Provident Capital Ltd v Bortolin Papa - [2011] NSWSC 460 - NSWSC 2011 case summary — Zoe

NSWNSWSC

Provident Capital Ltd v Bortolin Papa

[2011] NSWSC 460

Supreme Court of NSW|2011-05-23|Before: Fullerton J, Bryson J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2011-05-23

Before

Fullerton J, Bryson J

Source

Original judgment source is linked above.

Judgment (25 paragraphs)

[1]

The application for finance and the loan approval process in February - April 2007 43Peter Bortolin said that the unsuccessful attempts to secure finance to acquire the gymnasium business throughout 2006 using the Leichhardt property without his mother's knowledge were undertaken with the assistance of Mr Hilellis from CMC, before Provident was ultimately approached by Mr Hilellis on his behalf as a lender of last resort. He said Mr Hilellis was well aware of his precarious financial situation and that of Luxury Enterprises. 44On 25 July 2006 CMC applied to Provident to become an "Introducer" under the signature of Ignatius Hilellis, (aka Mr George Hilellis). On 3 August 2006 CMC entered into an Introducer Agreement with Provident in which they agreed to provide the following services:

To seek out and introduce new prospective commercial clients for Provident;
To provide information about these clients to Provident to enable Provident to assess a commercial loan arrangement with those clients;
To provide a point of contact between Provident and those clients to facilitate communications, execution of documents the provision of information and other client liaison services associated with the ongoing management of any loan arrangement between Provident and the client, as required by problem from time to time ("continuing services"). 45Under the agreement Provident made available to CMC a variety of pro forma Applications for Finance to be completed by prospective borrowers and forwarded to Provident by CMC in accordance with its obligations as the Introducer. 46Peter Bortolin gave evidence of the following conversation with Mr Hill, Mr Hilellis' father: I consulted with Mr Charlie Hill of Community Mortgage Corporation on a few occasions, although I do not recall the exact number of meetings we had. In those meetings, I gave Mr Hill details of my financial situation, the reasons why I needed the money and the background to the gymnasium business. Mr Hill said words to the effect "Do you have any other properties to give as security". I replied words to the effect "No, but my mum has a property at Leichhardt where her shop is and where she lives. We could use that". After listening to my background and all of the information I gave him, Mr Hill said to me words to the effect "The only way you can get this money is to use your mother's property. You can't support an application for that amount of money using your financials or using the gym". Subsequent to those initial meetings, Mr Hill then referred me to his son, who worked for him, and advised me that his son would take care of the application. Mr Hill's son was known to me as Mr George Hilellis. Initially Mr Hilellis made an application to the National Australia Bank ("NAB") in my mother's name at my request. This application was conditionally approved initially, however was subsequently withdrawn by NAB because the nature of the zoning of my mother's property did not fall within NAB's lending guidelines. I subsequently met with Mr Hill again. During that meeting I recall Mr Hill saying to me words to the effect The only lender that will do this loan is Provident Capital. I know the CEO Michael Sullivan very well and he can get it through. We can get it done. In approaching my mother, I said to her words to the effect, Mum, I need some money for the gym and I want to use the deeds to your property to raise some money. It will be alright and it won't be long before it's all cleared. My mother said, "Ok" or words to that effect. ... I recall a conversation I had with Mr Hilellis on the telephone. I do not recall the precise date that occurred, but having reviewed the loan document dated 31 January 2007, I can say it would have been on or near that date. The conversation was to the following effect: Mr Hilellis: We need to get the application form signed by your mum. PAB: I'm busy at work today. I can't leave. Mr Hilellis: I can take them to her. If you let her know I am will come past I will go there and get her to sign. PAB: Ok. I'll call mum and let her know. I subsequently rang mum and said to her words to the effect, "My friend is going to come around and give you some documents to sign. I can't come, I'm very busy. Just sign the document he gives you. It's all ok". 47Mrs Bortolin Papa gave evidence that the first time she signed any document with respect to the Provident loan was in February 2007 when her son organised for a man to come to her house with a loan application for her to sign. The evidence compels the conclusion that this man was either Mr Hilellis or his son. Mrs Bortolin Papa gave uncontradicted evidence that she signed the loan application in blank and gave it to the man. 48I accept that the application for loan finance dated 31 January 2007 ( styled as an application for " Light and Easy Residential Mortgage Finance") was the document signed in blank by Mrs Bortolin Papa and that it was completed by Mr Hilellis with information supplied by her son before Mr Hilellis submitted it to Provident. 49Notably, this application calls for no information of any kind as to the capacity of the borrower to service the loan in the stated amount of $700,000. Mrs Bortolin Papa's financial circumstances are limited to details of her assets and liabilities. These were nominated by Mr Hilellis as a car valued at $25,000 and the Leichhardt property. The purpose of the loan was specified on the application as "refinance of $180,000 and $520,000 for business use". 50The application was forwarded to Provident under cover of a letter signed by Mr Hilellis and dated 1 February 2007. It was addressed to an officer of Provident with the initials KJ. That person was not otherwise identified in the evidence. The letter also attached 100 points of identification, rates notices confirming that the Leichhardt property was zoned residential and six months of bank statements relating to the borrowing from Bendigo Bank. The letter then states: Please note the total loan amount is $700,000.00 $180,000 is to pay out the existing mortgage. $520,000 is to be used to further invest in their business. (emphasis added) 51The letter produced in evidence by Provident also bears a handwritten note in the following terms: Loan Purpose $180,000 Refinance Sonhurst ? Trustees mtge $320,000 Purchase gym equipment for gym located at 15 Harris St, Pyrmont. $120,000 (6 months rental bond) $80,000 Working capital $700,000 52Since Provident did not deal directly with Mrs Bortolin Papa in the loan approval process, an officer of Provident must have made the handwritten note after additional information was sought from Mr Hilellis about the purpose of the loan and after he obtained the information from Peter Bortolin, if he were not already aware of it. I note that Provident's Credit Manual provides that any queries or requests for further information or clarifications concerning an application for finance are to be directed by the loans manager to the Introducer if the borrower did not approach Provident directly. 53Mr Hilellis did not give evidence. The basis upon which he described the business into which the funds were to be invested (albeit inferentially) as a joint business venture was not the subject of evidence from any other source. Ms Nolan, counsel for Provident, did not suggest that Peter Bortolin told Mr Hilellis that his mother was involved in the business with him (or that his mother was investing in the business). She did not put to Mrs Bortolin Papa that she represented that to be the case in any dealings she may have had with Mr Hilellis. The only evidence bearing upon the issue emerged, somewhat tangentially, in the evidence of Ms Voulgaris, Mr Caramanlis' paralegal, in the following context: On or about 10 January 2007, I received a call from George Hilellis, a mortgage broker from Community Mortgage Pty Ltd, which is located within the same building as Daniels Lawyers. Mr Hilellis and I had a conversation as follows: Mr Hilellis: Hi Stella, it's George from Community Mortgage. I've got a client here who is obtaining a loan advance from NAB and needs independent legal advice on the mortgage documents. She would like to make an appointment to see George. Her name is Gina Papa. Her son, Peter Bortolin, has previously had some dealings with you through a loan he obtained from Hock-A-Car. Ms Voulgaris: Hi George. Yes I remember Peter. Mr Hilellis: Are you able to come downstairs for a moment to meet Ms Papa and discuss what's required. Ms Voulgaris: No problem, I'll be down in a minute. I subsequently went downstairs to Community Mortgage and was introduced to Ms Papa. Mr Bortolin was also present. Mr Hilellis and I had a conversation as follows: Mr Hilellis: Ms Papa is refinancing her property to invest in a gym at Pyrmont with her son . She would like to make an appointment to see George to get some independent legal advice on the mortgage documents. (emphasis added) Ms Voulgaris: That shouldn't be a problem, but I'll need to check with George. I'll get back to you later today. 54Both Mrs Bortolin Papa and her son gave evidence that they did not attend any meeting with Mr Hilellis together. Mrs Bortolin Papa also gave evidence that she did not attend his office to discuss the loan with him or for him to arrange legal advice. Despite the significance of Ms Voulgaris' evidence to the case Provident mounted in defence of the cross claim, and Ms Nolan's reliance upon her evidence in final submissions, she did not put to either Mrs Bortolin Papa or her son that they were mistaken about attending a meeting with Mr Hilellis or that their evidence was untrue when they effectively denied the conversation Ms Voulgaris attributed to them. In addition, she did not put to either of them that they had conspired to mislead Mr Hilellis, and then later Mr Caramanlis, as to the extent of Mrs Bortolin Papa's interest in the gymnasium business in order to secure the loan finance from Provident. Although I was not invited by Mrs Bortolin Papa's counsel to invoke the rule in Browne v Dunn , the failure to explore the issue in cross-examination is productive of a lacuna in the evidence which does not operate to Provident's advantage. 55Consistent with the findings expressed later in this judgment when dealing with the conflict in the evidence of Mrs Bortolin Papa and her son and Mr Caramanlis and Ms Voulgaris, and the absence of any evidence from Mr Hilellis (or an explanation for his absence) I am not persuaded that Ms Voulgaris' evidence of her meeting with Mr Hilellis and Mrs Bortolin Papa is evidence upon which I can rely. 56On 6 February 2007 Mr Hilellis faxed a single page pro forma "Self-Certified Income Declaration" issued by Provident ("the Income Declaration") to Mrs Bortolin Papa which she then signed and faxed back to him that day under her son's instructions. 57She initially gave evidence that the handwritten figures of $700,000 (in the field for the amount borrowed) and $6500 (in the field for the monthly instalments) apparently in her son's handwriting were definitely not on the document when she signed it. During cross-examination she said that she did not know, or could not remember whether the dollar amounts were written on the document when she signed it. It would appear that these figures are in her son's handwriting. 58The I ncome Declaration made no provision for Mrs Bortolin Papa to declare or certify her income or even the sources of her income. It simply certifies that she is aware that she is applying for a loan in the stated amount of $700,000 and that monthly loan repayments are in the amount of $6500; that she is of the opinion that she is able to repay the loan without hardship; that she is unaware of any factors that may adversely affect her ability to make the repayments, or which may cause her hardship, and that she is aware that Provident is relying on her certification in agreeing to offer loan finance. 59The Income Declaration was forwarded by Mr Hilellis to Provident on 22 February 2007, accompanied at this time by a separate loan application styled as an "Application for Mortgage Finance", purportedly signed by Mrs Bortolin Papa. 60The purpose of the loan funds in this further application was elaborated upon as: $180,000 refinance, $120,000 rental bond, $380,000 purchase equipment and $20,000 working capital. (I note that this appears to be generally consistent with the handwritten notation on CMC's letter of 1 February.) 61Unlike the first application, the second application makes provision for an applicant to supply employment details, their accountant's details and a statement of income and expenses/assets and liabilities. The information concerning Mrs Bortolin Papa's assets and liabilities in the second application was broadly consistent with the information supplied in the first application, namely a motor vehicle and the Leichhardt property (subject to mortgage), but the second application also included furniture and personal effects valued at $60,000 and a superannuation fund at $18,000. Her employment details were nominated as "self" and her occupation "baby products". The name of her accountant and his firm were also supplied. 62I am satisfied that Mrs Bortolin Papa did not complete the second application and she did not sign it. Peter Bortolin gave evidence that he did not forge his mother's signature on this or on any documents submitted to Provident. He said that although he did not see Mr Hilellis sign the second application, he assumed he did so because Mr Hilellis was responsible for submitting the application on his (or his mother's) behalf. 63The reason a second application was submitted, and why Mr Hilellis forged Mrs Bortolin Papa's signature, is not obvious given her apparent willingness to sign any documents she was asked to sign to secure the loan for her son. The most cursory comparison between the first and second loan applications does however reveal that the signature on the second application differs markedly from the signature on the first. In addition, the second application is undated. Mr O'Sullivan gave evidence that both applications were considered by him in the loan approval process without questioning their form or adequacy. This may do nothing more than expose a lack of diligence on the part of the officers of Provident who dealt with the loan and a perfunctory assessment of the application by Mr O'Sullivan. However, in the circumstances of this loan, I am satisfied the attitude of Mr O'Sullivan (and other loans officers) extends further exposing a failure on Provident's part to ensure that the loan was approved in accordance with the credit policy and procedures specified in its Credit Manual. 64I am left in no doubt that Mr Hilellis was well aware that the applications for finance he submitted to Provident were for Peter Bortolin's benefit and of no commercial advantage to his mother. In the absence of any evidence to the contrary, I also accept Peter Bortolin's evidence that Mr Hilellis was well aware that his mother was borrowing a very significant sum of money secured against her home unaware of his (and Luxury Enterprises') parlous financial circumstances, the limited prospects of the gymnasium business generating an income sufficient to meet the monthly interest repayments and to discharge the capital debt after five years and the associated risk that there would be default under the loan agreements. I am further satisfied that his son, Mr Hill (who the evidence revealed is also associated with CMC), advised Peter Bortolin that Provident should be approached as a lender of last resort and, by inference, that information bearing upon the gymnasium business should be kept from Provident. No doubt this was because CMC was aware that were Provident to have actual knowledge of the true position it would not have advanced the loan to Mrs Bortolin Papa. The question that arises is whether CMC's knowledge of Mrs Bortolin Papa's financial situation, and that the real purpose of the loan was to on-lend to her son, is to be imputed to Provident as principal according to the law of agency. I will return to consider that question later in this judgment. 65Despite having a limit in her mind as to how much she was prepared to borrow for her son's business, Mrs Bortolin Papa said her son did not tell her how much money he wanted or needed and she did not ask. She gave evidence that she did not learn she was in fact borrowing $700,000 from any documents she signed in support of the April 2007 advance (or the further $125,000 in April 2008), whether at the time she executed the loan documents in the solicitor's office or from the correspondence that he forwarded after settlement purporting to confirm the advice he had given in conference. She said that she would not have entered into the loan agreements were she aware that she was borrowing a total of $825,000 secured against her home. She said her son was insistent that she sign the various loan documents relating to both advances but that she did not see any reference to any dollar amounts on any documents either because they were signed by her in blank, or because she did not read them, or both. 66Peter Bortolin gave evidence that he did not ask his mother to be the borrower per se, preferring to give her the impression that she was just providing the Leichhardt property as "a safeguard" if the business did not generate income sufficient to support the monthly interest payments. He said that he deliberately withheld information from her about the amount of money she was borrowing conscious that if he told her the amount he needed and the state of his finances, she would not sign the loan documents. Whether, and if so when she learnt of the amount of the borrowings before Provident instituted recovery proceedings in October 2008 is a question intrinsically bound up with her credibility as a witness more generally. I will also return to consider that question later.

[2]

Provident's lending policy and procedures and the issues to which they give rise in the proceedings 67Provident Capital Ltd is a corporation that attracts investors by the issue of debentures. It then lends investor funds to borrowers at varying rates of interest, and over varying terms, secured by a first mortgage over real property in Australia. Unsurprisingly, the company's principal objective is stated in its Credit Policy and Procedure Manual ("the Credit Manual") to be the safeguarding of investor funds and the generation of profit. The Credit Manual, current at the date of the April 2007 loan, was tendered in the proceedings together with the Credit Manual current as at 31 March 2008, that is after the loan variation had been approved but prior to the deed of variation being executed. On any reading of the manuals, the articulation of company policy, the type of products the company offers and the way loans are processed and structured specifies those commercial objectives as primary considerations in the decision whether to lend. 68The Credit Manual stipulates that Provident's lending activity is directed at a borrower who either chooses not to deal with traditional lenders or who does not conform to the lending criteria of those lenders. Typical borrowers are identified as business owners, the self-employed, property investors raising funds to purchase other property, the credit impaired and borrowers wishing to consolidate debt. 69The Credit Manual also provides (so far as is relevant to these proceedings) as follows: PCL's lending philosophy is that we will only lend to borrowers where:

The borrower has demonstrated a capacity, either through flow analysis, independent certification (ie an accountant's letter) or history via another lender that they can afford the level of credit sought, or
it is apparent that the level of credit sought will not create financial hardship for the borrower. 70It also provides that the borrower's capacity to service a loan without creating undue hardship is a prime consideration when loan applications are being assessed in the loan approval process. 71While recognising that its lending rates are such that it would not be regarded within the industry as a "tier one lender", Provident does not regard itself as a "lender of last resort". To this end the Credit Manual provides that finance will not be extended to a borrower of last resort lest, in the event of default, there be no option other than to sell a secured property with the associated risks and attendant costs of a mortgage sale.

[3]

The loan approval process provided for in the Credit Manual 72The Credit Manual provides that after processing an application for finance in an approved form the managing director is the sole source of authority for credit approval. Mr O'Sullivan, the managing director and effective owner of the company, confirmed in his evidence that although various officers of Provident (including the loan manager and head of credit) dealt with Mrs Bortolin Papa's application for finance at various stages in the loan approval process, both preliminary to the first loan advance in April 2007 and preliminary to the further advance in April 2008, he gave the final credit approval on both occasions. He also instructed Provident's solicitors to prepare the loan documentation in respect of both advances and to forward that documentation to the borrower's solicitor for execution. 73None of the officers of Provident who dealt with Mrs Bortolin Papa's application in the loan approval process, or who had the conduct of her account thereafter, gave evidence. I have already noted that Mr Hilellis did not give evidence. This remained the position despite Mr O'Sullivan's evidence that he was only in a position to address what occurred in the loan approval process in general terms, and principally on the basis of what he assumed to be the consideration given by Provident's employees to information received from the borrower (via CMC) relating to the purpose to which the loan monies was to be put and her capacity to service the loan, and from other documents in Provident's file. 74An integral part of the administrative framework by which loans are approved is the production of a document known as a "Loan Summary". The Credit Manual provides that this document is to be prepared for submission to the managing director for credit approval in the following way: Attached to the Loan Summary will be original information received from or on behalf of the borrower such as financial statements, cash flows, budgets, valuation reports or any other information which may give insight into the credit decision.. All information submitted is to be verified by the Loans Manager prior to the Loan Summary being submitted to the MD for approval. This includes verifying income, property ownership, completing ASIC searches, obtaining bank statements and the like. Any queries or requests for further information or clarifications are to be directed by the Loans Manager to the Introducer if the Borrower did not approach us directly. (emphasis added) 75Mr O'Sullivan was unable to explain why the Loan Summary, intended to reflect his consideration of Mrs Bortolin Papa's application for loan finance before the loan was approved in April 2007, was not able to be produced as part of the documentation in the client file that was produced in the proceedings. In these circumstances, and in the absence of any evidence from officers of Provident who dealt with the loan application before Mr O'Sullivan approved it, I am compelled to a finding that a Loan Summary was not created for the purposes of approving the initial advance. That said, because it emerged in evidence that the only evidence of Mrs Bortolin Papa's capacity to service the loans considered by Mr O'Sullivan before the loan was approved was the one page pro forma document entitled "Self-Certified Income Declaration", her applications for finance would not include any of the detail which should have been included in the Loan Summary in any event. Mr O'Sullivan accepted that no inquiries were made of Mrs Bortolin Papa, or anyone else, to verify her income or her capacity to meet her obligations as borrower. I have already noted that the Income Declaration makes no provision at all for Mrs Bortolin Papa to supply, certify or declare any details of her income. It simply provides for her to certify an awareness of her obligations to make the monthly loan repayments, to repay the loan in accordance with its terms and that this can be done without causing her any hardship. Mr O'Sullivan also agreed that Provident sought no information as to the financial viability of the gymnasium business, nominated as the business to which the loan funds were to be committed, and no information as to the financial status of any company operating that business. He gave evidence that it was not incumbent on Provident to make these inquiries. Even accepting that to be the case, in circumstances where Provident was aware that the borrower was a self-employed woman of 61 whose only source of income was from the sale of baby clothing from her home, and where Mr O'Sullivan confirmed that independent of the Income Declaration Provident sought no information as to her capacity to service the loan, I am of the view that the Income Declaration was of no practical utility at all in satisfying Provident of the issue of serviceability. 76Mr O'Sullivan also confirmed that Provident had no direct dealings with Mrs Bortolin Papa as borrower in regards to the April 2007 loan and that all correspondence was with Mr Hilellis. I have already noted that despite having her accountant's contact details, and despite what I regard as the most rudimentary information about her financial situation in the handwritten application forms forwarded by Mr Hilellis (apparently supplemented by some additional information supplied by him at Provident's request) Provident made no independent inquiry of her capacity to service a loan of $700,000. Rather, it either simply assumed she had a sufficient income stream, or it was indifferent to that fact. Furthermore, given Mr O'Sullivan's evidence that he had little if any actual memory of approving the loans to Mrs Bortolin Papa, coupled with the fact that a Loan Summary was not produced (and, as I have found on the probabilities, not prepared before Mr O'Sullivan approved the loans), there is no other conclusion open but that approval was given without Mrs Bortolin Papa signing the second application and with only the barest of details in the first application. In addition, Provident made no inquiry as to the profitability of the gymnasium business before extending further finance a year later. The loan was simply approved on the basis that it had been adequately serviced in the intervening twelve months. 77Mr O'Sullivan was cross-examined at length as to how Provident could have been satisfied of Mrs Bortolin Papa's capacity to service the loan in these circumstances. He emphasised that the particular lending product under which finance was advanced to Mrs Bortolin Papa in April 2007, styled as a "Light and Easy Residential Loan", one of a number of products offered by Provident in 2007 and 2008 known generically as "Low Doc Loans". Low Doc Loans are identified in the Credit Manual as a particular lending product where credit is provided to borrowers who cannot provide evidence of loan serviceability, and where the loans are offered at what is described as "healthy interest rates" to ensure against Provident taking any undue risk with investor funds. 78The product guide that accompanies the "Light and Easy Residential Loans" cites the key features as follows:

Self-certification (noted to be the minimum a borrower is required to complete to address the issue of serviceability)
loan to value ratios up 85%
loans up to $5 million
loan terms up to five years
fixed rate/interest only loans. 79Mr O'Sullivan gave the following evidence with respect to the company's practices in assessing an application for a Light and Easy Residential Loan on the basis of a Self-Certified Income Declaration: HER HONOUR Q. The Light and Easy product guide specifies on the issue of serviceability that borrowers are required to complete a selfcertified income declaration as a minimum requirement. That rather assumes, doesn't it, that the loan manager or the person ultimately approving the loan looking at all of the information bearing upon the decision whether to advance the loan or not, would make an assessment as to whether, in the particular circumstances, a selfcertified income declaration was sufficient or whether something more was required. Is that right? A. Your Honour... what the loans officer does is require that we at least get a selfcertified declaration. Q. That's as a bare minimum? A. Yes. Q. But as a minimum does not mean in all circumstances that it will be sufficient ... A. Yep, that's correct. Q. So that requires the exercise of some prudent judgment on the part of the loan assessor and ultimately the loan manager who signs off on the loan that in the particular circumstances, the selfcertified income declaration is sufficient to address the issue of serviceability given that the prime consideration in the company's practices is to ensure that the borrower is not going to suffer unjust hardship by reason of the obligations into which they are entering, correct? A. Yes, correct. Q. And what, in your view, would excite a loans officer to look for something beyond the selfcertification document which is in pro forma form where all of the questions are likely to be answered "yes", I would have thought, otherwise the person is not going to advance their prospects of getting the money that they are seeking; what is it that would excite a prudent loan officer to ask for something more? A. Other information that may become evident such as inconsistency in the application as to the story that we are being told as to what the funds would be used for. Q. Inconsistency. What about lack of substance in the purpose to which the loan is put in the context of who the applicant is and the likely business objectives to which that applicant might be directing very substantial funds; would that, in your judgment, excite a loan officer to press for a little more information? A. The loans officer wouldn't be concerned with the you know, the likelihood of success that somebody that a borrower was entering a business activity or an investment that the borrower was actually entering into. You know, they would be assuming that that business or investment, that they have done their own appropriate research into that. Q. This application, with all respect to the defendant, Ms Papa, was an application with the barest of detail, written in a not very sophisticated hand, if I can put it that way, and really with nothing more to it than the paper upon which it was written, agreed? A. I agree. Q. I am struggling to understand for my own part why that would not excite some additional inquiry on the part of the loan officer, or even passing through that person, if that person is keen to advance the loan process, why it wouldn't excite your attention as the person who ultimately signed off on the loan. Can you assist me with that? A. Well, your Honour, we are not a commercial bank. We are not there to assess, you know, the individual applications and and the businesses. We are there to assess what we what is put in front of us and, you know, the story that was presented to us by Ms Papa or her representatives was Q. When you refer to a story, what I see is a woman who wants what seems to me a lot of money to invest in gym equipment? A. Well, in Q. Now, is that the story that you are talking about? A. Yes... Q. Without knowing who is going to own the gym equipment, where the gym equipment is going to be housed and to what profitable purpose it is going to be put. The story is simply that she wants 500 odd thousand dollars to invest in gym equipment? A. Well, in a gym. 80Despite Mr O'Sullivan's evidence, I am of the view that there was no adequate basis upon which Provident could have had any confidence that Mrs Bortolin Papa had any capacity to service either the original advance or the further advance. The briefest of telephone calls to her accountant would have confirmed that to be the case. In considering whether I should regard Provident's business as that of an asset lender I regard Provident's failure to make any adequate inquiries of her capacity to service the loan as critical. 81Mr O'Sullivan referred repeatedly in his evidence to Provident being told "a story" about the use to which the borrowed funds which he maintained grounded his belief that the borrower was investing in a gymnasium in which she had an interest despite the fact that the application did not refer to that fact: Q. But if you thought in 2007 that Mrs Papa was acquiring a gymnasium, given that she didn't state as an asset that she owned one, or shares in a company which owned one, surely you would have expected her to say in this document that she owned a gymnasium or shares in a company which did, isn't that right? A. Well, certainly one would have expected her to put it in the document but based upon our knowledge of what we were told the first time, included in the fact that the cheques at settlement went to that purpose, I don't think that we would have raised it in our minds any higher than that. The story that we had, the usage of the funds, the application of the funds was consistent with the story that we were told. HER HONOUR Q. And what was that story do you say that you were told? A. Business use which was, when you go back to those original cheque directions sorry, the original application form, which I don't have in front of me, but 180,000 was for the repayment of the existing mortgage, three hundred and something for gym equipment, rental bond which I presume was for the gym and working capital of $20,000 and the cheques that we cut at settlement, the bank cheques, cheque directions that we received from the borrower's solicitor were consistent with that, or largely consistent with that usage. Q. If you had known that the borrower was proposing to onlend the funds to a family member in order that his financial difficulties might be able to be met where otherwise they might not be able to be met, would you have regarded that as a personal purpose to which the funds were to be put? A. More than likely, your Honour. In some circumstances, although limited, where there are proper loan agreements and and the like in place between the parties, there may be an exception but in the main Q. That is a personal purpose? A. Personal purpose, correct. SEGAL Q. Do you tell her Honour that you have a recollection of thinking at the time one way or another, that is at the time of the original loan approval, final approval of $700,000, as to whether or not the loan was for a gymnasium to be acquired by Mrs Bortolin or perhaps for some other person, do you remember having a thought about it at that time? A. Look, the process would have been one of the person the lending manager or head of credit coming to me and saying, "This is a security, it's a business use declaration, it's for investment in a gym or for a business", and that would have been the extent of it as far as my involvement personally. Q. So your involvement wouldn't have involved turning your head to whether or not this might be for a gymnasium purpose of Mrs Papa or otherwise. You wouldn't have turned your head to it is what I am saying, am I right? A. Well, what I am saying is if I was the credit manager on this file, the story is consistent from day one so I have already indicated that we wouldn't have turned our mind to the commercial viability of that decision whether she was making a good decision or a bad decision, but the file is consistent with that story and I would be satisfied with that story. Q. It is also consistent, isn't it, with a lady borrowing money on a house, where she had a little shop at the front of her ground floor, for the purpose of some other person having the benefit of that funds for a gymnasium? A. Are you asking me if that is a possibility? Q. Yes? A. Well, it's a possibility. Q. And I suggest to you that was a possibility you ought to have considered? A. Why? Q. Do you agree or disagree? A. I well, as I have said, on the information that we had in front of us, the declarations made by the borrower, the application, cheque directions, that that is a plausible and consistent story. Q. The cheque directions were equally consistent with the gym equipment being for the purpose of another person? A. Well, maybe if she had drawn the cheque to her son and then he'd have purchased the equipment, yes. Look, we are not here to be, you know, private investigators. She has told us what she wants to use the money for and the story is consistent from that point. The fact that she is 61 and, you know, a selfemployed entrepreneur, I don't see any, you know, inability on us to lend to people. In fact, we have got people in the office assessing these applications that are that age. Q. I don't want to focus too much on people being 61 or older, for more reasons than one, but the fact of the matter is, given the profile of the person, I would suggest to you that it would be reasonable to at least ponder the possibility, is this person buying a gymnasium? A. Well, I disagree. I mean, I think her profile is one of somebody who has worked for themselves for a number of years, has gone out in business for themselves for a number of years, operates a business and would know all the trials and tribulations of being selfemployed and, you know, the merits or otherwise of those types of decisions. She owns a property that is worth over a million dollars which is lowly geared so somewhere along the line she must have done something right. Her conduct on the account was sound, her original account with Sandhurst. Her conduct with us was sound. Her declarations throughout are consistent. 82Later he gave the following evidence: Q. Just finally, Mr O'Sullivan, just returning to this point in time in February 2007, taking all these things, treating them collectively rather than individually, that is the lady's age, the security was her home and the shop from which she generated income and her age and the amount of money, and taking into account repayments were to be $78,000 per annum, would you have regarded it as prudent or wise of a lender in your market place not to make a single independent inquiry as to serviceability, that is independent of the selfcertification? A. With the knowledge that we have got now? Q. No, the knowledge you had in February 2007. Do you think it was a wise thing to do not to seek a single independent piece of information regarding serviceability? A. Wise, no. ... Do you think that was prudent? A. No. ... Q. That practice of only relying upon selfcertification and not seeking any other independent information as to serviceability, would you regard that practice as prudent in February 2007? A. No. Q. Would you regard it as wise? A. No. Q. In other words, you regard that practice in 2007 of only relying upon a selfcertification and not seeking any independent information as to serviceability as imprudent and unwise, correct? A. You know, in in the context of Q. Correct? A. In the context of the question, yes. Q. And your company which had that practice in 2007 engaging in this imprudent, unwise practice, was of course comforted because you could always sell this lady's house if there was a default, correct? A. Comforted by the security and the other knowledge that we had.

[4]

The application for a variation and extension to the loan agreement in February - April 2008 83Despite what appears to be Peter Bortolin's genuine efforts to promote or improve the financial viability of the gymnasium business with the funds his mother had borrowed from Provident in April 2007, it did not generate a profit sufficient to meet Luxury Enterprises' ongoing obligations to Perpetual as mortgagee of the premises at Gosford and Camperdown or to enable him to make the monthly interest repayments due to Provident. 84On 8 August 2007 (at what I accept was at her son's insistence), Mrs Bortolin Papa sent a letter to Provident authorising him to discuss any account matters on her behalf. The letter was addressed to Andrew Walker as Assistant Lending Manager and appears to have been sent as part of his deliberate strategy that his mother should have no direct contact with Provident as he attempted to juggle his financial affairs and those of Luxury Enterprises. 85Although the interest payments to Provident were made at successive monthly intervals between February 2007 and February 2008 without default, correspondence under Mr Walker's hand in November 2007 addressed to Mrs Bortolin Papa, identified what was said to be Provident's inability to debit her account with the previous month's payment. I accept that she did not read this letter either because it was intercepted by her son or given to him at his insistence unopened. It would appear that thereafter Peter Bortolin dealt with Mr Walker concerning the account in his mother's name. 86On 30 November 2007 Mr Walker sent an email to Peter Bortolin at the gymnasium's email address confirming an earlier phone conversation concerning what he described as "the early repayment fee on your mother's loan facility". He advised the cost of retiring the loan within the five year term would total $64,108.33, additional to the repayment of the principal. There was no evidence as to why Peter Bortolin sought this information, although the inference is that it is an early indication of the deepening financial problems he was facing and what I regard as his desperate but fanciful hope he could sell the business, repay Provident and walk away debt free. On the other hand, it also indicates that Provident was aware, to some extent, of the degree of involvement of Peter Bortolin in the operation of the loan account held in his mother's name. 87On 17 December 2007 Perpetual Trustees Ltd issued default notices to Luxury Enterprises in the amount of $15,879 and on 21 February 2008 and commenced proceedings against Luxury Enterprises (and Peter Bortolin, as guarantor) seeking an order for possession of both properties and judgment debt in the amount of $516,891. The statement of claim was served on Daniels Lawyers on 14 April 2008. They accepted service on Peter Bortolin's and/or Luxury Enterprises' behalf. 88It is against this background that in January 2008 Peter Bortolin approached Mr Hilellis for advice as to whether it was possible to seek additional finance from Provident against the security of the Leichhardt property. Mr Hilellis advised that he contact Provident directly. There was no evidence that Mr Hilellis had any involvement in the negotiations with Provident which culminated in Mrs Bortolin Papa entering into the loan variation agreement in April 2008. 89On 23 January 2008 Peter Bortolin made telephone contact with Andrew Walker. He gave unchallenged evidence of a conversation to the following effect: Peter Bortolin: I need to borrow more money on my mum's house. Is it possible?" Andrew Walker: We may be willing to do so. I will have to get back to you. (emphasis added) 90Peter Bortolin was unable to recall whether Mr Walker asked any questions about the purpose of the loan or what interest he had in obtaining an extension to the loan that was secured against his mother's house. In an email sent later the same day Mr Walker indicated that Provident would be prepared to consider an increase in the loan subject to the Leichhardt property being revalued. He invited Peter Bortolin to have his mother send written confirmation of her desire to proceed with the fresh valuation with a view to increasing the facility based on that valuation. 91There is no evidence that Provident had any further communication with Peter Bortolin before it issued a letter of offer on 5 February 2008. The letter was signed by Mr Walker and countersigned by Ms O'Hare, Head of Credit and Lending. It was addressed to Mrs Bortolin Papa at the Leichhardt property. The offer provided for an extension to the loan in the varied amount of $825,000 on terms that the loan would be fully paid by 4 April 2012 and that interest would be calculated on the same terms as the advance of $700,000 in April 2007. In the letter the purpose of the loan is identified as "an increase on existing loan facility". The letter specifies that Provident's solicitors will require an executed Business Declaration on settlement, and that the offer is made subject to Provident receiving a satisfactorily completed loan application and a Self-Certified Income Declaration. 92Mr Walker's involvement in the variation to the loan was said to be further evidence of the fact that Provident knew, or should be taken to have known that Peter Bortolin was not only the intended recipient of the further advance of loan funds but was the de facto borrower of those monies secured against his mother's house. Mr Walker did not give evidence. Accordingly, whether the evidence supports an inference of this kind must be determined by reference to the available evidence. 93On 15 February 2008 Mrs Bortolin Papa signed and dated a document entitled "Application for Mortgage Finance". I accept that it was otherwise completed by her son . She said she signed the letter of offer on the same date. She said her son handed her the documents to sign some time after he had requested more money for the gymnasium from her. In her affidavit she said: He said, "Mum, just sign this". I did not inquire as to what they were. I do not recall whether when I signed the documents the words and figures appearing thereon were already present. I knew that the documents had something to do with borrowing more money for the gym business but I trusted my son and did not ask anything else about the documents. Peter said to me words, which he would say to me on several occasions, "Don't worry Mum. It will be alright. It will all get sorted out soon". 94The application nominated the purpose of the loan as "investment". Her assets were listed as the Leichhardt property and a motor vehicle valued at $20,000. In conformity with the application for loan finance submitted to Provident in February 2007, the 2008 application also included a "Business or Investment Purposes Declaration" (in the form provided for under the Consumer Credit Code) and a declaration and certification that she was aware of the likely monthly loan repayments (on this occasion specified to be $7000); that she was not aware of any factors affecting her ability to make those repayments and that she could repay the loan in accordance with its terms without causing hardship. 95Mr O'Sullivan gave evidence that Provident had no direct dealings with Mrs Bortolin Papa as the applicant for an extension and variation to the loan agreement and that all correspondence was with her son. He gave the following evidence: Q. And in 2008, would you regard it as a wise thing for lenders in your market place in assessing Ms Papa's application for an increase to not make a single inquiry as to whether this business had generated any income or profit? A. Well, the the business wasn't a party to her loan. Q. But in 2007, you assumed it would generate income to repay the loan? A. And to service the loan. Q. Yes? A. And it did. Q. And in 2008, did you think that this business would generate or potentially generate income to service your loan? A. Well it did. Q. Well, it paid but did it generate any income? A. Well, it serviced the loan, yes. Q. Do you think it was wise not to ask for any financial statements, cash flows, tax returns, some independent document? A. The business the business wasn't a party to her loan so I have no problems with the fact that we didn't seek independent verifications on a party that wasn't party to our loan, particularly with the knowledge that we had on serviceability. Q. Perhaps I am not asking the questions clearly enough but in February 2007, I think your evidence was you made an assumption A. Yes. Q. that the investment disclosed in Ms Papa's application would generate income for her to service the loan? A. Correct. Q. An assumption based on not a single independent fact, correct? A. Correct. Q. And of course you only knew in February 2007 that she generated income from selling baby's clothes at the shop, correct? A. Correct. Q. But as to how much she made, you had no idea? A. Correct. Q. And so in 2008 when you approved the variation, again there is the question of serviceability, correct? A. Correct. Q. And is it correct to assume that as to her ability to service the loan, the only two potential sources of income of which you were aware was the shop above which she lived and the business in which she had invested? A. Correct. ... Q. And is it correct to say that in 2008, you made no independent inquiry of any nature whatsoever, that is independent of Ms Papa, as to those two sources of income? A. And our own knowledge, yes. Q. I am sorry? A. And our own knowledge. Q. What do you mean your own knowledge? A. Well, we had a relationship with her then. I mean if if you if it was with another bank, that would be independent verification but you are saying because it is with us it is not independent, but it is still evidence of Q. You are talking about the repayments? A. Yes. Q. Just put that aside. I am talking about tax returns, cash flows, bank statements, that is other than yours, letters from accountants, anything of that sort? A. None of the ones you mentioned, no. ... Q. Would you regard the failure to make any independent inquiry from an accountant, from tax returns, financial statements, et cetera, as prudent? A. I don't accept it's a failure so therefore I can't accept it is prudent. Q. Okay, well, the absence of. Would you regard the absence of making those inquiries as prudent? A. No. Q. In 2008. For a lender in your market place? A. Well, we get back to what is the practice of what a lender in my market place does so if you want to make the assumption that everybody in this market place, banks, nonbanks, bank subsidiaries are imprudent because they don't seek that, then the answer to your question is yes. If you accept that this is the product and the nature of the product and what goes with it, then that is the standard commercial practice for noncode regulated, nonconforming lending.

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Section 11 of the Consumer Credit Code 98Section 11 of the Code provides as follows:

In any proceedings (whether brought under this code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.
Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes).
However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained.
A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not. 99Consistent with Provident's lending policy and corporate objectives the Credit Manual also stipulates that no credit is to be provided unless the borrower declares that the funds are to be applied wholly or predominantly for business or investment purposes and signs a Borrower's Declaration in the form provided for in regulations to the Consumer Credit Code. Given the presumption in s 11(1) that loan agreements are contracts to which the Code applies and that the onus is on a lender to prove otherwise, by requiring the borrower to execute the Declaration and having it witnessed by a solicitor, Provident seeks to ensure that the credit it provides to borrowers is not subject to regulation under the Code. 100Section 11(2) does not nominate the borrower's purpose as definitive in identifying a credit contract for the purposes of the Code (cf s 6(2) of the Contracts Review Act ). Accordingly, it is necessary to determine by reference to the operation of the Act whether the section is concerned with the borrower's purpose, in the sense that the inquiry is into whether the loan funds are to be applied by that person wholly or predominantly for their business or investment purposes, or whether it is sufficient that the ultimate purpose for which the credit was provided under s 6(1)(b), and the ultimate purpose to which the credit was applied under s 11(2), is wholly or predominantly for business or investment purposes. 101As Davies J noted at [116] in Dutta , s 6(1)(b) has attracted divergent views. The section relevantly provides: (1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or ... is proposed to be entered into - ... (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; ... 102I was invited by counsel for both Provident and Mr Caramanlis to adopt the analysis of the scope and operation of s 11(2) they submitted was favoured by Davies J in Dutta . This was to the effect that s 11 was purposive in the general sense such that, for present purposes, it was sufficient that the credit advanced by Provident in April 2007 and in 2008 was in fact applied to a gymnasium business in order for the conclusive presumption in s 11(2) of the Code to be invoked, and that it was irrelevant that Mrs Bortolin Papa had neither a legal or equitable interest in that business nor derived any financial benefit from it. 103On 22 March 2011, some weeks after the hearing before me concluded, Davies J had occasion to again consider the construction of s 11(2) in recovery proceedings instituted by a lender where, despite a lender obtaining a signed Borrower's Declaration, his Honour was satisfied that the Code applied to the loans under consideration ( Mango Media Pty Ltd v Comitogianni ). 104His Honour's further consideration of the construction of s 11(2) in Mango Media coincides with the construction I indicated to the parties in the course of argument was one that I favoured. That construction is also coincident with that of Gillard J in Linkenholt Pty Ltd v Quirk [2000] VSC 166 which Davies J adopted and applied in both Dutta at [118] - [124] and in Mango Media at [172], and contrary to the construction counsel for Provident and Mr Caramanlis attributed to Davies J and urged upon me. In considering the purpose of the provision of credit under s 6(1)(b) of the Code, and whether the lender has effectively invoked the mechanism in s 11(2) the focus is upon what the funds advanced were used for, not in the ultimate sense as contended for by counsel (although that may assist in resolving the question) but in the context of the particular transaction under consideration. 105In Dutta the operation of s 11(2) arose for consideration in circumstances where, although the borrower signed a Borrower's Declaration declaring that the purpose to which the funds were to be applied was wholly or predominantly for business or investment purposes, the lender did not ensure that the declarations were obtained in a way that gave rise to the conclusive presumption to which the section is directed, being obtained after the loan agreements were entered and not signed and dated as required by the Regulations. Although his Honour regarded the signing of the Declarations as some evidence of an admission by the borrower that the funds were to be used wholly or predominantly for business purposes, he did not consider that admission carried much weight where the evidence otherwise established that the funds were predominantly used to pay the borrower's personal and living expenses. His Honour observed at [124]: It does not seem to me appropriate to approach the legislation from a different point of view dependent upon whether the borrower tells the truth to the lender. The legislation has a particular meaning which must be construed independently of the facts that give rise to the need to understand its meaning in any given case. In my view, Shaw J was right when he said in Jonsson v Arkway at [28] that the legislation needs to be broadly and liberally interpreted as beneficial legislation. Section 11(2) enables the credit provider to protect itself against all sorts of borrowers including untruthful ones. If the credit provider does not avail itself of that sub-section it takes the risk that the presumption in sub-s (1) will operate against it because it cannot prove that the funds were used for purposes other than the purposes for which the borrower proves they were in fact used. 106The facts in Mango Media were more closely analogous to the present case. In that case the borrower sought loan finance from the lender secured against the borrower's property through the agency of a third party who was a friend of his and to whom the borrowed funds were on-lent purportedly for a business development for which the borrower was promised a fee of $20,000. The third party was also a finance broker. The lender was not privy to the arrangement between the borrower and the broker. At the broker's request the borrower signed a Borrower's Declaration and falsely represented in the application for finance that the loan was for the purposes of investment by him. Both documents were submitted to the lender by the broker. The broker did not repay the loan and recovery proceedings were instituted. 107One of the bases upon which the borrower sought to resist the claim was that the loan was subject to the Code because the funds advanced under the loan agreement were applied for personal purposes, namely to enable him to on-lend the funds. Despite the fact that he signed the Borrower's Declaration, he submitted that it was rendered ineffective because the broker was a relevant person within the meaning of s 11(3). 108The lender submitted that the Borrower's Declaration was effective to displace the presumption in s 11(1) because, when properly understood, the transaction between the borrower and the broker was either for business purposes (because of the expectation that the borrower would receive $20,000) or for investment purposes (because he acquired a chose in action being the right to sue the broker for repayment of the loan). His Honour rejected those submissions. He held that despite the fact that there was a commercial aspect of the arrangement between the borrower and the broker, the borrower was a truck driver and was not in the business of property development or money lending. The fact that he acquired a chose in action by on-lending the loan funds was simply a necessary incident of entering into the loan and the legal result of it. His Honour went further and said: It seems to me that the difference between an investment and what has taken place in the present case is that here the Defendant has not acquired any property from which some return might be expected. The fact that Mr Hraiki may be using the money for property development or for the acquisition of property with a view to a return does not mean that the Defendant, in the circumstances, is doing the same thing. Nor can the fact that he is receiving, or has been promised, consideration for the loan, convert a loan into an investment. Nor can the fact that he incidentally acquires a chose in action by reason of making the loan. ... In my opinion, the purpose of the loan from Mango Media to the Defendant was a personal purpose, namely, to enable the Defendant to make a personal loan to his friend Mr Hraiki. Nor can it make any difference that the Defendant accepted in cross-examination that he considered the advancing of the money to Mr Hraiki with the intent that he would make a profit (i.e. the $20,000) was an investment. Whether it was an investment must be objectively determined. It cannot depend on what the Defendant believes. 109His Honour was also satisfied that either or both the broker or the solicitor who witnessed the Borrower's Declaration obtained it from the borrower and, since it was beyond question that the broker knew the loan was to be used for personal purposes, because of the express exception provided for in s 11(3) the Borrower's Declaration was ineffective to give rise to the conclusive presumption in s 11(2). Accordingly, and despite the fact that the lender had no actual knowledge (or constructive knowledge under the general law of agency) that the loan was for personal purposes, the lender was fixed with knowledge by its association with the broker as a relevant person in s 11(3). His Honour observed at [171]: I discussed in Bank of Queensland Ltd v Dutta [2010] NSWSC 574 at [115]-[124] the divergent views on what is meant in s 6(1) of the Code, and particularly in the case where the lender had been misled by what it was told, in that case, by the borrower. In the present case, Mango Media has undoubtedly been misled by Mr Hraiki (the application he submitted said the loan was for investment), but for reasons which I discussed, that cannot alter the proper construction of the legislation which needs to be broadly and liberally interpreted as beneficial legislation. 110Applying the same analysis to the relationship between Mrs Bortolin Papa as borrower and her son (or his company) as the recipient of the loan funds, and the relationship between Provident and Mr Hilellis through his contractual role as an Introducer and the person through whom the credit was obtained as provided for in s 11(3), the inevitable conclusion is that the credit provided by Provident and applied for by Mrs Bortolin Papa was for personal purposes and therefore regulated by the Code. 111Because of the beneficial construction given to s 11 in the context of the Code generally, the same conclusion must obtain irrespective of whether Provident was misled by Mrs Bortolin Papa knowingly signing a false declaration in order to ensure her son secured the finance he needed, and irrespective of whether I am satisfied that she lied to her solicitor about the extent of her interest and involvement in her son's business motivated by the same objective. As will be clear later in this judgment I am not satisfied she acted in this way in any event. I simply make the observation that even were that the case it would not have altered the effect of the Borrower's Declaration for Code purposes. 112I have already referred to what has been held to be the approach to the impact on recovery proceedings where the Code has been found to operate and where there was a failure to serve a s 80 notice. This was considered most recently by Davies J in Mango Media at [200] - [204]. In that case his Honour referred to the approach to the question he took in Dutta at [157] and to a similar approach taken by Hoeben J in Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57 at [84]. The approach by their Honours is one with which I respectfully agree. Applied to this case I am satisfied that the recovery proceedings should be permitted to continue in circumstances where Provident's failure to serve the s 80 notice was neither contumelious nor a high-handed disregard of its obligations. In addition it cannot be seriously argued (and was not) that Mrs Bortolin Papa is disadvantaged by my refusing to dismiss the proceedings. To dismiss the proceedings and to require Provident to recommence them after service of the notice would be a flagrant waste of court resources and impose unnecessary costs on the parties to the litigation. 113Whether or not the exception in s 11(3) is enlivened for Code purposes, Mrs Bortolin Papa also contends that because of the relationship between CMC and Provident when the question of "unjustness" under the Contracts Review Act is under consideration Provident should be taken to have known that the loan funds were not to be applied for any business or investment purposes of hers but that of her son's. I have already determined that Mr Hilellis knew that Peter Bortolin was the intended recipient of the loan funds for use in his gymnasium business and that Mrs Bortolin Papa had no capacity to service the loan and no interest in doing so. In addition, I have already found that Mr Hilellis approached Provident as a lender of last resort effectively on his behalf. Provident maintained that it had no reason to believe that the funds were to be applied other than for the business or investment purposes of Mrs Bortolin Papa as borrower before the loan funds were advanced. It relied upon her express representations to this effect in the two written applications for loan finance forwarded by CMC in February 2007 and the Borrower's Declarations prepared in strict accordance with s 11(2) of the Code which were furnished in support of those applications and in support of the loan variation agreement in April 2008. 114The question is whether even if Provident had no actual knowledge of this state of affairs, and even if Mr Hilellis actively misled Provident by withholding that information from them, Mr Hilellis' knowledge of these matters is the knowledge of Provident according to the law of agency.

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The question of agency and its impact on the question of unjustness under the Contracts Review Act 115In O'Donnell Price J emphasised that the existence of an agency relationship between two parties depends on the facts of a particular case, referable, in the first instance, to whether the essential elements of the relationship are present, namely the consent of both principal and agent and the authority given to the agent by the principal to act on the principal's behalf. In emphasising that that the existence of the relationship does not depend on how the parties may have described their relationship (although the terminology used may be relevant to determine the intention of the parties), his Honour went on to observe at [337] as follows: The relationship of agency may arise pursuant to the express or implied consent of both principal and agent. An implied agency may arise through the instruction or request by one party to another to carry out a task and the consequential undertaking of that task. Professor Dal Pont provides a convenient summary of the principles of implied agency at [4.7]: "The focus on intention dictates that the parties need not have actually used the language of agency for the law to infer that they intended to create an agency relationship. The parties may not even appreciate the legal concept of agency but may nonetheless create an agency relationship if what they have done is best reflected by the legal concept of agency. This may be so even if they profess to disclaim such relationship, whether by the terms of the contract between them or otherwise. 'An intention to create an agency may be manifested...simply by placing another in a situation in which, according to the ordinary rules of law, or...according to the ordinary usages of mankind, that other is understood to represent and act for the person who has so placed him.' It need not involve a positive act by the principal, but may be created by the principal's acquiescence. " 116After a detailed analysis of the evidence his Honour was satisfied that the presumption against agency had been displaced and that the Introducer acted as agent for the Lender in promoting the Low Doc Loans the subject of the proceedings. In O'Donnell the features of the relationship and the arrangement which were ultimately determinative of agency included: (a)The "Introduction Deed" (the equivalent of the Introducer Agreement in this case) was entered into between the lender and the broker ("Streetwise") before each of the joint venture agreements were entered between "Streetwise Property" and the borrowers. Streetwise was a retail extension of the lender's lending business. (b)The lender agreed to badge loan application forms and letters confirming preliminary and final approval of loans as "Streetwise" and requested Streetwise to supply its logos electronically to allow that to occur. (c)The broker did not have loan application forms from a variety of lenders. (d)The lender's lending guidelines which applied to the loans under consideration, stipulated that Streetwise could carry out the loan interview, assist the borrower with the approval process and the preparation of the application, obtain supporting documentation, check the authenticity of that documentation and send copies to the loans officer; and thus be an integral part of the loan approval process. In the case of all borrowers, the lender had entrusted Streetwise with the responsibility under the lending guidelines of: i.conducting the loan interview, discussing the loan options and determining the suitable loan product for the customer from the point of view of the lender not the borrower; ii.advising the borrower about the loan approval process and providing the appropriate information from the point of view of the lender not the borrower; iii.assisting the borrower with the preparation of the loan application; and iv.obtaining the supporting documentation. (e)The lender undertook to Streetwise that it would not contact any borrowers introduced by Streetwise until after the loan had been settled. This was a departure from its usual practice. The assessment of a borrower's suitability and the gathering of information concerning the borrower was left entirely in the hands of Streetwise to carry out on the lender's behalf. To the extent that it occurred at all, the checking and verification of that information was superficial and perfunctory. (f)The lender gave Streetwise administrative control of the loan and access to the lender's processing system so that it could monitor the progress of the loan applications. (g)The lender allowed Streetwise to dictate which aspects of credit checking, valuation, instructing solicitors and post settlement management Streetwise wished to control and which matters to leave to the lender. (h)The lender offered to answer telephone calls from borrowers introduced by Streetwise in Streetwise's name. (i)The lender required Streetwise to have professional indemnity insurance. 117Provident relied upon a recognised body of authority for the prima facie presumption that a finance broker or a mortgage broker is the agent of the borrower and not the lender. This is said to be inherent in the fact that in the ordinary case the function of the broker is as a negotiator and/or an intermediary to secure credit for a borrower. It also submitted that although there are cases such as Michalopoulos v Perpetual Trustees Victoria Ltd [2010] NSWSC 1450 where the presumption has been displaced, and where a broker has been held to be the agent of the lender, agency will not readily be inferred and should not be inferred in this case. 118In seeking to resist a finding that CMC was Provident's agent in their dealings with Mrs Bortolin Papa, the significant indicia of its relationship with CMC being that of an independent contractor were identified by Provident as follows: (a) Although CMC introduced Mrs Bortolin Papa as a potential borrower that is not necessarily determinative of agency since it is equally as consistent with CMC providing that service under contract: see NMFM Property Pty Ltd v Citibank Ltd (No. 10) [2000] FCA 1558 at [1021] per Lindgren J. (b) Although CMC earned a fee for the introduction of a borrower where the application is successful (albeit not paid by Provident but by the borrower at the time of settlement), this does not justify the inference of agency for the same reason: Micarone v Perpetual Trustees Australia [1999] SASC 265; 75 SASR 1 at [123 - 5] per Debelle and Wicks JJ. (c) Although CMC completed Provident's prescribed loan application forms on behalf of the borrower, and arranged for Mrs Bortolin Papa to sign the first application, this is also not conclusive of agency. In Octapon Pty Ltd v Esanda Finance Corporation Ltd (SCNSW, 3 February 1989, unreported) at 27 Cole J held: ...The fact that the broker approached a finance company, arranged for execution of documents, provided details of the vehicles and of [the borrower's] financial position, arranged for the obtaining of an invoice from the supposed vendor, and otherwise took steps to enable the smooth application for and completion of the transaction, in no way constitutes him the agent of [the lender] (see Con-stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 234. (d) The Introducer Agreement does not provide for a relationship beyond that as agent for the borrower and expressly provides that the Introducer is not Provident's agent but an independent contractor. The Introducer Agreement provides as follows: Relationship: the Introducer is an independent contractor. The Introducer is not an employee, agent or partner of Provident. The Introducer has no authority to represent that it has any relationship or connection with Provident or to bind Provident or to make any representations on behalf of Provident, in any manner whatsoever, without the prior express written approval of Provident. The arrangements between Introducer and Provident under this agreement are non-exclusive and each party is free to enter into similar arrangements with other people without notice or the approval of the other party. Paragraph 3 of the Agreement provides: Commission: Provident will pay the Introducer commission for each loan agreed between Provident and a client introduced by the Introducer under this agreement. The commission will be calculated as set out in the commission schedule, as varied by Provident from time to time. (e) Provident also submitted that it is the borrower's interests that are advanced under the Agreement not its interests as lender. 119I accept that neither the fact nor degree of CMC's involvement in Provident's business as contemplated by the terms of the Introducer Agreement and the other evidence in the case (such as it was) as to how those terms were transacted is comparable to the intimate and interwoven relationship between lender and introducer the subject of consideration in O'Donnell . That is not however the end of the matter. Equally, the fact that the Introducer Agreement declares that no relationship of agency is created is not conclusive (see Micarone at [631]). It remains essential to examine whether what CMC and Provident agreed as between themselves amounts to the relationship of principal and agent at law. 120In addition to the specific services CMC agreed to provide under the agreement as set out in paragraph 4 of the Introducer Agreement and extracted at [44] above, in particular the provision of information about the borrower, CMC acknowledges its obligations to: carry on its business in a professional and ethical manner, and in accordance with all codes and licensing requirements applicable to its business; maintain insurance against loss or damage claimed by third parties arising out of the business activities of the Introducer, and in particular under this agreement, and to give Provident evidence of that insurance when requested; use information that Provident gives the Introducer in connection with this agreement only for the purpose for which that information is given and must not disclose any such information other than as authorised by Provident in writing. ... The Introducer indemnifies Provident against all expenses incurred by Provident and claims made against Provident in connection with any action or representation by the Introducer in breach of this agreement or otherwise in connection with the business of the Introducer. Provident may set off any amount owing to Provident under this provision against any amount that Provident may owe to the Introducer. The Introducer warrants that it has the resources and the skills necessary to fulfil its obligations under this agreement. 121I am satisfied that in carrying out its obligations under the Introducer Agreement CMC was acting as Provident's agent. In coming to that view I have given considerable weight to the express and primary obligation imposed on CMC under the agreement to provide information about prospective borrowers so as to enable Provident to assess the viability of forging a commercial loan arrangement with borrowers. The possibility of a risk to Provident associated with CMC discharging its obligations under the agreement is expressly provided for in the indemnification clause. While the related obligation imposed on CMC to provide a point of contact to facilitate communication between Provident and a prospective borrower, and to provide for the execution of documents and the provision of information and other client liaison services may inure equally to the benefit of a borrower and to Provident as lender, there is a clear and supervening advantage to Provident in the arrangement and a corresponding disadvantage to a borrower given CMC's obligation to provide information even if adverse to the borrower's interests. In the result I am satisfied that CMC's knowledge of Mrs Bortolin Papa's circumstances as borrower and, in particular, that the sole purpose of the loan was to benefit her son should be attributed to Provident as principal. 122I note that Ms Nolan did not direct any submission to the so-called "fraud exception" which might have operated to prevent CMC's knowledge of the circumstances of the borrower and the purpose of the loan being attributed to Provident were I satisfied that the evidence supported a finding that CMC acted contumaciously in disregard of Provident's interests by withholding that information from Provident or in deliberate disregard of Provident's lending guidelines (see the discussion of the principle in O'Donnell at [368]-[373]).

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Mrs Bortolin Papa's evidence 123On 1 March 2007 Peter Bortolin accompanied his mother to a conference at Mr Caramanlis' office at her son's request. He gave evidence this occurred the following way: I had meetings with Mr Caramanlis in early 2007 and prior to introducing my mother to him on the occasion she signed the mortgage documents. I said to him words to the effect, "I am getting the mortgage from Charlie Hillelis. He has arranged it for me. The mortgage will be over my mother's property as she's agreed to help me so I can borrow monies to buy the gymnasium". I further said words to the effect, "When all the documents are ready, I will bring Mum in to sign them". In one or more of such meetings, I said to Mr Caramanlis words to the effect, "I'm really being pressed by Hall Chadwicks, the real estate agent and the equipments people [creditors and others concerned with the gymnasium business]. I want you to get this over the line for me ASAP". He said words to the effect, "Yes, we are still waiting on the documents from Provident. Stella has organised everything. Once we receive the documents from Provident bring your Mum in to sign". 124Mr Caramanlis gives evidence set out in [134] as to how this meeting was convened. It is in conflict with Peter Bortolin's account. Counsel did not challenge Peter Bortolin's evidence on this point. 125Mrs Bortolin Papa said that she understood the purpose of the meeting with the solicitor was to sign documents about the money her son wanted to assist him with the purchase of equipment for his gymnasium business. She said that she "just went along" to this meeting because her son had told her that she was required to see a solicitor in order to borrow the money. 126Mrs Bortolin Papa said that her son introduced her to Mr Caramanlis when they arrived at his office. Before the conference formally commenced she said she was introduced to Ms Voulgaris and taken into her office. Mr Caramanlis said, "Stella will take care of you". He then left the room with her son. She said that Ms Voulgaris made copies of the identity documents that she had brought with her. According to Mrs Bortolin Papa, this was the first time she met Ms Voulgaris. 127She went on to say that Mr Caramanlis returned shortly thereafter after which she went with him into his office. She said she could recall her son being "in the doorway to that room, or just inside the room" and that he then sat beside her at Mr Caramanlis' desk throughout the conference. She said that Mr Caramanlis handed her various documents and as he did so he pointed at various places in the documents and said "Sign here". She said she signed as directed. She said that the meeting did not last any longer than ten minutes. 128She said that she could not recall anything of what Mr Caramanlis said to her in conference but he may have given her a general description of the various documents she was asked to sign. In her affidavit she gave the following evidence: He did not tell me anything about the financial circumstances of the companies associated with the gym, either then past or present. In particular he did not tell me that the company that had been running the gym, and of which my son was a shareholder, had been placed in administration. He did not tell me anything about any outstanding debts of the gym or the company involved in conducting the gym. He did not tell me anything about the loan from Hock-A-Car which had been obtained by my son and his partners at a very high interest rate; or there being any default by my son or anyone else in respect of any such loan. He did not tell me that I should get independent financial advice. He did not ask me what I knew about the affairs of my son, the gym or the companies that were involved with the gym or that I should make inquiries about these matters including as to my son's ongoing ability to service the loan, before I signed any of the documents. He did not explain to me anything concerning the meaning of the phrase "business purpose" or the meaning or effect of the [Borrower's Declaration]. He did not enquire as to my financial circumstances and whether or not I was able to service the loan if my son or his company were not able to do so. He did not advise me that the rates of interest charged on the loan were well above similar commercial rates for such loans on account of the risk level involved in the loan. He did not tell me that in the absence of someone looking at the financial records of the gym business and assessing its capacity to meet the payments to the plaintiff, in particular given the appointment of a receiver to the company that had been running the gym, the high rates of interest at which monies had been borrowed from Hock-A-Car (in respect of which there had been default) and that were being charged by the plaintiff, that such rates were well above ordinary commercial rates and were the rates charged by high risk lenders, that I was taking a very real risk of losing my property. He did not tell me that he had acted for my son. 129I set out her evidence in full aware that only some aspects concern the adequacy of the legal advice she was given in support of her claim for relief under the Contracts Review Act and that the wider ambit of her complaint is in support of her cross claim against her solicitor for damages.

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Peter Bortolin's evidence 130Peter Bortolin gave evidence that he was seated beside his mother throughout the conference. He also gave evidence that when the loan documentation was produced the following conversation took place: Mr Caramanlis: These are loan documents from Provident Capital. You need to sign these documents. Mrs Bortolin Papa: Well Peter has brought me here. He tells me to sign. I trust my son. Mr Caramanlis: Yes, Peter will be making the repayments. It has nothing to do with you. You are a very good Mum to help your son. 131Peter Bortolin said that Mr Caramanlis simply pointed to where his mother was required to sign and that he did not give her any information about the type of loan she was taking out, the interest rate, the fees being charged or any other matter related to the loan. He said that the financial circumstances of the gymnasium or Luxury Enterprises were not discussed, neither were his obligations under the Hock-A-Car loan. There was no discussion as to the capacity of the gymnasium business to generate income sufficient to make the loan repayments. 132Mrs Bortolin Papa said that she did not ask either her son or Mr Caramanlis how much money she was borrowing because she was willing to borrow money for her son simply because he needed it for the gym. Peter Bortolin gave evidence that he deliberately kept his mother ignorant of his financial affairs and put her under pressure to sign the loan applications. He said that he maintained that strategy in the conference with Mr Caramanlis. He did not claim (nor was it suggested to Mr Caramanlis) that they discussed this strategy in order to ensure that Mr Caramanlis said nothing in the conference to undermine the prospects of his mother signing the loan documentation. 133Mrs Bortolin Papa gave evidence that she did not read the correspondence relating to the Provident loan which Mr Caramanlis sent to her after the conference even though it was addressed to her. She said that she simply handed this letter to her son as he had instructed her to do with all correspondence concerning the loan from Provident.

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Mr Caramanalis' evidence 134Mr Caramanlis gave evidence that while Peter Bortolin accompanied his mother to his office for the purpose of the conference he was not present during the conference. He explained the circumstances in which the conference was convened in his affidavit as follows: On or about 10 January 2007, Stella Voulgaris came into my office and advised me that she had just met with George Hillelis, a mortgage broker from Community Mortgage Pty Ltd. Community Mortgage is located within the same building as Daniels Lawyers and sometimes referred clients to us for the purpose of providing independent legal advice on mortgage documents. Ms Voulgaris and I had a conversation as follows: Ms Voulgaris: I just met with George Hillelis. He wants to know whether you can provide independent legal advice to one of his clients. Her name is Gina Papa. You met her son Peter Bortolin last year in relation to a loan from Hock-A-Car. Mr Caramanlis: Yes, I remember Peter and tell George that it won't be a problem. I later became aware that Ms Papa was obtaining the loan from Provident Capital. On or about 23 February 2007, I received a letter from Bernstein Pain Solicitors, who acted on behalf of the lender Provident Capital attaching various documents in relation to the loan. Upon receiving this letter, I requested Ms Voulgaris to arrange a conference with Ms Papa. 135In effect, his account of the circumstances in which the conference was convened is in direct conflict with Peter Bortolin's evidence set out in [123]. 136He said that after exchanging introductions, Mrs Bortolin Papa came into his office and he handed her a costs disclosure and costs agreement. He said that she appeared to read it to herself for a period of about five minutes then asked him what the document was all about. He responded by saying: It's something I have to give to you by the Law Society. It's an agreement between ourselves as to the work that I have to do. 137Whilst there was no mention of it in his affidavit, under cross-examination, Mr Caramanlis gave evidence that she asked several questions whilst reading the documents concerning his fees and the advice he was going to give her. 138In his affidavit he said that the following exchange then passed between himself and Mrs Bortolin Papa: Mr Caramanlis: I have to explain the terms of the loan (meaning the loan document and mortgage) to you. Mrs Bortolin Papa: I have borrowed money before in respect of my own business in Leichhardt. Mr Caramanlis: What type of business? Mrs Bortolin Papa: I have been running a clothing business from Leichhardt. Mr Caramanlis: Is that the property which you are mortgaging? Mrs Bortolin Papa: Yes. Mr Caramanlis: What is the purpose of the loan? Mrs Bortolin Papa: To refinance a present loan and the rest of the loan is to invest in my son's gym. He is going to buy some flashy new equipment from the States. Mr Caramanlis: What is your involvement in the business? Mrs Bortolin Papa: Presently I don't have any involvement but I will be taking an interest in the business. My accountant will be dealing with the business and I have already discussed the loan with my accountant. Mr Caramanlis: I still need to discuss the terms of the loan with you. Mrs Bortolin Papa: I know that if I don't pay the loan I will lose the property. Mr Caramanlis: That's right, that's how all loans work when you use property as security. If you don't make the interest repayments eventually the bank will sell your property to get its money back. The bank would not hesitate to do so especially in your case where you speak fluent English, have taken out loans before and you have been running a commercial business for years. Mrs Bortolin Papa: I understand. 139Mr Caramanlis said that he did not ask her the nature of the interest she would be acquiring in the future because she told him she had had advice from her accountant. 140He said that although he knew that in a practical sense Peter Bortolin would be responsible for the loan repayments and that the repayments would be met by income generated from the gymnasium business, and he knew that Mrs Bortolin Papa was entirely dependent on the business generating income sufficient to enable the repayments to be met under the loan, he simply accepted that she was happy to invest in her son's gymnasium. He said that he gave no thought to whether she was entering an improvident loan. 141He said that he then proceeded to explain the terms of the loan and mortgage to Ms Bortolin Papa as follows: The loan is for $700,00 and is for a term of 60 months or 5 years from the date the loan is settled. You have to repay the loan at the end of this 5-year period. You can repay the loan early but you will be charged an early repayment fee. The interest rate is 16.99% per annum but reduced to a lower rate of 10.99% per annum if the interest is payable monthly and will be directly debited from your nominated account. The loan is secured by a first registered mortgage over your Leichhardt property. If you don't make the repayments the bank can take possession of your property and sell it to get their money back. 142He said that he asked Mrs Bortolin Papa about the purpose of the loan to establish whether or not the Credit Code applied and to confirm that the Borrower's Declaration was correct. He said that he showed her the Borrower's Declaration (as he did with all the other documents she signed) by placing it on the desk in front of her to enable her to read it. He said he had the following conversation about the Declaration: Mr Caramanlis: By signing this document you are saying that the loan is for business purposes or mainly for business purposes, so you are giving up any rights you may have under the Consumer Credit Code. Mrs Bortolin Papa: What's that all about? Mr Caramanlis: The Consumer Credit Code can protect you sometimes if you are an individual and you can't make the repayments but only if it's for a residential loan. Mrs Bortolin Papa: Ok. He said that he had informed Mrs Bortolin Papa in plain terms that the Business Declaration was an important document because of its impact on her rights under the Credit Code and that he confirmed her understanding of that in the conference for that reason. 143He then said that after he had finished explaining the loan documents Mrs Bortolin Papa signed: a)a Mortgage b)a Borrower's Declaration as to Purpose c)a Direct Debit Authority d)an Authority for Payment and to Complete Documents e)a Statutory Declaration - Encumbrances f)a Statutory Declaration - Survey. g)a Schedule 1 - Declaration by Borrower. 144In cross-examination he said that he read out loud the document certifying that he had given her independent legal advice and she appeared to follow what he was reading from the copy that was placed in front of her. 145He said that he asked Ms Voulgaris to make copies of the executed documents for Mrs Bortolin Papa which were then given to her. He said that he was with Mrs Bortolin Papa for about 45 minutes, of which 15 minutes was concerned with her telling him about her life and explaining her different surnames. It was not put to Mrs Bortolin Papa in cross-examination that she had any conversation with Mr Caramanlis of a personal nature nor did she make any reference to this alleged exchange taking place in her affidavit. 146Under cross-examination Mr Caramanlis denied that he had falsely claimed in his affidavit that Mrs Bortolin Papa told him that she would be taking an interest in the business. He also denied saying that Mrs Bortolin Papa was good to her son for borrowing money for his business and rejected the proposition that he told her where she was to sign the loan documents without providing advice as to their legal and practical effect. He said that he was concerned to ensure that she understood the documents she was asked to sign, given what he assessed to be her unsophisticated understanding of the English language despite her ability to communicate with him in English. He said that it would have been negligent for him to have permitted her to sign the loan documents without advice as to their legal effect. 147He also denied it was Peter Bortolin who had supplied him with the bank details to the account with National Australia Bank. Although he gave evidence that Mrs Bortolin Papa had the bank details written down, he said that he was not sure in what form he received them. When cross-examined about this apparent inconsistency, he said that he knew they were in written form, but was unsure whether they were on a bank statement or a piece of paper. He confirmed that, with the exception of Mrs Bortolin Papa's signature, all the handwriting on the Direct Debit Authority was his. 148Mrs Bortolin Papa confirmed that the only mark she made on the Direct Debit Authority was her signature. She could not recall whether the form was already filled out when she signed it, nor did she know whose writing appeared in the other fields. She did not remember signing it but said that she is not, and never has been a signatory to the account of Pyrmont Health and Fitness Club. She did not give evidence as to who supplied Mr Caramanlis with the bank details nor was she cross-examined on the issue. Neither did Peter Bortolin give evidence as to who provided Mr Caramanlis with the bank account details and he was not cross-examined on this point. 149On 8 March 2007 Mr Caramanlis sent a letter to Mrs Bortolin Papa purporting to confirm the advice he had given to her in conference. He said that he tried to make the letter as comprehensive as possible but also to highlight the important matters he had discussed with her in conference concerning the loan and its purpose. Under the heading "Purpose of Loan" he wrote: There are two reasons for you taking out this loan. The first is to refinance the mortgage you have with Sandhurst Trustees [Bendigo Bank]. The second reason is to provide money to your son, Peter Bortolin, to assist him with the purchase of equipment for his gymnasium business. (emphasis added) He concluded the letter as follows: We confirm your instructions that you understand the loan and that you are taking out the refinance to help your son Peter Bortolin with the money to use in his gymnasium business in Pyrmont. We note that all legal documentation was executed by you as a result of your own free will and that no pressure was placed upon you to execute the loan documents. (emphasis added) 150Despite the importance he said he attached to being informed that Mrs Bortolin Papa was acquiring an interest in the gymnasium consistent with the Business Declaration she signed, Mr Caramanlis could not explain why he did not specify that as the purpose of the loan in the letter or why he described the purpose of the loan in the terms that he did or why he saw the need to emphasise that she voluntarily executed the document. He said that he felt he had provided a sufficient explanation by noting that the loan was "to be used predominantly for business or investment purposes" under a paragraph in the letter entitled "Purpose of Loan". He said that although he thought she may not have known what the word "predominantly" meant, she would have understood it was for "investment purposes", which he defined as "investing in her son's gym". 151Despite Mr Caramanlis' evidence that he made detailed file notes of the conference with Mrs Bortolin Papa, reflecting the detailed written advice in the follow up letter and consistent with his usual practice, he was unable to produce them. They were not contained in his client file. Initially he said they had been removed from the file for the purposes of preparing the letter and not replaced. He subsequently gave evidence that he made the file notes on a notepad but could not remember whether he put them into the file. He said that it was possible that they were left on a pad, which he accessed for the purpose of preparing the correspondence to Mrs Bortolin Papa.

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Ms Voulgaris' evidence 152Ms Voulgaris gave evidence that on 1 March 2007 she saw Peter Bortolin and Mrs Bortolin Papa enter Mr Caramanlis' office. After some time she said that she heard Mr Caramanlis say: Peter, you are going to have to leave now. I need to speak to your mother by herself. 153She said that he came into her office, but because of the close proximity of the two offices, and the risk of him overhearing the advice his mother was being given, she made a note of his mobile phone number and asked him to leave the premises for the duration of the conference. She said that after he left, Mr Caramanlis asked her to photocopy Mrs Bortolin Papa's identification documents. She said that whilst she was in his office she recalls Mrs Bortolin Papa saying words to the effect of: I'm refinancing my property to invest in the gym with my son. It will make all of the repayments. The money is going to be used to purchase state of the art training equipment. It's going to make us a lot of money. 154When asked whether there was any particular document in the file that had prompted her memory of Mrs Bortolin Papa saying that she was investing in the business with her son, she said that the loan application had triggered her memory. She said that her involvement in preparation of the documents in relation to the security bond over the premises from which the gymnasium operated in Pyrmont had also assisted with her recall. Ms Voulgaris said that she also heard Mr Caramanlis ask Mrs Bortolin Papa, "So do you have an interest in the gym?" to which she responded, "No, not at the moment, but I will in the future". 155After she photocopied the identification documents Ms Voulgaris returned to work in her office. She said that while she could not recall the precise words which passed between Mr Caramanlis and Mrs Bortolin Papa during the course of the conference, she did recall that the interest rate, the default interest rate, the mortgagee's power to sell that the property in the event of default, the monthly loan repayment amount (although she did not recall the amount) and that it was higher than what Mrs Bortolin Papa was currently paying to the Bendigo Bank were discussed. She said that at the conclusion of the conference, she telephoned Peter Bortolin and he returned to collect his mother. 156Under cross-examination Ms Voulgaris claimed to have a general capacity to recall conversations passing between Mr Caramanlis and his clients in his office whilst she was in her office. She could not, however, recall any other conversations between Mr Caramanlis and his other clients on 1 March 2007 or on the following day or any other day, other than the one which passed between Mr Caramanlis and Mrs Bortolin Papa. She also gave evidence that in preparing her affidavit over three years later, she did not discuss her recollection of the conference with Mr Caramanlis. She said that she simply consulted the file and relied upon her memory. Ms Voulgaris gave evidence that she did not see any file notes written by Mr Caramanlis in Mrs Bortolin Papa's file.

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The conference in March 2008 157Mrs Bortolin Papa said that she was unsure when she first became aware that the original loan would be increased by a further $125,000. She said that it was probably in March 2008 when she again attended Mr Caramanlis' office with her son, at his request, to sign further documents. There was the same level of dissonance in her evidence (and that of her son's) and Mr Caramanlis' evidence (and that of his paralegal) as to what was said at this conference. 158Mrs Bortolin Papa said she could not recall what Mr Caramanlis said during the conference but did remember him pointing to places on various documents where she should sign. She said that her conversation with him was brief. She agreed that Mr Caramanlis might have said that the document she was signing would increase the amount of the mortgage to $125,000. She said that at the time of signing the Deed of Variation her son had not told her of the Hock-A-Car loan and the defaults thereunder; that the gym or Luxury Enterprises was in default to its creditors; or that he was in default under mortgages over properties owned by her son or his company. 159Peter Bortolin gave evidence that at the conference (at which he agreed Ms Voulgaris was also present) his mother was directed by Mr Caramanlis where to sign the Deed of Variation, the Business Declaration and other documents forwarded by Provident's solicitor. He said that the conference lasted approximately ten minutes. He said that Mr Caramanlis said, "Gina, sign here and here. Gina you are good to your son". 160Peter Bortolin said that Mr Caramanlis did not explain the legal effect of any of the documents his mother was asked to sign or raise with her the capacity of the gymnasium or Luxury Enterprises to meet the new scale of repayments under the variation to the loan agreement. He also said that Mr Caramanlis did not inform his mother of the proceedings that were being taken against him and Luxury Enterprises on behalf of Perpetual Trustee Co Ltd and there was no discussion as to why further funds were required by Luxury Enterprises for the gymnasium business. Mr Caramanlis said in cross-examination that this was because he had no information either in his capacity as solicitor acting for either Peter Bortolin or Luxury Enterprises that the gymnasium business was in straitened financial circumstances. He said that nothing in the documents that he had access to, or any information provided by Peter Bortolin, gave rise to any concern in his mind that the further advance might expose Mrs Papa to any financial risk. Furthermore, he said that it was his understanding that Mrs Bortolin Papa well knew that she was legally obliged to make the repayments under the new arrangements consistent with her obligations under the original loan. 161Mr Caramanlis confirmed that he conferred with Mrs Bortolin Papa on 6 March 2008 but claimed that Peter Bortolin was not present. He said that at the meeting she handed him a signed Costs Disclosure and Costs Agreement which had been sent to her by Ms Voulgaris. After exchanging pleasantries he said they had the following conversation: Mr Caramanlis: You are here today for me to explain the terms of the Deed to you. Mrs Bortolin Papa: I know, it's the same as last time. Mr Caramanlis: The principal amount has gone up from $700,000 to $825,000, an increase of $125,000. You still need to make the repayments as before or else the bank can take possession of your property and sell it to get its money back. Mrs Bortolin Papa: I know. Mr Caramanlis: Why are you borrowing the extra money? Mrs Bortolin Papa: It's to go towards the gym. I now have an interest in the business. 162Mr Caramanlis said that he then placed the Business Purpose Declaration on the desk in front of Mrs Bortolin Papa and said: Mr Caramanlis: This is a similar document to that you signed last time. You're again signing away your potential Credit Code rights by saying that the loan is for business purposes. Mrs Bortolin Papa: Yes, I understand. Mrs Bortolin Papa then signed the Declaration. 163Neither Mrs Bortolin Papa nor Peter Bortolin received any further correspondence from Mr Caramanlis regarding the loan variation. Mr Caramanlis gave evidence that he had started typing a letter confirming the advice he had given Mrs Bortolin Papa in conference but it was never sent. He did however print a copy and place it on the file. The contents of the letter was identical to the one sent on 8 March 2007 (even bearing the same date) save for the first four lines which read: We confirm your instructions that you wish to increase your previous loan from Provident Capital from $700,000 to $825,000. The bank has not prepared new documentation but has decided to simply amend the old loan agreement by way of a Deed of Variation. 164Ms Voulgaris said that she recalled a conversation whilst she was in Mr Caramanlis' office as follows: Mr Caramanlis: Aren't you concerned about the amount of money you're putting into the gym? Ms Bortolin Papa: No no, I'm now a director of Luxury Enterprises so I have more control of the company. Ms Voulgaris: Yeah, it's better when women are in control. Ms Voulgaris said that she was able to recall this particular conversation because Mrs Bortolin Papa laughed about her comment. 165The resolution of the dispute as to what occurred in the course of Mrs Bortolin Papa's dealings with her solicitor presented considerable difficulties. There is no room for a finding that any of the four witnesses suffered from a failure of recollection or that they were mistaken in their recall such as might explain their diametrically divergent evidence. Rather, the question is whether I accept any of them as entirely truthful witnesses such that I can confidently find that others have told lies or whether I am able to regard any of the witnesses as more reliable than others in the evidence they gave about critical matters. While the way in which the witnesses gave their evidence has a legitimate bearing upon the approach to resolving disputed issues of credibility, I am conscious of the need, as far as is possible, to reason to a conclusion on the basis of contemporary materials, objectively established facts and the apparent logic of events ( Fox v Percy [2003] HCA 22; 214 CLR 118). 166While I accept that Mr Caramanlis and Ms Voulgaris generally answered questions in cross-examination responsively and that Mrs Bortolin Papa and her son were both on occasions unsure and easily confused, that was not invariably the case. In respect of some matters their evidence was unqualified and given with confidence. In particular, the questions I asked of each of them as to how the conference was configured and what appeared to me to be their immediate reconstruction of being seated next to each other was impressive. 167In addition, while it must be said that Mrs Bortolin Papa appeared to take refuge from time to time in her imperfect command of English rather than deal with some of the questions asked her - in particular the circumstances in which the loan documents were signed and her claim to have been ignorant of the amount she was borrowing - there were occasions where Mr Caramanlis appeared uncomfortable under close questioning. I did not find him an impressive witness, much less a persuasive witness, when he sought to explain why there were no file notes of either conference able to be produced and how he was able in those circumstances to detail the course of both conferences with such particularity. 168In considering the question of demeanour I am also conscious of the need to be careful against drawing any adverse conclusions where a witness is from a different cultural or ethnic background or drawing any favourable conclusions, for that matter, where a witness has a familiarity with courtroom protocols and the forensic process by reason of professional standing or experience (see Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187 at [28]-[31]). In the result, I am not greatly assisted in resolving the conflict in the evidence by my impressions as to the demeanour of any of the witnesses. 169The critical matters that I consider require resolution (at this stage limited to the issues that arise in the litigation between Provident and Mrs Bortolin Papa) are as follows: (a) Who was present during the course of the conference with the solicitor; (b) What, if anything, did Mrs Bortolin Papa nominate as the purpose in seeking the loan finance and did she sign the Borrower's Declaration aware of its legal effect; (c) What did she claim to be her understanding of the loan and its terms and what advice was she given. 170Whether Mr Caramanlis breached his duty of care by accepting her instructions to advise her about the loan given what is claimed to be the relationship with her son as a client is a separate matter which only falls to be determined in the context of the cross claim against him for damages. 171Before considering these matters I propose to return to consider the question raised earlier, namely whether I accept Mrs Bortolin Papa as a witness of truth when she claims not to have known that she was borrowing $700,000 from Provident in April 2007 and a further $125,000 the following year (or for that matter the term of the loan or the interest rate) until the recovery proceedings were instituted in September 2008. Self evidently, an adverse credit finding on those matters may impact on whether I can accept her as a witness of truth in respect of other aspects of her evidence. 172While I accept that she may not have appreciated that her son was arranging for her to borrow $700,000 for a five year term and at the nominated interest rate of 16.99% (reducing to 10.99% if interest payments were received by the due date) when she signed the loan application in blank on 31 January 2007, or when she signed the Income Declaration a week later, in all the circumstances and after giving appropriate weight to her evidence under cross-examination I find it impossible to accept that she remained unaware of these matters until the loan was in default and proceedings were instituted in September 2008. Despite her protestations to the contrary, I am satisfied that prior to executing the documents in her solicitor's office on 1 March 2007 (even if it was during the conference) she became aware of the extent of the monies she was borrowing and appreciated the extent of her son's obligations to make monthly repayments of $7800 for a five year term. I am also satisfied that because she accepted his assurance that his business could support borrowings of that order she simply gave no thought to the risk she may lose her house were the loan to fall into default. 173I have reached this view independent of Mr Caramanlis' evidence that he gave her specific advice concerning the amount of the loan and the terms by which she would be bound as borrower. I am satisfied that she knew how much she was borrowing and the amount of the monthly repayments largely because I regard it as inconceivable that a woman of her relatively modest means, a woman with years of experience as a Justice of the Peace and, in particular, a woman who had been exposed to the consequences of her first husband's poor financial management would not have insisted (at the very latest by the time she was taken to the solicitor's office to sign the formal loan documents) knowing the amount she was borrowing secured against her home before executing the loan documents, the more so since her home was her only asset. However indifferent her son was to the fact that in the event of default the financial loss would be borne by his mother (which, given his and his company's finances, he must have seen as a real and not remote possibility), and however calculated he was in preventing her from making an informed decision about whether she borrow such a large sum of money, I am simply unable to accept that she was prepared to enter into the loan agreements (and execute various loan documents in a solicitor's office) unaware as to whether she was borrowing $100,000, $500,000, $700,000 or some other amount. I am also satisfied that she would have been concerned to know the extent of the further borrowings her son needed twelve months later and would have insisted on being told of that amount for the same reason. I reject her evidence that she signed the various loan documents without at least having a general appreciation of what they contained even if she did not read them in detail. What I do accept, however, is that by the time of her conference with Mr Caramanlis she had effectively closed her mind to the risk of losing her home believing, wrongly as it turned out, that her son would not do anything to undermine the financial security she had worked hard to build and maintain over her working life. 174In the result, I am satisfied that she gave an untrue account in her evidence of the extent of her knowledge of the detail of the borrowings at the time of signing the loan documents in 2007 and 2008 - no doubt motivated by a desire to advance her cross claim against Provident having come to realise, only in retrospect, how foolish she had been to trust her son. 175It does not follow, however, that I must therefore find that she has given an untruthful account of her conference with Mr Caramanlis in other respects, in particular when she denied telling him she was investing in the gymnasium with her son, despite being invited by counsel for Provident and Mr Caramanlis to regard her false denials about these matters as also motivated by her desire to avoid her contractual obligations. They submitted (albeit for different reasons - Provident in seeking to meet the claim for relief under the Contracts Review Act and Mr Caramanlis in defence of the claim that he had breached his duty of care to her) that I would be satisfied that she did tell Mr Caramanlis (and Ms Voulgaris) that she was or would be an investor in the gymnasium business and that she had obtained an accountant's advice concerning her investment. Because both counsel accepted that was in fact untrue, it must follow that in connivance with her son she lied to them in order to ensure that there was no impediment to her son obtaining the loan from Provident and that she signed the Borrower's Declaration for the same reason in the knowledge that it was untrue. 176While her conduct in signing the loan application in blank at her son's insistence, and her failure to seek independent financial advice before exposing herself to financial ruin is illustrative of the extent to which she was prepared to assist her son, I am not prepared to find that she entered into a cleverly constructed conspiratorial arrangement with him designed both to deceive the lender into accepting that the loan was for a business purpose, and designed to deceive her own solicitor so that the legal advice he provided would be based on the same false premise. Neither Mrs Bortolin Papa nor her son struck me as capable of behaving with that level of sophistication in their dealings with Mr Caramanlis or Mr Hilellis or conducting themselves with that level of guile as witnesses in the proceedings. I may have been persuaded to a different view were there any contemporaneous records supporting the version of the conference contended for by Mr Caramanlis. I do not regard the Borrower's Declaration as a document falling into that category. I expressly reject Mr Caramanlis' evidence concerning the advice he claimed he gave her about that document. 177His evidence at the hearing concerning the Borrower's Declaration and his understanding of its legal effect was in direct conflict with the his pleaded position filed in the defence to the cross claim. In his evidence he claimed that in both March 2007 and 2008 he was of the belief that if Mrs Bortolin Papa was in fact on-lending the borrowed funds to her son that would have been a loan for a business purpose under the Code but, since her instructions were that it was for her own investment purposes, the issue did not arise. Incidentally, this was also the position that his counsel urged upon me as the proper construction of s 11 of the Code and which I regard as wrong for the reasons I have set out. 178In his filed defence to the cross claim Mr Caramanlis admitted that he failed to inform Mrs Bortolin Papa that the Declarations were incorrect (in effect as I read it because she did on-lend the funds as she claimed in her cross claim) but says that given her instructions the Declarations were correctly executed. 179In the course of final submissions I raised this for counsel's attention. Mr Curtin sought and obtained instructions that the defence to the cross claim was drafted in error. I regard the position as not satisfactorily resolved by the simple mechanism of asserting an erroneous pleading. I am not persuaded that Mr Caramanlis gave any or any adequate thought or attention to the legal effect of the Borrower's Declarations. 180In the absence of any contemporaneous record of what he claimed was discussed in conference concerning the purpose of the loan, and in the absence of any plausible explanation for there being not just one set of file notes that Mr Caramanlis claims to have prepared and lost, but two sets prepared a year apart, and having regard to the content of the letter of 8 March 2007 where the purpose of the loan was identified in terms at total variance with his evidence, I am not satisfied that he has given a truthful account of his dealings with Mrs Bortolin Papa. Since both Mr Caramanlis and Ms Voulgaris were largely reliant upon their memories in reconstructing what I was invited to regard as detailed oral advice (reproduced by Mr Caramanlis in his evidence in question and answer form and that Ms Voulgaris gave from a casually overheard conversation some three years before she was first asked to recall it) I am also unable to regard their evidence as corroborative or supportive of each other as to the matters discussed in conference such as might give their evidence greater probative weight when contrasted with Mrs Bortolin Papa's and her son's evidence. 181In summary, I regard both Mrs Bortolin Papa's evidence and that of her son unacceptable in some respects, equally as I have found Mr Caramanlis' evidence and that of his employee unacceptable in other respects. However, on the limited question of the adequacy of the legal advice she received before entering into the loan agreements for the purpose of relief under the Contracts Review Act , I am not persuaded that she was given no advice at all (which is the effect of her evidence and that of her son's) or that she was simply directed by Mr Caramanlis to sign the loan documents without advising her in general terms about the legal character and legal effect of the documents that she was signing. Beyond that and because of the concerns I have about the credibility of each of the witnesses, in particular Mr Caramanlis' account of the course of the conference and the statements he attributed to Mrs Bortolin Papa, I am unable to come to any final view about the precise content of the advice that was given. 182To the extent that there is a need to determine whether Mrs Bortolin Papa's cross claim against her solicitor is made out, the fact that I am unable to come to any settled view as to the content of the legal advice she was given leaves exposed the question whether she has discharged the onus of proving a breach of duty to ground the claim against her solicitor for damages.

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The Contracts Review Act 183The relevant provisions of the Contracts Review Act 1980 are: 7(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19. 184Section 4(1) provides a non-exhaustive definition of "unjust": Unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding manner. 185Assistance in ascertaining the intended content of the concept of "unjust" is derived from s 9: 9(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. 186In Kowalczuk v Accom Finance Campbell JA, with whom Hodgson and McColl JJA agreed, summarised the principles concerning relief under the Contracts Review Act : [85] Comparatively early in the life of the Contracts Review Act , McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 recognised, at 621, that the Act "... is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with " unjust " contracts." [86] McHugh JA recognised, at 620, that a contract can be unjust "because of the way it operates in relation to the claimant or because of the way in which it was made or both." He recognised that a contract could be unjust because it contained "substantive injustice" - which arises "because its terms, consequences or effects are unjust" , or because of "procedural injustice" - which arises "because of the unfairness of the methods used to make it" - or both. He recognised, at 621, that a contract can be "unjust" even if it is not unconscionable, harsh or oppressive. Notwithstanding the traditional view that equity took about circumstances in which it would hold that enforcement of a contract was unconscionable, a contract may be unjust even though the circumstances that give rise to that injustice are not known to the other party: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 277; Nguyen v Taylor (1992) 27 NSWLR 48 at 71 per Sheller JA; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [94]-[96]. [87] In applying the Contracts Review Act , two distinct steps are involved. As stated by Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51]: "... The first is whether the contract was unjust in the circumstances in which it was made, having regard to the factors referred to in s 9. This is a conclusion of fact, albeit one of ultimate fact involving a broadly based value judgment [ Antonovic v Volker (1986) 7 NSWLR 151, 154-155 (Samuels JA, Kirby P agreeing); Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 270E (Samuels JA); Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41, [34]-[40] (Spigelman CJ), [106]-[111] (Basten JA)]. The second, which arises only if the first is resolved in the affirmative, is whether any and if so what relief should be granted; this involves the exercise of a judicial discretion [ Khoshaba , [34]-[36] (Spigelman CJ), [109] (Basten JA)]." [88] Thus, if the contract is found unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy that injustice. 187When considering the question of unjustness, it is necessary to have regard to the public interest (s 9(1) of the Contracts Review Act ). No detailed submissions were directed to how considerations of public interest were engaged in the present proceedings. I do however take into account the strong public interest in holding parties to their contracts when they were freely entered into, however ill-advised the transaction might be in retrospect and that the Contracts Review Act is not designed to regulate investments or to save individuals from the consequence of poor investment decisions. I also give weight to the public interest in promoting market integrity in the provision of credit accepting that a readiness on the part of courts to dispense with the otherwise binding conditions of loan agreements, and to relieve contracting parties of their obligations under such agreements, undermines the capacity of the market to offer credit thereby compromising economic liberty and the free flow of commerce Smith v Elders Rural Finance Ltd (NSWSC, Bryson J, 25 November 1994, at 48). On the other hand, there is also a public interest in ensuring the proper protection of consumers of credit and ensuring that lenders both appreciate and are appropriately vigilant to guard against the risk that commercially nave or disadvantaged borrowers do not assume levels of debt they cannot service in reliance upon unscrupulous brokers who are motivated by self interest. 188A side from the bank statements from Bendigo Bank which revealed a demonstrated capacity for Mrs Bortolin Papa to make monthly interest repayments of approximately $1400-$1500 Provident had no information, and made no inquiries, as to her capacity to make monthly repayments of more than four times that amount. In particular, they made no inquiries at all to ascertain the income generated by the retail business selling children's clothes she operated from her home or from any other source and no inquiries as to the capacity of the gymnasium business to generate income. While I do not mean to suggest that Provident had an obligation to inquire into the viability of the gymnasium business to provide the income to service the loan, it is their failure to make any inquiries at all of the issue of serviceability that is critical. In these circumstances, it is impossible to come to any other conclusion but that Provident was indifferent to Mrs Bortolin Papa's ability to fulfil her obligations under the loan agreements and that its principal concern was whether there was adequate security available in the event of default. 189As Hoeben J observed in Fast Fix Loans Pty Ltd v Samarzic [2011] NSWSC 19 asset lending also raises public interest considerations. His Honour then said: [80] The current position under the CRA in relation to asset lending was summarised by Campbell JA in Kowalczuk as follows: "96 It can be accepted that pure asset lending - described by Basten JA in Khoshaba at [128] as being "to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default" - is in at least some circumstances unjust within the meaning of the Contracts Review Act, or unconscionable: Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 at [57]-[59], [79] per Beazley JA (with whom Santow JA and MW Campbell AJA agreed); Khoshaba at [92] per Spigelman CJ (with whom Handley JA agreed on this point), [128] per Basten JA. However whether lending on the basis that the loan can adequately be repaid from the security, is in the circumstances of any particular case unconscionable or unjust, depends on other matters as well. Thus, in Elkofairi the facts that neither the applicant nor her husband had any income, the loan in question was for five years, and the security was over the applicant's only asset (involving the proposition that the applicant had no other resources from which to service the loan) and that the secured property was the applicant's home, were all relevant matters in reaching the conclusion that the transaction was both unconscionable and unjust. In Khoshaba , other factors relevant to the conclusion of injustice were that the applicants were a husband and wife, one of whom earned $43,000 pa and the other of whom was a pensioner, the lender had no information at all about the purpose for which the loan was being sought, and the security was over their home." [81] Campbell JA, however, qualified that approach: "99 I would accept that in some circumstances knowledge of a high degree of risk that there might be a default in payment of interest or principal so that a mortgagee sale would result, could be unjust lending, even though it could not be said that the lender knows that there will be default. However I do not accept that a lender is always bound to carry out a detailed investigation of the practicality of an intending borrower actually being able to carry through the plan the borrower says he or she has for repayment of the loan. In the present case, Kowalczuk stated to Accom that he proposed to pay the Berowra loan out through bank refinance, and the Haberfield loan through refinancing with FirstLoan (the same brokers through whom Kowalczuk was able successfully to refinance the Berowra loan) and there was no occasion for Accom to doubt that he would be able to do so. Thus, even if Mr Conti is right in saying that there can be pure asset lending if the lender knew that there was a high risk that the intended means of repayment might fail, in the present case Accom did not have knowledge of that type." 190Hoeben J went on to observe in Fast Fix Loans that the fact that a lender (Provident in this case) made only the most cursory inquiries of Mrs Bortolin Papa's actual financial circumstances, and no assessment at all of her capacity to service the loans, ought not put it in a better position than a lender who makes these inquires and who becomes aware in that process that the borrower has a very limited (or even no capacity) to repay the loan. Had Provident spoken to Mrs Bortolin Papa directly, or insisted that further inquiries be made of her accountant to confirm the underlying purpose of the loan application and her capacity to meet the loan repayments, it would have learnt that the borrowing was for a highly speculative business endeavour of her son, the details of which she was utterly unaware and in which she had no interest or involvement of any kind. 191While Provident's conduct and knowledge is of importance in determining the application of the Contracts Review Act , it is not the only consideration. In Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41 at [76] Spigelman CJ said: Plainly, the conduct, whether by act or omission, of the party resisting a finding of unjustness under the Act is highly relevant, and will often be determinative. However, the scope of relevant circumstances is not confined to what the person resisting an order under s7(1) did or did not do and knew or ought to have known. The critical phrase in s7(1) - "the circumstances relating to the contract at the time it was made"- cannot be so limited. Section 9(1) provides that when determining unjustness "the Court shall have regard to the public interest and to all the circumstances of the case". Furthermore, s9(2)(l) includes, as I have noted, amongst the relevant circumstances "the commercial or other setting, purpose and effect of the contract". 192The Chief Justice also observed at [119] that the power to grant relief under the Contracts Review Act may be engaged in circumstances where the unjustness of a contract is shown to be as a result of factors of which the lender was ignorant. That is of particular significance in this case where despite the attribution of CMC's knowledge of Peter Bortolin's affairs to Provident at the time of contract, and despite the suggestion in Mr Walker's dealings with Peter Bortolin that Provident was aware he was the de facto borrower, it had no direct knowledge that Peter Bortolin had exercised extremely poor business judgment in using his mother's home to finance the acquisition of a struggling gymnasium business at very significant cost. Again, this was because it made no inquiries of a kind as would have revealed the highly speculative nature of the investment as evidenced by the total collapse of that business with substantial accumulated debt within the space of less than two years of the original advance and within months of the further advance. 193An examination of the s 9(2) considerations reinforces my conclusion as to the unjustness of the loan agreeemnts.

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(f) The relative economic circumstances, educational background and literacy of the parties to the contract 194Although Mrs Bortolin Papa was only schooled to age 15 after emigrating to Australia at age 7, I am satisfied that she had a sound working command of English which equipped her to operate a modestly successful retail outlet over many years and to discharge her responsibilties as a Justice of the Peace with the necessary skill and ability. There is no suggestion that she was other than conscientious in dealing with the affairs of others in her official capacity. However, I do not regard her business as a retailer of children's clothing as providing her with any sophisticated knowledge of commercial matters. The evidence also established that although she has had personal experience with financial transactions, both in her marriage and in the Port Douglas transaction, the latter within a short time of contracting with Provident, she deferred to her husband and then her son to negotiate and settle the contractual terms of the loans and mortgages. This does not, however, disqualify her from having the capacity to exercise a level of judgment commensurate with the need for her to take responsibility for her own financial affairs in her dealings with prospective lenders. I do not regard her age as a disqualifying factor. 195I do accept, however, that she was subordinate to both her husband in the management of their matrimonial financial affairs during the course of the marriage and then subordinate to her son because of her dependence on him after her second husband died. It is clear beyond question that her son's determination to put his own needs above those of his mother, and to apply both subtle emotional pressure and at times overt pressure on a "do not ask me any questions - trust me I am your son" basis to achieve his own selfish ends was the only reason she entered into the loan agreements with Provident. 196It is equally clear that she gained no finanacial or other material benefit under the loan agreements. Self evidently, were I to have found that she deliberately used unfair tactics to mislead CMC, Provident and her own lawyer into a mistaken belief that she was involved in her son's business in order to secure the loan finance, her claim to have contracted under a material disadvantage would fail. I am however satisfied to the contrary. She was, in a practical sense, a silent and compliant dupe. 197The question is whether the combination of these circumstances render it unjust to enforce her contractual obligations against her with the inevitable loss of her home and retail outlet were she bound by them. In Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 at 491, Handley JA said: "... a contract is not unjust merely because it is not in someone's interest to enter into it, or because a person is unable to pay the debt when called upon to do so, or because its enforcement will lead to the loss of a home." 198Tong was referred to with approval by Basten JA in Khoshaba at [128] where his Honour said with respect to the question of the public policy that while there is a public interest in treating pure asset lending as unjust, when the asset in question is the borrower's sole residential property something more is required than that the borrower has been "foolish, gullible or greedy" before the contract, or part of it, will be set aside. In this case, in addition to Mrs Bortolin Papa's foolishness and gullibility, the involvement of Mr Hilellis and the steps he took to ensure the loan was processed in effect without reference to her are factors which support a finding that she was in an unequal bargaining position and not able in the particular circumstances to protect own interests.

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(i) The extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect 201Although Mrs Bortolin Papa understood her legal obligations under the loan agreements, she did not seek independent financial advice about her son's capacity (or his company's) to make successive and substantial monthly interest repayments or to repay the loan of $825,000 in full at the expiration of five years. In signing the loan documents she relied entirely upon the trust and affection for her son and did not appreciate the extent of the risk she was taking as a borrower of very substantial funds which she committed entirely into her son's hands. I am satisfied that the extent of her knowledge of her son's need for finance was limited to her unquestioning acceptance that he wanted to improve the prospects of a viable gymnasium business which could generate a net monthly income of at least $7800 to enable the interest repayments to be made while the business developed. Clearly enough she had no appreciation of the actual lack of commerciality in the arrangement since Luxury Enterprises' capacity to pay off the loan was wholly contingent upon a gymnasium business (formerly under adminstration) being successful enough in the short term to carry the debt and to generally improve its capital worth to ensure a sale or refinance at the expiration of five years. 202In addition, while I accept that Mr Caramanlis explained in general terms the nature and effect of the loan agreement and the mortgage, and while I am satisfied she understood the amount of the interest repayments and that Provident could sell her house if the loan was not repaid, because I am persauded that Mr Caramanlis allowed Peter Bortolin to be present during the course of the conference when the loan documents were executed and advice given about them (such as it was), I consider that on the probabilities the standard of independent legal advice fell short of what was warranted in the circumstances. In particular, Mr Caramanlis failed to ensure that she take pause and reflect upon the extent to which entering into the loan agreements at her son's insistence, and on interest only terms, exposed her to the real risk of losing her home and her only asset. By contrast, Provident was an experienced lender which sought and obtained legal advice and the provision of legal services essential to achieve its commercial objectives. I am satisfied that there was material inequality in bargaining power between Mrs Bortolin Papa and Provident for these reasons.

[22]

(j) Whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under the Act 203Although I am not prepared to find that the Mrs Bortolin Papa was subject to undue influence by her son, as that term is understood under the general law, she was certainly exposed to pressure from him at various stages in the precontractual period. The fact that he deliberately kept vital information from her is indicative of the extent of his manipulation of her, a strategy which Mr Hilellis employed on her son's behalf and apparently approved of. On the other hand, it was her trust and dependence on her son which totally overwhelmed her judgment. 204For the reasons set out in detail above, I have concluded that the loan agreements were unjust at the time they were entered into, in the sense in which that term is used in s7(1) of the Contracts Review Act . 205This does not end the matter. I must come to the positive view that relief should be provided to Mrs Bortolin Papa under the Contracts Review Act and the nature of that relief. 206While, as I have sought to emphasise, it is true that Provident did not have actual knowledge of Mrs Bortolin Papa's financial circumstances or that the borrowed funds were to be committed to a business venture in which she had no interest and over which she exercised no control, that was not because it was misled by her in some way. It was because it made no inquiry as to why a 61 year old retailer of children's clothing would choose to invest her only asset and her home in a gymansium. I am satisfied that it made no inquiry because it was not concerned about her ability to meet her obligations under the loan agreement should there be default by the company because it had the Leichhardt property as security. 207In the circumstances of this case as between Provident and Mrs Bortolin Papa, it is appropriate that the loss of the monies advanced pursuant to the loan agreement should be borne by Provident and not by Mrs Bortolin Papa, save to the extent of her admitted benefit in the discharge of the loan to Bendigo Bank. 208I have concluded that Mrs Bortolin Papa is entitled to relief under the Contracts Review Act . The balancing of her position against that of Provident by reference to the criteria set out in s 9 of the Act favours a finding in her favour. When Provident entered into the loan agreements there was already a body of case law which identified the dangers for lenders where monies are advanced without regard to the ability of those who put forward security to meet what are often onerous repayment obligations. The strict serviceability requirements and the importance given to the issue in Provident's own Credit Manual was in this case either ignored or treated by Mr O'Sullivan as a consideration he was at liberty to dispense with. 209Having determined that the plaintiff is entitled to relief under the Contracts Review Act it is only necessary to refer briefly to the alternate case for relief under the Australian Securities Investment Commission Act. 210The applicable authorities identify the matters which need to be established if an unconscionable transaction is to be set aside. In this case that would necessitate Mrs Bortolin Papa discharging the burden of establishing that she was under a relevant disability (whether that be weakness, ignorance or necessity) such that she was unable to assess for herself whether to enter into the impugned transaction. It would also require her to establish that Provident was aware of that fact and that it was unfair or unconscientious for them to have executed the loan agreements (and to seek to enforce them). I am not persuaded that in making or varying the loan Provident unconscientiously took advantage of Mrs Bortolin Papa much less that she was acting under any relevant disability. For that reason her claim for relief under the Act is rejected (see generally Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and in particular the analysis of McDougall J in Perpetual Trustees Victoria Ltd v Longobardi [2009] NSWSC 654).

[23]

The cross claim against Mr Caramanlis 211In final submissions counsel for Mrs Bortolin Papa advised that he was abandoning that part of the cross claim that alleged a breach of duty by Mr Caramanlis' failure to provide financial advice before she entered into the loan agreements. With that concession both parties addressed the question of breach of duty referable to whether he provided her with adequate or appropriate legal advice concerning her legal obligations under the loan agreements and/or whether, given what is said to be his knowledge of various financial matters relating to the viability of the gymnasium business operated by her son, he should have informed her of those matters or advised her to obtain independent financial advice or ceased to act for her altogether. 212In the context of the adequacy of the provision of legal advice, a related question was whether, in the event that I was satisfied that Mrs Bortolin Papa did not in fact represent she was an investor in her son's gymnasium business and that the true position was that at all times her solicitor was of the understanding that she was borrowing the money to give to her son for him to invest or commit to that business, Mr Caramanlis failed to advise her that the Borrower's Declaration could not be executed by her as a true declaration. 213At paragraph [179] above, and for the reasons there set out, I found myself unable to come to any settled view about the adequacy of the legal advice Mrs Bortolin Papa was given in conference with her solicitor in either March 2007 or March 2008. For that reason, and despite the fact that I rejected Mr Caramanlis' evidence concerning the advice he gave in regards to the Borrower's Declaration, largely because I was not persuaded that he was being truthful as to his own understanding of the legal effect of the Declarations at the time they were executed, Mrs Bortolin Papa has not discharged the onus of establishing that such advice as he did provide her fell so far short of the standard of care required of a solicitor retained to act on a mortgage as to constitute a breach of the solicitor's duty of care in this case. 214After considering Peter Bortolin's evidence concerning the extent of his dealings with Mr Caramanlis before advising his mother on the loan agreements (including the circumstances in which he claimed that his mother was introduced as a client) and again despite some misgivings as to whether Mr Caramanlis has been entirely truthful in claiming he knew nothing at all of the financial circumstances of the gymnasium business at any relevant time, I am not persuaded that Mrs Bortolin Papa's claim for damages based on breach in this context has been made out. As I have been at pains to make clear, Peter Bortolin is not only a person who has been prepared to lie to his mother to advance his own interests at the expense of his mother but he is also a person whose credibility generally is in question. While there was every indication in the evidence of a relationship between Mr Caramanlis and Peter Bortolin of solicitor and client which would have imposed obligations on Mr Caramanlis when dealing with Peter Bortolin's mother of the kind of which she complains, the true extent of that relationship was not proved to the extent necessary to constitute a breach of duty. 215Even assuming breach, Mrs Bortolin Papa failed to discharge the onus of proving facts, either directly or by inference, upon which a finding of causation could be made in her favour such as to ground a claim in damages. For that reason alone her cross claim against the solicitor would fail.

Parties

Applicant/Plaintiff:

Provident Capital Ltd

Respondent/Defendant:

Bortolin Papa

Legislation Cited (1)

Australian Securities and Investments Commission Act 2001(Cth)

Cases Cited (25)

The pleadings 1By statement of claim dated 3 October 2008, Provident Capital Ltd ("Provident") brings proceedings for an order for possession of a property in Leichhardt in which the defendant, Mrs Bortolin Papa, currently resides and from which she operates a modest business selling children's clothes. The statement of claim also seeks judgment in the amount of $841,257.56 plus costs. Of that sum $700,000 was advanced under a loan agreement dated 5 April 2007 ("the April loan agreement") and $125,000 advanced under a variation and extension to that loan agreement dated 3 April 2008 ("the loan variation agreement"), each of which was secured by a first mortgage over the Leichhardt property. The balance represents interest calculated at the penalty rate of 16.99% fixed under the April loan agreement and calculated from the date of default to the commencement of proceedings. As at 25 January 2011 the total amount claimed was $1,455,743. 2Mrs Bortolin Papa filed a defence and cross claim. By way of defence she contends that Provident was not entitled to commence the proceedings because the credit advanced under the loan agreements was for personal purposes, namely to give to her son for his gymnasium business, and therefore regulated by the Consumer Credit (New South Wales) Code ("the Code"). Section 80 of the Code provides that default notices must be issued before recovery proceedings are commenced. It was common ground that Provident did not issue default notices before commencing the proceedings. 3By way of cross claim she contends that the loan agreements (and the mortgage) are unjust contracts within the meaning of s 7 of the Contracts Review Act 1980, or in the alternative, that Provident's conduct as lender was unconscionable within the meaning of s 12CA-CC of the Australian Securities and Investments Commission Act 2001 (Cth). In either event, the relief sought is to be relieved of her contractual obligations other than in relation to an amount of $180,000 which was committed on settlement of the April 2007 advance to the discharge of an existing mortgage to Bendigo Bank and that upon payment of that amount Provident be ordered to provide an executed discharge of mortgage. She also submitted that interest should be calculated under the Supreme Court Rules and not under the loan agreement. 4The cross claim against Provident particularises a number of circumstances which, collectively, are said to satisfy the test of unfairness in s 9 of the Contracts Review Act . They include her age, what is said to be her imperfect study of English and her limited education and commercial experience. It is also said that because of Provident's relationship with Community Mortgage Corporation Pty Ltd, a company through whom the finance was arranged under the terms of an Introducer Agreement, it should be taken to have known that the loans were for her son's gymnasium business, a business which was in dire financial stress and in which she had no interest or involvement and that she was otherwise not capable of servicing the loan. She also submitted that the loan was advanced in breach of Provident's lending policy. 5Mrs Bortolin Papa also contends that Provident conducted itself as an asset lender in its dealings with her being indifferent to her capacity to service the loan but satisfied that the security in the form of the Leichhardt property was adequate to ensure recovery of the monies advanced in the event of default. She submitted that also provides grounds for setting the contracts aside under the Contracts Review Act . 6Provident maintained an entitlement to bring the proceedings unregulated by the Code. It relied upon a document entitled "Borrower's Declaration as to Purpose" ("the Borrower's Declaration") which Mrs Bortolin Papa was required to execute as a precondition to contracting with her in both April 2007 and April 2008. Provident contends that by signing the Borrower's Declarations she represented that the credit was to be applied predominantly for business or investment purposes thereby affording it the benefit of the conclusive presumption under s 11(2) of the Code which displaces the regime under the Code for the regulation of consumer credit contracts. 7In so far as the cross claim is concerned Provident contended that no case for relief under the Contracts Review Act or the Australian Securities and Investments Commission Act had been made out. It submitted that the loans were approved in strict conformity with its corporate policy and that it was entitled to rely on its security in the circumstances of default. Provident denied having any knowledge that the loan funds were on-lent or provided by way of a gift to Mrs Bortolin Papa's son and submitted that to the extent that CMC had knowledge that this was the case it should not be imputed with that knowledge since CMC was not its agent under the Introducer Agreement and agency should not be inferred as a matter of law. 8Mrs Bortolin Papa filed a second cross claim against her solicitor, Mr Caramanlis (trading as Daniels Lawyers), for breach of contract or breach of the duty of care he owed to her, in each case constituted by his failure to advise her in relation to the loan agreements and her obligations as borrower under those agreements, and by his failure to advise her as to the legal effect of the Borrower's Declarations before she executed them. The Borrower's Declaration was one of the loan documents forwarded to Mr Caramanlis by Provident's solicitors at the time of the original advance in April 2007 and again in April 2008 when the deed of variation was entered into. 9Mrs Bortolin Papa also contends that Mr Caramanlis acted in breach of his duty of care by accepting her instructions to provide legal advice on the loan documents when he should have refused to act by reason of a conflict of interest (or by continuing to act when that conflict became manifest) and/or by failing to advise her to seek independent legal advice before she executed the loan documents. The conflict of interest was said to arise from the fact that he had acted for Mrs Bortolin Papa's son, Peter Bortolin, (or Luxury Enterprises Pty Ltd, a company he controlled) and was aware of the parlous state of his (or its) finances as operators of a gymnasium business; that he knew that either Peter Bortolin or his company was the intended recipient of the loan monies and that the monthly instalments of interest would be paid by him (or the company) from the business without recourse to his mother. 10Accepting that a failure to comply with s 80 of the Code does not necessarily invalidate the proceedings or render them a nullity, and proceeding on the working assumption that I have the power to authorise the plaintiff nunc pro tunc to bring the proceedings, and that I would exercise that power in the plaintiff's favour in this case (see the discussion in Bank of Queensland Ltd v Dutta [2010] NSWSC 574 at [154] - [159] and Mango Media Pty Ltd v Comitogianni [2011] NSWSC 152 at [202]), for all practical purposes the litigation involving Provident and Mrs Bortolin Papa will be resolved according to whether she has discharged the onus of establishing that the circumstances relating to the loan agreements, at the time they were entered into, render them unjust thereby entitling her to seek relief under the Contracts Review Act , or whether she has established unconscionability on Provident's part under the Australian Securities and Investments Commission Act . Viewed in this way, if the loan agreements (or either of them) are found to be unjust, and the discretion as to whether to grant relief is exercised in Mrs Bortolin Papa's favour in accordance with the two staged approach to relief mandated by Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343, (or unconscionability is established), then the recovery proceedings brought by Provident will fail, irrespective of the procedural considerations that arise were I satisfied that the loans are regulated by the Code. 11I have already noted that Mrs Bortolin Papa acknowledges her obligation to repay Provident the $180,000 committed to discharge the existing mortgage to Bendigo Bank at the time of the settlement of the April 2007 loan. If the dispute between Provident and Mrs Bortolin Papa is otherwise resolved in her favour, it was the agreed position that her cross claim for damages against her solicitor should be dismissed. 12That does not mean, however, that when considering her claim for relief against Provident under the Contracts Review Act that the evidence she relies upon in bringing the cross claim against her solicitor, and his evidence in meeting that claim, is irrelevant. To the contrary. The circumstances that existed at the time the loan agreements were entered into involved both Provident as lender and Mr Caramanlis as the solicitor who had the obligation of advising her as to legal obligations under the loan agreements. Mrs Bortolin Papa's actual purpose in seeking finance, namely to enable her son to invest in his gymnasium business (whether that was what she told her solicitor or whether it was something he knew from other sources, or whether she told him something quite different), and the quality of the legal advice she was given before executing the loan documents, have a bearing on the question of unjustness under the Contracts Review Act . 13In meeting the claim that the contracts should be set aside as unjust Provident relied on what it submitted was the sound and comprehensive independent legal advice Mrs Bortolin Papa received as borrower and what she is alleged to have told her solicitor (and others) as to her interest in her son's business. 14For this reason alone, resolving the stark conflict between Mr Caramanlis' evidence and that of his paralegal, Ms Voulgaris, on the one hand and Mrs Bortolin Papa and her son on the other, both as to what she represented to them was her purpose in seeking loan funds and the nature of the advice she was given concerning the loan agreements, cannot be avoided. Even if that conflict is resolved in Mrs Bortolin Papa's favour, it will not be determinative of the success of her cross claim against Provident given the range of issues that must be considered in determining whether relief under the Contracts Review Act should be granted. 15In the event that her cross claim against Provident fails, resolving the conflict concerning the adequacy of the legal advice she was given is essential to the disposition of her cross claim for damages against her solicitor. It was conceded by Mr Curtin SC, counsel for Mr Caramanlis, that were I satisfied that Mrs Bortolin Papa was not given any, or any adequate legal advice before she entered into the loan agreements, breach of duty of care would be made out. The question then arises as to whether she has discharged the onus of establishing that the breach of duty was causative of any loss. It was submitted by Mr Curtin that the weight of the evidence compels a finding that because she was motivated by an overwhelming desire to assist her son in the belief that he would not put her only asset at risk, she would have borrowed against the Leichhardt property irrespective of the detail or quality of the legal advice she received prior to contract.

[2000] VSC 166

[1999] SASC 265

(1991) 23 NSWLR 256

(1997) 41 NSWLR 482

(1986) 160 CLR 226

(1986) 5 NSWLR 610

(1992) 27 NSWLR 48

(1986) 7 NSWLR 151

(1983) 151 CLR 447

[2003] HCA 22

[2006] NSWCA 187

[2008] NSWSC 775