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[2000] FCA 835
Federal Court of Australia
2000-06-21
Spender J
Original judgment source is linked above.
The Applicant's case in Negligence against Mr Sapuppo 74 The primary case of the applicant against Mr Sapuppo is that there was no meeting on 12 January 1993, nor any discussion concerning the mortgage documents between the applicant and Mr Sapuppo, and that the documents were not signed in his office on that day. She claims that the meeting simply did not happen, and that the statutory declaration deposes to events that did not occur. It is pleaded in the alternative that if Mr Sapuppo did give advice, he did so negligently. The particulars alleged in the statement of claim are: "(a) Failing to advise the Applicant that the documents she was executing constituted a mortgage over the property. (b) Failing to advise the Applicant that the documents she was executing secured an advance of $352,291.00; (c) Failing to advise the Applicant that if Andrew Rouyanian defaulted with respect to the advance, the property could be sold by the First Respondent. 75 In McNamara v Commonwealth Trading Bank (1984) 37 SASR 232, King CJ spoke of the duty of solicitor to a client who consults the solicitor for advice about signing a guarantee. His Honour's observations are apposite in circumstances such as the present. King CJ said at 241: "The solicitor should raise with client questions relating to the prudence of entering into the guarantee and should ascertain whether the client wishes to be advised as to such questions. The client may, of course, indicate that he does not wish advice as to those matters and that he is prepared to rely upon his own judgment. But unless the client so instructs the solicitor, the instructions from the client should be regarded as extending to advice on all matters relating to the guarantee, including the wisdom of entering into it from a practical point of view. The state of the financial affairs of the principal debtor should be discussed as well as the extent of the assets of the client. A client whose assets are few and who will be putting the whole of his assets, perhaps including his home, at risk obviously needs careful and perhaps quite forthright advice. The need is even greater when, as so often is the case, the affairs of the principal debtor are precarious. Solicitors undertaking to advise clients in relation to guarantees would do well to study the cases as to the type of independent advice which is required to rebut a presumption of undue influence." See also the very helpful judgment of Perry J in Citibank Savings Ltd v Nicholson (1997) 70 SASR 206, and Lenders and Independent Solicitors' Certificates for Guarantors and Borrowers: Risk Minimisation or Loss Sharing?, 24 Australian Business Law Review 5. 76 Counsel for the applicant here put to Mr Sapuppo: "You never, I suggest, saw Mrs Ribchenkov and gave her any advice on 12 January or at any other time?" To which he replied: "I have already said and sworn that I have, and I did." 77 I accept the evidence of Mr Sapuppo that there was a meeting in his office with the applicant on 12 January 1993, and that Mr Pridannikoff was present as interpreter. I also think it likely that the applicant was accompanied by her daughter, Mrs Rouyanian. The evidence of Mr Sapuppo makes it plain that he has no clear recollection of anything that transpired at that conference. The diary note, which clearly misunderstands the nature of the transaction, was prepared in all likelihood subsequent to the meeting, or at least most of it was prepared subsequent to the meeting. The diary note records Mr Sapuppo: "Perusing mortgage docs for her to sign (as co-mortgagor)". It notes: "She is giving mortgage over her own home as collateral security for loan to Rouyanian." 78 There is no suggestion there that the applicant is a co-borrower, and the diary note further records that the Rouyanians were transferring a one-twelfth share in their own home to her. In fact, it was Mr Rouyanian who was transferring two-tenths of his interest to his then mother-in-law. The diary note makes no reference to the amount of the loan, nor does the statutory declaration, which is dated 11 January 1993 but which I accept was executed by Mr Sapuppo on 12January 1993. It was witnessed by Janice O'Connell, who was (as noted previously) an employee in Mr Rouyanian's office. Whether the document was signed and witnessed at Mr Rouyanian's office or at Mr Sapuppo's office, I am unable conclusively to determine. It seems probable that the certificate, which was prepared by Mr Rouyanian, was prepared in advance of the meeting of 12 January 1993. Mr Sapuppo has no specific recollection of the meeting, save that it occurred. He cannot say how long it took, although he says from his normal practice it would be about one half hour. We do not know whether it occurred in the morning or in the afternoon. Mr Sapuppo did not open a file in respect of the matter, and rendered no fee to anyone - both Mr Rouyanian and Mr Sapuppo saying that on matters of this kind they helped each other out without charge from time to time. Mr Sapuppo says he has no specific recollection of what was said, when and how, other than: "I know I explained the terms of the document. That was the whole purpose and that is what I do normally". 79 Notwithstanding the terms of the statutory declaration by Mr Sapuppo, Mr Pridannikoff did not translate the documents to the applicant. The evidence of Mr Sapuppo makes it plain that he did not then, or even at the trial, appreciate the gravity of his task. In his affidavit he says that neither the Buranda mortgage nor the Greenslopes mortgage identified any terms or conditions of the loan, namely the amount, the term, the interest rate payable, the date of payment of instalments, the amount of instalments, the consequences of any default by the mortgagors, or any other terms. 80 In addition, Mr Sapuppo's affidavit says: "The mortgage documents did not identify the amount secured. Neither the Applicant, Andrew Rouyanian, Ludmila Rouyanian or anyone else ever informed me of the amount of the loan borrowed pursuant to the bills of mortgage" 81 He notes in his affidavit that the Acknowledgment executed by the applicant refers to the applicant as a co-borrower and that the amount of the advance was $352,291, in consideration of the transfer to the applicant of two-tenths of the son-in-law's interest in the property at 43 Nicholson Street Greenslopes. He says he no longer remembers signing that document, but importantly, the affidavit makes no claim that the contents of that document were explained to the applicant. What Mr Sapuppo says he explained to the applicant through the interpreter was: "(i) that both bills of mortgage were security documents provided to secure loan moneys in favour of the Bank over the properties situated at: s 21 Maynard Street, Buranda s 43 Nicholson Street, Greenslopes (ii) that the Applicant by herself, together with her daughter, Ludmila Rouyanian, and her son-in-law, Andrew Rouyanian, were each co-borrowers and mortgagors under the bills of mortgage; and (iii) that if the moneys which will become due to Metway are not paid when due and payable under the terms of the loan, whatever the terms, that the Bank will be entitled to enforce the security and recover pursuant to the mortgage whatever monies are due to the Bank. 82 I am satisfied that whatever discussions Mr Sapuppo had with the applicant did not include any explanation beyond that in those three items mentioned in the affidavit. The amount of the loan and the extent of the risk to which the applicant was exposed were never the subject of instruction or advice by Mr Sapuppo. My clear impression is that the explanations given to the applicant were of the most perfunctory kind. It was apparent that Mr Sapuppo himself did not understand the "all moneys" clause in the mortgages, and it follows that there was no mention to the applicant of the possibility of an expansion of her liability by the making of further advances. 83 I am satisfied that the advice which Mr Sapuppo did give fell considerably short of discharging his duty to the applicant. I am satisfied that the exposure of the applicant pursuant to the documentation which was to be the subject of advice was never mentioned to her. I am further satisfied, that had she been advised concerning the amount secured by her documents, which was $352,000, then she would not have agreed. I am of the opinion that the applicant then believed that she was affording assistance and that her level of exposure was in the order of $20,000, which had been the subject of conversation by Mr and Mrs Rouyanian with her in relation to what might happen if there was default on the loans. 84 I am satisfied that Mr Sapuppo was in breach of the duty which he owed both to the applicant and to the Bank. I reject, however, the allegation of deliberate fraud on the part of Mr Sapuppo. There is not the slightest basis of any motive for Mr Sapuppo to perpetrate a deliberate fraud, nor any evidence of pecuniary or other gain that he might have hoped to achieve. Curiously, the deficiencies in the diary note support the conclusion that there was a meeting such as that to which Mr Sapuppo deposes, but that the advice and explanations offered to the applicant fell woefully short of an adequate discharge of the duty that Mr Sapuppo owed to her. I am not satisfied that there was any fraud or dishonesty within the meaning of the exclusion clause under Mr Sapuppo's policy for professional indemnity insurance. 85 I am satisfied that the Bank did rely, in advancing the funds, on the contents of Mr Sapuppo's statutory declaration. I am satisfied that the amount the applicant is obliged to pay pursuant to the cross claim by the Bank against her is a consequence of the negligence of Mr Sapuppo, constituted by his inadequate advice to the applicant and, in particular, his failure to advise her of the extent of her exposure pursuant to the documents he witnessed. That liability of Mr Sapuppo to the applicant, in my view, was not brought about by the dishonest or fraudulent act or omission of Mr Sapuppo, with the consequence that the exclusion clause relied on by APPIL does not apply. 86 As to the quantum of judgment in respect of the claims, for the above reasons I have concluded that the Bank is entitled, as against the applicant, to the moneys secured and interest due and payable under the Loan Account 1680554, as if the Bank had not made the further advances to Mr and Mrs Rouyanian and the applicant in April 1994 and in July 1995. An affidavit by Stephen Richard Talbot, which was exhibit 27 before me, deposes: "The Moneys Secured and interest due and payable under loan account 1680554 as at 28 May 1999 would be $159,331.95 and $167,463.13 respectively if Metway Bank Limited had not made the further advances to Andrew Rouyanian, Ludmila Rouyanian and Alevtina Ribchenkov in April 1994 and July 1995." 87 I think judgment should be given for the amounts that would be owing as at the date of judgment on that basis. I will direct the parties to bring in short minutes of order to give effect to that intention, with interest to be calculated at the rates provided for in the terms applicable to the loan account. There should also be judgment for the applicant in that amount as damages for negligence against Mr Sapuppo. I find further that Mr Sapuppo is entitled to be indemnified pursuant to his policy with APPIL, but that such indemnity is subject to a deductible amount of $7,500. 88 I will direct the parties to bring in short minutes of orders to give effect to these reasons, and I will hear the parties on costs. I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.
Associate: Dated: 21 June 2000 Counsel for the Applicant: Mr M.D. Martin
Solicitor for the Applicant: Morgan Conley
Counsel for the First Respondent: Mr D. Andrews
Solicitor for the First Respondent: Allen Allen & Hemsley
Counsel for the Second Respondent: Mr I.A. Erskine
Solicitor for the Second Respondent: Carl Blumen
Counsel for the Cross Respondent to the Second Cross Claim: Mr D.K. Clothier
Solicitor for the Cross Respondent to the Second Cross Claim: Corrs Chambers Westgarth
Dates of Hearing: 4 and 7-11 (inclusive) June 1999
Date of Judgment: 21 June 2000
Ribchenkov
Suncorp-Metway Limited
REASONS FOR JUDGMENT 1 In this application, which was filed on 17 March 1997, Alevtina Ribchenkov applies to set aside a mortgage which was signed by her on either 12 or 13 January 1993 over a property which she owned at 21 Maynard Street Buranda, on the grounds of undue influence, unconscionable conduct, fraudulent misrepresentation or misleading conduct in contravention of s 52 of the Trade Practices Act 1974. The claim against the second respondent, who is a solicitor, is for damages for fraud and damages for negligence. The essence of the claim against Mr Sapuppo is that he made a false statutory declaration deposing to the provision of independent advice by him to Mrs Ribchenkov prior to the execution by her of the impugned mortgage. 2 There is a cross claim by Suncorp-Metway Limited (the Bank) against Mr Sapuppo which was filed on 23 July 1997, and there is a second cross claim by Mr Sapuppo against his professional indemnity insurer Australian Pacific Professional Insurance Company Ltd (APPIL) which has declined to provide indemnity because it is alleged the claim arose out of, inter alia, fraud and therefore was within an exclusion clause in the contract of insurance. That second cross claim was filed on 16 January 1998 and amended on 16 February 1998. There is a further cross claim made by the Bank against the applicant which was added by an amended defence filed 1 December 1998. As originally filed, Mrs Ribchenkov also brought proceedings against Nicol Robinson and Kidd (a firm). Mr Andrew Rouyanian was, for a time, a member of that firm, and he was the applicant's son-in-law practising as a solicitor. The proceedings were discontinued against Nicol Robinson and Kidd on 20 March 1997. Mr Rouyanian is an undischarged bankrupt. 3 Mrs Ribchenkov was born in 1918 in Harbard, a city in the province of Manchuria in China. It was a Russian colony and Mrs Ribchenkov was brought up as a Russian person speaking the Russian language. She was educated from 1926 to 1934. In 1938 she married Constantine Ribchenkov who was also of Russian-speaking background. In 1957, Mrs Ribchenkov and her husband emigrated to Australia. She worked at Pauls Ice Cream factory in Brisbane as a packer for two years, and then for approximately 20 years worked at Nabisco as a biscuit packer. This employment lasted until 1979. 4 The applicant's matrimonial home was at 40 Maynard Street Buranda. A bill of mortgage from Constantine Ribchenkov to Custom Credit Corporation was registered over 40 Maynard Street on 15 June 1960. In approximately 1960, the applicant acquired the house at 21 Maynard Street Buranda. The applicant as sole mortgagor and joint debtor executed a mortgage over the property at 21 Maynard Street on 4 October 1968 to the Commonwealth Trading Bank of Australia. On 15 October 1980 there was a release of that bill of mortgage. 5 There are very serious factual disputes as to what occurred leading to the execution by the applicant of the mortgage over her property at 21 Maynard Street in January 1993. The applicant cannot recall a meeting on 30 November 1992 with a Mr Agnew from the Bank, but what was said and who was present at that meeting is important in the resolution of the issues in this litigation. It is not in dispute that documents addressed to the applicant, her daughter Mrs Ludmila Rouyanian and Mr Rouyanian were sent under cover of a letter addressed to those three persons at 43 Nicholson Street Greenslopes, which was the address of Mr and Mrs Rouyanian. The applicant's version of events is that on or about 12 January 1993 her son-in-law Mr Rouyanian attended at her house, told her that he needed help to borrow $20,000, and placed some documents in front of her. She said that because of her relationship with her son-in-law she trusted him implicitly and signed the documents. She claims that she had no idea what the documents were about, and certainly no comprehension that they secured a mortgage over her house and in fact secured a mortgage to the extent of $355,000. 6 The documents forwarded to the applicant, her daughter and son-in-law included a requirement by the Bank that there be an independent translator to explain the documents to the applicant. Mr Rouyanian phoned the bank and said that he knew a Russian-speaking solicitor who would be able to translate and advise, and that he would be more independent than anyone the Bank appointed. The Bank agreed to the proposal that this solicitor, Mr Sebastian Sapuppo, advise the applicant concerning the documents. 7 Mr Sapuppo says that on 12 January 1993 he advised the applicant concerning the documents in the presence of at least her daughter, Mrs Rouyanian and possibly also Mr Ribchenkov, the applicant's husband. Mr Sapuppo does not speak Russian, and says that a translator, Mr Pridannikoff, was present. Mr Sapuppo says that he advised the applicant, through the translator, concerning the transaction and the effect of the documents and subsequently witnessed various documents and completed a statutory declaration (which document had been prepared by Mr Rouyanian) which was forwarded to the Bank. Officers at the Bank said that they relied on the contents of the statutory declaration in making the advance, which was for the purpose, amongst other things, of carrying out renovations to the home of the applicant's daughter and son-in-law. Mr Pridannikoff has sworn that he did not attend any such meeting. It will be necessary to make detailed findings concerning that meeting, and what in fact occurred there. The existence of the meeting and the giving of advice is crucial to the cross claim by the Bank against Mr Sapuppo, to the claim by the applicant against Mr Sapuppo for fraud or negligence, and in respect of the further cross claim in which Mr Sapuppo has been refused indemnity on the ground of fraud. 8 On 11 June 1992, Mr Pridannikoff had translated a will of the applicant in the office of Mr Sapuppo. Mr Pridannikoff and Mr Sapuppo were the attesting witnesses. The case for the applicant is that the procuring of the statutory declaration deposing to advice having been given to the applicant by a solicitor was simply a fraud, and that the meeting at which the applicant is said to have received advice never occurred. The applicant's husband, Mr Ribchenkov, died on 15 June 1998. 9 When considering claims of undue influence and unconscionable conduct, the factual circumstances in other cases are not to be treated as defining what is meant by "unconscionable" or as in some way governing the circumstances in the present case. As Gaudron, McHugh, Gummow and Hayne JJ noted in Garcia v National Australia Bank (1998) 155 ALR 614 at paragraph 38: "No doubt these [other cases concerning unconscionable dealing] are no more than analogies. …They are, however, useful illustrations of why the enforcement of the guarantee in this case would be unconscionable." 10 Before turning to the application of legal principle, it is necessary to determine what in fact occurred. Before turning to my findings, I should say something of the credibility of the principal witnesses. The applicant, while a critical witness, was, as a consequence of her age, inherently unreliable. Speaking generally, she had little clear recollection of important matters and no recollection at all on some critical points. Notwithstanding her vagueness she was, on occasions, quite evasive. Her account really was a repetition, almost like a mantra, of the fact that she trusted her son-in-law and that she understood that she was helping him in the provision of $20,000 towards the cost of the renovations of her daughter's and his home. This is clearly a case where documentary evidence is much to be preferred. I could not place any meaningful reliance on her oral evidence. Her daughter Mrs Rouyanian was also, in significant respects, unreliable. Her evidence is coloured by animosity towards her husband. She claimed to have no recollection of the effect or substance of documents which she had signed, and had no recollection of important and critical events. Again, her oral evidence was quite unhelpful and I prefer to rely on documentary evidence where it conflicts with that of her oral testimony. 11 I do not accept Mr Pridannikoff as being accurate in his denial of a meeting in January 1993 with Mr Sapuppo concerning this transaction. I am quite satisfied that a meeting with the applicant and Mr Sapuppo, in the presence of Mr Pridannikoff, occurred. His recollection is quite equivocal, and his earlier fresh recollection of events I prefer to his version as deposed in his evidence-in-chief. 12 The witnesses called by the Bank generally were, in my assessment, honestly giving their evidence, and each in my view attempted to answer the questions as honestly and accurately as they could. I accept, in particular, the evidence of Mr Agnew, despite there being some inconsistencies in that evidence and, in particular, noting that at the meeting on 30 November 1992 with the applicant, the need for an interpreter was essential in explaining the various documents that were put to her by the Bank. 13 I accept also Mr Rouyanian, who was centrally involved in the transactions, as a reliable and honest witness. I accept that there are inconsistencies in his recollection of critical events, but I generally am prepared to accept his account. As earlier indicated, I prefer the evidence of Mr Sapuppo, who gave his evidence warts and all, to that of Mr Pridannikoff. It is not Mr Sapuppo's honesty as a witness that is, in my assessment, suspect: what is relevant is what in fact was done by him and what he represented to the Bank that he had advised the applicant. 14 I turn now to set out my conclusions concerning the events leading up to the execution of the mortgage over 21 Maynard Street Buranda. 15 On 12 November 1992, Mr Rouyanian attended the Stones Corner branch of Metway Bank Limited, as the Bank was then called, seeking finance for renovations to his house, and refinancing a debt which he had with Beneficial Finance. Because of the total amount required, he advised the Bank that his mother-in-law was prepared to put up her property as third party security. On 13 November 1992, Mr and Mrs Rouyanian signed an application to Metway for a loan of $355,312. Mrs Rouyanian had signed this document at Mr Rouyanian's request at their home. On 24 November 1992, the Bank received a valuation of 43 Nicholson Street at $200,000 as is, and $300,000 on completion of the renovations. Mr Agnew, for the Bank, advised Mr Rouyanian on 25 November 1992 that the loan was refused. Later on that day, Mr Rouyanian asked Mr Agnew if the Bank would reconsider the refusal if the applicant was a co-borrower. 16 On 26 November Mr Agnew discussed Mr Rouyanian's proposal with an officer of the Bank at head office and explained the situation generally. His diary notes record the fact that he made reference to "the age of the mother-in-law and the fact that she was only a pensioner". On 30 November 1992 the applicant attended at the Bank with her husband and, as I find, with Mr and Mrs Rouyanian. I accept that Mr Agnew had a conversation with the applicant in which he indicated that she would be a co-borrower, and that the amount of the loan would be approximately $355,000. Mr Agnew's diary note of that meeting records, amongst other things, that: "Mrs Ribchenkov was explained the home loan brochure and all relevant details surrounding loan. She spoke very little English, and I strongly suggest that every endeavour be made to ensure her obligations are again spelt out prior to execution of mortgage documents." 17 Notwithstanding an acknowledgment signed by the applicant, as well as by Mr and Mrs Rouyanian, which bears date 13 November 1992 and acknowledges: "Receipt of 'Home Loans Explained' information leaflet during our home loan interview and …that the contents of the 'Home Loans Explained' information leaflet have been explained to me/us during my/our home loan interview and that I/We fully understand its contents", in my opinion the applicant did not understand what the true position was. She was, in fact, under a special disability vis-à-vis the Bank because of her age, her lack of English and her general ignorance of legal matters. This disability was known to the Bank, as reflected in Mr Agnew's diary notes. 18 On 2 December 1992, valuers Corbetts valued the applicant's property at 21 Maynard Street at $120,000. On 10 December 1992, the Bank refused approval of the loan. Mr Agnew's diary note of that day records: "Head Office advised that they are not happy with security being offered, ie mother-in-law offering security + not deriving any benefit. Advised Mr Rouyanian who was disappointed and he will get back to me." 19 On the following day Mr Rouyanian advised the Bank that he would offer his mother-in-law, the applicant, a two-tenths share in the property at 43 Nicholson Street, thus "allowing her to derive benefit as required". Mr Agnew notes that he went to Head Office with this new scenario and "Graham Gingell advised he will look at it". The diary notes of Mr Agnew further indicate that from 18 December to 29 December, there were negotiations concerning mortgage insurance with AMIC and with MGICA. "On 29 December MGICA approved deal", according to Mr Agnew's diary notes, which I accept are an accurate record of the events he noted. 20 In a recommendation by Mr Agnew concerning the proposal, which recommendation was that approval be granted, he recorded, amongst other things: "Because of valuation placed on completed property, full amount of loan required could not be made available without additional security. To this end, Mrs Ribchenkov (Mr Rouyanian's mother-in-law) has offered her property as additional collateral and will be a co-borrower to the loan. Her obligations have been clearly explained and she has been given the opportunity to seek independent counsel." 21 Concerning the serviceability of the loan, Mr Agnew noted that: "Mr Rouyanian's repayment obligation would drop by $391 per month even though his debt will increase almost double", and he said: "serviceability of this debt is considered proven." 22 Under the heading "Safety Assessment", Mr Agnew said: "It is strongly recommended that Mrs Ribchenkov be explained her obligations clearly by the corporate solicitor to remove any difficulties associated with her not being fully aware of the obligation she is undertaking." 23 On 17 December a Mr Shane Ellevsen, the Regional Lending Manager, recommended the loan for approval, noting: "1. Ability to service appears proven. 2. Collateral business by way of business referrals will be forthcoming. 3. Bank's position will be well secured." 24 Under the heading "Security", Mr Ellevsen said: "Security offered is somewhat unusual, as we will be taking an RIM over current residential home, as well as an RIM over A. Ribchenkov's residential home. She is the mother/mother-in-law of the debtors. In exchange for Mrs Ribchenkov offering her home as security, she will receive a part share of debtor's home, which will be registered on the title deed on or before settlement. This will ensure a direct Financial Benefit is obtained." 25 On 6 January 1993, the Bank's letter of loan offer was sent to Mr and Mrs Rouyanian and the applicant at the Rouyanian's Greenslopes address. The offer was for a total amount of $352,291 for a term of approximately 25 years from the date of approval, at an interest rate of 7.75% per annum, with repayments per calendar month of $2,663. The special conditions that applied to that offer of loan were detailed in an attached schedule which included, amongst other things, "A stamped transfer from Andrew Ardashir Rouyanian and Ludmila Rouyanian to Andrew Ardashir Rouyanian and Ludmila Rouyanian and Alevtina Ribchenkov, giving the latter a two-tenths share in the property located at 23 Nicholson Street Greenslopes, is to be provided prior to settlement. An acknowledgment from all borrowers confirming the transfer was agreed to by those parties, and that Metway Bank was in no way a party to their decision, should also be provided. An interpreter will be provided by the Bank at cost to the Borrowers to explain legal position involved with undertaking of loan." 26 Part of the negotiations concerning mortgage insurance involved a communication from Commercial Union Australia Mortgage Insurance Corporation Limited to Mr Agnew, where it was indicated that mortgage protection had been declined for reasons which included "mother-in-law's involvement and language problem re: 3rd party security". That communication advised that, on the point concerning the mother-in-law's involvement, it was noted: "Interpreter present at signing of documentation". 27 Notwithstanding that a diary note which purports to relate to a discussion by Mr Sapuppo with the applicant on 12 January 1993 was only produced by Mr Sapuppo belatedly, I am satisfied that the note was in fact made on 12 January 1993. Whether the first part of it was made contemporaneously with the meeting and the notation concerning Mr Pridannikoff made after the meeting, as the diary note seems to suggest, however, I cannot conclusively determine. The diary note, nonetheless, is very important as indicating the nature of the conversation that Mr Sapuppo had with the applicant. I set the diary note out in full: "12/1/93 Re: New Matter Pers/in - Mrs Alevitina Ribchenkov (Rouyanian's mother-in-law) - my perusing mrge doc's for her to sign (as co-mtgor) - she is giving mtge over her own home as collateral security for loan to Rouyanian - also Rouyanians are ? a 1/12th(?) share in their own home (Nicholson St, G'slopes) to her - GEORGE PRIDANNIKOFF, 1O A.M. Ph. 860-4142(W) Ph. 343-2592(H) - 12 Harper St, Mt Gravatt Was interpreter for Mrs Ribchenkov" 28 I am satisfied that Mrs Ribchenkov signed a bill of mortgage in respect of 43 Nicholson Street Greenslopes, a bill of mortgage in respect of 21 Maynard Street Buranda, an authority to complete/disburse, and an acknowledgment on 12 January 1993, and that her signature was witnessed by Mr Sapuppo. The bill of mortgage in respect of the Nicholson Street property was executed by Mr and Mrs Rouyanian on 13 January 1993, and their signatures were witnessed by Mr Marcus Johnson, a solicitor. I am also satisfied that the authority to complete and the authority to disburse which, importantly, referred to "loan funds of $352,291.00" were signed by the applicant on 12 January 1993, witnessed by Mr Sapuppo; and signed by Mr and Mrs Rouyanian in the presence of Mr Johnson, and I take that to have occurred on 13 January 1993. 29 By letter dated 13 January 1993, Mr Rouyanian, on the letterhead of Rouyanian Maunsell Solicitors, wrote to Mr Agnew enclosing a number of documents including the bill of mortgage relating to the property at 21 Maynard Street Buranda, the acknowledgment by the borrowers, the authority to complete and disburse, and the bill of mortgage relating to the property at 43 Nicholson Street Greenslopes, as well as other transfers and stamp duty declaration forms, and also including a statutory declaration of Mr Sapuppo. 30 The acknowledgment, signed by the applicant and her daughter and son-in-law, acknowledged that the transfer of an interest by Mr Rouyanian of his two-tenths interest in the property at 43 Nicholson Street Greenslopes was made to the applicant in consideration of her agreeing to provide as security her property situated at 21 Maynard Street Buranda. The statutory declaration referred to in that letter is important, and I set it out in full: "QUEENSLAND TO WIT I, SEBASTIAN ANTHONY SAPUPPO c/- 582 Logan Road, Greenslopes, Brisbane in the State of Queensland, solemnly and conscientiously declare as follows:- 1. I am a Solicitor of the Supreme Court of Queensland and am Principal of the firm Messrs S.A. Sapuppo and Associates. 2. I am a legal practitioner and am employed independently of Metway Bank Limited by the borrower independently of Andrew Ardashir Rouyanian and Ludmila Rouyanian as co-borrower. 3. On the 12th day of January 1993, I did attend upon Alevtina Ribchenkov in respect to the execution of certain mortgage documents for a loan by her as co-borrow with Andrew Ardashir Rouyanian and Ludmila Rouyanian from Metway Bank Limited. 4. Before the security documents were executed by Alevtina Ribchenkov, I explained the contents, nature and effect of them to her through her interpreter, George Pridannikoff. 5. In particular, I explained and advised on the consequences of default under the relevant security documents, including Metway's right to sell the property constituting her security at 21 Maynard Street, Buranda. 6. Prior to execution of the documents, I witnessed the interpreter Mr George Pridannikoff of 12 Harper Street, Mount Gravatt, Brisbane in the State of Queensland translate the documents to the said Alevtina Ribchenkov and explain to her in the Russian language the full force and effect of the said documentation. 7. I further declare the prior to the execution of the documents, I was satisfied that Alevtina Ribchenkov appeared to be aware of and to understand my explanations and advise as to the terms, nature and effect of the security documents and her obligation and liability under the said mortgage and she then proceeded to execute the mortgage documents and ancillary documentation provided by Metway Bank Limited. 8. I further state that the said documents were signed by Alevtina Ribchenkov in the presence of myself and the interpreter and that the said Alevtina Ribchenkov did so without oppression or undue influence, voluntarily as her own act and deed. AND I MAKE this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Oaths Act 1867-1980 (Queensland). SIGNED AND DECLARED by the ) Abovenamed Declarant at ) Brisbane in the State of ) ___________________________ Queensland this 11th day of ) SEBASTIAN ANTHONY SAPUPPO January 1993 before me ) A Justice of the Peace/Solicitor" 31 The document, it should be noted, bears date 11 January 1993. It is witnessed by Janice O'Connell JP, who was the secretary of Mr Rouyanian, and the evidence establishes that the statutory declaration had been drafted by Mr Rouyanian. It is admitted that the Bank relied on the truth of the statutory declaration in making the advances which it made. 32 On 13 December 1993, a letter on the letterhead of Rouyanian Maunsell Solicitors, was sent to the Bank requesting an extension of the present loan facility to cover a further amount of $34,445, being anticipated construction costs and PC items referred to in a schedule to that letter. That request was signed by the applicant, as well as her daughter and son-in-law. This letter, I accept, was signed by the applicant at her home at the request of Mr Rouyanian. I am not satisfied that the applicant understood that any further advance was supported by the mortgage over both the 43 Nicholson Street Greenslopes property and her investment property at 21 Maynard Street Buranda. A valuation report by Corbetts dated 3 March 1994 valued the Nicholson Street property at $340,000, and a valuation report dated 18 March 1994 by the Herriott Group Pty Ltd as Valuers valued the 21 Maynard Street Buranda property at $128,000. 33 The report by the Bank concerning this request focuses entirely on Mr Andrew Rouyanian. It says, for instance: "Applicant is a partner in a local solicitors office and is well known to the bank." 34 Concerning cash flow and repayment ability, the report indicated: "Whilst applicant is highly geared, it is to be expected with his profession." 35 Under "Safety Assessment", again: "Applicant is professional person in a well-established and profitable practice." 36 That additional loan for reimbursement of home improvements which had been recently completed was approved by the Regional Lending Manager, Mr Matthews, subject to satisfactory valuation confirming completion of extensions, mortgage insurance acceptance and receipts for payment of completed work being provided and normal terms and conditions. There was no concern by the Bank that Mrs Ribchenkov understood any increase in her obligations or risk as a result of the approval of the additional amount. The offer of 31 March 1994 made the following statements: "It is important that the borrower and guarantors read and understand the terms and conditions set out in this offer of loan. We strongly suggest the borrower and guarantor seek independent advice from a solicitor before accepting this offer." 37 Under the heading "Security", the offer said: "The Securities specified in Item 4 of the Schedule will secure the Loan the Other Monies owing and interest and any other moneys the Borrower or the Guarantors owe or may owe us". 38 The Securities referred to the bill of mortgage by the applicant in respect of 21 Maynard Street Buranda and the mortgage by the applicant and Mr and Mrs Rouyanian in respect of 43 Nicholson Street Greenslopes. This letter of offer is signed by Mrs Ribchenkov and witnessed by Ms O'Connell. The implications of this further loan were, I am satisfied, never understood by the applicant, and the Bank did not require satisfaction of independent advice to the applicant on this occasion as it had in respect of the earlier advance. 39 A notice of default under the mortgage was forwarded to the applicant and her daughter and son-in-law in a letter addressed to them at 43 Nicholson Street Greenslopes. On 21 July 1995, in a letter of offer to the applicant, her daughter and son-in-law, again addressed to them at 43 Nicholson Street Greenslopes, there was an offer of a further $25,000 as a variation of the existing loan. That letter said: It is important that the Borrower and Guarantor (if any) read and understand the Terms and Conditions set out in this Offer of Loan and the Securities. We strongly recommend the Borrower and Guarantor seek independent advice from a solicitor before accepting this Offer of Loan." 40 The purpose of the loan was expressed to be: "The Borrower shall only use the Loan - to cover the Existing Loan Account Number 1680554 (approximately) $379,145.00 Debt Consolidation $ 25,000.00 Basic Loan Amount $404,145.00" 41 An acceptance of this offer of loan was dated 23 July 1995 and signed by the applicant, her daughter and son-in-law. Again on this occasion, there was no requirement by the Bank to see that the applicant understood the position concerning the provision of the additional $25,000 or the effect this might have in respect of her obligations or risk pursuant to the securities she had executed. On 8 February 1996, notices of default concerning arrears of $5,429.50 were sent by the Bank. 42 On 8 April 1996, Mr and Mrs Ribchenkov authorised Mr Sapuppo to give to a solicitor described as: "our solicitor, Robert J. Grant of the firm Stubbs Barbeler and Grant full access to all information and documentation pertaining to: · our last will and testament, · the property located at 21 Maynard Street, Buranda, · the property located at 43 Nicholson Street, Greenslopes." 43 This authorisation, in my opinion, is an acknowledgment that Mr Sapuppo had documentation relating to the property located at 21 Maynard Street Buranda, as well as the property at 43 Nicholson Street Greenslopes. Yet, on the applicant's case, Mr Sapuppo never had any connection with her in relation to advice concerning property dealings with either 21 Maynard Street Buranda or 43 Nicholson Street Greenslopes. On 20 July 1996, an attempt was made to auction 43 Nicholson Street, but the auction did not result in a sale. On 23 November 1996, the property at 43 Nicholson Street was sold at auction for $250,000. 44 So far as the professional indemnity insurance of Mr Sapuppo is concerned, clause 5(e) of the policy provides that: "This insurance shall not indemnify the Assured in respect of any liability:- … (v) brought about by the dishonest or fraudulent act or omission of the Assured …" 45 In a letter dated 3 October 1997, the solicitors of APPIL indicated to Mr Sapuppo that in its view the claims fell within that clause. In that letter, solicitors for APPIL said: "In arriving at this determination, APPIL has not formed a view as to whether or not you were guilty of fraud or dishonesty and in particular, has not formed a view as to whether or not the certification you provided to the bank that you had met with and provided advice to Mrs Ribchenkov was false. However, it is the case that if the claim by either Mrs Ribchenkov or the bank succeeds against you, then it will necessarily be because your certification was false and that you did not, in fact, provide the advice to Mrs Ribchenkov. Thus, since any liability to either Mrs Ribchenkov or Metway would arise from fraud or dishonesty on your part, it is appropriate that indemnity now be declined." 46 In the light of the above, it is convenient to deal first with the applicant's case against the Bank, then briefly with the Bank's cross claim against Mr Sapuppo, with the applicant's case against Mr Sapuppo, and then with the cross-claim by Mr Sapuppo against APPIL. The Applicant's Case Against the Bank 47 There can be no doubt that the applicant would not have understood documents such as the mortgages and the transfer deeds, or the effect of authorisations and acknowledgments, unless such documents had been explained to her at any relevant time. It was obvious, and the Bank was on notice as a consequence of the meeting on 30 November 1992, that the applicant spoke little English, obviously could not understand a document such as a mortgage, and required independent advice. I do not accept that Mr Rouyanian was the Bank's agent for the purposes of procuring the applicant's signature on the loan documentation. It is clear that Mr Rouyanian was the driving force behind the transaction, and only one set of documents was sent to "all three borrowers" at Mr and Mrs Rouyanian's home, where the applicant did not live. It is true also that Mr Richardson, who prepared the security documents, admitted in evidence that he assumed that Mr Rouyanian would organise the documents to be signed and, in fact, the documents were returned to the Bank under cover of a letter from Mr Rouyanian's legal firm and signed by Mr Rouyanian. However, it was an important condition, from the Bank's point of view, that independent advice be given to the applicant, and but for the statutory declaration of Mr Sapuppo the Bank would not have made the advance of $355,000. I therefore reject the claim that the Bank is liable for any misrepresentation or fraud by Mr Rouyanian. I do not accept that he was the Bank's agent for the purpose of procuring the applicant's signature on the loan documentation. 48 As Heerey J said in Alderton v Prudential Assurance Co (1993) 41 FCR 435 at 444: "Recent authorities indicate that a court will intervene where a creditor has entrusted to the principal debtor the arranging of a surety's signature to a guarantee and the debtor obtains the signature by misrepresentation or undue influence." 49 Heerey J referred to Avon Finance Co Ltd v Bridger [1985] 2 All ER 281 and Kings North Trust Ltd v Bell [1986] 1WLR 119; [1986] 1 All ER 423. In the latter case Dillon LJ (with whom Sir John Donaldson MR and Mustill J agreed) said (at 124;427) that "…the same principle as in Turnbull & Co v Duval [1902] AC 429 and Chaplin & Co Ltd v Brammall [1908] 1 KB 233 could be applicable outside the mere field of husband and wife, if the creditor could or should have been aware that the relationship between the debtor and the persons from whom a guarantee or security was sought was such that the debtor could be expected to have some influence over those persons. If in such a case the creditor appointed the debtor to procure the execution of the guarantee or security, and the persons to give it had no independent advice, the creditor acted at his peril." [Emphasis added]. See also Platzer v Commonwealth Bank of Australia [1997] 1 QdR 266. 50 In any event, I do not accept the claim by the applicant that she was told by her son-in-law that he needed $20,000, and that he asked her to sign a document or documents. I accept the evidence of Mr Rouyanian, in particular, when he says that it was explained to the applicant that in the event of default there could be a $20,000 shortfall for which she may be liable. I do not accept the claim by the applicant that the security documents were presented to her on or about 12 January 1993 as being something which would assist Mr Rouyanian in getting a loan for $20,000, and that she executed them relying on that representation. 51 I further am not satisfied that any of Mr Rouyanian's conduct constitutes deceptive and misleading conduct, within s 52 of the Trade Practices Act 1974, on behalf of the Bank. 52 As to the assertion that Mr Rouyanian was acting as the Bank's agent, in Lisciandro v Official Trustee in Bankruptcy (1995) ATPR 41436 at 40903, Kiefel J said: "… as Lord Brown-Wilkinson in Barclays pointed out (194, 195), an imputation of agency is artificial, and came to be utilised no doubt because the Courts laboured under the need for statements of general principle. At 194 His Lordship said: '…As the Court of Appeal in this case pointed out, in the majority of cases the reality of the relationship is that, the creditor having required of the principal debtor that there must be a surety, the principal debtor on his own account in order to raise the necessary finance seeks to procure the support of the surety. In so doing, he is acting for himself not the creditor'." 53 On appeal in Lisciandro (1996) (139 ALR 689) Ryan and Drummond JJ remarked at 697 to the same effect, and Cooper J said at 703: "The notion that to leave a debtor or proposed debtor to obtain the signature of a third party guarantor is enough, without more, to create the debtor an agent of the creditor and thereby bind the creditor with the knowledge of the debtor and the consequences of the debtor's conduct has been rejected in Canada, New Zealand, United Kingdom and Australia: see Toronto Dominion Bank v Wong (1985) 65 BCLR 243 (CA) at 249; Contractors Bonding Ltd v Snee at 172, 175, 183; Barclays Bank Pty Ltd v O'Brien [1994] 1 AC 180 (HL) at 194-5; HG & R Nominees Pty Ltd v Fava (1995) V Conv R 54-522 at 66,183-5; Randall v GR Client Mortgages Pty Ltd (CA (Vic), 2 August 1995, Brooking, JD Phillips and Charles JJA, unreported) at 19-20. If the appellant seeks to contend that Radford was the agent of Alminco, then he must, in accordance with the general principles of agency law, show either an appointment in fact or a holding out: Contractors' Bonding Ltd v Snee at 172-5; HG & R Nominees Pty Ltd v Fava at 66,184." 54 The passage from the judgment of Lord Browne-Wilkinson in Barclays (at 194, 195) which was cited by Kiefel J at first instance in Lisciandro, was cited with approval by the High Court in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 in the judgment of Gaudron, McHugh, Gummow and Hayne JJ at paragraph 33, where their Honours were considering the elements of a creditor's unconscionable conduct. Their Honours observed: "Nor does the analysis depend upon identifying the husband as acting as agent for the creditor in procuring the wife's agreement to the transaction. [cf Barclays Bank Plc v O'Brien [1994] 1 AC 180 at 194, per Lord Browne-Wilkinson.]" 55 Mr Rouyanian was not an agent of the Bank in the ordinary sense of agency, nor within s 84(2) of the Trade Practices Act 1974. 56 The case pleaded by the applicant against the Bank does not allege that there was some special feature about the debt history of Mr Rouyanian that was required to be disclosed to the applicant, nor was it pleaded that the bank had a duty to disclose some unusual feature relating to the Rouyanian's accounts. While in the course of submissions it was contended that Mr Rouyanian was "in perilous financial circumstances" and was "living beyond his means", in any event in this case, at the time of the negotiations for the loan, the Rouyanians had a debt owing on seven Bankcards of the order of $17,000, and an unpaid bill to an architect in the order of $5,000. Neither of these is a feature that required disclosure, nor is there anything suspicious or unusual, when refinancing a debt, for there to be refinancing of a more expensive loan, namely Bankcards. 57 The matters about which it was submitted here there was an obligation to disclose have to be contrasted with those which were present in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. The facts in that case were quite extraordinary, and were held to be such as to render it unconscionable for the bank to take a mortgage without first disabusing the sureties of the false impression that the debtor was successful. In Amadio, Mason J as he then was, observed at 463.3: "However, it is accepted that the principal creditor is under a duty - '… to disclose to the intending surety anything which has taken place between the Bank and the principal debtor' which was not naturally to be expected, 'or as it was put by Pollock MR in Lloyds Bank Ltd v Harrison …cited in Paget's Law of Banking, 7th ed. (1966), p.583' the necessity for disclosure only goes to the extent of requiring it where there are some unusual features in the particular case relating to the particular account which is to be guaranteed' (Goodwin v National Bank of Australasia Ltd [(1968) 117 CLR 173, at p.175] per Barwick CJ). It has been said that this duty to disclose does not require a bank to give information as to matters affecting the credit of the debtor or of any circumstances connected with the transaction in which he is about to engage which will render his position more hazardous (Wythes v Labouchere …, per Lord Chelmsford LC). No surety is entitled to assume that the debtor has not been overdrawing, the proper presumption being in most instances that he has been doing so and wishes to do so again (London General Omnibus Co Ltd v Holloway …). But the fact that a bank's duty to make disclosure to its intending surety, arising from the mere relationship between principal creditor and surety, is so limited has no bearing on the availability of equitable relief on the ground of unconscionable conduct." 58 So, too, in Amadio, Gibbs CJ observed at 456: "The facts that the company was in grave financial difficulties, and was consistently exceeding its overdraft limit, and that its cheques were being dishonoured, in themselves did no more than throw light on the credit of the company. If there were no more to the case than that, in my opinion the bank would not have been bound to make disclosure of those facts. Further, if the only additional circumstance had been that the company had entered into an arrangement with General Credits Ltd, pursuant to which the company was doing building work for no profit, I should still have considered that there was no duty of disclosure. In Wythes v Labouchere Lord Chelmsford LC said… that all the authorities in which the question of concealment arose 'were cases in which it related to the transaction itself, and amounted to a fraud upon the surety'. The cases to which I have already referred - Hamilton v Watson, Goodwin v National Bank of Australasia Ltd, National Provincial Bank of England Ltd v Glanusk and Cooper v National Provincial Bank Ltd - all support the view that at least in the case of banker and customer the duty of disclosure arises only where there is a special arrangement between the bank and the customer of a kind which the surety would not expect." 59 Deane J said, in Amadio at 481: "It is true that it is not ordinarily encumbent upon a bank to bring to the attention of a potential guarantor of a customer's account details of a type which are ordinarily to be expected (see Goodwin v National Bank of Australasia Ltd …). In the present case however, it was, as has been said, evident to the bank that Mr and Mrs Amadio stood in need of advice as to the nature and effect of the transaction into which they were entering. It is apparent that any such advice would have included the importance to a guarantor of ascertaining from the bank the state of the customer's account which was being guaranteed and any unusual features of the account. If such information had been obtained by Mr and Mrs Amadio, they would not, on the evidence and in the light of the learned trial judge's finding, have entered into the guarantee/mortgage at all." 60 In this case I am satisfied that the knowledge of the Bank in December 1992 and January 1993 was to the effect that the Rouyanians' ability to service the loan was sound, and that their projected surplus after all living expenses and meeting the loan, was of the order of $60,000 per annum. Both Mr and Mrs Rouyanian were working. There was, in this case, no duty to disclose to the applicant the matters of the credit card debts or the unpaid architect's bill, nor any breach of any duty of disclosure, undue influence or unconscionable conduct. 61 The distinction between unconscionable conduct and undue influence was described in Amadio by Mason J at 461 and applied in Garcia at paragraph 26. Mason J said: "… relief on the ground of 'unconscionable conduct' is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage …Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of a disadvantageous position in which he is placed and of the other part unconscientiously taking advantage of that position." 62 Dixon J, as he then was, in Yerkey v Jones (1939) 631 CLR 649 said at 684: "But it is clearly necessary to distinguish between, on the one hand, cases in which a wife, alive to the nature and effect of the obligation she is undertaking, is procured to become her husband's surety by the exertion by him upon her of undue influence, affirmatively established, and on the other hand, cases where she does not understand the effect of the document or the nature of the transaction of suretyship." 63 This is not a case where the applicant was alive to the nature and effect of the obligation she was undertaking, but was procured by undue influence to be part of the transaction. In my assessment, the applicant simply did not understand the nature and extent of the obligations she was entering into, because those matters were not adequately explained to her. 64 In this particular case, the Bank reasonably believed that independent advice had been rendered to the applicant, and the original advance was made in reliance upon the statutory declaration of Mr Sapuppo. So far as the advance of $355,000 was concerned, the Bank's perception of the advice that the applicant had received from Mr Sapuppo means, in my view, that it did not behave unconscientiously. Dixon J in Yerkey v Jones said at 685: "…if the wife had been in receipt of the advice of a stranger whom the creditor believes on reasonable grounds to be competent, independent and disinterested, then the circumstances would need to be very exceptional before the creditor could be held bound by any equity which otherwise might arise from the husband's conduct and the wife's actual failure to understand the transaction: Cf. Per Cussen J [(1925) VLR at 649]. If undue influence in the full sense is not made out but the elements of pressure, surprise, misrepresentation or some or one of them combine with or cause a misunderstanding or failure to understand the document or transaction, the final question must be whether the grounds upon which the creditor believed that the document was fairly obtained and executed by a woman sufficiently understanding its purport and effect were such that it would be inequitable to fix the creditor with the consequences of the husband's improper or unfair dealing with his wife." 65 This passage was approved by Gaudron, McHugh, Gummow and Hayne JJ in Garcia at paragraph 24. Their Honours themselves further said, at paragraph 41: "If the creditor itself explains the transaction sufficiently, or knows that the surety has received 'competent, independent and disinterested' [Yerkey v Jones per Dixon J at 686] advice from a third party, it would not be unconscionable for the creditor to enforce it against the surety even though the surety is a volunteer and it later emerges that the surety claims to have been mistaken." 66 In paragraph 31, their Honours said that what makes enforcement unconscionable is the circumstance that : "…the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." 67 At paragraph 33, their Honours said: "To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable." 68 In Bridgewater v Leahy (1998) 158 ALR 66, Gaudron, Gummow and Kirby JJ observed at paragraph 100: "Where the complaint is of unconscionable dealing, the point is rather different. As Manning J put it in Re Levey; Ex parte Official Assignee [(1894) 15 NSWR (B & P) 30 at 36], 'the court does not allow any person to take advantage of any known weakness of the vendor' and the court asks whether that party had 'the opportunity' of professional advice as to 'the effect of what he [was] doing'. This denial of the opportunity to have 'the assistance of a disinterested legal adviser' [Longmate v Ledger (1860) 66 ER 67 at 69], rather than speculation as to what might have followed had it been pursued, is an element in the unconscientious conduct in respect of which equity intervenes to deny the entitlement of the disponee to retain the property in question, unless the disponee shows the disposition to have been 'fair, just and reasonable' [Amadio at 474]" 69 In this particular case the Bank, in my opinion, was entitled to rely on the statutory declaration of Mr Sapuppo, as it did, and that conclusion is not affected by the fact that Mr Sapuppo was found by Mr Rouyanian. In Barclays Bank plc v Thomson [1997] 4 All ER 816, a wife had received advice from solicitors who also acted for the husband's business. The solicitors explained to the wife, in her husband's absence, that in signing the charge she would be allowing her house to act as security for borrowing on the joint bank account. They wrote to the bank confirming that they had carried out its instructions. Simon Brown LJ, at 821 said: "The starting point for consideration of these rival arguments must be the trilogy of recent Court of Appeal decisions which clearly establish a bank's entitlement to rely upon a solicitor's certificate that proper advice has been given to the signatory of a relevant instrument even though that solicitor acts principally for the very person against whose undue influence the signatory must be guarded: Massey v Midland Bank plc [1995] 1 All ER 929, Banco Exterior Internacional v Mann [1995] 1 All ER 936 and Bank of Baroda v Rayarel [1995] 2 FLR 376. I content myself with two citations only from these cases although there are several similarly helpful passages in the other judgments. First, this from the judgment of Bingham MR in Mann's case …at 950: '… Was it reasonable to expect a solicitor, in explaining the nature and effect of the document, to give appropriate advice? In my view it was. It is an ordinary incident of a solicitor's duty to explain the obvious potential pitfalls of legal transactions to those about to take part in them, and there is no clear dividing line between explanation and advice. If the certifying solicitor did his job with reasonable competence, as the bank was entitled to expect, Mrs Mann would appreciate quite clearly that if the worse happened she could lose her rights in the house and that it was for her to decide whether she was willing to take that risk or not. It was no part of the solicitor's duty to advise her not to sign. It was enough if she would receive such advice as would leave her in no doubt of her right to decide whether she was willing in all the circumstances to take a risk which had been explained to her.' Second, this from Hoffman LJ's judgment in Rayarel's case … at 386: 'If a prospective surety deals with a bank through a solicitor, the bank is entitled to assume that the solicitor has given her appropriate advice. If there is a possibility of a conflict of interest between the surety and the other parties whom the solicitor is also advising, the bank is entitled to assume that the solicitor will have told her that she was entitled to take independent advice. The bank's legal department is not obliged to commit the professional discourtesy of communicating directly with the solicitor's client and tendering such advice itself. Nor is it obliged to inform the solicitor of his professional duties. This will be a fortiori the case when the documents submitted by the bank to the surety's solicitor contain a certificate that she has been advised of the effect of the document and her right to have independent legal advice. The bank was therefore not in the circumstances fixed with constructive notice of the undue influence which the judge found to have been exerted by the husband' …" 70 In respect of the advance of $355,000 in this case, the Bank, while aware of the special disability of the applicant, did not engage in unconscionable conduct or undue influence, or take advantage of undue influence. I think, however, that in respect of each of the later advances of $34,000 and $25,000, the Bank was on notice that the applicant required independent advice. Mr Rowe, an officer of the Bank, concedes that he had read the file, but did not make any arrangements to ensure that the applicant was independently advised. The request for the further advance of $34,450 was on the letterhead of Rouyanian's legal firm, and the letter of offer was forwarded to "all three borrowers" at 43 Nicholson Street Greenslopes, where the applicant did not live. I am satisfied that, without explanation, the applicant would not have understood that document. 71 The position is the same in respect of the further advance of $25,000. The Bank knew of the special disability of the applicant. The advance was approved by Mr Kirk, an officer of the Bank who did not give evidence, upon the recommendation of Mr Dunn, who did. Mr Dunn concedes that he had not read the file, as he had delegated that responsibility to a junior lending officer. He admits that he was not aware at any stage that the applicant spoke little English and had required a translator when the loan was originally approved. Mr Dunn, in my opinion both fairly and correctly, conceded that if he had known of those facts he would have made the appropriate arrangement. Mr Dunn admitted that he was not aware that when the original loan was made in January 1993, it was a requirement of the Bank that an interpreter be provided to explain the mortgage documents to the applicant. The following exchange occurred in cross-examination (at page 242 of the transcript): "If you had been aware of that, might you have required that again, that is, that it all be explained to her by an interpreter so that she understood it?---If that had been a condition previously, yes. But you did not do that because you did not know about it?---That is correct." 72 In all the circumstances, I think it would be unconscionable to permit the Bank to seek to enforce remedies in respect of the two further advances against the applicant. I reach this conclusion notwithstanding that the original mortgage documents, which the Bank reasonably believed had been explained to the applicant, were "all moneys" mortgages. 73 The applicant fails, except to this limited extent, in her claims against the Bank, and it follows that the Bank's cross-claim against Mr Sapuppo also fails as a consequence.
(1998) 155 ALR 614
(1993) 41 FCR 435
(1996) 139 ALR 689
(1998) 194 CLR 395
(1983) 151 CLR 447
(1939) 631 CLR 649
(1998) 158 ALR 66
(1984) 37 SASR 232
(1968) 117 CLR 173
(1997) 70 SASR 206