Vella v Permanent Mortgages Pty Ltd

CATCHWORDS : BANKING AND FINANCE [20]- Bank paid money by finance company because of customer's fraud- Whether bank "received" money to be liable to refund it on count for money had and received- Held "No". BANKING AND FINANCE [20]- Joint account with both customers to sign cheques- Bank paid out on one genuine signature- Whether other customer could recover whole or only half the money paid. CONVEYANCING [206]- Torrens system- Mortgage registered- Forged document- Secures money under loan agreement as defined- That agreement forged- Thus no money secured by indefeasible mortgage. MORTGAGES [4][5][6]- Forged mortgage- Registered- Refers to all monies owing under forged loan agreement- Mortgagor not liable despite indefeasibility. PROFESSIONS AND TRADES [67]- Solicitors- Forged mortgage- Solicitors relied on false statement by another solicitor- Problem could have been avoided if appropriate form used- Evidence of NSW practice- Whether could be practice widely accepted in Australia. TORTS [71]- Apportionment- Proportionality- Liability of fraudster and solicitor making false statement and solicitor drawing mortgage apportioned: 72.5%- 15%- 12.5%- Civil Liability Act 2002 (NSW) ss 34-35. -

Australian Securities and Investments Commission Act 2001 (Cth), s 12GF Cheques Act (1986) (Cth), s 32 Civil Liability Act 2002, ss 5B, 5C, 5 O, 34, 35 Consumer Credit (New South Wales) Act 1995, ss 5, 6, 11 LEGISLATION CITED : Contracts Review Act 1980, s 6 Fair Trading Act 1987, ss 42, 68, 72 Law Reform (Miscellaneous Provisions) Act 1946, s 5 Law Reform (Miscellaneous Provisions) Act 1965, s 9 Real Property Act 1900, s 80A

Abigail v Lapin [1934] AC 491; 51 CLR 58 Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 Agius v Great Western Colliery [1899] 1 QB 413 Aktieselskabet Ocean v B Harding & Sons Ltd [1928] 2 KB 371 Alati v Kruger (1955) 94 CLR 216 Ardern v Bank of New South Wales [1956] VLR 569 Associated Midland Corporation v Bank of New South Wales [1983] 1 NSWLR 533 Astley v Austrust Ltd (1999) 197 CLR 1 Auburn MC v ARC Engineering Pty Ltd [1973] 1 NSWLR 513 Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 Australian Bank of Commerce Ltd v Perel [1926] AC 737 Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6 Baker v Barclays Bank Ltd [1955] 1 WLR 822 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 Berkeley v Hardy (1826) 5 B & C 355; 108 ER 132 Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 Bolam v Friern Barnet Hospital Management Committee [1957] 1 WLR 582 Breskvar v Wall (1971) 126 CLR 376 Brewer v Westminster Bank Ltd [1952] 2 All ER 650 Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496 Cash Resources Pty Ltd v B T Securities Ltd [1990] VR 576 Catlin v Cyprus Finance Corp (London) Ltd [1983] 1 All ER 809 Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675 Chandra v Perpetual Trustees Victoria Ltd (No 2) [2008] NSWSC 178 City of Canada Bay Council v Bonaccorso Pty Ltd (2007) 156 LGERA 294 Clough v London & North Western Railway Co (1871) LR 7 Ex 26 Cobb v Becke (1845) 6 QB 930; 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6 ER 668 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 Symonds v Atkinson (1856) 1 H & N 144; 156 ER 1152 T W Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 The Solway Prince (1914) 31 TLR 56 Thompson v Palmer (1933) 49 CLR 507 Thoroughgood's case (1582) 2 Co Rep 9a; 76 ER 408 Tradigrain SA v King Diamond Shipping SA [2002] 2 Lloyd's Rep 319 Treacey v Edwards (2000) 49 NSWLR 739 Trust Co of Australia v Perpetual Trustees WA (1997) 42 NSWLR 237 Twibell v London Suburban Bank [1869] WN (Eng) 127 Vassos v State Bank of south Australia [1993] VR 316 Vinidex Tubemakers Pty Ltd v Thiess Contractors Pty Ltd [2000] NSWCA 67 Waters Motors Pty Ltd v Cratchley (1963) 80 WN (NSW) 1165 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 White v Garden (1851) 10 CB 919; 138 ER 364 White v Tomasel [2004] 2 Qd R 438 Wyong Shire Council v Shirt (1980) 146 CLR 40 Yan v Post Office Bank Ltd [1994] 1 NZLR 154 Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567

Alessio Emanuel Vella (P) PARTIES : Permanent Mortgages Pty Ltd (D) Maria Anna Palumbo (First Cross-Defendant)

M J Slattery QC, D A Smallbone and L M Wilson (P) COUNSEL : R A Parsons (D) No appearance (XD1)

Slater & Gordon Lawyers (P) SOLICITORS : Kells The Lawyers (D) No appearance (XD1)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4122/06 - VELLA v PERMANENT MORTGAGES PTY LTD JUDGMENT 1 HIS HONOUR: Six sets of proceedings have been consolidated and heard together. The present proceedings are the lead proceedings. The other proceedings are 4059/06 Vella v Mitchell Morgan Nominees Pty Ltd, 3957/06 Vella v ANZ Banking Corporation Ltd, 5103/06 Vella v Annous, 5143/06 Permanent Mortgages Pty Ltd v Vella and 5154/06 Permanent Mortgages Pty Ltd v Vella. 2 These proceedings concern mortgages over land at Leppington and Mangrove Mountain. Proceedings 4059/06 concern land at Enmore, proceedings 3957/06 deal with the proceeds obtained from mortgaging the land which proceeds found their way into a joint bank account in the name of the plaintiff and one A Caradonna. Proceedings 5103/06 deal with the tracing of the money that flowed through that bank account to various ultimate recipients. 3 Proceedings 5143/06 are the mirror reverse to part of 4122/06 in that the mortgagee seeks possession of the Mangrove Mountain property. Proceedings 5154/06 are the mirror image of the other part of 4122/06 being the mortgagee's claim for possession of the Leppington property. 4 All of the proceedings were heard by me for eight days, namely 3, 4, 5, 6, 7, 10, 12 and 13 March 2008. At the end of that hearing, the two possession proceedings, 5143/06 and 5154/06 were adjourned until 30 September 2008 for mention because their outcome depends on decisions in the other matters and I reserved my decision in the other four matters. 5 In 4122/06, Mr M J Slattery QC, Mr D A Smallbone and Ms L M Wilson appeared for the plaintiff and Mr R A Parsons appeared for Permanent Mortgages Pty Ltd. 6 In 4059/06 the plaintiff's team was the same, Mr B A Coles QC and Mr G A Sirtes appeared for the mortgagee, Mitchell Morgan Nominees Pty Ltd and its associated company, Mr J W Stevenson SC and Mr N Kabilafkas appeared for Hunt & Hunt, Mr R G Forster SC and Mr P J Dowdy appeared for the ANZ Bank and Mr P Morris appeared for Mr J Rutty. In 3957/06 the plaintiff's appearances were the same save that Mr S Burchett of counsel appeared for Mr Annous and Mr R D Marshall and Mr C H Cassimatis appeared for Mrs Vanessa Tsokos. 7 In 5103/06, the plaintiff's team was the same, Mr S Burchett appeared for Mr Annous and Mr R D Marshall and Mr C H Cassimatis appeared for Mrs Vanessa Tsokos. 8 The final two sets of proceedings were stood over to be considered after the publication of these reasons. 9 The facts in 4122/06 are basically that the plaintiff, Alessio Vella, claims a declaration that no monies are owing under either: (a) registered mortgage AC149762 affecting the land in Folio Identifier 2/553495 being land at XXX Bringelly Road, Leppington (the Leppington Property); and (b) registered mortgage AC149770 affecting the land in Folio Identifier 1/584827 being land at XXX Waratah Road, Mangrove Mountain (the Mangrove Mountain Property) (together, the Permanent Mortgages). The plaintiff is the sole registered proprietor of both those parcels of land. The defendant, to which I shall refer simply as "Permanent" is the mortgagee named in the mortgages and was the company which provided the funds which were paid out. 10 The basic case made out by the plaintiff is in outline as follows:

B. The plaintiff never received any money from Permanent;

C. It is acknowledged that the Permanent Mortgages obtained indefeasibility on their registration;

D. However, the Permanent Mortgages secured "all monies" due by the plaintiff under certain loan agreements;

F. Ergo, nothing is owing by the plaintiff to Permanent under the Permanent Mortgages;

G. The plaintiff is entitled to a declaration to have the Permanent Mortgages set aside. 11 There is a cross-claim by Permanent against Maria Anna Palumbo. Ms Palumbo is alleged to be the witness to the signature purporting to be that of Mr Vella to each of the Permanent Mortgages. It is alleged that she misrepresented that she witnessed Mr Vella sign the Permanent Mortgages. Damages are claimed against her for $1,151,500.00. Ms Palumbo never appeared and default judgment is being sought against her. There was a second cross-claim, but that has been settled. 12 I believe that it is most convenient if I consider the issues that arise between the parties under the following headings:

1. What are the basic facts?

(a) (i) on the Permanent Mortgages; (ii) on the Mitchell Morgan Mortgage; (iii) on the ANZ Bank.

(b) What monies do the mortgages secure under: (i) the Permanent Mortgages; (ii) the Mitchell Morgan Mortgage.

9. The cross-claim by Hunt & Hunt against Mr Flammia.

10. The cross-claim by Permanent against Mr Vella re misleading conduct.

11. The cross-claim by Mitchell Morgan against Mr Vella.

12. The cross-claims against Mrs Tsokos and other recipients of the monies.

(a) the cross-claim by Permanent against Ms Palumbo;

(b) the cross-claim by Mr Vella against Mr Caradonna;

(c) the cross-claim by the ANZ Bank against Mr Caradonna.

1. What are the basic facts? 13 The essential facts are in a relatively small compass and, apart from the vital facts, are not really in contest. 14 I should first briefly introduce the major players in this contest. 15 Mr Vella is a property investor and is also interested in motor bikes and boxing. He is the national president of a group of motor bike enthusiasts known as the Rebels. Mr Vella is unable to read English except to a very limited extent. 16 Mr Angelo Antonio (Tony) Caradonna is an entrepreneur involved inter alia in the sport of boxing. 17 Mr Vella came to know Mr Caradonna in 2002. Mr Caradonna would assist Mr Vella in transactions involving documents and would read them to him. 18 In late 2005, Messrs Vella and Caradonna entered into a business venture related to a boxing event between Anthony Mundine and Danny Green in autumn 2006. The venture involved selling tickets to the fight and to a dinner to be hosted on the night after the fight with one Joe Frazier, the ex-international heavyweight boxing champion as the guest of honour. 19 During the joint venture period, Mr Vella shared an office space leased and occupied by Mr Caradonna at Scott Street, Liverpool. The postal address of that office was PO Box XXX, Liverpool. The office belonged to Mr Caradonna who sometimes traded under the name of "Blaster Promotions" and who employed a person named Jodie Weir as a secretary. 20 Mr Lorenzo Flammia was at the relevant time a solicitor practising in Penrith. 21 There was a very close relationship between Mr Caradonna and Mr Flammia. First they were cousins. Secondly, Mr Flammia had acted for Mr Caradonna as a solicitor on previous occasions. In particular, when Mr Caradonna was imprisoned for forging group certificates in 2000 and 2001, Mr Flammia managed his finances, visited him in gaol on at least ten occasions, dealt with Mr Caradonna's parole officer, his doctor and his wife. 22 Mr Caradonna is now bankrupt. Leave was given to continue the proceedings against him up until judgment, but he did not appear in the proceedings, nor did he give evidence, and nor did his Trustee in Bankruptcy appear. 23 Mr Flammia, solicitor, who is a respondent to the fifth cross-claim in 4059/06 is also now a bankrupt. Again, leave was granted to continue the proceedings against him, but he did not give evidence, nor did he appear in the proceedings by himself or his Trustee in Bankruptcy. 24 At the time of his bankruptcy in November 2007, Mr Flammia stated he was owed approximately $400,000 by Mr Caradonna. In January 2006, there were 170 telephone calls made by Mr Flammia on his mobile phone to Mr Caradonna's mobile phone and one call to his office at Blaster Promotions, many of the calls being outside business hours. 25 Mr James Rutty is a finance broker with an office at Camden. 26 The companies described in these reasons under the tag of "Mitchell Morgan" or "La Trobe" are companies which appear to specialise in lending money either as principal or agent at high interest for short terms after minimum investigation into the borrower. 27 Hunt & Hunt are a leading Sydney firm of solicitors who were retained by Mitchell Morgan to act for it in respect of the loan purportedly to Mr Vella. 28 I now turn to the facts behind the present disputes. I should begin with 21 December 2005. 29 On 21 December 2005, Mr Vella had (with Mr Caradonna) attended the office of Maurice May, Lawyers, and uplifted from their custody, three certificates of title being the certificates of title to the Leppington Property, the Mangrove Mountain Property and also the Enmore Property which is the subject of proceedings 4059/06 involving Mitchell Morgan Nominees Pty Ltd. 30 After they had picked up the certificates of title, Messrs Vella and Caradonna went to a branch of the Commonwealth Bank recommended by Mr May to investigate the availability of loan funds on security of the properties comprised in the title deeds. Mr Vella's evidence is that the Commonwealth Bank's interest rates quoted were too high and its offer of finance was not accepted. 31 Mr Vella and Mr Caradonna then called at the ANZ Bank at Liverpool, and saw the manager, Mr G Welsh. They opened a cheque account with both to conjointly sign any cheques and they supplied specimen signatures to the ANZ Bank. 32 Many documents in this case purport to be signed by Mr Vella. Mr Slattery tendered a report from document examiners Paul Westwood and Michelle Novotny which opined that many of the documents were not signed by Mr Vella but were signed by the same person. However, it is clear that some documents do bear Mr Vella's genuine signature. One such document appears to be that on CB1142 which is a printed form to be sent to La Trobe Loans of Australia giving particulars of property being mortgaged. Another is CB1124, a similar piece of paper in respect of the Leppington Property. ("CB" is a reference to the relevant pages in the Court's casebook.) 33 If these documents, or either of them, were in fact signed by Mr Vella, then Mr Vella's explanation is that he had three loans outstanding in December 2005, two with the Commonwealth Bank (one for $550,000 and one for $300,000) and another with the Bank of Queensland for $500,000, and he was looking to consolidate those loans and take out a single loan for $1.2 million to $1.3 million. He spoke to Mr Caradonna about this and was of the view that Mr Caradonna was seeking to obtain that consolidated loan from the St George Bank. He was told that the documents being signed were to do with raising money from the St George Bank by Mr Caradonna. 34 In fact, Mr Caradonna arranged with a Mr Rutty, to apply for finance through La Trobe. Mr Rutty says that he received a telephone call from a Mr Brett Jones who worked for an organisation called "Fincorp". He had been introduced to Mr Caradonna at Fincorp. Mr Rutty says that, in December 2005, Brett Jones said to him: "Tony Caradonna and a client of his Alex Vella have applied to Fincorp for finance. Fincorp has rejected their application and can't assist them anymore. Can you have a look at the deal and see if you can help them." Mr Rutty agreed to do so. 35 Mr Rutty says that on a day late in 2005 at Camden he ran into Tony Caradonna and he had another man with him and Mr Caradonna introduced the other man as "Alex Vella" and said: "I am looking after Alex's financial affairs too." 36 Mr Rutty says that on about 24 December 2005, Brett Jones visited him and handed him a bundle of documents. These included an application to Fincorp Mortgages for finance purportedly signed by Mr Vella on 19 December 2005. These included full details of Mr Vella, though giving his address at a suite of offices in Scott Street, Liverpool, together with a photostat which included a driver's licence, Medicare card and passport of Mr Vella, certified by Lorenzo Flammia, to be true copies of the original documents on 19 December 2005. 37 Mr Rutty first contacted a company called "Mortgage Mart" and obtained an approval in principle from Mortgage Mart for $4 million broken into separate loan amounts of $2 million secured over Mr Vella's property in Abbotsbury, $1.5 million over the Leppington Property and $500,000 over the Mangrove Mountain Property. These did not proceed, it would seem, because Mortgage Mart became aware of what is called a "default" involved in a transaction in which Mr Vella had guaranteed a debt of a company called "Wreck Air". 38 Mr Rutty then put through the transaction with Mitchell Morgan which I will deal with in proceedings 4059/06, a transaction which was settled on 19 January 2006. I need to set out the facts leading to that loan in some detail. The following summary of the facts is taken from Hunt & Hunt's submissions, but appears to me to be non-controversial. 39 Mr Neil Virago, Mitchell Morgan's credit manager, instructed Richard Gabelich who was a senior associate employed by Hunt & Hunt, to commence drafting loan and mortgage documentation to document the alleged loan to Mr Vella over the Enmore Property at approximately 4pm on 16 January 2006 for settlement the following afternoon. 40 The instructions from Mr Virago included the contact details for Mr Vella's alleged solicitor, Mr Flammia. 41 Having received the email, Mr Gabelich telephoned Mr Virago and stated that: "I will draft the documents as soon as possible, but the timing is extremely tight." (As opposing counsel submitted, this shows that the brief time allowed for the task should not operate as a discounting factor). 42 In January 2006, it was Mitchell Morgan's policy that: paragraph (a) it would only deal with a borrower represented by a "registered" practising solicitor; paragraph (b)the borrower's solicitor was to certify, by reference to photo ID documents such as a passport or a driver's licence, that he or she had identified the borrower; and paragraph (c) the borrower's solicitor was to witness the borrower's signature on all loan and mortgage documents. 43 Mitchell Morgan instructed Mr Gabelich that the borrower's solicitor was Mr Lorenzo Flammia. 44 After speaking with Mr Virago, Mr Gabelich conducted an electronic NSW Law Society search on Mr Flammia and emailed that search to Mr Virago. He ascertained that Mr Flammia was recorded in the records of the Law Society as having a current practising certificate. 45 By letter dated 16 January 2006, Mr Gabelich informed Mr Flammia, in para 3(b) thereof, that he, as solicitor for the borrower "must":

(a) witness the execution of the mortgage, loan agreement, statutory declarations and Credit Code declaration as to purpose;

(b) confirm in writing that he had identified the borrower; and

(c) provide certified copies of, relevantly, the first page of the borrower's passport, and both the borrower's Medicare card and driver's licence. 46 On 17 January 2006, Mr Gabelich received from Mr Flammia:

(a) photocopies of Mr Vella's passport, driver's licence and Medicare card, certified by Mr Flammia as being true copies of the original documents;

(b) Loan Agreement (with the attestation "Signed, sealed and delivered by Alessio Emanuel Vella in the presence of [Flammia]");

(c) Mortgage (with attestation "I certify that the person(s) signing opposite, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this instrument in my presence");

(d) Authority for Payment and to Complete Documents (with attestation "Signed, sealed and delivered by Alessio Emanuel Vella in the presence of [Flammia]");

(e) Statutory declaration (with attestation "Declared at Penrith this 17 day of January 2006 before me");

(f) Declaration of purpose (evidently signed in the presence of Flammia);

(g) Declaration by borrower (with attestation "Made and subscribed by the said declarant at Penrith this 17 day of January 2006 before me");

(h) Original Certificate of Title for identifier F/443979, bearing a notation (made by an employee of Mr Vella's solicitor, Mr May) "taken by Mr Vella 21.12.05"; and

(i) An email from Mr Flammia stating that he had received instructions to "direct payment into the borrower's account" and stating:

" Details are ANZ Bank Liverpool BSB 012 323 A/c 567 474 717 Alessio Vella". 47 When examining the identification documents, Mr Gabelich noticed a disparity in the names appearing on the passport, driver's licence and Medicare card. 48 Mr Gabelich telephoned Mr Flammia and they had a conversation to the following effect:

Gabelich: "I have received the documents in relation to the loan to Mr Vella, but there are a few issues with them. One, you have not satisfied 3(b) of the letter attached to my email. Can you confirm that you were there when the borrower executed the documents and that you identified Mr Vella as the borrower?"

Flammia: "Yes, I confirm that I witnessed the borrower's signature and identified Mr Vella as the borrower."

Gabelich: "I also notice that the name appearing on the passport is Alessio Vella, the name appearing on the licence is Alexia Emanuel Vella, and the Medicare card is in the name of Alex Vella. Can you confirm that Alexia/Alessio/Alex Vella are the same person?"

Flammia: "Yes, they are one and the same person." 49 Mr Gabelich then sent an email to Mr Flammia, attaching a letter to the borrower's solicitor, the loan agreement, the mortgage, Consumer Credit Code declaration, authority for payment and NSW property statutory declaration for execution by Mr Vella and Mr Flammia. The letter required, inter alia, that Mr Flammia confirm in writing that he has identified Mr Vella as the borrower and that he provided certified copies of identification documents. 50 In the period until finance was approved, Mr Rutty remained in regular telephone contact with Mr Caradonna. On 17 January 2006, he forwarded his "Engagement and Fee Authority" and a direction for payment to Mr Caradonna for execution by Mr Vella. He received copies of those documents purportedly executed by Mr Vella the same day, together with a "Certificate of Currency of Insurance". Mr Rutty forwarded these documents to Mr Virago the same day. 51 Mr Gabelich then proceeded to instruct the Hunt & Hunt registration office to have the mortgage stamped and registered. 52 On the next day Mr Gabelich received a call from a person purporting to be Mr Vella who wished to know when the monies would be advanced. 53 The records subpoenaed from Optus of service number 0402 XXX XXX (Mr Flammia's phone), shows that that phone rang Hunt & Hunt at 4.03pm on 18 January 2006. This reinforces Mr Vella's denial that he made the call in question and strongly suggests that the call was made by Mr Flammia or someone using his telephone. 54 Mr Gabelich then spoke with Mr Virago and relayed the discrepancies he had noted and the assurances of Mr Flammia. Mr Virago instructed him to proceed. 55 Later that day, Mr Gabelich was informed by Ruth Brock, a registration clerk at Hunt & Hunt, that there was a delay in the registration as the Department of Lands wished to verify the certificate of title, which was in an older form more vulnerable to falsification. 56 The mortgage was registered on 19 January 2006. 57 After Mr Gabelich confirmed this fact via a title search of the Enmore Property, he informed Mr Virago that the funds could be advanced. 58 Mr Virago proceeded to disburse $1,001,748.85 to the account at the Liverpool branch of the ANZ Bank held in the joint names of Mr Vella and Mr Caradonna. Mr Virago also arranged for payment of Mr Rutty's $10,000 brokerage fee on that day. 59 On 20 January 2006, Mr Flammia emailed Mr Gabelich enquiring as to the progress of the registration and Mr Gabelich responded the same day to the effect that the registration had been effected and the funds advanced. 60 Shortly after this transaction was completed, Mr Rutty says that Mr Caradonna said to him: "Alex would also like to seek further finance using some other properties he owns as security. My client needs the cash for a property deal. Can you assist?" Mr Rutty agreed that he could assist, and using the Fincorp documents, prepared a loan application lodgement form and an application for mortgage finance to La Trobe seeking $1.5 million. He did this on 19 January 2006. The same day La Trobe provided indicative offers of finance of $490,000 with respect to Mangrove Mountain, and $910,000 as against Leppington. 61 On 1 February 2006, Mr Rutty indicated to La Trobe that "my client wishes to proceed with the loan as proposed." The application for mortgage finance, an application for what La Trobe called its "lite doc loan" is a three-page document. It later became two three-page documents when the loan was split, with so much against Leppington and so much against Mangrove Mountain. The document as received by La Trobe in respect of the Leppington Property (sometimes called Bringelly) is on CB 1122-1124 and that in respect of the Mangrove Mountain Property on 1140-1142. It is quite clear that pages 1124 and 1142, namely the third page in each case, may well have been signed by Mr Vella, though each dated 20 February 2006. However, the first pages appear to be copies of each other, though that page 1140 has been altered, possibly by someone in La Trobe's office. 62 It is quite clear that Mr Rutty resorted to white-out and to the photostat machine so that he could prepare applications which he would fax to La Trobe which would disguise the fact that they were composite documents. Page 1123 bears date 10 January 2006 and probably was not signed by Mr Vella. The third page of the application re Leppington is dated 20 February 2006 and probably was signed by Mr Vella. The same applies to pages 1126 and 1127, save that page 1126 shows evidence of white-out being used on the line beneath the word "Mangrove". It was put to Mr Rutty that in making the Mangrove Mountain and Leppington applications he photostatted the corresponding page from the previous Enmore application. He said he could not remember that. 63 However, if one looks at the documents which were submitted to La Trobe with respect to a possible loan over Enmore (the loan that was later granted by Mitchell Morgan), it is quite clear that the application was submitted on 11 January and that the second page of the Enmore application is identical to page 1123 save that XX Enmore Road, Enmore 2042 has been obliterated and other words have been written in. This is clearly the reason why in the two applications in respect of Leppington and Mangrove Mountain, the second page is dated 10 January 2006 and the third page 20 February 2006. 64 In cross-examination Mr Smallbone put to Mr Rutty at T446: "Q. And you took no step to get Mr Vella's signature on the Mangrove Mountain and Leppington application did you? A. Well, I had the signature on the original application, and I was just taking instructions from Tony. Q. And you well knew that you needed to get Mr Vella's signature on the application, didn't you? A. Yeah.

… Q. You well knew when you faxed this to La Trobe, that they would believe that Mr Vella had signed this page at a time when the words 'Mangrove Mountain' and 'Leppington' were already upon it, didn't you? A. For the purpose of getting a preliminary approval, it would appear that way. Q. And you had no belief, did you, that Mr Vella had authorised the Mangrove Mountain and Leppington transaction to be made, did you? A. Only from advice from Tony.

... Q. And you deliberately took this short cut to avoid getting the requirement to get his signature on this document, didn't you? A. Possibly, but I do remember seeing another La Trobe application … ." 65 The applications were received by La Trobe in Traralgon, Victoria, where they were evaluated by a Ms Beverley Christou and a Mr Sambel. Both were strongly cross-examined, but I need not deal with the cross-examination in detail because it does not go to a principal issue, but rather to the point as to whether La Trobe and thus Permanent, failed to take reasonable care of their own interests. 66 Certainly the broad impression one gets from the evidence of Mr Sambel and Ms Christou was that in La Trobe, the sales department in making sure the company made loans, seemed to have a higher priority than the department (if it existed) of ensuring that there was no fraud being practised on La Trobe. The impression one gets is that everything was geared to lending money on little documentation and a relatively gung ho approach was taken as to whether the borrower was whom he or she said that he or she was. 67 As I say, I will not go into the full details at this stage but merely give three examples. 68 First, it would seem that whilst La Trobe had a manual directed to its lending officers as to how they should behave, this was just disregarded in practice. The result was that even though danger signs were pointed out, employees evidently were expected to ignore them. 69 Secondly, the organisation carried out a Baycorp Advantage credit search. This credit search indicated that there were "red lights" and gave suggestions as to how the warning signs should be dealt with. These were ignored. 70 Thirdly, the documents were sent to a Mr Mountford, a solicitor then practising in Noosa, Queensland, to act for the lender. Why a company in Traralgon, Victoria, taking a mortgage over NSW land would retain a solicitor in Noosa, Queensland, has never been explained. 71 However, Mr Mountford employed Melinda Thornhill who was an experienced former bank officer. She gave advice both to her employer Mr Mountford and to Ms Christou of what she considered were considerably impressive danger signs of fraud. She was ignored. Indeed, it might be said that in the whole of the lending process, Ms Thornhill seems to be the only person who exercised what a court would expect to be the normal precautions taken by lending institutions. 72 Mr Rutty did not pursue in any active way the La Trobe approval of 19 January 2006 in respect of the Enmore Property. He merely "accepted" it on 2 February 2006 to "keep it alive". It should be noted that this approval carried the condition requiring an accountant's letter to be provided. Curiously, his mandates for the Mangrove Mountain/Leppington transaction asserted that the loan purpose was "refinance". The only facility that Mr Rutty was contemplating refinancing was the Mitchell Morgan facility. Yet on settlement of the Mangrove Mountain/Leppington transaction he took no step to ensure that directions be made to pay Mitchell Morgan. 73 Mr Rutty's explanation is that he made an application for finance to Challenger on 7 February 2006. A forged accountant's letter on the letterhead of Mr Boulos was provided with this application. The Challenger application does not explain why the Permanent Mortgages' Enmore application, already approved was not pursued. 74 Despite what he says in his affidavit, it is clear that Mr Rutty was pursuing the Mitchell Morgan application up to settlement on 19 January and received commission. 75 On 14 February 2006, Mr Rutty told Lisa Stone of La Trobe, that Mr Vella was going overseas for three weeks on 22 February 2006. On this basis La Trobe proceeded with urgency. 76 There is no doubt that Mr Vella left Australia on 25 February 2006 and returned on 16 March 2006. He spent a week in Germany, four or five days in Italy and about a week in Malta. In Germany he went to the World Middleweight Title Fight in Oldenburg. His son had fought in one of the preliminary bouts and he was there as his son's manager. The fight took place on 4 March 2006 (CB 820). 77 On 20 February 2006, Mr Rutty wrote to Amba Little, of La Trobe reiterating that Mr Vella would be going overseas "for three weeks this week". 78 On 21 February 2006 Mr Rutty received a fax from Mountfords advising that documents were to be forwarded to the post office box address and requesting advice if that address were incorrect. He did not demur to the address. 79 Mr Rutty in cross-examination initially denied any further involvement in the forwarding of mortgage documentation. As an examination of documents discussed below will demonstrate, this was a preposterous denial. Mr Rutty later in his evidence admitted to making arrangements to get documents executed and returned by courier to Mountfords. 80 Despite the fact that he was the broker, acting without the intervention of a solicitor for Mr Vella, he left to Mr Caradonna important steps in relation to the transaction, including the payment directions, and including the execution and return of the Mangrove Mountain and Leppington mortgages. 81 When confronted with the email of 23 June 2006 he had to admit to some level of involvement, at least to the level of passing these things on to Mr Caradonna. 82 On 21 June 2006 draft transaction documents were forwarded by Mountfords addressed to Mr Vella at PO Box XXX Liverpool. These included draft mortgages in favour of Permanent. 83 On 21 February 2006, Deane Portch of La Trobe spoke to "the broker" about an explanation of the Wreck Air default. His note also records the decision of "Bev" (presumably Ms Christou) to let this matter "slide". 84 A large number of communications occurred on 22 February 2006. In what follows, the times referred to in the documents are given, but it is necessary to bear in mind that the time difference in respect of daylight saving between Queensland on the one hand and NSW and Victoria on the other hand, may affect the chronology. 85 On 22 February 2006 at 9.49am, Kylie Knight of La Trobe sent an email to Mr Rutty stating that mortgage documents had been sent out the previous day and that it was a condition that satisfactory property insurance for Mangrove Mountain be provided. 86 At 9.58am on 22 February 2006, Toni Turvey emailed Melinda Thornhill to report that she had spoken to Mr Caradonna and that he had said that "they require funds today" and that he was arranging a courier to deliver documents to Mountfords' office that day. Ms Turvey further reported that she had told Mr Caradonna that if the documents were received by 2pm funds could be released on the morrow. A further message on the same page, would seem to indicate that this conversation took place between 9.39 and 9.58am. 87 At 11.02am (probably 10.02am NSW time), Mr Rutty responds to Kylie Knight's email, asking for the fax number. 88 At 10.49am Mr Rutty emailed Melinda Thornhill to advise that he had just faxed to her two separate brokerage authorities. It would seem therefore that the two items next referred to are in NSW time, this email probably refers to Queensland time at which the message was received. 89 At 11.43am on 22 February 2006, Mr Rutty faxed the forged insurance certificates which have been produced on subpoena by Permanent. These, apparently had been faxed to Mr Rutty by Mr Caradonna at 9.31am. Mr Rutty's fax appears to be responsive to the Kylie Knight email of 9.49am. 90 At 11.44am on 22 February 2006 Mr Rutty faxed to Mountfords two mandates purportedly signed by Mr Vella, witnessed by Mr Caradonna dated 20 February 2006. These are fairly obvious forgeries. Mr Rutty's affidavit, paragraph 51 says he expected to get 1% up front commission and 0.5% trailing commission. However, these mandates provide for nearly double the up front commission. Mr Rutty's affidavit, paragraph 111 explains this as the result of a negotiation with Mr Caradonna. Mr Rutty provides no explanation for this change, other than that he was putting a lot of effort into the attempts to raise finance. This is not a satisfactory explanation. He had already received a $10,000 fee from Mitchell Morgan and stood to receive fees per approval on the other applications that he was making. 91 Given all of the other badges of fraud that were accumulating, the inference is available that Mr Rutty felt entitled to a higher return to reward him for the risk that he was undertaking. 92 At 3.10pm on 22 February 2006, Toni Turvey emailed Jessica Larkin and Melinda Thornhill to report information that documents had "been put in an express post envelope to us today". She further reported that "they are going to sign their 'copy to keep' documents and fax them to our office this afternoon for me to certify on". She further reported, "settlement will be tomorrow" and that she had booked funds to be sent "RT" (ie, real time) with "Leanne", presumably Leanne Seymour of La Trobe. Although the informant is not named, the email responds to a message from Jessica Larkin at 11.38am that she had left a message for Mr Caradonna returning his call and requesting him to return hers. The earlier note at CB 4048 indicates that Mr Caradonna was not willing to speak to Ms Larkin but insisted on speaking to Ms Turvey. 93 On 22 February 2006, at 4.07pm Mr Caradonna sent a fax to Toni (presumably Toni Turvey), including copies of statutory declarations mentioned below and a certificate of Ms Palumbo as a justice of the peace (no number supplied), also bearing purported signature of Mr Vella, by which Ms Palumbo certified that:

(b) Mr Vella had produced to her his driver's licence, Medicare card and passport;

(c) that she had been provided with certain of the transaction documents; and

(d) that she had been asked to witness signatures of Mr Vella "the mortgagor". 94 On 22 February 2006, at about 5:45pm, Mountfords faxed to La Trobe (to the attention of Nicole Waugh and Leanne Seymour) copies of executed transaction documents. These include a signed form of mortgage which had been:

(b) incorrectly attested, as bearing no attestation on the front page; and

(c) signed with a forged Vella signature. 95 This form of mortgage bore the fax header of Blaster Promotions dated 22 February 2006 at 4.18pm. 96 Dated 22 February 2006 there are a number of transaction documents, including statutory declarations purportedly signed by Mr Vella and attested by Ms Palumbo in NSW. Ms Palumbo is there represented to be a justice of the peace. These transaction documents include four purportedly executed mortgage instruments, two for each of the two titles. In respect of these four documents:

(b) Each is incorrectly attested as there is no attestation on the first page;

(c) Each bears a purported attestation by Ms Palumbo on the second page;

(e) Three state the address of Ms Palumbo to be 2XX George Street, Liverpool; and

(f) One states the same address for Ms Palumbo, but the number 2XX has been changed from 22X. 97 At 5.46pm on 22 February 2006, Toni Turvey emailed Leanne Seymour of La Trobe (with a copy to Melinda Thornhill) referring to a preceding telephone conversation between them and noting that "the mortgagee will be changing and that you were going to send an email through". Presumably this occurred when Ms Seymour received the fax from Mountfords. The message also referred to the incorrect completion of the GST declaration. 98 Then, at 6.25pm on the same day, Toni Turvey emailed Mr Rutty advising that the GST declaration must be done again and faxed back by 11am the next day. 99 At 7.50am on 23 February 2006, Leanne Seymour emailed Melinda Thornhill saying: "Please note that the mortgagee will be changing to La Trobe Investment Services Australia. Please also note that the 2nd page of the cert wasn't signed." This message responded to Turvey's email of the previous day at 5.46pm (Qld time) or 6.46pm (Victorian time). 100 Then, at 11.27am on 23 February 2006, Toni Turvey emailed Mr Rutty referring to a conversation between them, and confirming: "as discussed, we note that the front page of the Mortgage was not witnessed on either loans and accordingly we attach same for re-execution and witnessing IN DUPLICATE". The message goes on to request that copies be faxed and the originals express-posted that day. It concluded that provided the originals were received in the mail on the following day, Mountfords would be in a position to release funds to Mr Vella's nominated account on 24 February 2006. 101 Mr Rutty accepted that he made arrangements to have these documents executed and returned by courier to Mountfords. 102 At 1.47pm on 23 February 2006, Mr Caradonna faxed to Toni Turvey re-executed undated mortgage instruments in the form in which the mortgages were ultimately dated (22 February 2006) and registered. Each bore purported attestation by Ms Palumbo on both pages. 103 The authorities for surplus funds, bear file notes dated 24 February 2006, by which it is recorded that someone called Theo Mandemaker of the ANZ Bank at Noosa and advised that the holders of the nominated account were Mr Vella and another but that due to privacy reasons the name of the other account holder could not be disclosed. There were a series of other calls and enquiries, from the ANZ Bank, the NAB and Mr Caradonna. 104 Settlement occurred on 24 February 2006, with direct deposits to the joint account of Mr Vella and Mr Caradonna. 105 Mr Rutty was anxious to pursue his commission. Melinda Thornhill insisted on original mandates. Mr Rutty told her that he no longer had access to the originals. That does not make sense. If he ever had the originals, why release them to anyone but Mountfords or La Trobe? This statement was probably a ruse to put off Melinda Thornhill. 106 She persisting, was told that he would have to get them re-executed. She was informed that the borrower was overseas and that the mandates were to be posted from overseas. 107 She was also informed that the result of the enquiry made of Ms Palumbo was that Ms Palumbo said she knew Mr Vella was overseas. 108 Mr Rutty obtained fresh mandates, purportedly witnessed by Jodie Weir at Liverpool. 109 These mandates were dated 27 February 2006, by which time Mr Vella was in fact overseas and could not have signed the mandates at Liverpool on that date. It is hardly to be wondered that Ms Thornhill was alarmed. They were faxed by Blaster Promotions at 12.47pm and by Rutty at 1.29pm on 27 February. Mr Rutty had no expectation that Jodie Weir was overseas. 110 Mr Rutty then, the next day, 28 February 2006 submitted a further finance application to La Trobe, in respect of Mr Vella's Bonnyrigg property. This was a further forgery, prepared by Mr Rutty from the template of the Mangrove Mountain and Leppington applications. On this occasion, Mr Rutty altered not only that property particulars but also the date next to the signature. According to him it just so happens that the date he put on it was 22 February 2006. That was, according to the Mountfords file notes the date that Rutty had told them was the date on which Mr Vella was going overseas. It is reasonable to infer that Mr Rutty put that date in an effort to avoid any further alarm bells going off at La Trobe. 111 Mr Rutty put the Bonnyrigg application forward intending it to be taken as genuine. His evidence is that he believed Mr Vella was still in Australia. If that were so, there was no reason why he could not have Mr Vella sign the application and date it correctly. If he believed that Mr Vella was still in Australia, it is evident that he lied to Melinda Thornhill about Mr Vella not being available to sign his mandates. 112 The original mandates turned up at Mountfords' office on 2 March 2006 in an envelope postmarked from Liverpool, NSW. 113 In view of the considerable submissions made, I should say something about Mr Rutty's credibility. 114 Mr Rutty was extensively cross-examined. He entered the witness box at 11.50am on the first Friday, day 5 of the hearing. His cross-examination from Mr Smallbone continued into lunchtime. At 2pm solicitor witnesses were interposed and Mr Smallbone continued his cross-examination at 2.55pm and that continued through until 4pm. 115 He re-entered the witness box at 10.05am the following Monday and did not leave it until about 3.30pm on the Monday. 116 On the first day, Mr Rutty's evidence could be criticised for being a bit evasive and punctuated with too many "I don't remember"s to be fully accepted. 117 He repeatedly said on the Monday, particularly in the afternoon, that he only had one hour's sleep and that he was so tired that he could hardly read anything because everything was a blur, and he performed much worse on the second day. One reason for this may have been that he was exhausted with a very long cross-examination. Those who wished to attack the credit of Mr Rutty said that it was more him having a guilty conscience which caused the lack of sleep and accordingly the poor performance he gave in the witness box on the Monday. 118 My overall impression was that Mr Rutty's oral evidence had to be considered with great care. 119 Even if one takes the most charitable possible view of Mr Rutty's conduct, and the extremely peculiar circumstances surrounding the execution and delivery of the transaction documentation and the making of the advances, it strongly confirms the evidence that Mr Caradonna was perpetrating fraud upon Mr Vella and the mortgagees. 120 At the very least, Mr Rutty must have appreciated that the dealings on which he was embarked were extremely odd, and likely to be unauthorised, and he can only have been proceeding with his eyes wilfully shut to this risk. 121 I have already made some remarks about the gung ho attitude of lending adopted by La Trobe. I should add to this that the impression that I formed in this case is that the "industry" involved in low document short term loans at high interest appears to depend more on good luck than good management and that there are quite a number of people involved, at least in the lower echelons who do not have profound ideas of the ethics of the situation and who are prepared to "cut corners" in order to earn a quick commission. 122 It may be that the industry operates on so many bad loans being covered by high interest rates, or it may be that the gung ho attitude of operatives is a cause of the American mortgage crisis. In other words, Mr Rutty's attitudes do not so much point to him being a fraudster, rather they point to him being part of the culture of the industry. It may well be that Mr Rutty realises now what he should have done and the seriousness of what he did and did not do, and that is what has caused sleeplessness as much as any matter of guilty conscience. 123 I do not assess Mr Rutty as being anything more than a person who really was not fully aware of what he was doing, and thought that there was no real problem in "cutting corners", cutting and pasting documents, using signatures from other documents etc. However, because of this attitude, he certainly in fact assisted any fraudulent purpose that Mr Caradonna may have had. 124 I should refer to what Johnson J wrote recently in the Judicial Officers Bulletin, Volume 20, No 2, p 10 when his Honour noted, with respect to the increased business in the Possession List in the NSW Supreme Court that lenders outside the authorised deposit-taking institutions (ADI) since 2001 have offered loans written with considerably less than the normally required documentation and checking. Further, there has been an increasing tendency for ADIs to offer loans which had originated from mortgage brokers and other third-party channels with assessments done by those who had referred the borrower to them without the ADIs themselves verifying the borrower information. It would seem to me that this tendency has reached a high point in the present case. 125 Thus, despite all the warning signs, the loans were approved. Mr Mountford or Ms Thornhill drew up the mortgage documents. 126 The upshot was that on 24 February 2006, Permanent paid $502,731.85 and $608,392.28, a total of $1.111 million into the joint account at Liverpool. This was in addition to $800,000 and $201,748.85 paid into that account on 19 January as a result of the Mitchell Morgan transactions. $300,000 was also paid into that account as a result of a loan from Mr and Mrs Cartisano. 127 So far as the Cartisano loan is concerned, Mr Vella agrees that he and Mr Caradonna borrowed $300,000 fro the Cartisanos. He agrees that there was a joint venture between himself and Mr Caradonna to operate a business which would arrange prize boxing events and associated functions. The $300,000 was to be borrowed and put in a bank account to show persons with whom the joint venture was dealing, that they were solid citizens with cash in the bank. 128 The dealings on the Liverpool account show that $1 million went out by 19 January to Blaster Promotions or cash. Two sums of $100,000 each went out on 6 February to Mr Annous and to Rimridge Pty Ltd. $70,000 went out to Mr Caradonna on 6 February and the account was closed on 27 February 2006 by Mr Caradonna when he withdrew the remaining $915,356.77. Of this amount, $400,000 was paid to Mrs Vanessa Tsokos. 129 Mrs Tsokos had "invested" that amount with a Mr Azar who had evidently on-lent it to Mr Caradonna and Mrs Tsokos had been asking for her money back. She was repaid it on 27 February 2006. She in her turn, repaid half of that money to her brother-in-law Con Tsokos who had in fact made half the original investment. 130 All in all, Mr Caradonna benefited by withdrawing the monies from the ANZ Bank at Liverpool using cheques signed by himself and a forged signature of Mr Vella and abstracted $2,417,382.97. That is the amount Mr Vella claims from the ANZ Bank in proceedings 3957/06. 131 The ANZ Bank has cross-claimed against the persons who received the money including Mr Annous against whom $550,000 is claimed, Rimridge Pty Ltd against whom $400,000 is claimed and Vanessa Tsokos against whom $400,000 is claimed.

2. Mr Vella's credibility 132 I have made passing references to Mr Vella's credibility in the above outline of facts. I now need to consider it in great detail. 133 Mr Vella swore a number of affidavits in the various proceedings. He was cross-examined for a considerable time entering the witness box at 11.45am on day one and exiting it at 2.45pm on day two. He was cross-examined by Mr Parsons, Mr Coles, Mr Forster and Mr Morris. 134 My view was that on the first day Mr Vella was well able to cope with the cross-examination and responded thoughtfully and carefully. However, on the second day he was not so composed and tended to react against some of the cross-examination in a more emotional way. 135 His general thesis was that he wanted to consolidate the three loans he had into one loan and for that purpose needed a loan of $1.3 million or thereabouts. He took the certificates of title from Mr May's custody on 21 December so that he could show them to prospective lenders which he thought might be the Commonwealth Bank or the St George Bank. He rejected the Commonwealth Bank because its rates of interest were too high, and he thought that Mr Caradonna was processing a loan application with the St George Bank. 136 His initial evidence was that he put the certificates of title in his desk drawer at the Scott Street, Liverpool office and he could only imagine that Mr Caradonna must have stolen them from the drawer and used them to gain credit from Permanent and from Mitchell Morgan. He did not sign loan documents to either of those bodies. However, he agreed that he may have signed documents put in front of him by Mr Caradonna which he thought were for borrowing from the St George Bank. 137 Not all the evidence was completely consistent with that story. It was clear that as at December 2005, Mr Vella's Horsley Park and Abbotsbury properties were mortgaged to the Commonwealth Bank, and his Bonnyrigg property to the Bank of Queensland. He intended to raise money to consolidate his loan on Abbotsbury plus Mangrove Mountain, Leppington and Enmore. 138 Mr Vella says he telephoned Mr May to make an appointment to pick up his deeds, but Mr May is fairly sure he came unannounced. He says that Mr Caradonna came with him merely to give him a lift because Mr Caradonna was going near Mr May's office in any event. There was some talk at the meeting about where Mr Vella could get a consolidated loan and Mr May rang his relationship manager at the Commonwealth Bank and arranged for Messrs Caradonna and Vella to call on him. He handed Mr Vella three certificates of title. 139 Mr Vella said that he did not wish to trade with the Commonwealth Bank because they wanted 8%. He was sure that he could do better elsewhere because at the time he thought money could be borrowed at only 5-6%. Mr Coles put to Mr Vella that that was hard to square with the fact that the money that he borrowed with Mr Caradonna from Mr and Mrs Cartisano was at a very high rate of interest. Mr Vella gave the answer that that loan was only for a very short time so that the interest rate didn't matter too much. 140 In answer to Mr Coles, Mr Vella said that he put the certificates of title in his drawer in Scott Street. He denied any suggestions that he took them home. 141 On the second day, however, under cross-examination from others, he indicated that he did take the documents home and brought them back from time to time. 142 I need to examine the evidence about the dealings with the three certificates of title in some detail. 143 Mr Vella says that the reason for collecting the certificates of title was that he wanted to consolidate various loans he had into the one loan. He says that he understood through Mr Caradonna that money could be available through the St George Bank and he was happy for Mr Caradonna to assist him in preparing the documentation for that. He went to Mr May's office with Mr Caradonna and had made the decision to go and pick the deeds up before he called at Mr May's office (T72). There was some discussion as to whether Mr Caradonna just drove Mr Vella to Mr May's office out of the goodness of his heart, or whether he was more involved than that. 144 Mr Vella's evidence as to why he picked up the certificates of title did not really add up. He says that he took the certificates out from Mr May's office because Mr Caradonna had told him that he was able to consolidate his loans with the St George Bank and he would need the certificates of title. However, he agreed with Mr Coles that, having been involved in earlier transactions, he knew that he would not need the certificates of title until settlement of the transactions in due course. 145 Indeed, immediately after leaving Mr May's office, Mr Caradonna and Mr Vella went to the Commonwealth Bank to investigate the availability of loan funds on the security of the properties comprised in the title deeds. Mr Vella says they did not take up the Commonwealth Bank's offer because he thought the interest rate was too high. He seemed to give the impression that he needed to show the deeds to the bank to indicate that they were unencumbered. This does not fit well with his evidence about the St George Bank. 146 After leaving the Commonwealth Bank, Mr Vella and Mr Caradonna went to the ANZ Bank at Liverpool where they opened the account that has been previously referred to. Again, the deeds seem to have been produced. 147 Mr Vella's affidavit at CB574-5 says that after he collected the certificates of title from Mr May, he placed them in the top drawer of his desk in his office noting that he shared an office space with Mr Caradonna at Scott Street, Liverpool. He said he did not authorise Mr Caradonna or any other person to remove the deeds from his possession. 148 At T91-92 he said he put the deeds in the top drawer of his desk, but that was an unlocked drawer but the office was always closed and locked. He was asked (T92) why he didn't take the certificates of title home with him and the answer was: "Because I wanted to get in touch with this St George Bank we talked about and try to borrow money on them, sir." 149 However, at T108 and following in cross-examination by Mr Coles, he says that between 21 December and the end of January he would have picked up the certificates of title and taken them home and brought them back about five times. The cross-examination continued at T124-5 and Mr Vella said that he kept bringing them back to Scott Street because Mr Caradonna kept telling him to bring them over because he had to show them to the St George Bank. 150 Finally, in mid-January he said that Mr Caradonna told him the St George Bank wanted the deeds, he took them to Scott Street and that's the last he saw of them. In the middle of February, just before he went overseas, he told Mr Caradonna to forget about the St George Bank as he had enough of the problems with the alleged default over Wreck Air and told Mr Caradonna to "forget about St George". 151 He was asked why, when this happened, he did not repossess the title deeds. The evidence was a little inconsistent, but it would seem that Mr Vella's evidence can be summarised by saying that he did ask Mr Caradonna for the deeds in February on more than one occasion and then in the preparation to go overseas he forgot all about it. He did not think at all about the deeds whilst he was overseas and in March he must have thought that Mr Caradonna had put the deeds back and he didn't give it another thought until he was alerted to the possible fraud in about April 2006. 152 As I say, not all of this evidence tied together and there must be some doubt about its accuracy. 153 Mr Coles would have me infer from it that Mr Vella always knew that Mr Caradonna had the deeds and was seeking to arrange finance (not only finance through the St George Bank). Accordingly, he had placed the deeds in Mr Caradonna's custody and control and so facilitated the fraud. Mr Vella, on the other hand, says that the documents may have been even carelessly left in his drawer where Mr Caradonna could get hold of them, but he trusted Mr Caradonna. His desk was separate to anything that was being used by Mr Caradonna, and that he has not been guilty of any fraud or gross negligence in and about the deeds. 154 Mr Slattery puts that the involvement of Mr Rutty in the transaction supports the inference of fraud of Mr Caradonna upon Mr Vella and the mortgagees. 155 Mr Slattery's submissions, which I reproduce below, more or less verbatim, deal with the details of this involvement and to my mind, support the principal submission noted above. 156 Mr Slattery puts that Mr Rutty's evidence tends to establish very firmly that Mr Caradonna was a manipulative fraudster acting on his own, using persons such as Mr Rutty as his instruments to defraud Mr Vella and undertake a series of acts without Mr Vella's authority. 157 As against Permanent and the ANZ Bank, that evidence shows a complete lack of association between Mr Vella and the execution of the mortgages with the single-minded and fraudulent actions of Mr Caradonna. 158 Mr Rutty's evidence is that he did not deal at any stage directly with Mr Vella in respect of any of the transactions in which he purported to act for Mr Vella. 159 Mr Rutty said that he acted only on the instructions of Mr Caradonna and relied entirely on the belief that Mr Caradonna was duly authorised to instruct him on behalf of Mr Vella in relation to the making of applications and the communication of whatever documents he communicated. 160 In fact this was less than the whole truth, because Mr Rutty was himself prepared, as he himself put it, to cut corners on at least some occasions. 161 The 19 January 2006 applications for finance from La Trobe against the security of Mr Vella's properties at Mangrove Mountain and Leppington, were in fact forgeries that Mr Rutty prepared and propounded. Mr Rutty prepared these by photocopying the execution page in the 11 January 2006 application to La Trobe in respect of the Enmore Property. He then altered the particulars as to the properties being offered as security. He then submitted this as the execution page on a fresh application, intending it to be taken as genuine. He did this without any attempt to get authentication of the application by Mr Vella. 162 Mr Rutty's sole defence for acting in this way is that Mr Caradonna instructed him to do it. If this is the truth, it confirms the other evidence that Mr Caradonna was himself embarked upon a fraud against Mr Vella, since there could be no legitimate reason for not presenting the instrument to Mr Vella for signature. Mr Vella was, so far as Mr Rutty was aware, available if required at that time. 163 The Enmore application was itself a forgery. 164 In the Mangrove Mountain and Leppington transactions, Mr Rutty took the further step of informing La Trobe of a change of address for correspondence to P O Box XXX, Liverpool 2170. This, he said, was done at the direction of Mr Caradonna. He said it was more convenient for Mr Caradonna. He said it was the quickest way to get correspondence to Mr Caradonna's office, where Mr Vella was working as well. 165 This was hardly consistent with his approach that he thought that all was well because Mr Caradonna and Mr Vella were sharing the Scott Street office. That would have been a reason to refrain from redirecting the correspondence. The previous address that he had given to La Trobe was the Scott Street office itself. 166 Whether the redirection was Mr Caradonna's idea alone, or was connived at by Mr Rutty, it supports the inference of attempts to keep Mr Vella ignorant of the business that was going forward. That inference is already strong from Mr Caradonna's forgery of Mr Vella's signatures, and from Mr Rutty's forgery of loan applications without attempting re-authentication. 167 This inference receives further support from the use of the Lewers Close, Abbotsbury address on the various finance applications. This was not Mr Vella's address, Mr Caradonna knew that Mr Vella lived at Horsley Park. Further, Mr Rutty had the driver's licence and rates notice giving the Horsley Park address. 168 Mr Rutty in the first application that he made (the Mortgage Mart application of 28 December 2005) initially wrote in an address, then, under the direction of Mr Caradonna (according to Mr Rutty), he altered the address to the Abbotsbury address. 169 Mr Rutty initially tried to justify this by saying that he got the Abbotsbury address from a previous application rather than from Mr Caradonna. The only previous application, however, was the one Mr Jones had given him on Christmas Eve (the Fincorp application), which stated the Scott Street address. The inference should be drawn that Mr Rutty initially wrote the address that to him seemed natural, namely the address of Horsley Park stated in the driver's licence, but that he changed this at the direction of or with the agreement of Mr Caradonna. 170 The various applications stated various lengths of residence by Mr Vella at the Abbotsbury address. Mr Rutty must have known that this variety of durations was being stated. 171 The appropriate inference is that at least Mr Caradonna and possibly Mr Rutty also, were attempting to place difficulties in the way of any information or enquiry coming to Mr Vella. 172 These inferences receive further support from the use of Mr Flammia on occasions when a solicitor was required, and otherwise, using no solicitor. Mr Flammia was the creature of Mr Caradonna. Mr May was not retained, notwithstanding that he had been named in the Fincorp application. Mr Rutty could give no clear explanation for this, other than that Mr Caradonna told him to use Mr Flammia. 173 Mr Flammia attested the forged Vella signatures on the Mitchell Morgan mortgage. Mr Flammia had acted for Mr Caradonna whilst in prison. Mr Caradonna had been convicted for defrauding the Commonwealth by dishonestly claiming that he had been in receipt of income from which income tax deductions had been made, whereas that was not the case. Mr Flammia must be taken to have known that Mr Caradonna was an unsuitable person to be giving instructions in a mortgage transaction. According to Mr Flammia's statement of affairs, Mr Caradonna owed him $400,000. 174 Another matter is that on 31 December 2005, Mr Rutty falsely attested and submitted a "low doc" declaration to Mortgage Mart. He also signed and submitted a 100-point identity verification check without seeing Mr Vella, without seeing the original documents to which it referred and without even a legible copy of the driver's licence. The licence number was available to Mr Rutty from the Fincorp application documents. There is no suggestion that Mr Rutty pointed out to Mortgage Mart that the address in the drivers licence did not match the address given in the Mortgage Mart application. That licence should not have qualified for the purpose of identity verification. 175 Mr Rutty made the Mitchell Morgan application and a La Trobe application for finance against Enmore. A La Trobe offer was received for finance against Enmore. Mr Rutty proposed this to Mitchell Morgan as the "exit strategy" for the Mitchell Morgan loan. 176 Mr Vella also said that when the ANZ Bank cheque account was opened,he received a cheque book. He said he took that cheque book home and put it in a cupboard and it never left his place until he passed it to Mr May (T101). Mr Coles put to him that the cheque book that he had commenced with cheque form No 26 and there must have been an earlier cheque book. 177 There were some odd matters surrounding this cheque book. A major oddity was that the cheque book in evidence contains forms 26-50, rather than 1-25. This was never explained. Further, Mr Vella must have been mistaken when he said the manager handed him a cheque book when the account was opened because the bank manager, Mr Welsh, gave evidence that he had to put in train the appropriate requisition and the cheque book would issue normally a week or so after the account had been opened by being posted to the account address. This evidence seems in accordance with usual banking practice. 178 However, I did not really consider this material badly affected Mr Vella's credit, though, of course, it was a significant matter to be taken into the total mix of facts. 179 It will be remembered that one of the documents which was uttered to lenders was a certificate by a solicitor, Lorenzo Flammia. Mr Vella said that he did lend his passport, driver's licence and Medicare card to Mr Caradonna who said that he needed them because of the default problem with Wreck Air in order to secure the loan from the St George Bank. He said that just before Christmas 2005: "Tony Caradonna came past my house and picked me up and told me 'I'm going to my cousin's place. He is a solicitor. Come for a drive'." ( T103). 180 Accordingly the two of them went for a drive from Mr Vella's home, presumably at Horsley Park. They drove to Penrith where Mr Flammia's office was and both men went into the office though Mr Vella said he waited in the waiting room. They then appear to have driven to Camden where they went to a Christmas party, or at least went there for a few minutes. It was there that Mr Vella may have caught sight of Mr Rutty and been introduced to Mr Jones, but he cannot really remember. He certainly says that he never gave Mr Rutty any instructions about a loan. 181 Another disturbing matter comes from the cross-examination by Mr Morris commencing at T158. Although Mr Vella had sworn that he had not signed anything Mr Caradonna had put in front of him about mortgages until after he had picked up the certificates of title from Mr May, Mr Vella acknowledged his genuine signature was at the foot of an application to Fincorp on 19 December 2005, two days before he went to Mr May. 182 Mr Vella said he knew nothing about it, he must have signed something but "not about no loans sir. I never tried to borrow money off nobody except St George, sir". Mr Morris then asked: "Q. Well it couldn't have been Mr Caradonna putting this under your nose to sign because you've told us that Mr Caradonna didn't do that sort of thing until after you saw Mr May; correct? A. Well maybe sir but as I said I'm not saying that's not my signature, I never claimed from nobody to get a loan before St George sir." 183 I then thought Mr Vella modified his previous evidence at T160 when he said that he had spoken to Mr Caradonna about loans before the two went to Mr May. At T162 Mr Morris put: "Q. You made, to your knowledge, I want to suggest to you, an application for finance to Fincorp on the Monday 19 December. You knew it was made? A. No sir. Q. The reason you went to Mr May on the Wednesday to pick up title deeds is because you thought that Fincorp was going to lend you money? A. No sir. Wrong. I only applied with St George to borrow money, sir. No-one else.

… Q. Do you have an explanation as to why you should be picking up the three particular titles out of a group of five or six that just happened to be mentioned in an application for finance? A. I don't know." 184 It was then put to Mr Vella that the Christmas party at Camden was at Fincorp's office. He replied that he did not know where it was, he just went with Tony for a drive to Camden. He said (T165): "I went from my house in Horsley Park to Penrith, from Penrith we went to Camden on the same day." 185 This cross-examination was biting on Mr Vella's credibility. However, one has to set it against the undisputed fact that Mr May gave evidence which accords with Mr Vella's evidence that obtaining a loan from Mr May was mentioned in Mr May's office and that Mr May telephoned his relationship manager at the Commonwealth Bank and that Messrs Vella and Caradonna then attended on that manager. If the deeds were to be picked up from Mr May purely for the purpose of Fincorp, that evidence is just inexplicable. 186 However, it does sit nicely with the scenario that Mr Caradonna was using Mr Vella's name to borrow money from Fincorp and was picking up the certificates of title from Mr May for his own purposes. 187 The attacks made on the plaintiff's case by counsel for Permanent and Mitchell Morgan differed considerably. The thrust of the Permanent attack was that Mr Vella trusted and relied upon Mr Caradonna; that both of them were involved in loan raising; that Mr Vella signed critical documents; even though he was perhaps unaware of the contents of the documents, he knew that he was unaware of the contents of the documents; he placed the certificates of title out of his custody and in the custody of Mr Caradonna; he knew that the documents he signed and the certificates of title were being used to pursue finance; and he cannot complain that that is what happened. 188 On the other hand, the Mitchell Morgan attack was that Mr Vella wished to raise a large amount of money for a boxing promotion business with Mr Tony Caradonna and that Mr Vella himself, or by authorising and entrusting Mr Caradonna to do it for him, sought to borrow short term funds from Mitchell Morgan. He signed or had Mr Caradonna sign for him loan applications and received payment into an ANZ bank account set up specifically for the purpose of receiving such funds. He knew that the Mitchell Morgan loan was short term and it would need refinancing by mid to late March, and indeed, took steps to achieve this result though failed to do so. 189 Mr Coles put that Mr Vella's version of events is implausible. Indeed, he submits that the story which Mr Vella promulgates ought to be rejected as utterly false and there is a far simpler explanation which could be summarised as follows:

(a) Mr Vella was enthusiastically thrusting himself into the boxing promotion business through a business bearing part of his own name, Velladonna Promotions Pty Ltd;

(b) That venture would require access to substantial capital, more than the $300,000 needed as show money;

(c) In furtherance of the business aim, Mr Vella completed the loan application with Fincorp to borrow money dated 19 December 2005. Mr Coles puts that the significance of this application is that it sets forth in the statement of assets and liabilities the properties at Leppington assessed at $2 million, Enmore assessed at $4 million and Mangrove Mountain assessed at $1 million. Most significantly, it notes, at the bottom of the page, that Mr Vella would be offering as security the properties at Leppington, Enmore and Mangrove Mountain. These are the very same properties that Mr Vella collected the certificates of title for on 21 December 2005 from Maurice May;

(d) Mr Vella visited solicitor Mr Flammia on 19 December 2005 with his passport, driver's licence and Medicare card;

(e) Consistent with the contents of the Fincorp application, Mr Vella and Mr Caradonna attended the ANZ Bank on 21 December 2005 and opened a joint account; At the meeting when the account was opened the bank manager gave evidence that there was discussion about a large amount of money coming in and it was going to be coming from the Enmore Property;

(f) After Fincorp declined to lend money, Mr Vella completed forms to facilitate borrowing money from Mitchell Morgan and either instructed Mr Caradonna to act on his behalf, or authorised Mr Caradonna to do so;

(i) After 17 January 2006, Mr Vella no longer held the certificate of title to the Enmore Property. Further, Mr Vella must have known that he no longer held that certificate of title. There is nothing in Mr Vella's 13 affidavits that mentions a word about him discovering the Enmore certificate of title having gone missing. The evidence that Mr Vella gave that he did not give a thought about the certificates of title from mid-January is "absurd";

(j) On 18 January 2006 Mr Vella rang Mr Gabelich about the loan monies. It is put that only Mr Vella could have given that information;

(k) Mr Vella knew that the Mitchell Morgan loan would need to be refinanced by late March and this explains his activities through James Rutty to facilitate such refinancing through other lenders;

(l) Mr Rutty swore that Mr Vella spoke to him in March 2006 and said: "Tony has told me about the Enmore valuation for Challenger (Challenger being one of the new lenders that was approached). That is even lower than the last one. What the hell is going on?" Mr Coles puts that despite Mr Rutty's lengthy cross-examination by a number of counsel no-one challenged that statement. This being so the only purpose that Mr Vella could have had in enquiring about the valuation was in the context of a loan refinanced of the Mitchell Morgan loan;

(m) Mr Rutty's evidence is consistent with Mr Vella realising he had to refinance the Mitchell Morgan loan and Wendy Harvey's file note of 28 April 2006 at CB4387, is utterly inconsistent with Mr Vella's entire case as it acknowledges on the part of Mr Vella of the La Trobe account numbers and also dealings with an entity known as "New Era" in the context of the Enmore Property;

(n) Apart from the applications to Challenger and La Trobe for refinancing, Mr Vella also approached New Era. Ms Harvey's file note shows that Mr Vella was well aware of this;

(o) The New Era loan was for one purpose only, that is, to refinance Mitchell Morgan. Mr Coles puts that if Mr Vella's evidence is rejected, there is no evidence to displace the inference that Mr Flammia acted with Mr Vella's express authority to communicate assent to the transaction to Hunt & Hunt including supplying the certificate of title and mortgage documents and a direction to pay. Mr Vella by his conduct, it is put, armed Mr Flammia with authority to represent him in the transaction. He supplied, directly or indirectly, intentionally or through carelessness, the certificate of title to Flammia and the identification material so is not able to disclaim authority of those who represented him. 190 I have not, to date, mentioned Ms Harvey's note. Wendy Harvey is a solicitor in the firm of Slater & Gordon. Slater & Gordon succeeded to the practice of Maurice May (amongst others). 191 The background of Mr Vella's visit to Ms Harvey is that Mr Vella said that he was at the Liverpool office about 28 April 2006 and someone came up looking for Caradonna. Mr Vella informed the gentleman that Mr Caradonna was not there. The man said that he worked for the Commonwealth Bank and: "Alex, he is using your deeds … He has your paperwork and he is borrowing money in your name". 192 Mr Vella says he rang his solicitors straight away. Mr Vella hasn't the faintest idea who this person was, he wasn't worried that the person called him Alex as he is a well-known identity in the area, but he is sure he did say the man identified himself as being from the Commonwealth Bank. 193 Ms Harvey's note of 28 April 2006 reads, in summary, as follows: "Received a call from Alex Vella. He was ringing to see whether we had received any mortgage documents. I asked him who the mortgage documents should be coming from and he said La Trobe. … I suggested that maybe it would be easier if I could contact La Trobe and chase them up. He gave me their details. … I asked him if he had a reference and he said yes a/c numbers 33601000 and 33600800. I rang La Trobe chasing the documents and was told the matter had settled a couple of months ago. I was then told by Tony they are waiting on documents from New Era in relation to the Bonnyrigg and Enmore properties and their contact number was 0411 XXX XXX. He then put Alex back on the phone to ask me if it was a bit clearer. I said yes it was and I would chase those documents and the money and get back to him on Monday. He said thank you." 194 I must confess I do not put the same significance on Ms Harvey's note as Mr Coles does. Mr Vella said in evidence that he found an envelope on the stairs of the Liverpool office and that gave him the details which he passed on to Ms Harvey because he was concerned that he knew nothing about it. He still thought that the monies were coming to consolidate his loan. 195 As to New Era, CB 4382 seems to suggest that it was seeking to pay out a loan on Mangrove Mountain, not a loan on Enmore which was the security held by Mitchell Morgan. 196 Accordingly, I do not consider that Ms Harvey's evidence has the great significance that Mr Coles would put on it. 197 I will consider the points raised by Mr Coles after considering the evidence of Mr Leitner and the Mitchell Morgan submissions as to Mr Vella's credibility. 198 I have not yet referred to the evidence of Mr Jack Leitner, solicitor. Mr Leitner, on 25 May 2006, was employed by Mark Rumore, solicitor of Liverpool. At Mr Rumore's request he saw Mr Vella and Mr Caradonna. Mr Leitner was told by Mr Caradonna that Mr Caradonna wanted to make a statement and he had some handwritten notes. Mr Leitner sat at the secretary's computer and typed out his verbal statement. He printed it off and gave Mr Caradonna a copy. Mr Caradonna checked it and signed it. Mr Leitner says: "Mr Caradonna appeared to me to make the statement of his own free will. I specifically asked Mr Caradonna if he was making the statement of his own free will which was answered in the affirmative." 199 The statement is on CB 952. Paragraphs 4-6 read as follows: "4. In December 2005 I had business difficulties and against my character I took advantage of Alex's friendship and took it upon myself by raising finance against Alex's properties without Alex's knowledge. I took three of Alex's property deeds from his desk and used them without Alex's knowledge or consent as security in order to borrow monies. 5. I told Alex many times that he could not get finance because of a credit default. That was the case at the time but due to desperation I did something which I now deeply regret. 6. I obtained funds using Alex's deeds without his knowledge and consent as security to borrow monies and have forged his signature on loan documents which is totally out of my character, but due to pressure and business difficulties I didn't know what I was doing." 200 Mr Leitner swore a second affidavit which was read which replied to an affidavit of Mr Caradonna which was not read. In his second affidavit, Mr Leitner said that he categorically denied handing Mr Caradonna a document as he walked into the room. He reiterated that Mr Caradonna provided his statement orally from handwritten notes which he, Leitner, did not read, and that when Mr Caradonna had finished speaking, he read aloud the document. Mr Caradonna drew attention to a minor amendment, the statement was reprinted. Mr Caradonna said "Yes" and signed it in Mr Leitner's presence. Mr Leitner was briefly cross-examined. He was unaffected by cross-examination. He indicated during the cross-examination that there did not seem to be any acrimony between the two men when the statement was given. 201 In my view Mr Leitner's evidence is strong material corroborating Mr Vella's version. Even the fact that Mr Caradonna made that statement to Mr Leitner is strong corroboration. 202 The attack made by Mitchell Morgan on the credibility of Mr Vella was focused on a theory that Mr Vella had authorised Mr Caradonna to do what he did so that whilst the actual signatures on documents were not those of Mr Vella, they were there with his authority. 203 I should note that there are some technical difficulties with this posited scenario. 204 First, s 52 of the Powers of Attorney Act 2003 which is in the same words of section 163 of the Conveyancing Act 1919 which is replaced, provides that a deed affecting land executed under a power of attorney, has no effect unless the instrument creating the power has been registered. Section 52(3) makes it clear that "deed" includes land instruments dealing with interests in land under the Torrens system. 205 The Powers of Attorney Act does not define the term "power of attorney", but probably means a formal grant of agency powers; see eg Bowstead & Reynolds on Agency, 16th ed (Sweet & Maxwell, London, 1996) at 2-038 and 3-011. 206 As Bowstead & Reynolds points out at 2-039, where an agent is authorised to execute a deed on behalf of his principal, the authority must be given by deed even at common law over and above what is in the Powers of Attorney Act; see eg Berkeley v Hardy (1826) 5 B & C 355; 108 ER 132; Richardson v Harris [1930] NZLR 890, 923. If Mr Caradonna were authorised, he was not authorised: (a) by deed; nor (b) an instrument that was registered as required by statute. 207 The second objection is that without express authority, not even a solicitor is authorised to make a contract on behalf of the client: see Painter v Abel (1863) 2 H & C 113; 159 ER 47; Magripilis v Baird [1926] St R Qd 89 (HC); CTM Nominees Pty Ltd v Galba Pty Ltd (1982) 2 BPR 9588. 208 Returning to matters of fact, this submission was subject to intense scrutiny by Mr Slattery, Mr Smallbone and Ms Wilson with which I basically agree. Again, I set out more or less verbatim that submission. 209 Mr Slattery and his team put that this submission never really comes to grips with how that authority is given. However, the inference which Mitchell Morgan asked the Court to draw is one of actual authority by Mr Vella to Mr Flammia. 210 The plaintiff puts that for the reasons set out in the following paragraphs, the inference contended for should not be drawn because the theory that such express authority was given does not fit the known facts and does not account in any sensible way for Mr Caradonna's involvement and that this inference should not be drawn. 211 First though, there is a preliminary point to be noted about this express authority case. It fails on the formalities. The Mitchell Morgan loan agreement, although called a "loan agreement", is expressed to be executed as a deed and is on its face appropriately witnessed as a deed so as to satisfy s 38 of the Conveyancing Act. The document is however a forgery. 212 For the loan agreement to be signed under proper authority, it would be necessary to put in contest Mr Vella's case that his signature on the loan agreement was a forgery. That case has not been put in contest by cross-examining Ms Novotny or by asking Mr Vella any questions about it. The only other way the case can be put is to suggest that Mr Caradonna signed Mr Vella's name. Assuming he was given some authority to do so (and leaving aside for a moment, the absence of an explanation as to why that authority is not referred to in the loan agreement itself), the authority would need to be conferred by deed. The authority to execute a deed can only be granted by deed. The absence of proof of the existence of such a deed on the part of Mitchell Morgan is an immediate answer to the authority case propounded by Mitchell Morgan. There are however other arguments as well. 213 The failure to put the authority case now contended for by Mitchell Morgan has serious practical consequences. 214 The evidence that Mr Vella may have authorised the Fincorp application should not be taken any further. It is said to follow from this that Mr Vella must have authorised Mr Caradonna to search for finance and make loan applications on his behalf. The question that needs to be asked is "authorised" for what? 215 This submission fails because it does not account for or describe the detail of Mr Vella's so-called authority to Mr Caradonna, was it an authority to:

(d) sign mortgages. 216 If the authority is (a) and (b), it does not help Mitchell Morgan because the authority given does not rise to giving any valid authority to the loan agreement or the mortgage. If however, it was (c) and (d) several consequences follow for Mitchell Morgan. 217 First, no such case was ever put to Mr Vella for his explanation. This is not a case that is obvious from the evidence. None of the Mitchell Morgan evidence touches on it. It is not expressly pleaded by Mitchell Morgan. It should have been clearly put to Mr Vella. In the absence of that occurring it cannot be relied on by Mitchell Morgan now. This is made all the clearer when the unanswered questions about the Mitchell Morgan case set out in the next paragraph are considered. Second, the theory that Mr Vella might have authorised Mr Caradonna to sign the loan agreement and the mortgages in his (Mr Vella's) name makes no sense for a number of reasons set out in the following paragraphs. 218 First, despite his illiteracy Mr Vella was perfectly capable of signing his own name on both the loan agreements and the mortgages. There was no evidence that he was out of contact with Mr Caradonna and was unable to sign for that reason. Why therefore did he need to authorise Mr Caradonna to sign for him at all? This remains wholly unexplained in the Mitchell Morgan case (and now cannot be relied on without having been put to Mr Vella). 219 Secondly, if Mr Caradonna did sign under Mr Vella's proper authority, one would expect that there would be no reason why Mr Vella (and probably even Mr May) would not be given the signed copy of the transaction documents with some formal letter closing and reporting on either of these transactions from Mr Flammia or Mr Caradonna. Such a badge of legitimate transaction is not present here. Perhaps it is to be suggested that Mr Vella has disposed of or cancelled such documents. Of course, this case too has not been put to Mr Vella. It is a serious matter that should not be left to speculation. It should have been put to Mr Vella and cannot be relied upon now. 220 Thirdly, the idea that Mr Vella authorised Mr Caradonna actually to sign his name on the mortgages could have been achieved by other means such as giving Mr Caradonna a power of attorney. If Mr Flammia was acting, that kind of authorisation would have been possible. Why was a means chosen which on the face of it has Mr Flammia participating in a fraudulent representation to Permanent? What the face of the Mitchell Morgan mortgage should have said is that Mr Flammia was witnessing Mr Caradonna's signature as the authorised attorney of Mr Vella. This exposes the problem for this un-thought out theory for Mitchell Morgan. Mitchell Morgan cannot propound the bona fides of Mr Flammia and the fact that Mr Caradonna signed Mr Vella's name under authority without further trying to resolve the problem of how Mr Vella's signature came to be on the page written by Mr Caradonna and witnessed by Mr Flammia in a form that looks to all the world as though it was signed by Mr Vella in the presence of Mr Flammia. The Mitchell Morgan theory simply breaks down at this point. 221 Fourthly, the Mitchell Morgan theory never comes to grips with the significant body of other evidence to the effect that:

(a) Mr Vella's behaviour on the discovery of the forged mortgages was observed both by Wendy Harvey to be perfectly consistent with the conduct of one upon whom a serious fraud had been practised. Wendy Harvey was not cross-examined about this evidence and accordingly nothing was put to her to rebut the inference that Mr Vella's conduct was consistent him being a victim of Mr Caradonna's fraud;

(b) the course of deposit and withdrawal transactions itself speaks fraud upon Mr Vella by Mr Caradonna. It is possible to look at the forged withdrawals so rapidly after the deposits and from there to infer backwards that it is unlikely that funds so fraudulently disposed so quickly after they were deposited into the account would have been legitimately obtained with Mr Vella's authority and consent;

(c) the hypothesis being advanced by Mitchell Morgan is really that this was a legitimate transaction so that Mr Caradonna signed the Mitchell Morgan mortgage in Mr Vella's name. Although this theory might attempt to explain under some supposed doctrine of authority why Mr Caradonna signed in Mr Vella's name (although this argument does not meet the necessary formalities for the giving of such authority as is explained above), it cannot explain the need for the other forged documents in the transaction. The forged insurance certificates in respect of Enmore Road, Newtown and the forged accountant's letter from "John Voulos, Chartered Accountant" in respect of XX Enmore Road, Enmore. If this was a legitimate transaction authorised by Mr Vella, why was it necessary for Mr Caradonna or anyone, for that matter, to generate these forged documents? 222 As I indicated earlier, I basically agree with the above submissions. 223 The submissions about the actual authority of Mr Caradonna were followed by submissions that sought to reinforce the argument as to Mr Flammia's position. 224 Mitchell Morgan has submitted that Mr Flammia, in his absence from the courtroom, should be regarded as a solicitor, as a person of good character and one who would be unlikely to have engaged in the conduct complained of by the plaintiff namely, signing the Mitchell Morgan mortgage as witness when the plaintiff had not indeed signed the Mitchell Morgan mortgage as mortgagor. It may incidentally also support the fact contended for by Hunt & Hunt, namely telling Mr Gabelich that he had witnessed the mortgage and been present with the borrower when he had not done so. 225 This submission is designed to underpin the wider submission by Mitchell Morgan that Mr Vella's account is incredible, that Mr Caradonna was not involved in a fraud, but that Mr Vella properly authorised Mr Flammia to proceed. 226 Although this submission might have had force in the absence of any other evidence about Mr Flammia, here the Court has a number of material pieces of evidence that suggest that Mr Flammia was indeed involved in the false conduct suggested by the plaintiff. I agree with the submission that this material evidence neutralises any presumption of good character that would otherwise apply. I summarise the material in the following paragraphs. 227 Mr Flammia himself has written a letter that says he did not witness the Mitchell Morgan mortgage (CB 4472). Mr Flammia's letter has not been qualified by any oral evidence by him and supports the position put by the plaintiff that Mr Flammia did not witness the letter. 228 Mr Flammia's not having properly witnessed the mortgage is consistent with Mr Caradonna's written "confession" of 25 May 2005. It is difficult to see how the confessed wrong could properly have been perpetrated by Mr Caradonna without Mr Flammia's participation as his signature, not anyone else's is on the subject mortgage. 229 Mr Flammia's involvement is likely because of his prior business and personal arrangements with Mr Caradonna including the fact they are cousins, and the number of phone calls between Mr Flammia and Mr Gabelich on 16 and 17 January. 230 Mr Parsons makes no bones about his basic submission that Mr Vella is a liar and should not be accepted. He puts as Schedule B to his submissions, five matters where he submits Mr Vella's evidence is badly affected by "insuperable inconsistencies and implausibilities". 231 The five matters essentially are:

(a) Mr Vella collected the certificates of title for the purpose of refinancing;

(b) Mr Vella stored the certificates of title in his desk at Scott Street or at his home and shuffled the documents backwards and forwards;

(c) Mr Vella forgot to ask Mr Caradonna for return of his certificates of title when he returned to Australia;

(d) Mr Vella needed to raise money for boxing promotion;

(e) Mr Vella only found out the true situation in June 2005. 232 I have already considered most of these matters. However, points (d) and (e) go too far. As to point (d), I took the evidence as to the borrowed money for boxing promotion only to refer to a small part of the money borrowed. 233 As to point (e), whilst the evidence sounds bizarre, Ms Harvey's evidence tends to confirm it. Further, the discovery was probably in April/May rather than June 2005. 234 I would not class any of these matters as so weighty as to operate to destroy Mr Vella's credibility. 235 Indeed, the same can be said of Mr Coles' list of problems with Mr Vella's evidence. 236 Although there are, as I have said, considerable problems with some of Mr Vella's evidence, in the whole, where there is external evidence or corroboration, Mr Vella's evidence is confirmed rather than contradicted. Further reinforcement of Mr Vella's story is provided by the fact which I can easily and do infer from the evidence that Mr Caradonna was a fraudster and probably Mr Flammia was too. 237 One final matter that has affected my mind is that whilst Mr Vella was very keen on his evidence in December to consolidate his loans, that keenness soon fell away so that when he returned from his overseas trip, he had virtually forgotten all about it. 238 First, there is something singular about why Mr Vella would want to go to all the trouble of consolidating his loans in any event. However, the difficulties with the Wreck Air "default" and the way in which an overseas trip focused on his beloved boxing, which sometimes does seek to calm the mind, may be reasons for Mr Vella's change. There is not enough in this point in any event to make me change my general view. 239 As I have said, there are difficulties with some of Mr Vella's evidence. I do not share the view of Mr Coles that his evidence is fantastic. Mr Vella withstood severe cross-examination, even though he did react adversely to it on the second day. The Fincorp material is disturbing, but it can be explained consistently with Mr Vella's statement. The rest of the objections made against Mr Vella's evidence are not sufficiently serious to outweigh Mr Vella's evidence and the corroboration of Mr Leitner and the other material to which I have adverted. 240 Accordingly, I would accept Mr Vella's evidence, as basically reliable.

3. What are the consequences of my finding in section 2. 241 3(a)(i) Permanent Mortgages. As to the Permanent Mortgages, my finding about them is that they were forged. However, under the Torrens system, where the Registrar-General registers forged mortgages, the effect is that the Registrar-General as agent of the Crown grants to the mortgagee the same interest as the mortgagee would have had had the instrument been effective: see Breskvar v Wall (1971) 126 CLR 376 and City of Canada Bay Council v Bonaccorso Pty Ltd (2007) 156 LGERA 294 (I will refer to this in future as the "Canada Bay case"). 242 It follows that unless Mr Vella succeeds on what I have called the Tsai point (see section 3(c)) or in his submissions under the Consumer Credit Code (see section 4 below), or that there is some personal equity (see section 6), or the Contracts Review Act affects the matter (see section 5), the mortgagee must succeed. 243 3(a)(ii) Mitchell Morgan Mortgage. The same result must follow as with 3(a)(i). However, I should briefly deal with an additional argument, which is of no consequence in view of my finding in section 2, but may be useful if the matter goes further. 244 A rather interesting argument that was put by Mr Parsons for Mitchell Morgan is on handwriting. He put that if the Court does not believe Mr Vella's evidence, it ought not to accept the handwriting expert for two reasons: (a) first, because the authenticity of the signatures is not the real question: it is whether Mr Vella authorised his signature to be placed on the document; and (b) that the evidence was hardly conclusive. 245 I have already dealt with the first matter. As to the second, Mr Parsons quoted the decision of the Court of Final Appeal of the Hong Kong Special Administrative Region delivered by Chan PJ in Nina Kung v Wang Din Shin [2005] HKCFA 54, where the Court indicated that validity of documents where there was a disputed signature must not be decided on the handwriting evidence alone, but by the whole of the evidence. The Curt referred to the decision of the House of Lords in Newton v Ricketts (1861) 9 HLC 263; 11 ER 731. However, with respect, that does not really seem to be authority for the point, it is mere authority that in equity where a person swears that he saw the deed signed and sealed and is not cross-examined, a court of equity may determine the fact itself without sending the matter for trial at law. 246 The Court also relied on Fuller v Strum [2001] WTLR 677. That was a decision of Mr Jules Sher QC sitting as a deputy judge of the High Court in Chancery (Probate Section). In that case an expert in handwriting gave evidence that she thought that the signature was forged, but the judge rightly said that he had to express his own view and in the light of the evidence which he accepted that someone had actually seen the testator sign the document, he would find in favour of the will. The matter went on appeal. The appeal was allowed on the basis that the propounder of the will had not allayed the suspicion caused by the circumstances of execution: see Fuller v Strum [2002] 1 WTLR 1097. The present point was not mentioned, but the Court of Appeal was generally critical of the way in which the trial judge had found the facts. 247 I do not really consider that the cases to which I have referred raise any great question of principle. Of course a judge sitting as a tribunal of fact has to consider all the evidence before making his or her decision, and may prefer the oral evidence to the evidence of experts. However, it is more difficult to do so when the expert is not cross-examined at all as Ms Novotny was not cross-examined. 248 In any event, in the instant case, there is no sufficient material to take a position contrary to Ms Novotny (and I should note it was also the joint opinion of her colleague Mr Westwood who was unavailable for cross-examination). Accordingly, there is nothing in this point interesting though it might be. 249 3(a)(iii) ANZ Bank. Different matters need to be considered in the case involving the ANZ Bank because there is no question of indefeasibility arising. 250 Mr Vella says that both at common law and under the Cheques Act 1986 (Cth), a forged cheque is no mandate to a bank and the bank cannot debit the customer's account in the absence of a mandate. 251 Section 32 of the Cheques Act 1986 (Cth) provides that: "(1) Where a signature is written or placed on a cheque as that of the drawer without the authority of the person whose signature it purports to be … the signature is wholly inoperative … unless: (a) the person against whom it is sought to assert a right on the cheque is estopped from denying the genuineness of the signature or the existence of authority for the signature, as the case requires; or (b) the signature is ratified or adopted … ." 252 None of the exemptions or provisos has been pleaded as a defence. 253 At common law, the same principle applies; see eg London & River Plate Bank Ltd v Bank of Liverpool Ltd [1896] 1 QB 7, 9. 254 Mr Forster says that the evidence as to the possible forgery of the cheques is not as substantial as that involving the mortgages. He notes that there is nothing in the documents signed in the presence of Mr Leitner that refers to cheques. He notes that Ms Novotny concluded that it was only probable that the signatures and the cheques were not written by the person supplying the specimen signatures. He puts that Mr Vella's onus is therefore undischarged. However, in a civil case, probable is sufficient to make an adverse finding against the ANZ Bank on the issue, a fortiori where one looks at all the surrounding circumstances. 255 Most of the rest of the ANZ Bank's defence dealt with other matters, the most important being that if the cases against the mortgagees succeeded, then as a consequence the ANZ Bank was "let off the hook". If the ANZ Bank was liable, then the questions that arose were mainly whether the ANZ Bank was only liable for half the amount obtained as a result of the forged cheques, and whether the ANZ Bank could trace through to the persons who ultimately received the money. These matters which mainly come up under sections 7, 12 and 13 will be dealt with either there or in the separate judgment involving the ANZ Bank.

3(b)(i) What debts do the Permanent Mortgages secure? 256 The mortgage over Leppington is AC149762M which is set out at CB 4070-4071. The mortgage over Mangrove Mountain is AC149770N which is set out on CB 4074-4075. Each is in identical form save for the reference to title. Each refers to memorandum 5719619 filed at Land and Property Information NSW. 257 Although I refer to the Permanent memorandum, the applicant shown on the memorandum is actually La Trobe Home Loans of Australia Pty Ltd. 258 The memorandum appears at CB 583 and following. It is a "plain language" document. As often with such documents, people can mistakenly think that they understand the ordinary English words used. Clause 12 headed "Understanding this Mortgage" contains in clause 12.1 a series of definitions and clause 12.2, rules of interpretation "to help you understand this mortgage". Clause 12.1 contains a definition, inter alia, of secured money which is as follows: " 'Secured money' means: · all amounts that are or may become owing by you to the mortgagee under any agreement between you and the mortgagee now or in the future, including all amounts that you owe the mortgagee under: (a) a loan agreement; or (b) a guarantee and indemnity now or in the future given in relation to a loan agreement ; or (c) a security. · all money that any agreement says is secured money or which an agreement says is secured by this mortgage; and · reasonable expenses of enforcing this mortgage. It does not include any amount that exceeds the total of the amount payable under any contract secured by this mortgage and the reasonable enforcement expenses of enforcing this mortgage. Money is part of the secured money whether it is: · provided by the mortgagee alone or with anyone else; or · provided to you or anyone whose obligations you have guaranteed alone or with anyone else; or · owing immediately or at some time in the future; or · actually owing or not required to be paid until something else happens; or · provided before or after this mortgage is signed or at some time in the future." 259 "Loan agreement" is defined as follows: " ' Loan agreement ' means any contract now or in the future providing for the provision of credit or other financial assistance and the giving of this mortgage." 260 One then has to go back to clause 2.2(a) which reads: "(a) Secured Money You must pay the mortgagee the secured money at the times and in the way agreed with the mortgagee ." 261 Although I may have missed it, there does not appear to be any actual charging clause in the memorandum or in the mortgage itself charging the land with the repayment of the secured money. However, no one has made any point about this and the submission of the mortgagee is that one must read these documents in a commercial and sensible way. It is, however, rather odd. 262 Mr Slattery simply submits that the memorandum secures money "owing under 'any agreement between you and the mortgagee' and importantly do not refer in their text to the securing or repayment of any particular sum of money. There are and have never been any such agreements between Mr Vella and the mortgagees." Accordingly, nothing is due under the mortgages from Mr Vella. 263 Permanent has said very little about that and it would seem that its counsel acknowledges the force of that submission unless the matters dealt with under section 3(c) or questions of personal equity or the like dictate a different result. Accordingly I will pass on. 264 3(b)(ii) The Mitchell Morgan mortgage is AC56277M and is found, amongst other places, at CB 461. The document, which is forged but registered, says that Mr Vella mortgages to the relevant Mitchell Morgan companies his estate and interest in the Enmore Property. Again the mortgage incorporates a memorandum filed with Land and Property Information NSW. On this occasion the relevant memorandum is 7022382. In addition to the memorandum there is an annexure A, and that includes the following: "(1) The Mortgagor covenants with the Mortgagee that the Mortgagor will duly and punctually observe and perform the provisions set forth in Memorandum No 7022382 … in consideration of the Mortgagee, at the request of the Mortgagor (testified by its execution hereof) agreeing to provide the Advance as provided for in the Loan Agreement between the Mortgagor and the Mortgagee ( 'Loan Agreement ') dated on or about the date of this Mortgage and on the terms and in the manner therein referred to; (2) The Mortgagor acknowledges and agrees that: (a) the monies owing to the Mortgagee by the Mortgagor under the Loan Agreement form part of the 's ecured money' referred to in this Mortgage, including the Memorandum (' Secured Money '); (b) … (c) the Loan Agreement is a 'r elated agreement' for the purposes of the Mortgage."

This document is also forged. 265 The memorandum is virtually identical with that in the Permanent case. I will consider its exact provisions more precisely when dealing with the comments of Hunt & Hunt which is a cross-defendant in the Mitchell Morgan case. 266 A memorandum such as the present is lodged with the Registrar-General and then operates in accordance with s 80A of the Real Property Act 1900. 267 Subsection (1) of that section reads: " … 'Memorandum' means a memorandum in the approved form setting forth provisions which are capable of being covenants in a dealing of a class which is specified in the memorandum."

Subsection (4) provides: "Where a dealing relating to land under the provisions of this Act is of a class specified in a memorandum filed in the office of the Registrar-General and contains a provision which incorporates in the dealing (with or without amendment) any or all of the provisions set out in that memorandum, those provisions … shall be deemed to be set out at length in the dealing." 268 The section was considered by the Court of Appeal in McIntosh v Goulburn City Council [1985] 3 BPR 9367. The Court of Appeal, reversing Carruthers J, held that although the word "covenant" is used in subsection (1), a memorandum registered under s 80A operates so that the whole of the memorandum is deemed to be set out at length in the dealing whether containing covenants or otherwise. Even apart from s 80A(1), as 80A(6) makes clear, a document not registered may be incorporated in a registered document by reference. 269 Subject to what Hunt & Hunt have to say, and I will deal with that in detail presently, the same considerations apply here as with the Permanent Mortgages, that is, that the mortgage being forged gets indefeasibility, but one must ask the question "indefeasibility for what?" and the answer is (unless section 3(c) or the personal equity point or Hunt & Hunt's submissions are upheld), that the mortgage is indefeasible for nothing because nothing is secured for the reasons given in Mr Slattery's submissions. 270 It is now convenient to pass to Hunt & Hunt's submissions which I set out more or less verbatim. 271 Hunt & Hunt's first submission is that the mortgage incorporates the payment covenants in the loan agreement by reference, and for that reason, those covenants obtain the benefit of indefeasibility in so far as they circumscribe an interest in land in the Enmore Property. 272 Hunt & Hunt submits that the mortgages considered by this Court in PT Ltd v Maradona Pty Ltd (1991) 25 NSWLR 643 (hereafter "Maradona"); Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281 (hereafter "Tsai"); Printy v Provident Capital Ltd (2007) 13 BPR 24,603 (hereafter "Printy"); Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675 (hereafter "Chandra No 1") and Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567 (hereafter "Yazgi") are distinguishable from the present mortgage. 273 Mitchell Morgan has pleaded both the making and receipt of the advance by Mr Vella, and the evidence indicates that Mitchell Morgan made the advance which was paid into an account of which Mr Vella was one of the joint account holders. Thus, it is put, the evidentiary and pleading issues that arose in Tsai do not arise in the present case. 274 The authorities have emphasised that the question of whether the covenants to repay - in so far as they secure an interest in land - will obtain the benefit of indefeasibility "will depend upon the wording of the covenant concerned". Hunt & Hunt refer to Tsai at [16]; Small v Tomassetti (2001) 12 BPR 22,253 at [12] (hereafter "Tomassetti"); Chandra No 1 at [36] and Yazgi at [24]. 275 It is then put that what distinguishes the present case from cases such as Tsai and Printy is that the mortgage refers to "the loan agreement" rather than to "any" or "an" agreement which may or may not exist. Further, in the present case, the mortgage refers to "the 'loan agreement' dated on or about the date of this mortgage". 276 What is said in the previous paragraph refers to Annexure "A" rather than the mortgage itself or the memorandum registered (pursuant to s 80A). 277 In Tsai at [5], "Secured Agreement" was defined to mean "Any present or future agreement between me or us, or any one of us, and You or an agreement which varies such an agreement", and "Secured Money" to mean any moneys owing under such an agreement. In the first mortgage considered by Studdert J in Printy at [17]-[19], "secured money" was relevantly defined as "money which the Mortgagor owes the Mortgagee under any related agreement", with "related agreement" defined as "any agreement or arrangement under which the Mortgagee lends money or incurs any obligation or liability [or] the Mortgagee has any security interest which relates to the Mortgagor". 278 The submission is that the use of the definite article in the present case makes reference to a single agreement which is intended to operate together with the mortgage as a single transaction, notwithstanding the fact that the mortgage is drawn so that it would also embrace subsequent advances and other liabilities. That agreement - the loan agreement - was executed together with the mortgage in furtherance of that single transaction. 279 The submission proceeds on the basis that if the loan agreement was physically annexed to and incorporated within the mortgage there would have been no doubt that the payment covenants would have obtained the benefit of indefeasibility to the extent that they described an interest in land (the registered charge over the Enmore Property). 280 Hunt & Hunt submits that although the actual sum of the advance is not stated, in terms, within the mortgage itself (including the Memorandum of Mortgage), the mortgage incorporates the payment provisions of the loan agreement by reference. 281 The submission then refers to the principle of incorporation by reference has been developed in the context of determining whether a will incorporates testamentary documents which have not themselves complied with the formal requirements for wills as discussed by Austin J in Treacey v Edwards (2000) 49 NSWLR 739 at 747 [33]-[34]. Hunt & Hunt submit that these principles are equally applicable in determining whether a registered dealing incorporates an extrinsic document. 282 However, one must normally exercise great reserve in incorporating principles from probate law, which derived from the Ecclesiastical courts, into the common law of contract to help resolve a construction question. 283 Another warning sign about relying on authorities outside the common law is that it would seem that the principles of incorporation of one document into another derived from technical rules in the ancient process of fine and recovery: see Halsbury's Laws of England, 4th ed, vol 12 (Deeds) at [1470]. 284 There is now no real magic about incorporation. However, there are various problems that occur when incorporation is attempted as set out in Lewison, The Interpretation of Contracts, 3rd ed (Sweet & Maxwell, London 2004) pp 63 et seq. 285 In Aktieselskabet Ocean v B Harding & Sons Ltd [1928] 2 KB 371 at 393-4, F Russel LJ said if parties show the intention of incorporating one document into another, then there are normally incorporated into the main document all the conditions of the other document not inconsistent with the main document. Furthermore, it matters not that the "other document" may have been inoperative or ineffective. This is because it is merely the terms and conditions of the "other document" which are written into the main document as if those words had actually been transcribed in the main document. 286 Hunt & Hunt also rely on the principle of construction of documents which constitute a "single transaction". They quote from the judgment of Jessel MR In Smith v Chadwick (1882) 20 Ch D 27 at 62-3, where it was held that: "[W]hen documents are actually contemporaneous, that is, two deeds executed at the same moment, a very common case, or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are all treated as one deed; and, of course, one deed between the same parties may be read to shew the meaning of a sentence, and be equally read, although not contained in one deed, but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose." 287 Hunt & Hunt also referred to or quoted from the dissenting judgment of Fletcher Moulton LJ in Manks v Whiteley [1912] 1 Ch 735 at 754-5, the decision of two judges of the Full Court of the Federal Court in Re Piccolo; McVeigh v National Australia Bank Ltd [2000] FCA 187 where Finklestein J at [33] extracted a passage from the judgment of Palmieri J in Kurz v United States 156 F Supp 99 at 103-4 (1957) that: "this canon of construction applies with particular force in situations where … one document requires the execution of the second to accomplish its purpose". 288 The submission is that, in the present case, the mortgage and the loan agreement were executed as part of a single transaction for the purposes of these principles. The loan agreement was purportedly executed as a deed, and the mortgage had the effect of a deed on registration. They were executed contemporaneously. 289 Hunt & Hunt submits that, on the basis of the foregoing:

(a) on the proper construction of the mortgage, having regard to the principles concerning incorporation by reference and those concerning multiple documents used to effect a single transaction, the mortgage secures the moneys owing on the face of the loan agreement; and

(b) the present case is therefore distinguishable from cases such as Tsai and Printy where the terms of the mortgages did not incorporate a single identifiable loan agreement. 290 I will deal with (b) under section 3(c). 291 On the construction point referred to in Hunt & Hunt's submission (a), the matter is a little more complicated than the submissions would suggest. 292 We have three documents: (1) the formal mortgage; (2) the memorandum; and (3) annexure A to the mortgage which is a part of the mortgage yet refers to a document which is to be incorporated in the mortgage by way of statute, so we have the main document referring to the other document which then refers back to the main document. 293 The doctrine of incorporation as set out by F Russell LJ in the Ocean case cited earlier, was also applied in cases such as Modern Buildings Wales Ltd v Limmer & Trinidad Ltd [1975] 1 WLR 1281 at 1289 (CA) per Buckley LJ. 294 In Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 at 179, Lord Keith said that there were slight differences in approach in the cases as to how one construed an incorporated document between the approach of Lord Esher in Hamilton & Co v Mackie & Sons (1889) 5 TLR 677 (CA) and that adopted by Lords Gorell and Robson in TW Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 but they come to very much the same thing. Lord Esher would read in the whole terms of the incorporated document and then treat any term which was inconsistent with the incorporating document as insensible and to be disregarded. Lords Gorell and Robson approached the matter by reading in only so much of the incorporated document as not inconsistent with the subject matter of the incorporating document. 295 In Sabah Flour and Feedmills Sdn Bhd v Comfez Ltd [1988] 2 Lloyd's Rep 18 at 20, Parker LJ said that Lord Keith's observations (and those of Viscount Simonds earlier at 155) lent support to the proposition that if an incorporated document contains provisions which conflict with the provisions of the written document, then the latter ordinarily prevailed. 296 In his Interpretation of Contracts, 3rd ed (Sweet & Maxwell, London, 2004), Lewinson at [3.06] sets out as a rule: "Where parties expressly incorporate terms into a contract, the incorporated terms must be construed as if they had been written out in full in the contract, and accordingly must be construed in the context of the contract into which they have been incorporated." He then continues: "The first question to be determined is what terms the parties have incorporated into their contract. The second question is what the incorporated terms mean in the context of the contract into which they have been incorporated. These two questions are to some extent interlinked."

That material derives from what Rix LJ said in Tradigrain SA v King Diamond Shipping SA [2000] 2 Lloyd's Rep 319. 297 The present case presents the odd situation that one has to construe a document which has another document as an annexure together with a third document incorporated by statute. The annexed document includes as "secured money" monies owing under "the loan agreement". Does the loan agreement so referred to mean an actual loan agreement as well as the italicised loan agreement as defined? 298 It seems to me that in view of the wide definition of loan agreement, this would be nonsense and hence under the principles which I have recently been discussing, there would be no incorporation of the provisions of annexure A to the mortgage. The same problem occurs with the definition of related agreement and there is an additional problem that related agreement is not lined up with the definition of secured money. 299 Accordingly, it does not seem to me that I can accept the rather ingenious submissions as to construction put forward by counsel for Hunt & Hunt. 300 However, even if I were able to accept them, would that make any difference? 301 For the purpose of incorporation, as was shown by the Ocean case, it matters not that the "other document" sought to be incorporated was invalid or was forged because all one is doing is copying the text of that document into the main document. 302 Thus the question is, if the words were incorporated, would they mean that the mortgage as registered was indefeasible for the matters referred to in the loan document. 303 The answer is probably "No" for two reasons. The first reason is that one merely transposes the words "the monies owing to the mortgagee by the mortgagor under the loan agreement between Vella and Mitchell Morgan of 17 January 2006 form part of the secured money." 304 When one then construes the mortgage there are no monies owing under that agreement because it was a forgery. 305 The second reason is that even assuming that under s 80A of the Real Property Act, the whole loan agreement somehow or other is written out in the mortgage, it is difficult to say that even in connection with other relevant provisions of the mortgage, there is a promise that might constitute a covenant: see McIntosh's case at 9374.4. 306 Accordingly, it seems to me that the Mitchell Morgan Mortgage is in the same plight as the Permanent Mortgages. 307 I should add that it is often said that agreements in a commercial context must be given a business-like interpretation as opposed to a pedantic or technical interpretation; see for instance McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, 589 [22]. However, this aphorism cannot be of any assistance when the dispute is whether the plaintiff was a party to the contract at all. 308 However, if one does have to descend to aphorisms, then the contra proferentem rule would be one that would come to mind and operate against Mitchell Morgan. 309 3(c) The Tsai Point. What I have briefly called "the Tsai point" (because of the Tsai case which I have earlier cited) is that whilst registered forged mortgages are indefeasible, one has to ask "indefeasible for what?" and if there is a mere reference to monies owing by the opponent in some form or other and the monies have never been advanced to the opponent nor has the opponent ever signed any loan agreement, then nothing is owing by the opponent under the mortgage. That principle appears to be applicable in the instant case though the fact that the monies were paid into a joint account of Messrs Vella and Caradonna may provide a twist to the norm. 310 The so-called Tsai principle did not commence with that case, but its birth and development can be traced through the cases that were referred to in the second of the paragraphs of the Hunt & Hunt submissions I set out earlier, namely Maradona, Printy, Yazgi as well as well as Tsai. Yazgi is a decision of the Court of Appeal, Printy is a decision of Studdert J which I understand will be reviewed by the Court of Appeal in the next month or so, Tsai is one of my decisions and Maradona is a decision of Giles J when he was sitting at first instance in commercial matters. 311 In Chandra v Perpetual Trustees Victoria Ltd (No 2) [2008] NSWSC 178, Bryson AJ, as he had become, referred to Tsai and Printy and said at [4] as to the claim that no money was in fact secured under the mortgage because of Tsai: "I do not regard matters as having been so clear that this submission should be upheld. Tsai was an interlocutory decision of a single judge; it was given on documents quite close although not identical with those in the present case. It did not settle the law about the meaning of Perpetual Trustee Victoria's documents; although I found it very helpful and highly persuasive when I considered similar documents. Printy was not decided until shortly before the trial of the present proceedings, and again, the documents were in different terms." 312 The Tsai case featured prominently in the expert evidence of two solicitors who were called by various parties. 313 The facts in Tsai were that the plaintiff was the first registered mortgagee of property owned by the appellant. The mortgage document, written in plain English, included a clause which said: "The mortgage is security for payment to you of the Secured Money and for the performance of all my obligations under the Mortgage. I agree to pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of each Secured Agreement or the Mortgage." 314 The mortgage was forged and there was no evidence to show that the defendant ever received the money. The mortgagee received summary judgment from the Master and the mortgagor appealed. I allowed the appeal. A ratio of the decision was that there was just no evidence that there was any obligation on the defendant to repay the money sought by the mortgagee because of the form of mortgage adopted and that as the collateral agreement was forged and no money was actually lent to the mortgagor, the mortgage was indefeasible but it secured nothing. 315 This was not the first case in this mould. The earliest one where the point arose was Maradona in 1992. At pp 681-682 of the report in 25 NSWLR, Giles J makes it clear that if a mortgage secures monies due under a guarantee and no monies are due under the guarantee, then nothing is due under the mortgage. 316 Tomassetti was quite a different case. In that case the mortgage specified a particular sum which was owing and even though the mortgage was forged, Campbell J held that it was indefeasible for that sum. 317 The Court of Appeal handed down its judgment in Yazgi on 5 September 2007, thus it was not known to any of the lawyers involved in the instant transaction early in 2006. The facts were identical to some of the earlier cases, a husband and wife were joint registered proprietors and the husband forged the wife's signature to a mortgage and he alone received the proceeds. The Court considered cases such as Tomassetti, Tsai and Maradona with approval. It ruled that where the mortgage does not contain a sum certain, the mortgagee must prove what is owing under the mortgage in some other way (see [24]). In Yazgi the mortgagee had not done so, thus, despite the mortgage having indefeasible status, nothing was owing thereunder. 318 As I have said, two solicitors gave evidence as experts in conveyancing, Mr Peter Carkagis was called by the ANZ Bank and Mr Stephen Edward Martin was called by Hunt & Hunt. 319 Mr Carkagis' report at CB 1047 notes that he has been asked to report as to how a prudent solicitor exercising due care, skill and diligence, practising in the area of mortgages and related securities and holding himself out to be an expert in the area would have acted in the light of the decision in Tsai as at January 2006. 320 Mr Carkagis' basal conclusions were that a prudent practitioner in January 2006 ought to have known of the decision in Tsai. Further, in performing his or her duties, a prudent practitioner should have drafted and prepared a mortgage which contained a covenant to pay a stipulated sum by the mortgagor or at least advised the client that the form of mortgage prepared by Hunt & Hunt would arguably expose the mortgagee to being unsecured in the presence of fraud in factual situations similar to Tsai. 321 In cross-examination by Mr Stevenson for Hunt & Hunt at T424, Mr Carkagis agreed that his experience was that most mortgages in Australia in the second half of 2005 did operate on the basis of an all monies clause. 322 He also agreed that if the mortgagee's solicitor had taken steps which were professionally competent to satisfy him or herself that the borrower had been adequately identified, it would be competent professional practice to use an all monies mortgage (T430). However, the answers he gave at T428-429 showed that Mr Carkagis was not completely comfortable with that as a broad general statement. Mr Stevenson, however, having got that answer sat down. 323 Mr Martin was asked as at January 2006 was it widely accepted in Australia by peer professional opinion as competent professional practice by solicitors to draft a mortgage for use by a lender in the form of the mortgage used in the Mitchell Morgan case and to give reasons for his opinion. He was also asked to take account of the effect of decisions such as Tsai and to state what relevance, if any, to his answer is the possibility that the mortgagor's signature on the mortgage might be forged. 324 The principal question was so phrased because of s 5 O (1) of the Civil Liability Act 2002 which I will consider in section 9 of these reasons. I merely flag it at this stage. 325 Mr Martin opined at CB1397 that there are three views about the Tsai line of cases. The first is that they are simply wrong and will be overturned if the matter comes before the Court of Appeal (Mr Martin gave his report on 17 April 2007 - see CB 1399). The second is that unless a mortgage refers to a specific amount and contains an acknowledgement of receipt it will lose its indefeasibility against a borrower where fraud has occurred and the third, which the most widely held view, is that unless a lender can establish that the loan funds have been paid and received by the "real" borrower, then the indefeasibility of the mortgage will not assist a lender as it does not secure anything. The inclusion of a provision in the mortgage that refers to a specific amount and acknowledges receipt may assist a lender, but will not be conclusive in determining whether the funds were received by the borrower. He then opined: "In my view most lenders and legal practitioners believe that these decisions do not justify the changing of the practice of using 'all monies' mortgages and that the lenders can best be protected against fraud by making appropriate enquiries as to the identity of the borrower before advancing the funds." 326 In cross-examination at T437 by Mr Coles, Mr Martin agreed that there would be no positive advantage to a lender in the current situation to have an all monies mortgage and there would be potentially a disadvantage. He agreed with those propositions. He acknowledged that of the three views set out in his report he personally favoured the second proposition, but he considered from his attendance at seminars and discussions with other practitioners that the third view was more widely held. 327 As one would expect, neither solicitor was weakened in his credibility by cross-examination nor, apart from the matters that I have set out, were his views modified. 328 It seems to me that reviewing this material I should follow what I said in Tsai and what Giles and Campbell JJ have said and it further follows from that statement that nothing was secured under the mortgages.

4. The effect of the Consumer Credit Code 329 Mr Slattery put his case on this aspect of the matter concisely and clearly and I set out virtually verbatim his opening written submissions. 330 A mortgage to which the Consumer Credit Code applies is not enforceable unless it is signed by the mortgagor: see Consumer Credit (New South Wales) Act 1995 s 5; Consumer Credit Code (Qld) s 38(1), (4). 331 This provision accordingly operates as a statutory exception to indefeasibility. 332 Mr Vella did not sign the Mitchell Morgan and Permanent Mortgages. 333 Therefore, if the Consumer Credit Code applies, those mortgages are not enforceable. 334 The Code applies to a mortgage if it secures obligations under a credit contact and the mortgagor is a natural person: Consumer Credit Code, section 8(1). 335 Under s 5 of the Code, a credit contact is a contract under which credit is or may be provided, being the provision of credit to which the Code applies. The hypothesis in the alternative case is that Mr Vella is otherwise bound by the loan agreements because they are caught by the provisions of the indefeasible mortgages. 336 Under s 6, the Code applies to the provision of credit where:

(a) the debtor is a natural person ordinarily resident in the jurisdiction;

(b) a charge is or may be made for the provision of the credit;

(c) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider; and

(d) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes. 337 The first three of these elements are admitted by Permanent but are formally not admitted by Mitchell Morgan. However, there can be no serious issue as to these matters. Mitchell Morgan itself is suing for interest and has by affidavits filed on its behalf admitted to being in the relevant business. These are deliberate and formal admissions from which Mitchell Morgan cannot depart without leave of the court: see Coopers Brewery v Panfida Foods Ltd (1992) 26 NSWLR 738. 338 The key issue therefore on the Consumer Credit Code part of the case is the last of the four elements of credit to which the Code applies, namely, the purpose or intended purpose of the credit. 339 By virtue of Mr Vella claiming that the Code applies, there is a presumption (relied on in the pleadings) that the Code does apply because of Consumer Credit Code, s 11(1). 340 In respect of the issue of the purpose of provision of the credit (ie the key issue) this presumption is conclusively negated if, in accordance with section 11(2) and (4) the debtor, before entering into the contract, makes a declaration of the prescribed matters in the prescribed form. The declaration must assert that the credit is to be applied wholly or predominantly for business or investment purposes or for both of those purposes. 341 In the present case, declarations were provided to the mortgagees, but they were forgeries. Accordingly, no such declaration has been made by Mr Vella of the matters required in the form required by the legislation. Alternatively, s 11(3) of the Code applies, as appropriate enquiries were not made, compare Pontello v Giannotis (1989) 16 IPR 174. For either reason, the onus therefore remains with the mortgagees. 342 The legislation does not expressly indicate whether the purpose is to be considered subjectively or objectively or by a combination of subjective and objective considerations. Considering s 6, particularly with the contextual assistance of s 11 and the beneficial purpose of the legislation, it is apparent that the enquiry is into the use to which the funds are put or intended to be put by the debtor. The court may consider what the money was used for in order to determine the purpose of the credit. "The court must consider the substance and reality of the transaction": Linkenholt Pty Ltd v Quirk [2000] VSC 166 at [98] and [121] per Gillard J; Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451 at 455-456. See also First Mortgage Managed Investments Ltd v Oberlechner [2006] NSWSC 1397 per Rothman J. 343 In the present case, both advances were procured and misappropriated by a fraudster. The "debtor" Mr Vella had no purpose at all in respect of the provision of the advances by the mortgagees. 344 Even on the ostensible basis stated in the correspondence between the mortgagees and Mr Rutty, and on the limited enquires made by the mortgagors, the use that could be made of the money was unrestricted. 345 The mere refinancing or consolidation of private debts is a personal use. 346 The mere provision (as in the case of Mitchell Morgan) of short term bridging finance is a provision of credit for personal use. 347 The mere acquisition of personal assets is personal use. 348 No particular business was stated in any of the correspondence as the intended destination of the funds. No particular income earning activity is identified in the documentation between the broker and the mortgagees as to the intended use. 349 It follows that the Code was applicable and the mortgage is unenforceable. 350 Mitchell Morgan says the declaration was signed by Mr Vella so that a lot of what Mr Slattery puts can just be passed over. However, I have found the mortgage a forgery and it must follow that the declaration was a forgery and accordingly Mr Vella did not sign it. 351 Mitchell Morgan submits that on this basis the Code still would not apply as s 11 requires a litigant who seeks to avail himself of its benevolent safeguards positively to assert that the loan was not for business purposes. 352 I do not read s 11 of the Consumer Credit Code in this way. I agree with Mr Slattery's submission that the presumption is that the Code applies unless there is a declaration substantially in the form of the Regulations where the debtor makes a declaration. In this case as the document was forged, the debtor did not make the declaration. 353 However, s 11(1) is not a conclusive presumption. It merely presumes that a credit contract is one to which the Code applies unless the contrary is established. 354 Assuming for the moment that Mr Vella received the money, the whole of the evidence shows that the loan was not for personal, domestic or household purposes. The loan was either for investment, for repaying business loans or for the boxing promotion business. There is just not one scintilla of evidence to suggest that it was for domestic purposes. 355 Submissions were made as to whether, if the Consumer Credit Code submissions had validity they could prevail against a registered instrument and there was discussion as to the Court of Appeal's recent decision in the Canada Bay case. However, in the light of my decision on this point, I do not have to deal with this problem. 356 Accordingly, on the evidence in this case, my view is that the Consumer Credit Code does not apply. 357 5. The Contracts Review Act. Mr Slattery puts that the mortgages are by force of the Real Property Act deemed to be contracts and as contracts, they are subject to the Contracts Review Act 1980. He then makes the following submissions. 358 In the alternative to the Consumer Credit Code case, if the mortgagees escape from the reach of that legislation, it can only be under circumstances in which they gave the most perfunctory attention to the real purpose of the "loan". 359 Further, they failed to deal with Mr Vella personally and apparently have erected a structure to insulate themselves from ever dealing with the borrower personally, by interposing brokers and other intermediaries with whom they have the ability to make insurance arrangements and have done so. 360 The erection of such a structure can hardly assist mortgagees to fairly insulate themselves from factors which bear against the justice of contracts. If they rely on brokers to act appropriately, let them look to the brokers for remedy. 361 The contracts were and are unjust having regard to Mr Vella's lack of knowledge and approval because of the fraud practised on him by Mr Caradonna, his lack of legal or financial advice in respect of the fact that he received in reality no benefit from the advances, and particularly in the case of Mitchell Morgan, the extraordinarily onerous terms of the interest being charged. 362 The mortgagees also failed to make prudent enquiries. Their identity checks were plainly inadequate. The 100 points identity test is apparently considered by them to be satisfied merely by obtaining documents carrying the requisite points in the requisite categories, without consideration of their contents. For example, the merest attention to the driver's licence would have shown that Mr Vella's address had been misstated in the applications for finance. If that means that the driver's licence counts towards the 100 points, then the 100 points test is hopeless. Surely a document can only count as an identity verification measure if it conforms with the information provided in the application for finance. 363 It is clear that the Contracts Review Act does not apply to contracts of a commercial nature. Section 6(2) of the Act provides: "A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person … ".

See also West v AGC (Advances) Ltd (1986) 5 NSWLR 610. For the reasons set out when I was considering the Consumer Credit Code , on the evidence the purpose of the contract was commercial and it seems to me that on the balance of probabilities, because of s 6(2) of the Act, it does not apply. 364 6. Personal Equities. Each side claims that there is some personal equity which can be invoked to avoid the indefeasibility consequences of the Real Property Act. So far as the plaintiff is concerned, Mr Slattery puts the plaintiff asserts the equity for delivery up and cancellation of forged instruments: see Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32. 365 The mortgagees failed to make the enquiries that a reasonably prudent mortgagee would make before entering into the transaction. 366 It is no answer to say that mortgagees of third last or second last resort habitually do not make such enquiries. Had the mortgagees pursued basic enquiries they would have discovered the truth. 367 Accordingly, prior to registration they had constructive notice of the plaintiff's equity for delivery up of the forged mortgaged instruments. 368 Gosper's case was one where Mr and Mrs Gosper owed Mercantile Mutual $265,000. However, Mr Gosper then forged a document which increased the amount to $550,000. The forgery became registered and Mercantile Mutual gained an indefeasible title. 369 Mrs Gosper then moved to have the mortgage discharged on repaying the $265,000. The Court of Appeal (Kirby P and Mahoney JA, Meagher JA dissenting) held that she was entitled. At p 43 of the report, Mahoney JA said: "Under the general law, where Y sets up a forged document affecting X's title, X is, in general, entitled to have the document declared a forgery and to have it delivered up for cancellation. … But if Y sets up a forged deed, X is entitled to have the dispute as to its validity determined and, if it is held to be forged, she is ordinarily entitled to have the forged deed appropriately dealt with. This is so in particular where it is necessary to quiet disputes as to X's title." 370 His Honour then went on to say that where the defendant not only sets up the void deed but the document has by virtue of its registration under the Real Property Act achieved effects the position is an a fortiori one and that there is no doubt that as between the original owner and the new owner, there is a personal equity to set the transaction aside and to have the documents delivered up to the original owner. 371 However, it is clear that the mere fact that the mortgage which is registered is forged is insufficient for the original owner to claim that he or she has a personal equity to set it aside. 372 This was held by Hayne J in Vassos v State Bank of South Australia [1993] 2 VR 316 at 332-3 who said that more than "the bare fact of forgery" must be established before there can be a personal equity against the registered proprietor. 373 His Honour also said at p 333: "In the present case … it may well be that the bank did not act without neglect but there is … no material which would show that the bank acted unconscionably … . Even if by making reasonable enquiries the bank could have discovered the fact of the forgery I do not consider … that the plaintiffs have any in personam right against the bank" 374 The same was said in the NSW Court of Appeal on at least three occasions by judges who formed part of the majority. It was said by Mahoney JA in Garafano v Reliance Finance Corporation (1992) NSW ConvR 55-640 at 59,661 and again by that learned judge in Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 at 739 and by Powell JA in Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 222. 375 Woodman & Nettle on the Torrens System well put the matter thus at p 10305 (Update 40) (omitting authorities): "There is no right in personam or personal equity unless the circumstances give rise to a known legal or equitable cause of action against the registered proprietor. The expressions "personal equity" and "rights in personam" do not supply a blank canvas on which a plaintiff can paint any picture. For example, it is not enough merely to show that a person has become registered under a dealing that is forged … . Nor does the proprietor's mere neglect create a personal equity, unless accompanied by unconscionable conduct." 376 The reference to a blank canvas is taken from LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517, 556.

377 The Vassos case has been considered to put forward the correct approach in subsequent cases both in NSW and elsewhere in Australia. Thus, in Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722, Gleeson CJ (with whom Cripps JA agreed), after citing Gosper, followed the key passage from Vassos at p 737 as did Mahoney JA at 739. 378 The decisions of interstate courts on the point are well analysed by the Queensland Court of Appeal in White v Tomasel [2004] 2 Qd R 438. 379 In his recent decision in Spina v Conran Associates Pty Ltd [2008] NSWSC 326, Austin J discusses Gosper's case and other decisions on what is a "personal equity" for the purposes of the exceptions to indefeasibility and comes to the view that unless it can be said that the mortgagee behaved unconscionably, there is no personal equity to be asserted. In the Spina case Austin J found unconscionability, so did not have to pursue the matter. 380 This means that one cannot read everything said in Gosper's case as literally correct. Professor Butt in his note in (1992) 66 ALJ 596 notes that in Gosper there was unconscionability because of the unauthorised use by the mortgagee of the plaintiff's certificate of title and see Ginelle Finance Pty Ltd v Diakakis (2002) 12 BPR 22,137, 22,140-1. 381 Accordingly, I must look to see if there is any operative unconscionable conduct on the part of Mr Vella or the mortgagees in the present case. 382 The basal answer given by Mitchell Morgan and Permanent to Mr Vella's claim to a personal equity is that there are countervailing matters which show that that equity does not apply in the instant case. 383 I do not need to get into that area of the debate. It is sufficient that Mr Slattery can point to no more than carelessness by the lending authority as well as the fact of forgery and that is not enough to establish a personal equity. 384 I now turn to the claim that there is a personal equity against Mr Vella. 385 Permanent relied on the equity that a person who provides the indicia of title to another loses priority. 386 Mr Coles put that in the present case Mr Vella at least proposed to Mr Caradonna access and custody of the certificates of title to the relevant properties. More importantly, from an agency prospective, he fully armed Mr Flammia with all the indicia of authority of a solicitor acting on Mr Vella's part including clothing Mr Flammia with authority to represent as genuine the mortgage instruments which Mr Vella now denies having signed. 387 He also notes that "in more modern times" there is no particular formality involved in the identification of the elements which enliven the conclusion that a person is being clothed with the authority to enter into transactions binding upon the supposed principal and refers in particular to the High Court's decision in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 466-469. 388 I do not see how this can really affect the position in view of the authorities dealing with agents executing deeds referred to earlier. 389 Mr Coles then says that the traditional response of courts of equity to the allocation of loss between two innocent persons where the loss has been inflicted by the activities of a third person is to refer back to the ancient principle laid down by Ashhurst J in Lickbarrow v Mason (1787) 2 Term Rep 63 at 70; 100 ER 35 at 39, that there is a broad general principle "that, wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it." 390 In Thompson v Palmer (1933) 49 CLR 507at 546, Dixon J made it clear that there were great dangers in applying that proposition literally as a rule of law. Notwithstanding, it carries considerable weight when considering questions of priority. 391 There is no doubt that there is a principle that where the legal owner or prior equitable owner has been guilty of fraud or gross negligence in allowing the indicia of title to fall into the hands of another person who induces the later equity, then the legal interest or prior equitable interest might be postponed: Colyer v Finch (1856) 5 HLC 905, 928; 10 ER 1159, 1168. 392 There are many illustrations of this in the authorities; see eg Abigail v Lapin [1934] AC 491; 51 CLR 58. 393 In Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 339, Mason and Deane JJ said that there was some difficulty in ascertaining the exact theoretical basis for this equity. At 341 they said that the equity should not be considered to be based on estoppel and they accepted: "a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances. It will always be necessary to characterize the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest." 394 Brooking J in Cash Resources Pty Ltd v BT Securities Ltd [1990] VR 576 at 586 again says much the same thing: "Questions of priority as between competing equities must be determined by applying, not technical rules, but broad principles of right and justice." 395 Mr Coles puts that Mitchell Morgan's interest in the land as registered mortgagee is a legal estate; however, Mr Vella's interest to recover his land is a "mere equity". In the light of the authorities I have just cited, such a technical answer cannot be accepted. 396 However, this case has more to it than a mere competition between an earlier and later interest. 397 The classic position is that the equity only arises where the person in the situation of Mr Vella can be said to be guilty of fraud or gross negligence. I must direct my mind as to whether on the facts this is so. 398 This means that I direct my attention to the custody of the three certificates of title. 399 There is no doubt that the certificates of title had been with Mr Vella's solicitor, Mr May, for safe keeping since the purchase of the relevant properties and that on 21 December 2005, Mr Vella called at Mr May's office and picked up the three certificates of title. 400 I have already set out the facts about the handling of the three certificates of title in some detail. Mr Coles says that I should infer from those facts that Mr Vella was guilty of gross negligence with respect to them. 401 The onus of proving fraud or gross negligence is on the mortgagees. Although there are discrepancies in the evidence, and Mr Vella's evidence was not entirely convincing, it is a large step to take to say that merely because one does not accept all Mr Vella says that the contrary is proved. 402 I do not consider that I can infer anything more than Mr Vella may have been careless about the custody of the certificates of title. 403 I accept that Mr Vella believed that it was necessary to have the deeds handy to provide to financial institutions, and that Mr Caradonna might borrow them for that purpose, but I do not consider that the evidence goes as far as to show that Mr Vella was grossly negligent or fraudulent in allowing Mr Caradonna the opportunity to use the deeds. 404 Accordingly the claim of a personal equity against Mr Vella fails. 405 I should conclude this section by noting that, although I have held that there is nothing owing under the mortgages, I have also held that Mr Vella has no personal equity to set aside the registration of the mortgages. 406 However, Mr Vella has available to him the usual procedure of a redemption suit. Once the court determines that nothing is owing under a mortgage, because of the rule "once a mortgage, always a mortgage", the mortgagee is bound to reconvey. 407 There is no reason why such an order should not be made in the present case as a consequential order to the declaration. 408 It is the fact that no money is owing under the mortgages which distinguishes this case from the others that I have been recently discussing. 409 7. The case against the ANZ Bank. Mr Forster for the ANZ Bank points out that if (as I have held) the claims by Mr Vella against Mitchell Morgan and Permanent succeed, then he will have suffered no loss or damage with respect to the sums advanced purportedly pursuant to the mortgages and which were deposited into the joint account. Mr Forster is right in saying that it therefore follows that Mr Vella has no claim against the Bank in connection with the monies transferred with the joint account by the mortgagees at the behest of Mr Caradonna. 410 Mr Forster does not really dispute that if Mr Vella's evidence is accepted in general and if his claim against Mitchell Morgan and Permanent fails, that the Bank was liable under either s 32 of the Cheques Act 1986 (Cth) or under the general law for paying money out of its customer's account without a proper mandate. Most of the debate between Mr Slattery and Mr Forster had to do with the amount for which the Bank was liable if that became relevant, which, in the circumstances did not occur. 411 Although there is no need to evaluate the principal claim made by Mr Vella against the ANZ Bank, as Mr Slattery points out in his submissions, Mr Vella has pleaded in para 11A of his amended statement of claim (CB 21-22) a number of consequential losses arising from ANZ's breach of mandate. 412 In summary these alleged consequential losses are:

(b) the need to pursue the Mitchell Morgan proceedings;

(c) the loss of the $300,000 borrowed from the Cartisanos which was stolen by Mr Caradonna; and

(d) the money that was needed to prosecute the claims against Permanent. 413 In its defence, the Bank merely denies the allegations in para 11A. However, in its written submissions, the Bank says that in an action for damages for breach of duty to its customer, the customer is not entitled to recover damages for consequential loss. The claims, accordingly, for legal costs over and above what might be recovered from the mortgagees is not sustainable. The Bank principally relies on the decision of National Australia Bank v Nemur Varity Pty Ltd (2002) 4 VR 252. 414 Mr Slattery says that the Nemur Varity case turned on its own facts and expresses no general principle, and indeed, is mainly focused on the tort of conversion and I believe that Callaway JA's judgment bears this out. Notwithstanding this, it is of some value in dealing with the present problem. 415 The ANZ Bank then relies on a decision of Hamilton J in Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100. 416 In that case his Honour analysed the situation as to whether costs could be claimed as damages: (a) against the original opponent; and (b) against a third party. Both sets of counsel agree that Hamilton J's analysis in the Queanbeyan Leagues case makes it quite clear that a successful plaintiff who has an order made in his favour cannot, either in those proceedings or in subsequent proceedings, seek as against that same defendant damages in respect of the actual cost incurred by him. 417 Whilst the decision does not reach a firm conclusion in relation to a claim made by an otherwise successful plaintiff in relation to costs incurred by him in separate proceedings against a third party, his Honour concluded at para [45] sub-par (4) that: "A plaintiff may in some circumstances recover costs of the earlier proceedings as damages if recoverable according to the ordinary principles of the law of damages." 418 An argument which is given some reinforcement by Hamilton J's judgment is that just as in England judges have decided that there is now no difference between party and party costs and other costs, so the same applies in NSW. As Mr Slattery points out, if this were so, then there would be no point in the arguments that frequently occur in courts as to whether costs should be on the ordinary basis or the indemnity basis. 419 Mr Slattery also says that it should not be assumed that the costs ordered to be paid by Mitchell Morgan will be paid by them as it appears that the business of Mitchell Morgan is being wound down. 420 The ANZ Bank then submits that applying the test of common sense and experience the loss constituted by the difference, if any, between the costs actually expended by Mr Vella in relation to the proceedings involving Mitchell Morgan and Permanent and the costs assessed in his favour were not "caused" by the Bank but either by Mr Caradonna or by Permanent and Mitchell Morgan. 421 Mr Slattery says that one looks at the actual terms of operation of the joint account, whlich required two to sign. For the purposes of the rule in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145, the court must consider whether it was within the reasonable contemplation of the parties at the time of contracting that payment on a cheque signed by only one party might cause loss to the other. The Bank was informed that the purpose of the account was for the boxing-related proposed venture, yet the Bank was able to permit the inflow and outflow of a million dollars from the joint account to Mr Caradonna's account on the same day. 422 Even conceding what has just been said, however, it does not seem to me that one gets support for the proposition that the excess costs of suing Permanent and Mitchell Morgan reasonably flowed from the Bank's failure to honour its mandate. 423 I consider that the damages claimed for extra legal costs are not shown to have been caused by the breach of the Bank of its duty in contract. 424 I now pass to the claim in respect of the loss of the Cartisano money. The dispute here is whether the plaintiff is entitled to be reimbursed the full $300,000 or one-half of that amount, $150,000 because Mr Caradonna was also an equal customer in this joint account. 425 Mr Forster relies on Ardern v Bank of New South Wales [1956] VLR 569 where Martin J in the Victorian Supreme Court held in similar circumstances that only half of the amount lost was entitled to be recovered by the innocent holder of a two person joint account. Mr Forster says the present case is on all fours. 426 Mr Slattery says that Mr Vella is liable to pay Mr and Mrs Cartisano the whole $300,000. As Mr Caradonna is now bankrupt and unable to repay his share, the whole loss will fall on Mr Vella. If the ANZ Bank had not breached its mandate, the full $300,000 would have been available for Mr Vella to repay the Cartisanos. The ANZ Bank's breach of mandate has exposed Mr Vella to the full loss. 427 Mr Slattery acknowledges that Ardern's case is against him. He acknowledges too that Ardern's case was followed in the ACT by Connor J in Simos v National Bank of Australasia Ltd (1976) 45 FLR 97. 428 The only other case that has been cited which has any significance in this area is Brewer v Westminster Bank Ltd [1952] 2 All ER 650 where McNair J ruled that nothing was owing because of a joint contract both must sue as plaintiffs. I agree with Mr Slattery's submission that whilst Brewer's case has not been overruled in England, it is now thoroughly discredited both in England and Australia and need not trouble us. 429 Mr Slattery says that central to the reasoning in Ardern's case was that the forger might at some stage later sue the bank for his share of the money. That is not a difficulty here because both Mr Caradonna and his Trustee in Bankruptcy are parties to the proceedings and will be bound by final orders. The Trustee has filed a submitting appearance and asserts no entitlement to any part of the fund. Accordingly, the Bank cannot be heard to say that its creditors have not appropriately recognised their entitlements inter se concerning this money. 430 Mr Slattery puts that when properly and conceptually understood, Ardern is really a case where the account holders being equally entitled to the money, the bank was entitled to say that one of them having received his share by fraud the bank was entitled to treat itself as discharged of obligation so far as that share was concerned. This can be justified on the footing that the remaining balance is then paid to the innocent joint holder as if he were solely entitled. 431 He puts further that the holding in Ardern must be seen as a special rule applicable to cases of fraud because it is not easily reconcilable with ordinary principles of debtor and creditor which would require the state of the account between the bank and the joint account holders to be restored as if there had been no breach of mandate by the bank. 432 The Ardern case has been consistently followed on the point that Brewer's case was wrongly decided. On this aspect, it has been approved in England at least twice: see Jackson v White and Midland Bank Ltd [1967] 2 Lloyd's Rep 68, 77 and Catlin v Cyprus Finance Corp (London) Ltd [1983] 1 All ER 809. It has also been approved by the writers of most of the leading textbooks. However, Tyree in his Banking Law in Australia, 4th ed (Butterworths, 2002) at 10.6.3 says: "The Ardern case also noted that the appropriate measure of damages is half the amount of the forged cheque since the parties in that case were entitled to equal shares in the account. When the account is a trust account or where it can be established that all the funds in the account were the property of the defrauded customer such a reasoning would not apply." 433 As at the date when the Bank failed to carry out its mandate, the money in the account was equally owned by both Mr Vella and Mr Caradonna. It does not seem to me that the fact that as at the date of trial the Bank can be protected against a claim by another joint holder is sufficient to alter the situation. 434 However, in the Jackson case, Park J at 81 appears to have avoided the problem by granting a mandatory injunction that the bank restore the money to the joint account. 435 I do not know whether the joint account is still in esse. If it is not, some more convoluted mandatory injunction could be granted. 436 Alternatively there may be an appropriate remedy by issuing an injunction against Mr Caradonna or his Trustee in Bankruptcy from applying to withdraw his "half of the restored monies". 437 It seems to me that this could well be a case where the common law remedy is inadequate so that equity should intervene. 438 Although equitable remedy may be available, the question is whether it should be implemented. No specific request has been made for it. Moreover, at the time of the breach Mr Caradonna did own half the monies in the account. 439 I doubt whether one can rationalise how the result in Ardern's case was reached either in the way put by Mr Slattery or that in Professor Tyree's book. In Ardern Martin J followed what the Court of Common Pleas had done in Twibell v London Suburban Bank [1869] WN (Eng) 127. That report is most unsatisfactory, it being a one paragraph report in the Weekly Notes indicating that the decision was a decision of the Court of Common Pleas (presumably the Full Bench), but no reasons are given and the reporter has merely indicated the result. However, Bingham J in the Catlin case mentioned it with approval on another point. 440 Martin J in Ardern also said that the moiety result was consistent with the approach taken in cases in tort where damages are recoverable by a co-owner of property. He particularly referred to the decision of Devlin J in Baker v Barclays Bank Ltd [1955] 1 WLR 822. 441 That was the case of conversion of a cheque in a case where there was a joint account between two partners and one partner wrote cheques out not initialled by the other where the bank's mandate was only to pay cheques signed by one and initialled by the other. Devlin J, referring to the then current edition of Lindley on Partnership said that the general rule was that if one partner sues he will be entitled to recover damages only in respect of his interest in the goods and applied that by analogy to one-half the proceeds of a cheque. 442 Accordingly, it seems to me that the weight of authority is in favour of the proposition that in a case like the present where one joint holder sues the bank for breach of compliance with its mandate, it is only the plaintiff's proportional interest in the property that is to be compensated for in damages. 443 The distinction that Mr Slattery makes about cases where the second holder cannot make any claim against the fund does not appear to have appealed to any of the judges who have dealt with the few cases in the area, but on the other hand, that particular point does not seem to have been raised. 444 I would also refer to the article Conversion by Wrongful Disposal by David P Derham in (1952) 68 LQR 507 where the learned author analyses cases such as Parr v Ash (1876) 14 SCR (NSW) 352 that unless a chattel is destroyed, a co-owner cannot sue his or her co-owner in conversion, the rationale being that a mere sale of the chattel gives only the fraudulent co-owner's moiety to the purchaser and the innocent co-owner can sue the purchaser for the value of his or her moiety, whereas this cannot happen if the chattel is destroyed. This again lends weight to the view that only a moiety of the value of the loss can be claimed. 445 Accordingly, the verdict must be for $150,000 plus interest. 446 I now turn to the case of Mitchell Morgan v the ANZ Bank. 447 The third cross-claim in 4059/06 is by Mitchell Morgan against the ANZ Bank. The claim is that the cross-claimant paid $1,001,748.85 under a mistake and that money should be repaid to it with interest. It is pleaded that on about 17 February 2001, Mitchell Morgan entered into a loan agreement purportedly with Mr Vella, and in consequence of that loan it electronically transferred into an account that Mr Vella and Mr Caradonna held with the ANZ Bank the sum of $1,001,748.85. This was made under a mistake and misunderstanding that the mortgage was valid. The payment should be returned. There is an alternative claim in conversion. 448 In his submissions, Mr Parsons put that if contrary to its main submissions no monies were owing under the mortgage then the amounts advanced, at least to the extent of those deposited in the joint account of Messrs Vella and Caradonna are monies had and received by the ANZ Bank. 449 Mr Parsons cites Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, particularly at 671. The submission is that unless the ANZ Bank can put forward some matter which would make it unjust for the money to have to be repaid, then Mitchell Morgan is entitled to a verdict. 450 Mr Forster in reply first says that the conversion claim cannot succeed because it is not possible to convert money or funds unless it involves specific coins or notes which is not the case here. He cites Associated Midland Corporation v Bank of New South Wales [1983] 1 NSWLR 533, 537. 451 So far as the claim for money had and received is concerned, the ANZ Bank relies on two grounds and I will set out Mr Forster's submissions verbatim in the following paragraphs. 452 He first puts that the Bank received the funds into its account not as a volunteer, but not having given value in the sense that it became obliged to deal with the monies and the proceeds thereof not in any manner of its own choosing but only in accordance with certain terms of its contractual arrangements with Messrs Vella and Caradonna. In "receiving" those funds, the Bank acted only as an agent for collection for Messrs Vella and Caradonna and held the funds at their direction. The funds would only have become the property of the Bank, and could only be considered to have been "received" by it, if and when it credited those funds to its customers' account pursuant to its customers' direction and authority to do so. 453 In the present case, assuming that Mr Vella was unaware that those funds had been made available, he gave no such direction or authority, and as a consequence, the Bank did not at any time "receive" those funds within the meaning, or for the purposes of Mitchell Morgan's claim for money had and received. 454 Secondly, or in the alternative, that in paying out those monies, without knowledge of the facts alleged by Mr Vella, the Bank itself changed its position to its detriment in reliance upon the payment having been made into its account. In other words, the Bank paid away the funds so received from Mitchell Morgan in reliance upon its belief that the monies were paid into that account in circumstances where it was entitled to deal with those funds in the manner that it did. It acted in good faith in reliance upon that belief and to its detriment and is not now in a position to recover those funds unless, and then only to the extent that, it is able to recover those amounts from their ultimate recipients. 455 As to the first submission, this matter was canvassed by the High Court in ANZ Banking Group Ltd v Westpac Banking Corp supra. The Court at 673-4 and again at 682 and following, analysed the cases as to who is deemed to have received money when money is paid to an agent such as a bank. 456 The Court said at 673, that prima facie, the person receiving the money is the payee but continued: "However, when the person to whom the payment is directly made receives it as an intermediary (eg as agent for a designated principal), there may be uncertainty about the identity of the actual recipient of the benefit at the moment of payment. If the circumstances are such that the intermediary is to be seen as being himself the initial recipient of the benefit, his prima facie liability would ordinarily be displaced when he has handed the money received on to the person for whom he received it." 457 At 682 the Court said: "If money is paid to an agent on behalf of a principal and the agent receives it in his capacity as such and, without notice of any mistake or irregularity in the payment, applies the money for the purpose for which it was paid to him, he has applied it in accordance with the mandate of the payer who must look to the principal for recovery."

These words were originally used by Cockburn CJ in Holland v Russell (1861) 1 B & S 424, 434; 121 ER 773, 777. 458 Another way of considering the matter is to say that the agent does indeed "receive" the funds (as the word "receive" is used in the phrase "money had and received"). However, if before notice of a problem it pays the funds away in accordance with its mandate, then the payer can only recover against the bank's principal. 459 However, a problem in the instant case is that the monies were not paid away in accordance with the mandate of the Bank because both of the customers had to sign a cheque and in fact only one signed. 460 There was little argument on this point. However, the English Court of Appeal decision in Gowers v Lloyds and National Provincial Foreign Bank Ltd [1938] 1 All ER 766, tends to the conclusion that it does not matter that the bank paid away the money to a person whom it believed to be its principal. In the present case there is no allegation that the Bank was in any way guilty of reprehensible conduct except in so far as it may have been guilty of a breach of contract between itself and its customers. 461 Indeed, the reason why, generally speaking, one seeks return of the money from the bank rather than from the bank's principal (apart from the commercial reason that the bank will have more money), is that the rule at law was that no one but the principal could call his agent to account: see Stoljar, The Law of Quasi Contract, 2nd ed (Law Book Company, Sydney, 1989) p 124. 462 The exception was where the bank was as a matter of fact "merely the hand employed to forward the plaintiff's money to the defendants" (Cobb v Becke (1845) 6 QB 930, 936; 115 ER 350, 353) or was acting merely in a ministerial capacity (Symonds v Atkinson (1856) 1 H & N 144, 150; 156 ER 1152, 1155) or was a mere conduit (Continental Caoutchouc & Gutta Percha Co v Kleinwort Sons & Co (1904) 9 Com Cas 240, 248 quoted with approval by the High Court in ANZ Banking Group Ltd v Westpac Banking Corporation at 674). See also Stoljar op cit at 124. 463 It follows that in the present case the Bank is not liable to Mitchell Morgan in money had and received. 464 8. The case against Hunt & Hunt. This needs to be considered in two tranches, first, under the common law and secondly, as governed by section 5 O of the Civil Liability Act 2002. 465 The essential dispute between Mitchell Morgan and Hunt & Hunt is well set out in the written submissions of Mr Stevenson for Hunt & Hunt which are produced almost verbatim below. 466 In the second cross-claim, Mitchell Morgan pleads that in or about January 2006, Mitchell Morgan orally retained Hunt & Hunt to advise and draft a mortgage with respect to a loan to Mr Vella to be secured by a registered first mortgage over the Enmore Property ("the Retainer"). Further, that it was an implied term of the Retainer that Hunt & Hunt perform the Retainer with due care, skill and diligence, and exercise such care, skill and diligence such that the mortgage would obtain the benefit of indefeasibility despite being procured by fraud. 467 Mitchell Morgan pleads that Hunt & Hunt breached their contractual and tortious duty of care by failing:

(i) to draft the Mortgage and loan agreement "in such terms as to ensure that the mortgage was not susceptible to attach, in the event of fraud, on the principles set forth in Tsai ("the failure to draft claim"); and

(ii) to advise Mitchell Morgan "to amend their mortgage documentation so as to include a personal covenant that the mortgagor repay, under such mortgage, such amount as Mr Vella also owed under" the loan agreement ("the failure to advise claim"). 468 The second cross-claim states that Mitchell Morgan thereby suffered loss and damage in that: "[I]f the Court finds that the mortgage was procured by fraud and, further, that the mortgage was rendered defeasible in consequence of the dicta in Tsai, (Mitchell Morgan's) loss is the sum lent, together with interest and additional expenses". 469 Hunt & Hunt admits the Retainer and that it owed a duty to carry out that Retainer with due care, skill and diligence, but otherwise denies the scope of duty, breach and causation of damage. It further pleads that it drafted the mortgage in a manner that, as at January 2006, was widely accepted in Australia by peer professional opinion as competent professional practice within the meaning of s 5 O(1) of the Civil Liability Act. 470 It also pleads that Messrs Caradonna, Flammia and/or Rutty are concurrent wrong-doers within the meaning of s 34(2) of the Civil Liability Act, such that Hunt & Hunt's liability should be limited to an amount reflecting that proportion of the loss which is just having regard to Hunt & Hunt's responsibility for Mitchell Morgan's damage. 471 There is a fifth cross-claim. Originally this was against Mr Caradonna, Mr Rutty and Mr Flammia. However, it has been discontinued against the first two, and is only now pursued against Mr Flammia. The current version of the cross-claim is the amended statement of cross-claim filed 3 March 2008. 472 The issues for determination in the second and fifth cross-claims in proceedings 4059/06 are:

(a) whether the mortgage secures monies owing under the loan agreement;

(b) if the mortgage does not secure any monies, whether Hunt & Hunt: (i) were in breach of their contractual and tortious duty of care; or (ii) are in any event not liable by reason of section 5 O of the Civil Liability Act ; (iii) whether any breach by Hunt & Hunt caused Mitchell Morgan any loss;

(c) if Hunt & Hunt are liable for any loss by Mitchell Morgan:

(i) the quantum of such loss; (ii) the proportion of such loss for which Hunt & Hunt are liable; and (iii) whether and to what extent, Hunt & Hunt can recover any amount they are liable to pay from Mr Flammia. 473 In summary, Hunt & Hunt submit that:

(a) the mortgage, as a matter of construction, incorporates the payment obligations in the loan agreement and hence secures those obligations by reason of the mortgage being indefeasible, notwithstanding the fact (assumed for this purpose) that the signature on the mortgage is an unauthorised forgery. That being so, Hunt & Hunt are not negligent and Mitchell Morgan has not suffered any loss;

(b) if the mortgage did not secure the loan monies: (i) Hunt & Hunt did not breach their contractual and tortious duty of care; or (ii) are otherwise not liable, by virtue of section 5 O of the Civil Liability Act, because they drafted the mortgage in a manner which, as at January 2006, was widely accepted within Australia by peer professional opinion as competent professional practice; (iii) if Hunt & Hunt did breach their duty of care, that breach did not cause any loss because Mitchell Morgan would not have requested that Hunt & Hunt redraft the mortgage, and in any event, if the mortgage had been drafted so that it expressly incorporated the payment covenants in the loan agreement, it would nevertheless have been liable to be set aside pursuant to section 38(4) of the Consumer Credit Code and section 7 of the Contracts Review Act ;

(c) if a breach of duty by Hunt & Hunt did cause compensable loss, then the quantum of that loss is: (i) the amount of the monies paid away on 19 January 2006 plus statutory interest from that date; or (ii) in the alternative, the amount owing on the date of a notional mortgagee's sale, up to a maximum of the amount realised by such a sale, plus statutory interest from the date of that sale; (iii) Mr Caradonna and Mr Flammia are also liable to Mitchell Morgan in relation to the perpetration of the fraud on Mitchell Morgan and Mr Vella, and in the circumstances it is just, for the purposes of s 35 of the Civil Liability Act , that Hunt & Hunt bear no more than 5% of Mitchell Morgan's loss; and Mr Flammia is liable to Hunt & Hunt for any damages which Hunt & Hunt are liable to pay Mitchell Morgan. 474 For the purposes of the second and fifth cross-claims, the undisputed facts include that Mr Vella did not sign the transaction documentation, nor did he authorise its execution. 475 The cross-claim against Mr Flammia is considered in section 9 of these reasons and questions of damages in section 13. I will deal with the other matters raised shortly. 476 (a) I will now deal with the issues raised in the second and fifth cross-claims other than those to be dealt with in other sections. Issue (a), that is whether the relevant mortgage secures monies owing under the loan agreement has already been answered "No". 477 This leaves for me to consider: (b) whether Hunt & Hunt were in breach of its contractual or tortious duty of care; (c) if so, whether any breach caused Mitchell Morgan any loss and, if so, whether the loss can be apportioned or laid off. 478 (b)(i) I will first examine the situation apart from s 5 O of the Civil Liability Act 2002. 479 I have already set out the relevant facts, most of which were abstracted from Hunt & Hunt's submissions. 480 Mr Stevenson puts that it was consistent with practice widely regarded in the profession as competent for Mr Gabelich to accept Mr Flammia's word in the light of the relevant facts known to him. 481 In these circumstances, he puts, Mr Gabelich was entitled to assume, and did in fact assume, that, as a matter of fact, the person who signed the mortgage and other documents was the person whose photograph appeared in the licence and passport. 482 Mr Stevenson puts that Mr Gabelich thus received a specific assurance from Mr Flammia that a person had, in Mr Flammia's presence, signed the mortgage and other documents, and that that person was the same person whose photograph appeared in the photocopy licence and passport forwarded by Mr Flammia. 483 That being so, it was appropriate for Mr Gabelich to proceed on the basis that there was no problem with the identity of the borrower nor the genuine nature of the signature on the documents. 484 Having received such assurances from Mr Flammia as to the borrower's identity it was competent professional practice for Mr Gabelich to use an all monies mortgage in the transaction. 485 In those circumstances it is submitted, the steps taken by Mr Gabelich, outlined above, would be widely accepted in "Australia by peer professional opinion as competent professional practice by a solicitor ensuring that the identity of a borrower in a mortgage transaction was satisfied". 486 As noted earlier, Mr Gabelich made the usual enquiries and reported these matters to Mr Virago, both in writing and by telephone and received instructions to proceed. 487 Thus, it is submitted, Mr Gabelich had done all that he could do, consistent with Mitchell Morgan's policy, to ensure that the identity of the borrower had been ascertained. 488 Although arrangements were originally made for Mr Gabelich to be cross-examined from Germany where he was temporarily at the time of the hearing, the application to cross-examine him was later withdrawn. 489 Mr Virago swore two affidavits, again Mr Virago was not cross-examined. In his second affidavit, CB 1927, he said that at no time was he advised by Hunt & Hunt that mortgages drafted in a certain way may, in the event of fraud by a third person, have as a consequence that Mitchell Morgan would not be able to obtain possession of the mortgage security and sell it in the event of a borrower default. Nor was he at any time advised by Hunt & Hunt about Tsai or that a consequence of Tsai was that the kind of mortgage that was being prepared by Hunt & Hunt may fail as an effective security in the event that there was fraud involved in circumstances involving the execution of the loan and mortgage. 490 He says that had he been advised of those matters he would not have authorised the money being lent or would have at least requested that Hunt & Hunt draft a mortgage that overcame those problems. 491 Of course, one always discounts statements like what I have just noted which are made after the event. There is great doubt whether the statement was admissible because of s 5D(3)(b) of the Civil Liability Act 2002. However, there was no objection, the statement was made and the evidence was unchallenged. 492 When dealing with professional negligence, some obvious points must be stated because sometimes they tend to be overlooked. The first is that a professional advisor is not an insurer. Doubtless the client expects that if the "paperwork" are entrusted to a solicitor, the paperwork that results will be effective. The solicitor must use his or her best professional skills to bring that about, but the mere fact that the result is disastrous to the client does not mean necessarily that the solicitor was negligent. 493 At the other extreme, putting aside the operation of s 5 O of the Civil Liability Act 2002, the fact that there is a general practice of solicitors to do or not to do a certain thing does not of itself negative negligence if the thing is done or not done by the solicitor in question: Mercer v Commissioner for Road Transport and Tramways (1936) 56 CLR 580. 494 It is doubtless good business practice for solicitors to have standard forms and to have forms which can be used in every transaction by merely changing names, dates and amounts in a schedule and this fits in with procedure in the modern computer age. It is accordingly understandable that the majority of solicitors will use, if they can, a form of all monies mortgage which would cover almost all situations, though it would be of real benefit only in cases where there is or might well be more than one transaction between mortgagor and mortgagee or where there is some running account. 495 However, it cannot be a principle that a solicitor is not negligent if he or she uses the most common form. As the learned editors said in their preliminary comments to the Law Book Company's Practical Forms and Precedents in 1957, Vol,1 p xxi: "The transactions of modern society are so varied, that it would be impossible to devise a set of precedents which would suit all occasions…..Not even a line should be copied from a precedent without proper consideration of its meaning and effect, and its application to the then instant transaction. Precedents are not made for the ignorant. They are only in aid, in method and expression, to those who know their subject, and a reminder of dangers to be avoided, and of provisions which should not be overlooked. The draftsman…should have an exact knowledge or understanding of the meaning and legal significance of every phrase and clause in a precedent, and the reason for the retention or the omission of any phrase or clause in such precedent." 496 People do not go to solicitors just so that the solicitor can earn a fee by pulling out a form from his or her computer and instructing a word processing clerk how he or she should fill out the blanks. A solicitor earns his or her money by directing his or her mind to the transaction and the risks that need to be covered and the advice that needs to be given to the client. Doubtless it is very tempting in a transaction which looks at first sight to be the same as thousands of other transactions that have been processed by the solicitor, and where it appears that there is no fraud, to just adopt the policy of "one size fits all". If that were all the solicitor was to do, then an unqualified clerk in the mortgagee's employee could do the same task far more efficiently and cheaply. So, the solicitor is there to direct his or her mind to the transaction. 497 However, one must recognise that what was said by the editors of the Precedent Book is a statement of best practice, what is expected of the top solicitors and the standard to which "ordinary" solicitors are to aspire. That is not the standard by which a court judges an allegation of breach of duty. 498 It has been said in the highest courts that whilst it is always a matter of looking to the retainer in each case, solicitors are ordinarily not retained to achieve a result, but rather to use their professional skill to assist the client to achieve the result: Auburn MC v ARC Engineering Pty Ltd [1973] 1 NSWLR 513, 531; Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, 1100; [1975] 3 All ER 99, 103. 499 The solicitor is not expected to be a person who has superhuman abilities, but rather a person who will bring to bear on the tasks at hand the competence and skill that is usual among qualified and ordinary competent and careful solicitors in the exercise of their profession: Hawkins v Clayton (1988) 164 CLR 539, 580 (Deane J). 500 In Macindoe v Parbery [1994] Aust Tort Rep 81-290 at p 61,453 (CA), in a passage endorsed by Dunford J in Kyriacou v Kogarah MC (1995) 88 LGERA 110 at 122, I said that the ordinary retainer of a solicitor in a conveyancing transaction extends beyond mere documentation to a duty to warn the client of anything that is unusual and anything which may prevent the client from obtaining the intended benefit from the transaction. 501 I said earlier that I thought that Mr Gabelich's acknowledgement to Mr Virago that the task which he was commissioned to do could be done within the time specified showed that the time available was not a factor that I need take into account. I remain of this view. However, I should note that in para 85 of their submissions, Hunt & Hunt put that the urgency of the transaction is a factor together with the difficulty of the issue at hand and the lack of time for calm deliberation must be put in the mix when considering whether on the facts there has been a breach of the duty of care. I agreed with that proposition when sitting in the Court of Appeal in Macindoe v Parbery [1994] Aust Tort Rep 81-290 at p 61 453. During submissions I was also referred to Trust Co of Australia v Perpetual Trustees WA (1997) 42 NSWLR 237, 247-8 per M McLelland CJ in Eq. 502 In the same case that learned judge noted as of course is trite law, that not every mistake by a solicitor founds liability in negligence. All that a solicitor owes is a duty to exercise reasonable care and skill and that solicitors are not liable for making mistakes "in a nice and difficult point of law", a quote which ultimately derives from the House of Lords' decision in Stevenson v Rowand (1830) 2 Dow & Clark 104, 119; 6 ER 668, 674. 503 Further, a lawyer is not normally required to warn experienced business clients of the possibility that his or her opinion though firmly held may not in fact prevail. 504 Again, when one is acting for an experienced client in the commercial area in which the solicitor is retained, a solicitor is not at fault if he or she does not advise the client of risks which a reasonable person would assume the client was well aware: see Walmsley, Abadee, Zipser, Professional Liability in Australia, 2nd ed (2007) at [3.920]. 505 I do not consider that the solicitor in the current circumstances was obliged to warn the client of the possible risk of fraud. Nor do I consider that the client would have been at all interested to hear advice about the implications of the Tsai case. 506 Thus I do not consider that there was a failure of the obligation to warn of danger. 507 However, the allegation of failure to draft a mortgage that would avoid a remote possibility of fraud is more difficult of resolution. 508 In the instant case, the inference that I draw from Mr Gabelich's evidence and the other evidence in this case is that the solicitor regarded this as more or less a routine task; he did not direct his mind as to the possibility of fraud, though that omission was lessened by the assurance that he had been given by Mr Flammia. Lessened it was though not removed. He knew he was dealing with an experienced short term finance provider, but he also knew that his care and skill was being relied on by that mortgage provider to ensure that its investment was secure. 509 With these tests in mind, I now turn to the question whether, under the general law, there was a breach of duty of care imposed by the retainer, or alternatively under the law of tort. 510 I have already noted that two expert solicitors gave evidence, Mr Peter Carkagis for Mitchell Morgan and Mr Stephen Martin for Hunt & Hunt. 511 Mr Carkagis (CB 1049) gave us his view that a prudent practitioner exercising due care, skill and diligence practising in the area of mortgages and related securities and holding himself out to be an expert in the area, should have known about Tsai. Further, that in performing the retainer, a prudent practitioner should have drafted and prepared a mortgage which contained a covenant to pay a stipulated amount by the mortgagor. Further, a prudent practitioner should have advised Mitchell Morgan that the form of mortgage prepared by Hunt & Hunt would at least arguably expose it to the indebtedness being unsecured by the mortgage in the presence of fraud in fact situations similar to Tsai. 512 Mr Carkagis annexed to his affidavit part of the Registrar-General's report for the year 2004-2005 which, inter alia, drew attention to the Tsai case and similar cases. Mr Stevenson put to Mr Carkagis that the Registrar-General seemed to be saying that most NSW mortgages were in the "all monies" form, a proposition with which Mr Carkagis agreed. 513 Mr Carkagis was asked about the scenario of solicitor A being assured by solicitor B that certain things were done correctly and he agreed that it would be appropriate for solicitor A to take solicitor B's word for it, at least in the absence of something that would cause suspicion and furthermore agreed that "the proper and efficient conduct of conveyancing practice in this State depends upon the ability of solicitors to trust that assurances given in such circumstances are truthful" (T427). 514 At T429, Mr Stevenson put to Mr Carkagis the circumstances that Mr Flammia had identified the borrower and his signature to Mr Gabelich and said: "Would you agree that in those circumstances someone who was in Mr Gabelich's position was entitled to assume, based on the assurance that he got from Mr Flammia, that the person who signed the mortgage was the person whose photograph appeared in the licence and the passport." 515 Mr Carkagis agreed that that would be correct. Then he was asked: "Now in those assumed circumstances it would be competent professional practice, would it not, to use an all monies mortgage. That is to say, when you have satisfied yourself as a lender's solicitor as to the borrower's identity in the manner I have asked you to assume." 516 The answer is "It follows, if all those factors fall into place." However, Mr Stevenson asked the question again and got the wrong answer: "And if all factors fell into place do you agree that in January 2006 it would be widely regarded in the profession as competent professional practice to use an all monies mortgage"

to which Mr Carkagis gave the answer "No". 517 At T430 he answered the question "Yes" and Mr Stevenson then sat down. However, earlier on in T430 he said that there was arguably no problem in the circumstances put to him why an all monies mortgage should not be signed, but a competent solicitor would still have to evaluate the risks shown up in Tsai and other cases. 518 Mr Martin's evidence went mainly to the section 5 O point. 519 Mr Coles put that Mr Gabelich simply drafted a mortgage that was not fit for the purposes Mitchell Morgan sought it for. It was an all monies mortgage where there was no commercial utility in the drafting of a document in those terms. He put that one drafts an all monies mortgage for portability of borrowing and cross collateralisation and these factors had no relevance at all to Mitchell Morgan. The use of an all monies mortgage gave rise to difficulties which drafting of an ordinary mortgage with a fixed sum owing completely avoided. The fact that the majority of solicitors may have used all monies mortgages widely was not a factor at common law which gave a conclusive answer to whether a solicitor had been negligent. 520 He pointed out that even Mr Martin agreed that where there is a one-off transaction and there are no "all monies" as such, there is no need to use an all monies mortgage: see T435. Mr Martin also noted that the presence or prospect of fraud can never be entirely excluded in a mortgage transaction (T436) a proposition that one would have thought was self evident. 521 It seems to me that Mr Carkagis' evidence went no further than to say that whilst the solicitor must consider each transaction, it would commonly be expected that he or she would use the new form of mortgage, namely, the all monies form of mortgage. 522 Mr Coles puts that there is no question that on the proper construction of the mortgage it is an all monies mortgage. Hunt & Hunt therefore drafted a mortgage in circumstances where: (a) Mitchell Morgan was undertaking short term funding for two months at a relatively high interest rate with no other loan facilities or financial accommodation to Mr Vella; (b) Mr Vella was not a known or regular customer of Mitchell Morgan; (c) Hunt & Hunt knew that Mitchell Morgan had never sighted Mr Vella and were taking no steps personally to identify him; (d) Hunt & Hunt knew that they were to assume the obligation of identification of Mr Vella so as to ensure to the fullest extent possible Mitchell Morgan was not the victim of fraud; and (e) there was no commercial likelihood of the facility being rolled or there being any refinance with Mitchell Morgan given the nature of it being short term funding and the relatively high interest rate being charged. 523 All of those factors, Mr Coles said, irresistibly pointed in favour of the old fashioned type mortgage in the circumstances of this case. 524 Prior to s 5 O, the question of negligence was primarily a question of fact to be determined by the court. 525 In Bolam v Friern Barnet Hospital Management Committee [1957] 1 WLR 582, a medical negligence case, McNair J summed up to the jury at 587-8, using these words: "He is not guilty of negligence if he has acted in accordance with a practice accepted as proper by a responsible body of medical men skilled in that particular art. ... Putting it the other way round, a man is not negligent, if he is acting in accordance with such a practice, merely because there is a body of opinion who would take a contrary view. ... It is not essential for you to decide which of two practices is the better practice, as long as you accept that what the defendants did was in accordance with a practice accepted by responsible persons ... ." 526 In Rogers v Whitaker (1992) 175 CLR 479, the High Court declined to follow the Bolam approach. Five justices said at 487: "In Australia, it has been accepted that the standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill. But, that standard is not determined solely or even primarily by reference to the practice followed or supported by a responsible body of opinion in the relevant professional trade. ... particularly in the field of non-disclosure of risk and the provision of advice and information, the Bolam principle has been discarded and instead, the courts have adopted the principle that, while evidence of acceptable medical practice is a useful guide for the courts, it is for the courts to adjudicate on what is the appropriate standard of care ... ". 527 It may be that the enactment of s 5 O has neutralised what the High Court said in Rogers v Whitaker. However, if one puts that aside and puts s 5 O to one side, I must ask myself whether a skilled solicitor would have known about, at least the potential problems, highlighted in Tsai and in a situation where there was a short term loan of a fixed sum would have directed his or her mind to whether a traditional form of mortgage naming an amount borrowed was preferable to an all monies mortgage and having had that thought, elected to use an all monies mortgage. 528 Mr Gabelich in his evidence at no stage mentions that he ever directed his attention to whether he should use an all monies mortgage or not. The inference that I draw is that he merely proceeded on the basis that the mortgage would be in his usual form and never considered the problems there may be. 529 Although he was justified in accepting what Mr Flammia said, he was not justified in thereby considering that there was no possibility of fraud. His duty was to protect his client or to warn against possibilities. He had two possible methods of proceeding, one which was safe and the other was subject to some risk and he chose the second, or at least he proceeded along the second path without directing his mind one way or the other as to what he should be doing. 530 Section 5B of the Civil Liability Act 2002 which seems to embrace substantially what was once called the "Shirt Calculus" (see Wyong Shire Council v Shirt (1980) 146 CLR 40, 47-8), says that a person is not negligent in failing to take precautions against the risk of harm unless in the circumstances a reasonable person in that person's position would have taken precautions and that the court must consider the probability that harm would occur if care were not taken, the likely seriousness of the harm and the burden of taking precautions to avoid the risk of harm plus other things that are not relevant to the present case. 531 In the present case, the probability that harm would occur if care were not taken, was fairly low. The enquiries made of Mr Flammia would have gone a long way to satisfying a reasonable person that Mr Vella was the person who had signed the mortgage. Although fraud was not excluded, its presence was improbable. 532 However, counterbalancing that was that the seriousness of the harm to the client was that a very large sum of money would be completely lost. The risk, to my mind, was foreseeable, but could it be said that it was "not insignificant"? I have worried about this point. However, it seems to me that the risk was not insignificant. 533 I say this because the whole reason that a mortgagee, even a professional mortgagee such as the client in the present case, goes to a solicitor is because, unless the documentation is properly drawn, there is a very real risk of loss. I do not consider it is correct merely to focus on the possibility of fraud. Rather, the thing to look at is the whole mortgage transaction and that if the solicitor is careless in and about appreciating the risks or failing to warn or failing to draft properly, then in all events the client will suffer loss and that risk of the transaction being a disaster is not insignificant. 534 The burden of taking precautions to avoid the risk of harm was not very great. The solicitor could have either used the old fashioned form or advised the client, who was an experienced short term money lender of the risk. It seems to me that in the circumstances a reasonable person in the solicitor's position would have taken more precautions in selecting the right form than Hunt & Hunt did in this case. 535 In their submissions, Hunt & Hunt put forward the following propositions (the number in parenthesis refers to the paragraph of their written submissions). 536 (83) The evidence of both experts is that it would be consistent with competent professional practice to use an all monies type mortgage if steps taken by Mr Gabelich were taken to identify the borrower and hence address the risk posed by fraud. 537 (84) Section 5C(b) of the Civil Liability Act 2002 provides that: "(b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done." 538 Thus it is put, that the risk of fraud may also have been addressed by drafting the mortgage in a way which expressly incorporated an obligation to repay a specific sum is not crucial. 539 However, it must be noted that s 5C(b) uses the words "not of itself". The section does not stop this factor being taken into account when making its overall assessment as to whether, on the facts in any particular case, there was negligence. 540 Again, one must construe s 5C(b) rationally. If there is a right way of doing things and a wrong way of doing them, the section cannot be utilised. It is there to deal with the situation where there were two or more apparently equally viable alternatives and a choice was made which turned out not to be the best. 541 As Villa notes in his Annotated Civil Liability Act at p 40, the section reminds judges that: "The fact that the one alternative has failed to prevent the harm that has eventuated and the other alternative would have so prevented the harm does not logically require a finding that the defendant ought to have chosen the other alternative. Section 5C(b) makes it clear that such reasoning is impermissible." 542 Apart from s 5 O, in my view the evidence shows that on the balance of probabilities Hunt & Hunt may well have breached their duty of care to their client. The transaction was not a very complicated one. It could have been processed in two ways: (a) by using a traditional form of mortgage with a fixed loan; and (b) by using the new form being an all monies mortgage. The first had no risk; the second did have risk. However, the solicitor did not turn his mind to the risk. 543 It should have been self evident to any professional lawyer that one can never avoid completely the risk of fraud because fraudsters can be very convincing. Although it was reasonable for Hunt & Hunt to rely on what Mr Flammia said, that assurance should not have completely ruled out the possibility of fraud. That possibility could have been ruled out, however, by getting an indefeasibly registered mortgage for a fixed sum. Hunt & Hunt do not seem to have taken into account that that would be the better way of doing what they were retained to do; they merely used the ordinary form. 544 (b)(ii) I now turn to consider the impact of s 5 O of the Civil Liability Act 2002. That section is as follows: "5 O Standard of care for professionals (1) A person practising a profession ('a professional') does not incur a liability in negligence arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice. (2) However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational. (3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section. (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted." 545 Section 5 O was considered by the Court of Appeal in Dobler v Halverson [2007] NSWCA 335. In that case Giles JA, with whom Ipp and Basten JJA agreed, referred to the Bolam case and to Rogers v Whitaker and then said at [59]-[61]: "[59] Section 5 O was amongst the tort law reforms consequent on the Review of Law of Negligence Final Report , September 2002 ('the Review'). It was intended to introduce a modified Bolam principle. Its importance does not lie so much in questions of onus of proof as in who determines the standard of care. ... Apart from s 5 O the Court would determine the standard of care, guided by the evidence of acceptable professional practice. It would not be obliged to hold against the plaintiff if the defendant's conduct accorded with professional practice regarded as acceptable by some although not by others. Section 5 O has the effect that, if the defendant's conduct accorded with professional practice regarded as acceptable by some (more fully, if he 'acted in a manner that ... was widely accepted ... by peer professional opinion as competent professional practice'), then subject to rationality that professional practice sets the standard of care. [60] In this sense, s 5 O provides a defence. ... The defendant has the interest in calling expert evidence to establish that he acted according to professional practice widely accepted by peer professional opinion, which if accepted will (subject to rationality) mean that he escapes liability. [61] It follows that I do not accept the appellant's submission that s 5 O did not provide a defence but defined the content of the duty of care owed by the appellant ... with the onus on the respondents to prove that the manner in which he acted was not widely accepted by peer professional opinion as competent professional practice. Section 5 O may end up operating so as to determine the defendant's standard of care, but the standard of care will be that determined by the court with guidance from evidence of acceptable professional practice unless it is established (in practice, by the defendant) that the defendant acted according to professional practice widely accepted by (rational) peer professional opinion." 546 In D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 62 [189] McHugh J said: "The Bolam test of professional liability, which has now been adopted in most Australian jurisdictions by statute (he referred in the footnote inter alia to sections 5 O and 5P of the Civil Liability Act 2002), is intended to preclude judges and legal practitioners imposing their own views as to what is negligent practice in many professions." 547 Mr Stevenson submits (94): "Hitherto the courts have taken the view that the standard of care to be applied to legal practitioners is a question for the court. However, the Parliament had now enacted that the standard of care is, in the circumstances to which s 5 O applies, a matter for the profession, unless the particular practice is 'irrational'." 548 With respect, I do not consider that states the law with complete accuracy. The plaintiff still may present his or her case in exactly the same way as prior to s 5 O. If there is no evidence called as to peer professional practice, then the court decides the matter in the same way as it always has decided the matter. However, if evidence is called, as the Court of Appeal notes usually by the defendant as to what is peer professional practice in Australia, then it may be that it is the profession that sets the standard. 549 In the instant case, Mr Stevenson points out that the defendant has called evidence of peer professional practice in Australia. That evidence is that all monies mortgages are commonly used throughout Australia and are accepted by the profession. 550 Mr Coles objects to this submission. He says that there is no evidence as to what the Australia-wide professional practice is. All that we have is evidence as to what NSW solicitors would do in the circumstances and this is not necessarily the same as what would happen in Australia generally. 551 It certainly is true that the Torrens system whilst containing certain basic principles throughout Australia, is contained in a series of state and territorial statutes which differ from each other in a number of respects, and that it is sometimes unwise to read an interstate decision as being directly applicable to one's own state; see eg Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496, 9498 (though the Court of Appeal did not share those doubts in Lyons Bros (Australia) Pty Ltd v Caleo Bros Pty Ltd (1981) 2 BPR 9334, 9339). 552 It is also true that the Tsai type case has been purely an NSW phenomenon and there does not appear to be any decision that is reported on the point outside NSW. 553 However, I consider it is too restrictive a way of approaching s 5 O to say that unless there is a peer professional practice throughout the whole of Australia the section cannot apply. 554 For instance, if one was working out the duty of care of a tender of a boab tree which as far as I know only grows in the north west of Australia, it surely could not have been the legislature's intention that s 5 O would be completely inapplicable. Rather, it would accord with the intention of the legislature if one said that where one had an industry which was only practised in part of Australia that that part was the Australian peer professional practice for the purpose of s 5 O. 555 Likewise, if one has different though similar professions in different parts of Australia, it would seem to me that one does not dismissively say there is no Australian professional practice but one looks to see the professional practice that exists in the particular locality where the negligent act or omission took place. There may also be other problems where, for instance, things would be done differently on King Island in Tasmania from Thursday Island in Queensland because one is in the cold wet south and the other is in the monsoonal north. 556 Accordingly, I reject the submission that there is not in this case an Australia-wide practice. 557 However, I also do not consider that the evidence that has been presented both of Mr Carkagis and Mr Martin necessarily lead to the view that Hunt & Hunt complied with peer professional practice in the instant case. 558 It may well be that the most common form of mortgage used in Australia or NSW is the all monies form. However, that, of itself, does not excuse a solicitor from addressing the question in each transaction as whether that is the best form in the transaction with which he or she has to document. 559 The principal plank of the case of failure to act with due care and skill is the failure to realise that there were risks in employing the standard form of all monies mortgage in every case, and that the client would be better protected in a "one- off" deal with what has been described in submissions as the "old fashioned form". 560 The problem in the instant case is that the only inference that I can draw from Mr Gabelich's evidence is that he did not turn his mind to the possible problems and he just used the form as a matter of rote. 561 I do not consider that an examination of the provisions of the Civil Liability Act affects the decision in this case. 562 Accordingly, in my view, Mitchell Morgan has made out its case of negligence against Hunt & Hunt. 563 (b)(iii) I now have to direct my mind to the submissions that any breach by Hunt & Hunt did not cause Mitchell Morgan any loss. The principal reasons for this submissions are that: (1) Mitchell Morgan would not have requested that Hunt & Hunt redraft the mortgage even if it had known that there was a risk; and (2) in any event if the mortgage had been drafted so that it expressly incorporated the payment covenants in the loan agreement, it would nevertheless be liable to be set aside pursuant to 38(4) of the Consumer Credit Code and s 7 of the Contracts Review Act. 564 As to the second submission, in view of what I have said in sections 4 and 5 of these reasons, the two statutes I have mentioned would be no answer to the claim. 565 As to (1), although Mr Stevenson's submissions at para 13(c) indicate that these submissions are fleshed out in section G of his submissions, in fact they are not unless I have completely overlooked something. 566 In considering this sub-question, I accept that the onus of establishing on the balance of probabilities that the solicitor's breach of duty caused the client's loss is on the client, see Civil Liability Act 2002 s 5E. 567 As I have mentioned before, Mr Virago's affidavit says that had Hunt & Hunt given him certain advice then he would at least have requested that Hunt & Hunt draft a mortgage that overcame the problem. 568 Mr Stevenson cross-examined Mr Virago on this at T332. He acknowledged that based upon what Mr Gabelich had told Mr Virago of his conversation with Mr Flammia, he was entirely comfortable about proceeding with the transaction and recommending its approval. The cross-examination then continued: "Q. And your state of mind was, wasn't it, that Mr Gabelich had done all that he could do consistent with Mitchell Morgan's policy to ensure that the identity of the borrower had been ascertained? A. Yes. Q. And I want to suggest to you that in those circumstances that had Mr Gabelich said anything to you to the effect that his Honour's decision in the Tsai case might mean if there were a forgery that Mitchell Morgan's position would be unsecure that would have made no difference at all to your decision-making processes about this transaction? A. At that stage no. Q. You agree with me? A. I agree with you, yes."

That was another time when Mr Stevenson wisely thought that he should sit down. 569 Even though this was an admission, I do not think the material as a whole is strong enough for me to say that Mitchell Morgan would not have requested that Hunt & Hunt redraft the mortgage if the matters had been properly explained to it. The whole purpose of asking the solicitors to deal with the matter rather than dealing with it internally by just getting a form from the Registrar-General's Department and filling in the blanks was that so the solicitors' expertise in making sure there was security for the loan was utilised. Any client who understood that course A had no risk and course B had some risk would be inclined to tell the solicitor to take course A rather than to pursue course B. 570 Thus, this defence fails. 571 (c) Thus I have to consider in due course: (i) the quantum of damages, which I will do in section 13 of these reasons; (ii) the proportion of such loss for which Hunt & Hunt are liable (which I will do shortly in this section); and (iii) whether and to what extent, Hunt & Hunt can recover any amount they are liable to pay from Mr Flammia (a matter I will consider in section 9). 572 The necessity to consider the proportion arises because of ss 34-35 within Part 4 of the Civil Liability Act 2002. 573 The purpose of Part 4 of the Civil Liability Act was explained by Palmer J in Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 at [93]-[94], where his Honour stated: "The object of Pt IV CLA is remedial and it dramatically changes the previous law. Formerly, a plaintiff could choose to sue only one of several wrongdoers who caused the same loss and the Court could enter judgment for the whole of that loss against that defendant. Even if the defendant cross claimed in the proceedings for indemnity or contribution against the other wrongdoers, the plaintiff could enforce a judgment against the defendant alone for the whole of the loss, leaving the defendant to recover from the cross defendants, if it could. Sometimes the defendant obtained judgment against a cross defendant but could not recover the judgment because of the cross defendant's insolvency. Part IV is designed to alleviate this perceived injustice. It is intended to visit on each concurrent wrongdoer only that amount of liability which the Court considers 'just', having regard to the comparative responsibilities of all wrongdoers for the plaintiff's loss." 574 Section 35(1) of that Act is as follows:

"(1) In any proceedings involving an apportionable claim:

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount.

… (3) In apportioning responsibility between defendants in the proceedings … (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings." 575 There is no doubt that the present is an "apportionable claim". 576 Mr Stevenson says that Messrs Caradonna and Flammia are "concurrent wrongdoers" within the meaning of s 34 of the Act as they are persons whose acts or omissions caused, independently of each other or jointly, the damage or loss suffered by Mitchell Morgan. 577 Hunt & Hunt submit that in the circumstances, where Mr Caradonna and Mr Flammia are guilty of actual fraud, and (it is assumed for this purpose) Hunt & Hunt have been found to have fallen short of the standard of care imposed by law upon solicitors, Hunt & Hunt's liability should be limited to no more than 5% of Mitchell Morgan's loss or damage. 578 The operation of s 35 was considered by Palmer J in Yates, where his Honour stated at [94]: "How the Court is to assess what is 'just' is not explained. The Court must exercise a large discretionary judgment founded upon the facts proved in each particular case. The principles upon which the Court will exercise this discretionary judgment will come to be developed on a case-by-case basis. However, it seems clear enough that the policy of Pt IV is that a wrongdoer who is, in a real and pragmatic sense, more to blame for the loss than another wrongdoer should bear more of the liability. This calls for the exercise of the same kind of judgment as the Court exercises in apportioning responsibility as between a defendant sued in tort for negligence and a plaintiff who, by his or her own negligence, has been partly responsible for the injury." 579 Mr Stevenson then drew attention to the principles governing the apportionment exercise in contributory negligence cases set out by the High Court in Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 at 495: "The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, i.e. of the degree of departure from the standard of care of the reasonable man … and of the relative importance of the acts of the parties in causing the damage … It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance." 580 He puts that these principles apply equally to contribution between tortfeasors. He cites what Rolfe AJA (with whom Sheller & Fitzgerald JJA agreed) stated in Vinidex Tubemakers Pty Ltd v Thiess Contractors Pty Ltd [2000] NSWCA 67 at [29]: "First, the principles relating to the apportionment of liability caused by negligence and appellate deference to the discretion exercised by the tribunal of fact are well established … Secondly, the Court must have regard to what is just and equitable and, in doing so, it must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness and the relevant causal potency of the negligence of each party, and to the whole conduct of each negligent party in relation to the circumstances of the accident by way of comparative examination." 581 Hunt & Hunt submit that it follows from Palmer J's equation in Yates of the apportionment exercise under s 35 of the Civil Liability Act with that in respect of contributory negligence, that nothing turns on the difference between the use of the word "just" in s 35, and the words "just and equitable" in s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (relating to contribution between tortfeasors) and s 9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) (relating to contributory negligence): see Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 [42]-[43]. 582 Mitchell Morgan put that Hunt & Hunt's submissions on s 35 are misconceived and involve a misapplication of the section. Mitchell Morgan's sole loss is the failure of Hunt & Hunt to perform their obligations under their retainer and draft a mortgage in terms that would fit the purpose. 583 Mitchell Morgan say that the case is analogous to the situation where a bullet proof vest manufacturer is sued by the victim of a gunshot wound arising from the failure of the vest itself. For the manufacturer to claim that the shooter is a concurrent wrongdoer misconceives the whole purpose of the Part because the failure of the bullet proof vest is the event that gave rise to the injury, the shooting is immaterial as had the bullet proof vest worked properly, no injury would have been sustained. 584 Hunt & Hunt's riposte was that this type of argument has been rejected by the High Court in Astley v Austrust Ltd (1999) 197 CLR 1 at 12-14. 585 It is completely correct to say that the High Court did at least to a degree do so. It rejected the argument that as an auditor or solicitor was designed to protect the client, the client's own carelessness could never be contributory negligence. However, this does not seem to me to counter the bullet proof vest illustration. The bullet proof vest case is not the same as the case instanced by the High Court of a customer who employs a security guard, but then is careless about its own security. 586 However, it seems to me that the High Court's approach to these sorts of case in Astley tells against accepting Mitchell Morgan's argument. 587 In making the apportionment, I exclude any negligence or carelessness on the part of Mitchell Morgan (Civil Liability Act s 35(3)(a)). 588 However, there is no doubt that both Messrs Caradonna and Flammia were each causes of the loss. This means that I must apportion the loss. 589 As the High Court pointed out in Astley, the fact that the auditor or solicitor was entrusted with the duty of ensuring that there would be no loss might mean that a court would hold that that the professional should bear the whole loss. 590 However, of the various wrongdoers, the most morally blameworthy was Mr Caradonna who orchestrated the fraud. Mr Flammia played a significant, but relatively minor part. 591 The assessment of the percentages by which the loss or damage must be apportioned is, of necessity, a matter for judgment and is not a matter of scientific exactitude. However, Palmer J's guidelines noted above are that a judge "must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness and the relevant causal potency of the negligence of each party". 592 Mr Stevenson referred me to two recent unreported cases where the respective liability under the apportionment legislation of a fraudster and a solicitor were considered. 593 In Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60, Hoeben J had to deal with a case where, essentially, his Honour found that the proper apportionment was 90% to the fraudster and 10% to the solicitor. 594 An almost identical result was reached by Bryson AJ in Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675. 595 It would be wrong simply to say that those two cases almost compel subsequent courts to reach the same apportionment in similar cases. However, they do provide much needed guidance. 596 There can be cases (a good illustration is State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618 at 625) where the solicitor who wrongly certified that he had witnessed a forged mortgage was said to be the principal cause of the lender's loss. 597 In the instant case, I consider that the degree of negligence of the solicitors exceeds that in the cases before Hoeben J and Bryson AJ. 598 I consider that the fact that Hunt & Hunt were retained to protect the client from what actually happened is a significant factor and that Mr Stevenson's submission of 5% is far too low. I consider Mr Caradonna has the major liability of about 70-75%, say 72.5%. Mr Flammia's contribution is I think a little more than that of the solicitors at about 15%, and Hunt & Hunt about 12.5%. 599 I should mention that Mitchell Morgan put that s 34A of the Civil Liability Act 2002 prevented Hunt & Hunt from advancing a claim for apportionment. 600 I reject this submission. I agree with Mr Stevenson's submission that section 34A only prevents intentional or fraudulent wrongdoers from claiming the benefit of the apportionment legislation. Hunt & Hunt are not in either of those categories.

9. The cross-claim by Hunt & Hunt against Mr Flammia 601 Hunt & Hunt sue Mr Flammia on three counts: (a) for contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946; (b) for damages for false and misleading conduct pursuant to s 68 of the Fair Trading Act 1987; and (c) for damages pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth). 602 Mr Flammia is a bankrupt but permission has been given by the Federal Magistrates Court for the matter to proceed against him up until judgment. The Trustee in Bankruptcy has taken absolutely no part in the proceedings, nor has Mr Flammia himself given evidence. 603 Because I have made an apportionment under s 35 of the Civil Liability Act, 2002, s 36 of that Act operates to bar part of any proceedings for contribution. Thus the only claim is in respect of the 12.5% for which they are directly liable to Mitchell Morgan. Hunt & Hunt submit that, in the circumstances, they are entitled to recover from Mr Flammia the whole of that liability. 604 It is clear that a person who asserts that he or she is a witness to a signature and who must know that that assertion is going to be acted upon by another owes a duty of care to that other not to misrepresent the fact of witnessing: Graham v Hall (2006) 67 NSWLR 135, 145. 605 So, in State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618, a solicitor attested as signed in his presence a loan facility document which was not so signed and indeed was a forgery. Giles J found the solicitor's representations were the substantial clause of the lender's loss. 606 Section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 gives a right of contribution against another tortfeasor who, would if sued, be liable for the same damage. 607 Section 42 of the Fair Trading Act prohibits false and misleading conduct in trade and commerce and damages flow for breach under s 68. 608 Section 12GF of the Australian Securities and Investments Commission Act gives a cause of action in damages for a person who breaches certain sections of that Act. Those sections include s 12DA which prohibits conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive. 609 Hunt & Hunt's submissions acknowledge that these causes of action really involve the same facts. They say in para 113 of their written submissions that that conduct was that Mr Flammia made the following representations:

(a) that the applicant for the mortgage was Mr Vella; and

(b) that Mr Flammia had personally witnessed the signature of Mr Vella on the transaction documents. 610 From the evidence that I have already analysed, I am satisfied on the balance of probabilities that Mr Flammia did so represent. 611 That being so, it is open for Hunt & Hunt to recover the damages it is liable to pay Mitchell Morgan from Mr Flammia pursuant to all three causes of action. To obtain such an indemnity pursuant to section 5(2) of the Law Reform (Miscellaneous Provisions) Act 1946, Hunt & Hunt would have to show that it would be "just and equitable having regard to the extent of [Mr Flammia's] responsibility for [Hunt & Hunt's] damage". Hunt & Hunt submit that on the facts for which they contend, set out in section G of their written submissions, that it is just and equitable that Mr Flammia provide a complete indemnity. 612 To obtain the indemnity pursuant to section 12GF of the ASIC Act and/or s 68 of the Fair Trading Act, Hunt & Hunt would need to prove that the conduct of Mr Flammia misled them (as opposed to just misleading Mitchell Morgan) and that Hunt & Hunt suffered loss in reliance upon that conduct. Hunt & Hunt submit, in relation to this claim, that:

(a) if Mr Flammia is held to have misled Mitchell Morgan it follows that he equally misled Hunt & Hunt;

(b) that the evidence indicates that Mr Gabelich relied upon the representations of Mr Flammia, and in particular the verbal assurance provided on 17 January 2006;

(c) that that reliance was "a" cause of Hunt & Hunt's loss, because without that assurance the transaction would not have proceeded and Mitchell Morgan would not have made (and lost) the advance; and

(d) the fact that their own negligence and Mr Caradonna's fraud were also a cause of that loss does not prevent Hunt & Hunt recovering the whole of the loss they actually suffered. 613 It follows that as Hunt & Hunt have suffered by having to meet the 12.5% liability to Mitchell Morgan, Mr Flammia was also liable for the same damage and as the real causa causans of the loss he should indemnify Hunt & Hunt. I agree with the submission that it matters not that Mr Caradonna may also be liable in the same way and in the same amount.

10. The cross-claim by Permanent against Mr Vella 614 I now pass to the claim by Permanent against Mr Vella for false and misleading conduct under the Fair Trading Act or the Trade Practices Act. 615 Permanent alleges that Mr Vella engaged in misleading conduct in signing certain of the critical documents and providing them to Mr Caradonna. The documents primarily fixed upon by Permanent for this submission are the loan applications, CB 1124 and 1142 and the GST declarations at CB 1162 and 1163. 616 Permanent alleges that Mr Vella signed and handed over the relevant documents as requested by Mr Caradonna. He knew he was doing so and that he did not know what the documents contained. He signed the documents during the time when it is alleged he had given the title deeds to Mr Caradonna and they had not been returned to him (this allegation of fact may need to be further considered). 617 Permanent says that that conduct caused the advancing of the Mangrove Mountain and Leppington loan amounts and that without those documents, the loans would not have proceeded to settlement. Permanent relies on the evidence of Ms Christou at CB 1112 and notes that that evidence was not challenged or contradicted. Permanent then says that its loss was suffered by the conduct of Mr Vella. It seeks relief under s 72 of the Fair Trading Act and suggests that the relief most likely to be appropriate is that the court should order that the mortgage secures such amount as the court may determine as the loss which Permanent will otherwise suffer by Mr Vella's conduct. 618 In advancing these submissions, Mr Parsons submits that there is no requirement of intent, knowledge or lack of care imported into s 42 of the Fair Trading Act (see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 197). There is evidence of reliance (see Ms Christou's evidence and indeed there is a fair inference of reliance otherwise available). Furthermore, the submission is that cases such as Huntsman Chemical Company Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242, 245 make it clear that the same approach to principles of proof of reliance accepted in a claim of deceit apply to analogous claims under s 52 of the Trade Practices Act or s 42 of the Fair Trading Act. 619 In reply, Mr Slattery puts that it is not misleading and deceptive conduct for an illiterate person to sign a document which is non est factum because of a false representation as to its contents. The document is not his act and therefore it is not his conduct, and thus there is no basis for imputing to Mr Vella any representation to Permanent. He refers to Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576, a decision of LW Street J. However, that was a case of a client who had no knowledge at all of her solicitor's forgery and the judge held that she was not vicariously tainted by the forgery: see p 584. 620 The reference to non est factum is not one which assists the plaintiff in the present case. It is clear that right from Thoroughgood's case (1582) 2 Co Rep 9a; 76 ER 408 a deed executed by an illiterate has been held to be not binding if it had been falsely explained whether by the grantee or by a stranger. 621 The seminal cases of Saunders v Anglia Building Society [1971] AC 1004 and the decision of the High Court in Petelin v Cullen (1975) 132 CLR 355 authoritatively settle the scope of non est factum in modern law. What is needed is a situation where the signer is under a disability (illiteracy is a disability for this purpose), and that there is sufficient difference between the document as it is and as the signer believed it to be. The High Court at 360 says "radically different from what it was in fact" and that the signer must not be careless. That last matter is usually a question as to whether the signer asked for the document to be explained because it is clear that if he or she signed it without seeking an explanation, then the plea is not available. 622 In the instant case Mr Vella asked for or even if he had not asked for, was given an explanation by Mr Caradonna that the document which he signed was not radically different from the document he thought he was signing, namely a piece of paper in aid of the loan anticipated from the St George Bank. Thus non est factum as such would not avail. 623 It is doubtful whether one can translate that concept into the statutory wrong of false and misleading conduct in trade and commerce. Indeed, at least as a general rule, the intention of the defendant in a claim for damages for such a statutory wrong is not relevant at all. All that is relevant is whether tested objectively the conduct was misleading or deceptive: see Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, 223. 624 It must be remembered that this is not a case where the false and misleading document (if that be its classification) was uttered to a person who knew that Mr Vella was illiterate. Accordingly, the fact of his illiteracy would not be one of the factors that one would take into account when considering whether the document was false and misleading. 625 I should note that no case was cited to me by counsel nor did my own research discover anywhere the question as to whether an illiterate person misunderstanding what he or she was signing was said to be conduct or a representation within the meaning of the Trade Practices Act or Fair Trading Act. 626 Mr Slattery then says that even if the document could constitute false and misleading conduct, it was not in trade or commerce. One of the mortgaged properties was vacant land with an unimproved shed, that is the Mangrove Mountain land, whereas the Leppington land was the Rebels Club House. Thus, it is put that whilst the mortgagee may have been acting in trade and commerce, the focus must be on whether Mr Vella's conduct was in trade and commerce and this requirement has not been met. 627 There are many situations where activities with respect to sale of private land will not be within the concept of trade or commerce; see eg O'Brien v Smolonogov (1983) 53 ALR 107. 628 However, whether in any individual case activity comes within trade and commerce is essentially a matter of fact to be decided in all the circumstances of the case. As the Full Federal Court said in Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330, the ratio of the O'Brien case was that "a private sale of property by an individual is not conduct in trade or commerce except if done in the course of a business activity or otherwise arising in a 'business context' ". See also the decision at first instance in that case Lubidineuse v Bevanere Pty Ltd (1984) 3 FCR 1 at 13 per Wilcox J. 629 A further distinction is that the present case, unlike O'Brien's case does not involve the disposal of a capital asset that was not used in trade and commerce, rather it involves the raising of finance over a capital asset in circumstances where the raising of finance was for non private and domestic purposes (unless one applies the presumption in the Consumer Credit Code). 630 The documentation presented to Permanent by Mr Caradonna showed that what was being sought was a business loan. Even if one goes back to what Mr Vella intended, his aim was to consolidate his loans which appear to have been for business purposes. [However one of the assets sought to be mortgaged was trust property, namely his association's club house!]. 631 It seems to me as a matter of fact that Mr Vella was acting in trade or commerce when he signed the documents. 632 The next question is whether the plaintiff has proved reliance. I have already set out Permanent's case on this. In reply, Mr Slattery puts that a person seeking to recover damages under s 42 must establish that the loss was suffered by conduct in breach of the Act. 633 In the present case, Permanent made its loan after receiving a host of documents only some of which were signed by Mr Vella. Furthermore, the mortgagee had the advantage of the assessment of the application by La Trobe and by Mr Mountford, its solicitor, but more particularly, by Ms Thornhill, Mr Mountford's employee. 634 Ms Thornhill, a former bank officer of experience, made it quite clear to anyone who wanted to listen, including Mr Mountford and Ms Christou of La Trobe that there was something wrong about the proposed transaction. No one in fact listened to her, and Ms Christou in fact expressly overruled the objection. Ms Thornhill comes through this whole transaction as the only person involved in assessing these loans who showed any of the traditional common sense and skill that advisors of mortgage transactions have possessed in ages past. The clear inference is that La Trobe, and hence Permanent, were far more concerned with the sale side of the transaction than the security side of it. As a matter of fact, I find that the documents which Mr Vella signed were not documents relied on by the mortgagee or its agents in recommending the loan. Accordingly, this count fails. 635 I should note, as Mr Slattery has pointed out, that although Permanent has pleaded a knowing assistance case under s 68 of the Fair Trading Act, no submissions have been made on this and there is no obvious basis for the claim; accordingly, there is no need for me to say anything about it. 636 11. The cross-claim by Mitchell Morgan against Mr Vella. The gravamen of this claim is that as the monies paid out by Mitchell Morgan were received into a bank account of which the plaintiff was a co-owner, he has an obligation to repay Mitchell Morgan. The cause of action would appear to be money had and received. However, the cross-claim which is CB 155 and following, is really put forward on the basis that Mr Vella signed the mortgage and did not repay the money advanced, rather than what appears now to be the real claim, that is, that as the money was paid into Mr Vella's bank account that he held jointly with Mr Caradonna and it was paid under a mistake, that the money is refundable. 637 I could not find any submissions by the plaintiff to address this claim. When my Associate at my request telephoned Mr Smallbone, she was informed that there was nothing because the plaintiff did not understand that Mitchell Morgan was making any such claim against them and that if they were wrong in this understanding, they would wish to make submissions. 638 However, in answer to an allied suggestion made by Permanent, Mr Slattery put that cases such as National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251, make it clear that if money comes into a joint account as a result of a joint holder's fraud, and the other joint holder is unaware of that fact, and the money is then misappropriated still without his knowledge or intervention, then the innocent party will not be answerable for the money, at least unless he ought to have known that he had possession or control of it. This matter was not argued by Mr Coles on behalf of Mitchell Morgan. The position I have reached is that it may be the parties had agreed that this cross-claim could not be interpreted as meaning a claim for money had and received in the circumstances as I have found them to be, but that if it is, Batty's case is a complete answer. The matter has not been properly argued and accordingly I should merely note this and make no determination of the point allowing the parties if they should feel so advised, to raise it at the short minutes stage.

The cross-claims Mrs Tsokos and other recipients of the monies 639 Much of the submissions made in connection with this aspect of the case do not need to be considered in view of my finding on the ANZ Bank claims. 640 However, the finding that the ANZ Bank is liable to Mr Vella for $150,000 plus interest leaves one to consider claims as against the $100,000 received by Mr Annous on or about 6 February 2006 and a further $100,000 paid to Rimridge Pty Ltd on the same day. 641 Rimridge filed a defence denying the claim and saying that it had made a number of loans to Caradonna Investments Pty Ltd and that it received $100,000 in February 2006. It did not appear at the hearing. 642 Rimridge is a company which is the alter ego of Mr Jeff Fenech the well-known boxing promoter. 643 The Bank claims in its statement of cross-claim (CB 46) that on or about 6 February 2006, Rimridge received a cheque for $100,000 drawn on the joint account of the Liverpool Branch. Shortly thereafter Rimridge presented the cheque and obtained payment. The monies representing the proceeds of the cheque were monies, the property of the Bank and in the circumstances Rimridge has received the Bank's monies and would be unjustly enriched at the expense of the Bank if the Bank was not granted relief. There is also a claim that Rimridge holds the money on trust. 644 Identical pleadings were put against Mr Annous. 645 The ANZ Bank submits that its entitlement to recover in respect of those cheques is supported by authority of the highest level. It refers to High Court decisions in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 385; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 529-530 [26]-[28] as well as Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677. 646 This submission is probably an overstatement because only the last of the cases mentioned actually involves the wrongful payment of a cheque. However, the Lipkin Gorman case is authority for the proposition that an innocent recipient of stolen money is obliged to pay an equivalent sum to the true owner where he has not given full consideration for it and has thus been unjustly enriched at the expense of the true owner. The High Court authorities are authority for making orders by way of restitution where monies are paid under a mistake of law. 647 In the Barclays Bank case, a cheque was drawn in favour of X and for commercial reasons the cheque was stopped. By mistake the bank paid it and was held to be able to recover the amount from the payee. 648 However, it does seem axiomatic that if a bank, contrary to its mandate, pays a cheque it is entitled to recover the money from the payee unless the payee can show that it is to be classed as a person who took the money for value or has changed its position; see eg the discussion by Hunter J in Majesty Restaurant Pty Ltd v Commonwealth Bank of Australia Ltd (1998) 47 NSWLR 593 at 603 and following. 649 In the case of Rimridge, there is no evidence of such claim and accordingly, the Bank's suit against that company must succeed. Whether it is for the full amount of $100,000 or some lesser amount seeing that the Bank's liability is in total $150,000 plus interest can be left to the short minutes stage. 650 As against Mr Annous, the position is more complicated. Mr Caradonna originally gave Mr Annous a personal cheque which bounced. Mr Annous then sought a bank cheque and what seems to have happened is that Mr Caradonna drew a cheque for $100,000 on the joint account and bought a bank cheque in favour of Mr Annous with that sum. 651 Mr Annous says that banks have constantly advertised that bank cheques are as good as cash and should not be permitted to resile from that commonly held belief which it has itself spread amongst the community. Mr Burchett for Mr Annous endeavoured to tender a whole lot of material put out by bank clearing houses, but I rejected this as irrelevant to what I have to decide. 652 It should be pointed out that there is some judicial authority for the proposition that a bank cheque is as good as cash. In Perel v Australian Bank of Commerce (1923) 24 SR (NSW) 62 at 75, P W Street CJ in Eq said: "Bank cheques payable to bearer are to all intents and purposes equivalent to cash …"

and in the Privy Council on appeal Australian Bank of Commerce Ltd v Perel [1926] AC 737 at 740-741, Viscount Cave LC, giving the judgment of the Privy Council said: "A bank cheque so issued by a responsible bank is treated as equivalent to cash, and is used by the customer for any purpose for which cash or its equivalent is required." 653 As Weerasooria points out in his article The Australian Bank Cheque - Some Legal Aspects (1976) 2 Monash University Law Review 180 at 184-5, even the High Court in Fabre v Ley (1972) 127 CLR 665 at 671 seems to have taken the same view. See also Commercial Banking Co of Sydney v Mann [1961] AC 1, 4. 654 It may be that after Commonwealth Trading Bank of Australia v Sidney Raper Pty Ltd [1975] 2 NSWLR 227 this statement ceased to be literally true and in a note in (1976) 3 Monash Law Review 66, Robert Makim then Chief Solicitor of the Commonwealth Bank said at p 69 that what the maxim meant was that the community accepts that the issuing bank has adequate funds to pay the cheque on presentation and no more. Notwithstanding that comment, the commercial community and probably the community generally possess a very high degree of faith in the bank cheque system and it is important for commercial purposes in Australia that that be maintained. 655 The ANZ Bank's riposte to all this is that Mr Annous is not being sued on the cheques in question, rather the claim that is made against him is that notwithstanding his status as their holder in due course, the proceeds of the cheques were had and received by him and ought to be repaid. The submissions about the significance about the bank cheques which I will come to in a moment is, according to Mr Forster, completely irrelevant. 656 Mr Burchett puts that on the proper interpretation of the facts, Mr Annous did not receive any proceeds of the personal cheque. The ANZ Bank received them, presumably in consideration for the issue of a bank cheque. The proceeds of that bank cheque (which was drawn on a separate ANZ bank account) were received by the Bank of Queensland in settlement to that extent of a debt owed to it by Mr Annous recorded against his overdraft account. 657 Mr Burchett also puts that there is no evidence that the source of the bank cheque was the joint account. Unfortunately for that submission, there is evidence of it though it may well be that Mr Annous had no idea as to the source of the funds. 658 I believe that consistently with the approach of most courts since the decision of the House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, it is best to deal with claims of this nature under the head of monies had and received at common law rather than involving any trust. However, it really does not matter very much as the general principles are the same. 659 I cannot see any comparable case in the authorities that were cited by counsel on either side of this argument. I do not consider, with respect, that the question as to whether Mr Annous was the holder in due course or not really bears on the result. The vital question is whether the fact that the cheque drawn from the joint account was paid to the Bank for it to issue a bank cheque breaks the ability of the Bank to follow the monies into the hands of Mr Annous. 660 A similar problem confronted the Court of Appeal in Raper. The simplified facts in that case were that an American equivalent of a bank cheque was deposited with a Sydney bank and the Sydney bank then drew a bank cheque in favour of Raper. However, the American bank cheque was dishonoured because of action taken by American revenue authorities. The bank then dishonoured the bank cheque. 661 The Court held that when the American cheque was dishonoured the local bank was entitled to debit the customer's account for the amount of that cheque, and as the credit allowed by the bank to the customers was conditional upon the American cheque being cleared, the consideration for which the bank cheque was issued wholly failed. Raper had given no value for the bank cheque and accordingly the bank was entitled to do what it did. 662 The decision in Raper appears to be determinative of the present case. The bank cheque was issued for a consideration which has wholly failed and the Bank is entitled to rescind it. 663 In the New Zealand case of Yan v Post Office Bank Ltd [1994] 1 NZLR 154, the New Zealand Court of Appeal distinguished the Raper case in a relatively similar case. However, the New Zealand court appears to have taken into account the fact that in Raper the case was one where there was a not negotiable cheque made out to Raper, whereas in the New Zealand case the cheque was not marked "not negotiable" and was a bearer cheque. However, the judgment of Hutley JA in Raper shows that this distinction was not vital to the decision in Raper. In any event, whether I consider Raper is right or not, in view of what was decided in New Zealand, it is binding on me. 664 Raper was followed in Western Australia in Justin Seward Pty Ltd v Commissioners of Rural and Industries Bank (1980) 60 FLR 51. 665 In many ways, stopping a bank cheque, indeed stopping an ordinary cheque, or a bank seeking to recover from the ultimate payee, monies where the bank has issued the cheque in error, are similar to cases of rescission. 666 In cases of rescission at law, one had to distinguish between a void transaction and a voidable transaction. A void transaction was for almost all purposes treated as if it had never occurred. On the other hand, a voidable transaction was valid until it was repudiated. Fraud and mistake usually lead to a transaction being voidable only. If the transaction involved goods, then the rule was that the innocent party could only rescind the transaction up until the time that an innocent third party obtained a title. Explicit statements to this effect can be found in cases of fair antiquity such as the decision of the Full Court of Common Pleas in White v Garden (1851) 10 CB 919, 926; 138 ER 364, 367 and the decision of the Exchequer Chamber in Clough v London & North Western Railway Co (1871) LR 7 Ex 26, 35. 667 The reason for this is quite obvious, and that is, that at the time when the third party took title, the contract had still not been repudiated so that the fraudster had a title to convey to the third party. 668 However, the general rule was applied over the years where there were not goods involved but money; see eg Hunter BNZ Finance Ltd v C G Maloney Pty Ltd (1989) 18 NSWLR 420, 433. 669 Mention should be made of the Court of Appeal's decision in Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 where the Court of Appeal considered the bank's right to recover on cheques issued by mistake. 670 However, whilst rescission is always the act of the party and not the act of the court, Alati v Kruger (1955) 94 CLR 216 at 224, applying Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 at 73, ordinarily a person cannot effect rescission where a third party has become interested without taking advantage of the ability that a court of equity has to grant substantial restitutio in integrum. 671 As Else-Mitchell J pointed out in Waters Motors Pty Ltd v Cratchley (1963) 80 WN (NSW) 1165 at 1177, equity will not give relief unless it can achieve justice by all relevant parties including the third party. As his Honour said, the basis of the court not interfering where rights have passed to a third party, has as "its true basis in equity … not simply the third parties have acquired an interest in the subject matter but that rescission would cause injustice to such third parties who would be punished for no fault of their own". 672 This passage was also applied by Giles J in the Hunter BNZ case at 434. 673 Those two learned judges based their view on what appears in Spencer Bower on Actionable Misrepresentation a passage which appeared up to the 3rd ed in 1974 at p 309 where it was said that rescission would not be granted "if the undoing of the contract would prejudicially affect the rights or interests which any third party has, in good faith and for value, acquired under it whilst it was still unavoided". 674 In the 4th ed Spencer Bower Turner and Handley Actionable Misrepresentation (Butterworths, London, 2000), the learned editor said in para 314 under the heading "Rescission unjust to representor or third parties" that: "Although this was treated as an affirmative defence in previous editions, it is suggested this is not strictly correct. The representee, in seeking to enforce his rescission, must establish that substantial restitution is possible … Rescission is not permitted if it would prejudice rights or interests which a third party has acquired in good faith and for value. This appears to be a true defence by way of confession and avoidance, which admits the right to rescind against the representor but asserts further facts which negative that right, and if this is correct, the onus of proof would be on the representor." 675 Although Mr Annous has sued for money had and received which is a common law count, it is clear from the authorities that this is treated for all intents and purposes as if there were an equity. This was so right from the time of Lord Mansfield. Accordingly, the equitable defences are applicable. 676 It must be remembered that Raper was a case where the person who had the money had not given any consideration. In the instant case, Mr Annous was owed money by Mr Caradonna. The inference that must be drawn from the facts is that Mr Annous had "invested" money with Mr Caradonna, had demanded it back and Mr Caradonna was ostensibly paying it back. Especially in view of s 35 of the Cheques Act this must be classed as consideration. Mr Annous took the money in good faith and it would seem to me that he has a good defence to the ANZ Bank's claim. 677 Mr Annous also relies on the doctrine of change of position. In view of what I have said about him taking bona fide and for proper consideration before the transaction was avoided by the Bank, it is unnecessary to deal with this. However, the material put up by Mr Annous under this head reinforces the view that I have come to on the other aspects of his defence. 678 It may seem odd that the decision in respect to Mr Annous is different to the decision in Rimridge. One clear differentiation was the issue of the bank cheque. The second is that Rimridge did not argue the matter. An inference may have been open that Rimridge gave consideration and acted in good faith, but it did not advance that argument in court nor present any evidence.

Issues of damages 679 I now need to consider the damages claimed against Hunt & Hunt by Mitchell Morgan 680 The claim is for one eighth of the $1,001,748.85 plus interest which Mitchell Morgan paid out in respect of the forged mortgage, ie $125,218 plus interest. 681 Hunt & Hunt say that their damages must be calculated by working out what was the net sum that Mitchell Morgan would have received if Mitchell Morgan had retained the benefits of indefeasibility and had sold the Enmore Property. 682 Hunt & Hunt point out that what indeed did happen was that, after the issue of the appropriate statutory notice, Mitchell Morgan moved into possession of the Enmore Property and listed it for sale by auction. The auction was cancelled because of these proceedings. 683 There is some evidence of value of the Enmore Property before the Court, but this has not been tested. However, what there is seems to indicate a value at the date of the proposed auction of about $1,650,000. 684 This would seem to indicate that the property would have fetched more than was needed to clear the loan. Thus the damages are equal to the lost principal plus interest. 685 As to interest, the evidence is that Mitchell Morgan itself borrowed at 17% in order to make the advance. It claims interest at the rate it charged under the mortgage (78% per annum, reduced to 54% for prompt payment) or 17%. 686 I can see no justification at all for allowing the rate under the mortgage, particularly as the loan was only for two months and at a very high rate of interest, even though Hunt & Hunt would have known these figures.. 687 Hunt & Hunt say that Mitchell Morgan has failed to prove any entitlement to interest as damages pursuant to Hungerfords v Walker (1989) 171 CLR 125. They say that no such claim has been properly pleaded as Smith J held was necessary in Freemantle's Pastoral Pty Ltd v Hyett [1999] VSC 129 at [76]. 688 Furthermore, there is only slender evidence of this claim and that is in the affidavit of Mr Rogers filed shortly before the hearing. Thus the appropriate rate of interest from the date of the hypothetical sale of the Enmore Property, is therefore the statutory rate pursuant to s 100 of the Civil Procedure Act. This it is put far short of what would be required to persuade it that some rate other than the rate prescribed by s 100 is appropriate, let alone interest on a compounding basis. 689 Mr Stevenson notes that in Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49, Brereton J noted at [9] that: "[The] courts have apparently adopted a far more stringent approach to what is required to prove a claim for interest as damages, than to claims for statutory pre-judgment interest. Whereas the cases on statutory pre-judgment interest suggest that loss from late payment will be assumed, the cases in which interest is claimed as damages for deprivation of money suggest that the plaintiff bears the onus of establishing the loss, which is not presumed to arise from the mere withholding of money." 690 I agree with the submission that the only evidence before the Court which might possibly form the basis for a Hungerfords v Walker submission is that of Mr Rogers. Yet it is clear from his evidence that the loan he describes was drawn down well before the Mitchell Morgan proceedings and used as working capital to fund its entire business. It was not therefore specifically referable to the Vella transaction. 691 Furthermore, Hunt & Hunt submit that it is clear that over the entire life of the loan, Mitchell Morgan only made payments of interest and not principal. That being so, even if the mortgage had been indefeasible and the Enmore Property sold, it follows that none of those funds would have been applied to reduce Mitchell Morgan's liability under this loan, and hence Mitchell Morgan has failed to discharge its burden of proof on causation with respect to this head of the claim (which, as stated, has not been pleaded or particularised). 692 I also agree with the submission that in any event, Mitchell Morgan's loan from its investors could not otherwise form the basis for interest as damages, because of Mr Roger's frank acknowledgement that the only reason Mitchell Morgan has not paid off the loan is to await the outcome of these proceedings and that that is an admission of an unambiguous failure to mitigate. 693 In my view the applicable interest rate is the rate under s 100 of the Civil Procedure Act 2005. However, I can see no reason why that interest should not run from the date of the payment out of the monies. 694 For completeness, I should note the damages which Mr Caradonna must pay Mr Vella pursuant to my consideration in 14(c) and the moiety of the Cartisano monies which the ANZ Bank needs to pay to Mr Vella as considered in 11.

Other matters 695 There are three outstanding cross-claims:

(a) in 4122/06 the cross-claim by Permanent against Ms Palumbo;

(b) the cross-claim by Mr Vella against Mr Caradonna; and

(c) the cross-claim in 3957/06 by the ANZ Bank against Mr Caradonna. 696 As to the first, Ms Palumbo did not take any part in the hearing nor did she file any evidence. 697 It will be remembered that Ms Palumbo is alleged to have been the witness to the signature purporting to be that of Mr Vella to each of the mortgages. It is alleged that she misrepresented that she was the witness and that the loss suffered by Permanent as a result of her misrepresentation was the loss of its investment of $1,151,500. The first cross-claim seeks damages for negligence, damages for deceit and damages pursuant to s 68 of the Fair Trading Act for contraventions of s 42 of that Act. 698 The cross-claim is pleaded and the essential facts pleaded are as follows:

(a) On about 19 January 2006, a loan application in the name of Mr Vella was submitted to La Trobe on behalf of Permanent for loan advances over Leppington and Mangrove Mountain;

(b) On about 22 February 2006, Ms Palumbo affixed her signature as witness to two memoranda of mortgages which purported to grant mortgages by Mr Vella over those properties in favour of Permanent;

(c) At the time she affixed her signature to those memoranda of mortgages she knew, or ought to have known, that Permanent was the mortgagee named in each memorandum of mortgage;

(d) In so affixing her signature, she represented to Permanent that the plaintiff was known to her and had affixed his signature to the memorandum of mortgage in her presence;

(e) She confirmed that representation to Permanent's solicitor Mr Mountford;

(g) Permanent relying on those representations advanced funds of $1,151,500 which were lost. 699 There was no defence filed, the allegations are deemed to be admitted. I did not deal with the matter earlier in case other evidence in the proceedings showed that what was claimed was contrary to the facts that came out in the whole of the proceedings, but that has not happened. 700 Accordingly, there is no reason to doubt that the cross-claimant's case is established and there should be verdict against Ms Palumbo for the sum claimed plus the appropriate amount of interest. 701 As to the cross-claim by Mr Vella against Mr Caradonna, Mr Slattery says that the court must focus on the following matters:

(a) Mr Caradonna was one of the holders of the joint account. He did not give consideration for and was not entitled to receive payments into the account totalling $2,417,382.97. Consequently, these monies were received to the use of Mr Vella;

(b) Mr Caradonna caused the whole of the funds in the account to be paid out without the knowledge or approval of Mr Vella;

(c) Mr Caradonna falsely and maliciously caused various statements including forged loan agreements to be published to various lenders and uttered cheques drawn on the joint account as cheques signed by Mr Vella; and

(d) Mr Caradonna caused advances totalling $1,130,000 from Mitchell Morgan and $1,151,500 from Permanent to be made on the security of Mr Vella's land. 702 On the facts as I have found them, Mr Caradonna is liable. The question is as to the amount, and this may well be academic because Mr Caradonna is bankrupt and there may never be leave to proceed against his bankrupt estate. 703 If, pursuant to the orders that I am making in these proceedings, the unencumbered fee simple in Leppington, Mangrove Mountain and Enmore is retransferred to the plaintiff, then apart from the Cartisano monies, the only loss Mr Vella will have suffered is any excess costs that he may have had to bear in recovering back his land. 704 When I considered this sort of problem between Mr Vella and the ANZ Bank, I had problems with causation. There is no problem with causation so far as Mr Caradonna is concerned. Cases such as The Solway Prince (1914) 31 TLR 56; Agius v Great Western Colliery [1899] 1 QB 413; Lloyds v Ellis NSWCA 25/2/1998 per Powell JA at 22; Hamilton J's decision in the Queanbeyan Leagues Club case; Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6 and Hammond & Co v Bussey (1887) 20 QBD 79 as cited by Mr Slattery seem sufficient warrant for ordering this expense to be paid to Mr Vella by Mr Caradonna. 705 There is not the material for me to quantify this and so the order should be that if Mr Vella wishes to pursue it, that I will, at a subsequent occasion, deal with the quantum of this particular claim. 706 Of course, this amount is in addition to the Cartisano monies other than where they have been recovered from the ANZ Bank by Mr Vella. 707 The ANZ Bank's cross-claim against Mr Caradonna seems to me to be indefensible. He received the money as a result of the mistake of other parties engendered by him. He is liable to indemnify the Bank for any loss.

Costs 708 So far as costs are concerned, I will merely make a few remarks at this stage and leave the matter to be dealt with after the form of the orders are discussed when short minutes are brought in by the plaintiff. 709 It would seem tolerably clear to me that the plaintiff is entitled to his costs of the proceedings, but just how they should be borne and how the costs of the various cross-claims, most of which turned out to be unnecessary, are to be borne, may well be a matter of great debate. 710 Mr Vella essentially succeeded in almost all his claims, but I should note that with respect to the Cartisano money claim, although he recovers against the ANZ Bank, he is not recovering anything more than the Bank appears to have offered to pay in any event. 711 It may well be that separate consideration needs to be given on the one hand to the costs of the people I might call "the major players" and others. 712 The others, who were only involved in the case to a minor extent and who mainly were successful, should present no difficulty to the court in making an appropriate order for costs. How far the quantum of those costs will be affected by the fact that the minor claims were caught up in major litigation will be a matter for the costs assessors. 713 So far as the major players are concerned, the case should be considered globally and not as six separate actions.

Conclusion 714 There does not appear to be much point in being precise as to the actual orders that should be made consequent upon these reasons. In summary, the plaintiff is successful and that orders must be made restoring him to the title as holding his interest unencumbered by the mortgages of Permanent or Mitchell Morgan. Permanent should have judgment against Ms Palumbo for $1,151,500 plus interest. 715 In the associate proceedings 4059/06, Hunt & Hunt are liable to pay Mitchell Morgan one-eighth of its loss, but, in theory anyway, can recover that loss against others. I will formally make the necessary orders in each of the associated proceedings. 716 I must thank all counsel and other lawyers involved in the case for the expeditious manner in which they handled the case. It lost nothing for that and saved a considerable amount of time and money. 717 I might say that it is always possible that despite careful preparation of these reasons I may have unintentionally overlooked a point on which a party reasonably requires my reasons. If this has occurred, I am sure that the appropriate request will be made at the short minute stage. 718 The course I will take is to publish these reasons and then stand the matter over so that short minutes may be brought in. 719 Unfortunately, in one sense, I will not be sitting for most of June 2008, thus I will put the matter in my list for mention at 9.30am on 1 July 2008 for the purpose of considering when and how the remaining issues can be determined.

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