finally, in my view, the timing of the lodgement of the caveat does not provide any support to Norman's case as suggested by his Counsel. I accept George's explanation of the slow preparation and lodgement of the caveat; namely, that he was lenient on Norman because Norman was like a brother and that as repayment was due at the end of the month he wanted to avoid spending any more money on legal fees than was necessary.

125 In the circumstances, I find Norman's evidence on the issue of characterisation of the transaction wholly unbelievable and highly damaging to his credit on the other matters in issue. Norman became agitated when pressed in cross-examination, resorting on occasion to expressing his frustration that his old friend George was pursuing recovery in this proceeding despite their long association. It was a measure of the extent of his desperation to protect his or his former wife's interest in the family home to resort to such an unconvincing rationalisation for the loan and mortgage documentation.

126 In my view, Norman unmeritoriously sought to take advantage of the fact that the funds were transferred directly to his cousin as a platform to mount the defence that George (through the plaintiff company) invested in the venture directly. I am satisfied that the only reason George facilitated the transfer of money directly to Mr Coorey's account was to help Norman minimise the purported risk of losing the opportunity of obtaining the second boat.

127 Similarly, in my view, Norman also sought to take unmeritorious advantage of the fact that the executed documents were not provided to Meerkin & Apel until the end of June 2012, and that a caveat was not lodged on the title of the security property until early July 2012.

128 Accordingly, I find that the transaction is properly characterised as a loan by the plaintiff and not an investment by the plaintiff in the venture directly.

129 I also find that the arrangement was consummated on 2 May 2012 and enforceable from that date. In this regard, the plaintiff pleaded that a 'head agreement' was reached on 1 or 2 May 2012 through conversations between George and Norman (on his own behalf and on Pauline's behalf) in which the plaintiff agreed to lend the defendants $1,050,000 for three or four weeks, secured by a mortgage over the property at 9A Young Street, Brighton, such agreement to be later reduced to writing.[85] I accept this characterisation of events (but say more about the agency issue in question two). In my view, the present case falls within the first category in Masters v Cameron:[86] where the parties have reached agreement on the terms of the bargain and intend to be immediately bound, but at the same time propose to have the terms restated in fuller terms in transaction documents not different in effect.

Question 2: Given that the transaction is properly characterised as a loan, is the second defendant liable as borrower under the loan agreement and mortgagor under the mortgage?

130 The issues in question two (and the three sub-questions) exclusively concern the second defendant, Pauline, and whether she is also liable under the arrangement reached between Norman and George on 1-2 May 2012.

131 Pauline gave evidence that she was married to Norman for a little under 30 years at the time of their divorce in 2014. She said that during the marriage their respective roles were quite traditional: Norman was the 'breadwinner', and Pauline looked after the household and children.[87]

132 Pauline recalled first hearing rumblings of a trip to London 'but not really connected with us in possibly June of 2012... there was a boat and a few things that did not really relate to us at the time...'[88] Pauline's evidence was, in essence, that the trip was a last-minute surprise to her by Norman. Pauline denied that there was any consultation by or with Norman on dates, availability or other arrangements for the trip to London.

133 It was suggested to Pauline that Norman was extremely excited, optimistic and confident about the London boat investment, and that he had previously mentioned it to her. Pauline said that Norman was not accustomed to discussing business ventures or dealings with her unless they were unusual, and that he was very 'private'[89] and 'secretive'.[90] Pauline also said that Norman did not tell her he had made an investment in the boat venture in late-2011, and there was no discussion about using the loan facility of $300,000, backed by the mortgage and Pauline's guarantee, for this purpose. She further denied that Norman expressed any excitement or confidence about the deal 'because we never had a conversation about anything, unrelated to a couple of days before signing the papers'.[91] Pauline said:

I only heard about the trip vaguely in June and it wasn't until the signing of the documents that Norm said something about the trip and I knew that it might be happening. He talked about it a couple of days before but it wasn't in concrete.[92]

134 Pauline said that when Norman did finally raise the trip with her, there was no talk of George Saade or of offering the house as security, but only a 'murmur' of Norman's cousin having a boat.[93] Pauline said she was more interested in the name of the boat and where it was.

135 Pauline denied that when the trip was raised, she was curious to know more about how it had come about or how it was to be funded. Pauline said she was simply thrilled because Norman had finally listened to some advice from a marriage counsellor (to the effect that a trip would be a good idea) and because they had not had such a trip in 30 years of marriage. Pauline also gave evidence that she had a two-day-a-week part-time job and had not taken holidays in the three years she had worked there, and that when she requested holidays 'they were all a bit surprised but [she] did not have problems getting it off'.[94]

136 Pauline denied that she had ever had any business dealings with the plaintiff company or with George. She recalled signing papers during the period preceding the trip but said that she had not received any advice about the papers before she signed them.

137 Pauline described the circumstances of the signing of the papers and the contemporaneous conversation in the following terms:

It was in 2012. It was in the family home, 9A Young Street. I was, uh, in the kitchen, um, and I was cooking dinner when Norm came in with some pages in hand.

Can you describe what conversation was had at the time?---It was quite brief. Norm came in, as I said, with pages in hand. He said, 'Pauline, can I have your attention. Look, I need you to sign some documents for me.' As I was cooking, it was sort of a little bit awkward, and I said - I sort of pressed him for some information, and he said to me, 'Look, I'm in a hurry. I've got so many things to do. I've got other meetings and other places to be. Can you please just fucking sign the documents?' and he pointed to where I should sign. He then sort of softened and said, 'Look - look, don't [stress], don't stress. I'll - I'll explain it all to you later. Just - I'm just in such a hurry. If you want to - you know. I'd love to go on this trip. If you want to go on this trip - I've got so much to do, please let me go and do it. I've got other things to do.' And he pointed to where I should sign, and I conceded and I signed.

Do you recall what he handed to you to sign?---Um, he handed a couple of loose sheets of white paper.[95]

138 Asked whether she had any reason to doubt what her husband had told her, Pauline replied, 'No, not in 30 years of marriage'.[96]

139 Pauline identified her signature on the loan agreement which she signed (apparently) in her own right as a borrower and as witness for her husband, and also on a document headed 'Mortgage of Land' and on a page marked Special Conditions, which she signed (apparently) in her own right as mortgagor. Upon being shown the original mortgage, Pauline denied receiving the first page.

140 Pauline denied that she was given an opportunity to read the papers before she signed them. As to whether she understood what she was signing, Pauline said:

Well I didn't really know, I didn't get an explanation thoroughly. Norman did not say these were for the trip, but Norm said, "If you want to go on the trip, sign these documents," basically. 'And I sort of presumed it was something to do with cabin hire or the like. I really didn't give it too much weight'.[97]

141 Pauline was shown the original mortgage in cross-examination and identified the heading 'Mortgage of Land' on the second page and her signature in the middle of that page against the words 'Signed, Sealed and Delivered'. Asked whether she understood when she signed the document that it was a serious legal document and the words 'Signed, Sealed and Delivered' indicated as much to her then as they do now, Pauline reiterated that 'I didn't read the document'.[98] Pauline said further:

I was in the kitchen. I wear glasses. I was cooking. Norm handed me the document, 'Can you sign there and there?' and that's exactly what I did.[99]

142 When it was pointed out that the document had three pages and that not only did she have to sign it on the middle page but also had to sign it on the last page, Pauline said:

I never saw that page. That page was never present. I might have signed where I signed, but there was no separate pages, apart from pages that I signed. There was no - I think there was three documents - three pages in general. There was nothing presented to me like that, in case you think it said 'Mortgage of Land' on the title page.[100]

143 When it was pointed out that the words 'Mortgage of Land' on the page she had signed were in large font and bold letters which could be read with or without (reading) glasses, Pauline agreed 'Yes, but Norm handed it like that (indicating that his hand was covering the words) and said 'Can you sign there?''[101] Asked how she knew this, Pauline replied 'I just remember him keeping his hand on the pages the whole time and turning them and it was a quick process of signing and he went'.[102]

144 When challenged on whether she was reconstructing or making up this evidence, Pauline said:

No I'm not. That's how - he - he didn't let go of the pages. He actually put it in front of me and said "Sign here" and he pointed to where to sign, and that's where I signed.[103]

145 In relation to the loan agreement, Pauline was directed to the words 'SIGNED, SEALED AND DELIVERED' in bold, capitalised letters immediately above her name on the signature page. When she was asked whether she could see them, Pauline said 'I can with my glasses on, yep.'[104] Pauline was also asked what happened when she looked at those words in 2012, to which she replied 'I didn't read it unfortunately'.[105] In response to whether she had asked Norman any questions, Pauline said 'I did press Norm for information and he didn't reveal anything'.[106]

146 Pauline was then directed to a schedule in the loan agreement which set out the names of the borrowers, Principal Sum (recorded as $1,000,050), due date, interest rate, security and special covenants. Pauline denied ever seeing this page.

147 Pauline was also asked to look at a document with a heading in bold, capitalised letters 'DECLARATION OF PURPOSES FOR WHICH CREDIT PROVIDED'.[107] She identified her signature on the document. She was directed to a box in the centre of the page immediately above her signature, which states:

IMPORTANT NOTICE

You should only sign this Declaration if this loan is wholly or predominantly for business purposes or investment purposes other than investment in residential property.

By signing this Declaration you may lose your protection under the National Credit Code.

148 When it was suggested to her that it was likely that when she saw the document and signed it she also saw the Important Notice in the box, Pauline said 'It's likely but I don't recall'.[108]

149 In response to the suggestion that the document was clear on its face when she was asked to sign it, Pauline said that when she looked at the document now with glasses on, in the presence of everyone, and having had the time to read it, it does say Important Notice, but that she still did not know what it was for. She said she just thought it was something to do with cabin hire for the trip. Speaking generally about the headings on the transaction documents, Pauline said 'I didn't read them and I didn't see them'.[109]

150 In summary, Pauline denied having signed the documents with an understanding that she was entering into a loan or mortgage. She denied that she had an understanding that it was a loan that she had already authorised, or that she signed the mortgage with an understanding that she was putting the house on the line. Pauline just thought it was 'something connected with the trip'.[110]

151 Pauline gave evidence that she left Australia on 25 July 2012 and arrived in London in time for the opening ceremony, which she watched on television on the MS Caledonian Sky. During their stay in London Pauline and Norman stayed in a suite on the vessel (although for some of the time Pauline left London to make a side trip to Holland). Their daughter Tanya, a talented singer, also shared their cabin and had the opportunity to perform to audiences on the vessel during her stay.

152 Pauline claimed that she first learned that she had signed pages of a loan agreement and mortgage document some time in February 2013 when she received a notice of default in the mail. She said that Norman was residing at the house at the time. She said that on receiving the notice she became alarmed as she did not know what a notice of default was. Because the notice had her address, name and the amount of $1 million on it she knew it was something serious, so she contacted Norman who told her not to worry and that he would talk to George.

153 Pauline said that she would not have signed the documents had she known they were for a loan agreement secured by a mortgage.

Other evidence and previous business experience

154 During cross-examination, Pauline was taken to various Australian Securities and Investments Commission searches which indicated that she had been:

(a) a director of a company Benedictine Pty Ltd for a period exceeding 10 years up until 2004; and

(b) a shareholder of a company called Group 1 Thoroughbreds Pty Ltd.[111]

155 Pauline denied having any recollection of either company or knowing that she was a director or shareholder. Pauline also denied having any knowledge of directorships of companies or signing documents from accountants.

156 Pauline was taken to a lease and sale of business from 1985 for the restaurant Ricardo's.[112] Pauline identified her signature on both documents but could not recall being involved in the business. When taken to the words 'Signed, sealed and delivered' beside her signature on the lease, Pauline conceded that the words indicated to her (both then and now) that the document was a legal document with consequences.

157 Pauline was also taken to mortgages in respect of three properties, being 48 Mitchell Street, Bentleigh (dated 31 December 1996), 58 Ludbrooke Avenue, Caulfield South (dated 23 November 1999) and 9A Young Street, Brighton (dated 31 October 2006).[113] Pauline agreed that she had become registered as the sole proprietor of those three properties.

158 On being shown the mortgages, Pauline accepted that the heading alone was enough to tell her that the document was a mortgage of land, and that the heading 'Mortgage of Land' was obvious. It was suggested to Pauline that each time she signed these mortgage documents she understood the concept of a mortgage, to which she replied 'Yeah, one would presume so'.[114] Pressed, she did concede that she understood. She also conceded that she understood on each occasion when she signed a mortgage that if there was a default, the lender could sell the mortgaged property to cover the debt. She agreed that she knew on each occasion when she signed the mortgage that her house was on the line if anything went wrong with repayments. She agreed that she understood this throughout the first half of 2012, adding the qualification that she had no cause to be thinking about it. She conceded the same specifically in respect of the property at 9A Young Street Brighton.

159 Pauline was shown NAB documentation for a 'Flexiplus mortgage facility agreement' supporting a loan facility of $300,000 secured under the then-existing mortgage of the Brighton family home and guaranteed by her.[115] Pauline gave evidence that she vaguely recalled signing the guarantee and meeting with the bank officer before it was signed. She agreed that the documentation suggested she was happy to have 9A Young Street Brighton secure the new loan. She agreed that the loan was for a replacement line of credit so that Norman could 'do things'.[116] She agreed that the additional line of credit was something which she would have discussed with Norman given that he needed to take her into a bank and ask her to sign documents ('I imagine so yep'),[117] though she said she could not remember this clearly. She said that Norman was not really one to discuss business, but in this case she was sure that he did (though she could not recall the discussion).

160 Pauline said that Norman sometimes but not always told her about businesses that he was involved in. Asked whether she would sometimes ask him about things, particularly if they had the ability to affect her in any way, she said 'I imagine so'.[118] When asked whether Norman would raise and discuss with her something that affected her, she replied 'I imagine so, but not always'.[119] She agreed that she would have expected Norman to talk to her if she was being required to put up the family home, which was registered in her name, to support borrowings.

161 It is now convenient to deal with the factual and legal issues (being authority, sufficiency of understanding and ratification) raised in questions 2(a), (b) and (c) above.

Question 2(a): Was the first defendant authorised to act on behalf of the second defendant to enter into an agreement to borrow the money from the plaintiff and to provide security for the loan?

162 I have accepted above that on 1 May 2012 Norman asked George to lend him $1,050,000 and that George agreed to do so. I also accept that as part of this conversation, there were words to the effect that the marital home was registered in Pauline's name, and the 1 May 2012 meeting was left on the basis that George said that Norman would need to ensure that Pauline was willing to accept the loan and to provide the house as security.

163 In my view, viewed objectively, any offer by an experienced businessperson like George to lend such a large sum of money was likely to be conditional on the provision of security. The only security available in this case was Norman and Pauline's family home, which George had become aware was registered solely in Pauline's name. I therefore consider it likely that George asked Norman to make sure that Pauline was also willing to borrow the money and to provide security against the home for the proposed borrowings.

164 George gave evidence that the next day, Norman indicated to George that he had spoken to Pauline and that Pauline was 'happy to go ahead with the deal'.[120] I accept that this conversation took place as George described.

165 Norman admitted that he told George that Pauline was prepared to grant a mortgage, but said that this conversation did not take place until three weeks after the money had been transferred. Norman denied, however, that he had ever told George that Pauline was prepared to borrow the money. Pauline gave evidence that she and Norman had never had a conversation 'about anything' to this effect[121] and that she did not give her consent to the loan or the mortgage.

166 I accept that Norman had a conversation where he informed George that Pauline was prepared to grant a mortgage. I reject Norman's evidence to the effect that he never told George that Pauline was prepared to borrow the money. Moreover, I reject Norman's evidence that the conversation with George occurred three weeks after the money was transferred. Prudence would dictate that George had some assurance from Norman before transferring such a large sum of money, even if the arrangements had yet to be documented. I accept that he did get such an assurance from Norman on 2 May 2012, but that he was lenient in the sense that he was content to allow the formalities to be attended to after transferring the money.

167 If Norman is to be believed that he told George (at any time) that Pauline was prepared to give the mortgage without having first spoken to Pauline, it must be inferred that Norman lied to his friend about having Pauline's permission and was also planning to later deceive Pauline by using the family home as security for a very substantial loan.

168 To me, this makes little sense. At the time of the conversation with George, Norman was extremely confident and enthusiastic about the merits of the boat venture and could see no material risk. Norman had shown the brochure for the venture to George, Nicholas, Michelle and Ms Mott and extolled the virtues of the investment. In my view, it is likely that he would have shared his enthusiasm for the boat venture with Pauline, as he had with others. Though they had been having some difficulties in their marriage, Norman and Pauline were trying to resolve these difficulties. There was no evidence of any ill-will or of any history of deception by or between Norman and Pauline. Moreover, the investment of more than $1 million on a return of two to three times presented a once-in-a-lifetime opportunity for Norman and Pauline to make serious money quickly.

169 For these reasons it is in my view likely that Norman made the statement to George that Pauline was 'happy to go ahead with the deal' and that the statement was true at the time it was made as a result of Norman having had a conversation with Pauline in sufficient detail to allow her to know that George was willing to lend them $1,050,000 provided that the loan was secured against the family home, and for Pauline to have given informed consent to that course.

170 I reject Norman and Pauline's denial of having any conversation with each other about the business opportunity. The underlying purpose for the loan was essential context for any discussion about the proposed loan and security. I also reject Pauline's evidence that she did not give her consent to the proposed borrowing or provision of security. Pauline did admit to having a conversation with Norman 'a couple of days before signing the papers'[122] but was very vague about the content of that conversation. In my view, it is very likely that this was the conversation that Norman had with Pauline at George's request before George would lend the money.

171 In the circumstances, I accept that Norman was authorised to act on behalf of Pauline to enter into the agreement when he reported back to George on 2 May 2012 that Pauline was willing to borrow the money and mortgage the house as security.

Question 2(b): Did the second defendant have a sufficient understanding of the transaction when she signed the transaction documents?

172 The transaction documents in this case, being the loan agreement and mortgage, are readily understandable. Together, they document a loan transaction for the principal sum of $1,000,050 (plus any further advances made from time to time) from the plaintiff to Norman and Pauline George, secured by a mortgage over the family home at 9A Young Street, Brighton.

173 The terms of the loan are summarised in a single-page schedule on page 11 of the loan agreement.[123] Set out are the names of the parties, the principal sum, the due date for repayment, interest of 20% per annum (waived if the borrower repays the loan by the due date i.e. 30 days from drawdown) and the security of a second mortgage over 9A Young Street, Brighton.

174 In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[124] the High Court discussed the principle of objectivity by which the rights and liabilities of parties to a contract are determined. The Court there discussed the significance that the law attaches to the signing of commercial documents. Consistent with the objective approach to the determination of rights and liabilities of contracting parties, signing a document known and intended to affect legal relations is an act which ordinarily conveys a representation to a reasonable reader of the document that the person has either read and approved the contents of the document, or is otherwise willing to take the chance of being bound by the document's contents.[125] That is, absent fraud or other special circumstance, a party's signature should be treated as conclusive assent to the contents.[126]

175 In this case, Pauline signed the loan agreement in her own right, witnessed the signature of her husband, and signed the mortgage of land (in two places). Pauline also signed a declaration to the effect that the loan was for business purposes. Prima facie she is bound by the contents of those documents.

176 The law does, however, recognise that a wife stands in a special position where she acts as a guarantor for her husband's debt and receives no direct financial benefit in return.[127] A special defence has developed in such circumstances reflecting the trust and confidence which exists between marriage partners, and which recognises that a relationship between husband and wife may be such where business decisions are made by the husband with little or no consultation with the wife.[128]

177 This principle (known as the rule in Yerkey v Jones) was re-affirmed by the High Court in Garcia where the majority held that the enforcement of a guarantee against a wife will be deemed to be unconscionable in circumstances where:

(a) the wife did not understand the 'purport and effect of the transaction';

(b) the transaction was voluntary (that is, the wife did not receive any gain from the contract the performance of which was guaranteed);

(c) the lender is to be taken to have understood that the wife may repose trust and confidence in her husband in business matters and that the husband may not fully or accurately explain the purport and effect of the transaction to his wife; and

(d) the lender did not take steps itself to explain the transaction to the wife or to determine whether a stranger had explained it to her.[129]

178 In her defence, the second defendant contended that each of these facts were present and that the plaintiff's conduct was, in all of the circumstances, unconscionable.[130]

179 The plaintiff did not seek to resist the application of points (c) and (d) in this case. Further, although counsel for the plaintiff made references to benefits that Pauline received (for example, the trip to London or through her daughter Tanya's performances on the vessel), he did not dwell on point (b) (that the transaction was voluntary), relying on submissions to the effect that if Norman and Pauline were knowing co-borrowers for the purpose of the investment, it is reasonable to infer that they both stood to gain from it. For reasons which follow, it is not necessary to determine this issue. Pauline's liability in this case falls to be determined on whether she understood the 'purport and effect of the transaction' at the time that she granted Norman authority to enter into the head agreement or otherwise signed the transaction documents. Einstein J held in State Bank of NSW Ltd v Chia that this requires knowledge at least of the fact of liability, the general extent of liability and the possible consequences of default.[131]

180 Pauline has the onus of establishing that she did not have a sufficient understanding of the transaction in essential respects when she signed the transaction documents in order to take advantage of the Yerkey v Jones defence.[132] In my view, Pauline failed to do so and cannot avail herself of the defence.

181 I have already found that after discussing the loan with George on 1 May 2012, Norman raised the issue of the loan with Pauline and obtained Pauline's authority to enter into the loan agreement and proffer the family home at 9A Young Street, Brighton, as security for the loan. This finding itself substantially undermines Pauline's defence.

182 That said, there are many other reasons why I do not accept Pauline's evidence that she did not have a sufficient understanding of the transaction at the time that she signed the relevant documents. These reasons are identified and set out separately below.

183 Pauline gave evidence to the effect that she did not see the whole loan agreement or mortgage as Norman came in 'with some pages in hand'[133] and simply handed her a 'couple of loose sheets of white pages',[134] 'three pages in general'.[135] Pauline denied that she was handed or sighted critical pages of the transaction documents, including:

(a) the schedule to the loan agreement (which states that she and Norman were the borrowers for the principal sum of $1,000,050 and that the lender was the plaintiff); or

(b) the first page of the mortgage (which states that she is the mortgagor and sets out the amount of the Principal Sum of $1,000,050).

184 Pauline's evidence, however, does not sit well with the defence originally pleaded[136] or with the further and better particulars of the defence subsequently provided.[137]

185 In her original defence, Pauline admitted that on a date unknown she signed a loan agreement and mortgage in favour of the plaintiff over the matrimonial home at 9A Young Street, Brighton,[138] but says nothing about being presented with or signing incomplete documents or 'loose sheets'.

186 Likewise, the further and better particulars to Pauline's defence (in respect of which Pauline admitted she had instructed her lawyers and which reflected her version of events as she understood them in late-November 2013) say nothing about signing incomplete documents or being presented with incomplete documents. In response to this, Pauline gave the vague and unsatisfactory explanation that '...by that stage I knew what they were connected to, so I thought the only important pages were the pages that were signed'.[139] Pauline could not point to any correspondence or other document which contained assertions to this effect.

187 In my view, Pauline's evidence about being presented with incomplete documents or loose sheets was a recent invention. Pauline was present in court while Norman gave evidence, and was the next witness called. Norman's evidence was to the effect that he had received incomplete documents from George. In my view, having heard this evidence, Pauline opportunistically adapted her own evidence to avoid any inconsistency with Norman's evidence and to fortify her own defence.

188 Similarly, I am also not satisfied that Norman (and, subsequently, Pauline) was provided with incomplete transaction documents. Ms Mott's evidence was to the effect that she made a copy of all of the documents and that it was her practice to staple them together. There was no evidence that this did not occur in the present case, and I can otherwise see no sensible reason why Ms Mott or George would provide incomplete documents to Norman for his and Pauline's signature.

189 Norman gave evidence that all of the documents that had been received were returned to George by hand delivery to his letterbox a few days later. In this regard, George and Norman each gave evidence that the letterbox at George's house was not very big. Both Norman and George gave evidence that the documents had been 'crumpled up' to fit into the letterbox.[140] During the trial the original loan agreement and mortgage were called for and produced. It was apparent that the original loan agreement had been bound in plastic. By way of explanation, the court was informed that Meerkin & Apel had a practice of binding non-land transfer documents such as agreements and deeds for storage in the firm's deed room. Counsel for the plaintiff indicated to the court that he understood that there was no dispute on this issue and neither Counsel for the first defendant nor Senior Counsel for the second defendant contended otherwise.

190 It is evident from an examination of the original loan agreement and mortgage that the documents have each been creased and bear the indications of having been folded.[141] It is significant that the complete documents appear to bear uniform crease marks on each page. This would suggest that Norman returned to George a complete version of the loan agreement and mortgage which were together folded and 'crumpled up' to fit into the letterbox, and not incomplete documents as has been suggested. As the plastic folder and plastic spine of the loan agreement have not been folded or creased, I infer that the original loan agreement was bound after it had been returned to George and, given the explanation for the binding, most likely before it was placed in Meerkin & Apel's deed room. A possible explanation for the creases is that George re-inserted the executed pages into the remainder of the documents and sought to give the remaining pages identical creases. I regard this as unlikely given my assessment of Mr Saade's credit generally. In any event, this possibility was not raised or argued by the defendants.

191 In her further and better particulars of 13 February 2014, Pauline stated that Norman told her:

(a) that the documents were required to be signed to enable tickets for Pauline and Tanya to be allocated for the London Olympics as part of a group booking; and

(b) that by signing the documents Tanya (a promising singer) would have the opportunity to sing aboard the vessel during the London Olympics in front of important dignitaries in the music and entertainment industry.[142]

192 At trial, Norman denied giving Pauline those explanations. Further, neither explanation was given by Pauline in her evidence-in-chief, which again I note followed immediately after she had listened to Norman give evidence.

193 When it was pointed out to Pauline that she did not give these explanations when she had given her evidence, Pauline said that Norman did not give those explanations at the time of the signing but at 'some point' (which she could not recall).[143] Later, she said that 'It's really hard to remember a lot of it but I do remember bits of pieces, I just remember at the signing he didn't say anything about Tanya. He might have said it the week...before the week passed.'[144]

194 Further, the evidence given by Pauline about having 'sort of presumed [the documents were] something to do with cabin hire or the like'[145] at the time of signing is problematic.

195 Pauline gave evidence that she only heard about the trip 'vaguely' in June and 'not really connected with us in possibly June of 2012',[146] and that the trip (which took place in late-July) was a last minute surprise. As noted above, however, there is overwhelming evidence that the documents were signed in early May 2012. It is not clear in early May 2012 how Pauline could have presumed that the documents were something to do with cabin hire when on her version of events she professed to know nothing about the opportunity to stay on the vessel until June.

196 Alternatively, if it was the case that Pauline did, in fact, presume that the documents had something to do with cabin hire or the like - which I do not accept - then it must be the case that Pauline knew about the boat trip in early May, and the trip cannot have been a last minute surprise as her evidence otherwise suggested.

197 Considered in light of the whole of the evidence, I do not accept Pauline's account of the conversation in the kitchen. In my view, Pauline's evidence generally on the issue of what was said on the occasion of the signing of the documents was highly questionable and unreliable. I also found her evidence that she remembered at the time of signing that Norman did not say anything about Tanya very unpersuasive. In my assessment, that evidence was a further opportunistic recent invention. I also note that the only 'corroboration' of Pauline's evidence was by Norman, whose evidence I have also found to be highly unreliable.

198 At trial, Pauline was shown the signature pages of several mortgages that she had previously signed. Each mortgage had the heading 'Mortgage of Land' on it in large bold letters.[147]

199 In relation to these mortgages, Pauline agreed that it was clear from the prominent headings that when she signed the documents she was providing a mortgage, and she agreed that she knew that if anything went wrong the house was on the line and might be sold. Pauline also agreed that she understood in the first half of 2012 what a mortgage was and what consequences could flow if anything went wrong with the underlying loan.

200 When Pauline was directed to the words 'Mortgage of Land' which were in large, bold letters on the page of the mortgage which she signed, she accepted that the writing was in big bold letters but gave evidence that Norman's hand was covering the words when he gave her the documents in the kitchen to sign and that he kept his hand over the words the whole time. I do not accept this evidence. Norman said nothing about obscuring parts of the document in his evidence and no reference has been made to this taking place in any document, pleading or other evidence to date. In my view, this was another recent invention employed to explain away the obvious heading.

201 Pauline was taken to the execution pages of a lease in respect of Ricardo's restaurant, which she had previously signed.[148] Her signature appeared beside the words 'Signed, Sealed and Delivered'. It was suggested to Pauline that those words indicated to her then, as they do now, that the document was a legal document with consequences, and Pauline agreed.

202 When Pauline was shown her signature on the second page of the mortgage beside bold, large capitalised words 'Signed, Sealed and Delivered', it was put to her that she understood when she signed the document that it was a serious legal document. Pauline responded to this by saying that she did not read the document at all. Pauline said that she was in the kitchen, cooking, without glasses, and that Norman handed her the document and said '"Can you sign there and there", and that's exactly what I did'.[149] Pauline was asked whether she asked questions, to which she responded 'I did press Norm for information and he didn't reveal anything'.[150]

203 Given the serious doubts I have about the evidence of Pauline on the other issues, I have serious doubts about her credibility on this issue as well. I do not accept that Pauline did not see the words 'Signed, Sealed and Delivered' or failed to understand the significance of the documents that she was signing. The explanation of the circumstances of the signing at the time it was given seemed to me to be stylised and rehearsed. There was no reference to short or long sightedness in the second defendant's court documents. No evidence was foreshadowed about Pauline's need to wear reading glasses in her witness outline. No evidence was given about the optical prescription to enable informed consideration of the extent of correction required. In the witness box, sometimes Pauline used glasses when reading documents and sometimes she did not. I formed the view that she was not heavily dependent on her reading glasses.

204 Furthermore, I am not satisfied that Norman used an expletive to 'pressure' his wife to sign the documents and that she signed the documents under pressure of time and force of language such that Norman exercised ascendency over her. This was one of the threads of the defence which seemed to me to be artificial when the evidence was adduced (from each defendant) and which I reject.

205 It was suggested to Pauline that she received a notice of caveat from the Department of Sustainability and Environment in July 2012 which was addressed to her at her home address in Brighton.[151] Pauline denied receiving the letter, and gave various explanations in an attempt to neutralise the potentially damaging effect that receipt of the letter giving notice of the caveat, coupled with her inaction, might have on her defence, including that:

(a) she was not familiar with the kind of document;

(b) the letter might have gone to 9 Young Street rather than 9A Young Street;

(c) she did not see the letter in 2012 (or did not know what it was);

(d) the letter may have been intercepted by Norman; or

(e) she never saw the letter before her and Norman went to the United Kingdom in 2012 or after they came back, and that she only became aware of the letter in 2013.

206 In cross-examination, Pauline was informed that the letter was a document that she had discovered. Pauline reiterated that she did not recall receiving the letter. She said 'I know what a caveat is now but I wouldn't have known what it was in 2012'.[152] Finally, she said that if she did see it (which she could not recall), she would not have known to do anything about it, notwithstanding that the letter suggested that she see a lawyer.

207 In my view, Pauline's evidence concerning the notice of caveat letter is most unsatisfactory. I find that Pauline received the letter in July 2012, soon after the date on which it bears, and that her inaction at the time reflected her awareness that the Brighton property had been mortgaged as security for the loan. It is for this reason that the notice did not cause her any alarm at the time. It follows that I reject Pauline's evidence to the effect that she had not seen and was unaware of this letter in 2012. Pauline may not have had a sophisticated understanding of what a caveat is, but as a tertiary-educated person she would have had no difficulty reading the letter and taking up the suggestion of consulting a lawyer had it caused her any concern.

208 Ms Mott gave evidence at trial (set out in detail above) that she spoke with Pauline by phone in early 2013 and advised her that she could have more time to sell the house. I accept Ms Mott's evidence of the conversation that took place. Moreover, there was no evidence to suggest that during that conversation Pauline purported to deny liability for the loan and mortgage. On the contrary, I infer that she did not take issue with her liability for the loan and mortgage but instead sought extra time to sell the house. Such conduct is inconsistent with a belief that she was not liable for the loan and had not given any security over her home.

209 At trial, Pauline sought to convey the impression to the court that she had little involvement with Norman's business affairs and that she looked after the household and the children whereas Norman worked and earned the money.

210 A somewhat different picture emerged at trial. Pauline gave evidence that she had been a partner in a restaurant business with Norman. Pauline had also waitressed in restaurants managed by Norman and helped Norman to manage a caravan park for the Saade brothers in Nelsons Bay. Pauline was also a director and shareholder of companies for extensive periods. All indications are that Pauline knowingly and willingly supported Norman's ventures for the 30-year duration of their marriage.

211 In my view, Pauline deliberately and repeatedly sought to distance herself from any involvement or knowledge in Norman's business activities, and took every opportunity to underplay her role. Pauline gave evidence about this subject in an extremely guarded fashion and was evasive when questions appeared difficult for her to answer. She also sought to underplay her level of sophistication. For example, she acknowledged that in 2013 she received a notice of default in the mail. She said 'I didn't really know what a notice of default was, but it sounded scary'.[153] This is to be contrasted with her evidence in an unguarded moment on a less contentious topic - the (first) sale of the matrimonial home in July 2013. When asked whether she obtained legal advice on the contract of sale, Pauline replied 'No. It was a... early REIV. Straightforward'.[154] In my view, on the balance of probabilities, Pauline knowingly and willingly supported the investment in the boat venture to the extent required.

212 Pauline called no corroborative evidence to support the key proposition of her defence that the trip to London for the Olympic Games was a surprise and that she knew nothing about the trip until a very short time beforehand.

213 For example, Pauline gave evidence at trial that her employer was surprised when she asked for leave to go to London. In lieu of any explanation to the contrary, I infer that any evidence her employer could have given about when she asked for leave from work and the reasons she gave her employer at that time would not have assisted her defence.

214 Moreover, I note the absence of Norman and Pauline's daughter, Tanya, who might have been called to lend weight to the proposition that the trip to London had come as a surprise to her mother. I also infer that any evidence that Tanya could have given about finding out about the trip would also not have assisted Pauline's defence.

215 In cross-examination, Ms Mott firmly resisted the assertion raised by Senior Counsel for Pauline that Ms Mott had a telephone conversation with Pauline about a 'without prejudice' letter. Ms Mott did not accept that she had been instructed to pass on a message from George that he had not authorised sending the letter and that Pauline should dispose of the letter.

216 I accept Ms Mott's evidence in this regard. When Senior Counsel for Pauline suggested that such a conversation took place, it was also suggested that Pauline faxed a copy of the letter to Ms Mott at or around the time of the conversation on 13 March 2013. It is significant that there is no objective corroboration of this alleged telephone conversation or fax. No evidence in the nature of telephone records, a facsimile cover sheet or transmission record was discovered by Pauline and no attempt was made to tender such records to corroborate evidence given. The lack of corroboration was a common theme throughout Pauline's evidence.

217 In my view, for all the above reasons, Pauline has failed to discharge the onus of proving that she did not understand the purport and effect of the transaction when she signed the loan agreement and mortgage.

Question 2(c): Did the second defendant ratify any earlier agreement by signing the transaction documents?

218 On 2 May 2012, by telling George that Pauline was happy to proceed with the loan and mortgage, Norman purported to enter into the 'head agreement' (being the loan agreement and mortgage) as agent for Pauline. The plaintiff argued that if the Court were to find that Norman did not have such authority (i.e. had not received Pauline's express consent beforehand), then Pauline's later execution of the loan and mortgage and acceptance of the benefits flowing therefrom operated to ratify any excess of authority by Norman in purporting to bind Pauline at that time.[155]

219 I have already found that Pauline authorised Norman to enter into the relevant agreements on her behalf,[156] so the question of ratification does not arise. However, had I found that Pauline did not authorise Norman to enter into the agreements (so that at the time Norman spoke to George, Norman did not in fact have authority to agree to the loan or provide security on Pauline's behalf), in my view Pauline ratified the making of those agreements by Norman by her later conduct.

220 It is trite law that ratification has retrospective effect such that the agent is treated as having had the requisite authority at the time of the earlier transaction.[157] Whether the relevant conduct amounts to ratification is a question of fact. The authorities require 'clear adoptive acts' by the principal in the nature of unequivocal conduct with full knowledge of all the material circumstances in which the act was done (or a clear intention to take that risk whatever those circumstances may be).[158]

221 In my opinion, 'clear adoptive acts' occurred in this case when Pauline signed and witnessed Norman's signature on the loan agreement and signed the mortgage and declaration. In so doing, Pauline squarely and unequivocally endorsed the agreement to borrow the money from George and to provide a mortgage as security.

222 I also found above that Pauline signed the loan agreement and mortgage with a sufficient understanding of the purport and effect of her actions. This, objectively speaking, reflects that fact that she fully endorsed the arrangements made between George and Norman on her behalf, which were to be later documented.

223 Pauline sought to rely on the fact of the loan monies being transferred before the transaction had been documented as a material fact of which she was unaware when deciding whether or not to adopt the unauthorised acts. However, for the reasons given above, I do not accept that Pauline was unaware that the money had already been transferred. In my view, it is likely that Norman informed Pauline that George had fulfilled his conditional promise to lend the money. In my view, Norman would have been delighted that George had been willing to transfer the funds virtually immediately so that they would not miss the opportunity to invest in the second boat, and it is likely that Norman shared this fact with Pauline when presenting her with the documents.

224 Even if this were not so, I am not satisfied that the fact of the transfer was a sufficiently material factor in this case so as to preclude ratification. Once the commitment was made by all concerned on the understanding that documentation was to follow, the timing of the actual transfer of funds was of little significance. That is, whether the matter was documented before or after transfer was not key to the arrangement. What was important was the fact of the agreement, the 'deal' itself.

225 I do not accept that the reference in the loan agreement to the words 'agreed to advance' suggests that the money had not been transferred. Rather, in my opinion, it reflects the fact that there was an earlier agreement (the oral agreement reached on 2 May 2012) pursuant to which the plaintiff agreed to advance the money.

226 Furthermore, clause 3 of the loan agreement appears to contemplate that the money had already been transferred. Clause 3 provides:

The lender has agreed to lend the Borrower the Principal Sum and the Borrower hereby acknowledges that it has on the date hereof received payment of the Principal Sum from that Lender or the Principal Sum has otherwise been paid in accordance with its authorisation.[159]

227 The acknowledgement that the borrower 'has on the date hereof received payment of the Principal Sum... or the Principal Sum has otherwise been paid...' tends to suggest that the transfer occurred prior to execution. Likewise, the mortgage refers to the Principal Sum in the past tense as 'the amount advanced'.[160]

228 The only reservation I have about ratification is as to the amount. The error made by Ms Mott (to record the amount of the loan as $1,000,050 instead of $1,050,000) carried through to the documentation - both the loan agreement and the mortgage refer to the lesser amount as the Principal Sum. However, the express words of the definition of 'Moneys hereby secured' in the loan agreement includes 'any further advances'. This means that Pauline ratified the making of the agreement not only for the stated sum of $1,000,050, but for other amounts transferred as well (including the $49,950 transferred to Mr Coorey later on 3 May 2012).

Question 3: Does it matter that the funds were advanced before the transaction was documented?

229 It was contended that the loan agreement was unenforceable because the consideration provided was 'past consideration' and insufficient to support an enforceable agreement.[161] There is no dispute that the defendants executed the transaction documents after the money was advanced.

230 In response, the plaintiff submitted that the Court should apply a functional, rather than strictly chronological, test by treating the advance and subsequent execution of the transaction documents as forming part of a single transaction.

231 In my view, a functional test should be applied in this case. I have already found that a head agreement was reached between George, Norman and Pauline on 2 May 2012 (under the first category in Masters v Cameron). It is plain that this head agreement, the advance of funds by George on 3 May 2012 (pursuant to Norman's urgent request), the documentation of the transaction on the same day and the execution of the transaction documents by 6 May 2012 form part of a single transaction, with the execution of the transaction documents reflecting the fact of the earlier agreement.

232 Even if this were not so, the plaintiff would still be able to enforce the agreement. In Pao On v Lau Yiu Long,[162] their Lordships made it clear that consideration can support a later agreement in certain circumstances. Their Lordships said to this effect:

An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be a consideration for the promise. The act must have been done at the promisor's request, the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit and payment or the conferment of a benefit must have been legally enforceable had it been promised in advance.[163]

233 In this case, the 'act' was the early transfer of funds by George at Norman's request. In my view, the parties must have understood that the act of transferring funds would be effected in consideration of subsequent repayment by Norman and Pauline. The promise to repay the amount advanced would undoubtedly have been legally enforceable had it been promised in advance. For these reasons, it is not possible to treat the promises made in the loan agreement as independent from the plaintiff's antecedent promise to transfer, and the transfer of, funds to a third party at Norman's request.[164] For these reasons, in my view, no question of unenforceability of the loan agreement arises by reason of past consideration.

234 In any event, it is strongly arguable that no issue of past consideration can arise in respect of the loan agreement as it prima facie operates as a matter of law as a deed.

235 Whether an agreement is to operate as a deed or according to the law of contract is to be determined by reference to the intention of the parties.[165] In Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd, the Court of Appeal observed that no particular form of words is necessary in order to render an instrument a deed of the party executing it. Rather, there must be actual words sufficient to show that the party intended the instrument to be executed as a deed so as to be personally binding on the party executing it.[166]

236 Here, the loan agreement employs the language of 'agreement' in its title and some of its operative provisions. However, the execution provisions expressly state that the agreement is 'executed by the parties as a deed'. There are also other strong contextual indications of the parties' intention that the document be executed as a deed, in that:

(a) many of the key operative provisions are expressed to be 'covenants',[167] which are ordinarily obligations contained in a deed;[168]

(b) the execution clauses contain the words 'Signed, Sealed and Delivered' in conjunction with the expression 'Executed by the parties as a Deed'; and

(c) the mortgage refers to the loan agreement as the 'Primary Security Loan Deed'.

237 Taken together and considered objectively, these words unambiguously indicate that the parties intended the loan agreement to operate as a deed.

238 For the forgoing reasons, the question of past consideration does not arise. In all the circumstances, I find that the defendants are jointly and severally liable to the plaintiff for the full amount of the loan (plus interest and costs).

239 I have in these reasons made the following findings:

(a) that the transaction between the plaintiff and the defendants was a loan made by the plaintiff to the defendants and not an investment made by the plaintiff;

(b) that the second defendant authorised the first defendant to act on her behalf in entering into the loan agreement and to provide security for the loan;

(c) that if and to the extent that the second defendant did not authorise the first defendant to enter into the loan agreement, the second defendant ratified the entry into the agreement by her later conduct in signing the transaction documents;

(d) that the second defendant failed to discharge the onus of showing that she did not have a sufficient understanding of the transaction when she signed the transaction documents to avail herself of the defence in Yerkey v Jones. In this regard, I am confident that the second defendant had a sufficient understanding of the transaction; and

(e) that in the circumstances of this case, it is immaterial that the funds were advanced (at the first defendant's request) before the transaction was documented.

240 At trial, the plaintiff produced a Prima Facie Evidence Certificate which certified the amount of interest on the loan advance and enforcement costs pursuant to clause 31(1) of the Memorandum of Common Provisions incorporated into the mortgage.[169] Those interest calculations were not challenged by either defendant and I accept that they accurately reflect the interest on the amounts owing at the appropriate rate.

241 There will be judgment for the plaintiff against both defendants for the amount of the claim (in addition to interest and costs) in the terms sought by the plaintiff.

242 As at the time of trial the property at 9A Young Street, Brighton had been sold. The net proceeds of the sale are held in a controlled trust account on behalf of the plaintiff and the second defendant.[170]

243 I will hear counsel on the appropriate form of order in light of these reasons.

[1] Alternatively the first defendant alone.

[3] Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649; Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 ('Garcia').

[6] Telegraphic transfer NAB $274,132.08 dated 28 November 2011, CB639; NAB statements for account no. 89-542-7784 from 8 November 2011, CB994.

[18] CB666-668 (attaching a Memorandum of Common Provisions (CB669-688)).

[30] Initially Ms Mott said she called Norman for details (T 124.25-30) but later, after seeing her email, said she got information from George (T 125.25-30).

[35] T 135.14-19; T 143.1-21; T 154.30-155.1.

[69] These documents were identified by the reference to pages in the court book '728 through I think 734 or 35', T 249.22-25; T 249.31-250.1

[71] Page 11 of the loan agreement, CB729.

[85] Fifth amended statement of claim paragraph 5AA, CB1-22.

[86] [1954] HCA 72; (1954) 91 CLR 353, 360-362.

[124] (2004) 219 CLR 165, 179-180. See also Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451.

[125] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 180-181.

[127] Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649; Garcia [1998] HCA 48; (1998) 194 CLR 395.

[128] Garcia [1998] HCA 48; (1998) 194 CLR 395, 404 [21].

[129] Ibid 408-409 [31]. In this case, the facts involve a husband and wife, though the underlying principles are not confined to such relationships.

[130] Defence of the second defendant to the third amended statement of claim dated 10 August 2015, paragraph 16A, CB26-27.

[131] [2000] NSWSC 552; (2000) 50 NSWLR 587, 600 [169] ('Chia').

[132] Ibid 598 [170]; Groves v Groves & Ors [2013] QCS 277 ]198] (emphasis added).

[136] Defence of the Second Defendant dated 28 November 2013, Exhibit P11.

[138] Defence of the Second Defendant dated 28 November 2013 paragraph 23a, Exhibit P11.

[140] T 113.11; T 64.8-19 (George Saade); T 336.26-28 (Norman George).

[142] See Further and Better Particulars paragraphs 8(ii) and 9, CB46.

[155] Fifth amended statement of claim dated 24 January 2017, paragraph 9AB, CB1-22..

[157] Leybourne v Permanent Custodians Ltd [2010] NSWCA 78, [131].

[161] First defendant's third amended defence to the third amended statement of claim dated 11 August 2015, paragraph 7(b)(ii), CB36.

[162] [1979] UKPC 2; [1980] AC 614.

[165] Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd (2016) 337 ALR 303, 319 [68].

[167] For example, clauses 5, 6, 7, 8 and 10.

[168] See definition of deed in Osborn Concise Law Dictionary.

[169] Prima Facie Evidence Certificate, CB1036-1041.