Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell

The O'Donnell Loan 157At [405] the primary judge dealt with the application of the CRA, s 9(4) to the O'Donnells, as follows: "Although they were rushed and not provided with the opportunity to consider the loan applications in any detail by Streetwise, Mr and Mrs O'Donnell were careless when they signed the partially completed loan application. Mr O'Donnell was also careless in signing the income declaration form in blank. By doing so, the O'Donnells exposed themselves, Tonto and Permanent to the risk of fraud by Streetwise. Section 9(4) of the CRA requires the court not to have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. Whilst the O'Donnells were careless, they could not have reasonably foreseen that Streetwise would insert in the loan application and income declaration false details of their assets and income. It was not suggested by the plaintiffs nor does the evidence establish that the risk of fraud by Streetwise could reasonably have been foreseen by Mr and Mrs O'Donnell." 158The primary judge then considered the following circumstances: (a) the matters upon which the O'Donnells were misled by Streetwise ([406]); (b) the lack of income to service the loans ([407]); (c) the fraud of Streetwise (not making any distinctions as to corporate form) without which the loan would not have been made ([407]); (d) the lack of legal advice and the persuasion by Streetwise that the O'Donnells did not need their own lawyers, balanced against the opportunity (not taken up) to see a lawyer and an accountant ([407]); (e) the lack of full explanation of the contract and mortgage documents balanced against the opportunity the O'Donnells had to read them ([408]); (f) the O'Donnells' understanding of the gist of what they were doing ([408]); (g) Tonto HL and Permanent not being parties to the joint venture ([409]); (h) the general policy to hold people to their bargains and to provide certainty in commercial relations ([410]-[411]); (i) the fact that the contracts arose from unfair pressure, deception and fraudulent conduct of Tonto HL's agent Streetwise ([413(i)]); (j) the fact that by the way Tonto HL conducted its business with Streetwise, Tonto HL exposed the O'Donnells to a serious risk of fraud which was reasonably foreseeable at the time the contracts were made ([413(ii)]); (k) that the branding of the loan application and letters assisted Mr Bangaru to mislead the O'Donnells, supporting the impression that Streetwise was a business of substance ([413(ii)]; (l) that the O'Donnells were in a position of disadvantage compared to Tonto and Permanent when they came to negotiate the terms of the contracts. Tonto was in a much better position both to appreciate and to manage the risk of fraud by Streetwise than Mr and Mrs O'Donnell ([413(ii)]); (m) the failure to follow the Origin lending guidelines, in particular the failure to make an ABN search or obtain a certificate of business registration or financial statements ([413(iii)]); (n) with Streetwise's knowledge imputed to Tonto HL, the characterisation of the lending as asset lending ([413(iii)]); and (o) that failure to follow the cash out condition made it easier for the fraud to remain undetected ([415]). 159The primary judge emphasised at [414] the consequences of the loose attitude to lending guidelines: " ... The loose attitude that was adopted to the lending guidelines indicates that the lender was not much concerned about the purpose of the loan and the self-employment of the borrowers and was content to lend on the security of the Harbord property and mortgage insurance." 160The importance of the finding of agency can perhaps best be seen in how the primary judge dealt at [416] and [418] with the submission that the O'Donnells were not people unable to look after themselves in entering a transaction such as that offered by Streetwise: "[416] ... Where the asset lending has arisen because of the fraud and deception of the lender's agent and the borrowers are unaware that the reality of the lending is on the value of their home, in my opinion, it makes little difference to considerations of injustice under the CRA that the borrowers are persons who normally are able to look after themselves. After all, a purpose of the CRA is to protect persons from unfair pressure or unfair tactics when they enter into contracts. ... [418] ... The fraudulent conduct of Streetwise commenced at the time the borrowers were persuaded to sign the loan applications and income declarations. ... [I]t was not the borrowers who supplied false information to Tonto but its agent, Streetwise. ... Tonto possessed the knowledge of Streetwise and by the way it conducted its business with Streetwise exposed itself and the borrowers to a serious risk of fraud." 161Finally, at [419], the primary judge considered the public interest: "There is, as the cross-claimants submit, a public interest in ensuring that prudent lending practices are followed. Prudent lending practice, to my mind, includes the conduct of the relationship between loan provider/mortgage manager and finance broker. This must be the case in Lo Doc lending where reliance is placed by the lender on the accuracy of the information provided in the loan application documentation. Prudent lending practice requires adherence by the lender to Lo Doc lending guidelines when the finance broker has been entrusted with the first stage of the loan application process. An agreement for commercial self-interest not to contact a broker's client until after the settlement of the loan does nothing to ensure the integrity of the material supplied. The public interest against unjust asset lending was referred to in Khoshaba and Kowalczuk. I consider that it is unnecessary to consider ASIC's submissions on public interest." 162He concluded at [420]: "I have concluded that the loan agreement and mortgage were unjust in the circumstances relating to the contracts at the time that they were made."

The Di Benedetto Loan 163The reasons of the primary judge for concluding at [429] that the loan agreement and mortgage were unjust in all the circumstances were set out at [421]-[428] and were similar to the reasons dealing with the O'Donnells, which I have outlined.

The Tavares and Rowe Loan 164Once again the reasons at [430]-[438] were similar.

Relief 165In dealing with relief, the primary judge set the whole loan agreements aside. 166Once again, the importance of the agency finding was referred to by the primary judge: [440]-[441] of his reasons. 167In rejecting an argument that the loan agreements should be set aside in part, his Honour said at [445]: " ... It seems to me that if I was to accede to this submission an unjust consequence or result would not be avoided as the contracts arose from the fraudulent conduct of Streetwise and the cross-claimants received no benefit from the loan monies save for the sum of $50,872.76 which was used by Mr Tavares and Ms Rowe to discharge their mortgage with the ANZ bank."

The appeal 168Central to the appeal are the primary judge's conclusions on agency and imputation of knowledge. 169Depending upon the outcome of those grounds of appeal, three broad areas of debate were raised by numerous other complaints: (a) the insufficiency of weight said to have been given to the conduct of the borrowers and its capacity to mislead the lenders; (b) the characterisation of this as asset lending; and (c) numerous asserted factual errors.

Introductory remarks on agency 170Before turning to the evidence it is appropriate to say something of the ultimate issue that is being addressed. The word agency is one apt to cause difficulty, in significant part, because of its broad usage in business: Kennedy v De Trafford [1897] AC 180 at 188; Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd [1931] HCA 53; 46 CLR 41 at 50; Scott v Davis [2000] HCA 52; 204 CLR 333 at 338 [4], 408 [227] and 435 [299]. It is a common business expression with a potentially wide and varying meaning. 171The core conception of agency as a legal concept was expressed by the High Court in International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co [1958] HCA 16; 100 CLR 644 at 652: "Agency is a word used in the law to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties. But in the business world its significance is by no means thus restricted." The relevant question in that case was whether the manufacturer of goods (or its Australian subsidiary) was a party to a contract for sale of equipment sold through one of its distributing "agents", so-called. The question was whether the so-called agent had capacity to make the manufacturer (or its local subsidiary) a party to the contract for sale of goods, and so bind its interests. The answer was, no. The distribution agent was a business in its own right, not in any way acting on behalf of the manufacturer in the sale transaction in question. 172As will be seen from the provisions of the Introduction Deed, S Loans had no authority to bind Tonto HL, and, through it, the lender, to acceptance of any loan. 173One needs to consider the purpose for which one is asking the question whether A is P's agent: Kirkpatrick v Kotis [2004] NSWSC 1265; 62 NSWLR 567 at 581 [86], per Campbell J (as his Honour then was). The question that must be addressed here by the factual and legal analysis is whether Tonto HL appointed S Loans to undertake tasks for it, short of creating a binding loan agreement, such that knowledge gained, or conduct engaged in, by S Loans in the performance of such tasks was knowledge to be imputed to Tonto HL, or conduct for which Tonto HL was to be held legally responsible by some form of vicarious attribution. 174The appellants' first submission was that this could not be so because the expression of the matter in International Harvester was the limit of any relevant concept of agency known to the common law. If S Loans had no capacity to create legal relations between the third party and the principal by binding the lender to a loan, it could not, in law, be an agent. This is too narrow a conception of agency. The High Court in International Harvester was concerned with the question of the creation of legal rights. Other cases contemplate a possibly broader role for agents. See for example the place of an insurance canvasser in Colonial Mutual at 48-51. 175The conception and central elements of agency were discussed helpfully by Finn J in South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611 at 645-647 [131]-[137], in P Watts and F M B Reynolds Bowstead and Reynolds on Agency (19 th Ed, Sweet & Maxwell, 2010) at 1-10, in G E Dal Pont Law of Agency (2 nd Ed, LexisNexis, 2008) at 4-8 and 26-28 and see also W A Seavey "The Rationale of Agency" (1919-1920) 29 Yale Law Journal 859. Recognising, at once, the wisdom of what the authors of Bowstead and Reynolds on Agency (19 th Ed) say at 2 [1-003] as to the limited utility of reasoning from conceptual or presupposed definitions, it is to be borne in mind that the concept of agency is not merely functional, whereby something that is necessary to be done for P and that could be done by P itself is done by A under some arrangement; rather it is a consensual arrangement, a relationship, whereby A is to be taken as, or as representing, P. In South Sydney v News at 646 [136], Finn J referred to the authoritative character of the expressions of the relationship in Art 1 of Bowstead and Reynolds on Agency (an earlier edition) and Art 1 of the Restatement, Second, on Agency , these expressions being as cited by Finn J: "'[1] Agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.' I would note in passing that the definition proposed in the Restatement, Third, Agency , Tentative Draft No 1, [1.01] proposes no material departure from the above. Bowstead and Reynolds' definition is that: 'Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts.' 176It is appropriate to set out the whole of Art 1 from Bowstead and Reynolds on Agency (19 th Ed) at 1 [1-001] since Art 1(4), in particular, posits a form of agency of some relevance here - one in which the agent has no power to create or affect legal relations: "(1) Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. Any person other than the principal and the agent may be referred to as a third party. (2) In respect of the acts to which the principal so assents, the agent is said to have authority to act; and this authority constitutes a power to affect the principal's legal relations with third parties. (3) Where the agent's authority results from a manifestation of assent that he should represent or act for the principal expressly or impliedly made by the principal to the agent himself, the authority is called actual authority, express or implied. But the agent may also have authority resulting from such a manifestation made by the principal to a third party ; such authority is called apparent authority. (4) A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority, and hence no power, to affect the principal's relations with third parties. Because of the fiduciary relationship such a person may also be called an agent." (Footnotes omitted.) 177These expressions of the central characteristics of the relationship reveal the closeness of identity that is required for the relationship to exist. Not every independent contractor performing a task for, or for the benefit of, a party will be an agent, and so identified as it, or as representing it, and its interests. Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. Central is the conception of identity or representation of the principal: Colonial Mutual at 48-49; Seavey op cit at 859. Examples and contexts may be infinite, and any arrangement must be understood and characterised by reference to its legal terms in context. In McKenzie v McDonald [1927] VLR 134 at 144 Dixon AJ, in saying that not every agent stands as a fiduciary, was recognising that the word "agent" is used in many senses and is apt to mislead, citing Kennedy v De Trafford at 188. That is, however, no more than to say that the word "agent" has a potentially wide and varying meaning in life and business and that, on some occasions, the business description will be given to someone who is not a fiduciary. See also Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 at 71-72 (per Gibbs CJ), cf at 96-97 (per Mason J), Boardman v Phipps [1967] 2 AC 46 at 127, F E Dowrick "The Relationship of Principal and Agent" (1954) 17 Modern Law Review 24 and R P Meagher, J D Heydon and M J Leeming (eds) Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4 th Ed, LexisNexis, 2002) at 191-192 [5-195]. It is sufficient to recognise that the essential characteristic is that one party (A) acts on the other's (P's) behalf, and that this will generally be in circumstances of a requirement or duty not to act otherwise than in the interests of P in the performance of the consensual arrangement. Bowstead and Reynolds on Agency , the Restatement and Seavey op cit at 863 include in the conception of agency the characteristic of fiduciary duty. The duty will, of course, conform with the extent and scope of the agency and thus be of potentially varied content, recognising that context (in particular, perhaps, a market or commercial context) may attenuate the rigour or content of the fiduciary duty: Birtchnell v The Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; 42 CLR 384 at 408; In re Goldcorp Exchange Ltd [1995] 1 AC 74 at 98; Meagher, Gummow and Lehane (4 th Ed) at 161-162 [5-010]); Finn J in South Sydney v News at [136], and in his text Fiduciary Obligations (LawBook Co, 1977) at 201. The necessary good faith implicit in a fiduciary character in the relationship reflects the character of identity or representation that the relationship essentially carries. 178That the concept of agency may properly extend to canvassers and those seeking to bring business to another party should not be controversial. In a helpful discussion at 9-10 [1-019], the authors of Bowstead and Reynolds on Agency (19 th Ed) refer to Art 1(4) as "incomplete agency" directed in particular to the "canvassing" or "introducing agent". The following is useful and relevant: "Article 1(4) seeks to achieve completeness by taking in a well-established type of intermediary who makes no contracts and disposes of no property, but is simply hired, whether as an employee or independent contractor, to introduce parties desirous of contracting and leaves them to contract between themselves. In effecting such introductions he is remunerated by commission, which he may sometimes take from both parties. Such a person is a common figure in most western legal systems and may well be referred to as an agent. The most obvious example of such an intermediary in the English cases is the estate agent, who introduces purchasers to vendors and tenants to lessors of houses and vice versa ... Canvassing agents are on the fringe of the central agency principles used by the common law, since their powers to alter their principals' legal relations are at best extremely limited. They often, however, have authority to receive and communicate information on their principals' behalf, and in so doing have the capacity to alter their principals' legal position. They also usually act in a capacity which may involve the repose of trust and confidence, and hence may be subject in some respects to the fiduciary duties of agents towards their principals." (Footnotes omitted.) 179It is appropriate to turn to the particular facts of this case to ascertain whether S Loans agreed to act in the manner described by the authors of Bowstead and Reynolds on Agency to receive and communicate information and otherwise act on Tonto HL's behalf in a capacity which has the necessary character to permit the characterisation of agency. 180There was no challenge to the findings at [362] that Tonto HL was the agent of the lender in each case and that any appointment by Tonto HL of S Loans as its agent was within the scope of Tonto HL's authority, and, thus, if S Loans were Tonto HL's agent, it was also the agent of Permanent and Tonto HLA.

The Introduction Deed 181I turn to the Introduction Deed. Two clauses should be dealt with at the outset: cl 3.1 (no agency) and cl 2.6 (no power to bind). 182Clause 3.1 (see [ 132 ] above) is not determinative. The true character of the parties' relationship is to be gathered from an examination of all the surrounding circumstances, including, in particular, the provisions of the deed. Though agency is consensual, it is sufficient that the parties have agreed to what amounts in law to such a relationship. The labelling of the relationship as not agency does not determine the question, though, unless a sham, the relevant provision is to be given proper weight. There was no dispute about the relevant governing principles in this regard: see South Sydney v News at 645-646 [133]-[134] per Finn J; NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; 107 FCR 270 at 408-409 [629] per Lindgren J. 183Clause 2.6 (see [ 132 ] above) was said to strike at the core of agency. Reliance was placed on International Harvester . Whilst the clause is sufficient to deny to S Loans the authority to bind Tonto HL, for the reasons already adverted to, that is not the end of the agency enquiry. 184The relationship between Tonto HL and Streetwise was contained in the Introduction Deed and the collateral arrangements as to non-contact by Tonto HL of loan applicants, rebadging and access to Tonto HL's computer system. 185The relationship must be set in its commercial context. Tonto HL appreciated that Streetwise, and thus S Loan, had its own customers. Indeed, the expectation that there would be many customers of Streetwise was the reason why Streetwise was targeted as an introducer. Thus, the Introduction Deed must be construed against the background of the recognition of the parties that S Loans would have customers on whose behalf and in whose interests it was obliged to act carefully and in good faith. 186Turning to the clauses in that light, the principal obligation in cl 2.1 was to "endeavour" to introduce loans which complied with the terms and conditions as specified by Tonto HL from time to time. The word "endeavour" means to try, no doubt imparting an element of reasonable conduct. That is not, as the appellants submitted, an empty or illusory promise. S Loans was obliged to endeavour to introduce such loans. In the recognition that S Loans had a client base, such an obligation would not require S Loans to sacrifice the interests of its customers if another funder or programme were more attractive. No reasonable reading of "endeavour" would require that; and the Court would hesitate before giving such a meaning. Further, a reasonable endeavour would not necessarily require S Loans to sacrifice its own interests to Tonto HL by introducing loans in circumstances where they could obtain higher commission elsewhere. Reasonable endeavour is not sacrifice of one's own interests: cf Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; 144 CLR 83, where "best endeavours" to sell the Arlo pole did not impliedly restrict the promisor from selling competing poles. 187The obligation of "endeavour", thus understood, may lead to elements of assessment and choice as to whether S Loans should, conformably with its obligations to its customers, to Tonto HL and taking into account its own interests, refer any particular loan application to Tonto HL. These are not obligations to act in the interests of Tonto HL, and not ones of a fiduciary character. 188If the circumstances are such that its obligation to endeavour to introduce loans to Tonto HL leads to an application being submitted, the balance of cl 2.1 requires all information required by Tonto HL to be provided. Clause 2.4 is also directed to the introduction of loans. Clause 2.5 places S Loans under the reasonable directions of Tonto HL, not as to the conduct of its business in general, but in performing its "duty as an introducer of loans", that is once the performance of an introduction has commenced. Clause 2.7 attaches only once an introduction has been accepted by Tonto HL and a loan has been made. Clause 2.9 restricts Streetwise in how it is to be remunerated should it introduce a loan to Tonto HL. 189No provision requires that S Loans will represent Tonto HL. Not only is that not contemplated, but S Loans was contractually forbidden from disclosing the terms of the deed or the arrangement: cl 3.2. This position was reinforced by the collateral arrangement that Tonto HL not contact applicants until after settlement. The fact that S Loans did not hold itself out as working for, or being in some way connected with, Tonto or Permanent or the relevant loan programme makes it plain that the facts could not give rise to ostensible or apparent authority in S Loans. That is not, however, the limit of the relevance of that fact. It also assists in the conclusion that S Loans was not representing Tonto HL in any real business sense in what it (S Loans) was doing. It was, as between it and prospective borrowers, canvassing for itself, apparently. This could not deny any conclusion of agency as between S Loans and Tonto HL if the agreement between them otherwise dictated that conclusion. It removed, however, any suggestion that S Loans did in fact act as a representative of Tonto HL in dealing with third parties. 190No provision purported to regulate how S Loans conducted its business prior to the point of introduction of loans, except cl 2.4, which only required the maintenance of sound business practices according to law. 191Taken as a whole, the Introduction Deed and the other agreed arrangements did not provide for an arrangement under which S Loans would act on behalf, and in the interests, of Tonto HL in the respects found by the primary judge. The reasoning of the primary judge commenced with the recognition that Tonto HL did not undertake interviews with the prospective borrowers and played no part in collecting and submitting relevant information. All those tasks, in respect of these borrowers, and any others introduced to Tonto HL by S Loans were done by S Loans. Thus, there was an entrusting of the organisational or enterprise tasks in that respect to S Loans. In these circumstances, and given the obligations of the deed, the primary judge saw no room for S Loans to act for its own customers. 192That approach has two principal flaws. First, it elevates the organisational or enterprise structure of the relevant business and activity as a key factor in determining agency. Tonto HL, as the instigator of the business structure, is seen to have placed Streetwise in the position of collecting all relevant information for the conduct of the lending enterprise. Therefore the tasks that are part of the operation of the organisation or enterprise are to be viewed as entrusted with S Loans as agent: see generally Seavey op cit at 883-885; the discussion in F M B Reynolds, W Bowstead and M Graziadei Bowstead and Reynolds on Agency (17 th Ed, Sweet & Maxwell, 2001) at 21-22, and Lord Wilberforce in dissent in Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 585-586. This approach deflects attention from the correct task - ascertainment of the legal content of the consensual agreement between the parties. 193Secondly, the approach fails to place the Introduction Deed in its commercial context. It was an agreement between two entities each of which had its own business. One was to endeavour to introduce business from its own customer base for the mutual commercial advantage of both. 194Agency is to be determined by an analysis of the consensual legal relations between the parties, it is not merely a conclusion drawn from the performance by A of a function important, even necessary, to the operation or functioning of the business enterprise of P in question.

Conclusion on agency 195The primary judge was wrong to characterise the relationship between Tonto HL and S Loans as agency. 196This conclusion does not, however, mean that when one turns to the application of the CRA , one ignores the history and detail of the relationship between Tonto HL and S Loans. They were not commercial strangers; they were intimate commercial counterparties, the latter performing functions that were integral to the operation of the former's business and the lending enterprises. 197This conclusion makes it unnecessary to deal at any length with some of the particular complaints made about the primary judge's reasoning as to agency. It is appropriate to deal with some, however, in order that this Court's evaluation of the circumstances for the operation of the CRA can take place on the correct factual foundation.

Aspects of the primary judge's reasoning as to agency

Streetwise's part in the administrative process 198Particular challenge was made to the primary judge's finding (at [307 (b)(iii)]) that Streetwise would have "absolute administrative control of the loan applications". That challenge was to any proposition beyond the matters explained by Mr Narramore: that the live window was provided to Streetwise to upload required documents and to monitor the status of the application. The primary judge's finding went no further than this. Taken together with the agreement by Tonto HL not to contact prospective borrowers, and the ability of Streetwise to have read only access to the progress of any application, Streetwise had a degree of control over the administrative process once an application was lodged. I do not take his Honour's finding of Streetwise playing an "integral part on behalf of Tonto and Origin in their loan approval and credit assessment process" ([356]) as going further than that. This can be seen from the primary judge's findings at [261] that neither Mr Lougoon nor Mr Wright was contacted by Mr Bangaru or anyone at Streetwise when approving the loan applications in question. If the primary judge is to be understood as going further, any such finding was not supported by the evidence.

The joint venture agreements 199A central submission of the appellants as to the error in the conclusion of agency concerned the relevant joint venture agreements. The appellants submitted that the primary judge fundamentally misconceived the place of the joint venture agreements. The joint venture agreements were formal and binding, appointing S Property as "co-ordinator and project manager on our behalf to locate and develop a suitable site" in a "profit share arrangement". As the primary judge found at [330], S Property promised in the agreement that either through Streetwise Home & Investment Loans Pty Ltd (that is, S Loans) or through an external financier, it would obtain necessary finance on the basis that the "financing of the borrowed funds" would be the responsibility of the O'Donnells, Di Benedettos or Mr Tavares and Ms Rowe. S Property undertook to advise the respondents. Thus, it was submitted that before Tonto HL or the lender was approached, the respondents had assumed contractual obligations to develop land. Thus, it was submitted, there could be no conflict between the interests and duties of S Loans (the party to the Tonto HL Introduction Deed). In the joint venture agreement, the respondents agreed that S Property would act on their behalf to obtain finance. This was done, it was submitted, by S Property delegating this task to S Loans to obtain funds from external financiers. Thus, S Loans, acting on behalf of S Property to effect the latter's obligation to the respondents to obtain finance to fulfil their obligations under the joint venture agreements, can be seen as acting for the respondents. 200This is a legitimate legal and factual analysis of what occurred, though it is unnecessary to be this precise. These borrowers were enticed to Streetwise. They entered agreements with S Property and, through their involvement with Streetwise, became persons for whom S Loans undertook tasks. I have already concluded that S Loans was not Tonto HL's agent. The fact of agency or not is not conclusive or determinative as to the attribution of responsibility here within an analysis under the CRA , a subject to which I will return.

Tonto HL's knowledge of Streetwise 201It is convenient at this point to the deal with the challenge to the primary judge's findings at [320] (see [138] above) that Tonto HL knew that Streetwise was "not only a broker, but was a property developer" and that "the business of Streetwise was not confined to being a loan introducer" and that "it would have been obvious to a reasonably prudent lender possessed of that knowledge that Streetwise as a broker had a clear conflict of interest". It was submitted that it was wrong to conflate the companies in the Streetwise group. One undertook property development; the other was a finance broker. It was wrong in law, it was submitted, to analyse the position otherwise than by reference to the interests of S Property and the duties of S Loans. Further, it was submitted that the timing of the joint venture agreements meant that there was no conflict because the respondents knew from the joint venture agreements that S Property would seek finance for them, either from an internal company or externally. Indeed, they had bound themselves to this process. 202With respect, these submissions of the appellants have an air of unreality and formalism. What Tonto HL could see (as Mr Paul O'Donnell accepted in cross-examination, reflecting on it) was that an apparently closely held group ran a land developing business, had a finance broking operation and had a significant interest in having loans approved to gain access to loan funds, through the borrowings of individuals dealing with the so-called broking arm of the group, which had in fact bound itself to Tonto HL in the form of the Introduction Deed. This was more than the usual interest of a broker in a commission. There was a powerful incentive for Streetwise to see loans given to borrowers. The description of this as "conflict" is reasonable. There was a plain and obvious incentive for Streetwise to put forward loans to obtain money for its customers and through them its property business, which interest might conflict with duties to Tonto HL or to its customers if the commercial interest overwhelmed care or honesty. The relevant point was what could reasonably be perceived by Tonto HL. The companies in the group were seen by Mr Paul O'Donnell as "effectively the same". 203The property development business of S Property and the prospective borrowers generated by Streetwise were the attractions for Tonto HL. Mr Narramore said at para 19 of his affidavit of 15 April 2008: "Streetwise ... was the typical type of target client that I was employed to chase. They were multi-tiered and vertically integrated in selling property: they would have a division that would generate a lead with a particular investor market, a separate division would then make a sale and a further division again would organise the finance on behalf of those investors to fund that purchase." Mr Paul O'Donnell gave similar evidence. Tonto HL viewed Streetwise as a group and as a potentially lucrative "target client to chase". This was because of the volume of anticipated lending to people introduced by S Loans to fund their arrangements with S Property. 204The primary judge's findings of a "conflict of interest" able to be perceived by Tonto HL rested on an assumption that any Streetwise entity acting as a broker had a potentially powerful conflicting interest if its duty to a prospective borrower required caution or advice as to the suitability of borrowing. To that extent and so understood the finding was open. Tonto HL knew that S Loans would bring people to the lending programme in order to provide funds to invest in business offered by Streetwise. That was the commercial attraction of Streetwise. It bespoke the real risk that any duty that S Loans may have to a borrower would or might give way to the interest in Streetwise as a property developer for funds. 205The timing of the joint venture agreements and of the approach to Tonto HL did not affect this commercial position and the reality of the potential for conflict that was apparent to Tonto HL.

Imputation of knowledge 206The conclusion that S Loans was not the agent of Tonto HL makes it unnecessary to consider whether, on the assumption that there were an agency relationship, the so-called fraud exception would prevent the imputation of knowledge held by Streetwise employees to Tonto HL and through to the lenders. 207Knowledge acquired through an agent is dealt with in Bowstead and Reynolds on Agency (19 th Ed) in Art 95 at 514 [8-207]: "(1) The law may impute to a principal knowledge relating to the subject-matter of the agency which the agent acquires while acting within the scope of his authority. (2) Where an agent is authorised to enter into a transaction in which his own knowledge is material, knowledge which he acquired outside the scope of his authority may also be imputed to the principal. (3) Where the principal has a duty to investigate and make disclosure, he may have imputed to him not only facts which he knows but also material facts of which he might expect to have been told by his agents. (4) Knowledge is not attributed to the principal where it is acquired by an agent who is defrauding the principal in the same transaction." (Footnotes omitted.) The authors express the exception in Art 95(4) with the same clarity of expression as did Buckley LJ in Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] 1 Ch 250 at 261-262: "But in my view such knowledge should not be imputed to the company, for the essence of the arrangement was to deprive the company improperly of a large part of its assets. As I have said, the company was a victim of the conspiracy. I think it would be irrational to treat the directors, who were allegedly parties to the conspiracy, notionally as having transmitted this knowledge to the company; and indeed it is a well-recognised exception from the general rule that a principal is affected by notice received by his agent that, if the agent is acting in fraud of his principal and the matter of which he has notice is relevant to the fraud, that knowledge is not to be imputed to the principal." 208Notwithstanding this apparent clarity, the rule is not without controversy. The authors of Bowstead and Reynolds on Agency (19 th Ed) express the view that the existence of and justification for the rule is open to question: at 523 [8-213], citing the illuminating article of one of the authors (Prof Watts) in (2001) 117 Law Quarterly Review 300. That said, as Prof Watts makes clear in the article, the rule appears to have been applied for over 150 years, having its roots in the decision of Lord Brougham in Kennedy v Green (1834) 3 My & K 699; 40 ER 266. Glazebrook J and Robertson J in the New Zealand Court of Appeal have expressed the view that the exception is not soundly grounded in authority: Nathan v Dollars & Sense Finance Ltd [2007] NZCA 177; [2007] 2 NZLR 747 at 770 [99]. 209The rule is not limited to circumstances where the principal is suing the agent. There imputation of knowledge is irrelevant. It extends to circumstances where it becomes relevant to know the state of knowledge of the principal by reference to what the agent knew in relation to the claims or rights of third parties. 210The rationale of the exception is said to be twofold: the existence of the fraud rebutting a presumption of communication of information: Turner VC in Hewitt v Loosemore (1851) 9 Hare 449; 68 ER 586; or as taking place outside or as severing the agency relationship: Espin v Pemberton (1859) 3 De G & J 547 at 554-555; 44 ER 1380 at 1383. Certainly, the latter foundation is difficult to sustain after Lloyd v Grace, Smith & Co [1912] AC 716. 211No party put submissions that the exception did not exist. It was said not to apply for the reasons given by the primary judge: that S Loans' actions were not "acting totally in fraud" of Tonto HL (see Beach Petroleum v Johnson 43 FCR 1 at 31; 115 ALR 411 at 574 and Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (In liq) [1999] FCA 1820; 96 FCR 217 at 229 [46]) and there was no "moral certainty" of lack of disclosure (see Bowstead and Reynolds on Agency (16 th Ed) cited in Beach Petroleum v Kennedy ). 212I would agree with the primary judge that the transaction was not totally in fraud of Tonto HL. The lenders are, after all, seeking to enforce the very transaction and security that have given them monetary return even though the engagement was brought about by the fraud in question. The lenders and Tonto HL obtained a benefit - the deployment of the funds at interest upon a valuable security. Lies brought it about, but they were not the victims of a theft or depredation. They maintain the validity of that very transaction. 213There is much to be said for not applying the exception to a case such as the present where Tonto HL and the lenders have chosen (on this hypothesis) the agent who was undertaking the very tasks required of it, albeit exhibiting dishonesty, to the immediate benefit of both it and the principal and, further, where the ultimate principal seeks to enforce the very transaction. That said, it is unnecessary to express a final view on the rule.

The other grounds of the appeal 214Given my view that the primary judge erred in his conclusion about agency, it must be concluded that his Honour's conclusions as to relief under the CRA were flawed, requiring the powers under the CRA , ss 7 and 9 to be examined and, if necessary, re-exercised by this Court in the light of the notices of contention that have been filed. The other complaints made by the appellants are relevant to examine, because the resolution of them will inform this Court's approach to the re-application of the CRA.

Giving manifestly insufficient weight to the misleading conduct of the borrowers 215The appellants drew particular attention to the misleading character of the borrowers' conduct in the way they applied for the loans. Emphasis was placed on the incompleteness of the documents that were signed and the fact that some of the information in the O'Donnells' forms was false, to their knowledge. Thus, by leaving blank sections (and the O'Donnells by allowing wrong information to remain in the document) the borrowers misled the lenders. Further, the declarations that they could afford to make the loan repayments without undue financial hardship were false: they could not, without the Streetwise contribution. 216The conduct was objectively misleading and it was a cause of inducing the loan facility. The conduct was, it was submitted, careless, misleading and reckless and directly facilitated the fraud. 217The primary judge recognised that the borrowers' conduct exposed the lenders and themselves to the risk of fraud: [68], [323] and [405] of the reasons. The submission that the primary judge gave manifestly insufficient weight to the circumstances need not be dealt with insofar as a consideration of the primary judge's reasoning does not assist in any re-exercise of the powers under the CRA . It is helpful, however, to analyse the complaints so as to throw up the correct approach for this Court in the re-exercise of power. 218First, the appellants complained that the primary judge understated the conduct by his Honour by merely calling it "careless". It was said to be reckless, intentional and grossly misleading conduct, which had a direct consequence on the conduct of Tonto and the lenders. To the extent that reckless and grossly misleading seek to import a notion of intention or perception of the risk to others, the primary difficulty standing in the way of the submission is that senior counsel appearing for the appellants at first instance did not put this matter to the borrowers in cross-examination. That is not a criticism of his cross-examination. The conduct of the borrowers, in its carelessness, speaks for itself. As to whom they actually perceived might be misled by this depended, in significant part, upon who they thought the lenders were at the time they were doing things. The failure to press the borrowers with notions of intentionally misleading conduct and actual perception of risk of others puts it out of the hands of the appellants now to rely on such submissions. 219There can be no doubt that the borrowers were careless and careless in a significant degree. But they were misled with blandishments and worse. They thought they were dealing with a substantial organisation, perhaps they should not have done so. They expected Streetwise to deal honestly with their applications and there is no evidence that they actually anticipated any fraud. It can be accepted that, as a matter of objective fact, they left the forms concerned in a misleading state. That they were aware that they were misleading people or may mislead lenders was not put to them. In any re-exercise of power, the cause or place of the plain carelessness of the borrowers is to be given significance, which conclusion will involve the capacity of the forms to mislead the lender should they be filled in incorrectly or falsely by Streetwise. However, given the way the matter was conducted, it is not to be found that the borrowers intentionally misled anyone or were conscious of the risk of doing so. 220The truly misleading conduct was that of Streetwise inserting false information without the borrowers' knowledge; though their careless conduct objectively permitted the conduct of Streetwise to mislead the lenders. 221The second complaint as to the manifestly inadequate weight given to the borrowers' conduct was that the primary judge discounted the significance of the carelessness on the basis of his finding ([68] and [405]) that the respondents were rushed by Streetwise into signing the incomplete documents. It was submitted that the primary judge should not have found that the fact that Streetwise rushed the borrowers into signing was an excuse for making false and misleading declarations to the appellants. However, the findings as to being rushed were plainly open to the primary judge. If there were a misleading of the lenders by the borrowers, it may not excuse it. However, as discussed earlier, the misleading of the lenders was by the fraudulent conduct of Streetwise. His Honour was entitled to take into account the objective facts he found about the pressure placed upon the borrowers as to time. How it falls out in an ultimate re-exercise of power will be dealt with later. 222The third complaint was that his Honour mitigated the findings as to carelessness by what was said to be an erroneous conclusion that the fraud of Streetwise was not reasonably foreseeable by the respondents. This conclusion led his Honour, it was submitted, to treat as irrelevant the circumstance that the conduct by the borrowers exposed the appellants to the risk of fraud. This finding was said to have been bound up with a misapplication of the CRA , s 9(4) in that the primary judge failed to take into account at all the injustice to the appellants which the carelessness caused. 223For present purposes the important question is whether or not the primary judge was correct (and this Court can apply a similar finding) that the fraud of Streetwise was not reasonably foreseeable by the respondents. This is not a tort case. It can be readily accepted, for the purpose of argument, that if one gives a signed document to a stranger (or someone of whom one has little knowledge) with blank sections to be filled in, which document is to be given to a third party for a business purpose, it is reasonably foreseeable that if the person is dishonest or careless the wrong information may be placed on the documents. That objective analysis is readily acceptable. The primary judge was engaged, however, in a more subtle exercise. He was assessing the people before him and characterising their conduct. All these borrowers trusted Streetwise. In particular with the benefit of hindsight, they should not have done so. Other people in the community may have been more cautious. His Honour found them to be careless. They were careless because they were giving open documents signed by them to commercial persons they had just met. The finding as to lack of reasonable foreseeability was based on the trust of ordinary people who had accepted the blandishments of rogues. That is how his Honour's findings should be understood; they were open and should not be disturbed. 224In due course, I will say something as to the systemic risk inhering in a business organisation and structure whereby Tonto HL placed the gaining of all relevant information in the hands of Streetwise. The reasonable foreseeability of Tonto HL is that of business people assessing the risk in the structure and running of their enterprise. This is a quite different matter from the reasonable foreseeability of honest, trusting, but careless people such as these borrowers acting under the blandishments and lies of Streetwise. Seen in the above light, I do not think that his Honour's findings as to lack of reasonable foresight in the respondents of the risk that Streetwise would engage in fraud are open to criticism. 225The fourth complaint was that in evaluation of the injustice the primary judge found that Tonto HL "was in a much better position both to appreciate and to manage the risk of fraud by Streetwise" than were the respondents: [413(ii)]. It was submitted in this regard that the various declarations and acknowledgements contained in the application forms and declaration were prudent measures for Tonto to take in order to avoid the risk of fraud. It was submitted that it was the borrowers who facilitated the fraud in the face of those measures and absent their conduct the fraud would not have occurred. At this point the appellants emphasised that the fraudulent party (Streetwise) was the agent of the borrowers, not the lenders. 226I will deal with these submissions more fully in due course. However the fundamental point made by his Honour was a good one. Tonto HL had chased and finally won a property development group to act through its finance broking arm as a loan introducer. The commercial risks (and rewards) involved in that choice have been adverted to and will be the subject of further consideration in the re-exercise of power. The fact that S Loans was not the agent of Tonto HL does not mean that all the surrounding facts as to how S Loans came to be an introducer and the terms of the arrangement, including, in particular, the agreement by Tonto HL not to approach customers before settlement, should not be taken into account. The clear inhering business risk of sub-contracting the important process of information collection and choice of appropriate loan product to a land developer to assist in obtaining funds for people doing business with it and so effectively providing a source of funding for its projects should be taken into account in understanding how the fraud occurred. In any such business enterprise, appropriate safeguards were necessary to minimise the risk of fraud. They were administered loosely, to the direct risk of the lenders and the indirect risk of the prospective borrowers. Agreeing not to contact prospective borrowers before settlement and agreeing to mislead them if they rang by answering the telephone as Streetwise were hardly risk minimisation strategies. The guidelines for loan approval were fundamental to avoiding the risk of fraud. None of this is to say that anyone at Tonto HL actually knew or suspected that Streetwise was fraudulent. The point his Honour was making was that in undertaking a business enterprise of this character, Tonto HL, as a professional mortgage manager, was in a much better position to appreciate the risk of fraud or mismanagement, than were the borrowers. Putting declarations in the fine print of application forms is not an entirely adequate response in the other circumstances to which I have made reference. I will deal with this more fully in due course. 227Fifthly, the appellants submitted that the primary judge should have followed the approach of McDougall J in Perpetual Trustees Victoria Ltd v Longobardi [2009] NSWSC 654 in relation to borrowers who sign documents in blank. His Honour said that such borrowers should bear the responsibility for fraud because they permitted it to happen. Judges are not obliged to follow other judge's findings of fact. One needs to understand all the facts in any case to form relevant views as to their importance. In Longobardi the factual circumstances were different. The Longobardis signed application forms in blank and saw documents before the loan was completed which, had they read them, would have told them that the lender was proceeding upon an incorrect understanding of their income. 228None of the above is to deny that the objective fact that the documents were signed in blank is an important matter to take into account in circumstances where it has facilitated fraud.

Other relevant factual errors asserted 229Amended appeal ground 16 concerns the asserted error of the primary judge in finding that the preliminary and final approval letters and the application, having been "branded" as "Streetwise" assisted Streetwise dishonestly to mislead the respondents: [312]-[314] and [413(ii)]. It was submitted that these documents do not support such a conclusion. In support of this, detailed textual expressions are focused upon in the preliminary and final approval letters and in the application forms. With great respect, these submissions are somewhat unrealistic. What the learned primary judge found was plainly open. Indeed, it was the very commercial advantage and circumstance that Tonto and Streetwise understood at the time. The branding (and the agreement not to speak to prospective borrowers by Tonto HL) was to assist the introducer in fostering a belief that it had a connection with the lender or the making of the loan. It was to facilitate the development of a business connection of the making of the loan with the introducer's name and operation. It enabled Streetwise to represent that it was closer to the loan than it really was. This enabled Streetwise, as happened here, to persuade people that the filling in of forms was a matter of formality, it (Streetwise) having been given all relevant information. Of course the forms, if read carefully, make clear the importance of their being filled in fully and accurately and carefully, but this aspect of the conduct of the two businesses (of Tonto HL and Streetwise) did justify the primary judge's conclusion that it facilitated Streetwise misleading the respondents into a view that Streetwise was either the lender or closely related to the lender. It may be a common practice. Nevertheless, to the extent that such impression can lead to difficulty, it is designed to permit the introducer to represent its connection with the loan. It is to be recalled that Tonto HL in its standard form Introduction Deed had a provision forbidding S Loans disclosing the terms of the deed or the arrangement with Tonto HL. Tonto HL and the lenders wanted to "stay in the background". That is, if they desire it, a legitimate commercial position. What the primary judge was saying, and it was entirely justified, was that the branding and the "ownership" given to the introducer enabled the introducer to have the borrower believe that it was closely connected with the loan to the extent that such might be relevant to a deception. 230Appeal grounds 9 and 11 complain about erroneous findings as to Tonto HL exposing the respondents to a serious risk of fraud. At [311] and [320]-[321] the primary judge found that Tonto's agreement with Streetwise not to speak to borrowers and to answer telephone calls from Streetwise clients in the name of Streetwise created a risk in respect of compliance with lending guidelines and the reliability of information provided in applications and that Tonto was aware that loan applicants might be misled. This was relevant to his Honour's findings that the way Tonto conducted its business with Streetwise exposed the respondents to a serious risk of fraud which was reasonably foreseeable. 231First it was said that the conclusion was tainted by a misconceived finding as to "conflict of interest". I have already dealt with this question of conflict of interest. In my view, Tonto HL was plainly aware of the character of Streetwise's business and the inhering risk that someone in the business of Streetwise might misuse its position in order to obtain funding for its own projects through selling products or involving itself with members of the public. Further, the primary judge was entitled to give weight to answers in cross-examination by Mr Paul O'Donnell about the relationship with Streetwise and risk. 232Secondly, it was submitted that the answer of Mr O'Donnell as to risk referred only to the ordinary risk of brokers fulfilling the function of interviews and information collection. That is not the case. Mr O'Donnell was being cross-examined by Mr Menzies SC about the heightened risk brought about by Tonto HL disentitling itself from communicating with prospective borrowers. That undoubtedly, as the primary judge correctly found, undermined the capacity of Tonto HL to carry out its tasks by diligently applying the guidelines insofar as that might require, in any given case, contact with the prospective borrower. 233Thirdly, complaint was made about the finding in the last sentence of [311] that Tonto HL was aware that loan applicants might be misled by the badging of Streetwise, but nevertheless proceeded with the arrangement. It was submitted that the cross-examination did not squarely put this matter to Mr Paul O'Donnell. Looking at the cross-examination of Mr Menzies, I do not accept that criticism. Mr Menzies was cross-examining Mr O'Donnell about badging of the documentation and the agreement not to speak to prospective borrowers. The relevant cross-examination is set out in [306] of the reasons. The answer by Mr O'Donnell was to a direct question to the effect that there was some consideration to the possibility that persons would be misled or confused about the process. Evidently Tonto did go ahead nevertheless. The finding of his Honour was open. 234Fourthly, it was submitted that the primary judge did not properly take clause 2.1 of the Introduction Deed into account in his finding that Tonto exposed the borrowers to a serious risk of fraud. The Introduction Deed of course required all information to be accurate. I do not think that this is a fair criticism of his Honour. He was well aware of the deed. What his Honour found created a risk was the taking on of an introducer such as Streetwise with the risks inhering in that in circumstances where, in particular, Tonto HL put it out of its hands to rigorously pursue its guidelines to the extent that such required contact with the prospective borrower before settlement of the loan. 235These considerations should not be taken as part of any conclusion that Tonto HL could not retain S Loans as an introducer. They do however mean that a commercial party in Tonto HL's position should appreciate the inhering risks involved, as his Honour correctly found. The consequence of this should be to apply guideline checks with rigour.

Erroneous finding of borrowers not exposing lenders to risk of fraud 236The appellants complained that the primary judge did not at [415] take into account the findings, otherwise properly made, that the borrowers by signing blank or partially completed documents exposed themselves and the lenders to the risk of fraud. 237Given the necessity to re-examine and re-exercise the power under the CRA it is strictly unnecessary to deal with the point. The borrowers were careless. Their actions created, to a degree, the risk of fraud. The primary judge's conclusion as to the lack of reasonable foreseeability of fraud (at [405]) should be understood in the way that I have described earlier.

Erroneous finding that the borrowers obtained no benefit 238At one level of analysis there is force in the appellants' contention that the borrowers received a benefit from the loans. Their obligations under the joint venture agreements were satisfied. Thus, a financial benefit was obtained from the agreement said to be unjust. That, however, was not the point being made by the primary judge. The investment was worthless. 239It was submitted that this finding about the worthlessness of the investment was irrelevant. It was not. It was relevant to all the circumstances that might go to relief, should the contracts be held to be unjust.

Erroneous finding as to non-compliance with special condition 240At [247], [413(iv)] and [415] of his reasons, the primary judge found that the "cash out" special condition in the O'Donnells' application was not complied with, and that the approach of Tonto HL made it easier for the fraud to go undetected. 241The complaint is that the special condition was not a condition at all of the loan agreement. The primary judge should have worked on the basis that there was no special condition. 242There is some confusion with this special condition. It appeared in the preliminary approval letter of 7 November 2002, the approval letter of 6 January 2003 issued under the FirstMac Program, and the approval by Origin on 30 January 2003 of the application submitted by Tonto HL on 29 January 2003. Thereafter, the special condition was removed. It is unclear why this occurred. The closeness in time of the (second) final approval letter (31 January 2003) may bespeak a decision around this time to remove the condition. 243The primary judge did not refer to this complexity. In the circumstances, it is difficult to draw any conclusion relevant to the causal consequences of what might, nevertheless, be seen to be a failure to follow guidelines. 244One possible reason for the removal of the condition in the agreement was that it had been satisfied (by the inadequate information). 245To the extent that the special condition was in the documentation put forward by Tonto HL for approval, the guidelines were breached. It was a matter for the appellants to explain in evidence the irrelevance of the information to satisfy it. At the very least, the inadequate information reflects a lack of attention to the guidelines when the condition was stated to be relevant. That said it is, perhaps, problematic what causal effect it had.

The question of legal advice 246Whilst the appellants do not challenge the finding at [407] that the O'Donnells were "persuaded" or "convinced" by Streetwise not to obtain legal advice, it was submitted that the primary judge erred in failing to take into account the O'Donnells' signing of a legal advice acknowledgement certificate. It was submitted that the certificate was misleading if they had been "convinced" not to do so because the certificate use the word "chosen". With respect the submission thus put is semantic and pedantic. 247More to the point is the fact that it told the lenders that the borrowers had had the opportunity to seek legal assistance. The facts otherwise found by his Honour make clear the choice they made - both as to legal and accounting advice. These are matters of some significance.

Asset lending 248The primary judge found at [378] that the loans to the borrowers were "asset-based ... and amounted to asset lending." A critical aspect of that conclusion was his findings of agency and imputation of knowledge. Such findings were wrong. 249Also relevant to the conclusions were the breaches of the guidelines set out at [413(iii)], which findings were not challenged. Complaint was made, however, about the findings in respect of the assessment of each of the loans that the loose attitude adopted to the lending guidelines indicated that those examining the application were not much concerned about the purpose of the loans and whether the borrowers were self-employed and were content to lend on the security of the properties and mortgage insurance: [414], [428] and [437] of the reasons. 250The appellants referred to all the steps taken by Mr Wright and Mr Lougoon in their approval processes and submitted that it is unfair to them, in the absence of the finding having been put to them in terms, to conclude as his Honour did. I disagree. There can be little doubt that their attention to the guidelines was inadequate. There was a clear preparedness to rely upon what had been assumed to be done by others. The overall impression of Mr Lougoon and Mr Wright in the light of their work of applying the guidelines makes it difficult for this Court to interfere with the primary judge's conclusion. To adopt the language of the submissions of ASIC as another way of putting what his Honour did: the lack of regard for the borrowers' capacity to pay can be inferred from the failure to follow the relevant guidelines, the agreement not to contact the borrowers before settlement, the preparedness to rely upon the mortgage insurers' assumed assessment, the paltry information accepted and perfunctory enquiries as to loan purpose and the lack of verification of information, all set against the otherwise scrupulous care and perspicacity with which independent valuations and valid first mortgages were taken. Failure to verify information relevant to capacity to service the loans, in particular ABNs and certificates of business registration and, in relation to Mr Tavares, confirmation that he had been self employed in the same business for two years, lead inexorably to the conclusion his Honour made.

Reconsideration of the CRA and the notice of contention

Reapplication of the CRA 251The principles concerning relief under the CRA were recently restated by Campbell JA in Kowalczuk . There was no substantive debate as to the relevant principles. It was their application that was in contest.

Whether the contracts were unjust 252The first stage of analysis is whether the contracts were unjust as between the parties in the circumstances in which they were made. Of particular relevance here is the element of procedural injustice. The agreements for loan and mortgage were unexceptional. They contained no harsh or unjust terms of themselves. The unjustness of the contracts arises from the deception and fraud practised by Streetwise in the arrangement of the agreements. 253For the reasons that follow, the circumstances in each case lead to the conclusion that the contracts were unjust. I will not re-iterate all the facts. The following features are to be emphasised. 254The central feature that brought about the loan agreements and mortgages was the dishonest conduct of Streetwise in the filling in, and submission of, the various forms and information to Tonto HL. This brought about the contracts which would not have been entered without false information. This was done for the financial advantage of S Property and the principals of Streetwise, to the distinctly possible (at the time) detriment of the lenders and the borrowers. 255That S Loans was not in law the agent of Tonto HL does not mean that for the purpose of evaluating the operation of the CRA , the position of Streetwise, how it came to take its place in the overall enterprises of the lending programmes and the objective perceptible risk of fraud arising from its position should not be considered. 256The perpetrator of the fraud was not a stranger to Tonto HL. It was a retained introducer. It was a sought-after commercial counterparty put in place by Tonto HL for the purpose of hoped for introduction of business. It was part of the "shopfront" of the retail business of the enterprise, albeit sub-contracted, and branded as Streetwise. Its role was to introduce business, obtain information in respect of suitable products and bring forward applications. The characteristics of the group of companies to which it belonged gave it its commercial attractiveness to Tonto HL. As a broking arm of a group engaging in property development it had the attraction to Tonto HL of members of the public as customers engaging in property development or buying property from the group and seeking money so to do. It was obvious commercially that Streetwise was obtaining sources of funding for members of the public going into or doing business with it (all funds at settlement being directed to S Property) and thus providing funding directly or indirectly for its projects. One need not be too specific about this. It is sufficient to recognise that S Loans had a significant incentive (beyond the obtaining of commission) for successful applications, and that this was objectively evident to a commercial party in the position of Tonto HL. In a structure based on independent contract without the control over employees, there was an inherent or systemic risk of exaggeration and fraud which came to pass. This was only heightened by the agreement not to contact prospective borrowers until after settlement, which necessarily weakened Tonto HL's ability to apply its own credit guidelines under both programmes with appropriate commercial vigour. 257One legitimate way of analysing the facts is that through S Property, S Loans was the agent of the borrowers. If S Loans had been worth powder and shot any suggestion that it was not acting for the borrowers would have been shortly dealt with. Nevertheless, this legal position should not be over emphasised in the whole commercial context in which the lending took place, in particular the place and function of S Loans in the commercial enterprise of the lending programmes. 258Whilst the effect of the "badging" of the approvals with the Streetwise logo and name should also not be overstated, its capacity (correctly recognised by the primary judge) to mislead or confuse should not be ignored. As was apparently common in the industry, Streetwise was assisted through the badging (reinforced by the agreement of Tonto HL not to contact prospective borrowers before settlement) to represent itself as closely connected with the lending and as a company of substance. This permitted some of the borrowers to think, at least up until the final loan and mortgage documentation was sent to them, that Streetwise was the lender. Thus, a sense of completeness of disclosure in the customers was brought about, irrespective of the formalities in the various documents that were shown. Once again, this capacity to mislead was created by the structure and operation of the commercial arrangement put in place by Tonto HL. 259The only clear organisational checks and precautions were the guidelines. Not only were they not followed, but they were disregarded in a way found by the primary judge to reflect a lack of real concern for aspects that underpinned serviceability and the suitability of the borrowers. Of course, lending guidelines such as these are principally the relevant tool to protect the lender's interests. However, as recognised by Spigelman CJ in Perpetual Trustee Company v Khoshaba [2006] NSWCA 41 at [80]-[82] and Campbell JA in Kowalczuk at 228 [102], following the guidelines confers a direct benefit on a prospective borrower by identifying risky loans and preventing fraud. The failures can be seen to be material in permitting the fraud to occur. 260There can be no doubt that, to varying degrees, these borrowers were preyed upon by Streetwise, through the blandishments and lies of apparently sophisticated and skilful people. The written page can never fully reflect, in recalled snippets of conversations, the effects of personality, charm, pressure and deception in a carefully orchestrated body of persuasion of ordinary people. That is not to say that the borrowers were not careless, to a degree, foolish and gullible. They all succumbed to the lure placed before them of monetary gain, the lure being made more respectable by its characterisation as the provision for their future and "wealth-building" for their later years. Greed would be too strong a word, and unfair perhaps. But such caution as was initially revealed by them dissolved under the persuasion of, and trust in, Streetwise. These matters went, in particular, to the collateral joint venture transaction. To complete the exercise of deception, a group of lies directed to obtaining the contracts in question was necessary. 261The above said, the behaviour of the borrowers to a degree militates against any conclusion of injustice. The signing of incomplete or blank documents was careless, giving the opportunity for the fraud. The carelessness also extended to the degree to which the documents were misleading; though, to a significant, indeed overwhelming, degree the causative deception occurred through the dishonesty of Streetwise. 262I will not repeat the detail of the coming of each couple to the borrowing set out above and more fully by the primary judge. Read with that detail the following is necessary to say. The O'Donnells were the most deeply involved in the analysis of the property venture put to them by Streetwise. Mrs O'Donnell spent time analysing what was said to her, making notes and explaining matters to her husband. They visited Melbourne to view the property. They considered the retention of a lawyer and accountant, but chose not to do so because of cost and the persuasion of Streetwise. They were prepared to, and did, bind themselves to S Property under the joint venture agreement. Yet, as those at Streetwise must have known, the undertaking was fraught with risk and imprudence. The O'Donnells' judgment was influenced and impressed by Streetwise's apparent substance and its lies and persuasions. The loan, although one which they clearly had applied for, was, however, effected by the fraudulent conduct of Streetwise. 263The same conclusions follow in relation to the loan and mortgage contracts of the Di Benedettos and Mr Tavares and Ms Rowe. The Di Benedettos were subject to greater pressure than the O'Donnells. They did not have the advantage of having the loan and mortgage documentation sent to them directly to enable them to consider it. Tonto HL sent it to them via Streetwise. They were somewhat less deliberate in their assessment of what they were being persuaded of than were the O'Donnells. Mr Tavares and Ms Rowe were the least sophisticated of the three couples. They paid the least attention to what was happening. They were persuaded, pressured and lied to and their loan, like the others, was effected through fraud. 264The position of the lenders should not be judged as detached third parties, distinct and separate from what happened. Nor should they be seen as complicit with, or actually knowing of, Streetwise's deception, fraud and predatory conduct towards the borrowers. Whilst not having actual knowledge or actual notice of Streetwise's behaviour, the lenders' position should be assessed by reference to the reality of the significant responsibility of those structuring the elements of the lending programmes or, in the case of Permanent, those providing the wholesale funds. The mortgage manager (Tonto HL) with delegated lending authority operated the guidelines loosely and in a way which reflected a lack of concern with the suitability of the borrowers and serviceability. The mortgage manager brought into the roles of interviewing and selecting prospective borrowers an intermediary whose commercial attractiveness bespoke the inhering risks to which I have referred, heightened by Tonto HL's agreement not to contact prospective borrowers before settlement. These considerations materially facilitated the ability of Streetwise to effect these frauds. 265In all the circumstances, these considerations are relevant to conclude that the unjustness of the contracts can be seen as unjustness affecting Tonto HL and the lenders. This conclusion is relevant to the assessment of unjustness and the extent to which the lenders should be viewed as bearing responsibility for what happened and in applying the broad considerations contained in the CRA , founded as they are in justice and fairness. Looking at these events as brought about primarily by the fraud of Streetwise, a fair assessment is that the business structure put in place by the lenders in how it operated was significantly responsible for the preying upon these people by Streetwise. That is not to ignore the basis upon which the trial and appeal proceeded, that "Lo Doc Lending" per se was not unjust. Nor is it to introduce an enterprise concept of agency; rather it is to recognise that a sub-contracted lending structure of the kind here, in which persons such as Streetwise are "chased" to become the introductory agents, should have guidelines enforced with real vigour to deal with the obvious objective risks of fraud and deception. No one criticised these guidelines. Their operation was loose, and affected by the attitude found by his Honour. It is only fair and just to recognise the significant responsibility of the lenders in these circumstances. 266Unjustness is a not concept or word with immutable or unvarying content. The degree of unjustness here stems primarily from the fraud and procedural injustice of Streetwise. Though not the agent in law of Tonto HL or Permanent, it was, as I have explained, the link in the business enterprise for which, in the sense I have discussed, the lenders, through Tonto HL, should take significant responsibility. 267What order ought be made for the purpose of "avoiding an unjust consequence or result" for the CRA , s 7(1) will depend in part on the competing matters bearing on the conclusion of injustice and the content of that injustice. 268Before turning to relief it is necessary to say something about the public interest.

Public interest 269The public interest is the subject of particular reference in the CRA , s 9(1). One aspect of the public interest recognised early is keeping people to their freely entered bargains: Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9. By stating the importance of this aspect of the public interest shortly, I should not be thought to be consigning it as a matter of mere note only. It is fundamental, indeed it inheres in the CRA itself. It is an aspect of society that is of vital importance. As Story J said, writing extra-judicially ("Contract" (1832) 9 Encyclopaedia Americana 156), "confidence in promises is ... essential to the existence of social intercourse among men ...". Its strength as an operative legal norm that can be seen as fundamental is directly related to circumstances which give it strength - the just and free circumstances that give rise to the bargain. As Finn J said, writing extra-judicially in "Unconscionable Conduct" (1994) 8(1) Journal of Contract Law 37 at 49, if parties are to be held to their bargains once made, the law should act with vigour to promote the conditions necessary to make the freedom of contract effective, free and just. 270Another aspect of the public interest is the advancement of the protection, which the CRA manifestly intends to give, to those not able fully to protect themselves and to those preyed upon by dishonesty, trickery and other forms of predation. The Peden Report (J R Peden Harsh and Unconscionable Contracts: Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales , 1976) said that the reference to public interest "would direct the courts' attention to the underlying purpose of the Bill, namely to prevent unjust dealings which offend against community standards of business morality": J R Peden The Law of Unjust Contracts (Butterworths, 1982) at 122. 271ASIC sought to draw into the public interest contemplated by s 9(1) aspects of the aims, functions and powers of ASIC in performing its duties under the ASIC Act . By the ASIC Act , s 1(2)(a) in performing its functions and exercising its powers ASIC must strive, amongst other things, to promote and facilitate commercial certainty and efficiency of the economy; and by s 12A it has the function of promoting market integrity and consumer protection in relation to the Australian financial system. These concepts can be seen as relevant to the public interest, not because of the direct operation of the Commonwealth statue, but by their inherent appropriateness to the concept of public interest in respect of financial contracts and the operation of the financial market insofar as an individual contract is concerned. Procedures that promote suitable borrowings and operate as checks against fraud should be seen not only as matters for the lenders to comply with or not as they choose, but as indirect guards against conduct that can produce injustice to members of the public and thus undermine confidence in the free and fair operation of financial markets. That said, it is not part of the purpose of the CRA to promote an efficient banking system or to lay down rules for good banking practice: cf Cook v Permanent Mortgages Pty Ltd [2007] NSWCA 219 at [14]. Nevertheless, to the extent that the organisation of lending programmes, through sub-contracted intermediaries, has the capacity to generate risk of lending to duped, misled or inappropriate borrowers and such structures are administered without clear operational regard for the lending guidelines, it is in the public interest to administer the CRA to protect such people. Such protection will, in the public interest, encourage the recognition by lenders that the safeguards in such structures to avoid or minimise fraud or misleading conduct should be rigorously applied. For example, here, it was not good enough to be precise and perspicacious only about the taking of security and its value. Care must be taken not to misuse a statute, designed for the protection of individuals, by employing it to regulate the financial system. But when people are duped, misled, defrauded or taken advantage of by participants in the financial system by means that have been, in significant part, facilitated by inhering obvious risk and lax operation of appropriate safeguards, it conforms to the public interest to take into account such systemic and operational failure in order to assist to promote conditions that will make it more difficult for such conduct to exist, and thus encourage circumstances more conducive to free and just contracts. 272Such considerations here militate in favour of a finding of unjustness and in favour of granting relief to the borrowers. This is so because the structure of the enterprise, the retention of Streetwise with its evident interests, the lack of attention to safeguards and the act of the retained intermediary (albeit not an agent) played a significant and material part in creating the conditions for Streetwise's fraud to flourish and for these loans to be effected.

Relief 273Section 7(1) authorises the Court, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, to declare the contract void (s 7(1)(b)), refuse to enforce the contract (s 7(1)(a)), vary the contract (s 7(1)(c)) and, in respect of a land instrument, make orders requiring execution of an instrument that varies, terminates or affects the land instrument or its operation (s 7(1)(d)). Section 7 is subject to s 19, sub-section (1) of which says: "An order made under section 7(1) (b) or (c) has no effect in relation to a contract so far as the contract is constituted by a land instrument that is registered under the Real Property Act 1900 ." 274It is necessary to amend the orders of the primary judge. Section 19(1) meant that he could not declare the registered mortgages void. If, as his Honour found, the loan agreements were to be declared void, that meant that there was no indebtedness over which the mortgages could operate. Thus, the appropriate order to make was that the mortgagees deliver up a discharge of mortgage in registrable form to the borrowers. 275Of course, as the primary judge provided for, Mr Tavares and Ms Rowe were required to give credit for the indisputable benefit of the receipt of $50,872.76 together with interest. 276The relief to be given in accordance with the direction of s 7(1) permits the Court a wide choice based on its evaluation of the circumstances and of the injustice, to avoid the relevant unjustness. In circumstances such as the present, where the primary source of the unjustness is the fraud of a third party, avoidance of the unjustness calls for an evaluation of the respective positions of the parties. Relevant to that is the degree and extent to which the parties can be seen to have responsibility for what happened and the extent to which it is just that such responsibility should be reflected in the extent of remedial relief. Also of particular relevance is the capacity and context of the respective participation of the parties. The borrowers were all the subject of the kind of predation that the CRA was designed to relieve, in appropriate circumstances. The predation occurred in circumstances that were objectively facilitated by the structure and operation of the lending enterprises. I do not wish to repeat what I have already said about this, except to emphasise that it was the chosen commercial counterparty of Tonto HL which committed the fraud, and in circumstances where the objective risk of placing the functions of interview and information collection in that party's hands were evident and exacerbated by the arrangements not to speak to borrowers and by the loose attention to operational checks by the guidelines. 277In respect of the Di Benedettos, Mr Tavares and Ms Rowe, the order that is appropriate, in all the circumstances of the unjustness, including the public interest to which I have referred, is to relieve them of liability as the primary judge did (recognising the repayment by Mr Tavares and Ms Rowe and amending the orders about the mortgages). 278From the evidence as to their resources, a substantive share of responsibility for the loans could well deprive them of their homes. In the circumstances of their being misled and preyed upon by Streetwise and all the other circumstances, such a result would be unjust. 279The O'Donnells are in a somewhat different position. The evidence reveals that Mrs O'Donnell, in particular, expended considerable effort in understanding what the property venture was. Their decision to enter all the transactions was significantly more the result of the exercise of free will than the decisions of the Di Benedettos and Mr Tavares and Ms Rowe. The assessment is not an easy one to make; but I am left with the positive persuasion that it would involve a degree of injustice to the lender to remove all consequences of responsibility for what happened from the O'Donnells. It is, of course, to be remembered that it is the loan agreement that was unjust because of the fraud of Streetwise. Further, Mrs O'Donnell was to a degree misled about the identity of the lender. Nevertheless, they wanted this borrowing to effectuate their considered decision to enter into the arrangement with Streetwise, they having chosen not to make use of their available advisers (accounting and legal). 280In my view, an unjust consequence (both to the O'Donnells and the lender) would be avoided by relieving them of three quarters of the financial consequences of the loan agreement. To do more would be unjust to the lender. 281It is to be noted that no issue was pleaded or argument run invoking the CRA , s 6(2).

Notice of contention - other statutory relief 282The borrowers and ASIC also maintained that the orders made by the primary judge should be supported by: (a) the ASIC Act , ss 12CB and 12CC; (b) the Trade Practices Act 1974 (Cth) (" TPA "), ss 51AB and 51AC; and (c) the Fair Trading Act 1987 (NSW) (" FTA " ) , s 43 283Each of these provisions operates on a prohibition of "conduct that is, in all the circumstances, unconscionable". 284In argument, it became common ground that the loans in question here involve the provision of a financial service as defined in the ASIC Act , s 12BAB. This made the TPA and FTA provisions irrelevant. 285The provisions of the ASIC Act relied upon by ASIC, ss 12CB and 12CC were, at the relevant time, in the following terms: " 12CB Unconscionable conduct (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without limiting the matters to which the Court may have regard for the purpose of determining whether a person (the supplier ) has contravened subsection (1) in connection with the supply or possible supply of services to a person (the consumer ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the consumer; and (b) whether, as a result of conduct engaged in by the supplier, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent services from a person other than the supplier. (3) A person is not taken for the purposes of this section to engage in unconscionable conduct in connection with the supply or possible supply of financial services to another person merely because the person: (a) institutes legal proceedings in relation to that supply or possible supply; or (b) refers a dispute or claim in relation to that supply or possible supply to arbitration. (4) For the purpose of determining whether a person has contravened subsection (1) in connection with the supply or possible supply of financial services to another person: (a) the Court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the Court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (5) A reference in this section to financial services is a reference to financial services of a kind ordinarily acquired for personal, domestic or household use. 12CC Unconscionable conduct in business transactions (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of financial services (see subsection (6)) to another person (other than a listed public company); or (b) the acquisition or possible acquisition of financial services (see subsection (7)) from another person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a person (the supplier ) has contravened subsection (1) in connection with the supply or possible supply of financial services to another person (the service recipient ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the service recipient; and (b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and (e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the service recipient was consistent with the supplier's conduct in similar transactions between the supplier and other like service recipients; and (g) if the person is a corporation-the requirements of any applicable industry code (see subsection (11)); and (h) the requirements of any other industry code (see subsection (11)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the service recipient: (i) any intended conduct of the supplier that might affect the interests of the service recipient; and (ii) any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and (j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the financial services with the service recipient; and (k) the extent to which the supplier and the service recipient acted in good faith. (3) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a person (the acquirer ) has contravened subsection (1) in connection with the acquisition or possible acquisition of financial services from a person (the business supplier ), the Court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the business supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the business supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the business supplier was able to understand any documents relating to the acquisition or possible acquisition of the financial services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business supplier or a person acting on behalf of the business supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the financial services; and (e) the amount for which, and the circumstances in which, the business supplier could have supplied identical or equivalent financial services to a person other than the acquirer; and (f) the extent to which the acquirer's conduct towards the business supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like business suppliers; and (g) if the person is a corporation-the requirements of any applicable industry code (see subsection (11)); and (h) the requirements of any other industry code (see subsection (11)), if the business supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the business supplier: (i) any intended conduct of the acquirer that might affect the interests of the business supplier; and (ii) any risks to the business supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the business supplier); and (j) the extent to which the acquirer was willing to negotiate the terms and conditions of any contract for the acquisition of the financial services with the business supplier; and (k) the extent to which the acquirer and the business supplier acted in good faith. (4) A person is not taken for the purposes of this section to engage in unconscionable conduct in connection with: (a) the supply or possible supply of financial services to another person; or (b) the acquisition or possible acquisition of financial services from another person; merely because the person institutes legal proceedings in relation to that supply, possible supply, acquisition or possible acquisition or refers a dispute or claim in relation to that supply, possible supply, acquisition or possible acquisition to arbitration. (5) For the purpose of determining whether a person has contravened subsection (1) in connection with the supply, possible supply, acquisition, or possible acquisition of financial products: (a) the Court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the Court may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement. (6) Subject to subsection (8), a reference in this section to the supply or possible supply of financial services is a reference to the supply or possible supply of financial services to a person whose acquisition or possible acquisition of the financial services is or would be for the purpose of trade or commerce. (7) Subject to subsection (9), a reference in this section to the acquisition or possible acquisition of financial services is a reference to the acquisition or possible acquisition of financial services by a person whose acquisition or possible acquisition of the financial services is or would be for the purpose of trade or commerce. (8) A reference in this section to the supply or possible supply of financial services does not include a reference to the supply or possible supply of financial services at a price in excess of $3,000,000, or such higher amount as is prescribed. (9) A reference in this section to the acquisition or possible acquisition of financial services does not include a reference to the acquisition or possible acquisition of financial services at a price in excess of $3,000,000, or such higher amount as is prescribed. (10) For the purposes of subsections (8) and (9): (a) subject to paragraphs (b), (c), (d) and (e), the price for: (i) the supply or possible supply of financial services to a person; or (ii) the acquisition or possible acquisition of financial services by a person; is taken to be the amount paid or payable by the person for the financial services; and (b) if a person: (i) was supplied financial services pursuant to a purchase; or (ii) acquired financial services by way of purchase; together with other property or services, or with both other property and services, and a specified price was not allocated to the services in the contract under which they were purchased, the price of the services is taken to have been: (iii) the price at which, at the time of the supply or acquisition, the person could have purchased the services from the supplier without the other property or services; or (iv) if, at the time of the purchase, the services were only available for purchase together with the other property or services but, at that time, services of the kind purchased were available for purchase from another supplier without other property or services-the lowest price at which the person could, at that time, reasonably have purchased services of that kind from another supplier; or (v) if, at the time of the purchase, services of the kind purchased were not available for purchase from any supplier except together with other property or services-the value of the services at that time; and (c) if a person is supplied with financial services otherwise than pursuant to a purchase, the price of the services is taken to have been: (i) the price at which, at the time of the supply, the person could have purchased the services from the supplier; or (ii) if, at the time of the supply, the services were not available for purchase from the supplier, or were available only together with other property or services, but, at that time, services of the kind supplied were available for purchase from another supplier-the lowest price at which the person could, at that time, reasonably have purchased services of that kind from another supplier; or (iii) if services of the kind supplied were not available, at the time of the supply, for purchase from any supplier, or were not available except together with other property or services-the value of the services at that time; and (d) without limiting by implication the meaning of the expression services in subsection 12BA(1): (i) the obtaining of credit by a person in connection with the supply of financial services to the person is taken to be the acquisition by the person of a service; and (ii) any amount by which the amount paid or payable by the person for the services is increased by reason of the person's so obtaining credit is taken to be paid or payable by the person for that service; and (e) the price for the supply or possible supply, or the acquisition or possible acquisition, of services comprising or including a loan or loan facility is taken to include the capital value of the loan or loan facility. (11) In this section: applicable industry code , in relation to a corporation, has the same meaning as it has in subsection 51ACA(1) of the Trade Practices Act 1974 . industry code has the same meaning as it has in subsection 51ACA(1) of the Trade Practices Act 1974 . listed public company has the same meaning as it has in the Income Tax Assessment Act 1997." Those provisions were relied upon in the alternative. Section 12CB applied only in circumstances set out in s 12CB(5), being supply of financial services of a kind ordinarily acquired for personal, domestic or household use. If the loans did not fit that description s 12CC applied, but only if the supply of the financial services was to someone whose acquisition or possible acquisition of the financial services is or would be for the purpose of trade or commerce: s 12CC(6). ASIC and the respondents submitted that one or other of s 12CB or 12CC applied. The appellants submitted that neither applied and the only provision that was operative was s 12CA which required unconscionability "within the meaning of the unwritten law". This would have taken the matter back to equitable principle. Only faint reliance was made by ASIC or the respondents upon s 12CA in submissions. 286It is unnecessary to resolve finally the question as to the operation of either s 12CB or s 12CC because, in my view, the conduct of Tonto HL, and through it the lender, cannot be described as "unconscionable". Section 12CA also therefore should not apply. 287The conduct of Streetwise was undoubtedly unconscionable. Little time needs to be spent reaching that conclusion. If the correct view were that S Loans was the agent of Tonto HL equally little time would be required to reach the conclusion that Tonto HL, and through it the lender, would have had its conduct so characterised. No so-called fraud exemption would operate here. This would be the attribution of conduct from an agent to a principal, on this hypothesis, within the scope of the agency. That, however, is not the position. The attribution of corporate state of mind by agency is dealt with in the ASIC Act , s 12GH. That provision works on the premise of the existence of a "director, employee or agent" of the body corporate. There was no argument that "agent" here was different to that found at general law. 288The person whose conduct is to be characterised as unconscionable is Tonto HL and through it the lenders. It is important to bear this in mind. It is not a matter of concluding that a contract induced by fraud of Streetwise is unjust and assessing whether in all the circumstances that unjustness should be seen to taint the agreement such that relief should flow against the lenders. It is the conduct of the lenders, through Tonto HL that is to be attributed with the characterisation as unconscionable. The submissions of ASIC and the respondents recognised this. This unconscionability could, of course, arise from the actions and knowledge of the lenders. Notice of the conduct of Streetwise may well have led to the conclusion that Tonto HL and the lender acted unconscionably. That, however, was not shown. 289The notion of unconscionable in this context finds its origin in the general law, equity and concepts underpinning provisions such as articles 2-302 and 5-108 of the Uniform Commercial Code and the German Civil Code (BGB) para 138, the Consumer Protection Act 1967 (British Columbia), s 18, the Unconscionable Transactions Relief Act 1990 (Ontario), s 2, various money lenders legislation, hire purchase legislation, the Industrial Arbitration Act 1940 (NSW), s 88F and other particular legislation: see generally Peden The Law of Unjust Contracts at 3-81 and the Peden Report. 290ASIC pressed the argument that the meaning of "unconscionable" in the ASIC Act should take its content in part from provisions dealing with ASIC's functions such as ss 1(2) and s 12A. One should be cautious about acceding to a submission that would see subtly different meanings given to cognate provisions in legislation such as the ASIC Act and the TPA (and FTA ). It suffices to say that the context of "unconscionable" in the ASIC Act does not give it a distinct or different meaning from its equivalent provisions in the TPA or FTA . All three sets of provisions have similar purposes in the protection of consumers and the promotion of just and fair markets. 291Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at 583 [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at 140 [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; 117 FCR 301 at 316-317 [44]; Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262; factors similar to those that are relevant to the CRA are relevant: Spina v Permanent Custodians Ltd [2009] NSWCA 206 at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at 140 [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at 143 [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances. 292I do not propose to rehearse once again the totality of the conduct. Streetwise was not Tonto HL's agent. That is of great importance in this enquiry. Not only does it remove attribution of the conduct of Streetwise and its knowledge, but it also removes the finding of asset lending in the way his Honour found it. There remain the breaches of the guidelines and the lack of attention and care to serviceability and suitability based upon primary reliance upon security. There also remains the objective risk that existed by the employment of a company such as Streetwise together with the additional arrangement of not approaching borrowers. Whilst these are facts which all amount to circumstances and conduct which, for the reasons I have already given, are sufficient to justify relief being given against the lenders under the CRA , they do not in my view amount to unconscionability. There is no real suggestion in the argument or the evidence that those at Tonto HL understood the actuality of the trickery and lies that were being undertaken by Streetwise or had any notice of them. I do not think that the structural creation of risk and the heightening of that risk by the arrangements with Streetwise meet the notion of moral obloquy required. The true facts are now known, but in circumstances where those at Tonto HL were innocent of the conduct at the time it is not unconscionable to be seeking to maintain the transaction. 293This conclusion is an evaluative one. The respondents and ASIC pressed the view strongly that the circumstances that lead (even without a finding of agency) to the conclusion of the responsibility of Tonto HL and the lenders for what happened so as to invoke the CRA equally lead to a conclusion as to unconscionability. I cannot agree. Spigelman CJ in World Best Holdings at 583 [121] referred to a "high level" of moral obloquy. Whether that is too stringent and whether "significant" or "real" may be preferable need not be decided. What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party. Here, without a finding of some knowledge or complicity, the circumstances do not reach that level. 294If I be wrong and if the conduct of Tonto HL and the lenders was unconscionable, the flexible relief provided for by the ASIC Act , ss 12GD and 12GM would lead to no different relief than I would give under the CRA . 295In my view relief should not be given on the basis of unconscionability. 296For the above reasons it is unnecessary to deal with whether s 12CB or s 12CC applied. The question as to how one characterises whether financial services (being here the provision of a "credit facility" within Reg 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth) (as the provision of credit or a mortgage that secures obligations under a credit contract) and thus a "credit facility" for s 12BAA(7)(k) and through it a "financial product" for ss 5(1) and 12BA(1)) are ordinarily acquired for personal, domestic or household use is not straightforward. It is not necessary to examine whether the Full Court of the Federal Court in Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; 191 FCR 71 at 121 [416] was correct in examining the matter from the perspective of the predominant business purpose of the loan. If a person sought to finance a business in trading in derivatives by taking out a 20 year standard home loan it would be difficult to conclude otherwise than that the credit facility or financial product fell within s 12CB(5). Here the "products" were so-called "LoDoc" loans for the purchase or refinance of a home or an investment property or to access equity for personal or investment reasons. Judicial notice can be taken of the wide investment in the community for the provision of retirement saving. Such borrowing for such purposes is not infrequently undertaken for the personal use of saving for one's retirement. To a degree that is a business use; to a degree it is a personal or household use - for personal savings. 297In any analysis of this question, the careful and helpful judgment of Young J in Bunnings Group Limited v Laminex Group Limited [2006] FCA 682; 153 FCR 479 at 496-507 is of great assistance. Given the place of this issue in the resolution of this dispute, it is unnecessary to review in detail his Honour's analysis or reach any final view. It is sufficient to express my general agreement with it. 298Looking here at the characteristics of this so-called financial product, were it necessary to decide, I would conclude that "ordinarily" such loans are used for the personal use of investment saving: cf Hygienic Lily Ltd v Deputy Federal Commissioner of Taxation (1987) 13 FCR 396 at 399; Bunnings v Laminex at 502-503. One can see this from the nature and characteristics of the product and the type of small business person that the guidelines reveal might well be applying for the loan.

Orders 299Thus the orders that I would make are as follows: (1)As to appeal number 2009/00298570 (formerly 40454 of 2009) being the Tavares and Rowe appeal: (a)Allow the appeal in part. (b)Set aside order 2(b) made by the Supreme Court on 26 February 2010 (as set out in [448] of the primary judge's reasons) and in lieu thereof order that the mortgagee Tonto Home Loans Australia Pty Ltd deliver up to Jose De Carvalho E Rego Tavares and Kim Lee-Anne Rowe a registrable discharge of mortgage, but only on condition that Mr Tavares and Ms Rowe pay or have paid to the mortgagee or at its direction the sums referred to in order 4 made by the Supreme Court on 26 February 2010. (c)The appellant pay the respondents' costs of the appeal. (2)As to appeal number 2009/00298571 (previously 40455 of 2009) being the Di Benedetto appeal: (a)Allow the appeal in part. (b)Set aside order 2(b) made by the Supreme Court on 26 February 2010 (as set out in [447] of the primary judge's reasons) and in lieu thereof order that the mortgagee, Permanent Trustee Company Limited ("Permanent"), or to the extent that it has acceded to that company's rights, FirstMac Limited, deliver up to Lawrence Di Benedetto and Maria Di Benedetto a registrable discharge of mortgage. (c)The appellant pay the respondents' costs of the appeal. (3)As to appeal number 2009/00298572 (previously 40456 of 2009) being the O'Donnell appeal: (a)Allow the appeal in part. (b)Set aside orders 2 and 5 made by the Supreme Court on 26 February 2010 (as set out in [446] of the primary judge's reasons) and in lieu thereof order: (i)The loan agreement dated 10 January 2003 and made between Permanent as lender, or to the extent that it has acceded to that company's rights, FirstMac Limited, and Gillian O'Donnell and John Robert O'Donnell as borrowers be varied to reduce the principal loan from $500,000 to $125,000 such variation to take effect from 1 August 2005, with the effect that thereafter the responsibility for payment of interest and principal be referable to a principal sum of $125,000. (ii)The security provided by registered mortgage numbered 9386484P between Mr and Mrs O'Donnell and Permanent, or to the extent that it has acceded to Permanent's rights, FirstMac Limited, be limited in effect accordingly such that upon payment of the sum or sums sufficient to repay said loan as varied the O'Donnells be entitled to receipt of a registrable discharge of mortgage. (iii)The plaintiff pay 75 per cent of the defendants'/cross-claimants' costs of the proceedings. (c)The appellant pay 75 per cent of the respondents' costs of the appeal. 300I have made the appellant responsible for three quarters of the costs of the proceedings and the appeal because I do not think that the costs order can be separated from relief of the injustice contemplated by s 7(1) of the CRA. The variation to the loan agreement leaving the O'Donnells to fund 25 per cent of the loan achieves justice in my view to both the lender and the O'Donnells. The costs order should reflect that proportion. The parties have not, however, been heard on this aspect of costs and I would give the parties an opportunity to seek a different order. 301There may also be a need for particular variations of the orders to meet exigencies of circumstances or the documentation. Further, the leaving in place of the orders of the primary judge avoiding the loan agreements might be the subject of slight variation to ensure (as no doubt was intended by the primary judge) that Streetwise not benefit in any way from that avoidance. 302The parties should apply promptly (within 14 days) by notice of motion for any such variations. 303CAMPBELL JA: I agree with the reasons of Allsop P. I add remarks concerning one topic. 304It is implicit in the President's reasoning at [223] that, insofar as it was relevant to enquire whether the fraud of Streetwise was reasonably foreseeable, the appropriate enquiry was whether that fraud was reasonably foreseeable by the respondents . I shall explain why that way of approaching the matter is correct. 305Presently relevant parts of the Contracts Review Act 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, ... ... 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." 306The wording of s 9(4) does not say by whom circumstances are to be "not reasonably foreseeable at the time the contract was made" , if those circumstances are to be ignored by the court. 307There are textual indications in s 9 that what is meant is "not reasonably foreseeable by the party to the contract whose conduct and circumstances is being considered" . Section 9(2)(a) is concerned with the position in which the individual parties to the contract find themselves. The same can be said of each of s 9(2)(b), (c), (d), (e) and (f). Concerning s 9(2)(g), whether the contract is wholly or partly in writing, and the physical form of the contract, are objective matters. However, the intelligibility of the language in which it is expressed can include matters relating to the individual position of a party - a contract written in the plainest of English will not be understood, from the writing alone, by someone who does not read English, or does not read English sufficiently well. Section 9(2)(h), (i) and (j) pay particular attention to the position of the party to the contract who is seeking relief. Section 9(2)(k) requires the court to pay attention to the circumstances of the individual parties to the contract. After all those matters that are dependent upon the particular position of parties to the contract, it would be in keeping that s 9(4) similarly decides what is "reasonably foreseeable" by reference to the position of the parties to the contract. 308Admittedly, there are legal contexts in which "reasonably foreseeable" mean reasonably foreseeable by the notional ordinary reasonable person. However, importing that shade of meaning into s 9(4) would not advance the purposes of the Contracts Review Act . One of the purposes of the Contracts Review Act is to provide some measure of protection to the vulnerable, the naive and the unintelligent. If the term "reasonably foreseeable" in s 9(4) was taken to mean reasonably foreseeable by the notional ordinary reasonable person, the Act would be hobbled. This is because injustice arising from circumstances that were reasonably foreseeable by a notional reasonable person but that were not reasonably foreseeable by a person with the limitations that a particular plaintiff has, would be excluded from the balancing exercise that is involved in deciding whether a contract is unjust. Conversely, if either a plaintiff, or a defendant, has particular sophistication or knowledge that makes a consequence reasonably foreseeable to someone in their situation, that consequence can be taken into account in the balancing exercise even if it would not be reasonably foreseeable by the notional ordinary reasonable person. The purpose of s 9(4) is, after all, to identify circumstances that the court is forbidden to take into account in deciding whether a contract is unjust. The broader purposes of the Act as a whole are more effectively advanced by limiting the matters that the Court is obliged to ignore. 309In the context in which [223] appeared, the topic under discussion was whether the fraud of Streetwise should have been left out of the balancing exercise because it is reasonably foreseeable that handing over signed documents containing blanks might lead to fraud. Thus, in that context, what was relevant was what was reasonably foreseeable to the respondents. 310Another aspect of this case concerned whether the fraud of Streetwise was reasonably foreseeable by Tonto HL in its position of running a substantial lending business using a structure that involved deliberately keeping itself out of communication with potential borrowers. To such a person the risk was reasonably foreseeable, and thus appropriately entered into the balancing exercise. 311I agree with the orders proposed by Allsop P.

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